Key Trust Document Shows Bishop of Providence Has Oversight of Failed St. Joseph Pension Fund
Friday, December 08, 2017
The Trust document flies in the face of pronouncements asserted by Bishop Thomas Tobin that claim he and the church have no legal or moral responsibility.
“We, for six or seven years now, have been no more involved in the oversight of pension funds than we have been in the renovation of a lobby. So it’s a little bit frustrating, I think, and unfair for people to be asking what has the diocese been doing during this time,” said Tobin in an interview published in the RI Catholic, the newspaper of the Diocese.
Tobin has refused repeated requests for comment on the St. Joseph pension fund collapse.
The Trust was established in 1995 and the power is directly tied to the position of Bishop of the Diocese of Providence — at that time Bishop Louis Gelineau held the appointment.
The Trust document was amended only once in 2000, but it was a non-material amendment. The amendment was signed by then Bishop Robert Mulvey. Tobin became Bishop of Providence.
Del Sesto tells GoLocal that the Plan is governed by two documents:
The St. Joseph Health Services of Rhode Island Retirement Plan which was effective as of July 1, 1965, and amended and restated July 1, 2016 (I have not yet received the original 1965 Plan document or any amendments, if any, prior to July 1, 2016 – we have requested from St. Joe’s); and the Trust Agreement dated September 27, 1995, as amended on August 4, 2000.
"Those two documents are read together to govern the pension plan and its assets. The Plan governs the terms of the Plan as it pertains to beneficiaries, benefit accruals, payments and other administration issues and the Trust holds, manages and invests the assets for the benefit of the Plan and its beneficiaries," said Del Sesto.
It seems impossible that Tobin is unaware of the structure. The pension fund was forced into receivership on August 17 and the incident has been mired in legal battles since. At hearing earlier this week, Tobin was represented by four partners of the firm Partridge, Snow and Hahn. It seems unlikely that the downtown Providence firm complete with four partner-level attorneys has not briefed the Diocese on the basic legal structure of the pension fund. The firm refused to answer questions on the Trust document.
Documents Undermine Tobin's Claims
“Under my reading of the Trust document, only the Retirement Board (whose members are appointed by the Bishop) and the Bishop for the Diocese of Providence each have equal, full power to direct or authorize the Trustee, Bank of America, to act. Therefore it would follow that if the Retirement Board is inactive or has no appointees, the Bishop for the Diocese of Providence is the only person with full authority and power under the Trust to direct or authorize the Trustee to act,” said the court-appointed receiver Stephen Del Sesto.
In contrast to the Trust document and Del Sesto’s comments are Tobin’s claims.
“I don’t remember during my time on the board of St. Joseph Health Services, or since then, when these transactions took place — beginning six or seven years ago, and then three years ago," said Tobin in the RI Catholic article. "I don’t remember one serious conversation about the status of the pension fund.”
Tobin and the Diocese have been trying to block and limit the scope of the subpoena issued by special investigator Max Wistow.
Tobin’s claims are inconsistent with the documents and the Bishop of Providence has ultimate powers over the operation of the fund. “…my interpretation of the Trust, the Bishop, either through the Retirement Board that he appoints or individually has full power to require or authorize the Trustee to take any action,” said Del Sesto.
With less than two months before the pensioners' will see their benefits slashed there is growing urgency for Wistow to complete the investigation and to determine who has responsibility for the pension fund collapse and to pursue recovery.
Related Slideshow: 10 Things to Know About One of Biggest Pension Failures in RI - St. Joseph Bankruptcy
Biggest Pension Failure Ever in Rhode Island?
There is not a record book, but according to a number of top bankruptcy attorneys, the failure of the St. Joseph Health Services Pension Fund impacts the most individuals and the adverse financial impact will be the highest percentage impact to the retirees' monthly payments in Rhode Island history.
In Central Falls, by 2014 then-Governor Lincoln Chafee signed legislation that upped police and fire beneficiaries to 75 percent of their benefits. The cost of the legislation — post-Central Falls bankruptcy — was $4.8 million.
Kilmartin’s Role in the Hospital Conversion Act
Attorney General Peter Kilmartin won’t answer questions about his role in the approval of the Hospital Conversion of St. Joseph Health Services to CharterCare. GoLocal has repeatedly reached out to Kilmartin to answer questions, without response.
As part of the review of the deal, Kilmartin, as Attorney General, had the responsibility to review and approve the financial viability of the transaction. The Hospital Conversion law is very specific to the responsibilities of Kilmartin and his office.
"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.”
The bankruptcy of St. Joseph Health Services pension fund will impact between 3,600 and 3,800 existing or future pensioners — and the loss of pension payments may be 40 percent, according to court-appointed receiver Steven Del Sesto, a partner at Donoghue Barrett & Singal.
However, Del Sesto said the plan for winding down the pension fund is only in the preliminary phase.
How Many Are Presently Receiving Benefits
According to the receiver, attorney Stephen Del Sesto, there are 1382 active/vested who have reached retirement date; 639 active/vested who reached early retirement, for a total of 2,021.
On average, retirees are receiving just $425 between the two classes. The retirees are facing a 40 percent reduction — thus, the average retiree would receive just $255 per month.
Kilmartin Called the Plan "Best Interest of...Employees"
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.” Kilmartin's office has refused to respond to questions from GoLocal regarding the collapse of the fund.
How Much Will the Receiver be Paid?
Stephen Del Sesto, the receiver for the St. Joseph Health Services Pension Fund, said he will be paid $375.00 per hour -- which is more than the average retiree will receive per month after the 40 percent cut in benefits.
“My fees will not be paid from the plan assets,” said Del Sesto in an email to GoLocal.
Role of the Diocese of Providence
According to to the document filed with the court seeking bankruptcy protection, the fund or petitioner “has been affiliated with the Catholic Church — “as an affiliate of the Catholic Church, the Plan Qualified as a 'church plan,' which is exempt from the provisions of the Employment Retirement Income Securities Act of 1974 (ERISA) governing defined benefit pension plans.”
And, as a “church plan” the fund and the Diocese were not required to make a minimum contribution to the Plan, or “make pension insurance payments to the Pension Benefit Guaranty Corp."
Will the Receiver Seek a New Actuarial and an Independent Audit?
Stephen Del Sesto, the receiver, said he does not know yet if he will seek an independent actuarial and call for a forensic audit.
He is less than a week in his role and told GoLocal that he would need the court's approval to move forward with both steps.
The big date for this case is October 11 -- at that time the receiver Stephen Del Sesto will present the full plan of action.
Payment levels and payment dates will continue at present level, "nothing will change until October 11," said Del Sesto.
The biggest question swirling over the sale of St. Joseph's to CharterCARE and the bankruptcy is how could Attorney General Peter Kilmartin approve the sale with the only condition relating to the pension fund was a one-time $14 million payment in 2014 as part of the approval process -- and then just three years later -- the fund collapses.
The present fund has a balance of approximately $85 million. According to court documents filled as part of the bankruptcy petition, the actuarial claims the fund has a shortfall of $43 million.
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