19–006

108TH CONGRESS REPORT " HOUSE OF REPRESENTATIVES ! 1st Session 108–248

AMENDING THE SECURITIES LAWS TO PERMIT CHURCH 

PENSION PLANS TO BE INVESTED IN COLLECTIVE 

TRUSTS 

SEPTEMBER 3, 2003.—Committed to the Committee of the Whole House on the State 

of the Union and ordered to be printed 

Mr. OXLEY, from the Committee on Financial Services, 

submitted the following 

R E P O R T 

[To accompany H.R. 1533] 

[Including cost estimate of the Congressional Budget Office]

The Committee on Financial Services, to whom was referred the 

bill (H.R. 1533) to amend the securities laws to permit church pension plans to be invested in collective trusts, having considered the 

same, report favorably thereon without amendment and recommend that the bill do pass.

CONTENTS 

Page 

Purpose and Summary ............................................................................................ 2

Background and Need for Legislation .................................................................... 2

Hearings ................................................................................................................... 2

Committee Consideration ........................................................................................ 2

Committee Votes ...................................................................................................... 3

Committee Oversight Findings ............................................................................... 3

Performance Goals and Objectives ......................................................................... 3

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 3

Committee Cost Estimate ....................................................................................... 3

Congressional Budget Office Cost Estimate .......................................................... 3

Federal Mandates Statement ................................................................................. 4

Advisory Committee Statement .............................................................................. 4

Constitutional Authority Statement ...................................................................... 4

Applicability to Legislative Branch ........................................................................ 4

Section-by-Section Analysis .................................................................................... 4

Changes in Existing Law Made by the Bill, as Reported ..................................... 5

2

PURPOSE AND SUMMARY

H.R. 1533 amends the Federal securities laws to grant church 

plans, as described in section 3(c)(14) of the Investment Company 

Act of 1940, the ability to invest their assets in collective trust 

funds, as described in section 3(c)(11) of the Investment Company 

Act. The legislation thus provides parallel treatment under the securities laws of the assets of church plans to the treatment afforded 

the assets of governmental plans, as described in section 3(a)(2)(C) 

of the Securities Act of 1933. It permits Church Plan assets to be 

invested in a collective trust fund that also holds assets of certain 

trusts which meet the requirements for qualification under section 

401 of the Internal Revenue Code and governmental plans. 

BACKGROUND AND NEED FOR LEGISLATION

Many pension plans diversify their holdings by investing a portion of their portfolios in rental real estate and other private investment offerings. Frequently, pension plans make these investments by joining other pension plans in a collective trust fund that 

is created and managed by a financial institution solely as an investment vehicle for pension programs. Current law prohibits 

Church Plans from participating in these arrangements. 

Section 3(c)(11) of the Investment Company Act of 1940 excludes, 

among other things, any collective trust fund that consists of the 

assets of pension plans that meet the qualifications of section 401 

of the Internal Revenue Code or governmental plans, or both, from 

the definition of investment company under the Investment Company Act. This reflects the change made in 1980 by Congress to 

broaden the Investment Company Act’s exclusion of collective trust 

funds to permit investment in those funds by governmental plans. 

Section 3(a)(2) of the Securities Act of 1933 and section 3(a)(12)(c) 

of the Securities Exchange Act of 1934 provide exemptions from 

various registration and disclosure rules for collective trust funds. 

However, church plans are not covered by these provisions. 

Church plans today make investments similar to those permitted 

for Collective Trust Funds. However, the inability of church plans 

to participate with trusts and governmental plans in collective 

trust funds unnecessarily increases the costs for these investments 

and makes it more difficult for church plans to diversify their investments. 

HEARINGS

No hearings were held on this legislation in the 108th Congress. 

COMMITTEE CONSIDERATION

The Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises met in open session on July 10, 2003, 

and approved H.R. 1533 for full Committee consideration, without 

amendment, by a voice vote. 

The Committee on Financial Services met in open session on 

July 23, 2003, and ordered H.R. 1533 reported to the House with 

a favorable recommendation by a voice vote. 

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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. No record votes were 

taken in conjunction with the consideration of this legislation. A 

motion by Mr. Oxley to report the bill to the House with a favorable recommendation was agreed to by a voice vote. 

COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee 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: 

The administrators of church plans will use the authority granted by this legislation to diversify their holdings and increase the 

returns for their investors. 

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 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 ESTIMATE

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:

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, August 27, 2003. 

Hon. MICHAEL G. OXLEY, 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. 1533, a bill to amend the 

securities laws to permit church pension plans to be invested in collective trusts. 

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If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Melissa Zimmerman. 

Sincerely, 

DOUGLAS HOLTZ-EAKIN, 

Director. 

Enclosure. 

H.R. 1533—A bill to amend the securities laws to permit church 

pension plans to be invested in collective trusts 

H.R. 1533 would allow churches to pool their pension funds for 

the purposes of investment. Current law prohibits churches from 

pooling pension funds for this purpose. CBO estimates that implementing H.R. 1533 would have no effect on the federal budget. 

H.R. 1533 contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act and would 

impose no costs on state, local, or tribal governments. 

The CBO staff contact for this estimate is Melissa E. Zimmerman. This estimate was approved by Peter H. Fontaine, 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. 

CONSTITUTIONAL AUTHORITY STATEMENT

Pursuant to clause 3(d)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee finds that the Constitutional 

Authority of Congress to enact this legislation is provided by Article 1, section 8, clause 1 (relating to the defense and general welfare of the United States), and clause 3 (relating to the power to 

regulate foreign and interstate commerce). 

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 section 102(b)(3) of the Congressional Accountability Act. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Conforming amendments for church plan partcipation in 

collective funds 

This section amends section 3(c)(11) of the Investment Company 

Act of 1940, section 3(a)(2) of the Securities Act of 1933, and section 3(a)(12)(c) of the Securities Exchange Act of 1934 to permit 

church plan assets to be invested in collective trust funds. These 

amendments to the Federal securities laws permit church plan asVerDate jul 14 2003 02:41 Sep 04, 2003 Jkt 019006 PO 00000 Frm 00004 Fmt 6659 Sfmt 6602 E:\HR\OC\HR248.XXX HR248
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sets to be included in a collective trust fund that also includes assets of trusts or governmental plans. 

The Committee does not intend that this legislation be construed 

as modifying the Internal Revenue Code requirement that a church 

plan be maintained by a church or a convention or an association 

of churches, and does not intend to modify the securities law requirement that a collective trust fund must be maintained by a 

bank or financial institution. 

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 (existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, 

existing law in which no change is proposed is shown in roman): 

INVESTMENT COMPANY ACT OF 1940

* * * * * * *

TITLE I—INVESTMENT COMPANIES 

* * * * * * *

DEFINITION OF INVESTMENT COMPANY

SEC. 3. (a)(1) * * *

* * * * * * *

(c) Notwithstanding subsection (a), none of the following persons 

is an investment company within the meaning of this title: 

(1) * * *

* * * * * * *

(11) Any employee’s stock bonus, pension, or profit-sharing 

trust which meets the requirements for qualification under section 401 of the Internal Revenue Code of 1986; or any governmental plan described in section 3(a)(2)(C) of the Securities Act 

of 1933; or any collective trust fund maintained by a bank consisting solely of assets of øsuch trusts or governmental plans, 

or both¿ one or more of such trusts, government plans, or 

church plans, companies or accounts that are excluded from the 

definition of an investment company under paragraph (14) of 

this subsection; or any separate account the assets of which are 

derived solely from (A) contributions under pension or profitsharing plans which meet the requirements of section 401 of 

the Internal Revenue Code of 1986 or the requirements for deduction of the employer’s contribution under section 404(a)(2) 

of such Code, (B) contributions under governmental plans in 

connection with which interests, participations, or securities 

are exempted from the registration provisions of section 5 of 

the Securities Act of 1933 by section 3(a)(2)(C) of such Act, and 

(C) advances made by an insurance company in connection 

with the operation of such separate account. 

* * * * * * *

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SECURITITES ACT OF 1933

TITLE I 

* * * * * * *

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, øor¿ (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 clause (A), (B), or (C) of this paraVerDate jul 14 2003 02:41 Sep 04, 2003 Jkt 019006 PO 00000 Frm 00006 Fmt 6659 Sfmt 6602 E:\HR\OC\HR248.XXX HR248
7

graph (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, or (iii) 

which is a plan funded by an annuity contract described in section 403(b) of such Code. 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; 

* * * * * * *

SECURITIES EXCHANGE ACT OF 1934

TITLE I—REGULATION OF SECURITIES EXCHANGES 

* * * * * * *

DEFINITIONS AND APPLICATION OF TITLE

SEC. 3. (a) When used in this title, unless the context otherwise 

requires—

(1) * * *

* * * * * * *

(12)(A) * * *

* * * * * * *

(C) For purposes of subparagraph (A)(iv) of this paragraph, 

the term ‘‘qualified plan’’ means (i) a stock bonus, pension, or 

profit-sharing plan which meets the requirements for qualification under section 401 of the Internal Revenue Code of 1954, 

(ii) an annuity plan which meets the requirements for the deduction of the employer’s contribution under section 404(a)(2) 

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of such Code, øor¿ (iii) 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 (iv) 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 

clause (i), (ii), or (iii) of this subparagraph which (I) covers employees some or all of whom are employees within the meaning 

of section 401(c) of such Code, or (II) is a plan funded by an 

annuity contract described in section 403(b) of such Code. 

* * * * * * *

REGISTRATION REQUIREMENTS FOR SECURITIES

SEC. 12. (a) * * *

* * * * * * *

(g)(1) * * *

(2) The provisions of this subsection shall not apply in respect 

of—

(A) * * *

* * * * * * *

(H) any interest or participation in any collective trust funds 

maintained by a bank or in a separate account maintained by 

an insurance company which interest or participation is issued 

in connection with (i) a stock-bonus, pension, or profit-sharing 

plan which meets the requirements for qualification under section 401 of the Internal Revenue Code of 1954, øor¿ (ii) an annuity plan which meets the requirements for deduction of the 

employer’s contribution under section 404(a)(2) of such Code, 

or (iii) 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. 

* * * * * * *

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