For several years, the Kane County Hospital has been dealing with a difficult problem. The problem began in 1993 when the hospital decided to enhance the employees benefits by offering a private 401(K) retirement program. Years later, in 2007, the hospital learned the state requires any public entity who provides a private retirement benefit program to pay retirement contributions for its employees into the Utah State Retirement System (URS).

August 11, 2009 the State Retirement Board (URS) filed an administrative Notice of Board Action against the hospital for eight million dollars to fund state retirement benefits for hospital employees from 1993 through April 30, 2009. The hospital responded to the notice and has denied any liability.

Meanwhile, in 2009, the Utah Legislature passed a bill allowing any public entity, like the hospital, to withdraw from the Retirement Board’s employees pension plan.

In April 2009, the Hospital Board of Directors approved, by resolution, to withdraw from the URS plan. This did not resolve whether the hospital employees should have been participating with the pension plan between 1993 and April 2009.

Shortly after the Retirement Board filed its administrative action in 2009, two Kane County hospital employees (who are still employed by the hospital) brought a separate lawsuit, represented by attorney, against the hospital, the Retirement Board, and John Hancock Life Insurance Company (which provided the 401-K plan) to recover the amounts these employees believed was necessary to receive funding of retirement benefits in the State Retirement System for themselves and other similarly situated employees.

The case went on appeal through the Utah appellate courts, and on February 25, 2014, the Utah Supreme Court upheld the district court’s dismissal. With this decision: No further action based on the employee’s lawsuit may be taken in Utah State Courts.

On August 26, 2013, the Hearing Officer in the Board Action, entered an order that the Retirements Office’s claim was limited by the applicable statute of limitations to the period between August 11, 2006 (three years before the Board Action was filed), and April 30, 2009 (when the hospital withdrew from the URS System), a period of less than three years. Employee claims are limited to the same time period of August 11, 2006 to April 30, 2009.

Note: An employee must have at least four years of service credit with an employer who participates in the URS in order to be eligible for URS benefits.

In March 2014, the hospital board sent a letter to each current or former employees explaining the Hospital’s Proposed Resolution on the retirement benefits. Plus, on March 25 and 26, two open meetings were conducted by representatives from the Utah Retirement System (URS) and the hospital attorneys explaining more about the resolution.

The legislature approved a grant of $900,000 to assist the hospital in meeting a liability for state retirement benefits. The hospital was required to contribute $400,000 from the general fund. This will allow for a total settlement fund of $1,300,000.

The hospital will offer to distribute these funds to its eligible, employees depending on their service between August 11, 2006, and April 30, 2009. Distribution can be by a cash settlement or by a service credit. A release and a waiver must be signed by the employee.