December 14, 2015

Senate Passes Cardin Measure to Clarify Pension Rules for Clergy and Other Religious Institutions

WASHINGTON – The Church Plan Clarification Act of 2015 (S. 2308), authored by U.S. Senator Ben Cardin (D-Md.), was approved by the Senate late last week. The bill, which clarifies the application of certain tax and retirement laws and regulations to the unique structures of church pension plans, heads to the House of Representatives for consideration. Companion legislation (H.R. 4085) has previously been introduced.

 

“Retirement security should not be based on faith when you dedicate your working life to serving a church, synagogue or other religious entity. Many so-called ‘church plans’ date back to the 18thcentury. While their unique structures have been recognized by the law, our modern, complicated tax system hasn’t always been accommodating,” said Senator Cardin.,” said Senator Cardin. “More than 1 million clergy, faith institution workers, and their dependents are closer now to having the well-deserved peace of mind that comes with the financial security during retirement that we wish for every American.”

 

In recognition of their unique status, most church retirement plans are exempt from the Employee Retirement Income Security Act of 1974 (“ERISA”) and are instead subject to special laws and regulations that reflect the distinctive issues that these plans and churches confront. Church retirement plans are subject to stringent state and federal laws and Church Alliance regulations, including state fiduciary standards, state contract law, and Internal Revenue Code requirements.

 

Due to their distinctive structure, certain legislative and regulatory changes have unintentionally resulted in uncertainty and/or compliance issues for these plans.  The Church Plan Clarification Act of 2015 corrects five legal/regulatory issues confronting church retirement plans:

 

  • Controlled Group Rules
  • Grandfathered Defined Benefit (“DB”) Plans
  • Automatic Enrollment
  • Transfers Between 403(b) and 401(a) Plans
  • 81-100 Trusts

 

 

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