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.

Wednesday, December 30, 2015

Appellate Court Follow-up

So far we know of two published articles on yesterday's appellate court decision: a short news item by Hazel Bradford in Pensions & Investments, which includes quotes from Karen Handorf of Cohen Milstein (Saint Peter's attorney declined comment), and a longer analysis by Thomas E. Clark, Jr., at his Fiduciary Matters Blog. Both are worthwhile reading, as is the court's complete opinion.

The basis of the court's opinion is that the "plain meaning" of the ERISA statute requires that to meet the church plan exemption, a pension plan must have been established by a church. Saint Peter's has sought (and claimed) church plan status based on a new interpretation of amendments made to ERISA in 1980, to allow an agency of a church to maintain such a plan; Saint Peter's has claimed that this clause expands the definition of a church plan enough to claim the exemption. The court disagreed, and also cited the "remedial" nature of the statute: its purpose was to protect plan members. In the court's opinion, construing the exemption so broadly would achieve the opposite of the statute's intent. As in the district court ruling that preceded it, the court gave no deference to the IRS's rulings, starting with a 1983 memo, that interpreted the 1980 amendments as a broad exemption for church-related agencies. The court also addressed, and rejected, a new (and recently in vogue) First Amendment argument: that denying a church plan exemption somehow violates the hospital's right to free exercise of religion: "St. Peter’s has not offered any reason why the First Amendment entitles it to a retirement plan structured using a particular corporate form."

In Clark's reading of the opinion, "(t)his is a significant victory for those who have challenged the broad interpretation of the church plan exemption. It should be given serious persuasive consideration by the other circuit and district courts with similar cases." Clark also, however, cites a recent district court ruling in a similar case, which not only went in favor of the church affiliated hospital system, but "also strongly suggested the hospital system itself may meet the definition of a church itself" (emphasis Clark's). Because of the contradictory opinions handed down in the federal courts, we are likely to see the ultimate decision in this case come from the Supreme Court. Since it likely remains cheaper for the hospital to continue to fight the case than to restore the funding of the pension plan, let alone the retroactive PBGC insurance premiums, we don't expect the hospital to change its strategy now.

Tuesday, December 29, 2015

Victory in Appellate Court!

Today the three-judge panel of the Third Circuit appeals court filed a unanimous decision in Kaplan v. Saint Peter's Healthcare System in favor of Larry Kaplan and the pension plan members. Very briefly, the court agreed with the appellees—as well as the prior district court ruling—that Saint Peter's is not entitled to the ERISA church plan exemption, since its pension plan was not established by a church as required in the statute. We have not yet had the time to read through the opinion in detail, so we should be back shortly with more analysis (for what that's worth). We understand Saint Peter's now has 30 days to ask for the entire Third Circuit to re-hear the case, though that seems unlikely given the unanimous decision. What seems more likely is for Saint Peter's to request a hearing before the Supreme Court, especially if some of the many cases now pending in district and appellate courts are decided differently. (Saint Peter's is the first such case to be decided at the appellate level.)

Big thanks to Karen Handorf and her legal team for arguing a great case, to Karen Ferguson and all at the Pension Rights Center for their help. and to Larry Kaplan for taking on this burden and seeing it through on behalf of all the pension plan members.