What’s a “Church Plan” when evaluating your right to benefits under employer benefit plan?

As you know, churches occupy a special place in the law. For example, the First Amendment bars the government from prohibiting the free exercise of religion, and churches, indeed almost all religioous institutions, get special tax treatment from the IRS.

However, you may not know that this distinction can also affect your employee benefits. Almost all employee benefits are governed by a federal law called ERISA (the Employee Retirement Income Security Act of 1974). This law provides various protections, including imposing a fiduciary duty on your employer to act in your best interests in administering your benefits.

However, if you are a beneficiary of an employee benefit plan established by a church (or other religious organization), your benefits are not governed by ERISA, because ERISA has an exemption for “church plans.” (There is also an exemption for government plans.) As a result, you may lose protections under ERISA if you are a church employee.

But what if you are not employed directly by a church, but instead by a church-affiliated organization, such as a church aid organization or a hospital? In the past, this was a difficult legal question that divided the courts. Some courts have said that only plans established by a church itself can be exempted from ERISA, while others have said that a mere church affiliation is sufficient to qualify for the exemption.

The Supreme Court resolved this issue earlier this year, ruling that church-affiliated groups qualify for an exemption from ERISA. If you’re interested, the opinion is here: https://www.supremecourt.gov/opinions/16pdf/16-74_5i36.pdf. (A more in-depth look can be found here, http://narrowestgrounds.blogspot.com/2017/08/supreme-court-2016-statutory-term-in.html, or here: http://www.scotusblog.com/2017/06/opinion-analysis-justices-unanimously-uphold-erisa-exemption-church-affiliated-pension-plans/ .)

Thus, if you work for a hospital or other non-profit affiliated with a church, your employee benefits are not governed by ERISA (unless your employer has “opted in” to ERISA governance). You thus do not enjoy ERISA’s protections.

However, there is a silver lining. If your benefits are not governed by ERISA, that means they are governed by your state’s laws, which may be more favorable in some respects. For example, some states allow you to sue an insured benefit plan for “bad faith” damages, which is not allowed under ERISA.

As you can see, employee benefit laws are tricky and there are trade-offs everywhere. This is why consulting a lawyer who specializes in this area of law is so helpful. If you are having difficulty with your claim for employee benefits, whether it’s governed by a church plan or not, contact us, and we may be able to help. (877) 783-8686.



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