Dignity Health, San Francisco, will pay $100 million to settle a long-running class-action lawsuit challenging its status as a church plan.
The settlement, set for final approval Aug. 1, calls for Dignity Health to contribute $50 million in 2020 and $50 million in 2021. It also requires mandatory funding contributions to the plan for five years and payment of $1.49 million to a related group of vested participants, according to motions filed June 27 with the U.S. District Court in San Francisco.
The settlement notice filed by the plaintiffs notes that Dignity Health has made previous voluntary contributions to the plan, including $271 million in fiscal 2018, but “has no obligation under the plan document to continue to do so,” and the impact of a merger into CommonSpirit Health on plan funding decisions is “unknown.”
The complaint in Rollins et al. vs. Dignity Health et al. was first filed in April 2013 by plaintiffs seeking more than $2 billion in missed pension contributions and other damages. Among other claims, the lawsuit challenged the interpretations made by the IRS and the Department of Labor that allowed the hospitals in the Dignity Health network, which have varying degrees of church associations, to be exempt from the Employee Retirement Income Security Act.
By December 2013, the District Court had ruled that Dignity Health did not qualify for a church plan exemption from ERISA because only a church can sponsor and maintain a church plan. After various motions, that decision was affirmed in July 2016, by the 9th U.S. Circuit of Appeals in San Francisco.
In August 2016, Dignity Health asked the U.S. Supreme Court to review the 9th Circuit’s decision, and the case was consolidated with two similar church plan challenges against Advocate Health Care Network and St. Peter’s Healthcare System.
The Supreme Court ruled in June 2017 that pension plans did not have to be established by a church to be exempt from ERISA, as long as they are controlled by or associated with one. Plaintiffs then filed an amended class-action complaint in November 2017 in the 9th Circuit.