U.S. Ninth Circuit - The FindLaw 9th Circuit Court of Appeals Opinion Summaries Blog

'Not a Church' -- Dignity Health Plan Doesn't Qualify for ERISA Exception

In what can be fairly called a legal nice try, the Ninth Circuit's Court of Appeals has ruled that Dignity Health's pension plan does not qualify for ERISA's church plan exemption.

It's a a ruling that is so far consistent with the findings of other courts on the subject. Only this time, it looked like it could have gone either way from the start. After all, Dignity Health at least started out as a church.

So Close and Yet So Far

The suit stems from a 2013 dispute when an employee of Dignity Health brought suit against her employer, alleging that Dignity was underfunding her benefits plan in violation of ERISA. Dignity responded by pointing to the "church plan" exemption recognized by the 1983 ERISA amendment. Under this rule, churches who offer plans need comply with the same high levels that apply to other employers.

"Church plan" refers to any "plan established and maintained by its employees by a church or a convention or association of churches."

Dignity Health began when two congregations in California merged to create nonprofit medical systems which later consolidated yet against to form Catholic Healthcare West. In the late 80s, all of the organizations merged their employee pension plans. Owing to its history, Dignity Health maintains that its pension plans should be exempted under ERISA because an organization that is associated with a church runs the show. "If a church plan may cover employees of a church-associated organization, and a church-associated organization may maintain the plan, Congress had no reason to insist that the church itself must establish the plan," Dignity argued in court.

Congressional Intent

Neither the district court nor the appeals court bought that theory. "There is nothing in the legislative history to suggest that Congress intended, in expanding the definition of eligible employees, to eliminate the requirement that a church plan be established by a church," judge Fletcher said, writing for the majority."Nor is there anything in the legislative history to suggest that Congress intended, in broadening the definition of organizations that are authorized to maintain a church plan, to eliminate that same requirement."

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