Supreme Court unanimously rules in favor of faith-based hospitals in pension case

The U.S. Supreme Court has unanimously ruled on Monday that faith-based hospitals and other religiously affiliated institutions, such as schools and day cares, are not required to comply with federal pension plans.

The justices ruled that the three church-affiliated nonprofit hospital systems that are being sued for underfunding their employee pension plans are exempted from U.S. Employee Retirement Income Security Act (ERISA).

Three federal appeals courts have previously ruled against the hospitals, namely Illinois-based Advocate Health Care Network, California-based Dignity Health and New Jersey-based Saint Peter's Healthcare System. But the hospitals filed an appeal, fearing that the decisions could expose them to billions of dollars in liability.

The Supreme Court ruling overturns the appeals courts, and will affect dozens of similar cases that are awaiting decisions in courts across the country.

CBS News reported that the three hospitals have contended that their pensions are "church plans" that are exempt from the pension law and have been treated as such by federal officials for decades.

"From the beginning, ERISA has defined a 'church plan' as 'a plan established and maintained ... for its employees ... by a church," Justice Elena Kagan wrote, as reported by Christianity Today.

"A plan maintained by a principal-purpose organization qualifies as a 'church plan,' regardless of who established it," she continued.

Workers have argued that Congress did not intend to exempt massive hospital systems that employ tens of thousands of employees.

CBS News noted that the three hospitals employ about 100,000 workers altogether, but about a million workers across the U.S. work for similar nonprofits that are exempted from the pension law.

In one of the cases, workers have alleged that Dignity Health has underfunded its pension plan by $1.2 billion. Dignity Health is said to be the fifth largest health care provider in the U.S.

Under federal law, pension plans are required to be fully funded and insured, but Congress granted narrow exemptions for churches and other religious organizations.

The hospitals, two with Catholic affiliation and one linked with the Lutheran church, asserted that the law also exempts plans associated with or controlled by a church, whether or not it was created by a church.

The federal government has long agreed with the hospitals' interpretation of the law, with agencies such as the IRS and the Labor Department assuring them for over 30 years that they are exempt from the traditional pension rules.