Supreme Court Holds that Church Plan Exemption Applies to Church-Affiliated Hospital Retirement Plans
In an eight to zero decision, the U.S. Supreme Court held that ERISA’s church plan exemption applies to plans maintained by a church-affiliated organization whose principal purpose is the administration or funding of a retirement plan covering employees of a church or a church-affiliated organization (which the Court dubbed principal-purpose organizations), even if the retirement plan was not originally established by a church. Church plans are generally exempt from ERISA, including its fiduciary and minimum funding requirements. Multiple lower courts previously held that the church plan exemption did not apply to the retirement plans of Advocate Healthcare Network, Dignity Health, and St. Peter’s Healthcare System, which are church-affiliated healthcare systems, because their plans were not originally established by a church, but rather by the healthcare systems. Applying a plain-text reading of the statute and noting that the federal government had long agreed the exemption applied to such retirement plans, the Supreme Court reversed the lower courts, reasoning the exemption applied to plans maintained by so-called principal-purpose organizations regardless of whether a plan was originally established by a church or by a principal-purpose organization. The Supreme Court’s opinion only addressed the issue of whether a church plan must have been originally established by a church, not the degree of association required between a church-affiliated organization and a church or whether an employer’s internal benefit plan committee would qualify as a principal-purpose organization.