Diocese of Providence to pay $2.5 million in St. Joseph's pension case. What happens next?

PROVIDENCE – The Roman Catholic Diocese of Providence has reached a settlement in principle with the thousands of workers left hanging by the collapse of the St. Joseph Health Services of Rhode Island pension fund.

Under the terms reached recently, the Diocese would pay $2.5 million into the plan as long as it is accepted by the Pension Benefit Guaranty Corporation, the federal agency that protects private sector pension plans, according to a joint statement announcing the agreement.

“The parties are hopeful that this settlement along with settlements previously reached with other defendants will increase the likelihood of PBGC taking over the Plan and also guaranteeing payment of future retiree benefits up to the statutory maximum,” the parties said.

To date, lawyer Max Wistow said they have recovered about $50 million through settlements with other defendants in the case.

The statement emphasized that the underlying allegations involving the troubled fund remain intensely disputed and that there was no admission of fault by the Bishop Richard G. Henning or any diocesan-related entity.

'A win-win for the clients'

The receiver is expected to submit the plan to PBGC no sooner than spring 2024 in hopes that it will agree to provide the maximum statutory guaranteed benefits, Wistow said.

Since 2019, about $1.4 million in premiums have been paid annually to PBCG to improve the odds that the agency will agree take over the plan, according to Wistow. He and receiver Stephen Del Selsto have been working to claw back as much of the pension plan as possible for the workers.

The agreement is contingent, too, upon ongoing litigation being stayed in U.S. District Court and PBCG agreeing not to assert any claims against any diocesan-related entities. Judge William E. Smith ordered a stay in the case Aug. 31.

“We consider this a win-win for the clients,” Wistow said. “Our job is to get the clients the best possible result.”

If any part of the agreement falls apart, the settlement agreement will be void, no payments will be made, and litigation would resume and the matters contested. Wistow said.

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The St. Joseph’s plan goes into receivership

The St. Joseph's Health Service pension crisis came to light in August 2017 when the managers of the pension fund asked the court to put it in receivership and approve a 40% across-the-board benefit cut among the 2,700 current and former employees eligible for pensions.

The $95 million pension fund was placed in receivership three years after it was sold to Prospect CharterCare in 2014.

Superior Court Judge Brian Stern appointed Del Sesto as receiver, with Wistow named special counsel.

Del Sesto sued in 2018, objecting to the proposed cuts and accusing Prospect CharterCare and then Bishop Thomas Tobin of concealing financial problems within the pension fund to shield their own liability from regulators during Prospect CharterCare’s acquisition of the company that owned Roger Williams Medical Center, Fatima Hospital and the now shuttered St. Joseph Health Center.

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Mediation leads to agreement

Wistow expressed gratitude to former state Supreme Court Chief Justice Frank Williams who helped the parties mediate the proposed resolution.

Wistow represents the workers’ interests along with Stephen P. Sheehan and Benjamin G. Ledsham.

The joint statement extended appreciation for the Diocese's cooperation in assisting them to position the plan so that it has an opportunity for PBGC to take over the plan and make payments to participants.

"While both sides believe they have strong claims and defenses, they agree that ending the lawsuit and taking those steps necessary to hopefully secure full coverage for the Plan participants is in the best interests of everyone," they said.

This article originally appeared on The Providence Journal: Diocese of Providence to pay $2.5 million in St. Joseph's pension case