Attorney Stephen Del Sesto was appointed temporary receiver of the St. Joseph Health Services of Rhode Island Retirement Plan, North Providence, in light of the pension fund's looming insolvency.
The temporary receivership was granted by Rhode Island Superior Court Judge Michael A. Silverstein on Aug. 17 at the request of St. Joseph Hospital Services.
The hospital operating company wrote in its receivership request that the pension fund is "unsustainable" and absent any judicial intervention, it anticipates the pension fund "will be terminated and its funds distributed in a manner that will result in current plan beneficiaries receiving approximately 60% of their accrued benefits and all others receiving nothing."
As receiver, Mr. Del Sesto will monitor and make adjustments to the pension plans' investments "to maximize what currently exists as plan assets" and oversee the distribution of plan assets, he said in a telephone interview Wednesday.
Along with temporary receivership, St. Joseph requested court approval of a 40% reduction in benefits for all participants, arguing that a uniform reduction of 40% was a more equitable resolution for all participants. Mr. Del Sesto will weigh in on the recommended 40% cut on Oct. 11.
When St. Joseph sold its operating assets in 2014, it retained control of the pension plan. However, since the hospital operating company no longer had a hospital to operate, St. Joseph did not have the revenue to make pension contributions, Mr. Del Sesto said.
Aside from a one-time $14 million contribution, the pension fund, which is funded solely through employer contributions, has not received any employer contributions since St. Joseph was sold in 2014, Mr. Del Sesto said.
As of June 30, 2016, the pension plan had $95.5 million in assets on actuarial basis and faces a deficit of approximately $43 million, according to St. Joseph's receivership request and accompanying documents. At the time of the 2014 sale, the plan was estimated to be 90% funded, according to the same documents.
St. Joseph added in its receivership request that it believes the pension fund will lose its church plan status on or before Dec. 31, and St. Joseph will be required to make minimum annual contributions and payments to the Pension Benefit Guaranty Corp., which it argues, it can't afford.
An attorney for St. Joseph said that the hospital operating company sought the appointment of a receiver to "try to maximize the value of the pension (fund) for most people," and that the lack of employer contributions, weak market returns and assumptions contributed to the plan's underfunding. He did not have information on why St. Joseph retained control of the pension fund after it was sold in 2014.