Underfunding employee pensions: An exercise of religious freedom?

America is being treated to another unedifying spectacle on the religious freedom v. worker justice front. Some Catholic hospital chains that have systematically underfunded their employees’ retirement plans are before the Supreme Court invoking religious freedom protections to evade accountability.

The Employee Retirement Income Security Act (ERISA) protects the retirement of most private sector workers, requiring employers to set aside funds to cover their employees’ promised retirement benefits, so employees aren’t suddenly left destitute in their old age if the company runs into financial trouble. But Congress exempted church employee retirement plans from ERISA coverage – and for the past couple of decades, the IRS has permitted Catholic hospitals to claim this exemption.

If all Catholic hospitals had properly funded their retirement plans anyway – just because it’s good corporate governance and the right thing to do for your employees – there’d be nothing to see here. Unfortunately, some succumbed to the temptation to balance today’s budgets by reducing pension contributions or assuming unrealistic returns. Now Dignity Healthcare (formerly Catholic Healthcare West) has more than $1 billion in unfunded pension liabilities and employees have sued, demanding to be made whole. Dignity and two smaller religious hospital groups are in the Supreme Court arguing that religious freedom renders them untouchable.

Religious hospitals are hardly the only institutions to exhibit this weakness. Public employee retirement programs are also excluded from ERISA, and many state and local governments made similar irresponsible moves. And our efforts as Catholics to protect the boundaries of religious freedom are valid and important. But for heaven’s sake, this is poor evangelization. When Catholic employers invoke religious freedom to deny their employees the right to organize, or to bargain, or to receive promised retirement benefits, certainly no one in America is saying “see how they love one another.”