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  6.  » Supreme Court Finds ERISA Exemption Applies to Religious Hospital Plan

Supreme Court Finds ERISA Exemption Applies to Religious Hospital Plan

On Behalf of | Jul 15, 2017 |

The Supreme Court, in Advocate Health Care Network v. Stapleton, has ruled that ERISA’s church plan exemption applies to employee benefit plans established by church-affiliated organizations. In reaching this determination, the Court reversed three lower courts’ conclusion that the exemption only applies to plans initially established by actual churches.

Law. “Church plans” are exempted from ERISA. The law defines a church plan as a plan established and maintained for its employees by a church, which includes an organization whose principal purpose is the administration or funding of a plan for the provision of retirement or welfare benefits for the employees of a church, if such organization is controlled by or associated with a church.

The IRS and DOL have taken the position that an employee benefit plan maintained by a board or committee on behalf of a religious affiliated organization is a church plan and therefore exempt from ERISA, even though the plan was not established by a church.

Background. Advocate Health Care Network involved three church-affiliated hospitals that maintained employee benefit plans for their employees. Current and former employees of the hospitals filed a lawsuit claiming that their employer’s plan failed to meet ERISA’s church plan exemption and were subject to ERISA’s requirements. The lower courts (i.e., the Third, Seventh and Ninth Circuit Courts of Appeal) all ruled that the plans were not exempt from ERISA because the plans were not established by churches.

Supreme Court. The Supreme Court reversed the lower courts’ rulings, finding that the church plan exception does not require the plan to be established by an actual church. The Court explained that ERISA’s definition of a church plan includes employee benefit plans maintained by principal-purpose organizations, regardless of who first established them. The Court reasoned that because Congress deemed the category of plans “established and maintained by a church” to include plans “maintained by” principal-purpose organizations, the plans at issue in Advocate Health Care Network were church plans exempt from ERISA even though they were not initially established by churches.

The Supreme Court’s opinion in Advocate Health Care Network is accessible at: https://www.supremecourt.gov/opinions/16pdf/16-74_5i36.pdf

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