ERISA: Health systems not church plans; Federal court rejects "committee" model for church plan sponsorship

In denying Dignity Health's motion to dismiss, the court rejected the "committee" model for church plan sponsorship, which is relied upon by a number of tax-exempt organizations such as hospitals and universities that are affiliated with churches. The court agreed with the plaintiff's contention that while a church-affiliated entity may "maintain" an ERISA-exempt church plan, only plans established directly by a church or convention of churches qualify as church plans. This case has important implications for sponsors of church pension plans that are not churches and rely instead on the committee model. The court's holding conflicts with the regulatory guidance noted above and the holdings of other courts which permit the establishment and maintenance of a church plan by a tax-exempt entity controlled by or associated with a church, so long as a church plan committee that satisfies the "organization" requirement is in place. (Note that the ERISA provision set forth above begins with the language: "(a) plan established and maintained for its employees ... by a church or by a convention or association of churches includes...") The court was not persuaded by these contrary authorities. It held that IRS letter rulings are not entitled to judicial deference and that conflicting court rulings utilized "flawed approaches."