In Thorkelson v. Publishing House of the Evangelical Lutheran Church in America, d/b/a Augsburg Fortress Publishers, No. 10-1712 (D. Minn. 2011), the plaintiffs sought to represent a class of individuals that were participants of the Retirement Plan for Employees of Augsburg Fortress Publishers, Publishing House of the ELCA (“the Plan”). The Plan had been underfunded for many years, and was terminated in 2010. In the complaint, the plaintiffs asserted a number of claims, arising out of the underfunding, against the defendants under ERISA, as well as under state law, generally for breach of duty, promissory estoppel, and consumer fraud.
One issue faced by the Court is whether the Plan is a “church plan” for ERISA purposes. If it is a church plan, then ERISA will not apply, and only the state law claims may be reviewed. If it is not, then ERISA applies, and the state law claims are preempted. In analyzing this issue, the Court noted that, under ERISA, a “church plan” includes a plan established and maintained by a church, or by a convention/ association of churches (for convenience, below, a church, or a convention/association of churches, is referred to as a “church”). Further, under section 3(33)(C)(i) of ERISA, a “church plan” also includes one that is maintained by an organization, the principal purpose of which is the administration or funding of the plan for the provision of benefits for the employees of a church, if such organization is controlled by or associated with a church. Under section 3(33)(C)(ii)(II) of ERISA, the employees of a church include employees of an organization, which is exempt from tax under section 501 of the Internal Revenue Code, and which is controlled by or associated with a church.
The Court found that the Plan must be treated as a church plan. Augsburg Fortress Publishers (“AFP”) is tax-exempt under section 501 of the Code, and is controlled by and associated with a church, namely, the Evangelical Lutheran Church in America (or “ELCA”). The Plan is sponsored by AFP, and is administered by AFP’s Pension Committee. The Pension Committee’s sole purpose is to administer the Plan. As such, based on the above provisions of ERISA, the Plan is a church plan, which is exempt from ERISA. Accordingly, the Court dismissed all claims based on ERISA. However, (other than a claim based on the Minnesota Consumer Fraud Act, which the Court dismissed) the Court held that the plaintiffs alleged sufficient facts to withstand dismissal of the state law claims.
One Thought: In many cases, plaintiffs would rather have ERISA not apply. Why? Because if ERISA does apply, the state law claims would be preempted, and state law often provides much better remedies for plaintiffs than ERISA.