Adventist Health Plan Must Meet ERISA Requirements, Says Class Action

When is a company’s employee health plan governed by the Employee Retirement Income Security Act (ERISA)? Adventist Health System West (AHW), which does business as Adventist Health offers the Adventist Health Employee Medical Plan—Engaged!, which it claims is a church plan and does not fall under ERISA. The complaint brings suit against the complaint, the plan, its Administrative Committee, and Blue Zones, LLC, alleging that the health plan should meet the requirements of ERISA.

The class for this action is all participants and beneficiaries in the Adventist Health Employee Medical Plan—Engaged! who did not receive adequate notice from the defendants in this case about their enhanced rights under COBRA, within the statute of limitations, and thus did not choose coverage.

In 2020, due to the Covid-19 pandemic, AHW laid off many employees. Because of Covid, the Department of Labor lengthened deadlines to sign up for continued health coverage through the Consolidated Omnibus Budget Reconciliation Act (COBRA), and employers were later required to pay the premiums for the extended coverage.

But the complaint alleges that AHW and its health plan did not comply with COBRA, claiming the plan was a church plan and therefore was not governed by ERISA.

This is not true, the complaint alleges, because AHW does not qualify as a church plan.

The complaint claims, “In 2020, AHW announced its ‘transformative strategy’ to invest $1B in the trillion-dollar health and wellness industry. … The $100M med-spas, mental health apps and web platforms, the future core of its business, [are] not affiliated with the Seventh-day Adventist Church, no matter what their websites claim.”

The AHW shift from low-income hospitals to pricey “wellness spas” is permitted by law, but the complaint alleges that the company is no longer exempt from ERISA as a church plan.

In particular, the complaint claims, “The Plan has used plan assets to purchase each service or technology which AHW has invested in—defraying AHW’s risks and cost of investment.” AHW has two other plans that are considered non-church plans, and whose assets have been used, even under ERISA, in a similar manner.

Furthermore, the complaint alleges AHW employees are required to use AHW services and technology. This means, the complaint claims, that AHW executives “gain undisclosed stock options, phantom stocks, dividends, pension benefits and bonuses from the for-profit subsidiaries and investments.”

But ERISA requires that plan assets be used only for the benefit of plan participants. As to the above, the complaint alleges, “These transactions are prohibited transactions with a party in interest.”

“Undisclosed executive compensation is the motor driving AHW’s for-profit endeavors[,]” the complaint claims. It adds that the plan “does not meet the requisite principal-purpose organization requirement, which requires the plan’s principal purpose to be the administration of health benefits to church employees.”

Article Type: Lawsuit
Topic: Employment
Tags: ERISA, ERISA Violations, Health Insurance, Prohibited Transactions