Click here for a short summary of the issue. Click here for a detailed timeline.
See also the Pension Rights Center website.
Click here for ex-St. Peter's CEO John Matuska's 2011 letter to the IRS.
Click here for ex-St. Peter's VP of HR Bruce Pardo's 2011 letter to the IRS.
Haga clic aqui para verun resumen del problema en español.


Thursday, March 17, 2016

Second Straight Appeals Court Victory For Retirees

Today a three-judge panel in the Seventh Circuit Court of Appeals in Chicago ruled in Stapleton v. Advocate Health Care Network, rejecting the hospital system's appeal of a district court ruling and affirming that their pension plan is not a church plan. This is the second such ruling in a series of similar cases involving pension plans of church-affiliated hospital systems—including, of course, Kaplan v. Saint Peter's Healthcare System—and the second straight win at the circuit court level for pension plan members in such cases. You can read the 30-page ruling here.

In her majority opinion, Judge Ilana Diamond Rovner prominently cites the Third Circuit's decision denying Saint Peter's appeal. As in the Saint Peter's case, the judges in Advocate found that a plain-language reading of the ERISA statute makes clear that in order to qualify for a "church plan" exemption, a plan must be established by a church, as required by subsection (33)(A) of the statute, and specifically that subsection (33)(C), often cited by church-affiliated hospital corporations as widening the exemption to include them, does not override the establishment requirement in subsection (33)(A). She notes, as did the Saint Peter's opinion, the remedial nature of ERISA: it was created to "protect employees from losing savings meant for their retirement years from either intentional mishandling of funds or innocent mismanagement." Congress did not intend a broad exemption for corporations with church affiliations: "Congress carved out only narrow exemptions for employee-benefit plans, including those for churches whose plans were excused from regulation in order to prevent excessive government entanglement with religion. ... Employees of religiously-affiliated hospitals are not immune from the perils of unregulated pension plans." She dismisses prior rulings in favor of such a wide exemption as insufficiently rigorous: "Until this recent spate of litigation, most courts evaluating church plans ... merely glossed over the statutory language and assumed that the exemption applied to plans established by church-affiliated agencies."

In a short concurring opinion, Judge Michael S. Kanne adds a very interesting postscript. While agreeing in full with the majority opinion, he also dismisses the arguments, posited in amicus briefs in support of the hospital systems in these cases, that denying a church plan exemption compels health care corporations to violate their religious beliefs (as Hobby Lobby successfully argued in their landmark case). He emphasizes that that is not the case here.

Retirees are now 2-for-2 at the circuit court level in such cases. There are still cases pending in the appellate courts where lower courts have ruled both in favor of retirees and in favor of the hospital systems seeking church plan status. It will likely take a year or two for the courts—perhaps including a Supreme Court that currently has only eight members—to sort this all out. In the meantime, one thing seems certain: Saint Peter's will continue to operate its pension plan without ERISA protections as long as they can get away with it. We expect news media to weigh in soon; we'll follow up when that happens.

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