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Compliance July 27, 2016
Two Church Plans Take Cases to Supreme Court
Both petitions to the high court question whether ERISA's church plan exemption applies so long as a pension plan is maintained by a qualifying church-affiliated organization, or whether the exemption applies only if a church initially established the plan.
Reported by Rebecca Moore
Advocate Health Care and St. Peter’s Healthcare System have filed petitions for writ of certiorari with the U.S. Supreme Court to determine whether their pension plans are considered “church plans” under the Employee Retirement Income Security Act (ERISA).
ERISA exempts “church plans” from funding and other requirements. These plans are not insured by the Pension Benefit Guaranty Corporation (PBGC).
Both petitions question whether ERISA’s church plan exemption applies so long as a pension plan is maintained by an otherwise qualifying church-affiliated organization, or whether the exemption applies only if, in addition, a church initially established the plan.
In December 2015, the 3rd U.S. Circuit Court of Appeals agreed with a district court ruling that because no church established St. Peter’s Healthcare System’s defined benefit (DB) retirement plan, it is ineligible for church plan exemption.
In March, the 7th U.S. Circuit Court of Appeals, using similar reasoning as the 3rd Circuit, ruled that the DB plan sponsored by Advocate Health Care Network does not qualify as a church plan exempt from many provisions of ERISA.
There have been a number of lawsuits filed against health care providers challenging the status of their DB plans. An attorney speaking at the 2016 PLANSPONSOR National Conference said such lawsuits are filed nearly every week.
Saint Francis Hospital, one of many health care organizations sued over the “church plan” status of its pension, has agreed to a $107 million settlement.