Bon Secours Agrees to $98M Settlement in Church Pension Suit

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

Bon Secours Health System Inc. will pay $98.3 million to settle claims that it underfunded its pension plans by wrongly claiming a religious exemption from federal pension law ( Hodges v. Bon Secours Health Sys., Inc. , D. Md., No. 1:16-cv-01079-RDB, motion for settlement approval filed 5/31/17 ).

The deal, announced in court papers filed May 31, requires the hospital to contribute $98 million to its pension plans over a seven-year period. This payment represents the “total amount” of plan underfunding at the time of the settlement, according to the filing. The hospital also agreed to pay $300,000 to 530 employees who would have received additional benefits had the hospital used a pension-vesting schedule that complied with the Employee Retirement Income Security Act.

The proposed class action said Bon Secours wrongly treated its pension plans as church plans exempt from ERISA’s funding and vesting requirements, which led to an underfunding of $390 million. More than three dozen similar class actions have been filed over the past four years, and several hospitals have agreed to multimillion-dollar settlements.

The U.S. Supreme Court heard arguments on the scope of ERISA’s church plan exemption in March and is expected to rule on the issue by late June. The federal district courts have been mixed on the question, but three federal appellate courts—the U.S. Courts of Appeals for the Third, Seventh, and Ninth circuits—have ruled against the hospitals and found that ERISA-exempt church plans must be established by churches, not hospitals.

In addition to paying more than $98 million, Bon Secours agreed to “mimic” certain ERISA-required protections until at least 2025. Among other things, Bon Secours will refrain from cutting benefits and will follow ERISA’s claims procedures and notice requirements, according to settlement papers.

The deal, which the parties say will benefit more than 20,000 plan participants, allows the participants’ attorneys to receive fees of up to $3.5 million. Any attorneys’ fees will be in addition to the settlement amount, court papers indicate.

The settlement must receive approval from a federal judge before becoming final. The case is pending before Judge Richard D. Bennett of the U.S. District Court for the District of Maryland

Cohen Milstein Sellers & Toll PLLC, Keller Rohrback LLP, and Block & Leviton LLP represent the plan participants. Groom Law Group represents Bon Secours.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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