Presenting a live 90-minute webinar with interactive Q&A ERISA Church Plan Exemption Under Attack: Implications for Church-Affiliated Employers Administering Pension Plans Structuring, Operating, and Funding Church-Affiliated Employer Pension Plans Amid Conflicting Court and IRS Guidance TUESDAY, OCTOBER 11, 2016 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: G. Daniel Miller, Partner, Conner & Winters , Washington, D.C. Jeffrey D. Smith, Partner, Fisher & Phillips , Cleveland The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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ERISA C HURCH P LAN E XEMPTION U NDER A TTACK G. Daniel Miller, Esq. Jeffrey D. Smith, Esq. Conner & Winters, LLP Fisher & Phillips, LLP dmiller@cwlaw.com jdsmith@fisherphillips.com
C HURCH P LAN D EFINITI ON (33) (A) The term “church plan” means a plan established and maintained (to the extent required in clause (ii) of subparagraph (B)) for its employees (or their beneficiaries) by a church or by a convention or association of churches which is exempt from tax under section 501 of title 26 6
C HURCH P LAN D EFINITION (33) (C) For purposes of this paragraph — (i) A plan established and maintained for its employees (or their beneficiaries) by a church or by a convention or association of churches includes a plan maintained by an organization, whether a civil law corporation or otherwise, the principal purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits or welfare benefits, or both, for the employees of a church or a convention or association of churches, if such organization is controlled by or associated with a church or a convention or association of churches. 7
C HURCH P LAN D EFINITION (33) (C) (i) The term employee of a church or a convention or association of churches includes — (I) a duly ordained, commissioned, or licensed minister of a church in the exercise of his ministry, regardless of the source of his compensation; (II) an employee of an organization, whether a civil law corporation or otherwise, which is exempt from tax under section 501 of title 26 and which is controlled by or associated with a church or a convention or association of churches; and (III) an individual described in clause (v). 8
A UGSBURG P UBLISHING • Plan frozen 2005, terminated 2010 providing reduced lump sums, participants sued claiming plan was not a church plan. • Decision issued January 27, 2011 (D. Minn.): Augsburg plan is a church plan exempt from ERISA – court did not accept plaintiffs’ theory of the church plan definition. • Court dismissed all ERISA-related and Minnesota Consumer Fraud claims, but allowed plaintiffs to pursue claims against ELCA under state law “alter ego” theory. 9
C HURCH P LAN L ITIGATION • Over 30 lawsuits have been filed against non-profit health care systems alleging that a defined benefit plan maintained by each health care system is not entitled to church plan status. • Allegations in each lawsuit are substantially the same: − Defendants violated minimum funding, notice, written plan document, trust and fiduciary rules of ERISA; engaged in prohibited transactions. − Defendants purposefully ignored ERISA requirements that are meant to protect plan participants by “improperly” claiming to be church plans and exempt from ERISA. − Plaintiffs claim underfunding, plus other unspecified damages. − Failure to pay PBGC premiums. 10
P LAINTIFFS ’ A LLEGATIONS • Most of the lawsuits also introduce claim that the ERISA church plan exemption violates the Establishment Clause of the First Amendment. • Cases do not mention Internal Revenue Code disqualification consequences of church plan status failure. • Cases do not mention the defined contribution plans or welfare plans of the defendant health care systems, though same arguments apply. 11
R OLLINS V . D IGNITY H EALTH Decision in Rollins v. Dignity Health : • Trial court ruled the plan was not a church plan on July 24, 2014. • 9 th Circuit Court of Appeals ruled in favor of plaintiffs on July 26, 2016, affirming the district court’s decision that the plan was not a church plan; motion to stay mandate was not granted. • Dignity Health has filed a petition for writ of certiorari with the U.S. Supreme Court, asking the Court to determine whether its pension plan is considered a “church plan” under ERISA. Also requested the Supreme Court to stay the Ninth Circuit’s mandate; this request was granted. 12
K APLAN V . S T . P ETER ’ S H EALTHCARE S YSTEM Decision in Kaplan v. Saint Peter’s Healthcare System : • Trial court ruled the plan was not a church plan on March 31, 2014. • The 3 rd Circuit Court of Appeals ruled in favor of plaintiffs on December 24, 2015, affirming the district court’s decision that the plan was not a church plan; stay of mandate pending cert. petition to Supreme Court was not granted. • St. Peter’s Healthcare System has filed a petition for writ of certiorari with the U.S. Supreme Court, asking the Court to determine whether its pension plan is considered a “church plan” under ERISA. 13
O VERALL V . A SCENSION H EALTH Decision in Overall v. Ascension Health : • Trial court granted employer’s motion to dismiss and held the plan was a church plan on May 9, 2014. • The parties settled on September 22, 2015, after the plaintiffs had appealed to the 6 th Circuit and briefs were filed, but before oral arguments were heard. 14
M EDINA V . C ATHOLIC H EALTH I NITIATIVES Decision in Medina v. Catholic Health Initiatives : • Trial court ruled in favor of employer on August 29, 2014 — determined that the plan in question is a church plan and therefore is exempt from ERISA. • The case is now on appeal to 10 th Circuit; initial briefs have been filed. 15
M EDINA • Magistrate Mix • Plan must be established by a church • Judge Blackburn • Does not need to be established by a church 16
S TAPLETON V . A DVOCATE H EALTH C ARE N ETWORK Decision in Stapleton v. Advocate Health Care Network : • Trial court held the plan was not a church plan on December 31, 2014. • On March 17, 2016, the 7 th Circuit affirmed the trial court’s decision. • Employer petitioned for a stay of mandate on March 31, 2016 pending filing and disposition for writ of certiorari; stay of mandate was granted. • Advocate Health Care Network has filed a petition for writ of certiorari with the U.S. Supreme Court, asking the Court to determine whether its pension plan is considered a “church plan” under ERISA. 17
L ANN V . T RINITY H EALTH Decision in Lann v. Trinity Health : • Trial court granted a partial motion to dismiss on February 24, 2015. • Case was administratively closed on December 11, 2015 following settlement. 18
K EMP -D E L ISSER V . S T F RANCIS H OSPITAL Decision in Kemp-DeLisser v. St. Francis Hospital and Medical Center : • Parties filed proposed settlement order on May 20, 2016; case has now settled. 19
T HE C OURTS OF A PPEAL O PINIONS • All three circuits found the statute’s meaning plain, but all three went on to consider the legislative history and agency guidance interpreting the church plan definition. • All three circuits adopted the “gatekeeper” view of the church plan definition’s general rule in ERISA section 3(33)(A). 20
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