July 11, 2017
On June 5, 2017, the Supreme Court decided Advocate Health Care Network v. Stapleton, which is consolidated with Saint Peter’s Healthcare System v. Kaplan, and Dignity Health v. Rollins. The Employee Retirement Income Security Act of 1974 (ERISA) requires that employee retirement plans contain certain safeguards, but exempts “church plan[s]” from these requirements. Under 29 U.S.C. 1002(33)(A), the term “church plan” means “a plan established and maintained… by a church or by a convention or association of churches which is exempt from tax….” After a controversy involving an Internal Revenue Service determination that the church plan exemption did not encompass pension plans established and maintained by two orders of Catholic sisters for the employees of their hospitals, Congress amended the statute to add subsection (C), which provides: “A plan established and maintained for its employees (or their beneficiaries) by a church or by a convention or association of churches includes a plan maintained by an organization, whether a civil law corporation or otherwise, the principal purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits or welfare benefits, or both, for the employees of a church or a convention or association of churches, if such organization is controlled by or associated with a church or a convention or association of churches.”
Plaintiffs in this case are a group of employees who work for church-affiliated non-profits. Plaintiffs sued the non-profits, alleging that their retirement plans are subject to ERISA and that by failing to adhere to ERISA’s requirements the non-profits have breached their respective fiduciary duties. Defendants moved for summary judgment, but the district court denied the motions because it determined that a plan established and maintained by a church-affiliated organization was not a church plan within the meaning of the statutory language. The U.S. Court of Appeals for the Seventh Circuit affirmed.
By a vote of 8-0, the Court reversed the judgment of the Seventh Circuit. In an opinion by Justice Kagan, the Court held that under ERISA, a defined-benefit pension plan maintained by a principal-purpose organization -- one controlled by or associated with a church for the administration or funding of a plan for the church's employees -- qualifies as a "church plan," regardless of who established it. All members joined her opinion except for Justice Gorsuch, who took no part in the consideration or decision of the case. Justice Sotomayor filed a concurring opinion.
To discuss the case, we have Eric Baxter who is Senior Counsel at The Becket Fund for Religious Liberty.