In what would be an unprecedented move, attorneys trying to save the St. Joseph pension plan from insolvency are looking to federal insurers for a possible lifeline.
Max Wistow, Stephen P. Sheehan and Benjamin G. Ledsham, of Providence-based Wistow, Sheehan & Loveley PC, traveled to Washington, D.C., recently to meet with representatives of the Pension Benefit Guaranty Corp. to discuss the possibility of the federal insurance agency taking over the embattled pension plan.
The $85 million plan, known formally as the St. Joseph Health Services of Rhode Island Retirement Plan, became insolvent after a business deal in 2014 left it without any employee contributions.
The argument, Wistow explained, is that the pension plan – while first started and administered by the Roman Catholic Church – become disassociated along the way, at which time it should have been brought under the umbrella of the PBGC. The independent federal insurer backs private defined-benefit pension plans under the Employee Retirement Income Security Act, known as ERISA.
“The relationship of the church to the plan got lesser and lesser,” Wistow said.
The court-appointed receiver, Stephen Del Sesto of Providence-based Pierce Atwood LLP, is working with Wistow’s firm to shepherd the pension plan through insolvency.
In February, Del Sesto identified at least $20 million in pursuable funds, although Wistow said the number might end up being much greater depending on the scope of the litigation.
The St. Joseph pension plan covers about 2,700 current and former employees of Our Lady of Fatima and Roger Williams hospitals. There’s no money – except for investment income – going into the plan.
If the PBGC agreed to insure the plan, it could guarantee every pensioner up to $65,000 in annual benefits. The coverage, according to Del Sesto, would account for about 98 percent of total benefits promised.
“I’m not going to say this is anywhere near a slam dunk, but there’s a real opportunity here,” Del Sesto told PBN in February.
The so-called “church plans,” meaning retirement plans started by churches or church affiliates, are largely exempt from the regulations and financial safeguards that protect other pension plans.
While private and public pension plans are theoretically backed by American taxpayers – whether it be through municipal, state or federal government – so-called church plans are not, making them highly vulnerable.
The PBGC confirmed it had talked with the local attorneys, although when asked whether it is considering taking on the St. Joseph pension plan, it said it was up to the IRS to decide whether a former church plan can be considered for taxpayer backing under ERISA.
The PBGC confirmed it has never taken over an insolvent church plan.
“We’re in an evolving area of the law,” Wistow said. “There are a lot of exotic issues that remain undecided by the court.”
