Former Chancellor Renews Call for Takeover of Archdiocesan Pension Plan by Mass. Attorney General Secretary of Commonwealth to Protect Public Interest

The following statement was released to the press and to BCI this afternoon. For those following or affected by the ongoing situation with the lay pension fund, we thought you would find it to be of interest.

April 4, 2011 Statement of David W. Smith, Retired Chancellor of the Archdiocese of Boston, Former Pension Plan Administrator, Former Pension Plan Trustee

Former Archdiocese of Boston Chancellor renews Call for Takeover of Archdiocesan Pension Plan by Massachusetts Attorney General Martha Coakley and Secretary of Commonwealth William Galvin to Protect Public Interest

I am pleased that His Eminence Sean Cardinal O’Malley publicly committed on April 1 to “do everything in my power to care of the thousands of people who have given their lives in service to the Church.”   While at a high level the words may be reassuring to some pension beneficiaries, since the details and actions behind the words are missing, the question must still be asked, “Where’s the beef?”  Unfortunately, the Cardinal’s statement on the Archdiocesan pension plan failed to answer the open questions and did little more than shift the focus away from the key issue: The Archdiocese cannot be allowed to retain control of the pension trust.

I am also glad that Cardinal O’Malley has implicitly acknowledged coercion was used to get people to sign up for the “take you share of whatever happens to be left” offer and he will give those who have already made that choice a chance to change their decision.

Although Cardinal O’Malley committed to do everything in his power to care for the thousands of people who served the Church, what he did not say is that he has promised this in the past and those promises have not been kept. This is the same position he took when he and I first talked about lay pensions, and it’s also the same position he took when he committed in 2004 to use the proceeds of reconfiguration to fully fund the obligations of closed parishes. 

As many know, the 2010 pension fund actuary’s report shows that over $5 Million is still due the pension fund for benefit obligations arising from closed parishes. Instead of honoring the commitment, this “take your share of whatever happens to be left” offer has tried to shift that extra $5 million in costs to employees.  Nothing in the Cardinal’s statement or the current archdiocesan operating plans addresses or fulfills this commitment. We need an independent trustee to make sure that this time the Cardinal’s statement has a real payment plan—preferably one secured by assets—that can’t be set aside to balance a budget. 

Beyond the issue of past commitments having been broken, the Archdiocese cannot be allowed to retain control of the pension trust for a number of other reasons:

  1.  Tax Consequences to Beneficiaries: The “take your share of whatever happens to be left” offer simply cannot be made by a qualified pension plan, ERISA or not.  Any “voluntary” forfeiture provision not removed from the plan before the Internal Revenue Service rules on the plan will result in adverse tax consequences for all of the beneficiaries of in the plan.
  2.  Use of Unreasonable Discount Rate to calculate lump sum payouts: is not permitted by qualified pension plans, ERISA or not.  Failure to correct this issue would also provide a basis for disqualification of the plan by the Internal Revenue Service.
  3. Deceptive Offer: Using a 6.5% discount rate misleads employees into concluding that the “take your share of whatever happens to be left” offer is worth 83% of each employee’s accrued benefit, when, in reality, the sum offered will only allow for the purchase of an annuity equal to something in the low 60% range.  This tactic is, at best, deceitful.  I can’t find a single insurance company who would even consider writing fixed rate life annuities at 4%, let alone 6.5%.  On that basis alone Secretary Galvin should immediately seek an injunction to halt the offer.
  4. Unfair Allocation of Shortfall: The pension plan is being used to shift assets and liabilities from one corporation to another.  Employees of entities that are 95% funded and those that 63% funded got the same offer.
  5.  Selective Targeting of Beneficiaries: The “take your share of whatever happens to be left offer” is not made across the board to all beneficiaries of the plan—it depends on which entity they worked for. It is also selective in that it only targets those who are not yet drawing benefits.
  6. Abuse by Trustees: Since RCAB Corporation Sole is about two thirds of the plan, the other participating Catholic entities are being abused by the trustees for the benefit of the Archdiocese.  Worse yet, I would expect that plan assets are being used to defend legal actions resulting from that abuse.
  7. Conflicts of Interest: Many, if not all, of the trustees have conflicts of interest.  The Archdiocese has repeatedly refused to divulge those conflicts.  Perhaps the press should ask the “transparent” Church the same question.

All employers must fund up proportionate to their obligations, and I believe they will do so much more readily once they know they will not be taken advantage of by the current conflicted trustees.

It is hoped that appointment of an independent trustee by the state will also ensure that the true status of pension plan funding is openly communicated. While the pension plan funding percentage is by definition a guess, ERISA assumptions would show the plan funded in the low 60% range. Ms. Gustavson says it will take more than 10 years to fund it and she thinks the deficit is only half of what more rational assumptions would indicate that it is.  The Chancellor says that the Archdiocese will cut its contribution rate nearly 30% next year, when instead it needs to be doubled, at the very least, in order to meet the Cardinal’s new promise. These contradictions need to be resolved for the sake of the beneficiaries.

The statement by Cardinal O’Malley which fails to address previous broken promises or detail how it would be fulfilled this time around is an attempt by the Archdiocese to shift the focus off the key issue. The issue is that they cannot retain control of the pension plan.

I ask that Mr. Galvin and Ms. Coakley do their duty and put an independent trustee in place promptly.  I ask every employee and former employee to call and write to each of their offices until they do.

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7 Responses to Former Chancellor Renews Call for Takeover of Archdiocesan Pension Plan by Mass. Attorney General Secretary of Commonwealth to Protect Public Interest

  1. Former employee says:

    Point 6 never occurred to me, that plan assets are now being drawn down to defend against the lawsuit by the Daughters of St. Paul. The archdiocese stalls for years prompting a lawsuit, and now retiree funds are wasted to defend against it. BCI, what was the outcome of the Daughters of St. Paul mediation with the archdiocese last week? I thought for sure it would be settled promptly but haven’t heard anything.

  2. FR B says:

    Also please remember that for several years the Christmas + Easter Collections{traditionally marked for retired/disabled priests] from the parishes of the Archdiocese were not well managed by those advising the RCAB {Towers + Perrin} yet they still remain in service to the RCAB {much to my absolute confusion}.

    So poorly managed that a great deal more than 5 million has never been saisfactorily accounted for.
    This all seems part of the whole.

    Is there some connection with the issues of ‘sexual abuse’ and the financial issues ????

    Let us shine the Flood light of truth on the entire stage not merely a spot-light.

    Lord, send us your light that we may no longer walk in darkness!

  3. Longtime K of C says:

    While I admire former Chancellor Smith for coming forward, I hold little hope that A.G. Coakley or Secretary Galvin will do anything to help.

    After all, Coakley once famously said that practicing Catholics shouldn’t work in emergency rooms. Meanwhile, Galvin was found to have acted in violation of the Uniformed and Overseas Citizens Absentee Voting Act (UOCAVA) of 2002 for irregularities with military absentee ballots. A BC grad, I’m sure Galvin won’t want to upset fellow Eagle Jack Connors’ apple cart. Sadly, in my opinion the best hope for the Daughters of St. Paul and the RCAB pensioners is in the courts.

    • K&JSR says:

      Galvin has no love for him Alma Mater. Nor do I think he cares about his fellow Alums.
      Galvin is a devout Catholic and daily communicant. And he took on the ADOB when it came to his own Parish, Our Lady of the Presentation.
      I wouldn’t count him out in taking on the ADOB if it is in his jurisdiction.

  4. dick says:

    I am not sure we have a choice other than pull our money and run. Sad that my wife gave more than 30 years to the Church and her school and work 80+ hours a week to provide a parochial education to so many and now faces this treatment.Reality is we are meeting with an annuity specialist today to to get the best deal we can with 60% of what was promised. If I did this with my company’s pension funds the IRS would be at my front door with handcuffs

  5. Mr. Smith has performed a great service to the retirees by identifying and addressing the pertinent issues regarding pensions.

    However, I don’t think that there should be a move to rescind the lump sum offer. Even though the Archdiocese has low balled the amount, the decision should be allowed to be made by each individual. This is voluntary. The issue really is whether or not the Archdiocese is going to fund this and honor it’s future committments.

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