The Employment Retirement Income Security Act of 1974, otherwise known as ERISA, protects employees from unanticipated losses in retirement or pension plans.  As we have discussed in several articles on the topic, ERISA safeguards such plans by establishing strict protections and requirements on the administration of most employer-sponsored health, disability, life, retirement and other employee benefits plans.  However, ERISA does not govern all employer-sponsored benefit plans.  In general, ERISA carves out exemptions for those plans established or maintained by a government or church entity.

Just a few days ago, in Advocate Health Care Network v. Stapleton, the United States Supreme Court determined a significant question affecting pension plans run by church-affiliated hospitals.  As we predicted months ago, the Supreme Court reversed, applying the ERISA exemption to pension plans maintained by a church-affiliated organization, regardless of who established the plan.  In this article, we briefly cover the Supreme Court’s decision, including the issue the Court addressed, the basic facts underlying the lawsuit, its procedural history and the Court’s rationale in its decision.

Advocate Health Care Network v. Stapleton

As noted above, ERISA’s protections do not apply to all employers and it specifically exempts “church plans” as those established or maintained by a church or church-affiliated organization.  Initially, ERISA only exempted those employer-sponsored plans that were both established and maintained by a church.  Later, Congress changed the definition of what qualified as a “church plan” to include plans maintained by a church or church-affiliated organization whose principal-purpose was to administer a plan for the employees of a church (referred to as a “principal purpose organization”).  In the Supreme Court’s recent decision, the Court addressed just that issue: whether the entity’s religious affiliation qualified it as a church plan exempt from ERISA.

The lawsuit began when plaintiffs sued their former employer, Advocate Health Care Network (“Advocate”), on the basis that it breached a fiduciary duty under ERISA.  By way of brief background, Advocate operates several hospitals and treatment centers across northern Illinois and has a history as a religiously affiliated organization.  Advocate began as the result of a merger between two religious-affiliated hospital systems and, post-merger, Advocate continued its religious affiliation through contracts with the church and its affirmation of the church’s ministry.  Accordingly, Advocate argued that, because of its religious affiliation, it qualified as a church organization.  Thus, the pension plan it offered its employees was not subject to ERISA’s requirements.  

The trial court found in favor of plaintiffs, determining that the pension plan did not fall within the exemption for “church plans” under ERISA, in part, because Advocate did not qualify as a church-affiliated organization.  On appeal, the U.S. Court of Appeals for the Seventh Circuit agreed.  Similar decisions from the Ninth and Third Circuits were consolidated before the Supreme Court in Advocate Health Care Network v. Stapeleton.  The Supreme Court reversed and in a unanimous opinion decided that Advocate qualified as a church-affiliated organization exempt from ERISA.

In explaining the rationale supporting its decision, the Court relied on consistent interpretations made by the three federal agencies responsible for ensuring compliance with ERISA: the Internal Revenue Service, the Department of Labor and the Pension Benefit Guaranty Corporation.  Those agencies interpreted the change in ERISA to include any plan maintained by a principal purpose organization, regardless of whether the plan was originally established by a church.  The Court also pointed out that, such an interpretation of the amended statute was consistent with ERISA’s plain language and general principles of logic.  Ultimately, the Court used these, and other principles, to determine that a “church plan” includes those maintained by a principal purpose organization, regardless of whether a church originally established the plan.

The decision was unanimous absent newly-appointed Justice Neil Gorsuch, who did not participate in the decision-making because he was not present when the decision was argued before the Court.  However, while Justice Sonia Sotomayor agreed, she wrote a separate opinion to express concern that the interpretation was made based on such a limited legislative record.  In this concurrence, Justice Sotomayor noted that, despite their relationship to churches, several of these organizations operate for-profit subsidiaries that employ thousands of employees, earn billions of dollars in revenue and compete in a market with companies that must bear the cost of complying with ERISA.  Accordingly, these organizations may not be the organizations Congress originally envisioned when it amended ERISA in 1980.

Of course, determining whether ERISA applies to a claim is a significant first step in pursuing a wrongfully denied claim.  As the above suggests, it can be a complex issue and having an experienced attorney matters.  If your claim for retirement, health, life, short-term disability or long-term disability benefits has been denied, you can call (949)387-9595 for a free consultation with the attorneys of the McKennon Law Group PC, several of whom previously represented insurance companies and are exceptionally experienced in handling ERISA and Non-ERISA insurance claims.