Below are stories from people who have suffered because of their penion plan’s status as a “church pension plan”.
I was an employee of the Hospital Center at Orange in New JerseyJ for 27 years, until the hospital was closed 7 years ago. Through the years we were always told that our retirement money was ours, no one could touch it, it was safe, etc. Well, since it was changed to a church plan several years ago, we have been told the funds will be gone in about 3 years! I don’t have another 27 years to work with another employer, and with the worsening economy, my current employer is cutting benefits. It is just not fair that I will have to struggle in my golden years. And my poor former co-workers who have already retired are in an even worse position. We need support to have our pension plan “unchurched” and protected again.
I worked at The Hospital Center at Orange as a registered nurse from 1977 till 1998. Those were the best years of my nursing career. I left in 1998 only because of the financial difficulties that the hospital was experiencing.
During those difficult times we all endured and accepted no pay raises and frozen pensions in hopes that our hospital would recover from those financial difficulties. Unfortunately it did not. So in 1998 our hospital was taken over by Cathedral Healthcare System. Then the unthinkable happened. Our pension lost its PBGC protection and became a “church plan”. We have been told that in 3 years from now the funds will be gone. We can not accept and endure this!
We all worked very hard and gave 100% to our patients and the hospital. Is our reward for all the years of service loss earnings that had been promised to us? The IRS needs to make this right and reverse this unfair and unthinkable ruling.
This injustice was unknowingly bestowed upon a group of people who worked hard and long for a secure future.
I began working at the Hospital Center at Orange as a full time emergency room physician in 1975. The wage was somewhat lower than the nearby hospitals but the administration promised to provide pension benefits equal to 2% of the wage per year and insured by PBGC. I accepted the offer and settled down and worked with this hospital until its closure. The hospital ran into financial problems and was subsequently taken over by Cathedral Healthcare System (CHS) in 1998. Two years later, the contribution to pension benefit was suspended because of the precarious financial situation. In 2003, CHS announced its intention to close the hospital for good. During one of the meetings to notify the hospital closing, one of the employees asked about the pension plan and was unable to get straight answers from the hospital representative. However, following the subsequent meetings, under intense questioning, it became clear that the administration had transferred the pension benefits plan from PBGC to a new non-insured “Church Plan” which apparently is not obliged to report the status of the plan to its participants or anybody. I believe that the administrator of any pension plan has a fiduciary duty to protect the interest of the pensioners but instead, the transfer was done in secrecy and even after the facts became known the administration made no attempt to clarify and educate the employees of the new “Church Plan”. A few months later I sent a certified mail requesting an annual summary plan description without success.
I was somewhat luckier than some of my colleagues because in 2002, when I turned 60, I put in the application for distribution of my benefit and naturally selected the option of” wife as beneficiary”. This means that the monthly benefits would be substantially reduced (by almost 40%) but I thought for the sake of my wife and two young children (12 y/o twins) it would be worth it. Should they have let me know at the time of the application that the plan was not under PBGC, I would naturally have selected the option of “single-no beneficiary” which would pay much more benefits. As a result, I now have to work part-time to support my family and save for children’s education.
I personally respect all the religions and Catholic religion is no exception. I know that they try to help people. However, the people the organization hired behaved more like a gang of thieves or worse, mafia. They acted in a dishonest manner, disregarded the employee’s rights, showed no common human decency and degraded all of us. It is not right to downgrade their promised benefits that were accumulated over the years without consulting them, let alone notifying them. The CHS took over the hospital, cut down employees’ pays, stopped contributing to their pensions, drained all the Orange Memorial Hospital Endowment Fund, then closed down the hospital, removing all the equipments/instruments used in the Operating Room, Cardiology Lab, CT Scan, MRI… etc, etc, etc.. to St Michael Hospital Medical Center, the CHS’ flagship hospital. The similar patterns of taking over then closing down also occurred with Columbus Hospital and St James’ Hospital in Newark. Furthermore, a year prior to being taken over, the Hospital Center at Orange was planning to build a new medical building and requested contributions from the medical staff and all the employees to the tune of several million dollars. The money was supposed to be used only for construction and nothing else. Since the building was never constructed, the money should have been returned to us. It is anyone’s guess where the money had gone.
In regard to the almighty IRS, I now understand their power. With a single stroke of pen, they can destroy the livelihood of hundreds or even thousands of families, just like that! I am not sure why they have so much authority to destroy and negate the cost of insurance that the Hospital Center at Orange had been religiously paying to PBGC for many, many years past. In 1998, when the hospital was on the brink of bankruptcy with no more contribution to the pension plan and eventually taken over by CHS, the situation, though not on paper, was in reality a bankruptcy and thus, by laws, obligated the PBGC to take over the pension responsibility. By permitting the CGS to convert to Church Plan, the IRS effectively and possibly illegally relieved PBGC of all the obligations due the pensioners. This is not only injustice but extreme cruelty. I believed the fairest thing to do is for the IRS to reverse its permission to let CHS convert to Church plan and let the PBGC take over our pension plan. At the minimum, if the IRS refuses to reverse its permission, the PBGC should return all the insurance premium the hospital had paid over the years and put it in the pension fund instead.
As a Registered Nurse and Healthcare Executive who devoted 25 years of her work life to one acute care hospital in northern NJ, I feel compelled to share the story of over 950 employees who lost essential Pension Benefit Guarantee Coverage (PBGC) protection just one year prior to the closure of the organization. The Hospital Center at Orange (HCO) served an urban inner city community for over 100 years as a secular hospital located in Orange, NJ. In 1998, the hospital became an affiliate of a Catholic faith based organization, Cathedral Healthcare System. Without notice to the employees, the system applied for and was granted an IRS ruling converting the pension plan to a church plan, which subsequently eliminated stringent compliance requirements and the PBGC protection.
Over the past 2 years, the Cathedral Healthcare System closed two other hospitals, transferred ownership of the last remaining hospital to another system, and is no longer in the acute care hospital business. To make matters worse, there has been no formal notification from the system to the pension participants, therefore not all affected employees are aware of the impending benefit loss. The HCO built a legacy for employing a large number of loyal staff who devoted most of their entire careers to working in this one institution. During periods of financial struggle, these same devoted employees gave up their personal days, did not receive annual pay raises for many years, and worked far below market wages, but were secure in the knowledge that the pension plan was protected and regarded as an important compensation benefit.
In closing, I must share that not only did I devote more than half my working life to this organization, but so did my husband. Thus the unjust loss of this pension benefit will be doubly difficult for our future financial security in retirement. The nurse who asked the innocent pension question never expecting the unprotected response is also married to a nurse and as a couple, they both worked for more than 25 years each at the hospital. As a long term HCO employee, I earned a pension that was supposed to be insured by the PBGC. The pension plan protection should not have been removed one year prior to the closure of the hospital. All HCO employees deserve the right to a receive a pension benefit that was not only well earned, but also promised in written documents distributed over many decades.
While the legal interventions of the HCO employees have brought attention to this egregious church plan practice and resulted in a moratorium on current rulings, the IRS needs to withdraw the ruling, “unchurch” this pension plan, and reinstate PBGC protection before it is too late. At the very least, the IRS should require restoration of pension protections for the HCO participants for all the years that the plan was not a church plan and paid annual PBGC premiums. This is morally, ethically, legally, and principally the only right thing to do.