Religious Health Systems, Facing ERISA Liability, Pin Hope on Justices

Justice Anthony Kennedy said the legislative history was “wholly uninformative.” The letter ruling that started the series of exemptions for religious-affiliated health systems was “thinly reasoned,” Justice Ruth Bader Ginsburg said.

Blatt told the justices that religious nonprofits have been exempt from ERISA for more than 30 years “whether or not a church established the plan.” The law’s text, she argued, does not require a church to establish benefit plans for someone else’s employees.

“So whether it’s a pension board that’s either sitting in the hospital or religious charity or it’s a pension board that’s externally incorporated, Congress made sure that the maintaining organization, the one with control over the funds and the administration itself, has to be religiously affiliated,” she said.

Chief Justice John Roberts Jr. questioned how much deference is owed the letter rulings by the IRS and labor department. Under so-called “Skidmore deference,” the lowest deference, Roberts said, “To me, anyway, as it’s been articulated, it seems to be the principle as you should defer to agencies when you agree with their interpretation.”

Blatt said employees in two of the three cases are seeking $11 billion in penalties per year. “That’s $66 billion in two cases if ERISA’s six-year statute of limitations applies,” she said. “The risk that the other side could recover, even any fraction of that amount, is reason enough for you to make sure that the IRS’s decision is somehow unreasonable, that would jettison 30 years of settled expectations.”

Justice Sonia Sotomayor told James Feldman, counsel to the health system employees, that the text could be read either way. Where should she look to break the tie, she asked.

Feldman said Congress wanted a close tie between the church and the plan because “their purpose was they didn’t want to get involved in church affairs. And so they said church plan has to be established and—established and maintained by a church. It needs to fit both criteria because we want—if there’s church involvement here, we want hands off.”

If there were no church involvement, Feldman argued, there would be no reason why these hospitals, like any other hospital in the country, like every other firm in the country, shouldn’t have to provide the employees with the pension insurance to protect them against the possibility that when the plan goes bust, they end up with nothing.”

The three nonprofits have drawn support from more than a dozen religious-affiliated organizations and the Trump administration. The National Employment Lawyers Association, AARP, Pension Rights Center and Americans United for Separation of Church and State filed briefs supporting the employees.

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