I 

111TH CONGRESS 

2D SESSION H. R. 4742 

To amend the Internal Revenue Code of 1986 to encourage retirement savings 

by modifying requirements with respect to employer-established IRAs, 

and for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 3, 2010 

Mr. KIND (for himself and Mr. REICHERT) introduced the following bill; which 

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

the Committee on Education and Labor, 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 encourage 

retirement savings by modifying requirements with respect to employer-established IRAs, 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. 

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

5 ‘‘Small Businesses Add Value for Employees Act of 2009’’ 

6 or the ‘‘SAVE Act of 2009’’. 


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1 (b) TABLE OF CONTENTS.—The table of contents for 

2 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Elimination of restriction on SIMPLE IRA rollovers. 

Sec. 3. Allowing mid-year SIMPLE IRA plan termination. 

Sec. 4. Elimination of higher penalty on early SIMPLE IRA distributions. 

Sec. 5. Increase in contributions allowed for SIMPLE IRA. 

Sec. 6. SIMPLE 401(k) parity for additional nonelective employer contributions. 

Sec. 7. Automatic deferral IRAs. 

Sec. 8. 401(k) automatic deferral percentage parity. 

Sec. 9. Limited transfer of unused balance in flexible spending arrangement. 

Sec. 10. Prior years compensation taken into account in determining maximum 

retirement savings deduction. 

Sec. 11. Expanding small employer pension plan startup cost credit. 

Sec. 12. Financial education. 

Sec. 13. Multiple small employer plan. 

Sec. 14. Amendments to Employee Retirement Income Security Act of 1974. 

3 SEC. 2. ELIMINATION OF RESTRICTION ON SIMPLE IRA 

4 ROLLOVERS. 

5 (a) IN GENERAL.—Paragraph (3) of section 408(d) 

6 of the Internal Revenue Code of 1986 (relating to rollover 

7 contribution) is amended by striking subparagraph (G). 

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

9 this section shall apply to distributions in taxable years 

10 beginning after the date of the enactment of this Act. 

11 SEC. 3. ALLOWING MID-YEAR SIMPLE IRA PLAN TERMI12 NATION. 

13 (a) IN GENERAL.—Subsection (p) of section 408 of 

14 the Internal Revenue Code of 1986 is amended by adding 

15 at the end the following new paragraph: 

16 ‘‘(11) SPECIAL RULES RELATING TO MID-YEAR

17 TERMINATION.— 


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1 ‘‘(A) IN GENERAL.—An employer may 

2 elect to terminate (in such form and manner as 

3 the Secretary may provide) the qualified salary 

4 reduction arrangement of the employer at any 

5 time during the year. 

6 ‘‘(B) PRORATION AND APPLICATION OF

7 QUALIFIED PLAN LIMITATION.—In the case of a 

8 year during which an employer terminates a 

9 qualified salary reduction arrangement before 

10 the end of such year— 

11 ‘‘(i) the applicable dollar amount in 

12 effect for such year shall be prorated to 

13 the date of such termination, 

14 ‘‘(ii) for purposes of determining the 

15 compensation of an employee for such ar16 rangement for such year, the year of such 

17 termination shall be treated as ending on 

18 the date of such termination, and 

19 ‘‘(iii) subparagraph (D) of paragraph 

20 (2) shall not apply with respect to a quali21 fied plan maintained in such year only 

22 after the date of such termination.’’. 

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

24 this section shall apply to years beginning after the date 

25 of the enactment of this Act. 


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1 SEC. 4. ELIMINATION OF HIGHER PENALTY ON EARLY SIM2 PLE IRA DISTRIBUTIONS. 

3 (a) IN GENERAL.—Subsection (t) of section 72 of the 

4 Internal Revenue Code of 1986 (relating to 10-percent ad5 ditional tax on early distributions from qualified retire6 ment plans) is amended by striking paragraph (6). 

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

8 this section shall apply to distributions in taxable years 

9 beginning after the date of the enactment of this Act. 

10 SEC. 5. INCREASE IN CONTRIBUTIONS ALLOWED FOR SIM11 PLE IRA. 

12 (a) ADDITIONAL NONELECTIVE EMPLOYER CON13 TRIBUTIONS ALLOWED.— 

14 (1) IN GENERAL.—Subparagraph (A) of section 

15 408(p)(2) of the Internal Revenue Code of 1986 (re16 lating to qualified salary reduction arrangement) is 

17 amended by striking ‘‘and’’ at the end of clause (iii), 

18 by redesignating clause (iv) as clause (v), and by in19 serting after clause (iii) the following new clause: 

20 ‘‘(iv) the employer may make, in addi21 tion to any other contribution under this 

22 paragraph, nonelective contributions of not 

23 more than 10 percent of compensation 

24 (subject to the limitation described in sub25 paragraph (B)(ii)) for each employee who 

26 is eligible to participate in the arrangement 


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1 and who has at least $5,000 of compensa2 tion from the employer for the year, and’’. 

3 (2) CONFORMING AMENDMENT.—Clause (v) of 

4 section 408(p)(2)(A) of such Code, as redesignated 

5 by this section, is amended by striking ‘‘clause (i) or 

6 (iii)’’ and inserting ‘‘clause (i), (iii), or (iv)’’. 

7 (b) INCREASE IN ELECTIVE CONTRIBUTION LIMITA8 TION.—Subparagraph (E) of section 408(p)(2) is amend9 ed to read as follows: 

10 ‘‘(E) APPLICABLE DOLLAR AMOUNT.—For 

11 purposes of subparagraph (A)(ii), the applicable 

12 dollar amount shall be the applicable dollar 

13 amount in effect under subparagraph (B) of 

14 section 402(g)(1).’’. 

15 (c) SIMPLE IRA SUBJECT TO DEFINED CONTRIBU16 TION PLAN LIMITATION.—Subsection (p) of section 408 

17 of such Code is amended by adding at the end the fol18 lowing new paragraph: 

19 ‘‘(11) SUBJECT TO DEFINED CONTRIBUTION

20 PLAN LIMITATION.—An arrangement shall not be 

21 treated as a qualified salary reduction arrangement 

22 for any year if contributions with respect to any em23 ployee for the year exceed the limitation of para24 graph (1) of section 415(c) (relating to limitation for 

25 defined contribution plans).’’. 


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

2 this section shall apply to contributions for taxable years 

3 beginning after December 31, 2007. 

4 SEC. 6. SIMPLE 401(k) PARITY FOR ADDITIONAL NONELEC5 TIVE EMPLOYER CONTRIBUTIONS. 

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

7 401(k)(11) of such Code (relating to contribution require8 ments) is amended by adding at the end the following new 

9 clause: 

10 ‘‘(iv) SPECIAL RULE FOR ADDITIONAL

11 NONELECTIVE EMPLOYER CONTRIBU12 TIONS.—An arrangement shall not be 

13 treated as failing to meet the requirements 

14 of this subparagraph merely because under 

15 such arrangement the employer makes, in 

16 addition to any other contribution under 

17 this subparagraph, nonelective contribu18 tions of not more than 10 percent of com19 pensation for each employee who is eligible 

20 to participate in the arrangement and who 

21 has at least $5,000 of compensation from 

22 the employer for the year.’’. 

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

24 this section shall apply to plan years beginning after De25 cember 31, 2007. 


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1 SEC. 7. AUTOMATIC DEFERRAL IRAS. 

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

3 D of chapter 1 of the Internal Revenue Code of 1986 (re4 lating to pension, profit-sharing, stock bonus plans, etc.) 

5 is amended by inserting after section 408A the following 

6 new section: 

7 ‘‘SEC. 408B. AUTOMATIC DEFERRAL IRAS. 

8 ‘‘(a) IN GENERAL.—An automatic deferral IRA shall 

9 be treated for purposes of this title in the same manner 

10 as an individual retirement plan. An automatic deferral 

11 IRA may also be treated as a Roth IRA for purposes of 

12 this title if it meets the requirements of section 408A. 

13 ‘‘(b) AUTOMATIC DEFERRAL IRA.—For purposes of 

14 this section, the term ‘automatic deferral IRA’ means an 

15 individual retirement plan (as defined in section 

16 7701(a)(37)) with respect to which contributions are made 

17 under an arrangement which satisfies the requirements of 

18 paragraphs (1) through (4) of subsection (c). 

19 ‘‘(c) AUTOMATIC DEFERRAL IRA ARRANGEMENTS.— 

20 ‘‘(1) ENROLLMENT.— 

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

22 this paragraph are met if each employee eligible 

23 to participate in the arrangement is treated as 

24 having elected to have the employer make pay25 ments as elective contributions to an automatic 

26 deferral IRA on behalf of such employee (which 


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1 would have otherwise been made to the em2 ployee directly in cash) in an amount equal to 

3 so much of a qualified percentage of compensa4 tion of such employee as does not exceed the 

5 deductible amount for such year (within the 

6 meaning of section 219(b)). 

7 ‘‘(B) ELIGIBILITY.—An employee is eligi8 ble to participate if such employee is described 

9 in paragraph (2) of section 408(k), except that 

10 for purposes of determining whether an em11 ployee is described in such paragraph, subpara12 graph (C) thereof shall be applied by sub13 stituting ‘$5,000’ for ‘$450’. 

14 ‘‘(C) ELECTION OUT.—The election treat15 ed as having been made under subparagraph 

16 (A) shall cease to apply with respect to any em17 ployee who makes an affirmative election— 

18 ‘‘(i) to not have such elective contribu19 tions made, or 

20 ‘‘(ii) not later than the close of the 

21 30-day period beginning on the date of the 

22 first contribution with respect to such em23 ployee, to make elective contributions at a 

24 level specified in such affirmative election. 


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1 ‘‘(D) QUALIFIED PERCENTAGE.—For pur2 poses of this paragraph, the term ‘qualified per3 centage’ means, with respect to any employee, 

4 any percentage determined under the trust 

5 agreement if such percentage is applied uni6 formly, does not exceed 15 percent, and is at 

7 least— 

8 ‘‘(i) 3 percent during the period end9 ing on the last day of the first plan year 

10 which begins after the date on which the 

11 first elective contribution described in sub12 paragraph (A) is made with respect to 

13 such employee, and 

14 ‘‘(ii) during any subsequent plan year, 

15 a percentage equal to— 

16 ‘‘(I) 3 percent, plus 

17 ‘‘(II) 1 percent multiplied by the 

18 number of plan years (but not more 

19 than 12) beginning after the plan year 

20 described in clause (i). 

21 ‘‘(2) NOTICE.— 

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

23 this paragraph are met if, within a reasonable 

24 period before the first day an employee is eligi25 ble to participate in the arrangement, the emVerDate Nov 24 2008 06:25 Mar 04, 2010 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H4742.IH H4742

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1 ployee receives written notice of the employee’s 

2 rights and obligations under the arrangement 

3 which— 

4 ‘‘(i) is sufficiently accurate and com5 prehensive to apprise the employee of such 

6 rights, and 

7 ‘‘(ii) is written in a manner calculated 

8 to be understood by the average employee 

9 to whom the arrangement applies. 

10 ‘‘(B) TIMING AND CONTENT.—A notice 

11 shall not be treated as meeting the require12 ments of subparagraph (A) with respect to an 

13 employee unless— 

14 ‘‘(i) the notice explains the employee’s 

15 right to elect not to have elective contribu16 tions made on the employee’s behalf (or to 

17 elect to have such contributions made at a 

18 different percentage), 

19 ‘‘(ii) the notice explains how contribu20 tions made under the arrangement will be 

21 invested in the absence of any investment 

22 election by the employee, and 

23 ‘‘(iii) the employee has a reasonable 

24 period of time after receipt of the notice 

25 described in clauses (i) and (ii) and before 


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1 the first elective contribution is made to 

2 make either such election. 

3 ‘‘(3) DEFAULT INVESTMENT ARRANGEMENT.— 

4 The requirements of this paragraph are met if— 

5 ‘‘(A) in the absence of an investment elec6 tion by the employee with respect to the em7 ployee’s interest in the trust, such interest is in8 vested as provided in regulations prescribed 

9 pursuant to subparagraph (A) of section 

10 404(c)(5) of the Employee Retirement Income 

11 Security Act of 1974, and 

12 ‘‘(B) the employer provides each employee 

13 who has an interest in the trust, notice which 

14 meets the requirements of subparagraph (B) of 

15 such section. 

16 ‘‘(4) ADMINISTRATIVE REQUIREMENTS.—The 

17 requirements of this paragraph are met if— 

18 ‘‘(A) an employer must make the elective 

19 employer contributions under paragraph (1)(A) 

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

21 following the last day of the month with respect 

22 to which the contributions are to be made, 

23 ‘‘(B) an employee may elect to terminate 

24 participation in the arrangement at any time 

25 during the year, except that if the employee so 


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1 terminates, the arrangement may provide that 

2 the employee may elect to resume participation 

3 until the beginning of the next year, and 

4 ‘‘(C) each employee eligible to participate 

5 may elect, during the 30-day period before the 

6 beginning of any year, or to modify the amount 

7 subject to such arrangement, for such year.’’. 

8 (b) PREEMPTION OF CONFLICTING STATE LAWS.— 

9 Any law of a State shall be superseded if it would directly 

10 or indirectly prohibit or restrict an employer from creating 

11 or organizing an automatic deferral IRA (as defined in 

12 section 408B of the Internal Revenue Service of 1986). 

13 (c) CLERICAL AMENDMENT.—The table of sections 

14 for subpart A of part I of subchapter D of chapter 1 of 

15 the Internal Revenue Code of 1986 is amended by insert16 ing after the item relating to 408A the following new item: 

‘‘408B. Automatic deferral IRAs.’’. 

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

18 this section shall apply to taxable years beginning after 

19 December 31, 2007. 

20 SEC. 8. 401(k) AUTOMATIC DEFERRAL PERCENTAGE PAR21 ITY. 

22 (a) IN GENERAL.—Clause (iii) of section 

23 401(k)(13)(C) of the Internal Revenue Code of 1986 is 

24 amended by striking ‘‘10 percent’’ and inserting ‘‘15 per25 cent’’. 


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

2 this section shall apply to plan years beginning after De3 cember 31, 2009. 

4 SEC. 9. LIMITED TRANSFER OF UNUSED BALANCE IN 

5 FLEXIBLE SPENDING ARRANGEMENT. 

6 (a) IN GENERAL.—Section 125 of the Internal Rev7 enue Code of 1986 is amended by redesignating sub8 sections (i) and (j) as subsections (j) and (k), respectively, 

9 and by inserting after subsection (h) the following new 

10 subsection: 

11 ‘‘(i) SPECIAL RULE FOR UNUSED BENEFITS IN

12 FLEXIBLE SPENDING ARRANGEMENTS.— 

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

14 a plan or other arrangement shall not fail to be 

15 treated as a cafeteria plan or flexible spending ar16 rangement merely because such arrangement pro17 vides for qualified retirement distributions. 

18 ‘‘(2) QUALIFIED RETIREMENT DISTRIBUTION.— 

19 ‘‘(A) IN GENERAL.—For purposes of this 

20 section, the term ‘qualified retirement distribu21 tion’ means any distribution to an individual of 

22 all or a portion of the employee’s account under 

23 such arrangement, but only to the extent— 

24 ‘‘(i) the amount does not exceed the 

25 lesser of— 


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1 ‘‘(I) $250, or 

2 ‘‘(II) the unused benefits with re3 spect to the arrangement, and 

4 ‘‘(ii) the amount received is paid into 

5 a qualified retirement plan (as defined in 

6 section 4974(c)), or an eligible deferred 

7 compensation plan (as defined in section 

8 457(b)) of an eligible employer described in 

9 section 457(e)(1)(A), of the individual not 

10 later than the 60th day after the day on 

11 which the individual receives the payment 

12 or distribution. 

13 ‘‘(B) UNUSED BENEFITS.—For purposes 

14 of this paragraph, the term ‘unused benefits’ 

15 means, with respect to an employee, the excess 

16 of— 

17 ‘‘(i) the maximum amount of reim18 bursement allowable to the employee dur19 ing a plan year under a flexible spending 

20 arrangement, over 

21 ‘‘(ii) the actual amount of reimburse22 ment during such year under such ar23 rangement. 

24 ‘‘(C) SPECIAL RULES FOR TREATMENT OF

25 CONTRIBUTIONS TO RETIREMENT PLANS.—For 


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1 purposes of this title, qualified retirement dis2 tributions— 

3 ‘‘(i) shall be treated as elective defer4 rals (as defined in section 402(g)(3)) in 

5 the case of contributions to a qualified 

6 cash or deferred arrangement (as defined 

7 in section 401(k)) or to an annuity con8 tract described in section 403(b), 

9 ‘‘(ii) shall be treated as employer con10 tributions to which the employee has a 

11 nonforfeitable right in the case of a plan 

12 which is described in section 401(a) which 

13 includes a trust exempt from tax under 

14 section 501(a), 

15 ‘‘(iii) shall be treated as deferred com16 pensation in the case of contributions to an 

17 eligible deferred compensation plan (as de18 fined in section 457(b)), and 

19 ‘‘(iv) shall be treated in the manner 

20 designated for purposes of section 408 or 

21 408A in the case of contributions to an in22 dividual retirement plan.’’. 

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

24 this section shall apply to plan years ending after the date 

25 of the enactment of this Act. 


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1 SEC. 10. PRIOR YEARS COMPENSATION TAKEN INTO AC2 COUNT IN DETERMINING MAXIMUM RETIRE3 MENT SAVINGS DEDUCTION. 

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

5 219(b)(1) of the Internal Revenue Code of 1986 is amend6 ed by striking ‘‘for such taxable year’’ and inserting ‘‘for 

7 the preceding taxable year’’. 

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

9 this section shall apply to taxable years beginning after 

10 the date of the enactment of this Act. 

11 SEC. 11. EXPANDING SMALL EMPLOYER PENSION PLAN 

12 STARTUP COST CREDIT. 

13 (a) IN GENERAL.— 

14 (1) INCLUDING STARTUP COSTS FOR EM15 PLOYER-ESTABLISHED IRAS.—Paragraph (2) of sec16 tion 45E(d) of the Internal Revenue Code of 1986 

17 (defining eligible employer plan) is amended by 

18 striking ‘‘means a qualified employer plan’’ and all 

19 that follows and inserting: ‘‘means— 

20 ‘‘(A) a qualified employer plan within the 

21 meaning of section 4972(d), or 

22 ‘‘(B) a plan of which a trust described in 

23 section 408(c) is a part.’’. 

24 (2) ADDITIONAL CREDIT AMOUNT.— 

25 (A) IN GENERAL.—Subsection (a) of sec26 tion 45E of such Code is amended by striking 


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1 ‘‘50 percent of’’ and all that follows and insert2 ing ‘‘the sum of— 

3 ‘‘(1) the applicable percentage of the qualified 

4 startup costs paid or incurred by the taxpayer dur5 ing the taxable year, plus 

6 ‘‘(2) $25 multiplied by the number of employees 

7 of the employer who participate in any eligible em8 ployer plan of the employer for the first time in such 

9 taxable year.’’. 

10 (B) APPLICABLE PERCENTAGE.—Sub11 section (d) of section 45E of such Code is 

12 amended by adding at the end the following 

13 new paragraph: 

14 ‘‘(4) APPLICABLE PERCENTAGE.—The applica15 ble percentage is— 

16 ‘‘(A) in the case of a plan described in sub17 section (d)(2)(A), 75 percent, or 

18 ‘‘(B) in the case of a plan described in 

19 subsection (d)(2)(B), 50 percent.’’. 

20 (C) CONFORMING AMENDMENT.—Para21 graph (2) of section 45E(c) of such Code (de22 fining eligible employer) is amended— 

23 (i) by striking ‘‘qualified employer 

24 plan’’ in each place it appears and insert25 ing ‘‘eligible employer plan’’, and 


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1 (ii) by striking ‘‘QUALIFIED’’ in the 

2 heading thereof and inserting ‘‘ELIGIBLE’’. 

3 (3) INCREASED LIMITATION.—Paragraph (1) of 

4 section 45E(b) of such Code is amended by striking 

5 ‘‘$500’’ and inserting ‘‘$750 ($2,000 in the case of 

6 qualified startup costs attributable to a plan de7 scribed in subsection (d)(2)(A)’’. 

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

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

10 years beginning after the date of the enactment of this 

11 Act. 

12 SEC. 12. FINANCIAL EDUCATION. 

13 (a) RETIREMENT PLAN EDUCATION FOR SMALL

14 BUSINESSES.—Not later than 6 months after the date of 

15 the enactment of this Act— 

16 (1) the Department of the Treasury Office of 

17 Financial Education, in consultation with the De18 partment of Labor, shall develop and implement an 

19 outreach plan to educate small businesses on the 

20 types of retirement plans available and the benefits 

21 and requirements of such plans, and 

22 (2) the Secretary of the Treasury and the Sec23 retary of Labor shall develop recommendations for 

24 small businesses in order to improve retirement out25 comes. Such recommendations shall take into acVerDate Nov 24 2008 06:25 Mar 04, 2010 Jkt 089200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 E:\BILLS\H4742.IH H4742

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1 count established behavioral trends of employee in2 vestment and the effect of default design features 

3 such as auto escalation, expansion of auto rollovers, 

4 auto diversification for near retirees, and automatic 

5 forms of distribution. 

6 (b) FINANCIAL LITERACY.— 

7 (1) IN GENERAL.—Not later than 1 year after 

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

9 of the Treasury, in consultation with the Secretary 

10 of Education, shall develop sample age-appropriate 

11 curricula to be made available for financial literacy 

12 education in elementary and secondary schools. 

13 (2) CONTENT OF CURRICULA.—Such curricula 

14 shall include the following: 

15 (A) How to balance a checkbook, read a 

16 credit card statement, and calculate interest 

17 rates. 

18 (B) What a pay stub is and why Federal 

19 and State income taxes and Social Security and 

20 Medicare taxes are withheld from wages. 

21 (C) The differences between various types 

22 of bank accounts. 

23 (D) The significance of a credit score and 

24 how to read credit reports. 


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1 (E) The marketing techniques frequently 

2 used by individuals and businesses to attract 

3 patrons. 

4 (F) The importance of saving for college 

5 and retirement, including the various methods 

6 for saving such as traditional pensions, 401(k)s, 

7 and IRAs. 

8 SEC. 13. MULTIPLE SMALL EMPLOYER PLAN. 

9 (a) IN GENERAL.—Paragraph (11) of section 401(k) 

10 of the Internal Revenue Code of 1986 is amended by add11 ing the following at the end thereof: 

12 ‘‘(E) MULTIPLE SMALL EMPLOYER

13 PLAN.— 

14 ‘‘(i) IN GENERAL.—In the case of a 

15 plan described in clause (ii)— 

16 ‘‘(I) the amount described in sub17 paragraph (B)(i)(I) shall be $10,000, 

18 in lieu of the amount in effect under 

19 section 408(p)(2)(A)(ii), 

20 ‘‘(II) such $10,000 amount shall 

21 be adjusted as described in section 

22 408(p)(2)(E)(ii) except that the base 

23 period taken into account shall be the 

24 calendar quarter beginning July 1, 

25 2010, 


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1 ‘‘(III) subclause (II) of subpara2 graph (B)(i) and clause (ii) of sub3 paragraph (B) shall not apply, and 

4 ‘‘(IV) section 414(v) shall not 

5 apply. 

6 ‘‘(ii) PLAN DESCRIBED.—A plan is de7 scribed in this clause if the plan satisfies 

8 the following requirements: 

9 ‘‘(I) Such plan satisfies the re10 quirements of this paragraph, as 

11 modified by clause (i). 

12 ‘‘(II) The plan is described in 

13 section 413(c). 

14 ‘‘(III) The plan includes a quali15 fied automatic contribution arrange16 ment, as defined in paragraph (13), 

17 except that subparagraph (D) of para18 graph (13) shall not apply and the 

19 qualified percentage shall be deter20 mined by reference to subclauses (I), 

21 (II), (III), and (IV) of paragraph 

22 (13)(C)(iii). 

23 ‘‘(IV) The plan does not permit 

24 any participant or beneficiary to reVerDate Nov 24 2008 06:25 Mar 04, 2010 Jkt 089200 PO 00000 Frm 00021 Fmt 6652 Sfmt 6201 E:\BILLS\H4742.IH H4742

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1 ceive or maintain a loan from the 

2 plan. 

3 ‘‘(V) The plan does not permit 

4 hardship distributions described in 

5 paragraph (2)(B)(i)(IV) except to the 

6 extent any such distribution is 

7 deemed, under regulations prescribed 

8 by the Secretary, to be on account of 

9 an immediate and heavy financial 

10 need of the employee and necessary to 

11 satisfy an immediate and heavy finan12 cial need of the employee. 

13 ‘‘(VI) The plan is maintained 

14 pursuant to a model plan document 

15 published by the Secretary.’’. 

16 (b) SIMPLIFICATION.— 

17 (1) MODEL PLAN.—Within one year of the date 

18 of the enactment of this Act, the Secretary of the 

19 Treasury shall publish a model plan that may be 

20 used to satisfy the requirement of subclause (VI) of 

21 section 401(k)(11)(E)(ii) of the Internal Revenue 

22 Code of 1986. 

23 (2) PROTECTION AGAINST LOSS.—Within 120 

24 days of the date of the enactment of this Act, the 

25 Secretary of Labor shall amend Department of 


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1 Labor Regulation section 2550.404c–5(e)(4)(iv)(B) 

2 so that, in the case of a plan described in section 

3 401(k)(11)(E) of such Code ‘‘four years’’ shall be 

4 substituted for ‘‘120 days’’. 

5 (3) CLARIFYING DUTIES AND REDUCING BUR6 DENS.—Within one year of the date of the enact7 ment of this Act, the Secretary of Labor shall— 

8 (A) publish rules clarifying the extent to 

9 which the fiduciary duties of a participating 

10 employer and of a named fiduciary with respect 

11 to a plan described in section 401(k)(11)(E) of 

12 such Code are limited to prudently selecting 

13 and monitoring the provider of such plan and 

14 the services, fees, and investment options avail15 able from such provider, and 

16 (B) prescribe interim final regulations pro17 viding simplified means by which plans de18 scribed in section 401(k)(11)(E) of such Code 

19 may satisfy the requirements of sections 102, 

20 103, and 105 of the Employee Retirement In21 come Security Act of 1974. 

22 (4) ELIMINATION OF DISINCENTIVE TO POOL23 ING.—Not later than one year after the date of en24 actment of this Act, the Secretary of the Treasury 

25 shall prescribe final regulations under which a plan 


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1 described in section 413(c) of such Code may be 

2 treated as satisfying the qualification requirements 

3 of section 401(a) of such Code despite the violation 

4 of such requirements with respect to one or more 

5 participating employers. Such rules may require that 

6 the portion of the plan attributable to such partici7 pating employers be spun off to plans maintained by 

8 such employers. 

9 (c) EFFECTIVE DATE.— 

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

12 shall apply to years beginning after December 31, 

13 2010. 

14 (2) EXCEPTION.—Subsection (b) shall apply as 

15 of the date of the enactment of this Act. 

16 SEC. 14. AMENDMENTS TO EMPLOYEE RETIREMENT IN17 COME SECURITY ACT OF 1974. 

18 (a) IN GENERAL.—Section 3(2) of the Employee Re19 tirement Income Security Act of 1974 (29 U.S.C. 

20 1002(2)) is amended by adding at the end the following 

21 new subparagraph: 

22 ‘‘(C) An individual retirement plan (as defined in sec23 tion 7701(a)(37) of the Internal Revenue Code of 1986) 

24 shall not be considered a pension plan merely because an 

25 employer establishes a payroll deduction program for the 


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1 purpose of enabling employees to make voluntary con2 tributions to such account or annuity.’’. 

3 (b) DISCLOSURE REGARDING LIFETIME INCOME.— 

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

5 105(a)(2) of such Act (29 U.S.C. 1025(a)(2)) is 

6 amended— 

7 (A) in clause (i), by striking ‘‘and’’ at the 

8 end; 

9 (B) in clause (ii), by striking ‘‘diversifica10 tion.’’ and inserting ‘‘diversification, and’’; and 

11 (C) by inserting at the end the following: 

12 ‘‘(iii) the lifetime income disclosure 

13 described in subparagraph (D)(i). 

14 In the case of pension benefit statements de15 scribed in clause (i) of paragraph (1)(A), a life16 time income disclosure under clause (iii) of this 

17 subparagraph shall only be required to be in18 cluded in one pension benefit statement in each 

19 calendar year.’’. 

20 (2) LIFETIME INCOME.—Paragraph (2) of sec21 tion 105(a) of such Act (29 U.S.C. 1025(a)) is 

22 amended by adding at the end the following new 

23 subparagraph: 

24 ‘‘(D) LIFETIME INCOME DISCLOSURE.— 

25 ‘‘(i) IN GENERAL.— 


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1 ‘‘(I) DISCLOSURE.—A lifetime in2 come disclosure shall set forth the an3 nuity equivalent of the total benefits 

4 accrued with respect to the partici5 pant or beneficiary. 

6 ‘‘(II) ANNUITY EQUIVALENT OF

7 THE TOTAL BENEFITS ACCRUED.— 

8 For purposes of this subparagraph, 

9 the ‘annuity equivalent of the total 

10 benefits accrued’ means the amount of 

11 monthly payments the participant or 

12 beneficiary would receive at the plan’s 

13 normal retirement age if the total ac14 crued benefits of such participant or 

15 beneficiary were used on the date of 

16 the lifetime income disclosure to pur17 chase the life annuities described in 

18 subclause (III), with payments under 

19 such annuities commencing at the 

20 plan’s normal retirement age. 

21 ‘‘(III) LIFE ANNUITIES.—The 

22 life annuities described in this sub23 clause are a qualified joint and sur24 vivor annuity (as defined in section 

25 205(d)), based on assumptions speciVerDate Nov 24 2008 06:25 Mar 04, 2010 Jkt 089200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\H4742.IH H4742

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1 fied in rules prescribed by the Sec2 retary, including the assumption that 

3 the participant or beneficiary has a 

4 spouse of equal age, and a single life 

5 annuity. Such annuities may have a 

6 term certain or other features to the 

7 extent permitted under rules pre8 scribed by the Secretary. 

9 ‘‘(ii) MODEL DISCLOSURE.—Not later 

10 than 1 year after the date of the enact11 ment of the Lifetime Income Disclosure 

12 Act, the Secretary shall issue a model life13 time income disclosure, written in a man14 ner so as to be understood by the average 

15 plan participant, that— 

16 ‘‘(I) explains that the annuity 

17 equivalent is only provided as an illus18 tration; 

19 ‘‘(II) explains that the actual an20 nuity payments that may be pur21 chased with the total benefits accrued 

22 will depend on numerous factors and 

23 may vary substantially from the annu24 ity equivalent in the disclosures; 


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1 ‘‘(III) explains the assumptions 

2 upon which the annuity equivalent 

3 was determined; and 

4 ‘‘(IV) provides such other similar 

5 explanations as the Secretary con6 siders appropriate. 

7 ‘‘(iii) ASSUMPTIONS AND RULES.— 

8 Not later than 1 year after the date of the 

9 enactment of the Lifetime Income Disclo10 sure Act, the Secretary shall— 

11 ‘‘(I) prescribe assumptions that 

12 administrators of individual account 

13 plans may use in converting total ac14 crued benefits into annuity equiva15 lents for purposes of this subpara16 graph; and 

17 ‘‘(II) issue interim final rules 

18 under clause (i). 

19 In prescribing assumptions under sub20 clause (I), the Secretary may prescribe a 

21 single set of specific assumptions (in which 

22 case the Secretary may issue tables or fac23 tors that facilitate such conversions), or 

24 ranges of permissible assumptions. To the 

25 extent that an accrued benefit is or may be 


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1 invested in an annuity contract, the as2 sumptions prescribed under subclause (I) 

3 shall, to the extent appropriate, permit ad4 ministrators of individual account plans to 

5 use the amounts payable under such con6 tract as an annuity equivalent. 

7 ‘‘(iv) LIMITATION ON LIABILITY.—No 

8 plan fiduciary, plan sponsor, or other per9 son shall have any liability under this title 

10 solely by reason of the provision of annuity 

11 equivalents which are derived in accord12 ance with the assumptions and rules de13 scribed in clause (iii) and which include the 

14 explanations contained in the model life15 time income disclosure described in clause 

16 (ii). This clause shall apply without regard 

17 to whether the provision of such annuity 

18 equivalent is required by subparagraph 

19 (B)(iii). 

20 ‘‘(v) EFFECTIVE DATE.—The require21 ment in subparagraph (B)(iii) shall apply 

22 to pension benefit statements furnished 

23 more than 12 months after the latest of 

24 the issuance by the Secretary of— 


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1 ‘‘(I) interim final rules under 

2 clause (i); 

3 ‘‘(II) the model disclosure under 

4 clause (ii); or 

5 ‘‘(III) the assumptions under 

6 clause (iii).’’. 

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

8 this section shall take effect on the date of the enactment 

9 of this Act. 

Æ 


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