Court Says Catholic Hospitals' Pension Plan Does Not Qualify As "Church Plan" Under ERISA

In an important decision for religiously affiliated hospitals, a California federal district court has held that the pension plan for employees of  Dignity Health, a 16-state non-profit Catholic healthcare provider, does not qualify for the "church plan" exemption in ERISA.  In Rollins v. Dignity Health, (ND CA, Dec. 12, 2013), the court rejected the legal analysis set out by the Internal Revenue Service in a series of private letter rulings, as well as the reasoning of several courts in other circuits.  Instead it held that 29 U.S.C. § 1002(33)(A) clearly requires that to qualify as a church plan, the plan must be established by a church or association of churches.  It rejected Dignity Health's argument that so long as a plan is maintained by a church-affiliated organization, it can qualify as a church plan, even if it was not established by a church.  As reported by Law360, this holding allows plaintiff to move forward with her class action claim that under ERISA, Dignity Health's plan is underfunded by $1.2 billion.  Four similar lawsuits have been filed against other Catholic health care systems by the law firms involved in this litigation.