New York Attorney General Files Lawsuit to Recover Lost Retirement Benefits for Hospital Workers

Neglect and mismanagement by the Roman Catholic Diocese of Albany caused 1,100+ former employees to lose retirement benefits, attorney general alleges.

The New York attorney general today filed a lawsuit to help more than 1,100 former employees of St. Clare's Hospital in Schenectady, New York, recover lost retirement benefits because of alleged "negligent and intentional actions" by the Roman Catholic Diocese of Albany.

Attorney General Letitia James alleges that the Diocese shirked its fiduciary and legal responsibilities to the former hospital's nurses, lab technicians, social workers, EMTs, orderlies, housekeepers, and other essential workers when it failed to preserve and protect the hospital's pension that was entrusted to its care.

Of those 1,100+ who lost their retirement benefits, 650 retirees lost all their pension rights and nearly 450 retirees received a single payment equal to 70% of their pension's value.

James seeks to hold the Diocese liable for the misconduct and recover the pensions.

"These former hospital workers nobly served their community and cared for the sick, elderly, and vulnerable. But when they retired, they were left with nothing," James said.

"No one should ever have to deal with the financial and emotional trauma of losing the resources they were counting on to survive," she said. "With this action, we're standing up for New Yorkers who deserve to retire with dignity, and I will do everything in my power to make sure they get the pension benefits they’re owed."

The Diocese's decision to remove the pension plan from the protections available under federal law, its failures to adequately fund, monitor, or insure the pension, and its resulting failure to administer the pension violate New York Not-for-Profit Corporations Law and New York Estates, Powers & Trusts Law, according to a press release issued by James' office.

St. Clare’s Hospital, co-founded by the Diocese in 1948 and closed in 2008, was managed primarily by the St. Clare’s Corporation, a not-for-profit corporation created by the Diocese to oversee the hospital's operations.

The attorney general launched an investigation into the Diocese in 2019 after it terminated the pension that had been in place since 1959. That investigation found "repeated and pervasive violations of the Diocese’s fiduciary duties of care, loyalty, obedience, and disclosure to St. Clare’s Corporation," resulting in failure to pay the promised retirement benefits to its former employees and vested pensioners, according to the attorney general.

For example:

• In 1992, the Diocese used its religious status to obtain a federal exemption to avoid the required federal protections for pensioners, such as pension insurance and minimum funding contributions. After obtaining the exemption, the Diocese failed to make any annual contributions to the pension for all but two years from 2000 to 2019, causing the pension to be underfunded by $43 million.
• The Diocese hid the collapse of the pension plan from the federal government and former hospital workers who were vested in the plan and rejected all attempts to address the deficit.
• In 2007, the Diocese requested and received $28.5 million in Medicaid funds from the state of New York to eliminate the pension’s deficit. However, the Diocese knew the funds were not sufficient to fully fund the pension, despite representing that they were.
• The Diocese failed to require yearly audits and accounting of the St. Clare’s Corporation's finances and pension, as required by the St. Clare’s Corporation’s bylaws.

In 2018, the leadership of the St. Clare’s Corporation learned that their liability insurance coverage for directors and officers would not be extended, so to avoid exposing themselves to the risk of personal liability, they unanimously voted to terminate the pension and dissolve the corporation, according to James.

In the petition for dissolution, filed in 2019, the corporation admitted that it owed more than $50 million to the retirement plan and its members and had no means or intention to fully fund the pension.

New York law requires the Office of the Attorney General to approve voluntary dissolutions of New York not-for-profit corporations. Because of concerns about the outstanding benefits owed to the 1,100+ pensioners, James opposed the corporation’s petition and sought answers to why the pension failed to provide the promised and earned benefits and what happened to the $28.5 million in Medicaid funds received by St. Clare’s from New York state.

The lawsuit is a strong step in getting their pensions restored, one pensioner said.

"We have fought to regain our rightful pension for more than three years," said Mary Hartshorne, a St. Clare’s pensioner. "We have endured a pandemic and skyrocketing inflation that limited our already depleted resources. We had almost given up on multiple occasions … We finally have light at the end of the tunnel."

The Roman Catholic Diocese of Albany did not respond to a HealthLeaders request for comment.