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:
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 you 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
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 bill 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.