This is a story about a religious organization that made a smart business decision. But it is much more than that. It is about an organization applying a moral principle to its retirement package. The United Methodist Church has decided to offer a traditional retirement plan to its staff members.
There was a time when the traditional, or conventional, retirement plans were common in the business world, but no longer. Traditional plans commit organizations to paying their retirees a fixed amount, regardless of financial market conditions. The Federal government ensures the plan’s payments. In other words, the plans offer retirees long-term security and certainty. Today most businesses offer 401Ks and other variants of “defined” pension plans that give retirees varying degrees of autonomy, and all the risk, if all the reward. These plans are often cheaper for employers that offer them. The employers are responsible for limited, “defined” financial contributions, if any at all. Employees often take deductions from their paychecks to fund their own retirement. Defined pension plans seemed like a great tradeoff to many retirees during the financial boom times of the mid- to late-1990s, when they could reap stock market gains. But as the stock market tanked, so too did the benefits of those retirees, who absorbed all the risks involved, with no minimal retirement guarantee. Their employers offered the retirees a roll of the dice for retirement.
Barbara Boiggrain, Secretary General of the United Methodist Church’s General Board of Pension and Health Benefits explains the reason to move from a defined benefits plan to a traditional plan with a small defined benefits option, saying “I don’t feel that a defined-contribution plan only is necessarily the best way to take care of employees. Especially for a large, stable organization that has a considerable future in front of it.” This is really a moral argument. It says that the people that dedicate their lives working for you deserve the certainty of being taken care of by you in their old age. It also says that the organization believes its past and present are a part of its future. This is too rare a sentiment today.
There are a lot of financial reasons why traditional pensions have fallen by the wayside. There are financial advantages the United Methodist Church and other non-profit and government entities have that private businesses don’t receive in traditional benefit plans. This is an area where lawmakers could make the difference, offering greater incentives to promote the stable retirement of older workers. They should do this not only because it is good policy, but because of the moral lesson it teaches: you take care of the people that work for you. There is also a positive moral lesson about the organizations that offer such security, they are stable organizations with a future.
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