I

104TH CONGRESS

1ST SESSION H. R. 1048

To amend the Internal Revenue Code of 1986 and title I of the Employee

Retirement Income Security Act of 1974 with regard to pension integration, participation, and vesting requirements, to provide for division of

pension benefits upon divorce unless otherwise provided in qualified domestic relations orders, to provide for studies relating to cost-of-living

adjustments and pension portability, to clarify the continued availability,

under provisions governing domestic relations orders, of remedies relating

to matters treated in such orders entered before 1985, and to provide

for entitlement of divorced spouses under the Railroad Retirement Act

of 1974 independent of the actual entitlement of the employee.

IN THE HOUSE OF REPRESENTATIVES

FEBRUARY 24, 1995

Mrs. KENNELLY introduced the following bill; which was referred to the Committee on Ways and Means and, in addition, to the Committee on Economic and Educational Opportunities, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions

as fall within the jurisdiction of the committee concerned

A BILL

To amend the Internal Revenue Code of 1986 and title

I of the Employee Retirement Income Security Act of

1974 with regard to pension integration, participation,

and vesting requirements, to provide for division of pension benefits upon divorce unless otherwise provided in

qualified domestic relations orders, to provide for studies

relating to cost-of-living adjustments and pension portability, to clarify the continued availability, under provisions governing domestic relations orders, of remedies
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relating to matters treated in such orders entered before

1985, and to provide for entitlement of divorced spouses

under the Railroad Retirement Act of 1974 independent

of the actual entitlement of the employee.

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.

4 This Act may be cited as the ‘‘Pension Reform Act

5 of 1995’’.

6 SEC. 2. PENSION INTEGRATION RULES.

7 (a) APPLICABILITY OF NEW INTEGRATION RULES

8 EXTENDED TO ALL EXISTING ACCRUED BENEFITS.—

9 Notwithstanding subsection (c)(1) of section 1111 of the

10 Tax Reform Act of 1986 (relating to effective date of ap11 plication of nondiscrimination rules to integrated plans)

12 (100 Stat. 2440), effective for plan years beginning after

13 the date of the enactment of this Act, the amendments

14 made by subsection (a) of such section 1111 shall also

15 apply to benefits attributable to plan years beginning on

16 or before December 31, 1988.

17 (b) INTEGRATION DISALLOWED FOR SIMPLIFIED

18 EMPLOYEE PENSIONS.—

19 (1) IN GENERAL.—Subparagraph (D) of section

20 408(k)(3) of the Internal Revenue Code of 1986 (re21 lating to permitted disparity under rules limiting
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1 discrimination under simplified employee pensions)

2 is repealed.

3 (2) CONFORMING AMENDMENT.—Subparagraph

4 (C) of such section 408(k)(3) is amended by striking

5 ‘‘and except as provided in subparagraph (D),’’.

6 (3) EFFECTIVE DATE.—The amendments made

7 by this subsection shall apply with respect to taxable

8 years beginning on or after January 1, 1996.

9 (c) EVENTUAL REPEAL OF INTEGRATION RULES.—

10 Effective for plan years beginning on or after January 1,

11 2003—

12 (1) subparagraphs (C) and (D) of section

13 401(a)(5) of the Internal Revenue Code of 1986 (re14 lating to pension integration exceptions under non15 discrimination requirements for qualification) are re16 pealed, and subparagraph (E) of such section

17 401(a)(5) is redesignated as subparagraph (C); and

18 (2) subsection (l) of section 401 of such Code

19 (relating to nondiscriminatory coordination of de20 fined contribution plans with OASDI) is repealed.
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1 SEC. 3. APPLICATION OF MINIMUM COVERAGE REQUIRE2 MENTS WITH RESPECT TO SEPARATE LINES

3 OF BUSINESS.

4 (a) IN GENERAL.—Subsection (b) of section 410 of

5 the Internal Revenue Code of 1986 (relating to minimum

6 coverage requirements) is amended—

7 (1) in paragraph (1), by striking ‘‘A trust’’ and

8 inserting ‘‘In any case in which the employer with

9 respect to a plan is treated, under section 414(r), as

10 operating separate lines of business for a plan year,

11 a trust’’, and by inserting ‘‘for such plan year’’ after

12 ‘‘requirements’’; and

13 (2) by redesignating paragraphs (3) through

14 (6) as paragraphs (4) through (7), respectively and

15 by inserting after paragraph (2) the following new

16 paragraph:

17 ‘‘(3) SPECIAL RULE WHERE EMPLOYER OPER18 ATES SINGLE LINE OF BUSINESS.—In any case in

19 which the employer with respect to a plan is not

20 treated, under section 414(r), as operating separate

21 lines of business for a plan year, a trust shall not

22 constitute a qualified trust under section 401(a) un23 less such trust is designated by the employer as part

24 of a plan which benefits all employees of the

25 employer.’’.
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1 (b) LIMITATION ON LINE OF BUSINESS EXCEP2 TION.—Paragraph (6) of section 410(b) of such Code (as

3 redesignated by subsection (a)(2) of this section) is

4 amended by inserting ‘‘other than paragraph (1)(A)’’ after

5 ‘‘this subsection’’.

6 SEC. 4. ELIMINATION OF SPECIAL VESTING RULE FOR MUL7 TIEMPLOYER PLANS.

8 (a) INTERNAL REVENUE CODE AMENDMENT.—Para9 graph (2) of section 411(a) of the Internal Revenue Code

10 of 1986 (relating to minimum vesting standards) is

11 amended—

12 (1) by striking ‘‘subparagraph (A), (B), or (C)’’

13 and inserting ‘‘subparagraph (A) or (B)’’; and

14 (2) by striking subparagraph (C).

15 (b) ERISA AMENDMENT.—Paragraph (2) of section

16 203(a)(2) of the Employee Retirement Income Security

17 Act of 1974 (29 U.S.C. 1053(a)(2)) is amended—

18 (1) by striking ‘‘subparagraph (A), (B), or (C)’’

19 and inserting ‘‘subparagraph (A) or (B)’’; and

20 (2) by striking subparagraph (C).

21 SEC. 5. DIVISION OF PENSION BENEFITS UPON DIVORCE.

22 (a) AMENDMENTS TO THE INTERNAL REVENUE

23 CODE OF 1986.—
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1 (1) IN GENERAL.—Subsection (a) of section

2 401 of the Internal Revenue Code of 1986 (relating

3 to requirements for qualification) is amended—

4 (A) by inserting after paragraph (31) the

5 following new paragraph:

6 ‘‘(32) DIVISION OF PENSION BENEFITS UPON

7 DIVORCE.—

8 ‘‘(A) IN GENERAL.—In the case of a di9 vorce of a participant in a pension plan from a

10 spouse who is, immediately before the divorce,

11 a beneficiary under the plan, a trust forming a

12 part of such plan shall not constitute a quali13 fied trust under this section unless the plan

14 provides that at least 50 percent of the marital

15 share of the accrued benefit of the participant

16 under the plan ceases to be an accrued benefit

17 of such participant and becomes an accrued

18 benefit of such divorced spouse, determined and

19 payable upon the earlier of the retirement of

20 the participant, the participant’s death, or the

21 termination of the plan, except to the extent

22 that a qualified domestic relations order in con23 nection with such divorce provides otherwise.

24 ‘‘(B) LIMITATION.—Subparagraph (A)

25 shall not be construed—
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1 ‘‘(i) to require a plan to provide any

2 type or form of benefit, or any option, not

3 otherwise provided under the plan,

4 ‘‘(ii) to require the plan to provide in5 creased benefits (determined on the basis

6 of actuarial value),

7 ‘‘(iii) to require the payment of bene8 fits to the divorced spouse which are re9 quired to be paid to another individual in

10 accordance with this paragraph or pursu11 ant to a domestic relations order previously

12 determined to be a qualified domestic rela13 tions order, or

14 ‘‘(iv) to require payment of benefits to

15 the divorced spouse in the form of a quali16 fied joint and survivor annuity to the di17 vorced spouse and his or her subsequent

18 spouse.

19 ‘‘(C) DEFINITIONS.—For purposes of this

20 paragraph—

21 ‘‘(i) DOMESTIC RELATIONS ORDER;

22 QUALIFIED DOMESTIC RELATIONS

23 ORDER.—The terms ‘domestic relations

24 order’ and ‘qualified domestic relations
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1 order’ shall have the meanings provided in

2 section 414(p).

3 ‘‘(ii) MARITAL SHARE.—The term

4 ‘marital share’ means, in connection with

5 an accrued benefit under a pension plan,

6 the product derived by multiplying—

7 ‘‘(I) the actuarial present value

8 of the accrued benefit, by

9 ‘‘(II) a fraction, the numerator of

10 which is the period of time, during the

11 marriage between the spouse and the

12 participant in the plan, which con13 stitutes creditable service by the par14 ticipant under the plan, and the de15 nominator of which is the total period

16 of time which constitutes creditable

17 service by the participant under the

18 plan.

19 ‘‘(iii) QUALIFIED JOINT AND SURVI20 VOR ANNUITY.—The term ‘qualified joint

21 and survivor annuity’ has the meaning pro22 vided in section 417(b).

23 ‘‘(D) REGULATIONS.—In prescribing regu24 lations under this paragraph, the Secretary

25 shall consult with the Secretary of Labor.’’; and
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1 (B) in the last sentence, by striking ‘‘and

2 (20)’’ and inserting ‘‘(20), and (32)’’.

3 (2) CONFORMING AMENDMENTS.—

4 (A) Subparagraph (B) of section

5 401(a)(13) of such Code (relating to special

6 rules for domestic relations orders) is amended

7 by inserting ‘‘or if such creation, assignment, or

8 recognition pursuant to such order is necessary

9 for compliance with the requirements of para10 graph (32)’’ before the period.

11 (B) Subsection (p) of section 414 of such

12 Code (defining qualified domestic relations or13 ders) is amended—

14 (i) in paragraph (3)(C), by inserting

15 ‘‘or to a divorced spouse of the participant

16 in connection with a previously occurring

17 divorce as required under section

18 401(a)(32)’’ before the period; and

19 (ii) in paragraph (7)(C), by striking

20 ‘‘if there had been no order’’ and inserting

21 ‘‘in accordance with section 401(a)(32) as

22 if there had been no qualified domestic re23 lations order’’.

24 (b) AMENDMENTS TO THE EMPLOYEE RETIREMENT

25 INCOME SECURITY ACT OF 1974.—
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1 (1) IN GENERAL.—Section 206 of Employee

2 Retirement Income Security Act of 1974 (29 U.S.C.

3 1056) is amended by adding at the end the following

4 new subsection:

5 ‘‘(e)(1) In the case of a divorce of a participant in

6 a pension plan from a spouse who is, immediately before

7 the divorce, a beneficiary under the plan, the plan shall

8 provide that at least 50 percent of the marital share of

9 the accrued benefit of the participant under the plan

10 ceases to be an accrued benefit of such participant and

11 becomes an accrued benefit of such divorced spouse, deter12 mined and payable upon the earlier of the retirement of

13 the participant, the participant’s death, or the termination

14 of the plan, except to the extent that a qualified domestic

15 relations order in connection with such divorce provides

16 otherwise.

17 ‘‘(2) Paragraph (1) shall not be construed—

18 ‘‘(A) to require a plan to provide any type or

19 form of benefit, or any option, not otherwise pro20 vided under the plan,

21 ‘‘(B) to require the plan to provide increased

22 benefits (determined on the basis of actuarial value),

23 ‘‘(C) to require the payment of benefits to the

24 divorced spouse which are required to be paid to an25 other individual in accordance with this subsection
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1 or pursuant to a domestic relation order previously

2 determined to be a qualified domestic relations

3 order, or

4 ‘‘(D) to require payment of benefits to the di5 vorced spouse in the form of a joint and survivor an6 nuity to the divorced spouse and his or her subse7 quent spouse.

8 ‘‘(3) For purposes of this subsection—

9 ‘‘(A) The terms ‘domestic relations order’ and

10 ‘qualified domestic relations order’ shall have the

11 meanings provided in subsection (d)(3)(B).

12 ‘‘(B) The term ‘marital share’ means, in con13 nection with an accrued benefit under a pension

14 plan, the product derived by multiplying—

15 ‘‘(i) the actuarial present value of the ac16 crued benefit, by

17 ‘‘(ii) a fraction—

18 ‘‘(I) the numerator of which is the pe19 riod of time, during the marriage between

20 the spouse and the participant in the plan,

21 which constitutes creditable service by the

22 participant under the plan, and

23 ‘‘(II) the denominator of which is the

24 total period of time which constitutes cred-
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1 itable service by the participant under the

2 plan.

3 ‘‘(C) The term ‘qualified joint and survivor an4 nuity’ shall have the meaning provided in section

5 205(d).

6 ‘‘(4) In prescribing regulations under this subsection,

7 the Secretary shall consult with the Secretary of the

8 Treasury.’’.

9 (2) CONFORMING AMENDMENTS.—Section

10 206(d) of such Act (29 U.S.C. 1056(d)) is amend11 ed—

12 (A) in the first sentence of paragraph

13 (3)(A), by inserting ‘‘or if such creation, assign14 ment, or recognition pursuant to such order is

15 necessary for compliance with the requirements

16 of subsection (e)’’ before the period;

17 (B) in paragraph (3)(D)(iii), by inserting

18 ‘‘or to a divorced spouse of the participant in

19 connection with a previously occurring divorce

20 as required under subsection (e)’’ before the pe21 riod; and

22 (C) in paragraph (3)(H)(iii), by striking

23 ‘‘if there had been no order’’ and inserting ‘‘in

24 accordance with subsection (e) as if there had

25 been no qualified domestic relations order’’.
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1 SEC. 6. EFFECTIVE DATES.

2 (a) IN GENERAL.—Except as provided in subsection

3 (b), the amendments made by this Act, other than section

4 2, shall apply with respect to plan years beginning on or

5 after January 1, 1996, and the amendments made by sec6 tion 5 shall apply only with respect to divorces becoming

7 final in such plan years.

8 (b) SPECIAL RULE FOR COLLECTIVELY BARGAINED

9 PLANS.—In the case of a plan maintained pursuant to 1

10 or more collective bargaining agreements between em11 ployee representatives and 1 or more employers ratified

12 on or before the date of the enactment of this Act, sub13 section (a) shall be applied to benefits pursuant to, and

14 individuals covered by, any such agreement by substituting

15 for ‘‘January 1, 1996’’ the date of the commencement of

16 the first plan year beginning on or after the earlier of—

17 (1) the later of—

18 (A) January 1, 1996, or

19 (B) the date on which the last of such col20 lective bargaining agreements terminates (de21 termined without regard to any extension there22 of after the date of the enactment of this Act),

23 or

24 (2) January 1, 1999.

25 (c) PLAN AMENDMENTS.—If any amendment made

26 by this Act requires an amendment to any plan, such plan
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1 amendment shall not be required to be made before the

2 first plan year beginning on or after January 1, 1996, if—

3 (1) during the period after such amendment

4 made by this Act takes effect and before such first

5 plan year, the plan is operated in accordance with

6 the requirements of such amendment made by this

7 Act, and

8 (2) such plan amendment applies retroactively

9 to the period after such amendment made by this

10 Act takes effect and such first plan year.

11 A plan shall not be treated as failing to provide definitely

12 determinable benefits or contributions, or to be operated

13 in accordance with the provisions of the plan, merely be14 cause it operates in accordance with this subsection.

15 SEC. 7. CLARIFICATION OF CONTINUED AVAILABILITY OF

16 REMEDIES RELATING TO MATTERS TREATED

17 IN DOMESTIC RELATIONS ORDERS ENTERED

18 BEFORE 1985.

19 (a) IN GENERAL.—In any case in which—

20 (1) under a prior domestic relations order en21 tered before January 1, 1985, in an action for di22 vorce—

23 (A) the right of a spouse under a pension

24 plan to an accrued benefit under such plan was

25 not divided between spouses,
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1 (B) any right of a spouse with respect to

2 such an accrued benefit was waived without the

3 informed consent of such spouse, or

4 (C) the right of a spouse as a participant

5 under a pension plan to an accrued benefit

6 under such plan was divided so that the other

7 spouse received less than such other spouse’s

8 pro rata share of the accrued benefit under the

9 plan, or

10 (2) a court of competent jurisdiction determines

11 that any further action is appropriate with respect

12 to any matter to which a prior domestic relations

13 order entered before such date applies,

14 nothing in the provisions of section 104, 204, or 303 of

15 the Retirement Equity Act of 1984 (Public Law 98–397)

16 or the amendments made thereby shall be construed to

17 require or permit the treatment, for purposes of such pro18 visions, of a domestic relations order, which is entered on

19 or after the date of the enactment of this Act and which

20 supercedes, amends the terms of, or otherwise affects such

21 prior domestic relations order, as other than a qualified

22 domestic relations order solely because such prior domestic

23 relations order was entered before January 1, 1985.

24 (b) DEFINITIONS.—For purposes of this section—
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1 (1) IN GENERAL.—Terms used in this section

2 which are defined in section 3 of the Employee Re3 tirement Income Security Act of 1974 (29 U.S.C.

4 1002) shall have the meanings provided such terms

5 by such section.

6 (2) PRO RATA SHARE.—The term ‘‘pro rata

7 share’’ of a spouse means, in connection with an ac8 crued benefit under a pension plan, 50 percent of

9 the product derived by multiplying—

10 (A) the actuarial present value of the ac11 crued benefit, by

12 (B) a fraction—

13 (i) the numerator of which is the pe14 riod of time, during the marriage between

15 the spouse and the participant in the plan,

16 which constitutes creditable service by the

17 participant under the plan, and

18 (ii) the denominator of which is the

19 total period of time which constitutes cred20 itable service by the participant under the

21 plan.

22 (3) PLAN.—All pension plans in which a person

23 has been a participant shall be treated as one plan

24 with respect to such person.
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1 SEC. 8. ENTITLEMENT OF DIVORCED SPOUSES TO RAIL2 ROAD RETIREMENT ANNUITIES INDEPEND3 ENT OF ACTUAL ENTITLEMENT OF EM4 PLOYEE.

5 Section 2 of the Railroad Retirement Act of 1974 (45

6 U.S.C. 231a) is amended—

7 (1) in subsection (c)(4)(i), by striking ‘‘(A) is

8 entitled to an annuity under subsection (a)(1) and

9 (B)’’; and

10 (2) in subsection (e)(5), by striking ‘‘or di11 vorced wife’’ the second place it appears.

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