David Zellner has spent 16 years guiding the retirement security of people who are devoted more to the spiritual than the temporal.
For most of those 16 years, Mr. Zellner had concentrated on educating clergy — and lay people — about asset accumulation in his role as chief investment officer of the General Board of Pension and Health Benefits of the United Methodist Church, Glenview, Ill. But something was missing.
“A colleague told me we do well in educating them about accumulation,” Mr. Zellner recalled. “But we don't do a good job of educating them about taking money out of their accounts in retirement.”
So two years ago, acting on these comments from Mark Conner, a benefits educator, Mr. Zellner convened a team to develop a lifetime income strategy for the United Methodist Church's five defined contribution plans with combined assets of $8.1 billion and 91,000 participants.
The plans began enrolling participants in January 2013, and Mr. Zellner's efforts have been acknowledged by Innovator Award judges in the category of distribution planning.
“Our goal is to help people so they don't outspend their accumulated principal, but also to help so they don't underspend,” he said.
“Clergy are highly educated, but they're on call 24 hours a day,” he added. “There's a lot of stress. They move often. They don't have much time to focus on retirement. They rely heavily on our experience.”
Mr. Zellner and his team decided to build a lifetime income program, called LifeStage Retirement Income, as a companion to the existing managed account called LifeStage Investment Management Service.
Working with Towers Watson & Co., Mr. Zellner created a service that presents a “payment safety zone” based on a participant's account balance, age and investment approach.
The payment safety zone establishes a monthly income stream designed to make sure participants don't outlive their savings.
Each year, LifeStage Retirement Income calculates a cost-of-living increase and a new payment safety zone based on a participant's age and account balance. It will adjust payments if they fall outside the safety zone, and a reserve can be established for unanticipated expenses. Participants can join or exit the service whenever they wish.
During the 19 months from initial concept to launch, Mr. Zellner said team members ran tests with participants on a prototype, watching via a webcam how they navigated the service.
His team made adjustments to the program based on those observations.
“It was a very challenging and innovative idea to personalize every retiree's drawdown of benefits, while assuring they would effectively address longevity risk,” wrote one Innovator Award judge.
Although 164 participants are now using the service, Mr. Zellner said “any time we put in something new, people want to wait and see.” Participants “are not bashful in communicating with us about products and services,” but he hasn't received any negative feedback yet.
Whatever the results, Mr. Zellner takes an expansive view of his team's mission. “The participants here have given their lives to serve God,” he said. “We're here to serve them to serve God.”