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.

Sunday, April 2, 2017

Monday's Supreme Court Hearing

This past Monday, March 27, the U.S. Supreme Court heard oral arguments in the consolidated case — including Saint Peter's Healthcare System, et al., v. Laurence Kaplan, et al. — that will decide whether church-affiliated organizations such as Saint Peter's are entitled to shield their pension plans from federal ERISA regulations. Arguing before the court were Lisa Blatt, for the hospital corporations; Malcolm Stewart, for the U.S. Government in support of the hospitals; and James Feldman, for the pension plan members. A transcript of the session is available here, and an audio recording here.

It's difficult to predict the outcome of the ruling based on the questions asked. Though the focus stayed mainly on the language of the ERISA statute, there was also much focus on why church-affiliated organizations such as hospitals were or were not entitled to be considered churches for the purposes of the statute. There were tough questions for both sides of the argument. Other than feeling hopeful, and perhaps cautiously optimistic, there seems little to do but await the court's ruling, expected by late June. In the meantime, here's news coverage of the hearing:

Sunday, March 26, 2017

Bloomberg BNA Article on Supreme Court Case

Bloomberg BNA's Pension & Benefits Daily has posted a great summary of the issues and the stakes leading up to Monday's all-important Supreme Court hearing. We can't really improve upon it; it's required reading.

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

Saint Peter's CEO Resigns as Supreme Court Hearing Nears

This past Wednesday, March 22, news emerged that Ronald Rak had resigned as Saint Peter's CEO. A terse, undated announcement in employees' email from Vincent J. Dicks, chairman of the board of governors, announced that Rak had resigned "for personal reasons" and that company president Leslie Hirsch had assumed the additional role of interim CEO. The statement did not mention whether Rak would remain at Saint Peter's in any capacity.

The news comes as the scheduled date nears for Saint Peter's hearing before the US Supreme Court in its ERISA church exemption appeal. Oral argument in the three consolidated cases is scheduled for one hour this coming Monday, March 27.

There is no indication, and we have no idea, whether the timing of the Rak announcement is any more than coincidence. We will relay any news we can about Monday's court hearing as we get it.

Wednesday, March 1, 2017

Oral Argument Scheduled in Supreme Court Case

Oral argument before the Supreme Court in the three consolidated ERISA "church plan" cases is now scheduled for Monday, March 27. It seems likely that the court's vacant seat will still be unfilled as of that date.

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.

Wednesday, December 14, 2016

More Supreme Court News

More news items have been published regarding the recent agreement by the U.S. Supreme Court to hear cases involving three church-affiliated hospital pension plans, including Saint Peter's. In all three cases, the hospitals, claiming the right to shed federal ERISA worker protections under an exemption for churches, had lost in federal appeals court.

  • Joellen Leavelle of Pension Rights Center has published an excellent overview which should be required reading. (We admit, we rushed to publish the update in our previous post; Ms. Leavelle's is far superior.)
  • The always reliable Hazel Bradford at Pensions & Investments has written a balanced, in-depth report.
  • Karin Price Mueller of the Star-Ledger/ has an update to her Bamboozled item we featured in a previous blog post. Ms. Mueller again touches on another New Jersey hospital, St. James of Newark, whose corporate owners used the church exemption to stiff their retirees and bankrupt their pension plan.
We found other accounts, to which we decline to link here. Florida Baptist Witness reports that "religious freedom advocates" say the court's impending decision would determine "if Protestant and Catholic hospitals qualify as faith-based ministries." The president of the Southern Baptist Ethics & Religious Liberty Commission is reported as saying, "I hope the Supreme Court rules in favor of these hospitals, their employees, and their communities, and rejects this attempt to attack once again religious freedom and human compassion." The reporter doesn't question how compelling a hospital to keep its promises to its employees is somehow anti-employee or an attack on compassion, or how an ethics commission president can display such a brazen disregard for ethics. Breitbart News, the far-right website until recently helmed by Donald Trump's prospective White House strategist Stephen Bannon, is even worse. By their telling, the hospitals in these cases "are all faith-based healthcare providers. They are nonprofit organizations which provide health care to the poor and needy, and they do it as their faith-based ministry to the world." The bad guys? "Trial lawyers."

We hear that the court will hear oral argument in the consolidated group of cases in March 2017, when the court will in all likelihood still have only eight members.

Tuesday, December 6, 2016

Supreme Court Will Hear Hospitals' Appeals

The U.S. Supreme Court has decided to hear the appeals of three church-affiliated hospital systems, including Saint Peter's Healthcare System. All three hospital systems' pension plans were declared ineligible by federal appeals courts for the ERISA exemption for churches. Besides Saint Peter's, the hospital systems are Dignity Health of California, which operates Catholic hospitals, and Advocate Health System of Illinois, affiliated with the Evangelical Lutheran Church in America and United Church of Christ. The cases have been consolidated, so the Court will hear arguments for all three cases together.

It seems strange that the Court would hear these cases when there has been no disagreement at the appellate level that the church exemption applies only to plans established by churches, according to a clear reading of the statute. The Court apparently accepted the argument of the hospitals' lawyers that decisions by the Department of Labor and the IRS which interpreted the statute differently should be given weight similar to the actual wording of the statute.

We will have more soon, but for now, here are three articles on this latest development from The National Law Journal, ABA Journal, and Reuters.

Tuesday, November 29, 2016

Star-Ledger/ "Bamboozled" article

The Star-Ledger/ has published an excellent article on pensions of New Jersey Catholic hospitals, and its title is blunt: Bamboozled: How Catholic Hospitals Get Away With Letting Pensions Go Broke. Karin Price Mueller's Bamboozled series tends to focus on scams, fraud, and avoidance of responsibility to citizens and consumers. The new article, showing Catholic hospitals' attempt to renege on their debt to employees and retirees, fits the pattern.

The article focuses on both St. Peter's plan and that of the now-defunct St. James Hospital of Newark. St. James' pension plan was starved of funds after a "church plan" ruling, then completely abandoned in a series of corporate mergers. The corporate parent(s) told one story (via press release, and probably to their retirees as well) at the time of the mergers about who was responsible for the plan, but now say that story was "incorrect or misleading"—while taking no responsibility for the outcome. St. James' plan will run out of money in the next few months; the plan's facilitator can't find the responsible party, and the Archdiocese of Newark won't return their phone calls.

It's not difficult to see the parallels. St. Peter's has done their best to rewrite the past, with help from their consultants and lawyers (e.g., "We have always been a church plan"), and their rare public statements about the plan are careful not to mention future benefits. Any words coming from St. Peter's or the Archdiocese of Metuchen about the plan should be subject to careful scrutiny.

As the article mentions, the Supreme Court's decision on whether to hear the St. Peter's case and/or others like it is imminent. We expect to have more for you on this very soon.