Ninth Circuit Agrees: Hospital Pension Plans Are Not “Church Plans”

Image by Getty Images

Image by Getty Images

Today, the Ninth Circuit held that Dignity Health, a non-profit religious healthcare system that runs 39 hospitals and more than 400 care centers, did not qualify for the church-plan exemption to the Employee Retirement Income Security Act (ERISA). What does that mean? It means that Dignity, and dozens of other religious healthcare systems, cannot promise pension plans to their employees and then avoid actually providing those pensions to employees upon retirement.

Under ERISA, employers that provide pension plans must adhere to a number of requirements. They must ensure that their pension plans are sufficiently funded. They must purchase federal pension insurance so that—should their plan fail—employees will still receive some sort of payment upon retirement. They also must regularly disclose certain information to employees so that they will understand what their pensions entail and can prepare adequately for retirement.

Plans provided by churches are exempt from all of these requirements, but the Ninth Circuit has now joined the Third and Seventh Circuits in holding that the plans offered by religious healthcare systems are not.

This is important. In New Jersey, employees at St. Mary’s hospital lost tens of thousands of dollars in expected retirement funds because the plan was underfunded for more than a decade and their employer did not purchase federal pension insurance. Employees who had worked at the hospital for as long as eighteen years reached retirement age and realized that the money they expected to retire on had gone up in smoke. The Ninth Circuit’s decision ensures that Dignity Health’s employees will not suffer the same outcomes—nor, hopefully, will employees of any other religious healthcare system, as there are now unanimous decisions from three federal appellate courts.

Religious affiliation does not give an organization license to shirk the law. Now, employees of religiously affiliated hospitals will know that the law protects them.