II 

113TH CONGRESS 

1ST SESSION S. 952 

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 

MAY 14, 2013 

Mr. CARDIN (for himself and Mr. PORTMAN) 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. 

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. 

4 This Act may be cited as the ‘‘Church Plan Clarifica5 tion Act of 2013’’. 

6 SEC. 2. CHURCH PLAN CLARIFICATION. 

7 (a) APPLICATION OF CONTROLLED GROUP RULES TO

8 CHURCH PLANS.— 

9 (1) IN GENERAL.—Section 414(c) of the Inter10 nal Revenue Code of 1986 is amended— 


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1 (A) by striking ‘‘For purposes’’ and insert2 ing the following: 

3 ‘‘(1) IN GENERAL.—For purposes’’, and 

4 (B) by adding at the end the following new 

5 paragraph: 

6 ‘‘(2) CHURCH PLANS.— 

7 ‘‘(A) GENERAL RULE.—Except as provided 

8 in subparagraphs (B) and (C), for purposes of 

9 this subsection and subsection (m), an organi10 zation that is otherwise eligible to participate in 

11 a church plan as defined in subsection (e) shall 

12 not be aggregated with another such organiza13 tion and treated as a single employer with such 

14 other organization unless— 

15 ‘‘(i) one such organization provides di16 rectly or indirectly at least 80 percent of 

17 the operating funds for the other organiza18 tion during the preceding tax year of the 

19 recipient organization, and 

20 ‘‘(ii) there is a degree of common 

21 management or supervision between the or22 ganizations. 

23 For purposes of this subparagraph, a degree of 

24 common management or supervision exists only 

25 if the organization providing the operating 


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1 funds is directly involved in the day-to-day op2 erations of the other organization. 

3 ‘‘(B) NONQUALIFIED CHURCH-CON4 TROLLED ORGANIZATIONS.—Notwithstanding 

5 the provisions of subparagraph (A), for pur6 poses of this subsection and subsection (m), an 

7 organization that is a nonqualified church-con8 trolled organization shall be aggregated with 

9 one or more other nonqualified church-con10 trolled organizations, or with an organization 

11 that is not exempt from tax under section 501, 

12 and treated as a single employer with such 

13 other organizations, if at least 80 percent of the 

14 directors or trustees of such organizations are 

15 either representatives of, or directly or indi16 rectly controlled by, the first organization. For 

17 purposes of this subparagraph, a ‘nonqualified 

18 church controlled organization’ shall mean a 

19 church-controlled organization described in sec20 tion 501(c)(3) that is not a qualified church21 controlled organization described in section 

22 3121(w)(3)(B). 

23 ‘‘(C) PERMISSIVE AGGREGATION AMONG

24 CHURCH-RELATED ORGANIZATIONS.—Organiza25 tions described in subparagraph (A) may elect 


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1 to be treated as under common control for pur2 poses of this subsection. Such election shall be 

3 made by the church or convention or association 

4 of churches with which such organizations are 

5 associated within the meaning of subsection 

6 (e)(3)(D), or by an organization determined by 

7 such church or convention or association of 

8 churches to be the appropriate organization for 

9 making such election. 

10 ‘‘(D) PERMISSIVE DISAGGREGATION OF

11 CHURCH-RELATED ORGANIZATIONS.—For pur12 poses of subparagraph (A), in the case of a 

13 church plan (as defined in subsection (e)), any 

14 employer may permissively disaggregate those 

15 entities that are not churches (as defined in 

16 section 403(b)(12)(B)) separately from those 

17 entities that are churches, even if such entities 

18 maintain separate church plans. 

19 ‘‘(E) ANTI-ABUSE RULE.—For purposes of 

20 subparagraphs (A) and (B), the anti-abuse rule 

21 in Treasury Regulation section 1.414(c)–5(f) 

22 shall apply.’’. 

23 (2) EFFECTIVE DATE.—The amendments made 

24 by this subsection shall apply to taxable years beginVerDate Mar 15 2010 02:26 May 17, 2013 Jkt 029200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S952.IS S952

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1 ning before, on, or after the date of the enactment 

2 of this Act. 

3 (b) APPLICATION OF CONTRIBUTION AND FUNDING

4 LIMITATIONS TO 403(b) GRANDFATHERED DEFINED

5 BENEFIT PLANS.— 

6 (1) IN GENERAL.—Section 251(e)(5) of the Tax 

7 Equity and Fiscal Responsibility Act of 1982 (Public 

8 Law 97–248), is amended— 

9 (A) by striking ‘‘403(b)(2)’’ and inserting 

10 ‘‘403(b)’’, and 

11 (B) by inserting before the period at the 

12 end the following: ‘‘, and shall be subject to the 

13 applicable limitations of section 415(b) of such 

14 Code as if it were a defined benefit plan under 

15 section 401(a) of such Code and not the limita16 tions of section 415(c) of such Code (relating to 

17 limitation for defined contribution plans).’’. 

18 (2) EFFECTIVE DATE.—The amendments made 

19 by this subsection shall apply as if included in the 

20 enactment of the Tax Equity and Fiscal Responsi21 bility Act of 1982. 

22 (c) AUTOMATIC ENROLLMENT BY CHURCH PLANS.— 

23 (1) IN GENERAL.—This subsection shall super24 sede any law of a State that relates to wage, salary, 

25 or payroll payment, collection, deduction, garnishVerDate Mar 15 2010 02:26 May 17, 2013 Jkt 029200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S952.IS S952

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1 ment, assignment, or withholding which would di2 rectly or indirectly prohibit or restrict the inclusion 

3 in any church plan (as defined in this subsection) of 

4 an automatic contribution arrangement. 

5 (2) DEFINITION OF AUTOMATIC CONTRIBUTION

6 ARRANGEMENT.—For purposes of this subsection, 

7 the term ‘‘automatic contribution arrangement’’ 

8 means an arrangement— 

9 (A) under which a participant may elect to 

10 have the plan sponsor make payments as con11 tributions under the plan on behalf of the par12 ticipant, or to the participant directly in cash, 

13 and 

14 (B) under which a participant is treated as 

15 having elected to have the plan sponsor make 

16 such contributions in an amount equal to a uni17 form percentage of compensation provided 

18 under the plan until the participant specifically 

19 elects not to have such contributions made (or 

20 specifically elects to have such contributions 

21 made at a different percentage). 

22 (3) NOTICE REQUIREMENTS.— 

23 (A) IN GENERAL.—The plan administrator 

24 of an automatic contribution arrangement shall, 

25 within a reasonable period before such plan 


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1 year, provide to each participant to whom the 

2 arrangement applies for such plan year notice 

3 of the participant’s rights and obligations under 

4 the arrangement which— 

5 (i) is sufficiently accurate and com6 prehensive to apprise the participant of 

7 such rights and obligations, and 

8 (ii) is written in a manner calculated 

9 to be understood by the average partici10 pant to whom the arrangement applies. 

11 (B) ELECTION REQUIREMENTS.—A notice 

12 shall not be treated as meeting the require13 ments of subparagraph (A) with respect to a 

14 participant unless— 

15 (i) the notice includes an explanation 

16 of the participant’s right under the ar17 rangement not to have elective contribu18 tions made on the participant’s behalf (or 

19 to elect to have such contributions made at 

20 a different percentage), 

21 (ii) the participant has a reasonable 

22 period of time, after receipt of the notice 

23 described in clause (i) and before the first 

24 elective contribution is made, to make such 

25 election, and 


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1 (iii) the notice explains how contribu2 tions made under the arrangement will be 

3 invested in the absence of any investment 

4 election by the participant. 

5 (4) EFFECTIVE DATE.—This subsection shall 

6 take effect on the date of the enactment of this Act. 

7 (d) ALLOW CERTAIN PLAN TRANSFERS AND MERG8 ERS.— 

9 (1) IN GENERAL.—Section 414 of the Internal 

10 Revenue Code of 1986 is amended by adding at the 

11 end the following new subsection: 

12 ‘‘(y) CERTAIN PLAN TRANSFERS AND MERGERS.— 

13 ‘‘(1) IN GENERAL.—Under rules prescribed by 

14 the Secretary, except as provided in paragraph (2), 

15 no amount shall be includible in gross income by 

16 reason of— 

17 ‘‘(A) a transfer of all or a portion of the 

18 account balance of a participant or beneficiary, 

19 whether or not vested, from a plan described in 

20 section 401(a) or an annuity contract described 

21 in section 403(b), which is a church plan de22 scribed in subsection (e) to an annuity contract 

23 described in section 403(b), if such plan and 

24 annuity contract are both maintained by the 


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1 same church or convention or association of 

2 churches, 

3 ‘‘(B) a transfer of all or a portion of the 

4 account balance of a participant or beneficiary, 

5 whether or not vested, from an annuity contract 

6 described in section 403(b) to a plan described 

7 in section 401(a) or an annuity contract de8 scribed in section 403(b), which is a church 

9 plan described in subsection (e), if such plan 

10 and annuity contract are both maintained by 

11 the same church or convention or association of 

12 churches, or 

13 ‘‘(C) a merger of a plan described in sec14 tion 401(a), or an annuity contract described in 

15 section 403(b), which is a church plan described 

16 in subsection (e) with an annuity contract de17 scribed in section 403(b), if such plan and an18 nuity contract are both maintained by the same 

19 church or convention or association of churches. 

20 ‘‘(2) LIMITATION.—Paragraph (1) shall not 

21 apply to a transfer or merger unless the partici22 pant’s or beneficiary’s benefit immediately after the 

23 transfer or merger is equal to or greater than the 

24 participant’s or beneficiary’s benefit immediately be25 fore the transfer or merger. 


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1 ‘‘(3) QUALIFICATION.—A plan or annuity con2 tract shall not fail to be considered to be described 

3 in sections 401(a) or 403(b) merely because such 

4 plan or account engages in a transfer or merger de5 scribed in this subsection. 

6 ‘‘(4) DEFINITIONS.—For purposes of this sub7 section: 

8 ‘‘(A) CHURCH.—The term ‘church’ in9 cludes an organization described in subpara10 graph (A) or (B)(ii) of subsection (e)(3). 

11 ‘‘(B) ANNUITY CONTRACT.—The term ‘an12 nuity contract’ includes a custodial account de13 scribed in section 403(b)(7) and a retirement 

14 income account described in section 

15 403(b)(9).’’. 

16 (2) EFFECTIVE DATE.—The amendment made 

17 by this subsection shall apply to transfers or merg18 ers occurring after the date of the enactment of this 

19 Act. 

20 (e) INVESTMENTS BY CHURCH PLANS IN COLLEC21 TIVE TRUSTS.— 

22 (1) IN GENERAL.—In the case of— 

23 (A) a church plan (as defined in section 

24 414(e) of the Internal Revenue Code of 1986), 

25 including a plan described in section 401(a) of 


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1 such Code and a retirement income account de2 scribed in section 403(b)(9) of such Code, and 

3 (B) an organization described in section 

4 414(e)(3)(A) of such Code the principal pur5 pose or function of which is the administration 

6 of such a plan or account, 

7 the assets of such plan, account, or organization (in8 cluding any assets otherwise permitted to be com9 mingled for investment purposes with the assets of 

10 such a plan, account, or organization) may be in11 vested in a group trust otherwise described in Inter12 nal Revenue Service Revenue Ruling 81–100 (as 

13 modified by Internal Revenue Service Revenue Rul14 ings 2004–67 and 2011–1), or any subsequent rev15 enue ruling that supersedes or modifies such revenue 

16 ruling, without adversely affecting the tax status of 

17 the group trust, such plan, account, or organization, 

18 or any other plan or trust that invests in the group 

19 trust. 

20 (2) EFFECTIVE DATE.—This subsection shall 

21 apply to investments made after the date of the en22 actment of this Act. 

Æ 


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