Participants in Ascension Health’s defined benefit plans have agreed to a preliminary settlement in a complaint that alleged the Catholic hospital network has underfunded pension plans by $440 million.
If the terms of the deal are ultimately accepted by a U.S. District Court in Detroit, the case would be the first “church plan” claim to be settled, according to Thomas Clark, an attorney with the Wagner Group, in a post on Fiduciary Matters.
Religious institutions that sponsor retirement plans are exempted from ERISA’s requirements of typical plan sponsors.
Last May, Judge Avern Cohn granted Ascension’s motion to have the case dismissed, citing the IRS interpretation of ERISA, which says retirement plans qualify for church plan exemption if the organization sponsoring the plan is controlled, or associated, with a church.
Though the church-plan exemption “may appear to be an irrational distinction, it is a distinction mandated by law,” wrote Cohn when he dismissed the case.
The plaintiffs appealed to the 6th Circuit. The appellate court appointed a mediator before hearing the case. Six months of negotiations ensued, according to the settlement agreement.
Under the terms, participants in Ascension’s retirement plans will receive “ERISA-like” protections for the next seven-and-a-half years, but the plans still will be considered to have church-plan status.