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Ascension pension settlement highlights vulnerability of 'church plans'

Ascension pension settlement highlights vulnerability of 'church plans'

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Ascension corporate logo. Handout art.

Ascension, the Edmundson-based parent company of the nation’s largest nonprofit health system, has agreed to settle a 2013 class-action lawsuit that alleged it improperly maintained employee pensions plans.

Under the settlement, contingent on approval next month by a federal judge in Michigan, Ascension agrees to make a one-time $8 million cash payment to its pension plans and adopt certain ERISA-like protections. The protections include the guarantee of plan benefits through June 30, 2022, and regular financial notices about the plans.

The Ascension pension plans, however, will still be considered “church plans,” which are exempt from ERISA, or Employee Retirement Income Security Act, the federal law that sets minimum standards for pension and health plans.

“We are pleased to have reached a settlement in this matter, which will avoid further litigation costs and have no impact on individual pension plans or benefits,” Ascension spokesman Nick Ragone said in a statement to the Post-Dispatch.

While the Ascension lawsuit is close to being resolved, similar challenges to other “church plans” are working their way through the courts.

The religious designation, say critics, frees organizations from complying with ERISA, allowing plan sponsors to underfund plans and put participants at risk of never collecting retirement benefits.

In the Ascension case, brought by Marilyn Overall, a former employee of an Ascension hospital in Michigan, alleged the pension plans were underfunded by $444.5 million, affecting 122,000 employees. Ascension has about 153,000 employees. Ragone counters the Ascension plans were “very well-funded.”

Thomas E. Clark Jr., counsel at the Wagner Law Group, a legal expert on ERISA who has closely followed this case, says the Ascension lawsuit illustrates a larger issue with the church plan designation.

“Simply being a church plan isn’t positive or negative,” he said. But it’s about whether the employer is legally required to live up to the benefits its promises employees via their pensions.

“Because of the lack of state law protections, and the fact that ERISA does not apply, those participants are left purely to the promises of their employer and the continued existence of that employer in the marketplace if they compete against for-profit entities,” Clark said.

Some critics argue that the church plan designation is used too liberally for employers like Ascension that are not direct employees of a church.

Religious pension plans are exempt from ERISA if the plan was established and maintained by a tax-exempt church, or if the tax-exempt employer is controlled by or associated with a church.

Under ERISA-exempt church plans, the employer is not required to pay the benefits it has promised to employees, it is not required to disclose financial information about the plan or the plan’s overall financial health, and the plan is not protected by the Pension Benefit Guaranty Corp., the federal government agency that insures most private pensions.

The church plans have been a growing problem within the last five years, said Nancy Hwa, spokeswoman for the Pension Rights Center, a consumer advocacy group.

“No one knew that employers were using the church plan exemptions in this way to get out of their ERISA obligations,” Hwa said.

That status should be a concern for employees, Hwa said, because it means employees are not protected by the PBGC.

“So if the plan goes under, or the employer goes under, and the pension is severely underfunded, they are going to get a fraction of the benefits that they earned,” Hwa said.

Some of St. Louis’ largest employers are affiliated with a religious institution, including SSM Health and Mercy Health. Neither organization would comment on the status of its pension plans.

Samantha Liss • 314-340-8017

@samanthann on Twitter

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