A Mississippi chancery court judge has ordered a 25% reduction in benefits and the suspension of cost-of-living adjustments effective immediately for the struggling Singing River Health System Defined Benefit pension, which covers hospital workers.
“The clear and convincing evidence proves that benefits must be cut by 25%,” said Judge James Bell in his ruling.
The pension plan is currently being overseen by a court-appointed special fiduciary, who has recommended benefits be reduced, and that the plan maintain a funding level range of 90% to 110% by decreasing benefits if the funding level falls below 90%, and increasing benefits if it rises above 110%. As of the end of December 2017, the assets of the plan totaled $123.6 million, making it less than 28% funded.
“It is reasonable and equitable to use the proposed settlement as a projected amount of future payments to be received by the plan,” the judge added. “To do otherwise would force immediate and draconian cuts in benefits.”
Singing River Health System retirees were dismayed by the ruling.
“They cheated us out of our money and now they are going to cheat us out of our right to have 60 days to get our house in order, so I’m kind of disturbed by it,” retiree Irby Tillman told television station WLOX.
“I’ve been crying for the last few days, since I heard this,” Homa Moradmand, another retiree, told WLOX. “I live by myself. You think our Social Security is going to pay our expenses?”
According to court documents, the hospital allegedly stopped making pension contributions in 2009, which the employees were not aware of until 2014, at which point hundreds of lawsuits were filed against the plan. A class action was certified in 2016.
Mediation in 2016 resulted in a settlement proposal, however, the settlement still has not been approved more than two years later, as it has been objected to by hundreds of plaintiffs. The settlement, which was approved earlier this year by a federal judge, is under appeal to the US Court of Appeals Fifth Circuit in New Orleans. Those who object to the settlement say they will take their fight to the US Supreme Court if necessary.
The special fiduciary testified before the court that without significant adjustments to the plan, its funds would be depleted by 2025. That would leave “virtually nothing to pay beneficiaries,” other than a small fractional interest that would translate to an average of approximately $2,000 per year to each beneficiary, minus expenses. The court agreed that the condition of the plan is “indeed dire.”
Although the court’s decision was based on the recommendations of the special fiduciary, the fiduciary said she wasn’t expecting the judge to have the cuts take effect so suddenly. The change is set to take effect when plan participants’ receive their next monthly retirement payment on May 1.
“While I understand the necessity of the court to make the decisions and moves regarding the benefits, I am surprised that a 60-day notice was not given to retirees about the timing of benefit reductions,” said special fiduciary Traci Christian in a letter to plan participants following the court’s ruling. “While the timing is surprising and the changes will be difficult to manage in the short term, we all know that the sooner we make them, the more secure the fund will be for all plan participants in the long term.”
Tags: Defined Benefit, Mississippi, Singing River Health System