A federal judge has denied a motion to dismiss a breach-of-fiduciary-duty lawsuit against Denver-based Catholic Health Initiatives, saying that the overseers of the hospital system’s defined benefit plan can be sued, even though the plan operates as a “church plan.”
The decision, filed on Sept. 30, was made in spite of the fact that, in August, U.S. District Judge Robert Blackburn rejected a magistrate judge’s recommendation that the court strip CHI of its church plan status.
Blackburn found that the allegations made by the lead plaintiff, Janeen Medina, were “adequate to put the individual defendants on notice that they each allegedly failed to exercise the power of their positions to make the plan compliant with ERISA.”
The Employee Retirement Income Security Act exempts church plans from many of the law’s requirements. The law defines church plans as “a plan established and maintained for its employees by a church or by a convention or association of churches” that have tax-exempt status.
Originally filed in May of 2013, plaintiffs in the case allege that CHI, a non-profit health care conglomerate established by the Catholic church and operating in 17 states, failed to adequately fund its pension plans, to “the detriment of 78,000 employees who deserve better,” according to court documents.
Specifically, the plaintiffs claim CHI’s defined benefit plans are underfunded by $892 million.
CHI has maintained that it is not beholden to ERISA funding obligations because it operates as church plans.
The plaintiffs claim that none of CHI’s retirement plans meet the definition of a church plan, because CHI “plainly is not a church or a convention or association of churches,” according to the suit.
The case is one of several class-actions in courts throughout the country claiming more than $2 billion of pension underfunding by church-affiliated health care systems.
Representing the plaintiffs in all of the cases are the law firms Kellar Rohrback in Seattle and Cohen, Milstein, Sellers and Toll in Washington, D.C. The Groom Law Group is defending CHI.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
