Church Plan Case Reaches Settlement

A federal district court judge has preliminarily approved a settlement in one of the cases challenging a retirement plan’s church plan status.

Last May, U.S. District Judge Avern Cohn of the U.S. District Court for the Eastern District of Michigan found the retirement plans of Ascension Health Alliance entities qualify for “church plan” status under the Employee Retirement Income Security Act (ERISA). The ruling is one of three handed down so far that say a plan need not be established by a church in order to qualify as a church plan. So far, courts are split in their decisions about church plan cases (see “Courts Split on Definition of Church Plan”).

The key concept of the settlement agreement is that the participants in the plans will receive certain Employee Retirement Income Security Act (ERISA)-like protections for the next seven and one-half years, the agreement says. Barring a significant change in the law, the plans will remain non-ERISA plans, but Ascension itself will guarantee participants will receive from their plans the level of benefits stated in the plans through June 30, 2022.

The settlement includes provisions that mimic the provisions of ERISA, concerning plan administration, summary plan descriptions, notices (annual summaries, pension benefits statements, current benefit values), and the plans’ claim review procedure. Ascension has also agreed to contribute $8 million to the plans.

The settlement calls for the release of claims by lead plaintiff Marilyn Overall based upon allegations in the lawsuit. However, noting that the law on church plans is still in flux, the settlement agreement provides that Ascension will not be released prospectively in the event of a change in the law which makes clear that the Ascension plans are not church plans, and the release will not apply prospectively in the event the structure of the Ascension plans changes so that the plans are plainly not church plans.

A hearing for final approval for the settlement agreement is set for September. The motion for approving the settlement in Overall v. Ascension Health is here.