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ARP Nears Closure of $8.5 Million Retirement Fund Deficit

The Associate Reformed Presbyterian Church, a small denomination of about 264 churches, narrowly averted a crisis last year when it raided every fund it could find to cover an $8.5 million shortfall in its retirement fund. After discovering the extent of the deficit a few years ago, the South Carolina-headquartered organization moved to reallocate its assets and transition its defined-benefit (pension) plan to a defined-contribution model.

Through those actions, the ARP raised over $7.6 million from its Synod boards and agencies, as well as contributions from several presbyteries and individuals. As of April 2022, the shortfall had fallen to $823,875, according to the ARP’s last publicly available update on the matter.

MinistryWatch asked the ARP’s special committee on net assets reallocation (or SCONAR) to provide the latest figures on the fund’s deficit and overall status. However, the committee wasn’t able to grant our request without authorization from the executive board, which won’t meet again until October.

With that, here are the facts we know at this point:

First, it’s worth noting that the ARP’s situation is not unique. Over the last few decades, the private sector saw a wave of employers switch their retirement plans from the standard defined-benefit model to a defined-contribution arrangement, realizing the negative impacts of estimating pension liabilities decades in advance of an employee’s retirement. Then came the rise of the 401(k), today’s most common defined-contribution plan.

The ARP’s defined-benefit plan was adopted in 1961 and reached 621 participants by 2020. Participation is mandatory for salaried, ordained ministers serving in pastoral or administrative roles, as well as career missionaries and salaried Synod employees. After three years of employment, participants vest at 20% annually until they’ve vested 100%.

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At the 2019 General Synod meeting, the ARP’s Board of Benefits proposed a change in the fund’s actuarial assumptions, stating, “The single greatest liability of the ARPC is the ARP Retirement Fund.” At the following year’s meeting, the ARP’s actuary estimated the retirement plan’s assets could only fund payouts for 10 to 15 years with no contributions or 30 years if the ARP continued its 12% contribution rate.

Mainly, the benefit rate increased from 1% to 3.10% over the first four decades of the plan, typically following large portfolio returns (displayed in the graph below). Further, as stated in the 2020 General Synod minutes, “a review of a longer history of valuations indicates that the Retirement Plan became underfunded in the aftermath of the financial crisis and Great Recession and that it has been underfunded annually since 2012.”

(Photo Source: 2020 General Synod minutes)

The ARP formed a “special committee on net assets reallocation” (or SCONAR) to address the problem in three ways: ARP would make a hard freeze on the accrual of benefits among non-retired participants. It would also commence an involuntary termination for active and vested terminated participants, who would receive a payout of 100% of the present value of the accrued benefit either through a check or by rolling over the funds to the ARP’s new defined-contribution plan. Finally, the third category of participants—retirees currently collecting pension benefits and those eligible (over 62 years old) but not yet retired—would still be allowed to stay in the plan.

To meet those objectives, SCONAR spent the next year raising millions by reallocating assets and requesting contributions from presbyteries, churches and individuals. By December 2021, the committee had raised $7 million. With an additional $1.5 million needed to cover the shortfall, SCONAR Chairman Harry Jeffcoat wrote a blog post calling on ARP congregations: “We now turn to you, the churches, and individual members of the ARPC, and ask that you support those who have faithfully served the Lord over many years.”

As mentioned, the committee reported last April that the deficit had fallen to about $820,000, but since then, there don’t appear to be any public updates on the status of the fund. Though the committee did present an update at this year’s General Synod meeting (held in June), an ARP representative told MinistryWatch that the minutes won’t be posted online until late summer or early fall.

(Source: ARP News)

Although SCONAR members weren’t authorized to speak with MinistryWatch about the fund’s progress, the ARP Magazine’s coverage of the 2022 General Synod offers some indication. The publication mentioned that Jeffcoat reported on the committee’s progress at this year’s event, saying, “we are close to our desired goal.”

Main photo: A shot of the audience at the 2022 General Synod meeting, an annual gathering of ARP pastors and other leaders. (Photo source: ARP)

Shannon Cuthrell

Shannon Cuthrell is a journalist with a background covering business, technology and economic development. She has written for Business North Carolina magazine, WRAL TechWire, Charlotte Inno and EE Power, among other publications.