The HR Legal News Blog

The Church Plan Debate Continues: Overall v. Ascension Health

Another federal court has weighed in on the question of whether a plan sponsored by a religiously affiliated organization may qualify as a “church plan” within the meaning of Section 3(33) of ERISA.  In Overall v. Ascension Health, the U.S. District Court for the Eastern District of Michigan held that “a plan need not be established by a church in order to qualify as a church plan.”  

Ascension Health Alliance, through its subsidiaries, operates hospitals in 21 states and the District of Columbia.  Ascension Health and its affiliates sponsor a variety of benefit plans which they treated as “church plans” within the meaning of Section 3(33) of ERISA and Section 414(e) of the Internal Revenue Code.   Employees brought a class action challenging the application of the church plan exemption to the various Ascension plans.   The Court examined the management structure of Ascension Health and determined that “the control of the Roman Catholic Church flows downward through Ascension Health Ministries, an entity created within the Roman Catholic Church, to Ascension and its system entities.”  As a result, the plans sponsored by Ascension Health group members satisfied the criteria for classification as “church plans” for purposes of ERISA.

Three aspects of this decision are noteworthy:

  • First, the Court engaged in a painstaking analysis of the management structure of the Ascension Health group in order to determine whether the plans were sponsored by entities that were controlled by the Catholic Church.   In particular, the Court examined the ability of five religious orders to control the membership of the boards of the members of the Ascension Health group, approve corporate transactions and ensure conformity to the expectations of Catholic health ministries.
  • Second, the Court explained in detail the legislative history of the church plan exemption, noting in particular Congress’ decision to “broade[n] the exemption to include organizations affiliated with churches, such as hospitals or schools.”
  • Third, the Court afforded deference to long-standing agency interpretations holding that the term “church” is not limited to entities that engage in “worshipful” activities.

 

The Overall v. Ascension Health decision is in direct conflict with the decision of the U.S. District Court for the District of New Jersey in Kaplan v. Saint Peter’s Healthcare.   Odds are that this issue will end up in the Supreme Court.