The Clinton Herald, Clinton, Iowa

National News

April 2, 2014

Courts question law leaving pensions unprotected

NEW YORK — New rulings against Catholic hospital chains on both coasts have intensified a faceoff between religiously affiliated employers and workers who are alarmed by the companies' efforts to avoid insuring or funding their pensions.

A federal judge in New Jersey ruled Monday that a loophole in federal pension law exempting churches does not extend to hospitals and other employers not directly controlled by religious orders. The opinion, echoing one issued in December in a case involving a California hospital chain, allows an employee's lawsuit to move forward against the New Jersey operator, St. Peter's Healthcare System.

While the rulings hinge on a little-known bit of law, the debate over so-called "church plans" could affect some of the nation's largest hospital networks and thousands of people counting on them for retirement benefits.

That debate remains far from settled. But the two judges' opinions are notable for their stiff questioning of a practice that has alarmed some workers and retirees.

A pension boils down to a promise. Federal law requires most private employers with pension plans to contribute to them and insure them in case they can't meet their obligations. But Congress crafted an exemption for churches to protect them from government interference in their finances. Hospitals and other religiously affiliated employers have cited that exemption to convert their pensions to "church plans," including some that have let retirement funds dwindle.

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

The opinion recognizes the importance of federal benefits law "and the consequences of what allowing this exemption would do to the retirees and employees," said Nancy Hwa, a spokeswoman for the Pension Rights Center, a Washington, D.C.-based advocacy group. "There's a lot of good language in this decision and we hope other judges are paying attention."

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