Pension Protection Act

[Guest Patrick Foley]

The church plan provisions in sections 865 to 867 of the Pension Protection Act took me by surprise. Can anyone satisfy my curiouslty as to the process by which they got into the legislation?

[Guest Danny Miller]

The self-annuitizaton provision was an issue of interest to one denomination. A few of the denominational plans (DB type) use an average denominational salary approach to insure that clergy serving in small parishes (and hence with low salaries) have more meaningful pensions. This created a technical 415(b) issue. The UBIT provision was of interest to a number of 403(b ) denominational benefit programs. I assume that the UBIT exception for section 401(a) qualified plans was thought to be the only one needed in the past, as 403(b) (1) annuities and 403(b)(7) custodial accounts are subject to their own specialized taxation rules. But, church 403(b)(9) retirement income account programs needed the fix.

Hope this helps.

P.S. These three provisions had been under consideration for at least a couple of years. The 415(b) fix was included in Portman-Cardin legislation, as far back as Portman-Cardin II, I believe.

[Guest Patrick Foley]

Thanks, Danny, that is very helpful.