Understanding Church Plans, ERISA Exemptions, and State Mini-COBRA Laws

Definitions of Church Plans Under ERISA

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that establishes minimum standards for retirement and health benefit plans in private industry to protect individuals in these plans. However, certain types of plans are exempt from ERISA, including what are known as “church plans.”

Church Plans Defined:

1. General Definition: A church plan is a retirement or health benefit plan established and maintained by a church or a group of churches. These plans can include pension plans, health insurance, and other welfare benefit plans.
2. ERISA’s Specific Definition: Under ERISA, a church plan is specifically defined in Section 3(33) of the act. It includes plans established and maintained for its employees by a church, a convention, or an association of churches. This definition also extends to organizations controlled by or associated with a church or group of churches.
3. Internal Revenue Code (IRC): Section 414(e) of the IRC also defines church plans similarly and provides additional tax-related provisions.

Characteristics of Church Plans:

• Church-Controlled Organizations: These plans can also cover employees of organizations, such as schools, hospitals, or other entities controlled by or associated with a church or group of churches.
• Exemptions: Church plans are generally exempt from many of the regulatory requirements imposed by ERISA. This includes specific reporting and disclosure requirements, minimum standards for participation, vesting, benefit accrual, and funding.

Why Church Plans Are Exempt from COBRA

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) provides employees and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan under certain circumstances, such as job loss, reduction in hours worked, transition between jobs, death, divorce, and other life events. However, church plans are exempt from COBRA requirements.

Reasons for COBRA Exemption:

1. Historical and Legislative Background: When ERISA was enacted, Congress recognized religious organizations’ unique nature and plans. The exemption was partly due to respect for the separation of church and state, allowing religious organizations to manage their benefits by their beliefs and doctrines without governmental interference.
2. Autonomy of Religious Organizations: The exemption acknowledges religious organizations’ autonomy in managing their internal affairs, including employee benefits. Requiring compliance with COBRA could impose administrative and financial burdens that might interfere with these organizations’ religious mission and operational practices.
3. Alternative Protections: Church plans may create continuation coverage provisions through severance agreements if the plan carrier allows. 
4. Notifications: Church plans must notify their employees upon hire that they do not qualify for Federal COBRA

Implications of COBRA Exemption:

• Limited Employee Rights: Employees of church-affiliated organizations might not have the same federally guaranteed right to continuation of health coverage as employees in other private sector plans. This could lead to gaps in coverage for individuals who lose their jobs or experience other qualifying events.
• Reliance on Church Plan Policies: Employees must rely on their church plan’s specific policies and practices, which may vary significantly from one organization to another. Employees need to understand their plan’s provisions regarding continuation coverage and other benefits.

State Mini-COBRA Laws and Their Impact on Employers

Church plans, as defined under ERISA, play a significant role in the benefits landscape for employees of religious organizations. Their exemption from ERISA’s stringent requirements, including COBRA, underscores the legislative intent to respect these plans’ unique nature and religious entities’ autonomy. However, it also requires employers to be aware of and understand their specific plan’s provisions to ensure they have adequate coverage and benefits.

While COBRA is a federal program, many states have enacted their own laws that extend similar continuation coverage requirements beyond federal mandates, often referred to as “mini-COBRA” laws. Here’s a look at which states offer COBRA and the specific provisions of their mini-COBRA laws.

California

California’s mini-COBRA law, known as Cal-COBRA, applies to employers with 2-19 employees. It allows for up to 36 months of continuation coverage. 

New York

New York extends continuation coverage to employees of smaller businesses with fewer than 20 employees. Under New York law, individuals can continue their health insurance for up to 36 months.

New Jersey

New Jersey’s mini-COBRA law applies to employers with fewer than 50 employees. The continuation coverage can last up to 18 months, similar to the federal requirement, but it ensures that smaller employers are also covered.

Texas

Texas provides continuation coverage under its state law for employees of companies with 2-19 employees. Coverage can last up to 9 months, which is shorter than the federal COBRA but provides an option for those not covered by the federal law.

Massachusetts

Massachusetts requires that employers with 2-19 employees offer continuation coverage for up to 18 months, mirroring the federal COBRA timeline but ensuring smaller businesses comply.

Florida

Florida’s mini-COBRA law mandates that employers with fewer than 20 employees offer continuation coverage for up to 18 months, similar to the federal law.

Illinois

Illinois offers continuation coverage under its mini-COBRA law for employees of small businesses with fewer than 20 employees. The coverage can extend up to 12 months.

Pennsylvania

Pennsylvania’s mini-COBRA law applies to employers with 2-19 employees and provides up to 9 months of continuation coverage.

Connecticut

Connecticut requires employers with fewer than 20 employees to offer continuation coverage for up to 30 months, which is longer than the federal requirement for similar employers.

The Importance of Understanding State Mini-COBRA Laws

While many religious organizations are exempt from Federal COBRA, they may be subject to state mini-COBRA laws that extend similar protections to employees of smaller businesses. These laws ensure more employees can maintain their health insurance coverage during transitional periods. 

Understanding the nuances of church plans, their COBRA exemptions, and the applicability of state mini-COBRA laws is essential for employers. Religious organizations should strive to provide clear, detailed benefit information to their staff, while employees should take an active role in understanding their rights and options for health coverage during significant life events.

For more detailed information on each state’s mini-COBRA laws and how they might apply to you, it’s advisable to consult the specific state’s insurance department or a legal expert in health insurance law.

How Church HR Network Can Help

Navigating the complexities of church plans, ERISA exemptions, and state mini-COBRA laws can be challenging for religious organizations. Church HR Network specializes in providing tailored HR support to churches and faith-based organizations, ensuring compliance with applicable laws while respecting religious autonomy. 

From designing benefit programs aligned with your organization’s values to offering guidance on employee rights and state-specific regulations, Church HR Network is your trusted partner. Whether you need assistance with training, workshops, or creating clear policies, our team is here to simplify the process and help you manage your workforce effectively. Visit Church HR Network to learn more about our services.