Board of Pensions: Progress on Health Insurance
By Dave Hood
Chair, IGRC Board of Pensions and Health Benefits
The Board of Pensions met on February 10th to continue the discussion on health insurance. First topic on the agenda was our performance for 2013. Our health costs exceeded the amount we charged the health coverage by about $5,000 per pastor. In total this was about a $1.5 million shortfall.
Annual Conference approved the 2014 plan design changes in June, so the primary agenda item was deliberating on the plan for 2015. Our health insurance consultants presented a comparison of our expense versus the costs for an “average” pastor making $45,000 with a spouse and a child. The cost of continuing with our plan was $10 million. The cost of having pastors purchase their health care through the exchanges was $6.5 million.
This comparison did not include the tax credits that our pastors would have available. When taking the credits into consideration the cost of health care through the exchanges would be approximately $4 million. The consultants had our full attention with a potential $6 million savings.
In order to accomplish the change from a Conference plan to pastors having choice under exchange plans we need to provide the funds for them to purchase this coverage. We are recommending to the Equitable Compensation Committee and the Annual Conference that the wages of all pastors be increased in order for the pastor to purchase health insurance.
The Conference charges $17,520 per full-time pastor for health insurance and lost about $5,000 per pastor. Under the Board’s recommendation the churches would no longer pay $17,520 to the conference. Instead they would increase the pay to their pastor by $12,000 per year. There would be a corresponding increase in the pension payments for each pastor of $720 (6 percent) on this amount.
The church saves close to $10,000 per pastor compared to increasing the cost of the IGRC insurance to what it is actually costing us. This makes the change a win for the local church.
The pastor has additional salary of $12,000 less income tax on this amount to pay for health insurance through the exchanges. Is this a great deal for the pastors, too?
It depends upon the taxable income on their personal income tax return. For pastors with lower than average taxable income there are going to be tax credits that offset a substantial portion of their insurance costs. These pastors are likely to be net winners.
For pastors with high compensation and/or with spouses with high compensation the exchanges will be affordable, but they will not qualify for tax credits. They may qualify for affordable health insurance though a spouse and do quite well. However, on average the most highly compensated will not be net winners. Their local churches may choose, but are not mandated, to increase their compensation beyond the recommended $12,000 level.
Some clergy couples will be net winners. In the past, churches have paid for both pastors, but under the exchange clergy couples will be able to purchase health insurance together.
Early retirees will not be paying the $18,540 (for clergy and spouse) to the Conference prior to becoming Medicare eligible at age 65. They will simply continue with their exchange plans.
We fully realize that the exchange plans may become more expensive. Based upon the substantial size of our savings we are confident that the prices will increase. However, the price of insurance offered by the exchanges could double and still provide a net Conference wide savings.
All of this is just proposed until Annual Conference meets in June. However, your Board of Pensions is confident that this change will provide savings for the churches, provide health care options to the pastors, and is the best current alternative in a rapidly changing world. There will be additional information provided to all to enhance the understanding for pastors and the laity in the months to come.