Workers drop $229M claim against California health system

Nurses and other healthcare workers have voluntarily dismissed a proposed class-action lawsuit they brought against Los Altos Hills, Calif.-based Daughters of Charity Health System, now Verity Health.

The lawsuit, filed in 2014, alleged DCHS evaded federal pension law by improperly classifying its pension plan as a "church plan." Due to the classification, the system's pension plan was exempt from the Employee Retirement Security Act of 1974, which requires pension plans to have adequate funding to pay their promised benefits.

The healthcare workers argued DCHS did not qualify for the "church plan" exemption, and the pension plan was short $229 million due to the exemption.

The lawsuit was filed after DCHS agreed to sell its six hospitals to Ontario, Calif.-based Prime Healthcare Services. According to the lawsuit, Prime would not commit to operate the pension plan as an ERISA-protected plan nor address the pension's funding shortfall. However, Prime backed out of the transaction, and DCHS subsequently inked a deal with hedge fund BlueMountain Capital Management to keep the system's hospitals afloat.

Under the deal with BlueMountain, the health system's pension plan became ERISA-protected, prompting workers to drop their lawsuit, according to a Courthouse News report.

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