II

106TH CONGRESS

1ST SESSION S. 60

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

for contributions by employees to pension plans.

IN THE SENATE OF THE UNITED STATES

JANUARY 19, 1999

Mr. GRASSLEY 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

equitable treatment for contributions by employees to

pension plans.

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

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

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

5 ‘‘Enhanced Savings Opportunities 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 SEC. 2. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF

4 EMPLOYEES TO DEFINED CONTRIBUTION

5 PLANS.

6 (a) EQUITABLE TREATMENT.—

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

8 415(c)(1) (relating to limitation for defined con9 tribution plans) is amended to read as follows:

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

11 (2) CONFORMING AMENDMENTS.—

12 (A) Subsection (f) of section 72 is amend13 ed by striking ‘‘section 403(b)(2)(D)(iii))’’ and

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

15 on December 31, 1998)’’.

16 (B) Section 403(b) is amended—

17 (i) by striking ‘‘the exclusion allow18 ance for such taxable year’’ in paragraph

19 (I) and inserting ‘‘the applicable limit

20 under section 415’’,

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

22 (iii) by inserting ‘‘or any amount re23 ceived by a former employee after the 5th

24 taxable year following the taxable year in

25 which such employee was terminated’’ be-
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1 fore the period at the end of the second

2 sentence of paragraph (3).

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

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

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

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

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

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

13 of an annuity contract described in section

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

15 means the participant’s includible compensation

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

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

18 paragraph (4).

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

20 as follows:

21 ‘‘(7) CERTAIN CONTRIBUTIONS BY CHURCH

22 PLANS NOT TREATED AS EXCEEDING LIMIT.—

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

24 other provision of this subsection, at the elec25 tion of a participant who is an employee of a
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1 church, a convention or association of churches,

2 including an organization described in section

3 414(e)(3)(B)(ii), contributions and other addi4 tions for an annuity contract or retirement in5 come account described in section 403(b) with

6 respect to such participant, when expressed as

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

10 is not in excess of $10,000.

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

12 The total amount of additions with respect to

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

15 years may not exceed $40,000.

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

17 this paragraph, the term ‘annual addition’ has

18 the meaning given such term by paragraph

19 (2).’’

20 (H) Section 415(e)(5) is amended—

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

22 a participant who has elected under sub23 section (c)(4)(D) to have the provisions of

24 subsection (c)(4)(C) apply)’’, and

25 (ii) by striking the last sentence.
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1 (I) Section 415(n)(2)(B) is amended by

2 striking ‘‘percentage’’.

3 (J) 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 Enhanced Savings Oppor7 tunity 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 SECTIONS 403(b) AND

12 408.—For purposes of this section, any annuity con13 tract described in section 403(b) for the benefit of

14 a participant shall be treated as a defined contribu15 tion plan maintained by each employer with respect

16 to which the participant has the control required

17 under subsection (b) or (c) of section 414 (as modi18 fied by subsection (h)). For purposes of this section,

19 any contribution by an employer to a simplified em20 ployee pension plan for an individual for a taxable

21 year shall be treated as an employer contribution to

22 a defined contribution plan for such individual for

23 such year.’’

24 (c) DEFERRED COMPENSATION PLANS OF STATE

25 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI-
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1 ZATIONS.—Subparagraph (B) of section 457(b)(2) (relat2 ing to salary limitation on eligible deferred compensation

plans’’ is amended by striking ‘‘331 3 ⁄3 percent’’ and insert4 ing ‘‘100 percent’’.

5 (d) EFFECTIVE DATES.—

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

8 shall apply to years beginning after December 31,

9 1999.

10 (2) SPECIAL RULES FOR SECTIONS 403(B) AND

11 408.—The amendment made by subsection (b) shall

12 apply to limitation years beginning after December

13 31, 2000.

14 SEC. 3. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT

15 FOR PURPOSES OF LIMITS.

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

17 at the end the following new subsection:

18 ‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC19 COUNT FOR PURPOSES OF LIMITS.—Elective deferrals (as

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

21 limitations described in this section (other than subsection

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

23 account in applying such limitations to any other contribu24 tions.’’
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to years beginning after December

3 31, 1999.

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