U.S. Supreme Court

Pension plans created by church-affiliated groups get ERISA exemption, SCOTUS rules

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Pension plans established by church-affiliated groups are not subject to the Employee Retirement Income Security Act, the U.S. Supreme Court ruled on Monday.

Justice Elena Kagan wrote the unanimous opinion (PDF) in the case brought by current and former employees of three church-affiliated nonprofits that run hospitals and other health care facilities. The employees wanted ERISA’s protection for their pension plans. Kagan ruled against them in a decision based on a reading of the statute.

The health care group’s pension plans qualify as “church plans” that are exempt from ERISA even though they were established by the health care facilities rather than the church, Kagan wrote.

Justice Sonia Sotomayor wrote a concurrence saying she agreed with Kagan’s reading of the statute. “I am nonetheless troubled by the outcome of these cases,” she wrote. Church-affiliated organizations operate for-profit subsidiaries, employ thousands of people, earn billions of dollars in revenue, and compete with companies that have to comply with ERISA, she said.

“These organizations thus bear little resemblance to those Congress considered” when it enacted the statutory amendment at issue in the case. “This current reality might prompt Congress to take a different path,” she said.

Justice Neil M. Gorsuch did not participate in the opinion.

Co-counsel for the employees issued statements expressing disappointment in the decision but pledging to continue to fight for their clients’ earned retirement benefits. The lawyers are Karen Handorf, a partner at Cohen Milstein Sellers & Toll, and Lynn Sarko, a partner at Keller Rohrback.

Still undecided, Handorf said, is whether large nonprofit hospital systems meet the requirements for the ERISA exemption.

The court ruled in three consolidated cases: Advocate Health Care v. Stapleton, St. Peter’s Healthcare v. Kaplan, and Dignity Health v. Rollins.

Story updated at 4:50 p.m. to include comments from the lawyers.

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