Opinion ID: 3166165
Heading Depth: 1
Heading Rank: 3

Heading: The Church Plan Exemption

Text: 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  (D. Colo. Dec. 8, 2015). 10 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. 11 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 12 (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.” 13 noted below, we believe this reading fails to follow the actual words of the provision.