Pension Plans (North America)
The development of pension or retirement funds must be understood in the context of the changing patterns of ministerial leadership among North American Mennonites over the course of the 20th century. Equally important are the changing societal and demographic patterns during the same period. Another factor has been the dramatic growth of Mennonite-related institutions and the need to provide for staff members not only during years of active service but also during retirement. Thus the retirement concerns for the church have become much larger than pastors and missionaries.
In an earlier period of unsalaried lay ministry, there was no need for the church to concern itself with pension plans. Pastors made their living by other vocations, usually farming; and they were responsible for and had resources available for their own retirement years. Included of course was the home in which they had lived throughout their years of ministry.
During the course of the 20th century several significant changes occurred which brought crises to some who gave themselves to the service and ministry of the church. After several decades of foreign mission work, missionaries who had served for years began to return to North America with no accumulated assets for housing or for retirement living. In North America the change to trained and salaried ministry had the same effect. Pastors who served with minimum salaries, and who moved from one parsonage to another came to retirement with the dilemma—what to do about housing and retirement income. There were those who survived well, either because of inheritance or independent income. But many faced retirement with bleak prospects.
Another major factor during the 20th century was the dramatic increase in life expectancy. According to data from Statistical Abstracts of the United States 1986, the life expectancy at birth of men went from 53.6 years in 1920 to 71.1 years in 1984 and women from 54.6 years in 1920 to 78.3 years in 1984. Furthermore, in 1982 men who survived to age 65 could expect to live to 79.5 years and women to 83.9. What this often meant, of course, was that the surviving spouse faced several additional years of financial uncertainty.
The concern for retirement security is not only an issue for the church but also one for the whole society. National pension programs have become common in most industrialized countries. In the 1930s, in the United States, the response came in the form of the Social Security System to provide a base for retirement, though it was never intended to be a full retirement income. For pastors this was not an adequate answer since they were still considered self-employed, though eventually they were permitted to choose to enter the Social Security program. To add to the confusion, a change was again made in 1968, according to which pastors were automatically in the Social Security program unless they chose not to be for reasons of conscience, an interesting exception made largely to accommodate the Amish. Still pastors were considered self-employed, were subject to much higher tax rates for social security than were other employees, and they received no additional benefits.
In Canada there has been government assistance available to all persons of retirement age through a program called "The Old Age Security Pension;" this is a non-contributory program based on age, residence and legal status in Canada. In the same program is a guaranteed income supplement for persons with little or no income. In addition the Canada Pension Plan, similar to U.S. Social Security, is a contributory social insurance program which provides retirement benefits and other benefits as well.
Despite these gains in retirement benefits in North American society, they have been far from adequate to meet the needs of church workers in retirement. The church has responded in several ways. (1) Several Mennonite denominational bodies have provided a missionary and pastor's aid fund to supplement those with the very lowest income who did not benefit from more recent pension programs. (2) They have developed more systematic forms of retirement income through pension plans provided for pastors, missionaries, and workers in the institutions of the church.
In 1947 the General Conference Mennonite Church authorized the development of a pension program for ministers, missionaries, and church workers under the leadership of a "Committee on Pensions" (later under the Division of Administration). With this plan it was the intention of the church that congregations or employing institutions would set aside 10 percent of income (cash salary plus housing) to be invested for retirement and other needed benefits. These funds paid to the General Conference Mennonite Church were then invested with the Presbyterian Minister's Fund as a group flexible premium-deferred annuity. Various changes have been negotiated over the years, all with the goal of increasing the eventual benefits to the persons enrolled. In 1987 approximately 47 percent of the General Conference pastors in the United States were participating in the conference pension plan. The Conference of Mennonites in Canada developed a similar group retirement plan with contributed funds being invested with the Excelsior Life Insurance Company. Overall the goal has been to provide a reasonable retirement income when the combined resources of personal savings, church pension plans, and government programs were available for pastor, missionaries, and church workers.
In 1963 Mennonite Mutual Aid of Goshen, IN, began a pension plan called Mennonite Retirement Trust. This inter-Mennonite agency thus made available to the larger Mennonite community in North America another retirement plan option, since those previously described were limited to the General Conference Mennonite Church personnel. Included on the Mennonite Mutual Aid Board were persons representing the Mennonite Church (MC), the Mennonite Brethren, and the General Conference Mennonite Church. Again a certain percentage of salary was to be placed with Mennonite Retirement Trust each year, with the accumulated investments and earnings to be made available upon retirement or total disability.
Operating on a somewhat different investment philosophy than the General Conference program, Mennonite Retirement Trust used the funds entrusted to it to invest in stocks and bonds, etc. with the goal of 8 percent annual growth. In the 1970s-1980s period the actual returns were 10.1 percent with a high in 1985 of 15.86 percent.
In 1987 over 4,300 people were enrolled in Mennonite Retirement Trust and the total assets at the end of 1986 were 34.4 million dollars. Mennonite Retirement Trust became the primary retirement plan for the Mennonite Church (MC). However, as an inter-Mennonite agency, Mennonite Retirement Trust had persons enrolled representing many different Mennonite groups.
In 1974 the Mennonite Brethren church made the Mennonite Retirement Trust the recommended plan for pastors in the United States. Several districts put in an annual minimum amount for all pastors in order to assure maximum participation. In addition, each congregation was encouraged to contribute six percent of salary and each pastor was encouraged to give an additional three percent of salary as annual contributions to Mennonite Retirement Trust. The Mennonite Brethren church in Canada had its own pension program for church leaders.
By 1987 many pastors, missionaries, and church workers were enrolled in one of these plans. These together with Social Security and Canada Pension Plan and personal savings were seen as providing the essential, though certainly not extravagant, income for the retirement years. For pastors an additional factor has changed the picture regarding housing. The 1970s saw a major shift from church-owned parsonages to pastors purchasing their own homes and thus gaining enough equity to provide housing during retirement years. In 1985, 83 percent of the General Conference and Mennonite Church pastors who responded to a salary survey reported that they owned or rented their own homes rather than living in a parsonage.
|Author(s)||John A Esau|
Cite This Article
Esau, John A. "Pension Plans (North America)." Global Anabaptist Mennonite Encyclopedia Online. 1987. Web. 15 Aug 2018. http://gameo.org/index.php?title=Pension_Plans_(North_America)&oldid=121274.
Esau, John A. (1987). Pension Plans (North America). Global Anabaptist Mennonite Encyclopedia Online. Retrieved 15 August 2018, from http://gameo.org/index.php?title=Pension_Plans_(North_America)&oldid=121274.
Adapted by permission of Herald Press, Harrisonburg, Virginia, from Mennonite Encyclopedia, Vol. 5, pp. 689-690. All rights reserved.
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