HSE in €60m pension bailout

Extraordinary steps taken to address a €60m pension deficit that exploded in the voluntary health sector in the last 24 months have been revealed.

The HSE has agreed to provide a series of lump-sum payments to bailout pension plans in the same sector that is currently embroiled in the salary top-ups scandal.

This money was sanctioned to plug escalating deficits arising from the recruitment embargo and the take-up in incentivised early-retirement packages.

However, the HSE only agreed to make its contribution to the unfunded superannuation schemes in the voluntary sector after an extended period of frontline budget cuts in some areas and brinkmanship between it and some of Ireland’s largest health providers.

In June, the St Vincent’s Hospital Group warned the HSE the problem had got so bad its directors could be seen as negligent if they continued to trade amid increasing unfunded deficits.

The auditors, PwC, also warned of the liability in its annual accounts for 2011.

Senior management was told to cut back on service levels at St Vincent’s and St Michael’s Hospitals before the HSE backed down in July and sanctioned a once-off €12m pension bailout.

A year earlier, the board of another large voluntary body threatened to resign if the HSE did not agree to pay for the pension deficit.

This was revealed in the board minutes of the Brothers of Charity Service South East, which also had to have its plan funded by the HSE, despite initial resistance.

The National Maternity Hospital told the HSE the pension deficit problem in the voluntary sector had been flagged for the last 10 years and the continual deficit meant money for primary services had to be diverted to meeting commitments to retired staff.

The HSE had maintained that the pension liability, which is funded from current spending rather than a dedicated reserve, was the responsibility of each voluntary group.

The extensive correspondence, released under the Freedom of Information Act, show the State contribution towards the pensions of voluntary sector workers rose from €4m in 2011 to €39m in 2012.

This year, €21m has been provided, but this is expected to rise dramatically as budget gaps widen near the end of the financial year.

Last year, 37 separate hospitals and groups negotiated pension bailouts ranging from €47,000 to €4m.

In June, the group chief executive of the St Vincent’s group, Nicholas C Jermyn, said the problems had escalated beyond what it was able to cope with.

Brian O’Donnell, the chief executive of the federation of voluntary groups, said it was working to quantify the scale of the problem: “We are currently in the process of surveying our members with a view to quantifying the problem in the current year as we have done in previous years.”

The HSE said in Section 38 groups there would be funding shortfalls on occasion but at this time it did not have concerns regarding the pension scheme.

It said at St Vincent’s and elsewhere the issues were monitored as part of budget discussions.

St Vincent’s said the problems accumulated between 2008 and 2012 but while it received the largest single bailout, its annual deficit was similar to other organisations of its size.

“This historical deficit issue has been resolved with the HSE,” it said.

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