II

106TH CONGRESS

1ST SESSION S. 1357

To amend the Internal Revenue Code of 1986 to enhance the portability

of retirement benefits, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JULY 13 (legislative day, JULY 12), 1999

Mr. JEFFORDS introduced the following bill; which was read twice and

referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to enhance

the portability of retirement benefits, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Retirement Account Portability Act of 1999’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment

9 to, or repeal of, a section or other provision, the reference
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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986.

3 SEC. 2. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF

4 PLANS.

5 (a) ROLLOVERS FROM AND TO SECTION 457

6 PLANS.—

7 (1) ROLLOVERS FROM SECTION 457 PLANS.—

8 (A) IN GENERAL.—Section 457(e) (relat9 ing to other definitions and special rules) is

10 amended by adding at the end the following:

11 ‘‘(16) ROLLOVER AMOUNTS.—

12 ‘‘(A) GENERAL RULE.—In the case of an

13 eligible deferred compensation plan, if—

14 ‘‘(i) any portion of the balance to the

15 credit of an employee in such plan is paid

16 to such employee in an eligible rollover dis17 tribution (within the meaning of section

18 402(c)(4) without regard to subparagraph

19 (C) thereof),

20 ‘‘(ii) the employee transfers any por21 tion of the property such employee receives

22 in such distribution to an eligible retire23 ment plan described in section

24 402(c)(8)(B), and
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1 ‘‘(iii) in the case of a distribution of

2 property other than money, the amount so

3 transferred consists of the property distrib4 uted,

5 then such distribution (to the extent so trans6 ferred) shall not be includible in gross income

7 for the taxable year in which paid.

8 ‘‘(B) CERTAIN RULES MADE APPLICA9 BLE.—The rules of paragraphs (2) through (7)

10 (other than paragraph (4)(C)) and (9) of sec11 tion 402(c) and section 402(f) shall apply for

12 purposes of subparagraph (A).

13 ‘‘(C) REPORTING.—Rollovers under this

14 paragraph shall be reported to the Secretary in

15 the same manner as rollovers from qualified re16 tirement plans (as defined in section 4974(c)).’’

17 (B) DEFERRAL LIMIT DETERMINED WITH18 OUT REGARD TO ROLLOVER AMOUNTS.—Section

19 457(b)(2) (defining eligible deferred compensa20 tion plan) is amended by inserting ‘‘(other than

21 rollover amounts)’’ after ‘‘taxable year’’.

22 (C) DIRECT ROLLOVER.—Paragraph (1) of

23 section 457(d) is amended by striking ‘‘and’’ at

24 the end of subparagraph (A), by striking the

25 period at the end of subparagraph (B) and in-
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1 serting ‘‘, and’’, and by inserting after subpara2 graph (B) the following:

3 ‘‘(C) the plan meets requirements similar

4 to the requirements of section 401(a)(31).

5 Any amount transferred in a direct trustee-to-trust6 ee transfer in accordance with section 401(a)(31)

7 shall not be includible in gross income for the tax8 able year of transfer.’’

9 (D) WITHHOLDING.—

10 (i) Paragraph (12) of section 3401(a)

11 is amended by adding at the end the fol12 lowing:

13 ‘‘(E) under or to an eligible deferred com14 pensation plan which, at the time of such pay15 ment, is a plan described in section 457(b); or’’.

16 (ii) Paragraph (5) of section 3405(e)

17 is amended by adding at the end the fol18 lowing: ‘‘Such term shall include an eligible

19 deferred compensation plan described in

20 section 457(b).’’

21 (iii) Paragraph (3) of section 3405(c)

22 is amended to read as follows:

23 ‘‘(3) ELIGIBLE ROLLOVER DISTRIBUTION.—For

24 purposes of this subsection, the term ‘eligible roll-
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1 over distribution’ has the meaning given such term

2 by section 402(f)(2)(A).’’

3 (iv) LIABILITY FOR WITHHOLDING.—

4 Subparagraph (B) of section 3405(d)(2) is

5 amended by striking ‘‘or’’ at the end of

6 clause (ii), by striking the period at the

7 end of clause (iii) and inserting ‘‘, or’’, and

8 by adding at the end the following:

9 ‘(iv) section 457(b).’’

10 (2) ROLLOVERS TO SECTION 457 PLANS.—

11 (A) Section 402(c)(8)(B) (defining eligible

12 retirement plan) is amended by striking ‘‘and’’

13 at the end of clause (iii), by striking the period

14 at the end of clause (iv) and inserting ‘‘, and’’,

15 and by adding at the end the following:

16 ‘‘(v) an eligible deferred compensation

17 plan described in section 457(b) of an eli18 gible employer described in section

19 457(e)(1)(A).’’

20 (B) Paragraph (9) of section 402(c) is

21 amended by striking ‘‘except that’’ and all that

22 follows and inserting ‘‘except that only an ac23 count or annuity described in clause (i) or (ii)

24 of paragraph (8)(B) shall be treated as an eligi-
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1 ble retirement plan with respect to such dis2 tribution.’’

3 (C) Subsection (a) of section 457 (relating

4 to year of inclusion in gross income) is amended

5 by striking ‘‘or otherwise made available’’.

6 (3) MINIMUM DISTRIBUTIONS.—Paragraph (2)

7 of section 457(d) is amended to read as follows:

8 ‘‘(2) MINIMUM DISTRIBUTION REQUIRE9 MENTS.—A plan meets the distribution requirements

10 of this paragraph if the plan meets the requirements

11 of section 401(a)(9).’’

12 (4) CONFORMING AMENDMENT.—Paragraph (9)

13 of section 457(e) is amended to read as follows:

14 ‘‘(9) BENEFITS NOT TREATED AS FAILING TO

15 MEET DISTRIBUTION REQUIREMENTS OF SUB16 SECTION (d).—A plan shall not be treated as failing

17 to meet the distribution requirements of subsection

18 (d) by reason of a distribution of the total amount

19 payable to a participant under the plan if—

20 ‘‘(A) such amount does not exceed the dol21 lar limit under section 411(a)(11)(A), and

22 ‘‘(B) such amount may be distributed only

23 if—

24 ‘‘(i) no amount has been deferred

25 under the plan with respect to such partici-
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1 pant during the 2-year period ending on

2 the date of the distribution, and

3 ‘‘(ii) there has been no prior distribu4 tion under the plan to such participant to

5 which this paragraph applied.’’

6 (b) ALLOWANCE OF ROLLOVERS FROM AND TO

7 403(b) PLANS.—

8 (1) ROLLOVERS FROM SECTION 403(b)

9 PLANS.—Section 403(b)(8)(A)(ii) (relating to roll10 over amounts) is amended by striking ‘‘such dis11 tribution’’ and all that follows and inserting ‘‘such

12 distribution to an eligible retirement plan described

13 in section 402(c)(8)(B), and’’.

14 (2) ROLLOVERS TO SECTION 403(b) PLANS.—

15 Section 402(c)(8)(B) (defining eligible retirement

16 plan), as amended by subsection (a), is amended by

17 striking ‘‘and’’ at the end of clause (iv), by striking

18 the period at the end of clause (v) and inserting

19 ‘‘, and’’, and by adding at the end the following:

20 ‘‘(vi) an annuity contract described in

21 section 403(b).’’

22 (3) CONFORMING AMENDMENT.—Subparagraph

23 (B) of section 403(b)(8) is amended by striking

24 ‘‘Rules similar to the’’ and inserting ‘‘The’’.
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1 (c) EXPANDED EXPLANATION TO RECIPIENTS OF

2 ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section

3 402(f) (relating to written explanation to recipients of dis4 tributions eligible for rollover treatment) is amended by

5 striking ‘‘and’’ at the end of subparagraph (C), by striking

6 the period at the end of subparagraph (D) and inserting

7 ‘‘, and’’, and by adding at the end the following new sub8 paragraph:

9 ‘‘(E) of the provisions under which dis10 tributions from the eligible retirement plan re11 ceiving the distribution may be subject to re12 strictions and tax consequences which are dif13 ferent from those applicable to distributions

14 from the plan making such distribution.’’

15 (d) CONFORMING AMENDMENTS.—

16 (1) Section 72(o)(4) is amended by striking

17 ‘‘and 408(d)(3)’’ and inserting ‘‘403(b)(8),

18 408(d)(3), and 457(e)(16)’’.

19 (2) Section 219(d)(2) is amended by striking

20 ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or

21 457(e)(16)’’.

22 (3) Section 401(a)(31)(B) is amended by strik23 ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),

24 403(b)(8), and 457(e)(16)’’.
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1 (4) Subparagraph (A) of section 402(f)(2) is

2 amended by striking ‘‘or paragraph (4) of section

3 403(a)’’ and inserting ‘‘, paragraph (4) of section

4 403(a), subparagraph (A) of section 403(b)(8), or

5 subparagraph (A) of section 457(e)(16)’’.

6 (5) Paragraph (1) of section 402(f) is amended

7 by striking ‘‘from an eligible retirement plan’’.

8 (6) Subparagraphs (A) and (B) of section

9 402(f)(1) are amended by striking ‘‘another eligible

10 retirement plan’’ and inserting ‘‘an eligible retire11 ment plan’’.

12 (7) Subparagraph (B) of section 403(b)(8) is

13 amended by striking ‘‘shall apply for purposes of

14 subparagraph (A)’’ and inserting ‘‘and section

15 402(f) shall apply for purposes of subparagraph (A),

16 except that section 402(f) shall be applied to the

17 payor in lieu of the plan administrator’’.

18 (8) Subparagraph (B) of section 403(b)(8) is

19 amended by inserting ‘‘and (9)’’ after ‘‘through

20 (7)’’.

21 (9) Section 408(a)(1) is amended by striking

22 ‘‘or 403(b)(8)’’ and inserting ‘‘, 403(b)(8), or

23 457(e)(16)’’.

24 (10) Subparagraphs (A) and (B) of section

25 415(b)(2) are each amended by striking ‘‘and
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1 408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and

2 457(e)(16)’’.

3 (11) Section 415(c)(2) is amended by striking

4 ‘‘and 408(d)(3)’’ and inserting ‘‘408(d)(3), and

5 457(e)(16)’’.

6 (12) Section 4973(b)(1)(A) is amended by

7 striking ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or

8 457(e)(16)’’.

9 (e) EFFECTIVE DATE; SPECIAL RULE.—

10 (1) EFFECTIVE DATE.—The amendments made

11 by this section shall apply to distributions after De12 cember 31, 1999.

13 (2) SPECIAL RULE.—Notwithstanding any other

14 provision of law, subsections (h)(3) and (h)(5) of

15 section 1122 of the Tax Reform Act of 1986 shall

16 not apply to any distribution from an eligible retire17 ment plan described in clause (iii) or (iv) of section

18 402(c)(8)(B) of the Internal Revenue Code of 1986

19 on behalf of an individual if there was a rollover to

20 such plan on behalf of such individual which is per21 mitted solely by reason of any amendment made by

22 this section.
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1 SEC. 3. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE2 MENT PLANS.

3 (a) IN GENERAL.—Subparagraph (A) of section

4 408(d)(3) (relating to rollover amounts) is amended by

5 adding ‘‘or’’ at the end of clause (i), by striking clauses

6 (ii) and (iii), and by adding at the end the following:

7 ‘‘(ii) the entire amount received (in8 cluding money and any other property) is

9 paid into an eligible retirement plan for

10 the benefit of such individual not later

11 than the 60th day after the date on which

12 the individual receives the payment or dis13 tribution.

14 For purposes of clause (ii), the term ‘eligible re15 tirement plan’ means an eligible retirement plan

16 described in clause (iii), (iv), (v), or (vi) of sec17 tion 402(c)(8)(B).’’

18 (b) CONFORMING AMENDMENTS.—

19 (1) Paragraph (1) of section 403(b) is amended

20 by striking ‘‘section 408(d)(3)(A)(iii)’’ and inserting

21 ‘‘section 408(d)(3)(A)(ii)’’.

22 (2) Clause (i) of section 408(d)(3)(D) is amend23 ed by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i)

24 or (ii)’’.

25 (3) Subparagraph (G) of section 408(d)(3) is

26 amended to read as follows:
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1 ‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—In

2 the case of any payment or distribution out of

3 a simple retirement account (as defined in sub4 section (p)) to which section 72(t)(6) applies,

5 this paragraph shall not apply unless such pay6 ment or distribution is paid into another simple

7 retirement account.’’

8 (c) EFFECTIVE DATE; SPECIAL RULE.—

9 (1) EFFECTIVE DATE.—The amendments made

10 by this section shall apply to distributions after De11 cember 31, 1999.

12 (2) SPECIAL RULE.—Notwithstanding any other

13 provision of law, subsections (h)(3) and (h)(5) of

14 section 1122 of the Tax Reform Act of 1986 shall

15 not apply to any distribution from an eligible retire16 ment plan described in clause (iii) or (iv) of section

17 402(c)(8)(B) of the Internal Revenue Code of 1986

18 on behalf of an individual if there was a rollover to

19 such plan on behalf of such individual which is per20 mitted solely by reason of the amendments made by

21 this section.

22 SEC. 4. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS; HARD23 SHIP EXCEPTION.

24 (a) AFTER-TAX CONTRIBUTIONS.—
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1 (1) ROLLOVERS.—Subsection (c) of section 402

2 (relating to rules applicable to rollovers from exempt

3 trusts) (as amended by section 2) is amended by

4 striking paragraph (2) and redesignating paragraphs

5 (3) through (10) as paragraphs (2) through (9), re6 spectively.

7 (2) DIRECT TRANSFERS.—Paragraph (31) of

8 section 401(a) (relating to optional direct transfer of

9 eligible rollover distributions) is amended by striking

10 subparagraph (B) and redesignating subparagraphs

11 (C) and (D) as subparagraphs (B) and (C), respec12 tively.

13 (3) ANNUITIES.—Subparagraph (B) of section

14 408(d)(3) (relating to rollover contributions) is

15 amended by striking ‘‘which was not includible in his

16 gross income because of the application of this para17 graph’’ and inserting ‘‘to which this paragraph ap18 plied’’.

19 (4) ELIGIBLE RETIREMENT PLAN.—Paragraph

20 (7)(B) of section 402(c) (as redesignated by sub21 section (a)(1) and as amended by section 2) is

22 amended—

23 (A) by striking ‘‘The term’’ and inserting

24 ‘‘Except as provided in this subparagraph, the

25 term’’, and
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1 (B) by adding at the end the following:

2 ‘‘Arrangements described in clauses (iii), (iv)

3 (v), and (vi) shall not be treated as eligible re4 tirement plans for purposes of receiving a roll5 over contribution of an eligible rollover distribu6 tion to the extent that such eligible rollover dis7 tribution is not includible in gross income (de8 termined without regard to paragraph (1)).’’

9 (5) TAXATION OF DISTRIBUTIONS.—Paragraph

10 (2) of section 408(d) is amended—

11 (A) by striking ‘‘For purposes’’ and insert12 ing the following:

13 ‘‘(A) IN GENERAL.—Except as provided in

14 this paragraph, for purposes’’,

15 (B) by striking ‘‘(A) all’’ and inserting ‘‘(i)

16 all’’;

17 (C) by striking ‘‘(B) all’’ and inserting

18 ‘‘(ii) all’’;

19 (D) by striking ‘‘(C) the’’ and inserting

20 ‘‘(iii) the’’,

21 (E) by striking ‘‘subparagraph (C)’’ and

22 inserting ‘‘clause (iii)’’, and

23 (F) by inserting at the end the following:

24 ‘‘(B) APPLICATION OF SECTION 72.—For

25 purposes of applying section 72, if—
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1 ‘‘(i) a distribution is made from an in2 dividual retirement plan, and

3 ‘‘(ii) a rollover contribution described

4 in paragraph (3) is made to an eligible re5 tirement plan described in section

6 402(c)(7)(B)(iii), (iv), (v), or (vi) with re7 spect to all or part of such distribution,

8 the includible amount in the individual’s indi9 vidual retirement plans shall be reduced by the

10 amount described in subparagraph (C). As of

11 the close of the calendar year in which the tax12 able year begins, the reduction of all amounts

13 described in subparagraph (C)(i) shall be ap14 plied prior to the computations described in

15 subparagraph (A)(iii). The amount of any dis16 tribution with respect to which there is a roll17 over contribution described in clause (ii) shall

18 not be treated as a distribution for purposes of

19 subparagraph (A).

20 ‘‘(C) AMOUNT DESCRIBED.—The amount

21 described in this subparagraph is the sum of—

22 ‘‘(i) the amount of the rollover con23 tribution described in subparagraph

24 (B)(ii), and
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1 ‘‘(ii) in the case of any portion of the

2 distribution with respect to which there is

3 not a rollover contribution described in

4 paragraph (3), the amount of such portion

5 that is included in gross income under sec6 tion 72.

7 ‘‘(D) INCLUDIBLE AMOUNT.—For purposes

8 of this paragraph, the term ‘includible amount’

9 shall mean the amount that is not investment

10 in the contract (as defined in section 72).’’

11 (6) TRANSFERS TO IRAS.—Subparagraph (C) of

12 section 402(c)(5) (as redesignated by subsection

13 (a)(1)) is amended by inserting after ‘‘other than

14 money’’ the following: ‘‘or where the amount of the

15 distribution exceeds the amount of the rollover con16 tribution’’.

17 (b) HARDSHIP EXCEPTION TO 60-DAY RULE.—

18 (1) PLAN ROLLOVERS.—Paragraph (2) of sec19 tion 402(c) (as so redesignated) is amended to read

20 as follows:

21 ‘‘(2) TRANSFER MUST BE MADE WITHIN 60

22 DAYS OF RECEIPT.—

23 ‘‘(A) IN GENERAL.—Except as provided in

24 subparagraph (B), paragraph (1) shall not

25 apply to any transfer of a distribution made
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1 after the 60th day following the day on which

2 the distributee received the property distrib3 uted.

4 ‘‘(B) HARDSHIP EXCEPTION.—The Sec5 retary may waive the 60-day requirement under

6 subparagraph (A) where the failure to waive

7 such requirement would be against equity or

8 good conscience, including casualty, disaster, or

9 other events beyond the reasonable control of

10 the individual subject to such requirement.’’

11 (2) IRA ROLLOVERS.—Paragraph (3) of section

12 408(d) (relating to rollover contributions) is amend13 ed by adding at the end the following new subpara14 graph:

15 ‘‘(H) WAIVER OF 60-DAY REQUIREMENT.—

16 The Secretary may waive the 60-day require17 ment under subparagraphs (A) and (D) where

18 the failure to waive such requirement would be

19 against equity or good conscience, including

20 casualty, disaster, or other events beyond the

21 reasonable control of the individual subject to

22 such requirement.’’

23 (c) CONFORMING AMENDMENTS.—
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1 (1) Paragraph (4) of section 402(c) (as redesig2 nated by subsection (a)(1)) is amended by striking

3 ‘‘(8)(B)’’ and inserting ‘‘(7)(B)’’.

4 (2) Subparagraph (B) of section 403(a)(4) is

5 amended by striking ‘‘(2) through (7)’’ and inserting

6 ‘‘(2) through (6)’’.

7 (3) Section 403(b)(8)(A)(ii) (as amended by

8 section 2) is amended by striking ‘‘section

9 402(c)(8)(B)’’ and inserting ‘‘section 402(c)(7)(B)’’.

10 (4) Subparagraph (B) of section 403(b)(8) (as

11 amended by section 2) is amended by striking ‘‘(2)

12 through (7) and (9) of section 402(c)’’ and inserting

13 ‘‘(2) through (6) and (8) of section 402(c)’’.

14 (5) Subparagraph (A) of section 408(d)(3) (as

15 amended by section 3) is amended by striking

16 ‘‘402(c)(8)’’ and inserting ‘‘402(c)(7)’’.

17 (6) Paragraph (16) of section 457(e) (as added

18 by section 2) is amended—

19 (A) in subparagraph (A)(i) by striking

20 ‘‘402(c)(4)’’ and inserting ‘‘402(c)(3)’’,

21 (B) in subparagraph (A)(ii) by striking

22 ‘‘402(c)(8)(B)’’ and inserting ‘‘402(c)(7)(B)’’,

23 and

24 (C) in subparagraph (B) by striking ‘‘para25 graphs (2) through (7) (other than paragraph
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1 (4)(C)) and (9) of section 402(c)’’ and inserting

2 ‘‘paragraphs (2) through (6) (other than para3 graph (3)(C)) and (8) of section 402(c)’’.

4 (d) EFFECTIVE DATE.—

5 (1) IN GENERAL.—Except as provided by para6 graph (2), the amendments made by this section

7 shall apply to distributions made after December 31,

8 1999.

9 (2) HARDSHIP EXCEPTION.—The amendments

10 made by subsection (b) shall apply to 60-day periods

11 ending after the date of the enactment of this Act.

12 SEC. 5. EXTENSION OF MISSING PARTICIPANTS PROGRAM

13 TO MULTIEMPLOYER PLANS.

14 (a) IN GENERAL.—Section 4050 of the Employee Re15 tirement Income Security Act of 1974 (29 U.S.C. 1350)

16 is amended by redesignating subsection (c) as subsection

17 (d) and by inserting after subsection (b) the following new

18 subsection:

19 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation

20 shall prescribe rules similar to the rules in subsection (a)

21 for multiemployer plans covered by this title that termi22 nate under section 4041A.’’

23 (b) CONFORMING AMENDMENT.—Section 206(f) of

24 the Employee Retirement Income Security Act of 1974
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1 (29 U.S.C. 1056(f)) is amended by striking ‘‘the plan shall

2 provide that,’’.

3 (c) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to distributions made after final

5 regulations implementing subsection (c) of section 4050

6 of the Employee Retirement Income Security Act of 1974

7 (as added by subsection (a)) are prescribed.

8 SEC. 6. RATIONALIZATION OF RESTRICTIONS ON DISTRIBU9 TIONS FROM DEFINED CONTRIBUTION

10 PLANS.

11 (a) DISTRIBUTIONS PERMITTED ON SEVERANCE

12 FROM EMPLOYMENT.—

13 (1) 401(k) PLANS.—Section 401(k)(2)(B)(i)(I)

14 (relating to qualified cash or deferred arrangements)

15 is amended by striking ‘‘separation from service’’

16 and inserting ‘‘severance from employment’’.

17 (2) 403(b) CONTRACTS.—

18 (A) Clause (ii) of section 403(b)(7)(A) is

19 amended by striking ‘‘separates from service’’

20 and inserting ‘‘severs from employment’’.

21 (B) Paragraph (11) of section 403(b) is

22 amended—

23 (i) by striking ‘‘SEPARATION FROM

24 SERVICE’’ in the heading and inserting

25 ‘‘SEVERANCE FROM EMPLOYMENT’’, and
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1 (ii) by striking ‘‘separates from serv2 ice’’ and inserting ‘‘severs from employ3 ment’’.

4 (3) 457 PLANS.—Clause (ii) of section

5 457(d)(1)(A) is amended by striking ‘‘is separated

6 from service’’ and inserting ‘‘has a severance from

7 employment’’.

8 (b) BUSINESS SALE REQUIREMENTS DELETED.—

9 (1) IN GENERAL.—Section 401(k)(2)(B)(i)(II)

10 (relating to qualified cash or deferred arrangements)

11 is amended by striking ‘‘an event’’ and inserting ‘‘a

12 plan termination’’.

13 (2) CONFORMING AMENDMENTS.—Section

14 401(k)(10) is amended—

15 (A) by striking subparagraph (A) and in16 serting the following:

17 ‘‘(A) IN GENERAL.—A plan termination is

18 described in this paragraph if the termination

19 of the plan does not involve the establishment

20 or maintenance of another defined contribution

21 plan (other than an employee stock ownership

22 plan as defined in section 4975(e)(7)).’’,

23 (B) in subparagraph (B)—

24 (i) by striking ‘‘An event’’ and insert25 ing ‘‘A termination’’, and
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1 (ii) by striking ‘‘the event’’ and insert2 ing ‘‘the termination’’,

3 (C) by striking subparagraph (C), and

4 (D) by striking ‘‘OR DISPOSITION OF AS5 SETS OR SUBSIDIARY’’ in the heading.

6 (c) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to distributions after December 31,

8 1999.

9 SEC. 7. TRANSFEREE DEFINED CONTRIBUTION PLAN NEED

10 NOT HAVE SAME DISTRIBUTION OPTIONS AS

11 TRANSFEROR DEFINED CONTRIBUTION

12 PLAN.

13 (a) IN GENERAL.—Section 411(d)(6) (relating to ac14 crued benefit not to be decreased by amendment) is

15 amended by adding at the end the following new subpara16 graph:

17 ‘‘(D) PLAN TRANSFERS.—A defined con18 tribution plan (in this subparagraph referred to

19 as the ‘transferee plan’) shall not be treated as

20 failing to meet the requirements of this para21 graph merely because the transferee plan does

22 not provide some or all of the forms of distribu23 tion previously available under another defined

24 contribution plan (in this subparagraph referred

25 to as the ‘transferor plan’) to the extent that—
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1 ‘‘(i) the forms of distribution pre2 viously available under the transferor plan

3 applied to the account of a participant or

4 beneficiary under the transferor plan that

5 was transferred from the transferor plan to

6 the transferee plan pursuant to a direct

7 transfer rather than pursuant to a dis8 tribution from the transferor plan,

9 ‘‘(ii) the terms of both the transferor

10 plan and the transferee plan authorize the

11 transfer described in clause (i),

12 ‘‘(iii) the transfer described in clause

13 (i) was made pursuant to a voluntary elec14 tion by the participant or beneficiary

15 whose account was transferred to the

16 transferee plan,

17 ‘‘(iv) the election described in clause

18 (iii) was made after the participant or ben19 eficiary received a notice describing the

20 consequences of making the election,

21 ‘‘(v) if the transferor plan provides for

22 an annuity as the normal form of distribu23 tion under the plan in accordance with sec24 tion 417, the transfer is made with the

25 consent of the participant’s spouse (if
24

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1 any), and such consent meets requirements

2 similar to the requirements imposed by

3 section 417(a)(2), and

4 ‘‘(vi) the transferee plan allows the

5 participant or beneficiary described in

6 clause (iii) to receive any distribution to

7 which the participant or beneficiary is enti8 tled under transferee plan in the form of

9 a single sum distribution.’’

10 (b) AMENDMENT TO ERISA.—Section 204(g) of the

11 Employee Retirement Income Security Act of 1974 (29

12 U.S.C. 1054(g)) is amended by adding at the end the fol13 lowing new paragraph:

14 ‘‘(4) A defined contribution plan (in this paragraph

15 referred to as the ‘transferee plan’) shall not be treated

16 as failing to meet the requirements of this subsection

17 merely because the transferee plan does not provide some

18 or all of the forms of distribution previously available

19 under another defined contribution plan (in this para20 graph referred to as the ‘transferor plan’) to the extent

21 that—

22 ‘‘(A) the forms of distribution previously avail23 able under the transferor plan applied to the account

24 of a participant or beneficiary under the transferor

25 plan that was transferred from the transferor plan
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•S 1357 IS

1 to the transferee plan pursuant to a direct transfer

2 rather than pursuant to a distribution from the

3 transferor plan,

4 ‘‘(B) the terms of both the transferor plan and

5 the transferee plan authorize the transfer described

6 in subparagraph (A),

7 ‘‘(C) the transfer described in subparagraph

8 (A) was made pursuant to a voluntary election by

9 the participant or beneficiary whose account was

10 transferred to the transferee plan,

11 ‘‘(D) the election described in subparagraph (C)

12 was made after the participant or beneficiary re13 ceived a notice describing the consequences of mak14 ing the election,

15 ‘‘(E) if the transferor plan provides for an an16 nuity as the normal form of distribution under the

17 plan in accordance with section 205, the transfer is

18 made with the consent of the participant’s spouse (if

19 any), and such consent meets requirements similar

20 to the requirements imposed by section 205(c)(2),

21 and

22 ‘‘(F) the transferee plan allows the participant

23 or beneficiary described in subparagraph (C) to re24 ceive any distribution to which the participant or
26

•S 1357 IS

1 beneficiary is entitled under transferee plan in the

2 form of a single sum distribution.’’

3 (b) EFFECTIVE DATE.—The amendments made by

4 this section shall apply to transfers after December 31,

5 1999.

6 SEC. 8. EMPLOYERS MAY DISREGARD ROLLOVERS FOR

7 PURPOSES OF CASH-OUT AMOUNTS.

8 (a) AMENDMENTS TO 1986 CODE.—

9 (1) Section 411(a)(11) (relating to restrictions

10 on certain mandatory distributions) is amended by

11 adding at the end the following:

12 ‘‘(D) SPECIAL RULE FOR ROLLOVER CON13 TRIBUTIONS.—A plan shall not fail to meet the

14 requirements of this paragraph if, under the

15 terms of the plan, the present value of the non16 forfeitable accrued benefit is determined with17 out regard to that portion of such benefit which

18 is attributable to rollover contributions (and

19 earnings allocable thereto). For purposes of this

20 subparagraph, the term ‘rollover contributions’

21 means any rollover contribution under sections

22 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),

23 and 457(e)(16).’’

24 (2) Clause (i) of section 457(e)(9)(A) is amend25 ed by striking ‘‘such amount’’ and inserting ‘‘the
27

•S 1357 IS

1 portion of such amount which is not attributable to

2 rollover contributions (as defined in section

3 411(a)(11)(D))’’.

4 (b) AMENDMENT TO ERISA.—Section 203(e) of the

5 Employee Retirement Income Security Act of 1974 (29

6 U.S.C. 1053(e)) is amended by adding at the end the fol7 lowing:

8 ‘‘(4) A plan shall not fail to meet the requirements

9 of this subsection if, under the terms of the plan, the

10 present value of the nonforfeitable accrued benefit is de11 termined without regard to that portion of such benefit

12 which is attributable to rollover contributions (and earn13 ings allocable thereto). For purposes of this paragraph,

14 the term ‘rollover contributions’ means any rollover con15 tribution under sections 402(c), 403(a)(4), 403(b)(8),

16 408(d)(3)(A)(ii), and 457(e)(16) of the Internal Revenue

17 Code of 1986.’’

18 (c) EFFECTIVE DATE.—The amendments made by

19 this section shall apply to distributions after December 31,

20 1999.

21 SEC. 9. PURCHASE OF SERVICE CREDIT IN GOVERN22 MENTAL DEFINED BENEFIT PLANS.

23 (a) 403(b) PLANS.—Subsection (b) of section 403 is

24 amended by adding at the end the following new para25 graph:
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•S 1357 IS

1 ‘‘(13) TRUSTEE-TO-TRUSTEE TRANSFERS TO

2 PURCHASE PERMISSIVE SERVICE CREDIT.—No

3 amount shall be includible in gross income by reason

4 of a direct trustee-to-trustee transfer to a defined

5 benefit governmental plan (as defined in section

6 414(d)) if such transfer is—

7 ‘‘(A) for the purchase of permissive service

8 credit (as defined in section 415(n)(3)(A))

9 under such plan, or

10 ‘‘(B) a repayment to which section 415

11 does not apply by reason of subsection (k)(3)

12 thereof.’’

13 (b) 457 PLANS.—

14 (1) Subsection (e) of section 457 is amended by

15 adding at the end the following new paragraph:

16 ‘‘(17) TRUSTEE-TO-TRUSTEE TRANSFERS TO

17 PURCHASE PERMISSIVE SERVICE CREDIT.—No

18 amount shall be includible in gross income by reason

19 of a direct trustee-to-trustee transfer to a defined

20 benefit governmental plan (as defined in section

21 414(d)) if such transfer is—

22 ‘‘(A) for the purchase of permissive service

23 credit (as defined in section 415(n)(3)(A))

24 under such plan, or
29

•S 1357 IS

1 ‘‘(B) a repayment to which section 415

2 does not apply by reason of subsection (k)(3)

3 thereof.’’

4 (2) Section 457(b)(2), as amended by section 2,

5 is amended by striking ‘‘(other than rollover

6 amounts)’’ and inserting ‘‘(other than rollover

7 amounts and amounts received in a transfer referred

8 to in subsection (e)(17))’’.

9 (c) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to trustee-to-trustee transfers after

11 December 31, 1999.

12 SEC. 10. PROVISIONS RELATING TO PLAN AMENDMENTS.

13 (a) IN GENERAL.—If this section applies to any plan

14 or contract amendment—

15 (1) such plan or contract shall be treated as

16 being operated in accordance with the terms of the

17 plan during the period described in subsection

18 (b)(2)(A), and

19 (2) such plan shall not fail to meet the require20 ments of section 411(d)(6) of the Internal Revenue

21 Code of 1986 or section 204(g) of the Employee Re22 tirement Income Security Act of 1974 by reason of

23 such amendment.

24 (b) AMENDMENTS TO WHICH SECTION APPLIES.—
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•S 1357 IS

1 (1) IN GENERAL.—This section shall apply to

2 any amendment to any plan or annuity contract

3 which is made—

4 (A) pursuant to any amendment made by

5 this Act or pursuant to any guidance issued by

6 the Secretary of the Treasury (or the Sec7 retary’s delegate) under any such amendment,

8 and

9 (B) on or before the last day of the first

10 plan year beginning on or after January 1,

11 2002.

12 In the case of a governmental plan (as defined in

13 section 414(d) of the Internal Revenue Code of

14 1986), this paragraph shall be applied by sub15 stituting ‘‘2004’’ for ‘‘2002’’.

16 (2) CONDITIONS.—This section shall not apply

17 to any amendment unless—

18 (A) during the period—

19 (i) beginning on the date the legisla20 tive amendment or guidance described in

21 paragraph (1)(A) takes effect (or in the

22 case of a plan or contract amendment not

23 required by such legislative amendment or

24 guidance, the effective date specified by the

25 plan), and
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•S 1357 IS

1 (ii) ending on the date described in

2 paragraph (1)(B) (or, if earlier, the date

3 the plan or contract amendment is adopt4 ed),

5 the plan or contract is operated as if such plan

6 or contract amendment were in effect, and

7 (B) such plan or contract amendment ap8 plies retroactively for such period.

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