I’ve followed the unfolding Singing River Hospital financial disaster from afar and thus far have managed to not look at a single audit or financial report as I’m currently neck deep in paying work. That said I have seen woeful misinformation spread about Defined Benefit Pension Plans during the course of the reporting. Defined Benfit plans, if properly run, can still be an excellent and cost effective employee benefit and it is there we begin because many have been looted out and then dumped on the taxpayers:
Looting the Pension Funds ~ Matt Taibbi
‘Retirement Heist’: How Firms Trimmed Pensions ~ Interview with former WSJ Reporter Ellen Schultz, WTEST
At Singing River Hospital, the pension fund was not looted. Instead it was simply not funded by the hospital to the point now where management now claims that the plan is actuarially unsound. The implications of not funding a qualified defined benefit plan, which likely had mandated minimum funding requirements, are legion.
For instance, when most people think of qualified pension plans they think IRS, because it is the IRS that writes the regulations for plan qualification and actually approves the plans both when they are established and terminated. However it is not the IRS that Singing River Hospital needs to worry about in this instance as it is the Department of Labor, specifically the Employee Benefits Security Administration that would handle the potential ERISA violations associated with the media disclosures involving the Singing River defined benefit plan and that is the bad news because while the IRS “audits”, the DOL “Investigates”. Having handled a DOL Investigation once or twice in my time practicing public accounting, I can say first hand it is far better to have the IRS show up than the DOL when it comes to this subject matter.
All that said the Singing River financial debacle could keep an enterprising business writer busy for weeks as the ramifications of seeing yet another defined benefit pension plan crash and burn are literally legion. Here are a few things that come to mind: Continue reading “A few keys to understanding Singing River Hospital disaster: Part 1”