If you thought that church plan litigation was effectively over after the Supreme Court’s decision upholding the traditional interpretation of the ERISA church plan definition in its 2017 decision in Advocate Health Care Network et al. v. Stapleton et al., you would be mistaken. A recent slip opinion in a case involving a church plan maintained by a hospital in upstate New York reminds us that being a non-ERISA plan brings its own set of challenges because state law is not preempted. In particular, the case illustrates that, if a church plan starts to fail to pay benefits, its sponsor – as well as related entities such as the church it is controlled by or associated with – may find themselves subject to various pension-related claims under state law.
This recent decision involves a church pension plan sponsored by St. Clare’s Hospital of Schenectady, N.Y (since renamed the St. Clare’s Corporation). The hospital had been originally co-founded by the Roman Catholic Diocese of Albany, New York. The plan had received an IRS private letter ruling that it was a church plan in 1992. Apparently, the plan had always been in a financially precarious position – the hospital itself had closed in 2008 – and in 2018, the corporation terminated the plan and advised pension recipients that their benefits would either be reduced or ended as of February 1, 2019. Thereafter, the corporation filed for dissolution indicating that it owed the plan about $50 million.
That resulted in...
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