The U.S. Supreme Court made its first move toward weighing in on whether Dignity Health and faith-based companies have to comply with federal regulations for costly worker pension plans.
Associate Justice Anthony Kennedy granted Dignity Health a temporary reprieve from complying with the federal Employee Retirement Income Security Act until the eight justices decide whether or not to take up their appeal. In July, the Ninth Circuit determined that Dignity Health didn't qualify for a religious exemption from ERISA and its employee pension system couldn't be considered a church plan.
Dozens of lawsuits have been filed against faith-based organizations over the issue. The lawsuits target some of the nation's largest health systems.
Under ERISA, pension plans must be fully insured and funded, but religious organizations can be exempt from those requirements. Dignity Health and other faith-based organizations claim they should receive a similar pass, despite growing resistance from their employees.
In its petition for certiorari in August, Dignity Health urged the Supreme Court to take up the issue and set nationwide precedent about the church plan exemption. Until that happens, the health system claims it and other faith-based organizations will be subject to "devastating uncertainty" and costly litigation. It said a stay was necessary to prevent it from making "irrevocable changes" to its pension plans that could be deemed unnecessary.
Dignity Health was sued by former hospital employee Starla Rollins in 2013 for failing to comply with ERISA. The suit alleges the health system's board decided in 1992 to treat its pension plan as a church plan.
Other faith-based health systems have already felt the financial weight of the changes. In May, a Trinity Health Corp. hospital paid $107 million to settle a class action over its ERISA pension obligations. In addition to that hefty sum, St. Francis Hospital and Medical Center will add $17 million into it employee pension coffers and another $10 million over nine years. Ascension Health settled a similar case as well.
Advocate Health Care in Illinois and St. Peter's Healthcare System in New Jersey have also come under fire for not complying with ERISA. So far, federal appeals courts have sided with employees: Advocate lost its Seventh Circuit appeal in March and the Third Circuit ruled against St. Peter's in December. Both cases have been appealed to the Supreme Court.
If the Supreme Court decides not to take up Dignity Health's appeal, the stay will expire and Dignity Health will be subject to ERISA. If the case is granted review, the stay will continue until the court rules on the appeal.