WASHINGTON — The Pension Rights Center applauds today’s decision by the Pension Benefit Guaranty Corporation (PBGC) to take over pension payments to more than 800 former employees of the now-defunct Hospital Center at Orange (HCO). The federal agency that insures most private pension plans has announced that it will restore insurance protections lost by HCO retirees more than a decade ago as the result of a ruling that their plan was a “church plan.” Had the PBGC not acted, the plan would have run out of money before the end of this year.
In a letter sent to PBGC Director Josh Gotbaum, the Pension Rights Center Director Karen Ferguson wrote, “Your agency’s strong advocacy and intervention on behalf of the [HCO] participants…helped rectify an injustice that the law never intended, and illustrate your agency’s strong commitment to the protection of pension plans and participants.”
“This is truly a triumph of justice” said Mary Rich, a former HCO vice president who led a 10-year effort to regain PBGC protection for the HCO participants. “For 125 years, HCO had no religious connection, and for nearly 30 years our pension was an ERISA plan. It should never have been declared a church plan. We are very grateful that the government has taken action to right this wrong.”
Nicholas Caprio, Special Counsel for HCO, echoed Mary Rich’s sentiment, saying, “Often, we think of government agencies as nameless, faceless bureaucracies. The PBGC showed that, inside these institutions, there are hard-working individuals committed to make things right for people.”
Last month, the Internal Revenue Service revoked a 2003 private letter ruling that had designated HCO’s pension plan as a church plan, making it ineligible for PBGC protection just one year before the hospital declared bankruptcy. The IRS’s recent move paved the way for today’s PBGC’s announcement.
The HCO situation presents unique facts and does not affect participants in other pension plans where employers are claiming church plan status. The Pension Rights Center, which provided legal and strategic support to the HCO retirees, will continue to advocate on behalf of those participants to ensure that their pensions are also protected by the PBGC.
Read a New York Times article about the Hospital Center at Orange case from April 2, 2013. Learn more about church plans.