We are not yet done with the topic of compensation and Finance Council-related corruption, but based on popular demand, will take a break today and tomorrow to discuss the Lay Pension Fund and some secrecy issues surrounding it. And yes, we will also get to the new Vice Presidents and other six-figure-salaried staff from the Campaign for Catholic Schools now moving over to the supposedly cash-poor Pastoral Center in a separate post. The pace of ill-conceived moves by the folks at 66 Brooks Drive is making it tough for us to keep up.
For months now people have been asking us to report on the cuts in the Lay Pension Plan, and in view of the Boston Globe article on Sunday and substantial number of questions we are getting, we will take a stab at it today.
Problem is that the archdiocese has been so non-transparent about this, we really have more questions than answers to offer you.
Today we are not going to try and sort out the various options for current employees or former employees who are not yet retired and collecting benefits. For those not yet retired, we know that the Archdiocese is not going to fully fund the existing plan and instead will be reducing promised retirement benefits to fund the plan. The plan is currently underfunded by about 21% (see chart at right), so all payouts are reduced by that amount and also discounted to the present value of future payments based on the age of the person.
For example, if someone was to collect $500/month for life ($6,000/year) from age 65 and they take a lump-sum payment at age 55, they get a one-time lump-sum payment of only $25,296. (See here for the explanation or click on image to right). Yes, that is a lot less benefit than you would have received over, say, 20 years of retirement.
Given the magnitude and impact of the changes on 10,000-odd participants, you would think that the archdiocese would be very transparent about what is going on and who is managing all this. Nope.
We hope this post is seen in the spirit of helping the archdiocese become more transparent and trustworthy, so they can better help employees and retirees who are dependent on these pension funds .
Here are the first 5 of 10 categories of questions the archdiocese should be answering:
1) Fund Trustees
Who are the fund trustees? A “trustee” is an individual or organization that holds or manages and invests assets for the benefit of another. How can anyone trust the trustees to be upholding their fiduciary responsibility if we do not know who they are? This presentation says the trustees are Cardinal O’Malley, the Vicar General, the Chancellor, and “Priests and lay individuals with pension/finance expertise.” (click on image to right). Who are these individuals? Why the secrecy? Why does the archdiocese refuse to identify them, despite many requests over a period of many months?
2) Qualifications for the Plan Administrator(s)
What qualifies Carol Gustavson, Exec. Dir of HR, to be running the separate company, the Benefits Trust? She is trained as an attorney and did labor relations for a newspaper before working for the Archdiocese. From where did the proudly ex-Catholic Gustavson gain the benefits expertise for this job in the Catholic Church?
3) Compensation for the Plan Administrator(s)
Is the compensation for Carol Gustavson of $150K/year appropriate for this role in a Catholic archdiocese? Are we paying some premium salary for a non-practicing attorney that would otherwise not be necessary for a benefits specialist? We asked another large archdiocese about this and were told that Carol’s comp was much higher than they pay their HR director.
How is Carol discharging her fiduciary duty exclusively for the good of the beneficiaries of the trust?
Who else’s salary besides Ms. Gustavson’s is paid in whole or in part? Is she and/or are others paid by both the trust and RCAB?
Who are the vendors of the trust (investment and program managers)? How are they compensated?
When do they meet with the trust leadership? How are they chosen?
Why are their plans underway to aggregate the 403B pension plan under one vendor? [Note: A 403(b) is a tax deferred retirement plan available to employees of certain non-profit organizations or educational institutions as determined by section 501(c)(3) of the Internal Revenue Code. Contributions and investment earnings in a 403(b) grow tax deferred until withdrawal (assumed to be retirement), at which time they are taxed as ordinary income]. What is or was the objective criteria used for selection? If a vendor has been selected, which one? Who else was evaluated? Why that vendor? How does aggregating under one vendor serve the needs of the beneficiaries?
5) Conflicts of Interest
Is a written agreement in-place that forbids Carol Gustavson from receiving any benefit from the vendor(s) employed for the trust? Is she legally foresworn from later being employed by any one of them or a related entity?
We will get to issues 6-10 (Costs, Goals, Transparency, RCAB Give & Take, and Investment Advisory Committee) tomorrow.