Click here for a short summary of the issue. Click here for a detailed timeline.
See also the Pension Rights Center website.
Click here for ex-St. Peter's CEO John Matuska's 2011 letter to the IRS.
Click here for ex-St. Peter's VP of HR Bruce Pardo's 2011 letter to the IRS.
Haga clic aqui para verun resumen del problema en español.

Monday, March 28, 2016

St. Peter's Appellate Rehearing Denied

You may remember (you certainly should!) that back in January, Saint Peter's announced that they had filed to request that the entire Third Circuit re-hear the appeal that a three-judge panel had previously denied. On Friday, March 18, the Third Circuit denied Saint Peter's request for a rehearing. Today, the Third Circuit sent the case back to the New Jersey District Court for a decision, which will presumably go against Saint Peter's. It will be interesting to see what Saint Peter's does next; plainly they do not intend to run the pension plan as an ERISA plan.

Sunday, March 20, 2016

First Media Reports Of Latest Appellate Victory

Rebecca Moore of PLANSPONSOR/PLANADVISOR has published a news item on last Thursday's decision in Stapleton v. Advocate Health Care Network. It's short, but this paragraph sums up the court's reasoning so well we're including it here in its entirety:
Using much the same logic as the 3rd U.S. Circuit Court of Appeals in Kaplan v. St. Peter’s Healthcare System, the 7th Circuit decided a church plan established by a church and maintained by a church is a church plan, and a church plan established by a church and maintained by a church-affiliated organization is a church plan—but a church plan established by a church-affiliated organization and maintained by a church-affiliated organization is not a church plan. The appellate court in Advocate agreed with the 3rd Circuit that, according to the language of ERISA, for church plan exemption, there are two requirements—establishment and maintenance—and only the maintenance requirement is expanded by the use of the word “includes.”
The Cohen Milstein law firm, having now won their second straight appellate judgment in this recent group of cases, deserves to crow a little; they do so in this informative press release.

Thursday, March 17, 2016

Second Straight Appeals Court Victory For Retirees

Today a three-judge panel in the Seventh Circuit Court of Appeals in Chicago ruled in Stapleton v. Advocate Health Care Network, rejecting the hospital system's appeal of a district court ruling and affirming that their pension plan is not a church plan. This is the second such ruling in a series of similar cases involving pension plans of church-affiliated hospital systems—including, of course, Kaplan v. Saint Peter's Healthcare System—and the second straight win at the circuit court level for pension plan members in such cases. You can read the 30-page ruling here.

In her majority opinion, Judge Ilana Diamond Rovner prominently cites the Third Circuit's decision denying Saint Peter's appeal. As in the Saint Peter's case, the judges in Advocate found that a plain-language reading of the ERISA statute makes clear that in order to qualify for a "church plan" exemption, a plan must be established by a church, as required by subsection (33)(A) of the statute, and specifically that subsection (33)(C), often cited by church-affiliated hospital corporations as widening the exemption to include them, does not override the establishment requirement in subsection (33)(A). She notes, as did the Saint Peter's opinion, the remedial nature of ERISA: it was created to "protect employees from losing savings meant for their retirement years from either intentional mishandling of funds or innocent mismanagement." Congress did not intend a broad exemption for corporations with church affiliations: "Congress carved out only narrow exemptions for employee-benefit plans, including those for churches whose plans were excused from regulation in order to prevent excessive government entanglement with religion. ... Employees of religiously-affiliated hospitals are not immune from the perils of unregulated pension plans." She dismisses prior rulings in favor of such a wide exemption as insufficiently rigorous: "Until this recent spate of litigation, most courts evaluating church plans ... merely glossed over the statutory language and assumed that the exemption applied to plans established by church-affiliated agencies."

In a short concurring opinion, Judge Michael S. Kanne adds a very interesting postscript. While agreeing in full with the majority opinion, he also dismisses the arguments, posited in amicus briefs in support of the hospital systems in these cases, that denying a church plan exemption compels health care corporations to violate their religious beliefs (as Hobby Lobby successfully argued in their landmark case). He emphasizes that that is not the case here.

Retirees are now 2-for-2 at the circuit court level in such cases. There are still cases pending in the appellate courts where lower courts have ruled both in favor of retirees and in favor of the hospital systems seeking church plan status. It will likely take a year or two for the courts—perhaps including a Supreme Court that currently has only eight members—to sort this all out. In the meantime, one thing seems certain: Saint Peter's will continue to operate its pension plan without ERISA protections as long as they can get away with it. We expect news media to weigh in soon; we'll follow up when that happens.

Thursday, January 21, 2016

Saint Peter's Seeks Rehearing Before Appeals Court

Saint Peter's management, in a January 15 letter to pension plan members, reports that they have filed for a rehearing of their failed appeal in the Third Circuit appeals court. Their original appeal was denied by a unanimous three-judge panel in late December; the rehearing, if Saint Peter's petition is accepted, would be before the full Court.

We had previously thought it unlikely that Saint Peter's would file for a rehearing, since the panel's unanimous decision would suggest a slim chance of success before the full court. Our guess is that the purpose of the move is to buy time before the hospital's ultimate objective of having the case heard before the Supreme Court. This is the first case of many essentially similar class action cases to have been decided in an appellate court. Saint Peter's points out in the letter that two other such cases are in process in appellate courts: one involving Advocate Health Care Network, which was argued in September, and one involving Dignity Health, scheduled for argument this coming February. Significantly, in both cases the hospitals lost in district court. For Saint Peter's to have a chance before the Supreme Court, they would need a win for a hospital in appellate court to counter their own defeat -- which would seem a long shot given the cases now before appellate courts and the 90-day filing window. If their petition is accepted, Saint Peter's holds off a court order to run the plan as an ERISA plan, while buying time for an appellate court win, in either of the two current appellate cases or one which eventually filters up from the district courts. In the meantime Saint Peter's can continue to run the pension plan as a church plan, with minimal federal oversight or funding requirements.

Sunday, January 10, 2016

Further Coverage of Appellate Ruling

Since our last post, more news items have been published about the recent appellate court victory for Saint Peter's pension plan members.

  • Charles Toutant in New Jersey Law Journal gives a quick history of the issue and a summary of the ruling, along with quotes from lead attorneys Karen Handorf for the plan members and Jeffrey Greenbaum for the hospital. This is the first statement we've seen on behalf of the hospital in the wake of the ruling. Greenbaum makes clear that the hospital plans to exhaust its legal options before making any changes to its management of the pension plan.
  • Rebecca Moore at PLANSPONSOR provides a somewhat more in-depth summary of how the court interpreted the intent of the ERISA statute's church plan exemption by studying its history. Both this and the New Jersey Law Journal article make clear that the ruling sets a precedent for the circuit courts, though apparently other cases pending in the appellate courts could make a contradictory ruling on other grounds, perhaps leading to review by the Supreme Court.
  • Cohen Milstein, Karen Handorf's law firm, has issued a press release following the court victory.

Wednesday, December 30, 2015

Appellate Court Follow-up

So far we know of two published articles on yesterday's appellate court decision: a short news item by Hazel Bradford in Pensions & Investments, which includes quotes from Karen Handorf of Cohen Milstein (Saint Peter's attorney declined comment), and a longer analysis by Thomas E. Clark, Jr., at his Fiduciary Matters Blog. Both are worthwhile reading, as is the court's complete opinion.

The basis of the court's opinion is that the "plain meaning" of the ERISA statute requires that to meet the church plan exemption, a pension plan must have been established by a church. Saint Peter's has sought (and claimed) church plan status based on a new interpretation of amendments made to ERISA in 1980, to allow an agency of a church to maintain such a plan; Saint Peter's has claimed that this clause expands the definition of a church plan enough to claim the exemption. The court disagreed, and also cited the "remedial" nature of the statute: its purpose was to protect plan members. In the court's opinion, construing the exemption so broadly would achieve the opposite of the statute's intent. As in the district court ruling that preceded it, the court gave no deference to the IRS's rulings, starting with a 1983 memo, that interpreted the 1980 amendments as a broad exemption for church-related agencies. The court also addressed, and rejected, a new (and recently in vogue) First Amendment argument: that denying a church plan exemption somehow violates the hospital's right to free exercise of religion: "St. Peter’s has not offered any reason why the First Amendment entitles it to a retirement plan structured using a particular corporate form."

In Clark's reading of the opinion, "(t)his is a significant victory for those who have challenged the broad interpretation of the church plan exemption. It should be given serious persuasive consideration by the other circuit and district courts with similar cases." Clark also, however, cites a recent district court ruling in a similar case, which not only went in favor of the church affiliated hospital system, but "also strongly suggested the hospital system itself may meet the definition of a church itself" (emphasis Clark's). Because of the contradictory opinions handed down in the federal courts, we are likely to see the ultimate decision in this case come from the Supreme Court. Since it likely remains cheaper for the hospital to continue to fight the case than to restore the funding of the pension plan, let alone the retroactive PBGC insurance premiums, we don't expect the hospital to change its strategy now.

Tuesday, December 29, 2015

Victory in Appellate Court!

Today the three-judge panel of the Third Circuit appeals court filed a unanimous decision in Kaplan v. Saint Peter's Healthcare System in favor of Larry Kaplan and the pension plan members. Very briefly, the court agreed with the appellees—as well as the prior district court ruling—that Saint Peter's is not entitled to the ERISA church plan exemption, since its pension plan was not established by a church as required in the statute. We have not yet had the time to read through the opinion in detail, so we should be back shortly with more analysis (for what that's worth). We understand Saint Peter's now has 30 days to ask for the entire Third Circuit to re-hear the case, though that seems unlikely given the unanimous decision. What seems more likely is for Saint Peter's to request a hearing before the Supreme Court, especially if some of the many cases now pending in district and appellate courts are decided differently. (Saint Peter's is the first such case to be decided at the appellate level.)

Big thanks to Karen Handorf and her legal team for arguing a great case, to Karen Ferguson and all at the Pension Rights Center for their help. and to Larry Kaplan for taking on this burden and seeing it through on behalf of all the pension plan members.