The Pension Benefit Guaranty Corp. is taking over two pension plans sponsored by Verity Health System of California, a bankrupt non-profit that is being acquired by the KPC Group.
The Verity Health System Retirement Plan A is estimated to be 52% funded, with $306 million in underfunding, while the Verity Health System Retirement Plan B is estimated to be 74% funded with $2.8 million in underfunding.
Verity and 16 affiliates filed for Chapter 11 protection in the U.S. Bankruptcy Court in Los Angeles on Aug. 31, 2018, after amassing more than $1 billion in bond debt in addition to the unfunded pension liability and other fiscal demands, according to court documents.
KPC Group is the parent company of KPC Health, operator of seven hospitals in Southern California. KPC Group made a $610 million stalking horse bid for St. Francis Medical Center, St. Vincent Medical Center, Seton Medical Center and several other facilities.
In January, El Segundo-based Verity Health entered an asset purchase agreement with the KPC Group that is awaiting final approval from the California attorney general and a federal bankruptcy court.
In a January announcement of the agreement, Verity Health said that the KPC Group agreed to make employment offers to substantially all employees, and that Verity Health “anticipates that payments to retirees will continue.” The PBGC, an unsecured creditor in the bankruptcy proceedings, stepped in as trustee because the company’s two pension plans would be abandoned following the sale of Verity Health System’s assets. The two plans were terminated April 30.
According to preliminary analysis by the PBGC, almost all plan participants will see their benefits reduced because at the time of the August bankruptcy the two pension plans had been insured by the PBGC less than the three-year minimum required for full coverage. Exact benefits are now being calculated.
Verity Health was formerly known as Daughters of Charity Health System and is a church plan exempt from ERISA regulations. It was purchased in 2015 by BlueMountain Capital Management, with additional investment from NantWorks in 2017.