Church-affiliated hospitals score major win in ERISA case

Churches may establish benefits plans exempt from ERISA (the Employee Retirement Income Security Act) (the nation’s leading benefits law). The statutory text limits this exemption to plan that are “established and maintained” by a church. Does this exemption also apply to benefits plans established and maintained by a hospital associated with a church?

That question has been working its way through the courts, with decisions landing on both sides of the issue. The uncertainty was so great that it is estimated recent settlements by hospitals tallied approximately $750-million in payments and further that the total amount at-issue in pension plans — given the differing requirements for ERISA-covered versus ERISA-exempt plans — approaches $4-billion.

The Supreme Court ruled that hospitals’ plans may qualify for this exemption even if the hospital is not itself a church, so long as the hospital is maintained and established by an entity “the principal purpose . . . of which is the administration or funding of [such] plan . . . for the employees of a church . . ., if such organization is controlled by or associated with a church,” aka a “principal-purpose” organization (colloquially, the hospital is religiously affiliated).

Source: Advocate Health Care Network v. Stapleton, case no. 16-74, 16-86, and 16-258 (U.S. June 05, 2017).

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