Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca3-15-01172/USCOURTS-ca3-15-01172-0/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 

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PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 15-1172

_____________

LAURENCE KAPLAN, on behalf of himself,

individually, and on behalf of all others similarly situated

v.

SAINT PETER’S HEALTHCARE SYSTEM; 

RONALD C. RAK; SUSAN BALLESTERO, an individual; 

GARRICK STOLDT, an individual;

JOHN and JANE DOES 1–20

Saint Peter’s Healthcare System, Ronald 

C. Rak, Susan Ballestero, Garrick Stoldt,

 Appellants

________________

Appeal from the United States District Court

for the District of New Jersey

(D.C. Civil Action No. 3-13-cv-02941)

District Judge: Honorable Michael A. Shipp

________________

Argued October 8, 2015

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Before: McKEE, Chief Judge, AMBRO, and HARDIMAN, 

Circuit Judges

(Opinion filed: December 29, 2015)

Jeffrey J. Greenbaum, Esquire (Argued)

James M. Hirschhorn, Esquire

Sills, Cummis & Gross

One Riverfront Plaza

Newark, NJ 07102

Katherine M. Lieb, Esquire

Sills, Cummis & Gross

One Rockefeller Plaza

New York, NY 10020

Counsel for Appellants

Saint Peter’s Healthcare System, Ronald C. Rak,

Susan Ballestero, Garrick Stoldt

Monya M. Bunch, Esquire

Karen L. Handorf, Esquire (Argued)

Mathew A. Smith, Esquire

Michelle C. Yau, Esquire

Cohen Milstein Sellers & Toll PLLC

1100 New York Avenue, N.W.

West Tower, Suite 500

Washington, DC 20005

Ron Kilgard, Esquire

Keller Rohrback

3101 North Central Avenue, Suite 1400

Phoenix, AZ 85012

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Lynn L. Sarko, Esquire

Havila C. Unrein, Esquire

Keller Rohrback

1201 Third Avenue, Suite 3200

Seattle, WA 98101

Counsel for Appellee

Jeremy P. Blumenfeld, Esquire

Melissa D. Hill, Esquire

Morgan Lewis & Bockius

1701 Market Street

Philadelphia, PA 19103

Counsel for Amicus Appellant

Catholic Health East

Mark E. Chopko, Esquire

Marissa Parker, Esquire

Brandon Riley, Esquire

Stradley, Ronon, Stevens & Young

1250 Connecticut Avenue, N.W.

Washington, DC 20036

Lisa Gilden, Esquire

The Catholic Health Association of the United States

1875 Eye Street, N.W., Suite 1000

Washington, DC 20006

Counsel for Amicus Appellant

Catholic Health Association of the United States

Jared M. Haynie, Esquire

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Chipman Gasser

2000 South Colorado Boulevard

Tower One, Suite 7500

Denver, CO 80222

James A. Sonne, Esquire

Stanford Law School

Religious Liberty Clinic

559 Nathan Abbott Way

Crown Quadrangle

Stanford, CA 94305

Counsel for Amicus Appellant

Becket Fund for Religious Liberty

Mary E. Signorille, Esquire

AARP Foundation Litigation

601 E Street, N.W.

Washington, DC 20049

Roberta L. Steele, Esquire

National Employment Lawyers Association

2201 Broadway, Suite 402

Oakland, CA 94612

Counsel for Amicus Appellees

AARP and National Employment Lawyers Association

Laurence A. Hansen, Esquire

Hugh S. Balsam, Esquire

Locke Lord

111 South Wacker Drive, Suite 4300

Chicago, IL 60606

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G. Daniel Miller, Esquire

Conner & Winters, LLP

1627 Eye Street, N.W., Suite 900

Washington, DC 20006

Counsel for Amicus Appellant

GuideStone Financial Resources of

the Southern Baptist Convention

Richard H. Frankel, Esquire

Drexel University

Thomas R. Kline School of Law

3320 Market Street

Philadelphia, PA 19104

Karen W. Ferguson, Esquire

Norman P. Stein, Esquire

Pension Rights Center

1350 Connecticut Avenue, N.W., Suite 206

Washington, DC 20036

Counsel for Amicus Appellee

Pension Rights Center

Patrick C. Elliott, Esquire

Andrew L. Seidel, Esquire

Freedom from Religion Foundation

P.O. Box 750

10 North Henry Street

Madison, WI 53703

Counsel for Amicus Appellee 

Freedom from Religion Foundation

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Gregory M. Lipper, Esquire

Ayesha N. Kahn, Esquire

Americans United for Separation of Church and State

1901 L Street, N.W., Suite 400

Washington, DC 20005

Daniel Mach, Esquire

American Civil Liberties Union Foundation

915 15th Street, N.W., 6th Floor

Washington, DC 20005

Counsel for Amicus Appellees

ACLU, ACLU of New Jersey, and 

Americans United for Separation of Church and State

________________

OPINION OF THE COURT

________________

AMBRO, Circuit Judge

Subsection 4(b)(2) of the Employee Retirement 

Income Security Act (“ERISA”) provides an exemption for 

church plans. These plans need not comply with a host of 

ERISA provisions, including fiduciary obligations and 

minimum-funding rules. ERISA § 3(33)(A) defines a church 

plan as one that is “established and maintained . . . for its 

employees (or their beneficiaries)” by a tax-exempt church. 

Subsection 3(33)(C)(i) clarifies that a “plan established and 

maintained” by a church includes a plan maintained by a 

qualifying agency of a church. But can a church agency, in 

addition to maintaining an exempt church plan, also establish

such a plan? The District Court concluded that it cannot. We 

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agree. Per the plain text of ERISA, only a church can 

establish a plan that qualifies for an exemption under 

§ 4(b)(2).1 Because no church established St. Peter’s 

Healthcare System’s retirement plan, we hold that it is 

ineligible for a church plan exemption. 

I. Background

St. Peter’s is a non-profit healthcare entity that runs a 

variety of facilities, including a hospital, and employs over 

2,800 people. Though it is not a church, St. Peter’s has ties to 

the Roman Catholic Diocese of Metuchen, New Jersey. For 

instance, the Bishop of Metuchen appoints all but two 

members of its Board of Governors. The Bishop also retains 

veto authority over the Board’s actions. Meanwhile, the 

hospital run by St. Peter’s features numerous indicia of the 

church relationship, including daily Mass and the presence of 

Catholic devotional pictures and statues throughout the 

building. 

St. Peter’s established the retirement plan before us in 

1974. It is a non-contributory defined benefit plan, and it 

covers substantially all employees of St. Peter’s hired before 

July 1, 2010. For more than three decades, St. Peter’s 

operated the plan subject to ERISA and represented to its 

employees in plan documents and other materials that it was 

complying with ERISA. Eventually, however, St. Peter’s 

began to consider whether the church plan exemption might

apply to its retirement plan. To that end, it filed an application 

in 2006 with the Internal Revenue Service seeking such an 

exemption. The Internal Revenue Code borrows its definition 

of a church plan from ERISA. See 26 U.S.C. § 414(e).

 

1 Subsection 4(b)(2) of ERISA is codified at 29 U.S.C. 

§ 1003(b)(2). Subsection 3(33) is located at 29 U.S.C. 

§ 1002(33).

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Although the application signaled the belief of St. Peter’s that 

it qualified for an ERISA exemption, it continued to pay 

ERISA-mandated insurance premiums for the retirement plan

while the application was pending. 

In May 2013, Laurence Kaplan, who worked for St. 

Peter’s from 1985 to 1999, filed a putative class action

alleging that St. Peter’s failed to comply with various ERISA 

obligations.2 Among other things, the complaint alleged that,

in the years after St. Peter’s filed the application for a church 

plan exemption, it did not provide ERISA-compliant 

summary plan descriptions or pension benefits statements. 

The most serious allegation was that, as of the end of 2011, 

the plan was underfunded by more than $70 million.3In 

August 2013, while the lawsuit was pending, St. Peter’s 

received a private letter ruling from the IRS affirming the 

plan’s status as an exempt church plan for tax purposes.4

St. Peter’s moved to dismiss the suit, claiming that it 

qualified for ERISA’s church plan exemption and hence was 

not required to comply with the provisions Kaplan claimed it 

had violated. Specifically, St. Peter’s argued that the claimed 

exemption robbed the District Court of subject matter 

jurisdiction over the ERISA allegations and in the alternative

 

2 The complaint also names certain individuals employed by 

St. Peter’s. We refer to these individuals and their employer 

collectively as “St. Peter’s.”

3 On appeal, Kaplan focuses on numbers from 2014. He says 

that those show that the plan was underfunded at that time by 

approximately $30 million. See Appellee’s Br. at 5. 

4 As discussed in Part VII, this private letter ruling does not 

control our inquiry. 

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that the complaint failed to state a claim. The District Court 

denied the motion after concluding that St. Peter’s could not 

establish an exempt church plan because it is not a church.

In reviewing the District Court’s conclusion, we do not 

write on a blank slate. In the decades following the current 

church plan definition’s enactment in 1980, various courts 

have assumed that entities that are not themselves churches, 

but have sufficiently strong ties to churches, can establish 

exempt church plans. See, e.g., Catholic Charities of Me., Inc. 

v. City of Portland, 304 F. Supp. 2d 77, 84–85 (D. Me. 2004); 

Humphrey v. Sisters of St. Francis Health Servs., Inc., 979 F. 

Supp. 781, 785–86 (N.D. Ind. 1997). The only Circuit to 

consider the question came to the same conclusion, albeit in a 

dictum. See Lown v. Cont’l Cas. Co., 238 F.3d 543, 547 (4th 

Cir. 2001). However, a new wave of litigation, of which this 

case is a part, has sprung up in the past few years and has 

presented an argument not previously considered by courts—

that the actual words of the church plan definition preclude 

this result. 

Riding this new wave, three other courts have agreed 

with the District Court here that only churches can establish 

exempt church plans. See Stapleton v. Advocate Health Care 

Network, 76 F. Supp. 3d 796, 806 (N.D. Ill. 2014); Medina v. 

Catholic Health Initiatives, No. 13-CV-01249, 2014 WL 

3408690, at *9 (D. Colo. July 9, 2014); Rollins v. Dignity 

Health, 19 F. Supp. 3d 909, 917 (N.D. Cal. 2013). By 

contrast, three courts have ruled that plans established and 

maintained by church agencies can qualify for an exemption. 

See Lann v. Trinity Health Corp., No. 8:14-cv-02237 (D. Md. 

Feb. 23, 2015) (ECF No. 54 at 1); Medina v. Catholic Health 

Initiatives, No. 13-CV-01249, 2014 WL 4244012, at *2 (D. 

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Colo. Aug. 26, 2014);5 Overall v. Ascension, 23 F. Supp. 3d 

816, 829 (E.D. Mich. 2014). The Seventh Circuit heard 

argument in Stapleton on September 18, 2015, but we are the 

first Circuit to decide the question in a holding. 

II. Jurisdiction and Standard of Review

The District Court had jurisdiction under 28 U.S.C.

§ 1331 and 29 U.S.C. § 1132(e)(1). St. Peter’s filed a motion 

to dismiss, which the District Court denied. However, the 

Court permitted St. Peter’s to seek leave from us to appeal, 

and we accepted the interlocutory appeal. We thus have 

jurisdiction under 28 U.S.C. § 1292(b). Our review of 

questions of law certified under this provision is plenary. See 

Florence v. Bd. of Chosen Freeholders of Cnty. of Burlington, 

621 F.3d 296, 301 (3d Cir. 2010).

III. The Church Plan Exemption

When Congress enacted ERISA in 1974, § 3(33) 

defined a church plan as follows:

(33)(A) The term “church plan” means 

(i) a plan established and maintained for its 

employees by a church or by a convention or 

 

5 The August 26, 2014 District Court opinion in Medina, 

written by Judge Blackburn, was on review of the July 9, 

2014 opinion, written by Magistrate Judge Mix. Judge 

Blackburn rejected Magistrate Judge Mix’s recommendation. 

In a later opinion, Judge Blackburn granted summary 

judgment to the defendants on the basis of a church plan 

exemption. Medina v. Catholic Health Initiatives, No. 13-CV01249, 2015 WL 8144956, at *14 (D. Colo. Dec. 8, 2015).

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association of churches which is exempt from 

tax under section 501 of the Internal Revenue 

Code of 1954, or (ii) a plan described in 

subparagraph (C).

. . . 

(C) . . . [A] plan in existence on January 

1, 1974, shall be treated as a “church plan” if it 

is established and maintained by a church or 

convention or association of churches for its 

employees and employees of one or more 

agencies of such church (or convention or 

association) . . . , and if such church (or 

convention or association) and each such 

agency is exempt from tax under section 501 of 

the Internal Revenue Code of 1954. The first 

sentence of this subparagraph shall not apply to 

any plan maintained for employees of an 

agency with respect to which the plan was not 

maintained on January 1, 1974. The first 

sentence of this subparagraph shall not apply 

with respect to any plan for any plan year 

beginning after December 31, 1982. 

In the years following ERISA’s enactment, this 

definition led to two problems, both of which are summarized 

here but discussed in more detail in Part VI below. First, 

experience showed that many churches established their own 

plans but relied on church pension boards for plan 

maintenance. Churches that followed this practice were 

concerned that their plans might not technically qualify as 

“established and maintained” by a church. Second, churches 

wanted the ability to continue to cover the employees of 

church agencies, such as church hospitals, after the sunset 

provision in § 3(33)(C) took effect at the end of 1982. 

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Congress addressed both concerns as part of the 

Multiemployer Pension Plan Amendments Act of 1980, 

which amended § 3(33) as follows:

(33)(A) The term “church plan” means a 

plan established and maintained . . . for its 

employees (or their beneficiaries) by a church 

or by a convention or association of churches 

which is exempt from tax under section 501 of 

Title 26. 

. . . 

(C) For purposes of [paragraph 33]—

(i) A plan established and maintained for 

its employees (or their beneficiaries) by a 

church or by a convention or association 

of churches includes a plan maintained 

by an organization, whether a civil law 

corporation or otherwise, the principal 

purpose or function of which is the 

administration or funding of a plan or 

program for the provision of retirement 

benefits or welfare benefits, or both, for 

the employees of a church or a 

convention or association of churches, if 

such organization is controlled by or 

associated with a church or a convention 

or association of churches.6

 

6 Although the statute speaks in terms of churches along with

conventions or associations of churches, for ease of reference 

we refer to them collectively as “churches.” Additionally, we 

refer to the principal-purpose entities described in 

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(ii) The term employee of a church or a 

convention or association of churches 

includes—

(I) a duly ordained, commissioned, or 

licensed minister of a church in 

the exercise of his ministry, 

regardless of the source of his 

compensation;

(II) an employee of an organization, 

whether a civil law corporation or 

otherwise, which is exempt from 

tax under section 501 of Title 

26 and which is controlled by or 

associated with a church or a 

convention or association of 

churches . . . .

This new definition solved both of the issues that 

stemmed from the 1974 definition. Specifically, new 

§ 3(33)(C)(i) unambiguously brought within the exemption 

plans established by churches but maintained by church 

pension boards. And new § 3(33)(C)(ii) allowed churches to 

establish plans that covered church agency employees even 

after the sunset provision kicked in at the end of 1982. 

However, St. Peter’s argues that the 1980 amendments 

also accomplished a third result—annulling the requirement 

that a church establish a plan in order for it to qualify for an 

exemption. Under its proposed reading, any plan can qualify 

for the exemption regardless of who establishes it as long as it 

meets the maintenance requirements of § 3(33)(C)(i). As 

 

§ 3(33)(C)(i) interchangeably as “church agencies” or 

“pension boards.”

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noted below, we believe this reading fails to follow the actual 

words of the provision. 

IV. Plain Meaning

We start our review, as we must, with a familiar 

question: Do the words of the statute have “a plain and 

unambiguous meaning with regard to the particular dispute in 

the case”? Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450 

(2002) (internal quotation marks omitted). Here, the statute 

has a plain meaning, and that meaning sets the result.

Subsection 3(33)(A) requires that all exempt plans be 

established by a church. Prior to 1980, a plan needed to be 

established and maintained by a church. The 1980 

amendments provided an alternate way of meeting the 

maintenance requirement by allowing plans maintained by 

church agencies to fall within the exemption. But they did not 

do away with the requirement that a church establish a plan in 

the first instance. As the District Court explained,

[t]he key to this interpretation is to recognize 

that subsection [3(33)]A is the gatekeeper to the 

church plan exemption: although the church 

plan definition, as defined in subsection A, is 

expanded by subsection C to include plans 

maintained by a tax-exempt organization, it 

nevertheless requires that the plan be 

established by a church or a convention or 

association of churches. In other words, if a 

church does not establish the plan, the inquiry 

ends there. If, on the other hand, a church 

establishes the plan, the remaining sections of 

the church plan definition are triggered. 

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Kaplan v. Saint Peter’s Healthcare Sys., No. 13-2941, 2014 

WL 1284854, at *5 (D.N.J. Mar. 31, 2014) (emphases in 

original).

St. Peter’s responds by arguing that the language of 

§ 3(33)(C)(i), which says that a plan “established and 

maintained” by a church “includes” a plan “maintained” by a 

qualifying church agency, means that any plan maintained, 

even if not established, by such an agency is exempt. This 

would be persuasive if there were only one requirement—

maintenance—for an exemption. But here we have two 

requirements—establishment and maintenance—and only the 

latter is expanded by the use of “includes.” 

Indeed, St. Peter’s essentially conceded the problem 

with its reading at oral argument when presented with the 

following scenario: Congress passes a law that any person 

who is disabled and a veteran is entitled to free insurance. In 

the ensuing years, there is a question about whether people 

who served in the National Guard are veterans for purposes of 

the statute. To clarify, Congress passes an amendment saying 

that, for purposes of the provision, “a person who is disabled 

and a veteran includes a person who served in the National 

Guard.” Asked if a person who served in the National Guard 

but is not disabled qualifies to collect free insurance, St. 

Peter’s responded that such a person does not because only 

the second of the two conditions was satisfied. This correct 

response only serves to highlight the fatal flaw in the

construction of ERISA advanced by St. Peter’s. 

V. Canons of Construction

Various canons of statutory construction add to the 

problems with the reading proposed by St. Peter’s. First, if St. 

Peter’s were right, the church establishment requirement in 

§ 3(33)(A) would be superfluous. That is because any plan, 

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regardless of who established it, would be eligible for an 

exemption as long as it is maintained by an entity that meets 

the requirements of § 3(33)(C)(i). Creating such superfluous 

language is a result we attempt to avoid when construing a 

statute. See Bennett v. Spear, 520 U.S. 154, 173 (1997) 

(noting that it is a “cardinal principle of statutory 

construction” to “give effect, if possible, to every clause and 

word of a statute”) (internal quotation marks omitted). This is 

particularly so where a contrary reading would “nullif[y]” a 

statute’s “careful limitation.” Id. Here, Congress carefully 

limited the church plan exemption to only those plans 

established by a church. In interpreting the statute, we must 

give meaning to this limitation.

Second, in cases where Congress “includes particular 

language in one section of a statute but omits it in another 

section of the same Act, it is generally presumed that 

Congress acts intentionally and purposely in the disparate 

inclusion or exclusion.” Russello v. United States, 464 U.S. 

16, 23 (1983) (internal quotation marks omitted). This canon 

is known as expressio unius est exclusio alterius (to express 

one is to exclude others). Here, Congress could have said that 

a plan “established and maintained” by a church includes a 

plan “established and maintained” by a church agency. But 

the final legislation did not say that. Tellingly, however, draft 

legislation introduced in 1978 by Representative Barber B. 

Conable, Jr. to amend the Internal Revenue Code had 

precisely that language. See Kaplan, 2014 WL 1284854, at *9 

n.4 (quoting 124 Cong. Rec. 12108 (May 2, 1978)). If 

Representative Conable’s text had been adopted, it would be 

quite clear that church establishment of a plan would no 

longer be a prerequisite for the exemption. But by the time 

Congress passed the 1980 ERISA amendments, the second 

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“established” was gone.7 This deletion from one version to 

another “is fairly seen . . . as a deliberate elimination of any 

possibility” of construing the statute to have the meaning it 

would have had in the rejected version. Doe v. Chao, 540 

U.S. 614, 623 (2004).

Third, we have noted that ERISA is a “remedial” 

statute that should be “liberally construed in favor of 

protecting the participants in employee benefit plans.” IUE 

AFL-CIO Pension Fund v. Barker & Williamson, Inc., 788 

F.2d 118, 127 (3d Cir. 1986). As certain of the amici explain, 

exempt church plans lack many of the protections associated 

with ERISA. Features that ERISA plans have that church 

plans need not follow include fiduciary duties and minimumfunding protections. See, e.g., Nat’l Emp’t Lawyers Assoc. &

AARP Found. Amicus Br. at 11–19. Excluding plans 

established by church agencies could take a large number of 

employees outside the scope of these ERISA protections. For 

instance, as of 2012 religiously affiliated hospitals accounted 

for seven of the country’s ten largest non-profit healthcare 

systems. ACLU & Americans United for Separation of 

Church and State Amicus Br. at 22. As the District Court 

noted, construing plans established by church hospitals to be 

exempt “would achieve quite the opposite” result of the canon 

directing us to construe exemptions narrowly. Kaplan, 2014 

WL 1284854, at *6. 

 

7 Viewed in light of the purpose of the provision, the use of 

the current language rather than Rep. Conable’s version 

makes sense. As discussed in Part VI below, the purpose of 

§ 3(33)(C)(i) was not to deal with a plan established and 

maintained by a church agency but rather to account for a 

plan established by a church and maintained by its pension 

board (i.e., a church agency). 

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St. Peter’s, for its part, contends that a fourth canon, 

construing provisions in light of their statutory neighbors, 

favors its reading. Specifically, it points to ERISA’s 

governmental plan exemption. ERISA § 3(32), 29 U.S.C 

§ 1002(32), defines an exempt governmental plan to mean “a 

plan established or maintained for its employees by the 

Government of the United States, by the government of any 

State or political subdivision thereof, or by any agency or 

instrumentality of any of the foregoing.” The provision goes 

on to say that an exempt governmental plan “includes,” 

among other options, certain plans to which the Railroad 

Retirement Act of 1935 applies and certain plans “established 

and maintained” by Native American tribal governments. St. 

Peter’s uses this as an example of an instance in which the 

initial definition of an exempt plan is enlarged through the 

use of “includes.” 

But the governmental plan provision hurts, not helps, 

St. Peter’s. It shows that Congress considers “established” 

and “maintained” to be different terms, as either is sufficient 

for the plans of the federal government and state 

governments, but both are required for Native American tribal 

plans. For the church plan exemption before us, Congress did 

not, as it did with plans of the federal government and state 

governments, say that either establishment or maintenance is 

sufficient for ERISA exemption. Rather, Congress explicitly 

required both (subject to the caveat that the second 

requirement could be met in the case of a plan maintained by 

a qualifying church agency).

* * *

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In this context, even if St. Peter’s may maintain an 

exempt church plan,8it cannot establish one. The plain terms 

of ERISA only make these exemptions available to plans 

established in the first instance by churches. Because St. 

Peter’s is not a church, the exemption is unavailable, and it is 

not entitled to dismissal of Kaplan’s complaint on that basis. 

 

8 Although we need not decide the issue, we have substantial 

reservations over whether St. Peter’s can even maintain an 

exempt plan. Subsection 3(33)(C)(i) requires that if a plan is 

to be maintained by an organization that is not a church, it 

must be an organization “the principal purpose or function of 

which is the administration or funding of a plan or program 

for the provision of retirement benefits or welfare benefits, or 

both, for the employees of a church or a convention or 

association of churches . . . .” In addition, the same subsection 

requires that the organization be “controlled by or associated 

with a church or a convention or association of churches.” 

Setting aside whether St. Peter’s is controlled by or associated 

with a church (as that depends on disputed facts not properly 

resolvable at the motion-to-dismiss stage), St. Peter’s itself 

does not appear to meet the principal purpose test, as its 

principal purpose is the provision of healthcare and not the 

administration or funding of the retirement plan. St. Peter’s 

contends, however, that its Retirement Plan Committee 

qualifies because the Committee’s principal purpose is to 

maintain the plan. However, this may be insufficient. See

Rollins, 19 F. Supp. 3d at 914 (“[T]he statute does not say 

that the organization may have a subcommittee who deals 

with plan administration. Rather, the statute dictates that [the] 

organization itself must have benefits plan administration as 

its ‘principal purpose,’ which Dignity plainly does not.”).

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VI. Legislative History

Because the terms of the statute are unambiguous, we 

need go no further. However, because the parties have 

devoted considerable resources to briefing and arguing the 

legislative history of the church plan exemption, we turn to it 

now. Even if the statute were ambiguous and the legislative 

history bore on our analysis, the result would be the same. 

Indeed, the legislative history of § 3(33) reinforces our 

conclusion that the exemption is only available to plans 

established by churches. Specifically, that history 

demonstrates that the purposes of the 1980 amendments were 

to account for plans established by churches but maintained 

by church agencies (hence the adoption of § 3(33)(C)(i)) and 

to extend the sunset provision set to take effect at the end of 

1982 (thus the adoption of § 3(33)(C)(ii)). 

St. Peter’s places great emphasis on the following floor 

statement from Senator Herman Talmadge, a co-sponsor of 

the 1980 church plan amendments, regarding the purpose of 

the 1980 language:

Church agencies are essential to the 

churches’ mission. They are for the sick and 

needy and disseminate religious instruction. 

They are, in fact, part of the churches. As a 

practical matter, it is doubtful that the agency 

plans would survive subjection to ERISA. 

There is an essential difference between the 

plans of business[es] and the plans of church 

institutions. If a business incurs increased plan 

maintenance costs, it merely passes these on to 

the consumer. The incomes of most church 

agencies, on the other hand, are dependent 

solely upon tithes and other offerings. There is 

virtually no way for them to compensate for the 

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additional costs of complying with ERISA. The 

churches fear that many of the agencies would 

abandon their plans. We are concerned today 

that the requirements of ERISA [have] made the 

maintenance of plans too expensive and 

demanding even for businesses which have the 

capacity to absorb additional costs. The impact

of ERISA on church agencies would be many 

times as serious as that on businesses. 

JA 122.9

St. Peter’s contends that this statement makes clear 

that Congress was focused on plans established by church 

agencies. Not so. Rather, the context demonstrates that 

Senator Talmadge’s real concern was the sunset provision set 

to take effect at the end of 1982. As discussed, the initial 

definition of a church plan was one “established and 

maintained for its employees by a church.” Existing plans 

established and maintained by churches were allowed to 

cover employees of church agencies, but only until the end of 

1982. This was not a question of who established and 

maintained the plans, as only churches could. Instead, the 

issue was that no exempt plans would be allowed to cover

agency employees after 1982 (unless the agency itself 

qualified as a church). Indeed, Senator Talmadge made the 

comments above in the context of explaining why churches, 

after 1982, would need to “divide their plans into two so that 

one will cover church employees and the other . . . agency 

employees.” Id. Absent an amendment, the plans in the latter 

category would not qualify for the exemption. That was the 

real threat to plans covering agency employees. 

 

9

“JA” refers to the parties’ joint appendix.

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22

The reliance of St. Peter’s on statements by Deputy 

Assistant Secretary of the Treasury Daniel Halperin during a 

hearing on the proposed legislation is similarly misplaced. St. 

Peter’s highlights his statement that Treasury’s “most serious 

concern” was that the amendments “would exclude church

agencies from the protection of ERISA, and that would mean 

that if somebody works for a hospital or a school that happens 

to be affiliated with a church it would be permissible for that 

plan to provide no retirement benefits unless they work until 

age 65, for example.” Appellants’ Addendum at 8. This does 

not help St. Peter’s. Assistant Secretary Halperin was merely 

pointing out that, if the sunset provision took effect, 

employees of church agencies could not be included within

the then-existing exemption, and a plan covering them would 

instead be subject to ERISA even if a church itself established 

it. However, nothing in the statement connotes that plans 

established by church agencies would be eligible for the 

exemption. 

Similarly, St. Peter’s does not benefit from the 

statement of Senator Jacob Javits, the general sponsor of the 

legislation in which the 1980 amendments were included. 

Senator Javits said that he was “not too happy” that the 

amendments would exempt “those who work for schools and 

similar institutions which are church-related.” JA 1524. 

Again, this relates to Congress’ decision not to allow the 

sunset provision to take effect. 

More to the point, the legislative history demonstrates 

that the purpose of § 3(33)(C)(i), the statutory provision on 

which St. Peter’s most heavily relies, was to bring explicitly 

within the exemption plans established by churches but 

maintained by church agencies known as pension boards. 

Senator Talmadge explained that “the church plan definition 

is so narrowly drawn that it does not in many ways even 

approximate the way church plans are organized or operated.” 

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JA 122. He mentioned congregational, as opposed to 

hierarchical, denominations, noting: “Most church plans of 

congregational denominations are administered by a pension 

board. This is usually an organization separately incorporated 

from, but controlled by, the denomination.” Id. There was 

some confusion as to whether such a structure qualified for an 

exemption. Id. As Senator Talmadge explained to the Senate 

Committee on Finance, the amendments dealt with that issue 

by expanding the definition to include “church plans which 

rather than being maintained directly by a church are instead 

maintained by a pension board maintained by a church.” 

Senate Committee on Finance, Executive Session Minutes, 

June 12, 1980, at 40. 

St. Peter’s, despite a lengthy discussion of legislative 

history, has not pointed to a single statement showing that 

Congress, in addition to being concerned about the sunset 

provision and plans maintained by pension boards (i.e., 

church agencies), was also focused on plans established by 

those agencies. Rather, that history overwhelmingly supports 

the conclusion that Congress did not intend to open up the 

exemption that broadly.

VII. IRS Rulings

St. Peter’s also seeks to imbue with considerable 

weight the interpretation that the IRS has given to the church 

plan definition. As discussed, the Internal Revenue Code gets 

its definition of church plans from ERISA. Construing the 

initial 1974 definition, the IRS took the position that 

healthcare companies with religious missions were not 

eligible for the church plan exemption because they were not 

performing sufficiently religious functions. I.R.S. Gen. 

Couns. Mem. 37,266 (Sept. 22, 1977). Essentially, the IRS’ 

position was that only church agencies that themselves could 

qualify as churches could establish exempt plans. 

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But the IRS changed course in 1983 based on its 

interpretation of the 1980 amendments and began issuing 

exemptions to plans that were not established by churches. A 

1983 IRS memorandum stated that because “religious orders 

can now have their employees covered by a church plan 

without a determination that such orders are churches, [an 

order’s] nonchurch status is not fatal.” I.R.S. Gen. Couns. 

Mem. 39,007 (July 1, 1983). According to St. Peter’s, the IRS 

has issued at least several hundred exemptions based on that 

reasoning. And, as discussed, St. Peter’s itself received an 

exemption from the IRS in 2013, after this lawsuit was filed. 

St. Peter’s also notes that the Department of Labor has issued 

several exemptions of its own based on the IRS’ position. 

However, because the IRS’ position came in a general 

counsel memorandum and not as a result of “formal 

adjudication or notice-and-comment rulemaking,” its 

interpretation is owed deference “only to the extent that [it 

has] the power to persuade.” Christensen v. Harris Cnty., 529 

U.S. 576, 587 (2000) (internal quotation marks omitted). The 

IRS’ 1983 memorandum lacks the power to persuade because 

it does not even consider the church establishment 

requirement of § 3(33)(A). Rather, it skips directly (and 

inexplicably) to § 3(33)(C). Because the IRS’ position is at 

odds with the statutory text, we owe it no deference. 

VIII. Congressional Ratification

St. Peter’s also advances a congressional ratification 

argument. Specifically, it notes that, following the IRS’ 1983 

memorandum, Congress has incorporated the church plan 

definition from the 1980 amendments into a variety of other 

laws. See, e.g., 26 U.S.C. § 4980D(b)(3)(C) (excluding 

church plans from certain minimum excise taxes imposed on 

health plans); 15 U.S.C. § 80a-3(c)(14) (excluding church 

plans from the definition of investment companies under the 

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25

Investment Company Act of 1940). From this, St. Peter’s 

contends that Congress legislated against the backdrop of the 

1983 IRS memorandum and should be presumed to have 

approved that interpretation when reusing the definition. 

It is true as a general matter that when it “adopts a new 

law incorporating sections of a prior law, Congress normally 

can be presumed to have had knowledge of the interpretation 

given to the incorporated law, at least insofar as it affects the 

new statute.” Lorillard v. Pons, 434 U.S. 575, 581 (1978). 

However, in Lorillard “Congress exhibited . . . a detailed 

knowledge of the [statutory] provisions and their . . . 

interpretation.” Id. St. Peter’s has not shown any evidence 

that Congress had such a detailed knowledge in this case. 

Moreover, ratification does not apply where, as is the case 

here, the statute has a plain meaning that is inconsistent with 

the proposed interpretation. Dutton v. Wolpoff & Abramson, 5 

F.3d 649, 655 (3d Cir. 1993). As a result, ratification cannot 

salvage things for St. Peter’s. 

IX. Free Exercise Clause

Finally, St. Peter’s raises an argument under the First 

Amendment’s Free Exercise Clause. It asserts that failing to 

adopt its position would create constitutional “[i]ssues.” 

Appellants’ Br. at 47. It is not clear whether St. Peter’s is 

invoking the doctrine of constitutional avoidance or is instead 

raising a full-blown constitutional challenge. In any event, the 

argument fails. St. Peter’s bases its constitutional concerns on 

the premise that, if church agencies cannot establish their own 

plans, the IRS will be forced, in considering requests for 

exemptions, to determine on an individualized basis whether 

particular agencies are performing sufficiently religious 

functions such that they can themselves qualify as churches. 

This is the approach the IRS took to agency-established plans 

prior to the 1983 memorandum. The argument misses the 

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26

point. Churches and agencies can avoid this inquiry altogether 

by having a church establish the plan in the first instance. 

Plans established by churches are explicitly permitted under 

§ 3(33)(C)(ii) to cover agency employees. 

St. Peter’s has not offered any reason why the First 

Amendment entitles it to a retirement plan structured using a 

particular corporate form. The ability of church agencies to 

have their employees covered by exempt plans is by no 

means eliminated by our reading. We have merely determined 

that Congress has required that such coverage come in the 

form of plans established by churches. Even assuming that St. 

Peter’s has a constitutional right to have its employees 

covered by an exempt plan, this arrangement does not unduly 

interfere with that. 

Moreover, to the extent that St. Peter’s also suggests 

that Congress cannot validly distinguish between churches 

and church agencies, that argument is unpersuasive. Indeed, 

Congress regularly applies provisions to churches without 

reference to church agencies. See, e.g., 26 U.S.C. 

§ 514(b)(3)(E) (creating a special rule for churches with 

respect to real property acquired for tax-exempt use); 26 

U.S.C. § 170(b)(1)(A)(i) (allowing deductions for charitable 

contributions to churches). See also Priests for Life v. U.S. 

Dep’t of Health & Human Servs., 772 F.3d 229, 272 (D.C. 

Cir. 2014), cert. granted, 84 U.S.L.W. 3257 (U.S. Nov. 6, 2015) 

(No. 14-1453) (describing the distinction between “churches . . 

. and nonprofit organizations that may have a religious 

character or affiliation, such as universities and hospitals” as 

“long-recognized” and “permissible”); Found. of Human 

Understanding v. United States, 614 F.3d 1383, 1389 (Fed. 

Cir. 2010) (noting, in context of 26 U.S.C. § 170(b)(1)(A)(i), 

the “generally accepted principle” that Congress intended to 

distinguish between churches and other religious 

organizations). 

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* * * * *

In interpreting a statute, we presume that Congress 

means what it says. Ever since it enacted ERISA in 1974, 

establishment of a pension plan by a church has been a 

prerequisite to triggering the exemption from ERISA. 

Nothing in the 1980 amendments changed that. St. Peter’s 

sought dismissal of the putative class action on the ground 

that its plan qualifies for the church plan exemption. 

However, that exemption is unavailable here, as the plan was 

not established by a church. We therefore affirm the District 

Court’s denial of the motion to dismiss.

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