I

106TH CONGRESS

1ST SESSION H. R. 1546

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

savings opportunities, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

APRIL 22, 1999

Mr. THOMAS 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 provide

increased retirement savings opportunities, and for other

purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS; AMEND4 MENT TO 1986 CODE.

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

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

7 (b) TABLE OF CONTENTS.—

Sec. 1. Short title; table of contents; amendment to 1986 Code.
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TITLE I—INDIVIDUAL RETIREMENT PLANS

Sec. 101. Modification of deduction limits for IRA contributions.

Sec. 102. Modification of income limits on contributions and rollovers to Roth

IRAs.

Sec. 103. Deemed IRAs under employer plans.

Sec. 104. Electronic signatures permitted.

TITLE II—PENSION PLANS

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

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

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

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

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

Sec. 206. Repeal of transitional rule.

TITLE III—SMALL BUSINESS INCENTIVES

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

costs.

Sec. 302. SAFE annuities and trusts.

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

TITLE IV—CATCHUP CONTRIBUTIONS

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

TITLE V—PLAN AMENDMENTS

Sec. 501. Provisions relating to plan amendments.

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

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

5 shall be considered to be made to a section or other provi6 sion of the Internal Revenue Code of 1986.
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1 TITLE I—INDIVIDUAL

2 RETIREMENT PLANS

3 SEC. 101. MODIFICATION OF DEDUCTION LIMITS FOR IRA

4 CONTRIBUTIONS.

5 (a) INCREASE IN CONTRIBUTION LIMIT.—Paragraph

6 (1)(A) of section 219(b) (relating to maximum amount of

7 deduction) is amended by striking ‘‘$2,000’’ and inserting

8 ‘‘$5,000’’.

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

10 to deduction for retirement savings) is amended by redes11 ignating subsection (h) as subsection (i) and by inserting

12 after subsection (g) the following new subsection:

13 ‘‘(h) COST-OF-LIVING ADJUSTMENT.—

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

15 any taxable year beginning in a calendar year after

16 2000, the $5,000 amount under subsection (b)(1)(A)

17 shall be increased by an amount equal to—

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

19 ‘‘(B) the cost-of-living adjustment deter20 mined under section 1(f)(3) for the calendar

21 year in which the taxable year begins, deter22 mined by substituting ‘calendar year 1999’ for

23 ‘calendar year 1992’ in subparagraph (B)

24 thereof.
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1 ‘‘(2) ROUNDING RULES.—If any amount after

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

3 $100, such amount shall be rounded to the next

4 lower multiple of $100.’’

5 (c) REPEAL OF RESTRICTIONS ON ACTIVE PARTICI6 PANTS.—

7 (1) IN GENERAL.—Section 219, as amended by

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

9 and by redesignating subsections (h) and (i) as sub10 sections (g) and (h).

11 (2) TECHNICAL AND CONFORMING AMEND12 MENTS.—

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

14 paragraph (7).

15 (B) Section 408(d)(5) is amended by strik16 ing the last sentence.

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

18 at the end the following new paragraph:

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

20 apply to any contribution for any taxable year begin21 ning after December 31, 1999.’’

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

23 striking ‘‘or (g)’’.

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

25 striking the last sentence.
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1 (F) Section 408A(c)(3)(C) is amended—

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

3 and inserting the following:

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

5 this paragraph—

6 ‘‘(i) adjusted gross income shall be

7 determined—

8 ‘‘(I) after application of sections

9 86 and 469, and

10 ‘‘(II) without regard to sections

11 135, 137, 221, and 911, the deduction

12 allowable under section 219, or any

13 amount included in gross income

14 under subsection (d)(3),’’,

15 (ii) by striking the period at the end

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

17 (iii) by adding at the end the fol18 lowing new clauses:

19 ‘‘(iii) no dollar limitation shall be re20 duced below $200 under subparagraph (A)

21 unless (without regard to this clause) such

22 limitation is reduced to zero, and

23 ‘‘(iv) any amount determined under

24 subparagraph (A) which is not a multiple
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1 of $10 shall be rounded to the next lowest

2 $10.’’

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

4 read as follows:

5 ‘‘(D) SPECIAL RULE FOR MARRIED INDI6 VIDUALS FILING SEPARATELY AND LIVING

7 APART.—A husband and wife who—

8 ‘‘(i) file separate returns for any tax9 able year, and

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

11 such taxable year,

12 shall not be treated as married individuals for

13 purposes of this paragraph.’’

14 (H) Section 4973(b) is amended by strik15 ing the last sentence.

16 (d) ADDITIONAL CONFORMING AMENDMENTS.—

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

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

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

20 of the amount in effect for such taxable year under

21 section 219(b)(1)(A)’’.

22 (2) Section 408(b)(2)(B) is amended by strik23 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

24 effect under section 219(b)(1)(A)’’.
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1 (3) Section 408(b) is amended by striking

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

3 inserting ‘‘the dollar amount in effect under section

4 219(b)(1)(A)’’.

5 (4) Section 408(j) is amended by striking

6 ‘‘$2,000’’.

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

8 ‘‘$2,000’’ and inserting ‘‘the dollar amount in effect

9 under section 219(b)(1)(A)’’

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

11 this section shall apply to taxable years beginning after

12 December 31, 1999.

13 SEC. 102. MODIFICATION OF INCOME LIMITS ON CON14 TRIBUTIONS AND ROLLOVERS TO ROTH IRAS.

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

16 Subsection 408A(c)(3) (relating to limits based on modi17 fied adjusted gross income), as amended by section

18 101(c)(2), is amended by striking subparagraph (A) and

19 by redesignating subparagraphs (B), (C), and (D) as sub20 paragraphs (A), (B), and (C), respectively.

21 (b) INCREASE IN AGI LIMIT FOR ROLLOVER CON22 TRIBUTIONS.—Clause (i) of section 408A(c)(3)(A) (relat23 ing to rollover from IRA), as redesignated by subsection

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

25 ‘‘$1,000,000’’.
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1 (c) CONFORMING AMENDMENTS.—

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

3 as redesignated by subsection (a) and as amended

4 by section 101(c)(2)(F), is amended to read as fol5 lows:

6 ‘‘(B) DEFINITION OF ADJUSTED GROSS IN7 COME.—For purposes of subparagraph (A), ad8 justed gross income shall be determined—

9 ‘‘(i) after application of sections 86

10 and 469, and

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

12 137, 221, and 911, the deduction allowable

13 under section 219, or any amount included

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

15 (B) EFFECTIVE DATE.—The amendment made

16 by this paragraph shall apply to taxable years begin17 ning after December 31, 1999.

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

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

20 as follows:

21 ‘‘(B) DEFINITION OF ADJUSTED GROSS IN22 COME.—For purposes of subparagraph (A), ad23 justed gross income shall be determined—

24 ‘‘(i) after application of sections 86

25 and 469, and
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1 ‘‘(ii) without regard to sections 135,

2 137, 221, and 911, the deduction allowable

3 under section 219, or any amount included

4 in gross income under subsection (d)(3) or

5 by reason of a required distribution under

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

7 (B) EFFECTIVE DATE.—The amendment made

8 by this paragraph shall apply to taxable years begin9 ning after December 31, 2004.

10 (d) EFFECTIVE DATE.—Except as otherwise pro11 vided in this section, the amendments made by this section

12 shall apply to taxable years beginning after December 31,

13 1999.

14 SEC. 103. DEEMED IRAS UNDER EMPLOYER PLANS.

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

16 retirement accounts) is amended by redesignating sub17 section (q) as subsection (r) and by inserting after sub18 section (p) the following new subsection:

19 ‘‘(q) DEEMED IRAS UNDER QUALIFIED EMPLOYER

20 PLANS.—

21 ‘‘(1) GENERAL RULE.—If—

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

23 allow employees to make voluntary employee

24 contributions to a separate account or annuity

25 established under the plan, and
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1 ‘‘(B) under the terms of the qualified em2 ployer plan, such account or annuity meets the

3 applicable requirements of this section or sec4 tion 408A for an individual retirement account

5 or annuity,

6 then such account or annuity shall be treated for

7 purposes of this title in the same manner as an indi8 vidual retirement plan (and contributions to such ac9 count or annuity as contributions to an individual

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

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

12 apply.

13 ‘‘(2) SPECIAL RULES FOR QUALIFIED EM14 PLOYER PLANS.—For purposes of this title—

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

16 fail to meet any requirement of this title solely

17 by reason of establishing and maintaining a

18 program described in paragraph (1), and

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

20 paragraph (1), and any contribution to the ac21 count or annuity, shall not be subject to any re22 quirement of this title applicable to a qualified

23 employer plan or taken into account in applying

24 any such requirement to any other contribu25 tions under the plan.
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1 ‘‘(3) DEFINITIONS.—For purposes of this

2 subsection—

3 ‘‘(A) QUALIFIED EMPLOYER PLAN.—The

4 term ‘qualified employer plan’ has the meaning

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

6 ‘‘(B) VOLUNTARY EMPLOYEE CONTRIBU7 TION.—The term ‘voluntary employee contribu8 tion’ means any contribution (other than a

9 mandatory contribution within the meaning of

10 section 411(c)(2)(C))—

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

12 an employee under a qualified employer

13 plan which allows employees to elect to

14 make contributions described in paragraph

15 (1), and

16 ‘‘(ii) with respect to which the indi17 vidual has designated the contribution as a

18 contribution to which this subsection ap19 plies.’’

20 (b) AMENDMENT OF ERISA.—

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

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

23 1003) is amended by adding at the end the following

24 new subsection:
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1 ‘‘(c) If a pension plan allows an employee to elect to

2 make voluntary employee contributions to accounts and

3 annuities as provided in section 408(q) of the Internal

4 Revenue Code of 1986, such accounts and annuities (and

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

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

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

8 405 (relating to exclusive benefit, and fiduciary and co9 fiduciary responsibilities).’’

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

11 of such Act (29 U.S.C. 1003(a)) is amended by in12 serting ‘‘or (c)’’ after ‘‘subsection (b)’’.

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

14 this section shall apply to plan years beginning after De15 cember 31, 1999.

16 SEC. 104. ELECTRONIC SIGNATURES PERMITTED.

17 Subsection (a) of section 408 (relating to individual

18 retirement accounts) is amended by adding at the end the

19 following new flush sentence:

20 ‘‘Notwithstanding any other provision of law, electronic

21 signatures (which are verified in such manner as the Sec22 retary may prescribe) shall be sufficient to establish any

23 individual retirement plan and shall satisfy any require24 ment otherwise imposed by Federal law for an actual sig25 nature to establish such a plan.’’
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1 TITLE II—PENSION PLANS

2 SEC. 201. OPTION TO TREAT ELECTIVE DEFERRALS AS

3 AFTER-TAX CONTRIBUTIONS.

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

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

6 is amended by inserting after section 402 the following

7 new section:

8 ‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER9 RALS AS PLUS CONTRIBUTIONS.

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

11 plan includes a qualified plus contribution program—

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

13 an employee pursuant to the program shall be treat14 ed as an elective deferral for purposes of this chap15 ter, except that such contribution shall not be ex16 cludable from gross income, and

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

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

19 meet any requirement of this chapter solely by rea20 son of including such program.

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

22 For purposes of this section—

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

24 contribution program’ means a program under which

25 an employee may elect to make designated plus con-
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1 tributions in lieu of all or a portion of elective defer2 rals the employee is otherwise eligible to make under

3 the applicable retirement plan.

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

5 program shall not be treated as a qualified plus con6 tribution program unless the applicable retirement

7 plan—

8 ‘‘(A) establishes separate accounts (‘des9 ignated plus accounts’) for the designated plus

10 contributions of each employee and any earn11 ings properly allocable to the contributions, and

12 ‘‘(B) maintains separate recordkeeping

13 with respect to each account.

14 ‘‘(c) DEFINITIONS AND RULES RELATING TO DES15 IGNATED PLUS CONTRIBUTIONS.—For purposes of this

16 section—

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

18 term ‘designated plus contribution’ means any elec19 tive deferral which—

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

21 employee without regard to this section, and

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

23 and in such manner as the Secretary may pre24 scribe) as not being so excludable.
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1 ‘‘(2) DESIGNATION LIMITS.—The amount of

2 elective deferrals which an employee may designate

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

4 any) of—

5 ‘‘(A) the maximum amount of elective de6 ferrals excludable from gross income of the em7 ployee for the taxable year (without regard to

8 this section), over

9 ‘‘(B) the aggregate amount of elective de10 ferrals of the employee for the taxable year

11 which the employee does not designate under

12 paragraph (1).

13 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

14 ‘‘(A) IN GENERAL.—A rollover contribu15 tion of any payment or distribution from a des16 ignated plus account which is otherwise allow17 able under this chapter may be made only if the

18 contribution is to—

19 ‘‘(i) another designated plus account

20 of the individual from whose account the

21 payment or distribution was made, or

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

23 ‘‘(B) COORDINATION WITH LIMIT.—Any

24 rollover contribution to a designated plus ac25 count under subparagraph (A) shall not be
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1 taken into account for purposes of paragraph

2 (1).

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

4 title—

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

6 from a designated plus account shall not be includ7 ible in gross income.

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

9 of this subsection—

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

11 distribution’ has the meaning given such term

12 by section 408A(d)(2)(A).

13 ‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU14 SION PERIOD.—A payment or distribution from

15 a designated plus account shall not be treated

16 as a qualified distribution if such payment or

17 distribution is made within the 5-taxable-year

18 period beginning with the earlier of—

19 ‘‘(i) the earlier of—

20 ‘‘(I) the 1st taxable year for

21 which the individual made a des22 ignated plus contribution to any des23 ignated plus account established for

24 such individual under the same appli25 cable retirement plan, or
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1 ‘‘(II) if a rollover contribution

2 was made to such designated plus ac3 count from a designated plus account

4 previously established for such indi5 vidual under another applicable retire6 ment plan, the 1st taxable year for

7 which the individual made a des8 ignated plus contribution to such pre9 viously established account), or

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

11 the individual (or the individual’s spouse)

12 made a contribution to a Roth IRA estab13 lished for such individual.

14 ‘‘(C) DISTRIBUTIONS OF EXCESS DEFER15 RALS AND EARNINGS.—The term ‘qualified dis16 tribution’ shall not include any distribution of

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

18 any income on the excess deferral.

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

20 be applied separately with respect to distributions

21 and payments from a designated plus account and

22 other distributions and payments from the plan.

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

24 section—
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1 ‘‘(1) APPLICABLE RETIREMENT PLAN.—The

2 term ‘applicable retirement plan’ means—

3 ‘‘(A) an employees’ trust described in sec4 tion 401(a) which is exempt from tax under

5 section 501(a), and

6 ‘‘(B) a plan under which amounts are con7 tributed by an individual’s employer for an an8 nuity contract described in section 403(b).

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

10 deferral’ means any elective deferral described in

11 subparagraph (A) or (C) of section 402(g)(3).’’

12 (b) EXCESS DEFERRALS.—Section 402(g) (relating

13 to limitation on exclusion for elective deferrals) is

14 amended—

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

16 following new sentence: ‘‘The preceding sentence

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

18 not exceed the designated plus contributions of the

19 individual for the taxable year.’’, and

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

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

22 paragraph (2)(A).

23 (c) ROLLOVERS.—
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1 (1) QUALIFIED TRUSTS.—Section 402(d)(8)(B)

2 is amended by adding at the end the following new

3 flush sentence:

4 ‘‘Without regard to the foregoing provisions of

5 this paragraph, if any portion of an eligible roll6 over distribution is attributable to payments or

7 distributions from a designated plus account (as

8 defined in section 402A), an eligible retirement

9 plan with respect to such portion shall include

10 only another designated plus account and a

11 Roth IRA.’’

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

13 amended by adding at the end the following new

14 sentence: ‘‘If any portion of an eligible rollover dis15 tribution is attributable to payments or distributions

16 from a designated plus account (as defined in sec17 tion 402A), the transfer of such portion under

18 clause (ii) may be made only to another such ac19 count or to a Roth IRA.’’

20 (3) INDIVIDUAL RETIREMENT PLANS.—Section

21 408(d)(3) is amended by adding at the end the fol22 lowing new subparagraph:

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

24 requirements of clauses (ii) and (iii) of subpara25 graph (A) shall not be treated as met if the
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1 rollover contribution includes any amount at2 tributable to a designated plus account (as de3 fined in section 402A).’’

4 (d) REPORTING REQUIREMENTS.—

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

6 amended by inserting ‘‘, including the amount of

7 designated plus contributions (as defined in section

8 402A)’’ before the comma at the end.

9 (2) INFORMATION.—Section 6047 is amended

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

11 by inserting after subsection (e) the following new

12 subsection:

13 ‘‘(f) DESIGNATED PLUS CONTRIBUTIONS.—The Sec14 retary shall require the plan administrator of each applica15 ble retirement plan (as defined in section 402A) to make

16 such returns and reports regarding designated plus con17 tributions (as so defined) to the Secretary, participants

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

19 the Secretary may prescribe.’’

20 (e) CONFORMING AMENDMENTS.—

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

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

23 term includes a rollover contribution described in

24 section 402A(c)(3)(A).’’
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1 (2) The table of sections for subpart A of part

2 I of subchapter D of chapter 1 is amended by insert3 ing after the item relating to section 402 the fol4 lowing new item:

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

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

6 this section shall apply to taxable years beginning after

7 December 31, 2000.

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

9 ELECTIVE DEFERRALS.

10 (a) INCREASE IN ELECTIVE DEFERRAL LIMIT.—

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

12 exclusion for elective deferrals) is amended by striking

13 ‘‘$7,000’’ and inserting ‘‘$15,000’’.

14 (b) CONFORMING AMENDMENTS.—

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

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

17 (6), (7), (8), and (9) as paragraphs (4), (5), (6),

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

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

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

21 402(g)(7)(A)(iii)’’.

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

23 striking ‘‘(other than paragraph (4) thereof)’’.
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1 (2) Section 402(g)(4), as redesignated by para2 graph (1)(A), is amended by striking ‘‘$7,000’’ and

3 inserting ‘‘$15,000’’.

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

5 amended by inserting ‘‘the base period taken into

6 account shall be the calendar quarter ending Sep7 tember 30, 1999, and’’ after ‘‘except that’’.

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

9 this section shall apply to taxable years beginning after

10 December 31, 1999.

11 SEC. 203. INCREASED LIMIT ON DEFERRED AMOUNT FOR

12 PLANS OF STATE AND LOCAL GOVERNMENTS.

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

14 457(b)(2) (defining eligible deferred compensation plan)

15 is amended by inserting ‘‘($12,000, in the case of a plan

16 of an eligible employer as defined in subsection (e)(1)(A))’’

17 after ‘‘$7,500’’.

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

19 this section shall apply to years beginning after December

20 31, 1999.

21 SEC. 204. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF

22 EMPLOYEES TO DEFINED CONTRIBUTION

23 PLANS.

24 (a) EQUITABLE TREATMENT.—
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1 (1) IN GENERAL.—Subparagraph (B) of section

2 415(c)(1) (relating to limitation for defined con3 tribution plans) is amended to read as follows:

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

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

6 403(b) is amended—

7 (A) by striking ‘‘the exclusion allowance

8 for such taxable year’’ in paragraph (1) and in9 serting ‘‘the applicable limit under section

10 415’’,

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

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

13 by a former employee after the 5th taxable year

14 following the taxable year in which such em15 ployee was terminated’’ before the period at the

16 end of the second sentence of paragraph (3).

17 (3) CONFORMING AMENDMENTS.—

18 (A) Subsection (f) of section 72 is amend19 ed by striking ‘‘section 403(b)(2)(D)(iii))’’ and

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

21 on December 31, 1998)’’.

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

23 striking ‘‘, the exclusion allowance under sec24 tion 403(b)(2),’’.
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1 (C) Section 415(a)(2) is amended by strik2 ing ‘‘, and the amount of the contribution for

3 such portion shall reduce the exclusion allow4 ance as provided in section 403(b)(2)’’.

5 (D) Section 415(c)(3) is amended by add6 ing at the end the following new subparagraph:

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

8 of an annuity contract described in section

9 403(b), the term ‘participant’s compensation’

10 means the participant’s includible compensation

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

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

13 paragraph (4) and redesignating paragraph (6)

14 as paragraph (4).

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

16 as follows:

17 ‘‘(5) CERTAIN CONTRIBUTIONS BY CHURCH

18 PLANS NOT TREATED AS EXCEEDING LIMIT.—

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

20 other provision of this subsection, at the elec21 tion of a participant who is an employee of a

22 church, a convention or association of churches,

23 including an organization described in section

24 414(e)(3)(B)(ii), contributions and other addi25 tions for an annuity contract or retirement in-
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1 come account described in section 403(b) with

2 respect to such participant, when expressed as

3 an annual addition to such participant’s ac4 count, shall be treated as not exceeding the lim5 itation of paragraph (1) if such annual addition

6 is not in excess of $10,000.

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

8 The total amount of additions with respect to

9 any participant which may be taken into ac10 count for purposes of this subparagraph for all

11 years may not exceed $40,000.

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

13 this paragraph, the term ‘annual addition’ has

14 the meaning given such term by paragraph

15 (2).’’

16 (G) Section 415(e)(3)(B) is amended—

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

18 clause (i) and inserting ‘‘subsection

19 (c)(4)’’, and

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

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

22 (c)(5)’’.

23 (H) Section 415(e)(5) is amended—

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

25 a participant who has elected under sub-
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1 section (c)(4)(D) to have the provisions of

2 subsection (c)(4)(C) apply)’’, and

3 (ii) by striking the last sentence.

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

5 striking ‘‘percentage’’.

6 (J) Subparagraph (B) of section

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

8 202(b)(1)(A), is amended by inserting before

9 the period at the end the following: ‘‘(as in ef10 fect on the date of the enactment of the Retire11 ment Savings Opportunity Act of 1999)’’.

12 (b) DEFERRED COMPENSATION PLANS OF STATE

13 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI14 ZATIONS.—Subparagraph (B) of section 457(b)(2) (relat15 ing to salary limitation on eligible deferred compensation

plans’’ is amended by striking ‘‘331 16 ⁄3 percent’’ and insert17 ing ‘‘100 percent’’.

18 (c) ELECTIVE DEFERRALS NOT TAKEN INTO AC19 COUNT FOR PURPOSES OF LIMITS.—Section 404 (relating

20 to deduction for contributions of an employer to an em21 ployees’ trust or annuity plan and compensation under a

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

23 the following new subsection:

24 ‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC25 COUNT FOR PURPOSES OF LIMITS.—Elective deferrals (as
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1 defined in section 402(g)(3)) shall not be subject to any

2 limitation described in this section (other than subsection

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

4 account in applying such limitations to any other contribu5 tions.’’

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

7 this section shall apply to years beginning after December

8 31, 1999.

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

10 FUNDING LIMIT.

11 (a) IN GENERAL.—

12 (1) CODE AMENDMENT.—Section 412(c)(7) (re13 lating to full-funding limitation) is amended—

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

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

16 case of plan years beginning before January 1,

17 2003, the applicable percentage’’, and

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

19 as follows:

20 ‘‘(F) APPLICABLE PERCENTAGE.—For

21 purposes of subparagraph (A)(i)(I), the applica22 ble percentage shall be determined in accord23 ance with the following table:

‘‘In the case of any plan year

beginning in—

The applicable percentage is—

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

2000 ......................................................................................... 160
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‘‘In the case of any plan year

beginning in—

The applicable percentage is—

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

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

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

2 the Employee Retirement Income Security Act of

3 1974 (29 U.S.C. 1082(c)(7)) is amended—

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

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

6 case of plan years beginning before January 1,

7 2003, the applicable percentage’’, and

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

9 as follows:

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

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

12 shall be determined in accordance with the following

13 table:

‘‘In the case of any plan year

beginning in—

The applicable percentage is—

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

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

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

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

14 (3) EFFECTIVE DATE.—The amendments made

15 by this subsection shall apply to plan years begin16 ning after December 31, 1998.

17 (b) MAXIMUM CONTRIBUTION DEDUCTION RULES

18 MODIFIED AND APPLIED TO ALL DEFINED BENEFIT

19 PLANS.—
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1 (1) IN GENERAL.—Section 404(a)(1)(D) (relat2 ing to special rule in case of certain plans) is

3 amended—

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

5 participants for the plan year’’,

6 (B) by striking ‘‘unfunded current liability

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

8 ‘‘unfunded termination liability (determined as

9 if the proposed termination date referred to in

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

11 Retirement Income Security Act of 1974 were

12 the last day of the plan year)’’,

13 (C) by inserting after the first sentence the

14 following new sentence: ‘‘For purposes of this

15 subparagraph, in the case of a plan which has

16 less than 100 participants for the plan year,

17 termination liability shall not include the liabil18 ity attributable to benefit increases for highly

19 compensated employees (as defined in section

20 414(q)) brought about by plan amendment

21 within the last 2 years before the termination

22 date.’’, and

23 (D) by striking ‘‘(other than a multiem24 ployer plan)’’.
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1 (2) CONFORMING AMENDMENT.—Paragraph (6)

2 of section 4972(c) is amended by striking the sen3 tence preceding the last sentence thereof.

4 (3) EFFECTIVE DATE.—The amendments made

5 by this subsection shall apply to plan years begin6 ning after the date of the enactment of this Act.

7 SEC. 206. REPEAL OF TRANSITIONAL RULE.

8 (a) IN GENERAL.—Paragraph (3) of section 1114(c)

9 of the Tax Reform Act of 1986 is hereby repealed.

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

11 subsection (a) shall apply to years beginning after Decem12 ber 31, 1999.

13 TITLE III—SMALL BUSINESS

14 INCENTIVES

15 SEC. 301. CREDIT FOR SMALL EMPLOYER PENSION PLAN

16 CONTRIBUTIONS AND START-UP COSTS.

17 (a) IN GENERAL.—Subpart D of part IV of sub18 chapter A of chapter 1 (relating to business related cred19 its) is amended by adding at the end the following new

20 section:

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

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

23 in the case of an eligible employer, the small employer pen24 sion plan credit determined under this section for any tax25 able year is an amount equal to the sum of—
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1 ‘‘(1) 50 percent of the qualified employer con2 tributions of the taxpayer for the taxable year, and

3 ‘‘(2) the qualified start-up costs paid or in4 curred by the taxpayer during the taxable year.

5 ‘‘(b) LIMITATIONS.—

6 ‘‘(1) LIMITS ON CONTRIBUTIONS.—For pur7 poses of subsection (a)(1)—

8 ‘‘(A) qualified employer contributions may

9 only be taken into account for each of the first

10 5 taxable years ending after the date the em11 ployer establishes the qualified employer plan to

12 which the contribution is made, and

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

14 contributions taken into account with respect to

15 any qualified employee for any such taxable

16 year shall not exceed 3 percent of the com17 pensation (as defined in section 414(s)) of the

18 qualified employee for such taxable year.

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

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

21 any taxable year shall not exceed—

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

23 and third taxable years ending after the date

24 the employer established the qualified employer

25 plan to which such costs relate, and
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1 ‘‘(B) zero for each taxable year thereafter.

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

3 ‘‘(1) ELIGIBLE EMPLOYER.—

4 ‘‘(A) IN GENERAL.—The term ‘eligible em5 ployer’’ means, with respect to any year, an em6 ployer which has no more than—

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

8 50 employees, and

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

10 100 employees,

11 who received at least $5,000 of compensation

12 from the employer for the preceding year.

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

14 employer who establishes and maintains a quali15 fied employer plan for 1 or more years and who

16 fails to be an eligible employer for any subse17 quent year shall be treated as an eligible em18 ployer for the 2 years following the last year

19 the employer was an eligible employer.

20 ‘‘(C) REQUIREMENT FOR NEW QUALIFIED

21 EMPLOYER PLANS.—Such term shall not in22 clude an employer if the employer (or any pred23 ecessor employer) established or maintained a

24 qualified employer plan with respect to which

25 contributions were made, or benefits were ac-
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1 crued, for service in the 3 taxable years ending

2 prior to the first taxable year in which the cred3 it under this section is allowed.

4 ‘‘(2) QUALIFIED EMPLOYER CONTRIBUTIONS.—

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

6 employer contributions’ means, with respect to

7 any taxable year, any employer contributions

8 made on behalf of a qualified employee to a

9 qualified employer plan for a plan year ending

10 with or within the taxable year.

11 ‘‘(B) EMPLOYER CONTRIBUTIONS.—The

12 term ‘employer contributions’ shall not include

13 any elective deferral (within the meaning of sec14 tion 402(g)(3)).

15 ‘‘(3) QUALIFIED EMPLOYEE.—The term ‘quali16 fied employee’ means an individual who—

17 ‘‘(A) is eligible to participate in the quali18 fied employer plan to which the employer con19 tributions are made, and

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

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

22 year for which the contribution is made.

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

24 ‘qualified start-up costs’ means any ordinary and
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1 necessary expenses of an eligible employer which are

2 paid or incurred in connection with—

3 ‘‘(A) the establishment or maintenance of

4 a qualified employer plan in which qualified em5 ployees are eligible to participate, and

6 ‘‘(B) providing educational information to

7 employees regarding participation in such plan

8 and the benefits of establishing an investment

9 plan.

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

11 ‘qualified employer plan’ has the meaning given such

12 term in section 4972(d).

13 ‘‘(d) SPECIAL RULES.—

14 ‘‘(1) AGGREGATION RULES.—All persons treat15 ed as a single employer under subsection (a) or (b)

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

17 shall be treated as one person. All qualified employer

18 plans of an employer shall be treated as 1 qualified

19 employer plan.

20 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No de21 duction shall be allowable under this chapter for any

22 qualified start-up costs or qualified employer con23 tributions for which a credit is determined under

24 subsection (a).
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1 ‘‘(3) ELECTION NOT TO CLAIM CREDIT.—This

2 section shall not apply to a taxpayer for any taxable

3 year if such taxpayer elects to have this section not

4 apply for such taxable year.’’

5 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI6 NESS CREDIT.—Section 38(b) (defining current year busi7 ness credit) is amended by striking ‘‘plus’’ at the end of

8 paragraph (11), by striking the period at the end of para9 graph (12) and inserting ‘‘, plus’’, and by adding at the

10 end the following new paragraph:

11 ‘‘(13) in the case of an eligible employer (as de12 fined in section 45D(c)), the small employer pension

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

14 (c) CONFORMING AMENDMENT.—The table of sec15 tions for subpart D of part IV of subchapter A of chapter

16 1 is amended by adding at the end the following new item:

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

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

18 this section shall apply to costs paid or incurred or con19 tributions made in connection with qualified employer

20 plans established after December 31, 1999.

21 SEC. 302. SAFE ANNUITIES AND TRUSTS.

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

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

24 is amended by inserting after section 408A the following

25 new section:
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1 ‘‘SEC. 408B. SAFE ANNUITIES AND TRUSTS.

2 ‘‘(a) EMPLOYER ELIGIBILITY.—

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

4 and maintain a SAFE annuity or a SAFE trust for

5 any year only if—

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

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

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

9 no predecessor of the employer maintains) a

10 qualified plan (other than a permissible plan)

11 with respect to which contributions were made,

12 or benefits were accrued, for service in any year

13 in the period beginning with the year such an14 nuity or trust became effective and ending with

15 the year for which the determination is being

16 made.

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

18 (1)—

19 ‘‘(A) QUALIFIED PLAN.—The term ‘quali20 fied plan’ has the meaning given such term by

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

22 ‘‘(B) PERMISSIBLE PLAN.—The term ‘per23 missible plan’ means—

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

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

26 deferred compensation described in section
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1 457, or employer matching contributions

2 may be made, and

3 ‘‘(ii) any collectively bargained plan.

4 ‘‘(b) SAFE ANNUITY.—

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

6 the term ‘SAFE annuity’ means an individual retire7 ment annuity (as defined in section 408(b) without

8 regard to paragraph (2) thereof and without regard

9 to the limitation on aggregate annual premiums con10 tained in the flush language of section 408(b)) if—

11 ‘‘(A) such annuity meets the requirements

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

13 ‘‘(B) the only contributions to such annu14 ity (other than rollover contributions) are em15 ployer contributions.

16 Nothing in this section shall be construed as pre17 venting an employer from using a group annuity

18 contract which is divisible into individual retirement

19 annuities for purposes of providing SAFE annuities.

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 section 410(b)(3).

12 ‘‘(3) VESTING.—The requirements of this para13 graph are met if the employee’s rights to any bene14 fits are nonforfeitable.

15 ‘‘(4) BENEFIT FORM.—

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

17 this paragraph are met if the only form of ben18 efit is—

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

20 form of a single life annuity with monthly

21 payments (with no ancillary benefits) be22 ginning at age 65, or

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

24 is the actuarial equivalent (based on the
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1 assumptions specified in the SAFE annu2 ity) of the benefit described in clause (i).

3 ‘‘(B) DIRECT TRANSFERS AND ROLL4 OVERS.—A plan shall not fail to meet the re5 quirements of this paragraph by reason of per6 mitting, at the election of the employee, a trust7 ee-to-trustee transfer or a rollover contribution.

8 ‘‘(5) AMOUNT OF ANNUAL ACCRUED BEN9 EFIT.—

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

11 this paragraph are met for any plan year if the

12 accrued benefit of each participant derived from

13 employer contributions for such year, when ex14 pressed as a benefit described in paragraph

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

16 participant’s compensation for such year.

17 ‘‘(B) APPLICABLE PERCENTAGE.—For

18 purposes of this paragraph—

19 ‘‘(i) IN GENERAL.—The term ‘applica20 ble percentage’ means 3 percent.

21 ‘‘(ii) ELECTION OF LOWER PERCENT22 AGE.—An employer may elect to apply an

23 applicable percentage of 1 percent, 2 per24 cent or zero percent for any year for all

25 employees eligible to participate in the plan
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1 for such year if the employer notifies the

2 employees of such percentage within a rea3 sonable period before the beginning of such

4 year.

5 ‘‘(C) COMPENSATION LIMIT.—The com6 pensation taken into account under this para7 graph for any year shall not exceed the limita8 tion in effect for such year under section

9 401(a)(17).

10 ‘‘(D) CREDIT FOR SERVICE BEFORE PLAN

11 ADOPTED.—

12 ‘‘(i) IN GENERAL.—An employer may

13 elect to take into account a specified num14 ber of years of service (not greater than

15 10) performed before the adoption of the

16 plan (each hereinafter referred to as a

17 ‘prior service year’) as service under the

18 plan if the same specified number of years

19 is available to all employees eligible to par20 ticipate in the plan for the first plan year.

21 ‘‘(ii) ACCRUAL OF PRIOR SERVICE

22 BENEFIT.—Such an election shall be effec23 tive for a prior service year only if the re24 quirements of this paragraph are met for

25 an eligible plan year (with respect to em-
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1 ployees entitled to credit for such prior

2 service year) by doubling the applicable

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

4 purposes of the preceding sentence, an eli5 gible plan year is a plan year in the period

6 of consecutive plan years (but not more

7 than the number specified under clause (i))

8 beginning with the first plan year that the

9 plan is in effect.

10 ‘‘(iii) ELECTION MAY NOT APPLY TO

11 CERTAIN PRIOR SERVICE YEARS.—This

12 subparagraph shall not apply with respect

13 to any prior service year of an employee

14 if—

15 ‘‘(I) for any part of such prior

16 service year such employee was an ac17 tive participant (within the meaning

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

19 the day before the date of the enact20 ment of the Retirement Savings Op21 portunity Act of 1999) under any de22 fined benefit plan of the employer (or

23 any predecessor thereof), or

24 ‘‘(II) such employee received dur25 ing such prior service year less than
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1 $5,000 in compensation from the em2 ployer.

3 ‘‘(6) FUNDING.—

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

5 this paragraph are met only if the employer is

6 required to contribute to the annuity for each

7 plan year the amount necessary (determined in

8 accordance with subparagraph (B)) to fund the

9 accrued benefit for each participant entitled to

10 such benefit for such year.

11 ‘‘(B) ACTUARIAL ASSUMPTIONS.—In deter12 mining the amount required to be contributed

13 under subparagraph (A)—

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

15 not less than 3 percent and not greater

16 than 5 percent per year,

17 ‘‘(ii) the assumed mortality shall be

18 determined under the applicable mortality

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

20 modified by the Secretary so that it does

21 not include any assumption for preretire22 ment mortality),

23 ‘‘(iii) the assumed retirement age

24 shall be 65, and
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1 ‘‘(iv) an assumption for reasonable ex2 penses shall be permitted consistent with

3 State law.

4 ‘‘(C) TIME WHEN CONTRIBUTIONS

5 DEEMED MADE.—For purposes of this para6 graph, an employer shall be deemed to have

7 made a contribution on the last day of the pre8 ceding taxable year if the payment is on ac9 count of such taxable year and is made not

10 later than the time prescribed by law for filing

11 the return for such taxable year (including ex12 tensions thereof).

13 ‘‘(D) PENALTY FOR FAILURE TO MAKE RE14 QUIRED CONTRIBUTION.—The taxes imposed by

15 section 4971 shall apply to a failure to make

16 the contribution required by this paragraph in

17 the same manner as if the amount of the failure

18 were an accumulated funding deficiency to

19 which such section applies.

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

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

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

23 this subsection.

24 ‘‘(B) USE OF DESIGNATED FINANCIAL IN25 STITUTIONS.—A rule similar to the rule of sec-
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1 tion 408(p)(7) (without regard to the last sen2 tence thereof) shall apply for purposes of this

3 subsection.

4 ‘‘(C) TREATMENT OF MATCHING CON5 TRIBUTIONS.—A rule similar to the rule of sec6 tion 408(p)(8) shall apply for purposes of this

7 subsection.

8 ‘‘(c) SAFE TRUST.—

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

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

11 of a defined benefit plan if—

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

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

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

15 plan are based solely on the balance of a sepa16 rate account in such plan of such participant,

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

18 paragraphs (2) through (8), and

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

20 (other than rollover contributions) are employer

21 contributions.

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

23 meets the requirements of this paragraph for any

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

25 are met for such year.
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1 ‘‘(3) VESTING.—A plan meets the requirements

2 of this paragraph for any year only if the require3 ments of subsection (b)(3) are met for such year.

4 ‘‘(4) BENEFIT FORM.—A plan meets the re5 quirements of this paragraph only if the require6 ments of subsection (b)(4) are met. For purposes of

7 this paragraph, a plan may satisfy the requirements

8 of subsection (b)(4) by purchasing an annuity con9 tract which meets the requirements of subsection

10 (b)(4).

11 ‘‘(5) AMOUNT OF ANNUAL ACCRUED BEN12 EFIT.—A plan meets the requirements of this para13 graph for any year only if the requirements of sub14 section (b)(5) are met for such year.

15 ‘‘(6) FUNDING.—

16 ‘‘(A) IN GENERAL.—A plan meets the re17 quirements of this paragraph for any year only

18 if—

19 ‘‘(i) the requirements of subsection

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

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

22 an unfunded prior year liability as of the

23 close of such plan year, the plan requires

24 that the employer make an additional con25 tribution to such plan for such year equal
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1 to the amount of such unfunded prior year

2 liability.

3 ‘‘(B) UNFUNDED PRIOR YEAR LIABIL4 ITY.—For purposes of this paragraph, the term

5 ‘unfunded prior year liability’ means, with re6 spect to any plan year, the excess (if any) of—

7 ‘‘(i) the aggregate of the accrued li8 abilities under the plan as of the close of

9 the prior plan year, over

10 ‘‘(ii) the value of the plan’s assets de11 termined under section 412(c)(2) as of the

12 close of the plan year (determined without

13 regard to any contributions for such plan

14 year).

15 Such accrued liabilities shall be determined

16 using the assumptions specified in subsection

17 (b)(6)(B).

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

19 the applicable mortality table under section

20 417(e)(3) for any plan year is not the same as

21 such table for the prior plan year, the Secretary

22 shall prescribe regulations which phase in the

23 effect of the changes over a reasonable period

24 of plan years determined by the Secretary.
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1 ‘‘(D) DISREGARD ASSUMPTIONS FOR EX2 PENSES.—For purposes of this paragraph, the

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

4 shall be disregarded.

5 ‘‘(7) SEPARATE ACCOUNTS FOR PARTICI6 PANTS.—A plan meets the requirements of this

7 paragraph for any year only if the plan provides—

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

9 participant, and

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

11 ‘‘(i) the amount contributed to the

12 participant’s account, and

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

14 losses, and any forfeitures of accounts of

15 other participants which may be allocated

16 to such participant’s account.

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

18 ARE NOT READILY TRADABLE.—A plan meets the

19 requirements of this paragraph only if the plan pro20 hibits the trust from holding directly or indirectly se21 curities which are not readily tradable on an estab22 lished securities market or otherwise. Nothing in

23 this paragraph shall prohibit the trust from holding

24 insurance company products regulated by State law.
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1 ‘‘(9) DEFINITIONS AND SPECIAL RULE.—The

2 definitions and special rule applicable under sub3 section (b)(7) shall apply for purposes of this sub4 section.

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

6 TRUSTS.—

7 ‘‘(1) CERTAIN REQUIREMENTS TREATED AS

8 MET.—For purposes of section 401(a), a SAFE an9 nuity and a SAFE trust shall be treated as meeting

10 the requirements of the following provisions:

11 ‘‘(A) Section 401(a)(4) (relating to non12 discrimination rules).

13 ‘‘(B) Section 401(a)(26) (relating to min14 imum participation).

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

16 participation and coverage requirements).

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

18 benefit requirements).

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

20 412(c) (relating to full funding limitation).

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

22 on benefits and contributions under qualified

23 plans).

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

25 for top-heavy plans).
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1 ‘‘(2) CONTRIBUTIONS NOT TAKEN INTO AC2 COUNT IN APPLYING LIMITS TO OTHER PLANS.—

3 Contributions to a SAFE annuity or a SAFE trust

4 shall not be taken into account in applying sections

5 404 and 415 to other plans maintained by the em6 ployer.

7 ‘‘(3) COORDINATION WITH MAXIMUM LIMITA8 TION UNDER SUBSECTION (a).—In the case of any

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

10 and (b) of section 408 shall be applied by sub11 stituting ‘the dollar amount in effect under section

12 408B(b)(5)(C)’ for ‘$2,000’ each place it appears in

13 such subsections.

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

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

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

17 403(b)(8), 408(d)(3), or 457(e)(16).’’

18 (b) DEDUCTION LIMITS NOT TO APPLY TO EM19 PLOYER CONTRIBUTIONS.—

20 (1) IN GENERAL.—Section 404 (relating to de21 ductions for contributions of an employer to pension,

22 etc., plans), as amended by section 204(c), is amend23 ed by adding at the end the following new sub24 section:
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1 ‘‘(o) SPECIAL RULES FOR SAFE ANNUITIES AND

2 TRUSTS.—

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

4 a SAFE annuity or SAFE trust shall be treated as

5 if they are made to a plan subject to the require6 ments of this section.

7 ‘‘(2) TIMING.—

8 ‘‘(A) DEDUCTION.—Contributions de9 scribed in paragraph (1) shall be deductible in

10 the taxable year of the employer with or within

11 which the calendar year for which the contribu12 tions were made ends.

13 ‘‘(B) CONTRIBUTIONS AFTER END OF

14 YEAR.—For purposes of this subsection, con15 tributions shall be treated as made for a taxable

16 year if they are made on account of the taxable

17 year and are made not later than the time pre18 scribed by law for filing the return for the tax19 able year (including extensions thereof).’’

20 (2) COORDINATION WITH DEDUCTION UNDER

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

22 amount of deduction) is amended by adding at the

23 end the following new paragraph:

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

25 This section shall not apply with respect to any
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1 amount contributed to a SAFE annuity established

2 under section 408A(B).’’

3 (c) CONTRIBUTIONS AND DISTRIBUTIONS.—Section

4 402 (relating to taxability of beneficiary of employees’

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

6 subsection:

7 ‘‘(l) TREATMENT OF SAFE ANNUITIES.—Rules simi8 lar to the rules of paragraphs (1) and (3) of subsection

9 (h) shall apply to contributions and distributions with re10 spect to a SAFE annuities under section 408B.’’

11 (d) INCREASED PENALTY ON EARLY WITH12 DRAWALS.—Section 72(t) (relating to additional tax on

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

14 following new paragraph:

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

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

17 a SAFE annuity or a SAFE trust (within the mean18 ing of section 408B), paragraph (1) shall be applied

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

20 (e) SIMPLIFIED EMPLOYER REPORTS.—

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

22 to simplified employer reports) is amended by add23 ing at the end the following new paragraph:

24 ‘‘(3) SAFE ANNUITIES.—
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1 ‘‘(A) SIMPLIFIED REPORT.—The employer

2 maintaining any SAFE annuity (within the

3 meaning of section 408B) shall file a simplified

4 annual return with the Secretary containing

5 only the information described in subparagraph

6 (B).

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

8 subparagraph (A) shall set forth—

9 ‘‘(i) the name and address of the em10 ployer,

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

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

13 employer,

14 ‘‘(iv) the number of such employees

15 who are eligible to participate in the plan,

16 ‘‘(v) the total amount contributed by

17 the employer to each such annuity for such

18 year and the minimum amount required

19 under section 408B to be so contributed,

20 ‘‘(vi) the percentage elected under sec21 tion 408B(b)(5)(B), and

22 ‘‘(vii) the number of employees with

23 respect to whom contributions are required

24 to be made for such year under section

25 408B(b)(5)(D).
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1 ‘‘(C) REPORTING BY ISSUER OF SAFE AN2 NUITY.—

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

4 SAFE annuity shall provide to the owner

5 of the annuity for each year a statement

6 setting forth as of the close of such year—

7 ‘‘(I) the benefits guaranteed at

8 age 65 under the annuity, and

9 ‘‘(II) the cash surrender value of

10 the annuity.

11 ‘‘(ii) SUMMARY DESCRIPTION.—The

12 issuer of any SAFE annuity shall provide

13 to the employer maintaining the annuity

14 for each year a description containing the

15 following information:

16 ‘‘(I) The name and address of

17 the employer and the issuer.

18 ‘‘(II) The requirements for eligi19 bility for participation.

20 ‘‘(III) The benefits provided with

21 respect to the annuity.

22 ‘‘(IV) The procedures for, and ef23 fects of, withdrawals (including roll24 overs) from the annuity.
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1 ‘‘(D) TIME AND MANNER OF REPORT2 ING.—Any return, report, or statement required

3 under this paragraph shall be made in such

4 form and at such time as the Secretary shall

5 prescribe.’’

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

7 actuarial reports) is amended by redesignating sub8 sections (c) and (d) as subsections (d) and (e), re9 spectively, and by inserting after subsection (b) the

10 following new subsection:

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

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

13 require a simplified actuarial report which contains infor14 mation similar to the information required in section

15 408(l)(3)(B).’’

16 (f) CONFORMING AMENDMENTS.—

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

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

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

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

21 following new subparagraph:

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

23 408B.’’
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1 (2) Subsections (b), (c), (m)(4)(B), and

2 (n)(3)(B) of section 414 are each amended by in3 serting ‘‘408B,’’ after ‘‘408(p),’’.

4 (3) Section 4972(d)(1)(A) is amended by strik5 ing ‘‘and’’ at the end of clause (iii), by striking the

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

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

8 new clause:

9 ‘‘(v) any SAFE annuity (within the

10 meaning of section 408B).’’

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

12 I of subchapter D of chapter 1 is amended by insert13 ing after the item relating to section 408A the fol14 lowing new item:

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

15 (g) MODIFICATIONS OF ERISA.—

16 (1) EXEMPTION FROM INSURANCE COV17 ERAGE.—Subsection (b) of section 4021 of the Em18 ployee Retirement Income Security Act of 1974 (29

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

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

21 of paragraph (13) and inserting ‘‘; or’’, and by add22 ing at the end the following new paragraph:

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

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

25 of the Internal Revenue Code of 1986).’’
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1 (2) REPORTING REQUIREMENTS.—Section 101

2 of such Act (29 U.S.C. 1021) is amended by redes3 ignating the second subsection (h) as subsection (j)

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

5 following new subsection:

6 ‘‘(i) SAFE ANNUITIES.—

7 ‘‘(1) NO EMPLOYER REPORTS.—Except as pro8 vided in this subsection, no report shall be required

9 under this section by an employer maintaining a

10 SAFE annuity under section 408B(b) of the Inter11 nal Revenue Code of 1986.

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

13 any SAFE annuity shall provide to the employer

14 maintaining the annuity for each year a description

15 containing the following information:

16 ‘‘(A) The name and address of the em17 ployer and the issuer.

18 ‘‘(B) The requirements for eligibility for

19 participation.

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

21 the annuity.

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

23 withdrawals (including rollovers) from the an24 nuity.
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1 ‘‘(3) EMPLOYEE NOTIFICATION.—The employer

2 shall provide each employee eligible to participate in

3 the SAFE annuity with the description described in

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

5 required under section 408B(b)(5)(B) of the Inter6 nal Revenue Code of 1986.’’

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

8 this section shall apply to years beginning after December

9 31, 1998.

10 SEC. 303. INCREASED LIMIT ON CONTRIBUTION AMOUNT

11 FOR SIMPLE RETIREMENT ACCOUNTS.

12 (a) INCREASE IN CONTRIBUTION LIMIT.—Subpara13 graph (A)(ii) of section 408(p)(2) (relating to qualified

14 salary reduction arrangement) is amended by striking

15 ‘‘$6,000’’ and inserting ‘‘$10,000’’.

16 (b) CONFORMING AMENDMENTS.—

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

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

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

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

21 ‘‘$10,000’’.

22 (3) Section 408(p)(2)(E) of such Code is

23 amended—

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

25 ‘‘$10,000’’, and
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1 (B) by striking ‘‘1996’’ and inserting

2 ‘‘1999’’.

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

4 this section shall apply to years beginning after December

5 31, 1999.

6 TITLE IV—CATCHUP

7 CONTRIBUTIONS

8 SEC. 401. CATCHUP CONTRIBUTIONS FOR INDIVIDUALS

9 AGE 50 OR OVER.

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

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

12 end the following new subsection:

13 ‘‘(v) CATCHUP CONTRIBUTIONS FOR INDIVIDUALS

14 AGE 50 OR OVER.—

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

16 plan shall not be treated as failing to meet any re17 quirement of this title solely because the plan per18 mits an eligible participant to make additional elec19 tive deferrals in any plan year.

20 ‘‘(2) LIMITATION ON AMOUNT OF ADDITIONAL

21 DEFERRALS.—A plan shall not permit additional

22 elective deferrals under paragraph (1) for any year

23 in an amount greater than the lesser of—

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

25 of elective deferrals excludable from gross in-
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1 come of the participant for such year (deter2 mined without regard to this subsection, sub3 section (u), or any limitation described in para4 graph (3)(A)), or

5 ‘‘(B) the excess (if any) of—

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

7 the year, over

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

9 participant for such year which are made

10 without regard to this subsection.

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

12 case of any contribution to a plan under paragraph

13 (1) (and any employer matching contribution with

14 respect thereto)—

15 ‘‘(A) such contribution shall not, with re16 spect to the year in which the contribution is

17 made—

18 ‘‘(i) be subject to any otherwise appli19 cable limitation contained in section

20 402(g), 402(h), 403(b), 404(a), 404(h),

21 408, 415, or 457, or

22 ‘‘(ii) be taken into account in applying

23 such limitations to other contributions or

24 benefits under such plan or any other such

25 plan, and
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1 ‘‘(B) except as provided in paragraph (4),

2 such plan shall not be treated as failing to meet

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

4 401(a)(26), 401(k)(3), 401(k)(11), 401(k)(12),

5 401(m), 403(b)(12), 408(k), 408(p), 408B,

6 410(b), or 416 by reason of the making of (or

7 the right to make) such contribution.

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

9 paragraph (1) shall require an employer to make

10 any matching contribution with respect to any addi11 tional elective deferrals under paragraph (1) for any

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

13 matching contribution, such matching contribution

14 shall be taken into account in determining whether

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

16 the year.

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

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

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

20 plan—

21 ‘‘(A) who has attained the age of 50 before

22 the close of the plan year, and

23 ‘‘(B) with respect to whom no other elec24 tive deferrals may (without regard to this sub25 section) be made to the plan for the plan year
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1 by reason of the application of any limitation or

2 other restriction described in paragraph (3) or

3 contained in the terms of the plan.

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

5 purposes of this subsection—

6 ‘‘(A) APPLICABLE EMPLOYER PLAN.—The

7 term ‘applicable employer plan’ means—

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

9 section 401(a) which is exempt from tax

10 under section 501(a),

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

12 contributed by an individual’s employer for

13 an annuity contract described in section

14 403(b),

15 ‘‘(iii) an eligible deferred compensa16 tion plan under section 457 of an eligible

17 employer as defined in section

18 457(e)(1)(A), and

19 ‘‘(iv) an arrangement meeting the re20 quirements of section 408 (k) or (p).

21 ‘‘(B) ELECTIVE DEFERRAL.—The term

22 ‘elective deferral’ has the meaning given such

23 term by subsection (u)(2)(C).’’
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1 (b) INDIVIDUAL RETIREMENT PLANS.—Section

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

3 by adding at the end the following new paragraph:

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

5 an individual who has attained the age of 50 before

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

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

8 shall be equal to 150 percent of such amount deter9 mined without regard to this paragraph.’’

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

11 this section shall apply to contributions in taxable years

12 beginning after December 31, 2000.

13 TITLE V—PLAN AMENDMENTS

14 SEC. 501. PROVISIONS RELATING TO PLAN AMENDMENTS.

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

16 or contract amendment—

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

18 being operated in accordance with the terms of the

19 plan during the period described in subsection

20 (b)(2)(A), and

21 (2) such plan shall not fail to meet the require22 ments of section 411(d)(6) of the Internal Revenue

23 Code of 1986 or section 204(g) of the Employee Re24 tirement Income Security Act of 1974 (29 U.S.C.

25 1054(g)) by reason of such amendment.
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1 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

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

3 any amendment to any plan or annuity contract

4 which is made—

5 (A) pursuant to any amendment made by

6 this Act, or pursuant to any regulation issued

7 under this Act, and

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

9 year beginning on or after January 1, 2002.

10 In the case of a government plan (as defined in sec11 tion 414(d) of the Internal Revenue Code of 1986

12 and section 3(32) of the Employee Retirement In13 come Security Act of 1974), this paragraph shall be

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

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

16 to any amendment unless—

17 (A) during the period—

18 (i) beginning on the date the legisla19 tive or regulatory amendment described in

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

21 case of a plan or contract amendment not

22 required by such legislative or regulatory

23 amendment, the effective date specified by

24 the plan), and
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1 (ii) ending on the date described in

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

3 the plan or contract amendment is adopt4 ed),

5 the plan or contract is operated as if such plan

6 or contract amendment were in effect, and

7 (B) such plan or contract amendment ap8 plies retroactively for such period.

Æ