Pension Roadshow: “The Circus is in Town”

If you are new to the saga of how the Archdiocese of Boston is cutting promised pension benefits to former employees and religious, you may want to first catch-up by reading our most recent posts on the pension plan  issue, as well as “Is Boston Archdiocese Committing Fraud?

A series of meetings took place on Thursday evening and Saturday at the Pastoral Center with former employees to discuss the changes.  BCI received this essay written by some former employees who were in attendance and BCI is sharing it with their permission:

“The Circus is in Town”

It was cold and rainy when the circus pulled into 66 Brooks Drive Thursday night.  The Commonwealth requires permits for games of chance and limits the amount of wagers at church fundraisers.  No permits were needed that night when Carol Gustavson kicked off the big show for the Archdiocese of Boston, or for the repeat performances with Carol and Jim McDonough on Saturday. Why not?  Because there was no chance that any of those who showed up for the event could win!

All of the truth that’s fit to print.  That’s what 50 or so people heard.  Early in the presentation, Ms. Gustavson was asked why are we being offered less than 100% of what we are due from the trust?  Answer, because if the trust paid 100% it would hurt the funded status of the trust.  It must be the new math. 

Example: A trust owes 10,000 people a total of $300 million (on average $30,000 each) and has $225 million. (Numbers are close to her trust, but rounded, so even a plan administrator can understand them).  The example trust is underfunded by $75 million.  If the example trust pays half of the people $30,000 each (what they are due in our example) the trust still owes the rest of the folks $150 million and it has $75 million. The trust is underfunded the same $75 million that it was before the payments were made.  It is not hurt by the transaction.

If that same trust pays each of those people $25,000 (around 83% of what is due) and those people discharge the reminder of the trust’s debt, the Trust then owes the same $150 million to the remaining folks but has $117,500,000 left.  Wow, it cut its funding deficit in half! 

So begins a big-time capital campaign hiding with the circus chickens under a tent.  The trustees–virtually all employees of the Archdiocese or vendors who rely on relationships with the Archdiocese–are doing a great job, but for whom?  The people who gave their lives in service to the Church? Not from where we sit.  Perhaps the trustees are more likely serving those upon whom they rely for income as employees or vendors.

So how do you scare half of your creditors into taking a big haircut?  Not so hard.  Tell them times are tough, smile at them and tell them that it is your goal to be able to pay them all of what you owe.  When they ask if there is any guarantee that they will get all of what they are due if they pass on your “voluntary offer,” be careful to say “no.”  Feel comfortable saying no.  Just assume that the question meant something more like, “Is there FDIC Insurance behind this?”  Of course there isn’t.  Make sure that you don’t tell them that paragraph 19.3 of the trust agreement says “Each employer shall periodically make contributions which … are sufficient on an actuarial basis approved by the plan’s actuary to fund the costs of the plan arising with respect to the participants…”

Don’t tell them that your benefits are GUARANTEED BY NOT ONLY THIER EMPLOYER BUT ALL OF THE OTHER EMPLOYERS IN THE PLAN.  They don’t need to know, and after all, it wasn’t likely the information they were seeking.

Speaking of things they don’t need to know, the largest employer, The Roman Catholic Archbishop of Boston  holds real estate with a value we estimate is north of $1 Billion and has no material liabilities.  They don’t need to know that Boston Catholic Television has a huge unrestricted endowment.  Don’t mention BC High and its balance sheet.  Don’t tell them that the now well-capitalized Caritas Christi was once in the plan and is on the hook for much if not all of this shortfall.  Just say no.  There are no guarantees because the plan isn’t backed by whoever you thought they were asking about.  Then call Anne Hathaway and see if she has an extra acting award left over from the Oscars gala.

Other things you might forget to mention?  Oh, you might forget to mention that you valued your offer based on the trust’s assets on hand, versus those that the Archbishop promised would be on hand.  Why tell them this?  They also really don’t need to be reminded that the Archbishop promised to pay off all of the debts of closed parishes from the proceeds of their sale before using the rest of the money for a series of other purposes. And why would they need know that the July 1, 2010 Actuarial Valuations show (on page 4) that the portion of the shortfall attributable to closed parishes was $5,059,000?  They might be less inclined to buy into the whole lump-sum payoff scheme if they knew the amount of the offer would have been larger had the Archdiocese only kept its word to first pay off the debts of the closed parishes.  If someone raises this question, you can always say that no one is left here that remembers what was promised in 2004.

Even with all of the influence the Archdiocese has over the Boston Globe, the Globe’s own experts said in essence the payouts were “financially unwise” and that no one should take this offer unless they know themselves to be terminally ill.  If all of those who are due pensions read that article and followed that advice, guess what would happen?  The trust would pay out money to a bunch of folks who its actuary didn’t count on and the trust would be worse off.  The circus owners need not worry–the article ran a long time ago and few people listen to the Globe’s financial experts.

Also, no one will take note of the fact that all of Father Bryan Hehir’s old Catholic Charities folks didn’t get this offer.  Ever wonder what the circus folks are telling them about ultimate funding risk?

If you are considering taking this offer and are not terminally ill, you will need to earn 6.5% on the money you take today, and you would need to die on schedule.  People without the investment skills of a hedge fund manager and or with good genes should think twice.

What should you do? Like the circus chicken says, carefully consider what you know, look at your circumstances, consult with you lawyers and advisors.

What might a truly independent trustee do?  How about sending bills to all of the participating employers for their respective shortfalls, noting on each bill that it accrues interest at the 6.5% rate from today forward and giving them each 6 months to come back with a payment plan and real collateral to back their obligations.

What should Attorney General Martha Coakley and Secretary of State William Galvin do???

Last thought, don’t play tic-tac-toe with the chicken. He plays every day.

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29 Responses to Pension Roadshow: “The Circus is in Town”

  1. John Cronin says:

    The only question I have to ask is…why in the world would anyone trust the Archdiocese of Boston from now on. You just don’t deal with your employees or the flock fo the church in this manner. Thou shalt not steal! Somebody better watch these people who are deceiving our Cardinal Archbishop….

    • Carolyn says:

      Except the cardinal archbishop is Corporation Sole and is charged with actual knowledge and ultimate accountability. So it doesn’t matter who has been fudging what, they are on the hook and so is he. Remember the recent reading about rendering to Caesar what is Caesar’s? Well it’s a civil and possibly criminal matter, and the cardinal archbishop is where the buck stops.

  2. Dave says:

    Whoever wrote this owes an apology to circus folks.

  3. Was at the meeting says:

    I do not agree with what was stated above. I came out of the meeting feeling that I was given all the information that I needed in terms of a lump sum vs. monthly payments. I did not feel in any way that I was being pushed into taking a lump sum. I felt they were very upfront in terms of the taxes and penalties involved with taking the lump sum. They were very clear in stating that the monthly payment option was still a very real option or if we wanted we did not have to do anything at all. From my point of view I thought everything was out in the open so I could select the option that was best for me.

    • Former employee at the meeting says:

      Yes they were up-front about the taxes and penalties. That’s about it from my perspective.

      Maybe you stepped out of the room or attended a different meeting than me. Do you realize that $5M of the under-funding YOU PERSONALLY and WE COLLECTIVELY are being forced to deprive yourself of comes from closed parishes who the Archbishop promised would pay the fund back the money they owed before those funds were used anywhere else? But the archdiocese is now reneging on that promise, and they are going out and used our vested pension funds elsewhere instead. They were never up-front about that. When questioned, don’t you remember Carol Gustavson saying she didn’t know the numbers or about the prior promise MADE BY THE ARCHBISHOP OF BOSTON TO THE PEOPLE OF THE ARCHDIOCESE IN 2004? Did the plan administrator saying she’s not as good with the numbers as a former employee gone for 5 years make you feel good? Did that leave you feeling confident they were being truthful? Not me.

      If the archdiocese had integrity or if the Attorney General or Secretary of State were doing their jobs, they would insist that the archdiocese uphold prior promises and fund the plan with at least the $5M that’s missing from parishes, and all former employees would have their annuity or lump-sum payments increased. If you’re willing to walk away from this broken promise and just say, “Oh well”, I’ll be very glad to take your share of the $5 million if we can get them to put that back into the pool.

      Maybe there smooth-talking and convenient breaking of past promises without even letting you know about those promises snookered you, which seems to me to be the point of the post. We’re all being cheated, maybe illegally, and I think the post captured that well.

      • Clem Kadiddlehopper says:

        Former employee, you make a key point. Reconfiguration was advanced for many reasons, but pension funding was key among them. That promise was made in writing, no doubt approved by the Finance Council, and signed by the Cardinal. If that promise, and the promise made to employees that pension would be fully funded are not honored, trust is out the window.
        The “financial crisis” is a smokescreen used to take our eye off the ball. What is being pitched is an unethical and immoral plan that is a bait and switch on vulnerable retirees.

  4. Paul says:

    What has B. C. High’s balance sheet got to do with he Archdiocese?

    • Dave says:

      BC High, as a participating employer, is on the hook for all of the plan’s obligations. The trustees job is to bill each of the employers for whatever is needed to pay accrued benefits. If the Archdiocese or other entities don’t pay or don’t have the funds to pay, the trustees must bill all of the other employers, including BC High, to make up the shortfall. This could wipe out BC High and all of the other Catholic entities that trusted the Archdiocese to pay it share as promissed.

      • anonymous says:

        Why did the trustees waive payments from Catholic Charities in 2008 and 2009? Is this their fiduciary responsibility? What other payments have been waived?

  5. We received this anonymous comment from “John” via email:

    “Did anyone notice on Thursday after the opening prayer Carol Gustavson blessed herself? Whats up with that? Don’t you have to be Catholic to do that?
    I guess when you are paid a six-figure salary anything goes in Braintree.

    Can BCI find out if she is Catholic now?”

  6. anonymous says:

    The facts seem clear on the $5 million due from the closed parishes and I think that, at the very least, an adjustment to the amounts should be made for this amount.

    John, what is the relevance on wwhether or not Carol blessed herself?

    • Objective Observer says:

      As long as people are consulting dictionary.com, here’s their definition of the word “conversion” in a legal context:

      unauthorized assumption and exercise of rights of ownership over personal property belonging to another

      This is very unlike the conversion of souls. In civil court, this is what people are sued for if they forgot whose money was whose. Depending on knowledge and intent, it can then cross the hall to the criminal court and be called “larceny” or “fraud.”

      Actually, one is arguably better off to go for the criminal side of the hall first, because a conviction on that side can just be strolled over to civil court and is all the evidence needed to prove the civil case. You just have to add a plea for damages.

      Best seat in the house will be the bench in the hallway… that way you can keep an eye on both courtrooms at once.

    • Retired Catholic School Teacher says:

      It is relevant because she is playing a role…in that case, a fake Catholic. It all seems to be about playing roles and acting there.

      • Teddyballgame says:

        Retired Catholic Teacher is absolutely correct. By making the Sign of the Cross as a fallen away Catholic Gustuvson demonstrates she is an insincere person who will bend the truth (lie?) to keep her job. You don’t want a phony like that in Corporate America let alone in a senior position with the Archdiocese.

  7. [...] Pension Roadshow: “The Circus is in Town” – Boston Catholic Insider [...]

  8. Larry says:

    Those of you who are considering legal action against the archdiocese should really get moving with it.

    • Steve says:

      I don’t think we can take legal action because the pension plan is a church plan. All Church Plans are exempt from State And Federal regulations including the most important ERISA.

      • anonymous says:

        There is never an exemption from fraud and a violation of fiduciary responsibility.

      • ex-teacher says:

        They are exempt and they know they are exempt. Whhich is why they are doing what they are doing

      • Another ex teacher says:

        A few years back when the Archdiocese busted the Catholic teacher’s union here in Boston, the courts wouldn’t even hear it because of seperation of church and state. Trust me take what you can now because who knows what else they can get away with.

      • Objective Observer says:

        They are exempt from ERISA but not altogether exempt from regulation. A reasonable member of the court could find reason to bring suit for equitable relief. There are two different bases for parties to file suit (at least). The first would be on behalf of employers who, in reliance on RCAB, assured their employees of a pension. (Non-RCAB entities like schools run by religious orders… think BC High, Mount Alvernia, Fontbonne.) The second would be employees of RCAB who could make the case that financial misconduct or other breach of fiduciary duty resulted in underfunding.

        Can anyone with expertise think of a third platform?

      • Pension Pete says:

        If anyone knows folks at the Daughters of St. Paul perhaps they could amend the current legal action to include these issues. Also if anyone know the High School teachers union folks or the cemetery workers union folks, they have already have paid for legal action as part of dues. If the regulators won’t take on Jack Connors Inc. It will take someone with money to get this into court.

      • Teddyballgame says:

        If there is a lawsuit, the action should be to request the IRS to eliminate the ERISA exemption. The whole ERISA law came to pass because of Teamster Union mismanagement and corruption. If there was ever a pension plan that should have Erisa oversight it’s the RCAB plan. McDonough et. al. see the plan as their own little play toy. I don’t think Gustavson knew what a pension plan was until she got to 66 Brooks.

    • Steve says:

      I agree with ex teacher. Take what you can now.83% is better than nothing and nothing is what we get if this thing drags on and they go into bankruptcy. Not only is the pension not subject to ERISA but it is not insured.

      • anonymous says:

        Legal action should be taken given the current situation there. They are asking the retirees to take the hit for their broken promises. This must be stopped.

  9. Anonymous says:

    It is time that the Board if Trustees demand Carol Gustavson’s resignation and replacement with someone well versed in the operation of a pension plan.

    Does anyone question why the investment vehicle that has the Pension Plan’s funds is none other than the Archdiocese’s own Collective Investment Partnership?

    • Carolyn says:

      Carol is the little fish. Who hired her, knowing she had no background in pension management? She may be smarter and more adept, and she may be holding the proverbial bag, but her friend, Jim, would be the one who might be seen as playing fast and loose with the rules.

  10. anonymous says:

    Carol wasn’t hired as the Pension Administrator. She was hired as the HR Director. She was given that role later after several individuals had it.

    Traditionally, the Director of Finance was the Administrator.

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