Church DB Plan Funding Requirement

I have been told by a long-time church plan actuary that church plans are subject to the pre-ERISA minimum funding requirements which they summarized as "contributions must be made such that the plan's unfunded liability doesn't increase". Despite several hours of research, I can't find any confirmation that 1) church plans are subject to the pre-ERISA minimum, or 2) that the pre-ERISA minimum is in fact a contribution to at least maintain the funded position of the plan. All I can find is that the plan must be funded (Rev Rul 71-91). Is anyone able or willing to confirm (preferably with some form of documentation) what I was told?

IRC 412(a)(1) reads as, "In general.  A plan to which this section applies shall satisfy the minimum funding standard applicable to the plan for any plan year."

IRC 412(e) is titled "Plans to which section applies", and then paragraph "(2) Exceptions", and then "(D) any church plan (within the meaning of section 414(e)) with respect to which the election provided by section 410(d) has not been made," and then flush language "No plan described in subparagraph (C), (D), or (F) shall be treated as a qualified plan for purposes of section 401(a) unless such plan meets the requirements of section 401(a)(7) as in effect on September 1, 1974."

Take note that no member of Congress wants to be in the position of regulating any church plan.

Pre-ERISA you could terminate a plan without funding vested benefits.  There were not vesting or trust requirements' either.  Basically, pensions were paid out of general assets of the employer and you gambled they would be solvent at the point you retired.  This is in large part one of the reasons ERISA passed. To create the trust, vesting and funding requirements and set up insurance for when an employer was insolvent and plans were underfunded.  Title IV!

For two of several interpretations of a before-ERISA funding condition, consider:

IRS Publication 778 (Feb. 1972), part 2(b); IRS General Counsel Memo. 36813 (Aug. 16, 1976).

If a church plan has not elected to be ERISA-governed, ERISA’s remedies for causing an employer to fund a pension plan do not apply.

Whatever tax law condition might apply might not motivate an employer to fund a plan. If a plan does not meet a condition for I.R.C. § 401(a) treatment, the IRS could apply Federal tax laws as if a plan is not a qualified plan. But the IRS might be reluctant to do so:

Initiating an examination that relates to a church requires extra supervisory and executive approvals within the IRS.

Developing proof that a plan is insufficiently funded such that it does not meet a condition of § 401(a) treatment under the Internal Revenue Code of 1954 as amended through September 1, 1974 involves unusual and burdensome work.

Denying an employer an income tax deduction for contributions to a plan might have little or no practical effect on a church.

Treating a plan as not tax-qualified might burden employees, retirees, and beneficiaries.

I think it would have to be severely under

16 hours ago, Peter Gulia said:

IRS General Counsel Memo. 36813 (Aug. 16, 1976).

That Memo is a trip, can you imagine that today? Wild.