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[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3520 Introduced in House (IH)]

104th CONGRESS
  2d Session
                                H. R. 3520

            To provide for retirement savings and security.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                              May 23, 1996

Mr. Gephardt (for himself, Mr. Bonior, Mr. Bentsen, Mr. Gejdenson, Mr. 
   Pomeroy, Mr. Sawyer, Mr. Fazio of California, Mrs. Kennelly, Mr. 
Dingell, Mr. Gibbons, Mr. Clay, Mr. LaFalce, Mr. Oberstar, Mr. Durbin, 
 Mr. Johnson of South Dakota, Mr. Kennedy of Massachusetts, Mr. Stark, 
Mr. Matsui, Mr. Coyne, Mr. Levin, Mr. McDermott, Mr. Kleczka, Mr. Lewis 
 of Georgia, Mr. Neal of Massachusetts, Mr. Miller of California, Mr. 
   Williams, Mr. Andrews, Mr. Gene Green of Texas, Ms. Woolsey, Mr. 
  Fattah, Ms. DeLauro, Mr. Murtha, Mr. Obey, Mr. Frost, Mr. Brown of 
   California, Mr. Yates, Mr. Gonzalez, Mr. Studds, Mr. Markey, Mr. 
 Rahall, Mr. Vento, Mr. Evans, Ms. Kaptur, Mr. Spratt, Mr. Torres, Mr. 
    Towns, Mr. Wise, Mr. Kanjorski, Mr. Thornton, Mr. Costello, Ms. 
    Slaughter, Mrs. Lowey, Mr. Serrano, Mr. Olver, Mr. Filner, Mr. 
 Gutierrez, Ms. Harman, Mr. Hastings of Florida, Mr. Holden, Mrs. Meek 
  of Florida, Mr. Scott, Mr. Stupak, Mrs. Thurman, Ms. Velazquez, Mr. 
  Wynn, Mr. Baldacci, Ms. Lofgren, Mr. Faleomavaega, and Mr. Sanders) 
 introduced the following bill; which was referred to the Committee on 
   Ways and Means, and in addition to the Committees on Economic and 
    Educational Opportunities, Government Reform and Oversight, and 
  Transportation and Infrastructure, 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 provide for retirement savings and security.

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

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Retirement Savings 
and Security Act''.
    (b) Table of Contents.--

Sec. 1. Short title; table of contents.
                      TITLE I--REVENUE PROVISIONS

Sec. 1100. Amendment of 1986 Code.
        Subtitle A--Expanded Pension Coverage and Simplification

            Chapter 1--The NEST and Other Coverage Expansion

Sec. 1101. Establishment of national employee savings trusts for 
                            employees of small employers.
Sec. 1102. Tax-exempt organizations eligible under section 401(k).
Sec. 1103. Nondiscrimination rules for qualified cash or deferred 
                            arrangements and matching contributions.
Sec. 1104. Repeal of family aggregation.
Sec. 1105. Definition of highly compensated employees.
Sec. 1106. Repeal of limitation in case of defined benefit plan and 
                            defined contribution plan for same 
                            employee.
Sec. 1107. Contributions on behalf of disabled employees.
Sec. 1108. Plans covering self-employed individuals.
Sec. 1109. Trust requirement for deferred compensation plans of State 
                            and local governments.
Sec. 1110. Treatment of certain disability benefits received by former 
                            police officers or firefighters.
               Chapter 2--Simplification and Cost Savings

Sec. 1201. Treatment of governmental and multiemployer plans under 
                            section 415 and treatment of excess benefit 
                            plans.
Sec. 1202. Definition of compensation for section 415 purposes.
Sec. 1203. Assumptions for adjusting certain benefits of defined 
                            benefit plans for early retirees.
Sec. 1204. Treatment of deferred compensation plans of State and local 
                            governments and tax-exempt organizations.
Sec. 1205. No required distributions for active employees.
Sec. 1206. Simplified method for taxing annuity distributions under 
                            certain employer plans.
Sec. 1207. Repeal of 5-year income averaging for lump-sum 
                            distributions.
Sec. 1208. Elimination of half-year requirements.
Sec. 1209. Distributions under rural cooperative plans.
Sec. 1210. Modification of additional participation requirements.
Sec. 1211. Uniform retirement age.
Sec. 1212. Treatment of leased employees.
Sec. 1213. Full funding limitation for multiemployer plans.
Sec. 1214. Elimination of partial termination rules for multiemployer 
                            plans.
Sec. 1215. Elective deferrals under section 403(b).
Sec. 1216. Uniform penalty provisions to apply to certain pension 
                            reporting requirements.
Sec. 1217. Tax on prohibited transactions.
Sec. 1218. Date for adoption of plan amendments.
    Subtitle B--Expanded Individual Retirement Accounts to Increase 
                        Coverage and Portability

                Chaptesubchapter a--ira deductionentives
Sec. 1301. Increase in income limitations.
Sec. 1302. Inflation adjustment for deductible amount and income 
                            limitations.
Sec. 1303. Coordination of IRA deduction limit with elective deferral 
               subchapter b--nondeductible tax-free iras
Sec. 1311. Establishment of nondeductible tax-free individual 
                            retirement accounts.
                Chapter 2--Distributions and Investments

Sec. 1321. Distributions from IRAs may be used without additional tax 
                            to purchase first homes, to pay higher 
                            education or financially devastating 
                            medical expenses, or by the unemployed.
Sec. 1322. Contributions must be held at least 5 years in certain 
                            cases.
Sec. 1323. Investments in qualified State prepaid tuition programs.
              Chapter 3--Termination of Certain Provisions

Sec. 1331. Termination of certain provisions
          Subtitle C--Other Expansions of Pension Portability

Sec. 1401. Alternative nondiscrimination rules for certain plans that 
                            provide for early participation.
Sec. 1402. Treatment of certain veterans' reemployment rights.
Sec. 1403. Elimination of special vesting rule for multiemployer plans.
                   Subtitle D--Conforming Amendments

Sec. 1501. Conforming amendment relating to missing participants.
Sec. 1502. Conforming amendments relating to ERISA enforcement.
                       TITLE II--ERISA PROVISIONS

Sec. 2000. Amendment of ERISA.
        Subtitle A--Expanded Pension Coverage and Simplification

Sec. 2001. Reporting and fiduciary requirements relating to NESTs.
Sec. 2002. Elimination of requirement for plan descriptions and the 
                            filing requirement for summary plan 
                            descriptions and descriptions of material 
                            modifications to a plan; technical 
                            corrections.
Sec. 2003. Conforming amendment relating to investment in qualified 
                            State prepaid tuition programs.
                        Subtitle B--Portability

Sec. 2011. Missing participants.
Sec. 2012. Elimination of special vesting rule for multiemployer plans.
Sec. 2013. Treatment of loans during military service.
                     Subtitle C--Enhanced Security

                     Chapter 1--General Provisions

Sec. 2021. Multiemployer plan benefits guaranteed.
Sec. 2022. Reversion report.
Sec. 2023. Full funding limitation for multiemployer plans.
Sec. 2024. Prohibited transactions.
Sec. 2025. Substantial owner benefits.
                      Chapter 2--ERISA Enforcement

Sec. 2031. Short title.
Sec. 2032. Repeal of limited scope audit.
Sec. 2033. Reporting and enforcement requirements for employee benefit 
                            plans.
Sec. 2034. Additional requirements for qualified public accountants.
Sec. 2035. Clarification of fiduciary penalties.
TITLE III--ADDITIONAL RETIREMENT PARTICIPATION AND PAYMENT OPTIONS FOR 
                           FEDERAL EMPLOYEES

Sec. 3001. Immediate participation in the Thrift Savings Plan for 
                            Federal employees.
Sec. 3002. Deferred annuities for surviving spouses of Federal 
                            employees.
Sec. 3003. Payment of lump-sum credit for former spouses of Federal 
                            employees.
 TITLE IV--CONFORMING RAILROAD RETIREMENT BENEFITS WITH SOCIAL SECURITY

Sec. 4001. Child's annuity.
Sec. 4002. Entitlement to spousal annuities.
Sec. 4003. Continued payment to survivors of waived lump sum benefits 
                            in amounts equivalent to social security 
                            survivor benefits.
Sec. 4004. Lump sum death benefits equivalent to social security 
                            benefits.
Sec. 4005. Payment of benefits equivalent to social security benefits 
                            with respect to service for which certain 
                            railroad retirement annuities are not 
                            payable.
Sec. 4006. Effective date.

                      TITLE I--REVENUE PROVISIONS

SEC. 1100. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Internal Revenue Code of 
1986.

        Subtitle A--Expanded Pension Coverage and Simplification

            CHAPTER 1--THE NEST AND OTHER COVERAGE EXPANSION

SEC. 1101. ESTABLISHMENT OF NATIONAL EMPLOYEE SAVINGS TRUSTS FOR 
              EMPLOYEES OF SMALL EMPLOYERS.

    (a) In General.--Section 408 (relating to individual retirement 
accounts) is amended by redesignating subsection (p) as subsection (q) 
and by inserting after subsection (o) the following new subsection:
    ``(p) NESTs.--
            ``(1) In general.--For purposes of this title, the term 
        `NEST' means an individual retirement account or annuity 
        established under a written plan of an eligible employer--
                    ``(A) which meets the requirements of paragraphs 
                (4), (5), (6), (7), and (8), and
                    ``(B) under which contributions are made to NESTs 
                solely in accordance with a qualified formula.
            ``(2) Qualified formula.--For purposes of this subsection--
                    ``(A) In general.--The term `qualified formula' 
                means a contribution formula which meets the 
                requirements for--
                            ``(i) a 3-percent formula under 
                        subparagraph (B), or
                            ``(ii) a matching-contribution formula 
                        under subparagraph (C).
                    ``(B) 3-percent formula.--
                            ``(i) Nonelective contributions.--The 
                        requirements of the 3-percent formula are met 
                        if, pursuant to the terms of the plan, the 
                        employer makes nonelective contributions of 3 
                        percent of compensation for each eligible 
                        employee who has at least $5,000 of 
                        compensation from the employer for the year.
                            ``(ii) Elective contributions.--A plan 
                        shall not fail to meet the requirements of this 
                        subparagraph merely because, pursuant to the 
                        terms of the plan, an eligible employee may 
                        elect to have the employer make payments--
                                    ``(I) as elective contributions to 
                                the NEST on behalf of the employee, or
                                    ``(II) to the employee directly in 
                                cash.
                    ``(C) Matching-contribution formula.--The 
                requirements of the matching-contribution formula are 
                met if, pursuant to the terms of the plan--
                            ``(i) the employer makes nonelective 
                        contributions of 1 percent of compensation for 
                        each eligible employee who has at least $5,000 
                        of compensation from the employer for the year,
                            ``(ii) an eligible employee may elect to 
                        have the employer make payments--
                                    ``(I) as elective contributions to 
                                the NEST on behalf of the employee, or
                                    ``(II) to the employee directly in 
                                cash, and
                            ``(iii) the employer makes matching 
                        contributions on behalf of each eligible 
                        employee in an amount equal to--
                                    ``(I) 100 percent of the elective 
                                contributions of the employee to the 
                                extent such elective contributions do 
                                not exceed 3 percent of the employee's 
                                compensation, and
                                    ``(II) a uniform percentage (which 
                                is at least 50 percent but not more 
                                than 100 percent) of the elective 
                                contributions of the employee to the 
                                extent that such elective contributions 
                                exceed 3 percent but do not exceed 5 
                                percent of the employee's compensation.
                    ``(D) Discretionary contributions.--A plan shall 
                not be treated as failing to meet the requirements of 
                this paragraph merely because, pursuant to the terms of 
                the plan, an employer makes nonelective contributions 
                under subparagraph (B)(i) or (C)(i) in excess of 3 
                percent or 1 percent of compensation, respectively, but 
                only if all such contributions bear a uniform 
                relationship to the compensation of each eligible 
                employee and do not exceed 5 percent of compensation 
                for any eligible employee.
                    ``(E) Limitation on elective contributions.--
                Elective contributions to a NEST under subparagraph 
                (B)(ii) or (C)(ii) shall not be treated as made 
                pursuant to a qualified formula if such contributions 
                on behalf of any employee for a year exceed the greater 
                of $5,000 or one-half of the limitation applicable for 
                the year to elective deferrals under section 402(g).
                    ``(F) Compensation limit.--Contributions to a NEST 
                shall not be treated as made pursuant to a qualified 
                formula if the annual compensation taken into account 
                for any employee under the formula exceeds the 
                limitation imposed by section 401(a)(17).
                    ``(G) Lower compensation threshold permitted.--A 
                plan shall not be treated as failing to meet the 
                requirements of this paragraph merely because, pursuant 
                to the terms of the plan, an employer makes nonelective 
                contributions under subparagraph (B)(i) or (C)(i) to 
                each eligible employee who has compensation from the 
                employer for the year in excess of a uniform 
                compensation threshold which is less than $5,000.
                    ``(H) For purposes of this paragraph--
                            ``(i) In general.--The term `compensation' 
                        has the meaning given such term by section 
                        414(q)(3).
                            ``(ii) Self-employed individuals.--
                        Notwithstanding clause (i), in the case of an 
                        employee within the meaning of section 
                        401(c)(1), compensation under section 414(q)(3) 
                        shall be determined without regard to paragraph 
                        (2)(A) (v) and (vi) of section 401(c).
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Eligible employer.--
                            ``(i) In general.--The term `eligible 
                        employer' means, with respect to any year, an 
                        employer which had no more than 100 employees 
                        who received at least $5,000 of compensation 
                        from the employer for the preceding year.
                            ``(ii) 2-year grace period.--An eligible 
                        employer who establishes and maintains a plan 
                        under this subsection for 1 or more years and 
                        who fails to be an eligible employer for any 
                        subsequent year shall be treated as an eligible 
                        employer for the 2 years following the last 
                        year the employer was an eligible employer. If 
                        such failure is due to any acquisition, 
                        disposition, or similar transaction involving 
                        an eligible employer, the preceding sentence 
                        shall apply only in accordance with rules 
                        similar to the rules of section 
                        410(b)(6)(C)(i).
                    ``(B) Employee.--The term `employee' includes an 
                employee as defined in section 401(c)(1).
                    ``(C) Eligible employee.--
                            ``(i) In general.--The term `eligible 
                        employee' means, with respect to any year, any 
                        employee who, prior to such year--
                                    ``(I) completed 2 consecutive years 
                                of service with the employer, and
                                    ``(II) attained 21 years of age.
                        A plan may provide a uniform shorter period of 
                        service or lower age to apply in lieu of those 
                        under the preceding sentence.
                            ``(ii) Excludable employees.--An employer 
                        may elect not to treat employees described in 
                        section 410(b)(3) as eligible employees.
                            ``(iii) Year of service.--For purposes of 
                        this paragraph, an employee shall be treated as 
                        completing a year of service for each year for 
                        which the employee receives at least $5,000 of 
                        compensation from the employer.
                    ``(D) Compensation.--For purposes of this 
                paragraph, the term `compensation' means wages within 
                the meaning of section 3401(a) and all other payments 
                of compensation to an employee by the employer with 
                respect to which the employer is required to furnish 
                the employee a written statement under sections 
                6041(d), 6051(a)(3), and 6052. In the case of an 
                employee (within the meaning of section 401(c)(1)), 
                such term means earned income within the meaning of 
                section 401(c)(2).
                    ``(E) Year.--The term `year' means the calendar 
                year.
            ``(4) Vesting requirements.--A plan meets the requirements 
        of this paragraph only if the employee's rights to the 
        employee's account balance under the NEST are nonforfeitable. 
        Except as provided in paragraph (5), the rules of subsection 
        (k)(4) shall apply for purposes of this paragraph.
            ``(5) Two-year holding period.--A plan meets the 
        requirements of this paragraph only if the plan, and each NEST 
        under the plan, prohibits the withdrawal of contributions made 
        for a year (and any earnings allocable thereto) during the 2-
        year period beginning on the first day of such year.
            ``(6) Time contributions required to be made.--
                    ``(A) Elective contributions.--A plan meets the 
                requirements of this paragraph only if, under the terms 
                of the plan, the employer must make all elective 
                contributions to a NEST not later than the date on 
                which such contributions would otherwise be required to 
                be made under title I of the Employee Retirement Income 
                Security Act of 1974 if such contributions were 
                elective contributions under a qualified cash or 
                deferred arrangement under section 401(k).
                    ``(B) Nonelective and matching contributions.--
                            ``(i) In general.--A plan meets the 
                        requirements of this paragraph only if, under 
                        the terms of the plan, the employer must make 
                        all nonelective and matching contributions not 
                        later than the close of the 45-day period 
                        following the last day of the calendar quarter 
for which the contributions are to be made.
                            ``(ii) Compensation exception.--If an 
                        employer does not make nonelective 
                        contributions to a NEST for employees whose 
                        compensation from the employer for the year is 
                        less than the threshold amount of $5,000 (or 
                        such lower amount permitted under paragraph 
                        (2)(G)), then clause (i) shall apply with 
                        respect to nonelective contributions only for 
                        employees who received at least the threshold 
                        amount of compensation as of the end of the 
                        applicable quarter. In the case of an employee 
                        who reaches the threshold amount in a calendar 
                        quarter other than the first calendar quarter, 
                        the employer shall make nonelective 
                        contributions for that calendar quarter and all 
                        preceding calendar quarters not later than the 
                        date prescribed for that quarter.
                    ``(C) Contributions after year-end.--For purposes 
                of this subsection, a contribution on account of a year 
                which is made within 45 days (or within a period 
                prescribed by the Secretary) after the close of the 
                year shall be deemed to have been made on the last day 
                of such year.
            ``(7) Employee elections.--A plan meets the requirements of 
        this paragraph only if, under the terms of the plan--
                    ``(A) an employee may elect to terminate elective 
                contributions (described in subparagraphs (B)(ii) and 
                (C)(ii) of paragraph (2)) at any time during the year, 
                except that, if the employer so elects, the employee 
                may not resume participation until the first day of the 
                next year (or such earlier time as provided by the 
                plan), and
                    ``(B) each employee eligible to participate--
                            ``(i) may elect, during the 60-day period 
                        before the beginning of any year, to make 
                        elective contributions, or to modify the amount 
                        of elective contributions, for such year, and
                            ``(ii) may elect, within 30 days of 
                        becoming eligible to participate in the plan, 
                        to make elective contributions for the year.
            ``(8) Other plans of the employer.--
                    ``(A) Prohibition on other plans with elective or 
                matching contributions.--A plan shall not meet the 
                requirements of this paragraph for a year if the 
                employer maintaining the plan maintains--
                            ``(i) a plan providing for elective 
                        deferrals described in section 402(g)(3), or
                            ``(ii) any plan described in section 401(a) 
                        which provides for matching contributions 
                        (within the meaning of section 401(m)(4)(A)).
                For purposes of this subparagraph, an employer shall 
                not be treated as maintaining a plan for a year if, 
                under the plan, no contributions or benefit accruals 
                may occur for such year.
                    ``(B) Coordination with other plans.--
                            ``(i) Other plans disregarded.--If an 
                        employer maintaining a plan to which this 
                        subsection applies also maintains 1 or more 
                        plans described in section 401(a), 403(a), or 
                        408(k) (other than a plan described in 
                        subparagraph (A)), the determination of whether 
                        such plan satisfies the requirements of this 
                        subsection shall be made without regard to such 
                        other plans.
                            ``(ii) NEST disregarded.--Except as 
                        provided in sections 404(m) and 415(a)(2), a 
                        plan to which this subsection applies shall not 
                        be taken into account in applying this title to 
                        any other plan described in clause (i).
            ``(9) Employer options.--
                    ``(A) Use of designated financial institution.--A 
                plan shall not be treated as failing to satisfy the 
                requirements of this subsection or any other provision 
                of this title merely because the employer makes all 
                contributions to the individual retirement accounts or 
                annuities of a designated trustee or issuer. The 
                preceding sentence shall not apply unless each NEST 
                plan participant is notified in writing (either 
                separately or as part of the notice under subsection 
                (l)(2)(C)) that the participant's balance may be 
                transferred without cost or penalty to another 
                individual account or annuity in accordance with 
                section 408(d)(3)(G).
                    ``(B) Suspension of plan.--Except as provided by 
                the Secretary, a plan shall not be treated as failing 
to meet the requirements of this subsection if, under the plan, the 
employer may suspend all elective, matching, and nonelective 
contributions under the plan after notifying eligible employees of such 
suspension in writing at least 30 days in advance. Such suspension 
shall apply to contributions with respect to compensation earned after 
the effective date of the suspension. Only 1 suspension under this 
subparagraph may take effect during any year.
            ``(10) Model form to be provided.--The Secretary shall 
        issue a model form that may be used by an eligible employer to 
        establish a plan that satisfies all requirements of this 
        subsection.''
    (b) Tax Treatment of NESTs.--
            (1) Deductibility of contributions.--
                    (A) Section 219(b) (relating to maximum amount of 
                deduction) is amended by adding at the end the 
                following new paragraph:
            ``(4) Special rule for nests.--This section shall not apply 
        with respect to any amount contributed to a NEST established 
        under section 408(p).''
                    (B) Section 219(g)(5)(A) (defining active 
                participant) is amended by striking ``or'' at the end 
                of clause (iv) and by adding at the end the following 
                new clause:
                            ``(vi) any NEST (with the meaning of 
                        section 408(p)), or''.
                    (C) Section 404 (relating to deductions for 
                contributions of an employer) is amended by adding at 
                the end the following new subsection:
    ``(m) Special Rules for NESTs.--
            ``(1) In general.--Employer contributions to a NEST (within 
        the meaning of section 408(p)) shall be treated as if they are 
        made to a plan subject to the requirements of this section. 
        Employer deductions for such contributions shall be subject to 
        the following limitations:
                    ``(A) Contributions made for a calendar year are 
                deductible for the taxable year of the employer with or 
                within which the calendar year ends.
                    ``(B) Contributions shall be treated for purposes 
                of this subsection as if they were made for a calendar 
                year if such contributions are made on account of such 
                calendar year and are made not later than the time 
                prescribed in section 408(p)(6).
                    ``(C) The amount deductible in a taxable year for a 
                NEST shall not exceed the amount contributed pursuant 
                to a qualified formula (within the meaning of section 
                408(p)(2)), and shall be deductible without regard to 
                the amount contributed under any other plan subject to 
                this section.
            ``(2) Effect on stock bonus and profit-sharing trust.--For 
        any taxable year for which the employer has a deduction under 
        paragraph (1), the otherwise applicable limitations in 
        subsection (a)(3)(A) with respect to a stock bonus or profit-
        sharing trust maintained by the same employer shall be reduced 
        by the amount of the allowable deduction under paragraph (1).
            ``(3) Coordination with subsection (a)(7).--For purposes of 
        applying the limitation of subsection (a)(7) with respect to a 
        plan to which this section applies (other than a plan to which 
        section 408(p) applies), a plan to which section 408(p) applies 
        shall be treated as if it were a separate stock bonus or 
        profit-sharing trust of the employer maintaining the plan.
            ``(4) Coordination with subsection (h).--For any taxable 
        year for which the employer has a deduction under paragraph 
        (1), the otherwise applicable limitations in subsection (h) 
        with respect to a simplified employee pension maintained by the 
        same employer shall be reduced by the amount of the deduction 
        allowable under paragraph (1).''
            (2) Contributions and distributions.--
                    (A) Section 402 (relating to taxability of 
                beneficiary of employees' trust) is amended by adding 
                at the end the following new subsection:
    ``(k) Treatment of NESTs.--The rules of paragraphs (1) and (3) of 
subsection (h) shall apply to contributions and distributions with 
respect to a NEST under section 408(p).''
                    (B) Section 408(d)(3) is amended by adding at the 
                end the following new subparagraph:
                    ``(G) NESTs.--This paragraph shall apply to an 
                amount distributed to an individual with respect to a 
                NEST only to the extent such amount is paid directly to 
                an individual retirement account or annuity for the 
                benefit of such individual in a direct transfer and, if 
                applicable, such amount continues to be subject to the 
                2-year holding period described in subsection (p)(5).''
                    (C) Clause (i) of section 457(c)(2)(B) is amended 
                by striking ``section 402(h)(1)(B)'' and inserting 
                ``section 402 (h)(1)(B) or (k)''.
    (c) Reporting Requirements.--
            (1) In general.--
                    (A) Summary descriptions and employee 
                notification.--Section 408(l) is amended by adding at 
                the end the following new paragraph:
            ``(2) NESTs.--
                    ``(A) No employer reports.--Except as provided in 
                this paragraph, no report shall be required under this 
                section by an employer maintaining a NEST under 
                subsection (p).
                    ``(B) Summary description.--The trustee or issuer 
                of any individual retirement account or annuity under a 
                NEST described in subsection (p) shall prepare, and 
                provide to the employer maintaining the arrangement, 
                each year a description containing the following 
                information:
                            ``(i) The name and address of the employer 
                        and the trustee or issuer.
                            ``(ii) The requirements for eligibility for 
                        participation.
                            ``(iii) The benefits provided with respect 
                        to the NEST.
                            ``(iv) The time and method of making 
                        elections with respect to the NEST.
                            ``(v) The procedures for, and effects of, 
                        distributions (including rollovers) from the 
                        arrangement.
                    ``(C) Employee notification.--The employer shall 
                notify each employee immediately before the period for 
                which an election described in subsection (p)(7)(B) may 
                be made of the employee's opportunity to make such 
                election. Such notice shall include a copy of the 
                description described in subparagraph (B) and shall 
                indicate whether matching contributions will be made 
                with respect to the employee's elective contributions, 
                and the level of employer matching and nonelective 
                contributions which will be made, for the year for 
                which the election may be made.''
                    (B) Conforming amendment.--Section 408(l) is 
                amended by striking ``an employer'' and inserting--
            ``(1) In general.--An employer''.
            (2) Trustee and issuer reports.--Section 408(i) (relating 
        to reports of trustees or issuers) is amended by adding at the 
        end thereof the following new flush sentence:
``In the case of an individual retirement account or annuity maintained 
in connection with a NEST described in subsection (p), only 1 report 
under this subsection shall be required to be submitted each calendar 
year to the Secretary (at the time provided under paragraph (2)) but, 
in addition to the report under this subsection, there shall be 
furnished, within 30 days after each calendar quarter, to the 
individual on whose behalf the account is maintained a statement with 
respect to the account balance as of the close of, and the account 
activity during, such calendar quarter.''
            (3) Penalties for failure to report.--Section 6693 is 
        amended by redesignating subsection (c) as subsection (d) and 
        by inserting after subsection (b) the following new subsection:
    ``(c) Penalties Relating to NESTs.--
            ``(1) Employer penalties.--An employer who fails to provide 
        1 or more notices required by section 408(l)(2)(C) shall pay a 
        penalty of $50 for each day on which such failures continue.
            ``(2) Trustee penalties.--A trustee who fails--
                    ``(A) to provide 1 or more statements required by 
                the last sentence of section 408(i) shall pay a penalty 
                of $50 for each day on which such failures continue, or
                    ``(B) to provide 1 or more summary descriptions 
                required by section 408(l)(2)(B) shall pay a penalty of 
                $50 for each day on which such failures continue.
            ``(3) Reasonable cause exception.--No penalty shall be 
        imposed under this subsection with respect to any failure which 
        the taxpayer shows was due to reasonable cause.''
    (d) Conforming Amendments.--
            (1) Section 280G(b)(6) is amended by striking the ``or'' at 
        the end of subparagraph (B), by striking the period at the end 
        of subparagraph (C) and inserting ``, or'', and by adding after 
        subparagraph (C) the following new subparagraph:
                    ``(D) a NEST described in section 408(p).''
            (2) Section 402(g)(3) is amended by striking ``and'' at the 
        end of subparagraph (B), by striking the period at the end of 
        subparagraph (C) and inserting ``, and'', and by adding after 
        subparagraph (C) the following new subparagraph:
                    ``(D) any elective contribution under section 
                408(p)(2)(B)(ii) or (C)(ii).''
            (3) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) of 
        section 414 are each amended by inserting ``408(p),'' after 
        ``408(k),''.
            (4) Section 415(a)(2) is amended by adding at the end the 
        following new flush sentence:
``A plan described in section 408(p) shall not be subject to this 
section, except that if an employer that maintains such plan also 
maintains 1 or more plans, annuities, or accounts subject to this 
section, such plan shall be taken into account in determining whether 
any such other plans, annuities, or accounts satisfy the requirements 
of this section.''
            (5) Section 4972(d)(1)(A) is amended by striking ``and'' at 
        the end of clause (ii), by striking the period at the end of 
        clause (iii) and inserting ``, and'', and by adding after 
        clause (iii) the following new clause:
                            ``(iv) any NEST (within the meaning of 
                        section 408(p)).''
            (6)(A) Paragraph (5) of section 3121(a) is amended by 
        striking ``or'' at the end of subparagraph (F), by inserting 
        ``or'' at the end of subparagraph (G), and by adding at the end 
        the following new subparagraph:
                    ``(H) under a plan to which section 408(p) applies, 
                other than any elective contributions under 
                subparagraphs (B)(ii) and (C)(ii) of section 
                408(p)(2),''.
            (B) Section 209(a)(4) of the Social Security Act is amended 
        by inserting ``, or (J) under a plan to which section 408(p) of 
        such Code applies, other than any elective contributions under 
        subparagraphs (B)(ii) and (C)(ii) of section 408(p)(2) of such 
        Code'' before the semicolon at the end thereof.
            (C) Paragraph (5) of section 3306(b) is amended by striking 
        ``or'' at the end of subparagraph (F), by inserting ``or'' at 
        the end of subparagraph (G), and by adding at the end the 
        following new subparagraph:
                    ``(H) under a plan to which section 408(p) applies, 
                other than any elective contributions under 
                subparagraphs (B)(ii) and (C)(ii) of section 
                408(p)(2),''.
            (D) Paragraph (12) of section 3401(a) is amended by adding 
        the following new subparagraph:
                    ``(D) under or to a NEST described in section 
                408(p); or''.
    (e) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1996.

SEC. 1102. TAX-EXEMPT ORGANIZATIONS ELIGIBLE UNDER SECTION 401(k).

    (a) In General.--Subparagraph (B) of section 401(k)(4) is amended 
to read as follows:
                    ``(B) Eligibility of state and local governments 
                and tax-exempt organizations.--
                            ``(i) Tax-exempts eligible.--Except as 
                        provided in clause (ii), any organization 
                        exempt from tax under this subtitle may include 
                        a qualified cash or deferred arrangement as 
                        part of a plan maintained by it.
                            ``(ii) Governments ineligible.--A cash or 
                        deferred arrangement shall not be treated as a 
                        qualified cash or deferred arrangement if it is 
                        part of a plan maintained by a State or local 
                        government or political subdivision thereof, or 
                        any agency or instrumentality thereof. This 
                        clause shall not apply to a rural cooperative 
                        plan or to a plan of an employer described in 
                        clause (iii).
                            ``(iii) Treatment of indian tribal 
                        governments.--An employer which is an Indian 
                        tribal government (as defined in section 
                        7701(a)(40)), a subdivision of an Indian tribal 
                        government (determined in accordance with 
                        section 7871(d)), or an agency or 
                        instrumentality of an Indian tribal government 
                        or subdivision thereof may include a qualified 
                        cash or deferred arrangement as part of a plan 
                        maintained by it.''
    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 1996, but shall not apply to 
any cash or deferred arrangement to which clause (i) of section 
1116(f)(2)(B) of the Tax Reform Act of 1986 applies.

SEC. 1103. NONDISCRIMINATION RULES FOR QUALIFIED CASH OR DEFERRED 
              ARRANGEMENTS AND MATCHING CONTRIBUTIONS.

    (a) Alternative Methods of Satisfying Section 401(k) 
Nondiscrimination Tests.--Section 401(k) (relating to cash or deferred 
arrangements) is amended by adding at the end the following new 
paragraph:
            ``(11) Alternative methods of meeting nondiscrimination 
        requirements.--
                    ``(A) In general.--A cash or deferred arrangement 
                shall be treated as meeting the requirements of 
                paragraph (3)(A)(ii) if such arrangement--
                            ``(i) meets the contribution requirements 
                        of subparagraph (B) or (C), and
                            ``(ii) meets the notice requirements of 
                        subparagraph (D).
                    ``(B) Nonelective and matching contributions.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if the requirements of 
                        clauses (ii) and (iii) are met.
                            ``(ii) Nonelective contributions.--The 
                        requirements of this clause are met if, under 
                        the arrangement, the employer is required, 
                        without regard to whether the employee makes an 
                        elective contribution or employee contribution, 
                        to make a contribution to a defined 
                        contribution plan on behalf of each employee 
                        who is not a highly compensated employee and 
                        who is eligible to participate in the 
                        arrangement in an amount equal to at least 1 
                        percent of the employee's compensation.
                            ``(iii) Matching contributions.--The 
                        requirements of this clause are met if, under 
                        the arrangement, the employer makes matching 
                        contributions on behalf of each employee who is 
                        not a highly compensated employee in an amount 
                        equal to--
                                    ``(I) 100 percent of the elective 
                                contributions of the employee to the 
                                extent such elective contributions do 
                                not exceed 3 percent of the employee's 
                                compensation, and
                                    ``(II) 50 percent of the elective 
                                contributions of the employee to the 
                                extent that such elective contributions 
                                exceed 3 percent but do not exceed 5 
                                percent of the employee's compensation.
                            ``(iv) Rate for highly compensated 
                        employees.--The requirements of clause (iii) 
                        are not met if, under the arrangement, the rate 
of matching contribution with respect to any rate of elective 
contribution of a highly compensated employee is greater than that with 
respect to an employee who is not a highly compensated employee. For 
purposes of this clause, to the extent provided in regulations, the 
last sentences of paragraph (3)(A) and subsection (m)(2)(B) shall not 
apply.
                            ``(v) Alternative plan designs.--If the 
                        rate of matching contribution with respect to 
                        any rate of elective contribution is not equal 
                        to the percentage required under clause (iii), 
                        an arrangement shall not be treated as failing 
                        to meet the requirements of clause (iii) if--
                                    ``(I) the rate of an employer's 
                                matching contribution does not increase 
                                as an employee's rate of elective 
                                contribution increase, and
                                    ``(II) the aggregate amount of 
                                matching contributions at such rate of 
                                elective contribution is at least equal 
                                to the aggregate amount of matching 
                                contributions which would be made if 
                                matching contributions were made on the 
                                basis of the percentages described in 
                                clause (iii).
                    ``(C) Nonelective contributions.--The requirements 
                of this subparagraph are met if, under the arrangement, 
                the employer is required, without regard to whether the 
                employee makes an elective contribution or employee 
                contribution, to make a contribution to a defined 
                contribution plan on behalf of each employee who is not 
                a highly compensated employee and who is eligible to 
                participate in the arrangement in an amount equal to at 
                least 3 percent of the employee's compensation.
                    ``(D) Notice requirement.--An arrangement meets the 
                requirements of this paragraph if, under the 
                arrangement, each employee eligible to participate is, 
                within a reasonable period before any year, given 
                written notice of the employee's rights and obligations 
                under the arrangement which--
                            ``(i) is sufficiently accurate and 
                        comprehensive to reasonably apprise the 
                        employee of such rights and obligations, and
                            ``(ii) is written in a manner calculated to 
                        be understood by the average employee eligible 
                        to participate.
                    ``(E) Other requirements.--
                            ``(i) Withdrawal and vesting 
                        restrictions.--An arrangement shall not be 
                        treated as meeting the requirements of 
                        subparagraph (B) or (C) of this paragraph 
                        unless the requirements of subparagraphs (B) 
                        and (C) of paragraph (2) are met with respect 
                        to all employer contributions (including 
                        matching contributions) taken into account in 
                        determining whether the requirements of 
                        subparagraphs (B) and (C) of this paragraph are 
                        met.
                            ``(ii) Social security and similar 
                        contributions not taken into account.--An 
                        arrangement shall not be treated as meeting the 
                        requirements of subparagraph (B) or (C) unless 
                        such requirements are met without regard to 
                        subsection (l), and, for purposes of subsection 
                        (l), employer contributions under subparagraph 
                        (B) or (C) shall not be taken into account.
                    ``(F) Other plans.--An arrangement shall be treated 
                as meeting the requirements under subparagraph (A)(i) 
                if any other plan maintained by the employer meets such 
                requirements with respect to employees eligible under 
                the arrangement.''
    (b) Alternative Methods of Satisfying Section 401(m) 
Nondiscrimination Tests.--Section 401(m) (relating to nondiscrimination 
test for matching contributions and employee contributions) is amended 
by redesignating paragraph (10) as paragraph (11) and by adding after 
paragraph (9) the following new paragraph:
            ``(10) Alternative method of satisfying tests.--
                    ``(A) In general.--A defined contribution plan 
                shall be treated as meeting the requirements of 
                paragraph (2) with respect to matching contributions if 
                the plan--
                            ``(i) meets the contribution requirements 
                        of subparagraph (B) or (C) of subsection 
                        (k)(11),
                            ``(ii) meets the notice requirements of 
                        subsection (k)(11)(D), and
                            ``(iii) meets the requirements of 
                        subparagraphs (B) and (C).
                    ``(B) Limitation on matching contributions.--The 
                requirements of this subparagraph are met if--
                            ``(i) matching contributions on behalf of 
                        any employee may not be made with respect to an 
                        employee's contributions or elective deferrals 
                        in excess of 6 percent of the employee's 
                        compensation,
                            ``(ii) the rate of an employer's matching 
                        contribution does not increase as the rate of 
                        an employee's contributions or elective 
                        deferrals increase, and
                            ``(iii) the matching contribution with 
                        respect to any highly compensated employee at 
                        any rate of an employee contribution or rate of 
                        elective deferral is not greater than that with 
                        respect to an employee who is not a highly 
                        compensated employee.
                To the extent provided in regulations, the last 
                sentences of paragraph (2)(B) and subsection (k)(3)(A) 
                shall not apply for purposes of clause (iii).
                    ``(C) Test must be met separately.--If this 
                paragraph applies to any matching contributions, such 
                contributions shall not be taken into account in 
                determining whether employee contributions satisfy the 
                requirements of this subsection.''
    (c) Year for Computing Nonhighly Compensated Employee Percentage.--
            (1) Cash or deferred arrangements.--Clause (ii) of section 
        401(k)(3)(A) is amended--
                    (A) by striking ``such year'' and inserting ``the 
                plan year'',
                    (B) by striking ``for such plan year'' and 
                inserting ``for the preceding plan year'', and
                    (C) by adding at the end the following new 
                sentence: ``An arrangement may apply this clause by 
                using the plan year rather than the preceding plan year 
                if the employer so elects, except that if such an 
                election is made, it may not be changed except as 
                provided by the Secretary.''
            (2) Matching and employee contributions.--Section 
        401(m)(2)(A) is amended--
                    (A) by inserting ``for such plan year'' after 
                ``highly compensated employees'',
                    (B) by inserting ``for the preceding plan year'' 
                after ``eligible employees'' each place it appears in 
                clause (i) and clause (ii), and
                    (C) by adding at the end the following flush 
                sentence: ``This subparagraph may be applied by using 
                the plan year rather than the preceding plan year if 
                the employer so elects, except that if such an election 
                is made, it may not be changed except as provided the 
                Secretary.''
    (d) Special Rule for Determining Average Deferral Percentage for 
First Plan Year, Etc.--
            (1) Paragraph (3) of section 401(k) is amended by adding at 
        the end the following new subparagraph:
                    ``(E) For purposes of this paragraph, in the case 
                of the first plan year of any plan, the amount taken 
                into account as the actual deferral percentage of 
                nonhighly compensated employees for the preceding plan 
                year shall be--
                            ``(i) 3 percent, or
                            ``(ii) the actual deferral percentage of 
                        nonhighly compensated employees determined for 
                        such first plan year in the case of--
                                    ``(I) an employer who elects to 
                                have this clause apply, or
                                    ``(II) except to the extent 
                                provided by the Secretary, a successor 
                                plan.''
            (2) Paragraph (3) of section 401(m) is amended by adding at 
        the end the following: ``Rules similar to the rules of 
        subsection (k)(3)(E) shall apply for purposes of this 
        subsection.''
    (e) Distribution of Excess Contributions and Excess Aggregate 
Contributions.--
            (1) Subparagraph (C) of section 401(k)(8) (relating to 
        arrangement not disqualified if excess contributions 
        distributed) is amended by striking ``on the basis of the 
        respective portions of the excess contributions attributable to 
        each of such employees'' and inserting ``on the basis of the 
        amount of contributions by, or on behalf of, each of such 
        employees''.
            (2) Subparagraph (C) of section 401(m)(6) (relating to 
        method of distributing excess aggregate contributions) is 
        amended by striking ``on the basis of the respective portions 
        of such amounts attributable to each of such employees'' and 
        inserting ``on the basis of the amount of contributions on 
        behalf of, or by, each such employee''.
    (f) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 1998.
            (2) Subsections (c), (d), and (e).--The amendments made by 
        subsections (c), (d), and (e) shall apply to plan years 
        beginning after December 31, 1996.

SEC. 1104. REPEAL OF FAMILY AGGREGATION.

    (a) Repeal of Family Aggregation Rules.--
            (1) In general.--Paragraph (6) of section 414(q) is hereby 
        repealed.
            (2) Compensation limit.--Paragraph (17)(A) of section 
        401(a) is amended by striking the last sentence.
            (3) Deduction.--Subsection (l) of section 404 is amended by 
        striking the last sentence.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1996.

SEC. 1105. DEFINITION OF HIGHLY COMPENSATED EMPLOYEES.

    (a) In General.--Paragraph (1) of section 414(q) (defining highly 
compensated employee) is amended to read as follows:
            ``(1) In general.--The term `highly compensated employee' 
        means any employee who--
                    ``(A) was a 5-percent owner at any time during the 
                year or the preceding year, or
                    ``(B) for the preceding year had compensation from 
                the employer in excess of $80,000.
        The Secretary shall adjust the $80,000 amount under 
        subparagraph (B) at the same time and in the same manner as 
        under section 415(d), except that the base period shall be the 
        calendar quarter ending September 30, 1996.''
    (b) Conforming Amendments.--
            (1)(A) Subsection (q) of section 414 is amended by striking 
        paragraphs (2), (4), (5), (8), (10), and (12) and by 
        redesignating paragraphs (3), (7), (9), and (11) as paragraphs 
        (2) through (5), respectively.
            (B) Sections 129(d)(8)(B), 401(a)(5)(D)(ii), 408(k)(2)(C), 
        and 416(i)(1)(D) are each amended by striking ``section 
        414(q)(7)'' and inserting ``section 414(q)(3)''.
            (C) Section 416(i)(1)(A) is amended by striking ``section 
        414(q)(8)'' and inserting ``section 414(r)(9)''.
            (2)(A) Section 414(r) is amended by adding at the end the 
        following new paragraph:
            ``(9) Excluded employees.--For purposes of paragraph 
        (2)(A), the following employees shall be excluded:
                    ``(A) Employees who have not completed 6 months of 
                service.
                    ``(B) Employees who normally work less than 17\1/2\ 
                hours per week.
                    ``(C) Employees who normally work not more than 6 
                months during any year.
                    ``(D) Employees who have not attained the age of 
                21.
                    ``(E) Except to the extent provided in regulations, 
                employees who are included in a unit of employees 
                covered by an agreement which the Secretary of Labor 
                finds to be a collective bargaining agreement between 
                employee representatives and the employer.''
            (B) Subparagraph (A) of section 414(r)(2) is amended by 
        striking ``subsection (q)(8)'' and inserting ``paragraph (9)''.
            (3) Section 1114(c)(4) of the Tax Reform Act of 1986 is 
        amended by adding at the end the following new sentence: ``Any 
        reference in this paragraph to section 414(q) shall be treated 
        as a reference to such section as in effect on the day before 
        the date of the enactment of the Retirement Savings and 
        Security Act.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1996, except that in 
determining whether an employee is a highly compensated employee for 
years beginning in 1997, such amendments shall be treated as having 
been in effect for years beginning in 1996.

SEC. 1106. REPEAL OF LIMITATION IN CASE OF DEFINED BENEFIT PLAN AND 
              DEFINED CONTRIBUTION PLAN FOR SAME EMPLOYEE.

    (a) In General.--Section 415(e) is repealed.
    (b) Conforming Amendments.--
            (1) Paragraph (1) of section 415(a) is amended--
                    (A) by adding ``or'' at the end of subparagraph 
                (A),
                    (B) by striking ``, or'' at the end of subparagraph 
                (B) and inserting a period, and
                    (C) by striking subparagraph (C).
            (2) Subparagraph (B) of section 415(b)(5) is amended by 
        striking ``and subsection (e)''.
            (3) Paragraph (1) of section 415(f) is amended by striking 
        ``subsections (b), (c), and (e)'' and inserting ``subsections 
        (b) and (c)''.
            (4) Subsection (g) of section 415 is amended by striking 
        ``subsections (e) and (f)'' in the last sentence and inserting 
        ``subsection (f)''.
            (5) Clause (i) of section 415(k)(2)(A) is amended to read 
        as follows:
                            ``(i) any contribution made directly by an 
                        employee under such an arrangement shall not be 
                        treated as an annual addition for purposes of 
                        subsection (c), and''.
            (6) Clause (ii) of section 415(k)(2)(A) is amended by 
        striking ``subsections (c) and (e)'' and inserting ``subsection 
        (c)''.
            (7) Section 416 is amended by striking subsection (h).
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1998.

SEC. 1107. CONTRIBUTIONS ON BEHALF OF DISABLED EMPLOYEES.

    (a) All Disabled Participants Receiving Contributions.--Section 
415(c)(3)(C) is amended by adding at the end the following: ``If a 
defined contribution plan provides for the continuation of 
contributions on behalf of all participants described in clause (i) for 
a fixed or determinable period, this subparagraph shall be applied 
without regard to clauses (ii) and (iii).''
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1996.

SEC. 1108. PLANS COVERING SELF-EMPLOYED INDIVIDUALS.

    (a) Aggregation Rules.--Section 401(d) (relating to additional 
requirements for qualification of trusts and plans benefiting owner-
employees) is amended to read as follows:
    ``(d) Contribution Limit on Owner-Employees.--A trust forming part 
of a pension or profit-sharing plan which provides contributions or 
benefits for employees some or all of whom are owner-employees shall 
constitute a qualified trust under this section only if, in addition to 
meeting the requirements of subsection (a), the plan provides that 
contributions on behalf of any owner-employee may be made only with 
respect to the earned income of such owner-employee which is derived 
from the trade or business with respect to which such plan is 
established.''
    (b) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1996.

SEC. 1109. TRUST REQUIREMENT FOR DEFERRED COMPENSATION PLANS OF STATE 
              AND LOCAL GOVERNMENTS.

    (a) In General.--Section 457 is amended by adding at the end the 
following new subsection:
    ``(g) Governmental Plans Must Maintain Set-Asides for Exclusive 
Benefit of Participants.--
            ``(1) In general.--A plan maintained by an eligible 
        employer described in subsection (e)(1)(A) shall not be treated 
        as an eligible deferred compensation plan unless all amounts, 
        property and rights, and income of the plan described in 
        subparagraphs (A), (B), and (C) of subsection (b)(6) are held 
        in trust for the exclusive benefit of participants and their 
        beneficiaries.
            ``(2) Taxability of trusts and participants.--For purposes 
        of this title--
                    ``(A) a trust described in paragraph (1) shall be 
                treated as an organization exempt from taxation under 
                section 501(a), and
                    ``(B) notwithstanding any other provision of this 
                title, amounts in the trust shall be includible in the 
                gross income of participants and beneficiaries only to 
                the extent, and at the time, provided in this section.
            ``(3) Custodial account and contracts.--For purposes of 
        this subsection, custodial accounts and contracts described in 
        section 401(f) shall be treated as trusts under rules similar 
        to the rules under section 401(f).''
    (b) Conforming Amendment.--Paragraph (6) of section 457(b) is 
amended by inserting ``except as provided in subsection (g),'' before 
``which provides that''.
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to amounts, 
        property and rights, and income described in subparagraphs (A), 
        (B), and (C) of section 457(b)(6) of the Internal Revenue Code 
        of 1986 held by a plan on and after the date of the enactment 
        of this Act.
            (2) Transition rule.--In the case of amounts, property and 
        rights, and income described in paragraph (1) under a plan 
        before the last day of the first calendar quarter beginning 
        after the close of the first regular session (beginning after 
        the date of the enactment of this Act) of the State legislature 
        of the State in which the governmental entity maintaining the 
        plan is located, a trust need not be established by reason of 
        the amendments made by this section before such last day. For 
        purposes of the preceding sentence, in the case of a State that 
        has a 2-year legislative session, each year of such session 
        shall be deemed to be a separate regular session of the State 
        legislature.

SEC. 1110. TREATMENT OF CERTAIN DISABILITY BENEFITS RECEIVED BY FORMER 
              POLICE OFFICERS OR FIREFIGHTERS.

    (a) General Rule.--For purposes of determining whether any amount 
to which this section applies is excludable from gross income under 
section 104(a)(1) of the Internal Revenue Code of 1986, the following 
conditions shall be treated as personal injuries or sickness in the 
course of employment:
            (1) Heart disease.
            (2) Hypertension.
    (b) Amounts To Which Section Applies.--This section shall apply to 
any amount--
            (1) which is payable--
                    (A) to an individual (or to the survivors of an 
                individual) who was a full-time employee of any police 
                department or fire department which is organized and 
                operated by a State, by any political subdivision 
                thereof, or by any agency or instrumentality of a State 
                or political subdivision thereof, and
                    (B) under a State law (as in existence on July 1, 
                1992) which irrebuttably presumed that heart disease 
                and hypertension are work-related illnesses but only 
                for employees separating from service before such date; 
                and
            (2) which is received in calendar year 1989, 1990, or 1991.
For purposes of the preceding sentence, the term ``State'' includes the 
District of Columbia.
    (c) Waiver of Statute of Limitations.--If, on the date of the 
enactment of this Act (or at any time within the 1-year period 
beginning on such date of enactment) credit or refund of any 
overpayment of tax resulting from the provisions of this section is 
barred by any law or rule of law, credit or refund of such overpayment 
shall, nevertheless, be allowed or made if claim therefore is filed 
before the date 1 year after such date of enactment.

               CHAPTER 2--SIMPLIFICATION AND COST SAVINGS

SEC. 1201. TREATMENT OF GOVERNMENTAL AND MULTIEMPLOYER PLANS UNDER 
              SECTION 415 AND TREATMENT OF EXCESS BENEFIT PLANS.

    (a) Compensation Limit.--Subsection (b) of section 415 is amended 
by adding immediately after paragraph (10) the following new paragraph:
            ``(11) Special limitation rule for governmental and 
        multiemployer plans.--In the case of a governmental plan (as 
        defined in section 414(d)) or a multiemployer plan (as defined 
        in section 414(f)), subparagraph (B) of paragraph (1) shall not 
        apply.''
    (b) Treatment of Certain Excess Benefit Plans.--
            (1) In general.--Section 415 is amended by adding at the 
        end the following new subsection:
    ``(m) Treatment of Qualified Governmental Excess Benefit 
Arrangements.--
            ``(1) Governmental plan not affected.--In determining 
        whether a governmental plan (as defined in section 414(d)) 
        meets the requirements of this section, benefits provided under 
a qualified governmental excess benefit arrangement shall not be taken 
into account. Income accruing to a governmental plan (or to a trust 
that is maintained solely for the purpose of providing benefits under a 
qualified governmental excess benefit arrangement) in respect of a 
qualified governmental excess benefit arrangement shall constitute 
income derived from the exercise of an essential governmental function 
upon which such governmental plan (or trust) shall be exempt from tax 
under section 115.
            ``(2) Taxation of participant.--For purposes of this 
        chapter--
                    ``(A) the taxable year or years for which amounts 
                in respect of a qualified governmental excess benefit 
                arrangement are includible in gross income by a 
                participant, and
                    ``(B) the treatment of such amounts when so 
                includible by the participant,
        shall be determined as if such qualified governmental excess 
        benefit arrangement were treated as a plan for the deferral of 
        compensation which is maintained by a corporation not exempt 
        from tax under this chapter and which does not meet the 
        requirements for qualification under section 401.
            ``(3) Qualified governmental excess benefit arrangement.--
        For purposes of this subsection, the term `qualified 
        governmental excess benefit arrangement' means a portion of a 
        governmental plan if--
                    ``(A) such portion is maintained solely for the 
                purpose of providing to participants in the plan that 
                part of the participant's annual benefit otherwise 
                payable under the terms of the plan that exceeds the 
                limitations on benefits imposed by this section,
                    ``(B) under such portion no election is provided at 
                any time to the participant (directly or indirectly) to 
                defer compensation, and
                    ``(C) benefits described in subparagraph (A) are 
                not paid from a trust forming a part of such 
                governmental plan unless such trust is maintained 
                solely for the purpose of providing such benefits.''
            (2) Rules relating to excess benefit arrangement.--
                    (A) Application of section 457.--Subsection (e) of 
                section 457 is amended by adding at the end the 
                following new paragraph:
            ``(14) Treatment of excess benefit arrangements.--
                    ``(A) In general.--Subsections (b)(2) and (c)(1) 
                shall not apply to any excess benefit arrangement and 
                benefits provided under such an arrangement shall not 
                be taken into account in determining whether any other 
                plan is an eligible deferred compensation plan.
                    ``(B) Excess benefit arrangement defined.--For 
                purposes of this section, the term `excess benefit 
                arrangement' means a plan which is maintained by an 
                eligible employer solely for purposes of providing 
                benefits for certain employees in excess of the limits 
                on contributions and benefits imposed by section 415. 
                Such term includes a qualified governmental excess 
                benefit arrangement (as defined in section 
                415(m)(3)).''
                    (B) Conforming amendment.--Paragraph (2) of section 
                457(f) is amended by striking ``and'' at the end of 
                subparagraph (C), by striking the period at the end of 
                subparagraph (D) and inserting ``, and'', and by 
                inserting immediately thereafter the following new 
                subparagraph:
                    ``(E) an excess benefit arrangement (as defined in 
                subsection (e)(14)(B)).''
    (c) Exemption for Survivor and Disability Benefits.--Paragraph (2) 
of section 415(b) is amended by adding at the end the following new 
subparagraph:
                    ``(I) Exemption for survivor and disability 
                benefits provided under governmental and multiemployer 
                plans.--Subparagraph (C) of this paragraph and 
                paragraph (5) shall not apply to--
                            ``(i) income received from a governmental 
                        plan (as defined in section 414(d)) or a 
                        multiemployer plan (as defined in section 
                        414(f)) as a pension, annuity, or similar 
                        allowance as the result of the recipient 
                        becoming disabled by reason of personal 
                        injuries or sickness, or
                            ``(ii) amounts received from a governmental 
                        or multiemployer plan by the beneficiaries, 
                        survivors, or the estate of an employee as the 
                        result of the death of the employee.''
    (d) Revocation of Grandfather Election.--
            (1) In general.--Subparagraph (C) of section 415(b)(10) is 
        amended by adding at the end the following new clause:
                            ``(ii) Revocation of election.--An election 
                        under clause (i) may be revoked not later than 
                        the last day of the third plan year beginning 
                        after the date of the enactment of this clause. 
                        The revocation shall apply to all plan years to 
                        which the election applied and to all 
                        subsequent plan years. Any amount paid by a 
                        plan in a taxable year ending after the 
                        revocation shall be includible in income in 
                        such taxable year under the rules of this 
                        chapter in effect for such taxable year, except 
                        that, for purposes of applying the limitations 
                        imposed by this section, any portion of such 
                        amount which is attributable to any taxable 
                        year during which the election was in effect 
                        shall be treated as received in such taxable 
                        year.''
            (2) Conforming amendment.--Subparagraph (C) of section 
        415(b)(10) is amended by striking ``This'' and inserting:
                            ``(i) In general.--This''.
    (e) Effective Date.--
            (1) In general.--The amendments made by subsections (a), 
        (b), and (c) shall apply to years beginning after December 31, 
        1996.
            (2) Special rules for governmental plans.--
                    (A) In general.--In the case of a governmental 
                plan, the amendments made by subsections (a), (b), and 
                (c) shall apply to years beginning after December 31, 
                1995.
                    (B) Revocations.--The amendments made by subsection 
                (d) shall apply with respect to revocations adopted 
                after the date of the enactment of this Act.
                    (C) Treatment for years beginning before january 1, 
                1996.--Nothing in the amendments made by this section 
                shall be construed to imply that a governmental plan 
                (as defined in section 414(d) of the Internal Revenue 
                Code of 1986) fails to satisfy the requirements of 
                section 415 of such Code for any year beginning before 
                January 1, 1996.

SEC. 1202. DEFINITION OF COMPENSATION FOR SECTION 415 PURPOSES.

    (a) General Rule.--Section 415(c)(3) (defining participant's 
compensation) is amended by adding at the end the following new 
subparagraph:
                    ``(D) Certain deferrals included.--The term 
                `participant's compensation' shall include--
                            ``(i) any elective deferral (as defined in 
                        section 402(g)(3)),
                            ``(ii) any amount which is contributed by 
                        the employer at the election of the employee 
                        and which is not includible in the gross income 
                        of the employee pursuant to section 125, and
                            ``(iii) any amount which is deferred at the 
                        election of the employee and which is not 
                        includible in the gross income of the employee 
                        pursuant to section 457.''
    (b) Conforming Amendments.--
            (1) Section 414(q)(3), as redesignated by section 1105, is 
        amended to read as follows:
            ``(3) Compensation.--For purposes of this subsection, the 
        term `compensation' has the meaning given such term by section 
        415(c)(3).''
            (2) Section 414(s)(2) is amended by inserting ``not'' after 
        ``elect'' in the text and heading thereof.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1996.

SEC. 1203. ASSUMPTIONS FOR ADJUSTING CERTAIN BENEFITS OF DEFINED 
              BENEFIT PLANS FOR EARLY RETIREES.

    (a) In General.--Subparagraph (E) of section 415(b)(2) (relating to 
limitation on certain assumptions) is amended--
            (1) by striking ``Except as provided in clause (ii), for 
        purposes of adjusting any benefit or limitation under 
        subparagraph (B) or (C),'' in clause (i) and inserting ``For 
        purposes of adjusting any limitation under subparagraph (C) 
        and, except as provided in clause (ii), for purposes of 
        adjusting any benefit under subparagraph (B),'', and
            (2) by striking ``For purposes of adjusting the benefit or 
        limitation of any form of benefit subject to section 
        417(e)(3),'' in clause (ii) and inserting ``For purposes of 
        adjusting any benefit under subparagraph (B) for any form of 
        benefit subject to section 417(e)(3),''.
    (b) Effective Date.--The amendments made by this section shall take 
effect as if included in the provisions of section 767 of the Uruguay 
Round Agreements Act.

SEC. 1204. TREATMENT OF DEFERRED COMPENSATION PLANS OF STATE AND LOCAL 
              GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.

    (a) Special Rules for Plan Distributions.--Paragraph (9) of section 
457(e) (relating to other definitions and special rules) is amended to 
read as follows:
            ``(9) Benefits not treated as made available by reason of 
        certain elections, etc.--
                    ``(A) Total amount payable is $3,500 or less.--The 
                total amount payable to a participant under the plan 
                shall not be treated as made available merely because 
                the participant may elect to receive such amount (or 
                the plan may distribute such amount without the 
                participant's consent) if--
                            ``(i) such amount does not exceed $3,500, 
                        and
                            ``(ii) such amount may be distributed only 
                        if--
                                    ``(I) no amount has been deferred 
                                under the plan with respect to such 
                                participant during the 2-year period 
                                ending on the date of the distribution, 
                                and
                                    ``(II) there has been no prior 
                                distribution under the plan to such 
                                participant to which this subparagraph 
                                applied.
                A plan shall not be treated as failing to meet the 
                distribution requirements of subsection (d) by reason 
                of a distribution to which this subparagraph applies.
                    ``(B) Election to defer commencement of 
                distributions.--The total amount payable to a 
                participant under the plan shall not be treated as made 
                available merely because the participant may elect to 
                defer commencement of distributions under the plan if--
                            ``(i) such election is made after amounts 
                        may be available under the plan in accordance 
                        with subsection (d)(1)(A) and before 
                        commencement of such distributions, and
                            ``(ii) the participant may make only 1 such 
                        election.''
    (b) Cost-of-Living Adjustment of Maximum Deferral Amount.--
Subsection (e) of section 457, as amended by section 1201(b)(2) 
(relating to governmental plans), is amended by adding at the end the 
following new paragraph:
            ``(15) Cost-of-living adjustment of maximum deferral 
        amount.--The Secretary shall adjust the $7,500 amount specified 
        in subsections (b)(2) and (c)(1) at the same time and in the 
        same manner as under section 415(d), except that the base 
        period shall be the calendar quarter ending September 30, 1994, 
        and any increase under this paragraph which is not a multiple 
        of $500 shall be rounded to the next lowest multiple of $500.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.

SEC. 1205. NO REQUIRED DISTRIBUTIONS FOR ACTIVE EMPLOYEES.

    (a) In General.--Section 401(a)(9)(C) (defining required beginning 
date) is amended to read as follows:
                    ``(C) Required beginning date.--For purposes of 
                this paragraph--
                            ``(i) In general.--The term `required 
                        beginning date' means April 1 of the calendar 
                        year following the later of--
                                    ``(I) the calendar year in which 
                                the employee attains age 70\1/2\, or
                                    ``(II) the calendar year in which 
                                the employee retires.
                            ``(ii) Exception.--Subclause (II) of clause 
                        (i) shall not apply--
                                    ``(I) except as provided in section 
                                409(d), in the case of an employee who 
                                is a 5-percent owner (as defined in 
                                section 416) with respect to the plan 
                                year ending in the calendar year in 
                                which the employee attains age 70\1/2\, 
                                or
                                    ``(II) for purposes of section 408 
                                (a)(6) or (b)(3).
                            ``(iii) Actuarial adjustment.--In the case 
                        of an employee to whom clause (i)(II) applies 
                        who retires in a calendar year after the 
                        calendar year in which the employee attains age 
                        70\1/2\, the employee's accrued benefit shall 
                        be actuarially increased to take into account 
                        the period after age 70\1/2\ in which the 
                        employee was not receiving any benefits under 
                        the plan.
                            ``(iv) Exception for governmental and 
                        church plans.--Clauses (ii) and (iii) shall not 
                        apply in the case of a governmental plan or 
                        church plan. For purposes of this clause, the 
                        term `church plan' means a plan maintained by a 
                        church for church employees, and the term 
                        `church' means any church (as defined in 
                        section 3121(w)(3)(A)) or qualified church-
                        controlled organization (as defined in section 
                        3121(w)(3)(B)).''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to years beginning after December 31, 1996.

SEC. 1206. SIMPLIFIED METHOD FOR TAXING ANNUITY DISTRIBUTIONS UNDER 
              CERTAIN EMPLOYER PLANS.

    (a) General Rule.--Subsection (d) of section 72 (relating to 
annuities; certain proceeds of endowment and life insurance contracts) 
is amended to read as follows:
    ``(d) Special Rules for Qualified Employer Retirement Plans.--
            ``(1) Simplified method of taxing annuity payments.--
                    ``(A) In general.--In the case of any amount 
                received as an annuity under a qualified employer 
                retirement plan--
                            ``(i) subsection (b) shall not apply, and
                            ``(ii) the investment in the contract shall 
                        be recovered as provided in this paragraph.
                    ``(B) Method of recovering investment in 
                contract.--
                            ``(i) In general.--Gross income shall not 
                        include so much of any monthly annuity payment 
                        under a qualified employer retirement plan as 
                        does not exceed the amount obtained by 
                        dividing--
                                    ``(I) the investment in the 
                                contract (as of the annuity starting 
                                date), by
                                    ``(II) the number of anticipated 
                                payments determined under the table 
                                contained in clause (iii) (or, in the 
                                case of a contract to which subsection 
                                (c)(3)(B) applies, the number of 
                                monthly annuity payments under such 
                                contract).
                            ``(ii) Certain rules made applicable.--
                        Rules similar to the rules of paragraphs (2) 
                        and (3) of subsection (b) shall apply for 
                        purposes of this paragraph.
                            ``(iii) Number of anticipated payments.--

                         ``If the age of the
                                                                       
                           primary annuitant on
                                                             The number
                           the annuity starting
                                                         of anticipated
                           date is:
                                                           payments is:
                               Not more than 55......              360 
                               More than 55 but not                310 
                            more than 60.
                               More than 60 but not                260 
                            more than 65.
                               More than 65 but not                210 
                            more than 70.
                               More than 70..........              160.

                    ``(C) Adjustment for refund feature not 
                applicable.--For purposes of this paragraph, investment 
                in the contract shall be determined under subsection 
                (c)(1) without regard to subsection (c)(2).
                    ``(D) Special rule where lump sum paid in 
                connection with commencement of annuity payments.--If, 
                in connection with the commencement of annuity payments 
                under any qualified employer retirement plan, the 
                taxpayer receives a lump sum payment--
                            ``(i) such payment shall be taxable under 
                        subsection (e) as if received before the 
                        annuity starting date, and
                            ``(ii) the investment in the contract for 
                        purposes of this paragraph shall be determined 
                        as if such payment had been so received.
                    ``(E) Exception.--This paragraph shall not apply in 
                any case where the primary annuitant has attained age 
                75 on the annuity starting date unless there are fewer 
                than 5 years of guaranteed payments under the annuity.
                    ``(F) Adjustment where annuity payments not on 
                monthly basis.--In any case where the annuity payments 
                are not made on a monthly basis, appropriate 
                adjustments in the application of this paragraph shall 
                be made to take into account the period on the basis of 
                which such payments are made.
                    ``(G) Qualified employer retirement plan.--For 
                purposes of this paragraph, the term `qualified 
                employer retirement plan' means any plan or contract 
                described in paragraph (1), (2), or (3) of section 
                4974(c).
            ``(2) Treatment of employee contributions under defined 
        contribution plans.--For purposes of this section, employee 
        contributions (and any income allocable thereto) under a 
        defined contribution plan may be treated as a separate 
        contract.''
    (b) Effective Date.--The amendment made by this section shall apply 
in cases where the annuity starting date is after December 31, 1996.

SEC. 1207. REPEAL OF 5-YEAR INCOME AVERAGING FOR LUMP-SUM 
              DISTRIBUTIONS.

    (a) In General.--Subsection (d) of section 402 (relating to 
taxability of beneficiary of employees' trust) is amended to read as 
follows:
    ``(d) Taxability of Beneficiary of Certain Foreign Situs Trusts.--
For purposes of subsections (a), (b), and (c), a stock bonus, pension, 
or profit-sharing trust which would qualify for exemption from tax 
under section 501(a) except for the fact that it is a trust created or 
organized outside the United States shall be treated as if it were a 
trust exempt from tax under section 501(a).''
    (b) Conforming Amendments.--
            (1) Subparagraph (D) of section 402(e)(4) (relating to 
        other rules applicable to exempt trusts) is amended to read as 
        follows:
                    ``(D) Lump-sum distribution.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `lump sum 
                        distribution' means the distribution or payment 
                        within one taxable year of the recipient of the 
                        balance to the credit of an employee which 
                        becomes payable to the recipient--
                                    ``(I) on account of the employee's 
                                death,
                                    ``(II) after the employee attains 
                                age 59\1/2\,
                                    ``(III) on account of the 
                                employee's separation from service, or
                                    ``(IV) after the employee has 
                                become disabled (within the meaning of 
                                section 72(m)(7)),
                        from a trust which forms a part of a plan 
                        described in section 401(a) and which is exempt 
                        from tax under section 501 or from a plan 
                        described in section 403(a). Subclause (III) of 
                        this clause shall be applied only with respect 
                        to an individual who is an employee without 
                        regard to section 401(c)(1), and subclause (IV) 
                        shall be applied only with respect to an 
                        employee within the meaning of section 
                        401(c)(1). For purposes of this clause, a 
distribution to two or more trusts shall be treated as a distribution 
to one recipient. For purposes of this paragraph, the balance to the 
credit of the employee does not include the accumulated deductible 
employee contributions under the plan (within the meaning of section 
72(o)(5)).
                            ``(ii) Aggregation of certain trusts and 
                        plans.--For purposes of determining the balance 
                        to the credit of an employee under clause (i)--
                                    ``(I) all trusts which are part of 
                                a plan shall be treated as a single 
                                trust, all pension plans maintained by 
                                the employer shall be treated as a 
                                single plan, all profit-sharing plans 
                                maintained by the employer shall be 
                                treated as a single plan, and all stock 
                                bonus plans maintained by the employer 
                                shall be treated as a single plan, and
                                    ``(II) trusts which are not 
                                qualified trusts under section 401(a) 
                                and annuity contracts which do not 
                                satisfy the requirements of section 
                                404(a)(2) shall not be taken into 
                                account.
                            ``(iii) Community property laws.--The 
                        provisions of this paragraph shall be applied 
                        without regard to community property laws.
                            ``(iv) Amounts subject to penalty.--This 
                        paragraph shall not apply to amounts described 
                        in subparagraph (A) of section 72(m)(5) to the 
                        extent that section 72(m)(5) applies to such 
                        amounts.
                            ``(v) Balance to credit of employee not to 
                        include amounts payable under qualified 
                        domestic relations order.--For purposes of this 
                        paragraph, the balance to the credit of an 
                        employee shall not include any amount payable 
                        to an alternate payee under a qualified 
                        domestic relations order (within the meaning of 
                        section 414(p)).
                            ``(vi) Transfers to cost-of-living 
                        arrangement not treated as distribution.--For 
                        purposes of this paragraph, the balance to the 
                        credit of an employee under a defined 
                        contribution plan shall not include any amount 
                        transferred from such defined contribution plan 
                        to a qualified cost-of-living arrangement 
                        (within the meaning of section 415(k)(2)) under 
                        a defined benefit plan.
                            ``(vii) Lump-sum distributions of alternate 
                        payees.--If any distribution or payment of the 
                        balance to the credit of an employee would be 
                        treated as a lump-sum distribution, then, for 
                        purposes of this paragraph, the payment under a 
                        qualified domestic relations order (within the 
                        meaning of section 414(p)) of the balance to 
                        the credit of an alternate payee who is the 
                        spouse or former spouse of the employee shall 
                        be treated as a lump-sum distribution. For 
                        purposes of this clause, the balance to the 
                        credit of the alternate payee shall not include 
                        any amount payable to the employee.''
            (2) Section 402(c) (relating to rules applicable to 
        rollovers from exempt trusts) is amended by striking paragraph 
        (10).
            (3) Paragraph (1) of section 55(c) (defining regular tax) 
        is amended by striking ``shall not include any tax imposed by 
        section 402(d) and''.
            (4) Paragraph (8) of section 62(a) (relating to certain 
        portion of lump-sum distributions from pension plans taxed 
        under section 402(d)) is hereby repealed.
            (5) Section 401(a)(28)(B) (relating to coordination with 
        distribution rules) is amended by striking clause (v).
            (6) Subparagraph (B)(ii) of section 401(k)(10) (relating to 
        distributions that must be lump-sum distributions) is amended 
        to read as follows:
                            ``(ii) Lump-sum distribution.--For purposes 
                        of this subparagraph, the term `lump-sum 
                        distribution' has the meaning given such term 
                        by section 402(e)(4)(D), without regard to 
                        subclauses (I), (II), (III), and (IV) of clause 
                        (i) thereof.''
            (7) Section 406(c) (relating to termination of status as 
        deemed employee not to be treated as separation from service 
        for purposes of limitation of tax) is hereby repealed.
            (8) Section 407(c) (relating to termination of status as 
        deemed employee not to be treated as separation from service 
        for purposes of limitation of tax) is hereby repealed.
            (9) Section 691(c) (relating to deduction for estate tax) 
        is amended by striking paragraph (5).
            (10) Paragraph (1) of section 871(b) (relating to 
        imposition of tax) is amended by striking ``section 1, 55, or 
        402(d)(1)'' and inserting ``section 1 or 55''.
            (11) Subsection (b) of section 877 (relating to alternative 
        tax) is amended by striking ``section 1, 55, or 402(d)(1)'' and 
        inserting ``section 1 or 55''.
            (12) Section 4980A(c)(4) is amended--
                    (A) by striking ``to which an election under 
                section 402(d)(4)(B) applies'' and inserting ``(as 
                defined in section 402(e)(4)(D)) with respect to which 
                the individual elects to have this paragraph apply'',
                    (B) by adding at the end the following new flush 
                sentence:
        ``An individual may elect to have this paragraph apply to only 
        one lump-sum distribution.'', and
                    (C) by striking the heading and inserting:
            ``(4) Special one-time election.--''.
            (13) Section 402(e) is amended by striking paragraph (5).
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 1998.
            (2) Retention of certain transition rules.--Notwithstanding 
        any other provision of this section, the amendments made by 
        this section shall not apply to any distribution for which the 
        taxpayer elects the benefits of section 1122 (h)(3) or (h)(5) 
        of the Tax Reform Act of 1986. For purposes of the preceding 
        sentence, the rules of sections 402(c)(10) and 402(d) of the 
        Internal Revenue Code of 1986 (as in effect before the 
        amendments made by this Act) shall apply.

SEC. 1208. ELIMINATION OF HALF-YEAR REQUIREMENTS.

    (a) In General.--Each of the following provisions are amended by 
striking ``age 59\1/2\'' and inserting ``age 59'':
            (1) Section 72(q)(2)(A).
            (2) Section 72(q)(3)(B)(i).
            (3) Section 72(q)(3)(B)(ii).
            (4) Section 72(t)(2)(A)(i).
            (5) Section 72(t)(4)(A)(ii)(I).
            (6) Section 72(t)(4)(A)(ii)(II).
            (7) Section 72(v)(2)(A).
            (8) Section 401(k)(2)(B)(i)(III).
            (9) Section 403(b)(7)(A)(ii).
            (10) Section 403(b)(11)(A).
            (11) The heading for section 403(b)(11).
            (12) Section 4978(d)(1)(B).
    (b) Other Provisions.--Each of the following provisions are amended 
by striking ``age 70\1/2\'' each place it appears and inserting ``age 
70'':
            (1) Section 219(d)(1).
            (2) The heading for section 219(d)(1).
            (3) Section 401(a)(9)(B)(iv)(I).
            (4) Section 401(a)(9)(C).
            (5) Section 408(b).
            (6) Section 457(d)(1)(A).
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1996.

SEC. 1209. DISTRIBUTIONS UNDER RURAL COOPERATIVE PLANS.

    (a) Distributions for Hardship or After a Certain Age.--Section 
401(k)(7) is amended by adding at the end the following new 
subparagraph:
                    ``(C) Special rule for certain distributions.--A 
                rural cooperative plan which includes a qualified cash 
                or deferred arrangement shall not be treated as 
                violating the requirements of section 401(a) or of 
                paragraph (2) merely because, under the plan, 
                distributions may be made by reason of hardship or the 
                attainment of age 59\1/2\. For purposes of this 
                section, the term `hardship distribution' means a 
                distribution described in paragraph (2)(B)(i)(IV) 
                (without regard to the limitation of its application to 
                profit-sharing or stock bonus plans).''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to distributions after the date of the enactment of this Act.

SEC. 1210. MODIFICATION OF ADDITIONAL PARTICIPATION REQUIREMENTS.

    (a) General Rule.--Section 401(a)(26)(A) (relating to additional 
participation requirements) is amended to read as follows:
                    ``(A) In general.--In the case of a trust which is 
                a part of a defined benefit plan, such trust shall not 
                constitute a qualified trust under this subsection 
                unless, on each day of the plan year, such plan 
                benefits at least the lesser of--
                            ``(i) 50 employees of the employer, or
                            ``(ii) the greater of--
                                    ``(I) 40 percent of all employees 
                                of the employer, or
                                    ``(II) 2 employees (or if there is 
                                only 1 employee, such employee).''
    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 1996.

SEC. 1211. UNIFORM RETIREMENT AGE.

    (a) Discrimination Testing.--Paragraph (5) of section 401(a) 
(relating to special rules relating to nondiscrimination requirements) 
is amended by adding at the end the following new subparagraph:
                    ``(F) Social security retirement age.--For purposes 
                of testing for discrimination under paragraph (4)--
                            ``(i) the social security retirement age 
                        (as defined in section 415(b)(8)) shall be 
                        treated as a uniform retirement age, and
                            ``(ii) subsidized early retirement benefits 
                        and joint and survivor annuities shall not be 
                        treated as being unavailable to employees on 
                        the same terms merely because such benefits or 
                        annuities are based in whole or in part on an 
                        employee's social security retirement age (as 
                        so defined).''
    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 1996.

SEC. 1212. TREATMENT OF LEASED EMPLOYEES.

    (a) General Rule.--Subparagraph (C) of section 414(n)(2) (defining 
leased employee) is amended to read as follows:
                    ``(C) such services are performed under significant 
                direction or control by the recipient.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to years beginning after December 31, 1996, but shall not apply 
to any relationship determined under an Internal Revenue Service ruling 
issued before the date of the enactment of this Act pursuant to section 
414(n)(2)(C) of the Internal Revenue Code of 1986 (as in effect on the 
day before such date) not to involve a leased employee.

SEC. 1213. FULL FUNDING LIMITATION FOR MULTIEMPLOYER PLANS.

    (a) Full-Funding Limitation.--Section 412(c)(7)(C) (relating to 
full-funding limitation) is amended--
            (1) by inserting ``or in the case of a multiemployer 
        plan,'' after ``paragraph (6)(B),'', and
            (2) by inserting ``and multiemployer plans'' after 
        ``paragraph (6)(b)'' in the heading thereof.
    (b) Valuation.--Section 412(c)(9) is amended--
            (1) by inserting ``(3 years in the case of a multiemployer 
        plan)'' after ``year'', and
            (2) by striking ``Annual valuation'' in the heading and 
        inserting ``Valuation''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1996.

SEC. 1214. ELIMINATION OF PARTIAL TERMINATION RULES FOR MULTIEMPLOYER 
              PLANS.

    (a) Partial Termination Rules for Multiemployer Plans.--Section 
411(d)(3) is amended by adding at the end the following new sentence: 
``This paragraph shall not apply in the case of a partial termination 
of a multiemployer plan.''
    (b) Effective Date.--The amendment made by this section shall apply 
to partial terminations beginning after December 31, 1996.

SEC. 1215. ELECTIVE DEFERRALS UNDER SECTION 403(b).

    (a) In General.--Subparagraph (E) of section 403(b)(1) is amended 
to read as follows:
                    ``(E) in the case of a contract purchased under a 
                salary reduction agreement, the contract meets the 
                requirements of section 401(a)(30),''.
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1996.

SEC. 1216. UNIFORM PENALTY PROVISIONS TO APPLY TO CERTAIN PENSION 
              REPORTING REQUIREMENTS.

    (a) Penalties.--
            (1) Statements.--Paragraph (1) of section 6724(d) is 
        amended by striking ``and'' at the end of subparagraph (A), by 
        striking the period at the end of subparagraph (B) and 
        inserting ``, and'', and by inserting after subparagraph (B) 
        the following new subparagraph:
                    ``(C) any statement required to be made to the 
                Secretary under--
                            ``(i) section 408(i) (relating to reports 
                        with respect to individual retirement accounts 
                        or annuities), or
                            ``(ii) section 6047(d) (relating to reports 
                        by employers, plan administrators, etc.).''
            (2) Reports.--Paragraph (2) of section 6724(d) is amended 
        by striking ``or'' at the end of subparagraph (S), by striking 
the period at the end of subparagraph (T) and inserting a comma, and by 
inserting after subparagraph (T) the following new subparagraphs:
                    ``(U) section 408(i) (relating to reports with 
                respect to individual retirement plans) to any person 
                other than the Secretary, or
                    ``(V) section 6047(d) (relating to reports by plan 
                administrators) to any person other than the 
                Secretary.''
            (3) Penalties.--
                    (A) Section 6721(e)(2)(A) is amended by striking 
                ``or 6050L'' and inserting ``6050L, or 408(i)''.
                    (B) Section 6722(c)(1)(A) is amended by striking 
                ``or 6050L(c)'' and inserting ``6050L(c), or 408(i)''.
    (b) Modification of Reportable Designated Distributions.--
            (1) Section 408.--Subsection (i) of section 408 (relating 
        to individual retirement account reports) is amended by 
        inserting ``aggregating $10 or more in any calendar year'' 
        after ``distributions''.
            (2) Section 6047.--Paragraph (1) of section 6047(d) 
        (relating to reports by employers, plan administrators, etc.) 
        is amended by adding at the end the following new sentence: 
        ``No return or report may be required under the preceding 
        sentence with respect to distributions to any person during any 
        year unless such distributions aggregate $10 or more.''
    (c) Conforming Amendments.--
            (1) Paragraph (1) of section 6047(f) is amended to read as 
        follows:

                                ``(1) For provisions relating to 
penalties for failures to file returns and reports required under this 
section, see sections 6652(e), 6721, and 6722.''
            (2) Subsection (e) of section 6652 is amended by adding at 
        the end the following new sentence: ``This subsection shall not 
        apply to any return or statement which is an information return 
        described in section 6724(d)(1)(C)(ii) or a payee statement 
        described in section 6724(d)(2)(V).''
            (3) Subsection (a) of section 6693 is amended by adding at 
        the end the following new sentence: ``This subsection shall not 
        apply to any report which is an information return described in 
        section 6724(d)(1)(C)(i) or a payee statement described in 
        section 6724(d)(2)(U).''
    (d) Effective Date.--The amendments made by this section shall 
apply to returns, reports, and other statements the due date for which 
(determined without regard to extensions) is after December 31, 1996.

SEC. 1217. TAX ON PROHIBITED TRANSACTIONS.

    (a) In General.--Section 4975(a) is amended by striking ``5 
percent'' and inserting ``10 percent''.
    (b) Effective Date.--The amendment made by this section shall apply 
to prohibited transactions occurring after the date of the enactment of 
this Act.

SEC. 1218. DATE FOR ADOPTION OF PLAN AMENDMENTS.

    (a) In General.--If any amendment made by this subtitle requires an 
amendment to any plan, such plan amendment shall not be required to be 
made before the last day of the first plan year beginning on or after 
January 1, 1998, if--
            (1) during the period after such amendment takes effect and 
        before the last day of such first plan year, the plan is 
        operated in accordance with the requirements of such amendment, 
        and
            (2) such plan amendment applies retroactively to such 
        period.
    (b) Governmental Plans.--In the case of a governmental plan (as 
defined in section 414(d) of the Internal Revenue Code of 1986), 
subsection (a) shall be applied by substituting for ``January 1, 1998'' 
the later of--
            (1) January 1, 1999, or
            (2) the date which is 90 days after the opening of the 
        first legislative session beginning after January 1, 1999, of 
        the governing body with authority to amend the plan, but only 
        if such governing body does not meet continuously.

    Subtitle B--Expanded Individual Retirement Accounts to Increase 
                        Coverage and Portability

                CHAPTER 1--RETIREMENT SAVINGS INCENTIVES

                      Subchapter A--IRA Deduction

SEC. 1301. INCREASE IN INCOME LIMITATIONS.

    (a) In General.--Subparagraph (B) of section 219(g)(3) is amended--
            (1) by striking ``$40,000'' in clause (i) and inserting 
        ``$80,000 ($70,000 in the case of taxable years beginning in 
        1996, 1997, or 1998)'', and
            (2) by striking ``$25,000'' in clause (ii) and inserting 
        ``$50,000 ($45,000 in the case of taxable years beginning in 
        1996, 1997, or 1998)''.
    (b) Phaseout of Limitations.--Clause (ii) of section 219(g)(2)(A) 
is amended by striking ``$10,000'' and inserting ``an amount equal to 
10 times the dollar amount applicable for the taxable year under 
subsection (b)(1)(A)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 1302. INFLATION ADJUSTMENT FOR DEDUCTIBLE AMOUNT AND INCOME 
              LIMITATIONS.

    (a) In General.--Section 219 is amended by redesignating subsection 
(h) as subsection (i) and by inserting after subsection (g) the 
following new subsection:
    ``(h) Cost-of-Living Adjustments.--
            ``(1) Deductible amounts.--In the case of any taxable year 
        beginning in a calendar year after 1996, the $2,000 amounts 
        under subsections (b)(1)(A) and (c)(2) shall be increased by an 
        amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 1995' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(2) Applicable dollar amount.--In the case of any taxable 
        year beginning in a calendar year after 1999, the applicable 
        dollar amounts under subsection (g)(3)(B) shall be increased by 
        an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 1998' for `calendar year 1992' in 
                subparagraph (B) thereof.
            ``(3) Rounding rules.--
                    ``(A) Deduction amounts.--If any amount after 
                adjustment under paragraph (1) is not a multiple of 
                $500, such amount shall be rounded to the next lowest 
                multiple of $500.
                    ``(B) Applicable dollar amounts.--If any amount 
                after adjustment under paragraph (2) is not a multiple 
                of $5,000, such amount shall be rounded to the next 
                lowest multiple of $5,000.''
    (b) Conforming Amendments.--
            (1) Clause (i) of section 219(c)(2)(A) is amended to read 
        as follows:
                            ``(i) the sum of $250 and the dollar amount 
                        in effect for the taxable year under subsection 
                        (b)(1)(A), or''.
            (2) Section 408(a)(1) is amended by striking ``in excess of 
        $2,000 on behalf of any individual'' and inserting ``on behalf 
        of any individual in excess of the amount in effect for such 
        taxable year under section 219(b)(1)(A)''.
            (3) Section 408(b)(2)(B) is amended by striking ``$2,000'' 
        and inserting ``the dollar amount in effect under section 
        219(b)(1)(A)''.
            (4) Subparagraph (A) of section 408(d)(5) is amended by 
        striking ``$2,250'' and inserting ``the dollar amount in effect 
        for the taxable year under section 219(c)(2)(A)(i)''.
            (5) Section 408(j) is amended by striking ``$2,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 1303. COORDINATION OF IRA DEDUCTION LIMIT WITH ELECTIVE DEFERRAL 
              LIMIT.

    (a) In General.--Section 219(b) (relating to maximum amount of 
deduction) is amended by adding at the end the following new paragraph:
            ``(4) Coordination with elective deferral limit.--The 
        amount determined under paragraph (1) or subsection (c)(2) with 
        respect to any individual for any taxable year shall not exceed 
        the excess (if any) of--
                    ``(A) the limitation applicable for the taxable 
                year under section 402(g)(1), over
                    ``(B) the elective deferrals (as defined in section 
                402(g)(3)) of such individual for such taxable year.''
    (b) Conforming Amendment.--Section 219(c) is amended by adding at 
the end the following new paragraph:
    ``(3) Cross reference.--

                                ``For reduction in paragraph (2) 
amount, see subsection (b)(4).''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

               Subchapter B--Nondeductible Tax-Free IRAs

SEC. 1311. ESTABLISHMENT OF NONDEDUCTIBLE TAX-FREE INDIVIDUAL 
              RETIREMENT ACCOUNTS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
(relating to pension, profit-sharing, stock bonus plans, etc.) is 
amended by inserting after section 408 the following new section:

``SEC. 408A. SPECIAL INDIVIDUAL RETIREMENT ACCOUNTS.

    ``(a) General Rule.--Except as provided in this chapter, a special 
individual retirement account shall be treated for purposes of this 
title in the same manner as an individual retirement plan.
    ``(b) Special Individual Retirement Account.--For purposes of this 
title, the term `special individual retirement account' means an 
individual retirement plan which is designated at the time of 
establishment of the plan as a special individual retirement account.
    ``(c) Treatment of Contributions.--
            ``(1) No deduction allowed.--No deduction shall be allowed 
        under section 219 for a contribution to a special individual 
        retirement account.
            ``(2) Contribution limit.--The aggregate amount of 
        contributions for any taxable year to all special individual 
        retirement accounts maintained for the benefit of an individual 
        shall not exceed the excess (if any) of--
                    ``(A) the maximum amount allowable as a deduction 
                under section 219 with respect to such individual for 
                such taxable year, over
                    ``(B) the aggregate amount of contributions for 
                such taxable year to all individual retirement plans 
                (other than special individual retirement accounts) 
                maintained for the benefit of the individual.
            ``(3) Special rules for qualified transfers.--
                    ``(A) In general.--No rollover contribution may be 
                made to a special individual retirement account unless 
                it is a qualified transfer.
                    ``(B) Limit not to apply.--The limitation under 
                paragraph (2) shall not apply to a qualified transfer 
                to a special individual retirement account.
    ``(d) Tax Treatment of Distributions.--
            ``(1) In general.--Except as provided in this subsection, 
        any amount paid or distributed out of a special individual 
        retirement account shall not be included in the gross income of 
        the distributee.
            ``(2) Exception for earnings on contributions held less 
        than 5 years.--
                    ``(A) In general.--Any amount distributed out of a 
                special individual retirement account which consists of 
                earnings allocable to contributions made to the account 
                during the 5-year period ending on the day before such 
                distribution shall be included in the gross income of 
                the distributee for the taxable year in which the 
                distribution occurs.
                    ``(B) Ordering rule.--
                            ``(i) First-in, first-out rule.--
                        Distributions from a special individual 
                        retirement account shall be treated as having 
                        been made--
                                    ``(I) first from the earliest 
                                contribution (and earnings allocable 
                                thereto) remaining in the account at 
                                the time of the distribution, and
                                    ``(II) then from other 
                                contributions (and earnings allocable 
                                thereto) in the order in which made.
                            ``(ii) Allocations between contributions 
                        and earnings.--Any portion of a distribution 
                        allocated to a contribution (and earnings 
                        allocable thereto) shall be treated as 
                        allocated first to the earnings and then to the 
                        contribution.
                            ``(iii) Allocation of earnings.--Earnings 
                        shall be allocated to a contribution in such 
                        manner as the Secretary may prescribe.
                            ``(iv) Aggregations of contributions.--
                        Except as provided by the Secretary, for 
                        purposes of this subparagraph--
                                    ``(I) all contributions made during 
                                the same taxable year may be treated as 
                                1 contribution, and
                                    ``(II) all contributions made 
                                before the first day of the 5-year 
                                period ending on the day before any 
                                distribution may be treated as 1 
                                contribution.
                    ``(C) Cross reference.--

                                ``For additional tax for early 
withdrawal, see section 72(t).
            ``(3) Qualified transfer.--
                    ``(A) In general.--Paragraph (2) shall not apply to 
                any distribution which is transferred in a qualified 
                transfer to another special individual retirement 
                account.
                    ``(B) Contribution period.--For purposes of 
                paragraph (2), the special individual retirement 
                account to which any contributions are transferred 
                shall be treated as having held such contributions 
                during any period such contributions were held (or are 
                treated as held under this subparagraph) by the special 
                individual retirement account from which transferred.
            ``(4) Special rules relating to certain transfers.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, in the case of a qualified transfer 
                to a special individual retirement account from an 
                individual retirement plan which is not a special 
                individual retirement account--
                            ``(i) there shall be included in gross 
                        income any amount which, but for the qualified 
                        transfer, would be includible in gross income, 
                        but
                            ``(ii) section 72(t) shall not apply to 
                        such amount.
                    ``(B) Time for inclusion.--In the case of any 
                qualified transfer which occurs before January 1, 1998, 
                any amount includible in gross income under 
                subparagraph (A) with respect to such contribution 
                shall be includible ratably over the 4-taxable year 
                period beginning in the taxable year in which the 
                amount was paid or distributed out of the individual 
                retirement plan. The amount of such qualified transfer 
                taken into account for purposes of section 4980A(c) 
                shall be taken into account ratably over such period.
                    ``(C) Additional reporting.--A trustee of an 
                individual retirement plan shall include such 
                additional information in any report required under 
                section 408(i) as the Secretary may require to insure 
                that amounts described in subparagraph (B) are included 
                in gross income for the appropriate taxable year.
    ``(e) Qualified Transfer.--For purposes of this section--
            ``(1) In general.--The term `qualified transfer' means a 
        transfer to a special individual retirement account from 
        another such account or from an individual retirement plan but 
        only if such transfer meets the requirements of section 
        408(d)(3).
            ``(2) Limitation.--
                    ``(A) In general.--A transfer otherwise described 
                in paragraph (1) shall not be treated as a qualified 
                transfer if the taxpayer's adjusted gross income for 
                the taxable year of the transfer exceeds the sum of--
                            ``(i) the applicable dollar amount, plus
                            ``(ii) the dollar amount applicable for the 
                        taxable year under section 219(g)(2)(A)(ii).
                This subparagraph shall not apply to a transfer from a 
                special individual retirement account to another 
                special individual retirement account.
                    ``(B) Transition rule.--In the case of a transfer 
                before January 1, 1999, the dollar limitation under 
                subparagraph (A) shall be $100,000 in the case of a 
                married individual filing a joint return, zero in the 
                case of a married individual filing a separate return, 
                and $70,000 in any other case.
            ``(3) Definitions.--For purposes of this subsection, the 
        terms `adjusted gross income' and `applicable dollar amount' 
        have the meanings given such terms by section 219(g)(3), except 
        that adjusted gross income shall be determined by taking into 
        account the deduction under section 219 and not taking into 
        account any transfer to which paragraph (2) applies.''
    (b) Additional Tax on Early Distributions.--Section 72(t) is 
amended by adding at the end the following new paragraph:
            ``(6) Rules relating to special individual retirement 
        accounts.--In the case of a special individual retirement 
        account under section 408A--
                    ``(A) this subsection shall only apply to 
                distributions out of such account which consist of 
                earnings allocable to contributions made to the account 
                during the 5-year period ending on the day before such 
                distribution, and
                    ``(B) paragraph (2)(A)(i) shall not apply to any 
                distribution described in subparagraph (A).''
    (c) Excess Contributions.--Section 4973(b) is amended--
            (1) by inserting ``, or a qualified transfer described in 
        section 408A(e)'' after ``408(d)(3)'' in paragraph (1)(A), and
            (2) by adding at the end the following new sentence: ``For 
        purposes of paragraphs (1)(B) and (2)(C), the amount allowable 
        as a deduction under section 219 shall be computed without 
        regard to section 408A.''
    (d) Reporting.--Section 408(i) is amended by striking ``under 
regulations'' and ``in such regulations'' each place such terms appear.
    (e) Conforming Amendment.--The table of sections for subpart A of 
part I of subchapter D of chapter 1 is amended by inserting after the 
item relating to section 408 the following new item:

                              ``Sec. 408A. Special individual 
                                        retirement accounts.''
    (f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

                CHAPTER 2--DISTRIBUTIONS AND INVESTMENTS

SEC. 1321. DISTRIBUTIONS FROM IRAS MAY BE USED WITHOUT ADDITIONAL TAX 
              TO PURCHASE FIRST HOMES, TO PAY HIGHER EDUCATION OR 
              FINANCIALLY DEVASTATING MEDICAL EXPENSES, OR BY THE 
              UNEMPLOYED.

    (a) In General.--Paragraph (2) of section 72(t) (relating to 
exceptions to 10-percent additional tax on early distributions from 
qualified retirement plans) is amended by adding at the end the 
following new subparagraph:
                    ``(D) Distributions from certain plans for first 
                home purchases or educational expenses.--Distributions 
                to an individual from an individual retirement plan--
                            ``(i) which are qualified first-time 
                        homebuyer distributions (as defined in 
                        paragraph (7)); or
                            ``(ii) to the extent such distributions do 
                        not exceed the qualified higher education 
                        expenses (as defined in paragraph (8)) of the 
                        taxpayer for the taxable year.''
    (b) Financially Devastating Medical Expenses.--
            (1) In general.--Section 72(t)(3)(A) is amended by striking 
        ``(B),''.
            (2) Certain lineal descendants and ancestors treated as 
        dependents and long-term care services treated as medical 
        care.--Subparagraph (B) of section 72(t)(2) is amended by 
        striking ``medical care'' and all that follows and inserting 
        ``medical care determined--
                            ``(i) without regard to whether the 
                        employee itemizes deductions for such taxable 
                        year, and
                            ``(ii) in the case of an individual 
                        retirement plan--
                                    ``(I) by treating such employee's 
                                dependents as including all children, 
                                grandchildren, and ancestors of the 
                                employee or such employee's spouse and
                                    ``(II) by treating qualified long-
                                term care services (as defined in 
                                paragraph (9)) as medical care for 
                                purposes of this subparagraph.''
            (3) Conforming amendment.--Subparagraph (B) of section 
        72(t)(2) is amended by striking ``or (C)'' and inserting ``, 
        (C), or (D)''.
    (c) Definitions.--Section 72(t), as amended by this Act, is amended 
by adding at the end the following new paragraphs:
            ``(7) Qualified first-time homebuyer distributions.--For 
        purposes of paragraph (2)(D)(i)--
                    ``(A) In general.--The term `qualified first-time 
                homebuyer distribution' means any payment or 
                distribution received by an individual to the extent 
                such payment or distribution is used by the individual 
                before the close of the 60th day after the day on which 
                such payment or distribution is received to pay 
                qualified acquisition costs with respect to a principal 
                residence of a first-time homebuyer who is such 
                individual or the spouse, child (as defined in section 
                151(c)(3)), or grandchild of such individual.
                    ``(B) Qualified acquisition costs.--For purposes of 
                this paragraph, the term `qualified acquisition costs' 
                means the costs of acquiring, constructing, or 
                reconstructing a residence. Such term includes any 
                usual or reasonable settlement, financing, or other 
                closing costs.
                    ``(C) First-time homebuyer; other definitions.--For 
                purposes of this paragraph--
                            ``(i) First-time homebuyer.--The term 
                        `first-time homebuyer' means any individual 
                        if--
                                    ``(I) such individual (and if 
                                married, such individual's spouse) had 
                                no present ownership interest in a 
                                principal residence during the 3-year 
                                period ending on the date of 
                                acquisition of the principal residence 
                                to which this paragraph applies, and
                                    ``(II) subsection (h) or (k) of 
                                section 1034 did not suspend the 
                                running of any period of time specified 
                                in section 1034 with respect to such 
                                individual on the day before the date 
                                the distribution is applied pursuant to 
                                subparagraph (A).
                        In the case of an individual described in 
                        section 143(i)(1)(C) for any year, an ownership 
                        interest shall not include any interest under a 
                        contract of deed described in such section. An 
                        individual who loses an ownership interest in a 
                        principal residence incident to a divorce or 
                        legal separation is deemed for purposes of this 
                        subparagraph to have had no ownership interest 
                        in such principal residence within the period 
                        referred to in subclause (II).
                            ``(ii) Principal residence.--The term 
                        `principal residence' has the same meaning as 
                        when used in section 1034.
                            ``(iii) Date of acquisition.--The term 
                        `date of acquisition' means the date--
                                    ``(I) on which a binding contract 
                                to acquire the principal residence to 
                                which subparagraph (A) applies is 
                                entered into, or
                                    ``(II) on which construction or 
                                reconstruction of such a principal 
                                residence is commenced.
                    ``(D) Special rule where delay in acquisition.--Any 
                portion of any distribution from any individual 
                retirement plan which fails to meet the requirements of 
                subparagraph (A) solely by reason of a delay or 
                cancellation of the purchase or construction of the 
                residence may be contributed to an individual 
                retirement plan as provided in section 408(d)(3)(A)(i) 
                (determined by substituting `120 days' for `60 days' in 
                such section), except that--
                            ``(i) section 408(d)(3)(B) shall not be 
                        applied to such portion, and
                            ``(ii) such portion shall not be taken into 
                        account in determining whether section 
                        408(d)(3)(B) applies to any other amount.
            ``(8) Qualified higher education expenses.--For purposes of 
        paragraph (2)(D)(ii)--
                    ``(A) In general.--The term `qualified higher 
                education expenses' means tuition and fees required for 
                the enrollment or attendance of--
                            ``(i) the taxpayer,
                            ``(ii) the taxpayer's spouse,
                            ``(iii) a dependent of the taxpayer with 
                        respect to whom the taxpayer is allowed a 
                        deduction under section 151, or
                            ``(iv) the taxpayer's child (as defined in 
                        section 151(c)(3)) or grandchild,
                as an eligible student at an institution of higher 
                education.
                    ``(B) Exceptions.--The term `qualified higher 
                education expenses' does not include--
                            ``(i) expenses with respect to any course 
                        or other education involving sports, games, or 
                        hobbies, unless such expenses--
                                    ``(I) are part of a degree program, 
                                or
                                    ``(II) are deductible under this 
                                chapter without regard to this section; 
                                or
                            ``(ii) any student activity fees, athletic 
                        fees, insurance expenses, or other expenses 
                        unrelated to a student's academic course of 
                        instruction.
                    ``(C) Coordination with savings bond provisions.--
                The amount of qualified higher education expenses for 
                any taxable year shall be reduced by any amount 
                excludable from gross income under section 135.
                    ``(D) Eligible student.--For purposes of 
                subparagraph (A), the term `eligible student' means a 
                student who--
                            ``(i) meets the requirements of section 
                        484(a)(1) of the Higher Education Act of 1965 
                        (20 U.S.C. 1091(a)(1)), as in effect on the 
date of the enactment of this section, and
                            ``(ii)(I) is carrying at least one-half the 
                        normal full-time work load for the course of 
                        study the student is pursuing, as determined by 
                        the institution of higher education, or
                            ``(II) is enrolled in a course which 
                        enables the student to improve the student's 
                        job skills or to acquire new job skills.
                    ``(E) Institution of higher education.--The term 
                `institution of higher education' means an institution 
                which--
                            ``(i) is described in section 481 of the 
                        Higher Education Act of 1965 (20 U.S.C. 1088), 
                        as in effect on the date of the enactment of 
                        this section, and
                            ``(ii) is eligible to participate in 
                        programs under title IV of such Act.
            ``(9) Qualified long-term care services.--For purposes of 
        paragraph (2)(B)--
                    ``(A) In general.--The term `qualified long-term 
                care services' means necessary diagnostic, curing, 
                mitigating, treating, preventive, therapeutic, and 
                rehabilitative services, and maintenance and personal 
                care services (whether performed in a residential or 
                nonresidential setting) which--
                            ``(i) are required by an individual during 
                        any period the individual is an incapacitated 
                        individual (as defined in subparagraph (B)),
                            ``(ii) have as their primary purpose--
                                    ``(I) the provision of needed 
                                assistance with 1 or more activities of 
                                daily living (as defined in 
                                subparagraph (C)), or
                                    ``(II) protection from threats to 
                                health and safety due to severe 
                                cognitive impairment, and
                            ``(iii) are provided pursuant to a 
                        continuing plan of care prescribed by a 
                        licensed professional (as defined in 
                        subparagraph (D)).
                    ``(B) Incapacitated individual.--The term 
                `incapacitated individual' means any individual who--
                            ``(i) is unable to perform, without 
                        substantial assistance from another individual 
                        (including assistance involving cueing or 
                        substantial supervision), at least 2 activities 
                        of daily living as defined in subparagraph (C), 
                        or
                            ``(ii) has severe cognitive impairment as 
                        defined by the Secretary in consultation with 
                        the Secretary of Health and Human Services.
                Such term shall not include any individual otherwise 
                meeting the requirements of the preceding sentence 
                unless, within the preceding 12-month period, a 
                licensed professional has certified that such 
                individual meets such requirements.
                    ``(C) Activities of daily living.--Each of the 
                following is an activity of daily living:
                            ``(i) Eating.
                            ``(ii) Toileting.
                            ``(iii) Transferring.
                            ``(iv) Bathing.
                            ``(v) Dressing.
                    ``(D) Licensed professional.--The term `licensed 
                professional' means--
                            ``(i) a physician or registered 
                        professional nurse, or
                            ``(ii) any other individual who meets such 
                        requirements as may be prescribed by the 
                        Secretary after consultation with the Secretary 
                        of Health and Human Services.
                    ``(E) Certain services not included.--The term 
                `qualified long-term care services' shall not include 
                any services provided to an individual--
                            ``(i) by a relative (directly or through a 
                        partnership, corporation, or other entity) 
                        unless the relative is a licensed professional 
                        with respect to such services, or
                            ``(ii) by a corporation or partnership 
                        which is related (within the meaning of section 
                        267(b) or 707(b)) to the individual.
                For purposes of this subparagraph, the term `relative' 
                means an individual bearing a relationship to the 
                individual which is described in paragraphs (1) through 
                (8) of section 152(a).''
    (d) Distributions for Certain Unemployed Individuals.--Paragraph 
(2) of section 72(t) is amended by adding at the end the following new 
subparagraph:
                    ``(E) Distributions to unemployed individuals.--A 
                distribution from an individual retirement plan to an 
                individual after separation from employment, if--
                            ``(i) such individual has received 
                        unemployment compensation for 12 consecutive 
                        weeks under any Federal or State unemployment 
                        compensation law by reason of such separation, 
                        and
                            ``(ii) such distributions are made during 
                        any taxable year during which such unemployment 
                        compensation is paid or the succeeding taxable 
                        year.''
    (e) Effective Date.--The amendments made by this section shall 
apply to payments and distributions after December 31, 1995.

SEC. 1322. CONTRIBUTIONS MUST BE HELD AT LEAST 5 YEARS IN CERTAIN 
              CASES.

    (a) In General.--Section 72(t), as amended by this Act, is amended 
by adding at the end the following new paragraph:
            ``(10) Certain contributions must be held 5 years.--
                    ``(A) In general.--Paragraph (2)(A)(i) shall not 
                apply to any amount distributed out of an individual 
                retirement plan (other than a special individual 
                retirement account) which is allocable to contributions 
                made to the plan during the 5-year period ending on the 
                date of such distribution (and earnings on such 
                contributions).
                    ``(B) Ordering rule.--For purposes of this 
                paragraph--
                            ``(i) First-in, first-out rule.--
                        Distributions shall be treated as having been 
                        made--
                                    ``(I) first from the earliest 
                                contribution (and earnings allocable 
                                thereto) remaining in the account at 
                                the time of the distribution, and
                                    ``(II) then from other 
                                contributions (and earnings allocable 
                                thereto) in the order in which made.
                            ``(ii) Allocation of earnings.--Earnings 
                        shall be allocated to contributions in such 
                        manner as the Secretary may prescribe.
                            ``(iii) Aggregations of contributions.--
                        Except as provided by the Secretary, for 
                        purposes of this subparagraph--
                                    ``(I) all contributions made during 
                                the same taxable year may be treated as 
                                1 contribution, and
                                    ``(II) all contributions made 
                                before the first day of the 5-year 
                                period ending on the day before any 
                                distribution may be treated as 1 
                                contribution.
                    ``(C) Special rule for rollovers.--
                            ``(i) Pension plans.--Subparagraph (A) 
                        shall not apply to distributions out of an 
                        individual retirement plan which are allocable 
                        to rollover contributions to which section 
                        402(c), 403(a)(4), or 403(b)(8) applied.
                            ``(ii) Contribution period.--For purposes 
                        of subparagraph (A), amounts shall be treated 
                        as having been held by a plan during any period 
                        such contributions were held (or are treated as 
                        held under this clause) by any individual 
                        retirement plan from which transferred.
                    ``(D) Special accounts.--For rules applicable to 
                special individual retirement accounts under section 
                408A, see paragraph (8).''
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions (and earnings allocable thereto) which are made after 
December 31, 1995.

SEC. 1323. INVESTMENTS IN QUALIFIED STATE PREPAID TUITION PROGRAMS.

    (a) In General.--Section 408, as amended by section 1101, is 
amended by redesignating subsection (q) as subsection (r) and by 
inserting after subsection (p) the following new subsection:
    ``(q) Special Rules for Qualified State Prepaid Tuition Program 
Instruments.--
            ``(1) In general.--In the case of a qualified State prepaid 
        tuition program instrument to which this subsection applies--
                    ``(A) the use of all or part of the assets of an 
                individual retirement plan to purchase such an 
                instrument shall be treated for purposes of this 
                section as for the exclusive benefit of the individual 
                for whom the plan was established or the individual's 
                beneficiaries, and
                    ``(B) to the extent such instrument is converted 
                into tuition and fees as provided in paragraph 
                (3)(B)(i), such individual (or such beneficiaries) 
                shall be treated--
                            ``(i) for purposes of subsection (d) as 
                        having received a distribution in an amount 
                        equal to such tuition and fees (as of the time 
                        of the conversion), and
                            ``(ii) for purposes of section 
                        72(t)(2)(D)(ii), as having incurred qualified 
                        higher education expenses to the extent such 
                        tuition and fees otherwise constitute such 
                        expenses.
            ``(2) Instruments to which subsection applies.--To the 
        extent provided by the Secretary, this subsection shall apply 
        to any qualified State prepaid tuition program instrument if--
                    ``(A) the instrument is purchased by the individual 
                retirement plan directly from the State or an 
                instrumentality thereof, and
                    ``(B) the beneficiary designated under the 
                instrument is the taxpayer, the taxpayer's spouse, a 
                dependent of the taxpayer with respect to whom the 
                taxpayer is allowed a deduction under section 151, or 
                the taxpayer's child (as defined in section 151(c)(3)) 
                or grandchild.
            ``(3) Qualified state prepaid tuition program instrument.--
        For purposes of this subsection, the term `qualified State 
        prepaid tuition program instrument' means an instrument which--
                    ``(A) is issued under a program established and 
                maintained by a State, and
                    ``(B) which may only be--
                            ``(i) converted into a percentage 
                        (determined as of the time of purchase) of 
                        tuition and fees which would constitute 
                        qualified higher education expenses (within the 
                        meaning of section 72(t)(8)) if the beneficiary 
                        designated under the instrument enrolls in or 
                        attends an institution of higher education 
                        specified in the instrument as an eligible 
                        student, or
                            ``(ii) redeemed for an amount not less than 
                        the purchase price (less any reasonable 
                        administrative fees) if the instrument is not 
                        converted as provided in clause (i).
            ``(4) Definitions.--For purposes of this subsection, the 
        terms `institution of higher education' and `eligible student' 
        have the meanings given such terms by section 72(t)(8).''
    (b) Exemption From Prohibited Transactions.--Section 4975(d) is 
amended by striking ``or'' at the end of paragraph (14), by striking 
the period at the end of paragraph (15) and inserting ``; or'', and by 
inserting after paragraph (15) the following new paragraph:
            ``(16) any purchase of a qualified State prepaid tuition 
        program instrument to which section 408(q) applies.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

              CHAPTER 3--TERMINATION OF CERTAIN PROVISIONS

SEC. 1331. TERMINATION OF CERTAIN PROVISIONS.

    (a) Termination of Inflation Adjustment for IRA Limitations.--The 
dollar amounts applicable under section 219 of the Internal Revenue 
Code of 1986 shall be determined without regard to subsection (h) of 
such section in the case of taxable years beginning after December 31, 
2000.
    (b) Termination of Contributions to Special Individual Retirement 
Accounts.--No contribution may be made after December 31, 2000, to any 
special individual retirement account (within the meaning of section 
408A of such Code).
    (c) Termination of Transfers to Special Individual Retirement 
Accounts From Regular Individual Retirement Accounts.--For purposes of 
section 408A of such Code, the term ``qualified transfer'' shall not 
include any transfer after December 31, 2000, to a special individual 
retirement account from any account other than a special individual 
retirement account.
    (d) Application of Early Withdrawal Tax.--The amendments made by 
the following provisions shall not apply to any distribution after 
December 31, 2000:
            (1) Section 1311(b) (relating to exception for 
        distributions from special individual retirement accounts 
        allocable to contributions held at least 5 years).
            (2) Section 1321 (relating to distributions from IRAs may 
        be used without additional tax to purchase first homes, to pay 
        higher education or financially devastating medical expenses, 
        or by the unemployed).
            (3) Section 1322 (relating to exception for distributions 
        allocable to contributions held at least 5 years).
    (e) Termination of Increases in Certain Limitations.--The 
amendments made by the following provisions shall not apply to any 
taxable year beginning after December 31, 2000:
            (1) Section 1301 (relating to increase in income 
        limitations for individual retirement plans).
            (2) Section 1303 (relating to coordination of IRA deduction 
        limit with elective deferral limit).

          Subtitle C--Other Expansions of Pension Portability

SEC. 1401. ALTERNATIVE NONDISCRIMINATION RULES FOR CERTAIN PLANS THAT 
              PROVIDE FOR EARLY PARTICIPATION.

    (a) Cash or Deferred Arrangements.--Paragraph (3) of section 401(k) 
(relating to application of participation and discrimination 
standards), as amended by section 1103(d), is amended by adding at the 
end the following new subparagraph:
                    ``(F) Special rule for early participation.--If an 
                employer elects to apply section 410(b)(4)(B) in 
                determining whether a cash or deferred arrangement 
                meets the requirements of subparagraph (A)(i), the 
                employer may, in determining whether the arrangement 
                meets the requirements of subparagraph (A)(ii), exclude 
                from consideration all eligible employees (other than 
                highly compensated employees) who have not met the 
                minimum age and service requirements of section 
                410(a)(1)(A).''
    (b) Matching Contributions.--Paragraph (5) of section 401(m) 
(relating to employees taken into consideration) is amended by adding 
at the end the following new subparagraph:
                    ``(C) Special rule for early participation.--If an 
                employer elects to apply section 410(b)(4)(B) in 
                determining whether a plan meets the requirements of 
                section 410(b), the employer may, in determining 
                whether the plan meets the requirements of paragraph 
                (2), exclude from consideration all eligible employees 
                (other than highly compensated employees) who have not 
                met the minimum age and service requirements of section 
                410(a)(1)(A).''
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1996.

SEC. 1402. TREATMENT OF CERTAIN VETERANS' REEMPLOYMENT RIGHTS.

    (a) In General.--Section 414 is amended by adding at the end the 
following new subsection:
    ``(u) Special Rules Relating to Veterans' Reemployment Rights Under 
USSERA.--
            ``(1) Treatment of certain contributions made pursuant to 
        veterans' reemployment rights under userra.--If any 
        contribution is made by an employer or an employee under an 
        individual account plan with respect to an employee, or by an 
        employee to a defined benefit plan that provides for employee 
        contributions, and such contribution is required by reason of 
        such employee's rights under chapter 43 of title 38, United 
        States Code, resulting from qualified military service, then--
                    ``(A) such contribution shall not be subject to any 
                otherwise applicable limitation contained in section 
                402(g), 402(h), 403(b), 404(a), 404(h), 408, 415, or 
                457, and shall not be taken into account in applying 
                such limitations to other contributions or benefits 
                under such plan or any other plan, with respect to the 
                year in which the contribution is made,
                    ``(B) such contribution shall be subject to the 
                limitations referred to in subparagraph (A) with 
                respect to the year to which the contribution relates 
                (in accordance with rules prescribed by the Secretary), 
                and
                    ``(C) such plan shall not be treated as failing to 
                meet the requirements of section 401(a)(4), 401(a)(26), 
                401(k)(3), 401(k)(11), 401(m), 403(b)(12), 408(k)(3), 
                408(k)(6), 408(p), 410(b), or 416 by reason of the 
                making of (or the right to make) such contribution.
        For purposes of the preceding sentence, any elective deferral 
        or employee contribution made under paragraph (2) shall be 
        treated as required by reason of the employee's rights under 
        such chapter 43.
            ``(2) Reemployment rights under userra with respect to 
        elective deferrals.--
                    ``(A) In general.--For purposes of this subchapter 
                and section 457, if an employee is entitled to the 
                benefits of chapter 43 of title 38, United States Code, 
                with respect to any plan which provides for elective 
                deferrals, the employer sponsoring the plan shall be 
                treated as meeting the requirements of such chapter 43 
                with respect to such elective deferrals only if such 
                employer--
                            ``(i) permits such employee to make 
                        additional elective deferrals under such plan 
                        (in the amount determined under subparagraph 
                        (B) or such lesser amount as is elected by the 
                        employee) during the period which begins on the 
                        date of the reemployment of such employee with 
                        such employer and has the same length as the 
                        lesser of--
                                    ``(I) the product of 3 and the 
                                period of qualified military service 
                                which resulted in such rights, and
                                    ``(II) 5 years, and
                            ``(ii) makes a matching contribution with 
                        respect to any additional elective deferral 
                        made pursuant to clause (i) which would have 
                        been required had such deferral actually been 
                        made during the period of such qualified 
                        military service.
                    ``(B) Amount of makeup required.--The amount 
                determined under this subparagraph with respect to any 
                plan is the maximum amount of the elective deferrals 
                that the individual would have been permitted to make 
                under the plan in accordance with the limitations 
                referred to in paragraph (1)(A) during the period of 
                qualified military service if the individual had 
                continued to be employed by the employer during such 
                period and received compensation as determined under 
                paragraph (7). Proper adjustment shall be made to the 
                amount determined under the preceding sentence for any 
                elective deferrals actually made during the period of 
                such qualified military service.
                    ``(C) Elective deferral.--For purposes of this 
                paragraph, the term `elective deferral' has the meaning 
                given such term by section 402(g)(3); except that such 
                term shall include any deferral of compensation under 
                an eligible deferred compensation plan (as defined in 
                section 457(b)).
                    ``(D) After-tax employee contributions.--References 
                in subparagraphs (A) and (B) to elective deferrals 
                shall be treated as including references to employee 
                contributions.
            ``(3) Certain retroactive adjustments not required.--For 
        purposes of this subchapter and subchapter E, no provision of 
        chapter 43 of title 38, United States Code, shall be construed 
        as requiring--
                    ``(A) any crediting of earnings to an employee with 
                respect to any contribution before such contribution is 
                actually made, or
                    ``(B) any allocation of any forfeiture with respect 
                to the period of qualified military service.
            ``(4) Loan repayment suspensions permitted.--If any plan 
        suspends the obligation to repay any loan made to an employee 
        from such plan for any part of any period during which such 
        employee is performing service in the uniformed services (as 
        defined in chapter 43 of title 38, United States Code), whether 
        or not qualified military service, such suspension shall not be 
        taken into account for purposes of section 72(p) or 401(a).
            ``(5) Qualified military service.--For purposes of this 
        subsection, the term `qualified military service' means any 
        service in the uniformed services (as defined in chapter 43 of 
        title 38, United States Code) by any individual if such 
        individual is entitled to reemployment rights under such 
        chapter with respect to such service.
            ``(6) Individual account plan.--For purposes of this 
        subsection, the term `individual account plan' means any 
        defined contribution plan (including any tax-sheltered annuity 
        plan under section 403(b), any simplified employee pension 
        under section 408(k), and any NEST under section 408(p)) and 
        any eligible deferred compensation plan (as defined in section 
        457(b)).
            ``(7) Compensation.--For purposes of sections 403(b)(3), 
        415(c)(3), and 457(e)(5), an employee who is in qualified 
        military service shall be treated as receiving compensation 
        from the employer during such period of qualified military 
        service equal to--
                    ``(A) the compensation the employee would have 
                received during such period if the employee were not in 
                qualified military service, determined based on the 
                rate of pay the employee would have received from the 
                employer but for absence during the period of qualified 
                military service, or
                    ``(B) if the compensation the employee would have 
                received during such period was not reasonably certain, 
                the employee's average compensation from the employer 
                during the 12-month period immediately preceding the 
                qualified military service (or, if shorter, the period 
                of employment immediately preceding the qualified 
                military service).
            ``(8) USERRA requirements for qualified retirement plans.--
        For purposes of this subchapter and section 457, an employer 
        sponsoring a retirement plan shall be treated as meeting the 
        requirements of chapter 43 of title 38, United States Code, 
        only if each of the following requirements is met:
                    ``(A) An individual reemployed under such chapter 
                is treated with respect to such plan as not having 
                incurred a break in service with the employer 
                maintaining the plan by reason of such individual's 
                period of qualified military service.
                    ``(B) Each period of qualified military service 
                served by an individual is, upon reemployment under 
                such chapter, deemed with respect to such plan to 
                constitute service with the employer maintaining the 
                plan for the purpose of determining the 
                nonforfeitability of the individual's accrued benefits 
                under such plan and for the purpose of determining the 
                accrual of benefits under such plan.
                    ``(C) An individual reemployed under such chapter 
                is entitled to accrued benefits that are contingent on 
                the making of, or derived from, employee contributions 
                or elective deferrals only to the extent the individual 
                makes payment to the plan with respect to such 
                contributions or deferrals. No such payment may exceed 
                the amount the individual would have been permitted or 
                required to contribute had the individual remained 
                continuously employed by the employer throughout the 
                period of qualified military service. Any payment to 
                such plan shall be made during the period beginning 
                with the date of reemployment and whose duration is 3 
                times the period of the qualified military service (but 
                not greater than 5 years).
            ``(9) Plans not subject to title 38.--This subsection shall 
        not apply to any retirement plan to which chapter 43 of title 
        38, United States Code, does not apply.
            ``(10) References.--For purposes of this section, any 
        reference to chapter 43 of title 38, United States Code, shall 
        be treated as a reference to such chapter as in effect on 
        December 12, 1994 (without regard to any subsequent 
        amendment).''
    (b) Coordination With Prohibited Transaction Rules.--Section 
4975(d) is amended by adding at the end the following new sentence: ``A 
loan made by a plan shall not fail to meet the requirements of 
paragraph (1) by reason of a loan repayment suspension described under 
section 414(u)(4).''
    (c) Effective Date.--The amendments made by this section shall be 
effective as of December 12, 1994.

SEC. 1403. ELIMINATION OF SPECIAL VESTING RULE FOR MULTIEMPLOYER PLANS.

    (a) In General.--Paragraph (2) of section 411(a) (relating to 
minimum vesting standards) is amended--
            (1) by striking ``subparagraph (A), (B), or (C)'' and 
        inserting ``subparagraph (A) or (B)''; and
            (2) by striking subparagraph (C).
    (b) Effective Date.--The amendments made by this section shall 
apply to plan years beginning on or after the earlier of--
            (1) the later of--
                    (A) January 1, 1997, or
                    (B) the date on which the last of the collective 
                bargaining agreements pursuant to which the plan is 
                maintained terminates (determined without regard to any 
                extension thereof after the date of the enactment of 
                this Act), or
            (2) January 1, 1999.
Such amendments shall not apply to any individual who does not have 
more than 1 hour of service under the plan on or after the 1st day of 
the 1st plan year to which such amendments apply.

                   Subtitle D--Conforming Amendments

SEC. 1501. CONFORMING AMENDMENT RELATING TO MISSING PARTICIPANTS.

    Section 401(a)(34) is amended by striking ``title IV'' and 
inserting ``section 4050''.

SEC. 1502. CONFORMING AMENDMENTS RELATING TO ERISA ENFORCEMENT.

    (a) Special Rule for Certain Judgments and Settlements.--Section 
401(a)(13) is amended by adding at the end the following new 
subparagraphs:
                    ``(C) Special rule for certain judgments and 
                settlements.--Subparagraph (A) shall not apply to any 
                offset of a participant's accrued benefit in a plan 
                against an amount that the participant is ordered or 
                required to pay to the plan if--
                            ``(i) the order or requirement to pay 
                        arises--
                                    ``(I) under a judgment of 
                                conviction for a crime involving such 
                                plan,
                                    ``(II) under a civil judgment 
                                (including a consent order or decree) 
                                entered by a court in an action brought 
                                in connection with a violation (or 
                                alleged violation) of part 4 of 
                                subtitle B of title I of the Employee 
                                Retirement Income Security Act of 1974, 
                                or
                                    ``(III) pursuant to a settlement 
                                agreement between the Secretary of 
                                Labor and the participant, or a 
                                settlement agreement between the 
                                Pension Benefit Guaranty Corporation 
                                and the participant, in connection with 
                                a violation (or alleged violation) of 
                                part 4 of subtitle B of title I of such 
                                Act,
                            ``(ii) the judgment, order, decree, or 
                        settlement agreement expressly provides for the 
                        offset of all or part of the amount ordered or 
                        required to be paid to the plan against the 
                        participant's accrued benefit in the plan, and
                            ``(iii) if the participant has a spouse at 
                        the time at which the offset is to be made--
                                    ``(I) such spouse has consented in 
                                writing to such offset and such consent 
                                is witnessed by a notary public or 
                                representative of the plan,
                                    ``(II) such spouse is ordered or 
                                required to pay in such judgment, 
                                order, decree, or settlement an amount 
                                to the plan in connection with a 
                                violation of part 4 of this title, or
                                    ``(III) in such judgment, order, 
                                decree, or settlement, such spouse 
                                retains the right to receive the value 
                                of the survivor annuity under a 
                                qualified joint and survivor annuity 
                                provided pursuant to paragraph 
                                (11)(A)(i) and under a qualified 
                                preretirement survivor annuity provided 
                                pursuant to paragraph 11(A)(ii), 
                                determined in accordance with 
                                subparagraph (D).
                    ``(D) Determination of value of survivor annuity in 
                connection with offset.--The value of the survivor 
                annuity described in subparagraph (C)(iii)(III) shall 
                be determined as if--
                            ``(i) the participant terminated employment 
                        on the date of the offset,
                            ``(ii) there was no offset,
                            ``(iii) the plan permitted retirement only 
                        on or after normal retirement age,
                            ``(iv) the plan provided only the minimum-
                        required qualified joint and survivor annuity, 
                        and
                            ``(v) the amount of the qualified 
                        preretirement survivor annuity under the plan 
                        is equal to the amount of the survivor annuity 
                        payable under the minimum-required qualified 
                        joint and survivor annuity.
                For purposes of this subparagraph, the term `minimum-
                required qualified joint and survivor annuity' means 
                the qualified joint and survivor annuity which is the 
                actuarial equivalent of a single annuity for the life 
                of the participant and under which the survivor annuity 
                is 50 percent of the amount of the annuity which is 
                payable during the joint lives of the participant and 
                the spouse.
                    ``(E) Waiver of certain distribution 
                requirements.--With respect to the requirements of 
                subsections (a) and (k) of section 401, section 403(b), 
                and section 409(d), a plan shall not be treated as 
                failing to meet such requirements solely by reason of 
                an offset under subparagraph (C).''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to judgments, orders, and decrees issued, and settlement 
agreements entered into, on or after the date of enactment of this Act.

                       TITLE II--ERISA PROVISIONS

SEC. 2000. AMENDMENT OF ERISA.

    Except as otherwise expressly provided, whenever in this title an 
amendment or repeal is expressed in terms of an amendment to, or repeal 
of, a section or other provision, the reference shall be considered to 
be made to a section or other provision of the Employee Retirement 
Income Security Act of 1974.

        Subtitle A--Expanded Pension Coverage and Simplification

SEC. 2001. REPORTING AND FIDUCIARY REQUIREMENTS RELATING TO NESTS.

    (a) Reporting Requirements.--Section 101 (29 U.S.C. 1021) is 
amended by redesignating subsection (g) as subsection (h) and by 
inserting after subsection (f) the following new subsection:
    ``(g) NESTs.--
            ``(1) In general.--Except as provided in this subsection, 
        no reporting or disclosure requirements under this title shall 
        apply with respect to a pension plan under section 408(p) of 
        the Internal Revenue Code of 1986.
            ``(2) Summary description.--The trustee or issuer of any 
        NEST established pursuant to a pension plan under section 
        408(p) of such Code shall provide to the employer maintaining 
        the arrangement each year a description containing the 
        following information:
                    ``(A) The name and address of the employer and the 
                trustee.
                    ``(B) The requirements for eligibility for 
                participation.
                    ``(C) The benefits provided with respect to the 
                arrangement.
                    ``(D) The time and method of making elections with 
                respect to the arrangement.
                    ``(E) The procedures for, and effects of, 
                distributions (including rollovers) from the 
                arrangement.
            ``(3) Employee notification.--The employer shall notify 
        each employee immediately before the period for which an 
        election described in section 408(p)(7)(B) of such Code may be 
        made of the employee's opportunity to make such election. Such 
        notice shall include a copy of the description described in 
        paragraph (2) and shall indicate whether matching contributions 
        will be made with respect to the employee's elective 
        contributions, and the level of employer matching and 
        nonelective contributions which will be made, for the year for 
        which the election may be made.''
    (b) Fiduciary Duties.--Section 404 (29 U.S.C. 1104) is amended by 
redesignating subsection (d) as subsection (e) and by adding after 
subsection (c) the following new subsection:
    ``(d)(1) In the case of a NEST established pursuant to a plan under 
section 408(p) of the Internal Revenue Code of 1986, no plan sponsor 
who is otherwise a fiduciary shall be liable under this part for any 
loss, or by reason of any breach, which results from--
            ``(A) the designation of the trustee or issuer of the NEST, 
        or
            ``(B) the manner in which the assets in the NEST are 
        invested,
after the earliest of the dates described in paragraph (2).
    ``(2) The dates described in this paragraph are as follows:
            ``(A) The date on which an affirmative election with 
        respect to the initial investment of any contribution is made 
        by the individual for whose benefit the NEST is established.
            ``(B) The date on which there is a rollover of the assets 
        of the NEST to any other NEST or individual retirement account 
        or annuity described in section 408 of the Internal Revenue 
        Code of 1986.
            ``(C) The date which is 1 year after the NEST is 
        established.
    ``(3) This subsection shall not apply to a participant in a plan 
unless the participant is notified in writing (either separately or as 
part of the notice under section 101(g)(3)) that the participant's 
balance may be transferred without cost or penalty to another 
individual account or annuity in accordance with section 408(d)(3)(G) 
of the Internal Revenue Code of 1986.''
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1996.

SEC. 2002. ELIMINATION OF REQUIREMENT FOR PLAN DESCRIPTIONS AND THE 
              FILING REQUIREMENT FOR SUMMARY PLAN DESCRIPTIONS AND 
              DESCRIPTIONS OF MATERIAL MODIFICATIONS TO A PLAN; 
              TECHNICAL CORRECTIONS.

    (a) Filing Requirements.--Section 101(b) (29 U.S.C. 1021(b)) is 
amended by striking paragraphs (1), (2), and (3) and by redesignating 
paragraphs (4) and (5) as paragraphs (1) and (2), respectively.
    (b) Plan Description.--
            (1) In general.--Section 102(a) (29 U.S.C. 1022(a)) is 
        amended--
                    (A) by striking paragraph (2), and
                    (B) by striking ``(a)(1)'' and inserting ``(a)''.
            (2) Conforming amendments.--
                    (A) Section 102(b) (29 U.S.C. 1022(b)) is amended 
                by striking ``The plan description and summary plan 
                description shall contain'' and inserting ``The summary 
                plan description shall contain''.
                    (B) The heading for section 102 is amended by 
                striking ``plan description and''.
    (c) Furnishing of Reports.--
            (1) In general.--Section 104(a)(1) (29 U.S.C. 1024(a)(1)) 
        is amended to read as follows:
    ``Sec. 104. (a)(1) The administrator of any employee benefit plan 
subject to this part shall file with the Secretary the annual report 
for a plan year within 210 days after the close of such year (or within 
such time as may be required by regulations promulgated by the 
Secretary in order to reduce duplicative filing). The Secretary shall 
make copies of such annual reports available for inspection in the 
public document room of the Department of Labor.''
            (2) Secretary may request documents.--
                    (A) In general.--Section 104(a) (29 U.S.C. 1024(a)) 
                is amended by adding at the end the following new 
                paragraph:
    ``(6) The administrator of any employee benefit plan subject to 
this part shall furnish to the Secretary, upon request, any documents 
relating to the employee benefit plan, including but not limited to, 
the latest summary plan description (including any summaries of plan 
changes not contained in the summary plan description), and the 
bargaining agreement, trust agreement, contract, or other instrument 
under which the plan is established or operated.''
                    (B) Penalty.--Section 502(c) (29 U.S.C. 1132(c)) is 
                amended by adding at the end the following new 
                paragraph:
    ``(5) If, within 30 days of a request by the Secretary to a plan 
administrator for documents under section 104(a)(6), the plan 
administrator fails to furnish the material requested to the Secretary, 
the Secretary may assess a civil penalty against the plan administrator 
of up to $100 a day from the date of such failure (but in no event in 
excess of $1,000 per request). No penalty shall be imposed under this 
paragraph for any failure resulting from matters reasonably beyond the 
control of the plan administrator.''
    (d) Conforming Amendments.--
            (1) Section 104(b)(1) (29 U.S.C. 1024(b)(1)) is amended by 
        striking ``section 102(a)(1)'' each place it appears and 
        inserting ``section 102(a)''.
            (2) Section 104(b)(2) (29 U.S.C. 1024(b)(2)) is amended by 
        striking ``the plan description and'' and inserting ``the 
        latest updated summary plan description and''.
            (3) Section 104(b)(4) (29 U.S.C. 1024(b)(4)) is amended by 
        striking ``plan description''.
            (4) Section 106(a) (29 U.S.C. 1026(a)) is amended by 
        striking ``descriptions,''.
            (5) Section 107 (29 U.S.C. 1027) is amended by striking 
        ``description or''.
            (6) Paragraph (2)(B) of section 108 (29 U.S.C. 1028) is 
        amended to read as follows: ``(B) after publishing or filing 
        the annual reports,''.
            (7) Section 502(a)(6) (29 U.S.C. 1132(a)(6)) is amended by 
        striking ``subsection (c)(2) or (i) or (l)'' and inserting 
        ``paragraph (2), (4), or (5) of subsection (c) or subsection 
        (i) or (l)''.
    (e) Technical Corrections to ERISA.--
            (1) Section 502(c)(1) (29 U.S.C. 1132(c)(1)) is amended by 
        adding at the end the following new sentence: ``For purposes of 
        this paragraph, each violation described in subparagraph (A) 
        with respect to any single participant, and each violation 
        described in subparagraph (B) with respect to any single 
        participant or beneficiary, shall be treated as a separate 
        violation.''
            (2) Section 502(c) (29 U.S.C. 1132(c)) is amended--
                    (A) by striking the last two sentences of paragraph 
                (4), and
                    (B) by adding at the end the following new 
                paragraph:
    ``(5) The Secretary and the Secretary of Health and Human Services 
shall maintain such ongoing consultation as may be necessary and 
appropriate to coordinate enforcement under this subsection with 
enforcement under section 1144(c)(9) of the Social Security Act.''
    (f) Effective Date.--The provisions of this section shall take 
effect on the date of the enactment of this Act.

SEC. 2003. CONFORMING AMENDMENT RELATING TO INVESTMENTS IN QUALIFIED 
              STATE PREPAID TUITION PROGRAMS.

    (a) In General.--Subsection (b) of section 408 is amended by adding 
at the end the following new paragraph:
            ``(14) any purchase of a qualified State prepaid tuition 
        program instrument to which section 408(q) of the Internal 
        Revenue Code of 1986 applies.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1995.

                        Subtitle B--Portability

SEC. 2011. MISSING PARTICIPANTS.

    (a) In General.--Section 4050 (29 U.S.C. 1350) is amended by 
redesignating subsection (c) as subsection (e) and by inserting after 
subsection (b) the following new subsections:
    ``(c) Multiemployer Plans.--The corporation shall prescribe rules 
similar to the rules in subsection (a) for multiemployer plans covered 
by this title that terminate under section 4041A.
    ``(d) Plans Not Otherwise Subject to Title.--
            ``(1) Transfer to corporation.--The plan administrator of a 
        plan described in paragraph (4) may elect to transfer a missing 
        participant's benefits to the corporation upon termination of 
        the plan.
            ``(2) Information to the corporation.--To the extent 
        provided in regulations, the plan administrator of a plan 
        described in paragraph (4) shall, upon termination of the plan, 
        provide the corporation information with respect to benefits of 
        a missing participant if the plan transfers such benefits--
                    ``(A) to the corporation, or
                    ``(B) to an entity other than the corporation or a 
                plan described in paragraph (4)(B)(ii).
            ``(3) Payment by the corporation.--If benefits of a missing 
        participant were transferred to the corporation under paragraph 
        (1), the corporation shall, upon location of the participant or 
        beneficiary, pay to the participant or beneficiary the amount 
        transferred (or the appropriate survivor benefit) either--
                    ``(A) in a single sum (plus interest), or
                    ``(B) in such other form as is specified in 
                regulations of the corporation.
            ``(4) Plans described.--A plan is described in this 
        paragraph if--
                    ``(A) the plan is a pension plan (within the 
                meaning of section 3(2))--
                            ``(i) to which the provisions of this 
                        section do not apply (without regard to this 
                        subsection), and
                            ``(ii) which is not a plan described in 
                        paragraphs (2) through (11) of section 4021(b), 
                        and
                    ``(B) at the time the assets are to be distributed 
                upon termination, the plan--
                            ``(i) has missing participants, and
                            ``(ii) has not provided for the transfer of 
                        assets to pay the benefits of all missing 
                        participants to another pension plan (within 
                        the meaning of section 3(2)).
            ``(5) Certain provisions not to apply.--Subsections (a)(1) 
        and (a)(3) shall not apply to a plan described in paragraph 
        (4).''
    (b) Conforming Amendments.--Section 206(f) (29 U.S.C. 1056(f)) is 
amended--
            (1) by striking ``title IV'' and inserting ``section 
        4050'', and
            (2) by striking ``the plan shall provide that''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions made after final regulations implementing 
subsections (c) and (d) of section 4050 of the Employee Retirement 
Income Security Act of 1974 (as added by subsection (a)), respectively, 
are prescribed.

SEC. 2012. ELIMINATION OF SPECIAL VESTING RULE FOR MULTIEMPLOYER PLANS.

    (a) In General.--Paragraph (2) of section 203(a) (29 U.S.C. 
1053(a)) is amended--
            (1) by striking ``subparagraph (A), (B), or (C)'' and 
        inserting ``subparagraph (A) or (B)''; and
            (2) by striking subparagraph (C).
    (b) Effective Date.--The amendments made by this section shall 
apply to plan years beginning on or after the earlier of--
            (1) the later of--
                    (A) January 1, 1997, or
                    (B) the date on which the last of the collective 
                bargaining agreements pursuant to which the plan is 
                maintained terminates (determined without regard to any 
                extension thereof after the date of the enactment of 
                this Act), or
            (2) January 1, 1999.
Such amendments shall not apply to any individual who does not have 
more than 1 hour of service under the plan on or after the first day of 
the first plan year to which such amendments apply.

SEC. 2013. TREATMENT OF LOANS DURING MILITARY SERVICE.

    (a) In General.--Section 408(b)(1) (29 U.S.C. 1148(b)) is amended 
by adding at the end the following new sentence: ``A loan made by a 
plan shall not fail to meet the requirements of the preceding sentence 
by reason of a loan repayment suspension described under section 
414(u)(4) of the Internal Revenue Code of 1986.''
    (b) Effective Date.--The amendment made by this section shall be 
effective as of December 12, 1994.

                     Subtitle C--Enhanced Security

                     CHAPTER 1--GENERAL PROVISIONS

SEC. 2021. MULTIEMPLOYER PLAN BENEFITS GUARANTEED.

    (a) In General.--Section 4022A(c) (29 U.S.C. 1322a(c)) is amended--
            (1) by striking ``$5'' each place it appears in paragraph 
        (1) and inserting ``$11'',
            (2) by striking ``$15'' in paragraph (1) and inserting 
        ``$33'', and
            (3) by striking paragraphs (2), (5), and (6) and by 
        redesignating paragraphs (3) and (4) as paragraphs (2) and (3), 
        respectively.
    (b) Effective Date.--The amendments made by this section shall 
apply to any multiemployer plan that has not received financial 
assistance (within the meaning of section 4261 of the Employee 
Retirement Income Security Act of 1974) within the 1-year period ending 
on the date of the enactment of this Act.

SEC. 2022. REVERSION REPORT.

    (a) In General.--Section 4008 (29 U.S.C. 1308) is amended by adding 
at the end the following new subsection:
    ``(b) Reversion Report.--As soon as practicable after the close of 
each fiscal year, the Secretary of Labor (acting in the Secretary's 
capacity as chairman of the corporation's board) shall transmit to the 
President and the Congress a report providing information on plans from 
which residual assets were distributed to employers pursuant to section 
4044(d).''
    (b) Conforming Amendment.--Section 4008 (29 U.S.C. 1308) is amended 
by striking ``Sec. 4008.'' and inserting ``Sec. 4008. (a) Annual 
Report.--''.
    (c) Effective Date.--The amendments made by this section shall 
apply to fiscal years beginning after September 30, 1996.

SEC. 2023. FULL FUNDING LIMITATION FOR MULTIEMPLOYER PLANS.

    (a) Full-Funding Limitation.--Section 302(c)(7)(C) (29 U.S.C. 
1082(c)(7)(C)) is amended--
            (1) by inserting ``or in the case of a multiemployer 
        plan,'' after ``paragraph (6)(B),'', and
            (2) by inserting ``and multiemployer plans'' after 
        ``paragraph (6)(b)'' in the heading thereof.
    (b) Valuation.--Section 302(c)(9) (29 U.S.C. 1082(c)(9)) is 
amended--
            (1) by inserting ``(3 years in the case of a multiemployer 
        plan)'' after ``year'', and
            (2) by striking ``Annual valuation'' in the heading and 
        inserting ``Valuation''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1996.

SEC. 2024. PROHIBITED TRANSACTIONS.

    (a) In General.--Section 502(i) (29 U.S.C. 1132(i)) is amended by 
striking ``5 percent'' and inserting ``10 percent''.
    (b) Effective Date.--The amendments made by this section shall 
apply to prohibited transactions occurring after the date of enactment 
of this Act.

SEC. 2025. SUBSTANTIAL OWNER BENEFITS.

    (a) Modification of Phase-in of Guarantee.--Subparagraphs (B) and 
(C) of section 4022(b)(5) (29 U.S.C. 1322(b)(5)) are amended to read as 
follows:
    ``(B) For purposes of this title, the term `majority owner' has the 
same meaning as substantial owner under subparagraph (A), except that 
subparagraph (A) shall be applied by substituting `50 percent or more' 
for `more than 10 percent' each place it appears.
    ``(C) In the case of a participant who is a majority owner, the 
amount of benefits guaranteed under this section shall not exceed the 
product of--
            ``(i) a fraction (not to exceed 1) the numerator of which 
        is the number of years from the later of the effective date or 
        the adoption date of the plan to the termination date, and the 
        denominator of which is 30, and
            ``(ii) the amount of the majority owner's monthly benefits 
        guaranteed under subsection (a) (as limited by paragraph (3) of 
        this subsection).''
    (b) Modification of Allocation of Assets.--
            (1) Section 4044(a)(4)(B) (29 U.S.C. 1344(a)(4)(B)) is 
        amended by striking ``section 4022(b)(5)'' and inserting 
        ``section 4022(b)(5)(C)''.
            (2) Section 4044(b) (29 U.S.C. 1344(b)) is amended--
                    (A) by striking ``(5)'' in paragraph (2) and 
                inserting ``(4), (5),'', and
                    (B) by redesignating paragraphs (3) through (6) as 
                paragraphs (4) through (7), respectively, and by 
                inserting after paragraph (2) the following new 
                paragraph:
            ``(3) If assets available for allocation under paragraph 
        (4) of subsection (a) are insufficient to satisfy in full the 
        benefits of all individuals who are described in that 
        paragraph, the assets shall be allocated first to benefits 
        described in subparagraph (A) of that paragraph. Any remaining 
        assets shall then be allocated to subparagraph (B). If assets 
        allocated to subparagraph (B) are insufficient to satisfy in 
        full the benefits in that subparagraph, the assets shall be 
        allocated pro rata among individuals on the basis of the 
        present value (as of the termination date) of their respective 
        benefits described in that subparagraph.''
    (c) Effective Date.--The amendments made by this section shall 
apply to plan terminations--
            (1) under section 4041(c) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1341(c)) with respect to which 
        notices of intent to terminate are provided under section 
        4041(a)(2) of such Act (29 U.S.C. 1341(a)(2)) on or after the 
        date of the enactment of this Act, or
            (2) under section 4042 of such Act (29 U.S.C. 1342) with 
        respect to which proceedings are instituted by the corporation 
        on or after such date.

                      CHAPTER 2--ERISA ENFORCEMENT

SEC. 2031. SHORT TITLE.

    This part may be cited as the ``Pension Audit Improvement Act of 
1996''.

SEC. 2032. REPEAL OF LIMITED SCOPE AUDIT.

    (a) In General.--Section 103(a)(3) (29 U.S.C. 1023(a)(3)) is 
amended by striking subparagraph (C) and by redesignating subparagraph 
(D) as subparagraph (C).
    (b) Conforming Amendments.--
            (1) Section 103(a)(3)(A) (29 U.S.C. 1023(a)(3)(A)) is 
        amended by striking ``Except as provided in subparagraph (C), 
        the'' and inserting ``The''.
            (2) Section 104(a)(5)(A) (29 U.S.C. 1024(a)(5)(A)) is 
        amended by striking ``section 103(a)(3)(D)'' and inserting 
        ``section 103(a)(3)(C)''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to opinions required under section 103(a)(3)(A) of 
the Employee Retirement Income Security Act of 1974 for plan years 
beginning on or after January 1 of the calendar year following the date 
of the enactment of this Act.

SEC. 2033. REPORTING AND ENFORCEMENT REQUIREMENTS FOR EMPLOYEE BENEFIT 
              PLANS.

    (a) In General.--Part 1 of subtitle B of title I (29 U.S.C. 1021 et 
seq.) is amended--
            (1) by redesignating section 111 as section 112, and
            (2) by inserting after section 110 the following new 
        section:

                  ``direct reporting of certain events

    ``Sec. 111. (a) Required Notifications.--
            ``(1) Notifications by plan administrator.--The 
        administrator of an employee benefit plan shall, within 5 
        business days after the administrator determines that there is 
        evidence (or after the administrator is notified under 
        paragraph (2)) that an irregularity may have occurred with 
        respect to the plan--
                    ``(A) notify the Secretary of the irregularity in 
                writing; and
                    ``(B) furnish a copy of such notification to the 
                accountant who is currently engaged under section 
                103(a)(3)(A).
            ``(2) Notifications by accountant.--
                    ``(A) In general.--An accountant engaged by the 
                administrator of an employee benefit plan under section 
                103(a)(3)(A) shall, within 5 business days after the 
                accountant in connection with such engagement 
                determines that there is evidence that an irregularity 
                may have occurred with respect to the plan--
                            ``(i) notify the plan administrator of the 
                        irregularity in writing, or
                            ``(ii) if the accountant determines that 
                        there is evidence that the irregularity may 
                        have involved an individual who is the plan 
                        administrator or who is a senior official of 
                        the plan administrator, notify the Secretary of 
                        the irregularity in writing.
                    ``(B) Notification upon failure of plan 
                administrator to notify.--If an accountant who has 
                provided notification to the plan administrator 
                pursuant to subparagraph (A)(i) does not receive a copy 
                of the administrator's notification to the Secretary 
                required under paragraph (1)(B) within the 5-business 
                day period specified therein, the accountant shall 
                furnish to the Secretary a copy of the accountant's 
                notification made to the plan administrator on the next 
                business day following such period.
            ``(3) Irregularity defined.--
                    ``(A) For purposes of this subsection, the term 
                `irregularity' means--
                            ``(i) a theft, embezzlement, or a violation 
                        of section 664 of title 18, United States Code 
                        (relating to theft or embezzlement from an 
                        employee benefit plan);
                            ``(ii) an extortion or a violation of 
                        section 1951 of such title 18 (relating to 
                        interference with commerce by threats or 
                        violence);
                            ``(iii) a bribery, a kickback, or a 
                        violation of section 1954 of such title 18 
                        (relating to offer, acceptance, or solicitation 
                        to influence operations of an employee benefit 
                        plan);
                            ``(iv) a violation of section 1027 of such 
                        title 18 (relating to false statements and 
                        concealment of facts in relation to employer 
                        benefit plan records); or
                            ``(v) a violation of section 411, 501, or 
                        511 of this title (relating to criminal 
                        violations).
                    ``(B) The term `irregularity' shall not include any 
                act or omission described in this paragraph involving 
                less than $1,000 unless there is reason to believe that 
                the act or omission may bear on the integrity of plan 
                management.
    ``(b) Notification Upon Termination of Engagement of Accountant.--
            ``(1) Notification by plan administrator.--Within 5 
        business days after the termination of an engagement for 
        auditing services under section 103(a)(3)(A) with respect to an 
        employee benefit plan, the administrator of such plan shall--
                    ``(A) notify the Secretary in writing of such 
                termination, giving the reasons for such termination, 
                and
                    ``(B) furnish the accountant whose engagement was 
                terminated with a copy of the notification sent to the 
                Secretary.
            ``(2) Notification by accountant.--If the accountant 
        referred to in paragraph (1)(B) has not received a copy of the 
        administrator's notification to the Secretary as required under 
        paragraph (1)(B), or if the accountant disagrees with the 
        reasons given in the notification of termination of the 
        engagement for auditing services, the accountant shall notify 
        the Secretary in writing of the termination, giving the reasons 
        for the termination, within 10 business days after the 
        termination of the engagement.
    ``(c) Determination of Periods Required for Notification.--In 
determining whether a notification required under this section with 
respect to any act or omission has been made within the required number 
of business days--
            ``(1) the day on which such act or omission begins shall 
        not be included; and
            ``(2) Saturdays, Sundays, and legal holidays shall not be 
        included.
For purposes of this subsection, the term `legal holiday' means any 
Federal legal holiday and any other day appointed as a holiday by the 
State in which the person responsible for making the notification 
principally conducts his business.
    ``(d) Immunity for Good Faith Notification.--Except as provided in 
this Act, no accountant or plan administrator shall be liable to any 
person for any finding, conclusion, or statement made in any 
notification made pursuant to subsection (a)(2) or (b)(2), or pursuant 
to any regulations issued thereunder, if such finding, conclusion, or 
statement is made in good faith.''
    (b) Civil Penalty.--
            (1) In general.--Section 502(c) (29 U.S.C. 1132(c)), as 
        amended by section 2002, is amended by redesignating paragraph 
        (6) as paragraph (7) and by inserting after paragraph (5) the 
        following new paragraph:
    ``(6)(A) The Secretary may assess a civil penalty of up to $100,000 
against any administrator who fails to provide the Secretary with any 
notification as required under section 111.
    ``(B) The Secretary may assess a civil penalty of up to $100,000 
against any accountant who knowingly and willfully fails to provide the 
Secretary with any notification as required under section 111.''
            (2) Conforming amendment.--Section 502(a)(6) (29 U.S.C. 
        1132(a)(6)), as amended by section 2002, is amended by striking 
        ``or (5)'' and inserting ``(5), or (6)''.
    (c) Clerical Amendments.--
            (1) Section 514(d) (29 U.S.C. 1144(d)) is amended by 
        striking ``111'' and inserting ``112''.
            (2) The table of contents in section 1 is amended by 
        striking the item relating to section 111 and inserting the 
        following new items:

``Sec. 111. Direct reporting of certain events.
``Sec. 112. Repeal and effective date.''
    (d) Effective Date.--The amendments made by this section shall 
apply with respect to any irregularity or termination of engagement 
described in such amendments only if the 5-day period described in such 
amendments in connection with such irregularity or termination 
commences at least 90 days after the date of the enactment of this Act.

SEC. 2034. ADDITIONAL REQUIREMENTS FOR QUALIFIED PUBLIC ACCOUNTANTS.

    (a) In General.--Section 103(a)(3)(C) (29 U.S.C. 1023(a)(3)(C)), as 
redesignated by section 2032, is amended--
            (1) by inserting ``(i)'' after ``(C)'';
            (2) by inserting ``, with respect to any engagement of an 
        accountant under subparagraph (A)'' after ``means'';
            (3) by redesignating clauses (i), (ii), and (iii) as 
        subclauses (I), (II), and (III), respectively;
            (4) by striking the period at the end of subclause (III) 
        (as so redesignated) and inserting a comma;
            (5) by adding after subclause (III) (as so redesignated), 
        and flush with clause (i), the following:
``but only if such person meets the requirements of clauses (ii) and 
(iii) with respect to such engagement.''; and
            (6) by adding at the end the following new clauses:
    ``(ii) A person meets the requirements of this clause with respect 
to an engagement of such person as an accountant under subparagraph (A) 
if such person--
            ``(I) has in operation an appropriate internal quality 
        control system;
            ``(II) has undergone a qualified external quality control 
        review of the person's accounting and auditing practices, 
        including such practices relevant to employee benefit plans (if 
        any), during the 3-year period immediately preceding such 
        engagement; and
            ``(III) has completed, within the 2-year period immediately 
        preceding such engagement, at least 80 hours of continuing 
        education or training which contributes to the accountant's 
        professional proficiency, at least 20 hours of which have been 
        completed during the 1-year period immediately preceding the 
        engagement, and at least 16 hours of which relate to employee 
        benefit plan matters.
    ``(iii) A person meets the requirements of this clause with respect 
to an engagement of such person as an accountant under subparagraph (A) 
if such person meets such additional requirements and qualifications of 
regulations which the Secretary deems necessary to ensure the quality 
of plan audits.
    ``(iv) For purposes of clause (ii)(II), an external quality control 
review shall be treated as qualified with respect to a person referred 
to in clause (ii) if--
            ``(I) such review is performed in accordance with the 
        requirements of external quality control review programs of 
        recognized auditing standard-setting bodies, as determined 
        under regulations of the Secretary, and
            ``(II) in the case of any such person who has, during the 
        peer review period, conducted one or more previous audits of 
        employee benefit plans, such review includes the review of an 
        appropriate number (determined as provided in such regulations, 
        but in no case less than one) of plan audits in relation to the 
        scale of such person's auditing practice.
The Secretary shall issue the regulations under subclause (I) no later 
than December 31, 1997.''
    (b) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply with respect to 
        plan years beginning on or after the date which is 3 years 
        after the date of the enactment of this Act.
            (2) Restrictions on conducting examinations.--Clause (iii) 
        of section 103(a)(3)(C) of the Employee Retirement Income 
        Security Act of 1974 (as added by subsection (a)(6)) shall take 
        effect on the date of enactment of this Act.

SEC. 2035. CLARIFICATION OF FIDUCIARY PENALTIES.

    (a) Modification of Prohibition of Assignment or Alienation.--
            (1) Amendment to erisa.--Section 206(d) (29 U.S.C. 1056(d)) 
        is amended by adding at the end the following new paragraphs:
    ``(4) Paragraph (1) shall not apply to any offset of a 
participant's accrued benefit in an employee pension benefit plan 
against an amount that the participant is ordered or required to pay to 
the plan if--
            ``(A) the order or requirement to pay arises--
                    ``(i) under a judgment of conviction for a crime 
                involving such plan,
                    ``(ii) under a civil judgment (including a consent 
                order or decree) entered by a court in an action 
                brought in connection with a violation (or alleged 
                violation) of part 4 of this subtitle, or
                    ``(iii) pursuant to a settlement agreement between 
                the Secretary and the participant, or a settlement 
                agreement between the Pension Benefit Guaranty 
                Corporation and the participant, in connection with a 
                violation (or alleged violation) of part 4 of this 
                subtitle,
            ``(B) the judgment, order, decree, or settlement agreement 
        expressly provides for the offset of all or part of the amount 
        ordered or required to be paid to the plan against the 
        participant's accrued benefit in the plan, and
            ``(C) if the participant has a spouse at the time at which 
        the offset is to be made--
                    ``(i) such spouse has consented in writing to such 
                offset and such consent is witnessed by a notary public 
                or representative of the plan,
                    ``(ii) such spouse is ordered or required in such 
                judgment, order, decree, or settlement to pay an amount 
                to the plan in connection with a violation of part 4 of 
                this title, or
                    ``(iii) in such judgment, order, decree, or 
                settlement, such spouse retains the right to receive 
                the value of the survivor annuity under a qualified 
                joint and survivor annuity provided pursuant to section 
                205(a)(1) and under a qualified preretirement survivor 
                annuity provided pursuant to section 205(a)(2), 
                determined in accordance with paragraph (5).
    ``(5)(A) The value of the survivor annuity described in paragraph 
(4)(C)(iii) shall be determined as if--
            ``(i) the participant terminated employment on the date of 
        the offset,
            ``(ii) there was no offset,
            ``(iii) the plan permitted retirement only on or after 
        normal retirement age,
            ``(iv) the plan provided only the minimum-required 
        qualified joint and survivor annuity, and
            ``(v) the amount of the qualified preretirement survivor 
        annuity under the plan is equal to the amount of the survivor 
        annuity payable under the minimum-required qualified joint and 
        survivor annuity.
    ``(B) For purposes of this paragraph, the term `minimum-required 
qualified joint and survivor annuity' means the qualified joint and 
survivor annuity which is the actuarial equivalent of a single annuity 
for the life of the participant and under which the survivor annuity is 
50 percent of the amount of the annuity which is payable during the 
joint lives of the participant and the spouse.''
            (2) Effective date.--The amendment made by this subsection 
        shall apply to judgments, orders, and decrees issued, and 
        settlement agreements entered into, on or after the date of 
        enactment of this Act.
    (b) Civil Penalties for Breach of Fiduciary Responsibility.--
            (1) Imposition and amount of penalty made discretionary.--
        Section 502(l)(1) (29 U.S.C. 1132(l)(1)) is amended--
                    (A) by striking ``shall'' and inserting ``may'', 
                and
                    (B) by striking ``equal to'' and inserting ``not 
                greater than''.
            (2) Applicable recovery amount.--Section 502(l)(2) (29 
        U.S.C. 1132(l)(2)) is amended to read as follows:
    ``(2) For purposes of paragraph (1), the term `applicable recovery 
amount' means any amount which is recovered from (or on behalf of) any 
fiduciary or other person with respect to a breach or violation 
described in paragraph (1) on or after the 30th day following receipt 
by such fiduciary or other person of written notice from the Secretary 
of the violation, whether paid voluntarily or by order of a court in a 
judicial proceeding instituted by the Secretary under subsection (a)(2) 
or (a)(5). The Secretary may, in the Secretary's sole discretion, 
extend the 30-day period described in the preceding sentence.''
            (3) Other rules.--Section 502(l) (29 U.S.C. 1132(l)) is 
        amended by adding at the end the following new paragraphs:
    ``(5) A person shall be jointly and severally liable for the 
penalty described in paragraph (1) to the same extent that such person 
is jointly and severally liable for the applicable recovery amount on 
which the penalty is based.
    ``(6) No penalty shall be assessed under this subsection unless the 
person against whom the penalty is assessed is given notice and 
opportunity for a hearing with respect to the violation and applicable 
recovery amount.''
            (4) Effective dates.--
                    (A) In general.--The amendments made by this 
                subsection shall apply to any breach of fiduciary 
                responsibility or other violation of part 4 of subtitle 
                B of title I of the Employee Retirement Income Security 
                Act of 1974 occurring on or after the date of enactment 
                of this Act.
                    (B) Transition rule.--In applying the amendment 
                made by paragraph (2) (relating to applicable recovery 
                amount), a breach or other violation occurring before 
                the date of the enactment of this Act which continues 
                after the 180th day after such date (and which may have 
                been discontinued at any time during its existence) 
                shall be treated as having occurred after such date of 
                enactment.

TITLE III--ADDITIONAL RETIREMENT PARTICIPATION AND PAYMENT OPTIONS FOR 
                           FEDERAL EMPLOYEES

SEC. 3001. IMMEDIATE PARTICIPATION IN THE THRIFT SAVINGS PLAN FOR 
              FEDERAL EMPLOYEES.

    (a) Elimination of Certain Waiting Periods for Purposes of Employee 
Contributions.--Paragraph (4) of section 8432(b) of title 5, United 
States Code, is amended to read as follows:
    ``(4) The Executive Director shall prescribe such regulations as 
may be necessary to carry out the following:
            ``(A) Notwithstanding subparagraph (A) of paragraph (2), an 
        employee or Member described in such subparagraph shall be 
        afforded a reasonable opportunity to first make an election 
        under this subsection beginning on the date of commencing 
        service or, if that is not administratively feasible, beginning 
        on the earliest date thereafter that such an election becomes 
        administratively feasible, as determined by the Executive 
        Director.
            ``(B) An employee or Member described in subparagraph (B) 
        of paragraph (2) shall be afforded a reasonable opportunity to 
        first make an election under this subsection (based on the 
        appointment or election described in such subparagraph) 
        beginning on the date of commencing service pursuant to such 
        appointment or election or, if that is not administratively 
        feasible, beginning on the earliest date thereafter that such 
        an election becomes administratively feasible, as determined by 
        the Executive Director.
            ``(C) Notwithstanding the preceding provisions of this 
        paragraph, contributions under paragraphs (1) and (2) of 
        subsection (c) shall not be payable with respect to any pay 
        period before the earliest pay period for which such 
        contributions would otherwise be allowable under this 
        subsection if this paragraph had not been enacted.
            ``(D) Sections 8351(a)(2), 8440a(a)(2), 8440b(a)(2), 
        8440c(a)(2), and 8440d(a)(2) shall be applied in a manner 
        consistent with the purposes of subparagraphs (A) and (B), to 
        the extent those subparagraphs can be applied with respect 
        thereto.
            ``(E) Nothing in this paragraph shall affect paragraph 
        (3).''.
    (b) Technical and Conforming Amendments.--(1) Section 8432(a) of 
title 5, United States Code, is amended--
            (A) in the first sentence by striking ``(b)(1)'' and 
        inserting ``(b)''; and
            (B) by amending the second sentence to read as follows: 
        ``Contributions under this subsection pursuant to such an 
        election shall, with respect to each pay period for which such 
        election remains in effect, be made in accordance with a 
        program of regular contributions provided in regulations 
        prescribed by the Executive Director.''.
    (2) Section 8432(b)(1)(B) of such title is amended by inserting 
``(or any election allowable by virtue of paragraph (4))'' after 
``subparagraph (A)''.
    (3) Section 8432(b)(3) of such title is amended by striking 
``Notwithstanding paragraph (2)(A), an'' and inserting ``An''.
    (4) Section 8432(i)(1)(B)(ii) of such title is amended by striking 
``either elected to terminate individual contributions to the Thrift 
Savings Fund within 2 months before commencing military service or''.
    (5) Section 8439(a)(1) of such title is amended by inserting ``who 
makes contributions or'' after ``for each individual'' and by striking 
``section 8432(c)(1)'' and inserting ``section 8432''.
    (6) Section 8439(c)(2) of such title is amended by adding at the 
end the following: ``Nothing in this paragraph shall be considered to 
limit the dissemination of information only to the times required under 
the preceding sentence.''.
    (7) Sections 8440a(a)(2) and 8440d(a)(2) of such title are amended 
by striking all after ``subject to'' and inserting ``subject to this 
chapter.''.
    (c) Effective Date.--This section shall take effect 6 months after 
the date of the enactment of this Act or such earlier date as the 
Executive Director may by regulation prescribe.

SEC. 3002. DEFERRED ANNUITIES FOR SURVIVING SPOUSES OF FEDERAL 
              EMPLOYEES.

    (a) In General.--Section 8341 of title 5, United States Code, is 
amended--
            (1) in subsection (h)(1) by striking ``section 8338(b) of 
        this title'' and inserting ``section 8338(b), and a former 
        spouse of a deceased former employee who separated from the 
        service with title to a deferred annuity under section 8338 (if 
        they were married to one another prior to the date of 
        separation),''; and
            (2) by adding at the end the following:
    ``(j)(1) If a former employee dies after having separated from the 
service with title to a deferred annuity under section 8338 but before 
having established a valid claim for annuity, and is survived by a 
spouse to whom married on the date of separation, the surviving spouse 
may elect to receive--
            ``(A) an annuity, commencing on what would have been the 
        former employee's 62d birthday, equal to 55 percent of the 
        former employee's deferred annuity;
            ``(B) an annuity, commencing on the day after the date of 
        death of the former employee, such that, to the extent 
        practicable, the present value of the future payments of the 
        annuity would be actuarially equivalent to the present value of 
        the future payments under subparagraph (A) as of the day after 
        the former employee's death; or
            ``(C) the lump-sum credit, if the surviving spouse is the 
        individual who would be entitled to the lump-sum credit and if 
        such surviving spouse files application therefor.
    ``(2) An annuity under this subsection and the right thereto 
terminate on the last day of the month before the surviving spouse 
remarries before becoming 55 years of age, or dies.''.
    (b) Corresponding Amendment for FERS.--Section 8445(a) of title 5, 
United States Code, is amended--
            (1) by striking ``(or of a former employee or'' and 
        inserting ``(or of a former''; and
            (2) by striking ``annuity)'' and inserting ``annuity, or of 
        a former employee who dies after having separated from the 
        service with title to a deferred annuity under section 8413 but 
        before having established a valid claim for annuity (if such 
        former spouse was married to such former employee prior to the 
        date of separation))''.
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to surviving spouses and former spouses (whose 
marriage, in the case of the amendments made by subsection (a), 
terminated after May 6, 1985) of former employees who die after the 
date of the enactment of this Act.

SEC. 3003. PAYMENT OF LUMP-SUM CREDIT FOR FORMER SPOUSES OF FEDERAL 
              EMPLOYEES.

    (a) In General.--Title 5, United States Code, is amended--
            (1) in section 8342(c) by striking ``Lump-sum'' and 
        inserting ``Except as provided in section 8345(j), lump-sum'';
            (2) in section 8345(j)--
                    (A) in paragraph (1) by inserting after ``that 
                individual'' the following: ``, or be made under 
                section 8342(d) through (f) to an individual entitled 
                under section 8342(c),''; and
                    (B) by adding at the end the following:
    ``(4) Any payment under this subsection to a person bars recovery 
by any other person.'';
            (3) in section 8424(d) by striking ``Lump-sum'' and 
        inserting ``Except as provided in section 8467(a), lump-sum''; 
        and
            (4) in section 8467--
                    (A) in subsection (a) by inserting after ``that 
                individual'' the following: ``, or be made under 
                section 8424(e) through (g) to an individual entitled 
                under section 8424(d),''; and
                    (B) by adding at the end the following:
    ``(d) Any payment under this section to a person bars recovery by 
any other person.''.
    (b) Effective Date.--The amendments made by this section shall 
apply with respect to any death occurring after the 90th day after the 
date of the enactment of this Act.

 TITLE IV--CONFORMING RAILROAD RETIREMENT BENEFITS WITH SOCIAL SECURITY

SEC. 4001. CHILD'S ANNUITY.

    (a) Eligibility for Annuity.--Section 2 of the Railroad Retirement 
Act of 1974 is amended by adding at the end the following new 
subsection:
    ``(i) The child (as defined in section 216(e) and (k) of the Social 
Security Act) of an individual, if--
            ``(i)(I) such child will be less than 18 years of age,
            ``(II) such child will be less than 19 years of age and a 
        full-time elementary or secondary school student, or
            ``(III) such child will, without regard to his or her age, 
        be under a disability which began before the child attained age 
        22 or before the 84th month following the month in which his 
        most recent entitlement to an annuity under this subsection 
        terminated because he or she ceased to be under a disability, 
        and
            ``(ii) such child is unmarried and dependent upon the 
        employee,
shall be entitled to an annuity, if he or she has filed an application 
therefor, in the amount provided under section 4 of this Act.''
    (b) Amount of Annuity.--Section 4 of such Act is amended--
            (1) in the heading, by adding at the end ``and child 
        annuities''; and
            (2) by adding at the end the following new subsection:
    ``(j) The annuity of a child of an individual under section 2(i) of 
this Act shall be in the amount that would have been payable to the 
child under title II of the Social Security Act if all of the 
individual's service after December 31, 1936, had been included in the 
term `employment' as defined in that Act reduced by any benefit payable 
under title II of the Social Security Act.''.
    (c) Technical Amendment.--The first sentence of section 3(f)(3) of 
such Act is amended by striking ``the spouse and divorced wife'' and 
inserting ``the spouse, child, and divorced wife''.

SEC. 4002. ENTITLEMENT TO SPOUSAL ANNUITIES.

    (a) Entitlement Despite Certain Age Requirements.--Section 2(c)(1) 
of the Railroad Retirement Act of 1974 is amended by adding at the end 
the following: ``A spouse who is not entitled to an annuity by reason 
of paragraph (i)(B) of this subdivision, but who otherwise meets the 
conditions for entitlement to an annuity under this subsection, shall 
be entitled to an annuity in such amount as would have been payable 
under title II of the Social Security Act if all of the individual's 
service after December 31, 1936, had been included in the term 
`employment' as defined in that Act reduced by any benefit payable to 
the spouse under title II of the Social Security Act.''.
    (b) Removal of Age Requirement for Divorced Spouses.--Section 
2(c)(4) of such Act is amended by striking paragraph (ii), by 
redesignating paragraph (iii) as paragraph (ii), and by striking 
paragraph (i) and inserting the following:
                    ``(i) such individual has completed 10 years of 
                service; and''.
    (c) Entitlement of Divorced Spouse Where Worker's Annuity Is Not 
Payable.--Section 2(e)(5) of such Act is amended by striking ``or 
divorced wife'' in the second sentence.

SEC. 4003. CONTINUED PAYMENT TO SURVIVORS OF WAIVED LUMP SUM BENEFITS 
              IN AMOUNTS EQUIVALENT TO SOCIAL SECURITY SURVIVOR 
              BENEFITS

    Section 6(c)(1) of the Railroad Retirement Act of 1974 is amended 
by striking all that follows ``Provided, however,'' and inserting the 
following: ``That if the employee is survived by a widow, widower, or 
parent who may upon attaining the age of eligibility be entitled to 
benefits under this Act, such lump sum shall not be paid unless such 
widow, widower, or parent makes and files with the Board an irrevocable 
election, in such form as the Board may prescribe, to have such lump 
sum be paid in lieu of all benefits, other than the amount of the 
benefits that the widow, widower, or parent would have received under 
title II of the Social Security Act if all of the employee's service 
after December 31, 1936, had been included in the term `employment' as 
defined in that Act. After a lump sum with respect to the death of an 
employee is paid pursuant to an election filed with the Board under the 
provisions of this subsection, no further benefits, other than benefits 
in such amounts as would have been payable under title II of the Social 
Security Act if all of the employee's service after December 31, 1936, 
had been included in the term `employment' as defined in that Act, 
shall be paid under this Act on the basis of such employee's 
compensation and service under this Act.''.

SEC. 4004. LUMP SUM DEATH BENEFITS EQUIVALENT TO SOCIAL SECURITY 
              BENEFITS.

    (a) In General.--Section 6(b)(2) of the Railroad Retirement Act of 
1974 is amended to read as follows:
    ``(2) Upon the death of an individual who (A) will have completed 
ten years of service at the time of his death, and (B) will have had a 
current connection with the railroad industry at the time of his death, 
a lump-sum death payment shall be made in accordance with the 
provisions of section 202(i) of the Social Security Act in an amount 
equal to the amount which would have been payable under such section 
202(i) if such individual's service as an employee after December 31, 
1936, were included in the term `employment' as defined in that Act.''.
    (b) Conforming Amendment.--Section 6(b)(1) of such Act is amended 
by inserting before the period at the end of the first sentence the 
following: ``less any lump-sum benefit payable under subdivision (2) of 
this subsection''.

SEC. 4005. PAYMENT OF BENEFITS EQUIVALENT TO SOCIAL SECURITY BENEFITS 
              WITH RESPECT TO SERVICE FOR WHICH CERTAIN RAILROAD 
              RETIREMENT ANNUITIES ARE NOT PAYABLE.

    Section 2(e) of the Railroad Retirement Act of 1974 is amended by 
adding at the end the following new subdivision:
    ``(6) A person who has filed an application for an annuity under 
this Act, but whose annuity is not payable for a month by reason of 
subdivision (1), (3), or (5) of this subsection and who is entitled to 
a benefit under title II of the Social Security Act for such month 
shall be entitled to receive an annuity under this Act for such month 
equal to the difference between the benefit under such title II paid 
for such month and the benefit under such title II that would have been 
paid for such month if all of the individual's service after December 
31, 1936, had been included in the term `employment' as defined in that 
Act.''.

SEC. 4006. EFFECTIVE DATE.

    The amendments made by this title shall take effect on January 1, 
1997.
                                 <all>
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