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Health systems ask Supreme Court to rule on pension plans

Health systems ask Supreme Court to rule on pension plans

Two faith-based health systems want the U.S. Supreme Court to weigh in on whether their pension plans should be exempt from certain federal protections for workers — an issue that has spurred dozens of lawsuits across the country in recent months.

Advocate Health Care in Illinois and St. Peter's Healthcare System in New Jersey argue that because of their religious affiliations, their employee pension plans should not be subject to the federal Employee Retirement Income Security Act. That law requires pension plans be insured and fully funded.

Dozens of lawsuits have been filed against faith-based organizations over the issue, including 22 just in the past four months, according to the systems' petitions. Those lawsuits target some of the largest faith-based health care systems in the country.

“The defendants in these suits are nonprofit organizations serving the needy for whom the potential financial liability could be crippling,” Advocate and St. Peter's said in their petitions.

The systems call the issue “immensely important,” saying the lawsuits have already caused “a massive upheaval in the administration of pension plans by religious employers.” If the lower courts' decisions stand, many religious organizations will have to renegotiate contracts with employees, revamp benefit structures, redesign pension funding policies and redo their budget plans, Advocate and St. Peter's say.

Those on the other side of the cases, however, have argued faith-based health systems have dodged their responsibilities to employees covered by their pension plans by claiming they're exempt from ERISA.

Many such plans are underfunded, said Karen Handorf, a partner at Cohen Milstein Seller & Toll P.L.L.C., who is representing those who challenged Advocate and St. Peter's. The law firm has brought many of the other cases as well, along with law firm Keller Rohrback Law Offices L.L.P.

“They receive absolutely no money from a church,” Ms. Handorf said of the faith-based health systems. “They're really no different than any other kind of secular organization. They don't really provide more charity care than secular organizations. The purpose of the (ERISA) exemption was to keep government out of the internal finances of churches, but because there's no church here, there's no purpose for it.”

Attorneys for Advocate and St. Peter's declined to comment on the petitions Monday. But they argue in their petitions that the recent lower court decisions against them contrast with three decades of administrative practice. They say the high court should take the case because appeals courts are divided over whether church-affiliated organizations may consider their pensions to be so-called “church plans” exempt from ERISA.

The 7th U.S. Circuit Court of Appeals ruled against Advocate in March, and the 3rd U.S. Circuit Court of Appeals ruled against St. Peter's in December.

Ms. Handorf, however, believes it's unlikely the Supreme Court will take up either of the cases. She disagrees with the contention that appeals courts are divided on the issue, saying the past decisions don't deal with the same issue.

Stuart Gerson, a former acting U.S. attorney general who now works on health care cases as a member at Epstein Becker & Green P.C., said he also doubts, at this point, that the Supreme Court would hear the cases. Mr. Gerson is not involved in the litigation.

The Supreme Court takes a very low percentage of cases that petition it, and this one might be especially unlikely because “the majority of the court doesn't show any great affinity toward the pleadings of organizations affiliated with religion,” he said. If the U.S. Department of Labor were to ask the solicitor general to urge the court to take it, that might change the case's chances of getting heard, but Mr. Gerson noted the Obama administration is unlikely to be sympathetic to the faith-based health systems' argument.

At least two other cases involving faith-based health systems are now in other circuit courts. A case against Catholic Health Initiatives is awaiting a decision in the 10th U.S. Circuit Court of Appeals, and a case involving Dignity Health is in the 9th U.S. Circuit Court of Appeals, Ms. Handorf said. District courts have been somewhat divided on the issue.

Lisa Schencker writes for Modern Healthcare, a sister publication of Business Insurance.

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