[House Report 108-248]
[From the U.S. Government Publishing Office]
108th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 108-248
======================================================================
AMENDING THE SECURITIES LAWS TO PERMIT CHURCH PENSION PLANS TO BE
INVESTED IN COLLECTIVE TRUSTS
_______
September 3, 2003.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Oxley, from the Committee on Financial Services, submitted the
following
R E P O R T
[To accompany H.R. 1533]
[Including cost estimate of the Congressional Budget Office]
The Committee on Financial Services, to whom was referred the
bill (H.R. 1533) to amend the securities laws to permit church
pension plans to be invested in collective trusts, having
considered the same, report favorably thereon without amendment
and recommend that the bill do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for Legislation.............................. 2
Hearings......................................................... 2
Committee Consideration.......................................... 2
Committee Votes.................................................. 3
Committee Oversight Findings..................................... 3
Performance Goals and Objectives................................. 3
New Budget Authority, Entitlement Authority, and Tax Expenditures 3
Committee Cost Estimate.......................................... 3
Congressional Budget Office Cost Estimate........................ 3
Federal Mandates Statement....................................... 4
Advisory Committee Statement..................................... 4
Constitutional Authority Statement............................... 4
Applicability to Legislative Branch.............................. 4
Section-by-Section Analysis...................................... 4
Changes in Existing Law Made by the Bill, as Reported............ 5
Purpose and Summary
H.R. 1533 amends the Federal securities laws to grant
church plans, as described in section 3(c)(14) of the
Investment Company Act of 1940, the ability to invest their
assets in collective trust funds, as described in section
3(c)(11) of the Investment Company Act. The legislation thus
provides parallel treatment under the securities laws of the
assets of church plans to the treatment afforded the assets of
governmental plans, as described in section 3(a)(2)(C) of the
Securities Act of 1933. It permits Church Plan assets to be
invested in a collective trust fund that also holds assets of
certain trusts which meet the requirements for qualification
under section 401 of the Internal Revenue Code and governmental
plans.
Background and Need for Legislation
Many pension plans diversify their holdings by investing a
portion of their portfolios in rental real estate and other
private investment offerings. Frequently, pension plans make
these investments by joining other pension plans in a
collective trust fund that is created and managed by a
financial institution solely as an investment vehicle for
pension programs. Current law prohibits Church Plans from
participating in these arrangements.
Section 3(c)(11) of the Investment Company Act of 1940
excludes, among other things, any collective trust fund that
consists of the assets of pension plans that meet the
qualifications of section 401 of the Internal Revenue Code or
governmental plans, or both, from the definition of investment
company under the Investment Company Act. This reflects the
change made in 1980 by Congress to broaden the Investment
Company Act's exclusion of collective trust funds to permit
investment in those funds by governmental plans. Section
3(a)(2) of the Securities Act of 1933 and section 3(a)(12)(c)
of the Securities Exchange Act of 1934 provide exemptions from
various registration and disclosure rules for collective trust
funds. However, church plans are not covered by these
provisions.
Church plans today make investments similar to those
permitted for Collective Trust Funds. However, the inability of
church plans to participate with trusts and governmental plans
in collective trust funds unnecessarily increases the costs for
these investments and makes it more difficult for church plans
to diversify their investments.
Hearings
No hearings were held on this legislation in the 108th
Congress.
Committee Consideration
The Subcommittee on Capital Markets, Insurance, and
Government Sponsored Enterprises met in open session on July
10, 2003, and approved H.R. 1533 for full Committee
consideration, without amendment, by a voice vote.
The Committee on Financial Services met in open session on
July 23, 2003, and ordered H.R. 1533 reported to the House with
a favorable recommendation by a 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. No
record votes were taken in conjunction with the consideration
of this legislation. A motion by Mr. Oxley to report the bill
to the House with a favorable recommendation was agreed to by a
voice vote.
Committee Oversight Findings
Pursuant to clause 3(c)(1) of rule XIII of the Rules of the
House of Representatives, the Committee 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:
The administrators of church plans will use the authority
granted by this legislation to diversify their holdings and
increase the returns for their investors.
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 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 Estimate
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:
U.S. Congress,
Congressional Budget Office,
Washington, DC, August 27, 2003.
Hon. Michael G. Oxley,
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. 1533, a bill to
amend the securities laws to permit church pension plans to be
invested in collective trusts.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Melissa
Zimmerman.
Sincerely,
Douglas Holtz-Eakin,
Director.
Enclosure.
H.R. 1533--A bill to amend the securities laws to permit church pension
plans to be invested in collective trusts
H.R. 1533 would allow churches to pool their pension funds
for the purposes of investment. Current law prohibits churches
from pooling pension funds for this purpose. CBO estimates that
implementing H.R. 1533 would have no effect on the federal
budget.
H.R. 1533 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would impose no costs on state, local, or tribal governments.
The CBO staff contact for this estimate is Melissa E.
Zimmerman. This estimate was approved by Peter H. Fontaine,
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.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds that the
Constitutional Authority of Congress to enact this legislation
is provided by Article 1, section 8, clause 1 (relating to the
defense and general welfare of the United States), and clause 3
(relating to the power to regulate foreign and interstate
commerce).
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 section
102(b)(3) of the Congressional Accountability Act.
Section-by-Section Analysis of the Legislation
Section 1. Conforming amendments for church plan partcipation in
collective funds
This section amends section 3(c)(11) of the Investment
Company Act of 1940, section 3(a)(2) of the Securities Act of
1933, and section 3(a)(12)(c) of the Securities Exchange Act of
1934 to permit church plan assets to be invested in collective
trust funds. These amendments to the Federal securities laws
permit church plan assets to be included in a collective trust
fund that also includes assets of trusts or governmental plans.
The Committee does not intend that this legislation be
construed as modifying the Internal Revenue Code requirement
that a church plan be maintained by a church or a convention or
an association of churches, and does not intend to modify the
securities law requirement that a collective trust fund must be
maintained by a bank or financial institution.
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 (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
INVESTMENT COMPANY ACT OF 1940
* * * * * * *
TITLE I--INVESTMENT COMPANIES
* * * * * * *
DEFINITION OF INVESTMENT COMPANY
Sec. 3. (a)(1) * * *
* * * * * * *
(c) Notwithstanding subsection (a), none of the following
persons is an investment company within the meaning of this
title:
(1) * * *
* * * * * * *
(11) Any employee's stock bonus, pension, or profit-
sharing trust which meets the requirements for
qualification under section 401 of the Internal Revenue
Code of 1986; or any governmental plan described in
section 3(a)(2)(C) of the Securities Act of 1933; or
any collective trust fund maintained by a bank
consisting solely of assets of [such trusts or
governmental plans, or both] one or more of such
trusts, government plans, or church plans, companies or
accounts that are excluded from the definition of an
investment company under paragraph (14) of this
subsection; or any separate account the assets of which
are derived solely from (A) contributions under pension
or profit-sharing plans which meet the requirements of
section 401 of the Internal Revenue Code of 1986 or the
requirements for deduction of the employer's
contribution under section 404(a)(2) of such Code, (B)
contributions under governmental plans in connection
with which interests, participations, or securities are
exempted from the registration provisions of section 5
of the Securities Act of 1933 by section 3(a)(2)(C) of
such Act, and (C) advances made by an insurance company
in connection with the operation of such separate
account.
* * * * * * *
----------
SECURITITES ACT OF 1933
TITLE I
* * * * * * *
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, [or] (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 clause (A), (B), or (C) 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, or (iii) which is a plan funded
by an annuity contract described in section 403(b) of
such Code. 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;
* * * * * * *
----------
SECURITIES EXCHANGE ACT OF 1934
TITLE I--REGULATION OF SECURITIES EXCHANGES
* * * * * * *
DEFINITIONS AND APPLICATION OF TITLE
Sec. 3. (a) When used in this title, unless the context
otherwise requires--
(1) * * *
* * * * * * *
(12)(A) * * *
* * * * * * *
(C) For purposes of subparagraph (A)(iv) of this
paragraph, the term ``qualified plan'' means (i) a
stock bonus, pension, or profit-sharing plan which
meets the requirements for qualification under section
401 of the Internal Revenue Code of 1954, (ii) an
annuity plan which meets the requirements for the
deduction of the employer's contribution under section
404(a)(2) of such Code, [or] (iii) 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 (iv) 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 clause (i), (ii), or (iii) of this
subparagraph which (I) covers employees some or all of
whom are employees within the meaning of section 401(c)
of such Code, or (II) is a plan funded by an annuity
contract described in section 403(b) of such Code.
* * * * * * *
REGISTRATION REQUIREMENTS FOR SECURITIES
Sec. 12. (a) * * *
* * * * * * *
(g)(1) * * *
(2) The provisions of this subsection shall not apply in
respect of--
(A) * * *
* * * * * * *
(H) any interest or participation in any collective
trust funds maintained by a bank or in a separate
account maintained by an insurance company which
interest or participation is issued in connection with
(i) a stock-bonus, pension, or profit-sharing plan
which meets the requirements for qualification under
section 401 of the Internal Revenue Code of 1954, [or]
(ii) an annuity plan which meets the requirements for
deduction of the employer's contribution under section
404(a)(2) of such Code, or (iii) 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.
* * * * * * *