Health Care Sponsor Challenged on Church Plan Status

April 2, 2013 ( - Two former employees of Catholic Health East are challenging whether its pension plans are actually “church plans.”

The lawsuit, filed in the U.S. District Court for the Eastern District of Pennsylvania last week, alleges Catholic Health East (CHE) violates numerous provisions of the Employee Retirement Income Security Act (ERISA)—including underfunding the CHE Plans by over $438 million—while erroneously claiming that the defined benefit plans are exempt from ERISA’s protections because they are “church plans.”    

The complaint says none of the CHE Plans meet the definition of a church plan because CHE is not a church or a convention or association of churches and because none of the CHE plans was established by a church or convention or association of churches.It further says CHE is not controlled by the Catholic Church and, despite its name, is not “associated with” the Catholic Church within the meaning of ERISA because it does not share common religious bonds and convictions with the Catholic Church.  

In a statement to PLANSPONSOR, the health care provider said: “Catholic Health East sees no merit in these allegations and is committed to meeting the obligations of our retirees. CHE is qualified as a church plan, and we are in compliance with federal rules governing retirement plans.”  

The suit, which seeks class action status, also seeks an order requiring CHE to comply with ERISA and afford the class all the protections of ERISA with respect to the CHE plans, as well as an order finding that the church-plan exemption, as claimed by CHE, is unconstitutional because it violates the Establishment Clause of the First Amendment. The suit seeks to have the church-plan status voided and have the plans made whole for any losses. The suit also calls for civil money penalties to be paid to the plaintiffs.  

CHE and two executives are named as defendants.  

The complaint is here.