The United States Supreme Court today heard oral arguments in Advocate Health Care Network v. Stapleton as to, in the words of the Washington Times, whether some of the nation’s largest hospitals should be allowed to sidestep federal laws protecting pension benefits for workers. The court agreed last December to hear the case and will likely withhold any decision until their session ends this June.
The three supposed church plans involved, with links to their latest 990 filings including the page with pension obligations, are:
- New Jersey-based St. Peter’s Healthcare System – $112,548,076
- Illinois-based Advocate Health System – $114,939,487
- California-based Dignity Health – $688,650,936
Pension plans for religious non-profits have been exempt from ERISA for over 30 years, whether or not a church established the plan. And the contrary holding of the three courts below should be reversed for three reasons. First, the text does not require a church to establish benefit plans for someone else’s employees. Second, the government’s consistent view, over three decades, has generated enormous reliance interest and warrants deference. And third, affirmance would resurrect the precise problems that everyone understood the 1980 amendment would fix. (page 4)
These were ex parte letters. Every one of them, up until the last couple of years, was done on an ex parte basis. The competitors had no chance to say this is what we think. The employees had no chance to say this is what we think. They didn’t analyze the importance of ERISA provisions. They didn’t analyze what would –inevitably did happen, which is there are six or seven church plans already that have failed and left the employees with nothing; but had they been covered by ERISA, they would have had PBGC insurance. The IRS didn’t take any of that into account at all. And to –you know, they were just wrong in 1982. (page 59 explaining away IRS PLRs approving these as church plans).
That’s about it as far as what I gleaned as relevant. For me, the pertinent arguments are those that could not be uttered in open court:
- Of course church plans should be covered by ERISA. Are they so much holier than thou that regulation is unnecessary.
- The IRS sent out all those letters saying these plans were not covered because it was the path of least resistance and would lighten their workload not to have to oversee all these plans.
- After 30 years of no ERISA coverage many of these plans are severely underfunded and would both create a massive amount of extra work for government agencies (at a time when multiemployer plans have already created a lot more work) and monetary liability since, if the court rules these plans are subject to ERISA, the sensible move for plans that could well be 20% funded (if not pay-as-you-go already) would be to file distress terminations with PBGC before their remaining assets are eaten up by PBGC premiums.