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Hospital agrees to funnel millions into pension plan to settle litigation


Another hospital has agreed to settle for $107 million in what's become a growing list of cases over whether faith-based health systems have to follow federal rules meant to protect employee pensions.

Carol Kemp-DeLisser, the pension participant who filed the class-action case, alleged that St. Francis Hospital and Medical Center, owned by Trinity Health Corp., wrongly classified its pension plan as a "church plan." Church plans are not subject to the federal Employee Retirement Income Security Act (ERISA), which protects employees by requiring that pension plans be insured and sufficiently funded. Kemp-DeLisser alleged that St. Francis failed to adhere to ERISAs minimum finding standards.

St. Francis, however, argued that because it is associated with and controlled by the Catholic Church, its pension plan is a church plan, exempt from ERISA.

As part of the settlement, the Hartford, Conn., hospital has agreed to pour another $17 million into its employee pension following settlement approval. It will then contribute another $10 million a year for nine years. St. Francis denied wrongdoing as part of the settlement and maintains that its pension plan is a church plan exempt from ERISA.

St. Francis said in a statement that it, “remains committed to ensuring our retirees and their beneficiaries receive their benefits under all of our retirement plans.” It noted that its plan remains a church plan.

“As intended, the plan has paid benefits in full to our retirees and will continue to do so into the future,” the hospital said in the statement. “The lawsuit was resolved by committing to fund the plan in a manner consistent with what St. Francis has done in the past and intends to do in the future.”

St. Francis also noted in court documents that part of the rationale for exempting church-affiliated plans from ERISA was to separate church and state.

The case is one of many similar across the country. As of March, about a dozen such cases had been filed and more are expected.

Ascension Health settled after a district court judge sided with the health system, finding that “a plan need not be established by a church in order to qualify as a church plan.”

And at least two federal appeals courts have weighed in on the issue. In March, the U.S. Court of Appeals for the 7th Circuit ruled that Advocate Health Care's pension plan is not a church plan simply because the health system is religiously affiliated. In December, the 3rd U.S. Circuit Court of Appeals ruled against St. Peter's Healthcare System in New Jersey.

District courts have been somewhat divided on the issue. For example, a district court judge recently partially granted a motion to dismiss a case filed against Trinity Health, saying an organization “controlled by or associated with a church or a convention of churches” is permitted to establish a church plan.

Some experts have speculated that the issue may eventually be decided by the U.S. Supreme Court.

Lisa Schencker writes for Modern Healthcare, a sister publication of Business Insurance.

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