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Courts

Plaintiffs challenge Atrium Health for claiming government exemption from ERISA

Participants in Atrium Health's retirement and health-care plans filed a class-action lawsuit against the large non-profit health-care system, alleging it avoids complying with federal benefits law by claiming to be a government entity.

The complaint, filed Monday in the U.S. District Court for the Middle District of North Carolina in Winston-Salem, was referred for mediation.

The plaintiffs, who are former employees, are represented by Martha Geer and Karen L. Hanford of Cohen Milstein Sellers & Toll in Washington. In a statement, Ms. Handorf called Charlotte, N.C.-based Atrium "a health-care behemoth" that is using an exemption in the Employee Retirement Income Security Act for government-run plans that allows more flexibility in managing benefit plans.

While Atrium Health claims to be a political subdivision of North Carolina, "belying that claim … is the fact that Atrium owns and/or operates numerous health-care facilities in three different states, including religiously affiliated health-care facilities," the lawsuit alleges.

By using the governmental exemption, the lawsuit claims, Atrium's benefit plans have put 65,000 participants at risk, including those in a "dramatically underfunded" defined benefit cash balance plan that at the end of 2017 had a $379 million unfunded liability.

The plaintiffs also claim ERISA is violated because Atrium requires five years vesting for the cash balance plan, while ERISA limits cash balance vesting to three years, and because reporting requirements such as annual Form 5500 filings and funding reports are not provided to participants.

The lawsuit is asking to have the defined benefit plan fully funded, and for payment of benefits to participants with three years' vesting.

Participants in the 401(k) plan are being harmed, the lawsuit alleges, because the plan does not follow ERISA disclosure regulations "meant to give participants information they need about the performance and expenses related to their investments so that participants can make sound investment decisions for their retirement savings." The lawsuit is seeking to have Atrium Health provide that information regularly.

In an emailed statement, Atrium Health said the claims that the system is not a governmental entity for purposes of ERISA “are wrong. Various regulatory agencies have reviewed Atrium Health’s governmental status, which stems from our origins as a Hospital Authority."

"Atrium Health’s retirement plans have always met our commitments to teammates, and the LiveWell health plan allows teammates to receive care at rates that are comparable to similar health plans," the statement continued. "All of our teammate benefit plans are regularly reviewed by nationally recognized third-party consultants. Nothing about our governmental status stands in the way of Atrium Health providing these market competitive benefit plans.”