Controversy is swirling around the Archdiocese of Boston, with its former chancellor calling for an independent takeover of its underfunded lay pension fund, and an order of religious sisters suing for money they paid into the pension system for their own lay employees. 

The archdiocese, meanwhile, says it has been transparent in its intention to freeze the existing pension plan and replace it with a 401(k)-style alternative, which will impact about 10,000 current and former lay employees and beneficiaries. 

“We have chosen a very thoughtful and reasonable approach that has been developed in consultation with pension plan experts,” said Terrence Donilon, spokesman for the Archdiocese of Boston. 

Donilon also told Our Sunday Visitor that the archdiocese is trying to resolve the central issues in a lawsuit brought forward in December by the Daughters of St. Paul, who are trying to withdraw about $1.3 million from the pension fund. The money had been deposited into the fund for 44 of the order’s lay employees.

Only 83 percent funded 

The Daughters of St. Paul, which operates the multimedia publishing house Pauline Books and Media, assert in the lawsuit that the archdiocese will not tell them what their assets are worth. The sisters have asked, through their attorney, for the Massachusetts Supreme Judicial Court to order the pension plan trustees to give them a full accounting, or rule that they were never part of the plan and reimburse them. 

The parties are trying to resolve their differences through mediation, officials said. 

“We are actively engaged in discussions with the Daughters as we continue to work toward resolution of the issues,” Donilon told OSV. 

According to the archdiocese, the recession’s catastrophic effects on world markets resulted in the Pension Plan and Trust of the Roman Catholic Archdiocese of Boston to be underfunded around 17 percent. 

Earlier this year, several months after announcing its plans to freeze the current system, the archdiocese offered 1,800 former employees the options of cashing out of the pension fund at its current underfunded level, accept an early annuity or remain in the fund. 

The archdiocese says detailed information about the pension plan, financial statements and valuation reports have been available online for more than a year, and that at least 11 regional meetings were organized to answer questions from employees and their financial advisers. 

However, critics say the archdiocese has not been completely forthcoming with its financial data, and have charged officials with pressuring pensioners into accepting payouts for far less value than what they were promised. 

“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,” according to Boston Catholic Insider, a blog written anonymously by several people with “close ties” to the archdiocese. 

A BCI writer told Our Sunday Visitor that he and other blog contributors do not disclose their identities because they fear retaliation from the archdiocese.

Alleged intimidation 

David W. Smith, the former chancellor for the Archdiocese of Boston and himself a pensioner, has publicly criticized the archdiocese’s handling of the pension fund. He said that he had tried to express his concerns to diocesan officials, but that he was ignored, and denied meetings with the archbishop, Cardinal Seán P. O’Malley. 

“There are thousands of people who worked for sub-market wages for 30-40 years while working for the Church, now looking at retirement and having the archdiocese offer something that’s worth 60 cents on the dollar,” Smith told OSV. 

Diocesan officials said Cardinal O’Malley sent a letter to former employees who had opted to cash out to inform them that they could change their mind if they felt pressured. 

Donilon said three people responded to the cardinal’s letter to say they had not felt intimidated or threatened. As of mid-April, the archdiocese had received 415 lump-sum requests, 40 annuity requests and 29 waivers. 

Donilon said one former employee who opted to take the lump sum wrote an e-mail thanking the archdiocese for its help, and said: “I never considered the Church as a guarantor of my financial security. To serve the Church is to give all.” 

Earlier this month, the archdiocese announced that it had balanced its 2010 operating budget, but Smith, a former pension plan trustee who oversaw the archdiocese’s financial management between 2001 and 2006, remains skeptical. 

“They don’t have a balanced budget. They’ve done everything but reduce operating expenses. It’s right there in their financial statements,” said Smith, who asked the Internal Revenue Service to investigate because of a risk that the pension plan could lose its tax-deferred status. 

Critics ‘using scare tactics’ 

Smith has also called on state officials to place the pension fund under the supervision of an independent third-party trustee. 

“I hope the secretary of state or attorney general stops these payouts,” said Smith, adding that pension plan participants have not received adequate information on how the archdiocese calculated the pension system to be funded around 83 percent. 

Representatives for Massachusetts Attorney General Martha Coakley and Secretary of State William F. Galvin told OSV that their offices have received Smith’s requests, and are currently reviewing his documents. 

“Secretary of state officials have met with Mr. Smith on several occasions at his request, and are looking into his materials,” said Brian McNiff, spokesman for the secretary of state. 

Smith told OSV he believes the current pension plan trustees have conflicts of interest because they have business connections with the archdiocese. He also said they did not have the authority to overhaul the pension fund without first seeking approval from the IRS. 

“The trustees haven’t been doing their job,” Smith said. “The only way to stop them is to go public.” 

Donilon told OSV that the archdiocese rejects Smith’s call for an independent trustee, and added that Smith appointed two current trustees, the law firm, pension consultants and actuary that the archdiocese recently collaborated with while revamping its pension fund system. 

“My response to David Smith is he is the one using scare tactics, which is shameful given he was the chancellor,” Donilon told OSV. 

Meanwhile, the archdiocese has also been criticized for its handling of the lawsuit brought forward by the Daughters of St. Paul. 

The sisters’ attorney, Michael C. McLaughlin, told reporters in Boston last month that the order hesitated to sue the pension plan’s 11 trustees, but felt they had no other choice. 

“At first, we just thought there were some problems — it’s a big organization. As years went by, and very recently, it became clear that they didn’t have the data,” McLaughlin said. 

Boston Catholic Insider charged that “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,” and alleged that the archdiocese was uncooperative and confrontational in the initial negotiations with the sisters. 

“The daughters had to sue them to get information that should be readily accessible,” Smith said. 

Carol Gustavson, the archdiocese’s director of human resources, benefits and administration, told the archdiocesan newspaper, The Pilot, that the sisters had been provided all the information they requested. 

“We have provided employee-level detail, years of service, dollar amounts in the pool,” said Gustavson, who added that the archdiocese “would like to get this promptly resolved for their benefit as much as for the pension plan’s benefit.” 

Brian Fraga writes from Massachusetts.