Catholic School Teachers Suffer Financial Implications Of Diocese’s Bankruptcy Filing
As sex abuse allegations matured into lawsuits with overwhelming financial implications for the Catholic Diocese of Wilmington, Delaware, it turned to bankruptcy filing as its only option to weather the storm. Unfortunately, the Wilmington Diocese's decision to file bankruptcy leaves thousands of church-related workers and retirees, such as lay teachers and receptionists, at risk of losing their financial lifeboat in retirement. Because of an obscure loophole in the federal protection of pensions, Church pension plans are not secured under government insurance as those of most corporations are. To make matters worse, bankruptcy filings revealed that the Diocese of Wilmington had not set aside the required funds to meet its pension obligations. In the separation of Church and State in the U.S., it was decided long ago that churches were exempt from filing disclosures of their financial standings.
That was the way the Church wanted it, and until recently, the inherent trust factor between the Church as an employer and its lay employees was never an issue. The Church was traditionally seen as an employer that had always done a good job of remunerating its employees. Now, under the public scrutiny of bankruptcy, it was discovered that the Diocese of Wilmington had contributed less than 15% of the required amount to keep their pensions afloat. And now, when the last of the pension funds dry up, it is clear that the Church pension plan isn’t insured by the Pension Benefit Guaranty Corporation – the government’s solution for pension insurance. Of course, employees of Wilmington's Catholic schools know they may not be the only ones left adrift. As bankruptcy filings increase for religious institutions settling abuse cases, more financial snags for its lay employees are almost certain to appear on the horizon.
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