On June 5, 2017, the Supreme Court unanimously ruled that religiously affiliated non-profit plans are exempt from ERISA even if the church did not originally establish the plan.
This ruling overturned lower court decisions at both the district and appellate levels in the 3rd, 7th and 9th circuits that maintained that plans had to be established by a church to qualify for the ERISA church-plan exemption. The class action suit was filed on behalf of current and former hospital employees of three church-affiliated healthcare organizations that sought to maintain that the hospital plans were not entitled to ERISA’s church-plan exemption since these plans were not established by a church.
The issue brought before the Supreme Court was whether ERISA’s church-plan exemption applies only to pension plans that are maintained by an otherwise qualifying church-affiliated organization or if the exemption applies only if a church originally established the plans.
In writing for the Court, Associate Justice Elena Kagan noted that ERISA does not impose the requirement that “a church must have originally established such a plan” for it to qualify for the exemption. She wrote that “From the beginning, ERISA provided that “[t]he term ‘church plan’ means a plan established and maintained…for its employees…by a church or by a convention or association of churches.” Justice Kagan went on to cite a 1980 Congressional amendment to ERISA that “specified that for purposes of the church-plan definition, an ‘employee of a church’ would include an employee of a church-affiliated organization (like the hospitals here).”
Justice Kagan further maintained that the three federal agencies responsible for administering ERISA (the Internal Revenue Service, the Department of Labor and the Pension Benefit Guaranty Corporation) “have long read those provisions, when taken together, to exempt plans like the hospitals’ from the statute’s mandates.”
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