II

103D CONGRESS

1ST SESSION S. 1415

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 SENATE OF THE UNITED STATES

AUGUST 6 (legislative day, JUNE 30), 1993

Mr. PRYOR (for himself, Mr. SIMON, Mr. BOREN, Mr. DURENBERGER, Mr.

WALLOP, Mr. INOUYE, Mr. BURNS, Mr. HEFLIN, Mr. LEVIN, Mr.

CHAFEE, Mr. BAUCUS, and Mr. COCHRAN) 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

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’’.
2

•S 1415 IS

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:
3

•S 1415 IS

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) 10-YEAR VESTING.—A plan satisfies

12 the requirements of this paragraph if an em13 ployee who has at least 10 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) 5- TO 15-YEAR VESTING.—A plan sat18 isfies the requirements of this paragraph if an

19 employee who has completed at least 5 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

5 ................................................................. 25

6 ................................................................. 30
4

•S 1415 IS

7 ................................................................. 35

8 ................................................................. 40

9 ................................................................. 45

10 ............................................................... 50

11 ............................................................... 60

12 ............................................................... 70

13 ............................................................... 80

14 ............................................................... 90

15 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)
5

•S 1415 IS

1 described in subparagraph (B) as a separate plan

2 (or plans).

3 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—

4 ‘‘(1) CHURCH.—For purposes of this section,

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

6 association of churches, including an organization

7 described in section 414(e)(3)(A) and an organiza8 tion described in section 414(e)(3)(B)(ii), other

9 than—

10 ‘‘(A) an organization described in section

11 170(b)(1)(A)(ii) above the secondary school

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

13 or

14 ‘‘(B) an organization described in section

15 170(b)(1)(A)(iii)—

16 ‘‘(i) which provides community service

17 for inpatient medical care of the sick or in18 jured (including obstetrical care); and

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

20 total patient days of which during any year

21 are customarily assignable to the cat22 egories of chronic convalescent and rest,

23 drug and alcoholic, epileptic, mentally defi24 cient, mental, nervous and mental, and tu25 berculosis, and care for the aged.
6

•S 1415 IS

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

2 plan shall not fail to be described in this section

3 merely because such plan is funded through an orga4 nization described in section 414(e)(3)(A) if—

5 ‘‘(A) such organization is subject to fidu6 ciary requirements under applicable State law;

7 ‘‘(B) such organization is separately incor8 porated from the church or convention or asso9 ciation of churches which controls it or with

10 which it is associated;

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

12 the plan are separately accounted for; and

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

14 the satisfaction of all liabilities with respect to

15 participants and their beneficiaries, such assets

16 cannot be used for, or diverted to, purposes

17 other than for the exclusive benefit of partici18 pants and their beneficiaries (except that this

19 paragraph shall not be construed to preclude

20 the use of plan assets to defray the reasonable

21 costs associated with administering the plan

22 and informing employees and employers of the

23 availability of the plan).
7

•S 1415 IS

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

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

3 plan.

4 ‘‘(4) FAILURE OF ONE ORGANIZATION MAIN5 TAINING PLAN NOT TO DISQUALIFY PLAN.—If one or

6 more organizations maintaining a church plan fail to

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

8 shall not be treated as failing to satisfy the require9 ments of this section with respect to other organiza10 tions maintaining such plan.

11 ‘‘(5) CERTAIN EMPLOYEES NOT CONSIDERED

12 HIGHLY COMPENSATED AND EXCLUDED EMPLOY13 EES.—For purposes of this section, no employee

14 shall be considered an officer, person whose principal

15 duties consist in supervising the work of other em16 ployees, or highly compensated employee if such em17 ployee during the year or the preceding year received

18 compensation from the employer of less than

19 $50,000. For purposes of this section, there shall be

20 excluded from consideration employees described in

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

22 $50,000 amount under this paragraph at the same

23 time and in the same manner as under section

24 415(d).
8

•S 1415 IS

1 ‘‘(6) TIME FOR DETERMINATION OF APPLICA2 BLE LAW.—Except where otherwise specified, the

3 determination of whether a plan meets the require4 ments of subsection (b) shall be made in accordance

5 with the provisions of this title as in effect imme6 diately following enactment of the Church Retire7 ment Benefits Simplification Act of 1993.’’

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

9 (within the meaning of section 414(e) of the Internal Rev10 enue Code of 1986) which is otherwise subject to the appli11 cable requirements of section 401(a) of such Code and

12 which has not made the election provided by section

13 410(d) of such Code shall not be subject to section 401A

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

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

16 board of directors or trustees of an organization described

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

18 governing body responsible for maintaining the plan,

19 adopts a resolution under which the church plan is made

20 subject to section 401A of such Code.

21 (c) EFFECTIVE DATES.—

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

23 this section shall be effective for years beginning

24 after December 31, 1992, except that the provisions

25 of section 401A(b)(3) of the Internal Revenue Code
9

•S 1415 IS

1 of 1986 shall be effective for years beginning after

2 December 31, 1994. No regulation or ruling under

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

4 31, 1992, shall apply to a qualified church plan de5 scribed in section 401A of such Code unless such

6 regulation or ruling is specifically made applicable

7 by its terms to qualified church plans.

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

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

10 deemed to have failed to satisfy the applicable re11 quirements of section 401(a) of such Code for any

12 year beginning prior to January 1, 1993.

13 SEC. 3. RETIREMENT INCOME ACCOUNTS OF CHURCHES.

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

15 read as follows:

16 ‘‘(9) RETIREMENT INCOME ACCOUNTS PRO17 VIDED BY CHURCHES, ETC.—

18 ‘‘(A) AMOUNTS PAID TREATED AS CON19 TRIBUTIONS.—For purposes of this title—

20 ‘‘(i) a retirement income account shall

21 be treated as an annuity contract described

22 in this subsection, and

23 ‘‘(ii) amounts paid by an employer de24 scribed in paragraph (1)(A) or by a church

25 or a convention or association of churches,
10

•S 1415 IS

1 including an organization described in sec2 tion 414(e)(3)(A) or 414(e)(3)(B)(ii), to a

3 retirement income account shall be treated

4 as amounts contributed by the employer

5 for an annuity contract for the employee

6 on whose behalf such account is main7 tained.

8 ‘‘(B) RETIREMENT INCOME ACCOUNT.—

9 For purposes of this paragraph, the term ‘re10 tirement income account’ means a program es11 tablished or maintained by a church, a conven12 tion or association of churches, including an or13 ganization described in section 414(e)(3)(A), to

14 provide benefits under this subsection for an

15 employee described in paragraph (1) or an indi16 vidual described in paragraph (13)(F), or their

17 beneficiaries.’’

18 (b) EFFECTIVE DATES.—

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

20 this section shall be effective for years beginning

21 after December 31, 1992.

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

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

24 have failed to satisfy the applicable requirements of
11

•S 1415 IS

1 section 403(b) for any year beginning prior to Janu2 ary 1, 1993.

3 SEC. 4. CONTRACTS PURCHASED BY A CHURCH.

4 (a) CLARIFICATION OF APPLICABLE NON5 DISCRIMINATION REQUIREMENTS.—Subparagraph (D) of

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

7 ‘‘(D) except in the case of a contract pur8 chased by a church, such contract is purchased

9 under a plan which meets the nondiscrimination

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

11 (b) CERTAIN COVERAGE RULES APPLY.—Subpara12 graph (B) of section 403(b)(12) is amended to read as

13 follows:

14 ‘‘(B) CERTAIN REQUIREMENTS.—If a con15 tract purchased by a church is purchased under

16 a church plan (within the meaning of section

17 414(e)) by—

18 ‘‘(i) an organization described in sec19 tion 170(b)(1)(A)(ii) above the secondary

20 school level (other than a school for reli21 gious training), or

22 ‘‘(ii) an organization described in sec23 tion 170(b)(1)(A)(iii)—

24 ‘‘(I) which provides community

25 service for inpatient medical care of
12

•S 1415 IS

1 the sick or injured (including obstetri2 cal care), and

3 ‘‘(II) no more than 50 percent of

4 the total patient days of which during

5 any year are customarily assignable to

6 the categories of chronic convalescent

7 and rest, drug and alcoholic, epileptic,

8 mentally deficient, mental, nervous

9 and mental, and tuberculosis, and

10 care for the aged,

11 the plan meets the requirements of sec12 tions 401(a)(3) and 401(a)(6), as in effect

13 on September 1, 1974, and sections

14 401(a)(4), 401(a)(5), 401(a)(17), and

15 401(m).

16 For purposes of this subparagraph, the plan ad17 ministrator may elect to treat the portion of the

18 plan maintained by any organization (or organi19 zations) described in this subparagraph as a

20 separate plan (or plans).’’

21 (c) SPECIAL RULES FOR CHURCHES.—Section

22 403(b) is amended by adding the following new paragraph

23 at the end thereof:

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

•S 1415 IS

1 ‘‘(A) CONTRACT PURCHASED BY A

2 CHURCH.—For purposes of this subsection, the

3 term ‘contract purchased by a church’ includes

4 an annuity described in section 403(b)(1), a

5 custodial account described in section

6 403(b)(7), and a retirement income account de7 scribed in section 403(b)(9).

8 ‘‘(B) CHURCH.—For purposes of this sub9 section, the term ‘church’ means a church or a

10 convention or association of churches, including

11 an organization described in section

12 414(e)(3)(A) or section 414(e)(3)(B)(ii).

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

14 purchased by a church under a church plan

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

16 ‘‘(i) sections 403(b)(1)(C) and

17 403(b)(6) shall not apply;

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

19 this subsection unless an employee’s rights

20 in the employee’s accrued benefit under

21 such contract which is attributable to con22 tributions made pursuant to a salary re23 duction agreement are nonforfeitable; and
14

•S 1415 IS

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

2 this subsection unless the plan satisfies the

3 requirements of either of the following:

4 ‘‘(I) The plan provides that an

5 employee who has at least 10 years of

6 service has a nonforfeitable right to

7 100 percent of the employee’s accrued

8 benefit derived from employer con9 tributions.

10 ‘‘(II) The plan provides that an

11 employee who has completed at least

12 5 years of service has a nonforfeitable

13 right to a percentage of the employ14 ee’s accrued benefit derived from em15 ployer contributions which percentage

16 is not less than the percentage deter17 mined under the following table:

Nonforfeitable

‘‘Years of service percentage

5 ................................................................. 25

6 ................................................................. 30

7 ................................................................. 35

8 ................................................................. 40

9 ................................................................. 45

10 ............................................................... 50

11 ............................................................... 60

12 ............................................................... 70

13 ............................................................... 80

14 ............................................................... 90

15 or more ................................................. 100.

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

19 of service shall be determined in accordance
15

•S 1415 IS

1 with any reasonable method selected by the

2 plan administrator.

3 ‘‘(D) FAILURE OF ONE ORGANIZATION

4 MAINTAINING PLAN NOT TO DISQUALIFY

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

6 a church under a church plan (within the mean7 ing of section 414(e)), if one or more organiza8 tions maintaining the church plan fails to sat9 isfy the requirements of this section, such plan

10 shall not be treated as failing to satisfy the re11 quirements of this section with respect to other

12 organizations maintaining such plan.

13 ‘‘(E) CERTAIN EMPLOYEES NOT CONSID14 ERED HIGHLY COMPENSATED AND EXCLUDED

15 EMPLOYEES.—For purposes of this subsection,

16 no employee for whom a contract is purchased

17 by a church shall be considered an officer, per18 son whose principal duties consist in super19 vising the work of other employees, or highly

20 compensated employee if such employee during

21 the year or the preceding year received com22 pensation from the employer of less than

23 $50,000. For purposes of this subsection, there

24 shall be excluded employees described in section

25 410(b)(3)(A). The Secretary shall adjust the
16

•S 1415 IS

1 $50,000 amount under this subparagraph at

2 the same time and in the same manner as

3 under section 415(d).

4 ‘‘(F) CERTAIN MINISTERS MAY PARTICI5 PATE.—For purposes of this subsection—

6 ‘‘(i) IN GENERAL.—The term ‘em7 ployee’ shall include a duly ordained, com8 missioned, or licensed minister of a church

9 in the exercise of his or her ministry who

10 is a self-employed individual (within the

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

12 duly ordained, commissioned, or licensed

13 minister of a church in the exercise of his

14 or her ministry who is employed by an or15 ganization other than an organization de16 scribed in section 501(c)(3).

17 ‘‘(ii) TREATMENT AS EMPLOYER AND

18 EMPLOYEE.—A self-employed minister de19 scribed in clause (i) shall be treated as his

20 or her own employer which is an organiza21 tion described in section 501(c)(3) and

22 which is exempt from tax under section

23 501(a). Such an employee who is employed

24 by an organization other than an organiza25 tion described in section 501(c)(3) shall be
17

•S 1415 IS

1 treated as employed by an organization de2 scribed in section 501(c)(3) and which is

3 exempt from tax under section 501(a).

4 ‘‘(iii) COMPENSATION.—In determin5 ing the compensation of a self-employed

6 minister described in clause (i), the earned

7 income (within the meaning of section

8 401(c)(2)) of such minister shall be sub9 stituted for ‘the amount of compensation

10 which is received from the employer’ under

11 paragraph (3).

12 In determining the years of service of a self-em13 ployed minister described in clause (i), the

14 years (and portions of years) in which such

15 minister was a self-employed individual (within

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

17 included for purposes of paragraph (4).

18 ‘‘(G) TIME FOR DETERMINATION OF AP19 PLICABLE LAW.—Except where otherwise speci20 fied, the determination of whether a contract

21 purchased by a church meets the requirements

22 of this subsection shall be made in accordance

23 with the provisions of this title as in effect im24 mediately following enactment of the Church
18

•S 1415 IS

1 Retirement Benefits Simplification Act of

2 1993.’’

3 (d) EFFECTIVE DATES.—

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

5 this section shall be effective for years beginning

6 after December 31, 1992, except that the provisions

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

8 Code of 1986 shall be effective for years beginning

9 after December 31, 1994. No regulation or ruling is10 sued under section 401(a) or 403(b) of such Code

11 after December 31, 1992, shall apply to a contract

12 purchased by a church unless such regulation or rul13 ing is specifically made applicable by its terms to

14 such contracts. For purposes of applying the exclu15 sion allowance of section 403(b)(2) of such Code and

16 the limitations of section 415 of such Code, any con17 tribution made after December 31, 1994, which is

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

19 Code shall be treated as an amount contributed to

20 the contract in the year for which such contribution

21 is made and not in the year the contribution be22 comes nonforfeitable.

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

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

25 deemed to have failed to satisfy the applicable re-
19

•S 1415 IS

1 quirements of section 403(b) of such Code for any

2 year beginning prior to January 1, 1993.

3 SEC. 5. CHANGE IN DISTRIBUTION REQUIREMENT FOR RE4 TIREMENT INCOME ACCOUNTS.

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

6 403(b)(11) is amended by inserting ‘‘or, in the case of a

7 retirement income account described in paragraph (9),

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

9 72(m)(7)’’.

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

11 this section shall be effective for years beginning after De12 cember 31, 1988.

13 SEC. 6. REQUIRED BEGINNING DATE FOR DISTRIBUTIONS

14 UNDER CHURCH PLANS.

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

16 401(a)(9) is amended by striking the last sentence and

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

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

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

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

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

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

23 relates.
20

•S 1415 IS

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

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

3 the following new subsection:

4 ‘‘(u) SPECIAL RULES FOR MINISTERS.—Notwith5 standing any other provision of this title, if a duly or6 dained, commissioned, or licensed minister of a church in

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

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

9 ‘‘(1) such minister shall be excluded from con10 sideration for purposes of applying sections

11 401(a)(3), 401(a)(4), and 401(a)(5), as in effect on

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

13 401(a)(5), 401(a)(26), 401(k)(3), 401(m),

14 403(b)(1)(D) (including section 403(b)(12)), and

15 410 to any stock bonus, pension, profit-sharing, or

16 annuity plan (including an annuity described in sec17 tion 403(b) or a retirement income account de18 scribed in section 403(b)(9)) described in this part.

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

20 such minister participates shall be treated as a plan

21 or contract meeting the requirements of section

22 401(a), 401A, or 403(b) (including section

23 403(b)(9)) with respect to such minister’s participa24 tion; and

25 ‘‘(2) such minister shall be excluded from con26 sideration for purposes of applying an applicable sec-
21

•S 1415 IS

1 tion to any plan providing benefits described in an

2 applicable section.

3 For purposes of paragraph (2), the term ‘applicable sec4 tion’ means section 79(d), section 105(h), paragraphs (1),

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

6 127(b)(2), and paragraphs (2), (3), and (8) of section

7 129(d).’’

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

9 this section shall be effective for years beginning before,

10 on, or after December 31, 1992.

11 SEC. 8. CERTAIN RULES AGGREGATING EMPLOYEES NOT

12 TO APPLY TO CHURCHES, ETC.

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

14 the following new subsection:

15 ‘‘(v) CERTAIN RULES AGGREGATING EMPLOYEES

16 NOT TO APPLY TO CHURCHES, ETC.—

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

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

19 401(a)(3), 401(a)(4), and 401(a)(5), as in effect on

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

21 401(a)(5), 401(a)(17), 401(a)(26), 401(h), 401(m),

22 410(b), 411(d)(1), and 416, subsections (b), (c),

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

24 treat the employees of church-related organizations

25 as employed by a single employer, except in the case
22

•S 1415 IS

1 of employees of church-related organizations which

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

3 which have a common, immediate parent.

4 ‘‘(2) DEFINITION OF CHURCH-RELATED ORGA5 NIZATION.—For purposes of this subsection, the

6 term ‘church-related organization’ means a church

7 or a convention or association of churches, an orga8 nization described in section 414(e)(3)(A), an orga9 nization described in section 414(e)(3)(B)(ii), or an

10 organization the employees of which would be aggre11 gated with the employees of such organizations but

12 for the election provided by paragraph (3).

13 ‘‘(3) ELECTION TO DISAGGREGATE.—The provi14 sions of this subsection shall apply if a church-relat15 ed organization makes an election for itself and

16 other church-related organizations (in such form and

17 manner as the Secretary may by regulations pre18 scribe) on or before the last day of the first plan

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

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

21 this section shall be effective as if included in the provi22 sions of Public Law 93–406, Public Law 98–369, and

23 Public Law 99–514 to which such amendment relates.
23

•S 1415 IS

1 SEC. 9. SELF-EMPLOYED MINISTERS TREATED AS EMPLOY2 EES FOR PURPOSES OF CERTAIN WELFARE

3 BENEFIT PLANS AND RETIREMENT INCOME

4 ACCOUNTS.

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

6 to read as follows:

7 ‘‘(20) EMPLOYEE.—For the purpose of apply8 ing the provisions of section 79 with respect to

9 group-term life insurance purchased for employees,

10 for the purpose of applying the provisions of sections

11 104, 105, and 106 with respect to accident or health

12 insurance or accident or health plans, for the pur13 pose of applying the provisions of section 101(b)

14 with respect to employees’ death benefits, for the

15 purpose of applying the provisions of subtitle A with

16 respect to contributions to or under a stock bonus,

17 pension, profit-sharing, or annuity plan, and with re18 spect to distributions under such a plan, or by a

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

20 of applying section 125 with respect to cafeteria

21 plans, the term ‘employee’ shall include a duly or22 dained, commissioned, or licensed minister of a

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

24 a self-employed individual (within the meaning of

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

26 salesman who is considered an employee for the pur-
24

•S 1415 IS

1 pose of chapter 21, or in the case of services per2 formed before January 1, 1951, who would be con3 sidered an employee if his services were performed

4 during 1951.’’

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

6 this section shall be effective for years beginning before,

7 on, or after December 31, 1992.

8 SEC. 10. DEDUCTIONS FOR CONTRIBUTIONS BY CERTAIN

9 MINISTERS TO RETIREMENT INCOME AC10 COUNTS.

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

12 adding the following new paragraph:

13 ‘‘(10) CONTRIBUTIONS BY CERTAIN MINISTERS

14 TO RETIREMENT INCOME ACCOUNTS.—In case con15 tributions are made by a minister described in sec16 tion 403(b)(13)(F) to a retirement income account

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

18 other than such minister, such contributions shall be

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

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

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

22 under this subsection to the extent such contribu23 tions do not exceed the exclusion allowance of such

24 minister, determined under section 403(b)(2).’’
25

•S 1415 IS

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

2 this section shall be effective for years beginning after De3 cember 31, 1992.

4 SEC. 11. MODIFICATION FOR CHURCH PLANS OF RULES

5 FOR PLANS MAINTAINED BY MORE THAN ONE

6 EMPLOYER.

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

8 adding the following new paragraph:

9 ‘‘(8) CHURCH PLANS MAINTAINED BY MORE

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

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

12 one employer, and with respect to which the election

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

14 which commingles assets solely for purposes of in15 vestment and pooling for mortality experience to

16 provide to participants annuities computed with ref17 erence to the balance in the participants’ accounts

18 when such accounts become payable shall not be

19 treated as a single plan maintained by more than

20 one employer under this subsection. The rules pro21 vided by this paragraph shall apply for purposes of

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

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

24 this section shall be effective for years beginning before,

25 on, or after December 31, 1992.
26

•S 1415 IS

1 SEC. 12. SECTION 457 NOT TO APPLY TO DEFERRED COM2 PENSATION OF A CHURCH.

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

4 is amended to read as follows:

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

6 term ‘eligible employer’ shall not include a church

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

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

9 this section shall apply to taxable years beginning after

10 December 31, 1978.

11 SEC. 13. CHURCH PLAN MODIFICATION TO SEPARATE AC12 COUNT REQUIREMENT OF SECTION 401(h).

13 (a) EXCEPTION TO SEPARATE ACCOUNT REQUIRE14 MENT.—Section 401(h) is amended by adding the follow15 ing new sentence at the end thereof: ‘‘Notwithstanding the

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

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

18 414(e)) which is maintained by more than one employer,

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

20 key employee for purposes of section 416 solely because

21 such employee is described in section 416(i)(1)(A)(i) (re22 lating to officers having an annual compensation greater

23 than 150 percent of the amount in effect under section

24 415(c)(1)(A)).’’

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

26 415(l)(1) is amended to read as follows:
27

•S 1415 IS

1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, the following shall be treated as an annual ad3 dition to a defined contribution plan for purposes of

4 subsection (c):

5 ‘‘(A) Contributions allocated to any indi6 vidual medical account which is part of a pen7 sion or annuity plan.

8 ‘‘(B) The actuarially determined amount of

9 prefunding for the insurance value of benefits

10 which are—

11 ‘‘(i) described in section 401(h);

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

13 plan that is a church plan (within the

14 meaning of section 414(e));

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

16 more than one employer; and

17 ‘‘(iv) payable solely to an employee

18 who is a key employee for purposes of sec19 tion 415 solely because such employee is

20 described in section 416(i)(1)(A)(i) (relat21 ing to officers having an annual compensa22 tion greater than 150 percent of the

23 amount in effect under section

24 415(c)(1)(A)), his spouse, or his depend25 ents.
28

•S 1415 IS

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

2 apply to any amount treated as an annual addi3 tion under the preceding sentence.’’

4 (c) EFFECTIVE DATE.—The amendment made by

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

6 1984.

7 SEC. 14. RULE RELATING TO INVESTMENT IN CONTRACT

8 NOT TO APPLY TO FOREIGN MISSIONARIES.

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

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

11 shall not apply to amounts which were contributed by the

12 employer, as determined under regulations prescribed by

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

14 the extent such credits are attributable to services per15 formed before January 1, 1963, and are provided pursu16 ant to pension or annuity plan provisions in existence on

17 March 12, 1962, and on that date applicable to such serv18 ices, or to provide pension or annuity credits for foreign

19 missionaries (within the meaning of section

20 403(b)(2)(D)(iii)).’’

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

22 this section shall apply to taxable years beginning after

23 December 31, 1992.
29

•S 1415 IS

1 SEC. 15. REPEAL OF ELECTIVE DEFERRAL CATCH-UP LIMI2 TATION FOR RETIREMENT INCOME AC3 COUNTS.

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

5 402(g)(8)(A) is amended to read as follows:

6 ‘‘(iii) except in the case of elective de7 ferrals under a retirement income account

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

9 of $5,000 multiplied by the number of

10 years of service of the employee with the

11 qualified organization over the employer

12 contributions described in paragraph (3)

13 made by the organization on behalf of such

14 employee for prior taxable years (deter15 mined in the manner prescribed by the

16 Secretary).’’

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

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

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

20 relates.

21 SEC. 16. CHURCH PLANS MAY ANNUITIZE BENEFITS.

22 (a) IN GENERAL.—A retirement income account de23 scribed in section 403(b)(9) of the Internal Revenue Code

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

25 414(e) of such Code) that is a plan described in section

26 401(a) or 401A of such Code, or an account which consists
30

•S 1415 IS

1 of qualifed voluntary employee contributions described in

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

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

4 earnings thereon, shall not fail to be described in such sec5 tions merely because it pays benefits to participants (and

6 their beneficiaries) from a pool of assets administered or

7 funded by an organization described in section

8 414(e)(3)(A) of such Code, rather than through the pur9 chase of annuities from an insurance company.

10 (b) EFFECTIVE DATE.—This provision shall be effec11 tive for years beginning before, on, or after December 31,

12 1992.

13 SEC. 17. CHURCH PLANS MAY INCREASE BENEFIT PAY14 MENTS.

15 (a) IN GENERAL.—A retirement income account de16 scribed in section 403(b)(9) of the Internal Revenue Code

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

18 414(e) of such Code) that is a plan described in section

19 401(a) or 401A of such Code, or an account which consists

20 of qualified voluntary employee contributions described in

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

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

23 earnings thereon, shall not fail to be described in such sec24 tions merely because it provides benefit payments to par25 ticipants (and their beneficiaries)—
31

•S 1415 IS

1 (1) to take into account the investment per2 formance of the underlying assets or favorable inter3 est or mortality experience, or

4 (2) that increase in an amount not in excess of

5 5 percent per year.

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

8 1992.

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

10 REIMBURSEMENT PLANS NOT TO APPLY TO

11 PLANS OF CHURCHES.

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

13 adding the following new paragraph:

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

15 shall not apply to a plan maintained by a church

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

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

18 this section shall be effective for years beginning before,

19 on, or after December 31, 1992.

20 SEC. 19. RETIREMENT BENEFITS OF MINISTERS NOT SUB21 JECT TO TAX ON NET EARNINGS FROM SELF22 EMPLOYMENT.

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

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

25 but shall not include in such net earning from self-employ-
32

•S 1415 IS

1 ment any retirement benefit received by such individual

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

3 the semicolon at the end.

4 (b) EFFECTIVE DATE.—The amendments made by

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

6 after December 31, 1992.

Æ

S 1415—O——2

S 1415—O——3

S 1415—O——4