Compliance October 26, 2016

Settlement Reached for Providence Health Church Plan Challenge

The health system agreed to pay more than $350 million to settle a lawsuit challenging its pension plan's church plan status under ERISA.
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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.

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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.

Products October 26, 2016

SEI and Redtail Collaborate on DOL Fiduciary Compliance Solution

A new toolkit is designed to help advisers comply with the DOL’s fiduciary rule through a number of tasks such as switching from fee- to commissioned-based investments.
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The SEI Advisor Network and Redtail Technology have partnered to create a toolkit that aims to help financial advisers comply with the Department of Labor’s (DOL)’s fiduciary rule, which takes effect in April 2017.  

The DOL Workflow Toolkit will provide financial advisers with systematized workflows that help assess business readiness and demonstrate compliance with the DOL rule through a variety of processes, such as moving from commission- to fee-based investments, the firms say. 

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The solution implemented through Redtail interacts with other customer relationship management (CRM) software as well as tools outside this technology to help advisers navigate the changing regulatory landscape, while also driving strategic business visions. It uses four total workflows with accompanying resources to help track advisers’ progress, while also creating an auditable business by documenting client interactions in their CRMs.

The package also offers full-workflow diagrams, process templates, and training resources.

“Everyone is talking about the DOL rule in our industry, but we still have advisers asking what it truly means, what they should be doing, and how they can get help,” says John Anderson, managing director for the SEI Advisor Network. “There has always been value in holistically using a CRM for both advisers and clients, but there’s a compliance reason for advisers to do so now, and there is no better time to prepare for the upcoming implementation of the DOL rule. It’s vital for advisers to have the workflows set in place to execute a plan for their clients and demonstrate compliance with the rule.”

SEI Advisor Network and Redtail’s DOL Action Plan process begins with a planning meeting, which advisers are recommended to complete by the end of 2016. Afterward, advisers should be able to identify their DOL fiduciary rule strategies, and audit and segment each household into an appropriate scenario which may include holding an account in a product/solution using a best interest contract (BIC) exemption, or orphaning an account.

To learn more about the toolkit, visit SEI DOL Worklflows.

SEI and Redtail are the latest firms to offer solutions designed to help advisers navigate the regulatory playing field that will grow out of the DOL’s implementation of its fiduciary rule. Others include PCS, Impact Financial Systems (IFS), Envestnet, and fi360.

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