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Supreme Court May Weigh in on Church Plans This Term

On Sept. 21, the U.S. Supreme Court granted a request for a stay in the Ninth Circuit’s decision in Dignity Health v. Rollins. The stay remains effective until the High Court either denies a hearing of the case or issues a final judgment this term.

In the last few years, 403(b) plan participants have filed more than a dozen major cases across nearly every federal appeals circuit against religiously affiliated healthcare institutions, challenging these plans’ ERISA-exempt status as “church plans.” The core issue: whether ERISA’s “church plan” exemption includes plans established by merely “church-affiliated” organizations. Until recently, it had been the settled understanding for three decades (and for about 500 different IRS and DOL rulings) that the answer was “yes.”

In July, the Ninth Circuit found that the “church plan” exemption should only be limited to brick-and-mortar churches, based on its parsing of a discrepancy between ERISA’s original Section 3(33) language and slightly altered phrasing in a 1980 update via the Multiemployer Pension Plan Amendments Act. The Ninth Circuit believes a “steeple” church must actually establish the plan, even if the plan is then maintained by a church-affiliated organization, in order for the plan to be exempt from ERISA.

Often the Supreme Court steps in to resolve a disagreement or “split” among the federal appeals circuits, but the Ninth Circuit’s decision in this case mirrored the Third Circuit’s decision in Kaplan v. Saint Peter’s Healthcare System and the Seventh Circuit’s decision in Stapleton et al v. Advocate Health Care Network. Until Sept. 21 it wasn’t clear whether the highest court in the land would choose to get involved anytime soon. Given that Justice Kennedy submitted the stay application to the full Court before it was granted, it looks like “the Supremes” will probably resolve the matter once and for all by June 2017.

Ray Harmon, Esq., is government affairs counsel for NTSA.