I

104TH CONGRESS

1ST SESSION H. R. 2584

To amend the Internal Revenue Code of 1986 to provide for the establishment

of simple retirement accounts, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

NOVEMBER 2, 1995

Mr. PORTMAN (for himself and Mr. CARDIN) introduced the following bill;

which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

for the establishment of simple retirement accounts, 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. ESTABLISHMENT OF SAVINGS INCENTIVE

4 MATCH PLANS FOR EMPLOYEES OF SMALL

5 EMPLOYERS.

6 (a) IN GENERAL.—Section 408 of the Internal Reve7 nue Code of 1986 (relating to individual retirement ac8 counts) is amended by redesignating subsection (p) as

9 subsection (q) and by inserting after subsection (o) the

10 following new subsection:
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1 ‘‘(p) SIMPLE RETIREMENT ACCOUNTS.—

2 ‘‘(1) IN GENERAL.—For purposes of this title,

3 the term ‘simple retirement account’ means an indi4 vidual retirement plan—

5 ‘‘(A) with respect to which the require6 ments of paragraphs (3), (4), and (5) are met;

7 and

8 ‘‘(B) with respect to which the only con9 tributions allowed are contributions under a

10 qualified salary reduction arrangement.

11 ‘‘(2) QUALIFIED SALARY REDUCTION ARRANGE12 MENT.—

13 ‘‘(A) IN GENERAL.—For purposes of this

14 subsection, the term ‘qualified salary reduction

15 arrangement’ means a written arrangement of

16 an eligible employer under which—

17 ‘‘(i) an employee eligible to participate

18 in the arrangement may elect to have the

19 employer make payments—

20 ‘‘(I) as elective employer con21 tributions to a simple retirement ac22 count on behalf of the employee, or

23 ‘‘(II) to the employee directly in

24 cash,
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1 ‘‘(ii) the amount which an employee

2 may elect under clause (i) for any year is

3 required to be expressed as a percentage of

4 compensation and may not exceed a total

5 of $6,000 for any year,

6 ‘‘(iii) the employer is required to make

7 a matching contribution to the simple re8 tirement account for any year in an

9 amount equal to so much of the amount

10 the employee elects under clause (i)(I) as

11 does not exceed the applicable percentage

12 of compensation for the year, and

13 ‘‘(iv) no contributions may be made

14 other than contributions described in

15 clause (i) or (iii).

16 ‘‘(B) DEFINITIONS.—For purposes of this

17 subsection—

18 ‘‘(i) ELIGIBLE EMPLOYER.—The term

19 ‘eligible employer’ means an employer who

20 normally employs 100 or fewer employees

21 on any day during the year.

22 ‘‘(ii) APPLICABLE PERCENTAGE.—

23 ‘‘(I) IN GENERAL.—The term

24 ‘applicable percentage’ means 3 per25 cent.
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1 ‘‘(II) ELECTION OF LOWER PER2 CENTAGE.—An employer may elect to

3 apply a lower percentage (not less

4 than 1 percent) for any year for all

5 employees eligible to participate in the

6 plan for such year if the employer no7 tifies the employees of such lower per8 centage within a reasonable period of

9 time before the 60-day election period

10 for such year under paragraph (5)(C).

11 An employer may not elect a lower

12 percentage under this subclause for

13 any year if that election would result

14 in the applicable percentage being

15 lower than 3 percent in more than 2

16 of the years in the 5-year period end17 ing with such year.

18 ‘‘(III) SPECIAL RULE FOR YEARS

19 ARRANGEMENT NOT IN EFFECT.—If

20 any year in the 5-year period de21 scribed in subclause (II) is a year

22 prior to the first year for which any

23 qualified salary reduction arrange24 ment is in effect with respect to the

25 employer (or any predecessor), the
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1 employer shall be treated as if the

2 level of the employer matching con3 tribution was at 3 percent of com4 pensation for such year.

5 ‘‘(C) ARRANGEMENT MAY BE ONLY PLAN

6 OF EMPLOYER.—

7 ‘‘(i) IN GENERAL.—An arrangement

8 shall not be treated as a qualified salary

9 reduction arrangement for any year if the

10 employer (or any predecessor employer)

11 maintained a qualified plan with respect to

12 which contributions were made, or benefits

13 were accrued, for service in any year in the

14 period beginning with the year such ar15 rangement became effective and ending

16 with the year for which the determination

17 is being made.

18 ‘‘(ii) QUALIFIED PLAN.—For purposes

19 of this subparagraph, the term ‘qualified

20 plan’ means a plan, contract, pension, or

21 trust described in subparagraph (A) or (B)

22 of section 219(g)(5).

23 ‘‘(D) NO FEE OR PENALTY ON EMPLOY24 EE’S INITIAL INVESTMENT DETERMINATION.—

25 An arrangement shall not be treated as a quali-
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1 fied salary reduction arrangement unless it pro2 vides that no fee or penalty will be imposed on

3 an employee’s initial determination with respect

4 to the investment of any contribution.

5 ‘‘(E) COST-OF-LIVING ADJUSTMENT.—The

6 Secretary shall adjust the $6,000 amount under

7 subparagraph (A)(ii) at the same time and in

8 the same manner as under section 415(d), ex9 cept that the base period taken into account

10 shall be the calendar quarter ending September

11 30, 1995, and any increase under this subpara12 graph which is not a multiple of $500 shall be

13 rounded to the next lower multiple of $500.

14 ‘‘(3) VESTING REQUIREMENTS.—The require15 ments of this paragraph are met with respect to a

16 simple retirement account if the employee’s rights to

17 any contribution to the simple retirement account

18 are nonforfeitable. For purposes of this paragraph,

19 the rules similar to the rules of subsection (k)(4)

20 shall apply.

21 ‘‘(4) PARTICIPATION REQUIREMENTS.—

22 ‘‘(A) IN GENERAL.—The requirements of

23 this paragraph are met with respect to any sim24 ple retirement account for a year only if, under
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1 the qualified salary reduction arrangement, all

2 employees of the employer who—

3 ‘‘(i) received at least $5,000 in com4 pensation from the employer during each

5 of the 2 preceding years, and

6 ‘‘(ii) who are reasonably expected to

7 receive at least $5,000 in compensation

8 during the year,

9 are eligible to make the election under para10 graph (2)(A)(i).

11 ‘‘(B) EXCLUDABLE EMPLOYEES.—An em12 ployer may elect to exclude from the require13 ment under subparagraph (A) employees de14 scribed in section 410(b)(3).

15 ‘‘(5) ADMINISTRATIVE REQUIREMENTS.—The

16 requirements of this paragraph are met with respect

17 to any simplified retirement account if, under the

18 qualified salary reduction arrangement—

19 ‘‘(A) an employer must—

20 ‘‘(i) make the elective employer con21 tributions under paragraph (2)(A)(i) not

22 later than the close of the 30-day period

23 following the last day of the month with

24 respect to which the contributions are to

25 be made, and
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1 ‘‘(ii) make the matching contributions

2 under paragraph (2)(A)(iii) not later than

3 the date described in section

4 404(m)(2)(B),

5 ‘‘(B) an employee may elect to terminate

6 participation in such arrangement at any time

7 during the year, except that if an employee so

8 terminates, the arrangement may provide that

9 the employee may not elect to resume participa10 tion until the beginning of the next year, and

11 ‘‘(C) each employee eligible to participate

12 may elect, during the 60-day period before the

13 beginning of any year, to participate in the ar14 rangement, or to modify the amounts subject to

15 such arrangement, for such year.

16 ‘‘(6) DEFINITIONS.—For purposes of this sub17 section—

18 ‘‘(A) COMPENSATION.—

19 ‘‘(i) IN GENERAL.—The term ‘com20 pensation’ means amounts described in

21 paragraphs (3) and (8) of section 6051(a).

22 ‘‘(ii) SELF-EMPLOYED.—In the case

23 of an employee described in subparagraph

24 (B), compensation means net earnings

25 from self-employment determined under
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1 section 1402(a) without regard to any con2 tribution under this subsection.

3 ‘‘(B) EMPLOYEE.—The term ‘employee’ in4 cludes an employee as defined in section

5 401(c)(1).

6 ‘‘(C) YEAR.—The term ‘year’ means the

7 calendar year.’’.

8 (b) SIMPLE RETIREMENT ACCOUNTS NOT TREATED

9 AS PENSION PLANS.—Notwithstanding any other provi10 sion of law, a simplified retirement account or qualified

11 salary reduction arrangement under section 408(p) of the

12 Internal Revenue Code of 1986 shall not be treated as an

13 employee benefit plan or pension plan for purposes of the

14 Employee Retirement Income Security Act of 1974.

15 (c) TAX TREATMENT OF SIMPLE RETIREMENT AC16 COUNTS.—

17 (1) DEDUCTIBILITY OF CONTRIBUTIONS BY EM18 PLOYEES.—

19 (A) Section 219(b) of such Code (relating

20 to maximum amount of deduction) is amended

21 by adding at the end the following new para22 graph:

23 ‘‘(4) SPECIAL RULE FOR SIMPLE RETIREMENT

24 ACCOUNTS.—This section shall not apply with re-
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1 spect to any amount contributed to a simple retire2 ment account established under section 408(p).’’.

3 (B) Section 219(g)(5)(A) of such Code

4 (defining active participant) is amended by

5 striking ‘‘or’’ at the end of clause (iv) and by

6 adding at the end the following new clause:

7 ‘‘(vi) any simple retirement account

8 (within the meaning of section 408(p)),

9 or’’.

10 (2) DEDUCTIBILITY OF EMPLOYER CONTRIBU11 TIONS.—Section 404 of such Code (relating to de12 ductions for contributions of an employer to pension,

13 etc. plans) is amended by adding at the end the fol14 lowing new subsection:

15 ‘‘(m) SPECIAL RULES FOR SIMPLE RETIREMENT AC16 COUNTS.—

17 ‘‘(1) IN GENERAL.—Employer contributions to

18 a simple retirement account shall be treated as if

19 they are made to a plan subject to the requirements

20 of this section.

21 ‘‘(2) TIMING.—

22 ‘‘(A) DEDUCTION.—Contributions de23 scribed in paragraph (1) shall be deductible in

24 the taxable year of the employer with or within
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1 which the calendar year for which the contribu2 tions were made ends.

3 ‘‘(B) CONTRIBUTIONS AFTER END OF

4 YEAR.—For purposes of this subsection, con5 tributions shall be treated as made for a taxable

6 year if they are made on account of the taxable

7 year and are made not later than the time pre8 scribed by law for filing the return for the tax9 able year (including extensions thereof).’’.

10 (3) CONTRIBUTIONS AND DISTRIBUTIONS.—

11 (A) Section 402 of such Code (relating to

12 taxability of beneficiary of employees’ trust) is

13 amended by adding at the end the following

14 new subsection:

15 ‘‘(k) TREATMENT OF SIMPLE RETIREMENT AC16 COUNTS.—Rules similar to the rules of paragraphs (1)

17 and (3) of subsection (h) shall apply to contributions and

18 distributions with respect to a simple retirement account

19 under section 408(p).’’.

20 (B) Section 408(d)(3) of such Code is

21 amended by adding at the end the following

22 new subparagraph:

23 ‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—

24 This paragraph shall not apply to any amount

25 paid or distributed out of a simple retirement
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1 account (as defined in section 408(p)) unless it

2 is paid into another simple retirement ac3 count.’’.

4 (C) Clause (i) of section 457(c)(2)(B) of

5 such Code is amended by striking ‘‘section

6 402(h)(1)(B)’’ and inserting ‘‘section

7 402(h)(1)(B) or (k)’’.

8 (4) PENALTIES.—

9 (A) EARLY WITHDRAWALS.—Section 72(t)

10 of such Code (relating to additional tax in early

11 distributions) is amended by adding at the end

12 the following new paragraph:

13 ‘‘(6) SPECIAL RULES FOR SIMPLE RETIREMENT

14 ACCOUNTS.—In the case of any amount received

15 from a simple retirement account (within the mean16 ing of section 408(p)) during the 2-year period be17 ginning on the date such individual first participated

18 in any qualified salary reduction arrangement main19 tained by the individual’s employer under section

20 408(p)(2), paragraph (1) shall be applied by sub21 stituting ‘25 percent’ for ‘10 percent’.’’.

22 (B) FAILURE TO REPORT.—Section 6693

23 of such Code is amended by redesignating sub24 section (c) as subsection (d) and by inserting
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1 after subsection (b) the following new sub2 section:

3 ‘‘(c) PENALTIES RELATING TO SIMPLE RETIREMENT

4 ACCOUNTS.—

5 ‘‘(1) EMPLOYER PENALTIES.—An employer who

6 fails to provide 1 or more notices required by section

7 408(l)(2)(C) shall pay a penalty of $50 for each day

8 on which such failures continue.

9 ‘‘(2) TRUSTEE PENALTIES.—A trustee who

10 fails—

11 ‘‘(A) to provide 1 or more statements re12 quired by the last sentence of section 408(i)

13 shall pay a penalty of $50 for each day on

14 which such failures continue, or

15 ‘‘(B) to provide 1 or more summary de16 scriptions required by section 408(l)(2)(B) shall

17 pay a penalty of $50 for each day on which

18 such failures continue.

19 ‘‘(3) REASONABLE CAUSE EXCEPTION.—No

20 penalty shall be imposed under this subsection with

21 respect to any failure which the taxpayer shows was

22 due to reasonable cause.’’.

23 (5) REPORTING REQUIREMENTS.—
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1 (A)(i) Section 408(l) of such Code is

2 amended by adding at the end the following

3 new paragraph:

4 ‘‘(2) SIMPLE RETIREMENT ACCOUNTS.—

5 ‘‘(A) NO EMPLOYER REPORTS.—Except as

6 provided in this paragraph, no report shall be

7 required under this section by an employer

8 maintaining a qualified salary reduction ar9 rangement under subsection (p).

10 ‘‘(B) SUMMARY DESCRIPTION.—The trust11 ee of any simple retirement account established

12 pursuant to a qualified salary reduction ar13 rangement under subsection (p) shall provide to

14 the employer maintaining the arrangement,

15 each year a description containing the following

16 information:

17 ‘‘(i) The name and address of the em18 ployer and the trustee.

19 ‘‘(ii) The requirements for eligibility

20 for participation.

21 ‘‘(iii) The benefits provided with re22 spect to the arrangement.

23 ‘‘(iv) The time and method of making

24 elections with respect to the arrangement.
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1 ‘‘(v) The procedures for, and effects

2 of, withdrawals from the arrangement.

3 ‘‘(C) EMPLOYEE NOTIFICATION.—The em4 ployer shall notify each employee immediately

5 before the period for which an election de6 scribed in subsection (p)(5)(C) may be made of

7 the employee’s opportunity to make such elec8 tion. Such notice shall include a copy of the de9 scription described in subparagraph (B).’’.

10 (ii) Section 408(l) of such Code is amend11 ed by striking ‘‘An employer’’ and inserting—

12 ‘‘(1) IN GENERAL.—An employer’’.

13 (B) Section 408(i) of such Code is amend14 ed by adding at the end the following new flush

15 sentence:

16 ‘‘In the case of a simple retirement account under sub17 section (p), only one report under this subsection shall be

18 required to be submitted each calendar year to the Sec19 retary (at the time provided under paragraph (2)) but, in

20 addition to the report under this subsection, there shall

21 be furnished, within 30 days after each calendar year, to

22 the individual on whose behalf the account is maintained

23 a statement with respect to the account balance as of the

24 close of, and the account activity during, such calendar

25 year.’’.
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1 (6) EXEMPTION FROM TOP-HEAVY PLAN

2 RULES.—Section 416(g)(4) of such Code (relating to

3 special rules for top-heavy plans) is amended by

4 adding at the end the following new subparagraph:

5 ‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—

6 The term ‘top-heavy plan’ shall not include a

7 simple retirement account under section

8 408(p).’’.

9 (7) CONFORMING AMENDMENTS.—

10 (A) Section 280G(b)(6) of such Code is

11 amended by striking ‘‘or’’ at the end of sub12 paragraph (B), by striking the period at the

13 end of subparagraph (C) and inserting ‘‘, or’’

14 and by adding after subparagraph (C) the fol15 lowing new subparagraph:

16 ‘‘(D) a simple retirement account described

17 in section 408(p).’’.

18 (B) Section 402(g)(3) of such Code is

19 amended by striking ‘‘and’’ at the end of sub20 paragraph (B), by striking the period at the

21 end of subparagraph (C) and inserting ‘‘, and’’,

22 and by adding after subparagraph (C) the fol23 lowing new subparagraph:

24 ‘‘(D) any elective employer contribution

25 under section 408(p)(2)(A)(i).’’.
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1 (C) Subsections (b), (c), (m)(4)(B), and

2 (n)(3)(B) of section 414 of such Code are each

3 amended by inserting ‘‘408(p),’’ after

4 ‘‘408(k),’’.

5 (D) Section 4972(d)(1)(A) of such Code is

6 amended by striking ‘‘and’’ at the end of clause

7 (ii), by striking the period at the end of clause

8 (iii) and inserting ‘‘, and’’, and by adding after

9 clause (iii) the following new clause:

10 ‘‘(iv) any simple retirement account

11 (within the meaning of section 408(p)).’’.

12 (d) EFFECTIVE DATE.—The amendments made by

13 this section shall apply to taxable years beginning after

14 December 31, 1995.

15 SEC. 2. EXTENSION OF SIMPLE PLAN TO 401(k) ARRANGE16 MENTS.

17 (a) ALTERNATIVE METHOD OF SATISFYING SECTION

18 401(k) NONDISCRIMINATION TESTS.—Section 401(k) of

19 the Internal Revenue Code of 1986 (relating to cash or

20 deferred arrangements) is amended by adding at the end

21 the following new paragraph:

22 ‘‘(11) ADOPTION OF SIMPLE PLAN TO MEET

23 NONDISCRIMINATION TESTS.—

24 ‘‘(A) IN GENERAL.—A cash or deferred ar25 rangement maintained by an eligible employer
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1 shall be treated as meeting the requirements of

2 paragraph (3)(A)(ii) if such arrangement

3 meets—

4 ‘‘(i) the contribution requirements of

5 subparagraph (B),

6 ‘‘(ii) the exclusive benefit require7 ments of subparagraph (C), and

8 ‘‘(iii) the vesting requirements of sec9 tion 408(p)(3).

10 ‘‘(B) CONTRIBUTION REQUIREMENTS.—

11 The requirements of this subparagraph are met

12 if, under the arrangement—

13 ‘‘(i) an employee may elect to have

14 the employer make elective contributions

15 for the year on behalf of the employee to

16 a trust under the plan in an amount which

17 is expressed as a percentage of compensa18 tion of the employee but which in no event

19 exceeds $6,000,

20 ‘‘(ii) the employer is required to make

21 a matching contribution to the trust for

22 the year in an amount equal to so much of

23 the amount the employee elects under

24 clause (i) as does not exceed 3 percent of

25 compensation for the year, and
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1 ‘‘(iii) no other contributions may be

2 made other than contributions described in

3 clause (i) or (ii).

4 ‘‘(C) EXCLUSIVE BENEFIT.—The require5 ments of this subparagraph are met for any

6 year to which this paragraph applies if no con7 tributions were made, or benefits were accrued,

8 for services during such year under any quali9 fied plan of the employer on behalf of any em10 ployee eligible to participate in the cash or de11 ferred arrangement, other than contributions

12 described in subparagraph (B).

13 ‘‘(D) DEFINITIONS AND SPECIAL RULE.—

14 ‘‘(i) DEFINITIONS.—For purposes of

15 this paragraph, any term used in this

16 paragraph which is also used in section

17 408(p) shall have the meaning given such

18 term by such section.

19 ‘‘(ii) COORDINATION WITH TOP-HEAVY

20 RULES.—A plan meeting the requirements

21 of this paragraph for any year shall not be

22 treated as a top-heavy plan under section

23 416 for such year.’’.

24 (b) ALTERNATIVE METHODS OF SATISFYING SEC25 TION 401(m) NONDISCRIMINATION TESTS.—Section
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1 401(m) of such Code (relating to nondiscrimination test

2 for matching contributions and employee contributions) is

3 amended by redesignating paragraph (10) as paragraph

4 (11) and by adding after paragraph (9) the following new

5 paragraph:

6 ‘‘(10) ALTERNATIVE METHOD OF SATISFYING

7 TESTS.—A defined contribution plan shall be treated

8 as meeting the requirements of paragraph (2) with

9 respect to matching contributions if the plan—

10 ‘‘(A) meets the contribution requirements

11 of subparagraph (B) of subsection (k)(11),

12 ‘‘(B) meets the exclusive benefit require13 ments of subsection (k)(11)(C), and

14 ‘‘(C) meets the vesting requirements of

15 section 408(p)(3).’’.

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

17 this section shall apply to plan years beginning after De18 cember 31, 1995.

19 SEC. 3. CREDIT FOR PENSION PLAN START-UP COSTS OF

20 SMALL EMPLOYERS.

21 (a) ALLOWANCE OF CREDIT.—Section 38(b) of the

22 Internal Revenue Code of 1986 (defining current year

23 business credit) is amended by striking ‘‘plus’’ at the end

24 of paragraph (10), by striking the period at the end of
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1 paragraph (11), and inserting ‘‘, plus’’, and by adding at

2 the end the following new paragraph:

3 ‘‘(12) the small employer pension plan start-up

4 cost credit.’’.

5 (b) SMALL EMPLOYER PENSION PLAN START-UP

6 COST CREDIT.—Subpart D of part IV of subchapter A

7 of chapter 1 of such Code (relating to business related

8 credits), as amended by this Act is amended by adding

9 at the end the following new section:

10 ‘‘SEC. 45C. SMALL EMPLOYER PENSION PLAN START-UP

11 COST CREDIT.

12 ‘‘(a) AMOUNT OF CREDIT.—For purposes of section

13 38—

14 ‘‘(1) IN GENERAL.—The small employer pen15 sion plan start-up cost credit for any taxable year is

16 an amount equal to 50 percent of the qualified start17 up costs of an eligible employer in establishing a

18 qualified pension plan.

19 ‘‘(2) AGGREGATE LIMITATION.—The amount of

20 the credit under paragraph (1) for any taxable year

21 shall not exceed $500, reduced by the aggregate

22 amount determined under this section for all preced23 ing taxable years of the taxpayer.

24 ‘‘(b) QUALIFIED START-UP COSTS; QUALIFIED PEN25 SION PLAN.—For purposes of this section—
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1 ‘‘(1) QUALIFIED START-UP COSTS.—The term

2 ‘qualified start-up costs’ means any ordinary and

3 necessary expenses of an eligible employer which—

4 ‘‘(A) are paid or incurred in connection

5 with the establishment of a qualified pension

6 plan, and

7 ‘‘(B) are of a nonrecurring nature.

8 ‘‘(2) QUALIFIED PENSION PLAN.—The term

9 ‘qualified pension plan’ means—

10 ‘‘(A) a qualified salary reduction arrange11 ment described in section 408(p) (relating to

12 simple retirement accounts), or

13 ‘‘(B) an arrangement described in section

14 401(k)(11).

15 ‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this

16 section—

17 ‘‘(1) IN GENERAL.—The term ‘eligible em18 ployer’ means an employer which did not make any

19 contributions on behalf of any employee to—

20 ‘‘(A) a qualified pension plan,

21 ‘‘(B) a plan described in section 401(a)

22 which includes a trust exempt from tax under

23 section 501(a), or

24 ‘‘(C) a simplified employee pension (as de25 fined in section 408(k)),
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1 during the 2 taxable years immediately preceding

2 the taxable year.

3 ‘‘(2) PROFESSIONAL SERVICE EMPLOYERS EX4 CLUDED.—Such term shall not include an employer

5 substantially all of the activities of which involve the

6 performance of services in the fields of health, law,

7 engineering, architecture, accounting, actuarial

8 science, performing arts, financial services, or con9 sulting.

10 ‘‘(d) SPECIAL RULES.—For purposes of this sec11 tion—

12 ‘‘(1) AGGREGATION RULES.—All persons treat13 ed as a single employer under subsection (a) or (b)

14 of section 52 or subsection (n) or (o) of section 414

15 shall be treated as one person.

16 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No de17 duction shall be allowable under this chapter for any

18 qualified start-up costs for which a credit is allow19 able under subsection (a).’’.

20 (c) CONFORMING AMENDMENTS.—

21 (1) Section 39(d) of such Code is amended by

22 adding at the end the following new paragraph:

23 ‘‘(7) NO CARRYBACK OF PENSION CREDIT.—No

24 portion of the unused business credit for any taxable

25 year which is attributable to the small employer pen-
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1 sion plan start-up cost credit determined under sec2 tion 45C may be carried back to a taxable year end3 ing before the date of the enactment of section

4 45C.’’.

5 (2) The table of sections for subpart D of part

6 IV of subchapter A of chapter 1 of such Code is

7 amended by adding at the end the following new

8 item:

‘‘Sec. 45C. Small employer pension plan start-up cost credit.’’.

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

10 this section shall apply to costs incurred after the date

11 of the enactment of this Act in taxable years ending after

12 such date.

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