Church Pays Off Loan and Creates New Pension Trust
The First Church of Christ, Scientist, announced it has fully repaid a loan from its pension fund that was used to cover the cost of closing The Christian Science Monitor's television activities.
The church also announced it has established a separate legal entity, The Mother Church Pension and Benefits Trust, and made an irrevocable donation to the trust to fund pension benefits for its employees. Three trustees will hold the funds on behalf of participants in the church's pension plan.
The two actions "bring closure to one chapter and open a new one which strengthens the church's long-term commitment to its employees and retirees," said Virginia S. Harris, chairman of the Christian Science Board of Directors.
In early 1992, the church borrowed $42.5 million from its pension-reserve fund to help pay personnel severance costs involved in closing the Monitor's television operations in April, 1992. Since then, the church has paid interest on the pension loan monthly. Payments of principal reduced the amount of internal indebtedness to $35.2 million as of April 30, 1998.
After paying off the loan to the pension reserve, the church placed $67.7 million in cash and securities in the new pension trust. That was the amount Deloitte and Touche LLP, the church's actuarial consultants, said was needed to pay all benefits already earned by current and former employees.
The amount and schedule of current pension payments are not affected by the recent moves.
"Over the past several years, steady member contributions, strict financial controls, and good investment performance have placed The Mother Church in a strong financial position," said Walter D. Jones, church treasurer. "As a result, we have been able to take these two important steps."
EACH year, the church will make contributions to the trust to cover the value of benefits earned by employees over the previous 12 months. If the value of the trust's investments falls and the trust no longer contains enough to pay all promised pension benefits, the church will add contributions to make up the shortfall.
A strong stock market could leave the trust with more than it needs to pay pension benefits. In that case, the trust document allows excess funds to be used to pay the cost of other benefits for church employees and retirees, such as life insurance, while requiring the fund trustees to keep on hand at least 105 percent of the amount needed to pay all pension benefits.
Under the terms of the trust, its assets cannot be used or borrowed to fund other church activities or programs. By contrast, the pension reserve fund was considered part of the church's unrestricted assets that could be used for other purposes if needed and could be subject to claims by church creditors.
After funding the new trust, church directors closed the pension reserve fund. Some $32 million in cash and securities as well as $23 million of real estate from the reserve fund were left over after paying off the loan and setting up the new trust. Those assets were moved to the church's general fund to support mission-related activities.