A bid by participants in Atrium Health's retirement and health-care plans to have ERISA apply to the large non-profit health-care system was dismissed in U.S. District Court in Winston-Salem, N.C.
Former employees filed a proposed class-action lawsuit in November against Charlotte, N.C.-based Atrium, arguing that it was using an exemption in the Employee Retirement Income Security Act intended to give government-run plans more flexibility in managing benefit plans, despite the fact that it owns or operates health-care facilities in three different states, including religiously affiliated ones.
Using the governmental plan exemption for Atrium's benefit plans 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 lawsuit claimed.
The plaintiffs also alleged ERISA violations related to vesting limits for cash balance plans, annual reporting and participant disclosure rules. The plaintiffs asked to have the defined benefit plan fully funded and for participants subject to longer vesting rules to be paid for the shorter three-year vesting periods called for in ERISA.
Atrium Health disputed the question of it being a governmental entity for purposes of ERISA, saying in an emailed statement at the time the lawsuit was filed that "various regulatory agencies have reviewed Atrium Health's governmental status, which stems from our origins as a (Charlotte-Mecklenburg) Hospital Authority." The company said its retirement plans have always met its commitments and are regularly reviewed by nationally recognized third-party consultants.
In dismissing the complaint Aug. 30, U.S. District Judge Thomas D. Schroeder said Atrium met the definition of a political subdivision because its authority was delegated to it by a local governmental entity with the power to appoint or remove governing members.
Mr. Schroeder cited case law noting that Congress exempted governmental plans from ERISA coverage in part because of concern over "long-standing abuses and deficiencies in the private pension system," and partly because of principles of federalism.
Calls to Atrium Health were not returned.