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.