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Entries in Church Plans (7)


Voluntary Compliance with ERISA Does Not Preclude Church Plan Status 

The IRS has once again confirmed that an employee benefit plan maintained by a church or church-affiliated organization is not subject to ERISA unless the plan sponsor makes an affirmative written election to have ERISA apply to the plan.  That is the case even if the plan historically has been administered and operated as though it were an ERISA plan.

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Supreme Court Upholds ERISA Exemption for Church Plans in Advocate Health Care Network v. Stapleton

In this Verrill Voices podcast, Eric Altholz and Misti Munster discuss the implications of the recent Supreme Court decision in Advocate Health Care Network v. Stapleton, which held that a plan established by a church-affiliated organization can qualify as a church plan exempt from ERISA. 

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Supreme Court’s Church Plan Decision Restores Order (But It May Not End the Litigation)

Earlier this week, in a unanimous decision, the U.S. Supreme Court overturned decisions by three federal Circuit Courts of Appeals and held that an employee benefit plan maintained by a church-controlled or church-affiliated organization can qualify as a “church plan” exempt from ERISA regardless of who establishes the plan.  Advocate Health Care Network v. Stapleton, No. 16-74, 581 U.S. ___ (2017).  In a concise and clearly written opinion, Justice Elena Kagan restored order in the church plan universe – and validated nearly 40 years of administrative decisions by the Internal Revenue Service, the Department of Labor, and the Pension Benefit Guaranty Corporation – by explicitly affirming that church-affiliated hospitals and other organizations can establish benefit plans that should be accorded the same treatment as plans actually established by a church.  The Stapleton decision completely shut down the primary line of argument pursued by plaintiffs in a series of class action lawsuits.  The plaintiffs challenged the status of pension plans maintained by hospitals and other church-affiliated organizations as church plans, and sought to bring those plans into the strict regulatory framework of ERISA.  Nevertheless, the decision leaves open one final line of argument that could be pursued by attorneys representing aggrieved plan participants in church plan cases.  So the discussion, and the litigation, may not end here.  

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Thirty Years of Church Plan Rulings Challenged

Within the past five months, two federal District Court judges have cast doubt on the validity of IRS letter rulings (and similar DOL opinion letters) issued to church-affiliated employers dating back to 1983.  These federal judges – one in California and one in New Jersey – concluded that the IRS and the DOL have fundamentally misinterpreted the statutory definitions of “church plan” in the Internal Revenue Code and ERISA by finding that a plan “established” by a tax exempt church-affiliated entity could qualify as a church plan.  In the views of the two judges, such entities may be allowed to “maintain” a plan established by a church but only a church can “establish” a church plan.  Is it possible that two large federal agencies employing hundreds of lawyers got something so essential wrong, time and time again, over a period of 30 years?  These judges certainly think so.

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New IRS Church Plan Guidance Should Influence Participant Disclosures

IRS Revenue Procedure 2011-44 imposes a new notice requirement upon any employer requesting a ruling from the IRS to confirm the status of an employee benefit plan as a “church plan” within the meaning of Code Section 414(e).  The notice, for which the IRS has provided a model, is intended to let employees know that their employer is seeking a church plan ruling for its identified plans and explain the consequences to them (as plan participants) of such a ruling.  Since those consequences include the elimination of many rights that participants and beneficiaries would enjoy if the subject plans were governed by ERISA, it seems appropriate that an employer seeking church plan status should have to make this kind of disclosure to its employees.  More interesting to us, however, is what Rev. Proc. 2011-44 could mean for an employer who already maintains a church plan and the conclusions that such an employer can draw from this new guidance.    

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