INVESTIGATION: Diocese Underfunded St. Joseph Pension Fund by $100 Million
Monday, December 04, 2017
Now, receiver Stephen Del Sesto confirms to GoLocal that the pension fund is actually underfunded by $125 to $150 million to pay all of the more than 2,700 plan participants through to actuarial expected funding needs.
Numbers in Focus
When the pension fund of St. Joseph Health Services was thrust into receivership in August, court documents filed claimed the fund was underfunded by $43 million. The pension fund was created in the late 1960s, and according to pension plan members, they have always received mailings confirming that the fund was in good standing.
GoLocal has made repeated outreaches to the Diocese of Providence and its attorney Eugene Bernardo, Jr. To date, neither has responded.
For more than a decade, Bishop Thomas Tobin has lead the Diocese of Providence -- he celebrates his 25th anniversary of Episcopal Consecration this month.
“Pursuant to the Actuarial Report, the Plan is severely underfunded and requires additional capital of over $43,000,000 to reach a 100% funding level,” said the filing by Richard J. Land of the Providence law firm Chace Ruttenberg & Freedman, LLP. Land represents St. Joseph Hospital Services Rhode Island -- the now collapsed pension fund.
However, the number is actually 100 percent higher.
“To pay off all the plan retirees that existing shortfall is $125 to $150 million…this is a devastating number,” said Del Sesto.
“The actuarial firm told me that no one has ever been asked them this question [what is the total payout amount],” said Del Sesto. St. Joseph's actuarial firm for the past decade has been Angell Pension Group of East Providence.
“Retirees had no idea that their pension fund was so underfunded for years. They were made promises and pensioners were mislead on the health of the fund,” said Del Sesto.
The fact that ‘no one’ asked may be a sad indication of how the fund could be operated with such a mammoth unfunded liability and state regulators — the Rhode Island Attorney General’s office — failed to properly review the state of the St. Joseph pension fund both when St. Joseph was merged into Roger Williams Medical Center creating CharterCARE in 2009, and then when CharterCARE was acquired by Prospect of California.
“The question for me, that is more in my face in the failure by St. Joseph, is why didn’t Roger Williams Hospital, CharterCARE and regulators weigh the impact of the condition of the pension fund and the impact on the retirees more,” said Del Sesto.
Both Kilmartin and the Diocese have filed multiple court motions trying to block the release of documents which had been subpoenaed by special investigator Max Wistow. Wistow was appointed by Del Sesto to investigate and recover funds to the failed pension fund.
On Wednesday, an effort by Kilmartin to block the release of critical documents tied to the Attorney General’s review of the merger between CharterCARE and Prospect was slapped down by Judge Brian Stern during a hearing in Providence Superior Court.
Wistow blistered Kilmartin for the delay in providing key documents. And, Wistow laid out that he believed Kilmartin lacked the understanding of the key issues relating to the 2014 merger.
Kilmartin tried to quash many elements of a subpoena issued by Wistow looking into the failure of St. Joseph Health Services pension fund. The subpoena was issued to Kilmartin on November 3, and to date lawyers in the Attorney General’s office admitted before Stern that they have yet to provide one single document.
When the orphaned pension fund filed for receivership, documents claimed that the fund was expected to realize 7.75 percent rate of return.
“One of the underlying assumptions in the actuarial calculation, an annual rate of return of 7.75%, has been consistently attributed to the Plan and, historically, constituted a reasonable estimate of performance. However, going forward there is concern the 7.75% projected annualized return is unlikely to be sustained in the long term. Applying a lower anticipated annual rate of return would result in a higher underfunding projection,” wrote attorney Land in the August receivership filing.
Del Sesto tells GoLocal that as the pension fund receives no contributions, future assumptions should be in the range of 3 to 4 percent annual rate of return.
“Upon conclusion of such winddown efforts, the net assets of Petitioner, RWH [Roger Williams] and CCCB [CharterCARE] may become available to assist with the Plan. While the availability of additional funds is uncertain at this time, such additional funds could be used to support the Plan for long-term pay-outs to beneficiaries or provide supplemental distributions to beneficiaries whose benefit payments might be reduced as part of the Plan's wind-down process. The potential for additional Plan funds is not contemplated by the Benefit Adjustment Analysis,” was written in the petition.
EDITORIAL NOTE: An earlier version of this story was unclear as to the date he was named to head the Diocese of Providence. In March of 2005, he was appointed the eighth Bishop of the Diocese of Providence.
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- Coming Monday - INVESTIGATION: The Real Cost of the St. Joseph Pension Fund Collapse