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Workers Denied Pensions Despite Years of Service

Bob Edwards talks about employees at a Catholic hospital that filed a lawsuit after not getting their pensions

A jar with the word pensions on it filled with money

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Bob Edwards: Today, we’ll discuss how prescription drugs factored into President Trump’s State of the Union address. And our guest will discuss a lawsuit filed by former employees of a Catholic hospital over their pensions.

Dara Smith: The hospital operated for a lot of low income people, people who didn't have insurance and a lot of the employees were similarly low income. The salary wasn't very good, but they did it out of a sense of service to the community, and because they were promised a pension.

Bob Edwards: Hi, I’m Bob Edwards with An AARP Take on Today. On Tuesday night, President Trump delivered his State of the Union Address. He tackled topics from the economy to immigration and was cheered and booed, but one note was particularly unifying: high drug prices. Here are two excerpts from his speech.

Donald Trump: My administration is also taking on the big pharmaceutical companies. We have approved a record number of affordable generic drugs, and medicines are being approved by the F.D.A. at a faster clip than ever before. 

And working together, Congress can reduce drug prices substantially from current levels. I’ve been speaking to Senator Chuck Grassley of Iowa and others in Congress in order to get something on drug pricing done, and done quickly and properly. I’m calling for bipartisan legislation that achieves the goal of dramatically lowering prescription drug prices. Get a bill on my desk, and I will sign it into law immediately.

Bob Edwards: POLITICO notes that this was the second year in a row the president attacked the pharmaceutical industry in his address, and that it was the only industry singled out for criticism.

This message was especially encouraging for those who have dedicated themselves to fighting high prescription drug prices. Responding to President Trump’s remarks, AARP’s Nancy LeaMond said, “Millions of Americans are looking to their elected leaders from both parties to put their differences aside and work together to lower drug prices. The time for federal action is now.”

To learn more, including how to contact your representatives in Washington, visit aarp dot org slash stop RX greed.

Hello, I'm Bob Edwards with an AARP take on today. Pension. What pension? In September, pensioners who spent their lives working for a Catholic hospital called on a higher authority.

In a lawsuit at the Schenectady County Supreme Court in New York State. The suit is against the Roman Catholic diocese of Albany and it's on behalf of more than 100 former employees of St. Clare's Hospital. At issue, St. Clare's failure to pay its former employees the pensions it promised. Many of the former nurses, orderlies, lab techs and others worked for years, in many cases decades, at St. Clare's Hospital. But a year ago, St. Clare's management told some 1100 former hospital employees that despite their years of service, most of them would not receive a pension and others would have their pensions drastically reduced. Tragically, the story isn't just about one religiously affiliated hospital. The best estimates are that nearly a million Americans worked for such institutions and maybe at risk. Today our guest is Dara Smith, the attorney with AARP Foundation handling the case.

Dara Smith: This is about a hospital called St. Clare's that the Catholic diocese of Albany opened and laid the cornerstone for. And the hospital operated for a lot of low income people, people who didn't have insurance and a lot of the employees were similarly low income. The salary wasn't very good, but they did it out of a sense of service to the community, and because they were promised a pension. A lot of these folks serve there for 20, 30 years, some even more. And the hospital closed in 2008. A lot was going on then, but basically the state of New York reorganized a lot of the local hospitals to serve that population better. And St. Clare's was taken over by another hospital, but they kept the pension fund going.

Bob Edwards: Happens to a lot of religious hospitals these days.

Dara Smith: That's right. Basically a corporation was left in place to run the pension and that's all that it did. But no money was going into the pension for years. And it wasn't until last year that they finally told people, "Hey, we're actually just going to stop paying out. And for those of you who haven't started collecting a pension yet, sorry, you get nothing."

Bob Edwards: Was this a pension that the employer paid into? Or employees?

Dara Smith: It was an employer funded program.

Bob Edwards: But people were working now on the promise of, "Hey, someday there's be something back."

Dara Smith: Yes, that's right. That's very common. Pensions are less and less common, that defined benefit that people get. Most people just have 401ks now, but for people with pensions, that's a really good deal. And a lot of folks that we talked to, lot of our clients, kept working there even though they could have gotten more money somewhere else because they knew that they'd be secure with a pension someday. Except that turned out not to be true.

Bob Edwards: So they counted on the pension, so they kept working there and then nothing. You feel the rug was pulled out from under them?

Dara Smith: That's exactly what they say, yes.

Bob Edwards: This doesn't sound like a charity or a handout, but instead a request to fix a broken promise.

Dara Smith: That's exactly right. It's part of the terms and conditions of their employment. Effectively it's a deferred part of their salary. Some now, some later. In fact, in a similar case in Rhode Island, that's exactly what people say they were told. They were told, "This is your paycheck now and you're only getting like a $0.01 raise this year, but you'll get a hidden paycheck later and that's your pension." And then of course they didn't get it either. So it really is in return for the work that you've done. It's not charity at all.

Bob Edwards: So what's the law? I mean this may not be a written contract.

Dara Smith: It is a written contract.

Bob Edwards: It is a written contract? I was going to say that a promise might be a contract in legal terms.

Dara Smith: That's absolutely right, but in this case it is written. So people get, and most people probably get a plan statement every year and they also will get a summary plan description and maybe even access to the retirement plan itself. And when I say plan, I do mean the employer retirement plan that you have when you're an employee. And it describes what you can expect. So in this instance, and we've detailed a lot of this in the complaint, but basically it said, "If few work here for five years, when you reach retirement age, you will get this pension and here's how it will be calculated."

Bob Edwards: Well, hello, you present the paper to them and say, "Here, you promised."

Dara Smith: Right. So we should be able to hold them to that. For most people whose pensions and retirement are covered by federal law, there's a guarantee. So even if the employer runs out of money, the fund runs out of money, there's a backstop of insurance that employers have to pay into. Because this was a church plan, a religiously affiliated plan, they didn't have to do that. So they had no insurance, they had no private insurance, no federal insurance. They weren't paying in at the required amount that they would have to if they were covered by federal law and our clients can't bring a federal case. So we brought a state case instead.

Bob Edwards: Is this happening to a lot of people?

Dara Smith: Unfortunately, the best estimate we have right now is that it's about 1 million people who are covered by these plans.

Bob Edwards: Oh.

Dara Smith: That's not to say that all of those people's plans are in jeopardy, but all of them are not required to have this federal backstop. And so that automatically does create more risk even if nothing's going on right now.

Bob Edwards: What does the church say, "Not our problem."?

Dara Smith: Essentially, yes. I mean they've done a lot to talk to the pensioners and there's some indication that they want to help, but they say they're not responsible and that they didn't run the pension fund.

Bob Edwards: Did they say it's the responsibility of the company that took over the hospital from the diocese?

Dara Smith: Yes. So they say that they were never in charge of running the hospital. We believe that's just not correct.

Bob Edwards: Does this affect only Catholic institutions?

Dara Smith: Not at all. The federal exemption for religious affiliated organizations applies to any religious affiliated organization. And that 1 million estimate covers people who worked for, retired from, institutions affiliated with institutions of all faiths.

Bob Edwards: So there are other cases involving other denominations?

Dara Smith: Yes.

Bob Edwards: Where can people turn to help?

Dara Smith: We're certainly hoping to be able to help here at AARP, but the Pension Rights Center has also been very involved in this issue nationally in tracking what's going on with these cases all around the country. There are cases in New Jersey, Wisconsin, Puerto Rico, Rhode Island, and Minnesota that have advanced a similar theory, which is to say it's a state breach of contract claim and breach of trust claim, and we're holding the Catholic diocese accountable for failing to run the pension right. The affiliation with the church is the reason that they were able to not be subject to these federal requirements, so our theory is the church should be accountable for taking care of the pensioners.

Bob Edwards: So if I'm expecting a pension and I have some doubts now after hearing this, what do I do?

Dara Smith: There are a couple of things that you can do. One is when you get those regular updates, read them very carefully. In this case, unfortunately, people didn't have all the information they needed, but many times those updates will tell you if the pension is in trouble and then you know that you need to look elsewhere. One thing to do if that's the case, is to use other retirement planning tools. AARP has great retirement planning tools online that you can use and people who can help you figure out what else you might be able to do, so stay informed.

Bob Edwards: For more information, visit aarpfoundation.org and be sure to click on the what we do tab.

Thank you to our news team, producer Colby Nelson; assistant producer, Danny Alicon; production assistant, [Bridgid Launi 00:08:22] ; engineer, Julio Gonzales; writer, Jill Higgs; executive producer, Jason Young. And of course my cohosts, Wilma Consul and Mike Ellison. Become a subscriber. Be sure to rate our podcast on Apple Podcasts, Google Play, Stitcher, and other podcast apps. Thanks for listening. I'm Bob Edwards.

Tune in to this week’s episode to hear from AARP Foundation’s Dara Smith about the lawsuit filed by former employees of a Catholic hospital who were denied their pensions despite years of service. Plus, listen to what the president had to say about prescription drug prices in the State of Union Address.

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