Providence Health & Services Settlement
Welcome to the Providence Health & Services (“Providence”) Settlement website. This website is designed to keep class members informed regarding the Class Action Settlement in Griffith v. Providence Health & Services. While the District Court has approved the Notice of Proposed Settlement and ordered that certain documents filed with the Court be posted on this website, the content of this website is the responsibility of Plaintiffs’ Class Counsel, and has not been approved by the Court.
On March 21, 2017, the Honorable John C. Coughenour granted the Final Approval Order of the Settlement. The Settlement is now Final.
After the Court granted final approval of the Settlement, the Parties needed to perform some unanticipated research and engage tax experts to ensure proper treatment of the payments to the Group II class members. As a result, the checks to Group II class members have not yet been mailed. Pursuant to a recently approved Minute Order, the checks to Group II class members will be mailed by July 21, 2017.
On November 7, 2014, a putative class action complaint was filed against Providence and various other defendants alleging violations of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Court has appointed Keller Rohrback L.L.P. and Cohen Milstein Sellers & Toll, PLLC as Class Counsel.
The Complaint alleged that Defendants denied the Plan’s participants and beneficiaries the protections of ERISA by claiming that the Providence Health & Services Cash Balance Retirement Plan (“Plan”), also known as the Core Plan, qualified as an ERISA exempt “church plan.” The Complaint alleged that the Plan sponsored by Providence—a large, non-profit healthcare provider—did not qualify as an ERISA-exempt church plan.
Defendants moved to dismiss the Complaint on January 26, 2015. The Parties submitted briefs and documents regarding Defendants’ motion. While the motion to dismiss briefing was in progress, the Parties engaged in informal discovery. Plaintiffs propounded discovery requests on Defendants and Defendants produced approximately 2,100 pages of documents in response to those requests.
Also, while the motion to dismiss was pending, the Parties agreed to stay further proceedings pending the result of a similar case pending in the Ninth Circuit Court of Appeals, Rollins v. Dignity Health, No. 13-01450 (N.D. Cal.). That case is now pending before the Supreme Court.
The Parties stipulated to stay the case while the Parties engaged in extensive settlement negotiations that took place over the course of many weeks and were overseen by a third party JAMS mediator. After weeks of negotiations, the Parties reached an agreement in principle to settle the case and on September 29, 2016, the Parties filed a status report informing the Court they had signed a Term Sheet containing the preliminary terms resolving this matter. They requested that the Court lift the stay in order to carry out settlement approval proceedings, which the Court granted on September 29, 2016.
The Settlement Class
On March 21, 2017, Judge Coughenour granted the Final Approval Order of the ERISA Settlement on behalf of the following:
All Persons who are or were participants, whether vested or non-vested, in the Plan, on or after January 1, 2008, and their beneficiaries.
The Settlement is now Final and provides specific benefits to two groups of people. These groups do not overlap. If you are covered by the Settlement, you can only be in one of the groups. Members of Group II, described below, received an additional enclosure with their Class Notice informing them that they are in Group II.
GROUP I: Current Participants and Beneficiaries in the Plan
For active participants and inactive participants with a deferred vested benefit in the Plan, and their beneficiaries, the Settlement provides a cash contribution of $350 million over seven years to the Plan, which will be used to pay retirement benefits to Plan participants and beneficiaries that are or will become eligible to receive benefits and Plan expenses. The Settlement also provides significant financial and administrative protections, described in more detail below under the section called “The Settlement.”
GROUP II: Persons Who Were Credited with More than Three Years of Vesting Service, But Less Than Five Years of Vesting Service
The Plan requires that a participant be credited with five years of “vesting service” in order to be 100% vested in the Plan. However, ERISA requires that participants in a cash balance plan be 100% vested after three years of vesting service. Pursuant to the Settlement, Plan participants who had a break in covered service under the Plan on or after January 1, 2008 and who, as of the break in service, were credited with at least three (3) years of vesting service, but less than five (5) years of vesting service, will receive a one-time lump sum payment of $500 each. Individuals who are in this Group II received an additional enclosure with the Class Notice informing them that they are in Group II.
As described in detail below, the monetary consideration provided under this Settlement is substantial, totaling $351.9 million. The Settlement also includes significant non-monetary equitable consideration, in that participants in the Plan will receive certain ERISA-like financial and administrative protections. The benefits provided by the Settlement are as follows:
Benefits for Members of Group I
The Settlement requires a cash contribution of $350 million to the Plan, over a seven year period, to settle the claims against Defendants. This payment will be made by annual contributions to the Plan for seven years. In addition to these payments, the Settlement provides that, beginning eight years after the Effective Date, Providence will make annual minimum contributions to the Plan as recommended by the Plan’s actuary with the intent to fully fund the Plan by December 31, 2029. Because the Plan is a defined benefit pension plan and not a defined contribution plan, like a 403(b) plan with individual accounts, the cash amount will be contributed to the Plan as a whole, rather than to individual Plan participants and beneficiaries.
Providence also guarantees that the Plan’s trust will have sufficient funds to pay the vested benefits owed to participants under the terms of the Plan as they come due. Furthermore, no Plan amendment or termination may result in a reduction in a participant or beneficiary’s accrued benefit. In the event of a merger with or into another plan, all participants and beneficiaries must receive the same (or greater) benefits as they enjoyed before the merger. These payments and commitments benefit the current participants in and beneficiaries under the Plan, including individuals who are currently receiving their benefits, described as Group I (see above under the section titled “The Settlement Class”). These commitments are crucial because, as it stands now, the Plan’s promise to pay is “fund-specific,” meaning that the Plan’s financial responsibility for benefits is limited solely to the amount of assets held in the Plan’s trust fund. Because of this Settlement, if the assets in the Plan’s trust are ever insufficient to pay accrued benefits, Providence must make sufficient contributions to the trust to ensure all accrued benefits are paid.
Plan participants will also receive many other protections under this Settlement that are comparable to key ERISA provisions. For example, Plan participants will be entitled to summary plan descriptions (“SPDs”) describing the Plan, summaries of any material modifications to the Plan, pension benefit statements, and claims procedures. Plan participants and beneficiaries may also request annual reports containing financial information about the Plan.
Benefits for Members of Group II
The Settlement also provides that within thirty days after the Effective Date of the Settlement, Providence will pay, pro rata, $1.9 million to the 3,799 non-vested former participants in the Plan who left covered service under the Plan after completing at least 3, but less than 5, years of vesting service and who, as a result, allegedly forfeited a benefit accrued under a cash balance formula. This group is labeled Group II (see above under the section titled “The Settlement Class”). Each member of Group II will receive $500, along with an enclosure attached to their Class Notice informing them that they are in Group II.
Costs & Uncertainties of the Litigation
With this Settlement, the Court has not decided in favor of Named Plaintiffs or Defendants. Instead, Named Plaintiffs and Defendants have agreed to a settlement to resolve the Action. In reaching the Settlement, they have avoided the cost and time associated with continued litigation. As with any litigation, the Named Plaintiffs would face an uncertain outcome if this case proceeded, including the risk of dismissal of their case as well as the risk of not prevailing at trial. Indeed, the scope of the ERISA church plan exemption is currently being litigated in the U.S. Supreme Court. The uncertain outcome of the proceedings in the Supreme Court also raised risks for both parties in continuing this litigation.
The Settlement Agreement generally defines the Released Claims as claims brought by Plaintiffs, or claims that could have been asserted by Plaintiffs, arising out of the allegations in the instant action. However, there is a significant carve out from the Released Claims. Namely, the Settlement Agreement provides that Defendants will not be released prospectively in the event of certain developments in the law, such as the Internal Revenue Service issuing a written ruling that the Plan does not qualify as a church plan.
Fairness Hearing and Objections
On March 21, 2017, the District Court held a Fairness Hearing and granted Named Plaintiffs’ request for final approval of the Settlement, for class certification, for an award of attorneys’ fees and expenses, and for an Incentive Fee to Named Plaintiffs and granted Final Approval of the Settlement. The Settlement is now Final.
Q: How do I know whether I am part of the Settlement Class?
The Court has certified the Action as a class action. You are a member of the Settlement Class if you are or were a participant (whether vested or non-vested), or a beneficiary of a participant, in the Providence Health & Services Cash Balance Retirement Plan on or after January 1, 2008.
Q: What does the Settlement provide?
Under the Settlement, Providence is required to make a $350 million cash contribution to the Plan. This contribution will be made over the course of seven years. The first payment of $50 million will be made thirty days after the Order approving the Settlement becomes Final and non-appealable and all other conditions to the Settlement have been satisfied (the “Effective Date”). For the next six years, Providence will make annual payments of $50 million in each calendar year. Beginning eight years after the Effective Date and continuing thereafter as long as the Plan has not been terminated, Providence will also make annual minimum contributions to the Plan as recommended by the Plan’s enrolled actuary with the intent to fully fund the Plan by December 31, 2029.
Providence guarantees that the Plan’s trust will have sufficient funds to pay participants’ vested benefits under the terms of the Plan as they are due. The Settlement additionally provides that, if the Plan is ever merged with or into another plan, participants and beneficiaries in all affected plans will be entitled to the same (or greater) accrued benefits as they enjoyed before the event. Furthermore, the accrued benefits of participants and beneficiaries cannot be reduced if the Plan is ever amended or terminated.
In addition to the payments above, within thirty days after the Final Approval Order approving the Settlement becomes Final and non-appealable, Providence will pay $1.9 million in the aggregate ($500 per person) to the 3,799 former participants in the Plan who had a break in covered service under the Plan on or after January 1, 2008 and who, as of the break in service, were credited with at least three, but less than five, years of vesting service, and who allegedly forfeited an accrued benefit (“Group II”). These individuals received an additional enclosure with the Class Notice informing them that they are in Group II, and the lump sum payment of $500 will be mailed to each person’s last known address.
The Settlement also provides significant non-monetary equitable consideration, in that participants and beneficiaries in the Plan will receive certain ERISA-like protections concerning plan administration, summary plan descriptions, summaries of material modifications to the Plan, notices (pension benefit statements, annual reports), and the Plan’s claims review procedure.
The above description of the operation of the Settlement is only a summary. The governing provisions are set forth in the Settlement Agreement.
Q: How will the Settlement be distributed?
Members of the Settlement Class do not need to do anything with respect to the Settlement in this Action. Thirty (30) days after the Final Approval Order approving the Settlement becomes Final and non-appealable, Providence will make the first payment of $50 million into the Plan, and will continue making contributions over the course of seven years which will, in total, amount to a $350 million contribution to the Plan for the benefit of members in Group I.
Providence, through its claims administrator, Rust Consulting, will also issue checks to members of Group II, who are not current participants in the Plan and who meet the criteria described above under the heading “The Settlement Class,” by July 21, 2017.
For more information about these payments, see the Class Notice.
For inquiries re this Settlement, please email: .
You may also contact Class Counsel at (800) 233-8509.
If you are a Class Member and you have questions regarding the Group to which you belong, please contact Rust Consulting at (866) 317-3194.
- Motion for Preliminary Approval
- Declaration in Support of Preliminary Approval
- Preliminary Approval Order
- Settlement Agreement
- Class Notice
- Motion for Final Approval
- Motion for Approval of Attorneys’ Fees & Incentive Fees
- Joint Declaration in Support of Final Approval
- Affidavit of Rust Consulting
- Declaration of Saper
- Defs.’ Memo re Final Approval
- Reply in Support Motion for Final Approval
- Declaration in Support of Reply
- Affidavit of Rust Consulting re Reply
- Final Approval Order and Judgment
- Minute Order