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.
Wednesday, June 7, 2017
Prior to the ruling, three federal appellate courts ruled that to take advantage of the governing ERISA statute's church exemption, a pension plan must have been established by a church. Monday's ruling reversed these appellate rulings, allowing church-affiliated organizations, including some of the largest healthcare corporations in the country, an exemption from ERISA's protections for employees and retirees.
In Justice Elena Kagan's written opinion, the court studied the statutory language, weighed both sides and found that "the hospitals have the better of the argument." Justice Sonia Sotomayor wrote in a concurring opinion that while she agreed with the majority about the establishment requirement, she was "troubled" – specifically that Congress, when they authored and adopted the statute, would likely not anticipate the large church-connected healthcare corporations of the present day, many of them for-profit, and all competing in the market with non-church-connected organizations whose pensions (if they have them) must comply with ERISA. She states that "other provisions ... including the provisions governing which organizations qualify as principal purpose organizations permitted to establish and maintain 'church plans,'" should also be considered in granting such exemptions.
These concerns in Justice Sotomayor's opinion appear to drive the remaining hope that such plans might still be brought under ERISA protections. Karen Ferguson, director of the Pension Rights Center, stated in a PRC press release that "(t)he Court addressed only one issue: that a pension plan can be a church plan even if it is not established by a church. The Court did not decide whether the plans involved in the cases before it are maintained by the type of organization envisioned by Congress when it enacted the law. That this was not addressed in the Court’s decision leaves hope for workers and retirees covered by these plans that they will receive the pensions they earned."
Yesterday the hospital sent a statement to all employees from new interim CEO Leslie Hirsch, celebrating the ruling and its freeing the hospital to "appropriately fund its defined benefit pension plan minus the burden of excessive and often costly government regulations." As before, on behalf of the hospital Hirsch promises the hospital's commitment to deliver on its promises to plan members – but for now, the hospital's word will have to suffice.
We will continue to update the blog when and if events warrant. Until then, on behalf of the members of the Saint Peter's pension plan, we'd like to thank Karen Ferguson and all at Pension Rights Center, who have fought steadfastly for us since this effort began; former Saint Peter's executives John Matuska and Bruce Pardo, for stepping forward and putting their names to letters and other forms of support, and everyone who has supported our effort and this blog with information and opinions, even (perhaps especially) anonymously. Special thanks to Larry Kaplan, who has devoted several years and untold grey hairs to challenging Saint Peter's shifting explanations and serving as the face of the original lawsuit and the subsequent appeals. Larry has performed a great service and valiantly fought the good fight, and he has our eternal gratitude. (We believe he would appreciate comments to that effect under this post.)
Some selected media reports:
Tuesday, June 6, 2017
Monday, May 1, 2017
Among the revelations in the article:
- The loan was made in 2011, with Rak's stated intention to use the loan to buy the apartment and to open a joint fertility clinic.
- SPUH's relationship with Drexel that occasioned the loan ended in 2014. Rak had never purchased the Philadelphia apartment; the article doesn't say what happened to the fertility clinic plan.
- In 2015, more than three-quarters of the loan remained unpaid. The hospital board approved a repayment plan requiring that Rak complete repayment by December 2017, but included provisions that would forgive the loan under certain circumstances if Rak was no longer employed by SPUH.
- Several years ago, according to the article's sources, the hospital felt it necessary to launch an internal inquiry into the loan's status.
Sunday, April 2, 2017
- An excellent Bloomberg BNA article by Jacklyn Wille, following up on last week's essential case summary. (If the link above doesn't work for you, try this one which accesses the article via Google News.)
- Writeups in the Chicago Tribune and Education Week (church schools, of course, are also affected by the decision).
- Finally, an op-ed in the editorial website NJ Spotlight, "Why U.S. Supreme Court Must Stand Up for Retired Americans," by Mary Rich. Ms. Rich led a successful 10-year fight to restore ERISA coverage for her pension fund, that of Hospital Center at Orange, and has since been a tireless advocate for pension rights. We're proud and grateful to have her support.
Sunday, March 26, 2017
As the article states, the questions asked in oral argument should give us some idea of the court's thinking in the case. If we are lucky, the main focus will be on the language in the ERISA statute, as it was in all three appellate cases (which all three hospital organizations lost). As we surmised previously, the court will still have an even number of members when the case goes before it. A 4-4 split ruling is possible but "unlikely," as one ERISA attorney opines in the article. Such a decision would be a win for plan members in the three cases, since the appellate rulings would stand, but it would not provide the definitive guidance — one way or the other — sought by the appellees on behalf of all church-affiliated plan sponsors, and which the court likely wants to provide. Stay tuned.
Friday, March 24, 2017
Wednesday, March 1, 2017
Documents in the case can be found on the page for Saint Peter's Healthcare System v. Kaplan at the SCOTUSblog website. (Documents pertaining to the Supreme Court hearing can be found on dates after December 2, 2016, when the court granted the hospitals' petition for a hearing.)
In addition to briefs filed by the petitioners (the hospitals) and respondents (retirees), numerous organizations have filed amicus briefs on both sides of the argument. Church and church health organizations have filed, declaring, among other things, that the term "church" should be construed as broadly as possible, to encompass any entity with any conceivable connection to a church. As in the prior incarnations of these cases, they declare that subjecting church-affiliated organizations to regulations that govern other pension plans will infringe on the liberty of the church to act on its religious mission. (Interestingly, the United States—specifically the Treasury Department, the IRS, the Labor Department, and PBGC—has also filed on behalf of the hospitals.)
The Pension Rights Center's brief, by Drexel law professor Norman Stein and Karen Ferguson of the PRC, is a strong corrective. It gives several examples of organizations that have taken advantage of the church exemption, at the urging of benefits consultants like KPMG and Ernst & Young, and reaped a financial windfall. Many, like Saint Peter's, operated for decades as ERISA plans, only to retroactively claim church status in order to receive refunds of their PBGC insurance premiums (the predecessor of the petitioner in the related Dignity Health case received over $1.4 million in premium refunds after operating for 19 years as an ERISA plan). In addition, the lax funding and reporting requirements allow the organization to underfund the plan and keep its health secret from its members, often until it is abandoned in a buyout or bankruptcy. They note that in all these cases, the church disavows any financial responsibility for the affiliated organization's pension plan.
As in previous briefs (in cases the retirees won at the district and appellate level), PRC relates the history of the church plan exemption and explains how both the clear language of the ERISA statute and its legislative history make clear that the exemption was never intended as a broad exemption for church-related agencies. We hope the Court agrees that the church's "good work" should not include depriving workers of their promised retirement benefits.