Plan participants challenging Ascension Health Alliance’s church plan status have agreed to settle, according to preliminary settlement documents filed May 7.
Judge Avern Cohn in the U.S. District Court in Detroit reviewed the motion to settle Monday and scheduled a final approval hearing for Sept. 17.
On May 9, 2014, Mr. Cohn granted Ascension Health’s bid to dismiss the class-action lawsuit, ruling that while the church exemption from federal pension laws and regulations “may appear to be an irrational distinction, it is a distinction mandated by law.” At least two other courts in other jurisdictions have disagreed and allowed similar cases to proceed against plan sponsors.
After the plaintiffs appealed to the U.S. Court of Appeals for the 6th Circuit, the parties in Overall vs. Ascension entered into six months of court-sponsored mediation before accepting a mediator’s proposal. In the preliminary settlement document, plaintiffs call it “an excellent result for the proposed class” because it provides for “significant” plan changes, “in essence mimicking some of ERISA’s key provisions,” through 2022. Participants will be guaranteed full benefits through 2022 and Ascension will contribute $8 million. Other ERISA-like changes affect plan administration, such as annual notices, statements and claims review. Attorneys’ fees and an incentive fee for the named plaintiff are capped at an additional $2 million.
The size of the plan could not be learned by press time. In their initial complaint, the plaintiffs alleged Ascension’s pension plans were underfunded by $444.5 million
Lead plaintiff Marilyn Overall entered into the settlement “with an understanding of the strength and weaknesses” of the claim, the document said, including lengthy and expensive litigation to continue, “significant uncertainties in predicting the outcome of this complex litigation,” and the defendants’ “determination to fight.”
The plaintiffs did not give up the right to sue if the law on church plans changes as a result of other court challenges in other circuits. “Ascension Health is not immune from any change in the law. The change in the law just won’t come from the 6th Circuit,” said Thomas E. Clark Jr., an ERISA lawyer with The Wagner Law Group in St. Louis. Mr. Clark is not connected to the Ascension case.
With church plan cases working their way through several District Courts and appeals courts, “I have always felt that it’s a race toward either the Supreme Court or Congress,” said Mr. Clark.
Calls to Ascension and law firms representing the plaintiffs and the defendants were not returned at press time.