II

106TH CONGRESS

1ST SESSION S. 741

To provide for pension reform, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MARCH 25, 1999

Mr. GRAHAM (for himself, Mr. GRASSLEY, Mr. BAUCUS, Mr. HATCH, Mr.

BREAUX, Mr. JEFFORDS, Mr. KERREY, Mr. ROBB, Mr. MACK, Mr.

BOND, Mr. CHAFEE, Mr. THOMPSON, Mr. BINGAMAN and Mr. MURKOWSKI) introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To provide for pension reform, and for other purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Pension Coverage and Portability Act’’.

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
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1 shall be considered to be made to a section or other provi2 sion of the Internal Revenue Code of 1986.

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

4 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—EXPANDING COVERAGE FOR SMALL BUSINESS

Sec. 101. Plan loans for subchapter S owners, partners, and sole proprietors.

Sec. 102. Contributions to IRAs through payroll deductions.

Sec. 103. Safe annuities and trusts.

Sec. 104. Modification of top-heavy rules.

Sec. 105. Salary reduction only simple plans.

Sec. 106. Credit for small employer pension plan contributions and start-up

costs.

Sec. 107. Increasing limits for deferrals to simple plans.

Sec. 108. Phase-in of additional PBGC premium for new plans.

Sec. 109. Reduced PBGC premium for new plans of small employers.

Sec. 110. Elimination of user fee for requests to IRS regarding new pension

plans.

Sec. 111. Compensation limit not to apply to simple 401(k) arrangements.

Sec. 112. Elective deferrals not taken into account for purposes of limits.

Sec. 113. Repeal of coordination requirements for deferred compensation plans

of State and local governments and tax-exempt organizations.

Sec. 114. Alternative method of meeting nondiscrimination requirements for

opt-out plans.

TITLE II—INCREASING PENSION ACCESS AND FAIRNESS FOR

WOMEN

Sec. 201. Equitable treatment for contributions of employees to defined contribution plans.

Sec. 202. Faster vesting of certain employer matching contributions.

Sec. 203. Deferred annuities for surviving spouses of Federal employees.

Sec. 204. Clarification of tax treatment of division of section 457 plan benefits

upon divorce.

Sec. 205. Spouses’ right to know proposal.

Sec. 206. Simplify and update the minimum distribution rules.

Sec. 207. Modification of safe harbor relief for hardship withdrawals from cash

or deferred arrangements.

TITLE III—INCREASING PORTABILITY OF PENSION PLANS

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

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

Sec. 303. Rollovers of after-tax contributions; hardship exception.

Sec. 304. Rationalization of restrictions on distributions from defined contribution plans.

Sec. 305. Transferee defined contribution plan need not have same distribution

options as transferor defined contribution plan.

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

Sec. 307. Employers may disregard rollovers for purposes of cash-out amounts.
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TITLE IV—STRENGTHENING PENSION SECURITY AND

ENFORCEMENT

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

Sec. 402. Increase in limits for employer-sponsored retirement plans.

Sec. 403. Treatment of multiemployer plans under section 415.

Sec. 404. Extension of missing participants program to multiemployer plans.

Sec. 405. Civil penalties for breach of fiduciary responsibility.

Sec. 406. Penalty tax relief for sound pension funding.

Sec. 407. Protection of investment of employee contributions to 401(k) plans.

Sec. 408. Elimination of ERISA double jeopardy.

TITLE V—ENCOURAGING RETIREMENT EDUCATION

Sec. 501. Periodic pension benefits statements.

Sec. 502. Small Business Administration advice to small businesses.

Sec. 503. Clarification of treatment of employer-provided retirement advice.

TITLE VI—REDUCING RED TAPE

Sec. 601. Modification of timing of plan valuations.

Sec. 602. Rules for substantial owners relating to plan terminations.

Sec. 603. ESOP dividends may be reinvested without loss of dividend deduction.

Sec. 604. Modification of 403(b) exclusion allowance to conform to 415 modification.

Sec. 605. Safety valve from mechanical rules.

Sec. 606. Coverage test flexibility.

Sec. 607. Section 457 inapplicable to certain mirror plans.

Sec. 608. Notice and consent period regarding distributions.

Sec. 609. Conforming amendments relating to election to receive taxable cash

compensation in lieu of nontaxable transportation fringe benefits.

Sec. 610. Repeal of transition rule relating to certain highly compensated employees.

Sec. 611. Extension to international organizations of moratorium on application

of certain nondiscrimination rules applicable to State and local

plans.

Sec. 612. Annual report dissemination.

Sec. 613. Employees of tax-exempt entities.

Sec. 614. Repeal of the multiple use test.

TITLE VII—PLAN AMENDMENTS

Sec. 701. Provisions relating to plan amendments.

1 TITLE I—EXPANDING COVERAGE

2 FOR SMALL BUSINESS

3 SEC. 101. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART4 NERS, AND SOLE PROPRIETORS.

5 (a) AMENDMENTS TO 1986 CODE.—
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1 (1) IN GENERAL.—Section 4975(f) (relating to

2 other definitions and special rules) is amended by

3 striking paragraph (6).

4 (2) CONFORMING AMENDMENT.—Section

5 4975(d) (relating to exemptions) is amended by

6 striking ‘‘Except as provided in subsection (f)(6),

7 the prohibitions’’ and inserting ‘‘The prohibitions’’.

8 (b) AMENDMENTS TO ERISA.—

9 (1) IN GENERAL.—Section 408 of the Employee

10 Retirement Income Security Act of 1974 (29 U.S.C.

11 1108(d)) is amended—

12 (A) by striking subsection (d), and

13 (B) by redesignating subsections (e) and

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

15 (2) CONFORMING AMENDMENT.—Section

16 407(b)(2)(B) of such Act (29 U.S.C. 1107(b)(2)(B))

17 is amended by striking ‘‘section 408(e)’’ and insert18 ing ‘‘section 408(d)’’.

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

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

21 this Act.

22 SEC. 102. CONTRIBUTIONS TO IRAS THROUGH PAYROLL DE23 DUCTIONS.

24 (a) DEFINITIONS.—For purposes of this section—
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1 (1) CONTRIBUTION CERTIFICATE.—The term

2 ‘‘contribution certificate’’ means a certificate sub3 mitted by an employee to the employee’s employer

4 which—

5 (A) identifies the employee by name, ad6 dress, and social security number,

7 (B) identifies the individual retirement

8 plan to which the employee wishes to make con9 tributions through payroll deductions, and

10 (C) identifies the amount of such contribu11 tions, not to exceed the amount allowed under

12 section 408 of the Internal Revenue Code of

13 1986 to an individual retirement plan for such

14 year.

15 (2) EMPLOYEE.—The term ‘‘employee’’ does

16 not include an employee as defined in section

17 401(c)(1) of such Code.

18 (3) INDIVIDUAL RETIREMENT PLANS.—The

19 term ‘‘individual retirement plan’’ has the meaning

20 given the term by section 7701(a)(37) of the Inter21 nal Revenue Code of 1986.

22 (4) SECRETARY.—The term ‘‘Secretary’’ means

23 the Secretary of the Treasury.

24 (b) ESTABLISHMENT OF PAYROLL DEDUCTION SYS25 TEM.—An employer may establish a system under which
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1 employees, through employer payroll deductions, may

2 make contributions to individual retirement plans. An em3 ployer shall not incur any liability under title I of the Em4 ployee Retirement Income Security Act of 1974 in pro5 viding for such a system.

6 (c) CONTRIBUTIONS TO INDIVIDUAL RETIREMENT

7 PLANS.—

8 (1) IN GENERAL.—The system established

9 under subsection (b) shall provide that contributions

10 made to an individual retirement plan for any tax11 able year are—

12 (A) contributions through employer payroll

13 deductions, and

14 (B) if the employer so elects, additional

15 contributions by the employee which, when

16 added to contributions under subparagraph (A),

17 do not exceed the amount allowed under section

18 408 of the Internal Revenue Code of 1986 for

19 the taxable year.

20 (2) EMPLOYER PAYROLL DEDUCTIONS.—

21 (A) IN GENERAL.—The system established

22 under subsection (b) shall provide that an em23 ployee may establish and maintain an individual

24 retirement plan simply by—
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1 (i) completing a contribution certifi2 cate, and

3 (ii) submitting such certificate to the

4 employee’s employer in the manner pro5 vided under subparagraph (D).

6 (B) CHANGE OF AMOUNTS.—An employee

7 establishing and maintaining an individual re8 tirement plan under subparagraph (A) may

9 change the amount of an employer payroll de10 duction in the same manner as under subpara11 graph (A).

12 (C) SIMPLIFIED FORMS.—

13 (i) CONTRIBUTION CERTIFICATE.—

14 The Secretary shall develop a model con15 tribution certificate for purposes of this

16 paragraph—

17 (I) which is written in a clear

18 and easily understandable manner,

19 and

20 (II) the completion of which by

21 an employee will constitute the estab22 lishment of an individual retirement

23 plan and the request for employer

24 payroll deductions or changes in such

25 deductions.
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1 (ii) AVAILABILITY.—The Secretary

2 shall make available to all employees and

3 employers the forms developed under this

4 subparagraph, and shall include with such

5 forms easy to understand explanatory ma6 terials.

7 (D) USE OF CERTIFICATE.—Each em8 ployer electing to adopt a system under sub9 section (b) shall, upon receipt of a contribution

10 certificate from an employee, deduct the appro11 priate contribution as determined by such cer12 tificate from the employee’s wages in equal

13 amounts during the remaining payroll periods

14 for the taxable year and shall remit such

15 amounts for investment in the employee’s indi16 vidual retirement plan not later than the close

17 of the 30-day period following the last day of

18 the month in which such payroll period occurs.

19 (E) FAILURE TO REMIT PAYROLL DEDUC20 TIONS.—For purposes of the Internal Revenue

21 Code of 1986, any amount which an employer

22 fails to remit on behalf of an employee pursuant

23 to a contribution certificate of such employee

24 shall not be allowed as a deduction to the em25 ployer under such Code.
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1 (d) ADDITIONAL INFORMATION.—

2 (1) IN GENERAL.—The system established

3 under subsection (b) shall provide for the furnishing

4 of information to employees of the opportunity of es5 tablishing individual retirement plans and of trans6 ferring amounts to such plans.

7 (2) INVESTMENT INFORMATION.—The employer

8 shall also make available to employees information

9 on how to make informed investment decisions and

10 how to achieve retirement objectives.

11 (3) INFORMATION NOT INVESTMENT ADVICE.—

12 Information provided under this subsection shall not

13 be treated as investment advice for purposes of any

14 Federal or State law.

15 SEC. 103. SAFE ANNUITIES AND TRUSTS.

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

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

18 is amended by inserting after section 408A the following:

19 ‘‘SEC. 408B. SAFE ANNUITIES AND TRUSTS.

20 ‘‘(a) EMPLOYER ELIGIBILITY.—

21 ‘‘(1) IN GENERAL.—An employer may establish

22 and maintain a SAFE annuity or a SAFE trust for

23 any year only if—

24 ‘‘(A) the employer is an eligible employer

25 (as defined in section 408(p)(2)(C)), and
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1 ‘‘(B) the employer does not maintain (and

2 no predecessor of the employer maintains) a

3 qualified plan (other than a permissible plan)

4 with respect to which contributions were made,

5 or benefits were accrued, for service in any year

6 in the period beginning with the year such an7 nuity or trust became effective and ending with

8 the year for which the determination is being

9 made.

10 ‘‘(2) DEFINITIONS.—For purposes of paragraph

11 (1)—

12 ‘‘(A) QUALIFIED PLAN.—The term ‘quali13 fied plan’ has the meaning given such term by

14 section 408(p)(2)(D)(ii).

15 ‘‘(B) PERMISSIBLE PLAN.—The term ‘per16 missible plan’ means—

17 ‘‘(i) a plan under which only elective

18 deferrals described in section 402(g)(3),

19 deferred compensation described in section

20 457, or employer matching contributions

21 may be made, and

22 ‘‘(ii) any collectively bargained plan.

23 ‘‘(b) SAFE ANNUITY.—

24 ‘‘(1) IN GENERAL.—For purposes of this title,

25 the term ‘SAFE annuity’ means an individual retire-
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1 ment annuity (as defined in section 408(b) without

2 regard to paragraph (2) thereof and without regard

3 to the limitation on aggregate annual premiums con4 tained in the flush language of section 408(b)) if—

5 ‘‘(A) such annuity meets the requirements

6 of paragraphs (2) through (6), and

7 ‘‘(B) the only contributions to such annu8 ity (other than rollover contributions) are em9 ployer contributions.

10 Nothing in this section shall be construed as pre11 venting an employer from using a group annuity

12 contract which is divisible into individual retirement

13 annuities for purposes of providing SAFE annuities.

14 ‘‘(2) PARTICIPATION REQUIREMENTS.—

15 ‘‘(A) IN GENERAL.—The requirements of

16 this paragraph are met for any year only if all

17 employees of the employer who—

18 ‘‘(i) received at least $5,000 in com19 pensation from the employer during any 2

20 consecutive preceding years, and

21 ‘‘(ii) received at least $5,000 in com22 pensation during the year,

23 are entitled to the benefit described in para24 graph (5) for such year.
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1 ‘‘(B) EXCLUDABLE EMPLOYEES.—An em2 ployer may elect to exclude from the require3 ments under subparagraph (A) employees de4 scribed in section 410(b)(3).

5 ‘‘(3) VESTING.—The requirements of this para6 graph are met if the employee’s rights to any bene7 fits are nonforfeitable.

8 ‘‘(4) BENEFIT FORM.—

9 ‘‘(A) IN GENERAL.—The requirements of

10 this paragraph are met if the only form of ben11 efit is—

12 ‘‘(i) a benefit payable annually in the

13 form of a single life annuity with monthly

14 payments (with no ancillary benefits) be15 ginning at age 65, or

16 ‘‘(ii) any other form of benefit which

17 is the actuarial equivalent (based on the

18 assumptions specified in the SAFE annu19 ity) of the benefit described in clause (i).

20 ‘‘(B) DIRECT TRANSFERS AND ROLL21 OVERS.—A plan shall not fail to meet the re22 quirements of this paragraph by reason of per23 mitting, at the election of the employee, a trust24 ee-to-trustee transfer or a rollover contribution.
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1 ‘‘(5) AMOUNT OF ANNUAL ACCRUED BEN2 EFIT.—

3 ‘‘(A) IN GENERAL.—The requirements of

4 this paragraph are met for any plan year if the

5 accrued benefit of each participant derived from

6 employer contributions for such year, when ex7 pressed as a benefit described in paragraph

8 (4)(A), equals the applicable percentage of the

9 participant’s compensation for such year.

10 ‘‘(B) APPLICABLE PERCENTAGE.—For

11 purposes of this paragraph—

12 ‘‘(i) IN GENERAL.—The term ‘applica13 ble percentage’ means 3 percent.

14 ‘‘(ii) ELECTION OF LOWER PERCENT15 AGE.—An employer may elect to apply an

16 applicable percentage of 1 percent, 2 per17 cent or zero percent for any year for all

18 employees eligible to participate in the plan

19 for such year if the employer notifies the

20 employees of such percentage within a rea21 sonable period before the beginning of such

22 year.

23 ‘‘(C) COMPENSATION LIMIT.—The com24 pensation taken into account under this para25 graph for any year shall not exceed the limita-
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1 tion in effect for such year under section

2 401(a)(17).

3 ‘‘(D) CREDIT FOR SERVICE BEFORE PLAN

4 ADOPTED.—

5 ‘‘(i) IN GENERAL.—An employer may

6 elect to take into account a specified num7 ber of years of service (not greater than

8 10) performed before the adoption of the

9 plan (each hereinafter referred to as a

10 ‘prior service year’) as service under the

11 plan if the same specified number of years

12 is available to all employees eligible to par13 ticipate in the plan for the first plan year.

14 ‘‘(ii) ACCRUAL OF PRIOR SERVICE

15 BENEFIT.—Such an election shall be effec16 tive for a prior service year only if the re17 quirements of this paragraph are met for

18 an eligible plan year (with respect to em19 ployees entitled to credit for such prior

20 service year) by doubling the applicable

21 percentage (if any) for such plan year. For

22 purposes of the preceding sentence, an eli23 gible plan year is a plan year in the period

24 of consecutive plan years (but not more

25 than the number specified under clause (i))
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1 beginning with the first plan year that the

2 plan is in effect.

3 ‘‘(iii) ELECTION MAY NOT APPLY TO

4 CERTAIN PRIOR SERVICE YEARS.—This

5 subparagraph shall not apply with respect

6 to any prior service year of an employee

7 if—

8 ‘‘(I) for any part of such prior

9 service year such employee was an ac10 tive participant (within the meaning

11 of section 219(g)(5)) under any de12 fined benefit plan of the employer (or

13 any predecessor thereof), or

14 ‘‘(II) such employee received dur15 ing such prior service year less than

16 $5,000 in compensation from the em17 ployer.

18 ‘‘(6) FUNDING.—

19 ‘‘(A) IN GENERAL.—The requirements of

20 this paragraph are met only if the employer is

21 required to contribute to the annuity for each

22 plan year the amount necessary (determined in

23 accordance with subparagraph (B)) to fund the

24 accrued benefit for each participant entitled to

25 such benefit for such year.
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1 ‘‘(B) ACTUARIAL ASSUMPTIONS.—In deter2 mining the amount required to be contributed

3 under subparagraph (A)—

4 ‘‘(i) the assumed interest rate shall be

5 not less than 3 percent and not greater

6 than 5 percent per year,

7 ‘‘(ii) the assumed mortality shall be

8 determined under the applicable mortality

9 table (as defined in section 417(e)(3), as

10 modified by the Secretary so that it does

11 not include any assumption for preretire12 ment mortality),

13 ‘‘(iii) the assumed retirement age

14 shall be 65, and

15 ‘‘(iv) an assumption for reasonable ex16 penses shall be permitted consistent with

17 State law.

18 ‘‘(C) TIME WHEN CONTRIBUTIONS

19 DEEMED MADE.—For purposes of this para20 graph, an employer shall be deemed to have

21 made a contribution on the last day of the pre22 ceding taxable year if the payment is on ac23 count of such taxable year and is made not

24 later than the time prescribed by law for filing
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1 the return for such taxable year (including ex2 tensions thereof).

3 ‘‘(D) PENALTY FOR FAILURE TO MAKE RE4 QUIRED CONTRIBUTION.—The taxes imposed by

5 section 4971 shall apply to a failure to make

6 the contribution required by this paragraph in

7 the same manner as if the amount of the failure

8 were an accumulated funding deficiency to

9 which such section applies.

10 ‘‘(7) DEFINITIONS AND SPECIAL RULE.—

11 ‘‘(A) DEFINITIONS.—The definitions in

12 section 408(p)(6) shall apply for purposes of

13 this subsection.

14 ‘‘(B) USE OF DESIGNATED FINANCIAL IN15 STITUTIONS.—A rule similar to the rule of sec16 tion 408(p)(7) (without regard to the last sen17 tence thereof) shall apply for purposes of this

18 subsection.

19 ‘‘(C) TREATMENT OF MATCHING CON20 TRIBUTIONS.—A rule similar to the rule of sec21 tion 408(p)(8) shall apply for purposes of this

22 subsection.

23 ‘‘(c) SAFE TRUST.—
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1 ‘‘(1) IN GENERAL.—For purposes of this title,

2 the term ‘SAFE trust’ means a trust forming part

3 of a defined benefit plan if—

4 ‘‘(A) such trust meets the requirements of

5 section 401(a) as modified by subsection (d),

6 ‘‘(B) a participant’s benefits under the

7 plan are based solely on the balance of a sepa8 rate account in such plan of such participant,

9 ‘‘(C) such plan meets the requirements of

10 paragraphs (2) through (8), and

11 ‘‘(D) the only contributions to such trust

12 (other than rollover contributions) are employer

13 contributions.

14 ‘‘(2) PARTICIPATION REQUIREMENTS.—A plan

15 meets the requirements of this paragraph for any

16 year only if the requirements of subsection (b)(2)

17 are met for such year.

18 ‘‘(3) VESTING.—A plan meets the requirements

19 of this paragraph for any year only if the require20 ments of subsection (b)(3) are met for such year.

21 ‘‘(4) BENEFIT FORM.—A plan meets the re22 quirements of this paragraph only if the require23 ments of subsection (b)(4) are met. For purposes of

24 this paragraph, a plan may satisfy the requirements

25 of subsection (b)(4) by purchasing an annuity con-
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1 tract which meets the requirements of subsection

2 (b)(4).

3 ‘‘(5) AMOUNT OF ANNUAL ACCRUED BEN4 EFIT.—A plan meets the requirements of this para5 graph for any year only if the requirements of sub6 section (b)(5) are met for such year.

7 ‘‘(6) FUNDING.—

8 ‘‘(A) IN GENERAL.—A plan meets the re9 quirements of this paragraph for any year only

10 if—

11 ‘‘(i) the requirements of subsection

12 (b)(6) are met for such year, and

13 ‘‘(ii) in the case of a plan which has

14 an unfunded prior year liability as of the

15 close of such plan year, the plan requires

16 that the employer make an additional con17 tribution to such plan for such year equal

18 to the amount of such unfunded prior year

19 liability.

20 ‘‘(B) UNFUNDED PRIOR YEAR LIABIL21 ITY.—For purposes of this paragraph, the term

22 ‘unfunded prior year liability’ means, with re23 spect to any plan year, the excess (if any) of—
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1 ‘‘(i) the aggregate of the accrued li2 abilities under the plan as of the close of

3 the prior plan year, over

4 ‘‘(ii) the value of the plan’s assets de5 termined under section 412(c)(2) as of the

6 close of the plan year (determined without

7 regard to any contributions for such plan

8 year).

9 Such accrued liabilities shall be determined

10 using the assumptions specified in subsection

11 (b)(6)(B).

12 ‘‘(C) CHANGES IN MORTALITY TABLE.—If

13 the applicable mortality table under section

14 417(e)(3) for any plan year is not the same as

15 such table for the prior plan year, the Secretary

16 shall prescribe regulations which phase in the

17 effect of the changes over a reasonable period

18 of plan years determined by the Secretary.

19 ‘‘(D) DISREGARD ASSUMPTIONS FOR EX20 PENSES.—For purposes of this paragraph, the

21 assumption specified in subsection (b)(6)(B)(iv)

22 shall be disregarded.

23 ‘‘(7) SEPARATE ACCOUNTS FOR PARTICI24 PANTS.—A plan meets the requirements of this

25 paragraph for any year only if the plan provides—
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1 ‘‘(A) for an individual account for each

2 participant, and

3 ‘‘(B) for benefits based solely on—

4 ‘‘(i) the amount contributed to the

5 participant’s account, and

6 ‘‘(ii) any income, expenses, gains and

7 losses, and any forfeitures of accounts of

8 other participants which may be allocated

9 to such participant’s account.

10 ‘‘(8) TRUST MAY NOT HOLD SECURITIES WHICH

11 ARE NOT READILY TRADABLE.—A plan meets the

12 requirements of this paragraph only if the plan pro13 hibits the trust from holding directly or indirectly se14 curities which are not readily tradable on an estab15 lished securities market or otherwise. Nothing in

16 this paragraph shall prohibit the trust from holding

17 insurance company products regulated by State law.

18 ‘‘(9) DEFINITIONS AND SPECIAL RULE.—The

19 definitions and special rule applicable under sub20 section (b)(7) shall apply for purposes of this sub21 section.

22 ‘‘(d) SPECIAL RULES FOR SAFE ANNUITIES AND

23 TRUSTS.—

24 ‘‘(1) CERTAIN REQUIREMENTS TREATED AS

25 MET.—For purposes of section 401(a), a SAFE an-
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1 nuity and a SAFE trust shall be treated as meeting

2 the requirements of the following provisions:

3 ‘‘(A) Section 401(a)(4) (relating to non4 discrimination rules).

5 ‘‘(B) Section 401(a)(26) (relating to min6 imum participation).

7 ‘‘(C) Section 410 (relating to minimum

8 participation and coverage requirements).

9 ‘‘(D) Section 411(b) (relating to accrued

10 benefit requirements).

11 ‘‘(E) Paragraphs (6) and (7) of section

12 412(c) (relating to full funding limitation).

13 ‘‘(F) Section 415 (relating to limitations

14 on benefits and contributions under qualified

15 plans).

16 ‘‘(G) Section 416 (relating to special rules

17 for top-heavy plans).

18 ‘‘(2) CONTRIBUTIONS NOT TAKEN INTO AC19 COUNT IN APPLYING LIMITS TO OTHER PLANS.—

20 Contributions to a SAFE annuity or a SAFE trust

21 shall not be taken into account in applying sections

22 404 and 415 to other plans maintained by the em23 ployer.

24 ‘‘(3) COORDINATION WITH MAXIMUM LIMITA25 TION UNDER SUBSECTION (a).—In the case of any
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1 SAFE annuity or SAFE trust, subsections (a)(1)

2 and (b) of section 408 shall be applied by sub3 stituting ‘the dollar amount in effect under section

4 408B(b)(5)(C)’ for ‘$2,000’ each place it appears in

5 such subsections.

6 ‘‘(e) ROLLOVER CONTRIBUTION.—For purposes of

7 this section, the term ‘rollover contribution’ means any

8 rollover contribution under section 402(c), 403(a)(4),

9 403(b)(8), 408(d)(3), or 457(e)(16).’’.

10 (b) DEDUCTION LIMITS NOT TO APPLY TO EM11 PLOYER CONTRIBUTIONS.—

12 (1) IN GENERAL.—Section 404 (relating to de13 ductions for contributions of an employer to pension,

14 etc., plans) is amended by adding at the end the fol15 lowing:

16 ‘‘(n) SPECIAL RULES FOR SAFE ANNUITIES AND

17 TRUSTS.—

18 ‘‘(1) IN GENERAL.—Employer contributions to

19 a SAFE annuity or SAFE trust shall be treated as

20 if they are made to a plan subject to the require21 ments of this section.

22 ‘‘(2) TIMING.—

23 ‘‘(A) DEDUCTION.—Contributions de24 scribed in paragraph (1) shall be deductible in

25 the taxable year of the employer with or within
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1 which the calendar year for which the contribu2 tions were made ends.

3 ‘‘(B) CONTRIBUTIONS AFTER END OF

4 YEAR.—For purposes of this subsection, con5 tributions shall be treated as made for a taxable

6 year if they are made on account of the taxable

7 year and are made not later than the time pre8 scribed by law for filing the return for the tax9 able year (including extensions thereof).’’.

10 (2) COORDINATION WITH DEDUCTION UNDER

11 SECTION 219.—

12 (A) Section 219(b) (relating to maximum

13 amount of deduction) is amended by adding at

14 the end the following:

15 ‘‘(5) SPECIAL RULE FOR SAFE ANNUITIES.—

16 This section shall not apply with respect to any

17 amount contributed to a SAFE annuity established

18 under section 408A(B).’’.

19 (B) Section 219(g)(5)(A) (defining active

20 participant) is amended by striking ‘‘or’’ at the

21 end of clause (v) and by adding at the end the

22 following:

23 ‘‘(vii) any SAFE annuity (within the

24 meaning of section 408B), or’’.
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1 (c) CONTRIBUTIONS AND DISTRIBUTIONS.—Section

2 402 (relating to taxability of beneficiary of employees’

3 trust) is amended by adding at the end the following:

4 ‘‘(l) TREATMENT OF SAFE ANNUITIES.—Rules simi5 lar to the rules of paragraphs (1) and (3) of subsection

6 (h) shall apply to contributions and distributions with re7 spect to a SAFE annuities under section 408B.’’.

8 (d) INCREASED PENALTY ON EARLY WITH9 DRAWALS.—Section 72(t) (relating to additional tax on

10 early distributions) is amended by adding at the end the

11 following:

12 ‘‘(9) SPECIAL RULES FOR SAFE ANNUITIES AND

13 TRUSTS.—In the case of any amount received from

14 a SAFE annuity or a SAFE trust (within the mean15 ing of section 408B), paragraph (1) shall be applied

16 by substituting ‘20 percent’ for ‘10 percent’.’’.

17 (e) SIMPLIFIED EMPLOYER REPORTS.—

18 (1) SAFE ANNUITIES.—Section 408(l) (relating

19 to simplified employer reports) is amended by add20 ing at the end the following:

21 ‘‘(3) SAFE ANNUITIES.—

22 ‘‘(A) SIMPLIFIED REPORT.—The employer

23 maintaining any SAFE annuity (within the

24 meaning of section 408B) shall file a simplified

25 annual return with the Secretary containing
26

•S 741 IS

1 only the information described in subparagraph

2 (B).

3 ‘‘(B) CONTENTS.—The return required by

4 subparagraph (A) shall set forth—

5 ‘‘(i) the name and address of the em6 ployer,

7 ‘‘(ii) the date the plan was adopted,

8 ‘‘(iii) the number of employees of the

9 employer,

10 ‘‘(iv) the number of such employees

11 who are eligible to participate in the plan,

12 ‘‘(v) the total amount contributed by

13 the employer to each such annuity for such

14 year and the minimum amount required

15 under section 408B to be so contributed,

16 ‘‘(vi) the percentage elected under sec17 tion 408B(b)(5)(B), and

18 ‘‘(vii) the number of employees with

19 respect to whom contributions are required

20 to be made for such year under section

21 408B(b)(5)(D).

22 ‘‘(C) REPORTING BY ISSUER OF SAFE AN23 NUITY.—

24 ‘‘(i) IN GENERAL.—The issuer of each

25 SAFE annuity shall provide to the owner
27

•S 741 IS

1 of the annuity for each year a statement

2 setting forth as of the close of such year—

3 ‘‘(I) the benefits guaranteed at

4 age 65 under the annuity, and

5 ‘‘(II) the cash surrender value of

6 the annuity.

7 ‘‘(ii) SUMMARY DESCRIPTION.—The

8 issuer of any SAFE annuity shall provide

9 to the employer maintaining the annuity

10 for each year a description containing the

11 following information:

12 ‘‘(I) The name and address of

13 the employer and the issuer.

14 ‘‘(II) The requirements for eligi15 bility for participation.

16 ‘‘(III) The benefits provided with

17 respect to the annuity.

18 ‘‘(IV) The procedures for, and ef19 fects of, withdrawals (including roll20 overs) from the annuity.

21 ‘‘(D) TIME AND MANNER OF REPORT22 ING.—Any return, report, or statement required

23 under this paragraph shall be made in such

24 form and at such time as the Secretary shall

25 prescribe.’’.
28

•S 741 IS

1 (2) SAFE TRUSTS.—Section 6059 (relating to

2 actuarial reports) is amended by redesignating sub3 sections (c) and (d) as subsections (d) and (e), re4 spectively, and by inserting after subsection (b) the

5 following:

6 ‘‘(c) SAFE TRUSTS.—In the case of a SAFE Trust

7 (within the meaning of section 408B), the Secretary shall

8 require a simplified actuarial report which contains infor9 mation similar to the information required in section

10 408(l)(3)(B).’’.

11 (f) CONFORMING AMENDMENTS.—

12 (1) Section 280G(b)(6) is amended by striking

13 ‘‘or’’ at the end of subparagraph (C), by striking the

14 period at the end of subparagraph (D) and inserting

15 ‘‘, or’’ and by adding after subparagraph (D) the

16 following:

17 ‘‘(E) a SAFE annuity described in section

18 408B.’’.

19 (2) Subsections (b), (c), (m)(4)(B), and

20 (n)(3)(B) of section 414 are each amended by in21 serting ‘‘408B,’’ after ‘‘408(p),’’.

22 (3) Section 4972(d)(1)(A) is amended by strik23 ing ‘‘and’’ at the end of clause (iii), by striking the

24 period at the end of clause (iv) and inserting ‘‘,

25 and’’, and by adding after clause (iv) the following:
29

•S 741 IS

1 ‘‘(v) any SAFE annuity (within the

2 meaning of section 408B).’’.

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

4 I of subchapter D of chapter 1 is amended by insert5 ing after the item relating to section 408A the fol6 lowing:

‘‘Sec. 408B. SAFE annuities and trusts.’’.

7 (g) MODIFICATIONS OF ERISA.—

8 (1) EXEMPTION FROM INSURANCE COV9 ERAGE.—Subsection (b) of section 4021 of the Em10 ployee Retirement Income Security Act of 1974 (29

11 U.S.C. 1321) is amended by striking ‘‘or’’ at the end

12 of paragraph (12), by striking the period at the end

13 of paragraph (13) and inserting ‘‘; or’’, and by add14 ing at the end the following:

15 ‘‘(14) which is established and maintained as

16 part of a SAFE trust (as defined in section 408B

17 of the Internal Revenue Code of 1986).’’.

18 (2) REPORTING REQUIREMENTS.—Section 101

19 of such Act (29 U.S.C. 1021) is amended by redes20 ignating the second subsection (h) as subsection (j)

21 and by inserting after the first subsection (h) the

22 following:

23 ‘‘(i) SAFE ANNUITIES.—

24 ‘‘(1) NO EMPLOYER REPORTS.—Except as pro25 vided in this subsection, no report shall be required
30

•S 741 IS

1 under this section by an employer maintaining a

2 SAFE annuity under section 408B(b) of the Inter3 nal Revenue Code of 1986.

4 ‘‘(2) SUMMARY DESCRIPTION.—The issuer of

5 any SAFE annuity shall provide to the employer

6 maintaining the annuity for each year a description

7 containing the following information:

8 ‘‘(A) The name and address of the em9 ployer and the issuer.

10 ‘‘(B) The requirements for eligibility for

11 participation.

12 ‘‘(C) The benefits provided with respect to

13 the annuity.

14 ‘‘(D) The procedures for, and effects of,

15 withdrawals (including rollovers) from the an16 nuity.

17 ‘‘(3) EMPLOYEE NOTIFICATION.—The employer

18 shall provide each employee eligible to participate in

19 the SAFE annuity with the description described in

20 paragraph (2) at the same time as the notification

21 required under section 408B(b)(5)(B) of the Inter22 nal Revenue Code of 1986.’’.

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

24 this section shall apply to years beginning after December

25 31, 1999.
31

•S 741 IS

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

2 (a) REPEAL OF FAMILY AGGREGATION RULES.—

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

4 amended by inserting ‘‘(without regard to subsection

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

6 (b) SIMPLIFICATION OF DEFINITION OF KEY EM7 PLOYEE.—

8 (1) IN GENERAL.—Section 416(i)(1)(A) (defin9 ing key employee) is amended—

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

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

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

13 following:

14 ‘‘(i) an officer of the employer who is

15 a highly compensated employee described

16 in section 414(q)(1)(B),’’,

17 (C) by striking clause (ii) and redesig18 nating clauses (iii) and (iv) as clauses (ii) and

19 (iii), respectively, and

20 (D) by striking the second sentence in the

21 matter following clause (iii), as redesignated by

22 subparagraph (C).

23 (2) CONFORMING AMENDMENT.—Section

24 416(i)(1)(B)(iii) is amended by striking ‘‘and sub25 paragraph (A)(ii)’’.
32

•S 741 IS

1 (c) EMPLOYEE ELECTIVE CONTRIBUTIONS TO PLAN

2 NOT TAKEN INTO ACCOUNT.—

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

4 416(g)(4) (relating to other special rules) is amend5 ed by adding at the end the following:

6 ‘‘(H) EMPLOYEE ELECTIVE CONTRIBU7 TIONS TO PLAN NOT TAKEN INTO ACCOUNT.—

8 At the election of the employer, any employee

9 elective contribution described in section

10 415(c)(3)(D) to a plan (and earnings allocable

11 thereto) shall not be taken into account for pur12 poses of determining whether a plan is a top13 heavy plan (or whether any aggregation group

14 which includes such plan is a top-heavy

15 group).’’.

16 (2) DEFINITION OF COMPENSATION.—Section

17 416(i)(1)(D) (defining compensation) is amended to

18 read as follows:

19 ‘‘(D) COMPENSATION.—

20 ‘‘(i) IN GENERAL.—For purposes of

21 this paragraph, except as provided in

22 clause (ii), the term ‘compensation’ has the

23 meaning given such term by section

24 414(q)(4).
33

•S 741 IS

1 ‘‘(ii) EMPLOYEE ELECTIVE CONTRIBU2 TIONS TO PLAN NOT TAKEN INTO AC3 COUNT.—At the election of the employer,

4 any employee elective contribution de5 scribed in section 415(c)(3)(D) to a plan

6 shall not be taken into account for pur7 poses of determining compensation.’’.

8 (d) MATCHING CONTRIBUTIONS TAKEN INTO AC9 COUNT FOR MINIMUM CONTRIBUTION REQUIREMENTS.—

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

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

12 ‘‘Employer matching contributions (as defined in section

13 401(m)(4)(A)) shall be taken into account for purposes

14 of this subparagraph.’’.

15 (e) DISTRIBUTIONS DURING LAST YEAR BEFORE

16 DETERMINATION DATE TAKEN INTO ACCOUNT.—Section

17 416(g) is amended—

18 (1) in paragraph (3)—

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

20 heading and inserting ‘‘LAST YEAR BEFORE DE21 TERMINATION DATE’’, and

22 (B) in the matter following subparagraph

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

24 ‘‘1-year period’’, and

25 (2) in paragraph (4)(E)—
34

•S 741 IS

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

2 heading and inserting ‘‘LAST YEAR BEFORE DE3 TERMINATION DATE’’, and

4 (B) by striking ‘‘5-year period’’ and insert5 ing ‘‘1-year period’’.

6 (f) REQUIREMENTS FOR QUALIFICATIONS.—Clause

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

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

9 at the end the following new flush sentence:

10 ‘‘The preceding sentence shall not apply to

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

12 it is not reasonable to expect that the plan

13 will become a top-heavy plan.’’.

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

15 (1) EXCLUSION OF CERTAIN PLANS FROM DEFI16 NITION OF TOP-HEAVY PLAN.—Section 416(g)(4)

17 (relating to other special rules for top-heavy plans),

18 as amended by subsection (c), is amended by adding

19 at the end the following new subparagraph:

20 ‘‘(I) CASH OR DEFERRED ARRANGEMENTS

21 AND PLANS USING ALTERNATIVE METHODS OF

22 MEETING NONDISCRIMINATION REQUIRE23 MENTS.—The term ‘top-heavy plan’ shall not

24 include—
35

•S 741 IS

1 ‘‘(i) a cash or deferred arrangement

2 to the extent that such arrangement meets

3 the requirements of section 401(k)(12), or

4 ‘‘(ii) a defined contribution plan to

5 the extent that such plan meets the re6 quirements of section 401(m)(11),

7 This subparagraph shall also apply to contribu8 tions that are not required to satisfy the re9 quirements of section 401(k)(12) or

10 401(m)(11), whichever is applicable, but are

11 consistent with the purposes of such section, as

12 permitted under regulations which the Sec13 retary shall prescribe. Nothing in this subpara14 graph shall preclude an employer from taking

15 into account contributions made under the cash

16 or deferred arrangement or the defined con17 tribution plan when determining whether any

18 plan of such employer satisfies the requirements

19 of this section.’’.

20 (2) AGGREGATION GROUP NOT REQUIRED TO

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

22 416(g)(2)(A) of such Code (relating to required ag23 gregation) is amended by adding at the end the fol24 lowing new flush sentence:
36

•S 741 IS

1 ‘‘Such term shall not include a plan or ar2 rangement described in subparagraph (I)

3 of paragraph (4).’’.

4 (h) EFFECTIVE DEFERRALS NOT TAKEN INTO AC5 COUNT.—Clause (i) of section 416(c)(2)(B) (relating to

6 special rule where maximum contribution less than 3 per7 cent) is amended by inserting ‘‘(other than elective defer8 rals (as defined in section 402(g)(3))’’ after ‘‘contribu9 tions’’.

10 (i) FROZEN PLAN EXEMPT FROM MINIMUM BEN11 EFIT REQUIREMENT.—

12 (1) IN GENERAL.—Subparagraph (C) of section

13 416(c)(1) (relating to defined benefit plans) is

14 amended—

15 (A) in clause (i), by striking ‘‘clause (ii)’’

16 and inserting ‘‘clause (ii) or (iii)’’, and

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

18 ‘‘(iii) EXCEPTION FOR FROZEN

19 PLAN.—For purposes of determining an

20 employee’s years of service with the em21 ployer, any service with the employer shall

22 be disregarded to the extent that such

23 service occurs during a plan year when the

24 plan benefits (within the meaning of sec-
37

•S 741 IS

1 tion 410(b)) no employee or former em2 ployee.’’.

3 (2) CONFORMING AMENDMENT.—Subparagraph

4 (A) of section 415(b)(5) is amended by adding at

5 the end the following: ‘‘An employee shall not be

6 credited with a year of participation in a defined

7 benefit plan for any year in which the plan does not

8 benefit (within the meaning of section 410(b)) such

9 employee.’’.

10 (j) ALTERNATIVE 60 PERCENT.—

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

12 416 (relating to top heavy plan defined) is amended

13 by adding at the end the following:

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

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

16 employer may elect for this paragraph to apply

17 to all plans maintained by such employer. If

18 this paragraph applies to a plan, the term ‘top19 heavy plan’ shall have the meaning set forth in

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

21 group’ shall have the meaning set forth in sub22 paragraph (C).

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

24 case of any plan to which this paragraph ap-
38

•S 741 IS

1 plies, the term ‘top-heavy plan’ means, with re2 spect to any plan year—

3 ‘‘(i) any defined benefit plan if, for

4 the plan year ending on the determination

5 date, the present value of the accruals for

6 key employees, exceeds 60 percent of the

7 present value of the accruals for all em8 ployees, and

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

10 for the plan year ending on the determina11 tion date, the annual additions for key em12 ployees exceed 60 percent of the annual

13 additions for all employees.

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

15 any plan to which this paragraph applies, the

16 term ‘top-heavy group’ means any aggregation

17 group if—

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

19 on the determination date, of—

20 ‘‘(I) the present value of the ac21 cruals for key employees under all de22 fined benefit plans included in such

23 group, and

24 ‘‘(II) the aggregate of the annual

25 additions of key employees under all
39

•S 741 IS

1 defined contribution plans included in

2 such group,

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

4 sum determined for all employees.

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

6 this paragraph, the term ‘annual addition’ shall

7 have the same meaning as when used in section

8 415(c)(2) (without regard to section 415(l) or

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

10 ‘‘(E) CERTAIN RULES NOT TO APPLY.—

11 Paragraphs (3) and (4) (other than subpara12 graphs (B), (C), (D), (E), and (G) of para13 graph (4)) shall not apply for purposes of this

14 paragraph.’’.

15 (2) CONFORMING AMENDMENTS.—

16 (A) Subparagraph (A) of section 416(g)(1)

17 is amended by striking ‘‘subparagraph (B)’’

18 and inserting ‘‘subparagraph (B) and para19 graph (5)’’.

20 (B) Subparagraph (B) of section 416(g)(2)

21 is amended by striking ‘‘The term’’ and insert22 ing ‘‘Except as provided in paragraph (5), the

23 term’’.
40

•S 741 IS

1 (k) EFFECTIVE DATE.—The amendments made by

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

4 SEC. 105. SALARY REDUCTION ONLY SIMPLE PLANS.

5 (a) SIMPLE RETIREMENT ACCOUNTS.—

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

7 408(p) is amended—

8 (A) by redesignating subparagraphs (C),

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

10 (F), respectively, and

11 (B) by inserting after subparagraph (B)

12 the following:

13 ‘‘(C) EMPLOYER MAY ELECT SALARY RE14 DUCTION ONLY ARRANGEMENT.—

15 ‘‘(i) IN GENERAL.—An employer shall

16 be treated as meeting the requirements of

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

18 lieu of the contributions described in such

19 subparagraph, the employer elects to have

20 subparagraph (A)(ii) applied for the year

21 by substituting ‘$4,000’ for ‘$6,000’. If an

22 employer makes an election under this sub23 paragraph for any year, the employer shall

24 notify employees of such election within a

25 reasonable period of time before the 60-day
41

•S 741 IS

1 period for such year under paragraph

2 (5)(C).

3 ‘‘(ii) EXCEPTION.—This subpara4 graph shall not apply to an employer if

5 such employer (or any predecessor em6 ployer) maintained another qualified plan

7 (as defined in subparagraph (E)(ii)) with

8 respect to which contributions were made,

9 or benefits were accrued, for service during

10 the year in which the arrangement de11 scribed in clause (i) became effective or ei12 ther of the 2 preceding years. If only indi13 viduals other than employees described in

14 subparagraph (A) or (B) of section

15 410(b)(3) are eligible to participate in the

16 arrangement described in clause (i), then

17 the preceding sentence shall be applied

18 without regard to any qualified plan in

19 which only employees so described are eli20 gible to participate.’’.

21 (2) SPECIAL RULE FOR ACQUISITIONS, DISPOSI22 TIONS, AND SIMILAR TRANSACTIONS.—Subpara23 graph (B) of section 408(p)(10) is amended by

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

25 the period at the end of clause (iii) and inserting ‘‘;
42

•S 741 IS

1 and’’, and by inserting after clause (iii) the fol2 lowing:

3 ‘‘(iv) the requirement under para4 graph (2)(C) that the employer not have

5 maintained another qualified plan de6 scribed therein.’’.

7 (3) COST-OF-LIVING ADJUSTMENT.—Subpara8 graph (F) of section 408(p)(2) (as so redesignated)

9 is amended by inserting ‘‘and the $4,000 and

10 $6,000 amounts under subparagraph (C)’’ after

11 ‘‘subparagraph (A)(ii)’’.

12 (4) COORDINATION WITH MAXIMUM LIMITA13 TION.—Paragraph (8) of section 408(p) (relating to

14 coordination with maximum limitation under sub15 section (a)) is amended by striking ‘‘paragraph

16 (2)(A)(ii) of this subsection’’ and inserting ‘‘sub17 paragraph (A)(ii) or (C) of paragraph (2) of this

18 subsection, whichever is applicable,’’.

19 (b) ADOPTION OF SIMPLE PLAN TO MEET NON20 DISCRIMINATION TESTS.—

21 (1) SIMPLE PLAN.—Subparagraph (B) of sec22 tion 401(k)(11) is amended by redesignating clause

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

24 the following new clause:
43

•S 741 IS

1 ‘‘(iii) EMPLOYER MAY ELECT SALARY

2 REDUCTION ONLY ARRANGEMENT.—

3 ‘‘(I) IN GENERAL.—An employer

4 shall be treated as meeting the re5 quirements of clause (i)(II) for any

6 year if, in lieu of the contributions de7 scribed in such clause, the employer

8 elects to have clause (i)(I) applied for

9 the year by substituting ‘$4,000’ for

10 ‘$6,000’. If an employer makes an

11 election under this clause for any

12 year, the employer shall notify em13 ployees of such election within a rea14 sonable period of time before the 60-

15 day period for such year under clause

16 (iv)(II).

17 ‘‘(II) EXCEPTION.—This clause

18 shall not apply to an employer if such

19 employer (or any predecessor em20 ployer) maintained another qualified

21 plan (as defined in section

22 408(p)(2)(E)(ii)) with respect to

23 which contributions were made, or

24 benefits were accrued, for service dur25 ing the year in which the arrangement
44

•S 741 IS

1 described in subclause (I) became ef2 fective or either of the 2 preceding

3 years. This subclause shall not apply

4 if such contributions or benefits were

5 solely on behalf of employees who are

6 not eligible to participate in the ar7 rangement described in subclause

8 (I).’’.

9 (2) COST-OF-LIVING ADJUSTMENT.—Subpara10 graph (E) of section 401(k)(11) is amended by in11 serting ‘‘and the $4,000 and $6,000 amounts under

12 subparagraph (B)(iii)’’ after ‘‘subparagraph

13 (B)(i)(I)’’.

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

15 this section shall apply to years beginning after December

16 31, 1999.

17 SEC. 106. CREDIT FOR SMALL EMPLOYER PENSION PLAN

18 CONTRIBUTIONS AND START-UP COSTS.

19 (a) IN GENERAL.—Subpart D of part IV of sub20 chapter A of chapter 1 (relating to business related cred21 its) is amended by adding at the end the following new

22 section:

23 ‘‘SEC. 45D. SMALL EMPLOYER PENSION PLAN CREDIT.

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

25 in the case of an eligible employer, the small employer pen-
45

•S 741 IS

1 sion plan credit determined under this section for any tax2 able year is an amount equal to the sum of—

3 ‘‘(1) 50 percent of the qualified employer con4 tributions of the taxpayer for the taxable year, and

5 ‘‘(2) 50 percent of the qualified start-up costs

6 paid or incurred by the taxpayer during the taxable

7 year.

8 ‘‘(b) LIMITATIONS.—

9 ‘‘(1) LIMITS ON CONTRIBUTIONS.—For pur10 poses of subsection (a)(1)—

11 ‘‘(A) qualified employer contributions may

12 only be taken into account for each of the first

13 5 taxable years ending after the date the em14 ployer establishes the qualified employer plan to

15 which the contribution is made, and

16 ‘‘(B) the amount of the qualified employer

17 contributions taken into account with respect to

18 any qualified employee for any such taxable

19 year shall not exceed 3 percent of the com20 pensation (as defined in section 414(s)) of the

21 qualified employee for such taxable year.

22 ‘‘(2) LIMITS ON START-UP COSTS.—The amount

23 of the credit determined under subsection (a)(2) for

24 any taxable year shall not exceed—
46

•S 741 IS

1 ‘‘(A) $2,000 for the first taxable year end2 ing after the date the employer established the

3 qualified employer plan to which such costs re4 late,

5 ‘‘(B) $1,000 for each of the second and

6 third such taxable years, and

7 ‘‘(C) zero for each taxable year thereafter.

8 ‘‘(c) DEFINITIONS.—For purposes of this section—

9 ‘‘(1) ELIGIBLE EMPLOYER.—

10 ‘‘(A) IN GENERAL.—The term ‘eligible em11 ployer’ means, with respect to any year, an em12 ployer which has no more than—

13 ‘‘(i) for purposes of subsection (a)(1),

14 50 employees, and

15 ‘‘(ii) for purposes of subsection (a)(2),

16 100 employees,

17 who received at least $5,000 of compensation

18 from the employer for the preceding year.

19 ‘‘(B) 2-YEAR GRACE PERIOD.—An eligible

20 employer who establishes and maintains a quali21 fied employer plan for 1 or more years and who

22 fails to be an eligible employer for any subse23 quent year shall be treated as an eligible em24 ployer for the 2 years following the last year

25 the employer was an eligible employer.
47

•S 741 IS

1 ‘‘(C) REQUIREMENT FOR NEW QUALIFIED

2 EMPLOYER PLANS.—Such term shall not in3 clude an employer if, during the 3-taxable year

4 period immediately preceding the 1st taxable

5 year for which the credit under this section is

6 otherwise allowable for a qualified employer

7 plan of the employer, the employer and each

8 member of any controlled group including the

9 employer (or any predecessor of either) estab10 lished or maintained a qualified employer plan

11 with respect to which contributions were made,

12 or benefits were accrued, for substantially the

13 same employees as are in the qualified employer

14 plan.

15 ‘‘(2) QUALIFIED EMPLOYER CONTRIBUTIONS.—

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

17 employer contributions’ means, with respect to

18 any taxable year, any employer contributions

19 made on behalf of a qualified employee to a

20 qualified employer plan for a plan year ending

21 with or within the taxable year.

22 ‘‘(B) EMPLOYER CONTRIBUTIONS.—The

23 term ‘employer contributions’ shall not include

24 any elective deferral (within the meaning of sec25 tion 402(g)(3)).
48

•S 741 IS

1 ‘‘(3) QUALIFIED EMPLOYEE.—The term ‘quali2 fied employee’ means an individual who—

3 ‘‘(A) is eligible to participate in the quali4 fied employer plan to which the employer con5 tributions are made, and

6 ‘‘(B) is not a highly compensated employee

7 (within the meaning of section 414(q)) for the

8 year for which the contribution is made.

9 ‘‘(4) QUALIFIED START-UP COSTS.—The term

10 ‘qualified start-up costs’ means any ordinary and

11 necessary expenses of an eligible employer which are

12 paid or incurred in connection with—

13 ‘‘(A) the establishment or maintenance of

14 a qualified employer plan in which qualified em15 ployees are eligible to participate, and

16 ‘‘(B) providing educational information to

17 employees regarding participation in such plan

18 and the benefits of establishing an investment

19 plan.

20 ‘‘(5) QUALIFIED EMPLOYER PLAN.—The term

21 ‘qualified employer plan’ has the meaning given such

22 term in section 4972(d).

23 ‘‘(d) SPECIAL RULES.—

24 ‘‘(1) AGGREGATION RULES.—All persons treat25 ed as a single employer under subsection (a) or (b)
49

•S 741 IS

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

2 shall be treated as one person. All qualified employer

3 plans of an employer shall be treated as a single

4 qualified employer plan.

5 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No de6 duction shall be allowable under this chapter for any

7 qualified start-up costs or qualified contributions for

8 which a credit is determined under subsection (a).

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

10 section shall not apply to a taxpayer for any taxable

11 year if such taxpayer elects to have this section not

12 apply for such taxable year.’’.

13 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI14 NESS CREDIT.—Section 38(b) (defining current year busi15 ness credit) is amended by striking ‘‘plus’’ at the end of

16 paragraph (11), by striking the period at the end of para17 graph (12) and inserting ‘‘, plus’’, and by adding at the

18 end the following new paragraph:

19 ‘‘(13) in the case of an eligible employer (as de20 fined in section 45D(c)), the small employer pension

21 plan credit determined under section 45D(a).’’.

22 (c) PORTION OF CREDIT REFUNDABLE.—Section

23 38(c) (relating to limitation based on amount of tax) is

24 amended by adding at the end the following new para25 graph:
50

•S 741 IS

1 ‘‘(4) PORTION OF SMALL EMPLOYER PENSION

2 PLAN CREDIT REFUNDABLE.—

3 ‘‘(A) IN GENERAL.—In the case of the

4 small employer pension plan credit under sub5 section (b)(13), the aggregate credits allowed

6 under subpart C shall be increased by the lesser

7 of—

8 ‘‘(i) the credit which would be allowed

9 without regard to this paragraph and the

10 limitation under paragraph (1), or

11 ‘‘(ii) the amount by which the aggre12 gate amount of credits allowed by this sec13 tion (without regard to this paragraph)

14 would increase if the limitation under

15 paragraph (1) were increased by the tax16 payer’s applicable payroll taxes for the tax17 able year.

18 ‘‘(B) TREATMENT OF CREDIT.—The

19 amount of the credit allowed under this para20 graph shall not be treated as a credit allowed

21 under this subpart and shall reduce the amount

22 of the credit allowed under this section for the

23 taxable year.

24 ‘‘(C) APPLICABLE PAYROLL TAXES.—For

25 purposes of this paragraph—
51

•S 741 IS

1 ‘‘(i) IN GENERAL.—The term ‘applica2 ble payroll taxes’ means, with respect to

3 any taxpayer for any taxable year—

4 ‘‘(I) the amount of the taxes im5 posed by sections 3111 and 3221(a)

6 on compensation paid by the taxpayer

7 during the taxable year,

8 ‘‘(II) 50 percent of the taxes im9 posed by section 1401 on the self-em10 ployment income of the taxpayer dur11 ing the taxable year, and

12 ‘‘(III) 50 percent of the taxes im13 posed by section 3211(a)(1) on

14 amounts received by the taxpayer dur15 ing the calendar year in which the

16 taxable year begins.

17 ‘‘(ii) AGREEMENTS REGARDING FOR18 EIGN AFFILIATES.—Section 24(d)(5)(C)

19 shall apply for purposes of clause (i).’’.

20 (d) CONFORMING AMENDMENT.—The table of sec21 tions for subpart D of part IV of subchapter A of chapter

22 1 is amended by adding at the end the following new item:

‘‘Sec. 45D. Small employer pension plan credit.’’.

23 (e) EFFECTIVE DATE.—The amendments made by

24 this section shall apply to costs paid or incurred or con-
52

•S 741 IS

1 tributions made in connection with qualified employer

2 plans established after April 30, 1999.

3 SEC. 107. INCREASING LIMITS FOR DEFERRALS TO SIMPLE

4 PLANS.

5 (a) SIMPLE RETIREMENT ACCOUNTS.—

6 (1) IN GENERAL.—Paragraph (2)(A)(ii) of sec7 tion 408(p) (relating to simple retirement accounts)

8 is amended by striking ‘‘$6,000’’ and inserting

9 ‘‘$8,000’’.

10 (2) CONFORMING AMENDMENTS.—

11 (A) Section 408(p)(2)(C)(i), as added by

12 section 105, is amended by striking ‘‘$6,000’’

13 and inserting ‘‘$8,000’’.

14 (B) Subparagraph (F) of section 408(p)(2)

15 (relating to cost-of-living adjustment), as

16 amended by section 105, is amended by striking

17 ‘‘$6,000’’ each place it appears and inserting

18 ‘‘$8,000’’.

19 (b) NONDISCRIMINATION TESTS.—

20 (1) IN GENERAL.—Section 401(k)(11)(B)(i)(I)

21 is amended by striking ‘‘$6,000’’ and inserting

22 ‘‘$8,000’’.

23 (2) CONFORMING AMENDMENTS.—
53

•S 741 IS

1 (A) Section 401(k)(11)(B)(iii)(I), as added

2 by section 105, is amended by striking

3 ‘‘$6,000’’ and inserting ‘‘$8,000’’.

4 (B) Section 401(k)(11)(E), as amended by

5 section 105, is amended by striking ‘‘$6,000’’

6 each place it appears and inserting ‘‘$8,000’’.

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

8 this section shall apply to years beginning after December

9 31, 1999.

10 SEC. 108. PHASE-IN OF ADDITIONAL PBGC PREMIUM FOR

11 NEW PLANS.

12 (a) AMENDMENTS TO ERISA.—Subparagraph (E) of

13 section 4006(a)(3) of the Employee Retirement Income

14 Security Act of 1974 (29 U.S.C. 1306(a)(3)(E)) is amend15 ed by adding at the end the following new clause:

16 ‘‘(v) In the case of a new defined benefit plan, the

17 amount determined under clause (ii) for any plan year

18 shall be an amount equal to the product derived by multi19 plying the amount determined under clause (ii) by the ap20 plicable percentage. For purposes of this clause, the term

21 ‘applicable percentage’ means—

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

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

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

25 ‘‘(IV) 60 percent, for the fourth plan year.
54

•S 741 IS

1 ‘‘(V) 80 percent, for the fifth plan year.

2 ‘‘(VI) 100 percent, for the sixth plan year, and

3 for each succeeding plan year.

4 For purposes of this clause, a defined benefit plan (as de5 fined in section 3(35)) maintained by an employer shall

6 be treated as a new defined benefit plan if, during the

7 36-month period ending on the date of the adoption of

8 the plan, the employer and each member of any controlled

9 group including the employer (or any predecessor of ei10 ther) did not establish or maintain a plan to which this

11 title applies with respect to which contributions were

12 made, or benefits were accrued, for substantially the same

13 employees as are in the new plan.’’.

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

15 this section shall apply to plan years beginning after De16 cember 31, 1999.

17 SEC. 109. REDUCED PBGC PREMIUM FOR NEW PLANS OF

18 SMALL EMPLOYERS.

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

20 4006(a)(3) of the Employee Retirement Income Security

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

22 (1) in clause (i), by inserting ‘‘other than a new

23 single-employer plan (as defined in subparagraph

24 (F)),’’ after ‘‘single-employer plan,’’,
55

•S 741 IS

1 (2) in clause (iii), by striking the period at the

2 end and inserting ‘‘, and’’, and

3 (3) by adding at the end the following new

4 clause:

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

6 (as defined in subparagraph (F)) maintained by a

7 small employer (as so defined) for the plan year, $5

8 for each individual who is a participant in such plan

9 during the plan year.’’.

10 (b) DEFINITION OF NEW SINGLE-EMPLOYER

11 PLAN.—Section 4006(a)(3) of the Employee Retirement

12 Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is

13 amended by adding at the end the following new subpara14 graph:

15 ‘‘(F)(i) For purposes of this paragraph, a

16 single-employer plan maintained by an employer

17 shall be treated as a new single-employer plan

18 for each of its first 5 plan years if, during the

19 36-month period ending on the date of the

20 adoption of such plan, the employer or any

21 member of such employer’s controlled group (or

22 any predecessor of either) had not established

23 or maintained a plan to which this title applies

24 with respect to which contributions were made,

25 or benefits were accrued, for substantially the
56

•S 741 IS

1 same employees as are in the new single-em2 ployer plan.

3 ‘‘(ii)(I) For purposes of this paragraph,

4 the term ‘small employer’ means an employer

5 which on the first day of any plan year has, in

6 aggregation with all members of the controlled

7 group of such employer, 100 or fewer employ8 ees.

9 ‘‘(II) In the case of a plan maintained by

10 2 or more contributing sponsors that are not

11 part of the same controlled group, the employ12 ees of all contributing sponsors and controlled

13 groups of such sponsor shall be aggregated for

14 purposes of determining whether the sponsor is

15 a small employer.’’.

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

17 this section shall apply to plan years beginning after De18 cember 31, 1999.

19 SEC. 110. ELIMINATION OF USER FEE FOR REQUESTS TO

20 IRS REGARDING NEW PENSION PLANS.

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

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

23 not require payment of user fees under the program estab24 lished under section 10511 of the Revenue Act of 1987

25 for requests to the Internal Revenue Service for ruling let-
57

•S 741 IS

1 ters, opinion letters, and determination letters or similar

2 requests with respect to the qualified status of a new pen3 sion benefit plan or any trust which is part of the plan.

4 (b) NEW PENSION BENEFIT PLAN.—For purposes of

5 this section—

6 (1) IN GENERAL.—The term ‘‘new pension ben7 efit plan’’ means a pension, profit-sharing, stock

8 bonus, annuity, or employee stock ownership plan

9 which is maintained by one or more eligible employ10 ers if such employer (or any predecessor employer)

11 has not made a prior request described in subsection

12 (a) for such plan (or any predecessor plan).

13 (2) ELIGIBLE EMPLOYER.—The term ‘‘eligible

14 employer’’ means an employer (or any predecessor

15 employer) which has not established or maintained a

16 qualified employer plan with respect to which con17 tributions were made, or benefits were accrued for

18 service, in the 3 most recent taxable years ending

19 prior to the first taxable year in which the request

20 is made.

21 (c) EFFECTIVE DATE.—The provisions of this section

22 shall apply with respect to requests made after December

23 31, 1999.
58

•S 741 IS

1 SEC. 111. COMPENSATION LIMIT NOT TO APPLY TO SIMPLE

2 401(K) ARRANGEMENTS.

3 (a) IN GENERAL.—Section 401(k)(11) (relating to

4 adoption of simple plan to meet nondiscrimination tests)

5 is amended by adding at the end the following new sub6 paragraph:

7 ‘‘(F) COMPENSATION.—The limitation

8 under subsection (a)(17) shall not apply for

9 purposes of determining compensation taken

10 into account under this paragraph (other than

11 subparagraph (B)(ii)).’’.

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

13 this section shall apply to years beginning after December

14 31, 1999.

15 SEC. 112. ELECTIVE DEFERRALS NOT TAKEN INTO AC16 COUNT FOR PURPOSES OF LIMITS.

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

18 at the end the following new subsection:

19 ‘‘(o) ELECTIVE DEFERRALS NOT TAKEN INTO AC20 COUNT FOR PURPOSES OF LIMITS.—Elective deferrals (as

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

22 limitations described in this section (other than subsection

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

24 account in applying such limitations to any other contribu25 tions.’’.
59

•S 741 IS

1 (b) CONFORMING AMENDMENT.—Paragraph (3) of

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

3 ‘‘(3) CONTRIBUTIONS NOT TAKEN INTO AC4 COUNT.—In determining the amount of nondeduct5 ible contributions for any taxable year, there shall

6 not be taken into account—

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

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

9 ‘‘(B) any contribution for such taxable

10 year which is distributed to the employer in a

11 distribution described in section

12 4980(c)(2)(B)(ii) if such distribution is made

13 on or before the last day on which a contribu14 tion may be made for such taxable year under

15 section 404(a)(6).’’.

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

17 this section shall apply to years beginning after December

18 31, 1999.

19 SEC. 113. REPEAL OF COORDINATION REQUIREMENTS FOR

20 DEFERRED COMPENSATION PLANS OF STATE

21 AND LOCAL GOVERNMENTS AND TAX-EX22 EMPT ORGANIZATIONS.

23 (a) IN GENERAL.—Subsection (c) of section 457 (re24 lating to deferred compensation plans of State and local
60

•S 741 IS

1 governments and tax-exempt organizations) is amended by

2 striking paragraph (2).

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

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

6 SEC. 114. ALTERNATIVE METHOD OF MEETING NON7 DISCRIMINATION REQUIREMENTS FOR OPT8 OUT PLANS.

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

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

11 the following new paragraph:

12 ‘‘(13) NONDISCRIMINATION REQUIREMENTS

13 FOR OPT-OUT ARRANGEMENTS.—

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

18 (a ‘NET’).

19 ‘‘(B) NEGATIVE ELECTION TRUST.—For

20 purposes of this paragraph, the term ‘negative

21 election trust’ means an arrangement—

22 ‘‘(i) under which each employee eligi23 ble to participate in the arrangement is

24 treated as having elected to have the em25 ployer make elective contributions in an
61

•S 741 IS

1 amount equal to the uniform percentage

2 (not less than 3 percent) of compensation

3 provided under the arrangement unless the

4 employee specifically elects not to have

5 such contributions made, and

6 ‘‘(ii) which meets the other require7 ments of this paragraph.

8 Clause (i) of this subparagraph shall not apply

9 to any employee who was eligible to participate

10 in the arrangement (or a predecessor arrange11 ment) immediately before the first date on

12 which the arrangement is a NET. The election

13 treated as having been made under clause (i)

14 shall cease to apply to compensation paid after

15 the specific election by the employee.

16 ‘‘(C) PARTICIPATION.—An arrangement

17 meets the requirements of this subparagraph

18 for any year if, during the plan year or the pre19 ceding plan year, elective contributions are

20 made on behalf of at least 70 percent of em21 ployees other than highly compensated employ22 ees eligible to participate in the arrangement.

23 ‘‘(D) MATCHING OR NONELECTIVE CON24 TRIBUTIONS.—The requirements of this sub-
62

•S 741 IS

1 paragraph are met if, under the arrangement,

2 the employer—

3 ‘‘(i) makes matching contributions on

4 behalf of each employee who is not a highly

5 compensated employee in an amount equal

6 to 50 percent of the elective contributions

7 of the employee to the extent such elective

8 contributions do not exceed 5 percent of

9 compensation, or

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

11 whether the employee makes an elective

12 contribution or employee contribution, to

13 make a contribution to a defined contribu14 tion plan on behalf of each employee who

15 is not a highly compensated employee and

16 who is eligible to participate in the ar17 rangement in an amount equal to at least

18 2 percent of the employee’s compensation.

19 The rules of clauses (ii), (iii), and (iv) of para20 graph (12)(B) shall apply for purposes of clause

21 (i).

22 ‘‘(E) WITHDRAWAL AND VESTING.—The

23 requirements of this subparagraph are met if

24 the requirements of subparagraphs (B) and (C)

25 of paragraph (2) are met with respect to all em-
63

•S 741 IS

1 ployer contributions (including matching con2 tributions) taken into account in determining

3 whether the requirements of subparagraph (B)

4 or (D) are met.

5 ‘‘(F) NOTICE REQUIREMENTS.—The re6 quirements of this subparagraph are met if

7 each employee eligible to participate in the

8 arrangement—

9 ‘‘(i) receives a notice explaining the

10 employee’s right under the arrangement to

11 elect not to have elective contributions

12 made on the employee’s behalf, and

13 ‘‘(ii) has a reasonable period of time

14 after receipt of such notice and before the

15 first elective contribution is made to make

16 such election.

17 The requirements of clauses (i) and (ii) of para18 graph (12)(D) shall be met with respect to such

19 notice.’’.

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

21 (relating to nondiscrimination test for matching contribu22 tions and employee contributions) is amended by redesig23 nating paragraph (12) as paragraph (13) and by inserting

24 after paragraph (11) the following new paragraph:
64

•S 741 IS

1 ‘‘(12) ALTERNATIVE METHOD FOR OPT-OUT

2 PLANS.—

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

4 plan shall be treated as meeting the require5 ments of paragraph (2) with respect to match6 ing contributions if the plan—

7 ‘‘(i) meets the contribution require8 ments of subparagraphs (B)(i) and (D) of

9 subsection (k)(13),

10 ‘‘(ii) meets the participation require11 ments of subsection (k)(13)(C),

12 ‘‘(iii) meets the vesting and notice re13 quirements of subparagraphs (E) and (F)

14 of subsection (k)(13), and

15 ‘‘(iv) meets the requirements of

16 clauses (i) and (ii) of paragraph (11)(B).

17 ‘‘(B) MATCHING CONTRIBUTIONS UNDER

18 SECTION 403(b) PLANS.—An annuity contract

19 under section 403(b) shall be treated as meet20 ing the requirements of paragraph (2) with re21 spect to matching contributions on account of

22 an elective deferral described in section

23 402(g)(3)(C) if such contract meets require24 ments similar to the requirements under sub25 paragraph (A).’’.
65

•S 741 IS

1 (c) EXCLUSION FROM DEFINITION OF TOP-HEAVY

2 PLANS.—Paragraph (4) of section 416(g) (relating to

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

4 section 104(g), is amended by adding at the end the fol5 lowing new subparagraph:

6 ‘‘(J) NEGATIVE ELECTION TRUST.—The

7 term ‘top-heavy plan’ shall not include a nega8 tive election trust under section 401(k)(13).

9 Nothing in this subparagraph shall preclude an

10 employer from taking into account contributions

11 made under the negative election trust when de12 termining whether any plan of such employer

13 satisfies the requirements of this section.’’.

14 (d) DEFINITION OF COMPENSATION.—

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

16 401(k) is amended to read as follows:

17 ‘‘(9) COMPENSATION.—

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

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

20 the term ‘compensation’ has the meaning given

21 such term by section 414(s).

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

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

24 means compensation as defined under the terms
66

•S 741 IS

1 of the cash or deferred arrangement if such

2 compensation—

3 ‘‘(i) meets the requirements of section

4 414(s), or

5 ‘‘(ii) constitutes base pay.

6 ‘‘(C) BASE PAY.—For purposes of sub7 paragraph (B), the term ‘base pay’ means a

8 reasonable definition of compensation which

9 does not by design favor highly compensated

10 employees and which excludes on a consistent

11 basis all irregular or additional compensation.’’.

12 (2) NEGATIVE ELECTION TRUSTS.—Paragraph

13 (9)(B) of section 401(k) (as amended by paragraph

14 (1)) is amended by striking ‘‘paragraph (12)(B)’’

15 and inserting ‘‘paragraphs (12)(B), (13)(B), and

16 (13)(D)(i)’’.

17 (3) MATCHING CONTRIBUTIONS.—Paragraph

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

19 end the following:

20 ‘‘(C) DEFINITION OF COMPENSATION.—

21 For purposes of subparagraph (B), the term

22 ‘‘compensation’’ has the meaning given such

23 term by subsection (k)(9)(B).’’.

24 (e) APPLICATION BY YEAR OR PAYROLL PERIOD.—
67

•S 741 IS

1 (1) CASH OR DEFERRED ARRANGEMENTS.—

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

3 by adding at the end the following:

4 ‘‘(iv) APPLICATION BY YEAR OR PAY5 ROLL PERIOD.—The requirements of this

6 subparagraph may be met for a plan year

7 by meeting such requirements either—

8 ‘‘(I) with respect to the plan year

9 as a whole, or

10 ‘‘(II) separately with respect to

11 each payroll period (or other payment

12 of compensation) taken into account

13 under the arrangement for the plan

14 year.’’.

15 (2) DEFINED CONTRIBUTION PLANS.—Para16 graph (11) of section 401(m) (as amended by this

17 section) is amended by adding at the end the fol18 lowing:

19 ‘‘(D) APPLICATION BY YEAR OR PAYROLL

20 PERIOD.—The requirements of subparagraph

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

22 such requirements either—

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

24 a whole, or
68

•S 741 IS

1 ‘‘(ii) separately with respect to each

2 payroll period (or other payment of com3 pensation) taken into account under the

4 plan for the plan year.’’.

5 (f) EFFECTIVE DATE.—

6 (1) IN GENERAL.—Except as provided by para7 graph (2), the amendments made by this section

8 shall apply to plan years beginning after December

9 31, 1999.

10 (2) EXCEPTION.—The amendments made by

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

12 years beginning after December 31, 1998.

13 TITLE II—INCREASING PENSION

14 ACCESS AND FAIRNESS FOR

15 WOMEN

16 SEC. 201. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF

17 EMPLOYEES TO DEFINED CONTRIBUTION

18 PLANS.

19 (a) EQUITABLE TREATMENT.—

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

21 415(c)(1) (relating to limitation for defined con22 tribution plans) is amended to read as follows:

23 ‘‘(B) the participant’s compensation.’’.

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

25 403(b) is amended—
69

•S 741 IS

1 (A) by striking ‘‘the exclusion allowance

2 for such taxable year’’ in paragraph (1) and in3 serting ‘‘the applicable limit under section

4 415’’, and

5 (B) by striking paragraph (2).

6 (3) CONFORMING AMENDMENTS.—

7 (A) Subsection (f) of section 72 is amend8 ed by striking ‘‘section 403(b)(2)(D)(iii))’’ and

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

10 on December 31, 1998)’’.

11 (B) Section 403(b)(3) is amended by in12 serting ‘‘or any amount received by a former

13 employee after the 5th taxable year following

14 the taxable year in which such employee was

15 terminated’’ before the period at the end of the

16 second sentence.

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

18 striking ‘‘, the exclusion allowance under sec19 tion 403(b)(2),’’.

20 (D) Section 415(a)(2) is amended by strik21 ing ‘‘, and the amount of the contribution for

22 such portion shall reduce the exclusion allow23 ance as provided in section 403(b)(2)’’.

24 (E) Section 415(c)(3) is amended by add25 ing at the end the following new subparagraph:
70

•S 741 IS

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

2 of an annuity contract described in section

3 403(b), the term ‘participant’s compensation’

4 means the participant’s includible compensation

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

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

7 paragraph (4) and by redesignating paragraph

8 (6) as paragraph (4).

9 (G) Section 415(c) is amended by striking

10 paragraph (7) and inserting the following new

11 paragraph:

12 ‘‘(5) CERTAIN CONTRIBUTIONS BY CHURCH

13 PLANS NOT TREATED AS EXCEEDING LIMIT.—

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

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

17 church, a convention or association of churches,

18 including an organization described in section

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

22 respect to such participant, when expressed as

23 an annual addition to such participant’s ac24 count, shall be treated as not exceeding the lim-
71

•S 741 IS

1 itation of paragraph (1) if such annual addition

2 is not in excess of $10,000.

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

4 The total amount of additions with respect to

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

7 years may not exceed $40,000.

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

9 this paragraph, the term ‘annual addition’ has

10 the meaning given such term by paragraph

11 (2).’’.

12 (H) Section 415(e)(3)(B) is amended—

13 (i) by striking ‘‘subsection (c)(6)’’ in

14 clause (i) and inserting ‘‘subsection

15 (c)(4)’’, and

16 (ii) by striking ‘‘subsection (c)(7)’’ in

17 clause (ii)(II) and inserting ‘‘subsection

18 (c)(5)’’.

19 (I) Section 415(e)(5) is amended—

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

21 a participant who has elected under sub22 section (c)(4)(D) to have the provisions of

23 subsection (c)(4)(C) apply)’’, and

24 (ii) by striking the last sentence.
72

•S 741 IS

1 (J) Section 415(n)(2)(B) is amended by

2 striking ‘‘percentage’’.

3 (K) Subparagraph (B) of section 402(g)(7)

4 is amended by inserting before the period at the

5 end the following: ‘‘(as in effect on the date of

6 the enactment of the Pension Coverage and

7 Portability Act)’’.

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

9 408.—Subsection (k) of section 415 is amended by adding

10 at the end the following new paragraph:

11 ‘‘(4) SPECIAL RULES FOR ANNUITY CONTRACTS

12 AND SIMPLIFIED PENSIONS.—For purposes of this

13 section—

14 ‘‘(A) ANNUITY CONTRACTS.—Any annuity

15 contract described in section 403(b) for the

16 benefit of a participant shall be treated as a de17 fined contribution plan maintained by each em18 ployer with respect to which the participant has

19 the control required under subsection (b) or (c)

20 of section 414 (as modified by subsection (h)).

21 ‘‘(B) SIMPLIFIED PLANS.—Any contribu22 tion by an employer to a simplified employee

23 pension plan for an individual for a taxable

24 year shall be treated as an employer contribu-
73

•S 741 IS

1 tion to a defined contribution plan for such in2 dividual for such year.’’.

3 (c) DEFERRED COMPENSATION PLANS OF STATE

4 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI5 ZATIONS.—Subparagraph (B) of section 457(b)(2) (relat6 ing to salary limitation on eligible deferred compensation

plans) is amended by striking ‘‘331 7 ⁄3 percent’’ and insert8 ing ‘‘100 percent’’.

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

10 this section shall apply to years beginning after December

11 31, 1999.

12 SEC. 202. FASTER VESTING OF CERTAIN EMPLOYER

13 MATCHING CONTRIBUTIONS.

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

15 (relating to minimum vesting standards) is amended—

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

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

18 plan’’, and

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

20 ‘‘(12) FASTER VESTING FOR MATCHING CON21 TRIBUTIONS.—In the case of matching contributions

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

23 shall be applied—

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

25 in subparagraph (A), and
74

•S 741 IS

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

2 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

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

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

4 Employee Retirement Income Security Act of 1974 (29

5 U.S.C. 1053(a)) is amended—

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

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

8 plan’’, and

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

10 ‘‘(4) FASTER VESTING FOR MATCHING CON11 TRIBUTIONS.—In the case of matching contributions

12 (as defined in section 401(m)(4)(A) of the Internal

13 Revenue Code of 1986), paragraph (2) shall be

14 applied—

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

16 in subparagraph (A), and

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

18 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

6 ............................................................................................... 100.’’.
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•S 741 IS

1 (c) EFFECTIVE DATES.—

2 (1) IN GENERAL.—Except as provided in para3 graph (2), the amendments made by this section

4 shall apply to contributions for plan years beginning

5 after December 31, 1999.

6 (2) COLLECTIVE BARGAINING AGREEMENTS.—

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

8 more collective bargaining agreements between em9 ployee representatives and 1 or more employers rati10 fied by the date of enactment of this Act, the

11 amendments made by this section shall not apply to

12 contributions on behalf of employees covered by any

13 such agreement for plan years beginning before the

14 earlier of—

15 (A) the later of—

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

17 collective bargaining agreements termi18 nates (determined without regard to any

19 extension thereof on or after such date of

20 enactment), or

21 (ii) January 1, 2000, or

22 (B) January 1, 2004.

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

24 plan, the amendments made by this section shall not

25 apply to any employee before the date that such em-
76

•S 741 IS

1 ployee has 1 hour of service under such plan in any

2 plan year to which the amendments made by this

3 section apply.

4 SEC. 203. DEFERRED ANNUITIES FOR SURVIVING SPOUSES

5 OF FEDERAL EMPLOYEES.

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

7 States Code, is amended—

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

9 8338(b) of this title’’ and inserting ‘‘section

10 8338(b), and a former spouse of a deceased former

11 employee who separated from the service with title

12 to a deferred annuity under section 8338 (if they

13 were married to one another prior to the date of sep14 aration),’’; and

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

16 ‘‘(j)(1) If a former employee dies after having sepa17 rated from the service with title to a deferred annuity

18 under section 8338 but before having established a valid

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

20 married on the date of separation, the surviving spouse

21 may elect to receive—

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

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

24 to 55 percent of the former employee’s deferred an25 nuity;
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•S 741 IS

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

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

3 to the extent practicable, the present value of the fu4 ture payments of the annuity would be actuarially

5 equivalent to the present value of the future pay6 ments under subparagraph (A) as of the day after

7 the former employee’s death; or

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

9 spouse is the individual who would be entitled to the

10 lump-sum credit and if such surviving spouse files

11 application therefor.

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

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

14 surviving spouse remarries before becoming 55 years of

15 age, or dies.’’.

16 (b) CORRESPONDING AMENDMENT FOR FERS.—

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

18 amended—

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

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

21 (2) by striking ‘‘annuity)’’ and inserting ‘‘annu22 ity, or of a former employee who dies after having

23 separated from the service with title to a deferred

24 annuity under section 8413 but before having estab25 lished a valid claim for annuity (if such former
78

•S 741 IS

1 spouse was married to such former employee prior

2 to the date of separation))’’.

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

4 this section shall apply with respect to surviving spouses

5 and former spouses (whose marriage, in the case of the

6 amendments made by subsection (a), terminated after

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

8 of the enactment of this Act.

9 SEC. 204. CLARIFICATION OF TAX TREATMENT OF DIVISION

10 OF SECTION 457 PLAN BENEFITS UPON DI11 VORCE.

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

13 application of rules to governmental and church plans) is

14 amended—

15 (1) by inserting ‘‘or an eligible deferred com16 pensation plan (within the meaning of section

17 457(b))’’ after ‘‘subsection (e))’’, and

18 (2) in the heading, by striking ‘‘GOVERN19 MENTAL AND CHURCH PLANS’’ and inserting ‘‘CER20 TAIN OTHER PLANS’’.

21 (b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE22 MENTS.—Section 414(p)(10) is amended by striking ‘‘and

23 section 409(d)’’ and inserting ‘‘section 409(d), and section

24 457(d)’’.
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•S 741 IS

1 (c) TAX TREATMENT OF PAYMENTS FROM A SEC2 TION 457 PLAN.—Subsection (p) of section 414 is amend3 ed by redesignating paragraph (12) as paragraph (13) and

4 inserting after paragraph (11) the following new para5 graph:

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

7 SECTION 457 PLAN.—If a distribution or payment

8 from an eligible deferred compensation plan de9 scribed in section 457(b) is made pursuant to a

10 qualified domestic relations order, rules similar to

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

12 distribution or payment.’’.

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

14 this section shall apply to transfers, payments, and dis15 tribution after the date of the enactment of this Act.

16 SEC. 205. SPOUSES’ RIGHT TO KNOW PROPOSAL.

17 (a) SPOUSE’S RIGHT TO KNOW DISTRIBUTION IN18 FORMATION.—

19 (1) AMENDMENT OF INTERNAL REVENUE

20 CODE.—Section 417(a)(3) (relating to plan to pro21 vide written explanations) is amended by adding at

22 the end the following new subparagraph:

23 ‘‘(C) EXPLANATION TO SPOUSE.—At the

24 time a plan provides a participant with a writ25 ten explanation under subparagraph (A) or (B),
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•S 741 IS

1 such plan shall provide a copy of such expla2 nation to such participant’s spouse. If the last

3 known address of the spouse is the same as the

4 last known address of the participant, the re5 quirement of the preceding sentence shall be

6 treated as met if the copy referred to in the

7 preceding sentence is included in a single mail8 ing made to such address and addressed to both

9 such participant and spouse.’’.

10 (2) AMENDMENT OF ERISA.—Paragraph (3) of

11 section 205(c) of Employee Retirement Income Se12 curity Act of 1974 is amended by adding at the end

13 the following new subparagraph:

14 ‘‘(C) EXPLANATION TO SPOUSE.—At the

15 time a plan provides a participant with a writ16 ten explanation under subparagraph (A) or (B),

17 such plan shall provide a copy of such expla18 nation to such participant’s spouse. If the last

19 known address of the spouse is the same as the

20 last known address of the participant, the re21 quirement of the preceding sentence shall be

22 treated as met if the copy referred to in the

23 preceding sentence is included in a single mail24 ing made to such address and addressed to both

25 such participant and spouse.’’.
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•S 741 IS

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

2 this section shall apply to years beginning after December

3 31, 1999.

4 SEC. 206. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU5 TION RULES.

6 (a) REQUIRED DISTRIBUTIONS.—

7 (1) IN GENERAL.—Subparagraphs (C)(i)(I) and

8 (C)(ii)(I) of section 401(a)(9) are each amended by

striking ‘‘701 9 ⁄2’’ and inserting ‘‘75’’.

10 (2) ACTUARIAL ADJUSTMENT OF BENEFIT

11 UNDER DEFINED BENEFIT PLAN.—Clause (iii) of

12 section 401(a)(9)(C) is amended to read as follows:

13 ‘‘(iii) ACTUARIAL ADJUSTMENT.—In

14 the case of a defined benefit plan, an em15 ployee’s accrued benefit shall be actuarially

16 increased to take into account any

17 period—

18 ‘‘(I) which occurs after April 1 of

19 the calendar year following the cal20 endar year in which the employee attains age 701 21 ⁄2, and

22 ‘‘(II) during which the employee

23 was not eligible to receive any benefits

24 under the plan.’’.
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•S 741 IS

1 (3) EFFECTIVE DATE.—The amendments made

2 by this subsection shall apply to years beginning

3 after December 31, 2000.

4 (b) SIMPLIFICATION AND FINALIZATION OF MIN5 IMUM DISTRIBUTION REQUIREMENTS.—

6 (1) IN GENERAL.—The Secretary of the Treas7 ury shall—

8 (A) simplify and finalize the regulations re9 lating to minimum distribution requirements

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

11 403(b)(10), and 457(d)(2) of the Internal Rev12 enue Code of 1986, and

13 (B) modify such regulations to—

14 (i) reflect increases in life expectancy,

15 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
83

•S 741 IS

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 (c) AMOUNT NOT SUBJECT TO MINIMUM DISTRIBU12 TION REQUIREMENTS.—Paragraph (9) of section 401(a)

13 is amended—

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

15 the exclusion amount)’’ after ‘‘the entire interest’’,

16 and

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

18 ‘‘(H) EXCLUSION AMOUNT.—

19 ‘‘(i) IN GENERAL.—For purposes of

20 this paragraph, the term ‘exclusion

21 amount’ means—

22 ‘‘(I) $100,000 in the case of a

23 defined contribution plan,

24 ‘‘(II) $100,000 in the case of an

25 individual retirement plan, and
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•S 741 IS

1 ‘‘(III) $0 in the case of a defined

2 benefit plan.

3 ‘‘(ii) AGGREGATION OF PLANS.—For

4 purposes of determining the exclusion

5 amount under clause (i)—

6 ‘‘(I) all defined contribution

7 plans maintained by the same em8 ployer shall be treated as a single

9 plan,

10 ‘‘(II) all individual retirement

11 plans (other than Roth IRAs) of the

12 individual shall be treated as a single

13 plan, and

14 ‘‘(III) all Roth IRAs of the indi15 vidual shall be treated as a single

16 plan.

17 ‘‘(iii) COST-OF-LIVING ADJUST18 MENT.—The Secretary shall adjust each of

19 the $100,000 amounts specified in clause

20 (i) at the same time and in the same man21 ner as under section 415(d), except that

22 the base period shall be the calendar quar23 ter ending September 30, 1999.’’.
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•S 741 IS

1 (3) EFFECTIVE DATE.—The amendments made

2 by this subsection shall apply to years beginning

3 after December 31, 2000.

4 (d) REPEAL OF RULE WHERE DISTRIBUTIONS HAD

5 BEGUN BEFORE DEATH OCCURS.—

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

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

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

10 (2) CONFORMING CHANGES.—

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

12 so redesignated) is amended—

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

14 the heading, and

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

16 employee’s interest has begun in accord17 ance with subparagraph (A)(ii),’’ and in18 serting ‘‘the employee’s entire interest has

19 been distributed to such employee, the re20 mainder of’’.

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

22 so redesignated) is amended by striking ‘‘clause

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

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

25 so redesignated) is amended—
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•S 741 IS

1 (i) by striking ‘‘clause (iii)(I)’’ and in2 serting ‘‘clause (ii)(I)’’,

3 (ii) in subclause (I), by striking

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

5 (ii)(III)’’,

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

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

9 1 of the calendar year following the cal10 endar year in which the spouse attains 75,

11 and clause (ii) shall not apply to the exclu12 sion amount,’’, and

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

14 distributions to such spouse begin,’’ and

15 inserting ‘‘such spouse’s entire interest has

16 been distributed to such spouse,’’.

17 (3) REDUCTION IN EXCISE TAX.—Subsection

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

20 (4) EFFECTIVE DATE.—

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

22 subparagraph (B), the amendments made by

23 this subsection shall apply to years beginning

24 after December 31, 2000.
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•S 741 IS

1 (B) EXCISE TAX.—The amendment made

2 by paragraph (3) shall apply to years beginning

3 after December 31, 1999.

4 SEC. 207. MODIFICATION OF SAFE HARBOR RELIEF FOR

5 HARDSHIP WITHDRAWALS FROM CASH OR

6 DEFERRED ARRANGEMENTS.

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

8 shall revise the regulations relating to hardship distribu9 tions under section 401(k)(2)(B)(i)(IV) of the Internal

10 Revenue Code of 1986 to provide that the period an em11 ployee is prohibited from making elective and employee

12 contributions in order for a distribution to be deemed nec13 essary to satisfy financial need shall be equal to 6 months.

14 (b) EFFECTIVE DATE.—The revised regulations

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

16 December 31, 1999.

17 TITLE III—INCREASING PORT18 ABILITY OF PENSION PLANS

19 SEC. 301. ROLLOVERS ALLOWED AMONG VARIOUS TYPES

20 OF PLANS.

21 (a) ROLLOVERS FROM AND TO SECTION 457

22 PLANS.—

23 (1) ROLLOVERS FROM SECTION 457 PLANS.—
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•S 741 IS

1 (A) IN GENERAL.—Section 457(e) (relat2 ing to other definitions and special rules) is

3 amended by adding at the end the following:

4 ‘‘(16) ROLLOVER AMOUNTS.—

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

6 eligible deferred compensation plan, if—

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

8 credit of an employee in such plan is paid

9 to such employee in an eligible rollover dis10 tribution,

11 ‘‘(ii) the employee transfers any por12 tion of the property such employee receives

13 in such distribution to an eligible retire14 ment plan described in section

15 402(c)(8)(B), and

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

17 property other than money, the amount so

18 transferred consists of the property distrib19 uted,

20 then such distribution (to the extent so trans21 ferred) shall not be includible in gross income

22 for the taxable year in which paid.

23 ‘‘(B) CERTAIN RULES MADE APPLICA24 BLE.—Rules similar to the rules of paragraphs

25 (2) through (7) (other than paragraph (4)(C))
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•S 741 IS

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

2 shall apply for purposes of subparagraph (A).

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

4 paragraph shall be reported to the Secretary in

5 the same manner as rollovers from qualified re6 tirement plans (as defined in section

7 4974(c)).’’.

8 (B) DEFERRAL LIMIT DETERMINED WITH9 OUT REGARD TO ROLLOVER AMOUNTS.—Section

10 457(b)(2) (defining eligible deferred compensa11 tion plan) is amended by inserting ‘‘(other than

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

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

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

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

16 period at the end of subparagraph (B) and in17 serting ‘‘, and’’, and by inserting after subpara18 graph (B) the following:

19 ‘‘(C) the plan meets requirements similar

20 to the requirements of section 401(a)(31).

21 Any amount transferred in a direct trustee-to-trust22 ee transfer in accordance with section 401(a)(31)

23 shall not be includible in gross income for the tax24 able year of transfer.’’.

25 (D) WITHHOLDING.—
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•S 741 IS

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

2 is amended by adding at the end the fol3 lowing:

4 ‘‘(E) under or to an eligible deferred com5 pensation plan which, at the time of such pay6 ment, is a plan described in section 457(b); or’’.

7 (ii) Paragraph (5) of section 3405(e)

8 is amended by adding at the end the fol9 lowing: ‘‘Such term shall include an eligible

10 deferred compensation plan described in

11 section 457(b).’’.

12 (iii) Paragraph (3) of section 3405(c)

13 is amended to read as follows:

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

15 purposes of this subsection, the term ‘eligible roll16 over distribution’ has the meaning given such term

17 by section 402(f)(2)(A).’’.

18 (iv) LIABILITY FOR WITHHOLDING.—

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

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

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

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

23 by adding at the end the following:

24 ‘‘(iv) section 457(b).’’.

25 (2) ROLLOVERS TO SECTION 457 PLANS.—
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•S 741 IS

1 (A) Section 402(c)(8)(B) (defining eligible

2 retirement plan) is amended by striking ‘‘and’’

3 at the end of clause (iii), by striking the period

4 at the end of clause (iv) and inserting ‘‘, and’’,

5 and by adding at the end the following:

6 ‘‘(v) an eligible deferred compensation

7 plan described in section 457(b) of an eli8 gible employer described in section

9 457(e)(1)(A).’’.

10 (B) Paragraph (9) of section 402(c) is

11 amended by striking ‘‘except that’’ and all that

12 follows and inserting ‘‘except that only an ac13 count or annuity described in clause (i) or (ii)

14 of paragraph (8)(B) shall be treated as an eligi15 ble retirement plan with respect to such dis16 tribution.’’.

17 (C) Subsection (a) of section 457 (relating

18 to year of inclusion in gross income) is amended

19 by striking ‘‘or otherwise made available’’.

20 (3) MINIMUM DISTRIBUTIONS.—Paragraph (2)

21 of section 457(d) is amended to read as follows:

22 ‘‘(2) MINIMUM DISTRIBUTION REQUIRE23 MENTS.—A plan meets the distribution requirements

24 of this paragraph if the plan meets the requirements

25 of section 401(a)(9).’’.
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•S 741 IS

1 (b) ALLOWANCE OF ROLLOVERS FROM AND TO

2 403(b) PLANS.—

3 (1) ROLLOVERS FROM SECTION 403(b)

4 PLANS.—Section 403(b)(8)(A)(ii) (relating to roll5 over amounts) is amended by striking ‘‘such dis6 tribution’’ and all that follows and inserting ‘‘such

7 distribution to an eligible retirement plan described

8 in section 402(c)(8)(B), and’’.

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

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

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

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

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

14 and’’, and by adding at the end the following:

15 ‘‘(vi) an annuity contract described in

16 section 403(b).’’.

17 (3) CONFORMING AMENDMENT.—Subparagraph

18 (B) of section 403(b)(8) is amended by striking

19 ‘‘Rules similar to the’’ and inserting ‘‘The’’.

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
93

•S 741 IS

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) CONFORMING AMENDMENTS.—

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

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

12 408(d)(3), and 457(e)(16)’’.

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

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

15 457(e)(16)’’.

16 (3) Section 401(a)(31)(B) is amended by strik17 ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),

18 403(b)(8), and 457(e)(16)’’.

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

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

21 403(a)’’ and inserting ‘‘, paragraph (4) of section

22 403(a), subparagraph (A) of section 403(b)(8), or

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

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

25 by striking ‘‘from an eligible retirement plan’’.
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•S 741 IS

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

2 402(f)(1) are amended by striking ‘‘another eligible

3 retirement plan’’ and inserting ‘‘an eligible retire4 ment plan’’.

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

6 amended by striking ‘‘shall apply for purposes of

7 subparagraph (A)’’ and inserting ‘‘and section

8 402(f) shall apply for purposes of subparagraph (A),

9 except that section 402(f) shall be applied to the

10 payor in lieu of the plan administrator’’.

11 (8) Subparagraph (B) of section 403(b)(8) is

12 amended by inserting ‘‘and (9)’’ after ‘‘through

13 (7)’’.

14 (9) Section 408(a)(1) is amended by striking

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

16 457(e)(16)’’.

17 (10) Subparagraphs (A) and (B) of section

18 415(b)(2) are each amended by striking ‘‘and

19 408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and

20 457(e)(16)’’.

21 (11) Section 415(c)(2) is amended by striking

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

23 457(e)(16)’’.
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•S 741 IS

1 (12) Section 4973(b)(1)(A) is amended by

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

3 457(e)(16)’’.

4 (e) EFFECTIVE DATE; SPECIAL RULE.—

5 (1) EFFECTIVE DATE.—The amendments made

6 by this section shall apply to distributions after De7 cember 31, 1999.

8 (2) SPECIAL RULE.—Notwithstanding any other

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

10 section 1122 of the Tax Reform Act of 1986, and

11 section 402(d) of the Internal Revenue Code of 1986

12 (as in effect for taxable years beginning before Jan13 uary 1, 2000), shall not apply to any distribution

14 from a defined contribution plan (as defined in sec15 tion 408(d)(3)(A) of such Code, as amended by sec16 tion 302) or a defined benefit plan (as so defined)

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

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

20 this section.

21 SEC. 302. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE22 MENT PLANS.

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

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

25 striking ‘‘or’’ at the end of clause (ii), by striking the pe-
96

•S 741 IS

1 riod at the end of clause (iii) and inserting a semicolon,

2 and by adding at the end the following:

3 ‘‘(iv)(I) the entire amount received

4 (including money and other property) rep5 resents the entire interest in the account

6 or the entire value of the annuity,

7 ‘‘(II) no amount in the account and

8 no part of the value of the annuity is at9 tributable to any source other than a roll10 over contribution from a defined contribu11 tion plan or a defined benefit plan and any

12 earnings on such rollover, and

13 ‘‘(III) such entire amount received is

14 paid into a defined contribution plan or a

15 defined benefit plan (for the benefit of

16 such individual) not later than the 60th

17 day after he receives the payment or dis18 tribution; or

19 ‘‘(v)(I) the entire amount received (in20 cluding money and other property) rep21 resents the entire interest in the account

22 or the entire value of the annuity,

23 ‘‘(II) no amount in any such account

24 and no part of the value of any such annu25 ity is attributable to any source other than
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•S 741 IS

1 a rollover contribution from such an ac2 count or annuity of such individual (and

3 any earnings on such contribution),

4 ‘‘(III) all contributions to all indi5 vidual retirement accounts, and all

6 amounts paid for all individual retirement

7 annuities, of such individual were allowed

8 as a deduction under section 219, and

9 ‘‘(IV) such entire amount received is

10 paid (not later than the 60th day after

11 being so received) into a defined contribu12 tion plan or a defined benefit plan (for the

13 benefit of such individual) under which

14 amounts are held in trust by a person de15 scribed in section 408(a)(2) or in a manner

16 that satisfies section 401(f).

17 If a payment or distribution from an individual

18 retirement plan is described in more than one

19 clause of this subparagraph, such payment or

20 distribution shall be treated as described only in

21 the clause specified by the payee or distributee.

22 For purposes of this subparagraph, the term

23 ‘defined contribution plan’ means a defined con24 tribution plan (as defined in section 414(i))

25 which includes a trust exempt from tax under
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•S 741 IS

1 section 501(a), an annuity plan described in

2 section 403(a), an annuity contract described in

3 section 403(b), and an eligible deferred com4 pensation plan described in section 457(b) of an

5 eligible employer described in section

6 457(e)(1)(A). For purposes of clause (iv)(II),

7 the term ‘defined contribution plan’ shall also

8 include an eligible deferred compensation plan

9 described in section 457(b) of an eligible em10 ployer described in section 457(e)(1)(B). For

11 purposes of this subparagraph, the term ‘de12 fined benefit plan’ means a defined benefit plan

13 (as defined in section 414(j)) which includes a

14 trust exempt from tax under section 501(a).’’.

15 (b) CONFORMING AMENDMENT.—Paragraph (1) of

16 section 403(b) is amended by striking ‘‘section

17 408(d)(3)(A)(iii)’’ and inserting ‘‘clause (iii), (iv), or (v)

18 of section 408(d)(3)(A)’’.

19 (c) EFFECTIVE DATE; SPECIAL RULE.—

20 (1) EFFECTIVE DATE.—The amendments made

21 by this section shall apply to distributions after De22 cember 31, 1999.

23 (2) SPECIAL RULE.—Notwithstanding any other

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

25 section 1122 of the Tax Reform Act of 1986, and
99

•S 741 IS

1 section 402(d) of the Internal Revenue Code of 1986

2 (as in effect for taxable years beginning before Jan3 uary 1, 2000), shall not apply to any distribution

4 from a defined contribution plan (as defined in sec5 tion 408(d)(3)(A) of the such Code, as amended by

6 this section) or a defined benefit plan (as so defined)

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

8 such plan on behalf of such individual which is per9 mitted solely by reason of the amendments made by

10 this section.

11 SEC. 303. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS;

12 HARDSHIP EXCEPTION.

13 (a) ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.—

14 (1) IN GENERAL.—Subsection (c) of section

15 402 (relating to rules applicable to rollovers from ex16 empt trusts) (as amended by section 301) is amend17 ed by striking paragraph (2) and redesignating

18 paragraphs (3) through (10) as paragraphs (2)

19 through (9), respectively.

20 (2) DIRECT TRANSFERS.—Paragraph (31) of

21 section 401(a) (relating to optional direct transfer of

22 eligible rollover distributions) is amended by striking

23 subparagraph (B) and redesignating subparagraphs

24 (C) and (D) as subparagraphs (B) and (C), respec25 tively.
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•S 741 IS

1 (3) ANNUITIES.—Subparagraph (B) of section

2 408(d)(3) (relating to rollover contributions) is

3 amended by striking ‘‘which was not includible in his

4 gross income because of the application of this para5 graph’’ and inserting ‘‘to which this paragraph ap6 plied’’.

7 (b) HARDSHIP EXCEPTION TO 60-DAY RULE.—

8 (1) PLAN ROLLOVERS.—Paragraph (2) of sec9 tion 402(c) (as so redesignated) is amended to read

10 as follows:

11 ‘‘(2) TRANSFER MUST BE MADE WITHIN 60

12 DAYS OF RECEIPT.—

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

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

15 apply to any transfer of a distribution made

16 after the 60th day following the day on which

17 the distributee received the property distrib18 uted.

19 ‘‘(B) HARDSHIP EXCEPTION.—The Sec20 retary may waive the 60-day requirement under

21 subparagraph (A) where the failure to waive

22 such requirement would be against equity or

23 good conscience, including casualty, disaster, or

24 other events beyond the reasonable control of

25 the individual subject to such requirement.’’.
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1 (2) IRA ROLLOVERS.—Paragraph (3) of section

2 408(d) (relating to rollover contributions) is amend3 ed by adding at the end the following new subpara4 graph:

5 ‘‘(H) WAIVER OF 60-DAY REQUIREMENT.—

6 The Secretary may waive the 60-day require7 ment under subparagraphs (A) and (D) where

8 the failure to waive such requirement would be

9 against equity or good conscience, including

10 casualty, disaster, or other events beyond the

11 reasonable control of the individual subject to

12 such requirement.’’.

13 (c) CONFORMING AMENDMENTS.—

14 (1) Paragraph (4) of section 402(c) (as redesig15 nated by subsection (a)(1)) is amended by striking

16 ‘‘(8)(B)’’ and inserting ‘‘(7)(B)’’.

17 (2) Subparagraph (B) of section 403(a)(4) is

18 amended by striking ‘‘(2) through (7)’’ and inserting

19 ‘‘(2) through (6)’’.

20 (3) Section 403(b)(8)(A)(ii) (as amended by

21 section 301) is amended by striking ‘‘section

22 402(c)(8)(B)’’ and inserting ‘‘section 402(c)(7)(B)’’.

23 (4) Subparagraph (B) of section 403(b)(8) (as

24 amended by section 301) is amended by striking
102

•S 741 IS

1 ‘‘(2) through (7) and (9) of section 402(c)’’ and in2 serting ‘‘(2) through (6) and (8) of section 402(c)’’.

3 (5) Paragraph (16) of section 457(e) (as added

4 by section 301) is amended—

5 (A) in subparagraph (A)(i) by striking

6 ‘‘402(c)(4)’’ and inserting ‘‘402(c)(3)’’,

7 (B) in subparagraph (A)(ii) by striking

8 ‘‘402(c)(8)(B)’’ and inserting ‘‘402(c)(7)(B)’’,

9 and

10 (C) in subparagraph (B) by striking ‘‘para11 graphs (2) through (7) and (9) of section

12 402(c)’’ and inserting ‘‘paragraphs (2) through

13 (6) and (8) of section 402(c)’’.

14 (d) EFFECTIVE DATE.—

15 (1) IN GENERAL.—Except as provided by para16 graph (2), the amendments made by this section

17 shall apply to distributions made after December 31,

18 1999.

19 (2) HARDSHIP EXCEPTION.—The amendments

20 made by subsection (b) shall apply to 60-day periods

21 ending after the date of the enactment of this Act.
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1 SEC. 304. RATIONALIZATION OF RESTRICTIONS ON DIS2 TRIBUTIONS FROM DEFINED CONTRIBUTION

3 PLANS.

4 (a) DISTRIBUTIONS PERMITTED ON SEVERANCE

5 FROM EMPLOYMENT.—

6 (1) 401(k) PLANS.—Section 401(k)(2)(B)(i)(I)

7 (relating to qualified cash or deferred arrangements)

8 is amended by striking ‘‘separation from service’’

9 and inserting ‘‘severance from employment’’.

10 (2) 403(b) CONTRACTS.—

11 (A) Clause (ii) of section 403(b)(7)(A) is

12 amended by striking ‘‘separates from service’’

13 and inserting ‘‘severs from employment’’.

14 (B) Paragraph (11) of section 403(b) is

15 amended—

16 (i) by striking ‘‘SEPARATION FROM

17 SERVICE’’ in the heading and inserting

18 ‘‘SEVERANCE FROM EMPLOYMENT’’, and

19 (ii) by striking ‘‘separates from serv20 ice’’ and inserting ‘‘severs from employ21 ment’’.

22 (3) 457 PLANS.—Clause (ii) of section

23 457(d)(1)(A) is amended by striking ‘‘is separated

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

25 employment’’.

26 (b) BUSINESS SALE REQUIREMENTS DELETED.—
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1 (1) IN GENERAL.—Section 401(k)(2)(B)(i)(II)

2 (relating to qualified cash or deferred arrangements)

3 is amended by striking ‘‘an event’’ and inserting ‘‘a

4 plan termination’’.

5 (2) CONFORMING AMENDMENTS.—Section

6 401(k)(10) is amended—

7 (A) by striking subparagraph (A) and in8 serting the following:

9 ‘‘(A) IN GENERAL.—A plan termination is

10 described in this paragraph if the termination

11 of the plan does not involve the establishment

12 or maintenance of another defined contribution

13 plan (other than an employee stock ownership

14 plan as defined in section 4975(e)(7)).’’,

15 (B) in subparagraph (B)—

16 (i) by striking ‘‘An event’’ and insert17 ing ‘‘A termination’’, and

18 (ii) by striking ‘‘the event’’ and insert19 ing ‘‘the termination’’,

20 (C) by striking subparagraph (C), and

21 (D) by striking ‘‘OR DISPOSITION OF AS22 SETS OR SUBSIDIARY’’ in the heading.

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

24 this section shall apply to distributions after December 31,

25 1999.
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1 SEC. 305. TRANSFEREE DEFINED CONTRIBUTION PLAN

2 NEED NOT HAVE SAME DISTRIBUTION OP3 TIONS AS TRANSFEROR DEFINED CONTRIBU4 TION PLAN.

5 (a) AMENDMENT TO 1986 CODE.—Section 411(d)(6)

6 (relating to accrued benefit not to be decreased by amend7 ment) is amended by adding at the end the following new

8 subparagraph:

9 ‘‘(D) PLAN TRANSFERS.—A defined con10 tribution plan (in this subparagraph referred to

11 as the ‘transferee plan’) shall not be treated as

12 failing to meet the requirements of this para13 graph merely because the transferee plan does

14 not provide some or all of the forms of distribu15 tion previously available under another defined

16 contribution plan (in this subparagraph referred

17 to as the ‘transferor plan’) to the extent that—

18 ‘‘(i) the forms of distribution pre19 viously available under the transferor plan

20 applied to the account of a participant or

21 beneficiary under the transferor plan that

22 was transferred from the transferor plan to

23 the transferee plan pursuant to a direct

24 transfer rather than pursuant to a dis25 tribution from the transferor plan,
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•S 741 IS

1 ‘‘(ii) the terms of both the transferor

2 plan and the transferee plan authorize the

3 transfer described in clause (i),

4 ‘‘(iii) the transfer described in clause

5 (i) was made pursuant to a voluntary elec6 tion by the participant or beneficiary

7 whose account was transferred to the

8 transferee plan,

9 ‘‘(iv) the election described in clause

10 (iii) was made after the participant or ben11 eficiary received a notice describing the

12 consequences of making the election,

13 ‘‘(v) if the transferor plan provides for

14 an annuity as the normal form of distribu15 tion under the plan in accordance with sec16 tion 417, the transfer is made with the

17 consent of the participant’s spouse (if

18 any), and such consent meets requirements

19 similar to the requirements imposed by

20 section 417(a)(2), and

21 ‘‘(vi) the transferee plan allows the

22 participant or beneficiary described in

23 clause (iii) to receive any distribution to

24 which the participant or beneficiary is enti-
107

•S 741 IS

1 tled under transferee plan in the form of

2 a single sum distribution.’’.

3 (b) AMENDMENT TO ERISA.—Section 204(g) of the

4 Employee Retirement Income Security Act of 1974 (29

5 U.S.C. 1054(g)) is amended by adding at the end the fol6 lowing new paragraph:

7 ‘‘(4) A defined contribution plan (in this paragraph

8 referred to as the ‘transferee plan’) shall not be treated

9 as failing to meet the requirements of this subsection

10 merely because the transferee plan does not provide some

11 or all of the forms of distribution previously available

12 under another defined contribution plan (in this para13 graph referred to as the ‘transferor plan’) to the extent

14 that—

15 ‘‘(A) the forms of distribution previously avail16 able under the transferor plan applied to the account

17 of a participant or beneficiary under the transferor

18 plan that was transferred from the transferor plan

19 to the transferee plan pursuant to a direct transfer

20 rather than pursuant to a distribution from the

21 transferor plan,

22 ‘‘(B) the terms of both the transferor plan and

23 the transferee plan authorize the transfer described

24 in subparagraph (A),
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•S 741 IS

1 ‘‘(C) the transfer described in subparagraph

2 (A) was made pursuant to a voluntary election by

3 the participant or beneficiary whose account was

4 transferred to the transferee plan,

5 ‘‘(D) the election described in subparagraph (C)

6 was made after the participant or beneficiary re7 ceived a notice describing the consequences of mak8 ing the election,

9 ‘‘(E) if the transferor plan provides for an an10 nuity as the normal form of distribution under the

11 plan in accordance with section 205, the transfer is

12 made with the consent of the participant’s spouse (if

13 any), and such consent meets requirements similar

14 to the requirements imposed by section 205(c)(2),

15 and

16 ‘‘(F) the transferee plan allows the participant

17 or beneficiary described in subparagraph (C) to re18 ceive any distribution to which the participant or

19 beneficiary is entitled under transferee plan in the

20 form of a single sum distribution.’’.

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

22 this section shall apply to transfers after December 31,

23 1999.
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1 SEC. 306. PURCHASE OF SERVICE CREDIT IN GOVERN2 MENTAL DEFINED BENEFIT PLANS.

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

4 amended by adding at the end the following new para5 graph:

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

7 PURCHASE PERMISSIVE SERVICE CREDIT.—No

8 amount shall be includible in gross income by reason

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

10 benefit governmental plan (as defined in section

11 414(d)) if such transfer is—

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

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

14 under such plan, or

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

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

17 thereof.’’.

18 (b) 457 PLANS.—

19 (1) Subsection (e) of section 457 is amended by

20 adding at the end the following new paragraph:

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

22 PURCHASE PERMISSIVE SERVICE CREDIT.—No

23 amount shall be includible in gross income by reason

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

25 benefit governmental plan (as defined in section

26 414(d)) if such transfer is—
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•S 741 IS

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

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

3 under such plan, or

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

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

6 thereof.’’.

7 (2) Section 457(b)(2), as amended by section

8 301(a)(1)(B), is amended by striking ‘‘(other than

9 rollover amounts)’’ and inserting ‘‘(other than roll10 over amounts and amounts received in a transfer re11 ferred to in subsection (e)(17))’’.

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

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

14 December 31, 1999.

15 SEC. 307. EMPLOYERS MAY DISREGARD ROLLOVERS FOR

16 PURPOSES OF CASH-OUT AMOUNTS.

17 (a) AMENDMENTS TO 1986 CODE.—

18 (1) Section 411(a)(11) (relating to restrictions

19 on certain mandatory distributions) is amended by

20 adding at the end the following:

21 ‘‘(D) SPECIAL RULE FOR ROLLOVER CON22 TRIBUTIONS.—A plan shall not fail to meet the

23 requirements of this paragraph if, under the

24 terms of the plan, the present value of the non25 forfeitable accrued benefit is determined with-
111

•S 741 IS

1 out regard to that portion of such benefit which

2 is attributable to rollover contributions (and

3 earnings allocable thereto). For purposes of this

4 subparagraph, the term ‘rollover contributions’

5 means any rollover contribution under sections

6 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A) (ii),

7 (iii), or (iv), and 457(e)(16).’’.

8 (2) Clause (i) of section 457(e)(9)(A) is amend9 ed by striking ‘‘such amount’’ and inserting ‘‘the

10 portion of such amount which is not attributable to

11 rollover contributions (as defined in section

12 411(a)(11)(D))’’.

13 (b) AMENDMENT TO ERISA.—Section 203(e) of the

14 Employee Retirement Income Security Act of 1974 (29

15 U.S.C. 1053(e)) is amended by adding at the end the fol16 lowing:

17 ‘‘(4) A plan shall not fail to meet the requirements

18 of this subsection if, under the terms of the plan, the

19 present value of the nonforfeitable accrued benefit is de20 termined without regard to that portion of such benefit

21 which is attributable to rollover contributions (and earn22 ings allocable thereto). For purposes of this paragraph,

23 the term ‘rollover contributions’ means any rollover con24 tribution under sections 402(c), 403(a)(4), 403(b)(8),
112

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1 408(d)(3)(A) (ii), (iii), or (iv), and 457(e)(16) of the In2 ternal Revenue Code of 1986.’’.

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

4 this section shall apply to distributions after December 31,

5 1999.

6 TITLE IV—STRENGTHENING

7 PENSION SECURITY AND EN8 FORCEMENT

9 SEC. 401. REPEAL OF 150 PERCENT OF CURRENT LIABILITY

10 FUNDING LIMIT.

11 (a) IN GENERAL.—

12 (1) CODE AMENDMENT.—Section 412(c)(7) (re13 lating to full-funding limitation) is amended—

14 (A) by striking ‘‘the applicable percentage’’

15 in subparagraph (A)(i)(I) and inserting ‘‘in the

16 case of plan years beginning before January 1,

17 2003, the applicable percentage’’, and

18 (B) by amending subparagraph (F) to read

19 as follows:

20 ‘‘(F) APPLICABLE PERCENTAGE.—For

21 purposes of subparagraph (A)(i)(I), the applica22 ble percentage shall be determined in accord23 ance with the following table:

‘‘In the case of any plan year

beginning in—

The applicable percentage is—

1999 ......................................................................................... 155

2000 ......................................................................................... 160
113

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‘‘In the case of any plan year

beginning in—

The applicable percentage is—

2001 ......................................................................................... 165

2002 ......................................................................................... 170.’’.

1 (2) ERISA AMENDMENT.—Section 302(c)(7) of

2 the Employee Retirement Income Security Act of

3 1974 (29 U.S.C. 1082(c)(7)) is amended—

4 (A) by striking ‘‘the applicable percentage’’

5 in subparagraph (A)(i)(I) and inserting ‘‘in the

6 case of plan years beginning before January 1,

7 2003, the applicable percentage’’, and

8 (B) by amending subparagraph (F) to read

9 as follows:

10 ‘‘(F) APPLICABLE PERCENTAGE.—For purposes

11 of subparagraph (A)(i)(I), the applicable percentage

12 shall be determined in accordance with the following

13 table:

‘‘In the case of any plan year

beginning in—

The applicable percentage is—

1999 ......................................................................................... 155

2000 ......................................................................................... 160

2001 ......................................................................................... 165

2002 ......................................................................................... 170.’’.

14 (3) EFFECTIVE DATES.—The amendments

15 made by this subsection shall apply to plan years be16 ginning after December 31, 1998.

17 (b) MAXIMUM CONTRIBUTION DEDUCTION RULES

18 MODIFIED AND APPLIED TO ALL DEFINED BENEFIT

19 PLANS.—
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1 (1) IN GENERAL.—Section 404(a)(1)(D) (relat2 ing to special rule in case of certain plans) is

3 amended—

4 (A) by striking ‘‘which has more than 100

5 participants for the plan year’’,

6 (B) by striking ‘‘unfunded current liability

7 determined under section 414(l)’’ and inserting

8 ‘‘unfunded termination liability (determined as

9 if the proposed termination date referred to in

10 section 4041(b)(2)(A)(i)(II) of the Employee

11 Retirement Income Security Act of 1974 were

12 the last day of the plan year)’’,

13 (C) by inserting after the first sentence the

14 following: ‘‘For purposes of this subparagraph,

15 in the case of a plan which has less than 100

16 participants for the plan year, termination li17 ability shall not include the liability attributable

18 to benefit increases for highly compensated em19 ployees (as defined in section 414(q)) brought

20 about by plan amendment within the last 2

21 years before the termination date.’’, and

22 (D) by striking ‘‘(other than a multiem23 ployer plan)’’.
115

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1 (2) CONFORMING AMENDMENT.—Paragraph (6)

2 of section 4972(c) is amended by striking the sen3 tence preceding the last sentence thereof.

4 (3) EFFECTIVE DATE.—The amendments made

5 by this subsection shall apply to plan years begin6 ning after the date of enactment of this Act.

7 SEC. 402. INCREASE IN LIMITS FOR EMPLOYER-SPONSORED

8 RETIREMENT PLANS.

9 (a) DEFINED BENEFIT PLANS.—

10 (1) DOLLAR LIMIT.—

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

12 (relating to limitation for defined benefit plans)

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

14 ‘‘$160,000’’.

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

16 415(b)(2) are each amended by striking

17 ‘‘$90,000’’ each place it appears in the head18 ings and the text and inserting ‘‘$160,000’’.

19 (C) Paragraph (7) of section 415(b) (relat20 ing to benefits under certain collectively bar21 gained plans) is amended by striking ‘‘the

22 greater of $68,212 or one-half the amount oth23 erwise applicable for such year under paragraph

24 (1)(A) for ‘$90,000’ ’’ and inserting ‘‘one-half
116

•S 741 IS

1 the amount otherwise applicable for such year

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

3 (2) LIMIT REDUCED WHEN BENEFIT BEGINS

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

5 415(b)(2) is amended—

6 (A) by striking the last sentence and in7 serting the following: ‘‘The reduction under this

8 subparagraph shall not reduce the limitation of

9 paragraph (1)(A) below (i) $75,000 if the ben10 efit begins at or after age 55, or (ii) if the ben11 efit begins before age 55, the equivalent of the

12 $75,000 limitation for age 55.’’,

13 (B) by striking ‘‘the social security retire14 ment age’’ each place it appears and inserting

15 ‘‘age 62’’, and

16 (C) by striking ‘‘THE SOCIAL SECURITY

17 RETIREMENT AGE’’ in the heading and inserting

18 ‘‘AGE 62’’.

19 (3) LIMIT INCREASED WHEN BENEFIT BEGINS

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

21 415(b)(2) is amended—

22 (A) by striking ‘‘the social security retire23 ment age’’ each place it appears and inserting

24 ‘‘age 65’’, and
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1 (B) by striking ‘‘THE SOCIAL SECURITY

2 RETIREMENT AGE’’ in the heading and inserting

3 ‘‘AGE 65’’.

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

7 is amended to read as follows:

8 ‘‘(F) MULTIEMPLOYER PLANS AND PLANS

9 MAINTAINED BY GOVERNMENTS AND TAX EX10 EMPT ORGANIZATIONS.—

11 ‘‘(i) IN GENERAL.—Subparagraph (C)

12 shall apply in the case of a governmental

13 plan (within the meaning of section

14 414(d)), a plan maintained by an organiza15 tion (other than a governmental unit) ex16 empt from tax under this subtitle, a multi17 employer plan (as defined in section

18 414(f)), or a qualified merchant marine

19 plan.

20 ‘‘(ii) QUALIFIED MERCHANT MARINE

21 PLAN.—For purposes of clause (i), the

22 term ‘qualified merchant marine plan’

23 means a plan in existence on January 1,

24 1986, the participants in which are mer25 chant marine officers holding licenses
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•S 741 IS

1 issued by the Secretary of Transportation

2 under title 46, United States Code.’’.

3 (5) COST-OF-LIVING ADJUSTMENTS.—Sub4 section (d) of section 415 (related to cost-of-living

5 adjustments) is amended—

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

7 ‘‘$90,000’’ and inserting ‘‘$160,000’’,

8 (B) in paragraph (3)(A)—

9 (i) by striking ‘‘$90,000’’ in the head10 ing and inserting ‘‘$160,000’’, and

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

12 inserting ‘‘July 1, 1999’’, and

13 (C) by striking paragraph (4) and insert14 ing the following:

15 ‘‘(4) ROUNDING.—Any increase under subpara16 graph (A) or (C) of paragraph (1) which is not a

17 multiple of $5,000 shall be rounded to the next low18 est multiple of $5,000.’’.

19 (b) QUALIFIED TRUSTS.—

20 (1) COMPENSATION LIMIT.—Sections

21 401(a)(17), 404(l), 408(k), and 505(b)(7) are each

22 amended by striking ‘‘$150,000’’ each place it ap23 pears and inserting ‘‘$200,000’’.
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•S 741 IS

1 (2) BASE PERIOD AND ROUNDING OF COST-OF2 LIVING ADJUSTMENT.—Subparagraph (B) of section

3 401(a)(17) is amended—

4 (A) by striking ‘‘October 1, 1993’’ and in5 serting ‘‘July 1, 1999’’, and

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

7 appears and inserting ‘‘$5,000’’.

8 (c) ELECTIVE DEFERRALS.—

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

10 section 402(g) (relating to limitation on exclusion

11 for elective deferrals) are each amended by striking

12 ‘‘$7,000’’ and inserting ‘‘$12,000’’.

13 (2) CONFORMING AMENDMENTS.—

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

15 on exclusion for elective deferrals), as amended

16 by paragraph (1), is amended by striking para17 graph (4) and redesignating paragraphs (5),

18 (6), (7), (8), and (9) as paragraphs (4), (5),

19 (6), (7), and (8), respectively.

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

21 amended by striking ‘‘(other than paragraph

22 (4) thereof)’’.

23 (d) DEFERRED COMPENSATION PLANS OF STATE

24 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI25 ZATIONS.—Section 457 (relating to deferred compensation
120

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1 plans of State and local governments and tax-exempt orga2 nizations) is amended—

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

4 by striking ‘‘$7,500’’ each place it appears and in5 serting ‘‘$10,000’’, and

6 (2) in subsection (e)(15), by striking ‘‘Sep7 tember 30, 1994’’ and inserting ‘‘September 30,

8 1999’’.

9 (e) EFFECTIVE DATE.—The amendments made by

10 this section shall apply to years beginning after December

11 31, 1999.

12 SEC. 403. TREATMENT OF MULTIEMPLOYER PLANS UNDER

13 SECTION 415.

14 (a) COMPENSATION LIMIT.—Paragraph (11) of sec15 tion 415(b) (relating to limitation for defined benefit

16 plans) is amended to read as follows:

17 ‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN18 MENTAL AND MULTIEMPLOYER PLANS.—In the case

19 of a governmental plan (as defined in section

20 414(d)) or a multiemployer plan (as defined in sec21 tion 414(f)), subparagraph (B) of paragraph (1)

22 shall not apply.’’.

23 (b) COMBINING AND AGGREGATION OF PLANS.—
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1 (1) COMBINING OF PLANS.—Subsection (f) of

2 section 415 (relating to combining of plans) is

3 amended by adding at the end the following:

4 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER

5 PLANS.—Notwithstanding paragraph (1) and sub6 section (g), a multiemployer plan (as defined in sec7 tion 414(f)) shall not be combined or aggregated

8 with any other plan maintained by an employer for

9 purposes of applying the limitations established in

10 this section. The preceding sentence shall not apply

11 for purposes of applying subsection (b)(1)(A) to a

12 plan which is not a multiemployer plan.’’.

13 (2) CONFORMING AMENDMENT FOR AGGREGA14 TION OF PLANS.—Subsection (g) of section 415 (re15 lating to aggregation of plans) is amended by strik16 ing ‘‘The Secretary’’ and inserting ‘‘Except as pro17 vided in subsection (f)(3), the Secretary’’.

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

19 this section shall apply to years beginning after December

20 31, 1999.

21 SEC. 404. EXTENSION OF MISSING PARTICIPANTS PRO22 GRAM TO MULTIEMPLOYER PLANS.

23 (a) IN GENERAL.—Section 4050 of the Employee Re24 tirement Income Security Act of 1974 (29 U.S.C. 1350)
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1 is amended by redesignating subsection (c) as subsection

2 (d) and by inserting after subsection (b) the following:

3 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation

4 shall prescribe rules similar to the rules in subsection (a)

5 for multiemployer plans covered by this title that termi6 nate under section 4041A.’’.

7 (b) CONFORMING AMENDMENT.—Section 206(f) of

8 the Employee Retirement Income Security Act of 1974

9 (29 U.S.C. 1056(f)) is amended by striking ‘‘the plan shall

10 provide that,’’.

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

12 this section shall apply to distributions made after final

13 regulations implementing subsection (c) of section 4050

14 of the Employee Retirement Income Security Act of 1974

15 (as added by subsection (a)) are prescribed.

16 SEC. 405. CIVIL PENALTIES FOR BREACH OF FIDUCIARY

17 RESPONSIBILITY.

18 (a) IMPOSITION AND AMOUNT OF PENALTY MADE

19 DISCRETIONARY.—Section 502(l)(1) of the Employee Re20 tirement Income Security Act of 1974 (29 U.S.C.

21 1132(l)(1)) is amended—

22 (1) by striking ‘‘shall’’ and inserting ‘‘may’’,

23 and

24 (2) by striking ‘‘equal to’’ and inserting ‘‘not

25 greater than’’.
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1 (b) APPLICABLE RECOVERY AMOUNT.—Section

2 502(l)(2) of the Employee Retirement Income Security

3 Act of 1974 (29 U.S.C. 1132(l)(2)) is amended to read

4 as follows:

5 ‘‘(2) For purposes of paragraph (1), the term ‘appli6 cable recovery amount’ means any amount which is recov7 ered from (or on behalf of) any fiduciary or other person

8 with respect to a breach or violation described in para9 graph (1) on or after the 90th day following receipt by

10 such fiduciary or other person of written notice from the

11 Secretary of the violation, whether paid voluntarily or by

12 order of a court in a judicial proceeding instituted by the

13 Secretary under subsection (a)(2) or (a)(5). The Secretary

14 may, in the Secretary’s sole discretion, extend the 90-day

15 period described in the preceding sentence.’’.

16 (c) OTHER RULES.—Section 502(l) of the Employee

17 Retirement Income Security Act of 1974 (29 U.S.C.

18 1132(l)) is amended by adding at the end the following:

19 ‘‘(5) A person shall be jointly and severally liable for

20 the penalty described in paragraph (1) to the same extent

21 that such person is jointly and severally liable for the ap22 plicable recovery amount on which the penalty is based.

23 ‘‘(6) No penalty shall be assessed under this sub24 section unless the person against whom the penalty is as-
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1 sessed is given notice and opportunity for a hearing with

2 respect to the violation and applicable recovery amount.’’.

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

4 this section shall apply to any action or claim, including

5 any action or claim commenced by the Secretary of Labor,

6 pending on or after the date of enactment of this Act.

7 SEC. 406. PENALTY TAX RELIEF FOR SOUND PENSION

8 FUNDING.

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

10 (relating to nondeductible contributions) is amended by

11 adding at the end the following:

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

13 determining the amount of nondeductible contribu14 tions for any taxable year, an employer may elect for

15 such year not to take into account any contributions

16 to a defined benefit plan except to the extent that

17 such contributions exceed the full-funding limitation

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

19 regard to subparagraph (A)(i)(I) thereof). For pur20 poses of this paragraph, the deductible limits under

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

22 contributed to defined contribution plans and then

23 to amounts described in this paragraph. If an em24 ployer makes an election under this paragraph for a
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1 taxable year, paragraph (6) shall not apply to such

2 employer for such taxable year.’’.

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

4 this section shall apply to years beginning after December

5 31, 1999.

6 SEC. 407. PROTECTION OF INVESTMENT OF EMPLOYEE

7 CONTRIBUTIONS TO 401(K) PLANS.

8 (a) IN GENERAL.—Section 1524(b) of the Taxpayer

9 Relief Act of 1997 is amended to read as follows:

10 ‘‘(b) EFFECTIVE DATE.—

11 ‘‘(1) IN GENERAL.—Except as provided in para12 graph (2), the amendments made by this section

13 shall apply to elective deferrals for plan years begin14 ning after December 31, 1998.

15 ‘‘(2) NONAPPLICATION TO PREVIOUSLY AC16 QUIRED PROPERTY.—The amendments made by this

17 section shall not apply to any elective deferral used

18 to acquire an interest in the income or gain from

19 employer securities or employer real property

20 acquired—

21 ‘‘(A) before January 1, 1999, or

22 ‘‘(B) after such date pursuant to a written

23 contract which was binding on such date and at

24 all times thereafter on such plan.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply as if included in the provision of

3 the Taxpayer Relief Act of 1997 to which it relates.

4 SEC. 408. ELIMINATION OF ERISA DOUBLE JEOPARDY.

5 (a) IN GENERAL.—Section 502(h) of the Employee

6 Retirement Income Security Act of 1974 (29 U.S.C.

7 1132(h)) is amended—

8 (1) by inserting ‘‘(1)’’ after ‘‘(h)’’, and

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

10 ‘‘(2) If a complaint in an action brought against a

11 person under subsection (a)(2) is served in accordance

12 with paragraph (1), and

13 ‘‘(A) the action is resolved by a court-approved

14 settlement, and

15 ‘‘(B) the proposed settlement is served upon the

16 Secretary and the Secretary of the Treasury at least

17 90 days before the date of the entry of the final

18 judgment approving such settlement,

19 either Secretary shall be barred from litigating any claim

20 against such person under subsection (a)(2) that was, or

21 could have been, brought in that action with respect to

22 the same plan.’’.

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

24 this section shall apply to any action or claim, including

25 any action or claim commenced by the Secretary of Labor
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1 or the Secretary of the Treasury, pending on or after the

2 date of enactment of this Act.

3 TITLE V—ENCOURAGING

4 RETIREMENT EDUCATION

5 SEC. 501. PERIODIC PENSION BENEFITS STATEMENTS.

6 (a) IN GENERAL.—Section 105(a) of the Employee

7 Retirement Income Security Act of 1974 (29 U.S.C. 1025

8 (a)) is amended to read as follows:

9 ‘‘(a)(1) Except as provided in paragraph (2)—

10 ‘‘(A) The administrator of an individual ac11 count plan shall furnish a pension benefit

12 statement—

13 ‘‘(i) to a plan participant at least once an14 nually, and

15 ‘‘(ii) to a plan beneficiary upon written re16 quest.

17 ‘‘(B) The administrator of a defined benefit

18 plan shall furnish a pension benefit statement—

19 ‘‘(i) at least once every 3 years to each

20 participant with a nonforfeitable accrued ben21 efit who is employed by the employer maintain22 ing the plan at the time the statement is fur23 nished to participants, and

24 ‘‘(ii) to a participant or beneficiary of the

25 plan upon written request.
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1 ‘‘(2) Notwithstanding paragraph (1), the adminis2 trator of a plan to which more than 1 unaffiliated em3 ployer is required to contribute shall only be required to

4 furnish a pension benefit statement under paragraph (1)

5 upon the written request of a participant or beneficiary

6 of the plan.

7 ‘‘(3) A pension benefit statement under paragraph

8 (1)—

9 ‘‘(A) shall indicate, on the basis of the latest

10 available information—

11 ‘‘(i) the total benefits accrued, and

12 ‘‘(ii) the nonforfeitable pension benefits, if

13 any, which have accrued, or the earliest date on

14 which benefits will become nonforfeitable,

15 ‘‘(B) shall be written in a manner calculated to

16 be understood by the average plan participant, and

17 ‘‘(C) may be provided in written, electronic, tel18 ephonic, or other appropriate form.

19 ‘‘(4) In the case of a defined benefit plan, the require20 ments of paragraph (1)(B)(i) shall be treated as met with

21 respect to a participant if the administrator provides the

22 participant at least once each year with notice of the avail23 ability of the pension benefit statement and the ways in

24 which the participant may obtain such statement. Such

25 notice shall be provided in written, electronic, telephonic,
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1 or other appropriate form, and may be included with other

2 communications to the participant if done in a manner

3 reasonably designed to attract the attention of the partici4 pant.’’.

5 (b) CONFORMING AMENDMENTS.—

6 (1) Section 105 of the Employee Retirement In7 come Security Act of 1974 (29 U.S.C. 1025) is

8 amended by striking subsection (d).

9 (2) Section 105(b) of such Act (29 U.S.C.

10 1025(b)) is amended to read as follows:

11 ‘‘(b) In no case shall a participant or beneficiary of

12 a plan be entitled to more than one statement described

13 in subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is appli14 cable, in any 12-month period.’’.

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

16 this section shall apply to plan years beginning after De17 cember 31, 2000.

18 SEC. 502. SMALL BUSINESS ADMINISTRATION ADVICE TO

19 SMALL BUSINESSES.

20 (a) PREPARATION OF PLAN.—The Administrator of

21 the Small Business Administration shall, not later than

22 9 months after the date of the enactment of this Act, pre23 pare and submit to Congress a plan to—

24 (1) increase the awareness of the American peo25 ple of retirement benefits,
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1 (2) increase the understanding of the American

2 people of the types of plans and other options avail3 able to provide retirement benefits, including simple

4 retirement plans, payroll deduction IRAs, and SAFE

5 annuities and trusts, and

6 (3) periodically update small business owners

7 on changes made by Congress and the executive

8 branch in the laws, regulations, and rules governing

9 retirement benefits.

10 The Administrator shall consult with the Secretary of

11 Labor in preparing the plan under this subsection.

12 (b) POSTING OF INFORMATION ON INTERNET.—The

13 Administrator of the Small Business Administration shall

14 post on the Internet information on the types of plans and

15 other options available to provide retirement benefits, in16 cluding simple retirement plans, payroll deduction IRAs,

17 and SAFE annuities and trusts.

18 SEC. 503. CLARIFICATION OF TREATMENT OF EMPLOYER19 PROVIDED RETIREMENT ADVICE.

20 (a) IN GENERAL.—Section 132(e) (defining de mini21 mis fringe) is amended by adding at the end the following:

22 ‘‘(3) TREATMENT OF CERTAIN RETIREMENT

23 PLANNING SERVICES.—The provision of retirement

24 planning services by an employer to employees shall

25 be treated as a de minimis fringe to the extent not
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1 treated as a working condition fringe under sub2 section (d).’’.

3 (b) NO CONSTRUCTIVE RECEIPT.—Section 132 is

4 amended by redesignating subsection (m) as subsection

5 (n) and by inserting after subsection (l) the following:

6 ‘‘(m) RETIREMENT PLANNING.—

7 ‘‘(1) IN GENERAL.—No amount shall be in8 cluded in the gross income of an employee solely be9 cause the employee may choose between any retire10 ment planning fringe and compensation which would

11 otherwise be includible in the gross income of such

12 employee.

13 ‘‘(2) NONDISCRIMINATION REQUIREMENT.—

14 Paragraph (1) shall apply to a highly compensated

15 employee only if the choice described in such para16 graph is available on substantially the same terms to

17 each member of a group of employees which is de18 fined under a reasonable classification set up by the

19 employer which does not discriminate in favor of

20 highly compensated employees.

21 ‘‘(3) RETIREMENT PLANNING FRINGE.—For

22 purposes of this subsection, the term ‘retirement

23 planning fringe’ means any retirement planning

24 services provided by an employer to an employee
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1 which are not included in the gross income of the

2 employee by reason of subsection (d) or (e).’’.

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

4 this section shall apply to years beginning after December

5 31, 1999.

6 TITLE VI—REDUCING RED TAPE

7 SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.

8 (a) IN GENERAL.—Section 412(c)(9) (relating to an9 nual valuation) is amended—

10 (1) by striking ‘‘For purposes’’ and inserting

11 the following:

12 ‘‘(A) IN GENERAL.—For purposes’’, and

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

14 ‘‘(B) ELECTION TO USE PRIOR YEAR

15 VALUATION.—

16 ‘‘(i) IN GENERAL.—If, for any plan

17 year—

18 ‘‘(I) an election is in effect under

19 this subparagraph with respect to a

20 plan, and

21 ‘‘(II) the assets of the plan are

22 not less than 125 percent of the

23 plan’s current liability (as defined in

24 paragraph (7)(B)), determined as of
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1 the valuation date for the preceding

2 plan year,

3 then this section shall be applied using the

4 information available as of such valuation

5 date.

6 ‘‘(ii) ADJUSTMENTS.—Information

7 under clause (i) shall, in accordance with

8 regulations, be actuarially adjusted to re9 flect significant differences in participants.

10 ‘‘(iii) ELECTION.—An election under

11 this subparagraph, once made, shall be ir12 revocable without the consent of the Sec13 retary.’’.

14 (b) AMENDMENTS TO ERISA.—Paragraph (9) of

15 section 302(c) of the Employee Retirement Income Secu16 rity Act of 1974 (29 U.S.C. 1053(c)) is amended—

17 (1) by inserting ‘‘(A)’’ after ‘‘(9)’’, and

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

19 ‘‘(B)(i) If, for any plan year—

20 ‘‘(I) an election is in effect under this subpara21 graph with respect to a plan, and

22 ‘‘(II) the assets of the plan are not less than

23 125 percent of the plan’s current liability (as defined

24 in paragraph (7)(B)), determined as of the valuation

25 date for the preceding plan year,
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1 then this section shall be applied using the information

2 available as of such valuation date.

3 ‘‘(ii) Information under clause (i) shall, in accordance

4 with regulations, be actuarially adjusted to reflect signifi5 cant differences in participants.

6 ‘‘(iii) An election under this subparagraph, once

7 made, shall be irrevocable without the consent of the Sec8 retary of the Treasury.’’.

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

10 this section shall apply to plan years beginning on or after

11 the date of enactment of this Act.

12 SEC. 602. RULES FOR SUBSTANTIAL OWNERS RELATING TO

13 PLAN TERMINATIONS.

14 (a) MODIFICATION OF PHASE-IN OF GUARANTEE.—

15 Section 4022(b)(5) of the Employee Retirement Income

16 Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended

17 to read as follows:

18 ‘‘(5)(A) For purposes of this paragraph, the term

19 ‘majority owner’ means an individual who, at any time

20 during the 60-month period ending on the date the deter21 mination is being made—

22 ‘‘(i) owns the entire interest in an unincor23 porated trade or business,

24 ‘‘(ii) in the case of a partnership, is a partner

25 who owns, directly or indirectly, 50 percent or more
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1 of either the capital interest or the profits interest

2 in such partnership, or

3 ‘‘(iii) in the case of a corporation, owns, directly

4 or indirectly, 50 percent or more in value of either

5 the voting stock of that corporation or all the stock

6 of that corporation.

7 For purposes of clause (iii), the constructive ownership

8 rules of section 1563(e) of the Internal Revenue Code of

9 1986 shall apply (determined without regard to section

10 1563(e)(3)(C)).

11 ‘‘(B) In the case of a participant who is a majority

12 owner, the amount of benefits guaranteed under this sec13 tion shall not exceed the product of—

14 ‘‘(i) a fraction (not to exceed 1) the numerator

15 of which is the number of years from the later of the

16 effective date or the adoption date of the plan to the

17 termination date, and the denominator of which is

18 30, and

19 ‘‘(ii) the amount of the majority owner’s month20 ly benefits guaranteed under subsection (a) (as lim21 ited by paragraph (3) of this subsection).’’.

22 (b) MODIFICATION OF ALLOCATION OF ASSETS.—

23 (1) Section 4044(a)(4)(B) of the Employee Re24 tirement Income Security Act of 1974 (29 U.S.C.
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1 1344(a)(4)(B)) is amended by striking ‘‘section

2 4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.

3 (2) Section 4044(b) of such Act (29 U.S.C.

4 1344(b)) is amended—

5 (A) by striking ‘‘(5)’’ in paragraph (2) and

6 inserting ‘‘(4), (5),’’, and

7 (B) by redesignating paragraphs (3)

8 through (6) as paragraphs (4) through (7), re9 spectively, and by inserting after paragraph (2)

10 the following:

11 ‘‘(3) If assets available for allocation under

12 paragraph (4) of subsection (a) are insufficient to

13 satisfy in full the benefits of all individuals who are

14 described in that paragraph, the assets shall be allo15 cated first to benefits described in subparagraph (A)

16 of that paragraph. Any remaining assets shall then

17 be allocated to benefits described in subparagraph

18 (B) of that paragraph. If assets allocated to such

19 subparagraph (B) are insufficient to satisfy in full

20 the benefits described in that subparagraph, the as21 sets shall be allocated pro rata among individuals on

22 the basis of the present value (as of the termination

23 date) of their respective benefits described in that

24 subparagraph.’’.

25 (c) CONFORMING AMENDMENTS.—
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1 (1) Section 4021 of the Employee Retirement

2 Income Security Act of 1974 (29 U.S.C. 1321) is

3 amended—

4 (A) in subsection (b)(9), by striking ‘‘as

5 defined in section 4022(b)(6)’’, and

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

7 ‘‘(d) For purposes of subsection (b)(9), the term ‘sub8 stantial owner’ means an individual who, at any time dur9 ing the 60-month period ending on the date the determina10 tion is being made—

11 ‘‘(1) owns the entire interest in an unincor12 porated trade or business,

13 ‘‘(2) in the case of a partnership, is a partner

14 who owns, directly or indirectly, more than 10 per15 cent of either the capital interest or the profits inter16 est in such partnership, or

17 ‘‘(3) in the case of a corporation, owns, directly

18 or indirectly, more than 10 percent in value of either

19 the voting stock of that corporation or all the stock

20 of that corporation.

21 For purposes of paragraph (3), the constructive ownership

22 rules of section 1563(e) of the Internal Revenue Code of

23 1986 shall apply (determined without regard to section

24 1563(e)(3)(C)).’’.
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1 (2) Section 4043(c)(7) of such Act (29 U.S.C.

2 1343(c)(7)) is amended by striking ‘‘section

3 4022(b)(6)’’ and inserting ‘‘section 4021(d)’’.

4 (d) EFFECTIVE DATES.—

5 (1) IN GENERAL.—Except as provided in para6 graph (2), the amendments made by this section

7 shall apply to plan terminations—

8 (A) under section 4041(c) of the Employee

9 Retirement Income Security Act of 1974 (29

10 U.S.C. 1341(c)) with respect to which notices

11 of intent to terminate are provided under sec12 tion 4041(a)(2) of such Act (29 U.S.C.

13 1341(a)(2)) on or after the date of enactment

14 of this Act, or

15 (B) under section 4042 of such Act (29

16 U.S.C. 1342) with respect to which proceedings

17 are instituted by the corporation on or after

18 such date.

19 (2) CONFORMING AMENDMENTS.—The amend20 ments made by subsection (c) shall take effect on

21 the date of enactment of this Act.

22 SEC. 603. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT

23 LOSS OF DIVIDEND DEDUCTION.

24 (a) IN GENERAL.—Section 404(k)(2)(A) (defining

25 applicable dividends) is amended by striking ‘‘or’’ at the
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1 end of clause (ii), by redesignating clause (iii) as clause

2 (iv), and by inserting after clause (ii) the following:

3 ‘‘(iii) is, at the election of such par4 ticipants or their beneficiaries—

5 ‘‘(I) payable as provided in clause

6 (i) or (ii), or

7 ‘‘(II) paid to the plan and rein8 vested in qualifying employer securi9 ties, or’’.

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

11 this section shall apply to taxable years beginning after

12 December 31, 1999.

13 SEC. 604. MODIFICATION OF 403(b) EXCLUSION ALLOWANCE

14 TO CONFORM TO 415 MODIFICATION.

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

16 shall modify the regulations regarding the exclusion allow17 ance under section 403(b)(2) of the Internal Revenue

18 Code of 1986 to repeal the requirement that contributions

19 to a defined benefit pension plan be treated as previously

20 excluded amounts for purposes of the exclusion allowance.

21 (b) EFFECTIVE DATE.—The revised regulations

22 under subsection (a) shall apply to taxable years beginning

23 after December 31, 1999.
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1 SEC. 605. SAFETY VALVE FROM MECHANICAL RULES.

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

3 shall, by regulation, provide that a plan shall be deemed

4 to satisfy the requirements of section 401(a)(4) of the In5 ternal Revenue Code of 1986 if such plan satisfies the

6 facts and circumstances test under section 401(a)(4) of

7 such Code, as in effect before January 1, 1994, but only

8 if—

9 (1) the plan satisfies conditions prescribed by

10 the Secretary to appropriately limit the availability

11 of such test, and

12 (2) the plan is submitted to the Secretary for

13 a determination of whether it satisfies such test.

14 Paragraph (2) shall only apply to the extent provided by

15 the Secretary.

16 (b) EFFECTIVE DATES.—

17 (1) REGULATIONS.—The regulation required by

18 subsection (a) shall apply to years beginning after

19 December 31, 1999.

20 (2) CONDITIONS OF AVAILABILITY.—Any condi21 tion of availability prescribed by the Secretary under

22 subsection (a)(1) shall not apply before the first year

23 beginning not less than 120 days after the date on

24 which such condition is prescribed.
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1 SEC. 606. COVERAGE TEST FLEXIBILITY.

2 (a) IN GENERAL.—Section 410(b)(1) (relating to

3 minimum coverage requirements) is amended by adding

4 at the end the following:

5 ‘‘(D) In the case that the plan fails to

6 meet the requirements of subparagraphs (A),

7 (B) and (C), the plan—

8 ‘‘(i) satisfies subparagraph (B), as in

9 effect immediately before the enactment of

10 the Tax Reform Act of 1986,

11 ‘‘(ii) is submitted to the Secretary for

12 a determination of whether it satisfies the

13 requirement described in clause (i), and

14 ‘‘(iii) satisfies conditions prescribed by

15 the Secretary by regulation that appro16 priately limit the availability of this sub17 paragraph.

18 Clause (ii) shall apply only to the extent pro19 vided by the Secretary.’’.

20 (b) EFFECTIVE DATES.—

21 (1) IN GENERAL.—The amendment made by

22 subsection (a) shall apply to years beginning after

23 December 31, 1999.

24 (2) CONDITIONS OF AVAILABILITY.—Any condi25 tion of availability prescribed by the Secretary under

26 regulations prescribed by the Secretary under sec-
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1 tion 410(b)(1)(D) of the Internal Revenue Code of

2 1986 shall not apply before the first year beginning

3 not less than 120 days after the date on which such

4 condition is prescribed.

5 SEC. 607. SECTION 457 INAPPLICABLE TO CERTAIN MIRROR

6 PLANS.

7 (a) IN GENERAL.—Subsection (e) of section 457 (re8 lating to deferred compensation plans of State and local

9 governments and tax-exempt organizations), as amended

10 by section 306, is amended by adding at the end the fol11 lowing:

12 ‘‘(18) This section shall not apply to a plan,

13 program, or arrangement maintained solely for the

14 purposes of providing retirement benefits for em15 ployees in excess of the limitations imposed by sec16 tions 401(a)(17) or 415.’’.

17 (b) CERTAIN DEFERRED COMPENSATION NOT

18 TAKEN INTO ACCOUNT.—Section 457(c) (relating to indi19 viduals who are participants in more than 1 plan), as

20 amended by section 113, is amended by adding at the end

21 the following:

22 ‘‘(2) EXCEPTION FOR MIRROR PLANS.—This

23 section shall be applied without regard to a plan,

24 program, or arrangement described in subsection

25 (e)(18).’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to years beginning after December

3 31, 1999.

4 SEC. 608. NOTICE AND CONSENT PERIOD REGARDING DIS5 TRIBUTIONS.

6 (a) EXPANSION OF PERIOD.—

7 (1) IN GENERAL.—

8 (A) Section 417(a)(6)(A) (defining applica9 ble election period) is amended by striking ‘‘90-

10 day’’ and inserting ‘‘one-year’’.

11 (B) Subparagraph (A) of section 205(c)(7)

12 of the Employee Retirement Income Security

13 Act of 1974 (29 U.S.C. 1055) is amended by

14 striking ‘‘90-day’’ and inserting ‘‘one-year’’.

15 (2) MODIFICATION OF REGULATIONS.—The

16 Secretary of the Treasury shall modify the regula17 tions under sections 402(f), 411(a)(11), and 417 of

18 the Internal Revenue Code of 1986 to substitute

19 ‘‘one year’’ for ‘‘90 days’’ each place it appears in

20 Treasury Regulations sections 1.402(f)–1 Q/A–2,

21 1.411(a)–11T(c)(2), and 1.417(e)–1T(b)(3).

22 (3) EFFECTIVE DATE.—The amendment made

23 by paragraph (1) and the modifications required by

24 paragraph (2) shall apply to years beginning after

25 December 31, 1999.
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1 (b) CONSENT REGULATION INAPPLICABLE TO CER2 TAIN DISTRIBUTIONS.—

3 (1) IN GENERAL.—The Secretary of the Treas4 ury shall modify the regulations under section

5 411(a)(11) of the Internal Revenue Code of 1986 to

6 provide that the description of a participant’s right,

7 if any, to defer receipt of a distribution shall also de8 scribe the consequences of failing to defer such re9 ceipt.

10 (2) EFFECTIVE DATE.—The modifications re11 quired by paragraph (1) shall apply to years begin12 ning after December 31, 1999.

13 SEC. 609. CONFORMING AMENDMENTS RELATING TO ELEC14 TION TO RECEIVE TAXABLE CASH COM15 PENSATION IN LIEU OF NONTAXABLE TRANS16 PORTATION FRINGE BENEFITS.

17 (a) IN GENERAL.—

18 (1) Clause (ii) of section 415(c)(3)(D) and sub19 paragraph (B) of section 403(b)(3) are each amend20 ed by striking ‘‘section 125 or’’ and inserting ‘‘sec21 tion 125, 132(f)(4), or’’.

22 (2) Paragraph (2) of section 414(s) is amended

23 by striking ‘‘section 125, 402(e)(3)’’ and inserting

24 ‘‘section 125, 132(f)(4), 402(e)(3)’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 subsection (a) shall take effect as if included in the

3 amendment made by section 1072 of the Taxpayer Relief

4 Act of 1997.

5 SEC. 610. REPEAL OF TRANSITION RULE RELATING TO CER6 TAIN HIGHLY COMPENSATED EMPLOYEES.

7 (a) IN GENERAL.—Paragraph (4) of section

8 1114(c)(4) of the Tax Reform Act of 1986 is hereby re9 pealed.

10 (b) EFFECTIVE DATE.—The repeal made by sub11 section (a) shall apply to plan years beginning after De12 cember 31, 1999.

13 SEC. 611. EXTENSION TO INTERNATIONAL ORGANIZATIONS

14 OF MORATORIUM ON APPLICATION OF CER15 TAIN NONDISCRIMINATION RULES APPLICA16 BLE TO STATE AND LOCAL PLANS.

17 (a) IN GENERAL.—Subparagraph (G) of section

18 401(a)(5), subparagraph (H) of section 401(a)(26), sub19 paragraph (G) of section 401(k)(3), and paragraph (2) of

20 section 1505(d) of the Taxpayer Relief Act of 1997 are

21 each amended by inserting ‘‘or by an international organi22 zation which is described in section 414(d)’’ after ‘‘or in23 strumentality thereof)’’.

24 (b) CONFORMING AMENDMENTS.—
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1 (1) The headings for subparagraph (G) of sec2 tion 401(a)(5) and subparagraph (H) of section

3 401(a)(26) are each amended by inserting ‘‘AND

4 INTERNATIONAL ORGANIZATION’’ after ‘‘GOVERN5 MENTAL’’.

6 (2) Subparagraph (G) of section 401(k)(3) is

7 amended by inserting ‘‘STATE AND LOCAL GOVERN8 MENTAL AND INTERNATIONAL ORGANIZATION

9 PLANS.—’’ after ‘‘(G)’’.

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

11 this section shall take effect as if included in the amend12 ment made by section 1505 of the Taxpayer Relief Act

13 of 1997.

14 SEC. 612. ANNUAL REPORT DISSEMINATION.

15 (a) IN GENERAL.—Section 104(b)(3) of the Em16 ployee Retirement Income Security Act of 1974 (29

17 U.S.C. 1024(b)(3)) is amended by striking ‘‘shall furnish’’

18 and inserting ‘‘shall make available for examination (and,

19 upon request, shall furnish)’’.

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

21 this section shall apply to reports for years beginning after

22 December 31, 1998.

23 SEC. 613. EMPLOYEES OF TAX-EXEMPT ENTITIES.

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

25 shall modify Treasury Regulations section 1.410(b)–6(g)
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1 to provide that employees of an organization described in

2 section 403(b)(1)(A)(i) of the Internal Revenue Code of

3 1986 who are eligible to make contributions under section

4 403(b) pursuant to a salary reduction agreement may be

5 treated as excludable with respect to a plan under section

6 401(k) or section 401(m) of such Code that is provided

7 under the same general arrangement as a plan under such

8 section 401(k), if—

9 (1) no employee of an organization described in

10 section 403(b)(1)(A)(i) of such Code is eligible to

11 participate in such section 401(k) plan or section

12 401(m) plan, and

13 (2) 95 percent of the employees who are not

14 employees of an organization described in section

15 403(b)(1)(A)(i) of such Code are eligible to partici16 pate in such section 401(k) plan or section 401(m)

17 plan.

18 (b) EFFECTIVE DATE.—The modification required by

19 subsection (a) shall apply as of the same date set forth

20 in section 1426(b) of the Small Business Job Protection

21 Act of 1996.

22 SEC. 614. REPEAL OF THE MULTIPLE USE TEST.

23 (a) IN GENERAL.—Paragraph (9) of section 401(m)

24 (relating to nondiscrimination test for matching contribu-
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1 tions and employee contributions) is amended to read as

2 follows:

3 ‘‘(9) REGULATIONS.—The Secretary shall pre4 scribe such regulations as may be necessary to carry

5 out the purposes of this subsection and subsection

6 (k), including regulations permitting appropriate ag7 gregation of plans and contributions.’’.

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

9 this section shall apply to years after December 31, 1999.

10 TITLE VII—PLAN AMENDMENTS

11 SEC. 701. PROVISIONS RELATING TO PLAN AMENDMENTS.

12 (a) IN GENERAL.—If this section applies to any plan

13 or contract amendment—

14 (1) such plan or contract shall be treated as

15 being operated in accordance with the terms of the

16 plan during the period described in subsection

17 (b)(2)(A), and

18 (2) such plan shall not fail to meet the require19 ments of section 411(d)(6) of the Internal Revenue

20 Code of 1986 or section 204(g) of the Employee Re21 tirement Income Security Act of 1974 (29 U.S.C.

22 1054(g)) by reason of such amendment.

23 (b) AMENDMENTS TO WHICH SECTION APPLIES.—
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1 (1) IN GENERAL.—This section shall apply to

2 any amendment to any plan or annuity contract

3 which is made—

4 (A) pursuant to any amendment made by

5 this Act, or pursuant to any regulation issued

6 under this Act, and

7 (B) on or before the last day of the first

8 plan year beginning on or after January 1,

9 2003.

10 In the case of a government plan (as defined in sec11 tion 414(d) of the Internal Revenue Code of 1986

12 and section 3(32) of the Employee Retirement In13 come Security Act of 1974), this paragraph shall be

14 applied by substituting ‘‘2004’’ for ‘‘2003’’.

15 (2) CONDITIONS.—This section shall not apply

16 to any amendment unless—

17 (A) during the period—

18 (i) beginning on the date the legisla19 tive or regulatory amendment described in

20 paragraph (1)(A) takes effect (or in the

21 case of a plan or contract amendment not

22 required by such legislative or regulatory

23 amendment, the effective date specified by

24 the plan), and
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1 (ii) ending on the date described in

2 paragraph (1)(B) (or, if earlier, the date

3 the plan or contract amendment is adopt4 ed),

5 the plan or contract is operated as if such plan

6 or contract amendment were in effect, and

7 (B) such plan or contract amendment ap8 plies retroactively for such period.

Æ