High Court to Decide if Church-Affiliated Pension Plans Are ERISA Exempt

Hospital System employees argue that pension plans were wrongly classified.

The U.S. Supreme Court has begun hearing arguments over whether church-affiliated pension plans that are not run by the church should continue to be exempt from Employee Retirement Income Security Act of 1974 (ERISA) rules.

Three church-affiliated hospitals are asking the high court to reverse the rulings of lower courts that found that their pension plans are not church plans because they were neither established nor maintained by a church and therefore aren’t exempt from ERISA oversight. Meanwhile, the hospitals’ employees argue that their pension plans are dangerously underfunded because the hospitals have claimed a religious exemption.

If the Court rules against the hospitals, it could affect an estimated 1 million employees, and the hospitals could be required to pay retroactive penalties in the billions of dollars, argued Lisa Blatt, of law firm Arnold & Porter Kaye Scholer, who is representing the petitioning hospitals, during arguments. 

The three opinions under review by the Court are Rollins v. Dignity Health, (9th Circuit), Stapleton v. Advocate Health Care Network (7th Circuit), and Kaplan v. St. Peters Healthcare System, (3rd Circuit). In each case, employees of the hospital systems argued that the pension plans maintained by their employers were wrongly classified as except from ERISA rules. All three courts of appeals ruled unanimously.

On March 27, the Court heard oral arguments, which focused on the definition of a church according to ERISA and whether consideration should be given to Internal Revenue Service letters granting church plan status to the entities’ plans.

“Pension plans for religious nonprofits have been exempt from ERISA for over 30 years, whether or not a church established the plan,” Blatt argued.

But attorneys for the hospital employees argued that if there’s no direct involvement by church in the plans, then they shouldn’t be exempt from ERISA.

“There’s no reason why these hospitals, like any other hospital in the country, and like many other — every other firm in the country — shouldn’t have to provide the employees with the pension insurance to protect them against the possibility that when the plan goes bust, they end up with nothing,” James Feldman, who is representing the respondents, said during arguments. Feldman is an adjunct professor at University of Pennsylvania Law School who has a solo practice in Washington, D.C.

By Michael Katz