The Employee Retirement Income Security Act (ERISA) is a federal law that applies to many, but not all, private employers that offer employer-sponsored health insurance coverage and certain other benefit plans. One exemption includes plans established by a church and plans established by a church but maintained by an affiliated organization; however, Congress left it unclear whether a hospital established by a church with pension plans established and maintained by an affiliated organization is exempt from ERISA.
On June 5, 2017, the Supreme Court issued a unanimous decision upholding the ERISA exemption for church-affiliated pension plans that are not established or maintained by a church. Relying on legislative history and statutory language, Justice Elena Kagan authored the majority opinion stating that it was Congress’s intention to include these plans in the exemption. Why is this question so important? Because of the protections in place through ERISA, exempting those plans from ERISA requirements exposes the hospitals’ employees to the possibility of making career-long contributions to a pension plan that is insolvent by the time they retire. On the other hand, because compliance is expensive, and liability for damages when an ERISA-governed plan does something wrong are so severely limited, extending those rules to church-affiliated hospitals would raise the costs of health care at a time when the need for cost containment in the health-care industry could hardly be more pressing.
Without addressing these public policy implications, the Court published a unanimous decision, authored by Justice Sonia Sotomayor, and rested the result on the plain language of ERISA. Specifically, the opinion focused on the provision of ERISA that exempts any plan “established and maintained for its employees by a church.” Shortly after the adoption of ERISA, the IRS held that the exemption did not reach hospitals established by an order of Catholic nuns, reasoning that the hospitals did not involve “religious functions.” Congress responded with a 1980 amendment to ERISA that broadened the church-plan exemption, stating that “[a] plan established and maintained for its employees … by a church … includes a plan maintained by an organization … controlled by or associated with a church.”
Another interesting point about the opinion: It shows how far the court has moved in the still-nascent post-Scalia epoch that an opinion can justify its sense of what Congress could and could not have meant by reference to legislative history, without a single word of objection or qualification. In a passage that would have been remarkable in a unanimous opinion a few short years ago, Kagan reports that “everything we can tell from extra-statutory sources about Congress’s purpose … supports our reading of its text.” To be sure, the opinion’s tack is to suggest that the legislative history is unhelpful rather than to say that the legislative history is affirmatively persuasive. Justice Kagan went on to comment that there was little to no legislative history on this point at all, much less anything particularly helpful.
In any case, the case can be viewed as both a positive and a negative. Positive in the sense that ERISA’s limitations on recovery have a massive chilling effect on litigation related to ERISA-governed plans. Negative in that ERISA provides a certain amount of protection to consumers whose entire retirement savings may fall into one of these accounts. Consumers should always be aware of the investments their employer is making, though, regardless of whether or not the plan is governed by ERISA.
If you need additional information on this subject, contact Rebecca Gilliland, a lawyer in our firm’s Consumer Fraud & Commercial Litigation Section, at 800-898-2034 or email Rebecca.Gilliland@beasleyallen.com.
Sources: Lahle Wolfe, What is Erisa and What Does it Cover? (Mar. 7, 2017) https://www.thebalance.com/what-is-erisa-law-3515060 and Ronald Mann, Opinion Analysis: Justices Unanimously Uphold ERISA Exemption for Church-Affiliated Pension Plans (June 5, 2017) http://www.scotusblog.com/2017/06/opinion-analysis-justices-unanimously-uphold-erisa-exemption-church-affiliated-pension-plans/
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