Court Finds Charter School Benefit Plans Fall Under ERISA’s Governmental Plan Exempt

“Because the state not only funds the charter schools but also approves their establishment and continued existence, it is not appropriate to treat them as private institutions subject to public regulation.”

Seventh Circuit Finds Charter School Benefit Plans Fall Under ERISA’s Governmental Plan Exempt

August 11, 2021 By Michelle L. Roberts, Principal at Roberts Disability Law

In Graham v. Bd. of Educ., No. 19-2745, __F.4th__, 2021 WL 3508563 (7th Cir. Aug. 10, 2021), Plaintiff-Appellant Tamika Graham, representing herself pro se, appealed the dismissal of her complaint alleging state law claims and an ERISA claim related to her termination as a public-school teacher. The district court determined that the school system’s pension and health benefits plans are exempt from ERISA. The Seventh Circuit asked two attorneys from Williams & Connolly LLP to appear as amicus curiae and present oral argument on the ERISA question.

The court noted that ERISA exempts from coverage governmental pension and welfare plans. Section 4(b)(1), 29 U.S.C. § 1003(b)(1). ERISA Section 1002(32) defines a “governmental plan” to include “a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing.” The district court determined that Chicago’s school system is a subdivision of Illinois and that it was enough that the plans were established and maintained by the Board of Education. The Seventh Circuit noted that the district court did not consider the “for its employees” part of the definition. The DOL takes the position that the phrase “for its employees” means that a governmental plan must not include more than a “de minimis” portion of private workers. An earlier DOL advisory opinion assumed that the plan could not include even one private employee. The court noted that the statutory language and the DOL’s opinions “present all sorts of problems” and that it is unclear whether the phrase “for its employees” modifies “maintained” or “established” or both. The court questioned the basis for the DOL opinions but determined that they need to resolve these questions today.

Illinois law provides that “[a] charter school shall be a public, nonsectarian, nonreligious, non-home based, and non-profit school” (105 ILCS 5/27A-5(a)), and that charter schools operate “within the public school system” of Illinois (105 ILCS 5/27A-2(a)(3)). “[C]harter schools have enough public attributes to make them (permissibly) governmental under ERISA.” The court explained that “because the state not only funds the charter schools but also approves their establishment and continued existence, it is not appropriate to treat them as private institutions subject to public regulation.” The court affirmed the judgment with respect to the ERISA claim.

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Michelle L. Roberts

Principal at Roberts Disability Law

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