Catholic Health Initiatives Wins Church Plan Dispute

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By Jacklyn Wille

Dec. 9 — Catholic Health Initiatives scored a court order allowing it to operate its pension plan free from federal funding requirements.

The Dec. 8 ruling by the U.S. District Court for the District of Colorado upheld the company's decision to treat its pension plan as a church plan exempt from the Employee Retirement Income Security Act, which mandates certain funding requirements.

In the past few years, more than a dozen pension plans sponsored by religiously-affiliated health-care companies have been targeted in class actions. These suits accuse the companies of misusing ERISA's church plan exemption in order to underfund their pension plans by millions of dollars.

The district courts considering these lawsuits have disagreed over whether the pension plans in question truly qualify as church plans under ERISA. The instant decision by Judge Robert E. Blackburn is notable because it considered—and rejected—the argument that ERISA's church plan exemption violates the First Amendment's establishment clause.

At this time, no federal appellate court has weighed in on these church plan challenges. Appeals are currently pending in the Third, Seventh and Ninth circuits.

More Permissive Exemption Identified

In the instant ruling, Judge Blackburn relied on a more expansive reading of ERISA's church plan exemption than other judges have used. In particular, Blackburn wrote that a plan can be a church plan in one of two ways—by being established and maintained by a church or association of churches, or by being maintained by a qualifying organization that is controlled by or associated with a church.

The Catholic Health Initiatives plan met this second, more permissive definition, Blackburn found.

In addition, Blackburn rejected the argument that ERISA's church plan exemption violates the First Amendment's establishment clause. He noted that forcing church-affiliated plans to comply with ERISA's fiduciary rules could have a “devastating” impact on these plans' “socially responsible investment policies,” because those rules “emphasize profits above all other considerations.”

In this ruling in favor of Catholic Health, Blackburn built on his 2014 decision denying the plan participants' motion for summary judgment (168 DER EE-11, 8/29/14).

The challengers were represented by Keller Rohrback LLP and Cohen Milstein Sellers & Toll PLLC. Catholic Health was represented by Groom Law Group Chtd.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com