Priest Pension Crisis: $74m Gap in Retirement Fund

By Erin Smith
Boston Herald
March 19, 2015

http://www.bostonherald.com/news_opinion/local_coverage/2015/03/priest_pension_crisis_74m_gap_in_retirement_fund


The Archdiocese of Boston is facing another mounting financial crisis, with a staggering $74 million in unfunded pensions for priests — and a growing number of aging clergy heading into retirement, the Herald has learned.

The archdiocese currently has enough funds on hand to cover only about 37 percent of its more than $117 million in retirement obligations for priests, according to its fiscal 2014 financial filings for priest retirement benefits in the Clergy Health and Retirement Trust.

“It’s not a looming crisis. It’s happening right now,” said Charles Zech, director of the Center for Church Management and Business Ethics at Villanova University.

“The numbers jump out at you in Boston because they’re so large, but most dioceses are struggling with this,” Zech said. “Priests are living longer than anticipated, and they haven’t been as smart in investing as they should have been. The church investments haven’t been keeping up.”

In the past decade, the percentage of so-called “senior” priests receiving retirement payments from the archdiocese has jumped from 28 to 38 percent of the total clergy in the archdiocese, according to the trust.

In fiscal 2014, the average age of active priests in Boston was 58, and church officials estimated that 134 of the 392 active priests would reach retirement age within the next decade.

In Boston, church officials are largely relying on annual parishioner donations to keep up with priests’ pensions and benefits.

“Right now we’re on a pay-as-you-go basis,” said Joseph D’Arrigo, the trust’s executive director, who was appointed by Cardinal Sean P. O’Malley. “We pay our bills as we go. I anticipate we’ll continue to pay our bills for the next 20 years.”

D’Arrigo said fundraising campaigns at Christmas and Easter and a dinner in September bring in about $6 million annually for the pension fund.

But Zech called that pay-as-you-go practice “dangerous.”

“It relies on the good faith of the parishioners,” he said. “If at some point parishioners decide to stop making the donations for whatever reason, then the archdiocese will fall behind.”

The Boston archdiocese closed churches and sold off property to solve its last financial crisis — spurred by settlements with clergy sex abuse victims. But D’Arrigo said he doesn’t see that happening this time.

“I have an Easter collection coming up in a few weeks and I estimate $2.7 (million) to $2.8 million coming in,” he said. “If we continue to do what we’ve always done and people are as generous as they’ve always been, I don’t see it being a problem.”

While other dioceses face similar pension problems, Chicago’s has funded more than 90 percent of its pension liability, according to Jack Ruhl, a Western Michigan University accountancy professor who researches diocesan financial reporting.

But Ruhl’s research also shows Chicago faces a huge funding liability for other retirement benefits, such as medical coverage and housing.

“I do think it’s a crisis,” Ruhl said. “Finances will be the next big scandal for the church. Unfortunately, the priest pensions are not federally protected, but under church law, they can’t abandon the priests in retirement.”

Cardinal O’Malley has worked to turn around archdiocesan finances, which were in a free fall when he came to Boston in 2003 amid the sex abuse scandal.

O’Malley raised the priest retirement age from 70 to 75, pushed for financial transparency and ordered a 2009 audit of the retirement trust, which showed $15.8 million had been taken from the fund to pay priests on administrative leave for “accusations of misconduct with a minor.”

But Zech said there’s still more work to do.

“They have a big job ahead of them,” he said. “The problem is these guys give their lives for virtually nothing. The least we can do is take care of them during their senior priest days.”