U.S. Intervenes in Church Plan Lawsuits

November 26, 2013 (PLANSPONSOR.com) – Currently there are five lawsuits questioning the appropriateness of “church plan” status for retirement plans of health care systems or providers.

In all five cases, the United States has intervened, saying “Federal Rule of Civil Procedure 5.1(c) permits the Attorney General to intervene in an action when, as here, the constitutionality of a federal statute has been challenged.” However, the U.S. is not filing a brief in the cases at this time because the courts have a duty “to resolve plaintiffs’ threshold statutory claims before adjudicating their constitutional contention.”

The Attorney General will decide when and if to address the constitutionality claims depending on further developments in the cases.

According to the FRA Plan Tools blog, at this point, motions to dismiss by the different defendants have been fully briefed in four cases and oral arguments have been held in two of those. In a case against Catholic Health Initiatives, the court turned the motion to dismiss into a motion for summary judgment, and discovery has begun.

The lawsuits challenge whether the pension plans in question are actually “church plans” and whether they should be exempt from federal regulations because of that status. The plaintiffs argue the health systems/providers are not churches or conventions or associations of churches nor do they meet any of the other criteria necessary to be considered church plan sponsors under federal regulations (see “Another Lawsuit Questions Sponsor’s Church Plan Status”).

The Pension Rights Center is backing one lawsuit, expressing concern that, because of the Internal Revenue Service (IRS) granting the plan church plan status, it will no longer be protected by the Employee Retirement Income Security Act or backed by the Pension Benefit Guaranty Corporation (see “Disagreement Voiced on IRS Church Plan Ruling”).

Following the filing of some of the lawsuits, two U.S. senators introduced a bill to help resolve what they term as “an unfortunate application of our current pension rules on church pension beneficiaries (see “Bill Addresses Issues with Church Retirement Plans”).”