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Church Plans, Automatic Contribution Arrangements, and the Consolidated Appropriations Act, 2016

Issue Title:

Church Plans, Automatic Contribution Arrangements, and the Consolidated Appropriations Act, 2016

Description:

The automatic enrollment provision of the Consolidated Appropriations Act, 2016 supersedes any state law that impedes the ability of a church plan to have an automatic contribution arrangement.

IRC Section and Treas. Regulation:

IRC 414(e) - Church Plans

IRC 410(d) - ERISA election

Resources (Court Cases, Chief Counsel Advice, Revenue Rulings, Internal Resources):

Consolidated Appropriations Act, 2016

Analysis:

Section 336(c) of the Consolidated Appropriations Act, 2016 (Act) which became law on December 18, 2015, allows church plans to have an automatic contribution arrangement. Section 336(c) of the Act supersedes any state law relating to wage, salary or payroll payment, collection, deduction, garnishment, assignment, or withholding that impedes the ability of a church plan to have an automatic enrollment feature.

The automatic enrollment provisions of the Pension Protection Act of 2006, which preempted state law, only applied to ERISA plans. Church plans are not subject to the Employee Retirement Income Security Act of 1974 (ERISA) requirements unless the church plan elects to be subject to ERISA. IRC 410(d) permits church plans to make an election to be covered by the ERISA requirements. The election is irrevocable and may be made only by the plan administrator and only in the manner provided in the regulations.

Many non-electing church plans have been unable to adopt an  automatic contribution arrangement because of state payroll deduction laws that are designed to protect employee wages from unauthorized employer deductions and/or access by creditors. This Act equalizes the availability of the automatic enrollment feature for church and conventional private-sector retirement plans by preempting state laws that directly or indirectly restrict automatic contribution arrangements for church retirement plans.

Issue Indicators or Audit Tips:

The effective date of section 336(c) of the Consolidated Appropriations Act, 2016 is the enactment date (12/18/2015).

Page Last Reviewed or Updated: 15-Nov-2016