Pension Consternation

March 8, 2011

Was everyone excited to have endured heard the launch of the Catholic Appeal this past weekend? Did your parish announce their individual goal publicly?  Naturally, each parish has a goal, but the overall goal for Jack Connors’ crack fund-raising team is nowhere to be heard, so nobody knows if they succeeded or failed. That is part of the “accountability” and integrity of the Archdiocese of Boston in fundraising.

Speaking of accountability and integrity, an alert reader commented on our last post that the biggest fundraiser of his tenure Cardinal O’Malley kicks off this week is not actually the Catholic Appeal–rather it is the “attempt to  intimidate thousands of former employees out of their pension money.”  We will have a lot more to say about this topic, but will cover a few points today.

First, BCI wonders how many people are aware that this is not the first time that Cardinal O’Malley and the Archdiocese of Boston have reduced the employee pension plan benefits.  A few years back, they cut out the cost of living allowance (COLA).  So, this is actually the second cut to pension benefits.

Second, with the new round of communication that the Chancellor and his minions are undertaking and all of the memos and PR flying around about the pension plan cuts, the average person would probably assume that the RCAB has done extensive research about how other dioceses are handling their pension obligations. Just like one would reasonably expect for employee compensation, one would also expect they have spoken to other large archdioceses like New York, Chicago, Los Angeles, and presumably ones in the northeast, like Worcester, Hartford, Fall River, Philadelphia, and maybe the likes of Cincinnati or Detroit.   Not necessarily. Sources tell BCI that when someone working for the Boston archdiocese in employee and retirement benefits in recent years took the initiative to speak to some other dioceses to ask about their plans, they were told by one of the powers-that-be (which means Chancellor McDonough or Carol Gustavson) to basically cease and desist.  Maybe work had already been recently done, and they were just saving the duplicate effort. We know in years past, before the current regime, the financial management of this diocese surveyed other dioceses on such matters.  But sources tell BCI that in recent years there had not been any kind of competitive study done for either benefits or compensation programs. Of course, we already knew that no one at 66 Brooks Drive or on the Finance Council cares about making sure compensation in this archdiocese is comparable to other dioceses.  Why should they?  They can pay a retired multi-millionare banker $1.25M over five years and pay a retired lawyer and retired school administrator nearly$1M each over 3 years, while claiming they didn’t have the cash to fund pension plans, and everyone basically lets them get away with the breaches of fiduciary responsibility and trust. 

Tip for the day: Try writing to Carol Gustavson today (cgustavson@rcab.org, benefits@rcab.org) and ask her to email a competitive assessment report performed no later than 2010 of the pension/retirement benefits in other dioceses.  Let us know what you hear back.

Lastly, former employees of the diocese who paid into in this pension plan need to understand that a lump-sum payment is not a good idea except in certain circumstances.  Re-read the Boston Globe article from December 12, “Archdiocese to end lay pension plan

Those workers can choose to receive their benefits in a single lump sum, or to begin receiving annuities while they continue to work. But the early payments would be reduced to reflect the plan’s unfunded liability and, in the case of the annuities, to reflect the younger age at which the employee receives payments.

If, for example, an employee who has earned $30,000 in benefits chooses the lump-sum option and cashes out and the plan has been 80 percent funded, on average, during the previous year, she would receive $24,000.

The more employees take advantage of these opportunities, the faster and cheaper it will be for the church to reduce its risk and eventually end its obligations under the plan. But pension experts say both deals are poor ones for employees, unless they have a terminal illness, because it guarantees that they will receive a smaller amount of money than they have earned.

“It’s really ugly, trying to get people to make bad financial decisions to save the Catholic Church some funding,’’ said Norman P. Stein, an authority on pension law and a professor at the Earle Mack School of Law at Drexel University.

He said corporations, unlike religious organizations, are prevented by law from discounting lump-sum payments to reflect a pension fund’s underfunded status. He said the payouts can be tempting, particularly for the unemployed, but financially unwise. “People sometimes have a hard time looking very far into the future.’’

By the archdicoese coercing you into taking a lump-sum now, they are reducing their obligation to pay the pensions to lower-paid past employees, so when the plan becomes fully funded again in a few years, they can take that full-funding and offer full benefits under the new plan to the likes of Jim McDonough, Beirne Lovely, Kathleen Driscoll, Mary Grassa O’Neill, John Straub, and everyone else making $200K+ a year. A better solution would be to uphold prior commitments made by ensuring the plan is fully-funded for those people who worked for years at low salaries in service to the church and were already vested–and then reduce benefits on a going-forward basis to current employees who are not yet reliant on those pension funds.

It increasingly appears there is no plan for a much-needed changing-of-the-guard in the financial management of the archdiocese, so the wasteful spending of donor money and rule by Archbishops Connors, McDonough, and Kaneb will continue.  More and more, BCI is becoming convinced that it will take an uprising of lay Catholics and priests–and perhaps even the threat of lawsuits–to stop this fast-moving train before more harm is done. Lay-people telling pastors they are not giving to the Catholic Appeal and pastors telling the archdicoese they will not support the Appeal is the first step.

What do you think?


Welcome Home!

March 5, 2011

Today, we welcome several people back to the archdiocese after time away.

First, we welcome back Cardinal O’Malley. This weekend the Cardinal opens the 2011 Catholic Appeal with Mass at Blessed Mother Teresa Parish – St. Margaret Church in Dorchester on Saturday at 4:00 p.m. He is also celebrating Mass tomorrow, Sunday, March 6 at 9:00 am at St. Michael in North Andover, and then finally at St. Brigid in Framingham on Sunday as 12pm.  We think it is very good that the Cardinal is in town visiting parishes and we encourage him to spend more time in the Boston archdiocese visiting parishes and also engaging in governance of the diocese.

Much to our dismay, there is still no word about what was raised in the 2010 Catholic Appeal.  The Boston Herald reports “Like last year, archdiocesan officials didn’t set an official fundraising goal because of concerns that parishioners might feel stretched by several ongoing campaigns, including one for school improvements.”  School improvements?  Is that the Jack Connors’ Catholic Schools 2010 Initiative–the one that was supposed to end last year, where all of the  $70 million to be raised was supposedly coming from deep-pocketed friends of Jack?  Is that millstone now hanging around the necks of everyone in the archdiocese?

Can anyone get a straight story from this archdiocese about what goal the team of 15 people under Kathleen Driscoll is accountable for hitting?  BCI hears the top three people on her team are collectively paid somewhere in the range of about $700k in salaries alone.  How can they ask Catholics to give towards the 2011 campaign without ever telling us what they raised in the 2010 campaign?

We said it before and we will say it again about the hypocracy from 66 Brooks Drive. Last November, when Kathleen Driscoll was announced as the new Secretary for Institutional Advancement and the new Boston Catholic Development Services was formed to centralize fundraising, we were all told this new effort would “ensure donors of…accountability.”

For an archdiocese who publicly criticized this blog last August, for “unfounded claims,” it would seem to us that the real “unfounded claim” is that the new archdiocesan fundraising structure would ensure accountability.

If the new archdiocesan fundraising efforts are characterized by “accountability,” then why is it that no one is accounting for what they have raised for the Catholic Schools 2010 Initiative or the 2010 Catholic Appeal?  Exactly who is this fundraising group accountable to, and if they are not accounting to donors in the pews before they open their hands and ask for more money, who exactly are they accounting to?

Sorry, we got so wrapped up in the Catholic Appeal, we almost forgot the other welcome home.

Secondly, welcome back to Fr. James Flavin and Fr. Michael Medas, who just returned from a boondoggle conference in New Orleans.  They were attending the 2011 convention of the NOCERCC.  For those not familiar with the organization, it is the National Organization for the Continuing Education of Roman Catholic Clergy.

In case you do not know some of these names, here is who these people are:

  • Father Flavin has a degree in counseling who has been director of pastoral care of priests since 2008.  That means he primarily oversees treatment plans for priests with psychological problems including substance abuse, and as best as we can tell, he is liked and respected for his work in this area. However, the archdiocese also asked him since 2008 to oversee the Clergy Retirement Fund, even though he had no specific financial training or qualification for that function. To say the fund’s performance in recent years has not been good is an understatement. Then Carol Gustavson, who also had no skills in that area, got involved helping.  Now Joe D’Arrigo, a consultant who has been trying to stabilize the fund, has just been officially named Executive Director, Clergy Funds.  Fr. Flavin is no longer the fund facillitator, but maintains his role as director of pastoral care of priests–a very important role.  We wonder how the trustees of the fund would grade the fund performance since 2006.  Coincidentally, it may not matter anyway because the trustees have now changed, but that is a topic for a different post.
  • Fr. Medas is Director of the Office for Clergy Personnel.  According to this Pilot article, he was formerly director of the Apostolate for the Deaf and has lived in residence at parishes, including Our Lady Help of Christians, Newton, St. Mary, Ayer and at Holy Family Parish, Concord.

The NOCERCC and their convention are interesting when one digs a little deeper.  Here is a look at the 2011 NOCERCC convention schedule and here are the related links from the NOCERCC website to other websites.  We will leave it to you to reach your own conclusions after checking it out further.  Suffice to say, we need to pray for our priests.

The conference, coincidentally, took place just before Mardi Gras, when a number of pre-Mardi Gras parades take place. The Loews New Orleans Hotel is “within easy walking distance of…the French Quarter” and cost $149/night for a room. Conference registration cost for members was $500 per person.  Assuming the priests from Boston are NOCERCC members, the trip probably cost somewhere around $3,500 for 3 nights, 2 people, with airfares, conference registration and meals.  Last July, when the archdiocese cut 20 positions to save money and Vicar General Fr. Richard Erikson said, “Nearly all travel and conference budgets have been reduced,” some of us thought the archdiocese was actually trying to save money.  Apparently we misunderstood the memo.

So, a hearty welcome back to Boston to Cardinal O’Malley.  We sincerely hope you will be in town for a little while now and can work on reducing spending on excessive six-figure salaries.  And welcome back to Fr. Flavin and Fr.  Medas. We hope and pray that the learnings from the convention and benefits to the Boston presbyterate will pay off the expense many times over.



How to Save $2 Million Annually Without Really Trying: Part 1

January 9, 2011

For all of the pressure put on pastors (and thus on parishioners) to support the annual Catholic Appeal, for all of the pension and clergy retirement fund cuts, for all of the layoffs of dedicated church workers and all the ministry cuts that have supposedly been “necessary” to save money under the current Chancellor, what if someone could provide evidence that the Archdiocese was basically wasting $2 million/year or more?  Would anyone responsible for that waste get fired? (Or would they get retained and/or promoted)?  What if there was a way to save $2 million a year while maintaining all of the services currently provided?  What could be done with that $2 million?

We see a way to save at least $2 million annually from the Archdiocese of Boston central administration expenditures–if not more—but the people at the very top of the hierarchical food-chain at the Pastoral Center in a position to act on this –and on the Presbyteral Council and Finance Council–are simply not doing anything about it.  The blog and our readers are frankly getting sick and tired of the ongoing fiscal mismanagement and squandering of assets.

In our last post, “Is Boston Archdiocese Violating the Law?we reported on how the excessive salaries doled out by the Archdiocese of Boston represent a breach of fiduciary responsibility and could also set the archdiocese up for fines or other penalties by the government.  “Objective Observer” objectively observed and asked:

“Is there no one else who could do as good or better job as chancellor, as benefit trust president, or as school superintendent? Their combined compensation and benefits comes to nearly $1 million for just 3 people….So shoo them out the door with all the usual accolades, find three people at about $150,000 each to do their jobs. Now you are at $450,000 for salary and about another $150,000 for benefits (new hires can’t start in the pension plan). Put the other $400,000 you’re not spending on those three positions into the pension trust to raise the total available every year, and sing all the way to the bank.

While you’re at it, place a $150,000 cap on the top ten salaries (think about those lawyers, layers of finance poobahs, etc.).

We did the math, and are pleased to offer you the exclusive Boston Catholic Insider plan for cutting $2 million in two simple steps.  Here is the quick explanation of how to save the money.

Step 1: Reduce Excessive Spending on Top Ten Salaries

First, take the top 10 salaried employees and reduce their compensation to no more than $150K/year. These are people who make anywhere from $166K/year up to $325K/year.  We have listed most of the names and salaries before, but with recent changes, as best as we can determine, the Top 10 names now include the following people:

  • Terry Donilon, Secretary for Communications
  • Kathleen Driscoll, Secretary for Institutional Advancement
  • Mary Flynn Myers, Vice President of Development
  • Mary Grassa O’Neill, Secretary for Education, Superintendent of Schools (who, on top of her $325K salary from the RCAB, coincidentally, also collects a state pension of at least $75K/year from her 30 years working for the public schools in Boston and Milton)
  • Scot Landry, Secretary for Catholic Media
  • Beirne Lovely, General Counsel
  • Jim McDonough, Chancellor
  • Glenn Matera, Director of Finance
  • John Straub, Executive Director of Finance and Operations for Central Ministries
  • Jim Walsh, Assistant Superintendent of Schools for Administration and Finance

Not all of their salaries are yet published in reports, but we figure these 10 people are costing the archdiocese about $2.9-$3M in salaries and benefits (e.g. health, dental, life, disability and pension contributions).  U.S. government statistics say the median household income in Boston is around $55K/year and in Massachusetts as a whole it is $64K/year, so anyone making $150K/year would be earning nearly 3 times more than the median household income in Boston and 2.5 times the median household income in Massachusetts. (As part of this salary adjustment, the archdiocese should also reduce the paygrade/salary of the lead benefits administrator, Carol Gustavson, from $150K/year to around half that amount–which is what a benefits administration position should be paid in a Catholic diocese).

We estimate this cap of $150K/year would save at least $900-$925K in salaries alone (if not $1M+, when you also adjust down salaries of direct reports), and if we allow 25% for benefits, that is another $225-250K, for a total of about $1.15 to $1.25 million in savings. If individual secretariats can raise money to pay salaries above $150K/year with the full knowledge and support of their donors (or if the likes of “Jack and Jim” want to open their own checkbooks to fund higher salaries), that is fine.  But, anyone else not willing to accept this level of compensation would be encouraged to pursue employment elsewhere.  This salary reduction would also avoid the potential IRS penalty of 25% of the excessive compensation, or about $250K in potential penalties.  (Which budget would the Chancellor take the IRS penalty from?)

Bottom line: annual savings of $1,150,000 to $1,250,000, starting immediately, plus avoidance of a possible $250,000 IRS penalty

How many donors keeping their wallets closed in the 2010 appeal will it take for the archdiocese to do something?  Will the Presbyteral Council and Finance Council finally take up this matter with great urgency and take action?  Will pastors “just say no” and stop sending money to feed Corporation Sole’s voracious spending appetite until this is addressed?  Will the Cardinal finally exercise episcopal leadership and simply order that cabinet-level salaries be slashed?  Or will Chancellor McDonough keep twiddling his Blackberry trackball and the powers-that-be continue “fiddling while Rome burns”?

Stay tuned for our next exciting Part 2 episode in “How to Save $2 Million Without Really Trying.”  You will also learn what YOU can do to ensure your voice is heard about this ongoing squandering of archdiocesan assets and the breach of fiduciary responsibility.

Meanwhile, if you are concerned about wasteful spending and know someone who is still donating to the Annual Appeal, click on “Leave a comment” and then click on the “email” graphic to send a copy of this blog post to them.


Is Boston Archdiocese Violating the Law?

January 7, 2011

For months now, we have been told by readers they are rather certain the Archdiocese of Boston has been violating the law in ways that could make the archdiocese subject to any of a variety of civil charges or fines.  The excessive salaries we have been reporting on which represent a breach in fiduciary responsibility, and now the manner in which the archdiocese is handling the freezing of the lay pension plan, both raise significant enough questions that we feel this merits urgent attention by those legally expert in such matters, as well as the Presbyteral Council, Finance Council, and College of Consultors.

In yesterday’s post, Catholic School Questions, the comments revealed how the archdiocese is implying to employees that their pension fund might not be there some day so as to encourage them to take a lump sum pension fund payment now.  Beyond the troubling ethical implications, on a legal basis, doing this could leave the RCAB open to sanctions under state and federal regulations. We will take this whole matter up in a separate post, but for now you can share your thoughts on that issue via comments on that post or this one.

Excessive salaries is a whole different issue which we bring to a new level in our coverage today based on the legal consequences many readers may have not been aware of.

In 2004, the Internal Revenue Service announced a new enforcement effort to identify and halt abuses by tax-exempt organizations that pay excessive compensation and benefits to their officers and other insiders.

Could the Boston Archdiocese be subject to fines or loss of their tax-exempt status because of excessive compensation?  The $325,000 annual salary of Schools Superintendent Mary Grassa O’Neill remains one of several glaring examples that could trigger government fines or sanctions.  Read on.

“We are concerned that some charities and private foundations are abusing their tax-exempt status by paying exorbitant compensation to their officers and others,” said Mark W. Everson, then-Commissioner of the Internal Revenue Service. (The current commissioner is  Douglas Shulman)

This particular enforcement effort lasted about a year.  According to this IRS report , twenty-five (25) of the organization examinations resulted in proposed or assessed excise taxes aggregating in excess of $21 million against 40 persons or organization managers. Among the issues giving rise to these assessments was “excessive salary and incentive compensation.”

If the IRS were to get wind of the current pay practices of the Boston Archdiocese for executive cabinet members, we are honestly not sure what would happen.

This report on the IRS effort says the following:

“There is no bright-line rule defining “reasonable” compensation. The IRS has indicated that reasonable compensation is measured with reference to the amount that would ordinarily be paid for comparable services by comparable enterprises under comparable circumstances.”  Fines are 25% of the part of compensation deemed “excess” plus an excise tax of 10% to the organization manager.  The report also says, “Finally, if the IRS determines that a nonprofit organization pays “excessive” compensation to an employee, it could revoke the nonprofit’s Section 501(c)(3) tax-exempt status on the basis that the payment of excessive compensation violates the prohibition against the use of nonprofit assets to benefit private individuals.”  We are not making this up.  Click on the image to see for yourself.

The report, “Wrongdoing by Officers and Directors of Charities: A Survey of Press Reports 1995-2002″ by the Hauser Center for Non-Profit Organizations at the Kennedy School of Government (where  the most trusted advisor to Cardinal O’Malley on everything, Fr. Bryan Hehir, works and collects his six-figure salary) looked at allegations of criminal and civil wrongdoing by officers and directors of charitable organizations. Of the 152 incidents found, 104 entailed criminal activity, 54 involved breaches of fiduciary responsibility (the duties of loyalty and prudence) – self-dealing, failing to carry out the mission of the charity, and negligent management of assets – and 6 fell into both categories.  Under the caretory of “Fiduciary Duties Breached”, in 14 cases “payment of excessive compensation” was present.

This is a very serious problem.

For first-time readers, here is a quick summary.  Dr. Mary Grassa O’Neill is paid a salary of $325,000 as Secretary for Education and Superintendent of Schools for the archdiocese.  This is the highest paid person in the archdiocese, and we can find no other person in a comparable role in another archdiocese paid at this level.  We checked.  (If someone proves us wrong with documented information, we will issue a correction, but no one has to date).  There are 42,500 students in Catholic schools in Boston and the number is dropping every year.  By means of comparison, Dr. Carol Johnson, superintendent of Boston Public Schools is paid $265,000 and they have 56,000 students.  (Apologies for an error previously–an alert reader checked with the Boston Public Schools office and verified directly that Dr. Johnson is paid exactly $265K, with no bonus accepted).   Here is our previous post on this topic where we cited how Grassa O’Neill was making about $138,000 in 2003 in her last superintendent job.  Here is a comparison vs other public school superintendents in large metropolitan areas:

But even this comparison is flawed because, unlike public schools, where the superintendent is directly responsible for management of policy, curriculum, busing, district-wide budgets, hiring and firing teachers and principals, negotiations with labor unions, and a host of other issues, Grassa O’Neill is not directly accountable for results.  She and her office may support pastors, school leaders and faculty on an as-needed basis with areas like planning, curriculum development, recruitment and hiring, development and fundraising, but they do not actually manage, direct or drive these areas. Since most Catholic schools are parish-based, the key decisions are all made locally, so the role of Catholic Schools Superintendent is mostly consultative and advisory.  As one reader wrote to us about the Boston Catholic Schools Office (CSO):

They aren’t running anything, they are just running to the bank.  It is far from the job description of a superintendent in New York City, Brookline, or Los Angeles, where the superintendent has the ultimate responsibility and authority over the schools.  CSO has none.  So why the big paydays?

It is bizarre.  A million bucks for a command staff that commands nothing, and puts out no financial reporting, no long range plan, no results, nothing.

One of our researchers wrote to other large dioceses about salaries and recently heard back from the head of HR for one of them.  Our researcher shared the Boston salaries and asked if the other diocese could give some sense for how they compared.  Here is what our researcher wrote and received back:

To HR Director,

I am a Boston-based writer conducting some research into whether salaries paid to lay leaders and executives in the Boston archdiocese are consistent with those paid in other dioceses.  I’m wondering if you might be able to share a general range of compensation paid in ___ for key positions, such as the following. The amount in parenthesis is what has been reported publicly that these positions pay in Boston:

Superintendent of Schools (publicly disclosed salary is $325K/year in Boston)
Assoc. Superintendents of Schools (publicly disclosed salary is $188K/year in Boston)
Chancellor and head of finance: (publicly disclosed salary is $250K in Boston)
General Counsel: $300K/year in Boston
HR Director: $150K/year in Boston

Are the salaries of some of these roles a matter of public record in the ___ archdiocese?  If not, I’d appreciate if you are able to give some sense for the ranges. We are looking for a basis to compare vs other large archdioceses.

Thanks in advance for any perspectives you can share.

The response:

These are not consistent in ___.  The first 2 are way over ___
Chancellor is a priest on priest stipend
General Counsel varies but $300K is high
And I wish HR got $150K…..but, not in my lifetime.

As best as this writer can determine, based on IRS guidelines and based on the Kennedy School of Government Hauser Center for Non-Profits’ report on wrongdoing by Officers and Directors of Charities, the leadership of the Boston Archdiocese is today breaching their fiduciary responsibility by paying excessive salaries to a number of senior lay executive employees–in the Catholic Schools Office, in HR/benefits, in legal, in finance, and probably in fund-raising, communications and other areas.   Are laws being violated?  We do not know–we will have to leave that determination up to others.

The archdiocesan Presbyteral Council is meeting with Cardinal O’Malley next week.  We are asking all readers to talk to their pastor this weekend at Sunday Mass about the problems you have seen documented on this blog and ask him to request that these concerns be discussed at the Presbyteral Council meeting. You can focus on just the excessive compensation and legal risks if you wish, but better still, ask him to request that the following concerns be discussed:

  • Leadership/Governance: especially the need for engaged, active leadership and governance by the Archbishop of Boston
  • Integrity: on the part of cabinet members and the archbishop in words and actions
  • Fiscal Management: breach of fiduciary responsibility with excessive six-figure salaries being a good starting point, and
  • Team: will there be likely changes with the Vicar General (returning to the military) and the Chancellor?  How will those be dealt with?

Click on “Leave a comment” at the end of this message, and you’ll get an email link/graphic that will let you easily email a copy of this post to any friend or colleague.  If you have your pastor’s email address or that of a member of the Archdiocesan Presbyteral Council, we suggest you start there.  At the same time you are asking your pastor to request that these issues be discussed by the Presbyteral Council, let your pastor know you are praying for him and supporting him 100% in raising these issues. If you do not know your pastor’s email, talk to him in-person over the weekend.  Regardless, you can also send a copy of this post to: newstip@globe.com.


Lay Pension Plan: Part 2

December 16, 2010

Today we continue our two-part series, “Lay Pension Plan: Can You Trust the Anonymous Trustees?with part 2.

As we mentioned yesterday, for months people have been asking questions about the cuts in the Lay Pension Plan.  Mostly what they get in response to the questions seems to be secrecy, not the sort of transparency desired.  All of the questions in our posts of yesterday and today came from people who follow the blog.

Yesterday we covered the first 5 of 10 categories of questions the archdiocese should be answering.

1. Fund Trustees
2. Qualifications for the Plan Administrator(s)
3. Compensation for the Plan Administrator(s)
4. Vendors
5. Conflicts of Interest

Today we cover the final 5 concerns:

6. Costs

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?  As we all know, whatever losses seen are not just based on the stock market and claims filed by an increasing number of retirees, but they are also based on all these administrative and management costs as well.

7. Goals and Performance

What goals are the vendors of the trust given?  Who sets those goals?

How is the RCAB Benefits Trust investing the money?  Who invests it?  Is the track record worse than the Dow Jones Industrial average or other stock market indices? 

Update: a good answer exists for these questions, but the archdicoese is just poor at communicating it.  The Collective Investment Partnership spells it all out here.  But who knew? Why is this not a part of the roadshow presentation that Carol Gustavson is giving across the archdiocese to employees?

8. Transparency

Is there any impediment to making public all agreements entered into by the Trust or on behalf of the Trust?  Is there any reason to not make the periodic earnings reports submitted to the Trust public? (By the way, the same should be done for the Clergy Retirement Fund).  If there is an impediment, what is it?  If there is not, why not publish them?  Where is the transparency?

9. RCAB Give and Take

How much has RCAB had to plow into the Lay Pension plan? Is the cause for the subsidy mainly due to a bad economic environment or has the investment philosophy changed? Or is it both with some other mitigating factors thrown in?

How many millions of dollars does the RCAB retain 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?  Would $1 million be enough of a cushion?

10. Finance Council Investment Advisory Committee

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? Some of the members of the Investment Advisory Committee have been around for a  long time (eg. Peter Lynch, Thomas O’Neill, Deacon Charlie Clough). Have the investment managers been changed? If so, what are their pedigrees?

Update: we believe some answers to the questions in #10 are here in the overview of the Collective Investment Partnership.

Aside from these ten areas of questions and concerns posted yesterday and today, everyone out there who has paid into the Lay Pension Plan and must rely on the plan in the future is feeling really good about the management of the fund.

We have written to Carol Gustavson to ask for answers to yesterday’s questions and have not yet heard back.  The Benefits Trust website lists these two emails if you want more information: cgustavson@rcab.org, benefits@rcab.org.  If the answers to the questions on the blog matter to you, feel free to copy the blog post into an email and drop it to Carol and the benefits email address and see if you can get a response.  You might also want to copy Jack McCarthy, the Vice Chair of the Finance Council (jack.mccarthy(at) neu.edu). Let us know what you hear back


Lay Pension Plan: Can You Trust the Anonymous Trustees?

December 15, 2010

We are not yet done with the topic of compensation and Finance Council-related corruption, but based on popular demand, will take a break today and tomorrow to discuss the Lay Pension Fund and some secrecy issues surrounding it.  And yes, we will also get to the new Vice Presidents and other six-figure-salaried staff from the Campaign for Catholic Schools now moving over to the supposedly cash-poor Pastoral Center in a separate post.  The pace of ill-conceived moves by the folks at 66 Brooks Drive is making it tough for us to keep up.

For months now people have been asking us to report on the cuts in the Lay Pension Plan, and in view of the Boston Globe article on Sunday and substantial number of questions we are getting, we will take a stab at it today.

Problem is that the archdiocese has been so non-transparent about this, we really have more questions than answers to offer you.

Today we are not going to try and sort out the various options for current employees or former employees who are not yet retired and collecting benefits.  For those not yet retired, we know that the Archdiocese is not going to fully fund the existing plan and instead will be reducing promised retirement benefits to fund the plan.  The plan is currently underfunded by about 21% (see chart at right), so all payouts are reduced by that amount and also discounted to the present value of future payments based on the age of the person.

For example, if someone was to collect $500/month for life ($6,000/year) from age 65 and they take a lump-sum payment at age 55, they get a one-time lump-sum payment of only $25,296. (See here for the explanation or click on image to right).   Yes, that is a lot less benefit than you would have received over, say, 20 years of retirement.

Given the magnitude and impact of the changes on 10,000-odd participants, you would think that the archdiocese would be very transparent about what is going on and who is managing all this.  Nope.

We hope this post is seen in the spirit of helping the archdiocese become more transparent and trustworthy, so they can better help employees and retirees who are dependent on these pension funds .

Here are the first 5 of 10 categories of questions the archdiocese should be answering:

1) Fund Trustees

Who are the fund trustees?  A “trustee” is an individual or organization that holds or manages and invests assets for the benefit of another. How can anyone trust the trustees to be upholding their fiduciary responsibility if we do not know who they are? This presentation says the trustees are Cardinal O’Malley, the Vicar General, the Chancellor, and “Priests and lay individuals with pension/finance expertise.”  (click on image to right). Who are these individuals?  Why the secrecy?  Why does the archdiocese refuse to identify them, despite many requests over a period of many months?

2) Qualifications for the Plan Administrator(s)

What qualifies Carol Gustavson, Exec. Dir of HR, to be running the separate company, the Benefits Trust?  She is trained as an attorney and did labor relations for a newspaper before working for the Archdiocese. From where did the proudly ex-Catholic Gustavson gain the benefits expertise for this job in the Catholic Church?

3) Compensation for the Plan Administrator(s)

Is the compensation for Carol Gustavson of $150K/year appropriate for this role in a Catholic archdiocese?  Are we paying some premium salary for a non-practicing attorney that would otherwise not be necessary for a benefits specialist?  We asked another large archdiocese about this and were told that Carol’s comp was much higher than they pay their HR director.

How is Carol discharging her fiduciary duty exclusively for the good of the beneficiaries of the trust?

Who else’s salary besides Ms. Gustavson’s is paid in whole or in part?  Is she and/or are others paid by both the trust and RCAB?

4) Vendors

Who are the vendors of the trust (investment and program managers)?  How are they compensated?

When do they meet with the trust leadership?  How are they chosen?

Why are their plans underway to aggregate the 403B pension plan under one vendor?  [Note: A 403(b) is a tax deferred retirement plan available to employees of certain non-profit organizations or educational institutions as determined by section 501(c)(3) of the Internal Revenue Code. Contributions and investment earnings in a 403(b) grow tax deferred until withdrawal (assumed to be retirement), at which time they are taxed as ordinary income].  What is or was the objective criteria used for selection? If a vendor has been selected, which one?  Who else was evaluated?  Why that vendor?  How does aggregating under one vendor serve the needs of the beneficiaries?

5) Conflicts of Interest

Is a written agreement in-place that forbids Carol Gustavson from receiving any benefit from the vendor(s) employed for the trust?  Is she legally foresworn from later being employed by any one of them or a related entity?

We will get to issues 6-10 (Costs, Goals, Transparency, RCAB Give & Take, and Investment Advisory Committee) tomorrow.


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