Stakes High for Church Plans, Lawyers Say

August 19, 2014 ( – Attorneys representing Catholic Health Initiatives (CHI) have requested that a federal court hear oral arguments in a case challenging the “church plan” status of the pension plan it offers employees.

The motion follows a recommendation by a U.S. magistrate judge that the U.S. District Court for the District of Colorado enter a declaratory judgment holding that the CHI Retirement Plan is not a church plan within the meaning of the Employee Retirement Income Security Act (ERISA), as well as a declaratory judgment holding that the CHI Plan must comply with ERISA, to the extent that it currently does not comply.

In a motion for oral argument in the case, CHI’s attorneys note the legal and factual issues raised in the magistrate judge’s recommendation and in CHI’s objections are complex and potentially “case dispositive.” They note the legal and factual issues include, among others, whether a church plan under ERISA must be established by a church; whether the statute is ambiguous; whether CHI judicially admitted that it is not a church; whether the CHI plan qualifies for the church plan exemption; whether certain agency rulings are entitled to deference; and whether the relief requested by the plaintiff is appropriate.

The attorneys also stressed that a ruling that the CHI plan is not a church plan could have severe consequences for CHI. “Given the magnitude of the relief Plaintiff has requested, an order granting her partial summary judgment motion could destabilize CHI and force the company to consider whether it can afford a retirement plan for its employees at all,” the motion states.

The attorneys also noted “the stakes in this matter are high,” not only for CHI, but for sponsors of retirement plans across the country that have relied on “some three decades of judicial and agency precedent holding that their plans are church plans.”

In her recommendation, U.S. Magistrate Judge Kristen L. Mix agreed with the federal court rulings in Rollins v. Dignity Health and Kaplan v. Saint Peter’s Health Care System, in which two federal courts determined the plain language of ERISA requires church plans to be established by a church. Mix said because she finds that the language of the statute is unambiguous, it is not appropriate to consider the legislative history. In addition, she said she should not defer to an agency interpretation (i.e., an Internal Revenue Service private letter ruling issued to CHI concluding that the plan was a church plan) when the intent of Congress is clear from the language of the statute. She also noted that the IRS letter clearly states it cannot be relied upon as precedent.

One thing Mix considered that the other two courts didn’t was the CHI defendants’ argument that if the court grants plaintiff Janeen Medina’s request for declaratory relief, the remaining relief requested in the motion should not be granted because subsection D of the ERISA section defining a church plan allows for the plan to be corrected. However, Mix pointed out that subsection D begins exactly as subsection A begins: “If a plan established and maintained for its employees (or their beneficiaries) by a church or by a convention or association of churches . . . .” She concluded that, based on a plain reading of the unambiguous language of the statute, subsection D only allows a correction period for a benefits plan established by a church.

However, Mix also found it is not appropriate to order the CHI defendants to take specific steps to comply with ERISA because the parties have provided no evidentiary support for their positions regarding the CHI Plan’s compliance or noncompliance with ERISA. So, while she recommended the district court order the CHI plan comply with ERISA, she did not recommend that the specific relief requested by Medina be ordered at this time.