[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 881 Introduced in Senate (IS)]







104th CONGRESS
  1st Session
                                 S. 881

   To amend the Internal Revenue Code of 1986 to clarify provisions 
relating to church pension benefit plans, to modify certain provisions 
relating to participants in such plans, to reduce the complexity of and 
   to bring workable consistency to the applicable rules, to promote 
        retirement savings and benefits, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              June 5, 1995

Mr. Pryor (for himself and Mr. Grassley) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
   To amend the Internal Revenue Code of 1986 to clarify provisions 
relating to church pension benefit plans, to modify certain provisions 
relating to participants in such plans, to reduce the complexity of and 
   to bring workable consistency to the applicable rules, to promote 
        retirement savings and benefits, and for other purposes.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Church Retirement 
Benefits Simplification Act of 1995''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

SEC. 2. NEW QUALIFICATION PROVISION FOR CHURCH PLANS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
(relating to pension, profit-sharing, stock bonus plans, etc.) is 
amended by adding after section 401 the following new section:

``SEC. 401A. QUALIFIED CHURCH PLAN.

    ``(a) General Rule.--For purposes of all Federal laws, including 
this title, a qualified church plan shall be treated as satisfying the 
requirements of section 401(a), and all references in (or pertaining 
to) this title and such laws to a plan described in section 401(a) 
shall include a qualified church plan. Except as otherwise provided in 
this section, no paragraph of section 401(a) shall apply to a qualified 
church plan.
    ``(b) Definition of Qualified Church Plan.--A plan is a qualified 
church plan if such plan meets the following requirements:
            ``(1) Church plan requirement.--The plan is a church plan 
        (within the meaning of section 414(e)), and the election 
        provided by section 410(d) has not been made with respect to 
        such plan.
            ``(2) Employee contributions are nonforfeitable.--An 
        employee's rights in the employee's accrued benefit derived 
        from the employee's own contributions are nonforfeitable.
            ``(3) Vesting requirements.--The plan satisfies the 
        requirements of subparagraph (A) or (B).
                    ``(A) 10-year vesting.--A plan satisfies the 
                requirements of this paragraph if an employee who has 
                at least 10 years of service has a nonforfeitable right 
                to 100 percent of the employee's accrued benefit 
                derived from employer contributions.
                    ``(B) 5- to 15-year vesting.--A plan satisfies the 
                requirements of this paragraph if an employee who has 
                completed at least 5 years of service has a 
                nonforfeitable right to a percentage of the employee's 
                accrued benefit derived from employer contributions 
                which is not less than the percentage determined under 
                the following table:
                  
                                                         Nonforfeitable
                    ``Years of service
                                                             percentage
                            5........................            25    
                            6........................            30    
                            7........................            35    
                            8........................            40    
                            9........................            45    
                            10.......................            50    
                            11.......................            60    
                            12.......................            70    
                            13.......................            80    
                            14.......................            90    
                            15 or more...............          100.    
                    ``(C) Years of service.--For purposes of this 
                paragraph, an employee's years of service shall be 
                determined in accordance with any reasonable method 
                selected by the plan administrator.
            ``(4) Funding requirements.--The plan meets the funding 
        requirements of section 401(a)(7) as in effect on September 1, 
        1974.
            ``(5) Additional requirements.--
                    ``(A) The plan meets the requirements of paragraphs 
                (1), (2), (8), (9), (16), (17), (25), (27), and (30) of 
                section 401(a).
                    ``(B) If the plan includes employees of an 
                organization which is not a church, the plan meets the 
                requirements of sections 401(a)(3) and 401(a)(6) (as in 
                effect on September 1, 1974) and sections 401(a)(4), 
                401(a)(5), and 401(m).
        For purposes of subparagraph (B), the plan administrator may 
        elect to treat the portion of the plan maintained by any 
        organization (or organizations) described in subparagraph (B) 
        as a separate plan (or plans).
    ``(c) Definitions and Special Rules.--
            ``(1) Church.--For purposes of this section, the term 
        `church' means a church or a convention or association of 
        churches, including an organization described in section 
        414(e)(3)(A) and an organization described in section 
        414(e)(3)(B)(ii), other than--
                    ``(A) an organization described in section 
                170(b)(1)(A)(ii) above the secondary school level 
                (other than a school for religious training), or
                    ``(B) an organization described in section 
                170(b)(1)(A)(iii)--
                            ``(i) which provides community service for 
                        inpatient medical care of the sick or injured 
                        (including obstetrical care); and
                            ``(ii) not more than 50 percent of the 
                        total patient days of which during any year are 
                        customarily assignable to the categories of 
                        chronic convalescent and rest, drug and 
                        alcoholic, epileptic, mentally deficient, 
                        mental, nervous and mental, and tuberculosis, 
                        and care for the aged.
            ``(2) Satisfaction of trust provision.--A plan shall not 
        fail to be described in this section
         merely because such plan is funded through an organization 
described in section 414(e)(3)(A) if--
                    ``(A) such organization is subject to fiduciary 
                requirements under applicable State law;
                    ``(B) such organization is separately incorporated 
                from the church or convention or association of 
                churches which controls it or with which it is 
                associated;
                    ``(C) the assets which equitably belong to the plan 
                are separately accounted for; and
                    ``(D) under the plan, at any time prior to the 
                satisfaction of all liabilities with respect to 
                participants and their beneficiaries, such assets 
                cannot be used for, or diverted to, purposes other than 
                for the exclusive benefit of participants and their 
                beneficiaries (except that this paragraph shall not be 
                construed to preclude the use of plan assets to defray 
                the reasonable costs associated with administering the 
                plan and informing employees and employers of the 
                availability of the plan).
            ``(3) Certain sections apply.--Section 401 (b), (c), and 
        (h) shall apply to a qualified church plan.
            ``(4) Failure of one organization maintaining plan not to 
        disqualify plan.--If one or more organizations maintaining a 
        church plan fail to satisfy the requirements of subsection (b), 
        such plan shall not be treated as failing to satisfy the 
        requirements of this section with respect to other 
        organizations maintaining such plan.
            ``(5) Certain employees not considered highly compensated 
        and excluded employees.--For purposes of this section, no 
        employee shall be considered an officer, person whose principal 
        duties consist in supervising the work of other employees, or 
        highly compensated employee if such employee during the year or 
        the preceding year received compensation from the employer of 
        less than $50,000. For purposes of this section, there shall be 
        excluded from consideration employees described in section 
        410(b)(3)(A). The Secretary shall adjust the $50,000 amount 
        under this paragraph at the same time and in the same manner as 
        under section 415(d).
            ``(6) Time for determination of applicable law.--Except 
        where otherwise specified, the determination of whether a plan 
        meets the requirements of subsection (b) shall be made in 
        accordance with the provisions of this title as in effect 
        immediately following enactment of the Church Retirement 
        Benefits Simplification Act of 1995.''.
    (b) Effect on Existing Plans.--A church plan (within the meaning of 
section 414(e) of the Internal Revenue Code of 1986) which is otherwise 
subject to the applicable requirements of section 401(a) of such Code 
and which has not made the election provided by section 410(d) of such 
Code shall not be subject to section 401A of such Code, and shall 
remain subject to the applicable requirements of section 401(a) of such 
Code, unless the board of directors or trustees of an organization 
described in section 414(e)(3)(A) of such Code, or other appropriate 
governing body responsible for maintaining the plan, adopts a 
resolution under which the church plan is made subject to section 401A 
of such Code.
    (c) Effective Dates.--
            (1) In general.--The amendment made by this section shall 
        be effective for years beginning after December 31, 1994, 
        except that the provisions of section 401A(b)(3) of the 
        Internal Revenue Code of 1986 shall be effective for years 
        beginning after December 31, 1996. No regulation or ruling 
        under section 401(a) of such Code issued after December 31, 
        1994, shall apply to a qualified church plan described in 
        section 401A of such Code unless such regulation or ruling is 
        specifically made applicable by its terms to qualified church 
        plans.
            (2) Prior years.--A church plan (within the meaning of 
        section 414(e) of such Code) shall not be deemed to have failed 
        to satisfy the applicable requirements of section 401(a) of 
        such Code for any year beginning prior to January 1, 1995.

SEC. 3. RETIREMENT INCOME ACCOUNTS OF CHURCHES.

    (a) In General.--Section 403(b)(9) is amended to read as follows:
            ``(9) Retirement income accounts provided by churches, 
        etc.--
                    ``(A) Amounts paid treated as contributions.--For 
                purposes of this title--
                            ``(i) a retirement income account shall be 
                        treated as an annuity contract described in 
                        this subsection, and
                            ``(ii) amounts paid by an employer 
                        described in paragraph (1)(A) or by a church or 
                        a convention or association of churches, 
                        including an organization described in section 
                        414(e)(3)(A) or 414(e)(3)(B)(ii), to a 
                        retirement income account shall be treated as 
                        amounts contributed by the employer for an 
                        annuity contract for the employee on whose 
                        behalf such account is maintained.
                    ``(B) Retirement income account.--For purposes of 
                this paragraph, the term `retirement income account' 
                means a program established or maintained by a church, 
                a convention or association of churches, including an 
                organization described in section 414(e)(3)(A), to 
                provide benefits under this subsection for an employee 
                described in paragraph (1) or an individual described 
                in paragraph (13)(F), or their beneficiaries.''.
    (b) Effective Dates.--
            (1) In general.--The amendment made by this section shall 
        be effective for years beginning after December 31, 1994.
            (2) Prior years.--A church plan (within the meaning of 
        section 414(e)) shall not be deemed to have failed to satisfy 
        the applicable requirements of section 403(b) for any year 
        beginning prior to January 1, 1995.
SEC. 4. CONTRACTS PURCHASED BY A CHURCH.

    (a) Clarification of Applicable Nondiscrimination Requirements.--
Subparagraph (D) of section 403(b)(1) is amended to read as follows:
                    ``(D) except in the case of a contract purchased by 
                a church, such contract is purchased under a plan which 
                meets the nondiscrimination requirements of paragraph 
                (12)(A), and''.
    (b) Certain Coverage Rules Apply.--Subparagraph (B) of section 
403(b)(12) is amended to read as follows:
                    ``(B) Certain requirements.--If a contract 
                purchased by a church is purchased under a church plan 
                (within the meaning of section 414(e)) by--
                            ``(i) an organization described in section 
                        170(b)(1)(A)(ii) above the secondary school 
                        level (other than a school for religious 
                        training), or
                            ``(ii) an organization described in section 
                        170(b)(1)(A)(iii)--
                                    ``(I) which provides community 
                                service for inpatient medical care of 
                                the sick or injured (including 
                                obstetrical care), and
                                    ``(II) no more than 50 percent of 
                                the total patient days of which during 
                                any year are customarily assignable to 
                                the categories of chronic convalescent 
                                and rest, drug and alcoholic, 
                                epileptic, mentally deficient, mental, 
                                nervous and mental, and tuberculosis, 
                                and care for the aged,
                        the plan meets the requirements of sections 
                        401(a)(3) and 401(a)(6), as in effect on 
                        September 1, 1974, and sections 401(a)(4), 
                        401(a)(5), 401(a)(17), and 401(m).
                For purposes of this subparagraph, the plan 
                administrator may elect to treat the portion of the 
                plan maintained by any organization (or organizations) 
                described in this subparagraph as a separate plan (or 
                plans).''.
    (c) Special Rules for Churches.--Section 403(b) is amended by 
adding the following new paragraph at the end thereof:
            ``(13) Definitions and special rules.--
                    ``(A) Contract purchased by a church.--For purposes 
                of this subsection, the term `contract purchased by a 
                church' includes an annuity described in section 
                403(b)(1), a custodial account described in section 
                403(b)(7), and a retirement income account described in 
                section 403(b)(9).
                    ``(B) Church.--For purposes of this subsection, the 
                term `church' means a church or a convention or 
                association of churches, including an organization 
                described in section 414(e)(3)(A) or section 
                414(e)(3)(B)(ii).
                    ``(C) Vesting.--In the case of a contract purchased 
                by a church under a church plan (within the meaning of 
                section 414(e))--
                            ``(i) sections 403(b)(1)(C) and 403(b)(6) 
                        shall not apply;
                            ``(ii) such contract is not described in 
                        this subsection unless an employee's rights in 
                        the employee's accrued benefit under such 
                        contract which is attributable to contributions 
                        made pursuant to a salary reduction agreement 
                        are nonforfeitable; and
                            ``(iii) such contract is not described in 
                        this subsection unless the plan satisfies the 
                        requirements of either of the following:
                                    ``(I) The plan provides that an 
                                employee who has at least 10 years of 
                                service has a nonforfeitable right to 
                                100 percent of the employee's accrued 
                                benefit derived from employer 
                                contributions.
                                    ``(II) The plan provides that an 
                                employee who has completed at least 5 
                                years of service has a nonforfeitable 
                                right to a percentage of the employee's 
                                accrued benefit derived from employer 
                                contributions which percentage is not 
                                less than the percentage determined 
                                under the following table:

                               
                                                         Nonforfeitable
                               ``Years of service
                                                             percentage
                                     5...............            25    
                                     6...............            30    
                                     7...............            35    
                                     8...............            40    
                                     9...............            45    
                                     10..............            50    
                                     11..............            60    
                                     12..............            70    
                                     13..............            80    
                                     14..............            90    
                                     15 or more......          100.    
                For purposes of clause (iii), an employee's years of 
                service shall be determined in accordance with any 
                reasonable method selected by the plan administrator.
                    ``(D) Failure of one organization maintaining plan 
                not to disqualify plan.--In the case of a contract 
                purchased by a church under a church plan (within the 
                meaning of section 414(e)), if one or more 
                organizations maintaining the church plan fails to 
                satisfy the requirements of this section, such plan 
                shall not be treated as failing to satisfy the 
                requirements of this section with respect to other 
                organizations maintaining such plan.
                    ``(E) Certain employees not considered highly 
                compensated and excluded employees.--For purposes of 
                this subsection, no employee for whom a contract is 
                purchased by a church shall be considered an officer, 
                person whose principal duties consist in supervising 
                the work of other employees, or highly compensated 
                employee if such employee during the year or the 
                preceding year received compensation from the employer 
                of less than $50,000. For purposes of this subsection, 
                there shall be excluded employees described in section 
                410(b)(3)(A). The Secretary shall adjust the $50,000 
                amount under this subparagraph at the same time and in 
                the same manner as under section 415(d).
                    ``(F) Certain ministers may participate.--For 
                purposes of this subsection--
                            ``(i) In general.--The term `employee' 
                        shall include a duly ordained, commissioned, or 
                        licensed minister of a church in the exercise 
                        of his or her ministry who is a self-employed 
                        individual (within the meaning of section 
                        401(c)(1)(B)) or any duly ordained, 
                        commissioned, or licensed minister of a church 
                        in the exercise of his or her ministry who is 
                        employed by an organization other than an 
                        organization described in section 501(c)(3).
                            ``(ii) Treatment as employer and 
                        employee.--A self-employed minister described 
                        in clause (i) shall be treated as his or her 
                        own employer which is an organization described 
                        in section 501(c)(3) and which is exempt from 
                        tax under section 501(a). Such an employee who 
                        is employed by an organization other than an 
                        organization described in section 501(c)(3) 
                        shall be treated as employed by an organization 
                        described in section 501(c)(3) and which is 
                        exempt from tax under section 501(a).
                            ``(iii) Compensation.--In determining the 
                        compensation of a self-employed minister 
                        described in clause (i), the earned income 
                        (within the meaning of section 401(c)(2)) of 
                        such minister shall be substituted for `the 
                        amount of compensation which is received from 
                        the employer' under paragraph (3).
                In determining the years of service of a self-employed 
                minister described in clause (i), the years (and 
                portions of years) in which such minister was a self-
                employed individual (within the meaning of section 
                401(c)(1)(B)) shall be included for purposes of 
                paragraph (4).
                    ``(G) Time for determination of applicable law.--
                Except where otherwise specified, the determination of 
                whether a contract purchased by a church meets the 
                requirements of this subsection shall be made in 
                accordance with the provisions of this title as in 
                effect immediately following enactment of the Church 
                Retirement Benefits Simplification Act of 1993.''.
    (d) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        be effective for years beginning after December 31, 1994, 
        except that the provisions of section 403(b)(13)(C)(iii) of the 
        Internal Revenue Code of 1986 shall be effective for years 
        beginning after December 31, 1996. No regulation or ruling 
        issued under section 401(a) or 403(b) of such Code after 
        December 31, 1994, shall apply to a contract purchased by a 
        church unless such regulation or ruling is specifically made 
        applicable by its terms to such contracts. For purposes of 
        applying the exclusion allowance of section 403(b)(2) of such 
        Code and the limitations of section 415 of such Code, any 
        contribution made after December 31, 1996, which is forfeitable 
        pursuant to section 403(b)(13)(C) of such Code shall be treated 
        as an amount contributed to the contract in the year for which 
        such contribution is made and not in the year the contribution 
        becomes nonforfeitable.
            (2) Prior years.--A church plan (within the meaning of 
        section 414(e) of such Code) shall not be deemed to have failed 
        to satisfy the applicable requirements of section 403(b) of 
        such Code for any year beginning prior to January 1, 1995.

SEC. 5. CHANGE IN DISTRIBUTION REQUIREMENT FOR RETIREMENT INCOME 
              ACCOUNTS.

    (a) In General.--Subparagraph (A) of section 403(b)(11) is amended 
by inserting ``or, in the case of a retirement income account described 
in paragraph (9), within the meaning of section 401(k)(2)'' after 
``section 72(m)(7)''.
    (b) Effective Date.--The amendment made by this section shall be 
effective for years beginning after December 31, 1988.

SEC. 6. REQUIRED BEGINNING DATE FOR DISTRIBUTIONS UNDER CHURCH PLANS.

    (a) In General.--Subparagraph (C) of section 401(a)(9) is amended 
by striking the last sentence and inserting the following new sentence: 
``For purposes of this subparagraph, the term `church plan' has the 
meaning given such term by section 414(e).''
    (b) Effective Date.--The amendment made by this section shall be 
effective as if included in the provision of the Tax Reform Act of 1986 
to which such amendment relates.
SEC. 7. PARTICIPATION OF MINISTERS IN CHURCH PLANS.

    (a) In General.--Section 414 is amended by adding the following new 
subsection:
    ``(u) Special Rules for Ministers.--Notwithstanding any other 
provision of this title, if a duly ordained, commissioned, or licensed 
minister of a church in the exercise of his or her ministry 
participates in a church plan (within the meaning of section 414(e)), 
then--
            ``(1) such minister shall be excluded from consideration 
        for purposes of applying sections 401(a)(3), 401(a)(4), and 
        401(a)(5), as in effect on September 1, 1974, and sections 
        401(a)(4), 401(a)(5), 401(a)(26), 401(k)(3), 401(m), 
        403(b)(1)(D) (including section 403(b)(12)), and 410 to any 
        stock bonus, pension, profit-sharing, or annuity plan 
        (including an annuity described in section 403(b) or a 
        retirement income account described in section 403(b)(9)) 
        described in this part. For purposes of this part, the church 
        plan in which such minister participates shall be treated as a 
        plan or contract meeting the requirements of section 401(a), 
        401A, or 403(b) (including section 403(b)(9)) with respect to 
        such minister's participation; and
            ``(2) such minister shall be excluded from consideration 
        for purposes of applying an applicable section to any plan 
        providing benefits described in an applicable section.
For purposes of paragraph (2), the term `applicable section' means 
section 79(d), section 105(h), paragraphs (1), (2), and (3) of section 
120(c), section 125(b), section 127(b)(2), and paragraphs (2), (3), and 
(8) of section 129(d).''.
    (b) Effective Date.--The amendment made by this section shall be 
effective for years beginning before, on, or after December 31, 1995.
SEC. 8. CERTAIN RULES AGGREGATING EMPLOYEES NOT TO APPLY TO CHURCHES, 
              ETC.

    (a) In General.--Section 414 is amended by adding the following new 
subsection:
    ``(v) Certain Rules Aggregating Employees Not To Apply to Churches, 
Etc.--
            ``(1) In general.--If the election provided by paragraph 
        (3) is made, for purposes of sections 401(a)(3), 401(a)(4), and 
        401(a)(5), as in effect on September 1, 1974, and sections 
        401(a)(4), 401(a)(5), 401(a)(17), 401(a)(26), 401(h), 401(m), 
        410(b), 411(d)(1), and 416, subsections (b), (c), (m), (o), and 
        (t) of this section shall not apply to treat the employees of 
        church-related organizations as employed by a single employer, 
        except in the case of employees of church-related organizations 
        which are not exempt from tax under section 501(a) and which 
        have a common, immediate parent.
            ``(2) Definition of church-related organization.--For 
        purposes of this subsection, the term `church-related 
        organization' means a church or a convention or association of 
        churches, an organization described in section 414(e)(3)(A), an 
        organization described in section 414(e)(3)(B)(ii), or an 
        organization the employees of which would be aggregated with 
        the employees of such organizations but for the election 
        provided by paragraph (3).
            ``(3) Election to disaggregate.--The provisions of this 
        subsection shall apply if a church-related organization makes 
        an election for itself and other church-related organizations 
        (in such form and manner as the Secretary may by regulations 
        prescribe) on or before the last day of the first plan year 
        beginning on or after January 1, 1998.''.
    (b) Effective Date.--The amendment made by this section shall be 
effective as if included in the provisions of Public Law 93-406, Public 
Law 98-369, and Public Law 99-514 to which such amendment relates.

SEC. 9. SELF-EMPLOYED MINISTERS TREATED AS EMPLOYEES FOR PURPOSES OF 
              CERTAIN WELFARE BENEFIT PLANS AND RETIREMENT INCOME 
              ACCOUNTS.

    (a) In General.--Section 7701(a)(20) is amended to read as follows:
            ``(20) Employee.--For the purpose of applying the 
        provisions of section 79 with respect to group-term life 
        insurance purchased for employees, for the purpose of applying 
        the provisions of sections 104, 105, and 106 with respect to 
        accident or health insurance or accident or health plans, for 
        the purpose of applying the provisions of section 101(b) with 
        respect to employees' death benefits, for the purpose of 
        applying the provisions of subtitle A with respect to 
        contributions to or under a stock bonus, pension, profit-
        sharing, or annuity plan, and with respect to distributions 
        under such a plan, or by a trust forming part of such a plan, 
        and for purposes of applying section 125 with respect to 
        cafeteria plans, the term `employee' shall include a duly 
        ordained, commissioned, or licensed minister of a church in the 
        exercise of his or her ministry who is a self-employed 
        individual (within the meaning of section 401(c)(1)(B)) or a 
        full-time life insurance salesman who is considered an employee 
        for the purpose of chapter 21, or in the case of services 
        performed before January 1, 1951, who would be considered an 
        employee if his services were performed during 1951.''.
    (b) Effective Date.--The amendment made by this section shall be 
effective for years beginning before, on, or after December 31, 1994.
SEC. 10. DEDUCTIONS FOR CONTRIBUTIONS BY CERTAIN MINISTERS TO 
              RETIREMENT INCOME ACCOUNTS.

    (a) In General.--Section 404(a) is amended by adding the following 
new paragraph:
            ``(10) Contributions by certain ministers to retirement 
        income accounts.--In case contributions are made by a minister 
        described in section 403(b)(13)(F) to a retirement income 
        account described in section 403(b)(9) and not by a person 
        other than such minister, such contributions shall be treated 
        as made to a trust which is exempt from tax under section 
        501(a) which is part of a plan which is described in section 
        401(a) and shall be deductible under this subsection to the 
        extent such contributions do not exceed the exclusion allowance 
        of such minister, determined under section 403(b)(2).''
    (b) Effective Date.--The amendment made by this section shall be 
effective for years beginning after December 31, 1994.
SEC. 11. MODIFICATION FOR CHURCH PLANS OF RULES FOR PLANS MAINTAINED BY 
              MORE THAN ONE EMPLOYER.

    (a) In General.--Section 413(c) is amended by adding the following 
new paragraph:
            ``(8) Church plans maintained by more than one employer.--A 
        church plan (within the meaning of section 414(e)) maintained 
        by more than one employer, and with respect to which the 
        election provided by section 410(d) has not been made, which 
        commingles assets solely for purposes of investment and pooling 
        for mortality experience to provide to participants annuities 
        computed with reference to the balance in the participants' 
        accounts when such accounts become payable shall not be treated 
        as a single plan maintained by more than one employer under 
        this subsection. The rules provided by this paragraph shall 
        apply for purposes of applying section 403(b)(12) to such 
        church plan.''.
    (b) Effective Date.--The amendment made by this section shall be 
effective for years beginning before, on, or after December 31, 1994.

SEC. 12. SECTION 457 NOT TO APPLY TO DEFERRED COMPENSATION OF A CHURCH.

    (a) In General.--Paragraph (13) of section 457(e) is amended to 
read as follows:
            ``(13) Special rule for churches.--The term `eligible 
        employer' shall not include a church (within the meaning of 
        section 401A(c)(1)).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1978.

SEC. 13. CHURCH PLAN MODIFICATION TO SEPARATE ACCOUNT REQUIREMENT OF 
              SECTION 401(h).

    (a) Exception to Separate Account Requirement.--Section 401(h) is 
amended by adding the following new sentence at the end thereof: 
``Notwithstanding the preceding sentence, in the case of a pension or 
annuity plan that is a church plan (within the meaning of section 
414(e)) which is maintained by more than one employer, paragraph (6) 
shall not apply to an employee who is a key employee for purposes of 
section 416 solely because such employee is described in section 
416(i)(1)(A)(i) (relating to officers having an annual compensation 
greater than 150 percent of the amount in effect under section 
415(c)(1)(A)).''
    (b) Application of Section 415(l).--Section 415(l)(1) is amended to 
read as follows:
            ``(1) In general.--For purposes of this section, the 
        following shall be treated as an annual addition to a defined 
        contribution plan for purposes of subsection (c):
                    ``(A) Contributions allocated to any individual 
                medical account which is part of a pension or annuity 
                plan.
                    ``(B) The actuarially determined amount of 
                prefunding for the insurance value of benefits which 
                are--
                            ``(i) described in section 401(h);
                            ``(ii) paid under a pension or annuity plan 
                        that is a church plan (within the meaning of 
                        section 414(e));
                            ``(iii) paid under a plan maintained by 
                        more than one employer; and
                            ``(iv) payable solely to an employee who is 
                        a key employee for purposes of section 415 
                        solely because such employee is described in 
                        section 416(i)(1)(A)(i) (relating to officers 
                        having an annual compensation greater than 150 
                        percent of the amount in effect under section 
                        415(c)(1)(A)), his spouse, or his dependents.
                Subparagraph (B) of section (c)(1) shall not apply to 
                any amount treated as an annual addition under the 
                preceding sentence.''.
    (c) Effective Date.--The amendment made by this section shall apply 
to years beginning after March 31, 1984.

SEC. 14. RULE RELATING TO INVESTMENT IN CONTRACT NOT TO APPLY TO 
              FOREIGN MISSIONARIES.

    (a) In General.--The last sentence of section 72(f) is amended to 
read as follows: ``The preceding sentence shall not apply to amounts 
which were contributed by the employer, as determined under regulations 
prescribed by the Secretary, to provide pension or annuity credits, to 
the extent such credits are attributable to services performed before 
January 1, 1963, and are provided pursuant to pension or annuity plan 
provisions in existence on March 12, 1962, and on that date applicable 
to such services, or to provide pension or annuity credits for foreign 
missionaries (within the meaning of section 403(b)(2)(D)(iii)).''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1994.
SEC. 15. REPEAL OF ELECTIVE DEFERRAL CATCH-UP LIMITATION FOR RETIREMENT 
              INCOME ACCOUNTS.

    (a) In General.--Clause (iii) of section 402(g)(8)(A) is amended to 
read as follows:
                            ``(iii) except in the case of elective 
                        deferrals under a retirement income account 
                        described in section 403(b)(9), the excess of 
                        $5,000 multiplied by the number of years of 
                        service of the employee with the qualified 
                        organization over the employer contributions 
                        described in paragraph (3) made by the 
                        organization on behalf of such employee for 
                        prior taxable years (determined in the manner 
                        prescribed by the Secretary).''.
    (b) Effective Date.--The amendment made by this section shall be 
effective as if included in the provision of the Tax Reform Act of 1986 
to which such amendment relates.

SEC. 16. CHURCH PLANS MAY ANNUITIZE BENEFITS.

    (a) In General.--A retirement income account described in section 
403(b)(9) of the Internal Revenue Code of 1986, a church plan (within 
the meaning of section 414(e) of such Code) that is a plan described in 
section 401(a) or 401A of such Code, or an account which consists of 
qualifed voluntary employee contributions described in section 
219(e)(2) of such Code (as in effect before the date of the enactment 
of the Tax Reform Act of 1986) and earnings thereon, shall not fail to 
be described in such sections merely because it pays benefits to 
participants (and their beneficiaries) from a pool of assets 
administered or funded by an organization described in section 
414(e)(3)(A) of such Code, rather than through the purchase of 
annuities from an insurance company.
    (b) Effective Date.--This provision shall be effective for years 
beginning before, on, or after December 31, 1994.

SEC. 17. CHURCH PLANS MAY INCREASE BENEFIT PAYMENTS.

    (a) In General.--A retirement income account described in section 
403(b)(9) of the Internal Revenue Code of 1986, a church plan (within 
the meaning of section 414(e) of such Code) that is a plan described in 
section 401(a) or 401A of such Code, or an account which consists of 
qualified voluntary employee contributions described in section 
219(e)(2) of such Code (as in effect before the date of the enactment 
of the Tax Reform Act of 1986) and earnings thereon, shall not fail to 
be described in such sections merely because it provides benefit 
payments to participants (and their beneficiaries)--
            (1) to take into account the investment performance of the 
        underlying assets or favorable interest or mortality 
        experience, or
            (2) that increase in an amount not in excess of 5 percent 
        per year.
    (b) Effective Date.--This provision shall be effective for years 
beginning before, on, or after December 31, 1994.

SEC. 18. RULES APPLICABLE TO SELF-INSURED MEDICAL REIMBURSEMENT PLANS 
              NOT TO APPLY TO PLANS OF CHURCHES.

    (a) In General.--Section 105(h) is amended by adding the following 
new paragraph:
            ``(11) Plans of churches.--This subsection shall not apply 
        to a plan maintained by a church (within the meaning of section 
        401A(c)(1)).''
    (b) Effective Date.--The amendment made by this section shall be 
effective for years beginning before, on, or after December 31, 1994.

SEC. 19. RETIREMENT BENEFITS OF MINISTERS NOT SUBJECT TO TAX ON NET 
              EARNINGS FROM SELF-EMPLOYMENT.

    (a) In General.--Section 1402(a)(8) (defining net earning from 
self-employment) is amended by inserting ``, but shall not include in 
such net earning from self-employment any retirement benefit received 
by such individual from a church plan (as defined in section 414(e))'' 
before the semicolon at the end.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning before, on, or after December 31, 1994.
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