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Hazel Bradford, Pensions & Investments

Federal court rejects church plan status for Dignity Health

December 17, 2013 - 9:19am

In the first decision among five major class action lawsuits challenging church-affiliated sponsors of defined benefit plans, a federal judge found that Employee Retirement Income Security Act rules do apply.

Dignity Health in San Francisco had claimed exemption as a church plan for its defined benefit plan, the size of which could not be learned by press time.

The lawsuits, filed by law firms Keller Rohrback L.L.P. in Seattle and Cohen Milstein Sellers & Toll P.L.L.C. in Washington, are collectively seeking more than $2 billion in missed pension contributions and other damages. Among other claims, the lawsuits challenge the interpretations made by the Internal Revenue Service and the U.S. Department of Labor that allowed the hospitals, which have varying degrees of church associations, to be exempt from ERISA.

A statement from Dignity Health said it remains “committed to ensuring our retirees and beneficiaries receive the benefits they have earned” and will continue to defend the case.

In the decision filed Dec. 12, U.S. District Court Judge Thelton Henderson in San Francisco said Dignity Health “does not have the statutory authority to establish its own church plan and is not exempt from ERISA as a matter of law.”

The decision “is a tremendous victory for the Dignity participants — and potentially also for participants in a great many other pension plans that were not established by churches,” said Karen Ferguson, director of the Pension Rights Center in Washington.

Hazel Bradford writes for Pensions & Investments, a sister publication of Business Insurance.