#aadth ,,congress #ast ,session ,s4 #bcjh ,,an ,,act ,to amend the ,internal ,revenue ,code of #aihf to clarify the treatment of church pension plans1 and for other purposes4 #a4 ,short title ,this ,act may be cited as the ,church ,plan ,clarification ,act of #bjae4 #b4 ,church plan clarification 7a7 ,application of controlled group rules to church plans 7#a7 ,in general ,section #dad7;c7 of the ,internal ,revenue ,code of #aihf is amended-- 7,a7 by striking ,for purposes and inserting the following3 7#a7 ,in general ,except as provided in paragraph 7#b71 for purposes 1 and 7,b7 by adding at the end the following new paragraph3 7#b7 ,special rules relating to church plans 7,a7 ,general rule ,except as provided in subparagraphs 7,b7 and 7,c71 for purposes of this subsection and subsection 7m71 an organization that is otherwise eligible to participate in a church plan shall not be aggregated with another such organization and treated as a single employer with such other organization for a plan year beginning in a taxable year unless-- 7i7 one such organization provides 7directly or indirectly7 at least #hj percent of the operating funds for the other organization during the preceding tax year of the recipient organization1 and 7ii7 there is a degree of common management or supervision between the organizations such that the organization providing the operating funds is directly involved in the day-to-day operations of the other organization4 7,b7 ,nonqualified church-controlled organizations ,notwithstanding subparagraph 7,a71 for purposes of this subsection and subsection 7m71 an organization that is a nonqualified church-controlled organization shall be aggregated with #a or more other nonqualified church-controlled organizations1 or with an organization that is not exempt from tax under section #eja1 and treated as a single employer with such other organization1 if at least #hj percent of the directors or trustees of such other organization are either representatives of1 or directly or indirectly controlled by1 such nonqualified church-controlled organization4 ,for purposes of this subparagraph1 the term nonqualified church-controlled organization means a church-controlled tax-exempt organization described in section #eja7;c77#c7 that is not a qualified church-controlled organization 7as defined in section #caba7w77#c77;,b774 7,c7 ,permissive aggregation among church-related organizations ,the church or convention or association of churches with which an organization described in subparagraph 7,a7 is associated 7within the meaning of subsection 7e77#c77;,d771 or an organization designated by such church or convention or association of churches1 may elect to treat such organizations as a single employer for a plan year4 ,such election1 once made1 shall apply to all succeeding plan years unless revoked with notice provided to the ,secretary in such manner as the ,secretary shall prescribe4 7,d7 ,permissive disaggregation of church-related organizations ,for purposes of subparagraph 7,a71 in the case of a church plan1 an employer may elect to treat churches 7as defined in section #djc7;b77#ab77;,b77 separately from entities that are not churches 7as so defined71 without regard to whether such entities maintain separate church plans4 ,such election1 once made1 shall apply to all succeeding plan years unless revoked with notice provided to the ,secretary in such manner as the ,secretary shall prescribe4 4 7#b7 ,clarification relating to application of anti-abuse rule ,the rule of #bf ,,cfr #a4dad7;c7-#e7;f7 shall continue to apply to each paragraph of section #dad7;c7 of the ,internal ,revenue ,code of #aihf1 as amended by paragraph 7#a74 7#c7 ,effective date ,the amendments made by paragraph 7#a7 shall apply to years beginning before1 on1 or after the date of the enactment of this ,act4 7b7 ,application of contribution and funding limitations to #djc7;b7 grandfathered defined benefit plans 7#a7 ,in general ,section #bea7;e77#e7 of the ,tax ,equity and ,fiscal ,responsibility ,act of #aihb 7,public ,law #ig-bdh71 is amended-- 7,a7 by striking #djc7;b77#b7 and inserting #djc7;b71 and 7,b7 by inserting before the period at the end the following3 1 and shall be subject to the applicable limitations of section #dae7;b7 of such ,code as if it were a defined benefit plan under section #dja7;a7 of such ,code 7and not to the limitations of section #dae7;c7 of such ,code744 7#b7 ,effective date ,the amendments made by this subsection shall apply to years beginning before1 on1 or after the date of the enactment of this ,act4 7c7 ,automatic enrollment by church plans 7#a7 ,in general ,this subsection shall supersede any law of a ,state that relates to wage1 salary1 or payroll payment1 collection1 deduction1 garnishment1 assignment1 or withholding which would directly or indirectly prohibit or restrict the inclusion in any church plan 7as defined in section #dad7;e7 of the ,internal ,revenue ,code of #aihf7 of an automatic contribution arrangement4 7#b7 ,definition of automatic contribution arrangement ,for purposes of this subsection1 the term automatic contribution arrangement means an arrangement-- 7,a7 under which a participant may elect to have the plan sponsor or the employer make payments as contributions under the plan on behalf of the participant1 or to the participant directly in cash1 7,b7 under which a participant is treated as having elected to have the plan sponsor or the employer make such contributions in an amount equal to a uniform percentage of compensation provided under the plan until the participant specifically elects not to have such contributions made 7or specifically elects to have such contributions made at a different percentage71 and 7,c7 under which the notice and election requirements of paragraph 7#c71 and the investment requirements of paragraph 7#d71 are satisfied4 7#c7 ,notice requirements 7,a7 ,in general ,the plan sponsor of1 or plan administrator or employer maintaining1 an automatic contribution arrangement shall1 within a reasonable period before the first day of each plan year1 provide to each participant to whom the arrangement applies for such plan year notice of the participant's rights and obligations under the arrangement which-- 7i7 is sufficiently accurate and comprehensive to apprise the participant of such rights and obligations1 and 7ii7 is written in a manner calculated to be understood by the average participant to whom the arrangement applies4 7,b7 ,election requirements ,a notice shall not be treated as meeting the requirements of subparagraph 7,a7 with respect to a participant unless-- 7i7 the notice includes an explanation of the participant's right under the arrangement not to have elective contributions made on the participant's behalf 7or to elect to have such contributions made at a different percentage71 7ii7 the participant has a reasonable period of time1 after receipt of the explanation described in clause 7i7 and before the first elective contribution is made1 to make such election1 and 7iii7 the notice explains how contributions made under the arrangement will be invested in the absence of any investment election by the participant4 7#d7 ,default investment ,if no affirmative investment election has been made with respect to any automatic contribution arrangement1 contributions to such arrangement shall be invested in a default investment selected with the care1 skill1 prudence1 and diligence that a prudent person selecting an investment option would use4 7#e7 ,effective date ,this subsection shall take effect on the date of the enactment of this ,act4 7d7 ,allow certain plan transfers and mergers 7#a7 ,in general ,section #dad of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new subsection3 7z7 ,certain plan transfers and mergers 7#a7 ,in general ,under rules prescribed by the ,secretary1 except as provided in paragraph 7#b71 no amount shall be includible in gross income by reason of-- 7,a7 a transfer of all or a portion of the accrued benefit of a participant or beneficiary1 whether or not vested1 from a church plan that is a plan described in section #dja7;a7 or an annuity contract described in section #djc7;b7 to an annuity contract described in section #djc7;b71 if such plan and annuity contract are both maintained by the same church or convention or association of churches1 7,b7 a transfer of all or a portion of the accrued benefit of a participant or beneficiary from an annuity contract described in section #djc7;b7 to a church plan that is a plan described in section #dja7;a7 or an annuity contract described in section #djc7;b71 if such plan and annuity contract are both maintained by the same church or convention or association of churches1 or 7,c7 a merger of a church plan that is a plan described in section #dja7;a71 or an annuity contract described in section #djc7;b7 with an annuity contract described in section #djc7;b71 if such plan and annuity contract are both maintained by the same church or convention or association of churches4 7#b7 ,limitation ,paragraph 7#a7 shall not apply to a transfer or merger unless the participant's or beneficiary's total accrued benefit immediately after the transfer or merger is equal to or greater than the participant's or beneficiary's total accrued benefit immediately before the transfer or merger1 and such total accrued benefit is nonforfeitable after the transfer or merger4 7#c7 ,qualification ,a plan or annuity contract shall not fail to be considered to be described in sections #dja7;a7 or #djc7;b7 merely because such plan or annuity contract engages in a transfer or merger described in this subsection4 7#d7 ,definitions ,for purposes of this subsection3 7,a7 ,church or convention or association of churches ,the term church or convention or association of churches includes an organization described in subparagraph 7,a7 or 7,b77ii7 of subsection 7e77#c74 7,b7 ,annuity contract ,the term annuity contract includes a custodial account described in section #djc7;b77#g7 and a retirement income account described in section #djc7;b77#i74 7,c7 ,accrued benefit ,the term accrued benefit means-- 7i7 in the case of a defined benefit plan1 the employee's accrued benefit determined under the plan1 and 7ii7 in the case of a plan other than a defined benefit plan1 the balance of the employee's account under the plan4 4 7#b7 ,effective date ,the amendment made by this subsection shall apply to transfers or mergers occurring after the date of the enactment of this ,act4 7e7 ,investments by church plans in collective trusts 7#a7 ,in general ,in the case of-- 7,a7 a church plan 7as defined in section #dad7;e7 of the ,internal ,revenue ,code of #aihf71 including a plan described in section #dja7;a7 of such ,code and a retirement income account described in section #djc7;b77#i7 of such ,code1 and 7,b7 an organization described in section #dad7;e77#c77;,a7 of such ,code the principal purpose or function of which is the administration of such a plan or account1 the assets of such plan1 account1 or organization 7including any assets otherwise permitted to be commingled for investment purposes with the assets of such a plan1 account1 or organization7 may be invested in a group trust otherwise described in ,internal ,revenue ,service ,revenue ,ruling #ha-ajj 7as modified by ,internal ,revenue ,service ,revenue ,rulings #bjjd-fg1 #bjaa-a1 and #bjad-bd71 or any subsequent revenue ruling that supersedes or modifies such revenue ruling1 without adversely affecting the tax status of the group trust1 such plan1 account1 or organization1 or any other plan or trust that invests in the group trust4 7#b7 ,effective date ,this subsection shall apply to investments made after the date of the enactment of this ,act4 ,passed the ,senate ,december #aj1 #bjae4,secretary