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NELA joined AARP to file amicus briefs in support of the plaintiffs-appellees in Kaplan v. Saint Peter’s Healthcare System, No. 14-8125 (3d Cir.), and Stapleton v. Advocate Health Care Network, No. 15-1368 (7th Cir.). These cases challenge the claimed religious exemption from the Employee Retirement Income Security Act’s (ERISA) requirements by two large health care organizations. The amicus brief in Kaplan was filed on May 11, 2015 and the Stapleton brief was filed on May 13, 2015. The amicus briefs were drafted by NELA members Mary Ellen Signorille of AARP Foundation Litigation, Washington, DC and Ronald Dean, Pacific Palisades, CA.

Both cases were bought as putative class actions on behalf of participants and beneficiaries of the defendants-appellants’ retirement plans, alleging that the plans are improperly maintained as exempt church plans under ERISA, 29 U.S.C. § 1001 et seq. Both organizations are large well-funded employers. Saint Peter’s Healthcare System (SPHS) is a non-profit healthcare corporation headquartered in New Brunswick, New Jersey with over 2,800 employees. In 1974, SPHS established its retirement plan, which is a non-contributory defined benefit pension plan and, for over thirty years, operated it as an ERISA plan. In 2006, during the nationwide economic downturn, SPHS determined that its plan was a church plan. SPHS does not receive funding from any religious entities but, instead, relies on revenue bonds to raise money.

Advocate Health Care Network is the largest healthcare provider in Illinois, operating 12 hospitals and more than 250 healthcare facilities with operating revenues of $4.6 billion and assets of $7.8 billion in 2012. It provides retirement benefits for most of its more than 33,000 employees through a retirement plan, which is a non-contributory, defined benefit pension plan. Advocate was formed in 1995 as a 501(c)(3) non-profit and competes with other non-profit and for-profit entities in the commercial healthcare market. Advocate relies on revenue bonds to raise money as do other large non-profit hospital systems. It is not owned, operated, or funded by any church.

Under the claimed religious exemption, the pensions of plaintiffs-appellees are not fully vested, properly funded or insured, or protected by other crucial ERISA requirements. In both cases, plaintiffs-appellees seek declarations that the retirement plans are benefit plans covered by ERISA, injunctions requiring Advocate and SPHS to reform the plans to comply with ERISA’s requirements, as well as an award of civil penalties.

In Kaplan, the U.S. District Court for the District of New Jersey denied defendants’ motion to dismiss on March 31, 2014. Upon defendants’ motion, the court then certified the following question for interlocutory appeal under 28 U.S.C. § 1292(b): Whether an organization, a civil law corporation or otherwise, can both establish and maintain a “church plan,” as defined in ERISA, 29 U.S.C. § 1002(33), if such organization is controlled by or associated with a church or a convention or association of churches.

Similarly in Stapleton, the U.S. District Court for the Northern District of Illinois denied defendants’ motion to dismiss on December 31, 2014. The court, upon defendants’ motion, then certified the following question for interlocutory appeal under 28 U.S.C. § 1292(b): In order for an employee benefit plan to qualify as a “church plan” under ERISA, 29 U.S.C. § 1003(b)(2) and § 1033, must the plan be established by a church (or by a convention or association of churches)?

These appeals present two issues: (1) whether an employee benefit plan that was not established by a church can nevertheless qualify under the statute that it is exempt from ERISA, and (2) if yes, whether exempting a hospital conglomerate from ERISA solely on the basis of its claimed religious affiliation violates the Establishment Clause of the First Amendment. The amicus briefs address only the first issue, which should be dispositive, focusing, from a policy perspective, on two areas: (1) hospitals which sponsor so-called church plans are big businesses, not churches; and (2) the impact to the plan participants of not having their pension plan benefits afforded ERISA coverage.

Amici argued in both cases that the core issue of retirement security is an interest of direct and immediate concern to AARP members and the clients of NELA members. Congress enacted ERISA based on a record showing a history and pattern of employers failing to provide promised employee benefits, a lack of disclosure and transparency, and varied and numerous financial abuses. Congress declared that ERISA is intended to ensure that “the interests of participants in employee benefit plans and their beneficiaries” are protected. Although Congress did not require that every pension plan be covered by ERISA, Congress did limit the exemptions to ERISA’s coverage due to the abuses it uncovered and the remedial nature of the legislation.

Amici made three salient points in the briefs. First, ERISA-protected retirement benefits are a critical element of an employee’s compensation package. Second, Congress designed ERISA’s church plan exemption to apply narrowly. Nonetheless, many organizations that take advantage of the church plan exemption are big businesses, not churches. Third, SPHS and Advocate have undermined participants’ retirement security by treating its pension plan as an exempt church plan. Thwarting Congress’s deliberate, protective design, it has stripped away each carefully-crafted ERISA requirement. Participants in church plans lose multiple ERISA protections, including the law’s minimum funding protections and insurance guarantees, limitations on reducing or eliminating pension benefits, mandated fiduciary responsibilities, and comprehensive disclosure scheme.

The Kaplan plaintiffs-appellees are represented by Daniel S. Sommers, Bruce F. Rinaldi, Karen L. Handorf, Michelle C. Yau, Monya M. Bunch, and Matthew A. Smith, Cohen Milstein Sellers & Toll PLLC, Washington, DC; Lynn Lincoln Sarko, Havila Unrein, and Matthew Gerend, Keller Rohrback L.L.P., Seattle, WA; Ron Kilgard and Laurie Ashton, Keller Rohrback P.L.C., Phoenix, AZ

The Stapleton plaintiffs-appellees are represented by Lynn Lincoln Sarko, Erin M. Riley, and Matthew M. Gerend, Keller Rohrback L.L.P., Seattle, WA; Ron Kilgard, Keller Rohrback L.L.P., Phoenix, AZ; Karen L. Handorf, Michelle C. Yau, Mary Bortscheller, Cohen Milstein Sellers & Toll PLLC, Washington, DC; and James B. Zouras, Ryan F. Stephan, Stephan Zouras, LLP, Chicago, IL.