Church Plan Increase in NRA

[jim241]

A non-electing church plan wishes to increase normal retirement age for most participants, effective for already accrued benefits. I know the plan is not subject to 411(d)6, so no cutback issue. Any other issues besides potentially upsetting participants? 

[Luke Bailey]

I doubt there is going to be any clear answer to this question. I don't deal much with church plans, but I think it's the identical issue as you have for governmental plans. Certainly for an employee that has already reached the plan's pre-amendment NRA, and so is "vested" under the pre-ERISA rules, you would have the argument that you are impermissibly "unvesting" the employee if you raise his or her retirement age. But for folks who have not yet reached NRA, and so are not vested, arguably you can do whatever you want.

That's not a comfortable answer based on common notions of fairness. A careful reading of the plan may indicate that notwithstanding that the law would not require vesting until NRA, the plan actually vested benefits at an earlier age, and so moving the retirement age for vested accrued benefits was, again, a violation of the vesting rules. You can also argue that moving the retirement age as to accrued benefits would violate the pre-ERISA "written plan" requirement of 1.401-1, but that's a tough argument since by its nature an amendment changes the written plan and retroactive negative changes are what 411(d)(6) (from which the plan was exempted) was designed to stop.

I think if you really want to know the answer you're going to have to do a lot of research into pre-ERISA rulings and cases.

[david rigby]

Consider also that many non-ERISA plans contain language required under ERISA.  It's possible this plan already contains some "anti-cutback" provision.

[Patricia Neal Jensen]

I am giving you sort of a "sideways" way to look at this:  what is the point?  I have several Non-Electing Church plans and, although there is a NRA, it really affects nothing.

[Luke Bailey]

You vest at NRA, right? Plus the plan may not provide for actuarial increases or even accruals if you retire after your NRA. I'm assuming it's a DB plan.

[John Feldt ERPA CPC QPA]

Non-ERISA Church plans are not subject to the IRC 411 anti-cutback rules, but state rules may apply. More importantly, the terms of the plan apply. I’ve seen quite a few church plans that had the IRC 411 anti-cutback rules in the plan document. 

[Luke Bailey]

Wouldn't ERISA preempt the application of state law?

[jpod]

You may find that the plan document contains an "anti-cutback rule" that mimics what a plan subject to Section 411 is required to say, in which case you likely would have a problem under State contract law if you unilaterally amend in a manner that violates that language. 

[John Feldt ERPA CPC QPA]

A non-electing church plan is not subject to ERISA. In order to benefit from the ERISA preemption of state law, they would need to make an irrevocable election under 410(d) to have ERISA apply. It is my understanding that making such an election would then require the usual participant protections and disclosures, among other things, including the anti-cutback rules. 

[Luke Bailey]

OK. Thanks, John Feldt. If no 410(d) election, then 4(b)(2) of ERISA kicks you out of ERISA.