Another Health System Settles Church Plan Challenge

The lawsuit challenges the status of the pension plans of Franciscan Missionaries of Our Lady Health System.

A preliminary settlement has been reached in a case challenging the “church plan” status of pension plans for Franciscan Missionaries of Our Lady Health System.

The plaintiff brought suit challenging the status of the plans and their exemption from the Employee Retirement Income Security Act (ERISA) and its minimum funding requirements.

According to the settlement agreement, Franciscan will contribute $125 million to the plans in the next five years, pay $450 to each of the more than 2,000 participants of the plans who accepted a lump-sum buyout of their balance in 2016, and guarantee participants will be paid the pension benefits they were promised for the next 15 years.

Specifically, Franciscan will contribute $35 million in each of the next three years and $10 million in the following two years.

Many cases have been filed in the past year challenging the church plan status of pensions for several health systems. While some have been settled, others have received either a favorable or unfavorable decision by the courts. The Supreme Court recently heard oral arguments focused on the definition of a church plan set forth in Section 3(33) of ERISA and whether deference should be given to Internal Revenue Service (IRS) letters granting church plan status to entities’ plans.