Understanding church plan status and the value of the Retirement Savings Plan

​The Retirement Savings Plan of the Presbyterian Church (U.S.A.) is a defined contribution 403(b)(9) church plan. The Retirement Savings Plan's church plan status has significant implications that can benefit both you and your organization as well as your employees who participate in the plan.

The Retirement Savings Plan of the Presbyterian Church (U.S.A.) is a defined contribution 403(b)(9) plan offered by the Board of Pensions with unique features that can only be offered by church plans. Employees and ministers of churches and eligible employers controlled by or associated with the Presbyterian Church (U.S.A.) are eligible to participate through their employer.

The Board of Pensions will work with your organization to determine if you are eligible to offer the Retirement Savings Plan, which has significant advantages to both you and your employees compared with 403(b) and 401(k) ERISA plans. Let's consider those differences and advantages.

What is ERISA?

ERISA is an acronym for the Employee Retirement Income Security Act of 1974. Enacted to protect consumers, or individuals in plans, this federal law identifies minimum standards for healthcare and retirement plans in the private sector.

ERISA doesn't require an employer to offer specific benefit plans but contains detailed rules that plan sponsors and other fiduciaries must comply with when setting up and operating such plans.

Some ERISA plan sponsor requirements include

  • filing government reports;
  • providing information to participants;
  • protecting plan assets; and
  • delivering benefits to participants.

ERISA establishes minimum standards for

  • participation;
  • vesting;
  • benefit accrual; and
  • funding of retirement plans.

ERISA is administered by the Employee Benefits Security Administration, a subsidiary of the U.S. Department of Labor. ERISA's protective laws apply only to non-government, private industry employers that offer certain benefits plans to employees.

What organizations are qualified to offer church retirement plans?

Church plans, as described in section 414(e) of the Internal Revenue Code, are exempt from Title 1 of ERISA and certain Internal Revenue Code provisions relating to retirement plans. This means that the 403(b)(9) plan sponsored by the Board of Pensions can be offered to employees and ministers of churches and eligible employers controlled by or associated with the Presbyterian Church (U.S.A.).

Even though an employer may currently provide and administer a plan consistent with ERISA standards, the organization may be eligible to offer the Retirement Savings Plan to their employees.

How can you determine the status of your plan and if your organization is eligible?

Many employers eligible to participate in church plans are unaware of the church plan specifics and establish individual employer plans for their employees. Using form plan documents supplied by consultants or brokers that are offered to any nonprofit, including religious organizations, eligible employers may believe that their plans have elected ERISA status because their documents include ERISA protections and refer to the Department of Labor.

The use of such form documents does not mean that the eligible church-related employer has elected to have its plan subject to ERISA. To be subject to ERISA, a church plan must take affirmative action to make an election. Once an election is made, it is irrevocable for the plan.

Your current plan is subject to ERISA if

  • the employer or its plan administrator made an affirmative election under Section 410(d) of the Internal Revenue Code; and
  • the election was filed with the IRS.

Filing of ERISA disclosure forms or including ERISA language in a plan document does not constitute an election under 410(d).

What are the administrative benefits of church retirement plans that are exempt from ERISA?

Because the Retirement Savings Plan is a 403(b)(9) plan, it is automatically classified as a church plan. As such, the Retirement Savings Plan is exempt from providing Form 5500s, audit requirements, and, for most employers, nondiscrimination testing.

As a benefit to employers, the Board of Pensions does provide certain notices to plan participants that are similar to those required by ERISA. The documents required by ERISA for which employers offering the Retirement Savings Plan are not responsible include the following:

  • Form 5500s
  • Summary Annual Reports (SARs)
  • Summary Plan Descriptions (SPDs)
  • Summaries of Material Modifications (SMMs)

Church plans have many advantages, but being free of ERISA requirements does not mean that anything goes or that employers and employees who enroll in their employers' plans, do not receive important protections. Church plans still need to conform to Internal Revenue Service regulations as well as state and other federal laws.

In administering the Benefits Plan, including the Retirement Savings Plan, the Board of Pensions is a fiduciary and required by law to act solely and exclusively in the best interests of the plan members and their beneficiaries. Thus, although exempt from ERISA, Retirement Savings Plan participants receive comparable disclosure and plan asset protections.

What are the advantages to participants?

As Retirement Savings Plan participants, your employees will enjoy the following unique church plan features:

  • Employees transferring employment from church to church may continue their participation without any break in service.
  • Participation in the plan is not subject to a minimum 20-hour-week requirement.
  • Lower paid employees may benefit from alternative contribution limits available for church plans under Sec. 415(c)(7).
  • As a church plan, the Retirement Savings Plan offers investment options that comport with the policies adopted by the General Assembly. The Board of Pensions participates in the Presbyterian Church (U.S.A.)'s Mission Responsibility Through Investments (MRTI) corporate responsibility engagement activities and practices.

More advantages of the Retirement Savings Plan

For more details about the Retirement Savings Plan, read about the plan's advantages for employers and its benefits for employees.