Okay for Church Retirement Plans to Be Exempt from Federal Regulatory Law

Like other religiously affiliated non-profits, Catholic Health Initiatives (a Colorado-based health care provider) offers its employees a retirement plan which is exempt from the requirements of the federal law known as ERISA (which stands for Early Retirement Income Security Act).

CHI’s headquarters in Inverness, Colorado.

ERISA sets minimum standards for private-sector pension plans and information for plans’ beneficiaries.  Janeen Medina, a CHI employee, sued CHI, alleging that the organization’s plan, which satisfied ERISA’s criteria for being an exempt church plan, violated the Establishment Clause of the First Amendment because the exemption constituted favoritism of religion by the government.

Ms. Medina was not successful.

Applying the classic Lemon test (named for a 1971 Supreme Court case), the U.S. Court of Appeals for the Tenth Circuit examined the government’s exemption of CHI’s plan for its purpose, effect, and potential entanglement with religion.  The Court found that the purpose of the government’s exemption was, in effect, to avoid entanglement with religion—which gave it a pass on the first prong of the Lemon test (purpose).  Medina argued that its effect, however, showed a clear favoring of religion.  The Court wasn’t persuaded by Medina’s argument there, because long-established precedent stated that an exemption of religion is not the same as a religion-advancing effect.  Rather, its effect (as well as other religious exemptions like the IRS tax exemption) is to remove burdens from the practice of religion.  Finally, the Court found that enforcing ERISA’s regulations on religious institutions would hamper those institutions in their religious missions, which would impermissibly entangle the government with religion.

The Court upheld the CHI’s plan, but that last bit—that not providing the exemption would cause government-religion entanglement—raises an interesting question:  if ERISA had no such religious exemption, would it be unconstitutional?  Must laws have religious exemptions to avoid excessive entanglement?  Or is it simply that the government may provide such exemptions if it wants, but it is not obligated to do so? Questions for another day, and another case.

Case: Medina v. Catholic Health Initiatives, No. 16-1005 (10th Cir. Dec. 19, 2017) (opinion here)

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