Kaplan v. Saint Peter’s Healthcare Sys., 2023 WL 2071725 (D.N.J. 2023)
A trial court has reconsidered whether a church-affiliated hospital’s retirement plan was a church plan exempt from ERISA’s funding and other requirements, reaching a different conclusion this time. As background, ERISA’s church plan exemption provides that a plan “established and maintained” by a church includes a plan “maintained” by a principal-purpose organization—an organization controlled by or associated with a church, the principal purpose of which is administering a plan that provides benefits for employees of a church or a church-affiliated nonprofit. Previously, this trial court and an appellate court concluded that the hospital’s plan was not a church plan because it had not been established by a church (see our Checkpoint article). But the U.S. Supreme Court subsequently ruled that church plans could include plans established (not merely maintained) by church-affiliated organizations (see our Checkpoint article). The trial court reconsidered the plan’s status in light of that ruling.
The court first explained the hospital’s corporate structure and the relationship among the hospital, the plan’s administrative committee, and the Roman Catholic church, noting that the bishop of the diocese that owned the hospital had “virtually unfettered discretion” over hospital business, including significant control over the retirement plan committee. The court then applied a three-step analysis developed by the Tenth Circuit following the Supreme Court’s ruling, asking whether the employer plan sponsor was associated with a church, whether the plan was maintained by a principal-purpose organization, and whether the principal-purpose organization was associated with a church. It concluded that the hospital was associated with the church based largely on its corporate form and inclusion in the Official Catholic Directory, the “definitive compilation” of U.S. Roman Catholic institutions. Because the committee had overall responsibility for plan oversight, including final authority over benefit claims and responsibility for plan assets and investments, it was a principal-purpose organization that maintained the plan. The court rejected the argument that only the entity with the authority to amend and terminate the plan (the employer) “maintains” a plan, concluding that this plan was maintained by both the employer and the committee. And the committee was associated with the church because it was a subpart of the church-affiliated hospital and was under the bishop’s supervision. Thus, the hospital’s plan was a church plan exempt from ERISA.
EBIA Comment: Unsurprisingly, applying the Supreme Court’s ruling yields a broader church plan definition—welcome news for church-affiliated entities that have long treated their employee benefit plans as exempt from ERISA. For more information, see EBIA’s 401(k) Plans manual at Section II.B.3 (“Exemption for Church Plan”), EBIA’s ERISA Compliance manual at Section V.D (“Exemption for Churches”), EBIA’s Self-Insured Health Plans manual at Section III.D.5 (“Plans Sponsored by Religious Organizations”), and EBIA’s Cafeteria Plans manual at Section VIII.D (“Cafeteria Plans Sponsored by Churches”).
Contributing Editors: EBIA Staff.