U.S. Supreme Court justices on Friday agreed to hear future appeals from three Christian-affiliated hospital systems about previous court rulings that supported employee lawsuits accusing the hospitals' representatives of wrongly claiming religious exemptions from federal pension law. The effected employees allege the hospital systems actually are big businesses posing as church organizations to avoid minimum funding and reporting requirements on employee pension plans mandated by the federal Employee Retirement Income Security Act, or ERISA.
New Jersey-based St. Peter's Healthcare System, Illinois-based Advocate Health System and California-based Dignity Health each appealed separate federal appeals courts rulings that refused to eliminate the employee lawsuits, reports Reuters. St. Peters is affiliated with the Roman Catholic Church, Dignity is formerly Catholic-affiliated but still operates many Catholic hospitals, and Advocate is affiliated with the Evangelical Lutheran Church in America and United Church of Christ.
The suits declare by claiming the exemption, the hospital systems are putting employee pension plans at risk. Representatives of the hospital systems said allowing the lawsuits to go forward could jeopardize nonprofit hospitals' ability to provide care.
Hundreds of hospitals and hospital systems claimed this same exemption since 1980, when Congress amended ERISA to allow the "church plan exemption," which originally was meant only for churches, to include certain religiously affiliated organizations. Employees since that time have filed lawsuits challenging hospitals' use of the exemption.
Trial court rulings have been mixed, reports MSN. The 3rd, 7th and 9th U.S. Circuit Courts of Appeals ruled against St. Peter's, Advocate and Dignity, respectively, refusing to dismiss employees' lawsuits against them. No other federal appeals' courts have decided cases on the issue. All three courts found that the plain language of ERISA allows the exemption only for organizations set up by churches to manage their employee pension plans, not for wholly separate entities, such as hospitals. They rejected hospitals' arguments that they relied on opinions from the Internal Revenue Service, which has allowed them to claim the church plan exemption since the early 1980s.
The employees suing St. Peter's and Dignity claim their plans are underfunded by about $70 million and $1.2 billion, respectively. Advocate is also accused of underfunding its plan, though the complaint in that case does not say by how much. Representatives of the hospitals denied their plans are underfunded.
The plaintiffs also seek retroactive penalties for past violations of ERISA, which the hospitals said could add up to hundreds of millions or billions of dollars.