USA: ERISA Compliance: ERISA Exemption for Plans of Church-Affiliated Organizations

In June, the U.S. Supreme Court issued an opinion that provided much-needed clarity about whether the ERISA exemption applies to plans maintained by church-affiliated organizations.

Our US Partner, Alliant Employee Benefits, recently released this synopsis of the decision.

The petitioners were three church-affiliated non-profit organizations that operated hospitals. These organizations established plans that were managed internally by the groups’ employee benefits committees. Former and current employees brought suit, alleging that the hospital plans did not fall within ERISA’s exemption for church plans because they were not established by a church. The following language was at issue:

“A plan established and maintained for its employees…by a church…includes a plan maintained by an organization…the principal purpose…of which is the administration or funding of [such] plan…for the employees of a church…, if such organization is controlled by or associated with a church.”

The Court referred to these as “principal purpose” organizations, and held unanimously that an employee benefit plan maintained by a principal purpose organization was exempt from ERISA, even if the plan was not established by a church. This decision resolves ambiguity that existed as a result of inconsistent opinions in different circuits, and provides clarity for many church-affiliated organizations such as hospitals and schools. You can link to the opinion here.

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