If you have a pension, it is probably governed by the Employee Retirement Income Security Act. This federal law provides protections for employer-provided retirement plans. In certain cases, such as when a plan is backed by a church, pension plans may be exempt from ERISA.

In recent years, many lawsuits have arisen regarding underfunded pension plans. Some of these lawsuits have been filed by pensioners who believe their church pension plans should actually be covered by ERISA. Here in New Jersey, a former employee sued Saint Peter’s University Hospital for underfunding its pension plan by $70 million.

In August, the IRS confirmed that the hospital’s pension plan is an exempt church plan, and the hospital sought to have the lawsuit dismissed. A federal district court judge in New Jersey has now issued a contrary ruling, denying the motion to dismiss after finding that the pension plan is not exempt from ERISA.

Saint Peter’s University Hospital, which has 4,700 retirees and current employees, is operated by the Diocese of Metuchen. The plan did comply with ERISA standards for more than 35 years, but stopped doing so in 2006.

The judge cited an earlier ruling that found that in order for a pension plan to be deemed an exempt church plan, it must have been instituted by a church. It can be managed by a church-controlled or associated organization, but it must have been established by a church. The judge further explained that if he were to accept the hospital’s argument, it would mean that “any tax-exempt organization can establish its own pension plan, maintain it, and then employ the church plan exemption by purporting to be controlled by or associated with a church.” He called this a “slippery slope.”

The hospital plans to appeal the decision.

ERISA is a very important and very complicated law. Despite the protections it provides workers and retirees, even covered employer-sponsored retirement plans are notorious for skirting requirements. If you have a legal concern regarding your employer-provided retirement benefits, it is important to talk to an attorney who has experience handling ERISA claims.

Source: My Central Jersey, “Federal judge: Saint Peter’s pension case can proceed,” Bob Makin, April 4, 2014