Saint Peter's University Hospital Retirement Plan: The law and the facts
In a letter dated February 24, 2012 to all Saint Peter's University Hospital Retirement Plan participants, Ronald C. Rak, the hospital's President and CEO states that a “a review undertaken by our outside pension consultants and attorneys has made clear that Saint Peter’s pension plan has never been – and is not currently – an ERISA plan, and that since its inception, the plan has always been – and is currently – a church plan.”
In fact, Saint Peter’s University Hospital Retirement Plan has been an ERISA plan since 1974.
In 1974, as a result of the enactment of the federal private pension law, the Employee Retirement Income Security Act of 1974 (ERISA), Saint Peter's University Hospital Retirement Plan became an "ERISA plan."
This is because all private retirement plans, with one permanent exception, were covered by ERISA. The one permanent exception was for plans established and maintained by churches for the churches’ own employees. In 1980 Congress made permanent a temporary exemption for plans established and maintained by churches for the churches’ own employees which also included the employees of church-affiliated organizations. This exemption also provided that plans maintained by "church pension boards" are also exempt from the law.
Since the Saint Peter’s plan was not established and maintained by a church, it does not fall within either the permanent or temporary exemption. Since 1974 it has been an ERISA plan.
As an ERISA plan, the Saint Peter’s plan is required to comply with federal standards for providing benefits and disclosure to participants. The hospital is required to fund the plan and to pay premiums to the federal pension insurance program, the Pension Benefit Guaranty Corporation (PBGC). The payment of premiums is necessary to ensure that the pension plan and participants’ pensions are insured in case the plan terminates without enough money to pay promised benefits.
The Saint Peter’s plan was not established by, and has never been maintained by, a church. In other words, the Saint Peter’s plan has never come within the "church plan exemption." Since 1974, it has always been an ERISA plan. This is why the Saint Peter’s plan has always paid PBGC premiums and has always informed its participants and employees the pension plan was an ERISA plan.
From 1974 until 2006, Saint Peter’s University Hospital fully complied with ERISA, the federal private pension law. The plan was funded in accordance with the law, and the plan paid pension insurance premiums to the PBGC. In addition, the plan’s own documents stated that the plan is an ERISA plan.
- The Saint Peter’s University Retirement Plan Summary Plan Description from 1985 says “Benefits under this plan are insured by the Pension Benefit Guaranty Corporation (PBGC) if the plan terminates.” It also states that “As a participant in the St. Peter’s Medical Center Retirement Plan, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974.”
- A December 11, 2000, summary annual report to participants says, with regard to ERISA’s minimum funding standards, “An actuary’s statement shows that enough money was contributed to the plan to keep it funded in accordance with the minimum funding standards of ERISA.”
- The Summary Plan Description dated January 2006 says..."Your Benefits And ERISA – as a participant in the plan, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (ERISA).” It also says, “If the Plan terminates (ends) without enough money to pay all benefits, the PBGC will step in to pay pension benefits.”
In 2006 the plan stopped complying with the funding requirements on the advice of consultants. It, however, continued to pay PBGC premiums. (It is important to note that the PBGC only accepts premiums from ERISA plans.)
- A June 14, 2010, memorandum to employees states that “Saint Peter’s pays into the Pension Benefit Guaranty Corporation, or PBGC, which protects a portion of pension benefits.”
Finally, former Saint Peter’s President and CEO John Matuska, who served on the hospital’s Retirement Committee from 1977 to 2004, in a letter to the IRS written on December 30, 2011 writes that “the plan has never been nor was ever considered to be a church plan”
Read responses to specific statements made in Ronald Rak’s letter and accompanying Q&As.
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Did You Know?
A 401(k) plan is a retirement savings plan in which the benefit is based on contributions to an individual account and the investment return on those contributions. Typically, employees make contributions to the plan and, in many cases, employers match the employees' contributions. These plans are called defined contribution plans. In most 401(k) and other retirement savings plans, the employee is responsible for choosing among the investments offered by the plan. Other types of retirement savings plans are 403(b) and 457 plans.