One Catholic bishop said he is “devastated” by a pension crisis faced by potentially dozens of American dioceses, which could leave longtime lay Catholic employees facing serious financial hardship in their retirement.
And bishops told The Pillar they are looking to find solutions — fast — after learning that diocesan pension plans administered by Christian Brothers Services are dramatically underfunded, and would take millions to get on track.
Cathedral of the Immaculate Conception, Crookston, Minnesota. Credit: farragutful/wikimedia. CC BY SA 4,0
In addition to dioceses, the pension crisis impacts Catholic schools across the country, and could leave tens of thousands of Catholic employees and pensioners facing benefit cuts.
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Bishop Andrew Cozzens of Crookston, Minnesota told The Pillar that his diocese received “devastating” news in early August that his diocesan lay pension plan was “significantly underfunded,” and that retired and current diocesan and parish employees could face the prospect of significant reductions to the benefits they were expecting.
The diocesan pension plan was managed by Christian Brothers Services, a non-profit founded by a LaSallian religious brother, which says it provides Catholic organizations with health benefit, retirement, and risk management plans. The Crookston plan, Cozzens learned, was funded only to 58% of its obligations — well below the threshold for a healthy retirement fund.
The crisis meant that his diocese would face new annual payments of about $1 million to get the plan on track, Cozzens said.
“When you have a pension fund, you’re paying a certain percentage of what your employees make. That goes into a fund which is going to pay out a certain percentage back to people over the years. And they told us that since it was significantly underfunded, they were going to slightly reduce the percentage that we were paying per employee … But they were to charge us an extra $1 million a year for the next 25 years, to make up the deficit.”
“This was a shock to us because we had no reason to believe, up to that point, that the pension plan was seriously underfunded.”
Bishop Cozzens told The Pillar that he does not have the money to pay the annual seven-figure amount that would restore the diocesan Christian Brothers pension fund back to health.
There are fewer than 40,000 Catholics in the bishop’s northern Minnesota diocese. There are few reserve funds available.
“The diocesan appeal, which goes to every Catholic, raises about $1 million a year. That’s our largest funding mechanism. We also have the cathedraticum tax on parishes, and that’s almost another million in income. So our annual income is right around $2 million a year, and we just can’t add another million to our expenses.”
Cozzens said the prospect of selling diocesan properties to meet the gap is also a non-starter.
“Like many dioceses in the United States, Crookston had a settlement for abuse cases long before I got there. And so any properties at that point were sold,” the bishop said.
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Christian Brothers Services, based in Chicago, was founded in 1960, by DeSallian Brother Joel Damien, who wanted to create a cooperative purchasing network for schools run by the Christian Brothers religious order. The non-profit expanded into insurance and pension services for Catholic institutions, and is now used by 180 Catholic institutions across the country.
Among the services offered by Christian Brothers is the Employee Retirement Plan, which has more than $1.5 billion in assets, and whose defined benefit pension plan has more than 40,000 members.
But the plan is now facing an $800 million total deficit against its liabilities, with funding problems starting in the 2008 financial crisis, and continuing to decline thereafter, according to the Minneapolis Star-Tribune.
Dioceses say they were not informed that their pensions were on such shaky ground, and that periodic communications from Christian Brothers indicated that the plan was healthy.
In fact, Cozzens said, his diocesan administrators had believed that their pension plan was well-funded, and being well-managed — annual communications suggested as much, and they had seen only one rate increase, in 2019.
In 2020, the Christian Brothers fund faced “catastrophic losses” because of a hedge fund investment managed by the German firm Allianz Global Investors, a company eventually charged with fraud for exposing investors to “higher risk than promised,” federal prosecutors said in 2023.
Christian Brothers sued Allianz, alleging that the fund manager “improperly invested client assets, employed a reckless strategy… and abandoned the risk controls it was required to have in place,” according to court records.
“AllianzGI’s extraordinarily risky and self-interested gamble resulted in massive multiple employer plan losses for the [Employee Retirement Plan], wiping out, in a matter of weeks, nearly $150 million of ERP’s participants’ retirement savings that had been accumulated over decades,” Christian Brothers alleged in the suit.
While Christian Brothers settled privately with Allianz, it is not clear how much of the $150 million it lost on the investment was recovered. But the losses, along with changing retiree demographics, compounded liabilities for the fund.
For most of the past five years, the Christian Brothers pension plan has sat below 70% of total liability funding, and presently has only 66% of the money needed to cover its total obligations, the Minneapolis Star-Tribune reported this week.
And as the fund got shakier, the company did not annually raise employer contribution rates — until its announcements of major plan changes this July.
For Cozzens, that pattern is a problem.
“Not only were we not informed,” Cozzens told The Pillar, “but there wasn’t over the years the kind of steady raising of the rates that you would’ve expected if the pension was in trouble.”
To the bishop, it seems “negligent that [Christian Brothers] didn’t keep us informed all the way along.”
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While it is common for many pension plans to face some level of underfunding, generally federal regulators expect to see plans funded to at least 80%. A plan funded at less than 60% of liabilities — as is the case in Crookston — faces a steep road to financial recovery, putting benefits at both short and long-term risk. And because the Christian Brothers pension plan is classified as a “church pension plan,” it is not actually monitored by federal regulators — and is not eligible for a federal bailout if it collapses.
That leaves the plan’s participants especially vulnerable to underfunding.
For his part, Cozzens said he’s not sure what the situation will mean for current and former diocesan and parish employees, especially as his diocese tries to work out a strategy — which could mean spinning the plan off from Christian Brothers and looking at other management solutions.
“We want to do everything we can to try to say there won’t be any reduction in benefits, but of course I can’t promise that at this point, because we’re still working on all of our options and trying to figure that out. We just want to do everything that we can.”
“I’ve tried to look at this through the lens of Catholic social teaching, and in that light, I see three categories of people: First, the people who are currently receiving the pension benefit, I think we have the most responsibility to them. They made their retirement plans based on what they knew they were going to get, and they’ve been living off of that.”
“The second group of people are those who have been working for the Church — some of them for long periods of time, and some them, like my own chancellor and my own CFO, who are helping me make these decisions, are in marriages where both people worked for the Church, and so their only retirement savings is this pension fund.”
“And then, of course, you have people who worked for the Church for a short time, and then went somewhere else. And so I try to weigh my moral responsibility to these groups. And I have to do everything I can, including raising money, to try to figure this out. But this is devastating for these people, and I’m devastated that I might not be able to pay these people a benefit that they actually earned.”
“So we want to do everything we can to figure out how we can be true to the commitment we made to them. That’s what we’re working on now.”
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Crookston is not the only diocese informed this summer of a crisis for a Christian Brothers pension plan.
In addition to Catholic schools, universities, and other Catholic institutions across the country, some sources have estimated there are at least 15 dioceses — and possibly many more — in the same situation, with thousands of diocesan and parish retirees facing the prospect of diminished or lost pension benefits.
Each of those dioceses faces a similar situation — the expectation of paying insurmountable sums to make a pension plan whole again — or to remove the available money from Christian Brothers’ management, and find a new solution for investing the funds and providing as much pension benefit as they’re able. For some dioceses and other institutions, that could mean substantial cuts.
The Diocese of New Ulm, Minnesota, has 811 enrolled members in its Christian Brothers pension plan, which is now funded to meet only 58.55% of its obligations to those members.
Carol Hacker, director of finance in the New Ulm diocese, told The Pillar that Christian Brothers informed her diocese in July that in addition to their regular pension contributions, they would soon face 25 years of seven-figure payments to cover the plan’s unfunded liability.
“They call it a phase-in,” Hacker explained. In 2026, “between the [current contribution] and the unfunded liability payment, it would be $1.7 million. For the next year, in 2027, they were requiring us to pay $2 million. And then for the following 23 years, $2.4 million, on an annual basis, is what we would have to pay them.”
“Our diocesan appeal is about $1.3 million a year,” Hacker said. “So it’s about twice that.”
Hacker said that before this summer, she was aware that Christian Brothers was attempting to improve its plan funding status, by raising contributions levels. But she said she had no idea how big the hole was.
New Ulm’s Bishop Chad Zielinski told The Pillar he’s put together a task force to help with decisions on what steps the diocese should take next, and to assess how the unfunded liability might impact benefits, and beneficiaries, in the diocese.
“We still don’t know exactly what that’s going to look like,” the bishop said.
News of the pension crisis “really and deeply disturbed me,” Zielinski said, “because you feel a responsibility.”
“There are people who worked in the diocese for 40 years — people who come to work in the Church because they believe in the ministry, and they’re willing to take the sacrifice of a lesser wage, and then all of the sudden, their benefit stands to be reduced.”
“From my gut, I just felt that this was a really grave injustice,” the bishop added, emphasizing to The Pillar that there was “no prior notification” of the underfunded liabilities.
“And I want to do something, which is why we created this ad hoc committee to take a terrible situation and to ask: ‘What can we do, in the name of justice, to rectify this?’”
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As she works with Zielinski to consider a plan for the future, Carol Hacker is among those Catholics who could be impacted directly by the pension crisis.
At 65, “retirement was in my near future,” Hacker said, “probably [in two years], at 67. But now I may have to work much longer.”
“People like me were basically promised from Christian Brothers what we had on their portal — that we could see exactly what we were supposed to be getting. We didn’t have a ‘plan B,’ because we thought this was a secure retirement, which we would be getting.”
“So we’ll have to figure out how we can scale back from what we thought we would have in retirement.”
Father Mark Steffl, diocesan vicar general, emphasized to The Pillar that diocesan officials “did not have any role in managing these funds.”
Instead, he said, the New Ulm pension fund was “only part of a larger plan. We were relying on Christian Brothers to manage the money, the investments, and even how to manage how decisions were made about whether the plan was funded or not funded enough.”
“We relied on them exclusively, and they didn’t give us any input and we didn’t have any input,” Steffl explained. “I think that needs to be underscored because they are now putting the responsibility on us, but we did not have any responsibility in this.”
“Now they are telling us that we need to come up with a huge amount of money, which is impossible for us to come up with,” the priest said. “They didn’t even give us other options. We have had to look into what options we have even to manage this situation.”
Hacker agreed that while no decisions have been made, continuing in the Christian Brothers plan seems financially unfeasible. The task force studying the problem will look to consider how the diocese could “take control of the [existing] assets to disperse them as we see fit, and then hopefully go a different route with our benefits going forward.”
But a plan has to unfold in steps, Hacker emphasized. “We have to take control of the assets in order to make any decisions as to how they are dispersed.”
North in Crookston, Cozzens also emphasized the trust his diocese had placed in Christian Brothers Services — both to manage the money well, and to be transparent in communication.
“We’re a small diocese, like most of the dioceses which Christian Brothers serves, and that is precisely why we went with an organization like Christian Brothers. It’s because they said, ‘We’ll manage this for you.’ We don’t have the staff to manage a pension for ourselves. But we were trusting an organization who has the same goals and mission that we do.”
“We trusted,” Cozzens emphasized. “Now, maybe we should have been asking harder questions on the annual reports that we got. But, as I understand it, those annual reports were generalized, not specified… And there has been a relationship of trust — that we are working with an organization which is going to handle our pension funds.”
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Terry Arya, chief marketing officer at Christian Brothers Services, declined The Pillar’s request for an interview, instead sending a short statement, which said that her organization is “committed to the long-term sustainability of the plan,” and “taking proactive steps to further strengthen the plan’s financial health.”
Those steps include “engaging independent actuarial experts to design a strategy in reaching full funding in approximately 25 years,” “ensuring transparency through ongoing communications with our member organizations,” and “offering our member organizations assistance in navigating their options,” Arya wrote.
In response to a question sent by email, about whether Christian Brothers communicated a compounding funding crisis, Arya told The Pillar that “the funding status of the pension plan is routinely communicated to participating pension plan employers in the Statement of Financial Condition and year-end reports. We will continue to ensure this transparency through ongoing communications with our member organizations.”
Bishop Zielinski questioned that commitment to transparency.
While the bishop acknowledged the challenges Christian Brothers has faced, his assessment was direct.
“I do not think that Christian Brothers has been completely transparent along the way,” the bishop said.
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Like Zielinski, Cozzens emphasized that he does not yet know how the diocese will proceed with its available assets, and what decisions will have to be made about benefits.
“I’m praying a lot, and talking with a lot of people here about what we can possibly do here, and how we can be creative.”
The bishop mentioned the prospect of an annual diocesan second collection, and other fundraising prospects.
“I want to ask generous Catholic benefactors to consider that this is an important cause, to serve people who generously serve the Church and are in need right now.”
Cozzens said he also hopes to speak with other diocesan bishops facing the same pension crisis, especially before a plan is finalized. But he recognized that the problem — funding promised pensions without the money to do so — could have ripple effects across the diocese.
“I imagine there might be tough decisions,” he said. “But I am really hopeful that looking at the problem with real experts, and trying to adjust things so we can make it work — I think we’re going to find workable solutions.”
Cozzens has a reputation for earnest faith, and the expectation of miracles. But he was direct about the pension crisis — and what kind of help he’ll need, miraculous or not.
“This is a problem of money,” the bishop said, “and so only money can solve it.”