Supplemental Pensions & Benefits

Rocky Mountain DistrictJune 28, 2012

A Report from the Board of General Superintendents

It began in 1971Who would begin an unfunded

Pension Assistance Plan and provide benefits back to 1908? – We did!

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How could a plan survive with no equity investing for the first 20 years of its life? – Ours did!

Could a plan become fully funded in just 29 years? – It happened! HOW?

BecauseLittle is much, when God is in it!

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Your church stepped out on faith.We’ve never missed a payment since the beginning in 1971!

Clouds on the Horizon

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2002 began decade of disappointing investment returns – from 7% to 5.6%“Bear” markets in 2002 and 2003 eroded trust assets of every pension plan, public or private.

During this period, P&B subsidized deficiencies from its own reserves.

A Perfect StormMore clergy began moving into

retirement

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Increased life expectancyDuring this decade, P&B raised

payouts to beneficiaries twice. Increased financial pressure was

felt by local churches, districts, etc.

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2011 2016 2021 2026 2031 2036 2041 2046 2051 2056 2060

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Contributions Benefit Payments Beginning of Year Assets

IF WE DO NOTHING

Shown for illustrative purposes only, contributions are not recommendationsAssumptions: (1) 2011 Trust Return: 0% (2) 2012 + Trust Return: 7% (3) Contributions: $5.0 M in 2011+

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$14.7 million

$5 million

Assets depleted 2023

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If We Do Something…

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2011 2016 2021 2026 2031 2036 2041 2046 2051 2056 2060

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Contributions Benefit Payments Beginning of Year Assets

Forecasts - Cash Flow Review

Shown for illustrative purposes only, contributions are not recommendationsAssumptions: (1) 2011 Trust Return: 0% (2) 2012 + Trust Return: 7% (3) Contributions: $5.0 M in 2011,

$8.0M until 2032, actuarial recommendation thereafter 8

$8+ million until 2034

Fully fundedBy 2041

BGS RECOMMENDATION ON P&B

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• The BGS consulted with U.S. DS’s, the Council on Higher Education, Dr. Don Walters, P&B Board members, & actuarial firm of Towers & Watson

BGS Recommendations

Increase the budget formula for P&B from 2% to 2.25% effective April 1, 2012, reduce from 2.5% to 2.25% for universities. This would result in a net increase for P&B of $1.4 million.

Capital Reserve Fund and supplemental earnings could contribute $2 million.

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BGS Recommendations

P&B department savings = $250,000 annually.

U.S. Region-wide emphasis on 100% payment of all budget allocations. This could result in an $1.2 million.

These timely measures could result in an additional $4.85 million per year.

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BGS Recommendations

We appeal to every local church to pay 100% of their WEF, District, P&B, and Educational “shares for others.”

We honor NNU for accepting a decrease in their funding apportionment to help us meet this immediate need. Some districts and churches are attempting to continue 2.5% for NNU. 12

For Your Information

District: Rocky MountainAmount received from Pensions &

Benefits to all beneficiaries last year: $164,859

Amount contributed to Pensions & Benefits last year: $56,533

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Retired Ministers

Will they find us faithful?THANK YOU, Rocky Mountain

Nazarenes, for supporting our legacy builders!

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For Your InformationDistrict: Iowa

Amount received from Pensions & Benefits to all beneficiaries last year: $157,490

Amount contributed to Pensions & Benefits last year: $115,007

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For Your InformationDistrict: Kansas

Amount received from Pensions & Benefits to all beneficiaries last year: $251,638

Amount contributed to Pensions & Benefits last year: $206,626

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For Your InformationDistrict: Prairie Lakes

Amount received from Pensions & Benefits to all beneficiaries last year: $141,198

Amount contributed to Pensions & Benefits last year: $128,965

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For Your InformationDistrict: Kansas City

Amount received from Pensions & Benefits to all beneficiaries last year:$624,911

Amount contributed to Pensions & Benefits last year: $408,066

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Lift Up Your Eyes

We’ve been looking at the hills…• The hills of financial stress• The hills of global turmoil• The hills of spiritual adversity

“I lift up my eyes to the mountains— where does my help come from? My help comes from the LORD, the Maker of heaven and earth.” –Psalm 121:1-2

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A Matrix of Possibilities

* % of Budget represents required pay-as-you-go funding as a portion of the P&B budget expected in that year (assuming 2% annual growth.) 28

Investment Return

4% 7% 10%

Annual Contribution (millions)

$5.0

Asset depletion: 2020

Pay-as-you-go: $16.2M

% of Budget*: 116%

Asset depletion: 2023

Pay-as-you-go: $14.7M

% of Budget*: 100%

Asset depletion: 2027

Pay-as-you-go: $12.1M

% of Budget*: 78%

$6.5

Asset depletion: 2023

Pay-as-you-go: $14.7M

% of Budget*: 100%

Asset depletion: 2026

Pay-as-you-go: $12.8M

% of Budget*: 83%

Full Funding: 2034

$8.0

Asset depletion: 2026

Pay-as-you-go: $12.8M

% of Budget*: 83%

Full Funding: 2041 Full Funding: 2028