Loophole Puts Pension Plans at Risk

Jewish Groups Use Exemptions for Churches to Skirt Rules

istockphoto.com

By Nathan Guttman

Published February 13, 2012, issue of February 17, 2012.
  • Print
  • Share Share
  • Single Page

Seeking to cut pension costs, Jewish social service groups are using an obscure tax loophole to skirt federal rules that protect workers from being left out in the cold if their retirement plans collapse.

Jewish organizations, including federations and hospitals, have filed for the special “church status” that strips workers and retirees of legal protections and allows groups to drop insurance that would cover shortfalls in their pension plans.

Federal tax experts say the status is supposed to be for houses of worship and clergy-run religious groups, yet groups that are not clearly religious in nature have been approved, and more are eager to qualify.

“Once you get a church status, workers will no longer have the protection all other private pension plans have,” said Eric Loi, an attorney who works at the Pension Rights Center, a Washington-based organization.

Among the Jewish groups that have already won the special status are the federations of Philadelphia, Detroit, Cleveland and Baltimore. Old-age homes and hospitals in Connecticut and in Baltimore, as well as the American Jewish Joint Distribution Committee, have also qualified.

Those groups all obtained the status several years ago, often with little or no publicity, even though the changes can dramatically affect workers’ retirement security. Last year, the Internal Revenue Service issued new guidelines ordering groups to inform employees about the proposed changes and to allow their input.

The latest major group to push for the controversial change is United Jewish Communities of MetroWest New Jersey, one of the nation’s largest federations.

On January 11, UJC MetroWest told current and former employees that “because of extraordinary financial pressure,” the federation has turned to the Internal Revenue Service and asked that its pension program be recognized as a church plan.

“To qualify for this special plan exception,” the letter reads, the federation will have to demonstrate to the IRS that its pension plan is “established and maintained by a religious organization.”

If the request is approved, the New Jersey federation’s pension plan will not have to abide by rules set in the Employee Retirement Income Security Act of 1974.

The most significant exemption is from the need to insure the plan in the Pension Benefit Guaranty Corporation. It’s a costly requirement for pension funds, but one that ensures employees get at least part of their money in case the pension plan goes broke. Church plans are also exempt from many of the reporting and transparency requirements put in place to inform workers of how their retirement money is managed.

Officials at UJC MetroWest assured 1,144 participants in their pension fund that the group will continue to run the plan “in a responsible way” regardless of the change in status.


The Jewish Daily Forward welcomes reader comments in order to promote thoughtful discussion on issues of importance to the Jewish community. In the interest of maintaining a civil forum, The Jewish Daily Forwardrequires that all commenters be appropriately respectful toward our writers, other commenters and the subjects of the articles. Vigorous debate and reasoned critique are welcome; name-calling and personal invective are not. While we generally do not seek to edit or actively moderate comments, our spam filter prevents most links and certain key words from being posted and The Jewish Daily Forward reserves the right to remove comments for any reason.





Find us on Facebook!
  • It’s over. The tyranny of the straight-haired, button nosed, tan-skinned girl has ended. Jewesses rejoice!
  • It's really, really, really hard to get kicked out of Hebrew school these days.
  • "If Netanyahu re-opens the settlement floodgates, he will recklessly bolster the argument of Hamas that the only language Israel understands is violence."
  • Would an ultra-Orthodox leader do a better job of running the Met Council?
  • So, who won the war — Israel or Hamas?
  • 300 Holocaust survivors spoke out against Israel. Did they play right into Hitler's hands?
  • Ari Folman's new movie 'The Congress' is a brilliant spectacle, an exhilarating visual extravaganza and a slapdash thought experiment. It's also unlike anything Forward critic Ezra Glinter has ever seen. http://jd.fo/d4unE
  • The eggplant is beloved in Israel. So why do Americans keep giving it a bad rap? With this new recipe, Vered Guttman sets out to defend the honor of her favorite vegetable.
  • “KlezKamp has always been a crazy quilt of gay and straight, religious and nonreligious, Jewish and gentile.” Why is the klezmer festival shutting down now?
  • “You can plagiarize the Bible, can’t you?” Jill Sobule says when asked how she went about writing the lyrics for a new 'Yentl' adaptation. “A couple of the songs I completely stole." Share this with the theater-lovers in your life!
  • Will Americans who served in the Israeli army during the Gaza operation face war crimes charges when they get back home?
  • Talk about a fashion faux pas. What was Zara thinking with the concentration camp look?
  • “The Black community was resistant to the Jewish community coming into the neighborhood — at first.” Watch this video about how a group of gardeners is rebuilding trust between African-Americans and Jews in Detroit.
  • "I am a Jewish woman married to a non-Jewish man who was raised Catholic, but now considers himself a “common-law Jew.” We are raising our two young children as Jews. My husband's parents are still semi-practicing Catholics. When we go over to either of their homes, they bow their heads, often hold hands, and say grace before meals. This is an especially awkward time for me, as I'm uncomfortable participating in a non-Jewish religious ritual, but don't want his family to think I'm ungrateful. It's becoming especially vexing to me now that my oldest son is 7. What's the best way to handle this situation?" http://jd.fo/b4ucX What would you do?
  • Maybe he was trying to give her a "schtickle of fluoride"...
  • from-cache

Would you like to receive updates about new stories?




















We will not share your e-mail address or other personal information.

Already subscribed? Manage your subscription.