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Professor Norman Stein Discusses Case that Could Bankrupt Religious Schools and Hospitals in The Atlantic

Professor Norman P. Stein

December 14, 2016

A Dec. 12 article in The Atlantic concerning a case before the U.S. Supreme Court that could seal the financial fate of a generation of workers employed by religiously affiliated schools, hospitals, nursing homes and orphanages quoted Professor Norman Stein extensively.  

Three consolidated cases turn on the language of the Employee Retirement Income Security Act, which created rules that require employers to handle their workers’ pension and retirement plans responsibly, the article said.

But, Stein explained, churches and religious organizations were made exempt from the rules for reasons partly because of a reluctance on the part of Congress to make churches have to open their books to the government.

“People felt that it’s the church—it’s not going to let its plan fail and screw its employees,” Stein said. “Some of the writing about the statute has speculated that this was a reason, too—churches are moral institutions that are going to stand behind their promise, because that’s what religions do.”

Several religious-affiliated hospitals have terminated their pension plans leaving retirees without a nest egg the article said, adding that the pending cases before the Supreme Court will determine if religious organizations should be exempt from ERISA.

Stein said the lack of clarity on this question dates back to 1974, when ERISA was first passed.

“This went on for as long as it did (because) there was no regulation, no formal rule-making” as to the way the IRS defines religiously affiliated employers, Stein said.  

As these religious affiliated employers’ pension plans were redefined in the 1990s and 2000s, he said, they were not required to advise workers of changes to benefits.   

“By and large, employees didn’t even know it was happening—churches didn’t write a letter saying, ‘By the way, we just decided to screw you,’” Stein said.