Pension and benefit plan changes announced

Lutheran Church–Canada’s Board of Directors approved changes to some parts of the Worker Benefit Plans based on recommendations from the Board of Managers (BOM). The BOM, which gives direction and oversight to LCC’s Worker Benefit Plans, made these recommendations after two days of careful deliberation at its meeting June 23-24 and after extensive consultation with stakeholders. The plan design changes are intended to assist in the sustainability of the benefits program. They were made considering the least impact to members and to save the most benefits. Both plan members and employees received notice of the changes earlier this month.

Pension

As a result of the focus group discussions the BOM decided to postpone any changes to the defined benefit component of the pension plan for one year. During this time WBP administration will investigate more options and alternatives. “As we talked through the concerns and ideas of the members and employers it became evident the pension plan is so important that we needed to explore further options,” said Mr. Cleave, executive director of WPB. However, the board decided that the plan will become contributory in some way and set July 2011 as a target date for proposed plan design changes, and implementation in January 2012. Any changes to the pension plan will apply to future service only and not affect benefits accrued up to the date of any changes.

Effective January 1, 2011 the employer’s match of a member’s contribution to their defined contribution pension plan will be suspended. However, members can continue to make contributions.

Post-retirement benefits

Changes to post-retirement benefits will also take effect January 1, 2011. The BOM decided to no longer offer post-retirement benefits (PRBs) to any members who retire after July 1, 2012. Those retiring before that date, or who are age 60 with 15 years of service at July 1, 2010 will still qualify for PRBs.

In addition, a number of changes will be made to the PRB’s for both current retirees and those qualifying under the rules outlined above including the requirement for all retirees to pay a premium for their PRBs. Those currently not required to pay a premium will pay 10 percent of premium costs or roughly $25 per month for a family.

Other changes include the introduction of a dispensing fee cap on prescription drugs, lowest-cost prescription drugs when available, a deductible on the medical plan before claims will be paid, and a change from covering dental check- ups from once every six months to once every nine months.

A now-depleted reserve fund initially supported current post-retirement benefits, and more recently WBP charged a premium each employer. The contribution from retirees will reduce the dependency on funding by the employers. “Retirees in the focus groups indicated their willingness to consider a premium to keep their benefits,” noted Mr. Cleave.

Long-term disability

Also effective January 1, 2011 members will pay the premiums for Long Term Disability coverage. By making this change, the benefit paid to a member in the event they become disabled, is non-taxable; when employers pay the premium the benefit paid to a disabled claimant is taxable.

Health and dental benefits

The focus groups with employers often included questions and discussion about the rising cost of health and dental benefits.

As a result of the different issues raised, the WBP will undertake a full review of the group benefits with a target implementation of January 1, 2012 for any changes. However, as an interim measure to help relieve budgetary pressure of some employers, the plan will allow them to negotiate a cost-sharing arrangement on the health and dental plans with employees. Mr. Cleave noted that “this is intended to apply only to situations where it is absolutely necessary, and taking into account the other costs we are asking members to pay.”

Like the post-retirement benefit changes, the plan will pay for only lowest cost drugs (in most cases this means generic rather than name brand) for active members.

Permanent part-time employees

The last area discussed in the focus groups was permanent part-time employees and their eligibility for the group benefits program. Currently, a part-time employee who works 15 hours a week or more can receive benefits. The BOM raised the minimum to 24 hours or more. Workers currently participating in the pension plan will continue participating even if they work less than 24 hours per week.

“While no plan sponsor wants to reduce benefits, the changes undertaken are necessary in the current environment” the executive director said. “While the decisions were not easy, I think we have managed to strike a balance that will help lay the foundation for long-term stability for the plans.”

Members and employers will receive further detailed information on the changes prior to the changes coming into effect.

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