I

106TH CONGRESS

1ST SESSION H. R. 1102

To provide for pension reform, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 11, 1999

Mr. PORTMAN (for himself, Mr. CARDIN, Mrs. JOHNSON of Connecticut, Mr.

HOUGHTON, Mr. LEWIS of Georgia, Mr. WELLER, Mr. TANNER, Mr.

BLUNT, Mr. BOEHNER, Mr. POMEROY, Mr. BENTSEN, Mr. KOLBE, Mrs.

MORELLA, Mr. NUSSLE, Mr. MCCRERY, and Mr. RAMSTAD) introduced

the following bill; which was referred to the Committee on Ways and

Means, and in addition to the Committees on Education and the Workforce, and Government Reform, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions

as fall within the jurisdiction of the committee concerned

A BILL

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,

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;

4 TABLE OF CONTENTS.

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

6 ‘‘Comprehensive Retirement Security and Pension Reform

7 Act’’.
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1 (b) AMENDMENT OF 1986 CODE.—Except as other2 wise expressly provided, whenever in this Act an amend3 ment or repeal is expressed in terms of an amendment

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

5 shall be considered to be made to a section or other provi6 sion of the Internal Revenue Code of 1986.

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

8 this Act is as follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.

TITLE I—EXPANDING COVERAGE

Sec. 101. Restoration of limits formerly in effect.

Sec. 102. Plan loans for subchapter S owners, partners, and sole proprietors.

Sec. 103. Salary reduction only simple plans.

Sec. 104. Modification of top-heavy rules.

Sec. 105. Elective deferrals not taken into account for purposes of limits.

Sec. 106. Reduced PBGC premium for new plans of small employers.

Sec. 107. Phase-in of additional premium for new plans.

Sec. 108. Repeal of coordination requirements for deferred compensation plans

of State and local governments and tax-exempt organizations.

Sec. 109. Elimination of user fee for requests to IRS regarding pension plans.

Sec. 110. Alternative method of meeting nondiscrimination requirements for

automatic contribution trust.

Sec. 111. Deduction limits.

Sec. 112. Option to treat elective deferrals as after-tax contributions.

Sec. 113. Credit for pension plan startup costs of small employers.

TITLE II—ENHANCING FAIRNESS FOR WOMEN AND CHILDREN

Sec. 201. Additional salary reduction catch-up contributions.

Sec. 202. Equitable treatment for contributions of employees to defined contribution plans.

Sec. 203. Faster vesting of certain employer matching contributions.

Sec. 204. Deferred annuities for surviving spouses of Federal employees.

Sec. 205. Simplify and update the minimum distribution rules.

Sec. 206. Clarification of tax treatment of division of section 457 plan benefits

upon divorce.

Sec. 207. Percentage limitations on contributions.

Sec. 208. Eligible rollover distributions.

Sec. 209. Immediate participation in the Thrift Savings Plan.

TITLE III—INCREASING PORTABILITY FOR PARTICIPANTS

Sec. 301. Rollovers allowed among various types of plans.

Sec. 302. Rollovers of IRAs into workplace retirement plans.

Sec. 303. Rollovers of after-tax contributions.
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Sec. 304. Treatment of forms of distribution.

Sec. 305. Rationalization of restrictions on distributions.

Sec. 306. Purchase of service credit in governmental defined benefit plans.

Sec. 307. Employers may disregard rollovers for purposes of cash-out amounts.

TITLE IV—STRENGTHENING PENSION SECURITY AND

ENFORCEMENT

Sec. 401. Repeal of 150 percent of current liability funding limit.

Sec. 402. Missing participants.

Sec. 403. Periodic pension benefits statements.

Sec. 404. Civil penalties for breach of fiduciary responsibility.

Sec. 405. Penalty tax relief for sound pension funding.

Sec. 406. Protection of investment of employee contributions to 401(k) plans.

Sec. 407. Notice of significant reduction in benefit accruals.

TITLE V—REDUCING REGULATORY BURDENS

Sec. 501. Intermediate sanctions for inadvertent failures.

Sec. 502. Repeal of the multiple use test.

Sec. 503. Safety valve from mechanical rules.

Sec. 504. Reform of the line of business rules.

Sec. 505. Coverage test flexibility.

Sec. 506. Increase in retirement plan cash-out amount.

Sec. 507. Modification of timing of plan valuations.

Sec. 508. Section 457 inapplicable to certain mirror plans.

Sec. 509. Substantial owner benefits in terminated plans.

Sec. 510. ESOP dividends may be reinvested without loss of dividend deduction.

Sec. 511. Modification of 403(b) exclusion allowance to conform to 415 modification.

Sec. 512. Treatment of multiemployer plans under section 415.

Sec. 513. Elimination of partial termination rules for multiemployer plans.

Sec. 514. Notice and consent period regarding distributions.

Sec. 515. Conforming amendments relating to election to receive taxable cash

compensation in lieu of nontaxable parking benefits.

Sec. 516. Extension to international organizations of moratorium on application

of certain nondiscrimination rules applicable to State and local

plans.

Sec. 517. Employees of tax-exempt entities.

Sec. 518. Permissive aggregation of collective bargaining units.

Sec. 519. Repeal of transition rule relating to certain highly compensated employees.

Sec. 520. Clarification of treatment of employer-provided retirement advice.

Sec. 521. Annual report dissemination.

Sec. 522. Excess benefit plans.

Sec. 523. Benefit suspension notice.

Sec. 524. Provisions relating to plan amendments.

Sec. 525. Reporting simplification.

Sec. 526. Model plans for small businesses.
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1 TITLE I—EXPANDING COVERAGE

2 SEC. 101. RESTORATION OF LIMITS FORMERLY IN EFFECT.

3 (a) DEFINED BENEFIT PLANS.—

4 (1) DOLLAR LIMIT.—(A) Subparagraph (A) of

5 section 415(b)(1) (relating to limitation for defined

6 benefit plans) is amended by striking ‘‘$90,000’’ and

7 inserting ‘‘$180,000’’.

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

9 415(b)(2) are each amended by striking ‘‘$90,000’’

10 each place it appears in the headings and the text

11 and inserting ‘‘$180,000’’.

12 (C) Paragraph (7) of section 415(b) (relating to

13 benefits under certain collectively bargained plans) is

14 amended by striking ‘‘the greater of $68,212 or one15 half the amount otherwise applicable for such year

16 under paragraph (1)(A) for ‘$90,000’ ’’ and insert17 ing ‘‘one-half the amount otherwise applicable for

18 such year under paragraph (1)(A) for ‘$180,000’ ’’.

19 (2) LIMIT REDUCED WHEN BENEFIT BEGINS

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

21 415(b)(2) is amended by striking ‘‘the social security

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

23 and text and inserting ‘‘age 62’’.

24 (3) LIMIT INCREASED WHEN BENEFIT BEGINS

25 AFTER AGE 65.—Subparagraph (D) of section
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1 415(b)(2) is amended by striking ‘‘the social security

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

3 and text and inserting ‘‘age 65’’.

4 (4) MULTIEMPLOYER PLANS AND PLANS MAIN5 TAINED BY GOVERNMENTS AND TAX EXEMPT ORGA6 NIZATIONS.—Subparagraph (F) of section 415(b)(2)

7 is amended to read as follows:

8 ‘‘(F) MULTIEMPLOYER PLANS AND PLANS

9 MAINTAINED BY GOVERNMENTS AND TAX EX10 EMPT ORGANIZATIONS.—

11 ‘‘(i) IN GENERAL.—In the case of a

12 governmental plan (within the meaning of

13 section 414(d)), a plan maintained by an

14 organization (other than a governmental

15 unit) exempt from tax under this subtitle,

16 a multiemployer plan (as defined in section

17 414(f)), or a qualified merchant marine

18 plan, subparagraph (C) shall be applied as

19 if the last sentence thereof read as follows:

20 ‘The reduction under this subparagraph

21 shall not reduce the limitation of para22 graph (1)(A) below (i) $130,000 if the

23 benefit begins at or after age 55, or (ii) if

24 the benefit begins before age 55, the equiv-
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1 alent of the $130,000 limitation for age

2 55.’

3 ‘‘(ii) DEFINITIONS.—For purposes of

4 this subparagraph—

5 ‘‘(I) QUALIFIED MERCHANT MA6 RINE PLAN.—The term ‘qualified mer7 chant marine plan’ means a plan in

8 existence on January 1, 1986, the

9 participants in which are merchant

10 marine officers holding licenses issued

11 by the Secretary of Transportation

12 under title 46, United States Code.

13 ‘‘(II) EXEMPT ORGANIZATION

14 PLAN COVERING 50 PERCENT OF ITS

15 EMPLOYEES.—A plan shall be treated

16 as a plan maintained by an organiza17 tion (other than a governmental unit)

18 exempt from tax under this subtitle if

19 at least 50 percent of the employees

20 benefiting under the plan are employ21 ees of an organization (other than a

22 governmental unit) exempt from tax

23 under this subtitle. If less than 50

24 percent of the employees benefiting

25 under a plan are employees of an or-
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1 ganization (other than a governmental

2 unit) exempt from tax under this sub3 title, the plan shall be treated as a

4 plan maintained by an organization

5 (other than a governmental unit) ex6 empt from tax under this subtitle only

7 with respect to employees of such an

8 organization.’’.

9 (5) COST-OF-LIVING ADJUSTMENTS.—Sub10 section (d) of section 415 (related to cost-of-living

11 adjustments) is amended—

12 (A) in paragraph (1)(A) by striking

13 ‘‘$90,000’’ and inserting ‘‘$180,000’’, and

14 (B) in paragraph (3)(A)—

15 (i) by striking ‘‘$90,000’’ in the head16 ing and inserting ‘‘$180,000’’, and

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

18 inserting ‘‘July 1, 1999’’.

19 (b) DEFINED CONTRIBUTION PLANS.—

20 (1) DOLLAR LIMIT.—Subparagraph (A) of sec21 tion 415(c)(1) (relating to limitation for defined con22 tribution plans) is amended by striking ‘‘$30,000’’

23 and inserting ‘‘$45,000’’.
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1 (2) COST-OF-LIVING ADJUSTMENTS.—Sub2 section (d) of section 415 (related to cost-of-living

3 adjustments) is amended—

4 (A) in paragraph (1)(C) by striking

5 ‘‘$30,000’’ and inserting ‘‘$45,000’’, and

6 (B) in paragraph (3)(D)—

7 (i) by striking ‘‘$30,000’’ in the head8 ing and inserting ‘‘$45,000’’, and

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

10 inserting ‘‘July 1, 1999’’.

11 (c) QUALIFIED TRUSTS.—

12 (1) COMPENSATION LIMIT.—Sections

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

14 amended by striking ‘‘$150,000’’ each place it ap15 pears and inserting ‘‘$235,000’’.

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

18 401(a)(17) is amended—

19 (A) by striking ‘‘October 1, 1993’’ and in20 serting ‘‘July 1, 1999’’, and

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

22 appears and inserting ‘‘$5,000’’.

23 (d) ELECTIVE DEFERRALS.—

24 (1) IN GENERAL.—Paragraphs (1) and (5) of

25 section 402(g) (relating to limitation on exclusion
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1 for elective deferrals) are each amended by striking

2 ‘‘$7,000’’ and inserting ‘‘$15,000’’.

3 (2) CONFORMING AMENDMENTS.—

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

5 on exclusion for elective deferrals), as amended

6 by paragraph (1), is further amended by strik7 ing paragraph (4) and redesignating para8 graphs (5), (6), (7), (8), and (9) as paragraphs

9 (4), (5), (6), (7), and (8), respectively.

10 (B) Clause (iii) of section 501(c)(18)(D) is

11 amended by striking ‘‘(other than paragraph

12 (4) thereof)’’.

13 (e) DEFERRED COMPENSATION PLANS OF STATE

14 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI15 ZATIONS.—Section 457 (relating to deferred compensation

16 plans of State and local governments and tax-exempt orga17 nizations) is amended—

18 (1) in subsections (b)(2)(A), (c)(1), and (e)(15)

19 by striking ‘‘$7,500’’ each place it appears and in20 serting ‘‘$15,000’’,

21 (2) in subsection (b)(3)(A) by striking

22 ‘‘$15,000’’ and inserting ‘‘$30,000’’, and

23 (3) in subsection (e)(15)—
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1 (A) by inserting ‘‘and the $30,000 amount

2 specified in subsection (b)(3)(A)’’ after

3 ‘‘(c)(1)’’, and

4 (B) by striking ‘‘September 30, 1994’’ and

5 inserting ‘‘September 30, 1999’’.

6 (f) SIMPLE RETIREMENT ACCOUNTS.—

7 (1) LIMITATION.—Sections 408(p)(2)(A)(ii),

8 408(p)(2)(E), 401(k)(11)(B)(i)(I), and

9 401(k)(11)(E) are each amended by striking

10 ‘‘$6,000’’ and inserting ‘‘$10,000’’.

11 (2) BASE PERIOD FOR COST-OF-LIVING ADJUST12 MENT.—Subparagraph (E) of section 408(p)(2) is

13 amended by striking ‘‘September 30, 1996’’ and in14 serting ‘‘September 30, 1999’’.

15 (g) COST-OF-LIVING ADJUSTMENTS.—

16 (1) PLANS MAINTAINED BY GOVERNMENTS AND

17 TAX EXEMPT ORGANIZATIONS.—Paragraph (1) of

18 section 415(d) (as amended by subsection (b)) is

19 amended by striking ‘‘and’’ at the end of subpara20 graph (B), by redesignating subparagraph (C) as

21 subparagraph (D), and by inserting after subpara22 graph (B) the following new subparagraph:

23 ‘‘(C) the $130,000 amount in subsection

24 (b)(2)(F), and’’.
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1 (2) BASE PERIOD.—Paragraph (3) of section

2 415(d) (as amended by subsection (b)) is further

3 amended by redesignating subparagraph (D) as sub4 paragraph (E) and by inserting after subparagraph

5 (C) the following new subparagraph:

6 ‘‘(D) $130,000 AMOUNT.—The base period

7 taken into account for purposes of paragraph

8 (1)(C) is the calendar quarter beginning July 1,

9 1999.’’.

10 (3) ROUNDING RULE RELATING TO DEFINED

11 BENEFIT PLANS AND DEFINED CONTRIBUTION

12 PLANS.—Paragraph (4) of section 415(d) is amend13 ed to read as follows:

14 ‘‘(4) ROUNDING.—

15 ‘‘(A) $180,000 AMOUNT.—Any increase

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

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

18 the next lowest multiple of $5,000.

19 ‘‘(B) $130,000 AND $45,000 AMOUNTS.—

20 Any increase under subparagraph (C) or (D) of

21 paragraph (1) which is not a multiple of $1,000

22 shall be rounded to the next lowest multiple of

23 $1,000.’’.

24 (4) CONFORMING AMENDMENT.—Subparagraph

25 (D) of section 415(d)(3) (as amended by paragraph
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1 (2)) is amended by striking ‘‘paragraph (1)(C)’’ and

2 inserting ‘‘paragraph (1)(D)’’.

3 (h) INCREASE IN AMOUNT OF DEDUCTIBLE IRA

4 CONTRIBUTIONS.—

5 (1) INCREASE IN MAXIMUM AMOUNT OF DEDUC6 TION.—Subparagraph (A) of section 219(b)(1) (re7 lating to maximum amount of deduction) is amended

8 by striking ‘‘$2,000’’ and inserting ‘‘$5,000’’.

9 (2) CONFORMING AMENDMENTS.—

10 (A) Subsections (a)(1), (b)(2), (j), and

11 (p)(8) of section 408 are each amended by

12 striking ‘‘$2,000’’ each place it appears and in13 serting ‘‘$5,000’’.

14 (B) Clause (i) of section 408(o)(2)(B) is

15 amended by inserting ‘‘the lesser of $2,000, or’’

16 after ‘‘means’’.

17 (C) Paragraph (2) of section 408A(c) is

18 amended by inserting ‘‘the lesser of $2,000, or’’

19 after ‘‘shall not exceed’’.

20 (D) Subparagraph (B) of section

21 4973(b)(1) is amended by inserting ‘‘(or in the

22 case of a nondeductible individual retirement

23 plan, the amount allowable as a contribution

24 under section 408(o))’’ after ‘‘contributions,’’.

25 (i) EFFECTIVE DATE.—
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1 (1) IN GENERAL.—The amendments made by

2 this section shall apply to years beginning after De3 cember 31, 1999.

4 (2) COLLECTIVE BARGAINING AGREEMENTS.—

5 In the case of a plan maintained pursuant to 1 or

6 more collective bargaining agreements between em7 ployee representatives and 1 or more employers rati8 fied by the date of enactment of this Act, the

9 amendments made by this section shall not apply to

10 contributions or benefits pursuant to any such

11 agreement for years beginning before the earlier

12 of—

13 (A) the later of—

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

15 collective bargaining agreements termi16 nates (determined without regard to any

17 extension thereof on or after such date of

18 enactment), or

19 (ii) January 1, 2000, or

20 (B) January 1, 2004.

21 SEC. 102. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART22 NERS, AND SOLE PROPRIETORS.

23 (a) AMENDMENT TO 1986 CODE.—Subsection (f) of

24 section 4975 (relating to other definitions and special

25 rules) is amended by striking paragraph (6).
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1 (b) AMENDMENTS TO ERISA.—

2 (1) Section 408 of the Employee Retirement In3 come Security Act of 1974 (29 U.S.C. 1108) is

4 amended—

5 (A) by striking subsection (d); and

6 (B) by redesignating subsections (e) and

7 (f) as subsections (d) and (e), respectively.

8 (2) Section 407(b)(3)(B) of such Act (29

9 U.S.C. 1107(b)(3)(B)) is amended by striking ‘‘sec10 tion 408(e)’’ and inserting ‘‘section 408(d)’’.

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

12 this section shall take effect on the date of enactment of

13 this Act.

14 SEC. 103. SALARY REDUCTION ONLY SIMPLE PLANS.

15 (a) SIMPLE RETIREMENT ACCOUNTS.—

16 (1) IN GENERAL.—Paragraph (2) of section

17 408(p) (as amended by section 101(f)) is further

18 amended—

19 (A) by redesignating subparagraphs (C),

20 (D), and (E) as subparagraphs (D), (E), and

21 (F), respectively; and

22 (B) by inserting after subparagraph (B)

23 the following:

24 ‘‘(C) EMPLOYER MAY ELECT SALARY RE25 DUCTION ONLY ARRANGEMENT.—
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1 ‘‘(i) IN GENERAL.—An employer shall

2 be treated as meeting the requirements of

3 subparagraph (A)(iii) for any year if, in

4 lieu of the contributions described in such

5 subparagraph, the employer elects to limit

6 the amount which an employee may elect

7 under subparagraph (A)(i) to a total of

8 $5,000 for the year. If an employer makes

9 an election under this subparagraph for

10 any year, the employer shall notify employ11 ees of such election within a reasonable pe12 riod of time before the 60-day period for

13 such year under paragraph (5)(C).

14 ‘‘(ii) EXCEPTION.—This subpara15 graph shall not apply to an employer if

16 such employer (or any predecessor em17 ployer) maintained another qualified plan

18 (as defined in subparagraph (D)(ii)) with

19 respect to which contributions were made,

20 or benefits were accrued, for service during

21 the year in which the arrangement de22 scribed in clause (i) became effective or ei23 ther of the 2 preceding years. If only indi24 viduals other than employees described in

25 subparagraph (A) of section 410(b)(3) are
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1 eligible to participate in the arrangement

2 described in clause (i), then the preceding

3 sentence shall be applied without regard to

4 any qualified plan in which only employees

5 so described are eligible to participate.’’.

6 (2) SPECIAL RULE FOR ACQUISITIONS, DISPOSI7 TIONS, AND SIMILAR TRANSACTIONS.—Subpara8 graph (B) of section 408(p)(10) is amended by

9 striking ‘‘and’’ at the end of clause (ii), by striking

10 the period at the end of clause (iii) and inserting

11 ‘‘; and’’, and by inserting after clause (iii) the fol12 lowing:

13 ‘‘(iv) the requirement under para14 graph (2)(C) that the employer not have

15 maintained another qualified plan de16 scribed therein.’’.

17 (3) COST-OF-LIVING ADJUSTMENT.—Subpara18 graph (F) of section 408(p)(2) (as so redesignated)

19 is amended by inserting ‘‘and the $5,000 amount

20 under subparagraph (C)’’ after ‘‘subparagraph

21 (A)(ii)’’.

22 (4) COORDINATION WITH MAXIMUM LIMITA23 TION.—Paragraph (8) of section 408(p) (relating to

24 coordination with maximum limitation under sub25 section (a)) is amended by striking ‘‘paragraph
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1 (2)(A)(ii) of this subsection’’ and inserting ‘‘sub2 paragraph (A)(ii) or (C) of paragraph (2) of this

3 subsection, whichever is applicable,’’.

4 (5) CONFORMING AMENDMENT.—Clause (ii) of

5 section 408(p)(10)(B) is amended by striking ‘‘para6 graph (2)(D)’’ and inserting ‘‘paragraph (2)(E)’’.

7 (b) ADOPTION OF SIMPLE PLAN TO MEET NON8 DISCRIMINATION TESTS.—

9 (1) SIMPLE PLAN.—Subparagraph (B) of sec10 tion 401(k)(11) is amended by redesignating clause

11 (iii) as clause (iv) and by inserting after clause (ii)

12 the following new clause:

13 ‘‘(iii) EMPLOYER MAY ELECT SALARY

14 REDUCTION ONLY ARRANGEMENT.—

15 ‘‘(I) IN GENERAL.—An employer

16 shall be treated as meeting the re17 quirements of clause (i)(II) for any

18 year if, in lieu of the contributions de19 scribed in such clause, the employer

20 elects to limit the amount which an

21 employee may elect under clause (i) to

22 a total of $5,000 for the year. If an

23 employer makes an election under this

24 clause for any year, the employer shall

25 notify employees of such election with-
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1 in a reasonable period of time before

2 the 60-day period for such year under

3 clause (iv)(II).

4 ‘‘(II) EXCEPTION.—This clause

5 shall not apply to an employer if such

6 employer (or any predecessor em7 ployer) maintained another qualified

8 plan (as defined in section

9 408(p)(2)(D)(ii)) with respect to

10 which contributions were made, or

11 benefits were accrued, for service dur12 ing the year in which the arrangement

13 described in subclause (I) became ef14 fective or either of the 2 preceding

15 years. This subclause shall not apply

16 if such contributions or benefits were

17 solely on behalf of employees who are

18 not eligible to participate in the ar19 rangement described in subclause

20 (I).’’.

21 (2) COST-OF-LIVING ADJUSTMENT.—Subpara22 graph (E) of section 401(k)(11) is amended by in23 serting ‘‘and the $5,000 amount under subpara24 graph (B)(iii)’’ after ‘‘subparagraph (B)(i)(I)’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to years beginning after December

3 31, 1999.

4 SEC. 104. MODIFICATION OF TOP-HEAVY RULES.

5 (a) REPEAL OF FAMILY AGGREGATION RULES.—

6 Section 416(i)(1)(B)(i)(I) (defining 5-percent owner) is

7 amended by inserting ‘‘(without regard to subsection

8 (a)(1) thereof)’’ after ‘‘section 318’’.

9 (b) SIMPLIFICATION OF DEFINITION OF KEY EM10 PLOYEE.—

11 (1) IN GENERAL.—Section 416(i)(1)(A) (defin12 ing key employee) is amended—

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

14 plan years’’ in the matter preceding clause (i),

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

16 following:

17 ‘‘(i) an officer of the employer who

18 has compensation from the employer of

19 more than $150,000,’’,

20 (C) by striking clause (ii) and redesignat21 ing clauses (iii) and (iv) as clauses (ii) and (iii),

22 respectively, and

23 (D) by striking the second sentence in the

24 matter following clause (iii), as redesignated by

25 subparagraph (C).
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1 (2) CONFORMING AMENDMENT.—Section

2 416(i)(1)(B)(iii) is amended by striking ‘‘and sub3 paragraph (A)(ii)’’.

4 (c) EMPLOYEE ELECTIVE CONTRIBUTIONS TO PLAN

5 NOT TAKEN INTO ACCOUNT.—

6 (1) DEFINITION OF TOP-HEAVY PLAN.—Section

7 416(g)(4) (relating to other special rules) is amend8 ed by adding at the end the following:

9 ‘‘(H) EMPLOYEE ELECTIVE CONTRIBU10 TIONS TO PLAN NOT TAKEN INTO ACCOUNT.—

11 At the election of the employer, any employee

12 elective contribution described in section

13 415(c)(3)(D) to a plan (and earnings allocable

14 thereto) shall not be taken into account for pur15 poses of determining whether a plan is a top16 heavy plan (or whether any aggregation group

17 which includes such plan is a top-heavy

18 group).’’.

19 (2) DEFINITION OF COMPENSATION.—Section

20 416(i)(1)(D) (defining compensation) is amended to

21 read as follows:

22 ‘‘(D) COMPENSATION.—

23 ‘‘(i) IN GENERAL.—For purposes of

24 this paragraph, except as provided in

25 clause (ii), the term ‘compensation’ has the
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1 meaning given such term by section

2 414(q)(4).

3 ‘‘(ii) EMPLOYEE ELECTIVE CONTRIBU4 TIONS TO PLAN NOT TAKEN INTO AC5 COUNT.—At the election of the employer,

6 any employee elective contribution de7 scribed in section 415(c)(3)(D) to a plan

8 shall not be taken into account for pur9 poses of determining compensation.’’.

10 (d) MATCHING CONTRIBUTIONS TAKEN INTO AC11 COUNT FOR MINIMUM CONTRIBUTION REQUIREMENTS.—

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

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

14 ‘‘Employer matching contributions (as defined in section

15 401(m)(4)(A)) shall be taken into account for purposes

16 of this subparagraph.’’.

17 (e) REQUIREMENTS FOR QUALIFICATIONS.—Clause

18 (ii) of section 401(a)(10)(B) (relating to requirements for

19 qualifications for top-heavy plans) is amended by adding

20 at the end the following new flush sentence:

21 ‘‘The preceding sentence shall not apply to

22 a plan if the plan is not top-heavy and if

23 it is not reasonable to expect that the plan

24 will become top-heavy.’’.
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1 (f) DISTRIBUTIONS DURING LAST YEAR BEFORE

2 DETERMINATION DATE TAKEN INTO ACCOUNT.—Section

3 416(g) is amended—

4 (1) in paragraph (3)—

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

6 heading and inserting ‘‘LAST YEAR BEFORE DE7 TERMINATION DATE’’, and

8 (B) in the matter following subparagraph

9 (B), by striking ‘‘5-year period’’ and inserting

10 ‘‘1-year period’’, and

11 (2) in paragraph (4)(E)—

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

13 heading and inserting ‘‘LAST YEAR BEFORE DE14 TERMINATION DATE’’, and

15 (B) by striking ‘‘5-year period’’ and insert16 ing ‘‘1-year period’’.

17 (g) DEFINITION OF TOP-HEAVY PLANS.—

18 (1) EXCLUSION OF CERTAIN PLANS FROM DEFI19 NITION OF TOP-HEAVY PLAN.—Paragraph (4) of sec20 tion 416(d) (relating to other special rules for top21 heavy plans) is amended by adding at the end the

22 following new subparagraphs:

23 ‘‘(H) CASH OR DEFERRED ARRANGEMENTS

24 USING ALTERNATIVE METHODS OF MEETING

25 NONDISCRIMINATION REQUIREMENTS.—The
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1 term ‘top-heavy plan’ shall not include a cash

2 or deferred arrangement to the extent that such

3 arrangement meets the requirements of section

4 401(k)(12). This subparagraph shall also apply

5 to contributions that are not required to satisfy

6 the requirements of section 401(k)(12) but are

7 consistent with the purposes of such section, as

8 permitted under regulations which the Sec9 retary shall prescribe. Nothing in this subpara10 graph shall preclude an employer from taking

11 into account contributions made under the cash

12 or deferred arrangement when determining

13 whether any plan of such employer satisfies the

14 requirements of this section.

15 ‘‘(I) DEFINED CONTRIBUTION PLANS

16 USING ALTERNATIVE METHODS OF MEETING

17 NONDISCRIMINATION REQUIREMENTS.—The

18 term ‘top-heavy plan’ shall not include a de19 fined contribution plan to the extent that such

20 plan meets the requirements of section

21 401(m)(11). This subparagraph shall also apply

22 to contributions that are not required to satisfy

23 the requirements of section 401(m)(11) but are

24 consistent with the purposes of such section, as

25 permitted under regulations which the Sec-
24

•HR 1102 IH

1 retary shall prescribe. Nothing in this subpara2 graph shall preclude an employer from taking

3 into account contributions made under the de4 fined contribution plan when determining

5 whether any plan of such employer satisfies the

6 requirements of this section.’’.

7 (2) AGGREGATION GROUP NOT REQUIRED TO

8 INCLUDE CERTAIN PLANS.—Clause (i) of section

9 416(g)(2)(A) of such Code (relating to required ag10 gregation) is amended by adding at the end the fol11 lowing new flush sentence:

12 ‘‘Such term shall not include a plan or ar13 rangement described in subparagraph (H)

14 or (I) of paragraph (4).’’.

15 (h) ELECTIVE DEFERRALS NOT TAKEN INTO AC16 COUNT.—Clause (i) of section 416(c)(2)(B) (relating to

17 special rule where maximum contribution less than 3 per18 cent) is amended by inserting ‘‘(other than elective defer19 rals (as defined in section 402(g)(3))’’ after ‘‘contribu20 tions’’.

21 (i) FROZEN PLAN EXEMPT FROM MINIMUM BENE22 FIT REQUIREMENT.—Subparagraph (C) of section

23 416(c)(1) (relating to defined benefit plans) is amended—

24 (1) in clause (i) by striking ‘‘clause (ii)’’ and in25 serting ‘‘clause (ii) or (iii)’’, and
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•HR 1102 IH

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

2 ‘‘(iii) For purposes of determining an

3 employee’s years of service with the em4 ployer, any service with the employer shall

5 be disregarded to the extent that such

6 service occurs during a plan year when no

7 employee or former employee benefits

8 under the plan within the meaning of sec9 tion 410(b).’’.

10 (j) ALTERNATIVE 60 PERCENT.—Subsection (g) of

11 section 416 (relating to top heavy plan defined) is amend12 ed by adding at the end the following:

13 ‘‘(5) ALTERNATIVE 60 PERCENT TEST.—

14 ‘‘(A) IN GENERAL.—For any plan year, an

15 employer may elect for this paragraph to apply

16 to all plans maintained by such employer. If

17 this paragraph applies to a plan, the term ‘top18 heavy plan’ shall have the meaning set forth in

19 subparagraph (B) and the term ‘top-heavy

20 group’ shall have the meaning set forth in sub21 paragraph (C).

22 ‘‘(B) TOP-HEAVY PLAN DEFINED.—In the

23 case of any plan to which this paragraph ap24 plies, the term ‘top-heavy plan’ means, with re25 spect to any plan year—
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1 ‘‘(i) any defined benefit plan if, for

2 the plan year ending on the determination

3 date, the present value of the accruals for

4 key employees exceeds 60 percent of the

5 present value of the accruals for all em6 ployees, and

7 ‘‘(ii) any defined contribution plan if,

8 for the plan year ending on the determina9 tion date, the annual additions for key em10 ployees exceed 60 percent of the annual

11 additions for all employees.

12 ‘‘(C) TOP-HEAVY GROUP.—In the case of

13 any plan to which this paragraph applies, the

14 term ‘top-heavy group’ means any aggregation

15 group if—

16 ‘‘(i) the sum, for the plan year ending

17 on the determination date, of—

18 ‘‘(I) the present value of the ac19 cruals for key employees under all de20 fined benefit plans included in such

21 group, and

22 ‘‘(II) the aggregate of the annual

23 additions of key employees under all

24 defined contribution plans included in

25 such group,
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•HR 1102 IH

1 ‘‘(ii) exceeds 60 percent of a similar

2 sum determined for all employees.

3 ‘‘(D) ANNUAL ADDITION.—For purposes of

4 this paragraph, the term ‘annual addition’ shall

5 have the same meaning as when used in section

6 415(c)(2) (without regard to section 415(l) or

7 section 419A(d)(2)).

8 ‘‘(E) CERTAIN RULES NOT TO APPLY.—

9 Paragraphs (3) and (4) (other than subpara10 graphs (B), (C), (D), (E), and (G) of para11 graph (4)) shall not apply for purposes of this

12 paragraph.’’.

13 (k) CONFORMING AMENDMENTS.—

14 (1) Subparagraph (A) of section 416(g)(1) is

15 amended by striking ‘‘subparagraph (B)’’ and insert16 ing ‘‘subparagraph (B) and paragraph (5)’’.

17 (2) Subparagraph (B) of section 416(g)(2) is

18 amended by striking ‘‘The term’’ and inserting ‘‘Ex19 cept as provided in paragraph (5), the term’’.

20 (3) Subparagraph (A) of section 415(b)(5) is

21 amended by adding at the end the following: ‘‘An

22 employee shall not be credited with a year of partici23 pation in a defined benefit plan for any year in

24 which such employee does not benefit under the plan

25 within the meaning of section 410(b).’’.
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1 (l) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to years beginning after December

3 31, 1999.

4 SEC. 105. ELECTIVE DEFERRALS NOT TAKEN INTO AC5 COUNT FOR PURPOSES OF LIMITS.

6 (a) IN GENERAL.—Section 404 is amended by adding

7 at the end the following new subsection:

8 ‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC9 COUNT FOR PURPOSES OF LIMITS.—Elective deferrals (as

10 defined in section 402(g)(3)) shall not be subject to any

11 limitations described in this section (other than subsection

12 (a)), and such elective deferrals shall not be taken into

13 account in applying such limitations to any other contribu14 tions.’’.

15 (b) CONFORMING AMENDMENTS.—Paragraph (3) of

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

17 ‘‘(3) CONTRIBUTIONS NOT TAKEN INTO AC18 COUNT.—In determining the amount of nondeduct19 ible contributions for any taxable year, there shall

20 not be taken into account—

21 ‘‘(A) any elective deferral (as defined in

22 section 402(g)(3)), or

23 ‘‘(B) any contribution for such taxable

24 year which is distributed to the employer in a

25 distribution described in section
29

•HR 1102 IH

1 4980(c)(2)(B)(ii) if such distribution is made

2 on or before the last day on which a contribu3 tion may be made for such taxable year under

4 section 404(a)(6).’’.

5 (c) EFFECTIVE DATE.—The amendment made by

6 this section shall apply to years beginning after December

7 31, 1999.

8 SEC. 106. REDUCED PBGC PREMIUM FOR NEW PLANS OF

9 SMALL EMPLOYERS.

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

11 4006(a)(3) of the Employee Retirement Income Security

12 Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is amended—

13 (1) by inserting ‘‘other than a new single-em14 ployer plan of a small employer (as defined in clause

15 (iv)),’’ after ‘‘in the case of a single-employer plan,’’

16 in clause (i),

17 (2) by striking the period at the end of clause

18 (iii) and inserting ‘‘; and’’, and

19 (3) by inserting after clause (iii) the following

20 new clause:

21 ‘‘(iv) in the case of a new single-employer plan

22 of a small employer, $5 for each individual who is

23 a participant in such plan during the plan year. For

24 purposes of this clause (iv):
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1 ‘‘(I) The term ‘new single-employer plan’

2 means a single-employer plan during its first

3 five plan years; provided, however, that a sin4 gle-employer plan is not a new single-employer

5 plan if any contributing sponsor or any member

6 of its controlled group (including any prede7 cessor of a contributing sponsor or member of

8 such predecessor’s controlled group) had estab9 lished or maintained a plan to which this title

10 applied that included substantially the same

11 employees as such new plan, at any time within

12 the 36-month period preceding the adoption of

13 such new plan.

14 ‘‘(II) The term ‘small employer‘ means a

15 contributing sponsor that on the first day of the

16 plan year has, in combination with all members

17 of its controlled group, 100 or fewer employees.

18 ‘‘(III) In the case of a plan maintained by

19 two or more contributing sponsors that are not

20 part of the same controlled group, the employ21 ees of all contributing sponsors and their con22 trolled groups shall be aggregated for purposes

23 of determining whether the plan shall be consid24 ered to be a plan of a small employer.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to plan years beginning after De3 cember 31, 1999.

4 SEC. 107. PHASE-IN OF ADDITIONAL PREMIUM FOR NEW

5 PLANS.

6 (a) IN GENERAL.—Subparagraph (E) of section

7 4006(a)(3) of the Employee Retirement Income Security

8 Act of 1974 (29 U.S.C. 1306(a)(3)(E)) is amended—

9 (1) by inserting ‘‘(or, in the case of a new sin10 gle-employer plan described in clause (vi), the

11 amount determined under clause (v))’’ after ‘‘deter12 mined under clause (ii)’’ in clause (i), and

13 (2) by inserting after clause (iv) the following

14 new clauses:

15 ‘‘(v) The amount determined under this clause for

16 any plan year of a new single-employer plan (as described

17 in clause (vi)) shall be an amount equal to the product

18 derived by multiplying the amount determined under

19 clause (ii) by the applicable percentage. For purposes of

20 this clause (v), the term ‘applicable percentage’ means—

21 ‘‘(I) 0 percent, for the first plan year,

22 ‘‘(II) 20 percent, for the second plan year,

23 ‘‘(III) 40 percent, for the third plan year,

24 ‘‘(IV) 60 percent, for the fourth plan year, and

25 ‘‘(V) 80 percent, for the fifth plan year.
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1 ‘‘(vi) For purposes of clause (v), the term ‘new single2 employer plan’ means a single-employer plan during its

3 first five plan years; provided, however, that a single-em4 ployer plan is not a new single-employer plan if any con5 tributing sponsor or any member of its controlled group

6 (including any predecessor of a contributing sponsor or

7 member of such predecessor’s controlled group) had estab8 lished or maintained a plan to which this title applied that

9 included substantially the same employees as such new

10 plan, at any time within the 36-month period preceding

11 the adoption of such new plan.’’.

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

13 this section shall apply to plan years beginning after De14 cember 31, 1999.

15 SEC. 108. REPEAL OF COORDINATION REQUIREMENTS FOR

16 DEFERRED COMPENSATION PLANS OF STATE

17 AND LOCAL GOVERNMENTS AND TAX-EX18 EMPT ORGANIZATIONS.

19 (a) IN GENERAL.—Subsection (c) of section 457 (re20 lating to deferred compensation plans of State and local

21 governments and tax-exempt organizations) is amended to

22 read as follows:

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

24 compensation of any one individual which may be deferred

25 under subsection (a) during any taxable year shall not ex-
33

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1 ceed $15,000 (as modified by any adjustment provided

2 under subsection (b)(3)).’’.

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

4 subsection (a) shall apply to years beginning after Decem5 ber 31, 1999.

6 SEC. 109. ELIMINATION OF USER FEE FOR REQUESTS TO

7 IRS REGARDING PENSION PLANS.

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

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

10 not require payment of user fees under the program estab11 lished under section 10511 of the Revenue Act of 1987

12 for requests to the Internal Revenue Service for ruling let13 ters, opinion letters, and determination letters or similar

14 requests with respect to the qualified status of a pension

15 benefit plan maintained solely by one or more eligible em16 ployers or any trust which is part of the plan.

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

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

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

20 ownership plan.

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

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

25 an employer is an eligible employer under this section shall
34

•HR 1102 IH

1 be made as of the date of the request described in sub2 section (a).

3 (d) EFFECTIVE DATE.—The provisions of this sec4 tion shall apply with respect to requests made after De5 cember 31, 1999.

6 SEC. 110. ALTERNATIVE METHOD OF MEETING NON7 DISCRIMINATION REQUIREMENTS FOR AUTO8 MATIC CONTRIBUTION TRUST.

9 (a) IN GENERAL.—Section 401(k) (relating to cash

10 or deferred arrangement) is amended by adding at the end

11 the following new paragraph:

12 ‘‘(13) NONDISCRIMINATION REQUIREMENTS

13 FOR AUTOMATIC CONTRIBUTION TRUSTS.—

14 ‘‘(A) IN GENERAL.—A cash or deferred ar15 rangement shall be treated as meeting the re16 quirements of paragraph (3)(A)(ii) if such ar17 rangement constitutes an automatic contribu18 tion trust.

19 ‘‘(B) AUTOMATIC CONTRIBUTION TRUST.—

20 For purposes of this paragraph, the term ‘auto21 matic contribution trust’ means an

22 arrangement—

23 ‘‘(i) under which each employee eligi24 ble to participate in the arrangement is

25 treated as having elected to have the em-
35

•HR 1102 IH

1 ployer make elective contributions in an

2 amount equal to the uniform percentage

3 (not less than 3 percent) of compensation

4 provided under the arrangement until the

5 employee specifically elects not to have

6 such contributions made, and

7 ‘‘(ii) which meets the other require8 ments of this paragraph.

9 Clause (i) of this subparagraph shall not apply

10 to any employee who was eligible to participate

11 in the arrangement (or a predecessor arrange12 ment) immediately before the first date on

13 which the arrangement is an automatic con14 tribution trust. The election treated as having

15 been made under clause (i) shall cease to apply

16 to compensation paid after the specific election

17 by the employee.

18 ‘‘(C) PARTICIPATION.—

19 ‘‘(i) Except as provided in clause (ii),

20 an arrangement meets the requirements of

21 this subparagraph for any year if, during

22 the plan year or the preceding plan year,

23 elective contributions are made on behalf

24 of at least 70 percent of employees other
36

•HR 1102 IH

1 than highly compensated employees eligible

2 to participate in the arrangement.

3 ‘‘(ii) An arrangement (other than a

4 successor arrangement) shall be treated as

5 meeting the requirements of this subpara6 graph with respect to the first plan year in

7 which the arrangement is effective.

8 ‘‘(D) MATCHING OR NONELECTIVE CON9 TRIBUTIONS.—The requirements of this sub10 paragraph are met if, under the arrangement,

11 the employer—

12 ‘‘(i) makes matching contributions on

13 behalf of each employee who is not a highly

14 compensated employee in an amount equal

15 to 50 percent of the elective contributions

16 of the employee to the extent such elective

17 contributions do not exceed 5 percent of

18 compensation, or

19 ‘‘(ii) is required, without regard to

20 whether the employee makes an elective

21 contribution or employee contribution, to

22 make a contribution to a defined contribu23 tion plan on behalf of each employee who

24 is not a highly compensated employee and

25 who is eligible to participate in the ar-
37

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1 rangement in an amount equal to at least

2 2 percent of the employee’s compensation.

3 The rules of clauses (ii), (iii), and (iv) of para4 graph (12)(B) shall apply for purposes of clause

5 (i).

6 ‘‘(E) VESTING.—The requirements of this

7 subparagraph are met if the requirements of

8 subparagraph (C) of paragraph (2) are met

9 with respect to all employer contributions (in10 cluding matching contributions) taken into ac11 count in determining whether the requirements

12 of subparagraph (B) or (C) are met.

13 ‘‘(F) NOTICE REQUIREMENTS.—

14 ‘‘(i) IN GENERAL.—The requirements

15 of this subparagraph are met if the re16 quirements of clauses (ii) and (iii) are met.

17 ‘‘(ii) REASONABLE PERIOD TO MAKE

18 ELECTION.—The requirements of this

19 clause are met if each employee to whom

20 subparagraph (B)(i) applies—

21 ‘‘(I) receives a notice explaining

22 the employee’s right under the ar23 rangement to elect not to have elective

24 contributions made on the employee’s

25 behalf, and
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1 ‘‘(II) has a reasonable period of

2 time after receipt of such notice and

3 before the first elective contribution is

4 made to make such election.

5 ‘‘(iii) ANNUAL NOTICE OF RIGHTS

6 AND OBLIGATIONS.—The requirements of

7 this clause are met if each employee eligi8 ble to participate in the arrangement is,

9 within a reasonable period before any year,

10 given notice of the employee’s rights and

11 obligations under the arrangement.

12 The requirements of clauses (i) and (ii) of para13 graph (12)(D) shall be met with respect to the

14 notices described in clauses (ii) and (iii) of this

15 subparagraph.’’.

16 (b) MATCHING CONTRIBUTIONS.—Section 401(m)

17 (relating to nondiscrimination test for matching contribu18 tions and employee contributions) is amended by redesig19 nating paragraph (12) as paragraph (13) and by inserting

20 after paragraph (11) the following new paragraph:

21 ‘‘(12) ALTERNATIVE METHOD FOR AUTOMATIC

22 CONTRIBUTION TRUSTS.—

23 ‘‘(A) IN GENERAL.—A defined contribution

24 plan shall be treated as meeting the require-
39

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1 ments of paragraph (2) with respect to match2 ing contributions if the plan—

3 ‘‘(i) meets the contribution require4 ments of subparagraphs (B)(i) and (D) of

5 subsection (k)(13),

6 ‘‘(ii) meets the participation require7 ments of subsection (k)(13)(C),

8 ‘‘(iii) meets the vesting and notice re9 quirements of subparagraphs (E) and (F)

10 of subsection (k)(13), and

11 ‘‘(iv) meets the requirements of para12 graph (11)(B).

13 ‘‘(B) MATCHING CONTRIBUTIONS.—An an14 nuity contract under section 403(b) shall be

15 treated as meeting the requirements of para16 graph (2) with respect to matching contribu17 tions if such contract meets requirements simi18 lar to the requirements under subparagraph

19 (A).’’.

20 (c) EXCLUSION FROM DEFINITION OF TOP-HEAVY

21 PLANS.—Paragraph (4) of section 416(d) (relating to

22 other special rules for top-heavy plans), as amended by

23 section 104(g), is amended by adding at the end the fol24 lowing new subparagraph:
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•HR 1102 IH

1 ‘‘(J) AUTOMATIC CONTRIBUTION TRUST.—

2 The term ‘top-heavy plan’ shall not include an

3 automatic contribution trust under section

4 401(k)(13). Nothing in this subparagraph shall

5 preclude an employer from taking into account

6 contributions made under the automatic con7 tribution trust when determining whether any

8 plan of such employer satisfies the requirements

9 of this section.’’.

10 (d) DEFINITION OF COMPENSATION.—

11 (1) IN GENERAL.—Paragraph (9) of section

12 401(k) is amended to read as follows:

13 ‘‘(9) COMPENSATION.—

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

15 subparagraph (B), for purposes of this section,

16 the term ‘compensation’ has the meaning given

17 such term by section 414(s).

18 ‘‘(B) USE OF BASE PAY.—For purposes of

19 paragraph (12)(B), the term ‘compensation’

20 means the definition of compensation used by

21 the cash or deferred arrangement if such

22 compensation—

23 ‘‘(i) meets the requirements of section

24 414(s), or

25 ‘‘(ii) constitutes base pay.
41

•HR 1102 IH

1 ‘‘(C) BASE PAY.—For purposes of sub2 paragraph (B), the term ‘base pay’ means a

3 reasonable definition of compensation that does

4 not by design favor highly compensated employ5 ees and that excludes on a consistent basis all

6 irregular or additional compensation.’’.

7 (2) AUTOMATIC CONTRIBUTION TRUSTS.—Para8 graph (9)(B) of section 401(k) (as amended by

9 paragraph (1)) is amended by striking ‘‘paragraph

10 (12)(B)’’ and inserting ‘‘paragraphs (12)(B),

11 (13)(B), and (13)(D)(i)’’.

12 (3) MATCHING CONTRIBUTIONS.—Paragraph

13 (11) of section 401(m) is amended by adding at the

14 end the following:

15 ‘‘(C) DEFINITION OF COMPENSATION.—

16 For purposes of subparagraph (B), the term

17 ‘‘compensation’’ has the meaning given such

18 term by subsection (k)(9)(B).’’.

19 (e) APPLICATION BY YEAR OR PAYROLL PERIOD.—

20 (1) CASH OR DEFERRED ARRANGEMENTS.—

21 Subparagraph (B) of section 401(k)(12) is amended

22 by adding at the end the following:

23 ‘‘(iv) APPLICATION BY YEAR OR PAY24 ROLL PERIOD.—The requirements of this
42

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1 subparagraph may be met for a plan year

2 by meeting such requirements either—

3 ‘‘(I) with respect to the plan year

4 as a whole, or

5 ‘‘(II) separately with respect to

6 each payroll period (or other payment

7 of compensation) taken into account

8 under the arrangement for the plan

9 year.’’.

10 (2) DEFINED CONTRIBUTION PLANS.—Para11 graph (11) of section 401(m) (as amended by this

12 section) is amended by adding at the end the follow13 ing:

14 ‘‘(D) APPLICATION BY YEAR OR PAYROLL

15 PERIOD.—The requirements of subparagraph

16 (B) may be met for a plan year by meeting

17 such requirements either—

18 ‘‘(i) with respect to the plan year as

19 a whole, or

20 ‘‘(ii) separately with respect to each

21 payroll period (or other payment of com22 pensation) taken into account under the

23 plan for the plan year.’’.
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1 (f) SECTION 403(b) CONTRACTS.—Paragraph (11) of

2 section 401(m) (as amended by this section) is amended

3 by adding at the end the following:

4 ‘‘(E) SECTION 403(B) CONTRACTS.—An an5 nuity contract under section 403(b) shall be

6 treated as meeting the requirements of para7 graph (2) with respect to matching contribu8 tions if such contract meets requirements simi9 lar to the requirements under subparagraph

10 (A).’’.

11 (e) EFFECTIVE DATE.—

12 (1) IN GENERAL.—Except as provided by para13 graph (2), the amendments made by this section

14 shall apply to plan years beginning after December

15 31, 1999.

16 (2) EXCEPTION.—The amendments made by

17 subsections (d)(1), (d)(3), (e), and (f) shall apply to

18 years beginning after December 31, 1998.

19 SEC. 111. DEDUCTION LIMITS.

20 (a) IN GENERAL.—

21 (1) STOCK BONUS AND PROFIT SHARING

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

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

24 amended by striking ‘‘15 percent’’ and inserting ‘‘25

25 percent’’.
44

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

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

3 following:

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

5 purposes of paragraphs (3), (7), and (9), the term

6 ‘compensation otherwise paid or accrued during the

7 taxable year’ shall include amounts treated as ‘par8 ticipant’s compensation’ under subparagraph (C) or

9 (D) of section 415(c)(3).’’.

10 (3) DEFINED CONTRIBUTION PLANS.—Subpara11 graph (A) of section 404(a)(3) (relating to stock

12 bonus and profit sharing trusts) is amended by add13 ing at the end the following:

14 ‘‘(vi) DEFINED CONTRIBUTION PLANS

15 SUBJECT TO THE FUNDING STANDARDS.—

16 Except as provided by the Secretary, for

17 purposes of this subparagraph, a defined

18 contribution plan which is subject to the

19 funding standards of section 412 shall be

20 treated in the same manner as a stock

21 bonus or profit-sharing plan.’’.

22 (b) CONFORMING AMENDMENTS.—

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

24 amended by striking clause (v) and by redesignating
45

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1 clause (vi) (as added by subsection (a)(3) of this sec2 tion) as clause (v).

3 (2) Subparagraph (B) of section 404(a)(3) is

4 amended by striking the last sentence thereof.

5 (3) Subparagraph (D) of section 404(a)(8) is

6 amended by striking the period at the end and in7 serting the following: ‘‘, except that such earned in8 come shall be adjusted under rules similar to the

9 rules of paragraph (12).’’.

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

11 amended by striking ‘‘15 percent’’ each place it ap12 pears and inserting ‘‘25 percent’’.

13 (5) Paragraph (2) of section 404(h) is amended

14 by striking ‘‘stock bonus or profit-sharing trust’’ and

15 inserting ‘‘trust subject to subsection (a)(3)(A)’’.

16 (6) Clause (i) of section 4972(c)(6)(B) is

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

18 404(a))’’ and inserting ‘‘(within the meaning of sec19 tion 404(a) and as adjusted under section

20 404(a)(12))’’.

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

22 this section shall apply to years beginning after December

23 31, 1999.
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1 SEC. 112. OPTION TO TREAT ELECTIVE DEFERRALS AS

2 AFTER-TAX CONTRIBUTIONS.

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

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

5 is amended by inserting after section 402 the following

6 new section:

7 ‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER8 RALS AS PLUS CONTRIBUTIONS.

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

10 plan includes a qualified plus contribution program—

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

12 an employee pursuant to the program shall be treat13 ed as an elective deferral for purposes of this chap14 ter, except that such contribution shall not be ex15 cludable from gross income, and

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

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

18 meet any requirement of this chapter solely by rea19 son of including such program.

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

21 For purposes of this section—

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

23 contribution program’ means a program under which

24 an employee may elect to make designated plus con25 tributions in lieu of all or a portion of elective defer-
47

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1 rals the employee is otherwise eligible to make under

2 the applicable retirement plan.

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

4 program shall not be treated as a qualified plus con5 tribution program unless the applicable retirement

6 plan—

7 ‘‘(A) establishes separate accounts (‘des8 ignated plus accounts’) for the designated plus

9 contributions of each employee and any earn10 ings properly allocable to the contributions, and

11 ‘‘(B) maintains separate recordkeeping

12 with respect to each account.

13 ‘‘(c) DEFINITIONS AND RULES RELATING TO DES14 IGNATED PLUS CONTRIBUTIONS.—For purposes of this

15 section—

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

17 term ‘designated plus contribution’ means any elec18 tive deferral which—

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

20 employee without regard to this section, and

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

22 and in such manner as the Secretary may pre23 scribe) as not being so excludable.

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

25 elective deferrals which an employee may designate
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1 under paragraph (1) shall not exceed the excess (if

2 any) of—

3 ‘‘(A) the maximum amount of elective de4 ferrals excludable from gross income of the em5 ployee for the taxable year (without regard to

6 this section), over

7 ‘‘(B) the aggregate amount of elective de8 ferrals of the employee for the taxable year

9 which the employee does not designate under

10 paragraph (1).

11 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

12 ‘‘(A) IN GENERAL.—A rollover contribu13 tion of any payment or distribution from a des14 ignated plus account which is otherwise allow15 able under this chapter may be made only if the

16 contribution is to—

17 ‘‘(i) another designated plus account

18 of the individual from whose account the

19 payment or distribution was made, or

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

21 ‘‘(B) COORDINATION WITH LIMIT.—Any

22 rollover contribution to a designated plus ac23 count under subparagraph (A) shall not be

24 taken into account for purposes of paragraph

25 (1).
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1 ‘‘(d) DISTRIBUTION RULES.—For purposes of this

2 title—

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

4 from a designated plus account shall not be includ5 ible in gross income.

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

7 of this subsection—

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

9 distribution’ has the meaning given such term

10 by section 408A(d)(2)(A).

11 ‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU12 SION PERIOD.—A payment or distribution from

13 a designated plus account shall not be treated

14 as a qualified distribution if such payment or

15 distribution is made within the 5-taxable-year

16 period beginning with the earlier of—

17 ‘‘(i) the earlier of—

18 ‘‘(I) the 1st taxable year for

19 which the individual made a des20 ignated plus contribution to any des21 ignated plus account established for

22 such individual under the same appli23 cable retirement plan, or

24 ‘‘(II) if a rollover contribution

25 was made to such designated plus ac-
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•HR 1102 IH

1 count from a designated plus account

2 previously established for such individ3 ual under another applicable retire4 ment plan, the 1st taxable year for

5 which the individual made a des6 ignated plus contribution to such pre7 viously established account), or

8 ‘‘(ii) the 1st taxable year for which

9 the individual (or the individual’s spouse)

10 made a contribution to a Roth IRA estab11 lished for such individual.

12 ‘‘(C) DISTRIBUTIONS OF EXCESS DEFER13 RALS AND EARNINGS.—The term ‘qualified dis14 tribution’ shall not include any distribution of

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

16 any income on the excess deferral.

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

18 be applied separately with respect to distributions

19 and payments from a designated plus account and

20 other distributions and payments from the plan.

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

22 section—

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

24 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)(7) (as amended by sections 301 and 302) is

23 amended by adding at the end the following:

24 ‘‘Without regard to the foregoing provisions of

25 this paragraph, if any portion of an eligible roll-
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1 over distribution is attributable to payments or

2 distributions from a designated plus account (as

3 defined in section 402A), an eligible retirement

4 plan with respect to such portion shall include

5 only another designated plus account and a

6 Roth IRA.’’

7 (d) REPORTING REQUIREMENTS.—

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

9 amended by inserting ‘‘, including the amount of

10 designated plus contributions (as defined in section

11 402A)’’ before the comma at the end.

12 (2) INFORMATION.—Section 6047 is amended

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

14 by inserting after subsection (e) the following new

15 subsection:

16 ‘‘(f) DESIGNATED PLUS CONTRIBUTIONS.—The Sec17 retary shall require the plan administrator of each applica18 ble retirement plan (as defined in section 402A) to make

19 such returns and reports regarding designated plus con20 tributions (as so defined) to the Secretary, participants

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

22 the Secretary may prescribe.’’

23 (e) CONFORMING AMENDMENTS.—

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

25 the first sentence the following new sentence: ‘‘Such
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1 term includes a rollover contribution described in

2 section 402A(c)(3)(A).’’

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

4 I of subchapter D of chapter 1 is amended by insert5 ing after the item relating to section 402 the follow6 ing new item:

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

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

8 this section shall apply to taxable years beginning after

9 December 31, 2000.

10 SEC. 113. CREDIT FOR PENSION PLAN STARTUP COSTS OF

11 SMALL EMPLOYERS.

12 (a) IN GENERAL.—Subpart D of part IV of sub13 chapter A of chapter 1 (relating to business related cred14 its) is amended by adding at the end the following new

15 section:

16 ‘‘SEC. 45D. SMALL EMPLOYER PENSION PLAN STARTUP

17 COSTS.

18 ‘‘(a) GENERAL RULE.—For purposes of section 38,

19 in the case of an eligible employer, the small employer pen20 sion plan startup cost credit determined under this section

21 for any taxable year is an amount equal to 50 percent

22 of the qualified startup costs paid or incurred by the tax23 payer during the taxable year.
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1 ‘‘(b) DOLLAR LIMITATION.—The amount of the cred2 it determined under this section for any taxable year shall

3 not exceed—

4 ‘‘(1) $1,000 for the first credit year,

5 ‘‘(2) $500 for each of the 2 taxable years imme6 diately following the first credit year, and

7 ‘‘(3) zero for any other taxable year.

8 ‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this

9 section—

10 ‘‘(1) IN GENERAL.—The term ‘eligible em11 ployer’ has the meaning given such term by section

12 408(p)(2)(C)(i).

13 ‘‘(2) EMPLOYERS MAINTAINING QUALIFIED

14 PLANS DURING 1998 NOT ELIGIBLE.—Such term

15 shall not include an employer if such employer (or

16 any predecessor employer) maintained a qualified

17 plan (as defined in section 408(p)(2)(D)(ii)) with re18 spect to which contributions were made, or benefits

19 were accrued, for service in 1998. If only individuals

20 other than employees described in subparagraph (A)

21 of section 410(b)(3) are eligible to participate in the

22 qualified employer plan referred to in subsection

23 (d)(1), then the preceding sentence shall be applied

24 without regard to any qualified plan in which only

25 employees so described are eligible to participate.
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1 ‘‘(d) OTHER DEFINITIONS.—For purposes of this

2 section—

3 ‘‘(1) QUALIFIED STARTUP COSTS.—

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

5 startup costs’ means any ordinary and nec6 essary expenses of an eligible employer which

7 are paid or incurred in connection with—

8 ‘‘(i) the establishment or administra9 tion of an eligible employer plan, or

10 ‘‘(ii) the retirement-related education

11 of employees with respect to such plan.

12 ‘‘(B) PLAN MUST HAVE AT LEAST 2 PAR13 TICIPANTS.—Such term shall not include any

14 expense in connection with a plan that does not

15 have at least 2 individuals who are eligible to

16 participate.

17 ‘‘(C) PLAN MUST BE ESTABLISHED BE18 FORE JANUARY 1, 2002.—Such term shall not

19 include any expense in connection with a plan

20 established after December 31, 2001.

21 ‘‘(2) ELIGIBLE EMPLOYER PLAN.—The term

22 ‘eligible employer plan’ means a qualified employer

23 plan within the meaning of section 4972(d).

24 ‘‘(3) FIRST CREDIT YEAR.—The term ‘first

25 credit year’ means—
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1 ‘‘(A) the taxable year which includes the

2 date that the eligible employer plan to which

3 such costs relate becomes effective, or

4 ‘‘(B) at the election of the eligible em5 ployer, the taxable year preceding the taxable

6 year referred to in subparagraph (A).

7 ‘‘(e) SPECIAL RULES.—For purposes of this

8 section—

9 ‘‘(1) AGGREGATION RULES.—All persons treat10 ed as a single employer under subsection (a) or (b)

11 of section 52, or subsection (n) or (o) of section 414,

12 shall be treated as one person. All eligible employer

13 plans shall be treated as 1 eligible employer plan.

14 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No de15 duction shall be allowed for that portion of the quali16 fied startup costs paid or incurred for the taxable

17 year which is equal to the credit determined under

18 subsection (a).

19 ‘‘(3) ELECTION NOT TO CLAIM CREDIT.—This

20 section shall not apply to a taxpayer for any taxable

21 year if such taxpayer elects to have this section not

22 apply for such taxable year.’’

23 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI24 NESS CREDIT.—Section 38(b) (defining current year busi25 ness credit) is amended by striking ‘‘plus’’ at the end of
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1 paragraph (11), by striking the period at the end of para2 graph (12) and inserting ‘‘, plus’’, and by adding at the

3 end the following new paragraph:

4 ‘‘(13) in the case of an eligible employer (as de5 fined in section 45D(c)), the small employer pension

6 plan startup cost credit determined under section

7 45D(a).’’

8 (c) CONFORMING AMENDMENTS.—

9 (1) Section 39(d) is amended by adding at the

10 end the following new paragraph:

11 ‘‘(8) NO CARRYBACK OF SMALL EMPLOYER

12 PENSION PLAN STARTUP COST CREDIT BEFORE EF13 FECTIVE DATE.—No portion of the unused business

14 credit for any taxable year which is attributable to

15 the small employer pension plan startup cost credit

16 determined under section 45D may be carried back

17 to a taxable year ending on or before the date of the

18 enactment of section 45D.’’

19 (2) Subsection (c) of section 196 is amended by

20 striking ‘‘and’’ at the end of paragraph (7), by strik21 ing the period at the end of paragraph (8) and in22 serting ‘‘, and’’, and by adding at the end the follow23 ing new paragraph:

24 ‘‘(9) the small employer pension plan startup

25 cost credit determined under section 45D(a).’’
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1 (3) The table of sections for subpart D of part

2 IV of subchapter A of chapter 1 is amended by add3 ing at the end the following new item:

‘‘Sec. 45D. Small employer pension plan startup costs.’’

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

5 this section shall apply to costs paid or incurred in taxable

6 years ending after the date of the enactment of this Act.

7 TITLE II—ENHANCING FAIRNESS

8 FOR WOMEN AND CHILDREN

9 SEC. 201. ADDITIONAL SALARY REDUCTION CATCH-UP CON10 TRIBUTIONS.

11 (a) LIMITATION ON EXCLUSION FOR ELECTIVE DE12 FERRALS.—

13 (1) IN GENERAL.—Subsection (g) of section

14 402 (as amended by section 101(d)) is further

15 amended by adding at the end the following:

16 ‘‘(9) CATCH-UP CONTRIBUTIONS FOR THOSE

17 APPROACHING RETIREMENT.—In the case of an indi18 vidual who has attained age 50 during any taxable

19 year, the limitation of paragraph (1) for such year,

20 after the application of paragraph (8), shall be in21 creased by $5,000.’’.

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

23 (4) of section 402(g) (relating to cost-of-living ad24 justment), as amended by section 101(d), is further
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1 amended by inserting ‘‘and the $5,000 amount

2 under paragraph (9)’’ after ‘‘paragraph (1)’’.

3 (b) SIMPLE RETIREMENT ACCOUNTS.—

4 (1) IN GENERAL.—Paragraph (2) of section

5 408(p) (relating to qualified salary reduction ar6 rangement) (as amended by sections 101(f) and

7 103(a)) is further amended by redesignating sub8 paragraph (F) as subparagraph (G) and by inserting

9 after subparagraph (E) the following new subpara10 graph:

11 ‘‘(F) CATCH-UP CONTRIBUTIONS FOR

12 THOSE APPROACHING RETIREMENT.—In the

13 case of an individual who has attained age 50

14 during any taxable year, the limitation of sub15 paragraph (A)(ii) for such year shall be in16 creased by $5,000.’’.

17 (2) COST-OF-LIVING ADJUSTMENT.—Subpara18 graph (G) of section 408(p)(2) (as so redesignated)

19 is amended by inserting ‘‘and the $5,000 amount

20 under subparagraph (F)’’ after ‘‘subparagraph

21 (A)(ii)’’.

22 (c) DEFERRED COMPENSATION PLANS OF STATE

23 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI24 ZATIONS.—
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1 (1) IN GENERAL.—Subsection (b) of section

2 457 (relating to definition of eligible deferred com3 pensation plan) is amended by adding at the end the

4 following new paragraph:

5 ‘‘(7) CATCH-UP CONTRIBUTIONS FOR THOSE

6 APPROACHING RETIREMENT.—In the case of an indi7 vidual who has attained age 50 during any taxable

8 year, the limitation of paragraph (2)(A) for such

9 year shall be increased by $5,000.’’.

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

11 (15) of section 457(e) (relating to cost-of-living ad12 justment) is amended by inserting ‘‘, and the $5,000

13 amount specified in subsection (b)(7),’’ after

14 ‘‘(c)(1)’’.

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

16 this section shall apply to years beginning after December

17 31, 1999.

18 SEC. 202. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF

19 EMPLOYEES TO DEFINED CONTRIBUTION

20 PLANS.

21 (a) IN GENERAL.—

22 (1) Subparagraph (B) of section 415(c)(1) (re23 lating to limitation for defined contribution plans) is

24 amended to read as follows:

25 ‘‘(B) the participant’s compensation.’’.
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1 (2) CONFORMING AMENDMENTS.—

2 (A) Subsection (f) of section 72 is amend3 ed by striking ‘‘section 403(b)(2)(D)(iii))’’ and

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

5 on December 31, 1998)’’.

6 (B) Section 403(b) is amended—

7 (i) by striking ‘‘the exclusion allow8 ance for such taxable year’’ in paragraph

9 (1) and inserting ‘‘the applicable limit

10 under section 415’’,

11 (ii) by striking paragraph (2), and

12 (iii) by inserting ‘‘or any amount re13 ceived by a former employee after the 5th

14 taxable year following the taxable year in

15 which such employee was terminated’’ be16 fore the period at the end of the second

17 sentence of paragraph (3).

18 (C) Section 404(a)(10)(B) is amended by

19 striking ‘‘, the exclusion allowance under sec20 tion 403(b)(2),’’.

21 (D) Section 415(a)(2) is amended by strik22 ing ‘‘, and the amount of the contribution for

23 such portion shall reduce the exclusion allow24 ance as provided in section 403(b)(2)’’.
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1 (E) Section 415(c)(3) is amended by add2 ing at the end the following new subparagraph:

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

4 of an annuity contract described in section

5 403(b), the term ‘participant’s compensation’

6 means the participant’s includible compensation

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

8 (F) Section 415(c) is amended by striking

9 paragraph (4).

10 (G) Section 415(c)(7) is amended to read

11 as follows:

12 ‘‘(7) CERTAIN CONTRIBUTIONS BY CHURCH

13 PLANS NOT TREATED AS EXCEEDING LIMIT.—

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

15 other provision of this subsection, at the elec16 tion of a participant who is an employee of a

17 church, a convention or association of churches,

18 including an organization described in section

19 414(e)(3)(B)(ii), contributions and other addi20 tions for an annuity contract or retirement in21 come account described in section 403(b) with

22 respect to such participant, when expressed as

23 an annual addition to such participant’s ac24 count, shall be treated as not exceeding the lim-
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1 itation of paragraph (1) if such annual addition

2 is not in excess of $10,000.

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

4 The total amount of additions with respect to

5 any participant which may be taken into ac6 count for purposes of this subparagraph for all

7 years may not exceed $40,000.

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

9 this paragraph, the term ‘annual addition’ has

10 the meaning given such term by paragraph

11 (2).’’.

12 (H) Section 415(e)(5) is amended—

13 (i) by striking ‘‘(except in the case of

14 a participant who has elected under sub15 section (c)(4)(D) to have the provisions of

16 subsection (c)(4)(C) apply)’’, and

17 (ii) by striking the last sentence.

18 (I) Section 415(n)(2)(B) is amended by

19 striking ‘‘percentage’’.

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

21 (as amended by section 101(d)) is amended by

22 inserting before the period at the end the fol23 lowing: ‘‘(as in effect on the date of the enact24 ment of the Retirement Security for the 21st

25 Century Act)’’.
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1 (3) EFFECTIVE DATE.—The amendments made

2 by this subsection shall apply to years beginning

3 after December 31, 1999.

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.—The amendment made

23 by paragraph (1) shall apply to limitation years be24 ginning after December 31, 1999.
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1 (c) DEFERRED COMPENSATION PLANS OF STATE

2 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI3 ZATIONS.—Subparagraph (B) of section 457(b)(2) (relat4 ing to salary limitation on eligible deferred compensation

plans) is amended by striking ‘‘331 5 ⁄3 percent’’ and insert6 ing ‘‘100 percent’’.

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

8 this section shall apply to years beginning after December

9 31, 1999.

10 SEC. 203. FASTER VESTING OF CERTAIN EMPLOYER

11 MATCHING CONTRIBUTIONS.

12 (a) AMENDMENTS TO 1986 CODE.—Section 411(a)

13 (relating to minimum vesting standards) is amended—

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

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

16 plan’’, and

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

18 ‘‘(12) FASTER VESTING FOR MATCHING CON19 TRIBUTIONS.—In the case of matching contributions

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

21 shall be applied—

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

23 in subparagraph (A), and

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

25 the table contained in subparagraph (B):
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The nonforfeitable

‘‘Years of service: percentage is:

1 ................................................................................... 20

2 ................................................................................... 40

3 ................................................................................... 60

4 ................................................................................... 80

5 ................................................................................... 100.’’.

1 (b) AMENDMENTS TO ERISA.—Section 203(a) of the

2 Employee Retirement Income Security Act of 1974 (29

3 U.S.C. 1053(a)) is amended—

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

5 inserting ‘‘Except as provided in paragraph (4), a

6 plan’’, and

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

8 ‘‘(4) In the case of matching contributions (as

9 defined in section 401(m)(4)(A) of the Internal Rev10 enue Code of 1986), paragraph (2) shall be

11 applied—

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

13 in subparagraph (A), and

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

15 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

1 ................................................................................... 20

2 ................................................................................... 40

3 ................................................................................... 60

4 ................................................................................... 80

5 ................................................................................... 100.’’.

16 (c) EFFECTIVE DATES.—

17 (1) IN GENERAL.—Except as provided in para18 graph (2), the amendments made by this section
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1 shall apply to contributions for plan years beginning

2 after December 31, 1999.

3 (2) COLLECTIVE BARGAINING AGREEMENTS.—

4 In the case of a plan maintained pursuant to 1 or

5 more collective bargaining agreements between em6 ployee representatives and 1 or more employers rati7 fied by the date of enactment of this Act, the

8 amendments made by this section shall not apply to

9 contributions on behalf of employees covered by any

10 such agreement for plan years beginning before the

11 earlier of—

12 (A) the later of—

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

14 collective bargaining agreements termi15 nates (determined without regard to any

16 extension thereof on or after such date of

17 enactment), or

18 (ii) January 1, 2000, or

19 (B) January 1, 2004.

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

21 plan, the amendments made by this section shall not

22 apply to any employee before the date that such em23 ployee has 1 hour of service under such plan in any

24 plan year to which the amendments made by this

25 section apply.
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1 SEC. 204. DEFERRED ANNUITIES FOR SURVIVING SPOUSES

2 OF FEDERAL EMPLOYEES.

3 (a) IN GENERAL.—Section 8341 of title 5, United

4 States Code, is amended—

5 (1) in subsection (h)(1), by striking ‘‘section

6 8338(b) of this title’’ and inserting ‘‘section

7 8338(b), and a former spouse of a deceased former

8 employee who separated from the service with title

9 to a deferred annuity under section 8338 (if they

10 were married to one another prior to the date of sep11 aration),’’; and

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

13 ‘‘(j)(1) If a former employee dies after having sepa14 rated from the service with title to a deferred annuity

15 under section 8338 but before having established a valid

16 claim for annuity, and is survived by a spouse to whom

17 married on the date of separation, the surviving spouse

18 may elect to receive—

19 ‘‘(A) an annuity, commencing on what would

20 have been the former employee’s 62d birthday, equal

21 to 55 percent of the former employee’s deferred an22 nuity;

23 ‘‘(B) an annuity, commencing on the day after

24 the date of death of the former employee, such that,

25 to the extent practicable, the present value of the fu26 ture payments of the annuity would be actuarially
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1 equivalent to the present value of the future pay2 ments under subparagraph (A) as of the day after

3 the former employee’s death; or

4 ‘‘(C) the lump-sum credit, if the surviving

5 spouse is the individual who would be entitled to the

6 lump-sum credit and if such surviving spouse files

7 application therefor.

8 ‘‘(2) An annuity under this subsection and the right

9 thereto terminate on the last day of the month before the

10 surviving spouse remarries before becoming 55 years of

11 age, or dies.’’.

12 (b) CORRESPONDING AMENDMENT FOR FERS.—

13 Section 8445(a) of title 5, United States Code, is

14 amended—

15 (1) by striking ‘‘(or of a former employee or’’

16 and inserting ‘‘(or of a former’’; and

17 (2) by striking ‘‘annuity)’’ and inserting ‘‘annu18 ity, or of a former employee who dies after having

19 separated from the service with title to a deferred

20 annuity under section 8413 but before having estab21 lished a valid claim for annuity (if such former

22 spouse was married to such former employee prior

23 to the date of separation))’’.

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

25 this section shall apply with respect to surviving spouses
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1 and former spouses (whose marriage, in the case of the

2 amendments made by subsection (a), terminated after

3 May 6, 1985) of former employees who die after the date

4 of the enactment of this Act.

5 SEC. 205. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU6 TION RULES.

7 (a) SIMPLIFICATION AND FINALIZATION OF MINI8 MUM DISTRIBUTION REQUIREMENTS.—

9 (1) IN GENERAL.—The Secretary of the Treas10 ury shall—

11 (A) simplify and finalize the regulations re12 lating to minimum distribution requirements

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

14 403(b)(10), and 457(d)(2) of the Internal Reve15 nue Code of 1986, and

16 (B) modify such regulations to—

17 (i) reflect increases in life expectancy,

18 and

19 (ii) revise the required distribution

20 methods so that, under reasonable assump21 tions, the amount of the required minimum

22 distribution does not decrease over a par23 ticipant’s life expectancy.

24 (2) FRESH START.—Notwithstanding subpara25 graph (D) of section 401(a)(9) of such Code, during
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1 the first year that regulations are in effect under

2 this subsection, required distributions for future

3 years may be redetermined to reflect changes under

4 such regulations. Such redetermination shall include

5 the opportunity to choose a new designated bene6 ficiary and to elect a new method of calculating life

7 expectancy.

8 (3) EFFECTIVE DATE FOR REGULATIONS.—

9 Regulations referred to in paragraph (1) shall be ef10 fective for years beginning after December 31, 2000,

11 and shall apply in such years without regard to

12 whether an individual had previously begun receiving

13 minimum distributions.

14 (b) AMOUNT NOT SUBJECT TO MINIMUM DISTRIBU15 TION REQUIREMENTS.—Paragraph (9) of section 401(a)

16 is amended—

17 (1) in subparagraph (A), by inserting ‘‘(minus

18 the exclusion amount)’’ after ‘‘the entire interest’’;

19 and

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

21 ‘‘(H) EXCLUSION AMOUNT.—

22 ‘‘(i) IN GENERAL.—For purposes of

23 this paragraph, the term ‘exclusion

24 amount’ means—
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1 ‘‘(I) $100,000 in the case of a

2 defined contribution plan;

3 ‘‘(II) $100,000 in the case of an

4 individual retirement plan; and

5 ‘‘(III) $0 in the case of a defined

6 benefit plan.

7 ‘‘(ii) AGGREGATION OF PLANS.—For

8 purposes of determining the exclusion

9 amount under clause (i)—

10 ‘‘(I) all defined contribution

11 plans maintained by the same em12 ployer shall be treated as a single

13 plan; and

14 ‘‘(II) all individual retirement

15 plans (other than Roth IRAs) of the

16 individual shall be treated as a single

17 plan.

18 ‘‘(iii) COST-OF-LIVING ADJUST19 MENT.—The Secretary shall adjust the

20 $100,000 exclusion amount specified in

21 clause (i) at the same time and in the

22 same manner as under section 415(d), ex23 cept that the base period shall be the cal24 endar quarter ending September 30,

25 1999.’’.
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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 (c) REPEAL OF RULE WHERE DISTRIBUTIONS HAD

5 BEGUN BEFORE DEATH OCCURS.—

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

7 401(a)(9) is amended by striking clause (i) and re8 designating clauses (ii), (iii), and (iv) as clauses (i),

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

10 (2) CONFORMING CHANGES.—

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

12 so redesignated) is amended—

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

14 the heading, and

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

16 employee’s interest has begun in accord17 ance with subparagraph (A)(ii)’’ and in18 serting ‘‘his entire interest has been dis19 tributed to him,’’.

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

21 so redesignated) is amended by striking ‘‘clause

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

23 (C) Clause (iii) of section 401(a)(9)(B)(iii)

24 (as so redesignated) is amended—
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1 (i) by striking ‘‘clause (iii)(I)’’ and in2 serting ‘‘clause (ii)(I)’’,

3 (ii) in subclause (I) by striking

4 ‘‘clause (iii)(III)’’ and inserting ‘‘clause

5 (ii)(III)’’,

6 (iii) in subclause (I) by striking ‘‘the

7 date on which the employee would have attained the age 701 8 ⁄2,’’ and inserting ‘‘April

9 1 of the calendar year following the cal10 endar year in which the spouse attains

701 11 ⁄2, and clause (ii) shall not apply to the

12 exclusion amount,’’, and

13 (iv) in subclause (II) by striking ‘‘the

14 distributions to such spouse begin,’’ and

15 inserting ‘‘his entire interest has been dis16 tributed to him,’’.

17 (3) REDUCTION IN EXCISE TAX.—Subsection

18 (a) of section 4974 is amended by striking ‘‘50 per19 cent’’ and inserting ‘‘10 percent’’.

20 (4) EFFECTIVE DATE.—

21 (A) IN GENERAL.—Except as provided by

22 subparagraph (B), the amendments made by

23 this subsection shall apply to years beginning

24 after December 31, 2000.
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1 (B) EXCISE TAX.—The amendment made

2 by paragraph (3) shall apply to years beginning

3 after December 31, 1999.

4 SEC. 206. CLARIFICATION OF TAX TREATMENT OF DIVISION

5 OF SECTION 457 PLAN BENEFITS UPON DI6 VORCE.

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

8 application of rules to governmental and church plans) is

9 amended—

10 (1) by inserting ‘‘or an eligible deferred com11 pensation plan (within the meaning of section

12 457(b))’’ after ‘‘subsection (e))’’, and

13 (2) in the heading, by striking ‘‘GOVERN14 MENTAL AND CHURCH PLANS’’ and inserting ‘‘CER15 TAIN OTHER PLANS’’.

16 (b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE17 MENTS.—Paragraph (10) of section 414(p) is amended by

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

19 409(d), and section 457(d)’’.

20 (c) TAX TREATMENT OF PAYMENTS FROM A SEC21 TION 457 PLAN.—Subsection (p) of section 414 is amend22 ed by redesignating paragraph (12) as paragraph (13) and

23 inserting after paragraph (11) the following new para24 graph:
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1 ‘‘(12) TAX TREATMENT OF PAYMENTS FROM A

2 SECTION 457 PLAN.—If a distribution or payment

3 from an eligible deferred compensation plan de4 scribed in section 457(b) is made pursuant to a

5 qualified domestic relations order, rules similar to

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

7 distribution or payment.’’.

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

9 this section shall apply to transfers, distributions, and

10 payments made after the date of enactment of this Act.

11 SEC. 207. PERCENTAGE LIMITATIONS ON CONTRIBUTIONS.

12 (a) AMENDMENTS RELATING TO FERS.—

13 (1) IN GENERAL.—

14 (A) Subsection (a) of section 8432 of title

15 5, United States Code, is amended by striking

16 ‘‘10 percent of ’’.

17 (B) Subsection (d) of section 8432 of title

18 5, United States Code, is amended by striking

19 ‘‘section 415’’ and inserting ‘‘section

20 401(a)(30) or 415’’.

21 (2) JUSTICES AND JUDGES.—Subsection (b) of

22 section 8440a of title 5, United States Code, is

23 amended—
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1 (A) by striking paragraph (2) and by re2 designating paragraphs (3) through (7) as

3 paragraphs (2) through (6), respectively; and

4 (B) in paragraph (6) (as so redesignated

5 by subparagraph (A)) by striking ‘‘paragraphs

6 (4) and (5)’’ and inserting ‘‘paragraphs (3) and

7 (4)’’.

8 (3) BANKRUPTCY JUDGES AND MAG9 ISTRATES.—Subsection (b) of section 8440b of title

10 5, United States Code, is amended—

11 (A) by striking paragraph (2) and by re12 designating paragraphs (3) through (8) as

13 paragraphs (2) through (7), respectively;

14 (B) in paragraph (4) (as so redesignated

15 by subparagraph (A)) by striking ‘‘paragraph

16 (4)(A), (B), or (C)’’ and inserting ‘‘paragraph

17 (3)(A), (B), or (C)’’; and

18 (C) in paragraph (7) (as so redesignated

19 by subparagraph (A)) by striking ‘‘Notwith20 standing paragraph (4),’’ and inserting ‘‘Not21 withstanding paragraph (3),’’.

22 (4) COURT OF FEDERAL CLAIMS JUDGES.—

23 Subsection (b) of section 8440c of title 5, United

24 States Code, is amended—
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1 (A) by striking paragraph (2) and by re2 designating paragraphs (3) through (8) as

3 paragraphs (2) through (7), respectively;

4 (B) in paragraph (4) (as so redesignated

5 by subparagraph (A)) by striking ‘‘paragraph

6 (4)(A) or (B)’’ and inserting ‘‘paragraph (3)(A)

7 or (B)’’; and

8 (C) in paragraph (7) (as so redesignated

9 by subparagraph (A)) by striking ‘‘Notwith10 standing paragraph (4),’’ and inserting ‘‘Not11 withstanding paragraph (3),’’.

12 (5) JUDGES OF THE UNITED STATES COURT OF

13 VETERANS APPEALS.—Paragraph (2) of section

14 8440d(b) of title 5, United States Code, is amended

15 to read as follows:

16 ‘‘(2) For purposes of contributions made to the Thrift

17 Savings Fund, basic pay does not include any retired pay

18 paid pursuant to section 7296 of title 38.’’.

19 (b) AMENDMENTS RELATING TO CSRS.—Paragraph

20 (2) of section 8351(b) of title 5, United States Code, is

21 amended by striking ‘‘5 percent of ’’.

22 (c) EFFECTIVE DATE.—

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

24 this section shall take effect on the date of enact25 ment of this Act.
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1 (2) COORDINATION WITH ELECTION PERI2 ODS.—The Executive Director shall by regulation

3 determine the first election period in which elections

4 may be made consistent with the amendments made

5 by this section.

6 (3) DEFINITIONS.—For purposes of this

7 section—

8 (A) the term ‘‘election period’’ means a pe9 riod afforded under section 8432(b) of title 5,

10 United States Code; and

11 (B) the term ‘‘Executive Director’’ has the

12 meaning given such term by section 8401(13)

13 of title 5, United States Code.

14 SEC. 208. ELIGIBLE ROLLOVER DISTRIBUTIONS.

15 Section 8432 of title 5, United States Code, is

16 amended by adding at the end the following:

17 ‘‘(j)(1) For the purpose of this subsection—

18 ‘‘(A) the term ‘eligible rollover distribution’ has

19 the meaning given such term by section 402(c)(3) of

20 the Internal Revenue Code of 1986; and

21 ‘‘(B) the term ‘eligible retirement plan’ has the

22 meaning given such term by section 402(c)(7) of the

23 Internal Revenue Code of 1986.

24 ‘‘(2) An employee or Member may contribute to the

25 Thrift Savings Fund an eligible rollover distribution from
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1 an eligible retirement plan. A contribution made under

2 this subsection shall be made by means of a direct rollover

3 from an eligible retirement plan in a manner that is simi4 lar to a direct rollover under section 401(a)(31) of the In5 ternal Revenue Code of 1986. In the case of an eligible

6 rollover distribution, the maximum amount transferred to

7 the Thrift Savings Fund shall not exceed the amount

8 which would otherwise have been included in the employ9 ee’s or Member’s gross income for Federal income tax pur10 poses.

11 ‘‘(3) The Executive Director shall prescribe regula12 tions to carry out this subsection.’’.

13 SEC. 209. IMMEDIATE PARTICIPATION IN THE THRIFT SAV14 INGS PLAN.

15 (a) ELIMINATION OF CERTAIN WAITING PERIODS

16 FOR PURPOSES OF EMPLOYEE CONTRIBUTIONS.—Para17 graph (4) of section 8432(b) of title 5, United States

18 Code, is amended to read as follows:

19 ‘‘(4) The Executive Director shall prescribe such reg20 ulations as may be necessary to carry out the following:

21 ‘‘(A) Notwithstanding subparagraph (A) of

22 paragraph (2), an employee or Member described in

23 such subparagraph shall be afforded a reasonable

24 opportunity to first make an election under this sub25 section beginning on the date of commencing service
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1 or, if that is not administratively feasible, beginning

2 on the earliest date thereafter that such an election

3 becomes administratively feasible, as determined by

4 the Executive Director.

5 ‘‘(B) An employee or Member described in sub6 paragraph (B) of paragraph (2) shall be afforded a

7 reasonable opportunity to first make an election

8 under this subsection (based on the appointment or

9 election described in such subparagraph) beginning

10 on the date of commencing service pursuant to such

11 appointment or election or, if that is not administra12 tively feasible, beginning on the earliest date there13 after that such an election becomes administratively

14 feasible, as determined by the Executive Director.

15 ‘‘(C) Notwithstanding the preceding provisions

16 of this paragraph, contributions under paragraphs

17 (1) and (2) of subsection (c) shall not be payable

18 with respect to any pay period before the earliest

19 pay period for which such contributions would other20 wise be allowable under this subsection if this para21 graph had not been enacted.

22 ‘‘(D) Sections 8351(a)(2), 8440a(a)(2),

23 8440b(a)(2), 8440c(a)(2), and 8440d(a)(2) shall be

24 applied in a manner consistent with the purposes of
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1 subparagraphs (A) and (B), to the extent those sub2 paragraphs can be applied with respect thereto.

3 ‘‘(E) Nothing in this paragraph shall affect

4 paragraph (3).’’.

5 (b) TECHNICAL AND CONFORMING AMENDMENTS.—

6 (1) Section 8432(a) of title 5, United States Code, is

7 amended—

8 (A) in the first sentence by striking ‘‘(b)(1)’’

9 and inserting ‘‘(b)’’; and

10 (B) by amending the second sentence to read as

11 follows: ‘‘Contributions under this subsection pursu12 ant to such an election shall, with respect to each

13 pay period for which such election remains in effect,

14 be made in accordance with a program of regular

15 contributions provided in regulations prescribed by

16 the Executive Director.’’.

17 (2) Section 8432(b)(1)(B) of title 5, United States

18 Code, is amended by inserting ‘‘(or any election allowable

19 by virtue of paragraph (4))’’ after ‘‘subparagraph (A)’’.

20 (3) Section 8432(b)(3) of title 5, United States Code,

21 is amended by striking ‘‘Notwithstanding paragraph

22 (2)(A), an’’ and inserting ‘‘An’’.

23 (4) Section 8432(i)(1)(B)(ii) of title 5, United States

24 Code, is amended by striking ‘‘either elected to terminate
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1 individual contributions to the Thrift Savings Fund within

2 2 months before commencing military service or’’.

3 (5) Section 8439(a)(1) of title 5, United States Code,

4 is amended by inserting ‘‘who makes contributions or’’

5 after ‘‘for each individual’’ and by striking ‘‘section

6 8432(c)(1)’’ and inserting ‘‘section 8432’’.

7 (6) Section 8439(c)(2) of title 5, United States Code,

8 is amended by adding at the end the following: ‘‘Nothing

9 in this paragraph shall be considered to limit the dissemi10 nation of information only to the times required under the

11 preceding sentence.’’.

12 (7) Sections 8440a(a)(2) and 8440d(a)(2) of title 5,

13 United States Code, are amended by striking all after

14 ‘‘subject to’’ and inserting ‘‘this chapter.’’.

15 (c) EFFECTIVE DATE.—This section shall take effect

16 6 months after the date of enactment of this Act or such

17 earlier date as the Executive Director (within the meaning

18 of section 8401(13) of title 5, United States Code) may

19 by regulation prescribe.

20 TITLE III—INCREASING PORT21 ABILITY FOR PARTICIPANTS

22 SEC. 301. ROLLOVERS ALLOWED AMONG VARIOUS TYPES

23 OF PLANS.

24 (a) ROLLOVERS FROM AND TO SECTION 457

25 PLANS.—
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1 (1) ROLLOVERS FROM SECTION 457 PLANS.—

2 (A) IN GENERAL.—Section 457(e) (relat3 ing to other definitions and special rules) is

4 amended by adding at the end the following:

5 ‘‘(16) ROLLOVER AMOUNTS.—

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

7 eligible deferred compensation plan, if—

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

9 credit of an employee in such plan is paid

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

12 402(c)(4) (other than section

13 402(c)(4)(C)),

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

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

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

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

20 property other than money, the amount so

21 transferred consists of the property distrib22 uted,

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

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

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

5 purposes of subparagraph (A).

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

7 paragraph shall be reported to the Secretary in

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

10 4974(c)).’’.

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

13 457(b)(2) (defining eligible deferred compensa14 tion plan) is amended by inserting ‘‘(other than

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

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

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

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

19 period at the end of subparagraph (B) and in20 serting ‘‘, and’’, and by inserting after subpara21 graph (B) the following:

22 ‘‘(C) the plan meets requirements similar

23 to the requirements of section 401(a)(31).

24 Any amount transferred in a direct trustee-to-trust25 ee transfer in accordance with section 401(a)(31)
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1 shall not be includible in gross income for the tax2 able year of transfer.’’.

3 (D) WITHHOLDING.—

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

5 is amended by adding at the end the fol6 lowing:

7 ‘‘(E) under or to an eligible deferred com8 pensation plan which, at the time of such pay9 ment, is a plan described in section 457(b);’’.

10 (ii) Paragraph (5) of section 3405(e)

11 is amended by adding at the end the fol12 lowing: ‘‘Such term shall include an eligible

13 deferred compensation plan described in

14 section 457(b).’’.

15 (iii) Paragraph (3) of section 3405(c)

16 is amended to read as follows:

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

18 purposes of this subsection, the term ‘eligible roll19 over distribution’ has the meaning given such term

20 by section 402(f)(2)(A).’’.

21 (iv) LIABILITY FOR WITHHOLDING.—

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

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

24 clause (ii), by striking the period at the
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1 end of clause (iii) and inserting ‘‘, or’’, and

2 by adding at the end the following:

3 ‘(iv) section 457(b).’’.

4 (2) ROLLOVERS TO SECTION 457 PLANS.—

5 (A) Section 402(c)(8)(B) (defining eligible

6 retirement plan) is amended by striking ‘‘and’’

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

8 at the end of clause (iv) and inserting ‘‘, and’’,

9 and by adding at the end the following:

10 ‘‘(v) an eligible deferred compensation

11 plan described in section 457(b) of an eli12 gible employer described in section

13 457(e)(1)(A).’’.

14 (B) Paragraph (9) of section 402(c) is

15 amended by striking ‘‘except that’’ and all that

16 follows and inserting ‘‘except that only an ac17 count or annuity described in clause (i) or (ii)

18 of paragraph (8)(B) shall be treated as an eligi19 ble retirement plan with respect to such dis20 tribution.’’.

21 (C) Subsection (t) of section 72 (relating

22 to 10-percent additional tax on early distribu23 tions from qualified retirement plans) is amend24 ed by adding at the end the following new para25 graph:
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1 ‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SEC2 TION 457 PLANS.—For purposes of this subsection,

3 a distribution from an eligible deferred compensation

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

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

6 a distribution from a qualified retirement plan to the

7 extent that such distribution is attributable to an

8 amount transferred to an eligible deferred compensa9 tion plan from a qualified retirement plan (as de10 fined in section 4974(c)). For purposes of this sub11 section, any such distribution shall be treated as if

12 made from a qualified retirement plan described in

13 section 4974(c)(1). This paragraph shall only apply

14 to a transfer that is in excess of $50,000 and that

15 is permitted by reason of section 402(c)(8)(B)(v) or

16 section 408(d)(3)(A)(ii).’’.

17 (D) Subsection (a) of section 457 (relating

18 to year of inclusion in gross income) is

19 amended—

20 (i) by striking ‘‘or otherwise made

21 available’’, and

22 (ii) by adding at the end the follow23 ing: ‘‘To the extent provided in section

24 72(t)(9), section 72(t) shall apply to any
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1 amount includible in gross income under

2 this subsection.’’.

3 (3) MINIMUM DISTRIBUTIONS.—Paragraph (2)

4 of section 457(d) is amended to read as follows:

5 ‘‘(2) MINIMUM DISTRIBUTION REQUIRE6 MENTS.—A plan meets the distribution requirements

7 of this paragraph if the plan meets the requirements

8 of section 401(a)(9).’’.

9 (4) CONFORMING AMENDMENT.—Paragraph (9)

10 of section 457(e) is amended to read as follows:

11 ‘‘(9) BENEFITS NOT TREATED AS FAILING TO

12 MEET DISTRIBUTION REQUIREMENTS OF SUB13 SECTION (d).—A plan shall not be treated as failing

14 to meet the distribution requirements of subsection

15 (d) by reason of a distribution of the total amount

16 payable to a participant under the plan if—

17 ‘‘(A) such amount does not exceed the dol18 lar limit under section 411(a)(11)(A), and

19 ‘‘(B) such amount may be distributed only

20 if—

21 ‘‘(i) no amount has been deferred

22 under the plan with respect to such partici23 pant during the 2-year period ending on

24 the date of the distribution, and
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1 ‘‘(ii) there has been no prior distribu2 tion under the plan to such participant to

3 which this paragraph applied.’’.

4 (b) ALLOWANCE OF ROLLOVERS FROM AND TO

5 403(b) PLANS.—

6 (1) ROLLOVERS FROM SECTION 403(b)

7 PLANS.—Section 403(b)(8)(A)(ii) (relating to roll8 over amounts) is amended by striking ‘‘such dis9 tribution’’ and all that follows and inserting ‘‘such

10 distribution to an eligible retirement plan described

11 in section 402(c)(8)(B), and’’.

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

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

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

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

16 the period at the end of clause (v) and inserting

17 ‘‘, and’’, and by adding at the end the following:

18 ‘‘(vi) an annuity contract described in

19 section 403(b).’’

20 (3) CONFORMING AMENDMENT.—Subparagraph

21 (B) of section 403(b)(8) is amended by striking

22 ‘‘Rules similar to the’’ and inserting ‘‘The’’.

23 (c) EXPANDED EXPLANATION TO RECIPIENTS OF

24 ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section

25 402(f) (relating to written explanation to recipients of dis-
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1 tributions eligible for rollover treatment) is amended by

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

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

4 ‘‘, and’’, and by adding at the end the following new sub5 paragraph:

6 ‘‘(E) of the provisions under which dis7 tributions from the eligible retirement plan re8 ceiving the distribution may be subject to re9 strictions and tax consequences which are dif10 ferent from those applicable to distributions

11 from the plan making such distribution.’’.

12 (d) CONFORMING AMENDMENTS.—

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

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

15 408(d)(3), and 457(e)(16)’’.

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

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

18 457(e)(16)’’.

19 (3) Section 401(a)(31)(B) is amended by strik20 ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),

21 403(b)(8), and 457(e)(16)’’.

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

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

24 403(a)’’ and inserting ‘‘, paragraph (4) of section
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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 by striking ‘‘shall apply for purposes of

11 subparagraph (A)’’ and inserting ‘‘and section

12 402(f) shall apply for purposes of subparagraph (A),

13 except that section 402(f) shall be applied to the

14 payor in lieu of the plan administrator’’.

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

16 amended by inserting ‘‘and (9)’’ after ‘‘through

17 (7)’’.

18 (9) Section 408(a)(1) is amended by striking

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

20 457(e)(16)’’.

21 (10) Subparagraphs (A) and (B) of section

22 415(b)(2) are each amended by striking ‘‘and

23 408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and

24 457(e)(16)’’.
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1 (11) Section 415(c)(2) is amended by striking

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

3 457(e)(16)’’.

4 (12) 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 (e) EFFECTIVE DATE; SPECIAL RULE.—

8 (1) EFFECTIVE DATE.—The amendments made

9 by this section shall apply to distributions after De10 cember 31, 1999.

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. 302. 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
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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 he receives the payment or distribution.

9 For purposes of clause (ii), the term ‘eligible re10 tirement plan’ has the meaning given such term

11 by clauses (iii), (iv), (v), and (vi) of section

12 402(c)(8)(B).’’.

13 (b) CONFORMING AMENDMENTS.—

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

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

16 ‘‘section 408(d)(3)(A)(ii)’’.

17 (2) Clause (i) of section 408(d)(3)(D) is amend18 ed by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i)

19 or (ii)’’.

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

21 amended to read as follows:

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

23 the case of any payment or distribution out of

24 a simple retirement account (as defined in sub25 section (p)) to which section 72(t)(6) applies,
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1 this paragraph shall not apply unless such pay2 ment or distribution is paid into another simple

3 retirement account.’’.

4 (c) EFFECTIVE DATE; SPECIAL RULE.—

5 (1) EFFECTIVE DATE.—The amendments made

6 by this section shall apply to distributions after De7 cember 31, 1999.

8 (2) SPECIAL RULE.—Notwithstanding any other

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

10 section 1122 of the Tax Reform Act of 1986 shall

11 not apply to any distribution from an eligible retire12 ment plan (as defined in clause (iii) or (iv) of section

13 402(c)(8)(B) of the Internal Revenue Code of 1986)

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

15 such plan on behalf of such individual which is per16 mitted solely by reason of the amendments made by

17 this section.

18 SEC. 303. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

19 (a) IN GENERAL.—

20 (1) Subsection (c) of section 402 (relating to

21 rules applicable to rollovers from exempt trusts) (as

22 amended by section 2) is amended by striking para23 graph (2) and redesignating paragraphs (3) through

24 (10) as paragraphs (2) through (9), respectively.
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1 (2) Paragraph (31) of section 401(a) (relating

2 to optional direct transfer of eligible rollover dis3 tributions) is amended by striking subparagraph (B)

4 and redesignating subparagraphs (C) and (D) as

5 subparagraphs (B) and (C), respectively.

6 (3) Subparagraph (B) of section 408(d)(3) (re7 lating to rollover contributions) is amended by strik8 ing ‘‘which was not includible in his gross income

9 because of the application of this paragraph’’ and in10 serting ‘‘to which this paragraph applied’’.

11 (4) Paragraph (7)(B) of section 402(c) (as re12 designated by subsection (a)(1) and as amended by

13 section 301) is amended—

14 (A) by striking ‘‘The term’’ and inserting

15 ‘‘Except as provided in this subparagraph, the

16 term’’, and

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

18 ‘‘Arrangements described in clauses (iii), (iv)

19 (v), and (vi) shall not be treated as eligible re20 tirement plans for purposes of receiving a roll21 over contribution of an eligible rollover distribu22 tion to the extent that such eligible rollover dis23 tribution is not includible in gross income (de24 termined without regard to paragraph (1)).’’.
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1 (5) Paragraph (2) of section 408(d) is

2 amended—

3 (A) by striking ‘‘For purposes’’ and insert4 ing the following:

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

6 this paragraph, for purposes’’,

7 (B) by striking ‘‘(A) all’’ and inserting ‘‘(i)

8 all’’;

9 (C) by striking ‘‘(B) all’’ and inserting

10 ‘‘(ii) all’’;

11 (D) by striking ‘‘(C) the’’ and inserting

12 ‘‘(iii) the’’,

13 (E) by striking ‘‘subparagraph (C)’’ and

14 inserting ‘‘clause (iii)’’, and

15 (F) by inserting at the end the following:

16 ‘‘(B) APPLICATION OF SECTION 72.—For

17 purposes of applying section 72, if—

18 ‘‘(i) a distribution is made from an in19 dividual retirement plan, and

20 ‘‘(ii) a rollover contribution described

21 in paragraph (3) is made to an eligible re22 tirement plan described in section

23 402(c)(7)(B)(iii), (iv), (v), or (vi) with re24 spect to all or part of such distribution,
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1 the includible amount in the individual’s indi2 vidual retirement plans shall be reduced by the

3 amount described in subparagraph (C). As of

4 the close of the calendar year in which the tax5 able year begins, the reduction of all amounts

6 described in subparagraph (C)(i) shall be ap7 plied prior to the computations described in

8 subparagraph (A)(iii). The amount of any dis9 tribution with respect to which there is a roll10 over contribution described in clause (ii) shall

11 not be treated as a distribution for purposes of

12 subparagraph (A).

13 ‘‘(C) AMOUNT DESCRIBED.—The amount

14 described in this subparagraph is the sum of—

15 ‘‘(i) the amount of the rollover con16 tribution described in subparagraph

17 (B)(ii), and

18 ‘‘(ii) in the case of any portion of the

19 distribution with respect to which there is

20 not a rollover contribution described in

21 paragraph (3), the amount of such portion

22 that is included in gross income under sec23 tion 72.

24 ‘‘(D) INCLUDIBLE AMOUNT.—For purposes

25 of this paragraph, the term ‘includible amount’
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1 shall mean the amount that is not investment

2 in the contract (as defined in section 72).’’.

3 (6) Subparagraph (C) of section 402(c)(5) (as

4 redesignated by subsection (a)(1)) is amended by in5 serting after ‘‘other than money’’ the following: ‘‘or

6 where the amount of the distribution exceeds the

7 amount of the rollover contribution’’.

8 (b) HARDSHIP EXCEPTION TO 60-DAY RULE.—

9 (1) Paragraph (2) of section 402(c) (as so re10 designated) is amended to read as follows:

11 ‘‘(2) TRANSFER MUST BE MADE WITHIN 60

12 DAYS OF RECEIPT.—

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

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

15 apply to any transfer of a distribution made

16 after the 60th day following the day on which

17 the distributee received the property distrib18 uted.

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

25 the individual subject to such requirement.’’.
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1 (2) Paragraph (3) of section 408(d) (relating to

2 rollover contributions) is amended by adding at the

3 end the following new subparagraph:

4 ‘‘(H) WAIVER OF 60-DAY REQUIREMENT.—

5 The Secretary may waive the 60-day require6 ment under subparagraphs (A) and (D) where

7 the failure to waive such requirement would be

8 against equity or good conscience, including

9 casualty, disaster, or other events beyond the

10 reasonable control of the individual subject to

11 such requirement.’’.

12 (c) CONFORMING AMENDMENTS.—

13 (1) Paragraph (4) of section 402(c) (as redesig14 nated by subsection (a)(1)) is amended by striking

15 ‘‘(8)(B)’’ and inserting ‘‘(7)(B)’’.

16 (2) Subparagraph (B) of section 403(a)(4) is

17 amended by striking ‘‘(2) through (7)’’ and inserting

18 ‘‘(2) through (6)’’.

19 (3) Section 403(b)(8)(A)(ii) (as amended by

20 section 301) is amended by striking ‘‘section

21 402(c)(8)(B)’’ and inserting ‘‘section 402(c)(7)(B)’’.

22 (4) Subparagraph (B) of section 403(b)(8) (as

23 amended by section 301) is amended by striking

24 ‘‘(2) through (7) and (9) of section 402(c) (includ25 ing paragraph (4)(C) thereof)’’ and inserting ‘‘(2)
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1 through (6) and (8) of section 402(c) (including

2 paragraph (3)(C) thereof)’’.

3 (5) Subparagraph (A) of section 408(d)(3) (as

4 amended by section 302) is amended by striking

5 ‘‘402(c)(8)’’ and inserting ‘‘402(c)(7)’’.

6 (6) Paragraph (16) of section 457(e) (as added

7 by section 301) is amended—

8 (A) in subparagraph (A)(i) by striking

9 ‘‘402(c)(4) (other than section 402(c)(4)(C))’’

10 and inserting ‘‘section 402(c)(3) (other than

11 section 402(c)(3)(C))’’,

12 (B) in subparagraph (A)(ii) by striking

13 ‘‘402(c)(8)(B)’’ and inserting ‘‘402(c)(7)(B)’’,

14 and

15 (C) in subparagraph (B) by striking ‘‘para16 graphs (2) through (7) (other than paragraph

17 (4)(C)) and (9) of section 402(c)’’ and inserting

18 ‘‘paragraphs (2) through (6) (other than para19 graph (3)(C)) and (8) of section 402(c)’’.

20 (d) EFFECTIVE DATE.—

21 (1) IN GENERAL.—Except as provided by para22 graph (2), the amendments made by this section

23 shall apply to distributions made after December 31,

24 1999.
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1 (2) HARDSHIP EXCEPTION.—The amendments

2 made by subsection (b) shall apply to 60-day periods

3 ending after the date of the enactment of this Act.

4 SEC. 304. TREATMENT OF FORMS OF DISTRIBUTION.

5 (a) IN GENERAL.—

6 (1) PLAN TRANSFERS.—Paragraph (6) of sec7 tion 411(d) (relating to accrued benefit not to be de8 creased by amendment) is amended by adding at the

9 end the following:

10 ‘‘(D) PLAN TRANSFERS.—

11 ‘‘(i) A defined contribution plan (in

12 this subparagraph referred to as the

13 ‘transferee plan’) shall not be treated as

14 failing to meet the requirements of this

15 subsection merely because the transferee

16 plan does not provide some or all of the

17 forms of distribution previously available

18 under another defined contribution plan

19 (in this paragraph referred to as the

20 ‘transferor plan’) to the extent that—

21 ‘‘(I) the forms of distribution

22 previously available under the trans23 feror plan applied to the account of a

24 participant or beneficiary under the

25 transferor plan that was transferred
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1 from the transferor plan to the trans2 feree plan pursuant to a direct trans3 fer rather than pursuant to a distribu4 tion from the transferor plan;

5 ‘‘(II) the terms of both the trans6 feror plan and the transferee plan au7 thorize the transfer described in sub8 clause (I);

9 ‘‘(III) the transfer described in

10 subclause (I) was made pursuant to a

11 voluntary election by the participant

12 or beneficiary whose account was

13 transferred to the transferee plan;

14 ‘‘(IV) the election described in

15 subclause (III) was made after the

16 participant or beneficiary received a

17 notice describing the consequences of

18 making the election;

19 ‘‘(V) if the transferor plan pro20 vides for an annuity as the normal

21 form of distribution under the plan in

22 accordance with section 417, the

23 transfer is made with the consent of

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

25 such consent meets requirements simi-
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1 lar to the requirements imposed by

2 section 417(a)(2); and

3 ‘‘(VI) the transferee plan allows

4 the participant or beneficiary de5 scribed in subclause (III) to receive

6 any distribution to which the partici7 pant or beneficiary is entitled under

8 the transferee plan in the form of a

9 single sum distribution.

10 ‘‘(ii) Clause (i) shall apply to plan

11 mergers and other transactions having the

12 effect of a direct transfer, including con13 solidations of benefits attributable to dif14 ferent employers within a multiple em15 ployer plan.

16 ‘‘(E) ELIMINATION OF FORM OF DISTRIBU17 TION.—Except to the extent provided in regula18 tions, a defined contribution plan shall not be

19 treated as failing to meet the requirements of

20 this section merely because of the elimination of

21 a form of distribution previously available there22 under. This subparagraph shall not apply to the

23 elimination of a form of distribution with re24 spect to any participant unless—
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1 ‘‘(i) a single sum payment is available

2 to such participant at the same time or

3 times as the form of distribution being

4 eliminated; and

5 ‘‘(ii) such single sum payment is

6 based on the same or greater portion of

7 the participant’s account as the form of

8 distribution being eliminated.’’.

9 (2) REGULATIONS.—The last sentence of para10 graph (6)(B) of section 411(d) (relating to accrued

11 benefit not to be decreased by amendment) is

12 amended to read as follows: ‘‘The Secretary may by

13 regulations provide that this subparagraph shall not

14 apply to any plan amendment that does not ad15 versely affect the rights of participants in a material

16 manner.

17 (3) SECRETARY DIRECTED.—Not later than

18 December 31, 2001, the Secretary of the Treasury

19 is directed to issue final regulations under section

20 411(d)(6) of the Internal Revenue Code of 1986.

21 Such regulations shall apply to plan years beginning

22 after December 31, 2001 or such earlier date as is

23 specified by the Secretary of the Treasury. Under

24 such regulations, section 411(d)(6) of such Code

25 shall not apply to plan amendments that do not ad-
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1 versely affect the rights of participants in a material

2 manner. In determining whether a plan amendment

3 has such a materially adverse effect on a participant,

4 the factors taken into account shall include—

5 (A) all of the participant’s early retirement

6 benefits, retirement-type subsidies, and optional

7 forms of benefit that are reduced or eliminated

8 by the plan amendment,

9 (B) the extent to which early retirement

10 benefits, retirement-type subsidies, and optional

11 forms of benefit in effect with respect to a par12 ticipant after the effective date of the plan

13 amendment provide rights that are comparable

14 to the rights that are reduced or eliminated by

15 the plan amendment,

16 (C) the number of years before the partici17 pant attains normal retirement age under the

18 plan (or early retirement age, as applicable),

19 (D) the size of the participant’s benefit

20 that is affected by the plan amendment, in rela21 tion to the amount of the participant’s com22 pensation, and

23 (E) the number of years before the plan

24 amendment is effective.
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1 The regulations described in this paragraph are in2 tended to permit the elimination or reduction of

3 early retirement benefits, retirement-type subsidies,

4 and optional forms of benefit that do not have a ma5 terial value for a plan’s participants but create sig6 nificant burdens and complexities for the plan and

7 its participants.

8 (b) CONFORMING AMENDMENT.—(1) Subsection (g)

9 of section 204 of the Employee Retirement Income Secu10 rity Act of 1974 (29 U.S.C. 1054) is amended by adding

11 at the end the following:

12 ‘‘(4)(A) A defined contribution plan (in this subpara13 graph referred to as the ‘transferee plan’) shall not be

14 treated as failing to meet the requirements of this sub15 section merely because the transferee plan does not pro16 vide some or all of the forms of distribution previously

17 available under another defined contribution plan (in this

18 paragraph referred to as the ‘transferor plan’) to the ex19 tent that—

20 ‘‘(i) the forms of distribution previously avail21 able under the transferor plan applied to the account

22 of a participant or beneficiary under the transferor

23 plan that was transferred from the transferor plan

24 to the transferee plan pursuant to a direct transfer
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1 rather than pursuant to a distribution from the

2 transferor plan;

3 ‘‘(ii) the terms of both the transferor plan and

4 the transferee plan authorize the transfer described

5 in clause (i);

6 ‘‘(iii) the transfer described in clause (i) was

7 made pursuant to a voluntary election by the partici8 pant or beneficiary whose account was transferred to

9 the transferee plan;

10 ‘‘(iv) the election described in clause (iii) was

11 made after the participant or beneficiary received a

12 notice describing the consequences of making the

13 election;

14 ‘‘(v) if the transferor plan provides for an annu15 ity as the normal form of distribution under the plan

16 in accordance with section 205, the transfer is made

17 with the consent of the participant’s spouse (if any),

18 and such consent meets requirements similar to the

19 requirements imposed by section 205(c)(2); and

20 ‘‘(vi) the transferee plan allows the participant

21 or beneficiary described in clause (iii) to receive any

22 distribution which the participant or beneficiary is

23 entitled under transferee plan in the form of a single

24 sum distribution.
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1 ‘‘(B) Subparagraph (A) shall apply to plan mergers

2 and other transactions having the effect of a direct trans3 fer, including consolidations of benefits attributable to dif4 ferent employers within a multiple employer plan.

5 ‘‘(5) Except to the extent provided in regulations, a

6 defined contribution plan shall not be treated as failing

7 to meet the requirements of this section merely because

8 of the elimination of a form of distribution previously

9 available thereunder. This paragraph shall not apply to

10 the elimination of a form of distribution with respect to

11 any participant unless—

12 ‘‘(A) a single sum payment is available to such

13 participant at the same time or times as the form

14 of distribution being eliminated; and

15 ‘‘(B) such single sum payment is based on the

16 same or greater portion of the participant’s account

17 as the form of distribution being eliminated.’’.

18 (2) Paragraph (2) of section 204(g) of the Employee

19 Retirement Income Security Act of 1974 (29 U.S.C. 1054)

20 is amended by striking the last sentence and inserting the

21 following: ‘‘The Secretary of the Treasury may by regula22 tions provide that this paragraph shall not apply to any

23 plan amendment that does not adversely affect the rights

24 of participants in a material manner.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to years beginning after December

3 31, 1999.

4 SEC. 305. RATIONALIZATION OF RESTRICTIONS ON DIS5 TRIBUTIONS.

6 (a) MODIFICATION OF SAME DESK EXCEPTION.—

7 (1) SECTION 401(k).—Section

8 401(k)(2)(B)(i)(I) (relating to qualified cash or de9 ferred arrangements) is amended by striking ‘‘sepa10 ration from service’’ and inserting ‘‘severance from

11 employment’’.

12 (2) SECTION 403(b).—

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

14 section 403(b) are each amended by striking

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

16 severance from employment’’.

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

18 section 403(b) is amended by striking ‘‘SEPARA19 TION FROM SERVICE’’ and inserting ‘‘SEVER20 ANCE FROM EMPLOYMENT’’.

21 (3) SECTION 457.—Clause (ii) of section

22 457(d)(1)(A) is amended by striking ‘‘is separated

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

24 employment’’.

25 (b) BUSINESS SALE REQUIREMENTS REPEALED.—
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1 (1) IN GENERAL.—Section 401(k)(2)(B)(i)(II)

2 (relating to qualified cash or deferred arrangements)

3 is amended by striking ‘‘an event’’ and inserting ‘‘a

4 plan termination’’.

5 (2) CONFORMING AMENDMENTS.—Section

6 401(k)(10) is amended—

7 (A) by striking subparagraph (A) and in8 serting the following:

9 ‘‘(A) IN GENERAL.—A plan termination is

10 described in this paragraph if the termination

11 of the plan does not involve the establishment

12 or maintenance of another defined contribution

13 plan (other than an employee stock ownership

14 plan as defined in section 4975(e)(7)).’’,

15 (B) in subparagraph (B)—

16 (i) by striking ‘‘An event’’ and insert17 ing ‘‘A termination’’, and

18 (ii) by striking ‘‘the event’’ and insert19 ing ‘‘the termination’’,

20 (C) by striking subparagraph (C), and

21 (D) by striking ‘‘OR DISPOSITION OF AS22 SETS OR SUBSIDIARY’’ in the heading.

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

24 this section shall apply to distributions after December 31,

25 1999.
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1 SEC. 306. PURCHASE OF SERVICE CREDIT IN GOVERN2 MENTAL DEFINED BENEFIT PLANS.

3 (a) 403(b) PLANS.—Subsection (b) of section 403 (as

4 amended by section 501) is amended by adding at the end

5 the following new paragraph:

6 ‘‘(14) TRUSTEE-TO-TRUSTEE TRANSFERS TO

7 PURCHASE PERMISSIVE SERVICE CREDIT.—No

8 amount shall be includible in gross income by reason

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

10 benefit governmental plan (as defined in section

11 414(d)) if such transfer is—

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

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

14 under such plan, or

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

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

17 thereof.’’.

18 (b) 457 PLANS.—

19 (1) Subsection (e) of section 457 (as amended

20 by section 509) is amended by adding at the end the

21 following new paragraph:

22 ‘‘(18) TRUSTEE-TO-TRUSTEE TRANSFERS TO

23 PURCHASE PERMISSIVE SERVICE CREDIT.—No

24 amount shall be includible in gross income by reason

25 of a direct trustee-to-trustee transfer to a defined
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1 benefit governmental plan (as defined in section

2 414(d)) if such transfer is—

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

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

5 under such plan, or

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

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

8 thereof.’’.

9 (2) Section 457(b)(2), as amended by sections

10 101, 202, and 301, is amended by striking ‘‘(other

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

12 rollover amounts and amounts received in a transfer

13 referred to in subsection (e)(16))’’.

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

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

16 December 31, 1999.

17 SEC. 307. EMPLOYERS MAY DISREGARD ROLLOVERS FOR

18 PURPOSES OF CASH-OUT AMOUNTS.

19 (a) AMENDMENTS TO 1986 CODE.—

20 (1) Section 411(a)(11) (relating to restrictions

21 on certain mandatory distributions) is amended by

22 adding at the end the following:

23 ‘‘(D) SPECIAL RULE FOR ROLLOVER CON24 TRIBUTIONS.—A plan shall not fail to meet the

25 requirements of this paragraph if, under the
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1 terms of the plan, the present value of the non2 forfeitable accrued benefit is determined with3 out regard to that portion of such benefit which

4 is attributable to rollover contributions (and

5 earnings allocable thereto). For purposes of this

6 subparagraph, the term ‘rollover contributions’

7 means any rollover contribution under sections

8 402(c), 403(a)(4), 403(b)(8), clause (ii), (iii),

9 or (iv) of 408(d)(3)(A), and 457(e)(16).’’.

10 (2) Clause (i) of section 457(e)(9)(A) is amend11 ed by striking ‘‘such amount’’ and inserting ‘‘the

12 portion of such amount which is not attributable to

13 rollover contributions (as defined in section

14 411(a)(11)(D))’’.

15 (b) AMENDMENT TO ERISA.—Section 203(e) of the

16 Employee Retirement Income Security Act of 1974 (29

17 U.S.C. 1053(e)) is amended by adding at the end the fol18 lowing:

19 ‘‘(4) A plan shall not fail to meet the requirements

20 of this subsection if, under the terms of the plan, the

21 present value of the nonforfeitable accrued benefit is de22 termined without regard to that portion of such benefit

23 which is attributable to rollover contributions (and earn24 ings allocable thereto). For purposes of this paragraph,

25 the term ‘rollover contributions’ means any rollover con-
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1 tribution under sections 402(c), 403(a)(4), 403(b)(8),

2 clause (ii), (iii), or (iv) of 408(d)(3)(A), and 457(e)(16)

3 of the Internal Revenue Code of 1986.’’.

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

5 this section shall apply to distributions after December 31,

6 1999.

7 TITLE IV—STRENGTHENING

8 PENSION SECURITY AND EN9 FORCEMENT

10 SEC. 401. REPEAL OF 150 PERCENT OF CURRENT LIABILITY

11 FUNDING LIMIT.

12 (a) IN GENERAL.—

13 (1) CODE AMENDMENT.—Section 412(c)(7) (re14 lating to full-funding limitation) is amended—

15 (A) by striking ‘‘the applicable percentage’’

16 in subparagraph (A)(i)(I) and inserting ‘‘in the

17 case of plan years beginning before January 1,

18 2003, the applicable percentage’’, and

19 (B) by amending subparagraph (F) to read

20 as follows:

21 ‘‘(F) APPLICABLE PERCENTAGE.—For

22 purposes of subparagraph (A)(i)(I), the applica23 ble percentage shall be determined in accord24 ance with the following table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

2000 ............................................................................. 160
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2001 ............................................................................. 165

2002 ............................................................................. 170.’’.

1 (2) ERISA AMENDMENT.—Section 302(c)(7) of

2 the Employee Retirement Income Security Act of

3 1974 (29 U.S.C. 1082(c)(7)) is amended—

4 (A) by striking ‘‘the applicable percentage’’

5 in subparagraph (A)(i)(I) and inserting ‘‘in the

6 case of plan years beginning before January 1,

7 2003, the applicable percentage’’, and

8 (B) by amending subparagraph (F) to read

9 as follows:

10 ‘‘(F) APPLICABLE PERCENTAGE.—For purposes

11 of subparagraph (A)(i)(I), the applicable percentage

12 shall be determined in accordance with the following

13 table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

2000 ............................................................................. 160

2001 ............................................................................. 165

2002 ............................................................................. 170.’’.

14 (3) EFFECTIVE DATES.—The amendments

15 made by this subsection shall apply to plan years be16 ginning after December 31, 1999.

17 (b) MAXIMUM CONTRIBUTION DEDUCTION RULES

18 MODIFIED AND APPLIED TO ALL DEFINED BENEFIT

19 PLANS.—
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1 (1) IN GENERAL.—Section 404(a)(1)(D) (relat2 ing to special rule in case of certain plans) is

3 amended—

4 (A) by striking ‘‘which has more than 100

5 participants for the plan year’’,

6 (B) by striking ‘‘unfunded current liability

7 determined under section 414(l)’’ and inserting

8 ‘‘unfunded termination liability (determined as

9 if the proposed termination date referred to in

10 section 4041(b)(2)(A)(i)(II) of the Employee

11 Retirement Income Security Act of 1974 were

12 the last day of the plan year)’’,

13 (C) by inserting after the first sentence the

14 following: ‘‘For purposes of this subparagraph,

15 in the case of a plan which has less than 100

16 participants for the plan year, termination li17 ability shall not include the liability attributable

18 to benefit increases for highly compensated em19 ployees (as defined in section 414(q)) brought

20 about by plan amendment within the last 2

21 years before the termination date.’’, and

22 (D) by striking ‘‘(other than a multiem23 ployer plan)’’.
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1 (2) CONFORMING AMENDMENT.—Paragraph (6)

2 of section 4972(c) is amended by striking the sen3 tence preceding the last sentence thereof.

4 (3) EFFECTIVE DATE.—The amendments made

5 by this subsection shall apply to plan years begin6 ning after the date of enactment of this Act.

7 SEC. 402. MISSING PARTICIPANTS.

8 (a) IN GENERAL.—Section 4050 of the Employee Re9 tirement Income Security Act of 1974 (29 U.S.C. 1350)

10 is amended by redesignating subsection (c) as subsection

11 (e) and by inserting after subsection (b) the following:

12 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation

13 shall prescribe rules similar to the rules in subsection (a)

14 for multiemployer plans covered by this title that termi15 nate under section 4041A.

16 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—

17 ‘‘(1) TRANSFER TO CORPORATION.—The plan

18 administrator of a plan described in paragraph (4)

19 may elect to transfer a missing participant’s benefits

20 to the corporation upon termination of the plan.

21 ‘‘(2) INFORMATION TO THE CORPORATION.—To

22 the extent provided in regulations, the plan adminis23 trator of a plan described in paragraph (4) shall,

24 upon termination of the plan, provide the corpora-
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1 tion information with respect to benefits of a miss2 ing participant if the plan transfers such benefits—

3 ‘‘(A) to the corporation, or

4 ‘‘(B) to an entity other than the corpora5 tion or a plan described in paragraph (4)(B)(ii).

6 ‘‘(3) PAYMENT BY THE CORPORATION.—If ben7 efits of a missing participant were transferred to the

8 corporation under paragraph (1), the corporation

9 shall, upon location of the participant or beneficiary,

10 pay to the participant or beneficiary the amount

11 transferred (or the appropriate survivor benefit)

12 either—

13 ‘‘(A) in a single sum (plus interest), or

14 ‘‘(B) in such other form as is specified in

15 regulations of the corporation.

16 ‘‘(4) PLANS DESCRIBED.—A plan is described

17 in this paragraph if—

18 ‘‘(A) the plan is a pension plan (within the

19 meaning of section 3(2))—

20 ‘‘(i) to which the provisions of this

21 section do not apply (without regard to

22 this subsection), and

23 ‘‘(ii) which is not a plan described in

24 paragraphs (2) through (11) of section

25 4021(b), and
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1 ‘‘(B) at the time the assets are to be dis2 tributed upon termination, the plan—

3 ‘‘(i) has missing participants, and

4 ‘‘(ii) has not provided for the transfer

5 of assets to pay the benefits of all missing

6 participants to another pension plan (with7 in the meaning of section 3(2)).

8 ‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—

9 Subsections (a)(1) and (a)(3) shall not apply to a

10 plan described in paragraph (4).’’.

11 (b) CONFORMING AMENDMENTS.—

12 (1) Section 206(f) of the Employee Retirement

13 Income Security Act of 1974 (29 U.S.C. 1056(f)) is

14 amended—

15 (A) by striking ‘‘title IV’’ and inserting

16 ‘‘section 4050’’, and

17 (B) by striking ‘‘the plan shall provide

18 that’’.

19 (2) Section 401(a)(34) of such Act (relating to

20 benefits of missing participants on plan termination)

21 is amended by striking ‘‘title IV’’ and inserting ‘‘sec22 tion 4050’’.

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

24 this section shall apply to distributions made after final

25 regulations implementing subsections (c) and (d) of sec-
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1 tion 4050 of the Employee Retirement Income Security

2 Act of 1974 (as added by subsection (a)), respectively, are

3 prescribed.

4 SEC. 403. PERIODIC PENSION BENEFITS STATEMENTS.

5 (a) IN GENERAL.—Section 105(a) of the Employee

6 Retirement Income Security Act of 1974 (29 U.S.C.

7 1025(a)) is amended by striking ‘‘shall furnish to any plan

8 participant or beneficiary who so requests in writing, a

9 statement’’ and inserting ‘‘shall furnish to each plan par10 ticipant at least once each year (in the case of a defined

11 contribution plan) and upon written request of a plan par12 ticipant or beneficiary (in the case of a defined benefit

13 plan), a statement in written or electronic form’’.

14 (b) REQUIRED PERIODIC STATEMENTS FOR PLANS

15 WITH MORE THAN ONE UNAFFILIATED EMPLOYER.—

16 Section 105(d) of the Employee Retirement Income Secu17 rity Act of 1974 (29 U.S.C. 1025(d)) is repealed.

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

19 this section shall apply to plan years beginning after De20 cember 31, 1999.

21 SEC. 404. CIVIL PENALTIES FOR BREACH OF FIDUCIARY

22 RESPONSIBILITY.

23 (a) IMPOSITION AND AMOUNT OF PENALTY MADE

24 DISCRETIONARY.—Section 502(l)(1) of the Employee Re-
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1 tirement Income Security Act of 1974 (29 U.S.C.

2 1132(l)(1)) is amended—

3 (1) by striking ‘‘shall’’ and inserting ‘‘may’’,

4 and

5 (2) by striking ‘‘equal to’’ and inserting ‘‘not

6 greater than’’.

7 (b) APPLICABLE RECOVERY AMOUNT.—Section

8 502(l)(2) of such Act (29 U.S.C. 1132(l)(2)) is amended

9 to read as follows:

10 ‘‘(2) For purposes of paragraph (1), the term ‘appli11 cable recovery amount’ means any amount which is recov12 ered from any fiduciary or other person (or from any other

13 person on behalf of any such fiduciary or other person)

14 with respect to a breach or violation described in para15 graph (1) on or after the 30th day following receipt by

16 such fiduciary or other person of written notice from the

17 Secretary of the violation, whether paid voluntarily or by

18 order of a court in a judicial proceeding instituted by the

19 Secretary under subsection (a)(2) or (a)(5). The Secretary

20 may, in the Secretary’s sole discretion, extend the 30-day

21 period described in the preceding sentence.’’.

22 (c) OTHER RULES.—Section 502(l) of the Employee

23 Retirement Income Security Act of 1974 (29 U.S.C.

24 1132(l)) is amended by adding at the end the following:
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1 ‘‘(5) A person shall be jointly and severally liable for

2 the penalty described in paragraph (1) to the same extent

3 that such person is jointly and severally liable for the ap4 plicable recovery amount on which the penalty is based.

5 ‘‘(6) No penalty shall be assessed under this sub6 section unless the person against whom the penalty is as7 sessed is given notice and opportunity for a hearing with

8 respect to the violation and applicable recovery amount.’’.

9 (d) EFFECTIVE DATES.—

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

11 this section shall apply to any breach of fiduciary re12 sponsibility or other violation of part 4 of subtitle B

13 of title I of the Employee Retirement Income Secu14 rity Act of 1974 occurring on or after the date of

15 enactment of this Act.

16 (2) TRANSITION RULE.—In applying the

17 amendment made by subsection (b) (relating to ap18 plicable recovery amount), a breach or other viola19 tion occurring before the date of enactment of this

20 Act which continues after the 180th day after such

21 date (and which may have been discontinued at any

22 time during its existence) shall be treated as having

23 occurred after such date of enactment.
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1 SEC. 405. PENALTY TAX RELIEF FOR SOUND PENSION

2 FUNDING.

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

4 (relating to nondeductible contributions) is amended by

5 adding at the end the following new paragraph:

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

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

9 such year not to take into account any contributions

10 to a defined benefit plan except to the extent that

11 such contributions exceed the full-funding limitation

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

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

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

16 contributed to defined contribution plans and then

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

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

20 employer for such taxable year.’’.

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

22 this section shall apply to years beginning after December

23 31, 1999.
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1 SEC. 406. 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

8 shall apply to elective deferrals for plan years begin9 ning after December 31, 1998.

10 ‘‘(2) NONAPPLICATION TO PREVIOUSLY AC11 QUIRED PROPERTY.—The amendments made by this

12 section shall not apply to any elective deferral if

13 such deferral is used for the payment of indebted14 ness incurred before January 1, 1999 (or any refi15 nancing thereof) on the acquisition by the plan of

16 employer securities or employer real property—

17 ‘‘(A) before January 1, 1999, or

18 ‘‘(B) after such date pursuant to a written

19 contract which was binding on such date and at

20 all times thereafter on such plan.’’.

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

22 this section shall apply as if included in the provision of

23 the Taxpayer Relief Act of 1997 to which it relates.
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1 SEC. 407. NOTICE OF SIGNIFICANT REDUCTION IN BENEFIT

2 ACCRUALS.

3 (a) IN GENERAL.—Subsection (h) of section 204 of

4 the Employee Retirement Income Security Act of 1974

5 (29 U.S.C. 1054) is amended to read as follows:

6 ‘‘(h) NOTICE OF SIGNIFICANT REDUCTION IN BENE7 FIT ACCRUALS.—

8 ‘‘(1) If a plan described in paragraph (4) is

9 amended to provide for a significant reduction in the

10 rate of future benefit accrual, the plan administrator

11 shall provide a notice to—

12 ‘‘(A) each affected participant in the plan,

13 ‘‘(B) each affected beneficiary who is an

14 alternate payee (within the meaning of section

15 206(d)(3)(K)) under an applicable qualified do16 mestic relations order (within the meaning of

17 section 206(d)(3)(B)(i)), and

18 ‘‘(C) each employee organization represent19 ing affected participants in the plan, except

20 that such notice shall instead be provided to a

21 person designated to receive such notice on be22 half of any person referred to in paragraph (A),

23 (B), or (C). For purposes of this paragraph, an

24 affected participant or beneficiary is a partici25 pant or beneficiary to whom the significant re-
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1 duction described in this paragraph is reason2 ably expected to apply.

3 ‘‘(2) The notice required by paragraph (1)

4 shall—

5 ‘‘(A) include the plan amendment, or a

6 summary of such plan amendment, and its ef7 fective date, and

8 ‘‘(B) provide a notification and description

9 of the reduction described in paragraph (1).

10 A notification and description shall not fail to satisfy

11 paragraph (2)(B) by reason of a failure to provide

12 the specific amount of the reduction with respect to

13 any participant or beneficiary.

14 ‘‘(3) The notice required by paragraph (1) shall

15 be provided no less than 30 days prior to the effec16 tive date of the plan amendment.

17 ‘‘(4) A plan is described in this paragraph if

18 such plan is—

19 ‘‘(A) a defined benefit plan, or

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

21 subject to the funding standards of section 302.

22 ‘‘(5) In the case of a material failure to comply

23 with requirements of this subsection with respect to

24 more than a de minimis number of persons described

25 in paragraph (1), the plan amendment to which the
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1 failure relates shall not be effective with respect to

2 such persons for any period prior to the expiration

3 of 30 days following the date on which a notice is

4 provided in accordance with this subsection. For

5 purposes of this paragraph, the term ‘material fail6 ure’ includes any failure that results in materially

7 less information being provided to the persons de8 scribed in paragraph (1).’’.

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

10 this section shall apply to plan amendments that are

11 adopted more than 120 days after the date of enactment

12 of this Act.

13 TITLE V—REDUCING

14 REGULATORY BURDENS

15 SEC. 501. INTERMEDIATE SANCTIONS FOR INADVERTENT

16 FAILURES.

17 (a) IN GENERAL.—Section 401(a) (relating to quali18 fied pension, profit-sharing, and stock bonus plans) is

19 amended by inserting after paragraph (34) the following:

20 ‘‘(35) PROTECTION FROM DISQUALIFICATION

21 UPON TIMELY CORRECTION OR PAYMENT OF FINE.—

22 A trust shall not fail to constitute a qualified trust

23 under this section if the plan of which such trust is

24 a part has made good faith efforts to meet the re25 quirements of this section, has inadvertently failed
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1 to satisfy 1 or more of such requirements, and

2 either—

3 ‘‘(A) substantially corrects (to the extent

4 possible) such failure before the date the plan

5 becomes subject to a plan examination for the

6 applicable year (as determined under rules pre7 scribed by the Secretary), or

8 ‘‘(B) substantially corrects (to the extent

9 possible) such failure on or after such date.

10 If the plan satisfies the requirement under subpara11 graph (B), the Secretary may require the sponsoring

12 employer to make a payment to the Secretary in an

13 amount that does not exceed an amount that bears

14 a reasonable relationship to the severity of the plan’s

15 failure to satisfy the requirements of this section.’’.

16 (b) APPLICATION TO CASH OR DEFERRED ARRANGE17 MENTS.—Section 401(k) is amended by inserting after

18 paragraph (12) the following new paragraph:

19 ‘‘(13) PROTECTION FROM DISQUALIFICATION.—

20 Rules similar to the rules set forth in section

21 401(a)(35) shall apply for purposes of determining

22 whether a cash or deferred arrangement is a quali23 fied cash or deferred arrangement.’’.
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1 (c) APPLICATION TO SECTION 403(b) ANNUITY CON2 TRACTS.—Section 403(b) is amended by inserting after

3 paragraph (12) the following:

4 ‘‘(13) CORRECTION OF ERRORS.—For purposes

5 of determining whether the exclusion from gross in6 come under paragraph (1) is applicable to an em7 ployee for any taxable year, rules similar to the rules

8 set forth in section 401(a)(35) shall apply to any an9 nuity contract purchased under this subsection or

10 any plan established to meet the requirements of

11 this subsection.’’.

12 (d) INCOME INCLUSION FOR DISQUALIFICATION NOT

13 APPLICABLE TO NONHIGHLY COMPENSATED EMPLOY14 EES.—Section 402(b) (relating to taxability of beneficiary

15 of nonexempt trust) is amended by striking paragraph (4)

16 and inserting the following:

17 ‘‘(4) INCOME INCLUSION FOR DISQUALIFICA18 TION NOT APPLICABLE TO NONHIGHLY COM19 PENSATED EMPLOYEES.—Paragraphs (1) and (2)

20 shall not apply to employees who are not highly com21 pensated employees.

22 ‘‘(5) FAILURE TO MEET REQUIREMENTS OF

23 SECTION 401(a)(26) OR 410(b).—If 1 of the reasons

24 a trust is not exempt from tax under section 501(a)

25 is the failure of the plan to meet the requirements
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1 of section 401(a)(26) or 410(b), then a highly com2 pensated employee shall, in lieu of the amount deter3 mined under paragraph (1) or (2), include in gross

4 income for the taxable year with or within which the

5 taxable year of the trust ends an amount equal to

6 the vested accrued benefit of such employee (other

7 than the employee’s investment in the contract) as

8 of the close of such taxable year of the trust.

9 ‘‘(6) HIGHLY COMPENSATED EMPLOYEE.—For

10 purposes of this subsection, the term ‘highly com11 pensated employee’ has the meaning given such term

12 by section 414(q).’’.

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

14 this section shall take effect on the date of enactment of

15 this Act.

16 SEC. 502. REPEAL OF THE MULTIPLE USE TEST.

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

18 is amended to read as follows:

19 ‘‘(9) REGULATIONS.—The Secretary shall pre20 scribe such regulations as may be necessary to carry

21 out the purposes of this subsection and subsection

22 (k), including regulations permitting appropriate ag23 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, 1999.

4 SEC. 503. SAFETY VALVE FROM MECHANICAL RULES.

5 (a) IN GENERAL.—The Secretary of the Treasury, by

6 regulation, shall provide that the plan shall be deemed to

7 satisfy the requirements of section 401(a)(4) of the Inter8 nal Revenue Code of 1986 if such plan satisfies the facts

9 and circumstances test under section 401(a)(4) of such

10 Code, as in effect before January 1, 1994, if—

11 (1) the plan satisfies conditions prescribed by

12 the Secretary to appropriately limit the availability

13 of such test, and

14 (2) the plan is submitted to the Secretary for

15 a determination of whether it satisfies such test.

16 Paragraph (2) shall only apply to the extent provided by

17 the Secretary.

18 (b) EFFECTIVE DATES.—

19 (1) REGULATIONS.—The regulation required by

20 subsection (a) shall apply to years beginning after

21 December 31, 2000.

22 (2) CONDITIONS OF AVAILABILITY.—Any condi23 tion of availability prescribed by the Secretary under

24 subsection (a)(1) shall not apply before the first year
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1 beginning not less than 120 days after the date on

2 which such condition is prescribed.

3 SEC. 504. REFORM OF THE LINE OF BUSINESS RULES.

4 (a) REPEAL OF GATEWAY TEST.—Paragraph (5) of

5 section 410(b) is amended to read as follows:

6 ‘‘(5) LINE OF BUSINESS EXCEPTION.—If, under

7 section 414(r), an employer is treated as operating

8 separate lines of business for a year, the employer

9 may apply the requirements of this subsection for

10 such year separately with respect to employees in

11 each separate line of business.’’.

12 (b) REGULATIONS.—The Secretary of the Treasury

13 shall modify the regulations issued under section 414(r)

14 of the Internal Revenue Code of 1986 (relating to special

15 rules for separate line of business) to—

16 (1) simplify the administrability of the rules for

17 both the Secretary and plans, and

18 (2) permit employees to be allocated among

19 lines of business based on all the facts and cir20 cumstances.

21 (c) EFFECTIVE DATES.—

22 (1) REPEAL.—The repeal made by subsection

23 (a) shall apply to years beginning after December

24 31, 2000.
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1 (2) REGULATIONS.—The regulations modified

2 under subsection (b) shall apply to years beginning

3 after December 31, 2000.

4 SEC. 505. COVERAGE TEST FLEXIBILITY.

5 (a) IN GENERAL.—Paragraph (1) of section 410(b)

6 is amended by adding at the end the following:

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

8 meet the requirements of subparagraphs (A),

9 (B) and (C), the plan—

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

11 effect immediately before the enactment of

12 the Tax Reform Act of 1986,

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

14 a determination of whether it satisfies the

15 requirement described in clause (i), and

16 ‘‘(iii) satisfies conditions prescribed by

17 the Secretary by regulation that appro18 priately limit the availability of this sub19 paragraph.

20 Clause (ii) shall apply only to the extent pro21 vided by the Secretary.’’.

22 (b) EFFECTIVE DATES.—

23 (1) IN GENERAL.—The amendment made by

24 subsection (a) shall apply to years beginning after

25 December 31, 2000.
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1 (2) CONDITIONS OF AVAILABILITY.—Any condi2 tion of availability prescribed by the Secretary under

3 regulations prescribed by the Secretary under sec4 tion 410(a)(1)(D) of the Internal Revenue Code of

5 1986 shall not apply before the first year beginning

6 not less than 120 days after the date on which such

7 condition is prescribed.

8 SEC. 506. INCREASE IN RETIREMENT PLAN CASH-OUT

9 AMOUNT.

10 (a) AMENDMENTS TO 1986 CODE.—Section

11 411(a)(11) (relating to restrictions on certain mandatory

12 distributions) is amended by adding at the end the follow13 ing:

14 ‘‘(D) INFLATION ADJUSTMENT.—In the

15 case of any plan year beginning in a calendar

16 year after 1999, the Secretary shall adjust an17 nually the $5,000 amount contained in subpara18 graph (A) for increases in the cost of living at

19 the same time and in the same manner as ad20 justments under section 415(d); except that the

21 base period shall be the calendar quarter ending

22 September 30, 1999, and any increase which is

23 not a multiple of $500 shall be rounded to the

24 next lowest multiple of $500.’’.
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1 (b) AMENDMENTS TO ERISA.—Section 203(e) of the

2 Employee Retirement Income Security Act of 1974 (29

3 U.S.C. 1053(e)) is amended by adding at the end the fol4 lowing:

5 ‘‘(4) INFLATION ADJUSTMENT.—In the case of any

6 plan year beginning in a calendar year after 1999, the

7 Secretary shall adjust annually the $5,000 amount con8 tained in paragraph (1) for increases in the cost of living

9 at the same time and in the same manner as adjustments

10 under section 415(d) of the Internal Revenue Code of

11 1986; except that the base period shall be the calendar

12 quarter ending September 30, 1999, and any increase

13 which is not a multiple of $500 shall be rounded to the

14 next lowest multiple of $500.’’.

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

16 this section shall apply to plan years beginning on or after

17 the date of enactment of this Act.

18 SEC. 507. MODIFICATION OF TIMING OF PLAN VALUATIONS.

19 (a) IN GENERAL.—Section 412(c)(9) (relating to an20 nual valuation) is amended—

21 (1) by striking ‘‘For purposes’’ and inserting

22 the following:

23 ‘‘(A) IN GENERAL.—For purposes’’, and

24 (2) by adding at the end the following:
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1 ‘‘(B) ELECTION TO USE PRIOR YEAR

2 VALUATION.—

3 ‘‘(i) IN GENERAL.—If, for any plan

4 year—

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

6 this subparagraph with respect to a

7 plan, and

8 ‘‘(II) the assets of the plan are

9 not less than 125 percent of the

10 plan’s current liability (as defined in

11 paragraph (7)(B)), determined as of

12 the valuation date for the preceding

13 plan year, then this section shall be

14 applied using the information avail15 able as of such valuation date.

16 ‘‘(ii) ADJUSTMENTS.—Information

17 under clause (i) shall, in accordance with

18 regulations, be actuarially adjusted to re19 flect significant differences in participants.

20 ‘‘(iii) ELECTION.—An election under

21 this subparagraph, once made, shall be ir22 revocable without the consent of the Sec23 retary.’’.
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1 (b) AMENDMENTS TO ERISA.—Paragraph (9) of

2 section 302(c) of the Employee Retirement Income Secu3 rity Act of 1974 (29 U.S.C. 1053(c)) is amended—

4 (1) by inserting ‘‘(A)’’ after ‘‘(9)’’, and

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

6 ‘‘(B)(i) If, for any plan year—

7 ‘‘(I) an election is in effect under this subpara8 graph with respect to a plan, and

9 ‘‘(II) the assets of the plan are not less than

10 125 percent of the plan’s current liability (as defined

11 in paragraph (7)(B)), determined as of the valuation

12 date for the preceding plan year,

13 then this section shall be applied using the information

14 available as of such valuation date.

15 ‘‘(ii) Information under clause (i) shall, in accordance

16 with regulations, be actuarially adjusted to reflect signifi17 cant differences in participants.

18 ‘‘(iii) An election under this subparagraph, once

19 made, shall be irrevocable without the consent of the Sec20 retary of the Treasury.’’.

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

22 this section shall apply to plan years beginning on or after

23 the date of enactment of this Act.
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1 SEC. 508. SECTION 457 INAPPLICABLE TO CERTAIN MIRROR

2 PLANS.

3 (a) IN GENERAL.—Subsection (e) of section 457 (re4 lating to deferred compensation plans of State and local

5 governments and tax-exempt organizations) is amended by

6 adding at the end the following new paragraph:

7 ‘‘(17) This section shall not apply to a plan,

8 program, or arrangement maintained solely for the

9 purposes of providing retirement benefits for em10 ployees in excess of the limitations imposed by sec11 tions 401(a)(17) or 415.’’.

12 (b) CERTAIN DEFERRED COMPENSATION NOT

13 TAKEN INTO ACCOUNT.—Subsection (c) of section 457

14 (relating to individuals who are participants in more than

15 1 plan) (as amended by section 108(a)) is amended by

16 adding at the end the following: ‘‘This section shall be ap17 plied without regard to a plan, program, or arrangement

18 described in subsection (e)(17).’’.

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

20 this section shall apply to years beginning after December

21 31, 1999.

22 SEC. 509. SUBSTANTIAL OWNER BENEFITS IN TERMINATED

23 PLANS.

24 (a) MODIFICATION OF PHASE-IN OF GUARANTEE.—

25 Section 4022(b)(5) of the Employee Retirement Income
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1 Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended

2 to read as follows:

3 ‘‘(5)(A) For purposes of this paragraph, the term

4 ‘majority owner’ means an individual who, at any time

5 during the 60-month period ending on the date the deter6 mination is being made—

7 ‘‘(i) owns the entire interest in an unincor8 porated trade or business,

9 ‘‘(ii) in the case of a partnership, is a partner

10 who owns, directly or indirectly, 50 percent or more

11 of either the capital interest or the profits interest

12 in such partnership, or

13 ‘‘(iii) in the case of a corporation, owns, directly

14 or indirectly, 50 percent or more in value of either

15 the voting stock of that corporation or all the stock

16 of that corporation.

17 For purposes of clause (iii), the constructive ownership

18 rules of section 1563(e) of the Internal Revenue Code of

19 1986 shall apply (determined without regard to section

20 1563(e)(3)(C)).

21 ‘‘(B) In the case of a participant who is a majority

22 owner, the amount of benefits guaranteed under this sec23 tion shall equal the product of—

24 ‘‘(i) a fraction (not to exceed 1) the numerator

25 of which is the number of years from the later of the
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1 effective date or the adoption date of the plan to the

2 termination date, and the denominator of which is

3 10, and

4 ‘‘(ii) the amount of benefits that would be guar5 anteed under this section if the participant were not

6 a majority owner.’’.

7 (b) MODIFICATION OF ALLOCATION OF ASSETS.—

8 (1) Section 4044(a)(4)(B) of the Employee Re9 tirement Income Security Act of 1974 (29 U.S.C.

10 1344(a)(4)(B)) is amended by striking ‘‘section

11 4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.

12 (2) Section 4044(b) of such Act (29 U.S.C.

13 1344(b)) is amended—

14 (A) by striking ‘‘(5)’’ in paragraph (2) and

15 inserting ‘‘(4), (5),’’, and

16 (B) by redesignating paragraphs (3)

17 through (6) as paragraphs (4) through (7), re18 spectively, and by inserting after paragraph (2)

19 the following:

20 ‘‘(3) If assets available for allocation under

21 paragraph (4) of subsection (a) are insufficient to

22 satisfy in full the benefits of all individuals who are

23 described in that paragraph, the assets shall be allo24 cated first to benefits described in subparagraph (A)

25 of that paragraph. Any remaining assets shall then
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1 be allocated to benefits described in subparagraph

2 (B) of that paragraph. If assets allocated to such

3 subparagraph (B) are insufficient to satisfy in full

4 the benefits described in that subparagraph, the as5 sets shall be allocated pro rata among individuals on

6 the basis of the present value (as of the termination

7 date) of their respective benefits described in that

8 subparagraph.’’.

9 (c) CONFORMING AMENDMENTS.—

10 (1) Section 4021 of the Employee Retirement

11 Income Security Act of 1974 (29 U.S.C. 1321) is

12 amended—

13 (A) in subsection (b)(9), by striking ‘‘as

14 defined in section 4022(b)(6)’’, and

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

16 ‘‘(d) For purposes of subsection (b)(9), the term

17 ‘‘substantial owner’’ means an individual who, at any time

18 during the 60-month period ending on the date the deter19 mination is being made—

20 ‘‘(1) owns the entire interest in an unincor21 porated trade or business,

22 ‘‘(2) in the case of a partnership, is a partner

23 who owns, directly or indirectly, more than 10 per24 cent of either the capital interest or the profits inter25 est in such partnership, or
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1 ‘‘(3) in the case of a corporation, owns, directly

2 or indirectly, more than 10 percent in value of either

3 the voting stock of that corporation or all the stock

4 of that corporation.

5 For purposes of paragraph (3), the constructive ownership

6 rules of section 1563(e) of the Internal Revenue Code of

7 1986 shall apply (determined without regard to section

8 1563(e)(3)(C)).’’.

9 (2) Section 4043(c)(7) of such Act (29 U.S.C.

10 1343(c)(7)) is amended by striking ‘‘section 4022(b)(6)’’

11 and inserting ‘‘section 4021(d)’’.

12 (d) EFFECTIVE DATES.—

13 (1) IN GENERAL.—Except as provided in para14 graph (2), the amendments made by this section

15 shall apply to plan terminations—

16 (A) under section 4041(c) of the Employee

17 Retirement Income Security Act of 1974 (29

18 U.S.C. 1341(c)) with respect to which notices

19 of intent to terminate are provided under sec20 tion 4041(a)(2) of such Act (29 U.S.C.

21 1341(a)(2)) on or after the date of enactment

22 of this Act, and

23 (B) under section 4042 of such Act (29

24 U.S.C. 1342) with respect to which proceedings
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1 are instituted by the corporation on or after

2 such date.

3 (2) CONFORMING AMENDMENTS.—The amend4 ments made by subsection (c) shall take effect on

5 the date of enactment of this Act.

6 SEC. 510. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT

7 LOSS OF DIVIDEND DEDUCTION.

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

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

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

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

12 clause:

13 ‘‘(iii) is, at the election of such par14 ticipants or their beneficiaries—

15 ‘‘(I) payable as provided in clause

16 (i) or (ii), or

17 ‘‘(II) paid to the plan and rein18 vested in qualifying employer securi19 ties, or’’.

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

21 this section shall apply to taxable years beginning after

22 December 31, 1999.
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1 SEC. 511. MODIFICATION OF 403(b) EXCLUSION ALLOWANCE

2 TO CONFORM TO 415 MODIFICATION.

3 The Secretary of the Treasury shall modify the regu4 lations regarding the exclusion allowance under section

5 403(b)(2) of the Internal Revenue Code of 1986 to render

6 void the requirement that contributions to a defined bene7 fit pension plan be treated as previously excluded amounts

8 for purposes of the exclusion allowance. For taxable years

9 beginning after December 31, 1999, such regulations shall

10 be applied as if such requirement were void.

11 SEC. 512. TREATMENT OF MULTIEMPLOYER PLANS UNDER

12 SECTION 415.

13 (a) COMPENSATION LIMIT.—Paragraph (11) of sec14 tion 415(b) (relating to limitation for defined benefit

15 plans) is amended to read as follows:

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

18 of a governmental plan (as defined in section

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

21 shall not apply.’’.

22 (b) EXEMPTION FOR SURVIVOR AND DISABILITY

23 BENEFITS.—Subparagraph (I) of section 415(b)(2) (relat24 ing to limitation for defined benefit plans) is amended—
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1 (1) by inserting ‘‘or a multiemployer plan (as

2 defined in section 414(f))’’ after ‘‘section 414(d))’’

3 in clause (i),

4 (2) by inserting ‘‘or multiemployer plan’’ after

5 ‘‘governmental plan’’ in clause (ii), and

6 (3) by inserting ‘‘AND MULTIEMPLOYER’’ after

7 ‘‘GOVERNMENTAL’’ in the heading.

8 (c) COMBINING AND AGGREGATION OF PLANS.—

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

10 section 415 (relating to combining of plans) is

11 amended by adding at the end the following:

12 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER

13 PLANS.—Notwithstanding paragraph (1) and sub14 section (g), a multiemployer plan (as defined in sec15 tion 414(f)) shall not be combined or aggregated

16 with any other plan maintained by an employer for

17 purposes of applying the limitations established in

18 this section.’’.

19 (2) CONFORMING AMENDMENT FOR AGGREGA20 TION OF PLANS.—Subsection (g) of section 415 (re21 lating to aggregation of plans) is amended by strik22 ing ‘‘The Secretary’’ and inserting ‘‘Except as pro23 vided in subsection (f)(3), the Secretary’’.
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to years beginning after December

3 31, 1999.

4 SEC. 513. ELIMINATION OF PARTIAL TERMINATION RULES

5 FOR MULTIEMPLOYER PLANS.

6 (a) PARTIAL TERMINATION RULES FOR MULTIEM7 PLOYER PLANS.—Section 411(d)(3) (relating to termi8 nation or partial termination; discontinuance of contribu9 tions) is amended by adding at the end the following new

10 sentence: ‘‘This paragraph shall not apply in the case of

11 a partial termination of a multiemployer plan.’’.

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

13 this section shall apply to partial terminations beginning

14 after December 31, 1999.

15 SEC. 514. NOTICE AND CONSENT PERIOD REGARDING DIS16 TRIBUTIONS.

17 (a) EXPANSION OF PERIOD.—

18 (1) IN GENERAL.—

19 (A) Subparagraph (A) of section 417(a)(6)

20 is amended by striking ‘‘90-day’’ and inserting

21 ‘‘one-year’’.

22 (B) Subparagraph (A) of section 205(c)(7)

23 of the Employee Retirement Income Security

24 Act of 1974 (29 U.S.C. 1055) is amended by

25 striking ‘‘90-day’’ and inserting ‘‘one-year’’.
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1 (2) MODIFICATION OF REGULATIONS.—The

2 Secretary of the Treasury shall modify the regula3 tions under sections 402(f), 411(a)(11), and 417 of

4 the Internal Revenue Code of 1986 to substitute

5 ‘‘one year’’ for ‘‘90 days’’ each place it appears in

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

7 11(c), and 1.417(e)–1(b).

8 (3) EFFECTIVE DATE.—The amendments made

9 by paragraph (1) and the modifications required by

10 paragraph (2) shall apply to years beginning after

11 December 31, 1999.

12 (b) CONSENT REGULATION INAPPLICABLE TO CER13 TAIN DISTRIBUTIONS.—

14 (1) IN GENERAL.—The Secretary of the Treas15 ury shall modify the regulations under section

16 411(a)(11) of the Internal Revenue Code of 1986 to

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

18 if any, to defer receipt of a distribution shall also de19 scribe the consequences of failing to defer such re20 ceipt.

21 (2) EFFECTIVE DATE.—The modifications re22 quired by paragraph (1) shall apply to years begin23 ning after December 31, 1999.
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1 SEC. 515. CONFORMING AMENDMENTS RELATING TO ELEC2 TION TO RECEIVE TAXABLE CASH COM3 PENSATION IN LIEU OF NONTAXABLE PARK4 ING BENEFITS.

5 (a) IN GENERAL.—

6 (1) Clause (ii) of section 415(c)(3)(D) and sub7 paragraph (B) of section 403(b)(3) are each amend8 ed by striking ‘‘section 125 or’’ and inserting ‘‘sec9 tion 125, 132(f)(4), or’’.

10 (2) Paragraph (2) of section 414(s) is amended

11 by striking ‘‘section 125, 402(e)(3)’’ and inserting

12 ‘‘section 125, 132(f)(4), 402(e)(3)’’.

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

14 subsection (a) shall take effect as if included in the

15 amendment made by section 1072 of the Taxpayer Relief

16 Act of 1997.

17 SEC. 516. EXTENSION TO INTERNATIONAL ORGANIZATIONS

18 OF MORATORIUM ON APPLICATION OF CER19 TAIN NONDISCRIMINATION RULES APPLICA20 BLE TO STATE AND LOCAL PLANS.

21 (a) IN GENERAL.—Subparagraph (G) of section

22 401(a)(5), subparagraph (H) of section 401(a)(26), sub23 paragraph (G) of section 401(k)(3), and paragraph (2) of

24 section 1505(d) of the Taxpayer Relief Act of 1997 are

25 each amended by inserting ‘‘or by an international organi-
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1 zation which is described in section 414(d)’’ after ‘‘or in2 strumentality thereof)’’.

3 (b) CONFORMING AMENDMENTS.—

4 (1) The headings for subparagraph (G) of sec5 tion 401(a)(5) and subparagraph (H) of section

6 401(a)(26) are each amended by inserting ‘‘AND

7 INTERNATIONAL ORGANIZATION’’ after ‘‘GOVERN8 MENTAL’’.

9 (2) Subparagraph (G) of section 401(k)(3) is

10 amended by inserting ‘‘STATE AND LOCAL GOVERN11 MENTAL AND INTERNATIONAL ORGANIZATION

12 PLANS.—’’ after ‘‘(G)’’.

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

14 this section shall take effect as if included in the amend15 ment made by section 1505 of the Taxpayer Relief Act

16 of 1997.

17 SEC. 517. EMPLOYEES OF TAX-EXEMPT ENTITIES.

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

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

20 to provide that employees of an organization described in

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

22 1986 who are eligible to make contributions under section

23 403(b) pursuant to a salary reduction agreement may be

24 treated as excludable with respect to a plan under section

25 401(k), or section 401(m) of such Code that is provided
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1 under the same general arrangement as a plan under such

2 section 401(k), if—

3 (1) no employee of an organization described in

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

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

6 401(m) plan, and

7 (2) 95 percent of the employees who are not

8 employees of an organization described in section

9 403(b)(1)(A)(i) of such Code are eligible to partici10 pate in such section 401(k) plan or section 401(m)

11 plan.

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

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

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

15 Act of 1996.

16 SEC. 518. PERMISSIVE AGGREGATION OF COLLECTIVE BAR17 GAINING UNITS.

18 (a) IN GENERAL.—Paragraph (3) of section 410(b)

19 is amended by inserting the following immediately before

20 the last sentence thereof: ‘‘Solely for purposes of applying

21 this subsection to employees who are not described in sub22 paragraph (A), an employer may elect to have subpara23 graph (A) not apply to one or more units of employees

24 who are described in subparagraph (A).’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to years beginning after December

3 31, 1999.

4 SEC. 519. REPEAL OF TRANSITION RULE RELATING TO CER5 TAIN HIGHLY COMPENSATED EMPLOYEES.

6 (a) IN GENERAL.—Paragraph (4) of section

7 1114(c)(4) of the Tax Reform Act of 1986 is hereby re8 pealed.

9 (b) EFFECTIVE DATE.—The repeal made by sub10 section (a) shall apply to plan years beginning on or after

11 January 1, 2000.

12 SEC. 520. CLARIFICATION OF TREATMENT OF EMPLOYER13 PROVIDED RETIREMENT ADVICE.

14 (a) IN GENERAL.—Section 132(e) (defining de mini15 mis fringe) is amended by adding at the end the following:

16 ‘‘(3) TREATMENT OF CERTAIN RETIREMENT

17 PLANNING SERVICES.—The provision of retirement

18 planning services by an employer to employees, to

19 the extent not described in subsection (d), shall be

20 treated as a de minimis fringe.’’.

21 (b) NO CONSTRUCTIVE RECEIPT.—Section 132 is

22 amended by redesignating subsection (m) as subsection

23 (n) and by inserting after subsection (l) the following:

24 ‘‘(m) RETIREMENT PLANNING.—
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1 ‘‘(1) IN GENERAL.—No amount shall be in2 cluded in the gross income of an employee solely be3 cause the employee may choose between any retire4 ment planning fringe and compensation which would

5 otherwise be includible in the gross income of such

6 employee.

7 ‘‘(2) NONDISCRIMINATION REQUIREMENT.—

8 Paragraph (1) shall apply to a highly compensated

9 employee only if the choice described in such para10 graph is available on substantially the same terms to

11 each member of a group of employees which is de12 fined under a reasonable classification set up by the

13 employer which does not discriminate in favor of

14 highly compensated employees.

15 ‘‘(3) RETIREMENT PLANNING FRINGE.—For

16 purposes of this subsection, the term ‘retirement

17 planning fringe’ means any retirement planning

18 services provided by an employer to an employee

19 which are not included in the gross income of the

20 employee by reason of subsection (d) or (e).’’.

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

22 this section shall apply to years beginning after December

23 31, 1999.
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1 SEC. 521. ANNUAL REPORT DISSEMINATION.

2 (a) IN GENERAL.—Section 104(b)(3) of the Em3 ployee Retirement Income Security Act of 1974 (29

4 U.S.C. 1024(b)(3)) is amended by striking ‘‘shall furnish’’

5 and inserting ‘‘shall make available for examination (and,

6 upon request, shall furnish)’’.

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

8 this section shall apply to reports for years beginning after

9 December 31, 1998.

10 SEC. 522. EXCESS BENEFIT PLANS.

11 (a) IN GENERAL.—Section 3(36) of the Employee

12 Retirement Income Security Act of 1974 (29 U.S.C.

13 1002(36)) is amended to read as follows:

14 ‘‘(36) The term ‘excess benefit plan’ means a

15 plan, without regard to whether such plan is funded,

16 maintained by an employer solely for the purpose of

17 providing benefits to employees in excess of the limi18 tations imposed by 1 or more of sections 401(a)(17),

19 401(k), 401(m), 402(g), 403(b), 408(k), 408(p), or

20 415 of the Internal Revenue Code of 1986 or any

21 other limitation on contributions or benefits in such

22 Code on plans to which any of such sections apply.

23 To the extent that a separable part of a plan (as de24 termined by the Secretary of Labor) maintained by

25 an employer is maintained for such purpose, that
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1 part shall be treated as a separate plan which is an

2 excess benefit plan.’’.

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

4 this section shall apply to years beginning after December

5 31, 1999.

6 SEC. 523. BENEFIT SUSPENSION NOTICE.

7 (a) MODIFICATION OF REGULATION.—The Secretary

8 of Labor shall modify the regulation under section

9 203(a)(3)(B) of the Employee Retirement Income Secu10 rity Act of 1974 (29 U.S.C. 1053(a)(3)(B)) to provide

11 that the notification required by such regulation—

12 (1) may be included in the summary plan de13 scription for the plan furnished in accordance with

14 section 104(b) of such Act (29 U.S.C. 1024(b)),

15 rather than in a separate notice, and

16 (2) need not include a copy of the relevant plan

17 provisions.

18 (b) EFFECTIVE DATE.—The modification made

19 under subsection (a) shall apply to plan years beginning

20 after December 31, 1999.

21 SEC. 524. PROVISIONS RELATING TO PLAN AMENDMENTS.

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

23 or contract amendment—

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

25 being operated in accordance with the terms of the
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1 plan during the period described in subsection

2 (b)(2)(A), and

3 (2) such plan shall not fail to meet the require4 ments of section 411(d)(6) of the Internal Revenue

5 Code of 1986 or section 204(g) of the Employee Re6 tirement Income Security Act of 1974 (29 U.S.C.

7 1054(g)) by reason of such amendment.

8 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

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

10 any amendment to any plan or annuity contract

11 which is made—

12 (A) pursuant to any amendment made by

13 this Act, or pursuant to any regulation issued

14 under this Act, and

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

16 plan year beginning on or after January 1,

17 2002.

18 In the case of a government plan (as defined in sec19 tion 414(d) of the Internal Revenue Code of 1986

20 and section 3(32) of the Employee Retirement In21 come Security Act of 1974), this paragraph shall be

22 applied by substituting ‘‘2004’’ for ‘‘2002’’.

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

24 to any amendment unless—

25 (A) during the period—
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1 (i) beginning on the date the legisla2 tive or regulatory amendment described in

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

4 case of a plan or contract amendment not

5 required by such legislative or regulatory

6 amendment, the effective date specified by

7 the plan), and

8 (ii) ending on the date described in

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

10 the plan or contract amendment is adopt11 ed),

12 the plan or contract is operated as if such plan

13 or contract amendment were in effect, and

14 (B) such plan or contract amendment ap15 plies retroactively for such period.

16 SEC. 525. REPORTING SIMPLIFICATION.

17 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

18 OWNERS AND THEIR SPOUSES.—

19 (1) IN GENERAL.—The Secretary of the Treas20 ury shall modify the requirements for filing annual

21 returns with respect to one-participant retirement

22 plans to ensure that such plans with assets of

23 $500,000 or less as of the close of the plan year

24 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 1st 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 SEC. 526. MODEL PLANS FOR SMALL BUSINESSES.

17 (a) IN GENERAL.—Not later than December 31,

18 2000, the Secretary of the Treasury is directed to issue

19 at least one model defined contribution plan and at least

20 one model defined benefit plan that fit the needs of small

21 businesses and that shall be treated as meeting the re22 quirements of section 401(a) of the Internal Revenue Code

23 of 1986 with respect to the form of the plan. To the extent

24 that the requirements of section 401(a) of such Code are

25 modified after the issuance of such plans, the Secretary
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1 of the Treasury shall, in a timely manner, issue model

2 amendments that, if adopted in a timely manner by an

3 employer that has a model plan in effect, shall cause such

4 model plan to be treated as meeting the requirements of

5 section 401(a) of such Code, as modified, with respect to

6 the form of the plan.

7 (b) MASTER AND PROTOTYPE PLAN ALTER8 NATIVE.—The Secretary of the Treasury may, in its dis9 cretion, satisfy the requirements of subsection (a) through

10 the enhancement and simplification of the Secretary’s pro11 grams for master and prototype plans in such a manner

12 as to achieve the purposes of subsection (a).

Æ