By Lynn Arditi
Published October 10, 2017

Across the country, millions of employees have entrusted their retirement savings to unregulated pension plans known as church plans. Many of these plans are run by church-affiliated schools, nursing homes and hospitals.

And when church plans run into financial trouble, as happened in Rhode Island, the beneficiaries’ retirement savings have no government safeguards.

Mary Grivers devoted 36 years of her life to caring for other people. She worked as a registered nurse — first at St. Joseph Hospital, in Providence, and later at a an affiliate, Our Lady of Fatima Hospital, in North Providence. And she embraced the mission of St. Joseph’s founders: the Roman Catholic Diocese of Providence.

“From the time we started, it was always a family atmosphere. But because it was the Catholic sponsorship it was always implied that there was an extra level of ministry.”

Grivers retired in 2007. Now 63, she lives in Cumberland and cares for her husband, Michael, who has Parkinson’s disease. And she counts on her monthly pension checks from the hospitals’ parent company — St. Joseph Health Services of Rhode Island — to help pay their mortgage and other bills.

“When we made our pension decisions about beneficiaries,’’ Grivers said, “when we made our life plan, it was under the assumption that we would always have these to fall back on.”

In a hallway of Superior Court, Providence, Grivers waits to hear about her pension. The company she worked for — St. Joseph Health Services — was sold three years ago to a California-based hospital chain. And the pension plan for Grivers and some 2,700 other current and former hospital employees is running out of money.

Judge Brian P. Stern explains a petition from St. Joseph Health Services to place its pension plan in receivership – a process similar to bankruptcy. St. Joseph Health Services has asked the court to approve an immediate 40 percent cut in benefits.

Dorothy Willner, a retired hospital receptionist, said her full pension is $183 per month.

“My husband has the beginning stages of dementia,’’ Willner said. “I cannot work because of that. I need my full pension.

Grivers, the retired nurse, wonders why nobody told them sooner that their pension plan was in trouble. “We’ve all been wronged,’’ Grivers said. “You know, we’ve been insulted. We’ve been disrespected. And we’ve been lied to.”

From his Providence law office one recent afternoon, receiver Stephen F. DelSesto returned calls from retirees like Grivers and Willner.

“And that’s the difficult thing,’’ he tells one caller, “is that, you know, the plan, as it stands right now, in order to make it work there has to be a cut. I’m looking to see how deep a cut does that needs to be.”

DelSesto has been making a lot of these calls. He said his voice is getting strained from all the talking. “They don’t know why this happened,’’ he said. “And they want answers. They’re looking to me, obviously to try to get those answers.”

So how did St. Joseph’s pension plan run into trouble?

One place DelSesto is looking for answers is the hospital company’s sale in 2014. At the time, the buyer — Prospect Medical Holdings — contributed $14 million to the pension plan.

That was supposed to ensure that the plan was well funded — or so the union official who represents hospital workers said they were led to believe.

Christopher Callaci, general counsel for the United Nurses & Allied Professionals, or UNAP, points to documents filed by state regulators at the time of the sale that said the $14 million dollars would increase the plan’s funding to more than 90 percent.

“And there’s something horribly amiss,’’ Callaci said, “when you go from a 90- or 92-percent funded plan three years ago, in this economy, to having it be in the hole. It doesn’t add up…”

Norman P. Stein, a law professor at Drexel University’s Thomas R. Kline School of Law in Philadelphia, Pa., reviewed the report on the pension fund prepared by the plan’s actuary. Stein said it was clear that $14 million only would have kept the plan 90 percent funded until the deal closed. In fact, he said, the $14 million contribution was less than half of what was needed to fully-fund the plan until all 2,700 plus beneficiaries were paid out.

“I mean it looks like…that that would have been inadequate even given the actuarial reports that were done in those years,’’ Stein said. “So they weren’t even fully funding the pension plan.’’

And by law, St. Joseph Health Services didn’t have to fully fund the pension plan. Pension plans are regulated under the Employee Retirement Income Security Act, or ERISA, a federal law that sets funding levels and requires regular contributions to private pension plans. The law also requires the plans to be insured, with one major exception: church plans.

Under any other private-sector pension plan, if something happened and a pension went bust, generally speaking, their pension plan and their pensions would be guaranteed by the federal private pension insurance program,’’ said Karen Friedman, executive vice president of the nonprofit Pension Rights Center, in Washington, D.C. “If you’re in a church plan you don’t these federal protections.”

The government’s hands-off approach to church plans reflects lawmakers’ concern at the time the law was enacted, in 1974, that requiring the government to review a church’s books could be construed as violating the separation of church and state. And legal experts say lawmakers believed churches would stand by their pension plans.

There are millions of church plans around the country, Friedman said, including hundreds of thousands run by hospitals and other church-affiliated groups.

“There’s no federal backup for these plans,’’ she said. “So the workers and the retirees end up taking the hit in this.’’

With no federal protection for St. Joseph’s pension plan, whose job was it to look out for the plan’s beneficiaries? When the hospital company was sold, state regulators had to approve the deal. The union supported the sale. St. Joseph’s board of directors oversaw the pension plan. And none of them alerted the plan’s beneficiaries that there was any reason for concern — even though St. Joseph’s board had skipped their annual contributions to the plan for at least three years prior to the sale.

“God certainly wasn’t running these plans,’’ Stein, the Drexel law professor, said. “Somebody was running them.”

Stein, a senior policy advisor to the Pension Rights Center, said that what happened with St. Joseph’s pension plan raises ethical concerns as well as legal ones.

“There are two questions: who’s morally responsible? And who’s legally responsible?” Stein said. “If you look at the people who failed these employees morally I think everybody body you named has played a role…from the Diocese to the hospital company to the regulators who approved this at the state level.”

Rhode Island Attorney General Peter F. Kilmartin is one of the state regulators who reviewed St. Joseph’s sale. He declined an interview for this story but his spokeswoman, Amy Kempe, said in an e-mail that the attorney general is very concerned and has questions about what happened.

Retiree Mary Grivers wonders why the Providence Diocese hasn’t stepped in to help.

“For me it goes back to the church, that’s where I started,’’ she said. “The Diocese was overseeing my pension. And I don’t know how you separate that now.”

The Dioceses has a representative who sits on the board that oversaw the pension plan. Bishop Thomas J. Tobin declined an interview. But Tobin said in a statement that he’s praying for St. Joseph’s pensioners. Since the sale of St. Joseph Health Services, however, Tobin said, the Diocese has had no more oversight of the pension funds than it has in “renovation of lobby.”

That doesn’t satisfy Mary Grivers.

“I went to Mass on Sunday,’’ Grivers said, “and I open the bulletin….. and it’s a request for second collection for the priests who are retired in the Diocese….And while I’m not a priest I do feel that there was some kind of a spiritual end to the care that gave. I did the best that I could. We all did…You know, these were Catholic institutions. And I feel that we’ve been let down by them.”

A Superior Court judge has appointed Providence lawyer Max Wistow to help the receiver investigate what happened to the pension fund and why. A decision on the proposed cuts to the pension benefits is expected early next year. In the meantime, Grivers and other beneficiaries will be back in court this week with their lawyers.