II

106TH CONGRESS

1ST SESSION S. 649

To amend the Internal Revenue Code of 1986 to provide increased retirement

savings opportunities, and for other purposes.

IN THE SENATE OF THE UNITED STATES

MARCH 17, 1999

Mr. ROTH (for himself and Mr. BAUCUS) introduced the following bill; which

was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide

increased retirement savings opportunities, 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; AMEND4 MENT TO 1986 CODE.

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

6 ‘‘Retirement Savings Opportunity Act of 1999’’.

7 (b) TABLE OF CONTENTS.—

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

TITLE I—INDIVIDUAL RETIREMENT PLANS

Sec. 101. Modification of deduction limits for IRA contributions.
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Sec. 102. Modification of income limits on contributions and rollovers to Roth

IRAs.

Sec. 103. Deemed IRAs under employer plans.

TITLE II—PENSION PLANS

Sec. 201. Option to treat elective deferrals as after-tax contributions.

Sec. 202. Increase in limit on exclusion amount for elective deferrals.

Sec. 203. Increased limit on deferred amount for plans of State and local governments.

Sec. 204. Equitable treatment for contributions of employees to defined contribution plans.

Sec. 205. Repeal of 150 percent of current liability funding limit.

TITLE III—SMALL BUSINESS INCENTIVES

Sec. 301. Credit for small employer pension plan contributions and start-up

costs.

Sec. 302. SAFE annuities and trusts.

Sec. 303. Increased limit on contribution amount for simple retirement accounts.

TITLE IV—CATCHUP CONTRIBUTIONS

Sec. 401. Catchup contributions for individuals age 50 or over.

TITLE V—PLAN AMENDMENTS

Sec. 501. Provisions relating to plan amendments.

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

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

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

7 TITLE I—INDIVIDUAL

8 RETIREMENT PLANS

9 SEC. 101. MODIFICATION OF DEDUCTION LIMITS FOR IRA

10 CONTRIBUTIONS.

11 (a) INCREASE IN CONTRIBUTION LIMIT.—Paragraph

12 (1)(A) of section 219(b) (relating to maximum amount of
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1 deduction) is amended by striking ‘‘$2,000’’ and inserting

2 ‘‘$5,000’’.

3 (b) INFLATION ADJUSTMENT.—Section 219 (relating

4 to deduction for retirement savings) is amended by redes5 ignating subsection (h) as subsection (i) and by inserting

6 after subsection (g) the following new subsection:

7 ‘‘(h) COST-OF-LIVING ADJUSTMENT.—

8 ‘‘(1) DEDUCTIBLE AMOUNTS.—In the case of

9 any taxable year beginning in a calendar year after

10 2000, the $5,000 amount under subsection (b)(1)(A)

11 shall be increased by an amount equal to—

12 ‘‘(A) such dollar amount, multiplied by

13 ‘‘(B) the cost-of-living adjustment deter14 mined under section 1(f)(3) for the calendar

15 year in which the taxable year begins, deter16 mined by substituting ‘calendar year 1999’ for

17 ‘calendar year 1992’ in subparagraph (B)

18 thereof.

19 ‘‘(2) ROUNDING RULES.—If any amount after

20 adjustment under paragraph (1) is not a multiple of

21 $100, such amount shall be rounded to the next

22 lower multiple of $100.’’

23 (c) REPEAL OF RESTRICTIONS ON ACTIVE PARTICI24 PANTS.—
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1 (1) IN GENERAL.—Section 219, as amended by

2 subsection (b), is amended by striking subsection (g)

3 and by redesignating subsections (h) and (i) as sub4 sections (g) and (h).

5 (2) TECHNICAL AND CONFORMING AMEND6 MENTS.—

7 (A) Section 219(f) is amended by striking

8 paragraph (7).

9 (B) Section 408(d)(5) is amended by strik10 ing the last sentence.

11 (C) Section 408(o) is amended by adding

12 at the end the following new paragraph:

13 ‘‘(5) TERMINATION.—This subsection shall not

14 apply to any contribution for any taxable year begin15 ning after December 31, 1999.’’

16 (D) Section 408A(c)(2)(A) is amended by

17 striking ‘‘or (g)’’.

18 (E) Section 408A(c)(3)(A) is amended by

19 striking the last sentence.

20 (F) Section 408A(c)(3)(C) is amended—

21 (i) by striking all before clause (ii)

22 and inserting the following:

23 ‘‘(C) SPECIAL RULES.—For purposes of

24 this paragraph—
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1 ‘‘(i) adjusted gross income shall be

2 determined—

3 ‘‘(I) after application of sections

4 86 and 469, and

5 ‘‘(II) without regard to sections

6 135, 137, 221, and 911, the deduction

7 allowable under section 219, or any

8 amount included in gross income

9 under subsection (d)(3),’’,

10 (ii) by striking the period at the end

11 of clause (ii) and inserting a comma, and

12 (iii) by adding at the end the fol13 lowing new clauses:

14 ‘‘(iii) no dollar limitation shall be re15 duced below $200 under subparagraph (A)

16 unless (without regard to this clause) such

17 limitation is reduced to zero, and

18 ‘‘(iv) any amount determined under

19 subparagraph (A) which is not a multiple

20 of $10 shall be rounded to the next lowest

21 $10.’’

22 (G) Section 408A(c)(3)(D) is amended to

23 read as follows:
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1 ‘‘(D) SPECIAL RULE FOR MARRIED INDI2 VIDUALS FILING SEPARATELY AND LIVING

3 APART.—A husband and wife who—

4 ‘‘(i) file separate returns for any tax5 able year, and

6 ‘‘(ii) live apart at all times during

7 such taxable year,

8 shall not be treated as married individuals for

9 purposes of this paragraph.’’

10 (H) Section 4973(b) is amended by strik11 ing the last sentence.

12 (d) ADDITIONAL CONFORMING AMENDMENTS.—

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

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

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

16 of the amount in effect for such taxable year under

17 section 219(b)(1)(A)’’.

18 (2) Section 408(b)(2)(B) is amended by strik19 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

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

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

22 ‘‘$2,000’’ in the matter following paragraph (4) and

23 inserting ‘‘the dollar amount in effect under section

24 219(b)(1)(A)’’.
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1 (4) Section 408(j) is amended by striking

2 ‘‘$2,000’’.

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

4 ‘‘$2,000’’ and inserting ‘‘the dollar amount in effect

5 under section 219(b)(1)(A)’’

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

7 this section shall apply to taxable years beginning after

8 December 31, 1999.

9 SEC. 102. MODIFICATION OF INCOME LIMITS ON CON10 TRIBUTIONS AND ROLLOVERS TO ROTH IRAS.

11 (a) REPEAL OF AGI LIMIT ON CONTRIBUTIONS.—

12 Subsection 408A(c)(3) (relating to limits based on modi13 fied adjusted gross income), as amended by section

14 101(c)(2), is amended by striking subparagraph (A) and

15 by redesignating subparagraphs (B), (C), and (D) as sub16 paragraphs (A), (B), and (C), respectively.

17 (b) INCREASE IN AGI LIMIT FOR ROLLOVER CON18 TRIBUTIONS.—Clause (i) of section 408A(c)(3)(A) (relat19 ing to rollover from IRA), as redesignated by subsection

20 (a), is amended by striking ‘‘$100,000’’ and inserting

21 ‘‘$1,000,000’’.

22 (c) CONFORMING AMENDMENTS.—

23 (1)(A) Subparagraph (B) of section 408A(c)(3),

24 as redesignated by subsection (a) and as amended
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1 by section 101(c)(2)(F), is amended to read as fol2 lows:

3 ‘‘(B) DEFINITION OF ADJUSTED GROSS IN4 COME.—For purposes of subparagraph (A), ad5 justed gross income shall be determined—

6 ‘‘(i) after application of sections 86

7 and 469, and

8 ‘‘(ii) without regard to sections 135,

9 137, 221, and 911, the deduction allowable

10 under section 219, or any amount included

11 in gross income under subsection (d)(3).’’

12 (B) EFFECTIVE DATE.—The amendment made

13 by this paragraph shall apply to taxable years begin14 ning after December 31, 1999.

15 (2)(A) Subparagraph (B) of section 408A(c)(3),

16 as amended by paragraph (1), is amended to read

17 as follows:

18 ‘‘(B) DEFINITION OF ADJUSTED GROSS IN19 COME.—For purposes of subparagraph (A), ad20 justed gross income shall be determined—

21 ‘‘(i) after application of sections 86

22 and 469, and

23 ‘‘(ii) without regard to sections 135,

24 137, 221, and 911, the deduction allowable

25 under section 219, or any amount included
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1 in gross income under subsection (d)(3) or

2 by reason of a required distribution under

3 a provision described in paragraph (5).’’

4 (B) EFFECTIVE DATE.—The amendment made

5 by this paragraph shall apply to taxable years begin6 ning after December 31, 2004.

7 (d) EFFECTIVE DATE.—Except as otherwise pro8 vided in this section, the amendments made by this section

9 shall apply to taxable years beginning after December 31,

10 1999.

11 SEC. 103. DEEMED IRAS UNDER EMPLOYER PLANS.

12 (a) IN GENERAL.—Section 408 (relating to individual

13 retirement accounts) is amended by redesignating sub14 section (q) as subsection (r) and by inserting after sub15 section (p) the following new subsection:

16 ‘‘(q) DEEMED IRAS UNDER QUALIFIED EMPLOYER

17 PLANS.—

18 ‘‘(1) GENERAL RULE.—If—

19 ‘‘(A) a qualified employer plan elects to

20 allow employees to make voluntary employee

21 contributions to a separate account or annuity

22 established under the plan, and

23 ‘‘(B) under the terms of the qualified em24 ployer plan, such account or annuity meets the

25 applicable requirements of this section or sec-
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1 tion 408A for an individual retirement account

2 or annuity,

3 then such account or annuity shall be treated for

4 purposes of this title in the same manner as an indi5 vidual retirement plan (and contributions to such ac6 count or annuity as contributions to an individual

7 retirement plan). For purposes of subparagraph (B),

8 the requirements of subsection (a)(5) shall not

9 apply.

10 ‘‘(2) SPECIAL RULES FOR QUALIFIED EM11 PLOYER PLANS.—For purposes of this title—

12 ‘‘(A) a qualified employer plan shall not

13 fail to meet any requirement of this title solely

14 by reason of establishing and maintaining a

15 program described in paragraph (1), and

16 ‘‘(B) any account or annuity described in

17 paragraph (1), and any contribution to the ac18 count or annuity, shall not be subject to any re19 quirement of this title applicable to a qualified

20 employer plan or taken into account in applying

21 any such requirement to any other contribu22 tions under the plan.

23 ‘‘(3) DEFINITIONS.—For purposes of this

24 subsection—
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1 ‘‘(A) QUALIFIED EMPLOYER PLAN.—The

2 term ‘qualified employer plan’ has the meaning

3 given such term by section 72(p)(4).

4 ‘‘(B) VOLUNTARY EMPLOYEE CONTRIBU5 TION.—The term ‘voluntary employee contribu6 tion’ means any contribution (other than a

7 mandatory contribution within the meaning of

8 section 411(c)(2)(C))—

9 ‘‘(i) which is made by an individual as

10 an employee under a qualified employer

11 plan which allows employees to elect to

12 make contributions described in paragraph

13 (1), and

14 ‘‘(ii) with respect to which the indi15 vidual has designated the contribution as a

16 contribution to which this subsection ap17 plies.’’

18 (b) AMENDMENT OF ERISA.—

19 (1) IN GENERAL.—Section 4 of the Employee

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

21 1003) is amended by adding at the end the following

22 new subsection:

23 ‘‘(c) If a pension plan allows an employee to elect to

24 make voluntary employee contributions to accounts and

25 annuities as provided in section 408(q) of the Internal
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1 Revenue Code of 1986, such accounts and annuities (and

2 contributions thereto) shall not be treated as part of such

3 plan (or as a separate pension plan) for purposes of any

4 provision of this title other than section 403(c), 404, or

5 405 (relating to exclusive benefit, and fiduciary and co6 fiduciary responsibilities).’’

7 (2) CONFORMING AMENDMENT.—Section 4(a)

8 of such Act (29 U.S.C. 1003(a)) is amended by in9 serting ‘‘or (c)’’ after ‘‘subsection (b)’’.

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

11 this section shall apply to plan years beginning after De12 cember 31, 1999.

13 TITLE II—PENSION PLANS

14 SEC. 201. OPTION TO TREAT ELECTIVE DEFERRALS AS

15 AFTER-TAX CONTRIBUTIONS.

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 402 the following

19 new section:

20 ‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER21 RALS AS PLUS CONTRIBUTIONS.

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

23 plan includes a qualified plus contribution program—

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

25 an employee pursuant to the program shall be treat-
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1 ed as an elective deferral for purposes of this chap2 ter, except that such contribution shall not be ex3 cludable from gross income, and

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

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

6 meet any requirement of this chapter solely by rea7 son of including such program.

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

9 For purposes of this section—

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

11 contribution program’ means a program under which

12 an employee may elect to make designated plus con13 tributions in lieu of all or a portion of elective defer14 rals the employee is otherwise eligible to make under

15 the applicable retirement plan.

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

17 program shall not be treated as a qualified plus con18 tribution program unless the applicable retirement

19 plan—

20 ‘‘(A) establishes separate accounts (‘des21 ignated plus accounts’) for the designated plus

22 contributions of each employee and any earn23 ings properly allocable to the contributions, and

24 ‘‘(B) maintains separate recordkeeping

25 with respect to each account.
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1 ‘‘(c) DEFINITIONS AND RULES RELATING TO DES2 IGNATED PLUS CONTRIBUTIONS.—For purposes of this

3 section—

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

5 term ‘designated plus contribution’ means any elec6 tive deferral which—

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

8 employee without regard to this section, and

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

10 and in such manner as the Secretary may pre11 scribe) as not being so excludable.

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

13 elective deferrals which an employee may designate

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

15 any) of—

16 ‘‘(A) the maximum amount of elective de17 ferrals excludable from gross income of the em18 ployee for the taxable year (without regard to

19 this section), over

20 ‘‘(B) the aggregate amount of elective de21 ferrals of the employee for the taxable year

22 which the employee does not designate under

23 paragraph (1).

24 ‘‘(3) ROLLOVER CONTRIBUTIONS.—
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1 ‘‘(A) IN GENERAL.—A rollover contribu2 tion of any payment or distribution from a des3 ignated plus account which is otherwise allow4 able under this chapter may be made only if the

5 contribution is to—

6 ‘‘(i) another designated plus account

7 of the individual from whose account the

8 payment or distribution was made, or

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

10 ‘‘(B) COORDINATION WITH LIMIT.—Any

11 rollover contribution to a designated plus ac12 count under subparagraph (A) shall not be

13 taken into account for purposes of paragraph

14 (1).

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

16 title—

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

18 from a designated plus account shall not be includ19 ible in gross income.

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

21 of this subsection—

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

23 distribution’ has the meaning given such term

24 by section 408A(d)(2)(A).
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1 ‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU2 SION PERIOD.—A payment or distribution from

3 a designated plus account shall not be treated

4 as a qualified distribution if such payment or

5 distribution is made within the 5-taxable-year

6 period beginning with the earlier of—

7 ‘‘(i) the earlier of—

8 ‘‘(I) the 1st taxable year for

9 which the individual made a des10 ignated plus contribution to any des11 ignated plus account established for

12 such individual under the same appli13 cable retirement plan, or

14 ‘‘(II) if a rollover contribution

15 was made to such designated plus ac16 count from a designated plus account

17 previously established for such indi18 vidual under another applicable retire19 ment plan, the 1st taxable year for

20 which the individual made a des21 ignated plus contribution to such pre22 viously established account, or

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

24 the individual (or the individual’s spouse)
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1 made a contribution to a Roth IRA estab2 lished for such individual.

3 ‘‘(C) DISTRIBUTIONS OF EXCESS DEFER4 RALS AND EARNINGS.—The term ‘qualified dis5 tribution’ shall not include any distribution of

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

7 any income on the excess deferral.

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

9 be applied separately with respect to distributions

10 and payments from a designated plus account and

11 other distributions and payments from the plan.

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

13 section—

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

15 term ‘applicable retirement plan’ means—

16 ‘‘(A) an employees’ trust described in sec17 tion 401(a) which is exempt from tax under

18 section 501(a), and

19 ‘‘(B) a plan under which amounts are con20 tributed by an individual’s employer for an an21 nuity contract described in section 403(b).

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

23 deferral’ means any elective deferral described in

24 subparagraph (A) or (C) of section 402(g)(3).’’
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1 (b) EXCESS DEFERRALS.—Section 402(g) (relating

2 to limitation on exclusion for elective deferrals) is

3 amended—

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

5 following new sentence: ‘‘The preceding sentence

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

7 not exceed the designated plus contributions of the

8 individual for the taxable year.’’, and

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

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

11 paragraph (2)(A).

12 (c) ROLLOVERS.—

13 (1) QUALIFIED TRUSTS.—Section 402(d)(8)(B)

14 is amended by adding at the end the following new

15 flush sentence:

16 ‘‘Without regard to the foregoing provisions of

17 this paragraph, if any portion of an eligible roll18 over distribution is attributable to payments or

19 distributions from a designated plus account (as

20 defined in section 402A), an eligible retirement

21 plan with respect to such portion shall include

22 only another designated plus account and a

23 Roth IRA.’’

24 (2) ANNUITIES.—Section 403(b)(8)(A) is

25 amended by adding at the end the following new
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1 sentence: ‘‘If any portion of an eligible rollover dis2 tribution is attributable to payments or distributions

3 from a designated plus account (as defined in sec4 tion 402A), the transfer of such portion under

5 clause (ii) may be made only to another such ac6 count or to a Roth IRA.’’

7 (3) INDIVIDUAL RETIREMENT PLANS.—Section

8 408(d)(3) is amended by adding at the end the fol9 lowing new subparagraph:

10 ‘‘(H) DESIGNATED PLUS ACCOUNTS.—The

11 requirements of clauses (ii) and (iii) of subpara12 graph (A) shall not be treated as met if the

13 rollover contribution includes any amount at14 tributable to a designated plus account (as de15 fined in section 402A).’’

16 (d) REPORTING REQUIREMENTS.—

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

18 amended by inserting ‘‘, including the amount of

19 designated plus contributions (as defined in section

20 402A)’’ before the comma at the end.

21 (2) INFORMATION.—Section 6047 is amended

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

23 by inserting after subsection (e) the following new

24 subsection:
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1 ‘‘(f) DESIGNATED PLUS CONTRIBUTIONS.—The Sec2 retary shall require the plan administrator of each applica3 ble retirement plan (as defined in section 402A) to make

4 such returns and reports regarding designated plus con5 tributions (as so defined) to the Secretary, participants

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

7 the Secretary may prescribe.’’

8 (e) CONFORMING AMENDMENTS.—

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

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

11 term includes a rollover contribution described in

12 section 402A(c)(3)(A).’’

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

14 I of subchapter D of chapter 1 is amended by insert15 ing after the item relating to section 402 the fol16 lowing new item:

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

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

18 this section shall apply to taxable years beginning after

19 December 31, 2000.

20 SEC. 202. INCREASE IN LIMIT ON EXCLUSION AMOUNT FOR

21 ELECTIVE DEFERRALS.

22 (a) INCREASE IN ELECTIVE DEFERRAL LIMIT.—

23 Paragraph (1) of section 402(g) (relating to limitation on

24 exclusion for elective deferrals) is amended by striking

25 ‘‘$7,000’’ and inserting ‘‘$15,000’’.
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1 (b) CONFORMING AMENDMENTS.—

2 (1)(A) Section 402(g) is amended by striking

3 paragraph (4) and by redesignating paragraphs (5),

4 (6), (7), (8), and (9) as paragraphs (4), (5), (6),

5 (7), and (8), respectively.

6 (B) Section 457(c)(2) is amended by striking

7 ‘‘section 402(g)(8)(A)(iii)’’ and inserting ‘‘section

8 402(g)(7)(A)(iii)’’.

9 (C) Section 501(c)(18)(D)(iii) is amended by

10 striking ‘‘(other than paragraph (4) thereof)’’.

11 (2) Section 402(g)(4), as redesignated by para12 graph (1)(A), is amended by striking ‘‘$7,000’’ and

13 inserting ‘‘$15,000’’.

14 (3) Section 402(g)(4), as so redesignated, is

15 amended by inserting ‘‘the base period taken into

16 account shall be the calendar quarter ending Sep17 tember 30, 1999, and’’ after ‘‘except that’’.

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

19 this section shall apply to taxable years beginning after

20 December 31, 1999.

21 SEC. 203. INCREASED LIMIT ON DEFERRED AMOUNT FOR

22 PLANS OF STATE AND LOCAL GOVERNMENTS.

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

24 457(b)(2) (defining eligible deferred compensation plan)

25 is amended by inserting ‘‘($12,000, in the case of a plan
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1 of an eligible employer as defined in subsection (e)(1)(A))’’

2 after ‘‘$7,500’’.

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

4 this section shall apply to years beginning after December

5 31, 1999.

6 SEC. 204. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF

7 EMPLOYEES TO DEFINED CONTRIBUTION

8 PLANS.

9 (a) EQUITABLE TREATMENT.—

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

11 415(c)(1) (relating to limitation for defined con12 tribution plans) is amended to read as follows:

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

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

15 403(b) is amended—

16 (A) by striking ‘‘the exclusion allowance

17 for such taxable year’’ in paragraph (1) and in18 serting ‘‘the applicable limit under section

19 415’’,

20 (B) by striking paragraph (2), and

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

22 by a former employee after the 5th taxable year

23 following the taxable year in which such em24 ployee was terminated’’ before the period at the

25 end of the second sentence of paragraph (3).
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1 (3) CONFORMING AMENDMENTS.—

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

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

5 on December 31, 1998)’’.

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

7 striking ‘‘, the exclusion allowance under sec8 tion 403(b)(2),’’.

9 (C) Section 415(a)(2) is amended by strik10 ing ‘‘, and the amount of the contribution for

11 such portion shall reduce the exclusion allow12 ance as provided in section 403(b)(2)’’.

13 (D) Section 415(c)(3) is amended by add14 ing at the end the following new subparagraph:

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

16 of an annuity contract described in section

17 403(b), the term ‘participant’s compensation’

18 means the participant’s includible compensation

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

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

21 paragraph (4) and redesignating paragraph (6)

22 as paragraph (4).

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

24 as follows:
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1 ‘‘(5) CERTAIN CONTRIBUTIONS BY CHURCH

2 PLANS NOT TREATED AS EXCEEDING LIMIT.—

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

4 other provision of this subsection, at the elec5 tion of a participant who is an employee of a

6 church, a convention or association of churches,

7 including an organization described in section

8 414(e)(3)(B)(ii), contributions and other addi9 tions for an annuity contract or retirement in10 come account described in section 403(b) with

11 respect to such participant, when expressed as

12 an annual addition to such participant’s ac13 count, shall be treated as not exceeding the lim14 itation of paragraph (1) if such annual addition

15 is not in excess of $10,000.

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

17 The total amount of additions with respect to

18 any participant which may be taken into ac19 count for purposes of this subparagraph for all

20 years may not exceed $40,000.

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

22 this paragraph, the term ‘annual addition’ has

23 the meaning given such term by paragraph

24 (2).’’

25 (G) Section 415(e)(3)(B) is amended—
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1 (i) by striking ‘‘subsection (c)(6)’’ in

2 clause (i) and inserting ‘‘subsection

3 (c)(4)’’, and

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

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

6 (c)(5)’’.

7 (H) Section 415(e)(5) is amended—

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

9 a participant who has elected under sub10 section (c)(4)(D) to have the provisions of

11 subsection (c)(4)(C) apply)’’, and

12 (ii) by striking the last sentence.

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

14 striking ‘‘percentage’’.

15 (J) Subparagraph (B) of section

16 402(g)(7), as redesignated by section

17 202(b)(1)(A), is amended by inserting before

18 the period at the end the following: ‘‘(as in ef19 fect on the date of the enactment of the Retire20 ment Savings Opportunity Act of 1999)’’.

21 (b) DEFERRED COMPENSATION PLANS OF STATE

22 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI23 ZATIONS.—Subparagraph (B) of section 457(b)(2) (relat24 ing to salary limitation on eligible deferred compensation
26

•S 649 IS

plans’’ is amended by striking ‘‘331 1 ⁄3 percent’’ and insert2 ing ‘‘100 percent’’.

3 (c) ELECTIVE DEFERRALS NOT TAKEN INTO AC4 COUNT FOR PURPOSES OF LIMITS.—Section 404 (relating

5 to deduction for contributions of an employer to an em6 ployees’ trust or annuity plan and compensation under a

7 deferred-payment plan) is amended by adding at the end

8 the following new subsection:

9 ‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC10 COUNT FOR PURPOSES OF LIMITS.—Elective deferrals (as

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

12 limitation described in this section (other than subsection

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

14 account in applying such limitations to any other contribu15 tions.’’

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

17 this section shall apply to years beginning after December

18 31, 1999.

19 SEC. 205. REPEAL OF 150 PERCENT OF CURRENT LIABILITY

20 FUNDING LIMIT.

21 (a) IN GENERAL.—

22 (1) CODE AMENDMENT.—Section 412(c)(7) (re23 lating to full-funding limitation) is amended—

24 (A) by striking ‘‘the applicable percentage’’

25 in subparagraph (A)(i)(I) and inserting ‘‘in the
27

•S 649 IS

1 case of plan years beginning before January 1,

2 2003, the applicable percentage’’, and

3 (B) by amending subparagraph (F) to read

4 as follows:

5 ‘‘(F) APPLICABLE PERCENTAGE.—For

6 purposes of subparagraph (A)(i)(I), the applica7 ble percentage shall be determined in accord8 ance with the following table:

‘‘In the case of any plan year

beginning in—

The applicable percentage is—

1999 ......................................................................................... 155

2000 ......................................................................................... 160

2001 ......................................................................................... 165

2002 ......................................................................................... 170.’’

9 (2) ERISA AMENDMENT.—Section 302(c)(7) of

10 the Employee Retirement Income Security Act of

11 1974 (29 U.S.C. 1082(c)(7)) is amended—

12 (A) by striking ‘‘the applicable percentage’’

13 in subparagraph (A)(i)(I) and inserting ‘‘in the

14 case of plan years beginning before January 1,

15 2003, the applicable percentage’’, and

16 (B) by amending subparagraph (F) to read

17 as follows:

18 ‘‘(F) APPLICABLE PERCENTAGE.—For purposes

19 of subparagraph (A)(i)(I), the applicable percentage

20 shall be determined in accordance with the following

21 table:

‘‘In the case of any plan year

beginning in—

The applicable percentage is—

1999 ......................................................................................... 155
28

•S 649 IS

‘‘In the case of any plan year

beginning in—

The applicable percentage is—

2000 ......................................................................................... 160

2001 ......................................................................................... 165

2002 ......................................................................................... 170.’’

1 (3) EFFECTIVE DATE.—The amendments made

2 by this subsection shall apply to plan years begin3 ning after December 31, 1998.

4 (b) MAXIMUM CONTRIBUTION DEDUCTION RULES

5 MODIFIED AND APPLIED TO ALL DEFINED BENEFIT

6 PLANS.—

7 (1) IN GENERAL.—Section 404(a)(1)(D) (relat8 ing to special rule in case of certain plans) is

9 amended—

10 (A) by striking ‘‘which has more than 100

11 participants for the plan year’’,

12 (B) by striking ‘‘unfunded current liability

13 determined under section 414(l)’’ and inserting

14 ‘‘unfunded termination liability (determined as

15 if the proposed termination date referred to in

16 section 4041(b)(2)(A)(i)(II) of the Employee

17 Retirement Income Security Act of 1974 were

18 the last day of the plan year)’’,

19 (C) by inserting after the first sentence the

20 following new sentence: ‘‘For purposes of this

21 subparagraph, in the case of a plan which has

22 less than 100 participants for the plan year,

23 termination liability shall not include the liabil-
29

•S 649 IS

1 ity attributable to benefit increases for highly

2 compensated employees (as defined in section

3 414(q)) brought about by plan amendment

4 within the last 2 years before the termination

5 date.’’, and

6 (D) by striking ‘‘(other than a multiem7 ployer plan)’’.

8 (2) CONFORMING AMENDMENT.—Paragraph (6)

9 of section 4972(c) is amended by striking the sen10 tence preceding the last sentence thereof.

11 (3) EFFECTIVE DATE.—The amendments made

12 by this subsection shall apply to plan years begin13 ning after the date of the enactment of this Act.

14 TITLE III—SMALL BUSINESS

15 INCENTIVES

16 SEC. 301. CREDIT FOR SMALL EMPLOYER PENSION PLAN

17 CONTRIBUTIONS AND START-UP COSTS.

18 (a) IN GENERAL.—Subpart D of part IV of sub19 chapter A of chapter 1 (relating to business related cred20 its) is amended by adding at the end the following new

21 section:

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

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

24 in the case of an eligible employer, the small employer pen-
30

•S 649 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) the qualified start-up costs paid or in6 curred by the taxpayer during the taxable year.

7 ‘‘(b) LIMITATIONS.—

8 ‘‘(1) LIMITS ON CONTRIBUTIONS.—For pur9 poses of subsection (a)(1)—

10 ‘‘(A) qualified employer contributions may

11 only be taken into account for each of the first

12 5 taxable years ending after the date the em13 ployer establishes the qualified employer plan to

14 which the contribution is made, and

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

16 contributions taken into account with respect to

17 any qualified employee for any such taxable

18 year shall not exceed 3 percent of the com19 pensation (as defined in section 414(s)) of the

20 qualified employee for such taxable year.

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

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

23 any taxable year shall not exceed—

24 ‘‘(A) $500 for each of the first, second,

25 and third taxable years ending after the date
31

•S 649 IS

1 the employer established the qualified employer

2 plan to which such costs relate, and

3 ‘‘(B) zero for each taxable year thereafter.

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

5 ‘‘(1) ELIGIBLE EMPLOYER.—

6 ‘‘(A) IN GENERAL.—The term ‘eligible em7 ployer’’ means, with respect to any year, an em8 ployer which has no more than—

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

10 50 employees, and

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

12 100 employees,

13 who received at least $5,000 of compensation

14 from the employer for the preceding year.

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

16 employer who establishes and maintains a quali17 fied employer plan for 1 or more years and who

18 fails to be an eligible employer for any subse19 quent year shall be treated as an eligible em20 ployer for the 2 years following the last year

21 the employer was an eligible employer.

22 ‘‘(C) REQUIREMENT FOR NEW QUALIFIED

23 EMPLOYER PLANS.—Such term shall not in24 clude an employer if the employer (or any pred25 ecessor employer) established or maintained a
32

•S 649 IS

1 qualified employer plan with respect to which

2 contributions were made, or benefits were ac3 crued, for service in the 3 taxable years ending

4 prior to the first taxable year in which the cred5 it under this section is allowed.

6 ‘‘(2) QUALIFIED EMPLOYER CONTRIBUTIONS.—

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

8 employer contributions’ means, with respect to

9 any taxable year, any employer contributions

10 made on behalf of a qualified employee to a

11 qualified employer plan for a plan year ending

12 with or within the taxable year.

13 ‘‘(B) EMPLOYER CONTRIBUTIONS.—The

14 term ‘employer contributions’ shall not include

15 any elective deferral (within the meaning of sec16 tion 402(g)(3)).

17 ‘‘(3) QUALIFIED EMPLOYEE.—The term ‘quali18 fied employee’ means an individual who—

19 ‘‘(A) is eligible to participate in the quali20 fied employer plan to which the employer con21 tributions are made, and

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

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

24 year for which the contribution is made.
33

•S 649 IS

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

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

3 necessary expenses of an eligible employer which are

4 paid or incurred in connection with—

5 ‘‘(A) the establishment or maintenance of

6 a qualified employer plan in which qualified em7 ployees are eligible to participate, and

8 ‘‘(B) providing educational information to

9 employees regarding participation in such plan

10 and the benefits of establishing an investment

11 plan.

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

13 ‘qualified employer plan’ has the meaning given such

14 term in section 4972(d).

15 ‘‘(d) SPECIAL RULES.—

16 ‘‘(1) AGGREGATION RULES.—All persons treat17 ed as a single employer under subsection (a) or (b)

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

19 shall be treated as one person. All qualified employer

20 plans of an employer shall be treated as 1 qualified

21 employer plan.

22 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No de23 duction shall be allowable under this chapter for any

24 qualified start-up costs or qualified employer con-
34

•S 649 IS

1 tributions for which a credit is determined under

2 subsection (a).

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

4 section shall not apply to a taxpayer for any taxable

5 year if such taxpayer elects to have this section not

6 apply for such taxable year.’’

7 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI8 NESS CREDIT.—Section 38(b) (defining current year busi9 ness credit) is amended by striking ‘‘plus’’ at the end of

10 paragraph (11), by striking the period at the end of para11 graph (12) and inserting ‘‘, plus’’, and by adding at the

12 end the following new paragraph:

13 ‘‘(13) in the case of an eligible employer (as de14 fined in section 45D(c)), the small employer pension

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

16 (c) CONFORMING AMENDMENT.—The table of sec17 tions for subpart D of part IV of subchapter A of chapter

18 1 is amended by adding at the end the following new item:

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

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

20 this section shall apply to costs paid or incurred or con21 tributions made in connection with qualified employer

22 plans established after December 31, 1999.

23 SEC. 302. SAFE ANNUITIES AND TRUSTS.

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

25 D of chapter 1 (relating to deferred compensation, etc.)
35

•S 649 IS

1 is amended by inserting after section 408A the following

2 new section:

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

4 ‘‘(a) EMPLOYER ELIGIBILITY.—

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

6 and maintain a SAFE annuity or a SAFE trust for

7 any year only if—

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

9 (as defined in section 408(p)(2)(C)), and

10 ‘‘(B) the employer does not maintain (and

11 no predecessor of the employer maintains) a

12 qualified plan (other than a permissible plan)

13 with respect to which contributions were made,

14 or benefits were accrued, for service in any year

15 in the period beginning with the year such an16 nuity or trust became effective and ending with

17 the year for which the determination is being

18 made.

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

20 (1)—

21 ‘‘(A) QUALIFIED PLAN.—The term ‘quali22 fied plan’ has the meaning given such term by

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

24 ‘‘(B) PERMISSIBLE PLAN.—The term ‘per25 missible plan’ means—
36

•S 649 IS

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

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

3 deferred compensation described in section

4 457, or employer matching contributions

5 may be made, and

6 ‘‘(ii) any collectively bargained plan.

7 ‘‘(b) SAFE ANNUITY.—

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

9 the term ‘SAFE annuity’ means an individual retire10 ment annuity (as defined in section 408(b) without

11 regard to paragraph (2) thereof and without regard

12 to the limitation on aggregate annual premiums con13 tained in the flush language of section 408(b)) if—

14 ‘‘(A) such annuity meets the requirements

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

16 ‘‘(B) the only contributions to such annu17 ity (other than rollover contributions) are em18 ployer contributions.

19 Nothing in this section shall be construed as pre20 venting an employer from using a group annuity

21 contract which is divisible into individual retirement

22 annuities for purposes of providing SAFE annuities.

23 ‘‘(2) PARTICIPATION REQUIREMENTS.—
37

•S 649 IS

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

2 this paragraph are met for any year only if all

3 employees of the employer who—

4 ‘‘(i) received at least $5,000 in com5 pensation from the employer during any 2

6 consecutive preceding years, and

7 ‘‘(ii) received at least $5,000 in com8 pensation during the year,

9 are entitled to the benefit described in para10 graph (5) for such year.

11 ‘‘(B) EXCLUDABLE EMPLOYEES.—An em12 ployer may elect to exclude from the require13 ments under subparagraph (A) employees de14 scribed in section 410(b)(3).

15 ‘‘(3) VESTING.—The requirements of this para16 graph are met if the employee’s rights to any bene17 fits are nonforfeitable.

18 ‘‘(4) BENEFIT FORM.—

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

20 this paragraph are met if the only form of ben21 efit is—

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

23 form of a single life annuity with monthly

24 payments (with no ancillary benefits) be25 ginning at age 65, or
38

•S 649 IS

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

2 is the actuarial equivalent (based on the

3 assumptions specified in the SAFE annu4 ity) of the benefit described in clause (i).

5 ‘‘(B) DIRECT TRANSFERS AND ROLL6 OVERS.—A plan shall not fail to meet the re7 quirements of this paragraph by reason of per8 mitting, at the election of the employee, a trust9 ee-to-trustee transfer or a rollover contribution.

10 ‘‘(5) AMOUNT OF ANNUAL ACCRUED BEN11 EFIT.—

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

13 this paragraph are met for any plan year if the

14 accrued benefit of each participant derived from

15 employer contributions for such year, when ex16 pressed as a benefit described in paragraph

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

18 participant’s compensation for such year.

19 ‘‘(B) APPLICABLE PERCENTAGE.—For

20 purposes of this paragraph—

21 ‘‘(i) IN GENERAL.—The term ‘applica22 ble percentage’ means 3 percent.

23 ‘‘(ii) ELECTION OF LOWER PERCENT24 AGE.—An employer may elect to apply an

25 applicable percentage of 1 percent, 2 per-
39

•S 649 IS

1 cent or zero percent for any year for all

2 employees eligible to participate in the plan

3 for such year if the employer notifies the

4 employees of such percentage within a rea5 sonable period before the beginning of such

6 year.

7 ‘‘(C) COMPENSATION LIMIT.—The com8 pensation taken into account under this para9 graph for any year shall not exceed the limita10 tion in effect for such year under section

11 401(a)(17).

12 ‘‘(D) CREDIT FOR SERVICE BEFORE PLAN

13 ADOPTED.—

14 ‘‘(i) IN GENERAL.—An employer may

15 elect to take into account a specified num16 ber of years of service (not greater than

17 10) performed before the adoption of the

18 plan (each hereinafter referred to as a

19 ‘prior service year’) as service under the

20 plan if the same specified number of years

21 is available to all employees eligible to par22 ticipate in the plan for the first plan year.

23 ‘‘(ii) ACCRUAL OF PRIOR SERVICE

24 BENEFIT.—Such an election shall be effec25 tive for a prior service year only if the re-
40

•S 649 IS

1 quirements of this paragraph are met for

2 an eligible plan year (with respect to em3 ployees entitled to credit for such prior

4 service year) by doubling the applicable

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

6 purposes of the preceding sentence, an eli7 gible plan year is a plan year in the period

8 of consecutive plan years (but not more

9 than the number specified under clause (i))

10 beginning with the first plan year that the

11 plan is in effect.

12 ‘‘(iii) ELECTION MAY NOT APPLY TO

13 CERTAIN PRIOR SERVICE YEARS.—This

14 subparagraph shall not apply with respect

15 to any prior service year of an employee

16 if—

17 ‘‘(I) for any part of such prior

18 service year such employee was an ac19 tive participant (within the meaning

20 of section 219(g)(5), as in effect on

21 the day before the date of the enact22 ment of the Retirement Savings Op23 portunity Act of 1999) under any de24 fined benefit plan of the employer (or

25 any predecessor thereof), or
41

•S 649 IS

1 ‘‘(II) such employee received dur2 ing such prior service year less than

3 $5,000 in compensation from the em4 ployer.

5 ‘‘(6) FUNDING.—

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

7 this paragraph are met only if the employer is

8 required to contribute to the annuity for each

9 plan year the amount necessary (determined in

10 accordance with subparagraph (B)) to fund the

11 accrued benefit for each participant entitled to

12 such benefit for such year.

13 ‘‘(B) ACTUARIAL ASSUMPTIONS.—In deter14 mining the amount required to be contributed

15 under subparagraph (A)—

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

17 not less than 3 percent and not greater

18 than 5 percent per year,

19 ‘‘(ii) the assumed mortality shall be

20 determined under the applicable mortality

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

22 modified by the Secretary so that it does

23 not include any assumption for preretire24 ment mortality),
42

•S 649 IS

1 ‘‘(iii) the assumed retirement age

2 shall be 65, and

3 ‘‘(iv) an assumption for reasonable ex4 penses shall be permitted consistent with

5 State law.

6 ‘‘(C) TIME WHEN CONTRIBUTIONS

7 DEEMED MADE.—For purposes of this para8 graph, an employer shall be deemed to have

9 made a contribution on the last day of the pre10 ceding taxable year if the payment is on ac11 count of such taxable year and is made not

12 later than the time prescribed by law for filing

13 the return for such taxable year (including ex14 tensions thereof).

15 ‘‘(D) PENALTY FOR FAILURE TO MAKE RE16 QUIRED CONTRIBUTION.—The taxes imposed by

17 section 4971 shall apply to a failure to make

18 the contribution required by this paragraph in

19 the same manner as if the amount of the failure

20 were an accumulated funding deficiency to

21 which such section applies.

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

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

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

25 this subsection.
43

•S 649 IS

1 ‘‘(B) USE OF DESIGNATED FINANCIAL IN2 STITUTIONS.—A rule similar to the rule of sec3 tion 408(p)(7) (without regard to the last sen4 tence thereof) shall apply for purposes of this

5 subsection.

6 ‘‘(C) TREATMENT OF MATCHING CON7 TRIBUTIONS.—A rule similar to the rule of sec8 tion 408(p)(8) shall apply for purposes of this

9 subsection.

10 ‘‘(c) SAFE TRUST.—

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

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

13 of a defined benefit plan if—

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

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

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

17 plan are based solely on the balance of a sepa18 rate account in such plan of such participant,

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

20 paragraphs (2) through (8), and

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

22 (other than rollover contributions) are employer

23 contributions.

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

25 meets the requirements of this paragraph for any
44

•S 649 IS

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

2 are met for such year.

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

4 of this paragraph for any year only if the require5 ments of subsection (b)(3) are met for such year.

6 ‘‘(4) BENEFIT FORM.—A plan meets the re7 quirements of this paragraph only if the require8 ments of subsection (b)(4) are met. For purposes of

9 this paragraph, a plan may satisfy the requirements

10 of subsection (b)(4) by purchasing an annuity con11 tract which meets the requirements of subsection

12 (b)(4).

13 ‘‘(5) AMOUNT OF ANNUAL ACCRUED BEN14 EFIT.—A plan meets the requirements of this para15 graph for any year only if the requirements of sub16 section (b)(5) are met for such year.

17 ‘‘(6) FUNDING.—

18 ‘‘(A) IN GENERAL.—A plan meets the re19 quirements of this paragraph for any year only

20 if—

21 ‘‘(i) the requirements of subsection

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

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

24 an unfunded prior year liability as of the

25 close of such plan year, the plan requires
45

•S 649 IS

1 that the employer make an additional con2 tribution to such plan for such year equal

3 to the amount of such unfunded prior year

4 liability.

5 ‘‘(B) UNFUNDED PRIOR YEAR LIABIL6 ITY.—For purposes of this paragraph, the term

7 ‘unfunded prior year liability’ means, with re8 spect to any plan year, the excess (if any) of—

9 ‘‘(i) the aggregate of the accrued li10 abilities under the plan as of the close of

11 the prior plan year, over

12 ‘‘(ii) the value of the plan’s assets de13 termined under section 412(c)(2) as of the

14 close of the plan year (determined without

15 regard to any contributions for such plan

16 year).

17 Such accrued liabilities shall be determined

18 using the assumptions specified in subsection

19 (b)(6)(B).

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

21 the applicable mortality table under section

22 417(e)(3) for any plan year is not the same as

23 such table for the prior plan year, the Secretary

24 shall prescribe regulations which phase in the
46

•S 649 IS

1 effect of the changes over a reasonable period

2 of plan years determined by the Secretary.

3 ‘‘(D) DISREGARD ASSUMPTIONS FOR EX4 PENSES.—For purposes of this paragraph, the

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

6 shall be disregarded.

7 ‘‘(7) SEPARATE ACCOUNTS FOR PARTICI8 PANTS.—A plan meets the requirements of this

9 paragraph for any year only if the plan provides—

10 ‘‘(A) for an individual account for each

11 participant, and

12 ‘‘(B) for benefits based solely on—

13 ‘‘(i) the amount contributed to the

14 participant’s account, and

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

16 losses, and any forfeitures of accounts of

17 other participants which may be allocated

18 to such participant’s account.

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

20 ARE NOT READILY TRADABLE.—A plan meets the

21 requirements of this paragraph only if the plan pro22 hibits the trust from holding directly or indirectly se23 curities which are not readily tradable on an estab24 lished securities market or otherwise. Nothing in
47

•S 649 IS

1 this paragraph shall prohibit the trust from holding

2 insurance company products regulated by State law.

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

4 definitions and special rule applicable under sub5 section (b)(7) shall apply for purposes of this sub6 section.

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

8 TRUSTS.—

9 ‘‘(1) CERTAIN REQUIREMENTS TREATED AS

10 MET.—For purposes of section 401(a), a SAFE an11 nuity and a SAFE trust shall be treated as meeting

12 the requirements of the following provisions:

13 ‘‘(A) Section 401(a)(4) (relating to non14 discrimination rules).

15 ‘‘(B) Section 401(a)(26) (relating to min16 imum participation).

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

18 participation and coverage requirements).

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

20 benefit requirements).

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

22 412(c) (relating to full funding limitation).

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

24 on benefits and contributions under qualified

25 plans).
48

•S 649 IS

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

2 for top-heavy plans).

3 ‘‘(2) CONTRIBUTIONS NOT TAKEN INTO AC4 COUNT IN APPLYING LIMITS TO OTHER PLANS.—

5 Contributions to a SAFE annuity or a SAFE trust

6 shall not be taken into account in applying sections

7 404 and 415 to other plans maintained by the em8 ployer.

9 ‘‘(3) COORDINATION WITH MAXIMUM LIMITA10 TION UNDER SUBSECTION (a).—In the case of any

11 SAFE annuity or SAFE trust, subsections (a)(1)

12 and (b) of section 408 shall be applied by sub13 stituting ‘the dollar amount in effect under section

14 408B(b)(5)(C)’ for ‘$2,000’ each place it appears in

15 such subsections.

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

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

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

19 403(b)(8), 408(d)(3), or 457(e)(16).’’

20 (b) DEDUCTION LIMITS NOT TO APPLY TO EM21 PLOYER CONTRIBUTIONS.—

22 (1) IN GENERAL.—Section 404 (relating to de23 ductions for contributions of an employer to pension,

24 etc., plans), as amended by section 204(c), is amend-
49

•S 649 IS

1 ed by adding at the end the following new sub2 section:

3 ‘‘(o) SPECIAL RULES FOR SAFE ANNUITIES AND

4 TRUSTS.—

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

6 a SAFE annuity or SAFE trust shall be treated as

7 if they are made to a plan subject to the require8 ments of this section.

9 ‘‘(2) TIMING.—

10 ‘‘(A) DEDUCTION.—Contributions de11 scribed in paragraph (1) shall be deductible in

12 the taxable year of the employer with or within

13 which the calendar year for which the contribu14 tions were made ends.

15 ‘‘(B) CONTRIBUTIONS AFTER END OF

16 YEAR.—For purposes of this subsection, con17 tributions shall be treated as made for a taxable

18 year if they are made on account of the taxable

19 year and are made not later than the time pre20 scribed by law for filing the return for the tax21 able year (including extensions thereof).’’

22 (2) COORDINATION WITH DEDUCTION UNDER

23 SECTION 219.—Section 219(b) (relating to maximum

24 amount of deduction) is amended by adding at the

25 end the following new paragraph:
50

•S 649 IS

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

2 This section shall not apply with respect to any

3 amount contributed to a SAFE annuity established

4 under section 408A(B).’’

5 (c) CONTRIBUTIONS AND DISTRIBUTIONS.—Section

6 402 (relating to taxability of beneficiary of employees’

7 trust) is amended by adding at the end the following new

8 subsection:

9 ‘‘(l) TREATMENT OF SAFE ANNUITIES.—Rules simi10 lar to the rules of paragraphs (1) and (3) of subsection

11 (h) shall apply to contributions and distributions with re12 spect to a SAFE annuities under section 408B.’’

13 (d) INCREASED PENALTY ON EARLY WITH14 DRAWALS.—Section 72(t) (relating to additional tax on

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

16 following new paragraph:

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

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

19 a SAFE annuity or a SAFE trust (within the mean20 ing of section 408B), paragraph (1) shall be applied

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

22 (e) SIMPLIFIED EMPLOYER REPORTS.—

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

24 to simplified employer reports) is amended by add25 ing at the end the following new paragraph:
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1 ‘‘(3) SAFE ANNUITIES.—

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

3 maintaining any SAFE annuity (within the

4 meaning of section 408B) shall file a simplified

5 annual return with the Secretary containing

6 only the information described in subparagraph

7 (B).

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

9 subparagraph (A) shall set forth—

10 ‘‘(i) the name and address of the em11 ployer,

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

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

14 employer,

15 ‘‘(iv) the number of such employees

16 who are eligible to participate in the plan,

17 ‘‘(v) the total amount contributed by

18 the employer to each such annuity for such

19 year and the minimum amount required

20 under section 408B to be so contributed,

21 ‘‘(vi) the percentage elected under sec22 tion 408B(b)(5)(B), and

23 ‘‘(vii) the number of employees with

24 respect to whom contributions are required
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1 to be made for such year under section

2 408B(b)(5)(D).

3 ‘‘(C) REPORTING BY ISSUER OF SAFE AN4 NUITY.—

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

6 SAFE annuity shall provide to the owner

7 of the annuity for each year a statement

8 setting forth as of the close of such year—

9 ‘‘(I) the benefits guaranteed at

10 age 65 under the annuity, and

11 ‘‘(II) the cash surrender value of

12 the annuity.

13 ‘‘(ii) SUMMARY DESCRIPTION.—The

14 issuer of any SAFE annuity shall provide

15 to the employer maintaining the annuity

16 for each year a description containing the

17 following information:

18 ‘‘(I) The name and address of

19 the employer and the issuer.

20 ‘‘(II) The requirements for eligi21 bility for participation.

22 ‘‘(III) The benefits provided with

23 respect to the annuity.
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1 ‘‘(IV) The procedures for, and ef2 fects of, withdrawals (including roll3 overs) from the annuity.

4 ‘‘(D) TIME AND MANNER OF REPORT5 ING.—Any return, report, or statement required

6 under this paragraph shall be made in such

7 form and at such time as the Secretary shall

8 prescribe.’’

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

10 actuarial reports) is amended by redesignating sub11 sections (c) and (d) as subsections (d) and (e), re12 spectively, and by inserting after subsection (b) the

13 following new subsection:

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

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

16 require a simplified actuarial report which contains infor17 mation similar to the information required in section

18 408(l)(3)(B).’’

19 (f) CONFORMING AMENDMENTS.—

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

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

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

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

24 following new subparagraph:
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1 ‘‘(E) a SAFE annuity described in section

2 408B.’’

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

4 (n)(3)(B) of section 414 are each amended by in5 serting ‘‘408B,’’ after ‘‘408(p),’’.

6 (3) Section 4972(d)(1)(A) is amended by strik7 ing ‘‘and’’ at the end of clause (iii), by striking the

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

9 and’’, and by adding after clause (iv) the following

10 new clause:

11 ‘‘(v) any SAFE annuity (within the

12 meaning of section 408B).’’

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

14 I of subchapter D of chapter 1 is amended by insert15 ing after the item relating to section 408A the fol16 lowing new item:

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

17 (g) MODIFICATIONS OF ERISA.—

18 (1) EXEMPTION FROM INSURANCE COV19 ERAGE.—Subsection (b) of section 4021 of the Em20 ployee Retirement Income Security Act of 1974 (29

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

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

23 of paragraph (13) and inserting ‘‘; or’’, and by add24 ing at the end the following new paragraph:
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1 ‘‘(14) which is established and maintained as

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

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

4 (2) REPORTING REQUIREMENTS.—Section 101

5 of such Act (29 U.S.C. 1021) is amended by redes6 ignating the second subsection (h) as subsection (j)

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

8 following new subsection:

9 ‘‘(i) SAFE ANNUITIES.—

10 ‘‘(1) NO EMPLOYER REPORTS.—Except as pro11 vided in this subsection, no report shall be required

12 under this section by an employer maintaining a

13 SAFE annuity under section 408B(b) of the Inter14 nal Revenue Code of 1986.

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

16 any SAFE annuity shall provide to the employer

17 maintaining the annuity for each year a description

18 containing the following information:

19 ‘‘(A) The name and address of the em20 ployer and the issuer.

21 ‘‘(B) The requirements for eligibility for

22 participation.

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

24 the annuity.
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1 ‘‘(D) The procedures for, and effects of,

2 withdrawals (including rollovers) from the an3 nuity.

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

5 shall provide each employee eligible to participate in

6 the SAFE annuity with the description described in

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

8 required under section 408B(b)(5)(B) of the Inter9 nal Revenue Code of 1986.’’

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

11 this section shall apply to years beginning after December

12 31, 1998.

13 SEC. 303. INCREASED LIMIT ON CONTRIBUTION AMOUNT

14 FOR SIMPLE RETIREMENT ACCOUNTS.

15 (a) INCREASE IN CONTRIBUTION LIMIT.—Subpara16 graph (A)(ii) of section 408(p)(2) (relating to qualified

17 salary reduction arrangement) is amended by striking

18 ‘‘$6,000’’ and inserting ‘‘$10,000’’.

19 (b) CONFORMING AMENDMENTS.—

20 (1) Section 401(k)(11)(B)(i)(I) is amended by

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

22 (2) Section 401(k)(11)(E) of such Code is

23 amended by striking ‘‘$6,000’’ and inserting

24 ‘‘$10,000’’.
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1 (3) Section 408(p)(2)(E) of such Code is

2 amended—

3 (A) by striking ‘‘$6,000’’ and inserting

4 ‘‘$10,000’’, and

5 (B) by striking ‘‘1996’’ and inserting

6 ‘‘1999’’.

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

8 this section shall apply to years beginning after December

9 31, 1999.

10 TITLE IV—CATCHUP

11 CONTRIBUTIONS

12 SEC. 401. CATCHUP CONTRIBUTIONS FOR INDIVIDUALS

13 AGE 50 OR OVER.

14 (a) ELECTIVE DEFERRALS.—Section 414 (relating to

15 definitions and special rules) is amended by adding at the

16 end the following new subsection:

17 ‘‘(v) CATCHUP CONTRIBUTIONS FOR INDIVIDUALS

18 AGE 50 OR OVER.—

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

20 plan shall not be treated as failing to meet any re21 quirement of this title solely because the plan per22 mits an eligible participant to make additional elec23 tive deferrals in any plan year.

24 ‘‘(2) LIMITATION ON AMOUNT OF ADDITIONAL

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

2 in an amount greater than the lesser of—

3 ‘‘(A) 50 percent of the maximum amount

4 of elective deferrals excludable from gross in5 come of the participant for such year (deter6 mined without regard to this subsection, sub7 section (u), or any limitation described in para8 graph (3)(A)), or

9 ‘‘(B) the excess (if any) of—

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

11 the year, over

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

13 participant for such year which are made

14 without regard to this subsection.

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

16 case of any contribution to a plan under paragraph

17 (1) (and any employer matching contribution with

18 respect thereto)—

19 ‘‘(A) such contribution shall not, with re20 spect to the year in which the contribution is

21 made—

22 ‘‘(i) be subject to any otherwise appli23 cable limitation contained in section

24 402(g), 402(h), 403(b), 404(a), 404(h),

25 408, 415, or 457, or
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1 ‘‘(ii) be taken into account in applying

2 such limitations to other contributions or

3 benefits under such plan or any other such

4 plan, and

5 ‘‘(B) except as provided in paragraph (4),

6 such plan shall not be treated as failing to meet

7 the requirements of section 401(a)(4),

8 401(a)(26), 401(k)(3), 401(k)(11), 401(k)(12),

9 401(m), 403(b)(12), 408(k), 408(p), 408B,

10 410(b), or 416 by reason of the making of (or

11 the right to make) such contribution.

12 ‘‘(4) MATCHING CONTRIBUTIONS.—Nothing in

13 paragraph (1) shall require an employer to make

14 any matching contribution with respect to any addi15 tional elective deferrals under paragraph (1) for any

16 year, but if the employer elects to make any such

17 matching contribution, such matching contribution

18 shall be taken into account in determining whether

19 the requirements of section 401(a)(4) are met for

20 the year.

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

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

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

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

2 the close of the plan year, and

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

6 by reason of the application of any limitation or

7 other restriction described in paragraph (3) or

8 contained in the terms of the plan.

9 ‘‘(6) OTHER DEFINITIONS AND RULES.—For

10 purposes of this subsection—

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

12 term ‘applicable employer plan’ means—

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

14 section 401(a) which is exempt from tax

15 under section 501(a),

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

17 contributed by an individual’s employer for

18 an annuity contract described in section

19 403(b),

20 ‘‘(iii) an eligible deferred compensa21 tion plan under section 457 of an eligible

22 employer as defined in section

23 457(e)(1)(A), and

24 ‘‘(iv) an arrangement meeting the re25 quirements of section 408 (k) or (p).
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1 ‘‘(B) ELECTIVE DEFERRAL.—The term

2 ‘elective deferral’ has the meaning given such

3 term by subsection (u)(2)(C).’’

4 (b) INDIVIDUAL RETIREMENT PLANS.—Section

5 219(b), as amended by section 302(b)(2)(A), is amended

6 by adding at the end the following new paragraph:

7 ‘‘(6) CATCHUP CONTRIBUTIONS.—In the case of

8 an individual who has attained the age of 50 before

9 the close of the taxable year, the dollar amount in

10 effect under paragraph (1)(A) for such taxable year

11 shall be equal to 150 percent of such amount deter12 mined without regard to this paragraph.’’

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

14 this section shall apply to contributions in taxable years

15 beginning after December 31, 2000.

16 TITLE V—PLAN AMENDMENTS

17 SEC. 501. PROVISIONS RELATING TO PLAN AMENDMENTS.

18 (a) IN GENERAL.—If this section applies to any plan

19 or contract amendment—

20 (1) such plan or contract shall be treated as

21 being operated in accordance with the terms of the

22 plan during the period described in subsection

23 (b)(2)(A), and

24 (2) such plan shall not fail to meet the require25 ments of section 411(d)(6) of the Internal Revenue
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1 Code of 1986 or section 204(g) of the Employee Re2 tirement Income Security Act of 1974 (29 U.S.C.

3 1054(g)) by reason of such amendment.

4 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

5 (1) IN GENERAL.—This section shall apply to

6 any amendment to any plan or annuity contract

7 which is made—

8 (A) pursuant to any amendment made by

9 this Act, or pursuant to any regulation issued

10 under this Act, and

11 (B) before the last day of the first plan

12 year beginning on or after January 1, 2002.

13 In the case of a government plan (as defined in sec14 tion 414(d) of the Internal Revenue Code of 1986

15 and section 3(32) of the Employee Retirement In16 come Security Act of 1974), this paragraph shall be

17 applied by substituting ‘‘2004’’ for ‘‘2002’’.

18 (2) CONDITIONS.—This section shall not apply

19 to any amendment unless—

20 (A) during the period—

21 (i) beginning on the date the legisla22 tive or regulatory amendment described in

23 paragraph (1)(A) takes effect (or in the

24 case of a plan or contract amendment not

25 required by such legislative or regulatory
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1 amendment, the effective date specified by

2 the plan), and

3 (ii) ending on the date described in

4 paragraph (1)(B) (or, if earlier, the date

5 the plan or contract amendment is adopt6 ed),

7 the plan or contract is operated as if such plan

8 or contract amendment were in effect, and

9 (B) such plan or contract amendment ap10 plies retroactively for such period.

Æ