The 9th U.S. Circuit Court of Appeals has ruled that Dignity Health’s pension plan is subject to the requirements of the Employee Retirement Income Security Act (ERISA) and does not qualify for ERISA’s ‘church plan’ exemption.
Agreeing with other circuits, the appellate court held that the plain language of ERISA requires that a “church plan” be established by a church or by a convention or association of churches. The 9th Circuit agreed with a district court ruling that Dignity Health had not argued it could meet that requirement.
In its opinion, the appellate court also rejected Dignity Health’s argument that it should defer to a 1983 general counsel memorandum (GCM) from the Internal Revenue Service (IRS) in which the IRS determined that the retirement plans in question had not been established by a church but opined that the plans could qualify as church plans if they were maintained either by a church or a church-affiliated principal-purpose organization. The court said an agency’s interpretation of statute is entitled to deference “when it appears that Congress delegated authority to the agency generally to make rules carrying out the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority.” The court noted that the GCM included a disclaimer that it is “not to be relied upon or otherwise cited by precedent by taxpayers.”
The 9th Circuit noted that the district court did not reach the question of whether the “church plan” exemption in ERISA is unconstitutional—a question raised by a recent filing of another lawsuit challenging a plan’s ‘church plan’ status. Dignity Health also urged the appellate court to review the district court’s rulings that the lawsuit was timely, that the plan was not established by a church and that the plan is not maintained by a principal-purpose organization, but the appellate court concluded that “interlocutory consideration of these issues is unwarranted.”
The case was remanded back to the district court for further proceedings. The 9th Circuit’s opinion is here.