Senate Floor Speech
Senator Kay Bailey Hutchison
January 25, 2006 -- Page: S135

MRS. HUTCHISON. Mr. President, I rise today to introduce a bill to fix an unfortunate application of our current pension rules on church pension beneficiaries.

Church pensions are critically important compensation plans that help support over a million clergy members across the country in their retirement, particularly those who dedicated their careers to serving in economically disadvantaged congregations.

Some of these plans date back to the 18th Century, and they are designed to ensure that our pastors and lay staff who are often paid lower salaries have adequate resources during their retirement years.

Unfortunately, the Internal Revenue Code impedes the ability of church pensions to recognize these valuable contributions to society with provisions that negatively impact church plans while exempting other equally important plans.

For example, Section 415(b)(1)(B) of the Code limits benefits for a retired church employee to 100 percent of the participant's average compensation for his or her highest three years.

This limitation penalizes church employees because some church plans allow lower-paid employees to accrue benefits based on median salaries rather than their own, individual, lower compensation.

While the Code allows exceptions to this general limitation for governmental and multiemployer plans, it does not allow one for church plans.

The rationale for allowing an exception for governmental plans but not church plans cannot be reconciled when one acknowledges the situation in which most ministers find themselves when they retire.

For example, ministers often live in parsonages throughout their careers; and they are faced with acquiring housing for the first time when they retire.

Not having a significant asset in retirement, such as a house--an asset which could be used as collateral and security in time of need, leaves ministers vulnerable in their retirement years and justifies the need for including church pension beneficiaries in an exception to the general limitation.

The Code further punishes church pensions by requiring church plans to pay unrelated business income taxes on investments in leveraged real estate, while exempting the vast majority of retirement plans from this very same tax.

This unequal treatment is simply unfair, and it is time we correct it.

The legislation I am introducing today would rectify this unequal treatment by exempting church plans from the 415(b)(1)(B) limit and the unrelated business income tax.

I ask my colleagues to join me today in establishing parity for the beneficiaries of church pensions by supporting this necessary, long over-due fix to the Internal Revenue Code.