To All SPUH Retirement Plan Participants:
I was invited to meet with representatives from SPUH to discuss the proposed changes to the retirement plan. The meeting was attended by Garrick Stoldt, Chief Financial Officer; Steven S. Radin, Esq., Vice President, Corporate and Legal Affairs; and Susan Ballestero, Vice President, Human Resources.
I would like to thank them for the invitation and the opportunity to share the concerns of plan participants. The meeting was an open and frank discussion of the issues and the confusing communications that have been sent to plan participants.
I also spoke to representatives at the Pension Benefit Guaranty Corporation (PBGC) and the Pension Rights Center (Center).
As always, there are two sides to a story.
According to Mr. Radin, “SPUH has submitted the Center’s interpretation of the pension laws to their attorneys. The attorneys for SPUH state that they disagree with the Center’s interpretation. They have pointed out that the federal courts that have reviewed the issue have emphatically rejected the Center’s position, noting that such position has no basis in the law.”
Mr. Radin also stated that “they also informed the Hospital that the statement by the PBGC representative is inaccurate since the PBGC itself has issued written guidelines that not only rejects the view by the PBGC representative, but requires, as explicitly stated in the law, that in order for the retirement plan to be covered under the PBGC insurance rules, the Administration must affirmatively elect such coverage with the IRS and affirmatively notify the PBGC that it intends for the plan to be covered. There has been no election by any administration of the Hospital at any time. Thus, the plan of the Hospital according to their attorneys has been a church plan from its inception and continues to be so.”
Mr. Radin also went on to say “that the Hospital cannot afford to meet ERISA’s requirement to fund the plan in the future based upon a combination of factors, including discount rates and current interest rates. SPUH intends to fund in the future a defined contribution plan to protect all beneficiaries.”
The Pension Rights Center has a different view of the law. Their lawyers point out that when ERISA was enacted in 1974, the definition of a church plan was a plan “established and maintained by a church” for its own employees, like a plan set up by a diocese for clergy and lay employees who work directly for the diocese. Clearly the SPUH plan didn’t meet those criteria because the Diocese of Trenton, now the Diocese of Metuchen, did not set up the SPUH plan. It also did not run the plan and had no control or financial responsibility for the plan.
According to the Center, the SPUH retirement plan was an ERISA plan insured by the PBGC beginning in 1974, and it remained an ERISA plan when the law was amended in 1980 to cover plans that were established and maintained by churches for both their own employees and also for employees of affiliated hospitals and schools. They also point to a Treasury regulation that says that “if at any time during its existence a plan is not a church plan… it cannot thereafter become a church plan.”
The Center’s lawyers are sympathetic to SPUH’s financial situation but do not think that it should be addressed at the expense of the security of participants’ pensions. They note that there are provisions in the laws that allow the IRS to modify funding requirements for employers facing financial hardship.
If SPUH does not withdraw its ruling request to the IRS, and the IRS rules that the SPUH retirement plan is a church plan, this issue will be have to be decided in the courts.
If anyone has any questions, please feel free to post them on the blog and we will try our best to answer them.