Pension & Benefits News ERISA preempts claim by religious order to enforce original beneficiary designation made by priest under vow of poverty
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Thursday, August 29, 2019

ERISA preempts claim by religious order to enforce original beneficiary designation made by priest under vow of poverty

By Pension and Benefits Editorial Staff

ERISA preempted claims by a religious order seeking to maintains its rights as the original designated beneficiary of the retirement accounts of a priest who changed beneficiaries prior to his death, according to a federal trial court in Connecticut. The order’s attempt to enforce its contractual rights to the benefits, based on the priest’s vow of poverty, related to a central function of an ERISA plan, the payment of plan benefits. The court also concluded that the application of ERISA preemption did not substantially burden the order’s exercise of religion in violation of the Religious Freedom Protection Act.

Beneficiary designation pursuant to vow of poverty. The Wisconsin Province of the Society of Jesus (Province) brought suit seeking declaratory judgment enforcing its rights to the retirement benefits of a deceased member of the order, Father Edwin Cassem. Pursuant to a vow of poverty required of members of the order, Father Cassem in 1976 named the Province as the beneficiary of two TIAA-CREF retirement accounts maintained for him incident to his work with Massachusetts General Hospital and Harvard Medical School. As of September 2017, the accounts held over $1,512,186.

Beginning in 2010, Father Cassem began experiencing symptoms of dementia, which caused him to move into the home of his sister-in law, the widow of his deceased brother. Subsequently, in January 2011, TIAA-CREF received a form, purportedly executed by Father Cassem, changing the beneficiary of the accounts from the Province to his sister-in-law and her son.

Following Father Cassem’s death in July 2015, the Province, in September 2017, brought suit against his sister-in-law, her son, TIAA-CREF and the trustee advising Father Cassem’s estate. The Province sought a declaratory judgement enforcing the original beneficiary designation, arguing that, because of his vows of poverty, chastity and obedience, Father Cassem was precluded from owning the funds in the retirement account and, thus, lacked the authority to designate a beneficiary other than the Province. The defendants, maintaining that the Province’s claim was preempted by ERISA, filed a motion to dismiss.

ERISA preempted contractual claim to benefits. After framing the Province’s action as an attempt to enforce contractual rights, the court analyzed whether the action for declaratory judgment based on state contract law was preempted by ERISA. The court noted that not all breach of contract actions that relate to employee benefit plans are preempted. For example, state laws of general application that merely impose burdens on the administration of ERISA plans are not preempted. However, the Province’s claim was preempted, the court ruled, because it acted upon one of the most central features of an ERISA plan--the payment of benefits in accordance with plan documents, as required under ERISA Sec. 404(a)(1)(D).

Determining the validity of the beneficiary designation, the court added, would also involve a central matter of plan administration. Applying state contract law would lead to the plan being administered according to standards other than those set forth by ERISA, requiring the plan administrator to determine whether the vows were an enforceable contract and whether Father Cassem maintained his membership in the religious order for his entire life.

Preemption does not violate Religious Freedom Restoration Act. The Province alternatively argued that the application of ERISA preemption to its claim violated its rights under the Religious Freedom Restoration Act (RFRA). The defendants countered that the RFRA does not apply to private disputes to which the government is not a party.

The RFRA prohibits the government from substantially burdening the exercise of religion, unless the burden is in furtherance of a compelling governmental interest and implemented by the least restrictive means of furthering that interest. Province as a religious nonstock corporation was covered by the protections of the RFRA. However, the court noted the absence of binding Second Circuit authority applying the RFRA to cases between private parties to which the government is not a party. The textual reference in the RFRA to governmental authority, the court further explained, made it difficult to conceive of how Congress intended the government to justify the application of burden to a person if the government was not a party to a suit, and, therefore, could not produce evidence to demonstrate such a justification.

In suggesting a governmental role in the case, Province relied on a case in which the RFRA was allowed to be used as a defense by a church to an ADEA claim because the action could have been brought by the federal Equal Employment Opportunity Commission, as well as a private party (Hankins v. Lyght, CA-2 (2006), 441 F. 396). According to the Province, the fact that the Employee Benefits Security Administration (EBSA) was authorized to enforce ERISA similarly allowed for application of the RFRA defense.

The court rejected the Province’s strained argument, stressing that the order’s action involved no attempt to implement or enforce ERISA. Thus, EBSA could not conceivably be a party to the lawsuit.

While strongly indicating that RFRA was not applicable to the case, the court concluded that the application of ERISA preemption would not impose a substantial burden on the Province’s free exercise of religion. Applying ERISA would not negate or burden the Province’s freedom to enforce its vows or otherwise burden its exercise of religion. Any burden on the Province’s exercise of religion, the court stressed, was not imposed by ERISA, but by Father Cassem’s designation of the defendants as beneficiaries.

Province remained free to exercise its religion. It just could not deploy the RFRA as a shield to ERISA preemption in an attempt to enforce those vows.

SOURCE: Wisconsin Province of the Society of Jesus v. Cassem (DC Conn).

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