(RNS) Religious denominations have long provided retired clergy and staff with secure pension payments—more secure, in some cases, than corporate retirement plans.
But some recent bumps have drawn attention to the vulnerabilities of so-called “church plans,” which are exempt from federal regulations aimed at safeguarding retirement funds for private-sector retirees.

As cash-strapped states and private companies revamp, freeze or end their pension programs altogether, participants in church plans are now realizing how church plans can be riskier than they appear, observers say.

“As a group, employees in so-called church plans are far more at risk than other private sector employees,” said Karen Ferguson, director of the Pension Rights Center, a Washington-based watchdog group.

Unlike other private sector workers whose pensions are insured by the federal Pension Benefit Guaranty Corporation, church employees have no federal agency poised to rescue their employer-provided pensions in the event of a devastating market crash.

Yet “because there hasn’t been a collapse of a (church) pension board plan, everybody I think is comfortable leaving them alone.” In several recent cases, however, churches have failed to keep their plans fully funded to be able to meet obligations to retirees:

— In October, the Roman Catholic Diocese of Wilmington (Del.) said it had just $8.5 million available to pay $52 million in pension liabilities. The diocese, which is under Chapter 11 bankruptcy protection because of the clergy sexual abuse scandal, is assuring pensioners it will meet its obligations.

— In August, the Archdiocese of Boston informed employees their pension plan—funded at just 79 percent—is “unsustainable.” The archdiocese will keep paying its obligations, according to spokesman Terrence Donilon, but a new market-based plan involving 401(k) or 403b accounts will take effect Jan. 1, 2012, funded through individual and employer contributions.

— About 12,000 Lutherans are seeing their pension payments shrink by 6 to 9 percent annually from 2010 through 2012. The defined benefit program of the Evangelical Lutheran Church in America was only 61 percent funded in February 2009, and has been closed to new participants since Jan. 1.

Other major denominations are reporting no such problems with their defined benefit plans. Several mainline denominations still offer defined benefit programs, which are increasingly rare in the private sector, as they promise to pay retirees a fixed monthly sum based on a formula.

Defined benefit plans of the Episcopal Church ($8.5 billion), the Presbyterian Church (USA) ($6.2 billion) and the United Methodist Church ($6.2 billion) are all sufficiently funded to meet future obligations, according to church spokespeople.

Those three denominational pension funds rank among the nation’s largest, each of them more than twice the size of Vermont’s $2.9 billion state pension fund, for example.

Unconvinced that they should follow the lead of corporate America and offer more plans like a 401(k), the organizations overseeing these assets remain committed to offering defined benefits.

“We maintain a prudent, long-term, disciplined and measured investment strategy, and remain convinced that this approach is the most prudent for achieving positive long-term investment results,” said Colette Nies, spokeswoman for the United Methodist Church’s General Board of Pension and Health Benefits, in an e-mail.

Observers cautioned church pensioners not to get lulled into a false sense of security.

“The church world tended to be a place that wanted, in the case of clergy, to protect those people from ordination to grave,” said David Powell, a Washington attorney and church pension expert who’s written the only book on the subject. “They wanted to make those sorts of pension promises. It’s the affordability of them that has got many of them concerned now.”

Powell said some denominations are considering switching from defined benefits to less-expensive defined contribution plans, such as those used by the ELCA and the American Baptist Churches. In the meantime, however, their assurances of sufficient funding don’t necessarily mean much in Powell’s view.

“A lot of this is rather fuzzy accounting,” Powell said. “You’re really trying to guess: how much money do I need now in order to pay Joe Blow $110 per month, commencing in 2030? … Actuaries will give you different assumptions, and it can vary very widely.”

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