The effects of a deepening pension scandal that has rocked the nation’s oldest Black church group are still being assessed by local church officials, though they’re hopeful that a federal investigation could help recoup about $90 million missing from its pension fund.
Experts are concerned the African Methodist Episcopal Church’s pension problems could become the norm for many nonfederally protected pensions as the aging population retires in larger numbers.
In early March, the AME Church suspended its pension payments to retirees after new leadership found significant financial irregularities.
News of the pension crisis has spread to AME churches across the country, including in Chicago, where church leaders say they’re waiting to receive more information about the pending investigation.
John F. White, presiding bishop of the AME’s Fourth Episcopal District, headquartered in Bronzeville, said he has not heard from any area retirees hurt by halted pension payments, but expressed confidence church leadership that took over last year will fix the problem.
“I think we’re on the right track of trying to resolve it,” the bishop told the Tribune in a phone interview. “We’ve got people working on it and hopefully, prayerfully, within the next month or two, we should have a report back.”
“We’ve got some other issues that need to be resolved when we get through with this process to make sure this would never happen again,” White said. “It is a challenge for us right now. To be honest with you, the economic structure around the world, around the United States is challenging. The church is no different — we’re not exempt from the process.”
A class-action lawsuit was filed later in March by a retired Maryland pastor who claimed that risky investments made by a former pension head resulted in a nearly $90 million loss in pension fund savings.
According to the AARP Foundation, which recently joined the suit on behalf of about 5,000 church employees and retirees, participants in the AME Church retirement plan had been told for years that contributions from individual local churches were invested in a conservative life insurance company and that the plans were covered by federal pension protections.
In reality, the plans weren’t covered by the federal Employee Retirement Income Security Act and the money had been invested in losing ventures that included land purchased in Florida, AARP Foundation officials said. Even worse, the church hadn’t enrolled some clergy members in the plan as they should have and didn’t make promised contributions.
Among the defendants named in the new suit were the pension head, the former chairman of the retirement service’s board of trustees and the church’s council of bishops and general board. The Maryland suit is the third such class-action suit. Suits against AME officials in Tennessee and Virginia have also been filed.
The suit is asking the federal court to force the church to restore the pension benefits to its 2021 level when it was valued at about $126 million, make contributions to all eligible clergy and other employees and to pay retired participants all of the pension benefits owed to them.
Founded by a black Methodist minister in Philadelphia in 1794, the AME Church has grown to one of the largest Methodist denominations in the world, with 2.5 million members in the U.S., Africa and the Caribbean. There are at least 20 AME churches in the Chicago area, most on the South and West sides.
In a statement released late last month, officials with the church’s Department of Retirement Services admitted that new leadership of the pension plan “uncovered possible financial irregularities in certain retirement fund investments,” and that “retirement plan participants may have been the victim of a financial crime.”
“Out of an abundance of caution, we immediately engaged outside legal counsel and forensics experts to conduct an independent and comprehensive investigation,” the statement read. “We continue to actively work with federal authorities who are investigating this matter and recover any misappropriated funds.”
Officials from the AME Church’s retirement services office in Memphis, Tennessee, didn’t respond to questions sent by the Tribune.
The Rev. Troy Venning, senior pastor of Quinn Chapel AME Church, the city’s first Black church, echoed White’s comments hoping for a quick resolution, adding that he had faith in the leadership of the new retirement plan director, theRev. James F. Miller, a longtime Chicago area AME pastor, who most recently served DuPage AME Church in Lisle.
“I think the church is growing increasingly confident (with the investigation) because we have a recently new director for the Department of Retirement Services,” Venning said.
“I know there’s still some uncertainty to it — I’m not privy to every single detail and the investigation is still underway — but I know the church bishops, including our folks who are in position to affect change in a real way, are doing everything in their power to make the church whole,” he added.
Norman P. Stein, a professor at Drexel University’s Kline School of Law and an expert on pensions, explained that church pensions as well as those for church-affiliated entities such as hospitals, were exempt from federal law that sets standards for most voluntarily established retirement and health plans in private industry.
As a result, oversight is left to officials the church chooses. Church pension participants also avoid scrutiny largely to a “feeling that churches are not going to let their (pension plans) fail, that they have a sort of moral center that a common law corporation isn’t necessarily going to have,” Stein said.
Stein expects a climb in troubled pension plans as older Americans who have paid into these pensions retire. The AARP Foundation has also filed a similar lawsuit against New York’s Catholic Diocese.
“I think this has been a real disaster and I think we’re just starting to see a lot these plans start failing ... a plan can survive on cash flow for a very long time, even when it’s seriously underfunded,” Stein explained. “But as the population matures and reaches retirement age, the plan is ultimately going to be unsustainable unless the employer can send a lot more money.”
Speaking generally of the AME Church’s dilemma, Stein said there could be a silver lining if a successful lawsuit could help recoup misappropriated funds from any bad actors involved.
“One problem is it’s going to take time,” Stein cautioned. “Particularly, this lawsuit is going to have to take a lot of time to be successful. And the one thing about elderly people that live on a pension is it’s not really a satisfactory answer to say, ‘We think there’s a pretty good chance that after two to three years of litigation, we’ll be able to get some of your money back.’ That, in itself, is a real problem for somebody living on a fixed income. Even if that materializes and, of course, nobody knows (if) these lawsuits are going to succeed or not.”
The pension problem has certainly crossed Bishop White’s mind, as he prepares for the end of his ministerial career that began in his native Florida and lasted more than 40 years.
“I don’t have but two more years, then I retire,” White said. “I’m going to be faced with the same process that some are facing now two years from now. The law says at a certain age I have to retire. I’m not fighting it — I’m ready to retire.”