Caring For Those Who Serve Puerto Rico Methodist Church Presented by: Manuel Vargas

Overview PRCRSP PRCRSP Personal savings into PRPIP Personal savings into PRPIP Investment returns Investment returns Benefits Access tools Benefits Access tools Participant services Participant services Proposed change to PRCRSP defined benefit Proposed change to PRCRSP defined benefit

PRCRSP: Defined Contribution Plan 2% Match 2% UMPIP PRCRSP 11% Non-match PRCRSP 11% Non-match PLUS *100% of UMPIP contributions up to 2% of compensation EFFECTIVE 01/01/13

PRUMPIP Not all clergy making personal contributions Not all clergy making personal contributions Not receiving the full 13% contribution (receiving 11%) Not receiving the full 13% contribution (receiving 11%) Missing out on the additional 2% contribution AND investment returns Missing out on the additional 2% contribution AND investment returns

Investing Early Pays Off Years $ 1,000 per year at 7% average earnings

Stable Value Fund Inflation Protection Fund Fixed Income Fund Multiple Asset Fund Balanced Social Value Plus Fund U.S. Equity Fund International Equity Fund Investment Options

General Board Competitive Returns Year-to-Date: December 31, 2013 SVFIPFFIFMAFBSVPFUSEFIEF

Updating Your Contribution Before-Tax and After-Tax Contributions Agreement Before-Tax and After-Tax Contributions Agreement Percentage or dollar amount Percentage or dollar amount Can increase or decrease throughout the year Can increase or decrease throughout the year

Before-Tax or After-Tax Contributions Before-Tax Federal income tax deferred until distributionFederal income tax deferred until distribution After-Tax Pay federal income taxPay federal income tax

Deferred Taxation on Earnings The earnings on your account balance are not taxed until you begin taking your benefits

2014 Elective Contribution Limits Before-Tax Limit: $15,000 Catch-up (age 50+):$1,500

Savings Goal— $500,000 at Retirement* Age years 30 years $452 per month $452 per month Age 65: $500,000 Age 65: $500,000 Age years 20 years $1,000 per month $1,000 per month Age 65: $500,000 Age 65: $500,000 *7% average rate of return and savings in retirement plan

How Much Income Is Enough? Replacement ratio: Percentage of current income you need to “replace” at retirement to meet your expected retirement expenses Percentage of current income you need to “replace” at retirement to meet your expected retirement expenses Usually 70% to 85% of income just before retirement Usually 70% to 85% of income just before retirement

Where Will My Retirement Income Come From? PRCRSP Spouse Retirement Other PRPIP Social Security

Benefits Access

Social security UMPIP Other Retirement Other

Benefits Access Account balances Account balances Contributions coming in Contributions coming in Investment information Investment information Personal/Address information Personal/Address information Beneficiary designations Beneficiary designations

Participant Services LifeStage Investment Management Service option that selects funds and rebalances as needed LifeStage Retirement Income option that turns an account balance into monthly payments designed to last a lifetime and keep up with inflation Ernst & Young Financial Planning Services available for financial counseling on a variety of topics including debt management and retirement planning All the above services provided at no charge to the participant

LifeStage Investment Management Service LifeStage Investment Management Service (LifeStage)—Managed Accounts

Risk tolerance Age Social Security eligibility Value of Social Security benefits Target Allocation * Defined contribution (DC) LifeStage—DC Accounts

LifeStage Retirement Income Helps participants manage distributions Helps participants manage distributions

Enrollment—Set Aside Money

LifeStage Retirement Income— Annual Process Annual adjustment calculated each November and reflected in January paymentAnnual adjustment calculated each November and reflected in January payment Participant receives letter detailing change in paymentParticipant receives letter detailing change in payment Payments are generally expected to increase— but a decrease is possiblePayments are generally expected to increase— but a decrease is possible Payment Safety Zone $758 / month

Ernst & Young Financial Planning Services

Program Advantages Confidential, expert advice at no charge Confidential, expert advice at no charge Unlimited hours of financial planning advice via telephone Unlimited hours of financial planning advice via telephone Financial planners (Ernst & Young, LLC) Financial planners (Ernst & Young, LLC) Objective advice—no sales pitch Objective advice—no sales pitch No need to enroll—just call or go online to set up an appointment No need to enroll—just call or go online to set up an appointment Free website: (company code: gbophb; company program: gbophb) Free website: (company code: gbophb; company program: gbophb)

Consultation Topics Creating a retirement plan Creating a retirement plan Choosing retirement plan investments Choosing retirement plan investments Buying a home Buying a home Developing an estate plan Developing an estate plan Managing debt Managing debt Funding children’s education Funding children’s education Other Other

PRCRSP Defined Benefit Example: DAC = $65,186 Clergyperson with 6 years of service in PRCRSP (01/01/07 – 12/31/2012) 1.25% x$65,186 x6 $4, ÷ 12 $407.41

Proposed Change Freeze the DAC at 2014 level: Freeze the DAC at 2014 level:  $65,186

Rationale for Proposed Change Increases in the DAC increases the contributions/liability for the PRMC Increases in the DAC increases the contributions/liability for the PRMC Assuming 3% increases in DAC the PRMC is underfunded by $1,391,134 Assuming 3% increases in DAC the PRMC is underfunded by $1,391,134 Freezing the DAC reduces the underfunded amount by an estimated 10% - 17% Freezing the DAC reduces the underfunded amount by an estimated 10% - 17%

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