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ACH's Retirement Plan Is Not Exempt From ERISA, 7th Cir. Rules

By Jonathan R. Tung, Esq. | Last updated on

The case of Stapleton et al. v. Health Care Network was reviewed and its decision affirmed at the Seventh Circuit recently, further solidifying the opinions of appellate courts that Advocate Health Care's retirement plan is not church-exempt from ERISA.

Stapleton is the current and latest in a series of appellate cases across the nation that have increasingly become critical of church-exempted claims from federal law and ERISA.

Retirement Plan Class Action

The named plaintiff in the class action suit at bar, Ms. Maria Stapleton as well as her other colleagues. They filed a class action suit against their employer AHC in early 2014, claiming that AHC failed to maintain their retirement plans in accordance with ERISA.

They further alleged injury by the company's failure to fund the retirement accounts, placing whatever funds there were in an insufficient trust, failing to produce an accounting, and also having in place a policy of five years' continuous employment before the retirement benefits would fully vest.

Move to Dismiss

AHC, an Illinois based company, moved to dismiss the case on the grounds that the company's retirement plans are not subject to ERISA because they are church plans. Under ERISA law (and echoed in recent case law), church retirement plans are the only select few retirement plans that escape federal law that require certain funding obligations by the employers as well as fiduciary duties. The unanimous panel also pointed to a district court decision in California of Dignity Health: in that case, the court also determined that the plans were not exempt from ERISA's requirements.

Nice try AHC, the Seventh Circuit ruled. Although the accounts were set up by a "religiously-affiliated" hospital, there was concern by the court that unregulated retirement plans of this type could leave workers in precarious positions should their employers run into financial difficulties. Generally, a reading of the opinion would have revealed a policy of "liberally construing ERISA" in favor of employees' benefit plans woven throughout.


Now that the court has determined that the AHCN plan does not enjoy exemption from ERISA, ACH must now bring all of its applicable retirement plans in compliance with the federal law and, inter alia, fully fund the subject accounts.

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