II

Calendar No. 802

106TH CONGRESS

2D SESSION H. R. 1102

[Report No. 106–411]

IN THE SENATE OF THE UNITED STATES

JULY 20, 2000

Received

JULY 27, 2000

Read the first time

SEPTEMBER 5, 2000

Read the second time and placed on the calendar; ordered referred to the

Committee on Finance

SEPTEMBER 13, 2000

Reported by Mr. ROTH, with an amendment and an amendment to the title

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

AN ACT

To provide for pension reform, and for other purposes.

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

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

4 ‘‘Comprehensive Retirement Security and Pension Reform

5 Act of 2000’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment

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

10 shall be considered to be made to a section or other provi11 sion of the Internal Revenue Code of 1986.

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

13 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.
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Sec. 306. Modification of safe harbor relief for hardship withdrawals from cash

or deferred arrangements.

TITLE IV—INCREASING PORTABILITY FOR PARTICIPANTS

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

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

Sec. 403. Rollovers of after-tax contributions.

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

Sec. 405. Treatment of forms of distribution.

Sec. 406. Rationalization of restrictions on distributions.

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

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

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

plans.

TITLE V—STRENGTHENING PENSION SECURITY AND

ENFORCEMENT

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

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

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

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

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

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

TITLE VI—REDUCING REGULATORY BURDENS

Sec. 601. Modification of timing of plan valuations.

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

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

Sec. 604. Employees of tax-exempt entities.

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

Sec. 606. Reporting simplification.

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

Sec. 608. Repeal of the multiple use test.

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

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

certain nondiscrimination rules applicable to State and local

plans.

Sec. 611. Notice and consent period regarding distributions.

TITLE VII—PLAN AMENDMENTS

Sec. 701. Provisions relating to plan amendments.
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1 TITLE I—INDIVIDUAL

2 RETIREMENT ACCOUNTS

3 SEC. 101. MODIFICATION OF IRA CONTRIBUTION LIMITS.

4 (a) INCREASE IN CONTRIBUTION LIMIT.—

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

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

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

8 deductible amount’’.

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

10 amended by adding at the end the following new

11 paragraph:

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

13 paragraph (1)(A)—

14 ‘‘(A) IN GENERAL.—The deductible

15 amount shall be determined in accordance with

16 the following table:

‘‘For taxable years The deductible

beginning in: amount is:

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

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

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

17 ‘‘(B) CATCH-UP CONTRIBUTIONS FOR INDI18 VIDUALS 50 OR OLDER.—In the case of an indi19 vidual who has attained the age of 50 before

20 the close of the taxable year, the deductible

21 amount for taxable years beginning in 2001 or

22 2002 shall be $5,000.

23 ‘‘(C) COST-OF-LIVING ADJUSTMENT.—
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1 ‘‘(i) IN GENERAL.—In the case of any

2 taxable year beginning in a calendar year

3 after 2003, the $5,000 amount under sub4 paragraph (A) shall be increased by an

5 amount equal to—

6 ‘‘(I) such dollar amount, multi7 plied by

8 ‘‘(II) the cost-of-living adjust9 ment determined under section

10 1(f)(3) for the calendar year in which

11 the taxable year begins, determined by

12 substituting ‘calendar year 2002’ for

13 ‘calendar year 1992’ in subparagraph

14 (B) thereof.

15 ‘‘(ii) ROUNDING RULES.—If any

16 amount after adjustment under clause (i)

17 is not a multiple of $500, such amount

18 shall be rounded to the next lower multiple

19 of $500.’’.

20 (b) CONFORMING AMENDMENTS.—

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

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

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

24 of the amount in effect for such taxable year under

25 section 219(b)(1)(A)’’.
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1 (2) Section 408(b)(2)(B) is amended by strik2 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

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

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

5 ‘‘$2,000’’ in the matter following paragraph (4) and

6 inserting ‘‘the dollar amount in effect under section

7 219(b)(1)(A)’’.

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

9 ‘‘$2,000’’.

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

11 ‘‘$2,000’’ and inserting ‘‘the dollar amount in effect

12 under section 219(b)(1)(A)’’.

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

14 this section shall apply to taxable years beginning after

15 December 31, 2000.

16 TITLE II—EXPANDING

17 COVERAGE

18 SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION LIM19 ITS.

20 (a) DEFINED BENEFIT PLANS.—

21 (1) DOLLAR LIMIT.—

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

23 (relating to limitation for defined benefit plans)

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

25 ‘‘$160,000’’.
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1 (B) Subparagraphs (C) and (D) of section

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

3 ‘‘$90,000’’ each place it appears in the head4 ings and the text and inserting ‘‘$160,000’’.

5 (C) Paragraph (7) of section 415(b) (relat6 ing to benefits under certain collectively bar7 gained plans) is amended by striking ‘‘the

8 greater of $68,212 or one-half the amount oth9 erwise applicable for such year under paragraph

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

11 the amount otherwise applicable for such year

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

13 (2) LIMIT REDUCED WHEN BENEFIT BEGINS

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

15 415(b)(2) is amended by striking ‘‘the social security

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

17 and text and inserting ‘‘age 62’’.

18 (3) LIMIT INCREASED WHEN BENEFIT BEGINS

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

20 415(b)(2) is amended by striking ‘‘the social security

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

22 and text and inserting ‘‘age 65’’.

23 (4) COST-OF-LIVING ADJUSTMENTS.—Sub24 section (d) of section 415 (related to cost-of-living

25 adjustments) is amended—
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1 (A) by striking ‘‘$90,000’’ in paragraph

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

3 (B) in paragraph (3)(A)—

4 (i) by striking ‘‘$90,000’’ in the head5 ing and inserting ‘‘$160,000’’; and

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

7 inserting ‘‘July 1, 2000’’.

8 (5) CONFORMING AMENDMENT.—Section

9 415(b)(2) is amended by striking subparagraph (F).

10 (b) DEFINED CONTRIBUTION PLANS.—

11 (1) DOLLAR LIMIT.—Subparagraph (A) of sec12 tion 415(c)(1) (relating to limitation for defined con13 tribution plans) is amended by striking ‘‘$30,000’’

14 and inserting ‘‘$40,000’’.

15 (2) COST-OF-LIVING ADJUSTMENTS.—Sub16 section (d) of section 415 (related to cost-of-living

17 adjustments) is amended—

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

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

20 (B) in paragraph (3)(D)—

21 (i) by striking ‘‘$30,000’’ in the head22 ing and inserting ‘‘$40,000’’; and

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

24 inserting ‘‘July 1, 2000’’.

25 (c) QUALIFIED TRUSTS.—
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1 (1) COMPENSATION LIMIT.—Sections

2 401(a)(17), 404(l), 408(k), and 505(b)(7) are each

3 amended by striking ‘‘$150,000’’ each place it ap4 pears and inserting ‘‘$200,000’’.

5 (2) BASE PERIOD AND ROUNDING OF COST-OF6 LIVING ADJUSTMENT.—Subparagraph (B) of section

7 401(a)(17) is amended—

8 (A) by striking ‘‘October 1, 1993’’ and in9 serting ‘‘July 1, 2000’’; and

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

11 appears and inserting ‘‘$5,000’’.

12 (d) ELECTIVE DEFERRALS.—

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

14 402(g) (relating to limitation on exclusion for elec15 tive deferrals) is amended to read as follows:

16 ‘‘(1) IN GENERAL.—

17 ‘‘(A) LIMITATION.—Notwithstanding sub18 sections (e)(3) and (h)(1)(B), the elective defer19 rals of any individual for any taxable year shall

20 be included in such individual’s gross income to

21 the extent the amount of such deferrals for the

22 taxable year exceeds the applicable dollar

23 amount.

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

25 purposes of subparagraph (A), the applicable
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1 dollar amount shall be the amount determined

2 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.’’.

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

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

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

6 case of taxable years beginning after December 31,

7 2005, the Secretary shall adjust the $15,000

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

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

10 except that the base period shall be the calendar

11 quarter beginning July 1, 2004, and any increase

12 under this paragraph which is not a multiple of

13 $500 shall be rounded to the next lowest multiple of

14 $500.’’.

15 (3) CONFORMING AMENDMENTS.—

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

17 on exclusion for elective deferrals), as amended

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

19 by striking paragraph (4) and redesignating

20 paragraphs (5), (6), (7), (8), and (9) as para21 graphs (4), (5), (6), (7), and (8), respectively.
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1 (B) Paragraph (2) of section 457(c) is

2 amended by striking ‘‘402(g)(8)(A)(iii)’’ and in3 serting ‘‘402(g)(7)(A)(iii)’’.

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

5 amended by striking ‘‘(other than paragraph

6 (4) thereof)’’.

7 (e) DEFERRED COMPENSATION PLANS OF STATE

8 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI9 ZATIONS.—

10 (1) IN GENERAL.—Section 457 (relating to de11 ferred compensation plans of State and local govern12 ments and tax-exempt organizations) is amended—

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

14 striking ‘‘$7,500’’ each place it appears and in15 serting ‘‘the applicable dollar amount’’; and

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

17 ‘‘$15,000’’ and inserting ‘‘twice the dollar

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

19 (2) APPLICABLE DOLLAR AMOUNT; COST-OF20 LIVING ADJUSTMENT.—Paragraph (15) of section

21 457(e) is amended to read as follows:

22 ‘‘(15) APPLICABLE DOLLAR AMOUNT.—

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

24 amount shall be the amount determined in ac25 cordance with the following table:
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‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

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

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

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

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

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

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

2 the case of taxable years beginning after De3 cember 31, 2005, the Secretary shall adjust the

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

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

7 that the base period shall be the calendar quar8 ter beginning July 1, 2004, and any increase

9 under this paragraph which is not a multiple of

10 $500 shall be rounded to the next lowest mul11 tiple of $500.’’.

12 (f) SIMPLE RETIREMENT ACCOUNTS.—

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

14 408(p)(2)(A) (relating to general rule for qualified

15 salary reduction arrangement) is amended by strik16 ing ‘‘$6,000’’ and inserting ‘‘the applicable dollar

17 amount’’.

18 (2) APPLICABLE DOLLAR AMOUNT.—Subpara19 graph (E) of 408(p)(2) is amended to read as fol20 lows:
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1 ‘‘(E) APPLICABLE DOLLAR AMOUNT; COST2 OF-LIVING ADJUSTMENT.—

3 ‘‘(i) IN GENERAL.—For purposes of

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

5 amount shall be the amount determined in

6 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.

7 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

8 In the case of a year beginning after De9 cember 31, 2004, the Secretary shall ad10 just the $10,000 amount under clause (i)

11 at the same time and in the same manner

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

13 base period taken into account shall be the

14 calendar quarter beginning July 1, 2003,

15 and any increase under this subparagraph

16 which is not a multiple of $500 shall be

17 rounded to the next lower multiple of

18 $500.’’.

19 (3) CONFORMING AMENDMENTS.—

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

21 is amended by striking ‘‘$6,000’’ and inserting
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1 ‘‘the amount in effect under section

2 408(p)(2)(A)(ii)’’.

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

4 striking subparagraph (E).

5 (g) ROUNDING RULE RELATING TO DEFINED BEN6 EFIT PLANS AND DEFINED CONTRIBUTION PLANS.—

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

8 follows:

9 ‘‘(4) ROUNDING.—

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

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

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

13 the next lowest multiple of $5,000.

14 ‘‘(B) $40,000 AMOUNT.—Any increase

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

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

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

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

19 this section shall apply to years beginning after December

20 31, 2000.

21 SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART22 NERS, AND SOLE PROPRIETORS.

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

24 4975(f)(6) (relating to exemptions not to apply to certain
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1 transactions) is amended by adding at the end the fol2 lowing new clause:

3 ‘‘(iii) LOAN EXCEPTION.—For pur4 poses of subparagraph (A)(i), the term

5 ‘owner-employee’ shall only include a per6 son described in subclause (II) or (III) of

7 clause (i).’’.

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

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

10 2000.

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

12 (a) SIMPLIFICATION OF DEFINITION OF KEY EM13 PLOYEE.—

14 (1) IN GENERAL.—Section 416(i)(1)(A) (defin15 ing key employee) is amended—

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

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

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

19 following:

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

21 an annual compensation greater than

22 $150,000,’’;

23 (C) by striking clause (ii) and redesig24 nating clauses (iii) and (iv) as clauses (ii) and

25 (iii), respectively; and
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1 (D) by striking the second sentence in the

2 matter following clause (iii), as redesignated by

3 subparagraph (C).

4 (2) CONFORMING AMENDMENT.—Section

5 416(i)(1)(B)(iii) is amended by striking ‘‘and sub6 paragraph (A)(ii)’’.

7 (b) MATCHING CONTRIBUTIONS TAKEN INTO AC8 COUNT FOR MINIMUM CONTRIBUTION REQUIREMENTS.—

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

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

11 ‘‘Employer matching contributions (as defined in section

12 401(m)(4)(A)) shall be taken into account for purposes

13 of this subparagraph.’’.

14 (c) DISTRIBUTIONS DURING LAST YEAR BEFORE

15 DETERMINATION DATE TAKEN INTO ACCOUNT.—

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

17 416(g) is amended to read as follows:

18 ‘‘(3) DISTRIBUTIONS DURING LAST YEAR BE19 FORE DETERMINATION DATE TAKEN INTO AC20 COUNT.—

21 ‘‘(A) IN GENERAL.—For purposes of

22 determining—

23 ‘‘(i) the present value of the cumu24 lative accrued benefit for any employee, or
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1 ‘‘(ii) the amount of the account of any

2 employee,

3 such present value or amount shall be increased

4 by the aggregate distributions made with re5 spect to such employee under the plan during

6 the 1-year period ending on the determination

7 date. The preceding sentence shall also apply to

8 distributions under a terminated plan which if

9 it had not been terminated would have been re10 quired to be included in an aggregation group.

11 ‘‘(B) 5-YEAR PERIOD IN CASE OF IN-SERV12 ICE DISTRIBUTION.—In the case of any dis13 tribution made for a reason other than separa14 tion from service, death, or disability, subpara15 graph (A) shall be applied by substituting ‘5-

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

17 (2) BENEFITS NOT TAKEN INTO ACCOUNT.—

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

19 amended—

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

21 heading and inserting ‘‘LAST YEAR BEFORE DE22 TERMINATION DATE’’; and

23 (B) by striking ‘‘5-year period’’ and insert24 ing ‘‘1-year period’’.
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1 (d) DEFINITION OF TOP-HEAVY PLANS.—Paragraph

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

3 top-heavy plans) is amended by adding at the end the fol4 lowing new subparagraph:

5 ‘‘(H) CASH OR DEFERRED ARRANGEMENTS

6 USING ALTERNATIVE METHODS OF MEETING

7 NONDISCRIMINATION REQUIREMENTS.—The

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

9 which consists solely of—

10 ‘‘(i) a cash or deferred arrangement

11 which meets the requirements of section

12 401(k)(12), and

13 ‘‘(ii) matching contributions with re14 spect to which the requirements of section

15 401(m)(11) are met.

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

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

18 member of an aggregation group which is a top19 heavy group, contributions under the plan may

20 be taken into account in determining whether

21 any other plan in the group meets the require22 ments of subsection (c)(2).’’.

23 (e) FROZEN PLAN EXEMPT FROM MINIMUM BEN24 EFIT REQUIREMENT.—Subparagraph (C) of section

25 416(c)(1) (relating to defined benefit plans) is amended—
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1 (A) by striking ‘‘clause (ii)’’ in clause (i)

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

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

4 ‘‘(iii) EXCEPTION FOR FROZEN

5 PLAN.—For purposes of determining an

6 employee’s years of service with the em7 ployer, any service with the employer shall

8 be disregarded to the extent that such

9 service occurs during a plan year when the

10 plan benefits (within the meaning of sec11 tion 410(b)) no employee or former em12 ployee.’’.

13 (f) ELIMINATION OF FAMILY ATTRIBUTION.—Sec14 tion 416(i)(1)(B) (defining 5-percent owner) is amended

15 by adding at the end the following new clause:

16 ‘‘(iv) FAMILY ATTRIBUTION DIS17 REGARDED.—Solely for purposes of apply18 ing this paragraph (and not for purposes

19 of any provision of this title which incor20 porates by reference the definition of a key

21 employee or 5-percent owner under this

22 paragraph), section 318 shall be applied

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

24 in determining whether any person is a 5-

25 percent owner.’’.
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1 (g) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to years beginning after December

3 31, 2000.

4 SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO AC5 COUNT FOR PURPOSES OF DEDUCTION LIM6 ITS.

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

8 for contributions of an employer to an employees’ trust

9 or annuity plan and compensation under a deferred pay10 ment plan) is amended by adding at the end the following

11 new subsection:

12 ‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC13 COUNT FOR PURPOSES OF DEDUCTION LIMITS.—Elective

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

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

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

17 not be taken into account in applying any such limitation

18 to any other contributions.’’.

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

20 this section shall apply to years beginning after December

21 31, 2000.
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1 SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR

2 DEFERRED COMPENSATION PLANS OF STATE

3 AND LOCAL GOVERNMENTS AND TAX-EX4 EMPT ORGANIZATIONS.

5 (a) IN GENERAL.—Subsection (c) of section 457 (re6 lating to deferred compensation plans of State and local

7 governments and tax-exempt organizations), as amended

8 by section 201, is amended to read as follows:

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

10 compensation of any one individual which may be deferred

11 under subsection (a) during any taxable year shall not ex12 ceed the amount in effect under subsection (b)(2)(A) (as

13 modified by any adjustment provided under subsection

14 (b)(3)).’’.

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

16 subsection (a) shall apply to years beginning after Decem17 ber 31, 2000.

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

19 IRS REGARDING PENSION PLANS.

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

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

22 not require payment of user fees under the program estab23 lished under section 7527 of the Internal Revenue Code

24 of 1986 for requests to the Internal Revenue Service for

25 determination letters with respect to the qualified status

26 of a pension benefit plan maintained solely by one or more
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1 eligible employers or any trust which is part of the plan.

2 The preceding sentence shall not apply to any request—

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

4 benefit plan is in existence; or

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

6 similar plan which the sponsor intends to market to

7 participating employers.

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

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

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

11 ownership plan.

12 (c) ELIGIBLE EMPLOYER.—For purposes of this sec13 tion, the term ‘‘eligible employer’’ has the same meaning

14 given such term in section 408(p)(2)(C)(i)(I) of the Inter15 nal Revenue Code of 1986. The determination of whether

16 an employer is an eligible employer under this section shall

17 be made as of the date of the request described in sub18 section (a).

19 (d) EFFECTIVE DATE.—The provisions of this sec20 tion shall apply with respect to requests made after De21 cember 31, 2000.

22 SEC. 207. DEDUCTION LIMITS.

23 (a) IN GENERAL.—

24 (1) STOCK BONUS AND PROFIT SHARING

25 TRUSTS.—Subclause (I) of section 404(a)(3)(A)(i)
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1 (relating to stock bonus and profit sharing trusts) is

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

3 percent’’.

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

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

6 following:

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

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

9 term ‘compensation otherwise paid or accrued dur10 ing the taxable year’ shall include amounts treated

11 as ‘participant’s compensation’ under subparagraph

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

13 (b) CONFORMING AMENDMENTS.—

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

15 amended by striking the last sentence thereof.

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

17 amended by striking ‘‘15 percent’’ each place it ap18 pears and inserting ‘‘20 percent’’.

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

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

21 404(a))’’ and inserting ‘‘(within the meaning of sec22 tion 404(a) and as adjusted under section

23 404(a)(12))’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to years beginning after December

3 31, 2000.

4 SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS

5 AFTER-TAX CONTRIBUTIONS.

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

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

8 is amended by inserting after section 402 the following

9 new section:

10 ‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER11 RALS AS PLUS CONTRIBUTIONS.

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

13 plan includes a qualified plus contribution program—

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

15 an employee pursuant to the program shall be treat16 ed as an elective deferral for purposes of this chap17 ter, except that such contribution shall not be ex18 cludable from gross income, and

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

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

21 meet any requirement of this chapter solely by rea22 son of including such program.

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

24 For purposes of this section—
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1 ‘‘(1) IN GENERAL.—The term ‘qualified plus

2 contribution program’ means a program under which

3 an employee may elect to make designated plus con4 tributions in lieu of all or a portion of elective defer5 rals the employee is otherwise eligible to make under

6 the applicable retirement plan.

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

8 program shall not be treated as a qualified plus con9 tribution program unless the applicable retirement

10 plan—

11 ‘‘(A) establishes separate accounts (‘des12 ignated plus accounts’) for the designated plus

13 contributions of each employee and any earn14 ings properly allocable to the contributions, and

15 ‘‘(B) maintains separate recordkeeping

16 with respect to each account.

17 ‘‘(c) DEFINITIONS AND RULES RELATING TO DES18 IGNATED PLUS CONTRIBUTIONS.—For purposes of this

19 section—

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

21 term ‘designated plus contribution’ means any elec22 tive deferral which—

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

24 employee without regard to this section, and
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1 ‘‘(B) the employee designates (at such time

2 and in such manner as the Secretary may pre3 scribe) as not being so excludable.

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

5 elective deferrals which an employee may designate

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

7 any) of—

8 ‘‘(A) the maximum amount of elective de9 ferrals excludable from gross income of the em10 ployee for the taxable year (without regard to

11 this section), over

12 ‘‘(B) the aggregate amount of elective de13 ferrals of the employee for the taxable year

14 which the employee does not designate under

15 paragraph (1).

16 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

17 ‘‘(A) IN GENERAL.—A rollover contribu18 tion of any payment or distribution from a des19 ignated plus account which is otherwise allow20 able under this chapter may be made only if the

21 contribution is to—

22 ‘‘(i) another designated plus account

23 of the individual from whose account the

24 payment or distribution was made, or

25 ‘‘(ii) a Roth IRA of such individual.
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1 ‘‘(B) COORDINATION WITH LIMIT.—Any

2 rollover contribution to a designated plus ac3 count under subparagraph (A) shall not be

4 taken into account for purposes of paragraph

5 (1).

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

7 title—

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

9 from a designated plus account shall not be includ10 ible in gross income.

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

12 of this subsection—

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

14 distribution’ has the meaning given such term

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

16 clause (iv) thereof).

17 ‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU18 SION PERIOD.—A payment or distribution from

19 a designated plus account shall not be treated

20 as a qualified distribution if such payment or

21 distribution is made within the 5-taxable-year

22 period beginning with the earlier of—

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

24 the individual made a designated plus con25 tribution to any designated plus account
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•HR 1102 RS

1 established for such individual under the

2 same applicable retirement plan, or

3 ‘‘(ii) if a rollover contribution was

4 made to such designated plus account from

5 a designated plus account previously estab6 lished for such individual under another

7 applicable retirement plan, the first taxable

8 year for which the individual made a des9 ignated plus contribution to such pre10 viously established account.

11 ‘‘(C) DISTRIBUTIONS OF EXCESS DEFER12 RALS AND EARNINGS.—The term ‘qualified dis13 tribution’ shall not include any distribution of

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

15 any income on the excess deferral.

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

17 be applied separately with respect to distributions

18 and payments from a designated plus account and

19 other distributions and payments from the plan.

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

21 section—

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

23 term ‘applicable retirement plan’ means—
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1 ‘‘(A) an employees’ trust described in sec2 tion 401(a) which is exempt from tax under

3 section 501(a), and

4 ‘‘(B) a plan under which amounts are con5 tributed by an individual’s employer for an an6 nuity contract described in section 403(b).

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

8 deferral’ means any elective deferral described in

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

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

11 to limitation on exclusion for elective deferrals) is

12 amended—

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

14 following new sentence: ‘‘The preceding sentence

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

16 not exceed the designated plus contributions of the

17 individual for the taxable year.’’; and

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

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

20 paragraph (2)(A).

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

22 402(c)(8) is amended by adding at the end the following:

23 ‘‘If any portion of an eligible rollover distribu24 tion is attributable to payments or distributions

25 from a designated plus account (as defined in
30

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1 section 402A), an eligible retirement plan with

2 respect to such portion shall include only an3 other designated plus account and a Roth

4 IRA.’’.

5 (d) REPORTING REQUIREMENTS.—

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

7 amended by inserting ‘‘, including the amount of

8 designated plus contributions (as defined in section

9 402A)’’ before the comma at the end.

10 (2) INFORMATION.—Section 6047 is amended

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

12 by inserting after subsection (e) the following new

13 subsection:

14 ‘‘(f) DESIGNATED PLUS CONTRIBUTIONS.—The Sec15 retary shall require the plan administrator of each applica16 ble retirement plan (as defined in section 402A) to make

17 such returns and reports regarding designated plus con18 tributions (as so defined) to the Secretary, participants

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

20 the Secretary may prescribe.’’.

21 (e) CONFORMING AMENDMENTS.—

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

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

24 term includes a rollover contribution described in

25 section 402A(c)(3)(A).’’.
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1 (2) The table of sections for subpart A of part

2 I of subchapter D of chapter 1 is amended by insert3 ing after the item relating to section 402 the fol4 lowing new item:

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

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

6 this section shall apply to taxable years beginning after

7 December 31, 2000.

8 TITLE III—ENHANCING

9 FAIRNESS FOR WOMEN

10 SEC. 301. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS

11 AGE 50 OR OVER.

12 (a) IN GENERAL.—Section 414 (relating to defini13 tions and special rules) is amended by adding at the end

14 the following new subsection:

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

16 AGE 50 OR OVER.—

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

18 plan shall not be treated as failing to meet any re19 quirement of this title solely because the plan per20 mits an eligible participant to make additional elec21 tive deferrals in any plan year.

22 ‘‘(2) LIMITATION ON AMOUNT OF ADDITIONAL

23 DEFERRALS.—A plan shall not permit additional
32

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1 elective deferrals under paragraph (1) for any year

2 in an amount greater than the lesser of—

3 ‘‘(A) $5,000, or

4 ‘‘(B) the excess (if any) of—

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

6 the year, over

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

8 participant for such year which are made

9 without regard to this subsection.

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

11 case of any contribution to a plan under paragraph

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

13 year in which the contribution is made—

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

15 limitation contained in section 402(g),

16 402(h)(2), 404(a), 404(h), 408(p)(2)(A)(ii),

17 415, or 457, or

18 ‘‘(B) be taken into account in applying

19 such limitations to other contributions or bene20 fits under such plan or any other such plan.

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

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

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

24 plan—
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1 ‘‘(A) who has attained the age of 50 before

2 the close of the plan year, and

3 ‘‘(B) with respect to whom no other elec4 tive deferrals may (without regard to this sub5 section) be made to the plan for the plan year

6 by reason of the application of any limitation or

7 other restriction described in paragraph (3) or

8 comparable limitation contained in the terms of

9 the plan.

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

11 purposes of this subsection—

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

13 term ‘applicable employer plan’ means—

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

15 section 401(a) which is exempt from tax

16 under section 501(a),

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

18 contributed by an individual’s employer for

19 an annuity contract described in section

20 403(b),

21 ‘‘(iii) an eligible deferred compensa22 tion plan under section 457 of an eligible

23 employer as defined in section

24 457(e)(1)(A), and
34

•HR 1102 RS

1 ‘‘(iv) an arrangement meeting the re2 quirements of section 408 (k) or (p).

3 ‘‘(B) ELECTIVE DEFERRAL.—The term

4 ‘elective deferral’ has the meaning given such

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

6 ‘‘(C) EXCEPTION FOR SECTION 457

7 PLANS.—This subsection shall not apply to an

8 applicable employer plan described in subpara9 graph (A)(iii) for any year to which section

10 457(b)(3) applies.

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

12 years beginning after December 31, 2005, the

13 Secretary shall adjust annually the $5,000

14 amount in subparagraph (A) for increases in

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

16 same manner as adjustments under section

17 415(d); except that the base period shall be the

18 calendar quarter beginning July 1, 2004, and

19 any increase which is not a multiple of $500

20 shall be rounded to the next lowest multiple of

21 $500.’’.

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

23 this section shall apply to contributions in taxable years

24 beginning after December 31, 2000.
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1 SEC. 302. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF

2 EMPLOYEES TO DEFINED CONTRIBUTION

3 PLANS.

4 (a) EQUITABLE TREATMENT.—

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

6 415(c)(1) (relating to limitation for defined con7 tribution plans) is amended by striking ‘‘25 percent’’

8 and inserting ‘‘100 percent’’.

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

10 403(b) is amended—

11 (A) by striking ‘‘the exclusion allowance

12 for such taxable year’’ in paragraph (1) and in13 serting ‘‘the applicable limit under section

14 415’’;

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

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

17 by a former employee after the fifth taxable

18 year following the taxable year in which such

19 employee was terminated’’ before the period at

20 the end of the second sentence of paragraph

21 (3).

22 (3) CONFORMING AMENDMENTS.—

23 (A) Subsection (f) of section 72 is amend24 ed by striking ‘‘section 403(b)(2)(D)(iii))’’ and

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

26 before the enactment of the Comprehensive Re-
36

•HR 1102 RS

1 tirement Security and Pension Reform Act of

2 2000)’’.

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

4 striking ‘‘, the exclusion allowance under sec5 tion 403(b)(2),’’.

6 (C) Section 415(a)(2) is amended by strik7 ing ‘‘, and the amount of the contribution for

8 such portion shall reduce the exclusion allow9 ance as provided in section 403(b)(2)’’.

10 (D) Section 415(c)(3) is amended by add11 ing at the end the following new subparagraph:

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

13 of an annuity contract described in section

14 403(b), the term ‘participant’s compensation’

15 means the participant’s includible compensation

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

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

18 paragraph (4).

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

20 as follows:

21 ‘‘(7) CERTAIN CONTRIBUTIONS BY CHURCH

22 PLANS NOT TREATED AS EXCEEDING LIMIT.—

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

24 other provision of this subsection, at the elec25 tion of a participant who is an employee of a
37

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1 church or a convention or association of church2 es, including an organization described in sec3 tion 414(e)(3)(B)(ii), contributions and other

4 additions for an annuity contract or retirement

5 income account described in section 403(b) with

6 respect to such participant, when expressed as

7 an annual addition to such participant’s ac8 count, shall be treated as not exceeding the lim9 itation of paragraph (1) if such annual addition

10 is not in excess of $10,000.

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

12 The total amount of additions with respect to

13 any participant which may be taken into ac14 count for purposes of this subparagraph for all

15 years may not exceed $40,000.

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

17 this paragraph, the term ‘annual addition’ has

18 the meaning given such term by paragraph

19 (2).’’.

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

21 (as redesignated by section 211) is amended by

22 inserting before the period at the end the fol23 lowing: ‘‘(as in effect before the enactment of

24 the Comprehensive Retirement Security and

25 Pension Reform Act of 2000)’’.
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1 (3) EFFECTIVE DATE.—The amendments made

2 by this subsection shall apply to years beginning

3 after December 31, 2000.

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

5 408.—

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

7 415 is amended by adding at the end the following

8 new paragraph:

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

10 408.—For purposes of this section, any annuity con11 tract described in section 403(b) for the benefit of

12 a participant shall be treated as a defined contribu13 tion plan maintained by each employer with respect

14 to which the participant has the control required

15 under subsection (b) or (c) of section 414 (as modi16 fied by subsection (h)). For purposes of this section,

17 any contribution by an employer to a simplified em18 ployee pension plan for an individual for a taxable

19 year shall be treated as an employer contribution to

20 a defined contribution plan for such individual for

21 such year.’’.

22 (2) EFFECTIVE DATE.—

23 (A) IN GENERAL.—The amendment made

24 by paragraph (1) shall apply to limitation years

25 beginning after December 31, 1999.
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1 (B) EXCLUSION ALLOWANCE.—Effective

2 for limitation years beginning in 2000, in the

3 case of any annuity contract described in sec4 tion 403(b) of the Internal Revenue Code of

5 1986, the amount of the contribution disquali6 fied by reason of section 415(g) of such Code

7 shall reduce the exclusion allowance as provided

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

9 (3) MODIFICATION OF 403(b) EXCLUSION AL10 LOWANCE TO CONFORM TO 415 MODIFICATION.—The

11 Secretary of the Treasury shall modify the regula12 tions regarding the exclusion allowance under section

13 403(b)(2) of the Internal Revenue Code of 1986 to

14 render void the requirement that contributions to a

15 defined benefit pension plan be treated as previously

16 excluded amounts for purposes of the exclusion al17 lowance. For taxable years beginning after Decem18 ber 31, 1999, such regulations shall be applied as if

19 such requirement were void.

20 (c) DEFERRED COMPENSATION PLANS OF STATE

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

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

24 457(b)(2) (relating to salary limitation on eligible
40

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1 deferred compensation plans) is amended by striking

‘‘331 2 ⁄3 percent’’ and inserting ‘‘100 percent’’.

3 (2) EFFECTIVE DATE.—The amendment made

4 by this subsection shall apply to years beginning

5 after December 31, 2000.

6 SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER

7 MATCHING CONTRIBUTIONS.

8 (a) IN GENERAL.—Section 411(a) (relating to min9 imum vesting standards) is amended—

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

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

12 plan’’; and

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

14 ‘‘(12) FASTER VESTING FOR MATCHING CON15 TRIBUTIONS.—In the case of matching contributions

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

17 shall be applied—

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

19 in subparagraph (A), and

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

21 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

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

22 (b) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendments made by this section

3 shall apply to contributions for plan years beginning

4 after December 31, 2000.

5 (2) COLLECTIVE BARGAINING AGREEMENTS.—

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

7 more collective bargaining agreements between em8 ployee representatives and one or more employers

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

10 amendments made by this section shall not apply to

11 contributions on behalf of employees covered by any

12 such agreement for plan years beginning before the

13 earlier of—

14 (A) the later of—

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

16 collective bargaining agreements termi17 nates (determined without regard to any

18 extension thereof on or after such date of

19 the enactment); or

20 (ii) January 1, 2001; or

21 (B) January 1, 2005.

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

23 plan, the amendments made by this section shall not

24 apply to any employee before the date that such em25 ployee has 1 hour of service under such plan in any
42

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1 plan year to which the amendments made by this

2 section apply.

3 SEC. 304. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU4 TION RULES.

5 (a) SIMPLIFICATION AND FINALIZATION OF MIN6 IMUM DISTRIBUTION REQUIREMENTS.—

7 (1) IN GENERAL.—The Secretary of the Treas8 ury shall—

9 (A) simplify and finalize the regulations re10 lating to minimum distribution requirements

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

12 403(b)(10), and 457(d)(2) of the Internal Rev13 enue Code of 1986; and

14 (B) modify such regulations to—

15 (i) reflect current life expectancy; and

16 (ii) revise the required distribution

17 methods so that, under reasonable assump18 tions, the amount of the required minimum

19 distribution does not decrease over a par20 ticipant’s life expectancy.

21 (2) FRESH START.—Notwithstanding subpara22 graph (D) of section 401(a)(9) of such Code, during

23 the first year that regulations are in effect under

24 this subsection, required distributions for future

25 years may be redetermined to reflect changes under
43

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1 such regulations. Such redetermination shall include

2 the opportunity to choose a new designated bene3 ficiary and to elect a new method of calculating life

4 expectancy.

5 (3) EFFECTIVE DATE FOR REGULATIONS.—

6 Regulations referred to in paragraph (1) shall be ef7 fective for years beginning after December 31, 2000,

8 and shall apply in such years without regard to

9 whether an individual had previously begun receiving

10 minimum distributions.

11 (b) REPEAL OF RULE WHERE DISTRIBUTIONS HAD

12 BEGUN BEFORE DEATH OCCURS.—

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

14 401(a)(9) is amended by striking clause (i) and re15 designating clauses (ii), (iii), and (iv) as clauses (i),

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

17 (2) CONFORMING CHANGES.—

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

19 so redesignated) is amended—

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

21 the heading; and

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

23 employee’s interest has begun in accord24 ance with subparagraph (A)(ii)’’ and in-
44

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1 serting ‘‘his entire interest has been dis2 tributed to him’’.

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

4 so redesignated) is amended by striking ‘‘clause

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

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

7 so redesignated) is amended—

8 (i) by striking ‘‘clause (iii)(I)’’ and in9 serting ‘‘clause (ii)(I)’’;

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

11 subclause (I) and inserting ‘‘clause

12 (ii)(III)’’;

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

14 the employee would have attained age

701 15 ⁄2,’’ in subclause (I) and inserting

16 ‘‘April 1 of the calendar year following the

17 calendar year in which the spouse attains

701 18 ⁄2,’’; and

19 (iv) by striking ‘‘the distributions to

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

21 inserting ‘‘his entire interest has been dis22 tributed to him,’’.

23 (3) EFFECTIVE DATE.—The amendments made

24 by this subsection shall apply to years beginning

25 after December 31, 2000.
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1 (c) REDUCTION IN EXCISE TAX.—

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

3 4974 is amended by striking ‘‘50 percent’’ and in4 serting ‘‘10 percent’’.

5 (2) EFFECTIVE DATE.—The amendment made

6 by this subsection shall apply to years beginning

7 after December 31, 2000.

8 SEC. 305. CLARIFICATION OF TAX TREATMENT OF DIVISION

9 OF SECTION 457 PLAN BENEFITS UPON DI10 VORCE.

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

12 application of rules to governmental and church plans) is

13 amended—

14 (1) by inserting ‘‘or an eligible deferred com15 pensation plan (within the meaning of section

16 457(b))’’ after ‘‘subsection (e))’’; and

17 (2) in the heading, by striking ‘‘GOVERN18 MENTAL AND CHURCH PLANS’’ and inserting ‘‘CER19 TAIN OTHER PLANS’’.

20 (b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE21 MENTS.—Paragraph (10) of section 414(p) is amended by

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

23 409(d), and section 457(d)’’.

24 (c) TAX TREATMENT OF PAYMENTS FROM A SEC25 TION 457 PLAN.—Subsection (p) of section 414 is amend-
46

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1 ed by redesignating paragraph (12) as paragraph (13) and

2 inserting after paragraph (11) the following new para3 graph:

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

5 SECTION 457 PLAN.—If a distribution or payment

6 from an eligible deferred compensation plan de7 scribed in section 457(b) is made pursuant to a

8 qualified domestic relations order, rules similar to

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

10 distribution or payment.’’.

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

12 this section shall apply to transfers, distributions, and

13 payments made after December 31, 2000.

14 SEC. 306. MODIFICATION OF SAFE HARBOR RELIEF FOR

15 HARDSHIP WITHDRAWALS FROM CASH OR

16 DEFERRED ARRANGEMENTS.

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

18 shall revise the regulations relating to hardship distribu19 tions under section 401(k)(2)(B)(i)(IV) of the Internal

20 Revenue Code of 1986 to provide that the period an em21 ployee is prohibited from making elective and employee

22 contributions in order for a distribution to be deemed nec23 essary to satisfy financial need shall be equal to 6 months.
47

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1 (b) EFFECTIVE DATE.—The revised regulations

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

3 December 31, 2000.

4 TITLE IV—INCREASING PORT5 ABILITY FOR PARTICIPANTS

6 SEC. 401. ROLLOVERS ALLOWED AMONG VARIOUS TYPES

7 OF PLANS.

8 (a) ROLLOVERS FROM AND TO SECTION 457

9 PLANS.—

10 (1) ROLLOVERS FROM SECTION 457 PLANS.—

11 (A) IN GENERAL.—Section 457(e) (relat12 ing to other definitions and special rules) is

13 amended by adding at the end the following:

14 ‘‘(16) ROLLOVER AMOUNTS.—

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

16 eligible deferred compensation plan established

17 and maintained by an employer described in

18 subsection (e)(1)(A), if—

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

20 credit of an employee in such plan is paid

21 to such employee in an eligible rollover dis22 tribution (within the meaning of section

23 402(c)(4) without regard to subparagraph

24 (C) thereof),
48

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1 ‘‘(ii) the employee transfers any por2 tion of the property such employee receives

3 in such distribution to an eligible retire4 ment plan described in section

5 402(c)(8)(B), and

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

7 property other than money, the amount so

8 transferred consists of the property distrib9 uted,

10 then such distribution (to the extent so trans11 ferred) shall not be includible in gross income

12 for the taxable year in which paid.

13 ‘‘(B) CERTAIN RULES MADE APPLICA14 BLE.—The rules of paragraphs (2) through (7)

15 (other than paragraph (4)(C)) and (9) of sec16 tion 402(c) and section 402(f) shall apply for

17 purposes of subparagraph (A).

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

19 paragraph shall be reported to the Secretary in

20 the same manner as rollovers from qualified re21 tirement plans (as defined in section

22 4974(c)).’’.

23 (B) DEFERRAL LIMIT DETERMINED WITH24 OUT REGARD TO ROLLOVER AMOUNTS.—Section

25 457(b)(2) (defining eligible deferred compensa-
49

•HR 1102 RS

1 tion plan) is amended by inserting ‘‘(other than

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

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

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

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

6 period at the end of subparagraph (B) and in7 serting ‘‘, and’’, and by inserting after subpara8 graph (B) the following:

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

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

11 the plan meets requirements similar to the re12 quirements of section 401(a)(31).

13 Any amount transferred in a direct trustee-to-trust14 ee transfer in accordance with section 401(a)(31)

15 shall not be includible in gross income for the tax16 able year of transfer.’’.

17 (D) WITHHOLDING.—

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

19 is amended by adding at the end the fol20 lowing:

21 ‘‘(E) under or to an eligible deferred com22 pensation plan which, at the time of such pay23 ment, is a plan described in section 457(b)

24 maintained by an employer described in section

25 457(e)(1)(A); or’’.
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1 (ii) Paragraph (3) of section 3405(c)

2 is amended to read as follows:

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

4 purposes of this subsection, the term ‘eligible roll5 over distribution’ has the meaning given such term

6 by section 402(f)(2)(A).’’.

7 (iii) LIABILITY FOR WITHHOLDING.—

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

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

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

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

12 by adding at the end the following:

13 ‘‘(iv) section 457(b).’’.

14 (2) ROLLOVERS TO SECTION 457 PLANS.—

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

16 (defining eligible retirement plan) is amended

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

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

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

20 (iv) the following new clause:

21 ‘‘(v) an eligible deferred compensation

22 plan described in section 457(b) of an em23 ployer described in section 457(e)(1)(A).’’.
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1 (B) SEPARATE ACCOUNTING.—Section

2 402(c) is amended by adding at the end the fol3 lowing new paragraph:

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

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

6 separately account for amounts rolled into such plan

7 from eligible retirement plans not described in such

8 clause, the plan described in such clause may not ac9 cept transfers or rollovers from such retirement

10 plans.’’.

11 (C) 10 PERCENT ADDITIONAL TAX.—Sub12 section (t) of section 72 (relating to 10-percent

13 additional tax on early distributions from quali14 fied retirement plans) is amended by adding at

15 the end the following new paragraph:

16 ‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SEC17 TION 457 PLANS.—For purposes of this subsection,

18 a distribution from an eligible deferred compensation

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

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

21 a distribution from a qualified retirement plan de22 scribed in 4974(c)(1) to the extent that such dis23 tribution is attributable to an amount transferred to

24 an eligible deferred compensation plan from a quali-
52

•HR 1102 RS

1 fied retirement plan (as defined in section

2 4974(c)).’’.

3 (b) ALLOWANCE OF ROLLOVERS FROM AND TO

4 403(b) PLANS.—

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

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

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

8 and all that follows and inserting ‘‘such distribution

9 to an eligible retirement plan described in section

10 402(c)(8)(B), and’’.

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

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

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

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

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

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

17 new clause:

18 ‘‘(vi) an annuity contract described in

19 section 403(b).’’.

20 (c) EXPANDED EXPLANATION TO RECIPIENTS OF

21 ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section

22 402(f) (relating to written explanation to recipients of dis23 tributions eligible for rollover treatment) is amended by

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

25 the period at the end of subparagraph (D) and inserting
53

•HR 1102 RS

1 ‘‘, and’’, and by adding at the end the following new sub2 paragraph:

3 ‘‘(E) of the provisions under which dis4 tributions from the eligible retirement plan re5 ceiving the distribution may be subject to re6 strictions and tax consequences which are dif7 ferent from those applicable to distributions

8 from the plan making such distribution.’’.

9 (d) SPOUSAL ROLLOVERS.—Section 402(c)(9) (relat10 ing to rollover where spouse receives distribution after

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

12 and all that follows up to the end period.

13 (e) CONFORMING AMENDMENTS.—

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

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

16 408(d)(3), and 457(e)(16)’’.

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

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

19 457(e)(16)’’.

20 (3) Section 401(a)(31)(B) is amended by strik21 ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),

22 403(b)(8), and 457(e)(16)’’.

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

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

25 403(a)’’ and inserting ‘‘, paragraph (4) of section
54

•HR 1102 RS

1 403(a), subparagraph (A) of section 403(b)(8), or

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

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

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

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

6 402(f)(1) are amended by striking ‘‘another eligible

7 retirement plan’’ and inserting ‘‘an eligible retire8 ment plan’’.

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

10 amended to read as follows:

11 ‘‘(B) CERTAIN RULES MADE APPLICA12 BLE.—The rules of paragraphs (2) through (7)

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

14 shall apply for purposes of subparagraph (A),

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

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

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

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

19 457(e)(16)’’.

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

21 415(b)(2) are each amended by striking ‘‘and

22 408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and

23 457(e)(16)’’.
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•HR 1102 RS

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

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

3 457(e)(16)’’.

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

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

6 457(e)(16)’’.

7 (f) EFFECTIVE DATE; SPECIAL RULE.—

8 (1) EFFECTIVE DATE.—The amendments made

9 by this section shall apply to distributions after De10 cember 31, 2000.

11 (2) SPECIAL RULE.—Notwithstanding any other

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

13 section 1122 of the Tax Reform Act of 1986 shall

14 not apply to any distribution from an eligible retire15 ment plan (as defined in clause (iii) or (iv) of section

16 402(c)(8)(B) of the Internal Revenue Code of 1986)

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

18 such plan on behalf of such individual which is per19 mitted solely by reason of any amendment made by

20 this section.

21 SEC. 402. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE22 MENT PLANS.

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

24 408(d)(3) (relating to rollover amounts) is amended by
56

•HR 1102 RS

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

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

3 ‘‘(ii) the entire amount received (in4 cluding money and any other property) is

5 paid into an eligible retirement plan for

6 the benefit of such individual not later

7 than the 60th day after the date on which

8 the payment or distribution is received, ex9 cept that the maximum amount which may

10 be paid into such plan may not exceed the

11 portion of the amount received which is in12 cludible in gross income (determined with13 out regard to this paragraph).

14 For purposes of clause (ii), the term ‘eligible re15 tirement plan’ means an eligible retirement plan

16 described in clause (iii), (iv), (v), or (vi) of sec17 tion 402(c)(8)(B).’’.

18 (b) CONFORMING AMENDMENTS.—

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

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

21 ‘‘section 408(d)(3)(A)(ii)’’.

22 (2) Clause (i) of section 408(d)(3)(D) is amend23 ed by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i)

24 or (ii)’’.
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•HR 1102 RS

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

2 amended to read as follows:

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

4 the case of any payment or distribution out of

5 a simple retirement account (as defined in sub6 section (p)) to which section 72(t)(6) applies,

7 this paragraph shall not apply unless such pay8 ment or distribution is paid into another simple

9 retirement account.’’.

10 (c) EFFECTIVE DATE; SPECIAL RULE.—

11 (1) EFFECTIVE DATE.—The amendments made

12 by this section shall apply to distributions after De13 cember 31, 2000.

14 (2) SPECIAL RULE.—Notwithstanding any other

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

16 section 1122 of the Tax Reform Act of 1986 shall

17 not apply to any distribution from an eligible retire18 ment plan (as defined in clause (iii) or (iv) of section

19 402(c)(8)(B) of the Internal Revenue Code of 1986)

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

21 such plan on behalf of such individual which is per22 mitted solely by reason of the amendments made by

23 this section.
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1 SEC. 403. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

2 (a) ROLLOVERS FROM EXEMPT TRUSTS.—Para3 graph (2) of section 402(c) (relating to maximum amount

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

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

6 to such distribution to the extent—

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

8 trustee-to-trustee transfer to a qualified trust

9 which is part of a plan which is a defined con10 tribution plan and which agrees to separately

11 account for amounts so transferred, including

12 separately accounting for the portion of such

13 distribution which is includible in gross income

14 and the portion of such distribution which is

15 not so includible, or

16 ‘‘(B) such portion is transferred to an eli17 gible retirement plan described in clause (i) or

18 (ii) of paragraph (8)(B).’’.

19 (b) OPTIONAL DIRECT TRANSFER OF ELIGIBLE

20 ROLLOVER DISTRIBUTIONS.—Subparagraph (B) of sec21 tion 401(a)(31) (relating to limitation) is amended by add22 ing at the end the following: ‘‘The preceding sentence shall

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

24 distribution is transferred—

25 ‘‘(i) agrees to separately account for

26 amounts so transferred, including sepa-
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1 rately accounting for the portion of such

2 distribution which is includible in gross in3 come and the portion of such distribution

4 which is not so includible, or

5 ‘‘(ii) is an eligible retirement plan de6 scribed in clause (i) or (ii) of section

7 402(c)(8)(B).’’.

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

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

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

11 end the following:

12 ‘‘(H) APPLICATION OF SECTION 72.—

13 ‘‘(i) IN GENERAL.—If—

14 ‘‘(I) a distribution is made from

15 an individual retirement plan, and

16 ‘‘(II) a rollover contribution is

17 made to an eligible retirement plan

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

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

20 part of such distribution,

21 then, notwithstanding paragraph (2), the

22 rules of clause (ii) shall apply for purposes

23 of applying section 72.
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1 ‘‘(ii) APPLICABLE RULES.—In the

2 case of a distribution described in clause

3 (i)—

4 ‘‘(I) section 72 shall be applied

5 separately to such distribution,

6 ‘‘(II) notwithstanding the pro

7 rata allocation of income on, and in8 vestment in, the contract to distribu9 tions under section 72, the portion of

10 such distribution rolled over to an eli11 gible retirement plan described in

12 clause (i) shall be treated as from in13 come on the contract (to the extent of

14 the aggregate income on the contract

15 from all individual retirement plans of

16 the distributee), and

17 ‘‘(III) appropriate adjustments

18 shall be made in applying section 72

19 to other distributions in such taxable

20 year and subsequent taxable years.’’.

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

22 this section shall apply to distributions made after Decem23 ber 31, 2000.
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1 SEC. 404. HARDSHIP EXCEPTION TO 60-DAY RULE.

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

3 402(c) (relating to transfer must be made within 60 days

4 of receipt) is amended to read as follows:

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

6 DAYS OF RECEIPT.—

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

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

9 apply to any transfer of a distribution made

10 after the 60th day following the day on which

11 the distributee received the property distrib12 uted.

13 ‘‘(B) HARDSHIP EXCEPTION.—The Sec14 retary may waive the 60-day requirement under

15 subparagraph (A) where the failure to waive

16 such requirement would be against equity or

17 good conscience, including casualty, disaster, or

18 other events beyond the reasonable control of

19 the individual subject to such requirement.’’.

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

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

22 amended by adding after subparagraph (H) the following

23 new subparagraph:

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

25 The Secretary may waive the 60-day require26 ment under subparagraphs (A) and (D) where
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•HR 1102 RS

1 the failure to waive such requirement would be

2 against equity or good conscience, including

3 casualty, disaster, or other events beyond the

4 reasonable control of the individual subject to

5 such requirement.’’.

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

7 this section shall apply to distributions after December 31,

8 2000.

9 SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.

10 (a) PLAN TRANSFERS.—

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

12 411(d) (relating to accrued benefit not to be de13 creased by amendment) is amended by adding at the

14 end the following:

15 ‘‘(D) PLAN TRANSFERS.—

16 ‘‘(i) IN GENERAL.—A defined con17 tribution plan (in this subparagraph re18 ferred to as the ‘transferee plan’) shall not

19 be treated as failing to meet the require20 ments of this subsection merely because

21 the transferee plan does not provide some

22 or all of the forms of distribution pre23 viously available under another defined

24 contribution plan (in this subparagraph re-
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1 ferred to as the ‘transferor plan’) to the

2 extent that—

3 ‘‘(I) the forms of distribution

4 previously available under the trans5 feror plan applied to the account of a

6 participant or beneficiary under the

7 transferor plan that was transferred

8 from the transferor plan to the trans9 feree plan pursuant to a direct trans10 fer rather than pursuant to a distribu11 tion from the transferor plan,

12 ‘‘(II) the terms of both the trans13 feror plan and the transferee plan au14 thorize the transfer described in sub15 clause (I),

16 ‘‘(III) the transfer described in

17 subclause (I) was made pursuant to a

18 voluntary election by the participant

19 or beneficiary whose account was

20 transferred to the transferee plan,

21 ‘‘(IV) the election described in

22 subclause (III) was made after the

23 participant or beneficiary received a

24 notice describing the consequences of

25 making the election,
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1 ‘‘(V) if the transferor plan pro2 vides for an annuity as the normal

3 form of distribution under the plan in

4 accordance with section 417, the

5 transfer is made with the consent of

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

7 such consent meets requirements simi8 lar to the requirements imposed by

9 section 417(a)(2), and

10 ‘‘(VI) the transferee plan allows

11 the participant or beneficiary de12 scribed in subclause (III) to receive

13 any distribution to which the partici14 pant or beneficiary is entitled under

15 the transferee plan in the form of a

16 single sum distribution.

17 ‘‘(ii) EXCEPTION.—Clause (i) shall

18 apply to plan mergers and other trans19 actions having the effect of a direct trans20 fer, including consolidations of benefits at21 tributable to different employers within a

22 multiple employer plan.

23 ‘‘(E) ELIMINATION OF FORM OF DISTRIBU24 TION.—Except to the extent provided in regula25 tions, a defined contribution plan shall not be
65

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1 treated as failing to meet the requirements of

2 this section merely because of the elimination of

3 a form of distribution previously available there4 under. This subparagraph shall not apply to the

5 elimination of a form of distribution with re6 spect to any participant unless—

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

8 to such participant at the same time or

9 times as the form of distribution being

10 eliminated, and

11 ‘‘(ii) such single sum payment is

12 based on the same or greater portion of

13 the participant’s account as the form of

14 distribution being eliminated.’’.

15 (2) EFFECTIVE DATE.—The amendment made

16 by this subsection shall apply to years beginning

17 after December 31, 2000.

18 (b) REGULATIONS.—

19 (1) IN GENERAL.—The last sentence of para20 graph (6)(B) of section 411(d) (relating to accrued

21 benefit not to be decreased by amendment) is

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

23 regulations provide that this subparagraph shall not

24 apply to any plan amendment that does not ad-
66

•HR 1102 RS

1 versely affect the rights of participants in a material

2 manner.’’.

3 (2) SECRETARY DIRECTED.—Not later than

4 December 31, 2001, the Secretary of the Treasury

5 is directed to issue final regulations under section

6 411(d)(6) of the Internal Revenue Code of 1986, in7 cluding the regulations required by the amendments

8 made by this subsection. Such regulations shall

9 apply to plan years beginning after December 31,

10 2001, or such earlier date as is specified by the Sec11 retary of the Treasury.

12 SEC. 406. RATIONALIZATION OF RESTRICTIONS ON DIS13 TRIBUTIONS.

14 (a) MODIFICATION OF SAME DESK EXCEPTION.—

15 (1) SECTION 401(k).—

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

17 qualified cash or deferred arrangements) is

18 amended by striking ‘‘separation from service’’

19 and inserting ‘‘severance from employment’’.

20 (B) Subparagraph (A) of section

21 401(k)(10) (relating to distributions upon ter22 mination of plan or disposition of assets or sub23 sidiary) is amended to read as follows:

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

25 this subparagraph is the termination of the
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1 plan without establishment or maintenance of

2 another defined contribution plan (other than

3 an employee stock ownership plan as defined in

4 section 4975(e)(7)).’’.

5 (C) Section 401(k)(10) is amended—

6 (i) in subparagraph (B)—

7 (I) by striking ‘‘An event’’ in

8 clause (i) and inserting ‘‘A termi9 nation’’; and

10 (II) by striking ‘‘the event’’ in

11 clause (i) and inserting ‘‘the termi12 nation’’;

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

14 (iii) by striking ‘‘OR DISPOSITION OF

15 ASSETS OR SUBSIDIARY’’ in the heading.

16 (2) SECTION 403(b).—

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

18 section 403(b) are each amended by striking

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

20 severance from employment’’.

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

22 section 403(b) is amended by striking ‘‘SEPARA23 TION FROM SERVICE’’ and inserting ‘‘SEVER24 ANCE FROM EMPLOYMENT’’.
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1 (3) SECTION 457.—Clause (ii) of section

2 457(d)(1)(A) is amended by striking ‘‘is separated

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

4 employment’’.

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

6 this section shall apply to distributions after December 31,

7 2000.

8 SEC. 407. PURCHASE OF SERVICE CREDIT IN GOVERN9 MENTAL DEFINED BENEFIT PLANS.

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

11 amended by adding at the end the following new para12 graph:

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

14 PURCHASE PERMISSIVE SERVICE CREDIT.—No

15 amount shall be includible in gross income by reason

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

17 benefit governmental plan (as defined in section

18 414(d)) if such transfer is—

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

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

21 under such plan, or

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

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

24 thereof.’’.
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1 (b) 457 PLANS.—Subsection (e) of section 457 is

2 amended by adding after paragraph (16) the following

3 new paragraph:

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

5 PURCHASE PERMISSIVE SERVICE CREDIT.—No

6 amount shall be includible in gross income by reason

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

8 benefit governmental plan (as defined in section

9 414(d)) if such transfer is—

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

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

12 under such plan, or

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

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

15 thereof.’’.

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

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

18 December 31, 2000.

19 SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR

20 PURPOSES OF CASH-OUT AMOUNTS.

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

22 to restrictions on certain mandatory distributions) is

23 amended by adding at the end the following:

24 ‘‘(D) SPECIAL RULE FOR ROLLOVER CON25 TRIBUTIONS.—A plan shall not fail to meet the
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1 requirements of this paragraph if, under the

2 terms of the plan, the present value of the non3 forfeitable accrued benefit is determined with4 out regard to that portion of such benefit which

5 is attributable to rollover contributions (and

6 earnings allocable thereto). For purposes of this

7 subparagraph, the term ‘rollover contributions’

8 means any rollover contribution under sections

9 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),

10 and 457(e)(16).’’.

11 (b) ELIGIBLE DEFERRED COMPENSATION PLANS.—

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

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

14 which is not attributable to rollover contributions (as de15 fined in section 411(a)(11)(D))’’.

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

17 this section shall apply to distributions after December 31,

18 2000.

19 SEC. 409. MINIMUM DISTRIBUTION AND INCLUSION RE20 QUIREMENTS FOR SECTION 457 PLANS.

21 (a) MINIMUM DISTRIBUTION REQUIREMENTS.—

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

23 requirements) is amended to read as follows:

24 ‘‘(2) MINIMUM DISTRIBUTION REQUIRE25 MENTS.—A plan meets the minimum distribution re-
71

•HR 1102 RS

1 quirements of this paragraph if such plan meets the

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

3 (b) INCLUSION IN GROSS INCOME.—

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

5 section 457 (relating to year of inclusion in gross in6 come) is amended to read as follows:

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

8 ‘‘(1) IN GENERAL.—Any amount of compensa9 tion deferred under an eligible deferred compensa10 tion plan, and any income attributable to the

11 amounts so deferred, shall be includible in gross in12 come only for the taxable year in which such com13 pensation or other income—

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

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

16 employer described in subsection (e)(1)(A), and

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

18 the participant or other beneficiary, in the case

19 of a plan of an eligible employer described in

20 subsection (e)(1)(B).

21 ‘‘(2) SPECIAL RULE FOR ROLLOVER

22 AMOUNTS.—To the extent provided in section

23 72(t)(9), section 72(t) shall apply to any amount in24 cludible in gross income under this subsection.’’.

25 (2) CONFORMING AMENDMENTS.—
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1 (A) So much of paragraph (9) of section

2 457(e) as precedes subparagraph (A) is amend3 ed to read as follows:

4 ‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION

5 PLANS NOT TREATED AS MADE AVAILABLE BY REA6 SON OF CERTAIN ELECTIONS, ETC.—In the case of

7 an eligible deferred compensation plan of an em8 ployer described in subsection (e)(1)(B)—’’.

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

10 at the end the following new paragraph:

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

12 An eligible deferred compensation plan of an em13 ployer described in subsection (e)(1)(A) shall not be

14 treated as failing to meet the requirements of this

15 subsection solely by reason of making a distribution

16 described in subsection (e)(9)(A).’’.

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

18 this section shall apply to distributions after December 31,

19 2000.
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1 TITLE V—STRENGTHENING PEN2 SION SECURITY AND EN3 FORCEMENT

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

5 FUNDING LIMIT.

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

7 full-funding limitation) is amended—

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

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

10 plan years beginning before January 1, 2004, the

11 applicable percentage’’; and

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

13 follows:

14 ‘‘(F) APPLICABLE PERCENTAGE.—For

15 purposes of subparagraph (A)(i)(I), the applica16 ble percentage shall be determined in accord17 ance with the following table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

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

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

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

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

19 this section shall apply to plan years beginning after De20 cember 31, 2000.
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1 SEC. 502. MAXIMUM CONTRIBUTION DEDUCTION RULES

2 MODIFIED AND APPLIED TO ALL DEFINED

3 BENEFIT PLANS.

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

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

6 is amended to read as follows:

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

8 PLANS.—

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

10 defined benefit plan, except as provided in

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

13 shall not be less than the unfunded termi14 nation liability (determined as if the pro15 posed termination date referred to in sec16 tion 4041(b)(2)(A)(i)(II) of the Employee

17 Retirement Income Security Act of 1974

18 were the last day of the plan year).

19 ‘‘(ii) PLANS WITH LESS THAN 100

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

22 less than 100 participants for the plan

23 year, termination liability shall not include

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

26 (as defined in section 414(q)) resulting
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1 from a plan amendment which is made or

2 becomes effective, whichever is later, within

3 the last 2 years before the termination

4 date.

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

7 determining whether a plan has more than

8 100 participants, all defined benefit plans

9 maintained by the same employer (or any

10 member of such employer’s controlled

11 group (within the meaning of section

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

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

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

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

19 Employee Retirement Income Security Act

20 of 1974.’’.

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

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

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

24 of nondeductible contributions for any taxable year,

25 there shall not be taken into account so much of the
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1 contributions to one or more defined contribution

2 plans which are not deductible when contributed

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

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

6 excess of 6 percent of compensation (within the

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

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

10 plans, or

11 ‘‘(B) the sum of—

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

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

16 For purposes of this paragraph, the deductible limits

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

18 amounts contributed to a defined benefit plan and

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

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

21 this section shall apply to plan years beginning after De22 cember 31, 2000.
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1 SEC. 503. EXCISE TAX RELIEF FOR SOUND PENSION FUND2 ING.

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

4 (relating to nondeductible contributions) is amended by

5 adding at the end the following new paragraph:

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

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

9 such year not to take into account any contributions

10 to a defined benefit plan except to the extent that

11 such contributions exceed the full-funding limitation

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

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

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

16 contributed to defined contribution plans and then

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

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

20 employer for such taxable year.’’.

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

22 this section shall apply to years beginning after December

23 31, 2000.
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1 SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY

2 DEFINED BENEFIT PLANS SIGNIFICANTLY

3 REDUCING FUTURE BENEFIT ACCRUALS.

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

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

6 following new section:

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

8 BENEFIT ACCRUALS TO SATISFY NOTICE RE9 QUIREMENTS.

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

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

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

14 ‘‘(b) AMOUNT OF TAX.—

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

17 to any applicable individual shall be $100 for each

18 day in the noncompliance period with respect to such

19 failure.

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

21 of this section, the term ‘noncompliance period’

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

24 on the date the failure is corrected.

25 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
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1 ‘‘(1) OVERALL LIMITATION FOR UNINTEN2 TIONAL FAILURES.—In the case of failures that are

3 due to reasonable cause and not to willful neglect,

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

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

6 a multiemployer plan, the taxable year of the trust

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

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

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

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

12 single employer for purposes of this section have the

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

15 the principles of section 1561.

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

17 failure which is due to reasonable cause and not to

18 willful neglect, the Secretary may waive part or all

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

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

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

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

2 plan.

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

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

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

8 administrator shall provide written notice to each

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

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

13 be understood by the average plan participant and

14 shall provide sufficient information (as determined

15 in accordance with regulations prescribed by the

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

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

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

20 shall be provided within a reasonable time before the

21 effective date of the plan amendment.

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

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

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

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

5 plan amendment if no material modification of the

6 amendment occurs before the amendment is adopt7 ed.

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

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

12 amendment—

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

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

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

16 under an applicable qualified domestic relations

17 order (within the meaning of section

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

19 who may reasonably be expected to be affected by

20 such plan amendment.

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

22 ‘applicable pension plan’ means—

23 ‘‘(A) any defined benefit plan, or

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

25 subject to the funding standards of section 412,
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1 which had 100 or more participants who had ac2 crued a benefit, or with respect to whom contribu3 tions were made, under the plan (whether or not

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

5 the plan year in which the plan amendment becomes

6 effective. Such term shall not include a governmental

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

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

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

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

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

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

to satisfy notice requirements.’’.

14 (c) EFFECTIVE DATES.—

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

16 this section shall apply to plan amendments taking

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

18 Act.

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

22 Code of 1986 (as added by the amendments made

23 by this section), a plan shall be treated as meeting
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1 the requirements of such sections if it makes a good

2 faith effort to comply with such requirements.

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

4 any notice required by the amendments made by this

5 section shall not end before the date which is 3

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

7 (d) STUDY.—The Secretary of the Treasury shall

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

11 conversions on longer service participants, including the

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

13 which participants earn no additional benefits for a period

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

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

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

18 on Ways and Means of the House of Representatives and

19 the Committee on Finance of the Senate.

20 SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER

21 SECTION 415.

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

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

3 of a governmental plan (as defined in section

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

6 shall not apply.’’.

7 (b) COMBINING AND AGGREGATION OF PLANS.—

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

9 section 415 (relating to combining of plans) is

10 amended by adding at the end the following:

11 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER

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

15 with any other plan maintained by an employer for

16 purposes of applying the limitations established in

17 this section, except that such plan shall be combined

18 or aggregated with another plan which is not such

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

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

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

4 this section shall apply to years beginning after December

5 31, 2000.

6 SEC. 506. PROHIBITED ALLOCATIONS OF STOCK IN S COR7 PORATION ESOP.

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

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

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

12 subsection:

13 ‘‘(p) PROHIBITED ALLOCATIONS OF SECURITIES IN

14 AN S CORPORATION.—

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

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

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

23 benefit of any disqualified person.

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

2 the requirements of paragraph (1), the plan

3 shall be treated as having distributed to any

4 disqualified person the amount allocated to the

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

7 ‘‘(B) CROSS REFERENCE.—

‘‘For excise tax relating to violations of paragraph

(1) and ownership of synthetic equity, see section

4979A.

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

9 this subsection—

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

12 stock ownership plan if, at any time during

13 such plan year—

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

17 ‘‘(ii) disqualified persons own at least

18 50 percent of the number of shares of

19 stock in the S corporation.

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

21 of subparagraph (A)—

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

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

4 the family described in paragraph

5 (4)(D), and

6 ‘‘(II) paragraph (4) thereof shall

7 not apply.

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

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

11 be treated as owning deemed-owned shares

12 of the individual.

13 Solely for purposes of applying paragraph (5),

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

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

18 this subsection—

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

20 person’ means any person if—

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

24 percent of the number of deemed-owned

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

3 deemed-owned shares of such person is at

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

6 ‘‘(B) TREATMENT OF FAMILY MEMBERS.—

7 In the case of a disqualified person described in

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

10 treated as a disqualified person if not otherwise

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

13 ‘‘(C) DEEMED-OWNED SHARES.—

14 ‘‘(i) IN GENERAL.—The term

15 ‘deemed-owned shares’ means, with respect

16 to any person—

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

19 of an employee stock ownership plan

20 which is allocated to such person

21 under the plan, and

22 ‘‘(II) such person’s share of the

23 stock in such corporation which is

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

2 UNALLOCATED STOCK.—For purposes of

3 clause (i)(II), a person’s share of

4 unallocated S corporation stock held by

5 such plan is the amount of the unallocated

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

8 to all participants in the same proportions

9 as the most recent stock allocation under

10 the plan.

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

12 of this paragraph, the term ‘member of the

13 family’ means, with respect to any individual—

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

15 ‘‘(ii) an ancestor or lineal descendant

16 of the individual or the individual’s spouse,

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

19 lineal descendant of the brother or sister,

20 and

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

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

2 of this subparagraph.

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

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

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

7 shares of stock in such corporation on which such

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

11 synthetic equity of 1 or more such persons results

12 in—

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

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

17 For purposes of this paragraph, synthetic equity

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

19 manner as stock is treated as owned by a person

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

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

23 treated as a nonallocation year, this paragraph shall

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

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

2 subsection—

3 ‘‘(A) EMPLOYEE STOCK OWNERSHIP

4 PLAN.—The term ‘employee stock ownership

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

7 ‘‘(B) EMPLOYER SECURITIES.—The term

8 ‘employer security’ has the meaning given such

9 term by section 409(l).

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

12 restricted stock, deferred issuance stock right,

13 or similar interest or right that gives the holder

14 the right to acquire or receive stock of the S

15 corporation in the future. Except to the extent

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

18 stock unit, or similar right to a future cash

19 payment based on the value of such stock or

20 appreciation in such value.

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

23 out the purposes of this subsection.’’.

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

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

2 409(p),’’ after ‘‘409(n)’’.

3 (c) EXCISE TAX.—

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

5 section 4979A (relating to tax on certain prohibited

6 allocations of employer securities) is amended—

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

9 (B) by striking all that follows paragraph

10 (2) and inserting the following:

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

13 or a nonallocation year described in subsection

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

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

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

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

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

23 section shall be paid—

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

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

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

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

5 the case may be), and

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

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

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

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

11 to definitions) is amended to read as follows:

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

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

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

16 same respective meanings as when used in sections

17 409 and 4978.

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

20 SUBSECTION (a).—

21 ‘‘(A) PROHIBITED ALLOCATIONS.—The

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

24 amount allocated to the account of any person

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

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

4 shares on which the synthetic equity is based.

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

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

11 shares of all disqualified persons with respect to

12 such plan.

13 ‘‘(D) STATUTE OF LIMITATIONS.—The

14 statutory period for the assessment of any tax

15 imposed by this section by reason of paragraph

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

18 of—

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

21 such tax, or

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

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

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

2 this section shall apply to plan years beginning after

3 December 31, 2001.

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

5 case of any—

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

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

12 section 1362(a) of the Internal Revenue Code

13 of 1986 is not in effect on such date,

14 the amendments made by this section shall apply to

15 plan years ending after July 11, 2000.

16 TITLE VI—REDUCING

17 REGULATORY BURDENS

18 SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.

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

20 412(c)(9) (relating to annual valuation) is amended to

21 read as follows:

22 ‘‘(9) ANNUAL VALUATION.—

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

24 section, a determination of experience gains and

25 losses and a valuation of the plan’s liability
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1 shall be made not less frequently than once

2 every year, except that such determination shall

3 be made more frequently to the extent required

4 in particular cases under regulations prescribed

5 by the Secretary.

6 ‘‘(B) VALUATION DATE.—

7 ‘‘(i) CURRENT YEAR.—Except as pro8 vided in clause (ii), the valuation referred

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

10 a date within the plan year to which the

11 valuation refers or within one month prior

12 to the beginning of such year.

13 ‘‘(ii) ELECTION TO USE PRIOR YEAR

14 VALUATION.—The valuation referred to in

15 subparagraph (A) may be made as of a

16 date within the plan year prior to the year

17 to which the valuation refers if—

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

19 this clause with respect to the plan,

20 and

21 ‘‘(II) as of such date, the value

22 of the assets of the plan are not less

23 than 125 percent of the plan’s current

24 liability (as defined in paragraph

25 (7)(B)).
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1 ‘‘(iii) ADJUSTMENTS.—Information

2 under clause (ii) shall, in accordance with

3 regulations, be actuarially adjusted to re4 flect significant differences in participants.

5 ‘‘(iv) ELECTION.—An election under

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

7 without the consent of the Secretary.’’.

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

9 this section shall apply to plan years beginning after De10 cember 31, 2000.

11 SEC. 602. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT

12 LOSS OF DIVIDEND DEDUCTION.

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

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

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

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

17 clause:

18 ‘‘(iii) is, at the election of such par19 ticipants or their beneficiaries—

20 ‘‘(I) payable as provided in clause

21 (i) or (ii), or

22 ‘‘(II) paid to the plan and rein23 vested in qualifying employer securi24 ties, or’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 2000.

4 SEC. 603. REPEAL OF TRANSITION RULE RELATING TO CER5 TAIN HIGHLY COMPENSATED EMPLOYEES.

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

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

8 (b) EFFECTIVE DATE.—The repeal made by sub9 section (a) shall apply to plan years beginning after De10 cember 31, 2000.

11 SEC. 604. EMPLOYEES OF TAX-EXEMPT ENTITIES.

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

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

14 to provide that employees of an organization described in

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

16 1986 who are eligible to make contributions under section

17 403(b) of such Code pursuant to a salary reduction agree18 ment may be treated as excludable with respect to a plan

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

20 under the same general arrangement as a plan under such

21 section 401(k), if—

22 (1) no employee of an organization described in

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

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

25 401(m) plan; and
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1 (2) 95 percent of the employees who are not

2 employees of an organization described in section

3 403(b)(1)(A)(i) of such Code are eligible to partici4 pate in such plan under such section 401(k) or (m).

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

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

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

8 Act of 1996.

9 SEC. 605. CLARIFICATION OF TREATMENT OF EMPLOYER10 PROVIDED RETIREMENT ADVICE.

11 (a) IN GENERAL.—Subsection (a) of section 132 (re12 lating to exclusion from gross income) is amended by

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

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

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

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

17 (b) QUALIFIED RETIREMENT PLANNING SERVICES

18 DEFINED.—Section 132 is amended by redesignating sub19 section (m) as subsection (n) and by inserting after sub20 section (l) the following:

21 ‘‘(m) QUALIFIED RETIREMENT PLANNING SERV22 ICES.—

23 ‘‘(1) IN GENERAL.—For purposes of this sec24 tion, the term ‘qualified retirement planning serv25 ices’ means any retirement planning service provided
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1 to an employee and his spouse by an employer main2 taining a qualified employer plan.

3 ‘‘(2) NONDISCRIMINATION RULE.—Subsection

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

5 employees only if such services are available on sub6 stantially the same terms to each member of the

7 group of employees normally provided education and

8 information regarding the employer’s qualified em9 ployer plan.

10 ‘‘(3) QUALIFIED EMPLOYER PLAN.—For pur11 poses of this subsection, the term ‘qualified employer

12 plan’ means a plan, contract, pension, or account de13 scribed in section 219(g)(5).’’.

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

15 this section shall apply to years beginning after December

16 31, 2000.

17 SEC. 606. REPORTING SIMPLIFICATION.

18 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

19 OWNERS AND THEIR SPOUSES.—

20 (1) IN GENERAL.—The Secretary of the Treas21 ury shall modify the requirements for filing annual

22 returns with respect to one-participant retirement

23 plans to ensure that such plans with assets of

24 $250,000 or less as of the close of the plan year

25 need not file a return for that year.
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1 (2) ONE-PARTICIPANT RETIREMENT PLAN DE2 FINED.—For purposes of this subsection, the term

3 ‘‘one-participant retirement plan’’ means a retire4 ment plan that—

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

6 (i) covered only the employer (and the

7 employer’s spouse) and the employer

8 owned the entire business (whether or not

9 incorporated); or

10 (ii) covered only one or more partners

11 (and their spouses) in a business partner12 ship (including partners in an S or C cor13 poration);

14 (B) meets the minimum coverage require15 ments of section 410(b) of the Internal Revenue

16 Code of 1986 without being combined with any

17 other plan of the business that covers the em18 ployees of the business;

19 (C) does not provide benefits to anyone ex20 cept the employer (and the employer’s spouse)

21 or the partners (and their spouses);

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

23 member of an affiliated service group, a con24 trolled group of corporations, or a group of

25 businesses under common control; and
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1 (E) does not cover a business that leases

2 employees.

3 (3) OTHER DEFINITIONS.—Terms used in para4 graph (2) which are also used in section 414 of the

5 Internal Revenue Code of 1986 shall have the re6 spective meanings given such terms by such section.

7 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

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

9 of a retirement plan which covers less than 25 employees

10 on the first day of the plan year and meets the require11 ments described in subparagraphs (B), (D), and (E) of

12 subsection (a)(2), the Secretary of the Treasury shall pro13 vide for the filing of a simplified annual return that is

14 substantially similar to the annual return required to be

15 filed by a one-participant retirement plan.

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

17 shall take effect on January 1, 2001.

18 SEC. 607. IMPROVEMENT OF EMPLOYEE PLANS COMPLI19 ANCE RESOLUTION SYSTEM.

20 The Secretary of the Treasury shall continue to up21 date and improve the Employee Plans Compliance Resolu22 tion System (or any successor program) giving special at23 tention to—
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1 (1) increasing the awareness and knowledge of

2 small employers concerning the availability and use

3 of the program;

4 (2) taking into account special concerns and

5 circumstances that small employers face with respect

6 to compliance and correction of compliance failures;

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

8 period under the Administrative Policy Regarding

9 Self-Correction for significant compliance failures;

10 (4) expanding the availability to correct insig11 nificant compliance failures under the Administra12 tive Policy Regarding Self-Correction during audit;

13 and

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

15 that is imposed by reason of a compliance failure is

16 not excessive and bears a reasonable relationship to

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

18 SEC. 608. REPEAL OF THE MULTIPLE USE TEST.

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

20 is amended to read as follows:

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

23 out the purposes of this subsection and subsection

24 (k), including regulations permitting appropriate ag25 gregation of plans and contributions.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to years beginning after December

3 31, 2000.

4 SEC. 609. FLEXIBILITY IN NONDISCRIMINATION, COV5 ERAGE, AND LINE OF BUSINESS RULES.

6 (a) NONDISCRIMINATION.—

7 (1) IN GENERAL.—The Secretary of the Treas8 ury shall, by regulation, provide that a plan shall be

9 deemed to satisfy the requirements of section

10 401(a)(4) of the Internal Revenue Code of 1986 if

11 such plan satisfies the facts and circumstances test

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

13 before January 1, 1994, but only if—

14 (A) the plan satisfies conditions prescribed

15 by the Secretary to appropriately limit the

16 availability of such test; and

17 (B) the plan is submitted to the Secretary

18 for a determination of whether it satisfies such

19 test.

20 Subparagraph (B) shall only apply to the extent pro21 vided by the Secretary.

22 (2) EFFECTIVE DATES.—

23 (A) REGULATIONS.—The regulation re24 quired by paragraph (1) shall apply to years be25 ginning after December 31, 2000.
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1 (B) CONDITIONS OF AVAILABILITY.—Any

2 condition of availability prescribed by the Sec3 retary under paragraph (1)(A) shall not apply

4 before the first year beginning not less than

5 120 days after the date on which such condition

6 is prescribed.

7 (b) COVERAGE TEST.—

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

9 to minimum coverage requirements) is amended by

10 adding at the end the following:

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

12 meet the requirements of subparagraphs (A),

13 (B) and (C), the plan—

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

15 effect immediately before the enactment of

16 the Tax Reform Act of 1986,

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

18 a determination of whether it satisfies the

19 requirement described in clause (i), and

20 ‘‘(iii) satisfies conditions prescribed by

21 the Secretary by regulation that appro22 priately limit the availability of this sub23 paragraph.

24 Clause (ii) shall apply only to the extent pro25 vided by the Secretary.’’.
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1 (2) EFFECTIVE DATES.—

2 (A) IN GENERAL.—The amendment made

3 by paragraph (1) shall apply to years beginning

4 after December 31, 2000.

5 (B) CONDITIONS OF AVAILABILITY.—Any

6 condition of availability prescribed by the Sec7 retary under regulations prescribed by the Sec8 retary under section 410(b)(1)(D) of the Inter9 nal Revenue Code of 1986 shall not apply be10 fore the first year beginning not less than 120

11 days after the date on which such condition is

12 prescribed.

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

14 the Treasury shall, on or before December 31, 2000, mod15 ify the existing regulations issued under section 414(r) of

16 the Internal Revenue Code of 1986 in order to expand

17 (to the extent that the Secretary determines appropriate)

18 the ability of a pension plan to demonstrate compliance

19 with the line of business requirements based upon the

20 facts and circumstances surrounding the design and oper21 ation of the plan, even though the plan is unable to satisfy

22 the mechanical tests currently used to determine compli23 ance.
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1 SEC. 610. EXTENSION TO ALL GOVERNMENTAL PLANS OF

2 MORATORIUM ON APPLICATION OF CERTAIN

3 NONDISCRIMINATION RULES APPLICABLE TO

4 STATE AND LOCAL PLANS.

5 (a) IN GENERAL.—

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

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

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

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

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

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

12 Relief Act of 1997 are each amended by striking

13 ‘‘maintained by a State or local government or polit14 ical subdivision thereof (or agency or instrumentality

15 thereof)’’.

16 (b) CONFORMING AMENDMENTS.—

17 (1) The heading for subparagraph (G) of sec18 tion 401(a)(5) is amended to read as follows: ‘‘GOV19 ERNMENTAL PLANS’’.

20 (2) The heading for subparagraph (H) of sec21 tion 401(a)(26) is amended to read as follows: ‘‘EX22 CEPTION FOR GOVERNMENTAL PLANS’’.

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

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

25 after ‘‘(G)’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to years beginning after December

3 31, 2000.

4 SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DIS5 TRIBUTIONS.

6 (a) EXPANSION OF PERIOD.—

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

8 417(a)(6) is amended by striking ‘‘90-day’’ and in9 serting ‘‘180-day’’.

10 (2) MODIFICATION OF REGULATIONS.—The

11 Secretary of the Treasury shall modify the regula12 tions under sections 402(f), 411(a)(11), and 417 of

13 the Internal Revenue Code of 1986 to substitute

14 ‘‘180 days’’ for ‘‘90 days’’ each place it appears in

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

16 11(c), and 1.417(e)–1(b).

17 (3) EFFECTIVE DATE.—The amendment made

18 by paragraph (1) and the modifications required by

19 paragraph (2) shall apply to years beginning after

20 December 31, 2000.

21 (b) CONSENT REGULATION INAPPLICABLE TO CER22 TAIN DISTRIBUTIONS.—

23 (1) IN GENERAL.—The Secretary of the Treas24 ury shall modify the regulations under section

25 411(a)(11) of the Internal Revenue Code of 1986 to
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1 provide that the description of a participant’s right,

2 if any, to defer receipt of a distribution shall also de3 scribe the consequences of failing to defer such re4 ceipt.

5 (2) EFFECTIVE DATE.—The modifications re6 quired by paragraph (1) shall apply to years begin7 ning after December 31, 2000.

8 TITLE VII—PLAN AMENDMENTS

9 SEC. 701. PROVISIONS RELATING TO PLAN AMENDMENTS.

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

11 or contract amendment—

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

13 being operated in accordance with the terms of the

14 plan during the period described in subsection

15 (b)(2)(A); and

16 (2) such plan shall not fail to meet the require17 ments of section 411(d)(6) of the Internal Revenue

18 Code of 1986 by reason of such amendment.

19 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

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

21 any amendment to any plan or annuity contract

22 which is made—

23 (A) pursuant to any amendment made by

24 this Act, or pursuant to any regulation issued

25 under this Act, and
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1 (B) on or before the last day of the first

2 plan year beginning on or after January 1,

3 2003.

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

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

6 1986), this paragraph shall be applied by sub7 stituting ‘‘2005’’ for ‘‘2003’’.

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

9 to any amendment unless—

10 (A) during the period—

11 (i) beginning on the date the legisla12 tive or regulatory amendment described in

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

14 case of a plan or contract amendment not

15 required by such legislative or regulatory

16 amendment, the effective date specified by

17 the plan); and

18 (ii) ending on the date described in

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

20 the plan or contract amendment is adopt21 ed),

22 the plan or contract is operated as if such plan

23 or contract amendment were in effect; and

24 (B) such plan or contract amendment ap25 plies retroactively for such period.
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1 SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CON2 TENTS.

3 (a) SHORT TITLE.—This Act may be cited as the ‘‘Re4 tirement Security and Savings Act of 2000’’.

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

6 expressly provided, whenever in this Act an amendment or

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

8 of, a section or other provision, the reference shall be consid9 ered to be made to a section or other provision of the Inter10 nal Revenue Code of 1986.

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

12 Act is as follows:

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

TITLE I—INDIVIDUAL RETIREMENT ACCOUNTS

Sec. 101. Modification of IRA contribution limits.

Sec. 102. Deemed IRAs under employer plans.

Sec. 103. Tax-free distributions from individual retirement accounts for charitable purposes.

Sec. 104. Modification of AGI limits for Roth IRAs.

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. Deduction limits.

Sec. 207. Option to treat elective deferrals as after-tax Roth contributions.

Sec. 208. Nonrefundable credit to certain individuals for elective deferrals and

IRA contributions.

Sec. 209. Credit for qualified pension plan contributions of small employers.

Sec. 210. Credit for pension plan startup costs of small employers.

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.
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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. Provisions relating to hardship distributions.

Sec. 307. Waiver of tax on nondeductible contributions for domestic or similar

workers.

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

Subtitle A—General Provisions

Sec. 501. Repeal of 155 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. Treatment of multiemployer plans under section 415.

Sec. 505. Protection of investment of employee contributions to 401(k) plans.

Sec. 506. Periodic pension benefits statements.

Sec. 507. Prohibited allocations of stock in S corporation ESOP.

Subtitle B—Treatment of Plan Amendments Reducing Future Benefit Accruals

Sec. 521. Notice required for pension plan amendments having the effect of significantly reducing future benefit accruals.

Sec. 522. Protection of participants during conversions to cash balance or other

hybrid defined benefit plans.

Sec. 523. Effective dates.

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.
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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.

Sec. 614. Studies.

TITLE VII—PLAN AMENDMENTS

Sec. 701. Provisions relating to plan amendments.

TITLE VIII—COMPLIANCE WITH BUDGET ACT.

Sec. 801. Compliance with Budget Act.

1 TITLE I—INDIVIDUAL

2 RETIREMENT ACCOUNTS

3 SEC. 101. MODIFICATION OF IRA CONTRIBUTION LIMITS.

4 (a) INCREASE IN CONTRIBUTION LIMIT.—

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

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

7 amended by striking ‘‘$2,000’’ and inserting ‘‘the de8 ductible amount’’.

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

10 amended by adding at the end the following new

11 paragraph:

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

13 paragraph (1)(A)—

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

15 shall be determined in accordance with the fol16 lowing table:

‘‘For taxable years The deductible

beginning in: amount is:

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

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

2003 and thereafter ........................................................... $5,000.
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1 ‘‘(B) CATCH-UP CONTRIBUTIONS FOR INDI2 VIDUALS 50 OR OLDER.—In the case of an indi3 vidual who has attained the age of 50 before the

4 close of the taxable year, the deductible amount

5 for such taxable year shall be an amount equal

6 to 150 percent of such amount determined with7 out regard to this subparagraph.

8 ‘‘(C) COST-OF-LIVING ADJUSTMENT.—

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

10 taxable year beginning in a calendar year

11 after 2003, the $5,000 amount under sub12 paragraph (A) shall be increased by an

13 amount equal to—

14 ‘‘(I) such dollar amount, multi15 plied by

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

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

18 the calendar year in which the taxable

19 year begins, determined by substituting

20 ‘calendar year 2002’ for ‘calendar year

21 1992’ in subparagraph (B) thereof.

22 ‘‘(ii) ROUNDING RULES.—If any

23 amount after adjustment under clause (i) is

24 not a multiple of $500, such amount shall
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1 be rounded to the next lower multiple of

2 $500.’’.

3 (b) INCREASE IN AGI LIMITS FOR ACTIVE PARTICI4 PANTS.—

5 (1) JOINT RETURNS.—The table in clause (i) of

6 section 219(g)(3)(B) (relating to applicable dollar

7 amount) is amended to read as follows:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 .................................................................................... $56,000

2002 .................................................................................... $60,000

2003 .................................................................................... $64,000

2004 .................................................................................... $68,000

2005 .................................................................................... $72,000

2006 .................................................................................... $76,000

2007 or thereafter .............................................................. $80,000.’’.

8 (2) OTHER TAXPAYERS.—Section 219(g)(3)(B)

9 (relating to applicable dollar amount) is amended by

10 striking clauses (ii) and (iii) and inserting the fol11 lowing:

12 ‘‘(ii) In the case of any other taxpayer:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 .................................................................................... $36,000

2002 .................................................................................... $40,000

2003 .................................................................................... $44,000

2004 .................................................................................... $48,000

2005 or thereafter .............................................................. $50,000.’’.

13 (c) CONFORMING AMENDMENTS.—

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

15 excess of $2,000 on behalf of any individual’’ and in16 serting ‘‘on behalf of any individual in excess of the
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1 amount in effect for such taxable year under section

2 219(b)(1)(A)’’.

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

4 ‘‘$2,000’’ and inserting ‘‘the dollar amount in effect

5 under section 219(b)(1)(A)’’.

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

7 ‘‘$2,000’’ in the matter following paragraph (4) and

8 inserting ‘‘the dollar amount in effect under section

9 219(b)(1)(A)’’.

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

11 ‘‘$2,000’’.

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

13 ‘‘$2,000’’ and inserting ‘‘the dollar amount in effect

14 under section 219(b)(1)(A)’’.

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

16 section shall apply to taxable years beginning after Decem17 ber 31, 2000.

18 SEC. 102. DEEMED IRAS UNDER EMPLOYER PLANS.

19 (a) IN GENERAL.—Section 408 (relating to individual

20 retirement accounts) is amended by redesignating sub21 section (q) as subsection (r) and by inserting after sub22 section (p) the following new subsection:

23 ‘‘(q) DEEMED IRAS UNDER QUALIFIED EMPLOYER

24 PLANS.—

25 ‘‘(1) GENERAL RULE.—If—
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1 ‘‘(A) a qualified employer plan elects to

2 allow employees to make voluntary employee

3 contributions to a separate account or annuity

4 established under the plan, and

5 ‘‘(B) under the terms of the qualified em6 ployer plan, such account or annuity meets the

7 applicable requirements of this section or section

8 408A for an individual retirement account or

9 annuity,

10 then such account or annuity shall be treated for pur11 poses of this title in the same manner as an indi12 vidual retirement plan and not as a qualified em13 ployer plan (and contributions to such account or an14 nuity as contributions to an individual retirement

15 plan and not to the qualified employer plan). For

16 purposes of subparagraph (B), the requirements of

17 subsection (a)(5) shall not apply.

18 ‘‘(2) SPECIAL RULES FOR QUALIFIED EMPLOYER

19 PLANS.—For purposes of this title, a qualified em20 ployer plan shall not fail to meet any requirement of

21 this title solely by reason of establishing and main22 taining a program described in paragraph (1).

23 ‘‘(3) DEFINITIONS.—For purposes of this

24 subsection—
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1 ‘‘(A) QUALIFIED EMPLOYER PLAN.—The

2 term ‘qualified employer plan’ has the meaning

3 given such term by section 72(p)(4); except such

4 term shall only include an eligible deferred com5 pensation plan (as defined in section 457(b))

6 which is maintained by an eligible employer de7 scribed in section 457(e)(1)(A).

8 ‘‘(B) VOLUNTARY EMPLOYEE CONTRIBU9 TION.—The term ‘voluntary employee contribu10 tion’ means any contribution (other than a man11 datory contribution within the meaning of sec12 tion 411(c)(2)(C))—

13 ‘‘(i) which is made by an individual as

14 an employee under a qualified employer

15 plan which allows employees to elect to

16 make contributions described in paragraph

17 (1), and

18 ‘‘(ii) with respect to which the indi19 vidual has designated the contribution as a

20 contribution to which this subsection ap21 plies.’’.

22 (b) AMENDMENT OF ERISA.—

23 (1) IN GENERAL.—Section 4 of the Employee Re24 tirement Income Security Act of 1974 (29 U.S.C.
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1 1003) is amended by adding at the end the following

2 new subsection:

3 ‘‘(c) If a pension plan allows an employee to elect to

4 make voluntary employee contributions to accounts and an5 nuities as provided in section 408(q) of the Internal Rev6 enue Code of 1986, such accounts and annuities (and con7 tributions thereto) shall not be treated as part of such plan

8 (or as a separate pension plan) for purposes of any provi9 sion of this title other than section 403(c), 404, or 405 (re10 lating to exclusive benefit, and fiduciary and co-fiduciary

11 responsibilities).’’.

12 (2) CONFORMING AMENDMENT.—Section 4(a) of

13 such Act (29 U.S.C. 1003(a)) is amended by inserting

14 ‘‘or (c)’’ after ‘‘subsection (b)’’.

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

16 section shall apply to plan years beginning after December

17 31, 2001.

18 SEC. 103. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RE19 TIREMENT ACCOUNTS FOR CHARITABLE PUR20 POSES.

21 (a) IN GENERAL.—Subsection (d) of section 408 (relat22 ing to individual retirement accounts) is amended by add23 ing at the end the following new paragraph:

24 ‘‘(8) DISTRIBUTIONS FOR CHARITABLE PUR25 POSES.—
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1 ‘‘(A) IN GENERAL.—In the case of a quali2 fied charitable distribution from an individual

3 retirement account to an organization described

4 in section 170(c), no amount shall be includible

5 in the gross income of the account holder or bene6 ficiary.

7 ‘‘(B) SPECIAL RULES RELATING TO CHARI8 TABLE REMAINDER TRUSTS, POOLED INCOME

9 FUNDS, AND CHARITABLE GIFT ANNUITIES.—

10 ‘‘(i) IN GENERAL.—In the case of a

11 qualified charitable distribution from an in12 dividual retirement account—

13 ‘‘(I) to a charitable remainder an14 nuity trust or a charitable remainder

15 unitrust (as such terms are defined in

16 section 664(d)),

17 ‘‘(II) to a pooled income fund (as

18 defined in section 642(c)(5)), or

19 ‘‘(III) for the issuance of a chari20 table gift annuity (as defined in sec21 tion 501(m)(5)),

22 no amount shall be includible in gross in23 come of the account holder or beneficiary.

24 The preceding sentence shall apply only if

25 no person holds any interest in the amounts
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1 in the trust, fund, or annuity attributable

2 to such distribution other than one or more

3 of the following: the individual for whose

4 benefit such account is maintained, the

5 spouse of such individual, or any organiza6 tion described in section 170(c).

7 ‘‘(ii) DETERMINATION OF INCLUSION

8 OF AMOUNTS DISTRIBUTED.—In deter9 mining the amount includible in the gross

10 income of the distributee of a distribution

11 from a trust described in clause (i)(I) or an

12 annuity (as described in clause (i)(III)), the

13 portion of any qualified charitable distribu14 tion to such trust or for such annuity which

15 would (but for this subparagraph) have been

16 includible in gross income—

17 ‘‘(I) in the case of any such trust,

18 shall be treated as income described in

19 section 664(b)(1), or

20 ‘‘(II) in the case of any such an21 nuity, shall not be treated as an invest22 ment in the contract.

23 ‘‘(iii) NO INCLUSION FOR DISTRIBU24 TION TO POOLED INCOME FUND.—No

25 amount shall be includible in the gross in-
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1 come of a pooled income fund (as so de2 fined) by reason of a qualified charitable

3 distribution to such fund.

4 ‘‘(C) QUALIFIED CHARITABLE DISTRIBU5 TION.—For purposes of this paragraph, the term

6 ‘qualified charitable distribution’ means any dis7 tribution from an individual retirement

8 account—

9 ‘‘(i) which is made on or after the date

10 that the individual for whose benefit the account is maintained has attained age 701 11 ⁄2,

12 and

13 ‘‘(ii) which is a charitable contribution

14 (as defined in section 170(c)) made directly

15 from the account to—

16 ‘‘(I) an organization described in

17 section 170(c), or

18 ‘‘(II) a trust, fund, or annuity de19 scribed in subparagraph (B).

20 ‘‘(D) DENIAL OF DEDUCTION.—The amount

21 allowable as a deduction to the taxpayer for the

22 taxable year under section 170 for qualified

23 charitable distributions shall be reduced (but not

24 below zero) by the sum of the amounts of the

25 qualified charitable distributions during such
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1 year which (but for this paragraph) would have

2 been includible in the gross income of the tax3 payer for such year.’’.

4 (b) EFFECTIVE DATE.—The amendment made by sub5 section (a) shall apply to taxable years beginning after De6 cember 31, 2000.

7 SEC. 104. MODIFICATION OF AGI LIMITS FOR ROTH IRAS.

8 (a) INCREASE IN AGI LIMIT FOR ROTH IRA CON9 TRIBUTIONS.—

10 (1) IN GENERAL.—Section 408A(c)(3)(C)(ii) (re11 lating to limits based on modified adjusted gross in12 come) is amended to read as follows:

13 ‘‘(ii) the applicable dollar amount is—

14 ‘‘(I) in the case of a taxpayer fil15 ing a joint return, $190,000, and

16 ‘‘(II) in the case of any other tax17 payer, $95,000.’’.

18 (2) PHASEOUT AMOUNT.—Clause (ii) of section

19 408A(c)(3)(A) is amended to read as follows:

20 ‘‘(ii) $15,000 ($30,000 in the case of a

21 joint return).’’

22 (b) INCREASE IN AGI LIMIT FOR ROTH IRA CONVER23 SIONS.—Section 408A(c)(3)(B) (relating to rollover from

24 IRA) is amended by striking ‘‘relates’’ and all that follows
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1 and inserting ‘‘relates, the taxpayer’s adjusted gross income

2 exceeds $100,000 ($200,000 in the case of a joint return).’’.

3 (c) CONFORMING AMENDMENT.—Section 408A(c)(3) is

4 amended by striking subparagraph (D).

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

6 section shall apply to taxable years beginning after Decem7 ber 31, 2000.

8 TITLE II—EXPANDING

9 COVERAGE

10 SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION LIM11 ITS.

12 (a) DEFINED BENEFIT PLANS.—

13 (1) DOLLAR LIMIT.—

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

15 (relating to limitation for defined benefit plans)

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

17 ‘‘$160,000’’.

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

19 415(b)(2) are each amended by striking

20 ‘‘$90,000’’ each place it appears in the headings

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

22 (C) Paragraph (7) of section 415(b) (relat23 ing to benefits under certain collectively bar24 gained plans) is amended by striking ‘‘the great25 er of $68,212 or one-half the amount otherwise
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1 applicable for such year under paragraph (1)(A)

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

3 amount otherwise applicable for such year under

4 paragraph (1)(A) for ‘$160,000’ ’’.

5 (2) LIMIT REDUCED WHEN BENEFIT BEGINS BE6 FORE AGE 62.—Subparagraph (C) of section 415(b)(2)

7 is amended by striking ‘‘the social security retirement

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

9 and inserting ‘‘age 62’’ and by striking the second

10 sentence.

11 (3) LIMIT INCREASED WHEN BENEFIT BEGINS

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

13 415(b)(2) is amended by striking ‘‘the social security

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

15 and text and inserting ‘‘age 65’’.

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

17 (d) of section 415 (related to cost-of-living adjust18 ments) is amended—

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

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

21 (B) in paragraph (3)(A)—

22 (i) by striking ‘‘$90,000’’ in the head23 ing and inserting ‘‘$160,000’’; and

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

25 inserting ‘‘July 1, 2000’’.
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1 (5) CONFORMING AMENDMENTS.—

2 (A) Section 415(b)(2) is amended by strik3 ing subparagraph (F).

4 (B) Section 415(b)(9) is amended to read as

5 follows:

6 ‘‘(9) SPECIAL RULE FOR COMMERCIAL AIR7 LINE PILOTS.—In the case of any participant

8 who is a commercial airline pilot, if, as of the

9 time of the participant’s retirement, regulations

10 prescribed by the Federal Aviation Administra11 tion require an individual to separate from serv12 ice as a commercial airline pilot after attaining

13 any age occurring on or after age 60 and before

14 age 62, paragraph (2)(C) (after application of

15 clause (i)) shall be applied by substituting such

16 age for age 62.’’.

17 (C) Section 415(b)(10)(C)(i) is amended by

18 striking ‘‘applied without regard to paragraph

19 (2)(F)’’.

20 (b) QUALIFIED TRUSTS.—

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

22 404(l), 408(k), and 505(b)(7) are each amended by

23 striking ‘‘$150,000’’ each place it appears and insert24 ing ‘‘$200,000’’.
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1 (2) BASE PERIOD AND ROUNDING OF COST-OF2 LIVING ADJUSTMENT.—Subparagraph (B) of section

3 401(a)(17) is amended—

4 (A) by striking ‘‘October 1, 1993’’ and in5 serting ‘‘July 1, 2000’’; and

6 (B) by striking ‘‘$10,000’’ both places it ap7 pears and inserting ‘‘$5,000’’.

8 (c) ELECTIVE DEFERRALS.—

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

10 402(g) (relating to limitation on exclusion for elective

11 deferrals) is amended to read as follows:

12 ‘‘(1) IN GENERAL.—

13 ‘‘(A) LIMITATION.—Notwithstanding sub14 sections (e)(3) and (h)(1)(B), the elective defer15 rals of any individual for any taxable year shall

16 be included in such individual’s gross income to

17 the extent the amount of such deferrals for the

18 taxable year exceeds the applicable dollar

19 amount.

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

21 purposes of subparagraph (A), the applicable

22 dollar amount shall be the amount determined in

23 accordance with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

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

2002 .................................................................................... $12,000
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2003 .................................................................................... $13,000

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

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

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

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

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

4 of taxable years beginning after December 31, 2005,

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

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

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

8 period shall be the calendar quarter beginning July 1,

9 2004, and any increase under this paragraph which

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

11 lowest multiple of $500.’’.

12 (3) CONFORMING AMENDMENTS.—

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

14 on exclusion for elective deferrals), as amended

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

16 by striking paragraph (4) and redesignating

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

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

20 amended by striking ‘‘402(g)(8)(A)(iii)’’ and in21 serting ‘‘402(g)(7)(A)(iii)’’.

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

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

24 thereof)’’.
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1 (d) DEFERRED COMPENSATION PLANS OF STATE AND

2 LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANIZA3 TIONS.—

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

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

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

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

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

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

13 (2) APPLICABLE DOLLAR AMOUNT; COST-OF-LIV14 ING ADJUSTMENT.—Paragraph (15) of section 457(e)

15 is amended to read as follows:

16 ‘‘(15) APPLICABLE DOLLAR AMOUNT.—

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

18 amount shall be the amount determined in ac19 cordance with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

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

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

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

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

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

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

21 the case of taxable years beginning after Decem-
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1 ber 31, 2005, the Secretary shall adjust the

2 $15,000 amount under subparagraph (A) at the

3 same time and in the same manner as under sec4 tion 415(d), except that the base period shall be

5 the calendar quarter beginning July 1, 2004,

6 and any increase under this paragraph which is

7 not a multiple of $500 shall be rounded to the

8 next lowest multiple of $500.’’.

9 (e) SIMPLE RETIREMENT ACCOUNTS.—

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

11 408(p)(2)(A) (relating to general rule for qualified

12 salary reduction arrangement) is amended by striking

13 ‘‘$6,000’’ and inserting ‘‘the applicable dollar

14 amount’’.

15 (2) APPLICABLE DOLLAR AMOUNT.—Subpara16 graph (E) of 408(p)(2) is amended to read as follows:

17 ‘‘(E) APPLICABLE DOLLAR AMOUNT; COST18 OF-LIVING ADJUSTMENT.—

19 ‘‘(i) IN GENERAL.—For purposes of

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

21 amount shall be the amount determined in

22 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.
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1 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

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

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

5 same time and in the same manner as

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

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

9 any increase under this subparagraph

10 which is not a multiple of $500 shall be

11 rounded to the next lower multiple of

12 $500.’’.

13 (3) CONFORMING AMENDMENTS.—

14 (A) Subclause (I) of section

15 401(k)(11)(B)(i) is amended by striking

16 ‘‘$6,000’’ and inserting ‘‘the amount in effect

17 under section 408(p)(2)(A)(ii)’’.

18 (B) Section 401(k)(11) is amended by strik19 ing subparagraph (E).

20 (f) ROUNDING RULE RELATING TO DEFINED BENEFIT

21 PLANS AND DEFINED CONTRIBUTION PLANS.—Paragraph

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

23 ‘‘(4) ROUNDING.—

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

25 under subparagraph (A) of paragraph (1) which
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1 is not a multiple of $5,000 shall be rounded to

2 the next lowest multiple of $5,000.

3 ‘‘(B) $30,000 AMOUNT.—Any increase

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

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

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

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

8 section shall apply to years beginning after December 31,

9 2000.

10 SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART11 NERS, AND SOLE PROPRIETORS.

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

13 4975(f)(6) (relating to exemptions not to apply to certain

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

15 new clause:

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

17 of subparagraph (A)(i), the term ‘owner-em18 ployee’ shall only include a person described

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

20 (b) AMENDMENT TO ERISA.—Section 408(d)(2) of the

21 Employee Retirement Income Security Act of 1974 (29

22 U.S.C. 1108(d)(2)) is amended by adding at the end the

23 following new subparagraph:
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1 ‘‘(C) For purposes of paragraph (1)(A), the term

2 ‘owner-employee’ shall only include a person described in

3 clause (ii) or (iii) of subparagraph (A).’’.

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

5 section shall apply to years beginning after December 31,

6 2000.

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

8 (a) SIMPLIFICATION OF DEFINITION OF KEY EM9 PLOYEE.—

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

11 key employee) is amended—

12 (A) by striking ‘‘plan year or any of the 4

13 preceding plan years’’ and inserting ‘‘preceding

14 plan year’’ in the matter preceding clause (i);

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

16 following:

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

18 an annual compensation greater than the

19 amount in effect under section

20 414(q)(1)(B)(i) for such plan year,’’;

21 (C) by striking clause (ii) and redesig22 nating clauses (iii) and (iv) as clauses (ii) and

23 (iii), respectively;
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1 (D) by striking the second sentence in the

2 matter following clause (iii), as redesignated by

3 subparagraph (C); and

4 (E) by adding at the end the following:

5 ‘‘For purposes of this subparagraph, in the case

6 of an employee who is not employed during the

7 preceding plan year or is employed for a portion

8 of such year, such employee shall be treated as a

9 key employee if it can be reasonably anticipated

10 that such employee will be described in 1 of the

11 preceding clauses for the current plan year.’’.

12 (2) CONFORMING AMENDMENT.—Section

13 416(i)(1)(B)(iii) is amended by striking ‘‘and sub14 paragraph (A)(ii)’’.

15 (b) MATCHING CONTRIBUTIONS TAKEN INTO ACCOUNT

16 FOR MINIMUM CONTRIBUTION REQUIREMENTS.—Section

17 416(c)(2)(A) (relating to defined contribution plans) is

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

19 matching contributions (as defined in section

20 401(m)(4)(A)) shall be taken into account for purposes of

21 this subparagraph.’’.

22 (c) DISTRIBUTIONS DURING LAST YEAR BEFORE DE23 TERMINATION DATE TAKEN INTO ACCOUNT.—

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

25 416(g) is amended to read as follows:
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1 ‘‘(3) DISTRIBUTIONS DURING LAST YEAR BEFORE

2 DETERMINATION DATE TAKEN INTO ACCOUNT.—

3 ‘‘(A) IN GENERAL.—For purposes of

4 determining—

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

6 accrued benefit for any employee, or

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

8 employee,

9 such present value or amount shall be increased

10 by the aggregate distributions made with respect

11 to such employee under the plan during the 1-

12 year period ending on the determination date.

13 The preceding sentence shall also apply to dis14 tributions under a terminated plan which if it

15 had not been terminated would have been re16 quired to be included in an aggregation group.

17 ‘‘(B) 5-YEAR PERIOD IN CASE OF IN-SERV18 ICE DISTRIBUTION.—In the case of any distribu19 tion made for a reason other than separation

20 from service, death, or disability, subparagraph

21 (A) shall be applied by substituting ‘5-year pe22 riod’ for ‘1-year period’.’’.

23 (2) BENEFITS NOT TAKEN INTO ACCOUNT.—Sub24 paragraph (E) of section 416(g)(4) is amended—
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1 (A) by striking ‘‘LAST 5 YEARS’’ in the

2 heading and inserting ‘‘LAST YEAR BEFORE DE3 TERMINATION DATE’’; and

4 (B) by striking ‘‘5-year period’’ and insert5 ing ‘‘1-year period’’.

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

7 (4) of section 416(g) (relating to other special rules for top8 heavy plans) is amended by adding at the end the following

9 new subparagraph:

10 ‘‘(H) CASH OR DEFERRED ARRANGEMENTS

11 USING ALTERNATIVE METHODS OF MEETING NON12 DISCRIMINATION REQUIREMENTS.—The term

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

14 consists solely of—

15 ‘‘(i) a cash or deferred arrangement

16 which meets the requirements of section

17 401(k)(12), and

18 ‘‘(ii) matching contributions with re19 spect to which the requirements of section

20 401(m)(11) are met.

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

22 treated as a top-heavy plan because it is a mem23 ber of an aggregation group which is a top-heavy

24 group, contributions under the plan may be

25 taken into account in determining whether any
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1 other plan in the group meets the requirements

2 of subsection (c)(2).’’.

3 (e) FROZEN PLAN EXEMPT FROM MINIMUM BENEFIT

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

5 (relating to defined benefit plans) is amended—

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

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

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

9 ‘‘(iii) EXCEPTION FOR FROZEN

10 PLAN.—For purposes of determining an em11 ployee’s years of service with the employer,

12 any service with the employer shall be dis13 regarded to the extent that such service oc14 curs during a plan year when the plan ben15 efits (within the meaning of section 410(b))

16 no key employee or former key employee.’’.

17 (f) ELIMINATION OF FAMILY ATTRIBUTION.—Section

18 416(i)(1)(B) (defining 5-percent owner) is amended by add19 ing at the end the following new clause:

20 ‘‘(iv) FAMILY ATTRIBUTION DIS21 REGARDED.—Solely for purposes of apply22 ing this paragraph (and not for purposes of

23 any provision of this title which incor24 porates by reference the definition of a key

25 employee or 5-percent owner under this
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1 paragraph), section 318 shall be applied

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

3 in determining whether any person is a 5-

4 percent owner.’’.

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

6 section shall apply to years beginning after December 31,

7 2000.

8 SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO AC9 COUNT FOR PURPOSES OF DEDUCTION LIM10 ITS.

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

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

13 annuity plan and compensation under a deferred payment

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

15 subsection:

16 ‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC17 COUNT FOR PURPOSES OF DEDUCTION LIMITS.—Elective

18 deferrals (as defined in section 402(g)(3)) shall not be sub19 ject to any limitation contained in paragraph (3), (7), or

20 (9) of subsection (a), and such elective deferrals shall not

21 be taken into account in applying any such limitation to

22 any other contributions.’’.

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

24 section shall apply to years beginning after December 31,

25 2000.
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1 SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR

2 DEFERRED COMPENSATION PLANS OF STATE

3 AND LOCAL GOVERNMENTS AND TAX-EXEMPT

4 ORGANIZATIONS.

5 (a) IN GENERAL.—Subsection (c) of section 457 (relat6 ing to deferred compensation plans of State and local gov7 ernments and tax-exempt organizations), as amended by

8 section 201, is amended to read as follows:

9 ‘‘(c) LIMITATION.—The maximum amount of the com10 pensation of any one individual which may be deferred

11 under subsection (a) during any taxable year shall not ex12 ceed the amount in effect under subsection (b)(2)(A) (as

13 modified by any adjustment provided under subsection

14 (b)(3)).’’.

15 (b) EFFECTIVE DATE.—The amendment made by sub16 section (a) shall apply to years beginning after December

17 31, 2000.

18 SEC. 206. DEDUCTION LIMITS.

19 (a) INCREASE IN PERCENTAGE.—

20 (1) STOCK BONUS AND PROFIT SHARING

21 TRUSTS.—

22 (A) IN GENERAL.—Subclause (I) of section

23 404(a)(3)(A)(i) (relating to stock bonus and

24 profit sharing trusts) is amended by striking ‘‘15

25 percent’’ and inserting ‘‘25 percent’’.
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1 (B) CONFORMING AMENDMENT.—Subpara2 graph (C) of section 404(h)(1) is amended by

3 striking ‘‘15 percent’’ each place it appears and

4 inserting ‘‘25 percent’’.

5 (2) DEFINED CONTRIBUTION PLANS.—

6 (A) IN GENERAL.—Clause (v) of section

7 404(a)(3)(A) (relating to stock bonus and profit

8 sharing trusts) is amended to read as follows:

9 ‘‘(v) DEFINED CONTRIBUTION PLANS

10 SUBJECT TO THE FUNDING STANDARDS.—

11 Except as provided by the Secretary, a de12 fined contribution plan which is subject to

13 the funding standards of section 412 shall

14 be treated in the same manner as a stock

15 bonus or profit-sharing plan for purposes of

16 this subparagraph.’’

17 (B) CONFORMING AMENDMENTS.—

18 (i) Section 404(h)(2) is amended by

19 striking ‘‘stock bonus or profit-sharing

20 trust’’ and inserting ‘‘trust subject to sub21 section (a)(3)(A)’’.

22 (ii) The heading of section 404(h)(2) is

23 amended by striking ‘‘STOCK BONUS AND

24 PROFIT-SHARING TRUST’’ and inserting

25 ‘‘CERTAIN TRUSTS’’.
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1 (b) COMPENSATION.—

2 (1) IN GENERAL.—Section 404(a) (relating to

3 general rule) is amended by adding at the end the fol4 lowing:

5 ‘‘(12) DEFINITION OF COMPENSATION.—For pur6 poses of paragraphs (3), (7), (8), and (9), the term

7 ‘compensation otherwise paid or accrued during the

8 taxable year’ shall include amounts treated as ‘par9 ticipant’s compensation’ under subparagraph (C) or

10 (D) of section 415(c)(3).’’.

11 (2) CONFORMING AMENDMENTS.—

12 (A) Subparagraph (B) of section 404(a)(3)

13 is amended by striking the last sentence thereof.

14 (B) Clause (i) of section 4972(c)(6)(B) is

15 amended by striking ‘‘(within the meaning of

16 section 404(a))’’ and inserting ‘‘(within the

17 meaning of section 404(a) and as adjusted under

18 section 404(a)(12))’’.

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

20 section shall apply to years beginning after December 31,

21 2000.

22 SEC. 207. OPTION TO TREAT ELECTIVE DEFERRALS AS

23 AFTER-TAX ROTH CONTRIBUTIONS.

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

25 D of chapter 1 (relating to deferred compensation, etc.) is
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1 amended by inserting after section 402 the following new

2 section:

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

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

6 plan includes a qualified Roth contribution program—

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

8 an employee pursuant to the program shall be treated

9 as an elective deferral for purposes of this chapter, ex10 cept that such contribution shall not be excludable

11 from gross income, and

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

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

14 meet any requirement of this chapter solely by reason

15 of including such program.

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

17 For purposes of this section—

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

19 contribution program’ means a program under which

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

23 the applicable retirement plan.

24 ‘‘(2) SEPARATE ACCOUNTING REQUIRED.—A pro25 gram shall not be treated as a qualified Roth con-
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1 tribution program unless the applicable retirement

2 plan—

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

5 contributions of each employee and any earnings

6 properly allocable to the contributions, and

7 ‘‘(B) maintains separate recordkeeping with

8 respect to each account.

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

11 section—

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

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

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

16 employee without regard to this section, and

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

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

20 ‘‘(2) DESIGNATION LIMITS.—The amount of elec21 tive deferrals which an employee may designate under

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

23 ‘‘(A) the maximum amount of elective defer24 rals excludable from gross income of the employee
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1 for the taxable year (without regard to this sec2 tion), over

3 ‘‘(B) the aggregate amount of elective defer4 rals of the employee for the taxable year which

5 the employee does not designate under paragraph

6 (1).

7 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

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

9 of any payment or distribution from a des10 ignated Roth account which is otherwise allow11 able under this chapter may be made only if the

12 contribution is to—

13 ‘‘(i) another designated Roth account

14 of the individual from whose account the

15 payment or distribution was made, or

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

17 ‘‘(B) COORDINATION WITH LIMIT.—Any

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

20 into account for purposes of paragraph (1).

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

22 title—

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

24 from a designated Roth account shall not be includ25 ible in gross income.
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1 ‘‘(2) QUALIFIED DISTRIBUTION.—For purposes

2 of this subsection—

3 ‘‘(A) IN GENERAL.—The term ‘qualified dis4 tribution’ has the meaning given such term by

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

6 (iv) thereof).

7 ‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU8 SION PERIOD.—A payment or distribution from

9 a designated Roth account shall not be treated as

10 a qualified distribution if such payment or dis11 tribution is made within the 5-taxable-year pe12 riod beginning with the earlier of—

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

14 individual made a designated Roth con15 tribution to any designated Roth account

16 established for such individual under the

17 same applicable retirement plan, or

18 ‘‘(ii) if a rollover contribution was

19 made to such designated Roth account from

20 a designated Roth account previously estab21 lished for such individual under another

22 applicable retirement plan, the first taxable

23 year for which the individual made a des24 ignated Roth contribution to such pre25 viously established account.
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1 ‘‘(C) DISTRIBUTIONS OF EXCESS DEFER2 RALS AND CONTRIBUTIONS AND EARNINGS

3 THEREON.—The term ‘qualified distribution’

4 shall not include any distribution of any excess

5 deferral under section 402(g)(2) or any excess

6 contribution under section 401(k)(8), and any

7 income on the excess deferral or contribution.

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

9 applied separately with respect to distributions and

10 payments from a designated Roth account and other

11 distributions and payments from the plan.

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

13 section—

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

15 ‘applicable retirement plan’ means—

16 ‘‘(A) an employees’ trust described in sec17 tion 401(a) which is exempt from tax under sec18 tion 501(a), and

19 ‘‘(B) a plan under which amounts are con20 tributed by an individual’s employer for an an21 nuity contract described in section 403(b).

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

23 deferral’ means any elective deferral described in sub24 paragraph (A) or (C) of section 402(g)(3).’’.
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1 (b) EXCESS DEFERRALS.—Section 402(g) (relating to

2 limitation on exclusion for elective deferrals) is amended—

3 (1) by adding at the end of paragraph (1)(A) (as

4 added by section 201(c)(1)) the following new sen5 tence: ‘‘The preceding sentence shall not apply to so

6 much of such excess as does not exceed the designated

7 Roth contributions of the individual for the taxable

8 year.’’; and

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

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

11 paragraph (2)(A).

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

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

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

16 from a designated Roth account (as defined in

17 section 402A), an eligible retirement plan with

18 respect to such portion shall include only another

19 designated Roth account and a Roth IRA.’’.

20 (d) REPORTING REQUIREMENTS.—

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

22 amended by inserting ‘‘, including the amount of des23 ignated Roth contributions (as defined in section

24 402A)’’ before the comma at the end.
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1 (2) INFORMATION.—Section 6047 is amended by

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

3 inserting after subsection (e) the following new sub4 section:

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

8 such returns and reports regarding designated Roth con9 tributions (as defined in section 402A) to the Secretary,

10 participants and beneficiaries of the plan, and such other

11 persons as the Secretary may prescribe.’’.

12 (e) CONFORMING AMENDMENTS.—

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

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

15 term includes a rollover contribution described in sec16 tion 402A(c)(3)(A).’’.

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

18 of subchapter D of chapter 1 is amended by inserting

19 after the item relating to section 402 the following

20 new item:

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

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

22 section shall apply to taxable years beginning after Decem23 ber 31, 2000.
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1 SEC. 208. NONREFUNDABLE CREDIT TO CERTAIN INDIVID2 UALS FOR ELECTIVE DEFERRALS AND IRA

3 CONTRIBUTIONS.

4 (a) IN GENERAL.—Subpart A of part IV of subchapter

5 A of chapter 1 (relating to nonrefundable personal credits)

6 is amended by inserting after section 25A the following new

7 section:

8 ‘‘SEC. 25B. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS

9 BY CERTAIN INDIVIDUALS.

10 ‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eligi11 ble individual, there shall be allowed as a credit against

12 the tax imposed by this subtitle for the taxable year an

13 amount equal to the applicable percentage of so much of

14 the qualified retirement savings contributions of the eligible

15 individual for the taxable year as do not exceed $2,000.

16 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of this

17 section, the applicable percentage is the percentage deter18 mined in accordance with the following table:

Adjusted Gross Income

Applicable percentage

Joint return Head of a household All other cases

Over Not over Over Not over Over Not over

$0 $20,000 $0 $15,000 $0 $10,000 50

20,000 25,000 15,000 18,750 10,000 12,500 30

25,000 30,000 18,750 22,500 12,500 15,000 25

30,000 35,000 22,500 26,250 15,000 17,500 20

35,000 40,000 26,250 30,000 17,500 20,000 15

40,000 45,000 30,000 33,750 20,000 22,500 10

45,000 50,000 33,750 37,500 22,500 25,000 5

50,000 37,500 25,000 0
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1 ‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this

2 section—

3 ‘‘(1) IN GENERAL.—The term ‘eligible indi4 vidual’ means any individual if such individual has

5 attained the age of 18 as of the close of the taxable

6 year.

7 ‘‘(2) DEPENDENTS AND FULL-TIME STUDENTS

8 NOT ELIGIBLE.—The term ‘eligible individual’ shall

9 not include—

10 ‘‘(A) any individual with respect to whom

11 a deduction under section 151 is allowed to an12 other taxpayer for a taxable year beginning in

13 the calendar year in which such individual’s

14 taxable year begins, and

15 ‘‘(B) any individual who is a student (as

16 defined in section 151(c)(4)).

17 ‘‘(d) QUALIFIED RETIREMENT SAVINGS CONTRIBU18 TIONS.—For purposes of this section—

19 ‘‘(1) IN GENERAL.—The term ‘qualified retire20 ment savings contributions’ means, with respect to

21 any taxable year, the sum of—

22 ‘‘(A) the amount of the qualified retirement

23 contributions (as defined in section 219(e)) made

24 by the eligible individual,

25 ‘‘(B) the amount of—
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1 ‘‘(i) any elective deferrals (as defined

2 in section 402(g)(3)) of such individual,

3 and

4 ‘‘(ii) any elective deferral of compensa5 tion by such individual under an eligible

6 deferred compensation plan (as defined in

7 section 457(b)) of an eligible employer de8 scribed in section 457(e)(1)(A), and

9 ‘‘(C) the amount of voluntary employee con10 tributions by such individual to any qualified

11 retirement plan (as defined in section 4974(c)).

12 ‘‘(2) REDUCTION FOR CERTAIN DISTRIBU13 TIONS.—

14 ‘‘(A) IN GENERAL.—The qualified retire15 ment savings contributions determined under

16 paragraph (1) shall be reduced (but not below

17 zero) by the sum of—

18 ‘‘(i) any distribution from a qualified

19 retirement plan (as defined in section

20 4974(c)), or from an eligible deferred com21 pensation plan (as defined in section

22 457(b)), received by the individual during

23 the testing period which is includible in

24 gross income, and
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1 ‘‘(ii) any distribution from a Roth

2 IRA received by the individual during the

3 testing period which is not a qualified roll4 over contribution (as defined in section

5 408A(e)) to a Roth IRA.

6 ‘‘(B) TESTING PERIOD.—For purposes of

7 subparagraph (A), the testing period, with re8 spect to a taxable year, is the period which

9 includes—

10 ‘‘(i) such taxable year,

11 ‘‘(ii) the 2 preceding taxable years,

12 and

13 ‘‘(iii) the period after such taxable

14 year and before the due date (including ex15 tensions) for filing the return of tax for such

16 taxable year.

17 ‘‘(C) EXCEPTED DISTRIBUTIONS.—There

18 shall not be taken into account under subpara19 graph (A)—

20 ‘‘(i) any distribution referred to in sec21 tion 72(p), 401(k)(8), 401(m)(6), 402(g)(2),

22 404(k), or 408(d)(4), and

23 ‘‘(ii) any distribution to which section

24 408A(d)(3) applies.
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1 ‘‘(D) TREATMENT OF DISTRIBUTIONS RE2 CEIVED BY SPOUSE OF INDIVIDUAL.—For pur3 poses of determining distributions received by an

4 individual under subparagraph (A) for any tax5 able year, any distribution received by the spouse

6 of such individual shall be treated as received by

7 such individual if such individual and spouse

8 file a joint return for such taxable year and for

9 the taxable year during which the spouse receives

10 the distribution.

11 ‘‘(e) ADJUSTED GROSS INCOME.—For purposes of this

12 section, adjusted gross income shall be determined without

13 regard to sections 911, 931, and 933.

14 ‘‘(f) INVESTMENT IN THE CONTRACT.—Notwith15 standing any other provision of law, a qualified retirement

16 savings contribution shall not fail to be included in deter17 mining the investment in the contract for purposes of sec18 tion 72 by reason of the credit under this section.’’

19 (b) CREDIT ALLOWED AGAINST REGULAR TAX AND

20 ALTERNATIVE MINIMUM TAX.—

21 (1) IN GENERAL.—Subsection (a) of section 26 is

22 amended by inserting ‘‘(other than the credit allowed

23 by section 25B)’’ after ‘‘credits allowed by this sub24 part’’.
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1 (2) CONFORMING AMENDMENT.—Section 25B, as

2 added by subsection (a), is amended by inserting after

3 subsection (f) the following new subsection:

4 ‘‘(g) LIMITATION BASED ON AMOUNT OF TAX.—The

5 aggregate credit allowed by this section for the taxable year

6 shall not exceed the sum of—

7 ‘‘(1) the taxpayer’s regular tax liability for the

8 taxable year reduced by the sum of the credits allowed

9 by sections 21, 22, 23, 24, 25, and 25A, plus

10 ‘‘(2) the tax imposed by section 55 for such tax11 able year.’’

12 (c) ANNUAL REPORT.—The Comptroller General of the

13 United States shall submit a report annually to the Com14 mittee on Ways and Means of the House of Representatives

15 and the Committee on Finance of the Senate regarding the

16 number of taxpayers receiving the credit allowed under sec17 tion 25B of the Internal Revenue Code of 1986, as added

18 by subsection (a).

19 (d) CONFORMING AMENDMENT.—The table of sections

20 for subpart A of part IV of subchapter A of chapter 1 is

21 amended by inserting after the item relating to section 25A

22 the following new item:

‘‘Sec. 25B. Elective deferrals and IRA contributions by certain individuals.’’

23 (e) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—The amendments made by

2 subsections (a) and (d) shall apply to taxable years

3 beginning after December 31, 2000, and before Janu4 ary 1, 2006.

5 (2) ALTERNATIVE MINIMUM TAX.—The amend6 ments made by subsection (b) shall apply to taxable

7 years beginning after December 31, 2001, and before

8 January 1, 2006.

9 SEC. 209. CREDIT FOR QUALIFIED PENSION PLAN CON10 TRIBUTIONS OF SMALL EMPLOYERS.

11 (a) IN GENERAL.—Subpart D of part IV of subchapter

12 A of chapter 1 (relating to business related credits) is

13 amended by adding at the end the following new section:

14 ‘‘SEC. 45D. SMALL EMPLOYER PENSION PLAN CONTRIBU15 TIONS.

16 ‘‘(a) GENERAL RULE.—For purposes of section 38, in

17 the case of an eligible employer, the small employer pension

18 plan contribution credit determined under this section for

19 any taxable year is an amount equal to 50 percent of the

20 amount which would (but for subsection (f)(1)) be allowed

21 as a deduction under section 404 for such taxable year for

22 qualified employer contributions made to any qualified re23 tirement plan on behalf of any employee who is not a highly

24 compensated employee.
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1 ‘‘(b) CREDIT LIMITED TO 3 YEARS.—The credit allow2 able by this section shall be allowed only with respect to

3 the period of 3 taxable years beginning with the first taxable

4 year for which a credit is allowable with respect to a plan

5 under this section.

6 ‘‘(c) QUALIFIED EMPLOYER CONTRIBUTION.—For

7 purposes of this section—

8 ‘‘(1) DEFINED CONTRIBUTION PLANS.—In the

9 case of a defined contribution plan, the term ‘quali10 fied employer contribution’ means the amount of non11 elective and matching contributions to the plan made

12 by the employer on behalf of any employee who is not

13 a highly compensated employee to the extent such

14 amount does not exceed 3 percent of such employee’s

15 compensation from the employer for the year.

16 ‘‘(2) DEFINED BENEFIT PLANS.—In the case of a

17 defined benefit plan, the term ‘qualified employer con18 tribution’ means the amount of employer contribu19 tions to the plan made on behalf of any employee who

20 is not a highly compensated employee to the extent

21 that the accrued benefit of such employee derived from

22 employer contributions for the year does not exceed

23 the equivalent (as determined under regulations pre24 scribed by the Secretary and without regard to con25 tributions and benefits under the Social Security Act)
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1 of 3 percent of such employee’s compensation from the

2 employer for the year.

3 ‘‘(d) QUALIFIED RETIREMENT PLAN.—

4 ‘‘(1) IN GENERAL.—The term ‘qualified retire5 ment plan’ means any plan described in section

6 401(a) which includes a trust exempt from tax under

7 section 501(a) if the plan meets—

8 ‘‘(A) the contribution requirements of para9 graph (2),

10 ‘‘(B) the vesting requirements of paragraph

11 (3), and

12 ‘‘(C) the distributions requirements of para13 graph (4).

14 ‘‘(2) CONTRIBUTION REQUIREMENTS.—

15 ‘‘(A) IN GENERAL.—The requirements of

16 this paragraph are met if, under the plan—

17 ‘‘(i) the employer is required to make

18 nonelective contributions of at least 1 per19 cent of compensation (or the equivalent

20 thereof in the case of a defined benefit plan)

21 for each employee who is not a highly com22 pensated employee who is eligible to partici23 pate in the plan, and

24 ‘‘(ii) allocations of nonelective em25 ployer contributions are either in equal dol-
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1 lar amounts for all employees covered by the

2 plan or bear a uniform relationship to the

3 total compensation, or the basic or regular

4 rate of compensation, of the employees cov5 ered by the plan.

6 ‘‘(B) COMPENSATION LIMITATION.—The

7 compensation taken into account under subpara8 graph (A) for any year shall not exceed the limi9 tation in effect for such year under section

10 401(a)(17).

11 ‘‘(3) VESTING REQUIREMENTS.—The require12 ments of this paragraph are met if the plan satisfies

13 the requirements of subparagraph (A) or (B).

14 ‘‘(A) 3-YEAR VESTING.—A plan satisfies the

15 requirements of this subparagraph if an em16 ployee who has completed at least 3 years of

17 service has a nonforfeitable right to 100 percent

18 of the employee’s accrued benefit derived from

19 employer contributions.

20 ‘‘(B) 5-YEAR GRADED VESTING.—A plan

21 satisfies the requirements of this subparagraph if

22 an employee has a nonforfeitable right to a per23 centage of the employee’s accrued benefit derived

24 from employer contributions determined under

25 the following table:
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The nonforfeitable

‘‘Years of service: percentage is:

1 ...................................................................................................... 20

2 ...................................................................................................... 40

3 ...................................................................................................... 60

4 ...................................................................................................... 80

5 ...................................................................................................... 100.

1 ‘‘(4) DISTRIBUTION REQUIREMENTS.—In the

2 case of a profit-sharing or stock bonus plan, the re3 quirements of this paragraph are met if, under the

4 plan, qualified employer contributions are distribut5 able only as provided in section 401(k)(2)(B).

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

7 section—

8 ‘‘(1) ELIGIBLE EMPLOYER.—

9 ‘‘(A) IN GENERAL.—The term ‘eligible em10 ployer’ means, with respect to any year, an em11 ployer which has no more than 50 employees

12 who received at least $5,000 of compensation

13 from the employer for the preceding year.

14 ‘‘(B) REQUIREMENT FOR NEW QUALIFIED

15 EMPLOYER PLANS.—Such term shall not include

16 an employer if, during the 3-taxable year period

17 immediately preceding the 1st taxable year for

18 which the credit under this section is otherwise

19 allowable for a qualified employer plan of the

20 employer, the employer or any member of any

21 controlled group including the employer (or any

22 predecessor of either) established or maintained a
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1 qualified employer plan with respect to which

2 contributions were made, or benefits were ac3 crued, for substantially the same employees as

4 are in the qualified employer plan.

5 ‘‘(2) HIGHLY COMPENSATED EMPLOYEE.—The

6 term ‘highly compensated employee’ has the meaning

7 given such term by section 414(q) (determined with8 out regard to section 414(q)(1)(B)(ii)).

9 ‘‘(f) SPECIAL RULES.—

10 ‘‘(1) DISALLOWANCE OF DEDUCTION.—No deduc11 tion shall be allowed for that portion of the qualified

12 employer contributions paid or incurred for the tax13 able year which is equal to the credit determined

14 under subsection (a).

15 ‘‘(2) ELECTION NOT TO CLAIM CREDIT.—This

16 section shall not apply to a taxpayer for any taxable

17 year if such taxpayer elects to have this section not

18 apply for such taxable year.

19 ‘‘(3) AGGREGATION RULES.—All persons treated

20 as a single employer under subsection (a) or (b) of

21 section 52, or subsection (n) or (o) of section 414,

22 shall be treated as one person. All eligible employer

23 plans shall be treated as 1 eligible employer plan.

24 ‘‘(g) RECAPTURE OF CREDIT ON FORFEITED CON25 TRIBUTIONS.—
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1 ‘‘(1) IN GENERAL.—Except as provided in para2 graph (2), if any accrued benefit which is forfeitable

3 by reason of subsection (d)(3) is forfeited, the employ4 er’s tax imposed by this chapter for the taxable year

5 in which the forfeiture occurs shall be increased by 35

6 percent of the employer contributions from which such

7 benefit is derived to the extent such contributions were

8 taken into account in determining the credit under

9 this section.

10 ‘‘(2) REALLOCATED CONTRIBUTIONS.—Para11 graph (1) shall not apply to any contribution which

12 is reallocated by the employer under the plan to em13 ployees who are not highly compensated employees.’’.

14 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI15 NESS CREDIT.—Section 38(b) (defining current year busi16 ness credit) is amended by striking ‘‘plus’’ at the end of

17 paragraph (11), by striking the period at the end of para18 graph (12) and inserting ‘‘, plus’’, and by adding at the

19 end the following new paragraph:

20 ‘‘(13) in the case of an eligible employer (as de21 fined in section 45D(e)), the small employer pension

22 plan contribution credit determined under section

23 45D(a).’’

24 (c) CONFORMING AMENDMENTS.—
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1 (1) Section 39(d) is amended by adding at the

2 end the following new paragraph:

3 ‘‘(9) NO CARRYBACK OF SMALL EMPLOYER PEN4 SION PLAN CONTRIBUTION CREDIT BEFORE JANUARY

5 1, 2001.—No portion of the unused business credit for

6 any taxable year which is attributable to the small

7 employer pension plan contribution credit determined

8 under section 45D may be carried back to a taxable

9 year beginning before January 1, 2001.’’

10 (2) Subsection (c) of section 196 is amended by

11 striking ‘‘and’’ at the end of paragraph (7), by strik12 ing the period at the end of paragraph (8) and insert13 ing ‘‘, and’’, and by adding at the end the following

14 new paragraph:

15 ‘‘(9) the small employer pension plan contribu16 tion credit determined under section 45D(a).’’

17 (3) The table of sections for subpart D of part

18 IV of subchapter A of chapter 1 is amended by adding

19 at the end the following new item:

‘‘Sec. 45D. Small employer pension plan contributions.’’

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

21 section shall apply to contributions paid or incurred in tax22 able years beginning after December 31, 2000.
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1 SEC. 210. CREDIT FOR PENSION PLAN STARTUP COSTS OF

2 SMALL EMPLOYERS.

3 (a) IN GENERAL.—Subpart D of part IV of subchapter

4 A of chapter 1 (relating to business related credits), as

5 amended by section 209, is amended by adding at the end

6 the following new section:

7 ‘‘SEC. 45E. SMALL EMPLOYER PENSION PLAN STARTUP

8 COSTS.

9 ‘‘(a) GENERAL RULE.—For purposes of section 38, in

10 the case of an eligible employer, the small employer pension

11 plan startup cost credit determined under this section for

12 any taxable year is an amount equal to 50 percent of the

13 qualified startup costs paid or incurred by the taxpayer

14 during the taxable year.

15 ‘‘(b) DOLLAR LIMITATION.—The amount of the credit

16 determined under this section for any taxable year shall not

17 exceed—

18 ‘‘(1) $500 for the first credit year and each of the

19 2 taxable years immediately following the first credit

20 year, and

21 ‘‘(2) zero for any other taxable year.

22 ‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this

23 section—

24 ‘‘(1) IN GENERAL.—The term ‘eligible employer’

25 has the meaning given such term by section

26 408(p)(2)(C)(i).
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1 ‘‘(2) REQUIREMENT FOR NEW QUALIFIED EM2 PLOYER PLANS.—Such term shall not include an em3 ployer if, during the 3-taxable year period imme4 diately preceding the 1st taxable year for which the

5 credit under this section is otherwise allowable for a

6 qualified employer plan of the employer, the employer

7 or any member of any controlled group including the

8 employer (or any predecessor of either) established or

9 maintained a qualified employer plan with respect to

10 which contributions were made, or benefits were ac11 crued, for substantially the same employees as are in

12 the qualified employer plan.

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

14 section—

15 ‘‘(1) QUALIFIED STARTUP COSTS.—

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

17 startup costs’ means any ordinary and necessary

18 expenses of an eligible employer which are paid

19 or incurred in connection with—

20 ‘‘(i) the establishment or administra21 tion of an eligible employer plan, or

22 ‘‘(ii) the retirement-related education

23 of employees with respect to such plan.

24 ‘‘(B) PLAN MUST HAVE AT LEAST 1 PARTICI25 PANT.—Such term shall not include any expense
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1 in connection with a plan that does not have at

2 least 1 employee eligible to participate who is

3 not a highly compensated employee.

4 ‘‘(2) ELIGIBLE EMPLOYER PLAN.—The term ‘eli5 gible employer plan’ means a qualified employer plan

6 within the meaning of section 4972(d).

7 ‘‘(3) FIRST CREDIT YEAR.—The term ‘first credit

8 year’ means—

9 ‘‘(A) the taxable year which includes the

10 date that the eligible employer plan to which

11 such costs relate becomes effective, or

12 ‘‘(B) at the election of the eligible employer,

13 the taxable year preceding the taxable year re14 ferred to in subparagraph (A).

15 ‘‘(e) SPECIAL RULES.—For purposes of this section—

16 ‘‘(1) AGGREGATION RULES.—All persons treated

17 as a single employer under subsection (a) or (b) of

18 section 52, or subsection (n) or (o) of section 414,

19 shall be treated as one person. All eligible employer

20 plans shall be treated as 1 eligible employer plan.

21 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No deduc22 tion shall be allowed for that portion of the qualified

23 startup costs paid or incurred for the taxable year

24 which is equal to the credit determined under sub25 section (a).
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1 ‘‘(3) ELECTION NOT TO CLAIM CREDIT.—This

2 section shall not apply to a taxpayer for any taxable

3 year if such taxpayer elects to have this section not

4 apply for such taxable year.’’

5 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI6 NESS CREDIT.—Section 38(b) (defining current year busi7 ness credit), as amended by section 209, is amended by

8 striking ‘‘plus’’ at the end of paragraph (12), by striking

9 the period at the end of paragraph (13) and inserting ‘‘,

10 plus’’, and by adding at the end the following new para11 graph:

12 ‘‘(14) in the case of an eligible employer (as de13 fined in section 45D(c)), the small employer pension

14 plan startup cost credit determined under section

15 45E(a).’’

16 (c) CONFORMING AMENDMENTS.—

17 (1) Section 39(d), as amended by section 209(c),

18 is amended by adding at the end the following new

19 paragraph:

20 ‘‘(10) NO CARRYBACK OF SMALL EMPLOYER PEN21 SION PLAN STARTUP COST CREDIT BEFORE JANUARY

22 1, 2001.—No portion of the unused business credit for

23 any taxable year which is attributable to the small

24 employer pension plan startup cost credit determined
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1 under section 45E may be carried back to a taxable

2 year beginning before January 1, 2001.’’

3 (2) Subsection (c) of section 196, as amended by

4 section 209(c), is amended by striking ‘‘and’’ at the

5 end of paragraph (8), by striking the period at the

6 end of paragraph (9) and inserting ‘‘, and’’, and by

7 adding at the end the following new paragraph:

8 ‘‘(10) the small employer pension plan startup

9 cost credit determined under section 45E(a).’’

10 (3) The table of sections for subpart D of part

11 IV of subchapter A of chapter 1, as amended by sec12 tion 209(c), is amended by adding at the end the fol13 lowing new item:

‘‘Sec. 45E. Small employer pension plan startup costs.’’

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

15 section shall apply to costs paid or incurred in taxable

16 years beginning after December 31, 2000, with respect to

17 qualified employer plans established after such date.

18 TITLE III—ENHANCING

19 FAIRNESS FOR WOMEN

20 SEC. 301. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS

21 AGE 50 OR OVER.

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

23 and special rules) is amended by adding at the end the fol24 lowing new subsection:
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1 ‘‘(v) CATCHUP CONTRIBUTIONS FOR INDIVIDUALS AGE

2 50 OR OVER.—

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

4 shall not be treated as failing to meet any require5 ment of this title solely because the plan permits an

6 eligible participant to make additional elective defer7 rals in any plan year.

8 ‘‘(2) LIMITATION ON AMOUNT OF ADDITIONAL

9 DEFERRALS.—

10 ‘‘(A) IN GENERAL.—A plan shall not permit

11 additional elective deferrals under paragraph (1)

12 for any year in an amount greater than the less13 er of—

14 ‘‘(i) the applicable percentage of the

15 applicable dollar amount for such elective

16 deferrals for such year, or

17 ‘‘(ii) the excess (if any) of—

18 ‘‘(I) the participant’s compensa19 tion (as defined in section 415(c)(3))

20 for the year, over

21 ‘‘(II) any other elective deferrals

22 of the participant for such year which

23 are made without regard to this sub24 section.
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1 ‘‘(B) APPLICABLE PERCENTAGE.—For pur2 poses of this paragraph, the applicable percent3 age shall be determined in accordance with the

4 following table:

‘‘For taxable years The applicable

beginning in: percentage is:

2001 ................................................................................................ 10 percent

2002 ................................................................................................ 20 percent

2003 ................................................................................................ 30 percent

2004 ................................................................................................ 40 percent

2005 and thereafter ........................................................................ 50 percent.

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

6 case of any contribution to a plan under paragraph

7 (1)—

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

10 made—

11 ‘‘(i) be subject to any otherwise appli12 cable limitation contained in section 402(g),

13 402(h), 403(b), 404(a), 404(h), 408(k),

14 408(p), 415, or 457, or

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

16 such limitations to other contributions or

17 benefits under such plan or any other such

18 plan, and

19 ‘‘(B) such plan shall not be treated as fail20 ing to meet the requirements of section 401(a)(4),

21 401(a)(26), 401(k)(3), 401(k)(11), 401(k)(12),

22 401(m), 403(b)(12), 408(k), 408(p), 408B,
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1 410(b), or 416 by reason of the making of (or the

2 right to make) such contribution.

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

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

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

6 plan—

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

8 the close of the plan year, and

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

10 deferrals may (without regard to this subsection)

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

12 of the application of any limitation or other re13 striction described in paragraph (3) or contained

14 in the terms of the plan.

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

16 purposes of this subsection—

17 ‘‘(A) APPLICABLE DOLLAR AMOUNT.—The

18 term ‘applicable dollar amount’ means, with re19 spect to any year, the amount in effect under

20 section 402(g)(1)(B), 408(p)(2)(E)(i), or

21 457(e)(15)(A), whichever is applicable to an ap22 plicable employer plan, for such year.

23 ‘‘(B) APPLICABLE EMPLOYER PLAN.—The

24 term ‘applicable employer plan’ means—
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1 ‘‘(i) an employees’ trust described in

2 section 401(a) which is exempt from tax

3 under section 501(a),

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

5 contributed by an individual’s employer for

6 an annuity contract described in section

7 403(b),

8 ‘‘(iii) an eligible deferred compensation

9 plan under section 457 of an eligible em10 ployer described in section 457(e)(1)(A),

11 and

12 ‘‘(iv) an arrangement meeting the re13 quirements of section 408 (k) or (p).

14 ‘‘(C) ELECTIVE DEFERRAL.—The term ‘elec15 tive deferral’ has the meaning given such term

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

17 ‘‘(D) EXCEPTION FOR SECTION 457 PLANS.—

18 This subsection shall not apply to an applicable

19 employer plan described in subparagraph

20 (B)(iii) for any year to which section 457(b)(3)

21 applies.’’.

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

23 section shall apply to contributions in taxable years begin24 ning after December 31, 2000.
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1 SEC. 302. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF

2 EMPLOYEES TO DEFINED CONTRIBUTION

3 PLANS.

4 (a) EQUITABLE TREATMENT.—

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

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

8 inserting ‘‘100 percent’’.

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

10 403(b) is amended—

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

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

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

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

16 by a former employee after the fifth taxable year

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

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

20 (3) CONFORMING AMENDMENTS.—

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

22 by striking ‘‘section 403(b)(2)(D)(iii))’’ and in23 serting ‘‘section 403(b)(2)(D)(iii), as in effect be24 fore the enactment of the Retirement Security

25 and Savings Act of 2000)’’.
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1 (B) Section 404(a)(10)(B) is amended by

2 striking ‘‘, the exclusion allowance under section

3 403(b)(2),’’.

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

6 such portion shall reduce the exclusion allowance

7 as provided in section 403(b)(2)’’.

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

9 at the end the following new subparagraph:

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

11 an annuity contract described in section 403(b),

12 the term ‘participant’s compensation’ means the

13 participant’s includible compensation deter14 mined under section 403(b)(3).’’.

15 (E) Section 415(c) is amended by striking

16 paragraph (4).

17 (F) Section 415(c)(7) is amended to read as

18 follows:

19 ‘‘(7) CERTAIN CONTRIBUTIONS BY CHURCH

20 PLANS NOT TREATED AS EXCEEDING LIMIT.—

21 ‘‘(A) IN GENERAL.—Notwithstanding any

22 other provision of this subsection, at the election

23 of a participant who is an employee of a church

24 or a convention or association of churches, in25 cluding an organization described in section
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1 414(e)(3)(B)(ii), contributions and other addi2 tions for an annuity contract or retirement in3 come account described in section 403(b) with re4 spect to such participant, when expressed as an

5 annual addition to such participant’s account,

6 shall be treated as not exceeding the limitation

7 of paragraph (1) if such annual addition is not

8 in excess of $10,000.

9 ‘‘(B) $40,000 AGGREGATE LIMITATION.—

10 The total amount of additions with respect to

11 any participant which may be taken into ac12 count for purposes of this subparagraph for all

13 years may not exceed $40,000.

14 ‘‘(C) ANNUAL ADDITION.—For purposes of

15 this paragraph, the term ‘annual addition’ has

16 the meaning given such term by paragraph (2).’’.

17 (G) Subparagraph (B) of section 402(g)(7)

18 (as redesignated by section 211) is amended by

19 inserting before the period at the end the fol20 lowing: ‘‘(as in effect before the enactment of the

21 Retirement Security and Savings Act of 2000)’’.

22 (3) EFFECTIVE DATE.—The amendments made

23 by this subsection shall apply to years beginning after

24 December 31, 2000.

25 (b) SPECIAL RULES FOR SECTIONS 403(b) AND 408.—
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1 (1) IN GENERAL.—Subsection (k) of section 415

2 is amended by adding at the end the following new

3 paragraph:

4 ‘‘(4) SPECIAL RULES FOR SECTIONS 403(b) AND

5 408.—For purposes of this section, any annuity con6 tract described in section 403(b) for the benefit of a

7 participant shall be treated as a defined contribution

8 plan maintained by each employer with respect to

9 which the participant has the control required under

10 subsection (b) or (c) of section 414 (as modified by

11 subsection (h)). For purposes of this section, any con12 tribution by an employer to a simplified employee

13 pension plan for an individual for a taxable year

14 shall be treated as an employer contribution to a de15 fined contribution plan for such individual for such

16 year.’’.

17 (2) EFFECTIVE DATE.—

18 (A) IN GENERAL.—The amendment made

19 by paragraph (1) shall apply to limitation years

20 beginning after December 31, 1999.

21 (B) EXCLUSION ALLOWANCE.—Effective for

22 limitation years beginning in 2000, in the case

23 of any annuity contract described in section

24 403(b) of the Internal Revenue Code of 1986, the

25 amount of the contribution disqualified by rea-
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1 son of section 415(g) of such Code shall reduce

2 the exclusion allowance as provided in section

3 403(b)(2) of such Code.

4 (3) MODIFICATION OF 403(b) EXCLUSION ALLOW5 ANCE TO CONFORM TO 415 MODIFICATION.—The Sec6 retary of the Treasury shall modify the regulations re7 garding the exclusion allowance under section

8 403(b)(2) of the Internal Revenue Code of 1986 to

9 render void the requirement that contributions to a

10 defined benefit pension plan be treated as previously

11 excluded amounts for purposes of the exclusion allow12 ance. For taxable years beginning after December 31,

13 1999, such regulations shall be applied as if such re14 quirement were void.

15 (c) DEFERRED COMPENSATION PLANS OF STATE AND

16 LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANIZA17 TIONS.—

18 (1) IN GENERAL.—Subparagraph (B) of section

19 457(b)(2) (relating to salary limitation on eligible de20 ferred compensation plans) is amended by striking

‘‘331 21 ⁄3 percent’’ and inserting ‘‘100 percent’’.

22 (2) EFFECTIVE DATE.—The amendment made by

23 this subsection shall apply to years beginning after

24 December 31, 2000.
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1 SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER MATCH2 ING CONTRIBUTIONS.

3 (a) IN GENERAL.—Section 411(a) (relating to min4 imum vesting standards) is amended—

5 (1) in paragraph (2), by striking ‘‘A plan’’ and

6 inserting ‘‘Except as provided in paragraph (12), a

7 plan’’; and

8 (2) by adding at the end the following:

9 ‘‘(12) FASTER VESTING FOR MATCHING CON10 TRIBUTIONS.—In the case of matching contributions

11 (as defined in section 401(m)(4)(A)), paragraph (2)

12 shall be applied—

13 ‘‘(A) by substituting ‘3 years’ for ‘5 years’

14 in subparagraph (A), and

15 ‘‘(B) by substituting the following table for

16 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

2 .......................................................................................... 20

3 .......................................................................................... 40

4 .......................................................................................... 60

5 .......................................................................................... 80

6 .......................................................................................... 100.’’.

17 (b) AMENDMENTS TO ERISA.—Section 203(a) of the

18 Employee Retirement Income Security Act of 1974 (29

19 U.S.C. 1053(a)) is amended—

20 (1) in paragraph (2), by striking ‘‘A plan’’ and

21 inserting ‘‘Except as provided in paragraph (4), a

22 plan’’, and
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1 (2) by adding at the end the following:

2 ‘‘(4) FASTER VESTING FOR MATCHING CONTRIBU3 TIONS.—In the case of matching contributions (as de4 fined in section 401(m)(4)(A) of the Internal Revenue

5 Code of 1986), paragraph (2) shall be applied—

6 ‘‘(A) by substituting ‘3 years’ for ‘5 years’

7 in subparagraph (A), and

8 ‘‘(B) by substituting the following table for

9 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

2 ...................................................................................................... 20

3 ...................................................................................................... 40

4 ...................................................................................................... 60

5 ...................................................................................................... 80

6 ...................................................................................................... 100.’’.

10 (c) EFFECTIVE DATES.—

11 (1) IN GENERAL.—Except as provided in para12 graph (2), the amendments made by this section shall

13 apply to contributions for plan years beginning after

14 December 31, 2000.

15 (2) COLLECTIVE BARGAINING AGREEMENTS.—In

16 the case of a plan maintained pursuant to one or

17 more collective bargaining agreements between em18 ployee representatives and one or more employers

19 ratified by the date of the enactment of this Act, the

20 amendments made by this section shall not apply to

21 contributions on behalf of employees covered by any
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1 such agreement for plan years beginning before the

2 earlier of—

3 (A) the later of—

4 (i) the date on which the last of such

5 collective bargaining agreements terminates

6 (determined without regard to any exten7 sion thereof on or after such date of the en8 actment); or

9 (ii) January 1, 2001; or

10 (B) January 1, 2005.

11 (3) SERVICE REQUIRED.—With respect to any

12 plan, the amendments made by this section shall not

13 apply to any employee before the date that such em14 ployee has 1 hour of service under such plan in any

15 plan year to which the amendments made by this sec16 tion apply.

17 SEC. 304. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU18 TION RULES.

19 (a) SIMPLIFICATION AND FINALIZATION OF MINIMUM

20 DISTRIBUTION REQUIREMENTS.—

21 (1) IN GENERAL.—The Secretary of the Treasury

22 shall—

23 (A) simplify and finalize the regulations re24 lating to minimum distribution requirements

25 under sections 401(a)(9), 408(a)(6) and (b)(3),
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1 403(b)(10), and 457(d)(2) of the Internal Rev2 enue Code of 1986; and

3 (B) modify such regulations to—

4 (i) reflect current life expectancy; and

5 (ii) revise the required distribution

6 methods so that, under reasonable assump7 tions, the amount of the required minimum

8 distribution does not decrease over a par9 ticipant’s life expectancy.

10 (2) FRESH START.—Notwithstanding subpara11 graph (D) of section 401(a)(9) of such Code, during

12 the first year that regulations are in effect under this

13 subsection, required distributions for future years

14 may be redetermined to reflect changes under such

15 regulations. Such redetermination shall include the

16 opportunity to choose a new designated beneficiary

17 and to elect a new method of calculating life expect18 ancy.

19 (3) DATE FOR REGULATIONS.—Not later than

20 December 31, 2001, the Secretary shall issue final reg21 ulations described in paragraph (1) and such regula22 tions shall apply without regard to whether an indi23 vidual had previously begun receiving minimum dis24 tributions.
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1 (b) REPEAL OF RULE WHERE DISTRIBUTIONS HAD

2 BEGUN BEFORE DEATH OCCURS.—

3 (1) IN GENERAL.—Subparagraph (B) of section

4 401(a)(9) is amended by striking clause (i) and redes5 ignating clauses (ii), (iii), and (iv) as clauses (i),

6 (ii), and (iii), respectively.

7 (2) CONFORMING CHANGES.—

8 (A) Clause (i) of section 401(a)(9)(B) (as so

9 redesignated) is amended—

10 (i) by striking ‘‘FOR OTHER CASES’’ in

11 the heading; and

12 (ii) by striking ‘‘the distribution of the

13 employee’s interest has begun in accordance

14 with subparagraph (A)(ii)’’ and inserting

15 ‘‘his entire interest has been distributed to

16 him’’.

17 (B) Clause (ii) of section 401(a)(9)(B) (as

18 so redesignated) is amended by striking ‘‘clause

19 (ii)’’ and inserting ‘‘clause (i)’’.

20 (C) Clause (iii) of section 401(a)(9)(B) (as

21 so redesignated) is amended—

22 (i) by striking ‘‘clause (iii)(I)’’ and in23 serting ‘‘clause (ii)(I)’’;
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1 (ii) by striking ‘‘clause (iii)(III)’’ in

2 subclause (I) and inserting ‘‘clause

3 (ii)(III)’’;

4 (iii) by striking ‘‘the date on which the

employee would have attained age 701 5 ⁄2,’’ in

6 subclause (I) and inserting ‘‘April 1 of the

7 calendar year following the calendar year

in which the spouse attains 701 8 ⁄2,’’; and

9 (iv) by striking ‘‘the distributions to

10 such spouse begin,’’ in subclause (II) and

11 inserting ‘‘his entire interest has been dis12 tributed to him,’’.

13 (3) EFFECTIVE DATE.—The amendments made

14 by this subsection shall apply to years beginning after

15 December 31, 2000.

16 (c) REDUCTION IN EXCISE TAX.—

17 (1) IN GENERAL.—Subsection (a) of section 4974

18 is amended by striking ‘‘50 percent’’ and inserting

19 ‘‘10 percent’’.

20 (2) EFFECTIVE DATE.—The amendment made by

21 this subsection shall apply to years beginning after

22 December 31, 2000.
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1 SEC. 305. CLARIFICATION OF TAX TREATMENT OF DIVISION

2 OF SECTION 457 PLAN BENEFITS UPON DI3 VORCE.

4 (a) IN GENERAL.—Section 414(p)(11) (relating to ap5 plication of rules to governmental and church plans) is

6 amended—

7 (1) by inserting ‘‘or an eligible deferred com8 pensation plan (within the meaning of section

9 457(b))’’ after ‘‘subsection (e))’’; and

10 (2) in the heading, by striking ‘‘GOVERNMENTAL

11 AND CHURCH PLANS’’ and inserting ‘‘CERTAIN OTHER

12 PLANS’’.

13 (b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE14 MENTS.—Paragraph (10) of section 414(p) is amended by

15 striking ‘‘and section 409(d)’’ and inserting ‘‘section

16 409(d), and section 457(d)’’.

17 (c) TAX TREATMENT OF PAYMENTS FROM A SECTION

18 457 PLAN.—Subsection (p) of section 414 is amended by

19 redesignating paragraph (12) as paragraph (13) and in20 serting after paragraph (11) the following new paragraph:

21 ‘‘(12) TAX TREATMENT OF PAYMENTS FROM A

22 SECTION 457 PLAN.—If a distribution or payment

23 from an eligible deferred compensation plan described

24 in section 457(b) is made pursuant to a qualified do25 mestic relations order, rules similar to the rules of
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1 section 402(e)(1)(A) shall apply to such distribution

2 or payment.’’.

3 (d) EFFECTIVE DATE.—

4 (1) IN GENERAL.—The amendment made by sub5 section (c) shall apply to distributions and payments

6 made after December 31, 2000.

7 (2) AMENDMENTS RELATING TO ASSIGNMENTS IN

8 DIVORCE, ETC., PROCEEDINGS.—The amendments

9 made by subsections (a) and (b) shall take effect on

10 January 1, 2001, except that in the case of a domestic

11 relations order entered before such date, the plan

12 administrator—

13 (A) shall treat such order as a qualified do14 mestic relations order if such administrator is

15 paying benefits pursuant to such order on such

16 date, and

17 (B) may treat any other such order entered

18 before such date as a qualified domestic relations

19 order even if such order does not meet the re20 quirements of such amendments.

21 SEC. 306. PROVISIONS RELATING TO HARDSHIP DISTRIBU22 TIONS.

23 (a) SAFE HARBOR RELIEF.—

24 (1) IN GENERAL.—The Secretary of the Treasury

25 shall revise the regulations relating to hardship dis-
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1 tributions under section 401(k)(2)(B)(i)(IV) of the In2 ternal Revenue Code of 1986 to provide that the pe3 riod an employee is prohibited from making elective

4 and employee contributions in order for a distribu5 tion to be deemed necessary to satisfy financial need

6 shall be equal to 6 months.

7 (2) EFFECTIVE DATE.—The revised regulations

8 under this subsection shall apply to years beginning

9 after December 31, 2000.

10 (b) HARDSHIP DISTRIBUTIONS NOT TREATED AS ELI11 GIBLE ROLLOVER DISTRIBUTIONS.—

12 (1) MODIFICATION OF DEFINITION OF ELIGIBLE

13 ROLLOVER.—Section 402(c)(4)(C) (relating to eligible

14 rollover distribution) is amended by striking ‘‘de15 scribed in section 401(k)(2)(B)(i)(IV)’’ and inserting

16 ‘‘under the terms of the plan’’.

17 (2) EFFECTIVE DATE.—

18 (1) IN GENERAL.—The amendment made by this

19 subsection shall apply to distributions made after De20 cember 31, 2000.

21 (2) TRANSITION REGULATIONS.—The Secretary

22 of the Treasury may promulgate regulations to pro23 vide transitional guidance with respect to the amend24 ments made by this subsection in order to allow suffi25 cient time for plans to implement such amendments.
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1 SEC. 307. WAIVER OF TAX ON NONDEDUCTIBLE CONTRIBU2 TIONS FOR DOMESTIC OR SIMILAR WORKERS.

3 (a) IN GENERAL.—Section 4972(c)(6) (relating to ex4 ceptions to nondeductible contributions), as amended by sec5 tion 502, is amended by striking ‘‘and’’ at the end of sub6 paragraph (A), by striking the period and inserting ‘‘, and’’

7 at the end of subparagraph (B), and by inserting after sub8 paragraph (B) the following new subparagraph:

9 ‘‘(C) so much of the contributions to a sim10 ple retirement account (within the meaning of

11 section 408(p)) or a simple plan (within the

12 meaning of section 401(k)(11)) which are not de13 ductible when contributed solely because such

14 contributions are not made in connection with a

15 trade or business of the employer.’’

16 (b) EXCLUSION OF CERTAIN CONTRIBUTIONS.—Sec17 tion 4972(c)(6) is amended by adding at the end the fol18 lowing new sentence: ‘‘Subparagraph (C) shall not apply

19 to contributions made on behalf of the employer or a mem20 ber of the employer’s family.’’.

21 (c) EFFECTIVE DATE.—The amendments made by this

22 section shall apply to taxable years beginning after Decem23 ber 31, 2000.
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1 TITLE IV—INCREASING PORT2 ABILITY FOR PARTICIPANTS

3 SEC. 401. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF

4 PLANS.

5 (a) ROLLOVERS FROM AND TO SECTION 457 PLANS.—

6 (1) ROLLOVERS FROM SECTION 457 PLANS.—

7 (A) IN GENERAL.—Section 457(e) (relating

8 to other definitions and special rules) is amend9 ed by adding at the end the following:

10 ‘‘(16) ROLLOVER AMOUNTS.—

11 ‘‘(A) GENERAL RULE.—In the case of an el12 igible deferred compensation plan established

13 and maintained by an employer described in

14 subsection (e)(1)(A), if—

15 ‘‘(i) any portion of the balance to the

16 credit of an employee in such plan is paid

17 to such employee in an eligible rollover dis18 tribution (within the meaning of section

19 402(c)(4) without regard to subparagraph

20 (C) thereof),

21 ‘‘(ii) the employee transfers any por22 tion of the property such employee receives

23 in such distribution to an eligible retire24 ment plan described in section 402(c)(8)(B),

25 and
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1 ‘‘(iii) in the case of a distribution of

2 property other than money, the amount so

3 transferred consists of the property distrib4 uted,

5 then such distribution (to the extent so trans6 ferred) shall not be includible in gross income for

7 the taxable year in which paid.

8 ‘‘(B) CERTAIN RULES MADE APPLICABLE.—

9 The rules of paragraphs (2) through (7) and (9)

10 of section 402(c) and section 402(f) shall apply

11 for purposes of subparagraph (A).

12 ‘‘(C) REPORTING.—Rollovers under this

13 paragraph shall be reported to the Secretary in

14 the same manner as rollovers from qualified re15 tirement plans (as defined in section 4974(c)).’’.

16 (B) DEFERRAL LIMIT DETERMINED WITH17 OUT REGARD TO ROLLOVER AMOUNTS.—Section

18 457(b)(2) (defining eligible deferred compensa19 tion plan) is amended by inserting ‘‘(other than

20 rollover amounts)’’ after ‘‘taxable year’’.

21 (C) DIRECT ROLLOVER.—Paragraph (1) of

22 section 457(d) is amended by striking ‘‘and’’ at

23 the end of subparagraph (A), by striking the pe24 riod at the end of subparagraph (B) and insert-
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1 ing ‘‘, and’’, and by inserting after subpara2 graph (B) the following:

3 ‘‘(C) in the case of a plan maintained by

4 an employer described in subsection (e)(1)(A),

5 the plan meets requirements similar to the re6 quirements of section 401(a)(31).

7 Any amount transferred in a direct trustee-to-trustee

8 transfer in accordance with section 401(a)(31) shall

9 not be includible in gross income for the taxable year

10 of transfer.’’.

11 (D) WITHHOLDING.—

12 (i) Paragraph (12) of section 3401(a)

13 is amended by adding at the end the fol14 lowing:

15 ‘‘(E) under or to an eligible deferred com16 pensation plan which, at the time of such pay17 ment, is a plan described in section 457(b)

18 maintained by an employer described in section

19 457(e)(1)(A), or’’.

20 (ii) Paragraph (3) of section 3405(c) is

21 amended to read as follows:

22 ‘‘(3) ELIGIBLE ROLLOVER DISTRIBUTION.—For

23 purposes of this subsection, the term ‘eligible rollover

24 distribution’ has the meaning given such term by sec25 tion 402(f)(2)(A).’’.
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1 (iii) LIABILITY FOR WITHHOLDING.—

2 Subparagraph (B) of section 3405(d)(2) is

3 amended by striking ‘‘or’’ at the end of

4 clause (ii), by striking the period at the end

5 of clause (iii) and inserting ‘‘, or’’, and by

6 adding at the end the following:

7 ‘‘(iv) section 457(b).’’.

8 (2) ROLLOVERS TO SECTION 457 PLANS.—

9 (A) IN GENERAL.—Section 402(c)(8)(B)

10 (defining eligible retirement plan) is amended by

11 striking ‘‘and’’ at the end of clause (iii), by

12 striking the period at the end of clause (iv) and

13 inserting ‘‘, and’’, and by inserting after clause

14 (iv) the following new clause:

15 ‘‘(v) an eligible deferred compensation

16 plan described in section 457(b) of an em17 ployer described in section 457(e)(1)(A).’’.

18 (B) SEPARATE ACCOUNTING.—Section

19 402(c) is amended by adding at the end the fol20 lowing new paragraph:

21 ‘‘(11) SEPARATE ACCOUNTING.—Unless a plan

22 described in clause (v) of paragraph (8)(B) agrees to

23 separately account for amounts rolled into such plan

24 from eligible retirement plans not described in such

25 clause, the plan described in such clause may not ac-
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1 cept transfers or rollovers from such retirement

2 plans.’’.

3 (C) 10 PERCENT ADDITIONAL TAX.—Sub4 section (t) of section 72 (relating to 10-percent

5 additional tax on early distributions from quali6 fied retirement plans) is amended by adding at

7 the end the following new paragraph:

8 ‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SECTION

9 457 PLANS.—For purposes of this subsection, a dis10 tribution from an eligible deferred compensation plan

11 (as defined in section 457(b)) of an employer de12 scribed in section 457(e)(1)(A) shall be treated as a

13 distribution from a qualified retirement plan de14 scribed in 4974(c)(1) to the extent that such distribu15 tion is attributable to an amount transferred to an el16 igible deferred compensation plan from a qualified re17 tirement plan (as defined in section 4974(c)).’’.

18 (b) ALLOWANCE OF ROLLOVERS FROM AND TO 403(b)

19 PLANS.—

20 (1) ROLLOVERS FROM SECTION 403(b) PLANS.—

21 Section 403(b)(8)(A)(ii) (relating to rollover

22 amounts) is amended by striking ‘‘such distribution’’

23 and all that follows and inserting ‘‘such distribution

24 to an eligible retirement plan described in section

25 402(c)(8)(B), and’’.
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1 (2) ROLLOVERS TO SECTION 403(b) PLANS.—Sec2 tion 402(c)(8)(B) (defining eligible retirement plan),

3 as amended by subsection (a), is amended by striking

4 ‘‘and’’ at the end of clause (iv), by striking the period

5 at the end of clause (v) and inserting ‘‘, and’’, and

6 by inserting after clause (v) the following new clause:

7 ‘‘(vi) an annuity contract described in

8 section 403(b).’’.

9 (c) EXPANDED EXPLANATION TO RECIPIENTS OF

10 ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section

11 402(f) (relating to written explanation to recipients of dis12 tributions eligible for rollover treatment) is amended by

13 striking ‘‘and’’ at the end of subparagraph (C), by striking

14 the period at the end of subparagraph (D) and inserting

15 ‘‘, and’’, and by adding at the end the following new sub16 paragraph:

17 ‘‘(E) of the provisions under which distribu18 tions from the eligible retirement plan receiving

19 the distribution may be subject to restrictions

20 and tax consequences which are different from

21 those applicable to distributions from the plan

22 making such distribution.’’.

23 (d) SPOUSAL ROLLOVERS.—Section 402(c)(9) (relat24 ing to rollover where spouse receives distribution after death
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1 of employee) is amended by striking ‘‘; except that’’ and

2 all that follows up to the end period.

3 (e) CONFORMING AMENDMENTS.—

4 (1) Section 72(o)(4) is amended by striking ‘‘and

5 408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and

6 457(e)(16)’’.

7 (2) Section 219(d)(2) is amended by striking ‘‘or

8 408(d)(3)’’ and inserting ‘‘408(d)(3), or 457(e)(16)’’.

9 (3) Section 401(a)(31)(B) is amended by strik10 ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),

11 403(b)(8), and 457(e)(16)’’.

12 (4) Subparagraph (A) of section 402(f)(2) is

13 amended by striking ‘‘or paragraph (4) of section

14 403(a)’’ and inserting ‘‘, paragraph (4) of section

15 403(a), subparagraph (A) of section 403(b)(8), or sub16 paragraph (A) of section 457(e)(16)’’.

17 (5) Paragraph (1) of section 402(f) is amended

18 by striking ‘‘from an eligible retirement plan’’.

19 (6) Subparagraphs (A) and (B) of section

20 402(f)(1) are amended by striking ‘‘another eligible

21 retirement plan’’ and inserting ‘‘an eligible retire22 ment plan’’.

23 (7) Subparagraph (B) of section 403(b)(8) is

24 amended to read as follows:
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1 ‘‘(B) CERTAIN RULES MADE APPLICABLE.—

2 The rules of paragraphs (2) through (7) and (9)

3 of section 402(c) and section 402(f) shall apply

4 for purposes of subparagraph (A), except that

5 section 402(f) shall be applied to the payor in

6 lieu of the plan administrator.’’.

7 (8) Section 408(a)(1) is amended by striking ‘‘or

8 403(b)(8),’’ and inserting ‘‘403(b)(8), or 457(e)(16)’’.

9 (9) Subparagraphs (A) and (B) of section

10 415(b)(2) are each amended by striking ‘‘and

11 408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and

12 457(e)(16)’’.

13 (10) Section 415(c)(2) is amended by striking

14 ‘‘and 408(d)(3)’’ and inserting ‘‘408(d)(3), and

15 457(e)(16)’’.

16 (11) Section 4973(b)(1)(A) is amended by strik17 ing ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or

18 457(e)(16)’’.

19 (f) EFFECTIVE DATE; SPECIAL RULE.—

20 (1) EFFECTIVE DATE.—The amendments made

21 by this section shall apply to distributions after De22 cember 31, 2001.

23 (2) SPECIAL RULE.—Notwithstanding any other

24 provision of law, subsections (h)(3) and (h)(5) of sec25 tion 1122 of the Tax Reform Act of 1986 shall not
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1 apply to any distribution from an eligible retirement

2 plan (as defined in clause (iii) or (iv) of section

3 402(c)(8)(B) of the Internal Revenue Code of 1986) on

4 behalf of an individual if there was a rollover to such

5 plan on behalf of such individual which is permitted

6 solely by reason of any amendment made by this sec7 tion.

8 SEC. 402. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE9 MENT PLANS.

10 (a) IN GENERAL.—Subparagraph (A) of section

11 408(d)(3) (relating to rollover amounts) is amended by add12 ing ‘‘or’’ at the end of clause (i), by striking clauses (ii)

13 and (iii), and by adding at the end the following:

14 ‘‘(ii) the entire amount received (in15 cluding money and any other property) is

16 paid into an eligible retirement plan for the

17 benefit of such individual not later than the

18 60th day after the date on which the pay19 ment or distribution is received, except that

20 the maximum amount which may be paid

21 into such plan may not exceed the portion

22 of the amount received which is includible

23 in gross income (determined without regard

24 to this paragraph).
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1 For purposes of clause (ii), the term ‘eligible re2 tirement plan’ means an eligible retirement plan

3 described in clause (iii), (iv), (v), or (vi) of sec4 tion 402(c)(8)(B).’’.

5 (b) CONFORMING AMENDMENTS.—

6 (1) Paragraph (1) of section 403(b) is amended

7 by striking ‘‘section 408(d)(3)(A)(iii)’’ and inserting

8 ‘‘section 408(d)(3)(A)(ii)’’.

9 (2) Clause (i) of section 408(d)(3)(D) is amended

10 by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i) or

11 (ii)’’.

12 (3) Subparagraph (G) of section 408(d)(3) is

13 amended to read as follows:

14 ‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—In

15 the case of any payment or distribution out of

16 a simple retirement account (as defined in sub17 section (p)) to which section 72(t)(6) applies,

18 this paragraph shall not apply unless such pay19 ment or distribution is paid into another simple

20 retirement account.’’.

21 (c) EFFECTIVE DATE; SPECIAL RULE.—

22 (1) EFFECTIVE DATE.—The amendments made

23 by this section shall apply to distributions after De24 cember 31, 2001.
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1 (2) SPECIAL RULE.—Notwithstanding any other

2 provision of law, subsections (h)(3) and (h)(5) of sec3 tion 1122 of the Tax Reform Act of 1986 shall not

4 apply to any distribution from an eligible retirement

5 plan (as defined in clause (iii) or (iv) of section

6 402(c)(8)(B) of the Internal Revenue Code of 1986) on

7 behalf of an individual if there was a rollover to such

8 plan on behalf of such individual which is permitted

9 solely by reason of the amendments made by this sec10 tion.

11 SEC. 403. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

12 (a) ROLLOVERS FROM EXEMPT TRUSTS.—Paragraph

13 (2) of section 402(c) (relating to maximum amount which

14 may be rolled over) is amended by adding at the end the

15 following: ‘‘The preceding sentence shall not apply to such

16 distribution to the extent—

17 ‘‘(A) such portion is transferred in a direct

18 trustee-to-trustee transfer to a qualified trust

19 which is part of a plan which is a defined con20 tribution plan and which agrees to separately

21 account for amounts so transferred, including

22 separately accounting for the portion of such dis23 tribution which is includible in gross income

24 and the portion of such distribution which is not

25 so includible, or
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1 ‘‘(B) such portion is transferred to an eligi2 ble retirement plan described in clause (i) or (ii)

3 of paragraph (8)(B).’’.

4 (b) OPTIONAL DIRECT TRANSFER OF ELIGIBLE ROLL5 OVER DISTRIBUTIONS.—Subparagraph (B) of section

6 401(a)(31) (relating to limitation) is amended by adding

7 at the end the following: ‘‘The preceding sentence shall not

8 apply to such distribution if the plan to which such dis9 tribution is transferred—

10 ‘‘(i) agrees to separately account for

11 amounts so transferred, including sepa12 rately accounting for the portion of such

13 distribution which is includible in gross in14 come and the portion of such distribution

15 which is not so includible, or

16 ‘‘(ii) is an eligible retirement plan de17 scribed in clause (i) or (ii) of section

18 402(c)(8)(B).’’.

19 (c) RULES FOR APPLYING SECTION 72 TO IRAS.—

20 Paragraph (3) of section 408(d) (relating to special rules

21 for applying section 72) is amended by inserting at the end

22 the following:

23 ‘‘(H) APPLICATION OF SECTION 72.—

24 ‘‘(i) IN GENERAL.—If—
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1 ‘‘(I) a distribution is made from

2 an individual retirement plan, and

3 ‘‘(II) a rollover contribution is

4 made to an eligible retirement plan de5 scribed in section 402(c)(8)(B)(iii),

6 (iv), (v), or (vi) with respect to all or

7 part of such distribution,

8 then, notwithstanding paragraph (2), the

9 rules of clause (ii) shall apply for purposes

10 of applying section 72.

11 ‘‘(ii) APPLICABLE RULES.—In the case

12 of a distribution described in clause (i)—

13 ‘‘(I) section 72 shall be applied

14 separately to such distribution,

15 ‘‘(II) notwithstanding the pro

16 rata allocation of income on, and in17 vestment in, the contract to distribu18 tions under section 72, the portion of

19 such distribution rolled over to an eli20 gible retirement plan described in

21 clause (i) shall be treated as from in22 come on the contract (to the extent of

23 the aggregate income on the contract

24 from all individual retirement plans of

25 the distributee), and
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1 ‘‘(III) appropriate adjustments

2 shall be made in applying section 72 to

3 other distributions in such taxable year

4 and subsequent taxable years.’’.

5 (d) EFFECTIVE DATE.—The amendments made by this

6 section shall apply to distributions made after December 31,

7 2001.

8 SEC. 404. HARDSHIP EXCEPTION TO 60-DAY RULE.

9 (a) EXEMPT TRUSTS.—Paragraph (3) of section

10 402(c) (relating to transfer must be made within 60 days

11 of receipt) is amended to read as follows:

12 ‘‘(3) TRANSFER MUST BE MADE WITHIN 60 DAYS

13 OF RECEIPT.—

14 ‘‘(A) IN GENERAL.—Except as provided in

15 subparagraph (B), paragraph (1) shall not

16 apply to any transfer of a distribution made

17 after the 60th day following the day on which the

18 distributee received the property distributed.

19 ‘‘(B) HARDSHIP EXCEPTION.—The Sec20 retary may waive the 60-day requirement under

21 subparagraph (A) where the failure to waive

22 such requirement would be against equity or

23 good conscience, including casualty, disaster, or

24 other events beyond the reasonable control of the

25 individual subject to such requirement.’’.
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1 (b) IRAS.—Paragraph (3) of section 408(d) (relating

2 to rollover contributions), as amended by section 403, is

3 amended by adding after subparagraph (H) the following

4 new subparagraph:

5 ‘‘(I) WAIVER OF 60-DAY REQUIREMENT.—

6 The Secretary may waive the 60-day require7 ment under subparagraphs (A) and (D) where

8 the failure to waive such requirement would be

9 against equity or good conscience, including cas10 ualty, disaster, or other events beyond the rea11 sonable control of the individual subject to such

12 requirement.’’.

13 (c) EFFECTIVE DATE.—The amendments made by this

14 section shall apply to distributions after December 31, 2000.

15 SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.

16 (a) PLAN TRANSFERS.—

17 (1) AMENDMENT OF INTERNAL REVENUE

18 CODE.—Paragraph (6) of section 411(d) (relating to

19 accrued benefit not to be decreased by amendment), as

20 amended by section 522(a)(1), is amended by adding

21 at the end the following:

22 ‘‘(E) PLAN TRANSFERS.—

23 ‘‘(i) IN GENERAL.—A defined contribu24 tion plan (in this subparagraph referred to

25 as the ‘transferee plan’) shall not be treated
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1 as failing to meet the requirements of this

2 subsection merely because the transferee

3 plan does not provide some or all of the

4 forms of distribution previously available

5 under another defined contribution plan (in

6 this subparagraph referred to as the ‘trans7 feror plan’) to the extent that—

8 ‘‘(I) the forms of distribution pre9 viously available under the transferor

10 plan applied to the account of a par11 ticipant or beneficiary under the

12 transferor plan that was transferred

13 from the transferor plan to the trans14 feree plan pursuant to a direct transfer

15 rather than pursuant to a distribution

16 from the transferor plan,

17 ‘‘(II) the terms of both the trans18 feror plan and the transferee plan au19 thorize the transfer described in sub20 clause (I),

21 ‘‘(III) the transfer described in

22 subclause (I) was made pursuant to a

23 voluntary election by the participant

24 or beneficiary whose account was

25 transferred to the transferee plan,
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1 ‘‘(IV) the election described in

2 subclause (III) was made after the par3 ticipant or beneficiary received a no4 tice describing the consequences of

5 making the election, and

6 ‘‘(V) the transferee plan allows the

7 participant or beneficiary described in

8 subclause (III) to receive any distribu9 tion to which the participant or bene10 ficiary is entitled under the transferee

11 plan in the form of a single sum dis12 tribution.

13 ‘‘(ii) SPECIAL RULE FOR MERGERS,

14 ETC.—Clause (i) shall apply to plan merg15 ers and other transactions having the effect

16 of a direct transfer, including consolidations

17 of benefits attributable to different employ18 ers within a multiple employer plan.’’.

19 (2) AMENDMENT TO ERISA.—Section 204(g) of

20 the Employee Retirement Income Security Act of

21 1974 (29 U.S.C. 1054(g)), as amended by section

22 522(b)(1), is amended by adding at the end the fol23 lowing:

24 ‘‘(5)(A) A defined contribution plan (in this subpara25 graph referred to as the ‘transferee plan’) shall not be treat-
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1 ed as failing to meet the requirements of this subsection

2 merely because the transferee plan does not provide some

3 or all of the forms of distribution previously available under

4 another defined contribution plan (in this subparagraph re5 ferred to as the ‘transferor plan’) to the extent that—

6 ‘‘(i) the forms of distribution previously avail7 able under the transferor plan applied to the account

8 of a participant or beneficiary under the transferor

9 plan that was transferred from the transferor plan to

10 the transferee plan pursuant to a direct transfer rath11 er than pursuant to a distribution from the transferor

12 plan;

13 ‘‘(ii) the terms of both the transferor plan and

14 the transferee plan authorize the transfer described in

15 clause (i);

16 ‘‘(iii) the transfer described in clause (i) was

17 made pursuant to a voluntary election by the partici18 pant or beneficiary whose account was transferred to

19 the transferee plan;

20 ‘‘(iv) the election described in clause (iii) was

21 made after the participant or beneficiary received a

22 notice describing the consequences of making the elec23 tion; and

24 ‘‘(v) the transferee plan allows the participant or

25 beneficiary described in clause (iii) to receive any dis-
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1 tribution to which the participant or beneficiary is

2 entitled under the transferee plan in the form of a

3 single sum distribution.

4 ‘‘(B) Subparagraph (A) shall apply to plan mergers

5 and other transactions having the effect of a direct transfer,

6 including consolidations of benefits attributable to different

7 employers within a multiple employer plan.’’.

8 (3) EFFECTIVE DATE.—The amendments made

9 by this subsection shall apply to years beginning after

10 December 31, 2000.

11 (b) REGULATIONS.—

12 (1) AMENDMENT TO INTERNAL REVENUE

13 CODE.—The last sentence of paragraph (6)(B) of sec14 tion 411(d) (relating to accrued benefit not to be de15 creased by amendment) is amended to read as follows:

16 ‘‘The Secretary shall by regulations provide that this

17 subparagraph shall not apply to any plan amend18 ment which reduces or eliminates benefits or subsidies

19 which create significant burdens or complexities for

20 the plan and plan participants, unless such amend21 ment adversely affects the rights of any participant in

22 a more than de minimis manner.’’.

23 (2) AMENDMENT TO ERISA.—The last sentence of

24 section 204(g)(2) of the Employee Retirement Income

25 Security Act of 1974 (29 U.S.C. 1054(g)(2)) is
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1 amended to read as follows: ‘‘The Secretary of the

2 Treasury shall by regulations provide that this para3 graph shall not apply to any plan amendment which

4 reduces or eliminates benefits or subsidies which cre5 ate significant burdens or complexities for the plan

6 and plan participants, unless such amendment ad7 versely affects the rights of any participant in a more

8 than de minimis manner.’’.

9 (2) SECRETARY DIRECTED.—Except as provided

10 in section 522(d), not later than December 31, 2001,

11 the Secretary of the Treasury is directed to issue regu12 lations under section 411(d)(6) of the Internal Rev13 enue Code of 1986 and section 204(g) of the Employee

14 Retirement Income Security Act of 1974, including

15 the regulations required by the amendment made by

16 this subsection. Such regulations shall apply to plan

17 years beginning after December 31, 2001, or such ear18 lier date as is specified by the Secretary of the Treas19 ury.

20 SEC. 406. RATIONALIZATION OF RESTRICTIONS ON DIS21 TRIBUTIONS.

22 (a) MODIFICATION OF SAME DESK EXCEPTION.—

23 (1) SECTION 401(k).—

24 (A) Section 401(k)(2)(B)(i)(I) (relating to

25 qualified cash or deferred arrangements) is
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1 amended by striking ‘‘separation from service’’

2 and inserting ‘‘severance from employment’’.

3 (B) Subparagraph (A) of section 401(k)(10)

4 (relating to distributions upon termination of

5 plan or disposition of assets or subsidiary) is

6 amended to read as follows:

7 ‘‘(A) IN GENERAL.—An event described in

8 this subparagraph is the termination of the plan

9 without establishment or maintenance of another

10 defined contribution plan (other than an em11 ployee stock ownership plan as defined in section

12 4975(e)(7)).’’.

13 (C) Section 401(k)(10) is amended—

14 (i) in subparagraph (B)—

15 (I) by striking ‘‘An event’’ in

16 clause (i) and inserting ‘‘A termi17 nation’’; and

18 (II) by striking ‘‘the event’’ in

19 clause (i) and inserting ‘‘the termi20 nation’’;

21 (ii) by striking subparagraph (C); and

22 (iii) by striking ‘‘OR DISPOSITION OF

23 ASSETS OR SUBSIDIARY’’ in the heading.

24 (2) SECTION 403(b).—
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1 (A) Paragraphs (7)(A)(ii) and (11)(A) of

2 section 403(b) are each amended by striking

3 ‘‘separates from service’’ and inserting ‘‘has a

4 severance from employment’’.

5 (B) The heading for paragraph (11) of sec6 tion 403(b) is amended by striking ‘‘SEPARATION

7 FROM SERVICE’’ and inserting ‘‘SEVERANCE

8 FROM EMPLOYMENT’’.

9 (3) SECTION 457.—Clause (ii) of section

10 457(d)(1)(A) is amended by striking ‘‘is separated

11 from service’’ and inserting ‘‘has a severance from

12 employment’’.

13 (b) EFFECTIVE DATE.—The amendments made by this

14 section shall apply to distributions after December 31, 2000.

15 SEC. 407. PURCHASE OF SERVICE CREDIT IN GOVERN16 MENTAL DEFINED BENEFIT PLANS.

17 (a) 403(b) PLANS.—Subsection (b) of section 403 is

18 amended by adding at the end the following new paragraph:

19 ‘‘(13) TRUSTEE-TO-TRUSTEE TRANSFERS TO

20 PURCHASE PERMISSIVE SERVICE CREDIT.—No

21 amount shall be includible in gross income by reason

22 of a direct trustee-to-trustee transfer to a defined ben23 efit governmental plan (as defined in section 414(d))

24 if such transfer is—
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1 ‘‘(A) for the purchase of permissive service

2 credit (as defined in section 415(n)(3)(A)) under

3 such plan, or

4 ‘‘(B) a repayment to which section 415 does

5 not apply by reason of subsection (k)(3) there6 of.’’.

7 (b) 457 PLANS.—Subsection (e) of section 457 is

8 amended by adding after paragraph (16) the following new

9 paragraph:

10 ‘‘(17) TRUSTEE-TO-TRUSTEE TRANSFERS TO

11 PURCHASE PERMISSIVE SERVICE CREDIT.—No

12 amount shall be includible in gross income by reason

13 of a direct trustee-to-trustee transfer to a defined ben14 efit governmental plan (as defined in section 414(d))

15 if such transfer is—

16 ‘‘(A) for the purchase of permissive service

17 credit (as defined in section 415(n)(3)(A)) under

18 such plan, or

19 ‘‘(B) a repayment to which section 415 does

20 not apply by reason of subsection (k)(3) there21 of.’’.

22 (c) EFFECTIVE DATE.—The amendments made by this

23 section shall apply to trustee-to-trustee transfers after De24 cember 31, 2000.
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1 SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR

2 PURPOSES OF CASH-OUT AMOUNTS.

3 (a) QUALIFIED PLANS.—Section 411(a)(11) (relating

4 to restrictions on certain mandatory distributions) is

5 amended by adding at the end the following:

6 ‘‘(D) SPECIAL RULE FOR ROLLOVER CON7 TRIBUTIONS.—A plan shall not fail to meet the

8 requirements of this paragraph if, under the

9 terms of the plan, the present value of the non10 forfeitable accrued benefit is determined without

11 regard to that portion of such benefit which is

12 attributable to rollover contributions (and earn13 ings allocable thereto). For purposes of this sub14 paragraph, the term ‘rollover contributions’

15 means any rollover contribution under sections

16 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),

17 and 457(e)(16).’’.

18 (b) ELIGIBLE DEFERRED COMPENSATION PLANS.—

19 Clause (i) of section 457(e)(9)(A) is amended by striking

20 ‘‘such amount’’ and inserting ‘‘the portion of such amount

21 which is not attributable to rollover contributions (as de22 fined in section 411(a)(11)(D))’’.

23 (c) EFFECTIVE DATE.—The amendments made by this

24 section shall apply to distributions after December 31, 2000.
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1 SEC. 409. MINIMUM DISTRIBUTION AND INCLUSION RE2 QUIREMENTS FOR SECTION 457 PLANS.

3 (a) MINIMUM DISTRIBUTION REQUIREMENTS.—Para4 graph (2) of section 457(d) (relating to distribution require5 ments) is amended to read as follows:

6 ‘‘(2) MINIMUM DISTRIBUTION REQUIREMENTS.—

7 A plan meets the minimum distribution requirements

8 of this paragraph if such plan meets the requirements

9 of section 401(a)(9).’’.

10 (b) INCLUSION IN GROSS INCOME.—

11 (1) YEAR OF INCLUSION.—Subsection (a) of sec12 tion 457 (relating to year of inclusion in gross in13 come) is amended to read as follows:

14 ‘‘(a) YEAR OF INCLUSION IN GROSS INCOME.—

15 ‘‘(1) IN GENERAL.—Any amount of compensa16 tion deferred under an eligible deferred compensation

17 plan, and any income attributable to the amounts so

18 deferred, shall be includible in gross income only for

19 the taxable year in which such compensation or other

20 income—

21 ‘‘(A) is paid to the participant or other ben22 eficiary, in the case of a plan of an eligible em23 ployer described in subsection (e)(1)(A), and

24 ‘‘(B) is paid or otherwise made available to

25 the participant or other beneficiary, in the case
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1 of a plan of an eligible employer described in

2 subsection (e)(1)(B).

3 ‘‘(2) SPECIAL RULE FOR ROLLOVER AMOUNTS.—

4 To the extent provided in section 72(t)(9), section

5 72(t) shall apply to any amount includible in gross

6 income under this subsection.’’.

7 (2) CONFORMING AMENDMENTS.—

8 (A) So much of paragraph (9) of section

9 457(e) as precedes subparagraph (A) is amended

10 to read as follows:

11 ‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION

12 PLANS NOT TREATED AS MADE AVAILABLE BY REASON

13 OF CERTAIN ELECTIONS, ETC.—In the case of an eligi14 ble deferred compensation plan of an employer de15 scribed in subsection (e)(1)(B)—’’.

16 (B) Section 457(d) is amended by adding at

17 the end the following new paragraph:

18 ‘‘(3) SPECIAL RULE FOR GOVERNMENT PLAN.—

19 An eligible deferred compensation plan of an em20 ployer described in subsection (e)(1)(A) shall not be

21 treated as failing to meet the requirements of this sub22 section solely by reason of making a distribution de23 scribed in subsection (e)(9)(A).’’.

24 (c) MODIFICATION OF TRANSITION RULES FOR EXIST25 ING 457 PLANS.—
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1 (1) IN GENERAL.—Section 1107(c)(3)(B) of the

2 Tax Reform Act of 1986 is amended by striking ‘‘or’’

3 at the end of clause (i), by striking the period at the

4 end of clause (ii) and inserting ‘‘, or’’ and by insert5 ing after clause (ii) the following new clause:

6 ‘‘(iii) are deferred pursuant to an

7 agreement with an individual covered by an

8 agreement described in clause (ii), to the ex9 tent the annual amount under such agree10 ment with the individual does not exceed—

11 ‘‘(I) the amount described in

12 clause (ii)(II), multiplied by

13 ‘‘(II) the cumulative increase in

14 the Consumer Price Index (as pub15 lished by the Bureau of Labor Statis16 tics of the Department of Labor).’’.

17 (2) CONFORMING AMENDMENT.—The fourth sen18 tence of section 1107(c)(3)(B) of the Tax Reform Act

19 of 1986 is amended by striking ‘‘This subparagraph’’

20 and inserting ‘‘Clauses (i) and (ii) of this subpara21 graph’’.

22 (3) EFFECTIVE DATE.—The amendments made

23 by this subsection shall apply to taxable years ending

24 after the date of the enactment of this Act with respect
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1 to increases in the Consumer Price Index after Sep2 tember 30, 1993.

3 (d) EFFECTIVE DATE.—The amendments made by

4 subsections (a) and (b) shall apply to distributions after

5 December 31, 2000.

6 TITLE V—STRENGTHENING PEN7 SION SECURITY AND EN8 FORCEMENT

9 Subtitle A—General Provisions

10 SEC. 501. REPEAL OF 155 PERCENT OF CURRENT LIABILITY

11 FUNDING LIMIT.

12 (a) AMENDMENTS TO INTERNAL REVENUE CODE.—

13 Section 412(c)(7) (relating to full-funding limitation) is

14 amended—

15 (1) by striking ‘‘the applicable percentage’’ in

16 subparagraph (A)(i)(I) and inserting ‘‘in the case of

17 plan years beginning before January 1, 2004, the ap18 plicable percentage’’; and

19 (2) by amending subparagraph (F) to read as

20 follows:

21 ‘‘(F) APPLICABLE PERCENTAGE.—For pur22 poses of subparagraph (A)(i)(I), the applicable

23 percentage shall be determined in accordance

24 with the following table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

2001 .................................................................................... 160
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2002 .................................................................................... 165

2003 .................................................................................... 170.’’.

1 (b) AMENDMENTS TO ERISA.—Section 302(c)(7) of

2 the Employee Retirement Income Security Act of 1974 (29

3 U.S.C. 1082(c)(7)) is amended—

4 (1) by striking ‘‘the applicable percentage’’ in

5 subparagraph (A)(i)(I) and inserting ‘‘in the case of

6 plan years beginning before January 1, 2004, the ap7 plicable percentage’’, and

8 (2) by amending subparagraph (F) to read as

9 follows:

10 ‘‘(F) APPLICABLE PERCENTAGE.—For pur11 poses of subparagraph (A)(i)(I), the applicable

12 percentage shall be determined in accordance

13 with the following table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

2001 .................................................................................... 160

2002 .................................................................................... 165

2003 .................................................................................... 170.’’.

14 (c) EFFECTIVE DATE.—The amendments made by this

15 section shall apply to plan years beginning after December

16 31, 2000.

17 SEC. 502. MAXIMUM CONTRIBUTION DEDUCTION RULES

18 MODIFIED AND APPLIED TO ALL DEFINED

19 BENEFIT PLANS.

20 (a) IN GENERAL.—Subparagraph (D) of section

21 404(a)(1) (relating to special rule in case of certain plans)

22 is amended to read as follows:
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1 ‘‘(D) SPECIAL RULE IN CASE OF CERTAIN

2 PLANS.—

3 ‘‘(i) IN GENERAL.—In the case of any

4 defined benefit plan, except as provided in

5 regulations, the maximum amount deduct6 ible under the limitations of this paragraph

7 shall not be less than the unfunded termi8 nation liability (determined as if the pro9 posed termination date referred to in section

10 4041(b)(2)(A)(i)(II) of the Employee Retire11 ment Income Security Act of 1974 were the

12 last day of the plan year).

13 ‘‘(ii) PLANS WITH LESS THAN 100 PAR14 TICIPANTS.—For purposes of this subpara15 graph, in the case of a plan which has less

16 than 100 participants for the plan year,

17 termination liability shall not include the

18 liability attributable to benefit increases for

19 highly compensated employees (as defined

20 in section 414(q)) resulting from a plan

21 amendment which is made or becomes effec22 tive, whichever is later, within the last 2

23 years before the termination date.

24 ‘‘(iii) RULE FOR DETERMINING NUM25 BER OF PARTICIPANTS.—For purposes of de-
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1 termining whether a plan has more than

2 100 participants, all defined benefit plans

3 maintained by the same employer (or any

4 member of such employer’s controlled group

5 (within the meaning of section

6 412(l)(8)(C))) shall be treated as one plan,

7 but only employees of such member or em8 ployer shall be taken into account.

9 ‘‘(iv) PLANS ESTABLISHED AND MAIN10 TAIN BY PROFESSIONAL SERVICE EMPLOY11 ERS.—Clause (i) shall not apply to a plan

12 described in section 4021(b)(13) of the Em13 ployee Retirement Income Security Act of

14 1974.’’.

15 (b) CONFORMING AMENDMENT.—Paragraph (6) of sec16 tion 4972(c) is amended to read as follows:

17 ‘‘(6) EXCEPTIONS.—In determining the amount

18 of nondeductible contributions for any taxable year,

19 there shall not be taken into account so much of the

20 contributions to one or more defined contribution

21 plans which are not deductible when contributed sole22 ly because of section 404(a)(7) as does not exceed the

23 greater of—

24 ‘‘(A) the amount of contributions not in ex25 cess of 6 percent of compensation (within the
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1 meaning of section 404(a)) paid or accrued (dur2 ing the taxable year for which the contributions

3 were made) to beneficiaries under the plans, or

4 ‘‘(B) the sum of—

5 ‘‘(i) the amount of contributions de6 scribed in section 401(m)(4)(A), plus

7 ‘‘(ii) the amount of contributions de8 scribed in section 402(g)(3)(A).

9 For purposes of this paragraph, the deductible limits

10 under section 404(a)(7) shall first be applied to

11 amounts contributed to a defined benefit plan and

12 then to amounts described in subparagraph (B).’’.

13 (c) EFFECTIVE DATE.—The amendments made by this

14 section shall apply to plan years beginning after December

15 31, 2000.

16 SEC. 503. EXCISE TAX RELIEF FOR SOUND PENSION FUND17 ING.

18 (a) IN GENERAL.—Subsection (c) of section 4972 (re19 lating to nondeductible contributions) is amended by add20 ing at the end the following new paragraph:

21 ‘‘(7) DEFINED BENEFIT PLAN EXCEPTION.—In

22 determining the amount of nondeductible contribu23 tions for any taxable year, an employer may elect for

24 such year not to take into account any contributions

25 to a defined benefit plan except to the extent that such
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1 contributions exceed the full-funding limitation (as

2 defined in section 412(c)(7), determined without re3 gard to subparagraph (A)(i)(I) thereof). For purposes

4 of this paragraph, the deductible limits under section

5 404(a)(7) shall first be applied to amounts contrib6 uted to defined contribution plans and then to

7 amounts described in this paragraph. If an employer

8 makes an election under this paragraph for a taxable

9 year, paragraph (6) shall not apply to such employer

10 for such taxable year.’’.

11 (b) EFFECTIVE DATE.—The amendment made by this

12 section shall apply to years beginning after December 31,

13 2000.

14 SEC. 504. TREATMENT OF MULTIEMPLOYER PLANS UNDER

15 SECTION 415.

16 (a) COMPENSATION LIMIT.—

17 (1) IN GENERAL.—Paragraph (11) of section

18 415(b) (relating to limitation for defined benefit

19 plans) is amended to read as follows:

20 ‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN21 MENTAL AND MULTIEMPLOYER PLANS.—In the case of

22 a governmental plan (as defined in section 414(d)) or

23 a multiemployer plan (as defined in section 414(f)),

24 subparagraph (B) of paragraph (1) shall not apply.’’.
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1 (2) CONFORMING AMENDMENT.—Section

2 415(b)(7) (relating to benefits under certain collec3 tively bargained plans) is amended by inserting

4 ‘‘(other than a multiemployer plan)’’ after ‘‘defined

5 benefit plan’’ in the matter preceding subparagraph

6 (A).

7 (b) COMBINING AND AGGREGATION OF PLANS.—

8 (1) COMBINING OF PLANS.—Subsection (f) of sec9 tion 415 (relating to combining of plans) is amended

10 by adding at the end the following:

11 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER PLANS.—

12 Notwithstanding paragraph (1) and subsection (g), a

13 multiemployer plan (as defined in section 414(f))

14 shall not be combined or aggregated with any other

15 plan maintained by an employer for purposes of ap16 plying subsection (b)(1)(B) to such plan or any other

17 such plan.’’.

18 (2) CONFORMING AMENDMENT FOR AGGREGATION

19 OF PLANS.—Subsection (g) of section 415 (relating to

20 aggregation of plans) is amended by striking ‘‘The

21 Secretary’’ and inserting ‘‘Except as provided in sub22 section (f)(3), the Secretary’’.

23 (c) EFFECTIVE DATE.—The amendments made by this

24 section shall apply to years beginning after December 31,

25 2000.
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1 SEC. 505. PROTECTION OF INVESTMENT OF EMPLOYEE

2 CONTRIBUTIONS TO 401(K) PLANS.

3 (a) IN GENERAL.—Section 1524(b) of the Taxpayer

4 Relief Act of 1997 is amended to read as follows:

5 ‘‘(b) EFFECTIVE DATE.—

6 ‘‘(1) IN GENERAL.—Except as provided in para7 graph (2), the amendments made by this section shall

8 apply to elective deferrals for plan years beginning

9 after December 31, 1998.

10 ‘‘(2) NONAPPLICATION TO PREVIOUSLY ACQUIRED

11 PROPERTY.—The amendments made by this section

12 shall not apply to any elective deferral which is in13 vested in assets consisting of qualifying employer se14 curities, qualifying employer real property, or both, if

15 such assets were acquired before January 1, 1999.’’.

16 (b) EFFECTIVE DATE.—The amendment made by this

17 section shall apply as if included in the provision of the

18 Taxpayer Relief Act of 1997 to which it relates.

19 SEC. 506. PERIODIC PENSION BENEFITS STATEMENTS.

20 (a) IN GENERAL.—Section 105(a) of the Employee Re21 tirement Income Security Act of 1974 (29 U.S.C. 1025 (a))

22 is amended to read as follows:

23 ‘‘(a)(1) Except as provided in paragraph (2)—

24 ‘‘(A) the administrator of an individual account

25 plan shall furnish a pension benefit statement—
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1 ‘‘(i) to a plan participant at least once an2 nually, and

3 ‘‘(ii) to a plan beneficiary upon written re4 quest, and

5 ‘‘(B) the administrator of a defined benefit plan

6 shall furnish a pension benefit statement—

7 ‘‘(i) at least once every 3 years to each par8 ticipant with a nonforfeitable accrued benefit

9 who is employed by the employer maintaining

10 the plan at the time the statement is furnished

11 to participants, and

12 ‘‘(ii) to a participant or beneficiary of the

13 plan upon written request.

14 ‘‘(2) Notwithstanding paragraph (1), the adminis15 trator of a plan to which more than 1 unaffiliated employer

16 is required to contribute shall only be required to furnish

17 a pension benefit statement under paragraph (1) upon the

18 written request of a participant or beneficiary of the plan.

19 ‘‘(3) A pension benefit statement under paragraph

20 (1)—

21 ‘‘(A) shall indicate, on the basis of the latest

22 available information—

23 ‘‘(i) the total benefits accrued, and
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1 ‘‘(ii) the nonforfeitable pension benefits, if

2 any, which have accrued, or the earliest date on

3 which benefits will become nonforfeitable,

4 ‘‘(B) shall be written in a manner calculated to

5 be understood by the average plan participant, and

6 ‘‘(C) may be provided in written, electronic, tele7 phonic, or other appropriate form.

8 ‘‘(4) In the case of a defined benefit plan, the require9 ments of paragraph (1)(B)(i) shall be treated as met with

10 respect to a participant if the administrator provides the

11 participant at least once each year with notice of the avail12 ability of the pension benefit statement and the ways in

13 which the participant may obtain such statement. Such no14 tice shall be provided in written, electronic, telephonic, or

15 other appropriate form, and may be included with other

16 communications to the participant if done in a manner

17 reasonably designed to attract the attention of the partici18 pant.’’.

19 (b) CONFORMING AMENDMENTS.—

20 (1) Section 105 of the Employee Retirement In21 come Security Act of 1974 (29 U.S.C. 1025) is

22 amended by striking subsection (d).

23 (2) Section 105(b) of such Act (29 U.S.C.

24 1025(b)) is amended to read as follows:
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1 ‘‘(b) In no case shall a participant or beneficiary of

2 a plan be entitled to more than one statement described in

3 subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is applica4 ble, in any 12-month period.’’.

5 (c) EFFECTIVE DATE.—The amendments made by this

6 section shall apply to plan years beginning after December

7 31, 2000.

8 SEC. 507. PROHIBITED ALLOCATIONS OF STOCK IN S COR9 PORATION ESOP.

10 (a) IN GENERAL.—Section 409 (relating to qualifica11 tions for tax credit employee stock ownership plans) is

12 amended by redesignating subsection (p) as subsection (q)

13 and by inserting after subsection (o) the following new sub14 section:

15 ‘‘(p) PROHIBITED ALLOCATIONS OF SECURITIES IN AN

16 S CORPORATION.—

17 ‘‘(1) IN GENERAL.—An employee stock ownership

18 plan holding employer securities consisting of stock in

19 an S corporation shall provide that no portion of the

20 assets of the plan attributable to (or allocable in lieu

21 of) such employer securities may, during a nonalloca22 tion year, accrue (or be allocated directly or indi23 rectly under any plan of the employer meeting the re24 quirements of section 401(a)) for the benefit of any

25 disqualified person.
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1 ‘‘(2) FAILURE TO MEET REQUIREMENTS.—

2 ‘‘(A) IN GENERAL.—If a plan fails to meet

3 the requirements of paragraph (1), the plan shall

4 be treated as having distributed to any disquali5 fied person the amount allocated to the account

6 of such person in violation of paragraph (1) at

7 the time of such allocation.

8 ‘‘(B) CROSS REFERENCE.—

‘‘For excise tax relating to violations of paragraph

(1) and ownership of synthetic equity, see section

4979A.

9 ‘‘(3) NONALLOCATION YEAR.—For purposes of

10 this subsection—

11 ‘‘(A) IN GENERAL.—The term ‘nonalloca12 tion year’ means any plan year of an employee

13 stock ownership plan if, at any time during such

14 plan year—

15 ‘‘(i) such plan holds employer securi16 ties consisting of stock in an S corporation,

17 and

18 ‘‘(ii) disqualified persons own at least

19 50 percent of the number of shares of stock

20 in the S corporation.

21 ‘‘(B) ATTRIBUTION RULES.—For purposes

22 of subparagraph (A)—
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1 ‘‘(i) IN GENERAL.—The rules of section

2 318(a) shall apply for purposes of deter3 mining ownership, except that—

4 ‘‘(I) in applying paragraph (1)

5 thereof, the members of an individual’s

6 family shall include members of the

7 family described in paragraph (4)(D),

8 and

9 ‘‘(II) paragraph (4) thereof shall

10 not apply.

11 ‘‘(ii) DEEMED-OWNED SHARES.—Not12 withstanding the employee trust exception

13 in section 318(a)(2)(B)(i), individual shall

14 be treated as owning deemed-owned shares

15 of the individual.

16 Solely for purposes of applying paragraph (5),

17 this subparagraph shall be applied after the at18 tribution rules of paragraph (5) have been ap19 plied.

20 ‘‘(4) DISQUALIFIED PERSON.—For purposes of

21 this subsection—

22 ‘‘(A) IN GENERAL.—The term ‘disqualified

23 person’ means any person if—

24 ‘‘(i) the aggregate number of deemed25 owned shares of such person and the mem-
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1 bers of such person’s family is at least 20

2 percent of the number of deemed-owned

3 shares of stock in the S corporation, or

4 ‘‘(ii) in the case of a person not de5 scribed in clause (i), the number of deemed6 owned shares of such person is at least 10

7 percent of the number of deemed-owned

8 shares of stock in such corporation.

9 ‘‘(B) TREATMENT OF FAMILY MEMBERS.—

10 In the case of a disqualified person described in

11 subparagraph (A)(i), any member of such per12 son’s family with deemed-owned shares shall be

13 treated as a disqualified person if not otherwise

14 treated as a disqualified person under subpara15 graph (A).

16 ‘‘(C) DEEMED-OWNED SHARES.—

17 ‘‘(i) IN GENERAL.—The term ‘deemed18 owned shares’ means, with respect to any

19 person—

20 ‘‘(I) the stock in the S corporation

21 constituting employer securities of an

22 employee stock ownership plan which

23 is allocated to such person under the

24 plan, and
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1 ‘‘(II) such person’s share of the

2 stock in such corporation which is held

3 by such plan but which is not allocated

4 under the plan to participants.

5 ‘‘(ii) PERSON’S SHARE OF

6 UNALLOCATED STOCK.—For purposes of

7 clause (i)(II), a person’s share of

8 unallocated S corporation stock held by

9 such plan is the amount of the unallocated

10 stock which would be allocated to such per11 son if the unallocated stock were allocated to

12 all participants in the same proportions as

13 the most recent stock allocation under the

14 plan.

15 ‘‘(D) MEMBER OF FAMILY.—For purposes of

16 this paragraph, the term ‘member of the family’

17 means, with respect to any individual—

18 ‘‘(i) the spouse of the individual,

19 ‘‘(ii) an ancestor or lineal descendant

20 of the individual or the individual’s spouse,

21 ‘‘(iii) a brother or sister of the indi22 vidual or the individual’s spouse and any

23 lineal descendant of the brother or sister,

24 and
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1 ‘‘(iv) the spouse of any individual de2 scribed in clause (ii) or (iii).

3 A spouse of an individual who is legally sepa4 rated from such individual under a decree of di5 vorce or separate maintenance shall not be treat6 ed as such individual’s spouse for purposes of

7 this subparagraph.

8 ‘‘(5) TREATMENT OF SYNTHETIC EQUITY.—For

9 purposes of paragraphs (3) and (4), in the case of a

10 person who owns synthetic equity in the S corpora11 tion, except to the extent provided in regulations, the

12 shares of stock in such corporation on which such

13 synthetic equity is based shall be treated as out14 standing stock in such corporation and deemed-owned

15 shares of such person if such treatment of synthetic

16 equity of 1 or more such persons results in—

17 ‘‘(A) the treatment of any person as a dis18 qualified person, or

19 ‘‘(B) the treatment of any year as a non20 allocation year.

21 For purposes of this paragraph, synthetic equity shall

22 be treated as owned by a person in the same manner

23 as stock is treated as owned by a person under the

24 rules of paragraphs (2) and (3) of section 318(a). If,

25 without regard to this paragraph, a person is treated
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1 as a disqualified person or a year is treated as a non2 allocation year, this paragraph shall not be construed

3 to result in the person or year not being so treated.

4 ‘‘(6) DEFINITIONS.—For purposes of this

5 subsection—

6 ‘‘(A) EMPLOYEE STOCK OWNERSHIP

7 PLAN.—The term ‘employee stock ownership

8 plan’ has the meaning given such term by sec9 tion 4975(e)(7).

10 ‘‘(B) EMPLOYER SECURITIES.—The term

11 ‘employer security’ has the meaning given such

12 term by section 409(l).

13 ‘‘(C) SYNTHETIC EQUITY.—The term ‘syn14 thetic equity’ means any stock option, warrant,

15 restricted stock, deferred issuance stock right, or

16 similar interest or right that gives the holder the

17 right to acquire or receive stock of the S corpora18 tion in the future. Except to the extent provided

19 in regulations, synthetic equity also includes a

20 stock appreciation right, phantom stock unit, or

21 similar right to a future cash payment based on

22 the value of such stock or appreciation in such

23 value.
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1 ‘‘(7) REGULATIONS.—The Secretary shall pre2 scribe such regulations as may be necessary to carry

3 out the purposes of this subsection.’’.

4 (b) COORDINATION WITH SECTION 4975(e)(7).—The

5 last sentence of section 4975(e)(7) (defining employee stock

6 ownership plan) is amended by inserting ‘‘, section 409(p),’’

7 after ‘‘409(n)’’.

8 (c) EXCISE TAX.—

9 (1) APPLICATION OF TAX.—Subsection (a) of sec10 tion 4979A (relating to tax on certain prohibited allo11 cations of employer securities) is amended—

12 (A) by striking ‘‘or’’ at the end of para13 graph (1), and

14 (B) by striking all that follows paragraph

15 (2) and inserting the following:

16 ‘‘(3) there is any allocation of employer securi17 ties which violates the provisions of section 409(p), or

18 a nonallocation year described in subsection (e)(2)(C)

19 with respect to an employee stock ownership plan, or

20 ‘‘(4) any synthetic equity is owned by a dis21 qualified person in any nonallocation year,

22 there is hereby imposed a tax on such allocation or owner23 ship equal to 50 percent of the amount involved.’’.

24 (2) LIABILITY.—Section 4979A(c) (defining li25 ability for tax) is amended to read as follows:
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1 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

2 section shall be paid—

3 ‘‘(1) in the case of an allocation referred to in

4 paragraph (1) or (2) of subsection (a), by—

5 ‘‘(A) the employer sponsoring such plan, or

6 ‘‘(B) the eligible worker-owned cooperative,

7 which made the written statement described in section

8 664(g)(1)(E) or in section 1042(b)(3)(B) (as the case

9 may be), and

10 ‘‘(2) in the case of an allocation or ownership re11 ferred to in paragraph (3) or (4) of subsection (a), by

12 the S corporation the stock in which was so allocated

13 or owned.’’.

14 (3) DEFINITIONS.—Section 4979A(e) (relating to

15 definitions) is amended to read as follows:

16 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur17 poses of this section—

18 ‘‘(1) DEFINITIONS.—Except as provided in para19 graph (2), terms used in this section have the same

20 respective meanings as when used in sections 409 and

21 4978.

22 ‘‘(2) SPECIAL RULES RELATING TO TAX IMPOSED

23 BY REASON OF PARAGRAPH (3) OR (4) OF SUBSECTION

24 (a).—
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1 ‘‘(A) PROHIBITED ALLOCATIONS.—The

2 amount involved with respect to any tax imposed

3 by reason of subsection (a)(3) is the amount allo4 cated to the account of any person in violation

5 of section 409(p)(1).

6 ‘‘(B) SYNTHETIC EQUITY.—The amount in7 volved with respect to any tax imposed by reason

8 of subsection (a)(4) is the value of the shares on

9 which the synthetic equity is based.

10 ‘‘(C) SPECIAL RULE DURING FIRST NON11 ALLOCATION YEAR.—For purposes of subpara12 graph (A), the amount involved for the first non13 allocation year of any employee stock ownership

14 plan shall be determined by taking into account

15 the total value of all the deemed-owned shares of

16 all disqualified persons with respect to such

17 plan.

18 ‘‘(D) STATUTE OF LIMITATIONS.—The stat19 utory period for the assessment of any tax im20 posed by this section by reason of paragraph (3)

21 or (4) of subsection (a) shall not expire before the

22 date which is 3 years from the later of—

23 ‘‘(i) the allocation or ownership re24 ferred to in such paragraph giving rise to

25 such tax, or
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1 ‘‘(ii) the date on which the Secretary is

2 notified of such allocation or ownership.’’.

3 (d) EFFECTIVE DATES.—

4 (1) IN GENERAL.—The amendments made by

5 this section shall apply to plan years beginning after

6 December 31, 2001.

7 (2) EXCEPTION FOR CERTAIN PLANS.—In the

8 case of any—

9 (A) employee stock ownership plan estab10 lished after July 11, 2000, or

11 (B) employee stock ownership plan estab12 lished on or before such date if employer securi13 ties held by the plan consist of stock in a cor14 poration with respect to which an election under

15 section 1362(a) of the Internal Revenue Code of

16 1986 is not in effect on such date,

17 the amendments made by this section shall apply to

18 plan years ending after July 11, 2000.
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1 Subtitle B—Treatment of Plan

2 Amendments Reducing Future

3 Benefit Accruals

4 SEC. 521. NOTICE REQUIRED FOR PENSION PLAN AMEND5 MENTS HAVING THE EFFECT OF SIGNIFI6 CANTLY REDUCING FUTURE BENEFIT ACCRU7 ALS.

8 (a) EXCISE TAX.—

9 (1) IN GENERAL.—Chapter 43 of subtitle D (re10 lating to qualified pension, etc., plans) is amended by

11 adding at the end the following new section:

12 ‘‘SEC. 4980F. FAILURE TO PROVIDE NOTICE OF PENSION

13 PLAN AMENDMENTS REDUCING BENEFIT AC14 CRUALS.

15 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed a

16 tax on the failure of an applicable pension plan to meet

17 the requirements of subsection (e) with respect to any appli18 cable individual.

19 ‘‘(b) AMOUNT OF TAX.—

20 ‘‘(1) IN GENERAL.—The amount of the tax im21 posed by subsection (a) on any failure with respect to

22 any applicable individual shall be $100 for each day

23 in the noncompliance period with respect to such fail24 ure.
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1 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes of

2 this section, the term ‘noncompliance period’ means,

3 with respect to any failure, the period beginning on

4 the date the failure first occurs and ending on the

5 date the notice to which the failure relates is provided

6 or the failure is otherwise corrected.

7 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—

8 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

9 DISCOVERED AND REASONABLE DILIGENCE EXER10 CISED.—No tax shall be imposed by subsection (a) on

11 any failure during any period for which it is estab12 lished to the satisfaction of the Secretary that any

13 person subject to liability for the tax under subsection

14 (d) did not know that the failure existed and exercised

15 reasonable diligence to meet the requirements of sub16 section (e).

17 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR18 RECTED WITHIN 30 DAYS.—No tax shall be imposed

19 by subsection (a) on any failure if—

20 ‘‘(A) any person subject to liability for the

21 tax under subsection (d) exercised reasonable

22 diligence to meet the requirements of subsection

23 (e), and

24 ‘‘(B) such person provides the notice de25 scribed in subsection (e) during the 30-day pe-
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•HR 1102 RS

1 riod beginning on the first date such person

2 knew, or exercising reasonable diligence would

3 have known, that such failure existed.

4 ‘‘(3) OVERALL LIMITATION FOR UNINTENTIONAL

5 FAILURES.—

6 ‘‘(A) IN GENERAL.—If the person subject to

7 liability for tax under subsection (d) exercised

8 reasonable diligence to meet the requirements of

9 subsection (e), the tax imposed by subsection (a)

10 for failures during the taxable year of the em11 ployer (or, in the case of a multiemployer plan,

12 the taxable year of the trust forming part of the

13 plan) shall not exceed $500,000. For purposes of

14 the preceding sentence, all multiemployer plans

15 of which the same trust forms a part shall be

16 treated as 1 plan.

17 ‘‘(B) TAXABLE YEARS IN THE CASE OF CER18 TAIN CONTROLLED GROUPS.—For purposes of

19 this paragraph, if all persons who are treated as

20 a single employer for purposes of this section do

21 not have the same taxable year, the taxable years

22 taken into account shall be determined under

23 principles similar to the principles of section

24 1561.
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1 ‘‘(4) WAIVER BY SECRETARY.—In the case of a

2 failure which is due to reasonable cause and not to

3 willful neglect, the Secretary may waive part or all

4 of the tax imposed by subsection (a) to the extent that

5 the payment of such tax would be excessive or other6 wise inequitable relative to the failure involved.

7 ‘‘(d) LIABILITY FOR TAX.—The following shall be lia8 ble for the tax imposed by subsection (a):

9 ‘‘(1) In the case of a plan other than a multiem10 ployer plan, the employer.

11 ‘‘(2) In the case of a multiemployer plan, the

12 plan.

13 ‘‘(e) NOTICE REQUIREMENTS FOR PLAN AMENDMENTS

14 SIGNIFICANTLY REDUCING BENEFIT ACCRUALS.—

15 ‘‘(1) IN GENERAL.—If the sponsor of an applica16 ble pension plan adopts an amendment which has the

17 effect of significantly reducing the rate of future ben18 efit accrual of 1 or more participants, the plan ad19 ministrator shall, not later than the 45th day before

20 the effective date of the amendment, provide written

21 notice to each applicable individual (and to each em22 ployee organization representing applicable individ23 uals) which—
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1 ‘‘(A) sets forth a summary of the plan

2 amendment and the effective date of the amend3 ment,

4 ‘‘(B) includes a statement that the plan

5 amendment is expected to significantly reduce

6 the rate of future benefit accrual,

7 ‘‘(C) includes a description of the classes of

8 employees reasonably expected to be affected by

9 the reduction in the rate of future benefit ac10 crual,

11 ‘‘(D) sets forth examples illustrating how

12 the plan will change benefits for such classes of

13 employees,

14 ‘‘(E) if paragraph (2) applies to the plan

15 amendment, includes a notice that the plan ad16 ministrator will provide a benefit estimation tool

17 kit described in paragraph (2)(B) to each appli18 cable individual no later than the date required

19 under paragraph (2)(A), and

20 ‘‘(F) includes a notice of each applicable in21 dividual’s right under Federal law to receive,

22 and of the procedures for requesting, an annual

23 benefit statement.

24 ‘‘(2) REQUIREMENT TO PROVIDE BENEFIT ESTI25 MATION TOOL KIT.—
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1 ‘‘(A) IN GENERAL.—If a plan amendment

2 results in the conversion of an applicable pension

3 plan to a cash balance plan (within the meaning

4 of section 411(d)(6)(D)(iv)), the plan adminis5 trator shall, not later than the 15th day before

6 the effective date of the amendment, provide a

7 benefit estimation tool kit described in subpara8 graph (B) to each applicable individual. If such

9 plan amendment occurs within 12 months of an

10 event described in section 410(b)(6)(C), the plan

11 administrator shall in no event be required to

12 provide the benefit estimation tool kit to applica13 ble individuals affected by the event before the

14 date which is 24 months after such event.

15 ‘‘(B) BENEFIT ESTIMATION TOOL KIT.—The

16 benefit estimation tool kit described in this sub17 paragraph shall include the following informa18 tion:

19 ‘‘(i) Sufficient information to enable

20 an applicable individual to estimate the in21 dividual’s projected benefits under the terms

22 of the plan in effect both before and after the

23 adoption of the amendment.

24 ‘‘(ii) The formulas and actuarial as25 sumptions necessary to estimate under both
241

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1 such plan terms a single life annuity at ap2 propriate ages, and, when available, a lump

3 sum distribution.

4 ‘‘(iii) The interest rate used to compute

5 a lump sum distribution and information

6 as to whether the value of any early retire7 ment benefit or retirement-type subsidy

8 (within the meaning of section

9 411(d)(6)(B)(i)) is included in the lump

10 sum distribution.

11 ‘‘(3) NOTICE TO DESIGNEE.—Any notice under

12 paragraph (1) or (2) may be provided to a person

13 designated, in writing, by the person to which it

14 would otherwise be provided.

15 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur16 poses of this section—

17 ‘‘(1) APPLICABLE INDIVIDUAL.—

18 ‘‘(A) IN GENERAL.—The term ‘applicable

19 individual’ means, with respect to any plan

20 amendment—

21 ‘‘(i) each participant in the plan, and

22 ‘‘(ii) any beneficiary who is an alter23 nate payee (within the meaning of section

24 414(p)(8)) under an applicable qualified
242

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1 domestic relations order (within the mean2 ing of section 414(p)(1)(A)),

3 whose rate of future benefit accrual under the

4 plan may reasonably be expected to be signifi5 cantly reduced by such plan amendment.

6 ‘‘(B) EXCEPTION FOR PARTICIPANTS WITH

7 LESS THAN 1 YEAR OF PARTICIPATION.—Such

8 term shall not include a participant who has less

9 than 1 year of participation (within the mean10 ing of section 411(b)(4)) under the plan as of the

11 effective date of the plan amendment.

12 ‘‘(2) APPLICABLE PENSION PLAN.—The term ‘ap13 plicable pension plan’ means—

14 ‘‘(A) a defined benefit plan, or

15 ‘‘(B) an individual account plan which is

16 subject to the funding standards of section 412.

17 Such term shall not include a governmental plan

18 (within the meaning of section 414(d)), a church plan

19 (within the meaning of section 414(e)) with respect to

20 which an election under section 410(d) has not been

21 made, or any other plan to which section 204(h) of

22 the Employee Retirement Income Security Act of

23 1974 does not apply.

24 ‘‘(3) EARLY RETIREMENT.—A plan amendment

25 which eliminates or significantly reduces any early
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1 retirement benefit or retirement-type subsidy (within

2 the meaning of section 411(d)(6)(B)(i)) shall be treat3 ed as having the effect of significantly reducing the

4 rate of future benefit accrual.

5 ‘‘(g) NEW TECHNOLOGIES.—The Secretary may by

6 regulations allow any notice under paragraph (1) or (2)

7 of subsection (e) to be provided by using new technologies.’’

8 (2) CONFORMING AMENDMENT.—The table of sec9 tions for chapter 43 of subtitle D is amended by add10 ing at the end the following new item:

‘‘Sec. 4980F. Failure to provide notice of pension plan amendments reducing benefit accruals.’’

11 (b) AMENDMENT TO ERISA.—Section 204(h) of the

12 Employee Retirement Income Security Act of 1974 (29

13 U.S.C. 1054(h)) is amended to read as follows:

14 ‘‘(h)(1) If an applicable pension plan is amended so

15 as to provide a significant reduction in the rate of future

16 benefit accrual of 1 or more participants, the plan adminis17 trator shall, not later than the 45th day before the effective

18 date of the amendment, provide written notice to each ap19 plicable individual (and to each employee organization rep20 resenting applicable individuals) which—

21 ‘‘(A) sets forth a summary of the plan amend22 ment and the effective date of the amendment,
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1 ‘‘(B) includes a statement that the plan amend2 ment is expected to significantly reduce the rate of fu3 ture benefit accrual,

4 ‘‘(C) includes a description of the classes of em5 ployees reasonably expected to be affected by the re6 duction in the rate of future benefit accrual,

7 ‘‘(D) sets forth examples illustrating how the

8 plan will change benefits for such classes of employees,

9 ‘‘(E) if paragraph (2) applies to the plan

10 amendment, includes a notice that the plan adminis11 trator will provide a benefit estimation tool kit de12 scribed in paragraph (2)(B) to each applicable indi13 vidual no later than the date required under para14 graph (2)(A), and

15 ‘‘(F) includes a notice of each applicable individ16 ual’s right under Federal law to receive, and of the

17 procedures for requesting, an annual benefit state18 ment.

19 ‘‘(2)(A) If a plan amendment results in the conversion

20 of an applicable pension plan to a cash balance plan (with21 in the meaning of section 204(g)(4)(D)), the plan adminis22 trator shall, not later than the 15th day before the effective

23 date of the amendment, provide a benefit estimation tool

24 kit described in subparagraph (B) to each applicable indi25 vidual. If such plan amendment occurs within 12 months
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1 of an event described in section 410(b)(6)(C) of the Internal

2 Revenue Code of 1986, the plan administrator shall in no

3 event be required to provide the benefit estimation tool kit

4 to applicable individuals affected by the event before the

5 date which is 24 months after such event.

6 ‘‘(B) The benefit estimation tool kit described in this

7 subparagraph shall include the following information:

8 ‘‘(i) Sufficient information to enable an applica9 ble individual to estimate the individual’s projected

10 benefits under the terms of the plan in effect both be11 fore and after the adoption of the amendment.

12 ‘‘(ii) The formulas and actuarial assumptions

13 necessary to estimate under both such plan terms a

14 single life annuity at appropriate ages, and, when

15 available, a lump sum distribution.

16 ‘‘(iii) The interest rate used to compute a lump

17 sum distribution and information as to whether the

18 value of any early retirement benefit or retirement19 type subsidy (within the meaning of subsection

20 (g)(2)(A)) is included in the lump sum distribution.

21 ‘‘(3) Any notice under paragraph (1) or (2) may be

22 provided to a person designated, in writing, by the person

23 to which it would otherwise be provided.

24 ‘‘(4)(A) In the case of any egregious failure to meet

25 any requirement of this subsection with respect to any plan
246

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1 amendment, the provisions of the applicable pension plan

2 shall be applied as if such plan amendment entitled all ap3 plicable individuals to the greater of—

4 ‘‘(i) the benefits to which they would have been

5 entitled without regard to such amendment, or

6 ‘‘(ii) the benefits under the plan with regard to

7 such amendment.

8 ‘‘(B) For purposes of subparagraph (A), there is an

9 egregious failure to meet the requirements of this subsection

10 if such failure is within the control of the plan sponsor and

11 is—

12 ‘‘(i) an intentional failure (including any failure

13 to promptly provide the required notice or informa14 tion after the plan administrator discovers an unin15 tentional failure to meet the requirements of this sub16 section),

17 ‘‘(ii) a failure to provide most of the individuals

18 with most of the information they are entitled to re19 ceive under this subsection, or

20 ‘‘(iii) a failure which is determined to be egre21 gious under regulations prescribed by the Secretary of

22 the Treasury.

23 ‘‘(C) For excise tax on failure to meet requirements,

24 see section 4980F of the Internal Revenue Code of 1986.
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1 ‘‘(5)(A) For purposes of this subsection, the term ‘ap2 plicable individual’ means, with respect to any plan

3 amendment—

4 ‘‘(i) each participant in the plan, and

5 ‘‘(ii) any beneficiary who is an alternate payee

6 (within the meaning of section 206(d)(3)(K)) under

7 an applicable qualified domestic relations order

8 (within the meaning of section 206(d)(3)(B)),

9 whose rate of future benefit accrual under the plan may

10 reasonably be expected to be significantly reduced by such

11 plan amendment.

12 ‘‘(B) Such term shall not include a participant who

13 has less than 1 year of participation (within the meaning

14 of subsection (b)(4)) under the plan as of the effective date

15 of the plan amendment.

16 ‘‘(6) For purposes of this subsection, the term ‘applica17 ble pension plan’ means—

18 ‘‘(A) a defined benefit plan, or

19 ‘‘(B) an individual account plan which is subject

20 to the funding standards of section 302.

21 ‘‘(7) For purposes of this subsection, a plan amend22 ment which eliminates or significantly reduces any early

23 retirement benefit or retirement-type subsidy (within the

24 meaning of section 204(g)(2)(A)) shall be treated as having
248

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1 the effect of significantly reducing the rate of future benefit

2 accrual.

3 ‘‘(8) The Secretary of the Treasury may by regulations

4 allow any notice under this subsection to be provided by

5 using new technologies.’’

6 SEC. 522. PROTECTION OF PARTICIPANTS DURING CONVER7 SIONS TO CASH BALANCE OR OTHER HYBRID

8 DEFINED BENEFIT PLANS.

9 (a) AMENDMENTS TO INTERNAL REVENUE CODE.—

10 (1) IN GENERAL.—Section 411(d)(6) (relating to

11 accrued benefit may not be decreased by amendment)

12 is amended by adding at the end the following new

13 subparagraph:

14 ‘‘(D) TREATMENT OF CONVERSIONS TO

15 CASH BALANCE OR OTHER HYBRID PLANS.—

16 ‘‘(i) IN GENERAL.—For purposes of

17 subparagraph (A), an applicable plan

18 amendment shall be treated as reducing the

19 accrued benefit of a participant if, under

20 the terms of the plan as in effect after the

21 amendment, the accrued benefit of the par22 ticipant may at any time be less than the

23 sum of—

24 ‘‘(I) the participant’s accrued ben25 efit for years of service before the effec-
249

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1 tive date of the amendment, determined

2 under the terms of the plan as in effect

3 before the amendment and by not tak4 ing into account any early retirement

5 benefit or retirement-type subsidy

6 (within the meaning of subparagraph

7 (B)(i)), plus

8 ‘‘(II) the participant’s accrued

9 benefit for years of service after the ef10 fective date of the amendment, deter11 mined under the terms of the plan as

12 in effect after the amendment.

13 ‘‘(ii) INITIAL ACCOUNT BALANCE.—If

14 an applicable plan amendment provides

15 that the accrued benefit initially credited to

16 a participant’s accumulation account (or

17 its equivalent) on the effective date of the

18 amendment is not less than the amount de19 termined under section 417(e)(3)(C) as of

20 such date, the plan shall not be treated as

21 failing to meet the requirements of clause

22 (i)(I) at any time after such date merely be23 cause of fluctuations in interest rates.
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1 ‘‘(iii) APPLICABLE PLAN AMEND2 MENT.—For purposes of this

3 subparagraph—

4 ‘‘(I) IN GENERAL.—The term ‘ap5 plicable plan amendment’ means an

6 amendment to a defined benefit plan

7 which has the effect of converting the

8 plan to a cash balance plan.

9 ‘‘(II) EXCEPTION FOR CERTAIN

10 PLAN AMENDMENTS.—A plan amend11 ment shall not be treated as an appli12 cable plan amendment with respect to

13 any participant who is eligible to con14 tinue to accrue benefits in the same

15 manner as under the terms of the plan

16 in effect before the amendment.

17 ‘‘(III) SPECIAL RULE FOR CO18 ORDINATED BENEFITS.—If the benefits

19 of 2 or more defined benefit plans es20 tablished or maintained by an em21 ployer are coordinated in such a man22 ner as to have the effect of the adoption

23 of an amendment described in sub24 clause (I), the sponsor of the defined

25 benefit plan or plans providing for
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1 such coordination shall be treated as

2 having adopted such a plan amend3 ment as of the date such coordination

4 begins.

5 ‘‘(IV) MULTIPLE AMENDMENTS.—

6 The Secretary shall issue regulations to

7 prevent the avoidance of the purposes

8 of this subparagraph through the use of

9 2 or more plan amendments rather

10 than a single amendment.

11 ‘‘(iv) CASH BALANCE PLAN.—For pur12 poses of this subparagraph—

13 ‘‘(I) IN GENERAL.—The term

14 ‘cash balance plan’ means a defined

15 benefit plan under which the accrued

16 benefit is determined as an amount

17 other than an annual benefit com18 mencing at normal retirement age.

19 ‘‘(II) REGULATIONS TO INCLUDE

20 SIMILAR OR OTHER HYBRID PLANS.—

21 The Secretary shall issue regulations

22 which provide that a defined benefit

23 plan (or any portion of such a plan)

24 which has an effect similar to a plan

25 described in subclause (I) shall be
252

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1 treated as a cash balance plan. Such

2 regulations may provide that if a plan

3 sponsor represents in communications

4 to participants and beneficiaries that a

5 plan amendment results in a plan

6 being described in the preceding sen7 tence, such plan shall be treated as a

8 cash balance plan.

9 ‘‘(v) COORDINATION WITH ACCRUAL

10 AND NONDISCRIMINATION RULES.—If a plan

11 amendment is not treated as an applicable

12 plan amendment with respect to any partic13 ipant because such participant is eligible to

14 continue to accrue benefits in the same

15 manner as under the terms of the plan in

16 effect before the amendment, the Secretary

17 shall prescribe regulations under which—

18 ‘‘(I) the plan shall be treated as

19 meeting the requirements of subpara20 graph (A), (B), or (C) of section

21 411(b)(1) if such requirements are met

22 separately with respect to each benefit

23 accrual formula under the terms of the

24 plan, and
253

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1 ‘‘(II) the plan shall, subject to

2 such terms and conditions as may be

3 provided in such regulations, not be

4 treated as failing to meet the require5 ments of section 401(a)(4) merely be6 cause only participants as of the effec7 tive date of the amendment are so eli8 gible, except that this subclause shall

9 only apply if the plan met the require10 ments of section 401(a)(4) under the

11 terms of the plan as in effect before the

12 amendment.’’

13 (2) ASSUMPTIONS USED IN COMPUTING PRESENT

14 VALUE OF ACCRUED BENEFIT.—

15 (A) BENEFITS ACCRUED BEFORE CASH BAL16 ANCE CONVERSION.—Section 417(e)(3) (relating

17 to determination of present value) is amended—

18 (i) by inserting ‘‘or (C)’’ after ‘‘sub19 paragraph (B)’’ in subparagraph (A)(i),

20 and

21 (ii) by adding at the end the following

22 new subparagraph:

23 ‘‘(C) SPECIAL RULE FOR CONVERSIONS TO

24 CASH BALANCE PLANS.—For purposes of deter25 mining the amount initially credited to the par-
254

•HR 1102 RS

1 ticipant’s accumulation account (or its equiva2 lent) under section 411(d)(6)(D)(ii) after adop3 tion of an applicable plan amendment (as de4 fined in section 411(d)(6)(D)(iii)), the present

5 value of the accrued benefit of any participant

6 described in section 411(d)(6)(D)(i)(I) for years

7 of service before the effective date of the amend8 ment shall not be less than the greater of—

9 ‘‘(i) the present value determined by

10 using the applicable mortality table and the

11 applicable interest rate under subparagraph

12 (A) which are in effect under the plan on

13 such effective date, or

14 ‘‘(ii) the amount of the lump sum dis15 tribution payable as of such effective date,

16 determined as if the individual were enti17 tled to the distribution and under the terms

18 of the plan as in effect immediately before

19 such effective date, but not taking into ac20 count any early retirement benefit or retire21 ment-type subsidy (within the meaning of

22 section 411(d)(6)(B)(i)).’’

23 (B) PRESENT VALUE DETERMINATION FOR

24 CASH BALANCE PLANS.—Section 417(e)(3), as

25 amended by subparagraph (A), is amended—
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1 (i) by striking ‘‘or (C)’’ in subpara2 graph (A)(i) and inserting ‘‘, (C), or (D)’’,

3 and

4 (ii) by adding at the end the following

5 new subparagraph:

6 ‘‘(D) PRESENT VALUE OF ACCRUED BEN7 EFIT UNDER CASH BALANCE PLAN.—Except as

8 provided in regulations, in the case of a cash

9 balance plan (as defined in section

10 411(d)(6)(D)(iv)), the present value of the ac11 crued benefit of any participant shall, for pur12 poses of paragraphs (1) and (2), be equal to the

13 balance in the participant’s accumulation ac14 count (or its equivalent) as of the time the

15 present value determination is being made. This

16 subparagraph shall not apply to any portion of

17 the accrued benefit described in section

18 411(d)(6)(D)(i)(I) except to the extent the plan

19 meets the requirements of section

20 411(d)(6)(D)(ii) with respect to such portion.’’

21 (b) AMENDMENTS TO ERISA.—

22 (1) IN GENERAL.—Section 204(g) of the Em23 ployee Retirement Income Security Act of 1974 (29

24 U.S.C. 1054(g)) is amended by adding at the end the

25 following new paragraph:
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1 ‘‘(4)(A) For purposes of paragraph (1), an applicable

2 plan amendment shall be treated as reducing the accrued

3 benefit of a participant if, under the terms of the plan as

4 in effect after the amendment, the accrued benefit of the par5 ticipant may at any time be less than the sum of—

6 ‘‘(i) the participant’s accrued benefit for years of

7 service before the effective date of the amendment, de8 termined under the terms of the plan as in effect be9 fore the amendment and by not taking into account

10 any early retirement benefit or retirement-type sub11 sidy (within the meaning of paragraph (2)(A)), plus

12 ‘‘(ii) the participant’s accrued benefit for years

13 of service after the effective date of the amendment,

14 determined under the terms of the plan as in effect

15 after the amendment.

16 ‘‘(B) If an applicable plan amendment provides that

17 the accrued benefit initially credited to a participant’s ac18 cumulation account (or its equivalent) on the effective date

19 of the amendment is not less than the amount determined

20 under section 205(g)(3)(C) as of such date, the plan shall

21 not be treated as failing to meet the requirements of sub22 paragraph (A)(i) at any time after such date merely be23 cause of fluctuations in interest rates.

24 ‘‘(C) For purposes of this paragraph—
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1 ‘‘(i) The term ‘applicable plan amendment’

2 means an amendment to a defined benefit plan which

3 has the effect of converting the plan to a cash balance

4 plan.

5 ‘‘(ii) A plan amendment shall not be treated as

6 an applicable plan amendment with respect to any

7 participant who is eligible to continue to accrue bene8 fits in the same manner as under the terms of the

9 plan in effect before the amendment.

10 ‘‘(iii) If the benefits of 2 or more defined benefit

11 plans established or maintained by an employer are

12 coordinated in such a manner as to have the effect of

13 the adoption of an amendment described in clause (i),

14 the sponsor of the defined benefit plan or plans pro15 viding for such coordination shall be treated as hav16 ing adopted such a plan amendment as of the date

17 such coordination begins.

18 ‘‘(iv) The Secretary of the Treasury shall issue

19 regulations to prevent the avoidance of the purposes

20 of this paragraph through the use of 2 or more plan

21 amendments rather than a single amendment.

22 ‘‘(D) For purposes of this paragraph—

23 ‘‘(i) The term ‘cash balance plan’ means a de24 fined benefit plan under which the accrued benefit is
258

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1 determined as an amount other than an annual ben2 efit commencing at normal retirement age.

3 ‘‘(ii) The Secretary of the Treasury shall issue

4 regulations which provide that a defined benefit plan

5 (or any portion of such a plan) which has an effect

6 similar to a plan described in clause (i) shall be

7 treated as a cash balance plan. Such regulations may

8 provide that if a plan sponsor represents in commu9 nications to participants and beneficiaries that a

10 plan amendment results in a plan being described in

11 the preceding sentence, such plan shall be treated as

12 a cash balance plan.

13 ‘‘(E) If a plan amendment is not treated as an appli14 cable plan amendment with respect to any participant be15 cause such participant is eligible to continue to accrue bene16 fits in the same manner as under the terms of the plan

17 in effect before the amendment, the Secretary shall prescribe

18 regulations under which the plan shall be treated as meeting

19 the requirements of subparagraph (A), (B), or (C) of section

20 204(b)(1) if such requirements are met separately with re21 spect to each benefit accrual formula under the terms of the

22 plan.’’

23 (2) ASSUMPTIONS USED IN COMPUTING PRESENT

24 VALUE OF ACCRUED BENEFIT.—
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1 (A) BENEFITS ACCRUED BEFORE CASH BAL2 ANCE CONVERSION.—Section 205(g)(3) of such

3 Act (29 U.S.C. 1055(g)(3)) is amended—

4 (i) by inserting ‘‘or (C)’’ after ‘‘sub5 paragraph (B)’’ in subparagraph (A)(i),

6 and

7 (ii) by adding at the end the following

8 new subparagraph:

9 ‘‘(C) For purposes of determining the amount initially

10 credited to the participant’s accumulation account (or its

11 equivalent) under section 204(g)(4)(B) after adoption of an

12 applicable plan amendment (as defined in section

13 204(g)(4)(C)), the present value of the accrued benefit of

14 any participant described in section 204(g)(4)(A)(i) for

15 years of service before the effective date of the amendment

16 shall not be less than the greater of—

17 ‘‘(i) the present value determined by using the

18 applicable mortality table and the applicable interest

19 rate under paragraph (1) which are in effect under

20 the plan on such effective date, or

21 ‘‘(ii) the amount of the lump sum distribution

22 payable as of such effective date, determined as if the

23 individual were entitled to the distribution and under

24 the terms of the plan as in effect immediately before

25 such effective date, but not taking into account any
260

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1 early retirement benefit or retirement-type subsidy

2 (within the meaning of section 204(g)(2)(A)).’’

3 (B) INTEREST RATE ASSUMPTION FOR CASH

4 BALANCE PLANS.—Section 205(g)(3) of such Act

5 (29 U.S.C. 1055(g)(3)), as amended by subpara6 graph (A), is amended—

7 (i) by striking ‘‘or (C)’’ in subpara8 graph (A)(i) and inserting ‘‘, (C), or (D)’’,

9 and

10 (ii) by adding at the end the following

11 new subparagraph:

12 ‘‘(D) Except as provided in regulations prescribed by

13 the Secretary of the Treasury, in the case of a cash balance

14 plan (as defined in section 204(g)(4)(D)), the present value

15 of the accrued benefit of any participant shall, for purposes

16 of paragraphs (1) and (2), be equal to the balance in the

17 participant’s accumulation account (or its equivalent) as

18 of the time the present value determination is being made.

19 This subparagraph shall not apply to any portion of the

20 accrued benefit described in section 204(g)(4)(A)(i) except

21 to the extent the plan meets the requirements of section

22 204(g)(4)(B) with respect to such portion.’’

23 (c) NO INFERENCE.—Nothing in the amendments

24 made by this section shall be construed to infer the proper

25 treatment of cash balance plans or conversions to cash bal-
261

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1 ance plans under the laws in effect before such amendments

2 or under laws not affected by such amendments.

3 (d) REGULATIONS RELATING TO EARLY RETIREMENT

4 SUBSIDIES.—The Secretary of the Treasury or his delegate

5 shall, not later than 1 year after the date of the enactment

6 of this Act, issue the regulations relating to early retirement

7 benefits or retirement-type subsidies described in section

8 411(d)(6)(B)(i) of the Internal Revenue Code of 1986 and

9 section 204(g)(2)(A) of the Employee Retirement Income

10 Security Act of 1974.

11 SEC. 523. EFFECTIVE DATES.

12 (a) IN GENERAL.—The amendments made by this sub13 title shall apply to plan amendments taking effect on or

14 after the date of the enactment of this Act.

15 (b) SPECIAL RULE FOR COLLECTIVELY BARGAINED

16 PLANS.—In the case of a plan maintained pursuant to 1

17 or more collective bargaining agreements between employee

18 representatives and 1 or more employers ratified by the date

19 of the enactment of this Act, the amendments made by this

20 subtitle shall not apply to plan amendments taking effect

21 before the earlier of—

22 (1) the later of—

23 (A) the date on which the last of such collec24 tive bargaining agreements terminates (deter-
262

•HR 1102 RS

1 mined without regard to any extension thereof on

2 or after such date of enactment), or

3 (B) January 1, 2001, or

4 (2) January 1, 2003.

5 (c) SPECIAL NOTICE RULES.—

6 (1) IN GENERAL.—The period for providing any

7 notice required by the amendments made by section

8 521 shall not end before the date which is 3 months

9 after the date of the enactment of this Act.

10 (2) REASONABLE NOTICE.—The amendments

11 made by section 521 shall not apply to any plan

12 amendment taking effect on or after the date of enact13 ment of this Act if, before September 5, 2000, notice

14 was provided to participants and beneficiaries ad15 versely affected by the plan amendment (or their rep16 resentatives) which was reasonably expected to notify

17 them of the nature and effective date of the plan

18 amendment.

19 TITLE VI—REDUCING

20 REGULATORY BURDENS

21 SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.

22 (a) IN GENERAL.—Paragraph (9) of section 412(c)(9)

23 (relating to annual valuation) is amended to read as fol24 lows:

25 ‘‘(9) ANNUAL VALUATION.—
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1 ‘‘(A) IN GENERAL.—For purposes of this

2 section, a determination of experience gains and

3 losses and a valuation of the plan’s liability

4 shall be made not less frequently than once every

5 year, except that such determination shall be

6 made more frequently to the extent required in

7 particular cases under regulations prescribed by

8 the Secretary.

9 ‘‘(B) VALUATION DATE.—

10 ‘‘(i) CURRENT YEAR.—Except as pro11 vided in clause (ii), the valuation referred

12 to in subparagraph (A) shall be made as of

13 a date within the plan year to which the

14 valuation refers or within one month prior

15 to the beginning of such year.

16 ‘‘(ii) ELECTION TO USE PRIOR YEAR

17 VALUATION.—The valuation referred to in

18 subparagraph (A) may be made as of a date

19 within the plan year prior to the year to

20 which the valuation refers if—

21 ‘‘(I) an election is in effect under

22 this clause with respect to the plan,

23 and

24 ‘‘(II) as of such date, the value of

25 the assets of the plan are not less than
264

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1 125 percent of the plan’s current liabil2 ity (as defined in paragraph (7)(B)).

3 ‘‘(iii) ADJUSTMENTS.—Information

4 under clause (ii) shall, in accordance with

5 regulations, be actuarially adjusted to re6 flect significant differences in participants.

7 ‘‘(iv) ELECTION.—An election under

8 clause (ii), once made, shall be irrevocable

9 without the consent of the Secretary.’’.

10 (b) AMENDMENTS TO ERISA.—Paragraph (9) of sec11 tion 302(c) of the Employee Retirement Income Security

12 Act of 1974 (29 U.S.C. 1053(c)) is amended—

13 (1) by inserting ‘‘(A)’’ after ‘‘(9)’’, and

14 (2) by adding at the end the following:

15 ‘‘(B)(i) Except as provided in clause (ii), if, for any

16 plan year—

17 ‘‘(I) an election is in effect under this subpara18 graph with respect to a plan, and

19 ‘‘(II) the assets of the plan are not less than 125

20 percent of the plan’s current liability (as defined in

21 paragraph (7)(B)), determined as of the valuation

22 date for the preceding plan year,

23 then this section shall be applied using the information

24 available as of such valuation date.
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1 ‘‘(ii)(I) Clause (i) shall not apply for more than 2 con2 secutive plan years and valuation shall be under subpara3 graph (A) with respect to any plan year to which clause

4 (i) does not apply by reason of this subclause.

5 ‘‘(II) Clause (i) shall not apply to the extent that more

6 frequent valuations are required under the regulations

7 under subparagraph (A).

8 ‘‘(iii) Information under clause (i) shall, in accord9 ance with regulations, be actuarially adjusted to reflect sig10 nificant differences in participants.

11 ‘‘(iv) An election under this subparagraph, once made,

12 shall be irrevocable without the consent of the Secretary of

13 the Treasury.’’.

14 (c) EFFECTIVE DATE.—The amendments made by this

15 section shall apply to plan years beginning after December

16 31, 2000.

17 SEC. 602. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT

18 LOSS OF DIVIDEND DEDUCTION.

19 (a) IN GENERAL.—Section 404(k)(2)(A) (defining ap20 plicable dividends) is amended by striking ‘‘or’’ at the end

21 of clause (ii), by redesignating clause (iii) as clause (iv),

22 and by inserting after clause (ii) the following new clause:

23 ‘‘(iii) is, at the election of such partici24 pants or their beneficiaries—
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1 ‘‘(I) payable as provided in clause

2 (i) or (ii), or

3 ‘‘(II) paid to the plan and rein4 vested in qualifying employer securi5 ties, or’’.

6 (b) EFFECTIVE DATE.—The amendments made by this

7 section shall apply to taxable years beginning after Decem8 ber 31, 2000.

9 SEC. 603. REPEAL OF TRANSITION RULE RELATING TO CER10 TAIN HIGHLY COMPENSATED EMPLOYEES.

11 (a) IN GENERAL.—Paragraph (4) of section 1114(c)

12 of the Tax Reform Act of 1986 is hereby repealed.

13 (b) EFFECTIVE DATE.—The repeal made by subsection

14 (a) shall apply to plan years beginning after December 31,

15 2000.

16 SEC. 604. EMPLOYEES OF TAX-EXEMPT ENTITIES.

17 (a) IN GENERAL.—The Secretary of the Treasury shall

18 modify Treasury Regulations section 1.410(b)–6(g) to pro19 vide that employees of an organization described in section

20 403(b)(1)(A)(i) of the Internal Revenue Code of 1986 who

21 are eligible to make contributions under section 403(b) of

22 such Code pursuant to a salary reduction agreement may

23 be treated as excludable with respect to a plan under section

24 401(k) or (m) of such Code that is provided under the same
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1 general arrangement as a plan under such section 401(k),

2 if—

3 (1) no employee of an organization described in

4 section 403(b)(1)(A)(i) of such Code is eligible to par5 ticipate in such section 401(k) plan or section 401(m)

6 plan; and

7 (2) 95 percent of the employees who are not em8 ployees of an organization described in section

9 403(b)(1)(A)(i) of such Code are eligible to partici10 pate in such plan under such section 401(k) or (m).

11 (b) EFFECTIVE DATE.—The modification required by

12 subsection (a) shall apply as of the same date set forth in

13 section 1426(b) of the Small Business Job Protection Act

14 of 1996.

15 SEC. 605. CLARIFICATION OF TREATMENT OF EMPLOYER16 PROVIDED RETIREMENT ADVICE.

17 (a) IN GENERAL.—Subsection (a) of section 132 (relat18 ing to exclusion from gross income) is amended by striking

19 ‘‘or’’ at the end of paragraph (5), by striking the period

20 at the end of paragraph (6) and inserting ‘‘, or’’, and by

21 adding at the end the following new paragraph:

22 ‘‘(7) qualified retirement planning services.’’.

23 (b) QUALIFIED RETIREMENT PLANNING SERVICES DE24 FINED.—Section 132 is amended by redesignating sub-
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1 section (m) as subsection (n) and by inserting after sub2 section (l) the following:

3 ‘‘(m) QUALIFIED RETIREMENT PLANNING SERV4 ICES.—

5 ‘‘(1) IN GENERAL.—For purposes of this section,

6 the term ‘qualified retirement planning services’

7 means any retirement planning advice or informa8 tion provided to an employee and his spouse by an

9 employer maintaining a qualified employer plan.

10 ‘‘(2) NONDISCRIMINATION RULE.—Subsection

11 (a)(7) shall apply in the case of highly compensated

12 employees only if such services are available on sub13 stantially the same terms to each member of the group

14 of employees normally provided education and infor15 mation regarding the employer’s qualified employer

16 plan.

17 ‘‘(3) QUALIFIED EMPLOYER PLAN.—For purposes

18 of this subsection, the term ‘qualified employer plan’

19 means a plan, contract, pension, or account described

20 in section 219(g)(5).’’.

21 (c) EFFECTIVE DATE.—The amendments made by this

22 section shall apply to years beginning after December 31,

23 2000.
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1 SEC. 606. REPORTING SIMPLIFICATION.

2 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

3 OWNERS AND THEIR SPOUSES.—

4 (1) IN GENERAL.—The Secretary of the Treasury

5 shall modify the requirements for filing annual re6 turns with respect to one-participant retirement plans

7 to ensure that such plans with assets of $250,000 or

8 less as of the close of the plan year need not file a

9 return for that year.

10 (2) ONE-PARTICIPANT RETIREMENT PLAN DE11 FINED.—For purposes of this subsection, the term

12 ‘‘one-participant retirement plan’’ means a retire13 ment plan that—

14 (A) on the first day of the plan year—

15 (i) covered only the employer (and the

16 employer’s spouse) and the employer owned

17 the entire business (whether or not incor18 porated); or

19 (ii) covered only one or more partners

20 (and their spouses) in a business partner21 ship (including partners in an S or C cor22 poration);

23 (B) meets the minimum coverage require24 ments of section 410(b) of the Internal Revenue

25 Code of 1986 without being combined with any
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1 other plan of the business that covers the employ2 ees of the business;

3 (C) does not provide benefits to anyone ex4 cept the employer (and the employer’s spouse) or

5 the partners (and their spouses);

6 (D) does not cover a business that is a

7 member of an affiliated service group, a con8 trolled group of corporations, or a group of busi9 nesses under common control; and

10 (E) does not cover a business that leases em11 ployees.

12 (3) OTHER DEFINITIONS.—Terms used in para13 graph (2) which are also used in section 414 of the

14 Internal Revenue Code of 1986 shall have the respec15 tive meanings given such terms by such section.

16 (b) EFFECTIVE DATE.—The provisions of this section

17 shall take effect on January 1, 2001.

18 SEC. 607. IMPROVEMENT OF EMPLOYEE PLANS COMPLI19 ANCE RESOLUTION SYSTEM.

20 The Secretary of the Treasury shall continue to update

21 and improve the Employee Plans Compliance Resolution

22 System (or any successor program) giving special attention

23 to—
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1 (1) increasing the awareness and knowledge of

2 small employers concerning the availability and use

3 of the program;

4 (2) taking into account special concerns and cir5 cumstances that small employers face with respect to

6 compliance and correction of compliance failures;

7 (3) extending the duration of the self-correction

8 period under the Administrative Policy Regarding

9 Self-Correction for significant compliance failures;

10 (4) expanding the availability to correct insig11 nificant compliance failures under the Administrative

12 Policy Regarding Self-Correction during audit; and

13 (5) assuring that any tax, penalty, or sanction

14 that is imposed by reason of a compliance failure is

15 not excessive and bears a reasonable relationship to

16 the nature, extent, and severity of the failure.

17 SEC. 608. REPEAL OF THE MULTIPLE USE TEST.

18 (a) IN GENERAL.—Paragraph (9) of section 401(m) is

19 amended to read as follows:

20 ‘‘(9) REGULATIONS.—The Secretary shall pre21 scribe such regulations as may be necessary to carry

22 out the purposes of this subsection and subsection (k),

23 including regulations permitting appropriate aggre24 gation of plans and contributions.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by this

2 section shall apply to years beginning after December 31,

3 2000.

4 SEC. 609. FLEXIBILITY IN NONDISCRIMINATION, COV5 ERAGE, AND LINE OF BUSINESS RULES.

6 (a) NONDISCRIMINATION.—

7 (1) IN GENERAL.—The Secretary of the Treasury

8 shall, by regulation, provide that a plan shall be

9 deemed to satisfy the requirements of section

10 401(a)(4) of the Internal Revenue Code of 1986 if

11 such plan satisfies the facts and circumstances test

12 under section 401(a)(4) of such Code, as in effect be13 fore January 1, 1994, but only if—

14 (A) the plan satisfies conditions prescribed

15 by the Secretary to appropriately limit the

16 availability of such test; and

17 (B) the plan is submitted to the Secretary

18 for a determination of whether it satisfies such

19 test.

20 Subparagraph (B) shall only apply to the extent pro21 vided by the Secretary.

22 (2) EFFECTIVE DATES.—

23 (A) REGULATIONS.—The regulation re24 quired by paragraph (1) shall apply to years be25 ginning after December 31, 2001.
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1 (B) CONDITIONS OF AVAILABILITY.—Any

2 condition of availability prescribed by the Sec3 retary under paragraph (1)(A) shall not apply

4 before the first year beginning not less than 120

5 days after the date on which such condition is

6 prescribed.

7 (b) COVERAGE TEST.—

8 (1) IN GENERAL.—Section 410(b)(1) (relating to

9 minimum coverage requirements) is amended by add10 ing at the end the following:

11 ‘‘(D) In the case that the plan fails to meet

12 the requirements of subparagraphs (A), (B) and

13 (C), the plan—

14 ‘‘(i) satisfies subparagraph (B), as in

15 effect immediately before the enactment of

16 the Tax Reform Act of 1986,

17 ‘‘(ii) is submitted to the Secretary for

18 a determination of whether it satisfies the

19 requirement described in clause (i), and

20 ‘‘(iii) satisfies conditions prescribed by

21 the Secretary by regulation that appro22 priately limit the availability of this sub23 paragraph.

24 Clause (ii) shall apply only to the extent pro25 vided by the Secretary.’’.
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1 (2) EFFECTIVE DATES.—

2 (A) IN GENERAL.—The amendment made

3 by paragraph (1) shall apply to years beginning

4 after December 31, 2001.

5 (B) CONDITIONS OF AVAILABILITY.—Any

6 condition of availability prescribed by the Sec7 retary under regulations prescribed by the Sec8 retary under section 410(b)(1)(D) of the Internal

9 Revenue Code of 1986 shall not apply before the

10 first year beginning not less than 120 days after

11 the date on which such condition is prescribed.

12 (c) LINE OF BUSINESS RULES.—The Secretary of the

13 Treasury shall, on or before December 31, 2001, modify the

14 existing regulations issued under section 414(r) of the Inter15 nal Revenue Code of 1986 in order to expand (to the extent

16 that the Secretary determines appropriate) the ability of

17 a pension plan to demonstrate compliance with the line of

18 business requirements based upon the facts and cir19 cumstances surrounding the design and operation of the

20 plan, even though the plan is unable to satisfy the mechan21 ical tests currently used to determine compliance.
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1 SEC. 610. EXTENSION TO ALL GOVERNMENTAL PLANS OF

2 MORATORIUM ON APPLICATION OF CERTAIN

3 NONDISCRIMINATION RULES APPLICABLE TO

4 STATE AND LOCAL PLANS.

5 (a) IN GENERAL.—

6 (1) Subparagraph (G) of section 401(a)(5) and

7 subparagraph (H) of section 401(a)(26) are each

8 amended by striking ‘‘section 414(d))’’ and all that

9 follows and inserting ‘‘section 414(d)).’’.

10 (2) Subparagraph (G) of section 401(k)(3) and

11 paragraph (2) of section 1505(d) of the Taxpayer Re12 lief Act of 1997 are each amended by striking ‘‘main13 tained by a State or local government or political

14 subdivision thereof (or agency or instrumentality

15 thereof)’’.

16 (b) CONFORMING AMENDMENTS.—

17 (1) The heading for subparagraph (G) of section

18 401(a)(5) is amended to read as follows: ‘‘GOVERN19 MENTAL PLANS’’.

20 (2) The heading for subparagraph (H) of section

21 401(a)(26) is amended to read as follows: ‘‘EXCEP22 TION FOR GOVERNMENTAL PLANS’’.

23 (3) Subparagraph (G) of section 401(k)(3) is

24 amended by inserting ‘‘GOVERNMENTAL PLANS.—’’

25 after ‘‘(G)’’.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to years beginning after December 31,

3 2000.

4 SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DIS5 TRIBUTIONS.

6 (a) EXPANSION OF PERIOD.—

7 (1) IN GENERAL.—Subparagraph (A) of section

8 417(a)(6) is amended by striking ‘‘90-day’’ and in9 serting ‘‘180-day’’.

10 (2) MODIFICATION OF REGULATIONS.—The Sec11 retary of the Treasury shall modify the regulations

12 under sections 402(f), 411(a)(11), and 417 of the In13 ternal Revenue Code of 1986 to substitute ‘‘180 days’’

14 for ‘‘90 days’’ each place it appears in Treasury Reg15 ulations sections 1.402(f)–1, 1.411(a)–11(c), and

16 1.417(e)–1(b).

17 (3) EFFECTIVE DATE.—The amendment made by

18 paragraph (1) and the modifications required by

19 paragraph (2) shall apply to years beginning after

20 December 31, 2000.

21 (b) CONSENT REGULATION INAPPLICABLE TO CERTAIN

22 DISTRIBUTIONS.—

23 (1) IN GENERAL.—The Secretary of the Treasury

24 shall modify the regulations under section 411(a)(11)

25 of the Internal Revenue Code of 1986 to provide that
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1 the description of a participant’s right, if any, to

2 defer receipt of a distribution shall also describe the

3 consequences of failing to defer such receipt.

4 (2) EFFECTIVE DATE.—The modifications re5 quired by paragraph (1) shall apply to years begin6 ning after December 31, 2000.

7 (c) DISCLOSURE OF OPTIONAL FORMS OF BENE8 FITS.—

9 (1) AMENDMENT OF INTERNAL REVENUE

10 CODE.—Section 417(a)(3) (relating to plan to provide

11 written explanation) is amended by adding at the end

12 the following:

13 ‘‘(C) EXPLANATION OF OPTIONAL FORMS OF

14 BENEFITS.—

15 ‘‘(i) IN GENERAL.—If—

16 ‘‘(I) a plan provides optional

17 forms of benefits, and

18 ‘‘(II) the present values of such

19 forms of benefits are not actuarially

20 equivalent as of the annuity starting

21 date,

22 then each written explanation required to be

23 provided under subparagraph (A) shall in24 clude the information described in clause

25 (ii).
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1 ‘‘(ii) INFORMATION.—A plan to which

2 this subparagraph applies shall include suf3 ficient information (as determined in ac4 cordance with regulations prescribed by the

5 Secretary) to allow the participant to un6 derstand the differences in the present val7 ues of the optional forms of benefits pro8 vided by the plan and the effect the partici9 pant’s election as to the form of benefit will

10 have on the value of the benefits available

11 under the plan. Any such information shall

12 be provided in a manner calculated to be

13 reasonably understood by the average plan

14 participant.’’

15 (2) AMENDMENT OF ERISA.—Section 205(c)(3) of

16 the Employee Retirement Income Security Act of

17 1974 (29 U.S.C. 1055(c)(3)) is amended by adding at

18 the end the following:

19 ‘‘(C)(i) If—

20 ‘‘(I) a plan provides optional forms of benefits,

21 and

22 ‘‘(II) the present values of such forms of benefits

23 are not actuarially equivalent as of the annuity start24 ing date,
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1 then such plan shall include the information described in

2 clause (ii) with each written explanation required to be pro3 vided under subparagraph (A).

4 ‘‘(ii) A plan to which this subparagraph applies shall

5 include sufficient information (as determined in accordance

6 with regulations prescribed by the Secretary of the Treas7 ury) to allow the participant to understand the differences

8 in the present values of the optional forms of benefits pro9 vided by the plan and the effect the participant’s election

10 as to the form of benefit will have on the value of the benefits

11 available under the plan. Any such information shall be

12 provided in a manner calculated to be reasonably under13 stood by the average plan participant.’’

14 (3) EFFECTIVE DATE.—The amendments made

15 by this subsection shall apply to years beginning after

16 December 31, 2000.

17 SEC. 612. ANNUAL REPORT DISSEMINATION.

18 (a) IN GENERAL.—Section 104(b)(3) of the Employee

19 Retirement Income Security Act of 1974 (29 U.S.C.

20 1024(b)(3)) is amended by striking ‘‘shall furnish’’ and in21 serting ‘‘shall make available for examination (and, upon

22 request, shall furnish)’’.

23 (b) EFFECTIVE DATE.—The amendment made by this

24 section shall apply to reports for years beginning after De25 cember 31, 1999.
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1 SEC. 613. TECHNICAL CORRECTIONS TO SAVER ACT.

2 Section 517 of the Employee Retirement Income Secu3 rity Act of 1974 (29 U.S.C. 1147) is amended—

4 (1) in subsection (a), by striking ‘‘2001 and

5 2005 on or after September 1 of each year involved’’

6 and inserting ‘‘2001, 2005, and 2009 in the month of

7 September of each year involved’’;

8 (2) in subsection (b), by adding at the end the

9 following new sentence: ‘‘To effectuate the purposes of

10 this paragraph, the Secretary may enter into a coop11 erative agreement, pursuant to the Federal Grant and

12 Cooperative Agreement Act of 1977 (31 U.S.C. 6301

13 et seq.), with the American Savings Education Coun14 cil.’’;

15 (3) in subsection (e)(2)—

16 (A) by striking ‘‘Committee on Labor and

17 Human Resources’’ in subparagraph (B) and in18 serting ‘‘Committee on Health, Education,

19 Labor, and Pensions’’;

20 (B) by striking subparagraph (D) and in21 serting the following:

22 ‘‘(D) the Chairman and Ranking Member of

23 the Subcommittee on Labor, Health and Human

24 Services, and Education of the Committee on

25 Appropriations of the House of Representatives

26 and the Chairman and Ranking Member of the
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1 Subcommittee on Labor, Health and Human

2 Services, and Education of the Committee on

3 Appropriations of the Senate;’’;

4 (C) by redesignating subparagraph (G) as

5 subparagraph (J); and

6 (D) by inserting after subparagraph (F) the

7 following new subparagraphs:

8 ‘‘(G) the Chairman and Ranking Member of

9 the Committee on Finance of the Senate;

10 ‘‘(H) the Chairman and Ranking Member

11 of the Committee on Ways and Means of the

12 House of Representatives;

13 ‘‘(I) the Chairman and Ranking Member of

14 the Subcommittee on Employer-Employee Rela15 tions of the Committee on Education and the

16 Workforce of the House of Representatives; and’’;

17 (4) in subsection (e)(3)(A)—

18 (A) by striking ‘‘There shall be no more

19 than 200 additional participants.’’ and inserting

20 ‘‘The participants in the National Summit shall

21 also include additional participants appointed

22 under this subparagraph.’’;

23 (B) by striking ‘‘one-half shall be appointed

24 by the President,’’ in clause (i) and inserting

25 ‘‘not more than 100 participants shall be ap-
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1 pointed under this clause by the President,’’, and

2 by striking ‘‘and’’ at the end of clause (i);

3 (C) by striking ‘‘one-half shall be appointed

4 by the elected leaders of Congress’’ in clause (ii)

5 and inserting ‘‘not more than 100 participants

6 shall be appointed under this clause by the elect7 ed leaders of Congress’’, and by striking the pe8 riod at the end of clause (ii) and inserting ‘‘;

9 and’’; and

10 (D) by adding at the end the following new

11 clause:

12 ‘‘(iii) The President, in consultation

13 with the elected leaders of Congress referred

14 to in subsection (a), may appoint under

15 this clause additional participants to the

16 National Summit. The number of such ad17 ditional participants appointed under this

18 clause may not exceed the lesser of 3 percent

19 of the total number of all additional par20 ticipants appointed under this paragraph,

21 or 10. Such additional participants shall be

22 appointed from persons nominated by the

23 organization referred to in subsection (b)(2)

24 which is made up of private sector busi25 nesses and associations partnered with Gov-
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1 ernment entities to promote long term fi2 nancial security in retirement through sav3 ings and with which the Secretary is re4 quired thereunder to consult and cooperate

5 and shall not be Federal, State, or local gov6 ernment employees.’’;

7 (5) in subsection (e)(3)(B), by striking ‘‘January

8 31, 1998’’ in subparagraph (B) and inserting ‘‘May

9 1, 2001, May 1, 2005, and May 1, 2009, for each of

10 the subsequent summits, respectively’’;

11 (6) in subsection (f)(1)(C), by inserting ‘‘, no

12 later than 90 days prior to the date of the commence13 ment of the National Summit,’’ after ‘‘comment’’ in

14 paragraph (1)(C);

15 (7) in subsection (g), by inserting ‘‘, in consulta16 tion with the congressional leaders specified in sub17 section (e)(2),’’ after ‘‘report’’;

18 (8) in subsection (i)—

19 (A) by striking ‘‘beginning on or after Octo20 ber 1, 1997’’ in paragraph (1) and inserting

21 ‘‘2001, 2005, and 2009’’; and

22 (B) by adding at the end the following new

23 paragraph:

24 ‘‘(3) RECEPTION AND REPRESENTATION AUTHOR25 ITY.—The Secretary is hereby granted reception and
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1 representation authority limited specifically to the

2 events at the National Summit. The Secretary shall

3 use any private contributions received in connection

4 with the National Summit prior to using funds ap5 propriated for purposes of the National Summit pur6 suant to this paragraph.’’; and

7 (9) in subsection (k)—

8 (A) by striking ‘‘shall enter into a contract

9 on a sole-source basis’’ and inserting ‘‘may enter

10 into a contract on a sole-source basis’’; and

11 (B) by striking ‘‘fiscal year 1998’’ and in12 serting ‘‘fiscal years 2001, 2005, and 2009’’.

13 SEC. 614. STUDIES.

14 (a) REPORT ON PENSION COVERAGE.—Not later than

15 5 years after the date of the enactment of this Act, the Sec16 retary of the Treasury shall submit a report to the Com17 mittee on Ways and Means of the House of Representatives

18 and the Committee on Finance of the Senate a report on

19 the effect of the provisions of the Retirement Security and

20 Savings Act of 2000 on pension coverage, including—

21 (1) any expansion of coverage for low- and mid22 dle-income workers;

23 (2) levels of pension benefits;

24 (3) quality of pension coverage;
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1 (4) worker’s access to and participation in

2 plans; and

3 (5) retirement security.

4 (b) STUDY OF PRE-RETIREMENT USE OF BENEFITS.—

5 (1) IN GENERAL.—The Secretary of the Treasury

6 shall conduct a study of—

7 (A) current tax provisions allowing individ8 uals to access individual retirement plans and

9 qualified retirement plan benefits of such indi10 vidual prior to retirement, including an analysis

11 of—

12 (i) the extent of use of such current

13 provisions by individuals; and

14 (ii) the extent to which such provisions

15 undermine the goal of accumulating ade16 quate resources for retirement; and

17 (B) the types of investment decisions made

18 by individual retirement plan beneficiaries and

19 participants in self-directed qualified retirement

20 plans, including an analysis of—

21 (i) current restrictions on investments;

22 and

23 (ii) the extent to which additional re24 strictions on investments would facilitate
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1 the accumulation of adequate income for re2 tirement.

3 (2) REPORT.—Not later than January 1, 2002,

4 the Secretary of the Treasury shall submit a report to

5 the Committee on Ways and Means of the House of

6 Representatives and the Committee on Finance of the

7 Senate containing the results of the study conducted

8 under paragraph (1) and any recommendations.

9 TITLE VII—PLAN AMENDMENTS

10 SEC. 701. PROVISIONS RELATING TO PLAN AMENDMENTS.

11 (a) IN GENERAL.—If this section applies to any plan

12 or contract amendment, such plan or contract shall be treat13 ed as being operated in accordance with the terms of the

14 plan during the period described in subsection (b)(2)(A).

15 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

16 (1) IN GENERAL.—This section shall apply to

17 any amendment to any plan or annuity contract

18 which is made—

19 (A) pursuant to any amendment made by

20 this Act, or pursuant to any regulation issued

21 under this Act, and

22 (B) on or before the last day of the first

23 plan year beginning on or after January 1,

24 2003.
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1 In the case of a governmental plan (as defined in sec2 tion 414(d) of the Internal Revenue Code of 1986),

3 this paragraph shall be applied by substituting

4 ‘‘2005’’ for ‘‘2003’’.

5 (2) CONDITIONS.—This section shall not apply to

6 any amendment unless—

7 (A) during the period—

8 (i) beginning on the date the legislative

9 or regulatory amendment described in para10 graph (1)(A) takes effect (or in the case of

11 a plan or contract amendment not required

12 by such legislative or regulatory amend13 ment, the effective date specified by the

14 plan); and

15 (ii) ending on the date described in

16 paragraph (1)(B) (or, if earlier, the date the

17 plan or contract amendment is adopted),

18 the plan or contract is operated as if such plan

19 or contract amendment were in effect; and

20 (B) such plan or contract amendment ap21 plies retroactively for such period.
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1 TITLE VIII—COMPLIANCE WITH

2 BUDGET ACT.

3 SEC. 801. COMPLIANCE WITH BUDGET ACT.

4 The amendments made by this Act shall not apply to

5 any taxable year beginning after December 31, 2004.

Amend the title so as to read: ‘‘An Act to provide

for reconciliation pursuant to section 104(2) of the concurrent resolution on the budget for fiscal year 2001.’’.

Calendar No. 802

106TH CONGRESS

2D SESSION H. R. 1102

[Report No. 106–411]

AN ACT

To provide for pension reform, and for other

purposes.

SEPTEMBER 13, 2000

Reported with an amendment and an amendment to the

title