What is ERISA and What Kind of Plan is the Retirement Plan?
“ERISA” stands for the Employee Retirement Income Security Act of 1974. It is a federal pension law that applies to private sector pension plans and, absent a special election, which Saint Peter’s has never made, does not apply to a pension plan sponsored by an organization with ties to a religion.
The pension plan is, and always has been, what is known as a “Church Plan.” IRS rules define a Church Plan as a plan established and maintained for its employees (or their beneficiaries) by a church or a convention or association of churches, including such a plan established and maintained by a church-controlled or association-controlled organization (e.g., a hospital with religious affiliation with a church).
As a non-electing Church Plan, the Retirement Plan is not subject to many rules that apply to private sector pension plans. One such rule is the rule requiring most private sector pension plans to be covered by Pension Benefit Guaranty Corporation (“PBGC”) insurance coverage. Saint Peter’s is seeking refunds of all PBGC premium payments that it erroneously made in prior years and will deposit all such refunds into the Retirement Plan to pay for benefits.
Who Else Has a Church Plan?
Numerous prestigious organizations, including hospitals and universities affiliated with churches or conventions or associations of churches, sponsor Church Plans.
The Retirement Plan has never been subject to PBGC insurance guarantees. Does this mean that I have no protection for my pension benefit?
It is true that the Retirement Plan has never been subject to PBGC insurance. It is also true, however, that Saint Peter’s has funded the plan over the years at a rate substantially greater than that required for a Church Plan. In fact, for 2012, we have planned for and committed to funding $14 million to the Retirement Plan. These contributions are being made on a weekly basis throughout the year.
Many of you may have the belief that PBGC insurance means that you definitely are protected for 100% of your pension benefit. This is not true. Even if the Retirement Plan were to become an ERISA-covered plan tomorrow, something that is not our intention to elect to have happen, the PBGC guarantee would be phased in over a five-year period, 20% each year. Further, the PBGC continues to run substantial deficits of its own, calling into question its own long-term solvency.
The best “protection” that one can have is for all employees to work as part of the Saint Peter’s team, helping to make us an even better, more profitable hospital.
I heard that Saint Peter’s has applied to the IRS for a ruling that the Retirement Plan is a Church Plan. Can you provide any more details?
Saint Peter’s has asked the IRS to confirm what has always been the case: the Plan’s status as a Church Plan. We will update you as more information becomes available to us from the IRS.
Do other religious hospitals maintain their pension plans as ERISA-covered plans?
We are not aware of any faith-based hospital in our state that currently funds an ERISA-governed pension plan.
Since I won’t earn any benefits after December 31, 2012, when can I receive my Defined Benefit (DB) plan benefits if I’m fully vested?
The DB Plan is designed to provide income for retirement. As such, the IRS requires that you cannot receive your benefit until you leave the hospital and retire. You can retire under the plan if you are at least age 55 with 5 years of service or age 65 with 5 years of service. The plan offers several annuity options for payment of your benefit.