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A: For more than 35 years, Girl Scouts has proudly sponsored a defined-benefit pension plan for Girl Scout councils, covering approximately 14,000 participants. Currently, 101 out of 112 councils participate in the NGSCRP. Girl Scout councils from across the country found that participating in the plan was a cost-effective means to attract and retain employees. The NGSCRP contributions are pooled from each participating council into a single trust, called a "multiple-employer pension plan."
The economic downturn created very serious burdens for the dwindling number of employers that maintain pension plans for their employees. Girl Scouts was similarly affected. Previously, the NGSCRP had been overfunded at nearly 150 percent, but the plan's position changed dramatically in 2008 when investment markets experienced the most significant downturn since the Great Depression.This market decline was made worse by the actions taken by the Fed, which led to historically low interest rates.
As a result, the NGSCRP is currently underfunded. To prevent the NGSCRP from accruing further liabilities, the Girl Scouts of the USA National Board of Directors voted to freeze the plan, effective July 31, 2010.
A: Starting on January 1, 2014, participating Girl Scout councils will see a 40 percent increase in their pension expenses for the frozen plan. For many Girl Scout councils, this means that the pension expense will suck up money that would normally go toward operating expenses such as staff salaries and benefits, camp maintenance, outreach programs for at-risk girls, scholarship support for low-income girls, and general programming. On average, the pension expense is expected to subsume approximately 20 percent of payroll costs and 7 percent of councils' total budgets.
This spike of 40 percent next year, and 62 percent over the next three years, is due to a little-understood trigger for frozen pension plans that fall under old rules established by the Employee Retirement Income Security Act of 1974. NGSCRP has a five-year amortization schedule. Previously, the plan expenses were amortized over the working lifetime of participants.
A: Yes. Girl Scouts of the USA is advocating on behalf of the Girl Scout councils by asking Congress to allow certain charity pension plans, including ours, to opt in as early as 2014 to pension funding rules that apply to for-profit companies. This would simply smooth out the pension expenses while still funding the plan. Bipartisan legislation (H.R. 2134/S. 1302) has been introduced in Congress.
If Congress acts, there would be no change or negative impact on beneficiaries. Legislation that would include this technical change is expected to save councils about $36 million over the next three years. Girl Scouts of the USA is also exploring ways to achieve similar results under the existing funding rules.
A: No, because it applies only to plans of certain tax-exempt organizations. In fact, it would have a positive local impact, as Girl Scout councils could then keep their staffs and continue to invest in girls in their communities.
A: No, this information was reported by the press inaccurately. As noted above, the real driver of the current pension deficiency is the decline in interest rates used to value pension liabilities. Only approximately 9 percent of the plan's benefit obligation (liability) at the end of 2012 was attributable to the early-retirement incentive.
Q: I've seen press reports stating that this pension issue was caused by 1,850 plan participants without a contribution history ("windfall participants") being added to the plan when the councils merged. Can you explain this decision and clarify the actual number of "windfall participants" in the plan and their fiscal impact on all councils?
A: The actual number of employees added during council consolidation is 107—not 1,850. That is 107 out of 14,000 plan participants. These so called "windfall participants" were added because they came from councils that had not participated in the plan prior to council realignment. Further, less than 1 percent of the plan's liability at the end of 2012 was attributable to these 107 employees, who received credit for service performed at a council that had not participated in the plan prior to realignment.
At the time this benefit was extended to these 107 employees, there was no concern about the underfunding of the plan; in fact the opposite was true: it was funded at almost 150 percent of liability.
A: Camping is and will always be an essential part of Girl Scouting. The decision to sell or close a camp is made entirely by local councils on the basis of usage, maintenance costs, availability of other camp property, and other factors. Approximately 10 to 15 percent of our members participate in camp experiences as part of Girl Scouting.
For further questions on this issue or to help with legislative efforts underway to help Girl Scouts, please e-mail firstname.lastname@example.org.