We have a situation whereby an ERISA plan will become a church plan (due to various restructuring matters). There is a bit of a disagreement on whether the church plan must protect the benefits accrued under the ERISA plan.

In the PLRs that I have read (e.g. 200036051, 200048050, 9717039, etc), the plan sponsors have represented that the resulting church plan will be amended to provide that no present or future plan amendment will reduce any benefits accrued while the plan was subject to ERISA.

The argument against this is that the IRS did not require the amendment, but that the plan sponsor offered the amendment.

Any insights? Suggestions? Opinions? Thanks

Wouldn't the sponsor have a lawsuit on its hands from the participants if the accrued benefits were reduced?

Since ERISA prevents the reduction of benefit accruals under any plan subject to Title I, the benefits are guaranteed to the participants regardless of whether the plan is amended to prevent a reduction of benefit accruals. Converting the plan to a non ERISA plan would only affect benefit accruals after the plan becomes exempt from Title I. A DB plan sponsor cannot avoid the application of the cutback rule of ERISA for accrued benefits by converting the plan to a church plan exempt from title I.