WASHINGTON — Reversing a prior position, the Pension Benefit Guaranty Corporation announced today that it will pay pension benefits for more than 800 former employees of the Hospital Center at Orange, which provided primary and emergency care in Orange Township, N.J. before closing in 2004.
The Hospital's pension plan was originally covered by ERISA and protected by PBGC. However, in 2003, after the hospital became affiliated with Cathedral Healthcare System Inc., the Internal Revenue Service determined that the hospital's pension plan had become a church plan, which removed it from PBGC's protection. Soon after that, the hospital began winding down its operations and laying off employees.
Over the past several years, at the request of the Pension Rights Center, PBGC worked with the hospital's former staff and the IRS to revisit that designation. IRS recently set the designation aside and PBGC can now cover the pensions. The plan is within months of running out of money, so if PBGC had not stepped up benefit payments would have stopped.
"Why did PBGC push to take on this substantial financial responsibility?" said PBGC Director Josh Gotbaum. "The answer is simple. Our job is to provide a safety net for pensions. In this case, we realized we could restore the safety net — so we did."
In a letter posted on May 10th, the Pension Rights Center praised PBGC for pushing to protect the hospital's retirees. "The PBGC's actions helped rectify an injustice that the law never intended, and illustrate your agency's strong commitment to the protection of pension plans and participants."
According to PBGC estimates, as of Jan. 1, 2009 (the plan termination date), the plan had $11 million in assets to pay $41 million in benefits. The agency expects to cover the entire $30 million shortfall and expects to pay the benefits owed under the plan.
Retirees will continue to get benefits without interruption, and future retirees can apply for benefits as soon as they are eligible.
PBGC can provide general information now and will be able to answer more detailed questions once it takes responsibility for the plan. Plan participants will be notified by letter after the transfer occurs.
For more information about the pension plan, please see our FAQs: Hospital Center at Orange and visit our webpage for The Employees' Improved Retirement Plan of the Hospital Center at Orange. PBGC can be reached by email at email@example.com or by phone at 1-800-400-7242 (8 a.m. to 7 p.m. EST, Monday — Friday) (TTY/TDD: call 1-800-877-8339 and ask to be connected to 1-800-400-7242).
PBGC protects more than 40 million Americans in private-sector pension plans by paying benefits when companies cannot. PBGC receives no taxpayer dollars and never has. Its operations are financed by insurance premiums and with assets and recoveries from failed plans. For more information, visit PBGC.gov.