Retirees' class action: Wheaton Franciscan, Ascension wrongly claim religious exemption to pension law

By Dan Churney | Jul 7, 2016

A pair of former employees have brought a federal class action suit against Wheaton Franciscan Healthcare and Ascension Health hospital chains, accusing the companies of mishandling the employee pension plan and skirting federal pension safeguards by claiming an undeserved religious exemption. 

Bruce Bowen and Cheryl Mueller filed a putative class-action suit June 28 in U.S. District Court for Northern Illinois in Chicago against Wheaton Franciscan, which has corporate offices in west suburban Wheaton and in Glendale, Wis., and against St. Louis-based Ascension Health. 

Wheaton Franciscan has run hospitals and other facilities since 1983 in Illinois, Wisconsin, Iowa and Colorado, employing more than 17,000 people. On March 1, 2016, Ascension took over Wheaton Franciscan facilities in southeast Wisconsin, assuming control of the pension plan for those employees. Ascension runs about 2,500 medical facilities, including 142 hospitals, employing about 160,000 people, according to the lawsuit. 

Bowen worked for Wheaton Franciscan from 1998 to 2014, while Mueller worked for the company from 1968 to 2015, the suit said. Both are vested in the retirement plan maintained by defendants. 

Plaintiffs’ 106-page suit alleged violations of the U.S. Employee Retirement Income Security Act of 1974, as well as a violation of fiduciary duty. 

The 1974 Act requires pension plan administrators comply with a number of provisions in order to protect pensions, but exempts certain plans administered by a “church or by a convention or associations of churches.” The exemption was put in place ostensibly to prevent the government from unnecessarily interfering with church affairs. 

The lawsuit alleged Wheaton Franciscan and Ascension have claimed the exemption, but do not qualify for it, because they are “neither run by nor intimately connected to any church financially.” Rather, they are largely operated by lay people, rather than clergy, and employees do not have to profess any faith or creed to work for them. According to plaintiffs, the exemption violates the constitutional prohibition barring government from establishing a religion. 

Plaintiffs allege that among defendants’ shortcomings, defendants have misused the church exemption to underfund the pension by hundreds of millions of dollars and have not informed employees of amendments to the plan.

“Extension of the Church Plan exemption to Wheaton Franciscan and Ascension Health, both non-church entities, privileges Wheaton Franciscan and Ascension Health for their claimed faith at the expense of their employees, who are told that their faith is not relevant to their employment, yet who are then denied the benefit of insured, funded pensions, as well as many other important ERISA (Employee Retirement Income Security Act) protections,” plaintiffs alleged. 

Defendants place their “tens of thousands of longtime employees' justified reliance on their pension benefits at great risk,” plaintiffs claimed. 

Further, plaintiffs contended defendants also enjoy advantage over competitors, based on their “claimed religious beliefs,” as defendants do not have to devote the same amount of resources to their pension plan, as do other companies that are not exempt. 

Plaintiffs asked the court to revoke the exemption and order the companies to fully fund and administer the plan in accordance with the 1974 Act. They also want Wheaton Franciscan and Ascension to pay into the plan any money they gained by allegedly breaching their fiduciary duty, as well as pay any appropriate civil penalties. 

The suit also asked the court to order the plan be placed into a trust with an independent fiduciary officer to oversee it. 

Plaintiffs are represented by the firm of Cohen, Milstein, Sellers & Toll, which has offices across the country, including Chicago, as well as by Seattle-based Keller Rohrback Law Offices. A status hearing is set for Aug. 23, with the case assigned to U.S. District Judge John Z. Lee.

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