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.

Saturday, May 10, 2014

Judge in Related Case Rules Hospital Plan a Church Plan

In one of the five related class-action lawsuits challenging Catholic hospital systems which have sought to have their pension plans ruled "church plans," exempting them from ERISA protections, a federal judge has ruled in Overall v. Ascension Health that the plan in the case is by law a church plan. The decision is contrary to the recent decisions in Kaplan v. Saint Peter's Healthcare System and Rollins v. Dignity Health, in which the hospital systems were deemed not eligible for church plan status. The judge ruled in favor of Ascension Health's Motion to Dismiss, thereby dismissing the suit.

For much more on the ruling, see the always reliable Thomas E. Clark Jr.'s post in the Fiduciary Matters Blog (formerly FRA PlanTools blog). The ruling hinged largely not on the specifics of the Ascension Health case, but on an interpretation of the ERISA statute that starkly opposes that of the judges in the Saint Peter's and Dignity Health cases. The judge ruled that the section of the statute that allows church-associated entities to manage a church plan removes the requirement, stated plainly in an earlier section, that such a plan be established by a church. The judge also ruled that the IRS's earlier rulings deserve deference in the case.

As Clark mentions in his summary, the opposing views in the federal district courts hint that the issue may well eventually be decided by the U.S. Supreme Court. We may have more on this later. Update 5/14/2014: We understand the plaintiffs in Overall v. Ascension Health plan to appeal this decision.

Thursday, April 10, 2014


We are glad to post the following message from Larry Kaplan's legal counsel:

Please do not contact Larry Kaplan, the named plaintiff in the Kaplan v. Saint Peter's Healthcare System lawsuit.  Larry is represented by counsel.  Please direct any inquires to his lawyers at Cohen Milstein.  They may be reached at (202) 408-4600. Thank you.

We would add that this request does indeed apply to you.

Saturday, April 5, 2014

Saint Peter's Response

Saint Peter's on April 3 sent a letter to plan participants and employees, confirming their intent to appeal the recent court order rejecting their claim to church plan status. Susan Ballestero, the hospital's VP of Human Resources, writes that "Saint Peter's plans to appeal this decision and take any action that may be necessary to affirm that Saint Peter’s Healthcare System may maintain its present Church Plan." The hospital apparently plans to continue its present operation of the plan – grossly underfunded, without insurance – until forced to do otherwise. We think they will have to find another venue for appeal, as the judge in the present case has emphatically rejected their arguments so far.

Another article has been published about the decision, this one on April 4 on the website of PLANADVISOR magazine.

Thursday, April 3, 2014

Court Ruling Analysis and Follow-up

Numerous news articles have now been published about the recent court ruling in Kaplan v. Saint Peter's Healthcare System that the hospital's pension plan is not a church plan. These include:

We'll get back to those articles a bit later.

Judge Shipp's ruling, in denying Saint Peter's claim that their pension plan is entitled to ERISA's church plan exemption, also denies their motion to dismiss the case. The case can thus now proceed, a process which we expect to take several months.

Tuesday, April 1, 2014


Yesterday, March 31st, the judge in Kaplan v. Saint Peter's Healthcare System ruled that Saint Peter's pension plan is not a church plan under ERISA as a matter of law, and denied the hospital's motion to dismiss the case. Judge Michael A. Shipp issued the ruling with a lengthy Memorandum Opinion which we are in the process of digesting. In the meantime, the always reliable Thomas E. Clark Jr. at FRA PlanTools has a blog entry summarizing the developments.

The ruling negates the IRS's August 2013 private letter ruling that the Saint Peter's plan is a church plan. It essentially agrees with, and we would say bolsters, the similar recent ruling in the related Dignity Health case in California. Litigation is not complete in either case, but as in the Dignity case, the essence of the Saint Peter's case has been decided by this ruling. We do not know whether Saint Peter's might make changes to the management of the pension plan in the near term. We don't know if they can stand pat until the completion of the case, or afterwards pending an appeal. We do know they can no longer claim that the Saint Peter's plan is a church plan.

Heartfelt congratulations to Larry Kaplan, who took on this burden on behalf of all the Plan members; the law firms arguing the case for the plaintiffs, led by Karen Handorf at Cohen Milstein; and to the members of the Saint Peter's pension plan, those still working and those now retired, whose victory this is. More soon.

Monday, March 31, 2014

Lawsuit Update

Last Thursday, March 27th in New Jersey District Court in Trenton, Judge Michael A. Shipp heard oral arguments from the litigants in Kaplan v. Saint Peter's Healthcare System concerning Saint Peter's motion to dismiss the case.

The judge was by all accounts well-prepared with a good understanding of the issues. There was much interest and discussion of the recent decision in the related case Rollins v. Dignity Health that that corporation's pension was not a church plan under federal law. Like the judge in that case, Judge Shipp dismissed as irrelevant all discussion of the IRS's recent history of granting church plan status to organizations that have only an association with a church. He said he would issue a ruling on Saint Peter's motion sometime the following week, i.e., this week. This would be a very rapid result; judges (reportedly) typically take two months to a year to issue such rulings. This ruling would not necessarily decide the case, as the Dignity ruling essentially has in that case; we will have to wait and see what develops.

We await the impending ruling with cautious optimism, and we will issue a post when we hear a result. Thanks for your patience!

Friday, March 14, 2014

Big Victory in Related Case; SPUH Lawsuit Update

We only just found out (sorry!) but we have a bombshell development to share, along with an update on the Saint Peter's class action suit.

Last December 12, the U.S. District Court judge in the case of Rollins v. Dignity Health ruled that the hospital system in that case was not entitled to "church plan" status. This is one of the five ongoing class action lawsuits (including Kaplan v. Saint Peter's Healthcare System) challenging Catholic hospital systems that have declared "church plan" exemptions for their pension plans. The law firms on the plaintiff's side are the same ones representing Larry Kaplan and the Saint Peter's plan membership, and the arguments they put forward are very similar (in all five cases, in fact), so this is a very heartening development indeed.

Thomas E. Clark, Jr. at the FRA PlanTools blog wrote a summary of the ruling that we really can't improve upon. We urge everyone to read it in its entirety, as well as the ruling itself.

In denying Dignity Health's motion to dismiss the case, Judge Henderson agreed with the plaintiffs' arguments in several important respects. According to his reading of the ERISA statute, only a church or association of churches can establish a church plan. (The subsection of the statute about church associated organizations [e.g., hospitals] allows them to maintain a church plan established by a church, but not to establish a church plan. Interpreting the statute to allow church associated organizations to establish such a plan would make superfluous the previous section of the statute, actively retained by Congress when they amended the statute, thus that interpretation is incorrect.) The ruling rejected the IRS's 30-year history of awarding church plan status to associated organizations as erroneous and lacking the force of law. It also argued that numerous prior court decisions granting church plan status to associated organizations were wrong, giving clear reasons why they were wrong.

Clark calls the decision "a resounding victory for the plaintiffs" -- though the ruling does not end the case (it was a rejection of Dignity's Motion to Dismiss), it rules that Dignity now stands in violation of ERISA. He concludes, "Although this decision does not directly apply to any plan but the one sponsored by Dignity Health, this could change everything if it becomes the law of the land, rather than just the law of this case."

Well, that's what we're hoping for. In the Saint Peter's case, oral argument on Saint Peter's Motion to Dismiss is scheduled for March 24. Karen Handorf of Cohen Milstein will argue on behalf of Larry and his fellow plan members, and the recent ruling in the Dignity Health case will be foremost in the minds of those in attendance. We will post further news when we get it (hopefully much more swiftly next time).