Court Rules In First of Five Church Plan Retirement Plan Cases Rejecting Dignity Health Retirement Plan Church Plan Status

By: Mark E. Furlane and David R. Levin

Last spring five complaints were filed against hospital systems challenging the church plan status of one or more of their plans.  The Hospital systems were Dignity Health, San Francisco; Ascension Health Alliance, St. Louis; Catholic Health Initiatives, Englewood, Colo., Catholic Health East, Newtown Square, Pa.; and Saint Peter’s Healthcare System, New Brunswick, N.J.  They all operated their pension plans under church plan status.  Motions to dismiss were filed and fully briefed in four of those cases and oral argument was heard in two of them.

On December 12, 2013, the district court for the Northern District of California ruled in one of them, Rollins v. Dignity Health, agreeing with Plaintiff that the Dignity Health retirement plan was not a church plan.  The suit claimed Dignity Health is “not a church or a convention or association of churches” nor does it meet any of the other criteria necessary to be considered a church plan sponsor under federal regulations.

In reaching its ruling that the retirement plan was not a church plan, the court rejected Dignity Health’s argument that its Pension Fund Sub-Committee met the committee approach to church plan status under 29 U.S.C. §1002(33)(C)(i).  The court ruled that under 29 U.S.C. §1002(33)(A), only a church or convention of churches can establish a church plan.  The court then rejected Dignity Health’s argument that the Plan met an alternative means of establishing a church plan found in 29 U.S.C. §1002(33)(C)(i).  According to Dignity Health, that section allows church plan status for plans not established by a church or convention or association of churches so long as they are “maintained” by an “organization” controlled or associated with a church, where the “organization’s” principal purpose is the administration of benefits.  The court rejected that argument, stating that it violates a cardinal rule of statutory construction, and concluding that the organization itself must have a principal purpose of benefit plan administration, not its Retirement Plan Sub-Committee.

The Dignity Health suit and the other four lawsuits demand that the pension plans be brought into compliance with ERISA and that the plans make whole any losses to participants; pay civil penalties and pay attorney fees and expenses to the plaintiff.  If the Dignity Health ruling is followed in the other cases or affirmed on appeal it will have a significant impact on the plans, both operationally and financially.  The financial implications of a binding ruling that upholds the position of the district court may include funding the plans to meet minimum funding levels, payment of PBGC premiums, and losses to participants harmed by plan terms and operations less favorable than those required by ERISA.

Employment Law Seminar Presented by the Federal Bar Association Chicago Chapter

Employment Law Seminar

The Chicago FBA invites you to attend its Employment Law Seminar on Thursday, January 23, 2014.  This program will feature eight judges from the federal and Illinois judiciary, including the Seventh Circuit Court of Appeals, the Northern District of
Illinois and the Circuit Court of Cook County, as well as representatives from the Equal Employment Opportunity Commission, University of Chicago Law School and private practitioners.

Do not miss this opportunity to hear firsthand from these experts about the ever-changing landscape of federal and state laws and regulations. Panel discussions will cover recent developments in employment discrimination law, procedural developments in individual and class litigation, settlement and mediation, and EEOC investigations and litigation, among other topics of utmost
importance to employment law attorneys, employers and employees.

To view the agenda and pricing information, click here.

Date:     
Thursday, January 23, 2014

Time: 
1 to 5 p.m.
Cocktails and Hors d’oeuvres to follow

Location:
Hosted by Drinker Biddle & Reath LLP
191 North Wacker Drive
Chicago, Illinois

CLE:
3.75 Illinois MCLE credit hours*

Register online:   www.fedbarchicago.org/employment-law-seminar

* FBA Chicago will be applying for accreditation for 3.75 Illinois MCLE credit hours. Continuing legal education credits for other states must be handled by individual attendees.

The Scoop on Revenue Sharing

Editor’s Note: The following post by Los Angeles Of Counsel Joe Faucher appears in the latest issue of the California HR Newsletter.

The Scoop on Revenue Sharing

The Issue: What do plan fiduciaries need to know about revenue sharing?

The Solution: Fiduciaries need to understand that revenue sharing is a common practice in the investment industry.  They must be aware if revenue sharing payments are being made and the amount of those payments, determine how those payments are used, and evaluate whether the overall compensation of the party that receives them is reasonable.

Analysis: “Revenue sharing” occurs when an investment company, like a mutual fund company, issues compensation to another service provider – a recordkeeper or a third party administrator.  The payments are typically made in exchange for services that the mutual fund company might otherwise have to provide itself.  Service providers who expect to receive them are obligated to disclose the anticipated payments and how they are calculated to the responsible plan fiduciary.  Fiduciaries need to understand what the service providers who receive revenue sharing do with the money they receive.  In some cases, service providers “offset” or reduce their fees by these payments, or credit the payments back to the accounts of the participants.  Others simply retain the payments.  Since fiduciaries are obligated to know how much compensation their service providers receive, and to determine whether that compensation is reasonable, it is imperative that they understand who is paying revenue sharing, who is receiving it, how much it is being paid and how it is being used.

Practical Tips for “Bring Your Own Devices” (BYOD) Policies and Practices

Editor’s Note: The following post by San Francisco Partner Cheryl Orr appears in the latest issue of the California HR Newsletter.  To view the entire newsletter click here.   To sign-up to receive the California HR Newsletter click here.

Practical Tips for “Bring Your Own Devices” (BYOD) Policies and Practices

The Issue: What do employers need to do to minimize risks (privacy, security, safety and wage and hour) caused by use of personal smart phones and tablets in the workplace?

The Solution:
Employers can minimize their risks by:

  • Drafting clear and consistent policies that cover all technologies and servers used;
  • Having employees sign requests granting them access to the company’s systems and acknowledging when they can be wiped;
  • Confirming in writing that all information accessed through the company’s systems is confidential and company property and can be wiped if lost or stolen;
  • Ensuring compliance with the company’s codes of legal and ethical business conduct; and
  • Addressing when employees can use their devices for work and how they will be paid for this time and any associated reimbursable expenses.

Analysis: Employees can inadvertently expose their employers to loss of confidential or trade secret information, create liabilities when inappropriate material on their devices is shared and blur the lines between work and personal time in a way that could be compensable. By following the above practical tips, employers can protect both themselves and their employees. Our team regularly assists with developing BYOD policies and/or training personnel on how to implement should you need further guidance.

Inside the Beltway Audiocast to Discuss the State of the Retirement Income Industry

Please join us for the Inside the Beltway Audiocast on Thursday, December 5, 2013.

On Thursday, December 5 at noon eastern our colleagues Fred Reish, partner in the firm’s Los Angeles office, and Bradford Campbell, Counsel in the firm’s Washington, DC office,  will give a free audiocast discussing developments in Washington that directly impact the retirement income industry.  Topics to be discussed during the audiocast include:

  • End of the year review of what happened, and what it means
  • Budget negotiations and impact on plans
  • DOL proposal for 408(b)(2) guide
  • DOL Target date fund disclosure final regulation
  • Update on the fiduciary advice proposal
  • Update on projections of retirement income
  • The latest developments in retirement plan litigation
  • Other recent developments

Date:  Thursday, December 5, 2013

Time:  Noon to 1:00 PM (ET)

How:   Click the above “RSVP Online” button to register for Inside the Beltway

 

Lynne Anderson Quoted in Miami Herald Story on Miami Dolphins Bullying Incidents

Lynne Anderson, partner in the firm’s Florham Park office, was quoted in a story that appeared in the Miami Herald regarding the recent incidents of bullying on the Miami Dolphins football team and the potential for the victim of the bullying, Jonathan Martin, to bring legal action against the team and its coaching staff.

Lynne addressed the possiblity of Martin bringing a suit against the team based on Martin belonging to a protected class.  “If Martin can prove he was harassed because of his race – and Incognito’s vile voice messages might be the proof he needs…”  But, being a member of a protected class is only the first step for bringing a claim against the team as Lynne added, “he also has to show that it [the bullying] was unwelcome behavior”.

Lynne also addressed the chance that even if the team was not aware of the bullying that legal action could be brought against the team’s coaching staff itself.  “If the coaches were aware that this kind of conduct was going on among the team, that by itself would be enough to give rise to a complaint.”  Lynne went on to further explain, “The law does not recognize a stick-your-head-in-the-sand defense for unlawful harassment”.

 

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