The St. Francis Healthcare System of Hawaii may soon end a long-established pension plan for its current and former employees.
In a July 23 letter to pension recipients, President and CEO Kathy Morimoto said she and the board of directors were considering a resolution to terminate the plan.
Morimoto, who took the helm of St. Francis in December, wrote that the pension plan was established in 1959 as a church plan, and though it has always been managed with the best of intentions, it is not fully funded and will be unable to continue providing all scheduled benefits.
The news has brought alarm to pension participants who worked for St. Francis believing they would have a reliable pension upon retirement.
It’s not a done deal yet, according to St. Francis, which emphasized it is still early in its decision-making process.
“At this time, no changes have been made to the pension plan and it continues to make payments to retirees,” said St. Francis in a statement. “Our goal is to determine a course of action that is fair and equitable, and that protects, as best we can, the interests of retirees currently receiving pension benefits, as well as current and former employees who will be eligible to receive pension benefits when they retire. We are working with our unions in compliance with our collective bargaining agreements about this matter and will share more information as it becomes available.”
Almost all private retirement plans are required to comply with federal pension and tax laws, according to the Pension Rights Center, a nonprofit based in Washington, D.C., with the exception of church pension plans.
The latest development from St. Francis calls attention to an ongoing controversy over the exemption of church plans from these requirements — and to what extent Opens in a new tab pension plans established by church-affiliated hospitals and schools count as church plans.
Congress enacted the federal Employee Retirement Income Security Act Opens in a new tabin 1974, establishing rules for pension plans. It set minimum standards for how or when the plan has to be funded, and requires information be provided to participants.
It also requires most traditional defined benefit plans to be protected by federal insurance through the Pension Benefit Guaranty Corp., similar to how bank accounts are backed by the Federal Deposit Insurance Corp.
Without those federal protections, a church pension could simply end once the funding is gone, leaving participants empty-handed.
Church pension plans can choose to be covered by federal pension laws, according to the Pension Rights Center, but very few do. Participants also may persuade church officials they have a moral obligation to make good on promises. Otherwise, the rights of employees and retirees under church pension plans are challenged under state laws.
“This isn’t uncommon at a lot of Catholic health care plans,” said Norman Stein, legal director of the Pension Rights Center, noting that a series of class-action suits have been brought to state courts.
“It would be under general state rule principles that you break a contract or engaged in fraud,” he said, “or that the church is actually in control of the organization — that it failed to ensure the plan was adequately funded and made promises to people.”
In 2019, the AARP Foundation filed suit against the Roman Catholic Diocese of Albany when more than 1,100 former workers at St. Clare’s Hospital in New York lost their promised pensions. In 2021, an appellate judge ruled in favor Opens in a new tabof the pensioners.
St. Francis declined to say how many employees are receiving pensions or eligible for them at this time.
Over the years, St. Francis, which runs a skilled living facility in Liliha and offers adult day care and home hospice care, among other services, has struggled financially. Morimoto wrote in the letter that the pension plan was frozen in January 2011, with no new participants added or additional benefits accrued since.
In 2014, the system closed a hospice in Ewa Beach, reduced services and laid off 110 workers. In 2019, it closed St. Francis School, a private Catholic school in Manoa, nearly a century after it was founded, due to financial woes.
Local firm Avalon Group earlier this year purchased the 11.1-acre school property for $23.3 million for residential redevelopment.
Based on tax filings from 2023, St. Francis reported a loss of more than $4.2 million in net income, and a loss of about $55.3 million in net assets. Since 2020, there have been negative net incomes, according to tax filings.
The system’s voluntary board members, as listed online, include Chair Howard Lee, Vice Chair Ivan Lui-Kwan, Lynn Babington, Jason Chang, Tom Dennison, John Henry Felix, Art Gladstone, Glenn Medeiros, Karen Mukai, Robert Myers III, Kuuhaku Park, Bishop Larry Silva, Arnold Wong and Thomas Zizzi.
St. Francis is working with two unions — the Hawaii Nurses’ Association and Teamsters Local 996 — to comply with their collective bargaining agreements.
HNA President Rosalee Agas-Yuu said the union is requesting more information about the possible termination.
“We’re very concerned because there are members affected by this,” she said. “We want to alleviate as much as possible, working with the Teamsters.”
In a list of frequently asked questions provided with the letter, St. Francis said no action is required on the part of vested pension participants, which includes retirees and eligible current and former St. Francis employees.
St. Francis said if terminated, available assets would be distributed equitably in proportion to each participant’s accrued benefit.
Separately, employees with a 403(b) plan are not impacted.
St. Francis has contracted October Three, a Chicago- based firm, to offer a support to pension participants with a dedicated service center to answer questions on weekdays.
