The Employee Retirement Income Security Act, or ERISA, is designed to protect the interests of employees who are benefit plan participants. It does this by guarding retirement savings plans from mismanagement. ERISA also ensures that the individuals who are charged with overseeing the plan act in the best interests of the participants.
However, some of these plans are exempted from ERISA oversight. This includes so-called “church plans.” Under this exemption, employee benefit plans for church employees are not subject to ERISA’s minimum standards. However, it isn’t always entirely clear which plans are exempted and which are not. This is true of hospitals that are associated with a religion.
Dignity Health is a healthcare conglomerate that operates in numerous states. It administrates the Dignity Health Pension Plan for its 80,000 employees. Moreover, Dignity Health is associated with the Catholic Church.
Starla Rollins was employed by Dignity from 1986 to 2012, during which time she participated in the Dignity Plan. Rollins and other plan participants sued Dignity under ERISA because it was underfunded. When the complaint was filed, the plan had only enough assets to pay 75 percent of their obligations.
Dignity Health is arguing that their plan isn’t subject to ERISA oversight because it is a church plan. Over the last several years, the Catholic Church has taken over multiple hospitals and other healthcare facilities. Catholic hospitals earn billions of dollars in revenue each year and also receive billions in taxpayer dollars.
However, it is unclear whether or not employees of Dignity Health actually qualify as church employees. Instead, the plaintiffs are arguing that they are the secular employees of a secular health care organization that provides its services through the distant oversight of the Catholic Church.
Rollins’ lawsuit raises a Constitutional objection to the exemption for church plans. This is because Dignity Health has chosen to compete in an industry with other commercial businesses. Thanks to the exemption, Dignity does not have to meet certain costly legal requirements. The outcome of this case may change the way these exemptions are applied to other hospital organizations that are affiliated with religions.