Category Archives: Pension Liability

Judge refuses to approve pension plan deal requiring Dignity to pay up to $747M

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Dignity Health Poised to Settle ERISA Lawsuit for $100 Million

A California federal judge again refused to approve a deal requiring Dignity Health to pay as much as $747 million to settle a class-action lawsuit accusing the San Francisco-based health system of underfunding its pension plan, according to Law360.

The lawsuit, filed by former Dignity Health workers, alleges the health system used a religious Employee Income Retirement Security Act exemption to underfund its pension plan by $1.8 billion. In October, a federal judge in the Northern District of California refused to sign off on a proposed settlement because it contained a “kicker” clause. The clause would allow Dignity to keep the difference between the amount of attorneys’ fees awarded by the court and the more than $6 million in fees authorized by the settlement.

“Although the fact is not explicitly stated in the settlement, if the court awards less than $6.15 million in fees, defendants keep the amount of the difference and those funds are not distributed to the class,” Judge Jon S. Tigar said, according to Bloomberg Law. “The Court concludes that this arrangement, which potentially denies the class money that defendants were willing to pay in settlement — with no apparent countervailing benefit to the class — renders the settlement unreasonable.”

Both sides agreed to eliminate the kicker clause and resolved other issues the court outlined when it denied preliminary approval and class certification in October. In November, the workers filed a renewed unopposed motion, which the court denied June 12.

To certify a class for the purpose of settlement, the court must find that the plaintiffs named in the lawsuit and their lawyer were negotiating on behalf of the entire class. In Dignity’s case, there’s a “fundamental conflict of interest between the vesting subgroup and the rest of the class that must be addressed by subclass certification,” Mr. Tigar wrote in the order denying the motion. “Because the court cannot certify the class, it cannot grant preliminary approval of the settlement.”

Mr. Tigar wrote that he made the finding reluctantly because of the extensive litigation that has already occurred and the age of the case. However, he said Rule 23 of the Federal Rules of Civil Procedure requires it. 

 

 

 

 

Dignity Health’s class-action settlement actually worth $700M, workers say

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https://www.beckershospitalreview.com/finance/dignity-health-s-class-action-settlement-actually-worth-700m-workers-say.html

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A California federal judge refused to approve a deal in October requiring Dignity Health to pay more than $100 million to settle a class-action lawsuit accusing the San Francisco-based health system of using a religious Employee Income Retirement Security Act exemption it wasn’t entitled to. Current and former Dignity workers argue the deal is actually worth more than $700 million in court documents filed Nov. 25, according to Law360.

Dignity Health allegedly used the religious exemption to underfund its pension plan by $1.5 billion. On Oct. 29, a federal judge in the Northern District of California refused to sign off on a proposed settlement because it contained a “kicker” clause. The clause would allow Dignity to keep the difference between the amount of attorneys’ fees awarded by the court and the more than $6 million in fees authorized by the settlement.

“Although the fact is not explicitly stated in the Settlement, if the Court awards less than $6.15 million in fees, Defendants keep the amount of the difference and those funds are not distributed to the class,” Judge Jon S. Tigar said, according to Bloomberg Law. “The Court concludes that this arrangement, which potentially denies the class money that Defendants were willing to pay in settlement — with no apparent countervailing benefit to the class — renders the Settlement unreasonable.”

Though the judge refused to sign off on the deal, he gave the parties an opportunity to revise the agreement and resubmit it for approval. Workers tweaked the proposed deal in a renewed motion for settlement filed Nov. 25.

According to the motion, the parties have agreed to eliminate the kicker clause.

“As provided in the new settlement, class counsel will apply to the court for approval of a total award of $6.15 million, for attorney fees, expenses and incentive awards,” the motion states. “If the court awards less than the requested amount, Dignity Health has agreed to pay the balance into the plan’s trust.”

The workers also argue that the attorney fee award is reasonable given the value of the settlement.

Under the proposed settlement, Dignity would add $50 million in retirement plan funding in 2020 and 2021.The settlement also requires Dignity to fund the pension plan until 2024 and prohibits the health system from reducing accrued benefits because of a plan merger or amendment for 10 years. For 2022 through 2024, Dignity Health’s cash contributions to the plan will be at least the “minimum contribution recommendation,” an amount calculated each year by independent actuaries.

“Under this settlement, Dignity Health will make substantial contributions to the plan for five years, in an amount we estimate to exceed $700 million,” the motion states.

The court previously noted that plaintiffs did not identify any settlement provisions governing how Dignity Health’s actuaries calculate the minimum contribution recommendation. The plaintiff’s actuary provided more information on the calculation in a supplemental declaration submitted Nov. 25.

The workers are seeking preliminary approval of the new settlement.

 

Attorneys’ Fees Doom Dignity Health’s $100 Million ERISA Deal

Posted on by • Posted in ERISA Church Plan Exemption, Health System, Hospital, Hospital Industry, Pension, Pension Funding, Pension Liability, Religious Affiliated Hospitals • Leave a comment

https://news.bloomberglaw.com/class-action/attorneys-fees-doom-dignity-healths-100-million-erisa-deal

Dignity Health’s $100 million class settlement with workers covered by its pension plan won’t get court approval until the parties rethink how the workers’ attorneys are paid, a federal judge in the Northern District of California ruled.

The deal is flawed because it contains a “kicker” clause allowing Dignity to keep any difference between the $6.15 million in attorneys’ fees authorized by the settlement and the amount of fees actually awarded by the court, Judge Jon S. Tigar said.

“Although the fact is not explicitly stated in the Settlement, if the Court awards less than $6.15 million in fees, Defendants keep the amount of the difference and those funds are not distributed to the class,” Tigar said. “The Court concludes that this arrangement, which potentially denies the class money that Defendants were willing to pay in settlement—with no apparent countervailing benefit to the class—renders the Settlement unreasonable.”

The proposed deal, which was slated to benefit more than 91,000 people, requires the hospital to put $50 million in its pension plan in 2020 and at least that much in 2021. Required contributions in the following three years will be based on recommendations from the plan’s actuaries, according to settlement papers filed in June.

Tiger also expressed concerns about Dignity’s agreement to make direct payments to certain plan participants. This has the potential to “shortchange or disproportionately favor these claims relative to classwide claims,” Tigar said.

Tiger withheld preliminary approval from the deal in an Oct. 29 order while giving the parties an opportunity to revise and try again.

Dignity Health is one of dozens of religiously affiliated hospitals that have been accused of wrongly treating their pension plans as “church plans” exempt from the Employee Retirement Income Security Act. The lawsuits claim that hospitals misuse ERISA’s church plan exemption in order to underfund their plans by tens or hundreds of millions of dollars.

The U.S. Supreme Court addressed ERISA’s church plan exemption in 2017, issuing a ruling that favored Dignity and other hospitals while leaving several questions open for further litigation.

The plan participants are represented by Keller Rohrback LLP and Cohen Milstein Sellers & Toll PLLC. Dignity is represented by Manatt Phelps & Phillips LLP, Trucker Huss APC, and Nixon Peabody LLP.

The case is Rollins v. Dignity Health, N.D. Cal., No. 4:13-cv-01450-JST, 10/29/19.

 

 

 

Kentucky’s New Pension Law Marks Unprecedented Reforms

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https://www.governing.com/week-in-finance/gov-kentucky-pension-bevin.html?utm_term=Kentucky%27s%20New%20Pension%20Law%20Marks%20Unprecedented%20Reforms&utm_campaign=Kentucky%27s%20New%20Pension%20Law%20Marks%20Unprecedented%20Reforms&utm_content=email&utm_source=Act-On+Software&utm_medium=email

Kentucky Gov. Matt Bevin signing a pension relief bill on Wednesday.

Critics say it could weaken the state’s retirement system, which is already the worst-funded in the nation. 

After several failed attempts and a special legislative session, Kentucky — the state with the worst-funded pension system — now has a plan to ease the financial burden that employees’ retirements are taking on quasi-governmental agencies.

In signing the pension reform bill on Wednesday, Republican Gov. Matt Bevin said it provides “much needed financial relief” and “a viable path forward for our mental health agencies, rape crisis centers, local health departments and other community agencies.”

But opponents of the new law warn that the controversial changes could worsen the state pension plan’s already precarious finances.

The bill freezes the pension payments for quasi-governmental institutions for another year, essentially allowing them to pay half of their bill until it significantly increases after 2020. And in an unprecedented move, the law allows those agencies to leave the state’s pension system and pay off their debt, with interest, over the next 30 years; those agencies can also now move employees hired after 2013 out of the state retirement system.

Pension advocates say the new law threatens the solvency of the $2.7 billion Kentucky Retirement System and will likely leave it waiting decades to get the money it’s owed. The state employees’ plan is already one of the worst-funded in the nation, with just 16 percent of the assets it needs to meet its expected liabilities.

Bridget Early, executive director of the National Public Pension Coalition, says the legislation builds on years of state changes that have weakened the system.

“Instead of finding a way to get money into the system, they’ve all focused on benefit cuts,” she says. “That ultimately removed needed contributions.”

The bill was pushed for by presidents of the state’s regional universities, who say that increasing pension costs are squeezing their budgets and forcing them to raise tuition.

A similar bill passed the legislature during the regular session, but it contained extreme conditions that could have led to retirees not getting pension checks. Bevin vetoed it and called a special session to address the issue.

The state’s 118 quasi-governmental agencies can start leaving the Kentucky Retirement System in April. If they do, they have to provide other options for their employees, such as a 401(k) — but they don’t have to continue contributing money toward their retirement.

Most observers expect the law to be challenged in court, most likely by state Attorney General Andy Beshear, a Democrat and frequent Bevin critic who is running against him for governor.

In the meantime, there are eight months, a governor’s election and the better part of a legislative session until agencies are eligible to exit the retirement system. A lot could change.

“They didn’t do anything draconian that starts right now,” says Brian O’Neill, a spokesman for the Kentucky Public Pension Coalition. “There are still opportunities to work on this.”