ERISA Deal’s $42M to St. Joseph’s Nurses Gets Initial OK

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In recent news, the St. Joseph’s Nurses received preliminary court approval for a $42 million settlement of claims. The New Jersey St. Joseph’s Healthcare System nurses won the settlement regarding claims that the system underfunded the pension plan. The deal was reached after the court stated that church-affiliated entities are exempt from ERISA (Employee Retirement Income Security Act).

The initial approval was offered by U.S. District Judge John Michael Vasquez. The nurses indicate that the settlement would reduce the plan’s alleged underfunding by approximately 50%. The final fairness hearing was scheduled for March of 2018.

The deal was proposed in August by the St. Joseph’s nurses following a Supreme Court ruling that extended ERISA’s exemption for religious entities, which effectively negated one of the key arguments for the plaintiffs in the case. The nurses advised the court that St. Joseph’s already put an amount slightly more than the settlement amount into the plan. Under the settlement agreement, the hospital would also be required to ensure all benefits are paid out for the next seven years (at a minimum). 

It is meant to provide certain and immediate relief to the class through removing the uncertainty associated with continued litigation and improving the plan participants’ retirement security.

The suit is the result of a consolidation of two proposed class actions, both filed in May of 2016. One filed on behalf of Donna Garbaccio, a nurse out of the Paterson, New Jersey St. Joseph’s Hospital and Medical Center from 1978 through 1998. This suit claimed that the pension plan was underfunded by more than $180 million. The second was filed on behalf of Mary Lynne Barker, nurse for St. Joseph’s from 1968 through 2003, Anne Marie Dalio, nurse for St. Joseph’s from 1984-1994, and Dorothy Flar, nurse for St. Joseph’s from 1990 through 1995. This suit claimed the plan was underfunded by a more substantial $210 million.

Plaintiffs alleged that St. Joseph’s violated ERISA law by denying protections to participants and beneficiaries of the pension plan through incorrect claims that the plan was exempt under ERISA due to qualifying as a “church plan.” This was one of the plaintiffs’ main arguments – that a church plan must be established by a church to qualify for the ERISA exemption. 

In the Supreme Court’s June 5th opinion, ERISA’s religious exemption provision was extended to plans that are maintained by church affiliates – even when an actual church did not actually establish the plan. This decision overturned federal circuit court rulings that the exemption would only apply in cases where the church itself actually established the benefit plan.

If you have questions about ERISA violations or if you need to discuss the intricacies of California employment law, please get in touch with one of the experienced California employment law attorneys at Blumenthal, Nordrehaug & Bhowmik.