Share |

Federal Court Questions Changes to Hospital Pension Plans

IRS Previously Approved Reclassification of St. Peter's Pensions as "Church Plans"
St. Peter's Univ. Hospital
A federal judge ruled that a lawsuit against St. Peter's Hospital could proceed. Google Maps

TRENTON, NJ—U.S District Judge Michael A. Shipp ruled on March 31 that the Saint Peter's Healthcare System pension plan does not constitute a "church plan," allowing a case against the hospital to move forward.

The decision has come amid the highly controversial and unpopular move by the hospital to exempt its pension plan from the requirements of the Employment Retirement Income Security Act (ERISA), citing the status is typically granted for religious organizations. 

"Opening the door to expand the church-plan exemption to this extent would place more employees at risk of having insufficient benefits upon retirement," Judge Shipp wrote in the opinion issued Monday, denying St. Peter's request to dismiss the case.

In November 2011, employees and retirees at St. Peter's received a letter outlining plans to seek approval of the "church plan" status.

The hospital, which is operated by the Diocese of Metuchen, had been operating under the guidelines laid out by ERISA since it was granted in 1974.

However, in 2006 the hospital proceded with its plans to file an application with the Internal Revenue Service for church-status. Church status would be granted to either a church or an organization operated by a church. 

Many workers complained about the hospitals failure to notify them of the plan until five years later. 

"I don't think they have any intention of protecting us," said Susan Fritz, who was employed by the hospital for 25 years when the letter was sent out. 

On August 14, 2013, the IRS declared that the Saint Peter's pension plan had been designated as a church plan.  The decision was met with backlash and sharp criticism from employees, retirees, and pension advocates.

"We are deeply disappointed that the IRS appears to have issued a church plan ruling to Saint Peter’s Healthcare System," said Karen Ferguson, Director of the D.C-based Pension Rights Center.

Ferguson criticized the IRS for not releasing the PLR to the public, and called on the action of the courts and Congress to "determine whether the IRS should be allowed to to continue to allow retirement plans... to convert to church plan status solely for the purpose of saving money."

In intiating the lawsuit, plantiff Laurence Kaplan asserted that Saint Peter's intended to use the status to evade a number of ERISA's requirements. 

In the court case, Kaplan is seeking an order declaring that Saint Peter's pension plan not be considered a church plan.

Alternatively, Kaplan could argue that that the church plan exemption should be ruled unconstitutional due to the Establishment Clause, which asserts that Congress cannot make a law "respecting the establishment of a religion." 

That argument was struck down by the New Jersey Federal Court, but nevertheless Judge Shipp ruled that St. Peter's pension plan was not a church plan.

Saint Peter's expressed dissappointment with the ruling 

"We believe the IRS ruling is correct and that the hospital system does qualify as a church plan" said Jeffrey Greenbaum, the Attorney for St. Peter's, who indicated the hospital may appeal the ruling to an even-higher court.

"I think it's undisputed that St. Peter's is controlled by the church."

A spokesperson for St. Peter's said that the hospital was uncertain as to whether or not it would appeal the decision.