A bill to clarify the status of certain retirement plans and the organizations which maintain the plans.

Summary: Sets forth rules regarding the status of certain retirement plans maintained by specified types of ecumenical organizations as church plans under the Internal Revenue Code.

Exempts certain of such plans from prohibitions, under the Employee Retirement Income Security Act of 1974, against commingling specified assets for investment purposes.

SECTION 1. CLARIFICATION OF STATUS OF CERTAIN ORGANIZATIONS AND 
              RETIREMENT PLANS.

    (a) In General.--For purposes of any provision of law--
            (1) the organization described in subsection (c)(5) 
        maintaining the retirement plan of the eligible organization 
        shall be treated as an organization described in section 
        414(e)(3)(A) of the Internal Revenue Code of 1986 with respect 
        to its maintenance of benefit plans of the eligible 
        organization, and
            (2) subject to the provisions of subsection (b), any 
        retirement plan which, as of January 1, 2003, was maintained by 
        the organization described in paragraph (1) shall be treated as 
        a church plan (within the meaning of section 414(e) of such 
        Code) which is maintained by an organization described in 
        section 414(e)(3)(A) of such Code.
    (b) Special Rules Relating to Retirement Plans.--
            (1) Tax-deferred retirement plan.--In the case of a 
        retirement plan which allows contributions to be made under a 
        salary reduction agreement and which is treated as a church 
        plan under subsection (a)--
                    (A) such treatment shall not apply for purposes of 
                section 415(c)(7) of the Internal Revenue Code of 1986, 
                and
                    (B) any account maintained for a participant or 
                beneficiary of such plan shall be treated as a 
                retirement income account described in section 
                403(b)(9) of such Code, except that such account shall 
                not, for purposes of section 403(b)(12) of such Code, 
                be treated as a contract purchased by a church for 
                purposes of section 403(b)(1)(D) of such Code.
            (2) Money purchase pension plan.--In the case of a 
        retirement plan subject to the requirements of section 401(a) 
        of such Code and treated as a church plan under subsection 
        (a)--
                    (A) such plan (but not any reserves held by the 
                organization described in subsection (c)(5) maintaining 
                the retirement plan of the eligible organization)--
                            (i) shall be treated as a defined 
                        contribution plan which is a money purchase 
                        pension plan, and
                            (ii) shall be treated as having made an 
                        election under section 410(d) of such Code for 
                        plan years beginning after December 31, 2005, 
                        except that notwithstanding the election--
                                    (I) nothing in the Employee 
                                Retirement Income Security Act of 1974 
                                shall prohibit the plan from 
                                commingling for investment purposes its 
                                assets with any other assets of the 
                                organization described in subsection 
                                (c)(5) maintaining the retirement plan 
                                of the eligible organization (or of 
                                plans maintained by it), and
                                    (II) nothing in this section shall 
                                be construed as subjecting such other 
                                assets to any provision of such Act,
                    (B) notwithstanding section 401(a)(11) or 417 of 
                such Code or section 205 of such Act, such plan may 
                offer a lump-sum distribution option to participants 
                who have not attained age 55 without offering such 
                participants an annuity option, and
                    (C) any account maintained for a participant or 
                beneficiary of such plan shall, for purposes of section 
                401(a)(9) of such Code, be treated as a retirement 
                income account described in section 403(b)(9) of such 
                Code.
    (c) Eligible Organization.--For purposes of this section, the term 
``eligible organization'' means any organization if, as of January 1, 
2003--
            (1) more than 1 church recognizes employment at the 
        organization by a duly ordained, commissioned, or licensed 
        minister as service in the exercise of the minister's ministry,
            (2) at least 1 nationally or internationally recognized 
        church association includes the organization (or its national 
        or international representative body) in its directory of 
        participating or founding organizations,
            (3) such organization or national representative body 
        thereof is part of an ecumenical movement (founded in the 
        nineteenth century) to promote worldwide fellowship united by 
        common loyalty to certain religious values,
            (4) such organization's national representative body has 
        chartered at least 1 organization that provides educational, 
        recreational, social and religious support to the armed forces 
        of the United States, and
            (5) the organization has a retirement plan which is 
        administered by an organization--
                    (A) which was established by State law by a special 
                act of the legislature and subject to certain 
                provisions of the State's insurance law,
                    (B) the principal purpose or function of which is 
                the administration or funding of a plan or program for 
                the provision of retirement benefits or welfare 
                benefits, or both, for employees of the eligible 
                organization,
                    (C) is treated as an entity exempt from tax under 
                section 501(m) of the Internal Revenue Code of 1986 
                without regard to the application of subsection (a), 
                and
                    (D) whose organizing documents are amended no later 
                than January 1, 2006, to require that, for plan years 
                beginning on or after such date, the greater of 2 
                trustees or 10 percent of the membership of its board 
                of trustees be associated with a church.
For purposes of paragraph (5)(D), association with a church may include 
past or present service as an officer or board member of a church 
(within the meaning of section 3121(w)(3)(A) of such Code) or a church-
controlled organization (within the meaning of section 3121(w)(3)(B) of 
such Code).
    (d) Effective Date.--The provisions of this section shall apply to 
plan years beginning after December 31, 2003.

            Passed the Senate July 14, 2004.

            Attest:

                                                             Secretary.
108th CONGRESS

  2d Session

                                S. 2589

_______________________________________________________________________

                                 AN ACT

To clarify the status of certain retirement plans and the organizations 
                       which maintain the plans.