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[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5381 Introduced in House (IH)]

113th CONGRESS
  2d Session
                                H. R. 5381

To amend the nondiscrimination provisions of the Internal Revenue Code 
         of 1986 to protect older, longer service participants.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             July 31, 2014

 Mr. Tiberi (for himself and Mr. Neal) introduced the following bill; 
         which was referred to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL

 
To amend the nondiscrimination provisions of the Internal Revenue Code 
         of 1986 to protect older, longer service participants.

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

SECTION 1. PROTECTING OLDER, LONGER SERVICE PARTICIPANTS.

    (a) In General.--Paragraph (4) of section 401(a) of the Internal 
Revenue Code of 1986 is amended to read as follows:
            ``(4) Nondiscrimination.--
                    ``(A) In general.--A trust shall not constitute a 
                qualified trust under this section unless the 
                contributions or benefits provided under the plan do 
                not discriminate in favor of highly compensated 
                employees (within the meaning of section 414(q)). For 
                purposes of this paragraph, there shall be excluded 
                from consideration employees described in section 
                410(b)(3) (A) and (C).
                    ``(B) Protection of older, longer service 
                participants.--
                            ``(i)(I) A defined benefit plan described 
                        in subclause (II) shall not fail to satisfy 
                        this paragraph with respect to plan benefits, 
                        rights, or features by reason of--
                                    ``(aa) the composition of the 
                                closed class of participants described 
                                in subclause (II), or
                                    ``(bb) the benefits, rights, or 
                                features provided to such closed class.
                            ``(II) A plan is described in this 
                        subclause if--
                                    ``(aa) the plan provides benefits, 
                                rights, or features to a closed class 
                                of participants,
                                    ``(bb) such closed class and such 
                                benefits, rights, and features satisfy 
                                the requirements of subparagraph (A) 
                                (without regard to this clause) as of 
                                the date that the class was closed, and
                                    ``(cc) after the date as of which 
                                the class was closed, any plan 
                                amendments that modify the closed class 
                                or the benefits, rights, and features 
                                provided to such closed class satisfy 
                                subparagraph (A) (without regard to 
                                this clause).
                        If a plan amendment causes a plan to cease to 
                        be described in this subclause (II) by reason 
                        of subclause (II)(cc), the plan is nevertheless 
                        described in this subclause (II) if such plan 
                        satisfies this subclause (II) (without regard 
                        to subclause (II)(cc)) as of the effective date 
                        of such amendment. In such cases, subclause 
                        (II)(bb) and (cc) shall subsequently be applied 
                        by reference to the effective date of the plan 
                        amendment, rather than by reference to the 
                        original date that the class was closed.
                            ``(ii)(I) A defined contribution plan 
                        described in subclause (II) shall be permitted 
                        to be tested on a benefits basis.
                            ``(II) A defined contribution plan is 
                        described in this subclause if--
                                    ``(aa) the plan provides make-whole 
                                contributions to a closed class of 
                                participants whose defined benefit plan 
                                accruals have been reduced or 
                                eliminated,
                                    ``(bb) such closed class of 
                                participants satisfies section 
                                410(b)(2)(A)(i) as of the date that the 
                                class of participants was closed, and
                                    ``(cc) after the date as of which 
                                the class was closed, any plan 
                                amendments that modify the closed class 
                                or the allocations, benefits, rights, 
                                and features provided to such closed 
                                class satisfy subparagraph (A) (without 
                                regard to this clause).
                        If a plan amendment causes a plan to cease to 
                        be described in this subclause (II) by reason 
                        of subclause (II)(cc), the plan is nevertheless 
                        described in this subclause (II) if such plan 
                        satisfies this subclause (II) (without regard 
                        to subclause (II)(cc)) as of the effective date 
                        of such amendment. In such cases, subclause 
                        (II)(bb) and (cc) shall subsequently be applied 
                        by reference to the effective date of the plan 
                        amendment, rather than by reference to the 
                        original date that the class was closed.
                            ``(III) In addition to other testing 
                        methodologies otherwise applicable, for 
                        purposes of determining compliance with this 
                        paragraph and with section 410(b) of the 
                        portion of one or more defined contribution 
                        plans described in subclause (II) that provide 
                        make-whole contributions, such portion of such 
                        plans may be aggregated and tested on a 
                        benefits basis with the portion of one or more 
                        defined contribution plans that--
                                    ``(aa) provides matching 
                                contributions (as defined in subsection 
                                (m)(4)(A)), or
                                    ``(bb) consists of an employee 
                                stock ownership plan within the meaning 
                                of section 4975(e)(7) or a tax credit 
                                employee stock ownership plan within 
                                the meaning of section 409(a).
                        For such purposes, matching contributions shall 
                        be treated in the same manner as employer 
                        contributions that are made without regard to 
                        whether an employee makes an elective 
                        contribution or employee contribution, 
                        including for purposes of applying the rules of 
                        subsection (l).
                    ``(C) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Make-whole contributions.--The term 
                        `make-whole contributions' means allocations 
                        for each employee in the class that are 
                        reasonably calculated, in a consistent manner, 
                        to replace some or all of the retirement 
                        benefits that the employee would have received 
                        under the defined benefit plan and any other 
                        plan or arrangement if the employee had 
                        continued to benefit at the same level under 
                        such defined benefit plan and such other plan 
                        or arrangement.
                            ``(ii) References to closed class of 
                        participants.--References to a closed class of 
                        participants and similar references to a closed 
                        class shall include arrangements under which 
                        one or more classes of participants are closed.
                    ``(D) Protecting grandfathered participants in 
                defined benefit plans.--
                            ``(i) One or more defined benefit plans 
                        described in clause (ii) shall be permitted to 
                        be tested on a benefits basis with one or more 
                        defined contribution plans.
                            ``(ii) A defined benefit plan is described 
                        in this clause if--
                                    ``(I) the plan provides benefits to 
                                a closed class of participants,
                                    ``(II) the plan and such benefits 
                                satisfy the requirements of 
                                subparagraph (A) (without regard to 
                                this subparagraph) as of the date the 
                                class was closed, and
                                    ``(III) after the date as of which 
                                the class was closed, any plan 
                                amendments that modify the closed class 
                                or the benefits provided to such closed 
                                class satisfy subparagraph (A) (without 
                                regard to this subparagraph).
                        If a plan amendment causes a plan to cease to 
                        be described in this clause (ii) by reason of 
                        subclause (III), the plan is nevertheless 
                        described in this clause (ii) if such plan 
                        satisfies this clause (ii) (without regard to 
                        subclause (III)) as of the effective date of 
                        such amendment. In such cases, subclauses (II) 
                        and (III) shall subsequently be applied by 
                        reference to the effective date of the plan 
                        amendment, rather than by reference to the 
                        original date that the class was closed.
                            ``(iii) In addition to other testing 
                        methodologies otherwise applicable, for 
                        purposes of determining compliance with this 
                        paragraph and with section 410(b) of one or 
                        more defined benefit plans described in clause 
                        (ii), such plans may be aggregated and tested 
                        on a benefits basis with the portion of one or 
                        more defined contribution plans that--
                                    ``(I) provides matching 
                                contributions (as defined in subsection 
                                (m)(4)(A)), or
                                    ``(II) consists of an employee 
                                stock ownership plan within the meaning 
                                of section 4975(e)(7) or a tax credit 
                                employee stock ownership plan within 
                                the meaning of section 409(a).
                        For such purposes, matching contributions shall 
                        be treated in the same manner as employer 
                        contributions that are made without regard to 
                        whether an employee makes an elective 
                        contribution or employee contribution, 
                        including for purposes of applying the rules of 
                        subsection (l).
                    ``(E) Rules.--The Secretary may prescribe rules 
                designed to prevent abuse of the plan designs otherwise 
                permitted by reason of subparagraphs (B) and (D). Such 
                rules shall be directed towards abuses under which the 
                defined benefit plan was established within a specified 
                period prior to the date that--
                            ``(i) the class of participants described 
                        in subparagraphs (B)(i)(II)(aa), 
                        (B)(ii)(II)(aa), and (D)(ii)(I) is closed, or
                            ``(ii) the defined benefit plan accruals 
                        have been reduced or eliminated, in the case of 
                        the make-whole contributions described in 
                        subparagraph (C).
                    ``(F) Transition rules.--Within one year after the 
                date of enactment of the Retirement Plan Simplification 
                and Enhancement Act of 2013, the Secretary shall 
                prescribe rules that facilitate the use of the 
                provisions of subparagraphs (B) and (D) without regard 
                to--
                            ``(i) whether the closing of the class of 
                        participants referred to in such subparagraphs 
                        occurred before or after such date of 
                        enactment, or
                            ``(ii) plan amendments that were adopted or 
                        effective before such date of enactment and 
                        that would not have been necessary if 
                        subparagraphs (B) and (D) had been in 
                        effect.''.
    (b) Participation Requirements.--Paragraph (26) of section 401(a) 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new subparagraph:
                    ``(I) Protected participants.--A plan described in 
                this subparagraph shall be deemed to satisfy the 
                requirements of subparagraph (A). A plan is described 
                in this paragraph if--
                            ``(i) the plan is amended to--
                                    ``(I) cease all benefit accruals, 
                                or
                                    ``(II) provide future benefit 
                                accruals only to a closed class of 
                                participants, and
                            ``(ii) the plan satisfies subparagraph (A) 
                        (without regard to this subparagraph) as of the 
                        effective date of the amendment.
                The Secretary may prescribe such rules as are necessary 
                or appropriate to fulfill the purposes of this 
                subparagraph, including prevention of abuse of this 
                subparagraph in the case of plans established within a 
                specific period prior to the effective date of the 
                amendment.''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of the enactment of this Act, without regard to 
whether any plan modifications referenced in such amendments are 
adopted or effective before, on, or after such date of enactment.
                                 <all>
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