Chicago hospital agrees to settle ERISA suit

Holy Cross Hospital in Chicago has agreed to pay $4 million to settle a lawsuit accusing it of improperly classifying its pension as a "church plan" exempt from the federal Employee Retirement Income Security Act. 

According to a 12-count complaint filed last June by former Holy Cross employees, the hospital retroactively claimed church plan status in 1993. The plan was then exempt from ERISA, which requires pension plans to have adequate funding to pay their promised benefits.

In 2013, when Holy Cross merged with Chicago-based Sinai Health System, the hospital's pension plan was allegedly underfunded by $31 million. At that time, the hospital transferred liability for the pension plan to an order of nuns called the Sisters of Saint Casimir of Chicago, according to the complaint. Two years later, the Sisters of Casimir announced the pension plan would be terminated. The benefits were paid out in lump sums, which were calculated using discount rates that would have not been available under ERISA.

In their class-action lawsuit, the former Holy Cross workers sought a declaration that the pension plan was governed by ERISA and damages for the allegedly improper termination of the plan.

After participating in lengthy settlement negotiations, the parties executed a settlement agreement March 1. Under the settlement, the hospital will pay $4 million and distribute the $5 million left in the pension plan. 

U.S. District Judge Manish S. Shah granted preliminary approval of the agreement on March 7. In his order, Judge Shah said the settlement is "sufficiently fair, reasonable, and adequate to warrant sending notice of the settlement" to all plaintiffs in the class-action suit. Class members will have the opportunity to object to the settlement, and a final hearing on whether the settlement should be approved is slated for June 29.

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Editor's Note: This article was updated March 14 to reflect that Holy Cross Hospital will pay $4 million to settle the lawsuit. A previous version incorrectly stated the hospital would pay $9 million to settle the suit. 

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