The Internal Revenue Service has issued a long-awaited revenue procedure clarifying the process for retirement plans to apply for “church plan” status. Rev. Proc. 2011-44 requires employers that seek an IRS ruling that their retirement plans are so-called “church plans” to notify participants in those plans that, as a church plan, their plan would not be protected by the Employee Retirement Income Security Act (ERISA), the nation’s landmark private pension law. The procedure also gives plan participants an opportunity to contest their plan’s claims that the plans are legally entitled to church plan status.
The ruling states that, under IRS regulations, church plans are defined as plans that are “established and at all times maintained for its employees by a church.” Thousands of participants in plans set up by church-affiliated hospitals and other nonprofits that were initially covered the federal pension law and continue to operate as ERISA plans will now have an opportunity challenge their plans’ requests for rulings.
“Because church pension plans are exempt from ERISA, participants in those plans lack critical protections, such as insurance of their benefits, adequate funding, and access to information about their plan,” said Karen Ferguson, director of the Pension Rights Center. “Finally, thousands of nurses, lab technicians, secretaries, and others who worked their entire lives with the understanding that their plans were fully protected by the pension law will now have a way of telling the government why it would be unlawful for their employers to cut costs at the expense of their retirement security.”
Plans already waiting for rulings will have 60 days from September 26, 2011, to make a “reasonable effort” to notify all plan participants and beneficiaries that the issuance of a church plan ruling would result in the loss of pension insurance and other protections. Plans making new requests will have to provide notices 30 days from the date they request a ruling, The participants and beneficiaries will then have 60 days to comment, and can also request a meeting to discuss their comments with the IRS.
Unfortunately, the revenue procedure applies only to pending and future requests for rulings. It does not directly help people in plans that have already received rulings, who could still lose all of their hard-earned pension benefits if their plans terminate without enough money to pay all promised benefits. See “IRS Nears Action on Church Pensions,” Wall Street Journal, June 5, 2010.
“Our hope is that the IRS will take action to forestall these devastating consequences by withdrawing the rulings issued to these plans,” said Ferguson.
For information about church plans, read the Pension Rights Center’s church plan fact sheets. To find a pension counseling project or other nonprofit organization that may be able to provide assistance to individuals interested in filing comments, go to PensionHelp America at www.pensionhelp.org, a free online referral service.