The Supreme Court Case That Could Bankrupt Religious Schools and Hospitals
A new case on the U.S. Supreme Court’s docket could potentially involve millions of American employees and lead to billions of dollars’ worth of litigation. The justices’ decision could affect the viability of religiously affiliated orphanages, hospitals, schools, and nursing homes, and it could also threaten the financial security of a generation of their workers, fast heading toward retirement.On its face, Advocate Health Care Network v. Stapleton and the two other cases it’s consolidated with may seem boring—after all, they’re about federal regulations on pension plans for church-affiliated hospitals. But these cases are actually the culmination of a new, vicious fight over the rights of employers that are loosely affiliated with religious institutions, and how they should have to pay retirement benefits to their employees in accordance with federal law.
The three consolidated cases in question seem likely to turn on something deceptively simple: the single word “established.” In 1974, Congress passed a law called the Employee Retirement Income Security Act, or ERISA, which, among other things, created guidelines for defined-benefit retirement plans, otherwise known as pensions. The two most relevant requirements in these cases have to do with good planning and risk mitigation: Employers have to put money into their employees’ retirement plans in a responsible way, so that they can afford to pay out big sums of money once those employees get old. But, if a company is in financial trouble when it comes time to pay out the promised benefits, there’s a safety net: ERISA established the Pension Benefit Guaranty Corporation, or PBGC, which is effectively a government insurance agency for underfunded pension plans.
These rules do not apply to houses of worship. Benefit plans “established and maintained” by these groups are exempt. The reasons for this are a bit opaque, said Norman Stein, a professor at Drexel University’s Kline School of Law, but an early draft of the law suggests Congress “didn’t want churches to have to open their books to the government.” Legislators also figured religious groups weren’t the problem: “People felt that it’s the church—it’s not going to let its plan fail and screw its employees,” he said. “Some of the writing about the statute has speculated that this was a reason, too—churches are moral institutions that are going to stand behind their promise [to pay for people’s pensions], because that’s what religions do.”
When ERISA first passed, it wasn’t clear whether this exception would apply long-term to religious organizations that weren’t houses of worship, like Jewish day schools or Catholic hospitals. In 1980, Congress amended the law to clarify that religiously affiliated groups can also maintain what’s called a “church plan,” so long as they satisfy certain requirements. For years, the IRS allowed religiously affiliated groups to offer these “church plans” without much controversy. Since 1982, according the hospitals’ Supreme Court petition, it has sent over 500 letters granting ERISA exemptions to organizations as diverse as the Princeton Theological Seminary and the Little Sisters of the Poor, an order of nuns.
Three years ago, employees across the country began filing lawsuits claiming that these organizations shouldn’t be exempt, after all. Current and former employees of three health-care systems filed suit against their employers: Dignity Health in California and Saint Peter’s Healthcare System in New Jersey, which are both associated with the Roman Catholic Church; and Advocate Health Care Network in Illinois, which is jointly associated with the the Evangelical Lutheran Church in America and the United Church of Christ. This is where everything comes back to “established”: Because these pension plans weren’t “established” by actual churches, the employees argue, they shouldn’t be exempt from ERISA.
Read the whole article, there’s a lot more, it points out that both the hospitals and employees will be big losers if the employees “win” the lawsuit.
I’m of two minds about the hospitals. As far as I can see Catholic hospitals are run like businesses just like other hospitals so the same labor laws including pension rights should apply. But once you grant that you’re endangering conscience exemptions for abortion, ABC &c.