The administrator of the Archdiocese of Boston's lay pension plan is seeking to address concerns over administration of the plan in letters sent last week to current and former employees.

Plan administrator Carol Gustavson sent two separate letters -- one to current employees of the archdiocese or its related entities and another to former employees eligible for an offer by the archdiocese to cash out of the plan early. Both letters contain virtually identical text.

The letters addressed recent criticisms surrounding management of the plan and sought to correct what the archdiocese said were inaccuracies in recent media coverage of how the archdiocese has handled the plan.

The move comes in the wake of news that the Daughters of St. Paul filed a lawsuit against the plan's trustees in an effort to withdraw funds contributed for their lay employees, and a press conference in which former archdiocesan chancellor David W. Smith slammed plan administrators and trustees for what he described as heavy-handed tactics to coerce former employees into an early cash-out of their pension benefits.

Last year, the archdiocese announced it was freezing its lay employee pension plan and switching to a defined-contribution 401(k) style retirement plan. At the time, the archdiocese said it would also offer eligible former employees the opportunity to take their money out of the plan or choose early annuity distributions at a reduced amount reflecting the plan's current funded status of 83 percent.

That decision drew criticism from Smith who said, that by encouraging former employees to take the reduced cash-out, the plan was transferring its losses to the participants. He also contended that those who take the cash out will ultimately suffer even greater losses because individuals will be unlikely to match the plan's returns if they reinvest the cash on their own.

Smith also questioned the morality of offering participants a reduced cash out, saying that such a move would be illegal under the Employment Retirement Income Security Act (ERISA), which governs most retirement plans. However, as a church plan, the archdiocese's pension plan is not bound by the law.

Gustavson countered that criticism saying that some former employees could benefit from taking the early cash.

"Each individual's life circumstances, including age, number of years before retirement, estimated life expectancy, and how and when the funds are invested, will result in a different determination of the value of a lump sum to that person."

"All individuals offered a lump sum have been encouraged to consult with a financial planner, and meetings have been held in March and April 2011 with financial educators present, who have provided information to attendees about how to evaluate these options," she wrote.

While she acknowledged that the cash-out was reduced to reflect the Plan's current underfunded status "rather than the funded status that might be attained at some point in the future," she also contended that the cash-out offer was a voluntary measure and that it "does not disadvantage participants who elect to wait to receive their benefits as a monthly annuity in the future."

The archdiocese has blamed the plan's current underfunded status on the lackluster economy, and Gustavson's letters address the fund's performance in recent years.

In 2007, according to the letters, the plan began to decline as a result of market performance, and by 2009, "only 74.6 percent of assets (were) available to cover the Plan's obligations" and the plan had a deficit of over $81 million.

With the recovery of the investment markets, the average funding ratio of the plan for 2010 improved to approximately 83 percent. Gustavson said that figure is comparable to Fortune 1000 company pension plans, which were funded at an average of 82 percent in the same period.

Gustavson's letters also address the other portion of the plan's funding -- contributions from employers, which for the Archdiocese of Boston's pension plan has included parishes, schools, central ministries and other Catholic entities.

Concerns have been raised that certain employers, including a number of parishes and schools, some of which are now closed, failed to make the required payments into the plan over a certain time period. However, the letters say that the archdiocese has addressed significant unpaid obligations to the fund through transferring $12.7 million from the Reconfiguration Fund into pension coffers.

The Reconfiguration fund was created to receive assets of closed parishes as part of the reconfiguration process initiated in archdiocese in 2004.

While the archdiocese has made progress towards addressing unfunded pension liability, the plan, according to Gustavson's letters, continues to be underfunded, with a deficit of $39 million for open parishes and $5 million for closed parishes. The letters also stated that another "$24 million deficit is spread across all other locations based on their allocated assets and liabilities."

In her letters, she also confirmed a commitment made in an April 1 statement Cardinal Seán P. O'Malley released to The Pilot that those who opted for the cash-out will be given the opportunity to reverse their decision. She said those individuals would receive a letter from Cardinal Seán P. O'Malley prior to April 30 giving them that choice.