Decision Number 360
Petition of the Southern Illinois Annual Conference for a Declaratory Decision on the Legality of a Lesser Annuity Rate Paid by the Southern Illinois United Methodist Ministers' Pension Fund, Inc. to Ministers Who Have Served in the Southern Illinois Annual Conference, but Subsequently Transferred to Another Annual Conference and Retired.
A lesser annuity rate paid by an Annual Conference to a minister who transfers out of that Conference and retires from another Annual Conference is illegal. Such a procedure violates the status of the ministry in our connectional church and is contrary to the specific requirements of Paragraphs 1257.11b and 1259.7 of the 1972 Discipline.
Statement of Facts
The Judicial Council has received from Robert R. Hollis, Conference Secretary, a letter certifying that the Southern Illinois Annual Conference took an action petitioning the Judicial Council for a declaratory decision on the relation of Paragraph 1379.7 of the 1968 Discipline to a lesser annuity rate paid by the Southern Illinois United Methodist Ministers' Pension Fund, Inc. to ministers who have served in the Southern Illinois Annual Conference, but subsequently moved to another Annual Conference and retired.
The Southern Illinois Annual Conference is under the Ministers' Reserve Pension Fund. The annuity rate paid by this Fund is the same for all ministers who have served in the Southern Illinois Annual Conference whether or not they have transferred to another Annual Conference. The variance in annuity rates comes from the payments from the Southern Illinois United Methodist Ministers' Pension Fund, Inc. which are used to supplement the rate paid by the Ministers' Reserve Pension Fund.
The Southern Illinois United Methodist Ministers' Pension Fund, Inc. was accumulated from the voluntary contributions of individuals and churches, bequests, etc. for the benefit of the retired ministers of the Conference. The Fund was incorporated in the State of Illinois as a Not-For-Profit Corporation under the supervision and control of the Annual Conference. The income from its investments is used to supplement whatever other pension plans the Conference may have. By an action taken some years ago, the annuity rate to be paid from this supplemental fund to a minister who transferred out of the Annual Conference was frozen at the level of payment in effect at the time of transfer. This means that any of the later increases in annuity payments from this fund have benefited only the ministers who remained in the Conference. The question before us concerns the legality of this procedure.
The Judicial Council has jurisdiction under Paragraph 1515 of the 1972 Discipline.
Analysis and Rationale
The Discipline (Par. 1379.1, 1968; Par. 1259.1, 1972) has granted an Annual Conference considerable power in the matter of determining, on the basis of the provisions of the Discipline, what services are approved for pension credit. The question before us is whether or not an Annual Conference also has the authority to fix varying annuity rates for the same approved services.
The pension provisions of the Discipline are a strong directive to the Annual Conferences to provide a pension plan based upon an annually determined annuity rate which is related to the average salary of the Annual Conference (Par. 1259.7). When this is done, the annuity rate increases as the average salary increases and there is, in effect, a cost-of-living benefit for the retired ministers who have a pension claim upon the Annual Conference. This assumes, of course, that such pensions are determined by the current annuity rate times the approved years of service. When, as in the case of the Southern Illinois United Methodist Ministers' Pension Fund, Inc., the annuity rate for certain retired ministers is frozen at some point in the past, they are denied such a cost-of-living benefit. Such a freezing is contrary to Paragraph 1259.7 which requires that the annuity rate for approved years of service of conference members be determined annually.
The petition from the Southern Illinois Annual Conference calls our attention to the fact that other Annual Conferences pay varying annuity rates for previous years of service. This is true in certain Annual Conferences which are the result of mergers between former Evangelical United Brethren and former Methodist Annual Conferences. By agreement, the endowment funds of the merging conferences were used to undergird the pension claims for years of service prior to merger, while a single annuity rate for all was approved for service years in the merged conference. It is to be noted, however, that half of such merged conferences have already moved to a single annuity rate for all previous years of service in both former conferences, and other such merged conferences are making progress toward this goal.
It is significant that most merged Annual Conferences were able to fix immediately a single annuity rate for all approved years of service, in the former merging conferences as well as in the newly merged conferences. Such a single annuity rate was made mandatory by the General Conference of 1970 when one of the merging Annual Conferences was a former Annual Conference of the former Central Jurisdiction (Par. 1259.7). This would seem to fix the pattern for the whole church.
Obviously the pension provisions of the Discipline have been flexible enough to permit some varying rates within an Annual Conference for previous years of service when merger conditions required it, even while the church deplored such inequities and called for programs to remove them. There is, however, a fundamental difference between such inequities which are caused by pension relationships to merging conferences, and the inequities in the operation of the Southern Illinois United Methodist Ministers' Pension Fund, Inc. which are caused by freezing the annuity rates of ministers who transfer out of the conference.
The question before us is not whether or not such an operation is unjust, but whether or not it transgresses the law of the church. It is the opinion of the Judicial Council that it does transgress that law in Paragraph 1259.7 and in two other respects.
First, it violates the connectional relationships of the church. Membership in an Annual Conference is the basic relationship of a minister in the United Methodist Church. All of his rights, privileges, and duties stem from this relationship, including his pension rights. Once this relationship is achieved, it can only be changed or terminated by surrender of office, withdrawal, location, or by trial. Transfer from one Annual Conference to another does not change this basic relationship. The General Conference has defined membership in an Annual Conference. No Annual Conference has authority to change that definition. To class an Annual Conference ministerial member as an "outsider" because he transfers to another Annual Conference and fix for him a lesser annuity rate because of such transfer is to deny the whole connectional relationship of a minister in the United Methodist Church.
Second, it contradicts not only Paragraph 1259.7 but the specific requirements of Paragraph 1259.11 of the Discipline. This paragraph authorizes the General Board of Pensions to administer a clearing house for the collection and distribution of pensions for retired ministers, some of whose approved service years have been given in Annual Conferences other than the Annual Conference from which they retired.
In this regard Paragraph 1257.11b reads:
"The board shall have authority to determine the pension responsibility of each Annual Conference, in accordance with the principle of divided annuity responsibility, and to collect from each Annual Conference, as determined on the basis of their respective pension programs, the amount required by the clearinghouse to provide the pension benefits related thereto. Each Annual Conference shall provide funds to meet its annuity responsibility to beneficiaries of other Annual Conferences on the same basis as it provides payments for beneficiaries related directly to itself." (emphasis added)
It is obvious that when the Southern Illinois United Methodist Ministers' Pension Fund, Inc. provides a lesser annuity rate to beneficiaries of other Annual Conferences it disobeys this disciplinary provision.
We do not find merit in any possible argument that the Southern Illinois United Methodist Ministers' Pension Fund, Inc., being a Not-For-Profit Corporation in the State of Illinois, is no longer subject to the pension provisions of the Discipline. The Fund was accumulated for the purpose of supplemental support for all pension claims upon the Southern Illinois Annual Conference. The Conference maintains supervisory control over the corporation and uses the income from the Fund for the supplemental support for its pension beneficiaries. An Annual Conference is not exempt from provisions of the Discipline regardless of the conduit it uses to channel its funds.
It is the decision of the Judicial Council that the lesser annuity rate paid by the Southern Illinois United Methodist Ministers' Pension Fund, Inc. to a minister who transfers out of the Southern Illinois Annual Conference and retires from another Annual Conference is contrary to the provisions of the Discipline.
October 28, 1972