• DAC and CACs Now Available for 2017
• Health Care Reform Update—Supreme Court Upholds Premium Tax Credits for All States

DAC and CACs Now Available for 2017

The 2017 Denominational Average Compensation¹ (DAC) and Conference Average Compensations (CACs) for jurisdictional (U.S.) conferences are now available. The attached document provides a complete listing, by conference name, of both the 2016 and 2017 figures.

In addition, the attached graph may be of interest. It shows that while the total amount of compensation in the United States for full-time clergy has been decreasing the past few years, the total number of U.S. full-time clergy has been decreasing faster. Therefore, the average full-time compensation level has continued to increase. The DAC increased 3.3% this year which is higher than the 1.7% increases of the last few years. Part of the reason for the large increase is that two conferences include increased salary in lieu of group health coverage. If the 2017 DAC was determined without this additional compensation, the DAC would have increased an estimated 2.3%. Note that the General Board is proposing legislation to General Conference 2016 regarding increased compensation in lieu of health coverage that, if passed, will result in a recalculation of the 2017 DAC and a reduction of the DAC.

In order to use the DAC and CAC figures properly, please remember the following:

• The General Board calculates the DAC and CACs solely for use by the denomination’s U.S. pension and welfare plans for clergy. Any other use is strongly discouraged.
• In general, the DAC and CAC are averages of the compensation (as defined by the benefit plans) of full-time U.S. clergy who participate in the Clergy Retirement Security Program (CRSP) and/or the Comprehensive Protection Plan (CPP).
• The DAC includes the compensation of clergy serving local U.S. churches, jurisdictional bishops and district superintendents, and clergy serving general agencies and other U.S. appointments extending the ministry of the United Methodist Church. Clergy in those extension ministries are included only if they participate in the denominational U.S. benefit plans for clergy.
• The CACs include the compensation of district superintendents, but exclude the compensation of bishops and clergy serving general agencies.
• Plan compensation includes either cash housing allowances or, for clergy living in parsonages, an amount equal to 25% of compensation. It also includes certain tax deferrals, such as UMPIP before-tax contributions and Code section 125 medical spending account deferrals.

To accommodate the Church’s advance budget planning needs, the General Board sustains a long tradition of calculating the DAC two years in advance. In other words, the 2016 DAC is calculated based on 2014 compensation data. There are no adjustments or projections to account for the two-year difference.

¹ Denominational Average Compensation is a specifically defined term associated with the Clergy Retirement Security Program, including its Supplements, and the Comprehensive Protection Plan. As such, its name can be changed only by General Conference.

Health Care Reform Update—Supreme Court Upholds Premium Tax Credits for All States

The U.S. Supreme Court today issued its decision in King v. Burwell—holding that premium tax credits (PTCs) are available in all states, including states where the federal government runs the Exchange (i.e., the Health Insurance Marketplace). The petitioners in King v. Burwell had challenged the legitimacy of premium tax credits for individuals who obtain health coverage through the federally facilitated Exchange in states that do not operate their own Exchanges. This challenge was based on a few words (“an Exchange established by the State”) from nearly 1,000 pages of the Affordable Care Act (ACA).

The Court’s ruling upholds PTCs for all 50 states—regardless of state or federal Exchange. The Court rejected the petitioners’ interpretation that PTCs only apply to state-based Exchanges.

Impact
The Court’s ruling that the statute should be interpreted to allow subsidies in all states means that premium subsidies will continue to be available as they have been since 2014. This will be helpful for modest-income clergy and lay employees in conferences that have decided to terminate their sponsorship of group health plans or who work for other UMC employers that do not offer health coverage. If the Court had invalidated the rule, then those employees might have found coverage on the Exchange unaffordable without the subsidies. Today’s ruling means their Exchange-based coverage can continue uninterrupted.

Background
The Court had granted a petition for certiorari on November 7, 2014, to review a decision issued by the Fourth Circuit Court of Appeals on May 14, 2014. The Fourth Circuit had upheld an Internal Revenue Service (IRS) Rule interpreting the ACA. The IRS Rule in question stated that premium tax credits would be available for individuals who purchased insurance on any Exchange, “regardless of whether the Exchange is established and operated by a State … or by HHS (U.S. Department of Health and Human Services).”

One section of the ACA required each State to set up an Exchange. Another section of the ACA provided that, if the State failed to do so, the Secretary of HHS will set up “such an Exchange within the State.” A third section, describing the calculation of the premium tax credit as the sum of the assistance for all “coverage months,” defines “coverage months” as those in which the taxpayer is enrolled in a plan through an Exchange “established by a State” under the first provision above.

In King v Burwell, some residents of Virginia sued the IRS and various other agencies and officials, claiming that the IRS Rule was invalid because the premium tax credit language referred only to Exchanges established by a State. The government lawyers argued that an Exchange set up by HHS was “such an Exchange,” within the language of the ACA, so the IRS Rule should not be invalidated.

Currently, more than half of U.S. states rely on the federally facilitated Exchange (Marketplace) or partnership Exchanges. Click here for more detail by state.

Further background was provided in December and September 2014.

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