I

106TH CONGRESS

2D SESSION H. R. 5546

To amend the Internal Revenue Code of 1986 to improve the retirement

security of American families.

IN THE HOUSE OF REPRESENTATIVES

OCTOBER 25, 2000

Mr. ANDREWS (for himself, Mr. CLAY, Mr. KILDEE, Mr. OWENS, Mr. PAYNE,

Mrs. MINK of Hawaii, Ms. WOOLSEY, Mr. ROMERO-BARCELO ́

, Mr.

FATTAH, Mr. TIERNEY, Mr. KIND, Ms. SANCHEZ, Mr. FORD, Mr.

KUCINICH, and Mr. HOLT) 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 improve

the retirement security of American families.

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 AND TABLE OF CONTENTS.

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

5 ‘‘Retirement Enhancement Revenue Act of 2000’’.

6 (b) TABLE OF CONTENTS.—The table of contents is

7 as follows:

Sec. 1. Short title and table of contents.

TITLE I—PUBLIC EMPLOYEE PENSION PLANS
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Sec. 101. New qualification requirements for public employee pension plans.

‘‘SUBPART F—PUBLIC EMPLOYEE PENSION PLANS

‘‘Sec. 420A. Reporting and disclosure requirements.

‘‘Sec. 420B. Review by qualified review boards of changes in employer contributions.

‘‘Sec. 420C. Effect on other laws.

‘‘Sec. 420D. Definitions and coverage.

Sec. 102. Effective date of title.

TITLE II—PENSION IMPROVEMENTS

Sec. 201. Automatic enrollment of all employees in 401(k) plans.

Sec. 202. Improvements in simplified employee pensions.

Sec. 203. Pension integration rules.

Sec. 204. Increase to age 75 for beginning mandatory distributions.

Sec. 205. Treatment of multiemployer plans under section 415.

Sec. 206. Restrictions on exclusion of unionized employees from participation in

401(k) plans.

Sec. 207. Repeal of coordination requirements for deferred compensation plans

of State and local governments and tax-exempt organizations.

Sec. 208. Clarification of tax treatment of division of section 457 plan benefits

upon divorce.

Sec. 209. Rollovers allowed among various types of plans.

Sec. 210. Purchase of service credit in governmental defined benefit plans.

TITLE III—ADDITIONAL AMENDMENTS

Sec. 301. Involuntary cash-outs from section 457 plans permitted only if distribution rolled to a qualified plan.

Sec. 302. Statutory exemption from prohibited transaction rules for emergent

transactions.

Sec. 303. Loans from retirement plans for health insurance and job training expenses.

Sec. 304. Missing participants.

Sec. 305. Income averaging of corrected civil service annuity benefit payments.

TITLE IV—GENERAL PROVISIONS

Sec. 401. General effective date.

Sec. 402. Plan amendments.

1 TITLE I—PUBLIC EMPLOYEE

2 PENSION PLANS

3 SEC. 101. NEW QUALIFICATION REQUIREMENTS FOR PUB4 LIC EMPLOYEE PENSION PLANS.

5 SEC. (a) IN GENERAL.—Subsection (a) of section

6 401 of the Internal Revenue Code of 1986 (relating to
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1 requirements for qualification) is amended by inserting

2 after paragraph (34) the following new paragraph:

3 ‘‘(35) PUBLIC EMPLOYEE PENSION PLANS.—A

4 trust forming a part of a public employee pension

5 plan (as defined in section 420D(a)(9)) shall not

6 constitute a qualified trust under this section unless

7 the requirements of subpart F of this part are met

8 in connection with such plan.’’

9 (b) REQUIREMENTS.—

10 (1) IN GENERAL.—Part I of subchapter D of

11 chapter 1 of such Code (relating to pension, profit12 sharing, stock bonus plans, etc.) is amended by in13 serting after subpart E the following new subpart:

14 ‘‘Subpart F—Public Employee Pension Plans

‘‘Sec. 420A. Reporting and disclosure requirements.

‘‘Sec. 420B. Review by qualified review boards of changes in employer contributions.

‘‘Sec. 420C. Effect on other laws.

‘‘Sec. 420D Definitions and coverage.

15 ‘‘SEC. 420A. REPORTING AND DISCLOSURE REQUIREMENTS.

16 ‘‘(a) IN GENERAL.—The requirements of this sub17 section are met in connection with a public employee pen18 sion plan if the terms of the plan include the requirements

19 of this section.

20 ‘‘(b) REQUIRED DISCLOSURES.—The plan shall pro21 vide that, within 210 days after the close of each plan

22 year, the administrator of the plan shall furnish to each
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1 participant, and to each beneficiary receiving benefits

2 under the plan—

3 ‘‘(1) a statement of the assets and liabilities of

4 the plan aggregated by categories and valued at

5 their current value, and the same data displayed in

6 comparative form for the end of the previous plan

7 year;

8 ‘‘(2) a statement of receipts and disbursements

9 during the preceding 12-month period aggregated by

10 general sources and applications;

11 ‘‘(3) a report containing—

12 ‘‘(A) a description of all investments and

13 assets of the plan, including their value;

14 ‘‘(B) the names and positions of all of the

15 trustees of the plan, and the time remaining be16 fore the expiration of their term;

17 ‘‘(C) a description of the method of trustee

18 selection;

19 ‘‘(D) a description of any changes in in20 vestment policy of the plan during the fiscal

21 year;

22 ‘‘(E) an evaluation of the long-term sol23 vency of the plan, including the number of par24 ticipants and beneficiaries and a summary of

25 their benefits, and a projection of the amount
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1 of benefits expected to be paid for the fifth,

2 tenth, and fifteenth plan year following the date

3 of the publication of the report; and

4 ‘‘(F) the percentage which the current

5 value of the assets of the plan is of the current

6 liability under the plan; and

7 ‘‘(4) any other material as is necessary to fairly

8 summarize the latest annual report.

9 Such information shall be written and calculated to be un10 derstood by the average plan participant, and shall be suf11 ficiently accurate and comprehensive to reasonably apprise

12 such participants and beneficiaries of their rights and obli13 gations under the plan.

14 ‘‘(c) AVAILABILITY OF PLAN DOCUMENTS FOR EX15 AMINATION.—The plan shall provide that the adminis16 trator shall make copies of the plan description and the

17 latest annual report and the bargaining agreement, trust

18 agreement, contract, or other instruments under which the

19 plan was established or is operated available for examina20 tion by any plan participant or beneficiary in the principal

21 office of the administrator and in such other places as may

22 be necessary to make available all pertinent information

23 to all participants (including such places as the Secretary

24 may prescribe by regulations).
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1 ‘‘(d) AVAILABILITY OF INFORMATION UPON RE2 QUEST.—The plan shall provide that the administrator

3 shall, upon written request of any participant or bene4 ficiary, furnish a copy of the latest annual report, any ter5 minal report, the bargaining agreement, trust agreement,

6 contract, or other instruments under which the plan is es7 tablished or operated. The administrator may make a rea8 sonable charge to cover the cost of furnishing such com9 plete copies. The Secretary may by regulation prescribe

10 the maximum amount which will constitute a reasonable

11 charge under the preceding sentence.

12 ‘‘SEC. 420B. REVIEW BY QUALIFIED REVIEW BOARDS OF

13 CHANGES IN EMPLOYER CONTRIBUTIONS.

14 ‘‘(a) IN GENERAL.—The requirements of this section

15 are met in connection with a public employee pension plan

16 if, under the plan, changes in employer contributions are

17 subject to review by a qualified review board established

18 for the plan as provided in this section. For purposes of

19 this section, the term ‘qualified review board’ means a

20 board—

21 ‘‘(1) whose membership is determined under the

22 law of the principal State in accordance with sub23 section (b), and
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1 ‘‘(2) whose powers are determined under the

2 law of the principal State in accordance with sub3 section (c).

4 ‘‘(b) MEMBERSHIP.—

5 ‘‘(1) IN GENERAL.—The membership of a quali6 fied review board established for a plan shall consist

7 of 3 members selected from among individuals who,

8 by means of their education and experience, have

9 demonstrated expertise in the area of pension fund

10 management, as follows:

11 ‘‘(A) one member is appointed by the Gov12 ernor of the State,

13 ‘‘(B) one member is selected by the partici14 pants in the plan, by means of an election held

15 in such form and manner as shall be prescribed

16 in regulations of the Secretary, and

17 ‘‘(C) one member is selected jointly by the

18 Governor and by a representative of partici19 pants in the plan (from a certified list of pen20 sion experts established in accordance with

21 paragraph (2)).

22 Each member of the board shall have 1 vote. Mem23 bers of the board shall serve for such equivalent

24 terms as shall be prescribed under the law of the

25 principal State.
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1 ‘‘(2) CERTIFIED LIST OF EXPERTS.—The Gov2 ernor of the State shall, for purposes of paragraph

3 (1)(C), establish and maintain with respect to each

4 public employee pension plan (for which such State

5 is the principal State) a certified list of pension ex6 perts meeting the requirements for membership on

7 the qualified review board. Individuals may be in8 cluded on such list only by agreement between the

9 Governor of the State and a representative elected

10 by participants in the plan, entered into by means

11 of collective bargaining in such form and manner as

12 shall be prescribed in regulations of the Secretary.

13 ‘‘(c) POWERS.—The board shall be treated as a quali14 fied review board for purposes of this section with respect

15 to any public employee pension plan (for which such State

16 is the principal State) only if the powers of such board

17 under the law of the principal State include review by the

18 board, for approval or disapproval by the board, of any

19 change in the terms of such plan, as a necessary pre20 requisite for such change to take effect, if—

21 ‘‘(1) such change would have the effect of

22 changing levels of employer contributions to the

23 plan, and
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1 ‘‘(2) such review is requested, in such form and

2 manner as shall be prescribed in regulations of the

3 Secretary, by—

4 ‘‘(A) at least one-third of the total number

5 of trustees of any trust fund forming a part of

6 the plan, or

7 ‘‘(B) the head of any employee organiza8 tion representing at least 20 percent of the

9 total number of active participants in the plan.

10 The board may be treated as a qualified review board for

11 purposes of this section only if, under the law of the prin12 cipal State, any such change submitted to such review by

13 the board may take effect only upon approval of the

14 change by the board.

15 ‘‘SEC. 420C. EFFECT ON OTHER LAWS.

16 ‘‘(a) IN GENERAL.—Nothing in this subpart shall be

17 construed to alter, amend, modify, invalidate, impair, or

18 supersede any law of a State or any rule or regulation

19 issued under any such law, except to the extent that such

20 law—

21 ‘‘(1) may now or hereafter relate to the subject

22 matter of the provisions of this subpart as they

23 apply to any public employee pension plan described

24 in section 420D(b)(1) and not exempt under section

25 420D(b)(2), and
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1 ‘‘(2) prevents the application of such provisions.

2 ‘‘(b) STATE CAUSES OF ACTION PRESERVED.—Noth3 ing in this subpart shall be construed to apply with respect

4 to State causes of action available in State courts.

5 ‘‘SEC. 420D. DEFINITIONS AND COVERAGE.

6 ‘‘(a) DEFINITIONS.—For purposes of this subpart—

7 ‘‘(1) ADMINISTRATOR.—The term ‘adminis8 trator’ means—

9 ‘‘(A) the board of trustees, retirement

10 board, or similar person with administrative re11 sponsibilities in connection with a plan, or any

12 other person specifically so designated in con13 nection with any requirement of this subpart by

14 the terms of the instrument or instruments

15 under which the plan is operated, including but

16 not limited to the law of any State or of any

17 political subdivision of any State, or

18 ‘‘(B) in any case in which there is no per19 son described in subparagraph (A) in connec20 tion with the plan, the plan sponsor.

21 ‘‘(2) BENEFICIARY.—The term ‘beneficiary’

22 means a person designated by a participant, or by

23 the terms of a public employee pension plan, who is

24 or may become entitled to a benefit thereunder.
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1 ‘‘(3) CURRENT LIABILITY.—The term ‘current

2 liability’ has the meaning provided in section

3 302(d)(7) of the Employee Retirement Income Secu4 rity Act of 1974.

5 ‘‘(4) EMPLOYEE.—The term ‘employee’ means

6 any individual employed by an employer, employer

7 representative, or other person required to make em8 ployer contributions under the plan.

9 ‘‘(5) EMPLOYEE ORGANIZATION.—The term

10 ‘employee organization’ means any labor union or

11 any organization of any kind, or any agency or em12 ployee representation committee, association, group,

13 or plan, in which employees participate and which

14 exists for the purpose, in whole or in part, of dealing

15 with employers or employer representatives con16 cerning a public employee pension plan or other

17 matters incidental to employment relationships; or

18 any employees’ beneficiary association organized for

19 the purpose, in whole or in part, of establishing such

20 a plan.

21 ‘‘(6) EMPLOYER.—The term ‘employer’

22 means—

23 ‘‘(A) the government of any State or of

24 any political subdivision of a State,
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1 ‘‘(B) any agency or instrumentality of a

2 government referred to in subparagraph (A), or

3 ‘‘(C) any agency or instrumentality of two

4 or more governments referred to in subpara5 graph (A).

6 ‘‘(7) EMPLOYER CONTRIBUTION.—The term

7 ‘employer contribution’ means any contribution to a

8 public employee pension plan other than a contribu9 tion made by a participant in the plan.

10 ‘‘(8) EMPLOYER REPRESENTATIVE.—The term

11 ‘employer representative’ means—

12 ‘‘(A) any group or association consisting,

13 in whole or in part, of employers acting, in con14 nection with a public employee pension plan, for

15 an employer, or

16 ‘‘(B) any person acting, in connection with

17 a public employee pension plan, indirectly in the

18 interest of an employer or of a group or asso19 ciation described in subparagraph (A).

20 ‘‘(9) PUBLIC EMPLOYEE PENSION PLAN.—The

21 terms ‘public employee pension plan’ and ‘plan’

22 mean any plan, fund, or program which was here23 tofore or is hereafter established or maintained, in

24 whole or in part, by an employer, an employer rep25 resentative, or an employee organization, or by a
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1 combination thereof, to the extent that by its express

2 terms or as a result of surrounding circumstances

3 such plan, fund, or program—

4 ‘‘(A) provides retirement income to em5 ployees, or

6 ‘‘(B) results in a deferral of income by em7 ployees for periods extending to the termination

8 of covered employment or beyond,

9 regardless of the method of calculating the contribu10 tions made to the plan, the method of calculating

11 the benefits under the plan, or the method of distrib12 uting benefits from the plan.

13 ‘‘(10) PRINCIPAL STATE.—The term ‘principal

14 State’ means, for any plan year with respect to a

15 public employee pension plan, the State in which, as

16 of the beginning of such plan year, the largest per17 centage of the participants of the plan employed in

18 any single State is employed.

19 ‘‘(11) GOVERNOR.—The term ‘Governor’

20 means, in connection with a public employee pension

21 plan, the Governor (or equivalent official) of the

22 principal State.

23 ‘‘(12) PARTICIPANT.—The term ‘participant’

24 means any individual who is or may become eligible

25 to receive a benefit of any type from a public em-
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1 ployee pension plan or whose beneficiaries may be el2 igible to receive any such benefit.

3 ‘‘(13) PERSON.—The term ‘person’ means a

4 State, a political subdivision of a State, any agency

5 or instrumentality of a State or a political subdivi6 sion of a State, an individual, a partnership, a joint

7 venture, a corporation, a mutual company, a joint8 stock company, a trust, an estate, an unincorporated

9 organization, an association, or an employee organi10 zation.

11 ‘‘(14) PLAN SPONSOR.—The term ‘plan spon12 sor’ means—

13 ‘‘(A) in the case of a plan established or

14 maintained solely for employees of a single em15 ployer, such employer,

16 ‘‘(B) in the case of a plan established or

17 maintained by an employee organization, the

18 employee organization, or

19 ‘‘(C) in the case of a plan established or

20 maintained by two or more employers or jointly

21 by one or more employers and one or more em22 ployee organizations, the association, com23 mittee, board of trustees, or other similar group

24 of representatives of the parties who establish

25 or maintain the plan.
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1 ‘‘(15) PLAN YEAR.—The term ‘plan year’

2 means, with respect to a plan, the calendar, policy,

3 or fiscal year on which the records of the plan are

4 kept.

5 ‘‘(16) STATE.—The term ‘State’ means any

6 State of the United States, the District of Columbia,

7 the Commonwealth of Puerto Rico, the Virgin Is8 lands, American Samoa, and Guam.

9 ‘‘(b) COVERAGE.—

10 ‘‘(1) IN GENERAL.—Except as provided in para11 graph (2), this subpart shall apply to any public em12 ployee pension plan.

13 ‘‘(2) EXCEPTIONS FROM COVERAGE.—The pro14 visions of this subpart shall not apply to—

15 ‘‘(A) any employee benefit plan described

16 in section 4(a) of the Employee Retirement In17 come Security Act of 1974 (29 U.S.C.

18 1003(a)), which is not exempt under section

19 4(b)(1) of such Act (29 U.S.C. 1003(b)(1));

20 ‘‘(B) any plan which is unfunded and is

21 maintained by an employer or employer rep22 resentative primarily for the purpose of pro23 viding deferred compensation for a select group

24 of management or highly compensated employ25 ees;
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1 ‘‘(C) any arrangement which would be a

2 severance pay arrangement, as defined in regu3 lations of the Secretary of Labor under section

4 3(2)(B)(i) of the Employee Retirement Income

5 Security Act of 1974 (29 U.S.C.

6 1002(2)(B)(i)), if the employer were an em7 ployer within the meaning of section 3(5) of

8 such Act (29 U.S.C. 1002(5));

9 ‘‘(D) any agreement to the extent it is a

10 coverage agreement entered into pursuant to

11 section 218 of the Social Security Act (42

12 U.S.C. 418);

13 ‘‘(E) any individual retirement account or

14 any individual retirement annuity within the

15 meaning of section 408, or a retirement bond

16 within the meaning of section 409;

17 ‘‘(F) any plan described in section 401(d);

18 ‘‘(G) any individual account plan con19 sisting of an annuity contract described in sec20 tion 403(b);

21 ‘‘(H) any eligible State deferred compensa22 tion plan, as defined in section 457(b); or

23 ‘‘(I) any plan maintained solely for the

24 purpose of complying with applicable workers’
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1 compensation laws or disability insurance

2 laws.’’

3 SEC. 102. EFFECTIVE DATE OF TITLE.

4 The amendments made by this title shall apply with

5 respect to plan years beginning on or after January 1,

6 2001.

7 TITLE II—PENSION

8 IMPROVEMENTS

9 SEC. 201. AUTOMATIC ENROLLMENT OF ALL EMPLOYEES IN

10 401(k) PLANS.

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

12 401(m) of the Internal Revenue Code of 1986 (relating

13 to additional alternative method of satisfying non14 discrimination tests) is amended by striking ‘‘and’’ at the

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

16 clause (iii) and inserting ‘‘, and’’, and by inserting after

17 clause (iii) the following new clause:

18 ‘‘(iv) meets the requirements of sub19 paragraph (C).’’.

20 (b) MINIMUM COVERAGE REQUIREMENTS.—Para21 graph (11) of section 401(m) of such Code is amended

22 by adding at the end the following new subparagraph:

23 ‘‘(C) MINIMUM COVERAGE REQUIRE24 MENTS.—The requirements of this subpara25 graph are met if—
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1 ‘‘(i) the plan meets the requirements

2 of section 410(b), or

3 ‘‘(ii) the plan is offered to all eligible

4 employees.

5 For purposes of clause (ii), a plan shall be

6 treated as offered to an eligible employee if the

7 employee is eligible to participate in the plan

8 and if the employee may elect to have employer

9 contributions made on the employee’s behalf

10 under the plan as elective employer contribu11 tions to such plan on behalf of the employee or

12 to the employee directly in cash.’’.

13 SEC. 202. IMPROVEMENTS IN SIMPLIFIED EMPLOYEE PEN14 SIONS.

15 (a) PARTICIPATION REQUIREMENTS.—Paragraph (2)

16 of section 408(k) of the Internal Revenue Code of 1986

17 (relating to participation requirements) is amended—

18 (1) in subparagraph (A), by adding ‘‘and’’ at

19 the end; and

20 (2) by striking subparagraphs (B) and (C) and

21 inserting the following:

22 ‘‘(B) has completed at least 3 years of

23 service (as defined in section 411(a)(5)) for the

24 employer.’’.
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1 (b) NONDISCRIMINATION RULES.—Subparagraph

2 (C) of section 408(k)(3) of such Code (requiring contribu3 tion to bear uniform relationship to total compensation)

4 is amended—

5 (1) in the heading, by striking ‘‘MUST BEAR

6 UNIFORM RELATIONSHIP TO TOTAL COMPENSATION’’

7 and inserting ‘‘MUST BE UNIFORM’’; and

8 (2) by inserting after ‘‘unless contributions

9 thereto’’ the following: ‘‘are uniform for all employ10 ees maintaining a simplified employee pension or’’.

11 (c) CONSENT TO PARTICIPATION NOT REQUIRED.—

12 Paragraph (2) of section 408(k) of such Code (relating

13 to participation requirements) is amended by adding at

14 the end the following new sentence: ‘‘An employer may

15 establish and maintain a simplified employee pension for

16 an employee without the employee’s consent.’’.

17 (d) RAISE IN LIMITATION ON CONTRIBUTIONS.—Sec18 tion 404(h)(1) of such Code (relating to special rules for

19 simplified employee pensions) is amended by striking sub20 paragraph (C) and inserting the following new subpara21 graphs:

22 ‘‘(C) The amount deductible in a taxable

23 year for a simplified employee pension shall not

24 exceed $30,000. The excess of the amount con25 tributed over the amount deductible for a tax-
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1 able year shall be deductible in the succeeding

2 taxable years in order of time, subject to the

3 limit of the preceding sentence.

4 ‘‘(D) The Secretary shall adjust annually

5 the $30,000 amount in subparagraph (C) for

6 increases in the cost-of-living at the same time

7 and in the same manner as adjustments under

8 section 415(d), except that the base period shall

9 be the calendar quarter ending September 30,

10 2000, and any increase which is not a multiple

11 of $100 shall be rounded to the next lowest

12 multiple of $100.’’.

13 (e) SEPARATE TREATMENT OF CONTRIBUTIONS TO

14 SIMPLIFIED EMPLOYEE PENSIONS.—

15 (1) DETERMINATION OF DEDUCTIBLE CON16 TRIBUTIONS.—Subsection (h) of section 404 of such

17 Code is amended by striking paragraphs (2) and (3)

18 and inserting the following new paragraph:

19 ‘‘(2) LIMITATION BASED ON COMBINATION OF

20 PLANS INAPPLICABLE.—Contributions to a sim21 plified employee pension shall not be taken into ac22 count for purposes of subsection (a)(7).’’.

23 (2) DETERMINATION OF LIMITS ON ANNUAL

24 CONTRIBUTIONS UNDER NONDISCRIMINATION

25 RULES.—Paragraph (5) of section 415(e) of such
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1 Code (relating to special rules for sections 403(b)

2 and 408) is amended by striking the second sentence

3 and inserting the following new sentence: ‘‘For pur4 poses of this section, any contribution by an em5 ployer to a simplified employee pension shall not be

6 taken into account.’’.

7 (f) JOINT AND SURVIVOR ANNUITY REQUIRE8 MENTS.—Section 408(k) of such Code is amended—

9 (1) by redesignating paragraph (9) as para10 graph (10); and

11 (2) by inserting after paragraph (8) the fol12 lowing new paragraph:

13 ‘‘(9) JOINT AND SURVIVOR ANNUITY REQUIRE14 MENTS.—Requirements similar to the requirements

15 of section 401(a)(11) shall apply with respect to an16 nuities purchased with amounts distributed from

17 simplified employee pensions.’’.

18 (g) ANNUAL REPORTING REQUIRMEENTS FOR SIM19 PLIFIED EMPLOYEE PENSIONS.—Paragraph (1) of section

20 408(l) of such Code (relating to simplified employer re21 ports) is amended to read as follows:

22 ‘‘(1) IN GENERAL.—The Secretary shall require

23 by regulations that an employer who makes a con24 tribution on behalf of an employee to a simplified

25 employee pension shall provide simplified annual re-
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1 ports. The reports required by this subsection shall

2 be filed in such manner, and information with re3 spect to such contributions shall be furnished to the

4 employee in such manner, as may be required by

5 regulations, except that such reports shall include

6 information sufficient to allow the employee to deter7 mine that the simplified employee pension is in com8 pliance with the requirements of this section.’’.

9 SEC. 203. PENSION INTEGRATION RULES.

10 (a) APPLICABILITY OF NEW INTEGRATION RULES

11 EXTENDED TO ALL EXISTING ACCRUED BENEFITS.—

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

13 Tax Reform Act of 1986 (relating to effective date of ap14 plication of nondiscrimination rules to integrated plans)

15 (100 Stat. 2440), effective for plan years beginning after

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

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

18 apply to benefits attributable to plan years beginning on

19 or before December 31, 1988.

20 (b) INTEGRATION DISALLOWED FOR SIMPLIFIED

21 EMPLOYEE PENSIONS.—

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

23 408(k)(3) of the Internal Revenue Code of 1986 (re24 lating to permitted disparity under rules limiting
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1 discrimination under simplified employee pensions)

2 is repealed.

3 (2) CONFORMING AMENDMENT.—Subparagraph

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

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

6 (3) EFFECTIVE DATE.—The amendments made

7 by this subsection shall apply with respect to taxable

8 years beginning on or after January 1, 1999.

9 (c) EVENTUAL REPEAL OF INTEGRATION RULES.—

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

11 2002—

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

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

17 section 401(a)(5) are redesignated as subparagraphs

18 (C), (D), and (E), respectively; and

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

20 (relating to nondiscriminatory coordination of de21 fined contribution plans with OASDI) is repealed.

22 SEC. 204. INCREASE TO AGE 75 FOR BEGINNING MANDA23 TORY DISTRIBUTIONS.

24 (a) QUALIFIED PENSION PLANS.—Subparagraph (C)

25 of section 401(a)(9) of the Internal Revenue Code of 1986
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1 (relating to required distributions) is amended by striking

‘‘age 701 2 ⁄2’’ each place it appears and inserting ‘‘the appli3 cable age’’.

4 (b) APPLICABLE AGE.—Subparagraph (C) of section

5 401(a)(9) of such Code is amended by adding at the end

6 the following new clause:

7 ‘‘(v) APPLICABLE AGE.—

8 ‘‘(I) IN GENERAL.—For purposes

9 of this clause, the term applicable age

10 shall be determined in accordance

11 with the following table:

Applicable

‘‘Calendar Year: Age:

2001 ......................................................................................... 71

2002 ......................................................................................... 72

2003 ......................................................................................... 73

2004 ......................................................................................... 74

2005 and each calendar year thereafter .................................. 75.

12 ‘‘(II) ELECTION TO USE AGE OF

13 SPOUSE.—For purposes of this sub14 paragraph, an employee who files a

15 joint return for a taxable year may

16 elect to substitute the age of the em17 ployee’s spouse for his age.’’.

18 (c) INDIVIDUAL RETIREMENT ACCOUNTS.—Para19 graph (1) of section 219(d) of such Code is amended—

(1) by striking ‘‘age 701 20 ⁄2’’ in the text and in21 serting ‘‘the applicable age (as defined in section

22 401(a)(9)(C)(v))’’, and
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(2) by striking ‘‘AGE 701 1 ⁄2’’ in the heading and

2 inserting ‘‘THE APPLICABLE AGE’’.

3 (d) ROTH IRA’S.—Paragraph (4) of section 408A(c)

4 of such Code is amended—

(1) by striking ‘‘age 701 5 ⁄2’’ in the text and in6 serting ‘‘the applicable age (as defined in section

7 401(a)(9)(C)(v))’’, and

(2) by striking ‘‘AGE 701 8 ⁄2’’ in the heading and

9 inserting ‘‘THE APPLICABLE AGE’’.

10 SEC. 205. TREATMENT OF MULTIEMPLOYER PLANS UNDER

11 SECTION 415.

12 (a) COMPENSATION LIMIT.—Paragraph (11) of sec13 tion 415(b) of the Internal Revenue Code of 1986 (relat14 ing to limitation for defined benefit plans) is amended to

15 read as follows:

16 ‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN17 MENTAL AND MULTIEMPLOYER PLANS.—In the case

18 of a governmental plan (as defined in section

19 414(d)) or a multiemployer plan (as defined in sec20 tion 414(f)), subparagraph (B) of paragraph (1)

21 shall not apply.’’.

22 (b) COMBINING AND AGGREGATION OF PLANS.—

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

24 section 415 of such Code (relating to combining of
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1 plans) is amended by adding at the end the fol2 lowing:

3 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER

4 PLANS.—Notwithstanding paragraph (1) and sub5 section (g), a multiemployer plan (as defined in sec6 tion 414(f)) shall not be combined or aggregated

7 with any other plan maintained by an employer for

8 purposes of applying the limitations established in

9 this section, except that such plan shall be combined

10 or aggregated with another plan which is not such

11 a multiemployer plan solely for purposes of deter12 mining whether such other plan meets the require13 ments of subsections (b)(1)(A) and (c).’’.

14 (2) CONFORMING AMENDMENT FOR AGGREGA15 TION OF PLANS.—Subsection (g) of section 415 of

16 such Code (relating to aggregation of plans) is

17 amended by striking ‘‘The Secretary’’ and inserting

18 ‘‘Except as provided in subsection (f)(3), the Sec19 retary’’.

20 SEC. 206. RESTRICTIONS ON EXCLUSION OF UNIONIZED

21 EMPLOYEES FROM PARTICIPATION IN 401(k)

22 PLANS.

23 Paragraph (4) of section 401(k) of the Internal Rev24 enue Code of 1986 (relating to other requirements) is
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1 amended by adding at the end the following new subpara2 graph:

3 ‘‘(D) BENEFITS SUBJECT OF BAR4 GAINING.—A cash or deferred arrangement of

5 any employer shall not be treated as a qualified

6 cash or deferred arrangement if any employee

7 of such employer who is described in section

8 410(b)(3)(A) and who is not eligible to benefit

9 under the arrangement is not otherwise covered

10 under an employee pension benefit plan (as de11 fined in section 3(2)(A) of the Employee Retire12 ment Income Security Act of 1974) which is

13 maintained for employees of such employer pur14 suant to an agreement which the Secretary of

15 Labor finds to be a collective bargaining agree16 ment between employee representatives and one

17 or more employers and which is qualified under

18 section 401(a).’’.

19 SEC. 207. 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 of

24 the Internal Revenue Code of 1986 (relating to deferred
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1 compensation plans of State and local governments and

2 tax-exempt organizations) is amended to read as follows:

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

4 compensation of any one individual which may be deferred

5 under subsection (a) during any taxable year shall not ex6 ceed the amount in effect under subsection (b)(2)(A) (as

7 modified by any adjustment provided under subsection

8 (b)(3)).’’.

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

10 subsection (a) shall apply to years beginning after Decem11 ber 31, 2000.

12 SEC. 208. CLARIFICATION OF TAX TREATMENT OF DIVISION

13 OF SECTION 457 PLAN BENEFITS UPON DI14 VORCE.

15 (a) IN GENERAL.—Section 414(p)(11) of the Inter16 nal Revenue Code of 1986 (relating to application of rules

17 to governmental and church plans) is amended—

18 (1) by inserting ‘‘or an eligible deferred com19 pensation plan (within the meaning of section

20 457(b))’’ after ‘‘subsection (e))’’, and

21 (2) in the heading, by striking ‘‘GOVERN22 MENTAL AND CHURCH PLANS’’ and inserting ‘‘CER23 TAIN OTHER PLANS’’.

24 (b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE25 MENTS.—Paragraph (10) of section 414(p) of such Code
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1 is amended by striking ‘‘and section 409(d)’’ and inserting

2 ‘‘section 409(d), and section 457(d)’’.

3 (c) TAX TREATMENT OF PAYMENTS FROM A SEC4 TION 457 PLAN.—Subsection (p) of section 414 of such

5 Code is amended by redesignating paragraph (12) as para6 graph (13) and inserting after paragraph (11) the fol7 lowing new paragraph:

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

9 SECTION 457 PLAN.—If a distribution or payment

10 from an eligible deferred compensation plan de11 scribed in section 457(b) is made pursuant to a

12 qualified domestic relations order, rules similar to

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

14 distribution or payment.’’.

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

16 this section shall apply to transfers, distributions, and

17 payments made after December 31, 2000.

18 SEC. 209. ROLLOVERS ALLOWED AMONG VARIOUS TYPES

19 OF PLANS.

20 (a) ROLLOVERS FROM AND TO SECTION 457

21 PLANS.—

22 (1) ROLLOVERS FROM SECTION 457 PLANS.—

23 (A) IN GENERAL.—Section 457(e) of the

24 Internal Revenue Code of 1986 (relating to
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1 other definitions and special rules) is amended

2 by adding at the end the following:

3 ‘‘(16) ROLLOVER AMOUNTS.—

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

5 eligible deferred compensation plan established

6 and maintained by an employer described in

7 subsection (e)(1)(A), if—

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

9 credit of an employee in such plan is paid

10 to such employee in an eligible rollover dis11 tribution (within the meaning of section

12 402(c)(4) without regard to subparagraph

13 (C) thereof),

14 ‘‘(ii) the employee transfers any por15 tion of the property such employee receives

16 in such distribution to an eligible retire17 ment plan described in section

18 402(c)(8)(B), and

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

20 property other than money, the amount so

21 transferred consists of the property distrib22 uted,

23 then such distribution (to the extent so trans24 ferred) shall not be includible in gross income

25 for the taxable year in which paid.
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1 ‘‘(B) CERTAIN RULES MADE APPLICA2 BLE.—The rules of paragraphs (2) through (7)

3 (other than paragraph (4)(C)) and (9) of sec4 tion 402(c) and section 402(f) shall apply for

5 purposes of subparagraph (A).

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

7 paragraph shall be reported to the Secretary in

8 the same manner as rollovers from qualified re9 tirement plans (as defined in section

10 4974(c)).’’.

11 (B) DEFERRAL LIMIT DETERMINED WITH12 OUT REGARD TO ROLLOVER AMOUNTS.—Section

13 457(b)(2) of such Code (defining eligible de14 ferred compensation plan) is amended by insert15 ing ‘‘(other than rollover amounts)’’ after ‘‘tax16 able year’’.

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

18 section 457(d) of such Code is amended by

19 striking ‘‘and’’ at the end of subparagraph (A),

20 by striking the period at the end of subpara21 graph (B) and inserting ‘‘, and’’, and by insert22 ing after subparagraph (B) the following:

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

24 an employer described in subsection (e)(1)(A),
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1 the plan meets requirements similar to the re2 quirements of section 401(a)(31).

3 Any amount transferred in a direct trustee-to-trust4 ee transfer in accordance with section 401(a)(31)

5 shall not be includible in gross income for the tax6 able year of transfer.’’.

7 (D) WITHHOLDING.—

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

9 of such Code is amended by adding at the

10 end the following:

11 ‘‘(E) under or to an eligible deferred com12 pensation plan which, at the time of such pay13 ment, is a plan described in section 457(b)

14 maintained by an employer described in section

15 457(e)(1)(A); or’’.

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

17 of such Code is amended to read as fol18 lows:

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

20 purposes of this subsection, the term ‘eligible roll21 over distribution’ has the meaning given such term

22 by section 402(f)(2)(A).’’.

23 (iii) LIABILITY FOR WITHHOLDING.—

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

25 such Code is amended by striking ‘‘or’’ at
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1 the end of clause (ii), by striking the pe2 riod at the end of clause (iii) and inserting

3 ‘‘, or’’, and by adding at the end the fol4 lowing:

5 ‘‘(iv) section 457(b).’’.

6 (2) ROLLOVERS TO SECTION 457 PLANS.—

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

8 such Code (defining eligible retirement plan) is

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

10 (iii), by striking the period at the end of clause

11 (iv) and inserting ‘‘, and’’, and by inserting

12 after clause (iv) the following new clause:

13 ‘‘(v) an eligible deferred compensation

14 plan described in section 457(b) of an em15 ployer described in section 457(e)(1)(A).’’.

16 (B) SEPARATE ACCOUNTING.—Section

17 402(c) of such Code is amended by adding at

18 the end the following new paragraph:

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

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

21 separately account for amounts rolled into such plan

22 from eligible retirement plans not described in such

23 clause, the plan described in such clause may not ac24 cept transfers or rollovers from such retirement

25 plans.’’.
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1 (C) 10 PERCENT ADDITIONAL TAX.—Sub2 section (t) of section 72 of such Code (relating

3 to 10-percent additional tax on early distribu4 tions from qualified retirement plans) is amend5 ed by adding at the end the following new para6 graph:

7 ‘‘(11) SPECIAL RULE FOR ROLLOVERS TO SEC8 TION 457 PLANS.—For purposes of this subsection,

9 a distribution from an eligible deferred compensation

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

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

12 a distribution from a qualified retirement plan de13 scribed in section 4974(c)(1) to the extent that such

14 distribution is attributable to an amount transferred

15 to an eligible deferred compensation plan from a

16 qualified retirement plan (as defined in section

17 4974(c)).’’.

18 (b) ALLOWANCE OF ROLLOVERS FROM AND TO

19 403(b) PLANS.—

20 (1) ROLLOVERS FROM SECTION 403(b)

21 PLANS.—Section 403(b)(8)(A)(ii) of such Code (re22 lating to rollover amounts) is amended by striking

23 ‘‘such distribution’’ and all that follows and insert24 ing ‘‘such distribution to an eligible retirement plan

25 described in section 402(c)(8)(B), and’’.
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1 (2) ROLLOVERS TO SECTION 403(b) PLANS.—

2 Section 402(c)(8)(B) of such Code (defining eligible

3 retirement plan), as amended by subsection (a), is

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

5 by striking the period at the end of clause (v) and

6 inserting ‘‘, and’’, and by inserting after clause (v)

7 the following new clause:

8 ‘‘(vi) an annuity contract described in

9 section 403(b).’’.

10 (c) EXPANDED EXPLANATION TO RECIPIENTS OF

11 ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section

12 402(f) of such Code (relating to written explanation to re13 cipients of distributions eligible for rollover treatment) is

14 amended by striking ‘‘and’’ at the end of subparagraph

15 (C), by striking the period at the end of subparagraph (D)

16 and inserting ‘‘, and’’, and by adding at the end the fol17 lowing new subparagraph:

18 ‘‘(E) of the provisions under which dis19 tributions from the eligible retirement plan re20 ceiving the distribution may be subject to re21 strictions and tax consequences which are dif22 ferent from those applicable to distributions

23 from the plan making such distribution.’’.

24 (d) SPOUSAL ROLLOVERS.—Section 402(c)(9) of

25 such Code (relating to rollover where spouse receives dis-
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1 tribution after death of employee) is amended by striking

2 ‘‘; except that’’ and all that follows up to the end period.

3 (e) CONFORMING AMENDMENTS.—

4 (1) Section 72(o)(4) of such Code is amended

5 by striking ‘‘and 408(d)(3)’’ and inserting

6 ‘‘403(b)(8), 408(d)(3), and 457(e)(16)’’.

7 (2) Section 219(d)(2) of such Code is amended

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

9 or 457(e)(16)’’.

10 (3) Section 401(a)(31)(B) of such Code is

11 amended by striking ‘‘and 403(a)(4)’’ and inserting

12 ‘‘, 403(a)(4), 403(b)(8), and 457(e)(16)’’.

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

14 such Code is amended by striking ‘‘or paragraph (4)

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

16 section 403(a), subparagraph (A) of section

17 403(b)(8), or subparagraph (A) of section

18 457(e)(16)’’.

19 (5) Paragraph (1) of section 402(f) of such

20 Code is amended by striking ‘‘from an eligible retire21 ment plan’’.

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

23 402(f)(1) of such Code are each amended by striking

24 ‘‘another eligible retirement plan’’ and inserting ‘‘an

25 eligible retirement plan’’.
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1 (7) Subparagraph (B) of section 403(b)(8) of

2 such Code is amended to read as follows:

3 ‘‘(B) CERTAIN RULES MADE APPLICA4 BLE.—The rules of paragraphs (2) through (7)

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

6 shall apply for purposes of subparagraph (A),

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

8 the payer in lieu of the plan administrator.’’.

9 (8) Section 408(a)(1) of such Code is amended

10 by striking ‘‘or 403(b)(8),’’ and inserting

11 ‘‘403(b)(8), or 457(e)(16)’’.

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

13 415(b)(2) of such Code are each amended by strik14 ing ‘‘and 408(d)(3)’’ and inserting ‘‘403(b)(8),

15 408(d)(3), and 457(e)(16)’’.

16 (10) Section 415(c)(2) of such Code is amended

17 by striking ‘‘and 408(d)(3)’’ and inserting

18 ‘‘408(d)(3), and 457(e)(16)’’.

19 (11) Section 4973(b)(1)(A) of such Code is

20 amended by striking ‘‘or 408(d)(3)’’ and inserting

21 ‘‘408(d)(3), or 457(e)(16)’’.

22 (f) EFFECTIVE DATE; SPECIAL RULE.—

23 (1) EFFECTIVE DATE.—The amendments made

24 by this section shall apply to distributions after De25 cember 31, 2000.
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1 (2) SPECIAL RULE.—Notwithstanding any other

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

3 section 1122 of the Tax Reform Act of 1986 shall

4 not apply to any distribution from an eligible retire5 ment plan (as defined in clause (iii) or (iv) of section

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

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

8 such plan on behalf of such individual which is per9 mitted solely by reason of any amendment made by

10 this section.

11 SEC. 210. PURCHASE OF SERVICE CREDIT IN GOVERN12 MENTAL DEFINED BENEFIT PLANS.

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

14 the Internal Revenue Code of 1986 is amended by adding

15 at the end the following new paragraph:

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

17 PURCHASE PERMISSIVE SERVICE CREDIT.—No

18 amount shall be includible in gross income by reason

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

20 benefit governmental plan (as defined in section

21 414(d)) if such transfer is—

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

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

24 under such plan, or
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1 ‘‘(B) a repayment to which section 415

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

3 thereof.’’.

4 (b) 457 PLANS.—

5 (1) Subsection (e) of section 457 of such Code

6 is amended by adding after paragraph (16) the fol7 lowing new paragraph:

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

9 PURCHASE PERMISSIVE SERVICE CREDIT.—No

10 amount shall be includible in gross income by reason

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

12 benefit governmental plan (as defined in section

13 414(d)) if such transfer is—

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

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

16 under such plan, or

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

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

19 thereof.’’.

20 (2) Section 457(b)(2) is amended by striking

21 ‘‘(other than rollover amounts)’’ and inserting

22 ‘‘(other than rollover amounts and amounts received

23 in a transfer referred to in subsection (e)(17))’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

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

3 December 31, 2000.

4 TITLE III—ADDITIONAL

5 AMENDMENTS

6 SEC. 301. INVOLUNTARY CASH-OUTS FROM SECTION 457

7 PLANS PERMITTED ONLY IF DISTRIBUTION

8 ROLLED TO A QUALIFIED PLAN.

9 (a) IN GENERAL.—Section 457(e)(9) of the Internal

10 Revenue Code of 1986 is amended—

11 (1) by striking clause (i) and inserting the fol12 lowing:

13 ‘‘(i) in any case in which such amount

14 exceeds $500, such amount (to the extent

15 the distribution of such amount is other16 wise includible in gross income) is distrib17 uted in a trustee-to-trustee transfer to a

18 qualified plan of such individual which is

19 specified by such individual.’’; and

20 (2) by adding at the end the following new sub21 paragraph:

22 ‘‘(C) QUALIFIED PLAN.—For purposes of

23 subparagraph (A), the term ‘qualified plan’

24 means a plan, contract, pension, or trust de-
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1 scribed in subparagraph (A) or (B) of section

2 219(g)(5).’’.

3 (b) EXCEPTION FROM INCOME TAX WITH4 HOLDING.—Paragraph (2) of section 3405(c) of such

5 Code is amended by inserting before the period ‘‘or if the

6 distribution is a trustee-to-trustee transfer described in

7 section 203(e) or 205(g) of the Employee Retirement In8 come Security Act of 1974 or section 457(e)(9) of this

9 title’’.

10 SEC. 302. STATUTORY EXEMPTION FROM PROHIBITED

11 TRANSACTION RULES FOR EMERGENT

12 TRANSACTIONS.

13 (a) IN GENERAL.—Section 4975 of the Internal Rev14 enue Code of 1986 (relating to tax on prohibited trans15 actions) is amended—

16 (1) by redesignating subsections (h) and (i) as

17 subsections (i) and (j), respectively; and

18 (2) by inserting after subsection (g) the fol19 lowing new subsection:

20 ‘‘(h) STATUTORY EXEMPTION FROM PROHIBITED

21 TRANSACTION RULES FOR EMERGENT TRANSACTIONS.—

22 ‘‘(1) IN GENERAL.—Pursuant to regulations

23 issued by the Secretary of Labor, a transaction be24 tween a plan and an eligible person constituting the

25 purchase or sale of a financial product which is in
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1 violation of a restriction imposed by subsection

2 (c)(1) may be exempted under section 408(a) of the

3 Employee Retirement Income Security Act of 1974

4 from treatment as a violation of such restriction if—

5 ‘‘(A) prior to engaging in the transaction,

6 the plan acquires from the eligible person a

7 qualifying guarantee, consisting of a letter of

8 credit or other form of written guarantee,

9 issued by a bank or similar financial institution

10 (other than the eligible person requesting the

11 exemption or an affiliate) regulated and super12 vised by, and subject to periodic examination

13 by, an agency of a State or of the Federal Gov14 ernment, in a stated amount equal, as of the

15 close of business on the day preceding the

16 transaction, to not less than 100 percent of the

17 amount of plan assets involved in the trans18 action, plus interest on that amount at a rate

19 determined by the parties to the transaction, or

20 in the absence of such determination, an inter21 est rate equal to the underpayment rate defined

22 in section 6621(a)(2);

23 ‘‘(B) the eligible person receives in such

24 transaction not more than reasonable com25 pensation;
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1 ‘‘(C) such transaction is expressly ap2 proved by an independent fiduciary who has in3 vestment authority with respect to the plan as4 sets involved in the transaction;

5 ‘‘(D) within 60 days after the transaction,

6 the eligible person submits to the Secretary an

7 application for an exemption under subsection

8 (a) from such restriction;

9 ‘‘(E) immediately after the acquisition of

10 the financial product—

11 ‘‘(i) the fair market value of such fi12 nancial product does not exceed 1 percent

13 of the fair market value of the assets of

14 the plan, and

15 ‘‘(ii) the aggregate fair market value

16 of all outstanding financial products ac17 quired by the plan from the eligible person

18 pursuant to this subsection does not exceed

19 5 percent of the fair market value of the

20 assets of the plan;

21 ‘‘(F) the Secretary determines not to grant

22 the exemption; and

23 ‘‘(G) the transaction is reversed within 60

24 days after the date of the Secretary’s deter25 mination.
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1 ‘‘(2) For purposes of this subsection—

2 ‘‘(A) a guarantee referred to in paragraph

3 (1) is ‘qualifying’ if such guarantee is irrev4 ocable and, under the terms of the guarantee—

5 ‘‘(i) if the Secretary grants the ex6 emption, the guarantee may expire without

7 any payments made to the plan, and

8 ‘‘(ii) if the Secretary determines not

9 to grant the exemption, the plan has the

10 unconditional right to apply the amounts

11 under the guarantee to any losses suffered

12 and to the payment of interest determined

13 under paragraph (1); and

14 ‘‘(B) the term ‘eligible person’ means a

15 person that—

16 ‘‘(i) consists of—

17 ‘‘(I) a bank as defined in section

18 202(a)(2) of the Investment Advisers

19 Act of 1940,

20 ‘‘(II) an investment adviser reg21 istered under the Investment Advisers

22 Act of 1940,

23 ‘‘(III) an insurance company

24 which is qualified to do business in

25 more than one State, or
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1 ‘‘(IV) a broker-dealer registered

2 under the Securities Exchange Act of

3 1934,

4 ‘‘(ii) has shareholders’ or partners’ eq5 uity in excess of $1,000,000, and

6 ‘‘(iii) is not described in section 411

7 of the Employee Retirement Income Secu8 rity Act of 1974.’’.

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

10 this section shall apply with respect to transactions occur11 ring after December 31, 2000.

12 SEC. 303. LOANS FROM RETIREMENT PLANS FOR HEALTH

13 INSURANCE AND JOB TRAINING EXPENSES.

14 (a) QUALIFICATION REQUIREMENT FOR PENSION

15 PLANS.—Paragraph (13) of section 401(a) of the Internal

16 Revenue Code of 1986 (relating to assignment and alien17 ation) is amended by adding at the end the following new

18 subparagraph:

19 ‘‘(E) LOANS FROM RETIREMENT PLANS

20 FOR HEALTH INSURANCE AND JOB TRAINING

21 EXPENSES.—Notwithstanding subparagraph

22 (A), a trust shall not constitute a qualified

23 trust under this section unless the plan of

24 which such trust is a part provides that a par25 ticipant or beneficiary who is involuntarily sepa-
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1 rated from employment may, on the date of

2 such separation, obtain a loan from the plan

3 the proceeds of which are to be used within 6

4 months after the date of such loan—

5 ‘‘(i) for payments for insurance which

6 constitutes medical care for the taxpayer

7 and the taxpayer’s spouse and dependents,

8 or

9 ‘‘(ii) for job training expenses.

10 For purposes of the preceding sentence, the re11 quirements of clauses subparagraphs (B)(iv),

12 (v), and (vi), (C), (D), and (E) of section

13 408(e)(7) shall apply, and in the case of a plan

14 that is a defined benefit plan, section

15 408(e)(7)(C) shall be applied by substituting

16 ‘accruals (other than contributions)’ for ‘inter17 ests and dividends’.’’.

18 (b) PROHIBITED TRANSACTION EXEMPTION.—Sec19 tion 4975(d) of such Code (relating to exemptions from

20 tax on prohibited transactions) is amended by striking

21 ‘‘or’’ at the end of paragraph (14), by striking the period

22 at the end of paragraph (15) and inserting ‘‘; or’’, and

23 by inserting after paragraph (15) the following new para24 graph:

25 ‘‘(16) any loan—
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1 ‘‘(A) from an individual retirement plan

2 for the payment of health insurance premiums

3 or job training expenses that is a qualified loan

4 (as defined in section 408(e)(7)(B)), or

5 ‘‘(B) made by the plan to a disqualified

6 person who is a participant or beneficiary of the

7 plan if such loan—

8 ‘‘(i) is for the payment of health in9 surance premiums or job training ex10 penses, and

11 ‘‘(ii) meets the requirements of sec12 tion 401(a)(13)(E).’’.

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

14 this section shall apply to loans made after the effective

15 date specified in section 401.

16 SEC. 304. MISSING PARTICIPANTS.

17 (a) IN GENERAL.—Section 401(a)(34) of the Internal

18 Revenue Code of 1986 (relating to benefits of missing par19 ticipants on plan termination) is amended by striking

20 ‘‘title IV’’ and inserting ‘‘section 4050’’.

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

22 this section shall apply to distributions made after 1 year

23 after the date of the enactment of this Act.
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1 SEC. 305. INCOME AVERAGING OF CORRECTED CIVIL SERV2 ICE ANNUITY BENEFIT PAYMENTS.

3 (a) IN GENERAL.—Part I of subchapter Q of chapter

4 1 of the Internal Revenue Code of 1986 (relating to in5 come averaging) is amended by inserting after section

6 1301 the following new section:

7 ‘‘SEC. 1302. AVERAGING OF CORRECTED CIVIL SERVICE AN8 NUITY BENEFIT PAYMENTS.

9 ‘‘(a) IN GENERAL.—Unless the taxpayer elects not

10 to have this section apply for a taxable year, any corrected

11 civil service annuity benefit payment includable in gross

12 income for such taxable year (without regard to this sec13 tion) shall be so included ratably over the 5-taxable year

14 period beginning with such taxable year.

15 ‘‘(b) CORRECTED CIVIL SERVICE ANNUITY BENEFIT

16 PAYMENT.—For purposes of subsection (a), the term ‘cor17 rected civil service annuity benefit payment’ means with

18 respect to an individual the sum of—

19 ‘‘(1) the lump sum payment awarded by reason

20 of a court order, or decision of the Merit Systems

21 Protection Board, under which the individual is enti22 tled to receive an amount equal to all or any part

23 of an annuity not paid to the individual as a result

24 of an erroneous application or interpretation of sub25 chapter III of chapter 83 or chapter 84 of title 5,
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1 United States Code, or any other provision of law

2 (or any rule or regulation relating thereto), plus

3 ‘‘(2) interest on the amount described in para4 graph (1) awarded under section 7704 of title 5,

5 United States Code.

6 ‘‘(c) ANNUITY.—For purposes of subsection (b), the

7 term ‘annuity’ has the meaning given to such term by sec8 tion 7704(c) of title 5, United States Code.

9 ‘‘(d) FINALITY OF ELECTION.—An election under

10 subsection (a) with respect to a corrected civil service an11 nuity benefit payment for a taxable year may not be

12 changed after the due date of the return for such taxable

13 year.’’.

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

15 for part I of subchapter Q of chapter 1 of such Code is

16 amended by inserting after the item relating to section

17 1301 the following new item:

‘‘Sec. 1302. Averaging of corrected civil service annuity benefit

payments.’’.

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

19 this section shall apply to payments received after Decem20 ber 31, 2000.
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1 TITLE IV—GENERAL

2 PROVISIONS

3 SEC. 401. GENERAL EFFECTIVE DATE.

4 (a) IN GENERAL.—Except as otherwise provided in

5 this Act, and subject to subsection (b), the amendments

6 made by this Act shall apply with respect to plan years

7 beginning on or after January 1, 2001.

8 (b) SPECIAL RULE FOR COLLECTIVELY BARGAINED

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

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

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

14 individuals covered by, any such agreement by substituting

15 for ‘‘January 1, 2001’’ the date of the commencement of

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

17 (1) the later of—

18 (A) January 1, 2002, or

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

23 or

24 (2) January 1, 2003.
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1 SEC. 402. PLAN AMENDMENTS.

2 If any amendment made by this Act requires an

3 amendment to any plan, such plan amendment shall not

4 be required to be made before the first plan year beginning

5 on or after January 1, 2003, if—

6 (1) during the period after such amendment

7 made by this Act takes effect and before such first

8 plan year, the plan is operated in accordance with

9 the requirements of such amendment made by this

10 Act, and

11 (2) such plan amendment applies retroactively

12 to the period after such amendment made by this

13 Act takes effect and such first plan year.

Æ