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March 17, 2016Diocese announces freeze of lay employee pension plan;
to establish new retirement savings plan for lay employeesDefined contribution plan will assist employees in retirement
CLIFTON In the Diocese’s new defined contribution plan for lay employees, which will begin July 1, participants will have choices regarding on how their funds are to be invested. When the defined contribution plan is implemented, Diocesan employers will contribute a matching percentage of each individual’s compensation to their defined contribution plan account. “While the amount of the Diocesan employer contribution will be discretionary and will be determined on an annual basis,” Patrick Brennan, the Diocese’s chief financial officer said, “we anticipate that Diocesan employers will match 50 percent of a full-time employee’s contribution up to a pre-determined percentage of the eligible employee’s compensation. This will allow employees to choose to save and invest a percentage of their pre-tax salary annually.”
CLIFTON The Diocese announced March 14 that it will freeze its lay employee pension plan, effective June 30, and will establish a new redefined contribution retirement savings plan for lay employees, effective July 1.
“The Diocese remains committed to assisting its employees in preparing for retirement,” said Patrick Brennan, the Diocese’s chief financial officer. “This action will enable the Diocese to meet its obligations to all current and future retirees; current and former employees will experience no loss or reduction of vested benefits. The Diocese’s new retirement savings plan — with employer matching — will help current and future full-time employees save for retirement.”
The lay employee pension plan was established in 1983 to assist those serving in the various ministries of the Diocese in retirement. Currently, 1,380 active employees are accruing benefits in the plan. Additionally, 875 are receiving retirement benefits and 560 former employees are vested and entitled to benefits from the plan. The assets of the lay pension are held in an IRS-qualified trust that is separate from other Diocesan entities. The funds in the trust can only be used for their stated pension purpose.
However, as a result of lower-than-expected investment returns in recent years, combined with new actuarial assumptions for retiree longevity, the pension plan was under funded by approximately $51 million at the end of the fiscal year on June 30, 2015.
While this funding level is sufficient to meet the current and medium-term benefit payments, Brennan said, “Action had to be taken now to ensure that the lay pension can meet its long-term obligations to future retirees at a cost that is affordable to the Diocese and its employing organizations.”
To address this issue, the Diocese engaged a leading human resources and benefits consulting firm to conduct an independent study of the plan with the objectives of assessing plan viability and the ability of the Diocese to maintain a defined benefit plan in the future. Following this study, in close consultation with a special subcommittee of the Pension Board, a recommendation was made to freeze the current defined benefit pension plan and establish a defined contribution retirement savings plan. This recommendation was reviewed and accepted by the full Lay Pension Board, the Diocesan Finance Council, and the plan’s trustees. Bishop Serratelli gave final approval to the changes.
Current employees learned of the changes March 14. They were provided with a letter via email or by their supervisors explaining the changes as well as a list of frequently asked questions. Former employees who are vested in the plan and retirees currently receiving benefits were sent notification via postal mail.
In the correspondence from the Diocese, lay employees were informed of the following:
• No current or former employee vested in the plan will experience a loss in accrued benefit.
• All current plan participants will retain the benefits they have earned and will continue to accrue benefits up to the freeze date.
• Accrued pension benefits under the Lay Pension will not increase for current employees with additional service or increases in pay after the freeze date.
• Current plan participants will continue to earn service credit towards their eligibility for early retirement benefits under the Plan.
• The Diocese will continue to make contributions to the Lay Pension after the freeze date to fund all benefits accrued through the freeze date.
• All former employees who are vested in the Lay Pension will retain benefits they earned while serving the Diocese or an entity participating in the plan.
• All retirees currently receiving benefits will continue to do so with no loss, reduction or interruption of benefit.
• The Diocese will be provide additional transition and grandfather benefits for current employees whose combined years of lay pension service plus age meet certain thresholds.
Current employees and plan participants will be mailed a final lay pension benefit statement after the freeze date of June 30.
A dedicated email address, ([email protected]), was activated March 15 for inquiries about the plan freeze and to assist current and former employees with any questions.
According to Brennan, multiple information sessions around the Diocese will also be held to share more details on the pension changes, the new retirement plan, and to answer any questions.
