Category: Family Law

End of the Year Bonuses – Do They Have to Be Shared with My Ex?

The end of the year is coming, and for many employees that means end of the year bonuses will be included in their paychecks this month. Many question whether their bonus should be included as “income” for the purpose of support obligations, as well as equitable distribution in the context of a divorce.

A baseball manager from Arizona, Anthony DeFrancesco, recently faced issues surrounding his year-end bonus and how it related to his support obligations. Mr. DeFrancesco, the manager of the Houston Astros AAA minor league team, was given a $28,000 bonus in 2017 when the Astros won the World Series. The Arizona Appeals Court recently found that the bonus was considered a gift, as opposed to earnings, and he did not have to provide a portion of the bonus to his now ex-wife.

This result is not typically what happens in New Jersey when courts consider whether bonuses are a part of income. In the vast majority of cases, bonuses are awarded to employees for their exemplary work during the preceding year, often resulting from meeting specific targets, going above and beyond the work of a typical employee, and sharing in the success of the company without which the company would have not have otherwise reached. While employees are not legally entitled to bonuses in most cases, bonuses are most often the result of the employee’s hard work. Thus, in the eyes of most courts, the bonus was earned. Any earned income is considered by courts when setting support obligations.

In connection with equitable distribution, money that is earned during the marriage is considered an asset of the marital estate. Therefore, even if the complaint for divorce has already been filed, an end-of-year bonus may be considered a part of the marital estate. For example, if a complaint for divorce is filed on July 1, and an employee receives a bonus of $50,000 at the end of the year for work performed during the previous calendar year, half of that bonus would be attributable to time spent during the marriage.

New Jersey is a court of equity. Arguments can be made that bonuses, or portions of bonuses, should or should not be considered for support and equitable distribution purposes.

Several years ago there was a case in New Jersey in which a private company had been working for many years to go public. One of the company officers had been a long-time employee and, in fact, his dedication to the company to the exclusion of all else contributed to the failure of his marriage. Two years after the divorce complaint was filed, the company went public. The SEC filings noted that the employee received a bonus in excess of $1 million for his dedication to the company and work over the last five years. His wife was successful in her application to reopen the divorce and obtain a portion of that payout due to the evidence that it was for work conducted during the course of their marriage. While this case may be unique, it speaks to why each case has to be evaluated on its own merits, and why each case may have a different result.

COPYRIGHT © 2019, STARK & STARK

For more on spousal support obligations, see the National Law Review Family Law, Divorce and Custody law page.

What is a Holographic Will?

When a loved one passes, questions may arise as to who possesses the Decedent’s Last Will and Testament. If a formal document exists that was validly executed and was drafted by an attorney, chances are that the document is a valid Last Will and Testament unless a challenge is levied against it. What may become problematic is when a handwritten document in the testator’s own handwriting is discovered. The question then becomes if this handwritten document is a valid Last Will and Testament of the Decedent. In general, a handwritten instrument of this nature is called a Holographic Will, and may be enforceable provided certain requirements are met.

Typically, Courts often do the best they can to accept as a Last Will and Testament a writing by the Decedent where it is clear that the Decedent intended the instrument to be their Last Will and Testament. That is because the Courts would rather enforce the wishes of the Decedent than to allow the document to be invalidated based upon a mere formality. Perhaps the least formal of all Last Wills and Testaments which may be admitted to Probate is a document called a Holographic Will. These documents are relatively simple and are akin to something that a Decedent wrote on a piece of notebook paper and signed. The requirements of a Holographic Will are set forth below.

In general, pursuant to New Jersey S.A, 3B:3-2B, a Will can be considered a Holographic Will and admitted to Probate if the signature and the material portions of the document are in the Decedent’s handwriting. The Holographic Will must have all material testamentary provisions in the handwriting of the testator and also must be signed by the testator. What this means is that the provisions in the Will which dispose of the Decedent’s property must be in their own handwriting and not the handwriting of another. Further, the Will must be signed by the Decedent and not another party. As noted, this is a very simple instrument and is akin to a piece of notebook paper upon which a Decedent described how to transfer his/her property.

Provided the Will meets the requirements of a Holographic Will, it may be admitted to Probate and the Decedent’s Estate may be distributed in this regard. Different things could occur if not all the Decedent’s property is disposed of pursuant to a Holographic Will, however, that is best left for another blog. The purpose of this blog is to merely highlight one potentially type of valid Last Will and Testament which is informal in nature.

COPYRIGHT © 2019, STARK & STARK

Article by Paul W. Norris of Stark & Stark.
For more on wills & testaments, see the National Law Review Estates & Trusts law page.

Employers Beware: SC Abolishes Common-Law Marriage

On July 24, 2019, South Carolina joined the ranks of Alabama, Pennsylvania, and others in abolishing future recognition of common law marriages in the state.  The state will continue to recognize all common law marriages in effect before this date, but they will be subject to a higher standard of proof.  On and after July 25, 2019, all South Carolina marriages will require the issuance of a marriage license.

This ruling from the South Carolina Supreme Court came after many legislative attempts at abolishing common law marriage failed.  The court determined the paternalistic reasons behind the original recognition of a common law marriage, e.g., the stigma of unwed mothers, children out of wedlock, and the logistics of the “circuit minister” or other official required to cover a large territory, no longer apply.  With the elimination of future common law marriage recognition, the court also handed down a new standard of proof parties must meet to continue to be considered married under common law.  Probate cases in South Carolina use the “clear and convincing evidence” standard to prove marriage, and now this standard applies to the living too.

Our workforce is transient.  Employees residing in South Carolina often move across state lines for work and personal reasons.  And many companies with principal offices outside South Carolina choose to open locations in South Carolina.  For that reason, this ruling reaches beyond state lines, and it is important for all employers to understand its implications upon benefit plans and leaves of absence.

After July 24, 2019, it no longer is enough for employees claiming an employee is a “spouse” for employee benefit plan purposes simply to establish they were married under the common law of South Carolina.  Now, the critical factor is the date as of which that marriage was established.  The documents submitted to prove the marriage (e.g., tax returns, documents filed under penalty of perjury, introductions in public, contracts, and checking accounts) must also reflect this timing.

This Court decision will also have implications for employees in South Carolina seeking to take a leave of absence under the Family and Medical Leave Act to care for a spouse with a serious health condition.  Before July 25, 2019, eligible employees could take a leave of absence under the FMLA to care for a common law spouse with a serious health condition.  Yet after this Court ruling, employees can only take FMLA leave to care for a common law spouse if that common law marriage was established on or before July 24, 2019.  Employers should remember that under the Department of Labor’s FMLA Regulations, employees can be required to provide reasonable documentation evidencing the existence of a valid marriage.

Jackson Lewis P.C. © 2019

Mental Illness in Family Law & Divorce

According to the National Institute of Mental Health,

Not surprisingly, mental health issues come up in the context of a divorce in a variety of ways. They arise when mental health issues contribute to the breakdown of the marriage or relationship. For instance, a partner may suffer from a condition which causes him or her to behave in ways that are detrimental to the relationship. This can manifest itself in aggression, narcissism, and self-centered behavior to the detriment of the other partner or children, excessive spending impacting family finances, to engaging in dangerous behavior with a partner, and/or their children.

What happens when someone believes that their partner’s actions are caused by a mental illness? After a complaint for divorce has been filed, or other court process started, attention needs to be focused to the behavior, and steps should be taken to:

  1. Ensure that children are safe;
  2. Assets of the marriage are protected; and
  3. A plan is created to provide treatment options if children are involved.

If a spouse or partner is suffering from mental illness to the extent that he or she cannot make rational decisions, the court has a variety of options to protect that person, both personally and his or her property. The court can appoint a guardian for the person, particularly if the illness is so extreme as to cause a person to be incompetent.

If the litigant is ill, but not to the point of incompetency, the court can appoint a Guardian Ad Litem.

If a partner or spouse’s illness is creating a risk of assets being dissipated, a court can freeze accounts, and limit access to funds. A court may allow a third party to make payments on behalf of a litigant such as rent, etc.

There is little question that difficult issues arise when a parent suffers from mental illness. The courts, acting in the best interests of children, must make sure the child is safe, while at the same time safeguarding a parent’s rights to have a relationship with a child. When custody is an issue and one parent is alleging that the other suffers from a mental illness, the court will typically order an evaluation by a licensed mental health provider with experience in custody cases. The court may enter an order limiting, or prohibiting contact with the children pending the outcome of the evaluation. Then, depending on the outcome of the evaluation, the court may order therapy, medication, or other recommended treatment as a condition to parenting time. While the parent is undergoing treatment, the court can order supervised parenting time to make sure the children see the parent, but also making sure they are safe.

If substance abuse is part of the illness, there are options to make sure a child is not with a parent who is intoxicated. In addition to random drug testing, which the court can order as a condition of parenting time, there are devices, similar to mini breathalyzers to detect alcohol and certain other substances. These can be carried on someone’s person, in a pocket or purse, and they will be sent a random text instructing them to blow into it. A report will then be sent to the custodial parent, who can take steps to protect the children.

Sometimes, a child will suffer from a mental illness and the parents may differ as to the existence of the illness or for its treatment. This often results in a health care provider refusing to treat in the absence of agreement. In that case, either parent can petition the court for assistance, and an order allowing treatment.

COPYRIGHT © 2019, STARK & STARK.

This post was written by Jennifer Weisberg Millner of Stark & Stark

Read more about Divorce & Family Law on the National Law Review’s Family Law, Estate Planning and Personal Injury Legal News page

Three Critical Legal Documents Every Parent Should Get in Place Now to Safeguard Their Adult Children

As a parent, you might not fully appreciate that when your child turns 18 years of age, at least in the eyes of the law, you no longer have certain inherent rights related to medical and financial details about your adult child. For this reason, you’re strongly advised to get three simple legal documents in place to ensure you’re able to intervene on behalf of your adult child in the event your child is injured, becomes ill or is otherwise incapacitated.

These situations aren’t easy to think about, but imagine the following scenarios:

  • Your 19-year-old son, while away at college, is involved in a severe car accident and is rushed to the hospital unconscious.

  • Your unmarried 25-year-old daughter, while vacationing with friends in Hawaii, is unconscious in the hospital following a jet-skiing accident.

  • Your newly divorced 30-year-old son is hospitalized after suffering a brain hemorrhage and is put into a medically induced coma.

In each scenario, when you find out that your adult child is in the hospital, you immediately call for details about your child’s condition. You are horrified when the nurse says, “I’m sorry, but I am not authorized to provide you with any information or allow you to make any decisions.”

Here are insights about the three legal documents that would be prudent to have in place on behalf of your adult child before another day goes by.

1. HIPAA Authorization Form (for Authority to Speak with Healthcare Providers)

HIPAA, or the Health Insurance Portability and Accountability Act of 1996, exists for good reason; it is a federal law that safeguards who can access an adult’s private health data. If you call or visit the hospital to inquire about your adult child, as in the above scenarios, healthcare providers are prohibited by law from revealing health information to you – or anybody else – about your child; healthcare practitioners could face severe penalties if they violate HIPAA laws.

This illustrates why a HIPAA authorization, signed by your adult child and naming you as an authorized recipient, is so critical. It gives you the ability to ask for and receive information from healthcare providers about your child’s health status, progress, and treatment. This is particularly important in the event your adult child is unconscious or incapacitated for a period of time. Without a HIPAA authorization in place, the only other way to obtain information regarding your child’s health would be to go to court.

2. Healthcare Power of Attorney (for Medical Decisions)

If your adult child signs a Healthcare Power of Attorney naming you his/her “medical agent,” you will have the ability to view your child’s medical records and make informed medical decisions on his/her behalf. Without this document or a court-appointed guardianship, healthcare decisions concerning your child’s diagnosis and treatment will be solely in the hands of healthcare providers. While this is not always a bad thing, a physician’s primary duty is to keep the patient alive. So, a healthcare provider might not pursue a risky or experimental course of treatment at the risk of exposure to liability.

Keep in mind that doctors prefer to see one medical agent named rather than multiple medical agents. The concern is that multiple medical agents may not agree on the medical course of action to take on behalf of the incapacitated adult. As a best practice, it’s prudent to name multiple agents in priority order with single authority; for example, the adult child’s mother might be listed first as the medical agent; if the mother is unable or unwilling to serve in that capacity, the second person listed—say the child’s father—would be empowered to step in.

3. General Durable Power of Attorney (for Financial Decisions)

If your adult child were ever incapacitated, you would also benefit greatly from having a General Durable Power of Attorney in place, where you were named as the “agent” authorized to make financial decisions on his/her behalf. This would allow you as the named agent to manage bank accounts, pay bills, sign tax returns, apply for government benefits, break or apply for a lease, and conduct similar activities relating to your child’s financial and legal affairs. Otherwise, you will not be able to assist your child in managing his or her financial affairs without a court-appointed conservatorship.

Important Considerations

There are some important considerations to keep in mind regarding these documents:

  • Update these forms yearly. Be prepared to have your adult child re-sign and re-execute these documents every couple of years. This is especially critical for Powers of Attorney. The institutions where you would be most likely to use these documents – such as hospitals and banks – might refuse to honor them if they perceive them to be outdated.

  • These documents are only as good as the institutions that will accept them. Making sure these documents are properly executed is half the battle; whether they will be accepted by the involved institutions is the other half of the battle—one you don’t have complete control over.

  • These documents can be revoked at any time by your adult child either orally or in writing. Your adult child retains control of the ongoing validity of these documents; therefore, your best bet is to maintain a trusting relationship with your child so he/she sees the benefit of giving you the access and control these documents afford.

  • For adult children attending college at an out-of-state university, parents will want to execute separate documents in both the student’s home state and college state. If your daughter is from Denver but is attending college in Los Angeles, you’ll want one set of documents prepared under and governed by Colorado law and a second set of documents prepared under and governed by California law.

Copyright © 2019 Ryley Carlock & Applewhite. A Professional Association. All Rights Reserved.

A Year-End Estate and Financial Planning Checklist: Make Your List and Check it Twice

During the holidays, it can be hard to find the time (or desire) to review your finances and estate plan. To help with that effort, here is a short list of things that you can easily accomplish before the ball drops on New Years’ Eve.

1. Review required minimum distributions (“RMDs”). If you’re 70½ or older, you must take RMDs from certain retirement accounts by December 31 or face a penalty equal to 50% of the sum you failed to withdraw. If you turned 70½ this year, you have until April 1, 2019, to take your first RMD without penalty. (However, note that deferring your first RMD to 2019 will mean taking two RMDs in the same tax year, which could bump you into a higher income tax bracket). These rules also apply in the case of an inherited or “stretch” IRA. Generally, you must begin taking RMDs for inherited IRA assets by December 31 of the year after the year of the original owner’s death, but certain exceptions may apply. The IRS provides some helpful worksheets here.

2. Reduce taxable income and rebalance investments. Work with your financial advisors to sell losing positions in taxable investment accounts as necessary to offset gains. Then review your asset allocation and, if necessary, rebalance your investment portfolio.

3. Max out company retirement plan contributions. In 2018, you can contribute up to $18,500 in your employer-sponsored retirement plan (i.e., 401(k), 403(b), most 457 plans, and the Federal government’s Thrift Savings Plan). Employees aged 50 or older who participate in such plans can contribute an additional $6,000 in “catch-up” contributions. If you are not able to contribute the maximum, try to contribute enough to qualify for any matching contributions by your employer.

4. Review insurance coverage. Make sure you have adequate policies in place insuring your life, health, disability, business, and assets (home and auto), which can help protect you and your family from unforeseen liabilities and expenses.

5. Review estate plans and beneficiary designations. Estate planning should be reviewed holistically and periodically to be sure that the plan you have in place accomplishes your goals. See “So You Think You’re Done With Your Estate Plan” for a more in-depth discussion.

6. Make gifts. The 2018 annual gift tax exclusion is $15,000. This exclusion is the amount of money you can give away per person per year, tax-free. In addition, married couples can elect to “split gifts”. By utilizing this strategy, married taxpayers can gift up to $30,000 to an individual in 2018 before a gift tax return is required. On top of annual exclusion gifts, an unlimited gift tax exclusion is available for amounts paid on behalf of a person directly to an educational organization, but only for amounts constituting tuition payments. Amounts paid to health care providers for medical services on behalf of a person also qualify for an unlimited gift tax exclusion. Annual gifting is an excellent way to reduce the value of your gross estate over time, thereby lowering the amount subject to estate tax upon your date of death. Charitable and philanthropic gifts (whether outright, in trust, or through a donor advised fund or similar vehicle) should also be considered.

7. Fund your Health Savings Account (“HSA”). In 2018, those in high-deductible health-insurance plans can save as much as $3,450 in pre-tax dollars in a health savings account. For families, the figure is $6,900, and those aged 55 and older can contribute an additional $1,000. Unlike a Flexible Spending Account, your HSA balance rolls over from year to year, so you never have to worry about losing your savings. If you are over age 65 and enrolled in Medicare, you can no longer contribute to an HSA, but you can still use the money for eligible out-of-pocket medical expenses.

8. Use your flexible spending dollars. Unused funds in a Flexible Spending Account (“FSA”) are typically forfeited at year’s end, so make sure to spend them for eligible health and medical expenses by December 31. Some plans offer a “grace period” of up to 2 ½ months to use FSA money. Other plans may allow you to carry over up to $500 per year to use in the following year. Bottom line, check with your employer to confirm your plan’s deadlines.

9. Check your credit and identity. Under the Fair Credit Reporting Act, each of the national credit-reporting agencies is required to provide you with a completely free copy of your credit report, upon request, once every 12 months. Get yours at www.annualcreditreport.com.

10. Organize your records for 2019. Now is the time to gather and organize the documents and 2018 records that will be needed to prepare your tax returns in 2019. As part of that process, shred documents that no longer need to be retained.

© Copyright 2018 Murtha Cullina

ARTICLE BY

Lisa P. Staron
Murtha Cullina

Death and Taxes: House Bill Eliminates “Death” Tax in 2024

On November 2, 2017, the U.S. House of Representatives’ Ways and Means Committee released its proposal for tax reform via the Tax Cuts and Jobs Act. The House’s draft legislation contains a number of provisions that, if enacted, would significantly change the wealth transfer landscape, including the total repeal of the estate and generation-skipping transfer taxes as of January 1, 2024.

Under the proposal, commencing on January 1, 2018, the individual lifetime gift and estate tax exemption amount will be doubled to $10 million ($20 million for married couples), indexed for inflation—$11.2 million per person in 2018 ($22.4 million for married couples). This increase in the exemption amount also applies to the generation-skipping transfer tax.

The draft legislation calls for a total repeal of the estate and generation-skipping transfer taxes as of January 1, 2024, while preserving the ability of beneficiaries to obtain a basis adjustment as to inherited property. Although the gift tax is set to remain in place, a reduction in the rate from 40% to 35% is provided for. Similarly, the annual exclusion—scheduled to increase to $15,000 per individual in 2018 ($30,000 for married couples who elect to split their gifts)—looks certain to survive.

This post was written by the Tax, Estate Planning & Administration  of Jones Walker LLP., © 2017
For more Family, Estates & Trusts legal analysis, go to The National Law Review

The Best Housewarming Gift for the Unmarried Couple: An Estate Plan

“Thinking too long about doing something is often the reason it never gets done.” 
–Everyday Life Lessons

In recent years, a growing number of Americans are deciding to cohabitate instead of getting married or remarried. Often, individuals of all ages, state they do not need an estate plan, either because they are not married or because they do not have children. These are not reasons to avoid preparing your estate plan and, in fact, are often more reason to ensure your estate is in order. Although this article will not discuss everything that unmarried cohabitating couples should have in place, it is a decent starting point for a conversation with your partner and, eventually, an estate planning attorney.

Estate plans are important for a devoted unmarried couple, because without an estate plan, you have no input into major healthcare and financial decisions for your partner.

Medical Decisions

You have been together for years or even decades, but if you are hospitalized, can your partner speak on your behalf and make decisions for your care and well-being? Sadly, no. Failure to have a valid Health Care Power of Attorney in place may result in a courtroom battle between your partner and family. A Health Care Power of Attorney is a document whereby you name an Agent to act on your behalf if you are unable to make reasonably informed medical decisions for yourself. Undertake an honest discussion with your partner concerning your wishes. Topics to discuss include organ transplant during life, removal of life sustaining treatment, burial arrangements, organ donation and religious limitations. Your wishes will be explicitly stated within the Health Care Power of Attorney, which your named Agent must follow to the best of their abilities.

Real Property and Holding Title

Throughout your relationship, you may have purchased a home (or several homes, depending on your lifestyle). Consider this scenario: you both paid half of the down payment for the home, and you each pay half of the monthly mortgage payments, but because your partner had a better credit score, the home is only titled in his or her name. If your partner dies without a Last Will and Testament that leaves the property to you, that property is not yours, and unless you purchase it for fair market value, you will have to vacate the home. If your partner did have a valid Last Will and Testament, it could provide that the home be distributed directly to you. Other options include your partner recording a Beneficiary Deed, which states that when he or she dies, the property passes to you by operation of law; another option is that your partner could deed the property to be held in both your names, as joint tenants with right of survivorship. Be aware that such a transfer may have gift tax implications and may affect your mortgage. Discuss these matters with your attorney before proceeding.

Distribution of Your Assets

By living together, you have likely acquired mutual possessions and one of you may have supported the other for a period of time, e.g. during graduate school, through loss of employment or through a disability. Because of this, there may be assets that you both believe are shared, even if they are in the sole name of one partner.

estate tax planning non us citizensIf you do not have a valid Last Will and Testament, your estate is considered intestate. An estate that passes through intestate succession means your assets will be distributed according to Arizona law. In this scenario, the following persons will receive your assets: first your legal spouse, then your children, siblings, parents, grandparents and finally, if none of the foregoing are then living, to issue of your grandparents. If you want to leave anything to your partner, you must execute a Will that provides for the distribution of your estate to him or her. There are also other options you can discuss with your attorney, such as beneficiary designations and language that provides for transfer on death of the assets.

You may also want to consider leaving your partner as your beneficiary on a life insurance policy or on any retirement accounts. At the very least, be aware of who is named as your beneficiary on your policies and accounts and be sure those are your wishes.

Although seeking the advice of an attorney is important, start the conversation at home, informally.

How to Start

Have a casual conversation with your partner to discuss the basics.  These topics will likely require multiple conversations.  If you are not sure how to start, go straight to the source.  Many attorneys charge a one-time flat fee for an initial consultation. You will want to find an attorney with whom you are both comfortable and, preferably, that you will use in the preparation of your documents. When you are satisfied with your decisions, engage the attorney and get drafts started.  Review the drafts with your attorney in his or her office and then take the drafts home to read and digest alone. Take your time. Be sure to ask any questions and voice any concerns; this is why you are paying the attorney. Throughout the process, it is important to remember that most estate planning documents can be revised if your circumstances or living arrangements change.

If it is important to you, discuss your plan with your family so they do not feel left out of important decisions.

Acceptance by Family and Friends

There is a chance some of your family or friends may not agree with your lifestyle or the decision to live together. Attempt to inform your friends and family that your desire is for your partner to be the lead in making decisions on your behalf, and that the two of you have discussed it and made each other aware of your personal wishes. Doing so may also avoid potentially costly and time-consuming legal battles should you become incapacitated or die.

Take the first step and work your way through it. Although it may seem overwhelming initially, the process should only take a couple of months. Once finished, you will both be able to sigh with relief knowing these issues have been resolved.

This post was written by Amber Hughes Curto and Amy K. Povinelli  of Ryley Carlock & Applewhite, A Professional Corporation.

Unanimous Supreme Court Decision in Favor of “Church Plan” Defendants

Today, the Supreme Court handed a long-awaited victory to religiously affiliated organizations operating pension plans under ERISA’s “church plan” exemption. In a surprising 8-0 ruling, the Court agreed with the Defendants that the exemption applies to pension plans maintained by church affiliated organizations such as healthcare facilities, even if the plans were not established by a church. Justice Kagan authored the opinion, with a concurrence by Justice Sotomayor.  Justice Gorsuch, who was appointed after oral argument, did not participate in the decision.  The opinion reverses decisions in favor of Plaintiffs from three Appellate Circuits – the Third, Seventh, and Ninth.

For those of you not familiar with the issue, ERISA originally defined a “church plan” as “a plan established and maintained . . . for its employees . . . by a church.”   Then, in 1980, Congress amended the exemption by adding the provision at the heart of the three consolidated cases.  The new section provides: “[a] plan established and maintained . . . by a church . . . includes a plan maintained by [a principal-purpose] organization.”  The parties agreed that under those provisions, a “church plan” need not be maintained by a church, but they differed as to whether a plan must still have been established by a church to qualify for the church-plan exemption.

The Defendants, Advocate Health Care Network, St. Peter’s Healthcare System, and Dignity Health, asserted that their pension plans are “church plans” exempt from ERISA’s strict reporting, disclosure, and funding obligations.  Although each of the plans at issue was established by the hospitals and not a church, each one of the hospitals had received confirmation from the IRS over the years that their plans were, in fact, exempt from ERISA, under the church plan exemption because of the entities’ religious affiliation.

The Plaintiffs, participants in the pension plans, argued that the church plan exemption was not intended to exempt pension plans of large healthcare systems where the plans were not established by a church.

Justice Kagan’s analysis began by acknowledging that the term “church plan” initially meant only “a plan established and maintained . . . by a church.” But the 1980 amendment, she found, expanded the original definition to “include” another type of plan—“a plan maintained by [a principal-purpose] organization.’”  She concluded that the use of the word “include” was not literal, “but tells readers that a different type of plan should receive the same treatment (i.e., an exemption) as the type described in the old definition.”

Thus, according to Justice Kagan, because Congress included within the category of plans “established and maintained by a church” plans “maintained by” principal-purpose organizations, those plans—and all those plans—are exempt from ERISA’s requirements. Although the DOL, PBGC, and IRS had all filed a brief supporting the Defendants’ position, Justice Kagan mentioned only briefly the agencies long-standing interpretation of the exemption, and did not engage in any “Chevron-Deference” analysis.  Some observers may find this surprising, because comments during oral argument suggested that some of the Justices harbored concerns regarding the hundreds of similar plans that had relied on administrative interpretations for thirty years.

In analyzing the legislative history, Justice Kagan aptly observed, that “[t]he legislative materials in these cases consist almost wholly of excerpts from committee hearings and scattered floor statements by individual lawmakers—the sort of stuff we have called `among the least illuminating forms of legislative history.’” Nonetheless, after reviewing the history, and as she forecasted by her questioning at oral argument (see our March 29, 2017 Blog, Supreme Court Hears “Church Plan” Erisa Class Action Cases), Justice Kagan rejected Plaintiffs’ argument that the legislative history demonstrated an intent to keep the “establishment” requirement.  To do so “would have prevented some plans run by pension boards—the very entities the employees say Congress most wanted to benefit—from qualifying as `church plans’…. No argument the employees have offered here supports that goal-defying (much less that text-defying) statutory construction.”

In sum, Justice Kagan held that “[u]nder the best reading of the statute, a plan maintained by a principal-purpose organization therefore qualifies as a `church plan,’ regardless of who established it.”

Justice Sotomayor filed a concurrence joining the Court’s opinion because she was “persuaded that it correctly interprets the relevant statutory text.” Although she agreed with the Court’s reading of the exemption, she was “troubled by the outcome of these cases.”  Her concern was based on the notion that “Church-affiliated organizations operate for-profit subsidiaries, employee thousands of people, earn billions of dollars in revenue, and compete with companies that have to comply with ERISA.”  This concern appears to be based on the view that some church-affiliated organizations effectively operate as secular, for-profit businesses.

Takeaways:

  • Although this decision is positive news for church plans, it may not be the end of the church plan litigation.  Numerous, large settlements have occurred before and since the Supreme Court took up the consolidated cases, and we expect some will still settle, albeit likely for lower numbers.
  • In addition, Plaintiffs could still push forward with the cases on the grounds that the entities maintaining the church plans are not “principal-purpose organizations” controlled by “a church.”

René E. Thorne and Charles F. Seemann III of Jackson Lewis P.C..

The Fundamentals of Guardianship: What Every Guardian Should Know [BOOK]

The Fundamentals of Guardianship: What Every Guardian Should KnowServing as guardian is never simple or easy. Having the responsibility to make major life decisions for another is much more difficult than making decisions for oneself. Recent studies by the National Center for State Courts estimate that between one to two million adults are under court-supervised guardianship. The Administrative Conference of the United States estimates that approximately 75 percent of guardians are family members or friends. A constant refrain in multiple national studies and legislative reports is that once guardians are appointed they receive little instruction on how to carry out their responsibilities and have few resources to guide them.

Fundamentals of Guardianship is the much-needed, basic manual for new guardians that explains those roles and responsibilities. The court orders guardians to make decisions; Fundamentals of Guardianship explains how to make those decisions. It guides the new guardian step-by-step through the process of how to make responsible and ethical decisions, prudently manage another’s resources, avoid conflicts of interest, and involve the person under guardianship in the decision process. Fundamentals of Guardianship is the authoritative resource written by guardians with decades of experience and members of the National Guardianship Association.

Click here to order The Fundamentals of Guardianship: What Every Guardian Should Know

This book will appeal to all who have been appointed as guardian or conservator, whether lawyer, family member, friend, volunteer, or public or private entity, as well as all those who serve vulnerable adults. Included on this list are judges, court administrators, law enforcement officials, adult protective services, social workers, health care providers, case managers, residential care administrators, long-term care ombudsmen, financial institutions, and financial advisors.