[Congressional Record Volume 161, Number 179 (Thursday, December 10, 2015)]
[Senate]
[Pages S8617-S8618]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                 CHURCH PLAN CLARIFICATION ACT OF 2015

  Mr. McCONNELL. Mr. President, I ask unanimous consent that the 
Committee on Finance be discharged from further consideration of S. 
2308 and the Senate proceed to its immediate consideration.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The clerk will report the bill by title.
  The legislative clerk read as follows:

       A bill (S. 2308) to amend the Internal Revenue Code of 1986 
     to clarify the treatment of church pension plans, and for 
     other purposes.

  There being no objection, the Senate proceeded to consider the bill.
  Mr. McCONNELL. Mr. President, I ask unanimous consent that the bill 
be read a third time and passed and the motion to reconsider be 
considered made and laid upon the table.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The bill (S. 2308) was ordered to be engrossed for a third reading, 
was read the third time, and passed, as follows:

                                S. 2308

       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

[[Page S8618]]

     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.

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