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Ascension, Wheaton Franciscan settle church-plan challenge

Ascension Health will guarantee $29.5 million in pension benefits to settle class-action claims that the Wheaton Franciscan Retirement Plan improperly claimed a church-plan exemption from the Employee Retirement Income Security Act.

Ascension, based in St. Louis, acquired the Wheaton-Ill.-based non-profit health-care system in March 2016. Two groups of pension plan participants sued Wheaton and Ascension in U.S. District Court in Chicago in April 2016 to compel the plan to fully comply with ERISA. The consolidated complaint alleged numerous violations of ERISA, including underfunding the plan by at least $134.5 million, requiring five years for vesting, failing to notify participants of benefit reductions and other disclosure issues.

The size of the plan's assets and liabilities could not be learned.

Plaintiffs also claimed that Wheaton's use of the church-plan exemption violates the establishment clause in the First Amendment because it harms Wheaton Franciscan workers, puts competitors at an economic disadvantage and interferes with religious beliefs. That establishment clause tactic is significant following the June 5 Supreme Court decision in similar cases that upheld the right of sponsors of church-related pension plans to be exempt from ERISA, if they are controlled by or associated with one.

In the proposed settlement agreement filed Friday, Ascension and Wheaton deny all allegations of wrongdoing. In addition to assuring $29.5 million in benefits if plan assets are insufficient, and paying $2.25 million in attorney fees and expenses, Ascension agreed to have any successor organization honor the commitment, and to guarantee equal benefits for 7.5 years in the event of a merger or consolidation. The proposed settlement, which could be approved at a Sept. 13 hearing, also calls for annual summaries and other disclosures to participants.

Ascension did not return calls by press time for comment.