I

106TH CONGRESS

1ST SESSION H. R. 1213

To amend the Internal Revenue Code of 1986 to promote expanded retirement

savings.

IN THE HOUSE OF REPRESENTATIVES

MARCH 22, 1999

Mr. NEAL of Massachusetts (for himself, Mr. RANGEL, Mr. COYNE, Mr.

LEVIN, and Mr. MATSUI) introduced the following bill; which was referred

to the Committee on Ways and Means, and in addition to the Committee

on Education and the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions

as fall within the jurisdiction of the committee concerned

A BILL

To amend the Internal Revenue Code of 1986 to promote

expanded retirement savings.

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

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

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

5 ‘‘Employee Pension Portability and Accountability Act of

6 1999’’.

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this Act an amend-
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1 ment or repeal is expressed in terms of an amendment

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

3 shall be considered to be made to a section or other provi4 sion of the Internal Revenue Code of 1986.

5 (c) TABLE OF CONTENTS.—

Sec. 1. Short title; amendment of 1986 Code.

Sec. 2. Exclusion for payroll deduction contributions to IRAs.

Sec. 3. Credit for pension plan startup costs of small employers.

Sec. 4. Secure money annuity or retirement (SMART) trusts.

Sec. 5. Faster vesting of employer matching contributions.

Sec. 6. Pension right to know proposals.

Sec. 7. Nondiscrimination rules for qualified cash or deferred arrangements and

matching contributions.

Sec. 8. Definition of highly compensated employees.

Sec. 9. Treatment of multiemployer plans under section 415.

Sec. 10. Full funding limitation for multiemployer plans.

Sec. 11. Elimination of partial termination rules for multiemployer plans.

Sec. 12. Allowance of rollovers from and to 403(b) plans.

Sec. 13. Rollover contributions from deferred compensation plans of State and

local governments.

Sec. 14. Rollovers of IRAs into workplace retirement plans.

Sec. 15. Rollovers of after-tax contributions.

Sec. 16. Purchase of service credit in governmental defined benefit plans.

Sec. 17. Modifications of joint and survivor annuity requirements.

Sec. 18. Periods of family and medical leave treated as hours of service for pension participation and vesting.

6 SEC. 2. EXCLUSION FOR PAYROLL DEDUCTION CONTRIBU7 TIONS TO IRAS.

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

9 retirement accounts) is amended by redesignating sub10 section (q) as subsection (r) and by inserting after sub11 section (p) the following new subsection:

12 ‘‘(q) QUALIFIED PAYROLL DEDUCTION ARRANGE13 MENT FOR IRA CONTRIBUTIONS.—

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

15 the term ‘qualified payroll deduction arrangement’
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1 means a written arrangement of an employer under

2 which—

3 ‘‘(A) an employee eligible to participate in

4 the arrangement may elect to have the employer

5 make payments—

6 ‘‘(i) to the employee directly in cash,

7 or

8 ‘‘(ii) as elective employer contributions

9 to an individual retirement plan (as de10 fined in section 7701(a)(37)), other than

11 an individual retirement plan described in

12 section 408(k), 408(p), or 408A(b), on be13 half of the employee for the taxable year in

14 which the payments otherwise would have

15 been made to the employee directly in

16 cash,

17 ‘‘(B) the amount which the employee may

18 elect under subparagraph (A) for any year may

19 not exceed a total of $2,000,

20 ‘‘(C) no other contributions may be made

21 other than contributions described in subpara22 graph (A),

23 ‘‘(D) the employee’s rights to any contribu24 tions made to an individual retirement plan are
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1 nonforfeitable (for this purpose, rules similar to

2 the rules of subsection (k)(4) shall apply), and

3 ‘‘(E) the employer makes the elective em4 ployer contributions under subparagraph (A)

5 not later than the close of the 30-day period

6 following the last day of the month with respect

7 to which the contributions are to be made.

8 ‘‘(2) ELECTION NOT TO HAVE SUBSECTION

9 APPLY.—An employer that maintains an arrange10 ment otherwise described in paragraph (1) may elect

11 to have contributions treated as though they were

12 not made under such an arrangement. If an em13 ployer does not make an election described in the

14 preceding sentence, an employee may elect, before

15 any contributions are made for the calendar year, to

16 have contributions on behalf of the employee treated

17 as though they were not made under an arrange18 ment described in paragraph (1). An employer shall

19 be deemed to have made an election under this para20 graph for a year if the employer maintained a quali21 fied plan with respect to which contributions were

22 made or benefits were accrued for such year. For

23 purposes of the preceding sentence, the term ‘quali24 fied plan’ means a plan, contract, pension, or trust
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1 described in subparagraph (A) or (B) of section

2 219(g)(5).’’.

3 (b) TAX TREATMENT OF EMPLOYER CONTRIBUTIONS

4 MADE UNDER A QUALIFIED PAYROLL DEDUCTION AR5 RANGEMENT.—

6 (1) COORDINATION WITH DEDUCTION UNDER

7 SECTION 219.—

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

9 amount of deduction) is amended by adding at

10 the end the following new paragraph:

11 ‘‘(5) SPECIAL RULE FOR CONTRIBUTIONS

12 UNDER A QUALIFIED PAYROLL DEDUCTION AR13 RANGEMENT.—This section shall not apply with re14 spect to any amount contributed under a qualified

15 payroll deduction arrangement described in section

16 408(q)(1) (for which an election has not been made

17 under section 408(q)(2)).’’.

18 (B) Section 219(g)(1) (relating to the limi19 tation on deduction for active participants) is

20 amended to read as follows:

21 ‘‘(1) IN GENERAL.—If (for any part of any plan

22 year ending with or within a taxable year) an indi23 vidual is an active participant, each of the dollar

24 limitations contained in subsections (b)(1)(A) and
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1 (c)(1)(A) for such taxable year shall be reduced (but

2 not below zero) by the sum of—

3 ‘‘(A) the amount determined under para4 graph (2), and

5 ‘‘(B) the amount contributed for the tax6 able year under a qualified payroll deduction ar7 rangement described in section 408(q)(1) (for

8 which an election has not been made under sec9 tion 408(q)(2)).’’.

10 (2) DEDUCTIBILITY OF EMPLOYER CONTRIBU11 TIONS.—Section 404 (relating to deductions for con12 tributions of an employer to pension, etc., plans) is

13 amended by adding at the end the following new

14 subsection:

15 ‘‘(n) SPECIAL RULES FOR CONTRIBUTIONS UNDER

16 A QUALIFIED PAYROLL DEDUCTION ARRANGEMENT.—

17 Rules similar to the rules of subsection (m) shall apply

18 to employer contributions made under a qualified payroll

19 deduction arrangement described in section 408(q)(1) (for

20 which an election has not been made under section

21 408(q)(2)).’’.

22 (3) CONTRIBUTIONS AND DISTRIBUTIONS.—

23 Section 402 (relating to taxability of beneficiary of

24 employees’ trust) is amended by adding at the end

25 the following new subsection:
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1 ‘‘(l) TREATMENT OF CONTRIBUTIONS AND DIS2 TRIBUTIONS UNDER A QUALIFIED PAYROLL DEDUCTION

3 ARRANGEMENT.—Rules similar to the rules of paragraphs

4 (1) and (3) of subsection (h) shall apply to contributions

5 and distributions made with respect to an individual re6 tirement plan under a qualified payroll deduction arrange7 ment described in section 408(q)(1) (for which an election

8 has not been made under section 408(q)(2)), except that

9 contributions made by an employer on behalf of an em10 ployee for a taxable year shall be excluded from income

11 only to the extent such contributions would have been de12 ductible for such taxable year under section 219, if such

13 section applied, without regard to section 219(g)(1)(B).

14 Contributions that are not excluded from income under

15 the preceding sentence shall be treated as designated non16 deductible contributions under section 408(o).’’.

17 (c) EXEMPTION FROM WITHHOLDING.—Subsection

18 (a) of section 3401 (defining wages) is amended by strik19 ing ‘‘or’’ at the end of paragraph (20), by striking the

20 period at the end of paragraph (21) and inserting ‘‘; or’’,

21 and by inserting after paragraph (21) the following new

22 paragraph:

23 ‘‘(22) for any payment made for the benefit of

24 the employee to an individual retirement plan if the
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1 amount of such payment was deducted and withheld

2 under section 408(q).’’.

3 (d) EXCLUSION SHOWN ON W–2.—Subsection (a) of

4 section 6051 (relating to receipts for employees) is amend5 ed by striking ‘‘and’’ at the end of paragraph (10), by

6 striking the period at the end of paragraph (11) and in7 serting ‘‘, and’’, and by inserting after paragraph (11) the

8 following new paragraph:

9 ‘‘(12) the total amount deducted and withheld

10 pursuant to section 408(q).’’.

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

12 this section shall apply to remuneration paid after Decem13 ber 31, 1999.

14 SEC. 3. CREDIT FOR PENSION PLAN STARTUP COSTS OF

15 SMALL EMPLOYERS.

16 (a) IN GENERAL.—Subpart D of part IV of sub17 chapter A of chapter 1 (relating to business related cred18 its) is amended by adding at the end the following new

19 section:

20 ‘‘SEC. 45D. SMALL EMPLOYER PENSION PLAN STARTUP

21 COSTS.

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

23 in the case of an eligible employer, the small employer pen24 sion plan startup cost credit determined under this section

25 for any taxable year is an amount equal to 50 percent
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1 of the qualified startup costs paid or incurred by the tax2 payer during the taxable year.

3 ‘‘(b) DOLLAR LIMITATION.—The amount of the cred4 it determined under this section for any taxable year shall

5 not exceed—

6 ‘‘(1) $1,000 for the first credit year,

7 ‘‘(2) $500 for each of the 2 taxable years imme8 diately following the first credit year, and

9 ‘‘(3) zero for any other taxable year.

10 ‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this

11 section—

12 ‘‘(1) IN GENERAL.—The term ‘eligible em13 ployer’ has the meaning given such term by section

14 408(p)(2)(C)(i).

15 ‘‘(2) EMPLOYERS MAINTAINING QUALIFIED

16 PLANS DURING 1997 NOT ELIGIBLE.—Such term

17 shall not include an employer if such employer (or

18 any predecessor employer) maintained a qualified

19 plan (as defined in section 408(p)(2)(D)(ii)) with re20 spect to which contributions were made, or benefits

21 were accrued, for service in 1997. If only individuals

22 other than employees described in subparagraph (A)

23 or (B) of section 410(b)(3) are eligible to participate

24 in the qualified employer plan referred to in sub25 section (d)(1), then the preceding sentence shall be
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1 applied without regard to any qualified plan in

2 which only employees so described are eligible to

3 participate.

4 ‘‘(d) OTHER DEFINITIONS.—For purposes of this

5 section—

6 ‘‘(1) QUALIFIED STARTUP COSTS.—

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

8 startup costs’ means any ordinary and nec9 essary expenses of an eligible employer which

10 are paid or incurred in connection with—

11 ‘‘(i) the establishment or administra12 tion of an eligible employer plan, or

13 ‘‘(ii) the retirement-related education

14 of employees with respect to such plan.

15 ‘‘(B) PLAN MUST HAVE AT LEAST 2 PAR16 TICIPANTS.—Such term shall not include any

17 expense in connection with a plan that does not

18 have at least 2 individuals who are eligible to

19 participate.

20 ‘‘(C) PLAN MUST BE ESTABLISHED BE21 FORE JANUARY 1, 2002.—Such term shall not

22 include any expense in connection with a plan

23 established after December 31, 2001.

24 ‘‘(2) ELIGIBLE EMPLOYER PLAN.—The term

25 ‘eligible employer plan’ means a qualified employer
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1 plan within the meaning of section 4972(d), or a

2 qualified payroll deduction arrangement within the

3 meaning of section 408(q)(2). A qualified payroll de4 duction arrangement shall be treated as an eligible

5 employer plan only if all employees of the employer

6 who—

7 ‘‘(A) have been employed for 90 days, and

8 ‘‘(B) are not described in subparagraph

9 (A) or (C) of section 410(b)(3),

10 are eligible to make the election under section

11 408(q)(1)(A).

12 ‘‘(3) FIRST CREDIT YEAR.—The term ‘first

13 credit year’ means—

14 ‘‘(A) the taxable year which includes the

15 date that the eligible employer plan to which

16 such costs relate becomes effective, or

17 ‘‘(B) at the election of the eligible em18 ployer, the taxable year preceding the taxable

19 year referred to in subparagraph (A).

20 ‘‘(e) SPECIAL RULES.—For purposes of this

21 section—

22 ‘‘(1) AGGREGATION RULES.—All persons treat23 ed as a single employer under subsection (a) or (b)

24 of section 52, or subsection (n) or (o) of section 414,
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1 shall be treated as one person. All eligible employer

2 plans shall be treated as 1 eligible employer plan.

3 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No de4 duction shall be allowed for that portion of the quali5 fied startup costs paid or incurred for the taxable

6 year which is equal to the credit determined under

7 subsection (a).

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

9 section shall not apply to a taxpayer for any taxable

10 year if such taxpayer elects to have this section not

11 apply for such taxable year.’’.

12 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI13 NESS CREDIT.—Section 38(b) (defining current year busi14 ness credit) is amended by striking ‘‘plus’’ at the end of

15 paragraph (11), by striking the period at the end of para16 graph (12) and inserting ‘‘, plus’’, and by adding at the

17 end the following new paragraph:

18 ‘‘(13) in the case of an eligible employer (as de19 fined in section 45D(c)), the small employer pension

20 plan startup cost credit determined under section

21 45D(a).’’.

22 (c) CONFORMING AMENDMENTS.—

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

24 end the following new paragraph:
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1 ‘‘(8) NO CARRYBACK OF SMALL EMPLOYER

2 PENSION PLAN STARTUP COST CREDIT BEFORE EF3 FECTIVE DATE.—No portion of the unused business

4 credit for any taxable year which is attributable to

5 the small employer pension plan startup cost credit

6 determined under section 45D may be carried back

7 to a taxable year ending on or before the date of the

8 enactment of section 45D.’’.

9 (2) Subsection (c) of section 196 is amended by

10 striking ‘‘and’’ at the end of paragraph (7), by strik11 ing the period at the end of paragraph (8) and in12 serting ‘‘, and’’, and by adding at the end the fol13 lowing new paragraph:

14 ‘‘(9) the small employer pension plan startup

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

16 (3) The table of sections for subpart D of part

17 IV of subchapter A of chapter 1 is amended by add18 ing at the end the following new item:

‘‘Sec. 45D. Small employer pension plan startup costs.’’.

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

20 this section shall apply to costs paid or incurred in taxable

21 years ending after the date of the enactment of this Act.
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1 SEC. 4. SECURE MONEY ANNUITY OR RETIREMENT (SMART)

2 TRUSTS.

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

4 D of chapter 1 is amended by inserting after section 408A

5 the following new section:

6 ‘‘SEC. 408B. SMART PLANS.

7 ‘‘(a) EMPLOYER ELIGIBILITY.—

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

9 and maintain a SMART annuity or a SMART trust

10 for any year only if—

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

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

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

14 no predecessor of the employer maintains) a

15 qualified plan (other than a permissible plan)

16 with respect to which contributions were made,

17 or benefits were accrued, for service in any year

18 in the period beginning with the year such an19 nuity or trust became effective and ending with

20 the year for which the determination is being

21 made.

22 The period described in subparagraph (B) shall in23 clude the period of 5 years before the year such

24 trust or annuity became effective with respect to

25 qualified plans which are defined benefit plans or

26 money purchase pension plans.
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1 ‘‘(2) DEFINITIONS.—For purposes of paragraph

2 (1)—

3 ‘‘(A) QUALIFIED PLAN.—The term ‘quali4 fied plan’ has the meaning given such term by

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

6 ‘‘(B) PERMISSIBLE PLAN.—The term ‘per7 missible plan’ means—

8 ‘‘(i) a SIMPLE plan described in sec9 tion 408(p),

10 ‘‘(ii) a SIMPLE 401(k) plan de11 scribed in section 401(k)(11),

12 ‘‘(iii) an eligible deferred compensa13 tion plan described in section 457(b),

14 ‘‘(iv) a collectively bargained plan but

15 only if the employees eligible to participate

16 in such plan are not also entitled to a ben17 efit described in subsection (b)(5) or

18 (c)(5), or

19 ‘‘(v) a plan under which there may be

20 made only—

21 ‘‘(I) elective deferrals described

22 in section 402(g)(3), and

23 ‘‘(II) employer matching con24 tributions not in excess of the
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1 amounts described in subclauses (I)

2 and (II) of section 401(k)(12)(B)(i).

3 ‘‘(b) SMART ANNUITY.—

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

5 the term ‘SMART annuity’ means an individual re6 tirement annuity (as defined in section 408(b) with7 out regard to paragraph (2) thereof and without re8 gard to the limitation on aggregate annual pre9 miums contained in the flush language of section

10 408(b)) if—

11 ‘‘(A) such annuity meets the requirements

12 of paragraphs (2) through (7), and

13 ‘‘(B) the only contributions to such annu14 ity are employer contributions.

15 Nothing in this section shall be construed as pre16 venting an employer from using a group annuity

17 contract which is divisible into individual retirement

18 annuities for purposes of providing SMART annu19 ities.

20 ‘‘(2) PARTICIPATION REQUIREMENTS.—

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

22 this paragraph are met for any year only if all

23 employees of the employer who—
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1 ‘‘(i) received at least $5,000 in com2 pensation from the employer during any 2

3 consecutive preceding years, and

4 ‘‘(ii) received at least $5,000 in com5 pensation during the year,

6 are entitled to the benefit described in para7 graph (5) for such year.

8 ‘‘(B) EXCLUDABLE EMPLOYEES.—An em9 ployer may elect to exclude from the require10 ments under subparagraph (A) employees de11 scribed in subparagraph (A) or (C) of section

12 410(b)(3).

13 ‘‘(3) VESTING.—The requirements of this para14 graph are met if the employee’s rights to any bene15 fits under the annuity are nonforfeitable.

16 ‘‘(4) BENEFIT FORM.—The requirements of

17 this paragraph are met if the only form of benefit

18 is—

19 ‘‘(A) a benefit payable annually in the

20 form of a single life annuity with monthly pay21 ments (with no ancillary benefits) beginning at

22 age 65, or

23 ‘‘(B) any other form of benefit which is the

24 actuarial equivalent (based on the assumptions
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1 specified in the SMART annuity) of the benefit

2 described in subparagraph (A).

3 ‘‘(5) AMOUNT OF ANNUAL ACCRUED BEN4 EFIT.—

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

6 this paragraph are met for any plan year if the

7 accrued benefit of each participant derived from

8 employer contributions for such year, when ex9 pressed as a benefit described in paragraph

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

11 participant’s compensation for such year.

12 ‘‘(B) APPLICABLE PERCENTAGE.—For

13 purposes of this paragraph—

14 ‘‘(i) IN GENERAL.—The term ‘applica15 ble percentage’ means 2 percent.

16 ‘‘(ii) ELECTION OF HIGHER PERCENT17 AGE.—An employer may elect to apply an

18 applicable percentage of 1 percent for any

19 year for all employees eligible to partici20 pate in the plan for such year, if the em21 ployer notifies the employees of such per22 centage within a reasonable period before

23 the beginning of such year. An employer

24 may also elect to apply an applicable per25 centage of 3 percent for any of the first 5
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1 years that the plan is effective for all em2 ployees eligible to participate in the plan

3 for such year, if the employer so notifies

4 the employees.

5 ‘‘(C) COMPENSATION LIMIT.—

6 ‘‘(i) IN GENERAL.—The compensation

7 taken into account under this paragraph

8 for any year shall not exceed $100,000.

9 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

10 The Secretary shall adjust annually the

11 $100,000 amount in clause (i) for in12 creases in the cost-of-living at the same

13 time and in the same manner as adjust14 ments under section 415(d); except that

15 the base period shall be the calendar quar16 ter beginning October 1, 1999, and any in17 crease which is not a multiple of $5,000

18 shall be rounded to the next lowest mul19 tiple of $5,000.

20 ‘‘(6) FUNDING.—

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

22 this paragraph are met only if the employer is

23 required to contribute to the annuity for each

24 plan year the amount necessary to purchase a

25 SMART annuity in the amount of the benefit
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1 accrued for such year for each participant enti2 tled to such benefit. Such contribution must be

made no later than 81 3 ⁄2 months after the end

4 of the plan year.

5 ‘‘(B) PENALTY FOR FAILURE TO MAKE RE6 QUIRED CONTRIBUTION.—The taxes imposed by

7 section 4971 shall apply to a failure to make

8 the contribution required by this paragraph in

9 the same manner as if the amount of the failure

10 were an accumulated funding deficiency to

11 which such section applies.

12 ‘‘(7) LIMITATION ON DISTRIBUTIONS.—

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

14 this paragraph are met only if distributions

15 may be paid only when the employee attains

16 age 65, separates from service, dies, or becomes

17 disabled (within the meaning of section

18 72(m)(7)).

19 ‘‘(B) LIMITATION ON DISTRIBUTIONS ON

20 SEPARATION FROM SERVICE OF EMPLOYEES

21 WHO HAVE NOT ATTAINED AGE 65.—Subpara22 graph (A) shall apply to a distribution on sepa23 ration of service of an employee who has not at24 tained age 65 only if—
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1 ‘‘(i) the aggregate cash value of an

2 employee’s SMART annuity does not ex3 ceed the dollar limit in effect under section

4 411(a)(11)(A), or

5 ‘‘(ii) the distribution is a direct trust6 ee-to-trustee transfer of the entire balance

7 to the credit of the employee to a SMART

8 trust described in subsection (c), a

9 SMART rollover plan, or a SMART annu10 ity for the benefit of such employee.

11 ‘‘(8) JOINT AND SURVIVOR ANNUITY RULES AP12 PLICABLE.—The requirements of this paragraph are

13 met only if the annuity satisfies section 401(a)(11).

14 ‘‘(9) DEFINITIONS AND SPECIAL RULE.—

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

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

17 this subsection.

18 ‘‘(B) USE OF DESIGNATED FINANCIAL IN19 STITUTIONS.—A rule similar to the rule of sec20 tion 408(p)(7) (without regard to the last sen21 tence thereof) shall apply for purposes of this

22 subsection.

23 ‘‘(C) SMART ROLLOVER PLAN.—For pur24 poses of this section, the term ‘SMART rollover

25 plan’ means an individual retirement plan for
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1 the benefit of the employee to which a rollover

2 was made from a SMART Annuity, SMART

3 trust, or another SMART Rollover plan.

4 ‘‘(c) SMART TRUST.—

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

6 the term ‘SMART trust’ means a trust forming part

7 of a defined benefit plan if—

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

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

10 ‘‘(B) such plan meets the requirements of

11 paragraphs (2) through (8), and

12 ‘‘(C) the only contributions to such trust

13 are employer contributions.

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

15 meets the requirements of this paragraph for any

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

17 are met for such year.

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

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

21 ‘‘(4) BENEFIT FORM.—

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

23 subparagraph (B), a plan meets the require24 ments of this paragraph only if the trustee dis25 tributes a SMART annuity that satisfies sub-
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1 section (b)(4) where the annual benefit de2 scribed in subsection (b)(4)(A) is no less than

3 the accrued benefit determined under para4 graph (5).

5 ‘‘(B) DIRECT TRANSFERS TO INDIVIDUAL

6 RETIREMENT PLAN OR SMART ANNUITY.—A

7 plan shall not fail to meet the requirements of

8 this paragraph by reason of permitting, as an

9 optional form of benefit, the distribution of the

10 entire balance to the credit of the employee. If

11 the employee is under age 65, such distribution

12 must be in the form of a direct trustee-to-trust13 ee transfer to a SMART annuity, another

14 SMART trust, or a SMART rollover plan (or,

15 in the case of a distribution that does not ex16 ceed the dollar limit in effect under section

17 411(a)(11)(A), any other individual retirement

18 plan).

19 ‘‘(5) AMOUNT OF ANNUAL ACCRUED BEN20 EFIT.—A plan meets the requirements of this para21 graph for any year only if the requirements of sub22 section (b)(5) are met for such year.

23 ‘‘(6) FUNDING.—
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1 ‘‘(A) IN GENERAL.—A plan meets the re2 quirements of this paragraph for any year only

3 if—

4 ‘‘(i) the requirements of subparagraph

5 (A) of subsection (b)(6) are met for such

6 year,

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

8 an unfunded annuity amount with respect

9 to the account of any participant, the plan

10 requires that the employer make an addi11 tional contribution to such plan (at the

12 time the annuity contract to which such

13 amount relates is purchased) equal to the

14 unfunded annuity amount, and

15 ‘‘(iii) in the case of a plan which has

16 an unfunded prior year liability with re17 spect to the account of any participant as

18 of the close of such plan year, the plan re19 quires that the employer make an addi20 tional contribution to such plan for such

21 year equal to the amount of such unfunded

prior year liability no later than 81 22 ⁄2

23 months following the end of the plan year.

24 ‘‘(B) UNFUNDED ANNUITY AMOUNT.—For

25 purposes of this paragraph, the term ‘unfunded
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1 annuity amount’ means, with respect to the ac2 count of any participant for whom an annuity

3 is being purchased, the excess (if any) of—

4 ‘‘(i) the amount necessary to purchase

5 an annuity contract which meets the re6 quirements of subsection (b)(4) in the

7 amount of the participant’s accrued benefit

8 determined under paragraph (5), over

9 ‘‘(ii) the balance in such account at

10 the time such contract is purchased.

11 ‘‘(C) UNFUNDED PRIOR YEAR LIABIL12 ITY.—For purposes of this paragraph, the term

13 ‘unfunded prior year liability’ means, with re14 spect to any plan year, the excess (if any) of—

15 ‘‘(i) the aggregate present value of the

16 participants’ accrued benefits under the

17 plan as of the close of the prior plan year,

18 over

19 ‘‘(ii) the value of the plan’s assets de20 termined under section 412(c)(2) as of the

21 close of the plan year (determined without

22 regard to any contributions for such plan

23 year).

24 Such present value shall be determined using

25 the assumptions specified in subparagraph (D).
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1 ‘‘(D) ACTUARIAL ASSUMPTIONS.—In deter2 mining the amount required to be contributed

3 under subparagraph (A)—

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

5 5 percent per year,

6 ‘‘(ii) the assumed mortality shall be

7 determined under the applicable mortality

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

9 modified by the Secretary so that it does

10 not include any assumption for preretire11 ment mortality), and

12 ‘‘(iii) the assumed retirement age

13 shall be 65.

14 ‘‘(E) CHANGES IN MORTALITY TABLE.—If

15 the applicable mortality table under section

16 417(e)(3) for any plan year is not the same as

17 such table for the prior plan year, the Secretary

18 shall prescribe regulations which phase in the

19 effect of the changes over a reasonable period

20 of plan years determined by the Secretary.

21 ‘‘(F) PENALTY FOR FAILURE TO MAKE RE22 QUIRED CONTRIBUTION.—The taxes imposed by

23 section 4971 shall apply to a failure to make

24 the contribution required by this paragraph in

25 the same manner as if the amount of the failure
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1 were an accumulated funding deficiency to

2 which such section applies.

3 ‘‘(7) SEPARATE ACCOUNTS FOR PARTICI4 PANTS.—A plan meets the requirements of this

5 paragraph for any year only if the plan provides—

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

7 participant, and

8 ‘‘(B) for benefits based solely on—

9 ‘‘(i) the amount contributed to the

10 participant’s account,

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

12 losses, and any forfeitures of accounts of

13 other participants which may be allocated

14 to such participant’s account, and

15 ‘‘(iii) the amount of any unfunded an16 nuity amount with respect to the partici17 pant.

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

19 ARE NOT READILY TRADABLE.—A plan meets the

20 requirements of this paragraph only if the plan pro21 hibits the trust from holding directly or indirectly se22 curities which are not readily tradable on an estab23 lished securities market. Nothing in this paragraph

24 shall prohibit the trust from holding insurance com25 pany products regulated by State law.
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1 ‘‘(9) DEFINITIONS.—The definitions applicable

2 under subsection (b)(8) shall apply for purposes of

3 this subsection.

4 ‘‘(d) SPECIAL RULES FOR SMART ANNUITIES AND

5 TRUSTS.—For purposes of section 401(a), a SMART an6 nuity and a SMART trust shall be treated as meeting the

7 requirements of the following provisions:

8 ‘‘(1) Section 401(a)(4) (relating to non9 discrimination rules).

10 ‘‘(2) Section 401(a)(26) (relating to minimum

11 participation).

12 ‘‘(3) Section 410 (relating to minimum partici13 pation and coverage requirements).

14 ‘‘(4) Section 411(b) (relating to accrued benefit

15 requirements).

16 ‘‘(5) Section 416 (relating to special rules for

17 top-heavy plans).’’

18 (b) DEDUCTION RULES.—

19 (1) IN GENERAL.—Section 404 is further

20 amended by adding at the end the following new

21 subsection:

22 ‘‘(o) SPECIAL RULES FOR SMART ANNUITIES AND

23 TRUSTS.—

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

25 a SMART annuity shall be treated as if they are
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1 made to a plan described in paragraph (1) of sub2 section (a).

3 ‘‘(2) DEDUCTIBLE LIMIT.—For purposes of sec4 tion 404(a)(1)(A)(i), the amount necessary to satisfy

5 the minimum funding requirement of section

6 408B(b)(6) or (c)(6) shall be treated as the amount

7 necessary to satisfy the minimum funding require8 ment of section 412.’’

9 (2) COORDINATION WITH DEDUCTION UNDER

10 SECTION 219.—

11 (A) Section 219(b) is amended by adding

12 at the end the following new paragraph:

13 ‘‘(5) SPECIAL RULE FOR SMART ANNUITIES.—

14 This section shall not apply with respect to any

15 amount contributed to a SMART annuity estab16 lished under section 408B(b).’’

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

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

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

20 following new clause:

21 ‘‘(vii) any SMART annuity (within

22 the meaning of section 408B), or’’.

23 (c) CONTRIBUTIONS AND DISTRIBUTIONS.—

24 (1) Section 402 is further amended by adding

25 at the end the following new subsection:
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1 ‘‘(m) TREATMENT OF SMART ANNUITIES.—Rules

2 similar to the rules of paragraphs (1) and (3) of sub3 section (h) shall apply to contributions and distributions

4 with respect to SMART annuities under section 408B.’’

5 (2) Section 408(d)(3) is amended by adding at

6 the end the following new subparagraph:

7 ‘‘(H) SMART ANNUITIES.—This para8 graph shall not apply to any amount paid or

9 distributed out of a SMART annuity (as de10 fined in section 408B) unless it is paid in a

11 trustee-to-trustee transfer into a SMART roll12 over plan.’’

13 (3)(A) Section 412(h) is amended by striking

14 ‘‘or’’ at the end of paragraph (5), by striking the pe15 riod at the end of paragraph (6) and inserting ‘‘,

16 or’’, and by inserting after paragraph (6) the fol17 lowing new paragraph:

18 ‘‘(7) any plan providing for the purchase of any

19 SMART annuity or any SMART plan.’’

20 (B) Section 301(a) of Employee Retirement In21 come Security Act of 1974 (29 U.S.C. 1081) is

22 amended by striking ‘‘or’’ at the end of paragraph

23 (9), by striking the period at the end of paragraph

24 (10) and inserting ‘‘; or’’, and by adding at the end

25 the following new paragraph:
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1 ‘‘(11) any plan providing for the purchase of

2 any SMART annuity or any SMART plan (as such

3 terms are defined in section 408B of such Code).’’

4 (4) Section 415(b) is amended by adding at the

5 end the following new paragraph:

6 ‘‘(12) TREATMENT OF SMART ANNUITIES AND

7 TRUSTS.—A SMART annuity and a SMART trust

8 shall be treated as meeting the requirements of this

9 section, but distributions from such an annuity or

10 trust shall be taken into account in determining

11 whether any other plan satisfies the requirements of

12 this section.’’

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

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

16 following new paragraph:

17 ‘‘(9) SPECIAL RULES FOR SMART ANNUITIES

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

19 from a SMART annuity, a SMART trust, or a

20 SMART rollover plan (within the meaning of section

21 408B), paragraph (1) shall be applied by sub22 stituting ‘20 percent’ for ‘10 percent’ and paragraph

23 (2) shall be applied by substituting ‘age 65’ for ‘age

591 24 ⁄2’.’’

25 (e) SIMPLIFIED EMPLOYER REPORTS.—
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1 (1) SMART ANNUITIES.—Section 408(l) (relat2 ing to simplified employer reports) is amended by

3 adding at the end the following new paragraph:

4 ‘‘(3) SMART ANNUITIES.—

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

6 maintaining any SMART annuity (within the

7 meaning of section 408B) shall file a simplified

8 annual return with the Secretary containing

9 only the information described in subparagraph

10 (B).

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

12 subparagraph (A) shall set forth—

13 ‘‘(i) the name and address of the em14 ployer,

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

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

17 employer,

18 ‘‘(iv) the number of such employees

19 who are eligible to participate in the plan,

20 ‘‘(v) the total amount contributed by

21 the employer to each such annuity for such

22 year and the minimum amount required

23 under section 408B to be so contributed,

24 ‘‘(vi) the percentage elected under sec25 tion 408B(b)(5)(B),
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1 ‘‘(vii) the name of the issuer,

2 ‘‘(viii) the employer identification

3 number,

4 ‘‘(ix) the name of the plan, and

5 ‘‘(x) the date of the contribution.

6 ‘‘(C) REPORTING BY ISSUER OF SMART AN7 NUITY.—

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

9 SMART annuity shall provide to the owner

10 of the annuity for each year a statement

11 setting forth as of the close of such year—

12 ‘‘(I) the benefits guaranteed at

13 age 65 under the annuity, and

14 ‘‘(II) the cash surrender value of

15 the annuity.

16 ‘‘(ii) SUMMARY DESCRIPTION.—The

17 issuer of any SMART annuity shall pro18 vide to the employer maintaining the annu19 ity for each year a description containing

20 the following information:

21 ‘‘(I) The name and address of

22 the employer and the issuer.

23 ‘‘(II) The requirements for eligi24 bility for participation.
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1 ‘‘(III) The benefits provided with

2 respect to the annuity.

3 ‘‘(IV) The procedures for, and ef4 fects of, withdrawals (including roll5 overs) from the annuity.

6 ‘‘(D) TIME AND MANNER OF REPORT7 ING.—Any return, report, or statement required

8 under this paragraph shall be made in such

9 form and at such time as the Secretary shall

10 prescribe.’’

11 (2) SMART TRUSTS.—Section 6059 (relating

12 to actuarial reports) is amended by redesignating

13 subsections (c) and (d) as subsections (d) and (e),

14 respectively, and by inserting after subsection (b)

15 the following new subsection:

16 ‘‘(c) SMART TRUSTS.—In the case of a SMART

17 trust (within the meaning of section 408B), the Secretary

18 shall require a simplified actuarial report which

19 contains—

20 ‘‘(1) information similar to the information re21 quired in section 408(l)(3)(B),

22 ‘‘(2) the fair market value of the assets of the

23 trust,

24 ‘‘(3) the amounts distributed directly to partici25 pants,
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1 ‘‘(4) the amounts transferred to SMART roll2 over plans, and

3 ‘‘(5) the present value of the annual accrued

4 benefits under the plan to which the trust relates.’’

5 (f) CONFORMING AMENDMENTS.—

6 (1) Subparagraph (A) of section 219(g)(5) is

7 amended by striking ‘‘or’’ at the end of clause (v)

8 and by inserting after clause (vi) the following new

9 clause:

10 ‘‘(vii) any SMART trust or SMART

11 annuity (within the meaning of section

12 408B), or’’.

13 (2) Section 280G(b)(6) is amended by striking

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

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

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

17 following new subparagraph:

18 ‘‘(E) a SMART annuity described in sec19 tion 408B.’’

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

21 (n)(3)(B) of section 414 are each amended by in22 serting ‘‘408B,’’ after ‘‘408(p),’’.

23 (4) Section 4972(d)(1)(A) is amended by strik24 ing ‘‘and’’ at the end of clause (iii), by striking the

25 period at the end of clause (iv) and inserting ‘‘,
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1 and’’, and by adding after clause (iv) the following

2 new clause:

3 ‘‘(v) any SMART annuity (within the

4 meaning of section 408B).’’

5 (g) REPORTING REQUIREMENTS UNDER ERISA.—

6 Section 101 of the Employee Retirement Income Security

7 Act of 1974 (29 U.S.C. 1021) is amended by redesig8 nating subsection (h) as subsection (i) and by inserting

9 after subsection (g) the following new subsection:

10 ‘‘(h) SMART ANNUITIES.—

11 ‘‘(1) NO EMPLOYER REPORTS.—Except as pro12 vided in this subsection, no report shall be required

13 under this section by an employer maintaining a

14 SMART annuity under section 408B(b) of the Inter15 nal Revenue Code of 1986.

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

17 any SMART annuity shall provide to the employer

18 maintaining the annuity for each year a description

19 containing the following information:

20 ‘‘(A) The name and address of the em21 ployer and the issuer.

22 ‘‘(B) The requirements for eligibility for

23 participation.

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

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

2 withdrawals (including rollovers) from the an3 nuity.’’

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

5 shall provide each employee eligible to participate in

6 the SMART annuity with the description described

7 in paragraph (2) at the same time as the notifica8 tion required under section 408B(b)(5)(B) of the In9 ternal Revenue Code of 1986.’’

10 (h) $5 PER PARTICIPANT PBGC PREMIUM.—Sub11 paragraph (A) of section 4006(a)(3) of the Employee Re12 tirement Income Security Act of 1974 (29 U.S.C. 1306)

13 is amended—

14 (1) by inserting ‘‘not described in clause (iv)’’

15 after ‘‘in the case of a single-employer plan’’ in

16 clause (i),

17 (2) by striking the period at the end of clause

18 (iii) and inserting ‘‘; and’’, and

19 (3) by inserting after clause (iii) the following

20 new clause:

21 ‘‘(iv) in the case of a single-employer plan de22 scribed in section 408B(c) of the Internal Revenue

23 Code of 1986, an amount equal to $5 for each par24 ticipant.’’.
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1 (i) CLERICAL AMENDMENT.—The table of sections

2 for subpart A of part I of subchapter D of chapter 1 is

3 amended by inserting after the item relating to section

4 408A the following new item:

‘‘Sec. 408B. SMART plans.’’

5 (j) EFFECTIVE DATE.—The amendments made by

6 this section shall apply to years beginning after December

7 31, 1999.

8 SEC. 5. FASTER VESTING OF EMPLOYER MATCHING CON9 TRIBUTIONS.

10 (a) AMENDMENT OF INTERNAL REVENUE CODE.—

11 Paragraph (2) of section 411(a) (relating to employer con12 tributions) is amended—

13 (1) by inserting ‘‘, and, if applicable, (C)’’ after

14 ‘‘or (B)’’, and

15 (2) by adding at the end the following new sub16 paragraph:

17 ‘‘(C) MATCHING CONTRIBUTIONS.—In the

18 case of a plan that includes an accrued benefit

19 derived from matching contributions (as defined

20 in section 401(m)(4)(A)), the plan satisfies the

21 requirements of this subparagraph if—

22 ‘‘(i) if an employee who has completed

23 at least 3 years of service has a nonforfeit24 able right to 100 percent of the employee’s
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1 accrued benefit derived from such match2 ing contributions, or

3 ‘‘(ii) an employee has a nonforfeitable

4 right to a percentage of the employee’s ac5 crued benefit derived from employer

6 matching contributions (as so defined) de7 termined under the following table:

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

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

8 (b) AMENDMENT OF ERISA.—Paragraph (2) of sec9 tion 203(a) of the Employee Retirement Income Security

10 Act of 1974 (29 U.S.C. 1053(a)) is amended—

11 (1) by inserting ‘‘, and, if applicable, (C)’’ after

12 ‘‘or (B)’’, and

13 (2) by adding at the end the following new sub14 paragraph:

15 ‘‘(C) MATCHING CONTRIBUTIONS.—In the

16 case of a plan that includes an accrued benefit

17 derived from matching contributions (as defined

18 in section 401(m)(4)(A) of the Internal Rev19 enue Code of 1986), the plan satisfies the re20 quirements of this subparagraph if—

21 ‘‘(i) if an employee who has completed

22 at least 3 years of service has a nonforfeit-
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1 able right to 100 percent of the employee’s

2 accrued benefit derived from such match3 ing contributions, or

4 ‘‘(ii) an employee has a nonforfeitable

5 right to a percentage of the employee’s ac6 crued benefit derived from employer

7 matching contributions (as so defined) de8 termined under the following table:

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

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

9 (c) EFFECTIVE DATE.—

10 (1) IN GENERAL.—Except as provided in para11 graphs (2) and (3), the amendments made by this

12 section shall apply to plan years beginning after De13 cember 31, 1999.

14 (2) APPLICATION TO CURRENT EMPLOYEES.—

15 The amendments made by this section shall not

16 apply to any employee who does not have at least 1

17 hour of service in any plan year beginning after De18 cember 31, 1999.

19 (3) COLLECTIVE BARGAINING AGREEMENTS.—

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

21 more collective bargaining agreements between em22 ployee representatives and 1 or more employers rati-
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1 fied by the date of the enactment of this Act, the

2 amendments made by this section shall not apply to

3 employees covered by any such agreement in plan

4 years beginning before the earlier of—

5 (A) the later of—

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

7 collective bargaining agreements termi8 nates (determined without regard to any

9 extension thereof on or after such date of

10 enactment), or

11 (ii) January 1, 1999, or

12 (B) January 1, 2004.

13 SEC. 6. PENSION RIGHT TO KNOW PROPOSALS.

14 (a) SPOUSE’S RIGHT TO KNOW DISTRIBUTION IN15 FORMATION.—

16 (1) AMENDMENT OF INTERNAL REVENUE

17 CODE.—Paragraph (3) of section 417(a) (relating to

18 definitions and special rules for purposes of min19 imum survivor annuity requirements) is amended by

20 adding at the end the following new subparagraph:

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

22 time a plan provides a participant with a writ23 ten explanation under subparagraph (A) or (B),

24 such plan shall provide a copy of such expla25 nation to such participant’s spouse. If the last
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1 known address of the spouse is the same as the

2 last known address of the participant, the re3 quirement of the preceding sentence shall be

4 treated as met if the copy referred to in the

5 preceding sentence is included in a single mail6 ing made to such address and addressed to both

7 such participant and spouse.’’.

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

9 section 205(c) of Employee Retirement Income Se10 curity Act of 1974 is amended by adding at the end

11 the following new subparagraph:

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

13 time a plan provides a participant with a writ14 ten explanation under subparagraph (A) or (B),

15 such plan shall provide a copy of such expla16 nation to such participant’s spouse. If the last

17 known address of the spouse is the same as the

18 last known address of the participant, the re19 quirement of the preceding sentence shall be

20 treated as met if the copy referred to in the

21 preceding sentence is included in a single mail22 ing made to such address and addressed to both

23 such participant and spouse.’’.

24 (b) EMPLOYEE’S RIGHT TO KNOW OF OPPORTUNITY

25 FOR ELECTIVE CONTRIBUTIONS UNDER 401(k) PLANS.—
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1 Subparagraph (D) of section 401(k)(12) (relating to no2 tice requirements) is amended—

3 (1) by striking ‘‘, within a reasonable period be4 fore any year,’’ and inserting ‘‘before the 60th day

5 before the beginning of any year’’, and

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

7 flush sentence:

8 ‘‘The requirements of paragraph (11)(B)(iii)

9 shall apply for purposes of this subparagraph.’’

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

11 this section shall apply to years beginning after December

12 31, 1999.

13 SEC. 7. NONDISCRIMINATION RULES FOR QUALIFIED CASH

14 OR DEFERRED ARRANGEMENTS AND MATCH15 ING CONTRIBUTIONS.

16 (a) ALTERNATIVE METHODS OF SATISFYING SEC17 TION 401(k) NONDISCRIMINATION TESTS.—Subpara18 graph (B) of section 401(k)(12) (relating to alternative

19 methods of meeting nondiscrimination requirements) is

20 amended to read as follows:

21 ‘‘(B) NONELECTIVE AND MATCHING CON22 TRIBUTIONS.—

23 ‘‘(i) IN GENERAL.—The requirements

24 of this subparagraph are met if the re25 quirements of clauses (ii) and (iii) are met.
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1 ‘‘(ii) NONELECTIVE CONTRIBU2 TIONS.—The requirements of this clause

3 are met if, under the arrangement, the em4 ployer is required, without regard to

5 whether the employee makes an elective

6 contribution or employee contribution, to

7 make a contribution to a defined contribu8 tion plan on behalf of each employee who

9 is not a highly compensated employee and

10 who is eligible to participate in the ar11 rangement in an amount equal to at least

12 1 percent of the employee’s compensation.

13 ‘‘(iii) MATCHING CONTRIBUTIONS.—

14 The requirements of this clause are met if,

15 under the arrangement, the employer

16 makes matching contributions on behalf of

17 each employee who is not a highly com18 pensated employee in an amount equal

19 to—

20 ‘‘(I) 100 percent of the elective

21 contributions of the employee to the

22 extent such elective contributions do

23 not exceed 3 percent of the employee’s

24 compensation, and
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1 ‘‘(II) 50 percent of the elective

2 contributions of the employee to the

3 extent that such elective contributions

4 exceed 3 percent but do not exceed 5

5 percent of the employee’s compensa6 tion.

7 ‘‘(iv) RATE FOR HIGHLY COM8 PENSATED EMPLOYEES.—The require9 ments of clause (iii) are not met if, under

10 the arrangement, the rate of matching con11 tribution with respect to any rate of elec12 tive contribution of a highly compensated

13 employee is greater than that with respect

14 to an employee who is not a highly com15 pensated employee. For purposes of this

16 clause, to the extent provided in regula17 tions, the last sentences of paragraph

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

19 apply.

20 ‘‘(v) ALTERNATIVE PLAN DESIGNS.—

21 If the rate of matching contribution with

22 respect to any rate of elective contribution

23 is not equal to the percentage required

24 under clause (iii), an arrangement shall
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1 not be treated as failing to meet the re2 quirements of clause (iii) if—

3 ‘‘(I) the rate of an employer’s

4 matching contribution does not in5 crease as an employee’s rate of elec6 tive contribution increase, and

7 ‘‘(II) the aggregate amount of

8 matching contributions at such rate of

9 elective contribution is at least equal

10 to the aggregate amount of matching

11 contributions which would be made if

12 matching contributions were made on

13 the basis of the percentages described

14 in clause (iii).’’

15 (b) ALTERNATIVE METHODS OF SATISFYING SEC16 TION 401(m) NONDISCRIMINATION TESTS.—Section

17 401(m)(11) (relating to alternative method of satisfying

18 tests) is amended by adding at the end of subparagraph

19 (B) the following new flush sentence:

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

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

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

23 (iii).’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to years beginning after December

3 31, 1999.

4 SEC. 8. DEFINITION OF HIGHLY COMPENSATED EMPLOY5 EES.

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

7 414(q)(1) (defining highly compensated employee) is

8 amended to read as follows:

9 ‘‘(B) for the preceding year had compensa10 tion from the employer in excess of $80,000.’’.

11 (b) CONFORMING AMENDMENTS.—

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

13 by striking paragraphs (3), (5), and (7) and by re14 designating paragraphs (4), (6), (8), and (9) as

15 paragraphs (3) through (6), respectively.

16 (B) Sections 129(d)(8)(B), 401(a)(5)(D)(ii),

17 408(k)(2)(C), and 416(i)(1)(D) are each amended

18 by striking ‘‘section 414(q)(4)’’ and inserting ‘‘sec19 tion 414(q)(3)’’.

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

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

22 414(r)(9)’’.

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

24 the end the following new paragraph:
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1 ‘‘(9) EXCLUDED EMPLOYEES.—For purposes of

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

3 excluded:

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

5 months of service.

6 ‘‘(B) Employees who normally work less

than 171 7 ⁄2 hours per week.

8 ‘‘(C) Employees who normally work during

9 not more than 6 months during any year.

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

11 age of 21.

12 ‘‘(E) Except to the extent provided in reg13 ulations, employees who are included in a unit

14 of employees covered by an agreement which

15 the Secretary of Labor finds to be a collective

16 bargaining agreement between employee rep17 resentatives and the employer.’’.

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

19 amended by striking ‘‘subsection (q)(5)’’ and insert20 ing ‘‘paragraph (9)’’.

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

22 this section shall apply to years beginning after December

23 31, 1999.
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1 SEC. 9. 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) EXEMPTION FOR SURVIVOR AND DISABILITY

13 BENEFITS.—Subparagraph (I) of section 415(b)(2) (relat14 ing to limitation for defined benefit plans) is amended—

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

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

17 in clause (i),

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

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

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

21 ‘‘GOVERNMENTAL’’ in the heading.

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

23 this section shall apply to years beginning after December

24 31, 1999.
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1 SEC. 10. FULL FUNDING LIMITATION FOR MULTIEMPLOYER

2 PLANS.

3 (a) AMENDMENTS TO CODE.—

4 (1) FULL FUNDING LIMITATION.—Section

5 412(c)(7)(C) (relating to full funding limitation) is

6 amended—

7 (A) by inserting ‘‘or in the case of a multi8 employer plan,’’ after ‘‘paragraph (6)(B),’’, and

9 (B) by inserting ‘‘AND MULTIEMPLOYER

10 PLANS’’ after ‘‘PARAGRAPH (6)(B)’’ in the head11 ing thereof.

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

13 annual valuation) is amended—

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

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

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

17 the heading and inserting ‘‘VALUATION’’.

18 (b) AMENDMENTS TO ERISA.—

19 (1) FULL FUNDING LIMITATION.—Section

20 302(c)(7)(C) of the Employee Retirement Income

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

22 amended—

23 (A) by inserting ‘‘or in the case of a multi24 employer plan,’’ after ‘‘paragraph (6)(B),’’, and
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1 (B) by inserting ‘‘AND MULTIEMPLOYER

2 PLANS’’ after ‘‘PARAGRAPH (6)(B)’’ in the head3 ing thereof.

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

5 (29 U.S.C. 1082(c)(9)) is amended—

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

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

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

9 the heading and inserting ‘‘VALUATION’’.

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

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

13 SEC. 11. ELIMINATION OF PARTIAL TERMINATION RULES

14 FOR MULTIEMPLOYER PLANS.

15 (a) PARTIAL TERMINATION RULES FOR MULTIEM16 PLOYER PLANS.—Section 411(d)(3) (relating to termi17 nation or partial termination; discontinuance of contribu18 tions) is amended by adding at the end the following new

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

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

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

22 this section shall apply to partial terminations beginning

23 after December 31, 1999.
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1 SEC. 12. ALLOWANCE OF ROLLOVERS FROM AND TO 403(b)

2 PLANS.

3 (a) ROLLOVERS FROM SECTION 403(b) PLANS.—

4 Section 403(b)(8)(A)(ii) (relating to rollover amounts) is

5 amended by striking ‘‘such distribution’’ and all that fol6 lows and inserting ‘‘such distribution to an eligible retire7 ment plan described in section 402(c)(8)(B), and’’.

8 (b) ROLLOVERS TO SECTION 403(b) PLANS.—Sec9 tion 402(c)(8)(B) (defining eligible retirement plan) is

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

11 striking the period at the end of clause (iv) and inserting

12 ‘‘, and’’, and by adding at the end the following:

13 ‘‘(v) an annuity contract described in

14 section 403(b).’’

15 (c) CONFORMING AMENDMENTS.—

16 (1) Section 72(o)(4) is amended by striking

17 ‘‘and 408(d)(3)’’ and inserting ‘‘403(b)(8), and

18 408(d)(3)’’.

19 (2) Section 401(a)(31)(B) is amended by strik20 ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4), and

21 403(b)(8)’’.

22 (3) Subparagraph (B) of section 403(b)(8) is

23 amended by inserting ‘‘and (9)’’ after ‘‘through

24 (7)’’.

25 (4) Subparagraphs (A) and (B) of section

26 415(b)(2) are each amended by striking ‘‘and
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1 408(d)(3)’’ and inserting ‘‘403(b)(8), and

2 408(d)(3)’’.

3 (d) EFFECTIVE DATE; SPECIAL RULE.—

4 (1) EFFECTIVE DATE.—The amendments made

5 by this section shall apply to distributions after De6 cember 31, 1999.

7 (2) SPECIAL RULE.—Notwithstanding any other

8 provision of law, subsections (h)(3) and (h)(5) of

9 section 1122 of the Tax Reform Act of 1986 shall

10 not apply to any distribution from an eligible retire11 ment plan on behalf of an individual if there was a

12 rollover to such plan on behalf of such individual

13 which is permitted solely by reason of any amend14 ment made by this section.

15 SEC. 13. ROLLOVER CONTRIBUTIONS FROM DEFERRED

16 COMPENSATION PLANS OF STATE AND

17 LOCAL GOVERNMENTS.

18 (a) ROLLOVERS FROM SECTION 457 PLANS.—

19 (1) IN GENERAL.—Section 457(e) (relating to

20 other definitions and special rules) is amended by

21 adding at the end the following:

22 ‘‘(16) ROLLOVER AMOUNTS.—

23 ‘‘(A) GENERAL RULE.—In the case of an

24 eligible deferred compensation plan of an eligi-
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1 ble employer described in paragraph (1)(A),

2 if—

3 ‘‘(i) any portion of the balance to the

4 credit of an employee in such plan is paid

5 to such employee in a rollover distribution

6 (other than a distribution described in sub7 section (d)(1)(A)(iii) or in subparagraph

8 (A) or (B) of section 402(c)(4)),

9 ‘‘(ii) the employee transfers any por10 tion of the property such employee receives

11 in such distribution to an individual retire12 ment plan (as defined in section

13 7701(a)(37), and

14 ‘‘(iii) in the case of a distribution of

15 property other than money, the amount so

16 transferred consists of the property distrib17 uted,

18 then such distribution (to the extent so trans19 ferred) shall not be includible in gross income

20 for the taxable year in which paid.

21 ‘‘(B) CERTAIN RULES MADE APPLICA22 BLE.—Rules similar to the rules of section

23 401(a)(31), paragraphs (2), (3), (5), (6), (7),

24 and (9) of section 402(c), and section 402(f)

25 shall apply for purposes of subparagraph (A).’’
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1 (2) DISTRIBUTION REQUIREMENTS.—Section

2 457(d)(1)(A) (relating to distribution requirements)

3 is amended by inserting ‘‘except as provided in sub4 section (e)(16),’’ after ‘‘(A)’’.

5 (3) CONFORMING AMENDMENTS.—

6 (A) Section 72(o)(4) is amended—

7 (i) by striking ‘‘and 408(d)(3)’’ and

8 inserting ‘‘408(d)(3), and 457(e)(16)’’,

9 (ii) by inserting ‘‘or excludable’’ after

10 ‘‘deductible’’ each place it appears, and

11 (iii) in the heading by inserting ‘‘OR

12 EXCLUDABLE’’ after ‘‘DEDUCTIBLE’’.

13 (B) Section 219(d)(2) is amended by strik14 ing ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or

15 457(e)(16)’’.

16 (C) Section 401(a)(31)(B) is amended by

17 striking ‘‘and 403(b)(8)’’ and inserting ‘‘,

18 403(b)(8), and 457(e)(16)’’.

19 (D) Paragraph (4) of section 402(c) is

20 amended by inserting ‘‘or in an eligible deferred

21 compensation plan (as defined in section

22 457(b)) of an eligible employer described in sec23 tion 457(e)(1)(A)’’ after ‘‘qualified trust’’.
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1 (E) Section 408(a)(1) is amended by strik2 ing ‘‘or 403(b)(8)’’ and inserting ‘‘, 403(b)(8),

3 or 457(e)(16)’’.

4 (F) Section 408(d)(3)(A)(ii) is amended by

5 striking ‘‘or’’ after ‘‘501(a)’’ and inserting a

6 comma, and by inserting ‘‘, or from an eligible

7 deferred compensation plan described in section

8 457(b)’’ after ‘‘contribution)’’.

9 (G) Subparagraphs (A) and (B) of section

10 415(b)(2) are each amended by striking ‘‘and

11 408(d)(3)’’ and inserting ‘‘408(d)(3), and

12 457(e)(16)’’.

13 (H) Section 4973(b)(1)(A) is amended by

14 striking ‘‘or 408(d)(3)’’ and inserting

15 ‘‘408(d)(3), or 457(e)(16)’’.

16 (d) EFFECTIVE DATE; SPECIAL RULE.—

17 (1) EFFECTIVE DATE.—The amendments made

18 by this section shall apply to distributions after De19 cember 31, 1999.

20 (2) SPECIAL RULE.—Notwithstanding any other

21 provision of law, subsections (h)(3) and (h)(5) of

22 section 1122 of the Tax Reform Act of 1986 shall

23 not apply to any distribution from an individual re24 tirement plan on behalf of an individual if there was

25 a rollover to such plan on behalf of such individual
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1 which is permitted solely by reason of any amend2 ment made by this section.

3 SEC. 14. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE4 MENT PLANS.

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

6 408(d)(3) (relating to rollover amounts) is amended by

7 striking ‘‘or’’ at the end of clause (ii), by striking the pe8 riod at the end of clause (iii) and inserting a semicolon,

9 and by adding at the end the following:

10 ‘‘(iv)(I) the entire amount received

11 (including money and other property) rep12 resents the entire interest in the account

13 or the entire value of the annuity,

14 ‘‘(II) no amount in the account and

15 no part of the value of the annuity is at16 tributable to any source other than a roll17 over contribution from a defined contribu18 tion plan and any earnings on such roll19 over, and

20 ‘‘(III) such entire amount received is

21 paid into another defined contribution plan

22 (for the benefit of such individual) not

23 later than the 60th day after he receives

24 the payment or distribution; or
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1 ‘‘(v)(I) the entire amount received (in2 cluding money and other property) rep3 resents the entire interest in the account

4 or the entire value of the annuity,

5 ‘‘(II) no amount in any such account

6 and no part of the value of any such annu7 ity is attributable to any source other than

8 a rollover contribution from such an ac9 count or annuity of such individual (and

10 any earnings on such contribution),

11 ‘‘(III) all contributions to all indi12 vidual retirement accounts, and all

13 amounts paid for all individual retirement

14 annuities, of such individual were allowed

15 as a deduction under section 219, and

16 ‘‘(IV) such entire amount received is

17 paid (not later than the 60th day after

18 being so received) into a defined contribu19 tion plan (for the benefit of such indi20 vidual) under which amounts are held in

21 trust by a person described in section

22 408(a)(2) or in a manner that satisfies

23 section 401(f).

24 If a payment or distribution from an individual

25 retirement plan is described in more than one
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1 clause of this subparagraph, such payment or

2 distribution shall be treated as described only in

3 the clause specified by the payee or distributee.

4 For purposes of this subparagraph, the term

5 ‘defined contribution plan’ means a defined con6 tribution plan (as defined in section 414(i))

7 which includes a trust exempt from tax under

8 section 501(a), an annuity plan described in

9 section 403(a), an annuity contract described in

10 section 403(b), and an eligible deferred com11 pensation plan described in section 457(b) of an

12 eligible employer described in section

13 457(e)(1)(A).’’

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

15 section 403(b) is amended by striking ‘‘section

16 408(d)(3)(A)(iii)’’ and inserting ‘‘clause (iii), (iv), or (v)

17 of section 408(d)(3)(A)’’.

18 (c) EFFECTIVE DATE; SPECIAL RULE.—

19 (1) EFFECTIVE DATE.—The amendments made

20 by this section shall apply to distributions after De21 cember 31, 1999.

22 (2) SPECIAL RULE.—Notwithstanding any other

23 provision of law, subsections (h)(3) and (h)(5) of

24 section 1122 of the Tax Reform Act of 1986 shall

25 not apply to any distribution from a defined con-
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1 tribution plan (as defined in section 408(d)(3)(A) of

2 the Internal Revenue Code of 1986 (as added by

3 this section) on behalf of an individual if there was

4 a rollover to such plan on behalf of such individual

5 which is permitted solely by reason of the amend6 ments made by this section.

7 SEC. 15. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

8 (a) IN GENERAL.—Paragraph (2) of section 402(c)

9 (relating to rules applicable to rollovers from exempt

10 trusts) is amended by adding at the end the following new

11 sentence: ‘‘In accordance with rules prescribed by the Sec12 retary, the preceding sentence shall not apply to any dis13 tribution if—

14 ‘‘(A) the portion of the distribution which

15 would be so includible is reported by the trust16 ee, and

17 ‘‘(B) the eligible retirement plan to which

18 it is paid agrees to report such amount in any

19 subsequent distribution.’’

20 (b) CONFORMING AMENDMENTS.—

21 (1) Subparagraph (B) of section 401(a)(31) is

22 amended by adding at the end the following new

23 sentence: ‘‘In accordance with rules prescribed by

24 the Secretary, the preceding sentence shall not apply

25 to any distribution if—
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1 ‘‘(i) the portion of the distribution

2 which would be so includible is reported by

3 the trustee, and

4 ‘‘(ii) the eligible retirement plan to

5 which it is paid agrees to report such

6 amount in any subsequent distribution.’’

7 (2) Subparagraph (B) of section 408(d)(3) is

8 amended—

9 (A) by striking ‘‘LIMITATION.—’’ in the

10 heading and inserting ‘‘LIMITATIONS.—’’, and

11 (B) by adding at the end the following: ‘‘In

12 addition, this paragraph does not apply unless

13 rules similar to the rules of section 402(c)(2)

14 are satisfied, except that the rollover contribu15 tion may exceed the amount includible in in16 come to the extent the rollover contribution con17 sists of nondeductible contributions described in

18 subsection (o).’’

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

20 this section shall apply to distributions made after Decem21 ber 31, 1999.
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1 SEC. 16. PURCHASE OF SERVICE CREDIT IN GOVERN2 MENTAL DEFINED BENEFIT PLANS.

3 (a) 403(b) PLANS.—Subsection (b) of section 403 is

4 amended by adding at the end the following new para5 graph:

6 ‘‘(13) TRUSTEE-TO-TRUSTEE TRANSFERS TO

7 PURCHASE PERMISSIVE SERVICE CREDIT.—No

8 amount shall be includible in gross income by reason

9 of a direct trustee-to-trustee transfer to a defined

10 benefit governmental plan (as defined in section

11 414(d)) if such transfer is—

12 ‘‘(A) for the purchase of permissive service

13 credit (as defined in section 415(n)(3)(A))

14 under such plan, or

15 ‘‘(B) a repayment to which section 415

16 does not apply by reason of subsection (k)(3)

17 thereof.’’

18 (b) 457 PLANS.—Subsection (e) of section 457, as

19 amended by section 12, is amended by adding at the end

20 the following new paragraph:

21 ‘‘(17) TRUSTEE-TO-TRUSTEE TRANSFERS TO

22 PURCHASE PERMISSIVE SERVICE CREDIT.—No

23 amount shall be includible in gross income by reason

24 of a direct trustee-to-trustee transfer to a defined

25 benefit governmental plan (as defined in section

26 414(d)) if such transfer is—
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1 ‘‘(A) for the purchase of permissive service

2 credit (as defined in section 415(n)(3)(A))

3 under such plan, or

4 ‘‘(B) a repayment to which section 415

5 does not apply by reason of subsection (k)(3)

6 thereof.’’

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

8 this section shall apply to trustee-to-trustee transfers after

9 December 31, 1999.

10 SEC. 17. MODIFICATIONS OF JOINT AND SURVIVOR ANNU11 ITY REQUIREMENTS.

12 (a) AMENDMENTS TO ERISA.—

13 (1) AMOUNT OF ANNUITY.—Paragraph (1) of

14 section 205(a) of the Employee Retirement Income

15 Security Act of 1974 (29 U.S.C. 1055(a)) is amend16 ed by inserting ‘‘or, at the election of the partici17 pant, shall be provided in the form of a qualified

18 joint and 75 percent survivor annuity’’ after ‘‘sur19 vivor annuity,’’.

20 (2) DEFINITION.—Subsection (d) of section 205

21 of such Act (29 U.S.C. 1055) is amended—

22 (A) by redesignating paragraphs (1) and

23 (2) as subparagraphs (A) and (B), respectively,

24 (B) by inserting ‘‘(1)’’ after ‘‘(d)’’, and
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1 (C) by adding at the end the following new

2 paragraph:

3 ‘‘(2) For purposes of this section, the term ‘‘qualified

4 joint and 75 percent survivor annuity’’ means a joint and

5 survivor annuity under which the survivor annuity for the

6 life of the surviving spouse is equal to at least 75 percent

7 of the amount of the annuity which is payable during the

8 joint lives of the participant and spouse.’’

9 (b) AMENDMENTS TO INTERNAL REVENUE CODE.—

10 (1) AMOUNT OF ANNUITY.—Clause (i) of sec11 tion 401(a)(11)(A) (relating to requirement of joint

12 and survivor annuity and preretirement survivor an13 nuity) is amended by inserting ‘‘or, at the election

14 of the participant, shall be provided in the form of

15 a qualified joint and 75 percent survivor annuity’’

16 after ‘‘survivor annuity,’’.

17 (2) DEFINITION.—Section 417 (relating to defi18 nitions and special rules for purposes of minimum

19 survivor annuity requirements), is amended by re20 designating subsection (f) as subsection (g) and by

21 inserting after subsection (e) the following new sub22 section:

23 ‘‘(f) DEFINITION OF QUALIFIED JOINT AND 75 PER24 CENT SURVIVOR ANNUITY.—For purposes of this section

25 and section 401(a)(11), the term ‘‘qualified joint and 75
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1 percent survivor annuity’’ means a joint and survivor an2 nuity under which the survivor annuity for the life of the

3 surviving spouse is equal to at least 75 percent of the

4 amount of the annuity which is payable during the joint

5 lives of the participant and spouse.’’

6 (c) EFFECTIVE DATE.—

7 (1) IN GENERAL.—Except as provided in para8 graphs (2) and (3), the amendments made by this

9 section shall apply to plan years beginning after De10 cember 31, 1999.

11 (2) APPLICATION TO CURRENT EMPLOYEES.—

12 The amendments made by this section shall not

13 apply to any employee who does not have at least 1

14 hour of service in any plan year beginning after De15 cember 31, 1999.

16 (3) COLLECTIVE BARGAINING AGREEMENTS.—

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

18 more collective bargaining agreements between em19 ployee representatives and 1 or more employers rati20 fied by the date of the enactment of this Act, the

21 amendments made by this section shall not apply to

22 employees covered by any such agreement in plan

23 years beginning before the earlier of—

24 (A) the later of—
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1 (i) the date on which the last of such

2 collective bargaining agreements termi3 nates (determined without regard to any

4 extension thereof on or after such date of

5 enactment), or

6 (ii) January 1, 1999, or

7 (B) January 1, 2004.

8 SEC. 18. PERIODS OF FAMILY AND MEDICAL LEAVE TREAT9 ED AS HOURS OF SERVICE FOR PENSION

10 PARTICIPATION AND VESTING.

11 (a) AMENDMENTS OF INTERNAL REVENUE CODE.—

12 (1) PARTICIPATION.—

13 (A) IN GENERAL.—Paragraph (3) of sec14 tion 410(a) (relating to minimum participation

15 standards) is amended by adding at the end the

16 following new subparagraph:

17 ‘‘(E) FAMILY AND MEDICAL LEAVE TREAT18 ED AS SERVICE.—

19 ‘‘(i) IN GENERAL.—For purposes of

20 this subsection, in the case of an individual

21 who is absent from work on leave required

22 to be given to such individual under the

23 Family and Medical Leave Act of 1993,

24 the plan shall treat as hours of service—
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1 ‘‘(I) the hours of service which

2 otherwise would normally have been

3 credited to such individual but for

4 such absence, or

5 ‘‘(II) in any case in which the

6 plan is unable to determine the hours

7 described in subclause (I), 8 hours of

8 service per day of absence.

9 ‘‘(ii) YEAR TO WHICH HOURS ARE

10 CREDITED.—The hours described in clause

11 (i) shall be treated as hours of service as

12 provided in this subparagraph—

13 ‘‘(I) only in the year in which the

14 absence from work begins, if section

15 411(a)(5)(E)(ii)(I) requires hours to

16 be credited to the year in which the

17 absence from work begins, or

18 ‘‘(II) in any other case, in the

19 immediately following year.’’

20 (B) COORDINATION WITH TREATMENT OF

21 MATERNITY AND PATERNITY ABSENCES UNDER

22 BREAK IN SERVICE RULES.—Subparagraph (E)

23 of section 410(a)(5) is amended—
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1 (i) by inserting ‘‘NOT UNDER FAMILY

2 AND MEDICAL LEAVE ACT OF 1993’’ after

3 ‘‘ABSENCES’’ in the heading, and

4 (ii) by adding at the end of clause (i)

5 the following new sentence: ‘‘The preceding

6 sentence shall apply to an absence from

7 work only if no part of such absence is re8 quired to be given under the Family and

9 Medical Leave Act of 1993.’’

10 (2) VESTING.—

11 (A) IN GENERAL.—Paragraph (5) of sec12 tion 411(a) (relating to minimum vesting stand13 ards) is amended by adding at the end the fol14 lowing new subparagraph:

15 ‘‘(E) FAMILY AND MEDICAL LEAVE TREAT16 ED AS SERVICE.—

17 ‘‘(i) IN GENERAL.—For purposes of

18 this subsection, in the case of an individual

19 who is absent from work on leave required

20 to be given to such individual under the

21 Family and Medical Leave Act of 1993,

22 the plan shall treat as hours of service—

23 ‘‘(I) the hours of service which

24 otherwise would normally have been
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1 credited to such individual but for

2 such absence, or

3 ‘‘(II) in any case in which the

4 plan is unable to determine the hours

5 described in subclause (I), 8 hours of

6 service per day of absence.

7 ‘‘(ii) YEAR TO WHICH HOURS ARE

8 CREDITED.—The hours described in clause

9 (i) shall be treated as hours of service as

10 provided in this subparagraph—

11 ‘‘(I) only in the year in which the

12 absence from work begins, if the par13 ticipant’s rights in his accrued benefit

14 derived from employer contributions

15 are to any extent not nonforfeitable

16 and the participant would have a year

17 of service solely because the period of

18 absence is treated as hours of service

19 as provided in clause (i); or

20 ‘‘(II) in any other case, in the

21 immediately following year.’’

22 (B) COORDINATION WITH TREATMENT OF

23 MATERNITY AND PATERNITY ABSENCES UNDER

24 BREAK IN SERVICE RULES.—Subparagraph (E)

25 of section 411(a)(6) is amended—
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1 (i) by inserting ‘‘NOT UNDER FAMILY

2 AND MEDICAL LEAVE ACT OF 1993’’ after

3 ‘‘ABSENCES’’ in the heading, and

4 (ii) by adding at the end of clause (i)

5 the following new sentence: ‘‘The preceding

6 sentence shall apply to an absence from

7 work only if no part of such absence is re8 quired to be given under the Family and

9 Medical Leave Act of 1993.’’

10 (b) AMENDMENTS OF ERISA.—

11 (1) PARTICIPATION.—

12 (A) IN GENERAL.—Paragraph (3) of sec13 tion 202(a) of the Employee Retirement Income

14 Security Act of 1974 (relating to minimum par15 ticipation standards) is amended by adding at

16 the end the following new subparagraph:

17 ‘‘(E)(i) For purposes of this subsection, in the case

18 of an individual who is absent from work on leave required

19 to be given to such individual under the Family and Med20 ical Leave Act of 1993, the plan shall treat as hours of

21 service—

22 ‘‘(I) the hours of service which otherwise would

23 normally have been credited to such individual but

24 for such absence, or
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1 ‘‘(II) in any case in which the plan is unable to

2 determine the hours described in subclause (I), 8

3 hours of service per day of absence.

4 ‘‘(ii) The hours described in clause (i) shall be treated

5 as hours of service as provided in this subparagraph—

6 ‘‘(I) only in the year in which the absence from

7 work begins, if section 203(b)(2)(E)(ii)(I) requires

8 hours to be credited to the year in which the absence

9 from work begins, or

10 ‘‘(II) in any other case, in the immediately fol11 lowing year.’’

12 (B) COORDINATION WITH TREATMENT OF

13 MATERNITY AND PATERNITY ABSENCES UNDER

14 BREAK IN SERVICE RULES.—Subparagraph (A)

15 of section 202(b)(5) of such Act is amended by

16 adding at the end of clause (i) the following

17 new sentence: ‘‘The preceding sentence shall

18 apply to an absence from work only if no part

19 of such absence is required to be given under

20 the Family and Medical Leave Act of 1993.’’

21 (2) VESTING.—

22 (A) IN GENERAL.—Paragraph (2) of sec23 tion 203(b) of such Act (relating to minimum

24 vesting standards) is amended by adding at the

25 end the following new subparagraph:
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1 ‘‘(E)(i) For purposes of this subsection, in the case

2 of an individual who is absent from work on leave required

3 to be given to such individual under the Family and Med4 ical Leave Act of 1993, the plan shall treat as hours of

5 service—

6 ‘‘(I) the hours of service which otherwise would

7 normally have been credited to such individual but

8 for such absence, or

9 ‘‘(II) in any case in which the plan is unable to

10 determine the hours described in subclause (I), 8

11 hours of service per day of absence.

12 ‘‘(ii) The hours described in clause (i) shall be treated

13 as hours of service as provided in this subparagraph—

14 ‘‘(I) only in the year in which the absence from

15 work begins, if the participant’s rights in his ac16 crued benefit derived from employer contributions

17 are to any extent not nonforfeitable and the partici18 pant would have a year of service solely because the

19 period of absence is treated as hours of service as

20 provided in clause (i); or

21 ‘‘(II) in any other case, in the immediately fol22 lowing year.’’

23 (B) COORDINATION WITH TREATMENT OF

24 MATERNITY AND PATERNITY ABSENCES UNDER

25 BREAK IN SERVICE RULES.—Clause (i) of sec-
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1 tion 203(b)(3)(E) of such Act is amended by

2 adding at the end of clause (i) the following

3 new sentence: ‘‘The preceding sentence shall

4 apply to an absence from work only if no part

5 of such absence is required to be given under

6 the Family and Medical Leave Act of 1993.’’

7 (c) EFFECTIVE DATE.—

8 (1) IN GENERAL.—Except as provided in para9 graph (2), the amendments made by this section

10 shall apply to plan years beginning after December

11 31, 1999.

12 (2) APPLICATION TO CURRENT EMPLOYEES.—

13 The amendments made by this section shall not

14 apply to any employee who does not have at least 1

15 hour of service in any plan year beginning after De16 cember 31, 1999.

Æ