[House Report 112-131]
[From the U.S. Government Publishing Office]
112th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 112-131
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CHURCH PLAN INVESTMENT CLARIFICATION ACT
_______
July 1, 2011.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Bachus, from the Committee on Financial Services,
submitted the following
R E P O R T
[To accompany H.R. 33]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred
the bill (H.R. 33) to amend the Securities Act of 1933 to
specify when certain securities issued in connection with
church plans are treated as exempted securities for purposes of
that Act, having considered the same, report favorably thereon
with an amendment and recommend that the bill as amended do
pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Church Plan Investment Clarification
Act''.
SEC. 2. SECURITIES ACT OF 1933 AMENDMENT.
Section 3(a)(2) of the Securities Act of 1933 (15 U.S.C. 77c(a)(2))
is amended--
(1) by inserting ``(other than a retirement income account
described in section 403(b)(9) of the Internal Revenue Code of
1986, to the extent that the interest or participation in such
single trust fund or collective trust fund is issued to a
church, a convention or association of churches, or an
organization described in section 414(e)(3)(A) of such Code
establishing or maintaining the retirement income account or to
a trust established by any such entity in connection with the
retirement income account)'' after ``403(b) of such Code''; and
(2) by inserting ``(other than a person participating in a
church plan who is described in section 414(e)(3)(B) of the
Internal Revenue Code of 1986)'' after ``section 401(c)(1) of
such Code''.
Purpose and Summary
H.R. 33, the Church Plan Investment Clarification Act,
would make a technical correction to Public Law 108-359, which
currently prevents church pension plans from investing in
collective trusts. The bill would broaden and clarify an
exemption that exists in the current law to allow church
pension plans to invest in collective trusts. In 2003, Congress
attempted to achieve this result, but omitted a necessary
exemption from the Securities Act of 1933 to provide parallel
treatment for church plans with exemptions in the Investment
Company Act of 1940 and the Securities Exchange Act of 1934.
Without this correction, collective trusts will not permit
investments from church pension plans.
Background and Need for Legislation
H.R. 33, the Church Plan Investment Clarification Act,
introduced by Insurance, Housing and Community Opportunity
Subcommittee Chairman Judy Biggert, would broaden and clarify
an exemption that exists in the current law to allow church
pension plans to invest in collective trusts. During the 108th
Congress, in 2003, Representative Biggert sponsored H.R. 1533,
which sought to amend the Investment Company Act of 1940 to
exclude from its definition of ``investment company'' any
collective trust fund maintained by a bank consisting solely of
certain church pension plans, companies, or accounts specified
in the Internal Revenue Code. The bill amended the Securities
Act of 1933 and the Securities Exchange Act of 1934 to exempt
such church pension plans, companies, or accounts from
regulation under such Acts, including registration
requirements. H.R. 1533 passed the house on suspension 397-0,
and later became Public Law 108-359.
Unfortunately, H.R. 1533 failed to exempt church plans not
funded by tax-deferred annuities or plans that did not include
self-employed individuals. The 1933 Act church plan exemption
failed to remove these two conditions for church plans, which
is the only place that the collective trust exemptions do not
provide parallel treatment among the various securities laws.
H.R. 33 would fix that omission.
Representative Biggert introduced H.R. 33 on January 5,
2011. On March 10, 2011, Representative Biggert raised H.R. 33
with Ms. Meredith Cross, Securities and Exchange Commission
(SEC) Director of Corporation Finance, during the Capital
Markets and Government Sponsored Enterprises Subcommittee
hearing entitled ``Oversight of the Securities and Exchange
Commission's Operations, Activities, Challenges and FY 2012
Budget Request.'' Ms. Cross indicated that the SEC
wholeheartedly embraced the idea that participants in a church
plan should have the same opportunities as participants in
other plans and that there should not be regulatory obstacles
to such investment, although the Commission itself had not
officially adopted a position on the bill.
Hearings
On March 10, 2011, the Subcommittee on Capital Markets and
Government Sponsored Enterprises held a hearing entitled
``Oversight of the Securities and Exchange Commission's
Operations, Activities, Challenges and FY 2012 Budget
Request.'' The Subcommittee received testimony from the
following witnesses: Mr. Robert Cook, Director, Division of
Trading and Markets, Securities and Exchange Commission (SEC);
Ms. Meredith Cross, Director, Division of Corporation Finance,
SEC: Mr. Robert Khuzami, Director, Division of Enforcement,
SEC; Ms. Eileen Rominger, Director, Division of Investment
Management, SEC; and Mr. Carlo di Florio, Director, Office of
Compliance Inspections and Examinations, SEC. During the
hearing, Representative Biggert asked Ms. Meredith Cross, the
Securities and Exchange Commission's Director of Corporation
Finance, to comment on the need for legislation to modify the
treatment of church pension plan investments in collective
trusts.
Committee Consideration
The Subcommittee on Capital Markets and Government
Sponsored Enterprises met in open session on May 3 and 4, 2011,
and ordered H.R. 33, as amended, favorably reported to the full
Committee by voice vote.
The Committee on Financial Services met in open session on
June 22, 2011 and ordered H.R. 33, without amendment, favorably
reported to the House by voice vote.
Committee Votes
Clause 3(b) of rule XIII of the Rules of the House of
Representatives requires the Committee to list the record votes
on the motion to report legislation and amendments thereto.
There were no record votes taken on amendments or in
connection with ordering H.R. 33 reported to the House. A
motion by Chairman Bachus to report the bill, as amended, to
the House with a favorable recommendation was agreed to by
voice vote.
During consideration of H.R. 33, the following motion was
considered by the Committee:
1. A motion offered by Mr. Bachus, to move the previous
question on H.R. 33, was agreed to by voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee has held hearings and
made findings that are reflected in this report.
Performance Goals and Objectives
Pursuant to clause 3(c)(4) of rule XIII of the Rules of the
House of Representatives, the Committee establishes the
following performance related goals and objectives for this
legislation:
H.R. 33, Church Plan Investment Clarification Act, would
make a technical correction to Public Law 108-359, which
currently prevents church pension plans from investing in
collective trusts. The bill would broaden and clarify an
exemption that exists in the current law to allow church
pension plans to invest in collective trusts. In 2003, Congress
attempted to achieve this result, but omitted a necessary
exemption from the Securities Act of 1933 to provide parallel
treatment for church plans with exemptions in the Investment
Company Act of 1940 and the Securities Exchange Act of 1934.
Without this correction, collective trusts will not permit
investments from church pension plans.
New Budget Authority, Entitlement Authority, and Tax Expenditures
In compliance with clause 3(c)(2) of rule XIII of the Rules
of the House of Representatives, the Committee adopts as its
own the estimate of new budget authority, entitlement
authority, or tax expenditures or revenues contained in the
cost estimate prepared by the Director of the Congressional
Budget Office pursuant to section 402 of the Congressional
Budget Act of 1974.
Committee Cost Estimate
The Committee adopts as its own the cost estimate prepared
by the Director of the Congressional Budget Office pursuant to
section 402 of the Congressional Budget Act of 1974.
Congressional Budget Office Estimates
Pursuant to clause 3(c)(3) of rule XIII of the Rules of the
House of Representatives, the following is the cost estimate
provided by the Congressional Budget Office pursuant to section
402 of the Congressional Budget Act of 1974:
June 30, 2011.
Hon. Spencer Bachus,
Chairman, Committee on Financial Services,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 33, the Church
Plan Investment Clarification Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Dubary Brea
and Susan Willie.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 33--Church Plan Investment Clarification Act
H.R. 33 would amend the Securities and Exchange Act of 1933
to allow churches to invest pension funds in certain investment
vehicles, known as collective trust funds (CTFs), that are
offered by banks and trust companies. Under current law, CTFs
are exempt from requirements to register with the Securities
and Exchange Commission (SEC) as long as the CTF accepts
investments only from certain eligible employee-benefit plans.
H.R. 33 would add church pension plans to the group of plans
that would be eligible to participate in a CTF.
CBO estimates that implementing H.R. 33 would affect
federal spending subject to appropriation, but because the bill
would have a negligible impact on the SEC's workload, such
effects would not be significant. Enacting H.R. 33 would not
affect direct spending or revenues; therefore, pay-as-you-go
procedures do not apply.
H.R. 33 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would not affect the budgets of state, local, or tribal
governments.
The CBO staff contacts for this estimate are Dubary Brea
and Susan Willie. The estimate was approved by Theresa Gullo,
Deputy Assistant Director for Budget Analysis.
Federal Mandates Statement
The Committee adopts as its own the estimate of Federal
mandates prepared by the Director of the Congressional Budget
Office pursuant to section 423 of the Unfunded Mandates reform
Act.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Applicability to Legislative Branch
The Committee finds that the legislation does not relate to
the terms and conditions of employment or access to public
services or accommodations within the meaning of the section
102(b)(3) of the Congressional Accountability Act.
Earmark Identification
H.R. 33 does not contain any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of rule XXI.
Section-by-Section Analysis of the Legislation
Section 1. Short title
This section provides a short title to the bill by citing
it as the ``Church Plan Investment Clarification Act.''
Section 2. Securities Act of 1933 amendments
This section amends the Securities Act of 1933 by inserting
language that provides for an exemption for a church plan
established under 403(b)(9) of the Internal Revenue Code of
1986 to invest in a collective trust. In addition, because of
the unique tax treatment of clergy and lay workers who
participate in their denominational pension plans, this section
clarifies that the exemption allows them to invest in
collective trusts.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (new matter is
printed in italic and existing law in which no change is
proposed is shown in roman):
SECURITIES ACT OF 1933
TITLE I--SHORT TITLE
* * * * * * *
EXEMPTED SECURITIES
Sec. 3. (a) Except as hereinafter expressly provided, the
provisions of this title shall not apply to any of the
following classes of securities:
(1) * * *
(2) Any security issued or guaranteed by the United
States or any Territory thereof, or by the District of
Columbia, or by any State of the United States, or by
any political subdivision of a State or Territory, or
by any public instrumentality of one or more States or
Territories, or by any person controlled or supervised
by and acting as an instrumentality of the Government
of the United States pursuant to authority granted by
the Congress of the United States; or any certificate
of deposit for any of the foregoing; or any security
issued or guaranteed by any bank; or any security
issued by or representing an interest in or a direct
obligation of a Federal Reserve bank; or any interest
or participation in any common trust fund or similar
fund that is excluded from the definition of the term
``investment company'' under section 3(c)(3) of the
Investment Company Act of 1940; or any security which
is an industrial development bond (as defined in
section 103(c)(2) of the Internal Revenue Code of 1954)
the interest on which is excludable from gross income
under section 103(a)(1) of such Code if, by reason of
the application of paragraph (4) or (6) of section
103(c) of such Code (determined as if paragraphs
(4)(A), (5), and (7) were not included in such section
103(c)), paragraph (1) of such section 103(c) does not
apply to such security; or any interest or
participation in a single trust fund, or in a
collective trust fund maintained by a bank, or any
security arising out of a contract issued by an
insurance company, which interest, participation, or
security is issued in connection with (A) a stock
bonus, pension, or profit-sharing plan which meets the
requirements for qualification under section 401 of the
Internal Revenue Code of 1954, (B) an annuity plan
which meets the requirements for the deduction of the
employer's contributions under section 404(a)(2) of
such Code, (C) a governmental plan as defined in
section 414(d) of such Code which has been established
by an employer for the exclusive benefit of its
employees or their beneficiaries for the purpose of
distributing to such employees or their beneficiaries
the corpus and income of the funds accumulated under
such plan, if under such plan it is impossible, prior
to the satisfaction of all liabilities with respect to
such employees and their beneficiaries, for any part of
the corpus or income to be used for, or diverted to,
purposes other than the exclusive benefit of such
employees or their beneficiaries, or (D) a church plan,
company, or account that is excluded from the
definition of an investment company under section
3(c)(14) of the Investment Company Act of 1940, other
than any plan described in subparagraph (A), (B), (C),
or (D) of this paragraph (i) the contributions under
which are held in a single trust fund or in a separate
account maintained by an insurance company for a single
employer and under which an amount in excess of the
employer's contribution is allocated to the purchase of
securities (other than interests or participations in
the trust or separate account itself) issued by the
employer or any company directly or indirectly
controlling, controlled by, or under common control
with the employer, (ii) which covers employees some or
all of whom are employees within the meaning of section
401(c)(1) of such Code (other than a person
participating in a church plan who is described in
section 414(e)(3)(B) of the Internal Revenue Code of
1986), or (iii) which is a plan funded by an annuity
contract described in section 403(b) of such Code
(other than a retirement income account described in
section 403(b)(9) of the Internal Revenue Code of 1986,
to the extent that the interest or participation in
such single trust fund or collective trust fund is
issued to a church, a convention or association of
churches, or an organization described in section
414(e)(3)(A) of such Code establishing or maintaining
the retirement income account or to a trust established
by any such entity in connection with the retirement
income account). The Commission, by rules and
regulations or order, shall exempt from the provisions
of section 5 of this title any interest or
participation issued in connection with a stock bonus,
pension, profit-sharing, or annuity plan which covers
employees some or all of whom are employees within the
meaning of section 401(c)(1) of the Internal Revenue
Code of 1954, if and to the extent that the Commission
determines this to be necessary or appropriate in the
public interest and consistent with the protection of
investors and the purposes fairly intended by the
policy and provisions of this title. For purposes of
this paragraph, a security issued or guaranteed by a
bank shall not include any interest or participation in
any collective trust fund maintained by a bank; and the
term ``bank'' means any national bank, or any banking
institution organized under the laws of any State,
territory, or the District of Columbia, the business of
which is substantially confined to banking and is
supervised by the State or territorial banking
commission or similar official; except that in the case
of a common trust fund or similar fund, or a collective
trust fund, the term ``bank'' has the same meaning as
in the Investment Company Act of 1940;
* * * * * * *