Supreme Court Holds Church-Affiliated Hospital Pension Plans Qualify as Church Plans

June 5, 2017Legal Alerts

In an 8-0 opinion penned by Justice Kagan, today the United States Supreme Court held a pension plan “maintained by a principal-purpose organization qualifies as a church plan regardless of who established it” and, as such, is exempt from ERISA’s requirements.

Current and former hospital employees filed separate class actions against three church-affiliated non-profits that run hospitals claiming the hospitals’ pension plans do not fall within ERISA’s church-plan exemption because they were not established by a church. The district courts agreed with the employees and held ERISA’s “plain text” requires a pension plan be established by a church to qualify for the church-plan exemption. The Courts of Appeals for the Third, Seventh and Ninth Circuits affirmed. The Supreme Court accepted certiorari.

In overturning the lower courts’ rulings, the Supreme Court spent the majority of its opinion analyzing in great detail the statutory language and the definition of a “church plan.” While the original definition included only a “plan established and maintained . . . by a church or by a convention or association of churches,” a 1980 amendment expanded that definition to include a plan maintained by a “principal-purpose organization.” The Supreme Court also pointed to Congress’ purpose in enacting the 1980 amendment and decades of federal agency decisions that interpreted the ERISA church-plan exemption in reaching its decision. In reversing, Justice Kagan concluded, “[u]nder the best reading of the statute, a plan maintained by a principal-purpose organization therefore qualifies as a ‘church plan,’ regardless of who established it.”

The Supreme Court’s Opinion can be found here.