A participants' lawsuit challenging the church plan status of OSF Healthcare System, Peoria, Ill., is headed for a settlement, two years after it was initially dismissed.
The proposed $25 million settlement, supported by both parties, calls for OSF Healthcare to contribute $5 million annually for the next five fiscal years and to pay $1.75 million in legal fees. It will also file annual participant statements and other documents sought by the participants.
In September 2018, U.S. District Court Judge Staci M. Yandle in Benton, Ill., granted the non-profit corporation's motion for summary judgment, claiming that its two defined benefit plans properly qualify for the church plan exemption and are not subject to the Employee Retirement Income Security Act of 1974.
That dismissal was reversed in August 2019 by the 7th U.S. Circuit Court of Appeals in Chicago, ruling that Ms. Yandle did not give the participants a full opportunity to conduct discovery before issuing the decision.
"With such high stakes, beneficiaries are entitled to conduct meaningful discovery before the courts decide legal issues such as whether formal structures are sufficient to satisfy the church plan definition, regardless of day-to-day realities," the appeals court said.
A hearing to finalize the settlement is scheduled for Oct. 7.
OSF Healthcare System was founded by the Sisters of the Third Order of St. Francis. It operates 11 acute-care hospitals, home health-care services and other health-care facilities in Illinois and Michigan. It administers two defined benefits plans for its employees, including one from the recently acquired St. Anthony's Health Center. The plans are Sisters of the Third Order of St. Francis Employees Pension Plan and the Retirement Plan for Employees of Saint Anthony's Health Center. Assets sizes for the pension plans were not available.
According to the participants' amended complaint filed in October 2017, the OSF plans were only 50% funded, and there was a substantial risk that the OSF plans would be unable to pay accrued pension benefits to the plaintiffs and the other class members.