Stephen Del Sesto Mentioned in Wall Street Journal: Church Pensions Sidestep Oversight -- Fund Collapses at Religiously Affiliated Hospitals Upend Retirees’ Plans

A recent Wall Street Journal article discussed religiously affiliated pension funds, and their ability to opt out of the federal Employee Retirement Income Security Act of 1974 (ERISA), which protects employees and their retirement savings by requiring the plan sponsor to “fund pensions well in advance and to set aside retirement savings in dedicated accounts.”

Church plans, as they’re commonly called, also “don’t have to participate in the federal insurance program by paying premiums to the Pension Benefit Guaranty Corp., or PBGC, which steps in when plans fail.

If a plan fails, PBGC guarantees benefits at varying amounts based on age and other factors, and “more than 80% of retirees in plans it takes over receive their full benefit.”

In 2017, Pierce Atwood partner Stephen Del Sesto was appointed as receiver for, “2,700 nurses and other employees of St. Joseph’s Health Services of Rhode Island,” which didn’t have nearly enough funds in its pension plan to pay participants’ benefits.

Stephen sued the hospital company (and others), “arguing that the company had improperly hidden behind the church plan exemption to avoid contributing funds for most of a decade and to mask the plan’s perilous financial condition from participants and the state.”

And when the pension plan shared its financial condition with employees and others, Stephen alleged that, “it used higher interest rate assumptions that would have been allowed under federal law, which let it say it had more than 90% of the money needed rather than about 50%.”

Stephen also alleged that, “hospital officials and the Roman Catholic Diocese of Providence improperly preserved the pensions church plan status after the hospitals were sold in 2014 to a California-based for-profit company,” helping to ensure the deal closed. A federal court, however, found not only that the plan didn’t qualify as a church plan, it hadn’t qualified as such even before the sale.

Through litigation and settlements, Stephen was successful in recouping about $55 million, “including infusions from the diocese and the buyer.” PBGC has agreed to take over pension payouts, and the vast majority of plan participants will collect their full benefits.

As a direct result of this crisis, “Rhode Island now requires church plans with more than 200 participants to disclose details about their financial health.”

The complete article can be found in the February 26, 2025 edition of Wall Street Journal.