By The lawsuit alleged that Providence Health had failed to adhere to the federal Employee Retirement Income Security Act in managing the company’s 401(k) plan.
The Catholic health system Providence Health & Services has agreed to a $42 million payout as part of a class-action lawsuit regarding the management of its retirement plan.
The lawsuit was originally brought in October 2024 by former Providence employee Victoria Halter along with a class of plaintiffs who had participated in Providence’s 401(k) retirement plan.
The health system has its roots in a network of hospitals founded by the Sisters of Providence starting in the mid-19th century. Providence says it carries out its health care undertakings “as expressions of God’s healing love, witnessed through the ministry of Jesus.”
The suit alleged that Providence failed to properly use company funds to cover expenses related to its 401(k) retirement plan. It claimed that participants in the plan were required to pay “significant portions” of expenses that should have been covered by other assets.
The filing explicitly accused the company of “improper, disloyal, and imprudent exercise of discretion” when managing the plan finances, and of putting the interests of Providence ahead of the plan beneficiaries. It accused the company of violating the federal Employee Retirement Income Security Act.
A settlement filed on Feb. 13 and obtained by EWTN News says Providence agreed to contribute nearly $42,725,000 to the plaintiffs in the class-action suit, though the filing asserts that the company denies “all liability” and “all allegations of wrongdoing.”
The eight-figure settlement “shall in no event be construed as, or be deemed to be evidence of, an admission … of any fault or liability whatsoever,” the agreement states.
The major settlement, which is still subject to court approval, comes amid wider concerns of Catholic retirement plans around the U.S.
The National Catholic Register reported in December 2025 on multiple U.S. dioceses and Catholic employers facing hundreds of millions of dollars in pension fund shortfalls.
“More than 180 member organizations” are affected by the shortfall in the pension fund run by Christian Brothers Services, which has asked members to dramatically boost their contributions to cover the gap.
The total gap facing the company as of July 2025 was about $800 million, the difference between the company’s $1.55 billion in assets and $2.35 billion in liabilities.
Also in December 2025, the Register reported that former Albany, New York, Bishop Edward Scharfenberger filed for personal bankruptcy protection after a jury found him partly liable for the collapse of a Catholic hospital pension fund that left about 1,100 retirees without pension payments.
The jury found Scharfenberger 10% liable in the $54.2 million judgment, which concerned the failed pension plan once provided by St. Clare’s Hospital in Schenectady, New York.
If you value the news and views Catholic World Report provides, please consider donating to support our efforts. Your contribution will help us continue to make CWR available to all readers worldwide for free, without a subscription. Thank you for your generosity!
Click here for more information on donating to CWR. Click here to sign up for our newsletter.
The fiscal mismanagement of hospitals claiming to be Catholic is massive and very tragic. These people claim to be a religious organization that are exempted them from the Employee Retirement Security Act under the religious exemption clause while operating very strictly as businesses. They cannot have it both ways. Whatever happened to taking care of your own? The people that work for you? I am glad to see that the bishop filed for personal bankruptcy. He should. This is deliberate negligence and another reason the faithful do not trust the bishops and related laymen.
I agree and can’t imagine ERISA exemption by a hospital plan is in the plan participants’ interest. As a general rule, it would be good for religious plans to make the irrevocable election under Internal Revenue Code § 410(d) to “opt-in”, even if they would qualify for the exemption.
Qualified retirement plans (technically 401k plans are NOT pensions, but a feature of a stock bonus or profit sharing plan) are complicated arrangements that are dually regulated by both the IRS and the DOL and require significant sophistication-for example, the term “highly compensated employee” does not mean the same thing to both agencies-to comply with the onerous requirements imposed by the law.
I looked up Bishop Edward Scharfenberger’s background. He graduated with a J.D. degree from Fordham University in New York City in 1990 and was admitted to the New York State Bar Association in 1991. There’s simply no good reason for a licensed attorney or former licensed attorney to not apprehend the legal responsibilities involved in being a plan fiduciary and obtain competent advice from specialized attorneys, accountants, actuaries and investment professionals to avoid this sort of scandal.
We have been lectured on filthy lucre by Bishops for decades, but there precious little evidence that they have any proficiency with an aspect of economics or financial management.