Religious Hospital Pension Clash Accepted by U.S. Supreme Court

(Bloomberg) -- The U.S. Supreme Court agreed to decide whether religious hospitals and schools must abide by the federal rules that govern most private pension plans, taking up an issue at the heart of dozens of lawsuits that seek potentially billions of dollars.

Workers have won a series of federal appeals court decisions opening religious hospital systems to claims that their plans are underfunded. The appeals courts say religious organizations must comply with the law that governs employee benefits and protects retirement plans.

The hospitals say those rulings conflict with the longstanding understanding that religious organizations are exempt from the pension law, just like churches themselves are.

“These suits seek billions in retroactive liability and a wholesale upheaval in the administration of pension plans affecting religious employers and employees across the country,” according to appeals filed by three hospital systems, including Advocate Health Care Network.

Advocate, affiliated with the Evangelical Lutheran Church in America and the United Church of Christ, operates 12 hospitals and employs 33,000 people in northern and central Illinois.

The court also agreed to hear arguments from Dignity Health, a Catholic organization with 39 hospitals in more than 20 states and 60,000 employees, and Saint Peter’s Healthcare System, which operates a Catholic hospital in New Brunswick, New Jersey.

The workers say the U.S. Employee Retirement Income Security Act, known as ERISA, exempts only churches themselves. That would force religious hospitals, schools, day-care centers and other organizations to comply with the law’s pension protections.

“Congress did not, and had no reason to, allow giant businesses like Advocate to create their own ERISA-exempt benefit plans, simply because they claim a religious affiliation,” the workers in that case argued.

ERISA exempts what it calls “church plans.” At one point the law defines those as plans “established and maintained for its employees by a church.” At another, it says plans are exempted if they are “maintained” by a group “that is controlled by or associated with a church.”

The hospitals say that for 30 years the three federal agencies that enforce ERISA have interpreted that language to exclude organizations affiliated with a church, regardless who established the plan.

The court will hear arguments and rule by June.

The cases are Advocate Health Care v. Stapleton, 16-74; St. Peter’s Healthcare v. Kaplan, 16-86; and Dignity Health v. Rollins, 16-258.