IB

Union Calendar No. 433

106TH CONGRESS

2D SESSION H. R. 4843

[Report No. 106–753]

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

security and pension reform.

IN THE HOUSE OF REPRESENTATIVES

JULY 13, 2000

Mr. ARCHER (for himself, Mr. PORTMAN, and Mr. CARDIN) introduced the

following bill; which was referred to the Committee on Ways and Means

JULY 17, 2000

Reported with an amendment, committed to the Committee of the Whole

House on the State of the Union, and ordered to be printed

[Strike out all after the enacting clause and insert the part printed in italic]

[For text of introduced bill, see copy of bill as introduced on July 13, 2000]

A BILL

To amend the Internal Revenue Code of 1986 to provide

for retirement security and pension reform.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CON2 TENTS.

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

4 ‘‘Comprehensive Retirement Security and Pension Reform

5 Act of 2000’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as otherwise

7 expressly provided, whenever in this Act an amendment or

8 repeal is expressed in terms of an amendment to, or repeal

9 of, a section or other provision, the reference shall be consid10 ered to be made to a section or other provision of the Inter11 nal Revenue Code of 1986.

12 (c) TABLE OF CONTENTS.—The table of contents of this

13 Act is as follows:

Sec. 1. Short title; references; table of contents.

TITLE I—INDIVIDUAL RETIREMENT ACCOUNT PROVISIONS

Sec. 101. Modification of IRA contribution limits.

TITLE II—EXPANDING COVERAGE

Sec. 201. Increase in benefit and contribution limits.

Sec. 202. Plan loans for subchapter S owners, partners, and sole proprietors.

Sec. 203. Modification of top-heavy rules.

Sec. 204. Elective deferrals not taken into account for purposes of deduction limits.

Sec. 205. Repeal of coordination requirements for deferred compensation plans of

State and local governments and tax-exempt organizations.

Sec. 206. Elimination of user fee for requests to IRS regarding pension plans.

Sec. 207. Deduction limits.

Sec. 208. Option to treat elective deferrals as after-tax contributions.

TITLE III—ENHANCING FAIRNESS FOR WOMEN

Sec. 301. Catch-up contributions for individuals age 50 or over.

Sec. 302. Equitable treatment for contributions of employees to defined contribution plans.

Sec. 303. Faster vesting of certain employer matching contributions.

Sec. 304. Simplify and update the minimum distribution rules.

Sec. 305. Clarification of tax treatment of division of section 457 plan benefits

upon divorce.
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Sec. 306. Modification of safe harbor relief for hardship withdrawals from cash

or deferred arrangements.

TITLE IV—INCREASING PORTABILITY FOR PARTICIPANTS

Sec. 401. Rollovers allowed among various types of plans.

Sec. 402. Rollovers of IRAs into workplace retirement plans.

Sec. 403. Rollovers of after-tax contributions.

Sec. 404. Hardship exception to 60-day rule.

Sec. 405. Treatment of forms of distribution.

Sec. 406. Rationalization of restrictions on distributions.

Sec. 407. Purchase of service credit in governmental defined benefit plans.

Sec. 408. Employers may disregard rollovers for purposes of cash-out amounts.

Sec. 409. Minimum distribution and inclusion requirements for section 457

plans.

TITLE V—STRENGTHENING PENSION SECURITY AND

ENFORCEMENT

Sec. 501. Repeal of 150 percent of current liability funding limit.

Sec. 502. Maximum contribution deduction rules modified and applied to all defined benefit plans.

Sec. 503. Excise tax relief for sound pension funding.

Sec. 504. Excise tax on failure to provide notice by defined benefit plans significantly reducing future benefit accruals.

Sec. 505. Treatment of multiemployer plans under section 415.

Sec. 506. Prohibited allocations of stock in S corporation ESOP.

TITLE VI—REDUCING REGULATORY BURDENS

Sec. 601. Modification of timing of plan valuations.

Sec. 602. ESOP dividends may be reinvested without loss of dividend deduction.

Sec. 603. Repeal of transition rule relating to certain highly compensated employees.

Sec. 604. Employees of tax-exempt entities.

Sec. 605. Clarification of treatment of employer-provided retirement advice.

Sec. 606. Reporting simplification.

Sec. 607. Improvement of employee plans compliance resolution system.

Sec. 608. Repeal of the multiple use test.

Sec. 609. Flexibility in nondiscrimination, coverage, and line of business rules.

Sec. 610. Extension to all governmental plans of moratorium on application of

certain nondiscrimination rules applicable to State and local

plans.

Sec. 611. Notice and consent period regarding distributions.

TITLE VII—PLAN AMENDMENTS

Sec. 701. Provisions relating to plan amendments.

1 TITLE I—INDIVIDUAL

2 RETIREMENT ACCOUNTS

3 SEC. 101. MODIFICATION OF IRA CONTRIBUTION LIMITS.

4 (a) INCREASE IN CONTRIBUTION LIMIT.—
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1 (1) IN GENERAL.—Paragraph (1)(A) of section

2 219(b) (relating to maximum amount of deduction) is

3 amended by striking ‘‘$2,000’’ and inserting ‘‘the de4 ductible amount’’.

5 (2) DEDUCTIBLE AMOUNT.—Section 219(b) is

6 amended by adding at the end the following new

7 paragraph:

8 ‘‘(5) DEDUCTIBLE AMOUNT.—For purposes of

9 paragraph (1)(A)—

10 ‘‘(A) IN GENERAL.—The deductible amount

11 shall be determined in accordance with the fol12 lowing table:

‘‘For taxable years The deductible

beginning in: amount is:

2001 .................................................................................... $3,000

2002 .................................................................................... $4,000

2003 and thereafter ........................................................... $5,000.

13 ‘‘(B) CATCH-UP CONTRIBUTIONS FOR INDI14 VIDUALS 50 OR OLDER.—In the case of an indi15 vidual who has attained the age of 50 before the

16 close of the taxable year, the deductible amount

17 for taxable years beginning in 2001 or 2002

18 shall be $5,000.

19 ‘‘(C) COST-OF-LIVING ADJUSTMENT.—

20 ‘‘(i) IN GENERAL.—In the case of any

21 taxable year beginning in a calendar year

22 after 2003, the $5,000 amount under sub-
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1 paragraph (A) shall be increased by an

2 amount equal to—

3 ‘‘(I) such dollar amount, multi4 plied by

5 ‘‘(II) the cost-of-living adjustment

6 determined under section 1(f )(3) for

7 the calendar year in which the taxable

8 year begins, determined by substituting

9 ‘calendar year 2002’ for ‘calendar year

10 1992’ in subparagraph (B) thereof.

11 ‘‘(ii) ROUNDING RULES.—If any

12 amount after adjustment under clause (i) is

13 not a multiple of $500, such amount shall

14 be rounded to the next lower multiple of

15 $500.’’.

16 (b) CONFORMING AMENDMENTS.—

17 (1) Section 408(a)(1) is amended by striking ‘‘in

18 excess of $2,000 on behalf of any individual’’ and in19 serting ‘‘on behalf of any individual in excess of the

20 amount in effect for such taxable year under section

21 219(b)(1)(A)’’.

22 (2) Section 408(b)(2)(B) is amended by striking

23 ‘‘$2,000’’ and inserting ‘‘the dollar amount in effect

24 under section 219(b)(1)(A)’’.
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1 (3) Section 408(b) is amended by striking

2 ‘‘$2,000’’ in the matter following paragraph (4) and

3 inserting ‘‘the dollar amount in effect under section

4 219(b)(1)(A)’’.

5 (4) Section 408( j) is amended by striking

6 ‘‘$2,000’’.

7 (5) Section 408(p)(8) is amended by striking

8 ‘‘$2,000’’ and inserting ‘‘the dollar amount in effect

9 under section 219(b)(1)(A)’’.

10 (c) EFFECTIVE DATE.—The amendments made by this

11 section shall apply to taxable years beginning after Decem12 ber 31, 2000.

13 TITLE II—EXPANDING

14 COVERAGE

15 SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION

16 LIMITS.

17 (a) DEFINED BENEFIT PLANS.—

18 (1) DOLLAR LIMIT.—

19 (A) Subparagraph (A) of section 415(b)(1)

20 (relating to limitation for defined benefit plans)

21 is amended by striking ‘‘$90,000’’ and inserting

22 ‘‘$160,000’’.

23 (B) Subparagraphs (C) and (D) of section

24 415(b)(2) are each amended by striking
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1 ‘‘$90,000’’ each place it appears in the headings

2 and the text and inserting ‘‘$160,000’’.

3 (C) Paragraph (7) of section 415(b) (relat4 ing to benefits under certain collectively bar5 gained plans) is amended by striking ‘‘the great6 er of $68,212 or one-half the amount otherwise

7 applicable for such year under paragraph (1)(A)

8 for ‘$90,000’ ’’ and inserting ‘‘one-half the

9 amount otherwise applicable for such year under

10 paragraph (1)(A) for ‘$160,000’ ’’.

11 (2) LIMIT REDUCED WHEN BENEFIT BEGINS BE12 FORE AGE 62.—Subparagraph (C) of section 415(b)(2)

13 is amended by striking ‘‘the social security retirement

14 age’’ each place it appears in the heading and text

15 and inserting ‘‘age 62’’.

16 (3) LIMIT INCREASED WHEN BENEFIT BEGINS

17 AFTER AGE 65.—Subparagraph (D) of section

18 415(b)(2) is amended by striking ‘‘the social security

19 retirement age’’ each place it appears in the heading

20 and text and inserting ‘‘age 65’’.

21 (4) COST-OF-LIVING ADJUSTMENTS.—Subsection

22 (d) of section 415 (related to cost-of-living adjust23 ments) is amended—

24 (A) by striking ‘‘$90,000’’ in paragraph

25 (1)(A) and inserting ‘‘$160,000’’; and
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1 (B) in paragraph (3)(A)—

2 (i) by striking ‘‘$90,000’’ in the head3 ing and inserting ‘‘$160,000’’; and

4 (ii) by striking ‘‘October 1, 1986’’ and

5 inserting ‘‘July 1, 2000’’.

6 (5) CONFORMING AMENDMENT.—Section

7 415(b)(2) is amended by striking subparagraph (F).

8 (b) DEFINED CONTRIBUTION PLANS.—

9 (1) DOLLAR LIMIT.—Subparagraph (A) of sec10 tion 415(c)(1) (relating to limitation for defined con11 tribution plans) is amended by striking ‘‘$30,000’’

12 and inserting ‘‘$40,000’’.

13 (2) COST-OF-LIVING ADJUSTMENTS.—Subsection

14 (d) of section 415 (related to cost-of-living adjust15 ments) is amended—

16 (A) by striking ‘‘$30,000’’ in paragraph

17 (1)(C) and inserting ‘‘$40,000’’; and

18 (B) in paragraph (3)(D)—

19 (i) by striking ‘‘$30,000’’ in the head20 ing and inserting ‘‘$40,000’’; and

21 (ii) by striking ‘‘October 1, 1993’’ and

22 inserting ‘‘July 1, 2000’’.

23 (c) QUALIFIED TRUSTS.—

24 (1) COMPENSATION LIMIT.—Sections 401(a)(17),

25 404(l), 408(k), and 505(b)(7) are each amended by
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1 striking ‘‘$150,000’’ each place it appears and insert2 ing ‘‘$200,000’’.

3 (2) BASE PERIOD AND ROUNDING OF COST-OF4 LIVING ADJUSTMENT.—Subparagraph (B) of section

5 401(a)(17) is amended—

6 (A) by striking ‘‘October 1, 1993’’ and in7 serting ‘‘July 1, 2000’’; and

8 (B) by striking ‘‘$10,000’’ both places it ap9 pears and inserting ‘‘$5,000’’.

10 (d) ELECTIVE DEFERRALS.—

11 (1) IN GENERAL.—Paragraph (1) of section

12 402(g) (relating to limitation on exclusion for elective

13 deferrals) is amended to read as follows:

14 ‘‘(1) IN GENERAL.—

15 ‘‘(A) LIMITATION.—Notwithstanding sub16 sections (e)(3) and (h)(1)(B), the elective defer17 rals of any individual for any taxable year shall

18 be included in such individual’s gross income to

19 the extent the amount of such deferrals for the

20 taxable year exceeds the applicable dollar

21 amount.

22 ‘‘(B) APPLICABLE DOLLAR AMOUNT.—For

23 purposes of subparagraph (A), the applicable

24 dollar amount shall be the amount determined in

25 accordance with the following table:
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‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 .................................................................................... $11,000

2002 .................................................................................... $12,000

2003 .................................................................................... $13,000

2004 .................................................................................... $14,000

2005 or thereafter .............................................................. $15,000.’’.

1 (2) COST-OF-LIVING ADJUSTMENT.—Paragraph

2 (5) of section 402(g) is amended to read as follows:

3 ‘‘(5) COST-OF-LIVING ADJUSTMENT.—In the case

4 of taxable years beginning after December 31, 2005,

5 the Secretary shall adjust the $15,000 amount under

6 paragraph (1)(B) at the same time and in the same

7 manner as under section 415(d), except that the base

8 period shall be the calendar quarter beginning July 1,

9 2004, and any increase under this paragraph which

10 is not a multiple of $500 shall be rounded to the next

11 lowest multiple of $500.’’.

12 (3) CONFORMING AMENDMENTS.—

13 (A) Section 402(g) (relating to limitation

14 on exclusion for elective deferrals), as amended

15 by paragraphs (1) and (2), is further amended

16 by striking paragraph (4) and redesignating

17 paragraphs (5), (6), (7), (8), and (9) as para18 graphs (4), (5), (6), (7), and (8), respectively.

19 (B) Paragraph (2) of section 457(c) is

20 amended by striking ‘‘402(g)(8)(A)(iii)’’ and in21 serting ‘‘402(g)(7)(A)(iii)’’.
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1 (C) Clause (iii) of section 501(c)(18)(D) is

2 amended by striking ‘‘(other than paragraph (4)

3 thereof)’’.

4 (e) DEFERRED COMPENSATION PLANS OF STATE AND

5 LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANIZA6 TIONS.—

7 (1) IN GENERAL.—Section 457 (relating to de8 ferred compensation plans of State and local govern9 ments and tax-exempt organizations) is amended—

10 (A) in subsections (b)(2)(A) and (c)(1) by

11 striking ‘‘$7,500’’ each place it appears and in12 serting ‘‘the applicable dollar amount’’; and

13 (B) in subsection (b)(3)(A) by striking

14 ‘‘$15,000’’ and inserting ‘‘twice the dollar

15 amount in effect under subsection (b)(2)(A)’’.

16 (2) APPLICABLE DOLLAR AMOUNT; COST-OF-LIV17 ING ADJUSTMENT.—Paragraph (15) of section 457(e)

18 is amended to read as follows:

19 ‘‘(15) APPLICABLE DOLLAR AMOUNT.—

20 ‘‘(A) IN GENERAL.—The applicable dollar

21 amount shall be the amount determined in ac22 cordance with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 .................................................................................... $11,000

2002 .................................................................................... $12,000

2003 .................................................................................... $13,000
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2004 .................................................................................... $14,000

2005 or thereafter .............................................................. $15,000.

1 ‘‘(B) COST-OF-LIVING ADJUSTMENTS.—In

2 the case of taxable years beginning after Decem3 ber 31, 2005, the Secretary shall adjust the

4 $15,000 amount specified in the table in sub5 paragraph (A) at the same time and in the same

6 manner as under section 415(d), except that the

7 base period shall be the calendar quarter begin8 ning July 1, 2004, and any increase under this

9 paragraph which is not a multiple of $500 shall

10 be rounded to the next lowest multiple of $500.’’.

11 (f) SIMPLE RETIREMENT ACCOUNTS.—

12 (1) LIMITATION.—Clause (ii) of section

13 408(p)(2)(A) (relating to general rule for qualified

14 salary reduction arrangement) is amended by striking

15 ‘‘$6,000’’ and inserting ‘‘the applicable dollar

16 amount’’.

17 (2) APPLICABLE DOLLAR AMOUNT.—Subpara18 graph (E) of 408(p)(2) is amended to read as follows:

19 ‘‘(E) APPLICABLE DOLLAR AMOUNT; COST20 OF-LIVING ADJUSTMENT.—

21 ‘‘(i) IN GENERAL.—For purposes of

22 subparagraph (A)(ii), the applicable dollar

23 amount shall be the amount determined in

24 accordance with the following table:
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‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 ............................................................................ $7,000

2002 ............................................................................ $8,000

2003 ............................................................................ $9,000

2004 or thereafter ...................................................... $10,000.

1 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

2 In the case of a year beginning after Decem3 ber 31, 2004, the Secretary shall adjust the

4 $10,000 amount under clause (i) at the

5 same time and in the same manner as

6 under section 415(d), except that the base

7 period taken into account shall be the cal8 endar quarter beginning July 1, 2003, and

9 any increase under this subparagraph

10 which is not a multiple of $500 shall be

11 rounded to the next lower multiple of

12 $500.’’.

13 (3) CONFORMING AMENDMENTS.—

14 (A) Clause (I) of section 401(k)(11)(B)(i) is

15 amended by striking ‘‘$6,000’’ and inserting ‘‘the

16 amount in effect under section 408(p)(2)(A)(ii)’’.

17 (B) Section 401(k)(11) is amended by strik18 ing subparagraph (E).

19 (g) ROUNDING RULE RELATING TO DEFINED BENEFIT

20 PLANS AND DEFINED CONTRIBUTION PLANS.—Paragraph

21 (4) of section 415(d) is amended to read as follows:

22 ‘‘(4) ROUNDING.—
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1 ‘‘(A) $160,000 AMOUNT.—Any increase

2 under subparagraph (A) of paragraph (1) which

3 is not a multiple of $5,000 shall be rounded to

4 the next lowest multiple of $5,000.

5 ‘‘(B) $40,000 AMOUNT.—Any increase

6 under subparagraph (C) of paragraph (1) which

7 is not a multiple of $1,000 shall be rounded to

8 the next lowest multiple of $1,000.’’.

9 (h) EFFECTIVE DATE.—The amendments made by this

10 section shall apply to years beginning after December 31,

11 2000.

12 SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART13 NERS, AND SOLE PROPRIETORS.

14 (a) IN GENERAL.—Subparagraph (B) of section

15 4975(f)(6) (relating to exemptions not to apply to certain

16 transactions) is amended by adding at the end the following

17 new clause:

18 ‘‘(iii) LOAN EXCEPTION.—For purposes

19 of subparagraph (A)(i), the term ‘owner-em20 ployee’ shall only include a person described

21 in subclause (II) or (III) of clause (i).’’.

22 (b) EFFECTIVE DATE.—The amendment made by this

23 section shall apply to loans made after December 31, 2000.
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1 SEC. 203. MODIFICATION OF TOP-HEAVY RULES.

2 (a) SIMPLIFICATION OF DEFINITION OF KEY EM3 PLOYEE.—

4 (1) IN GENERAL.—Section 416(i)(1)(A) (defining

5 key employee) is amended—

6 (A) by striking ‘‘or any of the 4 preceding

7 plan years’’ in the matter preceding clause (i);

8 (B) by striking clause (i) and inserting the

9 following:

10 ‘‘(i) an officer of the employer having

11 an annual compensation greater than

12 $150,000,’’;

13 (C) by striking clause (ii) and redesig14 nating clauses (iii) and (iv) as clauses (ii) and

15 (iii), respectively; and

16 (D) by striking the second sentence in the

17 matter following clause (iii), as redesignated by

18 subparagraph (C).

19 (2) CONFORMING AMENDMENT.—Section

20 416(i)(1)(B)(iii) is amended by striking ‘‘and sub21 paragraph (A)(ii)’’.

22 (b) MATCHING CONTRIBUTIONS TAKEN INTO ACCOUNT

23 FOR MINIMUM CONTRIBUTION REQUIREMENTS.—Section

24 416(c)(2)(A) (relating to defined contribution plans) is

25 amended by adding at the end the following: ‘‘Employer

26 matching contributions (as defined in section
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1 401(m)(4)(A)) shall be taken into account for purposes of

2 this subparagraph.’’.

3 (c) DISTRIBUTIONS DURING LAST YEAR BEFORE DE4 TERMINATION DATE TAKEN INTO ACCOUNT.—

5 (1) IN GENERAL.—Paragraph (3) of section

6 416(g) is amended to read as follows:

7 ‘‘(3) DISTRIBUTIONS DURING LAST YEAR BEFORE

8 DETERMINATION DATE TAKEN INTO ACCOUNT.—

9 ‘‘(A) IN GENERAL.—For purposes of

10 determining—

11 ‘‘(i) the present value of the cumulative

12 accrued benefit for any employee, or

13 ‘‘(ii) the amount of the account of any

14 employee,

15 such present value or amount shall be increased

16 by the aggregate distributions made with respect

17 to such employee under the plan during the 1-

18 year period ending on the determination date.

19 The preceding sentence shall also apply to dis20 tributions under a terminated plan which if it

21 had not been terminated would have been re22 quired to be included in an aggregation group.

23 ‘‘(B) 5-YEAR PERIOD IN CASE OF IN-SERV24 ICE DISTRIBUTION.—In the case of any distribu25 tion made for a reason other than separation
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1 from service, death, or disability, subparagraph

2 (A) shall be applied by substituting ‘5-year pe3 riod’ for ‘1-year period’.’’.

4 (2) BENEFITS NOT TAKEN INTO ACCOUNT.—Sub5 paragraph (E) of section 416(g)(4) is amended—

6 (A) by striking ‘‘LAST 5 YEARS’’ in the

7 heading and inserting ‘‘LAST YEAR BEFORE DE8 TERMINATION DATE’’; and

9 (B) by striking ‘‘5-year period’’ and insert10 ing ‘‘1-year period’’.

11 (d) DEFINITION OF TOP-HEAVY PLANS.—Paragraph

12 (4) of section 416(g) (relating to other special rules for top13 heavy plans) is amended by adding at the end the following

14 new subparagraph:

15 ‘‘(H) CASH OR DEFERRED ARRANGEMENTS

16 USING ALTERNATIVE METHODS OF MEETING NON17 DISCRIMINATION REQUIREMENTS.—The term

18 ‘top-heavy plan’ shall not include a plan which

19 consists solely of—

20 ‘‘(i) a cash or deferred arrangement

21 which meets the requirements of section

22 401(k)(12), and

23 ‘‘(ii) matching contributions with re24 spect to which the requirements of section

25 401(m)(11) are met.
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1 If, but for this subparagraph, a plan would be

2 treated as a top-heavy plan because it is a mem3 ber of an aggregation group which is a top-heavy

4 group, contributions under the plan may be

5 taken into account in determining whether any

6 other plan in the group meets the requirements

7 of subsection (c)(2).’’.

8 (e) FROZEN PLAN EXEMPT FROM MINIMUM BENEFIT

9 REQUIREMENT.—Subparagraph (C) of section 416(c)(1)

10 (relating to defined benefit plans) is amended—

11 (A) by striking ‘‘clause (ii)’’ in clause (i)

12 and inserting ‘‘clause (ii) or (iii)’’; and

13 (B) by adding at the end the following:

14 ‘‘(iii) EXCEPTION FOR FROZEN

15 PLAN.—For purposes of determining an em16 ployee’s years of service with the employer,

17 any service with the employer shall be dis18 regarded to the extent that such service oc19 curs during a plan year when the plan ben20 efits (within the meaning of section 410(b))

21 no employee or former employee.’’.

22 (f) ELIMINATION OF FAMILY ATTRIBUTION.—Section

23 416(i)(1)(B) (defining 5-percent owner) is amended by add24 ing at the end the following new clause:
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1 ‘‘(iv) FAMILY ATTRIBUTION DIS2 REGARDED.—Solely for purposes of apply3 ing this paragraph (and not for purposes of

4 any provision of this title which incor5 porates by reference the definition of a key

6 employee or 5-percent owner under this

7 paragraph), section 318 shall be applied

8 without regard to subsection (a)(1) thereof

9 in determining whether any person is a 5-

10 percent owner.’’.

11 (g) EFFECTIVE DATE.—The amendments made by this

12 section shall apply to years beginning after December 31,

13 2000.

14 SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO AC15 COUNT FOR PURPOSES OF DEDUCTION LIM16 ITS.

17 (a) IN GENERAL.—Section 404 (relating to deduction

18 for contributions of an employer to an employees’ trust or

19 annuity plan and compensation under a deferred payment

20 plan) is amended by adding at the end the following new

21 subsection:

22 ‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC23 COUNT FOR PURPOSES OF DEDUCTION LIMITS.—Elective

24 deferrals (as defined in section 402(g)(3)) shall not be sub25 ject to any limitation contained in paragraph (3), (7), or
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1 (9) of subsection (a), and such elective deferrals shall not

2 be taken into account in applying any such limitation to

3 any other contributions.’’.

4 (b) EFFECTIVE DATE.—The amendment made by this

5 section shall apply to years beginning after December 31,

6 2000.

7 SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR

8 DEFERRED COMPENSATION PLANS OF STATE

9 AND LOCAL GOVERNMENTS AND TAX-EXEMPT

10 ORGANIZATIONS.

11 (a) IN GENERAL.—Subsection (c) of section 457 (relat12 ing to deferred compensation plans of State and local gov13 ernments and tax-exempt organizations), as amended by

14 section 201, is amended to read as follows:

15 ‘‘(c) LIMITATION.—The maximum amount of the com16 pensation of any one individual which may be deferred

17 under subsection (a) during any taxable year shall not ex18 ceed the amount in effect under subsection (b)(2)(A) (as

19 modified by any adjustment provided under subsection

20 (b)(3)).’’.

21 (b) EFFECTIVE DATE.—The amendment made by sub22 section (a) shall apply to years beginning after December

23 31, 2000.
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1 SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO

2 IRS REGARDING PENSION PLANS.

3 (a) ELIMINATION OF CERTAIN USER FEES.—The Sec4 retary of the Treasury or the Secretary’s delegate shall not

5 require payment of user fees under the program established

6 under section 7527 of the Internal Revenue Code of 1986

7 for requests to the Internal Revenue Service for determina8 tion letters with respect to the qualified status of a pension

9 benefit plan maintained solely by one or more eligible em10 ployers or any trust which is part of the plan. The pre11 ceding sentence shall not apply to any request—

12 (1) made after the fifth plan year the pension

13 benefit plan is in existence; or

14 (2) made by the sponsor of any prototype or

15 similar plan which the sponsor intends to market to

16 participating employers.

17 (b) PENSION BENEFIT PLAN.—For purposes of this

18 section, the term ‘‘pension benefit plan’’ means a pension,

19 profit-sharing, stock bonus, annuity, or employee stock own20 ership plan.

21 (c) ELIGIBLE EMPLOYER.—For purposes of this sec22 tion, the term ‘‘eligible employer’’ has the same meaning

23 given such term in section 408(p)(2)(C)(i)(I) of the Internal

24 Revenue Code of 1986. The determination of whether an em25 ployer is an eligible employer under this section shall be
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1 made as of the date of the request described in subsection

2 (a).

3 (d) EFFECTIVE DATE.—The provisions of this section

4 shall apply with respect to requests made after December

5 31, 2000.

6 SEC. 207. DEDUCTION LIMITS.

7 (a) IN GENERAL.—

8 (1) STOCK BONUS AND PROFIT SHARING

9 TRUSTS.—Subclause (I) of section 404(a)(3)(A)(i) (re10 lating to stock bonus and profit sharing trusts) is

11 amended by striking ‘‘15 percent’’ and inserting ‘‘20

12 percent’’.

13 (2) COMPENSATION.—Section 404(a) (relating to

14 general rule) is amended by adding at the end the fol15 lowing:

16 ‘‘(12) DEFINITION OF COMPENSATION.—For pur17 poses of paragraphs (3), (7), (8), and (9), the term

18 ‘compensation otherwise paid or accrued during the

19 taxable year’ shall include amounts treated as ‘par20 ticipant’s compensation’ under subparagraph (C) or

21 (D) of section 415(c)(3).’’.

22 (b) CONFORMING AMENDMENTS.—

23 (1) Subparagraph (B) of section 404(a)(3) is

24 amended by striking the last sentence thereof.
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1 (2) Subparagraph (C) of section 404(h)(1) is

2 amended by striking ‘‘15 percent’’ each place it ap3 pears and inserting ‘‘20 percent’’.

4 (3) Clause (i) of section 4972(c)(6)(B) is amend5 ed by striking ‘‘(within the meaning of section

6 404(a))’’ and inserting ‘‘(within the meaning of sec7 tion 404(a) and as adjusted under section

8 404(a)(12))’’.

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

10 section shall apply to years beginning after December 31,

11 2000.

12 SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS

13 AFTER-TAX CONTRIBUTIONS.

14 (a) IN GENERAL.—Subpart A of part I of subchapter

15 D of chapter 1 (relating to deferred compensation, etc.) is

16 amended by inserting after section 402 the following new

17 section:

18 ‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER19 RALS AS PLUS CONTRIBUTIONS.

20 ‘‘(a) GENERAL RULE.—If an applicable retirement

21 plan includes a qualified plus contribution program—

22 ‘‘(1) any designated plus contribution made by

23 an employee pursuant to the program shall be treated

24 as an elective deferral for purposes of this chapter, ex-
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1 cept that such contribution shall not be excludable

2 from gross income, and

3 ‘‘(2) such plan (and any arrangement which is

4 part of such plan) shall not be treated as failing to

5 meet any requirement of this chapter solely by reason

6 of including such program.

7 ‘‘(b) QUALIFIED PLUS CONTRIBUTION PROGRAM.—

8 For purposes of this section—

9 ‘‘(1) IN GENERAL.—The term ‘qualified plus con10 tribution program’ means a program under which an

11 employee may elect to make designated plus contribu12 tions in lieu of all or a portion of elective deferrals

13 the employee is otherwise eligible to make under the

14 applicable retirement plan.

15 ‘‘(2) SEPARATE ACCOUNTING REQUIRED.—A pro16 gram shall not be treated as a qualified plus contribu17 tion program unless the applicable retirement plan—

18 ‘‘(A) establishes separate accounts (‘des19 ignated plus accounts’) for the designated plus

20 contributions of each employee and any earnings

21 properly allocable to the contributions, and

22 ‘‘(B) maintains separate recordkeeping with

23 respect to each account.
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1 ‘‘(c) DEFINITIONS AND RULES RELATING TO DES2 IGNATED PLUS CONTRIBUTIONS.—For purposes of this

3 section—

4 ‘‘(1) DESIGNATED PLUS CONTRIBUTION.—The

5 term ‘designated plus contribution’ means any elec6 tive deferral which—

7 ‘‘(A) is excludable from gross income of an

8 employee without regard to this section, and

9 ‘‘(B) the employee designates (at such time

10 and in such manner as the Secretary may pre11 scribe) as not being so excludable.

12 ‘‘(2) DESIGNATION LIMITS.—The amount of elec13 tive deferrals which an employee may designate under

14 paragraph (1) shall not exceed the excess (if any) of—

15 ‘‘(A) the maximum amount of elective defer16 rals excludable from gross income of the employee

17 for the taxable year (without regard to this sec18 tion), over

19 ‘‘(B) the aggregate amount of elective defer20 rals of the employee for the taxable year which

21 the employee does not designate under paragraph

22 (1).

23 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

24 ‘‘(A) IN GENERAL.—A rollover contribution

25 of any payment or distribution from a des-
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1 ignated plus account which is otherwise allow2 able under this chapter may be made only if the

3 contribution is to—

4 ‘‘(i) another designated plus account of

5 the individual from whose account the pay6 ment or distribution was made, or

7 ‘‘(ii) a Roth IRA of such individual.

8 ‘‘(B) COORDINATION WITH LIMIT.—Any

9 rollover contribution to a designated plus ac10 count under subparagraph (A) shall not be taken

11 into account for purposes of paragraph (1).

12 ‘‘(d) DISTRIBUTION RULES.—For purposes of this

13 title—

14 ‘‘(1) EXCLUSION.—Any qualified distribution

15 from a designated plus account shall not be includible

16 in gross income.

17 ‘‘(2) QUALIFIED DISTRIBUTION.—For purposes

18 of this subsection—

19 ‘‘(A) IN GENERAL.—The term ‘qualified dis20 tribution’ has the meaning given such term by

21 section 408A(d)(2)(A) (without regard to clause

22 (iv) thereof).

23 ‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU24 SION PERIOD.—A payment or distribution from

25 a designated plus account shall not be treated as
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1 a qualified distribution if such payment or dis2 tribution is made within the 5-taxable-year pe3 riod beginning with the earlier of—

4 ‘‘(i) the first taxable year for which the

5 individual made a designated plus con6 tribution to any designated plus account es7 tablished for such individual under the

8 same applicable retirement plan, or

9 ‘‘(ii) if a rollover contribution was

10 made to such designated plus account from

11 a designated plus account previously estab12 lished for such individual under another

13 applicable retirement plan, the first taxable

14 year for which the individual made a des15 ignated plus contribution to such previously

16 established account.

17 ‘‘(C) DISTRIBUTIONS OF EXCESS DEFER18 RALS AND EARNINGS.—The term ‘qualified dis19 tribution’ shall not include any distribution of

20 any excess deferral under section 402(g)(2) and

21 any income on the excess deferral.

22 ‘‘(3) AGGREGATION RULES.—Section 72 shall be

23 applied separately with respect to distributions and

24 payments from a designated plus account and other

25 distributions and payments from the plan.
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1 ‘‘(e) OTHER DEFINITIONS.—For purposes of this

2 section—

3 ‘‘(1) APPLICABLE RETIREMENT PLAN.—The term

4 ‘applicable retirement plan’ means—

5 ‘‘(A) an employees’ trust described in sec6 tion 401(a) which is exempt from tax under sec7 tion 501(a), and

8 ‘‘(B) a plan under which amounts are con9 tributed by an individual’s employer for an an10 nuity contract described in section 403(b).

11 ‘‘(2) ELECTIVE DEFERRAL.—The term ‘elective

12 deferral’ means any elective deferral described in sub13 paragraph (A) or (C) of section 402(g)(3).’’.

14 (b) EXCESS DEFERRALS.—Section 402(g) (relating to

15 limitation on exclusion for elective deferrals) is amended—

16 (1) by adding at the end of paragraph (1) the

17 following new sentence: ‘‘The preceding sentence shall

18 not apply to so much of such excess as does not exceed

19 the designated plus contributions of the individual for

20 the taxable year.’’; and

21 (2) by inserting ‘‘(or would be included but for

22 the last sentence thereof)’’ after ‘‘paragraph (1)’’ in

23 paragraph (2)(A).

24 (c) ROLLOVERS.—Subparagraph (B) of section

25 402(c)(8) is amended by adding at the end the following:
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1 ‘‘If any portion of an eligible rollover distribu2 tion is attributable to payments or distributions

3 from a designated plus account (as defined in

4 section 402A), an eligible retirement plan with

5 respect to such portion shall include only another

6 designated plus account and a Roth IRA.’’.

7 (d) REPORTING REQUIREMENTS.—

8 (1) W–2 INFORMATION.—Section 6051(a)(8) is

9 amended by inserting ‘‘, including the amount of des10 ignated plus contributions (as defined in section

11 402A)’’ before the comma at the end.

12 (2) INFORMATION.—Section 6047 is amended by

13 redesignating subsection (f) as subsection (g) and by

14 inserting after subsection (e) the following new sub15 section:

16 ‘‘(f) DESIGNATED PLUS CONTRIBUTIONS.—The Sec17 retary shall require the plan administrator of each applica18 ble retirement plan (as defined in section 402A) to make

19 such returns and reports regarding designated plus con20 tributions (as so defined) to the Secretary, participants and

21 beneficiaries of the plan, and such other persons as the Sec22 retary may prescribe.’’.

23 (e) CONFORMING AMENDMENTS.—

24 (1) Section 408A(e) is amended by adding after

25 the first sentence the following new sentence: ‘‘Such
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1 term includes a rollover contribution described in sec2 tion 402A(c)(3)(A).’’.

3 (2) The table of sections for subpart A of part I

4 of subchapter D of chapter 1 is amended by inserting

5 after the item relating to section 402 the following

6 new item:

‘‘Sec. 402A. Optional treatment of elective deferrals as plus contributions.’’.

7 (f) EFFECTIVE DATE.—The amendments made by this

8 section shall apply to taxable years beginning after Decem9 ber 31, 2000.

10 TITLE III—ENHANCING

11 FAIRNESS FOR WOMEN

12 SEC. 301. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS

13 AGE 50 OR OVER.

14 (a) IN GENERAL.—Section 414 (relating to definitions

15 and special rules) is amended by adding at the end the fol16 lowing new subsection:

17 ‘‘(v) CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS

18 AGE 50 OR OVER.—

19 ‘‘(1) IN GENERAL.—An applicable employer plan

20 shall not be treated as failing to meet any require21 ment of this title solely because the plan permits an

22 eligible participant to make additional elective defer23 rals in any plan year.
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1 ‘‘(2) LIMITATION ON AMOUNT OF ADDITIONAL

2 DEFERRALS.—A plan shall not permit additional

3 elective deferrals under paragraph (1) for any year in

4 an amount greater than the lesser of—

5 ‘‘(A) $5,000, or

6 ‘‘(B) the excess (if any) of—

7 ‘‘(i) the participant’s compensation for

8 the year, over

9 ‘‘(ii) any other elective deferrals of the

10 participant for such year which are made

11 without regard to this subsection.

12 ‘‘(3) TREATMENT OF CONTRIBUTIONS.—In the

13 case of any contribution to a plan under paragraph

14 (1), such contribution shall not, with respect to the

15 year in which the contribution is made—

16 ‘‘(A) be subject to any otherwise applicable

17 limitation contained in section 402(g),

18 402(h)(2), 404(a), 404(h), 408(p)(2)(A)(ii), 415,

19 or 457, or

20 ‘‘(B) be taken into account in applying such

21 limitations to other contributions or benefits

22 under such plan or any other such plan.

23 ‘‘(4) ELIGIBLE PARTICIPANT.—For purposes of

24 this subsection, the term ‘eligible participant’ means,
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1 with respect to any plan year, a participant in a

2 plan—

3 ‘‘(A) who has attained the age of 50 before

4 the close of the plan year, and

5 ‘‘(B) with respect to whom no other elective

6 deferrals may (without regard to this subsection)

7 be made to the plan for the plan year by reason

8 of the application of any limitation or other re9 striction described in paragraph (3) or com10 parable limitation contained in the terms of the

11 plan.

12 ‘‘(5) OTHER DEFINITIONS AND RULES.—For

13 purposes of this subsection—

14 ‘‘(A) APPLICABLE EMPLOYER PLAN.—The

15 term ‘applicable employer plan’ means—

16 ‘‘(i) an employees’ trust described in

17 section 401(a) which is exempt from tax

18 under section 501(a),

19 ‘‘(ii) a plan under which amounts are

20 contributed by an individual’s employer for

21 an annuity contract described in section

22 403(b),

23 ‘‘(iii) an eligible deferred compensation

24 plan under section 457 of an eligible em-
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1 ployer as defined in section 457(e)(1)(A),

2 and

3 ‘‘(iv) an arrangement meeting the re4 quirements of section 408 (k) or (p).

5 ‘‘(B) ELECTIVE DEFERRAL.—The term ‘elec6 tive deferral’ has the meaning given such term

7 by subsection (u)(2)(C).

8 ‘‘(C) EXCEPTION FOR SECTION 457 PLANS.—

9 This subsection shall not apply to an applicable

10 employer plan described in subparagraph

11 (A)(iii) for any year to which section 457(b)(3)

12 applies.

13 ‘‘(D) COST-OF-LIVING ADJUSTMENT.—For

14 years beginning after December 31, 2005, the

15 Secretary shall adjust annually the $5,000

16 amount in subparagraph (A) for increases in the

17 cost-of-living at the same time and in the same

18 manner as adjustments under section 415(d); ex19 cept that the base period shall be the calendar

20 quarter beginning July 1, 2004, and any in21 crease which is not a multiple of $500 shall be

22 rounded to the next lowest multiple of $500.’’.

23 (b) EFFECTIVE DATE.—The amendment made by this

24 section shall apply to contributions in taxable years begin25 ning after December 31, 2000.
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1 SEC. 302. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF

2 EMPLOYEES TO DEFINED CONTRIBUTION

3 PLANS.

4 (a) EQUITABLE TREATMENT.—

5 (1) IN GENERAL.—Subparagraph (B) of section

6 415(c)(1) (relating to limitation for defined contribu7 tion plans) is amended by striking ‘‘25 percent’’ and

8 inserting ‘‘100 percent’’.

9 (2) APPLICATION TO SECTION 403(b).—Section

10 403(b) is amended—

11 (A) by striking ‘‘the exclusion allowance for

12 such taxable year’’ in paragraph (1) and insert13 ing ‘‘the applicable limit under section 415’’;

14 (B) by striking paragraph (2); and

15 (C) by inserting ‘‘or any amount received

16 by a former employee after the fifth taxable year

17 following the taxable year in which such em18 ployee was terminated’’ before the period at the

19 end of the second sentence of paragraph (3).

20 (3) CONFORMING AMENDMENTS.—

21 (A) Subsection (f) of section 72 is amended

22 by striking ‘‘section 403(b)(2)(D)(iii))’’ and in23 serting ‘‘section 403(b)(2)(D)(iii), as in effect be24 fore the enactment of the Comprehensive Retire25 ment Security and Pension Reform Act of

26 2000)’’.
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1 (B) Section 404(a)(10)(B) is amended by

2 striking ‘‘, the exclusion allowance under section

3 403(b)(2),’’.

4 (C) Section 415(a)(2) is amended by strik5 ing ‘‘, and the amount of the contribution for

6 such portion shall reduce the exclusion allowance

7 as provided in section 403(b)(2)’’.

8 (D) Section 415(c)(3) is amended by adding

9 at the end the following new subparagraph:

10 ‘‘(E) ANNUITY CONTRACTS.—In the case of

11 an annuity contract described in section 403(b),

12 the term ‘participant’s compensation’ means the

13 participant’s includible compensation deter14 mined under section 403(b)(3).’’.

15 (E) Section 415(c) is amended by striking

16 paragraph (4).

17 (F) Section 415(c)(7) is amended to read as

18 follows:

19 ‘‘(7) CERTAIN CONTRIBUTIONS BY CHURCH

20 PLANS NOT TREATED AS EXCEEDING LIMIT.—

21 ‘‘(A) IN GENERAL.—Notwithstanding any

22 other provision of this subsection, at the election

23 of a participant who is an employee of a church

24 or a convention or association of churches, in25 cluding an organization described in section
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1 414(e)(3)(B)(ii), contributions and other addi2 tions for an annuity contract or retirement in3 come account described in section 403(b) with re4 spect to such participant, when expressed as an

5 annual addition to such participant’s account,

6 shall be treated as not exceeding the limitation

7 of paragraph (1) if such annual addition is not

8 in excess of $10,000.

9 ‘‘(B) $40,000 AGGREGATE LIMITATION.—

10 The total amount of additions with respect to

11 any participant which may be taken into ac12 count for purposes of this subparagraph for all

13 years may not exceed $40,000.

14 ‘‘(C) ANNUAL ADDITION.—For purposes of

15 this paragraph, the term ‘annual addition’ has

16 the meaning given such term by paragraph (2).’’.

17 (G) Subparagraph (B) of section 402(g)(7)

18 (as redesignated by section 211) is amended by

19 inserting before the period at the end the fol20 lowing: ‘‘(as in effect before the enactment of the

21 Comprehensive Retirement Security and Pension

22 Reform Act of 2000)’’.

23 (3) EFFECTIVE DATE.—The amendments made

24 by this subsection shall apply to years beginning after

25 December 31, 2000.
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1 (b) SPECIAL RULES FOR SECTIONS 403(b) AND 408.—

2 (1) IN GENERAL.—Subsection (k) of section 415

3 is amended by adding at the end the following new

4 paragraph:

5 ‘‘(4) SPECIAL RULES FOR SECTIONS 403(b) AND

6 408.—For purposes of this section, any annuity con7 tract described in section 403(b) for the benefit of a

8 participant shall be treated as a defined contribution

9 plan maintained by each employer with respect to

10 which the participant has the control required under

11 subsection (b) or (c) of section 414 (as modified by

12 subsection (h)). For purposes of this section, any con13 tribution by an employer to a simplified employee

14 pension plan for an individual for a taxable year

15 shall be treated as an employer contribution to a de16 fined contribution plan for such individual for such

17 year.’’.

18 (2) EFFECTIVE DATE.—

19 (A) IN GENERAL.—The amendment made

20 by paragraph (1) shall apply to limitation years

21 beginning after December 31, 1999.

22 (B) EXCLUSION ALLOWANCE.—Effective for

23 limitation years beginning in 2000, in the case

24 of any annuity contract described in section

25 403(b) of the Internal Revenue Code of 1986, the
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1 amount of the contribution disqualified by rea2 son of section 415(g) of such Code shall reduce

3 the exclusion allowance as provided in section

4 403(b)(2) of such Code.

5 (3) MODIFICATION OF 403(b) EXCLUSION ALLOW6 ANCE TO CONFORM TO 415 MODIFICATION.—The Sec7 retary of the Treasury shall modify the regulations re8 garding the exclusion allowance under section

9 403(b)(2) of the Internal Revenue Code of 1986 to

10 render void the requirement that contributions to a

11 defined benefit pension plan be treated as previously

12 excluded amounts for purposes of the exclusion allow13 ance. For taxable years beginning after December 31,

14 1999, such regulations shall be applied as if such re15 quirement were void.

16 (c) DEFERRED COMPENSATION PLANS OF STATE AND

17 LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANIZA18 TIONS.—

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

20 457(b)(2) (relating to salary limitation on eligible de21 ferred compensation plans) is amended by striking

‘‘331 22 ⁄3 percent’’ and inserting ‘‘100 percent’’.

23 (2) EFFECTIVE DATE.—The amendment made by

24 this subsection shall apply to years beginning after

25 December 31, 2000.
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1 SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER MATCH2 ING CONTRIBUTIONS.

3 (a) IN GENERAL.—Section 411(a) (relating to min4 imum vesting standards) is amended—

5 (1) in paragraph (2), by striking ‘‘A plan’’ and

6 inserting ‘‘Except as provided in paragraph (12), a

7 plan’’; and

8 (2) by adding at the end the following:

9 ‘‘(12) FASTER VESTING FOR MATCHING CON10 TRIBUTIONS.—In the case of matching contributions

11 (as defined in section 401(m)(4)(A)), paragraph (2)

12 shall be applied—

13 ‘‘(A) by substituting ‘3 years’ for ‘5 years’

14 in subparagraph (A), and

15 ‘‘(B) by substituting the following table for

16 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

2 .......................................................................................... 20

3 .......................................................................................... 40

4 .......................................................................................... 60

5 .......................................................................................... 80

6 .......................................................................................... 100.’’.

17 (b) EFFECTIVE DATES.—

18 (1) IN GENERAL.—Except as provided in para19 graph (2), the amendments made by this section shall

20 apply to contributions for plan years beginning after

21 December 31, 2000.
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1 (2) COLLECTIVE BARGAINING AGREEMENTS.—In

2 the case of a plan maintained pursuant to one or

3 more collective bargaining agreements between em4 ployee representatives and one or more employers

5 ratified by the date of the enactment of this Act, the

6 amendments made by this section shall not apply to

7 contributions on behalf of employees covered by any

8 such agreement for plan years beginning before the

9 earlier of—

10 (A) the later of—

11 (i) the date on which the last of such

12 collective bargaining agreements terminates

13 (determined without regard to any exten14 sion thereof on or after such date of the en15 actment); or

16 (ii) January 1, 2001; or

17 (B) January 1, 2005.

18 (3) SERVICE REQUIRED.—With respect to any

19 plan, the amendments made by this section shall not

20 apply to any employee before the date that such em21 ployee has 1 hour of service under such plan in any

22 plan year to which the amendments made by this sec23 tion apply.
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1 SEC. 304. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU2 TION RULES.

3 (a) SIMPLIFICATION AND FINALIZATION OF MINIMUM

4 DISTRIBUTION REQUIREMENTS.—

5 (1) IN GENERAL.—The Secretary of the Treasury

6 shall—

7 (A) simplify and finalize the regulations re8 lating to minimum distribution requirements

9 under sections 401(a)(9), 408(a)(6) and (b)(3),

10 403(b)(10), and 457(d)(2) of the Internal Rev11 enue Code of 1986; and

12 (B) modify such regulations to—

13 (i) reflect current life expectancy; and

14 (ii) revise the required distribution

15 methods so that, under reasonable assump16 tions, the amount of the required minimum

17 distribution does not decrease over a par18 ticipant’s life expectancy.

19 (2) FRESH START.—Notwithstanding subpara20 graph (D) of section 401(a)(9) of such Code, during

21 the first year that regulations are in effect under this

22 subsection, required distributions for future years

23 may be redetermined to reflect changes under such

24 regulations. Such redetermination shall include the

25 opportunity to choose a new designated beneficiary
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1 and to elect a new method of calculating life expect2 ancy.

3 (3) EFFECTIVE DATE FOR REGULATIONS.—Regu4 lations referred to in paragraph (1) shall be effective

5 for years beginning after December 31, 2000, and

6 shall apply in such years without regard to whether

7 an individual had previously begun receiving min8 imum distributions.

9 (b) REPEAL OF RULE WHERE DISTRIBUTIONS HAD

10 BEGUN BEFORE DEATH OCCURS.—

11 (1) IN GENERAL.—Subparagraph (B) of section

12 401(a)(9) is amended by striking clause (i) and redes13 ignating clauses (ii), (iii), and (iv) as clauses (i),

14 (ii), and (iii), respectively.

15 (2) CONFORMING CHANGES.—

16 (A) Clause (i) of section 401(a)(9)(B) (as so

17 redesignated) is amended—

18 (i) by striking ‘‘FOR OTHER CASES’’ in

19 the heading; and

20 (ii) by striking ‘‘the distribution of the

21 employee’s interest has begun in accordance

22 with subparagraph (A)(ii)’’ and inserting

23 ‘‘his entire interest has been distributed to

24 him’’.
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1 (B) Clause (ii) of section 401(a)(9)(B) (as

2 so redesignated) is amended by striking ‘‘clause

3 (ii)’’ and inserting ‘‘clause (i)’’.

4 (C) Clause (iii) of section 401(a)(9)(B) (as

5 so redesignated) is amended—

6 (i) by striking ‘‘clause (iii)(I)’’ and in7 serting ‘‘clause (ii)(I)’’;

8 (ii) by striking ‘‘clause (iii)(III)’’ in

9 subclause (I) and inserting ‘‘clause

10 (ii)(III)’’;

11 (iii) by striking ‘‘the date on which the

employee would have attained age 701 12 ⁄2,’’ in

13 subclause (I) and inserting ‘‘April 1 of the

14 calendar year following the calendar year

in which the spouse attains 701 15 ⁄2,’’; and

16 (iv) by striking ‘‘the distributions to

17 such spouse begin,’’ in subclause (II) and

18 inserting ‘‘his entire interest has been dis19 tributed to him,’’.

20 (3) EFFECTIVE DATE.—The amendments made

21 by this subsection shall apply to years beginning after

22 December 31, 2000.

23 (c) REDUCTION IN EXCISE TAX.—
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1 (1) IN GENERAL.—Subsection (a) of section 4974

2 is amended by striking ‘‘50 percent’’ and inserting

3 ‘‘10 percent’’.

4 (2) EFFECTIVE DATE.—The amendment made by

5 this subsection shall apply to years beginning after

6 December 31, 2000.

7 SEC. 305. CLARIFICATION OF TAX TREATMENT OF DIVISION

8 OF SECTION 457 PLAN BENEFITS UPON DI9 VORCE.

10 (a) IN GENERAL.—Section 414(p)(11) (relating to ap11 plication of rules to governmental and church plans) is

12 amended—

13 (1) by inserting ‘‘or an eligible deferred com14 pensation plan (within the meaning of section

15 457(b))’’ after ‘‘subsection (e))’’; and

16 (2) in the heading, by striking ‘‘GOVERNMENTAL

17 AND CHURCH PLANS’’ and inserting ‘‘CERTAIN OTHER

18 PLANS’’.

19 (b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE20 MENTS.—Paragraph (10) of section 414(p) is amended by

21 striking ‘‘and section 409(d)’’ and inserting ‘‘section

22 409(d), and section 457(d)’’.

23 (c) TAX TREATMENT OF PAYMENTS FROM A SECTION

24 457 PLAN.—Subsection (p) of section 414 is amended by
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1 redesignating paragraph (12) as paragraph (13) and in2 serting after paragraph (11) the following new paragraph:

3 ‘‘(12) TAX TREATMENT OF PAYMENTS FROM A

4 SECTION 457 PLAN.—If a distribution or payment

5 from an eligible deferred compensation plan described

6 in section 457(b) is made pursuant to a qualified do7 mestic relations order, rules similar to the rules of

8 section 402(e)(1)(A) shall apply to such distribution

9 or payment.’’.

10 (d) EFFECTIVE DATE.—The amendments made by this

11 section shall apply to transfers, distributions, and pay12 ments made after December 31, 2000.

13 SEC. 306. MODIFICATION OF SAFE HARBOR RELIEF FOR

14 HARDSHIP WITHDRAWALS FROM CASH OR DE15 FERRED ARRANGEMENTS.

16 (a) IN GENERAL.—The Secretary of the Treasury shall

17 revise the regulations relating to hardship distributions

18 under section 401(k)(2)(B)(i)(IV) of the Internal Revenue

19 Code of 1986 to provide that the period an employee is pro20 hibited from making elective and employee contributions in

21 order for a distribution to be deemed necessary to satisfy

22 financial need shall be equal to 6 months.

23 (b) EFFECTIVE DATE.—The revised regulations under

24 subsection (a) shall apply to years beginning after Decem25 ber 31, 2000.
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1 TITLE IV—INCREASING PORT2 ABILITY FOR PARTICIPANTS

3 SEC. 401. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF

4 PLANS.

5 (a) ROLLOVERS FROM AND TO SECTION 457 PLANS.—

6 (1) ROLLOVERS FROM SECTION 457 PLANS.—

7 (A) IN GENERAL.—Section 457(e) (relating

8 to other definitions and special rules) is amend9 ed by adding at the end the following:

10 ‘‘(16) ROLLOVER AMOUNTS.—

11 ‘‘(A) GENERAL RULE.—In the case of an el12 igible deferred compensation plan established

13 and maintained by an employer described in

14 subsection (e)(1)(A), if—

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

16 credit of an employee in such plan is paid

17 to such employee in an eligible rollover dis18 tribution (within the meaning of section

19 402(c)(4) without regard to subparagraph

20 (C) thereof),

21 ‘‘(ii) the employee transfers any por22 tion of the property such employee receives

23 in such distribution to an eligible retire24 ment plan described in section 402(c)(8)(B),

25 and
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1 ‘‘(iii) in the case of a distribution of

2 property other than money, the amount so

3 transferred consists of the property distrib4 uted,

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

7 the taxable year in which paid.

8 ‘‘(B) CERTAIN RULES MADE APPLICABLE.—

9 The rules of paragraphs (2) through (7) (other

10 than paragraph (4)(C)) and (9) of section 402(c)

11 and section 402(f) shall apply for purposes of

12 subparagraph (A).

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

14 paragraph shall be reported to the Secretary in

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

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

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

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

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

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

24 the end of subparagraph (A), by striking the pe25 riod at the end of subparagraph (B) and insert-
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1 ing ‘‘, and’’, and by inserting after subpara2 graph (B) the following:

3 ‘‘(C) in the case of a plan maintained by

4 an employer described in subsection (e)(1)(A),

5 the plan meets requirements similar to the re6 quirements of section 401(a)(31).

7 Any amount transferred in a direct trustee-to-trustee

8 transfer in accordance with section 401(a)(31) shall

9 not be includible in gross income for the taxable year

10 of transfer.’’.

11 (D) WITHHOLDING.—

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

13 is amended by adding at the end the fol14 lowing:

15 ‘‘(E) under or to an eligible deferred com16 pensation plan which, at the time of such pay17 ment, is a plan described in section 457(b)

18 maintained by an employer described in section

19 457(e)(1)(A); or’’.

20 (ii) Paragraph (3) of section 3405(c) is

21 amended to read as follows:

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

23 purposes of this subsection, the term ‘eligible rollover

24 distribution’ has the meaning given such term by sec25 tion 402(f)(2)(A).’’.
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1 (iii) LIABILITY FOR WITHHOLDING.—

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

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

4 clause (ii), by striking the period at the end

5 of clause (iii) and inserting ‘‘, or’’, and by

6 adding at the end the following:

7 ‘‘(iv) section 457(b).’’.

8 (2) ROLLOVERS TO SECTION 457 PLANS.—

9 (A) IN GENERAL.—Section 402(c)(8)(B)

10 (defining eligible retirement plan) is amended by

11 striking ‘‘and’’ at the end of clause (iii), by

12 striking the period at the end of clause (iv) and

13 inserting ‘‘, and’’, and by inserting after clause

14 (iv) the following new clause:

15 ‘‘(v) an eligible deferred compensation

16 plan described in section 457(b) of an em17 ployer described in section 457(e)(1)(A).’’.

18 (B) SEPARATE ACCOUNTING.—Section

19 402(c) is amended by adding at the end the fol20 lowing new paragraph:

21 ‘‘(11) SEPARATE ACCOUNTING.—Unless a plan

22 described in clause (v) of paragraph (8)(B) agrees to

23 separately account for amounts rolled into such plan

24 from eligible retirement plans not described in such

25 clause, the plan described in such clause may not ac-
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1 cept transfers or rollovers from such retirement

2 plans.’’.

3 (C) 10 PERCENT ADDITIONAL TAX.—Sub4 section (t) of section 72 (relating to 10-percent

5 additional tax on early distributions from quali6 fied retirement plans) is amended by adding at

7 the end the following new paragraph:

8 ‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SECTION

9 457 PLANS.—For purposes of this subsection, a dis10 tribution from an eligible deferred compensation plan

11 (as defined in section 457(b)) of an employer de12 scribed in section 457(e)(1)(A) shall be treated as a

13 distribution from a qualified retirement plan de14 scribed in 4974(c)(1) to the extent that such distribu15 tion is attributable to an amount transferred to an el16 igible deferred compensation plan from a qualified re17 tirement plan (as defined in section 4974(c)).’’.

18 (b) ALLOWANCE OF ROLLOVERS FROM AND TO 403(b)

19 PLANS.—

20 (1) ROLLOVERS FROM SECTION 403(b) PLANS.—

21 Section 403(b)(8)(A)(ii) (relating to rollover

22 amounts) is amended by striking ‘‘such distribution’’

23 and all that follows and inserting ‘‘such distribution

24 to an eligible retirement plan described in section

25 402(c)(8)(B), and’’.
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1 (2) ROLLOVERS TO SECTION 403(b) PLANS.—Sec2 tion 402(c)(8)(B) (defining eligible retirement plan),

3 as amended by subsection (a), is amended by striking

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

5 at the end of clause (v) and inserting ‘‘, and’’, and

6 by inserting after clause (v) the following new clause:

7 ‘‘(vi) an annuity contract described in

8 section 403(b).’’.

9 (c) EXPANDED EXPLANATION TO RECIPIENTS OF

10 ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section

11 402(f) (relating to written explanation to recipients of dis12 tributions eligible for rollover treatment) is amended by

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

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

15 ‘‘, and’’, and by adding at the end the following new sub16 paragraph:

17 ‘‘(E) of the provisions under which distribu18 tions from the eligible retirement plan receiving

19 the distribution may be subject to restrictions

20 and tax consequences which are different from

21 those applicable to distributions from the plan

22 making such distribution.’’.

23 (d) SPOUSAL ROLLOVERS.—Section 402(c)(9) (relat24 ing to rollover where spouse receives distribution after death
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1 of employee) is amended by striking ‘‘; except that’’ and

2 all that follows up to the end period.

3 (e) CONFORMING AMENDMENTS.—

4 (1) Section 72(o)(4) is amended by striking ‘‘and

5 408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and

6 457(e)(16)’’.

7 (2) Section 219(d)(2) is amended by striking ‘‘or

8 408(d)(3)’’ and inserting ‘‘408(d)(3), or 457(e)(16)’’.

9 (3) Section 401(a)(31)(B) is amended by strik10 ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),

11 403(b)(8), and 457(e)(16)’’.

12 (4) Subparagraph (A) of section 402(f)(2) is

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

14 403(a)’’ and inserting ‘‘, paragraph (4) of section

15 403(a), subparagraph (A) of section 403(b)(8), or sub16 paragraph (A) of section 457(e)(16)’’.

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

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

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

20 402(f)(1) are amended by striking ‘‘another eligible

21 retirement plan’’ and inserting ‘‘an eligible retire22 ment plan’’.

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

24 amended to read as follows:
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1 ‘‘(B) CERTAIN RULES MADE APPLICABLE.—

2 The rules of paragraphs (2) through (7) and (9)

3 of section 402(c) and section 402(f) shall apply

4 for purposes of subparagraph (A), except that

5 section 402(f) shall be applied to the payor in

6 lieu of the plan administrator.’’.

7 (8) Section 408(a)(1) is amended by striking ‘‘or

8 403(b)(8),’’ and inserting ‘‘403(b)(8), or 457(e)(16)’’.

9 (9) Subparagraphs (A) and (B) of section

10 415(b)(2) are each amended by striking ‘‘and

11 408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and

12 457(e)(16)’’.

13 (10) Section 415(c)(2) is amended by striking

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

15 457(e)(16)’’.

16 (11) Section 4973(b)(1)(A) is amended by strik17 ing ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or

18 457(e)(16)’’.

19 (f) EFFECTIVE DATE; SPECIAL RULE.—

20 (1) EFFECTIVE DATE.—The amendments made

21 by this section shall apply to distributions after De22 cember 31, 2000.

23 (2) SPECIAL RULE.—Notwithstanding any other

24 provision of law, subsections (h)(3) and (h)(5) of sec25 tion 1122 of the Tax Reform Act of 1986 shall not
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1 apply to any distribution from an eligible retirement

2 plan (as defined in clause (iii) or (iv) of section

3 402(c)(8)(B) of the Internal Revenue Code of 1986) on

4 behalf of an individual if there was a rollover to such

5 plan on behalf of such individual which is permitted

6 solely by reason of any amendment made by this sec7 tion.

8 SEC. 402. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE9 MENT PLANS.

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

11 408(d)(3) (relating to rollover amounts) is amended by add12 ing ‘‘or’’ at the end of clause (i), by striking clauses (ii)

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

14 ‘‘(ii) the entire amount received (in15 cluding money and any other property) is

16 paid into an eligible retirement plan for the

17 benefit of such individual not later than the

18 60th day after the date on which the pay19 ment or distribution is received, except that

20 the maximum amount which may be paid

21 into such plan may not exceed the portion

22 of the amount received which is includible

23 in gross income (determined without regard

24 to this paragraph).
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1 For purposes of clause (ii), the term ‘eligible re2 tirement plan’ means an eligible retirement plan

3 described in clause (iii), (iv), (v), or (vi) of sec4 tion 402(c)(8)(B).’’.

5 (b) CONFORMING AMENDMENTS.—

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

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

8 ‘‘section 408(d)(3)(A)(ii)’’.

9 (2) Clause (i) of section 408(d)(3)(D) is amended

10 by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i) or

11 (ii)’’.

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

13 amended to read as follows:

14 ‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—In

15 the case of any payment or distribution out of

16 a simple retirement account (as defined in sub17 section (p)) to which section 72(t)(6) applies,

18 this paragraph shall not apply unless such pay19 ment or distribution is paid into another simple

20 retirement account.’’.

21 (c) EFFECTIVE DATE; SPECIAL RULE.—

22 (1) EFFECTIVE DATE.—The amendments made

23 by this section shall apply to distributions after De24 cember 31, 2000.
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1 (2) SPECIAL RULE.—Notwithstanding any other

2 provision of law, subsections (h)(3) and (h)(5) of sec3 tion 1122 of the Tax Reform Act of 1986 shall not

4 apply to any distribution from an eligible retirement

5 plan (as defined in clause (iii) or (iv) of section

6 402(c)(8)(B) of the Internal Revenue Code of 1986) on

7 behalf of an individual if there was a rollover to such

8 plan on behalf of such individual which is permitted

9 solely by reason of the amendments made by this sec10 tion.

11 SEC. 403. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

12 (a) ROLLOVERS FROM EXEMPT TRUSTS.—Paragraph

13 (2) of section 402(c) (relating to maximum amount which

14 may be rolled over) is amended by adding at the end the

15 following: ‘‘The preceding sentence shall not apply to such

16 distribution to the extent—

17 ‘‘(A) such portion is transferred in a direct

18 trustee-to-trustee transfer to a qualified trust

19 which is part of a plan which is a defined con20 tribution plan and which agrees to separately

21 account for amounts so transferred, including

22 separately accounting for the portion of such dis23 tribution which is includible in gross income

24 and the portion of such distribution which is not

25 so includible, or
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1 ‘‘(B) such portion is transferred to an eligi2 ble retirement plan described in clause (i) or (ii)

3 of paragraph (8)(B).’’.

4 (b) OPTIONAL DIRECT TRANSFER OF ELIGIBLE ROLL5 OVER DISTRIBUTIONS.—Subparagraph (B) of section

6 401(a)(31) (relating to limitation) is amended by adding

7 at the end the following: ‘‘The preceding sentence shall not

8 apply to such distribution if the plan to which such dis9 tribution is transferred—

10 ‘‘(i) agrees to separately account for

11 amounts so transferred, including sepa12 rately accounting for the portion of such

13 distribution which is includible in gross in14 come and the portion of such distribution

15 which is not so includible, or

16 ‘‘(ii) is an eligible retirement plan de17 scribed in clause (i) or (ii) of section

18 402(c)(8)(B).’’.

19 (c) RULES FOR APPLYING SECTION 72 TO IRAS.—

20 Paragraph (3) of section 408(d) (relating to special rules

21 for applying section 72) is amended by inserting at the end

22 the following:

23 ‘‘(H) APPLICATION OF SECTION 72.—

24 ‘‘(i) IN GENERAL.—If—
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1 ‘‘(I) a distribution is made from

2 an individual retirement plan, and

3 ‘‘(II) a rollover contribution is

4 made to an eligible retirement plan de5 scribed in section 402(c)(8)(B)(iii),

6 (iv), (v), or (vi) with respect to all or

7 part of such distribution,

8 then, notwithstanding paragraph (2), the

9 rules of clause (ii) shall apply for purposes

10 of applying section 72.

11 ‘‘(ii) APPLICABLE RULES.—In the case

12 of a distribution described in clause (i)—

13 ‘‘(I) section 72 shall be applied

14 separately to such distribution,

15 ‘‘(II) notwithstanding the pro

16 rata allocation of income on, and in17 vestment in, the contract to distribu18 tions under section 72, the portion of

19 such distribution rolled over to an eli20 gible retirement plan described in

21 clause (i) shall be treated as from in22 come on the contract (to the extent of

23 the aggregate income on the contract

24 from all individual retirement plans of

25 the distributee), and
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1 ‘‘(III) appropriate adjustments

2 shall be made in applying section 72 to

3 other distributions in such taxable year

4 and subsequent taxable years.’’.

5 (d) EFFECTIVE DATE.—The amendments made by this

6 section shall apply to distributions made after December 31,

7 2000.

8 SEC. 404. HARDSHIP EXCEPTION TO 60-DAY RULE.

9 (a) EXEMPT TRUSTS.—Paragraph (3) of section

10 402(c) (relating to transfer must be made within 60 days

11 of receipt) is amended to read as follows:

12 ‘‘(3) TRANSFER MUST BE MADE WITHIN 60 DAYS

13 OF RECEIPT.—

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

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

16 apply to any transfer of a distribution made

17 after the 60th day following the day on which the

18 distributee received the property distributed.

19 ‘‘(B) HARDSHIP EXCEPTION.—The Sec20 retary may waive the 60-day requirement under

21 subparagraph (A) where the failure to waive

22 such requirement would be against equity or

23 good conscience, including casualty, disaster, or

24 other events beyond the reasonable control of the

25 individual subject to such requirement.’’.
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1 (b) IRAS.—Paragraph (3) of section 408(d) (relating

2 to rollover contributions), as amended by section 403, is

3 amended by adding after subparagraph (H) the following

4 new subparagraph:

5 ‘‘(I) WAIVER OF 60-DAY REQUIREMENT.—

6 The Secretary may waive the 60-day require7 ment under subparagraphs (A) and (D) where

8 the failure to waive such requirement would be

9 against equity or good conscience, including cas10 ualty, disaster, or other events beyond the rea11 sonable control of the individual subject to such

12 requirement.’’.

13 (c) EFFECTIVE DATE.—The amendments made by this

14 section shall apply to distributions after December 31, 2000.

15 SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.

16 (a) PLAN TRANSFERS.—

17 (1) IN GENERAL.—Paragraph (6) of section

18 411(d) (relating to accrued benefit not to be decreased

19 by amendment) is amended by adding at the end the

20 following:

21 ‘‘(D) PLAN TRANSFERS.—

22 ‘‘(i) IN GENERAL.—A defined contribu23 tion plan (in this subparagraph referred to

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

25 as failing to meet the requirements of this
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1 subsection merely because the transferee

2 plan does not provide some or all of the

3 forms of distribution previously available

4 under another defined contribution plan (in

5 this subparagraph referred to as the ‘trans6 feror plan’) to the extent that—

7 ‘‘(I) the forms of distribution pre8 viously available under the transferor

9 plan applied to the account of a par10 ticipant or beneficiary under the

11 transferor plan that was transferred

12 from the transferor plan to the trans13 feree plan pursuant to a direct transfer

14 rather than pursuant to a distribution

15 from the transferor plan,

16 ‘‘(II) the terms of both the trans17 feror plan and the transferee plan au18 thorize the transfer described in sub19 clause (I),

20 ‘‘(III) the transfer described in

21 subclause (I) was made pursuant to a

22 voluntary election by the participant

23 or beneficiary whose account was

24 transferred to the transferee plan,
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1 ‘‘(IV) the election described in

2 subclause (III) was made after the par3 ticipant or beneficiary received a no4 tice describing the consequences of

5 making the election,

6 ‘‘(V) if the transferor plan pro7 vides for an annuity as the normal

8 form of distribution under the plan in

9 accordance with section 417, the trans10 fer is made with the consent of the par11 ticipant’s spouse (if any), and such

12 consent meets requirements similar to

13 the requirements imposed by section

14 417(a)(2), and

15 ‘‘(VI) the transferee plan allows

16 the participant or beneficiary described

17 in subclause (III) to receive any dis18 tribution to which the participant or

19 beneficiary is entitled under the trans20 feree plan in the form of a single sum

21 distribution.

22 ‘‘(ii) EXCEPTION.—Clause (i) shall

23 apply to plan mergers and other trans24 actions having the effect of a direct transfer,

25 including consolidations of benefits attrib-
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1 utable to different employers within a mul2 tiple employer plan.

3 ‘‘(E) ELIMINATION OF FORM OF DISTRIBU4 TION.—Except to the extent provided in regula5 tions, a defined contribution plan shall not be

6 treated as failing to meet the requirements of this

7 section merely because of the elimination of a

8 form of distribution previously available there9 under. This subparagraph shall not apply to the

10 elimination of a form of distribution with re11 spect to any participant unless—

12 ‘‘(i) a single sum payment is available

13 to such participant at the same time or

14 times as the form of distribution being

15 eliminated, and

16 ‘‘(ii) such single sum payment is based

17 on the same or greater portion of the par18 ticipant’s account as the form of distribu19 tion being eliminated.’’.

20 (2) EFFECTIVE DATE.—The amendment made by

21 this subsection shall apply to years beginning after

22 December 31, 2000.

23 (b) REGULATIONS.—

24 (1) IN GENERAL.—The last sentence of para25 graph (6)(B) of section 411(d) (relating to accrued
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1 benefit not to be decreased by amendment) is amended

2 to read as follows: ‘‘The Secretary shall by regulations

3 provide that this subparagraph shall not apply to

4 any plan amendment that does not adversely affect

5 the rights of participants in a material manner.’’.

6 (2) SECRETARY DIRECTED.—Not later than De7 cember 31, 2001, the Secretary of the Treasury is di8 rected to issue final regulations under section

9 411(d)(6) of the Internal Revenue Code of 1986, in10 cluding the regulations required by the amendments

11 made by this subsection. Such regulations shall apply

12 to plan years beginning after December 31, 2001, or

13 such earlier date as is specified by the Secretary of

14 the Treasury.

15 SEC. 406. RATIONALIZATION OF RESTRICTIONS ON DIS16 TRIBUTIONS.

17 (a) MODIFICATION OF SAME DESK EXCEPTION.—

18 (1) SECTION 401(k).—

19 (A) Section 401(k)(2)(B)(i)(I) (relating to

20 qualified cash or deferred arrangements) is

21 amended by striking ‘‘separation from service’’

22 and inserting ‘‘severance from employment’’.

23 (B) Subparagraph (A) of section 401(k)(10)

24 (relating to distributions upon termination of
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1 plan or disposition of assets or subsidiary) is

2 amended to read as follows:

3 ‘‘(A) IN GENERAL.—An event described in

4 this subparagraph is the termination of the plan

5 without establishment or maintenance of another

6 defined contribution plan (other than an em7 ployee stock ownership plan as defined in section

8 4975(e)(7)).’’.

9 (C) Section 401(k)(10) is amended—

10 (i) in subparagraph (B)—

11 (I) by striking ‘‘An event’’ in

12 clause (i) and inserting ‘‘A termi13 nation’’; and

14 (II) by striking ‘‘the event’’ in

15 clause (i) and inserting ‘‘the termi16 nation’’;

17 (ii) by striking subparagraph (C); and

18 (iii) by striking ‘‘OR DISPOSITION OF

19 ASSETS OR SUBSIDIARY’’ in the heading.

20 (2) SECTION 403(b).—

21 (A) Paragraphs (7)(A)(ii) and (11)(A) of

22 section 403(b) are each amended by striking

23 ‘‘separates from service’’ and inserting ‘‘has a

24 severance from employment’’.
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1 (B) The heading for paragraph (11) of sec2 tion 403(b) is amended by striking ‘‘SEPARATION

3 FROM SERVICE’’ and inserting ‘‘SEVERANCE

4 FROM EMPLOYMENT’’.

5 (3) SECTION 457.—Clause (ii) of section

6 457(d)(1)(A) is amended by striking ‘‘is separated

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

8 employment’’.

9 (b) EFFECTIVE DATE.—The amendments made by this

10 section shall apply to distributions after December 31, 2000.

11 SEC. 407. PURCHASE OF SERVICE CREDIT IN GOVERN12 MENTAL DEFINED BENEFIT PLANS.

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

14 amended by adding at the end the following new paragraph:

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

16 PURCHASE PERMISSIVE SERVICE CREDIT.—No

17 amount shall be includible in gross income by reason

18 of a direct trustee-to-trustee transfer to a defined ben19 efit governmental plan (as defined in section 414(d))

20 if such transfer is—

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

22 credit (as defined in section 415(n)(3)(A)) under

23 such plan, or
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1 ‘‘(B) a repayment to which section 415 does

2 not apply by reason of subsection (k)(3) there3 of.’’.

4 (b) 457 PLANS.—Subsection (e) of section 457 is

5 amended by adding after paragraph (16) the following new

6 paragraph:

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

8 PURCHASE PERMISSIVE SERVICE CREDIT.—No

9 amount shall be includible in gross income by reason

10 of a direct trustee-to-trustee transfer to a defined ben11 efit governmental plan (as defined in section 414(d))

12 if such transfer is—

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

14 credit (as defined in section 415(n)(3)(A)) under

15 such plan, or

16 ‘‘(B) a repayment to which section 415 does

17 not apply by reason of subsection (k)(3) there18 of.’’.

19 (c) EFFECTIVE DATE.—The amendments made by this

20 section shall apply to trustee-to-trustee transfers after De21 cember 31, 2000.
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1 SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR

2 PURPOSES OF CASH-OUT AMOUNTS.

3 (a) QUALIFIED PLANS.—Section 411(a)(11) (relating

4 to restrictions on certain mandatory distributions) is

5 amended by adding at the end the following:

6 ‘‘(D) SPECIAL RULE FOR ROLLOVER CON7 TRIBUTIONS.—A plan shall not fail to meet the

8 requirements of this paragraph if, under the

9 terms of the plan, the present value of the non10 forfeitable accrued benefit is determined without

11 regard to that portion of such benefit which is

12 attributable to rollover contributions (and earn13 ings allocable thereto). For purposes of this sub14 paragraph, the term ‘rollover contributions’

15 means any rollover contribution under sections

16 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),

17 and 457(e)(16).’’.

18 (b) ELIGIBLE DEFERRED COMPENSATION PLANS.—

19 Clause (i) of section 457(e)(9)(A) is amended by striking

20 ‘‘such amount’’ and inserting ‘‘the portion of such amount

21 which is not attributable to rollover contributions (as de22 fined in section 411(a)(11)(D))’’.

23 (c) EFFECTIVE DATE.—The amendments made by this

24 section shall apply to distributions after December 31, 2000.
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1 SEC. 409. MINIMUM DISTRIBUTION AND INCLUSION RE2 QUIREMENTS FOR SECTION 457 PLANS.

3 (a) MINIMUM DISTRIBUTION REQUIREMENTS.—Para4 graph (2) of section 457(d) (relating to distribution require5 ments) is amended to read as follows:

6 ‘‘(2) MINIMUM DISTRIBUTION REQUIREMENTS.—

7 A plan meets the minimum distribution requirements

8 of this paragraph if such plan meets the requirements

9 of section 401(a)(9).’’.

10 (b) INCLUSION IN GROSS INCOME.—

11 (1) YEAR OF INCLUSION.—Subsection (a) of sec12 tion 457 (relating to year of inclusion in gross in13 come) is amended to read as follows:

14 ‘‘(a) YEAR OF INCLUSION IN GROSS INCOME.—

15 ‘‘(1) IN GENERAL.—Any amount of compensa16 tion deferred under an eligible deferred compensation

17 plan, and any income attributable to the amounts so

18 deferred, shall be includible in gross income only for

19 the taxable year in which such compensation or other

20 income—

21 ‘‘(A) is paid to the participant or other ben22 eficiary, in the case of a plan of an eligible em23 ployer described in subsection (e)(1)(A), and

24 ‘‘(B) is paid or otherwise made available to

25 the participant or other beneficiary, in the case
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1 of a plan of an eligible employer described in

2 subsection (e)(1)(B).

3 ‘‘(2) SPECIAL RULE FOR ROLLOVER AMOUNTS.—

4 To the extent provided in section 72(t)(9), section

5 72(t) shall apply to any amount includible in gross

6 income under this subsection.’’.

7 (2) CONFORMING AMENDMENTS.—

8 (A) So much of paragraph (9) of section

9 457(e) as precedes subparagraph (A) is amended

10 to read as follows:

11 ‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION

12 PLANS NOT TREATED AS MADE AVAILABLE BY REASON

13 OF CERTAIN ELECTIONS, ETC.—In the case of an eligi14 ble deferred compensation plan of an employer de15 scribed in subsection (e)(1)(B)—’’.

16 (B) Section 457(d) is amended by adding at

17 the end the following new paragraph:

18 ‘‘(3) SPECIAL RULE FOR GOVERNMENT PLAN.—

19 An eligible deferred compensation plan of an em20 ployer described in subsection (e)(1)(A) shall not be

21 treated as failing to meet the requirements of this sub22 section solely by reason of making a distribution de23 scribed in subsection (e)(9)(A).’’.

24 (c) EFFECTIVE DATE.—The amendments made by this

25 section shall apply to distributions after December 31, 2000.
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1 TITLE V—STRENGTHENING PEN2 SION SECURITY AND EN3 FORCEMENT

4 SEC. 501. REPEAL OF 150 PERCENT OF CURRENT LIABILITY

5 FUNDING LIMIT.

6 (a) IN GENERAL.—Section 412(c)(7) (relating to full7 funding limitation) is amended—

8 (1) by striking ‘‘the applicable percentage’’ in

9 subparagraph (A)(i)(I) and inserting ‘‘in the case of

10 plan years beginning before January 1, 2004, the ap11 plicable percentage’’; and

12 (2) by amending subparagraph (F) to read as

13 follows:

14 ‘‘(F) APPLICABLE PERCENTAGE.—For pur15 poses of subparagraph (A)(i)(I), the applicable

16 percentage shall be determined in accordance

17 with the following table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

2001 .................................................................................... 160

2002 .................................................................................... 165

2003 .................................................................................... 170.’’.

18 (b) EFFECTIVE DATE.—The amendments made by this

19 section shall apply to plan years beginning after December

20 31, 2000.
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1 SEC. 502. MAXIMUM CONTRIBUTION DEDUCTION RULES

2 MODIFIED AND APPLIED TO ALL DEFINED

3 BENEFIT PLANS.

4 (a) IN GENERAL.—Subparagraph (D) of section

5 404(a)(1) (relating to special rule in case of certain plans)

6 is amended to read as follows:

7 ‘‘(D) SPECIAL RULE IN CASE OF CERTAIN

8 PLANS.—

9 ‘‘(i) IN GENERAL.—In the case of any

10 defined benefit plan, except as provided in

11 regulations, the maximum amount deduct12 ible under the limitations of this paragraph

13 shall not be less than the unfunded termi14 nation liability (determined as if the pro15 posed termination date referred to in section

16 4041(b)(2)(A)(i)(II) of the Employee Retire17 ment Income Security Act of 1974 were the

18 last day of the plan year).

19 ‘‘(ii) PLANS WITH LESS THAN 100 PAR20 TICIPANTS.—For purposes of this subpara21 graph, in the case of a plan which has less

22 than 100 participants for the plan year,

23 termination liability shall not include the

24 liability attributable to benefit increases for

25 highly compensated employees (as defined

26 in section 414(q)) resulting from a plan
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1 amendment which is made or becomes effec2 tive, whichever is later, within the last 2

3 years before the termination date.

4 ‘‘(iii) RULE FOR DETERMINING NUM5 BER OF PARTICIPANTS.—For purposes of de6 termining whether a plan has more than

7 100 participants, all defined benefit plans

8 maintained by the same employer (or any

9 member of such employer’s controlled group

10 (within the meaning of section

11 412(l)(8)(C))) shall be treated as one plan,

12 but only employees of such member or em13 ployer shall be taken into account.

14 ‘‘(iv) PLANS ESTABLISHED AND MAIN15 TAIN BY PROFESSIONAL SERVICE EMPLOY16 ERS.—Clause (i) shall not apply to a plan

17 described in section 4021(b)(13) of the Em18 ployee Retirement Income Security Act of

19 1974.’’.

20 (b) CONFORMING AMENDMENT.—Paragraph (6) of sec21 tion 4972(c) is amended to read as follows:

22 ‘‘(6) EXCEPTIONS.—In determining the amount

23 of nondeductible contributions for any taxable year,

24 there shall not be taken into account so much of the

25 contributions to one or more defined contribution
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1 plans which are not deductible when contributed sole2 ly because of section 404(a)(7) as does not exceed the

3 greater of—

4 ‘‘(A) the amount of contributions not in ex5 cess of 6 percent of compensation (within the

6 meaning of section 404(a)) paid or accrued (dur7 ing the taxable year for which the contributions

8 were made) to beneficiaries under the plans, or

9 ‘‘(B) the sum of—

10 ‘‘(i) the amount of contributions de11 scribed in section 401(m)(4)(A), plus

12 ‘‘(ii) the amount of contributions de13 scribed in section 402(g)(3)(A).

14 For purposes of this paragraph, the deductible limits

15 under section 404(a)(7) shall first be applied to

16 amounts contributed to a defined benefit plan and

17 then to amounts described in subparagraph (B).’’.

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

19 section shall apply to plan years beginning after December

20 31, 2000.

21 SEC. 503. EXCISE TAX RELIEF FOR SOUND PENSION FUND22 ING.

23 (a) IN GENERAL.—Subsection (c) of section 4972 (re24 lating to nondeductible contributions) is amended by add25 ing at the end the following new paragraph:
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1 ‘‘(7) DEFINED BENEFIT PLAN EXCEPTION.—In

2 determining the amount of nondeductible contribu3 tions for any taxable year, an employer may elect for

4 such year not to take into account any contributions

5 to a defined benefit plan except to the extent that such

6 contributions exceed the full-funding limitation (as

7 defined in section 412(c)(7), determined without re8 gard to subparagraph (A)(i)(I) thereof). For purposes

9 of this paragraph, the deductible limits under section

10 404(a)(7) shall first be applied to amounts contrib11 uted to defined contribution plans and then to

12 amounts described in this paragraph. If an employer

13 makes an election under this paragraph for a taxable

14 year, paragraph (6) shall not apply to such employer

15 for such taxable year.’’.

16 (b) EFFECTIVE DATE.—The amendment made by this

17 section shall apply to years beginning after December 31,

18 2000.

19 SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY

20 DEFINED BENEFIT PLANS SIGNIFICANTLY RE21 DUCING FUTURE BENEFIT ACCRUALS.

22 (a) IN GENERAL.—Chapter 43 (relating to qualified

23 pension, etc., plans) is amended by adding at the end the

24 following new section:
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1 ‘‘SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING

2 BENEFIT ACCRUALS TO SATISFY NOTICE RE3 QUIREMENTS.

4 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed a

5 tax on the failure of any applicable pension plan to meet

6 the requirements of subsection (e) with respect to any appli7 cable individual.

8 ‘‘(b) AMOUNT OF TAX.—

9 ‘‘(1) IN GENERAL.—The amount of the tax im10 posed by subsection (a) on any failure with respect to

11 any applicable individual shall be $100 for each day

12 in the noncompliance period with respect to such fail13 ure.

14 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes of

15 this section, the term ‘noncompliance period’ means,

16 with respect to any failure, the period beginning on

17 the date the failure first occurs and ending on the

18 date the failure is corrected.

19 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—

20 ‘‘(1) OVERALL LIMITATION FOR UNINTENTIONAL

21 FAILURES.—In the case of failures that are due to

22 reasonable cause and not to willful neglect, the tax

23 imposed by subsection (a) for failures during the tax24 able year of the employer (or, in the case of a multi25 employer plan, the taxable year of the trust forming

26 part of the plan) shall not exceed $500,000. For pur-
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1 poses of the preceding sentence, all multiemployer

2 plans of which the same trust forms a part shall be

3 treated as one plan. For purposes of this paragraph,

4 if not all persons who are treated as a single em5 ployer for purposes of this section have the same tax6 able year, the taxable years taken into account shall

7 be determined under principles similar to the prin8 ciples of section 1561.

9 ‘‘(2) WAIVER BY SECRETARY.—In the case of a

10 failure which is due to reasonable cause and not to

11 willful neglect, the Secretary may waive part or all

12 of the tax imposed by subsection (a) to the extent that

13 the payment of such tax would be excessive relative to

14 the failure involved.

15 ‘‘(d) LIABILITY FOR TAX.—The following shall be lia16 ble for the tax imposed by subsection (a):

17 ‘‘(1) In the case of a plan other than a multiem18 ployer plan, the employer.

19 ‘‘(2) In the case of a multiemployer plan, the

20 plan.

21 ‘‘(e) NOTICE REQUIREMENTS FOR PLANS SIGNIFI22 CANTLY REDUCING BENEFIT ACCRUALS.—

23 ‘‘(1) IN GENERAL.—If an applicable pension

24 plan is amended to provide for a significant reduc25 tion in the rate of future benefit accrual, the plan ad-
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1 ministrator shall provide written notice to each ap2 plicable individual (and to each employee organiza3 tion representing applicable individuals).

4 ‘‘(2) NOTICE.—The notice required by paragraph

5 (1) shall be written in a manner calculated to be un6 derstood by the average plan participant and shall

7 provide sufficient information (as determined in ac8 cordance with regulations prescribed by the Sec9 retary) to allow applicable individuals to understand

10 the effect of the plan amendment.

11 ‘‘(3) TIMING OF NOTICE.—Except as provided in

12 regulations, the notice required by paragraph (1)

13 shall be provided within a reasonable time before the

14 effective date of the plan amendment.

15 ‘‘(4) DESIGNEES.—Any notice under paragraph

16 (1) may be provided to a person designated, in writ17 ing, by the person to which it would otherwise be pro18 vided.

19 ‘‘(5) NOTICE BEFORE ADOPTION OF AMEND20 MENT.—A plan shall not be treated as failing to meet

21 the requirements of paragraph (1) merely because no22 tice is provided before the adoption of the plan

23 amendment if no material modification of the amend24 ment occurs before the amendment is adopted.
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1 ‘‘(f) APPLICABLE INDIVIDUAL; APPLICABLE PENSION

2 PLAN.—For purposes of this section—

3 ‘‘(1) APPLICABLE INDIVIDUAL.—The term ‘appli4 cable individual’ means, with respect to any plan

5 amendment—

6 ‘‘(A) any participant in the plan, and

7 ‘‘(B) any beneficiary who is an alternate

8 payee (within the meaning of section 414(p)(8))

9 under an applicable qualified domestic relations

10 order (within the meaning of section

11 414(p)(1)(A)),

12 who may reasonably be expected to be affected by such

13 plan amendment.

14 ‘‘(2) APPLICABLE PENSION PLAN.—The term ‘ap15 plicable pension plan’ means—

16 ‘‘(A) any defined benefit plan, or

17 ‘‘(B) an individual account plan which is

18 subject to the funding standards of section 412,

19 which had 100 or more participants who had accrued

20 a benefit, or with respect to whom contributions were

21 made, under the plan (whether or not vested) as of the

22 last day of the plan year preceding the plan year in

23 which the plan amendment becomes effective. Such

24 term shall not include a governmental plan (within

25 the meaning of section 414(d)) or a church plan
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1 (within the meaning of section 414(e)) with respect to

2 which the election provided by section 410(d) has not

3 been made.’’.

4 (b) CLERICAL AMENDMENT.—The table of sections for

5 chapter 43 is amended by adding at the end the following

6 new item:

‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals

to satisfy notice requirements.’’.

7 (c) EFFECTIVE DATES.—

8 (1) IN GENERAL.—The amendments made by

9 this section shall apply to plan amendments taking

10 effect on or after the date of the enactment of this Act.

11 (2) TRANSITION.—Until such time as the Sec12 retary of the Treasury issues regulations under sec13 tions 4980F(e)(2) and (3) of the Internal Revenue

14 Code of 1986 (as added by the amendments made by

15 this section), a plan shall be treated as meeting the

16 requirements of such sections if it makes a good faith

17 effort to comply with such requirements.

18 (3) SPECIAL RULE.—The period for providing

19 any notice required by the amendments made by this

20 section shall not end before the date which is 3

21 months after the date of the enactment of this Act.

22 (d) STUDY.—The Secretary of the Treasury shall pre23 pare a report on the effects of conversions of traditional de24 fined benefit plans to cash balance or hybrid formula plans.
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1 Such study shall examine the effect of such conversions on

2 longer service participants, including the incidence and ef3 fects of ‘‘wear away’’ provisions under which participants

4 earn no additional benefits for a period of time after the

5 conversion. As soon as practicable, but not later than 60

6 days after the date of the enactment of this Act, the Sec7 retary shall submit such report, together with recommenda8 tions thereon, to the Committee on Ways and Means of the

9 House of Representatives and the Committee on Finance

10 of the Senate.

11 SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER

12 SECTION 415.

13 (a) COMPENSATION LIMIT.—Paragraph (11) of section

14 415(b) (relating to limitation for defined benefit plans) is

15 amended to read as follows:

16 ‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN17 MENTAL AND MULTIEMPLOYER PLANS.—In the case of

18 a governmental plan (as defined in section 414(d)) or

19 a multiemployer plan (as defined in section 414(f)),

20 subparagraph (B) of paragraph (1) shall not apply.’’.

21 (b) COMBINING AND AGGREGATION OF PLANS.—

22 (1) COMBINING OF PLANS.—Subsection (f) of sec23 tion 415 (relating to combining of plans) is amended

24 by adding at the end the following:
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1 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER PLANS.—

2 Notwithstanding paragraph (1) and subsection (g), a

3 multiemployer plan (as defined in section 414(f))

4 shall not be combined or aggregated with any other

5 plan maintained by an employer for purposes of ap6 plying the limitations established in this section, ex7 cept that such plan shall be combined or aggregated

8 with another plan which is not such a multiemployer

9 plan solely for purposes of determining whether such

10 other plan meets the requirements of subsections

11 (b)(1)(A) and (c).’’.

12 (2) CONFORMING AMENDMENT FOR AGGREGATION

13 OF PLANS.—Subsection (g) of section 415 (relating to

14 aggregation of plans) is amended by striking ‘‘The

15 Secretary’’ and inserting ‘‘Except as provided in sub16 section (f)(3), the Secretary’’.

17 (c) EFFECTIVE DATE.—The amendments made by this

18 section shall apply to years beginning after December 31,

19 2000.

20 SEC. 506. PROHIBITED ALLOCATIONS OF STOCK IN S COR21 PORATION ESOP.

22 (a) IN GENERAL.—Section 409 (relating to qualifica23 tions for tax credit employee stock ownership plans) is

24 amended by redesignating subsection (p) as subsection (q)
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1 and by inserting after subsection (o) the following new sub2 section:

3 ‘‘(p) PROHIBITED ALLOCATIONS OF SECURITIES IN AN

4 S CORPORATION.—

5 ‘‘(1) IN GENERAL.—An employee stock ownership

6 plan holding employer securities consisting of stock in

7 an S corporation shall provide that no portion of the

8 assets of the plan attributable to (or allocable in lieu

9 of) such employer securities may, during a nonalloca10 tion year, accrue (or be allocated directly or indi11 rectly under any plan of the employer meeting the re12 quirements of section 401(a)) for the benefit of any

13 disqualified person.

14 ‘‘(2) FAILURE TO MEET REQUIREMENTS.—

15 ‘‘(A) IN GENERAL.—If a plan fails to meet

16 the requirements of paragraph (1), the plan shall

17 be treated as having distributed to any disquali18 fied person the amount allocated to the account

19 of such person in violation of paragraph (1) at

20 the time of such allocation.

21 ‘‘(B) CROSS REFERENCE.—

‘‘For excise tax relating to violations of paragraph

(1) and ownership of synthetic equity, see section

4979A.

22 ‘‘(3) NONALLOCATION YEAR.—For purposes of

23 this subsection—
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1 ‘‘(A) IN GENERAL.—The term ‘nonalloca2 tion year’ means any plan year of an employee

3 stock ownership plan if, at any time during such

4 plan year—

5 ‘‘(i) such plan holds employer securi6 ties consisting of stock in an S corporation,

7 and

8 ‘‘(ii) disqualified persons own at least

9 50 percent of the number of shares of stock

10 in the S corporation.

11 ‘‘(B) ATTRIBUTION RULES.—For purposes

12 of subparagraph (A)—

13 ‘‘(i) IN GENERAL.—The rules of section

14 318(a) shall apply for purposes of deter15 mining ownership, except that—

16 ‘‘(I) in applying paragraph (1)

17 thereof, the members of an individual’s

18 family shall include members of the

19 family described in paragraph (4)(D),

20 and

21 ‘‘(II) paragraph (4) thereof shall

22 not apply.

23 ‘‘(ii) DEEMED-OWNED SHARES.—Not24 withstanding the employee trust exception

25 in section 318(a)(2)(B)(i), individual shall
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1 be treated as owning deemed-owned shares

2 of the individual.

3 Solely for purposes of applying paragraph (5),

4 this subparagraph shall be applied after the at5 tribution rules of paragraph (5) have been ap6 plied.

7 ‘‘(4) DISQUALIFIED PERSON.—For purposes of

8 this subsection—

9 ‘‘(A) IN GENERAL.—The term ‘disqualified

10 person’ means any person if—

11 ‘‘(i) the aggregate number of deemed12 owned shares of such person and the mem13 bers of such person’s family is at least 20

14 percent of the number of deemed-owned

15 shares of stock in the S corporation, or

16 ‘‘(ii) in the case of a person not de17 scribed in clause (i), the number of deemed18 owned shares of such person is at least 10

19 percent of the number of deemed-owned

20 shares of stock in such corporation.

21 ‘‘(B) TREATMENT OF FAMILY MEMBERS.—

22 In the case of a disqualified person described in

23 subparagraph (A)(i), any member of such per24 son’s family with deemed-owned shares shall be

25 treated as a disqualified person if not otherwise
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1 treated as a disqualified person under subpara2 graph (A).

3 ‘‘(C) DEEMED-OWNED SHARES.—

4 ‘‘(i) IN GENERAL.—The term ‘deemed5 owned shares’ means, with respect to any

6 person—

7 ‘‘(I) the stock in the S corporation

8 constituting employer securities of an

9 employee stock ownership plan which

10 is allocated to such person under the

11 plan, and

12 ‘‘(II) such person’s share of the

13 stock in such corporation which is held

14 by such plan but which is not allocated

15 under the plan to participants.

16 ‘‘(ii) PERSON’S SHARE OF

17 UNALLOCATED STOCK.—For purposes of

18 clause (i)(II), a person’s share of

19 unallocated S corporation stock held by

20 such plan is the amount of the unallocated

21 stock which would be allocated to such per22 son if the unallocated stock were allocated to

23 all participants in the same proportions as

24 the most recent stock allocation under the

25 plan.
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1 ‘‘(D) MEMBER OF FAMILY.—For purposes of

2 this paragraph, the term ‘member of the family’

3 means, with respect to any individual—

4 ‘‘(i) the spouse of the individual,

5 ‘‘(ii) an ancestor or lineal descendant

6 of the individual or the individual’s spouse,

7 ‘‘(iii) a brother or sister of the indi8 vidual or the individual’s spouse and any

9 lineal descendant of the brother or sister,

10 and

11 ‘‘(iv) the spouse of any individual de12 scribed in clause (ii) or (iii).

13 A spouse of an individual who is legally sepa14 rated from such individual under a decree of di15 vorce or separate maintenance shall not be treat16 ed as such individual’s spouse for purposes of

17 this subparagraph.

18 ‘‘(5) TREATMENT OF SYNTHETIC EQUITY.—For

19 purposes of paragraphs (3) and (4), in the case of a

20 person who owns synthetic equity in the S corpora21 tion, except to the extent provided in regulations, the

22 shares of stock in such corporation on which such

23 synthetic equity is based shall be treated as out24 standing stock in such corporation and deemed-owned
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1 shares of such person if such treatment of synthetic

2 equity of 1 or more such persons results in—

3 ‘‘(A) the treatment of any person as a dis4 qualified person, or

5 ‘‘(B) the treatment of any year as a non6 allocation year.

7 For purposes of this paragraph, synthetic equity shall

8 be treated as owned by a person in the same manner

9 as stock is treated as owned by a person under the

10 rules of paragraphs (2) and (3) of section 318(a). If,

11 without regard to this paragraph, a person is treated

12 as a disqualified person or a year is treated as a non13 allocation year, this paragraph shall not be construed

14 to result in the person or year not being so treated.

15 ‘‘(6) DEFINITIONS.—For purposes of this

16 subsection—

17 ‘‘(A) EMPLOYEE STOCK OWNERSHIP

18 PLAN.—The term ‘employee stock ownership

19 plan’ has the meaning given such term by sec20 tion 4975(e)(7).

21 ‘‘(B) EMPLOYER SECURITIES.—The term

22 ‘employer security’ has the meaning given such

23 term by section 409(l).

24 ‘‘(C) SYNTHETIC EQUITY.—The term ‘syn25 thetic equity’ means any stock option, warrant,
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1 restricted stock, deferred issuance stock right, or

2 similar interest or right that gives the holder the

3 right to acquire or receive stock of the S corpora4 tion in the future. Except to the extent provided

5 in regulations, synthetic equity also includes a

6 stock appreciation right, phantom stock unit, or

7 similar right to a future cash payment based on

8 the value of such stock or appreciation in such

9 value.

10 ‘‘(7) REGULATIONS.—The Secretary shall pre11 scribe such regulations as may be necessary to carry

12 out the purposes of this subsection.’’.

13 (b) COORDINATION WITH SECTION 4975(e)(7).—The

14 last sentence of section 4975(e)(7) (defining employee stock

15 ownership plan) is amended by inserting ‘‘, section 409(p),’’

16 after ‘‘409(n)’’.

17 (c) EXCISE TAX.—

18 (1) APPLICATION OF TAX.—Subsection (a) of sec19 tion 4979A (relating to tax on certain prohibited allo20 cations of employer securities) is amended—

21 (A) by striking ‘‘or’’ at the end of para22 graph (1), and

23 (B) by striking all that follows paragraph

24 (2) and inserting the following:
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1 ‘‘(3) there is any allocation of employer securi2 ties which violates the provisions of section 409(p), or

3 a nonallocation year described in subsection (e)(2)(C)

4 with respect to an employee stock ownership plan, or

5 ‘‘(4) any synthetic equity is owned by a dis6 qualified person in any nonallocation year,

7 there is hereby imposed a tax on such allocation or owner8 ship equal to 50 percent of the amount involved.’’.

9 (2) LIABILITY.—Section 4979A(c) (defining li10 ability for tax) is amended to read as follows:

11 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

12 section shall be paid—

13 ‘‘(1) in the case of an allocation referred to in

14 paragraph (1) or (2) of subsection (a), by—

15 ‘‘(A) the employer sponsoring such plan, or

16 ‘‘(B) the eligible worker-owned cooperative,

17 which made the written statement described in section

18 664(g)(1)(E) or in section 1042(b)(3)(B) (as the case

19 may be), and

20 ‘‘(2) in the case of an allocation or ownership re21 ferred to in paragraph (3) or (4) of subsection (a), by

22 the S corporation the stock in which was so allocated

23 or owned.’’.

24 (3) DEFINITIONS.—Section 4979A(e) (relating to

25 definitions) is amended to read as follows:
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1 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur2 poses of this section—

3 ‘‘(1) DEFINITIONS.—Except as provided in para4 graph (2), terms used in this section have the same

5 respective meanings as when used in sections 409 and

6 4978.

7 ‘‘(2) SPECIAL RULES RELATING TO TAX IMPOSED

8 BY REASON OF PARAGRAPH (3) OR (4) OF SUBSECTION

9 (a).—

10 ‘‘(A) PROHIBITED ALLOCATIONS.—The

11 amount involved with respect to any tax imposed

12 by reason of subsection (a)(3) is the amount allo13 cated to the account of any person in violation

14 of section 409(p)(1).

15 ‘‘(B) SYNTHETIC EQUITY.—The amount in16 volved with respect to any tax imposed by reason

17 of subsection (a)(4) is the value of the shares on

18 which the synthetic equity is based.

19 ‘‘(C) SPECIAL RULE DURING FIRST NON20 ALLOCATION YEAR.—For purposes of subpara21 graph (A), the amount involved for the first non22 allocation year of any employee stock ownership

23 plan shall be determined by taking into account

24 the total value of all the deemed-owned shares of
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1 all disqualified persons with respect to such

2 plan.

3 ‘‘(D) STATUTE OF LIMITATIONS.—The stat4 utory period for the assessment of any tax im5 posed by this section by reason of paragraph (3)

6 or (4) of subsection (a) shall not expire before the

7 date which is 3 years from the later of—

8 ‘‘(i) the allocation or ownership re9 ferred to in such paragraph giving rise to

10 such tax, or

11 ‘‘(ii) the date on which the Secretary is

12 notified of such allocation or ownership.’’.

13 (d) EFFECTIVE DATES.—

14 (1) IN GENERAL.—The amendments made by

15 this section shall apply to plan years beginning after

16 December 31, 2001.

17 (2) EXCEPTION FOR CERTAIN PLANS.—In the

18 case of any—

19 (A) employee stock ownership plan estab20 lished after July 11, 2000, or

21 (B) employee stock ownership plan estab22 lished on or before such date if employer securi23 ties held by the plan consist of stock in a cor24 poration with respect to which an election under
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1 section 1362(a) of the Internal Revenue Code of

2 1986 is not in effect on such date,

3 the amendments made by this section shall apply to

4 plan years ending after July 11, 2000.

5 TITLE VI—REDUCING

6 REGULATORY BURDENS

7 SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.

8 (a) IN GENERAL.—Paragraph (9) of section 412(c)(9)

9 (relating to annual valuation) is amended to read as fol10 lows:

11 ‘‘(9) ANNUAL VALUATION.—

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

13 section, a determination of experience gains and

14 losses and a valuation of the plan’s liability

15 shall be made not less frequently than once every

16 year, except that such determination shall be

17 made more frequently to the extent required in

18 particular cases under regulations prescribed by

19 the Secretary.

20 ‘‘(B) VALUATION DATE.—

21 ‘‘(i) CURRENT YEAR.—Except as pro22 vided in clause (ii), the valuation referred

23 to in subparagraph (A) shall be made as of

24 a date within the plan year to which the
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1 valuation refers or within one month prior

2 to the beginning of such year.

3 ‘‘(ii) ELECTION TO USE PRIOR YEAR

4 VALUATION.—The valuation referred to in

5 subparagraph (A) may be made as of a date

6 within the plan year prior to the year to

7 which the valuation refers if—

8 ‘‘(I) an election is in effect under

9 this clause with respect to the plan,

10 and

11 ‘‘(II) as of such date, the value of

12 the assets of the plan are not less than

13 125 percent of the plan’s current liabil14 ity (as defined in paragraph (7)(B)).

15 ‘‘(iii) ADJUSTMENTS.—Information

16 under clause (ii) shall, in accordance with

17 regulations, be actuarially adjusted to re18 flect significant differences in participants.

19 ‘‘(iv) ELECTION.—An election under

20 clause (ii), once made, shall be irrevocable

21 without the consent of the Secretary.’’.

22 (b) EFFECTIVE DATE.—The amendments made by this

23 section shall apply to plan years beginning after December

24 31, 2000.
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1 SEC. 602. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT

2 LOSS OF DIVIDEND DEDUCTION.

3 (a) IN GENERAL.—Section 404(k)(2)(A) (defining ap4 plicable dividends) is amended by striking ‘‘or’’ at the end

5 of clause (ii), by redesignating clause (iii) as clause (iv),

6 and by inserting after clause (ii) the following new clause:

7 ‘‘(iii) is, at the election of such partici8 pants or their beneficiaries—

9 ‘‘(I) payable as provided in clause

10 (i) or (ii), or

11 ‘‘(II) paid to the plan and rein12 vested in qualifying employer securi13 ties, or’’.

14 (b) EFFECTIVE DATE.—The amendments made by this

15 section shall apply to taxable years beginning after Decem16 ber 31, 2000.

17 SEC. 603. REPEAL OF TRANSITION RULE RELATING TO CER18 TAIN HIGHLY COMPENSATED EMPLOYEES.

19 (a) IN GENERAL.—Paragraph (4) of section 1114(c)

20 of the Tax Reform Act of 1986 is hereby repealed.

21 (b) EFFECTIVE DATE.—The repeal made by subsection

22 (a) shall apply to plan years beginning after December 31,

23 2000.

24 SEC. 604. EMPLOYEES OF TAX-EXEMPT ENTITIES.

25 (a) IN GENERAL.—The Secretary of the Treasury shall

26 modify Treasury Regulations section 1.410(b)–6(g) to pro-
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1 vide that employees of an organization described in section

2 403(b)(1)(A)(i) of the Internal Revenue Code of 1986 who

3 are eligible to make contributions under section 403(b) of

4 such Code pursuant to a salary reduction agreement may

5 be treated as excludable with respect to a plan under section

6 401(k) or (m) of such Code that is provided under the same

7 general arrangement as a plan under such section 401(k),

8 if—

9 (1) no employee of an organization described in

10 section 403(b)(1)(A)(i) of such Code is eligible to par11 ticipate in such section 401(k) plan or section 401(m)

12 plan; and

13 (2) 95 percent of the employees who are not em14 ployees of an organization described in section

15 403(b)(1)(A)(i) of such Code are eligible to partici16 pate in such plan under such section 401(k) or (m).

17 (b) EFFECTIVE DATE.—The modification required by

18 subsection (a) shall apply as of the same date set forth in

19 section 1426(b) of the Small Business Job Protection Act

20 of 1996.

21 SEC. 605. CLARIFICATION OF TREATMENT OF EMPLOYER22 PROVIDED RETIREMENT ADVICE.

23 (a) IN GENERAL.—Subsection (a) of section 132 (relat24 ing to exclusion from gross income) is amended by striking

25 ‘‘or’’ at the end of paragraph (5), by striking the period
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1 at the end of paragraph (6) and inserting ‘‘, or’’, and by

2 adding at the end the following new paragraph:

3 ‘‘(7) qualified retirement planning services.’’.

4 (b) QUALIFIED RETIREMENT PLANNING SERVICES DE5 FINED.—Section 132 is amended by redesignating sub6 section (m) as subsection (n) and by inserting after sub7 section (l) the following:

8 ‘‘(m) QUALIFIED RETIREMENT PLANNING SERV9 ICES.—

10 ‘‘(1) IN GENERAL.—For purposes of this section,

11 the term ‘qualified retirement planning services’

12 means any retirement planning service provided to

13 an employee and his spouse by an employer main14 taining a qualified employer plan.

15 ‘‘(2) NONDISCRIMINATION RULE.—Subsection

16 (a)(7) shall apply in the case of highly compensated

17 employees only if such services are available on sub18 stantially the same terms to each member of the group

19 of employees normally provided education and infor20 mation regarding the employer’s qualified employer

21 plan.

22 ‘‘(3) QUALIFIED EMPLOYER PLAN.—For purposes

23 of this subsection, the term ‘qualified employer plan’

24 means a plan, contract, pension, or account described

25 in section 219(g)(5).’’.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to years beginning after December 31,

3 2000.

4 SEC. 606. REPORTING SIMPLIFICATION.

5 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

6 OWNERS AND THEIR SPOUSES.—

7 (1) IN GENERAL.—The Secretary of the Treasury

8 shall modify the requirements for filing annual re9 turns with respect to one-participant retirement plans

10 to ensure that such plans with assets of $250,000 or

11 less as of the close of the plan year need not file a

12 return for that year.

13 (2) ONE-PARTICIPANT RETIREMENT PLAN DE14 FINED.—For purposes of this subsection, the term

15 ‘‘one-participant retirement plan’’ means a retire16 ment plan that—

17 (A) on the first day of the plan year—

18 (i) covered only the employer (and the

19 employer’s spouse) and the employer owned

20 the entire business (whether or not incor21 porated); or

22 (ii) covered only one or more partners

23 (and their spouses) in a business partner24 ship (including partners in an S or C cor25 poration);
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1 (B) meets the minimum coverage require2 ments of section 410(b) of the Internal Revenue

3 Code of 1986 without being combined with any

4 other plan of the business that covers the employ5 ees of the business;

6 (C) does not provide benefits to anyone ex7 cept the employer (and the employer’s spouse) or

8 the partners (and their spouses);

9 (D) does not cover a business that is a

10 member of an affiliated service group, a con11 trolled group of corporations, or a group of busi12 nesses under common control; and

13 (E) does not cover a business that leases em14 ployees.

15 (3) OTHER DEFINITIONS.—Terms used in para16 graph (2) which are also used in section 414 of the

17 Internal Revenue Code of 1986 shall have the respec18 tive meanings given such terms by such section.

19 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

20 PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case

21 of a retirement plan which covers less than 25 employees

22 on the first day of the plan year and meets the requirements

23 described in subparagraphs (B), (D), and (E) of subsection

24 (a)(2), the Secretary of the Treasury shall provide for the

25 filing of a simplified annual return that is substantially
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1 similar to the annual return required to be filed by a one2 participant retirement plan.

3 (c) EFFECTIVE DATE.—The provisions of this section

4 shall take effect on January 1, 2001.

5 SEC. 607. IMPROVEMENT OF EMPLOYEE PLANS COMPLI6 ANCE RESOLUTION SYSTEM.

7 The Secretary of the Treasury shall continue to update

8 and improve the Employee Plans Compliance Resolution

9 System (or any successor program) giving special attention

10 to—

11 (1) increasing the awareness and knowledge of

12 small employers concerning the availability and use

13 of the program;

14 (2) taking into account special concerns and cir15 cumstances that small employers face with respect to

16 compliance and correction of compliance failures;

17 (3) extending the duration of the self-correction

18 period under the Administrative Policy Regarding

19 Self-Correction for significant compliance failures;

20 (4) expanding the availability to correct insig21 nificant compliance failures under the Administrative

22 Policy Regarding Self-Correction during audit; and

23 (5) assuring that any tax, penalty, or sanction

24 that is imposed by reason of a compliance failure is
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1 not excessive and bears a reasonable relationship to

2 the nature, extent, and severity of the failure.

3 SEC. 608. REPEAL OF THE MULTIPLE USE TEST.

4 (a) IN GENERAL.—Paragraph (9) of section 401(m) is

5 amended to read as follows:

6 ‘‘(9) REGULATIONS.—The Secretary shall pre7 scribe such regulations as may be necessary to carry

8 out the purposes of this subsection and subsection (k),

9 including regulations permitting appropriate aggre10 gation of plans and contributions.’’.

11 (b) EFFECTIVE DATE.—The amendment made by this

12 section shall apply to years beginning after December 31,

13 2000.

14 SEC. 609. FLEXIBILITY IN NONDISCRIMINATION, COV15 ERAGE, AND LINE OF BUSINESS RULES.

16 (a) NONDISCRIMINATION.—

17 (1) IN GENERAL.—The Secretary of the Treasury

18 shall, by regulation, provide that a plan shall be

19 deemed to satisfy the requirements of section

20 401(a)(4) of the Internal Revenue Code of 1986 if

21 such plan satisfies the facts and circumstances test

22 under section 401(a)(4) of such Code, as in effect be23 fore January 1, 1994, but only if—
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1 (A) the plan satisfies conditions prescribed

2 by the Secretary to appropriately limit the

3 availability of such test; and

4 (B) the plan is submitted to the Secretary

5 for a determination of whether it satisfies such

6 test.

7 Subparagraph (B) shall only apply to the extent pro8 vided by the Secretary.

9 (2) EFFECTIVE DATES.—

10 (A) REGULATIONS.—The regulation re11 quired by paragraph (1) shall apply to years be12 ginning after December 31, 2000.

13 (B) CONDITIONS OF AVAILABILITY.—Any

14 condition of availability prescribed by the Sec15 retary under paragraph (1)(A) shall not apply

16 before the first year beginning not less than 120

17 days after the date on which such condition is

18 prescribed.

19 (b) COVERAGE TEST.—

20 (1) IN GENERAL.—Section 410(b)(1) (relating to

21 minimum coverage requirements) is amended by add22 ing at the end the following:

23 ‘‘(D) In the case that the plan fails to meet

24 the requirements of subparagraphs (A), (B) and

25 (C), the plan—
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1 ‘‘(i) satisfies subparagraph (B), as in

2 effect immediately before the enactment of

3 the Tax Reform Act of 1986,

4 ‘‘(ii) is submitted to the Secretary for

5 a determination of whether it satisfies the

6 requirement described in clause (i), and

7 ‘‘(iii) satisfies conditions prescribed by

8 the Secretary by regulation that appro9 priately limit the availability of this sub10 paragraph.

11 Clause (ii) shall apply only to the extent pro12 vided by the Secretary.’’.

13 (2) EFFECTIVE DATES.—

14 (A) IN GENERAL.—The amendment made

15 by paragraph (1) shall apply to years beginning

16 after December 31, 2000.

17 (B) CONDITIONS OF AVAILABILITY.—Any

18 condition of availability prescribed by the Sec19 retary under regulations prescribed by the Sec20 retary under section 410(b)(1)(D) of the Internal

21 Revenue Code of 1986 shall not apply before the

22 first year beginning not less than 120 days after

23 the date on which such condition is prescribed.

24 (c) LINE OF BUSINESS RULES.—The Secretary of the

25 Treasury shall, on or before December 31, 2000, modify the
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1 existing regulations issued under section 414(r) of the Inter2 nal Revenue Code of 1986 in order to expand (to the extent

3 that the Secretary determines appropriate) the ability of

4 a pension plan to demonstrate compliance with the line of

5 business requirements based upon the facts and cir6 cumstances surrounding the design and operation of the

7 plan, even though the plan is unable to satisfy the mechan8 ical tests currently used to determine compliance.

9 SEC. 610. EXTENSION TO ALL GOVERNMENTAL PLANS OF

10 MORATORIUM ON APPLICATION OF CERTAIN

11 NONDISCRIMINATION RULES APPLICABLE TO

12 STATE AND LOCAL PLANS.

13 (a) IN GENERAL.—

14 (1) Subparagraph (G) of section 401(a)(5) and

15 subparagraph (H) of section 401(a)(26) are each

16 amended by striking ‘‘section 414(d))’’ and all that

17 follows and inserting ‘‘section 414(d)).’’.

18 (2) Subparagraph (G) of section 401(k)(3) and

19 paragraph (2) of section 1505(d) of the Taxpayer Re20 lief Act of 1997 are each amended by striking ‘‘main21 tained by a State or local government or political

22 subdivision thereof (or agency or instrumentality

23 thereof)’’.

24 (b) CONFORMING AMENDMENTS.—
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1 (1) The heading for subparagraph (G) of section

2 401(a)(5) is amended to read as follows: ‘‘GOVERN3 MENTAL PLANS’’.

4 (2) The heading for subparagraph (H) of section

5 401(a)(26) is amended to read as follows: ‘‘EXCEP6 TION FOR GOVERNMENTAL PLANS’’.

7 (3) Subparagraph (G) of section 401(k)(3) is

8 amended by inserting ‘‘GOVERNMENTAL PLANS.—’’

9 after ‘‘(G)’’.

10 (c) EFFECTIVE DATE.—The amendments made by this

11 section shall apply to years beginning after December 31,

12 2000.

13 SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DIS14 TRIBUTIONS.

15 (a) EXPANSION OF PERIOD.—

16 (1) IN GENERAL.—Subparagraph (A) of section

17 417(a)(6) is amended by striking ‘‘90-day’’ and in18 serting ‘‘180-day’’.

19 (2) MODIFICATION OF REGULATIONS.—The Sec20 retary of the Treasury shall modify the regulations

21 under sections 402(f), 411(a)(11), and 417 of the In22 ternal Revenue Code of 1986 to substitute ‘‘180 days’’

23 for ‘‘90 days’’ each place it appears in Treasury Reg24 ulations sections 1.402(f)–1, 1.411(a)–11(c), and

25 1.417(e)–1(b).
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1 (3) EFFECTIVE DATE.—The amendment made by

2 paragraph (1) and the modifications required by

3 paragraph (2) shall apply to years beginning after

4 December 31, 2000.

5 (b) CONSENT REGULATION INAPPLICABLE TO CERTAIN

6 DISTRIBUTIONS.—

7 (1) IN GENERAL.—The Secretary of the Treasury

8 shall modify the regulations under section 411(a)(11)

9 of the Internal Revenue Code of 1986 to provide that

10 the description of a participant’s right, if any, to

11 defer receipt of a distribution shall also describe the

12 consequences of failing to defer such receipt.

13 (2) EFFECTIVE DATE.—The modifications re14 quired by paragraph (1) shall apply to years begin15 ning after December 31, 2000.

16 TITLE VII—PLAN AMENDMENTS

17 SEC. 701. PROVISIONS RELATING TO PLAN AMENDMENTS.

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

19 or contract amendment—

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

21 being operated in accordance with the terms of the

22 plan during the period described in subsection

23 (b)(2)(A); and
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1 (2) such plan shall not fail to meet the require2 ments of section 411(d)(6) of the Internal Revenue

3 Code of 1986 by reason of such amendment.

4 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

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

6 any amendment to any plan or annuity contract

7 which is made—

8 (A) pursuant to any amendment made by

9 this Act, or pursuant to any regulation issued

10 under this Act, and

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

12 plan year beginning on or after January 1,

13 2003.

14 In the case of a governmental plan (as defined in sec15 tion 414(d) of the Internal Revenue Code of 1986),

16 this paragraph shall be applied by substituting

17 ‘‘2005’’ for ‘‘2003’’.

18 (2) CONDITIONS.—This section shall not apply to

19 any amendment unless—

20 (A) during the period—

21 (i) beginning on the date the legislative

22 or regulatory amendment described in para23 graph (1)(A) takes effect (or in the case of

24 a plan or contract amendment not required

25 by such legislative or regulatory amend-
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1 ment, the effective date specified by the

2 plan); and

3 (ii) ending on the date described in

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

5 plan or contract amendment is adopted),

6 the plan or contract is operated as if such plan

7 or contract amendment were in effect; and

8 (B) such plan or contract amendment ap9 plies retroactively for such period.

Union Calendar No. 433

106TH CONGRESS

2D SESSION H. R. 4843

[Report No. 106–753]

A BILL

To amend the Internal Revenue Code of 1986 to

provide for retirement security and pension reform.

JULY 17, 2000

Reported with an amendment, committed to the Committee of the Whole House on the State of the Union,

and ordered to be printed