PBGC to Pay Benefits for St. Joseph Health Services Retirement Plan

The Pension Benefit Guaranty Corporation announced Tuesday that it will take over the St. Joseph Health Services of Rhode Island Retirement Plan, paying pension benefits to about 2,500 current and future retirees.

The PBGC estimates that the former church plan is 35% funded, with approximately $47 million in assets and about $135 million in benefit liabilities. The plan was underfunded by $88 million, according to the announcement.

St. Joseph Health Services was a not-for-profit corporation that operated a hospital in Providence, Rhode Island. The PBGC is stepping in to take responsibility for the plan because St. Joseph Health Services has ceased operations and is liquidating. According to the PBGC, the plan has been unable to fund the minimum required pension contributions, and the pension plan is significantly underfunded.

The sponsor of the plan, St. Joseph Health Services of Rhode Island Inc., sold substantially all of its operating assets in 2014 to Prospect CharterCare. In 2017, the plan was placed into state court receivership. The plan was originally established as a Catholic church pension plan and, as such, was not covered by PBGC insurance.

The plan became covered by the PBGC following the sale of hospital, the appointment of a receiver and a determination by the IRS that the plan was tax-qualified as of 2017.

Rhode Island Superior Court Judge Brian Stern appointed Stephen F. Del Sesto as the receiver, with lawyer Max Wistow named special counsel.

Del Sesto had previously filed a lawsuit against Prospect CharterCare on behalf of the plan and its participants in 2018, alleging that at a certain point, the plan lost its church plan status as defined by the Employee Retirement Income Security Act and was required to adhere to ERISA funding rules.

The parties eventually reached a settlement in 2021, and $30 million was paid to Prospect CharterCare. The lawsuit stated that the settling parties recognized that the claims were “disputed and uncertain” and that the settlement was reached amid a desire to avoid the costs and risks associated with uncertain litigation. Neither party admitted any fault or liability in entering into the agreement.

Retirees currently in the plan will continue to receive benefits without interruption, and future retirees can apply for benefits as soon as they are eligible. The PBGC is currently working with the court-appointed receiver to execute a PBGC trusteeship agreement, at which point the PBGC will become responsible for the plan and pay the pension benefits to current and future retirees up to the legal limits.

Until the trusteeship agreement is executed, the PBGC advises plan participants to continue to contact the receiver with any benefits-related questions.