Conference Trustees Update Disaffiliation Policy

August 24, 2022

Wednesday, August 24, the Kentucky Annual Conference Board of Trustees announces an update to the Conference’s terms for churches disaffiliating according to the Book of Discipline ¶2553. Effective immediately, disaffiliating churches will not be responsible for contributing a pro rata share of the Conference’s post-retirement medical liability.

The Trustees made this change in disaffiliation terms after receiving a report from the Conference Board of Pensions. The Board of Pensions began work on its report immediately following Annual Conference in June 2022 when it was asked via an approved motion to explore if its current assets could cover unfunded pension liabilities and unfunded retirement health liabilities.

After a review of its assets and liabilities and in consultation with Wespath and Mercer, the Board of Pensions determined the current funding level of its post-retirement medical liability sufficiently meets its target funding level. To achieve the Board-determined funding level, the Board of Pensions reevaluated its allocation of assets to existing obligations and determined funds could be reallocated from the Special Grant account that exceeded its target funding level to the account that supports the post-retirement medical program. The Board of Pensions determined the reallocation would not jeopardize the sufficiency and ability of the two funds to honor their benefit obligations. The Board of Pensions will continue to monitor both the fund balances and the benefit obligations to ensure they are meeting the needs of those who have served faithfully.

The Board of Pensions also reported to the Trustees on the Board of Pensions’ pension reserve assets and underfunded pension liability, an amount Wespath calculates and provides to annual conferences for Book of Discipline ¶2553 and ¶1504 purposes. After a review of its assets and liabilities and in consultation with Wespath, the Board of Pensions reported to the Trustees their recommendation that current pension reserve assets not be used to cover or offset underfunded pension liabilities that may exist due to Book of Discipline ¶2553 and ¶1504. In providing their report to the Trustees, the Board of Pensions highlighted their fiduciary responsibility and relationship to plan participants and the retirement plan obligations. The Board of Pensions specifically noted that pension reserve funds exist to ensure the sufficiency, integrity, and continuity of retiree benefits. The Board of Pensions report also emphasized that given market volatility, denominational uncertainty coupled with the delayed implementation of the COMPASS retirement plan, and the consideration of future Pre-82 benefits increases, pension reserve funds should not be considered for use at this time.

“I am grateful to the Board of Pensions and Board of Trustees for their work. I know it has been difficult, but they have done their work with diligence and wisdom. They have demonstrated a gracious and fair spirit while honoring their fiduciary and moral responsibilities. Securing the care of our active and retired clergy and surviving spouses is one of our highest priorities,” said Bishop Fairley.

In addition to receiving the Board of Pensions’ report, the Trustees reviewed a July 19 announcement from Wespath regarding the denomination’s and annual conference’s underfunded pension liability calculations. The announcement noted a review and adjustment in Wespath’s calculation of the liability premium component of an annual conference’s underfunding from 10% to 5% effective July 1, 2022. For local churches seeking disaffiliation at the special called Annual Conference on December 4, 2022, the Trustees will use this updated July 1, 2022 Wespath report when calculating a church's pro rata share of the Conference's underfunded pension liability.

Considering today’s update, the Trustees are extending the timeline for churches seeking disaffiliation effective at the special called Annual Conference on December 4, 2022. The new timeline:

Contact District Superintendent by… September 1, 2022
Hold church conference vote by… September 30, 2022
Fulfill terms by… November 11, 2022
Annual Conference ratification… December 4, 2022

If a church has received disaffiliation information since Annual Conference, a new information packet reflecting these changes will be provided by August 26, 2022.

If a church has questions about disaffiliation at the special called Annual Conference on December 4, 2022, but has not yet requested information or contacted the District Superintendent, contact with the District Superintendent must occur before September 1, 2022.

Churches seeking a ratification vote on their disaffiliation at the special called Annual Conference on December 4, 2022 must hold a church conference vote by September 30, 2022. The terms of disaffiliation must be fulfilled by November 11, 2022.

For more information about disaffiliation see here: Disaffiliation Process and Information

If a church wishes to remain United Methodist, there are no actions to be taken.