Hospital Sisters Health System Will Pay $62M To Settle ERISA Class Action

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Hospital Sisters Health System employees have asked a federal judge to approve a $62.5 million settlement agreement that would end a class action lawsuit alleging the company violated retirement laws.

Lead plaintiffs claim in the Hospital Sisters Health System ERISA class action lawsuit that the system, which runs health care facilities in Wisconsin and Illinois, improperly used an exemption under the Employee Retirement Income Security Act (ERISA).

The plaintiffs say the exemption cost retirement plan participants more than $500 million.

According to the Hospital Sisters Health System ERISA class action lawsuit, the hospital system exploited an ERISA exemption meant for religious organizations.

Under the terms of the class action settlement, Hospital Sisters Health System would still be able to use the exemption; however, they would be subject to additional requirements about notifying plan participants and limitations to plan administration.

“In addition to the cash payments, the settlement also provides for significant non­monetary equitable consideration, which will enhance the retirement security of the members of the settlement class,” said the Hospital Sisters Health System ERISA class action lawsuit settlement. “Current participants in the plan will receive certain financial and administrative protections comparable to ERISA through Fiscal Year 2022, or until such time as the $62.5 million is contributed to the plan.”

The Hospital Sisters Health System ERISA class action was initiated by the lead plaintiffs over questions about ties between plan administrators and the religious organization, the Catholic Church, which is affiliated with the hospital system. The plaintiffs alleged that the hospital system incorrectly applied the religious organizations exemption to ERISA requirements.

ERISA is a federal law that provides protection to participants in covered retirement, pension, and insurance plans. The law requires organizations running ERISA covered plans adhere to certain notification and plan administration requirements. There are a number of exemptions, including one for religious organizations running retirement plans for their employees.

In 2016, the United States Supreme Court clarified that the religious exemption to ERISA could be applied to organizations that are only closely affiliated. In light of this decision, and other settlements in similar ERISA lawsuits, the plaintiffs said the proposed $62.5 million settlement is appropriate.

“Comparison of this settlement with other recent church plan settlements provides an additional basis for finding the settlement is reasonable and should be approved,” stated the plaintiffs’ motion to approve the Hospital Sisters Health System ERISA class action lawsuit settlement.

Under the terms of the Hospital Sisters Health System ERISA class action settlement, the hospital system will pay the settlement amount to the fund over four years.

In addition, the hospital system will also need to provide “certain equitable provisions that are comparable to provisions of ERISA concerning plan administration, protection against cutbacks of accrued benefits, summary plan descriptions, notices and the Plan’s claim review procedure.”

The plaintiffs are represented by Laura R. Gerber, Lynn Lincoln Sarko, Alison S. Gaffney and Ron Kilgard of Keller Rohrback LLP.

The Hospital Sisters Health System ERISA Class Action Lawsuit is Mary Holcomb, et al. v. Hospital Sisters Health System, et al., Case No. 3:16-­cv­03282, in the U.S. District Court for the Central District of Illinois.