St. Clare's Hospital was everything to Jerry and Kathy Adach. They married after meeting at the Schenectady, New York area hospital, where both worked, in the early '80s. Their two daughters were born there. The couple, who devoted a combined 59 years of service to the facility, had expected to retire with a good pension from the hospital. That is, until last year, when their former employer — which went out of business back in 2008 — delivered a gut punch: Its pension plan was in financial distress and wouldn't pay a dime of their expected benefits. For Jerry and Kathy, both 58, that means losing around $27,000 a year in planned retirement income — around a third of their combined income from the hospital. "Last year, out of nowhere, they just said, 'We're done,'" said Jerry Adach, who works in information technology. "We wanted to retire at 62. We can't now." "I banked on that pension," he said. "We can't make that up."

The Adachs are among more than 1,100 former St. Clare's employees suing to recover their money. (St. Clare's closed in 2008, merging with two other area hospitals to form Ellis Medicine.) Hundreds of other employees at similar workplaces in states like Minnesota, New Jersey and Rhode Island have also sued in recent years to salvage their pensions. Federal retirement law typically puts a backstop in place to prevent this sort of doomsday financial scenario for retirees and near-retirees. However, St. Clare's was affiliated with the Roman Catholic Church. Its pension, and those of other nonprofits throughout the U.S. with ties to religious entities, are beholden to different rules that could ultimately leave people empty-handed or with reduced benefits. "We have seen estimates that it affects about 1 million people," said Dara Smith, a senior attorney for the AARP Foundation representing many of the former St. Clare's workers. For families like the Adachs, who are near retirement with little time to make up for lost pension income, or retirees living on fixed incomes and unable to go back to work, the effect could be financially crippling.

I banked on that pension. We can't make that up. Jerry Adach former employee at St. Clare's Hospital

Around 661 former St. Clare's workers — nurses, orderlies, lab technicians, clerical and housekeeping staff — were told they wouldn't get any of their pension benefits, according to a court filing. Roughly 440 who were already receiving pensions had their benefits cut by 30% for life. The Adachs estimated they'd have to save an extra $650,000 to make up for the lost income. While they will still get monthly Social Security checks once in retirement, they've had to live more modestly, downsize to a smaller house and forgo some vacations they'd have liked to take. But the couple knows others who are worse off. "They're in a bad way, some of them," Mr. Adach said. "There are people who are really financially strapped right now." Joseph Pofit, chairman and president of the board of St. Clare's Corporation, the successor to St. Clare's Hospital and associated to some degree with the Roman Catholic Diocese of Albany, declined to comment due to the ongoing litigation. Other organizations in the crosshairs of litigation have argued in court that their nonprofits serve the needy and the potential financial liability for their pensions could be devastating.

Church plans have different rules

Jason Cameron

The Employee Retirement Income Security Act, a federal law, requires private-sector companies offering pensions to pay annual insurance premiums to the Pension Benefit Guaranty Corporation, which steps in to pay monthly benefits to retirees (up to a maximum amount) if a company can no longer make its promised payments. The PBGC paid monthly benefits to more than 932,000 retirees in around 4,900 pension plans during the federal government's last fiscal year. The federal law, however, doesn't apply to "church plans" — meaning they don't have an insurance backstop in the event their pension goes belly up.

In 2017, the Supreme Court delivered a blow to workers in a similar situation to those at St. Clare's. While such pension plans weren't directly established by a church, the high court ruled that they are still considered "church plans" exempt from ERISA's protections. Former St. Clare's workers are suing the Albany diocese and other defendants in New York state court to try to recoup money they say was guaranteed. They claim the pension has assets of roughly $29 million, but owes workers more than $84 million — a shortfall of $55 million. "We respect the rights of pensioners to do what they feel is necessary to secure recovery of their lost benefits," said Mary DeTurris Poust, a spokeswoman for the diocese. "However, the Diocese of Albany never managed the St. Clare's pension fund. "St. Clare's is a separate corporation," she added. "Its pension was managed by the corporation, not by the diocese."

'Not a sob story right now'

Other workers are taking a similar approach. Around 135 former employees of a hospital system in New Jersey sued the Roman Catholic Archdiocese of Newark in May last year, claiming it deprived plaintiffs of at least $2.7 million in lifetime pension benefits. St. Joseph Health Services of Rhode Island settled a lawsuit with 2,700 pension beneficiaries last year for $14 million. The hospital, affiliated with the Roman Catholic Church, wanted to cut pension benefits by 40% across the board, according to a court filing.