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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