Franciscan Missionaries to Pay $125M to Settle 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

Louisiana hospital system Franciscan Missionaries of Our Lady Health will pay more than $125 million to settle a proposed class action challenging its reliance on a religious exemption from federal pension law ( Nicholson v. Franciscan Missionaries of Our Lady Health Sys. , M.D. La., No. 3:16-cv-00258-SDD-EWD, motion for settlement approval filed 5/5/17 ).

The deal, announced in federal court papers filed May 5, requires the hospital system to contribute $125 million to three of its pension plans over a five-year period. It will also make $450 payments to each of 2,087 pension plan participants who took a lump-sum buyout in 2016.

The lawsuit accused Franciscan Missionaries of wrongly treating its pension plans as church plans exempt from the funding requirements of the Employee Retirement Income Security Act, which caused the plans to be underfunded by nearly $300 million. More than three dozen similar class actions have been filed over the past four years. Several hospitals have agreed to multimillion-dollar settlements, including Washington-based Providence Health & Services ($352M), Connecticut-based Saint Francis Hospital ($107M), Trinity Health Corp. ($75M), Ascension Health ($8M) and Alabama-based Baptist Health System Inc. ($11M).

The U.S. Supreme Court heard arguments on the scope of ERISA’s church plan exemption in March and is expected to rule on that issue before the end of its current term in late June. The federal district courts have been mixed on this 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.

The Franciscan Missionaries settlement requires the hospital to guarantee that pension plan participants will receive their promised benefits for the next 15 years. The deal must receive approval from the U.S. District Court for the Middle District of Louisiana before becoming final.

Kessler Topaz Meltzer & Check LLP and Izard Nobel LLP represent the plan participants. The deal allows these firms to seek attorneys’ fees of up to $1 million, which is less than 1 percent of the total settlement.

Proskauer Rose LLP and Holifield Janich Rachal & Associates PLLC represent Franciscan Missionaries.

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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