Amicus Curiae Brief — Advocate Health Care Network v. Stapleton, 137 S. Ct. 1248 (2017) (No. 16-74)

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Nos. 16-74, 16-0, and 16-258 JAN 24 2917

In the Supreme Court of the Glniten Mstatesr | Tecen |

ADVOCATE HEALTH CARE NETWORK, ET AL..,

PETITIONERS

Vv.

MARIA STAPLETON, ET AL.

SAINT PETER’S HEALTHCARE SYSTEM, ET AL.,

PETITIONERS

LAURENCE KAPLAN

DIGNITY HEALTH, ET AL., PETITIONERS

STARLA ROLLINS

ON WRITS OF CERTIORARI

TO THE UNITED STATES COURTS OF APPEALS

FOR THE THIRD, SEVENTH, AND NINTH CIRCUITS

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING PETITIONERS

EDWIN S. KNEEDLER

Deputy Solicitor G. !

Counsel of Record

— R. BRANDA ,

tony Assistant Attorney

General

BRIAN H. FLETCHER

Assistant to the Solicitor

General

MARK B. STERN

ALISA B. KLEIN

NICOLAS Y. RILEY

(202) 514-2217

Additional Counse! Listed on Inside Cover

Linney ef Cangumm

ROBERT J. NEIS

Benefits Tax Counsel

Department > Treasury

Washington, D.C. 20220

DEBRA K. MOE

Deputy Chief Counsel

(Operations)

Internal Revenne Service

Washington, D.C. 20224

KATHERINE E. BISSELL

Deputy Solicitor for

Regional EF

Department of Labor

Washington, D.C. 20210

JUDITH R. STARR

General Counsel

——— Benefit Guaranty

waakegto D.C. 2008

QUESTION PRESENTED

Whether an employee benefit plan must he initially

established by a church in order to qualify for the

“church plan” exemption to the Employee Retirement

Income Security Act of 1974, 29 U.S.C. 1002(33).

(1)

TABLE OF CONTENTS

Page

Statutory provisions involved .................00..c.cccssesceeeeeeseeeeesnneenees 2

A. ERISA’s original church-plan exemption..... eaiietiateeeinitinn 2

B. The MPPAA’s -naisen Seamalconimmmnanal

C. The present contruversy.... sinctnditaiinibiaeiaiiemaaasenseiiinan

I iinsscaceresentennnernesnnntuiieindandteninenansmnnnetns 10

Argument:

The IRS, DOL, and PBGC have correctly concluded

that a plan need not be established by a church to

qualify as a church plan.... ... 18

A. The agencies’ longstanding interpretation reflects

the natural reading of the statutory text...................... 14

B. ees Glee aeteoen

of the MPPAA amendments .................<--cc..c0ccccc00c0ec0eee 18

C. The agencies’ longstanding interpretation

warrants deference under Skid1707 ..............cc00000-00- 24

D. There is no sound reason to reject the agencies’

wr eo anal

Conclusion ... SE

Appendix — “Statutory and regulatory provisions .. Eacieensteidiioms la

TABLE OF AUTHORITIES

Cases:

Abramski v. United States, 134 8. Ct. 2259 (2014)............ 18

Alaska Dep't of Envtl. Conservation v. EPA,

EET CT NR 26, 27

Almendarez-Torres v. United States, 523 U.S. 224

(fT)

Cases—Continued: Page

Barnhart v. Walton, 535 U.S. 212 (2002) ..............cccccceeeeeee 26

Beck v. FUR UES PEN, EE EE. SOE ciancienhiensenistetie 27

CFTC v. Schor, 478 U.S. 833 (1986)... soe OD

Corporation of the Presiding Bishop ofthe Church of

Jesus Christ of Latter-Day Saints v. Amos, 483

TECTIA eee ao ae aN 33

Donovan v. Dillingham, 688 F.2d 1367 (11th Cir

Set ciecicctindicoteiatiabeniabsinsniteniuaiaiseimeeteccntiteigiaasiindninmparenmnaieees 30

Federal Express Corp. v. Holowecki, 552 U.S. 389

ESSER EEE ro cen RE Oe CLR = 26

NLRB vy. Catholic Bishop of Chicago, 440 U.S. 490

ESE SA IRAE EEN aS et 33

Mead Corp. v. Tilley, 490 U.S. 714 (1989).............000+ 26, 27

Medina v. Catholic Health Initiatives, No. 13-cv-

1249, 2014 WL 4244012 (D. Colo. Aug. 26, 2014)............... i]

Mertens v. Hewitt Assocs., 508 U.S. 248 (1998) ............. 2, 26

Overall v. Ascension, 23 F . Supp. 3d 816 (E.D. Mich.

SUT isinscechinsntiastsininssiasetscipiiejusiiiidinieedeipmieiesaedideieteaitesnabenimes 9, 15

Power Reactor Dev. Co. v. International Union of

ee crercerinnintennteaciemitnenatiianienmereencces 26

Raymond B. Yates, M.D., P.C. Profit Sharing Plan

NS 27

Rose v. Long Island R.R. Pension Plan, 828 F.2d

910 (2d Cir. 1987), cert. denied, 485 U.S. 936 (1988)....... 32

Ross v. Blake, 136 S. Ct. 1850 (2016) ............-.cccccccensesseeeeveee 14

Sebelius v. Auburn Reg’l Med. Ctr., 133 S. Ct. 817

ST icnhsetencisdhislalttiaiangebaitataticiabuainteidinguidineabeeidtmannpemunmnitetinn 29

Skidmore v. Swift & Co., 323 U.S. 134 (1944)......... 12, 25, 26

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983)................ 2

TRW Inc. v. Andrews, 534A U.S. 19 (2001).............c.0scceeeeeee 17

Udall v. Tallman, 380 U.S. 1 (1965) .......2....-ccccccecceececeescseees 26

United States v. Mead Corp., 533 U.S. 218 (2001) ............ 26

Cases—Continued: Page

United States v. Menasche, 348 U.S. 528 (1955) ................ 17

Williams v. Taylor, 529 U.S. 362 (2000) .....................-. 11,17

Williams v. WCI Steel Co., 170 F.3d 598 (6th Cir.

1999)...

Yates v. Hendon, 541 US. 1.2004)... | SE AR ne

— v. United States, 437 U.S. 443

Constitution, statutes and regulations:

U.S. Const. Amend. I (Establishment Clause)................... 33

Act of July 10, 2000, Pub. L. No. 106-244, 114 Stat.

Act of Dec. 21, 2004, Pub. L. No. 108-476, § (a),

118 Stat. 3901 ... sais a

Connie’ Aenventations Act, 2016, P Pub. L. No.

114-113, § 336, 129 Stat. 3109-3113 ... Oe

§ 336(c), 129 Stat. 3111... ‘ mae

Consolidated Omnibus Budget Reconciliation Act of

1985, Pub. L. No. 99-272, § 10001, 100 Stat. 223.............. 22

Economic Growth and Tax Relief Reconciliation Act

of 2001, Pub. L. No. 107-16, § 659, 115 Stat. 139 ............. 28

yy enna temmaltt

29 U.S.C. 1001 et seg. .. aeliaed ibteiitidinivnns Gale

29 U.S.C. 1002(1)-(3) ... ee CTE AOE

29 U.S.C. 1002(16)(B)... ini siaiaicacitia diated train tidal 31

a a 3

29 U.S.C. 1002(33)(A) (1976) .............-ececcecsersseceeeeeees 3, 14

i crcsccnrunscccseenenaii passim

29 U.S.C. 1002(33)(C) (1976)... eeeesseeeseeneeeneenee Ay

a passim

29 U.S.C. 1002(33)(C) GID) ..........-nscssersserrenenes 6, 7, 14,

Statutes and regulations—Continued: Page

eT, 6, 7, 15

ne sceielancanaelll

AAA

0 2, 25

(“Ree

a cseteusaaesiesial 3

aaa

29 U.S.C. 1BOZ(DNB) «.--eeeeeeeeveevevsccsccsccsscerscnvceescesecessnne By 25

LAE a eS 3, 8

Health Insurance Portability and Accountability Act

of 1996, Pub. L. No. 104-191, § 402, 110 Stat. 2084-

Internal Revenue Code:

RTT RRA a RN 3

aaa aici cmesiclipieeiniellleneeinen 3

I ssslongneniiielicniseninaniad 3

TSAI

Ee ee a Ee 3, 8

TT a ae aS 7

26 U.S.C. 414(6KB)A) (1976).....0..0cecce---ecerncssesereensneeeesesees 4

ee 4, 7, 16, 29

ee ID ocrccscnsicnrmnsensecennnanesemnimimmnnstndeitie 7

TTT ee TEE Ree 7

SE LR ae ee acre ats 31

celica 6, 14

i tainreeaemaneanilinitii 2, 25

Vil

Statutes and regulations—Continued: Page

Multiemployer Pension Plan Amendments Act of

1980, Pub. L. No. 96-364, § 407, 94 Stat. 1303.................... 5

TALE 6

National Securities Markets Improvement Act of

1996, Pub. L. No. 104-290, § 508, 110 Stat. 3447.............. 28

Social Security Protection Act of 2004, Pub. L. No.

es i Bs I cece cccccesesensveercsccccccvecess 28

Taxpayer Relief Act of 1997, Pub. L. No. 105-34,

Miscellaneous:

124 Cong. Rec. (May 2, 1978):

SEE IE co 19, 21, 22

a ee 23

125 Cong. Rec. (May 7, 1979)

ea 11, 81, 20, 22, 32

ST ich ccdicsinisiiaiiunseiiuttapitiinisanemiorcivennserenenmniiisuiininiteniatls 21

126 Cong. Rec. (July 29, 1980)

I iniiasieciieeiciiatinahdethemmisneieparenanannneneinniot 6, 18, 32

iin ciicdetinticatintictniasnimeneiaaminiiinnin 18

149 Cong. Rec. 7380 (Mar. 25, 2008) ........0c00secseccsercnesereees 29

150 Cong. Rec. 24,328-24,331 (Nov. 19, 2004).............0....... 29

DOL Advisory Op. No. 2000-05A, 2000 WL 744359

(May 17, 2000) ... ha

and Stes sete Ouen on Svenen.

96th Cong., 2d Sess. (June 12, 1980) ..................cc-000 18, 32

ELR. 12,172, 95th Cong., 2d Sess. (1978) .........0.....000000000000 28

IRS GCM 37,288, 1977 WL 46200 (Sept. 22,

1977)... sana i 4, 6.7.23

Vill

Miscellaneous—Continued: Page

IRS GCM 39,007, 1983 WL 197946 (Nov. 2,

1982)... oe Soo FT

IRS GCM 39,793, 1989 WL 592761 (July 6, 1989) GaSe 8, 25

Miscellaneous Pension Bills: Hearings Before

the Subcomm. on Private Pension Plans and

Employee Fringe Benefits of the Senate Comm.

on Finance, 96th Cong., Ist Sess. (1979) .............-.. passim

PBGC, 2011 Enrolled Actuaries Meeting, Questions

to the PBGC and Summary of Their Responses

(Mar. 2011), http://www.pbgc.gov/documents/2011

EE -csecnscenceeaneninipinnaiengnatneninnetenesnctenienenscnmmsscoumeanstes 8

S. 1076, 96th Cong., 1st Sess. (1979)...........-0ereerees 6, 18, 32

S. 1090, 96th Cong., Ist Sess. (1979) ............cecsensseeseeeeesens 23

S. Rep. No. 383, 98d Cong., Ist Sess. (1973) ...........20cs0:000- 3

In the Supreme Court of the Gnited States

No. 16-74

ADVOCATE HEALTH CARE NETWORK, ET AL.,

PETITIONERS

Vv.

MARIA STAPLETON, ET AL.

No. 16-86

SAINT PETER’S HEALTHCARE SYSTEM, ET AL.,

PETITIONERS

Vv.

LAURENCE KAPLAN

No. 16-258

DIGNITY HEALTH, ET AL., PETITIONERS

STARLA ROLLINS

ON WRITS OF CERTIORARI

TO THE UNITED STATES COURTS OF APPEALS

FOR THE THIRD, SEVENTH, AND NINTH CIRCUITS

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING PETITIONERS

INTEREST OF THE UNITED STATES

These cases concern the “church plan” exemption

to the Employee Retirement Income Security Act of

(1)

1974 (ERISA), 29 U.S.C. 1001 et seg. The Internal

Revenue Service (IRS), the Department of Labor

(DOL), and the Pension Benefit Guaranty Corporation

(PBGC) administer the relevant provisions of ERISA.

26 U.S.C. 7801(a); 29 U.S.C. 1132-1135, 1302(b)(3). The

decisions below rejected an interpretation those agen-

cies have applied for more than three decades. The

United States therefore has a substantial interest in

this Court’s resolution of the question presented.

STATUTORY PROVISIONS INVOLVED

Pertinent statutory and regulatory provisions are

reproduced in the appendix to this brief. App., infra,

la-24a.

STATEMENT

ERISA generally exempts “church plans,” a term

defined broadly to encompass a plan covering the

employees of a religious hospital or other tax-exempt

organization associated with a church. The question

presented is whether such a plan must be initially

“established” by the church itself (as the decisions

below held) or whether it is sufficient if the plan is

“maintained” by a church-affiliated organization de-

scribed in the statute (as the IRS, DOL, and PBGC

have long concluded).

A. ERISA’s Original Church-Plan Exemption

1. Enacted in 1974, ERISA is a “comprehensive

and reticulated statute” regulating employee benefit

plans. Mertens v. Hewitt Assocs., 508 U.S. 248, 251

(1993) (citation omitted). ERISA governs both pen-

sion plans and welfare plans providing health, disabil-

ity, and other benefits. Shaw v. Delta Air Lines, Inc.,

463 U.S. 85, 91-92 (1983); see 29 U.S.C. 1002(1)-(3).

ERISA has four titles. Title | imposes reporting

and disclosure requirements, standards of fiduciary

conduct, vesting and funding schedules, and other

substantive rules for pension and welfare plans. 29

U.S.C. 1001 et seg. Title Il, which is codified in the

Internal Revenue Code, conditions preferential tax

treatment for pension plans on compliance with cer-

tain Title I requirements. Title III] governs admin-

istration and enforcement. 29 U.S.C. 1201 et seg. And

Title IV establishes the PBGC, which administers an

insurance program that protects employees against

the loss of benefits if an employer’s pension plan ter-

minates with insufficient funds. 29 U.S.C. 1301 et seq.;

see Yates v. Hendon, 541 U.S. 1, 6 (2004).

2. ERISA generally applies to any benefit plan

“established or maintained” by a private employer. 29

U.S.C. 1003(a). But Congress exempted “church plans,”

in part because “the examinations of books and rec-

ords” required under ERISA “might be regarded as

an unjustified invasion of the confidential relationship

that is believed to be appropriate with regard to church-

es and their religious activities.” S. Rep. No. 383, 93d

Cong., Ist Sess. 81 (1973). Unless a church plan elects to

be covered under 26 U.S.C. 410(d), it is exempt from

Title I of ERISA, from certain related tax provisions,

and from the PBGC’s insurance program. 29 U.S.C.

1003(b\(2), 1321(bX3); see, e.g., 26 U.S.C. 410(c)(1)(B).

411(e)(1)(B), 412(e(2)(D).

The term “church plan” is defined in 29 U.S.C.

1002(33) and a materially identical provision of the

Internal Revenue Code, 26 U.S.C. 414(e). As original-

ly enacted in 1974, that definition was narrow,

including only a plan “established and maintained for

its employees by a church.” 29 U.S.C. 1002(33)(A)

(1976).' Congress also adopted a temporary rule spec-

ifying that an existing plan covering church employees

could be “treated as a church plan” even if it also

covered the employees of “one or more agencies” of

the church. 29 U.S.C. 1002(33)(C) (1976); see 26

U.S.C. 414(e)(3)(A) (1976). That rule allowing the

employees of church agencies to be included in exempt

plans was set to expire in 1982. Jbid.

3. In 1977, the IRS issued a General Counsel

Memorandum (GCM) applying the church-plan defini-

tion to pension plans established by two orders of

Catholic sisters for the employees of their hospitals.

IRS GCM 37,266, 1977 WL 46200, at *1-*2 (Sept. 22,

1977) (1977 GCM). The IRS concluded that the plans

were not church plans because the orders were not

themselves “churches.” /d. at *6. The IRS reasoned

that a religious order qualifies as a “church” only if it

is “principally engaged in religious activities.” Jd. at

*3, *6. And the IRS determined that the Catholic

orders at issue were not churches because “operating

hospitals * * * is not a religious function.” /d. at *5.

B. The MPPAA’s Expansion Of The Church-Plan Exemption

1. A broad coalition of religious organizations

formed the Church Alliance for the Clarification of

ERISA (Church Alliance) to seek changes to the orig-

inal church-plan exemption. Miscellaneous Pension

Bills: Hearings Before the Subcomm. on Private

Pension Plans and Employee Fringe Benefits of the

: 1 Sie ttn nein batman en niente ii

church-plan definition in ERISA rather than the materially identi-

cal definition in the Internal Revenue Code. For brevity, we

generally use the term “church” as a shorthand for the statutory

phrase “church or convention or association of churches.”

Senate Comm. on Finance, 96th Cong., 1st Sess. 363-

364, 366 (1979) (Senate Hearing) (Sen. Talmadge).

Among other things, the Church Alliance opposed the

sunset of the temporary rule allowing church plans to

cover the employees of church agencies. Jd. at 384,

387-388 (Church Alliance). It also argued that the

original definition’s focus on plans established and

maintained by “churches” favored hierarchical denom-

inations over congregational denominations, which

typically relied on separate pension boards to admin-

ister the plans covering the employees of local church-

es and church agencies. /d. at 383, 388. And the

Church Alliance opposed government inquiries aimed

at determining whether particular entities were suffi-

ciently religious to qualify as “churches” entitled to

establish and maintain exempt plans. Jd. at 384.

Congress responded to those concerns by substan-

tially expanding ERISA’s church-plan exemption in

the Multiemployer Pension Plan Amendments Act of

1980 (MPPAA), Pub. L. No. 96-364, § 407, 94 Stat.

1303. The MPPAA amendments preserved the core of

the original definition, continuing to provide that

“(t]he term ‘church plan’ means a plan established and

maintained * * * for its employees (or their benefi-

ciaries) by a church.” 29 U.S.C. 1002(33)(A). That

approach made clear that any plan that met the origi-

nal definition remained exempt. But Congress broad-

ened the exemption by adopting provisions deeming

additional plans to satisfy that definition even though

they did not fall within its literal terms. Two of those

provisions are relevant here.

First, Congress specified that, for purposes of the

church-plan definition, “[t]he term employee of a

church * * * includes * * * an employee of an

organization, whether a civil law corporation or other-

wise, which is exempt from tax under [26 U.S.C. 501]

and which is controlled by or associated with a

church.” 29 U.S.C. 1002(83)(C)ii)ID. A separate

provision provides that “[a] church * * * shall be

deemed the employer of any individual included as an

employee” under that rule. 29 U.S.C. 1002(33)(C)(iii).

Those provisions allow “a church plan to cover em-

ployees of a tax-exempt agency controlled by or affili-

ated with a church,” such as a religious hospital. 126

Cong. Rec. 20,208 (July 29, 1980) (Joint Explanation of

S. 1076, 96th Cong., Ist Sess. (1979)).

Second, Congress addressed the concerns of con-

gregational denominations by specifying that “[a] plan

established and maintained for its employees (or their

beneficiaries) by a church”—that is, a church plan—

“includes a plan maintained by an organization,

whether a civil law corporation or otherwise, the prin-

cipal purpose or function of which is the administra-

tion or funding of a plan * * * for the employees of a

church * * * if such organization is controlled by or

associated with a church.” 29 U.S.C. 1002(33)(C)(i).

Under that provision, a plan maintained by a church-

affiliated pension board or other “principal-purpose”

organization is deemed to be a church plan.

Congress made the MPPAA amendments retroac-

tive to January 1, 1974, ensuring that plans previously

excluded from the church-plan exemption would not

be liable for any failure to comply with ERISA.

MPPAA § 407(c), 94 Stat. 1307.

2. The IRS first addressed the amended church-

plan definition in a GCM prepared in 1982 and re-

leased to the public in 1983. IRS GCM 39,007, 1983

WL 197946 (Nov. 2, 1982) (1982 GCM). Like the 1977

GCM, the 1982 GCM addressed pension plans estab-

lished by Catholic religious orders for the employees

of their hospitals. /d. at *1-*2. The IRS explained

that, under the approach adopted in the 1977 GCM,

the orders were not themselves “churches.” /d. at *4.

But the IRS concluded that the MPPAA amendments

meant that “nonchurch status is not fatal.” Jbid.

After parsing the amended definition, the IRS ex-

plained that the orders’ plans would qualify as church

plans so long as (a) “their employees are deemed em-

ployees of the Catholic Church,” and (b) their plans

are “administered by one of the organizations de-

scribed in the statute.” Jbid.

The IRS found both requirements satisfied. It ex-

plained that the religious orders’ employees were

deemed to be employees of the Catholic Church be-

cause the orders were associated with the Church.

1982 GCM at *5; see 26 U.S.C. 414(e)(3)(B)(ii) and (C);

29 U.S.C. 1002(33)(C)(ii)(IT) and (iii). And it conclud-

ed that a plan may qualify as a church plan under the

MPPAA amendments if it is either “established and

maintained * * * by a church,” 26 U.S.C. 414(e)(1);

see 29 U.S.C. 1002(33)(A), or “maintained” by a prin-

cipal-purpose organization, 26 U.S.C. 414(e)(3)(A); see

29 U.S.C. 1002(33)(C)(i). 1982 GCM at *5. The IRS

therefore determined that, although the orders’ plans

had not been established by a church, they would

qualify as church plans so long as they were maintained

by principal-purpose organizations. /d. at *5-*6.

3. In the decades since the 1982 GCM, the IRS has

issued hundreds of private letter rulings confirming

the exempt status of particular plans based on its

conclusion that a plan maintained by a principal-

purpose organization need not be “established” by a

church to qualify as a church plan. See No. 16-74

(Advocate) Pet. App. 70a-11lla (collecting citations);

see also IRS GCM 39,793, 1989 WL 592761, at *5-*7

(July 6, 1989) (reaffirming this interpretation).”

DOL has likewise concluded that the identical defi-

nition in Title I of ERISA does not require a church to

establish a church plan in the first instance. That

interpretation is reflected in dozens of DOL opinion

letters finding particular plans exempt. See, ¢.g.,

DOL Advisory Op. No. 2000-05A, 2000 WL 744359, at

*1 (May 17, 2000); see also Advocate Pet. App. 64a-69a

(collecting citations). The PBGC has similarly adopt-

ed the IRS’s interpretation, relying on the IRS to

determine whether particular plans qualify as church

plans. PBGC, 2011 Enrolled Actuaries Meeting, Ques-

tions to the PBGC and Summary of Their Responses

25 (Mar. 2011), http:/Awww.pbgc.gov/documents/2011

bluebook.pdf; see 29 U.S.C. 1321(b)(3) (incorporating

26 U.S.C. 414(e)).

C. The Present Controversy

1. Until recently, no court had questioned the

agencies’ longstanding interpretation of the church-

plan exemption. Since 2013, however, that interpreta-

tion has been challenged in dozens of class-action suits

filed by employees of religious hospitals and

healthcare providers. Petitioners are the defendants

in three of those suits. Respondents are current and

former employees at petitioners’ healthcare facilities

who allege that petitioners’ pension plans are subject

* The IRS and the Department of the Treasury issued a regula-

tion interpreting the original church-plan definition, but that regu-

lation has not been updated to address the MPPAA amendments.

26 C.F.R. 1.414(e)-1; see 45 Fed. Reg. 20,796 (Mar. 31, 1980).

to ERISA and that those plans do not satisfy ERISA’s

funding, vesting, disclosure, and other requirements.

As relevant here, respondents contend that petition-

ers’ plans do not qualify as church plans because the

plans were not established by a church. Advocate Pet.

App. 4a-5a; No. 16-86 (St. Peter’s) Pet. App. 6a-7a; No.

16-258 (Dignity) Pet. App. 4a-6a.

The district courts denied petitioners’ motions to

dismiss, agreeing with respondents that a plan must be

established by a church to be a church plan. Advocate

Pet. App. 30a-50a; St. Peter’s Pet. App. 29a-5la; Digni-

ty Pet. App. 26a-42a. All three courts then certified the

issue for interlocutory appeal, recognizing that other

district courts had reached the opposite conclusion.

Advocate Pet. App. 51a-53a; St. Peter’s Pet. App. 54a-

63a; Dignity Pet. App. 6la-72a; see Overall v. Ascen-

sion, 23 F. Supp. 3d 816, 826-829 (E.D. Mich. 2014);

Medina v. Catholic Health Initiatives, No. 13-cy-1249,

2014 WL 4244012, at *2-*3 (D. Colo. Aug. 26, 2014).

2. The courts of appeals affirmed. Advocate Pet.

App. 1la-29a; St. Peter’s Pet. App. la-26a; Dignity Pet.

App. 1la-25a.

The first appellate decision was issued by the Third

Circuit, which concluded that, under the “plain text”

of the church-plan definition, “only a church can es-

tablish a plan that qualifies for an exemption.” Sz.

Peter’s Pet. App. 6a. The court emphasized that the

statute defines a “church plan” as “a plan established

and maintained * * * by a church.” Z/d. at 9a-10a

(quoting 29 U.S.C. 1002(33)(A)). The court recognized

that the MPPAA expanded that definition by specify-

ing that a plan “established and maintained * * * by

a church * * * includes a plan maintained by” a

principal-purpose organization. /d. at 1la (quoting 29

U.S.C. 1002(83)(C)(i)). The court concluded that this

amendment “provided an alternate way of meeting the

maintenance requirement,” allowing a _principal-

purpose organization, rather than a church, to main-

tain an exempt church plan. /d. at 13a. But the court

held that the MPPAA “did not do away with the re-

quirement that a church establish a plan in the first

instance.” Jbid. (emphasis added). The court stated

that it found support for that reading in several can-

ons of construction, id. at 14a-18a, and in the

MPPAA’s legislative history, id. at 18a-22a. And

because the court believed that the agencies’ interpre-

tation “is at odds with the statutory text,” it gave “no

deference” to their longstanding view. /d. at 23a.

The subsequent decisions by the Seventh and

Ninth Circuits relied on similar reasoning, likewise

concluding that the statutory text and legislative his-

tory demonstrate that a church plan must be “estab-

lished” by a church, and likewise declining to defer to

the agencies’ contrary view. Advocate Pet. App. 6a-

29a; Dignity Pet. App. 7a-24a.

SUMMARY OF ARGUMENT

In 1980, Congress amended ERISA to allow the

employees of a religious hospital or other church-

affiliated nonprofit organization to be covered by an

exempt church plan. Ever since, the agencies respon-

sible for administering ERISA’s complex regulatory

scheme have consistently concluded that such a plan

need not be initially established by a church to qualify

as exempt. That longstanding interpretation is correct.

A. The agencies’ interpretation is the natural read-

ing of the statutory text. In the MPPAA, Congress

preserved ERISA’s basic definition of a church plan

as a plan “established and maintained * * * by a

church.” 29 U.S.C. 1002(33)(A). But Congress ex-

panded that definition by specifying that “[a] plan

established and maintained * * * by achurch * * *

includes a plan maintained by [a principal-purpose

organization].” 29 U.S.C. 1002(33)(C)(i). Section

1002(33)(C)(i) is most naturally read to provide that a

plan “maintained” by a principal-purpose organization

is deemed to be both “established” and “maintained”

by a church. Any other reading would render the

words “established and” superfluous, violating the

“cardinal principle of statutory construction” that

requires courts to “give effect, if possible, to every

clause and word of a statute.’” Williams v. Taylor,

529 U.S. 362, 404 (2000) (citation omitted).

B. The context, history, and purpose of the MPPAA

amendments reinforce the natural reading of the text.

One of Congress’s fundamental goals was to accom-

modate congregational denominations, which typically

relied on pension boards to administer plans covering

the employees of local churches and church agencies.

That goal could not have been achieved merely by

allowing pension boards to maintain plans established

by churches. Some pension boards for congregational

denominations established their own plans, and in

other cases it was unclear which entities had “estab-

lished” plans that long pre-dated ERISA.

The MPPAA amendments thus sought to eliminate

any uncertainty stemming from questions about

“whether [a] plan is established by a church * * * or

by a pension board.” 125 Cong. Rec. 10,052 (May 7,

1979) (Sen. Talmadge) (emphasis added). And the

drafting history confirms that Congress achieved that

objective by deeming a plan maintained by a pension

board or other principal-purpose organization to satis-

fy the requirement of church establishment, not mere-

ly the requirement of church maintenance.

C. If there were any doubt about the best interpre-

tation of the church-plan definition, it would be re-

solved by the position adopted and consistently ap-

plied by the IRS, DOL, and PBGC. Those agencies

have been charged by Congress with administering

ERISA, and their implementation of the church-plan

exemption “constitute[s] a body of experience and

informed judgment” entitled to a measure of defer-

ence. Skidmore v. Swift & Co., 323 U.S. 134, 140

(1944). Such an administrative interpretation carries

special force where, as here, it reflects a contempora-

neous and longstanding construction of a complex

statutory scheme. And the agencies’ oft-applied in-

terpretation of the church-plan definition is entitled to

even greater weight because Congress has left it un-

disturbed even as it has repeatedly refined the treat-

ment of church plans under ERISA, the Internal

Revenue Code, and related laws.

D. Neither respondents nor the courts of appeals

identified any sound reason to upset decades of reli-

ance interests by imposing a requirement that a

church plan be initially “established” by a church.

The courts appeared to assume that such a require-

ment would ensure that a church retained control of

or responsibility for the plan, but that is mistaken.

Those powers and responsibilities may fall on the

entity that maintains a plan, not the entity that estab-

lished it in the first instance.

Respondents have also suggested that Congress

did not intend to exclude the employees of large

healthcare providers like petitioners from ERISA’s

protections. But the MPPAA amendments unambigu-

ously allow the employees of any tax-exempt organiza-

tion controlled by or associated with a church to be

covered under an exempt church plan—indeed, Con-

gress expressly deemed such employees to be employ-

ees of a church. There is thus no dispute that the

employees of a church-affiliated nonprofit organiza-

tion can be covered under an exempt plan—the only

question is the mechanism by which that result may

be achieved. As the administering agencies have long

concluded, Congress did not require a church to estab-

lish such a plan in the first instance.

ARGUMENT

THE IRS, DOL, AND PBGC HAVE CORRECTLY CON-

CLUDED THAT A PLAN NEED NOT BE ESTABLISHED

BY A CHURCH TO QUALIFY AS A CHURCH PLAN

There is no dispute that the employees of a reli-

gious hospital or other nonprofit organization associ-

ated with a church may be covered under an ERISA-

exempt church plan. There is also no dispute that a

church plan need not be “maintained” by a church,

and may instead be maintained by an organization the

principal purpose of which is the administration or

funding of a church plan. The only question before

the Court is whether an otherwise-qualifying plan

maintained by a principal-purpose organization must

be “established” by a church in the first instance. As

the agencies responsible for administering ERISA

have concluded for more than three decades, the an-

swer to that question is no.’

* The courts of appeals held that petitioners’ plans are not

church plans because they were not “established” by a church.

Respondents have separately argued that petitioners’ plans are

not church plans because petitioners are not controlled by or

A. The Agencies’ Longstanding Interpretation Reflects

The Natural Reading Of The Statutory Text

Like any inquiry into the meaning of a federal stat-

ute, the interpretation of ERISA’s church-plan ex-

emption “begins with the text.” Ross v. Blake, 136

S. Ct. 1850, 1856 (2016). That text is most naturally

read to provide that a plan maintained by a principal-

purpose organization described in Section 1002(33)(C)(i)

qualifies as a church plan whether or not it was initial-

ly established by a church.

1. Since its enactment in 1974, ERISA has defined

a “church plan” as a plan “established and maintained

* * * for its employees * * * by a church.” 29

U.S.C. 1002(33)(A); see 29 U.S.C. 1002(33)(A) (1976).

In the MPPAA, however, Congress enacted amend-

ments that expanded the reach of that definition be-

yond its literal terms. Two of those amendments

combine to allow a plan covering the employees of a

religious hospital or other church-affiliated organiza-

tion to qualify as a church plan even if the plan was

not established by a church.

First, Congress specified that “[t]he term employ-

ee of a church” includes “an employee of an organiza-

tion * * * which is exempt from tax under [26 U.S.C.

501] and which is controlled by or associated with a

church.” 29 U.S.C. 1002(33)(C)(ii)(II). Congress

further provided that, for purposes of the church-plan

associated with a church and because the entities that maintain

petitioners’ plans do not qualify as principal-purpose organizations

under Section 1002(83)(C)i). Advocate Br. in Opp. 36-87; St.

Peter’s Br. in Opp. 28-30; Dignity Br. in Opp. 36-38. We do not

address those separate issues because they were not passed upon

by the courts of appeals and are not encompassed within the

question presented.

definition, “[a] church * * * shall be deemed the em-

ployer” of such employees. 29 U.S.C. 1002(33)(C)(iii).

Thus, a plan providing benefits for the employees of a

tax-exempt organization controlled by or associated

with a church qualifies as a plan providing benefits for

the employees of a “church.”

Second, Congress enacted Section 1002(33)(C)(i) to

address plans maintained by pension boards or other

principal-purpose organizations. That provision speci-

fies that “[a] plan established and maintained for its

employees * * * by achurch * * * includes a plan

maintained by [a principal-purpose organization].” 29

U.S.C. 1002(33)(C)(i). That provision is naturally read

to provide that a plan “maintained” for church em-

ployees by a principal-purpose organization is deemed

to be a plan “established and maintained for its em-

ployees * * * by a church”—that is, a church plan.

Ibid. As one court put the point, “if A is exempt and A

includes C, then C is also exempt.” Overall v. Ascen-

sion, 23 F. Supp. 3d 816, 828 (E.D. Mich. 2014) (cita-

tion omitted). Applying that logic here: Because a plan

“established and maintained for its employees * * * by

a church” is exempt, 29 U.S.C. 1002(33)(A)—and because

such a plan “includes a plan maintained by [a principal-

purpose organization],” 29 U.S.C. 1002(83)(C)(i)—it

follows that a plan maintained by a principal-purpose

organization is also exempt.‘

* The same point can be made in a slightly different way. Sec-

tion 1002(33)(C)(i) states that a phrase in Section 1002(33)(A)’s

definition of “church plan” “includes” additional plans described in

Section 1002(33)(C)(i). The relevant phrase in Section 1002(33)(A)

can therefore be replaced with the text from Section 1002(33\C)<(i),

with this result:

That natural reading of Section 1002(33)(C)(i)’s

text is reinforced by the title of the materially identi-

cal provision of the Internal Revenue Code, 26 U.S.C.

414(e)(3)(A). Cf. Almendarez-Torres v. United States,

523 U.S. 224, 234 (1998) (observing that “the heading

of a section” may resolve doubt over its meaning)

(citation omitted). The Internal Revenue Code provi-

sion is entitled “(treatment as church plan,” 26 U.S.C.

414(e)(3)(A), which confirms that the plans described

in Section 1002(33)(C)(i) and its Internal Revenue

Code counterpart are deemed to be church plans.

2. The courts of appeals adopted a different read-

ing of Section 1002(33)(C)(i). In their view, that provi-

sion “provided an alternate way of meeting the

maintenance requirement” in Section 1002(33)(A)’s

original church-plan definition, but “did not do away

with the requirement that a church establish a plan in

the first instance.” St. Peter’s Pet. App. 13a (empha-

sis added); see Advocate Pet. App. 1la-12a; Dignity

Pet. App. 10a-lla. That reading is unpersuasive.

If Congress had intended to eliminate the “mainte-

nance” requirement alone, it would have provided that

The term “church plan” means [a plan maintained by an organ-

ization, whether a civil law corporation or otherwise, the prin-

cipal purpose or function of which is the administration or

funding of a plan or program for the provision cf retirement

benefits or welfare benefits, or both, for the employees of a

church or a convention or association of churches, if such or-

ganization is controlled by or associated with a church or a

convention or association of churches] which is exempt from

tax under section 501 of title 26.

29 U.S.C. 1002(33)(A) (text from Section 1002(33)(C)(i) bracketed).

The two provisions thus combine to define a “church plan” to

include a plan maintained by a principal-purpose organization,

whether or not that plan was established by a church.

“a plan maintained by a church includes a plan main-

tained by a principal-purpose organization.” But Con-

gress did not do that. Instead, it specified that “(a]

plan established and maintained * * * by a church

* * * includes a plan maintained by [a principal-

purpose organization].” 29 U.S.C. 1002(33)(C)i) (em-

phasis added). The natural implication is that a plan

“maintained” by a principal-purpose organization is

deemed to be both “established” and “maintained” by

a church. In fact, any other reading would render the

words “established and” superfluous, violating “the

cardinal principle of statutory construction” that

courts “must ‘give effect, if possible, to every clause

and word of a statute.’” Williams v. Taylor, 529 U.S.

362, 404 (2000) (quoting United States v. Menasche,

348 U.S. 528, 538-539 (1955)). The courts of appeals

failed even to acknowledge this superfluity, much less

to identify any textual consideration sufficient to

overcome this Court’s “reluctan[ce] to treat statutory

terms as surplusage in any setting.” TRW Inc. v.

Andrews, 534 U.S. 19, 31 (2001) (citation omitted).°

* The Third and Seventh Circuits erroneously assumed that their

reading avoided a different surplusage problem. Those courts be-

lieved that, under the agencies’ interpretation, the “church establish-

ment requirement” in Section 1002(33)(A) “would be superfluous”

because even a plan that was not established by a church “would

be eligible for an exemption as long as it is maintained by [a prin-

cipal-purpose organization}.” St Peter’s Pet. App. 14a; see Advo-

cate Pet. App. 1la-12a. But that consequence does not render Sec-

tion 1002(33)(A) “superfluous.” Just as before the MPPAA, Sec-

tion 1002(33)(A) exempts plans that are both established and main-

tained by a church. Section 1002(33\C)(i), in contrast, exempts

only plans maintained by principal-purpose organizations; it does

not address plans maintained by churches.

B. The Agencies’ Longstanding Interpretation Is Sup-

ported By The Context, History, And Purpose Of The

MPPAA Amendments

The natural reading of Section 1002(33)(C)(i)’s text

is reinforced by the “context,” “history,” and “purpose”

of the MPPAA amendments. Abramski v. United

States, 134 S. Ct. 2259, 2267 (2014) (citation omitted).

1. Under ERISA’s original definition of “church

plan,” the employees of church agencies could be cov-

ered under an exempt plan only until 1982, and only if

the plan also covered employees of the church. 29

U.S.C. 1002(33)(C) (1976). One central purpose of the

MPPAA’s church-plan amendments was to replace

that temporary rule with a permanent provision allow-

ing the employees of church agencies to be covered

under exempt plans. See, e.g., 126 Cong. Rec. 20,208

(July 29, 1980) (Joint Explanation of S. 1076, 96th

Cong., Ist Sess. (1979)).

Both proponents and opponents of the MPPAA

amendments recognized that the amended definition

would exempt plans covering the employees of church

agencies. Proponents advocated that result on the

ground that “[cjhurch agencies are essential to the

churches’ mission” and “are, in fact, part of the

churches.” 125 Cong. Rec. 10,052 (May 7, 1979) (Sen.

Talmadge). Opponents, including the Department of

the Treasury, objected to the fact that the amend-

ments would “exclude church agencies from the pro-

tection of ERISA.” Exec. Sess. of the Senate Comm.

on Finance, 96th Cong., 2d Sess. 41 (June 12, 1980)

(Executive Session) (Daniel Halperin, Deputy Assis-

tant Secretary, Dep’t of Treasury); see 126 Cong. Rec.

at 20,180 (Sen. Javits) (“As to the church pension

plans, I might say that I am not too happy about [the

amendment] as it exempts those who work for schools

and similar institutions which are church-related.”).

2. The courts of appeals acknowledged that Con-

gress sought to allow exempt church plans to cover

the employees of church agencies, but concluded that

Congress intended to exempt such plans only if they

were initially established by a church. Advocate Pet.

App. 18a-22a; St. Peter’s Pet. App. 18a-22a; Dignity

Pet. App. lla-15a. That conclusion rests on a misun-

derstanding of another fundamental purpose of the

MPPAA amendments: to make the church-plan ex-

emption available on equal terms to the local churches

and church agencies of decentralized congregational

denominations.

One of the central criticisms of ERISA’s original

church-plan definition was that it failed to account for

“the structural differences” between religious denom-

inations and thereby disadvantaged “congregational

denominations.” 124 Cong. Rec. 12,107 (May 2, 1978)

(Rep. Conable). In “hierarchical churches such as the

Roman Catholic Church,” there are “clear lines of

responsibility, control and authority” through which

the national church controls local churches and church

agencies. Senate Hearing 399 (Gary Nash, Annuity

Bd. of the Southern Baptist Convention). In congre-

gational denominations, by contrast, “the national or

regional bodies do not control the local congrega-

tions.” Jd. at 405 (John Ordway, Pension Bds. of the

United Church of Christ); see 124 Cong. Rec. at 12,107

(Rep. Conable) (“In the congregational type of denom-

ination, the local churches and agencies are self-

governing.”).

In a hierarchical denomination, the bodies adminis-

tering benefit plans for the employees of churches and

church agencies could be integrated into the national

church structure. Senate Hearing 405 (John Ordway,

Pension Bds. of the United Church of Christ). Con-

gregational denominations, however, typically relied

on pension boards that were “separately incorporated

from, but controlled by, the denomination.” 125 Cong.

Rec. at 10,052. Those separate boards administered

pension and benefit plans for ministers and lay em-

ployees working in local churches and in church agen-

cies, including hospitals, schools, and charities.°

After ERISA was enacted, congregational denomi-

nations argued to the IRS that plans administered by

their pension boards satisfied the requirements of the

original church-plan definition (at least so long as the

temporary rule allowing coverage of church agencies

remained in effect) because the pension boards them-

selves qualified as “churches” that could establish and

maintain exempt church plans. See, e.g., Senate Hear-

ing 394 (Church Alliance); id. at 420 (Dean Wright,

Ministers and Missionaries Bd. of the Am. Baptist

Churches). But, as the Senate sponsor of the MPPAA’s

church-plan amendments explained, “there [wa]s a

question whether” a plan administered by a pension

board “is established by a church, as it must be, or by

a pension board.” 125 Cong. Rec. at 10,052 (Sen.

Talmadge). The House sponsor of a predecessor bill

made the same point, observing that “[ijt is not clear

whether a plan administered by a pension board of a

® See, eg., Senate Hearing 376-377, 468-469 (Charles Cowsert,

Bd. of Annuities and Relief, Presbyterian Church in the U.S.) (des-

cribing plans administered by a pension board for a congregational

denomination); id. at 379 (Leo Landes, Retirement Bd. of United

Synagogue of Am.) (same); id. at 413-417 (Dean Wright, Ministers

and Missionaries Benefit Bd. of the Am. Baptist Churches) (same).

congregational church is a plan established and main-

tained for its employees by a church.” 124 Cong. Rec.

at 12,107 (Rep. Conable).

The sponsors emphasized that the MPPAA amend-

ments resolved this uncertainty by making clear that

“{a] plan or program funded or administered through a

pension board * * * will be considered a church plan”

if the board meets the requirements for a principal-

purpose organization in Section 1002(33)(C)(i). 125

Cong. Rec. at 10,053 (Sen. Talmadge); see 124 Cong.

Rec. at 12,107 (Rep. Conable) (same). Nothing in

those statements indicated that a plan maintained by a

pension board had to be “established” by a church to

be exempt.

3. The lack of support for a church-establishment

requirement in the legislative record is not surprising,

because such a requirement would have excluded

plans that Congress sought to treat as church plans.

Some congregational denominations took the position

that their plans were “established” by churches and

merely “maintained” by pension boards, while recog-

nizing that such boards might not be regarded as part

of the church for purposes of the original exemption.

Senate Hearing 461 (John Ordway, Pension Bds. of

the United Church of Christ). But other denomina-

tions believed that their plans were both “established

and maintained through church pension boards.” /d.

at 400-401 (Gary Nash, Annuity Bd. of the Southern

Baptist Convention) (emphasis added); see Pet. Br.

35-36 (collecting additional examples). And even for

denominations that could argue that their plans were

“established” by churches and merely “maintained” by

pension boards, a church-establishment requirement

would have perpetuated the “question whether [such

a] plan is established by a church * * * or by a pen-

sion board”—an uncertainty the MPPAA amendments

were designed to eliminate. 125 Cong. Rec. at 10,052

(Sen. Talmadge); see 124 Cong. Rec. at 12,107 (Rep.

Conable).

Furthermore, Congress was aware that many plans

administered by pension boards had been created long

before ERISA was enacted. See 125 Cong. Rec. at

10,052 (Sen. Talmadge) (“The average age of a church

plan is at least 40 years.”); Senate Hearing 411 (Dean

Wright, Ministers and Missionaries Benefit Bd. of the

Am. Baptist Churches) (“Virtually all of these pension

boards were established and in operation many years

prior to the enactment of ERISA.”). It is implausible

to think that Congress intended the MPPAA’s amend-

ed church-plan definition to turn on an uncertain in-

quiry into the identity of the organization that had

“established” a plan decades earlier.

Preserving a church-establishment requirement

would, moreover, have perpetuated problems that the

MPPAA amendments were crafted to avoid. Such a

requirement would have been more easily satisfied by

hierarchical denominations than by their congrega-

tional counterparts, which lacked centralized govern-

ing bodies that could readily “establish” plans for the

employees of church agencies. See 124 Cong. Rec. at

12,107 (Rep. Conable); Senate Hearing 399 (Gary

Nash, Annuity Bd. of the Southern Baptist Conven-

tion); Senate Hearing 405 (John Ordway, Pension

Bds. of the United Church of Christ). And a church-

establishment requirement would have placed far

greater significance on the question whether a partic-

ular religious entity qualified as a “church” entitled to

establish an exempt plan, requiring inquiries like the

one reflected in the 1977 GCM. See IRS GCM 37,266,

1977 WL 46200, at *1-*2 (Sept. 22, 1977). The need

for such inquiries had prompted criticism of ERISA’s

original definition, and supporters of the changes that

were enacted by the MPPAA amendments emphasized

that those changes would “eliminate[] the need to

determine what organizations may be considered as

parts of a church.” Senate Hearing 458 (John Ord-

way, Pension Bds. of the United Church of Christ);

see id. at 375, 463; id. at 471 (Charles Cowsert, Bd. of

Annuities and Relief of the Presbyterian Church in

the U.S.).

4. The drafting history of the MPPAA amend-

ments confirms that a plan maintained by a principal-

purpose organization under Section 1002(33)(C)(i)

need not be established by a church. The language

that became the MPPAA amendments was originally

introduced in stand-alone bills in 1978 and 1979. See

Senate Hearing 101 (quoting S. 1090, 96th Cong., Ist

Sess. (1979)); 124 Cong. Rec. at 12,108 (quoting H.R.

12,172, 95th Cong., 2d Sess. (1978)). The initial draft

of Section 1002(33)(C)(i) in those bills expressly con-

templated that pension boards and other principal-

purpose organizations would “establish” exempt plans.

It provided that “[a} plan established and maintained

by achurch * * * shall include a plan established

and maintained by [a principal-purpose organiza-

tion].” Senate Hearing 102 (quoting S. 1090) (empha-

sis added); see 124 Cong. Rec. at 12,108 (quoting H.R.

12,172) (same).

As the Third and Seventh Circuits acknowledged,

that original language made it “quite clear that church

establishment of a plan would no longer be a prerequi-

site for the exemption.” St. Peter’s Pet. App. 15a; see

Advocate Pet. App. 20a. But those courts erroneously

assumed that the sponsors reintroduced a church-

establishment requirement in the version that was

ultimately enacted into law. As relevant here, the

final version reflected the following change from the

initial proposal:

A plan established and maintained * * * bya

church * * * shal includes a plan established

and maintained by [a principal-purpose organi-

zation].

29 U.S.C. 1002(33)(C)(i). That change actually broad-

ened the exemption: Whereas the original language

limited Section 1002(33)(C)(i) to plans that were both

established and maintained by a principal-purpose

organization, the final version encompassed any plan

maintained by such an organization. Such a modifica-

tion was necessary to achieve the MPPAA amend-

ments’ purpose, because the original draft would have

excluded plans that were “established” by churches

but then “maintained by a separate corporation” or

pension board. Senate Hearing 461 (John Ordway,

Pension Bds. of the United Church of Christ). It

would thus be anomalous to treat that change in lan-

guage as narrowing the exemption and re-imposing

the church-establishment requirement that the origi-

nal version of the amendments would have abolished.

C. The Agencies’ Longstanding Interpretation Warrants

Deference Under Skidmore

If there were any doubt about the best reading of

the church-plan exemption, it would be resolved by

the longstanding interpretation applied by the IRS,

DOL, and PBGC, the expert agencies charged by

Congress with administering ERISA’s complex statu-

tory scheme. That construction should carry particu-

lar weight because Congress has repeatedly revisited

the treatment of church plans under ERISA and re-

lated statutes without disturbing the agencies’ inter-

pretation.

1. Congress assigned responsibility for administer-

ing and enforcing the relevant provisions of ERISA to

the IRS, DOL, and PBGC. 26 U.S.C. 7801(a); 29

U.S.C. 1132-1135, 1302(b)(3). For more than three

decades, those agencies have consistently concluded

that a plan maintained by a principal-purpose organiza-

tion described in Section 1002(33)(C)(i) need not be

established by a church to qualify as a church plan.

See, e.g., DOL Advisory Op. No. 2000-05A, 2000 WL

744359, at *1 (May 17, 2000); IRS GCM 39,793, 1989

WL 592761, at *5-*7 (July 6, 1989); IRS GCM 39,007,

1983 WL 197946, at *4-*5 (Nov. 2, 1982). That inter-

pretation is reflected in hundreds of private letter

rulings and opinion letters confirming the exempt

status of particular plans. Advocate Pet. App. 64a-

111a (citing 568 examples).

Although the agencies’ interpretation is not embod-

ied in notice-and-comment regulations, the agencies’

implementation of the statute “constitute[s] a body of

experience and informed judgment” that, under the

circumstances present here, should be accorded con-

siderable deference. Skidmore v. Swift & Co., 323

U.S. 134, 140 (1944). Under Skidmore, the weight due

to such an administrative construction “depend([s]

upon the thoroughness evident in its consideration,

the validity of its reasoning, its consistency with earli-

er and later pronouncements, and all those factors

which give it power to persuade, if lacking power to

control.” Jbid.

The agencies’ interpretation of the church-plan ex-

emption originated in the IRS’s 1982 GCM, which

recognized that “because of the passage of the

MPPA[A]” two years earlier, “church plan status no

longer hinges on whether [a religious] order is a

church.” 1982 GCM at *6. The IRS explained that the

absence of a church-establishment requirement fol-

lowed from the text of the amended statute, which had

superseded the IRS’s own prior approach reflected in

the 1977 GCM. Id. at *4-*6. Deference to an agency’s

interpretation is “[pJarticularly” appropriate where,

as here, “the administrative practice at stake involves

a contemporaneous construction of a statute.” Udall v.

Taliman, 380 U.S. 1, 16 (1965) (quoting Power Reactor

Dev. Co. v. International Union of Elec., 367 U.S. 396,

408 (1961)).

The agencies have, moreover, consistently adhered

to that construction for more than three decades.

This Court “normally accord[s] particular deference to

an agency interpretation of ‘longstanding’ duration,”

Alaska Dep't of Envtl. Conservation v. EPA, 540 U.S.

461, 487 (2004) (ADEC) (quoting Barnhart v. Walton,

535 U.S. 212, 220 (2002)), and to agency positions

applied “with consistency,” Federal Express Corp. v.

Holowecki, 552 U.S. 389, 399 (2008). And there are

particularly strong reasons not to disturb a long-

settled administrative interpretation where, as here, it

has generated “substantial reliance” by parties who

have structured their affairs based on a position con-

sistently and frequently reaffirmed by the responsible

agencies. Zenith Radio Corp. v. United States, 437

U.S. 443, 457 (1978).

Deference is also appropriate “where [a] regulatory

scheme is highly detailed.” United States v. Mead

Corp., 533 U.S. 218, 235 (2001). That principle applies

with special force to ERISA, “an enormously complex

and detailed statute.” Mertens v. Hewitt Assocs., 508

U.S. 248, 262 (1993). This Court has thus traditionally

deferred to the IRS, DOL, and PBGC when interpret-

ing ERISA because “to attempt to answer these ques-

tions without the views of the agencies responsible for

enforcing ERISA, would be to embark upon a voyage

without a compass.” Mead Corp. v. Tilley, 490 U.S.

714, 726 (1989) (brackets and citation omitted); see

Beck v. Pace Int'l Union, 551 U.S. 96, 104 (2007)

(same). And the Court has extended such deference

even where, as here, the relevant administrative in-

terpretation was reflected in opinion letters rather

than notice-and-comment regulations. See, e.g., Ray-

mond B. Yates, M.D., P.C. Profit Sharing Plan v.

Hendon, 541 U.S. 1, 17-18 (2004) (DOL advisory opin-

ion); Mead, 490 U.S. at 722-725 (PBGC opinion let-

ters).

2. Congress’s subsequent treatment of church

plans confirms that the Court should not “reject as

impermissible [the agencies’] longstanding, consist-

ently maintained interpretation.” ADEC, 540 U.S. at

488. In the decades since enacting the MPPAA, Con-

gress has repeatedly revisited the legal status of

church plans to refine their treatment under ERISA,

the Internal Revenue Code, and related laws. In 2015,

for example, Congress enacted a detailed provision

modifying the application of a variety of tax provisions

to church plans. Consolidated Appropriations Act,

2016, Pub. L. No. 114-113, § 336, 129 Stat. 3109-3113.

Congress has also preempted the application of cer-

tain state laws to church plans. See id. § 336(c), 129

Stat. 3111; see also Act of July 10, 2000, Pub. L. No.

106-244, 114 Stat. 499 (enacting 29 U.S.C. 1144a). And

Congress has incorporated the MPPAA definition into

a variety of other statutes affording exemptions or

special treatment to church plans.’

The fact that Congress has repeatedly refined the

legal treatment of church plans and extended the

church-plan exemption to other contexts without dis-

turbing the agencies’ longstanding interpretation

further confirms that the agencies’ interpretation is

correct. “It is well established that when Congress

revisits a statute giving rise to a longstanding admin-

istrative interpretation without pertinent change, the

‘congressional failure to revise or repeal the agency’s

interpretation is persuasive evidence that the inter-

" See, e.g., Social Security Protection Act of 2004, Pub. L. No.

108-203, § 422, 118 Stat. 536 (amending 42 U.S.C. 411(a)(7) to

exempt certain benefits paid by church plans); Economic Growth

and Tax Relief Reconciliation Act of 2001, Pub. L. No. 107-16,

§ 659, 115 Stat. 139 (enacting 26 U.S.C. 4980F(f)(2), which excludes

defined-benefit church plans from the requirement to notify partic-

ipants of benefit accrual reductions in advance); Taxpayer Relief

Act of 1997, Pub. L. No. 105-34, § 1532, 111 Stat. 1085 (adopting 26

U.S.C. 9802(c) (now codified as 26 U.S.C. 9802(f)), which partially

exempts church plans from a prohibition against discrimination

based on health status); National Securities Markets Improvement

Act of 1996, Pub. L. No. 104-290, § 508, 110 Stat. 3447-3449 (enact-

ing various provisions exempting church plans from securities

laws); Health Insurance Portability and Accountability Act of 1996,

Pub. L. No. 104-191, § 402, 110 Stat. 2084-2085 (enacting 26 U.S.C.

4980D(b\(3)(C), which exempts church plans from an excise tax

imposed on health plans that do not meet certain requirements);

Consolidated Omnibus Budget Reconciliation Act of 1985, Pub. L.

No. 99-272, § 10001(b), 100 Stat. 223 (exempting church plans from

a tax provision related to continuation health coverage).

pretation is the one intended by Congress.’” CFTC v.

Schor, 478 U.S. 833, 846 (1986) (citation omitted); see,

e.g., Sebelius v. Auburn Reg’l Med. Ctr., 133 S. Ct.

817, 827-828 (2013).

In 2004, moreover, Congress enacted a statute

premised on the understanding that a church plan

need not be established by a church. The statute

addressed the pension plan of the Young Men’s Chris-

tian Association (YMCA). That plan had not been

established by a church, but the [RS—relying on the

agencies’ longstanding interpretation—had concluded

that the plan was “in full compliance” with the church-

plan exemption, with the “possible exception” that the

YMCA was not “affiliated with any one church.” 149

Cong. Rec. 7380 (Mar. 25, 2003) (Sen. Bunning); see

150 Cong. Rec. 24,328-24,331 (Nov. 19, 2004) (similar).

To resolve that uncertainty about the YMCA plan’s

status, Congress enacted a statute providing that, for

specified purposes, the plan “shall be treated as a

church plan (within the meaning of section 414(e) of

[the Internal Revenue] Code) which is maintained by

an organization described in section 414(e)(3)(A) of

such Code.” Act of Dec. 21, 2004, Pub. L. No. 108-476,

§ 1(a), 118 Stat. 3901 (emphasis added). That provi-

sion reflects cou.gressional ratification of the agencies’

view that a plan need not be established by a church to

qualify for church-plan treatment. And the specific

reference to 26 U.S.C. 414(e)(8)(A)—the Internal

Revenue Code counterpart to Section 1002(33)(C)(i)—

shows that Congress understood that being “main-

tained” by a principal-purpose organization described

in those provisions is sufficient to confer church-plan

status.

D. There Is No Sound Reason To Reject The Agencies’

Longstanding Interpretation And Impose A Church-

Establishment Requirement

The courts of appeals identified no sound reason to

upset decades of reliance on the agencies’ longstand-

ing interpretation by imposing a church-establishment

requirement.

1. The courts of appeals appeared to believe that

requiring a church to “establish” a church plan would

ensure that the church retained control of or financial

responsibility for the plan. See, ¢.g., Advocate Pet.

App. 17a-18a. Even if that were correct, the courts’

apparent view that an ERISA exemption should be

conditioned on continuing church involvement would

not justify the imposition of a requirement that Con-

gress omitted from the statute. And in any event,

requiring a church to establish a plan in the first in-

stance would not guarantee such an ongoing role.

The question whether an employer or other entity

“established” an ERISA plan typically arises when

there is a dispute about whether a benefit plan trig-

gering ERISA obligations exists at all. In that con-

text, the courts of appeals have concluded that the

establishment of a plan does not require a formal

written document and instead turns on a practical

inquiry into the surrounding circumstances. The

leading decision held that an ERISA plan is “estab-

lished” if “a reasonable person can ascertain the in-

tended benefits, a class of beneficiaries, the source of

financing, and procedures for receiving benefits.”

Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th

Cir. 1982) (en banc); see Williams v. WCI Steel Co.,

170 F.3d 598, 603 n.3 (6th Cir. 1999).

By analogy, requiring a church to “establish” an

ERISA-exempt plan for the employees of a church

agency would require the church to play some role in

the plan’s creation. But even for plans subject to

ERISA, the employer or other entity that establishes

a plan in the first instance does not necessarily retain

ongoing responsibility. ERISA defines the “sponsor”

responsible for a plan as the employer or other entity

that “establishe[s] or maintain(s]” the plan. 29

U.S.C. 1002(16)(B) (emphasis added). And it is not

uncommon for an ERISA plan to be initially estab-

lished by one entity and later transferred to a differ-

ent entity, which assumes responsibility for maintain-

ing it. See, e.g., 29 U.S.C. 1058 (regulating plan mer-

gers and transfers); see also 26 U.S.C. 414(/) (same).

In such circumstances, the entity that established the

plan need not retain any continuing financial liability

or other involvement.

Limiting the church-plan exemption to plans initial-

ly “established” by churches thus would not guarantee

that the churches would play an ongoing role in the

exempt plans. To the contrary, Section 1002(33)(C)(i)

expressly contemplates that the principal-purpose

organization that “maintain{s]” such a plan may have

responsibility for the plan’s “administration” and

“funding.” 29 U.S.C. 1002(33)(C)(i). The courts of

appeals identified no reason why Congress would have

wanted to condition an exemption for plans funded

and controlled by church-affiliated principal-purpose

organizations on a requirement that those plans be

“established” in the first instance by churches. To the

contrary, as the Second Circuit observed in a different

context, “the status of the entity which currently

maintains a particular pension plan bears more rela-

tion to Congress’ goals in enacting ERISA and its

various exemptions, than does the status of the entity

which established the plan.” Rose v. Long Island R.R.

Pension Plan, 828 F.2d 910, 920 (1987), cert. denied,

485 U.S. 936 (1988).

2. Respondents have also argued that Congress

would not have intended to exclude the employees of

large healthcare providers like petitioners from

ERISA. But the MPPAA amendments unambiguous-

ly allow the employces of any tax-cxempt organization

“controlled by or associated with « church” to be cov-

ered under an exempt church plan; indeed, Congress

expressly deemed such employees to be “employee(s!

of a church.” 29 U.S.C. 1002(33)((C)GIDUID. It was

understood at the time that those amendments would

allow the exemption of plans covering the employees

of church agencies, including “hospital[s].” Executive

Session 41 (Daniel Halperin, Deputy Assistant Secre-

tary, Dep’t of Treasury); see, ¢.g., 126 Cong. Rec. at

20,208 (Joint Explanation of S. 1076); 125 Cong. Reg.

at 10,052 (Sen. Talmadge).

There is thus no dispute that the employees of a

church-affiliated hospital that otherwise satisfies the

statutory requirements can be covered under an

E-RISA-exempt church plan. Indeed, the Third Cir-

cuit emphasized that its interpretation “by no means

eliminated” the “ability of church agencies to have

their employees covered by exempt plans.” St. Peter’s

Pet. App. 25a. Instead, the only question is the mech-

anism by which that, result may be achieved. As the

administering agencies have long concluded—and as

the statutory text, context, history, and purpose con-

firm—Congress did not condition the church-plan

exemption on a church establishing the plan in the

first instance.*

* Respondents have argued that the canon of constitutional

avoidance supports their position because exempting petitioners’

plans from ERISA would violate the Establishment Clause.

Advocate Br. in Opp. 34-35; St. Peter’s Br. in Opp. 26-27; Dignity

Br. in Opp. 34-35. The courts of appeals correctly declined to rely

on the avoidance canon. In other circumstances, this Court has

recognized that Congress may, consistent with the Establishment

Clause, respect religious autonomy and avoid entanglement with

the Presiding Bishop of the Church of Jesus Christ of Latter-Day

Saints v. Amos, 483 U.S. 327, 338 (1987); cf. NLRB v. Catholic

Bishop of Chicago, 440 U.S. 490, 501-507 (1979). In addition, the

church-establishment requirement that respondents seek to im-

pose would not cure the purported constitutional defect they

identify because it would not narrow the range of employees who

could potentially be covered under ERISA-exempt plans— instead,

it would merely condition that exemption on the additional proce-

dural step of church establishment.

CONCLUSION

The judgments of the courts of appeals should be

reversed.

Respectfully submitted.

ROBERT J. NEIS EDWIN S. KNEEDLER

Benefits Tax Counsel Deputy Solicitor General®

Department of the Treasury JOYCE R. BRANDA

wy erey oe , camensten

mely Chief Comnse

Ripreeties x) : ay ey = ——

futernal Renenue Scrvice G J

KATHERINE E. BISSELL MARK B. STERN

Deputy Solicitor for ALISA B. KLEIN

egianal Enforceinent NICOLAS Y. RILEY

Depertment of Labor Attorneys

JUDITH R. STARR

General Counsel

Pension Benefit Guaranty

Corporation

JANUARY 2017

* The Acting Solicitor General is recused in this case.

APPENDIX

1. 26 U.S.C. 414(e) provides:

Definitions and special rules

(e) Church plan

(1) In general

For purposes of this part, the term “church plan”

means a plan established and maintained (to the

extent required in paragraph (2)(B)) for its em-

ployees (or their beneficiaries) by a church or by a

convention or association of churches which is ex-

empt from tax under section 501.

(2) Certain plans excluded

The term “church plan” does not include a plan—

(A) which is established and maintained

primarily for the benefit of employees (or their

beneficiaries) of such church or convention or

association of churches who are employed in

connection with one or more unrelated trades or

businesses (within the meaning of section 513);

(B) if less than substantially all of the indi-

viduals included in the plan are individuals de-

scribed in paragraph (1) or (3)(B) (or their bene-

ficiaries).

(3) Definitions and other provisions

For purposes of this subsection—

(A) Treatment as church plan

(la)

A plan established and maintained for its em-

ployees (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 administra-

tion or funding of a plan or program for the pro-

vision of retirement benefits or welfare benefits,

or both, for the employees of a church or a con-

vention or association of churches, if such organ-

ization is controlled by or associated with a

church or a convention or association of church-

es.

(B) Employee defined

The term employee of a church or a conven-

tion or association of churches shall include—

(i) a duly ordained, commissioned, or li-

censed 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

“and which is controlled by or associated with

a church or a convention or association of

churches; and

(iii) an individual described in subpara-

graph (E).

A church or a convention or association of

churches which is exempt from tax under section

501 shall be deemed the employer of any indi-

vidual included as an employee under subpara-

graph (B).

(D) Association with church

An organization, whether a civil law corpora-

tion or otherwise, is associated with a church or a

convention or association of churches if it shares

common religious bonds and convictions with

that church or convention or association of

churches.

(E) Special rule in case of separation from plan

If an employee who is included in a church

plan separates from the service of a church or a

convention or association of churches or an or-

ganization described in clause (ii) of paragraph

(3)(B), the church plan shall not fail to meet the

requirements of this subsection merely because

the plan—

(i) retains the employee’s accrued benefit

or account for the payment of benefits to the

employee or his beneficiaries pursuant to the

terms of the plan; or

(ii) receives contributions on the employ-

ee’s behalf after the employee’s separation

from such service, but only for a period of 5

years after such separation, unless the em-

ployee is disabled (within the meaning of the

disability provisions of the church plan or, if

there are no such provisions in the church

plan, within the meaning of section 72(m)(7))

at the time of such separation from service.

(4) Correction of failure to meet church plan re-

quirements

(A) In general

If 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 fails to

meet one or more of the requirements of this

subsection and corrects its failure to meet such

requirements within the correction period, the

plan shall be deemed to meet the requirements

of this subsection for the year in which the cor-

rection was made and for all prior years.

(B) Failure to correct

If a correction is not made within the correc-

tion period, the plan shall be deemed not to mect

the requirements of this subsection beginning

with the date on which the earliest failure to

meet one or more of such requirements occurred.

The term “correction period” means—

(i) the period, ending 270 days after the

date of mailing by the Secretary of a notice of

default with respect to the plan’s failure to

meet one or more of the requirements of this

subsection;

(ii) any period set by a court of competent

jurisdiction after a final determination that

the plan fails to meet such requirements, or, if

the court does not specify such period, any

reasonable period determined by the Secre-

tary on the basis of all the facts and circum-

stances, but in any event not less than 270

days after the determination has become final;

(iii) any additional period which the Sec-

retary determines is reasonable or necessary

for the correction of the default,

whichever has the latest ending date.

(5) Special rules for chaplains and self-employed

ministers

(A) Certain ministers may participate

For purposes of this part—

(i) In general

A duly ordained, commissioned, or licensed

minister of a church is described in paragraph

(3)(B) if, in connection with the exercise of

their ministry, the minister—

(I) is a self-employed individual (within

the meaning of section 401(c)(1)(B), or

(II) is employed by an organization

other than an organization which is de-

scribed in section 501(c)(3) and with respect

to which the minister shares common reli-

gious bonds.

(ii) Treatment as employer and employee

For purposes of sections 403(b)(1)(A) and

404(a)(10), a minister described in clause (i)(I)

shall be treated as employed by the minister's

own employer which is an organization de-

scribed in section 501(c)(3) and exempt from

tax under section 501(a).

(B) Special rules for applying section 403(b) to

self-employed ministers

In the case of a minister described in subpar-

agraph (A)(iI)—

(i) the minister’s includible compensation

under section 403(b)(3) shall be determined by

reference to the minister’s earned income

(within the meaning of section 401(c)(2)) from

such ministry rather than the amount of com-

pensation which is received from an employer,

and

(ii) the years (and portions of years) in

which such minister was a self-employed indi-

vidual (within the meaning of section

401(c)(1)(B)) with respect to such ministry

shall be included for purposes of section

403(b)(4).

If a duly ordained, commissioned, or licensed

minister of a church in the exercise of his or her

ministry participates in a church plan (within the

meaning of this section) and in the exercise of

such ministry is employed by an employer not

otherwise participating in such church plan, then

such employer may exclude such minister from

being treated as an employee of such employer

for purposes of applying sections 401(a)(3),

401(a)(4), and 401(a)(5), as in effect on Septem-

ber 1, 1974, and sections 401(a)(4), 401(a)(5),

401(a)(26), 401(k)(3), 401(m), 403(b)(1)(D) (in-

cluding section 403(b)(12)), and 410 to any stock

bonus, pension, profit-sharing, or annuity plan

(including an annuity described in section 403(b)

or a retirement income account described in sec-

tion 403(b)(9)). The Secretary shall prescribe

such regulations as may be necessary or appro-

priate to carry out the purpose of, and prevent

the abuse of, this subparagraph.

(D) Compensation taken into account only once

If any compensation is taken into account in

determining the amount of any contributions

made to, or benefits to be provided under, any

church plan, such compensation shall not also be

taken into account in determining the amount of

any contributions made to, or benefits to be pro-

vided under, any other stock bonus, pension,

profit-sharing, or annuity plan which is not a

church plan.

(E) Exclusion

In the case of a contribution to a church plan

made on behalf of a minister described in sub-

paragraph (A)(i)(I]), such contribution shall not

be included in the gross income of the minister to

the extent that such contribution would not be so

included if the minister was an employee of a

church.

2. 29 U.S.C. 1002 provides in pertinent part:

Definitions

For purposes of this subchapter:

(1) The terms “employee welfare benefit plan”

and “welfare plan” mean any plan, fund, or program

which was heretofore or is hereafter established or

maintained by an employer or by an employee organi-

zation, or by both, to the extent that such plan, fund, or

program was established or is maintained for the pur-

pose of providing for its participants or their benefi-

ciaries, through the purchase of insurance or other-

wise, (A) medical, surgical, or hospital care or benefits,

or benefits in the event of sickness, accident, disability,

death or unemployment, or vacation benefits, appren-

ticeship or other training programs, or day care cen-

ters, scholarship funds, or prepaid legal services, or

(B) any benefit described in section 186(c) of this title

(other than pensions on retirement or death, and in-

surance to provide such pensions).

(2)(A) Except as provided in subparagraph (B),

the terms “employee pension benefit plan” and “pen-

sion plan” mean any plan, fund, or program which was

heretofore or is hereafter established or maintained by

an employer or by an employee organization, or by

both, to the extent that by its express terms or as a re-

sult of surrounding circumstances such plan, fund, or

program—

(i) provides retirement income to employees,

(ii) results in a deferral of income by employees

for periods extending to the termination of covered

employment or beyond,

regardless of the method of calculating the contribu-

tions made to the plan, the method of calculating the

benefits under the plan or the method of distributing

benefits from the plan. A distribution from a plan,

fund, or program shall not be treated as made in a

form other than retirement income or as a distribution

prior to termination of covered employment solely be-

cause such distribution is made to an employee who

has attained age 62 and who is not separated from em-

ployment at the time of such distribution.

oF € * + *

(3) The term “employee benefit plan” or “plan”

means an employee welfare benefit plan or an em-

ployee pension benefit plan or a plan which is both an

employee welfare benefit plan and an employee pen-

sion benefit plan.

* * * * .

(5) The term “employer” means any person acting

directly as an employer, or indirectly in the interest of

an employer, in relation to an employee benefit plan;

and includes a group or association of employers acting

for an employer in such capacity.

(6) The term “employee” means any individual

employed by an employer.

* . * * *

(16)A) The term “administrator” means—

(i) the person specifically so designated by the

terms of the instrument under which the plan is op-

erated;

10a

(ii) if an administrator is not so designated, the

plan sponsor; or

(iii) in the case of a plan for which an adminis-

trator is not designated and a plan sponsor cannot

be identified, such other person as the Secretary

may by regulation prescribe.

(B) The term “plan aponsor” means (i) the cm-

ployer in the case of an employee benefit plan estab-

lished or maintained by a single employer, (ii) the em-

ployee organization in the cause of a plan established or

maintained hy an employee organization, or (iii) in Lhe

case of a plan established or maintained by two or

more employers or jointly by one or more employers

and one or more employee oryanizations, the associa-

tion, committee, joint board of trustees, or other simi-

lar group of representatives of the parties who estab-

lish or maintain the plan.

> * . * *

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

tablished and maintained (to the extent required in

clause (ii) of subparagraph (B)) for its employees (or

their beneficiaries) by a church or by a convention or

association of churches which is exempt from tax un-

der section 501 of title 26.

(B) The term “church plan” does not include a

plan—

(i) which is established and maintained pri-

marily for the bencfit of employees (or their benefi-

ciaries) of such church or convention or association

of churches who are employed in connection with

lla

one or more unrelated trades or businesses (within

the meaning of section 513 of title 26), or

(ii) if less than substantially all of the individu-

als included in the plan are individuals described in

subparagraph (A) or in clause (ii) of subparagraph

(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 ur funding

of a plan or program for the provision of retirement

benefits or welfare benefits, or both, for the em-

ployees 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 associa-

tion of churches.

(ii) The term employee of a church or a conven-

tion or association of churches includes—

(1) a duly ordained, commissioned, or li-

censed minister of a church in the exercise of his

ministry, regardless of the source of his com-

pensation;

(II) an employee of an organization, whether

a civil law corporation or otherwise, which is ex-

empt from tax under section 501 of title 26 and

which is controlled by or associated with a

church or a convention or association of church-

es; and

12a

(III) an individual described in clause (v).

(iii) A church or a convention or association of

churches which is exempt from tax under section

501 of title 26 shall be deemed the employer of any

individual included as an employee under clause (ii).

(iv) An organization, whether a civil law corpo-

ration or otherwise, is associated with a church or a

convention or association of churches if it shares

common religious bonds and convictions with that

church or convention or association of churches.

(v) If an employee who is included in a church

plan separates from the service of a church or a

convention or association of churches or an organi-

zation, 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,

the church plan shall not fail to meet the require-

ments of this paragraph merely because the plan—

(I) retains the employee’s accrued benefit

or account for the payment of benefits to the em-

ployee or his beneficiaries pursuant to the terms

of the plan; or

(Il) receives contributions on the employee’s

behalf after the employee’s separation from such

service, but only for a period of 5 years after

such separation, unless the employee is disabled

(within the meaning of the disability provisions

of the church plan or, if there are no such provi-

sions in the church plan, within the meaning of

section 72(m)(7) of title 26) at the time of such

separation from service.

13a

(D)i) Ifa 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 fails to meet one

or more of the requirements of this paragraph and cor-

rects its failure to meet such requirements within the

correction period, the plan shall be deemed to meet the

requirements of this paragraph for the year in which

the correction was made and for all prior years.

(ii) If a correction is not made within the correc-

tion period, the plan shall be deemed not to meet the

requirements of this paragraph beginning with the

date on which the earliest failure to meet one or more

of such requirements occurred.

(iii) For purposes of this subparagraph, the term

“correction period” means—

(I) the period ending 270 days after the date

of mailing by the Secretary of the Treasury of a no-

tice of default with respect to the plan’s failure to

meet one or more of the requirements of this para-

graph; or

(II) any period set by a court of competent ju-

risdiction after a final determination that the plan

fails to meet such requirements, or, if the court does

not specify such period, any reasonable period de-

termined by the Secretary of the Treasury on the

basis of all the facts and circumstances, but in any

event not less than 270 days after the determination

has become final; or

l4a

(111) any additional period which the Secretary

of the Treasury determines is reasonable or neces-

sary for the correction of the default,

whichever has the latest ending date.

> * > > *

3. 26 U.S.C. 414(e) (1976) provides:

Definitions and special rules

(e) Church plan

(1) In general

For purposes of this part the term “church plan”

means—

(A) a plan established and maintained for its

employees by a church or by a convention or as-

sociation of churches which is exempt from tax

under section 501, or

(B) a plan described in paragraph (3).

(2) Certain unrelated business or multiemployer

plans

The term “church plan” does not include a plan—

(A) which is established and maintained

primarily for the benefit of employees (or their

beneficiaries) of such church or convention or

association of churches who are employed in

connection with one or more unrelated trades or

businesses (within the meaning of section 513), or

(B) which is a plan maintained by more than

one employer, if one or more of the employers in

15a

the plan is not a church (or a convention or asso-

ciation of churches) which is exempt from tax

under section 501.

(3) Special temporary rule for certain church

agencies under church plan

(A) Notwithstanding the provisions of para-

graph (2)(B), a plan in existence on January 1,

1974, shall be treated as a church plan if it is es-

tablished and maintained by a church or conven-

tion or association of churches and one or more

agencies of such church (or convention or associ-

ation) for the employees of such church (or con-

vention or association) and the 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.

(B) Subparagraph (A) 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.

respect to any plan for any plan year beginning

after December 31, 1982.

4. 29 U.S.C. 1002(33) (1976) provides:

Definitions

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

established and maintained for its employees by a

church or by a convention or association of churches

l6a

which is exempt from tax under section 501 of title 26,

or (ii) a plan described in subparagraph (C).

(B) The term “church plan” (notwithstanding the

provisions of subparagraph (A)) does not include a

plan—

(i) which is established and maintained pri-

marily for the benefit of employees (or their benefi-

ciaries) of such church or convention or association

of churches who are employed in connection with one

or more unrelated trades or businesses (within the

meaning of section 513 of title 26), or

(ii) which is a plan maintained by more than one

employer, if one or more of the employers in the plan

is not a church (or a convention or association of

churches) which is exempt from tax under section

501 of title 26.

graph (B)(ii), 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 associa-

tion of churches for its employees and employees of one

or more agencies of such church (or convention or as-

sociation) for the employees of such church (or conven-

tion or association) and the 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 title 26. 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

17a

this subparagraph shall not apply with respect to any

plan for any plan year beginning December 31, 1982.

5. Pub. L. No. 108-476, 118 Stat. 3901 provides:

SECTION 1. CERTAIN ARRANGEMENTS MAIN-

TAINED BY THE YMCA RETIREMENT FUND

TREATED AS CHURCH PLANS.

(a) RETIREMENT PLANS.—

(1) IN GENERAL.—For purposes of sections

401(a) and 403(b) of the Internal Revenue Code of

1986, any retirement plan maintained by the YMCA

Retirement Fund as of January 1, 2003, shall be

treated as a church plan (within the meaning of sec-

tion 414(e) of such Code) which is maintained by an

organization described in section 414(e)(3)(A) of

such Code.

(2) TAX-DEFERRED RETIREMENT PLAN.—In the

case of a retirement plan described in paragraph (1)

which allows contributions to be made under a salary

reduction agreement—

(A) such treatment shall not apply for pur-

poses of section 415(c)(7) of such Code, and

(B) any account maintained for a participant

or beneficiary of such plan shall be treated for

purposes of such Code as a retirement income

account described in section 403(b)(9) of such

Code, except that such account shall not, for pur-

poses of section 403(b)(12) of such Code, be

treated as a contract purchased by a church for

purposes of section 403(b)(1)(D) of such Code.

18a

(3) MONEY PURCHASE PENSION PLAN.—lIn the

case of a retirement plan described in paragraph (1)

which is subject to the requirements of section

401(a) of such Code—

(A) such plan (but not any reserves held by

the YMCA Retirement Fund)—

(i) shall be treated for purposes of such

Code as a defined contribution plan which is a

money purchase pension plan, and

(ii) shall be treated as having made an

election under section 410(d) of such Code for

plan years beginning after December 31, 2005,

except that notwithstanding the election—

(I) nothing in the Employee Retirement

Income Security Act of 1974 or such Code

shall prohibit the YMCA Retirement Fund

from commingling for investment purposes

the assets of the electing plan with the as-

sets of such Fund and with the assets of any

employee benefit plan maintained by such

Fund, and

(II) nothing in this section shall be con-

strued as subjecting any assets described in

subclause (I), other than the assets of the

electing plan, to any provision of such Act,

(B) notwithstanding section 401(a)(11) or 417

of such Code or section 205 of such Act, such plan

may offer a lump-sum distribution option to par-

ticipants who have not attained age 55 without

offering such participants an annuity option, and

19a

or beneficiary of such plan shall, for purposes « '

section 401(a)(9) of such Code, be treated as a

retirement income account described in section

403(b)(9) of such Code.

(4) SELF-FUNDED DEATH BENEFIT PLAN.—For

purposes of section 7702(j) of such Code, a retire-

ment plan described in paragraph (1) shall be

treated as an arrangement described in section

7702GQ)(2).

(b) YMCA RETIREMENT F'UND.—For purposes of

this section, the term “YMCA Retirement Fund”

means the Young Men’s Christian Association Retire-

ment Fund, a corporation created by an Act of the State

of New York which became law on April 30, 1921.

plan years beginning after December 31, 2003.

6. 26C.F.R. 1.414(e)-1 provides:

Definition of church plan.

(a) General rule. For the purposes of part I of

subchapter D of chapter 1 of the Code and the regula-

tions thereunder, the term “church plan” means a plan

established and at all times maintained for its em-

ployees by a church or by a convention or association of

churches (hereinafter included within the term

“church”) which is exempt from tax under section

501(a), provided that such plan meets the requirements

of paragraphs (b) and (if applicable) (c) of this section.

If at any time during its existence a plan is not a church

plan because of a failure to meet the requirements set

20a

forth in this section, it cannot thereafter become a

church plan.

(b) Unrelated businesses—(1) In general. A plan

is not a church plan unless it is established and main-

tained primarily for the benefit of employees (or their

beneficiaries) who are not employed in connection with

one or more unrelated trades or businesses (within the

meaning of section 513).

(2) Establishment or maintenance of a plan pri-

marily for persons not employed in connection with

one or more unrelated trades or businesses. (i) (A) A

plan, other than a plan in existence on September 2,

1974, is established primarily for the benefit of em-

ployees (or their beneficiaries) who are not employed in

connection with one or more unrelated trades or busi-

nesses if on the date the plan is established the number

of employees employed in connection with the unre-

lated trades or businesses eligible to participate in the

plan is less than 50 percent of the total number of

employees of the church eligible to participate in the

plan.

(B) A plan in existence on September 2, 1974, is to

be considered established as a plan primarily for the

benefit of employees (or their beneficiaries) who are

not employed in connection with one or more unrelated

trades or businesses if it meets the requirements of

both paragraphs (b)(2)(ii) (A) and (B) (if applicable) in

either of its first 2 plan years ending after September 2,

1974.

(ii) For plan years ending after September 2, 1974,

a plan will be considered maintained primarily for the

benefit of employees of a church who are not employed

Z2la

in connection with one or more unrelated trades or

businesses if in 4 out of 5 of its most recently completed

plan years—

(A) Less than 50 percent of the persons partici-

pating in the plan (at any time during the plan year)

consist of and in the same year

(B) Less than 50 percent of the total compensation

paid by the employer during the plan year (if benefits

or contributions are a function of compensation) to

employees participating in the plan is paid to, employ-

ees employed in connection with an unrelated trade or

business. The determination that the plan is not a

church plan will apply to the second year (within a 5

year period) for which the plan fails to meet paragraph

(b)(2){ii) (A) or (B) (if applicable) and to all plan years

thereafter unless, taking into consideration all of the

facts and circumstances as described in paragraph

(b)(2)(iii) of this section, the plan is still considered to

be achurch plan. A plan that has not completed 5 plan

years ending after September 2, 1974, shall be consid-

ered maintained primarily for the benefit of employees

not employed in connection with an unrelated trade or

business unless it fails to meet paragraphs (b)(2)(ii) (A)

and (B) in at least 2 such plan years.

(iii) Even though a plan does not meet the provi-

sions of paragraph (b)(2)ii) of this section, it nonethe-

less will be considered maintained primarily for the

benefit of employees who are not employed in connec-

tion with one or more unrelated trades or businesses if

the church maintaining the plan can demonstrate that

based on all of the facts and circumstances such is the

case. Among the facts and circumstances to be con-

sidered in evaluating each case are:

22a

(A) The margin by which the plan fails to meet the

provisions of paragraph (b)(2)(ii) of this section, and

(B) Whether the failure to meet such provisions was

due to a reasonable mistake as to what constituted an

unrelated trade or business or whether a particular

person or group of persons were employed in connec-

tion with one or more unrelated trades or businesses.

(iv) For purposes of this section, an employee will be

considered eligible to participate in a plan if such em-

ployee is a participant in the plan or could be a partic-

ipant in the plan upon making mandatory employee

contributions to the plan.

(3) Employment in connection with one or more

unrelated trades or businesses. An employee is em-

ployed in connection with one or more unrelated trades

or businesses of a church if a majority of such em-

ployee’s duties and responsibilities in the employ of the

church are directly or indirectly related to the carrying

on of such trades or businesses. Although an em-

ployee’s duties and responsibilities may be insignificant

with respect to any one unrelated trade or business,

such employee will nonetheless be considered as em-

ployed in connection with one or more unrelated trades

or businesses if such employee’s duties and responsi-

bilities with respect to all of the unrelated trades or

businesses of the church represent a majority of the

total of such person’s duties and responsibilities in the

employ of the church.

“church plan” does not include a plan which, during the

plan year, is maintained by two or more employers

unless—

23a

(1) Each of the employers is a church that is ex-

empt from tax under section 501(a), and

(2) With respect to the employees of each employer,

the plan meets the provisions of paragraph (b)(2)(ii) of

this section or would be determined to be a church plan

based on all the facts and circumstances described in

paragraph (b)(2)(iii) of this section.

Thus, if with respect to a single employer the plan fails

to meet any provision of this paragraph, the entire plan

ceases to be a church plan unless that employer ceases

maintaining the plan for all plan years beginning after

the plan year in which it receives a final notification

from the Internal Revenue Service that it does not

meet the provisions of this paragraph. Ifthe employer

does cease maintaining the plan in accordance with this

paragraph, the fact that the employer formerly did

maintain the plan will not prevent the plan from being a

church plan for prior years.

(d) Special rule. (1) Notwithstanding paragraph

(c)(1) of this section, a plan maintained by a church and

one or more agencies of such church for the employees

of such church and of such agency or agencies, that is in

existence on January 1, 1974, shall be treated as a

church plan for plan years ending after September 2,

1974, and beginning before January 1, 1983, provided

that the plan is described in paragraph (c) of this sec-

tion without regard to paragraph (c)(1) of this section,

and the plan is not maintained by an agency which did

not maintain the plan on January 1, 1974.

(2) For the purposes of section 414(e) and this sec-

tion, an agency of a church means an organization

which is exempt from tax under section 501 and which

24a

is either controlled by, or associated with, a church.

For example, an organization, a majority of whose

officers or directors are appointed by a church’s gov-

erning board or by officials of a church, is controlled by

a church within the meuning of this paragraph. An

organization is associuted with a chureh if it shares

common religious bon!s and convictions with that

church.

(e) Religious orders and religious organizations.

For the purpose of this section the term “church”

includes a religious order or a religious organization if

such order or organization (1) is an integral part of a

church, and (2) is engaged in carrying out the functions

of a church, whether as a civil law corporation or oth-

erwise.

(f) Separately incorporated fiduciaries. A plan

which otherwise meets the provisions of this section

shall not lose its status as a church plan because of the

fact that it is administered by a separately incorporated

fiduciary such as a pension board or a bank.

(g) Cross reference. (1) For rules relating to

treatment of church plans, see section 410(c), 411(e),

412(h), 4975(g), and the regulations thereunder.

(2) For rules relating to church plan elections, see

section 410(d) and the regulations thereunder.

FILED

FEB 23 2017

Nos. 16-74, 16-86, 16-258 Sn EPS

In the Supreme Court of the Anited States

ADVOCATE HEALTH CARE NETWCREK, et ai.,

Petitioners,

Vv.

MARIA STAPLETON, et al., Respondents.

SAINT PETER’S HEALTHCARE SYSTEM,

et al., Petitioners,

Vv.

LAURENCE KAPLAN, Respondent.

DIGNITY HEALTH, et al., Petitioners,

STARLA ROLLINS, Respondent.

On Writs of Certiorari to the

United States Courts of Appeals for the

Third, Seventh, and Ninth Circuits

BRIEF OF AARP AND AARP FOUNDATION AS

AMICI CURIAE IN SUPPORT OF

RESPONDENTS

WILLIAM ALVARADO RIVERA

MARY ELLEN SIGNORILLE*

AARP Foundation Litigation

601 E Street, NW

Washington, DC 20049

Tel: (202) 434-2072

Counsel for Amiai Curiae

AARP and AARP Foundation

*Counsel of Record

TABLE OF CONTENTS

pf, ERTL I EE iv

INTEREST OF AMICI CURIAE ................000000000.004. 1

SUMMARY OF ARGUMENT .....00000......00. cece 4

i alididesecicesehaciaaieipsvnieg ibaa scinlaaibesiiioaiacitibhniliniennn 7

I. PETITIONERS ARE BUSINESSES,

NOT CHURCHES, AND THUS ARE

NOT ENTITLED TO TAKE

ADVANTAGE OF ERISA’S CHURCH

FB irrttnciconnssecerievecesesesivmrees cence 7

Il. CONGRESS ENACTED ERISA IN

RESPONSE TO BROKEN PENSION

PROMISES TO ENSURE THAT

EMPLOYEES RECEIVE THEIR

REESE SEER ROO EN NCES aa 13

A. Employers Promise Pensions to

Employees As Deferred

iin ccicescensesentesnsees 18

B. Congress Enacted ERISA In

Response To Broken Pension

IIIA sccshccdnteatttaadlesicdtenladedaadabaedds 14

Ii.

C. Because Congress’ Intended

That ERISA Cover The Majority

Of Employee Benefit Plans To

Ensure That Employees Receive

Their Pensions, The Church

Plan Exemption Should Be

Narrowly Construed.......................-....

BROAD APPLICATION OF THE

CHURCH PLAN EXEMPTION

WOULD DEPRIVE EMPLOYEES OF

SAFEGUARDS THAT CONGRESS

ENACTED TO PROTECT

EMPLOYEE PENSIONS ........................... -

A. Broad Application Of The

Church Plan Exemption Would

Deprive Employees Of ERISA’s

Minimum Plan Funding

Protections And _ Insurance

B. Broad Application Of The

Church Plan Exemption Would

Deprive Employees Of ERISA’s

Guarantee Of Pension Vesting...........

C. Broad Application Of The

Church Plan Exemption Would

Deprive Employees Of ERISA’s

Protection From Reductions To,

Or Elimination Of, Their

i nitniisnttecencntenistatsocccsesin

Broad Application Of The

Church Plan Exemption Would

Deprive Employees Of ERISA’s

Fiduciary Protections Against

Self-dealing, Mismanagement,

Broad Application Of The

Church Plan Exemption Would

Deprive Employees Of ERISA's

DABCIOSUTO HERSMBE ........00.cccrcccsccccsesseee 31

Broad Application Of The

Church Plan Exemption Would

Deprive Employees Of ERISA's

Protections For Benefit

ER SR a ei 33

Broad Application Of The

Church Plan Exemption Would

Deprive Employees Of ERISA's

TABLE OF AUTHORITIES

Cases

A. H. Phillips, Inc. v. Walling,

a sseuebemmniemenenn 18

Alessi v. Raybestos-Manhattan, Inc.,

A 6, 25

Amato v. Western Union Int'l, Inc.,

Fe ee Be Ce Ge Bi ivcccccccccocccescseccccccscces 27

Andrus v. Glover Constr. Co..,

i . ccodommuininbiosnsodons 17

A-T-O-Inc. v. Pension Benefit Guar. Corp.,

634 F.2d 1013 (6th Cir. 1980)............................. 20

Boggs v. Boggs,

I esas 33

Cent. Laborers’ Pension Fund v. Heinz,

a ieneduacsouis 5, 26, 28

CIGNA Corp. v. Amara,

IEE SRS ART Ee ae ee 1

Comm’r of Internal Revenue v. Keystone

Consol. Indus., Inc., 508 U.S. 152 (1999) ........... 30

Grossmuller v. Int'l Union, UAW,

716 F.2d 868 (Sd Cir. 1963)..............ccccccsseccccescoes 34

Guidry v. Sheet Metal Workers Nat'l Pension

PE, Ge es Ge I cc crcescccecccseseccecesccnecesses 18

Hughes Aircraft Co. v. Jacobson,

ee assubniphaneonnebe 13

John Hancock Mut. Life Ins. Co. v. Harris Tr.

& Sav. Bank, 510 U.S. 86 (1998)............0..0....004. 18

Kaplan v. St. Peter's Healthcare Sys.,

810 F.3d 175 (3d Cir. 2015).................-..... 1, 19, 22

LaRue v. DeWolff, Boberg & Assocs.,

a csbapinbchnnbenenbibind 1

Lockheed Corp. v. Spink,

og | nm

Malone v. White Motor Corp.,

ll. cossubbenssente 14

McDonald v. Pension Plan of NYSA-ILA

Pension Tr. Fund, 320 F.3d 151 (2d Cir.

SRR Tt A Sa SL AE OR ae 27

Montanile v. Bd. of Trs. of the Nat'l Elevator

Indus. Health Ben. Plan, 136 S. Ct. 651

a a als l

Nachman Corp. v. Pension Benefit Guar.

Corp., 446 U.S. 369 (1980) .............ccccccceesees passim

Rodriguez v. Compass Shipping Co.,

A 17

Rollins v. Dignity Health,

830 F.3d 900 (Oth Cir. 2016)..............cc..cccccccscceree 1

Stapleton v. Advocate Health Care Network,

817 F.3d 517 (7th Cir. 2016)..................... 1, 18, 19

Statutes, Rules and Regulations

Employee Retirement Income Security Act (2012),

TET sc cconisenscsonenccsedansebmmnnsanied 2

TS 31, 32

ca eciecnctnmaneniinial passim

a a ssa cccdesipecneisenantion 2, 19, 29

cis ccnctsinesiononsesennossh 30

I . wcccasasasensunenens 26

I cs ccnsenensnnscnnsoubeni 26

oc rccncunacnspesscesnntnonnnnete 17, 22

TTL I ITN 4

a 32

TTT LESTE SES

eS ee 6

Sn on in scncenstnnesnndanionniineseninis 32

i as acatingneiabnndcisinsiadl 32

lin ceri nniccunsatasinianeuseninmmabininenth 32

EE:

as scams meinen 6

a ciarieiniccimniiiniennnivi 6, 25, 26

is cirniniecnieneticsstiltenieneieees 6, 26

a sccasesenianniinnnedl 27

In ccrccncesnecetococanensdenecetas 27

Ss IID cncccccunnscecncscrccusesesesecvenen 27

TC 28

(fi__—_ =,

a A ES 6

v1l

ea | ae eae 33

29 U.S.C. § 1055(C)(2) ....ceecesceccereoeeee- Ss. 33

(Ea. 6

i...” as 33

29 U.S.C. §§ 1081-1085 ...........ececcecesceseeseseseeseeeeeees 6

a i E: 21

a 21

I IG nce sca snes ce cecnscccoeees ee 6

a seumueannetmmnaticvnut 29

Uae 6 ieeee......................................... 8

29 U.S.C. § 1104(a)(1)(A) ....cescccececseeeeeesceeeeeeeeeee- 29

29 U.S.C. § 1104 (a)(1)(B) -....ccceceecccccseecesceceeeeveeen 29

29 U.S.C. § 1104 (a)(1)(C) -..........secsecceseseceeseseeseee 29

29 U.S.C. § 1104(a)(1)(D) -....--.ec-cocseecessececeeenesveee 30

a cencavssesservmmeensn ll

2D U.S.C. § 1106 (a)(1) ....e-ceccececoeeesseeeeveeeeeeeeeoeeeee 30

a spseniueoseomnnanauss 6, 34

ae < 21

20 U.S.C. § 1905-1907 .................-.cecceco.0scscsssss0es. 21

See a eee eee.....................................6

Mandatory Victims Restitution Act (2010)

NS 18

Legislative History

2 Legislative History of the Employee

Retirement Income Security Act of 1974

94th Cong. (Comm. Print 1976).................... 13, 16

120 CONG. REC. 29928 (1974).......................22222000+00-+- 3

120 CONG. REC. S15737 (daily ed. Aug. 22,

1974), reprinted in 1974 U.S.C.C.A.N.

H.R. REP. No. 93-533 (1973), as reprinted in

ee es Gi icettcneccoccrcassccncnenscceses 15, 16

H.R. REP. No. 93-807 (1974), reprinted in

ee es GI nccecesincnoccesesesenevecseseccocces 27

H.R. CONF. REP. NO. 93-1280 (1974), as

reprinted in 1974 U.S.C.C.A.N. 5038 ................. 21

Miscellaneous Pension Bills: Hearings Before

the Subcomm. on Private Pension Plans

and Emp. Fringe Benefits of the S. Comm.

on Fin., 96th Cong. (Comm. Print Dec. 4,

ASR RSE eee DIES Risse 7

Private Pension Plans, 1966: Hearings Before

the Subcomm. on Fiscal Policy of the d.

Econ. Comm., 89th Cong., 104-28 (1966) ............. 5

S. REP. No. 85-1440 (1958), as reprinted in

I, SII vrctceceenenntesccescesensecseseseeses 13

S. REP. No. 93-127 (1973), as reprinted in

Is Gi ecccnccccncsncsevvevassssons passim

S. REP. NO. 93-383 (1973), as reprinted in

ik dF 8 5S een 13

S. REP. No. 1440, 85th Cong., 2d Sess. (1958)......... 14

Subcomm. on Labor of the S. Comm. on Lab.

and Pub. Welfare, Legislative History of

the Employee Retirement Income Security

Act of 1974: Pub. L. No. 93-406, Vol. III

(U.S. Gov't. Printing Off. 1976) .......................... 31

Miscellaneous

Advocate Health and Hospitals Corporation,

Form 990, Return of Org. Exempt From

Income Tax (2014), https://goo.gl/ohNm

ith didicsiccistitiiiimeshdanmainiibtinesiscditantietaiedaieaniabdieds 10, 11, 12

Advocate Health Care, About Advocate,

TEE AA

Advocate Health Care, Executive Profiles,

EE 12

Advocate Health Care Network and

Subsidiaries, Inc., Consol. Fin.

Statements and Supplementary Info.,

Years Ended December 31, 2015 and 2014

With Reports of Independent Auditors

(2016), https://goo.gl/nBvPKD ............ 8, 10, 11, 12

David Barkholz, Dignity and Catholic Health

Initiatives are in merger talks, MODERN

HEALTHCARE, Oct. 24, 2016, https://goo.

RE E+ )

Hazel Bradford, Participants sue over

church-plan status for Holy Cross

Hospital pension fund, PENSIONS &

INVESTMENTS, June 7, 2016, http://goo

5 ISTE TE he EMO SS EES 23, 28

Danica Coto, Puerto Rico church strips

teachers of pension amid crisis,

ASSOCIATED PRESS, Apr. 12, 2016,

i ncilaraniciedvinbionsens 3

Dignity Health, About Us, https://goo.gl/nnS2

Dignity Health and Subordinate

Corporations, Consol. Fin. Statements as

of and for the Years Ended June 30, 2015

and 2014 and Independent Auditors’

Report (2015), https://goo.g/OVpzDM.... 10, 11, 12

Dignity Health, Form 990, Return of Org.

Exempt From Income Tax (2013),

https://goo.gl/Goa0Qy ...............ccceceeeeeeeees 10, 11, 12

Dignity Health, Governance and Leadership,

https://goo.g/Z3pwyL (last visited Feb.

ii icd ciccchcidicihpinabeinalanccgicgetaaidigedibabinnet 9,12

Emp. Benefit Res. Inst., Sudipto Banerjee,

Income Composition, Income Trends, and

Income Shortfalls of Older Households,

EBRI ISSUE BRIEF No. 383, Feb. 2013,

sa ncmtnehegmiminnenaenseinndnten 3

Eric Fontinelle, Outliving Your Retirement

Savings, FORBES, May 24, 2010, https://

Adam Geller, Associated Press, Workers find

retirement money jeopardized by loophole

treating hospitals, agencies as churches,

Fox NEws, Oct. 5, 2013, https://goo.gl

Michael S. Gordon, Overview: Why Was

ERISA Enacted? in U.S. Sen. Special

Comm. on Aging, 98th Cong., The

Employee Retirement Income Security

Act of 1974: The First Decade (1984) ................. 25

Claire Hughes, MRetirees of Former

Schnectady Hospital Face Pension Loss,

TIMES UNION, Jan. 10, 2017, — =

/AzPuuW ... isihesildiinsadaleidladdiamdedeal .-- 24, 28

Beth Kutscher, Dignity’s acquisition of U.S.

HealthWorks helped bolster fiscal 2013

revenue, MODERN HEALTHCARE, Dec. 26,

2013, https://goo.g/MzDqEVF......................020----00-+ 9

John H. Langbein, The Supreme Court

Flunks Trusts, 1990 Sup. CT. REv. 207

SII cssisncesbsisioesisbionapiininudincansdiaiepiaiininembeniaeene 14, 15, 29

JOHN H. LANGBEIN, DAVID A. PRATT, & SUSAN

J. STABILE, PENSION AND EMPLOYEE

BENEFIT LAW (Robert C. Clark et al. eds.,

a 1 Oe eeeaia edible 14, 20, 22

xii

Mary Jo Layton, Retirees from St. Mary's

Hospital in Passaic may lose their

pensions in sale, THE RECORD, Apr. 26,

2013, https://goo.g/QbH21o...........-.........-.0+. 23, 28

Mary E. O'Leary, New Haven's St. Raphael

workers face decision on pensions, NEW

HAVEN REGISTER, July 18, 2013,

https://goo.g/HSROUWA ..............cccceeceeeeeeeeeeees 24, 28

Press Release, Pension Benefit Guaranty

Corporation, In Reversal, PBGC Covers

Pension of Hospital Center at Orange

(May 10, 2013), https://goo.g/HSDt1v ......... 23, 28

Ronald C. Rak, Saint Peter's HealthCare

System CEO, Saint Peter’s University

Hospital meets the community’s needs,

NJ.com, Nov. 23, 2016, https://goo.gl/d2i1

Chris Rauber, Dignity Health’s acquisition of

U.S. HealthWorks quietly closes, SAN

FRANCISCO BUSINESS TIMES, Aug. 15,

2012, https://goo.gl//WGCXzZ1 ...............cceeeeeceeeeees

Saint Peter's Healthcare System, Inc.,

Consol. Fin. Statements and

Supplementary Info, Years Ended

December 31, 2015 and 2014 With Report

of Independent Auditors (2016),

TTD 11,12

Saint Peter’s Healthcare System, Inc., Form

990, Return of Org. Exempt From Income

Tax (2014), https://goo.gljpEcfg ............. 10, 11, 12

Norman Stein et al., An Article of Faith: The

Gratuity Theory of Pensions and Faux

Church Plans, EMP. BENEFITS COMM.

NEWSL. (ABA Section of Labor and Emp’t

Law, Chicago, Ill), Summer 2014,

BONE Bc cccccccccccccccccccceccsccccccecss 2, 7,17

Symposium, “The Most Glorious Story of

Failure in the Business”: The Studebaker-

Packard Corporation and the Origins of

ERISA, 49 BUFFALO L. REV. 683 (2001) ....... 15, 24

Mary Williams Walsh, /.R.S. Reversal on

‘Church’ Pension Plan Rescues a Fund,

THE NEW YORK TIMES, Apr. 1, 2013,

Stephen Williams, Hospital pension fund in

trouble, DAILY GAZETTE, Jan. 16, 2017,

Ts ceeriaeanieninsnntonnennenen 3

JAMES A. WOOTEN, ERISA: A _ POLITICAL

INTEREST OF AMICI CURIAE!

AARP is a nonprofit, nonpartisan organization

dedicated to fulfilling the needs and representing the

interests of people age fifty and older. AARP fights to

protect older people’s financial security, health, and

well-being. AARP Foundation — AARP’s charitable

affiliate — creates and advances effective solutions

that help low-income individuals fifty and older to

secure the essentials and to prevent them from

falling into poverty during retirement. Among other

things, AARP and AARP Foundation seek to increase

the availability, security, equity, and adequacy of

public and private pension, health, disability, and

other employee benefits that countless members and

older individuals receive or may be eligible to receive,

including through participation as amicus curiae in

state and federal courts.?

‘ Amici state that no party’s counsel authored this brief either in

whole or in part, and further, that no party or party’s counsel,

or any person or entity other than AARP, AARP Foundation,

AARP’s members, and their counsel, contributed money

intended to fund preparing or submitting this brief. Pursuant to

Supreme Court Rule 37.3, counsel of record for all parties have

consented to this filing in letters on file with the Clerk’s office.

2 Amici either singly or jointly have participated as amicus

curiae in numerous cases to protect the rights of workers and

their beneficiaries under ERISA. See, e.g., Montanile v. Bd. of

Trs. of the Nat'l Elevator Indus. Health Ben. Plan, 136 S. Ct.

651 (2016); CIGNA Corp. v. Amara, 563 U.S. 421 (2011); LaRue

vu. DeWolff, Boberg & Assocs., 552 U.S. 248 (2008); Rollins v.

Dignity Health, 830 F.3d 900 (9th Cir. 2016); Stapleton v.

Advocate Health Care Network, 817 F.3d 517 (7th Cir. 2016);

Kaplan v. St. Peter's Healthcare Sys., 810 F.3d 175 (3d Cir.

2015).

Congress enacted the Employee Ketirement

Income Security Act (ERISA), 29 U.S.C. §§ 1001-1461

(2012), after assembling a record that showed a

history and pattern of employers failing to provide

promised employee benefits, a lack of disclosure and

transparency, and varied and numerous financial

abuses. Congress intended ERISA to protect “the

interests of participants in employee benefit plans

and their beneficiaries.” 29 U.S.C. § 1001(b); see also,

e.g., Nachman Corp. v. Pension Benefit Guar. Corp.,

446 U.S. 359, 361-62 (1980). Although Congress did

not require that every pension plan be covered by

ERISA, Congress did limit the exemptions to

ERISA’s coverage due to the abuses it uncovered and

the remedial nature of the legislation.

Participants and beneficiaries in private

employer-sponsored employee benefit plans must be

able to rely on promised pension benefits because the

quality of these workers’ lives in retirement depends

8’ Although amici’s focus is the impact of the church plan

exemption on pension plans due to the significant negative

effects of underfunded plans, make no mistake that the loss of

ERISA protections for participants in welfare plans is just as

crucial. Many of these organizations cherry pick the use of the

church plan exemption — asserting ERISA coverage when it

benefits them particularly in welfare plans, but not when they

must comply with pension requirements.

4 See generally Norman Stein et al., An Article of Faith: The

Gratuity Theory of Pensions and Faux Church Plans, Emp.

BENEFITS COMM. NEWSL. (ABA Section of Labor and Emp’t Law,

Chicago, Ill), Summer 2014, https://goo.gl/wlYJbZ (noting that

ERISA’s predecessor, the Welfare and Pension Plan Disclosure

Act, exempted all tax-exempt organizations from its coverage,

whereas ERISA only exempts church and governmental! plans).

substantially on their ability to obtain those benefits

that they have been promised. As longevity and, as a

result, the amount of money needed to live

comfortably in retirement increases, retirement plans

become more crucial to individuals’ retirement

security. Indeed, for many people, outside of Social

Security, employee benefit plans are their main

source of retirement income.5

Mid-career and older participants have the

most to lose if exempt church plans have insufficient

funds to pay benefits because these individuals have

little time to make up any potential benefit shortfall.®

When an employer reneges on its pension promises,

it wreaks financial havoc upon older employees and

their families by destroying a lifetime of working and

planning for their retirement years.’ Retirement

typically occurs at an age when employees cannot

5 See Emp. Benefit Res. Inst., Sudipto Banerjee, Income

Composition, Income Trends, and Income Shortfalls of Older

Households, EBRI ISSUE BRIEF No. 383, Feb. 2013, at 5,

https://goo.gi/k4LeVA (pensions and annuities are the second-

most important source of income for most older households).

& See, e.g., Stephen Williams, Hospital pension fund in trouble,

DAILY GAZETTE, Jan. 16, 2017, https://goo.gl/9K3hst; Danica

Coto, Puerto Rico church strips teachers of pension amid crisis,

ASSOCIATED PRESS, Apr. 12, 2016, https://goo.g/QCEAZs.

7 120 CONG. REC. 29928 (1974) (statement of Sen. Williams)

(“[T]oo many workers, rather than being able to retire in dignity

and security after a lifetime of labor rendered on the promise of

a future pension, find that their earned expectations are not to

be realized”); see also S. REP. NO. 93-127, at 1-9 (1973), as

reprinted in 1974 U.S.C.C.A.N. 4838, 4838-44.

start all over again in hopes of obtaining a new

pension.® For those already retired, it is just too late.

These cases will have a significant impact on

the funding and integrity of employee benefit plans,

the ability of individual participants to obtain

accurate information to make informed decisions

concerning their benefits, and the ability of

individual participants to obtain their promised

retirement benefits. In light of the significance of the

issues presented by this case, which directly bears on

the retirement security of millions of Americans,

including AARP members, amici respectfully submit

this brief.

SUMMARY OF ARGUMENT

Petitioners are businesses, not churches. They

deliver healthcare services on national, multi-state,

or regional levels. They operate and compete for

market share against other large non-profit health

systems that are covered by ERISA. ERISA’s

protections are meant to apply to all employers

offering employee plans, unless those plans meet the

narrow exemption that Congress designed. 29 U.S.C.

§ 1003(b)(2). The necessity for such protections is

well-known.

In the 1950s, after investigation and studies,

Congress became cognizant of- the widespread

8 See, e.g., Eric Fontinelle, Outliving Your Retirement Savings,

FORBES, May 24, 2010, https://goo.gl/MD1p40 (“Many retirees

may not be able to go back to work due to failing health or lack

of skills.”).

damage that the loss of promised and earned pension

benefits caused to workers’ lives and their retirement

security.2 Congress concluded that current laws,

including the Internal Revenue Code and state laws,

were inadequate to protect employee benefit plans.!°

S. REP. No. 93-127 (1973), as reprinted in 1974

U.S.C.C.A.N. 4838, 4842. Congress believed that if

employees’ rights to their accrued pension benefits

are forfeitable, they have no assurances that they

will ultimately receive a pension. See Cent. Laborers’

Pension Fund v. Heinz, 541 U.S. 739, 743 (2004)

(recognizing the “centrality of ERISA’s object of

protecting employees’ justified expectations of

receiving the benefits their employers promise

them”). Congress sought to prevent employers from

pulling the rug out from under employees

participating in a pension plan after they met the

plan’s eligibility requirements. See Nachman Corp.,

446 U.S. 359, 375 (1980).

9 See Private Pension Plans, 1966: Hearings Before the

Subcomm. on Fiscal Policy of the J. Econ. Comm., 89th Cong.,

104-28 (1966) (statement of Clifford M. MacMillan, Vice-

President, Studebaker Corp.) (describing the closing of the

Studebaker automobile plant where approximately 7,000

employees lost some or all of their promised pension benefits).

10 The Brief amici curiae of the Illinois Conference of the United

Church of Christ, et al., states that church plans are regulated

under the Internal Revenue Code and state laws. Indeed, some

of the Internal Revenue Code sections cited were in effect prior

to ERISA’s enactment. This argument misses the point.

Congress determined that pre-ERISA standards were

insufficient to protect employee benefit plans.

In its statement of findings and declaration of

policy, Congress noted that "despite the enormous

growth in such plans many employees with long

years of employment are losing anticipated

retirement benefits owing to the lack of vesting

provisions in such plans." 29 U.S.C. § 1001(a).

Congress designed ERISA to prescribe minimum

vesting and accrual standards in response to such

problems. 29 U.S.C. §§ 1053, 1054. To ensure that

employee pension expectations are not thwarted,

ERISA establishes a comprehensive disclosure

scheme, 29 U.S.C. §§ 1021-30; minimum rules for

employee participation, 29 U.S.C. § 1052; funding

standards to increase solvency of pension plans, 29

U.S.C. §§ 1081-1085; fiduciary standards for plan

fiduciaries, 29 U.S.C. §§ 1101-1114; and an insurance

program in case of plan termination, 29

U.S.C. §§ 1341-1348; accord Alessi v. Raybestos-

Manhattan, Inc., 451 U.S. 504, 511 n.5 (1981).

Congress also provided standards for benefit

payments, 29 U.S.C. §§ 1055, 1056, and a procedure

to dispute benefit denials, 29 U.S.C. § 1133.

None of these fundamental safeguards applies

to church plans. Thus, church plans can design their

pension plans in any way they desire. Pension

provisions could certainly include, among other

harmful possibilities, allowing for the elimination or

reduction of accrued benefits, requiring five or even

thirty years of service to achieve a non-forfeitable

benefit (rather than ERISA’s three years of vesting),

providing disproportionate benefit accruals in the

later years of a participant's employment, stopping

accrual of a participant’s benefits at age 65, or not

providing for a joint and survivor annuity. Extending

ERISA’s limited church plan exemption to non-

churches like Petitioners creates significant risks and

changes settled expectations for retiring workers. If

this Court blesses their exemption from ERISA

protections, pension provisions similar to those listed

above undoubtedly will become more common and

underfunding of these pensions will continue or

increase, leaving plan participants with only their

employers’ empty promises.

ARGUMENT

I. PETITIONERS ARE BUSINESSES, NOT

CHURCHES, AND THUS ARE NOT

ENTITLED TO TAKE ADVANTAGE OF |

ERISA’S CHURCH PLAN EXEMPTION.

Congress enacted ERISA because, based on its

studies and investigations, it did not trust businesses

to protect and properly fund their pensions.

Significantly, Congress did not exempt non-profit

organizations, but treated them the same as any

other business. See supra note 4. In contrast, in

fashioning the church plan exemption, the legislative

history demonstrated that Congress trusted churches

to protect and properly fund the promised pension

benefits for their employees due to the church’s moral

obligation to their employees. See Miscellaneous

Pension Bills: Hearings Before the Subcomm. on

Private Pension Plans and Emp. Fringe Benefits of

the S. Comm. on Fin., 96th Cong. 364 (Comm. Print

Dec. 4, 1979) (statement of Sen. Herman E.

Talmadge, Member, S. Comm. on Fin.). Here,

Petitioner hospitals are not churches, but businesses.

Congress designed ERISA’s church plan

exemption to apply narrowly. See infra Section II.C.

As its label implies, the exemption was intended only

to apply to actual churches. However, like Petitioners

in this case, many of the organizations taking

advantage of the church plan exemption are big

businesses. They are organized to supply healthcare

services, to compete with similar institutions, which

do not claim the church plan exemption for their

pension plans, and operate with primarily laypersons

— including the CEOs — to achieve their goals.

Indeed, they are not organized to deliver religious

worship services. !!

Petitioners illustrate an _ all-too-common

distortion of the church plan exemption. These

entities are not churches. They are big businesses,

organized like similar non-profit health systems.

1! See Dignity Health, About Us, https://goo.gl/nnS2Ue (last

visited Feb. 15, 2017) (describing Dignity as a health care

delivery system); Advocate Health Care Network and

Subsidiaries, Inc., Consol. Fin. Statements and Supplementary

Info., Years Ended December 31, 2015 and 2014 With Reports of

Independent Auditors 8 (2016), https://goo.gl/inBvPKD

(“Substantially all expenses of [Advocate] are related to

providing health care services.”); Ronald C. Rak, Saint Peter's

HealthCare System CEO, Saint Peter’s University Hospital

meets the community’s needs, NJ.com, Nov. 23, 2016,

https://goo.gl/d2ildL (statement from CEO, describing Saint

Peter’s as the parent company of Saint Peter’s healthcare

delivery system).

Petitioners are all large employers organized

to deliver healthcare services on national, multi-

state, or regional levels.!12 They are managed by a

board of directors!’ and pursue aggressive growth

strategies through health'* and _ »non-health

12 Dignity employs approximately 60,000 people in 21 states. It

is the fifth largest health system in the nation and the largest

hospital provider in California. Dignity Health, About Us, supra

note 11. Advocate is one of Chicago’s largest employers with

more than 35,000 associates, including 6,300 affiliated

physicians and 11,000 nurses. It is the largest health system in

Illinois, offering more than 450 sites of care, with 12 acute-care

hospitals. Additionally, it has the State’s largest physician

network of primary physicians, specialists and sub-specialists.

Advocate Health Care, About Advocate, https://goo.gl/DfXaBa

(last visited Feb. 15, 2017). Saint Peter's employs over 3,300

employees, 1,028 credentialed physicians, and its children’s

hospital is one of the largest in New Jersey. See Ronald C. Rak,

Saint Peter’s Healthcare System CEO, supra note 11.

18 Dignity Health, Governance and Leadership, https://goo

-gVZ3pwyL (last visited Feb. 15, 2017).

14 In 2016, Dignity Health and Catholic Health Initiatives

entered into merger talks. A full merger would create the

nation’s largest not-for-profit hospital company, with a

combined revenue of $27.6 billion, and leave it trailing only

Kaiser Permanente as the largest not-for-profit health system.

David Barkholz, Dignity and Catholic Health Initiatives are in

merger talks, MODERN MHEALTHCARE, Oct. 24, 2016,

https://goo.gl/CSMJpW; see also Chris Rauber, Dignity Health’s

acquisition of U.S. HealthWorks quietly closes, SAN FRANCISCO

BUSINESS TIMES, Aug. 15, 2012, https://goo.gl//WGCXzl

(reporting that Dignity’s acquisition of U.S. HealthWorks “is

part of Dignity’s aggressive plans to . . . become a national

player in the near future.”); Beth Kutscher, Dignity’s acquisition

of U.S. HealthWorks helped bolster fiscal 2013 revenue, MODERN

HEALTHCARE, Dec. 26, 2013, https://goo.g/MzDqEF (At time of

the merger, U.S. HealthWorks had 172 locations in 15 states,

ventures. '5 Global investments play a significant role

in how these entities build revenue.'® In particular,

they all have financial accounts in the tax haven of

the Cayman Islands.!7 Their enormous revenues

evidence success in this regard.}®

which grew to 208 locations in 20 states a year after the

merger.).

15 See Dignity Health and Subordinate Corporations, Consol.

Fin. Statements as of and for the Years Ended June 30, 2015

and 2014 and Independent Auditors’ Report 10 (2015),

https://goo.g/OVpzDM (“Dignity Health also invests in

alternative investments through limited partnerships.

Alternative investments are comprised of private equity, real

estate, hedge fund and other investment vehicles.”); Advocate,

Consol. Fin. Statements, supra note 11, at 40 (approximately

$916 million in total assets in 2015, including: over $206 million

in hedge funds, almost $100 million in private equity funds, and

about $11 million in real estate investments); Dignity Health,

Form 990, Return of Org. Exempt From Income Tax at 1 (2013),

https://goo.gl/Goa0Qy (more than $23 million in revenue for

business unrelated to “the delivery of affordable health care,

advocacy for the poor and community partnerships”); Advocate

Health and Hospitals Corporation, Form 990, Return of Org.

Exempt From Income Tax at 1 (2014), https://goo.gl/ohNm3r

(Gust short of $60 million in revenue for business unrelated to

“serv[ing] health needs of communities . . .”).

16 Dignity has investments of over $2.1 billion in Central

America and the Caribbean, and Europe, including Iceland and

Greenland. Dignity Health, Form 990 at Schedule F, Part I,

https://goo.g/Goa0Qy. Advocate has activities in Central

America and the Caribbean. Advocate, Form 990 at Schedule F,

Part I, https://goo.gl/ohNm3r.

17 See Dignity Health, Form 990 at Schedule R, Part IV,

https://goo.gl/Goa0Qy; Advocate, Form 990 at Schedule R, Part

IV, https://goo.gl/ohNm3r; Saint Peter’s Healthcare System,

Although Petitioners claim religious

affiliations, they operate much like other large non-

profit health systems that are covered by ERISA.

Petitioners do not rely on any funding from

churches.!9 Instead, they all rely on revenue bonds to

raise money, and have significant sums invested in,

among other things, fixed-income securities, equity

securities, and hedge funds.?°

Patients pay for services as they would pay

any health care provider that does not assert its

retirement plan is a church plan — through, among

other means, insurance, self-payment, Medicare, and

Inc., Form 990, Return of Org. Exempt From Income Tax at

Schedule R, Part IV (2014), https://goo.gl/jpEcfq.

18 Dignity revenue: $8.6 billion in 2014. See Dignity Health,

Form 990 at 1, https://goo.gl/Goa0Qy. Advocate revenue: $4.3

million in 2014. See Advocate, Form 990 at 1,

https://goo.g/ohNm3r. Saint Peter’s revenue: $37 million in

2014. See Saint Peter’s, Form 990 at 1, https://goo.gl/jpEcfq.

19J. A. 258, 428, 777.

20 See Advocate, Consol. Fin. Statements, supra note 11, at 23

(more than $5.4 billion in total investments); Dignity, Consol.

Fin. Statements, supra note 15, at 18 (total investments and

assets, limited as to use, amounted to $6.5 billion in 2015);

Saint Peter’s Healthcare System, Inc., Consol. Fin. Statements

and Supplementary Info., Years Ended December 31, 2015 and

2014 With Report of Independent Auditors 22, 36 (2016),

https://goo.g/KnWI1Hf (fair value of more than $87 million in

securities for 2015).

Medicaid.?! Those in key leadership and management

positions are filled primarily by lay people.?? Like

other chief executive officers of for-profit systems and

large non-profit health care systems, the CEOs of

these entities are well compensated.?*

These entities are large corporations, they

compete with similarly structured non-profit health

systems and they bear no resemblance to churches.

Petitioners are enormous conglomerates built to

deliver health services — not religious worship.

Congress surely did not intend for businesses, with

investments in the Cayman (Islands, _ well-

compensated CEOs, and revenues in the billions, to

21 See Advocate, Consol. Fin. Statements, supra note 11, at 16;

Dignity, Consol. Fin. Statements, supra note 16, at 16; Saint

Peter's, Consol. Fin. Statements, supra note 20, at 18.

22 Dignity Board consists of thirteen members, 2 of which are

not lay people). See Dignity Health, Governance and

Leadership, supra note 13. All but one of twelve people on

Advocate’s leadership team is a layperson. Advocate Health

Care, Executive Profiles, https://goo.gl//Df{MYRD (last visited

Feb. 15, 2017).

23 Dignity’s CEO received over $8 million in 2013, and at least

nineteen officers or key employees received compensation in

excess of one million dollars. Dignity, Form 990 at Schedule J,

Part II, https://goo.gl//Goa0Qy. Advocate’s CEO received over

$7.6 million in 2014, and at least eight officers or key employees

received reportable compensation in excess of one million

dollars. Advocate, Form 990 at Schedule J, Part I,

https://goo.gl//ohNm3r. Saint Peter’s CEO received close to one

million dollars in 2014, and at least three officers or key

employees received reportable compensation in excess of half a

million dollars. Saint Peter’s, Form 990 at Schedule J, Part II,

https://goo.gl/jpEcfq.

claim ERISA’s church plan exemption to the

detriment of their employees.

Il, CONGRESS ENACTED ERISA IN

RESPONSE TO BROKEN PENSION

PROMISES TO ENSURE THAT

EMPLOYEES RECEIVE THEIR

PENSIONS.

A. Employers Promise Pensions to

Employees As Deferred

Compensation.

Congress has consistently recognized that “the

benefits the employers provide are a form of

compensation.” S. REP. No. 85-1440, at 3 (1958), as

reprinted in 1958 U.S.C.C.A.N. 4137, 4139

(legislative history of the Welfare and Pension Plans

Disclosure Act of 1958 (WPPDA), ERISA’s

predecessor). “[T]he private pension plan is a means

for transferring earnings during the working years

into income for a decent living in the older years.” 2

Legislative History of the Employee Retirement

Income Security Act of 1974 (“Legislative History”),

94th Cong. (Comm. Print 1976). Quite simply,

pensions are a form of deferred compensation, and

their protection is crucial to employees’ financial

security. See, e.g., S. REP. NO. 93-383, at 17, 25-26

(1973), as reprinted in 1974 U.S.C.C.A.N. 4890, 4903,

4910-11 (ERISA’s legislative history describing

pensions as “deferred wages”); S. REP. No. 93-127, at

3 (1973), as reprinted in 1974 U.S.C.C.A.N. 4838,

4839 (same); accord, Hughes Aircraft Co. v. Jacobson,

525 U.S. 432, 445 (1999); Lockheed Corp. v. Spink,

517 U.S. 882, 893-94 (1999) (“[A]mong the

legitimate benefits that a plan sponsor may receive

from the operation of a pension plan are attracting

and retaining employees [and] ,aying deferred

compensation.”); John H. Langbein, The Supreme

Court Flunks Trusts, 1990 SuP. Cr. REv. 207, 209

(1991) (pension plan assets are placed in trust form

to protect deferred wages).

B. Congress Enacted ERISA In

Response To Broken Pension

Promises.

At the behest of President Dwight D.

Eisenhower, in 1954, Congress began investigating

pension plans in order to protect these funds for the

workers covered by these plans. Congress found

extensive evidence of kickbacks, embezzlement, and

mismanagement during its four years of hearings,

studies, and investigation. It concluded that the

solution was to provide disclosures and information

to the participants “which will permit them to

determine (1) whether the program is being

administered efficiently and equitably, and (2) more

importantly, whether or not the assets and

prospective income of the programs are sufficient to

guarantee the benefits which have been promised to

them." S. REP. No. 1440, 85th Cong., 2d Sess., 12

(1958); see generally Malone v. White Motor Corp.,

435 U.S. 497, 506-507 (1978). In response, Congress

enacted the WPPDA. JOHN H. LANGBEIN, DAVID A.

PRATT, & SUSAN J. STABILE, PENSION AND EMPLOYEE

BENEFIT LAW 84 (Robert C. Clark et al. eds., 5th ed.

2010).

Subsequently, a confluence of incidents made

it apparent that the WPPDA was inadequate to

protect employees’ pensions. The most spectacular

incident was the failure of Studebaker Motor

Company and its pension plan. See JAMES A.

WOOTEN, ERISA: A POLITICAL HISTORY 8-10, 51-52,

80 (2004). It was not an accident that employees had

no vesting rights in their Studebaker pension. See

Symposium, “The Most Glorious Story of Failure in

the Business”: The Studebaker-Packard Corporation

and the Origins of ERISA, 49 BUFFALO L. REV. 683,

694-695 (2001). At the time that Studebaker folded,

its pension plan was not properly funded; as a result,

many employees received no pension distribution. Jd.

at 695-697, 706, 716. Moreover, the kickbacks,

embezzlement, and mismanagement that Congress

had previously uncovered in other benefit plans had

only become more egregious. See Langbein, The

Supreme Court Flunks Trusts, supra at 210 (ERISA

passed to curb looting and other abuses); JAMES A.

WOOTEN, ERISA: A POLITICAL HISTORY at 118, 158

(citing examples such as Jimmy Hoffa receiving loans

that Central States Pension Fund made for his

benefit; a union officer and “trustee for life” diverting

several million dollars from welfare and pension

plans to Liberia and Puerto Rico; Tony Boyle accused

of abusing position as United Mine Workers Funds

trustee).

Congress understood that ERISA’s predecessor

was “weak in its limited disclosure requirements and

wholly lacking in substantive fiduciary standards.”

H.R. REP. No. 93-533, at 4 (1973), as reprinted in

1974 U.S.C.C.A.N. 4639, 4642; S. REP. No. 93-127, at

4, 1974 U.S.C.C.A.N. at 4841. Indeed, the House

Education & Labor and the Senate Labor & Public

Welfare Committees’ reports concluded:

It is grossly unfair to hold an employee

accountable for acts which disqualify

him from benefits, if he had no

knowledge of these acts, or if the

conditions were stated in a misleading

or incomprehensible manner in plan

booklets. Subcommittee findings were

abundant in establishing that an

average plan participant, even where he

has been furnished an explanation of his

plan's provisions, often cannot

comprehend them because of the

technicalities and complexities of the

language used.

H.R. REP. No. 93-533, at 8, 1974 U.S.C.C.A.N. at

4646; S. Rep. No. 93-127, at 11, 1974 U.S.C.C.A.N. at

4847, reprinted in 2 Legislative History at 2348.

These reports also emphasized problems caused by a

lack of vesting, funding, and reinsurance provisions

in the current law. 1974 U.S.C.C.A.N. at 4844-4847.

Accordingly, Congress enacted ERISA over 40 years

ago to protect retirement benefits and plan assets

through a “comprehensive and reticulated” system,

designed to assure that employer-sponsored pension

plans actually pay employees the benefits they were

promised. Nachman Corp., 446 U.S. at 361, 374-75

(purpose of ERISA was to prevent the “great personal

tragedy” suffered by employees whose retirement

benefits were not paid). This Court should affirm this

construction.

Cc. Because Congress Intended That

ERISA Cover The Majority Of

Employee Benefit Plans To Ensure

That Employees Receive Their

Pensions, The Church Plan

Exemption Should Be Narrowly

Construed.

Ensuring that ERISA’s protections remain in

place throughout an employee’s work life and

retirement is crucial to an individual's retirement

security. Congress sought to accomplish this in part

by permitting only the most limited exemptions to

ERISA’s protections.“ See 29 U.S.C. § 1003(b).

In other contexts, this Court has consistently

held that exemptions to remedial statutes are to be

narrowly construed. See Rodriguez v. Compass

Shipping Co., 451 U.S. 596, 614 (1981) (“The

comprehensive character of the procedures outlined

in the [Longshoremen's and Harbor Workers'

Compensation Act] precludes the fashioning of an

entirely new set of remedies to deal with an aspect of

a problem that Congress expressly addressed”);

Andrus v. Glover Constr. Co., 446 U.S. 608, 616-17

(1980) (Gn construing the Federal Property and

Administrative Services Act of 1949, the Court held

that “where Congress explicitly enumerates certain

%4 See Stein et al., An Article of Faith: The Gratuity Theory of

Pensions and Faux Church Plans, supra note 4.

exceptions to a general prohibition, additional

exceptions are not to be implied, in the absence of

contrary legislative intent”); A. H. Phillips, Inc. v.

Walling, 324 U.S. 490, 493 (1945) (“Any exemption

from such humanitarian and remedial legislation

[such as the Fair Labor Standards Act] must

therefore be narrowly construed, giving due regard to

the plain meaning of statutory language and the

intent of Congress. To extend an exemption to other

than those plainly and unmistakably within its terms

and spirit is to abuse the interpretative process and

to frustrate the announced will of the people.”).

It is clear that an employee benefit plan must

meet all of ERISA’s requirements if it does not meet

the precise conditions of an exemption. This Court

has narrowly construed other ERISA exemptions

that limit participant protections. See, e.g., John

Hancock Mut. Life Ins. Co. v. Harris Tr. & Sav.

Bank, 510 US. 86, 97, 105-106 (1993)

(acknowledging a “tight reading of exemptions from

comprehensive schemes of this kind,” but limiting

exemption to the precise words of the statute);

Guidry v. Sheet Metal Workers Nat'l Pension Fund,

493 U.S. 365, 376 (1990) (declining to find an

exception to ERISA’s anti-alienation provision and

asserting that “[i]f exceptions to this policy are to be

made, it is for Congress to undertake that task”),

superseded by statute, Mandatory Victims Restitution

Act, 42 U.S.C. § 3663A (2010).

In construing the church plan exemption, the

circuit courts have faithfully applied this Court’s

teachings. See Stapleton v. Advocate Health Care

Network, 817 F.3d 517, 526 (7th Cir. 2016) (“ERISA .

. was written to protect workers who have invested

their retirement savings into employer-run financial

plans. And, because it ‘is a ‘remedial statute’ [it]

should be ‘liberally construed in favor of protecting

the participants in employee benefit plans.”) (quoting

Kaplan, 810 F.3d at 182); Kaplan v. St. Peter's

Healthcare Sys., 810 F.3d 175, 182 (8d Cir. 2015)

(“construing plans established by church hospitals to

be exempt ‘would achieve quite the opposite’ result of

the canon directing us to construe exemptions

narrowly”). This Court should affirm its teachings.

Ill. BROAD APPLICATION OF THE CHURCH

PLAN EXEMPTION WOULD DEPRIVE

EMPLOYEES OF SAFEGUARDS THAT

CONGRESS ENACTED TO PROTECT

EMPLOYEE PENSIONS.

ERISA’s main purpose is to ensure that

employees receive their promised employee pension

and welfare benefits. 29 U.S.C. § 1001(a)-(b). For

pension plans, Congress sought to achieve that

purpose by providing various protections, including

minimum funding protections and _ insurance

guarantees, limitations on reducing or eliminating

pension benefits, mandated fiduciary responsibilities,

and a comprehensive disclosure scheme. See supra p.

6. Reading the church plan exemption broadly

deprives these participants of each carefully crafted

ERISA requirement and leaves them vulnerable to

broken pension promises. See Stapleton, 817 F.3d at

526-527 (recognizing the perils of unregulated

pension plans); Kaplan, 810 F.3d at 182 (“[E]xempt

church plans lack many of the protections associated

with ERISA”); A-T-O-Inc. v. Pension Benefit Guar.

Corp., 634 F.2d 1013, 1020 (6th Cir. 1980) (ERISA

should be interpreted to “protect employees’

expectations in their vesting pension benefits”);

LANGBEIN et al., PENSION AND EMPLOYEE BENEFIT

LAW, supra p. 15, at 105 (providing examples of the

poor financial health of exempt governmental plans).

A. Broad Application Of The Church

Plan Exemption Would Deprive

Employees Of ERISA’s Minimum

Plan Funding Protections And

Insurance Guarantees.

ERISA arose in the wake of the failure of

Studebaker Motor Company and its pension plan — a

watershed moment in pension history. Studebaker

had agreed to pension increases, but had not funded

these pension promises. When the company failed,

the pension was underfunded by over $15 million.

Thousands of employees, including some who had

worked their whole lives for the company, lost all or

most of their pensions. See JAMES A. WOOTEN,

ERISA: A POLITICAL HISTORY at 8-10, 51, 80; S. REP.

No. 93-127, 1974 U.S.C.C.A.N. at 4846-4847 (noting

683 pension plan terminations for the first seven

months of 1972 affecting 20,700 pension

participants).

Moreover, Congress found that many plans

only funded their plans to the extent required by the

Internal Revenue Service; that is, employers made

contributions in an amount equal to that year’s

annual pension liabilities. These contributions did

not fund past service liabilities or make up for

investment losses. “Without adequate funding, a

promise of a pension may be illusory and empty.” Jd.

at 4845-4846.

In response to these losses and the hardships

it caused workers, Congress established minimum

funding requirements for pension plans to ensure

that they “wil) accumulate sufficient assets within a

reasonable period of time to pay benefits to covered

employees when they retire.” H.R. CONF. REP. No. 93-

1280, at 283 (1974), as reprinted in 1974

U.S.C.C.A.N. 5038, 5064. Plan sponsors must make

periodic contributions as participants accrue benefits

and must certify that these contributions comply

with ERISA’s established standards. 29

U.S.C. §§ 1082, 1083.

As a safeguard, Congress also established a

system of plan termination insurance to protect

individuals against the loss of pension benefits, in

the event a defined benefit pension plan terminates

with insufficient assets or the employer becomes

insolvent. This program guarantees the payment of

pension benefits for individuals in these plans

according to certain statutory limits. The Pension

Benefit Guaranty Corporation (“PBGC”) administers

the program, which is financed exclusively through

employer premiums, investment income, the assets of

terminated plans, and recoveries on claims for

termination liability. 29 U.S.C. §§ 1302, 1305-1307.

These minimum funding requirements do not

apply to church plans. 29 U.S.C. § 1003(b); see also

Kaplan, 810 F.3d at 182 (“These plans need not

comply with a host of ERISA provisions, including

fiduciary obligations and minimum-funding rules.”).

Thus, there is no guarantee that the employer will

properly fund the plan. Moreover, if ERISA does not

apply to these plans, employers will have no

obligation to pay PBGC premiums. Thus, these

retirement plan participants are currently ineligible

for PBGC protection if the plan terminates with

insufficient assets.25 This would leave them in the

same dire predicament as Studebaker employees

were in over forty-five years ago — with broken

promises, instead of their benefits.

This is not merely theoretical. To be sure,

there are a number of cases where church plans,

operating without ERISA’s safeguards, are unable to

fulfill their commitments to employees because of

underfunding. By cutting pension benefits, plans

break their promises to employees and take their

deferred compensation. See, e.g., St. Anthony Medical

Center Retirement Plan (40% cut back on pension

benefits for 1,900 participants when plan

25 Some of these “church” plans contain a “fund specific

promise.” Under a fund specific promise, only money in a fund

designated by the employer is available to pay plan benefits.

Thus, at termination, these plans will disburse pension benefits

in a specified order until there are no more funds. Moreover,

state law requires no more. ERISA bans these fund-specific

promises for ERISA-covered retirement plans because they limit

the money available for pensions to whatever the employer

chooses to provide—which could be nothing. See LANGBEIN et

al., PENSION AND EMPLOYEE BENEFIT LAW, supra p. 15, at 244.

terminated);26 Pension Plan for Employees of Holy

Cross Hospitals (HCH) (more than 50% loss in

benefits, underfunded by $31 million)?” Ausburg

Fortess, Publishing House for the Evangelical

Lutheran Church in America (more than 60%

shortfall in expected benefits);28 Hospital Center at

Orange Pension Plan (after eight-year internal

review, IRS reversed decision recognizing Plan as a

church plan; PBGC announced that it would cover

$30 million in liabilities);29 Retirement Plan for St.

Marys Hospitals in Passaic for Non-Union

Employees (underfunded by $36 million in 2015,

1,100 participants told funds would be exhausted in

the future);3° Retirement Plan for Employees of The

26 See Adam Geller, Associated Press, Workers find retirement

money jeopardized by loophole treating hospitals, agencies as

churches, FOX NEWS, Oct. 5, 2013, https://goo.gl/GLROJV.

27 See Hazel Bradford, Participants sue over church-plan status

for Holy Cross Hospital pension fund, PENSIONS &

INVESTMENTS, June 7, 2016, http://goo.gl/780Bf5

28 See Adam Geller, supra note 26.

29 See Mary Williams Walsh, 1.R.S. Reversal on ‘Church’ Pension

Plan Rescues a Fund, THE NEW YORK TIMES, Apr. 1, 2013,

https://goo.gl/l6ecS2; Press Release, Pension Benefit Guaranty

Corporation, In Reversal, PBGC Covers Pension of Hospital

Center at Orange (May 10, 2013), https://goo.g//HSDtlv; Adam

Geller, supra note 26 (“[T]he hospital . . . had unique

circumstances. It was a nonreligious institution for nearly all its

existence and paid insurance premiums to the PBGC for four

decades.”).

30 See Mary Jo Layton, Retirees from St. Mary's Hospital in

Passaic may lose their pensions in sale, THE RECORD, Apr. 26,

2013, https://goo.gl/QbH210; Adam Geller, supra note 26.

Hospital of Saint Raphael (3,250 employees told they

would receive reduced benefits based on revised

formula due to Plan’s $55 million underfunding);*! St.

Clare’s Retirement Income Plan (underfunded by $35

million and expected to exhaust funds in the

future).32

B. Broad Application Of che Church

Plan Exemption Would Deprive

Employees Of ERISA’s Guarantee

Of Pension Vesting.

Congress enacted ERISA “to make sure that if

a worker has been promised a defined pension benefit

upon retirement — and if he has fulfilled whatever

condition are required to obtain a vested benefit — he

actually will receive it.” Nachman Corp., 446 U.S. at

375. In ERISA’s findings and declaration of policy,

Congress stated, “many employees with long years of

employment are losing anticipated retirement

benefits owing to the lack of vesting provisions in

such plans.” 29 U.S.C. § 1001(a). To be sure, the lack

of vesting standards in the Studebaker pension plan

validated that finding. See Symposium, “The Most

Glorious Story of Failure in the Business”: The

Studebaker-Packard Corporation and the Origins of

ERISA, 49 BUFFALO L. REV. at 694-695. Moreover,

31 See Mary E. O'Leary, New Haven's St. Raphael workers face

decision on pensions, NEW HAVEN REGISTER, July 18, 2013,

https://goo.g/HSROJA.

32 See Claire Hughes, Retirees of Former Schnectady Hospital

Face Pension Loss, TIMES UNION, Jan. 10, 2017,

https://goo.g/AzPuuW.

Congressional reports found that at least 13 percent

of private pension plans in the United States did not

require vesting of benefits prior to retirement. S. REP.

No. 93-127, 1974 U.S.C.C.A.N. at 4845. Accordingly,

Congress enacted vesting standards so _ that

participants would have a legally enforceable right

(that is, benefits are non-forfeitable and non-

revocable) to their pensions after they had worked a

specific amount of time. See 29 U.S.C. § 1053; Alessi,

451 US. at 510 n.5.

A broad application of the church plan

exemption permits employers and plans to use any

vesting rules, even none, that they so desire. For

example, using a longer vesting schedule such as five

years versus three years can make the difference

between receiving a pension or not, especially for

shorter service employees. Moreover, there would be

no prohibition against these plans using a thirty-year

vesting schedule, just like employers did before

ERISA was enacted. See Michael S. Gordon,

Overview: Why Was ERISA Enacted? in U.S. Sen.

Special Comm. on Aging, 98th Cong., The Employee

Retirement Income Security Act of 1974: The First

Decade 16 (1984) (finding that numerous personal

letters sent to government offices confirmed that

workers were denied pension benefits despite many

years on the job). This could leave employees in these

plans without a legally enforceable right to a pension.

C. Broad Application Of The Church

Plan Exemption Would Deprive

Employees Of ERISA’s Protection

From Reductions To, Or

Elimination Of, Their Pension

Benefits.

Congress recognized that vesting requirements

alone could not achieve the goal of protecting

“employees’ justified expectations of receiving the

benefits their employers promise them.” Heinz, 541

U.S. at 743; see generally 29 U.S.C. § 1001(a). Indeed,

in a defined benefit plan, benefit accruals are one of

the factors in determining a participant’s final

benefit.33 Consequently, Congress established benefit

accrual requirements, see 29 U.S.C. §§ 1002(23)(A),

1054, to work hand in glove with the vesting

requirements. See 29 U.S.C. §§ 1002(19), 1053.

ERISA's vesting provisions could be

thwarted if employers were permitted

too much latitude in defining accrued

benefits. As Senator Williams,

Chairman of the Senate Committee on

Labor and Public Welfare, stated “The

vesting provisions apply to whatever

benefit an employee has accrued under

a plan. It is, therefore, important to

assure that a plan's accrual formula is

33 Lockheed Corp. v. Spink, 517 U.S. 882, 897 (1999) (“A

reduction in total benefits due is not the same thing as a

reduction in the rate of benefit accrual; the former is the final

outcome of the calculation, whereas the latter is one of the

factors in the equation.”).

not inconsistent with the statutory

purpose reflected in the bill's vesting

provisions. A basic concern was that a

plan not be permitted to use an accrual

formula ... to subvert the statutory

intent to provide meaningful vested rights.

... 120 CONG. REC. S15737 (daily ed.

Aug. 22, 1974) (statement of Sen.

Williams), reprinted in 1974

U.S.C.C.A.N. 5177.

Amato v. Western Union Int'l, Inc., 773 F.2d 1402,

1409 (2d Cir. 1985); see also McDonald v. Pension

Plan of NYSA-ILA Pension Tr. Fund, 320 F.3d 151,

156 (2d Cir. 2003) (explaining difference between

accrued and vested benefits).

The benefit accrual standards require that a

participants benefits must accrue _ relatively

consistently on an annual basis and cannot accrue

disproportionately at the end of her career, also

known as back-loading. 29 U.S.C. § 1054(a), (b)(1). By

these provisions, Congress intended to prohibit an

employer from "providing inordinately low rates of

accrual in the employee's early years of service when

he is most likely to leave the firm and...

concentrating the accrual of benefits in the

employee's later years of service when he is most

likely to remain with the firm until retirement." H.R.

REP. No. 93-807, at 4688 (1974), reprinted in 1974

U.S.C.C.A.N. 4639, 4688. Moreover, a plan cannot

stop a participant's accrual of benefits, or lower the

rate at which those benefits accrue, based on her age.

29 U.S.C. § 1054(b)(1)(H). Finally, ERISA requires

that a plan amendment cannot reduce or eliminate

an earned benefit. 29 U.S.C. § 1054(g); see also Heinz,

541 U.S. at 743 (recognizing the “centrality of

ERISA’s object of protecting employees’ justified

expectations of receiving the benefits their employers

promise them”).

A broad application of the church plan

exemption results in these plans being able to reduce

or eliminate accrued benefits, significantly back-load

formulas, and lower the rate at which benefits

accrue, based on the age of the participant. For

example, the Saint Raphael Hospital informed over

3,200 workers that they would not receive their

promised benefits. Instead, they will receive only a

portion of their pension benefits — regardless of their

vested rights or accrued benefits. See Mary E.

O'Leary, New Haven's St. Raphael workers face

decision on pensions, supra note 17. This reduction in

benefits reflects the employer’s broken promise to its

employees, which is exactly the result that Congress

was trying to prevent. See also supra notes 26-32 and

accompanying text (providing examples of church

plans cutting back on participant benefits).

D. Broad Application Of The Church

Plan Exemption Would Deprive

Employees Of ERISA’s Fiduciary

Protections Against Self-dealing,

Mismanagement, And Abuses.

“([In the wake of more than a decade of

Congressional investigation into looting and other

abuses of plans by some union leaders,”** Congress

concluded that it would safeguard employee benefits

“by establishing standards of conduct, responsibility,

and obligation of fiduciaries of employee benefit

plans.” 29 U.S.C. § 1001(b). It had previously

concluded that current federal law including Internal

Revenue Code provisions and state laws were

inadequate to protect pensions. S. REP. No. 93-127

(1973), as reprinted in 1974 U.S.C.C.A.N. 4838, 4842.

Thus, Congress imposed a federal fiduciary regime in

order to eliminate abuses.

ERISA requires fiduciaries to manage and

administer the plan and its assets. That means that

these fiduciaries must act solely in the best interests

of the participants. 29 U.S.C. § 1104(a)(1). Likewise,

they must act for the exclusive purpose of providing

benefits and defraying reasonable expenses incurred

in the administration of the plans. 29 U.S.C.

§ 1104({a)(1)(A). In _ addition, fiduciaries must

discharge their duties with the highest level of

loyalty and care known under the law and manage

plan assets prudently. 29 U.S.C. § 1104(a)(1)(B). Plan

assets must be held in trust, 29 U.S.C. § 1103, and

investments must be diversified to avoid large losses

to the plan. 29 U.S.C. § 1104(a)(1)(C). Finally,

%4 See Langbein, The Supreme Court Flunks Trusts, supra p. 15,

at 210; accord JAMES A. WOOTEN, ERISA: A POLITICAL HISTORY

at 158 (citing examples such as Jimmy Hoffa received loans that

Central States Funds made for his benefit; a union officer and

“trustee for life” diverted several million dollars from pension

and welfare funds to Liberia and Puerto Rico; Tony Boyle

accused of abusing position as United Mine Workers Funds

trustee).

fiduciaries must act in accordance with the

provisions of the plan document and other

instruments governing the plan, to the extent that

they are consistent with Titles I and IV of ERISA. 29

U.S.C. § 1104(a)(1)(D).

In its review of pension plan abuses, Congress

determined that certain types of transactions

frequently gave rise to misconduct, such as

transactions between the plan and the employer. 29

U.S.C. §§ 1106(a)(1), 1002(14)(c).*5 “Before ERISA's

enactment in 1974, the measure that governed a

transaction between a pension plan and its sponsor

was the customary arm's-length standard of

conduct.” Comm’r of Internal Revenue v. Keystone

Consol. Indus., Inc., 508 U.S. 152, 160 (1993).

Supplementing the general fiduciary duty

requirements, and unlike state trust law

requirements, Congress categorically prohibited plan

fiduciaries from engaging in specific transactions

that were “likely to injure the pension plan.” Id.

Therefore, Congress barred fiduciary self-dealing in

plan assets and other conflict of interest transactions

involving plan assets, and limited the types of assets

that a plan may hold. 29 U.S.C. § 1106.

A broad application of the church plan

exemption leaves such plans subject to minimal

35 The Studebaker pension plan invested plan assets in the

company in order to keep it afloat. When the company failed, so

did these investments, exacerbating the pension plan's

underfunding. JAMES A. WOOTEN, ERISA: A POLITICAL HISTORY

at n. 17 accompanying text at page 5. The employees were left

without their jobs and their pensions.

federal and state oversight that Congress determined

was inadequate to protect pensions. S. REP. No. 93-

127 (1973), as reprinted in 1974 U.S.C.C.A.N. 4838,

4842. Such plans would not be subject to any of

ERISA’s

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