Employee Retirement Income Security Act of 1974 (ERISA) generally requires private employers offering pension plans to comply with certain rules designed to protect plan participants and ensure plan solvency. “Church plans,” however, are exempt from most all of those requirements. ERISA Section 4(b)(2). Initially, ERISA defined a “church plan” as “a plan established and maintained ... for its employees ... by a church.” ERISA Section 1002(33)(A). Congress later amended the statute to create a new Section 3(33)(C)(i) which states, “[a] plan established and maintained for its employees (or their beneficiaries) by a church or by a convention or association of churches includes a plan maintained by an organization, ... the principal purpose or function of which is the administration or funding of a plan ... for the employees of a church or a convention or association of churches, if such organization is controlled by or associated with a church or a convention or association of churches.”
Since 2014, several courts have considered whether a church-associated organization whose principal purpose or function is the administration or funding of a plan (a “principal-purpose organization”) could establish a “church plan” exempt from ERISA’s reach. While district court decisions have been split, the three most recent court of appeal decisions were consistent in holding that principal-purpose organizations could not establish ERISA-exempt church plans.
On June 5, 2017, however, the Supreme Court decided in Advocate Health Care Network v. Stapleton that plans established by church-affiliated nonprofits that run hospitals and are maintained by internal employee-benefits committees could be “church plans.” The Court reasoned that ERISA Section 3(33)(C)(i) expanded the definition of the term “church plan” so that a plan maintained by a principal-purpose organization could “receive the same treatment (i.e., an exemption) as the type described in the old definition.” Stapleton, 2017 WL 2407476, at *5 (U.S. June 5, 2017). As a result, employee benefit plans maintained by principal-purpose organizations are “church plans” under ERISA and, thus, exempt from ERISA’s requirements.