The legislative history of church pension plans

Below is a brief summary of the legislative history of church plans.

• The 1974 private pension reform law, ERISA, provided a permanent exemption from the law for pension, health and other benefit plans sponsored and maintained by a church for its employees.

• This permanent exemption did not apply to plans for employees of church schools, hospitals and other church-related entities.
  • However, the law also included a temporary special rule that extended the exemption to plans sponsored and maintained by a church and church-related employer. This temporary rule was set to expire after 1982.

• In 1980, at the urging of the Southern Baptist Convention Annuity Board, Senator Herman Talmadge introduced legislation to amend ERISA to make the special temporary rule permanent. The SBC Annuity Board was an incorporated organization established for the purpose of administering SBC church and church-related benefit plans.
  • The Senate Finance Committee Report and statements made by Senator Talmadge and Senator Russell Long on the Senate floor on the day the amendments were passed confirm that the intent of the new law was solely to make permanent the special temporary rule so that plans administered by organizations like the SBC Annuity Board that had been established by a church for church employees and employees of church-related organizations would be permanently exempt from private pension law.

• However, the 1980 Talmadge amendments have been broadly interpreted by the Internal Revenue Service to also exempt plans sponsored by non-church employers that are administered by informal benefit committees designated by the employers.
  • The IRS rulings rely on provisions in the 1980 amendments that allow certain plans that are not “church plans” to be “treated as church plans.”   
  • A plan is treated as a church plan, if the plan is maintained by an “organization” controlled or associated with a church whose principal purpose or function is the administration or funding of the plan.
  • The legislative history makes plain that the term “organization” was intended to only include formal organizations, like the SBC Annuity Board, whose principal purpose and function were to administer employee benefit plans maintained for churches and church-related employers. Congress did not intend to expand the exemption to encompass non-church employers that administered their own plans. 

• As a result of the expansive interpretation of the law by the IRS, countless teachers, nurses, and other lay employees have been improperly denied critically important pension insurance and minimum standards protections conferred by Congress. 

Learn more about church plans by reading these fact sheets:

• The facts about church pension plans
• What is a “church pension plan”?
• Why does it matter if a pension plan is a church plan?
• Why are church pension plans not covered by federal laws?
• What are the types of church pension plans?
• What can you do to protect employees in church pension plans?
• Workers covered by church pension plans tell their stories