Cardinal reaffirms commitment to lay pension plan

April 1, 2011

Today, the Boston Pilot published an article entitled, “Cardinal reaffirms commitment to lay pension plan.”  Here is an excerpt from the article:

BRAINTREE — Cardinal Seán P. O’Malley is reaffirming his commitment to meeting the obligations of the lay pension fund and will give anyone who has already elected to cash out of the plan a chance to reverse that decision.

“As long as I have breath in me, I will do everything in my power to care for the thousands of people who have given their lives in the service of the Church,” the cardinal said in a March 30 statement to The Pilot.

In his statement Cardinal O’Malley also discussed the current financial health of the archdiocese that he says has improved from prior years.

“Today, the archdiocese is in a much better place and most of the fiscal challenges have been resolved,” Cardinal O’Malley’s statement said in part. “We are no longer in fiscal free fall and are in a much better position to meet our obligations.”

Pension plan administrator Carol Gustavson told The Pilot that Cardinal O’Malley will send a letter to each former employee who has opted to cash out of the archdiocese’s lay pension plan early by taking a lump sum distribution telling them they “can change their mind if they felt pressured” and that it will “make sure they understand he is involved.”

Gustavson could not say when the letter would be released.

Cardinal O’Malley’s actions come in the wake of recent criticism of the archdiocese’s handling of the lay pension fund.

Last week it became public that the Daughters of St. Paul have filed a lawsuit against the plan’s trustees in an effort to withdraw funds contributed for their lay employees to the plan. The sisters are asking the Supreme Judicial Court to order the trustees to provide them with an accounting, or rule the sisters were never part of the plan and require the archdiocese to reimburse them for any contributions they have made.

Also, earlier this week, former chancellor of the archdiocese David W. Smith met with reporters to outline what he called heavy-handed tactics to coerce former employees into an early cash-out of their pension benefits.

Gustavson said the archdiocese’s goal is to return the plan to fully funded status, which she cautioned could take well over 10 years depending on market projections and investment returns.

Cardinal’s statement on lay pension plan

“When I arrived in Boston the pension funds were in danger because the archdiocese was insolvent. We were running a $15 million annual deficit; we owed $30 million to the Knights of Columbus; the Catholic hospitals were losing $40 million a year; the Catholic Appeal had plummeted to $8 million; and there were about a thousand lawsuits against us. Some were even advocating that the archdiocese go into bankruptcy.

Today, the archdiocese is in a much better place and most of the fiscal challenges have been resolved. We are no longer in fiscal free fall and are in a much better position to meet our obligation. I am so grateful to our pastors, parishioners, benefactors, the army of very competent volunteers serving on our boards and our hard working staff who have helped us along the road to recovery. Their efforts will allow us to continue meeting our obligations and to carry on the mission Christ has entrusted to us.

If I did not care passionately about pension obligations I would never have transferred our Catholic hospitals to Cerberus. As long as I have breath in me, I will do everything in my power to care for the thousands of people who have given their lives in the service of the Church.”

We were pleasantly surprised to see the Cardinal make a statement about the pension plan and voice this level of commitment to taking care of retirees. We hope this statement represents a real commitment, rather than something just intended to quiet the current uproar over pensions, including bad publicity from the Daughters lawsuit and call for involvement by state officials. Unfortunately, many promises have been made in the past and not upheld, and we have no specifics on the actions the Cardinal is now committed to taking.  As just one example, what are the plans to uphold the Cardinal’s promise from 2004 that $5 million in pension plan obligations by closed parishes would be repaid from reconfiguration funds?  Despite justifiable skepticism, the statement is at least a small step forward vs the past practice of total ignoring of the issue.

What do you think?

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Pension Contention

March 30, 2011

We know everyone is waiting for the latest in the employee pension saga–both the issues raised by former Chancellor David Smith on behalf of former employees, and the mediation session yesterday between the Daughters of St. Paul and the Archdiocese of Boston to try and resolve the stalemate over them getting their lay employee pension funds out of the archdiocesan pension plan.

To be honest with you, we are afraid that we have not got much news we can report.

There is no public word from Attorney General Martha Coakley or Secretary of the Commonwealth William Galvin about whether they will intervene to take over and manage the archdiocesan plan.  Perhaps Martha is so busy looking at the issue of board of director fees paid by the state’s large health insurers that she has simply not had the time yet to look at the problems of coercion, deception, withholding of information, diversion of funds from one corporate entity to benefit a different one, material non-disclosure, and broken promises that affect 10,000 lay employees dealing with the $70 million underfunding of the Archdiocese’s employee pension fund.  As an aside, it baffles BCI how she can justify being so committed to dealing with the problem of director stipends at some non-profits (like Blue Cross), but not concerned at all with vastly greater excessive spending at other non-profits, like the Boston archdiocese. The AP reported earlier in March that she said this about Blue Cross:

“Blue Cross enjoys certain tax benefits as a non-profit in exchange for being committed to a purpose other than making money. Paying directors makes it look a lot like a regular business, and Blue Cross can’t have it both ways.”

Is it not be case that paying excessive salaries to lay executives instead of using those scarce monies to fund the lay or clergy pension funds would also be problematic for a non-profit charity like the Catholic Church, whose purpose is also other than making money?  (Sorry, we digress…)

Back to the pensions, as far as the mediation between the Daughters of St. Paul and the Boston archdiocese, sources indicate that no meaningful progress was made in the day-long mediation session on Tuesday.  The absence of any announcement by either side today would serve to validate that.  In terms of  next steps in the lawsuit and court case, we need to confirm those before we can share more details, but by all indications, it appears they will be headed to court.

The silence by Terry Donilon on this issue today is particularly noteworthy.  Terry was “Mr. Interview” on Monday when he was leading the smear campaign to counter the bad press about the latest pension flap.  Today, nada.  You will all also recall how confident he was just a week ago to Catholic News Service that the situation with the Daughters would get resolved amicably:

“Terrence Donilon, archdiocesan secretary for communications and public affairs, told Catholic News Service in an email March 23 that the archdiocese has been working “for some time” with the Daughters of St. Paul “regarding their request to withdraw from the lay pension plan.” Donilon said archdiocesan officials believed they were “making progress toward resolving any outstanding concerns” and found the December lawsuit “unexpected.” Since the suit was filed, he said, the archdiocese reached an agreement with the Daughters of St. Paul “on a number of issues.” He also noted that the archdiocese has “a long-standing and good relationship” with the sisters. “We will resolve this disagreement through mediation and continue to work closely together in the future for the good of the church.”

Terry, how confident are you now that the disagreement will get resolved through mediation?


Pension Tension

March 29, 2011

Tensions are escalating over the employee pension fund, and if you did not notice from the statement by the former Chancellor, David Smith and subsequent response by the archdiocese, there was a bit of a war of words going on yesterday.  As one might expect , the Archdiocese still fails to answer pointed questions and apparently has started their characteristic “smear campaign” in retaliation when someone raises public criticism they do not like.   Here are a few highlights from the fireworks:

Article in today’s Boston Globe:Church is faulted on handling of pensions.”  There are not really any new insights here.

“My concern is that there are 10,000 people out here who have worked their whole lives for the church for submarket wages, and those people are being put at risk,’’ Smith said.

He also said the archdiocese is overstating the value of the lump sum payments.

Smith also said that the archdiocese is taking advantage of the fact that church plans are not held to strict federal standards, which apply to most pension plans and which prohibit pension funds from asking employees to accept a reduced benefit.

Even if the church does not have a legal obligation to follow federal guidelines, he said, it has a moral responsibility to do so.

O’Malley should “simply stand up and publicly say on television that this is the full faith and credit of the diocese and every single person will get every dollar they’re due,’’ Smith said.

Before yesterday’s press conference, Smith met with a group of about 15 current and former employees of the archdiocese whom he provocatively dubbed “Boston Pension Abuse Victims.’’

Most of the employees declined to speak to the press. But one former administrator for the archdiocese who would give only her first name, Karen, said she had worked for the archdiocese for 22 years. Her lump sum payment would amount to about half of her former annual salary, but she is nervous about leaving it on the table.  “They’re making a threat that it may not be there,’’ she said.

In an interview yesterday, the current archdiocesan chancellor, James P. McDonough, said it is “the cardinal’s goal and the pension trustees’ goal to fully fund the pensions, but neither the cardinal nor the trustees can predict what will happen over the next 30 years.’’

Carol Gustavson, director of benefit trusts and plan administrator for the archdiocese, said the plan has been carefully reviewed by lawyers and actuaries to make sure it complies with the law.

Yes, Jim and Carol, it may comply with the law (because the law does not govern church plans), but does what you are doing comply with past promises made by the Archdiocese of Boston to employees and the Catholic faithful?  Is it correct on an ethical and moral basis to have the Catholic Church reneg on a promise made to the Catholic faithful like this?  Why will no one from the archdiocese acknowledge the promise made by Cardinal O’Malley in 2004 to repay $5 million still owed to the pension plan by closed parishes and to be repaid from reconfiguration funds? Why won’t the Chancellor at least add that $5 million to the pool of funds and recalculate all of the lump-sum payouts?  Why is no one explaining why $2.5 million of reconfiguration funds that was promised to first repay pension obligations was instead diverted to Jack Connors’ Trinity Academy project in Brockton?  The next time a reporter talks to Terry, could you ask him that question?  Terry, Jim, and Carol, next time you make a statement, could you comment on that?

Then there is the smear campaign.

Terry Donilon, criticized the former chancellor for there not being balanced budgets during his tenure, with no context for the financial freefall that followed the clergy sexual abuse crisis which Terry, of course, never had to deal with because he was doing PR at Shaws Supermarkets at the time.  Terry’s predecessor, who made somewhere in the range of $50-65K less/year than Terry is paid today, walked into her job thinking she was doing proactive PR for the good works of the archdiocese and Catholic Church in Boston, and instead found the sexual abuse crisis hitting weeks later.

In a WBUR interview, Terry continued the smear campaign.  The WBUR reporter discussed the objective downsides of the offer to retirees (listen at 2:35):

“I’ve talked to tax experts who say this is a problem because it could open the person receiving this lump sum up for a large tax bill, in addition, they’re reducing the amount that they get because they’re taking it earlier in their retirement, and in addition, they’re absorbing the losses for the plan suffered. One tax expert said,  ‘It’s a surprising idea to come from a Church.’ “

The response by Terry Donilon from the archdiocese (listen at 2:48):

“I don’t know what planet David Smith is living on.  What we’re doing is a very responsible transparent, and fair way of trying to protect the beneficiaries. We are living in extreme and extraordinary times.”

The reporter went on to say (3:30) that “Terry, really just attacked David Smith’s track record as chancellor of the archdiocese.”

Nice job, Terry, of upholding the “highest Christian ethical standards and personal integrity.”By the way, if you are being transparent, how’s about explaining what happened to the $5M owed by closed parishes the Cardinal promised would be repaid from reconfiguration funds?

We are waiting now to see what Attorney General Martha Coakley and Secretary of the Commonwealth William Galvin are going to do.  Do not all hold your breath at once waiting for their response. In the meantime, we think the failure to repay this $5M as promised and the redirection of reconfiguration funds to Brockton’s Trinity Academy constitutes “Abuse of, or Fraud with Benefits”, which would be a violation of the new Code of Conduct Policy.  Anyone who cares about this issue and wants to do something about it immediately can submit an Ethicspoint claim here and see what happens. All the information you need to reference is here.  Former employees, current employees, priests, religious, or any concerned Catholic can file a claim, and is set-up so you can file the claim anonymously.

Lastly, as reported in the media, the Daughters of St Paul and the Archdiocese sit with a mediator today to see if the issues that motivated their lawsuit against the archdiocese can be resolved.   Comedian and talk show host, Conan O’Brien mentioned the lawsuit by the Daughters in one of his monologues last week.  Here is a link to the video. (fast forward to 4:00 for the 20-second part about the Daughters).

Even if what they are doing is technically “legal,” does anyone believe it is correct ethically and morally for the Catholic archdiocese to summarily abandon their promises made to long-time dedicated Catholic employees and publicly position it as though they are somehow doing the right thing?


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.
STATEMENT OF THE ARCHDIOCESE

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 www.catholicbenefits.org 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 (http://www.bostoncatholic.org/annualreport.aspx).  A new benefits website (http://www.catholicbenefits.org/) 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
Email:  tdonilon@rcab.org
Work:  617-746-5775
Cell:  401-480-0171 

www.bostoncatholic.org

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.

Coercion

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…”

Deceit

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 Boston.com: “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.

 


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