[Congressional Record Volume 158, Number 122 (Wednesday, September 12, 2012)]
[Senate]
[Pages S6272-S6273]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
By Mrs. HUTCHISON (for herself and Mr. Cardin):
S. 3532. A bill to amend the Internal Revenue Code of 1986 to clarify
the treatment of church pension plans, and for other purposes; to the
Committee on Finance.
Mrs. HUTCHISON. Mr. President, I ask unanimous consent that this
statement be included in the Record upon introduction of my
legislation, the Church Plan Clarification Act of 2012, with Senator
Cardin.
Today, my colleague Senator Cardin and I are reintroducing this
legislation, which refines the language included in our previous bill,
S. 143.
Our goal is to resolve an unfortunate application of our current
pension rules on church pension beneficiaries, and protect the
retirement security of ministers and church lay workers.
Church pensions are critically important compensation plans that help
support over one 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.
Today, denominational church plans provide benefits to an estimated
one million-plus ministers, church workers, and their dependents, most
of them working for small churches throughout the nation.
Church plans developed structures and mechanisms that reflect the
differing church polities they serve and their unique status has been
recognized in law.
However, recent IRS regulations governing 403(b) pension programs and
legislative changes have resulted in uncertainty and compliance issues
for church pension plans. In response, Senator Cardin and I sent a
letter to the Internal Revenue Service informing them of our
legislation, nothing that the unintended consequences of their
regulations may negatively affect church ministers and church lay
workers.
I hope we can work to provide clarity for these distinctive plans and
resolve this issue before the end of the year.
This unequal treatment is simply unfair, and it is time we correct
it.
I ask my colleagues to join Senator Cardin and me today in
establishing parity for the beneficiaries of church pensions by
supporting this necessary, long overdue 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 text of the bill was ordered to be
printed in the Record, as follows:
S. 3532
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 2012''.
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.--For purposes'', and
(B) by adding at the end the following new paragraph:
``(2) 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 as defined in subsection (e)
shall not be aggregated with another such organization and
treated as a single employer with such other organization
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.
For purposes of this subparagraph, a degree of common
management or supervision exists only if 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 the provisions of subparagraph (A), for
purposes of this subsection and subsection (m), an
organization that is a nonqualified church-controlled
organization shall be aggregated with one 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
organizations, if at least 80 percent of the directors or
trustees of such organizations are either representatives of,
or directly or indirectly controlled by, the first
organization. For purposes of this subparagraph, a
`nonqualified church controlled organization' shall mean a
church-controlled organization described in section 501(c)(3)
that is not a qualified church-controlled organization
described in section 3121(w)(3)(B).
``(C) Permissive aggregation among church-related
organizations.--Organizations described in subparagraph (A)
may elect to be treated as under common control for purposes
of this subsection. Such election shall be made by the church
or convention or association of churches with which such
organizations are associated within the meaning of subsection
(e)(3)(D), or by an organization determined by such church or
convention or association of churches to be the appropriate
organization for making such election.
``(D) Permissive disaggregation of church-related
organizations.--For purposes of subparagraph (A), in the case
of a church plan (as defined in subsection (e)),
[[Page S6273]]
any employer may permissively disaggregate those entities
that are not churches (as defined in section 403(b)(12)(B))
separately from those entities that are churches, even if
such entities maintain separate church plans.
``(E) Anti-abuse rule.--For purposes of subparagraphs (A)
and (B), the anti-abuse rule in Treasury Regulation section
1.414(c)-5(f) shall apply.''.
(2) Effective date.--The amendments made by this subsection
shall apply to taxable 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 the limitations of section 415(c) of such Code (relating
to limitation for defined contribution plans).''.
(2) Effective date.--The amendments made by this subsection
shall apply as if included in the enactment of the Tax Equity
and Fiscal Responsibility Act of 1982.
(c) Automatic Enrollment by Church Plans.--
(1) In general.--This subsection shall supersede any law of
a State which would directly or indirectly prohibit or
restrict the inclusion in any church plan (as defined in this
subsection) 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 make payments as contributions under the plan on
behalf of the participant, or to the participant directly in
cash, and
(B) under which a participant is treated as having elected
to have the plan sponsor 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).
(3) Notice requirements.--
(A) In general.--The plan administrator of an automatic
contribution arrangement shall, within a reasonable period
before such 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 notice 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) 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 account balance
of a participant or beneficiary, whether or not vested, from
a plan described in section 401(a) or an annuity contract
described in section 403(b), which is a church plan described
in subsection (e) 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 account balance
of a participant or beneficiary, whether or not vested, from
an annuity contract described in section 403(b) to a plan
described in section 401(a) or an annuity contract described
in section 403(b), which is a church plan described in
subsection (e), 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 plan described in section 401(a), or an
annuity contract described in section 403(b), which is a
church plan described in subsection (e) 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
benefit immediately after the transfer or merger is equal to
or greater than the participant's or beneficiary's benefit
immediately before 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 account engages in a
transfer or merger described in this subsection.
``(4) Definitions.--For purposes of this subsection:
``(A) Church.--The term `church' 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).''.
(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 and 2011-1), 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.
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