3rd Circuit Holds Catholic Healthcare Retirement Plan Is Not Exempt From ERISA

In a decision that could have major financial implications for religiously affiliated hospitals and healthcare systems, the U.S. 3rd Circuit Court of Appeals yesterday gave the first appellate level victory to employees who, in a series of cases, are claiming that various healthcare system retirement plans do not qualify for the "church plan" exemption from ERISA.  In Kaplan v. St. Peters Healthcare System, (3d Cir., Dec. 29, 2015), the court read the definitional provisions in the statute literally and held that to qualify as a "church plan," the retirement plan, while it may be "maintained" by the religiously-affiliated healthcare system whose employees are covered, must have been "established" by a church or convention or association of churches.  Since St. Peters' plan was created by the healthcare system, and not by the Catholic diocese, it does not qualify.  In so holding, the court refused to give deference to IRS determination that St. Peters' and plans like it are "church plans."  Without the exemption, the plan is subject to the fiduciary and funding requirements of ERISA.  As of 2014, St. Peters Healthcare retirement plan was underfunded by $30 million. Pensions & Investments reports on the decision.