Sponsors of church-related pension plans are celebrating a Supreme Court decision upholding their right to be exempt from federal pension rules, but participant advocates vow to continue challenging them on other legal points and in new venues, including state courts.
The unexpectedly unanimous Supreme Court decision June 5 brought a collective sigh of relief from religiously affiliated health-care systems that long have operated as exempt from the Employee Retirement Income Security Act, with its detailed rules on funding obligations, vesting, reporting, disclosure and more.
Disagreeing with plan participants, who argued that there needed to be a direct church connection, the Supreme Court found pension plans did not have to be established by a church to be exempt from ERISA, as long as they are controlled by or associated with one.
For the three health-care systems consolidated into the Supreme Court case, Dignity Health, Advocate Health Care and Saint Peter's Healthcare System, an opposite conclusion by the justices would have left the sponsors and other health-care systems in related cases staring at a combined $4 billion funding shortfall for roughly 300,000 plan participants.
The Supreme Court's view of the matter, which was limited to interpreting what Congress intended when it created the exemption in 1980, is in sharp contrast to conclusions reached by three federal appellate courts in 2015 and 2016, upholding District Court rulings that only churches can set up church plans and disallowing the health systems' ERISA exemption. The trend of courts siding with plan participants led to several multimillion-dollar settlements in recent years, including the Franciscan Missionaries of Our Lady Health System, Baton Rouge, La., in May and from Providence Health & Services, Renton, Wash.; Saint Francis Hospital and Medical Center, Hartford, Conn.; and Trinity Health Corp., Livonia, Mich., all in 2016.