As discussed below, even though a church plan was operated in accordance with ERISA and the plan sponsor may have thought it was required to do so, as long as no 410(d) election was made, it is “no harm, no foul” for the plan’s status as a church plan.
Following the U.S. Supreme Court’s ruling in Advocate Health Care Network v. Stapleton, 137 S.Ct. 1652 (2017), holding that a church plan need not be established by a church, the IRS has continued to issue rulings affirming its long-standing position that (1) tax-exempt organizations that are controlled by or associated with a church are appropriate entities to sponsor church plans and (2) that a retirement committee, established by the sponsoring organization and controlled by or associated with the church, can satisfy the requirement that the plan be “maintained” by an organization whose principal purpose is the administration or funding of a retirement plan. Most recently, on June 29, 2018, the IRS released a church plan ruling that confirmed these two points, but importantly also concluded that a plan was a church plan even though at some time during its existence it was operated as though it were subject to ERISA.
In PLR 201826009 (133791-17), a church-affiliated organization sponsored a defined benefit pension plan and voluntarily operated it as though it were subject to ERISA. The sponsor filed Form 5500s, paid premiums to the Pension Benefit Guaranty Corporation, and updated and amended the plan on a continuous basis, presumably to comply with rules applicable to plans subject to ERISA. The PLR states that the sponsor “voluntarily” operated the plan to comply with ERISA, but it is unclear whether this was a deliberate choice or inadvertent.
The IRS ruled that church plans that wish to be legally required to comply with ERISA and the Code requirements applicable to plans subject to ERISA must file an election prescribed under Code Section 410(d), commonly called a “410(d) election.” Section 1.410(d)-1(c)(3) of the regulations provides that the plan administrator of the church plan may make the election by attaching an affirmative statement to either (i) the plan’s Treasury Form 5500 filed for the first plan year for which the election is effective or (ii) a written request for a determination letter relating to the qualification of the plan. The IRS concluded, “Section 1.410(d)-1 does not provide for an alternative form of election. Accordingly, we conclude that the administration and operation of … [the Plan], as if it were subject to Title I of ERISA, does not constitute an election under § 410(d).”