Our Benefits Leadership

MMBB: A Pioneer in Providing Retirement Benefits

The concept of retirement benefits was a 20th century invention. Even religious organizations expected lifetime service of their clergy and religious workers.

Henry Morehouse, MMBB’s visionary founder, frequently described Baptist pastors as “Old Soldiers of the Cross.” It’s easy to see why. In 1900, the average annual salary among Northern Baptist ministers was $683, the lowest among mainline Christian denominations.

This situation also caused problems for churches. A pastor continuing primarily out of necessity might not have the fresh vision and energy needed to inspire and grow the congregation.

As early as 1882, Morehouse began arguing for the need to provide financial support for retiring ministers. At the 1908 meeting of the Northern Baptist Convention in Oklahoma City, Morehouse presented a resolution to study how the denomination could offer a pioneering benefit to its pastors.

The resolution passed – creating a formal mechanism for Morehouse to pursue his vision.

From Charitable Grants to the Pension You Earn

Despite its remarkable success in raising capital, MMBB’s revenue stream was not sufficient to realize Morehouse’s vision of providing predictable, guaranteed lifetime income to retired ministers. MMBB needed a dependable source of funding.

At the 1920 meeting of the Northern Baptist Convention, MMBB brought a proposal to achieve this goal. MMBB asked the Convention to create The Retiring Pension Fund. It called on churches to contribute 6% of the minister’s salary into the Fund, with the Fund paying a quarterly pension beginning at age 65. The Convention approved the proposal and The Retiring Pension Fund was established on July 1, 1920, making MMBB one of the first pension plans in America. In the early years, MMBB subsidized a portion of the dues for ministers in order to ease the transition.

By 1931, MMBB reported that 2,475 were enrolled in The Retiring Pension Fund. This marked MMBB’s successful transition from a grant-making agency to a self-perpetuating defined benefit pension program that embodied Morehouse’s pioneering vision.

“A pension system and a charity are not synonymous…A correctly established pension system is an excellent investment, an investment in living assurance…I can assure you that The Retiring Pension Fund was established upon dependable foundations and has been since—and will continue to be—administered along scientifically correct lines.” The Ministry, MMBB’s quarterly publication

The Retiring Pension Fund as a Defined Benefit Plan

Approved at the 1920 meeting of the Northern Baptist Convention as a defined benefit plan, The Retiring Pension Fund established the principle that churches pay the premium calculated as a percentage of salary: 6%. It also defined the pension benefit members received—$1 for every $70 of salary—and set 65 as the retirement age.

While it borrowed features of the railroad and teacher pension plans, The Retiring Pension Fund represented the standard that served for more than a generation of pension benefit plans. It was pioneering leadership.

The Retiring Pension Fund began operation at the end of 1920 and a steady flow of applications soon followed. The first pension certificate was issued to Dr. Robert E. Farrier.

Before presenting the plan to the Northern Baptist Convention for approval, Everett Tomlinson shared it with several life insurance companies for comment. One chief executive remarked, “I had a strong hope when we first received your proposed plan that our company might be able to make you…a proposition that would be advantageous for all concerned. I must frankly tell you, however, that we have nothing to offer which can touch the plan you have formulated.”

What is a Defined Benefit Plan? Often thought of as a traditional pension, a defined benefit plan pays a specified monthly benefit calculated on a formula based on earnings, tenure of service and age.

Moving to a Defined Contribution Plan

Two trends fueled MMBB’s move from a defined benefit plan to a defined contribution plan. First, the post-World War II economic expansion drove up The Retiring Pension Fund’s value faster than pensions were being paid out. At the same time, inflation had eroded the value of the pensions.

MMBB wanted a plan that allowed members’ accumulated dues to benefit from market growth. The answer was “The Retirement Plan for the American Baptist Convention.” Church contributions on behalf of the pastor still financed the program, but—unlike The Retiring Pension Fund—the contributions went into an account earmarked for the member.

The member’s account grew in two ways. The longer the pastor worked and the higher his salary, the more the church contributed to the account. In addition, the member benefited from investment experience.

The Retirement Plan went into operation on June 1, 1965 when $26,567,670 in assets from The Retiring Pension Fund were transferred to the new Retirement Plan. The essential attributes of the plan created in 1965 remain in effect today, and this approach has been proven to work well in both up and down markets. As of the end of 2010, MMBB has assets of $2.3 billion and serves over 6,700 annuitants.

What is a defined contribution plan? A defined contribution plan is a retirement plan in which the amount of the employer’s annual contribution is specified but the amount of the benefit is determined by how much the employer contributes and investment experience.

Life & Disability Insurance

For MMBB’s founders, “to promote interest in the better maintenance of the ministry” went beyond providing a secure retirement. It also included financial protection for the pastor and the family in the case of disability or premature death.

That’s why The Retiring Pension Fund included disability benefits when the plan was established in 1920. The disability amount increased to $500 in 1925. In 1951, a $1,000 death benefit was added to the plan. In addition, disability benefits were increased from $500 to $900.

The value of the life and disability insurance benefits continues to grow. Today this coverage is bundled with the Benefits for Life program.

“I faced an extended illness after a series of strokes. I faced financial ruin and if it had not been for MMBB we would have suffered greatly.” – Rev. Wyatt Tee Walker

“The death benefit enabled my mother to continue her life after my father died. It also helped her feel connected to the American Baptist ministry.” – Rev. Cheryl Dudley