Sixth Church Plan Challenge Added to List

Four Advocate plan participants allege in a lawsuit filed in the U.S. District Court for the Northern District of Illinois that the organization’s retirement plan is not a church plan as defined in ERISA Section 3(33)(A) because it was not “established and maintained by” a church or by a convention or association of churches and were not maintained for employees of any church or convention or association of churches. In addition, the lawsuit says the Advocate plan does not qualify as a church plan under Section 3(33)(C)(i) because it is not maintained by any entity whose principal purpose or function is the administration or funding of a plan or program for the provision of retirement benefits or welfare benefits, or both.

The participants contend that even if the Advocate plan had been “established” by a church and even if the principal purpose or function of Advocate was the administration or funding of the Advocate plan (instead of running a hospital conglomerate), the plan still would not qualify as a church plan under ERISA Section 3(33)(C)(i) because the principal purpose of the plan is not to provide retirement or welfare benefits to employees of a church or convention or association of churches. “[T]he approximately 33,000 participants in the Advocate Plan work for Advocate, a non-profit hospital conglomerate. Advocate is not a church or convention or association of churches and its employees are not employees of a church or convention or association of churches within the meaning of ERISA,” the complaint says.

The lawsuit notes that under ERISA Section 3(33)(C)(ii) an employee of a tax exempt organization that is controlled by or associated with a church or a convention or association of churches also may be considered an employee of a church. It points out this part of the definition merely explains which employees a church plan may cover once a valid church plan is established, but Advocate is not controlled by or associated with a church or convention or association of churches within the meaning of ERISA. Advocate is not controlled by a church or convention or association of churches, it is not owned or operated by a church and does not receive funding from a church, and it is not “associated with” a church or convention or association of churches within the meaning of ERISA, the complaint says.

According to the lawsuit, the Advocate plan is a cash balance plan because it computes accrued benefits by reference to hypothetical accounts balance or equivalent amounts and is therefore required to comply with the special rules for cash balance plans, including but not limited to ERISA Section 203(f)(2), which requires that any employee who has completed at least three years of service has a non-forfeitable right to 100% of the employee’s accrued benefit derived from employer contributions. Unrelated to the church plan issue, the participants contend currently the plan is being operated in violation of ERISA because it requires participants in the plan to complete five years of service to be vested.

The filing of the lawsuit comes between rulings in two similar suits finding the plans were not church plans (see “Another Court Rejects Pension’s ‘Church Plan’ Status”).

The Advocate suit is the sixth such suit to be filed. Decisions in the cases could reverse 30 years of precedent (see “Church Plan Lawsuits Could Reverse 30 Years of Precedent”). The U.S. government has intervened, saying it will decide when and if to address constitutionality claims depending on further developments in the cases (see “U.S. Intervenes in Church Plan Lawsuits”).

The complaint in Stapleton v. Advocate Health Care Network is here.