Mercy Iowa City pensioners seek ‘official’ status in bankruptcy discussions

IOWA CITY — As attorneys wrangle over dwindling money available to pay lawyers, bankers, creditors and employees with the now-bankrupt Mercy Iowa City, the hospital’s pensioners are asking for a voice too.

Past and present Mercy employees who joined its now-frozen “church plan” over the nearly 50 years it was accepting new entrants on Wednesday made their payment concerns known — asking the U.S. Bankruptcy Court to establish an official “Committee of Pensioners,” similar to the committee it established for unsecured creditors.

With official status, the growing group of 449 pensioners who’ve requested regular communication would get more case information and a voice, given, “The future of the pension plan, as well as the status of its funding, is at issue.”

“The committee may have interest in other assets of this estate, to the extent the pension plan is underfunded,” according to the group’s request of the court.

Mercy, in continuing to operate through the bankruptcy and transition to new ownership, has sought court approval to use for ongoing operations its “cash collateral” — a shrinking pot of money that could be distributed among the hundreds of creditors still owed many millions, unlike restricted pension funds.

Upon filing for bankruptcy, Mercy was reporting five pension-specific bank accounts holding a total of $119.5 million — about 85 percent of its $141 million obligations.

That underfunding has pensioners worried about their financial futures.

“There is no indication that the pension funds are being held in a trust designated as Mercy Hospital Iowa City, Iowa Employees’ Pension Trust,” according to the pension’s court petition. “The future of the pension plan, as well as the status of its funding, is at issue in this case.”

Among the growing group of pensioners interested in receiving updates and help related to the Mercy bankruptcy and transition are five who have hired their own attorneys. The larger group that wants official committee status also has a lawyer.

“It is publicly acknowledged that the plan is substantially underfunded,” according to pensioners who on Friday filed a statement in support of official committee status. “At its simplest, that shortfall gives rise to a substantial claim held by the plan against (Mercy), an interesting situation given that … a representative or officer of (Mercy) is functioning as the trustee for the plan, a situation that, if true, would appear to give rise to potentially untenable conflicts of interest as the case progresses.”

Pensioners argued they are different than other unsecured creditors — as they have different interests and a different standing with Mercy.

“While (Mercy) has asserted in pleadings and the press that it has kept plan members adequately informed as the case moves along, that has not been the experience of the concerned pension beneficiaries,” according to that supportive statement. “Furthermore, the independence of the plan itself is in question.”

Vanessa Miller covers higher education for The Gazette.

Comments: (319) 339-3158; vanessa.miller@thegazette.com