[Congressional Record Volume 159, Number 67 (Tuesday, May 14, 2013)]
[Senate]
[Pages S3433-S3434]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. CARDIN (for himself and Mr. Portman):
  S. 952. 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.
  Mr. CARDIN. Mr. President, today my colleague Senator Portman and I 
are introducing this legislation, which refines the language included 
in a previous bill, S. 3532, introduced in the 112th Congress by 
Senator Hutchison and myself.
  Our goal is to ensure the retirement security of our Nation's clergy, 
church lay workers, and their families by resolving an unfortunate 
application of our current pension rules on church pension 
beneficiaries.
  Churches and synagogues established some of the first pension plans 
in the country, some dating back to the 18th century, and they are 
designed to ensure that our pastors and lay staff have adequate 
resources during their retirement years.
  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.
  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.
  The Church Plan Clarification Act is straightforward, non-
controversial, and has bipartisan support. I hope we can work quickly 
to provide clarity for these distinctive plans by enacting this 
legislation and thereby ensuring that those who dedicate their lives to 
religious service are not inappropriately and unfairly disadvantaged.
  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. 952

       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 2013''.

     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)), 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 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 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.

[[Page S3434]]

       (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:
       ``(y) 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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