The Employee Retirement Income Security Act (ERISA) is a federal law that sets minimum standards for pension plans in the private sector. For employers who establish pension plans, ERISA requires the disclosure of plan features and funding, sets a floor of fair standards for participation, vesting, benefit accrual and funding, and gives participants rights and remedies pertaining to the activities of plan fiduciaries.
ERISA provides important protections for millions of Americans - it helps ensure the funds employees set aside in retirement plans during their working lives will be there when they retire. Yet, these protections come at a cost to employers. As ERISA coverage is not required for pension plans run by religiously-affiliated organizations, many such institutions are putting their employees' retirements at risk by declining ERISA protections.
Refund of Pension Benefit Guaranty Corp. Premiums Attractive To Some Religious Organizations
The Pension Benefit Guaranty Corporation (PBGC) is a government-owned corporation established by ERISA that insures the retirement income of participants in private-sector defined benefit pension plans. The PBGC receives no funding from Congress; its revenues come from several sources, one of which is premiums paid by employers who sponsor defined benefit pension plans.
Church-affiliated organizations can opt in to ERISA pension plan coverage, but for most of them, it is not a requirement. By switching pensions to a church plan designation, companies avoid the PBGC premiums. In addition, such organizations may ask the PBGC for a refund of up to six years of premiums paid during the time their pension plan was under ERISA. In these tough economic times, the allure of this capital-injection can be a temptation some religious entities are unable to resist.
But, the switch from ERISA coverage to church plan designation comes at a grave cost to workers. For one thing, employees lose their right to retain Tennessee employment lawyers and sue under ERISA for benefits and breaches of fiduciary duty. To boot, the pension benefits guaranteed by the PBGC's insurance coverage are forfeited, meaning employees could reach retirement age and lose any right to the pension payments they were counting on.
Be Proactive In Protecting Your Retirement
In recent years, many religiously affiliated organizations, particularly hospitals, are taking advantage of the cost savings they can achieve by opting out of ERISA: between 1999 and 2007, the PBGC received 85 requests for premium refunds. Unfortunately, many workers, unaware of the negative impact this can have on their pensions, fail to take a stand for their right to retirement.
If you are worried about losing your guarantee to pension benefits, ensure that you have a voice. Contact an employment lawyer today to get your questions answered.
