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Tenth Circuit Answers Questions Left Open Following Supreme
Court's Advocate Health Network v. Stapleton Decision,
Significantly Diminishing Plaintiffs' Ability to Challenge a
Church-Affiliated Healthcare Organization's Retirement
Plan's Church Plan Status Under ERISA
Seyfarth Synopsis: In Medina v. Catholic
Health Initiatives, — F.3d —, 2017 WL 6459961
(10th Cir. Dec. 19, 2017), the Tenth Circuit held that a retirement
plan sponsored by Catholic Health Initiatives ("CHI"), a
church-affiliated healthcare organization, is a "church
plan" under ERISA. This decision strengthens the litigation
positions of religiously-affiliated healthcare systems who are
facing similar lawsuits across the country and gives other courts a
solid framework to analyze the relevant statutory provisions.
If a benefit plan is a "church plan," it is exempt
from the statute and is not required to adhere to ERISA
requirements. A "church plan" is defined as "a plan
established and maintained . . . for its employees (or their
beneficiaries) by a church . . . ." 29 U.S.C. §
1002(33)(A). The statute continues:
A plan established and maintained for its employees (or their
beneficiaries) by a church . . . includes a plan maintained by an
organization, whether a civil law corporation or otherwise, the
principal purpose or function of which is the administration or
funding of a plan or program for the provision of retirement
benefits or welfare benefits, or both, for the employees of a
church . . . if such organization is controlled by or associated
with a church. . . ."
29 U.S.C. § 1002(33)(C)(i).
We have previously written about the Supreme Court's June
2017 Advocate Health Network v. Stapleton decision
here. In Advocate, the Supreme Court held that plans
maintained by certain tax-exempt organizations controlled by or
associated with a church may qualify as church plans. Specifically,
a plan established by a non-church may qualify for the exemption if
the plan is maintained by a "principal-purpose
organization," i.e., an organization whose principal
purpose is administering or funding a plan and that is controlled
by or associated with a church. That being said, the Court did not
further explain what qualifies as a "principal-purpose
organization" or what it means to be "controlled by"
or "associated with" a church.
The Tenth Circuit analyzed these open issues by answering three
questions: (1) Is the entity offering the plan a tax-exempt
nonprofit organization associated with a church? (2) If so, is the
entity's plan maintained by a principal-purpose organization?
That is, is the plan maintained by an organization whose principal
purpose is administering or funding a plan for entity employees?
(3) If so, is that principal-purpose organization itself associated
with a church?
First, in determining whether CHI was "associated
with" the Catholic Church, the Court looked to the language of
29 U.S.C. § 1002(C)(iv), which defines the phrase to mean
sharing "common religious bonds and convictions" with a
church. It found CHI was "associated with" the Catholic
Church because of, among other things, CHI's relationship with
Catholic Health Care Federation, a "public juridic
person" created by, and accountable to, the Vatican; CHI's
Articles of Incorporation provide it was organized exclusively to
carry out religious purposes; and CHI was listed in the Official
Catholic Directory.
Second, Court considered what it means to "maintain" a
plan under 29 U.S.C. § 1002(C)(i). Analyzing the ordinary
meaning of the term, the Court concluded that to
"maintain" a plan means that an entity "cares for
the plan for purposes of operational productivity." Based on
this definition, CHI's Defined Benefit Plan Subcommittee, which
administers the CHI Plan, was a "principal purpose
organization" that "maintained" the plan for
purposes of the exemption.
Third, the Court determined that the subcommittee was an
"organization" because it satisfied the ordinary meaning
of the term, which means "a body of persons . . . formed for a
common purpose." The Court also concluded that the
subcommittee was "associated with" the Catholic Church
because it is a subdivision of CHI and the plan itself stated that
the subcommittee shared "common religious bonds and
convictions" with the Catholic Church.
The Court also found that the church plan exemption, as applied
to CHI's retirement plan, did not violate the Establishment
Clause of the First Amendment.
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