Case Name: Advocate Health Care Network v. Stapleton
The name of the court deciding the case: The U.S. Supreme Court
Citation: No. 16-74 S. Ct. (June 5, 2017)
Key Facts: In this case, the petitioners are three different church-affiliated non-profit hospital organizations that offer their employees defined-benefit pension plans. A respondent is a group of three employees who work for these church-affiliated health care network that operates hospitals as well as in-patient and outpatient treatment locations in Illinois. The respondents are covered under defined retirement plan run by the church-affiliated petitioners. The network was incorporated following a merger of two church-affiliated hospital organizations. Despite neither of the networks at the time of formation and in subsequent years being owned or financially supported by a church, the petitioners, Advocate Health Care Network remain affiliated to religious organizations.
The respondents, “the three employees” sued their employer, the petitioner for failure to comply with the Employee Retirement Income Security Act of 1974 (ERISA) where employees are generally protected from losses in case of the collapse of defined-pension plans run by their employers to which they have enrolled. The employees had argued that the retirement plan run by their employers who were the petitioners filed the case at the U.S. Supreme Court to appeal a ruling by the Seventh Circuit Court and other lower courts decisions that had concurred with the respondents that the plan is subject to ERISA. The rulings in the 7th Circuit Court and lower courts meant that the petitioner had failed to meet ERISA requirements and hence a violation of the federal law. In its filing to the Supreme Court, the Network countered that the retirement plan falls under the exception for the church plans as defined by the ERISA.
Issue: The issue before the Supreme Court was whether the 7TH Circuit Courts which had affirmed the ruling by the lower court that retirement run by the petitioner was subject to ERISA. In their petition, the Network argued that the 7th Circuit Court had erred in agreeing with the decision of the lower court that held the plan was subject to ERISA.
Rule: The Employee Retirement Income Security Act of 1974 (ERISA) was enacted by Congress to protect employees from unforeseen losses from their retirement pension plans through measures that require organizations operating the schemes to ensure the solvency of the plan. Church-operated pension schemes, however, are exempted not subject to ERISA requirements. Congress amendment on the statute in 1980 redefined the scope of church-operated pensions plans to include those ran by organizations that are affiliated to them through sponsorship or organization. In this sense, the decision of the Supreme Court on the petition brought by the petitioner who had felt that the 7th Circuit Court had erred in upholding the decision of the lower court is based on the interpretation of the amendment of the statute ( Kaplan v. Saint Peter’s Healthcare System; Stapleton v. Advocate Health Care Network).
Decision: In the June 5th, 2017 ruling, the U.S. Supreme Court unanimously agreed that the 1980 amendment to the Employee Retirement Income Security Act of 1974 implied that a pension scheme does not need to be founded or be operated by a religious institution for it to be exempted from ERISA requirements (Advocate Health Care Network v. Stapleton). Having made these deliberations, the decision of the 7th Circuit Court was reversed, handing the petitioners the ultimate victory in a case where lower courts had ruled against them. Effectively, this interpretation means that church-affiliated organized pension plans receive the same treatment as church-run pension plans, meaning they are not subject to ERISA whatsoever. The decision means that the Seventh Circuit Court and the lower court which had ruled that the pension plan operated by the Networks was not subject to ERISA as failure to deeply read and interpret ERISA.
Reasoning: The 1980 amendment of ERISA broadened the scope of church pension plans to include schemes ran by church-affiliated. According to the amended ERISA law, “a plan maintained by a principal-purpose organization qualifies as a “church plan” regardless of who established it.” As established in 1974, the term “church plan” or rather a pension scheme ran by a religious institution strictly applied to plans established, financed, and managed by a religious institution. Under the amendment, the term church plan now included the plans established and ran by a church, as well as a pension scheme maintained by a religious-affiliated institution. The petitioner, Advocate Health Care Network plan qualifies under an exemption from ERISA under the new redefined requirements.
If Congress had intended the amendment to affect only the maintenance requirements, it would have provided a subparagraph with the following words, for instance, “ a plan maintained by a church includes a plan maintained by” a principal-purpose organization excluding “established and” from the sentence. Intentionally, Congress added a new paragraph to emphasize that the scope of the word church as per ERISA included plans maintained or established by an organization that is affiliated to a religious organization.
In suing their employers, for allegedly not complying with ERISA requirements, the respondents seem to have either misread the amended statute guidelines that broadened the scope of church plans to include plans operated by affiliated organizations. Section (C) (1) could have been read as if it was missing the two words “established and.” In its ruling, the judges, however, emphasized every single word of the amended clause. Williams v. Taylor, 529. U.S. 362, 404. Pp 5-12. Without a doubt, the inclusion of the words “maintained by principal-purpose organizations” implies that Congress intended to include in their definition of a church plan, all schemes that were run by organizations affiliated to religious institutions.
From how the amended ERISA statute is a word, it is without no doubt that Congress wanted church-affiliated organizations to be interpreted as being part and parcel of a religious institution. If this was the intention, then the Supreme Court made the right decision to struck down the decision of the Seventh Circuit Court which had interpreted had ruled that the petitioners had acted in contempt of the federal law by not deducting and paying dues to IRS for protection of employees savings in the pension plans established and maintained by the Networks. As a church-affiliated organization, however, the court had made a mistake in ruling in favor of the respondents who had initially sued their employer for allegedly failing to comply with ERISA requirements.
In the United States, the church is an independent institution which is separate from the state. Perhaps, this explains why religious institutions in the country are exempted from taxes and why there the country is not affiliated to any religious denomination. Concerning this, the federal government generally accepts and recognizes religious institutions of having the capacity to carry out their operations in a manner that safeguards the interests of its followers. In addition, the church is generally viewed as an institution with the high degree of morals which implies that it is unlikely to engage in acts that will betray the high expectations. Therefore, it is not a surprise that Congress in its legislative capacity decided to amend the ERISA recognize church-affiliated pension schemes as part of church plans. In normal circumstance, except for a few errant cases, the church plays an important oversight role in society. In a way, this explains why Congress decided to include church-affiliated pension plans as part of schemes exempted from ERISA.
The decision of the Supreme Court to effectively rule on the matter finally brings into rest the protracted court battles concerning the petitioner and respondents and other parties with similar issues. The unanimous decision where the court in 8-0 decision decided to put aside the ruling of the Seventh Circuit will also mean that the taxpayer will be saved from funding private schemes from organizations that do not pay taxes whatsoever.
Advocate Health Care Network v. Stapleton (S. Ct. No. 16-74, June 5, 2017)
Kaplan v. Saint Peter’s Healthcare System (3rd Circuit, 2015),
Stapleton v. Advocate Health Care Network (7th Circuit, 2016)
Williams v. Taylor, 529. U.S. 362, 404