Trinity Health has entered into a settlement agreement to resolve claims in a lawsuit challenging its pension plans’ ‘church plan’ status under the Employee Retirement Income Security Act (ERISA).
Under the terms of the agreement, Trinity will make an annual $25 million contribution to the plans for three years, totaling $75 million. The contributions will be allocated to the plans in the sole discretion of Trinity.
In addition, the health care system will pay $550 each to the 219 individuals who elected and received a lump-sum distribution during the lump-sum window period in 2014. Within 30 days after final approval of the settlement, Trinity will pay $1.3 million to 7,371 former plan participants who left covered service under the plan after completing at least three years of service but less than five years and, as a result, forfeited a portion of the benefit accrued under a cash balance or pension equity formula.
The settlement agreement also includes agreed upon provisions relating to plan administration. For example, Trinity has agreed to guarantee the plans have sufficient funds to pay accrued benefits, to issue annual benefit statements to participants, and to not amend the plan to decrease the accrued benefit for at least 15 years following approval of the settlement. However, the settlement does allow for Trinity to terminate the plans as long as there are sufficient assets to pay the accrued benefits up to plan termination.
Last May, the U.S. District Court for the District of Maryland issued an order granting partial dismissal of claims against Trinity Health Corporation challenging the ‘church plan’ status of its retirement plans for employees. The court held that ERISA permits an organization that is “controlled by or associated with a church or convention of churches” to establish a “church plan.” The ruling evenly split district court findings in six circuits.
The settlement agreement noted that it does not represent that the plaintiffs in the case agree with the earlier court finding, and that Trinity Health specifically denies any wrongdoing.