Major Supreme Court Victory for Religious-Based Health Care Systems – ERISA Church Plan Exemption Applies to Church-Affiliated Hospital Plans

On June 5, 2017, the United States Supreme Court issued a unanimous[1] decision in Advocate Health Care v. Stapleton, holding that faith-based hospital pension plans are covered by the “church plan” exemption under the Employment Retirement Income Security Act (“ERISA”). Under ERISA, private employers must fully fund their pensions, pay premiums to the Pension Benefit Guaranty Corp. and comply with stringent disclosure requirements, unless they are subject to an exemption. In the 1980s, Congress expanded the church plan exemption to include the pension plans of church-affiliated organizations. However, in recent years, current and former plan participants brought class action law suits arguing that the exemption should only apply to pension plans that were actually established by a church.  Indeed, three federal appeals courts, including the Seventh Circuit, agreed and ruled against church-affiliated pension plans such as Dignity Health, Advocate Health System and St. Peter’s Healthcare System as not being covered by the church plan exemption. 

Justice Elena Kagan wrote the unanimous opinion holding that: “a plan maintained by a principal-purpose organization qualifies as a “church plan” regardless of who established it.”  This is a major victory for religious-based health care systems. 

This decision will have a broad impact across the spectrum of pension plans maintained by faith-based hospitals and affiliated organizations. For additional information, please contact Rachel Yarch at (312) 840-7029 / ryarch@burkelaw.com.

_{[1] Eight of the justices participated in the decision.  Neil Gorsuch did not participate because he was not on the bench when the Court heard oral argument last year.}