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Plans sponsored by Governmental & Religious Groups are NOT Under ERISA

History from SPBA Active Past President Fred Hunt, who was an eye-witness as the history of ERISA was in the making.

When ERISA legislation was evolving during the period 1964-1974, it was assumed that there would be a bill to cover private-employer plans (including those with unions). This became ERISA. There was also to be a totally separate nearly-twin bill for public plans, to be called PERISA (Public Employee Retirement Income Security Act). Religious plans were not to be touched because of fear of raising the divisive Constitutional issue of separation of church & state.

ERISA (and PERISA) was designed to be the ultimate consumer protection law, and it was so tough that there were screams from all corners that no employer (private or public) in their right mind would ever submit to or survive in the strict fiduciary requirements. So, most people thought that ERISA/PERISA was the death knell for employee benefits. That's why the insurance industry fought so hard for its own exemption. They figured that the rest of the system would collapse from the weight of ERISA/PERISA, and they could survive and serve the whole market unencumbered.

The biggest worry in those days was the safety of pension reserve funds. ERISA was triggered when Studebaker went out of business, and it was found that the money assumed to be there for pensions was used up. So, protecting and maximizing the size of the plan assets was a major goal. This was not only to be sure that there was no hanky-panky, but also to be sure that the most efficient (profitable & safe) investments were used.

Many local and state governmental plans were dipping into pension reserves for operating funds and other projects. It was also a time when many cities & states wanted to shape their investments for social goals, such as not investing in anything that had ties to South Africa, or limiting investments to things within the state or community. Since ERISA & PERISA would over-ride those social considerations in favor of simply maximizing the size & security of the workers' money, extensive pressure was placed on Congress by cities & states.  PERISA quickly evaporated and never reached the final stages.

So, what does that mean today? There is no ERISA law for "public" governmental plans (state/local/county/city... federal plans are simply off the regulatory scope).  The "governmental/public" & plans sponsored by religious entities such as Diocese workers or nuns are not exempted from ERISA. They simply are not included. They are in a sort of limbo. If a state wishes to regulate them, then the state may try topass laws to do so. Some states do directly; some do not because they feel that government will be honest and efficient with its own workers; and the issue has not been raised in many other states. So, what happens in the real world today? Ironically, the once-dreaded ERISA has turned out to be a wonderful model for responsible fiduciary management of employee benefit plans, so most TPAs urge public & church plans to consciously or unconsciously mimic the fiduciary procedures of ERISA in the way the plan is administered.

NOTE: The fact that public & church plans are not included in ERISA does NOT mean that they are exempt in any way  from federal mandates & requirements, such as COBRA, privacy, etc. etc. (unless specifically stated in legislation).