A federal judge has denied Advocate Health Care's motion to dismiss claims brought by participants in its defined benefit plan on the grounds that the religiously affiliated health care provider does not qualify for 'church plan' status under ERISA.
Based in Illinois, Advocate operates 12 hospitals. The non-profit was formed in 1995 and has affiliations with the United Church of Christ and the Evangelical Lutheran Church in America. It is not, however, owned by the churches.
Former and current Advocate employees allege Advocate's five-year vesting period for its defined benefit plan is "improperly long," and that it failed to adequately fund the plan and failed to provide proper communications regarding future benefits required under ERISA.
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In asking the court to dismiss the case, Advocate did "not contend that it itself is a church, nor does it claim that a church or an association of churches initially established its pension plan," according to U.S. District Judge Edmond Chang's denial of Advocate's motion to dismiss.
Advocate did argue that language in ERISA expands the definition of a church plan to include the defined benefit plan it administers. But Advocate's reading of the law "tries to make the statutory language say something it does not," wrote Chang.
While a plan maintained by an organization that qualifies as a church plan may include employees of an affiliated, non-church organization, the underlying requirement of ERISA is the "plan must first be established by a church," he said.
In a letter from the IRS, Advocate was, in fact, told its plan qualified for church plan exemptions, and that the designation was entitled to "substantial deference."
Chang disagreed. "Unfortunately for Advocate, the IRS opinion is not entitled to deference and its contents do not change the outcome," he wrote.
There are now nine cases challenging the interpretation of church plan status at various points of litigation across the country, according to Thomas Clark, an ERISA attorney writing in Fiduciary Matters blog.
Once case, Overall vs. Ascension, is on appeal in the 6th Circuit after a lower court upheld Ascension's claim that it qualified for church plan status.
"These cases continue to inspire passionate arguments on both sides. The issue will ultimately be resolved by one of two avenues: the Supreme Court or an act of Congress," wrote Clark.
"I'd bet on the first, but wouldn't be surprised to see the second."
The defense in Stapleton vs. Advocate Health Care Network, which is being heard in the Northern District of Illinois' Eastern Division, will be allowed to file a response to the denial of its motion to dismiss.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
