Archdiocese Responds to Former Chancellor

March 28, 2011

Sorry for all of the posts today.  The Archdiocese has now responded to the action by former Chancellor, David Smith, in the statement below.

Anyone reading this statement will note it still conveniently overlooks any mention of the $5 million still owed to the pension plan by closed parishes which Cardinal O’Malley promised in 2004 would be repaid from reconfiguration funds. Nor does it mention why $2.5 million of those reconfiguration funds was diverted to Trinity Academy in Brockton instead of being repaid to the plan.  Terry, next time you make a statement, could you comment on that?

(By the way, in case people are wondering, the person writing on pension-related matters for BCI is an independent voice here who is not an archdiocesan pension beneficiary and has no axes to grind. The person only has a desire for truth and integrity).

Here is the archdiocese’s statement, publicly accessible to anyone here.

The Archdiocese of Boston has been consistently and actively involved in developing and implementing a comprehensive plan to address the long-term stability of its defined benefit lay pension plan (the Plan).  The pension plan impacts approximately 10,000 current and former employees and beneficiaries of parishes, schools, and Archdiocesan-related agencies.   Due to extraordinarily difficult global markets, the Plan, once 100% funded, is now estimated to be 83% funded.  Like portfolios, pension plans and endowments in many sectors of society, the Archdiocesan Plan suffered greatly during the recent economic downturn.  Trustees of the Archdiocese pension plan are committed to addressing the financial problems the pension plan faces and continue to work towards the goal of full funding.  Neither commitments are new; both have been a matter of fact and practice for decades.   Despite the fact that since the inception of the Plan almost 50 years ago, benefits under the Archdiocese Pension Plan have not been guaranteed or insured, it is the goal of the Trustees of the Pension Plan and a priority of the Cardinal Archbishop to achieve full funding.

The Trustees for the Plan have been committed to a process that is transparent and inclusive while relying on the financial advice of experienced and reputable professionals in the industry.  Meetings regarding the changes to the plan, which include freezing the benefits for active employees at the end of the 2011, began in June 2010 with leaders of Archdiocesan entities.  Plan changes were then adjusted based on their feedback.  In the fall of 2010, letters went out to all 10,000 participants in the plan, and over 45 meetings and webinars were held with current employees.  Approximately 1,600 individuals attended those meetings. Additional meetings with current employees will be held in the fall, when they will become eligible for the lump sum or in-service annuity options.

In late February 2011, a detailed package of information was sent to approximately 1,800 former employees.  These individuals were being offered two voluntary options: those vested may elect to receive a monthly payment when they retire or a lump-sum payout reduced to reflect the plan’s underfunded status.   The average payment at age 65 for those receiving a letter is approximately $365 per month.  Information about the voluntary options was posted on and a dedicated telephone line was set up to answer calls.  Call volume was high right after the mailing and is now steady at 5-10 calls per day, many from financial advisors who represent eligible former employees.  All individuals offered the option were invited to attend one of 11 regional meetings and encouraged to bring a spouse or trusted advisor.  Approximately 100 people have attended the meetings to date.  The meetings include information from an independent financial education firm engaged to provide information about factors that should be considered in electing either option or doing nothing with the options today.  The Archdiocese has informed meeting attendees that the choice to take a lump-sum payment or remain in the pension plan would be a voluntary and individual one.  The Archdiocese has noted at the meetings and in prior correspondence that each person must consider his/her own life circumstances when making his/her decision.  The plan’s staff has also provided translators and held one-on-one meetings when requested.  Throughout these communications, the message that these options are voluntary has been consistent.

With regards to claims made by former Chancellor David Smith, a participant in the Plan and an individual currently eligible for a lump sum or monthly annuity payment, the Archdiocese and Plan Trustees deny unequivocally his claims, including that the choice to take a lump sum payment is an involuntary one.  The Plan Administrator and multiple Trustees have communicated directly with Mr. Smith via email, phone and in person since December 2010 to provide specific information in response to his expressed concerns.

Just as it would with any former employee who received a packet in February 2011 outlining his lump sum and monthly annuity option amounts, the Archdiocese has been responsive and thorough in responding to Mr. Smith’s questions.  Specific concerns he raised were addressed in two meetings he attended recently at the Pastoral Center with other former employees.

Mr. Smith notified the Archdiocese late last week that he had filed a document with the IRS several days earlier.  He was asked to provide a copy and to date has not done so.

The Pension Plan Trustee’s worked for over a year with several highly-respected consultants to develop the current voluntary options, all of whom had worked with Mr. Smith in the past when he was a Trustee and/or Plan Administrator – the Plan’s actuary; the law firm for the Trustees (Wilmer Hale); and the consultant for the Trustees (Towers Watson). Careful and considered thought, in additional to thorough legal and actuarial reviews, were completed before the options were announced.

The Trustees have made audited financial statements for the Plan available online back to FY2005 on the Archdiocese website (  A new benefits website ( was launched in early 2010 to encourage sharing of information to employees and employers.  Notice of the new website was sent to employees.  Detailed information about the Pension Plan, including recent financial statements and valuation reports, is available on the website and has been for nearly a year.

To date, 190 beneficiaries have elected the lump sum payment, 14 have waived participation and 22 have elected a monthly annuity.  The first round of payments will be mailed first week of May 2011.


Terrence C. Donilon
Secretary for Communications
Archdiocese of Boston
Work:  617-746-5775
Cell:  401-480-0171

Pastoral Center
66 Brooks Dr
Braintree, MA  02184

Statement of Former Boston Archdiocese Chancellor Calling for Takeover of Pension Plan by Massachusetts Attorney General and Secretary of Commonwealth

March 28, 2011

In follow-up of our last post with excerpts from the Boston Globe’s article on this same topic, BCI has obtained a copy of the statement released by David W. Smith, Retired Chancellor of the Archdiocese of Boston at a 3pm press conference at the Newton Marriott. We are publishing the statement worded just as we obtained it, with no editorial comments by BCI.

March 28, 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 Calls for Takeover of Archdiocesan Pension Plan by Massachusetts Attorney General Martha Coakley and Secretary of Commonwealth William Galvin to Protect Public Interest

I am here today because almost 10,000 people, most of whom worked for years at low wages in service to the Catholic Church in Boston, have their retirement pensions endangered by a reckless attempt by the Archdiocese to shirk their financial commitments by changing the previous “defined benefit” plan with guaranteed benefits to a “take your share of whatever happens to be left” offering.  Conflicted trustees are doing this through coercion and deceit, and by withholding information needed to evaluate their offer.  Worse yet, the promises of two Cardinal Archbishops, Cardinal Bernard Law and Cardinal Sean O’Malley are being abandoned, while money promised for pensions has been withheld or diverted elsewhere.  The time has come for Secretary of the Commonwealth Galvin and Attorney General Coakley to protect the public interest by taking control of the Archdiocese of Boston’s lay pension plan away from the Church and placing it in the hands of a truly independent third party trustee.


Officials of the Archdiocese Pension Plan are “offering” to “select” groups of employees the option of forfeiting previously accrued benefits.  Examples of the coercion can be found in their presentation materials:

“Financial stress on Plan expected to increase due to investment volatility, lower investment returns, and employees covered by the Plan are living longer”

“The pension Plan is not and has never been an insured plan…Although the goal is to make sure there are adequate assets in Trust to meet all Plan liabilities, due to the unpredictability of future investments, there is no guarantee that all benefits will be fully payable at retirement”

“The time frame for achieving full funding depends upon future market returns and the rate of future employer contributions and thus cannot be guaranteed.  The plan could become less well funded at any point in time, depending on economic and other factors”

Curiously, absent from their presentations on funded status is any reference to the obligations of the Trustees to invoice the participating institutions as needed to meet Plan liabilities, the liquidity of many of the participating employers or the obligation of these employers to fund the Plan as directed by the Trustees.  For example, paragraph 19.3 of the pension plan 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…”


The average person reading the Archdiocesanprepared “take your share of whatever happens to be is left” presentation materials who is unfamiliar with IRS code might easily miss the deceit.  Here is an example they used in the Archdiocesan presentations:

Example estimate: One-time lump sum opportunity

  • Sharon Sullivan has a $6,000 annual benefit ($500 monthly benefit) if she retires and begins payments at age 65.
  • If she elects a lump sum payment at age 55, the estimated amount of her lump sum payment would be $6,000 multiplied by a “present value” factor which takes into account her current age, the number of years payments will likely be made over her lifetime, and expected interest returns over that period.

$6,000 x 5.41 (PV FACTOR FOR AGE 55) = $32,460”

By using unrealistic assumptions, most notably a 6.5% investment return, the Trustees come up with a 5.41 PV Factor for Miss Sullivan.  Reasonable actuarial assumptions as defined by the Internal Revenue Code require a 7.0 PV factor and Miss Sullivan’s benefit would be worth closer to $42,000.  What happened? Miss Sullivan not only lost almost $10,000 to a fast-handed actuary,, the conflicted Trustees want to take yet another 17% discount because the plan is “underfunded.”  Her offer is for 64.1% of what the Internal Revenue Code says her benefit is worth, not the 83% that the trustees want her to believe.

The real value of the “take your share of whatever happens to be left” offer was confirmed when I asked for an annuity quote from the Hartford Insurance company.  If I took the funds offered to me, I could buy an annuity from them equal to 61.8% of my vested benefit, not the 83% that the trustees want me to believe.

If the plan were really 83% funded and 6.5% was a realistic investment target, why would the trustees be asking beneficiaries to accept payments worth just 62-64% of their accrued benefit? By trying to get us to simply “take our share of whatever happens to be left offer,” the conflicted trustees are acting to protect their income at the expense of the plan beneficiaries.

Unanswered Questions and Stonewalling

Further, the Plan Administrator and the Chancellor have stonewalled my written attempts, dating back to December 21st of last year, to get answers to questions that would be necessary to fairly evaluate the “take your share of whatever happens to be left” offer.

Here are some of the questions they that they have promised to answer for me on many occasions but have not answered.  I cannot help but wonder why these are unanswered:

  • Were assets and liabilities being shifted from one trust to another to facilitate the sale of Caritas?
  • Why are employees of the Archdiocesan Cemetery Association (94.4% funded according to the July 2010 actuarial valuation) getting the same offer as employees of the new central high schools (62.6% funded according to the same valuation report)?
  • Why are the 956 employees and former employees of Boston College High School, Campion Health Center, Inc, Campion Residential & Renewal Center, Inc., Catholic Charitable Bureau, Central Catholic High School, and New England Province of Jesuits (Society of Jesus of New England) are not included in this “offer”?
  • What are the conflicts of interest of “outside” trustees?  I know only two of them.  Both fine gentlemen BUT both represent major vendors.  We have a right to know about the others.
  • What is the attendance record of the each of the Trustees?  From what I know, the Cardinal never comes and the Chancellor rarely attends a full meeting, if he attends any portion of the meeting at all.  We should know who is behind this cost-shifting attempt.
  • What information do you have about the participating employers’ ability to fund their respective obligations, especially the Archdiocese and the Parishes?
  • Why did the Archdiocese breach its promise to fully fund the obligations of closed parishes  and how do you justify making this offer without first paying over the funds needed to cover the obligations to employees of closed Parishes and increasing the proposed payout?

Even if all of this were somehow acceptable, what is not acceptable is that the plan will lose its tax deferred status if this “take your share whatever is left” offer is allowed to stand.  On March 16th my lawyer Russ Gaudreau of the Wagner Law Group  filed a six-page comment letter with the IRS along with three pages of attachments pointing out that the amended and restated plan would not, as written, qualify to retain its tax status.

Broken Promises by Cardinal Bernard Law and Cardinal Sean O’Malley

A number of promises made by two Cardinal Archbishops have been broken, whether intentionally or due to employee turnover.

First, I remember when His Eminence Bernard Cardinal Law called me to his office and dispatched me to a Board meeting at what was then, Youville Hospital, because he had heard that they wanted to withdraw from our pension plan and go to a defined contribution plan.  I was sent to relay this message:

Every Catholic institution in this Archdiocese has a moral obligation to guarantee adequate pension benefits to its employees.  Most Church and hospital employees work for low wages and lack financial training.  Therefore, we must take on the investment and mortality risks for them.  Maintaining and funding a defined benefit pension program is our moral obligation.

Second, after then-Archbishop O’Malley arrived in Boston, Bishop Lennon sent me to his office to make sure that the Archbishop would allow the elimination of the cost of living allowance (COLA) provisions of the plan and the reduction in future accruals.  After a long discussion, then Archbishop O’Malley signed off on the changes with the express understanding that we could never even discuss any reduction of pension benefits, especially those that were already accrued.

Third, in two published letters from 2004, then-Archbishop O’Malley promised that funds from parishes closed as part of reconfiguration would be used to repay unfunded pension liabilities.  That has also been broken:

From letter dated February 13, 2004: “The Archbishop has chosen this approach so that many issues may be addressed…The proceeds from the assets of suppressed parishes will provide… for amounts for past employee benefits and parish insurances due from suppressed parishes…”

From letter dated July 24, 2004: “The funds raised from the sale of suppressed properties will be used to address past due obligations and employee benefits of the suppressed parishes, including: … 4. For covering unfunded pension liability for lay employees and clergy of all parishes.”

Despite these 2004 promises from the Archbishop, the Actuary’s 2010 report shows $5 million in unfunded benefits owed to the pension plan for employees of closed parishes.  So what the trustees are really saying is: after we allow the Archdiocese to divert $5 Million that Cardinal O’Malley promised to pay over to the pension plan, past and present employees can “take your share of whatever is left (minus $5 Million)”.

So what happened to the promise made by Bernard Cardinal Law that the Church in Boston would always and under all circumstances fund its pension obligations?  Not valid just because he is no longer Archbishop of Boston?   What happened to the promises of Sean Cardinal O’Malley that there could never even be a discussion about reducing accrued benefits, or that funds from closed parishes would be used to repay unfunded pension liability?  Not valid because David Smith is no longer Chancellor?

In summary we have:

  • Coercion
  • Deceit
  • Shifting of funds set aside for by one corporation to benefit another
  • Conflicts of interest
  • Selective offers
  • Breach of promise to fund liabilities of closed parishes
  • Material non-disclosure
  • 10,000 or so victims of pension abuse
  • The tax status of the beneficiaries at risk

The Secretary of the Commonwealth and/or the Attorney General share responsibility to address these breaches of public trust and to protect the best interests of these citizens of the Commonwealth.  I urge them to take control of this plan away from those with conflicts of interest who have broken the trust of the beneficiaries and have acted wrongly, and to appoint an independent trustee to correct this situation and protect the 10,000 people at risk.

Former archdiocesan official blasts church’s pension plan oversight

March 28, 2011

It is shaping up to be a mighty interesting week here in the Archdiocese of Boston.  If you have not yet read our post from this morning, “Dishonest Diocese,” give that a read when you can.

Meanwhile, our email is abuzz with the headline in a news story at “Former archdiocesan official blasts church’s pension plan oversight.”  Here are a few excerpts from the article, which describes how the previous chancellor, David Smith, is blasting the church’s oversight of pensions for retired lay church workers:

Today’s critique, by former archdiocesan chancellor David W. Smith, makes public long-simmering tension between Smith and his former employer, the Archdiocese of Boston. Smith said he would meet today with the offices of Secretary of State William Galvin and Attorney General Martha Coakley, asking them to look into the pension funds, and that he would also ask the IRS to investigate.

Smith also said he plans to meet today with a group he has provocatively dubbed “Boston Pension Abuse Victims.” He plans to hold a news conference in Newton this afternoon.

Smith says the archdiocese, which is in the process of freezing its pension plan for lay employees and transitioning to a 401(k)-style plan, is trying to get past and present employees “to choose to forfeit their pension benefits in exchange for a grossly inadequate one-time payout.”

Terrence C. Donilon, a spokesman for the archdiocese, reacted angrily to Smith’s criticisms.

“It’s outrageous — when David Smith was chancellor, we were running annual deficits and we are now running a balanced budget,” Donilon said. “If he wants to get into a give and take about his performance as chancellor, which included serving as a trustee of the plan, I’m sure a lot of people would like to do that. But we have prepared a good plan to address the lay pension plan for the future.”

Comments from Terry Donilon like this make our blood boil here at BCI. Feels like our first Code of Conduct policy violation for failing to uphold the “highest Christian ethical standards and personal integrity.”  BCI was obviously not blogging back during the tenure of Chancellor David Smith, but it does not take a brain surgeon or relative of the politically-powerful Donilon family to remember how donations to the Cardinal’s Appeal (later renamed the Catholic Appeal) had plummeted in the wake of the clergy sexual abuse crisis of 2002 and calls by people like Jack Connors to hold back on donating. But, Terry conveniently neglected to mention that as a contributing cause for the previous annual deficits. There is more

To get to what Terry is calling a “balanced budget,” the archdiocese is coincidentally leaving out about $200 million in debt they have not figured out how to repay, and whose annual cost could and should be treated as a debit/expense that would make the current budget “unbalanced”:

  • The Cardinal is breaking his own written promise to repay $5M to the lay employee pension plan from closed parishes and the archdiocese is leaving that pension plan underfunded in total by $70M.
  • They are technically in default of a payment of $5M due January 1, 2011 to St. Johns Seminary and have no plan for how to repay the other $36M owed.
  • The clergy retirement fund is down by around $95 million at last count.
  • And no explanation has been given for how the 2011 budget–that was “balanced” assuming they raised a minimum of $14 million from the  Catholic Appeal–will make do with just $12.5 million apparently raised in 2010. Oops, I forgot, they do not want to tell us about the 2010 results despite the pledges to operate fundraising and fiscal operations with “accountability” and “transparency.”

We will have more to say about this in a subsequent post.  We hope the next time mainstream reporters talk to Terry, they will ask him about these details, and whether he considers his deceptive comments to be consistent with “highest Christian ethical standards and personal integrity.”

Change the Chancellor

March 24, 2011

For 9 months we have been chronicling the deception, cronyism, conflicts of interest, excessive 6-figure salaries, mismanagement, and breaches of fiduciary responsibility in the Archdiocese of Boston. The Archdiocese is still basically trying to ignore issues raised on behalf of priests and religious, church employees, and other laity, so  today it is very important for you to let the archdiocese know it is time for a change.

March 24: 1pm UPDATE: Based on feedback that the message has been communicated and gotten through, we are ending the campaign.

Many readers asked U.S. bishops to not vote for Bishop Kicanas for USCCB President last November. Now it is very important for you to tell Cardinal O’Malley to not renew the term of the current Chancellor.

The Daughters of St. Paul experienced an “incredible lack of responsiveness, non-answers to very specific questions, and just endless, fruitless negotiations’’ over 5 years by people under the responsibility of Chancellor James McDonough. This is but one in a consistent pattern of actions over the past 5 years (detailed in our last post, Time for a Change) that have caused Boston Catholics to lose trust in the financial and administrative management of the Archdiocese of Boston:

A variety of people and factors may be to blame for this situation.  But the Chancellor is the lay executive responsible for managing these areas, and he has  failed to uphold his responsibility to be a good steward of assets, temporal goods, and donor funds. Something has to change to rebuild trust. With his contract up for renewal, now is the time for the change.

Therefore, Catholics need to ask Cardinal O’Malley to NOT renew the Chancellor’s 5-year term.

UPDATE: March 24: 1pm. Enough people have responded to this campaign, that the volume of emails sent has become annoying to some of our dedicated priests serving the Lord.

The message has been communicated.  We are ending the campaign.  Thanks to all who participated. Now we ask all to pray that some change occurs.


Time for a Change

March 22, 2011

The news on Monday that the Daughters of St. Paul have been stonewalled for 5 years trying to resolve issues with the archdiocese over protecting pension benefits of their lay employees is the last straw.  It is time for a change.

As we read yesterday, the “incredible lack of responsiveness, non-answers to very specific questions, and just endless, fruitless negotiations’’ over 5 years by people under the responsibility of Chancellor James McDonough left a community of Catholic religious sisters no choice but to file a lawsuit against the trustees of the pension plan, including Cardinal Sean O’Malley. As evidenced by pickups in publications ranging from the Village Voice and Forbes to the UK’s Daily Mail, NPR, CathNews India, and the Los Angeles Times, the Archdiocese of Boston has become the subject of criticism around the world for their mishandling of this situation and treatment of the sisters.

The management of the lay pension plan falls under the scope of responsibility of the Chancellor, who is paid $250K/year with six weeks of vacation, and who, sources tell BCI, attended very few meetings of the pension fund trustees in his time here.  The Chancellor’s point-person for the pension plan, a proud ex-Catholic, has admitted publicly she is not so good with numbers, has acknowledged internally she does not have deep experience with such pensions, has established a reputation in the Pastoral Center for not getting along well with other people, and also has a history of showing-up late for pension-related meetings, leaving early, or missing them entirely–and not actively participating while in attendance. This represents factual information and actions observed by a number of different people.

The manner in which the archdiocese has handled the Daughters’ situation is just one more in a litany of situations that have caused Boston Catholics to lose trust in the financial and administrative management of the Archdiocese of Boston.  True, the Central Ministries budget is touted as “balanced,” and there is less red ink hemorrhaging today from Corporation Sole than 5 years ago.  But a lot of that came from selling property assets, laying-off or pushing out long-time dedicated employees, and reneging on debts, and 40% of parishes are still operating in the red.

During the Chancellor’s 5-year tenure, Catholics have seen a consistent pattern of promises made and never kept, excessive spending, cronyism and breaches of trust which have harmed the Church:

  • A promise that proceeds from closed parishes were to repay debts to the lay pension fund was not kept
  • Lay and clergy pension plans remain underfunded by hundreds of millions of dollars
  • A promise to repay millions of dollars in debt to St. Johns Seminary remains unfulfilled
  • A promise of good financial stewardship was not kept. The Chancellor and two other lay executives are paid more than $1 million/year in combined salaries and benefits, while annual payroll and benefits for the top 10 archdiocesan employees has risen to nearly $3 million. BCI has verified that many of these salaries are unprecedented in other U.S. dioceses. Any excessive spending wastes the assets and temporal goods of the Church and takes scarce funds away from parishes, ministry to the needy, evangelization, and retirement needs of priests and former employees.
  • Long-time dedicated Church employees in the Cardinal’s office, finance, and HR/benefits have been pushed out and replaced by higher-paid, less-qualified staff with no Church experience.  Many of these new higher-paid, less-qualified staff are the Chancellor’s former bank employees or cronies.
  • A “no nepotism” policy in Pastoral Center hiring that applied to everyone else was circumvented so the Chancellor’s son and daughter could be given jobs after they graduated from college
  • A promise of financial‘transparency’ made 5 years ago has not been kept. The Chancellor played a key role in creating the new fundraising team and in the deception that surrounded its creation.  Donations to the annual Catholic Appeal have reportedly fallen from $15 million to $12.5 million–the lowest in five years, and the Chancellor’s team has failed to account publicly for 2010 fundraising results.

When he took the Chancellor position in 2006, James McDonough was already a multi-millionaire from the sale of Abington Bank who said he “didn’t need the job.”  Like it or not, Cardinal O’Malley hired the Chancellor and has delegated responsibilities for the areas above to him. Do Catholics in the archdiocese want another 5 years of the above, or is it time for different person and management approach?

Because of these broken promises–and the Chancellor’s failure to uphold his responsibility to be a good steward of assets, temporal goods, and donor funds–BCI is calling on Catholics and priests to urge Cardinal O’Malley to NOT renew the Chancellor’s 5-year term. We also suggest Catholics withhold donations from the Catholic Appeal until after a new Chancellor is named.

You can easily communicate this message to Cardinal O’Malley, members of the Boston presbyterate (for whom we have email addresses), and the Holy See by clicking the “ACT NOW” button to the right.

MARCH UPDATE: The message has been communicated. BCI is concluding the campaign.

Can. 212 §3 reminds Christian faithful of our right and duty to communicate this to our priests:

“According to the knowledge, competence, and prestige which they possess, they have the right and even at times the duty to manifest to the sacred pastors their opinion on matters which pertain to the good of the Church and to make their opinion known to the rest of the Christian faithful without prejudice to the integrity of faith and morals, with reverence toward their pastors, and attentive to common advantage and the dignity of persons.”

We are doing exactly that, based on objective factual information. We are not asking that the Chancellor be removed–this is a simple matter of allowing him to finish his existing term, and not granting him a second 5-year term.  We suggest the Cardinal appoint an interim Chancellor and undertake an open, independent search for a new Chancellor immediately for the good of the future of the Catholic Church in Boston and those the Church needs to serve.

Please pass this message on to friends and family members and try to fill out the form within the next 24 hours. To share, click on “Comments” below and to send to people you know.

Boston Globe: Nuns take O’Malley to court over pensions

March 21, 2011

We commend the Boston Globe for their article today, “Nuns take O’Malley to court over pensions.”  as well as the Associated Press for also picking-up the story, now running in the Boston Herald and no doubt across the country.  BCI urges everyone to read the articles, and we invite the lawyers involved to keep reading below to find some additional insights that perhaps might help you.

The gist of this is as BCI first reported March 9, Boston Archdiocese Sued Over Pension Plan.  The Globe captured it well, so we will share their reporting of the situation:

In a highly unusual case pending before the Supreme Judicial Court, an order of nuns is suing Cardinal Sean P. O’Malley, the Roman Catholic archbishop of Boston, after years of trying in vain to withdraw from a church-run pension fund.

Nuns fighting a cardinal in court is almost unheard of, and their lawyers say they are doing so only as a last resort.

“The Daughters of St. Paul are just as unhappy as they can be about having to do this,’’ said Michael C. McLaughlin, an attorney for the nuns.

The nuns have asked the Massachusetts Supreme Judicial Court to order the pension plan trustees, who include O’Malley and several of his top aides, to provide them with a full accounting of the nuns’ portion of the fund, or to rule that the nuns were technically never part of the church-run plan and to order the archdiocese to reimburse the nuns’ contributions, plus returns. The nuns are also seeking attorney’s fees.

Their lawsuit alleges that representatives of the church-run plan were unable to supply data concerning the Daughters’ contributions and earnings required to effectuate the spinoff. The trustees, the lawsuit alleges, never kept separate records for each contributing employer — even though, it alleges, they were required to do so by the document establishing the trust.

BCI has not spoken to the Daughters or had any interaction whatsoever with them concerning this matter. Everything we report to you comes from other sources familiar with what is going on, and everyone we have communicated with feels the Daughters are in the right, and the archdiocese is in the wrong.  Here are several points to note which are not covered in the Globe article:

1) Pension Money Missing

As we reported in “Is Boston Archdiocese Committing Fraud?, $5 million is owed to the pension fund for employee pensions by closed parishes.  That has not yet been repaid, yet $2.5 was diverted from closed parish reconfiguration funds to pay costs of Finance Council member, Jack Connors’ pet Catholic Schools project in Brockton.  Another $40 million is owed to the pension fund by open parishes.  One might reasonably ask, is the amount the archdiocese is offering the Daughters for their contributions being reduced to adjust for other employer participants who the Archdiocese is not collecting from?  (Sidenote: as we know from our post yesterday, Diocese Defaults on Debt, the current administration is not one necessarily prone towards upholding all of their their financial commitments, but we digress..).

2) Accounting for All Benefit Funds

If it is not happening already, BCI thinks the lawyers for the Daughters should insist on a full accounting of all employee pension plan-related payments made over the past 5 years.  We know that $1.4 million was taken from insurance funds in 2010 to say that the 2010 Central Ministries budget was balanced (see “Easy Come, Easy Go” or graphic below.

And we already knew from the 2009 Annual Report (p. 75) that $2.6M was taken from the self-insurance program to cover the expenses associated with administering abuse prevention efforts and outreach to promote healing and reconciliation with survivors and others harmed by sexual abuse.

In what ways might the Benefits Trust funds intended for pensions have been used to pay other expenses (e.g. finance, accounting, HR, IT, etc) over the years that were not pension-related?   Has anyone talked to  or deposed Joe M. over in Risk Management to ask him in what ways Risk Management/Insurance reserve funds were used by the Chancellor to help balance the budget by cross-billing them to other departments?

How much from the Benefits Trust has been paid towards Carol Gustavson’s compensation, that started at $125K/year and supposedly increased to around $149,999–vastly higher than HR people in other dioceses are paid? Who else is paid by Benefits Trust funds and how much?  How do the benefits administrative expenses compare today vs the cost in 2005 before Jim and Carol arrived? If they are higher, why?

As we asked in “20 Questions About Pensions,” what has become of the many millions of dollars the RCAB has retained over the past 20 years as fee income from the investment returns for some other purpose or Corporation Sole expense?   Since RCAB charged these fees without license, why should the RCAB not have to make up all losses?

3) Hypocrisy

Carol Gustavson said the archdiocese requested information “demonstrating that the Daughters were equipped to oversee their employers’ own pensions.”  Why exactly is that required of the Daughters of St. Paul, when the archdiocese is saying Corporation Sole is neither equipped nor feeling morally bound to oversee  and fund their own employee pension plan?

4) Is Carol Competent to Hold this Role?

At one of the recent meetings with former employees, Carol Gustavson, an attorney and labor negotiator by previous occupation, said she was unable to answer an important question about the plan, explaining she was not as good with numbers as the former employee, gone 5 years, who asked the question. 

Sources familiar with Carol’s tenure in the archdiocese tell BCI that Carol had to ask employees or consultants basic questions about the attributes of a “Defined Benefit” vs “Defined Contribution” plan.  She was unaware of the need to file certain healthcare forms, required by law, and disputed knowledgeable employees and consultants who knew the requirements.  We are told that her emails had to be checked for errors, and sources indicate on one occasion, she was unable to do simple math regarding costs of a life insurance program that employees would pay for.  

5) Nature of the Negotiation

In the Globe article, Marcia S. Wagner, a pension law specialist whom the nuns hired in 2007, said she has never encountered such difficulty acquiring basic information to complete what she said should have been a straightforward matter.

“What struck me as most atypical is the incredible lack of responsiveness, the lack of any hard data or information, non-answers to very specific questions, and just endless, fruitless negotiations,’’ she said.

She added: “When you want to accomplish something that is par for the course and ordinary, and it becomes mired in arcane complexity, nonresponsiveness and non-answers, that will usually mean that something is amiss.’’

We have confirmed the validity of her comments.  Negotiations were characterized to BCI as “adversarial”  and occasions where “vitriol was spewed.”   One person told BCI, “The Archdiocese stonewalled them because they thought if the RCAB allowed the Daughters to exit the plan, then we’ll lose other organizations in the same manner.”

Then there is Carol G’s style.  BCI has it on good word that Jim McDonough paid a substantial amount of money not long ago to an organizational consultant he knew from his days at Abington Bank to try and help him resolve the dysfunction on his team.  (John Straub is the latest attempt at resolving the dysfunction). Of Carol, she was apparently found by the consultant to have low teambuilding and collaborative skill and to have created significant animosity amongst her colleagues within the department and across the Pastoral Center, which in turn created problems for the Chancellor.  She was perceived as a labor negotiator, not as an empathetic, fair, trustworthy head of HR.   That is not a personal attack, it is simply factual information. (Moving her out of high-level responsibility for HR and having her coordinate just benefits, the Pastoral Center floorplan and the phone system was an attempt to address those problems, but BCI thinks it would be better for her to be told she is simply not a fit for this organization). Some amount of your donations to the Catholic Appeal probably paid for the organizational consultant.

If Carol is not good with math, does not understand pensions and benefits, and does not get along well with other people, one might reasonably ask why she is still employed at the Catholic Archdiocese of Boston making a nice six-figure salary in a job that requires the aforementioned skills?  Answer: because she is seen by the Chancellor as loyal to him and his agenda.

Perhaps the Daughters’ attorney should also request a different archdiocesan representative to negotiate with.

6) Other Lawsuits?

This one lawsuit is just about getting pension funds back.  Though BCI knows of no other lawsuits, we hear that the Chancellor has nicely positioned the archdiocese for other potential lawsuits on age discrimination, especially by women.  For example, there is the manner in which the Chancellor pushed out his former administrative assistant after about 30 years of service.   People familiar with the situation report he said many times he was looking to hire a young blond secretary. (He ended up hiring a student, Peter, straight out of BC with no experience, and in short order he was making the same or more than the previous admin with 30 years experience).  Was it age discrimination, or simply that he did not want people around in the Chancellors and Cardinals’ offices who knew their jobs well, had institutional memory and connections to past leaders, and who would not let him break past promises?  How many other long-time knowledgeable, dedicated people over the age of 55 were pushed out with offers of early retirement on the basis that if they did not take the money at that time, there would be less in the future?

A BCI commenter wrote that when the Chancellor was hiring the new head of HR, he was overheard by a manager saying his goal was to hire someone who could “get rid of all these menopausal women” without triggering a lawsuit.  Nice Christian attitude, Jim.

So, there you have it.  Yet more reasons for a changing of the guard.  Does the Cardinal have the courage and backbone to make the tough decision to replace the Chancellor and other members of the cabal? We are asking this question not for BCI, but in order that the Cardinal can rebuild trust, take care of dedicated former employees living on limited retirement incomes, and ensure the future good works of the Catholic Church in Boston

Pension Roadshow: “The Circus is in Town”

March 13, 2011

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.

Is Boston Archdiocese Committing Fraud?

March 11, 2011 defines “fraud” as “deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.”

For those following the saga of how the Archdiocese of Boston is cutting promised pension benefits to former employees and religious, we may now have a new word to use in discussing what is going on.  We are not sure what the answer to the question in the title is, but are just posing the question for consideration.  You decide.

Here is the situation in a nutshell:

The archdiocese promised certain benefits to employees when they were hired, and the Archbishop of Boston also promised that when parishes were closed and sold, the funds from property sales would pay off employee pension obligations, among other debts and obligations.  But today, some six years after parishes were closed, even though $5M exists in unpaid pension obligations from closed parishes that has never been paid back, instead of tapping the closed parish “reconfiguration funds” to pay off the debt as promised, the archdiocese is sticking it to former employees by cutting their pension benefits.  Worse than that, even as the archdiocese is cutting pension benefits saying they do not have the money to pay them, $2.5M from those closed parish reconfiguration funds was siphoned off from reconfiguration funds to pay for powerbroker Finance Council member Jack Connors’ pet school project in Brockton instead of going to pay back the pension funds.

Take a moment to re-read the first sentence of this blog post.

There is so much to say about events of the past few days, including the meeting at the Pastoral Center last night with former employees, that time simply does not permit a full discussion today.  Here are just two highlights, and the basis for the subject of this blog post.

1) Despite initial promises made to employees about pension benefits when they started working for the archdiocese, Carol Gustavson, the plan administrator, repeated last night that if former employees do not take their lump-sum payments now, there is no guarantee they will get their money later. 

 We all know by now, of course, that it is a conscious choice and decision by the archdiocese and plan trustees to not uphold the prior commitments, while still choosing to pay millions of dollars in excessive six-figure salaries to multi-millionaire employees. By the way, no one seems to mention that there is approximately $1 billion in real estate assets on the books, which the Chancellor and archdiocese seem perfectly content to sell off when they need the money for certain other things, but not for funding pension plan obligations.  So much for good faith in prior promises made by the Archdiocese of Boston.

2) A question asked last night deserves immediate investigation by the archdiocese and by legal authorities.  Why has the 2004 promise by the Archbishop of Boston that reconfiguration funds from parish closings would be used to payoff parish debts not been honored to retire $5 million owed by closed parishes towards the pension fund? 

Here is the promise, which we first wrote about in our September 22, 2010 post,  Moving Money, Building Distrust. You will find the promise made twice.  See page 4-7 of this document distributed at the March 2006 Archdiocesan Pastoral Council meeting, presided over by Cardinal Sean O’Malley.  Note how the document coincidentally opens on page 1, “Communication Builds Trust.”:

From letter dated February 13, 2004: The Archbishop has chosen this approach so that many issues may be addressed…The proceeds from the assets of suppressed parishes will provide monies due employees of suppressed parishes for past work and separation assistance, for vendors who are owed monies from suppressed parishes, for amounts for past employee benefits and parish insurances due from suppressed parishes…

Here is a graphic of the same passage:

If you keep reading in the .pdf, you will see a second letter, dated July 24, on pages 6-7 that reiterates the promise:

“The funds raised from the sale of suppressed properties will be used to address past due obligations and employee benefits of the suppressed parishes, including:

1. Monies due employees of suppressed parishes for past work and separation assistance;

2. For vendors who are owed monies from suppressed parishes;

3. For amounts for past employee benefits and parish insurance due from suppressed parishes;.

4. For covering unfunded pension liability for lay employees and clergy of all parishes

Promise was clear.  Was it upheld?  No. 

In this 2010 actuarial report on the pension plan, you can clearly see on page 9 a number of employers have unpaid obligations to the pension fund.  Open parishes owe nearly $40 million, and closed parishes have a $5 M debt to the pension plan.  Here is a snapshot of the page:

Despite that $5M debt to the pension plans from closed parishes, in the 2008 annual report we see this:

“On August 13, 2007 as part of the parish reconfiguration process $2.5 million was transferred to Trinity Catholic Academy Brockton, Inc.”  a newly formed related organization that consolidated the operations of certain parish schools in Brockton.”

We asked this last September and will ask it again.  How did Jack Connors’ new Catholic Schools project magically become part of the previous “parish reconfiguration process”? 

How is it that funds originally promised by the Archbishop to parishes, employee benefits, and the unfunded employee pensions were instead redirected to the Brockton project?

Then of course in 2009, when the Campaign for Catholic Schools, Inc., another separate but “related” corporate entity, needed cash to pay construction bills, somehow $26 million in Revolving Loan funds–some of which probably came through the revolving door from Reconfiguration–revolved right back out the door to Jack Connors’ pet project.  We keep going through the list of promised usages for reconfiguration funds and must be missing something.  Can anyone point out how building new non-parish-affiliated archdiocesan Catholic academies by a different but “related” corporation fits into the list of priorities above the promise to repay unfunded pension plan obligations? 

And  where exactly did the gain of about $40 million from sale of properties reported back in the 2006 Annual Report and  2006 audited results go after the Revolving Loan Fund was paid-back $14 million? defines  “fraud” as “deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.”

Objective reality from their own actuarial statements is that $45 million of the funding shortfall is actually owed by open and closed parishes, but former employees are being coerced into taking the hit in their pockets to let the archdicose off the hook.  This paves the way for a new fully-funded plan in the future for everyone making six-figure salaries currently working at 66 Brooks Drive.

Do the actions of the Archdiocese of Boston correspond to the practices in the dictionary definition of “fraud”?  We are just asking the question.  What do you think?

20 Questions about Pensions

March 10, 2011

Our last posts about the deception surrounding the cuts to the employee pension plan have resulted in a lot of emails coming in to BCI.  If you are just catching-up on the pension plan issue, be sure to check out “Boston Archdiocese Sued Over Pension Plan” , “Pension Consternation” and our earlier posts like “Lay Pension Plan: Can You Trust the Anonymous Trustees?” .

With information meetings scheduled at the Pastoral Center for lay employees tonight at 7pm, and this coming Saturday at 10am and 1pm,  we thought we would share common questions people are asking below of the archdiocese.    We started out with 20 questions as the goal (so we left that in the title of this blog)  but the list quickly grew.

  1. Isn’t this just the largest capital campaign ever conducted by the Archdiocese in disguise?
  2. Why are the trustees coming after former employees and not the employers who owe them the money to pay us?  It seems that you should go after the debtors before you try to compromise with those who are due benefits.
  3. Why should former RCAB employees, who often worked at low wages to serve the Church, believe the archdiocese is committed to upholding pension commitments made to them when the archdiocese is so willing to pay excessive salaries to people like Mary Grassa O’Neill, Jim McDonough, Beirne Lovely and others? Over a five-year period, the archdiocese is paying  just 3 lay employees–Jim McDonough, Mary Grassa O’Neill, and Beirne Lovely $4.3M in combined salaries, not including benefits, while previously promised pension benefits are being cut.  Their salaries cannot be justified under the premise of attracting the “best and brighest” because the searches were tainted by conflicts of interest, and no other archdioceses pay at these levels.  Have these people–some multi-millionaires and all of whom are retired from their 25+ year prior careers–been asked to return several million in excessive salaries to help fund the pension plan?  If not, why not?  What steps are being taken to slash today’s excessive salaries in order to better fund the pension plan?
  4. Isn’t it a huge conflict of interest for the Cardinal who owes us the money to have absolute control over the trust that they owe money to?  Why doesn’t he turn this plan over to an outside unbiased trustee who will act justly to protect all involved?  Shouldn’t the courts simply stop this whole thing until it gets unbiased review?
  5. The Boston Globe said that the only people who should consider this offer are those that are terminally ill.  Do you agree?
  6. Many people have left your meetings with the feeling that they have, in effect, been told that if they don’t cash out now they may get less or even nothing later.  Is it you intent that they get this feeling and, if so, are you selling this through intimidation and coercion?
  7. Is the Archdiocese or the Pension Plan considering bankruptcy to avoid their obligations to provide us the pensions we are do?
  8. Is the Church committed to fully fund the plan?
  9. Why was the offer not made to all beneficiaries of the plan?  Don’t we all face the same issues?
  10. Why were groups that are fully funded, like the cemetery association, lumped in with particularly underfunded groups like the central administration and the Parishes?  Should they not get their full benefits?
  11. Why did the Archdiocese promise additional service credit to employees to retire when they knew that the plan was underfunded and while they were plotting this low ball offer?
  12. The parishes owe the fund some $30 million.  Why not turn the vigil parishes over to the pension trust in partial satisfaction of this debt, before you calculate your offer?
  13. When you say the buyout is based on 83% you don’t mean that we are being offered an amount equal to 83% of what we are owed do you?  Because for me to get 83% of what I am owed I would need to get a 6.5% return on my investments.  I checked and insurance companies are paying about 3% on annuities.  For example, a hypothetical 61-year-old former employee would get only 61.5% of what the trust owes him if he took your offer and bought an annuity.  I understand that younger folks would get even less.
  14. This is the second time that the Cardinal has cut our pensions.  When he first arrived he tool away our COLA allowance knocking away about 30% of our pension value.  Now he wants another cut.  When will he stop taking sexual misconduct costs out of our pensions?
  15. What was the total cost of benefits management in 2005 before Jim McDonough, Carol Gustavson, and others took over?  What are the total costs today?
  16. What goals are the vendors of the trust given?  Who sets those goals?
  17. With proven members of the investment community on the Investment Advisory Committee of the Archdiocesan Finance Council, why has it taken so long for a rebound of RCAB investments?  How often do they meet specifically to review the investments and returns on the pension fund?  How are they adjusting the investment strategies? How has this fund performed over the past 24 months vs the market?
  18. Given that the stock market has gone up 115% in the two years since, why is the RCAB saying their fund went down over the same period?  Ordinary investors have gained at least 50% on shares bought in 2009, and anyone who just plain held on is about where they were before the slide. What is it about Chancellor McDonough’s management and oversight of this fund that leaves us in this situation today?
  19. How many millions of dollars has the RCAB retained over the past 20 years as fee income from the investment returns for some other purpose or Corporation Sole expense?  How much could premiums be reduced if the RCAB did not retain those $X million?   How can the RCAB, as an unlicensed financial advisor, be entitled to fees? Since RCAB charged these fees without license, why should the RCAB not have to make up all losses?
  20. Why does the archdiocese refuse to identify the names of fund trustees in all communications?
  21. Why are pension plan documents not signed by trustees and the Cardinal?  Do you consider them legally binding with no signatures?
  22. What qualifies Carol Gustavson, Exec. Dir of HR and benefits, 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 Ms. Gustavson gain the benefits expertise and experience for this job in the Catholic Church?
  23. Is the compensation for Carol Gustavson (estimated at $125K/year or more) appropriate for this role in a Catholic archdiocese?  Isn’t this more like an $80-90K/year job?  Are we paying some premium salary for a non-practicing attorney that would otherwise not be necessary for a benefits specialist?
  24. How is plan administrator, Carol Gustavson, discharging her fiduciary duty exclusively for the good of the beneficiaries of the trust?
  25. We understand plan administrator, Carol Gustavson, has a documented history of monitoring emails of people who work under her without legal cause and without their prior knowledge.  How much time does Ms. Gustavson spend monitoring emails of employees and for what purpose?  Is it appropriate for any valuable fund resources to be consumed by this practice?
  26. Who else’s salary besides Ms. Gustavson’s is paid in whole or in part by the investment returns on the fund?  Is she and/or are others paid by both the trust and RCAB?
  27. Who are the vendors of the trust (investment and program managers)?  How are they compensated? When do they meet with the trust leadership?
  28. How was the vendor for the trust chosen?  What is or was the objective criteria used for selection? Who else was evaluated?  Why that vendor?
  29. 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?

That is all we have time for today.  Feel free to add your additional questions or reactions in the comments section.

Boston Archdiocese Sued Over Pension Plan

March 9, 2011

As most readers know by now, just about the only way to get the Archdiocese of Boston to take action these days on anything is some sort of big threat or pressure.  These threats and pressures can take one of 3 forms: a) bad publicity, b) loss of money, or c) a lawsuit.  Today we talk about a lawsuit recently filed which many people might want to know about.

The cuts to the employee pension plan announced last fall that affect current and former diocesan employees as well as employees at affiliated organizations are getting a lot of attention of late.  Many dedicated former employees feel the communications from the archdiocese are intended to coerce them into accepting a lump-sum payment because of the uncertainty of the future funding status of the plan. We have copies of the letter we will post soon and agree it seems like coercion.

As part of our research to help readers prepare for the upcoming information sessions–including one Thursday night at the Pastoral Center in Braintree–the other day we were reading some of the information at the archdiocese’s glitzy benefits website, when we happened upon the pension plan financial statements from 2010 and 2009.

Check out this link to download the RCAB Pension Plan Audited FY 2010 Financials.  It was amended and released in mid-January 2011 with little public attention. Go to Page 13, note J for information about one entity whose funds have been managed by the RCAB that has filed a legal complaint to get their funds out.  Here is what it says:

The Plan Trustees have voted to amend the Plan to implement a soft freeze effective December 31, 2010, and a hard freeze effective December 31, 2011. Under the provision ofthe amendment, any employee hired after December 1,2010, will not be eligible to become a participant in the Plan. As of December 31, 2011, all participants will stop accruing benefits. Employees with five or more years of service will remain vested. Employees with at least one year of service as of December 31, 2011, will be allowed to continue to add years of service towards vesting after the freeze date.

During December 2010, a Complaint for Equitable Relief and an Accounting was brought against the Plan’s Trustees by the Daughters of St. Paul, a participating entity in the Plan. The entity is seeking a transfer of the assets and liabilities allocable to it relative to its current and former employees who have been participants in the Plan. Prior to agreement to the transfer of assets and assumption of liabilities by a new plan to be created by the participating entity, the Trustees of the Plan have sought assurances from the participating entity that will provide sufficient protection of pension plan benefits to the respective participants. It is the Trustees’ estimate that the nature of the legal action, which primarily seeks equitable action as opposed to monetary damages, will not materially and adversely impact the Plan. The Trustees hope to engage in discussions promptly to try to reach closure regarding the transfer of the pension plan assets of the Trust to the Daughters of St. Paul, on conditions, at a value, and with accounting and actuarial information satisfactory to both parties.

We did not let the Daughters of St. Paul know we learned about this lawsuit or seek permission from them or anyone to share news of this legal action since this published information is sitting right out there in the public domain.  Sources indicate to us that the Daughters tried to solve this problem by meeting with various archdiocesan officials, but the archdiocese was uncooperative and confrontational in the negotiations.

We cannot blame them for taking legal action. Very big of the archdiocese to respond back saying they want assurances from the Daughters that they will provide sufficient protection of pension plan benefits to their participants, when the archdiocese itself makes no assurances to its own participants they will provide sufficient protection of benefits. The Daughters run their own publishing business, they operate a chain of retail bookstores, they have their own recording studio, and more. They have never struck BCI as not being business-savvy, so BCI has little doubt they will be able to work out appropriate investments to ensure benefits are protected for their current and former employees.

Still, Jim McDonough, Carol Gustavson and the archdiocese should really be ashamed that people have to resort to lawsuits in order to protect themselves.

Speaking of being ashamed, it seems to BCI that the anonymous Trustees of the pension plan and Cardinal O’Malley must also be ashamed of the pension plan.  Why do we say that?  Because all kinds of documents list the “Trustees of the Roman Catholic Archdiocese of Boston Pension Plan and Trust” but the names are never listed and they never actually sign anything.

For example, here is the 67-page document outlining all of the terms of the 2011 RCAB Pension Plan and Trust. Go to p.64 in the .pdf (numbered page 59) and look at the approval/signature page.  Even easier, just click on the graphic below.

No names of the trustees.  No signature by a single trustee.  No signature by the Cardinal.  Did the Trustees meet, review, and approve this?  If so, why no signatures?  Did Cardinal O’Malley read and approve this?  If so, why no signature, date, and notarized seal of a witness?  One must reasonably ask the question if this is even a legally valid and binding document.

In case people want to know, here are the names of the anonymous trustees.

Chair: Seán P. Cardinal O’Malley, OFM Cap.,
Very Rev. Richard M Erikson
Mr. James P. McDonough
Very Rev. Joseph K. Raeke
Mr. Robert Guyon
Mr. Mark Rich
Joseph Maher, Esq.
Mr. David Woonton
Paul Sandman, Esq.
Ms. Jane Walsh
Mr. Jonathan Mellin
Plan Administrator: Carol Gustavson
Attorney for the Trust: Linda Sherman, Esq.
Consultants: Chris Green and Brenda Butler, Towers Watson; Tom Sablak, October Three

None of them apparently is sufficiently proud of the plan and their handiwork to sign their names to a single memo or plan document.  Thanks, guys.

Let us know what you think about the lawsuit and practice of never listing the names of the trustees who are supposed to be protecting the best interests of plan beneficiaries.

And stay tuned tomorrow morning (Thursday) for a list of questions to ask at Thursday night’s meeting in Braintree.

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