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Decision No. 976

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October 23 2003
In Re: Review of Bishop’s Decision of Law in the East Ohio Annual Conference on Whether the Annual Conference Had the Authority to Redesignate Certain Funds to Support the Conference’s Health Care Benefit Plan.

Digest of Case

The decision of law of Bishop Jonathan D. Keaton is affirmed for Question #1. The 2001 East Ohio Annual Conference had the authority to redesignate the Pension Reserve Account as the Conference Pension and Health Reserve Account. The decision of law for Question # 2 is not affirmed. The East Ohio Annual Conference is directed to fund the pre-1982 past service account meeting the donor intent of the 1988-92 capital funds campaign. The appropriate amount should be based on the current actuarial projections for the pre-1982 past service account. All remaining funds including accrued interest shall be held in the East Ohio Annual Conference Pension and Health Reserve Account for pension and health benefits for pre-1982 clergy, spouses and dependents.

Statement of Facts

At the 2003 session of the East Ohio Annual Conference on June 16th, a clergy member of the Conference submitted the following request to the bishop for an episcopal decision of law: WHEREAS, the 2001 East Ohio Annual Conference acted to redesignate the Pension Reserve Account to be the Conference Pension and Health Care Reserve Account and to authorize a portion of the earnings upon such fund to be utilized for health care benefits (2001 Conference Journal, Volume II, P. 290); and WHEREAS, the 2002 East Ohio Annual Conference referred to the Conference Board of Pensions a request by John Buchanan for a study of the permitted uses of funds generated out of the 1988-1992 Capital Fund Campaign which funds now comprise the Conference Pensions and Helath Care Resrve Account (2002 Conference Journal, Volume II, P. 171); and WHEREAS, during this Conference Year 2002-2003, the Conference Board of Pensions has received legal opinions from two independent law firms expressing their opinion that such funds are not restricted to funding the pre-1982 pension fund; and WHEREAS, Judicial Council, Decision 963, dated April 27, 2003, held that Conference funds are not restricted to the use of the pre-1982 pension fund unless and until such monies have been paid into such Plan; and WHEREAS, the Conference Pension and Health Care Reserve Account, formerly known as Pension Reserve Account and as the Capital Funds Campaign Account has never paid into the pre-1982 pension fund, 1. Did East Ohio Annual Conference have authority in 2001 to redesignate such funds as the Conference Pension and Health Care Reserve Account? 2. Does East Ohio Annual Conference have the authority to allocate a portion of such fund to support the Conference’s health care plan? The bishop made the following response to the request: Question No. 1 Did East Ohio Annual Conference have authority in 2001 to redesignate such funds as the Conference Pension and Health Reserve Account? Response The 2001 East Ohio Annual Conference had the authority to redesignate the Pension Reserve Account to the Conference Pension and Health Reserve Account. Here are the reasons: 1. 604.1 of The 2000 Book of Discipline states, “The annual conference, for its own government, may adopt rules and regulations not in conflict with the Discipline of The United Methodist Church;” 2. Judicial Council Decision #963 says in part, “While the deposit account is the reserve for the past funding account, it does not have the restrictions imposed by paragraph 1506.8 of the 2000 Book of Discipline. The Conference Pension and Health Reserve Account (CPHRA) does not have this restriction. It is not the GBOP pre-1982 past service funding account. 3. East Ohio Annual Conference has a funding plan to address its pre-1982 pension obligations. Financial documents from the Treasurer’s Office project that the CPHRA account has sufficient reserves to retire the pre-1982 obligations of East Ohio Conference per the action of the 1987 session of East Ohio Conference. (See attachment 1) 4. Based on information from the 1987, 1988 and 1992 Conference Journals, the Annual Conference did not place the funds raised in the 1988-1992 Capital Funds Drive nor the interest earned in the past Service Funding Account for Pre-1982 unfunded liability. All funds went to the Pension Reserve Account. With reference to the unfunded Pension Liability, one Conference Journal reads, “[T]he 1987 Annual Conference requests that the Council of Finance and Administration make a feasibility study for a Capital Funds Drive to pay off our unfunded liability of (thirteen million as of January 1, 1987) for the years of service prior to January 1, 1982 in order that we could begin paying for all pensions on a current year’s basis”. (See attachment 2) 5. Finally, several legal opinions conclude that the raising and use of CPHRA funds are in compliance with State and Federal Law. And it seems to be in conformity with the will of the East Ohio Conference. (See attachment 3) Question No. 2 Does East Ohio Annual Conference have authority to allocate a portion of such fund to support the Conference’s health care benefit plan? Response The East Ohio Annual Conference had the authority to allocate a portion of such funds to support the Conference’s health care benefit plan. Here is the rationale: 1. 604.1 of The 2000 Book of Discipline states, “The annual conference, for its own government, may adopt rules and regulations not in conflict with the Discipline of The United Methodist Church;” 2. Judicial Council Decision #963 says in part “While the deposit account is the reserve for the past funding account, it does not have the restrictions imposed by paragraph 1506.8 of the 2000 Book of Discipline. The Conference Pension and Health Reserve Account (CPHRA) does not have this restriction. It is not the GBOP pre-1982 past service funding account. 3. East Ohio Annual Conference has a funding plan to address its pre-1982 pension obligations. Financial documents from the Treasurer’s Office project that the CPHRA account has sufficient reserves to retire the pre-1982 obligations of East Ohio Conference per the action of the 1987 session of East Ohio Conference. (See attachment 1) Jurisdiction The Judicial Council has jurisdiction under ¶ 2609.6 of the 2000 Discipline. Analysis and Rationale These questions of law are a continuation of concerns that have been raised during several conference sessions concerning the pre-1982 pension fund and the uses to be made by the conference of funds and/or interest from a 1988-1992 capital funds campaign designed to ensure that pre-1982 pension benefits could be paid. Voluminous documentation has been provided to the Council concerning the nature of the 1988 capital funds campaign as well as the current status of the conference’s action to meet the requirements of having in place a funding plan to address its pre-1982 pension obligations. The 1988-1992 capital fund campaign was conducted for the following purpose: “The 1987 Annual Conference recommends that the Council on Finance and Administration make a feasibility study for a Capital Funds Drive to pay off our unfounded liability of (thirteen million as of January 1, 1987) for the years of service prior to January 1, 1982 in order that we could begin paying for all pensions on a current year’s basis.” (1987 East Ohio Annual Conference Journal, p. 263) The campaign was completed in 1992, and at the conference session of that year the Conference Journal reports: “The East Ohio Capital Funds Campaign be declared a success…” Based on the 1988 and 1992 conference journals, the conference placed all funds and accrued interest in the conference Pension Reserve Account. These funds derived from the capital funds campaign were not placed in the Past Service Funding Account. There are several paragraphs in the 2000 Discipline relating to donor intent, including but not limited to, the following: ¶ 258.4(b) - ...Contributions to benevolence shall not be used for any cause other than that to which they have been given... . ¶ 258.4(e) - Contributions designated for specific causes and objects shall be promptly forwarded according to the intent of the donor and shall not be used for any other purpose. ¶ 807.1 - To receive, collect, ...all donations...conveyed to The United Methodist Church, ...and...administer the same and the income there from in accordance with the direction of the donor... . ¶ 808.3 - If more than the amount approved ... is received ... the excess funds shall be held in trust. [T]he disposition of any remaining fund balances ... shall be consistent with the purposes for which the funds were raised. ¶ 1504.17 - ...[T]he general board [of pension and health benefits] shall dispose of or administer the same [gift] in the manner deemed most equitable according to the apparent intent of the donor... . The above disciplinary provisions indicate that any designated gifts must be used for the purpose the donor intended. The Council directs the East Ohio Annual Conference to fund the pre-1982 Past Service Account with the appropriate amount of funds donated through the 1988-92 capital funds campaign, thus meeting the donor intent of the capital campaign. The appropriate amount should be based on the current actuarial projections for the pre-1982 past service account. All remaining funds including accrued interest shall be held in the East Ohio Annual Conference Pension and Health Reserve Account for pension and health benefits for pre-1982 clergy, spouses and dependents.

Decision

The decision of law of Bishop Jonathan D. Keaton is affirmed for Question #1. The 2001 East Ohio Annual Conference had the authority to redesignate the Pension Reserve Account as the Conference Pension and Health Reserve Account. The decision of law for Question # 2 is not affirmed. The East Ohio Annual Conference is directed to fund the pre-1982 past service account meeting the donor intent of the 1988-92 capital funds campaign. The appropriate amount should be based on the current actuarial projections for the pre-1982 past service account. All remaining funds including accrued interest shall be held in the East Ohio Annual Conference Pension and Health Reserve Account for pension and health benefits for pre-1982 clergy, spouses and dependents. Sally Brown Geis was absent.

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