The U.S. Supreme Court has ruled that faith-based hospitals are exempt from federal pension requirements, holding that employees of religious-affiliated entities are not protected under the Employee Retirement Income Security Act (ERISA). The unanimous decision overturns rulings in the three circuit courts of appeals.
The opinion preserves the status quo, so it should not have an immediate effect on the affected employers and employees, said Ronald J. Mann, a law professor at Columbia University in New York who has written about one case, Advocate Health Care Network v. Stapleton, for Scotusblog.com.
Dr. Ronald J. Mann
The high court’s opinion centers on logic and the plain language of the ERISA statute, which is sensible, said Paul Secunda, a law professor and director of the labor and employment law program at Marquette University in Milwaukee. However, the decision does not address the larger question that matters to physicians and hospitals, he said.
“Some of these church-affiliated hospitals look an awful lot like their secular competitors,” he said. “They have thousands of employees. They make billions of dollars in revenue.”
Associate Justice Sonia Sotomayor raised similar concerns in a concurring opinion to the decision. While she agreed with her fellow justices on the ruling, she said the case outcome was still troubling.
“Despite their relationship to churches, organizations such as petitioners operate for-profit subsidiaries ... and compete in the secular market with companies that must bear the cost of complying with ERISA,” Justice Sotomayor wrote.
The Supreme Court ruling comes after current and former employees of three hospital chains – Dignity Health, Advocate Health Care, and Saint Peter’s Healthcare System – sued their employers in an effort to make them comply with ERISA. The employees argued that pension plans established by the large health care providers should not fall under ERISA’s “church plan” exception because the plans were not established by churches. ERISA requires that all private employers offering pension plans adhere to federal requirements designed to ensure plan solvency and protect plan participants.
The hospitals argued that pension plans do not have to be established by a church for the ERISA exemption to apply because the plans are maintained by qualifying church-affiliated organizations. The defendants based their position on a 1980 ERISA amendment that included the “maintained” exception. Since the amendment, the federal agencies charged with interpreting ERISA – the IRS, the Department of Labor, and the Pension Benefit Guaranty Corporation – have issued opinion after opinion reaffirming that view, the defendants noted.
Courts of appeals for the Third, Seventh, and Ninth circuits agreed with the employees, concluding that ERISA’s “plain text” requires that a pension plan be established by a church to qualify for the church-plan exemption.
The Supreme Court disagreed, however, ruling that a defined-benefit pension plan maintained by a principal-purpose organization – one controlled by or associate
Paul Secunda
However, the hospital sector has changed dramatically since the 1980 ERISA amendment, Mr. Secunda pointed out. “If you think back to when this reform was passed ... almost 40 years ago, we have a whole different animal [today] with regard to these large church-oriented hospital organizations.”
Justice Sotomayor raised similar concerns. “These organizations thus bear little resemblance to those Congress considered when enacting the 1980 amendment to the church plan definition. This current reality might prompt Congress to take a different path,” she wrote.
The legal battle over whether faith-based hospitals should comply with ERISA is not likely over, according to Mr. Secunda.
“This is not the end of the story,” he said. “This is just the beginning, and now the next big issue to be decided will be, okay, principal purpose organizations come under the church plan exemption, but do these large billion-dollar hospitals qualify? Are they principal purpose organizations? I think that’s a very open question.”
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