The U.S. Supreme Court on Monday took up an employee-retirement dispute that threatens to expose religious-affiliated, nonprofit health care systems to billions of dollars in retroactive penalties rooted in the protection of pensions.
Lisa Blatt of Arnold & Porter Kaye Scholer, representing the health systems, argued that three federal appellate courts were wrong to conclude that the hospital networks' retirement plans were not entitled to an exemption from the federal Employee Retirement Income Security Act, or ERISA.
The employee-retirement law, protecting employee assets, sets minimum standards for most voluntarily established pension and health plans in private industry, including rules to ensure the accountability of plan fiduciaries. The plans for religious-affiliated health system have been exempted as "church plans" for three decades. Class actions on behalf of affected employees are challenging those claimed exemptions.
The justices consolidated three cases for argument on Monday: Advocate Health Care Network v. Stapleton; St. Peter's Healthcare System v. Kaplan; and Dignity Health v. Rollins. Dignity Health is the fifth largest health system in the nation and the largest hospital provider in California. Advocate Health Care Network operates 12 Church of Christ and Lutheran affiliated hospitals in Illinois. St. Peter's Health Care System is a Catholic ministry with a hospital in New Jersey.
The hospital systems say they have relied for more than 30 years on "private letter" rulings by the Internal Revenue Service and Department of Labor that granted them the church plan exemptions.
Since 1974, the federal employee-retirement law has expressly exempted church plans from its coverage. The statute defines a church plan as a plan "established and maintained for its employees by a church." At the heart of the case is the scope of a 1980 amendment and whether the "established and maintained by a church" language in the amendment applies as well to organizations affiliated with churches—such as the hospitals in the three cases before the justices.
Several justices had problems with the text at issue and the private letter rulings granting the exemptions.
Justice Elena Kagan called the language "very odd" and "perplexing."
"There would be a simple way of accomplishing what you think this provision accomplishes," Kagan said to Blatt during one exchange. "You know, something along the lines of just saying any plan maintained by a church-affiliated organization is a church plan or something like that."
