The U.S. Supreme Court ruled last week that the long-held Church Exemption to the Employee Retirement Income Security Act (ERISA) did apply to benefit plans run by employers who are closely affiliated with churches. Both governmental plans and church plans have been exempt from ERISA since its inception in 1974. Advocate Health Care Network v. Stapleton (U.S. 2017).
The case combined three federal court of appeals decisions that would have removed the exemption from plans run by church affiliated hospitals. Justice Kagan wrote the opinion in this 8-0 decision. Justice Kagan noted that while church plans were originally exempt from ERISA, a 1980 amendment passed by Congress was designed to remove the distinction between benefit plans run by the actual church and those run by church-affiliated organizations whose principal purpose was to accomplish the church’s mission. She referred to this as the “principal purpose” amendment, and the justices agreed the hospitals had the stronger argument.
For now, this decision is welcome news to many church plans run by religious-affiliated schools, hospitals, soup kitchens, and homeless shelters whose principal purpose is to serve the mission of their church. This case has been closely watched due to the many lower court class action lawsuits that are seeking millions of dollars in retroactive liability from these organizations for non-compliance with ERISA.
In time, much will be written about this decision and future implications. For now, church plans run by their principal purposed organizations, along with government run benefit plans, will remain outside of ERISA-mandated hassles and protections.