Former U.S. Attorney Says Hospital Conversion Act Needs Review to Avoid Another St. Joseph’s
Thursday, October 26, 2017
Former U.S. Attorney Peter Neronha, now a candidate for Rhode Island Attorney General, has said that the state's Hospital Conversion Act needs to be changed -- so that another St. Joseph pension collapse does not happen.
“I think that anything that would bring additional pension expertise into the process would be a good thing, and making the state of [a hospital] pension system an explicit criteria for evaluating the proposed conversion would seem to make a lot of sense," said Neronha.
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GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTIn 2014, Attorney General Peter Kilmartin approved the acquisition of CharterCARE by Prospect of California and called the process a success. Just three years later, the pension fund of one group of employees was thrust into receivership with a deficit of tens of millions of dollars.
Kilmartin has a key role under Rhode Island’s Hospital Conversion Act and the law is very specific to the responsibilities of Kilmartin and his office, stating, “The department of attorney general [is] to preserve and protect public and charitable assets in reviewing both hospital conversions which involve for-profit corporations and hospital conversions which include only not-for-profit corporations.”
At the time of the agreement in 2014, Kilmartin said, “The transacting parties have worked diligently to provide regulators with the necessary documentation and information throughout this review process to make this decision, a decision I believe is in the best interest of Rhode Island’s healthcare marketplace, the community, the employees, and most importantly, the patients.”
Kilmartin said in his statement, “Conducting a hospital conversion review requires the commitment of a substantial amount of resources for the Office of Attorney General. I commend my staff for the time and careful consideration put into this review process.”
Lack of Regulation for Church Funds
Neronha flagged that there are a number of issues that need reform. “The situation that the beneficiaries of the St. Joseph’s pension plan find themselves in is very troubling. The plan beneficiaries worked very hard, for many years, at relatively low salaries, and the prospect of their retirement benefits being dramatically reduced should concern all of us,’ said Neronha.
“The fundamental problem with ‘church plans’ like the one at issue here is that they are carve-outs from ERISA, and therefore not subject to federal regulation or insurance of any kind. Such plans are experiencing difficulties all across the country,” warned Neronha.
Presently, “church plans” are unregulated by any federal or state authority and beneficiaries may or may not receive any statements of the performance of the funds. The Diocese of Providence operates other “church plans.”
Diocesan Lay Employees’ Retirement Plan
According to a 2009 article in the Diocese of Providence’s newspaper, Rhode Island Catholic, the Lay Employees’ Retirement Plan was in distress and the benefits payouts were being cut back.
The then-administrative secretary to the Lay Employees’ fund, J. Timothy Kocab, said, “The plan’s assets…have declined significantly in value during the past several months.”
In addition, Kocab is quoted as saying, "These are necessary steps in order for us to refocus our resources on strengthening the funding position of the Lay Employees’ Retirement Plan.”
Kocab told Diocesan employees in a letter, "Your employer remains committed to helping you build financial security for your retirement years.”
The Diocese fiscal office has continued to refuse to answer questions about the St. Joseph pension fund bankruptcy, the Lay Employees’ Retirement Fund, or any other church funds associated with the Diocese of Providence.
“While subject to state regulation, the degree of any such regulation in Rhode Island, and elsewhere across the country, appears to be minimal. These plans should be fully funded, of course, and people who are the beneficiaries of them should know the financial status of them, to avoid being blind-sided,” said Neronha.
Neronha refused to say if Kilmartin and his office’s review was flawed, “That is difficult to answer without knowing what materials were made available both to the Attorney General and the Department of Health.”
“I am not in a position to evaluate that review at the moment, given that the facts, from what I can tell from press accounts, are still being developed, other than the unfortunate obvious: that some really hard-working people are facing a very difficult, substantial reduction in benefits,” he added.
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