Court Finds Advocate Health Retirement Plan Not a Church Plan

A federal district court has found the defined benefit (DB) retirement plan of Advocate Health Care Network and its subsidiaries is not a “church plan” under the Employee Retirement Income Security Act (ERISA).

United States District Judge Edmond E. Chang of the U.S. District Court for the Northern District of Illinois concluded a statutory analysis reveals that the Advocate plan does not qualify as a church plan and is instead fully subject to ERISA’s requirements. Chang denied Advocate’s motion to dismiss the case.

According to the court opinion, although it is affiliated with the United Church of Christ and the Evangelical Lutheran Church in America, Advocate is not owned or financially supported by either church. The plaintiffs allege that by unlawfully operating the plan outside the scope of ERISA, Advocate breached its fiduciary duties and harmed the plan’s participants by requiring an improperly long period of five years of service to become fully vested in accrued benefits; failing to file reports and notices related to benefits and funding; funding the plan at insufficient levels; neglecting to provide written procedures in connection with the plan; placing the plan’s assets in a trust that do not meet statutory requirements; and failing to clarify participants’ rights to future benefits.

Alternatively, even if Advocate can evade liability on these counts under ERISA’s church plan exemption, the plaintiffs allege that this provision of ERISA is void as an unconstitutional violation of the First Amendment’s prohibition on state establishment of religion.

Chang found that ERISA Section 33(A) defines a church plan as a “plan established and maintained” by a church, and Section 33(C)(i)’s provision that a church plan includes a plan maintained by an organization established for the purpose of administering the plan does not override the fact that the plan must be established by a church. He quoted the case of Rollins v. Dignity Health in which a federal court in California made a similar finding and said if “all that is required for a plan to qualify as a church plan is that it meet section [33(C)’s] requirement that it be maintained by a church-associated organization, then there would be no purpose for section A.”

Chang contended that contrary findings by other courts incorrectly look at Section 33(C) in isolation. He said neither Medina v. Catholic Health Initiatives or Overall v. Ascension Health Alliance explain why “established and maintained” should be read as a singular term when those two words have separate, ordinary meanings. 

Looking at the legislative history of ERISA Section 33(C), Chang said the takeaway is that it was added to ERISA in response to very specific concerns about existing church plans and the fact that pension boards were set up to maintain their pension plans. 

Chang also concluded the Internal Revenue Service (IRS) opinion given to Advocate saying its plan is not entitled to deference and its contents do not change the outcome of the court’s decision. He cited other court cases which established that agency opinions expressed in letters are not owed the type of deference that is owed when an administrative agency interprets a statute through formal adjudication or rulemaking with a notice-and-comment process. “[T]he IRS letter, which reflects merely an advisory opinion and not the product of formal adjudication or rulemaking, should be deferred to only if its interpretation of the statute is convincing,” Chang wrote. He found that because the IRS opinion relied on the same reasoning used by the court decisions he rejected, it is not persuasive and is owed no deference. 

Because he found the Advocate plan is not a church plan, Chang said, “the constitutional question raised here, whether Congress may permissibly create within ERISA a religious-based exemption for certain employers, must await another day for resolution…” 

The opinion in Stapleton v. Advocate Health Care Network and Subsidiaries is here.