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.

Tuesday, December 17, 2019

Prospective Merger with RWJBarnabas Announced

Big news: on December 16, RWJBarnabas Health and St. Peter's Healthcare System announced that they had signed a letter of intent to become "strategic partners" going forward. According to a letter to employees by Saint Peter's President and CEO Leslie Hirsch, the specific structure of the resulting organization is presently undetermined, pending a more detailed agreement to be reached in the coming months.

The decision is in line with recent announcements and moves by Saint Peter's management to make the organization a more attractive takeover target. Never referred to as an outright acquisition of the Catholic Saint Peter's by the independent RWJBarnabas, the structure of the deal will allow the Saint Peter's part of the organization to remain in some respect affiliated to the church. A "Frequently Asked Questions" document distributed with the announcement states that the status of Saint Peter's facilities will remain unchanged for the foreseeable future, and that the partnership will enhance the outpatient services offered by Saint Peter's University Hospital. However, posing itself the question whether the hospital might merge in the future with nearby Robert Wood Johnson University Hospital, it doesn't quite issue a flat denial. The FAQ also hints, by avoiding direct statements to the contrary, that salaries and benefits, including retirement plans, are subject to change once the merger is finalized. However, it specifically states that the system "remain[s] committed to funding Saint Peter’s frozen defined benefit pension plan." (We can't help but note that retaining the church affiliation allows Saint Peter's to preserve the pension's financially advantageous "church plan" status.)

Read the Hirsch letter, the FAQ, and an article on the announcement in Modern Healthcare. If we hear of more developments we'll pass them along.

Friday, June 14, 2019

It's Alive

This is the first update to the blog in over two years. You could be forgiven for thinking there is no more to write on the subject of the Saint Peter's pension, but events are progressing... and hope springs eternal.

In their 2017 ruling on the original Kaplan v. Saint Peter's Healthcare System lawsuit, the Supreme Court reversed an earlier appeals court ruling and decided that ERISA's church plan exemption "applies to plans that are maintained by church-affiliated organizations whose principal purpose is to administer or fund the plans, even when those plans haven’t been established by a church." (Quote from Cohen Milstein update cited below.) However, in August 2018, litigant Larry Kaplan filed an amended complaint, with a particular focus on the increased risk of default brought on by Saint Peter's declaration of church plan status, underfunding the Plan by $130 million and ceasing PBGC insurance coverage after thirty years of operating as an ERISA plan. On April 30, U.S. District Judge Michael A. Shipp denied Saint Peter's motion to dismiss, allowing the suit to proceed. The amended lawsuit is very much alive.

As a reminder of what can (and often does) happen when church hospitals mismanage and abandon their retirement plans, here's the Star Ledger/'s Karin Price Mueller on a lawsuit filed in state court by retirees of now-closed St. James Hospital against the Newark Archdiocese, for raiding their retirement plan and allowing it to fail. The archdiocese claims that when the hospital was sold in 2008, responsibility for the plan passed to no one. As Saint Peter's recent targeted refurbishments hint that the hospital may be seeking a buyer or merger, we worry that a similar fate could befall Saint Peter's pension plan.

Wednesday, June 7, 2017

More: Hospitals Win Supreme Court Case

As we (too briefly) reported in a prior post, on Monday the U.S. Supreme Court ruled in favor of the church-affiliated hospital systems, including Saint Peter's, in the three consolidated "church plan" cases. The opinion was unanimous, 8-0 (new justice Neil Gorsuch did not participate).

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

Hospitals Win Supreme Court Case

Yesterday, June 5th, the U.S. Supreme Court ruled in the three consolidated pension cases, including Saint Peter's, affirming the right of religiously-affiliated organizations to exempt themselves from ERISA requirements for funding, reporting, and insuring their pension plans. The opinion was unanimous, 8-0. We will be back with more soon.

Monday, May 1, 2017

SPUH Loaned Rak $400k for Apartment Boondoggle

This past Friday, Advance Media (the online partner of the Star-Ledger and other New Jersey newspapers) reported that in 2011, Saint Peter's University Hospital loaned recently departed CEO Ronald Rak $400,000. The plan was for Rak to use the loan to purchase an apartment in Philadelphia, to better foster "an enhanced relationship" with Drexel University Medical School. Rak never purchased the apartment, and now—Rak having resigned suddenly "for personal reasons" in March—neither Rak nor the hospital will say how much of the loan he paid back, though Rak maintains he has met all his financial obligations to the hospital.

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.
Thanks to the anonymous commenter who brought this article to our attention! So far, the only follow-up in the media has been this editorial in the South Jersey Times, pointing out that when such mysterious perks appear in the pay packages of CEOs of non-profit hospitals, they are inevitably reflected in higher healthcare costs. Now that the cat is out of the bag, we expect further follow-up reporting by and other outlets.

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.