Each fall, Portico evaluates annual adjustments to payments made from the ELCA Participating Annuity Investment Fund. As a participating variable annuity, payments can increase, remain the same, or decrease to help meet the goal of providing monthly income for life.
Due to market declines, Portico recommended decreases in 2023 annuity payments, consistent with the established adjustment methodology. At their Nov. 4 meeting, the Portico Board of Trustees approved the following to take effect in January 2023:
- Participating annuity payments will decrease by 1.3%. Most ELCA annuitants receive this type of payment.
- Dividend-eligible annuity payments, received by a smaller group of ELCA annuitants, will decrease by 1.3%, and no lump-sum cash dividend will be paid in January 2023.
Roughly 9,000 retirees, surviving spouses, and beneficiaries receive ELCA Participating Annuity payments. While amounts range in size, a 1.3% decrease is equal to $27 per month for the average monthly payment.
“We recognize how important annuity payments are to our members and know that a decrease of any size is challenging, especially during this current period of high inflation,” said Stacy Kruse, Portico’s Chief Operating and Financial Officer. “This can be difficult news to receive, and we invite our members to talk with a Portico Financial Planner to help understand this adjustment.”
High inflation is responsible for the biggest Social Security payment increase since 1981, but ELCA Participating Annuity payment adjustments are calculated differently. ELCA annuity payments draw exclusively from the pooled assets of all participants invested in the Fund, while Social Security payments are adjusted for inflation and are not tied to investment performance.
Portico calculates annuity adjustments based on the Funded Ratio of the ELCA Participating Annuity Investment Fund as of Sept. 30 of the current year. The Funded Ratio reflects the Fund’s net assets divided by its projected benefit obligation over the lifetime of everyone who participates in the Fund. The Sept. 30, 2022, Funded Ratio was 0.961. Adjustments are set annually, with no interim adjustments throughout the year.
“2022 has been a year of more market volatility than we’ve experienced in the past decade,” said David Quello, Portico’s Chief Investment Officer. “As of Sept. 30, the Fund’s year-to-date investment performance was down 15.83%. By comparison, U.S. stocks were down 23.87% and non-U.S. stocks were down 26.92% year-to-date. Typically bonds help offset challenging equity performance, but investment grade bonds were also down 14.61% year-to-date due to rising interest rates.”* Portico invests the ELCA Participating Annuity Investment Fund in a diversified mix of stocks, bonds, and other asset classes designed to help achieve more consistent long-term returns.
Another measure designed to help smooth the impact of market volatility and keep annuity payments as predictable as possible is the annuity’s adjustment methodology, described in the Fund’s Investment Memorandum.
- A Sept. 30 Funded Ratio greater than 1.0 indicates a surplus, one-third of which is used to increase annuity payments. The other two-thirds remain in the ELCA Participating Annuity Trust to help ensure future annuity payments.
- A Sept. 30 Funded Ratio less than 1.0 indicates a shortfall. Payments are decreased by an amount that makes up one-third of the shortfall.
“Over the past ten years, strong investment performance allowed us to increase payments and retain a surplus in the Fund that helped absorb some of this year’s negative market returns,” David Quello said. “The Portico team carefully monitors the Fund’s performance and manages it according to the methodology we’ve communicated to participants, to help achieve the goal of having the ELCA Participating Annuity be a source of income for the rest of their lives.”
Members with questions about the ELCA Participating Annuity can contact a Portico Financial Planner at 800.922.4896 or mail@PorticoBenefits.org. (Please be aware they are not able to provide 2023 payment amounts over the phone.)
About the ELCA Participating Annuity
The ELCA Participating Annuity is designed to provide monthly annuity payments for life to participating ELCA plan members. Participating annuity payments are adjusted based on the investment performance and mortality experience of the ELCA Participating Annuity Investment Fund. The assets are held in trust and are separate from other assets. The ELCA Participating Annuity Trust does not rely on future cash flows to pay current benefits, so annuitants are not dependent on active members to fund their annuity payments. All funds, including the ELCA Participating Annuity Investment Fund, are subject to risk and uncertainty. Past performance cannot be used to predict future performance. Portico funds, including the ELCA Participating Annuity Investment Fund, are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Losses or underperformance in the markets could cause a reduction in monthly participating annuity payments. Fund assets are invested in multiple sectors of the market. Some sectors, as well as the funds, may perform below expectations and lose money over short or extended periods.
Members can find more information in the Investment Memorandum for the ELCA Participating Annuity Trust, at myPortico.PorticoBenefits.org/summaries, or by contacting a Portico Financial Planner at 800.922.4896.
Neither Portico Benefit Services nor the Portico funds are subject to registration, regulation, or reporting under the Investment Company Act of 1940, the Securities Act of 1933, the Employee Retirement Income Securities Act of 1974 (ERISA), the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, or state securities laws. Accordingly, members are not afforded the protections of the provisions of those laws and related regulations.
*Jan. 1, 2022 – Sept. 30, 2022, investment performance: U.S. stocks as measured by the S&P 500 Stock Index; non-U.S. stocks as measured by the MSCI All Country World ex USA IMI Index; investment-grade bonds as measured by the Bloomberg Barclays US Aggregate Bond Index.