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What does AARP’s lawsuit mean for health care pensions?

| Jun 5, 2020 | Employee Benefits/erisa |

As a New York health care worker, you likely rely on your pension plan to provide you with benefits once you retire. If you work for a religiously-affiliated organization, however, you may be in for a nasty surprise. 

As AARP reports, the Employee Retirement Income Security Act covers must private-industry retirement plans in the U.S. One of ERISA’s provisions is that each pension plan sponsor must pay insurance premiums to the Pension Benefit Guaranty Corporation. Should the pension plan fail, the PBGC, a governmental entity, can replace the affected employees’ pensions, thereby protecting their income source in their retirement years. 

The “Church Plan” exemption 

Unfortunately, ERISA contains a fatal flaw pertaining to many health care and other workers. The “Church Plan” exemption allows religious institutions, including church-run hospitals and schools, to opt out of ERISA’s mandates. Experts estimate that this puts approximately 1 million health care employees at risk nationwide for losing their pension benefits. 

The AARP lawsuit 

That exact scenario took place in Schenectady, NY, according to the allegations of AARP and other nonprofits in the lawsuit they filed last fall against the former St. Clare’s Hospital and its current corporate successor. Last year this corporation notified its current retirees that they would receive a one-third cut in their pension benefits. It notified its employees and former employees who have not yet begun receiving pension benefits that they will not receive any amounts whatsoever. The AARP lawsuit alleges financial mismanagement of the pension plan and seeks to restore the 1,100 workers’ full pension benefits. 

Should AARP, et al. win their lawsuit, many hope it will set a precedent that similarly situated health care workers employed by religiously-affiliated hospitals can use to protect their own pensions. As one health care worker employed by St. Clare’s Hospital’s successor stated, “If the church is the reason that ERISA doesn’t apply, then the church should keep its promises to the pensioners.”