BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.
To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.
To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.
CHICAGO--One of the largest archdioceses in the United States is freezing its defined benefit pension plan and beefing up its 403(b) savings plan.
After June 30, lay employees of the Archdiocese of Chicago will cease accruing benefits in the nearly 40-year-old pension plan, which is almost fully funded and covers about 10,000 lay employees.
The archdiocese will make automatic, age-related contributions to so-called target date funds after June 30. The funds are so named because the investment mix is adjusted over time, with a more aggressive allocation for funds with retirement target dates farther in the future and more conservative asset allocations for retirement dates that are closer.
The archdiocese's contributions will increase with age, starting at 1.25% of pay for employees age 21 through age 36 and topping out at 11.55% of pay for employees age 65 and older.
Additionally, the archdiocese--the second-largest in the United States that serves about 2.3 million Roman Catholics--will continue to match 50% of employees' 403(b) plan contributions, up to the first 4% of pay.
To boost employee participation, starting Jan. 1, 2008, the archdiocese will begin an automatic enrollment program for employees who haven't indicated whether or not they will make 403(b) plan contributions. The automatic enrollment contribution rate will be 3% of pay.
Only about 30% of lay employees now make contributions to the 403(b) plan, a percentage that should increase significantly with the implementation of the automatic enrollment program, archdiocese officials say.
Archdiocese officials say cost was not a driver in the move away from the defined benefit plan. "This is not a money saver. We will not be contributing less. What we are doing is redirecting how the money will be contributed," said Carol Fowler, the archdiocese's director of personnel services.
However, by moving to a defined contribution plan, the archdiocese's contributions will be more predictable compared with a defined benefit plan, where required contributions can be volatile due to fluctuations in interest rates and investment results.
"We wanted to stabilize the funding," Ms. Fowler said.
While the archdiocese is shifting investment risk to employees, employees will benefit from investment gains, the archdiocese noted. Additionally, employees' 403(b) accounts are portable, and account balances will continue to earn investment income when employees retire.
Blue Prairie Group, a Chicago-based benefit consultant, assisted the archdiocese in redesigning the retirement savings program.