IRS Working to Bring "Church" Pension Plans under ERISA

June 23, 2010, 06:00:00AM. By Charles Benson

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Washington, DC: The Internal Revenue Service is currently working to move the pension plans of employers with religious affiliations partially under the purview of the Employee Retirement Income Security Act, or ERISA.

When ERISA was enacted in 1974, religiously affiliated employers were exempted from the regulation, according to the Wall Street Journal. Recently, employers with only a tenuous association to religion have begun to convert their pension plans to "church plans," which generally cover the clergy and lay employees of churches and synagogues.

"They said: 'Hallelujah, I'm a church plan,' and no longer have to meet funding requirements, or pay premiums," said Andrew Zuckerman, the IRS's acting director of employee plans.

Church plans do not need to follow federal guidelines, perhaps the most important of which requires that employers ensure their plans through Pension Benefit Guaranty Corporation, a government agency that pays benefits if the pension fund goes under.

Now it appears that many businesses are taking advantage of the loophole in order to save money.

"Congress never intended for pension plans established and maintained by nonprofit hospitals, schools, and publishing houses for their own employees to be exempt from ERISA," Karen Ferguson, director of the Pension Rights Center, a consumer group, told the news source.

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