Since the early 1980s, the Internal Revenue Service and the U.S. Department of Labor have interpreted the so-called “church plan exemption” to the Employee Retirement Income Security Act of 1974 to permit certain religious-affiliated organizations, such as hospitals, colleges and charities, to establish and maintain retirement plans exempt from ERISA requirements. In Stapleton v. Advocate Health Care Network, decided by the Seventh Circuit of the U.S. Court of Appeals on March 17, 2016, the court interpreted ERISA’s definition of “church plan” to include only benefit plans actually established by churches, although such plans could be administered by organizations associated with or controlled by churches. Although this shift in authority has been on the horizon, the Seventh Circuit’s decision should cause church-affiliated entities to take stock of their retirement plans and past positions.
ERISA, the federal law governing employee benefit plans, imposes certain administrative requirements on employee benefit plans and, in conjunction with the Internal Revenue Code, requires compliance with minimum funding, vesting and nondiscrimination rules applicable to qualified retirement plans. Nevertheless, ERISA exempts “church plans” from its requirements and defines a church plan as a plan “established and maintained ... for its employees ... by a church or by a convention or association of churches which is exempt from tax under section 501 of the Internal Revenue Code.” ERISA further states that a church plan includes a plan maintained by an organization “controlled by or associated with a church or by a convention or association of churches.” In recent years, plaintiffs attempting to assert claims under ERISA have challenged the exemption of organizations that are not actual houses of worship.
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