Sunday, May 4, 2014

Important changes at GBGM — Missionaries read this post on pay raise, pension changes, and other steps in a journey just begun

Changes in compensation and pensions are first steps in a journey

Over the past several months UMMA has experienced how painfully change comes to our sending agency, the General Board of Global Ministries of The United Methodist Church.  Much of what has come to fruition in the past year can be traced back to conversations focussed on a Roundtable on Missionary Service at Drew University in 2010.  "Principles for future missionary service" and a series of parallel conversations came out of that meeting.  Even that 2010 Roundtable was preceded by years of appeals for policy review and change.  In the meantime ongoing structural adjustments and personnel changes on staff have both hindered and furthered the processes thus started.

Good News — a salary hike is in store for all missionaries!

At the Directors' Spring Meeting in April 2014 Global Ministries accepted a new compensation scale which, after January 1, 2015, will mean raises of varying amounts, ranging from 1-2% to around 20%, according to trial projections, for all missionaries. (More details follow in the "… as they now stand" section below.)

The salary increase follows major changes in missionary pension provisions last October (2013) which were agreed to by Global Ministries' Directors. UMMA representatives were not happy with the details of the changes. It seemed to be a matter of getting the cart before the horse. We had urged for years that salary, pension, health care and other benefits should always be considered as a unified package.  The pension changes anticipated other compensation changes which were not yet defined.

The  problem for missionaries was that the salary scale upon which the agency's new "defined contribution" was initially based has been experienced by almost all missionaries as inadequate, which would mean that retirement funding based on that salary would also be inadequate for living in the U.S., assuming that is the missionary's home country.  (A second problem was the initial false assumption by many missionaries that the pension contribution would be a deduction from or reduction of salary, much as an IRA would be, rather than an additional contribution by the Board over and above salary.) See paragraphs below for more on pensions.

Pension revisions  — Are you a missionary with less than 15 years of service?  Not thinking about retirement yet? Read on — these changes affect you!

In October 2013 fundamental changes in pension structures for all future and for a very few current missionaries were voted through by the Board's Directors to the general consternation of that part of the missionary community which had been paying close attention to such matters.  The fundamental change from a "Defined Benefit" (DB) plan held by the agency and paid out after retirement to a "Defined Contribution" (DC) plan which creates a retirement account for each missionary with the General Board of Pensions and Health Benefits managed by that Board until retirement was not itself the greater issue.

It is widely assumed that the "DC" approach reduces risk for the employer and therefore shifts part of the risk to the missionary employee, especially for post-retirement management of an individual's funds.  For the agency, the need to carry on its books an ever larger entry for "unfunded liability" of missionary pensions was largely a cosmetic problem, but one which required repeated explanation to those unfamiliar with such issues; it left an interface for attack by those who may seek a reason to do so.  In part the issue of unfunded liability became more visible and more blatant due to changes, first, in accounting laws to better protect employee pensions in large corporations by declaring the extent of pension liability, and, second, by revised recommendations from the Board's auditors and actuaries about how best to anticipate future needs.  Under the new provisions unfunded liability will be expected to shrink, not grow, as new missionaries' pensions are funded by monies paid out into their retirement accounts each year, with no liability accruing to the agency.

Under the new salary scale the Defined Contribution takes on a much higher absolute value for the missionary and comes closer to fully replacing the previous Defined Benefit, especially for those missionaries who may have worked their full careers under missionary assignment and compensation without more lucrative sources for supplemental pensions or augmented social security benefits.

For the first time, Global Ministries ' budget projections include unfunded liability for an assumed increasing Defined Benefit rate on a regular schedule, although enabling decisions have not yet been made.

2014 a transitional year

Those missionaries who were not "grandfathered in" for Defined Benefit payments in the future and those who begin service in 2014 will find their pension contributions for this year to be based on the old and inadequate salary structures — unless the Board were to take corrective measures and base the 2014 "DC" on 2015 salary levels.

Compensation and pensions as they now stand — raises for all

Pending likely further adjustment at the October 2014 Directors' meeting, the following statements reflect current reality (assuming no errors in this reporting):
  • The service rate for years of missionary service for those on the Defined Benefit plan is currently $525 per year (roughly 0.84% of the Denominational Average Compensation at the time set) compared to $495 before the increase in October.
  • The rate at which contributions will be made on behalf of newer and younger missionaries into their Defined Contribution accounts is 12.8% of a calculated average salary for all missionaries.
  • Current salaries are based on a scale beginning with the base salary of $20,553.84 ($1,712.82 per month), which applies uniformly for persons with 1-15 years of related experience, and increases for additional years of service.
  • The new salary scale will begin at $28,355.74 ($2,366.31 monthly) for those with 1-15 years of experience.  (As has been the case for the past several years, base level will increase annually at the same rate that increases may be granted to New York staff.)

Other related changes and open questions

Cost of Living Adjustment (aka CoLA)  — Never had this applied to your paycheck?  Read on —changes may affect many more missionaries.

Not all missionaries will experience these changes as a dramatic increase in their paychecks, however.  The Cost of Living Adjustment applied to part of each missionary's pay based on place of assignment has never been implemented for those countries of service where it is presumed that the cost of living is substantially lower than in the U.S.A.  In the future, a negative Cost of Living Adjustment will be made where the relative costs in a place of assignment are deemed to warrant it.  GBGM will subscribe to this information from Mercer, the predecessor firm to ORC, long the contractor for overseas cost-of-living data.  Provision has been made that no missionary should experience a reduction in compensation when this new approach is implemented in 2015.
In addition to implementation of a negative CoLA where appropriate, two further changes will occur. In the past the comparison "home city" for CoLA has been New York or — more recently — Washington, DC, although no one has claimed that current missionary salary is adequate for those cities.  The new "home city" will be defined as Columbus, Ohio.

A further change is that the "expatriate" model will no longer be used.  This model assumed the need to replicate a U.S. lifestyle in a foreign country at the same level you could live it "at home" with your U.S. salary.  (There are many reasons this was never a satisfactory model, not least of which was the relationship between our base salary and typical salaries in our "home" base of NYC or DC!)  Instead of the "expatriate" model the so-called "international model" will be applied.  It assumes that one goal of the missionary is to adjust to local living circumstances and to learn to drawn on local resources, to the degree available, instead of imported lifestyle.  (Global Ministries will continue to provide housing in addition to cash salary, exempting missionaries from that particular vagary of living in a foreign country.)

Service Grant — What is it and when is it disbursed?

A special feature of missionary compensation has been the so-called "Service Grant."  This is an end-of-service payment given each missionary who has served fifteen years or more and calculated per month of service.  From its appearance in missionary handbooks about 30 years ago the amount has never been increased from $15 per month of service.  As of May 1, 2014, the amount has been raised to $25, a 40% increase.  (It seems likely that the grant was originally intended to allow a retiring missionary to set up a household upon return to the missionary's home.  In today's market, the value of the grant might be sufficient to buy a used car or pay a security deposit on an apartment.)

Social Security for non-U.S. persons 

The question of social-security-equivalency payments into retirement accounts for missionaries of non-U.S. origin who are ineligible for the U.S. Social Security program is on the table and will likely be addressed by the October Directors' meeting.

Other issues regarding non-U.S. mission personnel — A work in progress

All of the above changes must in some way be seen as transitional and still US-centric at their heart, continuing the program previously administered under the former World Division of the General Board of Global Ministries.  In the light of the increasing internationalization of the programs of GBGM, both through UMCOR's field offices in many countries, through Global Health initiatives such as Image No More Malaria, and numerous examples of international cooperation, Global Ministries is seeking to develop an overall compensation plan which will treat fairly all the various international persons serving under one auspice or another worldwide and paid by Global Ministries.
The Board's treasurer Roland Fernandes has been assigned the difficult task of developing a plan over the next several months.  I suspect the process may take as much as two years to complete.

UMMA has long advocated for inclusion of the missionary community in conversations and in consultation before decisions are made.  The recent questions around pensions and compensation have shown us that even when that consultation is nominally occurring, it is often difficult for the missionary community to talk up issues and formulate a representative response within the timeframe offered.  In part this is due to the bureaucratic need to protect ongoing conversations until all the "kinks" have been worked out which then transitions to a need to act quickly while a consensus prevails.  Nevertheless, current staff persons in New York have repeatedly demonstrated their intention to include missionary input.  The persons with whom UMMA converses most directly and most frequently in this regard are Thomas Kemper, General Secretary, Roland Fernandes, General Treasurer, Judy Chung, Associate General Secretary for Missionary Services, and George Howard, Deputy General Secretary for Mission and Evangelism.  We have found in each of these persons a partner who has the best interests of the missionary and the agency at heart, even when we have disagreed about what those best interests on either side may be and how they relate.  Additionally, Scott Atnip, an elected director of GBGM and its corporate secretary as well as member of the GBGM finance committee and its investment and pension subcommittee, has proven himself to be an excellent partner as the director assigned to be a liaison to the Missionary Association.  Thanks are due to each and all, as well as to the many  in the background who work on our behalf and to further the mission of the church.

This post is part of UMMA's accompaniment of the process of Board-Missionary relations since 1995 and is our summary interpretation of the current situation.  Your membership in UMMA helps us to do our best to partner and negotiate with GBGM staff in keeping the best interests of the missionary community and the agency at heart and in furthering the future mission of the Church.

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