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Law shields churches, leaves pensions unprotected

October 6, 2013
By ADAM GELLER , The Associated Press

PASSAIC, N.J. - Working at St. Mary's Hospital was all about making do. When supply shelves emptied, respiratory therapist Lori-Ann Ligon made frantic calls to compatriots at nearby medical centers, arranging meetings on the fly to barter for blood gaskets. For a couple of years, she and other managers were told the endless budget squeeze left no room for raises.

But when St. Mary's outlasted two competitors to become this city's lone hospital, executives heralded a new era: "Not just health care. Human care." That care, though, only went so far. "Presently, the retirement plan's trust is severely underfunded," the CEO wrote to employees in early 2011, blaming investment losses and the hospital's decision not to put any money into one of its pension plans for more than a decade. "As a federally recognized church plan," he continued, St. Mary's had the right to do that - and there was no government pension insurance to fall back on.

The news angered many St. Mary's workers, but their situation is not unique. Pension shortfalls at some religiously affiliated hospitals, businesses and social service agencies are raising new alarms and spotlighting a largely overlooked gap in the law protecting Americans' retirement benefits.

Article Photos

AP PHOTO
Armantina Pelaez, a former crisis counselor at St. Mary’s Hospital, in Paterson, N.J., sits in Paterson's Saint Paul's Episcopal Church, Sept. 23. 'I was very angry. I felt betrayed, not only by the health care system, but by the Sisters of Charity and I got betrayed by the church,' said Pelaez, about St. Mary’s, which quietly converted its federally insured pension plan to an uncovered church plan in 2001.

"I felt betrayed, not only by the health care system, but by the Sisters of Charity, and I got betrayed by the church," said Armantina Pelaez, a former crisis counselor at St. Mary's, which quietly converted its federally insured pension plan to an uncovered church plan in 2001. The hospital's pending purchase by a for-profit company will see Pelaez and others get a fraction of their expected pensions. "They don't practice what they preach."

A pension is, essentially, a promise. For millions of workers counting on pension checks for retirement security, that promise comes with protections. Even as many companies move to freeze the benefits and eliminate them for younger workers, federal law requires most private employers with pension plans to contribute to them and insure them, in case they fail to honor their obligations.

But as the situation at St. Mary's shows, those protections do not cover all workers or pensions. Because of a legal loophole, there are actually parallel pension systems. One comes with safeguards. The other, while it may be backed by good faith and honorable intentions, has no safety net.

Congress set it up that way by crafting an exemption in benefits law to protect churches from government interference in their finances. But the exemption applies to religiously affiliated employers like hospitals and service agencies, including some that have let pension funds dwindle.

 
 

 

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