[Congressional Record Volume 152, Number 5 (Wednesday, January 25, 2006)]
[Senate]
[Pages S135-S136]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. HUTCHISON:
  S. 2193. A bill to amend the Internal Revenue Code of 1986 to 
establish fairness in the treatment of certain pension plans maintained 
by churches, and for other purposes; to the Committee on Finance.
  Mrs. HUTCHISON. Mr. President, I rise today to introduce a bill to 
fix an unfortunate application of our current pension rules on church 
pension beneficiaries.
  Church pensions are critically important compensation plans that help 
support over a million clergy members across the country in their 
retirement, particularly those who dedicated their careers to serving 
in economically disadvantaged congregations.
  Some of these plans date back to the 18th Century, and they are 
designed to ensure that our pastors and lay staff who are often paid 
lower salaries have adequate resources during their retirement years.
  Unfortunately, the Internal Revenue Code impedes the ability of 
church pensions to recognize these valuable contributions to society 
with provisions that negatively impact church plans while exempting 
other equally important plans.
  For example, Section 415(b)(1)(B) of the Code limits benefits for a 
retired church employee to 100 percent of the participant's average 
compensation for his or her highest three years.
  This limitation penalizes church employees because some church plans 
allow lower-paid employees to accrue benefits based on median salaries 
rather than their own, individual, lower compensation.
  While the Code allows exceptions to this general limitation for 
governmental and multiemployer plans, it does not allow one for church 
plans.
  The rationale for allowing an exception for governmental plans but 
not church plans cannot be reconciled when one acknowledges the 
situation in which most ministers find themselves when they retire.
  For example, ministers often live in parsonages throughout their 
careers; and they are faced with acquiring housing for the first time 
when they retire.
  Not having a significant asset in retirement, such as a house--an 
asset which could be used as collateral and security in time of need, 
leaves ministers vulnerable in their retirement years and justifies the 
need for including church pension beneficiaries in an exception to the 
general limitation.
  The Code further punishes church pensions by requiring church plans 
to pay unrelated business income taxes on investments in leveraged real 
estate, while exempting the vast majority of retirement plans from this 
very same tax.
  This unequal treatment is simply unfair, and it is time we correct 
it.
  The legislation I am introducing today would rectify this unequal 
treatment by exempting church plans from the 415(b)(1)(B) limit and the 
unrelated business income tax.
  I ask my colleagues to join me today in establishing parity for the 
beneficiaries of church pensions by supporting this necessary, long 
over-due fix to the Internal Revenue Code.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2193

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

[[Page S136]]

     SECTION 1. EXTENDING WAIVER OF DEFINED BENEFIT COMPENSATION 
                   LIMIT TO PARTICIPANTS IN CHURCH PLANS WHO ARE 
                   NOT HIGHLY COMPENSATED EMPLOYEES.

       (a) In General.--Paragraph (11) of section 415(b) of the 
     Internal Revenue Code of 1986 is amended by adding at the end 
     the following: ``Subparagraph (B) of paragraph (1) shall not 
     apply to a plan maintained by an organization described in 
     section 3121(w)(3) except with respect to highly compensated 
     benefits. For purposes of this paragraph, the term `highly 
     compensated benefits' means any benefits accrued for an 
     employee in any year on or after the first year in which such 
     employee is a highly compensated employee (as defined in 
     section 414(q)) of the organization described in section 
     3121(w)(3). For purposes of applying paragraph (1)(B) to 
     highly compensated benefits, all benefits of the employee 
     otherwise taken into account (without regard to this 
     paragraph) shall be taken into account.''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to plan years beginning after December 31, 2005.

     SEC. 2. EQUALIZING TREATMENT OF RETIREMENT INCOME ACCOUNTS 
                   PROVIDED BY CHURCHES WITH RESPECT TO 
                   ACQUISITION INDEBTEDNESS.

       (a) In General.--Section 514(c)(9)(C) of the Internal 
     Revenue Code of 1986 (defining qualified organization) is 
     amended by striking ``or'' at the end of clause (ii), by 
     striking the period at the end of clause (iii) and inserting 
     ``; or'' , and by adding at the end the following:
       ``(iv) a retirement income account (as defined in section 
     403(b)(9)(B)).''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2005.
                                 ______