Hospital Retirees Sue Newark Archdiocese for $2.7 Million in Lost Benefits

Retirees of Saint James Hospital of Newark, New Jersey, are suing the Archdiocese of Newark, claiming it wrongly denied them at least $2.7 million in lifetime pension benefits.

According to the complaint, which was filed in the Superior Court of Essex County, the Archdiocese did not inform the retirees about an IRS ruling that led to the loss of federal protections for its pension, yet it continued to assure the retirees that they were entitled to lifetime benefits.

In October 1988, the Archdiocese sent a letter to past and present employees informing them that it wanted to terminate the hospital’s pension plan. In the letter, the Archdiocese said the termination would not reduce or adversely affect vested benefits, and that “there appear to be sufficient assets to pay all benefit commitments under the plan.”

The retirees say the last statement was false.

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“There was not in fact enough money in the SJH Plan to cover the full cost of the pensions promised to its participants and beneficiaries,” said the plaintiffs in the complaint. “Instead of putting more money into the plan, the Archdiocese developed a strategy to escape PBGC scrutiny and the protections of ERISA [The Employee Retirement Income Security Act of 1974].”

The complaint said that without informing the plan’s participants and beneficiaries, the Archdiocese sent a request to the IRS to change its status to that of a church plan, and in 1990, the request was granted. The change meant that the plan was no longer subject to the rules of ERISA.

The plaintiffs say that the Archdiocese concealed the IRS ruling from the plan participants, and did not provide documents describing the new rules that governed the plan after it was no longer under ERISA jurisdiction.

Beginning in 1996, the Archdiocese began to transfer trust assets dedicated to funding the retirees’ pension benefits to another account that plaintiffs say was insufficient to pay the promised lifetime benefits. The complaint alleges the Archdiocese transferred $2.7 million less than was necessary to pay the promised full lifetime pensions, despite having a $20 million surplus in its overall pension accounts.

The plaintiffs consist of a group of 135 retirees who worked primarily for Saint James Hospital, earned pensions, and left the hospital before becoming eligible to collect their pensions.

“The Archdioceses knew that it was not providing enough money to pay lifetime pensions,” said the complaint. “But it also knew that, because none of the individual named plaintiffs or class participants had even started receiving their pension payments at the time of the 1996-1997 transactions, it would be decades before the money ran out.”

Tags: Archdiocese, Lawsuits, Pension, Saint James Hospital

The UK’s Financial Conduct Authority (FCA) has banned five directors from three firms and fined them more than £1 million ($1.3 million) for “acting without integrity” regarding pension advice, and for misleading the regulator.

The FCA said that the directors’ “reckless behavior” prompted more than 2,000 customers to invest approximately £76 million ($98.5 million) of their pension assets into products that invested in risky illiquid assets.

The regulator fined Thomas Ward and Andrew Page of Financial Page Ltd. £416,558 and £321,033, respectively, and fined Aiden Henderson, a director at Henderson Carter Associates Limited, £179,179. It also fined Robert Ward and Tristan Freer, directors at Bank House Investment Management Limited, £88,100 and £52,725, respectively.

“The directors should have known that the products were unlikely to be suitable for retail customers, except in very limited circumstances, but acted recklessly in closing their minds to the obvious risks,” the FCA said regarding all of the directors except Ward. “They were all approved persons in a controlled function at their firms and so should have known that by using the pension review and advice process they were acting recklessly.”

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As for Ward, he was not approved by the FCA, and was considered a de facto director.

“Ward disregarded the interests of FPL’s customers and showed a willingness to enrich himself at their expense,” said the FCA. “Ward also took deliberate steps to control and influence the information that FPL disclosed to the FCA and encouraged Mr. Page to withhold important information and deliberately drafted communications that were false and/or misleading.”

The five directors have referred the decision notices issued against them to the Upper Tribunal where they will present their respective cases. The FCA said that any findings in the decision notices are therefore provisional and reflect the FCA’s belief as to what occurred and how it considers their behavior should be characterized. The Upper Tribunal will determine the appropriate action for the FCA to take, if any, and will remit the matter to the FCA with directions the Upper Tribunal considers appropriate.

“HCA, FPL and BHIM held themselves out to customers as providing bespoke independent investment advice,” the FCA said in a release. “But that did not reflect the reality of the service that was provided. In reality customers were recommended pension switches and pension transfers to products that invested in high risk, illiquid assets which were unlikely to be suitable for them.”

As of Jan. 29, the Financial Services Compensation Scheme has paid compensation of £26.8 million to 1,106 customers of FPL, HCA, and BHIM in relation to the matter, and is investigating further claims.

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Tags: Bank House Investment Management Limited, Financial Conduct Authority, Financial Page Ltd., Henderson Carter Associates Limited, Pension