Committee backs effort by hospital to conserve trust's value
WILLMAR -- Rice Hospital Board's effort to conserve the value of a trust established decades ago to pay for hospital charity care has the support of the Willmar City Council's Finance Committee.
The committee voted Monday to support the hospital's ef-fort to reclassify the Rice Trust from a private foundation to a supporting organization.
The Rice Trust was created in 1927 to assist needy persons for care at Rice Memorial Hospital. The trust was classified as a supporting organization in 1973.
The 2006 federal Pension Protection Act, however, reclassified the trust to a private foundation, explained Bill Fenske, Rice chief financial officer.
As a result of the reclassification, the trust has been paying out more money in grants and expenses than it makes in net earnings, he said.
As a supporting organization, distributions were based on the intent of the trust and amounted to about $60,000 per year, Fenske said.
As a private foundation, under different rules, the trust paid $126,000 in grants and expenses in 2008, while net earnings were $99,000. Fenske said the required distributions could lead to decreased value of the trust.
"I think you can start to see we've got some problems here. We're significantly increasing the distributions out of this trust,'' he told the committee. The concern, he said, "is that we could have years where we're distributing more money than what this trust is building up and bringing in as income.''
He said the unnecessary payment of 2 percent excise tax on trust net income under the private foundation classification decreases the money available to help needy patients.
The hospital's Finance Committee studied options and decided to prepare legal papers to petition the court for approval to revert the trust back to a supporting organization, he said.
If the court approves the petition, legal work would be prepared for the IRS to revert the trust back to a supporting organization, he said.
The motion approved by the committee recommends the council support Rice's effort.
"I think this is the right course of action,'' said Michael Schramm, Rice's new chief executive officer. "The intent for the fund is to be able to pay for charity care and needy patients. This is something we want to keep strong, keep moving forward, build it up. Our need for charity care is not going to decrease.''