Diocese of Rockville Centre replaces pensions with 401(k)-style plan
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The Diocese of Rockville Centre, one of the largest employers on Long Island, is eliminating its defined benefit pension plan in favor of a 401(k)-style retirement plan for workers with less than 30 years service, church officials said.
The move, which will subject the retirement plans of close to 3,000 workers to fluctuations on Wall Street, affects teachers, parish workers, Catholic Charities employees and others who work in the diocese. The new 403(b) plan -- the equivalent of a 401(k) for nonprofits -- takes effect Jan. 1, 2015, said diocesan spokesman Sean Dolan.
"It's something most companies have already done," Dolan said. "We think we have done everything we can to try to be more compassionate . . . than many companies."
He said employees who have worked for 30 years or more for the diocese will be able to fully continue with the defined benefit pension plan, in which the diocese pays them a fixed monthly sum from retirement until death.
Employees with less than 30 years' experience will receive the defined benefit pension, but it will be based on their years of service as of Dec. 31, 2014, even if they continue working, he said.
Under the 403(b) plan, the diocese will put the equivalent of 3 percent of an employee's salary into an investment account. The diocese will match up to 1 percent if the employee contributes to that amount in as well, Dolan said.
Employees can deposit more on their own, and withdraw the money as they like after retirement. Letters were mailed out to employees late last week explaining the new system.
Several diocesan employees said they could not comment because the diocese prohibits them from talking to the news media.
The diocese is making the move to ensure employees have solid retirement funds available to them, Dolan said.
"We want to be able to deliver what we promise and promise what we deliver," Dolan said. "Look at how many governments and companies, people just wake up and they find they don't have a pension. We're just trying to make sure that is not the case."
It is unclear whether the change will save the diocese money, Dolan added.
The switch to 403(b)s is becoming "very common" among Catholic dioceses across the nation, said economics professor Charles Zeck, director of the Center for the Study of Church Management at the Villanova University School of Business.
"In a defined pension, the risk is on the part of the diocese to make sure their investments perform well enough to meet demands for the pension," Zeck said. "In a 403(b) you put the risk on the part of the employee. Now it's their job to invest the money. . . . Industry has done away with defined pension plans wherever they can, and now churches are following suit."
Not all dioceses have made the switch. The Archdiocese of New York has a defined benefit pension plan for its employees, along with an optional 403(b) that involves employee contributions only, said archdiocese spokesman Joseph Zwilling.