I

106TH CONGRESS

2D SESSION H. R. 4843

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

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,

3 SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CON4 TENTS.

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

6 ‘‘Comprehensive Retirement Security and Pension Reform

7 Act of 2000’’.

8 (b) AMENDMENT OF 1986 CODE.—Except as other9 wise expressly provided, whenever in this Act an amend10 ment or repeal is expressed in terms of an amendment
2

•HR 4843 IH

1 to, or repeal of, a section or other provision, the reference

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986.

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

5 this 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.

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
3

•HR 4843 IH

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.—

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

6 219(b) (relating to maximum amount of deduction)

7 is amended by striking ‘‘$2,000’’ and inserting ‘‘the

8 deductible amount’’.

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

10 amended by adding at the end the following new

11 paragraph:
4

•HR 4843 IH

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

2 paragraph (1)(A)—

3 ‘‘(A) IN GENERAL.—The deductible

4 amount shall be determined in accordance with

5 the following table:

‘‘For taxable years The deductible

beginning in: amount is:

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

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

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

6 ‘‘(B) CATCH-UP CONTRIBUTIONS FOR INDI7 VIDUALS 50 OR OLDER.—In the case of an indi8 vidual who has attained the age of 50 before

9 the close of the taxable year, the deductible

10 amount for taxable years beginning in 2001 or

11 2002 shall be $5,000.

12 ‘‘(C) COST-OF-LIVING ADJUSTMENT.—

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

14 taxable year beginning in a calendar year

15 after 2003, the $5,000 amount under sub16 paragraph (A) shall be increased by an

17 amount equal to—

18 ‘‘(I) such dollar amount, multi19 plied by

20 ‘‘(II) the cost-of-living adjust21 ment determined under section

22 1(f )(3) for the calendar year in which

23 the taxable year begins, determined by
5

•HR 4843 IH

1 substituting ‘calendar year 2002’ for

2 ‘calendar year 1992’ in subparagraph

3 (B) thereof.

4 ‘‘(ii) ROUNDING RULES.—If any

5 amount after adjustment under clause (i)

6 is not a multiple of $500, such amount

7 shall be rounded to the next lower multiple

8 of $500.’’.

9 (b) CONFORMING AMENDMENTS.—

10 (1) Section 408(a)(1) is amended by striking

11 ‘‘in excess of $2,000 on behalf of any individual’’

12 and inserting ‘‘on behalf of any individual in excess

13 of the amount in effect for such taxable year under

14 section 219(b)(1)(A)’’.

15 (2) Section 408(b)(2)(B) is amended by strik16 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

17 effect under section 219(b)(1)(A)’’.

18 (3) Section 408(b) is amended by striking

19 ‘‘$2,000’’ in the matter following paragraph (4) and

20 inserting ‘‘the dollar amount in effect under section

21 219(b)(1)(A)’’.

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

23 ‘‘$2,000’’.
6

•HR 4843 IH

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

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

3 under section 219(b)(1)(A)’’.

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

5 this section shall apply to taxable years beginning after

6 December 31, 2000.

7 TITLE II—EXPANDING

8 COVERAGE

9 SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION LIM10 ITS.

11 (a) DEFINED BENEFIT PLANS.—

12 (1) DOLLAR LIMIT.—

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

14 (relating to limitation for defined benefit plans)

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

16 ‘‘$160,000’’.

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

18 415(b)(2) are each amended by striking

19 ‘‘$90,000’’ each place it appears in the head20 ings and the text and inserting ‘‘$160,000’’.

21 (C) Paragraph (7) of section 415(b) (relat22 ing to benefits under certain collectively bar23 gained plans) is amended by striking ‘‘the

24 greater of $68,212 or one-half the amount oth25 erwise applicable for such year under paragraph
7

•HR 4843 IH

1 (1)(A) for ‘$90,000’ ’’ and inserting ‘‘one-half

2 the amount otherwise applicable for such year

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

4 (2) LIMIT REDUCED WHEN BENEFIT BEGINS

5 BEFORE AGE 62.—Subparagraph (C) of section

6 415(b)(2) is amended by striking ‘‘the social security

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

8 and text and inserting ‘‘age 62’’.

9 (3) LIMIT INCREASED WHEN BENEFIT BEGINS

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

11 415(b)(2) is amended by striking ‘‘the social security

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

13 and text and inserting ‘‘age 65’’.

14 (4) COST-OF-LIVING ADJUSTMENTS.—Sub15 section (d) of section 415 (related to cost-of-living

16 adjustments) is amended—

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

18 (1)(A) and inserting ‘‘$160,000’’; and

19 (B) in paragraph (3)(A)—

20 (i) by striking ‘‘$90,000’’ in the head21 ing and inserting ‘‘$160,000’’; and

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

23 inserting ‘‘July 1, 2000’’.

24 (5) CONFORMING AMENDMENT.—Section

25 415(b)(2) is amended by striking subparagraph (F).
8

•HR 4843 IH

1 (b) DEFINED CONTRIBUTION PLANS.—

2 (1) DOLLAR LIMIT.—Subparagraph (A) of sec3 tion 415(c)(1) (relating to limitation for defined con4 tribution plans) is amended by striking ‘‘$30,000’’

5 and inserting ‘‘$40,000’’.

6 (2) COST-OF-LIVING ADJUSTMENTS.—Sub7 section (d) of section 415 (related to cost-of-living

8 adjustments) is amended—

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

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

11 (B) in paragraph (3)(D)—

12 (i) by striking ‘‘$30,000’’ in the head13 ing and inserting ‘‘$40,000’’; and

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

15 inserting ‘‘July 1, 2000’’.

16 (c) QUALIFIED TRUSTS.—

17 (1) COMPENSATION LIMIT.—Sections

18 401(a)(17), 404(l), 408(k), and 505(b)(7) are each

19 amended by striking ‘‘$150,000’’ each place it ap20 pears and inserting ‘‘$200,000’’.

21 (2) BASE PERIOD AND ROUNDING OF COST-OF22 LIVING ADJUSTMENT.—Subparagraph (B) of section

23 401(a)(17) is amended—

24 (A) by striking ‘‘October 1, 1993’’ and in25 serting ‘‘July 1, 2000’’; and
9

•HR 4843 IH

1 (B) by striking ‘‘$10,000’’ both places it

2 appears and inserting ‘‘$5,000’’.

3 (d) ELECTIVE DEFERRALS.—

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

5 402(g) (relating to limitation on exclusion for elec6 tive deferrals) is amended to read as follows:

7 ‘‘(1) IN GENERAL.—

8 ‘‘(A) LIMITATION.—Notwithstanding sub9 sections (e)(3) and (h)(1)(B), the elective defer10 rals of any individual for any taxable year shall

11 be included in such individual’s gross income to

12 the extent the amount of such deferrals for the

13 taxable year exceeds the applicable dollar

14 amount.

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

16 purposes of subparagraph (A), the applicable

17 dollar amount shall be the amount determined

18 in accordance with the following table:

‘‘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.’’.

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

20 (5) of section 402(g) is amended to read as follows:
10

•HR 4843 IH

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

2 case of taxable years beginning after December 31,

3 2005, the Secretary shall adjust the $15,000

4 amount under paragraph (1)(B) at the same time

5 and in the same manner as under section 415(d),

6 except that the base period shall be the calendar

7 quarter beginning July 1, 2004, and any increase

8 under this paragraph which is not a multiple of

9 $500 shall be rounded to the next lowest multiple of

10 $500.’’.

11 (3) CONFORMING AMENDMENTS.—

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

13 on exclusion for elective deferrals), as amended

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

15 by striking paragraph (4) and redesignating

16 paragraphs (5), (6), (7), (8), and (9) as para17 graphs (4), (5), (6), (7), and (8), respectively.

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

19 amended by striking ‘‘402(g)(8)(A)(iii)’’ and in20 serting ‘‘402(g)(7)(A)(iii)’’.

21 (C) Clause (iii) of section 501(c)(18)(D) is

22 amended by striking ‘‘(other than paragraph

23 (4) thereof)’’.
11

•HR 4843 IH

1 (e) DEFERRED COMPENSATION PLANS OF STATE

2 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI3 ZATIONS.—

4 (1) IN GENERAL.—Section 457 (relating to de5 ferred compensation plans of State and local govern6 ments and tax-exempt organizations) is amended—

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

8 striking ‘‘$7,500’’ each place it appears and in9 serting ‘‘the applicable dollar amount’’; and

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

11 ‘‘$15,000’’ and inserting ‘‘twice the dollar

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

13 (2) APPLICABLE DOLLAR AMOUNT; COST-OF14 LIVING ADJUSTMENT.—Paragraph (15) of section

15 457(e) is amended to read as follows:

16 ‘‘(15) APPLICABLE DOLLAR AMOUNT.—

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

18 amount shall be the amount determined in ac19 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

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

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

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

21 the case of taxable years beginning after De-
12

•HR 4843 IH

1 cember 31, 2005, the Secretary shall adjust the

2 $15,000 amount specified in the table in sub3 paragraph (A) at the same time and in the

4 same manner as under section 415(d), except

5 that the base period shall be the calendar quar6 ter beginning July 1, 2004, and any increase

7 under this paragraph which is not a multiple of

8 $500 shall be rounded to the next lowest mul9 tiple of $500.’’.

10 (f) SIMPLE RETIREMENT ACCOUNTS.—

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

12 408(p)(2)(A) (relating to general rule for qualified

13 salary reduction arrangement) is amended by strik14 ing ‘‘$6,000’’ and inserting ‘‘the applicable dollar

15 amount’’.

16 (2) APPLICABLE DOLLAR AMOUNT.—Subpara17 graph (E) of 408(p)(2) is amended to read as fol18 lows:

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:
13

•HR 4843 IH

‘‘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 De3 cember 31, 2004, the Secretary shall ad4 just the $10,000 amount under clause (i)

5 at the same time and in the same manner

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

7 base period taken into account shall be the

8 calendar quarter beginning July 1, 2003,

9 and 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)

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

16 ‘‘the amount in effect under section

17 408(p)(2)(A)(ii)’’.

18 (B) Section 401(k)(11) is amended by

19 striking subparagraph (E).

20 (g) ROUNDING RULE RELATING TO DEFINED BEN21 EFIT PLANS AND DEFINED CONTRIBUTION PLANS.—
14

•HR 4843 IH

1 Paragraph (4) of section 415(d) is amended to read as

2 follows:

3 ‘‘(4) ROUNDING.—

4 ‘‘(A) $160,000 AMOUNT.—Any increase

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

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

7 the next lowest multiple of $5,000.

8 ‘‘(B) $40,000 AMOUNT.—Any increase

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

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

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

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

13 this section shall apply to years beginning after December

14 31, 2000.

15 SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART16 NERS, AND SOLE PROPRIETORS.

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

18 4975(f)(6) (relating to exemptions not to apply to certain

19 transactions) is amended by adding at the end the fol20 lowing new clause:

21 ‘‘(iii) LOAN EXCEPTION.—For pur22 poses of subparagraph (A)(i), the term

23 ‘owner-employee’ shall only include a per24 son described in subclause (II) or (III) of

25 clause (i).’’.
15

•HR 4843 IH

1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to loans made after December 31,

3 2000.

4 SEC. 203. MODIFICATION OF TOP-HEAVY RULES.

5 (a) SIMPLIFICATION OF DEFINITION OF KEY EM6 PLOYEE.—

7 (1) IN GENERAL.—Section 416(i)(1)(A) (defin8 ing key employee) is amended—

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

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

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

12 following:

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

14 an annual compensation greater than

15 $150,000,’’;

16 (C) by striking clause (ii) and redesig17 nating clauses (iii) and (iv) as clauses (ii) and

18 (iii), respectively; and

19 (D) by striking the second sentence in the

20 matter following clause (iii), as redesignated by

21 subparagraph (C).

22 (2) CONFORMING AMENDMENT.—Section

23 416(i)(1)(B)(iii) is amended by striking ‘‘and sub24 paragraph (A)(ii)’’.
16

•HR 4843 IH

1 (b) MATCHING CONTRIBUTIONS TAKEN INTO AC2 COUNT FOR MINIMUM CONTRIBUTION REQUIREMENTS.—

3 Section 416(c)(2)(A) (relating to defined contribution

4 plans) is amended by adding at the end the following:

5 ‘‘Employer matching contributions (as defined in section

6 401(m)(4)(A)) shall be taken into account for purposes

7 of this subparagraph.’’.

8 (c) DISTRIBUTIONS DURING LAST YEAR BEFORE

9 DETERMINATION DATE TAKEN INTO ACCOUNT.—

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

11 416(g) is amended to read as follows:

12 ‘‘(3) DISTRIBUTIONS DURING LAST YEAR BE13 FORE DETERMINATION DATE TAKEN INTO AC14 COUNT.—

15 ‘‘(A) IN GENERAL.—For purposes of

16 determining—

17 ‘‘(i) the present value of the cumu18 lative accrued benefit for any employee, or

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

20 employee,

21 such present value or amount shall be increased

22 by the aggregate distributions made with re23 spect to such employee under the plan during

24 the 1-year period ending on the determination

25 date. The preceding sentence shall also apply to
17

•HR 4843 IH

1 distributions under a terminated plan which if

2 it had not been terminated would have been re3 quired to be included in an aggregation group.

4 ‘‘(B) 5-YEAR PERIOD IN CASE OF IN-SERV5 ICE DISTRIBUTION.—In the case of any dis6 tribution made for a reason other than separa7 tion from service, death, or disability, subpara8 graph (A) shall be applied by substituting ‘5-

9 year period’ for ‘1-year period’.’’.

10 (2) BENEFITS NOT TAKEN INTO ACCOUNT.—

11 Subparagraph (E) of section 416(g)(4) is

12 amended—

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

14 heading and inserting ‘‘LAST YEAR BEFORE DE15 TERMINATION DATE’’; and

16 (B) by striking ‘‘5-year period’’ and insert17 ing ‘‘1-year period’’.

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

19 (4) of section 416(g) (relating to other special rules for

20 top-heavy plans) is amended by adding at the end the fol21 lowing new subparagraph:

22 ‘‘(H) CASH OR DEFERRED ARRANGEMENTS

23 USING ALTERNATIVE METHODS OF MEETING

24 NONDISCRIMINATION REQUIREMENTS.—The
18

•HR 4843 IH

1 term ‘top-heavy plan’ shall not include a plan

2 which consists solely of—

3 ‘‘(i) a cash or deferred arrangement

4 which meets the requirements of section

5 401(k)(12), and

6 ‘‘(ii) matching contributions with re7 spect to which the requirements of section

8 401(m)(11) are met.

9 If, but for this subparagraph, a plan would be

10 treated as a top-heavy plan because it is a

11 member of an aggregation group which is a top12 heavy group, contributions under the plan may

13 be taken into account in determining whether

14 any other plan in the group meets the require15 ments of subsection (c)(2).’’.

16 (e) FROZEN PLAN EXEMPT FROM MINIMUM BEN17 EFIT REQUIREMENT.—Subparagraph (C) of section

18 416(c)(1) (relating to defined benefit plans) is amended—

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

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

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

22 ‘‘(iii) EXCEPTION FOR FROZEN

23 PLAN.—For purposes of determining an

24 employee’s years of service with the em25 ployer, any service with the employer shall
19

•HR 4843 IH

1 be disregarded to the extent that such

2 service occurs during a plan year when the

3 plan benefits (within the meaning of sec4 tion 410(b)) no employee or former em5 ployee.’’.

6 (f) ELIMINATION OF FAMILY ATTRIBUTION.—Sec7 tion 416(i)(1)(B) (defining 5-percent owner) is amended

8 by adding at the end the following new clause:

9 ‘‘(iv) FAMILY ATTRIBUTION DIS10 REGARDED.—Solely for purposes of apply11 ing this paragraph (and not for purposes

12 of any provision of this title which incor13 porates by reference the definition of a key

14 employee or 5-percent owner under this

15 paragraph), section 318 shall be applied

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

17 in determining whether any person is a 5-

18 percent owner.’’.

19 (g) EFFECTIVE DATE.—The amendments made by

20 this section shall apply to years beginning after December

21 31, 2000.
20

•HR 4843 IH

1 SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO AC2 COUNT FOR PURPOSES OF DEDUCTION LIM3 ITS.

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

5 for contributions of an employer to an employees’ trust

6 or annuity plan and compensation under a deferred pay7 ment plan) is amended by adding at the end the following

8 new subsection:

9 ‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC10 COUNT FOR PURPOSES OF DEDUCTION LIMITS.—Elective

11 deferrals (as defined in section 402(g)(3)) shall not be

12 subject to any limitation contained in paragraph (3), (7),

13 or (9) of subsection (a), and such elective deferrals shall

14 not be taken into account in applying any such limitation

15 to any other contributions.’’.

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

17 this section shall apply to years beginning after December

18 31, 2000.

19 SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR

20 DEFERRED COMPENSATION PLANS OF STATE

21 AND LOCAL GOVERNMENTS AND TAX-EX22 EMPT ORGANIZATIONS.

23 (a) IN GENERAL.—Subsection (c) of section 457 (re24 lating to deferred compensation plans of State and local

25 governments and tax-exempt organizations), as amended

26 by section 201, is amended to read as follows:
21

•HR 4843 IH

1 ‘‘(c) LIMITATION.—The maximum amount of the

2 compensation of any one individual which may be deferred

3 under subsection (a) during any taxable year shall not ex4 ceed the amount in effect under subsection (b)(2)(A) (as

5 modified by any adjustment provided under subsection

6 (b)(3)).’’.

7 (b) EFFECTIVE DATE.—The amendment made by

8 subsection (a) shall apply to years beginning after Decem9 ber 31, 2000.

10 SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO

11 IRS REGARDING PENSION PLANS.

12 (a) ELIMINATION OF CERTAIN USER FEES.—The

13 Secretary of the Treasury or the Secretary’s delegate shall

14 not require payment of user fees under the program estab15 lished under section 7527 of the Internal Revenue Code

16 of 1986 for requests to the Internal Revenue Service for

17 determination letters with respect to the qualified status

18 of a pension benefit plan maintained solely by one or more

19 eligible employers or any trust which is part of the plan.

20 The preceding sentence shall not apply to any request—

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

22 benefit plan is in existence; or

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

24 similar plan which the sponsor intends to market to

25 participating employers.
22

•HR 4843 IH

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

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

3 profit-sharing, stock bonus, annuity, or employee stock

4 ownership plan.

5 (c) ELIGIBLE EMPLOYER.—For purposes of this sec6 tion, the term ‘‘eligible employer’’ has the same meaning

7 given such term in section 408(p)(2)(C)(i)(I) of the Inter8 nal Revenue Code of 1986. The determination of whether

9 an employer is an eligible employer under this section shall

10 be made as of the date of the request described in sub11 section (a).

12 (d) EFFECTIVE DATE.—The provisions of this sec13 tion shall apply with respect to requests made after De14 cember 31, 2000.

15 SEC. 207. DEDUCTION LIMITS.

16 (a) IN GENERAL.—

17 (1) STOCK BONUS AND PROFIT SHARING

18 TRUSTS.—Subclause (I) of section 404(a)(3)(A)(i)

19 (relating to stock bonus and profit sharing trusts) is

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

21 percent’’.

22 (2) COMPENSATION.—Section 404(a) (relating

23 to general rule) is amended by adding at the end the

24 following:
23

•HR 4843 IH

1 ‘‘(12) DEFINITION OF COMPENSATION.—For

2 purposes of paragraphs (3), (7), (8), and (9), the

3 term ‘compensation otherwise paid or accrued dur4 ing the taxable year’ shall include amounts treated

5 as ‘participant’s compensation’ under subparagraph

6 (C) or (D) of section 415(c)(3).’’.

7 (b) CONFORMING AMENDMENTS.—

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

9 amended by striking the last sentence thereof.

10 (2) Subparagraph (C) of section 404(h)(1) is

11 amended by striking ‘‘15 percent’’ each place it ap12 pears and inserting ‘‘20 percent’’.

13 (3) Clause (i) of section 4972(c)(6)(B) is

14 amended by striking ‘‘(within the meaning of section

15 404(a))’’ and inserting ‘‘(within the meaning of sec16 tion 404(a) and as adjusted under section

17 404(a)(12))’’.

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

19 this section shall apply to years beginning after December

20 31, 2000.

21 SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS

22 AFTER-TAX CONTRIBUTIONS.

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

24 D of chapter 1 (relating to deferred compensation, etc.)
24

•HR 4843 IH

1 is amended by inserting after section 402 the following

2 new section:

3 ‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER4 RALS AS PLUS CONTRIBUTIONS.

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

6 plan includes a qualified plus contribution program—

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

8 an employee pursuant to the program shall be treat9 ed as an elective deferral for purposes of this chap10 ter, except that such contribution shall not be ex11 cludable from gross income, and

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

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

14 meet any requirement of this chapter solely by rea15 son of including such program.

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

17 For purposes of this section—

18 ‘‘(1) IN GENERAL.—The term ‘qualified plus

19 contribution program’ means a program under which

20 an employee may elect to make designated plus con21 tributions in lieu of all or a portion of elective defer22 rals the employee is otherwise eligible to make under

23 the applicable retirement plan.

24 ‘‘(2) SEPARATE ACCOUNTING REQUIRED.—A

25 program shall not be treated as a qualified plus con-
25

•HR 4843 IH

1 tribution program unless the applicable retirement

2 plan—

3 ‘‘(A) establishes separate accounts (‘des4 ignated plus accounts’) for the designated plus

5 contributions of each employee and any earn6 ings properly allocable to the contributions, and

7 ‘‘(B) maintains separate recordkeeping

8 with respect to each account.

9 ‘‘(c) DEFINITIONS AND RULES RELATING TO DES10 IGNATED PLUS CONTRIBUTIONS.—For purposes of this

11 section—

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

13 term ‘designated plus contribution’ means any elec14 tive deferral which—

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

16 employee without regard to this section, and

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

18 and in such manner as the Secretary may pre19 scribe) as not being so excludable.

20 ‘‘(2) DESIGNATION LIMITS.—The amount of

21 elective deferrals which an employee may designate

22 under paragraph (1) shall not exceed the excess (if

23 any) of—

24 ‘‘(A) the maximum amount of elective de25 ferrals excludable from gross income of the em-
26

•HR 4843 IH

1 ployee for the taxable year (without regard to

2 this section), over

3 ‘‘(B) the aggregate amount of elective de4 ferrals of the employee for the taxable year

5 which the employee does not designate under

6 paragraph (1).

7 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

8 ‘‘(A) IN GENERAL.—A rollover contribu9 tion of any payment or distribution from a des10 ignated plus account which is otherwise allow11 able under this chapter may be made only if the

12 contribution is to—

13 ‘‘(i) another designated plus account

14 of the individual from whose account the

15 payment or distribution was made, or

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

17 ‘‘(B) COORDINATION WITH LIMIT.—Any

18 rollover contribution to a designated plus ac19 count under subparagraph (A) shall not be

20 taken into account for purposes of paragraph

21 (1).

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

23 title—
27

•HR 4843 IH

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

2 from a designated plus account shall not be includ3 ible in gross income.

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

5 of this subsection—

6 ‘‘(A) IN GENERAL.—The term ‘qualified

7 distribution’ has the meaning given such term

8 by section 408A(d)(2)(A) (without regard to

9 clause (iv) thereof).

10 ‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU11 SION PERIOD.—A payment or distribution from

12 a designated plus account shall not be treated

13 as a qualified distribution if such payment or

14 distribution is made within the 5-taxable-year

15 period beginning with the earlier of—

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

17 the individual made a designated plus con18 tribution to any designated plus account

19 established for such individual under the

20 same applicable retirement plan, or

21 ‘‘(ii) if a rollover contribution was

22 made to such designated plus account from

23 a designated plus account previously estab24 lished for such individual under another

25 applicable retirement plan, the first taxable
28

•HR 4843 IH

1 year for which the individual made a des2 ignated plus contribution to such pre3 viously established account.

4 ‘‘(C) DISTRIBUTIONS OF EXCESS DEFER5 RALS AND EARNINGS.—The term ‘qualified dis6 tribution’ shall not include any distribution of

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

8 any income on the excess deferral.

9 ‘‘(3) AGGREGATION RULES.—Section 72 shall

10 be applied separately with respect to distributions

11 and payments from a designated plus account and

12 other distributions and payments from the plan.

13 ‘‘(e) OTHER DEFINITIONS.—For purposes of this

14 section—

15 ‘‘(1) APPLICABLE RETIREMENT PLAN.—The

16 term ‘applicable retirement plan’ means—

17 ‘‘(A) an employees’ trust described in sec18 tion 401(a) which is exempt from tax under

19 section 501(a), and

20 ‘‘(B) a plan under which amounts are con21 tributed by an individual’s employer for an an22 nuity contract described in section 403(b).

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

24 deferral’ means any elective deferral described in

25 subparagraph (A) or (C) of section 402(g)(3).’’.
29

•HR 4843 IH

1 (b) EXCESS DEFERRALS.—Section 402(g) (relating

2 to limitation on exclusion for elective deferrals) is

3 amended—

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

5 following new sentence: ‘‘The preceding sentence

6 shall not apply to so much of such excess as does

7 not exceed the designated plus contributions of the

8 individual for the taxable year.’’; and

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

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

11 paragraph (2)(A).

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

13 402(c)(8) is amended by adding at the end the following:

14 ‘‘If any portion of an eligible rollover distribu15 tion is attributable to payments or distributions

16 from a designated plus account (as defined in

17 section 402A), an eligible retirement plan with

18 respect to such portion shall include only an19 other designated plus account and a Roth

20 IRA.’’.

21 (d) REPORTING REQUIREMENTS.—

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

23 amended by inserting ‘‘, including the amount of

24 designated plus contributions (as defined in section

25 402A)’’ before the comma at the end.
30

•HR 4843 IH

1 (2) INFORMATION.—Section 6047 is amended

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

3 by inserting after subsection (e) the following new

4 subsection:

5 ‘‘(f) DESIGNATED PLUS CONTRIBUTIONS.—The Sec6 retary shall require the plan administrator of each applica7 ble retirement plan (as defined in section 402A) to make

8 such returns and reports regarding designated plus con9 tributions (as so defined) to the Secretary, participants

10 and beneficiaries of the plan, and such other persons as

11 the Secretary may prescribe.’’.

12 (e) CONFORMING AMENDMENTS.—

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

14 the first sentence the following new sentence: ‘‘Such

15 term includes a rollover contribution described in

16 section 402A(c)(3)(A).’’.

17 (2) The table of sections for subpart A of part

18 I of subchapter D of chapter 1 is amended by insert19 ing after the item relating to section 402 the fol20 lowing new item:

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

21 (f) EFFECTIVE DATE.—The amendments made by

22 this section shall apply to taxable years beginning after

23 December 31, 2000.
31

•HR 4843 IH

1 TITLE III—ENHANCING

2 FAIRNESS FOR WOMEN

3 SEC. 301. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS

4 AGE 50 OR OVER.

5 (a) IN GENERAL.—Section 414 (relating to defini6 tions and special rules) is amended by adding at the end

7 the following new subsection:

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

9 AGE 50 OR OVER.—

10 ‘‘(1) IN GENERAL.—An applicable employer

11 plan shall not be treated as failing to meet any re12 quirement of this title solely because the plan per13 mits an eligible participant to make additional elec14 tive deferrals in any plan year.

15 ‘‘(2) LIMITATION ON AMOUNT OF ADDITIONAL

16 DEFERRALS.—

17 ‘‘(A) IN GENERAL.—A plan shall not per18 mit additional elective deferrals under para19 graph (1) for any year in an amount greater

20 than the lesser of—

21 ‘‘(i) $5,000, or

22 ‘‘(ii) the excess (if any) of—

23 ‘‘(I) the participant’s compensa24 tion for the year, over
32

•HR 4843 IH

1 ‘‘(II) any other elective deferrals

2 of the participant for such year which

3 are made without regard to this sub4 section.

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

6 case of any contribution to a plan under paragraph

7 (1)—

8 ‘‘(A) such contribution shall not, with re9 spect to the year in which the contribution is

10 made—

11 ‘‘(i) be subject to any otherwise appli12 cable limitation contained in section

13 402(g), 402(h), 403(b), 404(a), 404(h),

14 408, 415, or 457, or

15 ‘‘(ii) be taken into account in applying

16 such limitations to other contributions or

17 benefits under such plan or any other such

18 plan, and

19 ‘‘(B) such plan shall not be treated as fail20 ing to meet the requirements of section

21 401(a)(4), 401(a)(26), 401(k)(3), 401(k)(11),

22 401(k)(12), 401(m), 403(b)(12), 408(k),

23 408(p), 410(b), or 416 by reason of the making

24 of (or the right to make) such contribution.
33

•HR 4843 IH

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

2 this subsection, the term ‘eligible participant’ means,

3 with respect to any plan year, a participant in a

4 plan—

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

6 the close of the plan year, and

7 ‘‘(B) with respect to whom no other elec8 tive deferrals may (without regard to this sub9 section) be made to the plan for the plan year

10 by reason of the application of any limitation or

11 other restriction described in paragraph (3) or

12 contained in the terms of the plan.

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

14 purposes of this subsection—

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

16 term ‘applicable employer plan’ means—

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

18 section 401(a) which is exempt from tax

19 under section 501(a),

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

21 contributed by an individual’s employer for

22 an annuity contract described in section

23 403(b),

24 ‘‘(iii) an eligible deferred compensa25 tion plan under section 457 of an eligible
34

•HR 4843 IH

1 employer as defined in section

2 457(e)(1)(A), and

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

5 ‘‘(B) ELECTIVE DEFERRAL.—The term

6 ‘elective deferral’ has the meaning given such

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

8 ‘‘(C) EXCEPTION FOR SECTION 457

9 PLANS.—This subsection shall not apply to an

10 applicable employer plan described in subpara11 graph (A)(iii) for any year to which section

12 457(b)(3) 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

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

18 same manner as adjustments under section

19 415(d); except that the base period shall be the

20 calendar quarter beginning July 1, 2004, and

21 any increase which is not a multiple of $500

22 shall be rounded to the next lowest multiple of

23 $500.’’.
35

•HR 4843 IH

1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to contributions in taxable years

3 beginning after December 31, 2000.

4 SEC. 302. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF

5 EMPLOYEES TO DEFINED CONTRIBUTION

6 PLANS.

7 (a) EQUITABLE TREATMENT.—

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

9 415(c)(1) (relating to limitation for defined con10 tribution plans) is amended by striking ‘‘25 percent’’

11 and inserting ‘‘100 percent’’.

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

13 403(b) is amended—

14 (A) by striking ‘‘the exclusion allowance

15 for such taxable year’’ in paragraph (1) and in16 serting ‘‘the applicable limit under section

17 415’’;

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

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

20 by a former employee after the fifth taxable

21 year following the taxable year in which such

22 employee was terminated’’ before the period at

23 the end of the second sentence of paragraph

24 (3).

25 (3) CONFORMING AMENDMENTS.—
36

•HR 4843 IH

1 (A) Subsection (f) of section 72 is amend2 ed by striking ‘‘section 403(b)(2)(D)(iii))’’ and

3 inserting ‘‘section 403(b)(2)(D)(iii), as in effect

4 before the enactment of the Comprehensive Re5 tirement Security and Pension Reform Act of

6 2000)’’.

7 (B) Section 404(a)(10)(B) is amended by

8 striking ‘‘, the exclusion allowance under sec9 tion 403(b)(2),’’.

10 (C) Section 415(a)(2) is amended by strik11 ing ‘‘, and the amount of the contribution for

12 such portion shall reduce the exclusion allow13 ance as provided in section 403(b)(2)’’.

14 (D) Section 415(c)(3) is amended by add15 ing at the end the following new subparagraph:

16 ‘‘(E) ANNUITY CONTRACTS.—In the case

17 of an annuity contract described in section

18 403(b), the term ‘participant’s compensation’

19 means the participant’s includible compensation

20 determined under section 403(b)(3).’’.

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

22 paragraph (4).

23 (F) Section 415(c)(7) is amended to read

24 as follows:
37

•HR 4843 IH

1 ‘‘(7) CERTAIN CONTRIBUTIONS BY CHURCH

2 PLANS NOT TREATED AS EXCEEDING LIMIT.—

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

4 other provision of this subsection, at the elec5 tion of a participant who is an employee of a

6 church or a convention or association of church7 es, including an organization described in sec8 tion 414(e)(3)(B)(ii), contributions and other

9 additions for an annuity contract or retirement

10 income account described in section 403(b) with

11 respect to such participant, when expressed as

12 an annual addition to such participant’s ac13 count, shall be treated as not exceeding the lim14 itation of paragraph (1) if such annual addition

15 is not in excess of $10,000.

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

17 The total amount of additions with respect to

18 any participant which may be taken into ac19 count for purposes of this subparagraph for all

20 years may not exceed $40,000.

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

22 this paragraph, the term ‘annual addition’ has

23 the meaning given such term by paragraph

24 (2).’’.
38

•HR 4843 IH

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

2 (as redesignated by section 211) is amended by

3 inserting before the period at the end the fol4 lowing: ‘‘(as in effect before the enactment of

5 the Comprehensive Retirement Security and

6 Pension Reform Act of 2000)’’.

7 (3) EFFECTIVE DATE.—The amendments made

8 by this subsection shall apply to years beginning

9 after December 31, 2000.

10 (b) SPECIAL RULES FOR SECTIONS 403(b) AND

11 408.—

12 (1) IN GENERAL.—Subsection (k) of section

13 415 is amended by adding at the end the following

14 new paragraph:

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

16 408.—For purposes of this section, any annuity con17 tract described in section 403(b) for the benefit of

18 a participant shall be treated as a defined contribu19 tion plan maintained by each employer with respect

20 to which the participant has the control required

21 under subsection (b) or (c) of section 414 (as modi22 fied by subsection (h)). For purposes of this section,

23 any contribution by an employer to a simplified em24 ployee pension plan for an individual for a taxable

25 year shall be treated as an employer contribution to
39

•HR 4843 IH

1 a defined contribution plan for such individual for

2 such year.’’.

3 (2) EFFECTIVE DATE.—

4 (A) IN GENERAL.—The amendment made

5 by paragraph (1) shall apply to limitation years

6 beginning after December 31, 1999.

7 (B) EXCLUSION ALLOWANCE.—Effective

8 for limitation years beginning in 2000, in the

9 case of any annuity contract described in sec10 tion 403(b) of the Internal Revenue Code of

11 1986, the amount of the contribution disquali12 fied by reason of section 415(g) of such Code

13 shall reduce the exclusion allowance as provided

14 in section 403(b)(2) of such Code.

15 (3) MODIFICATION OF 403(b) EXCLUSION AL16 LOWANCE TO CONFORM TO 415 MODIFICATION.—The

17 Secretary of the Treasury shall modify the regula18 tions regarding the exclusion allowance under section

19 403(b)(2) of the Internal Revenue Code of 1986 to

20 render void the requirement that contributions to a

21 defined benefit pension plan be treated as previously

22 excluded amounts for purposes of the exclusion al23 lowance. For taxable years beginning after Decem24 ber 31, 1999, such regulations shall be applied as if

25 such requirement were void.
40

•HR 4843 IH

1 (c) DEFERRED COMPENSATION PLANS OF STATE

2 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI3 ZATIONS.—

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

5 457(b)(2) (relating to salary limitation on eligible

6 deferred compensation plans) is amended by striking

‘‘331 7 ⁄3 percent’’ and inserting ‘‘100 percent’’.

8 (2) EFFECTIVE DATE.—The amendment made

9 by this subsection shall apply to years beginning

10 after December 31, 2000.

11 SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER

12 MATCHING CONTRIBUTIONS.

13 (a) IN GENERAL.—Section 411(a) (relating to min14 imum vesting standards) is amended—

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

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

17 plan’’; and

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

19 ‘‘(12) FASTER VESTING FOR MATCHING CON20 TRIBUTIONS.—In the case of matching contributions

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

22 shall be applied—

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

24 in subparagraph (A), and
41

•HR 4843 IH

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

2 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

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

3 (b) EFFECTIVE DATES.—

4 (1) IN GENERAL.—Except as provided in para5 graph (2), the amendments made by this section

6 shall apply to contributions for plan years beginning

7 after December 31, 2000.

8 (2) COLLECTIVE BARGAINING AGREEMENTS.—

9 In the case of a plan maintained pursuant to one or

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

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

13 amendments made by this section shall not apply to

14 contributions on behalf of employees covered by any

15 such agreement for plan years beginning before the

16 earlier of—

17 (A) the later of—

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

19 collective bargaining agreements termi20 nates (determined without regard to any

21 extension thereof on or after such date of

22 the enactment); or
42

•HR 4843 IH

1 (ii) January 1, 2001; or

2 (B) January 1, 2005.

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

4 plan, the amendments made by this section shall not

5 apply to any employee before the date that such em6 ployee has 1 hour of service under such plan in any

7 plan year to which the amendments made by this

8 section apply.

9 SEC. 304. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU10 TION RULES.

11 (a) SIMPLIFICATION AND FINALIZATION OF MIN12 IMUM DISTRIBUTION REQUIREMENTS.—

13 (1) IN GENERAL.—The Secretary of the Treas14 ury shall—

15 (A) simplify and finalize the regulations re16 lating to minimum distribution requirements

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

18 403(b)(10), and 457(d)(2) of the Internal Rev19 enue Code of 1986; and

20 (B) modify such regulations to—

21 (i) reflect current life expectancy; and

22 (ii) revise the required distribution

23 methods so that, under reasonable assump24 tions, the amount of the required minimum
43

•HR 4843 IH

1 distribution does not decrease over a par2 ticipant’s life expectancy.

3 (2) FRESH START.—Notwithstanding subpara4 graph (D) of section 401(a)(9) of such Code, during

5 the first year that regulations are in effect under

6 this subsection, required distributions for future

7 years may be redetermined to reflect changes under

8 such regulations. Such redetermination shall include

9 the opportunity to choose a new designated bene10 ficiary and to elect a new method of calculating life

11 expectancy.

12 (3) EFFECTIVE DATE FOR REGULATIONS.—

13 Regulations referred to in paragraph (1) shall be ef14 fective for years beginning after December 31, 2000,

15 and shall apply in such years without regard to

16 whether an individual had previously begun receiving

17 minimum distributions.

18 (b) REPEAL OF RULE WHERE DISTRIBUTIONS HAD

19 BEGUN BEFORE DEATH OCCURS.—

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

21 401(a)(9) is amended by striking clause (i) and re22 designating clauses (ii), (iii), and (iv) as clauses (i),

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

24 (2) CONFORMING CHANGES.—
44

•HR 4843 IH

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

2 so redesignated) is amended—

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

4 the heading; and

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

6 employee’s interest has begun in accord7 ance with subparagraph (A)(ii)’’ and in8 serting ‘‘his entire interest has been dis9 tributed to him,’’.

10 (B) Clause (ii) of section 401(a)(9)(B) (as

11 so redesignated) is amended by striking ‘‘clause

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

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

14 so redesignated) is amended—

15 (i) by striking ‘‘clause (iii)(I)’’ and in16 serting ‘‘clause (ii)(I)’’;

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

18 subclause (I) and inserting ‘‘clause

19 (ii)(III)’’;

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

21 the employee would have attained the age

701 22 ⁄2,’’ in subclause (I) and inserting

23 ‘‘April 1 of the calendar year following the

24 calendar year in which the spouse attains

701 25 ⁄2,’’; and
45

•HR 4843 IH

1 (iv) by striking ‘‘the distributions to

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

3 inserting ‘‘his entire interest has been dis4 tributed to him,’’.

5 (3) EFFECTIVE DATE.—The amendments made

6 by this subsection shall apply to years beginning

7 after December 31, 2000.

8 (c) REDUCTION IN EXCISE TAX.—

9 (1) IN GENERAL.—Subsection (a) of section

10 4974 is amended by striking ‘‘50 percent’’ and in11 serting ‘‘10 percent’’.

12 (2) EFFECTIVE DATE.—The amendment made

13 by this subsection shall apply to years beginning

14 after December 31, 2000.

15 SEC. 305. CLARIFICATION OF TAX TREATMENT OF DIVISION

16 OF SECTION 457 PLAN BENEFITS UPON DI17 VORCE.

18 (a) IN GENERAL.—Section 414(p)(11) (relating to

19 application of rules to governmental and church plans) is

20 amended—

21 (1) by inserting ‘‘or an eligible deferred com22 pensation plan (within the meaning of section

23 457(b))’’ after ‘‘subsection (e))’’; and
46

•HR 4843 IH

1 (2) in the heading, by striking ‘‘GOVERN2 MENTAL AND CHURCH PLANS’’ and inserting ‘‘CER3 TAIN OTHER PLANS’’.

4 (b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE5 MENTS.—Paragraph (10) of section 414(p) is amended by

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

7 409(d), and section 457(d)’’.

8 (c) TAX TREATMENT OF PAYMENTS FROM A SEC9 TION 457 PLAN.—Subsection (p) of section 414 is amend10 ed by redesignating paragraph (12) as paragraph (13) and

11 inserting after paragraph (11) the following new para12 graph:

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

14 SECTION 457 PLAN.—If a distribution or payment

15 from an eligible deferred compensation plan de16 scribed in section 457(b) is made pursuant to a

17 qualified domestic relations order, rules similar to

18 the rules of section 402(e)(1)(A) shall apply to such

19 distribution or payment.’’.

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

21 this section shall apply to transfers, distributions, and

22 payments made after December 31, 2000.
47

•HR 4843 IH

1 SEC. 306. MODIFICATION OF SAFE HARBOR RELIEF FOR

2 HARDSHIP WITHDRAWALS FROM CASH OR

3 DEFERRED ARRANGEMENTS.

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

5 shall revise the regulations relating to hardship distribu6 tions under section 401(k)(2)(B)(i)(IV) of the Internal

7 Revenue Code of 1986 to provide that the period an em8 ployee is prohibited from making elective and employee

9 contributions in order for a distribution to be deemed nec10 essary to satisfy financial need shall be equal to 6 months.

11 (b) EFFECTIVE DATE.—The revised regulations

12 under subsection (a) shall apply to years beginning after

13 December 31, 2000.

14 TITLE IV—INCREASING PORT15 ABILITY FOR PARTICIPANTS

16 SEC. 401. ROLLOVERS ALLOWED AMONG VARIOUS TYPES

17 OF PLANS.

18 (a) ROLLOVERS FROM AND TO SECTION 457

19 PLANS.—

20 (1) ROLLOVERS FROM SECTION 457 PLANS.—

21 (A) IN GENERAL.—Section 457(e) (relat22 ing to other definitions and special rules) is

23 amended by adding at the end the following:

24 ‘‘(16) ROLLOVER AMOUNTS.—

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

26 eligible deferred compensation plan established
48

•HR 4843 IH

1 and maintained by an employer described in

2 subsection (e)(1)(A), if—

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

4 credit of an employee in such plan is paid

5 to such employee in an eligible rollover dis6 tribution (within the meaning of section

7 402(c)(4) without regard to subparagraph

8 (C) thereof),

9 ‘‘(ii) the employee transfers any por10 tion of the property such employee receives

11 in such distribution to an eligible retire12 ment plan described in section

13 402(c)(8)(B), and

14 ‘‘(iii) in the case of a distribution of

15 property other than money, the amount so

16 transferred consists of the property distrib17 uted,

18 then such distribution (to the extent so trans19 ferred) shall not be includible in gross income

20 for the taxable year in which paid.

21 ‘‘(B) CERTAIN RULES MADE APPLICA22 BLE.—The rules of paragraphs (2) through (7)

23 (other than paragraph (4)(C)) and (9) of sec24 tion 402(c) and section 402(f) shall apply for

25 purposes of subparagraph (A).
49

•HR 4843 IH

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

2 paragraph shall be reported to the Secretary in

3 the same manner as rollovers from qualified re4 tirement plans (as defined in section

5 4974(c)).’’.

6 (B) DEFERRAL LIMIT DETERMINED WITH7 OUT REGARD TO ROLLOVER AMOUNTS.—Section

8 457(b)(2) (defining eligible deferred compensa9 tion plan) is amended by inserting ‘‘(other than

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

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

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

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

14 period at the end of subparagraph (B) and in15 serting ‘‘, and’’, and by inserting after subpara16 graph (B) the following:

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

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

19 the plan meets requirements similar to the re20 quirements of section 401(a)(31).

21 Any amount transferred in a direct trustee-to-trust22 ee transfer in accordance with section 401(a)(31)

23 shall not be includible in gross income for the tax24 able year of transfer.’’.

25 (D) WITHHOLDING.—
50

•HR 4843 IH

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

2 is amended by adding at the end the fol3 lowing:

4 ‘‘(E) under or to an eligible deferred com5 pensation plan which, at the time of such pay6 ment, is a plan described in section 457(b)

7 maintained by an employer described in section

8 457(e)(1)(A); or’’.

9 (ii) Paragraph (3) of section 3405(c)

10 is amended to read as follows:

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

12 purposes of this subsection, the term ‘eligible roll13 over distribution’ has the meaning given such term

14 by section 402(f)(2)(A).’’.

15 (iii) LIABILITY FOR WITHHOLDING.—

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

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

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

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

20 by adding at the end the following:

21 ‘‘(iv) section 457(b).’’.

22 (2) ROLLOVERS TO SECTION 457 PLANS.—

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

24 (defining eligible retirement plan) is amended

25 by striking ‘‘and’’ at the end of clause (iii), by
51

•HR 4843 IH

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

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

3 (iv) the following new clause:

4 ‘‘(v) an eligible deferred compensation

5 plan described in section 457(b) of an em6 ployer described in section 457(e)(1)(A).’’.

7 (B) SEPARATE ACCOUNTING.—Section

8 402(c) is amended by adding at the end the fol9 lowing new paragraph:

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

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

12 separately account for amounts rolled into such plan

13 from eligible retirement plans not described in such

14 clause, the plan described in such clause may not ac15 cept transfers or rollovers from such retirement

16 plans.’’.

17 (C) 10 PERCENT ADDITIONAL TAX.—Sub18 section (t) of section 72 (relating to 10-percent

19 additional tax on early distributions from quali20 fied retirement plans) is amended by adding at

21 the end the following new paragraph:

22 ‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SEC23 TION 457 PLANS.—For purposes of this subsection,

24 a distribution from an eligible deferred compensation

25 plan (as defined in section 457(b)) of an employer
52

•HR 4843 IH

1 described in section 457(e)(1)(A) shall be treated as

2 a distribution from a qualified retirement plan de3 scribed in 4974(c)(1) to the extent that such dis4 tribution is attributable to an amount transferred to

5 an eligible deferred compensation plan from a quali6 fied retirement plan (as defined in section

7 4974(c)).’’.

8 (b) ALLOWANCE OF ROLLOVERS FROM AND TO 403

9 (b) PLANS.—

10 (1) ROLLOVERS FROM SECTION 403 (b)

11 PLANS.—Section 403(b)(8)(A)(ii) (relating to roll12 over amounts) is amended by striking ‘‘such dis13 tribution’’ and all that follows and inserting ‘‘such

14 distribution to an eligible retirement plan described

15 in section 402(c)(8)(B), and’’.

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

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

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

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

20 the period at the end of clause (v) and inserting ‘‘,

21 and’’, and by inserting after clause (v) the following

22 new clause:

23 ‘‘(vi) an annuity contract described in

24 section 403(b).’’.
53

•HR 4843 IH

1 (c) EXPANDED EXPLANATION TO RECIPIENTS OF

2 ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section

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

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

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

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

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

14 from the plan making such distribution.’’.

15 (d) SPOUSAL ROLLOVERS.—Section 402(c)(9) (relat16 ing to rollover where spouse receives distribution after

17 death of employee) is amended by striking ‘‘; except that’’

18 and all that follows up to the end period.

19 (e) CONFORMING AMENDMENTS.—

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

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

22 408(d)(3), and 457(e)(16)’’.

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

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

25 457(e)(16)’’.
54

•HR 4843 IH

1 (3) Section 401(a)(31)(B) is amended by strik2 ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),

3 403(b)(8), and 457(e)(16)’’.

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

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

6 403(a)’’ and inserting ‘‘, paragraph (4) of section

7 403(a), subparagraph (A) of section 403(b)(8), or

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

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

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

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

12 402(f)(1) are amended by striking ‘‘another eligible

13 retirement plan’’ and inserting ‘‘an eligible retire14 ment plan’’.

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

16 amended to read as follows:

17 ‘‘(B) CERTAIN RULES MADE APPLICA18 BLE.—The rules of paragraphs (2) through (7)

19 and (9) of section 402(c) and section 402(f)

20 shall apply for purposes of subparagraph (A),

21 except that section 402(f) shall be applied to

22 the payor in lieu of the plan administrator.’’.

23 (8) Section 408(a)(1) is amended by striking

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

25 457(e)(16)’’.
55

•HR 4843 IH

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

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

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

4 457(e)(16)’’.

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

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

7 457(e)(16)’’.

8 (11) Section 4973(b)(1)(A) is amended by

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

10 457(e)(16)’’.

11 (f) EFFECTIVE DATE; SPECIAL RULE.—

12 (1) EFFECTIVE DATE.—The amendments made

13 by this section shall apply to distributions after De14 cember 31, 2000.

15 (2) SPECIAL RULE.—Notwithstanding any other

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

17 section 1122 of the Tax Reform Act of 1986 shall

18 not apply to any distribution from an eligible retire19 ment plan (as defined in clause (iii) or (iv) of section

20 402(c)(8)(B) of the Internal Revenue Code of 1986)

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

22 such plan on behalf of such individual which is per23 mitted solely by reason of any amendment made by

24 this section.
56

•HR 4843 IH

1 SEC. 402. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE2 MENT PLANS.

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

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

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

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

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

9 paid into an eligible retirement plan for

10 the benefit of such individual not later

11 than the 60th day after the date on which

12 the payment or distribution is received, ex13 cept that the maximum amount which may

14 be paid into such plan may not exceed the

15 portion of the amount received which is in16 cludible in gross income (determined with17 out regard to this paragraph).

18 For purposes of clause (ii), the term ‘eligible re19 tirement plan’ means an eligible retirement plan

20 described in clause (iii), (iv), (v), or (vi) of sec21 tion 402(c)(8)(B).’’.

22 (b) CONFORMING AMENDMENTS.—

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

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

25 ‘‘section 408(d)(3)(A)(ii)’’.
57

•HR 4843 IH

1 (2) Clause (i) of section 408(d)(3)(D) is amend2 ed by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i)

3 or (ii)’’.

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

5 amended to read as follows:

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

7 the case of any payment or distribution out of

8 a simple retirement account (as defined in sub9 section (p)) to which section 72(t)(6) applies,

10 this paragraph shall not apply unless such pay11 ment or distribution is paid into another simple

12 retirement account.’’.

13 (c) EFFECTIVE DATE; SPECIAL RULE.—

14 (1) EFFECTIVE DATE.—The amendments made

15 by this section shall apply to distributions after De16 cember 31, 2000.

17 (2) SPECIAL RULE.—Notwithstanding any other

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

19 section 1122 of the Tax Reform Act of 1986 shall

20 not apply to any distribution from an eligible retire21 ment plan (as defined in clause (iii) or (iv) of section

22 402(c)(8)(B) of the Internal Revenue Code of 1986)

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

24 such plan on behalf of such individual which is per-
58

•HR 4843 IH

1 mitted solely by reason of the amendments made by

2 this section.

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

4 (a) ROLLOVERS FROM EXEMPT TRUSTS.—Para5 graph (2) of section 402(c) (relating to maximum amount

6 which may be rolled over) is amended by adding at the

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

8 to such distribution to the extent—

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

10 trustee-to-trustee transfer to a qualified trust

11 which is part of a plan which is a defined con12 tribution plan and which agrees to separately

13 account for amounts so transferred, including

14 separately accounting for the portion of such

15 distribution which is includible in gross income

16 and the portion of such distribution which is

17 not so includible, or

18 ‘‘(B) such portion is transferred to an eli19 gible retirement plan described in clause (i) or

20 (ii) of paragraph (8)(B).’’.

21 (b) OPTIONAL DIRECT TRANSFER OF ELIGIBLE

22 ROLLOVER DISTRIBUTIONS.—Subparagraph (B) of sec23 tion 401(a)(31) (relating to limitation) is amended by add24 ing at the end the following: ‘‘The preceding sentence shall
59

•HR 4843 IH

1 not apply to such distribution if the plan to which such

2 distribution is transferred—

3 ‘‘(i) agrees to separately account for

4 amounts so transferred, including sepa5 rately accounting for the portion of such

6 distribution which is includible in gross in7 come and the portion of such distribution

8 which is not so includible, or

9 ‘‘(ii) is an eligible retirement plan de10 scribed in clause (i) or (ii) of section

11 402(c)(8)(B).’’.

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

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

14 for applying section 72) is amended by inserting at the

15 end the following:

16 ‘‘(H) APPLICATION OF SECTION 72.—

17 ‘‘(i) IN GENERAL.—If—

18 ‘‘(I) a distribution is made from

19 an individual retirement plan, and

20 ‘‘(II) a rollover contribution is

21 made to an eligible retirement plan

22 described in section 402(c)(8)(B)(iii),

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

24 part of such distribution,
60

•HR 4843 IH

1 then, notwithstanding paragraph (2), the

2 rules of clause (ii) shall apply for purposes

3 of applying section 72.

4 ‘‘(ii) APPLICABLE RULES.—In the

5 case of a distribution described in clause

6 (i)—

7 ‘‘(I) section 72 shall be applied

8 separately to such distribution,

9 ‘‘(II) notwithstanding the pro

10 rata allocation of income on, and in11 vestment in, the contract to distribu12 tions under section 72, the portion of

13 such distribution rolled over to an eli14 gible retirement plan described in

15 clause (i) shall be treated as from in16 come on the contract (to the extent of

17 the aggregate income on the contract

18 from all individual retirement plans of

19 the distributee), and

20 ‘‘(III) appropriate adjustments

21 shall be made in applying section 72

22 to other distributions in such taxable

23 year and subsequent taxable years.’’.
61

•HR 4843 IH

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

2 this section shall apply to distributions made after Decem3 ber 31, 2000.

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

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

6 402(c) (relating to transfer must be made within 60 days

7 of receipt) is amended to read as follows:

8 ‘‘(3) TRANSFER MUST BE MADE WITHIN 60

9 DAYS OF RECEIPT.—

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

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

12 apply to any transfer of a distribution made

13 after the 60th day following the day on which

14 the distributee received the property distrib15 uted.

16 ‘‘(B) HARDSHIP EXCEPTION.—The Sec17 retary may waive the 60-day requirement under

18 subparagraph (A) where the failure to waive

19 such requirement would be against equity or

20 good conscience, including casualty, disaster, or

21 other events beyond the reasonable control of

22 the individual subject to such requirement.’’.

23 (b) IRAS.—Paragraph (3) of section 408(d) (relating

24 to rollover contributions), as amended by section 403, is
62

•HR 4843 IH

1 amended by adding after subparagraph (H) the following

2 new subparagraph:

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

4 The Secretary may waive the 60-day require5 ment under subparagraphs (A) and (D) where

6 the failure to waive such requirement would be

7 against equity or good conscience, including

8 casualty, disaster, or other events beyond the

9 reasonable control of the individual subject to

10 such requirement.’’.

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

12 this section shall apply to distributions after December 31,

13 2000.

14 SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.

15 (a) PLAN TRANSFERS.—

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

17 411(d) (relating to accrued benefit not to be de18 creased by amendment) is amended by adding at the

19 end the following:

20 ‘‘(D) PLAN TRANSFERS.—

21 ‘‘(i) IN GENERAL.—A defined con22 tribution plan (in this subparagraph re23 ferred to as the ‘transferee plan’) shall not

24 be treated as failing to meet the require25 ments of this subsection merely because
63

•HR 4843 IH

1 the transferee plan does not provide some

2 or all of the forms of distribution pre3 viously available under another defined

4 contribution plan (in this subparagraph re5 ferred to as the ‘transferor plan’) to the

6 extent that—

7 ‘‘(I) the forms of distribution

8 previously available under the trans9 feror plan applied to the account of a

10 participant or beneficiary under the

11 transferor plan that was transferred

12 from the transferor plan to the trans13 feree plan pursuant to a direct trans14 fer rather than pursuant to a distribu15 tion 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,
64

•HR 4843 IH

1 ‘‘(IV) the election described in

2 subclause (III) was made after the

3 participant or beneficiary received a

4 notice 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

10 transfer is made with the consent of

11 the participant’s spouse (if any), and

12 such consent meets requirements simi13 lar to the requirements imposed by

14 section 417(a)(2), and

15 ‘‘(VI) the transferee plan allows

16 the participant or beneficiary de17 scribed in subclause (III) to receive

18 any distribution to which the partici19 pant or beneficiary is entitled under

20 the transferee plan in the form of a

21 single sum distribution.

22 ‘‘(ii) EXCEPTION.—Clause (i) shall

23 apply to plan mergers and other trans24 actions having the effect of a direct trans25 fer, including consolidations of benefits at-
65

•HR 4843 IH

1 tributable to different employers within a

2 multiple 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

7 this section merely because of the elimination of

8 a 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

17 based on the same or greater portion of

18 the participant’s account as the form of

19 distribution being eliminated.’’.

20 (2) EFFECTIVE DATE.—The amendment made

21 by this subsection shall apply to years beginning

22 after 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
66

•HR 4843 IH

1 benefit not to be decreased by amendment) is

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

3 regulations provide that this subparagraph shall not

4 apply to any plan amendment that does not ad5 versely affect the rights of participants in a material

6 manner.’’.

7 (2) SECRETARY DIRECTED.—Not later than

8 December 31, 2001, the Secretary of the Treasury

9 is directed to issue final regulations under section

10 411(d)(6) of the Internal Revenue Code of 1986, in11 cluding the regulations required by the amendments

12 made by this subsection. Such regulations shall

13 apply to plan years beginning after December 31,

14 2001, or such earlier date as is specified by the Sec15 retary of the Treasury.

16 SEC. 406. RATIONALIZATION OF RESTRICTIONS ON DIS17 TRIBUTIONS.

18 (a) MODIFICATION OF SAME DESK EXCEPTION.—

19 (1) SECTION 401(k).—

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

21 qualified cash or deferred arrangements) is

22 amended by striking ‘‘separation from service’’

23 and inserting ‘‘severance from employment’’.

24 (B) Subparagraph (A) of section

25 401(k)(10) (relating to distributions upon ter-
67

•HR 4843 IH

1 mination of plan or disposition of assets or sub2 sidiary) is amended to read as follows:

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

4 this subparagraph is the termination of the

5 plan without establishment or maintenance of

6 another defined contribution plan (other than

7 an employee stock ownership plan as defined in

8 section 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’’.
68

•HR 4843 IH

1 (B) The heading for paragraph (11) of

2 section 403(b) is amended by striking ‘‘SEPARA3 TION FROM SERVICE’’ and inserting ‘‘SEVER4 ANCE 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

10 this section shall apply to distributions after December 31,

11 2000.

12 SEC. 407. PURCHASE OF SERVICE CREDIT IN GOVERN13 MENTAL DEFINED BENEFIT PLANS.

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

15 amended by adding at the end the following new para16 graph:

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

18 PURCHASE PERMISSIVE SERVICE CREDIT.—No

19 amount shall be includible in gross income by reason

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

21 benefit governmental plan (as defined in section

22 414(d)) if such transfer is—

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

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

25 under such plan, or
69

•HR 4843 IH

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

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

3 thereof.’’.

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

5 amended by adding after paragraph (16) the following

6 new 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

11 benefit governmental plan (as defined in section

12 414(d)) if such transfer is—

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

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

15 under such plan, or

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

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

18 thereof.’’.

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

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

21 December 31, 2000.
70

•HR 4843 IH

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 with11 out regard to that portion of such benefit which

12 is attributable to rollover contributions (and

13 earnings allocable thereto). For purposes of this

14 subparagraph, 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

24 this section shall apply to distributions after December 31,

25 2000.
71

•HR 4843 IH

1 SEC. 409. MINIMUM DISTRIBUTION AND INCLUSION RE2 QUIREMENTS FOR SECTION 457 PLANS.

3 (a) MINIMUM DISTRIBUTION REQUIREMENTS.—

4 Paragraph (2) of section 457(d) (relating to distribution

5 requirements) is amended to read as follows:

6 ‘‘(2) MINIMUM DISTRIBUTION REQUIRE7 MENTS.—A plan meets the minimum distribution re8 quirements of this paragraph if such plan meets the

9 requirements of section 401(a)(9).’’.

10 (b) INCLUSION IN GROSS INCOME.—

11 (1) YEAR OF INCLUSION.—Subsection (a) of

12 section 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 compensa17 tion plan, and any income attributable to the

18 amounts so deferred, shall be includible in gross in19 come only for the taxable year in which such com20 pensation or other income—

21 ‘‘(A) is paid to the participant or other

22 beneficiary, in the case of a plan of an eligible

23 employer 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
72

•HR 4843 IH

1 of a plan of an eligible employer described in

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

3 ‘‘(2) SPECIAL RULE FOR ROLLOVER

4 AMOUNTS.—To the extent provided in section

5 72(t)(9), section 72(t) shall apply to any amount in6 cludible in gross 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 amend10 ed to read as follows:

11 ‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION

12 PLANS NOT TREATED AS MADE AVAILABLE BY REA13 SON OF CERTAIN ELECTIONS, ETC.—In the case of

14 an eligible deferred compensation plan of an em15 ployer described in subsection (e)(1)(B)—’’.

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

17 at 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

22 subsection solely by reason of making a distribution

23 described in subsection (e)(9)(A).’’.
73

•HR 4843 IH

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

2 this section shall apply to distributions after December 31,

3 2000.

4 TITLE V—STRENGTHENING PEN5 SION SECURITY AND EN6 FORCEMENT

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

8 FUNDING LIMIT.

9 (a) IN GENERAL.—Section 412(c)(7) (relating to

10 full-funding limitation) is amended—

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

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

13 plan years beginning before January 1, 2004, the

14 applicable percentage’’; and

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

16 follows:

17 ‘‘(F) APPLICABLE PERCENTAGE.—For

18 purposes of subparagraph (A)(i)(I), the applica19 ble percentage shall be determined in accord20 ance with the following table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

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

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

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

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

22 this section shall apply to plan years beginning after De23 cember 31, 2000.
74

•HR 4843 IH

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 sec16 tion 4041(b)(2)(A)(i)(II) of the Employee

17 Retirement Income Security Act of 1974

18 were the last day of the plan year).

19 ‘‘(ii) PLANS WITH LESS THAN 100

20 PARTICIPANTS.—For purposes of this sub21 paragraph, in the case of a plan which has

22 less than 100 participants for the plan

23 year, termination liability shall not include

24 the liability attributable to benefit in25 creases for highly compensated employees

26 (as defined in section 414(q)) resulting
75

•HR 4843 IH

1 from a plan amendment which is made or

2 becomes effective, whichever is later, within

3 the last 2 years before the termination

4 date.

5 ‘‘(iii) RULE FOR DETERMINING NUM6 BER OF PARTICIPANTS.—For purposes of

7 determining whether a plan has more than

8 100 participants, all defined benefit plans

9 maintained by the same employer (or any

10 member of such employer’s controlled

11 group (within the meaning of section

12 412(l)(8)(C))) shall be treated as one plan,

13 but only employees of such member or em14 ployer shall be taken into account.

15 ‘‘(iv) PLANS ESTABLISHED AND MAIN16 TAIN BY PROFESSIONAL SERVICE EMPLOY17 ERS.—Clause (i) shall not apply to a plan

18 described in section 4021(b)(13) of the

19 Employee Retirement Income Security Act

20 of 1974.’’.

21 (b) CONFORMING AMENDMENT.—Paragraph (6) of

22 section 4972(c) is amended to read as follows:

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

24 of nondeductible contributions for any taxable year,

25 there shall not be taken into account so much of the
76

•HR 4843 IH

1 contributions to one or more defined contribution

2 plans which are not deductible when contributed

3 solely because of section 404(a)(7) as does not ex4 ceed the greater of—

5 ‘‘(A) the amount of contributions not in

6 excess of 6 percent of compensation (within the

7 meaning of section 404(a)) paid or accrued

8 (during the taxable year for which the contribu9 tions were made) to beneficiaries under the

10 plans, or

11 ‘‘(B) the sum of—

12 ‘‘(i) the amount of contributions de13 scribed in section 401(m)(4)(A), plus

14 ‘‘(ii) the amount of contributions de15 scribed in section 402(g)(3)(A).

16 For purposes of this paragraph, the deductible limits

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

18 amounts contributed to a defined benefit plan and

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

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

21 this section shall apply to plan years beginning after De22 cember 31, 2000.
77

•HR 4843 IH

1 SEC. 503. EXCISE TAX RELIEF FOR SOUND PENSION FUND2 ING.

3 (a) IN GENERAL.—Subsection (c) of section 4972

4 (relating to nondeductible contributions) is amended by

5 adding at the end the following new paragraph:

6 ‘‘(7) DEFINED BENEFIT PLAN EXCEPTION.—In

7 determining the amount of nondeductible contribu8 tions for any taxable year, an employer may elect for

9 such year not to take into account any contributions

10 to a defined benefit plan except to the extent that

11 such contributions exceed the full-funding limitation

12 (as defined in section 412(c)(7), determined without

13 regard to subparagraph (A)(i)(I) thereof). For pur14 poses of this paragraph, the deductible limits under

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

16 contributed to defined contribution plans and then

17 to amounts described in this paragraph. If an em18 ployer makes an election under this paragraph for a

19 taxable year, paragraph (6) shall not apply to such

20 employer for such taxable year.’’.

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

22 this section shall apply to years beginning after December

23 31, 2000.
78

•HR 4843 IH

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

2 DEFINED BENEFIT PLANS SIGNIFICANTLY

3 REDUCING FUTURE BENEFIT ACCRUALS.

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

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

6 following new section:

7 ‘‘SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING

8 BENEFIT ACCRUALS TO SATISFY NOTICE RE9 QUIREMENTS.

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

11 a tax on the failure of any applicable pension plan to meet

12 the requirements of subsection (e) with respect to any ap13 plicable individual.

14 ‘‘(b) AMOUNT OF TAX.—

15 ‘‘(1) IN GENERAL.—The amount of the tax im16 posed by subsection (a) on any failure with respect

17 to any applicable individual shall be $100 for each

18 day in the noncompliance period with respect to such

19 failure.

20 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes

21 of this section, the term ‘noncompliance period’

22 means, with respect to any failure, the period begin23 ning on the date the failure first occurs and ending

24 on the date the failure is corrected.

25 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
79

•HR 4843 IH

1 ‘‘(1) OVERALL LIMITATION FOR UNINTEN2 TIONAL FAILURES.—In the case of failures that are

3 due to reasonable cause and not to willful neglect,

4 the tax imposed by subsection (a) for failures during

5 the taxable year of the employer (or, in the case of

6 a multiemployer plan, the taxable year of the trust

7 forming part of the plan) shall not exceed $500,000.

8 For purposes of the preceding sentence, all multiem9 ployer plans of which the same trust forms a part

10 shall be treated as one plan. For purposes of this

11 paragraph, if not all persons who are treated as a

12 single employer for purposes of this section have the

13 same taxable year, the taxable years taken into ac14 count shall be determined under principles similar to

15 the principles of section 1561.

16 ‘‘(2) WAIVER BY SECRETARY.—In the case of a

17 failure which is due to reasonable cause and not to

18 willful neglect, the Secretary may waive part or all

19 of the tax imposed by subsection (a) to the extent

20 that the payment of such tax would be excessive rel21 ative to the failure involved.

22 ‘‘(d) LIABILITY FOR TAX.—The following shall be lia23 ble for the tax imposed by subsection (a):

24 ‘‘(1) In the case of a plan other than a multi25 employer plan, the employer.
80

•HR 4843 IH

1 ‘‘(2) In the case of a multiemployer plan, the

2 plan.

3 ‘‘(e) NOTICE REQUIREMENTS FOR PLANS SIGNIFI4 CANTLY REDUCING BENEFIT ACCRUALS.—

5 ‘‘(1) IN GENERAL.—If an applicable pension

6 plan is amended to provide for a significant reduc7 tion in the rate of future benefit accrual, the plan

8 administrator shall provide written notice to each

9 applicable individual (and to each employee organi10 zation representing applicable individuals).

11 ‘‘(2) NOTICE.—The notice required by para12 graph (1) shall be written in a manner calculated to

13 be understood by the average plan participant and

14 shall provide sufficient information (as determined

15 in accordance with regulations prescribed by the

16 Secretary) to allow applicable individuals to under17 stand the effect of the plan amendment.

18 ‘‘(3) TIMING OF NOTICE.—Except as provided

19 in regulations, the notice required by paragraph (1)

20 shall be provided within a reasonable time before the

21 effective date of the plan amendment.

22 ‘‘(4) DESIGNEES.—Any notice under paragraph

23 (1) may be provided to a person designated, in writ24 ing, by the person to which it would otherwise be

25 provided.
81

•HR 4843 IH

1 ‘‘(5) NOTICE BEFORE ADOPTION OF AMEND2 MENT.—A plan shall not be treated as failing to

3 meet the requirements of paragraph (1) merely be4 cause notice is provided before the adoption of the

5 plan amendment if no material modification of the

6 amendment occurs before the amendment is adopt7 ed.

8 ‘‘(f) APPLICABLE INDIVIDUAL; APPLICABLE PEN9 SION PLAN.—For purposes of this section—

10 ‘‘(1) APPLICABLE INDIVIDUAL.—The term ‘ap11 plicable individual’ means, with respect to any plan

12 amendment—

13 ‘‘(A) any participant in the plan, and

14 ‘‘(B) any beneficiary who is an alternate

15 payee (within the meaning of section 414(p)(8))

16 under an applicable qualified domestic relations

17 order (within the meaning of section

18 414(p)(1)(A)),

19 who may reasonably be expected to be affected by

20 such plan amendment.

21 ‘‘(2) APPLICABLE PENSION PLAN.—The term

22 ‘applicable pension plan’ means—

23 ‘‘(A) any defined benefit plan, or

24 ‘‘(B) an individual account plan which is

25 subject to the funding standards of section 412,
82

•HR 4843 IH

1 which had 100 or more participants who had ac2 crued a benefit, or with respect to whom contribu3 tions were made, under the plan (whether or not

4 vested) as of the last day of the plan year preceding

5 the plan year in which the plan amendment becomes

6 effective. Such term shall not include a governmental

7 plan (within the meaning of section 414(d)) or a

8 church plan (within the meaning of section 414(e))

9 with respect to which the election provided by sec10 tion 410(d) has not been made.’’.

11 (b) CLERICAL AMENDMENT.—The table of sections

12 for chapter 43 is amended by adding at the end the fol13 lowing new item:

‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals

to satisfy notice requirements.’’.

14 (c) EFFECTIVE DATES.—

15 (1) IN GENERAL.—The amendments made by

16 this section shall apply to plan amendments taking

17 effect on or after the date of the enactment of this

18 Act.

19 (2) TRANSITION.—Until such time as the Sec20 retary of the Treasury issues regulations under sec21 tions 4980F(e)(2) and (3) of the Internal Revenue

22 Code of 1986 (as added by the amendments made

23 by this section), a plan shall be treated as meeting
83

•HR 4843 IH

1 the requirements of such sections if it makes a good

2 faith effort to comply with such requirements.

3 (3) SPECIAL RULE.—The period for providing

4 any notice required by the amendments made by this

5 section shall not end before the date which is 3

6 months after the date of the enactment of this Act.

7 SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER

8 SECTION 415.

9 (a) COMPENSATION LIMIT.—Paragraph (11) of sec10 tion 415(b) (relating to limitation for defined benefit

11 plans) is amended to read as follows:

12 ‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN13 MENTAL AND MULTIEMPLOYER PLANS.—In the case

14 of a governmental plan (as defined in section

15 414(d)) or a multiemployer plan (as defined in sec16 tion 414(f)), subparagraph (B) of paragraph (1)

17 shall not apply.’’.

18 (b) COMBINING AND AGGREGATION OF PLANS.—

19 (1) COMBINING OF PLANS.—Subsection (f) of

20 section 415 (relating to combining of plans) is

21 amended by adding at the end the following:

22 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER

23 PLANS.—Notwithstanding paragraph (1) and sub24 section (g), a multiemployer plan (as defined in sec25 tion 414(f)) shall not be combined or aggregated
84

•HR 4843 IH

1 with any other plan maintained by an employer for

2 purposes of applying the limitations established in

3 this section, except that such plan shall be combined

4 or aggregated with another plan which is not such

5 a multiemployer plan solely for purposes of deter6 mining whether such other plan meets the require7 ments of subsections (b)(1)(A) and (c).’’.

8 (2) CONFORMING AMENDMENT FOR AGGREGA9 TION OF PLANS.—Subsection (g) of section 415 (re10 lating to aggregation of plans) is amended by strik11 ing ‘‘The Secretary’’ and inserting ‘‘Except as pro12 vided in subsection (f)(3), the Secretary’’.

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

14 this section shall apply to years beginning after December

15 31, 2000.

16 SEC. 506. PROHIBITED ALLOCATIONS OF STOCK IN S COR17 PORATION ESOP.

18 (a) IN GENERAL.—Section 409 (relating to qualifica19 tions for tax credit employee stock ownership plans) is

20 amended by redesignating subsection (p) as subsection (q)

21 and by inserting after subsection (o) the following new

22 subsection:

23 ‘‘(p) PROHIBITED ALLOCATIONS OF SECURITIES IN

24 AN S CORPORATION.—
85

•HR 4843 IH

1 ‘‘(1) IN GENERAL.—An employee stock owner2 ship plan holding employer securities consisting of

3 stock in an S corporation shall provide that no por4 tion of the assets of the plan attributable to (or allo5 cable in lieu of) such employer securities may, dur6 ing a nonallocation year, accrue (or be allocated di7 rectly or indirectly under any plan of the employer

8 meeting the requirements of section 401(a)) for the

9 benefit of any disqualified person.

10 ‘‘(2) FAILURE TO MEET REQUIREMENTS.—

11 ‘‘(A) IN GENERAL.—If a plan fails to meet

12 the requirements of paragraph (1), the plan

13 shall be treated as having distributed to any

14 disqualified person the amount allocated to the

15 account of such person in violation of para16 graph (1) at the time of such allocation.

17 ‘‘(B) CROSS REFERENCE.—

‘‘For excise tax relating to violations of paragraph

(1) and ownership of synthetic equity, see section

4979A.

18 ‘‘(3) NONALLOCATION YEAR.—For purposes of

19 this subsection—

20 ‘‘(A) IN GENERAL.—The term ‘nonalloca21 tion year’ means any plan year of an employee

22 stock ownership plan if, at any time during

23 such plan year—
86

•HR 4843 IH

1 ‘‘(i) such plan holds employer securi2 ties consisting of stock in an S corpora3 tion, and

4 ‘‘(ii) disqualified persons own at least

5 50 percent of the number of shares of

6 stock in the S corporation.

7 ‘‘(B) ATTRIBUTION RULES.—For purposes

8 of subparagraph (A)—

9 ‘‘(i) IN GENERAL.—The rules of sec10 tion 318(a) shall apply for purposes of de11 termining ownership, except that—

12 ‘‘(I) in applying paragraph (1)

13 thereof, the members of an individ14 ual’s family shall include members of

15 the family described in paragraph

16 (4)(D), and

17 ‘‘(II) paragraph (4) thereof shall

18 not apply.

19 ‘‘(ii) DEEMED-OWNED SHARES.—Not20 withstanding the employee trust exception

21 in section 318(a)(2)(B)(i), individual shall

22 be treated as owning deemed-owned shares

23 of the individual.

24 Solely for purposes of applying paragraph (5),

25 this subparagraph shall be applied after the at-
87

•HR 4843 IH

1 tribution rules of paragraph (5) have been ap2 plied.

3 ‘‘(4) DISQUALIFIED PERSON.—For purposes of

4 this subsection—

5 ‘‘(A) IN GENERAL.—The term ‘disqualified

6 person’ means any person if—

7 ‘‘(i) the aggregate number of deemed8 owned shares of such person and the mem9 bers of such person’s family is at least 20

10 percent of the number of deemed-owned

11 shares of stock in the S corporation, or

12 ‘‘(ii) in the case of a person not de13 scribed in clause (i), the number of

14 deemed-owned shares of such person is at

15 least 10 percent of the number of deemed16 owned shares of stock in such corporation.

17 ‘‘(B) TREATMENT OF FAMILY MEMBERS.—

18 In the case of a disqualified person described in

19 subparagraph (A)(i), any member of such per20 son’s family with deemed-owned shares shall be

21 treated as a disqualified person if not otherwise

22 treated as a disqualified person under subpara23 graph (A).

24 ‘‘(C) DEEMED-OWNED SHARES.—
88

•HR 4843 IH

1 ‘‘(i) IN GENERAL.—The term

2 ‘deemed-owned shares’ means, with respect

3 to any person—

4 ‘‘(I) the stock in the S corpora5 tion constituting employer securities

6 of an employee stock ownership plan

7 which is allocated to such person

8 under the plan, and

9 ‘‘(II) such person’s share of the

10 stock in such corporation which is

11 held by such plan but which is not al12 located under the plan to participants.

13 ‘‘(ii) PERSON’S SHARE OF

14 UNALLOCATED STOCK.—For purposes of

15 clause (i)(II), a person’s share of

16 unallocated S corporation stock held by

17 such plan is the amount of the unallocated

18 stock which would be allocated to such per19 son if the unallocated stock were allocated

20 to all participants in the same proportions

21 as the most recent stock allocation under

22 the plan.

23 ‘‘(D) MEMBER OF FAMILY.—For purposes

24 of this paragraph, the term ‘member of the

25 family’ means, with respect to any individual—
89

•HR 4843 IH

1 ‘‘(i) the spouse of the individual,

2 ‘‘(ii) an ancestor or lineal descendant

3 of the individual or the individual’s spouse,

4 ‘‘(iii) a brother or sister of the indi5 vidual or the individual’s spouse and any

6 lineal descendant of the brother or sister,

7 and

8 ‘‘(iv) the spouse of any individual de9 scribed in clause (ii) or (iii).

10 A spouse of an individual who is legally sepa11 rated from such individual under a decree of di12 vorce or separate maintenance shall not be

13 treated as such individual’s spouse for purposes

14 of this subparagraph.

15 ‘‘(5) TREATMENT OF SYNTHETIC EQUITY.—For

16 purposes of paragraphs (3) and (4), in the case of

17 a person who owns synthetic equity in the S corpora18 tion, except to the extent provided in regulations, the

19 shares of stock in such corporation on which such

20 synthetic equity is based shall be treated as out21 standing stock in such corporation and deemed22 owned shares of such person if such treatment of

23 synthetic equity of 1 or more such persons results

24 in—
90

•HR 4843 IH

1 ‘‘(A) the treatment of any person as a dis2 qualified person, or

3 ‘‘(B) the treatment of any year as a non4 allocation year.

5 For purposes of this paragraph, synthetic equity

6 shall be treated as owned by a person in the same

7 manner as stock is treated as owned by a person

8 under the rules of paragraphs (2) and (3) of section

9 318(a). If, without regard to this paragraph, a per10 son is treated as a disqualified person or a year is

11 treated as a nonallocation year, this paragraph shall

12 not be construed to result in the person or year not

13 being so treated.

14 ‘‘(6) DEFINITIONS.—For purposes of this

15 subsection—

16 ‘‘(A) EMPLOYEE STOCK OWNERSHIP

17 PLAN.—The term ‘employee stock ownership

18 plan’ has the meaning given such term by sec19 tion 4975(e)(7).

20 ‘‘(B) EMPLOYER SECURITIES.—The term

21 ‘employer security’ has the meaning given such

22 term by section 409(l).

23 ‘‘(C) SYNTHETIC EQUITY.—The term ‘syn24 thetic equity’ means any stock option, warrant,

25 restricted stock, deferred issuance stock right,
91

•HR 4843 IH

1 or similar interest or right that gives the holder

2 the right to acquire or receive stock of the S

3 corporation in the future. Except to the extent

4 provided in regulations, synthetic equity also in5 cludes a stock appreciation right, phantom

6 stock unit, or similar right to a future cash

7 payment based on the value of such stock or

8 appreciation in such value.

9 ‘‘(7) REGULATIONS.—The Secretary shall pre10 scribe such regulations as may be necessary to carry

11 out the purposes of this subsection.’’.

12 (b) COORDINATION WITH SECTION 4975(e)(7).—The

13 last sentence of section 4975(e)(7) (defining employee

14 stock ownership plan) is amended by inserting ‘‘, section

15 409(p),’’ after ‘‘409(n)’’.

16 (c) EXCISE TAX.—

17 (1) APPLICATION OF TAX.—Subsection (a) of

18 section 4979A (relating to tax on certain prohibited

19 allocations of employer securities) is amended—

20 (A) by striking ‘‘or’’ at the end of para21 graph (1),

22 (B) by striking the period at the end of

23 paragraph (2) and inserting a comma, and

24 (C) by striking all that follows paragraph

25 (2) and inserting the following:
92

•HR 4843 IH

1 ‘‘(3) there is any allocation of employer securi2 ties which violates the provisions of section 409(p),

3 or a nonallocation year described in subsection

4 (e)(2)(C) with respect to an employee stock owner5 ship plan, or

6 ‘‘(4) any synthetic equity is owned by a dis7 qualified person in any nonallocation year,

8 there is hereby imposed a tax on such allocation or owner9 ship equal to 50 percent of the amount involved.’’.

10 (2) LIABILITY.—Section 4979A(c) (defining li11 ability for tax) is amended to read as follows:

12 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

13 section shall be paid—

14 ‘‘(1) in the case of an allocation referred to in

15 paragraph (1) or (2) of subsection (a), by—

16 ‘‘(A) the employer sponsoring such plan, or

17 ‘‘(B) the eligible worker-owned cooperative,

18 which made the written statement described in sec19 tion 664(g)(1)(E) or in section 1042(b)(3)(B) (as

20 the case may be), and

21 ‘‘(2) in the case of an allocation or ownership

22 referred to in paragraph (3) or (4) of subsection (a),

23 by the S corporation the stock in which was so allo24 cated or owned.’’.
93

•HR 4843 IH

1 (3) DEFINITIONS.—Section 4979A(e) (relating

2 to definitions) is amended to read as follows:

3 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur4 poses of this section—

5 ‘‘(1) DEFINITIONS.—Except as provided in

6 paragraph (2), terms used in this section have the

7 same respective meanings as when used in sections

8 409 and 4978.

9 ‘‘(2) SPECIAL RULES RELATING TO TAX IM10 POSED BY REASON OF PARAGRAPH (3) OR (4) OF

11 SUBSECTION (a).—

12 ‘‘(A) PROHIBITED ALLOCATIONS.—The

13 amount involved with respect to any tax im14 posed by reason of subsection (a)(3) is the

15 amount allocated to the account of any person

16 in violation of section 409(p)(1).

17 ‘‘(B) SYNTHETIC EQUITY.—The amount

18 involved with respect to any tax imposed by rea19 son of subsection (a)(4) is the value of the

20 shares on which the synthetic equity is based.

21 ‘‘(C) SPECIAL RULE DURING FIRST NON22 ALLOCATION YEAR.—For purposes of subpara23 graph (A), the amount involved for the first

24 nonallocation year of any employee stock owner25 ship plan shall be determined by taking into ac-
94

•HR 4843 IH

1 count the total value of all the deemed-owned

2 shares of all disqualified persons with respect to

3 such plan.

4 ‘‘(D) STATUTE OF LIMITATIONS.—The

5 statutory period for the assessment of any tax

6 imposed by this section by reason of paragraph

7 (3) or (4) of subsection (a) shall not expire be8 fore the date which is 3 years from the later

9 of—

10 ‘‘(i) the allocation or ownership re11 ferred to in such paragraph giving rise to

12 such tax, or

13 ‘‘(ii) the date on which the Secretary

14 is notified of such allocation or owner15 ship.’’.

16 (d) EFFECTIVE DATES.—

17 (1) IN GENERAL.—The amendments made by

18 this section shall apply to plan years beginning after

19 December 31, 2001.

20 (2) EXCEPTION FOR CERTAIN PLANS.—In the

21 case of any—

22 (A) employee stock ownership plan estab23 lished after July 11, 2000, or

24 (B) employee stock ownership plan estab25 lished on or before such date if employer securi-
95

•HR 4843 IH

1 ties held by the plan consist of stock in a cor2 poration with respect to which an election under

3 section 1362(a) of the Internal Revenue Code

4 of 1986 is not in effect on such date,

5 the amendments made by this section shall apply to

6 plan years ending after July 11, 2000.

7 TITLE VI—REDUCING

8 REGULATORY BURDENS

9 SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.

10 (a) IN GENERAL.—Paragraph (9) of section

11 412(c)(9) (relating to annual valuation) is amended to

12 read as follows:

13 ‘‘(9) ANNUAL VALUATION.—

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

15 section, a determination of experience gains and

16 losses and a valuation of the plan’s liability

17 shall be made not less frequently than once

18 every year, except that such determination shall

19 be made more frequently to the extent required

20 in particular cases under regulations prescribed

21 by the Secretary.

22 ‘‘(B) VALUATION DATE.—

23 ‘‘(i) CURRENT YEAR.—Except as pro24 vided in clause (ii), the valuation referred

25 to in subparagraph (A) shall be made as of
96

•HR 4843 IH

1 a date within the plan year to which the

2 valuation refers or within one month prior

3 to the beginning of such year.

4 ‘‘(ii) ELECTION TO USE PRIOR YEAR

5 VALUATION.—The valuation referred to in

6 subparagraph (A) may be made as of a

7 date within the plan year prior to the year

8 to which the valuation refers if—

9 ‘‘(I) an election is in effect under

10 this clause with respect to the plan,

11 and

12 ‘‘(II) as of such date, the value

13 of the assets of the plan are not less

14 than 125 percent of the plan’s current

15 liability (as defined in paragraph

16 (7)(B)).

17 ‘‘(iii) ADJUSTMENTS.—Information

18 under clause (ii) shall, in accordance with

19 regulations, be actuarially adjusted to re20 flect significant differences in participants.

21 ‘‘(iv) ELECTION.—An election under

22 clause (ii), once made, shall be irrevocable

23 without the consent of the Secretary.’’.
97

•HR 4843 IH

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

2 this section shall apply to plan years beginning after De3 cember 31, 2000.

4 SEC. 602. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT

5 LOSS OF DIVIDEND DEDUCTION.

6 (a) IN GENERAL.—Section 404(k)(2)(A) (defining

7 applicable dividends) is amended by striking ‘‘or’’ at the

8 end of clause (ii), by redesignating clause (iii) as clause

9 (iv), and by inserting after clause (ii) the following new

10 clause:

11 ‘‘(iii) is, at the election of such par12 ticipants or their beneficiaries—

13 ‘‘(I) payable as provided in clause

14 (i) or (ii), or

15 ‘‘(II) paid to the plan and rein16 vested in qualifying employer securi17 ties, or’’.

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

19 this section shall apply to taxable years beginning after

20 December 31, 2000.

21 SEC. 603. REPEAL OF TRANSITION RULE RELATING TO CER22 TAIN HIGHLY COMPENSATED EMPLOYEES.

23 (a) IN GENERAL.—Paragraph (4) of section 1114(c)

24 of the Tax Reform Act of 1986 is hereby repealed.
98

•HR 4843 IH

1 (b) EFFECTIVE DATE.—The repeal made by sub2 section (a) shall apply to plan years beginning after De3 cember 31, 2000.

4 SEC. 604. EMPLOYEES OF TAX-EXEMPT ENTITIES.

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

6 shall modify Treasury Regulations section 1.410(b)–6(g)

7 to provide that employees of an organization described in

8 section 403(b)(1)(A)(i) of the Internal Revenue Code of

9 1986 who are eligible to make contributions under section

10 403(b) of such Code pursuant to a salary reduction agree11 ment may be treated as excludable with respect to a plan

12 under section 401(k) or (m) of such Code that is provided

13 under the same general arrangement as a plan under such

14 section 401(k), if—

15 (1) no employee of an organization described in

16 section 403(b)(1)(A)(i) of such Code is eligible to

17 participate in such section 401(k) plan or section

18 401(m) plan; and

19 (2) 95 percent of the employees who are not

20 employees of an organization described in section

21 403(b)(1)(A)(i) of such Code are eligible to partici22 pate in such plan under such section 401(k) or (m).

23 (b) EFFECTIVE DATE.—The modification required by

24 subsection (a) shall apply as of the same date set forth
99

•HR 4843 IH

1 in section 1426(b) of the Small Business Job Protection

2 Act of 1996.

3 SEC. 605. CLARIFICATION OF TREATMENT OF EMPLOYER4 PROVIDED RETIREMENT ADVICE.

5 (a) IN GENERAL.—Subsection (a) of section 132 (re6 lating to exclusion from gross income) is amended by

7 striking ‘‘or’’ at the end of paragraph (5), by striking the

8 period at the end of paragraph (6) and inserting ‘‘, or’’,

9 and by adding at the end the following new paragraph:

10 ‘‘(7) qualified retirement planning services.’’.

11 (b) QUALIFIED RETIREMENT PLANNING SERVICES

12 DEFINED.—Section 132 is amended by redesignating sub13 section (m) as subsection (n) and by inserting after sub14 section (l) the following:

15 ‘‘(m) QUALIFIED RETIREMENT PLANNING SERV16 ICES.—

17 ‘‘(1) IN GENERAL.—For purposes of this sec18 tion, the term ‘qualified retirement planning serv19 ices’ means any retirement planning service provided

20 to an employee and his spouse by an employer main21 taining a qualified employer plan.

22 ‘‘(2) NONDISCRIMINATION RULE.—Subsection

23 (a)(7) shall apply in the case of highly compensated

24 employees only if such services are available on sub25 stantially the same terms to each member of the
100

•HR 4843 IH

1 group of employees normally provided education and

2 information regarding the employer’s qualified em3 ployer plan.

4 ‘‘(3) QUALIFIED EMPLOYER PLAN.—For pur5 poses of this subsection, the term ‘qualified employer

6 plan’ means a plan, contract, pension, or account de7 scribed in section 219(g)(5).’’.

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

9 this section shall apply to years beginning after December

10 31, 2000.

11 SEC. 606. REPORTING SIMPLIFICATION.

12 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

13 OWNERS AND THEIR SPOUSES.—

14 (1) IN GENERAL.—The Secretary of the Treas15 ury shall modify the requirements for filing annual

16 returns with respect to one-participant retirement

17 plans to ensure that such plans with assets of

18 $250,000 or less as of the close of the plan year

19 need not file a return for that year.

20 (2) ONE-PARTICIPANT RETIREMENT PLAN DE21 FINED.—For purposes of this subsection, the term

22 ‘‘one-participant retirement plan’’ means a retire23 ment plan that—

24 (A) on the first day of the plan year—
101

•HR 4843 IH

1 (i) covered only the employer (and the

2 employer’s spouse) and the employer

3 owned the entire business (whether or not

4 incorporated); or

5 (ii) covered only one or more partners

6 (and their spouses) in a business partner7 ship (including partners in an S or C cor8 poration);

9 (B) meets the minimum coverage require10 ments of section 410(b) of the Internal Revenue

11 Code of 1986 without being combined with any

12 other plan of the business that covers the em13 ployees of the business;

14 (C) does not provide benefits to anyone ex15 cept the employer (and the employer’s spouse)

16 or the partners (and their spouses);

17 (D) does not cover a business that is a

18 member of an affiliated service group, a con19 trolled group of corporations, or a group of

20 businesses under common control; and

21 (E) does not cover a business that leases

22 employees.

23 (3) OTHER DEFINITIONS.—Terms used in para24 graph (2) which are also used in section 414 of the
102

•HR 4843 IH

1 Internal Revenue Code of 1986 shall have the re2 spective meanings given such terms by such section.

3 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

4 PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case

5 of a retirement plan which covers less than 25 employees

6 on the first day of the plan year and meets the require7 ments described in subparagraphs (B), (D), and (E) of

8 subsection (a)(2), the Secretary of the Treasury shall pro9 vide for the filing of a simplified annual return that is

10 substantially similar to the annual return required to be

11 filed by a one-participant retirement plan.

12 (c) EFFECTIVE DATE.—The provisions of this section

13 shall take effect on January 1, 2001.

14 SEC. 607. IMPROVEMENT OF EMPLOYEE PLANS COMPLI15 ANCE RESOLUTION SYSTEM.

16 The Secretary of the Treasury shall continue to up17 date and improve the Employee Plans Compliance Resolu18 tion System (or any successor program) giving special at19 tention to—

20 (1) increasing the awareness and knowledge of

21 small employers concerning the availability and use

22 of the program;

23 (2) taking into account special concerns and

24 circumstances that small employers face with respect

25 to compliance and correction of compliance failures;
103

•HR 4843 IH

1 (3) extending the duration of the self-correction

2 period under the Administrative Policy Regarding

3 Self-Correction for significant compliance failures;

4 (4) expanding the availability to correct insig5 nificant compliance failures under the Administra6 tive Policy Regarding Self-Correction during audit;

7 and

8 (5) assuring that any tax, penalty, or sanction

9 that is imposed by reason of a compliance failure is

10 not excessive and bears a reasonable relationship to

11 the nature, extent, and severity of the failure.

12 SEC. 608. REPEAL OF THE MULTIPLE USE TEST.

13 (a) IN GENERAL.—Paragraph (9) of section 401(m)

14 is amended to read as follows:

15 ‘‘(9) REGULATIONS.—The Secretary shall pre16 scribe such regulations as may be necessary to carry

17 out the purposes of this subsection and subsection

18 (k), including regulations permitting appropriate ag19 gregation of plans and contributions.’’.

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

21 this section shall apply to years beginning after December

22 31, 2000.

23 SEC. 609. FLEXIBILITY IN NONDISCRIMINATION, COV24 ERAGE, AND LINE OF BUSINESS RULES.

25 (a) NONDISCRIMINATION.—
104

•HR 4843 IH

1 (1) IN GENERAL.—The Secretary of the Treas2 ury shall, by regulation, provide that a plan shall be

3 deemed to satisfy the requirements of section

4 401(a)(4) of the Internal Revenue Code of 1986 if

5 such plan satisfies the facts and circumstances test

6 under section 401(a)(4) of such Code, as in effect

7 before January 1, 1994, but only if—

8 (A) the plan satisfies conditions prescribed

9 by the Secretary to appropriately limit the

10 availability of such test; and

11 (B) the plan is submitted to the Secretary

12 for a determination of whether it satisfies such

13 test.

14 Subparagraph (B) shall only apply to the extent pro15 vided by the Secretary.

16 (2) EFFECTIVE DATES.—

17 (A) REGULATIONS.—The regulation re18 quired by paragraph (1) shall apply to years be19 ginning after December 31, 2000.

20 (B) CONDITIONS OF AVAILABILITY.—Any

21 condition of availability prescribed by the Sec22 retary under paragraph (1)(A) shall not apply

23 before the first year beginning not less than

24 120 days after the date on which such condition

25 is prescribed.
105

•HR 4843 IH

1 (b) COVERAGE TEST.—

2 (1) IN GENERAL.—Section 410(b)(1) (relating

3 to minimum coverage requirements) is amended by

4 adding at the end the following:

5 ‘‘(D) In the case that the plan fails to

6 meet the requirements of subparagraphs (A),

7 (B) and (C), the plan—

8 ‘‘(i) satisfies subparagraph (B), as in

9 effect immediately before the enactment of

10 the Tax Reform Act of 1986,

11 ‘‘(ii) is submitted to the Secretary for

12 a determination of whether it satisfies the

13 requirement described in clause (i), and

14 ‘‘(iii) satisfies conditions prescribed by

15 the Secretary by regulation that appro16 priately limit the availability of this sub17 paragraph.

18 Clause (ii) shall apply only to the extent pro19 vided by the Secretary.’’.

20 (2) EFFECTIVE DATES.—

21 (A) IN GENERAL.—The amendment made

22 by paragraph (1) shall apply to years beginning

23 after December 31, 2000.

24 (B) CONDITIONS OF AVAILABILITY.—Any

25 condition of availability prescribed by the Sec-
106

•HR 4843 IH

1 retary under regulations prescribed by the Sec2 retary under section 410(b)(1)(D) of the Inter3 nal Revenue Code of 1986 shall not apply be4 fore the first year beginning not less than 120

5 days after the date on which such condition is

6 prescribed.

7 (c) LINE OF BUSINESS RULES.—The Secretary of

8 the Treasury shall, on or before December 31, 2000, mod9 ify the existing regulations issued under section 414(r) of

10 the Internal Revenue Code of 1986 in order to expand

11 (to the extent that the Secretary determines appropriate)

12 the ability of a pension plan to demonstrate compliance

13 with the line of business requirements based upon the

14 facts and circumstances surrounding the design and oper15 ation of the plan, even though the plan is unable to satisfy

16 the mechanical tests currently used to determine compli17 ance.

18 SEC. 610. EXTENSION TO ALL GOVERNMENTAL PLANS OF

19 MORATORIUM ON APPLICATION OF CERTAIN

20 NONDISCRIMINATION RULES APPLICABLE TO

21 STATE AND LOCAL PLANS.

22 (a) IN GENERAL.—

23 (1) Subparagraph (G) of section 401(a)(5) and

24 subparagraph (H) of section 401(a)(26) are each
107

•HR 4843 IH

1 amended by striking ‘‘section 414(d))’’ and all that

2 follows and inserting ‘‘section 414(d)).’’.

3 (2) Subparagraph (G) of section 401(k)(3) and

4 paragraph (2) of section 1505(d) of the Taxpayer

5 Relief Act of 1997 are each amended by striking

6 ‘‘maintained by a State or local government or polit7 ical subdivision thereof (or agency or instrumentality

8 thereof)’’.

9 (b) CONFORMING AMENDMENTS.—

10 (1) The heading for subparagraph (G) of sec11 tion 401(a)(5) is amended to read as follows: ‘‘GOV12 ERNMENTAL PLANS’’.

13 (2) The heading for subparagraph (H) of sec14 tion 401(a)(26) is amended to read as follows: ‘‘EX15 CEPTION FOR GOVERNMENTAL PLANS’’.

16 (3) Subparagraph (G) of section 401(k)(3) is

17 amended by inserting ‘‘GOVERNMENTAL PLANS.—’’

18 after ‘‘(G)’’.

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

20 this section shall apply to years beginning after December

21 31, 2000.

22 SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DIS23 TRIBUTIONS.

24 (a) EXPANSION OF PERIOD.—
108

•HR 4843 IH

1 (1) IN GENERAL.—Subparagraph (A) of section

2 417(a)(6) is amended by striking ‘‘90-day’’ and in3 serting ‘‘180-day’’.

4 (2) MODIFICATION OF REGULATIONS.—The

5 Secretary of the Treasury shall modify the regula6 tions under sections 402(f), 411(a)(11), and 417 of

7 the Internal Revenue Code of 1986 to substitute

8 ‘‘180 days’’ for ‘‘90 days’’ each place it appears in

9 Treasury Regulations sections 1.402(f)–1, 1.411(a)–

10 11(c), and 1.417(e)–1(b).

11 (3) EFFECTIVE DATE.—The amendment made

12 by paragraph (1) and the modifications required by

13 paragraph (2) shall apply to years beginning after

14 December 31, 2000.

15 (b) CONSENT REGULATION INAPPLICABLE TO CER16 TAIN DISTRIBUTIONS.—

17 (1) IN GENERAL.—The Secretary of the Treas18 ury shall modify the regulations under section

19 411(a)(11) of the Internal Revenue Code of 1986 to

20 provide that the description of a participant’s right,

21 if any, to defer receipt of a distribution shall also de22 scribe the consequences of failing to defer such re23 ceipt.
109

•HR 4843 IH

1 (2) EFFECTIVE DATE.—The modifications re2 quired by paragraph (1) shall apply to years begin3 ning after December 31, 2000.

4 TITLE VII—PLAN AMENDMENTS

5 SEC. 701. PROVISIONS RELATING TO PLAN AMENDMENTS.

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

7 or contract amendment—

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

9 being operated in accordance with the terms of the

10 plan during the period described in subsection

11 (b)(2)(A); and

12 (2) such plan shall not fail to meet the require13 ments of section 411(d)(6) of the Internal Revenue

14 Code of 1986 by reason of such amendment.

15 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

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

17 any amendment to any plan or annuity contract

18 which is made—

19 (A) pursuant to any amendment made by

20 this Act, or pursuant to any regulation issued

21 under this Act, and

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

23 plan year beginning on or after January 1,

24 2003.
110

•HR 4843 IH

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

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

3 1986), this paragraph shall be applied by sub4 stituting ‘‘2005’’ for ‘‘2003’’.

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

6 to any amendment unless—

7 (A) during the period—

8 (i) beginning on the date the legisla9 tive or regulatory amendment described in

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

11 case of a plan or contract amendment not

12 required by such legislative or regulatory

13 amendment, the effective date specified by

14 the plan); and

15 (ii) ending on the date described in

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

17 the plan or contract amendment is adopt18 ed),

19 the plan or contract is operated as if such plan

20 or contract amendment were in effect; and

21 (B) such plan or contract amendment ap22 plies retroactively for such period.

Æ