S 143

112th CONGRESS
1st Session

S. 143

To amend the Internal Revenue Code of 1986 to clarify the treatment of church pension plans, and for other purposes.

IN THE SENATE OF THE UNITED STATES

January 25 (legislative day, January 5), 2011

Mrs. HUTCHISON (for herself and Mr. CARDIN) introduced the following bill; which was read twice and referred to the Committee on Finance


A BILL

To amend the Internal Revenue Code of 1986 to clarify the treatment of church pension plans, and for other purposes.

    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 2011'.

SEC. 2. APPLICATION OF CONTROLLED GROUP RULES TO CHURCH PLANS.

    (a) In General- Section 414(c) of the Internal Revenue Code of 1986 is amended--

      (1) by striking `For purposes' and inserting the following:

      `(1) IN GENERAL- For purposes', and

      (2) by adding at the end the following new paragraph:

      `(2) CHURCH PLANS- For purposes of this subsection, in determining whether an employer who is otherwise eligible to participate in a church plan is treated as a member of a group of entities under common control, such employer (including an organization described in subsection (e)(3)(A)) shall not be treated as under common control with another entity if, based on all of the facts and circumstances, the day-to-day financial and operational activities are not under common control. In determining if such activities are under common control, the Secretary shall consider whether the entities have been historically viewed as distinct entities within the church or convention or association of churches.'.

    (b) Effective Date- The amendments made by this section shall apply to taxable years beginning before, on, or after the date of the enactment of this Act.

SEC. 3. APPLICATION OF CONTRIBUTION AND FUNDING LIMITATIONS TO 403(b) GRANDFATHERED DEFINED BENEFIT PLANS.

    (a) In General- Section 251(e)(5) of the Tax Equity and Fiscal Responsibility Act of 1982 (Public Law 97-248), is amended--

      (1) by striking `403(b)(2)' and inserting `403(b)', and

      (2) 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).'.

    (b) Effective Date- The amendments made by this section shall apply as if included in the enactment of the Tax Equity and Fiscal Responsibility Act of 1982.

SEC. 4. AUTOMATIC ENROLLMENT BY CHURCH PLANS.

    (a) In General- For purposes of section 514(e) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1114(e)), the term `plan' shall include an employee benefit plan which is a church plan (as defined in section 3(33) of such Act or section 414(e) of the Internal Revenue Code of 1986).

    (b) Effective Date- This section shall take effect on the date of the enactment of this Act.

SEC. 5. ALLOW CERTAIN PLAN TRANSFERS AND MERGERS.

    (a) 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 a retirement income account described in section 403(b)(9), which is a church plan described in section 414(e) to a retirement income account described in section 403(b)(9), if such plan and account 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 a retirement income account described in section 403(b)(9) to a plan described in section 401(a), or a retirement income account described in section 403(b)(9), which is a church plan described in section 414(e), if such plan and account 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 a retirement income account described in section 403(b)(9), which is a church plan described in section 414(e) with a retirement income account described in section 403(b)(9), if such plan and account 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 account shall not fail to be considered to be described in sections 401(a) or 403(b)(9) merely because such plan or account engages in a transfer or merger described in this subsection.

      `(4) DEFINITION OF CHURCH- For purposes of this subsection, the term `church' includes an organization described in subparagraph (A) or (B)(ii) of subsection (e)(3).'.

    (b) Effective Date- The amendment made by this section shall apply to transfers or mergers occurring after the date of the enactment of this Act.

SEC. 6. INVESTMENTS BY CHURCH PLANS IN COLLECTIVE TRUSTS.

    (a) In General- In the case of--

      (1) a church plan (as defined in section 414(e) of the Internal Revenue Code 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

      (2) 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 Ruling 2004-67), 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.

    (b) Effective Date- This section shall apply to investments made after the date of the enactment of this Act.

END