II

105TH CONGRESS

1ST SESSION S. 14

To provide for retirement savings and security, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JANUARY 21, 1997

Mr. DASCHLE (for himself, Mrs. BOXER, Mr. KENNEDY, Mr. BINGAMAN, Ms.

MOSELEY-BRAUN, Mr. ROCKEFELLER, Mr. GRAHAM, Ms. MIKULSKI, Mr.

KERRY, Mr. REID, Mr. DURBIN, Mr. INOUYE, Mr. TORRICELLI, and Mr.

BREAUX) introduced the following bill; which was read twice and referred

to the Committee on Finance

A BILL

To provide for retirement savings and security, 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.

4 This Act may be cited as the ‘‘Retirement Security

5 Act of 1997’’.

6 SEC. 2. TABLE OF CONTENTS.

7 The table of contents for this Act is as follows:

Sec. 1. Short title.

Sec. 2. Table of contents.

TITLE I—PENSION ACCESS AND COVERAGE
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Sec. 100. Amendment of 1986 Code.

Subtitle A—Improved Access to Individual Retirement Savings

CHAPTER 1—CONTRIBUTIONS TO INDIVIDUAL RETIREMENT PLANS THROUGH

PAYROLL DEDUCTIONS

Sec. 101. Definitions.

Sec. 102. Establishment of payroll deduction and investment system.

Sec. 103. Contributions to individual retirement plans.

Sec. 104. Investment options.

Sec. 105. Accounting and information.

Sec. 106. Administrative costs.

Sec. 107. Fiduciary responsibilities; liability and penalties; bonding; investigative authority.

Sec. 108. Selection of contractor.

CHAPTER 2—NONREFUNDABLE TAX CREDIT FOR CONTRIBUTIONS TO

INDIVIDUAL RETIREMENT ACCOUNTS

Sec. 111. Nonrefundable tax credit for contributions to individual retirement

plans.

CHAPTER 3—EXPANDED INDIVIDUAL RETIREMENT ACCOUNTS TO INCREASE

COVERAGE AND PORTABILITY

SUBCHAPTER A—IRA DEDUCTION

Sec. 121. Increase in income limitations.

Sec. 122. Inflation adjustment for deductible amount and income limitations.

SUBCHAPTER B—DISTRIBUTIONS AND INVESTMENTS

Sec. 131. Distributions from IRAs may be used without additional tax to purchase first homes, to pay higher education, or to pay financially devastating medical expenses.

Sec. 132. Contributions must be held at least 5 years in certain cases.

CHAPTER 4—PERIODIC PENSION BENEFITS STATEMENTS

Sec. 141. Periodic pension benefits statements.

Subtitle B—Improved Fairness in Retirement Plan Benefits

Sec. 151. Amendments to simple retirement accounts.

Sec. 152. Nondiscrimination rules for qualified cash or deferred arrangements

and matching contributions.

Sec. 153. Definition of highly compensated employees.

Subtitle C—Improving Retirement Plan Coverage

Sec. 161. Credit for pension plan start-up costs of small employers.

Sec. 162. Treatment of multiemployer plans under section 415.

Sec. 163. Exemption of mirror plans from section 457 limits.

Sec. 164. Special rules for self-employed individuals.

Sec. 165. Immediate participation in the thrift savings plan for Federal employees.

Sec. 166. Modification of 10 percent tax for nondeductible contributions.
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Subtitle D—Simplifying Plan Requirements

Sec. 171. Full funding limitation for multiemployer plans.

Sec. 172. Elimination of partial termination rules for multiemployer plans.

Sec. 173. Modifications to nondiscrimination and minimum participation rules

with respect to governmental plans.

Sec. 174. Elimination of requirement for plan descriptions and the filing requirement for summary plan descriptions and descriptions of

material modifications to a plan; technical corrections.

Sec. 175. New technologies in retirement plans.

TITLE II—SECURITY

Sec. 200. Amendment of ERISA.

Subtitle A—General Provisions

Sec. 201. Section 401(k) investment protection.

Sec. 202. Requirement of annual, detailed investment reports applied to certain

401(k) plans.

Sec. 203. Study on investments in collectibles.

Sec. 204. Qualified employer plans prohibited from making loans through credit

cards and other intermediaries.

Sec. 205. Multiemployer plan benefits guaranteed.

Sec. 206. Prohibited transactions.

Sec. 207. Substantial owner benefits.

Sec. 208. Reversion report.

Sec. 209. Development of additional remedies.

Subtitle B—ERISA Enforcement

Sec. 211. Repeal of limited scope audit.

Sec. 212. Additional requirements for qualified public accountants.

Sec. 213. Clarification of fiduciary penalties.

Sec. 214. Conforming amendments relating to ERISA enforcement.

TITLE III—PORTABILITY

Sec. 301. Faster vesting of employer matching contributions.

Sec. 302. Rationalize the restrictions on distributions from 401(k) plans.

Sec. 303. Treatment of transfers between defined contribution plans.

Sec. 304. Missing participants.

TITLE IV—TOWARD EQUITY FOR WOMEN

Sec. 401. Individual’s participation in plan not treated as participation by

spouse.

Sec. 402. Modifications of joint and survivor annuity requirements.

Sec. 403. Division of pension benefits upon divorce.

Sec. 404. Deferred annuities for surviving spouses of Federal employees.

Sec. 405. Payment of lump-sum credit for former spouses of Federal employees.

Sec. 406. Women’s pension toll-free phone number.

TITLE V—DATE FOR ADOPTION OF PLAN AMENDMENTS

Sec. 501. Date for adoption of plan amendments.
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1 TITLE I—PENSION ACCESS AND

2 COVERAGE

3 SEC. 100. AMENDMENT OF 1986 CODE.

4 Except as otherwise expressly provided, whenever in

5 this title an amendment or repeal is expressed in terms

6 of an amendment to, or repeal of, a section or other provi7 sion, the reference shall be considered to be made to a

8 section or other provision of the Internal Revenue Code

9 of 1986.

10 Subtitle A—Improved Access to

11 Individual Retirement Savings

12 CHAPTER 1—CONTRIBUTIONS TO INDI13 VIDUAL RETIREMENT PLANS

14 THROUGH PAYROLL DEDUCTIONS

15 SEC. 101. DEFINITIONS.

16 For purposes of this chapter:

17 (1) CONTRACTOR.—The term ‘‘contractor’’

18 means the private entity awarded a contract by the

19 Secretary of Labor under section 108.

20 (2) CONTRIBUTION CERTIFICATE.—The term

21 ‘‘contribution certificate’’ means a certificate submit22 ted by an eligible employee to the employee’s em23 ployer and the contractor which—

24 (A) identifies the employee by name, ad25 dress, and social security number,
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1 (B) includes a certification by the em2 ployee that the employee is an eligible employee,

3 and

4 (C) identifies the amount of the contribu5 tion to an individual retirement plan the em6 ployee wishes to make for the taxable year

7 through a payroll deduction, not to exceed the

8 amount allowed under section 408 of the Inter9 nal Revenue Code of 1986 to an individual re10 tirement plan for such year.

11 (2) ELIGIBLE EMPLOYEE.—

12 (A) IN GENERAL.—The term ‘‘eligible em13 ployee’’ means, with respect to any taxable

14 year, an employee whose employer does not

15 sponsor a qualified retirement plan (as defined

16 in section 4974(c) of the Internal Revenue Code

17 of 1986.

18 (B) EMPLOYEE.—The term ‘‘employee’’

19 does not include an employee as defined in sec20 tion 401(c)(1) of such Code.

21 (3) INDIVIDUAL RETIREMENT PLANS.—

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

23 retirement plan’’ has the meaning given the

24 term by section 7701(a)(37) of the Internal

25 Revenue Code of 1986).
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1 (B) APPLICATION OF RULES.—Rules appli2 cable to an individual retirement plan under the

3 Internal Revenue Code of 1986 are applicable

4 to an individual retirement plan referred to in

5 this chapter.

6 SEC. 102. ESTABLISHMENT OF PAYROLL DEDUCTION AND

7 INVESTMENT SYSTEM.

8 The contractor shall establish a system under

9 which—

10 (1) eligible employees, through employer payroll

11 deductions, may make contributions to individual re12 tirement plans, and

13 (2) amounts in the individual retirement plans

14 are invested as provided in section 104.

15 SEC. 103. CONTRIBUTIONS TO INDIVIDUAL RETIREMENT

16 PLANS.

17 (a) IN GENERAL.—The system established under sec18 tion 102 shall provide that contributions made to an indi19 vidual retirement plan for any taxable year are—

20 (1) contributions under an employer payroll de21 duction system, and

22 (2) additional contributions which, when added

23 to contributions under paragraph (1), do not exceed

24 the amount allowed under section 408 of the Inter25 nal Revenue Code of 1986 for the taxable year.
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1 (b) EMPLOYER PAYROLL DEDUCTION SYSTEMS.—

2 (1) IN GENERAL.—The system established

3 under section 102 shall provide to the maximum ex4 tent feasible that contributions under employer pay5 roll deduction systems are made in such a manner

6 as provides all employers with a simple, cost-effec7 tive way of making such contributions.

8 (2) SIMPLIFIED EMPLOYEE ENROLLMENT AND

9 PARTICIPATION.—

10 (A) ESTABLISHMENT.—An eligible em11 ployee may establish and maintain an individual

12 retirement plan simply by—

13 (i) completing a contribution certifi14 cate, and

15 (ii) submitting such certificate to the

16 eligible employee’s employer and the con17 tractor in the manner provided under para18 graph (3).

19 (B) EASE OF ADMINISTRATION.—An eligi20 ble employee establishing and maintaining an

21 individual retirement plan under subparagraph

22 (A) may change the amount of an employer

23 payroll deduction, request employer payroll de24 ductions by new employers to an existing plan,
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1 and make changes in elections made under sec2 tion 104(d) in the same manner as under sub3 paragraph (A).

4 (C) SIMPLIFIED FORMS.—

5 (i) CONTRIBUTION CERTIFICATE.—

6 The contractor shall develop a contribution

7 certificate for purposes of subparagraph

8 (A)—

9 (I) which is written in a clear

10 and easily understandable manner,

11 and

12 (II) the completion of which by

13 an eligible employee will constitute the

14 establishment of an individual retire15 ment plan and the request for em16 ployer payroll deductions.

17 (ii) OTHER FORMS.—The contractor

18 shall develop such model forms for pur19 poses of subparagraph (B) as are nec20 essary to enable the contractor and an em21 ployer to easily administer an individual

22 retirement plan on behalf of an eligible em23 ployee.
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1 (iii) AVAILABILITY.—The contractor

2 shall make available to all eligible employ3 ees and employers the forms developed

4 under this subparagraph, and shall include

5 with such forms easy to understand ex6 planatory materials.

7 (3) USE OF CERTIFICATE.—Each employer

8 upon receipt of a contribution certificate from an eli9 gible employee shall deduct the appropriate contribu10 tion as determined by such certificate from the em11 ployee’s wages in equal amounts during the remain12 ing payroll periods for the taxable year and shall

13 remit such amounts to the contractor for investment

14 in the employee’s individual retirement plan.

15 (4) FAILURE TO REMIT PAYROLL DEDUC16 TIONS.—For purposes of the Internal Revenue Code

17 of 1986, any amount which an employer fails to

18 remit to the contractor on behalf of an eligible em19 ployee pursuant to a contribution certificate of such

20 employee shall not be allowed as a deduction to the

21 employer under such Code.
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1 SEC. 104. INVESTMENT OPTIONS.

2 (a) IN GENERAL.—The contractor shall, pursuant to

3 the system established under section 102, enter into ar4 rangements, on a competitive basis, with qualified profes5 sional asset managers to provide individuals with the op6 portunity to invest sums in an individual retirement plan

7 in each of the funds described in subsection (b).

8 (b) TYPE OF FUNDS.—The funds described in the

9 subsection are the following:

10 (1) A government securities investment fund.

11 (2) A fixed income investment fund.

12 (3) A common stock index investment fund.

13 (c) ASSET MANAGERS.—

14 (1) IN GENERAL.—The contractor may select

15 more than 1 qualified professional asset manager for

16 each type of fund described in subsection (b).

17 (2) ASSET ALLOCATION.—The contractor may

18 place limits on the amount which may be allocated

19 by the contractor to any qualified professional asset

20 manager to the extent the contractor determines

21 necessary to prevent undue impact on any financial

22 market or undue risk to participants.

23 (3) DEFINITION.—For purposes of this section,

24 the term ‘‘qualified professional asset manager’’ has

25 the meaning given the term by section 8438(a)(7) of

26 title 5, United States Code.
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1 (d) PARTICIPANT ELECTIONS.—

2 (1) IN GENERAL.—The system established

3 under section 102 shall provide that an individual on

4 whose behalf an individual retirement plan is estab5 lished may—

6 (A) elect the investment funds into which

7 contributions to the plan are to be invested, and

8 (B) elect to transfer contributions (and

9 earnings) from one fund to another.

10 (2) METHOD.—Any election shall be made in

11 the manner provided by the system, except that the

12 contractor shall seek to ensure elections may be

13 made in a simple, timely manner.

14 (3) LIMITATION.—Any election under this sub15 section shall be subject to the asset allocation limita16 tion under subsection (c)(2).

17 (e) INVESTMENT POLICIES.—The system established

18 under section 102 shall provide that any investment poli19 cies adopted by the contractor shall provide for—

20 (1) prudent investments suitable for accumulat21 ing funds for payment of retirement income, and

22 (2) low administrative costs.

23 SEC. 105. ACCOUNTING AND INFORMATION.

24 (a) ESTABLISHMENT OF PLANS.—
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1 (1) IN GENERAL.—The system established

2 under section 102 shall provide for the establishment

3 and maintenance of an individual retirement plan

4 for each individual—

5 (A) for whom contributions are made to

6 the contractor under an employer payroll deduc7 tion system pursuant to a contribution certifi8 cate, and

9 (B) who makes any additional contribu10 tions allowed under section 408 of the Internal

11 Revenue Code of 1986 for the taxable year.

12 (2) ALLOCATIONS AND REDUCTIONS TO

13 PLAN.—Such system shall provide for—

14 (A) the allocation to each plan of an

15 amount equal to a pro rata share of the net

16 earnings and net losses from each investment of

17 sums in such plan, and

18 (B) a reduction in each such plan for the

19 plan’s appropriate share of the administrative

20 expenses to be paid out.

21 (3) EXAMINATION OF PLANS.—

22 (A) IN GENERAL.—The contractor shall

23 annually engage, on behalf of all individuals for
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1 whom an individual retirement plan is main2 tained, an independent qualified public account3 ant (within the meaning of section

4 103(a)(3)(D) of the Employee Retirement In5 come Security Act of 1974 (29 U.S.C.

6 1023(a)(3)(D)) who shall conduct an examina7 tion of all plans and other books and records

8 maintained in the administration of this chapter

9 as the accountant considers necessary to make

10 the determination under subparagraph (B). The

11 examination shall be conducted in accordance

12 with generally accepted auditing standards and

13 shall involve such tests of the plans, books, and

14 records as the public accountant considers nec15 essary.

16 (B) DETERMINATION OF COMPLIANCE.—

17 The public accountant conducting an examina18 tion under subparagraph (A) shall determine

19 whether the plans, books, and records referred

20 to in such subparagraph have been maintained

21 in conformity with generally accepted account22 ing principles. The public accountant shall

23 transmit to the contractor and the Secretary of

24 Labor a report on such examination and deter25 mination.
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1 (C) RELIANCE.—In making a determina2 tion under subparagraph (B), a public account3 ant may rely on the correctness of any actuarial

4 matter certified by an enrolled actuary if the

5 public accountant states a reliance in the report

6 to the contractor.

7 (b) ADDITIONAL INFORMATION.—

8 (1) IN GENERAL.—The system established

9 under section 102 shall provide for the furnishing of

10 information to employees and employers of the op11 portunity of establishing individual retirement plans

12 and of transferring amounts to such plans.

13 (2) PLAN PARTICIPANTS.—

14 (A) IN GENERAL.—Such system shall pro15 vide that each individual for whom an individ16 ual retirement plan is maintained shall be peri17 odically furnished with—

18 (i) a statement relating to the individ19 ual’s plan, and

20 (ii) a summary description of the in21 vestment options under the plan and a his22 tory of the investment performance of such

23 options during the 5-year period preceding

24 the evaluation.
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1 (B) PLAN VALUATION.—Such system shall

2 also provide that each individual for whom an

3 individual retirement plan is established shall be

4 entitled, upon request, to a periodic valuation of

5 amounts in each fund described in section

6 104(b) in order to enable the individual to

7 make an election to transfer such amounts be8 tween funds.

9 (3) INVESTMENT INFORMATION.—The contrac10 tor shall also make available to employees informa11 tion on how to make informed investment decisions

12 and how to achieve retirement objectives.

13 (4) INFORMATION NOT INVESTMENT ADVICE.—

14 Information provided under this subsection shall not

15 be treated as investment advice for purposes of any

16 Federal or State law.

17 SEC. 106. ADMINISTRATIVE COSTS.

18 (a) IN GENERAL.—Except as provided from amounts

19 described in section 108(c), any expense incurred by the

20 contractor in carrying out its functions under this chapter

21 shall be paid first from the earnings of the funds in indi22 vidual retirement plans and then from balances in such

23 plans.
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1 (b) ALLOCATION.—Expenses under subsection (a)

2 shall be allocated to each individual retirement plan in the

3 manner provided under section 105.

4 SEC. 107. FIDUCIARY RESPONSIBILITIES; LIABILITY AND

5 PENALTIES; BONDING; INVESTIGATIVE AU6 THORITY.

7 Except as modified by the Secretary of Labor in regu8 lations to correspond to the structure and responsibilities

9 of the contractor, the provisions of sections 8477, 8478,

10 8478a, and 8479(a) of title 5, United States Code, shall

11 apply to the contractor in the same manner as such provi12 sions apply to the Thrift Savings Fund.

13 SEC. 108. SELECTION OF CONTRACTOR.

14 (a) SELECTION.—

15 (1) IN GENERAL.—The Secretary of Labor shall

16 contract out, on a competitive basis, the duties

17 under this chapter to a private entity.

18 (2) MEASUREMENT OF CONTRACT PERFORM19 ANCE.—No contract shall be entered into with any

20 entity under paragraph (1) unless the Secretary of

21 Labor finds that such entity will perform its obliga22 tions under the contract efficiently and effectively

23 and will meet such requirements as to financial re24 sponsibility, legal authority, and other matters as

25 the Secretary finds pertinent. The Secretary of
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1 Labor shall publish in the Federal Register stand2 ards and criteria for the efficient and effective per3 formance of contract obligations under this chapter

4 (including standards and criteria for the termination

5 of such contract), and opportunity shall be provided

6 for public comment prior to implementation.

7 (b) TREATMENT AS TRUSTEE.—For purposes of the

8 Internal Revenue Code of 1986 the contractor shall be

9 treated in the same manner as a trustee described in sec10 tion 408(a)(2) of such Code.

11 (c) AUTHORIZATION OF APPROPRIATIONS.—There

12 are authorized to be appropriated such sums as are nec13 essary for the Secretary of Labor to design and award the

14 contract described in subsection (a)(1) and for the con15 tractor to begin operations under this chapter.

16 (d) EFFECTIVE DATE OF SYSTEM.—The system es17 tablished under section 102 shall take effect on the first

18 day of the sixth month following the month in which the

19 contract under subsection (a) is awarded.
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1 CHAPTER 2—NONREFUNDABLE TAX

2 CREDIT FOR CONTRIBUTIONS TO IN3 DIVIDUAL RETIREMENT ACCOUNTS

4 SEC. 111. NONREFUNDABLE TAX CREDIT FOR CONTRIBU5 TIONS TO INDIVIDUAL RETIREMENT PLANS.

6 (a) IN GENERAL.—Subpart A of part IV of sub7 chapter A of chapter 1 (relating to nonrefundable personal

8 credits) is amended by inserting after section 25 the fol9 lowing new section:

10 ‘‘SEC. 25A. RETIREMENT SAVINGS.

11 ‘‘(a) ALLOWANCE OF CREDIT.—There shall be al12 lowed as a credit against the tax imposed by this chapter

13 so much of the qualified retirement contributions of the

14 taxpayer for the taxable year as does not exceed the appli15 cable amount of the adjusted gross income of the taxpayer

16 for such year.

17 ‘‘(b) APPLICABLE AMOUNT.—For purposes of sub18 section (a), the applicable amount is determined in accord19 ance with the following table:

‘‘If adjusted gross income is: The applicable amount is:

Not over $15,000 .......................... $450.

Over $15,000 but not over

$20,000.

$400.

Over $20,000 but not over

$25,000.

$350.

Over $25,000 but not over

$30,000.

$300.

Over $30,000 ................................. $0.
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1 ‘‘(c) SECTION NOT TO APPLY TO CERTAIN CON2 TRIBUTIONS.—This section shall not apply with respect

3 to—

4 ‘‘(1) an employer contribution to a simplified

5 employee pension, and

6 ‘‘(2) any amount contributed to a simple retire7 ment account established under section 408(p).

8 ‘‘(d) OTHER LIMITATIONS AND RESTRICTIONS.—

9 ‘‘(1) BENEFICIARY MUST BE UNDER AGE

701 10 ⁄2.—No credit shall be allowed under this section

11 with respect to any qualified retirement contribution

12 for the benefit of an individual if such individual has

attained age 701 13 ⁄2 before the close of such individ14 ual’s taxable year for which the contribution was

15 made.

16 ‘‘(2) RECONTRIBUTED AMOUNTS.—No credit

17 shall be allowed under this section with respect to a

18 rollover contribution described in section 402(c),

19 403(a)(4), 403(b)(8), or 408(d)(3).

20 ‘‘(3) AMOUNTS CONTRIBUTED UNDER ENDOW21 MENT CONTRACT.—In the case of an endowment

22 contract described in section 408(b), no credit shall

23 be allowed under this section for that portion of the

24 amounts paid under the contract for the taxable

25 year which is properly allocable, under regulations
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1 prescribed by the Secretary, to the cost of life insur2 ance.

3 ‘‘(4) DENIAL OF CREDIT FOR AMOUNT CON4 TRIBUTED TO INHERITED ANNUITIES OR AC5 COUNTS.—No credit shall be allowed under this sec6 tion with respect to any amount paid to an inherited

7 individual retirement account or individual retire8 ment annuity (within the meaning of section

9 408(d)(3)(C)(ii)).

10 ‘‘(5) NO DOUBLE BENEFIT.—No credit shall be

11 allowed under this section for any taxable year with

12 respect to the amount of any qualified retirement

13 contribution for the benefit of an individual if such

14 individual takes a deduction with respect to such

15 amount under section 219 for such taxable year.

16 ‘‘(e) QUALIFIED RETIREMENT CONTRIBUTION.—For

17 purposes of this section, the term ‘qualified retirement

18 contribution’ means—

19 ‘‘(1) any amount paid in cash for the taxable

20 year by or on behalf of an individual to an individual

21 retirement plan for such individual’s benefit, and

22 ‘‘(2) any amount contributed on behalf of any

23 individual to a plan described in section 501(a)(18).

24 ‘‘(f) OTHER DEFINITIONS AND SPECIAL RULES.—
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1 ‘‘(1) COMPENSATION.—For purposes of this

2 section, the term ‘compensation’ has the meaning

3 given in section 219(f)(1).

4 ‘‘(2) MARRIED COUPLES MUST FILE JOINT RE5 TURN.—If the taxpayer is married at the close of

6 the taxable year, the credit shall be allowed under

7 subsection (a) only if the taxpayer and the tax8 payer’s spouse file a joint return for the taxable

9 year.

10 ‘‘(3) TIME WHEN CONTRIBUTIONS DEEMED

11 MADE.—For purposes of this section, a taxpayer

12 shall be deemed to have made a contribution to an

13 individual retirement plan on the last day of the pre14 ceding taxable year if the contribution is made on

15 account of such taxable year and is made not later

16 than the time prescribed by law for filing the return

17 for such taxable year (not including extensions

18 thereof).

19 ‘‘(4) REPORTS.—The Secretary shall prescribe

20 regulations which prescribe the time and the manner

21 in which reports to the Secretary and plan partici22 pants shall be made by the plan administrator of a

23 qualified employer or government plan receiving

24 qualified voluntary employee contributions.
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1 ‘‘(5) EMPLOYER PAYMENTS.—For purposes of

2 this title, any amount paid by an employer to an in3 dividual retirement plan shall be treated as payment

4 of compensation to the employer (other than a self5 employed individual who is an employee within the

6 meaning of section 401(c)(1)) includible in his gross

7 income in the taxable year for which the amount was

8 contributed, whether or not a credit for such pay9 ment is allowable under this section to the employee.

10 ‘‘(g) CROSS REFERENCE.—

‘‘For failure to provide required reports, see section 6652(g).’’.

11 (b) CONFORMING AMENDMENTS.—

12 (1) Section 86(f) is amended by redesignating

13 paragraphs (2), (3), and (4) as paragraphs (3), (4),

14 and (5), respectively, and by inserting after para15 graph (1) the following new paragraph:

16 ‘‘(2) section 25A(f)(1) (defining compensa17 tion),’’.

18 (2) Clause (i) of section 501(c)(18)(D) is

19 amended by inserting ‘‘which may be taken into ac20 count in computing the credit allowable under sec21 tion 25A or’’ before ‘‘with respect’’.

22 (3) Section 6047(c) is amended by inserting

23 ‘‘section 25A or’’ before ‘‘section 219’’.

24 (4) Section 6652(g) is amended—
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1 (A) by inserting ‘‘section 25A(f)(4) or’’ be2 fore ‘‘section 219(f)(4)’’, and

3 (B) by inserting ‘‘CREDITABLE’’ before

4 ‘‘DEDUCTIBLE’’ in the heading thereof.

5 (5) The table of sections for subpart A of part

6 IV of subchapter A of chapter 1 is amended by in7 serting after the item relating to section 25 the fol8 lowing new item:

‘‘Sec. 25A. Retirement savings.’’.

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

10 this section apply to taxable years beginning after Decem11 ber 31, 1997.

12 CHAPTER 3—EXPANDED INDIVIDUAL RE13 TIREMENT ACCOUNTS TO INCREASE

14 COVERAGE AND PORTABILITY

15 Subchapter A—IRA Deduction

16 SEC. 121. INCREASE IN INCOME LIMITATIONS.

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

18 219(g)(3) (defining applicable dollar amount) is amend19 ed—

20 (1) by striking ‘‘$40,000’’ in clause (i) and in21 serting ‘‘$80,000 ($70,000 in the case of taxable

22 years beginning in 1997, 1998, or 1999)’’, and

23 (2) by striking ‘‘$25,000’’ in clause (ii) and in24 serting ‘‘$50,000 ($45,000 in the case of taxable

25 years beginning in 1997, 1998, or 1999)’’.
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1 (b) PHASEOUT OF LIMITATIONS.—Clause (ii) of sec2 tion 219(g)(2)(A) (relating to amount of reduction) is

3 amended by striking ‘‘$10,000’’ and inserting ‘‘an amount

4 equal to 10 times the dollar amount applicable for the tax5 able year under subsection (b)(1)(A)’’.

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

7 this section shall apply to taxable years beginning after

8 December 31, 1996.

9 SEC. 122. INFLATION ADJUSTMENT FOR DEDUCTIBLE

10 AMOUNT AND INCOME LIMITATIONS.

11 (a) IN GENERAL.—Section 219 (relating to retire12 ment savings) is amended by redesignating subsection (h)

13 as subsection (i) and by inserting after subsection (g) the

14 following new subsection:

15 ‘‘(h) COST-OF-LIVING ADJUSTMENTS.—

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

17 any taxable year beginning in a calendar year after

18 1997, the $2,000 amount under subsection (b)(1)(A)

19 shall be increased by an amount equal to—

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

21 ‘‘(B) the cost-of-living adjustment deter22 mined under section 1(f)(3) for the calendar

23 year in which the taxable year begins, deter24 mined by substituting ‘calendar year 1996’ for
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1 ‘calendar year 1992’ in subparagraph (B)

2 thereof.

3 ‘‘(2) APPLICABLE DOLLAR AMOUNT.—In the

4 case of any taxable year beginning in a calendar

5 year after 2000, the applicable dollar amounts under

6 subsection (g)(3)(B) shall be increased by an

7 amount equal to—

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

9 ‘‘(B) the cost-of-living adjustment deter10 mined under section 1(f)(3) for the calendar

11 year in which the taxable year begins, deter12 mined by substituting ‘calendar year 1999’ for

13 ‘calendar year 1992’ in subparagraph (B)

14 thereof.

15 ‘‘(3) ROUNDING RULES.—

16 ‘‘(A) DEDUCTION AMOUNTS.—If any

17 amount after adjustment under paragraph (1)

18 is not a multiple of $500, such amount shall be

19 rounded to the next lowest multiple of $500.

20 ‘‘(B) APPLICABLE DOLLAR AMOUNTS.—If

21 any amount after adjustment under paragraph

22 (2) is not a multiple of $5,000, such amount

23 shall be rounded to the next lowest multiple of

24 $5,000.’’.

25 (b) CONFORMING AMENDMENTS.—
26

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

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

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

4 of the amount in effect for such taxable year under

5 section 219(b)(1)(A)’’.

6 (2) Section 408(b)(2)(B) is amended by strik7 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

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

9 (3) Section 408(j) is amended by striking

10 ‘‘$2,000’’.

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

12 this section shall apply to taxable years beginning after

13 December 31, 1996.

14 Subchapter B—Distributions and

15 Investments

16 SEC. 131. DISTRIBUTIONS FROM IRAS MAY BE USED WITH17 OUT ADDITIONAL TAX TO PURCHASE FIRST

18 HOMES, TO PAY HIGHER EDUCATION, OR TO

19 PAY FINANCIALLY DEVASTATING MEDICAL

20 EXPENSES.

21 (a) IN GENERAL.—Paragraph (2) of section 72(t)

22 (relating to exceptions to 10-percent additional tax on

23 early distributions from qualified retirement plans) is

24 amended by adding at the end the following new subpara25 graph:
27

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1 ‘‘(E) DISTRIBUTIONS FROM CERTAIN

2 PLANS FOR FIRST HOME PURCHASES OR EDU3 CATIONAL EXPENSES.—Distributions to an in4 dividual from an individual retirement plan—

5 ‘‘(i) which are qualified first-time

6 homebuyer distributions (as defined in

7 paragraph (7)); or

8 ‘‘(ii) to the extent such distributions

9 do not exceed the qualified higher edu10 cation expenses (as defined in paragraph

11 (8)) of the taxpayer for the taxable year.’’.

12 (b) FINANCIALLY DEVASTATING MEDICAL EX13 PENSES.—

14 (1) CERTAIN LINEAL DESCENDANTS AND AN15 CESTORS TREATED AS DEPENDENTS.—Subpara16 graph (B) of section 72(t)(2) (relating to subsection

17 not to apply to certain distributions) is amended by

18 striking ‘‘medical care’’ and all that follows and in19 serting ‘‘medical care determined—

20 ‘‘(i) without regard to whether the

21 employee itemizes deductions for such tax22 able year, and

23 ‘‘(ii) in the case of an individual re24 tirement plan, by treating such employee’s

25 dependents as including all children,
28

•S 14 IS

1 grandchildren, and ancestors of the em2 ployee or such employee’s spouse.’’.

3 (2) CONFORMING AMENDMENT.—Subparagraph

4 (B) of section 72(t)(2) is amended by striking ‘‘or

5 (D)’’ and inserting ‘‘, (D), or (E)’’.

6 (c) DEFINITIONS.—Section 72(t) is amended by add7 ing at the end the following new paragraphs:

8 ‘‘(7) QUALIFIED FIRST-TIME HOMEBUYER DIS9 TRIBUTIONS.—For purposes of paragraph

10 (2)(E)(i)—

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

12 first-time homebuyer distribution’ means any

13 payment or distribution received by an individ14 ual to the extent such payment or distribution

15 is used by the individual before the close of the

16 60th day after the day on which such payment

17 or distribution is received to pay qualified ac18 quisition costs with respect to a principal resi19 dence of a first-time homebuyer who is such in20 dividual or the spouse, child (as defined in sec21 tion 151(c)(3)), or grandchild of such individ22 ual.

23 ‘‘(B) QUALIFIED ACQUISITION COSTS.—

24 For purposes of this paragraph, the term

25 ‘qualified acquisition costs’ means the costs of
29

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1 acquiring, constructing, or reconstructing a res2 idence. Such term includes any usual or reason3 able settlement, financing, or other closing

4 costs.

5 ‘‘(C) FIRST-TIME HOMEBUYER; OTHER

6 DEFINITIONS.—For purposes of this para7 graph—

8 ‘‘(i) FIRST-TIME HOMEBUYER.—The

9 term ‘first-time homebuyer’ means any in10 dividual if—

11 ‘‘(I) such individual (and if mar12 ried, such individual’s spouse) had no

13 present ownership interest in a prin14 cipal residence during the 3-year pe15 riod ending on the date of acquisition

16 of the principal residence to which

17 this paragraph applies, and

18 ‘‘(II) subsection (h) or (k) of sec19 tion 1034 did not suspend the run20 ning of any period of time specified in

21 section 1034 with respect to such in22 dividual on the day before the date

23 the distribution is applied pursuant to

24 subparagraph (A).
30

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1 In the case of an individual described in

2 section 143(i)(1)(C) for any year, an own3 ership interest shall not include any inter4 est under a contract of deed described in

5 such section. An individual who loses an

6 ownership interest in a principal residence

7 incident to a divorce or legal separation is

8 deemed for purposes of this subparagraph

9 to have had no ownership interest in such

10 principal residence within the period re11 ferred to in subclause (II).

12 ‘‘(ii) PRINCIPAL RESIDENCE.—The

13 term ‘principal residence’ has the same

14 meaning as when used in section 1034.

15 ‘‘(iii) DATE OF ACQUISITION.—The

16 term ‘date of acquisition’ means the date—

17 ‘‘(I) on which a binding contract

18 to acquire the principal residence to

19 which subparagraph (A) applies is en20 tered into, or

21 ‘‘(II) on which construction or re22 construction of such a principal resi23 dence is commenced.

24 ‘‘(D) SPECIAL RULE WHERE DELAY IN AC25 QUISITION.—Any portion of any distribution
31

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1 from any individual retirement plan which fails

2 to meet the requirements of subparagraph (A)

3 solely by reason of a delay or cancellation of the

4 purchase or construction of the residence may

5 be contributed to an individual retirement plan

6 as provided in section 408(d)(3)(A)(i) (deter7 mined by substituting ‘120 days’ for ‘60 days’

8 in such section), except that—

9 ‘‘(i) section 408(d)(3)(B) shall not be

10 applied to such portion, and

11 ‘‘(ii) such portion shall not be taken

12 into account in determining whether sec13 tion 408(d)(3)(B) applies to any other

14 amount.

15 ‘‘(8) QUALIFIED HIGHER EDUCATION EX16 PENSES.—For purposes of paragraph (2)(E)(ii)—

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

18 higher education expenses’ means tuition and

19 fees required for the enrollment or attendance

20 of—

21 ‘‘(i) the taxpayer,

22 ‘‘(ii) the taxpayer’s spouse,

23 ‘‘(iii) a dependent of the taxpayer

24 with respect to whom the taxpayer is al25 lowed a deduction under section 151, or
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1 ‘‘(iv) the taxpayer’s child (as defined

2 in section 151(c)(3)) or grandchild,

3 as an eligible student at an institution of higher

4 education.

5 ‘‘(B) EXCEPTIONS.—The term ‘qualified

6 higher education expenses’ does not include—

7 ‘‘(i) expenses with respect to any

8 course or other education involving sports,

9 games, or hobbies, unless such expenses—

10 ‘‘(I) are part of a degree pro11 gram, or

12 ‘‘(II) are deductible under this

13 chapter without regard to this section;

14 or

15 ‘‘(ii) any student activity fees, athletic

16 fees, insurance expenses, or other expenses

17 unrelated to a student’s academic course of

18 instruction.

19 ‘‘(C) COORDINATION WITH SAVINGS BOND

20 PROVISIONS.—The amount of qualified higher

21 education expenses for any taxable year shall be

22 reduced by any amount excludable from gross

23 income under section 135.
33

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1 ‘‘(D) ELIGIBLE STUDENT.—For purposes

2 of subparagraph (A), the term ‘eligible student’

3 means a student who—

4 ‘‘(i) meets the requirements of section

5 484(a)(1) of the Higher Education Act of

6 1965 (20 U.S.C. 1091(a)(1)), as in effect

7 on the date of the enactment of this sec8 tion, and

9 ‘‘(ii)(I) is carrying at least one-half

10 the normal full-time work load for the

11 course of study the student is pursuing, as

12 determined by the institution of higher

13 education, or

14 ‘‘(II) is enrolled in a course which en15 ables the student to improve the student’s

16 job skills or to acquire new job skills.

17 ‘‘(E) INSTITUTION OF HIGHER EDU18 CATION.—The term ‘institution of higher edu19 cation’ means an institution which—

20 ‘‘(i) is described in section 481 of the

21 Higher Education Act of 1965 (20 U.S.C.

22 1088), as in effect on the date of the en23 actment of this section, and

24 ‘‘(ii) is eligible to participate in pro25 grams under title IV of such Act.’’.
34

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

2 this section shall apply to payments and distributions after

3 December 31, 1996.

4 SEC. 132. CONTRIBUTIONS MUST BE HELD AT LEAST 5

5 YEARS IN CERTAIN CASES.

6 (a) IN GENERAL.—Section 72(t), as amended by sec7 tion 131(c), is amended by adding at the end the following

8 new paragraph:

9 ‘‘(9) CERTAIN CONTRIBUTIONS MUST BE HELD

10 5 YEARS.—

11 ‘‘(A) IN GENERAL.—Paragraph (2)(A)(i)

12 shall not apply to any amount distributed out

13 of an individual retirement plan (other than a

14 special individual retirement account) which is

15 allocable to contributions made to the plan dur16 ing the 5-year period ending on the date of

17 such distribution (and earnings on such con18 tributions).

19 ‘‘(B) ORDERING RULE.—For purposes of

20 this paragraph—

21 ‘‘(i) FIRST-IN, FIRST-OUT RULE.—

22 Distributions shall be treated as having

23 been made—

24 ‘‘(I) first from the earliest con25 tribution (and earnings allocable
35

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1 thereto) remaining in the account at

2 the time of the distribution, and

3 ‘‘(II) then from other contribu4 tions (and earnings allocable thereto)

5 in the order in which made.

6 ‘‘(ii) ALLOCATION OF EARNINGS.—

7 Earnings shall be allocated to contribu8 tions in such manner as the Secretary may

9 prescribe.

10 ‘‘(iii) AGGREGATIONS OF CONTRIBU11 TIONS.—Except as provided by the Sec12 retary, for purposes of this subpara13 graph—

14 ‘‘(I) all contributions made dur15 ing the same taxable year may be

16 treated as 1 contribution, and

17 ‘‘(II) all contributions made be18 fore the first day of the 5-year period

19 ending on the day before any distribu20 tion may be treated as 1 contribution.

21 ‘‘(C) SPECIAL RULE FOR ROLLOVERS.—

22 ‘‘(i) PENSION PLANS.—Subparagraph

23 (A) shall not apply to distributions out of

24 an individual retirement plan which are al25 locable to rollover contributions to which
36

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1 section 402(c), 403(a)(4), or 403(b)(8) ap2 plied.

3 ‘‘(ii) CONTRIBUTION PERIOD.—For

4 purposes of subparagraph (A), amounts

5 shall be treated as having been held by a

6 plan during any period such contributions

7 were held (or are treated as held under

8 this clause) by any individual retirement

9 plan from which transferred.’’.

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

11 this section shall apply to contributions (and earnings allo12 cable thereto) which are made after December 31, 1996.

13 CHAPTER 4—PERIODIC PENSION

14 BENEFITS STATEMENTS

15 SEC. 141. PERIODIC PENSION BENEFITS STATEMENTS.

16 (a) IN GENERAL.—Subsection (a) of section 105 of

17 the Employee Retirement Income Security Act of 1974

18 (29 U.S.C. 1025) is amended by striking ‘‘shall furnish

19 to any plan participant or beneficiary who so requests in

20 writing,’’ and inserting ‘‘shall furnish at least once every

21 3 years, in the case of a defined benefit plan, and annu22 ally, in the case of a defined contribution plan, to each

23 plan participant, and shall furnish to any plan participant

24 or beneficiary who so requests,’’.
37

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1 (b) RULE FOR MULTIEMPLOYER PLANS.—Subsection

2 (d) of section 105 of the Employee Retirement Income Se3 curity Act of 1974 (29 U.S.C. 1025) is amended to read

4 as follows:

5 ‘‘(d) Each administrator of a plan to which more than

6 1 unaffiliated employer is required to contribute shall fur7 nish to any plan participant or beneficiary who so requests

8 in writing, a statement described in subsection (a).’’.

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

10 this section shall apply to plan years beginning after the

11 earlier of—

12 (1) the date of issuance by the Secretary of

13 Labor of regulations providing guidance for simplify14 ing defined benefit plan calculations with respect to

15 the information required under section 105 of the

16 Employee Retirement Income Security Act of 1974

17 (29 U.S.C. 1025), or

18 (2) December 31, 1997.

19 Subtitle B—Improved Fairness in

20 Retirement Plan Benefits

21 SEC. 151. AMENDMENTS TO SIMPLE RETIREMENT AC22 COUNTS.

23 (a) MINIMUM CONTRIBUTION REQUIREMENT.—
38

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

2 408(p) (defining qualified salary reduction arrange3 ment) is amended—

4 (A) by striking clauses (iii) and (iv) of sub5 paragraph (A) and inserting the following new

6 clauses:

7 ‘‘(iii) the employer is required to make

8 a matching contribution to the simple re9 tirement account for any year in an

10 amount equal to—

11 ‘‘(I) so much of the amount the

12 employee elects under clause (i)(I) as

13 does not exceed 3 percent of com14 pensation for the year, and

15 ‘‘(II) a uniform percentage

16 (which is at least 50 percent but not

17 more than 100 percent) of the amount

18 the employee elects under clause (i)(I)

19 to the extent that such amount ex20 ceeds 3 percent but does not exceed 5

21 percent of the employee’s compensa22 tion,

23 ‘‘(iv) the employer is required to make

24 nonelective contributions of 1 percent of

25 compensation for each employee eligible to
39

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1 participate in the arrangement who has at

2 least $5,000 of compensation from the em3 ployer for the year, and

4 ‘‘(v) no contributions may be made

5 other than contributions described in

6 clause (i), (iii), or (iv).’’, and

7 (B) by striking subparagraph (B) and in8 serting the following new subparagraph:

9 ‘‘(B) CONTRIBUTION RULES.—

10 ‘‘(i) EMPLOYER MAY ELECT 3-PER11 CENT NONELECTIVE CONTRIBUTION.—An

12 employer shall be treated as meeting the

13 requirements of clauses (iii) and (iv) of

14 subparagraph (A) for any year if, in lieu of

15 the contributions described in such clauses,

16 the employer elects to make nonelective

17 contributions of 3 percent of compensation

18 for each employee who is eligible to partici19 pate in the arrangement and who has at

20 least $5,000 of compensation from the em21 ployer for the year. If an employer makes

22 an election under this clause for any year,

23 the employer shall notify employees of such

24 election within a reasonable period of time
40

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1 before the 60-day period for such year

2 under paragraph (5)(C).

3 ‘‘(ii) DISCRETIONARY CONTRIBU4 TIONS.—A plan shall not be treated as fail5 ing to meet the requirements of subpara6 graph (A)(v) merely because, pursuant to

7 the terms of the plan, an employer makes

8 nonelective contributions under subpara9 graph (A)(iv) or clause (i) of this subpara10 graph in excess of 1 percent or 3 percent

11 of compensation, respectively, but only if

12 all such contributions bear a uniform rela13 tionship to the compensation of each eligi14 ble employee and do not exceed 5 percent

15 of compensation for any eligible employee.

16 ‘‘(iii) COMPENSATION LIMITATION.—

17 The compensation taken into account

18 under this paragraph for any year shall

19 not exceed the limitation in effect for such

20 year under section 401(a)(17).’’.

21 (2) MATCHING CONTRIBUTIONS.—Subpara22 graph (B) of section 401(k)(11) (relating to adop23 tion of simple plan to meet nondiscrimination tests)

24 is amended—
41

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1 (A) by striking subclauses (II) and (III) of

2 clause (i) and inserting the following new sub3 clauses:

4 ‘‘(II) the employer is required to

5 make a matching contribution to the

6 trust for any year in an amount equal

7 to—

8 ‘‘(aa) so much of the

9 amount the employee elects

10 under subclause (I) as does not

11 exceed 3 percent of compensation

12 for the year, and

13 ‘‘(bb) a uniform percentage

14 (which is at least 50 percent but

15 not more than 100 percent) of

16 the amount the employee elects

17 under subclause (I) to the extent

18 that such amount exceeds 3 per19 cent but does not exceed 5 per20 cent of the employee’s compensa21 tion,

22 ‘‘(III) the employer is required to

23 make nonelective contributions of 1
42

•S 14 IS

1 percent of compensation for each em2 ployee eligible to participate in the ar3 rangement who has at least $5,000 of

4 compensation from the employer for

5 the year, and

6 ‘‘(IV) no other contributions may

7 be made other than contributions de8 scribed in subclause (I), (II), or

9 (III).’’, and

10 (B) by striking clause (ii) and inserting the

11 following new clause:

12 ‘‘(ii) CONTRIBUTION RULES.—

13 ‘‘(I) EMPLOYER MAY ELECT 3-

14 PERCENT NONELECTIVE CONTRIBU15 TION.—An employer shall be treated

16 as meeting the requirements of sub17 clauses (II) and (III) of clause (i) for

18 any year if, in lieu of the contribu19 tions described in such subclauses, the

20 employer elects to make nonelective

21 contributions of 3 percent of com22 pensation for each employee who is el23 igible to participate in the arrange24 ment and who has at least $5,000 of

25 compensation from the employer for
43

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1 the year. If an employer makes an

2 election under this subclause for any

3 year, the employer shall notify em4 ployees of such election within a rea5 sonable period of time before the 60th

6 day before the beginning of such year.

7 ‘‘(II) DISCRETIONARY CONTRIBU8 TIONS.—A plan shall not be treated

9 as failing to meet the requirements of

10 clause (i)(IV) merely because, pursu11 ant to the terms of the plan, an em12 ployer makes nonelective contributions

13 under clause (i)(III) or subclause (I)

14 of this clause in excess of 1 percent or

15 3 percent of compensation, respec16 tively, but only if all such contribu17 tions bear a uniform relationship to

18 the compensation of each eligible em19 ployee and do not exceed 5 percent of

20 compensation for any eligible em21 ployee.’’.

22 (b) FIDUCIARY DUTIES.—Section 404 of the Em23 ployee Retirement Income Security Act of 1974 (29

24 U.S.C. 1104) is amended—
44

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1 (1) by striking ‘‘(1)’’ after ‘‘(c)’’ in subsection

2 (c),

3 (2) by striking paragraph (2) in subsection (c),

4 and

5 (3) by redesignating subsection (d) as sub6 section (e) and by inserting after subsection (c) the

7 following new subsection:

8 ‘‘(d)(1) In the case of a simple retirement account

9 which meets the requirements of section 408(p) of the In10 ternal Revenue Code of 1986, no plan sponsor who is oth11 erwise a fiduciary shall be liable under this part for any

12 loss, or by reason of any breach, which results from—

13 ‘‘(A) the designation of the trustee or issuer of

14 such account, or

15 ‘‘(B) the manner in which the assets in the ac16 count are invested,

17 after the earliest of the dates described in paragraph (2).

18 ‘‘(2) The dates described in this paragraph are as fol19 lows:

20 ‘‘(A) The date on which an affirmative election

21 with respect to the initial investment of any con22 tribution is made by the individual for whose benefit

23 the account is maintained.
45

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1 ‘‘(B) The date on which there is a rollover of

2 the assets of the account to any other simple retire3 ment account or individual retirement plan.

4 ‘‘(C) The date which is 1 year after the account

5 is established.

6 ‘‘(3) This subsection shall not apply to the plan spon7 sor of a simple retirement account unless the plan partici8 pants are notified in writing (either separately or as part

9 of the notice under section 408(l)(2)(C)) that such con10 tributions may be transferred without cost or penalty to

11 another individual account or annuity.’’.

12 (c) OPTION TO SUSPEND CONTRIBUTIONS.—Section

13 408(p) (relating to simple retirement accounts) is amend14 ed by adding at the end the following new paragraph:

15 ‘‘(8) SUSPENSION OF PLAN.—Except as pro16 vided by the Secretary, a plan shall not be treated

17 as failing to meet the requirements of this sub18 section if, under the plan, the employer may suspend

19 all elective, matching, and nonelective contributions

20 under the plan after notifying employees eligible to

21 participate in the arrangement of such suspension in

22 writing at least 30 days in advance. Such suspension
46

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1 shall apply to contributions with respect to com2 pensation earned after the effective date of the sus3 pension. Only 1 suspension under this paragraph

4 may take effect during any year.’’.

5 (d) CONFORMING AMENDMENTS.—Section

6 408(p)(2)(C), as so added, is amended—

7 (1) by striking clause (ii),

8 (2) by striking ‘‘DEFINITIONS’’ in the heading

9 and inserting ‘‘ELIGIBLE EMPLOYER’’,

10 (3) by striking ‘‘(i) ELIGIBLE EMPLOYER.—’’,

11 and

12 (4) by redesignating subclauses (I) and (II) as

13 clauses (i) and (ii), respectively.

14 (e) EFFECTIVE DATE.—

15 (1) IN GENERAL.—Except as provided in para16 graph (2), the amendments made by this section

17 shall apply to taxable years beginning after Decem18 ber 31, 1997.

19 (2) DELAYED EFFECTIVE DATE FOR PLANS ES20 TABLISHED IN 1997.—In the case of plans estab21 lished in 1997 under section 408(p) of the Internal

22 Revenue Code of 1986, as in effect on January 1,

23 1997, the amendments made by this section shall

24 apply to taxable years beginning after December 31,

25 2002.
47

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1 SEC. 152. NONDISCRIMINATION RULES FOR QUALIFIED

2 CASH OR DEFERRED ARRANGEMENTS AND

3 MATCHING CONTRIBUTIONS.

4 (a) ALTERNATIVE METHODS OF SATISFYING SEC5 TION 401(k) NONDISCRIMINATION TESTS.—Subpara6 graph (B) of section 401(k)(12) (relating to alternative

7 methods of meeting nondiscrimination requirements) is

8 amended to read as follows:

9 ‘‘(B) NONELECTIVE AND MATCHING CON10 TRIBUTIONS.—

11 ‘‘(i) IN GENERAL.—The requirements

12 of this subparagraph are met if the re13 quirements of clauses (ii) and (iii) are met.

14 ‘‘(ii) NONELECTIVE CONTRIBU15 TIONS.—The requirements of this clause

16 are met if, under the arrangement, the em17 ployer is required, without regard to

18 whether the employee makes an elective

19 contribution or employee contribution, to

20 make a contribution to a defined contribu21 tion plan on behalf of each employee who

22 is not a highly compensated employee and

23 who is eligible to participate in the ar24 rangement in an amount equal to at least

25 1 percent of the employee’s compensation.
48

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1 ‘‘(iii) MATCHING CONTRIBUTIONS.—

2 The requirements of this clause are met if,

3 under the arrangement, the employer

4 makes matching contributions on behalf of

5 each employee who is not a highly com6 pensated employee in an amount equal

7 to—

8 ‘‘(I) 100 percent of the elective

9 contributions of the employee to the

10 extent such elective contributions do

11 not exceed 3 percent of the employee’s

12 compensation, and

13 ‘‘(II) 50 percent of the elective

14 contributions of the employee to the

15 extent that such elective contributions

16 exceed 3 percent but do not exceed 5

17 percent of the employee’s compensa18 tion.

19 ‘‘(iv) RATE FOR HIGHLY COM20 PENSATED EMPLOYEES.—The require21 ments of clause (iii) are not met if, under

22 the arrangement, the rate of matching con23 tribution with respect to any rate of elec24 tive contribution of a highly compensated

25 employee is greater than that with respect
49

•S 14 IS

1 to an employee who is not a highly com2 pensated employee. For purposes of this

3 clause, to the extent provided in regula4 tions, the last sentences of paragraph

5 (3)(A) and subsection (m)(2)(B) shall not

6 apply.

7 ‘‘(v) ALTERNATIVE PLAN DESIGNS.—

8 If the rate of matching contribution with

9 respect to any rate of elective contribution

10 is not equal to the percentage required

11 under clause (iii), an arrangement shall

12 not be treated as failing to meet the re13 quirements of clause (iii) if—

14 ‘‘(I) the rate of an employer’s

15 matching contribution does not in16 crease as an employee’s rate of elec17 tive contribution increase, and

18 ‘‘(II) the aggregate amount of

19 matching contributions at such rate of

20 elective contribution is at least equal

21 to the aggregate amount of matching

22 contributions which would be made if

23 matching contributions were made on

24 the basis of the percentages described

25 in clause (iii).’’.
50

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1 (b) CONTRIBUTIONS PART OF QUALIFIED CASH OR

2 DEFERRED ARRANGEMENT.—Subparagraph (E)(ii) of

3 section 401(k)(12), as so added, is amended to read as

4 follows:

5 ‘‘(ii) SOCIAL SECURITY AND SIMILAR

6 CONTRIBUTIONS NOT TAKEN INTO AC7 COUNT.—Except as provided in regula8 tions, an arrangement shall not be treated

9 as meeting the requirements of subpara10 graph (B) or (C) unless such requirements

11 are met without regard to subsection (l),

12 and, for purposes of subsection (l), and de13 termining whether contributions provided

14 under a plan satisfy subsection (a)(4) on

15 the basis of equivalent benefits, employer

16 contributions under subparagraph (B) or

17 (C) shall not be taken into account.’’.

18 (c) ALTERNATIVE METHODS OF SATISFYING SEC19 TION 401(m) NONDISCRIMINATION TESTS.—Section

20 401(m)(11) (relating to alternative method of satisfying

21 tests) is amended—

22 (1) by striking ‘‘subparagraph (B)’’ in subpara23 graph (A)(iii) and inserting ‘‘subparagraphs (B) and

24 (C)’’,
51

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1 (2) by adding at the end of subparagraph (B)

2 the following new flush sentence:

3 ‘‘To the extent provided in regulations, the last

4 sentences of paragraph (2)(B) and subsection

5 (k)(3)(A) shall not apply for purposes of clause

6 (iii).’’, and

7 (3) by adding at the end the following new sub8 paragraph:

9 ‘‘(C) TEST MUST BE MET SEPARATELY.—

10 If this paragraph applies to any matching con11 tributions, such contributions shall not be taken

12 into account in determining whether employee

13 contributions satisfy the requirements of this

14 subsection.’’.

15 (d) SPECIAL RULE FOR DETERMINING AVERAGE DE16 FERRAL PERCENTAGE FOR FIRST PLAN YEAR, ETC.—

17 Subparagraph (E) of section 401(k)(3) is amended to read

18 as follows:

19 ‘‘(E) For purposes of this paragraph, in

20 the case of the first plan year of any plan, the

21 amount taken into account as the actual defer22 ral percentage of nonhighly compensated em23 ployees for the preceding plan year shall be—

24 ‘‘(i) 3 percent, or
52

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1 ‘‘(ii) the actual deferral percentage of

2 nonhighly compensated employees deter3 mined for such first plan year in the case

4 of—

5 ‘‘(I) an employer who elects to

6 have this clause apply, or

7 ‘‘(II) except to the extent pro8 vided by the Secretary, a successor

9 plan.’’.

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

11 this section shall take effect as if included in the amend12 ments made by section 1433 of the Small Business Job

13 Protection Act of 1996.

14 SEC. 153. DEFINITION OF HIGHLY COMPENSATED EMPLOY15 EES.

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

17 414(q)(1) (defining highly compensated employee) is

18 amended to read as follows:

19 ‘‘(B) for the preceding year had compensa20 tion from the employer in excess of $80,000. ’’.

21 (b) CONFORMING AMENDMENTS.—

22 (1)(A) Subsection (q) of section 414 is amended

23 by striking paragraphs (3), (5), and (7) and by re24 designating paragraphs (4), (6), and (8) as para25 graphs (3) through (5), respectively.
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1 (B) Sections 129(d)(8)(B), 401(a)(5)(D)(ii),

2 408(k)(2)(C), and 416(i)(1)(D) are each amended

3 by striking ‘‘section 414(q)(4)’’ and inserting ‘‘sec4 tion 414(q)(3)’’.

5 (C) Section 416(i)(1)(A) is amended by striking

6 ‘‘section 414(q)(5)’’ and inserting ‘‘section

7 414(r)(9)’’.

8 (2)(A) Section 414(r) is amended by adding at

9 the end the following new paragraph:

10 ‘‘(9) EXCLUDED EMPLOYEES.—For purposes of

11 paragraph (2)(A), the following employees shall be

12 excluded:

13 ‘‘(A) Employees who have not completed 6

14 months of service.

15 ‘‘(B) Employees who normally work less

than 171 16 ⁄2 hours per week.

17 ‘‘(C) Employees who normally work not

18 more than 6 months during any year.

19 ‘‘(D) Employees who have not attained the

20 age of 21.

21 ‘‘(E) Except to the extent provided in reg22 ulations, employees who are included in a unit

23 of employees covered by an agreement which

24 the Secretary of Labor finds to be a collective
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1 bargaining agreement between employee rep2 resentatives and the employer.’’.

3 (B) Subparagraph (A) of section 414(r)(2) is

4 amended by striking ‘‘subsection (q)(5)’’ and insert5 ing ‘‘paragraph (9)’’.

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

7 this section shall take effect as if included in the amend8 ments made by section 1431 of the Small Business Job

9 Protection Act of 1996.

10 Subtitle C—Improving Retirement

11 Plan Coverage

12 SEC. 161. CREDIT FOR PENSION PLAN START-UP COSTS OF

13 SMALL EMPLOYERS.

14 (a) ALLOWANCE OF CREDIT.—Section 38(b) (defin15 ing current year business credit) is amended by striking

16 ‘‘plus’’ at the end of paragraph (11), by striking the period

17 at the end of paragraph (12) and inserting ‘‘, plus’’, and

18 by adding at the end the following new paragraph:

19 ‘‘(13) the small employer pension plan start-up

20 cost credit.’’.

21 (b) SMALL EMPLOYER PENSION PLAN START-UP

22 COST CREDIT.—Subpart D of part IV of subchapter A

23 of chapter 1 (relating to business related credits) is

24 amended by adding at the end the following new section:
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1 ‘‘SEC. 45D. SMALL EMPLOYER PENSION PLAN START-UP

2 COST CREDIT.

3 ‘‘(a) AMOUNT OF CREDIT.—For purposes of section

4 38—

5 ‘‘(1) IN GENERAL.—The small employer pen6 sion plan start-up cost credit for any taxable year is

7 an amount equal to the qualified start-up costs of an

8 eligible employer in establishing a qualified pension

9 plan or qualified employer payroll deduction system.

10 ‘‘(2) AGGREGATE LIMITATION.—The amount of

11 the credit under paragraph (1) for any taxable year

12 shall not exceed $500, reduced by the aggregate

13 amount determined under this section for all preced14 ing taxable years of the taxpayer.

15 ‘‘(b) ELIGIBLE EMPLOYER.—For purposes of this

16 section, the term ‘eligible employer’ means an employer

17 which—

18 ‘‘(1) had an average daily number of employees

19 during the preceding taxable year not in excess of

20 50, and

21 ‘‘(2) did not make any contributions on behalf

22 of any employee to a qualified pension plan during

23 the 2 taxable years immediately preceding the tax24 able year.

25 ‘‘(c) OTHER DEFINITIONS.—For purposes of this

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

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

3 necessary expenses of an eligible employer which—

4 ‘‘(A) are paid or incurred in connection

5 with the establishment of a qualified pension

6 plan or a qualified employer payroll deduction

7 system, and

8 ‘‘(B) are of a nonrecurring nature.

9 ‘‘(2) QUALIFIED PENSION PLAN.—The term

10 ‘qualified pension plan’ means—

11 ‘‘(A) a plan described in section 401(a)

12 which includes a trust exempt from tax under

13 section 501(a),

14 ‘‘(B) a simplified employee pension (as de15 fined in section 408(k)), or

16 ‘‘(C) a simple retirement account (as de17 fined in section 408(p)).

18 ‘‘(3) QUALIFIED EMPLOYER PAYROLL DEDUC19 TION SYSTEM.—The term ‘qualified employer payroll

20 deduction system’ means a system described in sec21 tion 103 of the Retirement Security Act of 1997.

22 ‘‘(d) SPECIAL RULES.—For purposes of this sec23 tion—

24 ‘‘(1) AGGREGATION RULES.—All persons treat25 ed as a single employer under subsection (a) or (b)
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1 of section 52 or subsection (n) or (o) of section 414

2 shall be treated as one person.

3 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No de4 duction shall be allowable under this chapter for any

5 qualified start-up costs for which a credit is allow6 able under subsection (a).’’.

7 (c) CONFORMING AMENDMENTS.—

8 (1) Section 39(d) is amended by adding at the

9 end the following new paragraph:

10 ‘‘(8) NO CARRYBACK OF PENSION CREDIT.—No

11 portion of the unused business credit for any taxable

12 year which is attributable to the small employer pen13 sion plan start-up cost credit determined under sec14 tion 45D may be carried back to a taxable year end15 ing before the date of the enactment of section

16 45D.’’.

17 (2) The table of sections for subpart D of part

18 IV of subchapter A of chapter 1 is amended by add19 ing at the end the following new item:

‘‘Sec. 45D. Small employer pension plan start-up cost credit.’’.

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

21 this section shall apply to costs incurred after the date

22 of the enactment of this Act in taxable years ending after

23 such date.
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1 SEC. 162. TREATMENT OF MULTIEMPLOYER PLANS UNDER

2 SECTION 415.

3 (a) COMPENSATION LIMIT.—Paragraph (11) of sec4 tion 415(b) (relating to limitation for defined benefit

5 plans) is amended to read as follows:

6 ‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN7 MENTAL AND MULTIEMPLOYER PLANS.—In the case

8 of a governmental plan (as defined in section

9 414(d)) or a multiemployer plan (as defined in sec10 tion 414(f)), subparagraph (B) of paragraph (1)

11 shall not apply.’’.

12 (b) TREATMENT OF CERTAIN EXCESS BENEFIT

13 PLANS.—

14 (1) APPLICATION OF SECTION 457.—Paragraph

15 (14) of section 457(e) (relating to other definitions

16 and special rules) is amended to read as follows:

17 ‘‘(14) TREATMENT OF EXCESS BENEFIT AR18 RANGEMENTS.—

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

20 and (c)(1) shall not apply to any excess benefit

21 arrangement and benefits provided under such

22 an arrangement shall not be taken into account

23 in determining whether any other plan is an eli24 gible deferred compensation plan.

25 ‘‘(B) EXCESS BENEFIT ARRANGEMENT DE26 FINED.—For purposes of this section, the term
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1 ‘excess benefit arrangement’ means a plan

2 which is maintained by an eligible employer

3 solely for purposes of providing benefits for cer4 tain employees in excess of the limits on con5 tributions and benefits imposed by section 415.

6 Such term includes a qualified governmental ex7 cess benefit arrangement (as defined in section

8 415(m)(3)).’’.

9 (2) CONFORMING AMENDMENT.—Subparagraph

10 (E) of section 457(f)(2) (relating to tax treatment of

11 participants where plan or arrangement of employer

12 is not eligible) is amended to read as follows:

13 ‘‘(E) an excess benefit arrangement (as de14 fined in subsection (e)(14)(B)).’’.

15 (c) EXEMPTION FOR SURVIVOR AND DISABILITY

16 BENEFITS.—Subparagraph (I) of section 415(b)(2) (relat17 ing to limitation for defined benefit plans) is amended—

18 (1) by inserting ‘‘or a multiemployer plan (as

19 defined in section 414(f))’’ after ‘‘section 414(d))’’

20 in clause (i),

21 (2) by inserting ‘‘or multiemployer plan’’ after

22 ‘‘governmental plan’’ in clause (ii), and

23 (3) by inserting ‘‘AND MULTIEMPLOYER’’ after

24 ‘‘GOVERNMENTAL’’ in the heading.
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1 (d) EFFECTIVE DATE.—The amendments made by

2 this section shall take effect as if included in the amend3 ments made by section 1444 of the Small Business Job

4 Protection Act of 1996.

5 SEC. 163. EXEMPTION OF MIRROR PLANS FROM SECTION

6 457 LIMITS.

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 162(b)(1), is amended by adding at the end

11 the following new paragraph:

12 ‘‘(15) EXEMPTION FOR MIRROR PLANS.—

13 ‘‘(A) IN GENERAL.—Amounts of com14 pensation deferred under a mirror plan shall

15 not be taken into account in applying this sec16 tion to amounts of compensation deferred under

17 any other deferred compensation plan.

18 ‘‘(B) MIRROR PLAN.—The term ‘mirror

19 plan’ means a plan, program, or arrangement

20 maintained solely for the purpose of providing

21 retirement benefits for employees in excess of

22 the limitations imposed by section 401(a)(17)

23 or section 415, or both.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to taxable years beginning after

3 December 31, 1996.

4 SEC. 164. SPECIAL RULES FOR SELF-EMPLOYED INDIVID5 UALS.

6 (a) CONTRIBUTIONS BY SELF-EMPLOYED INDIVID7 UALS TREATED AS MATCHING CONTRIBUTIONS.—Section

8 414 (relating to definitions and special rules) is amended

9 by adding at the end the following new subsection:

10 ‘‘(v) CONTRIBUTIONS BY SELF-EMPLOYED INDIVID11 UALS TREATED AS MATCHING CONTRIBUTIONS.—For

12 purposes of this title, matching contributions (as defined

13 in section 401(m)(4)(A)) made on behalf of a self-em14 ployed individual shall not be treated as elective deferrals

15 (within the meaning of section 402(g)(3)) or as made pur16 suant to an election by the self-employed individual.’’.

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

18 this section shall apply to years beginning after December

19 31, 1996.

20 SEC. 165. IMMEDIATE PARTICIPATION IN THE THRIFT SAV21 INGS PLAN FOR FEDERAL EMPLOYEES.

22 (a) ELIMINATION OF CERTAIN WAITING PERIODS

23 FOR PURPOSES OF EMPLOYEE CONTRIBUTIONS.—Para24 graph (4) of section 8432(b) of title 5, United States

25 Code, is amended to read as follows:
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1 ‘‘(4) The Executive Director shall prescribe such reg2 ulations as may be necessary to carry out the following:

3 ‘‘(A) Notwithstanding subparagraph (A) of

4 paragraph (2), an employee or Member described in

5 such subparagraph shall be afforded a reasonable

6 opportunity to first make an election under this sub7 section beginning on the date of commencing service

8 or, if that is not administratively feasible, beginning

9 on the earliest date thereafter that such an election

10 becomes administratively feasible, as determined by

11 the Executive Director.

12 ‘‘(B) An employee or Member described in sub13 paragraph (B) of paragraph (2) shall be afforded a

14 reasonable opportunity to first make an election

15 under this subsection (based on the appointment or

16 election described in such subparagraph) beginning

17 on the date of commencing service pursuant to such

18 appointment or election or, if that is not administra19 tively feasible, beginning on the earliest date there20 after that such an election becomes administratively

21 feasible, as determined by the Executive Director.

22 ‘‘(C) Notwithstanding the preceding provisions

23 of this paragraph, contributions under paragraphs

24 (1) and (2) of subsection (c) shall not be payable

25 with respect to any pay period before the earliest
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1 pay period for which such contributions would other2 wise be allowable under this subsection if this para3 graph had not been enacted.

4 ‘‘(D) Sections 8351(a)(2), 8440a(a)(2),

5 8440b(a)(2), 8440c(a)(2), and 8440d(a)(2) shall be

6 applied in a manner consistent with the purposes of

7 subparagraphs (A) and (B), to the extent those sub8 paragraphs can be applied with respect thereto.

9 ‘‘(E) Nothing in this paragraph shall affect

10 paragraph (3).’’.

11 (b) TECHNICAL AND CONFORMING AMENDMENTS.—

12 (1) Section 8432(a) of title 5, United States

13 Code, is amended—

14 (A) in the first sentence by striking

15 ‘‘(b)(1)’’ and inserting ‘‘(b)’’; and

16 (B) by amending the second sentence to

17 read as follows: ‘‘Contributions under this sub18 section pursuant to such an election shall, with

19 respect to each pay period for which such elec20 tion remains in effect, be made in accordance

21 with a program of regular contributions pro22 vided in regulations prescribed by the Executive

23 Director.’’.
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1 (2) Section 8432(b)(1)(B) of such title is

2 amended by inserting ‘‘(or any election allowable by

3 virtue of paragraph (4))’’ after ‘‘subparagraph (A)’’.

4 (3) Section 8432(b)(3) of such title is amended

5 by striking ‘‘Notwithstanding paragraph (2)(A), an’’

6 and inserting ‘‘An’’.

7 (4) Section 8432(i)(1)(B)(ii) of such title is

8 amended by striking ‘‘either elected to terminate in9 dividual contributions to the Thrift Savings Fund

10 within 2 months before commencing military service

11 or’’.

12 (5) Section 8439(a)(1) of such title is amended

13 by inserting ‘‘who makes contributions or’’ after ‘‘for

14 each individual’’ and by striking ‘‘section

15 8432(c)(1)’’ and inserting ‘‘section 8432’’.

16 (6) Section 8439(c)(2) of such title is amended

17 by adding at the end the following: ‘‘Nothing in this

18 paragraph shall be considered to limit the dissemina19 tion of information only to the times required under

20 the preceding sentence.’’.

21 (7) Sections 8440a(a)(2) and 8440d(a)(2) of

22 such title are amended by striking all after ‘‘subject

23 to’’ and inserting ‘‘subject to this chapter.’’.

24 (c) EFFECTIVE DATE.—This section shall take effect

25 6 months after the date of the enactment of this Act or
65

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1 such earlier date as the Executive Director may by regula2 tion prescribe.

3 SEC. 166. MODIFICATION OF 10 PERCENT TAX FOR NON4 DEDUCTIBLE CONTRIBUTIONS.

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

6 4972(c)(6) (relating to exceptions) is amended to read as

7 follows:

8 ‘‘(B) contributions to 1 or more defined

9 contribution plans which are not deductible

10 when contributed solely because of section

11 404(a)(7), in an amount not in excess of the

12 greater of—

13 ‘‘(i) the amount of contributions not

14 in excess of 6 percent of compensation

15 (within the meaning of section 404(a))

16 paid or accrued (during the taxable year

17 for which the contributions were made) to

18 beneficiaries under the plans, or

19 ‘‘(ii) the amount of contributions de20 scribed in section 401(m)(4)(A) or

21 402(g)(3)(A).’’.

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

23 this section shall apply to taxable years beginning after

24 December 31, 1996.
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1 Subtitle D—Simplifying Plan

2 Requirements

3 SEC. 171. FULL FUNDING LIMITATION FOR MULTIEM4 PLOYER PLANS.

5 (a) AMENDMENTS TO CODE.—

6 (1) FULL-FUNDING LIMITATION.—Section

7 412(c)(7)(C) (relating to full-funding limitation) is

8 amended—

9 (A) by inserting ‘‘or in the case of a multi10 employer plan,’’ after ‘‘paragraph (6)(B),’’, and

11 (B) by inserting ‘‘AND MULTIEMPLOYER

12 PLANS’’ after ‘‘PARAGRAPH (6)(B)’’ in the head13 ing thereof.

14 (2) VALUATION.—Section 412(c)(9) (relating to

15 annual valuation) is amended—

16 (A) by inserting ‘‘(3 years in the case of a

17 multiemployer plan)’’ after ‘‘year’’, and

18 (B) by striking ‘‘ANNUAL VALUATION’’ in

19 the heading and inserting ‘‘VALUATION’’.

20 (b) AMENDMENTS TO ERISA.—

21 (1) FULL-FUNDING LIMITATION.—Section

22 302(c)(7)(C) of the Employee Retirement Income

23 Security Act of 1974 (29 U.S.C. 1082(c)(7)(C)) is

24 amended—
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1 (A) by inserting ‘‘or in the case of a multi2 employer plan,’’ after ‘‘paragraph (6)(B),’’, and

3 (B) by inserting ‘‘AND MULTIEMPLOYER

4 PLANS’’ after ‘‘PARAGRAPH (6)(B)’’ in the head5 ing thereof.

6 (2) VALUATION.—Section 302(c)(9) of such Act

7 (29 U.S.C. 1082(c)(9)) is amended—

8 (A) by inserting ‘‘(3 years in the case of a

9 multiemployer plan)’’ after ‘‘year’’, and

10 (B) by striking ‘‘ANNUAL VALUATION’’ in

11 the heading and inserting ‘‘VALUATION’’.

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

13 this section shall apply to plan years beginning after De14 cember 31, 1996.

15 SEC. 172. ELIMINATION OF PARTIAL TERMINATION RULES

16 FOR MULTIEMPLOYER PLANS.

17 (a) PARTIAL TERMINATION RULES FOR MULTIEM18 PLOYER PLANS.—Section 411(d)(3) (relating to termi19 nation or partial termination; discontinuance of contribu20 tions) is amended by adding at the end the following new

21 sentence: ‘‘This paragraph shall not apply in the case of

22 a partial termination of a multiemployer plan.’’.

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

24 this section shall apply to partial terminations beginning

25 after December 31, 1996.
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1 SEC. 173. MODIFICATIONS TO NONDISCRIMINATION AND

2 MINIMUM PARTICIPATION RULES WITH RE3 SPECT TO GOVERNMENTAL PLANS.

4 (a) GENERAL NONDISCRIMINATION AND PARTICIPA5 TION RULES.—

6 (1) NONDISCRIMINATION REQUIREMENTS.—

7 Paragraph (5) of section 401(a) (relating to quali8 fied pension, profit-sharing, and stock bonus plans)

9 is amended by adding at the end the following new

10 subparagraph:

11 ‘‘(F) GOVERNMENTAL PLANS.—Para12 graphs (3) and (4) shall not apply to a govern13 mental plan (within the meaning of section

14 414(d)).’’.

15 (2) ADDITIONAL PARTICIPATION REQUIRE16 MENTS.—Subparagraph (H) of section 401(a)(26) is

17 amended to read as follows:

18 ‘‘(H) EXCEPTION FOR GOVERNMENTAL

19 PLANS.—This paragraph shall not apply to a

20 governmental plan (within the meaning of sec21 tion 414(d)).’’.

22 (3) MINIMUM PARTICIPATION STANDARDS.—

23 Paragraph (2) of section 410(c) is amended to read

24 as follows:

25 ‘‘(2) A plan described in paragraph (1) shall be

26 treated as meeting the requirements of this section
69

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1 for purposes of section 401(a), except that in the

2 case of a plan described in subparagraph (B), (C),

3 or (D) of paragraph (1), this paragraph shall only

4 apply if such plan meets the requirements of section

5 401(a)(3) (as in effect on September 1, 1974).’’.

6 (b) PARTICIPATION STANDARDS FOR QUALIFIED

7 CASH OR DEFERRED ARRANGEMENTS.—Paragraph (3) of

8 section 401(k) is amended by adding at the end the follow9 ing new subparagraph:

10 ‘‘(E)(i) The requirements of subparagraph

11 (A)(i) and (C) shall not apply to a govern12 mental plan (within the meaning of section

13 414(d)).

14 ‘‘(ii) The requirements of subsection

15 (m)(2) (without regard to subsection (a)(4))

16 shall apply to any matching contribution of a

17 governmental plan (as so defined).’’.

18 (c) NONDISCRIMINATION RULES FOR SECTION

19 403(b) PLANS.—Paragraph (12) of section 403(b) is

20 amended by adding at the end the following new subpara21 graph:

22 ‘‘(C) GOVERNMENTAL PLANS.—For pur23 poses of paragraph (1)(D), the requirements of
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1 subparagraph (A)(i) shall not apply to a gov2 ernmental plan (within the meaning of section

3 414(d)).’’.

4 (d) EFFECTIVE DATE.—

5 (1) IN GENERAL.—The amendments made by

6 this section shall apply to taxable years beginning on

7 or after the date of the enactment of this Act.

8 (2) TREATMENT FOR YEARS BEGINNING BE9 FORE DATE OF ENACTMENT.—A governmental plan

10 (within the meaning of section 414(d) of the Inter11 nal Revenue Code of 1986) shall be treated as satis12 fying the requirements of sections 401(a)(3),

13 401(a)(4), 401(a)(26), 401(k), 401(m), 403

14 (b)(1)(D) and (b)(12), and 410 of such Code for all

15 taxable years beginning before the date of the enact16 ment of this Act.

17 SEC. 174. ELIMINATION OF REQUIREMENT FOR PLAN DE18 SCRIPTIONS AND THE FILING REQUIREMENT

19 FOR SUMMARY PLAN DESCRIPTIONS AND DE20 SCRIPTIONS OF MATERIAL MODIFICATIONS

21 TO A PLAN; TECHNICAL CORRECTIONS.

22 (a) FILING REQUIREMENTS.—Section 101(b) of the

23 Employee Retirement Income Security Act of 1974 (29

24 U.S.C. 1021(b)) is amended by striking paragraphs (1),
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1 (2), and (3) and by redesignating paragraphs (4) and (5)

2 as paragraphs (1) and (2), respectively.

3 (b) PLAN DESCRIPTION.—

4 (1) IN GENERAL.—Section 102(a) of the Em5 ployee Retirement Income Security Act of 1974 (29

6 U.S.C. 1022(a)) is amended—

7 (A) by striking paragraph (2), and

8 (B) by striking ‘‘(a)(1)’’ and inserting

9 ‘‘(a)’’.

10 (2) CONFORMING AMENDMENTS.—

11 (A) Section 102(b) of such Act (29 U.S.C.

12 1022(b)) is amended by striking ‘‘The plan de13 scription and summary plan description shall

14 contain’’ and inserting ‘‘The summary plan de15 scription shall contain’’.

16 (B) The heading for section 102 of such

17 Act is amended by striking ‘‘PLAN DESCRIPTION

18 AND’’.

19 (c) FURNISHING OF REPORTS.—

20 (1) IN GENERAL.—Section 104(a)(1) of the

21 Employee Retirement Income Security Act of 1974

22 (29 U.S.C. 1024(a)(1)) is amended to read as fol23 lows:
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1 ‘‘SEC. 104. (a)(1) The administrator of any employee

2 benefit plan subject to this part shall file with the Sec3 retary the annual report for a plan year within 210 days

4 after the close of such year (or within such time as may

5 be required by regulations promulgated by the Secretary

6 in order to reduce duplicative filing). The Secretary shall

7 make copies of such annual reports available for inspection

8 in the public document room of the Department of

9 Labor.’’.

10 (2) SECRETARY MAY REQUEST DOCUMENTS.—

11 (A) IN GENERAL.—Section 104(a) of such

12 Act (29 U.S.C. 1024(a)) is amended by adding

13 at the end the following new paragraph:

14 ‘‘(6) The administrator of any employee benefit plan

15 subject to this part shall furnish to the Secretary, upon

16 request, any documents relating to the employee benefit

17 plan, including but not limited to, the latest summary plan

18 description (including any summaries of plan changes not

19 contained in the summary plan description), and the bar20 gaining agreement, trust agreement, contract, or other in21 strument under which the plan is established or oper22 ated.’’.
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1 (B) PENALTY.—Section 502(c) of such Act

2 (29 U.S.C. 1132(c)) is amended by redesignat3 ing paragraph (6) as paragraph (7) and by in4 serting after paragraph (5) the following new

5 paragraph:

6 ‘‘(6) If, within 30 days of a request by the Secretary

7 to a plan administrator for documents under section

8 104(a)(6), the plan administrator fails to furnish the ma9 terial requested to the Secretary, the Secretary may assess

10 a civil penalty against the plan administrator of up to

11 $100 a day from the date of such failure (but in no event

12 in excess of $1,000 per request). No penalty shall be im13 posed under this paragraph for any failure resulting from

14 matters reasonably beyond the control of the plan admin15 istrator.’’.

16 (d) CONFORMING AMENDMENTS.—

17 (1) Section 104(b)(1) of the Employee Retire18 ment Income Security Act of 1974 (29 U.S.C.

19 1024(b)(1)) is amended by striking ‘‘section

20 102(a)(1)’’ each place it appears and inserting ‘‘sec21 tion 102(a)’’.

22 (2) Section 104(b)(2) of such Act (29 U.S.C.

23 1024(b)(2)) is amended by striking ‘‘the plan de24 scription and’’ and inserting ‘‘the latest updated

25 summary plan description and’’.
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1 (3) Section 104(b)(4) of such Act (29 U.S.C.

2 1024(b)(4)) is amended by striking ‘‘plan descrip3 tion’’.

4 (4) Section 106(a) of such Act (29 U.S.C.

5 1026(a)) is amended by striking ‘‘descriptions,’’.

6 (5) Section 107 of such Act (29 U.S.C. 1027)

7 is amended by striking ‘‘description or’’.

8 (6) Paragraph (2)(B) of section 108 of such

9 Act (29 U.S.C. 1028) is amended to read as follows:

10 ‘‘(B) after publishing or filing the annual reports,’’.

11 (7) Section 502(a)(6) of such Act (29 U.S.C.

12 1132(a)(6)) is amended by striking ‘‘or (5)’’ and in13 serting ‘‘(5), or (6)’’.

14 (e) TECHNICAL CORRECTION.—Section 1144(c) of

15 the Social Security Act (42 U.S.C. 1320b–14(c)) is

16 amended by redesignating paragraph (9) as paragraph

17 (8).

18 SEC. 175. NEW TECHNOLOGIES IN RETIREMENT PLANS.

19 The Secretary of the Treasury and the Secretary of

20 Labor shall expand their efforts to examine existing guid21 ance regarding notice, recordkeeping, and operational re22 quirements for retirement plans, in order to permit the

23 use of new technologies by plan sponsors and administra24 tors in ways which maintain the protection of the rights

25 of participants and beneficiaries.
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1 TITLE II—SECURITY

2 SEC. 200. AMENDMENT OF ERISA.

3 Except as otherwise expressly provided, whenever in

4 this title an amendment or repeal is expressed in terms

5 of an amendment to, or repeal of, a section or other provi6 sion, the reference shall be considered to be made to a

7 section or other provision of the Employee Retirement In8 come Security Act of 1974.

9 Subtitle A—General Provisions

10 SEC. 201. SECTION 401(k) INVESTMENT PROTECTION.

11 (a) LIMITATIONS ON INVESTMENT IN EMPLOYER SE12 CURITIES AND EMPLOYER REAL PROPERTY BY CASH OR

13 DEFERRED ARRANGEMENTS.—Paragraph (3) of section

14 407(d) (29 U.S.C. 1107(d)) is amended by adding at the

15 end the following new subparagraph:

16 ‘‘(D) The term ‘eligible individual account plan’

17 does not include that portion of an individual ac18 count plan that consists of elective deferrals (as de19 fined in section 402(g)(3) of the Internal Revenue

20 Code of 1986) pursuant to a qualified cash or de21 ferred arrangement as defined in section 401(k) of

22 the Internal Revenue Code of 1986 (and earnings

23 thereon), if such elective deferrals (or earnings

24 thereon) are required to be invested in qualifying
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1 employer securities or qualifying employer real prop2 erty or both pursuant to the documents and instru3 ments governing the plan or at the direction of a

4 person other than the participant (or the partici5 pant’s beneficiary) on whose behalf such elective de6 ferrals are made to the plan. For the purposes of

7 subsection (a), such portion shall be treated as a

8 separate plan. This subparagraph shall not apply to

9 an individual account plan if the fair market value

10 of the assets of all individual account plans main11 tained by the employer equals not more than 10 per12 cent of the fair market value of the assets of all pen13 sion plans maintained by the employer.’’.

14 (b) EFFECTIVE DATE.—

15 (1) IN GENERAL.—The amendments made by

16 this section shall take effect on the date of the en17 actment of this Act.

18 (2) TRANSITION RULE FOR PLANS HOLDING

19 EXCESS SECURITIES OR PROPERTY.—

20 (A) IN GENERAL.—In the case of a plan

21 which on the date of the enactment of this Act,

22 has holdings of employer securities and em23 ployer real property (as defined in section
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1 407(d) of the Employee Retirement Income Se2 curity Act of 1974 (29 U.S.C. 1107(d)) in ex3 cess of the amount specified in such section

4 407, the amendment made by this section ap5 plies to any acquisition of such securities and

6 property on or after such date, but does not

7 apply to the specific holdings which constitute

8 such excess during the period of such excess.

9 (B) SPECIAL RULE FOR CERTAIN ACQUISI10 TIONS.—Employer securities and employer real

11 property acquired pursuant to a binding written

12 contract to acquire such securities and real

13 property entered into and in effect on the date

14 of the enactment of this Act, shall be treated as

15 acquired immediately before such date.

16 SEC. 202. REQUIREMENT OF ANNUAL, DETAILED INVEST17 MENT REPORTS APPLIED TO CERTAIN 401(k)

18 PLANS.

19 (a) IN GENERAL.—Section 104(b)(3) (29 U.S.C.

20 1024(b)(3)) is amended—

21 (1) by inserting ‘‘(A)’’ after ‘‘(3)’’; and

22 (2) by adding at the end the following new sub23 paragraph:

24 ‘‘(B)(i) If a plan includes a qualified cash or

25 deferred arrangement (as defined in section
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1 401(k)(2) of the Internal Revenue Code of 1986)

2 and is maintained by an employer with less than 100

3 participants, the administrators shall furnish to each

4 participant and to each beneficiary receiving benefits

5 under the plan an annual investment report detail6 ing such information as the Secretary by regulation

7 shall require.

8 ‘‘(ii) Clause (i) shall not apply with respect to

9 any participant described in section 404(c).’’.

10 (b) REGULATIONS.—

11 (1) IN GENERAL.—The Secretary of Labor, in

12 prescribing regulations required under section

13 104(b)(3)(B)(i) of the Employee Retirement Income

14 Security Act of 1974 (29 U.S.C. 1023(b)(3)(B)(i)),

15 as added by subsection (a), shall consider including

16 in the information required in an annual investment

17 report the following:

18 (A) Total plan assets and liabilities as of

19 the beginning and ending of the plan year.

20 (B) Plan income and expenses and con21 tributions made and benefits paid for the plan

22 year.

23 (C) Any transaction between the plan and

24 the employer, any fiduciary, or any 10-percent
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1 owner during the plan year, including the acqui2 sition of any employer security or employer real

3 property.

4 (D) Any noncash contributions made to or

5 purchases of nonpublicly traded securities made

6 by the plan during the plan year without an ap7 praisal by an independent third party.

8 In determining the types of information to be in9 cluded in the annual investment report presented to

10 participants and beneficiaries, the Secretary of

11 Labor shall take into account the purposes of the di12 versification protection provided to such participants

13 and beneficiaries by section 407(d)(3)(D) of the Em14 ployee Retirement Income Security Act of 1974 (29

15 U.S.C. 1107(d)(3)(D)), as added by section 201(a).

16 (2) ELECTRONIC TRANSFER.—The Secretary of

17 Labor in prescribing such regulations shall also

18 make provision for the electronic transfer of the re19 quired annual investment report by a plan adminis20 trator to plan participants and beneficiaries.

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

22 subsection (a) shall apply to plan years beginning after

23 the date of the enactment of this Act.
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1 SEC. 203. STUDY ON INVESTMENTS IN COLLECTIBLES.

2 (a) STUDY.—The Secretary of Labor, in consultation

3 with the Secretary of the Treasury, shall study the extent

4 to which pension plans invest in collectibles and whether

5 such investments present a risk to the pension security

6 of the participants and beneficiaries of such plans.

7 (b) REPORT.—Not later than 12 months after the

8 date of the enactment of this Act, the Secretary of Labor

9 shall submit a report to the Congress containing the find10 ings of the study described in subsection (a) and any rec11 ommendations for legislative action.

12 SEC. 204. QUALIFIED EMPLOYER PLANS PROHIBITED FROM

13 MAKING LOANS THROUGH CREDIT CARDS

14 AND OTHER INTERMEDIARIES.

15 (a) IN GENERAL.—Subsection (a) of section 401 of

16 the Internal Revenue Code of 1986 is amended by adding

17 at the end the following new paragraph:

18 ‘‘(35) PROHIBITION OF LOANS THROUGH CRED19 IT CARDS AND OTHER INTERMEDIARIES.—A trust

20 shall not constitute a qualified trust under this sec21 tion if the plan makes any loan to any beneficiary

22 under the plan through the use of any credit card

23 or any other intermediary.’’.

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

25 subsection (a) shall apply to plan years beginning after

26 the date of the enactment of this Act.
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1 SEC. 205. MULTIEMPLOYER PLAN BENEFITS GUARANTEED.

2 (a) IN GENERAL.—Section 4022A(c) (29 U.S.C.

3 1322a(c)) is amended—

4 (1) by striking ‘‘$5’’ each place it appears in

5 paragraph (1) and inserting ‘‘$11’’,

6 (2) by striking ‘‘$15’’ in paragraph (1) and in7 serting ‘‘$33’’, and

8 (3) by striking paragraphs (2), (5), and (6) and

9 by redesignating paragraphs (3) and (4) as para10 graphs (2) and (3), respectively.

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

12 this section shall apply to any multiemployer plan that has

13 not received financial assistance (within the meaning of

14 section 4261 of the Employee Retirement Income Security

15 Act of 1974) within the 1-year period ending on the date

16 of the enactment of this Act.

17 SEC. 206. PROHIBITED TRANSACTIONS.

18 (a) IN GENERAL.—Section 502(i) (29 U.S.C.

19 1132(i)) is amended by striking ‘‘5 percent’’ and inserting

20 ‘‘10 percent’’.

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

22 this section shall apply to prohibited transactions occur23 ring after the date of the enactment of this Act.
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1 SEC. 207. SUBSTANTIAL OWNER BENEFITS.

2 (a) MODIFICATION OF PHASE-IN OF GUARANTEE.—

3 Subparagraphs (B) and (C) of section 4022(b)(5) (29

4 U.S.C. 1322(b)(5)) are amended to read as follows:

5 ‘‘(B) For purposes of this title, the term ‘majority

6 owner’ has the same meaning as substantial owner under

7 subparagraph (A), except that subparagraph (A) shall be

8 applied by substituting ‘50 percent or more’ for ‘more

9 than 10 percent’ each place it appears.

10 ‘‘(C) In the case of a participant who is a majority

11 owner, the amount of benefits guaranteed under this sec12 tion shall not exceed the product of—

13 ‘‘(i) a fraction (not to exceed 1) the numerator

14 of which is the number of years from the later of the

15 effective date or the adoption date of the plan to the

16 termination date, and the denominator of which is

17 30, and

18 ‘‘(ii) the amount of the majority owner’s month19 ly benefits guaranteed under subsection (a) (as lim20 ited by paragraph (3) of this subsection).’’.

21 (b) MODIFICATION OF ALLOCATION OF ASSETS.—

22 (1) Section 4044(a)(4)(B) (29 U.S.C.

23 1344(a)(4)(B)) is amended by striking ‘‘section

24 4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(C)’’.

25 (2) Section 4044(b) (29 U.S.C. 1344(b)) is

26 amended—
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1 (A) by striking ‘‘(5)’’ in paragraph (2) and

2 inserting ‘‘(4), (5),’’, and

3 (B) by redesignating paragraphs (3)

4 through (6) as paragraphs (4) through (7), re5 spectively, and by inserting after paragraph (2)

6 the following new paragraph:

7 ‘‘(3) If assets available for allocation under

8 paragraph (4) of subsection (a) are insufficient to

9 satisfy in full the benefits of all individuals who are

10 described in that paragraph, the assets shall be allo11 cated first to benefits described in subparagraph (A)

12 of that paragraph. Any remaining assets shall then

13 be allocated to subparagraph (B). If assets allocated

14 to subparagraph (B) are insufficient to satisfy in full

15 the benefits in that subparagraph, the assets shall

16 be allocated pro rata among individuals on the basis

17 of the present value (as of the termination date) of

18 their respective benefits described in that subpara19 graph.’’.

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

21 this section shall apply to plan terminations—

22 (1) under section 4041(c) of the Employee Re23 tirement Income Security Act of 1974 (29 U.S.C.

24 1341(c)) with respect to which notices of intent to

25 terminate are provided under section 4041(a)(2) of
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1 such Act (29 U.S.C. 1341(a)(2)) on or after the

2 date of the enactment of this Act, or

3 (2) under section 4042 of such Act (29 U.S.C.

4 1342) with respect to which proceedings are insti5 tuted by the corporation on or after such date.

6 SEC. 208. REVERSION REPORT.

7 (a) IN GENERAL.—Section 4008 (29 U.S.C. 1308)

8 is amended by adding at the end the following new sub9 section:

10 ‘‘(b) REVERSION REPORT.—As soon as practicable

11 after the close of each fiscal year, the Secretary of Labor

12 (acting in the Secretary’s capacity as chairman of the cor13 poration’s board) shall transmit to the President and the

14 Congress a report providing information on plans from

15 which residual assets were distributed to employers pursu16 ant to section 4044(d).’’.

17 (b) CONFORMING AMENDMENT.—Section 4008 (29

18 U.S.C. 1308) is amended by striking ‘‘SEC. 4008.’’ and

19 inserting ‘‘SEC. 4008. (a) ANNUAL REPORT.—’’.

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

21 this section shall apply to fiscal years beginning after Sep22 tember 30, 1996.

23 SEC. 209. DEVELOPMENT OF ADDITIONAL REMEDIES.

24 (a) FINDINGS.—The Congress finds that—
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1 (1) the provisions of this Act, like many of

2 those proposed by the President and recently signed

3 into law, are designed to expand retirement savings;

4 (2) this goal can be achieved in part by sim5 plifying the pension system and reducing administra6 tive costs of maintaining pension plans for all em7 ployers;

8 (3) such simplification can benefit not only the

9 implementation and ongoing administration of pen10 sion plans but also the correction of problems that

11 arise in the operation of such plans;

12 (4) the Secretary of the Treasury has com13 mendably already acted to develop programs in14 tended to facilitate such corrections; and

15 (5) efficient correction serves participants and

16 beneficiaries not only by fulfilling the law’s require17 ments regarding pension plans but also by directing

18 funds into plans rather than toward correction ef19 forts and by encouraging employers to continue to

20 sponsor support for such plans.

21 (b) SENSE OF CONGRESS.—It is the sense of the

22 Congress that the Secretary of the Treasury should—

23 (1) review existing correction mechanisms to de24 termine whether modifications might facilitate addi25 tional utilization by sponsors, improve voluntary
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1 compliance, and hasten the correction of pension

2 plans,

3 (2) consider whether additional means of ad4 dressing nonegregious violations should be explored,

5 (3) make whatever legislative recommendations,

6 if any, appear necessary to fulfill these goals, and

7 (4) remain cognizant that the Congress, as well

8 as the Secretary, considers the continuing security of

9 retirement savings for workers, retirees, and bene10 ficiaries of fundamental importance.

11 Subtitle B—ERISA Enforcement

12 SEC. 211. REPEAL OF LIMITED SCOPE AUDIT.

13 (a) IN GENERAL.—Section 103(a)(3)(C) (29 U.S.C.

14 1023(a)(3)(C)) is amended by adding at the end the fol15 lowing:

16 ‘‘(ii) If an accountant is offering an opinion under

17 this section in the case of an employee pension benefit

18 plan, the accountant shall, to the extent consistent with

19 generally accepted auditing standards, rely on the work

20 of any independent public accountant of any bank or simi21 lar institution or insurance carrier that holds assets or

22 processes transactions of the employee pension benefit

23 plan provided that such bank, institution, or insurance

24 carrier is regulated, supervised, and subject to periodic ex25 amination by a State or Federal agency.’’.
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1 (b) CONFORMING AMENDMENTS.—

2 (1) Section 103(a)(3)(A) of such Act (29

3 U.S.C. 1023(a)(3)(A)) is amended by striking ‘‘sub4 paragraph (C)’’ and inserting ‘‘subparagraph

5 (C)(i)’’.

6 (2) Section 103(a)(3)(C) of such Act (29

7 U.S.C. 1023(a)(3)(C)) is amended by striking ‘‘(C)

8 The’’ and inserting ‘‘(C)(i) In the case of an em9 ployee benefit plan other than an employee pension

10 benefit plan, the’’.

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

12 this section shall apply with respect to opinions required

13 under section 103(a)(3)(A) of the Employee Retirement

14 Income Security Act of 1974 for plan years beginning on

15 or after January 1 of the calendar year following the date

16 of the enactment of this Act.

17 SEC. 212. ADDITIONAL REQUIREMENTS FOR QUALIFIED

18 PUBLIC ACCOUNTANTS.

19 (a) IN GENERAL.—Section 103(a)(3)(D) (29 U.S.C.

20 1023(a)(3)(D)) is amended—

21 (1) by inserting ‘‘(i)’’ after ‘‘(D)’’;

22 (2) by inserting ‘‘, with respect to any engage23 ment of an accountant under subparagraph (A)’’

24 after ‘‘means’’;
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1 (3) by redesignating clauses (i), (ii), and (iii) as

2 subclauses (I), (II), and (III), respectively;

3 (4) by striking the period at the end of sub4 clause (III) (as so redesignated) and inserting a

5 comma;

6 (5) by adding after subclause (III) (as so redes7 ignated), and flush with clause (i), the following:

8 ‘‘but only if such person meets the require9 ments of clauses (ii) and (iii) with respect

10 to such engagement.’’; and

11 (6) by adding at the end the following new

12 clauses:

13 ‘‘(ii) A person meets the requirements

14 of this clause with respect to an engage15 ment of such person as an accountant

16 under subparagraph (A) if such person—

17 ‘‘(I) has in operation an appro18 priate internal quality control system;

19 ‘‘(II) has undergone a qualified

20 external quality control review of the

21 person’s accounting and auditing

22 practices, including such practices rel23 evant to employee benefit plans (if
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1 any), during the 3-year period imme2 diately preceding such engagement;

3 and

4 ‘‘(III) has completed, within the

5 2-year period immediately preceding

6 such engagement, at least 80 hours of

7 continuing education or training

8 which contributes to the accountant’s

9 professional proficiency and which

10 meets such requirements as may be

11 prescribed by the Secretary in regula12 tions.

13 The Secretary shall issue the regulations

14 under subclause (III) not later than De15 cember 31, 1998.

16 ‘‘(iii) A person meets the require17 ments of this clause with respect to an en18 gagement of such person as an accountant

19 under subparagraph (A) if such person

20 meets such additional requirements and

21 qualifications of regulations which the Sec22 retary deems necessary to ensure the qual23 ity of plan audits.

24 ‘‘(iv) For purposes of clause (ii)(II),

25 an external quality control review shall be
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1 treated as qualified with respect to a per2 son referred to in clause (ii) if—

3 ‘‘(I) such review is performed in

4 accordance with the requirements of

5 external quality control review pro6 grams of recognized auditing stand7 ard-setting bodies, as determined in

8 regulations of the Secretary, and

9 ‘‘(II) in the case of any such per10 son who has, during the peer review

11 period, conducted one or more pre12 vious audits of employee benefit plans,

13 such review includes the review of an

14 appropriate number (determined as

15 provided in such regulations, but in

16 no case less than one) of plan audits

17 in relation to the scale of such per18 son’s auditing practice.

19 The Secretary shall issue the regulations

20 under subclause (I) not later than Decem21 ber 31, 1998.’’.

22 (b) EFFECTIVE DATES.—

23 (1) IN GENERAL.—Except as provided in para24 graph (2), the amendments made by this section

25 shall apply with respect to plan years beginning on
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1 or after the date which is 3 years after the date of

2 the enactment of this Act.

3 (2) RESTRICTIONS ON CONDUCTING EXAMINA4 TIONS.—Clause (iii) of section 103(a)(3)(D) of the

5 Employee Retirement Income Security Act of 1974

6 (as added by subsection (a)(6)) shall take effect on

7 the date of the enactment of this Act.

8 SEC. 213. CLARIFICATION OF FIDUCIARY PENALTIES.

9 (a) MODIFICATION OF PROHIBITION OF ASSIGNMENT

10 OR ALIENATION.—

11 (1) IN GENERAL.—Section 206(d) (29 U.S.C.

12 1056(d)) is amended by adding at the end the fol13 lowing new paragraphs:

14 ‘‘(4) Paragraph (1) shall not apply to any offset of

15 a participant’s accrued benefit in an employee pension

16 benefit plan against an amount that the participant is or17 dered or required to pay to the plan if—

18 ‘‘(A) the order or requirement to pay arises—

19 ‘‘(i) under a judgment of conviction for a

20 crime involving such plan,

21 ‘‘(ii) under a civil judgment (including a

22 consent order or decree) entered by a court in

23 an action brought in connection with a violation

24 (or alleged violation) of part 4 of this subtitle,

25 or
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1 ‘‘(iii) pursuant to a settlement agreement

2 between the Secretary and the participant, or a

3 settlement agreement between the Pension Ben4 efit Guaranty Corporation and the participant,

5 in connection with a violation (or alleged viola6 tion) of part 4 of this subtitle by a fiduciary or

7 any other person,

8 ‘‘(B) the judgment, order, decree, or settlement

9 agreement expressly provides for the offset of all or

10 part of the amount ordered or required to be paid

11 to the plan against the participant’s accrued benefit

12 in the plan, and

13 ‘‘(C) if the participant has a spouse at the time

14 at which the offset is to be made—

15 ‘‘(i) such spouse has consented in writing

16 to such offset and such consent is witnessed by

17 a notary public or representative of the plan,

18 ‘‘(ii) such spouse is ordered or required in

19 such judgment, order, decree, or settlement to

20 pay an amount to the plan in connection with

21 a violation of part 4 of this title, or

22 ‘‘(iii) in such judgment, order, decree, or

23 settlement, such spouse retains the right to re24 ceive the value of the survivor annuity under a

25 qualified joint and survivor annuity provided
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1 pursuant to section 205(a)(1) and under a

2 qualified preretirement survivor annuity pro3 vided pursuant to section 205(a)(2), determined

4 in accordance with paragraph (5).

5 ‘‘(5)(A) The value of the survivor annuity described

6 in paragraph (4)(C)(iii) shall be determined as if—

7 ‘‘(i) the participant terminated employment on

8 the date of the offset,

9 ‘‘(ii) there was no offset,

10 ‘‘(iii) the plan permitted retirement only on or

11 after normal retirement age,

12 ‘‘(iv) the plan provided only the minimum-re13 quired qualified joint and survivor annuity, and

14 ‘‘(v) the amount of the qualified preretirement

15 survivor annuity under the plan is equal to the

16 amount of the survivor annuity payable under the

17 minimum-required qualified joint and survivor annu18 ity.

19 ‘‘(B) For purposes of this paragraph, the term ‘mini20 mum-required qualified joint and survivor annuity’ means

21 the qualified joint and survivor annuity which is the actu22 arial equivalent of a single annuity for the life of the par23 ticipant and under which the survivor annuity is 50 per24 cent of the amount of the annuity which is payable during

25 the joint lives of the participant and the spouse.’’.
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1 (2) EFFECTIVE DATE.—The amendment made

2 by this subsection shall apply to judgments, orders,

3 and decrees issued, and settlement agreements en4 tered into, on or after the date of the enactment of

5 this Act.

6 (b) CIVIL PENALTIES FOR BREACH OF FIDUCIARY

7 RESPONSIBILITY.—

8 (1) IMPOSITION AND AMOUNT OF PENALTY

9 MADE DISCRETIONARY.—Section 502(l)(1) (29

10 U.S.C. 1132(l)(1)) is amended—

11 (A) by striking ‘‘shall’’ and inserting

12 ‘‘may’’, and

13 (B) by striking ‘‘equal to’’ and inserting

14 ‘‘not greater than’’.

15 (2) APPLICABLE RECOVERY AMOUNT.—Section

16 502(l)(2) (29 U.S.C. 1132(l)(2)) is amended to read

17 as follows:

18 ‘‘(2) For purposes of paragraph (1), the term ‘appli19 cable recovery amount’ means any amount which is recov20 ered from (or on behalf of) any fiduciary or other person

21 with respect to a breach or violation described in para22 graph (1) on or after the 30th day following receipt by

23 such fiduciary or other person of written notice from the

24 Secretary of the violation, whether paid voluntarily or by

25 order of a court in a judicial proceeding instituted by the
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1 Secretary under subsection (a)(2) or (a)(5). The Secretary

2 may, in the Secretary’s sole discretion, extend the 30-day

3 period described in the preceding sentence.’’.

4 (3) OTHER RULES.—Section 502(l) (29 U.S.C.

5 1132(l)) is amended by adding at the end the follow6 ing new paragraphs:

7 ‘‘(5) A person shall be jointly and severally liable for

8 the penalty described in paragraph (1) to the same extent

9 that such person is jointly and severally liable for the ap10 plicable recovery amount on which the penalty is based.

11 ‘‘(6) No penalty shall be assessed under this sub12 section unless the person against whom the penalty is as13 sessed is given notice and opportunity for a hearing with

14 respect to the violation and applicable recovery amount.’’.

15 (4) EFFECTIVE DATES.—

16 (A) IN GENERAL.—The amendments made

17 by this subsection shall apply to any breach of

18 fiduciary responsibility or other violation of part

19 4 of subtitle B of title I of the Employee Re20 tirement Income Security Act of 1974 occurring

21 on or after the date of the enactment of this

22 Act.

23 (B) TRANSITION RULE.—In applying the

24 amendment made by paragraph (2) (relating to

25 applicable recovery amount), a breach or other
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1 violation occurring before the date of the enact2 ment of this Act which continues after the

3 180th day after such date (and which may have

4 been discontinued at any time during its exist5 ence) shall be treated as having occurred after

6 such date of enactment.

7 SEC. 214. CONFORMING AMENDMENTS RELATING TO ERISA

8 ENFORCEMENT.

9 (a) SPECIAL RULE FOR CERTAIN JUDGMENTS AND

10 SETTLEMENTS.—Section 401(a)(13) of the Internal Reve11 nue Code of 1986 (relating to assignment and alienation)

12 is amended by adding at the end the following new sub13 paragraphs:

14 ‘‘(C) SPECIAL RULE FOR CERTAIN JUDG15 MENTS AND SETTLEMENTS.—Subparagraph (A)

16 shall not apply to any offset of a participant’s

17 accrued benefit in a plan against an amount

18 that the participant is ordered or required to

19 pay to the plan if—

20 ‘‘(i) the order or requirement to pay

21 arises—

22 ‘‘(I) under a judgment of convic23 tion for a crime involving such plan,
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1 ‘‘(II) under a civil judgment (in2 cluding a consent order or decree) en3 tered by a court in an action brought

4 in connection with a violation (or al5 leged violation) of part 4 of subtitle B

6 of title I of the Employee Retirement

7 Income Security Act of 1974, or

8 ‘‘(III) pursuant to a settlement

9 agreement between the Secretary of

10 Labor and the participant, or a settle11 ment agreement between the Pension

12 Benefit Guaranty Corporation and the

13 participant, in connection with a viola14 tion (or alleged violation) of part 4 of

15 subtitle B of title I of such Act,

16 ‘‘(ii) the judgment, order, decree, or

17 settlement agreement expressly provides

18 for the offset of all or part of the amount

19 ordered or required to be paid to the plan

20 against the participant’s accrued benefit in

21 the plan, and

22 ‘‘(iii) if the participant has a spouse

23 at the time at which the offset is to be

24 made—
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1 ‘‘(I) such spouse has consented

2 in writing to such offset and such con3 sent is witnessed by a notary public or

4 representative of the plan,

5 ‘‘(II) such spouse is ordered or

6 required to pay in such judgment,

7 order, decree, or settlement an

8 amount to the plan in connection with

9 a violation of part 4 of this title, or

10 ‘‘(III) in such judgment, order,

11 decree, or settlement, such spouse re12 tains the right to receive the value of

13 the survivor annuity under a qualified

14 joint and survivor annuity provided

15 pursuant to paragraph (11)(A)(i) and

16 under a qualified preretirement survi17 vor annuity provided pursuant to

18 paragraph (11)(A)(ii), determined in

19 accordance with subparagraph (D).

20 ‘‘(D) DETERMINATION OF VALUE OF SUR21 VIVOR ANNUITY IN CONNECTION WITH OFF22 SET.—The value of the survivor annuity de23 scribed in subparagraph (C)(iii)(III) shall be

24 determined as if—
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1 ‘‘(i) the participant terminated em2 ployment on the date of the offset,

3 ‘‘(ii) there was no offset,

4 ‘‘(iii) the plan permitted retirement

5 only on or after normal retirement age,

6 ‘‘(iv) the plan provided only the mini7 mum-required qualified joint and survivor

8 annuity, and

9 ‘‘(v) the amount of the qualified pre10 retirement survivor annuity under the plan

11 is equal to the amount of the survivor an12 nuity payable under the minimum-required

13 qualified joint and survivor annuity.

14 For purposes of this subparagraph, the term

15 ‘minimum-required qualified joint and survivor

16 annuity’ means the qualified joint and survivor

17 annuity which is the actuarial equivalent of a

18 single annuity for the life of the participant and

19 under which the survivor annuity is 50 percent

20 of the amount of the annuity which is payable

21 during the joint lives of the participant and the

22 spouse.

23 ‘‘(E) WAIVER OF CERTAIN DISTRIBUTION

24 REQUIREMENTS.—With respect to the require25 ments of subsections (a) and (k) of section 401,
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1 section 403(b), and section 409(d), a plan shall

2 not be treated as failing to meet such require3 ments solely by reason of an offset under sub4 paragraph (C).’’.

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

6 subsection (a) shall apply to judgments, orders, and de7 crees issued, and settlement agreements entered into, on

8 or after the date of the enactment of this Act.

9 TITLE III—PORTABILITY

10 SEC. 301. FASTER VESTING OF EMPLOYER MATCHING CON11 TRIBUTIONS.

12 (a) IN GENERAL.—Paragraph (2) of section 203(a)

13 of the Employee Retirement Income Security Act of 1974

14 (29 U.S.C. 1053(a)) is amended—

15 (1) by striking ‘‘or (B)’’ and inserting ‘‘(B),

16 and, if applicable, (C)’’,

17 (2) by striking ‘‘3’’, ‘‘4’’, ‘‘5’’, ‘‘6’’, and ‘‘7’’ in

18 the table in subparagraph (B) and inserting ‘‘1’’,

19 ‘‘2’’, ‘‘3’’, ‘‘4’’, and ‘‘5’’, respectively, and

20 (3) by adding at the end the following new sub21 paragraph:

22 ‘‘(C) 401(k) PLANS.—A plan satisfies the re23 quirements of this subparagraph if—

24 ‘‘(i) the plan includes a qualified cash or

25 deferred arrangement (as defined in section
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1 401(k)(2)) of the Internal Revenue Code of

2 1986, and

3 ‘‘(ii) an employee who has completed at

4 least 3 years of service has a nonforfeitable

5 right to 100 percent of the employee’s accrued

6 benefit derived from employer matching con7 tributions (as defined in section 401(m)(4)(A)

8 of such Code).

9 For purposes of this subparagraph, matching con10 tributions shall be taken into account regardless of

11 whether the matching contributions are made to the

12 same plan as the contributions made under section

13 401(k) of such Code, and matching contributions to

14 any plan shall be taken into account if such match15 ing contributions are made with respect to after-tax

16 employee contributions includible in gross income

17 and if the employer’s limit on matching contribu18 tions with respect to such includible employee con19 tributions is coordinated with the employer’s limit on

20 matching contributions with respect to contributions

21 under such section.’’.

22 (b) CONFORMING AMENDMENTS.—Paragraph (2) of

23 section 411(a) of the Internal Revenue Code of 1986 (re24 lating to employer contributions) is amended—
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1 (1) by striking ‘‘or (B)’’ and inserting ‘‘(B),

2 and, if applicable, (C)’’,

3 (2) by striking ‘‘3’’, ‘‘4’’, ‘‘5’’, ‘‘6’’, and ‘‘7’’ in

4 the table in subparagraph (B) and inserting ‘‘1’’,

5 ‘‘2’’, ‘‘3’’, ‘‘4’’, and ‘‘5’’, respectively,

6 (3) by striking ‘‘3 TO 7’’ and inserting ‘‘1 TO

7 5’’, and

8 (4) by adding at the end the following new sub9 paragraph:

10 ‘‘(C) 401(k) PLANS.—A plan satisfies the

11 requirements of this subparagraph if—

12 ‘‘(i) the plan includes a qualified cash

13 or deferred arrangement (as defined in sec14 tion 401(k)(2)), and

15 ‘‘(ii) an employee who has completed

16 at least 3 years of service has a nonforfeit17 able right to 100 percent of the employee’s

18 accrued benefit derived from employer

19 matching contributions (as defined in sec20 tion 401(m)(4)(A)).

21 For purposes of this subparagraph, matching

22 contributions shall be taken into account re23 gardless of whether the matching contributions

24 are made to the same plan as the contributions
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1 made under section 401(k), and matching con2 tributions to any plan shall be taken into ac3 count if such matching contributions are made

4 with respect to after-tax employee contributions

5 and if the employer’s limit on matching con6 tributions with respect to such after-tax em7 ployee contributions is coordinated with the em8 ployer’s limit on matching contributions with

9 respect to contributions under such section.’’.

10 (c) EFFECTIVE DATE.—

11 (1) IN GENERAL.—Except as provided in para12 graphs (2) and (3), the amendments made by this

13 section shall apply to plan years beginning after De14 cember 31, 1997.

15 (2) APPLICATION TO CURRENT EMPLOYEES.—

16 The amendments made by this section shall not

17 apply to any employee who does not have at least 1

18 hour of service in any plan year beginning after De19 cember 31, 1997.

20 (3) COLLECTIVE BARGAINING AGREEMENTS.—

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

22 more collective bargaining agreements between em23 ployee representatives and 1 or more employers rati24 fied by the date of the enactment of this Act, the

25 amendments made by this section shall not apply to
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1 employees covered by any such agreement in plan

2 years beginning before the earlier of—

3 (A) the later of—

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

5 collective bargaining agreements termi6 nates (determined without regard to any

7 extension thereof on or after such date of

8 enactment), or

9 (ii) January 1, 1998, or

10 (B) January 1, 2002.

11 SEC. 302. RATIONALIZE THE RESTRICTIONS ON DISTRIBU12 TIONS FROM 401(k) PLANS.

13 (a) IN GENERAL.—Section 401(k)(2)(B)(i)(I) of the

14 Internal Revenue Code of 1986 (relating to qualified cash

15 or deferred arrangements) is amended by striking ‘‘sepa16 ration from service’’ and inserting ‘‘severance from em17 ployment’’.

18 (b) BUSINESS SALE REQUIREMENTS DELETED.—

19 (1) IN GENERAL.—Section 401(k)(2)(B)(i)(II)

20 of the Internal Revenue Code of 1986 (relating to

21 qualified cash or deferred arrangements) is amended

22 by striking ‘‘an event’’ and inserting ‘‘a plan termi23 nation’’.

24 (2) CONFORMING AMENDMENTS.—Section

25 401(k)(10) of such Code is amended—
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1 (A) by striking subparagraph (A) and in2 serting the following:

3 ‘‘(A) IN GENERAL.—A plan termination is

4 described in this paragraph if the termination

5 of the plan is without establishment or mainte6 nance of another defined contribution plan

7 (other than an employee stock ownership plan

8 as defined in section 4975(e)(7)).’’,

9 (B) by striking subparagraph (C), and

10 (C) by striking ‘‘OR DISPOSITION OF AS11 SETS OR SUBSIDIARY’’ in the heading.

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

13 this section shall apply to distributions after December 31,

14 1997.

15 SEC. 303. TREATMENT OF TRANSFERS BETWEEN DEFINED

16 CONTRIBUTION PLANS.

17 (a) IN GENERAL.—Section 411(d)(6) of the Internal

18 Revenue Code of 1986 (relating to accrued benefit not to

19 be decreased by amendment) is amended by adding at the

20 end the following new subparagraph:

21 ‘‘(D) PLAN TRANSFERS.—A defined con22 tribution plan (in this subparagraph referred to

23 as the ‘transferee plan’) shall not be treated as

24 failing to meet the requirements of this para25 graph merely because the transferee plan does
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1 not provide some or all of the forms of distribu2 tion previously available under another defined

3 contribution plan (in this subparagraph referred

4 to as the ‘transferor plan’) to the extent that—

5 ‘‘(i) the forms of distribution pre6 viously available under the transferor plan

7 applied to the account of a participant or

8 beneficiary under the transferor plan that

9 was transferred from the transferor plan to

10 the transferee plan pursuant to a direct

11 transfer rather than pursuant to a dis12 tribution from the transferor plan,

13 ‘‘(ii) the terms of both the transferor

14 plan and the transferee plan authorize the

15 transfer described in clause (i),

16 ‘‘(iii) the transfer described in clause

17 (i) was made pursuant to a voluntary elec18 tion by the participant or beneficiary

19 whose account was transferred to the

20 transferee plan,

21 ‘‘(iv) the election described in clause

22 (iii) was made after the participant or ben23 eficiary received a notice describing the

24 consequences of making the election,
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1 ‘‘(v) if the transferor plan provides for

2 an annuity as the normal form of distribu3 tion under the plan in accordance with sec4 tion 417, the transfer is made with the

5 consent of the participant’s spouse (if

6 any), and such consent meets requirements

7 similar to the requirements imposed by

8 section 417(a)(2), and

9 ‘‘(vi) the transferee plan allows the

10 participant or beneficiary described in

11 clause (iii) to receive any distribution to

12 which the participant or beneficiary is enti13 tled under transferee plan in the form of

14 a single sum distribution.’’.

15 (b) CONFORMING AMENDMENT.—Section 204(g) of

16 the Employee Retirement Income Security Act of 1974

17 (29 U.S.C. 1054(g)) is amended by adding at the end the

18 following new paragraph:

19 ‘‘(4) A defined contribution plan (in this paragraph

20 referred to as the ‘transferee plan’) shall not be treated

21 as failing to meet the requirements of this subsection

22 merely because the transferee plan does not provide some

23 or all of the forms of distribution previously available
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1 under another defined contribution plan (in this para2 graph referred to as the ‘transferor plan’) to the extent

3 that—

4 ‘‘(A) the forms of distribution previously avail5 able under the transferor plan applied to the account

6 of a participant or beneficiary under the transferor

7 plan that was transferred from the transferor plan

8 to the transferee plan pursuant to a direct transfer

9 rather than pursuant to a distribution from the

10 transferor plan,

11 ‘‘(B) the terms of both the transferor plan and

12 the transferee plan authorize the transfer described

13 in subparagraph (A),

14 ‘‘(C) the transfer described in subparagraph

15 (A) was made pursuant to a voluntary election by

16 the participant or beneficiary whose account was

17 transferred to the transferee plan,

18 ‘‘(D) the election described in subparagraph (C)

19 was made after the participant or beneficiary re20 ceived a notice describing the consequences of mak21 ing the election,

22 ‘‘(E) if the transferor plan provides for an an23 nuity as the normal form of distribution under the

24 plan in accordance with section 205, the transfer is

25 made with the consent of the participant’s spouse (if
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1 any), and such consent meets requirements similar

2 to the requirements imposed by section 205(c)(2),

3 and

4 ‘‘(F) the transferee plan allows the participant

5 or beneficiary described in subparagraph (C) to re6 ceive any distribution to which the participant or

7 beneficiary is entitled under transferee plan in the

8 form of a single sum distribution.’’.

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

10 this section shall apply to transfers after December 31,

11 1997.

12 SEC. 304. MISSING PARTICIPANTS.

13 (a) IN GENERAL.—Section 4050 of the Employee Re14 tirement Income Security Act of 1974 (29 U.S.C. 1350)

15 is amended by redesignating subsection (c) as subsection

16 (e) and by inserting after subsection (b) the following new

17 subsections:

18 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation

19 shall prescribe rules similar to the rules in subsection (a)

20 for multiemployer plans covered by this title that termi21 nate under section 4041A.

22 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—

23 ‘‘(1) TRANSFER TO CORPORATION.—The plan

24 administrator of a plan described in paragraph (4)
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1 may elect to transfer a missing participant’s benefits

2 to the corporation upon termination of the plan.

3 ‘‘(2) INFORMATION TO THE CORPORATION.—To

4 the extent provided in regulations, the plan adminis5 trator of a plan described in paragraph (4) shall,

6 upon termination of the plan, provide the corpora7 tion information with respect to benefits of a miss8 ing participant if the plan transfers such benefits—

9 ‘‘(A) to the corporation, or

10 ‘‘(B) to an entity other than the corpora11 tion or a plan described in paragraph (4)(B)(ii).

12 ‘‘(3) PAYMENT BY THE CORPORATION.—If ben13 efits of a missing participant were transferred to the

14 corporation under paragraph (1), the corporation

15 shall, upon location of the participant or beneficiary,

16 pay to the participant or beneficiary the amount

17 transferred (or the appropriate survivor benefit) ei18 ther—

19 ‘‘(A) in a single sum (plus interest), or

20 ‘‘(B) in such other form as is specified in

21 regulations of the corporation.

22 ‘‘(4) PLANS DESCRIBED.—A plan is described

23 in this paragraph if—

24 ‘‘(A) the plan is a pension plan (within the

25 meaning of section 3(2))—
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1 ‘‘(i) to which the provisions of this

2 section do not apply (without regard to

3 this subsection), and

4 ‘‘(ii) which is not a plan described in

5 paragraphs (2) through (11) of section

6 4021(b), and

7 ‘‘(B) at the time the assets are to be dis8 tributed upon termination, the plan—

9 ‘‘(i) has missing participants, and

10 ‘‘(ii) has not provided for the transfer

11 of assets to pay the benefits of all missing

12 participants to another pension plan (with13 in the meaning of section 3(2)).

14 ‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—

15 Subsections (a)(1) and (a)(3) shall not apply to a

16 plan described in paragraph (4).’’.

17 (b) CONFORMING AMENDMENTS.—

18 (1) Section 206(f) of the Employee Retirement

19 Income Security Act of 1974 (29 U.S.C. 1056(f)) is

20 amended—

21 (A) by striking ‘‘title IV’’ and inserting

22 ‘‘section 4050’’, and

23 (B) by striking ‘‘the plan shall provide

24 that’’.
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1 (2) Section 401(a)(34) (relating to benefits of

2 missing participants on plan termination) is amend3 ed by striking ‘‘title IV’’ and inserting ‘‘section

4 4050’’.

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

6 this section shall apply to distributions made after final

7 regulations implementing subsections (c) and (d) of sec8 tion 4050 of the Employee Retirement Income Security

9 Act of 1974 (as added by subsection (a)), respectively, are

10 prescribed.

11 TITLE IV—TOWARD EQUITY FOR

12 WOMEN

13 SEC. 401. INDIVIDUAL’S PARTICIPATION IN PLAN NOT

14 TREATED AS PARTICIPATION BY SPOUSE.

15 (a) IN GENERAL.—Paragraph (1) of section 219(g)

16 of the Internal Revenue Code of 1986 (relating to limita17 tion on deduction for active participants in certain pension

18 plans) is amended by striking ‘‘or the individual’s spouse’’.

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

20 this section shall apply to taxable years beginning after

21 December 31, 1996.

22 SEC. 402. MODIFICATIONS OF JOINT AND SURVIVOR ANNU23 ITY REQUIREMENTS.

24 (a) AMENDMENTS TO ERISA.—

25 (1) AMOUNT OF ANNUITY.—
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1 (A) IN GENERAL.—Paragraph (1) of sec2 tion 205(a) of the Employee Retirement Income

3 Security Act of 1974 (29 U.S.C. 1055(a)) is

4 amended by inserting ‘‘or, at the election of the

5 participant, shall be provided in the form of a

qualified joint and 2 6 ⁄3 survivor annuity’’ after

7 ‘‘survivor annuity,’’.

8 (B) DEFINITION.—Subsection (d) of sec9 tion 205 of such Act (29 U.S.C. 1055) is

10 amended—

11 (i) by redesignating paragraphs (1)

12 and (2) as subparagraphs (A) and (B), re13 spectively,

14 (ii) by inserting ‘‘(1)’’ after ‘‘(d)’’,

15 and

16 (iii) by adding at the end the follow17 ing new paragraph:

18 ‘‘(2) For purposes of this section, the term ‘‘qualified

joint and 2 19 ⁄3 survivor annuity’’ means an annuity—

20 ‘‘(A) for the participant while both the partici21 pant and the spouse are alive with a survivor annu22 ity for the life of surviving individual (either the par23 ticipant or the spouse) equal to 67 percent of the
114

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1 amount of the annuity which is payable to the par2 ticipant while both the participant and the spouse

3 are alive,

4 ‘‘(B) which is the actuarial equivalent of a sin5 gle annuity for the life of the participant, and

6 ‘‘(C) which, for all other purposes of this Act,

7 is treated as a qualified joint and survivor annuity.’’.

8 (2) ILLUSTRATION REQUIREMENT.—Clause (i)

9 of section 205(c)(3)(A) of such Act (29 U.S.C.

10 1055(c)(3)(A)) is amended to read as follows:

11 ‘‘(i) the terms and conditions of each qualified

joint and survivor annuity and qualified joint and 2 12 ⁄3

13 survivor annuity offered, accompanied by an illustra14 tion of the benefits under each such annuity for the

15 particular participant and spouse and an acknowl16 edgement form to be signed by the participant and

17 the spouse that they have read and considered the

18 illustration before any form of retirement benefit is

19 chosen,’’.

20 (b) AMENDMENTS TO INTERNAL REVENUE CODE.—

21 (1) AMOUNT OF ANNUITY.—

22 (A) IN GENERAL.—Clause (i) of section

23 401(a)(11)(A) of the Internal Revenue Code of
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1 1986 (relating to requirement of joint and sur2 vivor annuity and preretirement survivor annu3 ity) is amended by inserting ‘‘or, at the election

4 of the participant, shall be provided in the form

of a qualified joint and 2 5 ⁄3 survivor annuity’’

6 after ‘‘survivor annuity,’’.

7 (B) DEFINITION.—Section 417 of such

8 Code (relating to definitions and special rules

9 for purposes of minimum survivor annuity re10 quirements) is amended by redesignating sub11 section (f) as subsection (g) and by inserting

12 after subsection (e) the following new sub13 section:

‘‘(f) DEFINITION OF QUALIFIED JOINT AND 2 14 ⁄3 SUR15 VIVOR ANNUITY.—For purposes of this section and section

401(a)(11), the term ‘‘qualified joint and 2 16 ⁄3 survivor an17 nuity’’ means an annuity—

18 ‘‘(1) for the participant while both the partici19 pant and the spouse are alive with a survivor annu20 ity for the life of surviving individual (either the par21 ticipant or the spouse) equal to 67 percent of the

22 amount of the annuity which is payable to the par23 ticipant while both the participant and the spouse

24 are alive,
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1 ‘‘(2) which is the actuarial equivalent of a sin2 gle annuity for the life of the participant, and

3 ‘‘(3) which, for all other purposes of this title,

4 is treated as a qualified joint and survivor annuity.’’.

5 (2) ILLUSTRATION REQUIREMENT.—Clause (i)

6 of section 417(a)(3)(A) of such Code (relating to ex7 planation of joint and survivor annuity) is amended

8 to read as follows:

9 ‘‘(i) the terms and conditions of each

10 qualified joint and survivor annuity and

qualified joint and 2 11 ⁄3 survivor annuity of12 fered, accompanied by an illustration of

13 the benefits under each such annuity for

14 the particular participant and spouse and

15 an acknowledgement form to be signed by

16 the participant and the spouse that they

17 have read and considered the illustration

18 before any form of retirement benefit is

19 chosen,’’.

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

21 this section shall apply to plan years beginning after De22 cember 31, 1996.

23 SEC. 403. DIVISION OF PENSION BENEFITS UPON DIVORCE.

24 (a) AMENDMENTS TO THE INTERNAL REVENUE

25 CODE OF 1986.—Subsection (p)(1) of section 414 of the
117

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1 Internal Revenue Code of 1986 is amended by adding the

2 following new subparagraph:

3 ‘‘(C) DEEMED DOMESTIC RELATIONS

4 ORDER UPON DIVORCE.—

5 ‘‘(i) IN GENERAL.—A divorce decree

6 issued with respect to the participant and

7 the former spouse pursuant to a State do8 mestic relations law (including an annul9 ment or other order of marital dissolution)

10 shall, upon delivery to a plan along with

11 the information required by paragraph

12 (2)(A), be deemed by the plan to be a do13 mestic relations order that specifies that

14 50 percent of the marital share of the par15 ticipant’s accrued benefit is to be provided

16 to such former spouse, unless the divorce

17 decree states that pension benefits were

18 considered by the parties and no division is

19 intended.

20 ‘‘(ii) MARITAL SHARE.—The marital

21 share shall be the accrued benefit of the

22 participant under the plan as of the date

23 of the divorce (to the extent such accrued

24 benefit is vested at the date of the divorce

25 or any later date) multiplied by a fraction,
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1 the numerator of which is the period of

2 participation by the participant under the

3 plan starting with the date of marriage

4 and ending with the date of divorce, and

5 the denominator of which is the total pe6 riod of participation by the participant

7 under the plan.

8 ‘‘(iii) INTERPRETATION AS QUALIFIED

9 DOMESTIC RELATIONS ORDER.—Each plan

10 shall establish reasonable rules for deter11 mining how any such deemed domestic re12 lations order is to be interpreted under the

13 plan so as to constitute a qualified domes14 tic relations order that satisfies paragraphs

15 (2) through (4) (and a copy of such rules

16 shall be provided to such former spouse

17 promptly after delivery of the divorce de18 cree). Such rules—

19 ‘‘(I) may delay the effect of such

20 an order until the earlier of the date

21 the participant is fully vested or has

22 terminated employment,

23 ‘‘(II) may allow the former

24 spouse to be paid out immediately,
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1 ‘‘(III) shall permit the former

2 spouse to be paid not later than the

3 earliest retirement age under the plan,

4 ‘‘(IV) may require the submitter

5 of the divorce decree to present a

6 marriage certificate or other evidence

7 of the marriage date to assist in bene8 fit calculations,

9 ‘‘(V) may require that a divorce

10 decree be presented on the date which

11 is not later than 2 years after the

12 date of the issuance of the decree, and

13 ‘‘(VI) may conform to the rules

14 applicable to qualified domestic rela15 tions orders regarding form or type of

16 benefit.

17 ‘‘(iv) APPLICATION.—This subpara18 graph shall not apply to the extent that a

19 qualified domestic relations order issued in

20 connection with such divorce provides oth21 erwise.’’.

22 (b) AMENDMENTS TO THE EMPLOYEE RETIREMENT

23 INCOME SECURITY ACT OF 1974.—Subsection (d)(2)(B)
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1 of section 206 of the Employee Retirement Income Secu2 rity Act of 1974 (29 U.S.C. 1056) is amended by adding

3 the following new subclause (iii):

4 ‘‘(iii) DEEMED DOMESTIC RELATIONS

5 ORDER UPON DIVORCE.—

6 ‘‘(I) IN GENERAL.—A divorce de7 cree issued with respect to the partici8 pant and the former spouse pursuant

9 to a State domestic relations law (in10 cluding an annulment or other order

11 of marital dissolution) shall, upon de12 livery to a plan along with the infor13 mation required by subparagraph

14 (C)(i), be deemed by the plan to be a

15 domestic relations order that specifies

16 that 50 percent of the marital share

17 of the participant’s accrued benefit is

18 to be provided to such former spouse.

19 ‘‘(II) MARITAL SHARE.—The

20 marital share shall be the accrued

21 benefit of the participant under the

22 plan as of the date of the divorce (to

23 the extent such accrued benefit is

24 vested at the date of the divorce or
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•S 14 IS

1 any later date) multiplied by a frac2 tion, the numerator of which is the

3 period of participation by the partici4 pant under the plan starting with the

5 date of marriage and ending with the

6 date of divorce, and the denominator

7 of which is the total period of partici8 pation by the participant under the

9 plan.

10 ‘‘(III) INTERPRETATION AS

11 QUALIFIED DOMESTIC RELATIONS

12 ORDER.—Each plan shall establish

13 reasonable rules for determining how

14 any such deemed domestic relations

15 order is to be interpreted under the

16 plan so as to constitute a qualified do17 mestic relations order that satisfies

18 subparagraphs (C) through (E) (and

19 a copy of such rules shall be provided

20 to such former spouse promptly after

21 delivery of the divorce decree). Such

22 rules (aa) may delay the effect of such

23 an order until the earlier of the date

24 the participant is fully vested or has

25 terminated employment, (bb) may
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1 allow the former spouse to be paid out

2 immediately, and (cc) shall permit the

3 spouse to be paid not later than the

4 earliest retirement age under the plan.

5 ‘‘(IV) APPLICATION.—This sub6 clause shall not apply to the extent

7 that a qualified domestic relations

8 order issued in connection with such

9 divorce provides otherwise.’’.

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

11 this section shall be effective for divorce decrees issued

12 after December 31, 1999.

13 SEC. 404. DEFERRED ANNUITIES FOR SURVIVING SPOUSES

14 OF FEDERAL EMPLOYEES.

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

16 States Code, is amended—

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

18 8338(b) of this title’’ and inserting ‘‘section

19 8338(b), and a former spouse of a deceased former

20 employee who separated from the service with title

21 to a deferred annuity under section 8338 (if they

22 were married to one another prior to the date of sep23 aration),’’; and

24 (2) by adding at the end the following:
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1 ‘‘(j)(1) If a former employee dies after having sepa2 rated from the service with title to a deferred annuity

3 under section 8338 but before having established a valid

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

5 married on the date of separation, the surviving spouse

6 may elect to receive—

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

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

9 to 55 percent of the former employee’s deferred an10 nuity;

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

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

13 to the extent practicable, the present value of the fu14 ture payments of the annuity would be actuarially

15 equivalent to the present value of the future pay16 ments under subparagraph (A) as of the day after

17 the former employee’s death; or

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

19 spouse is the individual who would be entitled to the

20 lump-sum credit and if such surviving spouse files

21 application therefor.

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

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

24 surviving spouse remarries before becoming 55 years of

25 age, or dies.’’.
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1 (b) CORRESPONDING AMENDMENT FOR FERS.—

2 Section 8445(a) of title 5, United States Code, is amend3 ed—

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

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

6 (2) by striking ‘‘annuity)’’ and inserting ‘‘annu7 ity, or of a former employee who dies after having

8 separated from the service with title to a deferred

9 annuity under section 8413 but before having estab10 lished a valid claim for annuity (if such former

11 spouse was married to such former employee prior

12 to the date of separation))’’.

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

14 this section shall apply with respect to surviving spouses

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

16 amendments made by subsection (a), terminated after

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

18 of the enactment of this Act.

19 SEC. 405. PAYMENT OF LUMP-SUM CREDIT FOR FORMER

20 SPOUSES OF FEDERAL EMPLOYEES.

21 (a) IN GENERAL.—Title 5, United States Code, is

22 amended—

23 (1) in section 8342(c), by striking ‘‘Lump-sum’’

24 and inserting ‘‘Except as provided in section

25 8345(j), lump-sum’’;
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1 (2) in section 8345(j)—

2 (A) in paragraph (1), by inserting after

3 ‘‘that individual’’ the following: ‘‘, or be made

4 under section 8342(d) through (f) to an individ5 ual entitled under section 8342(c),’’; and

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

7 ‘‘(4) Any payment under this subsection to a person

8 bars recovery by any other person.’’;

9 (3) in section 8424(d), by striking ‘‘Lump-sum’’

10 and inserting ‘‘Except as provided in section

11 8467(a), lump-sum’’; and

12 (4) in section 8467—

13 (A) in subsection (a), by inserting after

14 ‘‘that individual’’ the following: ‘‘, or be made

15 under section 8424(e) through (g) to an indi16 vidual entitled under section 8424(d),’’; and

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

18 ‘‘(d) Any payment under this section to a person bars

19 recovery by any other person.’’.

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

21 this section shall apply with respect to any death occurring

22 after the 90th day after the date of the enactment of this

23 Act.
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1 SEC. 406. WOMEN’S PENSION TOLL-FREE PHONE NUMBER.

2 (a) IN GENERAL.—The Secretary of Labor shall con3 tract with an independent organization to create a wom4 en’s pension toll-free telephone number and contact to

5 serve as—

6 (1) a resource for women on pension questions

7 and issues;

8 (2) a source for referrals to appropriate agen9 cies; and

10 (3) a source for printed information.

11 (b) AUTHORIZATION OF APPROPRIATIONS.—There

12 are authorized to be appropriated $500,000 for each of

13 the fiscal years 1997, 1998, 1999, and 2000.

14 TITLE V—DATE FOR ADOPTION

15 OF PLAN AMENDMENTS

16 SEC. 501. DATE FOR ADOPTION OF PLAN AMENDMENTS.

17 (a) IN GENERAL.—Except as otherwise provided in

18 this Act, if any amendment made by this Act requires an

19 amendment to any plan, such plan amendment shall not

20 be required to be made before the last day of the first

21 plan year beginning on or after January 1, 1998, if—

22 (1) during the period after such amendment

23 takes effect and before the last day of such first

24 plan year, the plan is operated in accordance with

25 the requirements of such amendment, and
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1 (2) such plan amendment applies retroactively

2 to such period.

3 A plan shall not be treated as failing to provide definitely

4 determinable benefits or contributions, or to be operated

5 in accordance with the provisions of the plan, merely be6 cause it operates in accordance with this subsection.

7 (b) GOVERNMENTAL PLANS.—In the case of a gov8 ernmental plan (as defined in section 414(d) of the Inter9 nal Revenue Code of 1986), subsection (a) shall be applied

10 by substituting for ‘‘January 1, 1998’’ the later of—

11 (1) January 1, 1999, or

12 (2) the date which is 90 days after the opening

13 of the first legislative session beginning after Janu14 ary 1, 1999, of the governing body with authority to

15 amend the plan, but only if such governing body

16 does not meet continuously.

17 (c) SPECIAL RULE FOR COLLECTIVELY BARGAINED

18 PLANS.—Nothwithstanding any other provision of this

19 Act, in the case of a plan maintained pursuant to 1 or

20 more collective bargaining agreements between employee

21 representatives and 1 or more employers ratified on or be22 fore the date of the enactment of this Act, any amendment

23 made by this Act which requires an amendment to such

24 plan shall not be required to be made before the last day

25 of the first plan year beginning on or after the earlier of—
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1 (1) the later of—

2 (A) January 1, 1998, or

3 (B) the date on which the last of such col4 lective bargaining agreements terminates (de5 termined without regard to any extension there6 of after the date of the enactment of this Act),

7 or

8 (2) January 1, 1999.

Æ