Church Plans — ERISA Exemption for Religious Organization Benefits

A church plan is a retirement or welfare benefit plan established and maintained by a church, a convention or association of churches, or an organization controlled by or associated with a church — that is exempt from most provisions of ERISA (the Employee Retirement Income Security Act, 29 U.S.C. § 1002(33)) and from certain Internal Revenue Code requirements that apply to secular employer plans. This exemption means that church plans are not subject to ERISA's funding rules, vesting requirements, fiduciary standards, plan termination insurance (PBGC coverage), or reporting and disclosure obligations — unless the church voluntarily elects ERISA coverage. The exemption covers plans maintained by churches themselves and, since a 1980 amendment, plans maintained by church-affiliated organizations — including hospitals, universities, charities, and social services agencies that are associated with a religious denomination. An estimated 1.4 million workers participate in church plans, and these plans hold hundreds of billions of dollars in assets. The church plan exemption reflects a longstanding deference to religious organizations' autonomy in managing their internal affairs, but it also means participants in church plans have fewer legal protections than participants in comparable secular employer plans.

Current Law (2026)

Legal Authority

• 29 U.S.C. § 1002(33) — Definition of "church plan" (a plan established and maintained for its employees by a church or by a convention or association of churches; includes plans maintained by organizations controlled by or associated with a church — the "principal-purpose organization" must administer the plan)
• 26 U.S.C. § 414(e) — Church plan defined for tax purposes (mirrors the ERISA definition; a plan established and maintained for employees of a church or church-controlled organization; includes the 1980 expansion to church-affiliated organizations)
• 29 U.S.C. § 1003(b)(2) — ERISA exemption (ERISA does not apply to church plans unless the church voluntarily elects coverage)
• 26 U.S.C. § 403(b)(9) — Retirement income accounts for church employees (a special 403(b) subtype available exclusively to employees of churches or church-controlled organizations)

How It Works

Under ERISA § 3(33) and IRC § 414(e), a church plan must be established and maintained for employees of a church (or convention or association of churches), or of an organization controlled by or associated with a church. The 1980 amendment expanded the definition to include church-affiliated organizations that aren't churches themselves — bringing Catholic hospital systems, religious universities like Notre Dame or Baylor, and faith-based social service agencies like Lutheran Services or Catholic Charities within the exemption. The plan must be administered by a principal-purpose organization whose primary function is administering or funding the plan. In Advocate Health Care v. Stapleton (2017), the Supreme Court held unanimously that a plan need not be originally established by a church to qualify — it is sufficient if maintained by a qualifying church-affiliated organization, preserving the exemption for hundreds of large healthcare employers.

Because church plans are exempt from ERISA (unless they opt in), they are not required to meet ERISA's minimum funding standards (they can be underfunded without triggering penalties that apply to secular plans), follow vesting schedules, comply with fiduciary duty rules, purchase PBGC insurance (no government backstop if the plan fails), or file Form 5500 annual reports. The protections for participants are significantly weaker than in ERISA-covered plans — a church hospital's pension fund can be underfunded without the same consequences that would apply to a secular employer. Church and church-controlled organizations can also offer 403(b)(9) retirement income accounts — a special type of 403(b) plan exclusive to these employers, with fewer restrictions than standard 403(b) accounts.

How It Affects You

If you work at a church, diocese, religious school, or congregation, your retirement plan almost certainly operates as a church plan — and that means the safety net most Americans take for granted doesn't apply to you. The most significant gap: no PBGC insurance. The Pension Benefit Guaranty Corporation backstops failed private-sector pension plans, paying benefits up to a statutory maximum when plans run out of money. Church plans are entirely exempt from PBGC coverage. If your denomination's pension fund becomes significantly underfunded and can't meet its obligations, there is no federal guarantee of your benefits. A handful of denominational pension funds have faced exactly this scenario. To understand your actual exposure: request the plan's most recent actuarial valuation from your benefits administrator — it will show the funded percentage (assets as a percentage of projected benefit obligations). A well-funded plan at 90%+ is far less concerning than one at 70% or below. Church plans also have no ERISA-mandated minimum vesting schedules, though most reputable denominational plans set vesting rules in their plan documents. Your plan document (which you have a right to receive) is the governing document for your rights. Contact your denominational benefits board directly; major denominations publish plan documents and funded status reports at their benefits office websites.

If you work at a hospital, university, or social services agency affiliated with a religious denomination — and particularly if you never interact with religious programming in your job — you may be surprised to learn that your retirement plan is almost certainly a church plan under the Advocate Health Care v. Stapleton (2017) Supreme Court ruling. The Court held that a plan need not have been established by a church to qualify as a church plan — it only needs to be maintained by a qualifying church-affiliated organization (like a Catholic hospital system or a Lutheran social services agency). What this means for you: your plan has no PBGC protection (no federal backup if the plan fails), may not follow ERISA's vesting or disclosure rules, and may have fewer fiduciary duty standards than a comparable secular employer plan. Before Stapleton, class-action lawsuits challenged severely underfunded church plans at hospital systems like Dignity Health, Advocate Health, and others. After Stapleton, most of those claims were dismissed. Check whether your employer's plan has voluntarily elected ERISA coverage (some have, providing full protections) — this information should be disclosed in your plan's Summary Plan Description. The Pension Rights Center (pensionrights.org) provides free assistance to workers and retirees trying to understand their retirement plan rights.

If you're a denominational benefits board administrator, you operate under a lighter federal regulatory burden than ERISA-covered plans, but you carry significant responsibility under state trust law and your plan documents. State fiduciary standards — while generally weaker than ERISA's "prudent expert" standard — still require you to manage plan assets for the exclusive benefit of participants, invest prudently, and avoid conflicts of interest. Several state attorneys general have challenged the scope of the church plan exemption as applied to large, secular-appearing hospital employers. If your plan is significantly underfunded, participants may have state-law breach of fiduciary duty claims even where ERISA claims are barred. The decision to voluntarily elect ERISA coverage (under 29 U.S.C. § 1003(b)(2)) — an irrevocable election — deserves careful consideration: ERISA coverage adds meaningful participant protections, PBGC insurance (and its premiums), Form 5500 reporting requirements, and standardized fiduciary standards. Large denominations with sophisticated administrative capacity may find voluntary election appropriate; smaller organizations should consult ERISA counsel before making an irrevocable commitment.

If you're a retirement plan advisor or ERISA attorney, church plan work requires a distinct competency from mainstream ERISA practice. The definitional questions — what constitutes a "principal-purpose organization," which affiliates qualify as "controlled by or associated with" a church — remain fact-intensive and contentious even after Stapleton. IRS has issued private letter rulings on church plan status that are instructive but not binding on other taxpayers. DOL and IRS occasionally audit whether plans claiming the exemption actually qualify. The 403(b)(9) retirement income account structure available to qualifying church employees has unique features (including the ability to include annuities and lump sums in a single vehicle) that require specialized drafting. The interaction between church plan status and multiemployer pension structures — when church-affiliated organizations participate in union benefit funds — creates complex regulatory layering that requires coordination between church plan counsel and ERISA multiemployer specialists.

State Variations

The church plan exemption is federal law, but state law fills some gaps:

• State trust and fiduciary law may impose duties on church plan administrators that parallel (but are weaker than) ERISA fiduciary standards
• State insurance laws generally do not apply to self-insured church welfare plans (health, life, disability)
• State pension and benefits laws may provide limited protections for church plan participants
• Several state attorneys general have challenged the scope of the church plan exemption as applied to large hospital systems

Implementing Regulations

• 26 CFR 1.414(e) — IRS church plan definition and requirements (eligibility for ERISA exemption, maintained by church or convention of churches, principal purpose organization test)
• 29 CFR 2510.3-2(f) — DOL church plan exclusion from ERISA (regulatory guidance on when a plan qualifies for the church plan exemption)
• Church plans are largely exempt from ERISA's reporting, disclosure, fiduciary, and funding requirements — they are regulated primarily under Internal Revenue Code provisions

Pending Legislation

No standalone church plan reform bills have been introduced in the 119th Congress. Religious organization benefit provisions appear in broader retirement legislation — see ERISA Employee Benefits.

Recent Developments

The Stapleton decision (2017) settled the legal question of church-affiliated organizations but intensified policy debate about whether the exemption is too broad — particularly for large, secular-appearing hospital systems that employ thousands of non-religious workers. Several class-action lawsuits challenged underfunded church plans at major hospital systems before and after Stapleton, with mixed results. Legislative proposals to narrow the exemption or require minimum funding standards for church plans affiliated with large healthcare systems have been introduced but not enacted. The church plan exemption's interaction with healthcare consolidation — as religious hospital systems merge with secular ones — continues to raise complex questions about which employees and plans qualify.