DOL Church Plan Ruling Problem

[Guest BKH]

On behalf of a Catholic Hospital, I have obtained a PLR from the IRS that its pension plan is a "church plan." The IRS ruled that the pension plan is considered a "church plan" since the date of ERISA's enactment. Based on this ruling, the PBGC has made a refund of premiums made over the last 6 years. However, the DOL is conceptually having difficulty in issuing a similar ruling that the pension plan is exempt from ERISA because we asked that the DOL rule that the pension plan is a "church plan" retroactively to the date of ERISA's enactment. I have explained that both the Code and ERISA contain provisions which clearly state that if an employer corrects any defects in the "church plan" before audit, the plan can be determined to be a "church plan" back to the enactment of ERISA. The DOL does not like the concept of an employer establishing an intentionally defective church plan (covered by ERISA) and then corrects the defect and gets a ruling that it is exempt from ERISA. I have provided the DOL with other opinions it has rendered where the defective "church plan" structure was corrected and the DOL ruled that it was a "church plan." What I noticed in the rulings was that the DOL does not state that the plan is a "church plan" retroactively but just that it is a "church plan." I have told the DOL that we will inform participants that the plan is a "church plan" and will modify the SPD accordingly. Can anyone shed any light on why the DOL is having difficulty ruling retroactively? The pension plan at issue clearly meets the requirements for being a "church plan." Thanks.

[GBurns]

Maybe they just do not want to be that specific? Their universe is broader than jusyt your plan and they could see such an answer as being too broad. They could also take the position that the IRS takes on some issues and have a "No Ruling" position, which would be the same. You would then have to continue without the specifcity as you are currenlty now doing anyhow.

Does it really matter whether they use "retroactive" or not? What is the downside? If you had been operating and filing in a manner that meets the DoL requirements up to this time, what purpose would retroactivity serve? You cannot go back and unfile, so it can only be a going forward issue. And going forward you would have their "church plan" exemption anyhow.

Did I miss something? Unless it is that you think that there is a lawsuit lurking out there to which ERISA might be an issue. In that case even if you had DoL retroactivity, its applicability would still have to be adjudicated, because of what was conveyed etc to the employees at the time of the alleged violation.

[Guest BKH]

Thanks for the thoughts. It may be that I should not have specifically asked for retroactive status as a "church plan" from the DOL (even though ERISA specifically allows for this). The pension plan at issue has complied with Title I of ERISA up until it received IRS characterization as a "church plan." I wanted retro status from the DOL since this arguably avoids any potential ERISA compliance problems in the past. The DOL has stated that it wants to coordinate its approach with the IRS to make sure both agencies on are the same page. Unfortuantely, that may take years to achieve, if ever.

[SoCalActuary]

This is when you write your congressional representative to express concern about inter-agency cooperation. Presumably, you plan sponsor is a major employer in their district.