High Court Ruling May Not Settle Church Plan Issue

When the US Supreme Court unanimously ruled on June 5 that church-affiliated pension plans were exempt from The Employee Retirement Income Security Act of 1974 (ERISA) requirements, it seemed to put to bed a debate that had been working its way through the courts for years.

The debate was over whether an ERISA exemption for church pension plans applies only to plans that churches operate themselves for the their own employees, or if it also includes plans operated by administrators that are affiliated with churches, but aren’t churches. 

Despite the 8-0 ruling, written comments by Justice Sonia Sotomayor suggest that while the text of ERISA indicates church-affiliated plans are exempt from its rules, the spirit of the law suggests otherwise.

As a result, the ruling “may not, though, bring a conclusive end to the efforts of employees to bring these hospitals within ERISA,” wrote Ronald Mann, a professor of law at Columbia University, in SCOTUSblog, citing Sotomayor’s remarks.

“I join the Court’s opinion because I am persuaded that it correctly interprets the relevant statutory text,” wrote Justice Sotomayor. “But I am nonetheless troubled by the outcome of these cases.

“Despite their relationship to churches, organizations such as petitioners operate for-profit subsidiaries, employ thousands of employees, earn billions of dollars in revenue, and compete in the secular market with companies that must bear the cost of complying with ERISA,” Sotomayor continued. “These organizations thus bear little resemblance to those Congress considered when enacting the 1980 amendment to the church plan definition.”

When enacted in 1974, ERISA exempted pension plans that were established and maintained by churches for their employees. But in 1980, Congress expanded the exemption to include plans established by churches to cover employees of affiliated hospitals, schools, and other nonprofit organizations.

The Pension Rights Center, a nonprofit consumer organization, said the ruling left a key issue in the case unresolved.

“The Court did not decide whether the plans involved in the cases before it are maintained by the type of organization envisioned by Congress when it enacted the law,” said Karen Ferguson, director of the Pension Rights Center, in a statement. “The Court merely ruled that a religiously-affiliated entity can establish a ‘church plan’ that is exempt from federal pension law.”

Ferguson added “the Court noted that its ruling did not address a second requirement of the law, that an exempt church plan be maintained by an ‘organization’ that has administration of the plan as its principal purpose. That this was not addressed in the Court’s decision leaves hope for workers and retirees covered by these plans that they will receive the pensions they earned.”