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.


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.

Friday, October 30, 2015

Oral Argument Follow-up

On Thursday, October 8, a panel of judges in a federal appeals court in Philadelphia heard oral arguments in the Saint Peter's pension case. An audio recording of the proceedings is available here (MP3 format, 22 MB). The recording is somewhat distorted due to heavy digital compression; we suggest listening with headphones.

The judges were well-prepared and asked tough questions of the attorneys for both parties: Jeffrey Greenbaum for Saint Peter's, and Karen Handorf for Larry Kaplan and the pension plan membership. The questions for Greenbaum focused on Saint Peter's claim (common to the healthcare corporations involved in such cases) that the ERISA law, as amended in 1980, expanded the definition of church plans to include those not explicitly established by a church. The judges also questioned why Saint Peter's managed the pension plan for 30 years as an ERISA plan when they were ostensibly not required to do so. Greenbaum responded (prompted by one of the judges, rather oddly) that a change in the funding formula by "the government" brought about the switch, and that "the whole point of the exemption is to keep religious institutions free from government regulations."

Handorf was questioned on the long history of IRS church plan rulings in favor of church-related organizations. She argued that these rulings were in fact erroneous, and not focused on the language of the ERISA statute, which only intended a narrow exemption for churches. She also mentioned that Saint Peter's competes in the same market and "earns its money" in the same way as other healthcare corporations, and thus the exemption grants Saint Peter's an unfair competitive advantage.

The next step will probably be for the court to issue a decision in the case. We cannot predict how long that will take; it could be weeks or months. We hope the court recognizes Congress' intention that only plans established by churches should be exempt from the protections of federal law. We'll post again as soon as we hear more.


Thursday, August 27, 2015

New Date for Oral Argument

Oral argument in the Saint Peter's appeal has been rescheduled for Thursday, October 8 at 10:00 am at the U.S. Courthouse in Philadelphia. It had been previously scheduled for September 28. We will keep you informed of any further changes or updates.

Monday, August 24, 2015

Pension Plan Financial Update

A review of the Saint Peter’s 2014 financial statements shows that the unfunded pension liability doubled in one year: from $56 million in 2013 to $114.8 million in 2014. During meetings with plan participants, management stated that the intent was to fully fund the plan over a 10 year period. In 2014, only $3 million was funded, while payments to plan participants totaled $6.9 million. This is far short of management’s stated intent. The statements indicated that only $3 million will be funded in 2015. While management spends hundreds of thousands of dollars on new administrative offices, they cannot find the money to adequately fund a pension plan on which hundreds of retirees depend. It is time for a change in management and for the bishop to cede control of the hospital to an independent board. No bishop is above the Church’s teachings on social justice and worker’s rights, including Bishop Bootkoski.

Oral argument in Saint Peter's pension case appeal is (still) set for September 28 before the Third Circuit appeals court in Philadelphia.