Another Church Plan Lawsuit Is Filed

October 24, 2014 ( – Employees and retirees of Daughters of Charity Health System filed a class action lawsuit alleging that Daughters evaded federal pension law requirements by claiming its plan is a church plan.

The complaint alleges the plan does not qualify as a church plan under the plain language of the Employee Retirement Income Security Act (ERISA) because the plan was not established by a church, so it should not be exempt from ERISA’s funding and fiduciary requirements for defined benefit pension plans. The plaintiffs in the suit, filed in the U.S. District Court for the Northern District of California, cite the court’s previous decision in Rollins v. Dignity Health as demonstrating the Daughters plan is not a church plan.

In the Dignity case, the court granted a motion for partial summary judgment against Dignity, saying ERISA requires a church plan to be established by a church, and Dignity could only show an affiliation with a church.

According to the lawsuit, the Daughters of Charity Health System plan is underfunded by more than $229 million. In addition, on October 10, 2014, the health system announced it would sell its six California hospitals and medical foundation to Prime Healthcare Services and Prime Healthcare Foundation. “Plaintiffs fear the sale threatens their earned pension benefits,” the complaint says.

The plaintiffs further note that Prime has not committed to operate the plan as an ERISA-covered plan, nor has it committed to address the plan’s funding shortfall. Prime has also raised the possibility of putting the Daughters of Charity Health System into bankruptcy, “which would further endanger the pensions of Plaintiffs and the other Plan participants,” the complaint says.

The employees and retirees of Daughters are asking the court to declare that the plan is subject to ERISA. In addition, they are requesting that the court order Daughters to bring the plan in compliance with ERISA, including compliance with ERISA’s funding requirements.

A copy of the complaint is here.