MISSISSIPPI HEALTH SYSTEM TO PUT $150 MILLION INTO PENSION PLAN TO SETTLE CLASS ACTION
By: Lisa Schencker, Modern Healthcare
Published: June 6, 2016
A Mississippi health system has agreed to pour $150 million into its pension system over the next four decades to settle class action lawsuits that alleged it underfunded the plan.
Singing River Health System will pay the money into the plan over 35 years, according to the settlement, to make up for the cash it didn't contribute to the plan from 2009 to 2014. The systems stopped contributing in 2009 because of challenges caused by the recession, reductions in Medicaid and insurer reimbursements, large capital expenditures and accounting errors, the system told the court.
Attempts to reach Singing River were unsuccessful Monday afternoon. Singing Riveris a public health system with two hospitals, Singing River Hospital in Pascagoula and Ocean Springs Hospital in Ocean Springs.
Retirees and current employees had filed more than 200 lawsuits against the system after it announced in 2014 that it had not contributed to the plan since 2009 and that it planned to terminate and liquidate it. Employees had contributed 3% of their salaries into the plan.
Now, under the settlement agreement, if the system wants to change or terminate the plan, it will first have to get approval from an independent fiduciary and the Chancery Court in Mississippi, said Steve Nicholas, a partner at Cunningham Bounds, who represented the employees and retirees behind the class action.
The retirees and employees who filed the class action suits felt that the system shouldn't have been allowed to skip payments for five years and then terminate the plan, Nicholas said.
He said changes to the plan will still likely be needed, but the missed contributions will be restored.
Not everyone, however, was happy with the settlement agreement approved late last week.
More than 200 of the class of about 3,076 individuals had filed objections to the proposed settlement. They were mostly concerned that the then-proposed settlement would not guarantee their retirement benefits for life.
In his opinion approving the settlement agreement, Chief U.S. District Judge Louis Guirola Jr., said he sympathized with that concern, but the plan's ability to provide lifetime benefits had always been questionable. He said the court wouldn't be able to force the plan to guarantee lifetime benefits even with continued litigation. Given the financial condition of Singing River, the judge worried that rejecting the proposed settlement would only make matters worse for the hospital and its current and future retirees.
To help make the settlement possible, Jackson County, which owns the system, also agreed to pay $13.6 million to Singing River to support indigent care and keep Singing River from defaulting on bonds. Singing River's chief financial officer had testified in court that Singing River probably wouldn't be able to make the settlement payments into its pension system if Jackson County didn't contribute to its indigent care and bond payments.
As part of settlement negotiations, most of Singing River's board of trustees also resigned and Jackson County agreed to retain a turnaround firm to improve the system's performance.