I

103D CONGRESS

2D SESSION H. R. 3970

To amend the Internal Revenue Code of 1986 to clarify provisions relating

to church pension benefit plans, to modify certain provisions relating

to participants in such plans, to reduce the complexity of and to bring

workable consistency to the applicable rules, to promote retirement savings and benefits, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 8, 1994

Mr. CARDIN introduced the following bill; which was referred to the

Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to clarify

provisions relating to church pension benefit plans, to

modify certain provisions relating to participants in such

plans, to reduce the complexity of and to bring workable

consistency to the applicable rules, to promote retirement

savings and benefits, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Church Retirement Benefits Simplification Act of 1993’’.
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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise expressly provided, whenever in this Act an amend3 ment or repeal is expressed in terms of an amendment

4 to, or repeal of, a section or other provision, the reference

5 shall be considered to be made to a section or other provi6 sion of the Internal Revenue Code of 1986.

7 SEC. 2. NEW QUALIFICATION PROVISION FOR CHURCH

8 PLANS.

9 (a) IN GENERAL.—Subpart A of part I of subchapter

10 D of chapter 1 (relating to pension, profit-sharing, stock

11 bonus plans, etc.) is amended by adding after section 401

12 the following new section:

13 ‘‘SEC. 401A. QUALIFIED CHURCH PLAN.

14 ‘‘(a) GENERAL RULE.—For purposes of all Federal

15 laws, including this title, a qualified church plan shall be

16 treated as satisfying the requirements of section 401(a),

17 and all references in (or pertaining to) this title and such

18 laws to a plan described in section 401(a) shall include

19 a qualified church plan. Except as otherwise provided in

20 this section, no paragraph of section 401(a) shall apply

21 to a qualified church plan.

22 ‘‘(b) DEFINITION OF QUALIFIED CHURCH PLAN.—

23 A plan is a qualified church plan if such plan meets the

24 following requirements:
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1 ‘‘(1) CHURCH PLAN REQUIREMENT.—The plan

2 is a church plan (within the meaning of section

3 414(e)), and the election provided by section 410(d)

4 has not been made with respect to such plan.

5 ‘‘(2) EMPLOYEE CONTRIBUTIONS ARE NON6 FORFEITABLE.—An employee’s rights in the employ7 ee’s accrued benefit derived from the employee’s own

8 contributions are nonforfeitable.

9 ‘‘(3) VESTING REQUIREMENTS.—The plan sat10 isfies the requirements of subparagraph (A) or (B).

11 ‘‘(A) 5-YEAR VESTING.—A plan satisfies

12 the requirements of this paragraph if an em13 ployee who has at least 5 years of service has

14 a nonforfeitable right to 100 percent of the em15 ployee’s accrued benefit derived from employer

16 contributions.

17 ‘‘(B) 3- TO 7-YEAR VESTING.—A plan sat18 isfies the requirements of this paragraph if an

19 employee who has completed at least 3 years of

20 service has a nonforfeitable right to a percent21 age of the employee’s accrued benefit derived

22 from employer contributions which is not less

23 than the percentage determined under the fol24 lowing table:

Nonforfeitable

‘‘Years of service percentage

3 ................................................................. 20

4 ................................................................. 40
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5 ................................................................. 60

6 ................................................................. 80

7 or more ................................................... 100.

1 ‘‘(C) YEARS OF SERVICE.—For purposes of

2 this paragraph, an employee’s years of service

3 shall be determined in accordance with any rea4 sonable method selected by the plan adminis5 trator.

6 ‘‘(4) FUNDING REQUIREMENTS.—The plan

7 meets the funding requirements of section 401(a)(7)

8 as in effect on September 1, 1974.

9 ‘‘(5) ADDITIONAL REQUIREMENTS.—

10 ‘‘(A) The plan meets the requirements of

11 paragraphs (1), (2), (8), (9), (16), (17), (25),

12 (27), and (30) of section 401(a).

13 ‘‘(B) If the plan includes employees of an

14 organization which is not a church, the plan

15 meets the requirements of sections 401(a)(3)

16 and 401(a)(6) (as in effect on September 1,

17 1974) and sections 401(a)(4), 401(a)(5), and

18 401(m).

19 For purposes of subparagraph (B), the plan admin20 istrator may elect to treat the portion of the plan

21 maintained by any organization (or organizations)

22 described in subparagraph (B) as a separate plan

23 (or plans).

24 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—
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1 ‘‘(1) CHURCH.—For purposes of this section,

2 the term ‘church’ means a church or a convention or

3 association of churches, including an organization

4 described in section 414(e)(3)(A) and an organiza5 tion described in section 414(e)(3)(B)(ii), other

6 than—

7 ‘‘(A) an organization described in section

8 170(b)(1)(A)(ii) above the secondary school

9 level (other than a school for religious training),

10 or

11 ‘‘(B) an organization described in section

12 170(b)(1)(A)(iii)—

13 ‘‘(i) which provides community service

14 for inpatient medical care of the sick or in15 jured (including obstetrical care); and

16 ‘‘(ii) not more than 50 percent of the

17 total patient days of which during any year

18 are customarily assignable to the cat19 egories of chronic convalescent and rest,

20 drug and alcoholic, epileptic, mentally defi21 cient, mental, nervous and mental, and tu22 berculosis, and care for the aged.

23 ‘‘(2) SATISFACTION OF TRUST PROVISION.—A

24 plan shall not fail to be described in this section
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1 merely because such plan is funded through an orga2 nization described in section 414(e)(3)(A) if—

3 ‘‘(A) such organization is subject to fidu4 ciary requirements under applicable State law;

5 ‘‘(B) such organization is separately incor6 porated from the church or convention or asso7 ciation of churches which controls it or with

8 which it is associated;

9 ‘‘(C) the assets which equitably belong to

10 the plan are separately accounted for; and

11 ‘‘(D) under the plan, at any time prior to

12 the satisfaction of all liabilities with respect to

13 participants and their beneficiaries, such assets

14 cannot be used for, or diverted to, purposes

15 other than for the exclusive benefit of partici16 pants and their beneficiaries (except that this

17 paragraph shall not be construed to preclude

18 the use of plan assets to defray the reasonable

19 costs associated with administering the plan

20 and informing employees and employers of the

21 availability of the plan).

22 ‘‘(3) CERTAIN SECTIONS APPLY.—Section 401

23 (b), (c), and (h) shall apply to a qualified church

24 plan.
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1 ‘‘(4) FAILURE OF ONE ORGANIZATION MAIN2 TAINING PLAN NOT TO DISQUALIFY PLAN.—If one or

3 more organizations maintaining a church plan fail to

4 satisfy the requirements of subsection (b), such plan

5 shall not be treated as failing to satisfy the require6 ments of this section with respect to other organiza7 tions maintaining such plan.

8 ‘‘(5) CERTAIN EMPLOYEES NOT CONSIDERED

9 HIGHLY COMPENSATED AND EXCLUDED EMPLOY10 EES.—For purposes of this section, no employee

11 shall be considered an officer, person whose principal

12 duties consist in supervising the work of other em13 ployees, or highly compensated employee if such em14 ployee during the year or the preceding year received

15 compensation from the employer of less than

16 $50,000. For purposes of this section, there shall be

17 excluded from consideration employees described in

18 section 410(b)(3)(A). The Secretary shall adjust the

19 $50,000 amount under this paragraph at the same

20 time and in the same manner as under section

21 415(d).

22 ‘‘(6) TIME FOR DETERMINATION OF APPLICA23 BLE LAW.—Except where otherwise specified, the

24 determination of whether a plan meets the require25 ments of subsection (b) shall be made in accordance
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1 with the provisions of this title as in effect imme2 diately following enactment of the Church Retire3 ment Benefits Simplification Act of 1993.’’

4 (b) EFFECT ON EXISTING PLANS.—A church plan

5 (within the meaning of section 414(e) of the Internal Rev6 enue Code of 1986) which is otherwise subject to the appli7 cable requirements of section 401(a) of such Code and

8 which has not made the election provided by section

9 410(d) of such Code shall not be subject to section 401A

10 of such Code, and shall remain subject to the applicable

11 requirements of section 401(a) of such Code, unless the

12 board of directors or trustees of an organization described

13 in section 414(e)(3)(A) of such Code, or other appropriate

14 governing body responsible for maintaining the plan,

15 adopts a resolution under which the church plan is made

16 subject to section 401A of such Code.

17 (c) EFFECTIVE DATES.—

18 (1) IN GENERAL.—The amendment made by

19 this section shall be effective for years beginning

20 after December 31, 1993, except that the provisions

21 of section 401A(b)(3) of the Internal Revenue Code

22 of 1986 shall be effective for years beginning after

23 December 31, 1994. No regulation or ruling under

24 section 401(a) of such Code issued after December

25 31, 1992, shall apply to a qualified church plan de-
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1 scribed in section 401A of such Code unless such

2 regulation or ruling is specifically made applicable

3 by its terms to qualified church plans.

4 (2) PRIOR YEARS.—A church plan (within the

5 meaning of section 414(e) of such Code) shall not be

6 deemed to have failed to satisfy the applicable re7 quirements of section 401(a) of such Code for any

8 year beginning prior to January 1, 1994.

9 SEC. 3. RETIREMENT INCOME ACCOUNTS OF CHURCHES.

10 (a) IN GENERAL.—Section 403(b)(9) is amended to

11 read as follows:

12 ‘‘(9) RETIREMENT INCOME ACCOUNTS PRO13 VIDED BY CHURCHES, ETC.—

14 ‘‘(A) AMOUNTS PAID TREATED AS CON15 TRIBUTIONS.—For purposes of this title—

16 ‘‘(i) a retirement income account shall

17 be treated as an annuity contract described

18 in this subsection, and

19 ‘‘(ii) amounts paid by an employer de20 scribed in paragraph (1)(A) or by a church

21 or a convention or association of churches,

22 including an organization described in sec23 tion 414(e)(3)(A) or 414(e)(3)(B)(ii), to a

24 retirement income account shall be treated

25 as amounts contributed by the employer
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1 for an annuity contract for the employee

2 on whose behalf such account is main3 tained.

4 ‘‘(B) RETIREMENT INCOME ACCOUNT.—

5 For purposes of this paragraph, the term ‘re6 tirement income account’ means a program es7 tablished or maintained by a church, a conven8 tion or association of churches, including an or9 ganization described in section 414(e)(3)(A), to

10 provide benefits under this subsection for an

11 employee described in paragraph (1) or an indi12 vidual described in paragraph (13)(F), or their

13 beneficiaries.’’

14 (b) EFFECTIVE DATES.—

15 (1) IN GENERAL.—The amendment made by

16 this section shall be effective for years beginning

17 after December 31, 1993.

18 (2) PRIOR YEARS.—A church plan (within the

19 meaning of section 414(e)) shall not be deemed to

20 have failed to satisfy the applicable requirements of

21 section 403(b) for any year beginning prior to Janu22 ary 1, 1994.
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1 SEC. 4. CONTRACTS PURCHASED BY A CHURCH.

2 (a) CLARIFICATION OF APPLICABLE NON3 DISCRIMINATION REQUIREMENTS.—Subparagraph (D) of

4 section 403(b)(1) is amended to read as follows:

5 ‘‘(D) except in the case of a contract pur6 chased by a church, such contract is purchased

7 under a plan which meets the nondiscrimination

8 requirements of paragraph (12)(A), and’’.

9 (b) CERTAIN COVERAGE RULES APPLY.—Subpara10 graph (B) of section 403(b)(12) is amended to read as

11 follows:

12 ‘‘(B) CERTAIN REQUIREMENTS.—If a con13 tract purchased by a church is purchased under

14 a church plan (within the meaning of section

15 414(e)) by—

16 ‘‘(i) an organization described in sec17 tion 170(b)(1)(A)(ii) above the secondary

18 school level (other than a school for reli19 gious training), or

20 ‘‘(ii) an organization described in sec21 tion 170(b)(1)(A)(iii)—

22 ‘‘(I) which provides community

23 service for inpatient medical care of

24 the sick or injured (including obstetri25 cal care), and
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1 ‘‘(II) no more than 50 percent of

2 the total patient days of which during

3 any year are customarily assignable to

4 the categories of chronic convalescent

5 and rest, drug and alcoholic, epileptic,

6 mentally deficient, mental, nervous

7 and mental, and tuberculosis, and

8 care for the aged,

9 the plan meets the requirements of sec10 tions 401(a)(3) and 401(a)(6), as in effect

11 on September 1, 1974, and sections

12 401(a)(4), 401(a)(5), 401(a)(17), and

13 401(m).

14 For purposes of this subparagraph, the plan ad15 ministrator may elect to treat the portion of the

16 plan maintained by any organization (or organi17 zations) described in this subparagraph as a

18 separate plan (or plans).’’

19 (c) SPECIAL RULES FOR CHURCHES.—Section

20 403(b) is amended by adding the following new paragraph

21 at the end thereof:

22 ‘‘(13) DEFINITIONS AND SPECIAL RULES.—

23 ‘‘(A) CONTRACT PURCHASED BY A

24 CHURCH.—For purposes of this subsection, the

25 term ‘contract purchased by a church’ includes
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1 an annuity described in section 403(b)(1), a

2 custodial account described in section

3 403(b)(7), and a retirement income account de4 scribed in section 403(b)(9).

5 ‘‘(B) CHURCH.—For purposes of this sub6 section, the term ‘church’ means a church or a

7 convention or association of churches, including

8 an organization described in section

9 414(e)(3)(A) or section 414(e)(3)(B)(ii).

10 ‘‘(C) VESTING.—In the case of a contract

11 purchased by a church under a church plan

12 (within the meaning of section 414(e))—

13 ‘‘(i) sections 403(b)(1)(C) and

14 403(b)(6) shall not apply;

15 ‘‘(ii) such contract is not described in

16 this subsection unless an employee’s rights

17 in the employee’s accrued benefit under

18 such contract which is attributable to con19 tributions made pursuant to a salary re20 duction agreement are nonforfeitable; and

21 ‘‘(iii) such contract is not described in

22 this subsection unless the plan satisfies the

23 requirements of either of the following:

24 ‘‘(I) The plan provides that an

25 employee who has at least 5 years of
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1 service has a nonforfeitable right to

2 100 percent of the employee’s accrued

3 benefit derived from employer con4 tributions.

5 ‘‘(II) The plan provides that an

6 employee who has completed at least

7 3 years of service has a nonforfeitable

8 right to a percentage of the employ9 ee’s accrued benefit derived from em10 ployer contributions which percentage

11 is not less than the percentage deter12 mined under the following table:

Nonforfeitable

‘‘Years of service percentage

3 .............................................. 20

4 .............................................. 40

5 .............................................. 60

6 .............................................. 80

7 or more ................................ 100.

13 For purposes of clause (iii), an employee’s years

14 of service shall be determined in accordance

15 with any reasonable method selected by the

16 plan administrator.

17 ‘‘(D) FAILURE OF ONE ORGANIZATION

18 MAINTAINING PLAN NOT TO DISQUALIFY

19 PLAN.—In the case of a contract purchased by

20 a church under a church plan (within the mean21 ing of section 414(e)), if one or more organiza22 tions maintaining the church plan fails to sat-
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1 isfy the requirements of this section, such plan

2 shall not be treated as failing to satisfy the re3 quirements of this section with respect to other

4 organizations maintaining such plan.

5 ‘‘(E) CERTAIN EMPLOYEES NOT CONSID6 ERED HIGHLY COMPENSATED AND EXCLUDED

7 EMPLOYEES.—For purposes of this subsection,

8 no employee for whom a contract is purchased

9 by a church shall be considered an officer, per10 son whose principal duties consist in super11 vising the work of other employees, or highly

12 compensated employee if such employee during

13 the year or the preceding year received com14 pensation from the employer of less than

15 $50,000. For purposes of this subsection, there

16 shall be excluded employees described in section

17 410(b)(3)(A). The Secretary shall adjust the

18 $50,000 amount under this subparagraph at

19 the same time and in the same manner as

20 under section 415(d).

21 ‘‘(F) CERTAIN MINISTERS MAY PARTICI22 PATE.—For purposes of this subsection—

23 ‘‘(i) IN GENERAL.—The term ‘em24 ployee’ shall include a duly ordained, com25 missioned, or licensed minister of a church
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1 in the exercise of his or her ministry who

2 is a self-employed individual (within the

3 meaning of section 401(c)(1)(B)) or any

4 duly ordained, commissioned, or licensed

5 minister of a church in the exercise of his

6 or her ministry who is employed by an or7 ganization other than an organization de8 scribed in section 501(c)(3).

9 ‘‘(ii) TREATMENT AS EMPLOYER AND

10 EMPLOYEE.—A self-employed minister de11 scribed in clause (i) shall be treated as his

12 or her own employer which is an organiza13 tion described in section 501(c)(3) and

14 which is exempt from tax under section

15 501(a). Such an employee who is employed

16 by an organization other than an organiza17 tion described in section 501(c)(3) shall be

18 treated as employed by an organization de19 scribed in section 501(c)(3) and which is

20 exempt from tax under section 501(a).

21 ‘‘(iii) COMPENSATION.—In determin22 ing the compensation of a self-employed

23 minister described in clause (i), the earned

24 income (within the meaning of section

25 401(c)(2)) of such minister shall be sub-
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1 stituted for ‘the amount of compensation

2 which is received from the employer’ under

3 paragraph (3).

4 In determining the years of service of a self-em5 ployed minister described in clause (i), the

6 years (and portions of years) in which such

7 minister was a self-employed individual (within

8 the meaning of section 401(c)(1)(B)) shall be

9 included for purposes of paragraph (4).

10 ‘‘(G) TIME FOR DETERMINATION OF AP11 PLICABLE LAW.—Except where otherwise speci12 fied, the determination of whether a contract

13 purchased by a church meets the requirements

14 of this subsection shall be made in accordance

15 with the provisions of this title as in effect im16 mediately following enactment of the Church

17 Retirement Benefits Simplification Act of

18 1993.’’

19 (d) EFFECTIVE DATES.—

20 (1) IN GENERAL.—The amendments made by

21 this section shall be effective for years beginning

22 after December 31, 1993, except that the provisions

23 of section 403(b)(13)(C)(iii) of the Internal Revenue

24 Code of 1986 shall be effective for years beginning

25 after December 31, 1994. No regulation or ruling is-
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1 sued under section 401(a) or 403(b) of such Code

2 after December 31, 1993, shall apply to a contract

3 purchased by a church unless such regulation or rul4 ing is specifically made applicable by its terms to

5 such contracts. For purposes of applying the exclu6 sion allowance of section 403(b)(2) of such Code and

7 the limitations of section 415 of such Code, any con8 tribution made after December 31, 1994, which is

9 forfeitable pursuant to section 403(b)(13)(C) of such

10 Code shall be treated as an amount contributed to

11 the contract in the year for which such contribution

12 is made and not in the year the contribution be13 comes nonforfeitable.

14 (2) PRIOR YEARS.—A church plan (within the

15 meaning of section 414(e) of such Code) shall not be

16 deemed to have failed to satisfy the applicable re17 quirements of section 403(b) of such Code for any

18 year beginning prior to January 1, 1993.

19 SEC. 5. CHANGE IN DISTRIBUTION REQUIREMENT FOR RE20 TIREMENT INCOME ACCOUNTS.

21 (a) IN GENERAL.—Subparagraph (A) of section

22 403(b)(11) is amended by inserting ‘‘or, in the case of a

23 retirement income account described in paragraph (9),

24 within the meaning of section 401(k)(2)’’ after ‘‘section

25 72(m)(7)’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall be effective for years beginning after De3 cember 31, 1988.

4 SEC. 6. REQUIRED BEGINNING DATE FOR DISTRIBUTIONS

5 UNDER CHURCH PLANS.

6 (a) IN GENERAL.—Subparagraph (C) of section

7 401(a)(9) is amended by striking the last sentence and

8 inserting the following new sentence: ‘‘For purposes of this

9 subparagraph, the term ‘church plan’ has the meaning

10 given such term by section 414(e).’’

11 (b) EFFECTIVE DATE.—The amendment made by

12 this section shall be effective as if included in the provision

13 of the Tax Reform Act of 1986 to which such amendment

14 relates.

15 SEC. 7. PARTICIPATION OF MINISTERS IN CHURCH PLANS.

16 (a) IN GENERAL.—Section 414 is amended by adding

17 the following new subsection:

18 ‘‘(u) SPECIAL RULES FOR MINISTERS.—Notwith19 standing any other provision of this title, if a duly or20 dained, commissioned, or licensed minister of a church in

21 the exercise of his or her ministry participates in a church

22 plan (within the meaning of section 414(e)), then—

23 ‘‘(1) such minister shall be excluded from con24 sideration for purposes of applying sections

25 401(a)(3), 401(a)(4), and 401(a)(5), as in effect on
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1 September 1, 1974, and sections 401(a)(4),

2 401(a)(5), 401(a)(26), 401(k)(3), 401(m),

3 403(b)(1)(D) (including section 403(b)(12)), and

4 410 to any stock bonus, pension, profit-sharing, or

5 annuity plan (including an annuity described in sec6 tion 403(b) or a retirement income account de7 scribed in section 403(b)(9)) described in this part.

8 For purposes of this part, the church plan in which

9 such minister participates shall be treated as a plan

10 or contract meeting the requirements of section

11 401(a), 401A, or 403(b) (including section

12 403(b)(9)) with respect to such minister’s participa13 tion; and

14 ‘‘(2) such minister shall be excluded from con15 sideration for purposes of applying an applicable sec16 tion to any plan providing benefits described in an

17 applicable section.

18 For purposes of paragraph (2), the term ‘applicable sec19 tion’ means section 79(d), section 105(h), paragraphs (1),

20 (2), and (3) of section 120(c), section 125(b), section

21 127(b)(2), and paragraphs (2), (3), and (8) of section

22 129(d).’’

23 (b) EFFECTIVE DATE.—The amendment made by

24 this section shall be effective for years beginning before,

25 on, or after December 31, 1993.
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1 SEC. 8. CERTAIN RULES AGGREGATING EMPLOYEES NOT

2 TO APPLY TO CHURCHES, ETC.

3 (a) IN GENERAL.—Section 414 is amended by adding

4 the following new subsection:

5 ‘‘(v) CERTAIN RULES AGGREGATING EMPLOYEES

6 NOT TO APPLY TO CHURCHES, ETC.—

7 ‘‘(1) IN GENERAL.—If the election provided by

8 paragraph (3) is made, for purposes of sections

9 401(a)(3), 401(a)(4), and 401(a)(5), as in effect on

10 September 1, 1974, and sections 401(a)(4),

11 401(a)(5), 401(a)(17), 401(a)(26), 401(h), 401(m),

12 410(b), 411(d)(1), and 416, subsections (b), (c),

13 (m), (o), and (t) of this section shall not apply to

14 treat the employees of church-related organizations

15 as employed by a single employer, except in the case

16 of employees of church-related organizations which

17 are not exempt from tax under section 501(a) and

18 which have a common, immediate parent.

19 ‘‘(2) DEFINITION OF CHURCH-RELATED ORGA20 NIZATION.—For purposes of this subsection, the

21 term ‘church-related organization’ means a church

22 or a convention or association of churches, an orga23 nization described in section 414(e)(3)(A), an orga24 nization described in section 414(e)(3)(B)(ii), or an

25 organization the employees of which would be aggre-
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1 gated with the employees of such organizations but

2 for the election provided by paragraph (3).

3 ‘‘(3) ELECTION TO DISAGGREGATE.—The provi4 sions of this subsection shall apply if a church-relat5 ed organization makes an election for itself and

6 other church-related organizations (in such form and

7 manner as the Secretary may by regulations pre8 scribe) on or before the last day of the first plan

9 year beginning on or after January 1, 1996.’’

10 (b) EFFECTIVE DATE.—The amendment made by

11 this section shall be effective as if included in the provi12 sions of Public Law 93–406, Public Law 98–369, and

13 Public Law 99–514 to which such amendment relates.

14 SEC. 9. SELF-EMPLOYED MINISTERS TREATED AS EMPLOY15 EES FOR PURPOSES OF CERTAIN WELFARE

16 BENEFIT PLANS AND RETIREMENT INCOME

17 ACCOUNTS.

18 (a) IN GENERAL.—Section 7701(a)(20) is amended

19 to read as follows:

20 ‘‘(20) EMPLOYEE.—For the purpose of apply21 ing the provisions of section 79 with respect to

22 group-term life insurance purchased for employees,

23 for the purpose of applying the provisions of sections

24 104, 105, and 106 with respect to accident or health

25 insurance or accident or health plans, for the pur-
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1 pose of applying the provisions of section 101(b)

2 with respect to employees’ death benefits, for the

3 purpose of applying the provisions of subtitle A with

4 respect to contributions to or under a stock bonus,

5 pension, profit-sharing, or annuity plan, and with re6 spect to distributions under such a plan, or by a

7 trust forming part of such a plan, and for purposes

8 of applying section 125 with respect to cafeteria

9 plans, the term ‘employee’ shall include a duly or10 dained, commissioned, or licensed minister of a

11 church in the exercise of his or her ministry who is

12 a self-employed individual (within the meaning of

13 section 401(c)(1)(B)) or a full-time life insurance

14 salesman who is considered an employee for the pur15 pose of chapter 21, or in the case of services per16 formed before January 1, 1951, who would be con17 sidered an employee if his services were performed

18 during 1951.’’

19 (b) EFFECTIVE DATE.—The amendment made by

20 this section shall be effective for years beginning before,

21 on, or after December 31, 1993.
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1 SEC. 10. DEDUCTIONS FOR CONTRIBUTIONS BY CERTAIN

2 MINISTERS TO RETIREMENT INCOME AC3 COUNTS.

4 (a) IN GENERAL.—Section 404(a) is amended by

5 adding the following new paragraph:

6 ‘‘(10) CONTRIBUTIONS BY CERTAIN MINISTERS

7 TO RETIREMENT INCOME ACCOUNTS.—In case con8 tributions are made by a minister described in sec9 tion 403(b)(13)(F) to a retirement income account

10 described in section 403(b)(9) and not by a person

11 other than such minister, such contributions shall be

12 treated as made to a trust which is exempt from tax

13 under section 501(a) which is part of a plan which

14 is described in section 401(a) and shall be deductible

15 under this subsection to the extent such contribu16 tions do not exceed the exclusion allowance of such

17 minister, determined under section 403(b)(2).’’

18 (b) EFFECTIVE DATE.—The amendment made by

19 this section shall be effective for years beginning after De20 cember 31, 1993.

21 SEC. 11. MODIFICATION FOR CHURCH PLANS OF RULES

22 FOR PLANS MAINTAINED BY MORE THAN ONE

23 EMPLOYER.

24 (a) IN GENERAL.—Section 413(c) is amended by

25 adding the following new paragraph:
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1 ‘‘(8) CHURCH PLANS MAINTAINED BY MORE

2 THAN ONE EMPLOYER.—A church plan (within the

3 meaning of section 414(e)) maintained by more than

4 one employer, and with respect to which the election

5 provided by section 410(d) has not been made,

6 which commingles assets solely for purposes of in7 vestment and pooling for mortality experience to

8 provide to participants annuities computed with ref9 erence to the balance in the participants’ accounts

10 when such accounts become payable shall not be

11 treated as a single plan maintained by more than

12 one employer under this subsection. The rules pro13 vided by this paragraph shall apply for purposes of

14 applying section 403(b)(12) to such church plan.’’

15 (b) EFFECTIVE DATE.—The amendment made by

16 this section shall be effective for years beginning before,

17 on, or after December 31, 1993.

18 SEC. 12. SECTION 457 NOT TO APPLY TO DEFERRED COM19 PENSATION OF A CHURCH.

20 (a) IN GENERAL.—Paragraph (13) of section 457(e)

21 is amended to read as follows:

22 ‘‘(13) SPECIAL RULE FOR CHURCHES.—The

23 term ‘eligible employer’ shall not include a church

24 (within the meaning of section 401A(c)(1)).’’
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to taxable years beginning after

3 December 31, 1978.

4 SEC. 13. CHURCH PLAN MODIFICATION TO SEPARATE AC5 COUNT REQUIREMENT OF SECTION 401(h).

6 (a) EXCEPTION TO SEPARATE ACCOUNT REQUIRE7 MENT.—Section 401(h) is amended by adding the follow8 ing new sentence at the end thereof: ‘‘Notwithstanding the

9 preceding sentence, in the case of a pension or annuity

10 plan that is a church plan (within the meaning of section

11 414(e)) which is maintained by more than one employer,

12 paragraph (6) shall not apply to an employee who is a

13 key employee for purposes of section 416 solely because

14 such employee is described in section 416(i)(1)(A)(i) (re15 lating to officers having an annual compensation greater

16 than 150 percent of the amount in effect under section

17 415(c)(1)(A)).’’

18 (b) APPLICATION OF SECTION 415(l).—Section

19 415(l)(1) is amended to read as follows:

20 ‘‘(1) IN GENERAL.—For purposes of this sec21 tion, the following shall be treated as an annual ad22 dition to a defined contribution plan for purposes of

23 subsection (c):
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1 ‘‘(A) Contributions allocated to any indi2 vidual medical account which is part of a pen3 sion or annuity plan.

4 ‘‘(B) The actuarially determined amount of

5 prefunding for the insurance value of benefits

6 which are—

7 ‘‘(i) described in section 401(h);

8 ‘‘(ii) paid under a pension or annuity

9 plan that is a church plan (within the

10 meaning of section 414(e));

11 ‘‘(iii) paid under a plan maintained by

12 more than one employer; and

13 ‘‘(iv) payable solely to an employee

14 who is a key employee for purposes of sec15 tion 415 solely because such employee is

16 described in section 416(i)(1)(A)(i) (relat17 ing to officers having an annual compensa18 tion greater than 150 percent of the

19 amount in effect under section

20 415(c)(1)(A)), his spouse, or his depend21 ents.

22 Subparagraph (B) of section (c)(1) shall not

23 apply to any amount treated as an annual addi24 tion under the preceding sentence.’’
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1 (c) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to years beginning after March 31,

3 1984.

4 SEC. 14. RULE RELATING TO INVESTMENT IN CONTRACT

5 NOT TO APPLY TO FOREIGN MISSIONARIES.

6 (a) IN GENERAL.—The last sentence of section 72(f)

7 is amended to read as follows: ‘‘The preceding sentence

8 shall not apply to amounts which were contributed by the

9 employer, as determined under regulations prescribed by

10 the Secretary, to provide pension or annuity credits, to

11 the extent such credits are attributable to services per12 formed before January 1, 1963, and are provided pursu13 ant to pension or annuity plan provisions in existence on

14 March 12, 1962, and on that date applicable to such serv15 ices, or to provide pension or annuity credits for foreign

16 missionaries (within the meaning of section

17 403(b)(2)(D)(iii)).’’

18 (b) EFFECTIVE DATE.—The amendment made by

19 this section shall apply to taxable years beginning after

20 December 31, 1993.

21 SEC. 15. REPEAL OF ELECTIVE DEFERRAL CATCH-UP LIMI22 TATION FOR RETIREMENT INCOME AC23 COUNTS.

24 (a) IN GENERAL.—Clause (iii) of section

25 402(g)(8)(A) is amended to read as follows:
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1 ‘‘(iii) except in the case of elective de2 ferrals under a retirement income account

3 described in section 403(b)(9), the excess

4 of $5,000 multiplied by the number of

5 years of service of the employee with the

6 qualified organization over the employer

7 contributions described in paragraph (3)

8 made by the organization on behalf of such

9 employee for prior taxable years (deter10 mined in the manner prescribed by the

11 Secretary).’’

12 (b) EFFECTIVE DATE.—The amendment made by

13 this section shall be effective as if included in the provision

14 of the Tax Reform Act of 1986 to which such amendment

15 relates.

16 SEC. 16. CHURCH PLANS MAY ANNUITIZE BENEFITS.

17 (a) IN GENERAL.—A retirement income account de18 scribed in section 403(b)(9) of the Internal Revenue Code

19 of 1986, a church plan (within the meaning of section

20 414(e) of such Code) that is a plan described in section

21 401(a) or 401A of such Code, or an account which consists

22 of qualifed voluntary employee contributions described in

23 section 219(e)(2) of such Code (as in effect before the date

24 of the enactment of the Tax Reform Act of 1986) and

25 earnings thereon, shall not fail to be described in such sec-
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1 tions merely because it pays benefits to participants (and

2 their beneficiaries) from a pool of assets administered or

3 funded by an organization described in section

4 414(e)(3)(A) of such Code, rather than through the pur5 chase of annuities from an insurance company.

6 (b) EFFECTIVE DATE.—This provision shall be effec7 tive for years beginning before, on, or after December 31,

8 1993.

9 SEC. 17. CHURCH PLANS MAY INCREASE BENEFIT PAY10 MENTS.

11 (a) IN GENERAL.—A retirement income account de12 scribed in section 403(b)(9) of the Internal Revenue Code

13 of 1986, a church plan (within the meaning of section

14 414(e) of such Code) that is a plan described in section

15 401(a) or 401A of such Code, or an account which consists

16 of qualified voluntary employee contributions described in

17 section 219(e)(2) of such Code (as in effect before the date

18 of the enactment of the Tax Reform Act of 1986) and

19 earnings thereon, shall not fail to be described in such sec20 tions merely because it provides benefit payments to par21 ticipants (and their beneficiaries)—

22 (1) to take into account the investment per23 formance of the underlying assets or favorable inter24 est or mortality experience, or
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1 (2) that increase in an amount not in excess of

2 5 percent per year.

3 (b) EFFECTIVE DATE.—This provision shall be effec4 tive for years beginning before, on, or after December 31,

5 1993.

6 SEC. 18. RULES APPLICABLE TO SELF-INSURED MEDICAL

7 REIMBURSEMENT PLANS NOT TO APPLY TO

8 PLANS OF CHURCHES.

9 (a) IN GENERAL.—Section 105(h) is amended by

10 adding the following new paragraph:

11 ‘‘(11) PLANS OF CHURCHES.—This subsection

12 shall not apply to a plan maintained by a church

13 (within the meaning of section 401A(c)(1)).’’

14 (b) EFFECTIVE DATE.—The amendment made by

15 this section shall be effective for years beginning before,

16 on, or after December 31, 1993.

17 SEC. 19. RETIREMENT BENEFITS OF MINISTERS NOT SUB18 JECT TO TAX ON NET EARNINGS FROM SELF19 EMPLOYMENT.

20 (a) IN GENERAL.—Section 1402(a)(8) (defining net

21 earning from self-employment) is amended by inserting ‘‘,

22 but shall not include in such net earning from self-employ23 ment any retirement benefit received by such individual

24 from a church plan (as defined in section 414(e))’’ before

25 the semicolon at the end.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to years beginning before, on, or

3 after December 31, 1993.

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