Have you received a notice informing you that your pension plan is seeking approval from the Internal Revenue Service to convert to a “church plan”? Here’s what this means to your retirement – and what you can do about it.
Many people who work for nonprofit organizations that are associated with religious organizations – hospitals, schools, community centers – have begun to receive notices informing them of a change that could end up significantly reducing their pension benefits.
As a result of a new IRS procedure, any pension plan that wishes to “convert” its federally-protected pension plan to a “church plan” is now required to notify the people covered by the plan that the plan intends to seek IRS approval to convert. What does such a conversion mean for you?
Most private pension plans are protected by the federal pension law known as ERISA. This means that these pension plans are insured by the Pension Benefit Guaranty Corporation, have minimum funding requirements, and are required to provide participants with information on the funding status of the pension plan, among many other protective features. Church plans are the only private-sector pension plans that are exempt from all of these requirements (see Why it Matters if a Pension Plan is a Church Plan to learn more). This means that, if your plan becomes a church plan and your employer terminates the plan when it is underfunded, you could lose some or even all of the benefits you have earned under the plan.
In short, church pension plans offer few or no protections and are less secure than pension plans that have ERISA protections.
So you’ve seen or received a notice*. Now what? Here’s what you can do:
You have the right to contest your pension plan’s conversion and to ask the IRS to deny your pension plan’s request. See our sample letter for information that you can include. Time is of the essence. All comments are due to the IRS within 60 days of the date you receive the letter from your pension plan. For example, if you received a letter post-marked November 21, 2011, your comments must be submitted to the IRS by January 20, 2012.
Gather contact information from co-workers, retirees, and anyone else who might be affected by this change and create an e-mail list, Facebook group, or blog so that everyone can be updated about what is going on and so that you can share ideas for fighting the change. Need help? Contact us and we’ll help you get started.
Many of the people who make decisions about pension plans sit on your employer’s board of directors. Often these decision-makers are able to exert their influence to reverse the decision of the pension plan administrator. In fact, employees and retirees who are covered by the pension plan for the Jewish Community Center of Greater Washington (JCCGW) were so effective with their efforts that they were able to get JCCGW to reverse its decision to seek church plan status.
Make sure that your elected officials know that your pension plan is seeking church plan status and tell them how the change would affect you and the other people covered by the plan. Arrange an in-person meeting, write a letter, make phone calls or attend a town hall meeting to share your concerns with them.
To learn about other tactics that have been successful in bringing attention to issues related to protecting retirement security, check out our page on strategies that have worked in the past.
*Employers are not required to notify participants via U.S. mail. According to IRS rules, employers can notify employees by simply posting a notice on a bulletin board that is “regularly and actively used for a wide variety of purposes by employees who are plan participants.”