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[House Report 107-51]
[From the U.S. Government Publishing Office]

107th Congress                                             Rept. 107-51
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 2

======================================================================

 
    COMPREHENSIVE RETIREMENT SECURITY AND PENSION REFORM ACT OF 2001

                                _______
                                

  May 1, 2001.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

    Mr. Boehner, from the Committee on Education and the Workforce, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                         [To accompany H.R. 10]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Education and the Workforce, to whom was 
referred the bill (H.R. 10) to provide for pension reform, and 
for other purposes, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.
  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Comprehensive 
Retirement Security and Pension Reform Act of 2001''.
  (b) Amendment of 1986 Code.--Except as otherwise expressly provided, 
whenever in this Act an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Internal Revenue Code of 1986.
  (c) Table of Contents.--The table of contents of this Act is as 
follows:

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

           TITLE I--INDIVIDUAL RETIREMENT ACCOUNT PROVISIONS

Sec. 101. Modification of IRA contribution limits.

                      TITLE II--EXPANDING COVERAGE

Sec. 201. Increase in benefit and contribution limits.
Sec. 202. Plan loans for subchapter S owners, partners, and sole 
proprietors.
Sec. 203. Modification of top-heavy rules.
Sec. 204. Elective deferrals not taken into account for purposes of 
deduction limits.
Sec. 205. Repeal of coordination requirements for deferred compensation 
plans of State and local governments and tax-exempt organizations.
Sec. 206. Elimination of user fee for requests to IRS regarding pension 
plans.
Sec. 207. Deduction limits.
Sec. 208. Option to treat elective deferrals as after-tax 
contributions.

                TITLE III--ENHANCING FAIRNESS FOR WOMEN

Sec. 301. Catch-up contributions for individuals age 50 or over.
Sec. 302. Equitable treatment for contributions of employees to defined 
contribution plans.
Sec. 303. Faster vesting of certain employer matching contributions.
Sec. 304. Simplify and update the minimum distribution rules.
Sec. 305. Clarification of tax treatment of division of section 457 
plan benefits upon divorce.
Sec. 306. Modification of safe harbor relief for hardship withdrawals 
from cash or deferred arrangements.

           TITLE IV--INCREASING PORTABILITY FOR PARTICIPANTS

Sec. 401. Rollovers allowed among various types of plans.
Sec. 402. Rollovers of IRAs into workplace retirement plans.
Sec. 403. Rollovers of after-tax contributions.
Sec. 404. Hardship exception to 60-day rule.
Sec. 405. Treatment of forms of distribution.
Sec. 406. Rationalization of restrictions on distributions.
Sec. 407. Purchase of service credit in governmental defined benefit 
plans.
Sec. 408. Employers may disregard rollovers for purposes of cash-out 
amounts.
Sec. 409. Minimum distribution and inclusion requirements for section 
457 plans.

        TITLE V--STRENGTHENING PENSION SECURITY AND ENFORCEMENT

Sec. 501. Repeal of percent of current liability funding limit.
Sec. 502. Maximum contribution deduction rules modified and applied to 
all defined benefit plans.
Sec. 503. Excise tax relief for sound pension funding.
Sec. 504. Excise tax on failure to provide notice by defined benefit 
plans significantly reducing future benefit accruals.
Sec. 505. Treatment of multiemployer plans under section 415.
Sec. 506. Protection of investment of employee contributions to 401(k) 
plans.
Sec. 507. Periodic pension benefits statements.
Sec. 508. Prohibited allocations of stock in S corporation ESOP.

                 TITLE VI--REDUCING REGULATORY BURDENS

Sec. 601. Modification of timing of plan valuations.
Sec. 602. ESOP dividends may be reinvested without loss of dividend 
deduction.
Sec. 603. Repeal of transition rule relating to certain highly 
compensated employees.
Sec. 604. Employees of tax-exempt entities.
Sec. 605. Clarification of treatment of employer-provided retirement 
advice.
Sec. 606. Reporting simplification.
Sec. 607. Improvement of employee plans compliance resolution system.
Sec. 608. Repeal of the multiple use test.
Sec. 609. Flexibility in nondiscrimination, coverage, and line of 
business rules.
Sec. 610. Extension to all governmental plans of moratorium on 
application of certain nondiscrimination rules applicable to State and 
local plans.
Sec. 611. Notice and consent period regarding distributions.
Sec. 612. Annual report dissemination.
Sec. 613. Technical corrections to SAVER Act.

                   TITLE VII--OTHER ERISA PROVISIONS

Sec. 701. Missing participants.
Sec. 702. Reduced PBGC premium for new plans of small employers.
Sec. 703. Reduction of additional PBGC premium for new and small plans.
Sec. 704. Authorization for PBGC to pay interest on premium overpayment 
refunds.
Sec. 705. Substantial owner benefits in terminated plans.
Sec. 706. Civil penalties for breach of fiduciary responsibility.
Sec. 707. Benefit suspension notice.
Sec. 708. Studies.

                      TITLE VIII--PLAN AMENDMENTS

Sec. 801. Provisions relating to plan amendments.

                TITLE I--INDIVIDUAL RETIREMENT ACCOUNTS

SEC. 101. MODIFICATION OF IRA CONTRIBUTION LIMITS.

  (a) Increase in Contribution Limit.--
          (1) In general.--Paragraph (1)(A) of section 219(b) (relating 
        to maximum amount of deduction) is amended by striking 
        ``$2,000'' and inserting ``the deductible amount''.
          (2) Deductible amount.--Section 219(b) is amended by adding 
        at the end the following new paragraph:
          ``(5) Deductible amount.--For purposes of paragraph (1)(A)--
                  ``(A) In general.--The deductible amount shall be 
                determined in accordance with the following table:

                ``For taxable years
                                                         The deductible
                  beginning in:
                                                           amount is:  
                  2001.....................................     $3,000 
                  2002.....................................     $4,000 
                  2003 and thereafter......................     $5,000.

                  ``(B) Catch-up contributions for individuals 50 or 
                older.--In the case of an individual who has attained 
                the age of 50 before the close of the taxable year, the 
                deductible amount for taxable years beginning in 2001 
                or 2002 shall be $5,000.
                  ``(C) Cost-of-living adjustment.--
                          ``(i) In general.--In the case of any taxable 
                        year beginning in a calendar year after 2003, 
                        the $5,000 amount under subparagraph (A) shall 
                        be increased by an amount equal to--
                                  ``(I) such dollar amount, multiplied 
                                by
                                  ``(II) the cost-of-living adjustment 
                                determined under section 1(f )(3) for 
                                the calendar year in which the taxable 
                                year begins, determined by substituting 
                                `calendar year 2002' for `calendar year 
                                1992' in subparagraph (B) thereof.
                          ``(ii) Rounding rules.--If any amount after 
                        adjustment under clause (i) is not a multiple 
                        of $500, such amount shall be rounded to the 
                        next lower multiple of $500.''.
  (b) Conforming Amendments.--
          (1) Section 408(a)(1) is amended by striking ``in excess of 
        $2,000 on behalf of any individual'' and inserting ``on behalf 
        of any individual in excess of the amount in effect for such 
        taxable year under section 219(b)(1)(A)''.
          (2) Section 408(b)(2)(B) is amended by striking ``$2,000'' 
        and inserting ``the dollar amount in effect under section 
        219(b)(1)(A)''.
          (3) Section 408(b) is amended by striking ``$2,000'' in the 
        matter following paragraph (4) and inserting ``the dollar 
        amount in effect under section 219(b)(1)(A)''.
          (4) Section 408( j) is amended by striking ``$2,000''.
          (5) Section 408(p)(8) is amended by striking ``$2,000'' and 
        inserting ``the dollar amount in effect under section 
        219(b)(1)(A)''.
  (c) Effective Date.--The amendments made by this section shall apply 
to taxable years beginning after December 31, 2000.

                      TITLE II--EXPANDING COVERAGE

SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION LIMITS.

  (a) Defined Benefit Plans.--
          (1) Dollar limit.--
                  (A) Subparagraph (A) of section 415(b)(1) (relating 
                to limitation for defined benefit plans) is amended by 
                striking ``$90,000'' and inserting ``$160,000''.
                  (B) Subparagraphs (C) and (D) of section 415(b)(2) 
                are each amended by striking ``$90,000'' each place it 
                appears in the headings and the text and inserting 
                ``$160,000''.
                  (C) Paragraph (7) of section 415(b) (relating to 
                benefits under certain collectively bargained plans) is 
                amended by striking ``the greater of $68,212 or one-
                half the amount otherwise applicable for such year 
                under paragraph (1)(A) for `$90,000' '' and inserting 
                ``one-half the amount otherwise applicable for such 
                year under paragraph (1)(A) for `$160,000' ''.
          (2) Limit reduced when benefit begins before age 62.--
        Subparagraph (C) of section 415(b)(2) is amended by striking 
        ``the social security retirement age'' each place it appears in 
        the heading and text and inserting ``age 62'' and by striking 
        the second sentence.
          (3) Limit increased when benefit begins after age 65.--
        Subparagraph (D) of section 415(b)(2) is amended by striking 
        ``the social security retirement age'' each place it appears in 
        the heading and text and inserting ``age 65''.
          (4) Cost-of-living adjustments.--Subsection (d) of section 
        415 (related to cost-of-living adjustments) is amended--
                  (A) by striking ``$90,000'' in paragraph (1)(A) and 
                inserting ``$160,000''; and
                  (B) in paragraph (3)(A)--
                          (i) by striking ``$90,000'' in the heading 
                        and inserting ``$160,000''; and
                          (ii) by striking ``October 1, 1986'' and 
                        inserting ``July 1, 2000''.
          (5) Conforming amendments.--
                  (A) Section 415(b)(2) is amended by striking 
                subparagraph (F).
                  (B) Section 415(b)(9) is amended to read as follows:
                  ``(9) Special rule for commercial airline pilots.--
                          ``(A) In general.--Except as provided in 
                        subparagraph (B), in the case of any 
                        participant who is a commercial airline pilot, 
                        if, as of the time of the participant's 
                        retirement, regulations prescribed by the 
                        Federal Aviation Administration require an 
                        individual to separate from service as a 
                        commercial airline pilot after attaining any 
                        age occurring on or after age 60 and before age 
                        62, paragraph (2)(C) shall be applied by 
                        substituting such age for age 62.
                          ``(B) Individuals who separate from service 
                        before age 60.--If a participant described in 
                        subparagraph (A) separates from service before 
                        age 60, the rules of paragraph (2)(C) shall 
                        apply.''.
                  (C) Section 415(b)(10)(C)(i) is amended by striking 
                ``applied without regard to paragraph (2)(F)''.
  (b) Defined Contribution Plans.--
          (1) Dollar limit.--Subparagraph (A) of section 415(c)(1) 
        (relating to limitation for defined contribution plans) is 
        amended by striking ``$30,000'' and inserting ``$40,000''.
          (2) Cost-of-living adjustments.--Subsection (d) of section 
        415 (related to cost-of-living adjustments) is amended--
                  (A) by striking ``$30,000'' in paragraph (1)(C) and 
                inserting ``$40,000''; and
                  (B) in paragraph (3)(D)--
                          (i) by striking ``$30,000'' in the heading 
                        and inserting ``$40,000''; and
                          (ii) by striking ``October 1, 1993'' and 
                        inserting ``July 1, 2000''.
  (c) Qualified Trusts.--
          (1) Compensation limit.--Sections 401(a)(17), 404(l), 408(k), 
        and 505(b)(7) are each amended by striking ``$150,000'' each 
        place it appears and inserting ``$200,000''.
          (2) Base period and rounding of cost-of-living adjustment.--
        Subparagraph (B) of section 401(a)(17) is amended--
                  (A) by striking ``October 1, 1993'' and inserting 
                ``July 1, 2000''; and
                  (B) by striking ``$10,000'' both places it appears 
                and inserting ``$5,000''.
  (d) Elective Deferrals.--
          (1) In general.--Paragraph (1) of section 402(g) (relating to 
        limitation on exclusion for elective deferrals) is amended to 
        read as follows:
          ``(1) In general.--
                  ``(A) Limitation.--Notwithstanding subsections (e)(3) 
                and (h)(1)(B), the elective deferrals of any individual 
                for any taxable year shall be included in such 
                individual's gross income to the extent the amount of 
                such deferrals for the taxable year exceeds the 
                applicable dollar amount.
                  ``(B) Applicable dollar amount.--For purposes of 
                subparagraph (A), the applicable dollar amount shall be 
                the amount determined 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.''.

          (2) Cost-of-living adjustment.--Paragraph (5) of section 
        402(g) is amended to read as follows:
          ``(5) Cost-of-living adjustment.--In the case of taxable 
        years beginning after December 31, 2005, the Secretary shall 
        adjust the $15,000 amount under paragraph (1)(B) at the same 
        time and in the same manner as under section 415(d), except 
        that the base period shall be the calendar quarter beginning 
        July 1, 2004, and any increase under this paragraph which is 
        not a multiple of $500 shall be rounded to the next lowest 
        multiple of $500.''.
          (3) Conforming amendments.--
                  (A) Section 402(g) (relating to limitation on 
                exclusion for elective deferrals), as amended by 
                paragraphs (1) and (2), is further amended by striking 
                paragraph (4) and redesignating paragraphs (5), (6), 
                (7), (8), and (9) as paragraphs (4), (5), (6), (7), and 
                (8), respectively.
                  (B) Paragraph (2) of section 457(c) is amended by 
                striking ``402(g)(8)(A)(iii)'' and inserting 
                ``402(g)(7)(A)(iii)''.
                  (C) Clause (iii) of section 501(c)(18)(D) is amended 
                by striking ``(other than paragraph (4) thereof)''.
  (e) Deferred Compensation Plans of State and Local Governments and 
Tax-Exempt Organizations.--
          (1) In general.--Section 457 (relating to deferred 
        compensation plans of State and local governments and tax-
        exempt organizations) is amended--
                  (A) in subsections (b)(2)(A) and (c)(1) by striking 
                ``$7,500'' each place it appears and inserting ``the 
                applicable dollar amount''; and
                  (B) in subsection (b)(3)(A) by striking ``$15,000'' 
                and inserting ``twice the dollar amount in effect under 
                subsection (b)(2)(A)''.
          (2) Applicable dollar amount; cost-of-living adjustment.--
        Paragraph (15) of section 457(e) is amended to read as follows:
          ``(15) Applicable dollar amount.--
                  ``(A) In general.--The applicable dollar amount shall 
                be the amount determined 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.

                  ``(B) Cost-of-living adjustments.--In the case of 
                taxable years beginning after December 31, 2005, the 
                Secretary shall adjust the $15,000 amount under 
                subparagraph (A) at the same time and in the same 
                manner as under section 415(d), except that the base 
                period shall be the calendar quarter beginning July 1, 
                2004, and any increase under this paragraph which is 
                not a multiple of $500 shall be rounded to the next 
                lowest multiple of $500.''.
  (f) Simple Retirement Accounts.--
          (1) Limitation.--Clause (ii) of section 408(p)(2)(A) 
        (relating to general rule for qualified salary reduction 
        arrangement) is amended by striking ``$6,000'' and inserting 
        ``the applicable dollar amount''.
          (2) Applicable dollar amount.--Subparagraph (E) of 408(p)(2) 
        is amended to read as follows:
                  ``(E) Applicable dollar amount; cost-of-living 
                adjustment.--
                          ``(i) In general.--For purposes of 
                        subparagraph (A)(ii), the applicable dollar 
                        amount shall be the amount determined in 
                        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.

                          ``(ii) Cost-of-living adjustment.--In the 
                        case of a year beginning after December 31, 
                        2004, the Secretary shall adjust the $10,000 
                        amount under clause (i) at the same time and in 
                        the same manner as under section 415(d), except 
                        that the base period taken into account shall 
                        be the calendar quarter beginning July 1, 2003, 
                        and any increase under this subparagraph which 
                        is not a multiple of $500 shall be rounded to 
                        the next lower multiple of $500.''.
          (3) Conforming amendments.--
                  (A) Subclause (I) of section 401(k)(11)(B)(i) is 
                amended by striking ``$6,000'' and inserting ``the 
                amount in effect under section 408(p)(2)(A)(ii)''.
                  (B) Section 401(k)(11) is amended by striking 
                subparagraph (E).
  (g) Rounding Rule Relating to Defined Benefit Plans and Defined 
Contribution Plans.--Paragraph (4) of section 415(d) is amended to read 
as follows:
          ``(4) Rounding.--
                  ``(A) $160,000 amount.--Any increase under 
                subparagraph (A) of paragraph (1) which is not a 
                multiple of $5,000 shall be rounded to the next lowest 
                multiple of $5,000.
                  ``(B) $40,000 amount.--Any increase under 
                subparagraph (C) of paragraph (1) which is not a 
                multiple of $1,000 shall be rounded to the next lowest 
                multiple of $1,000.''.
  (h) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 2000.

SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND SOLE 
                    PROPRIETORS.

  (a) Amendment of Internal Revenue Code.--Subparagraph (B) of section 
4975(f)(6) (relating to exemptions not to apply to certain 
transactions) is amended by adding at the end the following new clause:
                          ``(iii) Loan exception.--For purposes of 
                        subparagraph (A)(i), the term `owner-employee' 
                        shall only include a person described in 
                        subclause (II) or (III) of clause (i).''.
  (b) Amendment of ERISA.--Section 408(d)(2) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1108(d)(2)) is amended by adding 
at the end the following new subparagraph:
  ``(C) For purposes of paragraph (1)(A), the term `owner-employee' 
shall only include a person described in clause (ii) or (iii) of 
subparagraph (A).''.
  (c) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 2001.

SEC. 203. MODIFICATION OF TOP-HEAVY RULES.

  (a) Simplification of Definition of Key Employee.--
          (1) In general.--Section 416(i)(1)(A) (defining key employee) 
        is amended--
                  (A) by striking ``or any of the 4 preceding plan 
                years'' in the matter preceding clause (i);
                  (B) by striking clause (i) and inserting the 
                following:
                          ``(i) an officer of the employer having an 
                        annual compensation greater than $150,000,'';
                  (C) by striking clause (ii) and redesignating clauses 
                (iii) and (iv) as clauses (ii) and (iii), respectively; 
                and
                  (D) by striking the second sentence in the matter 
                following clause (iii), as redesignated by subparagraph 
                (C).
          (2) Conforming amendment.--Section 416(i)(1)(B)(iii) is 
        amended by striking ``and subparagraph (A)(ii)''.
  (b) Matching Contributions Taken Into Account for Minimum 
Contribution Requirements.--Section 416(c)(2)(A) (relating to defined 
contribution plans) is amended by adding at the end the following: 
``Employer matching contributions (as defined in section 401(m)(4)(A)) 
shall be taken into account for purposes of this subparagraph.''.
  (c) Distributions During Last Year Before Determination Date Taken 
Into Account.--
          (1) In general.--Paragraph (3) of section 416(g) is amended 
        to read as follows:
          ``(3) Distributions during last year before determination 
        date taken into account.--
                  ``(A) In general.--For purposes of determining--
                          ``(i) the present value of the cumulative 
                        accrued benefit for any employee, or
                          ``(ii) the amount of the account of any 
                        employee,
                such present value or amount shall be increased by the 
                aggregate distributions made with respect to such 
                employee under the plan during the 1-year period ending 
                on the determination date. The preceding sentence shall 
                also apply to distributions under a terminated plan 
                which if it had not been terminated would have been 
                required to be included in an aggregation group.
                  ``(B) 5-year period in case of in-service 
                distribution.--In the case of any distribution made for 
                a reason other than separation from service, death, or 
                disability, subparagraph (A) shall be applied by 
                substituting `5-year period' for `1-year period'.''.
          (2) Benefits not taken into account.--Subparagraph (E) of 
        section 416(g)(4) is amended--
                  (A) by striking ``last 5 years'' in the heading and 
                inserting ``last year before determination date''; and
                  (B) by striking ``5-year period'' and inserting ``1-
                year period''.
  (d) Definition of Top-Heavy Plans.--Paragraph (4) of section 416(g) 
(relating to other special rules for top-heavy plans) is amended by 
adding at the end the following new subparagraph:
                  ``(H) Cash or deferred arrangements using alternative 
                methods of meeting nondiscrimination requirements.--The 
                term `top-heavy plan' shall not include a plan which 
                consists solely of--
                          ``(i) a cash or deferred arrangement which 
                        meets the requirements of section 401(k)(12), 
                        and
                          ``(ii) matching contributions with respect to 
                        which the requirements of section 401(m)(11) 
                        are met.
                If, but for this subparagraph, a plan would be treated 
                as a top-heavy plan because it is a member of an 
                aggregation group which is a top-heavy group, 
                contributions under the plan may be taken into account 
                in determining whether any other plan in the group 
                meets the requirements of subsection (c)(2).''.
  (e) Frozen Plan Exempt From Minimum Benefit Requirement.--
Subparagraph (C) of section 416(c)(1) (relating to defined benefit 
plans) is amended--
                  (A) by striking ``clause (ii)'' in clause (i) and 
                inserting ``clause (ii) or (iii)''; and
                  (B) by adding at the end the following:
                          ``(iii) Exception for frozen plan.--For 
                        purposes of determining an employee's years of 
                        service with the employer, any service with the 
                        employer shall be disregarded to the extent 
                        that such service occurs during a plan year 
                        when the plan benefits (within the meaning of 
                        section 410(b)) no key employee or former key 
                        employee.''.
  (f) Elimination of Family Attribution.--Section 416(i)(1)(B) 
(defining 5-percent owner) is amended by adding at the end the 
following new clause:
                          ``(iv) Family attribution disregarded.--
                        Solely for purposes of applying this paragraph 
                        (and not for purposes of any provision of this 
                        title which incorporates by reference the 
                        definition of a key employee or 5-percent owner 
                        under this paragraph), section 318 shall be 
                        applied without regard to subsection (a)(1) 
                        thereof in determining whether any person is a 
                        5-percent owner.''.
  (g) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 2001.

SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF 
                    DEDUCTION LIMITS.

  (a) In General.--Section 404 (relating to deduction for contributions 
of an employer to an employees' trust or annuity plan and compensation 
under a deferred payment plan) is amended by adding at the end the 
following new subsection:
  ``(n) Elective Deferrals Not Taken Into Account for Purposes of 
Deduction Limits.--Elective deferrals (as defined in section 402(g)(3)) 
shall not be subject to any limitation contained in paragraph (3), (7), 
or (9) of subsection (a), and such elective deferrals shall not be 
taken into account in applying any such limitation to any other 
contributions.''.
  (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 2001.

SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED COMPENSATION 
                    PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT 
                    ORGANIZATIONS.

  (a) In General.--Subsection (c) of section 457 (relating to deferred 
compensation plans of State and local governments and tax-exempt 
organizations), as amended by section 201, is amended to read as 
follows:
  ``(c) Limitation.--The maximum amount of the compensation of any one 
individual which may be deferred under subsection (a) during any 
taxable year shall not exceed the amount in effect under subsection 
(b)(2)(A) (as modified by any adjustment provided under subsection 
(b)(3)).''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
to years beginning after December 31, 2001.

SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO IRS REGARDING PENSION 
                    PLANS.

  (a) Elimination of Certain User Fees.--The Secretary of the Treasury 
or the Secretary's delegate shall not require payment of user fees 
under the program established under section 10511 of the Revenue Act of 
1987 for requests to the Internal Revenue Service for determination 
letters with respect to the qualified status of a pension benefit plan 
maintained solely by one or more eligible employers or any trust which 
is part of the plan. The preceding sentence shall not apply to any 
request--
          (1) made after the later of--
                  (A) the fifth plan year the pension benefit plan is 
                in existence; or
                  (B) the end of any remedial amendment period with 
                respect to the plan beginning within the first 5 plan 
                years; or
          (2) made by the sponsor of any prototype or similar plan 
        which the sponsor intends to market to participating employers.
  (b) Pension Benefit Plan.--For purposes of this section, the term 
``pension benefit plan'' means a pension, profit-sharing, stock bonus, 
annuity, or employee stock ownership plan.
  (c) Eligible Employer.--For purposes of this section, the term 
``eligible employer'' has the same meaning given such term in section 
408(p)(2)(C)(i)(I) of the Internal Revenue Code of 1986. The 
determination of whether an employer is an eligible employer under this 
section shall be made as of the date of the request described in 
subsection (a).
  (d) Determination of Average Fees Charged.--For purposes of any 
determination of average fees charged, any request to which subsection 
(a) applies shall not be taken into account.
  (e) Effective Date.--The provisions of this section shall apply with 
respect to requests made after December 31, 2001.

SEC. 207. DEDUCTION LIMITS.

  (a) Stock Bonus and Profit Sharing Trusts.--
          (1) In general.--Subclause (I) of section 404(a)(3)(A)(i) 
        (relating to stock bonus and profit sharing trusts) is amended 
        by striking ``15 percent'' and inserting ``20 percent''.
          (2) Conforming amendment.--Subparagraph (C) of section 
        404(h)(1) is amended by striking ``15 percent'' each place it 
        appears and inserting ``20 percent''.
  (b) Compensation.--
          (1) In general.--Section 404(a) (relating to general rule) is 
        amended by adding at the end the following:
          ``(12) Definition of compensation.--For purposes of 
        paragraphs (3), (7), (8), and (9), the term `compensation 
        otherwise paid or accrued during the taxable year' shall 
        include amounts treated as `participant's compensation' under 
        subparagraph (C) or (D) of section 415(c)(3).''.
          (2) Conforming amendments.--
                  (A) Subparagraph (B) of section 404(a)(3) is amended 
                by striking the last sentence thereof.
                  (B) Clause (i) of section 4972(c)(6)(B) is amended by 
                striking ``(within the meaning of section 404(a))'' and 
                inserting ``(within the meaning of section 404(a) and 
                as adjusted under section 404(a)(12))''.
  (c) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 2001.

SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX 
                    CONTRIBUTIONS.

  (a) In General.--Subpart A of part I of subchapter D of chapter 1 
(relating to deferred compensation, etc.) is amended by inserting after 
section 402 the following new section:

``SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS PLUS 
                    CONTRIBUTIONS.

  ``(a) General Rule.--If an applicable retirement plan includes a 
qualified plus contribution program--
          ``(1) any designated plus contribution made by an employee 
        pursuant to the program shall be treated as an elective 
        deferral for purposes of this chapter, except that such 
        contribution shall not be excludable from gross income, and
          ``(2) such plan (and any arrangement which is part of such 
        plan) shall not be treated as failing to meet any requirement 
        of this chapter solely by reason of including such program.
  ``(b) Qualified Plus Contribution Program.--For purposes of this 
section--
          ``(1) In general.--The term `qualified plus contribution 
        program' means a program under which an employee may elect to 
        make designated plus contributions in lieu of all or a portion 
        of elective deferrals the employee is otherwise eligible to 
        make under the applicable retirement plan.
          ``(2) Separate accounting required.--A program shall not be 
        treated as a qualified plus contribution program unless the 
        applicable retirement plan--
                  ``(A) establishes separate accounts (`designated plus 
                accounts') for the designated plus contributions of 
                each employee and any earnings properly allocable to 
                the contributions, and
                  ``(B) maintains separate recordkeeping with respect 
                to each account.
  ``(c) Definitions and Rules Relating to Designated Plus 
Contributions.--For purposes of this section--
          ``(1) Designated plus contribution.--The term `designated 
        plus contribution' means any elective deferral which--
                  ``(A) is excludable from gross income of an employee 
                without regard to this section, and
                  ``(B) the employee designates (at such time and in 
                such manner as the Secretary may prescribe) as not 
                being so excludable.
          ``(2) Designation limits.--The amount of elective deferrals 
        which an employee may designate under paragraph (1) shall not 
        exceed the excess (if any) of--
                  ``(A) the maximum amount of elective deferrals 
                excludable from gross income of the employee for the 
                taxable year (without regard to this section), over
                  ``(B) the aggregate amount of elective deferrals of 
                the employee for the taxable year which the employee 
                does not designate under paragraph (1).
          ``(3) Rollover contributions.--
                  ``(A) In general.--A rollover contribution of any 
                payment or distribution from a designated plus account 
                which is otherwise allowable under this chapter may be 
                made only if the contribution is to--
                          ``(i) another designated plus account of the 
                        individual from whose account the payment or 
                        distribution was made, or
                          ``(ii) a Roth IRA of such individual.
                  ``(B) Coordination with limit.--Any rollover 
                contribution to a designated plus account under 
                subparagraph (A) shall not be taken into account for 
                purposes of paragraph (1).
  ``(d) Distribution Rules.--For purposes of this title--
          ``(1) Exclusion.--Any qualified distribution from a 
        designated plus account shall not be includible in gross 
        income.
          ``(2) Qualified distribution.--For purposes of this 
        subsection--
                  ``(A) In general.--The term `qualified distribution' 
                has the meaning given such term by section 
                408A(d)(2)(A) (without regard to clause (iv) thereof).
                  ``(B) Distributions within nonexclusion period.--A 
                payment or distribution from a designated plus account 
                shall not be treated as a qualified distribution if 
                such payment or distribution is made within the 5-
                taxable-year period beginning with the earlier of--
                          ``(i) the first taxable year for which the 
                        individual made a designated plus contribution 
                        to any designated plus account established for 
                        such individual under the same applicable 
                        retirement plan, or
                          ``(ii) if a rollover contribution was made to 
                        such designated plus account from a designated 
                        plus account previously established for such 
                        individual under another applicable retirement 
                        plan, the first taxable year for which the 
                        individual made a designated plus contribution 
                        to such previously established account.
                  ``(C) Distributions of excess deferrals and 
                earnings.--The term `qualified distribution' shall not 
                include any distribution of any excess deferral under 
                section 402(g)(2) and any income on the excess 
                deferral.
          ``(3) Aggregation rules.--Section 72 shall be applied 
        separately with respect to distributions and payments from a 
        designated plus account and other distributions and payments 
        from the plan.
  ``(e) Other Definitions.--For purposes of this section--
          ``(1) Applicable retirement plan.--The term `applicable 
        retirement plan' means--
                  ``(A) an employees' trust described in section 401(a) 
                which is exempt from tax under section 501(a), and
                  ``(B) a plan under which amounts are contributed by 
                an individual's employer for an annuity contract 
                described in section 403(b).
          ``(2) Elective deferral.--The term `elective deferral' means 
        any elective deferral described in subparagraph (A) or (C) of 
        section 402(g)(3).''.
  (b) Excess Deferrals.--Section 402(g) (relating to limitation on 
exclusion for elective deferrals) is amended--
          (1) by adding at the end of paragraph (1) the following new 
        sentence: ``The preceding sentence shall not apply to so much 
        of such excess as does not exceed the designated plus 
        contributions of the individual for the taxable year.''; and
          (2) by inserting ``(or would be included but for the last 
        sentence thereof)'' after ``paragraph (1)'' in paragraph 
        (2)(A).
  (c) Rollovers.--Subparagraph (B) of section 402(c)(8) is amended by 
adding at the end the following:
                ``If any portion of an eligible rollover distribution 
                is attributable to payments or distributions from a 
                designated plus account (as defined in section 402A), 
                an eligible retirement plan with respect to such 
                portion shall include only another designated plus 
                account and a Roth IRA.''.
  (d) Reporting Requirements.--
          (1) W-2 information.--Section 6051(a)(8) is amended by 
        inserting ``, including the amount of designated plus 
        contributions (as defined in section 402A)'' before the comma 
        at the end.
          (2) Information.--Section 6047 is amended by redesignating 
        subsection (f) as subsection (g) and by inserting after 
        subsection (e) the following new subsection:
  ``(f) Designated Plus Contributions.--The Secretary shall require the 
plan administrator of each applicable retirement plan (as defined in 
section 402A) to make such returns and reports regarding designated 
plus contributions (as so defined) to the Secretary, participants and 
beneficiaries of the plan, and such other persons as the Secretary may 
prescribe.''.
  (e) Conforming Amendments.--
          (1) Section 408A(e) is amended by adding after the first 
        sentence the following new sentence: ``Such term includes a 
        rollover contribution described in section 402A(c)(3)(A).''.
          (2) The table of sections for subpart A of part I of 
        subchapter D of chapter 1 is amended by inserting after the 
        item relating to section 402 the following new item:

                              ``Sec. 402A. Optional treatment of 
                                        elective deferrals as plus 
                                        contributions.''.

  (f) Effective Date.--The amendments made by this section shall apply 
to taxable years beginning after December 31, 2001.

                TITLE III--ENHANCING FAIRNESS FOR WOMEN

SEC. 301. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS AGE 50 OR OVER.

  (a) In General.--Section 414 (relating to definitions and special 
rules) is amended by adding at the end the following new subsection:
  ``(v) Catch-up Contributions for Individuals Age 50 or Over.--
          ``(1) In general.--An applicable employer plan shall not be 
        treated as failing to meet any requirement of this title solely 
        because the plan permits an eligible participant to make 
        additional elective deferrals in any plan year.
          ``(2) Limitation on amount of additional deferrals.--A plan 
        shall not permit additional elective deferrals under paragraph 
        (1) for any year in an amount greater than the lesser of--
                  ``(A) $5,000, or
                  ``(B) the excess (if any) of--
                          ``(i) the participant's compensation for the 
                        year, over
                          ``(ii) any other elective deferrals of the 
                        participant for such year which are made 
                        without regard to this subsection.
          ``(3) Treatment of contributions.--In the case of any 
        contribution to a plan under paragraph (1), such contribution 
        shall not, with respect to the year in which the contribution 
        is made--
                  ``(A) be subject to any otherwise applicable 
                limitation contained in section 402(g), 402(h)(2), 
                404(a), 404(h), 408(p)(2)(A)(ii), 415, or 457, or
                  ``(B) be taken into account in applying such 
                limitations to other contributions or benefits under 
                such plan or any other such plan.
          ``(4) Application of nondiscrimination rules.--
                  ``(A) In general.--An applicable employer plan shall 
                not be treated as failing to meet the nondiscrimination 
                requirements under section 401(a)(4) with respect to 
                benefits, rights, and features if the plan allows all 
                eligible participants to make the same election with 
                respect to the additional elective deferrals under this 
                subsection.
                  ``(B) Aggregation.--For purposes of subparagraph (A), 
                all plans maintained by employers who are treated as a 
                single employer under subsection (b), (c), (m), or (o) 
                of section 414 shall be treated as 1 plan.
          ``(5) Eligible participant.--For purposes of this subsection, 
        the term `eligible participant' means, with respect to any plan 
        year, a participant in a plan--
                  ``(A) who has attained the age of 50 before the close 
                of the plan year, and
                  ``(B) with respect to whom no other elective 
                deferrals may (without regard to this subsection) be 
                made to the plan for the plan year by reason of the 
                application of any limitation or other restriction 
                described in paragraph (3) or comparable limitation 
                contained in the terms of the plan.
          ``(6) Other definitions and rules.--For purposes of this 
        subsection--
                  ``(A) Applicable employer plan.--The term `applicable 
                employer plan' means--
                          ``(i) an employees' trust described in 
                        section 401(a) which is exempt from tax under 
                        section 501(a),
                          ``(ii) a plan under which amounts are 
                        contributed by an individual's employer for an 
                        annuity contract described in section 403(b),
                          ``(iii) an eligible deferred compensation 
                        plan under section 457 of an eligible employer 
                        as defined in section 457(e)(1)(A), and
                          ``(iv) an arrangement meeting the 
                        requirements of section 408 (k) or (p).
                  ``(B) Elective deferral.--The term `elective 
                deferral' has the meaning given such term by subsection 
                (u)(2)(C).
                  ``(C) Exception for section 457 plans.--This 
                subsection shall not apply to an applicable employer 
                plan described in subparagraph (A)(iii) for any year to 
                which section 457(b)(3) applies.
                  ``(D) Cost-of-living adjustment.--In the case of a 
                year beginning after December 31, 2005, the Secretary 
                shall adjust annually the $5,000 amount in paragraph 
                (2)(A) for increases in the cost-of-living at the same 
                time and in the same manner as adjustments under 
                section 415(d); except that the base period taken into 
                account shall be the calendar quarter beginning July 1, 
                2004, and any increase under this subparagraph which is 
                not a multiple of $500 shall be rounded to the next 
                lower multiple of $500.''.
  (b) Effective Date.--The amendment made by this section shall apply 
to contributions in taxable years beginning after December 31, 2000.

SEC. 302. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES TO DEFINED 
                    CONTRIBUTION PLANS.

  (a) Equitable Treatment.--
          (1) In general.--Subparagraph (B) of section 415(c)(1) 
        (relating to limitation for defined contribution plans) is 
        amended by striking ``25 percent'' and inserting ``100 
        percent''.
          (2) Application to section 403(b).--Section 403(b) is 
        amended--
                  (A) by striking ``the exclusion allowance for such 
                taxable year'' in paragraph (1) and inserting ``the 
                applicable limit under section 415'';
                  (B) by striking paragraph (2); and
                  (C) by inserting ``or any amount received by a former 
                employee after the fifth taxable year following the 
                taxable year in which such employee was terminated'' 
                before the period at the end of the second sentence of 
                paragraph (3).
          (3) Conforming amendments.--
                  (A) Subsection (f) of section 72 is amended by 
                striking ``section 403(b)(2)(D)(iii))'' and inserting 
                ``section 403(b)(2)(D)(iii), as in effect before the 
                enactment of the Comprehensive Retirement Security and 
                Pension Reform Act of 2001)''.
                  (B) Section 404(a)(10)(B) is amended by striking ``, 
                the exclusion allowance under section 403(b)(2),''.
                  (C) Section 415(a)(2) is amended by striking ``, and 
                the amount of the contribution for such portion shall 
                reduce the exclusion allowance as provided in section 
                403(b)(2)''.
                  (D) Section 415(c)(3) is amended by adding at the end 
                the following new subparagraph:
                  ``(E) Annuity contracts.--In the case of an annuity 
                contract described in section 403(b), the term 
                `participant's compensation' means the participant's 
                includible compensation determined under section 
                403(b)(3).''.
                  (E) Section 415(c) is amended by striking paragraph 
                (4).
                  (F) Section 415(c)(7) is amended to read as follows:
          ``(7) Certain contributions by church plans not treated as 
        exceeding limit.--
                  ``(A) In general.--Notwithstanding any other 
                provision of this subsection, at the election of a 
                participant who is an employee of a church or a 
                convention or association of churches, including an 
                organization described in section 414(e)(3)(B)(ii), 
                contributions and other additions for an annuity 
                contract or retirement income account described in 
                section 403(b) with respect to such participant, when 
                expressed as an annual addition to suchparticipant's 
account, shall be treated as not exceeding the limitation of paragraph 
(1) if such annual addition is not in excess of $10,000.
                  ``(B) $40,000 aggregate limitation.--The total amount 
                of additions with respect to any participant which may 
                be taken into account for purposes of this subparagraph 
                for all years may not exceed $40,000.
                  ``(C) Annual addition.--For purposes of this 
                paragraph, the term `annual addition' has the meaning 
                given such term by paragraph (2).''.
                  (G) Subparagraph (B) of section 402(g)(7) (as 
                redesignated by section 201) is amended by inserting 
                before the period at the end the following: ``(as in 
                effect before the enactment of the Comprehensive 
                Retirement Security and Pension Reform Act of 2001)''.
                  (H) Section 664(g) is amended--
                          (i) in paragraph (3)(E) by striking 
                        ``limitations under section 415(c)'' and 
                        inserting ``applicable limitation under 
                        paragraph (7)'', and
                          (ii) by adding at the end the following new 
                        paragraph:
          ``(7) Applicable limitation.--
                  ``(A) In general.--For purposes of paragraph (3)(E), 
                the applicable limitation under this paragraph with 
                respect to a participant is an amount equal to the 
                lesser of--
                          ``(i) $30,000, or
                          ``(ii) 25 percent of the participant's 
                        compensation (as defined in section 415(c)(3)).
                  ``(B) Cost-of-living adjustment.--The Secretary shall 
                adjust annually the $30,000 amount under subparagraph 
                (A)(i) at the same time and in the same manner as under 
                section 415(d), except that the base period shall be 
                the calendar quarter beginning October 1, 1993, and any 
                increase under this subparagraph which is not a 
                multiple of $5,000 shall be rounded to the next lowest 
                multiple of $5,000.''.
          (3) Effective date.--The amendments made by this subsection 
        shall apply to years beginning after December 31, 2000.
  (b) Special Rules for Sections 403(b) and 408.--
          (1) In general.--Subsection (k) of section 415 is amended by 
        adding at the end the following new paragraph:
          ``(4) Special rules for sections 403(b) and 408.--For 
        purposes of this section, any annuity contract described in 
        section 403(b) for the benefit of a participant shall be 
        treated as a defined contribution plan maintained by each 
        employer with respect to which the participant has the control 
        required under subsection (b) or (c) of section 414 (as 
        modified by subsection (h)). For purposes of this section, any 
        contribution by an employer to a simplified employee pension 
        plan for an individual for a taxable year shall be treated as 
        an employer contribution to a defined contribution plan for 
        such individual for such year.''.
          (2) Effective date.--
                  (A) In general.--The amendment made by paragraph (1) 
                shall apply to limitation years beginning after 
                December 31, 1999.
                  (B) Exclusion allowance.--Effective for limitation 
                years beginning in 2000, in the case of any annuity 
                contract described in section 403(b) of the Internal 
                Revenue Code of 1986, the amount of the contribution 
                disqualified by reason of section 415(g) of such Code 
                shall reduce the exclusion allowance as provided in 
                section 403(b)(2) of such Code.
          (3) Modification of 403(b) exclusion allowance to conform to 
        415 modification.--The Secretary of the Treasury shall modify 
        the regulations regarding the exclusion allowance under section 
        403(b)(2) of the Internal Revenue Code of 1986 to render void 
        the requirement that contributions to a defined benefit pension 
        plan be treated as previously excluded amounts for purposes of 
        the exclusion allowance. For taxable years beginning after 
        December 31, 1999, such regulations shall be applied as if such 
        requirement were void.
  (c) Deferred Compensation Plans of State and Local Governments and 
Tax-Exempt Organizations.--
          (1) In general.--Subparagraph (B) of section 457(b)(2) 
        (relating to salary limitation on eligible deferred 
        compensation plans) is amended by striking ``33\1/3\ percent'' 
        and inserting ``100 percent''.
          (2) Effective date.--The amendment made by this subsection 
        shall apply to years beginning after December 31, 2000.

SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER MATCHING CONTRIBUTIONS.

  (a) Amendment of Internal Revenue Code.--Section 411(a) (relating to 
minimum vesting standards) is amended--
          (1) in paragraph (2), by striking ``A plan'' and inserting 
        ``Except as provided in paragraph (12), a plan''; and
          (2) by adding at the end the following:
          ``(12) Faster vesting for matching contributions.--In the 
        case of matching contributions (as defined in section 
        401(m)(4)(A)), paragraph (2) shall be applied--
                  ``(A) by substituting `3 years' for `5 years' in 
                subparagraph (A), and
                  ``(B) by substituting the following table for the 
                table contained in subparagraph (B):

                  
                                                     The nonforfeitable
                ``Years of service:
                                                       percentage is:  
                  2........................................        20  
                  3........................................        40  
                  4........................................        60  
                  5........................................        80  
                  6........................................     100.''.

  (b) Amendment of ERISA.--Section 203(a) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1053(a)) is amended--
          (1) in paragraph (2), in the matter preceding subparagraph 
        (A), by striking ``A plan'' and inserting ``Except as provided 
        in paragraph (4), a plan'', and
          (2) by adding at the end the following:
          ``(4) In the case of matching contributions (as defined in 
        section 401(m)(4)(A) of the Internal Revenue Code of 1986), 
        paragraph (2) shall be applied--
                  ``(A) by substituting `3 years' for `5 years' in 
                subparagraph (A), and
                  ``(B) by substituting the following table for the 
                table contained in subparagraph (B):

                  
                                                     The nonforfeitable
                ``Years of service:
                                                       percentage is:  
                  2........................................        20  
                  3........................................        40  
                  4........................................        60  
                  5........................................        80  
                  6........................................     100.''.

  (c) Effective Dates.--
          (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to contributions 
        for plan years beginning after December 31, 2001.
          (2) Collective bargaining agreements.--In the case of a plan 
        maintained pursuant to one or more collective bargaining 
        agreements between employee representatives and one or more 
        employers ratified by the date of the enactment of this Act, 
        the amendments made by this section shall not apply to 
        contributions on behalf of employees covered by any such 
        agreement for plan years beginning before the earlier of--
                  (A) the later of--
                          (i) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof on or after such date of the 
                        enactment); or
                          (ii) January 1, 2002; or
                  (B) January 1, 2006.
          (3) Service required.--With respect to any plan, the 
        amendments made by this section shall not apply to any employee 
        before the date that such employee has 1 hour of service under 
        such plan in any plan year to which the amendments made by this 
        section apply.

SEC. 304. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBUTION RULES.

  (a) Simplification and Finalization of Minimum Distribution 
Requirements.--
          (1) In general.--The Secretary of the Treasury shall--
                  (A) simplify and finalize the regulations relating to 
                minimum distribution requirements under sections 
                401(a)(9), 408(a)(6) and (b)(3), 403(b)(10), and 
                457(d)(2) of the Internal Revenue Code of 1986; and
                  (B) modify such regulations to--
                          (i) reflect current life expectancy; and
                          (ii) revise the required distribution methods 
                        so that, under reasonable assumptions, the 
                        amount of the required minimum distribution 
                        does not decrease over a participant's life 
                        expectancy.
          (2) Fresh start.--Notwithstanding subparagraph (D) of section 
        401(a)(9) of such Code, during the first year that regulations 
        are in effect under this subsection, required distributions for 
        future years may be redetermined to reflectchanges under such 
regulations. Such redetermination shall include the opportunity to 
choose a new designated beneficiary and to elect a new method of 
calculating life expectancy.
          (3) Date for regulations.--Not later than December 31, 2002, 
        the Secretary shall issue final regulations described in 
        paragraph (1) and such regulations shall apply without regard 
        to whether an individual had previously begun receiving minimum 
        distributions.
  (b) Repeal of Rule Where Distributions Had Begun Before Death 
Occurs.--
          (1) In general.--Subparagraph (B) of section 401(a)(9) is 
        amended by striking clause (i) and redesignating clauses (ii), 
        (iii), and (iv) as clauses (i), (ii), and (iii), respectively.
          (2) Conforming changes.--
                  (A) Clause (i) of section 401(a)(9)(B) (as so 
                redesignated) is amended--
                          (i) by striking ``for other cases'' in the 
                        heading; and
                          (ii) by striking ``the distribution of the 
                        employee's interest has begun in accordance 
                        with subparagraph (A)(ii)'' and inserting ``his 
                        entire interest has been distributed to him''.
                  (B) Clause (ii) of section 401(a)(9)(B) (as so 
                redesignated) is amended by striking ``clause (ii)'' 
                and inserting ``clause (i)''.
                  (C) Clause (iii) of section 401(a)(9)(B) (as so 
                redesignated) is amended--
                          (i) by striking ``clause (iii)(I)'' and 
                        inserting ``clause (ii)(I)'';
                          (ii) by striking ``clause (iii)(III)'' in 
                        subclause (I) and inserting ``clause 
                        (ii)(III)'';
                          (iii) by striking ``the date on which the 
                        employee would have attained age 70\1/2\,'' in 
                        subclause (I) and inserting ``April 1 of the 
                        calendar year following the calendar year in 
                        which the spouse attains 70\1/2\,''; and
                          (iv) by striking ``the distributions to such 
                        spouse begin,'' in subclause (II) and inserting 
                        ``his entire interest has been distributed to 
                        him,''.
          (3) Effective date.--
                  (A) In general.--Except as provided in subparagraph 
                (B), the amendments made by this subsection shall apply 
                to years beginning after December 31, 2001.
                  (B) Distributions to surviving spouse.--
                          (i) In general.--In the case of an employee 
                        described in clause (ii), distributions to the 
                        surviving spouse of the employee shall not be 
                        required to commence prior to the date on which 
                        such distributions would have been required to 
                        begin under section 401(a)(9)(B) of the 
                        Internal Revenue Code of 1986 (as in effect on 
                        the day before the date of the enactment of 
                        this Act).
                          (ii) Certain employees.--An employee is 
                        described in this clause if such employee dies 
                        before--
                                  (I) the date of the enactment of this 
                                Act, and
                                  (II) the required beginning date 
                                (within the meaning of section 
                                401(a)(9)(C) of the Internal Revenue 
                                Code of 1986) of the employee.
  (c) Reduction in Excise Tax.--
          (1) In general.--Subsection (a) of section 4974 is amended by 
        striking ``50 percent'' and inserting ``10 percent''.
          (2) Effective date.--The amendment made by this subsection 
        shall apply to years beginning after December 31, 2001.

SEC. 305. CLARIFICATION OF TAX TREATMENT OF DIVISION OF SECTION 457 
                    PLAN BENEFITS UPON DIVORCE.

  (a) In General.--Section 414(p)(11) (relating to application of rules 
to governmental and church plans) is amended--
          (1) by inserting ``or an eligible deferred compensation plan 
        (within the meaning of section 457(b))'' after ``subsection 
        (e))''; and
          (2) in the heading, by striking ``governmental and church 
        plans'' and inserting ``certain other plans''.
  (b) Waiver of Certain Distribution Requirements.--Paragraph (10) of 
section 414(p) is amended by striking ``and section 409(d)'' and 
inserting ``section 409(d), and section 457(d)''.
  (c) Tax Treatment of Payments From a Section 457 Plan.--Subsection 
(p) of section 414 is amended by redesignating paragraph (12) as 
paragraph (13) and inserting after paragraph (11) the following new 
paragraph:
          ``(12) Tax treatment of payments from a section 457 plan.--If 
        a distribution or payment from an eligible deferred 
        compensation plan described in section 457(b) is made pursuant 
        to a qualified domestic relations order, rules similar to the 
        rules of section 402(e)(1)(A) shall apply to such distribution 
        or payment.''.
  (d) Effective Date.--The amendments made by this section shall apply 
to transfers, distributions, and payments made after December 31, 2001.

SEC. 306. MODIFICATION OF SAFE HARBOR RELIEF FOR HARDSHIP WITHDRAWALS 
                    FROM CASH OR DEFERRED ARRANGEMENTS.

  (a) In General.--The Secretary of the Treasury shall revise the 
regulations relating to hardship distributions under section 
401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986 to provide 
that the period an employee is prohibited from making elective and 
employee contributions in order for a distribution to be deemed 
necessary to satisfy financial need shall be equal to 6 months.
  (b) Effective Date.--The revised regulations under subsection (a) 
shall apply to years beginning after December 31, 2001.

           TITLE IV--INCREASING PORTABILITY FOR PARTICIPANTS

SEC. 401. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.

  (a) Rollovers From and to Section 457 Plans.--
          (1) Rollovers from section 457 plans.--
                  (A) In general.--Section 457(e) (relating to other 
                definitions and special rules) is amended by adding at 
                the end the following:
          ``(16) Rollover amounts.--
                  ``(A) General rule.--In the case of an eligible 
                deferred compensation plan established and maintained 
                by an employer described in subsection (e)(1)(A), if--
                          ``(i) any portion of the balance to the 
                        credit of an employee in such plan is paid to 
                        such employee in an eligible rollover 
                        distribution (within the meaning of section 
                        402(c)(4) without regard to subparagraph (C) 
                        thereof),
                          ``(ii) the employee transfers any portion of 
                        the property such employee receives in such 
                        distribution to an eligible retirement plan 
                        described in section 402(c)(8)(B), and
                          ``(iii) in the case of a distribution of 
                        property other than money, the amount so 
                        transferred consists of the property 
                        distributed,
                then such distribution (to the extent so transferred) 
                shall not be includible in gross income for the taxable 
                year in which paid.
                  ``(B) Certain rules made applicable.--The rules of 
                paragraphs (2) through (7) (other than paragraph 
                (4)(C)) and (9) of section 402(c) and section 402(f) 
                shall apply for purposes of subparagraph (A).
                  ``(C) Reporting.--Rollovers under this paragraph 
                shall be reported to the Secretary in the same manner 
                as rollovers from qualified retirement plans (as 
                defined in section 4974(c)).''.
                  (B) Deferral limit determined without regard to 
                rollover amounts.--Section 457(b)(2) (defining eligible 
                deferred compensation plan) is amended by inserting 
                ``(other than rollover amounts)'' after ``taxable 
                year''.
                  (C) Direct rollover.--Paragraph (1) of section 457(d) 
                is amended by striking ``and'' at the end of 
                subparagraph (A), by striking the period at the end of 
                subparagraph (B) and inserting ``, and'', and by 
                inserting after subparagraph (B) the following:
                  ``(C) in the case of a plan maintained by an employer 
                described in subsection (e)(1)(A), the plan meets 
                requirements similar to the requirements of section 
                401(a)(31).
        Any amount transferred in a direct trustee-to-trustee transfer 
        in accordance with section 401(a)(31) shall not be includible 
        in gross income for the taxable year of transfer.''.
                  (D) Withholding.--
                          (i) Paragraph (12) of section 3401(a) is 
                        amended by adding at the end the following:
                  ``(E) under or to an eligible deferred compensation 
                plan which, at the time of such payment, is a plan 
                described in section 457(b) maintained by an employer 
                described in section 457(e)(1)(A); or''.
                          (ii) Paragraph (3) of section 3405(c) is 
                        amended to read as follows:
          ``(3) Eligible rollover distribution.--For purposes of this 
        subsection, the term `eligible rollover distribution' has the 
        meaning given such term by section 402(f)(2)(A).''.
                          (iii) Liability for withholding.--
                        Subparagraph (B) of section 3405(d)(2) is 
                        amended by striking ``or'' at the end of clause 
                        (ii), by striking the period at the end of 
                        clause (iii) and inserting ``, or'', and by 
                        adding at the end the following:
                          ``(iv) section 457(b) and which is maintained 
                        by an eligible employer described in section 
                        457(e)(1)(A).''.
          (2) Rollovers to section 457 plans.--
                  (A) In general.--Section 402(c)(8)(B) (defining 
                eligible retirement plan) is amended by striking 
                ``and'' at the end of clause (iii), by striking the 
                period at the end of clause (iv) and inserting ``, 
                and'', and by inserting after clause (iv) the following 
                new clause:
                          ``(v) an eligible deferred compensation plan 
                        described in section 457(b) which is maintained 
                        by an eligible employer described in section 
                        457(e)(1)(A).''.
                  (B) Separate accounting.--Section 402(c) is amended 
                by adding at the end the following new paragraph:
          ``(11) Separate accounting.--Unless a plan described in 
        clause (v) of paragraph (8)(B) agrees to separately account for 
        amounts rolled into such plan from eligible retirement plans 
        not described in such clause, the plan described in such clause 
        may not accept transfers or rollovers from such retirement 
        plans.''.
                  (C) 10 percent additional tax.--Subsection (t) of 
                section 72 (relating to 10-percent additional tax on 
                early distributions from qualified retirement plans) is 
                amended by adding at the end the following new 
                paragraph:
          ``(9) Special rule for rollovers to section 457 plans.--For 
        purposes of this subsection, a distribution from an eligible 
        deferred compensation plan (as defined in section 457(b)) of an 
        eligible employer described in section 457(e)(1)(A) shall be 
        treated as a distribution from a qualified retirement plan 
        described in 4974(c)(1) to the extent that such distribution is 
        attributable to an amount transferred to an eligible deferred 
        compensation plan from a qualified retirement plan (as defined 
        in section 4974(c)).''.
  (b) Allowance of Rollovers From and to 403(b) Plans.--
          (1) Rollovers from section 403(b) plans.--Section 
        403(b)(8)(A)(ii) (relating to rollover amounts) is amended by 
        striking ``such distribution'' and all that follows and 
        inserting ``such distribution to an eligible retirement plan 
        described in section 402(c)(8)(B), and''.
          (2) Rollovers to section 403(b) plans.--Section 402(c)(8)(B) 
        (defining eligible retirement plan), as amended by subsection 
        (a), is amended by striking ``and'' at the end of clause (iv), 
        by striking the period at the end of clause (v) and inserting 
        ``, and'', and by inserting after clause (v) the following new 
        clause:
                          ``(vi) an annuity contract described in 
                        section 403(b).''.
  (c) Expanded Explanation to Recipients of Rollover Distributions.--
Paragraph (1) of section 402(f) (relating to written explanation to 
recipients of distributions eligible for rollover treatment) is amended 
by striking ``and'' at the end of subparagraph (C), by striking the 
period at the end of subparagraph (D) and inserting ``, and'', and by 
adding at the end the following new subparagraph:
                  ``(E) of the provisions under which distributions 
                from the eligible retirement plan receiving the 
                distribution may be subject to restrictions and tax 
                consequences which are different from those applicable 
                to distributions from the plan making such 
                distribution.''.
  (d) Spousal Rollovers.--Section 402(c)(9) (relating to rollover where 
spouse receives distribution after death of employee) is amended by 
striking ``; except that'' and all that follows up to the end period.
  (e) Conforming Amendments.--
          (1) Section 72(o)(4) is amended by striking ``and 408(d)(3)'' 
        and inserting ``403(b)(8), 408(d)(3), and 457(e)(16)''.
          (2) Section 219(d)(2) is amended by striking ``or 408(d)(3)'' 
        and inserting ``408(d)(3), or 457(e)(16)''.
          (3) Section 401(a)(31)(B) is amended by striking ``and 
        403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and 
        457(e)(16)''.
          (4) Subparagraph (A) of section 402(f)(2) is amended by 
        striking ``or paragraph (4) of section 403(a)'' and inserting 
        ``, paragraph (4) of section 403(a), subparagraph (A) of 
        section 403(b)(8), or subparagraph (A) of section 457(e)(16)''.
          (5) Paragraph (1) of section 402(f) is amended by striking 
        ``from an eligible retirement plan''.
          (6) Subparagraphs (A) and (B) of section 402(f)(1) are 
        amended by striking ``another eligible retirement plan'' and 
        inserting ``an eligible retirement plan''.
          (7) Subparagraph (B) of section 403(b)(8) is amended to read 
        as follows:
                  ``(B) Certain rules made applicable.--The rules of 
                paragraphs (2) through (7) and (9) of section 402(c) 
                and section 402(f) shall apply for purposes of 
                subparagraph (A), except that section 402(f) shall be 
                applied to the payor in lieu of the plan 
                administrator.''.
          (8) Section 408(a)(1) is amended by striking ``or 
        403(b)(8),'' and inserting ``403(b)(8), or 457(e)(16)''.
          (9) Subparagraphs (A) and (B) of section 415(b)(2) are each 
        amended by striking ``and 408(d)(3)'' and inserting 
        ``403(b)(8), 408(d)(3), and 457(e)(16)''.
          (10) Section 415(c)(2) is amended by striking ``and 
        408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
          (11) Section 4973(b)(1)(A) is amended by striking ``or 
        408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
  (f) Effective Date; Special Rule.--
          (1) Effective date.--The amendments made by this section 
        shall apply to distributions after the date of the enactment of 
        this Act.
          (2) Special rule.--Notwithstanding any other provision of 
        law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
        Reform Act of 1986 shall not apply to any distribution from an 
        eligible retirement plan (as defined in clause (iii) or (iv) of 
        section 402(c)(8)(B) of the Internal Revenue Code of 1986) on 
        behalf of an individual if there was a rollover to such plan on 
        behalf of such individual which is permitted solely by reason 
        of any amendment made by this section.

SEC. 402. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.

  (a) In General.--Subparagraph (A) of section 408(d)(3) (relating to 
rollover amounts) is amended by adding ``or'' at the end of clause (i), 
by striking clauses (ii) and (iii), and by adding at the end the 
following:
                          ``(ii) the entire amount received (including 
                        money and any other property) is paid into an 
                        eligible retirement plan for the benefit of 
                        such individual not later than the 60th day 
                        after the date on which the payment or 
                        distribution is received, except that the 
                        maximum amount which may be paid into such plan 
                        may not exceed the portion of the amount 
                        received which is includible in gross income 
                        (determined without regard to this paragraph).
                For purposes of clause (ii), the term `eligible 
                retirement plan' means an eligible retirement plan 
                described in clause (iii), (iv), (v), or (vi) of 
                section 402(c)(8)(B).''.
  (b) Conforming Amendments.--
          (1) Paragraph (1) of section 403(b) is amended by striking 
        ``section 408(d)(3)(A)(iii)'' and inserting ``section 
        408(d)(3)(A)(ii)''.
          (2) Clause (i) of section 408(d)(3)(D) is amended by striking 
        ``(i), (ii), or (iii)'' and inserting ``(i) or (ii)''.
          (3) Subparagraph (G) of section 408(d)(3) is amended to read 
        as follows:
                  ``(G) Simple retirement accounts.--In the case of any 
                payment or distribution out of a simple retirement 
                account (as defined in subsection (p)) to which section 
                72(t)(6) applies, this paragraph shall not apply unless 
                such payment or distribution is paid into another 
                simple retirement account.''.
  (c) Effective Date; Special Rule.--
          (1) Effective date.--The amendments made by this section 
        shall apply to distributions after the date of the enactment of 
        this Act.
          (2) Special rule.--Notwithstanding any other provision of 
        law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
        Reform Act of 1986 shall not apply to any distribution from an 
        eligible retirement plan (as defined in clause (iii) or (iv) of 
        section 402(c)(8)(B) of the Internal Revenue Code of 1986) on 
        behalf of an individual if there was a rollover to such plan on 
        behalf of such individual which is permitted solely by reason 
        of the amendments made by this section.

SEC. 403. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

  (a) Rollovers From Exempt Trusts.--Paragraph (2) of section 402(c) 
(relating to maximum amount which may be rolled over) is amended by 
adding at the end the following: ``The preceding sentence shall not 
apply to such distribution to the extent--
                  ``(A) such portion is transferred in a direct 
                trustee-to-trustee transfer to a qualified trust which 
                is part of a plan which is a defined contribution plan 
                and which agrees to separately account for amounts so 
                transferred, including separately accounting for the 
                portion of such distribution which is includible in 
                gross income and the portion of such distribution which 
                is not so includible, or
                  ``(B) such portion is transferred to an eligible 
                retirement plan described in clause (i) or (ii) of 
                paragraph (8)(B).''.
  (b) Optional Direct Transfer of Eligible Rollover Distributions.--
Subparagraph (B) of section 401(a)(31) (relating to limitation) is 
amended by adding at the end the following: ``The preceding sentence 
shall not apply to such distribution if the plan to which such 
distribution is transferred--
                          ``(i) agrees to separately account for 
                        amounts so transferred, including separately 
                        accounting for the portion of such distribution 
                        which is includible in gross income and the 
                        portion of such distribution which is not so 
                        includible, or
                          ``(ii) is an eligible retirement plan 
                        described in clause (i) or (ii) of section 
                        402(c)(8)(B).''.
  (c) Rules for Applying Section 72 to IRAs.--Paragraph (3) of section 
408(d) (relating to special rules for applying section 72) is amended 
by inserting at the end the following:
                  ``(H) Application of section 72.--
                          ``(i) In general.--If--
                                  ``(I) a distribution is made from an 
                                individual retirement plan, and
                                  ``(II) a rollover contribution is 
                                made to an eligible retirement plan 
                                described in section 402(c)(8)(B)(iii), 
                                (iv), (v), or (vi) with respect to all 
                                or part of such distribution,
                        then, notwithstanding paragraph (2), the rules 
                        of clause (ii) shall apply for purposes of 
                        applying section 72.
                          ``(ii) Applicable rules.--In the case of a 
                        distribution described in clause (i)--
                                  ``(I) section 72 shall be applied 
                                separately to such distribution,
                                  ``(II) notwithstanding the pro rata 
                                allocation of income on, and investment 
                                in, the contract to distributions under 
                                section 72, the portion of such 
                                distribution rolled over to an eligible 
                                retirement plan described in clause (i) 
                                shall be treated as from income on the 
                                contract (to the extent of the 
                                aggregate income on the contract from 
                                all individual retirement plans of the 
                                distributee), and
                                  ``(III) appropriate adjustments shall 
                                be made in applying section 72 to other 
                                distributions in such taxable year and 
                                subsequent taxable years.''.
  (d) Effective Date.--The amendments made by this section shall apply 
to distributions made after the date of the enactment of this Act.

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

  (a) Exempt Trusts.--Paragraph (3) of section 402(c) (relating to 
transfer must be made within 60 days of receipt) is amended to read as 
follows:
          ``(3) Transfer must be made within 60 days of receipt.--
                  ``(A) In general.--Except as provided in subparagraph 
                (B), paragraph (1) shall not apply to any transfer of a 
                distribution made after the 60th day following the day 
                on which the distributee received the property 
                distributed.
                  ``(B) Hardship exception.--The Secretary may waive 
                the 60-day requirement under subparagraph (A) where the 
                failure to waive such requirement would be against 
                equity or good conscience, including casualty, 
                disaster, or other events beyond the reasonable control 
                of the individual subject to such requirement.''.
  (b) IRAs.--Paragraph (3) of section 408(d) (relating to rollover 
contributions), as amended by section 403, is amended by adding after 
subparagraph (H) the following new subparagraph:
                  ``(I) Waiver of 60-day requirement.--The Secretary 
                may waive the 60-day requirement under subparagraphs 
                (A) and (D) where the failure to waive such requirement 
                would be against equity or good conscience, including 
                casualty, disaster, or other events beyond the 
                reasonable control of the individual subject to such 
                requirement.''.
  (c) Effective Date.--The amendments made by this section shall apply 
to distributions after the date of the enactment of this Act.

SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.

  (a) Plan Transfers.--
          (1) Amendment of internal revenue code.--Paragraph (6) of 
        section 411(d) (relating to accrued benefit not to be decreased 
        by amendment) is amended by adding at the end the following:
                  ``(D) Plan transfers.--
                          ``(i) In general.--A defined contribution 
                        plan (in this subparagraph referred to as the 
                        `transferee plan') shall not be treated as 
                        failing to meet the requirements of this 
                        subsection merely because the transferee plan 
                        does not provide some or all of the forms of 
                        distribution previously available under another 
                        defined contribution plan (in this subparagraph 
                        referred to as the `transferor plan') to the 
                        extent that--
                                  ``(I) the forms of distribution 
                                previously available under the 
                                transferor plan applied to the account 
                                of a participant or beneficiary under 
                                the transferor plan that was 
                                transferred from the transferor plan to 
                                the transferee plan pursuant to a 
                                direct transfer rather than pursuant to 
                                a distribution from the transferor 
                                plan,
                                  ``(II) the terms of both the 
                                transferor plan and the transferee plan 
                                authorize the transfer described in 
                                subclause (I),
                                  ``(III) the transfer described in 
                                subclause (I) was made pursuant to a 
                                voluntary election by the participant 
                                or beneficiary whose account was 
                                transferred to the transferee plan,
                                  ``(IV) the election described in 
                                subclause (III) was made after the 
                                participant or beneficiary received a 
                                notice describing the consequences of 
                                making the election, and
                                  ``(V) the transferee plan allows the 
                                participant or beneficiary described in 
                                subclause (III) to receive any 
                                distribution to which the participant 
                                or beneficiary is entitled under the 
                                transferee plan in the form of a single 
                                sum distribution.
                          ``(ii) Exception.--Clause (i) shall apply to 
                        plan mergers and other transactions having the 
                        effect of a direct transfer, including 
                        consolidations of benefits attributable to 
                        different employers within a multiple employer 
                        plan.
                  ``(E) Elimination of form of distribution.--Except to 
                the extent provided in regulations, a defined 
                contribution plan shall not be treated as failing to 
                meet the requirements of this section merely because of 
                the elimination of a form of distribution previously 
                available thereunder. This subparagraph shall not apply 
                to the elimination of a form of distribution with 
                respect to any participant unless--
                          ``(i) a single sum payment is available to 
                        such participant at the same time or times as 
                        the form of distribution being eliminated, and
                          ``(ii) such single sum payment is based on 
                        the same or greater portion of the 
                        participant's account as the form of 
                        distribution being eliminated.''.
          (2) Amendment of erisa.--Section 204(g) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is 
        amended by adding at the end the following:
  ``(4)(A) A defined contribution plan (in this subparagraph referred 
to as the `transferee plan') shall not be treated as failing to meet 
the requirements of this subsection merely because the transferee plan 
does not provide some or all of the forms of distribution previously 
available under another defined contribution plan (in this subparagraph 
referred to as the `transferor plan') to the extent that--
          ``(i) the forms of distribution previously available under 
        the transferor plan applied to the account of a participant or 
        beneficiary under the transferor plan that was transferred from 
        the transferor plan to the transferee plan pursuant to a direct 
        transfer rather than pursuant to a distribution from the 
        transferor plan;
          ``(ii) the terms of both the transferor plan and the 
        transferee plan authorize the transfer described in clause (i);
          ``(iii) the transfer described in clause (i) was made 
        pursuant to a voluntary election by the participant or 
        beneficiary whose account was transferred to the transferee 
        plan;
          ``(iv) the election described in clause (iii) was made after 
        the participant or beneficiary received a notice describing the 
        consequences of making the election; and
          ``(v) the transferee plan allows the participant or 
        beneficiary described in clause (iii) to receive any 
        distribution to which the participant or beneficiary is 
        entitled under the transferee plan in the form of a single sum 
        distribution.
  ``(B) Subparagraph (A) shall apply to plan mergers and other 
transactions having the effect of a direct transfer, including 
consolidations of benefits attributable to different employers within a 
multiple employer plan.
  ``(5) Except to the extent provided in regulations promulgated by the 
Secretary of the Treasury, a defined contribution plan shall not be 
treated as failing to meet the requirements of this subsection merely 
because of the elimination of a form of distribution previously 
available thereunder. This paragraph shall not apply to the elimination 
of a form of distribution with respect to any participant unless--
          ``(A) a single sum payment is available to such participant 
        at the same time or times as the form of distribution being 
        eliminated; and
          ``(B) such single sum payment is based on the same or greater 
        portion of the participant's account as the form of 
        distribution being eliminated.''.
          (3) Effective date.--The amendments made by this subsection 
        shall apply to years beginning after December 31, 2001.
  (b) Regulations.--
          (1) Amendment of internal revenue code.--Paragraph (6)(B) of 
        section 411(d) (relating to accrued benefit not to be decreased 
        by amendment) is amended by inserting after the second sentence 
        the following new sentence: ``The Secretary shall by 
        regulations provide that this subparagraph shall not apply to 
        any plan amendment which reduces or eliminates benefits or 
        subsidies which create significant burdens or complexities for 
        the plan and plan participants and does not adversely affect 
        the rights of any participant in a more than de minimis 
        manner.''.
          (2) Amendment of erisa.--Section 204(g)(2) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)(2)) 
        is amended by inserting before the last sentence the following 
        new sentence: ``The Secretary of the Treasury shall by 
        regulations provide that this paragraph shall not apply to any 
        plan amendment which reduces or eliminates benefits or 
        subsidies which create significant burdens or complexities for 
        the plan and plan participants and does not adversely affect 
        the rights of any participant in a more than de minimis 
        manner.''.
          (3) Secretary directed.--Not later than December 31, 2003, 
        the Secretary of the Treasury is directed to issue regulations 
        under section 411(d)(6) of the Internal Revenue Code of 1986 
        and section 204(g) of the Employee Retirement Income Security 
        Act of 1974, including the regulations required by the 
        amendment made by this subsection. Such regulations shall apply 
        to plan years beginning after December 31, 2003, or such 
        earlier date as is specified by the Secretary of the Treasury.

SEC. 406. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.

  (a) Modification of Same Desk Exception.--
          (1) Section 401(k).--
                  (A) Section 401(k)(2)(B)(i)(I) (relating to qualified 
                cash or deferred arrangements) is amended by striking 
                ``separation from service'' and inserting ``severance 
                from employment''.
                  (B) Subparagraph (A) of section 401(k)(10) (relating 
                to distributions upon termination of plan or 
                disposition of assets or subsidiary) is amended to read 
                as follows:
                  ``(A) In general.--An event described in this 
                subparagraph is the termination of the plan without 
                establishment or maintenance of another defined 
                contribution plan (other than an employee stock 
                ownership plan as defined in section 4975(e)(7)).''.
                  (C) Section 401(k)(10) is amended--
                          (i) in subparagraph (B)--
                                  (I) by striking ``An event'' in 
                                clause (i) and inserting ``A 
                                termination''; and
                                  (II) by striking ``the event'' in 
                                clause (i) and inserting ``the 
                                termination'';
                          (ii) by striking subparagraph (C); and
                          (iii) by striking ``or disposition of assets 
                        or subsidiary'' in the heading.
          (2) Section 403(b).--
                  (A) Paragraphs (7)(A)(ii) and (11)(A) of section 
                403(b) are each amended by striking ``separates from 
                service'' and inserting ``has a severance from 
                employment''.
                  (B) The heading for paragraph (11) of section 403(b) 
                is amended by striking ``separation from service'' and 
                inserting ``severance from employment''.
          (3) Section 457.--Clause (ii) of section 457(d)(1)(A) is 
        amended by striking ``is separated from service'' and inserting 
        ``has a severance from employment''.
  (b) Effective Date.--The amendments made by this section shall apply 
to distributions after the date of the enactment of this Act.

SEC. 407. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED BENEFIT 
                    PLANS.

  (a) 403(b) Plans.--Subsection (b) of section 403 is amended by adding 
at the end the following new paragraph:
          ``(13) Trustee-to-trustee transfers to purchase permissive 
        service credit.--No amount shall be includible in gross income 
        by reason of a direct trustee-to-trustee transfer to a defined 
        benefit governmental plan (as defined in section 414(d)) if 
        such transfer is--
                  ``(A) for the purchase of permissive service credit 
                (as defined in section 415(n)(3)(A)) under such plan, 
                or
                  ``(B) a repayment to which section 415 does not apply 
                by reason of subsection (k)(3) thereof.''.
  (b) 457 Plans.--Subsection (e) of section 457 is amended by adding 
after paragraph (16) the following new paragraph:
          ``(17) Trustee-to-trustee transfers to purchase permissive 
        service credit.--No amount shall be includible in gross income 
        by reason of a direct trustee-to-trustee transfer to a defined 
        benefit governmental plan (as defined in section 414(d)) if 
        such transfer is--
                  ``(A) for the purchase of permissive service credit 
                (as defined in section 415(n)(3)(A)) under such plan, 
                or
                  ``(B) a repayment to which section 415 does not apply 
                by reason of subsection (k)(3) thereof.''.
  (c) Effective Date.--The amendments made by this section shall apply 
to trustee-to-trustee transfers after the date of the enactment of this 
Act.

SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF CASH-OUT 
                    AMOUNTS.

  (a) Qualified Plans.--
          (1) Amendment of internal revenue code.--Section 411(a)(11) 
        (relating to restrictions on certain mandatory distributions) 
        is amended by adding at the end the following:
                  ``(D) Special rule for rollover contributions.--A 
                plan shall not fail to meet the requirements of this 
                paragraph if, under the terms of the plan, the present 
                value of the nonforfeitable accrued benefit is 
                determined without regard to that portion of such 
                benefit which is attributable to rollover contributions 
                (and earnings allocable thereto). For purposes of this 
                subparagraph, the term `rollover contributions' means 
                any rollover contribution under sections 402(c), 
                403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 
                457(e)(16).''.
          (2) Amendment of erisa.--Section 203(e) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) is 
        amended by adding at the end the following:
  ``(4) A plan shall not fail to meet the requirements of this 
subsection if, under the terms of the plan, the present value of the 
nonforfeitable accrued benefit is determined without regard to that 
portion of such benefit which is attributable to rollover contributions 
(and earnings allocable thereto). For purposes of this subparagraph, 
the term `rollover contributions' means any rollover contribution under 
sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) 
of the Internal Revenue Code of 1986.''.
  (b) Eligible Deferred Compensation Plans.--Clause (i) of section 
457(e)(9)(A) is amended by striking ``such amount'' and inserting ``the 
portion of such amount which is not attributable to rollover 
contributions (as defined in section 411(a)(11)(D))''.
  (c) Effective Date.--The amendments made by this section shall apply 
to distributions after December 31, 2001.

SEC. 409. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS FOR SECTION 
                    457 PLANS.

  (a) Minimum Distribution Requirements.--Paragraph (2) of section 
457(d) (relating to distribution requirements) is amended to read as 
follows:
          ``(2) Minimum distribution requirements.--A plan meets the 
        minimum distribution requirements of this paragraph if such 
        plan meets the requirements of section 401(a)(9).''.
  (b) Inclusion in Gross Income.--
          (1) Year of inclusion.--Subsection (a) of section 457 
        (relating to year of inclusion in gross income) is amended to 
        read as follows:
  ``(a) Year of inclusion in gross income.--
          ``(1) In general.--Any amount of compensation deferred under 
        an eligible deferred compensation plan, and any income 
        attributable to the amounts so deferred, shall be includible in 
        gross income only for the taxable year in which such 
        compensation or other income--
                  ``(A) is paid to the participant or other 
                beneficiary, in the case of a plan of an eligible 
                employer described in subsection (e)(1)(A), and
                  ``(B) is paid or otherwise made available to the 
                participant or other beneficiary, in the case of a plan 
                of an eligible employer described in subsection 
                (e)(1)(B).
          ``(2) Special rule for rollover amounts.--To the extent 
        provided in section 72(t)(9), section 72(t) shall apply to any 
        amount includible in gross income under this subsection.''.
          (2) Conforming amendments.--
                  (A) So much of paragraph (9) of section 457(e) as 
                precedes subparagraph (A) is amended to read as 
                follows:
          ``(9) Benefits of tax exempt organization plans not treated 
        as made available by reason of certain elections, etc.--In the 
        case of an eligible deferred compensation plan of an employer 
        described in subsection
        (e)(1)(B)--''.
                  (B) Section 457(d) is amended by adding at the end 
                the following new paragraph:
          ``(3) Special rule for government plan.--An eligible deferred 
        compensation plan of an employer described in subsection 
        (e)(1)(A) shall not be treated as failing to meet the 
        requirements of this subsection solely by reason of making a 
        distribution described in subsection (e)(9)(A).''.
  (c) Effective Date.--The amendments made by this section shall apply 
to distributions after the date of the enactment of this Act.

        TITLE V--STRENGTHENING PENSION SECURITY AND ENFORCEMENT

SEC. 501. REPEAL OF PERCENT OF CURRENT LIABILITY FUNDING LIMIT.

  (a) Amendment of Internal Revenue Code.--Section 412(c)(7) (relating 
to full-funding limitation) is amended--
          (1) by striking ``the applicable percentage'' in subparagraph 
        (A)(i)(I) and inserting ``in the case of plan years beginning 
        before January 1, 2004, the applicable percentage''; and
          (2) by amending subparagraph (F) to read as follows:
                  ``(F) Applicable percentage.--For purposes of 
                subparagraph (A)(i)(I), the applicable percentage shall 
                be determined in accordance with the following table:

                ``In the case of any plan year
                                                         The applicable
                  beginning in--
                                                        percentage is--
                  2002.....................................       165  
                  2003.....................................     170.''.

  (b) Amendment of ERISA.--Section 302(c)(7) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1082(c)(7)) is amended--
          (1) by striking ``the applicable percentage'' in subparagraph 
        (A)(i)(I) and inserting ``in the case of plan years beginning 
        before January 1, 2004, the applicable percentage''; and
          (2) by amending subparagraph (F) to read as follows:
          ``(F) Applicable percentage.--For purposes of subparagraph 
        (A)(i)(I), the applicable percentage shall be determined in 
        accordance with the following table:

                ``In the case of any plan year
                                                         The applicable
                  beginning in--
                                                        percentage is--
                  2002.....................................       165  
                  2003.....................................     170.''.

  (c) Effective Date.--The amendments made by this section shall apply 
to plan years beginning after December 31, 2001.

SEC. 502. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND APPLIED TO 
                    ALL DEFINED BENEFIT PLANS.

  (a) In General.--Subparagraph (D) of section 404(a)(1) (relating to 
special rule in case of certain plans) is amended to read as follows:
                  ``(D) Special rule in case of certain plans.--
                          ``(i) In general.--In the case of any defined 
                        benefit plan, except as provided in 
                        regulations, the maximum amount deductible 
                        under the limitations of this paragraph shall 
                        not be less than the unfunded termination 
                        liability (determined as if the proposed 
                        termination date referred to in section 
                        4041(b)(2)(A)(i)(II) of the Employee Retirement 
                        Income Security Act of 1974 were the last day 
                        of the plan year).
                          ``(ii) Plans with less than 100 
                        participants.--For purposes of this 
                        subparagraph, in the case of a plan which has 
                        less than 100 participants for the plan year, 
                        termination liability shall not include the 
                        liability attributable to benefit increases for 
                        highly compensated employees (as defined in 
                        section 414(q)) resulting from a plan amendment 
                        which is made or becomes effective, whichever 
                        is later, within the last 2 years before the 
                        termination date.
                          ``(iii) Rule for determining number of 
                        participants.--For purposes of determining 
                        whether a plan has more than 100 participants, 
                        all defined benefit plans maintained by the 
                        same employer (or any member of such employer's 
                        controlled group (within the meaning of section 
                        412(l)(8)(C))) shall be treated as one plan, 
                        but only employees of such member or employer 
                        shall be taken into account.
                          ``(iv) Plans maintained by professional 
                        service employers.--Clause (i) shall not apply 
                        to a plan described in section 4021(b)(13) of 
                        the Employee Retirement Income Security Act of 
                        1974.''.
  (b) Conforming Amendment.--Paragraph (6) of section 4972(c) is 
amended to read as follows:
          ``(6) Exceptions.--In determining the amount of nondeductible 
        contributions for any taxable year, there shall not be taken 
        into account so much of the contributions to one or more 
        defined contribution plans which are not deductible when 
        contributed solely because of section 404(a)(7) as does not 
        exceed the greater of--
                  ``(A) the amount of contributions not in excess of 6 
                percent of compensation (within the meaning of section 
                404(a)) paid or accrued (during the taxable year for 
                which the contributions were made) to beneficiaries 
                under the plans, or
                  ``(B) the sum of--
                          ``(i) the amount of contributions described 
                        in section 401(m)(4)(A), plus
                          ``(ii) the amount of contributions described 
                        in section 402(g)(3)(A).
        For purposes of this paragraph, the deductible limits under 
        section 404(a)(7) shall first be applied to amounts contributed 
        to a defined benefit plan and then to amounts described in 
        subparagraph (B).''.
  (c) Effective Date.--The amendments made by this section shall apply 
to plan years beginning after December 31, 2001.

SEC. 503. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.

  (a) In General.--Subsection (c) of section 4972 (relating to 
nondeductible contributions) is amended by adding at the end the 
following new paragraph:
          ``(7) Defined benefit plan exception.--In determining the 
        amount of nondeductible contributions for any taxable year, an 
        employer may elect for such year not to take into account any 
        contributions to a defined benefit plan except to the extent 
        that such contributions exceed the full-funding limitation (as 
        defined in section 412(c)(7), determined without regard to 
        subparagraph (A)(i)(I) thereof). For purposes of this 
        paragraph, the deductible limits under section 404(a)(7) shall 
        first be applied to amounts contributed to defined contribution 
        plans and then to amounts described in this paragraph. If an 
        employer makes an election under this paragraph for a taxable 
        year, paragraph (6) shall not apply to such employer for such 
        taxable year.''.
  (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 2001.

SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED BENEFIT 
                    PLANS SIGNIFICANTLY REDUCING FUTURE BENEFIT 
                    ACCRUALS.

  (a) Amendment of Internal Revenue Code.--
          (1) In general.--Chapter 43 (relating to qualified pension, 
        etc., plans) is amended by adding at the end the following new 
        section:

``SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING BENEFIT ACCRUALS TO 
                    SATISFY NOTICE REQUIREMENTS.

  ``(a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of any applicable pension plan to meet the requirements of 
subsection (e) with respect to any applicable individual.
  ``(b) Amount of Tax.--
          ``(1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to any applicable 
        individual shall be $100 for each day in the noncompliance 
        period with respect to such failure.
          ``(2) Noncompliance period.--For purposes of this section, 
        the term `noncompliance period' means, with respect to any 
        failure, the period beginning on the date the failure first 
        occurs and ending on the date the failure is corrected.
  ``(c) Limitations on Amount of Tax.--
          ``(1) Overall limitation for unintentional failures.--In the 
        case of failures that are due to reasonable cause and not to 
        willful neglect, the tax imposed by subsection (a) for failures 
        during the taxable year of the employer (or, in the case of a 
        multiemployer plan, the taxable year of the trust forming part 
        of the plan) shall not exceed $500,000. For purposes of the 
        preceding sentence, all multiemployer plans of which the same 
        trust forms a part shall be treated as one plan. For purposes 
        of this paragraph, if not all persons who are treated as a 
        single employer for purposes of this section have the same 
        taxable year, the taxable years taken into account shall be 
        determined under principles similar to the principles of 
        section 1561.
          ``(2) Waiver by secretary.--In the case of a failure which is 
        due to reasonable cause and not to willful neglect, the 
        Secretary may waive part or all of the tax imposed by 
        subsection (a) to the extent that the payment of such tax would 
        be excessive relative to the failure involved.
  ``(d) Liability for Tax.--The following shall be liable for the tax 
imposed by subsection (a):
          ``(1) In the case of a plan other than a multiemployer plan, 
        the employer.
          ``(2) In the case of a multiemployer plan, the plan.
  ``(e) Notice Requirements for Plans Significantly Reducing Benefit 
Accruals.--
          ``(1) In general.--If an applicable pension plan is amended 
        to provide for a significant reduction in the rate of future 
        benefit accrual, the plan administrator shall provide written 
        notice to each applicable individual (and to each employee 
        organization representing applicable individuals).
          ``(2) Notice.--The notice required by paragraph (1) shall be 
        written in a manner calculated to be understood by the average 
        plan participant and shall provide sufficient information (as 
        determined in accordance with regulations prescribed by the 
        Secretary) to allow applicable individuals to understand the 
        effect of the plan amendment. The Secretary may provide a 
        simplified form of notice for, or exempt from any notice 
        requirement, a plan--
                  ``(A) which has fewer than 100 participants who have 
                accrued a benefit under the plan, or
                  ``(B) which offers participants the option to choose 
                between the new benefit formula and the old benefit 
                formula.
          ``(3) Timing of notice.--Except as provided in regulations, 
        the notice required by paragraph (1) shall be provided within a 
        reasonable time before the effective date of the plan 
        amendment.
          ``(4) Designees.--Any notice under paragraph (1) may be 
        provided to a person designated, in writing, by the person to 
        which it would otherwise be provided.
          ``(5) Notice before adoption of amendment.--A plan shall not 
        be treated as failing to meet the requirements of paragraph (1) 
        merely because notice is provided before the adoption of the 
        plan amendment if no material modification of the amendment 
        occurs before the amendment is adopted.
  ``(f) Definitions and Special Rules.--For purposes of this section--
          ``(1) Applicable individual.--The term `applicable 
        individual' means, with respect to any plan amendment--
                  ``(A) each participant in the plan, and
                  ``(B) any beneficiary who is an alternate payee 
                (within the meaning of section 414(p)(8)) under an 
                applicable qualified domestic relations order (within 
                the meaning of section 414(p)(1)(A)),
        whose rate of future benefit accrual under the plan may 
        reasonably be expected to be significantly reduced by such plan 
        amendment.
          ``(2) Applicable pension plan.--The term `applicable pension 
        plan' means--
                  ``(A) any defined benefit plan, or
                  ``(B) an individual account plan which is subject to 
                the funding standards of section 412.
        Such term shall not include a governmental plan (within the 
        meaning of section 414(d)) or a church plan (within the meaning 
        of section 414(e)) with respect to which the election provided 
        by section 410(d) has not been made.
          ``(3) Early retirement.--A plan amendment which eliminates or 
        significantly reduces any early retirement benefit or 
        retirement-type subsidy (within the meaning of section 
        411(d)(6)(B)(i)) shall be treated as having the effect of 
        significantly reducing the rate of future benefit accrual.
  ``(g) New Technologies.--The Secretary may by regulations allow any 
notice under subsection (e) to be provided by using new 
technologies.''.
          (2) Clerical amendment.--The table of sections for chapter 43 
        is amended by adding at the end the following new item:

                               ``Sec. 4980F. Failure of applicable 
                                        plans reducing benefit accruals 
                                        to satisfy notice 
                                        requirements.''.

  (b) Amendment of ERISA.--Section 204(h) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1054(h)) is amended by adding at 
the end the following new paragraphs:
  ``(3)(A) An applicable pension plan to which paragraph (1) applies 
shall not be treated as meeting the requirements of such paragraph 
unless, in addition to any notice required to be provided to an 
individual or organization under such paragraph, the plan administrator 
provides the notice described in subparagraph (B) to each applicable 
individual (and to each employee organization representing applicable 
individuals).
  ``(B) The notice required by subparagraph (A) shall be written in a 
manner calculated to be understood by the average plan participant and 
shall provide sufficient information (as determined in accordance with 
regulations prescribed by the Secretary of the Treasury) to allow 
applicable individuals to understand the effect of the plan amendment. 
The Secretary of the Treasury may provide a simplified form of notice 
for, or exempt from any notice requirement, a plan--
          ``(i) which has fewer than 100 participants who have accrued 
        a benefit under the plan, or
          ``(ii) which offers participants the option to choose between 
        the new benefit formula and the old benefit formula.
  ``(C) Except as provided in regulations prescribed by the Secretary 
of the Treasury, the notice required by subparagraph (A) shall be 
provided within a reasonable time before the effective date of the plan 
amendment.
  ``(D) Any notice under subparagraph (A) may be provided to a person 
designated, in writing, by the person to which it would otherwise be 
provided.
  ``(E) A plan shall not be treated as failing to meet the requirements 
of subparagraph (A) merely because notice is provided before the 
adoption of the plan amendment if no material modification of the 
amendment occurs before the amendment is adopted.
  ``(F) The Secretary of the Treasury may by regulations allow any 
notice under this paragraph to be provided by using new technologies.
  ``(4) For purposes of paragraph (3)--
          ``(A) The term `applicable individual' means, with respect to 
        any plan amendment--
                  ``(i) each participant in the plan; and
                  ``(ii) any beneficiary who is an alternate payee 
                (within the meaning of section 206(d)(3)(K)) under an 
                applicable qualified domestic relations order (within 
                the meaning of section 206(d)(3)(B)(i)),
        whose rate of future benefit accrual under the plan may 
        reasonably be expected to be significantly reduced by such plan 
        amendment.
          ``(B) The term `applicable pension plan' means--
                  ``(i) any defined benefit plan; or
                  ``(ii) an individual account plan which is subject to 
                the funding standards of section 412 of the Internal 
                Revenue Code of 1986.
          ``(C) A plan amendment which eliminates or significantly 
        reduces any early retirement benefit or retirement-type subsidy 
        (within the meaning of subsection (g)(2)(A)) shall be treated 
        as having the effect of significantly reducing the rate of 
        future benefit accrual.''.
  (c) Effective Dates.--
          (1) In general.--The amendments made by this section shall 
        apply to plan amendments taking effect on or after the date of 
        the enactment of this Act.
          (2) Transition.--Until such time as the Secretary of the 
        Treasury issues regulations under sections 4980F(e)(2) and (3) 
        of the Internal Revenue Code of 1986, and section 204(h)(3) of 
        the Employee Retirement Income Security Act of 1974, as added 
        by the amendments made by this section, a plan shall be treated 
        as meeting the requirements of such sections if it makes a good 
        faith effort to comply with such requirements.
          (3) Special notice rule.--The period for providing any notice 
        required by the amendments made by this section shall not end 
        before the date which is 3 months after the date of the 
        enactment of this Act.
          (4) Reasonable notice.--The amendments made by this section 
        shall not apply to any plan amendment taking effect on or after 
        the date of the enactment of this Act if, before April 25, 
        2001, notice was provided to participants and beneficiaries 
        adversely affected by the plan amendment (or their 
        representatives) which was reasonably expected to notify them 
        of the nature and effective date of the plan amendment.
  (d) Study.--The Secretary of the Treasury shall prepare a report on 
the effects of conversions of traditional defined benefit plans to cash 
balance or hybrid formula plans. Such study shall examine the effect of 
such conversions on longer service participants, including the 
incidence and effects of ``wear away'' provisions under which 
participants earn no additional benefits for a period of time after the 
conversion. As soon as practicable, but not later than 60 days after 
the date of the enactment of this Act, the Secretary shall submit such 
report, together with recommendations thereon, to the Committee on Ways 
and Means and the Committee on Education and the Workforce of the House 
of Representatives and the Committee on Finance and the Committee on 
Health, Education, Labor, and Pensions of the Senate.

SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.

  (a) Compensation Limit.--
          (1) In general.--Paragraph (11) of section 415(b) (relating 
        to limitation for defined benefit plans) is amended to read as 
        follows:
          ``(11) Special limitation rule for governmental and 
        multiemployer plans.--In the case of a governmental plan (as 
        defined in section 414(d)) or a multiemployer plan (as defined 
        in section 414(f)), subparagraph (B) of paragraph (1) shall not 
        apply.''.
          (2) Conforming amendment.--Section 415(b)(7) (relating to 
        benefits under certain collectively bargained plans) is amended 
        by inserting ``(other than a multiemployer plan)'' after 
        ``defined benefit plan'' in the matter preceding subparagraph 
        (A).
  (b) Combining and Aggregation of Plans.--
          (1) Combining of plans.--Subsection (f) of section 415 
        (relating to combining of plans) is amended by adding at the 
        end the following:
          ``(3) Exception for multiemployer plans.--Notwithstanding 
        paragraph (1) and subsection (g), a multiemployer plan (as 
        defined in section 414(f)) shall not be combined or aggregated 
        with any other plan maintained by an employer for purposes of 
        applying the limitations established in this section, except 
        that such plan shall be combined or aggregated with another 
        plan which is not such a multiemployer plan solely for purposes 
        of determining whether such other plan meets the requirements 
        of subsections (b)(1)(A) and (c).''.
          (2) Conforming amendment for aggregation of plans.--
        Subsection (g) of section 415 (relating to aggregation of 
        plans) is amended by striking ``The Secretary'' and inserting 
        ``Except as provided in subsection (f)(3), the Secretary''.
  (c) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 2001.

SEC. 506. PROTECTION OF INVESTMENT OF EMPLOYEE CONTRIBUTIONS TO 401(K) 
                    PLANS.

  (a) In General.--Section 1524(b) of the Taxpayer Relief Act of 1997 
is amended to read as follows:
  ``(b) Effective Date.--
          ``(1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to elective 
        deferrals for plan years beginning after December 31, 1998.
          ``(2) Nonapplication to previously acquired property.--The 
        amendments made by this section shall not apply to any elective 
        deferral which is invested in assets consisting of qualifying 
        employer securities, qualifying employer real property, or 
        both, if such assets were acquired before January 1, 1999.''.
  (b) Effective Date.--The amendment made by this section shall apply 
as if included in the provision of the Taxpayer Relief Act of 1997 to 
which it relates.

SEC. 507. PERIODIC PENSION BENEFITS STATEMENTS.

  (a) In General.--Section 105(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1025 (a)) is amended to read as 
follows:
  ``Sec. 105. (a)(1)(A) The administrator of an individual account plan 
shall furnish a pension benefit statement--
          ``(i) to a plan participant at least once annually, and
          ``(ii) to a plan beneficiary upon written request.
  ``(B) The administrator of a defined benefit plan shall furnish a 
pension benefit statement--
          ``(i) at least once every 3 years to each participant with a 
        nonforfeitable accrued benefit who is employed by the employer 
        maintaining the plan at the time the statement is furnished to 
        participants, and
          ``(ii) to a plan participant or plan beneficiary of the plan 
        upon written request.
  ``(2) A pension benefit statement under paragraph (1)--
          ``(A) shall indicate, on the basis of the latest available 
        information--
                  ``(i) the total benefits accrued, and
                  ``(ii) the nonforfeitable pension benefits, if any, 
                which have accrued, or the earliest date on which 
                benefits will become nonforfeitable,
          ``(B) shall be written in a manner calculated to be 
        understood by the average plan participant, and
          ``(C) may be provided in written, electronic, or other 
        appropriate form.
  ``(3)(A) In the case of a defined benefit plan, the requirements of 
paragraph (1)(B)(i) shall be treated as met with respect to a 
participant if the administrator provides the participant at least once 
each year with notice of the availability of the pension benefit 
statement and the ways in which the participant may obtain such 
statement. Such notice shall be provided in written, electronic, or 
other appropriate form, and may be included with other communications 
to the participant if done in a manner reasonably designed to attract 
the attention of the participant.
  ``(B) The Secretary may provide that years in which no employee or 
former employee benefits (within the meaning of section 410(b) of the 
Internal Revenue Code of 1986) under the plan need not be taken into 
account in determining the 3-year period under paragraph (1)(B)(i).''.
  (b) Conforming Amendments.--
          (1) Section 105 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1025) is amended by striking subsection 
        (d).
          (2) Section 105(b) of such Act (29 U.S.C. 1025(b)) is amended 
        to read as follows:
  ``(b) In no case shall a participant or beneficiary of a plan be 
entitled to more than one statement described in subsection (a)(1)(A) 
or (a)(1)(B)(ii), whichever is applicable, in any 12-month period.''.
  (c) Model Statements.--The Secretary of Labor shall develop a model 
benefit statement, written in a manner calculated to be understood by 
the average plan participant, that may be used by plan administrators 
in complying with the requirements of section 105 of the Employee 
Retirement Income Security Act of 1974.
  (d) Effective Date.--The amendments made by this section shall apply 
to plan years beginning after December 31, 2002.

SEC. 508. PROHIBITED ALLOCATIONS OF STOCK IN S CORPORATION ESOP.

  (a) In General.--Section 409 (relating to qualifications for tax 
credit employee stock ownership plans) is amended by redesignating 
subsection (p) as subsection (q) and by inserting after subsection (o) 
the following new subsection:
  ``(p) Prohibited Allocations of Securities in an S Corporation.--
          ``(1) In general.--An employee stock ownership plan holding 
        employer securities consisting of stock in an S corporation 
        shall provide that no portion of the assets of the plan 
        attributable to (or allocable in lieu of) such employer 
        securities may, during a nonallocation year, accrue (or be 
        allocated directly or indirectly under any plan of the employer 
        meeting the requirements of section 401(a)) for the benefit of 
        any disqualified person.
          ``(2) Failure to meet requirements.--
                  ``(A) In general.--If a plan fails to meet the 
                requirements of paragraph (1), the plan shall be 
                treated as having distributed to any disqualified 
                person the amount allocated to the account of such 
                person in violation of paragraph (1) at the time of 
                such allocation.
                  ``(B) Cross reference.--

                  ``For excise tax relating to violations of paragraph 
(1) and ownership of synthetic equity, see section 4979A.

          ``(3) Nonallocation year.--For purposes of this subsection--
                  ``(A) In general.--The term `nonallocation year' 
                means any plan year of an employee stock ownership plan 
                if, at any time during such plan year--
                          ``(i) such plan holds employer securities 
                        consisting of stock in an S corporation, and
                          ``(ii) disqualified persons own at least 50 
                        percent of the number of shares of stock in the 
                        S corporation.
                  ``(B) Attribution rules.--For purposes of 
                subparagraph (A)--
                          ``(i) In general.--The rules of section 
                        318(a) shall apply for purposes of determining 
                        ownership, except that--
                                  ``(I) in applying paragraph (1) 
                                thereof, the members of an individual's 
                                family shall include members of the 
                                family described in paragraph (4)(D), 
                                and
                                  ``(II) paragraph (4) thereof shall 
                                not apply.
                          ``(ii) Deemed-owned shares.--Notwithstanding 
                        the employee trust exception in section 
                        318(a)(2)(B)(i), individual shall be treated as 
                        owning deemed-owned shares of the individual.
                Solely for purposes of applying paragraph (5), this 
                subparagraph shall be applied after the attribution 
                rules of paragraph (5) have been applied.
          ``(4) Disqualified person.--For purposes of this subsection--
                  ``(A) In general.--The term `disqualified person' 
                means any person if--
                          ``(i) the aggregate number of deemed-owned 
                        shares of such person and the members of such 
                        person's family is at least 20 percent of the 
                        number of deemed-owned shares of stock in the S 
                        corporation, or
                          ``(ii) in the case of a person not described 
                        in clause (i), the number of deemed-owned 
                        shares of such person is at least 10 percent of 
                        the number of deemed-owned shares of stock in 
                        such corporation.
                  ``(B) Treatment of family members.--In the case of a 
                disqualified person described in subparagraph (A)(i), 
                any member of such person's family with deemed-owned 
                shares shall be treated as a disqualified person if not 
                otherwise treated as a disqualified person under 
                subparagraph (A).
                  ``(C) Deemed-owned shares.--
                          ``(i) In general.--The term `deemed-owned 
                        shares' means, with respect to any person--
                                  ``(I) the stock in the S corporation 
                                constituting employer securities of an 
                                employee stock ownership plan which is 
                                allocated to such person under the 
                                plan, and
                                  ``(II) such person's share of the 
                                stock in such corporation which is held 
                                by such plan but which is not allocated 
                                under the plan to participants.
                          ``(ii) Person's share of unallocated stock.--
                        For purposes of clause (i)(II), a person's 
                        share of unallocated S corporation stock held 
                        by such plan is the amount of the unallocated 
                        stock which would be allocated to such person 
                        if the unallocated stock were allocated to all 
                        participants in the same proportions as the 
                        most recent stock allocation under the plan.
                  ``(D) Member of family.--For purposes of this 
                paragraph, the term `member of the family' means, with 
                respect to any individual--
                          ``(i) the spouse of the individual,
                          ``(ii) an ancestor or lineal descendant of 
                        the individual or the individual's spouse,
                          ``(iii) a brother or sister of the individual 
                        or the individual's spouse and any lineal 
                        descendant of the brother or sister, and
                          ``(iv) the spouse of any individual described 
                        in clause (ii) or (iii).
                A spouse of an individual who is legally separated from 
                such individual under a decree of divorce or separate 
                maintenance shall not be treated as such individual's 
                spouse for purposes of this subparagraph.
          ``(5) Treatment of synthetic equity.--For purposes of 
        paragraphs (3) and (4), in the case of a person who owns 
        synthetic equity in the S corporation, except to the extent 
        provided in regulations, the shares of stock in such 
        corporation on which such synthetic equity is based shall be 
        treated as outstanding stock in such corporation and deemed-
        owned shares of such person if such treatment of synthetic 
        equity of 1 or more such persons results in--
                  ``(A) the treatment of any person as a disqualified 
                person, or
                  ``(B) the treatment of any year as a nonallocation 
                year.
        For purposes of this paragraph, synthetic equity shall be 
        treated as owned by a person in the same manner as stock is 
        treated as owned by a person under the rules of paragraphs (2) 
        and (3) of section 318(a). If, without regard to this 
        paragraph, a person is treated as a disqualified person or a 
        year is treated as a nonallocation year, this paragraph shall 
        not be construed to result in the person or year not being so 
        treated.
          ``(6) Definitions.--For purposes of this subsection--
                  ``(A) Employee stock ownership plan.--The term 
                `employee stock ownership plan' has the meaning given 
                such term by section 4975(e)(7).
                  ``(B) Employer securities.--The term `employer 
                security' has the meaning given such term by section 
                409(l).
                  ``(C) Synthetic equity.--The term `synthetic equity' 
                means any stock option, warrant, restricted stock, 
                deferred issuance stock right, or similar interest or 
                right that gives the holder the right to acquire or 
                receive stock of the S corporation in the future. 
                Except to the extent provided in regulations, synthetic 
                equity also includes a stock appreciation right, 
                phantom stock unit, or similar right to a future cash 
                payment based on the value of such stock or 
                appreciation in such value.
          ``(7) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this subsection.''.
  (b) Coordination With Section 4975(e)(7).--The last sentence of 
section 4975(e)(7) (defining employee stock ownership plan) is amended 
by inserting ``, section 409(p),'' after ``409(n)''.
  (c) Excise Tax.--
          (1) Application of tax.--Subsection (a) of section 4979A 
        (relating to tax on certain prohibited allocations of employer 
        securities) is amended--
                  (A) by striking ``or'' at the end of paragraph (1), 
                and
                  (B) by striking all that follows paragraph (2) and 
                inserting the following:
          ``(3) there is any allocation of employer securities which 
        violates the provisions of section 409(p), or a nonallocation 
        year described in subsection (e)(2)(C) with respect to an 
        employee stock ownership plan, or
          ``(4) any synthetic equity is owned by a disqualified person 
        in any nonallocation year,
there is hereby imposed a tax on such allocation or ownership equal to 
50 percent of the amount involved.''.
          (2) Liability.--Section 4979A(c) (defining liability for tax) 
        is amended to read as follows:
  ``(c) Liability for Tax.--The tax imposed by this section shall be 
paid--
          ``(1) in the case of an allocation referred to in paragraph 
        (1) or (2) of subsection (a), by--
                  ``(A) the employer sponsoring such plan, or
                  ``(B) the eligible worker-owned cooperative,
        which made the written statement described in section 
        664(g)(1)(E) or in section 1042(b)(3)(B) (as the case may be), 
        and
          ``(2) in the case of an allocation or ownership referred to 
        in paragraph (3) or (4) of subsection (a), by the S corporation 
        the stock in which was so allocated or owned.''.
          (3) Definitions.--Section 4979A(e) (relating to definitions) 
        is amended to read as follows:
  ``(e) Definitions and Special Rules.--For purposes of this section--
          ``(1) Definitions.--Except as provided in paragraph (2), 
        terms used in this section have the same respective meanings as 
        when used in sections 409 and 4978.
          ``(2) Special rules relating to tax imposed by reason of 
        paragraph (3) or (4) of subsection (a).--
                  ``(A) Prohibited allocations.--The amount involved 
                with respect to any tax imposed by reason of subsection 
                (a)(3) is the amount allocated to the account of any 
                person in violation of section 409(p)(1).
                  ``(B) Synthetic equity.--The amount involved with 
                respect to any tax imposed by reason of subsection 
                (a)(4) is the value of the shares on which the 
                synthetic equity is based.
                  ``(C) Special rule during first nonallocation year.--
                For purposes of subparagraph (A), the amount involved 
                for the first nonallocation year of any employee stock 
                ownership plan shall be determined by taking into 
                account the total value of all the deemed-owned shares 
                of all disqualified persons with respect to such plan.
                  ``(D) Statute of limitations.--The statutory period 
                for the assessment of any tax imposed by this section 
                by reason of paragraph (3) or (4) of subsection (a) 
                shall not expire before the date which is 3 years from 
                the later of--
                          ``(i) the allocation or ownership referred to 
                        in such paragraph giving rise to such tax, or
                          ``(ii) the date on which the Secretary is 
                        notified of such allocation or ownership.''.
  (d) Effective Dates.--
          (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2004.
          (2) Exception for certain plans.--In the case of any--
                  (A) employee stock ownership plan established after 
                March 14, 2001, or
                  (B) employee stock ownership plan established on or 
                before such date if employer securities held by the 
                plan consist of stock in a corporation with respect to 
                which an election under section 1362(a) of the Internal 
                Revenue Code of 1986 is not in effect on such date,
        the amendments made by this section shall apply to plan years 
        ending after March 14, 2001.

                 TITLE VI--REDUCING REGULATORY BURDENS

SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.

  (a) Amendment of Internal Revenue Code.--Paragraph (9) of section 
412(c)(9) (relating to annual valuation) is amended to read as follows:
          ``(9) Annual valuation.--
                  ``(A) In general.--For purposes of this section, a 
                determination of experience gains and losses and a 
                valuation of the plan's liability shall be made not 
                less frequently than once every year, except that such 
                determination shall be made more frequently to the 
                extent required in particular cases under regulations 
                prescribed by the Secretary.
                  ``(B) Valuation date.--
                          ``(i) Current year.--Except as provided in 
                        clause (ii), the valuation referred to in 
                        subparagraph (A) shall be made as of a date 
                        within the plan year to which the valuation 
                        refers or within one month prior to the 
                        beginning of such year.
                          ``(ii) Election to use prior year 
                        valuation.--The valuation referred to in 
                        subparagraph (A) may be made as of a date 
                        within the plan year prior to the year to which 
                        the valuation refers if--
                                  ``(I) an election is in effect under 
                                this clause with respect to the plan, 
                                and
                                  ``(II) as of such date, the value of 
                                the assets of the plan are not less 
                                than 125 percent of the plan's current 
                                liability (as defined in paragraph 
                                (7)(B)).
                          ``(iii) Adjustments.--Information under 
                        clause (ii) shall, in accordance with 
                        regulations, be actuarially adjusted to reflect 
                        significant differences in participants.
                          ``(iv) Election.--An election under clause 
                        (ii), once made, shall be irrevocable without 
                        the consent of the Secretary.''.
  (b) Amendment of ERISA.--Paragraph (9) of section 302(c) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) is 
amended--
          (1) by inserting ``(A)'' after ``(9)''; and
          (2) by adding at the end the following:
  ``(B)(i) Except as provided in clause (ii), the valuation referred to 
in subparagraph (A) shall be made as of a date within the plan year to 
which the valuation refers or within one month prior to the beginning 
of such year.
  ``(ii) The valuation referred to in subparagraph (A) may be made as 
of a date within the plan year prior to the year to which the valuation 
refers if--
          ``(I) an election is in effect under this clause with respect 
        to the plan; and
          ``(II) as of such date, the value of the assets of the plan 
        are not less than 125 percent of the plan's current liability 
        (as defined in paragraph (7)(B)).
  ``(iii) Information under clause (ii) shall, in accordance with 
regulations, be actuarially adjusted to reflect significant differences 
in participants.
  ``(iv) An election under clause (ii), once made, shall be irrevocable 
without the consent of the Secretary of the Treasury.''.
  (c) Effective Date.--The amendments made by this section shall apply 
to plan years beginning after December 31, 2001.

SEC. 602. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF DIVIDEND 
                    DEDUCTION.

  (a) In General.--Section 404(k)(2)(A) (defining applicable dividends) 
is amended by striking ``or'' at the end of clause (ii), by 
redesignating clause (iii) as clause (iv), and by inserting after 
clause (ii) the following new clause:
                          ``(iii) is, at the election of such 
                        participants or their beneficiaries--
                                  ``(I) payable as provided in clause 
                                (i) or (ii), or
                                  ``(II) paid to the plan and 
                                reinvested in qualifying employer 
                                securities, or''.
  (b) Effective Date.--The amendments made by this section shall apply 
to taxable years beginning after December 31, 2000.

SEC. 603. REPEAL OF TRANSITION RULE RELATING TO CERTAIN HIGHLY 
                    COMPENSATED EMPLOYEES.

  (a) In General.--Paragraph (4) of section 1114(c) of the Tax Reform 
Act of 1986 is hereby repealed.
  (b) Effective Date.--The repeal made by subsection (a) shall apply to 
plan years beginning after December 31, 2001.

SEC. 604. EMPLOYEES OF TAX-EXEMPT ENTITIES.

  (a) In General.--The Secretary of the Treasury shall modify Treasury 
Regulations section 1.410(b)-6(g) to provide that employees of an 
organization described in section 403(b)(1)(A)(i) of the Internal 
Revenue Code of 1986 who are eligible to make contributions under 
section 403(b) of such Code pursuant to a salary reduction agreement 
may be treated as excludable with respect to a plan under section 
401(k) or (m) of such Code that is provided under the same general 
arrangement as a plan under such section 401(k), if--
          (1) no employee of an organization described in section 
        403(b)(1)(A)(i) of such Code is eligible to participate in such 
        section 401(k) plan or section 401(m) plan; and
          (2) 95 percent of the employees who are not employees of an 
        organization described in section 403(b)(1)(A)(i) of such Code 
        are eligible to participate in such plan under such section 
        401(k) or (m).
  (b) Effective Date.--The modification required by subsection (a) 
shall apply as of the same date set forth in section 1426(b) of the 
Small Business Job Protection Act of 1996.

SEC. 605. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED RETIREMENT 
                    ADVICE.

  (a) In General.--Subsection (a) of section 132 (relating to exclusion 
from gross income) is amended by striking ``or'' at the end of 
paragraph (5), by striking the period at the end of paragraph (6) and 
inserting ``, or'', and by adding at the end the following new 
paragraph:
          ``(7) qualified retirement planning services.''.
  (b) Qualified Retirement Planning Services Defined.--Section 132 is 
amended by redesignating subsection (m) as subsection (n) and by 
inserting after subsection (l) the following:
  ``(m) Qualified Retirement Planning Services.--
          ``(1) In general.--For purposes of this section, the term 
        `qualified retirement planning services' means any retirement 
        planning advice or information provided to an employee and his 
        spouse by an employer maintaining a qualified employer plan.
          ``(2) Nondiscrimination rule.--Subsection (a)(7) shall apply 
        in the case of highly compensated employees only if such 
        services are available on substantially the same terms to each 
        member of the group of employees normally provided education 
        and information regarding the employer's qualified employer 
        plan.
          ``(3) Qualified employer plan.--For purposes of this 
        subsection, the term `qualified employer plan' means a plan, 
        contract, pension, or account described in section 
        219(g)(5).''.
  (c) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 2001.

SEC. 606. REPORTING SIMPLIFICATION.

  (a) Simplified Annual Filing Requirement for Owners and Their 
Spouses.--
          (1) In general.--The Secretary of the Treasury and the 
        Secretary of Labor shall modify the requirements for filing 
        annual returns with respect to one-participant retirement plans 
        to ensure that such plans with assets of $250,000 or less as of 
        the close of the plan year need not file a return for that 
        year.
          (2) One-participant retirement plan defined.--For purposes of 
        this subsection, the term ``one-participant retirement plan'' 
        means a retirement plan that--
                  (A) on the first day of the plan year--
                          (i) covered only the employer (and the 
                        employer's spouse) and the employer owned the 
                        entire business (whether or not incorporated); 
                        or
                          (ii) covered only one or more partners (and 
                        their spouses) in a business partnership 
                        (including partners in an S or C corporation);
                  (B) meets the minimum coverage requirements of 
                section 410(b) of the Internal Revenue Code of 1986 
                without being combined with any other plan of the 
                business that covers the employees of the business;
                  (C) does not provide benefits to anyone except the 
                employer (and the employer's spouse) or the partners 
                (and their spouses);
                  (D) does not cover a business that is a member of an 
                affiliated service group, a controlled group of 
                corporations, or a group of businesses under common 
                control; and
                  (E) does not cover a business that leases employees.
          (3) Other definitions.--Terms used in paragraph (2) which are 
        also used in section 414 of the Internal Revenue Code of 1986 
        shall have the respective meanings given such terms by such 
        section.
  (b) Simplified Annual Filing Requirement for Plans With Fewer Than 25 
Employees.--In the case of plan years beginning after December 31, 
2002, the Secretary of the Treasury and the Secretary of Labor shall 
provide for the filing of a simplified annual return for any retirement 
plan which covers less than 25 employees on the first day of a plan 
year and which meets the requirements described in subparagraphs (B), 
(D), and (E) of subsection (a)(2).
  (c) Effective Date.--The provisions of this section shall take effect 
on January 1, 2002.

SEC. 607. IMPROVEMENT OF EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM.

  The Secretary of the Treasury shall continue to update and improve 
the Employee Plans Compliance Resolution System (or any successor 
program) giving special attention to--
          (1) increasing the awareness and knowledge of small employers 
        concerning the availability and use of the program;
          (2) taking into account special concerns and circumstances 
        that small employers face with respect to compliance and 
        correction of compliance failures;
          (3) extending the duration of the self-correction period 
        under the Administrative Policy Regarding Self-Correction for 
        significant compliance failures;
          (4) expanding the availability to correct insignificant 
        compliance failures under the Administrative Policy Regarding 
        Self-Correction during audit; and
          (5) assuring that any tax, penalty, or sanction that is 
        imposed by reason of a compliance failure is not excessive and 
        bears a reasonable relationship to the nature, extent, and 
        severity of the failure.

SEC. 608. REPEAL OF THE MULTIPLE USE TEST.

  (a) In General.--Paragraph (9) of section 401(m) is amended to read 
as follows:
          ``(9) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this subsection and subsection (k), including regulations 
        permitting appropriate aggregation of plans and 
        contributions.''.
  (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 2001.

SEC. 609. FLEXIBILITY IN NONDISCRIMINATION, COVERAGE, AND LINE OF 
                    BUSINESS RULES.

  (a) Nondiscrimination.--
          (1) In general.--The Secretary of the Treasury shall, by 
        regulation, provide that a plan shall be deemed to satisfy the 
        requirements of section 401(a)(4) of the Internal Revenue Code 
        of 1986 if such plan satisfies the facts and circumstances test 
        under section 401(a)(4) of such Code, as in effect before 
        January 1, 1994, but only if--
                  (A) the plan satisfies conditions prescribed by the 
                Secretary to appropriately limit the availability of 
                such test; and
                  (B) the plan is submitted to the Secretary for a 
                determination of whether it satisfies such test.
        Subparagraph (B) shall only apply to the extent provided by the 
        Secretary.
          (2) Effective dates.--
                  (A) Regulations.--The regulation required by 
                paragraph (1) shall apply to years beginning after 
                December 31, 2003.
                  (B) Conditions of availability.--Any condition of 
                availability prescribed by the Secretary under 
                paragraph (1)(A) shall not apply before the first year 
                beginning not less than 120 days after the date on 
                which such condition is prescribed.
  (b) Coverage Test.--
          (1) In general.--Section 410(b)(1) (relating to minimum 
        coverage requirements) is amended by adding at the end the 
        following:
                  ``(D) In the case that the plan fails to meet the 
                requirements of subparagraphs (A), (B) and (C), the 
                plan--
                          ``(i) satisfies subparagraph (B), as in 
                        effect immediately before the enactment of the 
                        Tax Reform Act of 1986,
                          ``(ii) is submitted to the Secretary for a 
                        determination of whether it satisfies the 
                        requirement described in clause (i), and
                          ``(iii) satisfies conditions prescribed by 
                        the Secretary by regulation that appropriately 
                        limit the availability of this subparagraph.
                Clause (ii) shall apply only to the extent provided by 
                the Secretary.''.
          (2) Effective dates.--
                  (A) In general.--The amendment made by paragraph (1) 
                shall apply to years beginning after December 31, 2003.
                  (B) Conditions of availability.--Any condition of 
                availability prescribed by the Secretary under 
                regulations prescribed by the Secretary under section 
                410(b)(1)(D) of the Internal Revenue Code of 1986 shall 
                not apply before the first year beginning not less than 
                120 days after the date on which such condition is 
                prescribed.
  (c) Line of Business Rules.--The Secretary of the Treasury shall, on 
or before December 31, 2003, modify the existing regulations issued 
under section 414(r) of the Internal Revenue Code of 1986 in order to 
expand (to the extent that the Secretary determines appropriate) the 
ability of a pension plan to demonstrate compliance with the line of 
business requirements based upon the facts and circumstances 
surrounding the design and operation of the plan, even though the plan 
is unable to satisfy the mechanical tests currently used to determine 
compliance.

SEC. 610. EXTENSION TO ALL GOVERNMENTAL PLANS OF MORATORIUM ON 
                    APPLICATION OF CERTAIN NONDISCRIMINATION RULES 
                    APPLICABLE TO STATE AND LOCAL PLANS.

  (a) In General.--
          (1) Subparagraph (G) of section 401(a)(5) and subparagraph 
        (H) of section 401(a)(26) are each amended by striking 
        ``section 414(d))'' and all that follows and inserting 
        ``section 414(d)).''.
          (2) Subparagraph (G) of section 401(k)(3) and paragraph (2) 
        of section 1505(d) of the Taxpayer Relief Act of 1997 are each 
        amended by striking ``maintained by a State or local government 
        or political subdivision thereof (or agency or instrumentality 
        thereof)''.
  (b) Conforming Amendments.--
          (1) The heading for subparagraph (G) of section 401(a)(5) is 
        amended to read as follows: ``Governmental plans''.
          (2) The heading for subparagraph (H) of section 401(a)(26) is 
        amended to read as follows: ``Exception for governmental 
        plans''.
          (3) Subparagraph (G) of section 401(k)(3) is amended by 
        inserting ``Governmental plans.--'' after ``(G)''.
  (c) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 2001.

SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

  (a) Expansion of Period.--
          (1) Amendment of internal revenue code.--
                  (A) In general.--Subparagraph (A) of section 
                417(a)(6) is amended by striking ``90-day'' and 
                inserting ``180-day''.
                  (B) Modification of regulations.--The Secretary of 
                the Treasury shall modify the regulations under 
                sections 402(f), 411(a)(11), and 417 of the Internal 
                Revenue Code of 1986 to substitute ``180 days'' for 
                ``90 days'' each place it appears in Treasury 
                Regulations sections 1.402(f)-1, 1.411(a)-11(c), and 
                1.417(e)-1(b).
          (2) Amendment of erisa.--
                  (A) In general.--Section 205(c)(7)(A) of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 
                1055(c)(7)(A)) is amended by striking ``90-day'' and 
                inserting ``180-day''.
                  (B) Modification of regulations.--The Secretary of 
                the Treasury shall modify the regulations under part 2 
                of subtitle B of title I of the Employee Retirement 
                Income Security Act of 1974 to the extent that 
theyrelate to sections 203(e) and 205 of such Act to substitute ``180 
days'' for ``90 days'' each place it appears.
          (3) Effective date.--The amendments made by paragraph (1)(A) 
        and (2) and the modifications required by paragraph (1)(B) 
        shall apply to years beginning after December 31, 2001.
  (b) Consent Regulation Inapplicable to Certain Distributions.--
          (1) In general.--The Secretary of the Treasury shall modify 
        the regulations under section 411(a)(11) of the Internal 
        Revenue Code of 1986 and under section 205 of the Employee 
        Retirement Income Security Act of 1974 to provide that the 
        description of a participant's right, if any, to defer receipt 
        of a distribution shall also describe the consequences of 
        failing to defer such receipt.
          (2) Effective date.--The modifications required by paragraph 
        (1) shall apply to years beginning after December 31, 2001.

SEC. 612. ANNUAL REPORT DISSEMINATION.

  (a) Report Available Through Electronic Means.--Section 104(b)(3) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1024(b)(3)) is amended by adding at the end the following new sentence: 
``The requirement to furnish information under the previous sentence 
shall be satisfied if the administrator makes such information 
reasonably available through electronic means or other new 
technology.''.
  (b) Effective Date.--The amendment made by this section shall apply 
to reports for years beginning after December 31, 2000.

SEC. 613. TECHNICAL CORRECTIONS TO SAVER ACT.

  Section 517 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1147) is amended--
          (1) in subsection (a), by striking ``2001 and 2005 on or 
        after September 1 of each year involved'' and inserting ``2001, 
        2005, and 2009 in the month of September of each year 
        involved'';
          (2) in subsection (b), by adding at the end the following new 
        sentence: ``To effectuate the purposes of this paragraph, the 
        Secretary may enter into a cooperative agreement, pursuant to 
        the Federal Grant and Cooperative Agreement Act of 1977 (31 
        U.S.C. 6301 et seq.), with the American Savings Education 
        Council or any other appropriate, qualified entity.'';
          (3) in subsection (e)(2)--
                  (A) by striking ``Committee on Labor and Human 
                Resources'' in subparagraph (D) and inserting 
                ``Committee on Health, Education, Labor, and 
                Pensions'';
                  (B) by striking subparagraph (F) and inserting the 
                following:
                  ``(F) the Chairman and Ranking Member of the 
                Subcommittee on Labor, Health and Human Services, and 
                Education of the Committee on Appropriations of the 
                House of Representatives and the Chairman and Ranking 
                Member of the Subcommittee on Labor, Health and Human 
                Services, and Education of the Committee on 
                Appropriations of the Senate;'';
                  (C) by redesignating subparagraph (G) as subparagraph 
                (J); and
                  (D) by inserting after subparagraph (F) the following 
                new subparagraphs:
                  ``(G) the Chairman and Ranking Member of the 
                Committee on Finance of the Senate;
                  ``(H) the Chairman and Ranking Member of the 
                Committee on Ways and Means of the House of 
                Representatives;
                  ``(I) the Chairman and Ranking Member of the 
                Subcommittee on Employer-Employee Relations of the 
                Committee on Education and the Workforce of the House 
                of Representatives; and'';
          (4) in subsection (e)(3)--
                  (A) by striking ``There shall be not more than 200 
                additional participants.'' in subparagraph (A) and 
                inserting ``The participants in the National Summit 
                shall also include additional participants appointed 
                under this subparagraph.'';
                  (B) by striking ``one-half shall be appointed by the 
                President,'' in subparagraph (A)(i) and inserting ``not 
                more than 100 participants shall be appointed under 
                this clause by the President,'';
                  (C) by striking ``one-half shall be appointed by the 
                elected leaders of Congress'' in subparagraph (A)(ii) 
                and inserting ``not more than 100 participants shall be 
                appointed under this clause by the elected leaders of 
                Congress'';
                  (D) by redesignating subparagraph (B) as subparagraph 
                (C); and
                  (E) by inserting after subparagraph (A) the following 
                new subparagraph:
                  ``(B) Presidential authority for additional 
                appointments.--The President, in consultation with the 
                elected leaders of Congress referred to in subsection 
                (a), may appoint under this subparagraph additional 
                participants to the National Summit. The number of such 
                additional participants appointed under this 
                subparagraph may not exceed the lesser of 3 percent of 
                the total number of all additional participants 
                appointed under this paragraph, or 10. Such additional 
                participants shall be appointed from persons nominated 
                by the organization referred to in subsection (b)(2) 
                which is made up of private sector businesses and 
                associations partnered with Government entities to 
                promote long term financial security in retirement 
                through savings and with which the Secretary is 
                required thereunder to consult and cooperate and shall 
                not be Federal, State, or local government 
                employees.'';
          (5) in subsection (e)(3)(C) (as redesignated), by striking 
        ``January 31, 1998'' and inserting ``May 1, 2001, May 1, 2005, 
        and May 1, 2009, for each of the subsequent summits, 
        respectively'';
          (6) in subsection (f)(1)(C), by inserting ``, no later than 
        90 days prior to the date of the commencement of the National 
        Summit,'' after ``comment'';
          (7) in subsection (g), by inserting ``, in consultation with 
        the congressional leaders specified in subsection (e)(2),'' 
        after ``report'' the first place it appears;
          (8) in subsection (i)--
                  (A) by striking ``beginning on or after October 1, 
                1997'' in paragraph (1) and inserting ``2001, 2005, and 
                2009''; and
                  (B) by adding at the end the following new paragraph:
          ``(3) Reception and representation authority.--The Secretary 
        is hereby granted reception and representation authority 
        limited specifically to the events at the National Summit. The 
        Secretary shall use any private contributions accepted in 
        connection with the National Summit prior to using funds 
        appropriated for purposes of the National Summit pursuant to 
        this paragraph.''; and
          (9) in subsection (k)--
                  (A) by striking ``shall enter into a contract on a 
                sole-source basis'' and inserting ``may enter into a 
                contract on a sole-source basis''; and
                  (B) by striking ``fiscal year 1998'' and inserting 
                ``fiscal years 2001, 2005, and 2009''.

                   TITLE VII--OTHER ERISA PROVISIONS

SEC. 701. MISSING PARTICIPANTS.

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

SEC. 702. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL EMPLOYERS.

  (a) In General.--Subparagraph (A) of section 4006(a)(3) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)(A)) is amended--
          (1) in clause (i), by inserting ``other than a new single-
        employer plan (as defined in subparagraph (F)) maintained by a 
        small employer (as so defined),'' after ``single-employer 
        plan,'',
          (2) in clause (iii), by striking the period at the end and 
        inserting ``, and'', and
          (3) by adding at the end the following new clause:
          ``(iv) in the case of a new single-employer plan (as defined 
        in subparagraph (F)) maintained by a small employer (as so 
        defined) for the plan year, $5 for each individual who is a 
        participant in such plan during the plan year.''.
  (b) Definition of New Single-Employer Plan.--Section 4006(a)(3) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)) is amended by adding at the end the following new 
subparagraph:
  ``(F)(i) For purposes of this paragraph, a single-employer plan 
maintained by a contributing sponsor shall be treated as a new single-
employer plan for each of its first 5 plan years if, during the 36-
month period ending on the date of the adoption of such plan, the 
sponsor or any member of such sponsor's controlled group (or any 
predecessor of either) did not establish or maintain a plan to which 
this title applies with respect to which benefits were accrued for 
substantially the same employees as are in the new single-employer 
plan.
  ``(ii)(I) For purposes of this paragraph, the term `small employer' 
means an employer which on the first day of any plan year has, in 
aggregation with all members of the controlled group of such employer, 
100 or fewer employees.
  ``(II) In the case of a plan maintained by two or more contributing 
sponsors that are not part of the same controlled group, the employees 
of all contributing sponsors and controlled groups of such sponsors 
shall be aggregated for purposes of determining whether any 
contributing sponsor is a small employer.''.
  (c) Effective Date.--The amendments made by this section shall apply 
to plans established after December 31, 2001.

SEC. 703. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND SMALL PLANS.

  (a) New Plans.--Subparagraph (E) of section 4006(a)(3) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)(E)) is amended by adding at the end the following new 
clause:
  ``(v) In the case of a new defined benefit plan, the amount 
determined under clause (ii) for any plan year shall be an amount equal 
to the product of the amount determined under clause (ii) and the 
applicable percentage. For purposes of this clause, the term 
`applicable percentage' means--
          ``(I) 0 percent, for the first plan year.
          ``(II) 20 percent, for the second plan year.
          ``(III) 40 percent, for the third plan year.
          ``(IV) 60 percent, for the fourth plan year.
          ``(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as defined in 
section 3(35)) maintained by a contributing sponsor shall be treated as 
a new defined benefit plan for each of its first 5 plan years if, 
during the 36-month period ending on the date of the adoption of the 
plan, the sponsor and each member of any controlled group including the 
sponsor (or any predecessor of either) did not establish or maintain a 
plan to which this title applies with respect to which benefits were 
accrued for substantially the same employees as are in the new plan.''.
  (b) Small Plans.--Paragraph (3) of section 4006(a) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)), as amended 
by section 702(b), is amended--
          (1) by striking ``The'' in subparagraph (E)(i) and inserting 
        ``Except as provided in subparagraph (G), the'', and
          (2) by inserting after subparagraph (F) the following new 
        subparagraph:
  ``(G)(i) In the case of an employer who has 25 or fewer employees on 
the first day of the plan year, the additional premium determined under 
subparagraph (E) for each participant shall not exceed $5 multiplied by 
the number of participants in the plan as of the close of the preceding 
plan year.
  ``(ii) For purposes of clause (i), whether an employer has 25 or 
fewer employees on the first day of the plan year is determined taking 
into consideration all of the employees of all members of the 
contributing sponsor's controlled group. In the case of a plan 
maintained by two or more contributing sponsors, the employees of all 
contributing sponsors and their controlled groups shall be aggregated 
for purposes of determining whether the 25-or-fewer-employees 
limitation has been satisfied.''.
  (c) Effective Dates.--
          (1) Subsection (a).--The amendments made by subsection (a) 
        shall apply to plans established after December 31, 2001.
          (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to plan years beginning after December 31, 2001.

SEC. 704. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM OVERPAYMENT 
                    REFUNDS.

  (a) In General.--Section 4007(b) of the Employment Retirement Income 
Security Act of 1974 (29 U.S.C. 1307(b)) is amended--
          (1) by striking ``(b)'' and inserting ``(b)(1)'', and
          (2) by inserting at the end the following new paragraph:
  ``(2) The corporation is authorized to pay, subject to regulations 
prescribed by the corporation, interest on the amount of any 
overpayment of premium refunded to a designated payor. Interest under 
this paragraph shall be calculated at the same rate and in the same 
manner as interest is calculated for underpayments under paragraph 
(1).''.
  (b) Effective Date.--The amendment made by subsection (a) shall apply 
to interest accruing for periods beginning not earlier than the date of 
the enactment of this Act.

SEC. 705. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

  (a) Modification of Phase-In of Guarantee.--Section 4022(b)(5) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1322(b)(5)) 
is amended to read as follows:
  ``(5)(A) For purposes of this paragraph, the term `majority owner' 
means an individual who, at any time during the 60-month period ending 
on the date the determination is being made--
          ``(i) owns the entire interest in an unincorporated trade or 
        business,
          ``(ii) in the case of a partnership, is a partner who owns, 
        directly or indirectly, 50 percent or more of either the 
        capital interest or the profits interest in such partnership, 
        or
          ``(iii) in the case of a corporation, owns, directly or 
        indirectly, 50 percent or more in value of either the voting 
        stock of that corporation or all the stock of that corporation.
For purposes of clause (iii), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 shall apply 
(determined without regard to section 1563(e)(3)(C)).
  ``(B) In the case of a participant who is a majority owner, the 
amount of benefits guaranteed under this section shall equal the 
product of--
          ``(i) a fraction (not to exceed 1) the numerator of which is 
        the number of years from the later of the effective date or the 
        adoption date of the plan to the termination date, and the 
        denominator of which is 10, and
          ``(ii) the amount of benefits that would be guaranteed under 
        this section if the participant were not a majority owner.''.
  (b) Modification of Allocation of Assets.--
          (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
        striking ``section 4022(b)(5)'' and inserting ``section 
        4022(b)(5)(B)''.
          (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
        amended--
                  (A) by striking ``(5)'' in paragraph (2) and 
                inserting ``(4), (5),'', and
                  (B) by redesignating paragraphs (3) through (6) as 
                paragraphs (4) through (7), respectively, and by 
                inserting after paragraph (2) the following new 
                paragraph:
          ``(3) If assets available for allocation under paragraph (4) 
        of subsection (a) are insufficient to satisfy in full the 
        benefits of all individuals who are described in that 
        paragraph, the assets shall be allocated first to benefits 
        described in subparagraph (A) of that paragraph. Any remaining 
        assets shall then be allocated to benefits described in 
        subparagraph (B) of that paragraph. If assets allocated to such 
        subparagraph (B) are insufficient to satisfy in full the 
        benefits described in that subparagraph, the assets shall be 
        allocated pro rata among individuals on the basis of the 
        present value (as of the termination date) of their respective 
        benefits described in that subparagraph.''.
  (c) Conforming Amendments.--
          (1) Section 4021 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1321) is amended--
                  (A) in subsection (b)(9), by striking ``as defined in 
                section 4022(b)(6)'', and
                  (B) by adding at the end the following new 
                subsection:
  ``(d) For purposes of subsection (b)(9), the term `substantial owner' 
means an individual who, at any time during the 60-month period ending 
on the date the determination is being made--
          ``(1) owns the entire interest in an unincorporated trade or 
        business,
          ``(2) in the case of a partnership, is a partner who owns, 
        directly or indirectly, more than 10 percent of either the 
        capital interest or the profits interest in such partnership, 
        or
          ``(3) in the case of a corporation, owns, directly or 
        indirectly, more than 10 percent in value of either the voting 
        stock of that corporation or all the stock of that corporation.
For purposes of paragraph (3), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 shall apply 
(determined without regard to section 1563(e)(3)(C)).''.
  (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) is amended 
by striking ``section 4022(b)(6)'' and inserting ``section 4021(d)''.
  (d) Effective Dates.--
          (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to plan 
        terminations--
                  (A) under section 4041(c) of the Employee Retirement 
                Income Security Act of 1974 (29 U.S.C. 1341(c)) with 
                respect to which notices of intent to terminate are 
                provided under section 4041(a)(2) of such Act (29 
                U.S.C. 1341(a)(2)) after December 31, 2001, and
                  (B) under section 4042 of such Act (29 U.S.C. 1342) 
                with respect to which proceedings are instituted by the 
                corporation after such date.
          (2) Conforming amendments.--The amendments made by subsection 
        (c) shall take effect on January 1, 2002.

SEC. 706. CIVIL PENALTIES FOR BREACH OF FIDUCIARY RESPONSIBILITY.

  (a) Imposition and Amount of Penalty Made Discretionary.--Section 
502(l)(1) of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1132(l)(1)) is amended--
          (1) by striking ``shall'' and inserting ``may'', and
          (2) by striking ``equal to'' and inserting ``not greater 
        than''.
  (b) Applicable Recovery Amount.--Section 502(l)(2) of such Act (29 
U.S.C. 1132(l)(2)) is amended by inserting after ``fiduciary or other 
person'' the following: ``(or from any other person on behalf of any 
such fiduciary or other person)''.
  (c) Other Rules.--Section 502(l) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132(l)) is amended by adding at the 
end the following new paragraphs:
  ``(5) A person shall be jointly and severally liable for the penalty 
described in paragraph (1) to the same extent that such person is 
jointly and severally liable for the applicable recovery amount on 
which the penalty is based.
  ``(6) No penalty shall be assessed under this subsection unless the 
person against whom the penalty is assessed is given notice and 
opportunity for a hearing with respect to the violation and applicable 
recovery amount.''.
  (d) Effective Date.--The amendments made by this section shall apply 
to any breach of fiduciary responsibility or other violation of part 4 
of subtitle B of title I of the Employee Retirement Income Security Act 
of 1974 occurring on or after the date of the enactment of this Act.

SEC. 707. BENEFIT SUSPENSION NOTICE.

  (a) Modification of Regulation.--The Secretary of Labor shall modify 
the regulation under subparagraph (B) of section 203(a)(3) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1053(a)(3)(B)) to provide that the notification required by such 
regulation in connection with any suspension of benefits described in 
such subparagraph--
          (1) in the case of an employee who returns to service under 
        the plan after commencement of payment of benefits under the 
        plan--
                  (A) shall be made during the first calendar month or 
                payroll period in which the plan withholds payments, 
                and
                  (B) if a reduced rate of future benefit accrual will 
                apply to the returning employee (as of the first date 
                of participation in the plan by the employee after 
                returning to work), shall include a statement that the 
                rate of future benefit accrual will be reduced, and
          (2) in the case of any employee who is not described in 
        paragraph (1)--
                  (A) may be included in the summary plan description 
                for the plan furnished in accordance with section 
                104(b) of such Act (29 U.S.C. 1024(b)), rather than in 
                a separate notice, and
                  (B) need not include a copy of the relevant plan 
                provisions.
  (b) Effective Date.--The modification made under this section shall 
apply to plan years beginning after December 31, 2001.

SEC. 708. STUDIES.

  (a) Model Small Employer Group Plans Study.--As soon as practicable 
after the date of the enactment of this Act, the Secretary of Labor, in 
consultation with the Secretary of the Treasury, shall conduct a study 
to determine--
          (1) the most appropriate form or forms of--
                  (A) employee pension benefit plans which would--
                          (i) be simple in form and easily maintained 
                        by multiple small employers, and
                          (ii) provide for ready portability of 
                        benefits for all participants and 
                        beneficiaries,
                  (B) alternative arrangements providing comparable 
                benefits which may be established by employee or 
                employer associations, and
                  (C) alternative arrangements providing comparable 
                benefits to which employees may contribute in a manner 
                independent of employer sponsorship, and
          (2) appropriate methods and strategies for making pension 
        plan coverage described in paragraph (1) more widely available 
        to American workers.
  (b) Matters to Be Considered.--In conducting the study under 
subsection (a), the Secretary of Labor shall consider the adequacy and 
availability of existing employee pension benefit plans and the extent 
to which existing models may be modified to be more accessible to both 
employees and employers.
  (c) Report.--Not later than 18 months after the date of the enactment 
of this Act, the Secretary of Labor shall report the results of the 
study under subsection (a), together with the Secretary's 
recommendations, to the Committee on Education and the Workforce and 
the Committee on Ways and Means of the House of Representatives and the 
Committee on Health, Education, Labor, and Pensions and the Committee 
on Finance of the Senate. Such recommendations shall include one or 
more model plans described in subsection (a)(1)(A) and model 
alternative arrangements described in subsections (a)(1)(B) and 
(a)(1)(C) which may serve as the basis for appropriate administrative 
or legislative action.
  (d) Study on Effect of Legislation.--Not later than 5 years after the 
date of the enactment of this Act, the Secretary of Labor shall submit 
to the Committee on Education and the Workforce of the House of 
Representatives and the Committee on Health, Education, Labor, and 
Pensions of the Senate a report on the effect of the provisions of this 
Act on pension plan coverage, including any change in--
          (1) the extent of pension plan coverage for low and middle-
        income workers,
          (2) the levels of pension plan benefits generally,
          (3) the quality of pension plan coverage generally,
          (4) workers' access to and participation in pension plans, 
        and
          (5) retirement security.

                      TITLE VIII--PLAN AMENDMENTS

SEC. 801. PROVISIONS RELATING TO PLAN AMENDMENTS.

  (a) In General.--If this section applies to any plan or contract 
amendment--
          (1) such plan or contract shall be treated as being operated 
        in accordance with the terms of the plan during the period 
        described in subsection (b)(2)(A); and
          (2) except as provided by the Secretary of the Treasury, such 
        plan shall not fail to meet the requirements of section 
        411(d)(6) of the Internal Revenue Code of 1986 or section 
        204(g) of the Employee Retirement Income Security Act of 1974 
        by reason of such amendment.
  (b) Amendments to Which Section Applies.--
          (1) In general.--This section shall apply to any amendment to 
        any plan or annuity contract which is made--
                  (A) pursuant to any amendment made by this Act, or 
                pursuant to any regulation issued under this Act; and
                  (B) on or before the last day of the first plan year 
                beginning on or after January 1, 2004.
        In the case of a governmental plan (as defined in section 
        414(d) of the Internal Revenue Code of 1986), this paragraph 
        shall be applied by substituting ``2006'' for ``2004''.
          (2) Conditions.--This section shall not apply to any 
        amendment unless--
                  (A) during the period--
                          (i) beginning on the date the legislative or 
                        regulatory amendment described in paragraph 
                        (1)(A) takes effect (or in the case of a plan 
                        or contract amendment not required by such 
                        legislative or regulatory amendment, the 
                        effective date specified by the plan); and
                          (ii) ending on the date described in 
                        paragraph (1)(B) (or, if earlier, the date the 
                        plan or contract amendment is adopted),
                the plan or contract is operated as if such plan or 
                contract amendment were in effect; and
                  (B) such plan or contract amendment applies 
                retroactively for such period.

                                Purpose

    The purpose of H.R. 10, the ``Comprehensive Retirement 
Security and Pension Reform Act of 2001,'' is to make 
retirement security more available to millions of workers by 
(1) expanding small business retirement plans, (2) allowing 
workers to save more, (3) addressing the needs of an 
increasingly mobile workforce through greater portability and 
other changes, (4) making pensions more secure, and (5) cutting 
the red tape that has hamstrung employers who want to establish 
pension plans for their workers.

                            Committee Action

    H.R. 10 was introduced by Representative Rob Portman, with 
the lead co-sponsorship of Representative Ben Cardin, on March 
14, 2001. The bill has 305 cosponsors--175 Republicans and 130 
Democrats, including Committee Chairman John Boehner, 
Subcommittee on Employer-Employee Relations Chairman Sam 
Johnson, and Subcommittee Ranking Member Rob Andrews.
    The Subcommittee on Employer-Employee Relations held a 
legislative hearing on the bill on April 5, 2001. At the 
hearing, entitled ``Enhancing Retirement Security: A Hearing on 
H.R. 10, The `Comprehensive Retirement Security and Pension 
Reform Act of 2001,' '' testimony was received from the bill's 
authors, Representatives Portman and Cardin, as well as 
representatives of the American Benefits Council, the Building 
and Construction Trades Department, AFL-CIO and the National 
Coordinating Committee for Multiemployer Plans, the American 
Council of Life Insurers, and the Pension Rights Center.
    On April 26, 2001, the Committee on Education and the 
Workforce approved H.R. 10, as amended, by a voice vote, a 
quorum being present, and by voice vote ordered the bill 
favorably reported.
    In the 106th Congress, the Subcommittee on Employer-
Employee Relations held a legislative hearing on a very similar 
bill, H.R. 1102. On June 29, 1999, at the hearing, entitled 
``Enhancing Retirement Security: A Hearing on H.R. 1102, The 
`Comprehensive Retirement Security and Pension Reform Act of 
1999,' '' testimony was received from the bill's authors, 
Representatives Portman and Cardin.
    On July 14, 1999, the Committee on Education and the 
Workforce approved H.R. 1102, as amended, by a voice vote, a 
quorum being present, and by voice vote ordered the bill 
favorably reported.
    Fifteen provisions of Title VI of the bill, containing 
amendments to the Employee Retirement Income Security Act 
(ERISA), were added to H.R. 2488, the ``Taxpayer Refund and 
Relief Act of 1999,'' which passed the House and Senate on 
August 5, 1999, but was vetoed by the president. The tax bill 
passed by Congress included provisions either identical or 
similar to sections 601-606, 611-612, 615-616, 618, 621-622, 
and 627-628 of H.R. 1102, as reported.
    The House passed H.R. 1102 on July 19, 2000 by a vote of 
401-25 (although the ERISA provisions were deleted for 
procedural reasons). Twenty-two ERISA provisions from H.R. 1102 
were included in the ``Retirement Savings and Pension Coverage 
Act of 2000,'' part of H.R. 2614, the ``Taxpayer Relief Act of 
2000'' passed on October 26, 2000 (but not acted upon by the 
Senate).

                   Committee Statement and Views \1\

                      TITLE II--EXPANDING COVERAGE

Section 202--Plan loans for subchapter S owners, partners and sole 
        proprietors

            Current law
    A qualified retirement plan or Internal Revenue Code 
section 403(b) arrangement is permitted to make loans to 
participants. However, the statutory exemption from ERISA 
prohibited transaction rules for participant loans, sec. 408 
(with a counterpart in the Internal Revenue Code),\2\ generally 
does not apply to small business owners if the business is 
unincorporated (i.e., partnerships and sole-proprietorships) or 
has made an election to be taxed under the provisions of Code 
subchapter S.
---------------------------------------------------------------------------
    \1\ This report only contains Committee views on those provisions 
of H.R. 10 within the Committee's jurisdiction.
    \2\ Note all section references are to the Employee Retirement 
Income Security Act of 1974 (ERISA), 29 U.S.C. s1001, et seq., unless 
otherwise indicated.
---------------------------------------------------------------------------
    The statutory exemptions to the prohibited transaction 
rules do not apply to certain transactions in which the plan 
makes a loan to an owner-employee. For purposes of the 
prohibited transaction rules, an owner-employee means (1) a 
sole proprietor, (2) a partner who owns more than 10 percent of 
either the capital interest or the profits interest in the 
partnership, (3) an employee or officer of a Code subchapter S 
corporation who owns more than 5 percent of the outstanding 
stock of the corporation, and (4) the owner of an individual 
retirement arrangement (``IRA''). The term owner-employee also 
includes certain family members of an owner-employee and 
certain corporations owned by an owner-employee.
            Explanation of provision
    The sec. 408 prohibited transaction rules are amended to 
provide equal access to participant loans for all employees, 
including the owners of small businesses that are 
unincorporated or that choose to be taxed under Code subchapter 
S.
    Effective Date.--The provision is effective with respect to 
loans made after December 31, 2001.
            Rationale
    The Committee believes that the present-law prohibited 
transaction rules regarding loans unfairly discriminate against 
the owners of unincorporated businesses and subchapter S 
corporations. For example, under present law, the sole 
shareholder of a C corporation may take advantage of the 
statutory exemption to the prohibited transaction rules for 
loans, but an individual who does business as a sole proprietor 
may not. The restrictions on loans to owner-employees also 
reduce the incentive to establish plans and, for plans in 
existence, make it less likely that an affected plan will offer 
a loan feature.
    The provision generally eliminates the special present-law 
rules relating to plan loans made to an owner-employee. Thus, 
the general statutory exemption applies to such transactions. 
Present law continues to apply with respect to IRAs.

                TITLE III--ENHANCING FAIRNESS FOR WOMEN

Section 303--Faster vesting of certain employer matching contributions

            Current law
    Section 203(a) requires a participant's employer-provided 
benefit to vest in one of two ways: (1) a participant acquires 
a nonforfeitable right to 100 percent of the participant's 
accrued benefit derived from employer contributions upon the 
completion of 5 years of service; or (2) a participant has a 
nonforfeitable right to at least 20 percent of the 
participant's accrued benefit derived from employer 
contributions after 3 years of service, 40 percent after 4 
years of service, 60 percent after 5 years of service, 80 
percent after 6 years of service, and 100 percent after 7 years 
of service.
            Explanation of provision
    The provision applies an expedited vesting schedule to 
employer matching contributions. Under the provision, employer 
matching contributions have to vest in one of 2 accelerated 
ways: (1) a participant acquires a nonforfeitable right to 100 
percent of employer matching contributions upon the completion 
of 3 years of service; or (2) a participant has a 
nonforfeitable right to 20 percent of employer matching 
contributions for each year of service beginning with the 
participant's second year of service and ending with 100 
percent after 6 years of service.
    Effective Date.--The provision is effective for plan years 
beginning after December 31, 2001, with a delayed effective 
date for plans maintained pursuant to a collective bargaining 
agreement. The provision does not apply to any employee until 
the employee has an hour of service after the effective date. 
In applying the new vesting schedule, service before the 
effective date is taken into account.
            Rationale
    The Committee understands that many employees, particularly 
lower- and middle-income employees, do not take full advantage 
of the retirement savings opportunities provided by their 
employer's 401(k) plan. The Committee believes that providing 
faster vesting for matching contributions will make section 
401(k) plans more attractive for employees, particularly lower- 
and middle-income employees, and will encourage workers to save 
more for their own retirement. In addition, faster vesting for 
matching contributions will enable short-service employees to 
accumulate greater retirement savings. Given the increasingly 
mobile nature of today's workforce, there is a growing risk 
that many participants will leave employment before vesting in 
their matching contributions.

           TITLE IV--INCREASING PORTABILITY FOR PARTICIPANTS

Section 405--Treatment of forms of distributions

            Current law
    The sec. 204(g) ``anti-cutback rule'' generally provides 
that when a participant's benefits are transferred from one 
plan to another, the transferee plan must preserve all forms of 
distribution that were available under the transferor plan. The 
anti-cutback rule also generally provides that, without regard 
to a transfer, a plan may not eliminate forms of distribution. 
An amendment is treated as reducing an accrued benefit if, with 
respect to benefits accrued before the amendment is adopted, 
the amendment has the effect of either (1) eliminating or 
reducing an early retirement benefit or a retirement-type 
subsidy, or (2) except as provided by Department of Treasury 
regulations, eliminating an optional form of benefit. The 
prohibition against the elimination of an optional form of 
benefit applies to plan mergers, spinoffs, transfers, and 
transactions amending or having the effect of amending a plan 
or plans to transfer plan benefits.
            Explanation of provision
    A defined contribution plan to which benefits are 
transferred is not treated as reducing a participant's or 
beneficiary's accrued benefit even though it does not provide 
all of the forms of distribution previously available under the 
transferor plan if (1) the plan receives from another defined 
contribution plan a direct transfer of the participant's or 
beneficiary's benefit accrued under the transferor plan, or the 
plan results from a merger or other transaction that has the 
effect of a direct transfer (including consolidations of 
benefits attributable to different employers within a multiple 
employer plan), (2) the terms of both the transferor plan and 
the transferee plan authorize the transfer, (3) the transfer 
occurs pursuant to a voluntary election by the participant or 
beneficiary that is made after the participant or beneficiary 
received a notice describing the consequences of making the 
election, and (4) the transferee plan allows the participant or 
beneficiary to receive distribution of his or her benefit under 
the transferee plan in the form of a single sum distribution. 
Nothing in this amendment is to be construed to affect the 
applicability of the requirements of ERISA section 205 to the 
transferee plan.
    In addition, except to the extent provided by the Secretary 
of the Treasury in regulations, a defined contribution plan is 
not treated as reducing a participant's accrued benefit if (1) 
a plan amendment eliminates a form of distribution previously 
available under the plan, (2) a single sum distribution is 
available to the participant at the same time or times as the 
form of distribution eliminated by the amendment, and (3) the 
single sum distribution is based on the same or greater portion 
of the participant's accrued benefit as the form of 
distribution eliminated by the amendment.
    The Secretary of the Treasury is directed to issue, not 
later than December 31, 2003, final regulations under section 
204(g) implementing the provision.
    Furthermore, the provision directs the Secretary of the 
Treasury to provide by regulations that the prohibitions 
against eliminating or reducing an early retirement benefit, a 
retirement-type subsidy, or an optional form of benefit not 
apply to plan amendments that eliminate or reduce early 
retirement benefits, retirement-type subsidies, and optional 
forms of benefit that create significant burdens or 
complexities for a plan and its participants and that do not 
adversely affect the rights of any participant in more than a 
de minimis manner.
    It is intended that the factors to be considered in 
determining whether an amendment has more than a de minimis 
adverse effect on any participant include (1) all of the 
participant's early retirement benefits, retirement-type 
subsidies, and optional forms of benefits that are reduced or 
eliminated by the amendment, (2) the extent to which early 
retirement benefits, retirement-type subsidies, and optional 
forms of benefit in effect with respect to a participant after 
the amendment effective date provide rights that are comparable 
to the rights that are reduced or eliminated by the plan 
amendment, (3) the number of years before the participant 
attains normal retirement age under the plan (or early 
retirement age, as applicable), (4) the amount of the 
participant's benefit that is affected by the plan amendment, 
in relation to the amount of the participant's compensation, 
and (5) the number of years before the plan amendment is 
effective.
    Effective Date.--The provision is effective for years 
beginning after December 31, 2001.
            Rationale
    The Committee understands that the application of the 
prohibition against the elimination of any optional form of 
benefit to plan mergers and transfers with respect to defined 
contribution plans frequently results in complexity and 
confusion, especially in the context of business acquisitions 
and similar transactions. In addition, the Committee 
understands that a defined contribution plan participant who is 
entitled to receive a single sum distribution generally may 
roll over such a distribution to an IRA and control the manner 
of distribution from the IRA.
    The requirement that a plan preserve all forms of 
distribution can significantly increase the cost of plan 
administration. This requirement also causes confusion among 
plan participants who can have separate parts of their 
retirement benefits subject to very different plan provisions.

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

            Current law
    Under sec. 203(e), if a retirement plan participant ceases 
to be employed by the employer that maintains the plan, the 
plan may distribute the participant's nonforfeitable accrued 
benefit without the consent of the participant and, if 
applicable, the participant's spouse, if the present value of 
the benefit does not exceed $5,000. For purposes of calculating 
the accrued benefit of an individual, amounts rolled over from 
another employer's retirement plan or an IRA are taken into 
account in calculating the $5,000 limit.
            Explanation of provision
    In determining whether an employee's benefit level falls 
below the $5,000 cash-out threshold, a plan is permitted to 
exclude any benefits attributable to amounts that have been 
rolled over by the employee from another employer's plan or an 
IRA (and any earnings on such rollovers).
    Effective Date.--The provision is effective for 
distributions after December 31, 2001.
            Rationale
    Keeping track of and managing small account balances of 
former employees creates administrative burdens for plans. The 
Committee is concerned that, in some cases, the cash-out rule 
may discourage plans from accepting rollovers because the 
rollover will increase participants' benefits to above the 
cash-out amount, and increase administrative burdens. The 
Committee believes that disregarding rollovers for purposes of 
the cash-out rule will further the intent of the cash-out rule 
by removing a possible disincentive for plans to accept 
rollovers.

        title v--strengthening pension security and enforcement

Section 501--Repeal of 150% of current liability funding limit

            Current law
    Under present law, defined benefit pension plans are 
subject to minimum funding requirements designed to ensure that 
pension plans have sufficient assets to pay benefits. A defined 
benefit pension plan is funded using one of a number of 
acceptable actuarial cost methods. No contribution is required 
under the minimum funding rules in excess of the full funding 
limit. The full funding limit is generally defined by sec. 
302(c)(7) as the excess, if any, of (1) the lesser of (a) the 
accrued liability under the plan (including normal cost) or (b) 
155 percent of the plan's current liability, over (2) the value 
of the plan's assets. In general, current liability is all 
liabilities to plan participants and beneficiaries accrued to 
date, whereas the accrued liability full funding limit is based 
on projected benefits. The current liability full funding limit 
is scheduled to increase as follows: 160 percent for plan years 
beginning in 2001 and 2002, 165 percent for plan years 
beginning in 2003 and 2004, and 170 percent for plan 
yearsbeginning in 2005 and thereafter. In no event is a plan's full 
funding limit less than 90 percent of the plan's current liability over 
the value of the plan's assets.
            Explanation of provision
    The arbitrary funding limitation based on current liability 
would be phased-out more quickly. The provision gradually 
increases and then repeals the current liability full funding 
limit. The current liability full funding limit will be 165 
percent of current liability for plan years beginning in 2002 
and 170 percent for plan years beginning in 2003. The current 
liability full funding limit is repealed for plan years 
beginning in 2004 and thereafter.
    Effective Date.--The provision is effective for plan years 
beginning after December 31, 2001.
            Rationale
    The Committee is concerned that the current liability full 
funding limit may result in inadequate funding of pension plans 
and thus jeopardize pension security. The current-liability 
limitation was added in 1987, primarily to raise additional 
revenue. This funding limit--even at higher levels--can lead to 
systematic plan underfunding as well as erratic and unstable 
contribution patterns.

Section 504--Failure to provide notice by defined benefit plans 
        significantly reducing future benefit accruals

            Current law
    Under section 204(h), a defined benefit plan or a money 
purchase pension plan may not be amended so as to provide for a 
significant reduction in the rate of future benefit accrual 
unless, after the adoption of the plan amendment and not less 
than 15 days before the effective date of the plan amendment, 
the plan administrator satisfies a notice requirement. Under 
such requirement, the plan administrator must provide a written 
notice to participants and alternate payees, other than those 
whose rate of future benefit accrual is reasonably expected not 
to be reduced by the amendment, and to each employee 
organization that represents a participant to whom a section 
204(h) notice is required to be provided.
    The written notice must set forth the plan amendment and 
its effective date. Alternatively, under the applicable 
regulations, the notice may contain:

        a summary of the amendment, rather than the text of the 
        amendment, if the summary is written in a manner 
        calculated to be understood by the average plan 
        participant and contains the effective date. The 
        summary need not explain how the individual benefit of 
        each participant or alternate payee will be affected by 
        the amendment.

    Under the applicable regulations, in general, an amendment 
that significantly reduces the rate of future benefit accrual 
is effective with respect to participants and alternate payees 
with respect to whom a proper notice is provided in a timely 
manner. This rule applies even if certain participants and 
alternate payees do not receive a timely notice, provided that 
the plan administrator made a ``good faith effort to comply 
with the requirements of section 204(h).''
    The applicable regulations also provide that, under certain 
circumstances, an amendment that significantly reduces the rate 
of future benefit accrual is effective with respect to all 
affected persons--even those who are entitled to a notice but 
do not receive one--if the plan administrator ``made a good 
faith effort to comply'' and failed to provide a notice to ``no 
more than a de minimis percentage of participants and alternate 
payees to whom [a] section 204(h) notice is required to be 
provided.''
            Explanation of provision
    The provision amends the notice requirement in section 
204(h) to provide that an applicable pension plan may not be 
amended to provide for a significant reduction in the rate of 
future benefit accrual unless the plan administrator (of a 
defined benefit pension plan or a money purchase pension plan) 
furnishes a written notice concerning a plan amendment that 
provides for a significant reduction in the rate of future 
benefit accrual. Notice is also required with respect to the 
elimination or reduction of an early retirement benefit or 
retirement-type subsidy.
    The plan administrator is required to provide in this 
notice, in a manner calculated to be understood by the average 
plan participant, sufficient information (as defined in 
Treasury regulations) to allow participants to understand the 
effect of the amendment. The plan administrator is required to 
provide this notice to each affected participant, each affected 
alternate payee, and each employee organization representing 
affected participants. For purposes of the provision, an 
affected participant or alternate payee is a participant or 
alternate payee to whom the significant reduction in the rate 
of future benefit accrual is reasonably expected to apply. 
Except to the extent provided by Treasury regulations, the plan 
administrator is required to provide the notice within a 
reasonable time before the effective date of the plan 
amendment.
    The Secretary of the Treasury is authorized to provide a 
simplified notice requirement or an exemption from the notice 
requirement for plans with less than 100 participants and to 
allow any notice required under this section be provided by 
using new technologies. The Secretary of the Treasury is also 
authorized to provide a simplified notice requirement or an 
exemption from the notice requirement if participants are given 
the option to choose between benefits under the new plan 
formula and the old plan formula. In such cases, the Committee 
understands that the fiduciary rules applicable to pension 
plans may require appropriate disclosure to participants, even 
if no disclosure is required under the provision.
    It is intended that the Secretary of the Treasury will 
issue the necessary regulations with respect to disclosure 
within 90 days of enactment. It is also intended that such 
guidance may be relatively detailed because of the need to 
provide for alternative disclosures rather than a single 
disclosure methodology that may not fit all situations, and the 
need to consider the complex actuarial calculations and 
assumptions involved in providing necessary disclosures.
    In addition, the provision directs the Secretary of the 
Treasury to prepare a report on the effects of conversions of 
traditional defined benefit plans to cash balance or hybrid 
formula plans. Such study is to examine the effect of such 
conversions on longer service participants, including the 
incidence and effects of ``wear away'' provisions under which 
participants earn no additional benefits for a period of time 
after the conversion. The Secretary is directed to submit such 
report, together with recommendations thereon, to the Committee 
on Education and the Workforce and the Committee on Ways and 
Means of the House of Representatives and the Committee on 
Health Education Labor and Pensions and the Committee on 
Finance of the Senate as soon as practicable, but not later 
than 60 days after the date of enactment.
    Effective Date.--The provision is effective for plan 
amendments taking effect on or after the date of enactment. The 
period for providing any notice required under the provision 
will not end before the last day of the 3-month period 
following the date of enactment. Prior to the issuance of 
Treasury regulations, a plan will be treated as meeting the 
requirements of the provision if the plan makes a good faith 
effort to comply with such requirements.
            Rationale
    The Committee is aware of concerns raised regarding 
conversions of traditional defined benefit pension plans to so-
called ``cash balance'' plans, with particular focus on the 
impact such conversions have on affected workers. The Committee 
believes that employees are entitled to meaningful disclosure 
concerning plan amendments that may result in reductions of 
future benefit accruals. The Committee has determined that 
present law does not require employers to provide such 
disclosure, particularly in cases where traditional defined 
benefit plans are converted to cash balance plans. The 
Committee also believes that any disclosure requirements 
applicable to plan amendments should strike a balance between 
providing meaningful disclosure and avoiding the imposition of 
unnecessary administrative burdens on employers.

Section 506--Protection of investment of employee contributions to 
        401(k) plans

            Current law
    Section 1524 of the Taxpayer Relief Act of 1997 (``TRA''), 
P.L. 105-34, amended ERISA to prohibit certain employee benefit 
plans from acquiring securities or real property of the 
employer who sponsors the plan if, after the acquisition, the 
fair market value of such securities and property exceeds 10 
percent of the fair market value of plan assets. The 10-percent 
limitation does not apply to any ``eligible individual account 
plans'' that specifically authorize such investments. 
Generally, eligible individual account plans are defined 
contribution plans, including plans containing a cash or 
deferred arrangement (401(k) plans).
    The term ``eligible individual account plan'' does not 
include the portion of a plan that consists of elective 
deferrals made under section 401(k) if elective deferrals equal 
to more than 1 percent of any employee's eligible compensation 
are required to be invested in employer securities and employer 
real property. The rule excluding elective deferrals from the 
definition of individual account plan does not apply if 
individual account plans are a small part of the employer's 
retirement plans. In particular, that rule does not apply to an 
individual account plan for a plan year if the value of the 
assets of all individual account plans maintained by the 
employer do not exceed 10 percent of the value of the assets of 
all pension plans maintained by the employer (determined as of 
the last day of the preceding plan year).
    The rule excluding elective deferrals from the definition 
of individual account plan applies to elective deferrals for 
plan years beginning after December 31, 1998. It does not apply 
with respect to earnings on elective deferrals for plan years 
beginning before January 1, 1999.
            Explanation of provision
    The provision modifies the effective date of the rule 
excluding certain elective deferrals from the definition of 
individual account plan by providing that the rule does not 
apply to any elective deferral invested in assets consisting of 
qualifying employer securities, qualifying employer real 
property, or both, if such assets were acquired by the plan 
before January 1, 1999.
    Effective Date.--The section is effective as if included in 
the section of the Taxpayer Relief Act of 1997 that contained 
the rule excluding certain elective deferrals.
            Rationale
    The change would correct a technical problem with the 
application of section 1524 of the TRA. The Committee believes 
that the effective date provided in the TRA with respect to the 
rule excluding certain elective deferrals from the definition 
of individual account plan has produced unintended results.

Section 507--Periodic pension benefits statements

            Current law
    Section 105 provides that a pension plan administrator must 
furnish a benefit statement to any participant or beneficiary 
who makes a written request for such a statement. This 
statement must indicate, on the basis of the latest available 
information, (1) the participant's or beneficiary's total 
accrued benefit, and (2) the participant's or beneficiary's 
vested accrued benefit or the earliest date on which the 
accrued benefit will become vested. A participant or 
beneficiary is not entitled to receive more than 1 benefit 
statement during any 12-month period.
            Explanation of provision
    A plan administrator of a defined contribution plan 
generally would be required to furnish a benefit statement to 
each participant at least once annually and to a beneficiary 
upon written request.
    In addition to providing a benefit statement to a 
beneficiary upon written request, the plan administrator of a 
defined benefit plan generally would be required either (1) to 
furnish a benefit statement at least once every 3 years to each 
participant who has a vested accrued benefit andwho is employed 
by the employer at the time the plan administrator furnishes the 
benefit statements to participants, or (2) to annually furnish written, 
electronic, or other appropriate notice to each participant of the 
availability of and the manner in which the participant may obtain the 
benefit statement.
    The plan administrator would be required to write the 
benefit statement in a manner calculated to be understood by 
the average plan participant and would be permitted to furnish 
the statement in written, electronic, or other appropriate 
form.
    The Secretary of Labor is authorized to provide that years 
in which no employee or former employee benefits under a plan 
need not be taken into account in determining the applicable 3-
year period.
    In addition, the Secretary of Labor is directed to develop 
a model benefit statement, written in a manner calculated to be 
understood by the average plan participant, that may be used by 
plan administrators in complying with the requirements of 
section 105. The model statement's use would be optional. The 
model statement would include items such as the amount of 
nonforfeitable accrued benefits as of the statement date which 
is payable at normal retirement age under the plan, the amount 
of accrued benefits which are forfeitable but which may become 
nonforfeitable under the terms of the plan, information on how 
to contact the Social Security Administration to obtain a 
participant's personal earnings and benefit estimate statement, 
and other information that may be important to understanding 
benefits earned under the plan. Statements provided by 
electronic forms of communications shall be provided consistent 
with DOL and Treasury regulations.
    Effective Date.--The changes would apply to plan years 
beginning after December 31, 2002.
            Rationale
    Benefit statements provide meaningful information that each 
participant should receive regularly in order to evaluate his 
or her retirement benefits. This will encourage better 
awareness by plan participants of their overall retirement 
preparedness and the status of their benefits under the plan.

                 TITLE VI--REDUCING REGULATORY BURDENS

Section 601--Modification of timing of plan valuations

            Current law
    Under present law, in the case of plans subject to the 
minimum funding rules, a plan valuation is generally required 
annually. Under proposed Treasury regulations, except as 
provided by the Commissioner of Internal Revenue, the valuation 
must be as of a date within the plan year to which the 
valuation refers or within the month prior to the beginning of 
that year.
            Explanation of provision
    The provision incorporates into the statute the proposed 
Treasury regulation regarding the date of valuations (the 
valuation must be as of a date within the plan year to which 
the valuation refers or within the month prior to the beginning 
of that year). The provision also provides, as an exception to 
this general rule, that the valuation date with respect to a 
plan year may be any date within the immediately preceding plan 
year if, as of such date, plan assets are not less than 125 
percent of the plan's current liability. Information determined 
as of such date is required to be adjusted actuarially, in 
accordance with Treasury regulations, to reflect significant 
differences in plan participants. An election to use a prior 
plan year valuation date, once made, may only be revoked with 
the consent of the Secretary of the Treasury.
    Effective Date.--The provision is effective for plan years 
beginning after December 31, 2001.
            Rationale
    The Committee believes that while plan valuations are 
necessary to ensure adequate funding of defined benefit pension 
plans, they also create administrative burdens for employers. 
This new rule, in the case of well-funded plans, strikes an 
appropriate balance between funding concerns and employer 
concerns about plan administrative costs. Because valuations 
can be quite time consuming, the current-law rule means that a 
plan's minimum funding requirements, deductible limits, and 
full-funding limitation for a year are not known until after 
the beginning of the year, sometimes well into the year, and in 
extreme cases even after the year is over. This prevents 
accurate advance budgeting for pension contributions.

Section 606--Reporting simplification

            Current law
    A plan administrator of a pension, annuity, stock bonus, 
profit-sharing or other funded plan of deferred compensation 
generally must file with the Secretary of Labor, the Secretary 
of the Treasury, and the PBGC an annual return for each plan 
year containing certain information with respect to the 
qualification, financial condition, and operation of the plan. 
The plan administrator must use the Form 5500 series as the 
format for the required annual return. The Form 5500 series 
annual return/report, which consists of a primary form and 
various schedules, includes the information required to be 
filed with all three agencies. The plan administrator satisfies 
the reporting requirement with respect to each agency by filing 
the Form 5500 series annual return/report with the Internal 
Revenue Service, which forwards the form to the Department of 
Labor and the PBGC.
    The Form 5500 series consists of 3 different forms: Form 
5500, Form 5500-C/R, and Form 5500-EZ. Form 5500 is the most 
comprehensive of the forms and requires the most detailed 
financial information. Form 5500-C/R requires less information 
than Form 5500, and Form 5500-EZ, which consists of only 1 
page, is the simplest of the forms. The size of the plan 
determines which form a plan administrator must file. If the 
plan has more than 100 participantsat the beginning of the plan 
year, the plan administrator generally must file Form 5500. If the plan 
has fewer than 100 participants at the beginning of the plan year, the 
plan administrator generally may file Form 5500-C/R. A plan 
administrator generally may file Form 5500-EZ if (1) the only 
participants in the plan are the sole owner of a business that 
maintains the plan (and such owner's spouse), or partners in a 
partnership that maintains the plan (and such partners' spouses), (2) 
the plan is not aggregated with another plan in order to satisfy the 
minimum coverage requirements of Internal Revenue Code section 410(b), 
(3) the employer is not a member of a related group of employers, and 
(4) the employer does not receive the services of leased employees. If 
the plan satisfies the eligibility requirements for Form 5500-EZ and 
the total value of the plan assets as of the end of the plan year and 
all prior plan years does not exceed $100,000, the plan administrator 
is not required to file a return.
            Explanation of provision
    The Secretary of the Treasury and the Secretary of Labor 
are directed to modify the annual return filing requirements 
with respect to plans that satisfy the eligibility requirements 
for Form 5500 EZ to provide that if the total value of the plan 
assets of such a plan as of the end of the plan year and all 
prior plan years does not exceed $250,000, the plan 
administrator is not required to file a return.
    In addition, the Secretary of the Treasury and the 
Secretary of Labor are directed to provide simplified reporting 
requirements for plan years beginning after December 31, 2001, 
for a plan that (1) covers less than 25 employees on the first 
day of the plan year, (2) is not aggregated with another plan 
in order to satisfy the minimum coverage requirements of 
Internal Revenue Code section 410(b), (3) is maintained by an 
employer that is not a member of a related group of employers, 
and (4) is maintained by an employer that does not receive the 
services of leased employees. The Secretary of the Treasury and 
the Secretary of Labor shall provide for the filing of annual 
returns for such retirement plans covering fewer than 25 
workers in a manner and form that provides useful information 
to participants and that is simple for employers to comply 
with.
    Effective Date.--The provision is effective on January 1, 
2002.
            Rationale
    The Committee believes that simplification of the reporting 
requirements applicable to plans of small employers will make 
it easier for employers to provide retirement benefits for 
their employees.

Section 611--Notice and consent period regarding distributions

            Current law
    Notice and consent requirements in sec. 205 apply to 
certain distributions from qualified retirement plans. These 
requirements relate to the content and timing of information 
that a plan must provide to a participant prior to a 
distribution, and to whether the plan must obtain the 
participant's consent to the distribution. The nature and 
extent of the notice and consent requirements applicable to a 
distribution depend upon the value of the participant's vested 
accrued benefit and whether the joint and survivor annuity 
requirements apply to the participant.
    If the present value of the participant's vested accrued 
benefit exceeds $5,000, the plan may not distribute the 
participant's benefit without the written consent of the 
participant. The participant's consent to a distribution is not 
valid unless the participant has received from the plan a 
notice that contains a written explanation of: (1) the material 
features and the relative values of the optional forms of 
benefit available under the plan, (2) the participant's right, 
if any, to have the distribution directly transferred to 
another retirement plan or IRA, and (3) the rules concerning 
the taxation of a distribution. If the joint and survivor 
annuity requirements apply to the participant, this notice also 
must contain a written explanation of (1) the terms and 
conditions of the qualified joint and survivor annuity 
(``QJSA''), (2) the participant's right to make, and the effect 
of, an election to waive the QJSA, (3) the rights of the 
participant's spouse with respect to a participant's waiver of 
the QJSA, and (4) the right to make, and the effect of, a 
revocation of a waiver of the QJSA. The plan generally must 
provide this notice to the participant no less than 30 days and 
no more than 90 days before the date distribution commences.
    If the participant's vested accrued benefit does not exceed 
$5,000, the terms of the plan may provide for distribution 
without the participant's consent. The plan generally is 
required, however, to provide to the participant a notice that 
contains a written explanation of: (1) the participant's right, 
if any, to have the distribution directly transferred to 
another retirement plan or IRA, and (2) the rules concerning 
the taxation of a distribution. The plan generally must provide 
this notice to the participant no less than 30 days and no more 
than 90 days before the date distribution commences.
            Explanation of provision
    A qualified retirement plan is required to provide the 
applicable distribution notice no less than 30 days and no more 
than 180 days before the date distribution commences. The 
Secretary of the Treasury is directed to modify the applicable 
regulations to reflect the extension of the notice period to 
180 days and to provide that the description of a participant's 
right, if any, to defer receipt of a distribution shall also 
describe the consequences of failing to defer such receipt.
    Effective Date.--The provision is effective for years 
beginning after December 31, 2001.
            Rationale
    The Committee understands that an employee is not always 
able to evaluate distribution alternatives, select the most 
appropriate alternative, and notify the plan of the selection 
within a 90-day period. The Committee believes that requiring a 
plan to furnish multiple distribution notices to an employee 
who does not make a distribution election within 90 days is 
administratively burdensome. In addition, the Committee 
believes that participants who are entitled to defer 
distributions should be informed of the impact of a decision 
not to defer distribution on the taxation and accumulation of 
their retirement benefits.

Section 612--Annual report dissemination

            Current law
    Section 104(b)(3) requires that within nine months after 
the close of each plan year, the plan administrator must 
``furnish'' a summary annual report to each plan participant 
and to each beneficiary receiving benefits. The summary annual 
report is a summary of the annual report filed with the DOL 
regarding the financial position and management of the plan.
            Explanation of provision
    The requirement that plan administrators furnish a summary 
annual report would be satisfied if the report were made 
reasonably available through electronic means or other new 
technology. This provision would be interpreted consistent with 
the regulations of the Departments of Labor and Treasury.
    Effective Date.--The change applies to reports for years 
beginning after December 31, 2000.
            Rationale
    The Committee believes that this simplification of the 
summary annual report requirement will reduce the burden and 
cost of plan administration and disclosure, thereby encouraging 
more employers to establish and maintain retirement plans.

Section 613--Technical corrections to the SAVER Act

            Current law
    The Savings Are Vital to Everyone's Retirement (SAVER) Act 
of 1997 (P.L. 105-92), in addition to establishing an ongoing 
program by the DOL on retirement savings education and outreach 
(sec. 516), convenes a National Summit on Retirement Savings at 
the White House, cohosted by the President and the bipartisan 
Congressional leadership, in 1998 and again in 2001 and 2005 
(sec. 517). The National Summit brings together experts in the 
fields of employee benefits and retirement savings, key leaders 
of government, and interested parties from the private sector 
and general public. The delegates are selected by the 
Congressional leadership and the President. The National Summit 
is a public-private partnership, receiving substantial funding 
from private sector contributions. The National Summits' goals 
are to: (1) advance the public's knowledge and understanding of 
retirement savings and facilitate the development of a broad-
based, public education program; (2) identify the barriers 
which hinder workers from setting aside adequate savings for 
retirement and impede employers, especially small employers, 
from assisting their workers in accumulating retirement 
savings; and (3) develop specific recommendations for 
legislative, executive, and private sector actions to promote 
retirement income savings among American workers.
            Explanation of provision
    This section makes technical amendments to the SAVER Act 
regarding the administration of future statutorily created 
National Summits on Retirement Savings. It clarifies that 
National Summits shall be held in the month of September in 
2001 and 2005, and adds an additional National Summit in 2009. 
To facilitate the administration of future National Summits, 
the DOL is given authority to enter into cooperative agreements 
(pursuant to the Federal Grant and Cooperative Agreement Act of 
1977) with its 1998 summit partner, the American Savings 
Education Council, or any other appropriate, qualified entity.
    Six new statutory delegates are added to future summits: 
the Chairman and Ranking Member of the House Ways and Means 
Committee, the Senate Finance Committee, and the Subcommittee 
on Employer-Employee Relations of the House Education and the 
Workforce Committee, respectively. Further, the President, in 
consultation with the Congressional leadership, may appoint up 
to 3% of the delegates (not to exceed 10) from a list of 
nominees provided by the private sector partner in Summit 
administration. The section also clarifies that new delegates 
are to be appointed for each future National Summit (as was the 
intent of the original legislation) and sets deadlines for 
their appointment.
    The section also sets deadlines for DOL to publish the 
Summit agenda, gives DOL limited reception and representation 
authority, and mandates that DOL consult with the Congressional 
leadership in drafting the post-Summit report.
    Effective Date.--The section is effective upon date of 
enactment.
            Rationale
    This section clarifies the administration of future 
National Summits and is designed to assist in their planning 
and execution. It is also intended to clarify issues regarding 
the selection of delegates to future National Summits.

                   TITLE VII--OTHER ERISA PROVISIONS

Section 701--Missing participants

            Current law
    The plan administrator of a defined benefit pension plan 
that is subject to Title IV of ERISA, is maintained by a single 
employer, and terminates under a standard termination is 
required to distribute the assets of the plan. With respect to 
a participant whom the plan administrator cannot locate after a 
diligent search, the plan administrator satisfies the 
distribution requirement only by purchasing irrevocable 
commitments from an insurer to provide all benefit liabilities 
under the plan or transferring the participant's designated 
benefit to the PBGC, which holds the benefit of the missing 
participant as trustee until the PBGC locates the missing 
participant and distributes the benefit. The PBGC missing 
participant program is not available tomultiemployer plans or 
defined contribution plans and other plans not covered by Title IV of 
ERISA.
            Explanation of provision
    The PBGC is directed to prescribe for terminating 
multiemployer plans rules similar to the present-law missing 
participant rules applicable to terminating single employer 
plans that are subject to Title IV of ERISA. The missing 
participants program is also extended to defined contribution 
plans, defined benefit plans that do not have more than 25 
active participants and are maintained by professional service 
employers, and the portions of defined benefit plans that 
provide benefits based upon the separate accounts of 
participants and therefore are treated as defined contribution 
plans under ERISA.
    Effective Date.--The provision is effective for 
distributions from terminating plans that occur after the PBGC 
adopts final regulations implementing the provision. The 
Committee expects the regulations to be completed within one 
year.
            Rationale
    By allowing plan sponsors the option of transferring 
pension funds to PBGC, the chances will be increased that a 
missing participant will be able to recover benefits. Sponsors 
of terminated multiemployer plans and plans that are not 
covered by Title IV face uncertainty with respect to missing 
participants due to a lack of statutory or regulatory guidance. 
The Committee believes that it is appropriate to extend the 
established PBGC missing participant program to these plans in 
order to reduce uncertainty for plan sponsors and increase the 
likelihood that missing participants will receive their 
retirement benefits.

Section 702--Reduced PBGC premium for new plans of small employers

            Current law
    Under present-law sec. 4006, the Pension Benefit Guaranty 
Corporation (``PBGC'') provides insurance protection for 
participants and beneficiaries under certain defined benefit 
pension plans by guaranteeing certain basic benefits under the 
plan in the event the plan is terminated with insufficient 
assets to pay benefits promised under the plan. The guaranteed 
benefits are funded in part by premium payments from employers 
who sponsor defined benefit plans. The amount of the required 
annual PBGC premium for a single-employer plan is generally a 
flat rate premium of $19 per participant and an additional 
variable rate premium based on a charge of $9 per $1,000 of 
unfunded vested benefits. Unfunded vested benefits under a plan 
generally means (1) the unfunded current liability for vested 
benefits under the plan, over (2) the value of the plan's 
assets, reduced by any credit balance in the funding standard 
account. No variable rate premium is imposed for a year if 
contributions to the plan were at least equal to the full 
funding limit.
    The PBGC guarantee is phased in ratably in the case of 
plans that have been in effect for less than 5 years, and with 
respect to benefit increases from a plan amendment that was in 
effect for less than 5 years before termination of the plan.
            Explanation of provision
    Under the provision, for the first five plan years of a new 
single-employer plan of a small employer, the flat-rate PBGC 
premium is $5 per plan participant.
    A small employer is a contributing sponsor that, on the 
first day of the plan year, has 100 or fewer employees. For 
this purpose, all employees of the members of the controlled 
group of the contributing sponsor are taken into account. In 
the case of a plan to which more than one unrelated 
contributing sponsor contributes, employees of all contributing 
sponsors (and their controlled group members) are taken into 
account in determining whether the plan is a plan of a small 
employer.
    A new plan means a defined benefit plan maintained by a 
contributing sponsor if, during the 36-month period ending on 
the date of adoption of the plan, such contributing sponsor (or 
controlled group member or a predecessor of either) has not 
established or maintained a plan subject to PBGC coverage with 
respect to which benefits were accrued for substantially the 
same employees as are in the new plan.
    Effective Date.--The provisions relating to new plans are 
effective for plans established after December 31, 2001.
            Rationale
    The Committee believes that reducing the PBGC premiums for 
new and small plans will help encourage the establishment of 
defined benefit pension plans. The number of single-employer 
defined benefit plans covered by PBGC has declined dramatically 
in recent years--from 112,000 in 1985 to 43,000 in 1997. Most 
of the decline is because of the termination of small plans. An 
employer incurs a number of one-time costs to establish a plan. 
The proposal is intended to remove the PBGC premium as a 
disincentive to the establishment of a defined benefit plan by 
a small employer.

Section 703--Reduction of additional PBGC premium for new and small 
        plans

            Current law
    Under present law, the PBGC provides insurance protection 
for participants and beneficiaries under certain defined 
benefit pension plans by guaranteeing certain basic benefits 
under the plan in the event the plan is terminated with 
insufficient assets to pay benefits promised under the plan. 
The guaranteed benefits are funded in part by premium payments 
from employers who sponsor defined benefit plans. The amount of 
the required annual PBGC premium for a single-employer plan is 
generally a flat rate premium of $19 per participant and an 
additional variable rate premium based on a charge of $9 per 
$1,000 of unfunded vested benefits.Unfunded vested benefits 
under a plan generally means (1) the unfunded current liability for 
vested benefits under the plan, over (2) the value of the plan's 
assets, reduced by any credit balance in the funding standard account. 
No variable rate premium is imposed for a year if contributions to the 
plan were at least equal to the full funding limit.
    The PBGC guarantee is phased in ratably in the case of 
plans that have been in effect for less than 5 years, and with 
respect to benefit increases from a plan amendment that was in 
effect for less than 5 years before termination of the plan.
            Explanation of provision
    The provision amends sec. 4006(a)(3) to provide that the 
variable premium is phased in for new defined benefit plans 
over a six-year period starting with the plan's first plan 
year. The amount of the variable premium is a percentage of the 
variable premium otherwise due, as follows: 0 percent of the 
otherwise applicable variable premium in the first plan year; 
20 percent in the second plan year; 40 percent in the third 
plan year; 60 percent in the fourth plan year; 80 percent in 
the fifth plan year; and 100 percent in the sixth plan year 
(and thereafter).
    A new defined benefit plan is defined as in section 602 of 
this Act (relating to reduced PBGC premiums for new small 
employer plans).
    The provision also provides that, in the case of any plan 
(not just a new plan) of an employer with 25 or fewer 
employees, the variable-rate premium is no more than $5 
multiplied by the number of plan participants in the plan at 
the close of the preceding year.
    Effective Date.--The provision reducing the PBGC variable 
premium for small plans is effective for years beginning after 
December 31, 2001.
            Rationale
    The Committee believes this provision will help encourage 
the establishment of defined benefit pension plans. The number 
of single-employer defined benefit plans covered by PBGC has 
declined dramatically in recent years--from 112,000 in 1985 to 
43,000 in 1997. Moreover, employers that establish plans are 
not choosing defined benefit plans. The PBGC variable rate 
premium can be a disincentive to some employers.

Section 704--Authorization for PBGC to pay interest on premium 
        overpayment refunds

            Current law
    Under Sec. 4007(b) of ERISA, the PBGC charges interest on 
underpayments of premiums, but is not authorized to pay 
interest on overpayments.
            Explanation of provision
    The provision allows the PBGC to pay interest on 
overpayments made by premium payers. Interest paid on 
overpayments is to be calculated at the same rate and in the 
same manner as interest is charged on premium underpayments.
    Effective Date.--The provision is effective with respect to 
interest accruing for periods beginning not earlier than the 
date of enactment.
            Rationale
    Premium payers should receive interest on monies that are 
owed to them.

Section 705--Substantial owner benefits in terminated plans

            Current law
    The PBGC provides participants and beneficiaries in a 
defined benefit pension plan with certain minimal guarantees as 
to the receipt of benefits under the plan in case of plan 
termination. The employer sponsoring the defined benefit 
pension plan is required to pay premiums to the PBGC to provide 
insurance for the guaranteed benefits. In general, the PBGC 
will guarantee all basic benefits which are payable in periodic 
installments for the life (or lives) of the participant and his 
or her beneficiaries and are non-forfeitable at the time of 
plan termination. The amount of the guaranteed benefit is 
subject to certain limitations. One limitation is that the plan 
(or an amendment to the plan which increases benefits) must be 
in effect for 60 months before termination for the PBGC to 
guarantee the full amount of basic benefits for a plan 
participant, other than a substantial owner. In the case of a 
substantial owner, the guaranteed basic benefit is phased in 
over 30 years beginning with participation in the plan. A 
substantial owner is one who owns, directly or indirectly, more 
than 10 percent of the voting stock of a corporation or all the 
stock of a corporation. Special rules restricting the amount of 
benefit guaranteed and the allocation of assets also apply to 
substantial owners.
            Explanation of provision
    The provision provides that the 60 month phase-in of 
guaranteed benefits applies to a substantial owner with less 
than 50 percent ownership interest. For a substantial owner 
with a 50 percent or more ownership interest (``majority 
owner''), the phase-in depends on the number of years the plan 
has been in effect. The majority owner's guaranteed benefit is 
limited so that it may not be more than the amount phased in 
over 60 months for other participants. The rules regarding 
allocation of assets apply to substantial owners, other than 
majority owners, in the same manner as other participants.
    Effective Date.--The provision is effective for plan 
terminations with respect to which notices of intent to 
terminate are provided, or for which proceedings for 
termination are instituted by the PBGC, after December 31, 
2001.
            Rationale
    The Committee believes that the present-law rules 
concerning limitations on guaranteed benefits for substantial 
owners are overly complicated and restrictive and thus may 
discourage some small business owners from establishing defined 
benefit pension plans. Moreover, the current special 
substantial owner rules are inordinately complex and require 
plan documents going back as far as 30 years, which are often 
difficult or impossible to obtain.

Section 706--Civil penalties for breach of fiduciary responsibility

            Current law
    Section 502(l) was added to ERISA by the Omnibus Budget 
Reconciliation Act of 1989. In its current form, section 502(l) 
requires the Secretary of Labor to assess a civil penalty 
against (1) a fiduciary who breaches a fiduciary responsibility 
under, or commits a violation of, part 4 of Title I of ERISA, 
or (2) any other person who knowingly participates in such a 
breach or violation. The penalty is equal to 20 percent of the 
``applicable recovery amount'' that is paid pursuant to a 
settlement agreement with the Secretary or that a court orders 
to be paid in a judicial proceeding brought by the Secretary to 
enforce ERISA's fiduciary responsibility provisions. The 
Secretary may waive or reduce the penalty only if the Secretary 
finds in writing that either (1) the fiduciary or other person 
acted reasonably and in good faith, or (2) it is reasonable to 
expect that the fiduciary or other person cannot restore all 
the losses without severe financial hardship unless the waiver 
or reduction is granted.
            Explanation of provision
    ERISA section 502(l) is amended to make the assessment of 
the penalty discretionary with the Secretary of Labor, rather 
than mandatory. This change will allow the Secretary to refrain 
from imposing the penalty in certain cases as well as to assess 
a penalty of less than 20 percent of the applicable recovery 
amount.
    In addition, section 502(l) is amended so that the term 
``applicable recovery amount'' means not only any amount 
recovered from a fiduciary or other person but also any amount 
recovered from any other person on behalf of any such fiduciary 
or other person.
    Effective Date.--This section applies to any breach of 
fiduciary responsibility or other violation of part 4 of Title 
I of ERISA occurring on or after the date of enactment.
            Rationale
    The current statutory scheme of mandatory penalties creates 
disincentives to settlement and discourages parties from 
quickly settling claims of violations that the DOL brings to 
their attention.

Section 707--Benefit suspension notice

            Current law
    Section 203(a)(3)(B) provides that a plan will not fail to 
satisfy the vesting requirements with respect to a participant 
by reason of suspending payment of the participant's benefits 
while such participant is employed. Under the applicable DOL 
regulations, such a suspension is only permissible if the plan 
notifies the participant during the first calendar month or 
payroll period in which the plan withholds benefit payments. 
Such notice must provide certain information and must also 
include a copy of the plan's provisions relating to the 
suspension of payments.
    In the case of a plan that suspends benefits for 
participants working past normal retirement age (i.e., does not 
commence benefit payments to those participants and also does 
not provide an actuarially increased benefit upon retirement), 
the employer must monitor plan participants to determine when 
any participant who is still employed attains normal retirement 
age. In order to ``suspend'' payment of such a participant's 
benefits, generally a plan must, as noted above, promptly 
provide the participant with a suspension notice.
            Explanation of provision
    This section directs the Secretary of Labor to revise the 
regulations relating to the benefit suspension notice to 
generally permit the information currently required to be set 
forth in a suspension notice to be included in the summary plan 
description. The provision also directs the Secretary of Labor 
to eliminate the requirement that the notice include a copy of 
relevant plan provisions. However, individuals reentering the 
workforce to resume work with a former employer--or with an 
employer that belongs to the same multiemployer pension plan--
after they have begun to receive benefits will still receive 
the notification of the suspension of benefits (and a copy of 
the plan's provisions relating to suspension of payments). In 
addition, if a reduced rate of future benefit accrual will 
apply to a returning employee (as of his or her first date of 
participation in the plan after returning to work) who has 
begun to receive benefits, the notice must include a statement 
that the rate of future benefit accrual will be reduced. The 
individual benefit-suspension statement only need include such 
notice of reduction of future benefit accrual where the 
reduction is the result of a plan amendment covered under 
section 204(h). Such notice should include a description of the 
change and the date it took effect.
    Effective Date.--The modification made under this section 
shall apply to plan years beginning after December 31, 2001.
            Rationale
    The Committee believes that the present-law rules regarding 
suspension notices create unjustified burdens on defined 
benefit plans that do not pay benefits to active participants 
upon attainment of normal retirement age when they continue to 
draw pay. This dispenses with individual notices going to 
employees at the time they attain the normal retirement age--a 
practice that often unduly alarms workers who believe they are 
being encouraged to retire by their employer. The provision 
does provide notice of suspension to those who are reentering 
the workforce, along with notice of any reduction in rate of 
future benefit accrual.

Section 708--Studies

            Current law
    Current law contains no provision for the study of the 
feasibility of small employer group pension plans or for the 
study of the effects of the Act.
            Explanation of provision
    Study on small employer group plans: This section directs 
the Department of Labor, in consultation with the Treasury 
Department, to conduct a study to determine (1) the most 
appropriate form(s) of pension plans that would be simple to 
create and easy to maintain by multiple small employers, while 
providing ready portability of benefits for all participants 
and beneficiaries, (2) how such arrangements could be 
established by employer or employee associations, (3) how such 
arrangements could provide for employees to contribute 
independent of employer sponsorship, and (4) appropriate 
methods and strategies for making such pension plan coverage 
more widely available to American workers.
    The Department is to consider the adequacy and availability 
of existing pension plans and the extent to which existing 
models may be modified to be more accessible to both employees 
and employers. The Secretary of Labor is to issue a report 
within 18 months, including recommendations for one or more 
model plans or arrangements as described above which may serve 
as the basis for appropriate administrative or legislative 
action.
    Study on pension coverage: This section also directs the 
Secretary of labor to report to the Committee on Education and 
the Workforce of the House of Representatives and the Committee 
on Health, Education, Labor and Pensions of the Senate 
regarding the effect of the bill on pension coverage, 
including: the extent of pension plan coverage for low and 
middle-income workers, the levels of pension plan benefits 
generally, the quality of pension plan coverage generally, 
worker's access to and participation in pension plans, and 
retirement security. This report is required to be submitted no 
later than five years after the date of enactment.
    Effective Date.--This section is effective upon enactment.
            Rationale
    The Committee believes that the possibility of small 
employer pooling for pension coverage is worthy of study and 
consideration. During Committee hearings, witnesses have 
focused on the problem of low pension plan sponsorship rates by 
small employers. Some have proposed a possible solution of 
allowing individual small employers to join together to sponsor 
pension plans or to join into an existing group pension plan 
vehicle (similar to the ``association health plan'' concept 
reported out by the Employer-Employee Relations Subcommittee 
last Congress in H.R. 2047).
    The Committee also believes that it is appropriate to study 
the effects of this Act on pension coverage.

                      TITLE VIII--PLAN AMENDMENTS

Section 801--Provisions relating to plan amendments

            Current law
    Plan amendments to reflect amendments to the law generally 
must be made by the time prescribed by law for filing the 
income tax return of the employer for the employer's taxable 
year in which the change in law occurs.
            Explanation of provision
    This provision permits certain plan amendments made 
pursuant to the changes made by the bill (or regulations issued 
under the provisions of the bill) to be retroactively 
effective. If the plan amendment meets the requirements of the 
bill, then the plan is treated as being operated in accordance 
with its terms and the amendment does not violate the 
prohibition of reductions of accrued benefits. In order for 
this treatment to apply, the plan amendment must be made on or 
before the last day of the first plan year beginning on or 
after January 1, 2004.
    The provision applies to plan amendments required to 
maintain qualified status, as well as other amendments pursuant 
to the provisions of the bill (or applicable regulations). A 
plan amendment is not considered to be pursuant to the bill (or 
applicable regulations) if it has an effective date before the 
effective date of the provision of the bill (or regulations) to 
which it relates. Similarly, the provision does not provide 
relief from section 204(g) or Internal Revenue Code section 
411(d)(6) for periods prior to the effective date of the 
relevant provision of the bill (or regulations) or the plan 
amendment. The Secretary of the Treasury is given authority to 
provide exceptions to the relief from the prohibition on 
reductions in accrued benefits.
    Effective Date.--The provision is effective on the date of 
enactment.
            Rationale
    The Committee believes that plan sponsors should have 
adequate time to amend their plans to reflect amendments to the 
law.

                                Summary

    The ERISA provisions of the ``Comprehensive Retirement 
Security and Pension Reform Act of 2001,'' H.R. 10, as amended, 
will directly improve the retirement security of American 
workers by expanding small business retirement plans, allowing 
workers to save more, making pensions more secure, and cutting 
the red tape that has hamstrung employers who want to establish 
pension plans for their employees.

  Section-by-Section Analysis of the ERISA Provisions of H.R. 10, as 
                                Amended

    Sec. 202. Participant Loans for Small Business Owners. 
Generally, plans may make loans to participants. But, 
prohibited transaction rules prevent sole proprietors, 
partners, and Subchapter S corporation shareholders from taking 
participant loans. The prohibited transaction rules would be 
modified under this section to allow for participant loans to 
sole proprietors, partners, and subchapter S corporation 
shareholders.
    Sec. 303. Faster Vesting of Employer Matching 
Contributions. Employee contributions to a qualified plan are 
immediately vested. Employer matching contributions either must 
be fully vested after the employee has completed 5 years of 
service, or must become vested in increments of 20% for each 
year beginning with the third year of service, with full 
vesting after the employee has completed seven years of 
service. Under this section, employer matching contributions 
would have to be vested under a maximum 3-year cliff or 6-year 
graded vesting schedule. In the case of graded vesting, vesting 
would have to begin with the employee's second year of service.
    Sec. 405. Treatment of Forms of Distribution. Under the 
``anti-cutback rule,'' when a participant's benefits are 
transferred from one plan to another, the transferee plan must 
preserve all forms of distribution that were available under 
the transferor plan. The anti-cutback rule also provides that, 
without regard to a transfer, a plan may not eliminate forms of 
distribution. Under this section, an employee may elect to 
transfer benefits from one plan to another without requiring 
the transferee plan to preserve optional forms of benefits if 
the following requirements are satisfied: (1) the transfer was 
a direct transfer; (2) the transfer was authorized under the 
terms of both plans; (3) the transfer was pursuant to a 
voluntary election by the participant upon receipt of proper 
notice; (4) spousal consent for the transfer, if required, was 
obtained; and (5) the participant could have elected a lump sum 
distribution. In addition, under the provision, except to the 
extent provided in regulations, a form of distribution in a DC 
plan may be eliminated with respect to a participant if: (1) a 
lump sum distribution is available when the distribution form 
is being eliminated, and (2) such lump sum is based on the same 
or greater portion of the participant's account as the 
distribution form being eliminated. Treasury would also be 
directed to issue regulations.
    Sec. 408. Employers May Disregard Rollovers for Purposes of 
Cash-Out Amounts. Terminated participants' benefits may be 
cashed out if the nonforfeitable present value of such benefits 
does not exceed $5,000. The provision permits a plan to ignore 
amounts attributable to rollover contributions when determining 
the cash-out amount.
    Sec. 501. Repeal of 150% of Current Liability Funding 
Limit. Contributions to a defined benefit plan that exceed 150% 
of current liability are not tax deductible. This limit will 
phase up to 170% by 2005. Under this section, the limit would 
be phased-up in 5% increments beginning with the 2001 plan 
year. For plan years beginning after December 31, 2003, the 
current liability full funding limit would be completely 
repealed.
    Sec. 504. Notice of Significant Reduction in Benefit 
Accruals. Participants must be notified of a plan amendment 
significantly reducing future benefit accruals at least 15 days 
before such amendment takes effect. The notice must be given 
after the plan sponsor has formally adopted the amendment. 
Treasury regulations provide that participants need not be 
given an individual statement detailing how their own benefits 
will be affected by the amendment. This provision modifies 
ERISA Section 204(h) to require that affected participants be 
given ``reasonable notice,'' to be defined by Treasury 
regulations, of a plan amendment significantly reducing future 
benefit accruals before the amendment takes effect. The notice 
could be provided before the plan amendment is formally 
adopted. A penalty for noncompliance is added in the tax code.
    Sec. 506. Protection of Investment of Employee 
Contributions to 401(k) Plans. Section 1524 of the Taxpayer 
Relief Act of 1997 places certain limits on investment of 
employee salary reduction contributions in employer stock or 
employer real property. The section modifies the effective date 
of the rule excluding certain elective deferrals from the 
definition of individual account plan by providing that the 
rule does not apply to any elective deferral invested in assets 
consisting of qualifying employer securities, qualifying 
employer real property, or both, if such assets were acquired 
by the plan before January 1, 1999.
    Sec. 507. Periodic Pension Benefits Statements. Upon the 
request of a participant, the plan administrator must provide a 
summary of the participant's benefits under the plan. A 
participant is not entitled to more than one benefit statement 
per year. Under this provision, a benefit statement would have 
to be given to a defined contribution plan participant at least 
once a year. Statements would have to be provided to defined 
benefit plan participants at least once every three years. 
Alternatively, in the case of defined benefit plans, the 
employer could provide participants with notice of their right 
to request a benefit statement at least once a year. The DOL 
would be directed to develop a model benefits statement.
    Sec. 601. Modification of Timing of Plan Valuations. The 
valuation date for a defined benefit plan for a plan year must 
generally be in the same plan year. Under this section, defined 
benefit plans would be permitted to use a valuation date up to 
one year prior to the beginning of the plan year. The change 
would apply at the election of the employer but would not be 
available to an underfunded plan.
    Sec. 606. Reporting Simplification for Small Plans. A 
``one-participant retirement plan'' that is not exempt from the 
annual report filing requirement is only required to file a 
simplified form, i.e., Form 5500-EZ. A one-participant plan is 
a plan that covers and benefits only certain owners (or such 
owners and their spouses) of the sponsoring employer and meets 
the following requirements: (1) the plan satisfies the section 
410(b) coverage requirements without being aggregated with any 
other plan; (2) the plan does not cover a business that is a 
member of an affiliated service group, a controlled group of 
employers, or a group of businesses under common control; and 
(3) the plan does not cover a business that leases employees. 
Under this section, a plan that covers fewer than 25 employees 
on the first day of the plan year would only be required to 
file a new simplified Form 5500, provided that the plan meets 
the three requirements with respect to the definition of a one-
participant plan. Also raises from $100,000to $250,000 the 
level at which one-participant retirement plans are exempt from the 
annual report-filing requirement.
    Sec. 611. Notice and Consent Period Regarding 
Distributions. Generally, benefits cannot be distributed before 
the later of age 62 or normal retirement age unless the 
participant consents no more than 90 days before benefit 
commencement. Also, information on the tax implications of 
rollovers must be given to the employee within 90 days of 
distribution. Under this provision, the notice and consent 
period regarding distributions would be expanded from 90 days 
to 180 days.
    Sec. 612. Summary Annual Reports. Within 210 days after the 
close of a plan's fiscal year, the plan administrator must 
provide certain information to participants in a summary annual 
report (SAR). Under this section, Summary Annual Reports could 
now be distributed through electronic means (including 
Internet) or via other new technologies.
    Sec. 613. Technical Corrections to the SAVER Act. The 
Savings Are Vital to Everyone's Retirement (SAVER) Act of 1997 
convenes a National Summit on Retirement Savings at the White 
House, cohosted by the executive and legislative branches in 
1998 and again in 2001 and 2005. The National Summit brings 
together experts in the fields of employee benefits and 
retirement savings, key leaders of government, and interested 
parties from the private sector and general public. The 
delegates are selected by the Congressional leadership and the 
President. The National Summit is a public-private partnership, 
receiving substantial funding from private sector 
contributions. This section provides for technical amendments 
to the SAVER Act, regarding the administration of and delegate 
selection to future statutorily created National Summits on 
Retirement Savings.
    Sec. 701. Expansion of Missing Participants Program. The 
PBGC acts as a clearinghouse for benefits due to participants 
who cannot be located. When a defined benefit plan terminates, 
the plan may transfer the benefits of the missing participant 
to the PBGC, which then attempts to locate the participant. 
Under this section, the PBGC's missing participant program 
would be expanded to cover defined contribution plans. This 
expansion would be voluntary at the election of the plan 
sponsor.
    Sec. 702. Reduced PBGC Premiums for New Plans. Defined 
benefit plans are subject to a flat-rate premium of $19 per 
participant. Underfunded defined benefit plans are subject to 
an additional variable rate premium. There is no variable rate 
premium for the first year of a new defined benefit plan. Under 
this provision, new defined benefit plans established by 
employers with 100 employees or less would only have to pay a 
$5 per participant PBGC premium for the first 5 years of the 
plan. No variable rate premium would be assessed during this 
period.
    Sec. 703. Reduction of Additional PBGC Premiums. Defined 
benefit plans are subject to a flat-rate premium of $19 per 
participant. Underfunded defined benefit plans are subject to 
an additional variable rate premium. There is no variable rate 
premium for the first year of a new defined benefit plan. Under 
this section, any variable rate premium that might be assessed 
against a new defined benefit plan established by a larger 
employer would be phased-in as follows: 0% for the first plan 
year; 20% for the second; 40% for the third; 60% for the 
fourth; 80% for the fifth, and 100% for the sixth and 
succeeding plan years. For employers who have 25 or fewer 
employees on the first day of the plan year, the additional 
premium for each participant would not exceed $5 multiplied by 
the number of participants in the plan as of the close of the 
preceding plan year.
    Sec. 704. Authorization for PBGC to Pay Interest on Premium 
Overpayment Refunds. This would allow the PBGC to pay interest 
on overpayments made by premium payers. Interest paid on 
overpayments would be calculated at the same rate and in the 
same manner as interest is charged on premium underpayments.
    Sec. 705. Substantial Owner Benefits in Terminated Plans. 
``Substantial owners'' are individuals who own more than 10% of 
a business. ERISA contains complicated rules governing the 
benefit earned by substantial owners when a plan is 
terminating. Under this section, the same five-year phase-in 
that currently applies to a participant who is not a 
substantial owner would apply to a substantial owner with less 
than a 50% ownership interest. For a majority owner, the phase-
in would depend on the number of years the plan has been in 
effect, rather than on the number of years the owner has been a 
participant and the initial plan benefit.
    Sec. 706. Waiver of Civil Penalties for Breach of Fiduciary 
Responsibility. Section 502(l) requires DOL to assess a 20% 
penalty for violations of part 4 of Title I of ERISA for 
breaches of fiduciary duty. The DOL is limited in its ability 
to reduce this penalty. Under the provision, ERISA section 
502(l) would be amended to make the assessment discretionary 
with DOL rather than mandatory. This change would allow DOL to 
refrain from assessing the 20% penalty in certain cases or to 
assess a lower amount.
    Sec. 707. Benefit Suspension Notice. When an employee 
continues to work beyond normal retirement age, or is 
reemployed after commencing benefits, a defined benefit plan 
may provide for a suspension of pension payments during the 
post normal retirement age employment period. DOL regulations 
require that affected participants be notified in writing of 
such suspension and that such notice include a copy of the 
relevant plan provisions. Under this section, DOL would be 
required to modify its regulations regarding suspension of 
benefits rules to eliminate the requirement of a written 
individual notice and instead require that the suspension of 
benefits rules be outlined in the summary plan description, 
except for individuals reentering the workforce. Those 
rejoining a former employer would still receive the existing 
notice of suspension, along with a notice of any reduction in 
the rate of future benefit accrual.
    Sec. 708. Studies. (1) Model Small Employer Group Plans: 
Under this section, the DOL is directed to conduct a study to 
determine (1) the most appropriate form(s) of pension plans 
that would be simple to create and easy to maintain by multiple 
small employers, while providing ready portability of benefits 
for all participants and beneficiaries, (2) how such 
arrangements could be established by employer or employee 
associations, (3) how such arrangements could provide for 
employees to contribute independent of employer sponsorship, 
and (4) appropriate methods and strategies for making such 
pension plan coverage more widely available to American 
workers. (2) Pension Coverage: This section also directs the 
DOL to conduct a study regarding the effect of the bill on 
pension coverage, including: the extent of pension plan 
coverage for low and middle-income workers, the levels of 
pension plan benefits generally, thequality of pension plan 
coverage generally, worker's access to and participation in pension 
plans, and retirement security.
    Sec. 801. Provisions Relating to Plan Amendments. 
Generally, there is a short time within which to make plan 
amendments to reflect amendments to the law. In addition, the 
anti-cutback rules can have the unintended consequence of 
preventing an employer from amending its plan to reflect a 
change in the law. Under this section, amendments to a plan or 
annuity contract made pursuant to any amendment made by the Act 
would not be required to be made before the last day of the 
first plan year beginning on or after January 1, 2003. 
Operational compliance would, of course, be required with 
respect to all plans as of the applicable effective date of any 
amendment made by the Act. In addition, timely amendments to a 
plan or annuity contract made pursuant to any amendment made by 
the Act would be deemed to satisfy the anti-cutback rules.

                       Explanation of Amendments

    The provisions of the substitute are explained in this 
report.

                             Rollcall Votes

    No recorded votes were taken.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch. This bill initiates pension reform amendments to the 
Employee Retirement Income Security Act (ERISA). Since ERISA 
excludes governmental plans, the bill does not apply to 
legislative branch employees. As public employees, legislative 
branch employees are eligible to participate in the Federal 
Employee Retirement System.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of Rule XIII and clause 
(2)(b)(1) of Rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the body of this report.

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement of 
whether the provisions of the reported bill include unfunded 
mandates. This bill initiates pension reform amendments to the 
Employee Retirement Income Security Act (ERISA), and makes 
retirement security more available to millions of workers by 
expanding small business retirement plans, allowing workers to 
save more, addressing the needs of an increasingly mobile 
workforce through greater portability and other changes, making 
pensions more secure, and cutting the red tape that has 
hamstrung employers who want to establish pension plans for 
their workers. As such, the bill does not contain any unfunded 
mandates.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of Rule 
XIII of the House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974 and with respect to 
requirements of 3(c)(3) of Rule XIII of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for H.R. 10 from the Director of the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                       Washington, DC, May 1, 2001.
Hon. John A. Boehner,
Chairman, Committee on Education and the Workforce, House of 
        Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 10, the 
Comprehensive Retirement Security and Pension Reform Act of 
2001.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Erin 
Whitaker.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).
    Enclosure.

H.R. 10--Comprehensive Retirement Security and Pension Reform Act of 
        2001

    Summary: H.R. 10 would make numerous changes to the 
Internal Revenue Code (IRC) and the Employee Retirement Income 
Security Act of 1974 (ERISA) that would affect the taxation and 
operation of private pension plans.
    CBO and the Joint Committee on Taxation (JCT) estimate that 
the bill would reduce federal revenues by $1.1 billion in 2002, 
by $16.4 billion over the 2002-2006 period, and by $51.7 
billion over the 2002-2011 period. CBO estimates that the bill 
would increase direct spending by $2 million in 2002, by $49 
million over the 2002-2006 period, and by $112 million over the 
2002-2011 period. Since this bill would affect direct spending 
and revenues, pay-as-you-go procedures would apply. In 
addition, CBO estimates that implementing H.R. 10 would cost 
about $2 million over the 2002-2006 period, subject to 
appropriation of the necessary amounts.
    JCT and CBO have determined that H.R. 10 contains no 
intergovernmental mandates as defined in the Unfunded Mandates 
Reform Act (UMRA) and would not affect the budgets of state, 
local, or tribal governments. The bill contains one new 
private-sector mandate. JCT has determined that the cost of 
this mandate would not exceed the threshold established by UMRA 
for private-sector mandates ($113 million in fiscal year 2001, 
adjusted annually for inflation).
    Estimated cost to the Federal Government: The estimated 
budgetary impact of H.R. 10 is shown in the following table. 
The costs of this legislation would fall within budget 
functions 600 (income security) and 800 (general government).

----------------------------------------------------------------------------------------------------------------
                                                               By fiscal year, in millions of dollars--
                                                     -----------------------------------------------------------
                                                        2001      2002      2003      2004      2005      2006
----------------------------------------------------------------------------------------------------------------
                                               CHANGES IN REVENUES

Modification of IRA Contribution Limits.............         0      -368    -1,203    -2,059    -2,762    -3,311
Increased Limitation on Exclusion for Elective               0      -100      -328      -500      -636      -708
 Deferrals..........................................
Additional Increased Limitation on Exclusion for             0      -241      -320      -239      -155       -96
 Elective Deferrals for Individuals Age 50 and Above
Other Estimated Revenues............................         0      -385      -700      -663      -743      -919
                                                     -----------------------------------------------------------
      Total Revenues................................         0    -1,094    -2,551    -3,461    -4,296    -5,034
                                                     ===========================================================
                                           CHANGES IN DIRECT SPENDING

IRS User Fees.......................................         0        -1        -1     (\1\)         0         0
Reduced PBGC Flat-Rate Premiums.....................         0         0     (\1\)     (\1\)     (\1\)     (\1\)
Reduced PBGC Variable Premiums......................         0         0         9         9         9         9
Missing Participants in Terminated Plans............         0         0     (\1\)     (\1\)     (\1\)     (\1\)
Payment of Interest on PBGC Premium Overpayment.....         0         3         3         3         3         3
Benefits Paid to Substantial Owners.................         0         0     (\1\)     (\1\)     (\1\)     (\1\)
                                                     -----------------------------------------------------------
      Total Direct Spending.........................         0         2        11        12        12        12
                                                     ===========================================================
                                TOTAL CHANGES SUBJECT TO PAY-AS-YOU-GO PROCEDURES

Net Decrease in Budget Surplus......................         0    -1,096    -2,562    -3,473    -4,308    -5,046

                                        SPENDING SUBJECT TO APPROPRIATION

Studies by the Department of Labor:
    Estimated Authorization Level...................         0         2         0         0         0         0
    Estimated Outlays...............................         0     (\1\)     (\1\)     (\1\)     (\1\)         1
----------------------------------------------------------------------------------------------------------------
\1\ Less than $500,000.

Notes.--Components may not sum to totals because of rounding. Budget authority equals outlays for direct
  spending proposals.

Sources: CBO and Joint Committee on Taxation.

Basis of estimate

            Revenues
    Federal Tax Revenues. JCT estimates that H.R. 10 would 
reduce federal tax revenues by $1.1 billion in 2002, by $16.4 
billion over the 2002-2006 period, and by $51.7 billion over 
the 2002-2011 period. The bill would increase the maximum 
contribution limit for Individual Retirement Accounts (IRAs) to 
$3,000 in 2002, $4,000 in 2003, and $5,000 in 2004. After 2004, 
the maximum contribution rate would be indexed for inflation. 
The bill also would increase the maximum IRA contribution to 
$5,000 for individuals aged 50 or older in 2002 and 2003. In 
addition, the bill would make numerous changes to pension laws. 
For 2002, it would increase to $11,000 the dollar limit on 
certain contributions made to qualified plans (``elective 
deferrals'') under section 401(k) plans, section 403(b) 
annuities, and simplified employee pension plans (SEPs). That 
limitation would increase further, in $1,000 annual increments, 
until it reaches $15,000 in 2005. After 2005, the dollar limit 
would be indexed for inflation. The bill also would increase 
the otherwise applicable dollar limit on elective deferrals by 
$5,000 for individuals aged 50 or older in 2002 through 2006. 
After 2006, the dollar limit would be indexed for inflation.
    IRS User Fees. H.R. 10 would eliminate the fee that the IRS 
charges small businesses for providing ruling, opinion, and 
determination letters regarding the firms' pension plans if 
certain conditions are met. This provision would take effect 
after December 31, 2001. Based on the amount of fees collected 
in recent years and on information from the IRS, CBO estimates 
that eliminating the fee would decrease governmental receipts 
by a total of $17 million over fiscal years 2002 and 2003. 
Under current law, the IRS's authority to charge such fees will 
expire at the end of fiscal year 2003, so the provision would 
have no impact on receipts beyond that year.
    Department of Labor Civil Penalties. Under current law, the 
Department of Labor (DoL) is responsible for administering 
ERISA's reporting, disclosure, and fiduciary conduct 
requirements for private pension plans. In cases of fiduciary 
misconduct, DoL is required to assess a civil penalty equal to 
20 percent of any amount that is restored to a pension plan as 
part of a settlement or court judgment. These penalties, which 
totaled $3 million in 1998, are recorded as miscellaneous 
receipts.
    The bill would allow DoL to assess these civil penalties at 
its discretion and to assess penalties that could be less than 
20 percent of the recovered amount. With this more flexible 
authority, DoL has indicated that it would no longer assess 
penalties in cases where companies comply voluntarily with the 
department's enforcement efforts. According to DoL, these cases 
comprise about a third of the total. The full 20-percent 
penalty would still be assessed in the remaining cases, which 
are typically resolved through litigation. CBO estimates that 
this provision would reduce penalties collected by about a 
third, and that the drop in penalties would total $5 million 
over the 2002-2006 period.
            Direct spending
    National Summit on Retirement Income Security. The bill 
would extend the authorization for the National Summit on 
Retirement Income Security to include a meeting in 2009. CBO 
estimates that the Department of Labor would receive at least 
$500,000 in private donations, which would be spent to defray 
part of the costs of the conference. Therefore, this provision 
would increase revenues and direct spending by the same amounts 
and would have no net impact on the budget surplus.
    IRS User Fees. The Internal Revenue Service (IRS) has the 
authority to retain and spend without further appropriation 
action a small portion of the fees it collects from taxpayers 
for certain rulings and determinations by the Office of the 
Chief Counsel and by the Office for Employee Plans and Exempt 
Organizations. Because H.R. 10 would eliminate the fee paid by 
small businesses for rulings and determinations, the bill would 
also reduce the amounts available for the IRS to spend. These 
fees are recorded in the budget as revenues, and are scheduled 
to expire in 2003. CBO estimates that eliminating the fee would 
decrease direct spending by a total of $2 million over the 
2002-2004 period.
    Reduced Flat-Rate Premiums Paid to the PBGC. Under current 
law, defined benefit pension plans operated by a single 
employer pay two types of annual premiums to the Pension 
Benefit Guaranty Corporation (PBGC). All covered plans are 
subject to a flat-rate premium of $19 per participant. In 
addition, underfunded plans must also pay a variable premium 
that depends on the amount by which the plan's liabilities 
exceed its assets.
    The bill would reduce the flat-rate premium from $19 to $5 
per participant for plans established by employers with 100 or 
fewer employees during the first five years of the plan's 
operation. According to information obtained from the PBGC, 
approximately 3,000 plans would qualify for this reduction. 
Those plans cover an average of about 10 participants each. CBO 
estimates that the change would reduce PBGC's premium income, 
which is classified as an offsetting collection, by about 
$400,000 annually beginning in 2003 and by about $1.7 million 
over the 2003-2006 period.
    Reduced Variable Premiums Paid to the PBGC. H.R. 10 would 
make two changes affecting the variable-rate premium paid by 
underfunded plans. First, for all new plans thatare 
underfunded, the bill would phase in the variable-rate premium. In the 
first year, plans would pay nothing. In the succeeding four years, they 
would pay 20 percent, 40 percent, 60 percent, and 80 percent, 
respectively, of the full amount. In the sixth and later years, they 
would pay the full variable-rate premium determined by their funding 
status. On the basis of information about premiums paid to the PBGC in 
1998 and 1999, CBO estimates that this change would affect the premiums 
of approximately 400 plans each year. It would reduce PBGC's total 
premium receipts by about $28 million over the 2003-2006 period.
    The bill would also reduce the variable-rate premium paid 
by all underfunded plans (not just new plans) established by 
employers with 25 or fewer employees. Under the bill, the 
variable-rate premium per participant paid by those plans would 
not exceed $5 multiplied by the number of participants in the 
plan. CBO estimates that approximately 8,300 plans would have 
their premium payments to reduced by this provision beginning 
in 2003. As a result, premium receipts would decline by $1.6 
million in 2003 and by $7 million over the 2003-2006 period.
    Missing Participants in Terminated Pension Plans. The 
legislation would expand the mission participant program. The 
Retirement Protection Act of 1994 established a program to 
locate missing participants when defined benefit plans are 
terminated. The bill would expand the program to include 
terminating multiemployer plans, defined benefit plans not 
covered by the PBGC, and defined contribution plans.
    The budgetary impact of this provision would be less than 
$500,000 annually. The PBGC does not expect a high volume of 
missing participants as a result of this proposal, and the 
administrative costs of expanding the program would not be 
significant. The net budgetary effect of increased benefit 
payments would also be small. Amounts paid by a pension plan to 
the PBGC for missing participants are held in the PBGC's trust 
fund, which is not a part of the federal budget. Amounts paid 
by the PBGC to participants at the time they are located are 
funded in the same manner as benefit payments in plans for 
which PBGC is the trustee--partially by the trust fund and 
partially by on-budget revolving funds.
    Authorization for PBGC to Pay Interest on Premium 
Overpayment Refunds. The legislation would authorize the PBGC 
to pay interest to play sponsors on premium overpayments. 
Interest paid on overpayments would be calculated at the same 
rate as interest charged on premium underpayments. On average, 
PBGC receives $19 million per year in premium overpayments, 
charges an interest rate of 8 percent for underpayments, and 
allows for a two-year lag between the receipt of payments and 
the issuance of refunds. The agency would pay the same rate for 
premium overpayments as it charges for underpayments. Based on 
this information, CBO estimates that direct spending would 
increase by $3 million annually.
    Substantial Owner Benefits in Terminated Plans. H.R. 10 
would simplify the rules by which the PBGC pays benefits to 
substantial owners (those with an ownership interest of at 
least 10 percent) of terminated pension plans. Only about one-
third of the plans taken over by the PBGC involve substantial 
owners, and the change in benefits paid to owner-employees 
under this provision would be less than $500,000 annually.
            Spending subject to appropriation
    H.R. 10 would extend the authorization for the National 
Summit on Retirement Income Security to 2009 and would require 
the Secretary of Labor to conduct two studies--one on models 
for pension plan design and another on the the impact of H.R. 
10 on pension coverage. CBO estimates that these provisions 
would cost $2 million over the 2002-2006 period, subject to 
appropriation of the necessary funds.
    National Summit on Retirement Income Security. H.R. 10 
would amend ERISA to require the President to convene an 
additional conference on national savings in 2009. Under 
current law, the President is required to convene a National 
Summit on Retirement Income Security in 2001 and 2005. The 
appropriation of such sums as may be necessary is authorized 
for that purpose. The Secretary of Labor is also authorized to 
accept private donations to defray the costs of the conference. 
Based on the experience of the 1998 National Summit, CBO 
estimates that the 2009 National Summit would cost less than $1 
million and that more than one-half of the expenses would be 
offset by private donations. (See the discussion under direct 
spending for more details.)
    Model Small Employee Group Plans. H.R. 10 would direct the 
Secretary of Labor to undertake a study to determine the most 
appropriate forms of private pension plans that are easy to 
maintain and provide portable benefits. The study also should 
indicate alternative arrangements for providing benefits that 
might be used by employee or employer associations as well as 
those that could be independent of employer sponsorship. In 
addition, the Secretary would study methods and strategies for 
making coverage more widespread. Finally, the Secretary would 
be required to consider the adequacy and availability of 
existing plans. Based on discussions with DoL staff, CBO 
estimates that the 18-month study would cost less than 
$500,000.
    Report on Effects of Legislation. The bill would require 
the Secretary of Labor to report on the impact of H.R. 10 on 
various aspects of pension coverage to the Committee on 
Education and the Workforce of the House of Representatives and 
the Committee on Health, Education, Labor, and Pensions of the 
Senate. The study would assess the impact of the bill on 
pension coverage for low- and middle-income workers, the levels 
of pension benefits, thequality of pension plan coverage, 
workers' access to and participation in pension plans, and retirement 
security. Based on discussions with DoL staff, CBO estimates that the 
study would cost about $1 million over the 2002-2006 period.
    Pay-as-you-go considerations: The Balanced Budget and 
Emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in outlays and governmental receipts that are subject 
to pay-as-you-go procedures are shown in the following table. 
For the purposes of enforcing pay-as-you-go procedures, only 
the effects in the current year, the budget year, and the 
succeeding four years are counted.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                By fiscal year, in millions of dollars--
                                              ----------------------------------------------------------------------------------------------------------
                                                2001    2002      2003      2004      2005      2006      2007      2008      2009      2010      2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in receipts..........................      0    -1,094    -2,551    -3,461    -4,296    -5,034    -5,664    -6,287    -7,005    -7,799    -8,496
Changes in outlays...........................      0         2        11        12        12        12        12        12        13        13        13
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Estimated impact on state, local, and tribal governments: 
JCT has determined that H.R. 10 contains no intergovernmental 
mandates as defined in UMRA and would impose no costs on state, 
local, or tribal governments.
    Estimated impact on the private sector: JCT has determined 
the provision that would prohibit allocations of stock in an 
Employee Stock Ownership Plan of a subchapter S corporation 
would be a new private sector mandate. JCT has estimated that 
the cost of this mandate would not exceed the threshold 
established by UMRA for private-sector mandates ($113 million 
in fiscal year 2001, adjusted annually for inflation).
    Previous CBO estimate: On May 1, 2001, CBO transmitted a 
cost estimate of H.R. 10 as ordered reported by the Committee 
on Ways and Means. The pay-as-you-go estimates for the two 
versions of the bill are identical. However, the version of the 
bill approved by the Committee on Education and the Workforce 
contains additional discretionary authorizations.
    Estimate prepared by: Federal Revenues: Erin Whitaker. IRS 
User Fees (direct spending): John R. Righter. DoL Civil 
Penalties and Administrative Expenses: Christi Hawley Sadoti. 
Pension Benefit Guaranty Corporation: Tamara Ohler.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis. Roberton Williams, Deputy 
Assistant Director for Tax Analysis.

         Statement of General Performance Goals and Objectives

    In accordance with Clause (3)(c) of House Rule XIII, the 
goals of H.R. 10 are to make retirement security more available 
to millions of workers by expanding small business retirement 
plans, allowing workers to save more, addressing the needs of 
an increasingly mobile workforce through greater portability 
and other changes, making pensions more secure, and cutting the 
red tape that has hamstrung employers who want to establish 
pension plans for their workers. The Committee expects the 
Department of Labor to implement the changes to the law in 
accordance with these stated goals.

                   Constitutional Authority Statement

    Under clause 3(d)(1) of Rule XIII of the Rules of the House 
of Representatives, the Committee must include a statement 
citing the specific powers granted to Congress in the 
Constitution to enact the law proposed by H.R. 10.
    The Employee Retirement Income Security Act (ERISA) has 
been determined by the federal courts to be within Congress' 
Constitutional authority. In Commercial Mortgage Insurance, 
Inc. v. Citizens National Bank of Dallas, 526 F.Supp. 510 (N.D. 
Tex. 1981), the court held that Congress legitimately concluded 
that employee benefit plans so affected interstate commerce as 
to be within the scope of Congressional powers under Article 1, 
Section 8, Clause 3 of the Constitution of the United States. 
In Murphy v. Wal-Mart Associates' Group Health Plan, 928 
F.Supp. 700 (E.D. Tex 1996), the court upheld the preemption 
provisions of ERISA. Because H.R. 10 modifies but does not 
extend the federal regulation of pensions, the Committee 
believes that the Act falls within the same scope of 
Congressional authority as ERISA.

                           Committee Estimate

    Clause 3(d)(2) of Rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 10. However, clause 3(d)(3)(B) of that rule provides that 
this requirement does not apply when the Committee has included 
in its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 402 of the Congressional Budget Act.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986

Subtitle A--Income Taxes

           *       *       *       *       *       *       *

CHAPTER 1--NORMAL TAXES AND SURTAXES

           *       *       *       *       *       *       *

Subchapter B--Computation of Taxable Income

           *       *       *       *       *       *       *

PART II--ITEMS SPECIFICALLY INCLUDED IN GROSS INCOME

           *       *       *       *       *       *       *

SEC. 72. ANNUITIES; CERTAIN PROCEEDS OF ENDOWMENT AND LIFE INSURANCE 
                    CONTRACTS.

  (a) * * *

           *       *       *       *       *       *       *

  (f) Special Rules for Computing Employees' Contributions.--In 
computing, for purposes of subsection (c)(1)(A), the aggregate 
amount of premiums or other consideration paid for the 
contract, and for purposes of subsection (e)(6), the aggregate 
premiums or other consideration paid, amounts contributed by 
the employer shall be included, but only to the extent that--
          (1) * * *

           *       *       *       *       *       *       *

Paragraph (2) shall not apply to amounts which were contributed 
by the employer after December 31, 1962, and which would not 
have been includible in the gross income of the employee by 
reason of the application of section 911 if such amounts had 
been paid directly to the employee at the time of contribution. 
The preceding sentence shall not apply to amounts which were 
contributed by the employer, as determined under regulations 
prescribed by the Secretary, to provide pension or annuity 
credits, to the extent such credits are attributable to 
services performed before January 1, 1963, and are provided 
pursuant to pension or annuity plan provisions in existence on 
March 12, 1962, and on that date applicable to such services, 
or to the extent such credits are attributable to services 
performed as a foreign missionary (within the meaning of 
[section 403(b)(2)(D)(iii)] section 403(b)(2)(D)(iii), as in 
effect before the enactment of the Comprehensive Retirement 
Security and Pension Reform Act of 2001).

           *       *       *       *       *       *       *

  (o) Special rules for distributions from qualified plans to 
which employee made deductible contributions.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Special rule for treatment of rollover amounts.--
        For purposes of sections 402(c), 403(a)(4), [and 
        408(d)(3)] 403(b)(8), 408(d)(3), and 457(e)(16), the 
        Secretary shall prescribe regulations providing for 
        such allocations of amounts attributable to accumulated 
        deductible employee contributions, and for such other 
        rules, as may be necessary to insure that such 
        accumulated deductible employee contributions do not 
        become eligible for additional tax benefits (or freed 
        from limitations) through the use of rollovers.

           *       *       *       *       *       *       *

  (t) 10-Percent Additional Tax on Early Distributions From 
Qualified Retirement Plans.--
          (1) * * *

           *       *       *       *       *       *       *

          (9) Special rule for rollovers to section 457 
        plans.--For purposes of this subsection, a distribution 
        from an eligible deferred compensation plan (as defined 
        in section 457(b)) of an eligible employer described in 
        section 457(e)(1)(A) shall be treated as a distribution 
        from a qualified retirement plan described in 
        4974(c)(1) to the extent that such distribution is 
        attributable to an amount transferred to an eligible 
        deferred compensation plan from a qualified retirement 
        plan (as defined in section 4974(c)).

           *       *       *       *       *       *       *

PART III--ITEMS SPECIFICALLY EXCLUDED IN GROSS INCOME

           *       *       *       *       *       *       *

SEC. 132. CERTAIN FRINGE BENEFITS.

  (a) Exclusion From Gross Income.--Gross income shall not 
include any fringe benefit which qualifies as a--
          (1) * * *

           *       *       *       *       *       *       *

          (5) qualified transportation fringe, [or]
          (6) qualified moving expense reimbursement[.]; or
          (7) qualified retirement planning services.

           *       *       *       *       *       *       *

  (m) Qualified Retirement Planning Services.--
          (1) In general.--For purposes of this section, the 
        term ``qualified retirement planning services'' means 
        any retirementplanning advice or information provided 
to an employee and his spouse by an employer maintaining a qualified 
employer plan.
          (2) Nondiscrimination rule.--Subsection (a)(7) shall 
        apply in the case of highly compensated employees only 
        if such services are available on substantially the 
        same terms to each member of the group of employees 
        normally provided education and information regarding 
        the employer's qualified employer plan.
          (3) Qualified employer plan.--For purposes of this 
        subsection, the term ``qualified employer plan'' means 
        a plan, contract, pension, or account described in 
        section 219(g)(5).
  [(m)] (n) Regulations.--The Secretary shall prescribe such 
regulations as may be necessary or appropriate to carry out the 
purposes of this section.

           *       *       *       *       *       *       *

PART VII--ADDTIONAL ITEMIZED DEDUCTIONS FOR INDIVIDUALS

           *       *       *       *       *       *       *

SEC. 219. RETIREMENT SAVINGS.

  (a) * * *
  (b) Maximum Amount of Deduction.--
          (1) In general.--The amount allowable as a deduction 
        under subsection (a) to any individual for any taxable 
        year shall not exceed the lesser of--
                  (A) [$2,000] the deductible amount, or

           *       *       *       *       *       *       *

          (5) Deductible amount.--For purposes of paragraph 
        (1)(A)--
                  (A) In general.--The deductible amount shall 
                be determined in accordance with the following 
                table:

        For taxable years                                 The deductible
          beginning in:                                     amount is:  
          2001................................................   $3,000 
          2002................................................   $4,000 
          2003 and thereafter.................................   $5,000.

                  (B) Catch-up contributions for individuals 50 
                or older.--In the case of an individual who has 
                attained the age of 50 before the close of the 
                taxable year, the deductible amount for taxable 
                years beginning in 2001 or 2002 shall be 
                $5,000.
                  (C) Cost-of-living adjustment.--
                          (i) In general.--In the case of any 
                        taxable year beginning in a calendar 
                        year after 2003, the $5,000 amount 
                        under subparagraph (A) shall be 
                        increased by an amount equal to--
                                  (I) such dollar amount, 
                                multiplied by
                                  (II) the cost-of-living 
                                adjustment determined under 
                                section 1(f )(3) for the 
                                calendar year in which the 
                                taxable year begins, determined 
                                by substituting ``calendar year 
                                2002'' for ``calendar year 
                                1992'' in subparagraph (B) 
                                thereof.
                          (ii) Rounding rules.--If any amount 
                        after adjustment under clause (i) is 
                        not a multiple of $500, such amount 
                        shall be rounded to the next lower 
                        multiple of $500.

           *       *       *       *       *       *       *

  (d) Other Limitations and Restrictions.--
          (1) * * *
          (2) Recontributed amounts.--No deduction shall be 
        allowed under this section with respect to a rollover 
        contribution described in section 402(c), 403(a)(4), 
        403(b)(8), or [408(d)(3)] 408(d)(3), or 457(e)(16).

           *       *       *       *       *       *       *

Subchapter D--Deferred Compensation, Etc.

           *       *       *       *       *       *       *

PART I--PENSION, PROFIT-SHARING, STOCK BONUS PLANS, ETC.

           *       *       *       *       *       *       *

                        Subpart A--General Rule

        Sec. 401. Qualified pension, profit-sharing, and stock bonus 
                  plans.
     * * * * * * *
        Sec. 402A. Optional treatment of elective deferrals as plus 
                  contributions.

           *       *       *       *       *       *       *

SEC. 401. QUALIFIED PENSION, PROFIT-SHARING, AND STOCK BONUS PLANS.

  (a) Requirements for Qualification.--A trust created or 
organized in the United States and forming part of a stock 
bonus, pension, or profit-sharing plan of an employer for the 
exclusive benefit of his employees or their beneficiaries shall 
constitute a qualified trust under this section--
          (1) * * *

           *       *       *       *       *       *       *

          (5) Special rules relating to nondiscrimination 
        requirements.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (G) [State and local governmental plans] 
                Governmental plans.--Paragraphs (3) and (4) 
                shall not apply to a governmental plan (within 
                the meaning of [section 414(d)) maintained by a 
                State or local government or political 
                subdivision thereof (or agency or 
                instrumentality thereof).] section 414(d)).

           *       *       *       *       *       *       *

          (9) Required distributions.--
                  (A) * * *
                  (B) Required distribution where employee dies 
                before entire interest is distributed.--
                          [(i) Where distributions have begun 
                        under subparagraph (a)(ii).--A trust 
                        shall not constitute a qualified trust 
                        under this section unless the plan 
                        provides that if--
                                  [(I) the distribution of the 
                                employee's interest has begun 
                                in accordance with subparagraph 
                                (A)(ii), and
                                  [(II) the employee dies 
                                before his entire interest has 
                                been distributed to him,
                        the remaining portion of such interest 
                        will be distributed at least as rapidly 
                        as under the method of distributions 
                        being used under subparagraph (A)(ii) 
                        as of the date of his death.]
                          [(ii)] (i) 5-year rule [for other 
                        cases].--A trust shall not constitute a 
                        qualified trust under this section 
                        unless the plan provides that, if an 
                        employee dies before [the distribution 
                        of the employee's interest has begun in 
                        accordance with subparagraph (A)(ii)] 
                        his entire interest has been 
                        distributed to him, the entire interest 
                        of the employee will be distributed 
                        within 5 years after the death of such 
                        employee.
                          [(iii)] (ii) Exception to 5-year rule 
                        for certain amounts payable over life 
                        of beneficiary.--If--
                                  (I) * * *

           *       *       *       *       *       *       *

                        for purposes of clause [(ii)] (i), the 
                        portion referred to in subclause (I) 
                        shall be treated as distributed on the 
                        date on which such distributions begin.
                          [(iv)] (iii) Special rule for 
                        surviving spouse of employee.--If the 
                        designated beneficiary referred to in 
                        clause [(iii)(I)] (ii)(I) is the 
                        surviving spouse of the employee--
                                  (I) the date on which the 
                                distributions are required to 
                                begin under clause [(iii)(III)] 
                                (ii)(III) shall not be earlier 
                                than [the date on which the 
                                employee would have attained 
                                age 70\1/2\,] April 1 of the 
                                calendar year following the 
                                calendar year in which the 
                                spouse attains 70\1/2\, and
                                  (II) if the surviving spouse 
                                dies before [the distributions 
                                to such spouse begin,] his 
                                entire interest has been 
                                distributed to him, this 
                                subparagraph shall be applied 
                                as if the surviving spouse were 
                                the employee.

           *       *       *       *       *       *       *

          (17) Compensation limit.--
                  (A) In general.--A trust shall not constitute 
                a qualified trust under this section unless, 
                under the plan of which such trust is a part, 
                the annual compensation of each employee taken 
                into account under the plan for any year does 
                not exceed [$150,000] $200,000.
                  (B) Cost-of-living adjustment.--The Secretary 
                shall adjust annually the [$150,000] $200,000 
                amount in subparagraph (A) for increases in the 
                cost-of-living at the same time and in the same 
                manner as adjustments under section 415(d); 
                except that the base period shall be the 
                calendar quarter beginning [October 1, 1993] 
                July 1, 2000, and any increase which is not a 
                multiple of [$10,000] $5,000 shall be rounded 
                to the next lowest multiple of [$10,000] 
                $5,000.

           *       *       *       *       *       *       *

          (26) Additional participation requirements.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (H) [Exception for state and local 
                governmental plans] Exception for governmental 
                plans.--This paragraph shall not apply to a 
                governmental plan (within the meaning of 
                [section 414(d)) maintained by a State or local 
                government or political subdivision thereof (or 
                agency or instrumentality thereof).] section 
                414(d)).

           *       *       *       *       *       *       *

          (31) Optional direct transfer of eligible rollover 
        distributions.--
                  (A) * * *
                  (B) Limitation.--Subparagraph (A) shall apply 
                only to the extent that the eligible rollover 
                distribution would be includible in gross 
                income if not transferred as provided in 
                subparagraph (A) (determined without regard to 
                sections 402(c) [and 403(a)(4)], 403(a)(4), 
                403(b)(8), and 457(e)(16)). The preceding 
                sentence shall not apply to such distribution 
                if the plan to which such distribution is 
                transferred--
                          (i) agrees to separately account for 
                        amounts so transferred, including 
                        separately accounting for the portion 
                        of such distribution which is 
                        includible in gross income and the 
                        portion of such distribution which is 
                        not so includible, or
                          (ii) is an eligible retirement plan 
                        described in clause (i) or (ii) of 
                        section 402(c)(8)(B).

           *       *       *       *       *       *       *

  (k) Cash or Deferred Arrangements.--
          (1) * * *
          (2) Qualified cash or deferred arrangement.--A 
        qualified cash or deferred arrangement is any 
        arrangement which is part of a profit-sharing or stock 
        bonus plan, a pre-ERISA money purchase plan, or a rural 
        cooperative plan which meets the requirements of 
        subsection (a)--
                  (A) * * *
                  (B) under which amounts held by the trust 
                which are attributable to employer 
                contributions made pursuant to the employee's 
                election--
                          (i) may not be distributable to 
                        participants or other beneficiaries 
                        earlier than--
                                  (I) [separation from service] 
                                severance from employment, 
                                death, or disability,

           *       *       *       *       *       *       *

          (3) Application of participation and discrimination 
        standards.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (G) Governmental plans.--A governmental plan 
                (within the meaning of section 414(d) 
                [maintained by a State or local government or 
                political subdivision thereof (or agency or 
                instrumentality thereof)] shall be treated as 
                meeting the requirements of this paragraph.

           *       *       *       *       *       *       *

          (10) Distributions upon termination of plan [or 
        disposition of assets or subsidiary].--
                  [(A) In general.--The following events are 
                described in this paragraph:
                          [(i) Termination.--The termination of 
                        the plan without establishment or 
                        maintenance of another defined 
                        contribution plan (other than an 
                        employee stock ownership plan as 
                        defined in section 4975(e)(7)).
                          [(ii) Disposition of assets.--The 
                        disposition by a corporation of 
                        substantially all of the assets (within 
                        the meaning of section 409(d)(2)) used 
                        by such corporation in a trade or 
                        business of such corporation, but only 
                        with respect to an employee who 
                        continues employment with the 
                        corporation acquiring such assets.
                          [(iii) Disposition of subsidiary.--
                        The disposition by a corporation of 
                        such corporation's interest in a 
                        subsidiary (within the meaning of 
                        section 409(d)(3)), but only with 
                        respect to an employee who continues 
                        employment with such subsidiary.]
                  (A) In general.--An event described in this 
                subparagraph is the termination of the plan 
                without establishment or maintenance of another 
                defined contribution plan (other than an 
                employee stock ownership plan as defined in 
                section 4975(e)(7)).
                  (B) Distributions must be lump sum 
                distributions.--
                          (i) In general.--[An event] A 
                        termination shall not be treated as 
                        described in subparagraph (A) with 
                        respect to any employee unless the 
                        employee receives a lump sum 
                        distribution by reason of [the event] 
                        the termination.

           *       *       *       *       *       *       *

                  [(C) Transferor corporation must maintain 
                plan.--An event shall not be treated as 
                described in clause (ii) or (iii) of 
                subparagraph (A) unless the transferor 
                corporation continues to maintain the plan 
                after the disposition.]
          (11) Adoption of simple plan to meet 
        nondiscrimination tests.--
                  (A)  * * *
                  (B) Contribution requirements.--
                          (i) In general.--The requirements of 
                        this subparagraph are met if, under the 
                        arrangement--
                                  (I) an employee may elect to 
                                have the employer make elective 
                                contributions for the year on 
                                behalf of the employee to a 
                                trust under the plan in an 
                                amount which is expressed as a 
                                percentage ofcompensation of 
                                the employee but which in no 
                                event exceeds [$6,000] the 
                                amount in effect under section 
                                408(p)(2)(A)(ii).

           *       *       *       *       *       *       *

                  [(E) Cost-of-living adjustment.--The 
                Secretary shall adjust the $6,000 amount under 
                subparagraph (B)(i)(I) at the same time and in 
                the same manner as under section 408(p)(2)(E).]

           *       *       *       *       *       *       *

  (m) Nondiscrimination Test for Matching Contributions and 
Employee Contributions.--
          (1) * * *

           *       *       *       *       *       *       *

          [(9) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the 
        purposes of this subsection and subsection (k) 
        including--
                  [(A) such regulations as may be necessary to 
                prevent the multiple use of the alternative 
                limitation with respect to any highly 
                compensated employee, and
                  [(B) regulations permitting appropriate 
                aggregation of plans and contributions.
        For purposes of the preceding sentence, the term 
        ``alternative limitation'' means the limitation of 
        section 401(k)(3)(A)(ii)(II) and the limitation of 
        paragraph (2)(A)(ii) of this subsection.]
          (9) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the 
        purposes of this subsection and subsection (k), 
        including regulations permitting appropriate 
        aggregation of plans and contributions.

           *       *       *       *       *       *       *

SEC. 402. TAXABILITY OF BENEFICIARY OF EMPLOYEES' TRUST.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Rules Applicable to Rollovers From Exempt Trusts.--
          (1) * * *
          (2) Maximum amount which may be rolled over.--In the 
        case of any eligible rollover distribution, the maximum 
        amount transferred to which paragraph (1) applies shall 
        not exceed the portion of such distribution which is 
        includible in gross income (determined without regard 
        to paragraph (1)). The preceding sentence shall not 
        apply to such distribution to the extent--
                  (A) such portion is transferred in a direct 
                trustee-to-trustee transfer to a qualified 
                trust which is part of a planwhich is a defined 
contribution plan and which agrees to separately account for amounts so 
transferred, including separately accounting for the portion of such 
distribution which is includible in gross income and the portion of 
such distribution which is not so includible, or
                  (B) such portion is transferred to an 
                eligible retirement plan described in clause 
                (i) or (ii) of paragraph (8)(B).
          [(3) Transfer must be made within 60 days of 
        receipt.--Paragraph (1) shall not apply to any transfer 
        of a distribution made after the 60th day following the 
        day on which the distributee received the property 
        distributed.]
          (3) Transfer must be made within 60 days of 
        receipt.--
                  (A) In general.--Except as provided in 
                subparagraph (B), paragraph (1) shall not apply 
                to any transfer of a distribution made after 
                the 60th day following the day on which the 
                distributee received the property distributed.
                  (B) Hardship exception.--The Secretary may 
                waive the 60-day requirement under subparagraph 
                (A) where the failure to waive such requirement 
                would be against equity or good conscience, 
                including casualty, disaster, or other events 
                beyond the reasonable control of the individual 
                subject to such requirement.

           *       *       *       *       *       *       *

          (8) Definitions.--For purposes of this subsection--
                  (A) * * *
                  (B) Eligible retirement plan.--The term 
                ``eligible retirement plan'' means--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) a qualified trust, [and]
                          (iv) an annuity plan described in 
                        section 403(a)[.],
                          (v) an eligible deferred compensation 
                        plan described in section 457(b) which 
                        is maintained by an eligible employer 
                        described in section 457(e)(1)(A), and
                          (vi) an annuity contract described in 
                        section 403(b).
                If any portion of an eligible rollover 
                distribution is attributable to payments or 
                distributions from a designated plus account 
                (as defined in section 402A), an eligible 
                retirement plan with respect to such portion 
                shall include only another designated plus 
                account and a Roth IRA.
          (9) Rollover where spouse receives distribution after 
        death of employee.--If any distribution attributable to 
        an employee is paid to the spouse of the employee after 
        the employee's death, the preceding provisions of this 
        subsection shall apply to such distribution in the same 
        manner as if the spouse were the employee[; except that 
        a trust or plan described in clause (iii) or (iv) of 
        paragraph (8)(B) shall not be treated as an eligible 
        retirement plan with respect to such distribution].

           *       *       *       *       *       *       *

          (11) Separate accounting.--Unless a plan described in 
        clause (v) of paragraph (8)(B) agrees to separately 
        account for amounts rolled into such plan from eligible 
        retirement plans not described in such clause, the plan 
        described in such clause may not accept transfers or 
        rollovers from such retirement plans.

           *       *       *       *       *       *       *

  (f) Written Explanation to Recipients of Distributions 
Eligible for Rollover Treatment.--
          (1) In general.--The plan administrator of any plan 
        shall, within a reasonable period of time before making 
        an eligible rollover distribution [from an eligible 
        retirement plan], provide a written explanation to the 
        recipient--
                  (A) of the provisions under which the 
                recipient may have the distribution directly 
                transferred to [another eligible retirement 
                plan] an eligible retirement plan,
                  (B) of the provision which requires the 
                withholding of tax on the distribution if it is 
                not directly transferred to [another eligible 
                retirement plan] an eligible retirement plan,
                  (C) of the provisions under which the 
                distribution will not be subject to tax if 
                transferred to an eligible retirement plan 
                within 60 days after the date on which the 
                recipient received the distribution, [and]
                  (D) if applicable, of the provisions of 
                subsections (d) and (e) of this section[.], and
                  (E) of the provisions under which 
                distributions from the eligible retirement plan 
                receiving the distribution may be subject to 
                restrictions and tax consequences which are 
                different from those applicable to 
                distributions from the plan making such 
                distribution.
          (2) Definitions.--For purposes of this subsection--
                  (A) Eligible rollover distribution.--The term 
                ``eligible rollover distribution'' has the same 
                meaning as when used in subsection (c) of this 
                section [or paragraph (4) of section 403(a)], 
                paragraph (4) of section 403(a), subparagraph 
                (A) of section 403(b)(8), or subparagraph (A) 
                of section 457(e)(16).

           *       *       *       *       *       *       *

  (g) Limitation on Exclusion for Elective Deferrals.--
          [(1) In general.--Notwithstanding subsections (e)(3) 
        and (h)(1)(B), the elective deferrals of any individual 
        for any taxable year shall be included in such 
        individual's gross income to the extent the amount of 
        such deferrals for the taxable year exceeds $7,000.]
          (1) In general.--
                  (A) Limitation.--Notwithstanding subsections 
                (e)(3) and (h)(1)(B), the elective deferrals of 
                any individual for any taxable year shall be 
                included in such individual's gross income to 
                the extent the amount of such deferrals for the 
                taxable year exceeds the applicable dollar 
                amount. The preceding sentence shall not apply 
                to so much of suchexcess as does not exceed the 
designated plus contributions of the individual for the taxable year.
                  (B) Applicable dollar amount.--For purposes 
                of subparagraph (A), the applicable dollar 
                amount shall be the amount determined 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.

          (2) Distribution of excess deferrals.--
                  (A) In general.--If any amount (hereinafter 
                in this paragraph referred to as ``excess 
                deferrals'') is included in the gross income of 
                an individual under paragraph (1) (or would be 
                included but for the last sentence thereof) for 
                any taxable year--
                          (i) * * *

           *       *       *       *       *       *       *

          [(4) Increase in limit for amounts contributed under 
        section 403(b) contracts.--The limitation under 
        paragraph (1) shall be increased (but not to an amount 
        in excess of $9,500) by the amount of any employer 
        contributions for the taxable year described in 
        paragraph (3)(C).
          [(5) Cost-of-living adjustment.--The Secretary shall 
        adjust the $7,000 amount under paragraph (1) at the 
        same time and in the same manner as under section 
        415(d); except that any increase under this paragraph 
        which is not a multiple of $500 shall be rounded to the 
        next lowest multiple of $500.]
          (4) Cost-of-living adjustment.--In the case of 
        taxable years beginning after December 31, 2005, the 
        Secretary shall adjust the $15,000 amount under 
        paragraph (1)(B) at the same time and in the same 
        manner as under section 415(d), except that the base 
        period shall be the calendar quarter beginning July 1, 
        2004, and any increase under this paragraph which is 
        not a multiple of $500 shall be rounded to the next 
        lowest multiple of $500.
          [(6)] (5) Disregard of community property laws.--This 
        subsection shall be applied without regard to community 
        property laws.
          [(7)] (6) Coordination with section 72.--For purposes 
        of applying section 72, any amount includible in gross 
        income for any taxable year under this subsection but 
        which is not distributed from the plan during such 
        taxable year shall not be treated as investment in the 
        contract.
          [(8)] (7) Special rule for certain organizations.--
                  (A) * * *
                  (B) Qualified organizationFor purposes of 
                this paragraph, the term ``qualified 
                organization'' means any educational 
                organization, hospital, home health service 
                agency, health and welfare service agency, 
                church, or convention or association of 
                churches. Such term includes any organization 
                described in section 414(e)(3)(B)(ii). Terms 
                used in this subparagraph shall have the same 
                meaning as when used in section 415(c)(4) (as 
                in effect before the enactment of the 
                Comprehensive Retirement Security and Pension 
                Reform Act of 2001).

           *       *       *       *       *       *       *

          [(9)] (8) Matching contributions on behalf of self-
        employed individuals not treated as elective employer 
        contributions.--Except as provided in section 
        401(k)(3)(D)(ii), any matching contribution described 
        in section 401(m)(4)(A) which is made on behalf of a 
        self-employed individual (as defined in section 401(c) 
        shall not be treated as an elective employer 
        contribution under a qualified cash or deferred 
        arrangement (as defined in section 401(k) for purposes 
        of this title.

           *       *       *       *       *       *       *

SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS PLUS 
                    CONTRIBUTIONS.

  (a) General Rule.--If an applicable retirement plan includes 
a qualified plus contribution program--
          (1) any designated plus contribution made by an 
        employee pursuant to the program shall be treated as an 
        elective deferral for purposes of this chapter, except 
        that such contribution shall not be excludable from 
        gross income, and
          (2) such plan (and any arrangement which is part of 
        such plan) shall not be treated as failing to meet any 
        requirement of this chapter solely by reason of 
        including such program.
  (b) Qualified Plus Contribution Program.--For purposes of 
this section--
          (1) In general.--The term ``qualified plus 
        contribution program'' means a program under which an 
        employee may elect to make designated plus 
        contributions in lieu of all or a portion of elective 
        deferrals the employee is otherwise eligible to make 
        under the applicable retirement plan.
          (2) Separate accounting required.--A program shall 
        not be treated as a qualified plus contribution program 
        unless the applicable retirement plan--
                  (A) establishes separate accounts 
                (``designated plus accounts'') for the 
                designated plus contributions of each employee 
                and any earnings properly allocable to the 
                contributions, and
                  (B) maintains separate recordkeeping with 
                respect to each account.
  (c) Definitions and Rules Relating to Designated Plus 
Contributions.--For purposes of this section--
          (1) Designated plus contribution.--The term 
        ``designated plus contribution'' means any elective 
        deferral which--
                  (A) is excludable from gross income of an 
                employee without regard to this section, and
                  (B) the employee designates (at such time and 
                in such manner as the Secretary may prescribe) 
                as not being so excludable.
          (2) Designation limits.--The amount of elective 
        deferrals which an employee may designate under 
        paragraph (1) shall not exceed the excess (if any) of--
                  (A) the maximum amount of elective deferrals 
                excludable from gross income of the employee 
                for the taxable year (without regard to this 
                section), over
                  (B) the aggregate amount of elective 
                deferrals of the employee for the taxable year 
                which the employee does not designate under 
                paragraph (1).
          (3) Rollover contributions.--
                  (A) In general.--A rollover contribution of 
                any payment or distribution from a designated 
                plus account which is otherwise allowable under 
                this chapter may be made only if the 
                contribution is to--
                          (i) another designated plus account 
                        of the individual from whose account 
                        the payment or distribution was made, 
                        or
                          (ii) a Roth IRA of such individual.
                  (B) Coordination with limit.--Any rollover 
                contribution to a designated plus account under 
                subparagraph (A) shall not be taken into 
                account for purposes of paragraph (1).
  (d) Distribution Rules.--For purposes of this title--
          (1) Exclusion.--Any qualified distribution from a 
        designated plus account shall not be includible in 
        gross income.
          (2) Qualified distribution.--For purposes of this 
        subsection--
                  (A) In general.--The term ``qualified 
                distribution'' has the meaning given such term 
                by section 408A(d)(2)(A) (without regard to 
                clause (iv) thereof).
                  (B) Distributions within nonexclusion 
                period.--A payment or distribution from a 
                designated plus account shall not be treated as 
                a qualified distribution if such payment or 
                distribution is made within the 5-taxable-year 
                period beginning with the earlier of--
                          (i) the first taxable year for which 
                        the individual made a designated plus 
                        contribution to any designated plus 
                        account established for such individual 
                        under the same applicable retirement 
                        plan, or
                          (ii) if a rollover contribution was 
                        made to such designated plus account 
                        from a designated plus account 
                        previously established for such 
                        individual under another applicable 
                        retirement plan, the first taxable year 
                        for which the individual made a 
                        designated plus contribution to such 
                        previously established account.
                  (C) Distributions of excess deferrals and 
                earnings.--The term ``qualified distribution'' 
                shall not include any distribution of any 
                excess deferral under section 402(g)(2) and any 
                income on the excess deferral.
          (3) Aggregation rules.--Section 72 shall be applied 
        separately with respect to distributions and payments 
        from a designated plus account and other distributions 
        and payments from the plan.
  (e) Other Definitions.--For purposes of this section--
          (1) Applicable retirement plan.--The term 
        ``applicable retirement plan'' means--
                  (A) an employees' trust described in section 
                401(a) which is exempt from tax under section 
                501(a), and
                  (B) a plan under which amounts are 
                contributed by an individual's employer for an 
                annuity contract described in section 403(b).
          (2) Elective deferral.--The term ``elective 
        deferral'' means any elective deferral described in 
        subparagraph (A) or (C) of section 402(g)(3).

SEC. 403. TAXATION OF EMPLOYEE ANNUITIES.

  (a) * * *
  (b) Taxability of Beneficiary Under Annuity Purchased by 
Section 501(c)(3) Organization or Public School.--
          (1) General rule.--If--
                  (A) * * *

           *       *       *       *       *       *       *

then amounts contributed by such employer for such annuity 
contract on or after such rights become nonforfeitable shall be 
excluded from the gross income of the employee for the taxable 
year to the extent that the aggregate of such amounts does not 
exceed [the exclusion allowance for such taxable year] the 
applicable limit under section 415. The amount actually 
distributed to any distributee under such contract shall be 
taxable to the distributee (in the year in which so 
distributed) under section 72 (relating to annuities). For 
purposes of applying the rules of this subsection to amounts 
contributed by an employer for a taxable year, amounts 
transferred to a contract described in this paragraph by reason 
of a rollover contribution described in paragraph (8) of this 
subsection or [section 408(d)(3)(A)(iii)] section 
408(d)(3)(A)(ii) shall not be considered contributed by such 
employer.
          [(2) Exclusion allowance.--
                  [(A) In general.--For purposes of this 
                subsection, the exclusion allowance for any 
                employee for the taxable year is an amount 
                equal to the excess, if any, of--
                          [(i) the amount determined by 
                        multiplying 20 percent of his 
                        includible compensation by the number 
                        of years of service, over
                          [(ii) the aggregate of the amounts 
                        contributed by the employer for annuity 
                        contracts and excludable from the gross 
                        income of the employee for any prior 
                        taxable year.
                  [(B) Election to have allowance determined 
                under section 415 rules.--In the case of an 
                employee who makes an election under section 
                415(c)(4)(D) to have the provisions of section 
                415(c)(4)(C) (relating to special rule for 
                section 403(b) contracts purchased by 
                educational institutions, hospitals, home 
                health service agencies, and certain churches, 
                etc.) apply, the exclusion allowance for any 
                such employee for the taxable year is the 
                amount which could be contributed (under 
                section 415 without regard to section 
                415(c)(8)[(7)]) by his employer under a plan 
                described in section 403(a) if the annuity 
                contract for thebenefit of such employee were 
treated as a defined contribution plan maintained by the employer.
                  [(C) Number of years of service for duly 
                ordained, commissioned, or licensed ministers 
                or lay employees.--For purposes of this 
                subsection and section 415(c)(4)(A)--
                          [(i) all years of service by--
                                  [(I) a duly ordained, 
                                commissioned, or licensed 
                                minister of a church, or
                                  [(II) a lay person,as an 
                                employee of a church, a 
                                convention or association of 
                                churches, including an 
                                organization described in 
                                section 414(e)(3)(B)(ii), shall 
                                be considered as years of 
                                service for 1 employer, and
                          [(ii) all amounts contributed for 
                        annuity contracts by each such church 
                        (or convention or association of 
                        churches) or such organization during 
                        such years for such minister or lay 
                        person shall be considered to have been 
                        contributed by 1 employer.
        For purposes of the preceding sentence, the terms 
        ``church'' and ``convention or association of 
        churches'' have the same meaning as when used in 
        section 414(e).
                  [(D) Alternative exclusion allowance.--
                          [(i) In general.--In the case of any 
                        individual described in subparagraph 
                        (C), the amount determined under 
                        subparagraph (A) shall not be less than 
                        the lesser of--
                                  [(I) $3,000, or
                                  [(II) the includible 
                                compensation of such 
                                individual.
                          [(ii) Subparagraph not to apply to 
                        individuals with adjusted gross income 
                        over $17,000.--This subparagraph shall 
                        not apply with respect to any taxable 
                        year to any individual whose adjusted 
                        gross income for such taxable year 
                        (determined separately and without 
                        regard to any community property laws) 
                        exceeds $17,000.
                          [(iii) Special rule for foreign 
                        missionaries.--In the case of an 
                        individual described in subparagraph 
                        (C)(i) performing services outside the 
                        United States, there shall be included 
                        as includible compensation for any year 
                        under clause (i)(II) any amount 
                        contributed during such year by a 
                        church (or convention or association of 
                        churches) for an annuity contract with 
                        respect to such individual.]
          (3) Includible compensation.--For purposes of this 
        subsection, the term ``includible compensation'' means, 
        in the case of any employee, the amount of compensation 
        which is received from the employer described in 
        paragraph (1)(A), and which is includible in gross 
        income (computed without regard to section 911) for the 
        most recent period (ending not later than the close of 
        the taxable year) which under paragraph (4) may be 
        counted as one year of service. Such term does not 
        include any amount contributed by the employer for any 
        annuity contract to which this subsection applies or 
        any amount received by a former employee after the 
        fifth taxable year following the taxable year in which 
        such employee was terminated. Such term includes--
                  (A) * * *

           *       *       *       *       *       *       *

          (7) Custodial accounts for regulated investment 
        company stock.--
                  (A) Amounts paid treated as contributions.--
                For purposes of this title, amounts paid by an 
                employer described in paragraph (1)(A) to a 
                custodial account which satisfies the 
                requirements of section 401(f)(2) shall be 
                treated as amounts contributed by him for an 
                annuity contract for his employee if--
                          (i) * * *
                          (ii) under the custodial account no 
                        such amounts may be paid or made 
                        available to any distributee before the 
                        employee dies, attains age 59\1/2\, 
                        [separates from service] has a 
                        severance from employment, becomes 
                        disabled (within the meaning of section 
                        72(m)(7)), or in the case of 
                        contributions made pursuant to a salary 
                        reduction agreement (within the meaning 
                        of section 3121(a)(1)(D), encounters 
                        financial hardship.

           *       *       *       *       *       *       *

          (8) Rollover amounts.--
                  (A) General rule.--If--
                          (i) * * *
                          (ii) the employee transfers any 
                        portion of the property he receives in 
                        [such distribution to an individual 
                        retirement plan or to an annuity 
                        contract described in paragraph (1), 
                        and] such distribution to an eligible 
                        retirement plan described in section 
                        402(c)(8)(B), and

           *       *       *       *       *       *       *

                  [(B) Certain rules made applicable.--Rules 
                similar to the rules of paragraphs (2) through 
                (7) of section 402(c) (including paragraph 
                (4)(C) thereof) shall apply for purposes of 
                subparagraph (A).]
                  (B) Certain rules made applicable.--The rules 
                of paragraphs (2) through (7) and (9) of 
                section 402(c) and section 402(f) shall apply 
                for purposes of subparagraph (A), except that 
                section 402(f) shall be applied to the payor in 
                lieu of the plan administrator.

           *       *       *       *       *       *       *

          (11) Requirement that distributions not begin before 
        age 59\1/2\, [separation from service] severance from 
        employment, death, or disability.--This subsection 
        shall not apply to any annuity contract unless under 
        such contract distributions attributable to 
        contributions made pursuant to a salary reduction 
        agreement (within the meaning of section 402(g)(3)(C)) 
        may be paid only--
                  (A) when the employee attains age 59\1/2\, 
                [separates from service] has a severance from 
                employment, dies, orbecomes disabled (within 
the meaning of section 72(m)(7)), or

           *       *       *       *       *       *       *

          (13) Trustee-to-trustee transfers to purchase 
        permissive service credit.--No amount shall be 
        includible in gross income by reason of a direct 
        trustee-to-trustee transfer to a defined benefit 
        governmental plan (as defined in section 414(d)) if 
        such transfer is--
                  (A) for the purchase of permissive service 
                credit (as defined in section 415(n)(3)(A)) 
                under such plan, or
                  (B) a repayment to which section 415 does not 
                apply by reason of subsection (k)(3) thereof.

           *       *       *       *       *       *       *

SEC. 404. DEDUCTION FOR CONTRIBUTIONS OF AN EMPLOYER TO AN EMPLOYEES' 
                    TRUST OR ANNUITY PLAN AND COMPENSATION UNDER A 
                    DEFERRED-PAYMENT PLAN.

  (a) General Rule.--If contributions are paid by an employer 
to or under a stock bonus, pension, profit-sharing, or annuity 
plan, or if compensation is paid or accrued on account of any 
employee under a plan deferring the receipt of such 
compensation, such contributions or compensation shall not be 
deductible under this chapter; but, if they would otherwise be 
deductible, they shall be deductible under this section, 
subject, however, to the following limitations as to the 
amounts deductible in any year:
          (1) Pension trusts.--
                  (A) * * *

           *       *       *       *       *       *       *

                  [(D) Special rule in case of certain plans.--
                In the case of any defined benefit plan (other 
                than a multiemployer plan) which has more than 
                100 participants for the plan year, except as 
                provided in regulations, the maximum amount 
                deductible under the limitations of this 
                paragraph shall not be less than the unfunded 
                current liability determined under section 
                412(l). For purposes of determining whether a 
                plan has more than 100 participants, all 
                defined benefit plans maintained by the same 
                employer (or any member of such employer's 
                controlled group (within the meaning of section 
                412(l)(8)(C))) shall be treated as 1 plan, but 
                only employees of such member or employer shall 
                be taken into account.]
                  (D) Special rule in case of certain plans.--
                          (i) In general.--In the case of any 
                        defined benefit plan, except as 
                        provided in regulations, the maximum 
                        amount deductible under the limitations 
                        of this paragraph shall not be less 
                        than the unfunded termination liability 
                        (determined as if the proposed 
                        termination date referred to in section 
                        4041(b)(2)(A)(i)(II) of the Employee 
                        Retirement Income Security Act of 1974 
                        were the last day of the plan year).
                          (ii) Plans with less than 100 
                        participants.--For purposes of this 
                        subparagraph, in the case of a plan 
                        which has less than 100 participants 
                        for the plan year, termination 
                        liability shall not include the 
                        liability attributable to benefit 
                        increases for highly compensated 
                        employees (as defined in section 
                        414(q)) resulting from a plan amendment 
                        which is made or becomes effective, 
                        whichever is later, within the last 2 
                        years before the termination date.
                          (iii) Rule for determining number of 
                        participants.--For purposes of 
                        determining whether a plan has more 
                        than 100 participants, all defined 
                        benefit plans maintained by the same 
                        employer (or any member of such 
                        employer's controlled group (within the 
                        meaning of section 412(l)(8)(C))) shall 
                        be treated as one plan, but only 
                        employees of such member or employer 
                        shall be taken into account.
                          (iv) Plans maintained by professional 
                        service employers.--Clause (i) shall 
                        not apply to a plan described in 
                        section 4021(b)(13) of the Employee 
                        Retirement Income Security Act of 1974.

           *       *       *       *       *       *       *

          (3) Stock bonus and profit-sharing trusts.--
                  (A) Limits on deductible contributions.--
                          (i) In general.--In the taxable year 
                        when paid, if the contributions are 
                        paid into a stock bonus or profit-
                        sharing trust, and if such taxable year 
                        ends within or with a taxable year of 
                        the trust with respect to which the 
                        trust is exempt under section 501(a), 
                        in an amount not in excess of the 
                        greater of--
                                  (I) [15] 20 percent of the 
                                compensation otherwise paid or 
                                accrued during the taxable year 
                                to the beneficiaries under the 
                                stock bonus or profit-sharing 
                                plan, or

           *       *       *       *       *       *       *

                  (B) Profit-sharing plan of affiliated 
                group.--In the case of a profit-sharing plan, 
                or a stock bonus plan in which contributions 
                are determined with reference to profits, of a 
                group of corporations which is an affiliated 
                group within the meaning of section 1504, if 
                any member of such affiliated group is 
                prevented from making a contribution which it 
                would otherwise have made under the plan, by 
                reason of having no current or accumulated 
                earnings or profits or because such earnings or 
                profits are less than the contributions which 
                it would otherwise have made, then so much of 
                the contribution which such member was so 
                prevented from making may be made, for the 
                benefit of the employees of such member, by the 
                other members of the group, to the extent of 
                current or accumulated earningsor profits, 
except that such contribution by each such other member shall be 
limited, where the group does not file a consolidated return, to that 
proportion of its total current and accumulated earnings or profits 
remaining after adjustment for its contribution deductible without 
regard to this subparagraph which the total prevented contribution 
bears to the total current and accumulated earnings or profits of all 
the members of the group remaining after adjustment for all 
contributions deductible without regard to this subparagraph. 
Contributions made under the preceding sentence shall be deductible 
under subparagraph (A) of this paragraph by the employer making such 
contribution, and, for the purpose of determining amounts which may be 
carried forward and deducted under the second sentence of subparagraph 
(A) of this paragraph in succeeding taxable years, shall be deemed to 
have been made by the employer on behalf of whose employees such 
contributions were made. [The term ``compensation otherwise paid or 
accrued during the taxable year to all employees'' shall include any 
amount with respect to which an election under section 415(c)(3)(C) is 
in effect, but only to the extent that any contribution with respect to 
such amount is nonforfeitable.]

           *       *       *       *       *       *       *

          (10) Contributions by certain ministers to retirement 
        income accounts.--In the case of contributions made by 
        a minister described in section 414(e)(5) to a 
        retirement income account described in section 
        403(b)(9) and not by a person other than such minister, 
        such contributions--
                  (A) * * *
                  (B) shall be deductible under this subsection 
                to the extent such contributions do not exceed 
                the limit on elective deferrals under section 
                402(g)[, the exclusion allowance under section 
                403(b)(2),] or the limit on annual additions 
                under section 415.
        For purposes of this paragraph, all plans in which the 
        minister is a participant shall be treated as one plan.

           *       *       *       *       *       *       *

          (12) Definition of compensation.--For purposes of 
        paragraphs (3), (7), (8), and (9), the term 
        ``compensation otherwise paid or accrued during the 
        taxable year'' shall include amounts treated as 
        ``participant's compensation'' under subparagraph (C) 
        or (D) of section 415(c)(3).

           *       *       *       *       *       *       *

  (h) Special Rules for Simplified Employee Pensions.--
          (1) In general.--Employer contributions to a 
        simplified employee pension shall be treated as if they 
        are made to a plan subject to the requirements of this 
        section. Employer contributions to a simplified 
        employee pension are subject to the following 
        limitations:
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) The amount deductible in a taxable year 
                for a simplified employee pension shall not 
                exceed [15] 20 percent of the compensation paid 
                to the employees during the calendar year 
                ending with or within the taxable year (or 
                during the taxable year in the case of a 
                taxable year described in subparagraph 
                (A)(ii)). The excess of the amount contributed 
                over the amount deductible for a taxable year 
                shall be deductible in the succeeding taxable 
                years in order of time, subject to the [15] 20 
                percent limit of the preceding sentence.

           *       *       *       *       *       *       *

  (k) Deduction for dividends Paid on Certain Employer 
Securities.--
          (1) * * *
          (2) Applicable dividend.--For purposes of this 
        subsection--
                  (A) In general.--The term ``applicable 
                dividend'' means any dividend which, in 
                accordance with the plan provisions--
                          (i) is paid in cash to the 
                        participants in the plan or their 
                        beneficiaries,
                          (ii) is paid to the plan and is 
                        distributed in cash to participants in 
                        the plan or their beneficiaries not 
                        later than 90 days after the close of 
                        the plan year in which paid, [or]
                          (iii) is, at the election of such 
                        participants or their beneficiaries--
                                  (I) payable as provided in 
                                clause (i) or (ii), or
                                  (II) paid to the plan and 
                                reinvested in qualifying 
                                employer securities, or
                          [(iii)] (iv) is used to make payments 
                        on a loan described in subsection 
                        (a)(9) the proceeds of which were used 
                        to acquire the employer securities 
                        (whether or not allocated to 
                        participants) with respect to which the 
                        dividend is paid.

           *       *       *       *       *       *       *

  (l) Limitation on Amount of Annual Compensation Taken Into 
Account.--For purposes of applying the limitations of this 
section, the amount of annual compensation of each employee 
taken into account under the plan for any year shall not exceed 
[$150,000] $200,000. The Secretary shall adjust the [$150,000] 
$200,000 amount at the same time, and by the same amount, as 
any adjustment under section 401(a)(17)(B). For purposes of 
clause (i), (ii), or (iii) of subsection (a)(1)(A), and in 
computing the full funding limitation, any adjustment under the 
preceding sentence shall not be taken into account for any year 
before the year for which such adjustment first takes effect.

           *       *       *       *       *       *       *

  (n) Elective Deferrals Not Taken Into Account for Purposes of 
Deduction Limits.--Elective deferrals (as defined in section 
402(g)(3)) shall not be subject to any limitation contained in 
paragraph (3), (7), or (9) of subsection (a), and such elective 
deferrals shall not be taken into account in applying any such 
limitation to any other contributions.

           *       *       *       *       *       *       *

SEC. 408. INDIVIDUAL RETIREMENT ACCOUNTS.

  (a) Individual Retirement Account.--For purposes of this 
section, the term ``individual retirement account'' means a 
trustcreated or organized in the United States for the 
exclusive benefit of an individual or his beneficiaries, but only if 
the written governing instrument creating the trust meets the following 
requirements:
          (1) Except in the case of a rollover contribution 
        described in subsection (d)(3) in section 402(c), 
        403(a)(4), [or 403(b)(8),] 403(b)(8), or 457(e)(16) no 
        contribution will be accepted unless it is in cash, and 
        contributions will not be accepted for the taxable year 
        [in excess of $2,000 on behalf of any individual] on 
        behalf of any individual in excess of the amount in 
        effect for such taxable year under section 
        219(b)(1)(A).

           *       *       *       *       *       *       *

  (b) Individual Retirement Annuity.--For purposes of this 
section, the term ``individual retirement annuity'' means an 
annuity contract, or an endowment contract (as determined under 
regulations prescribed by the Secretary), issued by an 
insurance company which meets the following requirements:
          (1) * * *
          (2) Under the contract--
                  (A) the premiums are not fixed,
                  (B) the annual premium on behalf of any 
                individual will not exceed [$2,000] the dollar 
                amount in effect under section 219(b)(1)(A), 
                and

           *       *       *       *       *       *       *

          (4) The entire interest of the owner is 
        nonforfeitable.
Such term does not include such an annuity contract for any 
taxable year of the owner in which it is disqualified on the 
application of subsection (e) or for any subsequent taxable 
year. For purposes of this subsection, no contract shall be 
treated as an endowment contract if it matures later than the 
taxable year in which the individual in whose name such 
contract is purchased attains age 70\1/2\; if it is not for the 
exclusive benefit of the individual in whose name it is 
purchased or his beneficiaries; or if the aggregate annual 
premiums under all such contracts purchased in the name of such 
individual for any taxable year exceed [$2,000] the dollar 
amount in effect under section 219(b)(1)(A).

           *       *       *       *       *       *       *

  (d) Tax Treatment of Distributions.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Rollover contribution.--An amount is described in 
        this paragraph as a rollover contribution if it meets 
        the requirements of subparagraphs (A) and (B).
                  (A) In general.--Paragraph (1) does not apply 
                to any amount paid or distributed out of an 
                individual retirement account or individual 
                retirement annuity to the individual for whose 
                benefit the account or annuity is maintained 
                if--
                          (i) the entire amount received 
                        (including money and any other 
                        property) is paid into an individual 
                        retirement account or individual 
                        retirement annuity (other than an 
                        endowment contract) for the benefit of 
                        such individual not later than the 60th 
                        day after the day on which he receives 
                        the payment or distribution; or
                          [(ii) no amount in the account and no 
                        part of the value of the annuity is 
                        attributable to any source other than a 
                        rollover contribution (as defined in 
                        section 402 from an employee's trust 
                        described in section 401(a) which is 
                        exempt from tax under section 501(a) or 
                        from an annuity plan described in 
                        section 403(a) (and any earnings on 
                        such contribution), and the entire 
                        amount received (including property and 
                        other money) is paid (for the benefit 
                        of such individual) into another such 
                        trust or annuity plan not later than 
                        the 60th day on which the individual 
                        receives the payment or the 
                        distribution; or
                          [(iii)(I) the entire amount received 
                        (including money and other property) 
                        represents the entire interest in the 
                        account or the entire value of the 
                        annuity,
                                  [(II) no amount in the 
                                account and no part of the 
                                value of the annuity is 
                                attributable to any source 
                                other than a rollover 
                                contribution from an annuity 
                                contract described in section 
                                403(b) and any earnings on such 
                                rollover, and
                                  [(II) the entire amount 
                                thereof is paid into another 
                                annuity contract described in 
                                section 403(b) (for the benefit 
                                of such individual) not later 
                                than the 60th day after he 
                                receives the payment or 
                                distribution.]
                          (ii) the entire amount received 
                        (including money and any other 
                        property) is paid into an eligible 
                        retirement plan for the benefit of such 
                        individual not later than the 60th day 
                        after the date on which the payment or 
                        distribution is received, except that 
                        the maximum amount which may be paid 
                        into such plan may not exceed the 
                        portion of the amount received which is 
                        includible in gross income (determined 
                        without regard to this paragraph).
                For purposes of clause (ii), the term 
                ``eligible retirement plan'' means an eligible 
                retirement plan described in clause (iii), 
                (iv), (v), or (vi) of section 402(c)(8)(B).

           *       *       *       *       *       *       *

                  (D) Partial rollovers permitted.--
                          (i) In general.--If any amount paid 
                        or distributed out of an individual 
                        retirement account or individual 
                        retirement annuity would meet the 
                        requirements of subparagraph (A) but 
                        for the fact that the entire amount was 
                        not paid into an eligible plan as 
                        required by clause [(i), (ii), or 
                        (iii)] (i) or (ii) of subparagraph (A), 
                        such amount shall be treated as meeting 
                        the requirements of subparagraph (A) to 
                        the extent it is paid into an eligible 
                        plan referred to in such clause not 
                        later than the 60th day referred to in 
                        such clause.

           *       *       *       *       *       *       *

                  [(G) Simple retirements accounts.--This 
                paragraph shall not apply to any amount paid or 
                distributed out of a simple retirement account 
                (as defined in subsection (p)) unless--
                          [(i) it is paid into another simple 
                        retirement account, or
                          [(ii) in the case of any payment or 
                        distribution to which section 72(t)(6) 
                        does not apply, it is paid into an 
                        individual retirement plan.]
                  (G) Simple retirement accounts.--In the case 
                of any payment or distribution out of a simple 
                retirement account (as defined in subsection 
                (p)) to which section 72(t)(6) applies, this 
                paragraph shall not apply unless such payment 
                or distribution is paid into another simple 
                retirement account.
                  (H) Application of section 72.--
                          (i) In general.--If--
                                  (I) a distribution is made 
                                from an individual retirement 
                                plan, and
                                  (II) a rollover contribution 
                                is made to an eligible 
                                retirement plan described in 
                                section 402(c)(8)(B)(iii), 
                                (iv), (v), or (vi) with respect 
                                to all or part of such 
                                distribution,
                        then, notwithstanding paragraph (2), 
                        the rules of clause (ii) shall apply 
                        for purposes of applying section 72.
                          (ii) Applicable rules.--In the case 
                        of a distribution described in clause 
                        (i)--
                                  (I) section 72 shall be 
                                applied separately to such 
                                distribution,
                                  (II) notwithstanding the pro 
                                rata allocation of income on, 
                                and investment in, the contract 
                                to distributions under section 
                                72, the portion of such 
                                distribution rolled over to an 
                                eligible retirement plan 
                                described in clause (i) shall 
                                be treated as from income on 
                                the contract (to the extent of 
                                the aggregate income on the 
                                contract from all individual 
                                retirement plans of the 
                                distributee), and
                                  (III) appropriate adjustments 
                                shall be made in applying 
                                section 72 to other 
                                distributions in such taxable 
                                year and subsequent taxable 
                                years.
                  (I) Waiver of 60-day requirement.--The 
                Secretary may waive the 60-day requirement 
                under subparagraphs (A) and (D) where the 
                failure to waive such requirement would be 
                against equity or good conscience, including 
                casualty, disaster, or other events beyond the 
                reasonable control of the individual subject to 
                such requirement.

           *       *       *       *       *       *       *

  (j) Increase in Maximum Limitations for Simplified Employee 
Pensions.--In the case of any simplified employee pension, 
subsections (a)(1) and (b)(2) of this section shall be applied 
by increasing the [$2,000] amounts contained therein by the 
amount of the limitation in effect under section 415(c)(1)(A).
  (k) Simplified Employee Pension Defined.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Contributions may not discriminate in favor of 
        the highly compensated, etc.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Contributions must bear uniform 
                relationship to total compensation.--For 
                purposes of subparagraph (A), and except as 
                provided in subparagraph (D), employer 
                contributions to simplified employee pensions 
                (other than contributions under an arrangement 
                described in paragraph (6)) shall be considered 
                discriminatory unless contributions thereto 
                bear a uniform relationship to the compensation 
                (not in excess of the first [$150,000] 
                $200,000) of each employee maintaining a 
                simplified employee pension.

           *       *       *       *       *       *       *

          (6) Employee may elect salary reduction 
        arrangement.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) Deferral percentage.--For purposes of 
                this paragraph, the deferral percentage for an 
                employee for a year shall be the ratio of--
                          (i) * * *
                          (ii) the employee's compensation (not 
                        in excess of the first [$150,000] 
                        $200,000) for the year.

           *       *       *       *       *       *       *

          (8) Cost-of-living adjustment.--The Secretary shall 
        adjust the $300 amount in paragraph (2)(C) at the same 
        time and in the same manner as under section 415(d) and 
        shall adjust the [$150,000] $200,000 amount in 
        paragraphs (3)(C) and (6)(D)(ii) at the same time, and 
        by the same amount, as any adjustment under section 
        401(a)(17)(B) ; except that any increase in the $300 
        amount which is not a multiple of $50 shall be rounded 
        to the next lowest multiple of $50.

           *       *       *       *       *       *       *

  (p) Simple Retirement Accounts.--
          (1) * * *
          (2) Qualified salary reduction arrangement.--
                  (A) In general.--For purposes of this 
                subsection, the term ``qualified salary 
                reduction arrangement'' means a written 
                arrangement of an eligible employer under 
                which--
                          (i) * * *
                          (ii) the amount which an employee may 
                        elect under clause (i) for any year is 
                        required to be expressed as a 
                        percentage of compensation and may 
notexceed a total of [$6,000] the applicable dollar amount for any 
year,

           *       *       *       *       *       *       *

                  [(E) Cost-of-living adjustment.--The 
                Secretary shall adjust the $6,000 amount under 
                subparagraph (A)(ii) at the same time and in 
                the same manner as under section 415(d), except 
                that the base period taken into account shall 
                be the calendar quarter ending September 30, 
                1996, and any increase under this subparagraph 
                which is not a multiple of $500 shall be 
                rounded to the next lower multiple of $500.]
                  (E) Applicable dollar amount; cost-of-living 
                adjustment.--
                          (i) In general.--For purposes of 
                        subparagraph (A)(ii), the applicable 
                        dollar amount shall be the amount 
                        determined in 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.

                          (ii) Cost-of-living adjustment.--In 
                        the case of a year beginning after 
                        December 31, 2004, the Secretary shall 
                        adjust the $10,000 amount under clause 
                        (i) at the same time and in the same 
                        manner as under section 415(d), except 
                        that the base period taken into account 
                        shall be the calendar quarter beginning 
                        July 1, 2003, and any increase under 
                        this subparagraph which is not a 
                        multiple of $500 shall be rounded to 
                        the next lower multiple of $500.

           *       *       *       *       *       *       *

          (6) Definitions.--For purposes of this subsection--
                  (A) Compensation.--
                          (i) * * *
                          (ii) Self-employed.--In the case of 
                        an employee described in subparagraph 
                        (B), the term ``compensation'' means 
                        net earnings from self-employment 
                        determined under section 1402(a) 
                        without regard to any contribution 
                        under this subsection. The preceding 
                        sentence shall be applied as if the 
                        term ``trade or business'' for purposes 
                        of section 1402 included service 
                        described in section 1402(c)(6).

           *       *       *       *       *       *       *

          (8) Coordination with maximum limitation under 
        subsection (a).--In the case of any simple retirement 
        account, subsections (a)(1) and (b)(2) shall be applied 
        by substituting ``the sum of the dollar amount in 
        effect under paragraph (2)(A)(ii) of this subsection 
        and the employer contribution required under 
        subparagraph (A)(ii) or (B)(i) of paragraph (2) of this 
        subsection, whichever is applicable'' for ``[$2,000] 
        the dollar amount in effect under section 
        219(b)(1)(A)''.

           *       *       *       *       *       *       *

SEC. 408A. ROTH IRA'S.

  (a) * * *

           *       *       *       *       *       *       *

  (e) Qualified Rollover Contribution.--For purposes of this 
section, the term ``qualified rollover contribution'' means a 
rollover contribution to a Roth IRA from another such account, 
or from an individual retirement plan, but only if such 
rollover contribution meets the requirements of section 
408(d)(3). Such term includes a rollover contribution described 
in section 402A(c)(3)(A). For purposes of section 408(d)(3)(B), 
there shall be disregarded any qualified rollover contribution 
from an individual retirement plan (other than a Roth IRA) to a 
Roth IRA.

           *       *       *       *       *       *       *

SEC. 409. QUALIFICATIONS FOR TAX CREDIT EMPLOYEE STOCK OWNERSHIP PLANS.

  (a) * * *

           *       *       *       *       *       *       *

  (p) Prohibited Allocations of Securities in an S 
Corporation.--
          (1) In general.--An employee stock ownership plan 
        holding employer securities consisting of stock in an S 
        corporation shall provide that no portion of the assets 
        of the plan attributable to (or allocable in lieu of) 
        such employer securities may, during a nonallocation 
        year, accrue (or be allocated directly or indirectly 
        under any plan of the employer meeting the requirements 
        of section 401(a)) for the benefit of any disqualified 
        person.
          (2) Failure to meet requirements.--
                  (A) In general.--If a plan fails to meet the 
                requirements of paragraph (1), the plan shall 
                be treated as having distributed to any 
                disqualified person the amount allocated to the 
                account of such person in violation of 
                paragraph (1) at the time of such allocation.
                  (B) Cross reference.--

          For excise tax relating to violations of paragraph (1) and 
        ownership of synthetic equity, see section 4979A.

          (3) Nonallocation year.--For purposes of this 
        subsection--
                  (A) In general.--The term ``nonallocation 
                year'' means any plan year of an employee stock 
                ownership plan if, at any time during such plan 
                year--
                          (i) such plan holds employer 
                        securities consisting of stock in an S 
                        corporation, and
                          (ii) disqualified persons own at 
                        least 50 percent of the number of 
                        shares of stock in the S corporation.
                  (B) Attribution rules.--For purposes of 
                subparagraph (A)--
                          (i) In general.--The rules of section 
                        318(a) shall apply for purposes of 
                        determining ownership, except that--
                                  (I) in applying paragraph (1) 
                                thereof, the members of an 
                                individual's family shall 
                                include members of the family 
                                described in paragraph (4)(D), 
                                and
                                  (II) paragraph (4) thereof 
                                shall not apply.
                          (ii) Deemed-owned shares.--
                        Notwithstanding the employee trust 
                        exception in section 318(a)(2)(B)(i), 
                        individual shall be treated as owning 
                        deemed-owned shares of the individual.
                Solely for purposes of applying paragraph (5), 
                this subparagraph shall be applied after the 
                attribution rules of paragraph (5) have been 
                applied.
          (4) Disqualified person.--For purposes of this 
        subsection--
                  (A) In general.--The term ``disqualified 
                person'' means any person if--
                          (i) the aggregate number of deemed-
                        owned shares of such person and the 
                        members of such person's family is at 
                        least 20 percent of the number of 
                        deemed-owned shares of stock in the S 
                        corporation, or
                          (ii) in the case of a person not 
                        described in clause (i), the number of 
                        deemed-owned shares of such person is 
                        at least 10 percent of the number of 
                        deemed-owned shares of stock in such 
                        corporation.
                  (B) Treatment of family members.--In the case 
                of a disqualified person described in 
                subparagraph (A)(i), any member of such 
                person's family with deemed-owned shares shall 
                be treated as a disqualified person if not 
                otherwise treated as a disqualified person 
                under subparagraph (A).
                  (C) Deemed-owned shares.--
                          (i) In general.--The term ``deemed-
                        owned shares'' means, with respect to 
                        any person--
                                  (I) the stock in the S 
                                corporation constituting 
                                employer securities of an 
                                employee stock ownership plan 
                                which is allocated to such 
                                person under the plan, and
                                  (II) such person's share of 
                                the stock in such corporation 
                                which is held by such plan but 
                                which is not allocated under 
                                the plan to participants.
                          (ii) Person's share of unallocated 
                        stock.--For purposes of clause (i)(II), 
                        a person's share of unallocated S 
                        corporation stock held by such plan is 
                        the amount of the unallocated stock 
                        which would be allocated to such person 
                        if the unallocated stock were allocated 
                        to all participants in the same 
                        proportions as the most recent stock 
                        allocation under the plan.
                  (D) Member of family.--For purposes of this 
                paragraph, the term ``member of the family'' 
                means, with respect to any individual--
                          (i) the spouse of the individual,
                          (ii) an ancestor or lineal descendant 
                        of the individual or the individual's 
                        spouse,
                          (iii) a brother or sister of the 
                        individual or the individual's spouse 
                        and any lineal descendant of the 
                        brother or sister, and
                          (iv) the spouse of any individual 
                        described in clause (ii) or (iii).
                A spouse of an individual who is legally 
                separated from such individual under a decree 
                of divorce or separate maintenance shall not be 
                treated as such individual's spouse for 
                purposes of this subparagraph.
          (5) Treatment of synthetic equity.--For purposes of 
        paragraphs (3) and (4), in the case of a person who 
        owns synthetic equity in the S corporation, except to 
        the extent provided in regulations, the shares of stock 
        in such corporation on which such synthetic equity is 
        based shall be treated as outstanding stock in such 
        corporation and deemed-owned shares of such person if 
        such treatment of synthetic equity of 1 or more such 
        persons results in--
                  (A) the treatment of any person as a 
                disqualified person, or
                  (B) the treatment of any year as a 
                nonallocation year.
        For purposes of this paragraph, synthetic equity shall 
        be treated as owned by a person in the same manner as 
        stock is treated as owned by a person under the rules 
        of paragraphs (2) and (3) of section 318(a). If, 
        without regard to this paragraph, a person is treated 
        as a disqualified person or a year is treated as a 
        nonallocation year, this paragraph shall not be 
        construed to result in the person or year not being so 
        treated.
          (6) Definitions.--For purposes of this subsection--
                  (A) Employee stock ownership plan.--The term 
                ``employee stock ownership plan'' has the 
                meaning given such term by section 4975(e)(7).
                  (B) Employer securities.--The term ``employer 
                security'' has the meaning given such term by 
                section 409(l).
                  (C) Synthetic equity.--The term ``synthetic 
                equity'' means any stock option, warrant, 
                restricted stock, deferred issuance stock 
                right, or similar interest or right that gives 
                the holder the right to acquire or receive 
                stock of the S corporation in the future. 
                Except to the extent provided in regulations, 
                synthetic equity also includes a stock 
                appreciation right, phantom stock unit, or 
                similar right to a future cash payment based on 
                the value of such stock or appreciation in such 
                value.
          (7) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the 
        purposes of this subsection.
  [(p)] (q) Cross references.--

          (1) For requirements for allowance of employee plan credit, 
        see section 48(n).
          (2) For assessable penalties for failure to meet requirements 
        of this section, or for failure to make contributions required 
        with respect to the allowance of an employee plan credit or 
        employee stock ownership credit, see section 6699.
          (3) For requirements for allowance of an employee stock 
        ownership credit, see section 41.

           *       *       *       *       *       *       *

Subpart B--Special Rules

           *       *       *       *       *       *       *

SEC. 410. MINIMUM PARTICIPATION STANDARDS.

  (a) * * *
  (b) Minimum Coverage Requirements.--
          (1) In general.--A trust shall not constitute a 
        qualified trust under section 401(a) unless such trust 
        is designated by the employer as part of a plan which 
        meets 1 of the following requirements:
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) In the case that the plan fails to meet 
                the requirements of subparagraphs (A), (B) and 
                (C), the plan--
                          (i) satisfies subparagraph (B), as in 
                        effect immediately before the enactment 
                        of the Tax Reform Act of 1986,
                          (ii) is submitted to the Secretary 
                        for a determination of whether it 
                        satisfies the requirement described in 
                        clause (i), and
                          (iii) satisfies conditions prescribed 
                        by the Secretary by regulation that 
                        appropriately limit the availability of 
                        this subparagraph.
                Clause (ii) shall apply only to the extent 
                provided by the Secretary.

           *       *       *       *       *       *       *

SEC. 411. MINIMUM VESTING STANDARDS.

  (a) General Rule.--A trust shall not constitute a qualified 
trust under section 401(a) unless the plan of which such trust 
is a part provides that an employee's right to his normal 
retirement benefit is nonforfeitable upon the attainment of 
normal retirement age (as defined in paragraph (8)) and in 
addition satisfies the requirements of paragraphs (1), (2), and 
(11) of this subsection and the requirements of subsection 
(b)(3), and also satisfies, in the case of a defined benefit 
plan, the requirements of subsection (b)(1) and, in the case of 
a defined contribution plan, the requirements of subsection 
(b)(2).
          (1) * * *
          (2) Employer contributions.--[A plan] Except as 
        provided in paragraph (12), a plan satisfies the 
        requirements of this paragraph if it satisfies the 
        requirements of subparagraph (A) or (B).
                  (A) * * *
          (11) Restrictions on certain mandatory 
        distributions.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) Special rule for rollover 
                contributions.--A plan shall not fail to meet 
                the requirements of this paragraph if, under 
                the terms of the plan, the present value of the 
                nonforfeitable accrued benefit is determined 
                without regard to that portion of such benefit 
                which is attributable to rollover contributions 
                (and earnings allocable thereto). For purposes 
                of this subparagraph, the term ``rollover 
                contributions'' means any rollover contribution 
                under sections 402(c), 403(a)(4), 403(b)(8), 
                408(d)(3)(A)(ii), and 457(e)(16).

           *       *       *       *       *       *       *

          (12) Faster vesting for matching contributions.--In 
        the case of matching contributions (as defined in 
        section 401(m)(4)(A)), paragraph (2) shall be applied--
                  (A) by substituting ``3 years'' for ``5 
                years'' in subparagraph (A), and
                  (B) by substituting the following table for 
                the table contained in subparagraph (B):

                                                      The nonforfeitable
        Years of service:                               percentage is:  
          2...................................................      20  
          3...................................................      40  
          4...................................................      60  
          5...................................................      80  
          6...................................................    100.  
  (d) Special Rules.--
          (1) * * *

           *       *       *       *       *       *       *

          (6) Accrued benefit not to be decreased by 
        amendment.--
                  (A) * * *
                  (B) Treatment of certain plan amendments.--
                For purposes of subparagraph (A), a plan 
                amendment which has the effect of--
                          (i) eliminating or reducing an early 
                        retirement benefit or a retirement-type 
                        subsidy (as defined in regulations), or
                          (ii) eliminating an optional form of 
                        benefit,
                with respect to benefits attributable to 
                service before the amendment shall be treated 
                as reducing accrued benefits. In the case of a 
                retirement-type subsidy, the preceding sentence 
                shall apply only with respect to a participant 
                who satisfies (either before or after the 
                amendment) the preamendment conditions for the 
                subsidy. The Secretary shall by regulations 
                provide that this subparagraph shall not apply 
                to any plan amendment which reduces or 
                eliminates benefits or subsidies which create 
                significant burdens or complexities for the 
                plan and plan participants and does not 
                adversely affect the rights of any participant 
                in a more than de minimis manner. The Secretary 
                may by regulations provide that this 
                subparagraph shall not apply to a plan 
                amendment described in clause (ii) (other than 
                a plan amendment having an effect described in 
                clause (i)).

           *       *       *       *       *       *       *

                  (D) Plan transfers.--
                          (i) In general.--A defined 
                        contribution plan (in this subparagraph 
                        referred to as the ``transferee plan'') 
                        shall not be treated as failing to meet 
                        the requirements of this subsection 
                        merely because the transferee plan does 
                        not provide some or all of the forms of 
                        distribution previously available under 
                        another defined contribution plan (in 
                        this subparagraph referred to as the 
                        ``transferor plan'') to the extent 
                        that--
                                  (I) the forms of distribution 
                                previously available under the 
                                transferor plan applied to the 
                                account of a participant or 
                                beneficiary under the 
                                transferor plan that was 
                                transferred from the transferor 
                                plan to the transferee plan 
                                pursuant to a direct transfer 
                                rather than pursuant to a 
                                distribution from the 
                                transferor plan,
                                  (II) the terms of both the 
                                transferor plan and the 
                                transferee plan authorize the 
                                transfer described in subclause 
                                (I),
                                  (III) the transfer described 
                                in subclause (I) was made 
                                pursuant to a voluntary 
                                election by the participant or 
                                beneficiary whose account was 
                                transferred to the transferee 
                                plan,
                                  (IV) the election described 
                                in subclause (III) was made 
                                after the participant or 
                                beneficiary received a notice 
                                describing the consequences of 
                                making the election, and
                                  (V) the transferee plan 
                                allows the participant or 
                                beneficiary described in 
                                subclause (III) to receive any 
                                distribution to which the 
                                participant or beneficiary is 
                                entitled under the transferee 
                                plan in the form of a single 
                                sum distribution.
                          (ii) Exception.--Clause (i) shall 
                        apply to plan mergers and other 
                        transactions having the effect of a 
                        direct transfer, including 
                        consolidations of benefits attributable 
                        to different employers within a 
                        multiple employer plan.
                  (E) Elimination of form of distribution.--
                Except to the extent provided in regulations, a 
                defined contribution plan shall not be treated 
                as failing to meet the requirements of this 
                section merely because of the elimination of a 
                form of distribution previously available 
                thereunder. This subparagraph shall not apply 
                to the elimination of a form of distribution 
                with respect to any participant unless--
                          (i) a single sum payment is available 
                        to such participant at the same time or 
                        times as the form of distribution being 
                        eliminated, and
                          (ii) such single sum payment is based 
                        on the same or greater portion of the 
                        participant's account as the form of 
                        distribution being eliminated.

           *       *       *       *       *       *       *

SEC. 412. MINIMUM FUNDING STANDARDS.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Special Rules.--
          (1) * * *

           *       *       *       *       *       *       *

          (7) Full-funding limitation.--
                  (A) In general.--For purposes of paragraph 
                (6), the term ``full-funding limitation'' means 
                the excess (if any) of--
                          (i) the lesser of
                                  (I) [the applicable 
                                percentage] in the case of plan 
                                years beginning before January 
                                1, 2004, the applicable 
                                percentage of current liability 
                                (including the expected 
                                increase in current liability 
                                due to benefits accruing during 
                                the plan year), or

           *       *       *       *       *       *       *

                  [(F) Applicable percentage.--For purposes of 
                subparagraph (A)(i)(I), the applicable 
                percentage shall be determined in accordance 
                with the following table:

[In the case of any plan                                  The applicable
year beginning in--                                      percentage is--
    1999 or 2000.................................................. 155  
    2001 or 2002.................................................. 160  
    2003 or 2004.................................................. 165  
    2005 and succeeding years.....................................170]  

                  (F) Applicable percentage.--For purposes of 
                subparagraph (A)(i)(I), the applicable 
                percentage shall be determined in accordance 
                with the following table:

        In the case of any plan year                      The applicable
          beginning in--                                 percentage is--
          2002................................................    165   
170.    2003................................................

           *       *       *       *       *       *       *

          [(9) Annual valuation.--For purposes of this section, 
        a determination of experience gains and losses and a 
        valuation of the plan's liability shall be made not 
        less frequently than once every year, except that such 
        determination shall be made more frequently to the 
        extent required in particular cases under regulations 
        prescribed by the Secretary.]
          (9) Annual valuation.--
                  (A) In general.--For purposes of this 
                section, a determination of experience gains 
                and losses and a valuation of the plan's 
                liability shall be made not less frequently 
                than once every year, except that such 
                determination shall be made more frequently to 
                the extent required in particular cases under 
                regulations prescribed by the Secretary.
                  (B) Valuation date.--
                          (i) Current year.--Except as provided 
                        in clause (ii), the valuation referred 
                        to in subparagraph (A) shall be made as 
                        of a date within the plan year to which 
                        the valuation refers or within one 
                        month prior to the beginning of such 
                        year.
                          (ii) Election to use prior year 
                        valuation.--The valuation referred to 
                        in subparagraph (A) may be made as of a 
                        date within the plan year prior to the 
                        year to which the valuation refers if--
                                  (I) an election is in effect 
                                under this clause with respect 
                                to the plan, and
                                  (II) as of such date, the 
                                value of the assets of the plan 
                                are not less than 125 percent 
                                of the plan's current liability 
                                (as defined in paragraph 
                                (7)(B)).
                          (iii) Adjustments.--Information under 
                        clause (ii) shall, in accordance with 
                        regulations, be actuarially adjusted to 
                        reflect significant differences in 
                        participants.
                          (iv) Election.--An election under 
                        clause (ii), once made, shall be 
                        irrevocable without the consent of the 
                        Secretary.

           *       *       *       *       *       *       *

SEC. 414. DEFINITIONS AND SPECIAL RULES.

  (a) * * *

           *       *       *       *       *       *       *

  (p) Qualified Domestic Relations Order Defined.--For purposes 
of this subsection and section 401(a)(13)--
          (1) * * *

           *       *       *       *       *       *       *

          (10) Waiver of certain distribution requirements.--
        With respect to the requirements of subsections (a) and 
        (k) of section 401, section 403(b), [and section 
        409(d)] section 409(d), and section 457(d), a plan 
        shall not be treated as failing to meet such 
        requirements solely by reason of payments to an 
        alternative payee pursuant to a qualified domestic 
        relations order.
          (11) Application of rules to [governmental and church 
        plans] certain other plans.--For purposes of this 
        title, a distribution or payment from a governmental 
        plan (as defined in subsection (d)) or a church plan 
        (as described in subsection (e)) or an eligible 
        deferred compensation plan (within the meaning of 
        section 457(b)) shall be treated as made pursuant to a 
        qualified domestic relations order if it is made 
        pursuant to a domestic relations order which meets the 
        requirement of clause (i) of paragraph (1)(A).
          (12) Tax treatment of payments from a section 457 
        plan.--If a distribution or payment from an eligible 
        deferred compensation plan described in section 457(b) 
        is made pursuant to a qualified domestic relations 
        order, rules similar to the rules of section 
        402(e)(1)(A) shall apply to such distribution or 
        payment.
          [(12)] (13) Consultation with the Secretary.--In 
        prescribing regulations under this subsection and 
        section 401(a)(13), the Secretary of Labor shall 
        consult with the Secretary.

           *       *       *       *       *       *       *

  (v) Catch-up Contributions for Individuals Age 50 or Over.--
          (1) In general.--An applicable employer plan shall 
        not be treated as failing to meet any requirement of 
        this title solely because the plan permits an eligible 
        participant to make additional elective deferrals in 
        any plan year.
          (2) Limitation on amount of additional deferrals.--A 
        plan shall not permit additional elective deferrals 
        under paragraph (1) for any year in an amount greater 
        than the lesser of--
                  (A) $5,000, or
                  (B) the excess (if any) of--
                          (i) the participant's compensation 
                        for the year, over
                          (ii) any other elective deferrals of 
                        the participant for such year which are 
                        made without regard to this subsection.
          (3) Treatment of contributions.--In the case of any 
        contribution to a plan under paragraph (1), such 
        contribution shall not, with respect to the year in 
        which the contribution is made--
                  (A) be subject to any otherwise applicable 
                limitation contained in section 402(g), 
                402(h)(2), 404(a), 404(h), 408(p)(2)(A)(ii), 
                415, or 457, or
                  (B) be taken into account in applying such 
                limitations to other contributions or benefits 
                under such plan or any other such plan.
          (4) Application of nondiscrimination rules.--
                  (A) In general.--An applicable employer plan 
                shall not be treated as failing to meet the 
                nondiscrimination requirements under section 
                401(a)(4) with respect to benefits, rights, and 
                features if the plan allows all eligible 
                participants to make the same election with 
                respect to the additional elective deferrals 
                under this subsection.
                  (B) Aggregation.--For purposes of 
                subparagraph (A), all plans maintained by 
                employers who are treated as a single employer 
                under subsection (b), (c), (m), or (o) of 
                section 414 shall be treated as 1 plan.
          (5) Eligible participant.--For purposes of this 
        subsection, the term ``eligible participant'' means, 
        with respect to any plan year, a participant in a 
        plan--
                  (A) who has attained the age of 50 before the 
                close of the plan year, and
                  (B) with respect to whom no other elective 
                deferrals may (without regard to this 
                subsection) be made to the plan for the plan 
                year by reason of the application of any 
                limitation or other restriction described in 
                paragraph (3) or comparable limitation 
                contained in the terms of the plan.
          (6) Other definitions and rules.--For purposes of 
        this subsection--
                  (A) Applicable employer plan.--The term 
                ``applicable employer plan'' means--
                          (i) an employees' trust described in 
                        section 401(a) which is exempt from tax 
                        under section 501(a),
                          (ii) a plan under which amounts are 
                        contributed by an individual's employer 
                        for an annuity contract described in 
                        section 403(b),
                          (iii) an eligible deferred 
                        compensation plan under section 457 of 
                        an eligible employer as defined in 
                        section 457(e)(1)(A), and
                          (iv) an arrangement meeting the 
                        requirements of section 408 (k) or (p).
                  (B) Elective deferral.--The term ``elective 
                deferral'' has the meaning given such term by 
                subsection (u)(2)(C).
                  (C) Exception for section 457 plans.--This 
                subsection shall not apply to an applicable 
                employer plan described in subparagraph 
                (A)(iii) for any year to which section 
                457(b)(3) applies.
                  (D) Cost-of-living adjustment.--In the case 
                of a year beginning after December 31, 2005, 
                the Secretary shall adjust annually the $5,000 
                amount in paragraph (2)(A) for increases in the 
                cost-of-living at the same time and in the same 
                manner as adjustments under section 415(d); 
                except that the base period taken into account 
                shall be the calendar quarter beginning July 1, 
                2004, and any increase under this subparagraph 
                which is not a multiple of $500 shall be 
                rounded to the next lower multiple of $500.

SEC. 415. LIMITATIONS ON BENEFITS AND CONTRIBUTIONS UNDER QUALIFIED 
                    PLANS.

  (a) General Rule.--
          (1) * * *
          (2) Section applies to certain annuities and 
        accounts.--In the case of--
                  (A) * * *

           *       *       *       *       *       *       *

        such a contract, plan, or pension shall not be 
        considered to be described in section 403(a), 403(b), 
        or 408(k), as the case may be, unless it satisfies the 
        requirements of subparagraph (A) or subparagraph (B) of 
        paragraph (1), whichever is appropriate, and has not 
        been disqualified under subsection (g). In the case of 
        an annuity contract described in section 403(b), the 
        preceding sentence shall apply only to the portion of 
        the annuity contract which exceeds the limitation of 
        subsection (b) or the limitation of subsection (c), 
        whichever is appropriate[, and the amount of the 
        contribution for such portion shall reduce the 
        exclusion allowance as provided in section 403(b)(2)].
  (b) Limitation for Defined Benefit Plans.--
          (1) In general.--Benefits with respect to a 
        participant exceed the limitation of this subsection 
        if, when expressed as an annual benefit (within the 
        meaning of paragraph (2)), such annual benefit is 
        greater than the lesser of--
                  (A) [$90,000] $160,000, or

           *       *       *       *       *       *       *

          (2) Annual benefit.--
                  (A) In general.--For purposes of paragraph 
                (1), the term ``annual benefit'' means a 
                benefit payable annually in the form of a 
                straight life annuity (with no ancillary 
                benefits) under a plan to which employees do 
                not contribute and under which no rollover 
                contributions (as defined in sections 402(c), 
                403(a)(4), [and 408(d)(3)] 403(b)(8), 
                408(d)(3), and 457(e)(16)) are made.
                  (B) Adjustment for certain other forms of 
                benefit.--If the benefit under the plan is 
                payable in any form other than the form 
                described in subparagraph (A), or if the 
                employees contribute to the plan or make 
                rollover contributions (as defined in sections 
                402(c), 403(a)(4), [and 408(d)(3)] 403(b)(8), 
                408(d)(3), and 457(e)(16)), the determinations 
                as to whether the limitation described in 
                paragraph (1) has been satisfied shall be made, 
                in accordance with regulations prescribed by 
                the Secretary by adjusting such benefit so that 
                it is equivalent to the benefit described in 
                subparagraph (A). For purposes of this 
                subparagraph, any ancillary benefit which is 
                not directly related to retirement income 
                benefits shall not be taken into account; and 
                that portion of any joint and survivor annuity 
                which constitutes a qualified joint and 
                survivor annuity (as defined in section 417 
                shall not be taken into account.
                  (C) Adjustment to [$90,000] $160,000 limit 
                where benefit begins before [the social 
                security retirement age] age 62.--If the 
                retirement income benefit under the plan begins 
                before [the social security retirement age] age 
                62, the determination as to whether the 
                [$90,000] $160,000 limitation set forth in 
                paragraph (1)(A) has been satisfied shall be 
                made, in accordance with regulations prescribed 
                by the Secretary, by reducing the limitation of 
                paragraph (1)(A) so that such limitation (as so 
                reduced) equals an annual benefit (beginning 
                when such retirement income benefit begins) 
                which is equivalent to a [$90,000] $160,000 
                annual benefit beginning at [the social 
                security retirement age] age 62. [The reduction 
                under this subparagraph shall be made in such 
                manner as the Secretary may prescribe which is 
                consistent with the reduction for old-age 
                insurance benefits commencing before the social 
                security retirement age under the Social 
                Security Act.]
                  (D) Adjustment to [$90,000] $160,000 limit 
                where benefit begins after [the social security 
                retirement age] age 65.--If the retirement 
                income benefit under the plan begins after [the 
                social security retirement age] age 65, the 
                determination as to whether the [$90,000] 
                $160,000 limitation set forth in paragraph 
                (1)(A) has been satisfied shall be made, in 
                accordance with regulations prescribed by the 
                Secretary, by increasing the limitation of 
                paragraph (1)(A) so that such limitation (as so 
                increased) equals an annual benefit (beginning 
                when such retirement income benefit begins) 
                which is equivalent to a [$90,000] $160,000 
                annual benefit beginning at [the social 
                security retirement age] age 65.

           *       *       *       *       *       *       *

                  [(F) Plans maintained by governments and tax-
                exempt organizations.--In the case of a 
                governmental plan(within the meaning of section 
414(d)), a plan maintained by an organization (other than a 
governmental unit) exempt from tax under this subtitle, or a qualified 
merchant marine plan--
                          [(i) subparagraph (C) shall be 
                        applied--
                                  [(I) by substituting ``age 
                                62'' for ``social security 
                                retirement age'' each place it 
                                appears, and
                                  [(II) as if the last sentence 
                                thereof read as follows: ``The 
                                reduction under this 
                                subparagraph shall not reduce 
                                the limitation of paragraph 
                                (1)(A) below (i) $75,000 if the 
                                benefit begins at or after age 
                                55, or (ii) if the benefit 
                                begins before age 55, the 
                                equivalent of the $75,000 
                                limitation for age 55.'', and
                          [(ii) subparagraph (D) shall be 
                        applied by substituting ``age 65'' for 
                        ``social security retirement age'' each 
                        place it appears.
                For purposes of this subparagraph, the term 
                ``qualified merchant marine plan'' means a plan 
                in existence on January 1, 1986, the 
                participants in which are merchant marine 
                officers holding licenses issued by the 
                Secretary of Transportation under title 46, 
                United States Code.]

           *       *       *       *       *       *       *

          (7) Benefits under certain collectively bargained 
        plans.--For a year, the limitation referred to in 
        paragraph (1)(B) shall not apply to benefits with 
        respect to a participant under a defined benefit plan 
        (other than a multiemployer plan)--
                  (A) * * *

           *       *       *       *       *       *       *

        This paragraph shall not apply to a participant whose 
        compensation for any 3 years during the 10-year period 
        immediately preceding the year in which he separates 
        from service exceeded the average compensation for such 
        3 years of all participants in such plan. This 
        paragraph shall not apply to a participant for any 
        period for which he is a participant under another plan 
        to which this section applies which is maintained by an 
        employer maintaining this plan. For any year for which 
        the paragraph applies to benefits with respect to a 
        participant, paragraph (1)(A) and subsection (d)(1)(A) 
        shall be applied with respect to such participant by 
        substituting [the greater of $68,212 or one-half the 
        amount otherwise applicable for such year under 
        paragraph (1)(A) for ``$90,000''] one-half the amount 
        otherwise applicable for such year under paragraph 
        (1)(A) for ``$160,000''.

           *       *       *       *       *       *       *

          [(9) Special rule for commercial airline pilots.--
                  [(A) In general.--Except as provided in 
                subparagraph (B), in the case of any 
                participant who is a commercial airline pilot--
                          [(i) the rule of paragraph 
                        (2)(F)(i)(II) shall apply, and
                          [(ii) if, as of the time of the 
                        participant's retirement, regulations 
                        prescribed by the Federal Aviation 
                        Administration require an individual to 
                        separate from service as a commercial 
                        airline pilot after attaining any age 
                        occurring on or after age 60 and before 
                        the social security retirement age, 
                        paragraph (2)(C) (after application of 
                        clause (i)) shall be applied by 
                        substituting such age for the social 
                        security retirement age.
                  [(B) Individuals who separate from service 
                before age 60.--If a participant described in 
                subparagraph (A) separates from service before 
                age 60, the rules of paragraph (2)(F) shall 
                apply.]
                  (9) Special rule for commercial airline 
                pilots.--
                          (A) In general.--Except as provided 
                        in subparagraph (B), in the case of any 
                        participant who is a commercial airline 
                        pilot, if, as of the time of the 
                        participant's retirement, regulations 
                        prescribed by the Federal Aviation 
                        Administration require an individual to 
                        separate from service as a commercial 
                        airline pilot after attaining any age 
                        occurring on or after age 60 and before 
                        age 62, paragraph (2)(C) shall be 
                        applied by substituting such age for 
                        age 62.
                          (B) Individuals who separate from 
                        service before age 60.--If a 
                        participant described in subparagraph 
                        (A) separates from service before age 
                        60, the rules of paragraph (2)(C) shall 
                        apply.
          (10) Special rule for state and local government 
        plans.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Election.--
                          (i) In general--.--This paragraph 
                        shall not apply to any plan unless each 
                        employer maintaining the plan elects 
                        before the close of the 1st plan year 
                        beginning after December 31, 1989, to 
                        have this subsection (other than 
                        paragraph (2)(G)) [applied without 
                        regard to paragraph (2)(F)].
          [(11) Special limitation rule for governmental 
        plans.--In the case of a governmental plan (as defined 
        in section 414(d), subparagraph (B) of paragraph (1) 
        shall not apply.]
          (11) Special limitation rule for governmental and 
        multiemployer plans.--In the case of a governmental 
        plan (as defined in section 414(d)) or a multiemployer 
        plan (as defined in section 414(f)), subparagraph (B) 
        of paragraph (1) shall not apply.
  (c) Limitation for Defined Contribution Plans.--
          (1) In general.--Contributions and other additions 
        with respect to a participant exceed the limitation of 
        this subsection if, when expressed as an annual 
        addition (within the meaning of paragraph (2)) to the 
        participant's account, such annual addition is greater 
        than the lesser of--
                  (A) [$30,000] $40,000, or
                  (B) [25] 100 percent of the participant's 
                compensation.
          (2) Annual addition.--For purposes of paragraph (1), 
        the term ``annual addition'' means the sum for any year 
        of--
                  (A) * * *

           *       *       *       *       *       *       *

        For the purposes of this paragraph, employee 
        contributions under subparagraph (B) are determined 
        without regard to any rollover contributions (as 
        defined in sections 402(c), 403(a)(4), 403(b)(8), [and 
        408(d)(3)] 408(d)(3), and 457(e)(16)) without regard to 
        employee contributions to a simplified employee pension 
        which are excludable from gross income under section 
        408(k)(6). Subparagraph (B) of paragraph (1) shall not 
        apply to any contribution for medical benefits (within 
        the meaning of section 419A(f)(2)) after separation 
        from service which is treated as an annual addition.
          (3) Participant's compensation.--For purposes of 
        paragraph (1)--
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Annuity contracts.--In the case of an 
                annuity contract described in section 403(b), 
                the term ``participant's compensation'' means 
                the participant's includible compensation 
                determined under section 403(b)(3).
          [(4) Special election for section 403(b) contracts 
        purchased by educational organizations, hospitals, home 
        health service agencies, and certain churches, etc.--
                  [(A) In the case of amounts contributed for 
                an annuity contract described in section 403(b) 
                for the year in which occurs a participant's 
                separation from the service with an educational 
                organization, a hospital, a home health service 
                agency, a health and welfare service agency, or 
                a church, convention or association of 
                churches, or an organization described in 
                section 414(e)(3)(B)(ii), at the election of 
                the participant there is substituted for the 
                amount specified in paragraph (1)(B) the amount 
                of the exclusion allowance which would be 
                determined under section 403(b)(2) (without 
                regard to this section) for the participant's 
                taxable year in which such separation occurs if 
                the participant's years of service were 
                computed only by taking into account his 
                service for the employer (as determined for 
                purposes of section 403(b)(2)) during the 
                period of years (not exceeding ten) ending on 
                the date of such separation.
                  [(B) In the case of amounts contributed for 
                an annuity contract described in section 403(b) 
                for any year in the case of a participant who 
                is an employee of an educational organization, 
                a hospital, a home health service agency, a 
                health and welfare service agency, or a church, 
                convention or association of churches, or an 
                organization described in section 
                414(e)(3)(B)(ii), at the election of the 
                participant there is substituted for the amount 
                specified in paragraph (1)(B) the least of--
                          [(i) 25 percent of the participant's 
                        includible compensation (as defined in 
                        section 403(b)(3)) plus $4,000,
                          [(ii) the amount of the exclusion 
                        allowance determined for the year under 
                        section 403(b)(2), or
                          [(iii) $15,000.
                  [(C) In the case of amounts contributed for 
                an annuity contract described in section 403(b) 
                for any year for a participant who is an 
                employee of an educational organization, a 
                hospital, a home health service agency, a 
                health and welfare service agency, or a church, 
                convention or association of churches, or an 
                organization described in section 
                414(e)(3)(B)(ii), at the election of the 
                participant the provisions of section 
                403(b)(2)(A) shall not apply.
                  [(D)(i) The provisions of this paragraph 
                apply only if the participant elects its 
                application at the time and in the manner 
                provided under regulations prescribed by the 
                Secretary. Not more than one election may be 
                made under subparagraph (A) by any participant. 
                A participant who elects to have the provisions 
                of subparagraph (A), (B), or (C) of this 
                paragraph apply to him may not elect to have 
                any other subparagraph of this paragraph apply 
                to him. Any election made under this paragraph 
                is irrevocable.
                          [(ii) For purposes of this paragraph 
                        the term ``educational organization'' 
                        means an educational organization 
                        described in section 170(b)(1)(A)(ii).
                          [(iii) For purposes of this paragraph 
                        the term ``home health service agency'' 
                        means an organization described in 
                        subsection 501(c)(3) which is exempt 
                        from tax under section 501(a) and which 
                        has been determined by the Secretary of 
                        Health, Education, and Welfare to be a 
                        home health agency (as defined in 
                        section 1861(o) of the Social Security 
                        Act).
                          [(iv) For purposes of this paragraph, 
                        the terms ``church'' and ``convention 
                        or association of churches'' have the 
                        same meaning as when used in section 
                        414(e).]

           *       *       *       *       *       *       *

          [(7) Certain contributions by church plans not 
        treated as exceeding limits.--
                  [(A) Alternative exclusion allowance.--Any 
                contribution or addition with respect to any 
                participant, when expressed as an annual 
                addition, which is allocable to the application 
                of section 403(b)(2)(D) to such participant for 
                such year, shall be treated as not exceeding 
                the limitations of paragraph (1).
                  [(B) Contributions not in excess of $40,000 
                ($10,000 per year).--
                          [(i) In general.--Notwithstanding any 
                        other provision of this subsection, at 
                        the election of a participant who is an 
                        employee of a church, a convention or 
                        association of churches, including an 
                        organization described in section 
                        414(e)(3)(B)(ii), contributions and 
                        other additions for an annuity contract 
                        or retirement income account described 
                        in section 403(b) withrespect to such 
participant, when expressed as an annual addition to such participant's 
account, shall be treated as not exceeding the limitation of paragraph 
(1) if such annual addition is not in excess of $10,000.
                          [(ii) $40,000 aggregate limitation.--
                        The total amount of additions with 
                        respect to any participant which may be 
                        taken into account for purposes of this 
                        subparagraph for all years may not 
                        exceed $40,000.
                          [(iii) No election if paragraph 
                        (4)(A) election made.--No election may 
                        be made under this subparagraph for any 
                        year if an election is made under 
                        paragraph (4)(A) for such year.
                  [(C) Annual addition.--For purposes of this 
                paragraph, the term ``annual addition'' has the 
                meaning given such term by paragraph (2).]
          (7) Certain contributions by church plans not treated 
        as exceeding limit.--
                  (A) In general.--Notwithstanding any other 
                provision of this subsection, at the election 
                of a participant who is an employee of a church 
                or a convention or association of churches, 
                including an organization described in section 
                414(e)(3)(B)(ii), contributions and other 
                additions for an annuity contract or retirement 
                income account described in section 403(b) with 
                respect to such participant, when expressed as 
                an annual addition to such participant's 
                account, shall be treated as not exceeding the 
                limitation of paragraph (1) if such annual 
                addition is not in excess of $10,000.
                  (B) $40,000 aggregate limitation.--The total 
                amount of additions with respect to any 
                participant which may be taken into account for 
                purposes of this subparagraph for all years may 
                not exceed $40,000.
                  (C) Annual addition.--For purposes of this 
                paragraph, the term ``annual addition'' has the 
                meaning given such term by paragraph (2).
  (d) Cost-of-Living Adjustments.--
          (1) In general.--The Secretary shall adjust 
        annually--
                  (A) the [$90,000] $160,000 amount in 
                subsection (b)(1)(A),

           *       *       *       *       *       *       *

                  (C) the [$30,000] $40,000 amount in 
                subsection (c)(1)(A),for increases in the cost-
                of-living in accordance with regulations 
                prescribed by the Secretary.

           *       *       *       *       *       *       *

          (3) Base period.--For purposes of paragraph (2)--
                  (A) [$90,000] $160,000 Amount.--The base 
                period taken into account for purposes of 
                paragraph (1)(A) is the calendar quarter 
                beginning [October 1, 1986] July 1, 2000.

           *       *       *       *       *       *       *

                  (D) [$30,000] $40,000 Amount.--The base 
                period taken into account for purposes of 
                paragraph (1)(C) is the calendar quarter 
                beginning [October 1, 1993] July 1, 2000.
          [(4) Rounding.--Any increase under subparagraph (A) 
        or (C) of paragraph (1) which is not a multiple of 
        $5,000 shall be rounded to the next lowest multiple of 
        $5,000.]
          (4) Rounding.--
                  (A) $160,000 amount.--Any increase under 
                subparagraph (A) of paragraph (1) which is not 
                a multiple of $5,000 shall be rounded to the 
                next lowest multiple of $5,000.
                  (B) $40,000 amount.--Any increase under 
                subparagraph (C) of paragraph (1) which is not 
                a multiple of $1,000 shall be rounded to the 
                next lowest multiple of $1,000.

           *       *       *       *       *       *       *

  (f) Combining of Plans.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Exception for multiemployer plans.--
        Notwithstanding paragraph (1) and subsection (g), a 
        multiemployer plan (as defined in section 414(f)) shall 
        not be combined or aggregated with any other plan 
        maintained by an employer for purposes of applying the 
        limitations established in this section, except that 
        such plan shall be combined or aggregated with another 
        plan which is not such a multiemployer plan solely for 
        purposes of determining whether such other plan meets 
        the requirements of subsections (b)(1)(A) and (c).
  (g) Aggregation of Plans.--[The Secretary] Except as provided 
in subsection (f)(3), the Secretary, in applying the provisions 
of this section to benefits or contributions under more than 
one plan maintained by the same employer, and to any trusts, 
contracts, accounts, or bonds referred to in subsection (a)(2), 
with respect to which the participant has the control required 
under section 414(b) or (c), as modified by subsection (h), 
shall, under regulations prescribed by the Secretary, 
disqualify one or more trusts, plans, contracts, accounts, or 
bonds, or any combination thereof until such benefits or 
contributions do not exceed the limitations contained in this 
section. In addition to taking into account such other factors 
as may be necessary to carry out the purposes of subsection 
(f), the regulations prescribed under this paragraph shall 
provide that no plan which has been terminated shall be 
disqualified until all other trusts, plans, contracts, 
accounts, or bonds have been disqualified.

           *       *       *       *       *       *       *

  (k) Special Rules.--
          (1) * * *

           *       *       *       *       *       *       *

          (4) Special rules for sections 403(b) and 408.--For 
        purposes of this section, any annuity contract 
        described in section 403(b) for the benefit of a 
        participant shall be treated as a defined contribution 
        plan maintained by each employer with respect to which 
        the participant has the control required 
undersubsection (b) or (c) of section 414 (as modified by subsection 
(h)). For purposes of this section, any contribution by an employer to 
a simplified employee pension plan for an individual for a taxable year 
shall be treated as an employer contribution to a defined contribution 
plan for such individual for such year.

SEC. 416. SPECIAL RULES FOR TOP-HEAVY PLANS.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Plan Must Provide Minimum Benefits.--
          (1) Defined benefit plans.--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) Years of service.--For purposes of this 
                paragraph--
                          (i) In general.--Except as provided 
                        in [clause (ii)] clause (ii) or (iii), 
                        years of service shall be determined 
                        under the rules of paragraphs (4), (5), 
                        and (6) of section 411(a).

           *       *       *       *       *       *       *

                          (iii) Exception for frozen plan.--For 
                        purposes of determining an employee's 
                        years of service with the employer, any 
                        service with the employer shall be 
                        disregarded to the extent that such 
                        service occurs during a plan year when 
                        the plan benefits (within the meaning 
                        of section 410(b)) no key employee or 
                        former key employee.
          (2) Defined contribution plans.--
                  (A) In general.--A defined contribution plan 
                meets the requirements of the subsection if the 
                employer contribution for the year for each 
                participant who is a non-key employee is not 
                less than 3 percent of such participant's 
                compensation (within the meaning of section 
                415). Employer matching contributions (as 
                defined in section 401(m)(4)(A)) shall be taken 
                into account for purposes of this subparagraph.

           *       *       *       *       *       *       *

  (g) Top-Heavy Plan Defined.--For purposes of this section--
          (1) * * *

           *       *       *       *       *       *       *

          [(3) Distributions during last 5 years taken into 
        account.--For purposes of determining--
                  [(A) the present value of the cumulative 
                accrued benefit for any employee, or
                  [(B) the amount of the account of any 
                employee,such present value or amount shall be 
                increased by the aggregate distributions made 
                with respect to such employee under the plan 
                during the 5-year period ending on the 
                determination date. The preceding sentence 
                shall also apply to distributions under a 
                terminated plan which if it had not been 
                terminated would have been required to be 
                included in an aggregation group.]
          (3) Distributions during last year before 
        determination date taken into account.--
                  (A) In general.--For purposes of 
                determining--
                          (i) the present value of the 
                        cumulative accrued benefit for any 
                        employee, or
                          (ii) the amount of the account of any 
                        employee,
                such present value or amount shall be increased 
                by the aggregate distributions made with 
                respect to such employee under the plan during 
                the 1-year period ending on the determination 
                date. The preceding sentence shall also apply 
                to distributions under a terminated plan which 
                if it had not been terminated would have been 
                required to be included in an aggregation 
                group.
                  (B) 5-year period in case of in-service 
                distribution.--In the case of any distribution 
                made for a reason other than separation from 
                service, death, or disability, subparagraph (A) 
                shall be applied by substituting ``5-year 
                period'' for ``1-year period''.
          (4) Other special rules.--For purposes of this 
        subsection--
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) Benefits not taken into account if 
                employee not employed for [last 5 years] last 
                year before determination date.--If any 
                individual has not performed services for the 
                employer maintaining the plan at any time 
                during the [5] 1-year period ending on the 
                determination date, any accrued benefit for 
                such individual (and the account of such 
                individual) shall not be taken into account.

           *       *       *       *       *       *       *

                  (H) Cash or deferred arrangements using 
                alternative methods of meeting 
                nondiscrimination requirements.--The term 
                ``top-heavy plan'' shall not include a plan 
                which consists solely of--
                          (i) a cash or deferred arrangement 
                        which meets the requirements of section 
                        401(k)(12), and
                          (ii) matching contributions with 
                        respect to which the requirements of 
                        section 401(m)(11) are met.
                If, but for this subparagraph, a plan would be 
                treated as a top-heavy plan because it is a 
                member of an aggregation group which is a top-
                heavy group, contributions under the plan may 
                be taken into account in determining whether 
                any other plan in the group meets the 
                requirements of subsection (c)(2).

           *       *       *       *       *       *       *

  (i) Definitions.--For purposes of this section--
          (1) Key employee.--
                  (A) In general.--The term ``key employee'' 
                means an employee who, at any time during the 
                plan year [or any of the 4 preceding plan 
                years], is--
                          [(i) an officer of the employer 
                        having an annual compensation greater 
                        than 50 percent of the amountin effect 
under section 415(b)(1)(A) for any such plan year,
                          [(ii) 1 of the 10 employees having 
                        annual compensation from the employer 
                        of more than the limitation in effect 
                        under section 415(c)(1)(A) and owning 
                        (or considered as owning within the 
                        meaning of section 318 the largest 
                        interests in the employer,]
                          (i) an officer of the employer having 
                        an annual compensation greater than 
                        $150,000,
                          [(iii)] (ii) a 5-percent owner of the 
                        employer, or
                          [(iv)] (iii) a 1-percent owner of the 
                        employer having an annual compensation 
                        from the employer of more than 
                        $150,000.
                For purposes of clause (i), no more than 50 
                employees (or, if lesser, the greater of 3 or 
                10 percent of the employees) shall be treated 
                as officers. [For purposes of clause (ii), if 2 
                employees have the same interest in the 
                employer, the employee having greater annual 
                compensation from the employer shall be treated 
                as having a larger interest.] Such term shall 
                not include any officer or employee of an 
                entity referred to in section 414(d) (relating 
                to governmental plans). For purposes of 
                determining the number of officers taken into 
                account under clause (i), employees described 
                in section 414(q)(5) shall be excluded.
                  (B) Percentage owners.--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) Constructive ownership rules.--
                        For purposes of this subparagraph [and 
                        subparagraph (A)(ii)]--
                                  (I) * * *

           *       *       *       *       *       *       *

                          (iv) Family attribution 
                        disregarded.--Solely for purposes of 
                        applying this paragraph (and not for 
                        purposes of any provision of this title 
                        which incorporates by reference the 
                        definition of a key employee or 5-
                        percent owner under this paragraph), 
                        section 318 shall be applied without 
                        regard to subsection (a)(1) thereof in 
                        determining whether any person is a 5-
                        percent owner.

           *       *       *       *       *       *       *

SEC. 417. DEFINITIONS AND SPECIAL RULES FOR PURPOSES OF MINIMUM 
                    SURVIVOR ANNUITY REQUIREMENTS.

  (a) Election to Waive Qualified Joint and Survivor Annuity or 
Qualified Preretirement Survivor Annity.--
          (1) * * *

           *       *       *       *       *       *       *

          (6) Applicable election period defined.--For purposes 
        of this subsection, the term ``applicable election 
        period'' means--
                  (A) in the case of an election to waive the 
                qualified joint and survivor annuity form of 
                benefit, the [90] 180-day period ending on the 
                annuity starting date, or

           *       *       *       *       *       *       *

Subchapter E--Accounting Periods and Methods of Accounting

           *       *       *       *       *       *       *

PART II--METHODS OF ACCOUNTING

           *       *       *       *       *       *       *

Subpart B--Taxable Year for Which Items of Gross Income Included

           *       *       *       *       *       *       *

SEC. 457. DEFERRED COMPENSATION PLANS OF STATE AND LOCAL GOVERNMENTS 
                    AND TAX-EXEMPT ORGANIZATIONS.

  [(a) Year of Inclusion in Gross Income.--In the case of a 
participant in an eligible deferred compensation plan, any 
amount of compensation deferred under the plan, and any income 
attributable to the amounts so deferred, shall be includible in 
gross income only for the taxable year in which such 
compensation or other income is paid or otherwise made 
available to the participant or other beneficiary.]
  (a) Year of inclusion in gross income.--
          (1) In general.--Any amount of compensation deferred 
        under an eligible deferred compensation plan, and any 
        income attributable to the amounts so deferred, shall 
        be includible in gross income only for the taxable year 
        in which such compensation or other income--
                  (A) is paid to the participant or other 
                beneficiary, in the case of a plan of an 
                eligible employer described in subsection 
                (e)(1)(A), and
                  (B) is paid or otherwise made available to 
                the participant or other beneficiary, in the 
                case of a plan of an eligible employer 
                described in subsection (e)(1)(B).
          (2) Special rule for rollover amounts.--To the extent 
        provided in section 72(t)(9), section 72(t) shall apply 
        to any amount includible in gross income under this 
        subsection.
  (b) Eligible Deferred Compensation Plan Defined.--For 
purposes of this section, the term ``eligible deferred 
compensation plan'' means a plan established and maintained by 
an eligible employer--
          (1) in which only individuals who perform service for 
        the employer may be participants,
          (2) which provides that (except as provided in 
        paragraph (3)) the maximum amount which may be deferred 
        under the plan for the taxable year (other than 
        rollover amounts) shall not exceed the lesser of--
                  (A) [$7,500] the applicable dollar amount, or
                  (B) [33\1/3\] 100 percent of the 
                participant's includible compensation,
          (3) which may provide that, for 1 or more of the 
        participant's last 3 taxable years ending before he 
        attains normal retirement age under the plan, the 
        ceiling set forth in paragraph (2) shall be the lesser 
        of--
                  (A) [$15,000] twice the dollar amount in 
                effect under subsection (b)(2)(A), or

           *       *       *       *       *       *       *

  [(c) Individuals Who Are Participants in More Than 1 Plan.--
          [(1) In general.--The maximum amount of the 
        compensation of any one individual which may be 
        deferred under subsection (a) during any taxable year 
        shall not exceed $7,500 (as modified by any adjustment 
        provided under subsection (b)(3)).
          [(2) Coordination with certain other deferrals.--In 
        applying paragraph (1) of this subsection--
                  [(A) any amount excluded from gross income 
                under section 403(b) for the taxable year, and
                  [(B) any amount--
                          [(i) excluded from gross income under 
                        section 402(e)(3) or section 
                        402(h)(1)(B) or (k) for the taxable 
                        year, or
                          [(ii) with respect to which a 
                        deduction is allowable by reason of a 
                        contribution to an organization 
                        described in section 501(c)(18) for the 
                        taxable year,
        shall be treated as an amount deferred under subsection 
        (a). In applying section 402(g)(8)(A)(iii) or 
        403(b)(2)(A)(ii), an amount deferred under subsection 
        (a) for any year of service shall be taken into account 
        as if described in section 402(g)(3)(C) or 
        403(b)(2)(A)(ii), respectively. Subparagraph (B) shall 
        not apply in the case of a participant in a rural 
        cooperative plan (as defined in section 401(k)(7)).]
  (c) Limitation.--The maximum amount of the compensation of 
any one individual which may be deferred under subsection (a) 
during any taxable year shall not exceed the amount in effect 
under subsection (b)(2)(A) (as modified by any adjustment 
provided under subsection (b)(3)).
  (d) Distribution Requirements.--
          (1) In general.--For purposes of subsection (b)(5), a 
        plan meets the distribution requirements of this 
        subsection if--
                  (A) under the plan amounts will not be made 
                available to participants or beneficiaries 
                earlier than--
                          (i) the calendar year in which the 
                        participant attains age 70\1/2\,
                          (ii) when the participant [is 
                        separated from service] has a severance 
                        from employment with the employer, or
                          (iii) when the participant is faced 
                        with an unforeseeable emergency 
                        (determined in the manner prescribed by 
                        the Secretary in regulations), [and]
                  (B) the plan meets the minimum distribution 
                requirements of paragraph (2)[.], and
                  (C) in the case of a plan maintained by an 
                employer described in subsection (e)(1)(A), the 
                plan meets requirements similar to the 
                requirements of section 401(a)(31).
        Any amount transferred in a direct trustee-to-trustee 
        transfer in accordance with section 401(a)(31) shall 
        not be includible in gross income for the taxable year 
        of transfer.
          [(2) Minimum distribution requirements.--A plan meets 
        the minimum distribution requirements of this paragraph 
        if such plan meets the requirements of subparagraphs 
        (A), (B), and (C):
                  [(A) Application of section 401(a)(9).--A 
                plan meets the requirements of this 
                subparagraph if the plan meets the requirements 
                of section 401(a)(9).
                  [(B) Additional distribution requirements.--A 
                plan meets the requirements of this 
                subparagraph if--
                          [(i) in the case of a distribution 
                        beginning before the death of the 
                        participant, such distribution will be 
                        made in a form under which--
                                  [(I) the amounts payable with 
                                respect to the participant will 
                                be paid at times specified by 
                                the Secretary which are not 
                                later than the time determined 
                                under section 401(a)(9)(G) 
                                (relating to incidental death 
                                benefits), and
                                  [(II) any amount not 
                                distributed to the participant 
                                during his life will be 
                                distributed after the death of 
                                the participant at least as 
                                rapidly as under the method of 
                                distributions being used under 
                                subclause (I) as of the date of 
                                his death, or
                          [(ii) in the case of a distribution 
                        which does not begin before the death 
                        of the participant, the entire amount 
                        payable with respect to the participant 
                        will be paid during a period not to 
                        exceed 15 years (or the life expectancy 
                        of the surviving spouse if such spouse 
                        is the beneficiary).
                  [(C) Nonincreasing benefits.--A plan meets 
                the requirements of this subparagraph if any 
                distribution payable over a period of more than 
                1 year can only be made in substantially 
                nonincreasing amounts (paid not less frequently 
                than annually).]
          (2) Minimum distribution requirements.--A plan meets 
        the minimum distribution requirements of this paragraph 
        if such plan meets the requirements of section 
        401(a)(9).
          (3) Special rule for government plan.--An eligible 
        deferred compensation plan of an employer described in 
        subsection (e)(1)(A) shall not be treated as failing to 
        meet the requirements of this subsection solely by 
        reason of making a distribution described in subsection 
        (e)(9)(A).
  (e) Other Definitions and Special Rules.--For purposes of 
this section--
          (1) * * *

           *       *       *       *       *       *       *

          [(9) Benefits not treated as made available by reason 
        of certain elections, etc.--]
          (9) Benefits of tax exempt organization plans not 
        treated as made available by reason of certain 
        elections, etc.--In the case of an eligible deferred 
        compensation plan of an employer described in 
        subsection (e)(1)(B)--
                  (A) Total amount payable is dollar limit or 
                less.--The total amount payable to a 
                participant under the plan shall not be treated 
                as made available merely because the 
                participant may elect to receive such amount 
                (or the plan may distribute such amount without 
                the participant's consent) if--
                          (i) [such amount] the portion of such 
                        amount which is not attributable to 
                        rollover contributions (as defined in 
                        section 411(a)(11)(D)) does not exceed 
                        the dollar limit under section 
                        411(a)(11)(A), and

           *       *       *       *       *       *       *

          [(15) Cost-of-living adjustment of maximum deferral 
        amount.--The Secretary shall adjust the $7,500 amount 
        specified in subsections (b)(2) and (c)(1) at the same 
        time and in the same manner as under section 415(d), 
        except that the base period shall be the calendar 
        quarter ending September 30, 1994, and any increase 
        under this paragraph which is not a multiple of $500 
        shall be rounded to the next lowest multiple of $500.]
          (15) Applicable dollar amount.--
                  (A) In general.--The applicable dollar amount 
                shall be the amount determined 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.

                  (B) Cost-of-living adjustments.--In the case 
                of taxable years beginning after December 31, 
                2005, the Secretary shall adjust the $15,000 
                amount under subparagraph (A) at the same time 
                and in the same manner as under section 415(d), 
                except that the base period shall be the 
                calendar quarter beginning July 1, 2004, and 
                any increase under this paragraph which is not 
                a multiple of $500 shall be rounded to the next 
                lowest multiple of $500.
          (16) Rollover amounts.--
                  (A) General rule.--In the case of an eligible 
                deferred compensation plan established and 
                maintained by an employer described in 
                subsection (e)(1)(A), if--
                          (i) any portion of the balance to the 
                        credit of an employee in such plan is 
                        paid to such employee in an eligible 
                        rollover distribution (within the 
                        meaning of section 402(c)(4) without 
                        regard to subparagraph (C) thereof),
                          (ii) the employee transfers any 
                        portion of the property such employee 
                        receives in such distribution to an 
                        eligible retirement plan described in 
                        section 402(c)(8)(B), and
                          (iii) in the case of a distribution 
                        of property other than money, the 
                        amount so transferred consists of the 
                        property distributed,
                then such distribution (to the extent so 
                transferred) shall not be includible in gross 
                income for the taxable year in which paid.
                  (B) Certain rules made applicable.--The rules 
                of paragraphs (2) through (7) (other than 
                paragraph (4)(C)) and (9) of section 402(c) and 
                section 402(f) shall apply for purposes of 
                subparagraph (A).
                  (C) Reporting.--Rollovers under this 
                paragraph shall be reported to the Secretary in 
                the same manner as rollovers from qualified 
                retirement plans (as defined in section 
                4974(c)).
          (17) Trustee-to-trustee transfers to purchase 
        permissive service credit.--No amount shall be 
        includible in gross income by reason of a direct 
        trustee-to-trustee transfer to a defined benefit 
        governmental plan (as defined in section 414(d)) if 
        such transfer is--
                  (A) for the purchase of permissive service 
                credit (as defined in section 415(n)(3)(A)) 
                under such plan, or
                  (B) a repayment to which section 415 does not 
                apply by reason of subsection (k)(3) thereof.

           *       *       *       *       *       *       *

Subchapter F--Exempt Organizations

           *       *       *       *       *       *       *

PART I--GENERAL RULE

           *       *       *       *       *       *       *

SEC. 501. EXEMPTION FROM TAX ON CORPORATIONS, CERTAIN TRUSTS, ETC.

  (a) * * *

           *       *       *       *       *       *       *

  (c) List of Exempt Organizations.--The following 
organizations are referred to in subsection (a):
          (1) * * *

           *       *       *       *       *       *       *

          (18) A trust or trusts created before June 25, 1959, 
        forming part of a plan providing for the payment of 
        benefits under a pension plan funded only by 
        contributions of employees, if--
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) in the case of a plan under which an 
                employee may designate certain contributions as 
                deductible--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) such contributions are treated 
                        as elective deferrals for purposes of 
                        section 402(g) [(other than paragraph 
                        (4) thereof)], and

           *       *       *       *       *       *       *

SEC. 505. ADDITIONAL REQUIREMENTS FOR ORGANIZATIONS DESCRIBED IN 
                    PARAGRAPH (9), (17), OR (20) OF SECTION 501(C).

  (a) * * *
  (b) Nondiscrimination Requirements.--
          (1) * * *

           *       *       *       *       *       *       *

          (7) Compensation limit.--A plan shall not be treated 
        as meeting the requirements of this subsection unless 
        under the plan the annual compensation of each employee 
        taken into account for any year does not exceed 
        [$150,000] $200,000. The Secretary shall adjust the 
        [$150,000] $200,000 amount at the same time, and by the 
        same amount, as any adjustment under section 
        401(a)(17)(B). This paragraph shall not apply in 
        determining whether the requirements of section 79(d) 
        are met.

           *       *       *       *       *       *       *

Subchapter J--Estates, Trusts, Beneficiaries, and Decedents

           *       *       *       *       *       *       *

PART I--ESTATES, TRUSTS, AND BENEFICIARIES

           *       *       *       *       *       *       *

  Subpart C--Estates and Trusts Which May Accumulate Income or Which 
Distribute Corpus

           *       *       *       *       *       *       *

SEC. 664. CHARITABLE REMAINDER TRUSTS.

  (a) * * *

           *       *       *       *       *       *       *

  (g) Qualified Gratuitous Transfer of Qualified Employer 
Securities.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Plan requirements.--A plan contains the 
        provisions required by this paragraph if such plan 
        provides that--
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) such securities are held in a suspense 
                account under the plan to be allocated each 
                year, up to the [limitations under section 
                415(c)] applicable limitation under paragraph 
                (7), after first allocating all other annual 
                additions for the limitation year, up to the 
                limitations under sections 415 (c) and (e), and

           *       *       *       *       *       *       *

          (7) Applicable limitation.--
                  (A) In general.--For purposes of paragraph 
                (3)(E), the applicable limitation under this 
                paragraph with respect to a participant is an 
                amount equal to the lesser of--
                          (i) $30,000, or
                          (ii) 25 percent of the participant's 
                        compensation (as defined in section 
                        415(c)(3)).
                  (B) Cost-of-living adjustment.--The Secretary 
                shall adjust annually the $30,000 amount under 
                subparagraph (A)(i) at the same time and in the 
                same manner as under section 415(d), except 
                that the base period shall be the calendar 
                quarter beginning October 1, 1993, and any 
                increase under this subparagraph which is not a 
                multiple of $5,000 shall be rounded to the next 
                lowest multiple of $5,000.

           *       *       *       *       *       *       *

Subtitle C--Employment Taxes

           *       *       *       *       *       *       *

CHAPTER 24--COLLECTION OF INCOME TAX AT SOURCE ON WAGES

           *       *       *       *       *       *       *

Subchapter A--Withholding from Wages

           *       *       *       *       *       *       *

SEC. 3401. DEFINITIONS.

  (a) Wages.--For purposes of this chapter, the term ``wages'' 
means all remuneration (other than fees paid to a public 
official) for services performed by an employee for his 
employer, including the cash value of all remuneration 
(including benefits) paid in any medium other than cash; except 
that such term shall not include remuneration paid--
          (1) * * *

           *       *       *       *       *       *       *

          (12) to, or on behalf of, an employee or his 
        beneficiary--
                  (A) * * *

           *       *       *       *       *       *       *

                  (E) under or to an eligible deferred 
                compensation plan which, at the time of such 
                payment, is a plan described in section 457(b) 
                maintained by an employer described in section 
                457(e)(1)(A); or

           *       *       *       *       *       *       *

SEC. 3405. SPECIAL RULES FOR PENSIONS, ANNUITIES, AND CERTAIN OTHER 
                    DEFERRED INCOME.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Eligible Rollover Distributions.--
          (1) * * *

           *       *       *       *       *       *       *

          [(3) Eligible rollover distribution.--For purposes of 
        this subsection, the term ``eligible rollover 
        distribution'' has the meaning given such term by 
        section 402(f)(2)(A) (or in the case of an annuity 
        contract under section 403(b), a distribution from such 
        contract described in section 402(f)(2)(A)).]
          (3) Eligible rollover distribution.--For purposes of 
        this subsection, the term ``eligible rollover 
        distribution'' has the meaning given such term by 
        section 402(f)(2)(A).
  (d) Liability for Withholding.--
          (1) * * *
          (2) Plan administrator liable in certain cases.--
                  (A) * * *
                  (B) Plans to which paragraph applies.--This 
                paragraph applies to any plan described in, or 
                which at any time has been determined to be 
                described in--
                          (i) section 401(a),
                          (ii) section 403(a), [or]
                          (iii) section 301(d) of the Tax 
                        Reduction Act of 1975[.], or
                          (iv) section 457(b) and which is 
                        maintained by an eligible employer 
                        described in section 457(e)(1)(A).

           *       *       *       *       *       *       *

Subtitle D--Miscellaneous Excise Taxes

           *       *       *       *       *       *       *

               CHAPTER 43--QUALIFIED PENSION, ETC., PLANS

        Sec. 4971. Taxes on failure to meet minimum funding standards.
     * * * * * * *
        Sec. 4980F. Failure of applicable plans reducing benefit 
                  accruals to satisfy notice requirements.

           *       *       *       *       *       *       *

SEC. 4972. TAX ON NONDEDUCTIBLE CONTRIBUTIONS TO QUALIFIED EMPLOYER 
                    PLANS.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Nondeductible Contributions.--For purposes of this 
section--
          (1) * * *

           *       *       *       *       *       *       *

          [(6) Exceptions.--In determining the amount of 
        nondeductible contributions for any taxable year, there 
        shall not be taken into account--
                  [(A) contributions that would be deductible 
                under section 404(a)(1)(D) if the plan had more 
                than 100 participants if--
                          [(i) the plan is covered under 
                        section 4021 of the Employee Retirement 
                        Income Security Act of 1974, and
                          [(ii) the plan is terminated under 
                        section 4041(b) of such Act on or 
                        before the last day of the taxable 
                        year, and
                  [(B) so much of the contributions to 1 or 
                more defined contribution plans which are not 
                deductible when contributed solely because of 
                section 404(a)(7) as does not exceed the 
                greater of--
                          [(i) the amount of contributions not 
                        in excess of 6 percent of compensation 
                        (within the meaning of section 404(a) 
                        paid or accrued (during the taxable 
                        year for which the contributions were 
                        made) to beneficiaries under the plans, 
                        or]
          (6) Exceptions.--In determining the amount of 
        nondeductible contributions for any taxable year, there 
        shall not be taken into account so much of the 
        contributions to one or more defined contribution plans 
        which are not deductible when contributed solely 
        because of section 404(a)(7) as does not exceed the 
        greater of--
                  (A) the amount of contributions not in excess 
                of 6 percent of compensation (within the 
                meaning of section 404(a)) paid or accrued 
                (during the taxable year for which the 
                contributions were made) to beneficiaries under 
                the plans, or
                  (B) the sum of--
                          (i) the amount of contributions 
                        described in section 401(m)(4)(A), plus
                          (ii) the amount of contributions 
                        described in section 402(g)(3)(A).
        For purposes of this paragraph, the deductible limits 
        under section 404(a)(7) shall first be applied to 
        amounts contributed to a defined benefit plan and then 
        to amounts described in subparagraph (B).
          (7) Defined benefit plan exception.--In determining 
        the amount of nondeductible contributions for any 
        taxable year, an employer may elect for such year not 
        to take into account any contributions to a defined 
        benefit plan except to the extent that such 
        contributions exceed the full-funding limitation (as 
        defined in section 412(c)(7), determined without regard 
        to subparagraph (A)(i)(I) thereof). For purposes of 
        this paragraph, the deductible limits under section 
        404(a)(7) shall first be applied to amounts contributed 
        to defined contribution plans and then to amounts 
        described in this paragraph. If an employer makes an 
        election under this paragraph for a taxable year, 
        paragraph (6) shall not apply to such employer for such 
        taxable year.

           *       *       *       *       *       *       *

SEC. 4973. TAX ON EXCESS CONTRIBUTIONS TO CERTAIN TAX-FAVORED ACCOUNTS 
                    AND ANNUITIES.

  (a) * * *
  (b) Excess Contributions.--For purposes of this section, in 
the case of individual retirement accounts or individual 
retirement annuities, the term ``excess contributions'' means 
the sum of--
          (1) the excess (if any) of--
                  (A) the amount contributed for the taxable 
                year to the accounts or for the annuities 
                (other than a contribution to a Roth IRA or a 
                rollover contribution described in section 
                402(c), 403(a)(4), 403(b)(8), [or 408(d)(3)] 
                408(d)(3), or 457(e)(16)), over

           *       *       *       *       *       *       *

SEC. 4974. EXCISE TAX ON CERTAIN ACCUMULATIONS IN QUALIFIED RETIREMENT 
                    PLANS.

  (a) General Rule.--If the amount distributed during the 
taxable year of the payee under any qualified retirement plan 
or any eligible deferred compensation plan (as defined in 
section 457(b)) is less than the minimum required distribution 
for such taxable year, there is hereby imposed a tax equal to 
[50] 10 percent of the amount by which such minimum required 
distribution exceeds the actual amount distributed during the 
taxable year. The tax imposed by this section shall be paid by 
the payee.

           *       *       *       *       *       *       *

SEC. 4975. TAX ON PROHIBITED TRANSACTIONS.

  (a) * * *

           *       *       *       *       *       *       *

  (e) Definitions.--
          (1) * * *

           *       *       *       *       *       *       *

          (7) Employee stock ownership plan.--The term 
        ``employee stock ownership plan'' means a defined 
        contribution plan--
                  (A) which is a stock bonus plan which is 
                qualified, or a stock bonus and a money 
                purchase plan both of which are qualified under 
                section 401(a), and which are designed to 
                invest primarily in qualifying employer 
                securities; and
                  (B) which is otherwise defined in regulations 
                prescribed by the Secretary.
        A plan shall not be treated as an employee stock 
        ownership plan unless it meets the requirements of 
        section 409(h), section 409(o), and, if applicable, 
        section 409(n), section 409(p), and section 664(g) and, 
        if the employer has a registration-type class of 
        securities (as defined in section 409(e)(4)), it meets 
        the requirements of section 409(e).

           *       *       *       *       *       *       *

  (f) Other Definitions and Special Rules.--For purposes of 
this section--
          (1) * * *

           *       *       *       *       *       *       *

          (6) Exemptions not to apply to certain 
        transactions.--
                  (A) * * *
                  (B) Special rules for shareholder-employees, 
                etc.--
                          (i) * * *

           *       *       *       *       *       *       *

                          (iii) Loan exception.--For purposes 
                        of subparagraph (A)(i), the term 
                        ``owner-employee'' shall only include a 
                        person described in subclause (II) or 
                        (III) of clause (i).

           *       *       *       *       *       *       *

SEC. 4979A. TAX ON CERTAIN PROHIBITED ALLOCATIONS OF QUALIFIED 
                    SECURITIES.

  (a) Imposition of Tax.--If--
          (1) there is a prohibited allocation of qualified 
        securities by any employee stock ownership plan or 
        eligible worker-owned cooperative, [or]
          (2) there is an allocation described in section 
        664(g)(5)(A), there is hereby imposed a tax on such 
        allocation equal to 50 percent of the amount involved.
[there is hereby imposed a tax on such allocation equal to 50 
percent of the amount involved.]
          (3) there is any allocation of employer securities 
        which violates the provisions of section 409(p), or a 
        nonallocation year described in subsection (e)(2)(C) 
        with respect to an employee stock ownership plan, or
          (4) any synthetic equity is owned by a disqualified 
        person in any nonallocation year,
there is hereby imposed a tax on such allocation or ownership 
equal to 50 percent of the amount involved.

           *       *       *       *       *       *       *

  [(c) Liability for Tax.--The tax imposed by this section 
shall be paid by--
          [(1) the employer sponsoring such plan, or
          [(2) the eligible worker-owned cooperative,
which made the written statement described in section 
664(g)(1)(E) or in section 1042(b)(3)(B) (as the case may be).]
  (c) Liability for Tax.--The tax imposed by this section shall 
be paid--
          (1) in the case of an allocation referred to in 
        paragraph (1) or (2) of subsection (a), by--
                  (A) the employer sponsoring such plan, or
                  (B) the eligible worker-owned cooperative,
        which made the written statement described in section 
        664(g)(1)(E) or in section 1042(b)(3)(B) (as the case 
        may be), and
          (2) in the case of an allocation or ownership 
        referred to in paragraph (3) or (4) of subsection (a), 
        by the S corporation the stock in which was so 
        allocated or owned.

           *       *       *       *       *       *       *

  [(e) Definitions.--Terms used in this section have the same 
respective meaning as when used in section 4978.]
  (e) Definitions and Special Rules.--For purposes of this 
section--
          (1) Definitions.--Except as provided in paragraph 
        (2), terms used in this section have the same 
        respective meanings as when used in sections 409 and 
        4978.
          (2) Special rules relating to tax imposed by reason 
        of paragraph (3) or (4) of subsection (a).--
                  (A) Prohibited allocations.--The amount 
                involved with respect to any tax imposed by 
                reason of subsection (a)(3) is the amount 
                allocated to the account of any person in 
                violation of section 409(p)(1).
                  (B) Synthetic equity.--The amount involved 
                with respect to any tax imposed by reason of 
                subsection (a)(4) is the value of the shares on 
                which the synthetic equity is based.
                  (C) Special rule during first nonallocation 
                year.--For purposes of subparagraph (A), the 
                amount involved for the first nonallocation 
                year of any employee stock ownership plan shall 
                be determined by taking into account the total 
                value of all the deemed-owned shares of all 
                disqualified persons with respect to such plan.
                  (D) Statute of limitations.--The statutory 
                period for the assessment of any tax imposed by 
                this section by reason of paragraph (3) or (4) 
                of subsection (a) shall not expire before the 
                date which is 3 years from the later of--
                          (i) the allocation or ownership 
                        referred to in such paragraph giving 
                        rise to such tax, or
                          (ii) the date on which the Secretary 
                        is notified of such allocation or 
                        ownership.

           *       *       *       *       *       *       *

SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING BENEFIT ACCRUALS TO 
                    SATISFY NOTICE REQUIREMENTS.

  (a) Imposition of Tax.--There is hereby imposed a tax on the 
failure of any applicable pension plan to meet the requirements 
of subsection (e) with respect to any applicable individual.
  (b) Amount of Tax.--
          (1) In general.--The amount of the tax imposed by 
        subsection (a) on any failure with respect to any 
        applicable individual shall be $100 for each day in the 
        noncompliance period with respect to such failure.
          (2) Noncompliance period.--For purposes of this 
        section, the term ``noncompliance period'' means, with 
        respect to any failure, the period beginning on the 
        date the failure first occurs and ending on the date 
        the failure is corrected.
  (c) Limitations on Amount of Tax.--
          (1) Overall limitation for unintentional failures.--
        In the case of failures that are due to reasonable 
        cause and not to willful neglect, the tax imposed by 
        subsection (a) for failures during the taxable year of 
        the employer (or, in the case of a multiemployer plan, 
        the taxable year of the trust forming part of the plan) 
        shall not exceed $500,000. For purposes of the 
        preceding sentence, all multiemployer plans of which 
        the same trust forms a part shall be treated as one 
        plan. For purposes of this paragraph, if not all 
        persons who are treated as a single employer for 
        purposes of this section have the same taxable year, 
        the taxable years taken into account shall be 
        determined under principles similar to the principles 
        of section 1561.
          (2) Waiver by secretary.--In the case of a failure 
        which is due to reasonable cause and not to willful 
        neglect, the Secretary may waive part or all of the tax 
        imposed by subsection (a) to the extent that the 
        payment of such tax would be excessive relative to the 
        failure involved.
  (d) Liability for Tax.--The following shall be liable for the 
tax imposed by subsection (a):
          (1) In the case of a plan other than a multiemployer 
        plan, the employer.
          (2) In the case of a multiemployer plan, the plan.
  (e) Notice Requirements for Plans Significantly Reducing 
Benefit Accruals.--
          (1) In general.--If an applicable pension plan is 
        amended to provide for a significant reduction in the 
        rate of future benefit accrual, the plan administrator 
        shall provide written notice to each applicable 
        individual (and to each employee organization 
        representing applicable individuals).
          (2) Notice.--The notice required by paragraph (1) 
        shall be written in a manner calculated to be 
        understood by the average plan participant and shall 
        provide sufficient information (as determined in 
        accordance with regulations prescribed by the 
        Secretary) to allow applicable individuals to 
        understand the effect of the plan amendment. The 
        Secretary may provide a simplified form of notice for, 
        or exempt from any notice requirement, a plan--
                  (A) which has fewer than 100 participants who 
                have accrued a benefit under the plan, or
                  (B) which offers participants the option to 
                choose between the new benefit formula and the 
                old benefit formula.
          (3) Timing of notice.--Except as provided in 
        regulations, the notice required by paragraph (1) shall 
        be provided within a reasonable time before the 
        effective date of the plan amendment.
          (4) Designees.--Any notice under paragraph (1) may be 
        provided to a person designated, in writing, by the 
        person to which it would otherwise be provided.
          (5) Notice before adoption of amendment.--A plan 
        shall not be treated as failing to meet the 
        requirements of paragraph (1) merely because notice is 
        provided before the adoption of the plan amendment if 
        no material modification of the amendment occurs before 
        the amendment is adopted.
  (f) Definitions and Special Rules.--For purposes of this 
section--
          (1) Applicable individual.--The term ``applicable 
        individual'' means, with respect to any plan 
        amendment--
                  (A) each participant in the plan, and
                  (B) any beneficiary who is an alternate payee 
                (within the meaning of section 414(p)(8)) under 
                an applicablequalified domestic relations order 
(within the meaning of section 414(p)(1)(A)),
        whose rate of future benefit accrual under the plan may 
        reasonably be expected to be significantly reduced by 
        such plan amendment.
          (2) Applicable pension plan.--The term ``applicable 
        pension plan'' means--
                  (A) any defined benefit plan, or
                  (B) an individual account plan which is 
                subject to the funding standards of section 
                412.
        Such term shall not include a governmental plan (within 
        the meaning of section 414(d)) or a church plan (within 
        the meaning of section 414(e)) with respect to which 
        the election provided by section 410(d) has not been 
        made.
          (3) Early retirement.--A plan amendment which 
        eliminates or significantly reduces any early 
        retirement benefit or retirement-type subsidy (within 
        the meaning of section 411(d)(6)(B)(i)) shall be 
        treated as having the effect of significantly reducing 
        the rate of future benefit accrual.
  (g) New Technologies.--The Secretary may by regulations allow 
any notice under subsection (e) to be provided by using new 
technologies.

           *       *       *       *       *       *       *

Subtitle F--Procedure and Administration

           *       *       *       *       *       *       *

CHAPTER 61--INFORMATION AND RETURNS

           *       *       *       *       *       *       *

Subchapter A--Returns and Records

           *       *       *       *       *       *       *

PART III--INFORMATION RETURNS

           *       *       *       *       *       *       *

Subpart B--Information Concerning Transactions with Other Persons

           *       *       *       *       *       *       *

SEC. 6047. INFORMATION RELATING TO CERTAIN TRUSTS AND ANNUITY PLANS.

  (a) * * *

           *       *       *       *       *       *       *

  (f) Designated Plus Contributions.--The Secretary shall 
require the plan administrator of each applicable retirement 
plan (as defined in section 402A) to make such returns and 
reports regarding designated plus contributions (as so defined) 
to the Secretary, participants and beneficiaries of the plan, 
and such other persons as the Secretary may prescribe.
  [(f)] (g) Cross References.--

          (1) For provisions relating to penalties for failures to file 
        returns and reports required under this section, see sections 
        6652(e), 6721, and 6722.
          (2) For criminal penalty for furnishing fraudulent 
        information, see section 7207.
          (3) For provisions relating to penalty for failure to comply 
        with the provisions of subsection (d), see section 6704.

           *       *       *       *       *       *       *

Subpart C--Information Regarding Wages Paid Employees

           *       *       *       *       *       *       *

SEC. 6051. RECEIPTS FOR EMPLOYEES.

  (a) Requirement.--Every person required to deduct and 
withhold from an employee a tax under section 3101 or 3402, or 
who would have been required to deduct and withhold a tax under 
section 3402 (determined without regard to subsection (n)) if 
the employee had claimed no more than one withholding 
exemption, or every employer engaged in a trade or business who 
pays remuneration for services performed by an employee, 
including the cash value of such remuneration paid in any 
medium other than cash, shall furnish to each such employee in 
respect of the remuneration paid by such person to such 
employee during the calendar year, on or before January 31 of 
the succeeding year, or, if his employment is terminated before 
the close of such calendar year, within 30 days after the date 
of receipt of a written request from the employee if such 30-
day period ends before January 31, a written statement showing 
the following:
          (1) * * *

           *       *       *       *       *       *       *

          (8) the total amount of elective deferrals (within 
        the meaning of section 402(g)(3)) and compensation 
        deferred under section 457, including the amount of 
        designated plus contributions (as defined in section 
        402A),

           *       *       *       *       *       *       *

                              ----------                              

            EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974

TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS

           *       *       *       *       *       *       *

                   Subtitle B--Regulatory Provisions

Part 1--Reporting and Disclosure

           *       *       *       *       *       *       *

    filing with secretary and furnishing information to participants

  Sec. 104. (a) * * *
  (b) Publication of the summary plan descriptions and annual 
reports shall be made to participants and beneficiaries of the 
particular plan as follows:
  (1) * * *

           *       *       *       *       *       *       *

  (3) Within 210 days after the close of the fiscal year of the 
plan, the administrators shall furnish to each participant, and 
to each beneficiary receiving benefits under the plan, a copy 
of the statements and schedules, for such fiscal year, 
described in subparagraphs (A) and (B) of section 103(b)(3) and 
such other material (including the percentage determined under 
section 103(d)(11)) as is necessary to fairly summarize the 
latest annual report. The requirement to furnish information 
under the previous sentence shall be satisfied if the 
administrator makes such information reasonably available 
through electronic means or other new technology.

           *       *       *       *       *       *       *

               REPORTING OF PARTICIPANT'S BENEFIT RIGHTS

  [Sec. 105. (a) Each administrator of an employee pension 
benefit plan shall furnish to any plan participant or 
beneficiary who so requests in writing, a statement indicating, 
on the basis of the latest available information--
          [(1) the total benefits accrued, and
          [(2) the nonforfeitable pension benefits, if any, 
        which have accrued, or the earliest date on which 
        benefits will become nonforfeitable.
  [(b) In no case shall a participant or beneficiary be 
entitled under this section to receive more than one report 
described in subsection (a) during any one 12-month period.]
  Sec. 105. (a)(1)(A) The administrator of an individual 
account plan shall furnish a pension benefit statement--
          (i) to a plan participant at least once annually, and
          (ii) to a plan beneficiary upon written request.
  (B) The administrator of a defined benefit plan shall furnish 
a pension benefit statement--
          (i) at least once every 3 years to each participant 
        with a nonforfeitable accrued benefit who is employed 
        by the employer maintaining the plan at the time the 
        statement is furnished to participants, and
          (ii) to a plan participant or plan beneficiary of the 
        plan upon written request.
  (2) A pension benefit statement under paragraph (1)--
          (A) shall indicate, on the basis of the latest 
        available information--
                  (i) the total benefits accrued, and
                  (ii) the nonforfeitable pension benefits, if 
                any, which have accrued, or the earliest date 
                on which benefits will become nonforfeitable,
          (B) shall be written in a manner calculated to be 
        understood by the average plan participant, and
          (C) may be provided in written, electronic, or other 
        appropriate form.
  (3)(A) In the case of a defined benefit plan, the 
requirements of paragraph (1)(B)(i) shall be treated as met 
with respect to a participant if the administrator provides the 
participant at least once each year with notice of the 
availability of the pension benefit statement and the ways in 
which the participant may obtain such statement. Such notice 
shall be provided in written, electronic, or other appropriate 
form, and may be included with other communications to the 
participant if done in a manner reasonably designed to attract 
the attention of the participant.
  (B) The Secretary may provide that years in which no employee 
or former employee benefits (within the meaning of section 
410(b) of the Internal Revenue Code of 1986) under the plan 
need not be taken into account in determining the 3-year period 
under paragraph (1)(B)(i).
  (b) In no case shall a participant or beneficiary of a plan 
be entitled to more than one statement described in subsection 
(a)(1)(A) or (a)(1)(B)(ii), whichever is applicable, in any 12-
month period.

           *       *       *       *       *       *       *

  [(d) Subsection (a) of this section shall apply to a plan to 
which more than one unaffiliated employer is required to 
contribute only to the extent provided in regulations 
prescribed by the Secretary in coordination with the Secretary 
of the Treasury.]

           *       *       *       *       *       *       *

Part 2--Participation and Vesting

           *       *       *       *       *       *       *

                       MINIMUM VESTING STANDARDS

  Sec. 203. (a) Each pension plan shall provide that an 
employee's right to his normal retirement benefit is 
nonforfeitable upon the attainment of normal retirement age and 
in addition shall satisfy the requirements of paragraphs (1) 
and (2) of this subsection.
          (1)  * * *
          (2) [A plan] Except as provided in paragraph (4), a 
        plan satisfies the requirements of this paragraph if it 
        satisfies the requirements of subparagraph (A) or (B).
                  (A)  * * *

           *       *       *       *       *       *       *

          (4) In the case of matching contributions (as defined 
        in section 401(m)(4)(A) of the Internal Revenue Code of 
        1986), paragraph (2) shall be applied--
                  (A) by substituting ``3 years'' for ``5 
                years'' in subparagraph (A), and
                  (B) by substituting the following table for 
                the table contained in subparagraph (B):

                                                      The nonforfeitable
        Years of service:                               percentage is:  
          2...................................................     20   
          3...................................................     40   
          4...................................................     60   
          5...................................................     80   
100.    6...................................................

           *       *       *       *       *       *       *

  (e)(1) * * *

           *       *       *       *       *       *       *

  (4) A plan shall not fail to meet the requirements of this 
subsection if, under the terms of the plan, the present value 
of the nonforfeitable accrued benefit is determined without 
regard to that portion of such benefit which is attributable to 
rollover contributions (and earnings allocable thereto). For 
purposes of this subparagraph, the term ``rollover 
contributions'' means any rollover contribution under sections 
402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16) 
of the Internal Revenue Code of 1986.

                      BENEFIT ACCRUAL REQUIREMENTS

  Sec. 204. (a) * * *

           *       *       *       *       *       *       *

  (g)(1) * * *
  (2) For purposes of paragraph (1), a plan amendment which has 
the effect of--
          (A) eliminating or reducing an early retirement 
        benefit or a retirement-type subsidy (as defined in 
        regulations), or
          (B) eliminating an optional form of benefit,
with respect to benefits attributable to service before the 
amendment shall be treated as reducing accrued benefits. In the 
case of a retirement-type subsidy, the preceding sentence shall 
apply only with respect to a participant who satisfies (either 
before or after the amendment) the preamendment conditions for 
the subsidy. The Secretary of the Treasury shall by regulations 
provide that this paragraph shall not apply to any plan 
amendment which reduces or eliminates benefits or subsidies 
which create significant burdens or complexities for the plan 
and plan participants and does not adversely affect the rights 
of any participant in a more than de minimis manner. The 
Secretary of the Treasury may by regulations provide that this 
subparagraph shall not apply to a plan amendment described in 
subparagraph (B) (other than a plan amendment having an effect 
described in subparagraph (A)).

           *       *       *       *       *       *       *

  (4)(A) A defined contribution plan (in this subparagraph 
referred to as the ``transferee plan'') shall not be treated as 
failing to meet the requirements of this subsection merely 
because the transferee plan does not provide some or all of the 
forms of distribution previously available under another 
defined contribution plan (in this subparagraph referred to as 
the ``transferor plan'') to the extent that--
          (i) the forms of distribution previously available 
        under the transferor plan applied to the account of a 
        participant or beneficiary under the transferor plan 
        that was transferred from the transferor plan to the 
        transferee plan pursuant to a direct transfer rather 
        than pursuant to a distribution from the transferor 
        plan;
          (ii) the terms of both the transferor plan and the 
        transferee plan authorize the transfer described in 
        clause (i);
          (iii) the transfer described in clause (i) was made 
        pursuant to a voluntary election by the participant or 
        beneficiary whose account was transferred to the 
        transferee plan;
          (iv) the election described in clause (iii) was made 
        after the participant or beneficiary received a notice 
        describing the consequences of making the election; and
          (v) the transferee plan allows the participant or 
        beneficiary described in clause (iii) to receive any 
        distribution to which the participant or beneficiary is 
        entitled under the transferee plan in the form of a 
        single sum distribution.
  (B) Subparagraph (A) shall apply to plan mergers and other 
transactions having the effect of a direct transfer, including 
consolidations of benefits attributable to different employers 
within a multiple employer plan.
  (5) Except to the extent provided in regulations promulgated 
by the Secretary of the Treasury, a defined contribution plan 
shall not be treated as failing to meet the requirements of 
this subsection merely because of the elimination of a form of 
distribution previously available thereunder. This paragraph 
shall not apply to the elimination of a form of distribution 
with respect to any participant unless--
          (A) a single sum payment is available to such 
        participant at the same time or times as the form of 
        distribution being eliminated; and
          (B) such single sum payment is based on the same or 
        greater portion of the participant's account as the 
        form of distribution being eliminated.
  (h)(1) * * *

           *       *       *       *       *       *       *

  (3)(A) An applicable pension plan to which paragraph (1) 
applies shall not be treated as meeting the requirements of 
such paragraph unless, in addition to any notice required to be 
provided to an individual or organization under such paragraph, 
the plan administrator provides the notice described in 
subparagraph (B) to each applicable individual (and to each 
employee organization representing applicable individuals).
  (B) The notice required by subparagraph (A) shall be written 
in a manner calculated to be understood by the average plan 
participant and shall provide sufficient information (as 
determined in accordance with regulations prescribed by the 
Secretary of the Treasury) to allow applicable individuals to 
understand the effect of the plan amendment. The Secretary of 
the Treasury may provide a simplified form of notice for, or 
exempt from any notice requirement, a plan--
          (i) which has fewer than 100 participants who have 
        accrued a benefit under the plan, or
          (ii) which offers participants the option to choose 
        between the new benefit formula and the old benefit 
        formula.
  (C) Except as provided in regulations prescribed by the 
Secretary of the Treasury, the notice required by subparagraph 
(A)shall be provided within a reasonable time before the 
effective date of the plan amendment.
  (D) Any notice under subparagraph (A) may be provided to a 
person designated, in writing, by the person to which it would 
otherwise be provided.
  (E) A plan shall not be treated as failing to meet the 
requirements of subparagraph (A) merely because notice is 
provided before the adoption of the plan amendment if no 
material modification of the amendment occurs before the 
amendment is adopted.
  (F) The Secretary of the Treasury may by regulations allow 
any notice under this paragraph to be provided by using new 
technologies.
  (4) For purposes of paragraph (3)--
          (A) The term ``applicable individual'' means, with 
        respect to any plan amendment--
                  (i) each participant in the plan; and
                  (ii) any beneficiary who is an alternate 
                payee (within the meaning of section 
                206(d)(3)(K)) under an applicable qualified 
                domestic relations order (within the meaning of 
                section 206(d)(3)(B)(i)),
        whose rate of future benefit accrual under the plan may 
        reasonably be expected to be significantly reduced by 
        such plan amendment.
          (B) The term ``applicable pension plan'' means--
                  (i) any defined benefit plan; or
                  (ii) an individual account plan which is 
                subject to the funding standards of section 412 
                of the Internal Revenue Code of 1986.
          (C) A plan amendment which eliminates or 
        significantly reduces any early retirement benefit or 
        retirement-type subsidy (within the meaning of 
        subsection (g)(2)(A)) shall be treated as having the 
        effect of significantly reducing the rate of future 
        benefit accrual.

           *       *       *       *       *       *       *

 requirement of joint and survivor annuity and preretirement survivor 
                                annuity

  Sec. 205. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) * * *

           *       *       *       *       *       *       *

  (7) For purposes of this subsection, the term ``applicable 
election period'' means--
          (A) in the case of an election to waive the qualified 
        joint and survivor annuity form of benefit, the [90-
        day] 180-day period ending on the annuity starting 
        date, or

           *       *       *       *       *       *       *

       other provisions relating to form and payment of benefits

  Sec. 206. (a) * * *

           *       *       *       *       *       *       *

  (f) Missing Participants in Terminated Plans.--In the case of 
a plan covered by [title IV] section 4050, [the plan shall 
provide that,] upon termination of the plan, benefits of 
missing participants shall be treated in accordance with 
section 4050.

           *       *       *       *       *       *       *

Part 3--Funding

           *       *       *       *       *       *       *

                       minimum funding standards

  Sec. 302. (a) * * *
  (c)(1) * * *

           *       *       *       *       *       *       *

  (7) Full-funding limitation.--
          (A) In general.--For purposes of paragraph (6), the 
        term ``full-funding limitation'' means the excess (if 
        any) of--
                  (i) the lesser of (I) [the applicable 
                percentage] in the case of plan years beginning 
                before January 1, 2004, the applicable 
                percentage of current liability (including the 
                expected increase in current liability due to 
                benefits accruing during the plan year), or 
                (II) the accrued liability (including normal 
                cost) under the plan (determined under the 
                entry age normal funding method if such accrued 
                liability cannot be directly calculated under 
                the funding method used for the plan), over

           *       *       *       *       *       *       *

          [(F) Applicable percentage.--For purposes of 
        subparagraph (A)(i)(I), the applicable percentage shall 
        be determined in accordance with the following table:

[In the case of any plan year                             The applicable
  beginning in--                                         percentage is--
    1999 or 2000..............................................     155  
    2001 or 2002..............................................     160  
    2003 or 2004..............................................     165  
    2005 and succeeding years.................................    170.] 

          (F) Applicable percentage.--For purposes of 
        subparagraph (A)(i)(I), the applicable percentage shall 
        be determined in accordance with the following table:

        In the case of any plan year                      The applicable
          beginning in--                                 percentage is--
          2002................................................    165   
170.    2003................................................

           *       *       *       *       *       *       *

  (9)(A) For purposes of this part, a determination of 
experience gains and losses and a valuation of the plan's 
liability shall be made not less frequently than once every 
year, except that such determination shall be made more 
frequently to the extent required in particular cases under 
regulations prescribed by the Secretary of the Treasury.
  (B)(i) Except as provided in clause (ii), the valuation 
referred to in subparagraph (A) shall be made as of a date 
within the planyear to which the valuation refers or within one 
month prior to the beginning of such year.
  (ii) The valuation referred to in subparagraph (A) may be 
made as of a date within the plan year prior to the year to 
which the valuation refers if--
          (I) an election is in effect under this clause with 
        respect to the plan; and
          (II) as of such date, the value of the assets of the 
        plan are not less than 125 percent of the plan's 
        current liability (as defined in paragraph (7)(B)).
  (iii) Information under clause (ii) shall, in accordance with 
regulations, be actuarially adjusted to reflect significant 
differences in participants.
  (iv) An election under clause (ii), once made, shall be 
irrevocable without the consent of the Secretary of the 
Treasury.

           *       *       *       *       *       *       *

Part 4--Fiduciary Responsibility

           *       *       *       *       *       *       *

                EXEMPTIONS FROM PROHIBITED TRANSACTIONS

  Sec. 408. (a) * * *

           *       *       *       *       *       *       *

  (d)(1) * * *
  (2)(A) * * *

           *       *       *       *       *       *       *

  (C) For purposes of paragraph (1)(A), the term ``owner-
employee'' shall only include a person described in clause (ii) 
or (iii) of subparagraph (A).

           *       *       *       *       *       *       *

Part 5--Administration and Enforcement

           *       *       *       *       *       *       *

                           civil enforcement

  Sec. 502. (a) * * *

           *       *       *       *       *       *       *

  (l)(1) In the case of--
          (A) any breach of fiduciary responsibility under (or 
        other violation of) part 4 by a fiduciary, or
          (B) any knowing participation in such a breach or 
        violation by any other person,
the Secretary [shall] may assess a civil penalty against such 
fiduciary or other person in an amount [equal to] not greater 
than 20 percent of the applicable recovery amount.
  (2) For purposes of paragraph (1), the term ``applicable 
recovery amount'' means any amount which is recovered from a 
fiduciary or other person (or from any other person on behalf 
of any such fiduciary or other person) with respect to a breach 
or violation described in paragraph (1)--
          (A) pursuant to any settlement agreement with the 
        Secretary, or
          (B) ordered by a court to be paid by such fiduciary 
        or other person to a plan or its participants and 
        beneficiaries in a judicial proceeding instituted by 
        the Secretary under subsection (a)(2) or (a)(5).

           *       *       *       *       *       *       *

  (5) A person shall be jointly and severally liable for the 
penalty described in paragraph (1) to the same extent that such 
person is jointly and severally liable for the applicable 
recovery amount on which the penalty is based.
  (6) No penalty shall be assessed under this subsection unless 
the person against whom the penalty is assessed is given notice 
and opportunity for a hearing with respect to the violation and 
applicable recovery amount.

           *       *       *       *       *       *       *

                 national summit on retirement savings

  Sec. 517. (a) Authority To Call Summit.--Not later than July 
15, 1998, the President shall convene a National Summit on 
Retirement Income Savings at the White House, to be co-hosted 
by the President and the Speaker and the Minority Leader of the 
House of Representatives and the Majority Leader and Minority 
Leader of the Senate. Such a National Summit shall be convened 
thereafter in [2001 and 2005 on or after September 1 of each 
year involved] 2001, 2005, and 2009 in the month of September 
of each year involved. Such a National Summit shall--
          (1)  * * *

           *       *       *       *       *       *       *

  (b) Planning and Direction.--The National Summit shall be 
planned and conducted under the direction of the Secretary, in 
consultation with, and with the assistance of, the heads of 
such other Federal departments and agencies as the President 
may designate. Such assistance may include the assignment of 
personnel. The Secretary shall, in planning and conducting the 
National Summit, consult with the congressional leaders 
specified in subsection (e)(2). The Secretary shall also, in 
carrying out the Secretary's duties under this subsection, 
consult and coordinate with at least one organization made up 
of private sector businesses and associations partnered with 
Government entities to promote long-term financial security in 
retirement through savings. To effectuate the purposes of this 
paragraph, the Secretary may enter into a cooperative 
agreement, pursuant to the Federal Grant and Cooperative 
Agreement Act of 1977 (31 U.S.C. 6301 et seq.), with the 
American Savings Education Council or any other appropriate, 
qualified entity.

           *       *       *       *       *       *       *

  (e) National Summit Participants.--
          (1) * * *
          (2) Statutorily required participation.--The 
        participants in the National Summit shall include the 
        following individuals or their designees:
                  (A) * * *

           *       *       *       *       *       *       *

                  (D) the Chairman and ranking Member of the 
                [Committee on Labor and Human Resources] 
                Committee on Health, Education, Labor, and 
                Pensions of the Senate;
                  (E)  * * *
                  [(F) the Chairman and ranking Member of the 
                Subcommittees on Labor, Health and Human 
                Services, and Education of the Senate and House 
                of Representatives; and]
                  (F) the Chairman and Ranking Member of the 
                Subcommittee on Labor, Health and Human 
                Services, and Education of the Committee on 
                Appropriations of the House of Representatives 
                and the Chairman and Ranking Member of the 
                Subcommittee on Labor, Health and Human 
                Services, and Education of the Committee on 
                Appropriations of the Senate;
                  (G) the Chairman and Ranking Member of the 
                Committee on Finance of the Senate;
                  (H) the Chairman and Ranking Member of the 
                Committee on Ways and Means of the House of 
                Representatives;
                  (I) the Chairman and Ranking Member of the 
                Subcommittee on Employer-Employee Relations of 
                the Committee on Education and the Workforce of 
                the House of Representatives; and
                  [(G)] (J) the parties referred to in 
                subsection (b).
          (3) Additional participants.--
                  (A) In general.--[There shall be not more 
                than 200 additional participants.] The 
                participants in the National Summit shall also 
                include additional participants appointed under 
                this subparagraph. Of such additional 
                participants--
                          (i) [one-half shall be appointed by 
                        the President,] not more than 100 
                        participants shall be appointed under 
                        this clause by the President, in 
                        consultation with the elected leaders 
                        of the President's party in Congress 
                        (either the Speaker of the House of 
                        Representatives or the Minority Leader 
                        of the House of Representatives, and 
                        either the Majority Leader or the 
                        Minority Leader of the Senate; and
                          (ii) [one-half shall be appointed by 
                        the elected leaders of Congress] not 
                        more than 100 participants shall be 
                        appointed under this clause by the 
                        elected leaders of Congress of the 
                        party to which the President does not 
                        belong (one-half of that allotment to 
                        be appointed by either the Speaker of 
                        the House of Representatives or the 
                        Minority Leader of the House of 
                        Representatives, and one-half of that 
                        allotment to be appointed by either the 
                        Majority Leader or the Minority Leader 
                        of the Senate).
                  (B) Presidential authority for additional 
                appointments.--The President, in consultation 
                with the elected leaders of Congress referred 
                to in subsection (a), may appoint under this 
                subparagraph additional participants to the 
                National Summit. The number of such additional 
                participants appointed under this subparagraph 
                may not exceed the lesser of 3 percent of the 
                total number of all additional participants 
                appointed under this paragraph, or 10. Such 
                additional participants shall be appointed from 
                persons nominated by the organization referred 
                to in subsection (b)(2) which is made up of 
                private sector businesses and associations 
                partnered with Government entities to promote 
                long term financial security in retirement 
                through savings and with which the Secretary is 
                required thereunder to consult and cooperate 
                and shall not be Federal, State, or local 
                government employees.
                  [(B)] (C) Appointment requirements.--The 
                additional participants described in 
                subparagraph (A) shall be--
                          (i) appointed not later than [January 
                        31, 1998] May 1, 2001, May 1, 2005, and 
                        May 1, 2009, for each of the subsequent 
                        summits, respectively;

           *       *       *       *       *       *       *

  (f) National Summit Administration.--
          (1) Administration.--In administering this section, 
        the Secretary shall--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) make available for public comment, no 
                later than 90 days prior to the date of the 
                commencement of the National Summit, a proposed 
                agenda for the National Summit that reflects to 
                the greatest extent possible the purposes for 
                the National Summit set out in this section;

           *       *       *       *       *       *       *

  (g) Report.--The Secretary shall prepare a report, in 
consultation with the congressional leaders specified in 
subsection (e)(2), describing the activities of the National 
Summit and shall submit the report to the President, the 
Speaker and Minority Leader of the House of Representatives, 
the Majority and Minority Leaders of the Senate, and the chief 
executive officers of the States not later than 90 days after 
the date on which the National Summit is adjourned.

           *       *       *       *       *       *       *

  (i) Authorization of Appropriations.--
          (1) In general.--There is authorized to be 
        appropriated for fiscal years [beginning on or after 
        October 1, 1997] 2001, 2005, and 2009, such sums as are 
        necessary to carry out this section.

           *       *       *       *       *       *       *

          (3) Reception and representation authority.--The 
        Secretary is hereby granted reception and 
        representation authority limited specifically to the 
        events at the National Summit. The Secretary shall use 
        any private contributions accepted in connection with 
        the National Summit prior to using fundsappropriated 
for purposes of the National Summit pursuant to this paragraph.

           *       *       *       *       *       *       *

  (k) Contracts.--The Secretary may enter into contracts to 
carry out the Secretary's responsibilities under this section. 
The Secretary [shall enter into a contract on a sole-source 
basis] may enter into a contract on a sole-source basis to 
ensure the timely completion of the National Summit in [fiscal 
year 1998] fiscal years 2001, 2005, and 2009.

           *       *       *       *       *       *       *

                  TITLE IV--PLAN TERMINATION INSURANCE

Subtitle A--Pension Benefit Guaranty Corporation

           *       *       *       *       *       *       *

                             PREMIUM RATES

  Sec. 4006. (a)(1) * * *

           *       *       *       *       *       *       *

  (3)(A) Except as provided in subparagraph (C), the annual 
premium rate payable to the corporation by all plans for basic 
benefits guaranteed under this title is--
          (i) in the case of a single-employer plan, other than 
        a new single-employer plan (as defined in subparagraph 
        (F)) maintained by a small employer (as so defined), 
        for plan years beginning after December 31, 1990, an 
        amount equal to the sum of $19 plus the additional 
        premium (if any) determined under subparagraph (E) for 
        each individual who is a participant in such plan 
        during the plan year;

           *       *       *       *       *       *       *

          (iii) in the case of a multiemployer plan, for plan 
        years beginning after the date of enactment of the 
        Multiemployer Pension Plan Amendments Act of 1980, an 
        amount equal to--
                  (I) $1.40 for each participant, for the 
                first, second, third, and fourth plan years,
                  (II) $1.80 for each participant, for the 
                fifth and sixth plan years,
                  (III) $2.20 for each participant, for the 
                seventh and eighth plan years, and
                  (IV) $2.60 for each participant, for the 
                ninth plan year, and for each succeeding plan 
                year[.], and
          (iv) in the case of a new single-employer plan (as 
        defined in subparagraph (F)) maintained by a small 
        employer (as so defined) for the plan year, $5 for each 
        individual who is a participant in such plan during the 
        plan year.

           *       *       *       *       *       *       *

  (E)(i) [The] Except as provided in subparagraph (G), the 
additional premium determined under this subparagraph with 
respect to any plan for any plan year shall be an amount equal 
to the amount determined under clause (ii) divided by the 
number of participants in such plan as of the close of the 
preceding plan year.

           *       *       *       *       *       *       *

  (v) In the case of a new defined benefit plan, the amount 
determined under clause (ii) for any plan year shall be an 
amount equal to the product of the amount determined under 
clause (ii) and the applicable percentage. For purposes of this 
clause, the term ``applicable percentage'' means--
          (I) 0 percent, for the first plan year.
          (II) 20 percent, for the second plan year.
          (III) 40 percent, for the third plan year.
          (IV) 60 percent, for the fourth plan year.
          (V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as defined 
in section 3(35)) maintained by a contributing sponsor shall be 
treated as a new defined benefit plan for each of its first 5 
plan years if, during the 36-month period ending on the date of 
the adoption of the plan, the sponsor and each member of any 
controlled group including the sponsor (or any predecessor of 
either) did not establish or maintain a plan to which this 
title applies with respect to which benefits were accrued for 
substantially the same employees as are in the new plan.
  (F)(i) For purposes of this paragraph, a single-employer plan 
maintained by a contributing sponsor shall be treated as a new 
single-employer plan for each of its first 5 plan years if, 
during the 36-month period ending on the date of the adoption 
of such plan, the sponsor or any member of such sponsor's 
controlled group (or any predecessor of either) did not 
establish or maintain a plan to which this title applies with 
respect to which benefits were accrued for substantially the 
same employees as are in the new single-employer plan.
  (ii)(I) For purposes of this paragraph, the term ``small 
employer'' means an employer which on the first day of any plan 
year has, in aggregation with all members of the controlled 
group of such employer, 100 or fewer employees.
  (II) In the case of a plan maintained by two or more 
contributing sponsors that are not part of the same controlled 
group, the employees of all contributing sponsors and 
controlled groups of such sponsors shall be aggregated for 
purposes of determining whether any contributing sponsor is a 
small employer.
  (G)(i) In the case of an employer who has 25 or fewer 
employees on the first day of the plan year, the additional 
premium determined under subparagraph (E) for each participant 
shall not exceed $5 multiplied by the number of participants in 
the plan as of the close of the preceding plan year.
  (ii) For purposes of clause (i), whether an employer has 25 
or fewer employees on the first day of the plan year is 
determined taking into consideration all of the employees of 
all members of the contributing sponsor's controlled group. In 
the case of a plan maintained by two or more contributing 
sponsors, the employees of all contributing sponsors and their 
controlled groups shall be aggregated for purposes of 
determining whether the 25-or-fewer-employees limitation has 
been satisfied.

                          PAYMENT OF PREMIUMS

  Sec. 4007. (a) * * *
  (b)(1) If any basic benefit premium is not paid when it is 
due the corporation is authorized to assess a late payment 
charge of not more than 100 percent of the premium payment 
which was not timely paid. The preceding sentence shall not 
apply to any payment of premium made within 60 days after the 
date on which payment is due, if before such date, the 
designated payor obtains a waiver from the corporation based 
upon a showing of substantial hardship arising from the timely 
payment of the premium. The corporation is authorized to grant 
a waiver under this subsection upon application made by the 
designated payor, but the corporation may not grant a waiver if 
it appears that the designated payor will be unable to pay the 
premium within 60 days after the date on which it is due. If 
any premium is not paid by the last date prescribed for a 
payment, interest on the amount of such premium at the rate 
imposed under section 6601(a) of the Internal Revenue Code of 
1986 (relating to interest on underpayment, nonpayment, or 
extensions of time for payment of tax) shall be paid for the 
period from such last date to the date paid.
  (2) The corporation is authorized to pay, subject to 
regulations prescribed by the corporation, interest on the 
amount of any overpayment of premium refunded to a designated 
payor. Interest under this paragraph shall be calculated at the 
same rate and in the same manner as interest is calculated for 
underpayments under paragraph (1).

           *       *       *       *       *       *       *

                          Subtitle B--Coverage

                             PLANS COVERED

  Sec. 4021. (a) * * *
  (b) This section does not apply to any plan--
          (1) * * *

           *       *       *       *       *       *       *

          (9) which is established and maintained exclusively 
        for substantial owners [as defined in section 
        4022(b)(6)];

           *       *       *       *       *       *       *

  (d) For purposes of subsection (b)(9), the term ``substantial 
owner'' means an individual who, at any time during the 60-
month period ending on the date the determination is being 
made--
          (1) owns the entire interest in an unincorporated 
        trade or business,
          (2) in the case of a partnership, is a partner who 
        owns, directly or indirectly, more than 10 percent of 
        either the capital interest or the profits interest in 
        such partnership, or
          (3) in the case of a corporation, owns, directly or 
        indirectly, more than 10 percent in value of either the 
        voting stock of that corporation or all the stock of 
        that corporation.
For purposes of paragraph (3), the constructive ownership rules 
of section 1563(e) of the Internal Revenue Code of 1986 shall 
apply (determined without regard to section 1563(e)(3)(C)).

                SINGLE-EMPLOYER PLAN BENEFITS GUARANTEED

  Sec. 4022. (a) * * *
  (b)(1) * * *

           *       *       *       *       *       *       *

  [(5)(A) For purposes of this title, the term ``substantial 
owner'' means an individual who--
          [(i) owns the entire interest in an unincorporated 
        trade or business,
          [(ii) in the case of a partnership, is a partner who 
        owns, directly or indirectly, more than 10 percent of 
        either the capital interest or the profits interest in 
        such partnership, or
          [(iii) in the case of a corporation, owns, directly 
        or indirectly, more than 10 percent in value of either 
        the voting stock of that corporation or all the stock 
        of that corporation.
For purposes of clause (iii) the constructive ownership rules 
of section 1563(e) of the Internal Revenue Code of 1986 shall 
apply (determined without regard to section 1563(e)(3)(C)). For 
purposes of this title an individual is also treated as a 
substantial owner with respect to a plan if, at any time within 
the 60 months preceding the date on which the determination is 
made, he was a substantial owner under the plan.
  [(B) In the case of a participant in a plan under which 
benefits have not been increased by reason of any plan 
amendments and who is covered by the plan as a substantial 
owner, the amount of benefits guaranteed under this section 
shall not exceed the product of--
          [(i) a fraction (not to exceed 1) the numerator of 
        which is the number of years the substantial owner was 
        an active participant in the plan, and the denominator 
        of which is 30, and
          [(ii) the amount of the substantial owner's monthly 
        benefits guaranteed under subsection (a) (as limited 
        under paragraph (3) of this subsection).
  [(C) In the case of a participant in a plan, other than a 
plan described in subparagraph (B), who is covered by the plan 
as a substantial owner, the amount of the benefit guaranteed 
under this section shall, under regulations prescribed by the 
corporation, treat each benefit increase attributable to a plan 
amendment as if it were provided under a new plan. The benefits 
guaranteed under this section with respect to all such 
amendments shall not exceed the amount which would be 
determined under subparagraph (B) if subparagraph (B) applied.]
  (5)(A) For purposes of this paragraph, the term ``majority 
owner'' means an individual who, at any time during the 60-
month period ending on the date the determination is being 
made--
          (i) owns the entire interest in an unincorporated 
        trade or business,
          (ii) in the case of a partnership, is a partner who 
        owns, directly or indirectly, 50 percent or more of 
        either the capital interest or the profits interest in 
        such partnership, or
          (iii) in the case of a corporation, owns, directly or 
        indirectly, 50 percent or more in value of either the 
        voting stock of that corporation or all the stock of 
        that corporation.
For purposes of clause (iii), the constructive ownership rules 
of section 1563(e) of the Internal Revenue Code of 1986 shall 
apply (determined without regard to section 1563(e)(3)(C)).
  (B) In the case of a participant who is a majority owner, the 
amount of benefits guaranteed under this section shall equal 
the product of--
          (i) a fraction (not to exceed 1) the numerator of 
        which is the number of years from the later of the 
        effective date or the adoption date of the plan to the 
        termination date, and the denominator of which is 10, 
        and
          (ii) the amount of benefits that would be guaranteed 
        under this section if the participant were not a 
        majority owner.

           *       *       *       *       *       *       *

Subtitle C--Terminations

           *       *       *       *       *       *       *

                           REPORTABLE EVENTS

  Sec. 4043. (a) * * *

           *       *       *       *       *       *       *

  (c) For purposes of this section a reportable event occurs--
          (1) * * *

           *       *       *       *       *       *       *

          (7) when there is a distribution under the plan to a 
        participant who is a substantial owner as defined in 
        section [4022(b)(6)] 4021(d) if--
                  (A)  * * *

           *       *       *       *       *       *       *

                          ALLOCATION OF ASSETS

  Sec. 4044. (a) In the case of the termination of a single-
employer plan, the plan administrator shall allocate the assets 
of the plan (available to provide benefits) among the 
participants and beneficiaries of the plan in the following 
order:
          (1) * * *

           *       *       *       *       *       *       *

          (4) Fourth--
                  (A) * * *
                  (B) to the additional benefits (if any) which 
                would be determined under subparagraph (A) if 
                section [4022(b)(5)] 4022(b)(5)(B) did not 
                apply.
        For purposes of this paragraph, section 4021 shall be 
        applied without regard to subsection (c) thereof.
  (b) For purposes of subsection (a)--
          (1) * * *
          (2) If the assets available for allocation under any 
        paragraph of subsection (a) (other than paragraphs 
        [(5)] (4), (5), and (6)) are insufficient to satisfy in 
        full the benefits of all individuals which are 
        described in that paragraph, the assets shall be 
        allocated pro rata among such individuals on the basis 
        of the present value (as of the termination date) of 
        their respective benefits described in that paragraph.
          (3) If assets available for allocation under 
        paragraph (4) of subsection (a) are insufficient to 
        satisfy in full the benefits of all individuals who are 
        described in that paragraph, the assets shall be 
        allocated first to benefits described in subparagraph 
        (A) of that paragraph. Any remaining assets shall then 
        be allocated to benefits described in subparagraph (B) 
        of that paragraph. If assets allocated to such 
        subparagraph (B) are insufficient to satisfy in full 
        the benefits described in that subparagraph, the assets 
        shall be allocated pro rata among individuals on the 
        basis of the present value (as of the termination date) 
        of their respective benefits described in that 
        subparagraph.
          [(3)] (4) This paragraph applies if the assets 
        available for allocation under paragraph (5) of 
        subsection (a) are not sufficient to satisfy in full 
        the benefits of individuals described in that 
        paragraph.

           *       *       *       *       *       *       *

          [(4)] (5) If the Secretary of the Treasury determines 
        that the allocation made pursuant to this section 
        (without regard to this paragraph) results in 
        discrimination prohibited by section 401(a)(4) of the 
        Internal Revenue Code of 1986 then, if required to 
        prevent the disqualification of the plan (or any trust 
        under the plan) under section 401(a) or 403(a) of such 
        Code, the assets allocated under subsections (a)(4)(B), 
        (a)(5), and (a)(6) shall be reallocated to the extent 
        necessary to avoid such discrimination.
          [(5)] (6) The term ``mandatory contributions'' means 
        amounts contributed to the plan by a participant which 
        are required as a condition of employment, as a 
        condition of participation in such plan, or as a 
        condition of obtaining benefits under the plan 
        attributable to employer contributions. For this 
        purpose, the total amount of mandatory contributions of 
        a participant is the amount of such contributions 
        reduced (but not below zero) by the sum of the amounts 
        paid or distributed to him under the plan before its 
        termination.
          [(6)] (7) A plan may establish subclasses and 
        categories within the classes described in paragraphs 
        (1) through (6) of subsection (a) in accordance with 
        regulations prescribed by the corporation.

           *       *       *       *       *       *       *

SEC. 4050. MISSING PARTICIPANTS.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Multiemployer Plans.--The corporation shall prescribe 
rules similar to the rules in subsection (a) for multiemployer 
plans covered by this title that terminate under section 4041A.
  (d) Plans Not Otherwise Subject to Title.--
          (1) Transfer to corporation.--The plan administrator 
        of a plan described in paragraph (4) may elect to 
        transfer a missing participant's benefits to the 
        corporation upon termination of the plan.
          (2) Information to the corporation.--To the extent 
        provided in regulations, the plan administrator of a 
        plan described in paragraph (4) shall, upon termination 
        of the plan, provide the corporation information with 
        respect to benefits of a missing participant if the 
        plan transfers such benefits--
                  (A) to the corporation, or
                  (B) to an entity other than the corporation 
                or a plan described in paragraph (4)(B)(ii).
          (3) Payment by the corporation.--If benefits of a 
        missing participant were transferred to the corporation 
        under paragraph (1), the corporation shall, upon 
        location of the participant or beneficiary, pay to the 
        participant or beneficiary the amount transferred (or 
        the appropriate survivor benefit) either--
                  (A) in a single sum (plus interest), or
                  (B) in such other form as is specified in 
                regulations of the corporation.
          (4) Plans described.--A plan is described in this 
        paragraph if--
                  (A) the plan is a pension plan (within the 
                meaning of section 3(2))--
                          (i) to which the provisions of this 
                        section do not apply (without regard to 
                        this subsection), and
                          (ii) which is not a plan described in 
                        paragraphs (2) through (11) of section 
                        4021(b), and
                  (B) at the time the assets are to be 
                distributed upon termination, the plan--
                          (i) has missing participants, and
                          (ii) has not provided for the 
                        transfer of assets to pay the benefits 
                        of all missing participants to another 
                        pension plan (within the meaning of 
                        section 3(2)).
          (5) Certain provisions not to apply.--Subsections 
        (a)(1) and (a)(3) shall not apply to a plan described 
        in paragraph (4).
  [(c)] (e) Regulatory Authority.--The corporation shall 
prescribe such regulations as are necessary to carry out the 
purposes of this section, including rules relating to what will 
be considered a diligent search, the amount payable to the 
corporation, and the amount to be paid by the corporation.

           *       *       *       *       *       *       *

                              ----------                              

TAXPAYER RELIEF ACT OF 1997

           *       *       *       *       *       *       *

                TITLE XV--PENSIONS AND EMPLOYEE BENEFITS

Subtitle A--Simplification

           *       *       *       *       *       *       *

SEC. 1505. EXTENSION OF MORATORIUM ON APPLICATION OF CERTAIN 
                    NONDISCRIMINATION RULES TO STATE AND LOCAL 
                    GOVERNMENTS.

  (a) * * *

           *       *       *       *       *       *       *

  (d) Effective Dates.--
          (1) * * *
          (2) Treatment for years beginning before date of 
        enactment.--A governmental plan (within the meaning of 
        section 414(d) of the Internal Revenue Code of 1986) 
        [maintained by a State or local government or political 
        subdivision thereof (or agency or instrumentality 
        thereof)] shall be treated as satisfying the 
        requirements of sections 401(a)(3), 401(a)(4), 
        401(a)(26), 401(k), 401(m), 403 (b)(1)(D) and 
        (b)(12)(A)(i), and 410 of such Code for all taxable 
        years beginning before the date of enactment of this 
        Act.

           *       *       *       *       *       *       *

Subtitle B--Other Provisions Relating to Pensions and Employee Benefits

           *       *       *       *       *       *       *

SEC. 1524. DIVERSIFICATION OF SECTION 401(K) PLAN INVESTMENTS.

  (a) * * *

           *       *       *       *       *       *       *

  [(b) Effective Date.--The amendments made by this section 
shall apply to elective deferrals for plan years beginning 
after December 31, 1998.]
  (b) Effective Date.--
          (1) In general.--Except as provided in paragraph (2), 
        the amendments made by this section shall apply to 
        elective deferrals for plan years beginning after 
        December 31, 1998.
          (2) Nonapplication to previously acquired property.--
        The amendments made by this section shall not apply to 
        any elective deferral which is invested in assets 
        consisting of qualifying employer securities, 
        qualifying employer real property, or both, if such 
        assets were acquired before January 1, 1999.

           *       *       *       *       *       *       *

                              ----------                              

               SECTION 1114 OF THE TAX REFORM ACT OF 1986

SEC. 1114. DEFINITION OF HIGHLY COMPENSATED EMPLOYEE.

  (a) * * *

           *       *       *       *       *       *       *

  (c) Effective Date.--
          (1) * * *

           *       *       *       *       *       *       *

          [(4) Special rule for determining highly compensated 
        employees.--For purposes of sections 401(k) and 401(m) 
        of the Internal Revenue Code of 1986, in the case of an 
        employer incorporated on December 15, 1924, if more 
        than 50 percent of its employees in the top-paid group 
        (within the meaning of section 414(q)(4) of such Code) 
        earn less than $25,000 (indexed at the same time and in 
        the same manner as under section 415(d) of such Code), 
        then the highly compensated employees shall include 
        employees described in section 414(q)(1)(C) of such 
        Code determined without regard to the level of 
        compensation of such employees. Any reference in this 
        paragraph to section 414(q) shall be treated as a 
        reference to such section as in effect on the day 
        before the date of the enactment of the Small Business 
        Job Protection Act of 1996.]

           *       *       *       *       *       *       *

                            ADDITIONAL VIEWS

    We commend the sponsors of H.R. 10 for their commitment to 
strengthening incentives to maintain private pension plans and 
provide pension benefits to workers. The bill contains helpful 
provisions to shorten the period of time required for workers 
to vest a right to pension benefits in 401(k) plans and 
simplify the process for transferring pension monies between 
pension plans when employees change jobs. The bill also 
provides needed assistance to employees who work under multi-
employer plans by eliminating unfair pension benefit caps and 
state and local government employees by treating their pension 
plans similarly to private sector plans.
    We believe the bill could be strengthened by providing 
additional incentives to assist low and moderate income 
earners. H.R. 10 primarily seeks to provide incentives to 
employers and senior managerial employees to establish and 
maintain pension plans by increasing the amounts that such 
individuals may contribute for their own retirement. The 
expectation is that maintaining the support of the owners and 
senior employees also will benefit rank and file employees. We 
certainly hope that this will be the case, but believe more 
needs to be done.
    During the past year, the Committee received several new 
reports documenting the scope of pension coverage, and the lack 
thereof, in the United States. Both the Congressional Research 
Service and the General Accounting Office released detailed 
analyses of pension coverage from the most recently released 
Current Population Survey. This data confirmed that the percent 
of the workforce without pension coverage has remained at about 
50% for the past twenty-five years. Low income workers, part-
time workers (primarily women), and employees of small business 
are the most likely not to have pension coverage.
    According to a November 2000 Congressional Research Service 
(CRS) report, only 29% of full-time workers with earnings below 
$20,000 are covered by pensions. On the other hand, 76% of 
those with earnings above $60,000 have coverage. According to 
CRS, pension coverage for full-time workers averages 58%, but 
only 26% for part-time or part year workers. As of 1999, 71% of 
full-time employees at firms over 100 and 50% of full-time 
employees working for firms with 25 to 99 employees had pension 
coverage, but only 29% of employees working for firms with 
fewer than 25 employees had pension coverage.
    The challenge before Congress is how to expand pension 
coverage and adequacy to the most needy groups: low-come 
earners, less than full time workers, and employees of small 
business. Certainly, providing incentives to upper income 
employees is one option assuming they trickle down to rank and 
file employees. But, under current law there are a variety of 
pension exemptions that permit employers to maintain pension 
plans without providing any or significant benefits to lower 
income employees. For example, the coverage rules permit the 
exclusion of 30% of an employer's workforce without reason, and 
additional amounts with Internal Revenue Service permission. 
Other rules such as the Social Security integration rules, 
permit the benefits of lower income employees to be reduced by 
as much as 50% by taking Social Security into account. Although 
more than 90% of Americans are covered by SocialSecurity, it 
only replaces slightly more than 40%, on average, of pre-retirement 
income. Most retirement experts believe that somewhere between 65-85% 
of pre-retirement income is necessary to maintain a decent standard of 
living in retirement. Therefore, all income earners are equally in need 
of supplemental pensions to provide needed income in retirement.
    One of the most promising new ideas for improving private 
pension coverage is the creation of a refundable tax credit to 
match retirement contributions that low and moderate income 
individual make. President Clinton first conceptualized the 
idea in response to Social Security privatization proposals. 
But, the idea has received growing support from pension 
policymakers and economists. In the 107th congress, Congressman 
Neal of Massachusetts has introduced H.R. 1498 which would 
phase in a refundable tax credit for families earning up to 
$75,000 a year for retirement savings contributions and provide 
a tax credit to small employers who establish and contribute to 
new pension plans. We believe that these proposals would be an 
important addition to H.R. 10. We hope that these proposals 
will receive continued consideration as this bill continues 
through the legislative process.
    The other major issue related to consideration of H.R. 10 
is the provision providing for additional notice when employers 
convert their defined benefit pension plans to what are known 
as ``cash balance'' hybrid pension plans. Cash balance 
conversions are the most controversial pension issue occurring 
now. Cash balance plans were created during the 1980's, but it 
has only been in the past two years that large numbers of 
employers have moved to convert their traditional defined 
benefit plans. According to a 2000 GAO report, approximately 19 
percent of Fortune 1000 firms have converted to cash balance 
plans affecting over 2 million workers.
    Although the details vary somewhat from employer to 
employer, the primary change involves the plan's benefit 
formula calculation of future retirement benefits from a final 
pay formula to a career average formula. In addition, the 
employer expresses the career benefits in the form of a 
hypothetical ``account'' so that workers can see their benefits 
as a lump sum amount that increases with an assumed rate of 
earnings each year. The plan remains a defined benefit plan 
under which the employer provides a defined future benefit 
provided workers meet the necessary conditions, the employer 
guarantees a rate of return, and in the case of termination, 
the plan remains guaranteed by the Pension Benefit Guaranty 
Corporation (PBGC). As employers argue, in many ways a cash 
balance plan is fairer to younger workers since benefits accrue 
more evenly throughout a workers' career, instead of earning 
most benefits at the end of one's work service.
    The controversy primarily arises when an employer converts 
an existing traditional defined benefit plan to a cash balance 
plan. Three major issues have arisen in this context. First, 
the adequacy of the notice of the change that must be provided 
to workers. Under section 204(h) of ERISA, employers must 
provide participants and beneficiaries notice of a significant 
reduction of benefit accrual fifteen days before the change. 
Employers are not required to explain the effect of the 
amendment. They may simply give employees a copy of the 
amendment. In cash balance conversions, there has been 
considerable controversy not only that employers are not 
adequately explaining to their employees the effect on their 
retirement benefits of the change, but also that some employers 
may be intentionally hiding the negative effects from workers. 
There havebeen numerous documented statements by benefit 
consultants that one of the many benefits of cash balance conversions 
is that employers need not explain the effects to workers and workers 
are unlikely to understand the changes until it is too late.
    Second, there are significant effects on older workers. 
Many employers who convert to cash balance plans include an 
aspect known as ``wear-away'' under which employees whose 
accrued benefit under the plan before the conversion is greater 
than the benefit they would have accrued under the converted 
plan do not accrue new benefits until their former and new 
benefit levels are equal. For many older workers, up to 50% of 
their expected pension benefits can be lost. Since it primarily 
is older workers who have greater accrued benefits, this 
provision primarily affects older workers and has been alleged 
to be illegal age discrimination. In addition, since an 
important protection under ERISA is the protection of workers' 
accrued benefits, it also is alleged to be an undermining of 
the principle that accrued benefits cannot be reduced. There 
also are issues related to employer usage of differing interest 
rates that result in underestimating the value of older 
workers' benefits. Legislation and litigation is pending on 
these issues.
    Third is the issue of employee choice to remain under the 
former plan formula. A number of employers that have converted 
to cash balance plans have afforded all or vested workers the 
opportunity to remain covered by the prior plan formula. It 
also has been recommended that employers be required to provide 
workers an election option.
    The language included in the Committee adopted bill does 
not adequately resolve this issue. The bill simply requires 
employers to provide notice a reasonable period of time before 
a conversion and directs the Department of Treasury to develop 
clarifying regulations. The Committee has not fully discussed 
or resolved this issue. Several bills have been introduced 
which address the above discussed issues. In addition, at the 
mark-up session on this bill, an amendment was offered to 
provide adequate notice, protect the earned benefits of older 
workers, and permit employees to choose to remain under the 
defined benefit plan. The amendment was defeated by a voice 
vote. These additional changes would provide important needed 
protections to workers affected by cash balance conversions.

                                   George Miller.
                                   Major R. Owens.
                                   Patsy T. Mink.
                                   Lynn Woolsey.
                                   Ron Kind.
                                   Harold E. Ford, Jr.
                                   David Wu.
                                   Betty McCollum.
                                   Dale E. Kildee.
                                   Donald M. Payne.
                                   Robert E. Andrews.
                                   Bobby Scott.
                                   Lynn N. Rivers
                                   Ruben Hinojosa.
                                   John F. Tierney.
                                   Loretta Sanchez.
                                   Dennis J. Kucinich.
                                   Rush Holt.
                                   Hilda L. Solis.
                                   Susan Davis.

                                
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