Hospital's pension fund gets shut down

Jonathan D. Epstein

May 1, 2009 (McClatchy-Tribune Regional News delivered by Newstex) -- The U. S. Pension Benefit Guaranty Corp. took over the underfunded pension plan for 1,200 employees and retirees of Niagara Falls Memorial Medical Center on Thursday because the struggling hospital can't afford to fund the payments that it was required to make.

The federal agency announced the sudden termination of the plan Thursday, saying it acted to shut down the plan because the medical center failed to make about $7 million in legally required contributions.

The hospital hasn't paid into the plan since September 2006, and doesn't have the money to make up past-due payments or support future responsibilities, the agency said. And its failure to do so means the plan violated minimum funding standards under the Internal Revenue Code, which governs pensions.

"We initiated termination of this plan because of its status," said PBGC spokesman Marc Hopkins. "If it continued, it eventually wouldn't have had the assets to pay people."

The PBGC said retirees and beneficiaries will still get their monthly benefit checks without interruption, and other participants will get their pensions when they are eligible to retire. The agency will take the plan's assets and its own insurance funds to pay guaranteed benefits that have been earned.

However, Hopkins said there will no longer be any cost-of- living adjustments for retirees, and current workers will stop accruing benefits.

Also, the maximum guaranteed benefit that the agency can pay for a 65-year-old in the plan is $54,000, since that's the current limit for this year, when the plan ended. Workers who retire at a younger age or those who elect survivor benefits will get less, while those retiring at older ages will get more. The maximum is set by federal law and changes each year.

The actual impact on workers and retirees may not be significant, though. Only 325 of the 1,200 participants were still actively accruing benefits in the plan; the rest had either left the company or the plan, said Niagara Falls Memorial vice president of human resources Benjamin Baia. And the hospital had frozen its benefits and stopped accruals as of October 2008.

Finally, the agency's maximum guarantee is higher than the value of any of the participants payments, so no one will lose any value, Baia said.

Baia said the hospital now plans to replace the pension, or defined benefit, plan with a 403(b) defined contribution plan -- which is similar to a 401(k), but for a nonprofit.

PBGC will notify plan participants of the change by mail. Anyone with questions can go online to www.pbgc.gov or call (800) 400-7242. The PBGC and the hospital also will begin negotiating a fair compromise penalty or payment within a few months to cover the deficiency. "We're going to be working with them going forward, but it's been a very amicable process," Baia said.

According to the PBGC, the Niagara Falls Memorial pension plan is only about 43 percent funded, with assets of $9 million but liabilities of $21 million. That's a shortfall of $11.8 million, of which the PBGC now expects to be responsible for about $7.6 million.

In 2006, the nonprofit hospital earned $1.78 million in surplus. Its CEO, Joseph Ruffolo, earned $499,950, while chief financial officer Anthony Zito took in $302,738. In all, its top five officers got $1.32 million.

jepstein@buffnews.com

Newstex ID: KRTB-0019-34581659