Churches, ERISA and the Supreme Court: A question of exemptions

On behalf of Stephen G. Nagle & Associates posted in ERISA Claims on Friday, April 14, 2017.

The Employee Retirement Income Security Act of 1974 (ERISA) is essentially a statute that regulates the management of pension plans and imposes a federal fiduciary duty to those tasked with their management. This federal statute is designed to help better ensure that workers’ interests are protected.

ERISA applies to most insurance plans that are offered by employers. However, like most laws, there are some exceptions. One currently under scrutiny is an exemption involving churches.

Generally, churches qualify for an exemption from these requirements. A recent case questions the extent of the exemption. The question has risen to the highest level and will be decided upon by the Supreme Court of the United States (SCOTUS).

What are the details of the ERISA issue? The case, Advocate Health Care Network v. Stapleton, questions whether or not the church exemption to ERISA requirements extends beyond church employees to also cover organizations that are affiliated with the church.

More specifically, do these exemptions apply to hospitals that are affiliated with churches?

How has this exemption been handled thus far? Over the past three decades the Internal Revenue Service (IRS), Department of Labor and Pension Benefit Guaranty Corporation, the three federal agencies that administer this statute, have treated hospitals that are affiliated with churches as exempt from ERISA.

What are the arguments for and against the exemption extending to church affiliated organizations? The hospitals argue that a 1980 extension to the original ERISA plan covers affiliated groups. The language of the extension states that a “plan established and maintained for its employees … by a church … includes a plan maintained by an organization … controlled by or associated with a church.” The hospitals point specifically to the “established and maintained” language to support their argument.

Hospital employees counter that this language was set out to relax the requirement that churches must establish and maintain the pension plans while still keeping the exemption within the confines of the church employees.

What will the court decide? SCOTUS has yet to rule on the case, but experts in the field expect the high court to focus on the specific language of ERISA to continue the current extension of the exemption and encourage Congress to change the statute if it disagrees with the interpretation.

What does this mean for those with ERISA claims? If SCOTUS rules as experts expect, it will likely not impact ERISA claims. However, if SCOTUS decides that hospitals are not part of the exception it could result in an increase in ERISA based claims from hospital employees.

This case provides an example of the intricate nature of ERISA claims. Not only can the claims themselves be difficult, but the law governing the claims can change. As such, those who believe they may have an ERISA issue are wise to seek legal counsel to better ensure their interests are protected.