Loophole Puts Pension Plans at Risk

Jewish Groups Use Exemptions for Churches to Skirt Rules

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By Nathan Guttman

Published February 13, 2012, issue of February 17, 2012.
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Howard Rabner, the federation’s chief operating officer and chief financial officer, told the Forward that he expects the change to “have no impact on the pension benefits” of retirees and employees. Rabner added that obtaining an exemption from ERISA requirements would “provide critical flexibility to fund the pension plan while continuing to provide our mission-based programming locally, in Israel and overseas.”

Not all participants in the UJC MetroWest plan feel at ease. At least one wrote a letter to the IRS, arguing that the federation is not a religious organization but rather a provider of social services. In the letter, the participant, who asked not to be named, explained that the federation does not employ clergy, has no religious school and does not conduct worship services.

William Josephson, expert on not-for-profit law and former head of the New York State Attorney General’s Charities Bureau, agreed.

“They’re not a church,” he stated, quoting the legal requirements for obtaining a “church plan” status. “How are they going to bypass that?”

Rabner said he believed that UJC MetroWest fit the description of a religious group because other federations had qualified.

In another recent case involving a Jewish organization, workers succeeded in derailing a plan to achieve church status recognition. Employees of the Jewish Community Center of Greater Washington pushed back against their employer’s intention to ask for the religious exemption. After writing board members and consulting with experts, they managed to convince the JCC to withdraw the request.

History has shown that workers have good reason to be concerned. Losing federal protection can present a real risk for those counting on their pensions to provide for their retirement years.

In 2003, the Hospital Center at Orange, located in Orange, N.J., received a “church plan” status for its pension program. The hospital shut down the following year, and only then did employees learn that their pension program was underfunded and would soon be depleted. Since the hospital was exempt from buying into the PBGC insurance, workers have no way to retrieve their pensions.

In another case, the Roman Catholic Diocese of Wilmington, Del., went bankrupt, leaving behind an underfunded pension plan. Since it was a church plan, participants did not have access to information about the dire situation of their retirement program.

So far, there are no similar horror stories at Jewish federations or other groups that obtained the special status. The JDC insisted that it applied for the status to free up cash for programs because its pension was significantly overfunded.

“The plan was fully funded under (government) rules and remains fully funded today under the same rules,” JDC spokesman Michael Geller said.

An official with the Associated Jewish Federation of Baltimore said the question of its church plan status is no longer relevant since the federation closed its pension plan and switched to a 401(k) program several years ago.

A spokesman for the IRS did not respond to inquires regarding exemptions for Jewish organizations’ pension plans.

Contact Nathan Guttman at guttman@forward.com


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