II

Calendar No. 818

106TH CONGRESS

2D SESSION H. R. 5203

IN THE SENATE OF THE UNITED STATES

SEPTEMBER 20, 2000

Received and read the first time

SEPTEMBER 21, 2000

Read the second time and placed on the calendar

AN ACT

To provide for reconciliation pursuant to sections 103(a)(2),

103(b)(2), and 213(b)(2)(C) of the concurrent resolution

on the budget for fiscal year 2001 to reduce the public

debt and to decrease the statutory limit on the public

debt, and to amend the Internal Revenue Code of 1986

to provide for retirement security.
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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, ETC.

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

5 ‘‘Debt Relief and Retirement Security Reconciliation Act’’.

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

7 this Act is as follows:

Sec. 1. Short title, etc.

DIVISION A—DEBT RELIEF

Sec. 100. Findings and purpose.

TITLE I—DEBT REDUCTION LOCK-BOX

Sec. 101. Establishment of Public Debt Reduction Payment Account.

Sec. 102. Reduction of statutory limit on the public debt.

Sec. 103. Off-budget status of Public Debt Reduction Payment Account.

Sec. 104. Removing Public Debt Reduction Payment Account from budget pronouncements.

Sec. 105. Reports to Congress.

TITLE II—SOCIAL SECURITY AND MEDICARE LOCK-BOX

Sec. 201. Protection of Social Security and Medicare surpluses.

Sec. 202. Removing Social Security from budget pronouncements.

DIVISION B—RETIREMENT SECURITY

TITLE XI—INDIVIDUAL RETIREMENT ACCOUNTS

Sec. 1100. References.

Sec. 1101. Modification of IRA contribution limits.

TITLE XII—EXPANDING COVERAGE

Sec. 1201. Increase in benefit and contribution limits.

Sec. 1202. Plan loans for subchapter S owners, partners, and sole proprietors.

Sec. 1203. Modification of top-heavy rules.

Sec. 1204. Elective deferrals not taken into account for purposes of deduction

limits.

Sec. 1205. Repeal of coordination requirements for deferred compensation plans

of State and local governments and tax-exempt organizations.

Sec. 1206. Elimination of user fee for requests to irs regarding pension plans.

Sec. 1207. Deduction limits.

Sec. 1208. Option to treat elective deferrals as after-tax contributions.

TITLE XIII—ENHANCING FAIRNESS FOR WOMEN

Sec. 1301. Catch-up contributions for individuals age 50 or over.
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Sec. 1302. Equitable treatment for contributions of employees to defined contribution plans.

Sec. 1303. Faster vesting of certain employer matching contributions.

Sec. 1304. Simplify and update the minimum distribution rules.

Sec. 1305. Clarification of tax treatment of division of section 457 plan benefits

upon divorce.

Sec. 1306. Modification of safe harbor relief for hardship withdrawals from

cash or deferred arrangements.

TITLE XIV—INCREASING PORTABILITY FOR PARTICIPANTS

Sec. 1401. Rollovers allowed among various types of plans.

Sec. 1402. Rollovers of IRAs into workplace retirement plans.

Sec. 1403. Rollovers of after-tax contributions.

Sec. 1404. Hardship exception to 60-day rule.

Sec. 1405. Treatment of forms of distribution.

Sec. 1406. Rationalization of restrictions on distributions.

Sec. 1407. Purchase of service credit in governmental defined benefit plans.

Sec. 1408. Employers may disregard rollovers for purposes of cash-out

amounts.

Sec. 1409. Minimum distribution and inclusion requirements for section 457

plans.

TITLE XV—STRENGTHENING PENSION SECURITY AND

ENFORCEMENT

Sec. 1501. Repeal of 150 percent of current liability funding limit.

Sec. 1502. Maximum contribution deduction rules modified and applied to all

defined benefit plans.

Sec. 1503. Excise tax relief for sound pension funding.

Sec. 1504. Excise tax on failure to provide notice by defined benefit plans significantly reducing future benefit accruals.

Sec. 1505. Treatment of multiemployer plans under section 415.

Sec. 1506. Prohibited allocations of stock in S corporation ESOP.

TITLE XVI—REDUCING REGULATORY BURDENS

Sec. 1601. Modification of timing of plan valuations.

Sec. 1602. ESOP dividends may be reinvested without loss of dividend deduction.

Sec. 1603. Repeal of transition rule relating to certain highly compensated employees.

Sec. 1604. Employees of tax-exempt entities.

Sec. 1605. Clarification of treatment of employer-provided retirement advice.

Sec. 1606. Reporting simplification.

Sec. 1607. Improvement of employee plans compliance resolution system.

Sec. 1608. Repeal of the multiple use test.

Sec. 1609. Flexibility in nondiscrimination, coverage, and line of business rules.

Sec. 1610. Extension to all governmental plans of moratorium on application

of certain nondiscrimination rules applicable to State and local

plans.

Sec. 1611. Notice and consent period regarding distributions.

TITLE XVII—PLAN AMENDMENTS

Sec. 1701. Provisions relating to plan amendments.
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1 DIVISION A—DEBT RELIEF

2 SEC. 100. FINDINGS AND PURPOSE.

3 (a) FINDINGS.—The Congress finds that—

4 (1) fiscal discipline, resulting from the Bal5 anced Budget Act of 1997, and strong economic

6 growth have ended decades of deficit spending and

7 have produced budget surpluses without using the

8 social security surplus;

9 (2) fiscal pressures will mount in the future as

10 the aging of the population increases budget obliga11 tions;

12 (3) until Congress and the President agree to

13 legislation that saves social security and medicare,

14 the social security and medicare surpluses should be

15 used to reduce the debt held by the public;

16 (4) until Congress and the President agree on

17 significant tax reductions, amounts dedicated for

18 that purpose shall be used to reduce the debt held

19 by the public;

20 (5) strengthening the Government’s fiscal posi21 tion through public debt reduction increases national

22 savings, promotes economic growth, reduces interest

23 costs, and is a constructive way to prepare for the

24 Government’s future budget obligations; and
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1 (6) it is fiscally responsible and in the long2 term national economic interest to use a portion of

3 the nonsocial security and nonmedicare surpluses to

4 reduce the debt held by the public.

5 (b) PURPOSE.—It is the purpose of this division to—

6 (1) reduce the debt held by the public by

7 $240,000,000,000 in fiscal year 2001 with the goal

8 of eliminating this debt by 2012;

9 (2) decrease the statutory limit on the public

10 debt; and

11 (3) ensure that the social security and hospital

12 insurance trust funds shall not be used for other

13 purposes.

14 TITLE I—DEBT REDUCTION

15 LOCK-BOX

16 SEC. 101. ESTABLISHMENT OF PUBLIC DEBT REDUCTION

17 PAYMENT ACCOUNT.

18 (a) IN GENERAL.—Subchapter I of chapter 31 of title

19 31, United States Code, is amended by adding at the end

20 the following new section:

21 ‘‘§ 3114. Public debt reduction payment account

22 ‘‘(a) There is established in the Treasury of the

23 United States an account to be known as the Public Debt

24 Reduction Payment Account (hereinafter in this section

25 referred to as the ‘account’).
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1 ‘‘(b) The Secretary of the Treasury shall use amounts

2 in the account to pay at maturity, or to redeem or buy

3 before maturity, any obligation of the Government held

4 by the public and included in the public debt. Any obliga5 tion which is paid, redeemed, or bought with amounts

6 from the account shall be canceled and retired and may

7 not be reissued. Amounts deposited in the account are ap8 propriated and may only be expended to carry out this

9 section.

10 ‘‘(c) There is hereby appropriated into the account

11 on October 1, 2000, or the date of enactment of this sec12 tion, whichever is later, out of any money in the Treasury

13 not otherwise appropriated, $42,000,000,000 for the fiscal

14 year ending September 30, 2001. The funds appropriated

15 to this account shall remain available until expended.

16 ‘‘(d) The appropriation made under subsection (c)

17 shall not be considered direct spending for purposes of sec18 tion 252 of Balanced Budget and Emergency Deficit Con19 trol Act of 1985.

20 ‘‘(e) Establishment of and appropriations to the ac21 count shall not affect trust fund transfers that may be

22 authorized under any other provision of law.

23 ‘‘(f) The Secretary of the Treasury and the Director

24 of the Office of Management and Budget shall each take

25 such actions as may be necessary to promptly carry out
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1 this section in accordance with sound debt management

2 policies.

3 ‘‘(g) Reducing the debt pursuant to this section shall

4 not interfere with the debt management policies or goals

5 of the Secretary of the Treasury.’’.

6 (b) CONFORMING AMENDMENT.—The chapter anal7 ysis for chapter 31 of title 31, United States Code, is

8 amended by inserting after the item relating to section

9 3113 the following:

‘‘3114. Public debt reduction payment account.’’.

10 SEC. 102. REDUCTION OF STATUTORY LIMIT ON THE PUB11 LIC DEBT.

12 Section 3101(b) of title 31, United States Code, is

13 amended by inserting ‘‘minus the amount appropriated

14 into the Public Debt Reduction Payment Account pursu15 ant to section 3114(c)’’ after ‘‘$5,950,000,000,000’’.

16 SEC. 103. OFF-BUDGET STATUS OF PUBLIC DEBT REDUC17 TION PAYMENT ACCOUNT.

18 Notwithstanding any other provision of law, the re19 ceipts and disbursements of the Public Debt Reduction

20 Payment Account established by section 3114 of title 31,

21 United States Code, shall not be counted as new budget

22 authority, outlays, receipts, or deficit or surplus for pur23 poses of—

24 (1) the budget of the United States Govern25 ment as submitted by the President,
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1 (2) the congressional budget, or

2 (3) the Balanced Budget and Emergency Def3 icit Control Act of 1985.

4 SEC. 104. REMOVING PUBLIC DEBT REDUCTION PAYMENT

5 ACCOUNT FROM BUDGET PRONOUNCE6 MENTS.

7 (a) IN GENERAL.—Any official statement issued by

8 the Office of Management and Budget, the Congressional

9 Budget Office, or any other agency or instrumentality of

10 the Federal Government of surplus or deficit totals of the

11 budget of the United States Government as submitted by

12 the President or of the surplus or deficit totals of the con13 gressional budget, and any description of, or reference to,

14 such totals in any official publication or material issued

15 by either of such Offices or any other such agency or in16 strumentality, shall exclude the outlays and receipts of the

17 Public Debt Reduction Payment Account established by

18 section 3114 of title 31, United States Code.

19 (b) SEPARATE PUBLIC DEBT REDUCTION PAYMENT

20 ACCOUNT BUDGET DOCUMENTS.—The excluded outlays

21 and receipts of the Public Debt Reduction Payment Ac22 count established by section 3114 of title 31, United

23 States Code, shall be submitted in separate budget docu24 ments.
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1 SEC. 105. REPORTS TO CONGRESS.

2 (a) REPORTS OF THE SECRETARY OF THE TREAS3 URY.—(1) Within 30 days after the appropriation is de4 posited into the Public Debt Reduction Payment Account

5 under section 3114 of title 31, United States Code, the

6 Secretary of the Treasury shall submit a report to the

7 Committee on Ways and Means of the House of Rep8 resentatives and the Committee on Finance of the Senate

9 confirming that such account has been established and the

10 amount and date of such deposit. Such report shall also

11 include a description of the Secretary’s plan for using such

12 money to reduce debt held by the public.

13 (2) Not later than October 31, 2002, the Secretary

14 of the Treasury shall submit a report to the Committee

15 on Ways and Means of the House of Representatives and

16 the Committee on Finance of the Senate setting forth the

17 amount of money deposited into the Public Debt Reduc18 tion Payment Account, the amount of debt held by the

19 public that was reduced, and a description of the actual

20 debt instruments that were redeemed with such money.

21 (b) REPORT OF THE COMPTROLLER GENERAL OF

22 THE UNITED STATES.—Not later than November 15,

23 2002, the Comptroller General of the United States shall

24 submit a report to the Committee on Ways and Means

25 of the House of Representatives and the Committee on
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1 Finance of the Senate verifying all of the information set

2 forth in the reports submitted under subsection (a).

3 TITLE II—SOCIAL SECURITY AND

4 MEDICARE LOCK-BOX

5 SEC. 201. PROTECTION OF SOCIAL SECURITY AND MEDI6 CARE SURPLUSES.

7 (a) PROTECTION OF SOCIAL SECURITY AND MEDI8 CARE SURPLUSES.—Section 201 of the concurrent resolu9 tion on the budget for fiscal year 2001 (H. Con. Res. 290,

10 106th Congress) is amended as follows:

11 (1) In the section heading, by inserting ‘‘AND

12 MEDICARE’’ before ‘‘SURPLUSES’’.

13 (2) By striking subsection (c) and inserting the

14 following new subsection:

15 ‘‘(c) LOCK-BOX FOR SOCIAL SECURITY AND HOS16 PITAL INSURANCE SURPLUSES.—

17 ‘‘(1) CONCURRENT RESOLUTIONS ON THE

18 BUDGET.—It shall not be in order in the House of

19 Representatives or the Senate to consider any con20 current resolution on the budget, or conference re21 port thereon or amendment thereto, that would set

22 forth a surplus for any fiscal year that is less than

23 the surplus of the Federal Hospital Insurance Trust

24 Fund for that fiscal year.
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1 ‘‘(2) SUBSEQUENT LEGISLATION.—(A) Except

2 as provided by subparagraph (B), it shall not be in

3 order in the House of Representatives or the Senate

4 to consider any bill, joint resolution, amendment,

5 motion, or conference report if—

6 ‘‘(i) the enactment of that bill or resolution

7 as reported;

8 ‘‘(ii) the adoption and enactment of that

9 amendment; or

10 ‘‘(iii) the enactment of that bill or resolu11 tion in the form recommended in that con12 ference report,

13 would cause the on-budget surplus for any fiscal

14 year to be less than the projected surplus of the

15 Federal Hospital Insurance Trust Fund (as assumed

16 in the most recently agreed to concurrent resolution

17 on the budget) for that fiscal year or increase the

18 amount by which the on-budget surplus for any fis19 cal year would be less than such trust fund surplus

20 for that fiscal year.

21 ‘‘(B) Subparagraph (A) shall not apply to social

22 security reform legislation or medicare reform legis23 lation.’’.
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1 (3) By redesignating subsections (e) and (f) as

2 subsections (g) and (h), respectively, and inserting

3 after subsection (d) the following new subsections:

4 ‘‘(e) CONTENT OF CONCURRENT RESOLUTION ON

5 THE BUDGET.—The concurrent resolution on the budget

6 for each fiscal year shall set forth appropriate levels for

7 the fiscal year beginning on October 1 of such year and

8 for at least each of the 4 ensuing fiscal years of the sur9 plus or deficit in the Federal Hospital Insurance Trust

10 Fund.

11 ‘‘(f) DEFINITIONS.—As used in this section:

12 ‘‘(1) The term ‘medicare reform legislation’

13 means a bill or a joint resolution to save Medicare

14 that includes a provision stating the following: ‘For

15 purposes of section 201(c) of the concurrent resolu16 tion on the budget for fiscal year 2001, this Act con17 stitutes medicare reform legislation.’.

18 ‘‘(2) The term ‘social security reform legisla19 tion’ means a bill or a joint resolution to save social

20 security that includes a provision stating the fol21 lowing: ‘For purposes of section 201(c) of the con22 current resolution on the budget for fiscal year

23 2001, this Act constitutes social security reform leg24 islation.’.’’.
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1 (4) In the first sentence of subsection (h) (as

2 redesignated), by striking ‘‘(1)’’.

3 (5) At the end, by adding the following new

4 subsection:

5 ‘‘(i) EFFECTIVE DATE.—This section shall cease to

6 have any force or effect upon the enactment of social secu7 rity reform legislation and medicare reform legislation.’’.

8 (b) PROTECTION OF SOCIAL SECURITY AND MEDI9 CARE SURPLUSES.—(1) If the budget of the United States

10 Government submitted by the President under section

11 1105(a) of title 31, United States Code, recommends an

12 on-budget surplus for any fiscal year that is less than the

13 surplus of the Federal Hospital Insurance Trust Fund for

14 that fiscal year, then it shall include proposed legislative

15 language for social security reform legislation or medicare

16 reform legislation.

17 (2) Paragraph (1) shall cease to have any force or

18 effect upon the enactment of social security reform legisla19 tion and medicare reform legislation as defined by section

20 201(g) of the concurrent resolution on the budget for fis21 cal year 2001 (H. Con. Res 290, 106th Congress).

22 (c) CONFORMING AMENDMENT.—The item relating

23 to section 201 in the table of contents set forth in section

24 1(b) of the concurrent resolution on the budget for fiscal
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1 year 2001 (H. Con. Res 290, 106th Congress) is amended

2 to read as follows:

‘‘Sec. 201. Protection of social security and medicare surpluses.’’.

3 SEC. 202. REMOVING SOCIAL SECURITY FROM BUDGET

4 PRONOUNCEMENTS.

5 (a) IN GENERAL.—Any official statement issued by

6 the Office of Management and Budget, the Congressional

7 Budget Office, or any other agency or instrumentality of

8 the Federal Government of surplus or deficit totals of the

9 budget of the United States Government as submitted by

10 the President or of the surplus or deficit totals of the con11 gressional budget, and any description of, or reference to,

12 such totals in any official publication or material issued

13 by either of such Offices or any other such agency or in14 strumentality, shall exclude the outlays and receipts of the

15 old-age, survivors, and disability insurance program under

16 title II of the Social Security Act (including the Federal

17 Old-Age and Survivors Insurance Trust Fund and the

18 Federal Disability Insurance Trust Fund) and the related

19 provisions of the Internal Revenue Code of 1986.

20 (b) SEPARATE SOCIAL SECURITY BUDGET DOCU21 MENTS.—The excluded outlays and receipts of the old-age,

22 survivors, and disability insurance program under title II

23 of the Social Security Act shall be submitted in separate

24 Social Security budget documents.
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1 DIVISION B—RETIREMENT

2 SECURITY

3 TITLE XI—INDIVIDUAL

4 RETIREMENT ACCOUNTS

5 SEC. 1100. REFERENCES.

6 Except as otherwise expressly provided, whenever in

7 this division an amendment or repeal is expressed in terms

8 of an amendment to, or repeal of, a section or other provi9 sion, the reference shall be considered to be made to a

10 section or other provision of the Internal Revenue Code

11 of 1986.

12 SEC. 1101. MODIFICATION OF IRA CONTRIBUTION LIMITS.

13 (a) INCREASE IN CONTRIBUTION LIMIT.—

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

15 219(b) (relating to maximum amount of deduction)

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

17 deductible amount’’.

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

19 amended by adding at the end the following new

20 paragraph:

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

22 paragraph (1)(A)—

23 ‘‘(A) IN GENERAL.—The deductible

24 amount shall be determined in accordance with

25 the following table:
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‘‘For taxable years The deductible

beginning in: amount is:

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

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

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

1 ‘‘(B) CATCH-UP CONTRIBUTIONS FOR INDI2 VIDUALS 50 OR OLDER.—In the case of an indi3 vidual who has attained the age of 50 before

4 the close of the taxable year, the deductible

5 amount for taxable years beginning in 2001 or

6 2002 shall be $5,000.

7 ‘‘(C) COST-OF-LIVING ADJUSTMENT.—

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

9 taxable year beginning in a calendar year

10 after 2003, the $5,000 amount under sub11 paragraph (A) shall be increased by an

12 amount equal to—

13 ‘‘(I) such dollar amount, multi14 plied by

15 ‘‘(II) the cost-of-living adjust16 ment determined under section

17 1(f )(3) for the calendar year in which

18 the taxable year begins, determined by

19 substituting ‘calendar year 2002’ for

20 ‘calendar year 1992’ in subparagraph

21 (B) thereof.

22 ‘‘(ii) ROUNDING RULES.—If any

23 amount after adjustment under clause (i)
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1 is not a multiple of $500, such amount

2 shall be rounded to the next lower multiple

3 of $500.’’.

4 (b) CONFORMING AMENDMENTS.—

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

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

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

8 of the amount in effect for such taxable year under

9 section 219(b)(1)(A)’’.

10 (2) Section 408(b)(2)(B) is amended by strik11 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

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

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

14 ‘‘$2,000’’ in the matter following paragraph (4) and

15 inserting ‘‘the dollar amount in effect under section

16 219(b)(1)(A)’’.

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

18 ‘‘$2,000’’.

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

20 ‘‘$2,000’’ and inserting ‘‘the dollar amount in effect

21 under section 219(b)(1)(A)’’.

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

23 this section shall apply to taxable years beginning after

24 December 31, 2000.
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1 TITLE XII—EXPANDING

2 COVERAGE

3 SEC. 1201. INCREASE IN BENEFIT AND CONTRIBUTION

4 LIMITS.

5 (a) DEFINED BENEFIT PLANS.—

6 (1) DOLLAR LIMIT.—

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

8 (relating to limitation for defined benefit plans)

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

10 ‘‘$160,000’’.

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

12 415(b)(2) are each amended by striking

13 ‘‘$90,000’’ each place it appears in the head14 ings and the text and inserting ‘‘$160,000’’.

15 (C) Paragraph (7) of section 415(b) (relat16 ing to benefits under certain collectively bar17 gained plans) is amended by striking ‘‘the

18 greater of $68,212 or one-half the amount oth19 erwise applicable for such year under paragraph

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

21 the amount otherwise applicable for such year

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

23 (2) LIMIT REDUCED WHEN BENEFIT BEGINS

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

25 415(b)(2) is amended by striking ‘‘the social security
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1 retirement age’’ each place it appears in the heading

2 and text and inserting ‘‘age 62’’.

3 (3) LIMIT INCREASED WHEN BENEFIT BEGINS

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

5 415(b)(2) is amended by striking ‘‘the social security

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

7 and text and inserting ‘‘age 65’’.

8 (4) COST-OF-LIVING ADJUSTMENTS.—Sub9 section (d) of section 415 (related to cost-of-living

10 adjustments) is amended—

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

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

13 (B) in paragraph (3)(A)—

14 (i) by striking ‘‘$90,000’’ in the head15 ing and inserting ‘‘$160,000’’; and

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

17 inserting ‘‘July 1, 2000’’.

18 (5) CONFORMING AMENDMENT.—Section

19 415(b)(2) is amended by striking subparagraph (F).

20 (b) DEFINED CONTRIBUTION PLANS.—

21 (1) DOLLAR LIMIT.—Subparagraph (A) of sec22 tion 415(c)(1) (relating to limitation for defined con23 tribution plans) is amended by striking ‘‘$30,000’’

24 and inserting ‘‘$40,000’’.
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1 (2) COST-OF-LIVING ADJUSTMENTS.—Sub2 section (d) of section 415 (related to cost-of-living

3 adjustments) is amended—

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

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

6 (B) in paragraph (3)(D)—

7 (i) by striking ‘‘$30,000’’ in the head8 ing and inserting ‘‘$40,000’’; and

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

10 inserting ‘‘July 1, 2000’’.

11 (c) QUALIFIED TRUSTS.—

12 (1) COMPENSATION LIMIT.—Sections

13 401(a)(17), 404(l), 408(k), and 505(b)(7) are each

14 amended by striking ‘‘$150,000’’ each place it ap15 pears and inserting ‘‘$200,000’’.

16 (2) BASE PERIOD AND ROUNDING OF COST-OF17 LIVING ADJUSTMENT.—Subparagraph (B) of section

18 401(a)(17) is amended—

19 (A) by striking ‘‘October 1, 1993’’ and in20 serting ‘‘July 1, 2000’’; and

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

22 appears and inserting ‘‘$5,000’’.

23 (d) ELECTIVE DEFERRALS.—
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1 (1) IN GENERAL.—Paragraph (1) of section

2 402(g) (relating to limitation on exclusion for elec3 tive deferrals) is amended to read as follows:

4 ‘‘(1) IN GENERAL.—

5 ‘‘(A) LIMITATION.—Notwithstanding sub6 sections (e)(3) and (h)(1)(B), the elective defer7 rals of any individual for any taxable year shall

8 be included in such individual’s gross income to

9 the extent the amount of such deferrals for the

10 taxable year exceeds the applicable dollar

11 amount.

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

13 purposes of subparagraph (A), the applicable

14 dollar amount shall be the amount determined

15 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.’’.

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

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

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

19 case of taxable years beginning after December 31,

20 2005, the Secretary shall adjust the $15,000

21 amount under paragraph (1)(B) at the same time
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1 and in the same manner as under section 415(d),

2 except that the base period shall be the calendar

3 quarter beginning July 1, 2004, and any increase

4 under this paragraph which is not a multiple of

5 $500 shall be rounded to the next lowest multiple of

6 $500.’’.

7 (3) CONFORMING AMENDMENTS.—

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

9 on exclusion for elective deferrals), as amended

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

11 by striking paragraph (4) and redesignating

12 paragraphs (5), (6), (7), (8), and (9) as para13 graphs (4), (5), (6), (7), and (8), respectively.

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

15 amended by striking ‘‘402(g)(8)(A)(iii)’’ and in16 serting ‘‘402(g)(7)(A)(iii)’’.

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

18 amended by striking ‘‘(other than paragraph

19 (4) thereof)’’.

20 (e) DEFERRED COMPENSATION PLANS OF STATE

21 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI22 ZATIONS.—

23 (1) IN GENERAL.—Section 457 (relating to de24 ferred compensation plans of State and local govern25 ments and tax-exempt organizations) is amended—
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1 (A) in subsections (b)(2)(A) and (c)(1) by

2 striking ‘‘$7,500’’ each place it appears and in3 serting ‘‘the applicable dollar amount’’; and

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

5 ‘‘$15,000’’ and inserting ‘‘twice the dollar

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

7 (2) APPLICABLE DOLLAR AMOUNT; COST-OF8 LIVING ADJUSTMENT.—Paragraph (15) of section

9 457(e) is amended to read as follows:

10 ‘‘(15) APPLICABLE DOLLAR AMOUNT.—

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

12 amount shall be the amount determined in ac13 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.

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

15 the case of taxable years beginning after De16 cember 31, 2005, the Secretary shall adjust the

17 $15,000 amount specified in the table in sub18 paragraph (A) at the same time and in the

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

20 that the base period shall be the calendar quar21 ter beginning July 1, 2004, and any increase
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1 under this paragraph which is not a multiple of

2 $500 shall be rounded to the next lowest mul3 tiple of $500.’’.

4 (f) SIMPLE RETIREMENT ACCOUNTS.—

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

6 408(p)(2)(A) (relating to general rule for qualified

7 salary reduction arrangement) is amended by strik8 ing ‘‘$6,000’’ and inserting ‘‘the applicable dollar

9 amount’’.

10 (2) APPLICABLE DOLLAR AMOUNT.—Subpara11 graph (E) of 408(p)(2) is amended to read as fol12 lows:

13 ‘‘(E) APPLICABLE DOLLAR AMOUNT; COST14 OF-LIVING ADJUSTMENT.—

15 ‘‘(i) IN GENERAL.—For purposes of

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

17 amount shall be the amount determined in

18 accordance with the following table:

‘‘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.

19 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

20 In the case of a year beginning after De21 cember 31, 2004, the Secretary shall ad22 just the $10,000 amount under clause (i)
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1 at the same time and in the same manner

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

3 base period taken into account shall be the

4 calendar quarter beginning July 1, 2003,

5 and any increase under this subparagraph

6 which is not a multiple of $500 shall be

7 rounded to the next lower multiple of

8 $500.’’.

9 (3) CONFORMING AMENDMENTS.—

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

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

12 ‘‘the amount in effect under section

13 408(p)(2)(A)(ii)’’.

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

15 striking subparagraph (E).

16 (g) ROUNDING RULE RELATING TO DEFINED BEN17 EFIT PLANS AND DEFINED CONTRIBUTION PLANS.—

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

19 follows:

20 ‘‘(4) ROUNDING.—

21 ‘‘(A) $160,000 AMOUNT.—Any increase

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

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

24 the next lowest multiple of $5,000.
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1 ‘‘(B) $40,000 AMOUNT.—Any increase

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

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

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

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

6 this section shall apply to years beginning after December

7 31, 2000.

8 SEC. 1202. PLAN LOANS FOR SUBCHAPTER S OWNERS,

9 PARTNERS, AND SOLE PROPRIETORS.

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

11 4975(f)(6) (relating to exemptions not to apply to certain

12 transactions) is amended by adding at the end the fol13 lowing new clause:

14 ‘‘(iii) LOAN EXCEPTION.—For pur15 poses of subparagraph (A)(i), the term

16 ‘owner-employee’ shall only include a per17 son described in subclause (II) or (III) of

18 clause (i).’’.

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

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

21 2000.

22 SEC. 1203. MODIFICATION OF TOP-HEAVY RULES.

23 (a) SIMPLIFICATION OF DEFINITION OF KEY EM24 PLOYEE.—
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1 (1) IN GENERAL.—Section 416(i)(1)(A) (defin2 ing key employee) is amended—

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

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

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

6 following:

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

8 an annual compensation greater than

9 $150,000,’’;

10 (C) by striking clause (ii) and redesig11 nating clauses (iii) and (iv) as clauses (ii) and

12 (iii), respectively; and

13 (D) by striking the second sentence in the

14 matter following clause (iii), as redesignated by

15 subparagraph (C).

16 (2) CONFORMING AMENDMENT.—Section

17 416(i)(1)(B)(iii) is amended by striking ‘‘and sub18 paragraph (A)(ii)’’.

19 (b) MATCHING CONTRIBUTIONS TAKEN INTO AC20 COUNT FOR MINIMUM CONTRIBUTION REQUIREMENTS.—

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

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

23 ‘‘Employer matching contributions (as defined in section

24 401(m)(4)(A)) shall be taken into account for purposes

25 of this subparagraph.’’.
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1 (c) DISTRIBUTIONS DURING LAST YEAR BEFORE

2 DETERMINATION DATE TAKEN INTO ACCOUNT.—

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

4 416(g) is amended to read as follows:

5 ‘‘(3) DISTRIBUTIONS DURING LAST YEAR BE6 FORE DETERMINATION DATE TAKEN INTO AC7 COUNT.—

8 ‘‘(A) IN GENERAL.—For purposes of

9 determining—

10 ‘‘(i) the present value of the cumu11 lative accrued benefit for any employee, or

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

13 employee,

14 such present value or amount shall be increased

15 by the aggregate distributions made with re16 spect to such employee under the plan during

17 the 1-year period ending on the determination

18 date. The preceding sentence shall also apply to

19 distributions under a terminated plan which if

20 it had not been terminated would have been re21 quired to be included in an aggregation group.

22 ‘‘(B) 5-YEAR PERIOD IN CASE OF IN-SERV23 ICE DISTRIBUTION.—In the case of any dis24 tribution made for a reason other than separa25 tion from service, death, or disability, subpara-
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1 graph (A) shall be applied by substituting ‘5-

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

3 (2) BENEFITS NOT TAKEN INTO ACCOUNT.—

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

5 amended—

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

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

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

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

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

13 top-heavy plans) is amended by adding at the end the fol14 lowing new subparagraph:

15 ‘‘(H) CASH OR DEFERRED ARRANGEMENTS

16 USING ALTERNATIVE METHODS OF MEETING

17 NONDISCRIMINATION REQUIREMENTS.—The

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

19 which consists solely of—

20 ‘‘(i) a cash or deferred arrangement

21 which meets the requirements of section

22 401(k)(12), and

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

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

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

3 member of an aggregation group which is a top4 heavy group, contributions under the plan may

5 be taken into account in determining whether

6 any other plan in the group meets the require7 ments of subsection (c)(2).’’.

8 (e) FROZEN PLAN EXEMPT FROM MINIMUM BEN9 EFIT REQUIREMENT.—Subparagraph (C) of section

10 416(c)(1) (relating to defined benefit plans) is amended—

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

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

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

14 ‘‘(iii) EXCEPTION FOR FROZEN

15 PLAN.—For purposes of determining an

16 employee’s years of service with the em17 ployer, any service with the employer shall

18 be disregarded to the extent that such

19 service occurs during a plan year when the

20 plan benefits (within the meaning of sec21 tion 410(b)) no employee or former em22 ployee.’’.

23 (f) ELIMINATION OF FAMILY ATTRIBUTION.—Sec24 tion 416(i)(1)(B) (defining 5-percent owner) is amended

25 by adding at the end the following new clause:
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1 ‘‘(iv) FAMILY ATTRIBUTION DIS2 REGARDED.—Solely for purposes of apply3 ing this paragraph (and not for purposes

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

6 employee or 5-percent owner under this

7 paragraph), section 318 shall be applied

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

9 in determining whether any person is a 5-

10 percent owner.’’.

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

12 this section shall apply to years beginning after December

13 31, 2000.

14 SEC. 1204. ELECTIVE DEFERRALS NOT TAKEN INTO AC15 COUNT FOR PURPOSES OF DEDUCTION LIM16 ITS.

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

18 for contributions of an employer to an employees’ trust

19 or annuity plan and compensation under a deferred pay20 ment plan) is amended by adding at the end the following

21 new subsection:

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

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

25 subject to any limitation contained in paragraph (3), (7),
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1 or (9) of subsection (a), and such elective deferrals shall

2 not be taken into account in applying any such limitation

3 to any other contributions.’’.

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

5 this section shall apply to years beginning after December

6 31, 2000.

7 SEC. 1205. REPEAL OF COORDINATION REQUIREMENTS

8 FOR DEFERRED COMPENSATION PLANS OF

9 STATE AND LOCAL GOVERNMENTS AND TAX10 EXEMPT ORGANIZATIONS.

11 (a) IN GENERAL.—Subsection (c) of section 457 (re12 lating to deferred compensation plans of State and local

13 governments and tax-exempt organizations), as amended

14 by section 1201, is amended to read as follows:

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

16 compensation of any one individual which may be deferred

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

19 modified by any adjustment provided under subsection

20 (b)(3)).’’.

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

22 subsection (a) shall apply to years beginning after Decem23 ber 31, 2000.
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1 SEC. 1206. ELIMINATION OF USER FEE FOR REQUESTS TO

2 IRS REGARDING PENSION PLANS.

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

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

5 not require payment of user fees under the program estab6 lished under section 7527 of the Internal Revenue Code

7 of 1986 for requests to the Internal Revenue Service for

8 determination letters with respect to the qualified status

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

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

11 The preceding sentence shall not apply to any request—

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

13 benefit plan is in existence; or

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

15 similar plan which the sponsor intends to market to

16 participating employers.

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

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

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

20 ownership plan.

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

23 given such term in section 408(p)(2)(C)(i)(I) of the Inter24 nal Revenue Code of 1986. The determination of whether

25 an employer is an eligible employer under this section shall
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1 be made as of the date of the request described in sub2 section (a).

3 (d) EFFECTIVE DATE.—The provisions of this sec4 tion shall apply with respect to requests made after De5 cember 31, 2000.

6 SEC. 1207. DEDUCTION LIMITS.

7 (a) IN GENERAL.—

8 (1) STOCK BONUS AND PROFIT SHARING

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

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

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

12 percent’’.

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

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

15 following:

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

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

18 term ‘compensation otherwise paid or accrued dur19 ing the taxable year’ shall include amounts treated

20 as ‘participant’s compensation’ under subparagraph

21 (C) or (D) of section 415(c)(3).’’.

22 (b) CONFORMING AMENDMENTS.—

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

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

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

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

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

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

8 404(a)(12))’’.

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

10 this section shall apply to years beginning after December

11 31, 2000.

12 SEC. 1208. OPTION TO TREAT ELECTIVE DEFERRALS AS

13 AFTER-TAX CONTRIBUTIONS.

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

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

16 is amended by inserting after section 402 the following

17 new section:

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

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

21 plan includes a qualified plus contribution program—

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

23 an employee pursuant to the program shall be treat24 ed as an elective deferral for purposes of this chap-
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1 ter, except that such contribution shall not be ex2 cludable from gross income, and

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

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

5 meet any requirement of this chapter solely by rea6 son of including such program.

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

8 For purposes of this section—

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

10 contribution program’ means a program under which

11 an employee may elect to make designated plus con12 tributions in lieu of all or a portion of elective defer13 rals the employee is otherwise eligible to make under

14 the applicable retirement plan.

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

16 program shall not be treated as a qualified plus con17 tribution program unless the applicable retirement

18 plan—

19 ‘‘(A) establishes separate accounts (‘des20 ignated plus accounts’) for the designated plus

21 contributions of each employee and any earn22 ings properly allocable to the contributions, and

23 ‘‘(B) maintains separate recordkeeping

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

3 section—

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

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

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

8 employee without regard to this section, and

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

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

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

13 elective deferrals which an employee may designate

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

15 any) of—

16 ‘‘(A) the maximum amount of elective de17 ferrals excludable from gross income of the em18 ployee for the taxable year (without regard to

19 this section), over

20 ‘‘(B) the aggregate amount of elective de21 ferrals of the employee for the taxable year

22 which the employee does not designate under

23 paragraph (1).

24 ‘‘(3) ROLLOVER CONTRIBUTIONS.—
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1 ‘‘(A) IN GENERAL.—A rollover contribu2 tion of any payment or distribution from a des3 ignated plus account which is otherwise allow4 able under this chapter may be made only if the

5 contribution is to—

6 ‘‘(i) another designated plus account

7 of the individual from whose account the

8 payment or distribution was made, or

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

10 ‘‘(B) COORDINATION WITH LIMIT.—Any

11 rollover contribution to a designated plus ac12 count under subparagraph (A) shall not be

13 taken into account for purposes of paragraph

14 (1).

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

16 title—

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

18 from a designated plus account shall not be includ19 ible in gross income.

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

21 of this subsection—

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

23 distribution’ has the meaning given such term

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

25 clause (iv) thereof).
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1 ‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU2 SION PERIOD.—A payment or distribution from

3 a designated plus account shall not be treated

4 as a qualified distribution if such payment or

5 distribution is made within the 5-taxable-year

6 period beginning with the earlier of—

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

8 the individual made a designated plus con9 tribution to any designated plus account

10 established for such individual under the

11 same applicable retirement plan, or

12 ‘‘(ii) if a rollover contribution was

13 made to such designated plus account from

14 a designated plus account previously estab15 lished for such individual under another

16 applicable retirement plan, the first taxable

17 year for which the individual made a des18 ignated plus contribution to such pre19 viously established account.

20 ‘‘(C) DISTRIBUTIONS OF EXCESS DEFER21 RALS AND EARNINGS.—The term ‘qualified dis22 tribution’ shall not include any distribution of

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

24 any income on the excess deferral.
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1 ‘‘(3) AGGREGATION RULES.—Section 72 shall

2 be applied separately with respect to distributions

3 and payments from a designated plus account and

4 other distributions and payments from the plan.

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

6 section—

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

8 term ‘applicable retirement plan’ means—

9 ‘‘(A) an employees’ trust described in sec10 tion 401(a) which is exempt from tax under

11 section 501(a), and

12 ‘‘(B) a plan under which amounts are con13 tributed by an individual’s employer for an an14 nuity contract described in section 403(b).

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

16 deferral’ means any elective deferral described in

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

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

19 to limitation on exclusion for elective deferrals) is

20 amended—

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

22 following new sentence: ‘‘The preceding sentence

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

24 not exceed the designated plus contributions of the

25 individual for the taxable year.’’; and
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1 (2) by inserting ‘‘(or would be included but for

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

3 paragraph (2)(A).

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

5 402(c)(8) is amended by adding at the end the following:

6 ‘‘If any portion of an eligible rollover distribu7 tion is attributable to payments or distributions

8 from a designated plus account (as defined in

9 section 402A), an eligible retirement plan with

10 respect to such portion shall include only an11 other designated plus account and a Roth

12 IRA.’’.

13 (d) REPORTING REQUIREMENTS.—

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

15 amended by inserting ‘‘, including the amount of

16 designated plus contributions (as defined in section

17 402A)’’ before the comma at the end.

18 (2) INFORMATION.—Section 6047 is amended

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

20 by inserting after subsection (e) the following new

21 subsection:

22 ‘‘(f) DESIGNATED PLUS CONTRIBUTIONS.—The Sec23 retary shall require the plan administrator of each applica24 ble retirement plan (as defined in section 402A) to make

25 such returns and reports regarding designated plus con-
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1 tributions (as so defined) to the Secretary, participants

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

3 the Secretary may prescribe.’’.

4 (e) CONFORMING AMENDMENTS.—

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

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

7 term includes a rollover contribution described in

8 section 402A(c)(3)(A).’’.

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

10 I of subchapter D of chapter 1 is amended by insert11 ing after the item relating to section 402 the fol12 lowing new item:

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

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

14 this section shall apply to taxable years beginning after

15 December 31, 2000.

16 TITLE XIII—ENHANCING

17 FAIRNESS FOR WOMEN

18 SEC. 1301. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS

19 AGE 50 OR OVER.

20 (a) IN GENERAL.—Section 414 (relating to defini21 tions and special rules) is amended by adding at the end

22 the following new subsection:

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

24 AGE 50 OR OVER.—
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1 ‘‘(1) IN GENERAL.—An applicable employer

2 plan shall not be treated as failing to meet any re3 quirement of this title solely because the plan per4 mits an eligible participant to make additional elec5 tive deferrals in any plan year.

6 ‘‘(2) LIMITATION ON AMOUNT OF ADDITIONAL

7 DEFERRALS.—A plan shall not permit additional

8 elective deferrals under paragraph (1) for any year

9 in an amount greater than the lesser of—

10 ‘‘(A) $5,000, or

11 ‘‘(B) the excess (if any) of—

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

13 the year, over

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

15 participant for such year which are made

16 without regard to this subsection.

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

18 case of any contribution to a plan under paragraph

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

20 year in which the contribution is made—

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

22 limitation contained in section 402(g),

23 402(h)(2), 404(a), 404(h), 408(p)(2)(A)(ii),

24 415, or 457, or
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1 ‘‘(B) be taken into account in applying

2 such limitations to other contributions or bene3 fits under such plan or any other such plan.

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

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

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

7 plan—

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

9 the close of the plan year, and

10 ‘‘(B) with respect to whom no other elec11 tive deferrals may (without regard to this sub12 section) be made to the plan for the plan year

13 by reason of the application of any limitation or

14 other restriction described in paragraph (3) or

15 comparable limitation contained in the terms of

16 the plan.

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

18 purposes of this subsection—

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

20 term ‘applicable employer plan’ means—

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

22 section 401(a) which is exempt from tax

23 under section 501(a),

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

25 contributed by an individual’s employer for
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1 an annuity contract described in section

2 403(b),

3 ‘‘(iii) an eligible deferred compensa4 tion plan under section 457 of an eligible

5 employer as defined in section

6 457(e)(1)(A), and

7 ‘‘(iv) an arrangement meeting the re8 quirements of section 408 (k) or (p).

9 ‘‘(B) ELECTIVE DEFERRAL.—The term

10 ‘elective deferral’ has the meaning given such

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

12 ‘‘(C) EXCEPTION FOR SECTION 457

13 PLANS.—This subsection shall not apply to an

14 applicable employer plan described in subpara15 graph (A)(iii) for any year to which section

16 457(b)(3) applies.

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

18 years beginning after December 31, 2005, the

19 Secretary shall adjust annually the $5,000

20 amount in subparagraph (A) for increases in

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

22 same manner as adjustments under section

23 415(d); except that the base period shall be the

24 calendar quarter beginning July 1, 2004, and

25 any increase which is not a multiple of $500
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1 shall be rounded to the next lowest multiple of

2 $500.’’.

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

4 this section shall apply to contributions in taxable years

5 beginning after December 31, 2000.

6 SEC. 1302. EQUITABLE TREATMENT FOR CONTRIBUTIONS

7 OF EMPLOYEES TO DEFINED CONTRIBUTION

8 PLANS.

9 (a) EQUITABLE TREATMENT.—

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

11 415(c)(1) (relating to limitation for defined con12 tribution plans) is amended by striking ‘‘25 percent’’

13 and inserting ‘‘100 percent’’.

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

15 403(b) is amended—

16 (A) by striking ‘‘the exclusion allowance

17 for such taxable year’’ in paragraph (1) and in18 serting ‘‘the applicable limit under section

19 415’’;

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

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

22 by a former employee after the fifth taxable

23 year following the taxable year in which such

24 employee was terminated’’ before the period at
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1 the end of the second sentence of paragraph

2 (3).

3 (3) CONFORMING AMENDMENTS.—

4 (A) Subsection (f) of section 72 is amend5 ed by striking ‘‘section 403(b)(2)(D)(iii))’’ and

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

7 before the enactment of the Debt Relief and

8 Retirement Security Reconciliation Act)’’.

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

10 striking ‘‘, the exclusion allowance under sec11 tion 403(b)(2),’’.

12 (C) Section 415(a)(2) is amended by strik13 ing ‘‘, and the amount of the contribution for

14 such portion shall reduce the exclusion allow15 ance as provided in section 403(b)(2)’’.

16 (D) Section 415(c)(3) is amended by add17 ing at the end the following new subparagraph:

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

19 of an annuity contract described in section

20 403(b), the term ‘participant’s compensation’

21 means the participant’s includible compensation

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

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

24 paragraph (4).
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1 (F) Section 415(c)(7) is amended to read

2 as follows:

3 ‘‘(7) CERTAIN CONTRIBUTIONS BY CHURCH

4 PLANS NOT TREATED AS EXCEEDING LIMIT.—

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

6 other provision of this subsection, at the elec7 tion of a participant who is an employee of a

8 church or a convention or association of church9 es, including an organization described in sec10 tion 414(e)(3)(B)(ii), contributions and other

11 additions for an annuity contract or retirement

12 income account described in section 403(b) with

13 respect to such participant, when expressed as

14 an annual addition to such participant’s ac15 count, shall be treated as not exceeding the lim16 itation of paragraph (1) if such annual addition

17 is not in excess of $10,000.

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

19 The total amount of additions with respect to

20 any participant which may be taken into ac21 count for purposes of this subparagraph for all

22 years may not exceed $40,000.

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

24 this paragraph, the term ‘annual addition’ has
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1 the meaning given such term by paragraph

2 (2).’’.

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

4 (as redesignated by section 211) is amended by

5 inserting before the period at the end the fol6 lowing: ‘‘(as in effect before the enactment of

7 the Debt Relief and Retirement Security Rec8 onciliation Act)’’.

9 (3) EFFECTIVE DATE.—The amendments made

10 by this subsection shall apply to years beginning

11 after December 31, 2000.

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

13 408.—

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

15 415 is amended by adding at the end the following

16 new paragraph:

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

18 408.—For purposes of this section, any annuity con19 tract described in section 403(b) for the benefit of

20 a participant shall be treated as a defined contribu21 tion plan maintained by each employer with respect

22 to which the participant has the control required

23 under subsection (b) or (c) of section 414 (as modi24 fied by subsection (h)). For purposes of this section,

25 any contribution by an employer to a simplified em-
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1 ployee pension plan for an individual for a taxable

2 year shall be treated as an employer contribution to

3 a defined contribution plan for such individual for

4 such year.’’.

5 (2) EFFECTIVE DATE.—

6 (A) IN GENERAL.—The amendment made

7 by paragraph (1) shall apply to limitation years

8 beginning after December 31, 1999.

9 (B) EXCLUSION ALLOWANCE.—Effective

10 for limitation years beginning in 2000, in the

11 case of any annuity contract described in sec12 tion 403(b) of the Internal Revenue Code of

13 1986, the amount of the contribution disquali14 fied by reason of section 415(g) of such Code

15 shall reduce the exclusion allowance as provided

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

17 (3) MODIFICATION OF 403(b) EXCLUSION AL18 LOWANCE TO CONFORM TO 415 MODIFICATION.—The

19 Secretary of the Treasury shall modify the regula20 tions regarding the exclusion allowance under section

21 403(b)(2) of the Internal Revenue Code of 1986 to

22 render void the requirement that contributions to a

23 defined benefit pension plan be treated as previously

24 excluded amounts for purposes of the exclusion al25 lowance. For taxable years beginning after Decem-
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1 ber 31, 1999, such regulations shall be applied as if

2 such requirement were void.

3 (c) DEFERRED COMPENSATION PLANS OF STATE

4 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI5 ZATIONS.—

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

7 457(b)(2) (relating to salary limitation on eligible

8 deferred compensation plans) is amended by striking

‘‘331 9 ⁄3 percent’’ and inserting ‘‘100 percent’’.

10 (2) EFFECTIVE DATE.—The amendment made

11 by this subsection shall apply to years beginning

12 after December 31, 2000.

13 SEC. 1303. FASTER VESTING OF CERTAIN EMPLOYER

14 MATCHING CONTRIBUTIONS.

15 (a) IN GENERAL.—Section 411(a) (relating to min16 imum vesting standards) is amended—

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

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

19 plan’’; and

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

21 ‘‘(12) FASTER VESTING FOR MATCHING CON22 TRIBUTIONS.—In the case of matching contributions

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

24 shall be applied—
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1 ‘‘(A) by substituting ‘3 years’ for ‘5 years’

2 in subparagraph (A), and

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

4 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

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

5 (b) EFFECTIVE DATES.—

6 (1) IN GENERAL.—Except as provided in para7 graph (2), the amendments made by this section

8 shall apply to contributions for plan years beginning

9 after December 31, 2000.

10 (2) COLLECTIVE BARGAINING AGREEMENTS.—

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

12 more collective bargaining agreements between em13 ployee representatives and one or more employers

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

15 amendments made by this section shall not apply to

16 contributions on behalf of employees covered by any

17 such agreement for plan years beginning before the

18 earlier of—

19 (A) the later of—

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

21 collective bargaining agreements termi22 nates (determined without regard to any
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1 extension thereof on or after such date of

2 the enactment); or

3 (ii) January 1, 2001; or

4 (B) January 1, 2005.

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

6 plan, the amendments made by this section shall not

7 apply to any employee before the date that such em8 ployee has 1 hour of service under such plan in any

9 plan year to which the amendments made by this

10 section apply.

11 SEC. 1304. SIMPLIFY AND UPDATE THE MINIMUM DIS12 TRIBUTION RULES.

13 (a) SIMPLIFICATION AND FINALIZATION OF MIN14 IMUM DISTRIBUTION REQUIREMENTS.—

15 (1) IN GENERAL.—The Secretary of the Treas16 ury shall—

17 (A) simplify and finalize the regulations re18 lating to minimum distribution requirements

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

20 403(b)(10), and 457(d)(2) of the Internal Rev21 enue Code of 1986; and

22 (B) modify such regulations to—

23 (i) reflect current life expectancy; and

24 (ii) revise the required distribution

25 methods so that, under reasonable assump-
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1 tions, the amount of the required minimum

2 distribution does not decrease over a par3 ticipant’s life expectancy.

4 (2) FRESH START.—Notwithstanding subpara5 graph (D) of section 401(a)(9) of such Code, during

6 the first year that regulations are in effect under

7 this subsection, required distributions for future

8 years may be redetermined to reflect changes under

9 such regulations. Such redetermination shall include

10 the opportunity to choose a new designated bene11 ficiary and to elect a new method of calculating life

12 expectancy.

13 (3) EFFECTIVE DATE FOR REGULATIONS.—

14 Regulations referred to in paragraph (1) shall be ef15 fective for years beginning after December 31, 2000,

16 and shall apply in such years without regard to

17 whether an individual had previously begun receiving

18 minimum distributions.

19 (b) REPEAL OF RULE WHERE DISTRIBUTIONS HAD

20 BEGUN BEFORE DEATH OCCURS.—

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

22 401(a)(9) is amended by striking clause (i) and re23 designating clauses (ii), (iii), and (iv) as clauses (i),

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

25 (2) CONFORMING CHANGES.—
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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 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
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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. 1305. CLARIFICATION OF TAX TREATMENT OF DIVI16 SION OF SECTION 457 PLAN BENEFITS UPON

17 DIVORCE.

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
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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.
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1 SEC. 1306. 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 XIV—INCREASING PORT15 ABILITY FOR PARTICIPANTS

16 SEC. 1401. 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
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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).
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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.—
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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
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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
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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

9 403(b) PLANS.—

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

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

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

13 and all that follows and inserting ‘‘such distribution

14 to an eligible retirement plan described in section

15 402(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).’’.
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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)’’.
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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)’’.
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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.
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1 SEC. 1402. 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)’’.
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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-
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1 mitted solely by reason of the amendments made by

2 this section.

3 SEC. 1403. 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
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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,
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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.’’.
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1 (d) EFFECTIVE DATE.—The amendments made by

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

4 SEC. 1404. 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 1403, is
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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. 1405. 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
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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,
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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-
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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
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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. 1406. 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-
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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’’.
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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. 1407. 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
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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.—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.
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1 SEC. 1408. 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.
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1 SEC. 1409. 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
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1 of a plan of an eligible employer described in

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

3 ‘‘(2) SPECIAL RULE FOR ROLLOVER

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

2 this section shall apply to distributions after December 31,

3 2000.

4 TITLE XV—STRENGTHENING

5 PENSION SECURITY AND EN6 FORCEMENT

7 SEC. 1501. REPEAL OF 150 PERCENT OF CURRENT LIABIL8 ITY 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.
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1 SEC. 1502. 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
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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
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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.
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1 SEC. 1503. 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 amendment made by

22 this section shall apply to years beginning after December

23 31, 2000.
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1 SEC. 1504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE

2 BY 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.—
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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.
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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.
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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,
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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
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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 (d) STUDY.—The Secretary of the Treasury shall

8 prepare a report on the effects of conversions of tradi9 tional defined benefit plans to cash balance or hybrid for10 mula plans. Such study shall examine the effect of such

11 conversions on longer service participants, including the

12 incidence and effects of ‘‘wear away’’ provisions under

13 which participants earn no additional benefits for a period

14 of time after the conversion. As soon as practicable, but

15 not later than 60 days after the date of the enactment

16 of this Act, the Secretary shall submit such report, to17 gether with recommendations thereon, to the Committee

18 on Ways and Means of the House of Representatives and

19 the Committee on Finance of the Senate.

20 SEC. 1505. TREATMENT OF MULTIEMPLOYER PLANS UNDER

21 SECTION 415.

22 (a) COMPENSATION LIMIT.—Paragraph (11) of sec23 tion 415(b) (relating to limitation for defined benefit

24 plans) is amended to read as follows:
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1 ‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN2 MENTAL AND MULTIEMPLOYER PLANS.—In the case

3 of a governmental plan (as defined in section

4 414(d)) or a multiemployer plan (as defined in sec5 tion 414(f)), subparagraph (B) of paragraph (1)

6 shall not apply.’’.

7 (b) COMBINING AND AGGREGATION OF PLANS.—

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

9 section 415 (relating to combining of plans) is

10 amended by adding at the end the following:

11 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER

12 PLANS.—Notwithstanding paragraph (1) and sub13 section (g), a multiemployer plan (as defined in sec14 tion 414(f)) shall not be combined or aggregated

15 with any other plan maintained by an employer for

16 purposes of applying the limitations established in

17 this section, except that such plan shall be combined

18 or aggregated with another plan which is not such

19 a multiemployer plan solely for purposes of deter20 mining whether such other plan meets the require21 ments of subsections (b)(1)(A) and (c).’’.

22 (2) CONFORMING AMENDMENT FOR AGGREGA23 TION OF PLANS.—Subsection (g) of section 415 (re24 lating to aggregation of plans) is amended by strik-
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1 ing ‘‘The Secretary’’ and inserting ‘‘Except as pro2 vided in subsection (f)(3), the Secretary’’.

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

4 this section shall apply to years beginning after December

5 31, 2000.

6 SEC. 1506. PROHIBITED ALLOCATIONS OF STOCK IN S COR7 PORATION ESOP.

8 (a) IN GENERAL.—Section 409 (relating to qualifica9 tions for tax credit employee stock ownership plans) is

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

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

12 subsection:

13 ‘‘(p) PROHIBITED ALLOCATIONS OF SECURITIES IN

14 AN S CORPORATION.—

15 ‘‘(1) IN GENERAL.—An employee stock owner16 ship plan holding employer securities consisting of

17 stock in an S corporation shall provide that no por18 tion of the assets of the plan attributable to (or allo19 cable in lieu of) such employer securities may, dur20 ing a nonallocation year, accrue (or be allocated di21 rectly or indirectly under any plan of the employer

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

23 benefit of any disqualified person.

24 ‘‘(2) FAILURE TO MEET REQUIREMENTS.—
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1 ‘‘(A) IN GENERAL.—If a plan fails to meet

2 the requirements of paragraph (1), the plan

3 shall be treated as having distributed to any

4 disqualified person the amount allocated to the

5 account of such person in violation of para6 graph (1) at the time of such allocation.

7 ‘‘(B) CROSS REFERENCE.—

‘‘For excise tax relating to violations of paragraph

(1) and ownership of synthetic equity, see section

4979A.

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

9 this subsection—

10 ‘‘(A) IN GENERAL.—The term ‘nonalloca11 tion year’ means any plan year of an employee

12 stock ownership plan if, at any time during

13 such plan year—

14 ‘‘(i) such plan holds employer securi15 ties consisting of stock in an S corpora16 tion, and

17 ‘‘(ii) disqualified persons own at least

18 50 percent of the number of shares of

19 stock in the S corporation.

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

21 of subparagraph (A)—

22 ‘‘(i) IN GENERAL.—The rules of sec23 tion 318(a) shall apply for purposes of de24 termining ownership, except that—
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1 ‘‘(I) in applying paragraph (1)

2 thereof, the members of an individ3 ual’s family shall include members of

4 the family described in paragraph

5 (4)(D), and

6 ‘‘(II) paragraph (4) thereof shall

7 not apply.

8 ‘‘(ii) DEEMED-OWNED SHARES.—Not9 withstanding the employee trust exception

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

11 be treated as owning deemed-owned shares

12 of the individual.

13 Solely for purposes of applying paragraph (5),

14 this subparagraph shall be applied after the at15 tribution rules of paragraph (5) have been ap16 plied.

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

18 this subsection—

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

20 person’ means any person if—

21 ‘‘(i) the aggregate number of deemed22 owned shares of such person and the mem23 bers of such person’s family is at least 20

24 percent of the number of deemed-owned

25 shares of stock in the S corporation, or
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1 ‘‘(ii) in the case of a person not de2 scribed in clause (i), the number of

3 deemed-owned shares of such person is at

4 least 10 percent of the number of deemed5 owned shares of stock in such corporation.

6 ‘‘(B) TREATMENT OF FAMILY MEMBERS.—

7 In the case of a disqualified person described in

8 subparagraph (A)(i), any member of such per9 son’s family with deemed-owned shares shall be

10 treated as a disqualified person if not otherwise

11 treated as a disqualified person under subpara12 graph (A).

13 ‘‘(C) DEEMED-OWNED SHARES.—

14 ‘‘(i) IN GENERAL.—The term

15 ‘deemed-owned shares’ means, with respect

16 to any person—

17 ‘‘(I) the stock in the S corpora18 tion constituting employer securities

19 of an employee stock ownership plan

20 which is allocated to such person

21 under the plan, and

22 ‘‘(II) such person’s share of the

23 stock in such corporation which is

24 held by such plan but which is not al25 located under the plan to participants.
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1 ‘‘(ii) PERSON’S SHARE OF

2 UNALLOCATED STOCK.—For purposes of

3 clause (i)(II), a person’s share of

4 unallocated S corporation stock held by

5 such plan is the amount of the unallocated

6 stock which would be allocated to such per7 son if the unallocated stock were allocated

8 to all participants in the same proportions

9 as the most recent stock allocation under

10 the plan.

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

12 of this paragraph, the term ‘member of the

13 family’ means, with respect to any individual—

14 ‘‘(i) the spouse of the individual,

15 ‘‘(ii) an ancestor or lineal descendant

16 of the individual or the individual’s spouse,

17 ‘‘(iii) a brother or sister of the indi18 vidual or the individual’s spouse and any

19 lineal descendant of the brother or sister,

20 and

21 ‘‘(iv) the spouse of any individual de22 scribed in clause (ii) or (iii).

23 A spouse of an individual who is legally sepa24 rated from such individual under a decree of di25 vorce or separate maintenance shall not be
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1 treated as such individual’s spouse for purposes

2 of this subparagraph.

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

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

5 a person who owns synthetic equity in the S corpora6 tion, except to the extent provided in regulations, the

7 shares of stock in such corporation on which such

8 synthetic equity is based shall be treated as out9 standing stock in such corporation and deemed10 owned shares of such person if such treatment of

11 synthetic equity of 1 or more such persons results

12 in—

13 ‘‘(A) the treatment of any person as a dis14 qualified person, or

15 ‘‘(B) the treatment of any year as a non16 allocation year.

17 For purposes of this paragraph, synthetic equity

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

19 manner as stock is treated as owned by a person

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

21 318(a). If, without regard to this paragraph, a per22 son is treated as a disqualified person or a year is

23 treated as a nonallocation year, this paragraph shall

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

25 being so treated.
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1 ‘‘(6) DEFINITIONS.—For purposes of this

2 subsection—

3 ‘‘(A) EMPLOYEE STOCK OWNERSHIP

4 PLAN.—The term ‘employee stock ownership

5 plan’ has the meaning given such term by sec6 tion 4975(e)(7).

7 ‘‘(B) EMPLOYER SECURITIES.—The term

8 ‘employer security’ has the meaning given such

9 term by section 409(l).

10 ‘‘(C) SYNTHETIC EQUITY.—The term ‘syn11 thetic equity’ means any stock option, warrant,

12 restricted stock, deferred issuance stock right,

13 or similar interest or right that gives the holder

14 the right to acquire or receive stock of the S

15 corporation in the future. Except to the extent

16 provided in regulations, synthetic equity also in17 cludes a stock appreciation right, phantom

18 stock unit, or similar right to a future cash

19 payment based on the value of such stock or

20 appreciation in such value.

21 ‘‘(7) REGULATIONS.—The Secretary shall pre22 scribe such regulations as may be necessary to carry

23 out the purposes of this subsection.’’.

24 (b) COORDINATION WITH SECTION 4975(e)(7).—The

25 last sentence of section 4975(e)(7) (defining employee
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1 stock ownership plan) is amended by inserting ‘‘, section

2 409(p),’’ after ‘‘409(n)’’.

3 (c) EXCISE TAX.—

4 (1) APPLICATION OF TAX.—Subsection (a) of

5 section 4979A (relating to tax on certain prohibited

6 allocations of employer securities) is amended—

7 (A) by striking ‘‘or’’ at the end of para8 graph (1), and

9 (B) by striking all that follows paragraph

10 (2) and inserting the following:

11 ‘‘(3) there is any allocation of employer securi12 ties which violates the provisions of section 409(p),

13 or a nonallocation year described in subsection

14 (e)(2)(C) with respect to an employee stock owner15 ship plan, or

16 ‘‘(4) any synthetic equity is owned by a dis17 qualified person in any nonallocation year,

18 there is hereby imposed a tax on such allocation or owner19 ship equal to 50 percent of the amount involved.’’.

20 (2) LIABILITY.—Section 4979A(c) (defining li21 ability for tax) is amended to read as follows:

22 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

23 section shall be paid—

24 ‘‘(1) in the case of an allocation referred to in

25 paragraph (1) or (2) of subsection (a), by—
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1 ‘‘(A) the employer sponsoring such plan, or

2 ‘‘(B) the eligible worker-owned cooperative,

3 which made the written statement described in sec4 tion 664(g)(1)(E) or in section 1042(b)(3)(B) (as

5 the case may be), and

6 ‘‘(2) in the case of an allocation or ownership

7 referred to in paragraph (3) or (4) of subsection (a),

8 by the S corporation the stock in which was so allo9 cated or owned.’’.

10 (3) DEFINITIONS.—Section 4979A(e) (relating

11 to definitions) is amended to read as follows:

12 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur13 poses of this section—

14 ‘‘(1) DEFINITIONS.—Except as provided in

15 paragraph (2), terms used in this section have the

16 same respective meanings as when used in sections

17 409 and 4978.

18 ‘‘(2) SPECIAL RULES RELATING TO TAX IM19 POSED BY REASON OF PARAGRAPH (3) OR (4) OF

20 SUBSECTION (a).—

21 ‘‘(A) PROHIBITED ALLOCATIONS.—The

22 amount involved with respect to any tax im23 posed by reason of subsection (a)(3) is the

24 amount allocated to the account of any person

25 in violation of section 409(p)(1).
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1 ‘‘(B) SYNTHETIC EQUITY.—The amount

2 involved with respect to any tax imposed by rea3 son of subsection (a)(4) is the value of the

4 shares on which the synthetic equity is based.

5 ‘‘(C) SPECIAL RULE DURING FIRST NON6 ALLOCATION YEAR.—For purposes of subpara7 graph (A), the amount involved for the first

8 nonallocation year of any employee stock owner9 ship plan shall be determined by taking into ac10 count the total value of all the deemed-owned

11 shares of all disqualified persons with respect to

12 such plan.

13 ‘‘(D) STATUTE OF LIMITATIONS.—The

14 statutory period for the assessment of any tax

15 imposed by this section by reason of paragraph

16 (3) or (4) of subsection (a) shall not expire be17 fore the date which is 3 years from the later

18 of—

19 ‘‘(i) the allocation or ownership re20 ferred to in such paragraph giving rise to

21 such tax, or

22 ‘‘(ii) the date on which the Secretary

23 is notified of such allocation or owner24 ship.’’.

25 (d) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—The amendments made by

2 this section shall apply to plan years beginning after

3 December 31, 2001.

4 (2) EXCEPTION FOR CERTAIN PLANS.—In the

5 case of any—

6 (A) employee stock ownership plan estab7 lished after July 11, 2000, or

8 (B) employee stock ownership plan estab9 lished on or before such date if employer securi10 ties held by the plan consist of stock in a cor11 poration with respect to which an election under

12 section 1362(a) of the Internal Revenue Code

13 of 1986 is not in effect on such date,

14 the amendments made by this section shall apply to

15 plan years ending after July 11, 2000.

16 TITLE XVI—REDUCING

17 REGULATORY BURDENS

18 SEC. 1601. MODIFICATION OF TIMING OF PLAN VALU19 ATIONS.

20 (a) IN GENERAL.—Paragraph (9) of section

21 412(c)(9) (relating to annual valuation) is amended to

22 read as follows:

23 ‘‘(9) ANNUAL VALUATION.—

24 ‘‘(A) IN GENERAL.—For purposes of this

25 section, a determination of experience gains and
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1 losses and a valuation of the plan’s liability

2 shall be made not less frequently than once

3 every year, except that such determination shall

4 be made more frequently to the extent required

5 in particular cases under regulations prescribed

6 by the Secretary.

7 ‘‘(B) VALUATION DATE.—

8 ‘‘(i) CURRENT YEAR.—Except as pro9 vided in clause (ii), the valuation referred

10 to in subparagraph (A) shall be made as of

11 a date within the plan year to which the

12 valuation refers or within one month prior

13 to the beginning of such year.

14 ‘‘(ii) ELECTION TO USE PRIOR YEAR

15 VALUATION.—The valuation referred to in

16 subparagraph (A) may be made as of a

17 date within the plan year prior to the year

18 to which the valuation refers if—

19 ‘‘(I) an election is in effect under

20 this clause with respect to the plan,

21 and

22 ‘‘(II) as of such date, the value

23 of the assets of the plan are not less

24 than 125 percent of the plan’s current
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1 liability (as defined in paragraph

2 (7)(B)).

3 ‘‘(iii) ADJUSTMENTS.—Information

4 under clause (ii) shall, in accordance with

5 regulations, be actuarially adjusted to re6 flect significant differences in participants.

7 ‘‘(iv) ELECTION.—An election under

8 clause (ii), once made, shall be irrevocable

9 without the consent of the Secretary.’’.

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

11 this section shall apply to plan years beginning after De12 cember 31, 2000.

13 SEC. 1602. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT

14 LOSS OF DIVIDEND DEDUCTION.

15 (a) IN GENERAL.—Section 404(k)(2)(A) (defining

16 applicable dividends) is amended by striking ‘‘or’’ at the

17 end of clause (ii), by redesignating clause (iii) as clause

18 (iv), and by inserting after clause (ii) the following new

19 clause:

20 ‘‘(iii) is, at the election of such par21 ticipants or their beneficiaries—

22 ‘‘(I) payable as provided in clause

23 (i) or (ii), or
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1 ‘‘(II) paid to the plan and rein2 vested in qualifying employer securi3 ties, or’’.

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

5 this section shall apply to taxable years beginning after

6 December 31, 2000.

7 SEC. 1603. REPEAL OF TRANSITION RULE RELATING TO

8 CERTAIN HIGHLY COMPENSATED EMPLOY9 EES.

10 (a) IN GENERAL.—Paragraph (4) of section 1114(c)

11 of the Tax Reform Act of 1986 is hereby repealed.

12 (b) EFFECTIVE DATE.—The repeal made by sub13 section (a) shall apply to plan years beginning after De14 cember 31, 2000.

15 SEC. 1604. EMPLOYEES OF TAX-EXEMPT ENTITIES.

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

17 shall modify Treasury Regulations section 1.410(b)–6(g)

18 to provide that employees of an organization described in

19 section 403(b)(1)(A)(i) of the Internal Revenue Code of

20 1986 who are eligible to make contributions under section

21 403(b) of such Code pursuant to a salary reduction agree22 ment may be treated as excludable with respect to a plan

23 under section 401(k) or (m) of such Code that is provided

24 under the same general arrangement as a plan under such

25 section 401(k), if—
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1 (1) no employee of an organization described in

2 section 403(b)(1)(A)(i) of such Code is eligible to

3 participate in such section 401(k) plan or section

4 401(m) plan; and

5 (2) 95 percent of the employees who are not

6 employees of an organization described in section

7 403(b)(1)(A)(i) of such Code are eligible to partici8 pate in such plan under such section 401(k) or (m).

9 (b) EFFECTIVE DATE.—The modification required by

10 subsection (a) shall apply as of the same date set forth

11 in section 1426(b) of the Small Business Job Protection

12 Act of 1996.

13 SEC. 1605. CLARIFICATION OF TREATMENT OF EMPLOYER14 PROVIDED RETIREMENT ADVICE.

15 (a) IN GENERAL.—Subsection (a) of section 132 (re16 lating to exclusion from gross income) is amended by

17 striking ‘‘or’’ at the end of paragraph (5), by striking the

18 period at the end of paragraph (6) and inserting ‘‘, or’’,

19 and by adding at the end the following new paragraph:

20 ‘‘(7) qualified retirement planning services.’’.

21 (b) QUALIFIED RETIREMENT PLANNING SERVICES

22 DEFINED.—Section 132 is amended by redesignating sub23 section (m) as subsection (n) and by inserting after sub24 section (l) the following:
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1 ‘‘(m) QUALIFIED RETIREMENT PLANNING SERV2 ICES.—

3 ‘‘(1) IN GENERAL.—For purposes of this sec4 tion, the term ‘qualified retirement planning serv5 ices’ means any retirement planning service provided

6 to an employee and his spouse by an employer main7 taining a qualified employer plan.

8 ‘‘(2) NONDISCRIMINATION RULE.—Subsection

9 (a)(7) shall apply in the case of highly compensated

10 employees only if such services are available on sub11 stantially the same terms to each member of the

12 group of employees normally provided education and

13 information regarding the employer’s qualified em14 ployer plan.

15 ‘‘(3) QUALIFIED EMPLOYER PLAN.—For pur16 poses of this subsection, the term ‘qualified employer

17 plan’ means a plan, contract, pension, or account de18 scribed in section 219(g)(5).’’.

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

20 this section shall apply to years beginning after December

21 31, 2000.

22 SEC. 1606. REPORTING SIMPLIFICATION.

23 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

24 OWNERS AND THEIR SPOUSES.—
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1 (1) IN GENERAL.—The Secretary of the Treas2 ury shall modify the requirements for filing annual

3 returns with respect to one-participant retirement

4 plans to ensure that such plans with assets of

5 $250,000 or less as of the close of the plan year

6 need not file a return for that year.

7 (2) ONE-PARTICIPANT RETIREMENT PLAN DE8 FINED.—For purposes of this subsection, the term

9 ‘‘one-participant retirement plan’’ means a retire10 ment plan that—

11 (A) on the first day of the plan year—

12 (i) covered only the employer (and the

13 employer’s spouse) and the employer

14 owned the entire business (whether or not

15 incorporated); or

16 (ii) covered only one or more partners

17 (and their spouses) in a business partner18 ship (including partners in an S or C cor19 poration);

20 (B) meets the minimum coverage require21 ments of section 410(b) of the Internal Revenue

22 Code of 1986 without being combined with any

23 other plan of the business that covers the em24 ployees of the business;
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1 (C) does not provide benefits to anyone ex2 cept the employer (and the employer’s spouse)

3 or the partners (and their spouses);

4 (D) does not cover a business that is a

5 member of an affiliated service group, a con6 trolled group of corporations, or a group of

7 businesses under common control; and

8 (E) does not cover a business that leases

9 employees.

10 (3) OTHER DEFINITIONS.—Terms used in para11 graph (2) which are also used in section 414 of the

12 Internal Revenue Code of 1986 shall have the re13 spective meanings given such terms by such section.

14 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

15 PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case

16 of a retirement plan which covers less than 25 employees

17 on the first day of the plan year and meets the require18 ments described in subparagraphs (B), (D), and (E) of

19 subsection (a)(2), the Secretary of the Treasury shall pro20 vide for the filing of a simplified annual return that is

21 substantially similar to the annual return required to be

22 filed by a one-participant retirement plan.

23 (c) EFFECTIVE DATE.—The provisions of this section

24 shall take effect on January 1, 2001.
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1 SEC. 1607. IMPROVEMENT OF EMPLOYEE PLANS COMPLI2 ANCE RESOLUTION SYSTEM.

3 The Secretary of the Treasury shall continue to up4 date and improve the Employee Plans Compliance Resolu5 tion System (or any successor program) giving special at6 tention to—

7 (1) increasing the awareness and knowledge of

8 small employers concerning the availability and use

9 of the program;

10 (2) taking into account special concerns and

11 circumstances that small employers face with respect

12 to compliance and correction of compliance failures;

13 (3) extending the duration of the self-correction

14 period under the Administrative Policy Regarding

15 Self-Correction for significant compliance failures;

16 (4) expanding the availability to correct insig17 nificant compliance failures under the Administra18 tive Policy Regarding Self-Correction during audit;

19 and

20 (5) assuring that any tax, penalty, or sanction

21 that is imposed by reason of a compliance failure is

22 not excessive and bears a reasonable relationship to

23 the nature, extent, and severity of the failure.

24 SEC. 1608. REPEAL OF THE MULTIPLE USE TEST.

25 (a) IN GENERAL.—Paragraph (9) of section 401(m)

26 is amended to read as follows:
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1 ‘‘(9) REGULATIONS.—The Secretary shall pre2 scribe such regulations as may be necessary to carry

3 out the purposes of this subsection and subsection

4 (k), including regulations permitting appropriate ag5 gregation of plans and contributions.’’.

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

7 this section shall apply to years beginning after December

8 31, 2000.

9 SEC. 1609. FLEXIBILITY IN NONDISCRIMINATION, COV10 ERAGE, AND LINE OF BUSINESS RULES.

11 (a) NONDISCRIMINATION.—

12 (1) IN GENERAL.—The Secretary of the Treas13 ury shall, by regulation, provide that a plan shall be

14 deemed to satisfy the requirements of section

15 401(a)(4) of the Internal Revenue Code of 1986 if

16 such plan satisfies the facts and circumstances test

17 under section 401(a)(4) of such Code, as in effect

18 before January 1, 1994, but only if—

19 (A) the plan satisfies conditions prescribed

20 by the Secretary to appropriately limit the

21 availability of such test; and

22 (B) the plan is submitted to the Secretary

23 for a determination of whether it satisfies such

24 test.
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1 Subparagraph (B) shall only apply to the extent pro2 vided by the Secretary.

3 (2) EFFECTIVE DATES.—

4 (A) REGULATIONS.—The regulation re5 quired by paragraph (1) shall apply to years be6 ginning after December 31, 2000.

7 (B) CONDITIONS OF AVAILABILITY.—Any

8 condition of availability prescribed by the Sec9 retary under paragraph (1)(A) shall not apply

10 before the first year beginning not less than

11 120 days after the date on which such condition

12 is prescribed.

13 (b) COVERAGE TEST.—

14 (1) IN GENERAL.—Section 410(b)(1) (relating

15 to minimum coverage requirements) is amended by

16 adding at the end the following:

17 ‘‘(D) In the case that the plan fails to

18 meet the requirements of subparagraphs (A),

19 (B) and (C), the plan—

20 ‘‘(i) satisfies subparagraph (B), as in

21 effect immediately before the enactment of

22 the Tax Reform Act of 1986,

23 ‘‘(ii) is submitted to the Secretary for

24 a determination of whether it satisfies the

25 requirement described in clause (i), and
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1 ‘‘(iii) satisfies conditions prescribed by

2 the Secretary by regulation that appro3 priately limit the availability of this sub4 paragraph.

5 Clause (ii) shall apply only to the extent pro6 vided by the Secretary.’’.

7 (2) EFFECTIVE DATES.—

8 (A) IN GENERAL.—The amendment made

9 by paragraph (1) shall apply to years beginning

10 after December 31, 2000.

11 (B) CONDITIONS OF AVAILABILITY.—Any

12 condition of availability prescribed by the Sec13 retary under regulations prescribed by the Sec14 retary under section 410(b)(1)(D) of the Inter15 nal Revenue Code of 1986 shall not apply be16 fore the first year beginning not less than 120

17 days after the date on which such condition is

18 prescribed.

19 (c) LINE OF BUSINESS RULES.—The Secretary of

20 the Treasury shall, on or before December 31, 2000, mod21 ify the existing regulations issued under section 414(r) of

22 the Internal Revenue Code of 1986 in order to expand

23 (to the extent that the Secretary determines appropriate)

24 the ability of a pension plan to demonstrate compliance

25 with the line of business requirements based upon the
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1 facts and circumstances surrounding the design and oper2 ation of the plan, even though the plan is unable to satisfy

3 the mechanical tests currently used to determine compli4 ance.

5 SEC. 1610. EXTENSION TO ALL GOVERNMENTAL PLANS OF

6 MORATORIUM ON APPLICATION OF CERTAIN

7 NONDISCRIMINATION RULES APPLICABLE TO

8 STATE AND LOCAL PLANS.

9 (a) IN GENERAL.—

10 (1) Subparagraph (G) of section 401(a)(5) and

11 subparagraph (H) of section 401(a)(26) are each

12 amended by striking ‘‘section 414(d))’’ and all that

13 follows and inserting ‘‘section 414(d)).’’.

14 (2) Subparagraph (G) of section 401(k)(3) and

15 paragraph (2) of section 1505(d) of the Taxpayer

16 Relief Act of 1997 are each amended by striking

17 ‘‘maintained by a State or local government or polit18 ical subdivision thereof (or agency or instrumentality

19 thereof)’’.

20 (b) CONFORMING AMENDMENTS.—

21 (1) The heading for subparagraph (G) of sec22 tion 401(a)(5) is amended to read as follows: ‘‘GOV23 ERNMENTAL PLANS’’.
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1 (2) The heading for subparagraph (H) of sec2 tion 401(a)(26) is amended to read as follows: ‘‘EX3 CEPTION FOR GOVERNMENTAL PLANS’’.

4 (3) Subparagraph (G) of section 401(k)(3) is

5 amended by inserting ‘‘GOVERNMENTAL PLANS.—’’

6 after ‘‘(G)’’.

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

8 this section shall apply to years beginning after December

9 31, 2000.

10 SEC. 1611. NOTICE AND CONSENT PERIOD REGARDING DIS11 TRIBUTIONS.

12 (a) EXPANSION OF PERIOD.—

13 (1) IN GENERAL.—Subparagraph (A) of section

14 417(a)(6) is amended by striking ‘‘90-day’’ and in15 serting ‘‘180-day’’.

16 (2) MODIFICATION OF REGULATIONS.—The

17 Secretary of the Treasury shall modify the regula18 tions under sections 402(f), 411(a)(11), and 417 of

19 the Internal Revenue Code of 1986 to substitute

20 ‘‘180 days’’ for ‘‘90 days’’ each place it appears in

21 Treasury Regulations sections 1.402(f)–1, 1.411(a)–

22 11(c), and 1.417(e)–1(b).

23 (3) EFFECTIVE DATE.—The amendment made

24 by paragraph (1) and the modifications required by
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1 paragraph (2) shall apply to years beginning after

2 December 31, 2000.

3 (b) CONSENT REGULATION INAPPLICABLE TO CER4 TAIN DISTRIBUTIONS.—

5 (1) IN GENERAL.—The Secretary of the Treas6 ury shall modify the regulations under section

7 411(a)(11) of the Internal Revenue Code of 1986 to

8 provide that the description of a participant’s right,

9 if any, to defer receipt of a distribution shall also de10 scribe the consequences of failing to defer such re11 ceipt.

12 (2) EFFECTIVE DATE.—The modifications re13 quired by paragraph (1) shall apply to years begin14 ning after December 31, 2000.

15 TITLE XVII—PLAN AMENDMENTS

16 SEC. 1701. PROVISIONS RELATING TO PLAN AMENDMENTS.

17 (a) IN GENERAL.—If this section applies to any plan

18 or contract amendment—

19 (1) such plan or contract shall be treated as

20 being operated in accordance with the terms of the

21 plan during the period described in subsection

22 (b)(2)(A); and

23 (2) such plan shall not fail to meet the require24 ments of section 411(d)(6) of the Internal Revenue

25 Code of 1986 by reason of such amendment.
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1 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

2 (1) IN GENERAL.—This section shall apply to

3 any amendment to any plan or annuity contract

4 which is made—

5 (A) pursuant to any amendment made by

6 this Act, or pursuant to any regulation issued

7 under this Act, and

8 (B) on or before the last day of the first

9 plan year beginning on or after January 1,

10 2003.

11 In the case of a governmental plan (as defined in

12 section 414(d) of the Internal Revenue Code of

13 1986), this paragraph shall be applied by sub14 stituting ‘‘2005’’ for ‘‘2003’’.

15 (2) CONDITIONS.—This section shall not apply

16 to any amendment unless—

17 (A) during the period—

18 (i) beginning on the date the legisla19 tive or regulatory amendment described in

20 paragraph (1)(A) takes effect (or in the

21 case of a plan or contract amendment not

22 required by such legislative or regulatory

23 amendment, the effective date specified by

24 the plan); and
122

HR 5203 PCS

1 (ii) ending on the date described in

2 paragraph (1)(B) (or, if earlier, the date

3 the plan or contract amendment is adopt4 ed),

5 the plan or contract is operated as if such plan

6 or contract amendment were in effect; and

7 (B) such plan or contract amendment ap8 plies retroactively for such period.

Passed the House of Representatives September 19,

2000.

Attest: JEFF TRANDAHL,

Clerk.

Calendar No. 818

106TH CONGRESS

2D SESSION H. R. 5203

AN ACT

To provide for reconciliation pursuant to sections

103(a)(2), 103(b)(2), and 213(b)(2)(C) of theconcurrent resolution on the budget for fiscalyear 2001 to reduce the public debt and to decrease the statutory limit on the public debt, andto amend the Internal Revenue Code of 1986 toprovide for retirement security.

SEPTEMBER 21, 2000

Read the second time and placed on the calendar