“Does the ruling mean that it may be possible for such organizations to continue to maintain church plans that are not subject to the Employee Retirement Income Security Act (ERISA) as they have in the past, or is there more to come on this subject?”
Stacey Bradford, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:
For now, yes, organizations such as faith-based universities or church-affiliated hospitals may continue to establish and maintain church plans following the Supreme Court’s ruling in Advocate Health Care Network et al. v. Stapleton et al. The ruling means that plans maintained by certain tax-exempt organizations that are controlled by or associated with a church (like a faith-based university or a hospital) may qualify as a church plan exempt from ERISA.
Specifically, as long as the plan is maintained by an organization whose principal purpose is the administration or funding of a retirement plan or welfare plan, or both, and that organization is controlled by or associated with a church, the plan is a church plan. For example, a non-profit, church-affiliated health care system may establish a church plan.
But litigation over church plans is likely to continue in the lower courts because the Supreme Court left several issues unresolved, including:
- What qualifies as a “principal purpose organization” that may maintain a church plan?
- What does it mean to be “controlled by” or “associated with” a church?
- What is the definition of a “church”?
- Is the church plan exemption from ERISA an unconstitutional accommodation under the First Amendment’s Establishment Clause.
Of course, Congress could in the meantime amend Section 3(33) to tighten the definition of “church plan,” but that seems unlikely in the near future given its current make-up.
If you have any question whether your organization may establish or maintain a church plan, you should consult an attorney.
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