SCOTUS Endorses Broader Understanding of ‘Church Plans’

The Supreme Court has ruled plans maintained by principal-purpose religious organizations are eligible for the church-plan exemption, whatever their origins.

Following oral arguments in March in the cases of Advocate Health Care Network v. StapletonSt. Peter’s Healthcare System v. Kaplan, and Dignity Health v. Rollins, the U.S. Supreme Court found plans maintained by principal-purpose organizations qualified as “church plans.”

However, the court did not rule that the health care systems in these cases qualified as principal-purpose organizations.

Of the many cases challenging whether an entity’s pension plan is a “church plan” under the Employee Retirement Security Act (ERISA), federal appellate courts ruled that the plans in these cases did not fit ERISA’s definition of “church plan.”

In its slip opinion, the Supreme Court focuses on the definition of church plan under ERISA, noting that from the beginning, ERISA has defined a “church plan” as “a plan established and maintained … for its employees … by a church.” Congress then amended the statute to expand that definition, adding the provision that: “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.” 

The Supreme Court concluded that a plan maintained by a principal-purpose organization qualifies as a “church plan,” regardless of who established it. It noted that the amendment provides that the original definitional phrase will now “include” another—“a plan maintained by [a principal-purpose] organization.”

“That use of the word ‘include’ is not literal, but tells readers that a different type of plan should receive the same treatment (i.e., an exemption from ERISA) as the type described in the old definition,” the justices said.

“In other words, because Congress deemed the category of plans ‘established and maintained by a church’ to ‘include’ plans ‘maintained by’ principal-purpose organizations, those plans—and all those plans—are exempt from ERISA’s requirements. Had Congress wanted, as the employees contend, to alter only the maintenance requirement, it could have provided in the amendment that ‘a plan maintained by a church includes a plan maintained by’ a principal-purpose organization—removing ‘established and’ from the first part of the sentence. But Congress did not adopt that ready alternative. Instead, it added language [for which the] most natural reading is to enable a plan ‘maintained’ by a principal-purpose organization to substitute for a plan both ‘established’ and ‘maintained’ by a church,” Justice Elena Kagan wrote for the court.

Both parties’ accounts of Congress’s purpose in enacting the amendment tend to confirm the Supreme Court’s reading that plans maintained by principal-purpose organizations are eligible for the church-plan exemption, whatever their origins, the high court found. “According to the hospitals, Congress wanted to ensure that churches and church-affiliated organizations received comparable treatment under ERISA. If that is so, this Court’s construction of the text fits Congress’s objective to a T, as a church-establishment requirement would necessarily disfavor plans created by church affiliates,” Kagan wrote.

The employees, by contrast, claim that the amendment’s main goal was to bring within the church-plan exemption plans managed by local pension boards—organizations often used by congregational denominations—so as to ensure parity between congregational and hierarchical churches. “But that account cuts against, not in favor of, their position. Keeping the church-establishment requirement would have prevented some plans run by pension boards—the very entities the employees say Congress most wanted to benefit—from qualifying as ‘church plans’ under ERISA,” the opinion says.