A Brief Summary of Its Provisions and Benefits
The Christian Schools International Pension Plan and Trust Fund is designed to provide an important part of the income needed for retirement. The plan is a defined benefit pension plan and was established by Christian Schools International for employees of its member schools in the USA.
All employees who work 1,000 or more hours per plan year must participate.
There are both employer and employee contributions, each equal to 2, 3, 4, 5, 6, or 7 percent of the employee’s compensation. The board of each school elects which plan (2, 3, 4, 5, 6, or 7 percent) to participate in.
The board can choose whether employee contributions will be currently taxable or non-taxable. If the board chooses the regular plan, employee contributions are taxable; if the board chooses the employer contribution plan (ECP), employee contributions are non-taxable.
The Regular Plan:
The regular plan provides for contributions to be made by regular payroll deductions. An amount equal to 2, 3, 4, 5, 6, or 7 percent is deducted from each participant’s compensation and the board contributes an equal amount for a total of 4, 6, 8, 10, 12, or 14 percent. The employee contributions are deducted after taxes have been withheld.
The Employer Contribution Plan:
The employer contribution plan (ECP) provides for contributions totaling 4, 6, 8, 10, 12, or 14 percent of compensation to be paid by the board with no contributions made by the employee. However, the plan treats one-half of the contributions as employee contributions. The advantage of the ECP is that employees do not have to pay taxes on the “employee contributions” until retirement.
Changing from the Regular Plan to the Employer Contribution Plan:
Many employers choose to participate in the Employer Contribution Plan so that the contributions deemed made by the employee are not currently taxable. A board can begin to participate in the ECP and make the contributions for the employee without increasing the overall costs. This can be done by adjusting the salary scale down to account for the board now making the contributions for the employees. To do this in the 2 percent plan, the salary scale would be adjusted down 1.923 percent; in the 3 percent plan, 2.83 percent; in the 4 percent plan, 3.7037 percent; in the 5 percent plan, 4.545 percent; in the 6 percent plan, 5.3571 percent; and in the 7 percent plan, 6.1404 percent.
For example, assume a school is in the 5 percent regular plan. An employee of that school has a salary of $20,000. Currently the school contributes $1,000 and the employee contributes $1,000 after taxes from the $20,000 salary. The total compensation paid by the board is $20,000 salary plus $1,000 pension contribution. With the ECP, by adjusting the salary of $20,000 down by 4.545 percent, the salary becomes $19,091.00; 5 percent of $19,091.00 is $954.50. The total compensation paid by the board remains at $21,000 ($19,091.00 + $954.50 + $954.50).
The amount of compensation reported to the plan is the same for the regular plan or the ECP. Compensation equals the amounts paid that must be reported on the W-2 tax form. Compensation also includes any amounts excluded from current taxation by way of contributions to a 401(k) profit-sharing plan, a simplified employee pension plan, a 403(b) tax-sheltered annuity, or a 125 flexible spending account plan.
Making the Contributions:
The pension plan year runs from September 1 through August 31. Each month during the pension plan year, boards will receive an invoice for 4, 6, 8, 10, 12, or 14 percent of one-twelfth of the reported compensation. To keep the invoices accurate, it is important that any changes in compensation, any new hires, or the termination of any employee be reported to the plan so that the invoice can be adjusted. Invoices are mailed on the 10th of the month and payment is due immediately after the last payroll of the month.
- Pension Benefit - Available at retirement with the option to have benefit payments continue to a surviving spouse or another individual. This benefit is payable at age 65 or as early as age 55. The annual benefit is 50 percent of the accumulated employee contributions plus certain adjustments added in 1983, 1985, 1987, 1990, 1992, and 1994, if eligible. For early retirement prior to age 62, the annual benefit is proportionately reduced.
- Death Benefit - The balance of all employee contributions plus earned interest (minus any pension benefits received).
- Preretirement Surviving Spouse Benefit - Available to the surviving spouse of a vested participant.
- Cash Refund - Upon termination of employment, the balance of all employee contributions plus earned interest can be taken out of the plan. Employer contributions remain with the plan.
- Disability Benefit - 75 percent of average monthly salary for a maximum of five months after a four-week waiting period has been satisfied.