When an ERISA Plan Isn't an ERISA Plan

Minneapolis, MNThere are different degrees of faith in the world. There is the faith you have in yourself. There is the faith you have in a higher power. Then, there is your faith that come the conclusion of your work life, your ERISA plan is going to be there to provide you with the pension benefits you need to help fund a reasonably comfortable retirement.

That doesn't appear to be the case for about 500 current, former and retired workers of Augsburg Fortress, a publisher of hymnals and other works used by Lutheran congregations. In 2009, the CEO of Augsburg Fortress, Beth Lewis, informed her employees that the company's defined-benefits plan was insolvent, with one dollar in assets for every three dollars of long-term liability.

The company offered to make a lump-sum payment to employees from the fund's dwindling assets.

The employees took Augsburg Fortress to court; claiming that the company's management of the employee savings plans was in violation of federal law. However, defendants Augsburg Fortress and the Evangelical Lutheran Church of America (ELCA) moved in federal court to have the case dismissed on grounds that the Augsburg Fortress plan was a "church plan" and thus not governed under ERISA pension rules.

According to a recent edition of the Minneapolis Star Tribune, US District Judge Michael Davis agreed, in doing so also dismissing a charge of consumer fraud.

Undaunted, the plaintiffs were planning to pursue their claims at the state level, possibly through a class action. The employees assert that the defendants violated their fiduciary duties under the Employee Retirement Income and Security Act of 1974 (ERISA) by failing to properly fund the pension plan.

Plaintiffs allege that Augsburg Fortress purposefully underfunded the savings plan each year beginning in 2001. Plaintiffs further assert that the ELCA broke faith when it assumed operations of The Lutheran, the magazine published for members of the Evangelical Lutheran Church of America. That decision allegedly removed about $12 million each year from the Augsburg Fortress revenue stream.

Attorneys for the plaintiffs said that their target for a potential action at the state level would be the ELCA, which is reported to have deeper pockets than Augsburg Fortress. Such an effort may help about 175 retirees and 300 current and former employees of Augsburg Fortress get the most out of their employee savings plan. As with any plan—ERISA benefits plan or otherwise—the goal is to provide adequate retirement income. The latter takes time and careful planning. When time runs out, it's almost impossible to make up for lost value…