Laurence Kaplan v. Saint Peter's Healthcare Syste
810 F.3d 175
3rd Cir.2015Background
- St. Peter’s Healthcare System is a non-profit Catholic-affiliated hospital system (not itself a church) that established a defined-benefit retirement plan in 1974 covering most employees.
- St. Peter’s applied to the IRS in 2006 for recognition that the plan qualified as an ERISA "church plan"; it received an IRS private letter ruling in 2013 while a putative class action by former employee Kaplan was pending alleging ERISA violations (including large underfunding).
- ERISA § 3(33) (as amended in 1980) defines a "church plan" as a plan “established and maintained … by a church,” and § 3(33)(C)(i) states that such a plan “includes” a plan maintained by certain qualifying church agencies (e.g., pension boards).
- St. Peter’s argued the 1980 amendments allowed plans maintained by qualifying church agencies to qualify as church plans even if the agency — not a church — established the plan; it sought dismissal of Kaplan’s ERISA suit on that basis.
- The District Court denied dismissal, holding only a church can establish a qualifying church plan; the Third Circuit affirmed, holding the statutory text requires a church to establish the plan and that the 1980 amendments only expanded the maintenance prong.
Issues
| Issue | Kaplan's Argument | St. Peter’s Argument | Held |
|---|---|---|---|
| Whether a non‑church entity (a church agency) may itself establish a plan that qualifies as an ERISA "church plan." | Only plans established by a church qualify; non‑churchs cannot establish exempt plans. | The 1980 amendments make the definition broader: a plan that is maintained by a qualifying church agency is included even if not established by a church. | Held: Only plans established by a church (or convention/association of churches) qualify; §3(33)(C)(i) expands maintenance, not the establishment requirement. |
| Whether the IRS’s post‑1983 interpretation (granting exemptions to agency‑established plans) is entitled to deference. | IRS interpretation contradicts statute and is unpersuasive. | IRS practice and private letter rulings support permitting agency‑established plans to qualify. | Held: IRS general counsel memoranda are not entitled to controlling deference and conflict with the statute’s plain text, so they are unpersuasive. |
| Whether legislative history supports treating agency‑established plans as church plans. | Legislative history (floor statements) shows Congress intended to protect agency plans, implying agency establishment should suffice. | Legislative history shows Congress aimed to preserve plans established by churches and to permit church‑established plans to cover agency employees; it did not eliminate the establishment requirement. | Held: Legislative history reinforces that the 1980 amendments addressed maintenance and the sunset, not eliminating the church‑establishment prerequisite. |
| Whether rejecting St. Peter’s reading raises Free Exercise Clause concerns. | Allowing only church establishment forces intrusive IRS inquiries into religious functions and corporate form, possibly implicating First Amendment limits. | Churches can avoid entanglement by establishing plans that cover agency employees; the statutory distinction between churches and agencies is constitutionally permissible. | Held: No constitutional impediment; Congress may distinguish churches from church agencies and plan coverage can be achieved by having a church establish the plan. |
Key Cases Cited
- Barnhart v. Sigmon Coal Co., 534 U.S. 438 (statutory text controls when unambiguous)
- Bennett v. Spear, 520 U.S. 154 (cardinal principle to give effect to every clause and word)
- Russello v. United States, 464 U.S. 16 (expressio unius canon: deliberate inclusion/exclusion)
- Doe v. Chao, 540 U.S. 614 (changes from draft legislation can show deliberate elimination)
- Christensen v. Harris County, 529 U.S. 576 (lesser deference to agency memoranda not from formal adjudication)
- Lorillard v. Pons, 434 U.S. 575 (congressional adoption of a statute generally presumed to include contemporaneous interpretations only when Congress knows the interpretation)
- IUE AFL-CIO Pension Fund v. Barker & Williamson, Inc., 788 F.2d 118 (3d Cir.) (ERISA is remedial and construed to protect plan participants)
- Lown v. Continental Cas. Co., 238 F.3d 543 (4th Cir.) (prior circuit dictum allowing agency‑established plans to qualify)