According to the Boston Globe, Smith said he did so in order to protect lay workers from being financially harmed by the archdiocese’s handling of the transition from a traditional pension plan to retirement accounts funded largely by employee contributions (see Boston Archdiocese Moving to 403(b) Plan). He has also filed a letter expressing his concerns to the Internal Revenue Service.
The news report said employees vested in the plan had been promised a monthly payment when they retire, but the archdiocese, seeking to reduce its pension liability, is offering vested employees the opportunity to cash out of the plan early by taking a lump-sum payout, which would be discounted to reflect the plan’s underfunded status. Employees can also opt to accept an early monthly annuity or remain in the traditional pension plan.
Smith told reporters the archdiocese is trying to get past and present employees “to choose to forfeit their pension benefits in exchange for a grossly inadequate one-time payout.’’ He claimed the archdiocese is trying to frighten employees into taking less money than they have earned by suggesting that the pension fund may run out of money before they retire. He also said the archdiocese is overstating the value of the lump sum payments.
Smith said 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, it has a moral responsibility to do so, he said, according to the news report.
One former administrator for the archdiocese told the Globe 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.
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. Gustavson said archdiocesan officials had communicated repeatedly with Smith to try to assuage his concerns.
In a heated response to Smith’s criticisms, Terrence C. Donilon, a spokesman for the archdiocese, said: “It’s outrageous — when David Smith was chancellor, we were running annual deficits, and we are now running a balanced budget… [W]e have prepared a good plan to address the lay pension plan for the future.”Last week it was revealed that an order of nuns is suing Cardinal Sean P. O’Malley, the Roman Catholic archbishop of Boston, after years of trying to withdraw from a church-run pension fund (see Nuns Suing over Pension Benefits).