Many Texas pensioners can rest assured that their pensions are protected by federal law. The majority of private-sector retirement plans are governed by the federal Employment Retirement Security Act, under which employers have to honor their obligations to pension plans as well as insure them. However, there is one significant exception to ERISA protections.
Church pension plans are exempt from federal pension protections. A church pension plan is generally one that is established by a church, however, many hospitals, schools and other organizations that are affiliated with churches may have church pension plans.
Employers that have church pension plans may not have to give employees detailed information about plans, and they may not be required to pay benefits fairly. Church pensions are also generally not insured by the federal pension insurance program, which backs most pensions in the private-sector.
Church pensions were originally allowed exemptions from ERISA in order to keep the government from interfering with church finances. However, this arrangement is now causing retirement security problems for many people.
Five lawsuits have been filed against Catholic hospital chains, arguing that some of their pension plans are dangerously underfunded.
This spring, the publishing organization for the Evangelical Lutheran Church in America reached a $4.5 million settlement with its pensioners due to poor pension funding. The settlement, however, does not come very close to closing the gap in the expected pensions for the 500 people counting on retirement benefits.
Many people are currently challenging whether loosely-affiliated religious employers even have the right to maintain church pension plans rather than ERISA plans. The ERISA loophole, after all, was designed for churches.
Source: Associated Press, "Law shields churches, leaves pensions unprotected," Adam Geller, Oct. 5, 2013