II

106TH CONGRESS

2D SESSION H. R. 1102

IN THE SENATE OF THE UNITED STATES

JULY 20, 2000

Received

JULY 27, 2000

Read the first time

SEPTEMBER 5, 2000

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

Committee on Finance

AN ACT

To provide for pension reform, and for other purposes.

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

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

4 ‘‘Comprehensive Retirement Security and Pension Reform

5 Act of 2000’’.

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

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

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

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

13 this Act is as follows:

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

TITLE I—INDIVIDUAL RETIREMENT ACCOUNT PROVISIONS

Sec. 101. Modification of IRA contribution limits.

TITLE II—EXPANDING COVERAGE

Sec. 201. Increase in benefit and contribution limits.

Sec. 202. Plan loans for subchapter S owners, partners, and sole proprietors.

Sec. 203. Modification of top-heavy rules.

Sec. 204. Elective deferrals not taken into account for purposes of deduction

limits.

Sec. 205. Repeal of coordination requirements for deferred compensation plans

of State and local governments and tax-exempt organizations.

Sec. 206. Elimination of user fee for requests to IRS regarding pension plans.

Sec. 207. Deduction limits.

Sec. 208. Option to treat elective deferrals as after-tax contributions.

TITLE III—ENHANCING FAIRNESS FOR WOMEN

Sec. 301. Catch-up contributions for individuals age 50 or over.

Sec. 302. Equitable treatment for contributions of employees to defined contribution plans.

Sec. 303. Faster vesting of certain employer matching contributions.

Sec. 304. Simplify and update the minimum distribution rules.

Sec. 305. Clarification of tax treatment of division of section 457 plan benefits

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

or deferred arrangements.

TITLE IV—INCREASING PORTABILITY FOR PARTICIPANTS

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

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

Sec. 403. Rollovers of after-tax contributions.

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

Sec. 405. Treatment of forms of distribution.

Sec. 406. Rationalization of restrictions on distributions.

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

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

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

plans.

TITLE V—STRENGTHENING PENSION SECURITY AND

ENFORCEMENT

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

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

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

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

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

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

TITLE VI—REDUCING REGULATORY BURDENS

Sec. 601. Modification of timing of plan valuations.

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

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

Sec. 604. Employees of tax-exempt entities.

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

Sec. 606. Reporting simplification.

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

Sec. 608. Repeal of the multiple use test.

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

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

certain nondiscrimination rules applicable to State and local

plans.

Sec. 611. Notice and consent period regarding distributions.

TITLE VII—PLAN AMENDMENTS

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

2 RETIREMENT ACCOUNTS

3 SEC. 101. MODIFICATION OF IRA CONTRIBUTION LIMITS.

4 (a) INCREASE IN CONTRIBUTION LIMIT.—

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

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

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

8 deductible amount’’.

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

10 amended by adding at the end the following new

11 paragraph:

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

13 paragraph (1)(A)—

14 ‘‘(A) IN GENERAL.—The deductible

15 amount shall be determined in accordance with

16 the following table:

‘‘For taxable years The deductible

beginning in: amount is:

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

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

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

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

20 the close of the taxable year, the deductible

21 amount for taxable years beginning in 2001 or

22 2002 shall be $5,000.

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

2 taxable year beginning in a calendar year

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

5 amount equal to—

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

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

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

11 the taxable year begins, determined by

12 substituting ‘calendar year 2002’ for

13 ‘calendar year 1992’ in subparagraph

14 (B) thereof.

15 ‘‘(ii) ROUNDING RULES.—If any

16 amount after adjustment under clause (i)

17 is not a multiple of $500, such amount

18 shall be rounded to the next lower multiple

19 of $500.’’.

20 (b) CONFORMING AMENDMENTS.—

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

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

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

24 of the amount in effect for such taxable year under

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

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

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

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

6 inserting ‘‘the dollar amount in effect under section

7 219(b)(1)(A)’’.

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

9 ‘‘$2,000’’.

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

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

12 under section 219(b)(1)(A)’’.

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

14 this section shall apply to taxable years beginning after

15 December 31, 2000.

16 TITLE II—EXPANDING

17 COVERAGE

18 SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION

19 LIMITS.

20 (a) DEFINED BENEFIT PLANS.—

21 (1) DOLLAR LIMIT.—

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

23 (relating to limitation for defined benefit plans)

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

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

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

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

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

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

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

11 the amount otherwise applicable for such year

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

13 (2) LIMIT REDUCED WHEN BENEFIT BEGINS

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

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

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

17 and text and inserting ‘‘age 62’’.

18 (3) LIMIT INCREASED WHEN BENEFIT BEGINS

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

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

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

22 and text and inserting ‘‘age 65’’.

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

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

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

3 (B) in paragraph (3)(A)—

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

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

7 inserting ‘‘July 1, 2000’’.

8 (5) CONFORMING AMENDMENT.—Section

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

10 (b) DEFINED CONTRIBUTION PLANS.—

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

14 and inserting ‘‘$40,000’’.

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

17 adjustments) is amended—

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

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

20 (B) in paragraph (3)(D)—

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

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

24 inserting ‘‘July 1, 2000’’.

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

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

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

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

7 401(a)(17) is amended—

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

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

11 appears and inserting ‘‘$5,000’’.

12 (d) ELECTIVE DEFERRALS.—

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

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

16 ‘‘(1) IN GENERAL.—

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

20 be included in such individual’s gross income to

21 the extent the amount of such deferrals for the

22 taxable year exceeds the applicable dollar

23 amount.

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

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

2 in accordance with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

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

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

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

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

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

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

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

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

6 case of taxable years beginning after December 31,

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

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

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

10 except that the base period shall be the calendar

11 quarter beginning July 1, 2004, and any increase

12 under this paragraph which is not a multiple of

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

14 $500.’’.

15 (3) CONFORMING AMENDMENTS.—

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

17 on exclusion for elective deferrals), as amended

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

19 by striking paragraph (4) and redesignating

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

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

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

5 amended by striking ‘‘(other than paragraph

6 (4) thereof)’’.

7 (e) DEFERRED COMPENSATION PLANS OF STATE

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

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

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

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

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

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

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

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

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

22 ‘‘(15) APPLICABLE DOLLAR AMOUNT.—

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

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

beginning in dollar amount:

calendar year:

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

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

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

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

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

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

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

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

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

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

9 under this paragraph which is not a multiple of

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

12 (f) SIMPLE RETIREMENT ACCOUNTS.—

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

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

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

17 amount’’.

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

3 ‘‘(i) IN GENERAL.—For purposes of

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

5 amount shall be the amount determined in

6 accordance with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 ...................................................................... $7,000

2002 ...................................................................... $8,000

2003 ...................................................................... $9,000

2004 or thereafter ................................................ $10,000.

7 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

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

11 at the same time and in the same manner

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

13 base period taken into account shall be the

14 calendar quarter beginning July 1, 2003,

15 and any increase under this subparagraph

16 which is not a multiple of $500 shall be

17 rounded to the next lower multiple of

18 $500.’’.

19 (3) CONFORMING AMENDMENTS.—

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

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

2 408(p)(2)(A)(ii)’’.

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

4 striking subparagraph (E).

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

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

8 follows:

9 ‘‘(4) ROUNDING.—

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

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

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

13 the next lowest multiple of $5,000.

14 ‘‘(B) $40,000 AMOUNT.—Any increase

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

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

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

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

19 this section shall apply to years beginning after December

20 31, 2000.

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

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

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

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

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

7 clause (i).’’.

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

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

10 2000.

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

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

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

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

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

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

19 following:

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

21 an annual compensation greater than

22 $150,000,’’;

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

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

2 matter following clause (iii), as redesignated by

3 subparagraph (C).

4 (2) CONFORMING AMENDMENT.—Section

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

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

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

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

11 ‘‘Employer matching contributions (as defined in section

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

13 of this subparagraph.’’.

14 (c) DISTRIBUTIONS DURING LAST YEAR BEFORE

15 DETERMINATION DATE TAKEN INTO ACCOUNT.—

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

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

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

21 ‘‘(A) IN GENERAL.—For purposes of

22 determining—

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

2 employee,

3 such present value or amount shall be increased

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

6 the 1-year period ending on the determination

7 date. The preceding sentence shall also apply to

8 distributions under a terminated plan which if

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

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

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

17 (2) BENEFITS NOT TAKEN INTO ACCOUNT.—

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

19 amended—

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

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

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

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

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

5 ‘‘(H) CASH OR DEFERRED ARRANGEMENTS

6 USING ALTERNATIVE METHODS OF MEETING

7 NONDISCRIMINATION REQUIREMENTS.—The

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

9 which consists solely of—

10 ‘‘(i) a cash or deferred arrangement

11 which meets the requirements of section

12 401(k)(12), and

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

15 401(m)(11) are met.

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

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

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

20 be taken into account in determining whether

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

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

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

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

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

4 ‘‘(iii) EXCEPTION FOR FROZEN

5 PLAN.—For purposes of determining an

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

8 be disregarded to the extent that such

9 service occurs during a plan year when the

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

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

15 by adding at the end the following new clause:

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

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

21 employee or 5-percent owner under this

22 paragraph), section 318 shall be applied

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

24 in determining whether any person is a 5-

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

2 this section shall apply to years beginning after December

3 31, 2000.

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

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

8 for contributions of an employer to an employees’ trust

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

11 new subsection:

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

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

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

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

17 not be taken into account in applying any such limitation

18 to any other contributions.’’.

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

20 this section shall apply to years beginning after December

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

2 DEFERRED COMPENSATION PLANS OF STATE

3 AND LOCAL GOVERNMENTS AND TAX-EX4 EMPT ORGANIZATIONS.

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

7 governments and tax-exempt organizations), as amended

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

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

10 compensation of any one individual which may be deferred

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

13 modified by any adjustment provided under subsection

14 (b)(3)).’’.

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

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

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

19 IRS REGARDING PENSION PLANS.

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

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

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

24 of 1986 for requests to the Internal Revenue Service for

25 determination letters with respect to the qualified status

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

2 The preceding sentence shall not apply to any request—

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

4 benefit plan is in existence; or

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

6 similar plan which the sponsor intends to market to

7 participating employers.

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

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

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

11 ownership plan.

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

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

16 an employer is an eligible employer under this section shall

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

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

22 SEC. 207. DEDUCTION LIMITS.

23 (a) IN GENERAL.—

24 (1) STOCK BONUS AND PROFIT SHARING

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

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

3 percent’’.

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

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

6 following:

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

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

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

11 as ‘participant’s compensation’ under subparagraph

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

13 (b) CONFORMING AMENDMENTS.—

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

15 amended by striking the last sentence thereof.

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

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

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

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

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

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

2 this section shall apply to years beginning after December

3 31, 2000.

4 SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS

5 AFTER-TAX CONTRIBUTIONS.

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

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

8 is amended by inserting after section 402 the following

9 new section:

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

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

13 plan includes a qualified plus contribution program—

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

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

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

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

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

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

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

2 contribution program’ means a program under which

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

6 the applicable retirement plan.

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

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

10 plan—

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

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

15 ‘‘(B) maintains separate recordkeeping

16 with respect to each account.

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

19 section—

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

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

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

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

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

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

5 elective deferrals which an employee may designate

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

7 any) of—

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

11 this section), over

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

14 which the employee does not designate under

15 paragraph (1).

16 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

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

21 contribution is to—

22 ‘‘(i) another designated plus account

23 of the individual from whose account the

24 payment or distribution was made, or

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

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

4 taken into account for purposes of paragraph

5 (1).

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

7 title—

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

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

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

12 of this subsection—

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

14 distribution’ has the meaning given such term

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

16 clause (iv) thereof).

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

19 a designated plus account shall not be treated

20 as a qualified distribution if such payment or

21 distribution is made within the 5-taxable-year

22 period beginning with the earlier of—

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

24 the individual made a designated plus con25 tribution to any designated plus account
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1 established for such individual under the

2 same applicable retirement plan, or

3 ‘‘(ii) if a rollover contribution was

4 made to such designated plus account from

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

7 applicable retirement plan, the first taxable

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

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

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

15 any income on the excess deferral.

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

17 be applied separately with respect to distributions

18 and payments from a designated plus account and

19 other distributions and payments from the plan.

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

21 section—

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

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

3 section 501(a), and

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

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

8 deferral’ means any elective deferral described in

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

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

11 to limitation on exclusion for elective deferrals) is

12 amended—

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

14 following new sentence: ‘‘The preceding sentence

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

16 not exceed the designated plus contributions of the

17 individual for the taxable year.’’; and

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

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

20 paragraph (2)(A).

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

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

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

25 from a designated plus account (as defined in
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1 section 402A), an eligible retirement plan with

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

4 IRA.’’.

5 (d) REPORTING REQUIREMENTS.—

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

7 amended by inserting ‘‘, including the amount of

8 designated plus contributions (as defined in section

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

10 (2) INFORMATION.—Section 6047 is amended

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

12 by inserting after subsection (e) the following new

13 subsection:

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

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

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

20 the Secretary may prescribe.’’.

21 (e) CONFORMING AMENDMENTS.—

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

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

24 term includes a rollover contribution described in

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

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

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

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

6 this section shall apply to taxable years beginning after

7 December 31, 2000.

8 TITLE III—ENHANCING

9 FAIRNESS FOR WOMEN

10 SEC. 301. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS

11 AGE 50 OR OVER.

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

14 the following new subsection:

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

16 AGE 50 OR OVER.—

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

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

22 ‘‘(2) LIMITATION ON AMOUNT OF ADDITIONAL

23 DEFERRALS.—A plan shall not permit additional
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1 elective deferrals under paragraph (1) for any year

2 in an amount greater than the lesser of—

3 ‘‘(A) $5,000, or

4 ‘‘(B) the excess (if any) of—

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

6 the year, over

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

8 participant for such year which are made

9 without regard to this subsection.

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

11 case of any contribution to a plan under paragraph

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

13 year in which the contribution is made—

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

15 limitation contained in section 402(g),

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

17 415, or 457, or

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

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

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

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

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

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

2 the close of the plan year, and

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

6 by reason of the application of any limitation or

7 other restriction described in paragraph (3) or

8 comparable limitation contained in the terms of

9 the plan.

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

11 purposes of this subsection—

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

13 term ‘applicable employer plan’ means—

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

15 section 401(a) which is exempt from tax

16 under section 501(a),

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

18 contributed by an individual’s employer for

19 an annuity contract described in section

20 403(b),

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

23 employer as defined in section

24 457(e)(1)(A), and
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1 ‘‘(iv) an arrangement meeting the re2 quirements of section 408 (k) or (p).

3 ‘‘(B) ELECTIVE DEFERRAL.—The term

4 ‘elective deferral’ has the meaning given such

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

6 ‘‘(C) EXCEPTION FOR SECTION 457

7 PLANS.—This subsection shall not apply to an

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

10 457(b)(3) applies.

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

12 years beginning after December 31, 2005, the

13 Secretary shall adjust annually the $5,000

14 amount in subparagraph (A) for increases in

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

16 same manner as adjustments under section

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

18 calendar quarter beginning July 1, 2004, and

19 any increase which is not a multiple of $500

20 shall be rounded to the next lowest multiple of

21 $500.’’.

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

23 this section shall apply to contributions in taxable years

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

2 EMPLOYEES TO DEFINED CONTRIBUTION

3 PLANS.

4 (a) EQUITABLE TREATMENT.—

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

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

8 and inserting ‘‘100 percent’’.

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

10 403(b) is amended—

11 (A) by striking ‘‘the exclusion allowance

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

14 415’’;

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

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

17 by a former employee after the fifth taxable

18 year following the taxable year in which such

19 employee was terminated’’ before the period at

20 the end of the second sentence of paragraph

21 (3).

22 (3) CONFORMING AMENDMENTS.—

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

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

26 before the enactment of the Comprehensive Re-
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1 tirement Security and Pension Reform Act of

2 2000)’’.

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

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

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

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

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

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

13 of an annuity contract described in section

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

15 means the participant’s includible compensation

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

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

18 paragraph (4).

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

20 as follows:

21 ‘‘(7) CERTAIN CONTRIBUTIONS BY CHURCH

22 PLANS NOT TREATED AS EXCEEDING LIMIT.—

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

24 other provision of this subsection, at the elec25 tion of a participant who is an employee of a
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1 church or a convention or association of church2 es, including an organization described in sec3 tion 414(e)(3)(B)(ii), contributions and other

4 additions for an annuity contract or retirement

5 income account described in section 403(b) with

6 respect to such participant, when expressed as

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

10 is not in excess of $10,000.

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

12 The total amount of additions with respect to

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

15 years may not exceed $40,000.

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

17 this paragraph, the term ‘annual addition’ has

18 the meaning given such term by paragraph

19 (2).’’.

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

21 (as redesignated by section 211) is amended by

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

24 the Comprehensive Retirement Security and

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

2 by this subsection shall apply to years beginning

3 after December 31, 2000.

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

5 408.—

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

7 415 is amended by adding at the end the following

8 new paragraph:

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

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

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

14 to which the participant has the control required

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

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

19 year shall be treated as an employer contribution to

20 a defined contribution plan for such individual for

21 such year.’’.

22 (2) EFFECTIVE DATE.—

23 (A) IN GENERAL.—The amendment made

24 by paragraph (1) shall apply to limitation years

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

2 for limitation years beginning in 2000, in the

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

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

7 shall reduce the exclusion allowance as provided

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

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

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

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

14 render void the requirement that contributions to a

15 defined benefit pension plan be treated as previously

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

19 such requirement were void.

20 (c) DEFERRED COMPENSATION PLANS OF STATE

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

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

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

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1 deferred compensation plans) is amended by striking

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

3 (2) EFFECTIVE DATE.—The amendment made

4 by this subsection shall apply to years beginning

5 after December 31, 2000.

6 SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER

7 MATCHING CONTRIBUTIONS.

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

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

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

12 plan’’; and

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

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

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

17 shall be applied—

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

19 in subparagraph (A), and

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

21 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

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

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

3 shall apply to contributions for plan years beginning

4 after December 31, 2000.

5 (2) COLLECTIVE BARGAINING AGREEMENTS.—

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

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

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

10 amendments made by this section shall not apply to

11 contributions on behalf of employees covered by any

12 such agreement for plan years beginning before the

13 earlier of—

14 (A) the later of—

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

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

18 extension thereof on or after such date of

19 the enactment); or

20 (ii) January 1, 2001; or

21 (B) January 1, 2005.

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

23 plan, the amendments made by this section shall not

24 apply to any employee before the date that such em25 ployee has 1 hour of service under such plan in any
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1 plan year to which the amendments made by this

2 section apply.

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

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

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

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

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

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

14 (B) modify such regulations to—

15 (i) reflect current life expectancy; and

16 (ii) revise the required distribution

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

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

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

23 the first year that regulations are in effect under

24 this subsection, required distributions for future

25 years may be redetermined to reflect changes under
43

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1 such regulations. Such redetermination shall include

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

4 expectancy.

5 (3) EFFECTIVE DATE FOR REGULATIONS.—

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

8 and shall apply in such years without regard to

9 whether an individual had previously begun receiving

10 minimum distributions.

11 (b) REPEAL OF RULE WHERE DISTRIBUTIONS HAD

12 BEGUN BEFORE DEATH OCCURS.—

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

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

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

17 (2) CONFORMING CHANGES.—

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

19 so redesignated) is amended—

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

21 the heading; and

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

23 employee’s interest has begun in accord24 ance with subparagraph (A)(ii)’’ and in-
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1 serting ‘‘his entire interest has been dis2 tributed to him’’.

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

4 so redesignated) is amended by striking ‘‘clause

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

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

7 so redesignated) is amended—

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

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

11 subclause (I) and inserting ‘‘clause

12 (ii)(III)’’;

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

14 the employee would have attained age

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

16 ‘‘April 1 of the calendar year following the

17 calendar year in which the spouse attains

701 18 ⁄2,’’; and

19 (iv) by striking ‘‘the distributions to

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

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

23 (3) EFFECTIVE DATE.—The amendments made

24 by this subsection shall apply to years beginning

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

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

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

5 (2) EFFECTIVE DATE.—The amendment made

6 by this subsection shall apply to years beginning

7 after December 31, 2000.

8 SEC. 305. CLARIFICATION OF TAX TREATMENT OF DIVISION

9 OF SECTION 457 PLAN BENEFITS UPON DI10 VORCE.

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

12 application of rules to governmental and church plans) is

13 amended—

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

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

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

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

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

23 409(d), and section 457(d)’’.

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

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

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

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

5 SECTION 457 PLAN.—If a distribution or payment

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

8 qualified domestic relations order, rules similar to

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

10 distribution or payment.’’.

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

12 this section shall apply to transfers, distributions, and

13 payments made after December 31, 2000.

14 SEC. 306. MODIFICATION OF SAFE HARBOR RELIEF FOR

15 HARDSHIP WITHDRAWALS FROM CASH OR

16 DEFERRED ARRANGEMENTS.

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

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

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

22 contributions in order for a distribution to be deemed nec23 essary to satisfy financial need shall be equal to 6 months.
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1 (b) EFFECTIVE DATE.—The revised regulations

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

3 December 31, 2000.

4 TITLE IV—INCREASING PORT5 ABILITY FOR PARTICIPANTS

6 SEC. 401. ROLLOVERS ALLOWED AMONG VARIOUS TYPES

7 OF PLANS.

8 (a) ROLLOVERS FROM AND TO SECTION 457

9 PLANS.—

10 (1) ROLLOVERS FROM SECTION 457 PLANS.—

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

13 amended by adding at the end the following:

14 ‘‘(16) ROLLOVER AMOUNTS.—

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

16 eligible deferred compensation plan established

17 and maintained by an employer described in

18 subsection (e)(1)(A), if—

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

20 credit of an employee in such plan is paid

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

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

24 (C) thereof),
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1 ‘‘(ii) the employee transfers any por2 tion of the property such employee receives

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

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

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

7 property other than money, the amount so

8 transferred consists of the property distrib9 uted,

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

12 for the taxable year in which paid.

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

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

17 purposes of subparagraph (A).

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

19 paragraph shall be reported to the Secretary in

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

22 4974(c)).’’.

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

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

HR 1102 RCS

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

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

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

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

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

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

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

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

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

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

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

17 (D) WITHHOLDING.—

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

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

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

24 maintained by an employer described in section

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

2 is amended to read as follows:

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

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

6 by section 402(f)(2)(A).’’.

7 (iii) LIABILITY FOR WITHHOLDING.—

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

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

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

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

12 by adding at the end the following:

13 ‘‘(iv) section 457(b).’’.

14 (2) ROLLOVERS TO SECTION 457 PLANS.—

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

16 (defining eligible retirement plan) is amended

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

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

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

20 (iv) the following new clause:

21 ‘‘(v) an eligible deferred compensation

22 plan described in section 457(b) of an em23 ployer described in section 457(e)(1)(A).’’.
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HR 1102 RCS

1 (B) SEPARATE ACCOUNTING.—Section

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

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

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

6 separately account for amounts rolled into such plan

7 from eligible retirement plans not described in such

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

10 plans.’’.

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

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

15 the end the following new paragraph:

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

18 a distribution from an eligible deferred compensation

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

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

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

24 an eligible deferred compensation plan from a quali-
52

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1 fied retirement plan (as defined in section

2 4974(c)).’’.

3 (b) ALLOWANCE OF ROLLOVERS FROM AND TO

4 403(b) PLANS.—

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

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

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

8 and all that follows and inserting ‘‘such distribution

9 to an eligible retirement plan described in section

10 402(c)(8)(B), and’’.

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

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

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

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

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

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

17 new clause:

18 ‘‘(vi) an annuity contract described in

19 section 403(b).’’.

20 (c) EXPANDED EXPLANATION TO RECIPIENTS OF

21 ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section

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

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

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

HR 1102 RCS

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

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

8 from the plan making such distribution.’’.

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

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

12 and all that follows up to the end period.

13 (e) CONFORMING AMENDMENTS.—

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

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

16 408(d)(3), and 457(e)(16)’’.

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

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

19 457(e)(16)’’.

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

22 403(b)(8), and 457(e)(16)’’.

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

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

25 403(a)’’ and inserting ‘‘, paragraph (4) of section
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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 to read as follows:

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

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

14 shall apply for purposes of subparagraph (A),

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

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

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

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

19 457(e)(16)’’.

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

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

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

23 457(e)(16)’’.
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1 (10) Section 415(c)(2) is amended by striking

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

3 457(e)(16)’’.

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

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

6 457(e)(16)’’.

7 (f) EFFECTIVE DATE; SPECIAL RULE.—

8 (1) EFFECTIVE DATE.—The amendments made

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

11 (2) SPECIAL RULE.—Notwithstanding any other

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

13 section 1122 of the Tax Reform Act of 1986 shall

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

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

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

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

20 this section.

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

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

24 408(d)(3) (relating to rollover amounts) is amended by
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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 the payment or distribution is received, ex9 cept that the maximum amount which may

10 be paid into such plan may not exceed the

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

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

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

18 (b) CONFORMING AMENDMENTS.—

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

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

21 ‘‘section 408(d)(3)(A)(ii)’’.

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

24 or (ii)’’.
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1 (3) Subparagraph (G) of section 408(d)(3) is

2 amended to read as follows:

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

4 the case of any payment or distribution out of

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

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

9 retirement account.’’.

10 (c) EFFECTIVE DATE; SPECIAL RULE.—

11 (1) EFFECTIVE DATE.—The amendments made

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

14 (2) SPECIAL RULE.—Notwithstanding any other

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

16 section 1122 of the Tax Reform Act of 1986 shall

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

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

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

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

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

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

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

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

6 to such distribution to the extent—

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

8 trustee-to-trustee transfer to a qualified trust

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

11 account for amounts so transferred, including

12 separately accounting for the portion of such

13 distribution which is includible in gross income

14 and the portion of such distribution which is

15 not so includible, or

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

18 (ii) of paragraph (8)(B).’’.

19 (b) OPTIONAL DIRECT TRANSFER OF ELIGIBLE

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

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

24 distribution is transferred—

25 ‘‘(i) agrees to separately account for

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

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

4 which is not so includible, or

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

7 402(c)(8)(B).’’.

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

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

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

11 end the following:

12 ‘‘(H) APPLICATION OF SECTION 72.—

13 ‘‘(i) IN GENERAL.—If—

14 ‘‘(I) a distribution is made from

15 an individual retirement plan, and

16 ‘‘(II) a rollover contribution is

17 made to an eligible retirement plan

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

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

20 part of such distribution,

21 then, notwithstanding paragraph (2), the

22 rules of clause (ii) shall apply for purposes

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

2 case of a distribution described in clause

3 (i)—

4 ‘‘(I) section 72 shall be applied

5 separately to such distribution,

6 ‘‘(II) notwithstanding the pro

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

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

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

14 the aggregate income on the contract

15 from all individual retirement plans of

16 the distributee), and

17 ‘‘(III) appropriate adjustments

18 shall be made in applying section 72

19 to other distributions in such taxable

20 year and subsequent taxable years.’’.

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

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

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

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

4 of receipt) is amended to read as follows:

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

6 DAYS OF RECEIPT.—

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

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

9 apply to any transfer of a distribution made

10 after the 60th day following the day on which

11 the distributee received the property distrib12 uted.

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

15 subparagraph (A) where the failure to waive

16 such requirement would be against equity or

17 good conscience, including casualty, disaster, or

18 other events beyond the reasonable control of

19 the individual subject to such requirement.’’.

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

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

22 amended by adding after subparagraph (H) the following

23 new subparagraph:

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

25 The Secretary may waive the 60-day require26 ment under subparagraphs (A) and (D) where
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1 the failure to waive such requirement would be

2 against equity or good conscience, including

3 casualty, disaster, or other events beyond the

4 reasonable control of the individual subject to

5 such requirement.’’.

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

7 this section shall apply to distributions after December 31,

8 2000.

9 SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.

10 (a) PLAN TRANSFERS.—

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

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

14 end the following:

15 ‘‘(D) PLAN TRANSFERS.—

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

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

21 the transferee plan does not provide some

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

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

2 extent that—

3 ‘‘(I) the forms of distribution

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

6 participant or beneficiary under the

7 transferor plan that was transferred

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

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

16 ‘‘(III) the transfer described in

17 subclause (I) was made pursuant to a

18 voluntary election by the participant

19 or beneficiary whose account was

20 transferred to the transferee plan,

21 ‘‘(IV) the election described in

22 subclause (III) was made after the

23 participant or beneficiary received a

24 notice describing the consequences of

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

3 form of distribution under the plan in

4 accordance with section 417, the

5 transfer is made with the consent of

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

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

9 section 417(a)(2), and

10 ‘‘(VI) the transferee plan allows

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

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

15 the transferee plan in the form of a

16 single sum distribution.

17 ‘‘(ii) EXCEPTION.—Clause (i) shall

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

22 multiple employer plan.

23 ‘‘(E) ELIMINATION OF FORM OF DISTRIBU24 TION.—Except to the extent provided in regula25 tions, a defined contribution plan shall not be
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1 treated as failing to meet the requirements of

2 this section merely because of the elimination of

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

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

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

8 to such participant at the same time or

9 times as the form of distribution being

10 eliminated, and

11 ‘‘(ii) such single sum payment is

12 based on the same or greater portion of

13 the participant’s account as the form of

14 distribution being eliminated.’’.

15 (2) EFFECTIVE DATE.—The amendment made

16 by this subsection shall apply to years beginning

17 after December 31, 2000.

18 (b) REGULATIONS.—

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

21 benefit not to be decreased by amendment) is

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

23 regulations provide that this subparagraph shall not

24 apply to any plan amendment that does not ad-
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1 versely affect the rights of participants in a material

2 manner.’’.

3 (2) SECRETARY DIRECTED.—Not later than

4 December 31, 2001, the Secretary of the Treasury

5 is directed to issue final regulations under section

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

8 made by this subsection. Such regulations shall

9 apply to plan years beginning after December 31,

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

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

14 (a) MODIFICATION OF SAME DESK EXCEPTION.—

15 (1) SECTION 401(k).—

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

17 qualified cash or deferred arrangements) is

18 amended by striking ‘‘separation from service’’

19 and inserting ‘‘severance from employment’’.

20 (B) Subparagraph (A) of section

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

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

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

2 another defined contribution plan (other than

3 an employee stock ownership plan as defined in

4 section 4975(e)(7)).’’.

5 (C) Section 401(k)(10) is amended—

6 (i) in subparagraph (B)—

7 (I) by striking ‘‘An event’’ in

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

10 (II) by striking ‘‘the event’’ in

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

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

14 (iii) by striking ‘‘OR DISPOSITION OF

15 ASSETS OR SUBSIDIARY’’ in the heading.

16 (2) SECTION 403(b).—

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

18 section 403(b) are each amended by striking

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

20 severance from employment’’.

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

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

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

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

4 employment’’.

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

6 this section shall apply to distributions after December 31,

7 2000.

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

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

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

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

14 PURCHASE PERMISSIVE SERVICE CREDIT.—No

15 amount shall be includible in gross income by reason

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

17 benefit governmental plan (as defined in section

18 414(d)) if such transfer is—

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

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

21 under such plan, or

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

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

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

2 amended by adding after paragraph (16) the following

3 new paragraph:

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

5 PURCHASE PERMISSIVE SERVICE CREDIT.—No

6 amount shall be includible in gross income by reason

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

8 benefit governmental plan (as defined in section

9 414(d)) if such transfer is—

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

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

12 under such plan, or

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

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

15 thereof.’’.

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

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

18 December 31, 2000.

19 SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR

20 PURPOSES OF CASH-OUT AMOUNTS.

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

22 to restrictions on certain mandatory distributions) is

23 amended by adding at the end the following:

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

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

5 is attributable to rollover contributions (and

6 earnings allocable thereto). For purposes of this

7 subparagraph, the term ‘rollover contributions’

8 means any rollover contribution under sections

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

10 and 457(e)(16).’’.

11 (b) ELIGIBLE DEFERRED COMPENSATION PLANS.—

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

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

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

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

17 this section shall apply to distributions after December 31,

18 2000.

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

21 (a) MINIMUM DISTRIBUTION REQUIREMENTS.—

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

23 requirements) is amended to read as follows:

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

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1 quirements of this paragraph if such plan meets the

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

3 (b) INCLUSION IN GROSS INCOME.—

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

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

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

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

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

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

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

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

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

18 the participant or other beneficiary, in the case

19 of a plan of an eligible employer described in

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

21 ‘‘(2) SPECIAL RULE FOR ROLLOVER

22 AMOUNTS.—To the extent provided in section

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

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

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

4 ‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION

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

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

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

10 at the end the following new paragraph:

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

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

14 treated as failing to meet the requirements of this

15 subsection solely by reason of making a distribution

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

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

18 this section shall apply to distributions after December 31,

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

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

5 FUNDING LIMIT.

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

7 full-funding limitation) is amended—

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

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

10 plan years beginning before January 1, 2004, the

11 applicable percentage’’; and

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

13 follows:

14 ‘‘(F) APPLICABLE PERCENTAGE.—For

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

‘‘In the case of any plan year The applicable

beginning in— percentage is—

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

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

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

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

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

2 MODIFIED AND APPLIED TO ALL DEFINED

3 BENEFIT PLANS.

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

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

6 is amended to read as follows:

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

8 PLANS.—

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

10 defined benefit plan, except as provided in

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

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

17 Retirement Income Security Act of 1974

18 were the last day of the plan year).

19 ‘‘(ii) PLANS WITH LESS THAN 100

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

22 less than 100 participants for the plan

23 year, termination liability shall not include

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

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

2 becomes effective, whichever is later, within

3 the last 2 years before the termination

4 date.

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

7 determining whether a plan has more than

8 100 participants, all defined benefit plans

9 maintained by the same employer (or any

10 member of such employer’s controlled

11 group (within the meaning of section

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

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

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

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

19 Employee Retirement Income Security Act

20 of 1974.’’.

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

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

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

24 of nondeductible contributions for any taxable year,

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

2 plans which are not deductible when contributed

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

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

6 excess of 6 percent of compensation (within the

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

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

10 plans, or

11 ‘‘(B) the sum of—

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

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

16 For purposes of this paragraph, the deductible limits

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

18 amounts contributed to a defined benefit plan and

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

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

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

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

4 (relating to nondeductible contributions) is amended by

5 adding at the end the following new paragraph:

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

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

9 such year not to take into account any contributions

10 to a defined benefit plan except to the extent that

11 such contributions exceed the full-funding limitation

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

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

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

16 contributed to defined contribution plans and then

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

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

20 employer for such taxable year.’’.

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

22 this section shall apply to years beginning after December

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

2 DEFINED BENEFIT PLANS SIGNIFICANTLY

3 REDUCING FUTURE BENEFIT ACCRUALS.

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

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

6 following new section:

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

8 BENEFIT ACCRUALS TO SATISFY NOTICE RE9 QUIREMENTS.

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

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

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

14 ‘‘(b) AMOUNT OF TAX.—

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

17 to any applicable individual shall be $100 for each

18 day in the noncompliance period with respect to such

19 failure.

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

21 of this section, the term ‘noncompliance period’

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

24 on the date the failure is corrected.

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

3 due to reasonable cause and not to willful neglect,

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

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

6 a multiemployer plan, the taxable year of the trust

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

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

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

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

12 single employer for purposes of this section have the

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

15 the principles of section 1561.

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

17 failure which is due to reasonable cause and not to

18 willful neglect, the Secretary may waive part or all

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

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

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

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

2 plan.

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

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

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

8 administrator shall provide written notice to each

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

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

13 be understood by the average plan participant and

14 shall provide sufficient information (as determined

15 in accordance with regulations prescribed by the

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

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

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

20 shall be provided within a reasonable time before the

21 effective date of the plan amendment.

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

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

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

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

5 plan amendment if no material modification of the

6 amendment occurs before the amendment is adopt7 ed.

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

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

12 amendment—

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

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

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

16 under an applicable qualified domestic relations

17 order (within the meaning of section

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

19 who may reasonably be expected to be affected by

20 such plan amendment.

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

22 ‘applicable pension plan’ means—

23 ‘‘(A) any defined benefit plan, or

24 ‘‘(B) an individual account plan which is

25 subject to the funding standards of section 412,
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1 which had 100 or more participants who had ac2 crued a benefit, or with respect to whom contribu3 tions were made, under the plan (whether or not

4 vested) as of the last day of the plan year preceding

5 the plan year in which the plan amendment becomes

6 effective. Such term shall not include a governmental

7 plan (within the meaning of section 414(d)) or a

8 church plan (within the meaning of section 414(e))

9 with respect to which the election provided by sec10 tion 410(d) has not been made.’’.

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

12 for chapter 43 is amended by adding at the end the fol13 lowing new item:

‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals

to satisfy notice requirements.’’.

14 (c) EFFECTIVE DATES.—

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

16 this section shall apply to plan amendments taking

17 effect on or after the date of the enactment of this

18 Act.

19 (2) TRANSITION.—Until such time as the Sec20 retary of the Treasury issues regulations under sec21 tions 4980F(e)(2) and (3) of the Internal Revenue

22 Code of 1986 (as added by the amendments made

23 by this section), a plan shall be treated as meeting
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1 the requirements of such sections if it makes a good

2 faith effort to comply with such requirements.

3 (3) SPECIAL RULE.—The period for providing

4 any notice required by the amendments made by this

5 section shall not end before the date which is 3

6 months after the date of the enactment of this Act.

7 (d) STUDY.—The Secretary of the Treasury shall

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

11 conversions on longer service participants, including the

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

13 which participants earn no additional benefits for a period

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

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

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

18 on Ways and Means of the House of Representatives and

19 the Committee on Finance of the Senate.

20 SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER

21 SECTION 415.

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

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

3 of a governmental plan (as defined in section

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

6 shall not apply.’’.

7 (b) COMBINING AND AGGREGATION OF PLANS.—

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

9 section 415 (relating to combining of plans) is

10 amended by adding at the end the following:

11 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER

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

15 with any other plan maintained by an employer for

16 purposes of applying the limitations established in

17 this section, except that such plan shall be combined

18 or aggregated with another plan which is not such

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

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

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

4 this section shall apply to years beginning after December

5 31, 2000.

6 SEC. 506. PROHIBITED ALLOCATIONS OF STOCK IN S COR7 PORATION ESOP.

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

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

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

12 subsection:

13 ‘‘(p) PROHIBITED ALLOCATIONS OF SECURITIES IN

14 AN S CORPORATION.—

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

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

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

23 benefit of any disqualified person.

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

2 the requirements of paragraph (1), the plan

3 shall be treated as having distributed to any

4 disqualified person the amount allocated to the

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

7 ‘‘(B) CROSS REFERENCE.—

‘‘For excise tax relating to violations of paragraph

(1) and ownership of synthetic equity, see section

4979A.

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

9 this subsection—

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

12 stock ownership plan if, at any time during

13 such plan year—

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

17 ‘‘(ii) disqualified persons own at least

18 50 percent of the number of shares of

19 stock in the S corporation.

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

21 of subparagraph (A)—

22 ‘‘(i) IN GENERAL.—The rules of sec23 tion 318(a) shall apply for purposes of de24 termining ownership, except that—
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1 ‘‘(I) in applying paragraph (1)

2 thereof, the members of an individ3 ual’s family shall include members of

4 the family described in paragraph

5 (4)(D), and

6 ‘‘(II) paragraph (4) thereof shall

7 not apply.

8 ‘‘(ii) DEEMED-OWNED SHARES.—Not9 withstanding the employee trust exception

10 in section 318(a)(2)(B)(i), individual shall

11 be treated as owning deemed-owned shares

12 of the individual.

13 Solely for purposes of applying paragraph (5),

14 this subparagraph shall be applied after the at15 tribution rules of paragraph (5) have been ap16 plied.

17 ‘‘(4) DISQUALIFIED PERSON.—For purposes of

18 this subsection—

19 ‘‘(A) IN GENERAL.—The term ‘disqualified

20 person’ means any person if—

21 ‘‘(i) the aggregate number of deemed22 owned shares of such person and the mem23 bers of such person’s family is at least 20

24 percent of the number of deemed-owned

25 shares of stock in the S corporation, or
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1 ‘‘(ii) in the case of a person not de2 scribed in clause (i), the number of

3 deemed-owned shares of such person is at

4 least 10 percent of the number of deemed5 owned shares of stock in such corporation.

6 ‘‘(B) TREATMENT OF FAMILY MEMBERS.—

7 In the case of a disqualified person described in

8 subparagraph (A)(i), any member of such per9 son’s family with deemed-owned shares shall be

10 treated as a disqualified person if not otherwise

11 treated as a disqualified person under subpara12 graph (A).

13 ‘‘(C) DEEMED-OWNED SHARES.—

14 ‘‘(i) IN GENERAL.—The term

15 ‘deemed-owned shares’ means, with respect

16 to any person—

17 ‘‘(I) the stock in the S corpora18 tion constituting employer securities

19 of an employee stock ownership plan

20 which is allocated to such person

21 under the plan, and

22 ‘‘(II) such person’s share of the

23 stock in such corporation which is

24 held by such plan but which is not al25 located under the plan to participants.
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1 ‘‘(ii) PERSON’S SHARE OF

2 UNALLOCATED STOCK.—For purposes of

3 clause (i)(II), a person’s share of

4 unallocated S corporation stock held by

5 such plan is the amount of the unallocated

6 stock which would be allocated to such per7 son if the unallocated stock were allocated

8 to all participants in the same proportions

9 as the most recent stock allocation under

10 the plan.

11 ‘‘(D) MEMBER OF FAMILY.—For purposes

12 of this paragraph, the term ‘member of the

13 family’ means, with respect to any individual—

14 ‘‘(i) the spouse of the individual,

15 ‘‘(ii) an ancestor or lineal descendant

16 of the individual or the individual’s spouse,

17 ‘‘(iii) a brother or sister of the indi18 vidual or the individual’s spouse and any

19 lineal descendant of the brother or sister,

20 and

21 ‘‘(iv) the spouse of any individual de22 scribed in clause (ii) or (iii).

23 A spouse of an individual who is legally sepa24 rated from such individual under a decree of di25 vorce or separate maintenance shall not be
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1 treated as such individual’s spouse for purposes

2 of this subparagraph.

3 ‘‘(5) TREATMENT OF SYNTHETIC EQUITY.—For

4 purposes of paragraphs (3) and (4), in the case of

5 a person who owns synthetic equity in the S corpora6 tion, except to the extent provided in regulations, the

7 shares of stock in such corporation on which such

8 synthetic equity is based shall be treated as out9 standing stock in such corporation and deemed10 owned shares of such person if such treatment of

11 synthetic equity of 1 or more such persons results

12 in—

13 ‘‘(A) the treatment of any person as a dis14 qualified person, or

15 ‘‘(B) the treatment of any year as a non16 allocation year.

17 For purposes of this paragraph, synthetic equity

18 shall be treated as owned by a person in the same

19 manner as stock is treated as owned by a person

20 under the rules of paragraphs (2) and (3) of section

21 318(a). If, without regard to this paragraph, a per22 son is treated as a disqualified person or a year is

23 treated as a nonallocation year, this paragraph shall

24 not be construed to result in the person or year not

25 being so treated.
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1 ‘‘(6) DEFINITIONS.—For purposes of this

2 subsection—

3 ‘‘(A) EMPLOYEE STOCK OWNERSHIP

4 PLAN.—The term ‘employee stock ownership

5 plan’ has the meaning given such term by sec6 tion 4975(e)(7).

7 ‘‘(B) EMPLOYER SECURITIES.—The term

8 ‘employer security’ has the meaning given such

9 term by section 409(l).

10 ‘‘(C) SYNTHETIC EQUITY.—The term ‘syn11 thetic equity’ means any stock option, warrant,

12 restricted stock, deferred issuance stock right,

13 or similar interest or right that gives the holder

14 the right to acquire or receive stock of the S

15 corporation in the future. Except to the extent

16 provided in regulations, synthetic equity also in17 cludes a stock appreciation right, phantom

18 stock unit, or similar right to a future cash

19 payment based on the value of such stock or

20 appreciation in such value.

21 ‘‘(7) REGULATIONS.—The Secretary shall pre22 scribe such regulations as may be necessary to carry

23 out the purposes of this subsection.’’.

24 (b) COORDINATION WITH SECTION 4975(e)(7).—The

25 last sentence of section 4975(e)(7) (defining employee
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1 stock ownership plan) is amended by inserting ‘‘, section

2 409(p),’’ after ‘‘409(n)’’.

3 (c) EXCISE TAX.—

4 (1) APPLICATION OF TAX.—Subsection (a) of

5 section 4979A (relating to tax on certain prohibited

6 allocations of employer securities) is amended—

7 (A) by striking ‘‘or’’ at the end of para8 graph (1), and

9 (B) by striking all that follows paragraph

10 (2) and inserting the following:

11 ‘‘(3) there is any allocation of employer securi12 ties which violates the provisions of section 409(p),

13 or a nonallocation year described in subsection

14 (e)(2)(C) with respect to an employee stock owner15 ship plan, or

16 ‘‘(4) any synthetic equity is owned by a dis17 qualified person in any nonallocation year,

18 there is hereby imposed a tax on such allocation or owner19 ship equal to 50 percent of the amount involved.’’.

20 (2) LIABILITY.—Section 4979A(c) (defining li21 ability for tax) is amended to read as follows:

22 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

23 section shall be paid—

24 ‘‘(1) in the case of an allocation referred to in

25 paragraph (1) or (2) of subsection (a), by—
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1 ‘‘(A) the employer sponsoring such plan, or

2 ‘‘(B) the eligible worker-owned cooperative,

3 which made the written statement described in sec4 tion 664(g)(1)(E) or in section 1042(b)(3)(B) (as

5 the case may be), and

6 ‘‘(2) in the case of an allocation or ownership

7 referred to in paragraph (3) or (4) of subsection (a),

8 by the S corporation the stock in which was so allo9 cated or owned.’’.

10 (3) DEFINITIONS.—Section 4979A(e) (relating

11 to definitions) is amended to read as follows:

12 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur13 poses of this section—

14 ‘‘(1) DEFINITIONS.—Except as provided in

15 paragraph (2), terms used in this section have the

16 same respective meanings as when used in sections

17 409 and 4978.

18 ‘‘(2) SPECIAL RULES RELATING TO TAX IM19 POSED BY REASON OF PARAGRAPH (3) OR (4) OF

20 SUBSECTION (a).—

21 ‘‘(A) PROHIBITED ALLOCATIONS.—The

22 amount involved with respect to any tax im23 posed by reason of subsection (a)(3) is the

24 amount allocated to the account of any person

25 in violation of section 409(p)(1).
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1 ‘‘(B) SYNTHETIC EQUITY.—The amount

2 involved with respect to any tax imposed by rea3 son of subsection (a)(4) is the value of the

4 shares on which the synthetic equity is based.

5 ‘‘(C) SPECIAL RULE DURING FIRST NON6 ALLOCATION YEAR.—For purposes of subpara7 graph (A), the amount involved for the first

8 nonallocation year of any employee stock owner9 ship plan shall be determined by taking into ac10 count the total value of all the deemed-owned

11 shares of all disqualified persons with respect to

12 such plan.

13 ‘‘(D) STATUTE OF LIMITATIONS.—The

14 statutory period for the assessment of any tax

15 imposed by this section by reason of paragraph

16 (3) or (4) of subsection (a) shall not expire be17 fore the date which is 3 years from the later

18 of—

19 ‘‘(i) the allocation or ownership re20 ferred to in such paragraph giving rise to

21 such tax, or

22 ‘‘(ii) the date on which the Secretary

23 is notified of such allocation or owner24 ship.’’.

25 (d) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—The amendments made by

2 this section shall apply to plan years beginning after

3 December 31, 2001.

4 (2) EXCEPTION FOR CERTAIN PLANS.—In the

5 case of any—

6 (A) employee stock ownership plan estab7 lished after July 11, 2000, or

8 (B) employee stock ownership plan estab9 lished on or before such date if employer securi10 ties held by the plan consist of stock in a cor11 poration with respect to which an election under

12 section 1362(a) of the Internal Revenue Code

13 of 1986 is not in effect on such date,

14 the amendments made by this section shall apply to

15 plan years ending after July 11, 2000.

16 TITLE VI—REDUCING

17 REGULATORY BURDENS

18 SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.

19 (a) IN GENERAL.—Paragraph (9) of section

20 412(c)(9) (relating to annual valuation) is amended to

21 read as follows:

22 ‘‘(9) ANNUAL VALUATION.—

23 ‘‘(A) IN GENERAL.—For purposes of this

24 section, a determination of experience gains and

25 losses and a valuation of the plan’s liability
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1 shall be made not less frequently than once

2 every year, except that such determination shall

3 be made more frequently to the extent required

4 in particular cases under regulations prescribed

5 by the Secretary.

6 ‘‘(B) VALUATION DATE.—

7 ‘‘(i) CURRENT YEAR.—Except as pro8 vided in clause (ii), the valuation referred

9 to in subparagraph (A) shall be made as of

10 a date within the plan year to which the

11 valuation refers or within one month prior

12 to the beginning of such year.

13 ‘‘(ii) ELECTION TO USE PRIOR YEAR

14 VALUATION.—The valuation referred to in

15 subparagraph (A) may be made as of a

16 date within the plan year prior to the year

17 to which the valuation refers if—

18 ‘‘(I) an election is in effect under

19 this clause with respect to the plan,

20 and

21 ‘‘(II) as of such date, the value

22 of the assets of the plan are not less

23 than 125 percent of the plan’s current

24 liability (as defined in paragraph

25 (7)(B)).
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1 ‘‘(iii) ADJUSTMENTS.—Information

2 under clause (ii) shall, in accordance with

3 regulations, be actuarially adjusted to re4 flect significant differences in participants.

5 ‘‘(iv) ELECTION.—An election under

6 clause (ii), once made, shall be irrevocable

7 without the consent of the Secretary.’’.

8 (b) EFFECTIVE DATE.—The amendments made by

9 this section shall apply to plan years beginning after De10 cember 31, 2000.

11 SEC. 602. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT

12 LOSS OF DIVIDEND DEDUCTION.

13 (a) IN GENERAL.—Section 404(k)(2)(A) (defining

14 applicable dividends) is amended by striking ‘‘or’’ at the

15 end of clause (ii), by redesignating clause (iii) as clause

16 (iv), and by inserting after clause (ii) the following new

17 clause:

18 ‘‘(iii) is, at the election of such par19 ticipants or their beneficiaries—

20 ‘‘(I) payable as provided in clause

21 (i) or (ii), or

22 ‘‘(II) paid to the plan and rein23 vested in qualifying employer securi24 ties, or’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 2000.

4 SEC. 603. REPEAL OF TRANSITION RULE RELATING TO CER5 TAIN HIGHLY COMPENSATED EMPLOYEES.

6 (a) IN GENERAL.—Paragraph (4) of section 1114(c)

7 of the Tax Reform Act of 1986 is hereby repealed.

8 (b) EFFECTIVE DATE.—The repeal made by sub9 section (a) shall apply to plan years beginning after De10 cember 31, 2000.

11 SEC. 604. EMPLOYEES OF TAX-EXEMPT ENTITIES.

12 (a) IN GENERAL.—The Secretary of the Treasury

13 shall modify Treasury Regulations section 1.410(b)–6(g)

14 to provide that employees of an organization described in

15 section 403(b)(1)(A)(i) of the Internal Revenue Code of

16 1986 who are eligible to make contributions under section

17 403(b) of such Code pursuant to a salary reduction agree18 ment may be treated as excludable with respect to a plan

19 under section 401(k) or (m) of such Code that is provided

20 under the same general arrangement as a plan under such

21 section 401(k), if—

22 (1) no employee of an organization described in

23 section 403(b)(1)(A)(i) of such Code is eligible to

24 participate in such section 401(k) plan or section

25 401(m) plan; and
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1 (2) 95 percent of the employees who are not

2 employees of an organization described in section

3 403(b)(1)(A)(i) of such Code are eligible to partici4 pate in such plan under such section 401(k) or (m).

5 (b) EFFECTIVE DATE.—The modification required by

6 subsection (a) shall apply as of the same date set forth

7 in section 1426(b) of the Small Business Job Protection

8 Act of 1996.

9 SEC. 605. CLARIFICATION OF TREATMENT OF EMPLOYER10 PROVIDED RETIREMENT ADVICE.

11 (a) IN GENERAL.—Subsection (a) of section 132 (re12 lating to exclusion from gross income) is amended by

13 striking ‘‘or’’ at the end of paragraph (5), by striking the

14 period at the end of paragraph (6) and inserting ‘‘, or’’,

15 and by adding at the end the following new paragraph:

16 ‘‘(7) qualified retirement planning services.’’.

17 (b) QUALIFIED RETIREMENT PLANNING SERVICES

18 DEFINED.—Section 132 is amended by redesignating sub19 section (m) as subsection (n) and by inserting after sub20 section (l) the following:

21 ‘‘(m) QUALIFIED RETIREMENT PLANNING SERV22 ICES.—

23 ‘‘(1) IN GENERAL.—For purposes of this sec24 tion, the term ‘qualified retirement planning serv25 ices’ means any retirement planning service provided
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1 to an employee and his spouse by an employer main2 taining a qualified employer plan.

3 ‘‘(2) NONDISCRIMINATION RULE.—Subsection

4 (a)(7) shall apply in the case of highly compensated

5 employees only if such services are available on sub6 stantially the same terms to each member of the

7 group of employees normally provided education and

8 information regarding the employer’s qualified em9 ployer plan.

10 ‘‘(3) QUALIFIED EMPLOYER PLAN.—For pur11 poses of this subsection, the term ‘qualified employer

12 plan’ means a plan, contract, pension, or account de13 scribed in section 219(g)(5).’’.

14 (c) EFFECTIVE DATE.—The amendments made by

15 this section shall apply to years beginning after December

16 31, 2000.

17 SEC. 606. REPORTING SIMPLIFICATION.

18 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

19 OWNERS AND THEIR SPOUSES.—

20 (1) IN GENERAL.—The Secretary of the Treas21 ury shall modify the requirements for filing annual

22 returns with respect to one-participant retirement

23 plans to ensure that such plans with assets of

24 $250,000 or less as of the close of the plan year

25 need not file a return for that year.
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1 (2) ONE-PARTICIPANT RETIREMENT PLAN DE2 FINED.—For purposes of this subsection, the term

3 ‘‘one-participant retirement plan’’ means a retire4 ment plan that—

5 (A) on the first day of the plan year—

6 (i) covered only the employer (and the

7 employer’s spouse) and the employer

8 owned the entire business (whether or not

9 incorporated); or

10 (ii) covered only one or more partners

11 (and their spouses) in a business partner12 ship (including partners in an S or C cor13 poration);

14 (B) meets the minimum coverage require15 ments of section 410(b) of the Internal Revenue

16 Code of 1986 without being combined with any

17 other plan of the business that covers the em18 ployees of the business;

19 (C) does not provide benefits to anyone ex20 cept the employer (and the employer’s spouse)

21 or the partners (and their spouses);

22 (D) does not cover a business that is a

23 member of an affiliated service group, a con24 trolled group of corporations, or a group of

25 businesses under common control; and
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1 (E) does not cover a business that leases

2 employees.

3 (3) OTHER DEFINITIONS.—Terms used in para4 graph (2) which are also used in section 414 of the

5 Internal Revenue Code of 1986 shall have the re6 spective meanings given such terms by such section.

7 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

8 PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case

9 of a retirement plan which covers less than 25 employees

10 on the first day of the plan year and meets the require11 ments described in subparagraphs (B), (D), and (E) of

12 subsection (a)(2), the Secretary of the Treasury shall pro13 vide for the filing of a simplified annual return that is

14 substantially similar to the annual return required to be

15 filed by a one-participant retirement plan.

16 (c) EFFECTIVE DATE.—The provisions of this section

17 shall take effect on January 1, 2001.

18 SEC. 607. IMPROVEMENT OF EMPLOYEE PLANS COMPLI19 ANCE RESOLUTION SYSTEM.

20 The Secretary of the Treasury shall continue to up21 date and improve the Employee Plans Compliance Resolu22 tion System (or any successor program) giving special at23 tention to—
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1 (1) increasing the awareness and knowledge of

2 small employers concerning the availability and use

3 of the program;

4 (2) taking into account special concerns and

5 circumstances that small employers face with respect

6 to compliance and correction of compliance failures;

7 (3) extending the duration of the self-correction

8 period under the Administrative Policy Regarding

9 Self-Correction for significant compliance failures;

10 (4) expanding the availability to correct insig11 nificant compliance failures under the Administra12 tive Policy Regarding Self-Correction during audit;

13 and

14 (5) assuring that any tax, penalty, or sanction

15 that is imposed by reason of a compliance failure is

16 not excessive and bears a reasonable relationship to

17 the nature, extent, and severity of the failure.

18 SEC. 608. REPEAL OF THE MULTIPLE USE TEST.

19 (a) IN GENERAL.—Paragraph (9) of section 401(m)

20 is amended to read as follows:

21 ‘‘(9) REGULATIONS.—The Secretary shall pre22 scribe such regulations as may be necessary to carry

23 out the purposes of this subsection and subsection

24 (k), including regulations permitting appropriate ag25 gregation of plans and contributions.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to years beginning after December

3 31, 2000.

4 SEC. 609. FLEXIBILITY IN NONDISCRIMINATION, COV5 ERAGE, AND LINE OF BUSINESS RULES.

6 (a) NONDISCRIMINATION.—

7 (1) IN GENERAL.—The Secretary of the Treas8 ury shall, by regulation, provide that a plan shall be

9 deemed to satisfy the requirements of section

10 401(a)(4) of the Internal Revenue Code of 1986 if

11 such plan satisfies the facts and circumstances test

12 under section 401(a)(4) of such Code, as in effect

13 before January 1, 1994, but only if—

14 (A) the plan satisfies conditions prescribed

15 by the Secretary to appropriately limit the

16 availability of such test; and

17 (B) the plan is submitted to the Secretary

18 for a determination of whether it satisfies such

19 test.

20 Subparagraph (B) shall only apply to the extent pro21 vided by the Secretary.

22 (2) EFFECTIVE DATES.—

23 (A) REGULATIONS.—The regulation re24 quired by paragraph (1) shall apply to years be25 ginning after December 31, 2000.
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1 (B) CONDITIONS OF AVAILABILITY.—Any

2 condition of availability prescribed by the Sec3 retary under paragraph (1)(A) shall not apply

4 before the first year beginning not less than

5 120 days after the date on which such condition

6 is prescribed.

7 (b) COVERAGE TEST.—

8 (1) IN GENERAL.—Section 410(b)(1) (relating

9 to minimum coverage requirements) is amended by

10 adding at the end the following:

11 ‘‘(D) In the case that the plan fails to

12 meet the requirements of subparagraphs (A),

13 (B) and (C), the plan—

14 ‘‘(i) satisfies subparagraph (B), as in

15 effect immediately before the enactment of

16 the Tax Reform Act of 1986,

17 ‘‘(ii) is submitted to the Secretary for

18 a determination of whether it satisfies the

19 requirement described in clause (i), and

20 ‘‘(iii) satisfies conditions prescribed by

21 the Secretary by regulation that appro22 priately limit the availability of this sub23 paragraph.

24 Clause (ii) shall apply only to the extent pro25 vided by the Secretary.’’.
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1 (2) EFFECTIVE DATES.—

2 (A) IN GENERAL.—The amendment made

3 by paragraph (1) shall apply to years beginning

4 after December 31, 2000.

5 (B) CONDITIONS OF AVAILABILITY.—Any

6 condition of availability prescribed by the Sec7 retary under regulations prescribed by the Sec8 retary under section 410(b)(1)(D) of the Inter9 nal Revenue Code of 1986 shall not apply be10 fore the first year beginning not less than 120

11 days after the date on which such condition is

12 prescribed.

13 (c) LINE OF BUSINESS RULES.—The Secretary of

14 the Treasury shall, on or before December 31, 2000, mod15 ify the existing regulations issued under section 414(r) of

16 the Internal Revenue Code of 1986 in order to expand

17 (to the extent that the Secretary determines appropriate)

18 the ability of a pension plan to demonstrate compliance

19 with the line of business requirements based upon the

20 facts and circumstances surrounding the design and oper21 ation of the plan, even though the plan is unable to satisfy

22 the mechanical tests currently used to determine compli23 ance.
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1 SEC. 610. EXTENSION TO ALL GOVERNMENTAL PLANS OF

2 MORATORIUM ON APPLICATION OF CERTAIN

3 NONDISCRIMINATION RULES APPLICABLE TO

4 STATE AND LOCAL PLANS.

5 (a) IN GENERAL.—

6 (1) Subparagraph (G) of section 401(a)(5) and

7 subparagraph (H) of section 401(a)(26) are each

8 amended by striking ‘‘section 414(d))’’ and all that

9 follows and inserting ‘‘section 414(d)).’’.

10 (2) Subparagraph (G) of section 401(k)(3) and

11 paragraph (2) of section 1505(d) of the Taxpayer

12 Relief Act of 1997 are each amended by striking

13 ‘‘maintained by a State or local government or polit14 ical subdivision thereof (or agency or instrumentality

15 thereof)’’.

16 (b) CONFORMING AMENDMENTS.—

17 (1) The heading for subparagraph (G) of sec18 tion 401(a)(5) is amended to read as follows: ‘‘GOV19 ERNMENTAL PLANS’’.

20 (2) The heading for subparagraph (H) of sec21 tion 401(a)(26) is amended to read as follows: ‘‘EX22 CEPTION FOR GOVERNMENTAL PLANS’’.

23 (3) Subparagraph (G) of section 401(k)(3) is

24 amended by inserting ‘‘GOVERNMENTAL PLANS.—’’

25 after ‘‘(G)’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to years beginning after December

3 31, 2000.

4 SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DIS5 TRIBUTIONS.

6 (a) EXPANSION OF PERIOD.—

7 (1) IN GENERAL.—Subparagraph (A) of section

8 417(a)(6) is amended by striking ‘‘90-day’’ and in9 serting ‘‘180-day’’.

10 (2) MODIFICATION OF REGULATIONS.—The

11 Secretary of the Treasury shall modify the regula12 tions under sections 402(f), 411(a)(11), and 417 of

13 the Internal Revenue Code of 1986 to substitute

14 ‘‘180 days’’ for ‘‘90 days’’ each place it appears in

15 Treasury Regulations sections 1.402(f)–1, 1.411(a)–

16 11(c), and 1.417(e)–1(b).

17 (3) EFFECTIVE DATE.—The amendment made

18 by paragraph (1) and the modifications required by

19 paragraph (2) shall apply to years beginning after

20 December 31, 2000.

21 (b) CONSENT REGULATION INAPPLICABLE TO CER22 TAIN DISTRIBUTIONS.—

23 (1) IN GENERAL.—The Secretary of the Treas24 ury shall modify the regulations under section

25 411(a)(11) of the Internal Revenue Code of 1986 to
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1 provide that the description of a participant’s right,

2 if any, to defer receipt of a distribution shall also de3 scribe the consequences of failing to defer such re4 ceipt.

5 (2) EFFECTIVE DATE.—The modifications re6 quired by paragraph (1) shall apply to years begin7 ning after December 31, 2000.

8 TITLE VII—PLAN AMENDMENTS

9 SEC. 701. PROVISIONS RELATING TO PLAN AMENDMENTS.

10 (a) IN GENERAL.—If this section applies to any plan

11 or contract amendment—

12 (1) such plan or contract shall be treated as

13 being operated in accordance with the terms of the

14 plan during the period described in subsection

15 (b)(2)(A); and

16 (2) such plan shall not fail to meet the require17 ments of section 411(d)(6) of the Internal Revenue

18 Code of 1986 by reason of such amendment.

19 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

20 (1) IN GENERAL.—This section shall apply to

21 any amendment to any plan or annuity contract

22 which is made—

23 (A) pursuant to any amendment made by

24 this Act, or pursuant to any regulation issued

25 under this Act, and
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1 (B) on or before the last day of the first

2 plan year beginning on or after January 1,

3 2003.

4 In the case of a governmental plan (as defined in

5 section 414(d) of the Internal Revenue Code of

6 1986), this paragraph shall be applied by sub7 stituting ‘‘2005’’ for ‘‘2003’’.

8 (2) CONDITIONS.—This section shall not apply

9 to any amendment unless—

10 (A) during the period—

11 (i) beginning on the date the legisla12 tive or regulatory amendment described in

13 paragraph (1)(A) takes effect (or in the

14 case of a plan or contract amendment not

15 required by such legislative or regulatory

16 amendment, the effective date specified by

17 the plan); and

18 (ii) ending on the date described in

19 paragraph (1)(B) (or, if earlier, the date

20 the plan or contract amendment is adopt21 ed),

22 the plan or contract is operated as if such plan

23 or contract amendment were in effect; and
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1 (B) such plan or contract amendment ap2 plies retroactively for such period.

Passed the House of Representatives July 19, 2000.

Attest: JEFF TRANDAHL,

Clerk.