Written by Kevin P. Gilmore
From the Director
This past October marked the completion of two years of service in my role as executive director of Pensions and Benefits USA. In this article I would like to share a few observations from my experience so far. Please understand my intent is to focus attention on challenges that exist and how we might better handle them.
First, it is clear to me that many pastors, church treasurers, and boards do not fully understand the importance and value of the benefits and services we provide. It may be because they are busy with other matters, or perhaps we have not done a good enough job of promoting those benefits and services. Regardless of the cause, my interactions with district superintendents and pastors have caused me to believe there is a problem when it comes to ministers understanding what we do and how it can personally benefit them and their families.
Here’s an example: I recently received a staff report which tracks benefits we pay to the survivors of pastors or their spouses (what we used to call a “death benefit”) because their church failed to support the Pensions and Benefits Fund. By “support” I mean the church failed to contribute at least one dollar to the fund during the year. The average benefit value missed in 2021 was $12,500 ($15,000 in 2020). Such payments could have been a significant help to survivors in the aftermath of their loss.
This grieves me, but unless local churches support the P&B Fund, we have no other means to provide these benefits. I now make it a point to tell pastors that if their church is not paying the P&B allocation, they should personally contribute at least one dollar of their own money annually to their church treasurer and ask them to send it to the general treasurer in support of the P&B Fund. This way, that pastor is guaranteed coverage for age-based survivor benefits, as well as a $500 monthly long-term disability benefit. That’s a value no local church could hope to match.
Another observation is what I refer to as “PB Speak,” a term I recently introduced to my team. A comment I often receive from pastors, including district superintendents, is that we speak a foreign language which only those in Pensions and Benefits understand. This is likely because we work with the information daily, while pastors deal with it only occasionally.
I also believe the word “pension” is problematic in all of its various contexts. The average person hears the word “pension” and thinks of a monthly benefit sufficient to support the majority of their lifestyle in retirement. This is what defined benefit (i.e. pension) programs traditionally were designed to do. Most organizations abandoned these decades ago in favor of defined contribution plans such as the Nazarene 403(b) Retirement Savings Plan. They found pension plans too costly to fund, and our Church of the Nazarene is no exception to this reality.
The Basic Pension Plan for ministers was originally designed to provide a supplemental benefit in retirement, similar to that of the federal Social Security program. It was never intended to serve as a major source of funds for a pastor’s retirement. Let me illustrate it this way: when the plan was started in 1971 a retiring pastor with 40 years of service was entitled to a maximum $80 monthly benefit. Today, that figure would be $351 after applying an average annual inflation rate of 3%. This equates to $4,212 per year, which is a retirement supplement, not a pension.
Pastors should be actively engaged in securing their own financial viability in retirement through contributions to the Nazarene 403(b) plan and their own external retirement accounts, so when the time comes to retire they will have sufficient assets, along with Social Security, to provide for their needs.
Lastly, the importance of the minister’s housing allowance cannot be overstated—especially when it comes to retirement. The IRS provides this substantial exemption to qualified pastors to shelter retirement benefits from income tax. Active pastors who participate in our 403(b) plan also receive the exemption on the funds they, or their employers, contribute to the plan. This means no income tax on the dollars going in, none on the earnings, and none on the distributions coming out at retirement, since they are received as housing allowance (subject to IRS guidelines). I was a practicing CPA the first five years of my career, and a financial executive since then, and I am not aware of any other type of retirement benefit with such significant value.
Well, these are my thoughts after two years at the helm of Pensions and Benefits. I hope you will receive them as honest observations. I don’t believe we can begin to fix problems if we are not first willing to expose them to the light of day. I pray my words will be received with grace and spur you, or someone you know to learn more about our work, to get involved in (or contribute more) to your Nazarene 403(b) Retirement Savings Plan account, and make giving to the P&B Fund a priority for your church.
On behalf of our office, I pledge that we remain committed to serving the thousands of active and retired ministers and church-employed laypersons who have devoted their lives to serving God and their congregations. Blessings to you and yours in the New Year ahead!
Kevin P. Gilmore is executive director of Pensions and Benefits USA for the Church of the Nazarene.