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Dignity Health church plan challenge headed to settlement

A long-running class-action lawsuit against Dignity Health over its status as a church plan exempt from ERISA and alleged underfunding of its defined benefit plan is close to being settled, according to a joint notice of settlement filed Tuesday with the U.S. District Court in San Francisco.

The complaint in Rollins et al. vs. Dignity Health et al. was first filed in April 2013 by plaintiffs seeking more than $2 billion in missed pension contributions and other damages. Among other claims, the lawsuit challenged the interpretations made by the Internal Revenue Service and the Department of Labor that allowed the hospitals, which have varying degrees of church associations, to be exempt from the Employee Retirement Income Security Act.

By December 2013, the District Court had ruled that Dignity Health did not qualify for church plan exemption from ERISA because only a church can sponsor and maintain a church plan. After various motions, that decision was affirmed in July 2016, by the 9th U.S. Circuit of Appeals in San Francisco.

In August 2016, Dignity Health asked the U.S. Supreme Court to review the 9th Circuit's decision, and the case was consolidated with two similar church-plan challenges against Advocate Health Care Network and St. Peter's Healthcare System. While the plan participant plaintiffs argued that there needed to be a direct church connection, the Supreme Court ruled in June 2017 that pension plans did not have to be established by a church to be exempt from ERISA, as long as they are controlled by or associated with one.

After the Supreme Court ruling, the plaintiffs filed an amended class action complaint in November 2017 in the 9th Circuit, arguing that the church plan exemption violates the First Amendment. The complaint sought to have the sponsor adhere to ERISA requirements and address the funding issue.

Motions for preliminary approval of the settlement are expected May 15, according to the court document.