The U.S. Supreme Court has agreed to resolve whether church-affiliated retirement plan sponsors are covered by the ERISA, a decision that could have wide implications for all benefit plans.
The court agreed Dec. 2 to consolidate three cases brought by church-affiliated plan sponsors: Dignity Health, Advocate Health Care and Saint Peter's Healthcare System. The health-care systems are appealing lower court decisions that they are bound by federal pension law, including its funding and reporting rules. Arguments are expected to be heard in March, with a decision by June.
Pension plans run by church-affiliated organizations may choose to be covered by the Employee Retirement Income Security Act, but they are not required to be. Many of the class-action lawsuits filed in recent years involve plan sponsors that followed ERISA for years but later received private letter rulings from the IRS exempting them from the law as church plans.
The three consolidated cases before the Supreme Court involve defined benefit plans, but the question of whether ERISA applies will have wider consequences for all benefit plans, legal experts said.
“It's much bigger than DB plans. It's also DC and welfare benefit plans, and you would also find yourself having to deal with the IRS,” said attorney G. Daniel Miller of Conner & Winters LLP in Washington, who is representing the Church Alliance, a coalition of 37 church-related benefit programs' CEOs and directors.
Requiring church-affiliated plans to be covered by ERISA also would make sponsors vulnerable to class-action claims related to investment and other decisions, legal experts point out.
Lawyers for the three health-care systems said in their Supreme Court petition that the systems' “will face claims for billions of dollars in retroactive liability” if forced to convert to ERISA plans, while other religious non-profits in the rest of the country “would face paralyzing confusion and uncertainty.”