Church Plan Clarification Act of 2012 - Amends the Internal Revenue Code to declare that an organization otherwise eligible to participate in a church plan shall not be aggregated with another such organization and treated as a single employer with it unless: (1) one organization provides directly or indirectly at least 80% of the operating funds for the other one during the recipient organization's preceding tax year, and (2) there is a degree of common management or supervision between the organizations.
Preempts any state law which would directly or indirectly prohibit or restrict the inclusion in any church plan of an automatic contribution arrangement.
Excludes from gross income amounts attributable to transfers of and mergers of church plans that are maintained by the same church or convention or association of churches.
Allows church plans and their supporting organizations to invest plan assets in a group trust (as defined by Internal Revenue Service Revenue Rulings).
[Congressional Bills 112th Congress]
[From the U.S. Government Publishing Office]
[S. 3532 Introduced in Senate (IS)]
112th CONGRESS
2d Session
S. 3532
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
September 12, 2012
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
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)), 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.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S6272)
Read twice and referred to the Committee on Finance. (text of measure as introduced: CR S6272-6273)
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