Category Archives: Church Plans

Today in ERISA History

Posted on April 25, 2012 by Administrator| Comments Off

April 25, 2000 – The Commodity Futures Trading Commission (CFTC) publishes a Final Rule on Commodity Pool Operators; Exclusion for Certain Otherwise Regulated Persons From the Definition of the Term “Commodity Pool Operator”. It adds ERISA section 3(33) church plans to the types of employee benefit plans that CFTC Rule 4.5(a)(4) says will not be construed to be commodity pools.

The CFTC says factors that influenced this decision were Congress exempting Church Plans from coverage under Title I and IV of ERISA “to avoid excess Government entanglement with religion in violation of the First Amendment to the Constitution”, and Congress deciding, in the National Securities Markets Improvement Act of 1996, that Church Plans are not investment companies under the Investment Company Act of 1940 and therefore they are not subject to registration as such.

Because the CFTC rarely interacts with ERISA (the IRS, DOL, SEC and PBGC do most of the heavy lifting when it comes to regulating plans), and because Commodity Pool Operator does not immediately come to mind when someone mentions church plans, this is one of the more unusual ERISA-related regulations. A little background –

The CFTC was created in 1974 with the enactment of the Commodity Futures Trading Commission Act. It was given the task of regulating commodity futures and option markets in the United States. In 1974, most futures trading happened in the agricultural sector.

A Commodity Pool Operator is an individual or organization that operates a commodity pool and solicits funds for that commodity pool.

A commodity pool is an enterprise in which funds contributed by a number of persons are combined for the purposes of trading futures contracts, options on futures, or retail of-exchange forex contracts, or to invest in another commodity pool.

If you have any examples of church plans operating commodity pools, please share. I’ve never been able to quite picture how church plans operate commodity pools. When I think of church plans, I think of plans designed to provide pension or retirement benefits to employees of the church, like the pastor and his wife.

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Posted in Church Plans, ERISA, History, Investments

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Congress Proposes Changes to 414(e) Church Retirement Plans

Posted on March 19, 2012 by Administrator| Comments Off

I rarely write about ERISA-related bills pending before Congress. One of the reasons is that many bills are proposed but never gain traction, and die before they are ever enacted into law. A quick check of Thomas.gov today found 47 bills introduced before the current session of Congress, most of which will never become law.

One of those pending bills is S. 143, the Church Plan Clarification Act of 2011. It was introduced in the Senate on Jan. 25, 2011, read twice and referred to the Senate Committee on Finance where it remains

The Church Plan Clarification Act of 2011 contains five separate clarifications it would like to make to church plans. They are:

    1. Amend Code section 414(c) to apply controlled group rules to church plans;

    2. Amend section 251(e)(5) of TEFRA (Tax Equity and Fiscal Responsibility Act of 1982) to apply contribution and funding limitations to 403(b) grandfathered defined benefit plans;

    3. Add automatic enrollment to church plans;

    4. Add section 414(y) to the Internal Revenue Code, allowing certain plan transfers and mergers; and

    5. Permit investments by church plan in collective trusts described in Rev. Rul. 81-100 as modified by Rev. Rul. 2004-67.

Code section 414(e)(1) and (2) defines a church plan as:

    “(e) Church plan
      (1) In general. For purposes of this part, the term ”church plan” means a plan established and maintained (to the extent required in paragraph (2)(B)) for its employees (or their beneficiaries) by a church or by a convention or association of churches which is exempt from tax under section 501.

      (2) Certain plans excluded. The term ”church plan” does not include a plan -

        (A) which is established and maintained primarily for the benefit of employees (or their beneficiaries) of such church or convention or association of churches who are employed in connection with one or more unrelated trades or businesses (within the meaning of section 513); or

        (B) if less than substantially all of the individuals included in the plan are individuals described in paragraph (1) or (3)(B) (or their beneficiaries).”

Allowing church plans to invest in collective trusts described in Rev. Rul. 81-100 (as modified by Rev. Rul. 2004-67) is one of the more interesting provisions in this bill. On Jan. 10, 2011, the IRS issued Rev. Rul. 2011-1, modifying the rules for group trusts described in Rev. Rul. 81-100. It permits a group trust to participate in groups trusts of custodial accounts under Code section 403(b)(7), retirement income accounts under Code section 403(b)(9), and governmental retiree benefit plans under Code section 401(a)(24). Rev. Rul. 2011-1 also included 2 Model Amendments to be used by group trusts to comply with the holding of Rev. Rul. 2011-1.

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Posted in Church Plans, Legislation

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