Catholic institutions are facing a significant financial challenge due to an $800 million pension fund shortfall. Christian Brothers Services is requesting increased pension contributions from Catholic institutions to address the deficit. Some institutions express concerns about their ability to afford the substantial increase in contributions. The article highlights the financial strain on various U.S. dioceses and schools.
11 days ago
An $800 million funding gap has emerged in the pension plan managed by Christian Brothers Services, a nonprofit sponsored by the De La Salle Christian Brothers, affecting over 180 Catholic organizations including dioceses and schools across the U.S.1
The shortfall leaves the fund at 66% funded as of July 1, 2025, with assets of about $1.55 billion against $2.35 billion in liabilities for roughly 40,000 employees and retirees.1
Christian Brothers Services is requiring member organizations to increase contributions dramatically over the next 25 years to reach full funding, a move described as necessary but burdensome.1
The pension plan was over 100% funded through 2007, but the 2008 financial crisis caused a sharp decline, dropping the funded status to the low 70s after a 37% S&P 500 drop and prior benefit increases.1
Demographic shifts exacerbate the issue, with only 38% of participants (15,111) being active employees contributing, compared to 17,244 retirees and 7,717 separated or disabled individuals drawing or covered by benefits.1
Additional losses include $149 million from risky investments by Allianz Global Investors in early 2020, settled in a 2022 lawsuit with undisclosed terms, though the company primarily attributes the shortfall to the 2008 recession and demographics rather than recent mismanagement.1
Dioceses like New Ulm, Minnesota, face annual contributions exceeding $2 million for 25 years, which officials deem unfeasible amid existing financial strains.1
Catholic schools, particularly in Minnesota and other regions, report contribution hikes of 178% to 250% over the next few years, blindsiding many and prompting difficult decisions.1
Institutions such as Saint Mary’s University of Minnesota, at 58% funded, see no immediate benefit cuts but worry about long-term viability, with the university engaging external actuaries for analysis.1
Affected organizations must choose between sustaining higher contributions, withdrawing with significant fees, or spinning off independent plans—options some schools are pursuing despite lacking expertise.1
Pension expert Sam Hartmann notes minimal progress in funding from 2022 to 2024 (67% to 66%), despite a 40% S&P 500 rise, highlighting a sustained decline in active participant contributions.1
Christian Brothers Services maintains it has communicated proactively and is aiding members in navigating transitions, emphasizing responsible modifications by the pension board.1
Church pension plans like this one are exempt from ERISA, lacking federal funding standards and Pension Benefit Guaranty Corporation insurance that protects private plans.1
Employees' primary recourse is suing employers under state law, a challenging and costly process with no guaranteed payouts, especially given potential plan stipulations limiting sponsor liability.1
No immediate benefit reductions are planned at institutions like Saint Mary’s, but the underfunding raises risks of future cuts or halted payments without federal safeguards.1
How should Catholic institutions address pension obligations?
Catholic institutions, encompassing dioceses, parishes, schools, and other entities under Church governance, bear a profound moral and canonical responsibility to address pension obligations with justice, prudence, and fidelity to the common good. Rooted in the Church's social teaching, this duty extends to both clerical and lay employees, ensuring dignified support in retirement while safeguarding the mission of evangelization and service. Drawing from canon law, historical precedents, and papal guidance, institutions must prioritize sustainable funding mechanisms, respect the distinct legal personalities of Church bodies, and integrate ethical stewardship to avoid overburdening resources or compromising autonomy. This approach not only fulfills contractual and moral commitments but also witnesses to the Gospel's call for solidarity and care for workers.
At the heart of addressing pension obligations is a clear understanding of the Church's internal structure, which canon law delineates to prevent the undue entanglement of assets across entities. Catholic institutions are not a monolithic corporation but comprise separate juridic persons—dioceses, parishes, and schools each holding and managing their own property under the bishop's supervision. In disputes over pensions, such as those involving lay teachers in Catholic schools, courts must defer to these canonical determinations absent fraud, applying neutral civil principles like agency or alter ego doctrine rather than imposing a unified "super-entity" liability that could seize assets island-wide or nationwide. The Puerto Rico Supreme Court's erroneous treatment of the entire Catholic Church as a single liable body, ignoring canon law's separation of dioceses, exemplifies the risks of such overreach, potentially violating First Amendment protections by entangling civil authorities in ecclesiastical governance.
For Catholic institutions, this means pension obligations should be confined to the responsible entity—e.g., the school or archdiocese administering the plan—without extending to unrelated parishes or dioceses. The Archdiocese of San Juan's commitment to cover school pensions illustrates this localized accountability, underscoring that while moral solidarity exists, legal and financial burdens do not automatically pool across the universal Church. Bishops and administrators must thus establish clear governance in pension plans, consulting canon law to define liabilities and ensuring compliance with civil law where applicable, such as in the U.S. under ERISA for lay employees. This framework promotes transparency and prevents "disastrous results for the faithful," as broad seizures could divert resources from worship, education, and charity.
Ecclesiastical pensions, traditionally, provide annual sums from church revenues or benefices to clerics for just reasons approved by superiors, emphasizing support without conferring full benefice rights. The pope holds authority to impose pensions on any benefice, even patron-held ones, without needing to specify cause, though consent is sought from royal patrons historically. Bishops, however, face stricter limits: they cannot impose perpetual pensions on benefices or reserve them for third parties upon conferral, as this risks simony. Temporary pensions—for peace, education, Church utility, pauper relief, pious objects, service rewards, or resignation support—are permissible if moderate and consensual, burdening the incumbent rather than the benefice itself to avoid division of revenues. Laypersons cannot receive such pensions, and recipients must be in good standing, free from excommunication or suspension.
This tradition evolves in modern contexts through diocesan structures for clergy sustenance. Canon 1274 mandates a diocesan institute or fund for priestly support unless otherwise provided, drawing from multiple sources: ecclesiastical entities where priests minister, stipends or pensions from civil or Church bodies, and the common fund as a supplement. Priests serving multiple entities contribute proportionally, with the fund equalizing remuneration to reflect ministerial unity and fairness among incardinated clergy. Refusal of individual contributions undermines this "communicating vessels" system, as it shifts burdens to the common pool, harming others. Pensions owed by the state or quantifiable incomes (excluding personal savings like inheritances) must be factored in for equity, ensuring no priest claims supplements while forgoing entitled benefits.
For infirm or retired priests ordained under mission titles, bishops may grant pensions from parish revenues—not exceeding one-third after ten years' service—via special Propaganda Fide powers. Dioceses often establish "Clerical Funds," voluntary societies where healthy priests contribute annually for infirm members' support, administered under episcopal oversight. Even for repentant fallen priests, the Church provides retreats or monastic care rather than abandonment, embodying maternal compassion. These mechanisms highlight a preferential option for vulnerable clergy, balancing individual needs with communal resources.
Papal guidance underscores the urgency of sustainable pension systems, particularly amid economic pressures. Pope Francis, in addressing the Holy See's pension fund, emphasized achieving "deficit zero" for viability, pursuing an equitable model that delivers dignified benefits within available resources—a concern echoed by predecessors since the fund's inception. This moral responsibility extends to all Catholic institutions, urging proactive reforms to avert crises that could impair mission fulfillment.
Broader stewardship principles from Catholic social teaching reinforce this. Institutions entrusted with resources must manage them professionally and morally, aligning investments with faith tenets for integral human development and the common good. As stewards of God's providence, administrators exercise responsible dominion over temporal goods, using them to perfect human nature while benefiting others—rich talents demand mercy, generosity, and sharing. Private property's social function, as taught in Rerum Novarum, prohibits absolute ownership; excess after personal needs must aid the indigent through charity, not mere justice. In pension contexts, this translates to prudent funding—diversifying sources, avoiding simoniacal pacts, and ensuring transparency in costs, lest environmental or social burdens fall on future generations.
Catholic investors, including institutions, are called to "mensuram bonam"—good measure—by integrating Gospel light and reason into asset management, witnessing Christ's love amid crises like job insecurity or corruption. For pensions, this means ethical investing to grow funds sustainably, rejecting exploitation while prioritizing human dignity.
Controversies arise when civil law clashes with canon law, as in pension disputes where courts dismiss ecclesiastical evidence to avoid Establishment Clause issues. Institutions must advocate deference to Church determinations on internal structures, ensuring pensions respect both workers' rights and religious autonomy. For lay employees, unlike clerics, obligations stem from contracts and labor law, but Church entities should model solidarity, perhaps through shared risk pools at diocesan levels without violating separations.
Divergent interpretations exist on including personal incomes in clergy funds—some view pensions as private, but canonists prioritize equalization for justice. Recent sources like Pope Francis's letter take precedence, stressing collective responsibility over individualism. Where resources fall short, institutions cannot overreach; instead, they seek creative solutions like clerical funds or appeals to the faithful, always subordinating to the common good.
In conclusion, Catholic institutions should address pension obligations by anchoring plans in canon law's separation of entities, funding them through diversified, equitable diocesan mechanisms, and stewarding resources with moral prudence for sustainability and dignity. This faithful approach not only honors commitments to clergy and laity but also advances the Church's mission of justice and charity, ensuring that "the earth is the Lord's" bounty serves all generations. By doing so, they embody the call to treat creation and human labor as sacred trusts, fostering a legacy of solidarity.