Direct Invoicing Task Force. Agenda Timeline of Events Task Force Membership Review current financial collections & future Conference budgets under current

Direct Invoicing Task Force

Agenda• Timeline of Events• Task Force Membership• Review current financial collections & future

Conference budgets under current apportionment system

• Direct Invoicing – What?– Why?– How Much?– Other Alternatives?

• Recommendations from Task Force• Other Annual Conference Items• Q&A

Timeline of Events

• 2003 Annual Conference-first discussed• June 2007-Task force formed based upon

Annual Conference Action• September 2007-Present-Task Force

Meetings• Spring 2009-Task Force Recommendations• May 2009-Pre-Conference Briefings• June 2009-Vote at Annual Conference• January 1, 2011-Implementation (if

approved)

Task Force Members• Bishop Swanson• Charlie Harr, Board of

Pensions (BOP) Chair• Sandra Davis, CFA• Rev. Don Nation,

Cabinet Representative to BOP

• Rev. Dr. Chuck Starks, DS

• Rev. Ken Henderlight, DS

• Rev. Dr. Doug Fairbanks, DS

• Rev. Richard Edwards, Dir. of Congregational Development

• Kathy Mays, BOP

• Sue Ann Greene, CFA

• Rev. Walter Weikel, CFA

• Rev. Gary Grogg, CFA• Rev. Linda Bird Wright,

BOP• Rev. Charles Lockerby,

BOP• Norm Sparks, BOP• Patty Muse, BOP

Advisors• John Tate, Treasurer• Ron Matthews,

Executive Assistant to the Bishop

“We can do things the cheap way, the simple way, for the short-term and without regard for the future. Or, we can make the extra effort, do the hard work, absorb the criticism and make decisions that will cause a better future.”

-Mike Rounds

“Leadership requires the courage to make decisions that will benefit the next generation”

-Alan Autry

“Indecision becomes decision with time.”

-Author unknown

“The definition of insanity is doing the same things over and over again expecting a different result.”

-Albert Einstein

Holston Conference

$10

$11

$12

$13

$14

$15

$16

1998 2000 2002 2004 2006 2008

Mill

ions

Apportioned Received

Current Collection System

• Annual Conference Budget adopted each year.

• Conference Treasurer allocates proportionally, based upon total church spending (Table II), an amount due from each church based upon formula adopted by Annual Conference.

• Apportioned amounts due are sent to D.S. • Churches determine the amount that will

be paid or not paid.

Current Reality• The Conference must apportion more than

is needed.• Apportionments are a variable expense for

some churches-cash flow tool.• When churches do not pay 100%, future

apportionments must be increased.• Apportionment payments for benefits can

no longer be treated as an optional payment.

• We are directly invoiced for all benefit costs.

Single Figure Apportionments 2008

• Overall Budget– 25% of churches did not pay 100%– $15.7 million apportioned– $13.4 million received– $2.34 million total apportioned not

received• Pension & Health

– $6.3 million apportioned– $5.3 million received

Current Costs• 100% of pension, life, and disability

costs are paid through Conference apportionments. – $7.6 million will be paid in 2010– $3.5 million apportioned in 2010

• 25% of active health plans and 89% of retiree plans are paid by apportionments– Claims costs are increasing

~$1m/year

Projected Future Costs

• Continued large increases in health costs 5-12% per year

• Future pension costs– Increasing pastoral salaries & housing

allowances (+3.5%/year)– Defined Benefit program (2007)– MPP Annuity rates (Defined Benefit

Component)– Automatic increases in Pre-82 rates

Holston ConferenceApportionments devoted to Health Insurance

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

$5,500

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2009 2011 2013 2015

Tho

usan

ds

Projections

Holston ConferenceApportionments devoted to Pension Expenses

$2

$3

$4

$5

$6

$7

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2009 2011 2013 2015

Mill

ions Projections

Removal of Pre-82 Costs

Total Pension Costs

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

2009 2011 2013 2015 2017 2019 2021 2023 2025 2027

Apportionments Reserves & Investment Earnings

Holston Conference90% Collections

$2

$3

$4

$5

$6

$7

$8

$9

2009 2011 2013 2015 2017 2019 2021 2023 2025 2027

Apportionments Reserves & Investment Earnings

Holston ConferenceProjected Conference Budget-2% Increase

$2

$4

$6

$8

$10

$12

$14

$16

$18

$20

2004 2006 2008 2009 2011 2013 2015 2017 2019 2021 2023 2025

Mill

ions

Conference Budget-projects a 2% increase beginning in 2011Pension-Funds projected pension costs assuming actuarial amounts with no increases above 2% Past Service RateHealth Insurance-12% medical increase for 5 years & 5% for next 10 years

Pension & Health Costs

Other Ministry Costs

Projected Conference Budget


Projected Apportionments

Pension & Health CostsOther Ministry Costs

Holston ConferenceConference Budget-Ministry Funds at 0%

$2

$7

$12

$17

$22

$27

2004 2006 2008 2009 2011 2013 2015 2017 2019 2021 2023 2025

Mil

lion

s

Pension-Funds projected pension costs assuming actuarial amounts with no increases above 2% Past Service RateHealth Insurance-12% medical increase for 5 years & 5% for next 10 years


Pension & Health Costs


Projected Apportionments

What is direct invoicing?

Direct Invoicing• Church invoiced for their benefit costs instead

of through apportionments.• Costs must be paid by local church on

monthly basis.• Used by Annual Conferences to insure benefit

programs are fully funded as required by the Discipline.– 65% in South East Jurisdiction – 3 Annual Conferences are considering direct

invoicing @ 2009 Annual Conference

• Direct invoicing is being used by the General Church to collect pension contributions.

Why should we support

direct invoicing?

Expected Outcomes

• Proposed system would fund existing benefit programs.

• No benefit participation=No costs• Aligns costs with source of expense.• Proper reflection of cost of pastoral leadership.• Will indicate potential financial stress of

existing pastoral leadership.• Eliminates churches from unintentionally

funding the costs of the leadership of other churches (pay vs. no-pay).

Small ChurchAverage Attendance 25

Total Apportionment (FSA)

$1,653

Portion of FSA for Pension & Health*

$657

Apportionments Paid-All funds

$826

2008 Payment-P&H $328% Unpaid 50%

Pastoral Leadership PT Local Pastor

Est. Direct Invoice $0*Includes Retiree Program

Medium ChurchAverage Attendance 179


$46,074


$18,518


$0

2008 Payment-P&H $0% Unpaid 100%

Pastoral Leadership Full Time-Elder

Est. Direct Invoice $18,000*Includes Retiree Program

Large ChurchAverage Attendance 592


$193,626


$77,822


$122,933

2008 Payment-P&H $49,411% Unpaid 36.51%

Pastoral Leadership (2) Full Time-Elder

Est. Direct Invoice $37,500*Includes Retiree Program

How will this impact my church?

Direct Invoicing Impacts

• Will impact all churches in a unique manner.

• Depends upon salary and current benefits associated with pastoral leadership.

• May cause churches to evaluate how they can support their level of pastoral leadership (i.e. full or part-time).

• Apportionments for benefits will no longer be a variable expenditure.

Estimated Direct Invoiceper pastoral appointment

CRSP-Defined Benefit

10.4% of pensionable wage

CRSP-Defined Contribution

3% of pensionable wage

CPP 3% of pensionable wages

Health Insurance

$8,200 ¾ time or greater

Health Insurance Blended Rate

• The cost per appointment would be allocated by a charge to determine the amount that would be paid by each church on a circuit.

• Figure includes the amount paid as the church’s portion (35%) of health insurance.

Theoretical Example-SingleChurch Budget Church Budget

(Projected)

Apportionment $18,100 $8,507

Health Insurance (single only)

$2,100 $0

Direct Invoice-Health $0 $8,200

Direct Invoice-Pension

16.4%$0 $7,614

Totals $22,200 $24,321

Theoretical Example-E+1

Church Budget Church Budget (Projected)


Health Insurance (E+1)

$4,536 $0



16.4%$0 $7,614

Totals $22.636 $24,321

Theoretical Example-Family

Church Budget Church Budget (Projected)


Health Insurance (E+1)

$6,444 $0



16.4%$0 $7,614

Totals $24,544 $24,321

Division of costs for a circuit

Charge A Budget (Projected-25%)

Charge B Budget

(Projected-50%)

Charge C (Projected-25%)

Apportionment $2,000 $5,000 $2,000

Direct Invoice-Health

$2,050 $4,100 $2,050


16.4%

$1,903.50 $3,807 $1,903.50

Totals $5,953.50 $12,907 $5,953.50

Estimated Direct Invoice

• Minimum Salary $15,825• Average Compensation $19,885

– These figures include 35% of the cost that was previously paid out of the church budget $2,100-$6,444 per year for the church portion of health insurance.

Are there any alternatives to

direct invoicing?

Alternatives to Direct Invoicing

• Do nothing.• Elimination of funding for Conference

services and related agencies. • Reductions in health related programs

and cost sharing %’s for pastors, retirees, and lay employees.

• Increased apportionments.• Elimination of Single Figure

Apportionment.

How will this impact the Conference

Budget?

Conference Budget Impact

• Eliminates benefit costs from the Conference Budget that are currently apportioned (~$5 m)– Pension (100%)– Health Insurance (25%)

• Allows Conference to focus budget on other ministry and program costs that can be controlled based upon church’s support of these programs.

4 Final Points1. Ensures payment for existing benefit

programs for those that receive the benefits.

2. The budget will isolate items that can be controlled by the Annual Conference.

3. Matches the cost of pastoral leadership with the source of the costs.

4. Direct invoicing appears to be the best alternative to meet the future challenges.

Conference Council on Finance & Administration

(CCFA)• Encouraging churches to pay amounts

apportioned, but recognizing some cannot (will not) pay.

• Reduced Conference spending by 15% in recognition of churches sending less $

• Implemented ~1.5% pay increase January 1, 2009 for some personnel (4% approved by AC)

• Maintained health care costs, and pension expense at 100% of amount approved for 2009.

2010 Recommended Budget

• Recommending:– Same apportioned amounts as 2009 – 0% personnel cost budget increases– Same category totals for ministry groups as

2009 amended– No health insurance increases to budgeted

amounts (4% request from BOP)– No pension budget increases

• Differences between Book of Reports and actual line-item activities.

If the Conference is cutting expenses by 15%, why are our

apportionments not being decreased?

Differences

• Reserves are the first revenue sources used to fund Conference Budget.

• Lower receipts means more reserves are used.

• More reserves used leads to higher future apportionment costs.

• 90 day cash reserve policy is established.

CCFA 2010

• Seeking alternative methods for funding the 2011 Conference budget.– Spending caps– Multiple figures vs. single figure share– Tithe– Others?

• Encouraging churches to support direct invoicing.

Board of Pensions & Health Benefits

• Requested funding of $6.87m• Received apportioned funding of $6.35m

– Pension Programs (adopted by General Conference)• Implementing minimum 2% Past service rate increase

– Health Program (adopted by Holston Conference Board of Pensions & Health Benefits)

• Implementing 4% rate increase for active programs• Short-term-utilizes reserves for 2010• Long-term-evaluating cost share %’s, co-pays, &

procedures covered• Bidding retiree plan based upon amounts funded and

received (rates and plan details mailed to participants in Fall)

Trustees

• Recommending a Conference-wide workers compensation program administered by the Annual Conference.

• Invoiced separately on a monthly basis.

• Effective for renewals after January 1, 2010.

[email protected]

www.holston.org

mailto:[email protected]

Holston ConferenceConference Payments vs. Receipts

Churches less than 25% in 2008-Full-time Pastor

$44,880

$157,421

$0

$50,000

$100,000

$150,000

$200,000

$250,000

Amount Due

Pension ExpensesMedical Premiums


Churches less than 25% in 2008-Full-time Pastor

$44,880

$157,421

$172,330

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

Amount Due


Pension Expenses

Medical Premiums


Churches paying less than 25% in 2008 with a Full-time Pastor

$44,880

$157,421

$172,330

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

Amount Due Paid


Pension Costs

Medical Premiums

Apportionments Paid

$120,761

Local Salaries Paid $1,021,518

Holston Conference

$0

$20

$40

$60

$80

$100

$120

1973 1977 1981 1985 1989 1993 1997 2001 2005

Mill

ions

Total (Church) $$$$ (Line 76) Total Church Spending CPI Conf Apport. Conf. Apportionment CPI

Holston ConferenceApportionment as a % of Spending

12.00%

13.00%

14.00%

15.00%

16.00%

17.00%

18.00%

19.00%

1973 1977 1981 1985 1989 1993 1997 2001 2005

Avg Attendanc

e

Apportionment per

attendee

Church Spending per

attendee

1997

73,315 $179.00 $1,075.32

1998

73,539 $163.53 $1,057.84

1999

73,836 $183.40 $1,184.05

2000

74,018 $190.00 $1,238.89

2001

76,148 $193.93 $1,244.17

2002

75,644 $199.18 $1,353.80

2003

73,835 $212.08 $1,370.37

2004

74,375 $194.44 $1,448.74

2005

73,956 $201.32 $1,561.85

2006

73,112 $209.37 $1,588.36

2007

71,886 $221.14 $1,726.74

Holston ConferenceApportionments % Collected

84.00%

86.00%

88.00%

90.00%

92.00%

94.00%

96.00%

1973 1977 1981 1985 1989 1993 1997 2001 2005

Apportionments

% Increase in apportionments

2009 $3,502,824.00

2010 $3,502,824.00 0%

2011 $4,203,388.80 20%

2012 $4,833,897.12 15%

2013 $5,317,286.83 10%

2014 $5,849,015.52 10%

2015 $6,375,426.91 9%

2016 $6,853,583.93 7%

2017 $7,196,263.13 5%

2018 $7,484,113.65 4%

2019 $7,858,633.43 5%

2020 $8,079,750.60 3%

2021 $8,308,606.87 3%

2022 $7,004,473.11 -16%

2023 $7,249,629.67 4%

2024 $7,503,366.71 3%

2025 $7,765,984.55 3%

2026 $8,037,794.01 4%

2027 $8,319,116.80 3%

Future Pension Costs-100% receipts

Documents

Direct Invoicing Task Force. Agenda Timeline of Events Task Force Membership Review current financial collections & future Conference budgets under current