[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 2308 Engrossed in Senate (ES)]

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114th CONGRESS
  1st Session
                                S. 2308

_______________________________________________________________________

                                 AN ACT


 
To amend the Internal Revenue Code of 1986 to clarify the treatment of 
             church pension plans, 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.

    This Act may be cited as the ``Church Plan Clarification Act of 
2015''.

SEC. 2. CHURCH PLAN CLARIFICATION.

    (a) Application of Controlled Group Rules to Church Plans.--
            (1) In general.--Section 414(c) of the Internal Revenue 
        Code of 1986 is amended--
                    (A) by striking ``For purposes'' and inserting the 
                following:
            ``(1) In general.--Except as provided in paragraph (2), for 
        purposes'', and
                    (B) by adding at the end the following new 
                paragraph:
            ``(2) Special rules relating to church plans.--
                    ``(A) General rule.--Except as provided in 
                subparagraphs (B) and (C), for purposes of this 
                subsection and subsection (m), an organization that is 
                otherwise eligible to participate in a church plan 
                shall not be aggregated with another such organization 
                and treated as a single employer with such other 
                organization for a plan year beginning in a taxable 
                year unless--
                            ``(i) one such organization provides 
                        (directly or indirectly) at least 80 percent of 
                        the operating funds for the other organization 
                        during the preceding tax year of the recipient 
                        organization, and
                            ``(ii) there is a degree of common 
                        management or supervision between the 
                        organizations such that the organization 
                        providing the operating funds is directly 
                        involved in the day-to-day operations of the 
                        other organization.
                    ``(B) Nonqualified church-controlled 
                organizations.--Notwithstanding subparagraph (A), for 
                purposes of this subsection and subsection (m), an 
                organization that is a nonqualified church-controlled 
                organization shall be aggregated with 1 or more other 
                nonqualified church-controlled organizations, or with 
                an organization that is not exempt from tax under 
                section 501, and treated as a single employer with such 
                other organization, if at least 80 percent of the 
                directors or trustees of such other organization are 
                either representatives of, or directly or indirectly 
                controlled by, such nonqualified church-controlled 
                organization. For purposes of this subparagraph, the 
                term `nonqualified church-controlled organization' 
                means a church-controlled tax-exempt organization 
                described in section 501(c)(3) that is not a qualified 
                church-controlled organization (as defined in section 
                3121(w)(3)(B)).
                    ``(C) Permissive aggregation among church-related 
                organizations.--The church or convention or association 
                of churches with which an organization described in 
                subparagraph (A) is associated (within the meaning of 
                subsection (e)(3)(D)), or an organization designated by 
                such church or convention or association of churches, 
                may elect to treat such organizations as a single 
                employer for a plan year. Such election, once made, 
                shall apply to all succeeding plan years unless revoked 
                with notice provided to the Secretary in such manner as 
                the Secretary shall prescribe.
                    ``(D) Permissive disaggregation of church-related 
                organizations.--For purposes of subparagraph (A), in 
                the case of a church plan, an employer may elect to 
                treat churches (as defined in section 403(b)(12)(B)) 
                separately from entities that are not churches (as so 
                defined), without regard to whether such entities 
                maintain separate church plans. Such election, once 
                made, shall apply to all succeeding plan years unless 
                revoked with notice provided to the Secretary in such 
                manner as the Secretary shall prescribe.''.
            (2) Clarification relating to application of anti-abuse 
        rule.--The rule of 26 CFR 1.414(c)-5(f) shall continue to apply 
        to each paragraph of section 414(c) of the Internal Revenue 
        Code of 1986, as amended by paragraph (1).
            (3) Effective date.--The amendments made by paragraph (1) 
        shall apply to years beginning before, on, or after the date of 
        the enactment of this Act.
    (b) Application of Contribution and Funding Limitations to 403(b) 
Grandfathered Defined Benefit Plans.--
            (1) In general.--Section 251(e)(5) of the Tax Equity and 
        Fiscal Responsibility Act of 1982 (Public Law 97-248), is 
        amended--
                    (A) by striking ``403(b)(2)'' and inserting 
                ``403(b)'', and
                    (B) by inserting before the period at the end the 
                following: ``, and shall be subject to the applicable 
                limitations of section 415(b) of such Code as if it 
                were a defined benefit plan under section 401(a) of 
                such Code (and not to the limitations of section 415(c) 
                of such Code).''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to years beginning before, on, or after the date of 
        the enactment of this Act.
    (c) Automatic Enrollment by Church Plans.--
            (1) In general.--This subsection shall supersede any law of 
        a State that relates to wage, salary, or payroll payment, 
        collection, deduction, garnishment, assignment, or withholding 
        which would directly or indirectly prohibit or restrict the 
        inclusion in any church plan (as defined in section 414(e) of 
        the Internal Revenue Code of 1986) of an automatic contribution 
        arrangement.
            (2) Definition of automatic contribution arrangement.--For 
        purposes of this subsection, the term ``automatic contribution 
        arrangement'' means an arrangement--
                    (A) under which a participant may elect to have the 
                plan sponsor or the employer make payments as 
                contributions under the plan on behalf of the 
                participant, or to the participant directly in cash,
                    (B) under which a participant is treated as having 
                elected to have the plan sponsor or the employer make 
                such contributions in an amount equal to a uniform 
                percentage of compensation provided under the plan 
                until the participant specifically elects not to have 
                such contributions made (or specifically elects to have 
                such contributions made at a different percentage), and
                    (C) under which the notice and election 
                requirements of paragraph (3), and the investment 
                requirements of paragraph (4), are satisfied.
            (3) Notice requirements.--
                    (A) In general.--The plan sponsor of, or plan 
                administrator or employer maintaining, an automatic 
                contribution arrangement shall, within a reasonable 
                period before the first day of each plan year, provide 
                to each participant to whom the arrangement applies for 
                such plan year notice of the participant's rights and 
                obligations under the arrangement which--
                            (i) is sufficiently accurate and 
                        comprehensive to apprise the participant of 
                        such rights and obligations, and
                            (ii) is written in a manner calculated to 
                        be understood by the average participant to 
                        whom the arrangement applies.
                    (B) Election requirements.--A notice shall not be 
                treated as meeting the requirements of subparagraph (A) 
                with respect to a participant unless--
                            (i) the notice includes an explanation of 
                        the participant's right under the arrangement 
                        not to have elective contributions made on the 
                        participant's behalf (or to elect to have such 
                        contributions made at a different percentage),
                            (ii) the participant has a reasonable 
                        period of time, after receipt of the 
                        explanation described in clause (i) and before 
                        the first elective contribution is made, to 
                        make such election, and
                            (iii) the notice explains how contributions 
                        made under the arrangement will be invested in 
                        the absence of any investment election by the 
                        participant.
            (4) Default investment.--If no affirmative investment 
        election has been made with respect to any automatic 
        contribution arrangement, contributions to such arrangement 
        shall be invested in a default investment selected with the 
        care, skill, prudence, and diligence that a prudent person 
        selecting an investment option would use.
            (5) Effective date.--This subsection shall take effect on 
        the date of the enactment of this Act.
    (d) Allow Certain Plan Transfers and Mergers.--
            (1) In general.--Section 414 of the Internal Revenue Code 
        of 1986 is amended by adding at the end the following new 
        subsection:
    ``(z) Certain Plan Transfers and Mergers.--
            ``(1) In general.--Under rules prescribed by the Secretary, 
        except as provided in paragraph (2), no amount shall be 
        includible in gross income by reason of--
                    ``(A) a transfer of all or a portion of the accrued 
                benefit of a participant or beneficiary, whether or not 
                vested, from a church plan that is a plan described in 
                section 401(a) or an annuity contract described in 
                section 403(b) to an annuity contract described in 
                section 403(b), if such plan and annuity contract are 
                both maintained by the same church or convention or 
                association of churches,
                    ``(B) a transfer of all or a portion of the accrued 
                benefit of a participant or beneficiary from an annuity 
                contract described in section 403(b) to a church plan 
                that is a plan described in section 401(a) or an 
                annuity contract described in section 403(b), if such 
                plan and annuity contract are both maintained by the 
                same church or convention or association of churches, 
                or
                    ``(C) a merger of a church plan that is a plan 
                described in section 401(a), or an annuity contract 
                described in section 403(b) with an annuity contract 
                described in section 403(b), if such plan and annuity 
                contract are both maintained by the same church or 
                convention or association of churches.
            ``(2) Limitation.--Paragraph (1) shall not apply to a 
        transfer or merger unless the participant's or beneficiary's 
        total accrued benefit immediately after the transfer or merger 
        is equal to or greater than the participant's or beneficiary's 
        total accrued benefit immediately before the transfer or 
        merger, and such total accrued benefit is nonforfeitable after 
        the transfer or merger.
            ``(3) Qualification.--A plan or annuity contract shall not 
        fail to be considered to be described in sections 401(a) or 
        403(b) merely because such plan or annuity contract engages in 
        a transfer or merger described in this subsection.
            ``(4) Definitions.--For purposes of this subsection:
                    ``(A) Church or convention or association of 
                churches.--The term `church or convention or 
                association of churches' includes an organization 
                described in subparagraph (A) or (B)(ii) of subsection 
                (e)(3).
                    ``(B) Annuity contract.--The term `annuity 
                contract' includes a custodial account described in 
                section 403(b)(7) and a retirement income account 
                described in section 403(b)(9).
                    ``(C) Accrued benefit.--The term `accrued benefit' 
                means--
                            ``(i) in the case of a defined benefit 
                        plan, the employee's accrued benefit determined 
                        under the plan, and
                            ``(ii) in the case of a plan other than a 
                        defined benefit plan, the balance of the 
                        employee's account under the plan.''.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to transfers or mergers occurring after the date of 
        the enactment of this Act.
    (e) Investments by Church Plans in Collective Trusts.--
            (1) In general.--In the case of--
                    (A) a church plan (as defined in section 414(e) of 
                the Internal Revenue Code of 1986), including a plan 
                described in section 401(a) of such Code and a 
                retirement income account described in section 
                403(b)(9) of such Code, and
                    (B) an organization described in section 
                414(e)(3)(A) of such Code the principal purpose or 
                function of which is the administration of such a plan 
                or account,
        the assets of such plan, account, or organization (including 
        any assets otherwise permitted to be commingled for investment 
        purposes with the assets of such a plan, account, or 
        organization) may be invested in a group trust otherwise 
        described in Internal Revenue Service Revenue Ruling 81-100 (as 
        modified by Internal Revenue Service Revenue Rulings 2004-67, 
        2011-1, and 2014-24), or any subsequent revenue ruling that 
        supersedes or modifies such revenue ruling, without adversely 
        affecting the tax status of the group trust, such plan, 
        account, or organization, or any other plan or trust that 
        invests in the group trust.
            (2) Effective date.--This subsection shall apply to 
        investments made after the date of the enactment of this Act.

            Passed the Senate December 10, 2015.

            Attest:

                                                             Secretary.
114th CONGRESS

  1st Session

                                S. 2308

_______________________________________________________________________

                                 AN ACT

To amend the Internal Revenue Code of 1986 to clarify the treatment of 
             church pension plans, and for other purposes.