The United States’ health care industry is filled with numerous protections for individuals and entities who have objections based on religious beliefs and moral convictions. For example, there is a long history of conscience protections for individuals that object to performing or assisting in the performance of abortion or sterilization procedures or assisted suicide (including euthanasia or mercy killing). Over time, as more medical entities declare affiliation with religious entities, Congress has expanded conscience protections to cover more than just the daily activities of medical professionals. Generally, churches have to comply with the Employee Retirement Income Security Act (ERISA or the Act) just like any other employer. Yet, Congress provided an exception from ERISA for the administration of “church plans.” This exemption has existed for many years without issue until recently, when this exemption became the subject of increased litigation. ERISA defines “church plan” to apply more broadly than merely to plans covering people who work in houses of worship; schools, nursing homes, and hospitals may also comply if they are controlled or owned by religious entities. Most recently, questions have risen regarding whether the employee pension plans used by religiously-affiliated hospitals have been correctly classified as “church plans” exempt from ERISA. The answers to these questions carry with it large consequences because qualified church plans are excused from certain coverage, vesting, benefit accrual, and funding requirements of ERISA and the Internal Revenue Code (IRC) that otherwise apply to tax-qualified plans. In the 2017 landmark case Advocate Health Care Network v. Stapleton, one question that had long been debated between circuit courts regarding the extent of this exemption was resolved; the Court determined that a plan established and maintained by a church includes a plan maintained by a principal purpose organization. This ruling means that any religiously-controlled entity that manages an employee benefit plan no longer must be created by a religious entity in order to qualify for this exemption. Regardless of how (and by whom) the entity was first established, an organization may still take advantage of this exemption from ERISA as long as the entity is maintained by a principal purpose organization. This Supreme Court ruling is far from a full resolution of the issue. Advocate left a few issues unresolved, such as the definition of “principle purpose organization.” This leaves religiously-affiliated hospitals in a sticky place: unsure if they qualify for—and therefore can rely on—the ERISA church exemption. Since there are many potentially devastating effects on non-qualifying hospitals that mistakenly relied on this exemption, it is important for the qualifying factors to be clear. No longer should religiously-affiliated hospitals seek and rely on non-binding (and sometimes inaccurate) private letter rulings (PLRs) issued by the IRS in order to determine their exemption status. In Part I, this Comment will discuss ERISA’s church plan exemption pre- and post-Advocate. Additionally, it will cover a brief overview of the history of employee benefit plans in the healthcare system and describe the roles of different governmental entities. In Part II, this Comment will discuss the landmark case Advocate v. Stapleton and its impact on the employee benefit industry, and the current status of ERISA’s principal purpose requirement. Last, Part III will suggest a new set of factors that each religiously-controlled hospital and its employee benefit subcommittees can rely on in determining if it meets the “principal purpose” requirement.
Virginia L. Brown,
The “Principal Purpose” Driven Life: How Hospitals Should Apply ERISA’s Church Plan Exemption After Advocate v. Stapleton,
22 J. Health Care L. & Pol'y
Available at: https://digitalcommons.law.umaryland.edu/jhclp/vol22/iss2/16