In the 8-0 opinion authored by Justice Elena Kagan (the case was argued before Justice Neal Gorsuch’s confirmation to the bench), the court applied a more inclusive interpretation of the statutory language than the lower courts, and said exempted status extends to pensions maintained by hospitals affiliated with churches even if the churches did not directly establish the plans.

The decision represented an abrupt reversal of three district courts, which said the plans in question were not exempt from ERISA because they were not established directly by churches. The Third, Seventh, and Ninth Appellate courts each unanimously upheld the lower court rulings.

“We had concerns given that the courts of appeal in these three cases were all unanimously decided,” said Howard Shapiro, a partner in Proskauer Rose’s employee benefits practice who has represented several hospital systems in similar church plan cases. “It’s not common for the appellate courts to be unanimous.”

While the civil challenges to church plan status are relatively new, questions surrounding which religiously affiliated entities qualify for exempted relief are nearly as old as ERISA itself.

In 1977, the IRS denied an exemption to an order of Catholic Sisters on the grounds that they were not engaged in the “sacerdotal” duties of the Church’s mission in running hospitals.

“That outraged the church community,” explained Shapiro. “Here you had the IRS nosing around in churches’ business and saying who and who isn’t a sacerdotal entity.”

The appearance of the government medaling in church affairs was enough to motivate Congress to amend ERISA in 1980 and expand the church plan exemption. ERISA’s original definition of a church plan—one “established and maintained by a church”—was broadened to include any plan maintained by a “principal purpose organization” with a church affiliation, regardless of whether a church initially established the plan.

In the decades since, the IRS has issued hundreds of private letter rulings confirming plans’ exempted status, and the Labor Department has issued dozens of opinion letters exempting specific plans.

That extensive administrative record was not lost on the high court, said Shapiro.

“One of the very unfair things about this case is that all of these church plans had private letter rulings, and determination letters saying they were church plans,” said Shapiro, who was a part of the team that successfully defended a claim against Ascension Health in the U.S. District Court for the Eastern District of Michigan.

In the consolidated cases before the Supreme Court, the lower courts effectively disregarded 30 years of regulatory pronouncements, thinks Shapiro.

“What we have argued is that you can’t allow plaintiffs to use the judiciary to whipsaw executive action,” he said. “If you permit that to happen, what possible validity would an executive agency have going forward?”

Had the Supreme Court ruled in the other direction, it would have “decimated” the role of regulatory agencies “as we know it,” said Shapiro.

“Good day” for the court

Shapiro calls the decision in Advocate Health Care Network v. Stapleton monumental.

“This was a good day for the judiciary. The court was presented with a statutory question, and it made a decision based on the statue and reading of the history,” said Shapiro, noting that the decision commanded the support of Justices Stephen Breyer and Ruth Bader Ginsberg.

Justice Sonia Sotomayor filed a concurring opinion to Justice Kagan’s, albeit one that illuminated her concerns with how the church plan exemption is being utilized by massive hospital systems. “The available legislative history does not clearly endorse this result,” wrote Justice Sotomayor.

Not everyone shares Shapiro’s enthusiasm for the ruling. In a statement, Karen Ferguson, director of the Pension Rights Center, which advocates for retirees’ rights and filed an amici brief supporting the lower courts’ rulings, said the Supreme Court decision “is not a win, but it isn’t a loss either.”

“The Court addressed only one issue: that a pension plan can be a church plan even if it is not established by a church,” said Ferguson. “The Court did not decide whether the plans involved in the cases before it are maintained by the type of organization envisioned by Congress when it enacted the law. That this was not addressed in the Court’s decision leaves hope for workers and retirees covered by these plans that they will receive the pensions they earned.”

PRC’s website details the experiences of four former employees of the Hospital Center at Orange in New Jersey, which closed in 2003. Before it was acquired, it was granted a church plan exemption when its $40 million retirement plan had a $30 million shortfall. Ultimately, the Pension Benefit Guaranty Corp. assumed responsibility for the plan.

But Shapiro says cases like the Hospital Center at Orange are anomalous to most of the complaints wending their way through the courts, which have been brought against much larger hospital systems’ pensions that are in “less danger” of default.

“The emphasis in these cases has been on funding for the future and whether there are sufficient assets to meet obligations down the road,” said Shapiro. “But it’s not the large systems that have missed pension payments.”

The argument that modern non-profit hospital systems with billions on the books fall outside of Congress’ intent when it wrote and amended the church plan exemption has been central to employee plaintiffs’ arguments.

Shapiro thinks that the size-does-matter argument discounts the charitable work of large church-affiliated hospital systems.

“The plaintiffs have gone out of their way to present the health plan entities in a negative light,” he said. “They’ve tried to argue that because these hospitals have succeeded that that somehow makes them not religious enough. That’s unfair. No other hospital entities are doing the charitable works these religiously infused entities do. Somehow the plaintiffs seem to forget about that.”

Church plan claims expected to continue

No one—Shapiro included—thinks the Supreme Court’s decision sounds the death knell of church plan claims.

But the decision will buttress hospital defendants’ ability to defeat claims, predicts Shapiro.

“I like our chances on motions to dismiss, which is important, because you save clients the cost of discovery,” he said. “Given their loss in the Supreme Court, I think you will see plaintiffs’ legal focus change.”

Shapiro and others expect plaintiffs’ counsel to focus on whether church plans’ investment committees satisfy the principal purpose organization provision of the exemption. Plaintiffs may also seek remedies in state courts, given that the plans fall outside of ERISA’s federal purview.

As for his team, Shapiro says it is in a holding pattern before rushing to file motions to dismiss.

“The cases that exist will still be litigated. I expect the first thing the plaintiffs will do is file amended complaints. Once they do that, we may very well be filing motions to dismiss,” said Shapiro.