December 26, 2019

Class settlements in employee benefit disputes hit $449 million in 2019, up significantly from 2018 and nearly reaching 2017 levels, a Bloomberg Law analysis found.

Metropolitan Life Insurance Co., Massachusetts Institute of Technology, and Anthem Inc. are among the 30 or so defendants that filed settlement paperwork to end Employee Retirement Income Security Act class actions in 2019.

The cumulative dollar value of these deals is much higher than the $291 million negotiated in 2018, but still shy of the $559 million agreed to in 2017.

About half of 2019’s settlements stemmed from lawsuits challenging the fees associated with 401(k)-style retirement plans. These cases, which targeted employers including ABB Inc., Duke University, and Eaton Vance Corp., brought in about $193 million in settlement dollars, with an average deal of about $12 million.

The year’s largest settlements were much bigger and driven by other issues.

Dignity Health’s $100 million settlement—the year’s largest—resolved allegations that it wrongly treated its pension plan as an ERISA-exempt church plan.

And MetLife’s 75 million settlement ended a lawsuit challenging its practice of paying life insurance proceeds in checkbook-style accounts that allowed the company to continue earning interest after distributing benefits.

. . .

Litigation against religiously affiliated hospitals that treat their pension plans as ERISA-exempt “church plans” has cooled down since 2017, when the Supreme Court issued a ruling favoring three hospitals.

The lawsuits accuse the hospitals of misusing ERISA’s religious exemption to significantly underfund their pensions.

Before the Supreme Court weighed in, several hospitals had signed nine-figure deals to end these cases, with one hospital agreeing to pay $352 million.

Three hospitals settled church plan lawsuits in 2019, with settlement amounts down from recent highs.

The lower settlements seen in 2019 may stem from a handful of factors, including the greater risk to plaintiffs following the Supreme Court’s decision, said Karen L. Handorf, a Washington-based partner with Cohen Milstein Sellers & Toll PLLC who represents plaintiffs in ERISA class actions.

Dignity Health agreed to pay $100 million to end a church plan lawsuit, although the judge hearing the case has withheld approval until the parties rethink how attorneys’ fees will be paid.

SSM Health Care Corp. and St. Anthony Medical Center Inc. settled church plan lawsuits for $60 million and $4 million, respectively.

Some of the cases now being settled involve smaller health care systems, in which the pension plans and funding deficits aren’t as large as in earlier cases, Handorf added.

And the remaining defendants may have increased their pension contributions or seen favorable stock market returns, which would lead to less money recovered, she said.

The full article can be accessed here.