Memorial commission grapples with legal issues

The Memorial Commission met today to discuss several thorny legal questions, among them what happens to the pensions of the 4,000 people employed at the three-hospital system.

The pension question will weigh heavily as the commission decides whether to sell Memorial Health System and to whom. If a for-profit company buys the hospital system, then employees will no longer be able to participate in the Public Employees Retirement Association pension fund.

Employees would not lose their benefits, but the new owner would incur additional costs.

“The company will have to pay a termination fee, determined by an actuarial and approved by the PERA board,” said City Attorney Pat Kelly. “That sum would pay for the PERA benefits paid in by employees when they reach retirement age. It’s designed to protect PERA’s future interests.”

If the hospital is sold to a nonprofit organization, then the PERA board has the option of letting the hospital employees remain in the system.

The city is barred from benefiting financially from Memorial – even in its sale – under several legal requirements.

According to the Colorado Transfer Act, money from the sale would have to be used for a similar charitable activity. The commission plans to ask the state attorney general, John Suthers, for an opinion about whether that provision includes hospitals sold to non-profit groups.

The AG responds to requests for opinions within 30 days, Kelly said.

Memorial also cannot give money to the city’s general fund. The hospital and the city entered into that agreement in the 1990s, and it now is a part of its bond covenants.

“As long as those bonds exist, that (provision) has to be followed,” Kelly said. “The bonds would have to be paid off before that can be changed.”

The hospital system has no legal standing of its own to borrow money, she said, and even its bonds are issued by the city of Colorado Springs.

The commission plans to have its recommendations to council by December.