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Supreme Court Expands ERISA “Church Plan” Exemption

Dan Kuperstein

The United States Supreme Court recently ruled in a unanimous decision to expand the current ERISA “church plan” exemption from applying only to benefit plans established by a church to now applying to benefit plans of church-affiliated organizations. ERISA Attorney Dan Kuperstein explains the decision.

Resources:
Dignity Health v. Rollins
ACA(now) – News on Washington

 

Video Transcript: 
Hi, I’m Dan Kuperstein, and welcome to this episode of ComplianceMINUTE.

On June 5, 2017, the U.S. Supreme Court ruled in a unanimous decision to expand the current ERISA “church plan” exemption from applying only to benefit plans established by a church to now applying to benefit plans of church-affiliated organizations.

Let’s take a closer look at the facts in this case. This case involved several large tax-exempt organizations that operate hospitals. Each of these hospital organizations are affiliated or associated with a church. The hospitals sponsor defined benefit pension plans that are underfunded by the standards that apply to ERISA plans.

Employees filed suit claiming that ERISA applied to these plans. The hospitals claimed that the plans are exempt from ERISA because they are church plans. Three federal courts of appeals agreed with the employees. However, the Supreme Court did not.

Breaking down the court’s ruling, in general, a plan may be a church plan if:

  1. The plan was established and maintained by a church or a convention or association of churches; or
  2. The plan is maintained by a principal-purpose organization, which is an organization that:
    • Is controlled by, or associated with a church, and
    • Has a principal purpose or function of administering or funding a plan or program of employee benefits for employees of a church or a convention or association of churches, including employees of tax-exempt organizations controlled by or associated with a church or a convention or association of churches.

At the end of the day, the most significant takeaway is that if your organization is taking advantage of this church plan exemption, but your benefits managers don’t understand why, it’s a very good idea to review this decision and make sure that your organization’s interpretation of the requirements of the exemption is consistent with the Supreme Court’s interpretation.

For more information on this and other ACA topics, visit our Knowledge Center at corpsyn.com. Thank you.