Mercy Health Targeted in Latest Church Plan Class Action

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By Jacklyn Wille

March 31 — Another Cincinnati hospital has been sued for treating its pension plan as an ERISA-exempt church plan.

The proposed class action—which accuses Mercy Health of underfunding its pension plan by nearly $210 million—asks a question that more than a dozen recent lawsuits have asked, including one filed two weeks ago against fellow Cincinnati hospital St. Elizabeth Medical Center Inc. . The suits ask whether a religiously affiliated hospital can treat its pension plan as a “church plan” exempt from the Employee Retirement Income Security Act, or must comply with the statute's funding, vesting and disclosure requirements.

A loss in one of these lawsuits could be costly for a hospital, particularly if a judge orders it to make up a pension funding deficiency totaling hundreds of millions of dollars.

Successful Challenges

This lawsuit against Mercy Health comes on the heels of a nationwide litigation effort dating back to 2013 and led by plaintiffs' firms Cohen Milstein Sellers & Toll PLLC and Keller Rohrback LLP.

The district judges hearing these challenges have been evenly split, issuing decisions in favor of Ascension Health, Catholic Health East and Trinity Health Corp. Other rulings have gone against Saint Peter's Healthcare System, Advocate Health Care Network and Dignity Health.

So far, two appellate courts have weighed in on this line of cases, both ruling against the hospitals. In 2015, the Third Circuit disallowed Saint Peter's from using ERISA's church plan exemption . The Seventh Circuit followed suit earlier this month in a case against Advocate .

The next appellate decision is likely to come from the Ninth Circuit, which heard arguments in a case against Dignity Health in February.

The Sixth Circuit—which controls the district courts hearing the suits against Mercy Health and St. Elizabeth—was scheduled to hear a challenge to Ascension Health's pension plan, but that case settled for $8 million in 2015 .

New Allegations

The complaint against Mercy Health challenges the pension plan's underfunding and its failure to comply with ERISA's notice and disclosure requirements, which mandate certain annual reports and funding notices.

It also accuses the plan's fiduciaries of breaching their duties and operating under conflicted loyalties.

According to the complaint, Mercy Health is the largest health system in Ohio and the fourth largest employer in Ohio, operating 23 hospitals and employing 32,000 people.

The complaint was filed March 30 in the U.S. District Court for the Southern District of Ohio by Cincinnati-based Strauss Troy.

Mercy Health 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