before the Supreme Court are two petitions regarding the
thorny legal question of which organizations can qualify for
ERISA's Church-plan exemption. If the Supreme Court grants
certiorari and follows the recent Third and Seventh Circuit Court
decisions, then all Church-affiliated organizations (e.g. church
affiliated hospitals, daycares, and adoption agencies) will have to
bring their existing plans into compliance with ERISA, likely at a
substantial cost both to their bottom line and to their religious
In the fall term, the Supreme Court may address an ERISA
question with broad ranging impact on the First Amendment.
Specifically, currently before the Court are petitions in two cases
(Saint Peter's Healthcare System v. Kaplan and
Advocate Health Care Network v. Stapleton) where the
appellate court found that benefit plans established by religious
hospitals (Church-affiliated organizations) are not eligible for
ERISA's Church-plan exemption and therefore are subject to
Both the Third and Seventh Circuits found that the defendant
healthcare organizations did not qualify for the ERISA Church-plan
exemption, as they were Church affiliated organizations not
Churches. They reasoned the Church-plan exemption was very limited
and only applied to plans established by a church, or by a
convention or association of churches. The courts found that the
exemption does not apply to plans established and maintained by a
Church-affiliated organization. In reaching this holding, the
courts rejected the arguments that both the legislative history and
text of ERISA support a broad Church-plan exemption that extends to
Church affiliated organizations.
While a Circuit split has not yet emerged on this issue, there
is still a significant chance that the Supreme Court will grant
certiorari, given that these cases touch on the limits of the
Federal government to regulate religion.
As a practical matter, if the Supreme Court affirms the rulings
of the Circuit Court it will be difficult financially for many of
these plans to comply with ERISA. Subjecting formerly exempt plans
to the strictures of ERISA places high monetary demands on
Church-affiliated organizations that maintain pension plans. For
instance, the plan will be subjected to ERISA disclosure
requirements and compliance with the funding requirements of the
Pension Protection Act of 2006. In addition, an affirmance of the
Circuit Courts' holdings will cause many plans to make
amendments that contradict the religious tenets of the Church with
which they affiliate. For instance, retirement and welfare plans,
suddenly subject to ERISA, will likely be very limited in their
ability to limit health and survivor benefits to opposite-sex
spouses (a core tenet of many religious entities that maintain
Church plans). Even if the Supreme Court were to affirm the Circuit
Courts' holdings, it is certain that the plans, relying on the
decision in Hobby Lobby, would argue that their religious
right to provide benefits in accord with their religious tenets
should control. How the Supreme Court will ultimately decide that
issue has broad implications for employers and plan sponsors as it
will help clarify the line between an employer's freedom of
religion, and an employee's entitlement to certain benefits
under anti-discrimination laws.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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