What just happened?

On Monday the Supreme Court handed down an important ruling affirming that religiously affiliated organizations—including hospitals and colleges—are exempt from the U.S. Employee Retirement Income Security Act (ERISA).

What was the case about?

Over the past four years, Becket Law notes, class-action lawyers have “brought nearly 100 lawsuits against various Catholic and Protestant hospitals around the country, arguing that these nonprofit hospitals had broken the law by participating in nonprofit church pension plans instead of using lower-benefit pension plans designed for large for-profit corporations like Exxon and Walmart.”

Three federal district courts and the Court of Appeals agreed with the employees who filed these lawsuits, and held that to qualify as a church plan a church must establish the plan.

What was the Court’s decision?

In a unanimous decision (8-0; Justice Gorsuch did not vote) on Advocate Health Care Network v. Stapleton, the Court reversed lower court decisions and held that under ERISA, a pension plan controlled by or associated with a church for the administration or funding of a plan for the church's employees qualifies as a “church plan.”

What is the U.S. Employee Retirement Income Security Act (ERISA)?

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry. According to the Department of Labor, “ERISA requires plans to provide participants with plan information including important information about plan features and funding; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a grievance and appeals process for participants to get benefits from their plans; and gives participants the right to sue for benefits and breaches of fiduciary duty.”

ERISA generally does not cover retirement plans established or maintained by churches for their employees.

Under the law, who counts as a church employee?

The ERISA law considers “church plans” to be any “plan established and maintained for its employees (or their beneficiaries) by a church or by a convention or association of churches.” Employees under this law include both ministers and also any employees of organizations or companies “controlled by or associated with a church or a convention or association of churches.”

What was the ruling of the lower courts?

The Third and Seventh Circuits interpreted the church plan exemption to require, according to Becket Law, a significant change to the IRS’s longstanding rule: the definition of a church plan no longer may include plans established by religious organizations “controlled by or associated with a church.”

Why should Christians care about this ruling?

The underlying question being addressed by the case was whether the First Amendment allowed civil courts and government agencies to determine whether mercy ministries, such as homeless shelter or hospitals, should be considered as a part of the church.

The prevailing assumption has been that the First Amendment provides religious groups with a wide degree of latitude to determine their mission and internal organization. As Becket Law noted in their friend-of-the-court brief,

[T]he Third and Seventh Circuits would force government officials to treat every kind of religious polity as if it were a low-church Protestant denomination like the Primitive Baptists, where the legal form of a single nonprofit corporation tracks the primary unit of the religious polity. But many church polities simply do not map one-to-one onto specific legal structures. For instance, there is no civil legal analogue to the presbyterial form of church polity used by Reformed Christians or the connectional form of church polity used by Methodists.

Had the lower courts ruling been allowed to stand, the precedent could have affected other issues in which church structure affects how they carry out their mission.