ST. FRANCIS — When JSOnline posted a story Jan. 21 reporting that priests’ and lay pension plans in which the Archdiocese of Milwaukee participates were underfunded, the archdiocese’s central offices received e-mails and phone calls from those whose employers have invested in the multiple-employer plans. The questions were variations of, “Is my pension safe?”

John Marek, chief financial officer for the archdiocese, told your Catholic Herald Jan. 25, “Contributions are made by the employers. Retirees who are receiving a benefit will continue to get their checks. They should not be concerned. Employers will continue to put money into it,” he said.

Besides the archdiocese, parishes and schools, among others who contribute to the plans on behalf of their employees include Catholic Charities, Saint Francis Seminary, the Catholic Press Apostolate and the archdiocesan cemeteries.

Marek and Paul Jacobson, an attorney at Quarles and Brady who works with retirement and pension plans, and who advises committees that administer those plans, emphasized that the money contributed to the pension plans is placed in a trust.

Noting that this “is a tax-qualified pension plan established under section 401(a) of the Internal Revenue Code,” Jacobson explained, “Contributions held in trust are to be retained for the exclusive benefit of the plan participants, and used to pay for their pensions … the plan requires contributions and investment earnings be held in trust for the benefit of the employees exclusively.” Plan administrative expenses, however, are allowed to be paid from the trust.

He noted that as they were established in the early ‘70s, the pension plans for priests and laity, and the trusts that fund them, are “separate legal entities from the archdiocese.”
Funds at work

Marek explained what happens with the funds in the trust.
“We have a group of very good investment managers who will take those funds that are held at U.S. Bank; those funds are distributed to various money managers who have different styles so that’s how you build a diversified investment portfolio,” he said. “There’s a blend of different stock investing styles, there’s a blend of some fixed income investing styles.”

Marek added that oversight is provided by an independent investment consultant who reviews the performance of the money managers “to make sure they’re doing a good job.”

“For the first nine months of calendar year 2010, the investment returns were 12.6 percent, which was over a point better than the benchmark for a diversified portfolio similar to ours,” he said. “So they’re doing a good job.”

Underfunding affected all pension plans

While the archdiocesan pension plans were underfunded, it was not due to the filing for Chapter 11 reorganization on Jan. 4, nor was it unique to the multiple-employer pension plan that the archdiocese administrates, according to Marek.

“The investments, as everybody knows, a couple of years ago, took a hit. Everybody who had investments got hurt in the great recession, the worst economic decline we’ve gone through since the Great Depression,” he said. “The investments of the pension fund weren’t immune to that; they were affected, too. They’ve been regaining ground in the last year, year and a half, but we haven’t made it all up yet. It’s going to take longer to get there.”

As part of its reply to the JSOnline report, the archdiocese posted on its Web site,, under the listing of “setting the record straight – media corrections,” the following: “Due to poor investment experience in the last few years, many, if not most, defined benefit pension plans across the country are underfunded. As the stock market improved last year, the amount of underfunding was significantly reduced through the investment gains on the plans’ portfolios. Underfunding is a problem that defined benefit pension funds across the nation must address in the long term, but does not affect any of our employees in the near term.”