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Aug. 2 — Trinity Health Corp. will pay $75 million to settle class action claims that it underfunded its pension plans by improperly treating them as “church plans” exempt from federal law ( Lann v. Trinity Health Corp., D. Md., No. 8:14-cv-02237-PJM, motion for preliminary settlement approval filed 8/1/16 ).
The settlement requires Trinity Health to contribute $75 million among nine different pension plans within the Trinity Health umbrella, including the plan for Catholic Health East, which merged with Trinity in 2014. While this settlement is less than the $107 million deal Connecticut-based St. Francis Hospital agreed to in May, it dwarfs the $8 million settlement reached by Ascension Health and its workers in a similar case last year
Significantly, Trinity also agreed to run the pension plans in compliance with certain federal funding requirements and worker protection laws for the next 15 years.
The settlement puts an end to two of the nearly three dozen class actions that have been filed against large hospitals over the past three years. In each lawsuit, the hospital is accused of mismanaging and underfunding its pension plan—often by hundreds of millions of dollars—by wrongfully claiming a religious exemption from the Employee Retirement Income Security Act.
While district judges have issued mixed rulings, the three federal appellate courts to have considered these cases all ruled against the hospitals. The U.S. courts of appeal for the Third, Seventh and Ninth circuits concluded that only a church—and not a hospital with a claimed religious affiliation—can establish an ERISA-exempt church plan.
In addition to making three $25 million pension plan contributions, the settlement requires Trinity to pay 219 individual employees $550 each to compensate them for benefits they allegedly lost by taking lump sum pension distributions in 2014.
In a similar vein, Trinity will distribute $1.3 million among the 7,371 former employees who allegedly forfeited certain benefits as a result of the pension plans' vesting requirements, which employees argued violated ERISA.
The settlement allows class counsel to seek up to $8 million in attorneys' fees, expenses and incentive awards for certain plaintiffs.
The settlement papers were filed Aug. 1 in the U.S. District Court for the District of Maryland. According to the papers, the deal has the potential to benefit as many as 116,000 individuals who work for Trinity-affiliated entities.
The settlement must receive approval from a federal judge before becoming final.
The employees are represented by Michelle C. Yau, Karen L. Handorf, Mary J. Bortscheller and R. Joseph Barton of Cohen Milstein Sellers & Toll PLLC, Washington, and Lynn L. Sarko, Havila Unrein, Matthew Gerend, Ron Kilgard and Laurie B. Ashton of Keller Rohrback LLP, Seattle and Phoenix.
The Trinity defendants are represented by Howard Shapiro, Robert W. Rachal, Stacey C.S. Cerrone and Connie N. Bertram of Proskauer Rose LLP, New Orleans and Washington, and Robert R. Niccolini of Ogletree Deakins Nash Smoak & Stewart PC, Washington.
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Text of the motion for settlement approval is at http://www.bloomberglaw.com/public/document/Lann_et_al_v_Trinity_Health_Corporation_et_al_Docket_No_814cv0223/7. Text of the settlement agreement is at http://www.bloomberglaw.com/public/document/Lann_et_al_v_Trinity_Health_Corporation_et_al_Docket_No_814cv0223/8.
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