AARP Foundation Reaches Settlement in Lawsuit to Recover Church Retirement Funds

Nearly 5,000 employees and retirees of the African Methodist Episcopal (AME) Church will see some of their retirement funds restored thanks to a contingent settlement in a lawsuit in which they were represented by AARP Foundation and cocounsel. The settlement now awaits court approval.

In April 2022, AARP Foundation attorneys joined the class-action lawsuit to help former and current clergy and other employees recover roughly $90 million in retirement funds that were lost due to alleged mismanagement from the fiduciaries and others responsible for the accounts. The settlement provides immediate restoration of some funds and creates a pathway for the church and plaintiffs to restore the balance of the lost retirement funds. The agreement also allows for the church and plaintiffs to continue pursuing claims against all remaining defendants. The AME church also has committed to seeking full restoration for all plan participants and is introducing major reforms for its Department of Retirement Services operations to prevent future mismanagement.

“African Methodist Episcopal Church employees and retirees served their community for years and they deserve the retirement funds they were promised,” said William Alvarado Rivera, senior vice president of Litigation at AARP Foundation. “This agreement is an important step to address the financial harm caused to plan participants by restoring funding of the plan that thousands depend on.”

What happened with the AME retirement plan

Founded in 1816, the AME Church is the oldest Black church in the United States and one of the largest Protestant denominations in the country, with more than 2.5 million members. AME clergy and other participants in its retirement plan had been told for years that contributions from individual churches were being conservatively invested in a life insurance company. According to the lawsuit, the plan’s participants also were told that the fund was covered by the federal Employee Retirement Income Security Act (ERISA), which offers federal insurance protections.

But an audit in 2021 found that contrary to regular audits that had been presented to the AME board and church membership at large, two-thirds of the retirement funds — approximately $90 million — were instead placed in a risky venture capital company and a real estate deal, both of which are now essentially worthless. When they disclosed the loss of funds in February, AME leaders also told participants that the retirement plan actually was not covered by ERISA due to a religious exemption, so the plan did not have federal insurance to protect against the loss of funds.