Government Agencies Restore Protections to Hospital Retirees’ Pensions

Pension Rights Center

For Immediate Release

Contact: Nancy Hwa, 202-296-3776

March 29, 2013

WASHINGTON — After a 10-year struggle, hundreds of former workers and retirees from the Hospital Center at Orange (HCO) once again have federal protections for their pensions. In an unprecedented move, the Internal Revenue Service (IRS) has reversed its 2003 decision to grant HCO’s pension plan recognition as a “church plan.” In response to the IRS action, the Pension Benefit Guaranty Corporation (PBGC) will restore insurance protections to the HCO plan.

For decades, the Hospital Center at Orange was an independent nonprofit hospital, not affiliated with any religious organization. Its pension plan was covered by the Employee Retirement Income Security Act (ERISA), the federal law that governs and insures most private pension plans, requiring them to follow certain funding rules and pay insurance premiums to the PBGC.

In 1998, the hospital entered into a financial arrangement with Cathedral Health Systems and, four years later, based on this affiliation, applied to the IRS for a ruling that its pension plan was a “church plan” exempt from ERISA. The IRS granted HCO’s request for church plan status in early 2003. It was only later that year that HCO employees learned that their pensions would no longer be protected by the PBGC, and that their underfunded plan only had enough money to pay retirement benefits for a few years. The Hospital shut down the following year.

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