Providence Health Agrees to Settle Church Plan Challenge

The parties in the case reached a settlement following an appellate court’s conclusion that only a church can establish a church plan.

Provident Health & Services has agreed to pay $351 million to settle a lawsuit challenging the church plan status of its pension plan.

The case of Griffith v. Provident Health & Services was granted a stay while another case concerning the church plan exemption, Rollins v. Dignity Health, was appealed to the 9th U.S. Circuit Court of Appeals—this after a district court ruled in favor of the plaintiffs and found, on summary judgment, that only a church could establish a church plan.

The 9th Circuit agreed with the lower court and, in addition, the U.S. Supreme Court stayed the 9th Circuit’s mandate while it decides whether to review the decision. 

The parties in Griffith agreed to continue to stay their case while they engaged in extensive settlement discussions.

According to the settlement agreement, which includes a motion for approval by the court, Providence will contribute $350 million to the plan via annual contributions to the plan for seven years. In addition, Providence will pay up to $1.9 million in the aggregate ($500 per person) to the total of 3,802 nonvested former participants.

Providence also agreed that, beginning eight years after the effective date of the settlement, and continuing thereafter as long as the plan has not been terminated, it will make annual minimum contributions recommended by the plan’s enrolled actuary to fully fund the plan by December 31, 2029. The settlement agreement says this shall not be interpreted to require that the plan actually be fully funded by such date.

NEXT: Allegations and other church plan challenges

As with other challenges to health care providers’ defined benefit (DB) plans’ church plan status under the Employee Retirement Income Security Act (ERISA), plaintiffs in the Griffith case allege Providence’s plan is not a church plan within the meaning of ERISA Section 3(33) and thus is subject to the provisions of Title I and Title IV of ERISA. They allege that the defendants violated ERISA’s reporting and disclosure provisions; failed to adhere to ERISA’s required minimum funding standards for the plan; failed to establish the plan pursuant to a written instrument meeting the requirements of ERISA; and failed to establish a trust meeting the requirements of ERISA.

In this case, plaintiffs also allege that the church plan exemption violates the Establishment Clause of the First Amendment of the United States Constitution. A lawsuit filed against Holy Cross Hospital systems also raises the constitutionality issue

The settlement agreement notes that the Providence defendants “deny each and every allegation of the complaint and believe substantial and meritorious defenses exist for every claim alleged by plaintiffs.” The settlement agreement may be viewed here.

Appellate court decisions that the pension plans of Advocate Health Care and St. Peter's Healthcare System are not church plans under ERISA have also been petitioned to the Supreme Court. Trinity Health and Saint Francis Hospital have also agreed to settlements in cases against them.