St. Cloud Catholic diocese pension fiasco breeds mistrust

The St. Cloud, New Ulm and Crookston dioceses are caught up in a big shortfall in a national Christian Brothers pension fund. Retirees in St. Cloud have organized to press their concerns.

Mike Hughlett

The Minnesota Star Tribune

MARCH 20TH AT 6:00 AM CDT

ST. CLOUD — Elmer Kobbermann spent over three decades as an educator in the Catholic Diocese of St. Cloud. Now he’s actively working with fellow retirees to prevent their pension benefits from drying up.

The St. Cloud diocese is the largest Minnesota employer ensnared in a pension funding fiasco looming over Roman Catholic institutions nationwide, including several in Minnesota. It affects thousands of their lay retirees and employees.

The problems stem from the Christian Brothers Employee Retirement Plan, a national pension fund facing an $800 million shortfall. For some dioceses, the funding gap comes after payouts in sexual abuse lawsuits.

The St. Cloud diocese alone has a $35 million pension hole to plug. The New Ulm and Crookston Catholic dioceses are facing big deficits, too.

To protect themselves, Kobbermann and about 225 of his fellow diocese employees and retirees have organized, creating an advocacy group to press the diocese for more transparency — and action — on tackling the pension shortfall. They are contemplating a lawsuit against the diocese, members said.

“I just have developed a mistrust,” said Kobbermann, summarizing the mood of a recent advocacy group meeting at St. Cloud’s main library.

“And I have a feeling many people have been hung out to dry,” said the 80-year-old former principal and teacher at St. Mary’s Catholic School in Alexandria.

Elmer Kobbermann, former principal of St. Mary's School in Alexandria, said during a meeting of employees and retirees concerned about a shortfall in their pension fund that he's worried that they won't get fully paid. (Anthony Souffle / The Minnesota Star Tribune)

St. Cloud Bishop Patrick Neary said he sympathizes with the diocesan retirees and workers who have sent him “tons” of letters and emails.

“It has been sad to realize the impact,” he said. “To me, these are brothers and sisters, and I don’t want them to feel that I don’t care.”

The bishop is also taking steps to address the situation. Neary, six other bishops — including the head of the Crookston diocese — and Cardinal Blase Cupich of the Chicago Archdiocese met last month with top Christian Brothers Services executives in Joliet, Ill.

“We expressed our disappointment and shock,” Neary said.

Christian Brothers Services, the suburban Chicago nonprofit that manages the national retirement plan, “continues to work closely with participating employers,” said CEO Patrick Lynch in a statement.

The pension fund’s “goal is to protect the pensions of hard-working Catholic workers,” the statement said.

St. Cloud diocese must cover funding gap

The Christian Brothers pension plan covers 180 employers and 40,000 people nationwide, and it reaches extensively into Minnesota.

Some Twin Cities Catholic high schools — Cretin-Derham Hall in St. Paul, Holy Angels in Richfield and Totino-Grace in Fridley — are part of the Christian Brothers plan, as is St. Mary’s University.

The three diocesan pension funds cover lay employees, the majority of whom are teachers. Together, the dioceses operate over 40 schools.

Many teachers say they could have gotten paid considerably more by working in public schools rather than Catholic schools. But they chose the latter for the Church’s mission — and they counted on a pension.

“You are doing it for the community, the families and the kids,” Kobbermann told the Minnesota Star Tribune. “It’s part of your life.”

It was “a jolt” to hear about the pension plan’s woes, he said.

Last year, Christian Brothers Services notified employers that it needed to raise hundreds of millions of dollars to shore up the fund.

The number of retirees and current workers due pensions far exceeds the number of new employees entering the plan, Christian Brothers says, a problem also afflicting other traditional retirement funds.

The Christian Brothers’ overall plan has 66% of the assets needed to cover its liabilities, a number that will fall to 50% in 2035 if nothing is done.

But most employers in Minnesota — including the three dioceses — are worse off than the national fund as a whole. They currently have 58% to 59% of the assets needed to cover their liabilities.

To cover their shortfalls, schools and dioceses must either boost contributions to the overall Christian Brothers plan or spin off their individual pension funds and hire a third-party administrator to run them. The three dioceses — and some metro area schools — have chosen the spin-off option.

Staying in the plan “was financially unfeasible for most parishes and schools, and trust in Christian Brothers’ management has diminished,” Neary said in a December missive to St. Cloud diocese retirees and employees.

Still, even with a spin-off, employers must raise enough money to avoid cutting pension benefits — a tough task, especially for the dioceses. They generally don’t have the same access to wealthy benefactors as Twin Cities Catholic high schools might. 

“It is difficult in a mostly rural diocese like ours,” Neary said.

Retirees form group to push concerns

The St. Cloud diocese, which spans 16 central Minnesota counties, has about 1,400 retirees and employees covered by the Christian Brothers plan.

The diocese notified them of the pension predicament in an October letter and then held a virtual meeting in November.

Jeff Kaster and Mary Cheryl Opatz, both retirees and veteran educators, weren’t satisfied, so they started a diocesan “pension concerns” group, which has a website complete with a prominent portal to email Neary.

“I thought the diocese was just saying, ‘Trust us, we will make the decision for you,’ ” Kaster said.

Last fall, Neary formed a committee — mostly made up of Diocesan employees with financial backgrounds — to address the pension problem. Other dioceses have done the same.

The group has unsuccessfully pushed to add one of its members to the committee. It has also called for the diocese to provide information about the pension mess directly to parishioners.

And the group has pushed the diocese to launch a campaign dedicated to raising money for pension obligations, which has been rejected so far.

“I think the way the diocese is handling it is a big mistake,” Kobbermann said, adding that the diocese has “tunnel vision.”

Diocesan leaders should get the word out and “somebody may have a great idea on how this can be rectified,” he said. “Maybe there is a group or an individual that would be willing to do fundraising.”

Dioceses coming up with plans to cover shortfalls

Neary is sorting out the diocese’s financial options with the advisory group and an independent pension consultant. The choices are not good.

The diocese is primarily funded by assessments on individual parishes, which raise money from donations. Catholic schools collect tuition, and diocesan investments provide a modicum of income. Neary, like most bishops, also holds an “annual appeal” to raise money.

But St. Cloud’s annual appeal normally raises only $1.5 million, and it’s earmarked for specific ministries, Neary said.

“That basically keeps our diocesan budget going,” he said. “It’s a pretty tight budget.”

The St. Cloud diocese took a financial hit in recent years settling lawsuits against priests accused of sexual abuse. The diocese went through bankruptcy reorganization in 2020, agreeing to pay out $22.5 million to victims.

The New Ulm diocese did the same, agreeing to pay $34 million. The Crookston diocese avoided bankruptcy, but it still paid out $5 million in claims.

The Crookston diocese will avoid cutting pension benefits, despite an $11 million shortfall, said Bishop Andrew Cozzens. “We are confident we are going to meet the obligations to pensioners,” he said. Cozzens did not disclose the plan’s details because it has not yet been unveiled publicly. But “it will involve significant sacrifices from our schools, parishes and the diocese itself,” he said.

The St. Cloud and New Ulm dioceses have yet to decide if benefit reductions will be necessary. “It is too early in the process to know if and when we will see cuts,” Neary said.

Meanwhile, retiree and advocacy group member Mike Mullin has been talking to a prominent Twin Cities law firm about legal options.

Since the Christian Brothers retirement fund is a “church plan,” it’s not covered by federal pension law, making any lawsuit difficult.

Still, at the recent meeting attended by 80 group members, Mullin, a longtime teacher and school administrator, noted a recent $54.2 million jury award against the Diocese of Albany and leaders of a church-affiliated hospital whose 1,100 employees lost pension benefits.

“Our struggle is not with Christian Brothers, per se, because they didn’t make the [pension] promises,” Mullin told the group. “The diocese made the promises in thousands of contracts. That the diocese handed off responsibilities to Christian Brothers does not absolve them of this.”

Mike Hughlett

REPORTER

Mike Hughlett covers energy and other topics for the Minnesota Star Tribune, where he has worked since 2010. Before that he was a reporter at newspapers in Chicago, St. Paul, New Orleans and Duluth.