Bill to Amend Rules for Church Plans Hits Hill
Legislation that would amend the rules for church plans and 403(b)s in a variety of ways is now before both chambers of Congress. Rep. Pat Tiberi (R-Ohio) introduced the House version of The Church Plan Clarification Act of 2015, H.R. 4085, and Sen. Ben Cardin (D-Md.) introduced the Senate version, S. 2308. The language in both versions is the same.
The measure would add language to Internal Revenue Code Section 414 regarding:
- the circumstances under which an organization that is otherwise eligible to participate in a church plan shall not be aggregated with another such organization and then, together with another organization, treated as a single employer for a plan year beginning in a taxable year;
- plan transfers and mergers; and
- investments by church plans in collective trusts.
The bill also addresses automatic contribution arrangements. Its language:
- contains a provision that would supersede any state law that prohibits or even restricts the inclusion of an automatic contribution arrangement in any church plan;
- provides that a plan sponsor, plan administrator or employer maintaining an automatic contribution arrangement shall, within a reasonable period before the first day of each plan year, provide to each participant to whom the arrangement applies notice of his or her rights and obligations;
- says that such a notice must be sufficiently accurate and comprehensive to apprise the participant of his or her rights and obligations, and be written so that the average participant can understand it; and
- provides that if a participant has not made an investment election regarding an automatic contribution arrangement, contributions to such an arrangement shall be invested in a default investment.
The legislation also addresses the application of contribution and funding limitations to 403(b) grandfathered defined benefit plans. This portion of the bill includes a provision that would amend the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) to add language concerning the applicability of the Code Section 415 limitations to such 403(b) plans.
H.R. 4085 is before the House Ways and Means Committee; S. 2308 is before the Senate Finance Committee.