Direct Invoicing Task Force

1
Direct Invoicing Task Force
2
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
• QA

3
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)

4
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

5
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
6
Leadership requires the courage to make
decisions that will benefit the next generation
-Alan Autry
7
Indecision becomes decision with time. -Author
unknown
8

• The definition of insanity is doing the same
  things over and over again expecting a different
  result.
• -Albert Einstein

9
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.

10
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.

11
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

12
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

13
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

14
(No Transcript)
15
Removal of Pre-82 Costs
16
(No Transcript)
17
(No Transcript)
18
Projected Conference Budget
Pension Health Costs
Other Ministry Costs
19
Projected Apportionments
Projected Apportionments
Projected Conference Budget
Projected Conference Budget
Pension Health Costs
Pension Health Costs
Other Ministry Costs
Other Ministry Costs
20
What is direct invoicing?
21
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 _at_ 2009 Annual Conference
• Direct invoicing is being used by the General
  Church to collect pension contributions.

22
Why should we support direct invoicing?
23
Expected Outcomes

• Proposed system would fund existing benefit
  programs.
• No benefit participationNo 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).

24
Small Church
Average Attendance 25
Total Apportionment (FSA) 1,653
Portion of FSA for Pension Health 657
Apportionments Paid-All funds 826
2008 Payment-PH 328
Unpaid 50
Pastoral Leadership PT Local Pastor
Est. Direct Invoice 0
Includes Retiree Program
25
Medium Church
Average Attendance 179
Total Apportionment (FSA) 46,074
Portion of FSA for Pension Health 18,518
Apportionments Paid-All funds 0
2008 Payment-PH 0
Unpaid 100
Pastoral Leadership Full Time-Elder
Est. Direct Invoice 18,000
Includes Retiree Program
26
Large Church
Average Attendance 592
Total Apportionment (FSA) 193,626
Portion of FSA for Pension Health 77,822
Apportionments Paid-All funds 122,933
2008 Payment-PH 49,411
Unpaid 36.51
Pastoral Leadership (2) Full Time-Elder
Est. Direct Invoice 37,500
Includes Retiree Program
27
How will this impact my church?
28
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.

29
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
30
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 churchs
  portion (35) of health insurance.

31
Theoretical Example-Single
Church 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
32
Theoretical Example-E1
Church Budget Church Budget (Projected)
Apportionment 18,100 8,507
Health Insurance (E1) 4,536 0
Direct Invoice-Health 0 8,200
Direct Invoice-Pension 16.4 0 7,614
Totals 22.636 24,321
33
Theoretical Example-Family
Church Budget Church Budget (Projected)
Apportionment 18,100 8,507
Health Insurance (E1) 6,444 0
Direct Invoice-Health 0 8,200
Direct Invoice-Pension 16.4 0 7,614
Totals 24,544 24,321
34
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
Direct Invoice-Pension 16.4 1,903.50 3,807 1,903.50
Totals 5,953.50 12,907 5,953.50
35
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.

36
Are there any alternatives to direct invoicing?
37
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.

38
How will this impact the Conference Budget?
39
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 churchs support of these programs.

40
4 Final Points

1. 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.

41
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.

42
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.

43
If the Conference is cutting expenses by 15, why
are our apportionments not being decreased?
44
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.

45
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.

46
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)

47
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.

48
Questions?johntate_at_holston.orgwww.holston.org
49
(No Transcript)
50
(No Transcript)
51
Local Salaries Paid 1,021,518
52
(No Transcript)
53
(No Transcript)
54
  Avg Attendance 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
55
(No Transcript)
56
  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