Pension Choice and Security Act of 1996

Summary: Pension Choice and Security Act of 1996 - Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (IRC) to require the availability of a defined contribution plan option for participants in defined benefit plans. 
Amends ERISA to require timely investment by fiduciaries of pension plan contributions. 
Amends the IRC to increase the penalty for early distributions from pension plans.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Pension Choice and Security Act of 
1996''.

SEC. 2. AVAILABILITY OF DEFINED CONTRIBUTION PLAN OPTION FOR 
              PARTICIPANTS IN DEFINED BENEFIT PLANS.

    (a) Amendment to the Employee Retirement Income Security Act of 
1974.--Section 206 of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1056) is amended by adding at the end the following new 
subsection:
    ``(g) Availability of Defined Contribution Plan Option for 
Participants in Defined Benefit Plans.--
            ``(1) In general.--Each defined benefit plan to which an 
        employer makes contributions shall provide (in such form and 
        manner as may be provided in regulations prescribed jointly by 
        the Secretary and the Secretary of the Treasury) for an 
        opportunity for each participant employed by such employer to 
        elect, in lieu of coverage under the defined benefit plan and 
        before any election made by the employer under such plan 
        pursuant to subsection (c), coverage under a defined 
        contribution plan maintained in whole or in part by the 
        participant's employer. An employer making contributions to a 
        defined benefit plan shall maintain for his employees a defined 
        contribution plan to the extent necessary to provide for 
        coverage under such defined contribution plan pursuant to 
        elections under this subsection.
            ``(2) Required level of contributions.--The requirements of 
        paragraph (1) shall not be treated as met unless the defined 
        contribution plan with respect to which an election is made 
        under paragraph (1) provides for contributions (other than 
        employee contributions (if any)) at least equivalent to the 
        contributions (other than employee contributions (if any)) 
        provided for under the terms of the defined benefit plan.
            ``(3) Required election period.--The requirements of 
        paragraph (1) shall not be treated as met unless the defined 
        benefit plan provides that an election under paragraph (1) may 
        be made at any time during the 90-day period beginning with the 
        later of--
                    ``(A) the commencement of the first plan year to 
                which this subsection applies, or
                    ``(B) the commencement of the employee's service 
                under the plan.''.
    (b) Amendments to the Internal Revenue Code of 1986.--Subsection 
(a) of section 401 of the Internal Revenue Code of 1986 (relating to 
requirements for qualification) is amended by inserting after paragraph 
(34) the following new paragraph:
            ``(35) Availability of defined contribution plan option for 
        participants in defined benefit plans.--
                    ``(A) In general.--A trust forming a part of a 
                defined benefit plan to which an employer makes 
                contributions shall not constitute a qualified trust 
                under this section unless--
                            ``(i) the plan provides (in such form and 
                        manner as may be provided in regulations 
                        prescribed jointly by the Secretary and the 
                        Secretary of Labor) for an opportunity for each 
                        participant employed by such employer to elect, 
                        in lieu of coverage under the defined benefit 
                        plan and before any election made by the 
                        employer under such plan pursuant to section 
                        417, coverage under a defined contribution plan 
                        maintained in whole or in part by the 
                        participant's employer, and
                            ``(ii) the defined benefit plan provides 
                        that each employer making contributions to the 
                        plan maintains for his employees a defined 
                        contribution plan to the extent  necessary to 
provide for coverage under such defined contribution plan pursuant to 
elections under this paragraph.
                    ``(B) Required level of contributions.--The 
                requirements of subparagraph (A) shall not be treated 
                as met unless the defined contribution plan with 
                respect to which an election is made under subparagraph 
                (A) provides for contributions (other than employee 
                contributions (if any)) at least equivalent to the 
                contributions (other than employee contributions (if 
                any)) provided for under the terms of the defined 
                benefit plan.
                    ``(C) Required election period.--The requirements 
                of subparagraph (A) shall not be treated as met unless 
                the defined benefit plan provides that an election 
                under subparagraph (A) may be made at any time during 
                the 90-day period beginning with the later of--
                            ``(i) the commencement of the first plan 
                        year to which this paragraph applies, or
                            ``(ii) the commencement of the employee's 
                        service under the plan.''.
    (c) Effective Dates.--
            (1) General rule.--The amendments made by this section 
        shall apply to plan years beginning after December 31, 1996.
            (2) Special rule for collective bargaining agreements.--In 
        the case of a defined benefit plan maintained pursuant to one 
        or more collective bargaining agreements between employee 
        organizations and one or more employers ratified before the 
        date of the enactment of this Act, the amendments made by this 
        section shall not apply to plan years beginning before the 
        later of--
                    (A) the date on which the last of the collective 
                bargaining agreements relating to the plan terminates 
                (determined without regard to any extension thereof 
                agreed to after the date of the enactment of this Act), 
                or
                    (B) January 1, 1999.
        For purposes of subparagraph (A), any plan amendment made 
        pursuant to a collective bargaining agreement relating to the 
        plan which amends the plan solely to conform to any requirement 
        added by this section shall not be treated as a termination of 
        such collective bargaining agreement.

SEC. 3. TIMELY INVESTMENT OF PLAN CONTRIBUTIONS.

    (a) In General.--Section 404 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1104) is amended by adding at the end 
the following new subsection:
    ``(e) Any failure, by a person who is a fiduciary with respect to a 
pension plan and who has discretionary authority respecting investment 
of amounts contributed to the plan, to ensure that amounts contributed 
to the plan are invested, in accordance with the terms of the plan and 
this title, before 15 days after the calendar month in which such 
amounts are received by the plan, shall be treated as a breach of 
fiduciary duties under the plan.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply with respect to plan years beginning on December 31, 1996.

SEC. 4. INCREASE IN PENALTY FOR EARLY DISTRIBUTIONS FROM PENSION PLANS.

    (a) In General.--Paragraph (1) of section 72(t) of the Internal 
Revenue Code of 1986 (relating to imposition of additional tax) is 
amended by striking ``10 percent'' and all that follows and inserting 
``100 percent of the portion of such distribution which would (but for 
the following sentence) be includible in gross income. A distribution 
on which tax is imposed by the preceding sentence shall not be 
includible in gross income.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to distributions after December 31, 1996.