St. Clare’s Pension Plan…. Broken Promises Lead to Uncertainty for Beneficiaries

November 14th, 2018|By Travis Santa Barbara

The former St. Clare’s Hospital located in Schenectady, NY, is facing scrutiny over the recent decision to terminate the pension plan earlier than originally anticipated. Over 1,000 beneficiaries were recently made aware of the decision, which has left them uncertain about their future benefits. As unfortunate as this issue is, it is important to understand what a defined benefit plan is; how it is different from a defined contribution plan, and what this type of issue means for the beneficiaries.

First and foremost, there are significant differences between a defined benefit plan and a defined contribution plan. St. Clare’s had a defined benefit plan in place, which is more commonly known as a pension plan. A defined benefit plan promises to pay a set amount, typically paid as an annuity over the participants life or the joint-life of the participant and their spouse. Defined contribution plans, such as a 401(k) plan, does not promise a certain benefit but instead pays whatever has been accumulated through employer contributions, employee salary deferrals and investment gains.

Furthermore, since St. Clare’s is a religiously affiliated hospital, they applied for the “church plan” exemption which means that the plan was exempt from ERISA and not required to purchase insurance through the Pension Benefit Guaranty Corporation (PBGC).  Had St. Clare’s opted to be an ERISA sponsored plan, they would have been required to purchase insurance through the PBGC, which would have guaranteed at least part of the benefit for  the beneficiaries.

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