“Bankruptcy is [pension] “The plan is going to fail,” said Julie Pinkham, executive director of the Massachusetts Nurses Association and a trustee of the Nurses Retirement System. “We won’t know until we see how things play out for the hospitals.”
The future of pensions — whether workers can count on them for the long term — is inextricably linked to the fate of hospitals that primarily serve low-income neighborhoods and communities from Dorchester and Haverhill to Brockton, Taunton and Fall River.
For those who have cared for patients for decades, much is at stake: Retirees like Karen Kravitz, 72, who worked as a nurse at St. Elizabeths Hospital in Brighton for 46 years and is supported by Caritas and Steward, rely on her pension income to survive in expensive Massachusetts.
“I don’t know how I’d survive if I didn’t get my pension,” said Kravitz, who is still paying off the mortgage on her Stoughton home.
The new pension worries are different from those when the Archdiocese of Boston sold its Catholic hospitals to Steward more than a decade ago. At the time, the pension plans were underfunded and Steward, backed by private equity firms, was the only potential buyer willing to assume the debt and pump money into the retirement plans. Today, the pension plans are independently administered, federally insured and financially sound.
Steward, meanwhile, owes about $9 billion to landlords, lenders, contractors and service providers, according to a tally of liabilities the company filed at its bankruptcy hearing May 7. A new hospital operator will be needed to ensure the pension plan’s long-term viability.
For now, pension payments will continue as usual. Judge Christopher Lopez issued an order allowing Steward, which filed for bankruptcy on May 6, to continue paying the salaries and benefits, including the company’s contributions to the pensions of about 2,500 active nurses covered by Steward Hospital’s labor contract.
Dallas-based Steward’s contract with the nurses’ union contains so-called successor clauses that require any operator who buys the hospital to honor the terms of the contract, including pension obligations. But those protections will be ineffective if Steward can’t find a buyer.
Steward has agreed to sell its Massachusetts hospitals by the end of June. The company said it had received expressions of interest but had not disclosed bidders. If new owners are not found and some hospitals close, it could reduce revenue flowing to pension funds and make them more vulnerable to market investment fluctuations.
“Without a new owner, there will be no new contributions to the fund,” Pinkham said. “That could be devastating.”
A Steward spokeswoman declined to comment on the future of the pensions but said Steward keeps the pension plan in good standing. “The current pension plan is fully funded and supported by PBGB, the federal agency responsible for guaranteeing and protecting retirement plans,” she said.
Pensions aren’t a top issue in U.S. Bankruptcy Court in Houston, where Steward’s lenders and creditors are battling over who gets paid how much. But nurses who have dedicated their careers to serving patients at Steward Hospital see the pensions as a matter of fairness, something they’ve earned through their work and tough contract negotiations.
“We fought for our pensions, for all of us,” said Joan Ballantyne, 67, a longtime nurse at Norwood and St. Elizabeth hospitals who is now considering retirement.
The history of the pension system mirrors that of the state’s Catholic health care system: The original system, called Caritas Christi Retirement System, dates back decades and covered not only nurses, but also secretaries, kitchen staff, maintenance workers and even doctors. Many worked at Caritas hospitals, others at church-run nursing schools, nursing homes and other facilities, some of which have since closed.
By the time Caritas put the hospital up for sale, the pension plan had been frozen and Caritas had stopped paying contributions. The pension plan was underfunded and uninsured. Because of a religious exemption, the Catholic plan did not have to pay into the Federal Pension Guaranty Corporation, which could not guarantee payments to beneficiaries if the pension plan did not have sufficient funds.
The solution was to convert to what is known as the Taft-Hartley pension plan, a multiemployer plan that covers employees of several companies. Under an agreement with the nurses’ union made just before the sale to Steward, the hospital agreed to place active nurses’ pension contributions in an escrow account until the new plan was in place.
Steward and the union ultimately opted to join an existing fund for workers the Teamsters represent in funeral homes and other industries in New York, and on Dec. 15, 2015, they deposited their pensions and deposited assets into a fund that has been renamed the Nurses and Local 813 IBT Retirement Plan, which pools money from the former Caritas Christi plan and funds set aside for active nurses and about 1,800 Teamsters.
By merging with an existing Taft-Hartley plan, unions wanting to pool their funds “have the advantage of not having to start from scratch and deal with all the administrative costs,” said Gene Karwalski, chief executive officer of Cheiron Inc., a McLean, Virginia, company that provides actuarial services to private- and public-sector pension funds.
At the same time, Karwalski said, multiemployer pension plans are subject to the same long-term trends as other pension systems: Many employers stop contributing, the old industries that offered pensions are shrinking, and baby boomers are retiring. There are often more retirees collecting benefits than workers paying into the plan.
Because Steward doesn’t disclose its financials to regulators, there’s no public record of when the company put money into the pension plan. At the end of 2014, four years after it committed to funding the Caritas Plan, its pension obligations were $368 million, according to a 2015 state attorney general’s report. But at the end of 2015, records provided by the nurses’ union showed Steward had transferred $605.3 million in old Caritas Christi employee pension funds into the new plan.
The following year, Steward sold the land and buildings housing its Massachusetts hospitals to Alabama-based real estate company Medical Properties Trust, leaving the hospitals with millions of dollars in lease payments. In March, it agreed to sell Stewardship Health, a national physician network, to UnitedHealth’s Optum division.
Although Steward has said it plans to exit the Massachusetts market, its employees and their hopes for a secure retirement will remain.
While the asset sale has left Steward Hospital’s future uncertain and complicated the sale, nurses say any buyer can still count on them and other employees coming to work and treating patients every day.
“We are our most valuable asset,” Pinkham said.
Robert Weisman can be contacted at robert.weisman@globe.com.
