John Matuska's Letter to the Editor

Former St. Peter's CEO John Matuska has submitted a letter to the editor of the (Newark) Star-Ledger in response to last week's news article. The text of the letter follows.

Dear Editor:

Thank you for highlighting the complex subject of church pension plans (“N.J. workers at religious institutions fear change threatens pensions,” January 22). As the former CEO, CFO, and COO at Saint Peter’s University Hospital (SPUH) over a 24-year period, as a member of its Board of Trustees and Retirement Plan Committee during that time, and as a participant in the SPUH pension plan, I would like to make a few points:

1. The IRS has not yet recognized SPUH’s pension plan as a church plan, so there is still a chance that the plan will not be granted church plan status.
2. The hospital has treated the plan as an ERISA plan for decades, and, in the past, it has told participants that it is an ERISA plan. 
3. The administration claims that it will provide better insurance coverage for the plan, but it is hard to believe that any commercial insurance company can provide better coverage at a lower price than the PBGC, whose pension insurance is very inexpensive. The plan is only 63% funded.
4. I find SPUH’s priorities interesting. While hospital chapels are an important component of a Catholic hospital’s mission, spending $7 million on a new chapel while putting employees’ pensions at risk seems to be inconsistent with SPUH’s core values and the Church’s teachings on social justice and workers’ rights.

Sincerely,

John Matuska
Lavallette, NJ

Many thanks, John, for your support of this effort!

New Reuters News Article

A new article on the St. Peter's "church plan" conversion was published last week. Mark Miller, a columnist on retirement and aging for the international Reuters news agency, writes about St. Peter's in the context of the 2004 landmark case of the Hospital Center at Orange (HCO), whose own conversion was a prelude to gutting the pension plan to pay off the hospital's creditors. It's because of the HCO litigation, and subsequent decisions by the IRS, that most St. Peter's retirement plan participants are aware of the issue at all. The column has been published across the country and around the world by Reuters' affiliates. Read the article here.

The official IRS comment deadline has now come and gone. However, it's possible that letters received past the deadline may be considered. If you haven't already done so, please consider composing and sending a letter of comment. Use our letter templates to guide you. Probably the most productive action at this point is contacting your representatives in Congress; you can use the info we've provided here.

Newspaper Article in Star-Ledger

The (Newark) Star-Ledger, New Jersey's largest newspaper by circulation, published an article on the St. Peter's pension crisis on Sunday. The article, by reporter Tom Haydon, appears on the front page of the New Jersey section. Read it online here.

It seems a good, balanced article. Though it presents arguments from proponents as well as opponents of "church plans," overall it presents our arguments well. Since employees in particular are reluctant to speak out for fear of retaliation, the publicity is very welcome. The issue now enjoys a much higher level of awareness, and as they say, sunlight is the best disinfectant.

However, we had to chuckle at the comments of church plan officials who characterize federal pension requirements as "excessive administrative burdens." The Pension Benefit Guaranty Corporation insurance premiums for ERISA plans are exceedingly low—on the order of $35 per participant per year—because they cover every plan in the country (except church plans). This is a great bargain, especially for an underfunded plan! For a church plan that's only 64% funded to find an insurance company willing to underwrite an individual policy would be exceedingly difficult, and the insurance would cost a fortune.

We received the following anonymous comment after the article appeared:

As a former and vested employee of SPUH I found my self totally blindsided by the news about the church plan notice. (I just noticed the article on nj.com on 1/22 and did a search on the subject.) As a vested plan participant shouldn't I have received a copy of the IRS required notice? If SPUH neglected to send a notice to all vested participants, would this be grounds for extending the comment period?

We don't know. We believe they've done enough to pass the IRS requirement to notify "interested persons." This makes it vitally important to compose and send your comment letter as soon as possible, and ask all the former and current employees you know to visit this site and do the same.

Keep Sending Those Letters!

Though the IRS comment deadline is here, there's a grace period. The IRS will accept comment letters 60 days from when you received the notice from St. Peter's, so letters received by January 25th will be effective. If you haven't sent a comment letter, compose and send one today using the templates provided here. Thanks for getting involved!

Next Steps

At the risk of nagging, Friday, January 20 is the deadline for comment letters to the IRS.

In addition to writing the IRS, you can help defeat St. Peter's "church plan" action by contacting your representatives in Federal and State government. Tell them what St. Peter's is doing and how it affects you. Ask them to contact St. Peter's officials and to get them to explain their actions.

To get your representatives' contact information, use this page from the Pension Rights Center. If you want to use email, or contact your representatives' field offices, the Senate and House websites are handy. See also this PRC page, which links to tips on writing and calling effectively.

Here's St. Peter's contact information for you to provide to your representatives:

Saint Peter's University Hospital Administration Dept.: 732 745-7933

Ronald C. Rak, Esq.
President and CEO
732 745-8600 x5493
rrak@saintpetersuh.com

Patricia Carroll
COO and Sr. VP / SPHS
732 745-8600 x7944
pcarroll@saintpetersuh.com

Garrick Stoldt
Chief Finance Officer / SPHS
732 745-8600 x6651
gstoldt@saintpetersuh.com

Donald M. Daniels
Chairman, Board of Trustees
The Daniels Group, Inc.
908 665-2396
ddaniels@danielsgrp.com

Media Coverage ... and Confusing Statements

A new article by Hazel Bradford in Business Insurance, an insurance industry trade magazine, provides much-needed media coverage of the St. Peter's "church plan" move, along with more background on the strategy as it's been employed by many organizations to shield themselves from Federal obligations and oversight. Read the article here.

In the article, St. Peter's PR director Phil Hartman echoes recent statements by St. Peter's administration that the reason for declaring the St. Peter's plan a "church plan" was to "spread the (contribution) payments, rather than making a lump-sum payment." Leaving aside that better planning and sound management of contribution funds might have made this obligation easier to meet, this is the only reason St. Peter's has given to date for abandoning Federal oversight. St. Peter's claimed in December 2011 town-hall meetings that nothing else about the management of the plan would change: not the amount of yearly contributions, not planned benefits, not even insurance (see below). They admitted that if their application for "church plan" status were denied, the IRS would make it fairly easy to get back on the ERISA track, and they were hard-pressed to make a case that their obligations under ERISA were so onerous that "church plan" status was preferable to continued Federal protection for the plan.

Hartman goes on to say (paraphrased in the article) that "St. Peter's continued to pay PBGC [Pension Benefit Guaranty Corporation, a Federal insurance agency similar to the FDIC] premiums through 2011 and would like to figure out how to continue being protected by the PBGC or a private insurer despite seeking the church plan designation." St. Peter's administration claimed in the town-hall meetings that should the IRS grant the ruling, payment of premiums to the PBGC would continue. The current St. Peter's Summary Plan Description states clearly that PBGC coverage would end in such a case. It's difficult to judge which of these three statements by St. Peter's is closest to the truth.

Administrators also claimed in town-hall meetings that any premiums refunded by PBGC go into the pension fund and are not refunded to the organization that paid them. This would doubtless be news to the 85 organizations that lined up for such refunds between 1999 and 2007, according to the Pension Rights Center in the same article.

Lastly, we must again note that once granted by the IRS, "church plan" status is permanent. St. Peter's administration implored employees in the December town-hall meetings to trust them—that they would never do anything to harm employees' (and retirees') retirement security. Even granted for argument's sake that current management has only plan participants' best interests at heart, St. Peter's has suffered major administrative turnover in recent years. In a dire financial climate, future administrators may not be so considerate.

Outside Influence

Investigative reporter Ellen Schultz, who wrote a 2010 Wall Street Journal article that discusses the Saint Peter's situation in the overall context of "church plans," is the author of a recent book. Retirement Heist explores how companies have in recent years used their pension funds to boost short-term profits and executive compensation at the expense of ordinary workers. This review in Forbes magazine struck a chord:

[Schultz] explains that the current retirement crisis is “not a demographic accident. It was manufactured by an alliance of two groups: top executives and their facilitators in the retirement industry—benefits consultants, insurance companies and banks.” Executives are viewed “as beleaguered captains valiantly trying to keep their overloaded ships from being sunk in a perfect storm. In reality, they’re the silent pirates who looted the ships and left them to sink, along with the retirees, as they sailed away safely in their lifeboats.”

St. Peter's employees will recognize the reference to outside consultants. In early-December town-hall meetings, St. Peter's administration told employees that "outside consultants" drove the 2006 decision to pursue "church plan" status. Then on December 28, St. Peter's CEO Ronald Rak—in the same letter that clamped the lid on employee communication on the subject for the next two months—announced that "new outside experts" were shaping the retirement plan strategy going forward.

Outside benefits consultants continue to have the ear of St. Peter's executives, while employees are shut out. Whose interests are served by these consultants? Given the recent history documented by Ms. Schultz, and the stonewall erected by St. Peter's administration, is it any wonder employees and retirees are concerned about the future of the plan?

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Bruce Pardo's IRS Comment Letter

Ex-Saint Peter's VP of Human Resources Bruce Pardo has, like ex-CEO John Matuska, graciously allowed us to post his comment letter to the IRS here. Click here to read it.

Your comment letter is vitally important! Please click here to download a letter template and send it to the IRS by the January 20 deadline.

A Bit of Levity

Today's Mutts, by New Jersey's own Patrick McDonnell.

IRS Comment Letters Available

IRS comment letter templates are now available. Writing a letter to the IRS before the January 20 deadline is perhaps the most important thing you can do to preserve your pension's ERISA protections. To download the letters, click the "IRS Comment Letters" link under "Pages" on the right hand side of this page (or any page), or just click here.

If you have problems, please leave a comment below and we will do our best to help. Thank you for taking action!

John Matuska's IRS Comment Letter

Former Saint Peter's CEO (and CFO, and 24-year member of Saint Peter's Retirement Plan Committee) John Matuska has graciously consented to let us post his comment letter to the IRS on the website. It is a strong statement indeed. Please read it here (PDF format).

Again, it's vitally important for all plan participants, beneficiaries, and alternate payees who are able to submit comment letters to the IRS before the deadline date of January 20. Comment letter templates will be posted here in the next day or two.

Church Plan Timeline

Prior to 2006
St. Peter's managed its retirement plan in compliance with the requirements of the Employee Retirement Income Security Act of 1974 (ERISA). St. Peter's explicitly referenced ERISA and Federal insurance by the Pension Benefit Guaranty Corporation (PBGC) in its retirement plan documentation. See this excerpt from a St. Peter's employee brochure circa 1990s for details.

1990s - 2000s
A trend develops for organizations with some link to a religion -- such as hospitals, schools, and nursing homes -- to apply to the IRS for "church plan" status, taking advantage of a loophole in the tax code to exempt church pension plans from most ERISA protections. This saves organizations from having to pay PBGC insurance premiums and from complying with ERISA funding requirements.

Early 2000s
Cases begin coming to light of financially strapped organizations obtaining "church plan" status, then stranding their pension plans. For instance:

• Financially-strapped Medical Center at Orange (NJ) claims "church plan" status in 2003 and immediately stops contributing to its pension plan. When the organization declares bankruptcy in 2004, it pays off creditors but stiffs the pension plan. As of 2010, according to the Wall Street Journal, its funding was down to 30% of promised benefits, expected to run dry in 2013.
• St. Francis Medical Center in Lawrenceville, PA, goes bankrupt in 2002, leaving a funding deficit and no insurance. It had applied for church plan status in 1994.

2004
Medical Center at Orange employees file suit against the PBGC.

2006
St. Peter's applies to the Internal Revenue Service for church plan status. It removes references to the PBGC and ERISA protections from the plan documentation, but does little else differently in managing the plan.

2007
In response to the Medical Center at Orange lawsuit, and to evidence that organizations are misusing the church plan designation to escape their pension responsibilites, the IRS places a moratorium on church plan rulings.

September 2011
The IRS lifts the moratorium on church plan rulings, with a new requirement: employers must notify "interested persons" of the planned change in status, and give them a chance to comment. This is why SPUH employees and retirees received the detailed church plan notice in November, and why we have a chance to convince the IRS to deny the ruling the hospital seeks.

"Church Plans" In The News

New posts coming VERY soon. For now, here's some media coverage of other organizations that have taken advantage of the "church plan" loophole to escape Federal oversight:

Pensions in Peril Over Church Exemptions – New York Times, May 2006
This early article highlights the story of the Hospital Center at Orange, which in 2003 obtained "church plan" status and stopped contributing to its pension plan. Note: the Times limits non-subscribers to 20 articles a month.

IRS Nears Action on Church Pensions – Wall Street Journal, June 2010
This article also spotlights the Hospital Center at Orange fiasco, and provides details of the current situation at Saint Peter's.

Church Workers' Pensions Lack Safeguards – NPR, May 2010
This article spotlights the collapsing pensions of Catholic Diocese of Wilmington, Delaware, and Augsburg Fortress Publishers in Minnesota. These plans never enjoyed ERISA protection. Saint Peter's plan does... for now.

IRS Lifts Church Plan Moratorium But Imposes New Notice Requirements – Towers Watson, October 2011
Background on the lifting of the IRS's moratorium on church plan rulings. The IRS imposed the moratorium in 2007 in response to a lawsuit related to Hospital Center at Orange. In return for lifting the moratorium, the IRS required organizations such as Saint Peter's to notify "interested persons" that they had requested a ruling. This requirement generated the Notice to Interested Persons Saint Peter's issued November 21.