Advocate Health Care loses church plan appeal

Advocate Health Care lost its bid to be considered a church pension plan, with the 7th U.S. Circuit Court of Appeals in Chicago ruling against it.

In the unanimous decision, Judge Ilana Diamond Rovner noted last week that the case “explores the question that has been brewing in the lower federal courts: whether a plan established by a church-affiliated organization, such as a hospital, is also exempt from ERISA’s reach. We conclude that it is not.” Since neither Advocate nor its predecessor was a church, and the pension plan was not maintained by a church, it is not exempt from the Employee Retirement Income Security Act, she ruled.

Ms. Rovner also noted that lower courts were divided on the question until Dec. 29, when the 3rd U.S. Circuit Court of Appeals in Philadelphia disqualified the church plan exemption of St. Peter's Healthcare system. “Today, this circuit weighs in on the debate, siding with our colleagues on the Third Circuit,” she wrote.

The Advocate case now goes back to U.S. District Judge Edmond Chang to determine the merits of the class action filed March 2014 by former and current Advocate defined benefit plan participants, who questioned the vesting period, funding levels and written notices, among other issues.

Calls to Advocate were not returned at press time. Attorney Amy L. Blaisdell, a partner with Greensfelder Hemker & Gale, representing Advocate, said in December when the case was allowed to continue that it disregarded IRS private letter rulings allowing Advocate and other church-associated organizations to sponsor plans with the church plan exemption, and 30 years of federal court rulings.

The Advocate ruling will likely influence two similar cases in Illinois for starters, said plaintiffs’ co-lead counsel Karen L. Handorf of Cohen Milstein Sellers & Toll. “I think the broader impact will be that plans that are not established by churches need to start thinking about whether they should be covered by ERISA. I would think that other courts are going to start following that. Both the courts of appeals have said that the IRS interpretation is not correct.”