[House Report 112-131]
[From the U.S. Government Publishing Office]


112th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    112-131

======================================================================



 
                CHURCH PLAN INVESTMENT CLARIFICATION ACT

                                _______
                                

  July 1, 2011.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

         Mr. Bachus, from the Committee on Financial Services, 
                        submitted the following

                              R E P O R T

                         [To accompany H.R. 33]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Financial Services, to whom was referred 
the bill (H.R. 33) to amend the Securities Act of 1933 to 
specify when certain securities issued in connection with 
church plans are treated as exempted securities for purposes of 
that Act, having considered the same, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

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

SEC. 2. SECURITIES ACT OF 1933 AMENDMENT.

  Section 3(a)(2) of the Securities Act of 1933 (15 U.S.C. 77c(a)(2)) 
is amended--
          (1) by inserting ``(other than a retirement income account 
        described in section 403(b)(9) of the Internal Revenue Code of 
        1986, to the extent that the interest or participation in such 
        single trust fund or collective trust fund is issued to a 
        church, a convention or association of churches, or an 
        organization described in section 414(e)(3)(A) of such Code 
        establishing or maintaining the retirement income account or to 
        a trust established by any such entity in connection with the 
        retirement income account)'' after ``403(b) of such Code''; and
          (2) by inserting ``(other than a person participating in a 
        church plan who is described in section 414(e)(3)(B) of the 
        Internal Revenue Code of 1986)'' after ``section 401(c)(1) of 
        such Code''.

                          Purpose and Summary

    H.R. 33, the Church Plan Investment Clarification Act, 
would make a technical correction to Public Law 108-359, which 
currently prevents church pension plans from investing in 
collective trusts. The bill would broaden and clarify an 
exemption that exists in the current law to allow church 
pension plans to invest in collective trusts. In 2003, Congress 
attempted to achieve this result, but omitted a necessary 
exemption from the Securities Act of 1933 to provide parallel 
treatment for church plans with exemptions in the Investment 
Company Act of 1940 and the Securities Exchange Act of 1934. 
Without this correction, collective trusts will not permit 
investments from church pension plans.

                  Background and Need for Legislation

    H.R. 33, the Church Plan Investment Clarification Act, 
introduced by Insurance, Housing and Community Opportunity 
Subcommittee Chairman Judy Biggert, would broaden and clarify 
an exemption that exists in the current law to allow church 
pension plans to invest in collective trusts. During the 108th 
Congress, in 2003, Representative Biggert sponsored H.R. 1533, 
which sought to amend the Investment Company Act of 1940 to 
exclude from its definition of ``investment company'' any 
collective trust fund maintained by a bank consisting solely of 
certain church pension plans, companies, or accounts specified 
in the Internal Revenue Code. The bill amended the Securities 
Act of 1933 and the Securities Exchange Act of 1934 to exempt 
such church pension plans, companies, or accounts from 
regulation under such Acts, including registration 
requirements. H.R. 1533 passed the house on suspension 397-0, 
and later became Public Law 108-359.
    Unfortunately, H.R. 1533 failed to exempt church plans not 
funded by tax-deferred annuities or plans that did not include 
self-employed individuals. The 1933 Act church plan exemption 
failed to remove these two conditions for church plans, which 
is the only place that the collective trust exemptions do not 
provide parallel treatment among the various securities laws. 
H.R. 33 would fix that omission.
    Representative Biggert introduced H.R. 33 on January 5, 
2011. On March 10, 2011, Representative Biggert raised H.R. 33 
with Ms. Meredith Cross, Securities and Exchange Commission 
(SEC) Director of Corporation Finance, during the Capital 
Markets and Government Sponsored Enterprises Subcommittee 
hearing entitled ``Oversight of the Securities and Exchange 
Commission's Operations, Activities, Challenges and FY 2012 
Budget Request.'' Ms. Cross indicated that the SEC 
wholeheartedly embraced the idea that participants in a church 
plan should have the same opportunities as participants in 
other plans and that there should not be regulatory obstacles 
to such investment, although the Commission itself had not 
officially adopted a position on the bill.

                                Hearings

    On March 10, 2011, the Subcommittee on Capital Markets and 
Government Sponsored Enterprises held a hearing entitled 
``Oversight of the Securities and Exchange Commission's 
Operations, Activities, Challenges and FY 2012 Budget 
Request.'' The Subcommittee received testimony from the 
following witnesses: Mr. Robert Cook, Director, Division of 
Trading and Markets, Securities and Exchange Commission (SEC); 
Ms. Meredith Cross, Director, Division of Corporation Finance, 
SEC: Mr. Robert Khuzami, Director, Division of Enforcement, 
SEC; Ms. Eileen Rominger, Director, Division of Investment 
Management, SEC; and Mr. Carlo di Florio, Director, Office of 
Compliance Inspections and Examinations, SEC. During the 
hearing, Representative Biggert asked Ms. Meredith Cross, the 
Securities and Exchange Commission's Director of Corporation 
Finance, to comment on the need for legislation to modify the 
treatment of church pension plan investments in collective 
trusts.

                        Committee Consideration

    The Subcommittee on Capital Markets and Government 
Sponsored Enterprises met in open session on May 3 and 4, 2011, 
and ordered H.R. 33, as amended, favorably reported to the full 
Committee by voice vote.
    The Committee on Financial Services met in open session on 
June 22, 2011 and ordered H.R. 33, without amendment, favorably 
reported to the House by voice vote.

                            Committee Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires the Committee to list the record votes 
on the motion to report legislation and amendments thereto.
    There were no record votes taken on amendments or in 
connection with ordering H.R. 33 reported to the House. A 
motion by Chairman Bachus to report the bill, as amended, to 
the House with a favorable recommendation was agreed to by 
voice vote.
    During consideration of H.R. 33, the following motion was 
considered by the Committee:
    1. A motion offered by Mr. Bachus, to move the previous 
question on H.R. 33, was agreed to by voice vote.

                      Committee Oversight Findings

    Pursuant to clause 3(c)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee has held hearings and 
made findings that are reflected in this report.

                    Performance Goals and Objectives

    Pursuant to clause 3(c)(4) of rule XIII of the Rules of the 
House of Representatives, the Committee establishes the 
following performance related goals and objectives for this 
legislation:
    H.R. 33, Church Plan Investment Clarification Act, would 
make a technical correction to Public Law 108-359, which 
currently prevents church pension plans from investing in 
collective trusts. The bill would broaden and clarify an 
exemption that exists in the current law to allow church 
pension plans to invest in collective trusts. In 2003, Congress 
attempted to achieve this result, but omitted a necessary 
exemption from the Securities Act of 1933 to provide parallel 
treatment for church plans with exemptions in the Investment 
Company Act of 1940 and the Securities Exchange Act of 1934. 
Without this correction, collective trusts will not permit 
investments from church pension plans.

   New Budget Authority, Entitlement Authority, and Tax Expenditures

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee adopts as its 
own the estimate of new budget authority, entitlement 
authority, or tax expenditures or revenues contained in the 
cost estimate prepared by the Director of the Congressional 
Budget Office pursuant to section 402 of the Congressional 
Budget Act of 1974.

                        Committee Cost Estimate

    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional Budget Office pursuant to 
section 402 of the Congressional Budget Act of 1974.

                 Congressional Budget Office Estimates

    Pursuant to clause 3(c)(3) of rule XIII of the Rules of the 
House of Representatives, the following is the cost estimate 
provided by the Congressional Budget Office pursuant to section 
402 of the Congressional Budget Act of 1974:

                                                     June 30, 2011.
Hon. Spencer Bachus,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.

    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 33, the Church 
Plan Investment Clarification Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Dubary Brea 
and Susan Willie.
            Sincerely,
                                              Douglas W. Elmendorf.
    Enclosure.



H.R. 33--Church Plan Investment Clarification Act

    H.R. 33 would amend the Securities and Exchange Act of 1933 
to allow churches to invest pension funds in certain investment 
vehicles, known as collective trust funds (CTFs), that are 
offered by banks and trust companies. Under current law, CTFs 
are exempt from requirements to register with the Securities 
and Exchange Commission (SEC) as long as the CTF accepts 
investments only from certain eligible employee-benefit plans. 
H.R. 33 would add church pension plans to the group of plans 
that would be eligible to participate in a CTF.
    CBO estimates that implementing H.R. 33 would affect 
federal spending subject to appropriation, but because the bill 
would have a negligible impact on the SEC's workload, such 
effects would not be significant. Enacting H.R. 33 would not 
affect direct spending or revenues; therefore, pay-as-you-go 
procedures do not apply.
    H.R. 33 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contacts for this estimate are Dubary Brea 
and Susan Willie. The estimate was approved by Theresa Gullo, 
Deputy Assistant Director for Budget Analysis.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates reform 
Act.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act were created by this 
legislation.

                  Applicability to Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of the section 
102(b)(3) of the Congressional Accountability Act.

                         Earmark Identification

    H.R. 33 does not contain any congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined in 
clause 9 of rule XXI.

             Section-by-Section Analysis of the Legislation


Section 1. Short title

    This section provides a short title to the bill by citing 
it as the ``Church Plan Investment Clarification Act.''

Section 2. Securities Act of 1933 amendments

    This section amends the Securities Act of 1933 by inserting 
language that provides for an exemption for a church plan 
established under 403(b)(9) of the Internal Revenue Code of 
1986 to invest in a collective trust. In addition, because of 
the unique tax treatment of clergy and lay workers who 
participate in their denominational pension plans, this section 
clarifies that the exemption allows them to invest in 
collective trusts.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italic and existing law in which no change is 
proposed is shown in roman):

                         SECURITIES ACT OF 1933


                          TITLE I--SHORT TITLE

           *       *       *       *       *       *       *


                          EXEMPTED SECURITIES

  Sec. 3. (a) Except as hereinafter expressly provided, the 
provisions of this title shall not apply to any of the 
following classes of securities:
          (1) * * *
          (2) Any security issued or guaranteed by the United 
        States or any Territory thereof, or by the District of 
        Columbia, or by any State of the United States, or by 
        any political subdivision of a State or Territory, or 
        by any public instrumentality of one or more States or 
        Territories, or by any person controlled or supervised 
        by and acting as an instrumentality of the Government 
        of the United States pursuant to authority granted by 
        the Congress of the United States; or any certificate 
        of deposit for any of the foregoing; or any security 
        issued or guaranteed by any bank; or any security 
        issued by or representing an interest in or a direct 
        obligation of a Federal Reserve bank; or any interest 
        or participation in any common trust fund or similar 
        fund that is excluded from the definition of the term 
        ``investment company'' under section 3(c)(3) of the 
        Investment Company Act of 1940; or any security which 
        is an industrial development bond (as defined in 
        section 103(c)(2) of the Internal Revenue Code of 1954) 
        the interest on which is excludable from gross income 
        under section 103(a)(1) of such Code if, by reason of 
        the application of paragraph (4) or (6) of section 
        103(c) of such Code (determined as if paragraphs 
        (4)(A), (5), and (7) were not included in such section 
        103(c)), paragraph (1) of such section 103(c) does not 
        apply to such security; or any interest or 
        participation in a single trust fund, or in a 
        collective trust fund maintained by a bank, or any 
        security arising out of a contract issued by an 
        insurance company, which interest, participation, or 
        security is issued in connection with (A) a stock 
        bonus, pension, or profit-sharing plan which meets the 
        requirements for qualification under section 401 of the 
        Internal Revenue Code of 1954, (B) an annuity plan 
        which meets the requirements for the deduction of the 
        employer's contributions under section 404(a)(2) of 
        such Code, (C) a governmental plan as defined in 
        section 414(d) of such Code which has been established 
        by an employer for the exclusive benefit of its 
        employees or their beneficiaries for the purpose of 
        distributing to such employees or their beneficiaries 
        the corpus and income of the funds accumulated under 
        such plan, if under such plan it is impossible, prior 
        to the satisfaction of all liabilities with respect to 
        such employees and their beneficiaries, for any part of 
        the corpus or income to be used for, or diverted to, 
        purposes other than the exclusive benefit of such 
        employees or their beneficiaries, or (D) a church plan, 
        company, or account that is excluded from the 
        definition of an investment company under section 
        3(c)(14) of the Investment Company Act of 1940, other 
        than any plan described in subparagraph (A), (B), (C), 
        or (D) of this paragraph (i) the contributions under 
        which are held in a single trust fund or in a separate 
        account maintained by an insurance company for a single 
        employer and under which an amount in excess of the 
        employer's contribution is allocated to the purchase of 
        securities (other than interests or participations in 
        the trust or separate account itself) issued by the 
        employer or any company directly or indirectly 
        controlling, controlled by, or under common control 
        with the employer, (ii) which covers employees some or 
        all of whom are employees within the meaning of section 
        401(c)(1) of such Code (other than a person 
        participating in a church plan who is described in 
        section 414(e)(3)(B) of the Internal Revenue Code of 
        1986), or (iii) which is a plan funded by an annuity 
        contract described in section 403(b) of such Code 
        (other than a retirement income account described in 
        section 403(b)(9) of the Internal Revenue Code of 1986, 
        to the extent that the interest or participation in 
        such single trust fund or collective trust fund is 
        issued to a church, a convention or association of 
        churches, or an organization described in section 
        414(e)(3)(A) of such Code establishing or maintaining 
        the retirement income account or to a trust established 
        by any such entity in connection with the retirement 
        income account). The Commission, by rules and 
        regulations or order, shall exempt from the provisions 
        of section 5 of this title any interest or 
        participation issued in connection with a stock bonus, 
        pension, profit-sharing, or annuity plan which covers 
        employees some or all of whom are employees within the 
        meaning of section 401(c)(1) of the Internal Revenue 
        Code of 1954, if and to the extent that the Commission 
        determines this to be necessary or appropriate in the 
        public interest and consistent with the protection of 
        investors and the purposes fairly intended by the 
        policy and provisions of this title. For purposes of 
        this paragraph, a security issued or guaranteed by a 
        bank shall not include any interest or participation in 
        any collective trust fund maintained by a bank; and the 
        term ``bank'' means any national bank, or any banking 
        institution organized under the laws of any State, 
        territory, or the District of Columbia, the business of 
        which is substantially confined to banking and is 
        supervised by the State or territorial banking 
        commission or similar official; except that in the case 
        of a common trust fund or similar fund, or a collective 
        trust fund, the term ``bank'' has the same meaning as 
        in the Investment Company Act of 1940;

           *       *       *       *       *       *       *


                                  
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