The IRS has once again confirmed that an employee benefit plan maintained by a church or church-affiliated organization is not subject to ERISA unless the plan sponsor makes an affirmative written election to have ERISA apply to the plan.  That is the case even if the plan has historically been administered and operated as though it were an ERISA plan.

Private Letter Ruling 201826009 (June 29, 2018) deals with an application submitted by a church-affiliated organization that provides substance abuse and addiction treatment for members of the religious clergy.  The addiction treatment center maintained a defined benefit pension plan, which it operated in accordance with the major requirements of ERISA – filing Form 5500s, paying premiums to the PBGC, and updating and amending the plan regularly to comply with ERISA requirements.  However, no affirmative election was ever made to have the plan treated as an ERISA plan.  The addiction treatment center requested a ruling that the plan is and has always been a church plan, despite having been administered like an ERISA plan.  The IRS agreed.

After confirming that the applicant met the governance and other requirements to be considered church controlled, the IRS turned to the question of whether voluntary compliance with ERISA requirements operated as an election for the plan to be subject to ERISA.  The IRS reaffirmed that the only way for a church plan to become subject to ERISA is for the plan sponsor to make the irrevocable election described in Section 410(d) of the Internal Revenue Code.  The Treasury Regulations under Code Section 410(d) provide that the election must be made in writing and must be either attached to the plan’s Form 5500 or to a request for a determination letter relating to the qualification of the plan.

The IRS concluded that “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).”  At a time when the status of church plans is often challenged, the clear statement made by the IRS in PLR 201826009 will provide some comfort to church plan sponsors who have either intentionally or inadvertently allowed the administration of their plans to be ERISA-fied.