Legislation to clear up tax and compliance issues for church pension funds was approved by the Senate by unanimous consent. A companion House bill has not advanced.
Sen. Ben Cardin, D-Md., who co-sponsored the bill along with Sen. Rob Portman, R-Ohio, said in a statement that the Church Plan Clarification Act of 2015 approved Dec. 10 brings more than 1 million clergy, faith institution workers and dependents “closer now to having the well-deserved peace of mind that comes with the financial security during retirement that we wish for every American.” The bill corrects five legal and regulatory issues, including controlled group rules, grandfathered defined benefit plans, auto enrollment and transfers between plans.
Many church retirement plans are exempt from the Employee Retirement Income Security Act of 1974 and instead subject to state and federal laws and Church Alliance regulations, including state fiduciary standards, state contract law and tax rules.
Mr. Cardin said in a Senate floor statement Dec. 2 that the bill does not affect the definition of a church plan for tax or ERISA purposes. “In particular, no inference is intended by this legislation regarding the statutory requirements a pension plan must meet to be considered or treated as a church plan … and the bill has no bearing on the interpretation of those sections. Rather, the Church Plan Clarification Act is simply about fixing the rules that govern how church plans operate and serve their participants,” Mr. Cardin said.
However, Pension Rights Center Director Karen Ferguson is worried that the legislation, if passed, could nonetheless have a negative effect on litigation filed by church plan participants. “We did not oppose the Senate bill because it only addresses highly technical tax concerns of certain church benefits boards and had nothing to do with the definition of church plans under ERISA and the Internal Revenue Code. We were pleased that in his floor statement Sen. Ben Cardin clarified that no inference about the definition of church plan was to be drawn from the Senate bill. We were shocked (then) that lawyers representing defendants in pending lawsuits would try to suggest that this bill could torpedo litigation completely unrelated to the bill,” Ms. Ferguson said in an interview.