Church plan status
The Board of Pensions of the Presbyterian Church (U.S.A.) is the agency of the PC(USA) responsible for offering benefits to churches and other 501(c)(3) employers associated with the Church. As a member of the Church Alliance, the Board is part of a diverse network of 34 church benefits organizations that advocates for employee benefits — including retirement and health care — for clergy, lay workers, and their families. The Church Alliance supports the continued recognition of religious liberty and the unique governance structure of church benefits plans.
Below are frequently asked questions about church plans.
What is a church plan?
A church plan is defined within Section 414(e) of the Internal Revenue Code as an employee benefits plan established by a denomination or an organization, such as the Board of Pensions, that has as its primary purpose the maintenance and administration of retirement, medical, and other plans for the benefit of ministers and employees of churches and employees of affiliated organizations controlled by the church or associated with it.
The Defined Benefit Pension Plan and the Retirement Savings Plan of the PC(USA) are denominational plans, with thousands of participating employers. Employees and ministers of churches and employees of employers affiliated with the PC(USA) are eligible to participate through their employer. This structure permits even the smallest churches to offer a pension plan, something they could not do as an individual organization.
How financially secure are the Defined Benefit Pension Plan and the Retirement Savings Plan of the PC(USA)?
The Board of Directors of the Board of Pensions oversees all investment decisions that affect the fiscal health of the pension plan and the Retirement Savings Plan. The General Assembly of the PC(USA) elects 100% of the members of the Board of Directors of the Board of Pensions, none of whom are employed in the management of the agency. Additionally, the Board is engaged with leading professional actuaries and financial organizations to manage the fund and conduct annual financial audits, which are publicly available.
As a sign of the strength of the Defined Benefit Pension Plan, for 12 consecutive years, an experience apportionment has been granted by the Board of Directors. An apportionment results in a lifelong increase in pension benefits or pension credits accrued. Apportionments are tied to the plan’s overall funded status, which was 157% on Dec. 31, 2023.
What is ERISA?
ERISA is an acronym for the Employee Retirement Income Security Act of 1974. It is a federal law identifying minimum standards for healthcare and retirement plans in the private sector. ERISA does not require an employer to offer specific benefits plans but contains detailed rules that plan sponsors and other fiduciaries must comply with when setting up and operating such plans.
The retirement plans of the PC(USA) have elected not to be governed by ERISA. Plans that are not governed by ERISA protect the relationship between a church and its ministers and employees, ensuring there is no government entanglement. This election ensures churches can provide their ministers and others who carry out the church’s mission with retirement and welfare benefits in a manner that is consistent with the church’s beliefs and polities.
Are church plans at a disadvantage if they elect not to be governed by ERISA?
No. Church plans are defined in and governed by the federal tax code and are subject to other federal and state laws. The Board has fiduciary responsibility and must act in the best interest of plan members and their beneficiaries.
What are the advantages of electing out of ERISA governance?
Electing not to be subject to ERISA allows the plan to align the values of the Church in a way that a church plan subject to ERISA cannot. For example:
- ERISA requires pension credits to be accrued at a uniform rate. The Board calculates pension credits at differential rates, based on median effective salary, to ensure equity among plan participants. More than half of the Board’s Defined Benefit Pension Plan participants accrue at the median effective salary because the median is higher than their own effective salary.
- ERISA requires plans to consider economic return only when investing. Having church plan status permits the Board of Pensions to consider the recommendations of the PC(USA)’s Committee on Mission Responsibility Through Investment.