United Jewish Communities of MetroWest NJ has asked the Internal Revenue Service to exempt it from a federal law that requires employers to guarantee large annual contributions to their employees’ pension plans.
Declaring that the law imposes “onerous financial requirements” due to lower interest rates and stock market declines and a reduction in time permitted to fund losses, the federation asked that its pension program be classified as a so-called “church plan.”
The 1974 Employee Retirement Income Security Act mandates that the federation, as a nonprofit, currently make a required minimum contribution of approximately $2.5 million annually into the pension plan.
A “church-plan” designation would give the federation discretion over how much it would contribute annually to the pension plan.
If the request is granted, the change should have “no impact on the pension benefits” of retirees and employees, said Howard Rabner, MetroWest’s chief operating officer and chief financial officer.
He said that obtaining an exemption from ERISA requirements should provide “critical flexibility to fund the pension plan while continuing to provide our mission-based programming locally, in Israel, and overseas.”
Critics of church plans, however, say they remove critical federal guarantees of pension benefits accrued by employees.
“The church plan pensions are not monitored by the government, meaning that they can do whatever they want,” said Luz Santiago, associate executive director of the District Council 1707 of the Community and Social Agency Employees Union. “People can retire and discover the pension money is not there.
“Our lawyer says, ‘Hell no. Over our dead body.’”
Some 100 employees of UJC MetroWest and its agencies are represented by the local union. There are 1,144 participants in the Metro-West pension program.
The intention to seek the exemption was outlined in a Jan. 11 letter from UJC MetroWest to pension plan participants. They include employees of New Jersey Jewish News as well as MetroWest partnership agencies.
“The principal advantage of being a church plan is that UJC and the agencies are saved from burdensome ERISA funding requirements,” according to the memo. “Contribution requirements under ERISA have risen much faster than the money available to run our community services. That means the ERISA funding requirements are taking away a larger and larger share of the available money that is needed to pay your salaries, your health and other benefits, and continue our mission to serve our community.”
According to a Feb. 13 story in The Forward, Jewish federations in Philadelphia, Detroit, Cleveland, and Baltimore, as well as old-age homes and hospitals in Connecticut and Baltimore and the American Jewish Joint Distribution Committee, have already been granted ERISA waivers by the IRS.
Some employees of UJC MetroWest and its partner agencies who object to losing protection under the federal law are conducting a letter-writing campaign to urge the IRS to deny the federation’s request.
“I am worried that my pension and future retirement security will be at risk if the IRS grants the ‘church plan,’” wrote a current employee in a letter to the IRS.
“The federation does not fit a classical church definition,” said a pension-holder who worked at a MetroWest agency for more than 20 years and asked not to be identified. “It is not holding a worship service. It is not training clergy. It is not run by a religious institution. It is outrageous that they would look to eliminate protections for plan participants.”
When asked if the “church plan” designation would allow pension contributions to be suspended at any time, Rabner said that UJC MetroWest and its agencies are committed to their obligations to their employees.
“We are a Jewish organization and we have values and principles that we are going to uphold,” said Rabner. “I tell people I am just as vested in the plan as they are, and the intention of the community is to continue the benefits but fund the plan over a longer period of time.”
In its memo to pension participants, UJC MetroWest asserted that ERISA guarantees benefits only if UJC and all its partner agencies were to file for bankruptcy or go out of business. “We don’t see that happening,” stated the memo. “We are here to stay, and we know you are too.”
The memo also said that, even under a church plan, “the pension plan money and investments are safely held in trust for the exclusive benefit of retirees and people entitled to benefits. UJC and the agencies cannot take money out of the pension trust for any other reason.”
The IRS ruling is expected after a 60-day comment period, which will expire on March 11. Should the IRS agree that the pension plan qualifies as a church plan, a final decision would still have to be made by the UJC and the agencies, Rabner emphasized.
“The intention of the lay leadership of this community,” he said, “is to fulfill pension obligations and not harm any employees.”