The defined benefit pension plan for some 2,700 employees of Our Lady of Fatima Hospital in Providence, Rhode Island, is in limbo, with a judge placing it in temporary receivership after fund actuaries said it faced insolvency, according to local reports.
In a petition seeking court-appointed receivership, as well as approval of a 40% cut in benefits, St. Joseph Health Services of Rhode Island Inc., the fund’s administrator, said that the plan is “severely underfunded and requires additional capital of over $43 million to reach a 100% funding level.”
It added that “absent judicial intervention, [St. Joseph Health Services] anticipates that the plan will be terminated and its funds distributed in a manner that will result in current Plan beneficiaries receiving approximately 60% of their accrued benefits, and all others receiving nothing.”
A superior court judge granted the request for receivership, and appointed attorney Stephen Del Sesto as temporary receiver for the plan. The judge instructed Del Sesto to report back by Oct. 11 with a recommendation. Del Sesto told the The Providence Journal that benefit checks should not be affected until at least Oct. 11.
“Everyone is petrified that they’re going to lose, what, 40% of your pension,” retiree Dorothy Willner told NBC 10 News of Providence. “But the main question is, where did the money go? It couldn’t disappear into thin air.”
The pension plan’s troubles began in 2014, when Prospect Medical Holdings purchased CharterCARE Health Partners, which had been created by the merger of St. Joseph and Roger Williams Medical Center in 2011. A key provision of the acquisition agreement stipulated that the California-based for-profit company would have no liability for the pension plan in exchange for a $14 million payment into the fund.
Because the pension plan was founded by the Roman Catholic Church, it is considered a “church plan” and, as such, is exempt from federal pension funding requirements and participation in the Pension Benefit Guarantee Corporation (PBGC), which provides a safety net for insolvent private pension plans. According to the receivership petition, the plan is expected to lose religious exemption and begin owing PBGC premium payments in 2018.
“Our hearts go out to those affected by the receivership,” the Roman Catholic Diocese of Providence said in a statement. “It should be noted that no action by the Diocese resulted in the filing of this receivership … In fact, it is our understanding that the acquisition of the hospitals by Prospect/CharterCARE in 2014 left the pension funds in a very strong position.”
Although the $14 million payment increased the pension’s funding level to 90%, reports the Journal, it subsequently had to rely on investment earnings as CharterCARE and St. Joseph were closed down.
“We find it really difficult to believe that the fund balance could have been 90% or 92% in July of 2014, and it’s now $43 million shy, which is why we think Prospect has got some explaining to do,” said the nurses’ union lawyer Chris Callaci, according to NBC 10 News. “We’d like to know where the diocese is, and what we believe is a moral obligation that is owed to these pensioners.”