ERISA-Supreme Court Rules That A Retirement Plan Which Covers Church Employees, Is Maintained By An Organization  Intended To Administer Or Fund That Plan And Is Controlled By Or Affiliated With A Church, Is A Church Plan, Not Subject To ERISA, Without Regard To Who Actually Established The Plan

In Advocate Health Care Network v. Stapleton, Nos. 16-74, 16-86, 16-258 (Supreme Court June 5, 2017), the following matter arose. ERISA generally obligates private employers offering pension plans to adhere to an array of rules designed to ensure plan solvency and protect plan participants.  Church plans, however, are exempt from those regulations. See 29 U. S. C. §1003(b)(2).  From the beginning, ERISA has defined a “church plan” as “a plan established and maintained . . . for its employees . . . by a church.” §1002(33)(A).  Congress then amended the statute to expand that definition, adding the provision whose effect is at issue here: “A plan established and maintained for its employees . . . by a church . . . includes a plan maintained by an organization . . . the principal purpose . . . of which is the administration or funding of [such] plan . . . for the employees of a church . . . , if such organization is controlled by or associated with a church.” §1002(33)(C)(i). For convenience, the organizations described in that provision are referred to by the Supreme Court as “principal-purpose organizations.”

Petitioners, who identify themselves as three church-affiliated nonprofits that run hospitals and other healthcare facilities (collectively, “hospitals”), offer their employees defined-benefit pension plans. Those plans were established by the hospitals themselves, and are managed by internal employee-benefits committees. Respondents, current and former hospital employees, filed class actions alleging that the hospitals’ pension plans do not fall within ERISA’s church plan exemption because they were not established by a church.  The District Courts, agreeing with the employees, held that a plan must be established by a church to qualify as a church plan. The Courts of Appeals affirmed.

Upon analyzing the case, the Supreme Court ruled that a plan, which is maintained by a principal-purpose organization, qualifies as a “church plan,” regardless of who established it.  Accordingly, the Supreme Court reversed the judgments of the Courts of Appeals.

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