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The Supreme Court Exempts Church-affiliated Hospitals From ERISA

The United States Supreme Court has ruled 8-0 that church-affiliated hospitals are exempt from the requirements of the Employee Retirement Income Security Act (ERISA). ERISA is a 1974 law that protects employees who participate in pension plans.

It has long been the practice of federal agencies that impose ERISA penalties to exempt churches and church-affiliated organizations from ERISA. Employees of three large church-affiliated hospitals challenged this view, saying the hospitals were profitable businesses hiding behind their church affiliation to avoid the minimum funding and reporting requirements that ERISA imposes.

The three hospitals involved in the lawsuit are Catholic-affiliated Saint Peter’s Healthcare System and Dignity Health, and Advocate Health Care Network, which is affiliated with the United Church of Christ and the Evangelical Lutheran Church in America. The hospitals each claimed that hundreds of other hospitals similarly situated had received ERISA exemptions since the law’s enactment, and that being compelled to comply with ERISA now could cost them billions of dollars.

At the heart of the legal battle was whether the pension plan must be established by the church with which the hospital was affiliated, or whether it could originate with hospital itself. In all three cases, the hospital was the entity that created the ERISA plan. According to the statute, the plan must be “established and maintained ... by the church,” but each of the three hospitals had received confirmation from the government that their ERISA plans were exempt.

Justice Sonia Sotomayor filed a concurring opinion, agreeing with the outcome of the statutory interpretation, but was “troubled by the outcome of these cases.” Her concerns centered around the fact that some hospitals in this church-affiliated category act like secular hospitals in their business practices, and therefore compete unfairly with hospitals that do have to comply with ERISA.

Robert B. Vogel, MD, JD
Retinal Ophthalmologist at Piedmont Eye Center, Lynchburg VA;
Attorney, Overbey Hawkins & Wright, PLLS, Lynchburg, VA;
Adjunct Professor, Humanities and Bioethics, Liberty University School of Medicine, Lynchburg, VA.