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Supreme Court To Consider Health System 'Church Plan' Status

News  |  By Doug Desjardins  
   December 12, 2016

Plaintiffs from three organizations are challenging faith-based health systems' right to operate pension plans that are exempt from certain federal laws.

The U.S. Supreme Court has agreed to hear arguments in a case that challenges the right of Dignity Health to operate a "church plan" pension plan.

The Supreme Court earlier this month agreed to hear arguments from Dignity Health and two additional faith-based health systems with church-affiliated pension plans.

The three cases, which will receive hearings in early 2017, involve plaintiffs who challenged the right of faith-based health systems to operate church plans, which are exempt from some federal laws that govern standard pension plans.

Dignity Health's case stems from the Dignity Health v. Rollins lawsuit filed in the U.S. District Court for the Northern District of California by former Dignity employee Starla Rollins in 2013.

The lawsuit challenges the right of Dignity Health to operate a pension plan that is not subject to the Federal Employee Retirement Income Security Act (ERISA).

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The lawsuit suggests that since Dignity Health does not operate as a church, it does not have the legal standing to operate a church pension plan.

Dignity Health formed its pension plan in 1992 when it operated under its former name, Catholic HealthCare West. Dignity Health maintains that church plans do not have to be part of a church as long as they are maintained by a church-affiliated organization.

In July 2014, U.S. District Court Judge Thelton Henderson granted a partial summary judgment to the plaintiff and said Dignity Health was relying on an erroneous ruling from the Internal Revenue Service that gave its pension program church plan status.

The Ninth Circuit Court of Appeals upheld Henderson's ruling in a July 2016 decision.

U.S. Circuit Court Judge William Fletcher issued a ruling that stated that a church plan must be "maintained by either a church or a church-controlled or church-affiliated organization whose principal purpose is to provide benefits to church employees."

In September, however, the Supreme Court granted a temporary stay from the Ninth Circuit Court ruling so it could consider whether to hear the case in 2017. The Supreme Court will also consider similar cases involving Advocate Health Care in Illinois and Saint Peter's Healthcare System in New Jersey. 

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