Supreme Court Upholds ERISA Exemption for Church-Affiliated Hospital Pension Plans
Three cases hailing from three different federal appellate circuits, the Third, Seventh and Ninth, involved pension plan participants’ actions seeking a ruling that their nonprofit employers’ pension plan was not a “church plan” and thus was not exempt from the requirements of the Employee Retirement Income Security Act (ERISA). Such requirements have protected employees for decades from having their retirement savings decimated by an insolvent pension plan. Yet with church-affiliated hospitals being prevalent among health care providers, the countervailing issue is health cost containment. Notwithstanding these competing considerations, the U.S. Supreme Court held that an ERISA plan maintained by a principal-purpose organization qualifies as a church plan, and thus is exempt from ERISA, regardless of whether a church originally established the plan. The Court relied on the express terms of ERISA in rendering its decision. However, Justice Kagan wrote a separate opinion to emphasize the for-profit nature of affiliated subsidiaries of these health care providers that may prompt Congress to change the law.