Providence Health Inks $352M Church Plan Settlement

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By Jacklyn Wille

Oct. 24 — Washington-based Providence Health & Services will pay nearly $352 million to settle class action claims that it underfunded its pension plan by improperly treating it as a “church plan” exempt from federal funding requirements ( Griffith v. Providence Health & Servs. , W.D. Wash., No. 2:14-cv-01720-JCC, motion for preliminary settlement approval filed 10/20/16 ).

This agreement is the fifth—and by far the largest—settlement to come out of the recent litigation frenzy challenging the way religiously affiliated hospitals fund their pension plans. In May, Connecticut’s Saint Francis Hospital agreed to a $107 million settlement, and Trinity Health Corp. reached a $75 million deal with workers in August. Ascension Health settled similar claims for $8 million in 2015, and Alabama’s Baptist Health System Inc. reached an $11 million deal with its workers in August after making $89 million worth of voluntary pension contributions, according to court filings.

Over the past three years, the question of whether a large hospital can sponsor a pension plan exempt from the Employee Retirement Income Security Act has spawned three dozen proposed class actions and three appellate court rulings against the hospitals. 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 250,000 hospital workers face a pension shortfall of nearly $4 billion.

According to Providence’s settlement papers, filed Oct. 20 in the U.S. District Court for the Western District of Washington, the hospital will contribute $350 million to its pension plan over a seven-year period. Providence also agreed to make cash payments of $500 to each of 3,802 former plan participants who allegedly would have received higher benefits had the health system adopted an ERISA-compliant vesting schedule.

The agreement, which still must be approved by a federal judge, requires Providence to continue making minimum plan contributions that aim to fully fund the plan by 2029. Providence is also barred from reducing participants’ accrued pension benefits in the event of a merger or termination, which is an ERISA-like protection described as “crucial” in the settlement papers.

The Providence workers are represented by Keller Rohrback and Cohen Milstein Sellers & Toll, which spearheaded this litigation effort by filing nine of the first 10 lawsuits against large hospitals in 2014. The settlement allows Keller and Cohen to seek attorneys’ fees and expenses of up to $6.5 million, which the settlement papers say will be issued separately and apart from the $352 million deal.

Proskauer Rose and Davis Wright Tremaine represent Providence.

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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