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Pros of a Church Plan electing to be covered by ERISA


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Because the participants are cynical about throwing themselves at the ineptitude (or worse) of the church governance?  You might be surprised at the ignorance of the concept of "fiduciary responsibility" in churches.  ERISA at least provides a framework for reference.

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I note QDROphile's comments above but cannot personally imagine why they would do this.  Most of our church plans have discriminatory contribution formulas for pastors, etc which would not pass testing if they had to comply with ERISA.  Also the use of a waiting period for deferral eligibility can be very useful and important.  Finally, many of these plans exclude classes of employees for whom coverage would be required if the plan was ERISA.

I do think all church plans should have plan documents (although not all are required to do so).   The document is the "contract" with the participants and it is wise to have that in writing and an SPD to deliver.  It also provides some guidance and evidence of structure in a state where there are state fiduciary requirements for Non-ERISA plans (California).

PNJ

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In the context of a DB plan, there is no PBGC coverage unless the church requests it AND elects for the plan to be subject to ERISA. So absent that election, not only are there no meaningful minimum funding requirements, there is no PBGC backstop. Participants uneasy about that combination could motivate a church to elect ERISA coverage.

That rationale isn’t there for DC plans, but as QDROphile says, participants might still be happier if they knew that ERISA-level fiduciary principles applied there.

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