Judge Ducks Church Plan Question in Kingdom Now Spat

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

June 15 — A federal judge sent a life insurance dispute back to state court and, in the process, avoided addressing the hot-button question of which entities can sponsor church plans exempt from federal law ( Lawrence v. Nation , 2016 BL 188687, M.D. Ala., No. 2:16-CV-61-WKW, 6/14/16 ).

The lawsuit raises the question of whether Kingdom Now—an Alabama-based nonprofit that aims to “usher in the Kingdom of God in this generation”—can sponsor a life insurance plan that qualifies as a church plan exempt from the Employee Retirement Income Security Act.

Although this church plan question has spurred dozens of high-dollar lawsuits over the past three years in the context of pension benefits, the judge in this case declined to answer the question after noting the possibility that Kingdom Now qualified as a church.

Life Insurance Policies

According to the judge, Guardian Life Insurance Co. of America sold Kingdom Now a group life insurance plan for the benefit of its employees. Guardian then approached “affiliate churches” within Kingdom Now's network, claiming that it could offer insurance policies to all church members, even ones who weren't paid employees of Kingdom Now.

When two church members sought benefits under policies they had taken out on family members, Guardian denied the claims on the grounds that the church members weren't employees of Kingdom Now.

The church members sued Guardian and one of its agents for these benefits. Guardian argued that the lawsuit should be heard in federal court because the plan was governed by ERISA. The church members disagreed, arguing that the plan was an ERISA-exempt church plan.

Church Plan? Maybe

The judge rejected the idea that because Kingdom Now was a corporation, it couldn't also be a church. The judge explained that the two designations weren't “mutually exclusive statuses,” and that many churches are registered as corporations in Alabama.

Moreover, the judge said that Kingdom Now shared an address with Faith Christian Church, a fact that “suggests direct affiliation with a house of worship” and “logically supports” the argument that Kingdom Now is a church.

Even so, the judge declined to conclusively rule that Kingdom Now qualified as a church. Instead, the judge decided to send the case to state court because the two church members weren't participants in the relevant insurance plan and thus didn't have standing to sue under ERISA.

Chief District Judge W. Keith Watkins of the U.S. District Court for the Middle District of Alabama wrote the June 14 opinion.

Beasley Allen Crow Methvin Portis & Miles PC and Sinclair Law Firm represents the church members. Bradley Arant Boult Cummings LLP represents Guardian. Lloyd Gray Whitehead & Monroe represents the insurance agent involved in the dispute.

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

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