ELCA publishing house announces pension changes
Some 445 retirees and vested former employees of Augsburg Fortress Publishers will receive their last benefit payment in March as the company terminates a major retirement plan. Also affected are 55 current employees enrolled in the plan.
Augsburg Fortress is the Minneapolis-based publishing ministry of the ELCA. It operates as an independent, nonprofit corporation.
The Board of Trustees of the publishing firm acted to halt the plan in December because of its severe underfunding. At the end of 2009, the plan’s retirement benefit obligations totaled $24.2 million while assets amounted to only $8.6 million.
“Absent plan termination, the money in the plan was projected to be totally distributed as benefits to retirees in approximately five years, leaving many participants in the plan without any retirement benefits from Augsburg Fortress,” Beth Lewis, president and CEO of the company, said in a letter to plan members December 31.
The board also voted to amend the plan to provide what it considered a fairer distribution of the assets prior to termination. Participants are expected to receive lump-sum payments in March under the revised distribution plan.
Without those amendments, all the money in the plan would have been used to fund benefits for some 175 participants who retired prior to March 5, 2007, and their beneficiaries, Lewis said. The other 325 persons in the plan would receive nothing. With the changes, she said, most plan participants will receive a lump-sum payment amounting to “some portion” of their accrued benefits.
The beginning of the problem
The plan has been underfunded for nine years, Lewis said. However, participants were not informed of this situation.
The CEO explained that it appeared until recently that the plan had enough funding to provide benefit payments to plan participants “for many years.” The precipitous decline in financial markets in 2008 and early 2009 changed that, Lewis said, and continued payment of benefits to retirees during the downturn “compromised the opportunity for the plan assets to regain sufficient ground to sustain the plan during the ensuing market recovery.”
Lewis said Augsburg Fortress looked for an infusion of money from other sources before deciding to terminate the plan. The company itself was in no position to cover the shortfall, she said, because of “our own ongoing operational challenges resulting from fewer sales to shrinking ELCA congregations and increasing competition from the Internet and publishers outside of the Lutheran tradition.”
Augsburg Fortress looked for an infusion of money
from other sources before deciding to terminate the plan.
While Augsburg Fortress is the official publishing arm of the ELCA, it operates as a separate business and runs its pension plans independent of those of the ELCA. The company appealed to the churchwide organization for support, Lewis said, but the ELCA “advised us that it has no obligations or fiduciary duties with respect to the Augsburg Fortress plan.”
Because the plan was organized as a “church plan,” Lewis said, “participants are not covered by provisions of the Employee Retirement Income Security Act (ERISA) and the plan’s benefits are not guaranteed by the Pension Benefit Guaranty Corp.”
Consideration was also given to having Augsburg Fortress declare bankruptcy and sell off the assets of the company to cover the shortfall, according to Lewis.
But even that drastic step would not have entirely solved the funding deficit, she said, adding that “it would be a tragedy for the proclamation of the Gospel and would put almost 200 employees out of work.”
A new plan is in place
In 2005, Augsburg Fortress froze participation in the retirement plan now being terminated and began offering a so-called 403(b) defined-contribution plan to employees. Unlike the earlier plan which was funded entirely by company contributions, the current one calls for contributions by both workers and the company according to a set formula. Some 160 workers are enrolled in the new plan — 91 percent of eligible employees.
The plan being terminated was administered by a committee composed of Lewis; Sandy Middendorf, Augsburg Fortress vice-president for human relations; and John Rahja, the company’s chief financial officer. They were advised by ING Investment Trust Co., trustee of the assets, and Sibson Consulting, the plan’s actuaries.
In her letter to plan members announcing the termination, Lewis said, “These decisions and actions break our hearts and we apologize, but they are necessary. Know that you are in our hearts, our thoughts and especially our prayers.”
Tags: AF, Augsburg Fortress, Bankruptcy, Beth Lewis, Board of Trustees, ELCA, ERISA, Evangelical Lutheran Church in America, ING Investment Trust Co., John Rahja, Pension problems, Robert Ylvisaker, Sandy Middendorf, Sibson Consulting