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In Times of Loss
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In Times of Loss1

by Delbert Johnson

The sad event of the death of a minister prior to retirement creates a crisis in the family. A grieving widow finds herself in the position of needing to make difficult decisions at a time she is overwhelmed by circumstances. Survivor benefits designed to provide a modest living in retirement are often frighteningly inadequate in the pre-retirement timeframe, particularly if there are mortgage payments and/or tuition expenses. “If only I’d known, I’d have made sure we carried more insurance.”
 
This document is an effort to outline the various policies and provisions which the church uses to assist the surviving spouse in such a situation, and to assist in the preparation for the unthinkable. The document is divided into Retirement and Non-Retirement provisions. The footnotes refer to NAD Working Policy references.
 
Non-Retirement Matters
Life Insurance2:  Adventist employers maintain a group life insurance policy for most employees. Currently, the provision is $100,000. Most employers have provided opportunity for the employee to enhance this coverage by purchasing additional life insurance through payroll deductions. Planners often suggest that there should be at least three to five times annual wages in life insurance, more if there are children and/or an outstanding mortgage. Each family must determine their needs, considering the ages of children, ability of the spouse to work and housing expenses.
 
AD&D Insurance3: Adventist employers provide Accidental Death and Dismemberment insurance policies for traveling staff. If death occurred as the result of an accident, this policy would generally respond.
 
Continuation of Salary & Benefits4: The following benefits are provided in the case of the death of a full-time employee:

·      A payment equal to the continuation of regular remuneration for five months
·      Tuition assistance for the remainder of the school year
·      Healthcare assistance for up to six months
 
Workers Compensation: If death occurred on the job, the employer’s Workers Compensation policy should provide assistance, depending on the rules of eligibility and the circumstances of death.
 
Family Move5: Adventist employers provide a retirement move to employees who have been moved by the Church at some time in their career. While the policy does not specifically apply to the death of an employee, some employers have chosen to provide such a move to the surviving family if that participant would have become eligible for a move at retirement.
 
Social Security Benefits: If the participant participated in Social Security for at least 40 quarters, the surviving spouse may be eligible for assistance from Social Security, including:

·      One-time death benefit
·      Survivor’s benefit for a spouse or children
·      Disabled spouse or child benefits

The family should contact Social Security at 800-772-1213.
 
Veteran’s Benefits: If the deceased was a veteran, the surviving spouse may be eligible for burial assistance from the Veteran’s Administration. Call 800-827-1000.
 
Credit Card Insurance: Many credit cards carry various insurance products. For instance, if death occurred on public transport purchased by credit card or in travel to or from such public transport, some cards automatically provide accidental death insurance. These benefits can be best understood by contacting the issuing company.
 
Retirement Matters: The Church has operated a retirement plan, providing pensions for retirees and survivor benefits in the case of death. This plan was frozen in 1999 in favor of a retirement savings account plan. In the case of death, both plans will respond based on actual years of service credit and eligibility.
 
The Old Plan: The pension plan provided for service prior to 2000 includes a survivor benefit. The surviving spouse is eligible to begin to receive a survivor benefit at the time the participant would have reached his/her normal retirement age6. Calculation of benefits is complex and subject to specific eligibility requirements.
 
Accessing these benefits prior to the normal retirement age will result in a permanent benefits reduction of .5 percent for each month short of normal retirement age or 40 total years of qualifying service credit. The surviving spouse must decide when to apply for benefits — early and be subject to a life-long penalty or wait until the deceased participant would have reached or neared the normal retirement age7.
 
The survivor benefit is a modest amount, even when not reduced by early retirement, and is based only on pre-2000 years of service credit. Below is a table of some examples of survivor benefits.

·      Joint & Survivor is the un-reduced benefit, which would have been received upon retirement by the participant had he/she reached his/her normal retirement age. This is the rate upon which survivor benefits are based.

·      Survivor Benefit is half of the Joint & Survivor benefit, and is the amount granted to a surviving spouse.

·      Spouse Allowance is a contingent benefit, received by the participant with at least 20 years of qualifying service credit, in the case that the spouse has no retirement benefits of his or her own. While few retirees are eligible for a spouse allowance, we have shown it as an additional benefit as the spouse may be eligible.
 
Pre-2000 Years Service Credit Joint & Survivor Survivor Benefit Spouse Allowance Total Survivor Benefit
10 Yrs $270.97 $135.49 NA $135.49
15 Yrs $406.46 $203.23 NA $203.23
20 Yrs $541.94 $270.97 $150.54 $421.51
25 Yrs $677.43 $338.72 $235.22 $573.93
30 Yrs $812.92 $406.46 $338.72 $745.17
 
Example: If a pastor with 25 years of qualifying service credit prior to 2000 passes away prior to retirement, his surviving spouse would be eligible for survivor benefits. If she waits until her deceased spouse would have reached age 66, the Survivor Benefit would be $338.72 per month. If the spouse has no employer-provided retirement plan of her own other than Social Security, she might be eligible for a portion of the $235.22 Spouse Allowance8.
 
The New Plan: The defined contribution retirement plan provided after 1999 is a retirement savings account. Usually, this is tax deferred — meaning that taxes will be due on withdrawals. Upon the death of the participant, the account becomes accessible immediately by the beneficiary. In most cases, that is the spouse. The employer will have the beneficiary form, which was signed by the participant upon enrollment. If no form is signed, the spouse is the automatic beneficiary. If the participant was at least 59-and-one-half years of age, there is no tax penalty for withdrawal, but the withdrawal is taxable under normal income tax rates.
 
The survivor should seek guidance on how best to access this amount in a tax efficient manner.  

Options include:
·      Leaving the funds in the account for withdrawal on a structured basis, or as needed
·      Rolling the funds into an Individual Retirement Account (IRA)
·      Annuitizing (purchasing an annuity which provides a life-time stream of funds)
·      Cashing out, usually resulting in a significant tax payment
 
The Retirement Healthcare Plan: The Church operates a healthcare plan for its retirees, designed to wrap around Medicare, beginning at age 65. The plan is designed to be most helpful for individuals who are at least 65 years of age. The employer can provide information on SHARP, the healthcare assistance plan9.
 

1 This document is prepared by the Retirement Plan of the Seventh-day Adventist Church, and provides general guidance to Seventh-day Adventist ministers in the United States.
2 Y 34
3 Y 28
4 Y 25
5 Y 23 10
6 For individuals born before 1955, age 66 is the Normal Retirement Age.
7 The earliest benefits from the old plan can be received is when the participant would have reached age 59-and-one-half years of age.
8 There are several assumptions in these calculations:
a.  Spouse is within five years of participant in age.
b.  Spouse was married to the participant for all of pre-2000 service credit.
9 A copy of the SHARP documents can be obtained from the Retirement web site: www.adventistretirement.org. Under the Retiree tab, click on the Downloads link and scroll to “SHARP” documentation.


Delbert Johnson has worked primarily in denominational treasury positions. For 17 years, he served as a missionary in Asia where he has been a mission accountant, an Adventist Book Center manager, a youth director, a mission treasurer, a union treasurer, a healthcare system administrator and a division associate treasurer. Upon his return to North America, Delbert served as a conference treasurer and, since 1996, he has worked in the North American Division Retirement office. In 1999, he was appointed administrator of the retirement plans of the NAD.

Delbert graduated from Southern Missionary College with degrees in Business Administration and Theology in 1976. He obtained an MHA from Loma Linda University in 1987. Johnson is married to Andrea Johnson, a registered nurse. They have two sons.