A settlement agreement between St. Joseph's Hospital and Medical Center in Paterson, N.J., and defined benefit plan participants challenging its status as a church plan has been preliminarily approved by a U.S. District Court judge in Newark.
The agreement calls for St. Joseph to contribute $42.5 million within 60 days. If funding becomes insufficient to pay benefits over the next seven years, St. Joseph's must guarantee to ensure that all accrued benefits are paid. Those benefits are protected for seven years if the plan is amended or terminated, or if it is merged with another plan. Plan amendments call for the plan to be closed by Dec. 31, 2018.
The settlement terms also mimic some provisions of the Employee Retirement Income Security Act that dictate plan descriptions, notices, benefit statements and administrative procedures.
A settlement summary filed in the case docket by law firms for the plaintiffs also notes the possibility of a future ruling on ERISA's church-plan exemption by a court, the IRS, Congress or the Roman Catholic Church that could "change the litigation landscape, which would positively impact the class' claims. "Mindful of these possibilities," the summary said, the settlement includes specific carve-outs to protect the participants if future claims under ERISA arise.
The settlement was initially proposed before the Supreme Court ruled June 5 that church-affiliated health-care system retirement plan sponsors are covered by ERISA's church-plan exemption in some cases.
St. Joseph's denied the validity of all claims brought by the plan participant plaintiffs, but agreed to settle to avoid further litigation risks and costs.
"St. Joseph's Healthcare System is pleased to have reached a settlement on the pension plan. We look forward to continuing to provide sound retirement options that are in the best interest of our employees — our most valuable resource," the system said in a statement.
St. Joseph has already satisfied its financial requirement by contributing $45 million in cash to the plan, according to the summary document.
A final hearing to approve the settlement is scheduled for March 6, 2018.
The group of plan participants filed the lawsuit May 13, 2016, claiming that St. Joseph's pension fund does not meet the definition of a church plan because it was not established or controlled by a church, and was established as an ERISA plan initially. Consolidated financial statements for the parent company SJHS in 2014 showed the plan was underfunded by $183 million as of Dec. 31, 2014. More recent figures were not available at press time, according to court documents filed by the plaintiffs.