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Compass, a New Clergy Retirement Plan, Outlined

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As in many things in life, it helps when you have a map to get where you’re going. For United Methodist clergy, a new tool will be available next January to give them a compass in guiding them to retirement.

Starting in January, changes to the clergy retirement saving plans (RSP) will begin. This new plan, being rolled out by Wespath and starting January 1, 2026, is called “Compass.” It was approved at the 2020/2024 General Conference last year.

Hundreds of interested clergy participated in a day-long webinar April 30 to learn more about the new plan and what impacts it will have on them and the local church. An additional presentation on Compass will be made during the Clergy Session at this year's Annual Conference.

Compass is a new mandatory plan for all eligible clergy, according to Martin Bauer, Senior Managing Director of Benefit Plans at Wespath. Formerly known as the General Board of Pensions and Health Benefits, Wespath has been serving the church since 1908.

Compass is available to bishops and clergy with full-time appointments to the UMC who are members of annual conferences. Part-time clergy may be eligible based on annual conference choices, according to the Wespath website.

Kim Olson, Director of Retirement Plans at Wespath, said that for clergy already retired or retiring in 2025, their current plans will not change and there is nothing they need to do.

Active clergy will be automatically enrolled, but there are a few choices they need to make as the switch is made. Those choices center on how much of a pastor’s compensation they wish to contribute to their retirement savings plan, which then could affect a matching contribution from the church.

Compass is what’s known as “account-based, defined contribution” retirement plan, Wespath notes. With an account-based, defined contribution (DC) retirement plan, each clergy has their own account—the money in that account belongs to that individual, to keep for the rest of their lives—and any remaining balance can be left to family members, or to a church, charity or other beneficiaries after the clergy dies, according to Wespath.

A defined contribution account grows over time by investing in the financial markets. While CRSP - a piece of the current retirement plan -- includes a pension (defined benefit) component and a DC component, as a DC-only plan, Wespath notes that Compass will provide clergy with more flexibility and control over their own retirement account, and more investment options than they would have with a traditional pension plan.

What’s new in Compass is that there will be three streams for contributions to the RSP. Starting in 2026, each month, $150 will be contributed to the participants' Compass plan. This flat payment is given to every participant regardless of pay level, and is scheduled to rise by two percent every year.

The second contribution comes from three percent of a pastor’s base pay, including an additional 35 percent of base pay for housing allowance and/or parsonage.

The third contribution comes from the participants, where the clergy person can contribute up to four percent of their salary and the church would match it.

Participants in the webinar also learned that Compass provides for matching contributions on qualified student loan payments made by clergy so that student debt doesn’t stand in the way of saving for retirement.

In general, the plan treats clergy’s student loan payments as if they were personal contributions. The plan sponsor provides a match of up to four percent of compensation as if such payments had been clergy's personal contributions to the plan. To receive this match, clergy must periodically certify how much they have made in student loan payments.

“Clergy contributions are a critical component of Compass,” Olson said. “Clergy should consider contributing four percent of their plan compensation early in their career to reap the benefits of long-term investment growth, qualify for the full matching UMC contributions and experience tax benefits (with before-tax personal contributions).”

Compass was scheduled to go online in 2020, Bauer said during the webinar, but the pandemic and the postponement of the General Conference prevented it.

Learn more about Compass in these videos, produced by Wespath:

 

 

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