A settlement agreement reached in the case Butler
vs. Holy Cross Hospital will result in $4 million being paid to plan
participants and their attorneys.
The plaintiffs had alleged that their employer’s retirement
plan cannot be considered a church plan within the meaning of Employee
Retirement Income Security Act (ERISA) Section 3(33)—and thus that the plan
should be subject to the provisions of Title I and Title IV of ERISA.
Plaintiffs said the plan was terminated as of September 1,
2015, at a time when its assets were insufficient to pay for all accrued
benefits. They suggested the plan paid only about 50% of its liabilities upon
termination and further alleged the plan was in 2013 improperly transferred to
an entity that lacked sufficient assets or ability to fund the plan. If the
plan was not considered a church plan, plaintiffs argued, these actions would
have been barred under ERISA.
In their initial
complaint, plaintiffs alleged violations of ERISA’s required minimum
funding standards under Section 302; failure to establish the plan
pursuant to a written instrument under Section 402; failure to establish a
trust meeting the requirements of Section 403; failure to meet anti-cutback
provisions under Section 402(g) and (f). Additional breaches were alleged under
ERISA 404(a), 406(a) and 406(b).
The text of the settlement agreement shows the influence of
another case citing the church plan exception, Stapleton
v Advocate Healthcare Network. That case was appealed to the
Seventh U.S. Circuit Court of Appeals after a federal district court ruled in
favor of the plaintiffs and found that only an actual church can establish a
church plan. In March 2016, the Seventh Circuit issued its ruling in that case
and held that “a church plan must be established by a church, and a church plan
must be maintained either by a church or by a principal-purpose organization.”
That case has been appealed to the U.S. Supreme Court and
has been granted a review by the top court, which is still pending.
NEXT: Reading into the current decision