The Employee Retirement Income Security Act of 1974 (“ERISA”) was passed to protect the interests of participants in employee benefits plans and their beneficiaries by, among other things, setting out substantive regulatory requirements. These requirements are comprehensive and include funding, reporting, minimum standards, and fiduciary and disclosure provisions. ERISA contains an exemption to the regulatory requirements for certain religiously affiliated institutions. The question essentially before the court in Rollins v. Dignity Health, No. 15-15351, 2016 WL 3997259, (9th Cir. July 26, 2016) was: how broad is this exemption?
In Rollins, the plaintiff and a putative class filed suit against Dignity Health alleging that it did not comply with ERISA because Dignity’s plan could not properly claim the church-plan exemption. Dignity dates back to the 1980’s, when Sisters of Mercy Congregations established non-profit hospital systems. However, these systems underwent a series of mergers as well as corporate restructuring, emerging as Dignity Health as we know it today: a nonprofit corporation that is one of the largest hospital systems in the country. At issue in Rollins was the text of ERISA that laid out the following provisions: 1) a church-plan is exempt from ERISA; 2) a church-plan must be both “established and maintained by a church”; and 3) the phrase “established and maintained by a church” includes an organization whose principal purpose is to provide benefits for church employees.
Dignity argued that #3 above really just expanded the scope of #2 (in other words, ERISA does not require a Plan to be established by a church if it is maintained by church-affiliated organization whose principal purpose is to provide benefits for church employees). Rollins, on the other hand, argued that to claim the church-plan exemption, a plan must have been established by a church but can be maintained by a church-affiliate. The Court, looking to legislative history, agreed with Rollins and joined a series of rulings from other circuits holding that the church-plan exemption to ERISA regulatory requirements only extends to plans created by a church. The Court affirmed summary judgment against Dignity on this issue only and remanded to the District Court to determine whether, given the 9th Circuit’s ruling, the Dignity plan qualified for the church-plan exemption.