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Annuity Board reports positive despite financial market turmoil

DALLAS (BP)–Trustees of the Annuity Board of the Southern Baptist Convention heard positive third quarter reports from management despite sharp market declines in July and August. They adopted a $44.4 million operating budget for 1999 and heard a message from Paige Patterson, president of the Southern Baptist Convention.
Meeting in Dallas Nov. 2-3 for their regular fall session, trustees received reports from President O. S. Hawkins, Chief Operating Officer John R. Jones, Treasurer Jeffrey P. Billinger and each of the standing committees of the board.
Hawkins praised his officers and staff for their implementation of a new organizational structure announced last April. He also expressed satisfaction with a recent change in the board’s medical plan underwriting and claims administrator and coming expansion of access to managed care networks for medical plan participants.
Virgil V. Ayres, chairman of the insurance committee, noted claims processing for the indemnity medical plans of the board was moved from Prudential to Kirke-Van Orsdel (KVI) of West Des Moines, Iowa, in September. KVI had assumed underwriting responsibilities from Prudential in July. Ayres said KVI inherited a large backlog of claims and still is several weeks away from its standard of processing 90 percent of claims within 15 working days.
Douglas D. Day, managing director of insurance services, made a presentation on the new third-party administrator (KVI) and a Jan. 1, 1999, arrangement with Private Healthcare Services (PHCS) for access to preferred provider and point of service networks. The new networks will place more than 97 percent of participants in Annuity Board medical plans in reach of some form of cost-saving managed care. PHCS, a Waltham, Mass., firm, offers one of the nation’s largest PPO organizations, with 2,300 participating hospitals and 270,000 physicians and other providers.
Day also spoke of a new nationwide integrated pharmacy plan with Merck-Medco, that will bring local pharmacy and mail order drug orders under one provider. Merck-Medco is one of the nation’s largest pharmacy care managers, serving 50 million participants.
Addressing the subject of Annuity Board investment earnings, Hawkins observed, “In the kind of conditions that existed in much of the third quarter, we cannot expect to escape sharing in broad market events. Having said this, we take comfort in what is good in the American economy, and we look with confidence to long-term growth.”
Billinger, the board’s treasurer, reported total assets at the end of the third quarter were down 0.3 percent from one year ago, reflecting the sharp market downturn in July and August. Net income in September was $191 million, helping to keep total assets virtually even for the 12-month period ending Sept. 30.
Rodric E. Cummins, executive officer for investment services, in his written report, said, “Third quarter performance of U. S. stocks was the worst quarterly performance in eight years, with all major indices registering declines. The last time U. S. stocks performed this badly was in the third quarter of 1990 when Iraq’s invasion of Kuwait and escalating oil prices unsettled world markets.” Cummins noted markets rebounded in September and investment committee chairman John R. West observed performance was even better in October.
Timothy E. Head, chairman of the board, presided as trustees approved a 1999 budget of $44.4 million. Joseph A. Mack, chairman of the administrative policy committee, presented the committee’s recommendation of approval after the budget had been presented by the treasurer. Mack noted the budget had passed through a trustee budget subcommittee and the trustee executive committee before presentation to the administrative policy committee and full board. The document was mailed in advance to each trustee. The Annuity Board receives no Cooperative Program funds for operations, but pays all expenses from an advisory fee on each of the 13 investment funds available to participants in the various retirement plans offered by the board.
Operating expense for the insurance program is paid from rates charged to participants. The relief ministry administration expense is funded by the Retired Ministers’ Support Fund of the board. All Cooperative Program money received by the board is paid as relief grants to needy retired ministers or their widows.
The administrative policy committee reported there would be no increase in benefits for annuitants next year. A regularly scheduled analysis of the Fixed Benefit Plan, from which most retirement benefits are paid, revealed that due to market performance, margin has not developed in the previous 12 months to permit an increase in benefits for 1999. A 10 percent permanent increase went into effect Jan. 1, 1998, for Plan A participants, the Past Service Benefit Plan of the Foreign Mission Board (now International Mission Board) and purchased annuities.
The third quarter report of the president included statistical evidence that enrollments of church and institutional retirement plan participants remain strong, as do contributions to retirement accounts. By the end of the quarter, 4,568 new participants in the Church Annuity Plan had been enrolled in 1998, a 12.2 percent increase over the record for 1997. Contributions totaling $102.6 million to Church Annuity Plan accounts in the first nine months was an increase of 2.8 percent over the same period in 1997.
The institutional side of the retirement program — the Convention Annuity Plan — enrolled 5,859 in nine months, compared to 5,361 in 1997. Total contributions to Convention Annuity Plan and trusteed plan participant accounts were $113.7 million, up 5.1 percent over the nine-month period in 1997.
Based on valuation of the Protection Benefit Fund of the Church Annuity Plan, trustees approved extending a special billing credit to state conventions through the year 2002. The program, established Jan. 1, 1995, waives state convention billing costs for the Protection Section of the Church Annuity Plan, a part of the plan that provides a survivor benefit and supplemental disability benefit to eligible participants. There is no cost to the participant or church for the benefits that range from $100,000 survivor benefits for participants age 35 and younger to $10,000 benefits for participants age 71 and older. A supplemental disability benefit of $400 per month is paid to eligible participants.
The relief committee of trustees considered 51 relief requests. They approved 26 two-year monthly grants, five two-year expense grants, three one-time grants, declined 15 for being outside guidelines and returned two applications for additional information. Maximum supplemental assistance grants are $200 per month for a single person and $265 for couples. Twenty-eight recipients were added to the Adopt An Annuitant roll during the third quarter, and they receive an extra $75 each month added to their annuities.
Other actions by the relief committee included approving a $200 Christmas check for each relief recipient on the roll Dec. 1, and review of relief and Adopt An Annuitant guidelines. Guidelines for Adopt An Annuitant were amended to limit eligibility to those whose assets do not exceed $20,000 except for a house or other non-income-producing property. The same guideline already was in place for relief.
Richard M. Hart Jr., executive officer for systems & technology services, told trustees Year 2000 efforts are continuing on schedule. The various systems users are testing data using dates into the 21st century, and problems discovered are being corrected in a satisfactory manner. Year 2000 testing for the retirement system is being performed concurrent to upgrade installation, and systems integration testing is scheduled for completion in the second quarter of 1999.
Paige Patterson, president of the Southern Baptist Convention and president of Southeastern Baptist Theological Seminary, serves as a trustee by virtue of election as president of the convention. He addressed trustees Tuesday morning and praised the work of the Annuity Board. He encouraged staff to help ministers and missionaries accumulate retirement accounts that will allow them to continue serving in ministries and missions after formal retirement, but without the need for salaries. Patterson also suggested the formation of a prayer organization made up of widows of ministers.
The board adopted responses to two motions referred from the Southern Baptist Convention annual meeting in Salt Lake City last June. One motion asked that the Annuity Board regularly hold an open enrollment for its church medical plan. Trustees declined to take the requested action due to actuarial opinions that open enrollment would create a high likelihood of adverse selection against the plan and, accordingly, a financial risk to the Personal Security Program.
A second motion suggested a church-wide offering be taken for the Adopt An Annuitant ministry on the Sunday designated as Annuity Board Sunday (now Adopt An Annuitant Sunday) in the SBC calendar. Trustees expressed appreciation for the intent of the messenger’s motion, but declined to initiate such a promotion. Trustees said a church-wide offering appeal would require an amendment to the SBC Business and Financial Plan. They also said the move “might set a precedent that would encourage abandonment of the basis of Cooperative Program giving and could possibly begin to erode the unique giving patterns to the annual offerings for international and North American missions.”
The full text of official responses to the motions will be printed in the 1999 SBC Book of Reports.
The next scheduled meeting of Annuity Board trustees is March 1- 2, 1999, in Dallas.

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  • Thomas E. Miller Jr.