Church Plan Litigation Hits Seventh-Day Adventist Hospital

Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...

By Jacklyn Wille

Oct. 31 — A Florida-based Seventh-Day Adventist hospital system is the latest large health-care company to be accused of underfunding its pension plans by millions of dollars based on a faulty reliance on ERISA’s “church plan” exemption ( Sheedy v. Adventist Health Sys. Sunbelt Healthcare Corp. , M.D. Fla., No. 6:16-cv-01893-GAP-GJK, complaint filed 10/28/16 ).

The lawsuit, filed Oct. 28 in a Florida federal court, claims that Adventist Health System’s pension plans are underfunded by a combined $134 million. Like more than three dozen recent suits against Catholic and other religiously affiliated hospitals, this lawsuit attributes the underfunding to Adventist’s improper reliance on a religious exemption from the Employee Retirement Income Security Act, which allows “church plans” freedom to avoid the statute’s strict funding and disclosure requirements.

The U.S. Supreme Court is expected to announce in the coming weeks whether it will wade into this ongoing controversy, in which plaintiffs claim that more than 300,000 hospital workers face a pension shortfall of about $4 billion. The litigation effort has scored victories in the U.S. Courts of Appeals for the Third, Seventh and Ninth circuits and has netted several multimillion-dollar settlements, including a $352 million deal by Washington-based Providence Health & Services announced earlier this month.

The 12-count lawsuit against Adventist Health differs from many of its predecessors because it targets several pension plans, including a multiemployer plan covering several Adventist-affiliated entities and a group of frozen plans in which participants are no longer accruing benefits.

The case is also noteworthy for being the first to target a hospital system with ties to the Seventh-Day Adventist Church. The vast majority of the nearly 40 church plan lawsuits have targeted Catholic health-care providers.

Finally, this is the first church plan case to be filed in a Florida federal court and only the second to be filed in any court within the Eleventh Circuit. The other lawsuit, filed against Baptist Health System in the Northern District of Alabama, led to an $11 million settlement that the parties said was on top of $89 million in voluntary pension contributions by Baptist.

The employees suing Adventist are represented by Sheppard White Kachergus & DeMaggio P.A. and Gainey McKenna & Egleston, the latter of which recently filed a similar suit against Cincinnati-based Mercy Health. That case was recently consolidated with two other proposed class actions against the hospital, and the firm in August agreed to allow plaintiffs’ firms Cohen Milstein Sellers & Toll and Keller Rohrback to take over as class counsel.

Adventist didn’t immediately respond to Bloomberg BNA’s request for comments.

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

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.