I have used this anecdote before, so you can jump ahead if you have either read something where I have written it before or heard a talk of mine where I have said it, but if you haven’t, I have always thought it is a good lead in to any discussion of the church plan litigation. A long time client of mine was hired by his employer as an in-house staff lawyer in 1975, and was told that there is a new law, ERISA, and he is in charge of it. He once told me that, in the early years of ERISA, they used to operate by gut, analogy, metaphor and instinct in deciding what some of the terms meant and how they should be applied, given that much of the statute and its structure was, one, novel and, two, had not yet been interpreted by the courts. In those early years, he often had to decide whether a particular plan should be viewed as a governmental plan – which, much like church plans, are exempt from ERISA – and the test they applied was this: if it looked like it was run by a governmental type entity, quacked like it was run by one, and waddled like it was run by one, than it was a governmental plan, as far as he and his team were concerned.
I think much the same can be said about the status of church plans, and the belief that church plan status broadly applies, which has been followed by the IRS and many entities over the past 30 or so years. As the current litigation over the scope of the church plan exemption has demonstrated, the original assumption that the exemption should be broadly applied has a questionable foundation, and was not founded on the type of rigorous, extensive research and analysis we would normally assume underlies a significant act of statutory interpretation. And this, as much as any other reason, is why we are in the middle of very contentious and financially significant class action litigation over the scope of the church plan exemption, which has now landed in the Supreme Court.
Here are three very good articles on the litigation and on the argument on this issue before the Supreme Court this past Monday. One, from BNA Bloomberg, reflects the level of immediate detail and analysis on breaking ERISA decisions that has made them a mandatory follow for ERISA litigators (and which makes those of us old enough to remember waiting for weekly, paper summaries of decisions to show up in the mail feel like we began practicing law back in the 19th century, and not, as was the case, in the 1990s). The other two, from Planadviser and from The Economist, provide a broader perspective, for those of you who may not have followed the church plan cases as they have wound their way through the court system.
I am already on record on twitter on this (the risk of getting sucked into instant 140 character analysis is just too hard to resist, I am afraid), so I will go on the record with my prediction here as well: it will either end in a 4-4 tie or a 5-3 decision in favor of the plaintiffs in the underlying class action cases.