Updated with clarification
Participants in the underfunded St. Joseph Health Services of Rhode Island Retirement Plan, Providence, have reached a $30 million settlement agreement in a series of lawsuits against the hospital's former owner and plan actuaries.
The proposed settlement calls for the parent company, Prospect CharterCare, to contribute $27 million to the pension fund, with another $3 million paid by the plan's former actuarial firm and other defendants.
Litigation against the Catholic Diocese of Providence, which didn't participate in settlement talks, will continue.
The original 21-count lawsuit, which has since been amended, claimed that while St. Joseph's Health Services was responsible for the plan, it promised participants that it was making all contributions but then stopped making them. Other charges alleged in the lawsuits were that the defendants falsely claimed it was a church plan exempt from the Employee Retirement Income Security Act and that the sale of the hospitals was approved by state regulators under fraudulent circumstances.
The pension fund covers current and former employees of Our Lady of Fatima and Roger Williams hospitals.
The settlement was mediated by a former chief justice of Rhode Island's Supreme Court. It must be approved by the state and federal judges overseeing the long-running litigation, which could take at least six months, said Stephen Del Sesto with Pierce Atwood, the pension fund's receiver, in an interview.
Those judges "will do everything they can to assure that it moves expeditiously through the system. It will enable this plan to live on as we deal with the diocese," he said.
The pension fund had assets of $86 million when Mr. Del Sesto was appointed receiver in 2017, and there have been two other settlements. The last audit showed assets of $66 million and a funding deficit of $35 million, he said. The $30 million settlement will prevent benefit reductions, and "the plan is in a better position today than it was when it started," he said.
Mr. Del Sesto also changed the plan's status so that it now covered by ERISA.
Rhode Island Treasurer Seth Magaziner supported the participant lawsuits and backed legislation to increase transparency rules for pension plans with church plan status. In a statement, Mr. Magaziner said he was "pleased to hear the positive news that CharterCARE and other defendants have agreed to help make St. Joseph's Hospital and Fatima Hospital retirees whole again after mismanagement allowed their retirement system to become underfunded."
"While we are still reviewing the specifics of this settlement agreement, this is positive news for these workers," he said.
The settlement agreement also calls for CharterCare’s majority owner, Prospect Medical Holdings, to purchase the remaining 15% minority interest in Prospect’s Rhode Island hospitals held by CharterCARE Community Board. The $27 million payment resolves all litigation related to the pension fund provided by the prior owner of the CharterCARE hospitals, and involves no acknowledgment of liability by the parties, the company said in a separate statement.
“We are pleased to reach this agreement, which furthers our investment in the CharterCARE hospitals and Rhode Island,” CharterCare CEO Jeffrey Liebman said in the statement.