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104TH CONGRESS

2D SESSION S. 1538

To amend the Internal Revenue Code of 1986 to provide for the treatment

of excess benefit arrangements of certain tax-exempt group medical practices, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 26, 1996

Mr. GLENN (for himself and Mr. GORTON) introduced the following bill; which

was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide

for the treatment of excess benefit arrangements of certain tax-exempt group medical practices, and for other

purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. TREATMENT OF EXCESS BENEFIT ARRANGE4 MENTS OF CERTAIN TAX-EXEMPT GROUP

5 MEDICAL PRACTICES.

6 Subsection (e) of section 457 of the Internal Revenue

7 Code of 1986 (relating to deferred compensation plans of

8 State and local governments and tax-exempt organiza-
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1 tions) is amended by adding at the end the following new

2 paragraph:

3 ‘‘(14) EXCESS BENEFIT ARRANGEMENTS OF

4 CERTAIN GROUP MEDICAL PRACTICES.—

5 ‘‘(A) IN GENERAL.—Subsections (b)(2)

6 and (c)(1) shall not apply to any qualified ex7 cess benefit arrangement, and benefits provided

8 under such an arrangement shall not be taken

9 into account in determining whether any other

10 plan is an eligible deferred compensation plan

11 and the amount which may be deferred under

12 subsection (a) under such other plan.

13 ‘‘(B) LIMITATION.—The maximum amount

14 of compensation of any one participant which

15 may be deferred under subsection (a) during

16 any taxable year under a qualified excess bene17 fit arrangement shall not exceed the lesser of—

18 ‘‘(i) $25,000, or

‘‘(ii) 331 19 ⁄3 percent of the participant’s

20 includible compensation.

21 ‘‘(C) QUALIFIED EXCESS BENEFIT AR22 RANGEMENT.—For purposes of this paragraph,

23 the term ‘qualified excess benefit arrangement’

24 means a portion of a plan if—
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1 ‘‘(i) the plan is maintained by a quali2 fied medical entity which is described in

3 section 501(c)(3) and exempt from tax

4 under section 501(a), and

5 ‘‘(ii) such portion is so maintained

6 solely for the purpose of providing to par7 ticipants in the plan that part of the par8 ticipant’s annual benefit otherwise payable

9 under the terms of the plan that exceeds

10 the limitations on benefits imposed by sec11 tion 415.

12 ‘‘(D) QUALIFIED MEDICAL ENTITY.—For

13 purposes of subparagraph (C), the term ‘quali14 fied medical entity’ means—

15 ‘‘(i) any group medical practice, and

16 ‘‘(ii) any integrated health care deliv17 ery system which employs groups of physi18 cians to provide clinical services.’’

19 SEC. 2. PLANS OF QUALIFIED MEDICAL ENTITIES EXEMPT

20 FROM REDUCTION OF LIMIT UNDER SECTION

21 457 FOR OTHER ELECTIVE DEFERRALS.

22 The last sentence of paragraph (2) of section 457(c)

23 of the Internal Revenue Code of 1986 is amended by in24 serting before the period ‘‘or in a plan maintained by a

25 qualified medical entity (as defined in subsection (e)(14))
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1 which is described in section 501(c)(3) and exempt from

2 tax under section 501(a)’’.

3 SEC. 3. COST-OF-LIVING ADJUSTMENTS OF DEFERRAL LIM4 ITS UNDER SECTION 457.

5 Subsection (e) of section 457 of the Internal Revenue

6 Code of 1986 is amended by adding at the end the follow7 ing new paragraph:

8 ‘‘(15) COST-OF-LIVING ADJUSTMENT OF MAXI9 MUM DEFERRAL AMOUNT.—The Secretary shall ad10 just the dollar amounts specified in subsections

11 (b)(2) and (c)(1), and in paragraph (14) of this sub12 section, at the same time and in the same manner

13 as under section 415(d), except that the base period

14 in applying such section for purposes of this para15 graph shall be the calendar quarter beginning Octo16 ber 1, 1994.’’

17 SEC. 4. EFFECTIVE DATE.

18 The amendments made by this Act shall apply to tax19 able years beginning after December 31, 1994.

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