A five-year-old class action suit against a hospital system with ties to the Catholic Church will continue, according to a recent ruling by a U.S. federal district judge.
The suit claims that Dignity Health Hospital exploited a religious exemption in federal law to underfund its employees' pensions by $1.5 billion. The court ruled that Dignity failed to establish that it qualified as a "church plan" and therefore was not entitled to an exemption to retirement funding requirements imposed by the Employee Retirement Income Security Act (ERISA).
A former Dignity employee sued the hospital in 2013, alleging the hospital was underfunding its employee pension plan. ERISA establishes minimum funding and vesting requirements and fiduciary responsibilities for plan administrators. However, church plans are exempt from the requirements.
To qualify for ERISA's church-plan exemption, a retirement plan has to have been established and maintained by a church. The plaintiffs argued Dignity's plan does not qualify for the exemption because Dignity is not a church, but a hospital. Dignity contends it does qualify because it is affiliated with the Sisters of Mercy and other Catholic women's orders. Dignity Hospital is the product of the merger of 10 hospitals run by two California-based Sisters of Mercy congregations. Dignity now runs 39 hospitals in California, Arizona, and Nevada.
The class action plaintiffs allege Dignity's plan in 2016 held assets sufficient to fund only 72 percent of accrued benefits, siphoning money from more than 101,000 current and former Dignity employees. "Lawsuit Accusing Hospital of Underfunding Pension Plan May Continue," www.courthousenews.com (Mar. 22, 2018).