Hospital Plan Fails to Meet Church Plan ERISA Exemption

A federal court ruled that a pension plan established and maintained by a religiously affiliated tax-exempt hospital was not a “church plan” exempt from the requirements of the Employee Retirement Income Security Act (ERISA). Kaplan v. Saint Peter’s Healthcare System (D. N.J. 2014).

For the plan to be considered a church plan, the court said it must be established by a church. Until this decision, the hospital had relied upon an IRS ruling that the exemption included plans established not only by churches, but also by tax-exempt organizations “controlled by or associated with a church or a convention or association of churches.” The court held, however, that this plan was established by a hospital, not a church, and the hospital’s affiliation with the Roman Catholic Church was not sufficient to make the plan exempt.

The court’s decision that this was not a church plan allows an ERISA claim to proceed to trial. This decision is important for other plans relying on the “controlled or associated with” clause under ERISA. In light of this decision, organizations with such plans should review with counsel whether they meet ERISA’s definition of a church plan. If not, they must comply with ERISA’s reporting and disclosure, funding, trust, and fiduciary rules.