WASHINGTON – On April 7, President Obama signed the Cooperative and Small Employer Charity Pension Flexibility Act into law. (P.L. 113-97). The law allows pension plans that are run by charities and cooperative associations for groups of related employers to continue to receive relief from federal funding rules under certain conditions. One condition applies to certain religiously-affiliated employers that are currently paying premiums to the federal pension insurance program. These employers must agree to continue to operate their pension plans under federal law and not seek “church plan” status.
As a practical matter, this means that religiously-affiliated hospitals, social service organizations, and educational associations that accept the relief provided by the law will not be able to claim that they are “church plans,” which are exempt from federal law and the protections of the Pension Benefit Guaranty Corporation (PBGC), the agency that insures most private pension plans. At least two of the employers supporting the new law – Christian Schools International and the Jewish Federation of Greater MetroWest NJ – had asked the Internal Revenue Service to rule that they are church plans.
“This is a win-win situation,” said Karen Ferguson, director of the Pension Rights Center, which has been leading the fight to stop employers from using church plan status to escape their pension obligations. “The new law will help these nonprofit groups get the funding relief they need in order to continue their traditional pension plans, and it will protect the retirement security of tens of thousands of people in those plans.”
The law makes permanent a temporary exemption to the Pension Protection Act of 2006 that gave multiple employer charitable and cooperative association plans more time to fund their pension plans. It also temporarily freezes their PBGC insurance premiums at the current level.
The legislation was co-sponsored by Senator Tom Harkin (D-Iowa), Senator Pat Roberts (R-Kans.) and 48 other Senators, and by Representative Susan W. Brooks (R-Ind.) and Representative Ron Kind (D-Wisc.). In addition to the two groups already mentioned, supporters of the new law include: the Girl Scouts of the USA, the National Rural Electric Cooperative Association, NTCA-The Rural Broadband Association, and the United Way.
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