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Why does it matter if a pension plan is a church plan?

Church pension plans can choose to be covered by the federal private pension law, the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. However, most choose not to be. Without the protections provided by federal laws, these plans:

  • Have no funding requirements.  Unlike other private pension plans, church plans are not required to maintain set funding levels nor are they required to pay the benefits they have promised their employees. This can leave employees and retirees at risk of losing their pensions because the plan could run out of money.
  • Are not required to disclose information. Church plans are not required to inform workers and retirees or the federal government about their financial health. They also are not obligated to tell employees about their benefits or legal rights under the plans.
  • Are not insured by the federal pension insurance program. The pensions of most private-sector workers and retirees are protected by the Pension Benefit Guaranty Corporation (PBGC), the federal agency charged with insuring most private pensions. When a pension plan terminates without having enough money to pay the benefits that have been promised, the PBGC guarantees that, subject to certain limits, those who are already retired will continue to receive their pension payments and current employees will receive the benefits that they had earned as of the plan’s termination date. Church pension plans do not have any insurance protections. If a church plan terminates, participants will receive their pensions only as long as the plan has enough money to make payments.
  • Do not have to follow federal rules requiring that pensions be paid fairly. Federal pension and tax laws set minimum standards for pension plans. These rules specify who has to be covered by a plan and how long they have to work to earn benefits. These laws also detail when pensions must be paid, and require that pension plans include protections for surviving spouses. Although most church plans have similar rules, they are not required to abide by them.

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Learn more about church plans by reading these fact sheets: