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Church Plans Can Leave Retirees Out in the Cold

Learn how one group of private retirement plans have little-to-no protections for the workers and retirees who are covered by these plans.

What happened?
In late 2009 Augsburg Fortress, the publishing house of the Evangelical Lutheran Church in America, announced in a letter to employees that it would terminate its traditional pension plan, affecting approximately 500 workers and retirees. 

The termination of a pension plan is always an unfortunate event. However, under normal circumstances, most employees and retirees of a company with a terminated plan can take comfort in the fact that their benefits are insured by the Pension Benefit Guaranty Corporation (PBGC), the federal agency charged with insuring most private pensions. So those who are already retired would, subject to certain limits, continue to get their pension payments, while current employees would receive the benefits that they had earned as of the plan’s date of termination.

However, the Augsburg Fortress workers and retirees have been told that they will have no such guarantees. The publishing house says that their plan is a “church plan because it covers only employees of Augsburg Fortress Publishers, a tax exempt organization that is associated with, and shares common religious bonds with, the Evangelical Lutheran Church of America.”

What is a church plan?
Under federal pension and tax laws, a church plan is defined as a retirement plan that is established and maintained by a church or association of churches for its employees. Certain other plans can also be treated as church plans.

Church plans, and plans treated as church plans, fall into a special category of pension plans because they are exempt from the nation’s private pension law, the Employee Retirement Income Security Act of 1974 (ERISA), unless they choose to be covered by it.  

Among its provisions, ERISA requires plans to maintain minimum funding levels. According to Minnesota Public Radio, the Augsburg Fortress plan is underfunded by a staggering 67 percent. In other words, the plan has only enough money to cover one-third of its obligations. Such severe underfunding would not have been allowed to happen under ERISA. 

Furthermore, ERISA plans must be insured by the PBGC. Church plans are not insured by the PBGC. This is significant because PBGC insurance provides most workers and retirees with a level of security in the event that the company becomes unable to provide its promised benefits.  

In the case of the Augsburg Fortress plan, a combination of acute underfunding and lack of PBGC insurance coverage means that Augsburg Fortress employees and retirees will receive only a fraction of the pensions they had earned.

“I feel so abandoned,” “I’m having a really time believing this,” and “I’ve just lost so much trust” are examples of what we’ve heard Augsburg Fortress employees and retirees say about the termination.

What can be done?
Individuals who have been affected by Augsburg Fortress’ plan termination participated in a letter-writing campaign targeting the plan’s trustees, asking them to reconsider the plan’s termination.  They have also formed the Augsburg Fortress Pension—Speak Up!group on Facebook, where they share knowledge and information about the situation.

Another way Augsburg Fortress workers and retirees can take action is to let their legislators know about the situation. By informing their members of Congress about the situation, they can draw attention to the fact that the pension plan termination is leaving so many current and future retirees without much of their promised pensions. Contact your members of Congress.

One more way to gain attention is by writing a letter to the editor. Writing to the editors of local and national publications may spark a reporter’s interest in the situation and could result in media coverage about the fact that church plans that aren’t covered by ERISA can leave workers and retirees so vulnerable in retirement. 

Articles of Interest 
The following are just a few of the articles that have been written about the Augsburg Fortress decision to terminate its pension plan:

Other resources

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