Supreme Court ruling could jeopardize pensions for employees of religious hospitals

By Briana Vannozzi

The case affects retirement benefits for roughly a million hospital workers nationwide and thousands right here in New Jersey. The unanimous ruling by the U.S. Supreme Court means religious hospitals don’t have to comply with federal rules protecting pension plans.

“Obviously we were very pleased, this proceeding has been going on for quite some time,” said Leslie Hirsch, president of Saint Peter’s Healthcare System.

New Brunswick-based Saint Peter’s Healthcare System is  one of three plaintiffs in the case, along with Illinois-based Advocate Health Care Network and Dignity Health of California. The institutions were fighting to keep their so-called “church plan” status.

Church plans were established in the 1970s to exempt church employee pension plans from meeting certain rules under what’s known as ERISA — the Employee Retirement Income Security Act. Congress expanded that in 1980 to also included religiously affiliated hospitals and other nonprofits and it means those pension plans aren’t guaranteed and don’t have to meet certain minimum funding requirements.

Workers argued that Congress never intended to exempt now massive hospital systems with thousands of employees, calling it a loophole for legal safeguards that save the hospitals money but jeopardize benefits.

“We were disappointed, but we don’t think that the decision means that our losses are over with,” Attorney Karen Handorf said.

As one of the attorney’s for the employees, Handorf says the real concern is what happens if the pension plans go broke.

“Dignity Health, for example, is more than a billion dollars underfunded and is not insured by the Pension Benefit Guaranty Corporation, so those people, they don’t have the protections of ERISA.”

That happened at the now defunct Saint James hospital in Newark where former employees’ pension plans are at risk of running out of money. But Hirsch says the situation is different here; the hospital is one of seven in the country sponsored by a diocese.

“The pension is very well-funded and we put money into it weekly, this year almost $14 million will go into the pension fund. The pension fund is also in what’s known as an irrevocable trust. And the important thing to keep with an irrevocable trust is that the money in it cannot be accessed for other purposes,” Hirsch said.

“The bottom line is that if the plan runs out of money there’s no claim against the archdiocese. You don’t see the catholic church giving any of these plans money. You don’t even see the catholic church giving any of these companies money. They get their money like every other health care system in the country, they get it through through Medicare and Medicaid.”

A previous ruling went against the hospitals, then the hospitals appealed saying the decision could expose them to billions of dollars in liability. But the fight doesn’t end here. The case will likely head back to the lower courts, yet again, to decide whether the exempt church plan is maintained by an organization that has administration of the plan as its principal purpose — a requirement of the law the supreme court avoided.