Christian Brothers Pension Plan Underfunding Mess

Christian Brothers Pension Plan Update

Overview of the Pension Plan’s Condition

The Christian Brothers Employee Retirement Plan serves more than 180 Catholic institutions and approximately 40,000 participants nationwide, including many schools and dioceses in Minnesota. The plan is currently significantly underfunded, with an estimated $800 million shortfall.

As of mid-2025:

• The plan is approximately 66% funded
• Assets total about $1.55 billion
• Liabilities total about $2.35 billion

Only 38% of participants are active employees, while the majority are retirees or beneficiaries receiving payments. This imbalance places ongoing financial pressure on the plan.

The plan was fully funded in the late 1990s but declined following:

• The 2008 financial crisis
• A failed hedge fund investment in 2020, resulting in a loss of approximately $149 million

Despite recent strong market performance, the funded status of the plan has not improved. Employer contribution requirements have increased substantially, with some dioceses and schools being asked to pay two to three times current contribution levels for up to 25 years. For many parishes and schools, this level of funding is not financially sustainable.

Because this is a church-sponsored pension plan, it is not covered by ERISA and has:

• No federal oversight
• Oversight of pension was dioceses' responsibility
• No pension insurance or government guarantee.
• Benefits depend entirely on available assets and employer contributions.

Decision to Spin Off from Christian Brothers

After review by a task force and consideration of multiple options, Bishop Neary has decided to proceed with a spin-off from the Christian Brothers pension plan.

The options reviewed included:

• Remaining in the plan with substantially higher long-term contributions
• Withdrawing by paying the full underfunded amount
• Involuntary withdrawal, which would likely result in loss of benefits for active employees
• A spin-off to diocesan and third-party administration

The spin-off option was selected because it provides the most control locally and avoids outcomes that could result in immediate or severe loss of benefits. However, the diocese does not have sufficient funds to fully capitalize the new plan at the outset, which means financial risk remains.

What Will Happen

Plan Freeze

• Effective December 31, 2025, the current pension plan will be frozen.
• No new employees will enter the plan.
• Current employees will stop earning additional pension benefits.

Spin-Off Timeline

• In mid-2026, pension assets will transfer from Christian Brothers into a new trust   overseen by the diocese and administered by an outside third party.
• Until that transfer occurs, Christian  Brothers will continue administering the plan and paying benefits.

During the Transition

• Employees retiring before the spin-off will follow the current retirement process.
• Current retirees will continue receiving payments.
• Parishes, schools, and the diocese will continue making contributions into the new trust for several years to fund earned benefits as fully as possible.

The diocese is currently working to:

• Establish a legally separate pension trust
• Draft new plan documents
• Determine future benefit payment structures
• Develop a retirement plan for current and future employees

The 403(b) retirement plan, managed separately through Fidelity, is not affected at this time.

What This Means for Participants

• Benefits already earned remain in place, but no additional benefits will accrue after the freeze.
• Monthly payments are expected to continue, but long-term benefit levels depend on funding and investment performance.
• There is no guarantee of full future benefits, and adjustments may be required if funding is insufficient.
• Participants should plan  accordingly and remain informed as details are finalized.

Bottom Line

The Christian Brothers pension plan faces serious financial challenges. The decision to spin off the plan reflects an effort to manage these risks locally and avoid more severe outcomes. While this approach provides greater control, it does not eliminate uncertainty. Ongoing contributions and careful financial management will be necessary to support current and future retirees.

Key Takeaways

• The Christian Brothers pension plan is significantly underfunded and faces long-term financial risk.
• Required contribution increases to remain in the plan are not sustainable for many parishes and schools.
• Bishop Neary has approved a  spin-off from Christian Brothers to place the plan under diocesan and third-party management.
• The current pension plan will freeze on December 31, 2025; no new benefits will accrue after that date.
• Benefits already earned remain, but future payments depend on available funding and contributions.  All indications are that funding will not be adequate.
• Church pension plans are not federally insured, and future benefit levels cannot be guaranteed.
• Participants face a significant risk of reduced or lost benefits, especially if the employer or sponsor becomes financially distressed or terminates the plan.
• In essence: It can become a financial free-for-all where the pool of money shrinks, and everyone gets a smaller slice, with the most vulnerable potentially losing most of their expected retirement income.