Supreme Court Holds That Church-Related Hospital Pension Plans Are Not Subject to ERISA

The United States Supreme Court recently held in Advocate Health Care Network v. Stapleton, 2017 WL 2407476 (2017), that pension plans maintained by church-affiliated entities, such as hospitals and nursing homes, are exempt from the provisions of the Employee Retirement Income Security Act of 1974 (ERISA).

The Supreme Court reversed the rulings of a number of lower courts which had held, based on the relevant statutory language, that such pension plans were exempt from ERISA only if they were “established” by a church, but were not exempt from ERISA if they were simply “maintained” by a church-related entity, such as a hospital. The Supreme Court reasoned that “[u]nder the best reading of the statute, a plan maintained by a [church-related entity] therefore qualifies as a ‘church plan’ regardless of who established it.” The Supreme Court’s decision affirmed the position that the Department of Labor, Internal Revenue Service and Pension Benefit Guaranty Corporation had taken for many years prior to the recent spate of litigation suggesting that the agencies’ position was inconsistent with the relevant statutory provisions.

The Supreme Court’s decision is important because “church plans” are exempt from the funding requirements in ERISA, and are also exempt from the Pension Benefit Guaranty Corporation’s termination insurance program and the related insurance premium requirements. As a result, sponsors of church plans, such as religiously-affiliated hospitals and nursing homes, are not required to meet the ERISA funding requirements for their defined benefit pension plans and are not required to pay the increasingly costly Pension Benefit Guaranty Corporation termination insurance premiums.

Given the Supreme Court’s decision, it would appear that the litigation that has emerged in recent years involving the definition of a “church plan” under ERISA will be quickly and fully resolved.