KAPLAN v. SAINT PETER'S HEALTHCARE SYSTEM et al

Filing 68

MEMORANDUM OPINION. Signed by Judge Michael A. Shipp on 03/31/2014. (FH)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
_____________________________________
:
LAURENCE KAPLAN, on behalf of himself, :
individually, and on behalf of others similarly :
situated,
:
:
Plaintiff,
:
:
Civil Action No. 13-2941 (MAS)(TJB)
v.
:
:
SAINT PETER’S HEALTHCARE SYSTEM, :
MEMORANDUM OPINION
RONALD C. RAK, an individual, SUSAN
:
BALLESTERO, an individual, GARRICK
:
STOLDT, an individual, and JOHN and JANE :
DOES, each an individual, 1-20,
:
:
Defendants.
:
:
SHIPP, District Judge
This matter comes before the Court upon the motions of Defendants Saint Peter’s Healthcare
System, Ronald C. Rak, Susan Ballestero, and Garrick Stoldt (collectively, “SPHS” or “Defendants”)
pursuant to Federal Rules of Civil Procedure (“Rule”) 12(b)(1) and 12(b)(6). (Defs.’ Br., ECF No.
42-1.) Plaintiff Laurence Kaplan (“Plaintiff” or “Mr. Kaplan”) opposed Defendants’ motions (Pl.’s
Opp’n, ECF No. 48) and Defendants replied (Defs.’ Reply, ECF No. 54).
Plaintiff brought this putative class action on behalf of participants and beneficiaries of the
Saint Peter’s Healthcare System Retirement Plan (the “Plan”), alleging that the Plan is being
improperly maintained by SPHS as a “church plan” under the Employee Retirement Income

Security Act (“ERISA”), 29 U.S.C. § 1001 et seq. This case requires the Court to determine the
metes and bounds of ERISA’s church plan exemption, as defined in 29 U.S.C. § 1002(33). The
Court, in particular, must determine whether a non-profit healthcare corporation may establish and
maintain a church plan if it is controlled by or associated with a church. If answered in the

affirmative, the Court must then determine whether this interpretation of the church plan definition
violates the Establishment Clause of the United States Constitution.
After carefully considering the Parties’ submissions and hearing oral argument on March 27,
2014, the Court holds that, as a matter of law, SPHS’s employee pension Plan is not a church plan.
Therefore, for the reasons set forth below and other good cause shown, Defendants’ Motion to
Dismiss is DENIED.
I.

BACKGROUND
A.

Overview of the Employee Retirement Income Security Act

In 1974, Congress passed ERISA, which “is a comprehensive statute designed to promote
the interests of employees and their beneficiaries in employee benefit plans.” Shaw v. Delta Air
Lines, Inc., 463 U.S. 85, 90 (1983). It is a federal law that regulates private industry pension
plans, retirement plans, profit-sharing plans and health insurance coverage. For such plans,
ERISA establishes rules and minimum standards that are meant to protect plan participants.
Nothing in ERISA mandates employers to create these plans; it only sets the standards for those
that choose to establish them.
In alignment with its purpose, ERISA “seek[s] to ensure that employees will not be left
empty handed once employers have guaranteed them certain benefits.” Lockheed Corp. v. Spink,
517 U.S. 882, 887 (1996). “To increase the chances that employers will be able to honor their
benefits commitments—that is, to guard against the possibility of bankrupt pension funds—
Congress incorporated several key measures into ERISA.” Id. These measures include, among
other things, minimum funding and vesting requirements for all ERISA covered plans and rules
concerning reporting, disclosures, and fiduciary responsibilities. See, e.g., 29 U.S.C. § 1082.
Although private sector employee benefit plans typically come under ERISA’s purview,
there are limited exemptions. One such exemption is the church plan. Church plans were
2

exempted from ERISA because the examination of a church’s books by the government might be
regarded as “an unjustified invasion of the confidential relationship that is believed to be appropriate
with regard to churches and their religious activities.” Report of Senate Finance Comm., No. 93-383
(Aug. 21, 1973). As a result, a church plan is exempt from ERISA’s requirements unless an
election is made under the Internal Revenue Code (“IRC”), 26 U.S.C. § 410(d). 29 U.S.C.
§ 1003(b)(2).
B.

The Plan

SPHS is a non-profit healthcare corporation headquartered in New Brunswick, New
Jersey. (Compl., ECF No. 1, ¶¶ 25, 44.) According to Plaintiff, SPHS does not receive funding
from the Catholic Church or other religious entities but, instead, relies on revenue bonds to raise
money. (Id. ¶¶ 47, 49, 85.) SPHS owns Saint Peter’s University Hospital and Saint Peter’s
Health and Management Services Corporation, among other companies. (Id. ¶ 44.) SPHS
employs over 2,800 people and, in 1974, established the Plan, which is a non-contributory
defined benefit pension plan. (Id. ¶¶ 25, 45, 56, 68; see also id. ¶¶ 61-62, 66-67, 70-72.) For over
thirty years, the Plan was operated as an ERISA plan—meaning, it complied with ERISA’s
requirements regarding funding, reporting, and insurance premiums paid to the Pension Benefit
Guarantee Corporation (“PBGC”)—and represented such to its employees via Plan documents
and other written materials. (Id. ¶¶ 56-57.)
In 2006, during the rise of the nationwide economic downturn, SPHS “concluded that [its
Plan] was a church plan” and proceeded to file an application for church-plan status with the
Internal Revenue Service (“IRS”). (Id. ¶ 58.) Meanwhile, SPHS continued to pay insurance
premiums to PBGC as an ERISA plan. (Id.) Notwithstanding its IRS application, SPHS waited
until November 2011 to notify its employees of its application for church-plan status. (Id. ¶ 59.)

3

On August 14, 2013, in a private letter ruling, the IRS concluded that SPHS’s Plan is a church
plan as defined in ERISA.1 (Stoldt Supplemental Cert., ECF No. 45-1, Ex. A.)
C.

Plaintiff’s Grievance

Mr. Kaplan is one of many current or former employees of SPHS purportedly affected by
SPHS’s alleged conversion of its Plan from an ERISA plan to a church plan, exempt from
ERISA. (Compl. ¶ 24.) Mr. Kaplan worked for SPHS from 1985-1999. (Id.) He is a participant
in the Plan maintained by SPHS because he is or will be eligible for pension benefits under the
Plan. (Id.) Mr. Kaplan brings this action, pursuant to Rule 23(b)(1) and (b)(2), on behalf of
himself and others who are participants or beneficiaries of “any Plan operated or claimed by
[SPHS] to be a [c]hurch [p]lan as of [May 7, 2013,]” the date of the Complaint. (Id. ¶ 95.)
Plaintiff’s principal grievance is that SPHS is improperly maintaining its Plan to the
detriment of its employees. (Id. ¶ 2.) Strictly speaking, he alleges that SPHS is employing
church-plan status to evade ERISA’s various requirements including underfunding the Plan by
over $70 million. (Id. ¶¶ 14, 65.) Mr. Kaplan’s concerns are manifested in his eight-count
Complaint, alleging various ERISA violations including violations of ERISA’s requirements for
reporting and disclosure, minimum funding, establishment of a trust, and for breach of fiduciary
duties. He seeks, among other things, an order declaring that the Plan is not a church plan exempt
from ERISA or, in the alternative, that the church plan exemption, as claimed by SPHS, is an
unconstitutional accommodation under the Establishment Clause.2

1

SPHS received this ruling after the Complaint was filed.

2

The United States has filed a Notice to Intervene regarding Plaintiff’s constitutional claim. (ECF
No. 56.)
4

II.

DISCUSSION
Defendants move to dismiss Plaintiff’s claims on two grounds: (1) lack of subject matter

jurisdiction, pursuant to Rule 12(b)(1), for Plaintiff’s claims arising under ERISA; and (2) failure to
state a claim for which relief can be granted, pursuant to Rule 12(b)(6), regarding Plaintiff’s
Establishment Clause claim. The Court will address each ground, in turn.
A.

The Court Has Subject Matter Jurisdiction of Plaintiff’s ERISA Claims

Before proceeding to review the merits of a case, the Court has a duty to assure itself that it
has subject matter jurisdiction. Plaintiff alleges that the Court has subject matter jurisdiction pursuant
to 29 U.S.C. § 1132(e)(1) for his claims brought under Title I of ERISA and 28 U.S.C. § 1331 based
on a federal question. (Compl. ¶ 19.) Defendants do not dispute the Court’s federal question

jurisdiction as to Plaintiff’s constitutional claim, but instead challenge subject matter jurisdiction
of Plaintiff’s ERISA claims. (Defs.’ Br. 14.)
A defendant may challenge the court’s subject matter jurisdiction with either a facial or
factual attack. See Gould Elecs. Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000), modified by
Simon v. United States, 341 F.3d 193, 195 (3d Cir. 2003). Defendants have launched a factual attack,
appending various extrinsic certifications and exhibits to their motion. (See ECF No. 42.) The
extrinsic documents purportedly support their position that SPHS’s Plan is a church plan exempt
from ERISA and, therefore, outside of this Court’s subject matter jurisdiction. (See Defs.’ Br. 14-33.)
As amended in 1980, the current definition of a church plan provides, in pertinent part:
(A) The term “church plan” means a plan established and maintained (to the extent
required in clause (ii) of subparagraph (B)) for its employees (or their beneficiaries)
by a church or by a convention or association of churches which is exempt from tax
under section 501 of Title 26.
****
(C) For purposes of this paragraph--

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(i) A plan established and maintained for its employees (or their beneficiaries) by a
church or by a convention or association of churches includes a plan maintained by
an organization, whether a civil law corporation or otherwise, the principal purpose or
function of which is the administration or funding of a plan or program for the
provision of retirement benefits or welfare benefits, or both, for the employees of a
church or a convention or association of churches, if such organization is controlled
by or associated with a church or a convention or association of churches.
(ii) The term employee of a church or a convention or association of churches
includes-(I) a duly ordained, commissioned, or licensed minister of a church in the exercise of
his ministry, regardless of the source of his compensation;
(II) an employee of an organization, whether a civil law corporation or otherwise,
which is exempt from tax under section 501 of Title 26 and which is controlled by or
associated with a church or a convention or association of churches; and
(III) an individual described in clause (v).
(iii) A church or a convention or association of churches which is exempt from tax
under section 501 of Title 26 shall be deemed the employer of any individual
included as an employee under clause (ii).
(iv) An organization, whether a civil law corporation or otherwise, is associated with
a church or a convention or association of churches if it shares common religious
bonds and convictions with that church or convention or association of churches.
****
29 U.S.C. § 1002(33).3
1.

Parties’ Positions

According to SPHS, its Plan is a church plan exempt from ERISA for two primary reasons:
(1) because SPHS and its Retirement Plan Committee, charged with maintenance of the Plan, are
controlled by and associated with the Roman Catholic Church, as outlined under § 1002(33)(C)(i);
and (2) because SPHS’s employees are considered employees of the Roman Catholic Church under
§ 1002(33)(C)(ii)(II). (Defs.’ Br. 1, 21.)

3

The IRC contains a virtually identical definition. See 26 U.S.C. § 414(e).
6

At the base of SPHS’s factual assertions, however, is a significant legal one: that a pension
plan established and maintained by a tax exempt corporation controlled by or associated with a
church is a church plan. (Defs.’ Br. 15.) Plaintiff not only disputes Defendants’ factual assertions, but
his interpretation of the church plan definition differs in that he reads the definition as allowing only
a church or a convention or association of churches—which SPHS is not—to establish and maintain
a church plan. (Pl.’s Opp’n 1-2.) Despite their different interpretations of the church plan definition,
neither party asserts that the definition is ambiguous. (See Defs.’ Br. 17; Pl.’s Opp’n 10-11.)
The Parties’ dispute is one centered on, and resolved by, the statutory construction of
ERISA’s church plan definition, to which the Court now turns.
SPHS’s Plan is Not a Church Plan

2.

When interpreting a statute, a court “must give effect to the unambiguously expressed intent
of Congress.” Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984).
To ascertain Congress’ intent, the Court “begin[s] with the language of the statute. The first step ‘is
to determine whether the language at issue has a plain and unambiguous meaning with regard to the
particular dispute in the case.’” Barnhart v. Sigmon Coal Co., Inc., 534 U.S. 438, 450 (2002)
(quoting Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997)); accord United States v. Cooper, 396
F.3d 308, 310 (3d Cir. 2005). Where the text provides a clear answer to the interpretive question, the
analysis ends there as well. Cooper, 396 F.3d at 310 (citing Steele v. Blackman, 236 F.3d 130, 133
(3d Cir. 2001)). “In all events, it is not [the Court’s] task to assess the consequences of each approach
and adopt the one that produces the least mischief. [The Court’s] charge is to give effect to the law
Congress enacted.” Lewis v. City of Chicago, 560 U.S. 205, 217 (2010).
a)

Plain Text Analysis

As previously stated, the interpretive question here is whether a non-profit entity, purportedly
controlled by or associated with a church, may both establish and maintain a church plan. Based on
the plain text of the statute, the simple answer is no. Starting with subsection A, it is clear that
7

Congress intended for a church plan—first and foremost—to be established by a church. Once the
church establishes the plan, the church must also maintain it. From these two requirements, a church
plan is born—hence, “[t]he term ‘church plan’ means a plan established and maintained . . . by a
church or by a convention or association of churches . . . .” 29 U.S.C. § 1002(33)(A) (emphasis
added). However, in subsection C(i), Congress expanded the maintenance requirement outlined in
subsection A: a church plan, as defined in subsection A,
includes a plan maintained by an organization, whether a civil law corporation or
otherwise, the principal purpose or function of which is the administration or funding
of a plan or program for the provision of retirement benefits or welfare benefits, or
both, for the employees of a church or a convention or association of churches, if
such organization is controlled by or associated with a church or a convention or
association of churches.
29 U.S.C. § 1002(33)(C)(i) (emphasis added). Put differently, Congress has explicitly provided two
ways to fall within the church plan exemption: (1) a plan established and maintained by a church, or
(2) a plan established by a church and maintained by a tax-exempt organization, the principal
purpose or function of which is the administration or funding of the plan, that is either controlled by
or associated with a church. Once a church plan is established in one of these ways, subsection C(ii)
delineates what individuals may participate in the church plan as employees of the church.
The key to this interpretation is to recognize that subsection A is the gatekeeper to the church
plan exemption: although the church plan definition, as defined in subsection A, is expanded by
subsection C to include plans maintained by a tax-exempt organization, it nevertheless requires that
the plan be established by a church or a convention or association of churches. In other words, if a
church does not establish the plan, the inquiry ends there. If, on the other hand, a church establishes
the plan, the remaining sections of the church plan definition are triggered.
b)

SPHS’s Interpretation

Defendants, nevertheless, argue that the definition does not mean what it says. To bolster its
more general argument that a tax-exempt organization controlled by or associated with a church may
8

establish and maintain a church plan, SPHS grasps upon two specific propositions. SPHS first
highlights the fact that ERISA does not define the term “church.” (Defs.’ Br. 17.) To fill this
statutory crevice, SPHS provides its own definition to show that its Plan meets the requirements of
the church plan exemption. According to SPHS, reading subsection C “into” subsection A, “a
‘church’ for the purposes of the statute is broader than simply an institution for religious worship[.]”
(Id. at 18.) Specifically, SPHS asserts that subsection C expands the definition of a church to include
“any federally tax exempt corporation controlled by or in association with such an institution that
establishes and maintains a retirement plan for its employees, and a retirement plan established by
the corporation for those employees is a church plan.” (Id.) At oral argument, Defendants further
justified their interpretation by contending that Plaintiff’s interpretation would render the term
“includes” in subsection C(i) and the entirety of subsection C meaningless. (Mar. 27, 2014 Rough Tr.
22:11-24; see also Defs.’ Resp. to Pl.’s 2d Notice, ECF No. 59, 3-5.) SPHS’s interpretation,
however, is contrary to the plain text and the Court will address each of Defendant’s arguments, in
turn.
First, when interpreting a statute, the Court must be guided by the principle that Congress
says what it means and means what it says. Hartford Underwriters Ins. Co. v. Union Planters Bank,
N.A., 530 U.S. 1, 6 (2000); In re Phila. Newspapers, LLC, 599 F.3d 298, 304 (3d Cir. 2010). It is no
secret that ERISA is an “enormously complex and detailed statute[.]” Conkright v. Frommert, 559
U.S. 506, 509 (2010). As such, the Court concludes that Congress was cautious in crafting the
definition of a church plan and therefore the definition means what it says—that a church plan must,
from the outset, be established by a church and can be maintained by an organization controlled by or
associated with a church. In essence, Defendants urge the Court to read subsection C(i) as follows:
A plan established and maintained for its employees (or their beneficiaries) by a
church or by a convention or association of churches includes a plan [established
and] maintained by an organization, whether a civil law corporation or otherwise . . .
if such organization is controlled by or associated with a church or a convention or
association of churches.
9

Congress could have added this language to subsection C, but decidedly did not. To be sure,
Congress made the above distinction in the definition of a “governmental plan,” which is the
definition immediately preceding the church plan definition. The governmental plan definition states,
in pertinent part:
The term “governmental plan” means a plan established or maintained for its
employees by the Government of the United States, by the government of any State
or political subdivision thereof, or by any agency or instrumentality of any of the
foregoing . . . . The term “governmental plan” includes a plan which is established
and maintained by an Indian tribal government . . . a subdivision of an Indian tribal
government . . . or an agency or instrumentality of either[.]
29 U.S.C. § 1002(32) (emphasis added).
Second, Defendants’ interpretation ignores—and renders superfluous—Section A which
requires a church to establish a church plan. See Alexander v. Riga, 208 F.3d 419, 430 (3d Cir. 2000)
(when interpreting a statute, a court must give effect, if possible, to every word and clause of a
statute). If the Court were to accept SPHS’s interpretation, 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. In this context, a tax-exempt organization itself would
have to be considered a church under the statute because a church is the only entity allowed to
establish a church plan. Defendants’ contention in this regard is unreasonable. The Court cannot
conclude that Congress intended to create this slippery slope, especially considering that the point of
enacting ERISA was to promote the interest of employees and their beneficiaries. Opening the door
to expand the church plan exemption to this extent would place more employees at risk of having
insufficient benefits upon retirement. What must be kept in mind is that ERISA is a remedial statute,
so any exemptions included thereunder should be construed narrowly. See Rodriguez v. Compass
Shipping Co., 451 U.S. 596, 614 n.33 (1981). Defendants’ interpretation would achieve quite the
opposite.

10

On the other hand, Defendants insist that Plaintiff’s and the Court’s interpretation of the
definition would render the term “includes,” as provided in subsection C(i), meaningless. The Court
disagrees. The Court’s interpretation expands the definition of a church plan for the limited purpose
of allowing a plan that is first established by a church to include a plan that is maintained by a taxexempt organization. The term “includes” merely provides an alternative to the maintenance
requirement but does not eliminate the establishment requirement. In addition, the Court’s
interpretation does not render the entire subsection of C meaningless. As stated above, after a church
establishes a plan, subsection C provides clarity as to who can participate in the church’s plan and the
requirements for a tax-exempt organization, other than the church, to maintain a church-established
plan. Defendants’ interpretation would expand the church plan definition to untenable bounds and, in
the process, change the plain text of the statute.
Third, when examining the text of a statute, the Court must interpret statutory words as
taking their ordinary, common meaning unless otherwise defined by Congress. See Perrin v. United
States, 444 U.S. 37, 42 (1979). The Court does not venture to define “church” but, needless to say,
the Court cannot conclude that Congress intended for a tax-exempt agency, controlled by or
associated with a church, to be considered a church under the statute. Despite SPHS’s own definition
of a church, it does not appear to be arguing that it is a church. (See Defs.’ Br. 18; see also Defs.’
Resp. to Pl.’s 2d Notice 5.) This became evident at oral argument when it seemingly retreated from
its original position. (Mar. 27, 2014 Rough Tr. 24:5-7.)
Finally, the Court’s reading of the statute is consonant with the two appellate decisions that
have addressed the church plan definition. In both Lown v. Continental Casualty Co., 238 F.3d 543
(4th Cir. 2001) and Chronister v. Baptist Health, 442 F.3d 648 (8th Cir. 2006), the Fourth and Eighth
Circuits concluded that the entities at issue did not meet the definition of a church plan based on
factual findings. See Lown, 238 F.3d at 548 (considering whether a disability plan was a church plan,
but finding that Baptist Healthcare and the South Carolina Baptist Convention mutually ended their
11

affiliation); Chronister, 442 F.3d at 652 (finding that Baptist Health severed its ties with the
Arkansas Baptist State Convention in 1966). The courts were not faced with the legal issue present
before the Court and therefore did not need to address it.
Furthermore, the case law relied upon by Defendants is unpersuasive. Defendants primarily
rely on Thorkelson v. Publishing House of Evangelical Lutheran Church, 764 F. Supp. 2d 1119 (D.
Minn. 2011), for the proposition that a tax-exempt organization controlled by or associated with a
church can establish and maintain a church plan. (Defs.’ Br. 23, 30.) In Thorkelson, plaintiffs made
the same arguments as Mr. Kaplan—that the benefit plan for defendant Augsburg Fortress Publishers
(“AFP”), a non-profit publisher for the Lutheran Church, was not a church plan because it was
sponsored by AFP. Thorkelson, 764 F. Supp. 2d at 1125. Interpreting the church plan definition, the
court concluded that AFP’s plan was a church plan exempt from ERISA. Id. at 1126. Even though
plaintiff conceded that AFP was controlled by the Lutheran Church, the court focused its statutory
analysis on whether the plan was sponsored by a tax-exempt entity that is controlled by or associated
with a church. Id. at 1126-27. However, its interpretation did not apply § 1002(33)(A), which
requires—from the outset—a plan to be established by a church. The court also noted that
defendants’ position was supported by case law and agency decisions of the IRS and Department of
Labor (“DOL”). Id. at 1125.
On the other hand, a recent decision from the Northern District of California is more
persuasive. In Rollins v. Dignity Health, No. C13–1450 TEH, 2013 WL 6512682 (N.D. Cal. Dec. 12,
2013), plaintiff brought similar ERISA claims as Mr. Kaplan, alleging that defendant’s pension plan
was not a church plan because it was sponsored by a non-profit healthcare organization and not a
church. Rollins, 2013 WL 6512682, at *2. After a thorough analysis of the statutory text, the court
concluded that
notwithstanding section C, which permits a valid church plan to be maintained by
some church-affiliated organizations, section A still requires that a church establish a
church plan. Because the statute states that a church plan may only be established “by
12

a church or by a convention or association of churches,” only a church or a
convention or association of churches may establish a church plan. 29 U.S.C.
1002(33)(A). Dignity’s effort to expand the scope of the church plan exemption to
any organization maintained by a church-associated organization stretches the
statutory text beyond its logical ends.
Id. at *5. The Rollins court’s interpretation of the church plan definition is in accord with this Court’s
decision.
Defendants reiterate that Thorkelson is in alignment with thirty years of judicial decisions,
but none of these previous decisions undertook a detailed statutory analysis of the church plan
definition as Judge Henderson did in Rollins. Instead, these prior decisions often bypassed subsection
A of the definition and immediately applied subsection C(i), made conflicting determinations
regarding the limitations of C(i), or even misstated the text of subsection C(i). See, e.g., Rhinehart v.
Life Ins. Co. of N. Am., No. C08-5486 RBL, 2009 WL 995715, at *2 (W.D. Wash. Apr. 14, 2009)
(misquoting subsection A as providing that a church plan means a plan “established or maintained”
by a church and concluding that subsection C(i) does not expand the definition of a church plan)
(emphasis added); Catholic Charities of Maine, Inc. v. City of Portland, 304 F. Supp. 2d 77, 85 (D.
Me. 2004) (adding words to the plain text when it concluded that “ERISA brings a plan established
or maintained by a non-church organization within the general definition of ‘church plan’ if that
organization is ‘controlled by’ or ‘associated with’ a church”) (emphasis added); Friend v. Ancillia
Sys. Inc., 68 F. Supp. 2d 969, 973 (N.D. Ill. 1999) (pre-Lown decision considering whether a church
plan is required to be maintained by an organization, the principal purpose of which is administering
or funding the plan, and holding that this was not a requirement).
The Court finds that Plaintiff’s interpretation of the church plan definition provides a
common sense reading of the statute based on its plain text. Accordingly, for the foregoing reasons,
which are dispositive, the Court finds, as a matter of law, that SPHS’s Plan is not a church plan and
that the Court has subject matter jurisdiction of Plaintiff’s ERISA claims.

13

3.

Legislative History Does Not Justify a Departure from the Plain Text

Both Parties seek refuge in the legislative history by pointing particularly to comments made
on the congressional floor that purportedly support their reading of the statute. However, “where the
text of a statute is unambiguous, the statute should be enforced as written and ‘[o]nly the most
extraordinary showing of contrary intentions in the legislative history will justify a departure from
that language.’” In re Phila. Newspapers, LLC, 599 F.3d at 314 (quoting United States v. Albertini,
472 U.S. 675, 680 (1985)). The Parties have not made such a showing here. See Estate of Arrington
v. Michael, 738 F.3d 599, 606 (3d Cir. 2013) (“[S]elective invocation of fragments of the floor
debate is an object lesson in the perils of appealing to . . . legislative history as a guide to statutory
meaning . . . . The law is what Congress enacts, not what its members say on the floor.”) (citations
omitted).4
4.

The IRS Private Letter Ruling Is Contrary to the Plain Text

Were the Court to conclude that the church plan definition is ambiguous as to what entity can
establish and maintain a church plan, the Court could defer to an agency’s reasonable interpretation
of the statute. See Chevron, 467 U.S. at 842-43. Although the Court has determined Congress’ intent
based on the plain text, it seems appropriate to discuss the DOL and IRS private letter rulings; not
only because SPHS has received an IRS private letter ruling on this issue, but because these rulings
seem to be somewhat responsible for the overbroad application of the church plan exemption. See
Gen. Counsel Mem. (“GCM”) 39007 (July 1, 1983) (post-amendment interpretation of the church
plan definition, which concluded that plans established and maintained by two Catholic orders—not
4

The Court notes, however, that in 1978, when Representative Barber B. Conable, Jr. introduced a
bill to amend the church plan definition in the Internal Revenue Code of 1954, the proposed language
of what is now subsection C(i) read, in pertinent part: “A plan established and maintained by a
church . . . shall include a plan established and maintained by an organization . . . .” 124 Cong. Rec.
12108 (May 2, 1978) (emphasis added). The subsequent 1980 amendment of the church plan
definition excluded the word “established” from subsection C(i). See, e.g., Doe v. Chao, 540 U.S.
614, 622 (2004) (acknowledging that “drafting history show[s] that Congress cut the very language
in the bill that would have authorized any presumed damages”).
14

churches—that operated nursing homes and hospitals, were church plans). Since the 1983 GCM,
dozens of IRS private letter rulings have held that a church-related agency can establish its own
church plan. The DOL has also issued advisory opinions on church-related agencies, concluding that
their plans are church plans. See, e.g., Advisory Op. 94-04A (Feb. 17, 1994) (interpreting the church
plan definition as follows: “In accordance with Section 3(33)(C)(iii) . . . the Church is deemed the
employer of these individuals for purposes of the church plan definition in section 3(33); and the
Church, as employer, is deemed to have established and to maintain the Plans.”) (emphasis added).
Defendants argue that, “though not binding on the Courts, [these rulings] are entitled to
deference in accord with their persuasive power” to the extent that they are reasonable and consistent
with the text and legislative history. (Defs.’ Br. 20; see also id. at 21-22.) In response, Plaintiff
asserts that the agency determinations should not be given deference because they are inconsistent,
unpersuasive, and interpret the statute differently than the courts. (Pl.’s Opp’n 15-16.) Defendants
concede that courts and agencies interpret the church plan definition differently, but maintain that
agency decisions are entitled to deference. (Defs.’ Reply 5-6.) Moreover, Defendants assert that
congressional silence regarding the church plan definition gives the agency decisions the force of
law. (Mar. 27, 2014 Rough Tr. 6:5-10; 18:6-10.)
Although SPHS has received a private letter ruling, the Court cannot give it deference for
several reasons. As an initial matter, the ruling conflicts with the plain text of the statute and is
therefore unreasonable. “The judiciary is the final authority on issues of statutory construction and
must reject administrative constructions which are contrary to clear congressional intent.” See
Chevron, 467 U.S. at 843 n.9. Furthermore, the IRS private letter ruling is conclusory, lacking any
statutory analysis, and cannot be used as precedent because the ruling was issued in a non-adversarial
setting based on information supplied by SPHS. See 26 U.S.C. § 6110(k)(3); see also Christensen v.
Harris Cnty., 529 U.S. 576, 586-87 (2000) (pointing out that an agency’s opinion letters, policy

15

statements, agency manuals, and enforcement guidelines – unlike regulations adopted through
“formal adjudication or notice-and-comment rulemaking” – “do not warrant Chevron-style
deference”). In addition, courts have long held that congressional silence, alone, in the wake of
administrative rulings does not give the rulings the force of law. See Brown v. Gardner, 513 U.S.
115, 121-22 (1994) (“As we have recently made clear, congressional silence ‘lacks persuasive
significance,’ . . . particularly where administrative regulations are inconsistent with the controlling
statute . . . .”) (citations and internal quotations omitted); Aaron v. SEC, 446 U.S. 680, 694 n.11
(1980) (“[I]t is our view that the failure of Congress to overturn the Commission’s interpretation falls
far short of providing a basis to support a construction . . . so clearly at odds with its plain meaning
and legislative history.”) (citation omitted); Girouard v. United States, 328 U.S. 61, 69 (1946) (“It is
at best treacherous to find in congressional silence alone the adoption of a controlling rule of law.”);
cf. Lorillard, Div. of Loew’s Theatres, Inc. v. Pons, 434 U.S. 575, 580-81 (1978) (“Congress is
presumed to be aware of an administrative or judicial interpretation of a statute and to adopt that
interpretation when it re-enacts a statute without change . . . .”) (internal citations omitted) (emphasis
added). The church plan definition has not been amended since 1980 and Defendants cannot now use
congressional silence to turn agency rulings into law.5

5

On this point, Defendants appear to make a secondary argument that when an agency, such as the
IRS, is charged with the responsibility of administering a “congressional act,” deference should be
given to its rulings. (See Mar. 27, 2014 Rough Tr. 5:23-6:1.) However, Defendants have not cited
any precedent showing that Congress delegated authority for the IRS to issue regulations to define
terms within the ERISA church plan definition. Compare Christopher v. Smithkline Beecham Corp.,
132 S. Ct. 2156, 2162, 2165 (2012) (noting that Congress delegated authority to the DOL to issue
regulations and define the term “outside salesman” in the Fair Labor Standards Act, 29 U.S.C. §
213(a)(1), which states, in part, “any employee employed . . . in the capacity of an outside salesman
(as such terms are defined and delimited from time to time by regulations of the Secretary . . . .”))
(emphasis added), with Bellas v. CBS, Inc., 221 F.3d 517, 524, 532 (3d Cir. 2000) (stating that
Congress contemplated the Treasury Department setting forth the definition of “retirement-type
subsidy” in ERISA, but nevertheless holding that the IRS’s interpretation was at odds with the statute
and the legislative history) (citing ERISA, 29 U.S.C. § 1054(g)(2)(A), which states, in part, “a plan
amendment which has the effect of . . . eliminating or reducing . . . a retirement-type subsidy (as
defined in regulations) . . . .) (emphasis added).
16

For the reasons stated above, Defendants’ motion to dismiss pursuant to Rule 12(b)(1) is
denied.6
B.

Violation of Establishment Clause of First Amendment

Plaintiff’s Establishment Clause claim is based upon the Court finding that SPHS’s Plan is a
church plan as defined in ERISA. (Pl.’s Opp’n 32.) Because the Court finds that, as a matter of law,
SPHS’s Plan is not a church plan, it is unnecessary for the Court to address this claim. As such,
Defendants’ motion to dismiss pursuant to Rule 12(b)(6) is denied.
III.

CONCLUSION
For the reasons set forth above, and other good cause shown, it is hereby ordered that

Defendants’ Motions to Dismiss pursuant to Rules 12(b)(1) and 12(b)(6) are DENIED. An Order will
be entered consistent with this Opinion.

s/ Michael A. Shipp______________
MICHAEL A. SHIPP
UNITED STATES DISTRICT JUDGE
DATED: March 31, 2014

6

Because the Court finds, as a matter of law, that the Plan is not a church plan, the Court does not
reach the merits of Defendants’ factual assertions in connection with their Rule 12(b)(1) motion to
dismiss or the Parties’ dispute regarding whether the church plan exemption is jurisdictional. For the
same reason, Plaintiff’s Motion to Strike certain certifications and exhibits (ECF No. 47) is denied as
moot.
17