First Preliminary Settlement Reached In ERISA "Church Plan" Case

A series of cases filed around the country has challenged the treatment of Catholic hospital system pension plans as "church plans" exempt from ERISA. In Overall v. Ascension, a Michigan federal district court ruled in favor of the hospitals finding that the plans did not need to have been "established by" a church.  It is enough they were created by a church-affiliated organization. (See prior posting.)  Plaintiffs appealed the decision, and the U.S. 6th Circuit Court of Appeals appointed a mediator to try to settle the case. BenefitsPro reported yesterday that now, after 6 months of negotiations, the parties have agreed to a settlement that will give Ascension plan participants "ERISA-like" protections for the next seven and one-half years, but the plans will retain their "church plan" status. Plaintiffs in the case claimed that Ascension's plans were underfunded by $440 million.  The preliminary settlement would require Ascension to contribute an additional $8 million in funding. The proposed settlement still requires court approval.

Court Says Religiously-Affiliated Hospital's Plan Is Exempt From ERISA

Another federal district court has weighed in on whether retirement plans created and maintained by religiously-affiliated hospitals qualify for the "Church Plan" exemption from ERISA.  At issue is statutory language that is ambiguous as to whether a plan must have been created by a church itself in order to qualify for the exemption.  In Lann v. Trinity Health Corp., (D MD, Feb. 24, 2015), a Maryland federal district court resolved the issue in a brief written order referring to reasons the judge stated orally on the record in the case.  The court held that the plan qualifies for the exemption. BNA's Daily Report for Executives [subscription required] says that with this decision, district courts are split 3-3 on the issue. Several of the cases are on appeal.

Illinois Health Care System Pension Plan Is Not Exempt From ERISA As A "Church Plan"

In Stapleton v. Advocate Health Care Network, (ND IL, Dec. 31, 2014), an Illinois federal district court held that the defined benefit pension plan of Illinois' largest health care provider is not exempt from ERISA as a "church plan." Advocate is  affiliated with the United Church of Christ and the Evangelical Lutheran Church in America.  The court held that under ERISA a plan which is maintained merely by an organization associated with a church does not qualify for the exemption unless the plan was initially established by a church itself. In reaching its conclusion, the court refused to defer to a contrary opinion in an Internal Revenue Service private letter ruling issued to Advocate. Reporting on the decision, BNA Daily Report for Executives (Jan. 2) [subscription required] points out that this is the third district court to hold that this type of plan does not qualify for an exemption, while two district courts have held they are exempt.  Numerous other cases are pending.

ERISA "Church Plan" Definition Certified For Interlocutory Appeal To 9th Circuit

In Rollins v. Dignity Health, Inc., (ND CA, Nov. 26, 2014), a California federal district court, reversing it own earlier decision, certified for interlocutory appeal to the 9th Circuit its ruling that the pension plan for employees of  Dignity Health, a 16-state non-profit Catholic health care provider, does not qualify for the "church plan" exemption in ERISA. The court said that it is now persuaded that there is a "controlling question of law" involved such that an interlocutory appeal would be appropriate. The court said:

Dignity estimates having to spend several thousand additional attorney hours, costing in excess of $500,000, to respond to the currently pending and expected discovery requests, in addition to incurring several hundred thousand dollars in attorneys’ fees in responding to Plaintiff’s currently pending motions.... These costs could be avoided, perhaps entirely, by a reversal at the Court of Appeals.

The district court stayed all further proceedings in the case until the 9th Circuit decides whether to take the appeal.  If the 9th Circuit were to decide the plan qualifies as a church plan, the court could ultimately be faced with plaintiffs' argument that the church plan exemption violates the Establishment Clause. Sacramento Business Journal reports on the court's action.

Catholic Hospital's Disability Plan Does Not Qualify As A "Church Plan" Exempt From ERISA

In Hanshaw v. Life Insurance Company of North America, (WD KY, Oct. 24, 2014), a Kentucky federal district court held that a long term disability insurance plan offered to its employees by a Catholic hospital is covered by ERISA and does not qualify as an exempt "church plan." The court held that even if it is sufficient to qualify for an exemption that a plan is established and maintained by an organization affiliated with a church rather than by the church itself, ERISA also requires that the organization have as its principal purpose the administration or funding of a benefits plan.  Here the hospital's primary purpose is the provision of health care, not the administration of a benefits plan. Since the plan is covered by ERISA, the court upheld defendant's removal of the case to federal court.

Court Says Hospital's Retirement Plan Is "Church Plan," Rejecting Magistrate's Recommendation

In Medina v. Catholic Health Initiatives, (D CO, Aug. 26, 2014), a Colorado federal district court disagreed with the interpretation of ERISA in a federal magistrate judge's recommendation (see prior posting) and held that a Catholic health system's retirement plan is an exempt "church plan." This is one of a series of cases filed around the country claiming an IRS 2002 Private Letter Ruling was legally incorrect in allowing plans that were not "created" by a church to claim the exemption. The suits seek to require the religiously-affiliated hospital plans to meet ERISA's funding and other requirements. The court held that it is enough under the relevant statutory provision that the retirement plan is "maintained by an organization controlled by or associated with a church...." BNA Daily Report for Executives (Aug. 28) [subscription required] reports that with this decision, federal district courts are split 2-2 on the issue, with four more cases pending.

Court Reaffirms Catholic Hospital's Plan Not Exempt From ERISA As" Church Plan"

In Rollins v. Dignity Health,(ND CA, July 22, 2014), a California federal district court reaffirmed its earlier holding that Dignity Health's retirement plan is not a "church plan" exempt from ERISA because the plan was not established by a church.  Granting a declaratory judgment, the court rejected Dignity's argument that there is a genuine dispute of fact as to whether the plan should be seen as having been established by several religious orders that controlled Dignity at the time the plan was created.  The holding in the class action lawsuit means that the Catholic health care system's pension plan is underfunded by $1.2 billion.  San Francisco Business Times reports on the decision.

Federal Agencies Provide Disclosure Guidance For Companies Relying On Hobby Lobby Decision

The Department of Labor on Thursday posted an addition to Frequently Asked Questions to provide post-Hobby Lobby ERISA guidance from relevant federal agencies. For closely-held companies that terminate contraceptive coverage mid-plan year in reliance on the Hobby Lobby decision:

if an ERISA plan excludes all or a subset of contraceptive services from coverage under its group health plan, the plan's SPD [Summary Plan Description] must describe the extent of the limitation or exclusion of coverage. For plans that reduce or eliminate coverage of contraceptive services after having provided such coverage, expedited disclosure requirements for material reductions in covered services or benefits apply... which generally require disclosure not later than 60 days after the date of adoption of a modification or change.... Other disclosure requirements may apply, for example, under State insurance law applicable to health insurance issuers.

Court Says Catholic Health System's Pension Plans Qualify As "Church Plans" Under ERISA

In Overall v. Ascension, (ED MI, May 9, 2014), a Michigan federal district court-held that the pension plans of Ascension Health Alliance are "church plans" under ERISA, even though the plans were not "established by" a church.  Disagreeing with two other recent decisions from other districts (1, 2), the court held that it is sufficient that Ascension Health Alliance is controlled by and associated with the Roman Catholic Church. The court dismissed for lack of standing plaintiff's claim that permitting organizations associated with a church to claim church plan status would violate the Establishment Clause. Fiduciary Matters Blog discusses the decision.

Pension Plan of Catholic Hospital Does Not Qualify As "Church Plan" Exempt From ERISA

In Kaplan v. St. Peter's Healthcare System, (D NJ, March 31, 2014), a New Jersey federal district court held that in order for a pension plan to qualify as a "church plan" exempt from ERISA, it must be established by a church or an association of churches.  It is not sufficient that it is established by a tax exempt corporation merely controlled by or associated with a church, despite a 2013 IRS private letter ruling that recognized the New Brunswick, New Jersey Catholic hospital's plan as a church plan. This is the second recent case (see prior posting) to require pension plans of religiously affiliated health care organizations and hospital systems to comply with ERISA. Plaintiff contends that St. Peter's pension plan violates a number of ERISA's requirements, including a requirement that results in its being underfunded by $70 million. MyCentralJersey.com reports on the decision.

Court Refuses To Permit Interlocutory Appeal In Case Challenging Compliance With Church Plan Exemption To ERISA

In Rollins v. Dignity Health, (ND CA, March 17, 2014), a California federal district court refused to permit an interlocutory appeal of a decision holding 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. (See prior posting.)  The court concluded that the issue presented does not rise to the level of a "controlling question of law" which must be shown to justify appeal before the case is finally decided.  The court said:

If Dignity’s plan were not exempt, the Court would still have to consider Dignity’s ERISA compliance. And if the Dignity plan was held to be exempt, the Court would then have to consider Rollins’s claim regarding the constitutionality of such an exemption. Given these complicated, possibly divergent, and even potentially convergent paths the litigation could take, the Court agrees with Dignity that an interlocutory appeal could significantly alter the course the litigation would take. Nevertheless, the Court concludes that the issue proposed for appeal would not so materially affect the entire nature of the litigation, or its outcome, to justify interlocutory review.

As reported by BNA Daily Report for Executives (subscription required), the case is one of five class actions around the country filed last year challenging pension plan sponsors' reliance on the church plan exemption to justify non-compliance with ERISA. A sixth class action raising the same kind of challenge was filed earlier this week.

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.