Class Action Lawsuit Launched Against Saint Peter's

Saint Peter's Retirement Plan participant Larry Kaplan has asked us to share the following statement.

A Class Action Complaint has been filed against Saint Peter's Healthcare System by Laurence Kaplan, on behalf of himself, individually, and on behalf of all others similarly situated. This lawsuit is brought on behalf of Plan participants who are covered by the original Defined Benefit Plan, which the Healthcare System is trying to convert to a Church Plan.

The complaint has been filed to convince the Court that our Plan should remain covered by ERISA with all of the benefits and not be changed to a Church Plan. Within the complaint are many reasons which describe why the Healthcare System is not entitled to change the Plan to a Church Plan. I cannot go into detail, but the complaint clearly covers the technical reasons for this change not to happen.

Our attorneys are a Nationally known firm based in Washington, D.C. and are handling this case on a contingency basis, so there is no money that we have to pay them at any time. Their fee will be determined by the Court, if the case is won, and will be ultimately paid by the Healthcare System. If we lose, the firm will not be paid by anyone, but will have put many man hours working on this complaint for our benefit.

Larry Kaplan

At present we have no further info on this announcement, but we will share info if and when it becomes available. We still expect to follow up soon on our previous post with information on responding to the latest IRS comment period.

Until then, some other related news: There's a new article in the Star-Ledger about the restoration of benefits for Healthcare Center at Orange retirees. Meanwhile, employees of St. Mary's in Passaic are losing their "church fund" pensions, as management there starved the fund and then sold the business. I'm sure they received similar reassurances as we have heard from SPUH management.

Saint Peter's Re-applies for Church Plan Status

In the past two weeks, Saint Peter's Retirement Plan participants have received two communications from Saint Peter's Healthcare System (SPHS) management. The first, a letter dated April 24, notified participants that a "corrected copy" of the IRS-mandated Notice to Interested Persons would soon be issued. (The Notice informs Plan participants and other stakeholders that SPHS has applied for "church plan" status to the IRS, which allows SPHS to evade federal protections – required contributions, insurance, etc. – that apply to most pension plans. SPHS filed their first notice in November 2011.) The new Notice followed on April 29.

The letter attempts to downplay the significance of the new Notice:

The first Notice stated that a ruling was requested for the plan year beginning January 1, 2006 (the year the application to the IRS was filed). The Notice should have stated that the ruling is requested for the Plan Year beginning January 1, 1974. This is the only change from the first Notice you previously received. The corrected date does not impact your rights under the Plan.

The change from 2006 to 1974 appears to be the only difference between the two notices, but this notice in effect amounts to a re-application to the IRS. Perhaps most importantly, the new Notice opens a new 60-day window for stakeholders to send comment letters to the IRS. Since the Notice was distributed on April 29, the new comment window extends until June 28, 2013. We will soon update this blog with much more information, including comment letter templates to help participants effectively communicate their concerns to the IRS.

In related news, a rare and stunning victory:  in late March the IRS overturned their 2003 decision to award "church plan" status to Hospital Center at Orange, rescuing the fund just as it was running out of money. It was this case that compelled the IRS to institute the moratorium that held up Saint Peter's application for "church plan" status from 2006 until late 2011, and to require that the participants be notified of the application. In short, they are the reason we get this chance to fight for our pensions, so we celebrate their victory. This New York Times article about the win mentions our pension plan and links to this blog. We welcome the exposure, and strive for a similar win!

More soon...

Update

Saint Peter's has continued on their track to replace/augment the current Pension Plan with their new Defined Contribution (DC) plan for current employees. The transition is planned for January 1, 2013. With the new DC plan, the Hospital contributes a percentage of the employee's base pay to an account managed by an outside party, and the employee assumes the responsibility/risk of investing it wisely. The new plan, like the retirement plan offered to employees hired after July 1, 2010, will be managed by TIAA-CREF; in fact, the new plan will be merged with that plan.

The new plan is not as generous as the current Pension Plan, but to somewhat bridge the gap for older employees, the Hospital will increase its contribution on a sliding scale based on the age of the employee on January 1, 2013. The details are covered in the presentation slides presented to employees at meetings in August, provided here.

Current employees will cease vesting in the current Pension Plan on January 1, 2013, but will receive benefits from both the Pension Plan and the new DC plan upon retirement. The Hospital will continue to maintain the current plan, though of course as a "church plan" -- not covered by ERISA protections, and not insured by PBGC or anyone else. The Hospital has presented the following information at meetings with Pension Plan participants:

• SPUH Board of Trustees intends to fully fund the Plan over the next 10 years.
• There will be no reduction in vested benefits.
• Current assets are sufficient to pay benefits for the next 30 years.
• Plan assets can only be used to pay benefits and plan administrative expenses.
• The Plan will continue to be governed by the trust document.
• No changes will be made to the trust document that will negatively impact vested benefits or Plan assets.
• Plan participants will receive an annual summary similar to what is issued under ERISA.
• All rebates from the Pension Benefit Guaranty Corporation will be used to fund the Plan.

The above information is provided separately here.

We have attempted to confirm the above information with Garrick Stoldt, SPUH CFO. He has not returned our calls.

Update from John Matuska

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.

Pension Rights Center's Response (and Ours)

It's been about a week since St. Peter's CEO Ron Rak released a letter announcing the hospital's plan to end the St. Peter's Retirement Plan as we know it. The hospital's PR director concurrently released a "Q&A" document, answering questions which no one had actually asked.

ST. PETER'S TO REPLACE PENSION PLAN BY 2013

In a letter, released on Friday afternoon to minimize media coverage, Saint Peter's Healthcare System CEO Ronald Rak announced a plan to end the existing Saint Peter's Healthcare System Retirement Plan in 2013. The letter can be viewed here. In this letter Rak made several statements that are false and/or contradict statements made by St. Peter's management in December 2011 town-hall meetings. Specifically:

• Rak claims, multiple times, that the plan has never been subject to Federal ERISA law. In this he cites the hospital's outside benefits consultants and attorneys, but the claim ignores actual documented history.
• Directly contradicting statements made by COO Pat Carroll and CFO Garrick Stoldt in December, St. Peter's will seek refunds of PBGC insurance premiums. (We can assume that, also contrary to claims made by the hospital in December, the pension benefit will not be insured going forward.)

The hospital plans to replace the current plan with a new plan, the details of which will not be announced, but rather divulged only in discreet individual and small-group meetings. St. Peter's deems this tactic more "appropriate" but, like the Friday letter, it seems designed to limit exposure and discussion of the details by a large constituency or the media. It's unknown whether the new plan will be another defined-benefit plan, a retirement savings plan (401(k)) or some combination. Presumably the new plan will be cheaper to implement, and thus will return more than the annual PBGC insurance premium to the hospital's bottom line. It's safe to say the St. Peter's employees, ex-employees and retirees who are participants in the pension plan at the very least feel confused and dismayed at the deviousness displayed by hospital management.

We will have more on this news in coming days. In the meantime please tell your friends and your co-workers, past and present, and subscribe or visit the blog for the latest.

(Note: This post was edited on 2/27 to add more information and to dial back some language that may have been unduly harsh.)

Article in Home News Tribune

Middlesex County's Home News Tribune today published a front-page article on the St. Peter's "church plan" crisis. Read it here. Big thanks to Larry Kaplan for ensuring that this article got published!

Besides giving much-appreciated exposure to the issue, the article serves as a reminder of a few things:

• The IRS has no timetable for deciding on St. Peter's application for "church plan" status. When St. Peter's submitted their application, the IRS had a moratorium in force on granting such applications; now St. Peter's is one of the first institutions being considered for such status since the moratorium was lifted. A decision either way is far from automatic. This means that pressure brought to bear by, for example, contacting Congress can still have a big impact.
• Back in December, St. Peter's CEO Ronald Rak promised to share by the end of February the hospital's strategy "to protect your retirement dollars, with the help of new outside experts." The hospital has three weeks to make good on that promise.

Keep in mind that outside retirement industry consultants helped get us into this mess in the first place. Note also that the chairman of the hospital's board of trustees, Donald Daniels, heads a benefits consulting firm with a specialty in Catholic hospitals.

Win, lose, or draw, we'll be here to help in any way we can.