The Pension Benefit Guaranty Corporation (PBGC) is taking steps to assume responsibility for two pension plans sponsored by Verity Health System, which cover nearly 8,000 people. The six-hospital system is based in El Segundo, California.
Verity, with 16 of its affiliates, filed for Chapter 11 protection on August 31, 2018, and is no longer able to continue its plans. The bankruptcy court and the state of California recently approved the sale of four of Verity’s hospitals to KPC Group’s Strategic Global Management Inc. News reports say KPC is the only bidder that agreed to keep the hospitals open.
The Verity Health System Retirement Plan A covers 6,989 people. PBGC estimates Plan A is 52% funded, with underfunding of approximately $306 million. A separate plan, the Verity Health System Retirement Plan B, covers 985 people. PBGC estimates it is 74% funded with underfunding of approximately $2.8 million.This protection for employees and retirees by the PBGC is one reason for a string of lawsuits that challenge other nonprofit healthcare systems’ retirement plans’ status as “church plans” under the Employee Retirement Income Security Act (ERISA). ERISA imposes funding and reporting requirements for defined benefit (DB) plans, but church plans are exempt from these rules. Since they are exempt, church plans are also not insured by the PBGC.
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