A new article by Hazel Bradford in Business Insurance, an insurance industry trade magazine, provides much-needed media coverage of the St. Peter's "church plan" move, along with more background on the strategy as it's been employed by many organizations to shield themselves from Federal obligations and oversight. Read the article here.
In the article, St. Peter's PR director Phil Hartman echoes recent statements by St. Peter's administration that the reason for declaring the St. Peter's plan a "church plan" was to "spread the (contribution) payments, rather than making a lump-sum payment." Leaving aside that better planning and sound management of contribution funds might have made this obligation easier to meet, this is the only reason St. Peter's has given to date for abandoning Federal oversight. St. Peter's claimed in December 2011 town-hall meetings that nothing else about the management of the plan would change: not the amount of yearly contributions, not planned benefits, not even insurance (see below). They admitted that if their application for "church plan" status were denied, the IRS would make it fairly easy to get back on the ERISA track, and they were hard-pressed to make a case that their obligations under ERISA were so onerous that "church plan" status was preferable to continued Federal protection for the plan.
Hartman goes on to say (paraphrased in the article) that "St. Peter's continued to pay PBGC [Pension Benefit Guaranty Corporation, a Federal insurance agency similar to the FDIC] premiums through 2011 and would like to figure out how to continue being protected by the PBGC or a private insurer despite seeking the church plan designation." St. Peter's administration claimed in the town-hall meetings that should the IRS grant the ruling, payment of premiums to the PBGC would continue. The current St. Peter's Summary Plan Description states clearly that PBGC coverage would end in such a case. It's difficult to judge which of these three statements by St. Peter's is closest to the truth.
Administrators also claimed in town-hall meetings that any premiums refunded by PBGC go into the pension fund and are not refunded to the organization that paid them. This would doubtless be news to the 85 organizations that lined up for such refunds between 1999 and 2007, according to the Pension Rights Center in the same article.
Lastly, we must again note that once granted by the IRS, "church plan" status is permanent. St. Peter's administration implored employees in the December town-hall meetings to trust them—that they would never do anything to harm employees' (and retirees') retirement security. Even granted for argument's sake that current management has only plan participants' best interests at heart, St. Peter's has suffered major administrative turnover in recent years. In a dire financial climate, future administrators may not be so considerate.