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Benefits November 7, 2013
Philadelphia Archdiocese Moving to 403(b)
November 8, 2013 (PLANSPONSOR.com) – In an effort to improve its financial situation, the Archdiocese of Philadelphia is freezing its defined benefit plan for lay employees.
Reported by Rebecca Moore
The Archdiocese said it remains committed to assisting its employees in retirement, so after the freeze date, the Archdiocese will establish a defined contribution plan. The Archdiocese will contribute a percentage of individuals’ annual compensation to their defined contribution plan accounts. The amount of the Archdiocesan contribution will be discretionary and will be determined on an annual basis, but a contribution of 4.5% of each employee’s annual compensation is expected initially. Employees will also have the opportunity to make pre-tax contributions to their individual accounts.
According to the Archdiocese’s announcement, beginning last summer, a series of steps were taken to begin to remedy fiscal challenges, including selling a number of real estate assets, and reducing the workforce at the Archdiocesan Pastoral Center by 25%.
All measures were essential in order for the Catholic Church to maintain a viable presence in the Philadelphia region and provide for all those in need through its various ministries, the Archdiocese said.
Among the balance sheet liabilities outlined this past summer was the Lay Employees’ Retirement Plan (LERP). At that time, it was underfunded by approximately $150 million (i.e. approximately $630 million in actuarially determined liabilities versus $478 million in plan assets). While the funding level is sufficient to meet the current and medium-term benefit payments, action must be taken now to ensure the plan can meet its long-term obligations to future retirees, the announcement said.
The Archdiocese engaged a 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 Archdiocese to maintain a defined benefit plan in the future. Following this study, a recommendation was provided to freeze the LERP. This recommendation was reviewed and accepted by the Board of the LERP and the Archdiocesan Finance Council. Final approval was made by Archbishop Chaput.