Their pensions are gone. Newark Archdiocese is to blame, lawsuit says.

More than 100 retirees of the now defunct St. James Hospital of Newark are suing the Newark Archdiocese, saying they lost their pensions because the archdiocese mismanaged the fund.

As many as 135 former St. James employees were promised pensions, but the archdiocese intentionally underfunded and removed assets from the plan, resulting in it going broke, according to the lawsuit filed in Superior Court in Essex County.

Retirees, some of whom had worked for decades for the Catholic hospital, stopped receiving their pension checks in November 2017, while those who hadn’t started taking payments never received any money.

“I feel personally abandoned,” said Sharon Holutiak, 66, who would have received a monthly pension. “The Archdiocese of Newark should have the willingness to be up front and center, to unequivocally address the issues of underfunding, misplaced funding or even ignoring that they did indeed provide for a pension and handle it themselves.”

The lawsuit recaps much of what was reported in a series of stories by the Bamboozled column when the retirees first learned the pension was going belly-up.

Prior to filing the suit, employees said they tried to get answers about the pension from the archdiocese and from Cardinal Joseph Tobin, but their letters were ignored.

They said they had no choice but to file the suit, which seeks class action status, last month.

“We were trying to be fair from the get-go to communicate but we didn’t get the same courtesy back,” said Rich Salvia, St. James’ former chief financial officer. “Hopefully, the cardinal gets involved and rights a wrong.”

Charles Brennan, the former president and CEO of St. James, said the retirees don’t want to “jump out and attack Tobin.”

“We’re trying to be fair,” Brennan said. “This is probably the last opportunity for [the archdiocese] to sit down and look at this fairly and honestly as a religious organization and not as a corporate structure, so they can make a determination about what’s honorable and fair.”

When asked about the lawsuit, an attorney for the Newark Archdiocese said that while the archdiocese sympathizes with the retirees, the pension obligation was never part of the archdiocese pension plan and when St. James was sold in 2008, the archdiocese did not have responsibility for the plan.

Key changes to the plan

But there was a time when the archdiocese had control of the plan, the lawsuit alleges.

It alleges that when the archdiocese sold St. James, it did not transfer the pension liability to the new owner, therefore the archdiocese should be responsible for the pension.

The lawsuit claims that prior to the sale, the archdiocese made changes to the pension plan and it told retirees their pension benefits would not be affected.

In one letter cited in the suit, the archdiocese told the retirees, “The Pension Plan was fully funded and you will receive, when due, the full amount of your vested retirement benefit.”

The suit alleges the archdiocese intentionally hid a change to the plan - a change that would remove federal pension insurance protections - without telling plan participants.

St. James’ pension plan and other religious hospital pension plans were initially started as traditional pension plans. That meant they had to follow federal Employee Retirement Income Security Act (ERISA) rules, which include minimum funding requirements and pension insurance.

In the 1990s, the religious hospitals petitioned the IRS to reclassify the plans as “church” plans. Church plans are exempt from ERISA, saving the plans money because they wouldn’t have to buy pension insurance. The IRS granted the exceptions, leaving employee pensions without guarantees or protections.

When the St. James plan was granted church status in 1996, officials told employees the pension plan was fully funded and that the change “will have no impact on your right to receive a future monthly retirement benefit from us," according to documents.

That turned out to be untrue, the lawsuit said.

Employees of other religious hospitals nationwide, worried about having uninsured pensions, tried to fight in court, claiming the hospitals never should have been granted church status. Lower courts agreed that the hospitals, including St. Peter’s University Hospital in New Brunswick, should be subject to federal pension laws. But when the case made it to the U.S. Supreme Court, the religious hospitals won and the pensions maintained church status.

The St. James employees were not part of that suit.

The new lawsuit makes different claims against the archdiocese, alleging breach of contract, breach of fiduciary duty and promissory estoppel - a legal principle that says a promise is enforceable by law when the promisee suffered a detriment, and the promise is one that could be reasonably relied on.

“The archdiocese not only breached its moral obligations to its former employees, but also its legal obligations as a contracting party and a fiduciary under New Jersey law,” the lawsuit said.

The St. James employees and their pro bono attorneys are waiting for a response to the suit from the archdiocese’s legal team, and they still hold out hope that Cardinal Tobin will come to their aid.

“What’s the most disappointing is not having a response [from Tobin] and them giving us no alternative but to take the legal route,” Salvia said. “We’re just hoping everybody reevaluates after the cardinal hopefully gets involved.”

Have you been Bamboozled? Reach Karin Price Mueller at Bamboozled@NJAdvanceMedia.com. Follow her on Twitter @KPMueller. Find Bamboozled on Facebook. Mueller is also the founder of NJMoneyHelp.com. Stay informed and sign up for NJMoneyHelp.com’s weekly e-newsletter.

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