The eight justices ruled that faith-based hospitals’ pension plans qualify for the so-called “church plan” exemption from the Employee Retirement Income Security Act. Hospitals and health systems ranging from Dignity Health and Advocate Health Care down to one-hospital systems like St. Peter’s Healthcare System will not have to pay premiums to the Pension Benefit Guaranty Corp. or fully fund their pensions to meet ERISA requirements.
Dignity, Advocate, St. Peter’s and approximately three-dozen other faith-based health systems have faced lawsuits from current and former employees alleging they are not entitled to the church-plan exemption. Three federal appeals courts ruled against Dignity, Advocate and St. Peter’s, leading to the high court showdown.
While the employees alleged that only church-established pension plans warrant the ERISA exemption, the eight justices determined that wasn’t Congress’ intention when it amended ERISA in the 1980s.
“We conclude that the hospitals have the better of the argument,” Justice Elena Kagan wrote for the court.
Under ERISA, all private employers except faith-based organizations must fully fund their pensions, pay premiums to the Pension Benefit Guaranty Corp. and comply with the law’s disclosure requirements. In the 1980s, Congress expanded the church plan exemption to include the pension plans of church-affiliated organizations after the Internal Revenue Service denied an exemption to Little Sisters of the Poor in the 1970s.
Justice Neil Gorsuch did not participate in the decision because he wasn’t yet on the bench when the court heard the case earlier this year.
Kagan noted that the Internal Revenue Service, Department of Labor and PBGC have sent hundreds of letters to faith-based health systems over the last 35 years upholding their ERISA exemptions.
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Erica Teichert assigns, edits and directs news coverage for Modern Healthcare’s website and magazine. She previously served as the publication’s New York bureau chief and legal reporter. Before joining Modern Healthcare in 2016, she worked at Law360 as legal newswire’s first D.C. bureau chief after three years as a court reporter covering the U.S. Supreme Court, D.C. Circuit and other federal courts and agencies. Prior to that, she worked as an associate editor for FierceMarkets. She has a bachelor’s degree in communications with a print journalism emphasis from Brigham Young University.