Church Plan Arguments

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:

And there are many more church plans out there who would have major issues with ERISA coverage (as would the IRS and PBGC). Following are some excerpts from the arguments presented today.

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:

  1. Of course church plans should be covered by ERISA. Are they so much holier than thou that regulation is unnecessary.
  2. 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.
  3. 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.

6 responses to this post.

  1. Posted by Sandy Rich on March 28, 2017 at 8:05 am

    This eruption of activity was kicked off by the extension of protections from the PBGC to the Hospital Center at Orange in 2013, previously classified as a Church Plan by the IRS and nearing asset exhaustion. It is clearly driven by the failure of funding discipline resulting from the lack of ERISA coverage. The link to the PBGC press release is here, Apparently, Church Plans are not holier than thou.


  2. Posted by Anonymous on March 28, 2017 at 4:22 pm

    Church plans have a chance IF their prayers are answered. As for hospital, NJ’s State and Local government plans their only saving grace is Obamacare will soon be gone. No more death squads to ‘pull the plug’ on the feeble and elderly DBPs.


  3. Posted by Anonymous on March 28, 2017 at 6:24 pm

    One exception, the actor’s guild pension fund JB previously mentioned Mr Trump is receiving his excessive and deserving pension. Certainly they would be entitled to a Federal bailout!


  4. […] the United States Supreme Court released their ruling in Advocate Health Care Network v. Stapleton and it was […]


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