IB

Union Calendar No. 33

107TH CONGRESS

1ST SESSION H. R. 10

[Report No. 107–51, Parts I and II]

To provide for pension reform, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 14, 2001

Mr. PORTMAN (for himself, Mr. CARDIN, Mr. ARMEY, Mr. FROST, Mr.

BOEHNER, Mr. ANDREWS, Mr. BLUNT, Mr. BENTSEN, Mr. GALLEGLY,

Mr. MOORE, Mr. HOUGHTON, Mr. COYNE, Mr. SAM JOHNSON of Texas,

Mr. POMEROY, Mrs. JOHNSON of Connecticut, Mr. MANZULLO, Mrs.

MORELLA, Mr. WELLER, Mr. WYNN, Mr. AKIN, Mr. BACA, Mr. BACHUS,

Mr. BAIRD, Mr. BAKER, Mr. BALDACCI, Mr. BALLENGER, Mr. BARCIA,

Mr. BARRETT, Mr. BASS, Mr. BEREUTER, Ms. BERKLEY, Mrs. BIGGERT,

Mr. BLAGOJEVICH, Mr. BLUMENAUER, Mr. BORSKI, Mr. BOSWELL, Mrs.

BONO, Mr. BRADY of Texas, Mr. BRADY of Pennsylvania, Mr. BRYANT,

Mr. BURR of North Carolina, Mr. BUYER, Mr. CALVERT, Mr. CAMP, Mr.

CANTOR, Mrs. CAPITO, Mrs. CAPPS, Mr. CAPUANO, Mr. CHABOT, Mr.

CLAY, Mr. CLEMENT, Mr. COBLE, Mr. COLLINS, Mr. CONDIT, Mr.

COOKSEY, Mr. COX, Mr. CRANE, Mr. CRENSHAW, Mr. CROWLEY, Mr.

CULBERSON, Mr. CUNNINGHAM, Mrs. JO ANN DAVIS of Virginia, Mr.

DELAHUNT, Mr. DEMINT, Mr. DEUTSCH, Mr. DIAZ-BALART, Mr.

DOOLEY of California, Mr. DOYLE, Mr. DREIER, Ms. DUNN, Mr. EHRLICH, Mrs. EMERSON, Mr. ENGEL, Mr. ENGLISH, Ms. ESHOO, Mr.

ETHERIDGE, Mr. EVANS, Mr. FALEOMAVAEGA, Mr. FERGUSON, Mr. FILNER, Mr. FLETCHER, Mr. FOLEY, Mr. FORD, Mr. FOSSELLA, Mr.

FRELINGHUYSEN, Mr. GANSKE, Mr. GIBBONS, Mr. GILCHREST, Mr.

GILLMOR, Mr. GOSS, Mr. GONZALEZ, Mr. GOODE, Mr. GOODLATTE, Mr.

GORDON, Ms. GRANGER, Mr. GRAVES, Mr. GREEN of Texas, Mr. GREEN

of Wisconsin, Mr. GREENWOOD, Mr. HALL of Texas, Mr. HALL of Ohio,

Ms. HART, Mr. HASTINGS of Washington, Mr. HAYES, Mr. HAYWORTH,

Mr. HEFLEY, Mr. HERGER, Mr. HILL, Mr. HILLEARY, Mr. HOBSON, Mr.

HOLDEN, Ms. HOOLEY of Oregon, Mr. HORN, Mr. HOYER, Mr.

HULSHOF, Mr. HOLT, Mr. HUTCHINSON, Mr. HYDE, Mr. ISAKSON, Mr.

ISTOOK, Mr. JEFFERSON, Mrs. JONES of Ohio, Mr. JONES of North

Carolina, Mr. KANJORSKI, Mrs. KELLY, Mr. KENNEDY of Rhode Island,
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Mr. KILDEE, Mr. KIND, Mr. KING, Mr. KINGSTON, Mr. KIRK, Mr.

KLECZKA, Mr. KNOLLENBERG, Mr. KOLBE, Mr. KUCINICH, Mr.

LAHOOD, Mr. LAMPSON, Mr. LANGEVIN, Mr. LANTOS, Mr. LARGENT,

Mr. LARSEN of Washington, Mr. LARSON of Connecticut, Mr. LATHAM,

Mr. LATOURETTE, Mr. LEACH, Mr. LEWIS of Kentucky, Mr. LOBIONDO,

Ms. LOFGREN, Mrs. LOWEY, Mr. LUCAS of Oklahoma, Mr. LUCAS of

Kentucky, Mrs. MALONEY of New York, Mr. MALONEY of Connecticut,

Mr. MASCARA, Mr. MATHESON, Mrs. MCCARTHY of New York, Ms.

MCCARTHY of Missouri, Mr. MCCRERY, Mr. MCGOVERN, Mr. MCHUGH,

Mr. MCINNIS, Mr. MCINTYRE, Mr. MCKEON, Mr. MCNULTY, Mr. MEEHAN, Mr. MENENDEZ, Ms. MILLENDER-MCDONALD, Mr. GARY MILLER

of California, Mrs. MINK of Hawaii, Mr. MORAN of Kansas, Mrs.

MYRICK, Mr. NADLER, Mr. NETHERCUTT, Mr. NEY, Mrs. NORTHUP, Mr.

NORWOOD, Mr. NUSSLE, Mr. OSBORNE, Mr. OTTER, Mr. OXLEY, Mr.

PALLONE, Mr. PASCRELL, Mr. PASTOR, Mr. PAUL, Mr. PAYNE, Mr.

PENCE, Mr. PETERSON of Pennsylvania, Mr. PETRI, Mr. PLATTS, Ms.

PRYCE of Ohio, Mr. PUTNAM, Mr. QUINN, Mr. RAHALL, Mr. RAMSTAD,

Mr. REGULA, Mr. REYNOLDS, Mr. RILEY, Mr. ROEMER, Mr. ROGERS of

Michigan, Mrs. ROUKEMA, Mr. ROTHMAN, Mr. ROYCE, Mr. RYAN of Wisconsin, Mr. RYUN of Kansas, Mr. SANDLIN, Mr. SAWYER, Mr. SAXTON,

Ms. SCHAKOWSKY, Mr. SCARBOROUGH, Mr. SCHAFFER, Mr. SCHROCK,

Mr. SESSIONS, Mr. SHADEGG, Mr. SHAW, Mr. SHAYS, Mr. SHERMAN,

Mr. SHERWOOD, Mr. SHOWS, Mr. SIMMONS, Mr. SIMPSON, Mr. SKELTON, Mr. SMITH of Washington, Mr. SMITH of New Jersey, Mr. SMITH

of Texas, Mr. SNYDER, Mr. SOUDER, Mr. SPRATT, Mr. STEARNS, Mr.

STRICKLAND, Mr. STUPAK, Mr. SUNUNU, Mr. SWEENEY, Mr. TANCREDO,

Mr. TANNER, Mrs. TAUSCHER, Mr. TAYLOR of North Carolina, Mr.

TERRY, Mr. THOMPSON of Mississippi, Mr. THOMPSON of California, Mr.

THUNE, Mrs. THURMAN, Mr. TIBERI, Mr. TRAFICANT, Mr. TOOMEY, Mr.

TURNER, Mr. UDALL of Colorado, Mr. UDALL of New Mexico, Mr.

UPTON, Mr. WALDEN of Oregon, Mr. WALSH, Mr. WAMP, Mr. WATKINS,

Mr. WATTS of Oklahoma, Mr. WEINER, Mr. WELDON of Florida, Mr.

WHITFIELD, Mr. WOLF, Ms. WOOLSEY, Mr. WU, and Mr. YOUNG of

Alaska) 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

MAY 1, 2001

Additional sponsors: Mr. WELDON of Pennsylvania, Mr. FATTAH, Mr. FLAKE,

Mr. BARR of Georgia, Mr. ROGERS of Kentucky, Mr. SKEEN, Mr. FARR

of California, Mr. INSLEE, Mr. TIAHRT, Mr. JENKINS, Mr. BARTLETT of

Maryland, Mr. DEAL of Georgia, Mr. COSTELLO, Ms. DELAURO, Ms.

HARMAN, Ms. MCKINNEY, Mr. RUSH, Mr. BOUCHER, Mr. BURTON of Indiana, Mr. DAVIS of Illinois, Mr. SCHIFF, Mr. GEKAS, Ms. BALDWIN, Mr.

ISRAEL, Mr. GUTIERREZ, Mr. DOOLITTLE, Ms. CARSON of Indiana, Mr.

WICKER, Mr. HOSTETTLER, Mr. SHIMKUS, Mr. PETERSON of Minnesota,

Mr. HANSEN, Mrs. CLAYTON, Mr. TIERNEY, Mr. ABERCROMBIE, Mr.

GRUCCI, Mr. GILMAN, Ms. MCCOLLUM, Ms. ROS-LEHTINEN, Mr.

REHBERG, Mrs. NAPOLITANO, Mr. JOHNSON of Illinois, Mr. PITTS, Mr.
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DELAY, Mrs. CUBIN, Ms. SANCHEZ, Mr. THOMAS, Mr. ADERHOLT, Mr.

KERNS, Mr. TOM DAVIS of Virginia, Mr. VITTER, Mr. REYES, Mr.

BROWN of South Carolina, Mr. MORAN of Virginia, and Mr. BROWN of

Ohio

MAY 1, 2001

Reported from the Committee on Ways and Means with an amendment

[Strike out all after the enacting clause and insert the part printed in italic]

Reported from the Committee on Education and the Workforce with an

amendment, committed to the Committee of the Whole House on the

State of the Union, and ordered to be printed

[Strike out all after the enacting clause and insert the part printed in boldface roman]

[For text of introduced bill, see copy of bill as introduced on March 14, 2001]

A BILL

To provide for pension reform, 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; REFERENCES; TABLE OF CON4 TENTS.

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

6 ‘‘Comprehensive Retirement Security and Pension Reform

7 Act of 2001’’.

8 (b) AMENDMENT OF 1986 CODE.—Except as otherwise

9 expressly provided, whenever in this Act an amendment or

10 repeal is expressed in terms of an amendment to, or repeal

11 of, a section or other provision, the reference shall be consid12 ered to be made to a section or other provision of the Inter13 nal Revenue Code of 1986.
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1 (c) TABLE OF CONTENTS.—The table of contents of this

2 Act is as follows:

Sec. 1. Short title; references; table of contents.

TITLE I—INDIVIDUAL RETIREMENT ACCOUNT PROVISIONS

Sec. 101. Modification of IRA contribution limits.

TITLE II—EXPANDING COVERAGE

Sec. 201. Increase in benefit and contribution limits.

Sec. 202. Plan loans for subchapter S owners, partners, and sole proprietors.

Sec. 203. Modification of top-heavy rules.

Sec. 204. Elective deferrals not taken into account for purposes of deduction limits.

Sec. 205. Repeal of coordination requirements for deferred compensation plans of

State and local governments and tax-exempt organizations.

Sec. 206. Elimination of user fee for requests to IRS regarding pension plans.

Sec. 207. Deduction limits.

Sec. 208. Option to treat elective deferrals as after-tax contributions.

Sec. 209. Availability of qualified plans to self-employed individuals who are exempt from the self-employment tax by reason of their religious

beliefs.

Sec. 210. Certain nonresident aliens excluded in applying minimum coverage requirements.

TITLE III—ENHANCING FAIRNESS FOR WOMEN

Sec. 301. Catch-up contributions for individuals age 50 or over.

Sec. 302. Equitable treatment for contributions of employees to defined contribution plans.

Sec. 303. Faster vesting of certain employer matching contributions.

Sec. 304. Modifications to minimum distribution rules.

Sec. 305. Clarification of tax treatment of division of section 457 plan benefits

upon divorce.

Sec. 306. Provisions relating to hardship distributions.

Sec. 307. Waiver of tax on nondeductible contributions for domestic or similar

workers.

TITLE IV—INCREASING PORTABILITY FOR PARTICIPANTS

Sec. 401. Rollovers allowed among various types of plans.

Sec. 402. Rollovers of IRAs into workplace retirement plans.

Sec. 403. Rollovers of after-tax contributions.

Sec. 404. Hardship exception to 60-day rule.

Sec. 405. Treatment of forms of distribution.

Sec. 406. Rationalization of restrictions on distributions.

Sec. 407. Purchase of service credit in governmental defined benefit plans.

Sec. 408. Employers may disregard rollovers for purposes of cash-out amounts.

Sec. 409. Minimum distribution and inclusion requirements for section 457

plans.
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TITLE V—STRENGTHENING PENSION SECURITY AND

ENFORCEMENT

Sec. 501. Repeal of percent of current liability funding limit.

Sec. 502. Maximum contribution deduction rules modified and applied to all defined benefit plans.

Sec. 503. Excise tax relief for sound pension funding.

Sec. 504. Excise tax on failure to provide notice by defined benefit plans significantly reducing future benefit accruals.

Sec. 505. Treatment of multiemployer plans under section 415.

Sec. 506. Protection of investment of employee contributions to 401(k) plans.

Sec. 507. Periodic pension benefits statements.

Sec. 508. Prohibited allocations of stock in S corporation ESOP.

TITLE VI—REDUCING REGULATORY BURDENS

Sec. 601. Modification of timing of plan valuations.

Sec. 602. ESOP dividends may be reinvested without loss of dividend deduction.

Sec. 603. Repeal of transition rule relating to certain highly compensated employees.

Sec. 604. Employees of tax-exempt entities.

Sec. 605. Clarification of treatment of employer-provided retirement advice.

Sec. 606. Reporting simplification.

Sec. 607. Improvement of employee plans compliance resolution system.

Sec. 608. Repeal of the multiple use test.

Sec. 609. Flexibility in nondiscrimination, coverage, and line of business rules.

Sec. 610. Extension to all governmental plans of moratorium on application of

certain nondiscrimination rules applicable to State and local

plans.

Sec. 611. Notice and consent period regarding distributions.

Sec. 612. Annual report dissemination.

Sec. 613. Technical corrections to SAVER Act.

TITLE VII—OTHER ERISA PROVISIONS

Sec. 701. Missing participants.

Sec. 702. Reduced PBGC premium for new plans of small employers.

Sec. 703. Reduction of additional PBGC premium for new and small plans.

Sec. 704. Authorization for PBGC to pay interest on premium overpayment refunds.

Sec. 705. Substantial owner benefits in terminated plans.

Sec. 706. Civil penalties for breach of fiduciary responsibility.

Sec. 707. Benefit suspension notice.

TITLE VIII—PLAN AMENDMENTS

Sec. 801. Provisions relating to plan amendments.

1 TITLE I—INDIVIDUAL

2 RETIREMENT ACCOUNTS

3 SEC. 101. MODIFICATION OF IRA CONTRIBUTION LIMITS.

4 (a) INCREASE IN CONTRIBUTION LIMIT.—
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1 (1) IN GENERAL.—Paragraph (1)(A) of section

2 219(b) (relating to maximum amount of deduction) is

3 amended by striking ‘‘$2,000’’ and inserting ‘‘the de4 ductible amount’’.

5 (2) DEDUCTIBLE AMOUNT.—Section 219(b) is

6 amended by adding at the end the following new

7 paragraph:

8 ‘‘(5) DEDUCTIBLE AMOUNT.—For purposes of

9 paragraph (1)(A)—

10 ‘‘(A) IN GENERAL.—The deductible amount

11 shall be determined in accordance with the fol12 lowing table:

‘‘For taxable years The deductible

beginning in: amount is:

2002 .................................................................................... $3,000

2003 .................................................................................... $4,000

2004 and thereafter ........................................................... $5,000.

13 ‘‘(B) CATCH-UP CONTRIBUTIONS FOR INDI14 VIDUALS 50 OR OLDER.—In the case of an indi15 vidual who has attained the age of 50 before the

16 close of the taxable year, the deductible amount

17 for taxable years beginning in 2002 or 2003

18 shall be $5,000.

19 ‘‘(C) COST-OF-LIVING ADJUSTMENT.—

20 ‘‘(i) IN GENERAL.—In the case of any

21 taxable year beginning in a calendar year

22 after 2004, the $5,000 amount under sub-
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1 paragraph (A) shall be increased by an

2 amount equal to—

3 ‘‘(I) such dollar amount, multi4 plied by

5 ‘‘(II) the cost-of-living adjustment

6 determined under section 1(f )(3) for

7 the calendar year in which the taxable

8 year begins, determined by substituting

9 ‘calendar year 2003’ for ‘calendar year

10 1992’ in subparagraph (B) thereof.

11 ‘‘(ii) ROUNDING RULES.—If any

12 amount after adjustment under clause (i) is

13 not a multiple of $500, such amount shall

14 be rounded to the next lower multiple of

15 $500.’’.

16 (b) CONFORMING AMENDMENTS.—

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

18 excess of $2,000 on behalf of any individual’’ and in19 serting ‘‘on behalf of any individual in excess of the

20 amount in effect for such taxable year under section

21 219(b)(1)(A)’’.

22 (2) Section 408(b)(2)(B) is amended by striking

23 ‘‘$2,000’’ and inserting ‘‘the dollar amount in effect

24 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 (c) EFFECTIVE DATE.—The amendments made by this

11 section shall apply to taxable years beginning after Decem12 ber 31, 2001.

13 TITLE II—EXPANDING

14 COVERAGE

15 SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION

16 LIMITS.

17 (a) DEFINED BENEFIT PLANS.—

18 (1) DOLLAR LIMIT.—

19 (A) Subparagraph (A) of section 415(b)(1)

20 (relating to limitation for defined benefit plans)

21 is amended by striking ‘‘$90,000’’ and inserting

22 ‘‘$160,000’’.

23 (B) Subparagraphs (C) and (D) of section

24 415(b)(2) are each amended by striking
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1 ‘‘$90,000’’ each place it appears in the headings

2 and the text and inserting ‘‘$160,000’’.

3 (C) Paragraph (7) of section 415(b) (relat4 ing to benefits under certain collectively bar5 gained plans) is amended by striking ‘‘the great6 er of $68,212 or one-half the amount otherwise

7 applicable for such year under paragraph (1)(A)

8 for ‘$90,000’ ’’ and inserting ‘‘one-half the

9 amount otherwise applicable for such year under

10 paragraph (1)(A) for ‘$160,000’ ’’.

11 (2) LIMIT REDUCED WHEN BENEFIT BEGINS BE12 FORE AGE 62.—Subparagraph (C) of section 415(b)(2)

13 is amended by striking ‘‘the social security retirement

14 age’’ each place it appears in the heading and text

15 and inserting ‘‘age 62’’ and by striking the second

16 sentence.

17 (3) LIMIT INCREASED WHEN BENEFIT BEGINS

18 AFTER AGE 65.—Subparagraph (D) of section

19 415(b)(2) is amended by striking ‘‘the social security

20 retirement age’’ each place it appears in the heading

21 and text and inserting ‘‘age 65’’.

22 (4) COST-OF-LIVING ADJUSTMENTS.—Subsection

23 (d) of section 415 (related to cost-of-living adjust24 ments) is amended—
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1 (A) by striking ‘‘$90,000’’ in paragraph

2 (1)(A) and inserting ‘‘$160,000’’; and

3 (B) in paragraph (3)(A)—

4 (i) by striking ‘‘$90,000’’ in the head5 ing and inserting ‘‘$160,000’’; and

6 (ii) by striking ‘‘October 1, 1986’’ and

7 inserting ‘‘July 1, 2001’’.

8 (5) CONFORMING AMENDMENTS.—

9 (A) Section 415(b)(2) is amended by strik10 ing subparagraph (F).

11 (B) Section 415(b)(9) is amended to read as

12 follows:

13 ‘‘(9) SPECIAL RULE FOR COMMERCIAL AIRLINE

14 PILOTS.—

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

16 subparagraph (B), in the case of any participant

17 who is a commercial airline pilot, if, as of the

18 time of the participant’s retirement, regulations

19 prescribed by the Federal Aviation Administra20 tion require an individual to separate from serv21 ice as a commercial airline pilot after attaining

22 any age occurring on or after age 60 and before

23 age 62, paragraph (2)(C) shall be applied by

24 substituting such age for age 62.
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1 ‘‘(B) INDIVIDUALS WHO SEPARATE FROM

2 SERVICE BEFORE AGE 60.—If a participant de3 scribed in subparagraph (A) separates from serv4 ice before age 60, the rules of paragraph (2)(C)

5 shall apply.’’.

6 (C) Section 415(b)(10)(C)(i) is amended by

7 striking ‘‘applied without regard to paragraph

8 (2)(F)’’.

9 (b) DEFINED CONTRIBUTION PLANS.—

10 (1) DOLLAR LIMIT.—Subparagraph (A) of sec11 tion 415(c)(1) (relating to limitation for defined con12 tribution plans) is amended by striking ‘‘$30,000’’

13 and inserting ‘‘$40,000’’.

14 (2) COST-OF-LIVING ADJUSTMENTS.—Subsection

15 (d) of section 415 (related to cost-of-living adjust16 ments) is amended—

17 (A) by striking ‘‘$30,000’’ in paragraph

18 (1)(C) and inserting ‘‘$40,000’’; and

19 (B) in paragraph (3)(D)—

20 (i) by striking ‘‘$30,000’’ in the head21 ing and inserting ‘‘$40,000’’; and

22 (ii) by striking ‘‘October 1, 1993’’ and

23 inserting ‘‘July 1, 2001’’.

24 (c) QUALIFIED TRUSTS.—
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1 (1) COMPENSATION LIMIT.—Sections 401(a)(17),

2 404(l), 408(k), and 505(b)(7) are each amended by

3 striking ‘‘$150,000’’ each place it appears and insert4 ing ‘‘$200,000’’.

5 (2) BASE PERIOD AND ROUNDING OF COST-OF6 LIVING ADJUSTMENT.—Subparagraph (B) of section

7 401(a)(17) is amended—

8 (A) by striking ‘‘October 1, 1993’’ and in9 serting ‘‘July 1, 2001’’; and

10 (B) by striking ‘‘$10,000’’ both places it ap11 pears and inserting ‘‘$5,000’’.

12 (d) ELECTIVE DEFERRALS.—

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

14 402(g) (relating to limitation on exclusion for elective

15 deferrals) is amended to read as follows:

16 ‘‘(1) IN GENERAL.—

17 ‘‘(A) LIMITATION.—Notwithstanding sub18 sections (e)(3) and (h)(1)(B), the elective defer19 rals of any individual for any taxable year shall

20 be included in such individual’s gross income to

21 the extent the amount of such deferrals for the

22 taxable year exceeds the applicable dollar

23 amount.

24 ‘‘(B) APPLICABLE DOLLAR AMOUNT.—For

25 purposes of subparagraph (A), the applicable
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1 dollar amount shall be the amount determined in

2 accordance with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2002 .................................................................................... $11,000

2003 .................................................................................... $12,000

2004 .................................................................................... $13,000

2005 .................................................................................... $14,000

2006 or thereafter .............................................................. $15,000.’’.

3 (2) COST-OF-LIVING ADJUSTMENT.—Paragraph

4 (5) of section 402(g) is amended to read as follows:

5 ‘‘(5) COST-OF-LIVING ADJUSTMENT.—In the case

6 of taxable years beginning after December 31, 2006,

7 the Secretary shall adjust the $15,000 amount under

8 paragraph (1)(B) at the same time and in the same

9 manner as under section 415(d), except that the base

10 period shall be the calendar quarter beginning July 1,

11 2005, and any increase under this paragraph which

12 is not a multiple of $500 shall be rounded to the next

13 lowest multiple of $500.’’.

14 (3) CONFORMING AMENDMENTS.—

15 (A) Section 402(g) (relating to limitation

16 on exclusion for elective deferrals), as amended

17 by paragraphs (1) and (2), is further amended

18 by striking paragraph (4) and redesignating

19 paragraphs (5), (6), (7), (8), and (9) as para20 graphs (4), (5), (6), (7), and (8), respectively.
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1 (B) Paragraph (2) of section 457(c) is

2 amended by striking ‘‘402(g)(8)(A)(iii)’’ and in3 serting ‘‘402(g)(7)(A)(iii)’’.

4 (C) Clause (iii) of section 501(c)(18)(D) is

5 amended by striking ‘‘(other than paragraph (4)

6 thereof)’’.

7 (e) DEFERRED COMPENSATION PLANS OF STATE AND

8 LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANIZA9 TIONS.—

10 (1) IN GENERAL.—Section 457 (relating to de11 ferred compensation plans of State and local govern12 ments and tax-exempt organizations) is amended—

13 (A) in subsections (b)(2)(A) and (c)(1) by

14 striking ‘‘$7,500’’ each place it appears and in15 serting ‘‘the applicable dollar amount’’; and

16 (B) in subsection (b)(3)(A) by striking

17 ‘‘$15,000’’ and inserting ‘‘twice the dollar

18 amount in effect under subsection (b)(2)(A)’’.

19 (2) APPLICABLE DOLLAR AMOUNT; COST-OF-LIV20 ING ADJUSTMENT.—Paragraph (15) of section 457(e)

21 is amended to read as follows:

22 ‘‘(15) APPLICABLE DOLLAR AMOUNT.—

23 ‘‘(A) IN GENERAL.—The applicable dollar

24 amount shall be the amount determined in ac25 cordance with the following table:
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‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2002 .................................................................................... $11,000

2003 .................................................................................... $12,000

2004 .................................................................................... $13,000

2005 .................................................................................... $14,000

2006 or thereafter .............................................................. $15,000.

1 ‘‘(B) COST-OF-LIVING ADJUSTMENTS.—In

2 the case of taxable years beginning after Decem3 ber 31, 2006, the Secretary shall adjust the

4 $15,000 amount under subparagraph (A) at the

5 same time and in the same manner as under sec6 tion 415(d), except that the base period shall be

7 the calendar quarter beginning July 1, 2005,

8 and any increase under this paragraph which is

9 not a multiple of $500 shall be rounded to the

10 next lowest multiple of $500.’’.

11 (f) SIMPLE RETIREMENT ACCOUNTS.—

12 (1) LIMITATION.—Clause (ii) of section

13 408(p)(2)(A) (relating to general rule for qualified

14 salary reduction arrangement) is amended by striking

15 ‘‘$6,000’’ and inserting ‘‘the applicable dollar

16 amount’’.

17 (2) APPLICABLE DOLLAR AMOUNT.—Subpara18 graph (E) of 408(p)(2) is amended to read as follows:

19 ‘‘(E) APPLICABLE DOLLAR AMOUNT; COST20 OF-LIVING ADJUSTMENT.—
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1 ‘‘(i) IN GENERAL.—For purposes of

2 subparagraph (A)(ii), the applicable dollar

3 amount shall be the amount determined in

4 accordance with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2002 ............................................................................ $7,000

2003 ............................................................................ $8,000

2004 ............................................................................ $9,000

2005 or thereafter ...................................................... $10,000.

5 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

6 In the case of a year beginning after Decem7 ber 31, 2005, the Secretary shall adjust the

8 $10,000 amount under clause (i) at the

9 same time and in the same manner as

10 under section 415(d), except that the base

11 period taken into account shall be the cal12 endar quarter beginning July 1, 2004, and

13 any increase under this subparagraph

14 which is not a multiple of $500 shall be

15 rounded to the next lower multiple of

16 $500.’’.

17 (3) CONFORMING AMENDMENTS.—

18 (A) Subclause (I) of section

19 401(k)(11)(B)(i) is amended by striking

20 ‘‘$6,000’’ and inserting ‘‘the amount in effect

21 under section 408(p)(2)(A)(ii)’’.
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1 (B) Section 401(k)(11) is amended by strik2 ing subparagraph (E).

3 (g) ROUNDING RULE RELATING TO DEFINED BENEFIT

4 PLANS AND DEFINED CONTRIBUTION PLANS.—Paragraph

5 (4) of section 415(d) is amended to read as follows:

6 ‘‘(4) ROUNDING.—

7 ‘‘(A) $160,000 AMOUNT.—Any increase

8 under subparagraph (A) of paragraph (1) which

9 is not a multiple of $5,000 shall be rounded to

10 the next lowest multiple of $5,000.

11 ‘‘(B) $40,000 AMOUNT.—Any increase

12 under subparagraph (C) of paragraph (1) which

13 is not a multiple of $1,000 shall be rounded to

14 the next lowest multiple of $1,000.’’.

15 (h) EFFECTIVE DATE.—The amendments made by this

16 section shall apply to years beginning after December 31,

17 2001.

18 SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART19 NERS, AND SOLE PROPRIETORS.

20 (a) AMENDMENT OF INTERNAL REVENUE CODE.—

21 Subparagraph (B) of section 4975(f)(6) (relating to exemp22 tions not to apply to certain transactions) is amended by

23 adding at the end the following new clause:

24 ‘‘(iii) LOAN EXCEPTION.—For purposes

25 of subparagraph (A)(i), the term ‘owner-em-
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1 ployee’ shall only include a person described

2 in subclause (II) or (III) of clause (i).’’.

3 (b) AMENDMENT OF ERISA.—Section 408(d)(2) of the

4 Employee Retirement Income Security Act of 1974 (29

5 U.S.C. 1108(d)(2)) is amended by adding at the end the

6 following new subparagraph:

7 ‘‘(C) For purposes of paragraph (1)(A), the term

8 ‘owner-employee’ shall only include a person described in

9 clause (ii) or (iii) of subparagraph (A).’’.

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

11 section shall apply to years beginning after December 31,

12 2001.

13 SEC. 203. MODIFICATION OF TOP-HEAVY RULES.

14 (a) SIMPLIFICATION OF DEFINITION OF KEY EM15 PLOYEE.—

16 (1) IN GENERAL.—Section 416(i)(1)(A) (defining

17 key employee) is amended—

18 (A) by striking ‘‘or any of the 4 preceding

19 plan years’’ in the matter preceding clause (i);

20 (B) by striking clause (i) and inserting the

21 following:

22 ‘‘(i) an officer of the employer having

23 an annual compensation greater than

24 $150,000,’’;
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1 (C) by striking clause (ii) and redesig2 nating clauses (iii) and (iv) as clauses (ii) and

3 (iii), respectively; and

4 (D) by striking the second sentence in the

5 matter following clause (iii), as redesignated by

6 subparagraph (C).

7 (2) CONFORMING AMENDMENT.—Section

8 416(i)(1)(B)(iii) is amended by striking ‘‘and sub9 paragraph (A)(ii)’’.

10 (b) MATCHING CONTRIBUTIONS TAKEN INTO ACCOUNT

11 FOR MINIMUM CONTRIBUTION REQUIREMENTS.—Section

12 416(c)(2)(A) (relating to defined contribution plans) is

13 amended by adding at the end the following: ‘‘Employer

14 matching contributions (as defined in section

15 401(m)(4)(A)) shall be taken into account for purposes of

16 this subparagraph.’’.

17 (c) DISTRIBUTIONS DURING LAST YEAR BEFORE DE18 TERMINATION DATE TAKEN INTO ACCOUNT.—

19 (1) IN GENERAL.—Paragraph (3) of section

20 416(g) is amended to read as follows:

21 ‘‘(3) DISTRIBUTIONS DURING LAST YEAR BEFORE

22 DETERMINATION DATE TAKEN INTO ACCOUNT.—

23 ‘‘(A) IN GENERAL.—For purposes of

24 determining—
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1 ‘‘(i) the present value of the cumulative

2 accrued benefit for any employee, or

3 ‘‘(ii) the amount of the account of any

4 employee,

5 such present value or amount shall be increased

6 by the aggregate distributions made with respect

7 to such employee under the plan during the 1-

8 year period ending on the determination date.

9 The preceding sentence shall also apply to dis10 tributions under a terminated plan which if it

11 had not been terminated would have been re12 quired to be included in an aggregation group.

13 ‘‘(B) 5-YEAR PERIOD IN CASE OF IN-SERV14 ICE DISTRIBUTION.—In the case of any distribu15 tion made for a reason other than separation

16 from service, death, or disability, subparagraph

17 (A) shall be applied by substituting ‘5-year pe18 riod’ for ‘1-year period’.’’.

19 (2) BENEFITS NOT TAKEN INTO ACCOUNT.—Sub20 paragraph (E) of section 416(g)(4) is amended—

21 (A) by striking ‘‘LAST 5 YEARS’’ in the

22 heading and inserting ‘‘LAST YEAR BEFORE DE23 TERMINATION DATE’’; and

24 (B) by striking ‘‘5-year period’’ and insert25 ing ‘‘1-year period’’.
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1 (d) DEFINITION OF TOP-HEAVY PLANS.—Paragraph

2 (4) of section 416(g) (relating to other special rules for top3 heavy plans) is amended by adding at the end the following

4 new subparagraph:

5 ‘‘(H) CASH OR DEFERRED ARRANGEMENTS

6 USING ALTERNATIVE METHODS OF MEETING NON7 DISCRIMINATION REQUIREMENTS.—The term

8 ‘top-heavy plan’ shall not include a plan which

9 consists solely of—

10 ‘‘(i) a cash or deferred arrangement

11 which meets the requirements of section

12 401(k)(12), and

13 ‘‘(ii) matching contributions with re14 spect to which the requirements of section

15 401(m)(11) are met.

16 If, but for this subparagraph, a plan would be

17 treated as a top-heavy plan because it is a mem18 ber of an aggregation group which is a top-heavy

19 group, contributions under the plan may be

20 taken into account in determining whether any

21 other plan in the group meets the requirements

22 of subsection (c)(2).’’.

23 (e) FROZEN PLAN EXEMPT FROM MINIMUM BENEFIT

24 REQUIREMENT.—Subparagraph (C) of section 416(c)(1)

25 (relating to defined benefit plans) is amended—
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1 (A) by striking ‘‘clause (ii)’’ in clause (i)

2 and inserting ‘‘clause (ii) or (iii)’’; and

3 (B) by adding at the end the following:

4 ‘‘(iii) EXCEPTION FOR FROZEN

5 PLAN.—For purposes of determining an em6 ployee’s years of service with the employer,

7 any service with the employer shall be dis8 regarded to the extent that such service oc9 curs during a plan year when the plan ben10 efits (within the meaning of section 410(b))

11 no key employee or former key employee.’’.

12 (f) ELIMINATION OF FAMILY ATTRIBUTION.—Section

13 416(i)(1)(B) (defining 5-percent owner) is amended by add14 ing at the end the following new clause:

15 ‘‘(iv) FAMILY ATTRIBUTION DIS16 REGARDED.—Solely for purposes of apply17 ing this paragraph (and not for purposes of

18 any provision of this title which incor19 porates by reference the definition of a key

20 employee or 5-percent owner under this

21 paragraph), section 318 shall be applied

22 without regard to subsection (a)(1) thereof

23 in determining whether any person is a 5-

24 percent owner.’’.
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1 (g) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to years beginning after December 31,

3 2001.

4 SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO AC5 COUNT FOR PURPOSES OF DEDUCTION LIM6 ITS.

7 (a) IN GENERAL.—Section 404 (relating to deduction

8 for contributions of an employer to an employees’ trust or

9 annuity plan and compensation under a deferred payment

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

11 subsection:

12 ‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC13 COUNT FOR PURPOSES OF DEDUCTION LIMITS.—Elective

14 deferrals (as defined in section 402(g)(3)) shall not be sub15 ject to any limitation contained in paragraph (3), (7), or

16 (9) of subsection (a), and such elective deferrals shall not

17 be taken into account in applying any such limitation to

18 any other contributions.’’.

19 (b) EFFECTIVE DATE.—The amendment made by this

20 section shall apply to years beginning after December 31,

21 2001.
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1 SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR

2 DEFERRED COMPENSATION PLANS OF STATE

3 AND LOCAL GOVERNMENTS AND TAX-EXEMPT

4 ORGANIZATIONS.

5 (a) IN GENERAL.—Subsection (c) of section 457 (relat6 ing to deferred compensation plans of State and local gov7 ernments and tax-exempt organizations), as amended by

8 section 201, is amended to read as follows:

9 ‘‘(c) LIMITATION.—The maximum amount of the com10 pensation of any one individual which may be deferred

11 under subsection (a) during any taxable year shall not ex12 ceed the amount in effect under subsection (b)(2)(A) (as

13 modified by any adjustment provided under subsection

14 (b)(3)).’’.

15 (b) EFFECTIVE DATE.—The amendment made by sub16 section (a) shall apply to years beginning after December

17 31, 2001.

18 SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO

19 IRS REGARDING PENSION PLANS.

20 (a) ELIMINATION OF CERTAIN USER FEES.—The Sec21 retary of the Treasury or the Secretary’s delegate shall not

22 require payment of user fees under the program established

23 under section 10511 of the Revenue Act of 1987 for requests

24 to the Internal Revenue Service for determination letters

25 with respect to the qualified status of a pension benefit plan

26 maintained solely by one or more eligible employers or any
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1 trust which is part of the plan. The preceding sentence shall

2 not apply to any request—

3 (1) made after the later of—

4 (A) the fifth plan year the pension benefit

5 plan is in existence; or

6 (B) the end of any remedial amendment pe7 riod with respect to the plan beginning within

8 the first 5 plan years; or

9 (2) made by the sponsor of any prototype or

10 similar plan which the sponsor intends to market to

11 participating employers.

12 (b) PENSION BENEFIT PLAN.—For purposes of this

13 section, the term ‘‘pension benefit plan’’ means a pension,

14 profit-sharing, stock bonus, annuity, or employee stock own15 ership plan.

16 (c) ELIGIBLE EMPLOYER.—For purposes of this sec17 tion, the term ‘‘eligible employer’’ has the same meaning

18 given such term in section 408(p)(2)(C)(i)(I) of the Internal

19 Revenue Code of 1986. The determination of whether an em20 ployer is an eligible employer under this section shall be

21 made as of the date of the request described in subsection

22 (a).

23 (d) DETERMINATION OF AVERAGE FEES CHARGED.—

24 For purposes of any determination of average fees charged,
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1 any request to which subsection (a) applies shall not be

2 taken into account.

3 (e) EFFECTIVE DATE.—The provisions of this section

4 shall apply with respect to requests made after December

5 31, 2001.

6 SEC. 207. DEDUCTION LIMITS.

7 (a) STOCK BONUS AND PROFIT SHARING TRUSTS.—

8 (1) IN GENERAL.—Subclause (I) of section

9 404(a)(3)(A)(i) (relating to stock bonus and profit

10 sharing trusts) is amended by striking ‘‘15 percent’’

11 and inserting ‘‘20 percent’’.

12 (2) CONFORMING AMENDMENT.—Subparagraph

13 (C) of section 404(h)(1) is amended by striking ‘‘15

14 percent’’ each place it appears and inserting ‘‘20 per15 cent’’.

16 (b) COMPENSATION.—

17 (1) IN GENERAL.—Section 404(a) (relating to

18 general rule) is amended by adding at the end the fol19 lowing:

20 ‘‘(12) DEFINITION OF COMPENSATION.—For pur21 poses of paragraphs (3), (7), (8), and (9), the term

22 ‘compensation otherwise paid or accrued during the

23 taxable year’ shall include amounts treated as ‘par24 ticipant’s compensation’ under subparagraph (C) or

25 (D) of section 415(c)(3).’’.
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1 (2) CONFORMING AMENDMENTS.—

2 (A) Subparagraph (B) of section 404(a)(3)

3 is amended by striking the last sentence.

4 (B) Clause (i) of section 4972(c)(6)(B) is

5 amended by striking ‘‘(within the meaning of

6 section 404(a))’’ and inserting ‘‘(within the

7 meaning of section 404(a) and as adjusted under

8 section 404(a)(12))’’.

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

10 section shall apply to years beginning after December 31,

11 2001.

12 SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS

13 AFTER-TAX CONTRIBUTIONS.

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

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

16 amended by inserting after section 402 the following new

17 section:

18 ‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER19 RALS AS PLUS CONTRIBUTIONS.

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

21 plan includes a qualified plus contribution program—

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

23 an employee pursuant to the program shall be treated

24 as an elective deferral for purposes of this chapter, ex-
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1 cept that such contribution shall not be excludable

2 from gross income, and

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

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

5 meet any requirement of this chapter solely by reason

6 of including such program.

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

8 For purposes of this section—

9 ‘‘(1) IN GENERAL.—The term ‘qualified plus con10 tribution program’ means a program under which an

11 employee may elect to make designated plus contribu12 tions in lieu of all or a portion of elective deferrals

13 the employee is otherwise eligible to make under the

14 applicable retirement plan.

15 ‘‘(2) SEPARATE ACCOUNTING REQUIRED.—A pro16 gram shall not be treated as a qualified plus contribu17 tion program unless the applicable retirement plan—

18 ‘‘(A) establishes separate accounts (‘des19 ignated plus accounts’) for the designated plus

20 contributions of each employee and any earnings

21 properly allocable to the contributions, and

22 ‘‘(B) maintains separate recordkeeping with

23 respect to each account.
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1 ‘‘(c) DEFINITIONS AND RULES RELATING TO DES2 IGNATED PLUS CONTRIBUTIONS.—For purposes of this

3 section—

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

5 term ‘designated plus contribution’ means any elec6 tive deferral which—

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

8 employee without regard to this section, and

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

10 and in such manner as the Secretary may pre11 scribe) as not being so excludable.

12 ‘‘(2) DESIGNATION LIMITS.—The amount of elec13 tive deferrals which an employee may designate under

14 paragraph (1) shall not exceed the excess (if any) of—

15 ‘‘(A) the maximum amount of elective defer16 rals excludable from gross income of the employee

17 for the taxable year (without regard to this sec18 tion), over

19 ‘‘(B) the aggregate amount of elective defer20 rals of the employee for the taxable year which

21 the employee does not designate under paragraph

22 (1).

23 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

24 ‘‘(A) IN GENERAL.—A rollover contribution

25 of any payment or distribution from a des-
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1 ignated plus account which is otherwise allow2 able under this chapter may be made only if the

3 contribution is to—

4 ‘‘(i) another designated plus account of

5 the individual from whose account the pay6 ment or distribution was made, or

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

8 ‘‘(B) COORDINATION WITH LIMIT.—Any

9 rollover contribution to a designated plus ac10 count under subparagraph (A) shall not be taken

11 into account for purposes of paragraph (1).

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

13 title—

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

15 from a designated plus account shall not be includible

16 in gross income.

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

18 of this subsection—

19 ‘‘(A) IN GENERAL.—The term ‘qualified dis20 tribution’ has the meaning given such term by

21 section 408A(d)(2)(A) (without regard to clause

22 (iv) thereof).

23 ‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU24 SION PERIOD.—A payment or distribution from

25 a designated plus account shall not be treated as
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1 a qualified distribution if such payment or dis2 tribution is made within the 5-taxable-year pe3 riod beginning with the earlier of—

4 ‘‘(i) the first taxable year for which the

5 individual made a designated plus con6 tribution to any designated plus account es7 tablished for such individual under the

8 same applicable retirement plan, or

9 ‘‘(ii) if a rollover contribution was

10 made to such designated plus account from

11 a designated plus account previously estab12 lished for such individual under another

13 applicable retirement plan, the first taxable

14 year for which the individual made a des15 ignated plus contribution to such previously

16 established account.

17 ‘‘(C) DISTRIBUTIONS OF EXCESS DEFER18 RALS AND CONTRIBUTIONS AND EARNINGS

19 THEREON.—The term ‘qualified distribution’

20 shall not include any distribution of an excess

21 deferral under section 402(g)(2) or any excess

22 contribution under section 401(k)(8), and any

23 income on the excess deferral or contribution.

24 ‘‘(3) TREATMENT OF DISTRIBUTIONS OF CERTAIN

25 EXCESS DEFERRALS.—Notwithstanding section 72, if
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1 any excess deferral under section 402(g)(2) attrib2 utable to a designated plus contribution is not dis3 tributed on or before the 1st April 15 following the

4 close of the taxable year in which such excess deferral

5 is made, the amount of such excess deferral shall—

6 ‘‘(A) not be treated as investment in the

7 contract, and

8 ‘‘(B) be included in gross income for the

9 taxable year in which such excess is distributed.

10 ‘‘(4) AGGREGATION RULES.—Section 72 shall be

11 applied separately with respect to distributions and

12 payments from a designated plus account and other

13 distributions and payments from the plan.

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

15 section—

16 ‘‘(1) APPLICABLE RETIREMENT PLAN.—The term

17 ‘applicable retirement plan’ means—

18 ‘‘(A) an employees’ trust described in sec19 tion 401(a) which is exempt from tax under sec20 tion 501(a), and

21 ‘‘(B) a plan under which amounts are con22 tributed by an individual’s employer for an an23 nuity contract described in section 403(b).
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1 ‘‘(2) ELECTIVE DEFERRAL.—The term ‘elective

2 deferral’ means any elective deferral described in sub3 paragraph (A) or (C) of section 402(g)(3).’’.

4 (b) EXCESS DEFERRALS.—Section 402(g) (relating to

5 limitation on exclusion for elective deferrals) is amended—

6 (1) by adding at the end of paragraph (1)(A) (as

7 added by section 201(d)(1)) the following new sen8 tence: ‘‘The preceding sentence shall not apply to so

9 much of such excess as does not exceed the designated

10 plus contributions of the individual for the taxable

11 year.’’; and

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

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

14 paragraph (2)(A).

15 (c) ROLLOVERS.—Subparagraph (B) of section

16 402(c)(8) is amended by adding at the end the following:

17 ‘‘If any portion of an eligible rollover distribu18 tion is attributable to payments or distributions

19 from a designated plus account (as defined in

20 section 402A), an eligible retirement plan with

21 respect to such portion shall include only another

22 designated plus account and a Roth IRA.’’.

23 (d) REPORTING REQUIREMENTS.—

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

25 amended by inserting ‘‘, including the amount of des-
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1 ignated plus contributions (as defined in section

2 402A)’’ before the comma at the end.

3 (2) INFORMATION.—Section 6047 is amended by

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

5 inserting after subsection (e) the following new sub6 section:

7 ‘‘(f) DESIGNATED PLUS CONTRIBUTIONS.—The Sec8 retary shall require the plan administrator of each applica9 ble retirement plan (as defined in section 402A) to make

10 such returns and reports regarding designated plus con11 tributions (as so defined) to the Secretary, participants and

12 beneficiaries of the plan, and such other persons as the Sec13 retary may prescribe.’’.

14 (e) CONFORMING AMENDMENTS.—

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

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

17 term includes a rollover contribution described in sec18 tion 402A(c)(3)(A).’’.

19 (2) The table of sections for subpart A of part I

20 of subchapter D of chapter 1 is amended by inserting

21 after the item relating to section 402 the following

22 new item:

‘‘Sec. 402A. Optional treatment of elective deferrals as plus contributions.’’.
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1 (f) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to taxable years beginning after Decem3 ber 31, 2001.

4 SEC. 209. AVAILABILITY OF QUALIFIED PLANS TO SELF-EM5 PLOYED INDIVIDUALS WHO ARE EXEMPT

6 FROM THE SELF-EMPLOYMENT TAX BY REA7 SON OF THEIR RELIGIOUS BELIEFS.

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

9 401(c)(2) (defining earned income) is amended by adding

10 at the end thereof the following new sentence: ‘‘For purposes

11 of this part only (other than sections 419 and 419A), this

12 subparagraph shall be applied as if the term ‘trade or busi13 ness’ for purposes of section 1402 included service described

14 in section 1402(c)(6).’’.

15 (b) SIMPLE RETIREMENT ACCOUNTS.—Clause (ii) of

16 section 408(p)(6)(A) (defining self-employed) is amended by

17 adding at the end the following new sentence: ‘‘The pre18 ceding sentence shall be applied as if the term ‘trade or

19 business’ for purposes of section 1402 included service de20 scribed in section 1402(c)(6).’’.

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

22 section shall apply to taxable years beginning after Decem23 ber 31, 2001.
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1 SEC. 210. CERTAIN NONRESIDENT ALIENS EXCLUDED IN

2 APPLYING MINIMUM COVERAGE REQUIRE3 MENTS.

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

5 410(b)(3) (relating to exclusion of certain employees) is

6 amended by inserting ‘‘, determined without regard to the

7 reference to subchapter D in the last sentence thereof’’ after

8 ‘‘section 861(a)(3)’’.

9 (b) EFFECTIVE DATE.—The amendment made by sub10 section (a) shall apply to plan years beginning after Decem11 ber 31, 2001.

12 TITLE III—ENHANCING

13 FAIRNESS FOR WOMEN

14 SEC. 301. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS

15 AGE 50 OR OVER.

16 (a) IN GENERAL.—Section 414 (relating to definitions

17 and special rules) is amended by adding at the end the fol18 lowing new subsection:

19 ‘‘(v) CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS

20 AGE 50 OR OVER.—

21 ‘‘(1) IN GENERAL.—An applicable employer plan

22 shall not be treated as failing to meet any require23 ment of this title solely because the plan permits an

24 eligible participant to make additional elective defer25 rals in any plan year.
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1 ‘‘(2) LIMITATION ON AMOUNT OF ADDITIONAL

2 DEFERRALS.—A plan shall not permit additional

3 elective deferrals under paragraph (1) for any year in

4 an amount greater than the lesser of—

5 ‘‘(A) $5,000, or

6 ‘‘(B) the excess (if any) of—

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

8 the year, over

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

10 participant for such year which are made

11 without regard to this subsection.

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

13 case of any contribution to a plan under paragraph

14 (1), such contribution shall not, with respect to the

15 year in which the contribution is made—

16 ‘‘(A) be subject to any otherwise applicable

17 limitation contained in section 402(g),

18 402(h)(2), 404(a), 404(h), 408(p)(2)(A)(ii), 415,

19 or 457, or

20 ‘‘(B) be taken into account in applying such

21 limitations to other contributions or benefits

22 under such plan or any other such plan.

23 ‘‘(4) APPLICATION OF NONDISCRIMINATION

24 RULES.—
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1 ‘‘(A) IN GENERAL.—An applicable employer

2 plan shall not be treated as failing to meet the

3 nondiscrimination requirements under section

4 401(a)(4) with respect to benefits, rights, and

5 features if the plan allows all eligible partici6 pants to make the same election with respect to

7 the additional elective deferrals under this sub8 section.

9 ‘‘(B) AGGREGATION.—For purposes of sub10 paragraph (A), all plans maintained by employ11 ers who are treated as a single employer under

12 subsection (b), (c), (m), or (o) of section 414

13 shall be treated as 1 plan.

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

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

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

17 plan—

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

19 the close of the plan year, and

20 ‘‘(B) with respect to whom no other elective

21 deferrals may (without regard to this subsection)

22 be made to the plan for the plan year by reason

23 of the application of any limitation or other re24 striction described in paragraph (3) or com-
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1 parable limitation contained in the terms of the

2 plan.

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

4 purposes of this subsection—

5 ‘‘(A) APPLICABLE EMPLOYER PLAN.—The

6 term ‘applicable employer plan’ means—

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

8 section 401(a) which is exempt from tax

9 under section 501(a),

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

11 contributed by an individual’s employer for

12 an annuity contract described in section

13 403(b),

14 ‘‘(iii) an eligible deferred compensation

15 plan under section 457 of an eligible em16 ployer as defined in section 457(e)(1)(A),

17 and

18 ‘‘(iv) an arrangement meeting the re19 quirements of section 408 (k) or (p).

20 ‘‘(B) ELECTIVE DEFERRAL.—The term ‘elec21 tive deferral’ has the meaning given such term

22 by subsection (u)(2)(C).

23 ‘‘(C) EXCEPTION FOR SECTION 457 PLANS.—

24 This subsection shall not apply to an applicable

25 employer plan described in subparagraph
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1 (A)(iii) for any year to which section 457(b)(3)

2 applies.

3 ‘‘(D) COST-OF-LIVING ADJUSTMENT.—In the

4 case of a year beginning after December 31,

5 2006, the Secretary shall adjust annually the

6 $5,000 amount in paragraph (2)(A) for increases

7 in the cost-of-living at the same time and in the

8 same manner as adjustments under section

9 415(d); except that the base period taken into ac10 count shall be the calendar quarter beginning

11 July 1, 2005, and any increase under this sub12 paragraph which is not a multiple of $500 shall

13 be rounded to the next lower multiple of $500.’’.

14 (b) EFFECTIVE DATE.—The amendment made by this

15 section shall apply to contributions in taxable years begin16 ning after December 31, 2001.

17 SEC. 302. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF

18 EMPLOYEES TO DEFINED CONTRIBUTION

19 PLANS.

20 (a) EQUITABLE TREATMENT.—

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

22 415(c)(1) (relating to limitation for defined contribu23 tion plans) is amended by striking ‘‘25 percent’’ and

24 inserting ‘‘100 percent’’.
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1 (2) APPLICATION TO SECTION 403(b).—Section

2 403(b) is amended—

3 (A) by striking ‘‘the exclusion allowance for

4 such taxable year’’ in paragraph (1) and insert5 ing ‘‘the applicable limit under section 415’’;

6 (B) by striking paragraph (2); and

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

8 by a former employee after the fifth taxable year

9 following the taxable year in which such em10 ployee was terminated’’ before the period at the

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

12 (3) CONFORMING AMENDMENTS.—

13 (A) Subsection (f) of section 72 is amended

14 by striking ‘‘section 403(b)(2)(D)(iii))’’ and in15 serting ‘‘section 403(b)(2)(D)(iii), as in effect be16 fore the enactment of the Comprehensive Retire17 ment Security and Pension Reform Act of

18 2001)’’.

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

20 striking ‘‘, the exclusion allowance under section

21 403(b)(2),’’.

22 (C) Section 404(j) is amended by adding at

23 the end the following new paragraph:

24 ‘‘(3) SPECIAL RULE FOR MONEY PURCHASE

25 PLANS.—For purposes of paragraph (1)(B), in the
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1 case of a defined contribution plan which is subject

2 to the funding standards of section 412, section

3 415(c)(1)(B) shall be applied by substituting ‘25 per4 cent’ for ‘100 percent’.’’.

5 (D) Section 415(a)(2) is amended by strik6 ing ‘‘, and the amount of the contribution for

7 such portion shall reduce the exclusion allowance

8 as provided in section 403(b)(2)’’.

9 (E) Section 415(c)(3) is amended by adding

10 at the end the following new subparagraph:

11 ‘‘(E) ANNUITY CONTRACTS.—In the case of

12 an annuity contract described in section 403(b),

13 the term ‘participant’s compensation’ means the

14 participant’s includible compensation deter15 mined under section 403(b)(3).’’.

16 (F) Section 415(c) is amended by striking

17 paragraph (4).

18 (G) Section 415(c)(7) is amended to read as

19 follows:

20 ‘‘(7) CERTAIN CONTRIBUTIONS BY CHURCH

21 PLANS NOT TREATED AS EXCEEDING LIMIT.—

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

23 other provision of this subsection, at the election

24 of a participant who is an employee of a church

25 or a convention or association of churches, in-
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1 cluding an organization described in section

2 414(e)(3)(B)(ii), contributions and other addi3 tions for an annuity contract or retirement in4 come account described in section 403(b) with re5 spect to such participant, when expressed as an

6 annual addition to such participant’s account,

7 shall be treated as not exceeding the limitation

8 of paragraph (1) if such annual addition is not

9 in excess of $10,000.

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

11 The total amount of additions with respect to

12 any participant which may be taken into ac13 count for purposes of this subparagraph for all

14 years may not exceed $40,000.

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

16 this paragraph, the term ‘annual addition’ has

17 the meaning given such term by paragraph (2).’’.

18 (H) Subparagraph (B) of section 402(g)(7)

19 (as redesignated by section 201) is amended by

20 inserting before the period at the end the fol21 lowing: ‘‘(as in effect before the enactment of the

22 Comprehensive Retirement Security and Pension

23 Reform Act of 2001)’’.

24 (I) Section 664(g) is amended—
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1 (i) in paragraph (3)(E) by striking

2 ‘‘limitations under section 415(c)’’ and in3 serting ‘‘applicable limitation under para4 graph (7)’’, and

5 (ii) by adding at the end the following

6 new paragraph:

7 ‘‘(7) APPLICABLE LIMITATION.—

8 ‘‘(A) IN GENERAL.—For purposes of para9 graph (3)(E), the applicable limitation under

10 this paragraph with respect to a participant is

11 an amount equal to the lesser of—

12 ‘‘(i) $30,000, or

13 ‘‘(ii) 25 percent of the participant’s

14 compensation (as defined in section

15 415(c)(3)).

16 ‘‘(B) COST-OF-LIVING ADJUSTMENT.—The

17 Secretary shall adjust annually the $30,000

18 amount under subparagraph (A)(i) at the same

19 time and in the same manner as under section

20 415(d), except that the base period shall be the

21 calendar quarter beginning October 1, 1993, and

22 any increase under this subparagraph which is

23 not a multiple of $5,000 shall be rounded to the

24 next lowest multiple of $5,000.’’.
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1 (4) EFFECTIVE DATE.—The amendments made

2 by this subsection shall apply to years beginning after

3 December 31, 2001.

4 (b) SPECIAL RULES FOR SECTIONS 403(b) AND 408.—

5 (1) IN GENERAL.—Subsection (k) of section 415

6 is amended by adding at the end the following new

7 paragraph:

8 ‘‘(4) SPECIAL RULES FOR SECTIONS 403(B)AND

9 408.—For purposes of this section, any annuity con10 tract described in section 403(b) for the benefit of a

11 participant shall be treated as a defined contribution

12 plan maintained by each employer with respect to

13 which the participant has the control required under

14 subsection (b) or (c) of section 414 (as modified by

15 subsection (h)). For purposes of this section, any con16 tribution by an employer to a simplified employee

17 pension plan for an individual for a taxable year

18 shall be treated as an employer contribution to a de19 fined contribution plan for such individual for such

20 year.’’.

21 (2) EFFECTIVE DATE.—

22 (A) IN GENERAL.—The amendment made

23 by paragraph (1) shall apply to limitation years

24 beginning after December 31, 1999.
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1 (B) EXCLUSION ALLOWANCE.—Effective for

2 limitation years beginning in 2000, in the case

3 of any annuity contract described in section

4 403(b) of the Internal Revenue Code of 1986, the

5 amount of the contribution disqualified by rea6 son of section 415(g) of such Code shall reduce

7 the exclusion allowance as provided in section

8 403(b)(2) of such Code.

9 (3) MODIFICATION OF 403(b) EXCLUSION ALLOW10 ANCE TO CONFORM TO 415 MODIFICATION.—The Sec11 retary of the Treasury shall modify the regulations re12 garding the exclusion allowance under section

13 403(b)(2) of the Internal Revenue Code of 1986 to

14 render void the requirement that contributions to a

15 defined benefit pension plan be treated as previously

16 excluded amounts for purposes of the exclusion allow17 ance. For taxable years beginning after December 31,

18 1999, such regulations shall be applied as if such re19 quirement were void.

20 (c) DEFERRED COMPENSATION PLANS OF STATE AND

21 LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANIZA22 TIONS.—

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

24 457(b)(2) (relating to salary limitation on eligible de-
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1 ferred compensation plans) is amended by striking

‘‘331 2 ⁄3 percent’’ and inserting ‘‘100 percent’’.

3 (2) EFFECTIVE DATE.—The amendment made by

4 this subsection shall apply to years beginning after

5 December 31, 2001.

6 SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER MATCH7 ING CONTRIBUTIONS.

8 (a) AMENDMENT OF INTERNAL REVENUE CODE.—Sec9 tion 411(a) (relating to minimum vesting standards) is

10 amended—

11 (1) in paragraph (2) in the matter preceding

12 subparagraph (A), by striking ‘‘A plan’’ and insert13 ing ‘‘Except as provided in paragraph (12), a plan’’;

14 and

15 (2) by adding at the end the following:

16 ‘‘(12) FASTER VESTING FOR MATCHING CON17 TRIBUTIONS.—In the case of matching contributions

18 (as defined in section 401(m)(4)(A)), paragraph (2)

19 shall be applied—

20 ‘‘(A) by substituting ‘3 years’ for ‘5 years’

21 in subparagraph (A), and

22 ‘‘(B) by substituting the following table for

23 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

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

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

4 .......................................................................................... 60
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5 .......................................................................................... 80

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

1 (b) AMENDMENT OF ERISA.—Section 203(a) of the

2 Employee Retirement Income Security Act of 1974 (29

3 U.S.C. 1053(a)) is amended—

4 (1) in paragraph (2), by striking ‘‘A plan’’ and

5 inserting ‘‘Except as provided in paragraph (4), a

6 plan’’, and

7 (2) by adding at the end the following:

8 ‘‘(4) In the case of matching contributions (as

9 defined in section 401(m)(4)(A) of the Internal Rev10 enue Code of 1986), paragraph (2) shall be applied—

11 ‘‘(A) by substituting ‘3 years’ for ‘5 years’

12 in subparagraph (A), and

13 ‘‘(B) by substituting the following table for

14 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

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

15 (c) EFFECTIVE DATES.—

16 (1) IN GENERAL.—Except as provided in para17 graph (2), the amendments made by this section shall

18 apply to contributions for plan years beginning after

19 December 31, 2001.

20 (2) COLLECTIVE BARGAINING AGREEMENTS.—In

21 the case of a plan maintained pursuant to one or
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1 more collective bargaining agreements between em2 ployee representatives and one or more employers

3 ratified by the date of the enactment of this Act, the

4 amendments made by this section shall not apply to

5 contributions on behalf of employees covered by any

6 such agreement for plan years beginning before the

7 earlier of—

8 (A) the later of—

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

10 collective bargaining agreements terminates

11 (determined without regard to any exten12 sion thereof on or after such date of the en13 actment); or

14 (ii) January 1, 2002; or

15 (B) January 1, 2006.

16 (3) SERVICE REQUIRED.—With respect to any

17 plan, the amendments made by this section shall not

18 apply to any employee before the date that such em19 ployee has 1 hour of service under such plan in any

20 plan year to which the amendments made by this sec21 tion apply.

22 SEC. 304. MODIFICATIONS TO MINIMUM DISTRIBUTION

23 RULES.

24 (a) LIFE EXPECTANCY TABLES.—The Secretary of the

25 Treasury shall modify the life expectancy tables under the
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1 regulations relating to minimum distribution requirements

2 under sections 401(a)(9), 408(a)(6) and (b)(3), 403(b)(10),

3 and 457(d)(2) of the Internal Revenue Code to reflect cur4 rent life expectancy.

5 (b) REPEAL OF RULE WHERE DISTRIBUTIONS HAD

6 BEGUN BEFORE DEATH OCCURS.—

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

8 401(a)(9) is amended by striking clause (i) and redes9 ignating clauses (ii), (iii), and (iv) as clauses (i),

10 (ii), and (iii), respectively.

11 (2) CONFORMING CHANGES.—

12 (A) Clause (i) of section 401(a)(9)(B) (as so

13 redesignated) is amended—

14 (i) by striking ‘‘FOR OTHER CASES’’ in

15 the heading; and

16 (ii) by striking ‘‘the distribution of the

17 employee’s interest has begun in accordance

18 with subparagraph (A)(ii)’’ and inserting

19 ‘‘his entire interest has been distributed to

20 him’’.

21 (B) Clause (ii) of section 401(a)(9)(B) (as

22 so redesignated) is amended by striking ‘‘clause

23 (ii)’’ and inserting ‘‘clause (i)’’.

24 (C) Clause (iii) of section 401(a)(9)(B) (as

25 so redesignated) is amended—
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1 (i) by striking ‘‘clause (iii)(I)’’ and in2 serting ‘‘clause (ii)(I)’’;

3 (ii) by striking ‘‘clause (iii)(III)’’ in

4 subclause (I) and inserting ‘‘clause

5 (ii)(III)’’;

6 (iii) by striking ‘‘the date on which the

employee would have attained age 701 7 ⁄2,’’ in

8 subclause (I) and inserting ‘‘April 1 of the

9 calendar year following the calendar year

in which the spouse attains 701 10 ⁄2,’’; and

11 (iv) by striking ‘‘the distributions to

12 such spouse begin,’’ in subclause (II) and

13 inserting ‘‘his entire interest has been dis14 tributed to him,’’.

15 (3) EFFECTIVE DATE.—

16 (A) IN GENERAL.—Except as provided in

17 subparagraph (B), the amendments made by this

18 subsection shall apply to years beginning after

19 December 31, 2001.

20 (B) DISTRIBUTIONS TO SURVIVING

21 SPOUSE.—

22 (i) IN GENERAL.—In the case of an

23 employee described in clause (ii), distribu24 tions to the surviving spouse of the employee

25 shall not be required to commence prior to
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1 the date on which such distributions would

2 have been required to begin under section

3 401(a)(9)(B) of the Internal Revenue Code

4 of 1986 (as in effect on the day before the

5 date of the enactment of this Act).

6 (ii) CERTAIN EMPLOYEES.—An em7 ployee is described in this clause if such em8 ployee dies before—

9 (I) the date of the enactment of

10 this Act, and

11 (II) the required beginning date

12 (within the meaning of section

13 401(a)(9)(C) of the Internal Revenue

14 Code of 1986) of the employee.

15 (c) REDUCTION IN EXCISE TAX.—

16 (1) IN GENERAL.—Subsection (a) of section 4974

17 is amended by striking ‘‘50 percent’’ and inserting

18 ‘‘10 percent’’.

19 (2) EFFECTIVE DATE.—The amendment made by

20 this subsection shall apply to years beginning after

21 December 31, 2001.
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1 SEC. 305. CLARIFICATION OF TAX TREATMENT OF DIVISION

2 OF SECTION 457 PLAN BENEFITS UPON DI3 VORCE.

4 (a) IN GENERAL.—Section 414(p)(11) (relating to ap5 plication of rules to governmental and church plans) is

6 amended—

7 (1) by inserting ‘‘or an eligible deferred com8 pensation plan (within the meaning of section

9 457(b))’’ after ‘‘subsection (e))’’; and

10 (2) in the heading, by striking ‘‘GOVERNMENTAL

11 AND CHURCH PLANS’’ and inserting ‘‘CERTAIN OTHER

12 PLANS’’.

13 (b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE14 MENTS.—Paragraph (10) of section 414(p) is amended by

15 striking ‘‘and section 409(d)’’ and inserting ‘‘section

16 409(d), and section 457(d)’’.

17 (c) TAX TREATMENT OF PAYMENTS FROM A SECTION

18 457 PLAN.—Subsection (p) of section 414 is amended by

19 redesignating paragraph (12) as paragraph (13) and in20 serting after paragraph (11) the following new paragraph:

21 ‘‘(12) TAX TREATMENT OF PAYMENTS FROM A

22 SECTION 457 PLAN.—If a distribution or payment

23 from an eligible deferred compensation plan described

24 in section 457(b) is made pursuant to a qualified do25 mestic relations order, rules similar to the rules of
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1 section 402(e)(1)(A) shall apply to such distribution

2 or payment.’’.

3 (d) EFFECTIVE DATE.—The amendments made by this

4 section shall apply to transfers, distributions, and pay5 ments made after December 31, 2001.

6 SEC. 306. PROVISIONS RELATING TO HARDSHIP DISTRIBU7 TIONS.

8 (a) SAFE HARBOR RELIEF.—

9 (1) IN GENERAL.—The Secretary of the Treasury

10 shall revise the regulations relating to hardship dis11 tributions under section 401(k)(2)(B)(i)(IV) of the In12 ternal Revenue Code of 1986 to provide that the pe13 riod an employee is prohibited from making elective

14 and employee contributions in order for a distribu15 tion to be deemed necessary to satisfy financial need

16 shall be equal to 6 months.

17 (2) EFFECTIVE DATE.—The revised regulations

18 under this subsection shall apply to years beginning

19 after December 31, 2001.

20 (b) HARDSHIP DISTRIBUTIONS NOT TREATED AS ELI21 GIBLE ROLLOVER DISTRIBUTIONS.—

22 (1) MODIFICATION OF DEFINITION OF ELIGIBLE

23 ROLLOVER.—Subparagraph (C) of section 402(c)(4)

24 (relating to eligible rollover distribution) is amended

25 to read as follows:
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1 ‘‘(C) any distribution which is made upon

2 hardship of the employee.’’.

3 (2) EFFECTIVE DATE.—The amendment made by

4 this subsection shall apply to distributions made after

5 December 31, 2001.

6 SEC. 307. WAIVER OF TAX ON NONDEDUCTIBLE CONTRIBU7 TIONS FOR DOMESTIC OR SIMILAR WORKERS.

8 (a) IN GENERAL.—Section 4972(c)(6) (relating to ex9 ceptions to nondeductible contributions), as amended by sec10 tion 502, is amended by striking ‘‘and’’ at the end of sub11 paragraph (A), by striking the period and inserting ‘‘, and’’

12 at the end of subparagraph (B), and by inserting after sub13 paragraph (B) the following new subparagraph:

14 ‘‘(C) so much of the contributions to a sim15 ple retirement account (within the meaning of

16 section 408(p)) or a simple plan (within the

17 meaning of section 401(k)(11)) which are not de18 ductible when contributed solely because such

19 contributions are not made in connection with a

20 trade or business of the employer.’’

21 (b) EXCLUSION OF CERTAIN CONTRIBUTIONS.—Sec22 tion 4972(c)(6) is amended by adding at the end the fol23 lowing new sentence: ‘‘Subparagraph (C) shall not apply

24 to contributions made on behalf of the employer or a mem-
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1 ber of the employer’s family (as defined in section

2 447(e)(1)).’’.

3 (c) NO INFERENCE.—Nothing in the amendments

4 made by this section shall be construed to infer the proper

5 treatment of nondeductible contributions under the laws in

6 effect before such amendments.

7 (d) EFFECTIVE DATE.—The amendments made by this

8 section shall apply to taxable years beginning after Decem9 ber 31, 2001.

10 TITLE IV—INCREASING PORT11 ABILITY FOR PARTICIPANTS

12 SEC. 401. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF

13 PLANS.

14 (a) ROLLOVERS FROM AND TO SECTION 457 PLANS.—

15 (1) ROLLOVERS FROM SECTION 457 PLANS.—

16 (A) IN GENERAL.—Section 457(e) (relating

17 to other definitions and special rules) is amend18 ed by adding at the end the following:

19 ‘‘(16) ROLLOVER AMOUNTS.—

20 ‘‘(A) GENERAL RULE.—In the case of an el21 igible deferred compensation plan established

22 and maintained by an employer described in

23 subsection (e)(1)(A), if—

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

25 credit of an employee in such plan is paid
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1 to such employee in an eligible rollover dis2 tribution (within the meaning of section

3 402(c)(4) without regard to subparagraph

4 (C) thereof),

5 ‘‘(ii) the employee transfers any por6 tion of the property such employee receives

7 in such distribution to an eligible retire8 ment plan described in section 402(c)(8)(B),

9 and

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

11 property other than money, the amount so

12 transferred consists of the property distrib13 uted,

14 then such distribution (to the extent so trans15 ferred) shall not be includible in gross income for

16 the taxable year in which paid.

17 ‘‘(B) CERTAIN RULES MADE APPLICABLE.—

18 The rules of paragraphs (2) through (7) (other

19 than paragraph (4)(C)) and (9) of section 402(c)

20 and section 402(f) shall apply for purposes of

21 subparagraph (A).

22 ‘‘(C) REPORTING.—Rollovers under this

23 paragraph shall be reported to the Secretary in

24 the same manner as rollovers from qualified re25 tirement plans (as defined in section 4974(c)).’’.
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1 (B) DEFERRAL LIMIT DETERMINED WITH2 OUT REGARD TO ROLLOVER AMOUNTS.—Section

3 457(b)(2) (defining eligible deferred compensa4 tion plan) is amended by inserting ‘‘(other than

5 rollover amounts)’’ after ‘‘taxable year’’.

6 (C) DIRECT ROLLOVER.—Paragraph (1) of

7 section 457(d) is amended by striking ‘‘and’’ at

8 the end of subparagraph (A), by striking the pe9 riod at the end of subparagraph (B) and insert10 ing ‘‘, and’’, and by inserting after subpara11 graph (B) the following:

12 ‘‘(C) in the case of a plan maintained by

13 an employer described in subsection (e)(1)(A),

14 the plan meets requirements similar to the re15 quirements of section 401(a)(31).

16 Any amount transferred in a direct trustee-to-trustee

17 transfer in accordance with section 401(a)(31) shall

18 not be includible in gross income for the taxable year

19 of transfer.’’.

20 (D) WITHHOLDING.—

21 (i) Paragraph (12) of section 3401(a)

22 is amended by adding at the end the fol23 lowing:

24 ‘‘(E) under or to an eligible deferred com25 pensation plan which, at the time of such pay-
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1 ment, is a plan described in section 457(b)

2 maintained by an employer described in section

3 457(e)(1)(A); or’’.

4 (ii) Paragraph (3) of section 3405(c) is

5 amended to read as follows:

6 ‘‘(3) ELIGIBLE ROLLOVER DISTRIBUTION.—For

7 purposes of this subsection, the term ‘eligible rollover

8 distribution’ has the meaning given such term by sec9 tion 402(f)(2)(A).’’.

10 (iii) LIABILITY FOR WITHHOLDING.—

11 Subparagraph (B) of section 3405(d)(2) is

12 amended by striking ‘‘or’’ at the end of

13 clause (ii), by striking the period at the end

14 of clause (iii) and inserting ‘‘, or’’, and by

15 adding at the end the following:

16 ‘‘(iv) section 457(b) and which is

17 maintained by an eligible employer de18 scribed in section 457(e)(1)(A).’’.

19 (2) ROLLOVERS TO SECTION 457 PLANS.—

20 (A) IN GENERAL.—Section 402(c)(8)(B)

21 (defining eligible retirement plan) is amended by

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

23 striking the period at the end of clause (iv) and

24 inserting ‘‘, and’’, and by inserting after clause

25 (iv) the following new clause:
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1 ‘‘(v) an eligible deferred compensation

2 plan described in section 457(b) which is

3 maintained by an eligible employer de4 scribed in section 457(e)(1)(A).’’.

5 (B) SEPARATE ACCOUNTING.—Section

6 402(c) is amended by adding at the end the fol7 lowing new paragraph:

8 ‘‘(10) SEPARATE ACCOUNTING.—Unless a plan

9 described in clause (v) of paragraph (8)(B) agrees to

10 separately account for amounts rolled into such plan

11 from eligible retirement plans not described in such

12 clause, the plan described in such clause may not ac13 cept transfers or rollovers from such retirement

14 plans.’’.

15 (C) 10 PERCENT ADDITIONAL TAX.—Sub16 section (t) of section 72 (relating to 10-percent

17 additional tax on early distributions from quali18 fied retirement plans) is amended by adding at

19 the end the following new paragraph:

20 ‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SECTION

21 457 PLANS.—For purposes of this subsection, a dis22 tribution from an eligible deferred compensation plan

23 (as defined in section 457(b)) of an eligible employer

24 described in section 457(e)(1)(A) shall be treated as a

25 distribution from a qualified retirement plan de-
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1 scribed in section 4974(c)(1) to the extent that such

2 distribution is attributable to an amount transferred

3 to an eligible deferred compensation plan from a

4 qualified retirement plan (as defined in section

5 4974(c)).’’.

6 (b) ALLOWANCE OF ROLLOVERS FROM AND TO 403(b)

7 PLANS.—

8 (1) ROLLOVERS FROM SECTION 403(b)PLANS.—

9 Section 403(b)(8)(A)(ii) (relating to rollover

10 amounts) is amended by striking ‘‘such distribution’’

11 and all that follows and inserting ‘‘such distribution

12 to an eligible retirement plan described in section

13 402(c)(8)(B), and’’.

14 (2) ROLLOVERS TO SECTION 403(b)PLANS.—Sec15 tion 402(c)(8)(B) (defining eligible retirement plan),

16 as amended by subsection (a), is amended by striking

17 ‘‘and’’ at the end of clause (iv), by striking the period

18 at the end of clause (v) and inserting ‘‘, and’’, and

19 by inserting after clause (v) the following new clause:

20 ‘‘(vi) an annuity contract described in

21 section 403(b).’’.

22 (c) EXPANDED EXPLANATION TO RECIPIENTS OF

23 ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section

24 402(f) (relating to written explanation to recipients of dis25 tributions eligible for rollover treatment) is amended by
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1 striking ‘‘and’’ at the end of subparagraph (C), by striking

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

3 ‘‘, and’’, and by adding at the end the following new sub4 paragraph:

5 ‘‘(E) of the provisions under which distribu6 tions from the eligible retirement plan receiving

7 the distribution may be subject to restrictions

8 and tax consequences which are different from

9 those applicable to distributions from the plan

10 making such distribution.’’.

11 (d) SPOUSAL ROLLOVERS.—Section 402(c)(9) (relat12 ing to rollover where spouse receives distribution after death

13 of employee) is amended by striking ‘‘; except that’’ and

14 all that follows up to the end period.

15 (e) CONFORMING AMENDMENTS.—

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

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

18 457(e)(16)’’.

19 (2) Section 219(d)(2) is amended by striking ‘‘or

20 408(d)(3)’’ and inserting ‘‘408(d)(3), or 457(e)(16)’’.

21 (3) Section 401(a)(31)(B) is amended by strik22 ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),

23 403(b)(8), and 457(e)(16)’’.

24 (4) Subparagraph (A) of section 402(f)(2) is

25 amended by striking ‘‘or paragraph (4) of section
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1 403(a)’’ and inserting ‘‘, paragraph (4) of section

2 403(a), subparagraph (A) of section 403(b)(8), or sub3 paragraph (A) of section 457(e)(16)’’.

4 (5) Paragraph (1) of section 402(f) is amended

5 by striking ‘‘from an eligible retirement plan’’.

6 (6) Subparagraphs (A) and (B) of section

7 402(f)(1) are amended by striking ‘‘another eligible

8 retirement plan’’ and inserting ‘‘an eligible retire9 ment plan’’.

10 (7) Subparagraph (B) of section 403(b)(8) is

11 amended to read as follows:

12 ‘‘(B) CERTAIN RULES MADE APPLICABLE.—

13 The rules of paragraphs (2) through (7) and (9)

14 of section 402(c) and section 402(f) shall apply

15 for purposes of subparagraph (A), except that

16 section 402(f) shall be applied to the payor in

17 lieu of the plan administrator.’’.

18 (8) Section 408(a)(1) is amended by striking ‘‘or

19 403(b)(8),’’ and inserting ‘‘403(b)(8), or 457(e)(16)’’.

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

21 415(b)(2) are each amended by striking ‘‘and

22 408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and

23 457(e)(16)’’.
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1 (10) Section 415(c)(2) is amended by striking

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

3 457(e)(16)’’.

4 (11) Section 4973(b)(1)(A) is amended by strik5 ing ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or

6 457(e)(16)’’.

7 (f) EFFECTIVE DATE; SPECIAL RULE.—

8 (1) EFFECTIVE DATE.—The amendments made

9 by this section shall apply to distributions after De10 cember 31, 2001.

11 (2) REASONABLE NOTICE.—No penalty shall be

12 imposed on a plan for the failure to provide the infor13 mation required by the amendment made by sub14 section (c) with respect to any distribution made be15 fore the date that is 90 days after the date on which

16 the Secretary of the Treasury issues a safe harbor

17 rollover notice after the date of the enactment of this

18 Act, if the administrator of such plan makes a rea19 sonable attempt to comply with such requirement.

20 (3) SPECIAL RULE.—Notwithstanding any other

21 provision of law, subsections (h)(3) and (h)(5) of sec22 tion 1122 of the Tax Reform Act of 1986 shall not

23 apply to any distribution from an eligible retirement

24 plan (as defined in clause (iii) or (iv) of section

25 402(c)(8)(B) of the Internal Revenue Code of 1986) on
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1 behalf of an individual if there was a rollover to such

2 plan on behalf of such individual which is permitted

3 solely by reason of any amendment made by this sec4 tion.

5 SEC. 402. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE6 MENT PLANS.

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

8 408(d)(3) (relating to rollover amounts) is amended by add9 ing ‘‘or’’ at the end of clause (i), by striking clauses (ii)

10 and (iii), and by adding at the end the following:

11 ‘‘(ii) the entire amount received (in12 cluding money and any other property) is

13 paid into an eligible retirement plan for the

14 benefit of such individual not later than the

15 60th day after the date on which the pay16 ment or distribution is received, except that

17 the maximum amount which may be paid

18 into such plan may not exceed the portion

19 of the amount received which is includible

20 in gross income (determined without regard

21 to this paragraph).

22 For purposes of clause (ii), the term ‘eligible re23 tirement plan’ means an eligible retirement plan

24 described in clause (iii), (iv), (v), or (vi) of sec25 tion 402(c)(8)(B).’’.
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1 (b) CONFORMING AMENDMENTS.—

2 (1) Paragraph (1) of section 403(b) is amended

3 by striking ‘‘section 408(d)(3)(A)(iii)’’ and inserting

4 ‘‘section 408(d)(3)(A)(ii)’’.

5 (2) Clause (i) of section 408(d)(3)(D) is amended

6 by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i) or

7 (ii)’’.

8 (3) Subparagraph (G) of section 408(d)(3) is

9 amended to read as follows:

10 ‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—In

11 the case of any payment or distribution out of

12 a simple retirement account (as defined in sub13 section (p)) to which section 72(t)(6) applies,

14 this paragraph shall not apply unless such pay15 ment or distribution is paid into another simple

16 retirement account.’’.

17 (c) EFFECTIVE DATE; SPECIAL RULE.—

18 (1) EFFECTIVE DATE.—The amendments made

19 by this section shall apply to distributions after De20 cember 31, 2001.

21 (2) SPECIAL RULE.—Notwithstanding any other

22 provision of law, subsections (h)(3) and (h)(5) of sec23 tion 1122 of the Tax Reform Act of 1986 shall not

24 apply to any distribution from an eligible retirement

25 plan (as defined in clause (iii) or (iv) of section
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1 402(c)(8)(B) of the Internal Revenue Code of 1986) on

2 behalf of an individual if there was a rollover to such

3 plan on behalf of such individual which is permitted

4 solely by reason of the amendments made by this sec5 tion.

6 SEC. 403. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

7 (a) ROLLOVERS FROM EXEMPT TRUSTS.—Paragraph

8 (2) of section 402(c) (relating to maximum amount which

9 may be rolled over) is amended by adding at the end the

10 following: ‘‘The preceding sentence shall not apply to such

11 distribution to the extent—

12 ‘‘(A) such portion is transferred in a direct

13 trustee-to-trustee transfer to a qualified trust

14 which is part of a plan which is a defined con15 tribution plan and which agrees to separately

16 account for amounts so transferred, including

17 separately accounting for the portion of such dis18 tribution which is includible in gross income

19 and the portion of such distribution which is not

20 so includible, or

21 ‘‘(B) such portion is transferred to an eligi22 ble retirement plan described in clause (i) or (ii)

23 of paragraph (8)(B).’’.

24 (b) OPTIONAL DIRECT TRANSFER OF ELIGIBLE ROLL25 OVER DISTRIBUTIONS.—Subparagraph (B) of section
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1 401(a)(31) (relating to limitation) is amended by adding

2 at the end the following:

3 ‘‘The preceding sentence shall not apply to such

4 distribution if the plan to which such distribu5 tion is transferred—

6 ‘‘(i) agrees to separately account for

7 amounts so transferred, including sepa8 rately accounting for the portion of such

9 distribution which is includible in gross in10 come and the portion of such distribution

11 which is not so includible, or

12 ‘‘(ii) is an eligible retirement plan de13 scribed in clause (i) or (ii) of section

14 402(c)(8)(B).’’.

15 (c) RULES FOR APPLYING SECTION 72 TO IRAS.—

16 Paragraph (3) of section 408(d) (relating to special rules

17 for applying section 72) is amended by inserting at the end

18 the following:

19 ‘‘(H) APPLICATION OF SECTION 72.—

20 ‘‘(i) IN GENERAL.—If—

21 ‘‘(I) a distribution is made from

22 an individual retirement plan, and

23 ‘‘(II) a rollover contribution is

24 made to an eligible retirement plan de25 scribed in section 402(c)(8)(B)(iii),
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1 (iv), (v), or (vi) with respect to all or

2 part of such distribution,

3 then, notwithstanding paragraph (2), the

4 rules of clause (ii) shall apply for purposes

5 of applying section 72.

6 ‘‘(ii) APPLICABLE RULES.—In the case

7 of a distribution described in clause (i)—

8 ‘‘(I) section 72 shall be applied

9 separately to such distribution,

10 ‘‘(II) notwithstanding the pro

11 rata allocation of income on, and in12 vestment in, the contract to distribu13 tions under section 72, the portion of

14 such distribution rolled over to an eli15 gible retirement plan described in

16 clause (i) shall be treated as from in17 come on the contract (to the extent of

18 the aggregate income on the contract

19 from all individual retirement plans of

20 the distributee), and

21 ‘‘(III) appropriate adjustments

22 shall be made in applying section 72 to

23 other distributions in such taxable year

24 and subsequent taxable years.’’.
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1 (d) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to distributions after December 31, 2001.

3 SEC. 404. HARDSHIP EXCEPTION TO 60-DAY RULE.

4 (a) EXEMPT TRUSTS.—Paragraph (3) of section

5 402(c) (relating to transfer must be made within 60 days

6 of receipt) is amended to read as follows:

7 ‘‘(3) TRANSFER MUST BE MADE WITHIN 60 DAYS

8 OF RECEIPT.—

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

10 subparagraph (B), paragraph (1) shall not

11 apply to any transfer of a distribution made

12 after the 60th day following the day on which the

13 distributee received the property distributed.

14 ‘‘(B) HARDSHIP EXCEPTION.—The Sec15 retary may waive the 60-day requirement under

16 subparagraph (A) where the failure to waive

17 such requirement would be against equity or

18 good conscience, including casualty, disaster, or

19 other events beyond the reasonable control of the

20 individual subject to such requirement.’’.

21 (b) IRAS.—Paragraph (3) of section 408(d) (relating

22 to rollover contributions), as amended by section 403, is

23 amended by adding after subparagraph (H) the following

24 new subparagraph:
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1 ‘‘(I) WAIVER OF 60-DAY REQUIREMENT.—

2 The Secretary may waive the 60-day require3 ment under subparagraphs (A) and (D) where

4 the failure to waive such requirement would be

5 against equity or good conscience, including cas6 ualty, disaster, or other events beyond the rea7 sonable control of the individual subject to such

8 requirement.’’.

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

10 section shall apply to distributions after December 31, 2001.

11 SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.

12 (a) PLAN TRANSFERS.—

13 (1) AMENDMENT OF INTERNAL REVENUE

14 CODE.—Paragraph (6) of section 411(d) (relating to

15 accrued benefit not to be decreased by amendment) is

16 amended by adding at the end the following:

17 ‘‘(D) PLAN TRANSFERS.—

18 ‘‘(i) IN GENERAL.—A defined contribu19 tion plan (in this subparagraph referred to

20 as the ‘transferee plan’) shall not be treated

21 as failing to meet the requirements of this

22 subsection merely because the transferee

23 plan does not provide some or all of the

24 forms of distribution previously available

25 under another defined contribution plan (in
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1 this subparagraph referred to as the ‘trans2 feror plan’) to the extent that—

3 ‘‘(I) the forms of distribution pre4 viously available under the transferor

5 plan applied to the account of a par6 ticipant or beneficiary under the

7 transferor plan that was transferred

8 from the transferor plan to the trans9 feree plan pursuant to a direct transfer

10 rather than pursuant to a distribution

11 from the transferor plan,

12 ‘‘(II) the terms of both the trans13 feror plan and the transferee plan au14 thorize the transfer described in sub15 clause (I),

16 ‘‘(III) the transfer described in

17 subclause (I) was made pursuant to a

18 voluntary election by the participant

19 or beneficiary whose account was

20 transferred to the transferee plan,

21 ‘‘(IV) the election described in

22 subclause (III) was made after the par23 ticipant or beneficiary received a no24 tice describing the consequences of

25 making the election, and
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1 ‘‘(V) the transferee plan allows the

2 participant or beneficiary described in

3 subclause (III) to receive any distribu4 tion to which the participant or bene5 ficiary is entitled under the transferee

6 plan in the form of a single sum dis7 tribution.

8 ‘‘(ii) EXCEPTION.—Clause (i) shall

9 apply to plan mergers and other trans10 actions having the effect of a direct transfer,

11 including consolidations of benefits attrib12 utable to different employers within a mul13 tiple employer plan.

14 ‘‘(E) ELIMINATION OF FORM OF DISTRIBU15 TION.—Except to the extent provided in regula16 tions, a defined contribution plan shall not be

17 treated as failing to meet the requirements of this

18 section merely because of the elimination of a

19 form of distribution previously available there20 under. This subparagraph shall not apply to the

21 elimination of a form of distribution with re22 spect to any participant unless—

23 ‘‘(i) a single sum payment is available

24 to such participant at the same time or
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1 times as the form of distribution being

2 eliminated, and

3 ‘‘(ii) such single sum payment is based

4 on the same or greater portion of the par5 ticipant’s account as the form of distribu6 tion being eliminated.’’.

7 (2) AMENDMENT OF ERISA.—Section 204(g) of

8 the Employee Retirement Income Security Act of

9 1974 (29 U.S.C. 1054(g)) is amended by adding at

10 the end the following:

11 ‘‘(4)(A) A defined contribution plan (in this subpara12 graph referred to as the ‘transferee plan’) shall not be treat13 ed as failing to meet the requirements of this subsection

14 merely because the transferee plan does not provide some

15 or all of the forms of distribution previously available under

16 another defined contribution plan (in this subparagraph re17 ferred to as the ‘transferor plan’) to the extent that—

18 ‘‘(i) the forms of distribution previously avail19 able under the transferor plan applied to the account

20 of a participant or beneficiary under the transferor

21 plan that was transferred from the transferor plan to

22 the transferee plan pursuant to a direct transfer rath23 er than pursuant to a distribution from the transferor

24 plan;
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1 ‘‘(ii) the terms of both the transferor plan and

2 the transferee plan authorize the transfer described in

3 clause (i);

4 ‘‘(iii) the transfer described in clause (i) was

5 made pursuant to a voluntary election by the partici6 pant or beneficiary whose account was transferred to

7 the transferee plan;

8 ‘‘(iv) the election described in clause (iii) was

9 made after the participant or beneficiary received a

10 notice describing the consequences of making the elec11 tion; and

12 ‘‘(v) the transferee plan allows the participant or

13 beneficiary described in clause (iii) to receive any dis14 tribution to which the participant or beneficiary is

15 entitled under the transferee plan in the form of a

16 single sum distribution.

17 ‘‘(B) Subparagraph (A) shall apply to plan mergers

18 and other transactions having the effect of a direct transfer,

19 including consolidations of benefits attributable to different

20 employers within a multiple employer plan.

21 ‘‘(5) Except to the extent provided in regulations pro22 mulgated by the Secretary of the Treasury, a defined con23 tribution plan shall not be treated as failing to meet the

24 requirements of this subsection merely because of the elimi25 nation of a form of distribution previously available there-
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1 under. This paragraph shall not apply to the elimination

2 of a form of distribution with respect to any participant

3 unless—

4 ‘‘(A) a single sum payment is available to such

5 participant at the same time or times as the form of

6 distribution being eliminated; and

7 ‘‘(B) such single sum payment is based on the

8 same or greater portion of the participant’s account

9 as the form of distribution being eliminated.’’.

10 (3) EFFECTIVE DATE.—The amendments made

11 by this subsection shall apply to years beginning after

12 December 31, 2001.

13 (b) REGULATIONS.—

14 (1) AMENDMENT OF INTERNAL REVENUE

15 CODE.—Paragraph (6)(B) of section 411(d) (relating

16 to accrued benefit not to be decreased by amendment)

17 is amended by inserting after the second sentence the

18 following new sentence: ‘‘The Secretary shall by regu19 lations provide that this subparagraph shall not

20 apply to any plan amendment which reduces or

21 eliminates benefits or subsidies which create signifi22 cant burdens or complexities for the plan and plan

23 participants and does not adversely affect the rights

24 of any participant in a more than de minimis man25 ner.’’.
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1 (2) AMENDMENT OF ERISA.—Section 204(g)(2) of

2 the Employee Retirement Income Security Act of

3 1974 (29 U.S.C. 1054(g)(2)) is amended by inserting

4 before the last sentence the following new sentence:

5 ‘‘The Secretary of the Treasury shall by regulations

6 provide that this paragraph shall not apply to any

7 plan amendment which reduces or eliminates benefits

8 or subsidies which create significant burdens or com9 plexities for the plan and plan participants and does

10 not adversely affect the rights of any participant in

11 a more than de minimis manner.’’.

12 (3) SECRETARY DIRECTED.—Not later than De13 cember 31, 2003, the Secretary of the Treasury is di14 rected to issue regulations under section 411(d)(6) of

15 the Internal Revenue Code of 1986 and section 204(g)

16 of the Employee Retirement Income Security Act of

17 1974, including the regulations required by the

18 amendment made by this subsection. Such regulations

19 shall apply to plan years beginning after December

20 31, 2003, or such earlier date as is specified by the

21 Secretary of the Treasury.

22 SEC. 406. RATIONALIZATION OF RESTRICTIONS ON DIS23 TRIBUTIONS.

24 (a) MODIFICATION OF SAME DESK EXCEPTION.—

25 (1) SECTION 401(k).—
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1 (A) Section 401(k)(2)(B)(i)(I) (relating to

2 qualified cash or deferred arrangements) is

3 amended by striking ‘‘separation from service’’

4 and inserting ‘‘severance from employment’’.

5 (B) Subparagraph (A) of section 401(k)(10)

6 (relating to distributions upon termination of

7 plan or disposition of assets or subsidiary) is

8 amended to read as follows:

9 ‘‘(A) IN GENERAL.—An event described in

10 this subparagraph is the termination of the plan

11 without establishment or maintenance of another

12 defined contribution plan (other than an em13 ployee stock ownership plan as defined in section

14 4975(e)(7)).’’.

15 (C) Section 401(k)(10) is amended—

16 (i) in subparagraph (B)—

17 (I) by striking ‘‘An event’’ in

18 clause (i) and inserting ‘‘A termi19 nation’’; and

20 (II) by striking ‘‘the event’’ in

21 clause (i) and inserting ‘‘the termi22 nation’’;

23 (ii) by striking subparagraph (C); and

24 (iii) by striking ‘‘OR DISPOSITION OF

25 ASSETS OR SUBSIDIARY’’ in the heading.
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1 (2) SECTION 403(b).—

2 (A) Paragraphs (7)(A)(ii) and (11)(A) of

3 section 403(b) are each amended by striking

4 ‘‘separates from service’’ and inserting ‘‘has a

5 severance from employment’’.

6 (B) The heading for paragraph (11) of sec7 tion 403(b) is amended by striking ‘‘SEPARATION

8 FROM SERVICE’’ and inserting ‘‘SEVERANCE

9 FROM EMPLOYMENT’’.

10 (3) SECTION 457.—Clause (ii) of section

11 457(d)(1)(A) is amended by striking ‘‘is separated

12 from service’’ and inserting ‘‘has a severance from

13 employment’’.

14 (b) EFFECTIVE DATE.—The amendments made by this

15 section shall apply to distributions after December 31, 2001.

16 SEC. 407. PURCHASE OF SERVICE CREDIT IN GOVERN17 MENTAL DEFINED BENEFIT PLANS.

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

19 amended by adding at the end the following new paragraph:

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

21 PURCHASE PERMISSIVE SERVICE CREDIT.—No

22 amount shall be includible in gross income by reason

23 of a direct trustee-to-trustee transfer to a defined ben24 efit governmental plan (as defined in section 414(d))

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

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

3 such plan, or

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

5 not apply by reason of subsection (k)(3) there6 of.’’.

7 (b) 457 PLANS.—Subsection (e) of section 457 is

8 amended by adding after paragraph (16) the following new

9 paragraph:

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

11 PURCHASE PERMISSIVE SERVICE CREDIT.—No

12 amount shall be includible in gross income by reason

13 of a direct trustee-to-trustee transfer to a defined ben14 efit governmental plan (as defined in section 414(d))

15 if such transfer is—

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

17 credit (as defined in section 415(n)(3)(A)) under

18 such plan, or

19 ‘‘(B) a repayment to which section 415 does

20 not apply by reason of subsection (k)(3) there21 of.’’.

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

23 section shall apply to trustee-to-trustee transfers after De24 cember 31, 2001.
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1 SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR

2 PURPOSES OF CASH-OUT AMOUNTS.

3 (a) QUALIFIED PLANS.—

4 (1) AMENDMENT OF INTERNAL REVENUE

5 CODE.—Section 411(a)(11) (relating to restrictions on

6 certain mandatory distributions) is amended by add7 ing at the end the following:

8 ‘‘(D) SPECIAL RULE FOR ROLLOVER CON9 TRIBUTIONS.—A plan shall not fail to meet the

10 requirements of this paragraph if, under the

11 terms of the plan, the present value of the non12 forfeitable accrued benefit is determined without

13 regard to that portion of such benefit which is

14 attributable to rollover contributions (and earn15 ings allocable thereto). For purposes of this sub16 paragraph, the term ‘rollover contributions’

17 means any rollover contribution under sections

18 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),

19 and 457(e)(16).’’.

20 (2) AMENDMENT OF ERISA.—Section 203(e) of

21 the Employee Retirement Income Security Act of

22 1974 (29 U.S.C. 1053(c)) is amended by adding at

23 the end the following:

24 ‘‘(4) A plan shall not fail to meet the requirements of

25 this subsection if, under the terms of the plan, the present

26 value of the nonforfeitable accrued benefit is determined
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1 without regard to that portion of such benefit which is at2 tributable to rollover contributions (and earnings allocable

3 thereto). For purposes of this subparagraph, the term ‘roll4 over contributions’ means any rollover contribution under

5 sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and

6 457(e)(16) of the Internal Revenue Code of 1986.’’.

7 (b) ELIGIBLE DEFERRED COMPENSATION PLANS.—

8 Clause (i) of section 457(e)(9)(A) is amended by striking

9 ‘‘such amount’’ and inserting ‘‘the portion of such amount

10 which is not attributable to rollover contributions (as de11 fined in section 411(a)(11)(D))’’.

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

13 section shall apply to distributions after December 31, 2001.

14 SEC. 409. MINIMUM DISTRIBUTION AND INCLUSION RE15 QUIREMENTS FOR SECTION 457 PLANS.

16 (a) MINIMUM DISTRIBUTION REQUIREMENTS.—Para17 graph (2) of section 457(d) (relating to distribution require18 ments) is amended to read as follows:

19 ‘‘(2) MINIMUM DISTRIBUTION REQUIREMENTS.—

20 A plan meets the minimum distribution requirements

21 of this paragraph if such plan meets the requirements

22 of section 401(a)(9).’’.

23 (b) INCLUSION IN GROSS INCOME.—
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1 (1) YEAR OF INCLUSION.—Subsection (a) of sec2 tion 457 (relating to year of inclusion in gross in3 come) is amended to read as follows:

4 ‘‘(a) YEAR OF INCLUSION IN GROSS INCOME.—

5 ‘‘(1) IN GENERAL.—Any amount of compensa6 tion deferred under an eligible deferred compensation

7 plan, and any income attributable to the amounts so

8 deferred, shall be includible in gross income only for

9 the taxable year in which such compensation or other

10 income—

11 ‘‘(A) is paid to the participant or other ben12 eficiary, in the case of a plan of an eligible em13 ployer described in subsection (e)(1)(A), and

14 ‘‘(B) is paid or otherwise made available to

15 the participant or other beneficiary, in the case

16 of a plan of an eligible employer described in

17 subsection (e)(1)(B).

18 ‘‘(2) SPECIAL RULE FOR ROLLOVER AMOUNTS.—

19 To the extent provided in section 72(t)(9), section

20 72(t) shall apply to any amount includible in gross

21 income under this subsection.’’.

22 (2) CONFORMING AMENDMENTS.—

23 (A) So much of paragraph (9) of section

24 457(e) as precedes subparagraph (A) is amended

25 to read as follows:
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1 ‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION

2 PLANS NOT TREATED AS MADE AVAILABLE BY REASON

3 OF CERTAIN ELECTIONS, ETC.—In the case of an eligi4 ble deferred compensation plan of an employer de5 scribed in subsection (e)(1)(B)—’’.

6 (B) Section 457(d) is amended by adding at

7 the end the following new paragraph:

8 ‘‘(3) SPECIAL RULE FOR GOVERNMENT PLAN.—

9 An eligible deferred compensation plan of an em10 ployer described in subsection (e)(1)(A) shall not be

11 treated as failing to meet the requirements of this sub12 section solely by reason of making a distribution de13 scribed in subsection (e)(9)(A).’’.

14 (c) EFFECTIVE DATE.—The amendments made by this

15 section shall apply to distributions after December 31, 2001.

16 TITLE V—STRENGTHENING PEN17 SION SECURITY AND EN18 FORCEMENT

19 SEC. 501. REPEAL OF PERCENT OF CURRENT LIABILITY

20 FUNDING LIMIT.

21 (a) AMENDMENT OF INTERNAL REVENUE CODE.—Sec22 tion 412(c)(7) (relating to full-funding limitation) is

23 amended—

24 (1) by striking ‘‘the applicable percentage’’ in

25 subparagraph (A)(i)(I) and inserting ‘‘in the case of
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1 plan years beginning before January 1, 2004, the ap2 plicable percentage’’; and

3 (2) by amending subparagraph (F) to read as

4 follows:

5 ‘‘(F) APPLICABLE PERCENTAGE.—For pur6 poses of subparagraph (A)(i)(I), the applicable

7 percentage shall be determined in accordance

8 with the following table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

2002 .................................................................................... 165

2003 .................................................................................... 170.’’.

9 (b) AMENDMENT OF ERISA.—Section 302(c)(7) of the

10 Employee Retirement Income Security Act of 1974 (29

11 U.S.C. 1082(c)(7)) is amended—

12 (1) by striking ‘‘the applicable percentage’’ in

13 subparagraph (A)(i)(I) and inserting ‘‘in the case of

14 plan years beginning before January 1, 2004, the ap15 plicable percentage’’; and

16 (2) by amending subparagraph (F) to read as

17 follows:

18 ‘‘(F) APPLICABLE PERCENTAGE.—For pur19 poses of subparagraph (A)(i)(I), the applicable

20 percentage shall be determined in accordance

21 with the following table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

2002 .................................................................................... 165

2003 .................................................................................... 170.’’.
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1 (c) EFFECTIVE DATE.—The amendments made by this

2 section shall apply to plan years beginning after December

3 31, 2001.

4 SEC. 502. MAXIMUM CONTRIBUTION DEDUCTION RULES

5 MODIFIED AND APPLIED TO ALL DEFINED

6 BENEFIT PLANS.

7 (a) IN GENERAL.—Subparagraph (D) of section

8 404(a)(1) (relating to special rule in case of certain plans)

9 is amended to read as follows:

10 ‘‘(D) SPECIAL RULE IN CASE OF CERTAIN

11 PLANS.—

12 ‘‘(i) IN GENERAL.—In the case of any

13 defined benefit plan, except as provided in

14 regulations, the maximum amount deduct15 ible under the limitations of this paragraph

16 shall not be less than the unfunded termi17 nation liability (determined as if the pro18 posed termination date referred to in section

19 4041(b)(2)(A)(i)(II) of the Employee Retire20 ment Income Security Act of 1974 were the

21 last day of the plan year).

22 ‘‘(ii) PLANS WITH LESS THAN 100 PAR23 TICIPANTS.—For purposes of this subpara24 graph, in the case of a plan which has less

25 than 100 participants for the plan year,
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1 termination liability shall not include the

2 liability attributable to benefit increases for

3 highly compensated employees (as defined

4 in section 414(q)) resulting from a plan

5 amendment which is made or becomes effec6 tive, whichever is later, within the last 2

7 years before the termination date.

8 ‘‘(iii) RULE FOR DETERMINING NUM9 BER OF PARTICIPANTS.—For purposes of de10 termining whether a plan has more than

11 100 participants, all defined benefit plans

12 maintained by the same employer (or any

13 member of such employer’s controlled group

14 (within the meaning of section

15 412(l)(8)(C))) shall be treated as one plan,

16 but only employees of such member or em17 ployer shall be taken into account.

18 ‘‘(iv) PLANS MAINTAINED BY PROFES19 SIONAL SERVICE EMPLOYERS.—Clause (i)

20 shall not apply to a plan described in sec21 tion 4021(b)(13) of the Employee Retire22 ment Income Security Act of 1974.’’.

23 (b) CONFORMING AMENDMENT.—Paragraph (6) of sec24 tion 4972(c), as amended by section 207, is amended to read

25 as follows:
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1 ‘‘(6) EXCEPTIONS.—In determining the amount

2 of nondeductible contributions for any taxable year,

3 there shall not be taken into account so much of the

4 contributions to one or more defined contribution

5 plans which are not deductible when contributed sole6 ly because of section 404(a)(7) as does not exceed the

7 greater of—

8 ‘‘(A) the amount of contributions not in ex9 cess of 6 percent of compensation (within the

10 meaning of section 404(a)) paid or accrued (dur11 ing the taxable year for which the contributions

12 were made) to beneficiaries under the plans, or

13 ‘‘(B) the sum of—

14 ‘‘(i) the amount of contributions de15 scribed in section 401(m)(4)(A), plus

16 ‘‘(ii) the amount of contributions de17 scribed in section 402(g)(3)(A).

18 For purposes of this paragraph, the deductible limits

19 under section 404(a)(7) shall first be applied to

20 amounts contributed to a defined benefit plan and

21 then to amounts described in subparagraph (B).’’.

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

23 section shall apply to plan years beginning after December

24 31, 2001.
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1 SEC. 503. EXCISE TAX RELIEF FOR SOUND PENSION FUND2 ING.

3 (a) IN GENERAL.—Subsection (c) of section 4972 (re4 lating to nondeductible contributions) is amended by add5 ing at the end the following new paragraph:

6 ‘‘(7) DEFINED BENEFIT PLAN EXCEPTION.—In

7 determining the amount of nondeductible contribu8 tions for any taxable year, an employer may elect for

9 such year not to take into account any contributions

10 to a defined benefit plan except to the extent that such

11 contributions exceed the full-funding limitation (as

12 defined in section 412(c)(7), determined without re13 gard to subparagraph (A)(i)(I) thereof). For purposes

14 of this paragraph, the deductible limits under section

15 404(a)(7) shall first be applied to amounts contrib16 uted to defined contribution plans and then to

17 amounts described in this paragraph. If an employer

18 makes an election under this paragraph for a taxable

19 year, paragraph (6) shall not apply to such employer

20 for such taxable year.’’.

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

22 section shall apply to years beginning after December 31,

23 2001.
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1 SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY

2 DEFINED BENEFIT PLANS SIGNIFICANTLY RE3 DUCING FUTURE BENEFIT ACCRUALS.

4 (a) AMENDMENT OF INTERNAL REVENUE CODE.—

5 (1) IN GENERAL.—Chapter 43 (relating to quali6 fied pension, etc., plans) is amended by adding at the

7 end the following new section:

8 ‘‘SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING

9 BENEFIT ACCRUALS TO SATISFY NOTICE RE10 QUIREMENTS.

11 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed a

12 tax on the failure of any applicable pension plan to meet

13 the requirements of subsection (e) with respect to any appli14 cable individual.

15 ‘‘(b) AMOUNT OF TAX.—

16 ‘‘(1) IN GENERAL.—The amount of the tax im17 posed by subsection (a) on any failure with respect to

18 any applicable individual shall be $100 for each day

19 in the noncompliance period with respect to such fail20 ure.

21 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes of

22 this section, the term ‘noncompliance period’ means,

23 with respect to any failure, the period beginning on

24 the date the failure first occurs and ending on the

25 date the notice to which the failure relates is provided

26 or the failure is otherwise corrected.
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1 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—

2 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

3 DISCOVERED AND REASONABLE DILIGENCE EXER4 CISED.—No tax shall be imposed by subsection (a) on

5 any failure during any period for which it is estab6 lished to the satisfaction of the Secretary that any

7 person subject to liability for the tax under subsection

8 (d) did not know that the failure existed and exercised

9 reasonable diligence to meet the requirements of sub10 section (e).

11 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR12 RECTED WITHIN 30 DAYS.—No tax shall be imposed

13 by subsection (a) on any failure if—

14 ‘‘(A) any person subject to liability for the

15 tax under subsection (d) exercised reasonable

16 diligence to meet the requirements of subsection

17 (e), and

18 ‘‘(B) such person provides the notice de19 scribed in subsection (e) during the 30-day pe20 riod beginning on the first date such person

21 knew, or exercising reasonable diligence would

22 have known, that such failure existed.

23 ‘‘(3) OVERALL LIMITATION FOR UNINTENTIONAL

24 FAILURES.—
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1 ‘‘(A) IN GENERAL.—If the person subject to

2 liability for tax under subsection (d) exercised

3 reasonable diligence to meet the requirements of

4 subsection (e), the tax imposed by subsection (a)

5 for failures during the taxable year of the em6 ployer (or, in the case of a multiemployer plan,

7 the taxable year of the trust forming part of the

8 plan) shall not exceed $500,000. For purposes of

9 the preceding sentence, all multiemployer plans

10 of which the same trust forms a part shall be

11 treated as 1 plan.

12 ‘‘(B) TAXABLE YEARS IN THE CASE OF CER13 TAIN CONTROLLED GROUPS.—For purposes of

14 this paragraph, if all persons who are treated as

15 a single employer for purposes of this section do

16 not have the same taxable year, the taxable years

17 taken into account shall be determined under

18 principles similar to the principles of section

19 1561.

20 ‘‘(4) WAIVER BY SECRETARY.—In the case of a

21 failure which is due to reasonable cause and not to

22 willful neglect, the Secretary may waive part or all

23 of the tax imposed by subsection (a) to the extent that

24 the payment of such tax would be excessive or other25 wise inequitable relative to the failure involved.
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1 ‘‘(d) LIABILITY FOR TAX.—The following shall be lia2 ble for the tax imposed by subsection (a):

3 ‘‘(1) In the case of a plan other than a multiem4 ployer plan, the employer.

5 ‘‘(2) In the case of a multiemployer plan, the

6 plan.

7 ‘‘(e) NOTICE REQUIREMENTS FOR PLANS SIGNIFI8 CANTLY REDUCING BENEFIT ACCRUALS.—

9 ‘‘(1) IN GENERAL.—If an applicable pension

10 plan is amended to provide for a significant reduc11 tion in the rate of future benefit accrual, the plan ad12 ministrator shall provide written notice to each ap13 plicable individual (and to each employee organiza14 tion representing applicable individuals).

15 ‘‘(2) NOTICE.—The notice required by paragraph

16 (1) shall be written in a manner calculated to be un17 derstood by the average plan participant and shall

18 provide sufficient information (as determined in ac19 cordance with regulations prescribed by the Sec20 retary) to allow applicable individuals to understand

21 the effect of the plan amendment. The Secretary may

22 provide a simplified form of notice for, or exempt

23 from any notice requirement, a plan—

24 ‘‘(A) which has fewer than 100 participants

25 who have accrued a benefit under the plan, or
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1 ‘‘(B) which offers participants the option to

2 choose between the new benefit formula and the

3 old benefit formula.

4 ‘‘(3) TIMING OF NOTICE.—Except as provided in

5 regulations, the notice required by paragraph (1)

6 shall be provided within a reasonable time before the

7 effective date of the plan amendment.

8 ‘‘(4) DESIGNEES.—Any notice under paragraph

9 (1) may be provided to a person designated, in writ10 ing, by the person to which it would otherwise be pro11 vided.

12 ‘‘(5) NOTICE BEFORE ADOPTION OF AMEND13 MENT.—A plan shall not be treated as failing to meet

14 the requirements of paragraph (1) merely because no15 tice is provided before the adoption of the plan

16 amendment if no material modification of the amend17 ment occurs before the amendment is adopted.

18 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur19 poses of this section—

20 ‘‘(1) APPLICABLE INDIVIDUAL.—The term ‘appli21 cable individual’ means, with respect to any plan

22 amendment—

23 ‘‘(A) each participant in the plan, and

24 ‘‘(B) any beneficiary who is an alternate

25 payee (within the meaning of section 414(p)(8))
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1 under an applicable qualified domestic relations

2 order (within the meaning of section

3 414(p)(1)(A)),

4 whose rate of future benefit accrual under the plan

5 may reasonably be expected to be significantly re6 duced by such plan amendment.

7 ‘‘(2) APPLICABLE PENSION PLAN.—The term ‘ap8 plicable pension plan’ means—

9 ‘‘(A) any defined benefit plan, or

10 ‘‘(B) an individual account plan which is

11 subject to the funding standards of section 412.

12 Such term shall not include a governmental plan

13 (within the meaning of section 414(d)) or a church

14 plan (within the meaning of section 414(e)) with re15 spect to which the election provided by section 410(d)

16 has not been made.

17 ‘‘(3) EARLY RETIREMENT.—A plan amendment

18 which eliminates or significantly reduces any early

19 retirement benefit or retirement-type subsidy (within

20 the meaning of section 411(d)(6)(B)(i)) shall be treat21 ed as having the effect of significantly reducing the

22 rate of future benefit accrual.

23 ‘‘(g) NEW TECHNOLOGIES.—The Secretary may by

24 regulations allow any notice under subsection (e) to be pro25 vided by using new technologies.’’.
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1 (2) CLERICAL AMENDMENT.—The table of sec2 tions for chapter 43 is amended by adding at the end

3 the following new item:

‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals

to satisfy notice requirements.’’.

4 (b) AMENDMENT OF ERISA.—Section 204(h) of the

5 Employee Retirement Income Security Act of 1974 (29

6 U.S.C. 1054(h)) is amended by adding at the end the fol7 lowing new paragraphs:

8 ‘‘(3)(A) An applicable pension plan to which para9 graph (1) applies shall not be treated as meeting the re10 quirements of such paragraph unless, in addition to any

11 notice required to be provided to an individual or organiza12 tion under such paragraph, the plan administrator pro13 vides the notice described in subparagraph (B) to each ap14 plicable individual (and to each employee organization rep15 resenting applicable individuals).

16 ‘‘(B) The notice required by subparagraph (A) shall

17 be written in a manner calculated to be understood by the

18 average plan participant and shall provide sufficient infor19 mation (as determined in accordance with regulations pre20 scribed by the Secretary of the Treasury) to allow applicable

21 individuals to understand the effect of the plan amendment.

22 The Secretary of the Treasury may provide a simplified

23 form of notice for, or exempt from any notice requirement,

24 a plan—
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1 ‘‘(i) which has fewer than 100 participants who

2 have accrued a benefit under the plan, or

3 ‘‘(ii) which offers participants the option to

4 choose between the new benefit formula and the old

5 benefit formula.

6 ‘‘(C) Except as provided in regulations prescribed by

7 the Secretary of the Treasury, the notice required by sub8 paragraph (A) shall be provided within a reasonable time

9 before the effective date of the plan amendment.

10 ‘‘(D) Any notice under subparagraph (A) may be pro11 vided to a person designated, in writing, by the person to

12 which it would otherwise be provided.

13 ‘‘(E) A plan shall not be treated as failing to meet

14 the requirements of subparagraph (A) merely because notice

15 is provided before the adoption of the plan amendment if

16 no material modification of the amendment occurs before

17 the amendment is adopted.

18 ‘‘(F) The Secretary of the Treasury may by regulations

19 allow any notice under this paragraph to be provided by

20 using new technologies.

21 ‘‘(4) For purposes of paragraph (3)—

22 ‘‘(A) The term ‘applicable individual’ means,

23 with respect to any plan amendment—

24 ‘‘(i) each participant in the plan; and
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1 ‘‘(ii) any beneficiary who is an alternate

2 payee (within the meaning of section

3 206(d)(3)(K)) under an applicable qualified do4 mestic relations order (within the meaning of

5 section 206(d)(3)(B)(i)),

6 whose rate of future benefit accrual under the plan

7 may reasonably be expected to be significantly re8 duced by such plan amendment.

9 ‘‘(B) The term ‘applicable pension plan’

10 means—

11 ‘‘(i) any defined benefit plan; or

12 ‘‘(ii) an individual account plan which is

13 subject to the funding standards of section 412 of

14 the Internal Revenue Code of 1986.

15 ‘‘(C) A plan amendment which eliminates or sig16 nificantly reduces any early retirement benefit or re17 tirement-type subsidy (within the meaning of sub18 section (g)(2)(A)) shall be treated as having the effect

19 of significantly reducing the rate of future benefit ac20 crual.’’.

21 (c) EFFECTIVE DATES.—

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

23 this section shall apply to plan amendments taking

24 effect on or after the date of the enactment of this Act.
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1 (2) TRANSITION.—Until such time as the Sec2 retary of the Treasury issues regulations under sec3 tions 4980F(e)(2) and (3) of the Internal Revenue

4 Code of 1986, and section 204(h)(3) of the Employee

5 Retirement Income Security Act of 1974, as added by

6 the amendments made by this section, a plan shall be

7 treated as meeting the requirements of such sections

8 if it makes a good faith effort to comply with such re9 quirements.

10 (3) SPECIAL NOTICE RULE.—

11 (A) IN GENERAL.—The period for providing

12 any notice required by the amendments made by

13 this section shall not end before the date which

14 is 3 months after the date of the enactment of

15 this Act.

16 (B) REASONABLE NOTICE.—The amend17 ments made by this section shall not apply to

18 any plan amendment taking effect on or after the

19 date of the enactment of this Act if, before April

20 25, 2001, notice was provided to participants

21 and beneficiaries adversely affected by the plan

22 amendment (or their representatives) which was

23 reasonably expected to notify them of the nature

24 and effective date of the plan amendment.
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1 (d) STUDY.—The Secretary of the Treasury shall pre2 pare a report on the effects of conversions of traditional de3 fined benefit plans to cash balance or hybrid formula plans.

4 Such study shall examine the effect of such conversions on

5 longer service participants, including the incidence and ef6 fects of ‘‘wear away’’ provisions under which participants

7 earn no additional benefits for a period of time after the

8 conversion. As soon as practicable, but not later than 60

9 days after the date of the enactment of this Act, the Sec10 retary shall submit such report, together with recommenda11 tions thereon, to the Committee on Ways and Means and

12 the Committee on Education and the Workforce of the

13 House of Representatives and the Committee on Finance

14 and the Committee on Health, Education, Labor, and Pen15 sions of the Senate.

16 SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER

17 SECTION 415.

18 (a) COMPENSATION LIMIT.—

19 (1) IN GENERAL.—Paragraph (11) of section

20 415(b) (relating to limitation for defined benefit

21 plans) is amended to read as follows:

22 ‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN23 MENTAL AND MULTIEMPLOYER PLANS.—In the case of

24 a governmental plan (as defined in section 414(d)) or
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1 a multiemployer plan (as defined in section 414(f)),

2 subparagraph (B) of paragraph (1) shall not apply.’’.

3 (2) CONFORMING AMENDMENT.—Section

4 415(b)(7) (relating to benefits under certain collec5 tively bargained plans) is amended by inserting

6 ‘‘(other than a multiemployer plan)’’ after ‘‘defined

7 benefit plan’’ in the matter preceding subparagraph

8 (A).

9 (b) COMBINING AND AGGREGATION OF PLANS.—

10 (1) COMBINING OF PLANS.—Subsection (f) of sec11 tion 415 (relating to combining of plans) is amended

12 by adding at the end the following:

13 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER PLANS.—

14 Notwithstanding paragraph (1) and subsection (g), a

15 multiemployer plan (as defined in section 414(f))

16 shall not be combined or aggregated—

17 ‘‘(A) with any other plan which is not a

18 multiemployer plan for purposes of applying

19 subsection (b)(1)(B) to such other plan, or

20 ‘‘(B) with any other multiemployer plan for

21 purposes of applying the limitations established

22 in this section.’’.

23 (2) CONFORMING AMENDMENT FOR AGGREGATION

24 OF PLANS.—Subsection (g) of section 415 (relating to

25 aggregation of plans) is amended by striking ‘‘The
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1 Secretary’’ and inserting ‘‘Except as provided in sub2 section (f)(3), the Secretary’’.

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

4 section shall apply to years beginning after December 31,

5 2001.

6 SEC. 506. PROTECTION OF INVESTMENT OF EMPLOYEE

7 CONTRIBUTIONS TO 401(K) PLANS.

8 (a) IN GENERAL.—Section 1524(b) of the Taxpayer

9 Relief Act of 1997 is amended to read as follows:

10 ‘‘(b) EFFECTIVE DATE.—

11 ‘‘(1) IN GENERAL.—Except as provided in para12 graph (2), the amendments made by this section shall

13 apply to elective deferrals for plan years beginning

14 after December 31, 1998.

15 ‘‘(2) NONAPPLICATION TO PREVIOUSLY ACQUIRED

16 PROPERTY.—The amendments made by this section

17 shall not apply to any elective deferral which is in18 vested in assets consisting of qualifying employer se19 curities, qualifying employer real property, or both, if

20 such assets were acquired before January 1, 1999.’’.

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

22 section shall apply as if included in the provision of the

23 Taxpayer Relief Act of 1997 to which it relates.
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1 SEC. 507. PERIODIC PENSION BENEFITS STATEMENTS.

2 (a) IN GENERAL.—Section 105(a) of the Employee Re3 tirement Income Security Act of 1974 (29 U.S.C. 1025 (a))

4 is amended to read as follows:

5 ‘‘(a)(1) Except as provided in paragraph (2)—

6 ‘‘(A) the administrator of an individual account

7 plan shall furnish a pension benefit statement—

8 ‘‘(i) to a plan participant at least once an9 nually, and

10 ‘‘(ii) to a plan beneficiary upon written re11 quest, and

12 ‘‘(B) the administrator of a defined benefit plan

13 shall furnish a pension benefit statement—

14 ‘‘(i) at least once every 3 years to each par15 ticipant with a nonforfeitable accrued benefit

16 who is employed by the employer maintaining

17 the plan at the time the statement is furnished

18 to participants, and

19 ‘‘(ii) to a plan participant or plan bene20 ficiary of the plan upon written request.

21 ‘‘(2) Notwithstanding paragraph (1), the adminis22 trator of a plan to which more than 1 unaffiliated employer

23 is required to contribute shall only be required to furnish

24 a pension benefit statement under paragraph (1) upon the

25 written request of a participant or beneficiary of the plan.
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1 ‘‘(3) A pension benefit statement under paragraph

2 (1)—

3 ‘‘(A) shall indicate, on the basis of the latest

4 available information—

5 ‘‘(i) the total benefits accrued, and

6 ‘‘(ii) the nonforfeitable pension benefits, if

7 any, which have accrued, or the earliest date on

8 which benefits will become nonforfeitable,

9 ‘‘(B) shall be written in a manner calculated to

10 be understood by the average plan participant, and

11 ‘‘(C) may be provided in written, electronic, tele12 phonic, or other appropriate form.

13 ‘‘(4)(A) In the case of a defined benefit plan, the re14 quirements of paragraph (1)(B)(i) shall be treated as met

15 with respect to a participant if the administrator provides

16 the participant at least once each year with notice of the

17 availability of the pension benefit statement and the ways

18 in which the participant may obtain such statement. Such

19 notice shall be provided in written, electronic, telephonic,

20 or other appropriate form, and may be included with other

21 communications to the participant if done in a manner

22 reasonably designed to attract the attention of the partici23 pant.

24 ‘‘(B) The Secretary may provide that years in which

25 no employee or former employee benefits (within the mean-
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1 ing of section 410(b) of the Internal Revenue Code of 1986)

2 under the plan need not be taken into account in deter3 mining the 3-year period under paragraph (1)(B)(i).’’.

4 (b) CONFORMING AMENDMENTS.—

5 (1) Section 105 of the Employee Retirement In6 come Security Act of 1974 (29 U.S.C. 1025) is

7 amended by striking subsection (d).

8 (2) Section 105(b) of such Act (29 U.S.C.

9 1025(b)) is amended to read as follows:

10 ‘‘(b) In no case shall a participant or beneficiary of

11 a plan be entitled to more than one statement described in

12 subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is applica13 ble, in any 12-month period.’’.

14 (c) EFFECTIVE DATE.—The amendments made by this

15 section shall apply to plan years beginning after December

16 31, 2002.

17 SEC. 508. PROHIBITED ALLOCATIONS OF STOCK IN S COR18 PORATION ESOP.

19 (a) IN GENERAL.—Section 409 (relating to qualifica20 tions for tax credit employee stock ownership plans) is

21 amended by redesignating subsection (p) as subsection (q)

22 and by inserting after subsection (o) the following new sub23 section:

24 ‘‘(p) PROHIBITED ALLOCATIONS OF SECURITIES IN AN

25 S CORPORATION.—
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1 ‘‘(1) IN GENERAL.—An employee stock ownership

2 plan holding employer securities consisting of stock in

3 an S corporation shall provide that no portion of the

4 assets of the plan attributable to (or allocable in lieu

5 of) such employer securities may, during a nonalloca6 tion year, accrue (or be allocated directly or indi7 rectly under any plan of the employer meeting the re8 quirements of section 401(a)) for the benefit of any

9 disqualified person.

10 ‘‘(2) FAILURE TO MEET REQUIREMENTS.—

11 ‘‘(A) IN GENERAL.—If a plan fails to meet

12 the requirements of paragraph (1), the plan shall

13 be treated as having distributed to any disquali14 fied person the amount allocated to the account

15 of such person in violation of paragraph (1) at

16 the time of such allocation.

17 ‘‘(B) CROSS REFERENCE.—

‘‘For excise tax relating to violations of paragraph

(1) and ownership of synthetic equity, see section

4979A.

18 ‘‘(3) NONALLOCATION YEAR.—For purposes of

19 this subsection—

20 ‘‘(A) IN GENERAL.—The term ‘nonalloca21 tion year’ means any plan year of an employee

22 stock ownership plan if, at any time during such

23 plan year—
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1 ‘‘(i) such plan holds employer securi2 ties consisting of stock in an S corporation,

3 and

4 ‘‘(ii) disqualified persons own at least

5 50 percent of the number of shares of stock

6 in the S corporation.

7 ‘‘(B) ATTRIBUTION RULES.—For purposes

8 of subparagraph (A)—

9 ‘‘(i) IN GENERAL.—The rules of section

10 318(a) shall apply for purposes of deter11 mining ownership, except that—

12 ‘‘(I) in applying paragraph (1)

13 thereof, the members of an individual’s

14 family shall include members of the

15 family described in paragraph (4)(D),

16 and

17 ‘‘(II) paragraph (4) thereof shall

18 not apply.

19 ‘‘(ii) DEEMED-OWNED SHARES.—Not20 withstanding the employee trust exception

21 in section 318(a)(2)(B)(i), individual shall

22 be treated as owning deemed-owned shares

23 of the individual.

24 Solely for purposes of applying paragraph (5),

25 this subparagraph shall be applied after the at-
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1 tribution rules of paragraph (5) have been ap2 plied.

3 ‘‘(4) DISQUALIFIED PERSON.—For purposes of

4 this subsection—

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

6 person’ means any person if—

7 ‘‘(i) the aggregate number of deemed8 owned shares of such person and the mem9 bers of such person’s family is at least 20

10 percent of the number of deemed-owned

11 shares of stock in the S corporation, or

12 ‘‘(ii) in the case of a person not de13 scribed in clause (i), the number of deemed14 owned shares of such person is at least 10

15 percent of the number of deemed-owned

16 shares of stock in such corporation.

17 ‘‘(B) TREATMENT OF FAMILY MEMBERS.—

18 In the case of a disqualified person described in

19 subparagraph (A)(i), any member of such per20 son’s family with deemed-owned shares shall be

21 treated as a disqualified person if not otherwise

22 treated as a disqualified person under subpara23 graph (A).

24 ‘‘(C) DEEMED-OWNED SHARES.—
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1 ‘‘(i) IN GENERAL.—The term ‘deemed2 owned shares’ means, with respect to any

3 person—

4 ‘‘(I) the stock in the S corporation

5 constituting employer securities of an

6 employee stock ownership plan which

7 is allocated to such person under the

8 plan, and

9 ‘‘(II) such person’s share of the

10 stock in such corporation which is held

11 by such plan but which is not allocated

12 under the plan to participants.

13 ‘‘(ii) PERSON’S SHARE OF

14 UNALLOCATED STOCK.—For purposes of

15 clause (i)(II), a person’s share of

16 unallocated S corporation stock held by

17 such plan is the amount of the unallocated

18 stock which would be allocated to such per19 son if the unallocated stock were allocated to

20 all participants in the same proportions as

21 the most recent stock allocation under the

22 plan.

23 ‘‘(D) MEMBER OF FAMILY.—For purposes of

24 this paragraph, the term ‘member of the family’

25 means, with respect to any individual—
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1 ‘‘(i) the spouse of the individual,

2 ‘‘(ii) an ancestor or lineal descendant

3 of the individual or the individual’s spouse,

4 ‘‘(iii) a brother or sister of the indi5 vidual or the individual’s spouse and any

6 lineal descendant of the brother or sister,

7 and

8 ‘‘(iv) the spouse of any individual de9 scribed in clause (ii) or (iii).

10 A spouse of an individual who is legally sepa11 rated from such individual under a decree of di12 vorce or separate maintenance shall not be treat13 ed as such individual’s spouse for purposes of

14 this subparagraph.

15 ‘‘(5) TREATMENT OF SYNTHETIC EQUITY.—For

16 purposes of paragraphs (3) and (4), in the case of a

17 person who owns synthetic equity in the S corpora18 tion, except to the extent provided in regulations, the

19 shares of stock in such corporation on which such

20 synthetic equity is based shall be treated as out21 standing stock in such corporation and deemed-owned

22 shares of such person if such treatment of synthetic

23 equity of 1 or more such persons results in—

24 ‘‘(A) the treatment of any person as a dis25 qualified person, or
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1 ‘‘(B) the treatment of any year as a non2 allocation year.

3 For purposes of this paragraph, synthetic equity shall

4 be treated as owned by a person in the same manner

5 as stock is treated as owned by a person under the

6 rules of paragraphs (2) and (3) of section 318(a). If,

7 without regard to this paragraph, a person is treated

8 as a disqualified person or a year is treated as a non9 allocation year, this paragraph shall not be construed

10 to result in the person or year not being so treated.

11 ‘‘(6) DEFINITIONS.—For purposes of this

12 subsection—

13 ‘‘(A) EMPLOYEE STOCK OWNERSHIP

14 PLAN.—The term ‘employee stock ownership

15 plan’ has the meaning given such term by sec16 tion 4975(e)(7).

17 ‘‘(B) EMPLOYER SECURITIES.—The term

18 ‘employer security’ has the meaning given such

19 term by section 409(l).

20 ‘‘(C) SYNTHETIC EQUITY.—The term ‘syn21 thetic equity’ means any stock option, warrant,

22 restricted stock, deferred issuance stock right, or

23 similar interest or right that gives the holder the

24 right to acquire or receive stock of the S corpora25 tion in the future. Except to the extent provided
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1 in regulations, synthetic equity also includes a

2 stock appreciation right, phantom stock unit, or

3 similar right to a future cash payment based on

4 the value of such stock or appreciation in such

5 value.

6 ‘‘(7) REGULATIONS.—The Secretary shall pre7 scribe such regulations as may be necessary to carry

8 out the purposes of this subsection.’’.

9 (b) COORDINATION WITH SECTION 4975(e)(7).—The

10 last sentence of section 4975(e)(7) (defining employee stock

11 ownership plan) is amended by inserting ‘‘, section 409(p),’’

12 after ‘‘409(n)’’.

13 (c) EXCISE TAX.—

14 (1) APPLICATION OF TAX.—Subsection (a) of sec15 tion 4979A (relating to tax on certain prohibited allo16 cations of employer securities) is amended—

17 (A) by striking ‘‘or’’ at the end of para18 graph (1), and

19 (B) by striking all that follows paragraph

20 (2) and inserting the following:

21 ‘‘(3) there is any allocation of employer securi22 ties which violates the provisions of section 409(p), or

23 a nonallocation year described in subsection (e)(2)(C)

24 with respect to an employee stock ownership plan, or
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1 ‘‘(4) any synthetic equity is owned by a dis2 qualified person in any nonallocation year,

3 there is hereby imposed a tax on such allocation or owner4 ship equal to 50 percent of the amount involved.’’.

5 (2) LIABILITY.—Section 4979A(c) (defining li6 ability for tax) is amended to read as follows:

7 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

8 section shall be paid—

9 ‘‘(1) in the case of an allocation referred to in

10 paragraph (1) or (2) of subsection (a), by—

11 ‘‘(A) the employer sponsoring such plan, or

12 ‘‘(B) the eligible worker-owned cooperative,

13 which made the written statement described in section

14 664(g)(1)(E) or in section 1042(b)(3)(B) (as the case

15 may be), and

16 ‘‘(2) in the case of an allocation or ownership re17 ferred to in paragraph (3) or (4) of subsection (a), by

18 the S corporation the stock in which was so allocated

19 or owned.’’.

20 (3) DEFINITIONS.—Section 4979A(e) (relating to

21 definitions) is amended to read as follows:

22 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur23 poses of this section—

24 ‘‘(1) DEFINITIONS.—Except as provided in para25 graph (2), terms used in this section have the same
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1 respective meanings as when used in sections 409 and

2 4978.

3 ‘‘(2) SPECIAL RULES RELATING TO TAX IMPOSED

4 BY REASON OF PARAGRAPH (3)OR (4)OF SUBSECTION

5 (a).—

6 ‘‘(A) PROHIBITED ALLOCATIONS.—The

7 amount involved with respect to any tax imposed

8 by reason of subsection (a)(3) is the amount allo9 cated to the account of any person in violation

10 of section 409(p)(1).

11 ‘‘(B) SYNTHETIC EQUITY.—The amount in12 volved with respect to any tax imposed by reason

13 of subsection (a)(4) is the value of the shares on

14 which the synthetic equity is based.

15 ‘‘(C) SPECIAL RULE DURING FIRST NON16 ALLOCATION YEAR.—For purposes of subpara17 graph (A), the amount involved for the first non18 allocation year of any employee stock ownership

19 plan shall be determined by taking into account

20 the total value of all the deemed-owned shares of

21 all disqualified persons with respect to such

22 plan.

23 ‘‘(D) STATUTE OF LIMITATIONS.—The stat24 utory period for the assessment of any tax im25 posed by this section by reason of paragraph (3)
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1 or (4) of subsection (a) shall not expire before the

2 date which is 3 years from the later of—

3 ‘‘(i) the allocation or ownership re4 ferred to in such paragraph giving rise to

5 such tax, or

6 ‘‘(ii) the date on which the Secretary is

7 notified of such allocation or ownership.’’.

8 (d) EFFECTIVE DATES.—

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

10 this section shall apply to plan years beginning after

11 December 31, 2004.

12 (2) EXCEPTION FOR CERTAIN PLANS.—In the

13 case of any—

14 (A) employee stock ownership plan estab15 lished after March 14, 2001, or

16 (B) employee stock ownership plan estab17 lished on or before such date if employer securi18 ties held by the plan consist of stock in a cor19 poration with respect to which an election under

20 section 1362(a) of the Internal Revenue Code of

21 1986 is not in effect on such date,

22 the amendments made by this section shall apply to

23 plan years ending after March 14, 2001.
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1 TITLE VI—REDUCING

2 REGULATORY BURDENS

3 SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.

4 (a) AMENDMENT OF INTERNAL REVENUE CODE.—

5 Paragraph (9) of section 412(c) (relating to annual valu6 ation) is amended to read as follows:

7 ‘‘(9) ANNUAL VALUATION.—

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

9 section, a determination of experience gains and

10 losses and a valuation of the plan’s liability

11 shall be made not less frequently than once every

12 year, except that such determination shall be

13 made more frequently to the extent required in

14 particular cases under regulations prescribed by

15 the Secretary.

16 ‘‘(B) VALUATION DATE.—

17 ‘‘(i) CURRENT YEAR.—Except as pro18 vided in clause (ii), the valuation referred

19 to in subparagraph (A) shall be made as of

20 a date within the plan year to which the

21 valuation refers or within one month prior

22 to the beginning of such year.

23 ‘‘(ii) ELECTION TO USE PRIOR YEAR

24 VALUATION.—The valuation referred to in

25 subparagraph (A) may be made as of a date
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1 within the plan year prior to the year to

2 which the valuation refers if—

3 ‘‘(I) an election is in effect under

4 this clause with respect to the plan,

5 and

6 ‘‘(II) as of such date, the value of

7 the assets of the plan are not less than

8 125 percent of the plan’s current liabil9 ity (as defined in paragraph (7)(B)).

10 ‘‘(iii) ADJUSTMENTS.—Information

11 under clause (ii) shall, in accordance with

12 regulations, be actuarially adjusted to re13 flect significant differences in participants.

14 ‘‘(iv) ELECTION.—An election under

15 clause (ii), once made, shall be irrevocable

16 without the consent of the Secretary.’’.

17 (b) AMENDMENT OF ERISA.—Paragraph (9) of sec18 tion 302(c) of the Employee Retirement Income Security

19 Act of 1974 (29 U.S.C. 1053(c)) is amended—

20 (1) by inserting ‘‘(A)’’ after ‘‘(9)’’; and

21 (2) by adding at the end the following:

22 ‘‘(B)(i) Except as provided in clause (ii), the valuation

23 referred to in subparagraph (A) shall be made as of a date

24 within the plan year to which the valuation refers or within

25 one month prior to the beginning of such year.
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1 ‘‘(ii) The valuation referred to in subparagraph (A)

2 may be made as of a date within the plan year prior to

3 the year to which the valuation refers if—

4 ‘‘(I) an election is in effect under this clause

5 with respect to the plan; and

6 ‘‘(II) as of such date, the value of the assets of

7 the plan are not less than 125 percent of the plan’s

8 current liability (as defined in paragraph (7)(B)).

9 ‘‘(iii) Information under clause (ii) shall, in accord10 ance with regulations, be actuarially adjusted to reflect sig11 nificant differences in participants.

12 ‘‘(iv) An election under clause (ii), once made, shall

13 be irrevocable without the consent of the Secretary of the

14 Treasury.’’.

15 (c) EFFECTIVE DATE.—The amendments made by this

16 section shall apply to plan years beginning after December

17 31, 2001.

18 SEC. 602. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT

19 LOSS OF DIVIDEND DEDUCTION.

20 (a) IN GENERAL.—Section 404(k)(2)(A) (defining ap21 plicable dividends) is amended by striking ‘‘or’’ at the end

22 of clause (ii), by redesignating clause (iii) as clause (iv),

23 and by inserting after clause (ii) the following new clause:

24 ‘‘(iii) is, at the election of such partici25 pants or their beneficiaries—
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1 ‘‘(I) payable as provided in clause

2 (i) or (ii), or

3 ‘‘(II) paid to the plan and rein4 vested in qualifying employer securi5 ties, or’’.

6 (b) STANDARDS FOR DISALLOWANCE.—Section

7 404(k)(5)(A) (relating to disallowance of deduction) is

8 amended by inserting ‘‘avoidance or’’ before ‘‘evasion’’.

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

10 section shall apply to taxable years beginning after Decem11 ber 31, 2001.

12 SEC. 603. REPEAL OF TRANSITION RULE RELATING TO CER13 TAIN HIGHLY COMPENSATED EMPLOYEES.

14 (a) IN GENERAL.—Paragraph (4) of section 1114(c)

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

16 (b) EFFECTIVE DATE.—The repeal made by subsection

17 (a) shall apply to plan years beginning after December 31,

18 2001.

19 SEC. 604. EMPLOYEES OF TAX-EXEMPT ENTITIES.

20 (a) IN GENERAL.—The Secretary of the Treasury shall

21 modify Treasury Regulations section 1.410(b)–6(g) to pro22 vide that employees of an organization described in section

23 403(b)(1)(A)(i) of the Internal Revenue Code of 1986 who

24 are eligible to make contributions under section 403(b) of

25 such Code pursuant to a salary reduction agreement may
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1 be treated as excludable with respect to a plan under section

2 401(k) or (m) of such Code that is provided under the same

3 general arrangement as a plan under such section 401(k),

4 if—

5 (1) no employee of an organization described in

6 section 403(b)(1)(A)(i) of such Code is eligible to par7 ticipate in such section 401(k) plan or section 401(m)

8 plan; and

9 (2) 95 percent of the employees who are not em10 ployees of an organization described in section

11 403(b)(1)(A)(i) of such Code are eligible to partici12 pate in such plan under such section 401(k) or (m).

13 (b) EFFECTIVE DATE.—The modification required by

14 subsection (a) shall apply as of the same date set forth in

15 section 1426(b) of the Small Business Job Protection Act

16 of 1996.

17 SEC. 605. CLARIFICATION OF TREATMENT OF EMPLOYER18 PROVIDED RETIREMENT ADVICE.

19 (a) IN GENERAL.—Subsection (a) of section 132 (relat20 ing to exclusion from gross income) is amended by striking

21 ‘‘or’’ at the end of paragraph (5), by striking the period

22 at the end of paragraph (6) and inserting ‘‘, or’’, and by

23 adding at the end the following new paragraph:

24 ‘‘(7) qualified retirement planning services.’’.
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1 (b) QUALIFIED RETIREMENT PLANNING SERVICES DE2 FINED.—Section 132 is amended by redesignating sub3 section (m) as subsection (n) and by inserting after sub4 section (l) the following:

5 ‘‘(m) QUALIFIED RETIREMENT PLANNING SERV6 ICES.—

7 ‘‘(1) IN GENERAL.—For purposes of this section,

8 the term ‘qualified retirement planning services’

9 means any retirement planning advice or informa10 tion provided to an employee and his spouse by an

11 employer maintaining a qualified employer plan.

12 ‘‘(2) NONDISCRIMINATION RULE.—Subsection

13 (a)(7) shall apply in the case of highly compensated

14 employees only if such services are available on sub15 stantially the same terms to each member of the group

16 of employees normally provided education and infor17 mation regarding the employer’s qualified employer

18 plan.

19 ‘‘(3) QUALIFIED EMPLOYER PLAN.—For purposes

20 of this subsection, the term ‘qualified employer plan’

21 means a plan, contract, pension, or account described

22 in section 219(g)(5).’’.

23 (c) EFFECTIVE DATE.—The amendments made by this

24 section shall apply to years beginning after December 31,

25 2001.
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1 SEC. 606. REPORTING SIMPLIFICATION.

2 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

3 OWNERS AND THEIR SPOUSES.—

4 (1) IN GENERAL.—The Secretary of the Treasury

5 and the Secretary of Labor shall modify the require6 ments for filing annual returns with respect to one7 participant retirement plans to ensure that such

8 plans with assets of $250,000 or less as of the close

9 of the plan year need not file a return for that year.

10 (2) ONE-PARTICIPANT RETIREMENT PLAN DE11 FINED.—For purposes of this subsection, the term

12 ‘‘one-participant retirement plan’’ means a retire13 ment plan that—

14 (A) on the first day of the plan year—

15 (i) covered only the employer (and the

16 employer’s spouse) and the employer owned

17 the entire business (whether or not incor18 porated); or

19 (ii) covered only one or more partners

20 (and their spouses) in a business partner21 ship (including partners in an S or C cor22 poration);

23 (B) meets the minimum coverage require24 ments of section 410(b) of the Internal Revenue

25 Code of 1986 without being combined with any
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1 other plan of the business that covers the employ2 ees of the business;

3 (C) does not provide benefits to anyone ex4 cept the employer (and the employer’s spouse) or

5 the partners (and their spouses);

6 (D) does not cover a business that is a

7 member of an affiliated service group, a con8 trolled group of corporations, or a group of busi9 nesses under common control; and

10 (E) does not cover a business that leases em11 ployees.

12 (3) OTHER DEFINITIONS.—Terms used in para13 graph (2) which are also used in section 414 of the

14 Internal Revenue Code of 1986 shall have the respec15 tive meanings given such terms by such section.

16 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

17 PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case

18 of plan years beginning after December 31, 2002, the Sec19 retary of the Treasury and the Secretary of Labor shall pro20 vide for the filing of a simplified annual return for any

21 retirement plan which covers less than 25 employees on the

22 first day of a plan year and which meets the requirements

23 described in subparagraphs (B), (D), and (E) of subsection

24 (a)(2).
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1 (c) EFFECTIVE DATE.—The provisions of this section

2 shall take effect on January 1, 2002.

3 SEC. 607. IMPROVEMENT OF EMPLOYEE PLANS COMPLI4 ANCE RESOLUTION SYSTEM.

5 The Secretary of the Treasury shall continue to update

6 and improve the Employee Plans Compliance Resolution

7 System (or any successor program) giving special attention

8 to—

9 (1) increasing the awareness and knowledge of

10 small employers concerning the availability and use

11 of the program;

12 (2) taking into account special concerns and cir13 cumstances that small employers face with respect to

14 compliance and correction of compliance failures;

15 (3) extending the duration of the self-correction

16 period under the Self-Correction Program for signifi17 cant compliance failures;

18 (4) expanding the availability to correct insig19 nificant compliance failures under the Self-Correction

20 Program during audit; and

21 (5) assuring that any tax, penalty, or sanction

22 that is imposed by reason of a compliance failure is

23 not excessive and bears a reasonable relationship to

24 the nature, extent, and severity of the failure.
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1 SEC. 608. REPEAL OF THE MULTIPLE USE TEST.

2 (a) IN GENERAL.—Paragraph (9) of section 401(m) is

3 amended to read as follows:

4 ‘‘(9) REGULATIONS.—The Secretary shall pre5 scribe such regulations as may be necessary to carry

6 out the purposes of this subsection and subsection (k),

7 including regulations permitting appropriate aggre8 gation of plans and contributions.’’.

9 (b) EFFECTIVE DATE.—The amendment made by this

10 section shall apply to years beginning after December 31,

11 2001.

12 SEC. 609. FLEXIBILITY IN NONDISCRIMINATION, COV13 ERAGE, AND LINE OF BUSINESS RULES.

14 (a) NONDISCRIMINATION.—

15 (1) IN GENERAL.—The Secretary of the Treasury

16 shall, by regulation, provide that a plan shall be

17 deemed to satisfy the requirements of section

18 401(a)(4) of the Internal Revenue Code of 1986 if

19 such plan satisfies the facts and circumstances test

20 under section 401(a)(4) of such Code, as in effect be21 fore January 1, 1994, but only if—

22 (A) the plan satisfies conditions prescribed

23 by the Secretary to appropriately limit the

24 availability of such test; and
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1 (B) the plan is submitted to the Secretary

2 for a determination of whether it satisfies such

3 test.

4 Subparagraph (B) shall only apply to the extent pro5 vided by the Secretary.

6 (2) EFFECTIVE DATES.—

7 (A) REGULATIONS.—The regulation re8 quired by paragraph (1) shall apply to years be9 ginning after December 31, 2003.

10 (B) CONDITIONS OF AVAILABILITY.—Any

11 condition of availability prescribed by the Sec12 retary under paragraph (1)(A) shall not apply

13 before the first year beginning not less than 120

14 days after the date on which such condition is

15 prescribed.

16 (b) COVERAGE TEST.—

17 (1) IN GENERAL.—Section 410(b)(1) (relating to

18 minimum coverage requirements) is amended by add19 ing at the end the following:

20 ‘‘(D) In the case that the plan fails to meet

21 the requirements of subparagraphs (A), (B) and

22 (C), the plan—

23 ‘‘(i) satisfies subparagraph (B), as in

24 effect immediately before the enactment of

25 the Tax Reform Act of 1986,
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1 ‘‘(ii) is submitted to the Secretary for

2 a determination of whether it satisfies the

3 requirement described in clause (i), and

4 ‘‘(iii) satisfies conditions prescribed by

5 the Secretary by regulation that appro6 priately limit the availability of this sub7 paragraph.

8 Clause (ii) shall apply only to the extent pro9 vided by the Secretary.’’.

10 (2) EFFECTIVE DATES.—

11 (A) IN GENERAL.—The amendment made

12 by paragraph (1) shall apply to years beginning

13 after December 31, 2003.

14 (B) CONDITIONS OF AVAILABILITY.—Any

15 condition of availability prescribed by the Sec16 retary under regulations prescribed by the Sec17 retary under section 410(b)(1)(D) of the Internal

18 Revenue Code of 1986 shall not apply before the

19 first year beginning not less than 120 days after

20 the date on which such condition is prescribed.

21 (c) LINE OF BUSINESS RULES.—The Secretary of the

22 Treasury shall, on or before December 31, 2003, modify the

23 existing regulations issued under section 414(r) of the Inter24 nal Revenue Code of 1986 in order to expand (to the extent

25 that the Secretary determines appropriate) the ability of
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1 a pension plan to demonstrate compliance with the line of

2 business requirements based upon the facts and cir3 cumstances surrounding the design and operation of the

4 plan, even though the plan is unable to satisfy the mechan5 ical tests currently used to determine compliance.

6 SEC. 610. EXTENSION TO ALL GOVERNMENTAL PLANS OF

7 MORATORIUM ON APPLICATION OF CERTAIN

8 NONDISCRIMINATION RULES APPLICABLE TO

9 STATE AND LOCAL PLANS.

10 (a) IN GENERAL.—

11 (1) Subparagraph (G) of section 401(a)(5) of the

12 Internal Revenue Code of 1986 and subparagraph

13 (H) of section 401(a)(26) are each amended by strik14 ing ‘‘section 414(d))’’ and all that follows and insert15 ing ‘‘section 414(d)).’’.

16 (2) Subparagraph (G) of section 401(k)(3) and

17 paragraph (2) of section 1505(d) of the Taxpayer Re18 lief Act of 1997 are each amended by striking ‘‘main19 tained by a State or local government or political

20 subdivision thereof (or agency or instrumentality

21 thereof)’’.

22 (b) CONFORMING AMENDMENTS.—

23 (1) The heading for subparagraph (G) of section

24 401(a)(5) is amended to read as follows: ‘‘GOVERN25 MENTAL PLANS.—’’.
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1 (2) The heading for subparagraph (H) of section

2 401(a)(26) is amended to read as follows: ‘‘EXCEP3 TION FOR GOVERNMENTAL PLANS.—’’.

4 (3) Subparagraph (G) of section 401(k)(3) is

5 amended by inserting ‘‘GOVERNMENTAL PLANS.—’’

6 after ‘‘(G)’’.

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

8 section shall apply to years beginning after December 31,

9 2001.

10 SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DIS11 TRIBUTIONS.

12 (a) EXPANSION OF PERIOD.—

13 (1) AMENDMENT OF INTERNAL REVENUE

14 CODE.—

15 (A) IN GENERAL.—Subparagraph (A) of

16 section 417(a)(6) is amended by striking ‘‘90-

17 day’’ and inserting ‘‘180-day’’.

18 (B) MODIFICATION OF REGULATIONS.—The

19 Secretary of the Treasury shall modify the regu20 lations under sections 402(f), 411(a)(11), and

21 417 of the Internal Revenue Code of 1986 to sub22 stitute ‘‘180 days’’ for ‘‘90 days’’ each place it

23 appears in Treasury Regulations sections

24 1.402(f)–1, 1.411(a)–11(c), and 1.417(e)–1(b).
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1 (2) AMENDMENT OF ERISA.—Section

2 205(c)(7)(A) of the Employee Retirement Income Se3 curity Act of 1974 (29 U.S.C. 1055(c)(7)(A)) is

4 amended by striking ‘‘90-day’’ and inserting ‘‘180-

5 day’’.

6 (3) EFFECTIVE DATE.—The amendments made

7 by paragraph (1)(A) and (2) and the modifications

8 required by paragraph (1)(B) shall apply to years be9 ginning after December 31, 2001.

10 (b) CONSENT REGULATION INAPPLICABLE TO CERTAIN

11 DISTRIBUTIONS.—

12 (1) IN GENERAL.—The Secretary of the Treasury

13 shall modify the regulations under section 411(a)(11)

14 of the Internal Revenue Code of 1986 to provide that

15 the description of a participant’s right, if any, to

16 defer receipt of a distribution shall also describe the

17 consequences of failing to defer such receipt.

18 (2) EFFECTIVE DATE.—The modifications re19 quired by paragraph (1) shall apply to years begin20 ning after December 31, 2001.

21 SEC. 612. ANNUAL REPORT DISSEMINATION.

22 (a) REPORT AVAILABLE THROUGH ELECTRONIC

23 MEANS.—Section 104(b)(3) of the Employee Retirement In24 come Security Act of 1974 (29 U.S.C. 1024(b)(3)) is amend25 ed by adding at the end the following new sentence: ‘‘The
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1 requirement to furnish information under the previous sen2 tence shall be satisfied if the administrator makes such in3 formation reasonably available through electronic means or

4 other new technology.’’.

5 (b) EFFECTIVE DATE.—The amendment made by this

6 section shall apply to reports for years beginning after De7 cember 31, 2000.

8 SEC. 613. TECHNICAL CORRECTIONS TO SAVER ACT.

9 Section 517 of the Employee Retirement Income Secu10 rity Act of 1974 (29 U.S.C. 1147) is amended—

11 (1) in subsection (a), by striking ‘‘2001 and

12 2005 on or after September 1 of each year involved’’

13 and inserting ‘‘2001, 2005, and 2009 in the month of

14 September of each year involved’’;

15 (2) in subsection (b), by adding at the end the

16 following new sentence: ‘‘To effectuate the purposes of

17 this paragraph, the Secretary may enter into a coop18 erative agreement, pursuant to the Federal Grant and

19 Cooperative Agreement Act of 1977 (31 U.S.C. 6301

20 et seq.), with the American Savings Education Coun21 cil.’’;

22 (3) in subsection (e)(2)—

23 (A) by striking ‘‘Committee on Labor and

24 Human Resources’’ in subparagraph (D) and in-
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1 serting ‘‘Committee on Health, Education,

2 Labor, and Pensions’’;

3 (B) by striking subparagraph (F) and in4 serting the following:

5 ‘‘(F) the Chairman and Ranking Member of

6 the Subcommittee on Labor, Health and Human

7 Services, and Education of the Committee on

8 Appropriations of the House of Representatives

9 and the Chairman and Ranking Member of the

10 Subcommittee on Labor, Health and Human

11 Services, and Education of the Committee on

12 Appropriations of the Senate;’’;

13 (C) by redesignating subparagraph (G) as

14 subparagraph (J); and

15 (D) by inserting after subparagraph (F) the

16 following new subparagraphs:

17 ‘‘(G) the Chairman and Ranking Member of

18 the Committee on Finance of the Senate;

19 ‘‘(H) the Chairman and Ranking Member

20 of the Committee on Ways and Means of the

21 House of Representatives;

22 ‘‘(I) the Chairman and Ranking Member of

23 the Subcommittee on Employer-Employee Rela24 tions of the Committee on Education and the

25 Workforce of the House of Representatives; and’’;
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1 (4) in subsection (e)(3)(A)—

2 (A) by striking ‘‘There shall be no more

3 than 200 additional participants.’’ and inserting

4 ‘‘The participants in the National Summit shall

5 also include additional participants appointed

6 under this subparagraph.’’;

7 (B) by striking ‘‘one-half shall be appointed

8 by the President,’’ in clause (i) and inserting

9 ‘‘not more than 100 participants shall be ap10 pointed under this clause by the President,’’, and

11 by striking ‘‘and’’ at the end of clause (i);

12 (C) by striking ‘‘one-half shall be appointed

13 by the elected leaders of Congress’’ in clause (ii)

14 and inserting ‘‘not more than 100 participants

15 shall be appointed under this clause by the elect16 ed leaders of Congress’’, and by striking the pe17 riod at the end of clause (ii) and inserting ‘‘;

18 and’’;

19 (D) by adding at the end the following new

20 clause:

21 ‘‘(iii) The President, in consultation

22 with the elected leaders of Congress referred

23 to in subsection (a), may appoint under

24 this clause additional participants to the

25 National Summit. The number of such ad-
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1 ditional participants appointed under this

2 clause may not exceed the lesser of 3 percent

3 of the total number of all additional par4 ticipants appointed under this paragraph,

5 or 10. Such additional participants shall be

6 appointed from persons nominated by the

7 organization referred to in subsection (b)(2)

8 which is made up of private sector busi9 nesses and associations partnered with Gov10 ernment entities to promote long term fi11 nancial security in retirement through sav12 ings and with which the Secretary is re13 quired thereunder to consult and cooperate

14 and shall not be Federal, State, or local gov15 ernment employees.’’;

16 (5) in subsection (e)(3)(B), by striking ‘‘January

17 31, 1998’’ in subparagraph (B) and inserting ‘‘May

18 1, 2001, May 1, 2005, and May 1, 2009, for each of

19 the subsequent summits, respectively’’;

20 (6) in subsection (f)(1)(C), by inserting ‘‘, no

21 later than 90 days prior to the date of the commence22 ment of the National Summit,’’ after ‘‘comment’’ in

23 paragraph (1)(C);
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1 (7) in subsection (g), by inserting ‘‘, in consulta2 tion with the congressional leaders specified in sub3 section (e)(2),’’ after ‘‘report’’;

4 (8) in subsection (i)—

5 (A) by striking ‘‘beginning on or after Octo6 ber 1, 1997’’ in paragraph (1) and inserting

7 ‘‘2001, 2005, and 2009’’; and

8 (B) by adding at the end the following new

9 paragraph:

10 ‘‘(3) RECEPTION AND REPRESENTATION AUTHOR11 ITY.—The Secretary is hereby granted reception and

12 representation authority limited specifically to the

13 events at the National Summit. The Secretary shall

14 use any private contributions accepted in connection

15 with the National Summit prior to using funds ap16 propriated for purposes of the National Summit pur17 suant to this paragraph.’’; and

18 (9) in subsection (k)—

19 (A) by striking ‘‘shall enter into a contract

20 on a sole-source basis’’ and inserting ‘‘may enter

21 into a contract on a sole-source basis’’; and

22 (B) by striking ‘‘fiscal year 1998’’ and in23 serting ‘‘fiscal years 2001, 2005, and 2009’’.
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1 TITLE VII—OTHER ERISA

2 PROVISIONS

3 SEC. 701. MISSING PARTICIPANTS.

4 (a) IN GENERAL.—Section 4050 of the Employee Re5 tirement Income Security Act of 1974 (29 U.S.C. 1350) is

6 amended by redesignating subsection (c) as subsection (e)

7 and by inserting after subsection (b) the following new sub8 sections:

9 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation shall

10 prescribe rules similar to the rules in subsection (a) for mul11 tiemployer plans covered by this title that terminate under

12 section 4041A.

13 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—

14 ‘‘(1) TRANSFER TO CORPORATION.—The plan ad15 ministrator of a plan described in paragraph (4) may

16 elect to transfer a missing participant’s benefits to the

17 corporation upon termination of the plan.

18 ‘‘(2) INFORMATION TO THE CORPORATION.—To

19 the extent provided in regulations, the plan adminis20 trator of a plan described in paragraph (4) shall,

21 upon termination of the plan, provide the corporation

22 information with respect to benefits of a missing par23 ticipant if the plan transfers such benefits—

24 ‘‘(A) to the corporation, or
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1 ‘‘(B) to an entity other than the corporation

2 or a plan described in paragraph (4)(B)(ii).

3 ‘‘(3) PAYMENT BY THE CORPORATION.—If bene4 fits of a missing participant were transferred to the

5 corporation under paragraph (1), the corporation

6 shall, upon location of the participant or beneficiary,

7 pay to the participant or beneficiary the amount

8 transferred (or the appropriate survivor benefit)

9 either—

10 ‘‘(A) in a single sum (plus interest), or

11 ‘‘(B) in such other form as is specified in

12 regulations of the corporation.

13 ‘‘(4) PLANS DESCRIBED.—A plan is described in

14 this paragraph if—

15 ‘‘(A) the plan is a pension plan (within the

16 meaning of section 3(2))—

17 ‘‘(i) to which the provisions of this sec18 tion do not apply (without regard to this

19 subsection), and

20 ‘‘(ii) which is not a plan described in

21 paragraphs (2) through (11) of section

22 4021(b), and

23 ‘‘(B) at the time the assets are to be distrib24 uted upon termination, the plan—

25 ‘‘(i) has missing participants, and
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1 ‘‘(ii) has not provided for the transfer

2 of assets to pay the benefits of all missing

3 participants to another pension plan (with4 in the meaning of section 3(2)).

5 ‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—Sub6 sections (a)(1) and (a)(3) shall not apply to a plan

7 described in paragraph (4).’’.

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

9 section shall apply to distributions made after final regula10 tions implementing subsections (c) and (d) of section 4050

11 of the Employee Retirement Income Security Act of 1974

12 (as added by subsection (a)), respectively, are prescribed.

13 SEC. 702. REDUCED PBGC PREMIUM FOR NEW PLANS OF

14 SMALL EMPLOYERS.

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

16 4006(a)(3) of the Employee Retirement Income Security

17 Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is amended—

18 (1) in clause (i), by inserting ‘‘other than a new

19 single-employer plan (as defined in subparagraph

20 (F)) maintained by a small employer (as so de21 fined),’’ after ‘‘single-employer plan,’’,

22 (2) in clause (iii), by striking the period at the

23 end and inserting ‘‘, and’’, and

24 (3) by adding at the end the following new

25 clause:
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1 ‘‘(iv) in the case of a new single-employer plan

2 (as defined in subparagraph (F)) maintained by a

3 small employer (as so defined) for the plan year, $5

4 for each individual who is a participant in such plan

5 during the plan year.’’.

6 (b) DEFINITION OF NEW SINGLE-EMPLOYER PLAN.—

7 Section 4006(a)(3) of the Employee Retirement Income Se8 curity Act of 1974 (29 U.S.C. 1306(a)(3)) is amended by

9 adding at the end the following new subparagraph:

10 ‘‘(F)(i) For purposes of this paragraph, a single-em11 ployer plan maintained by a contributing sponsor shall be

12 treated as a new single-employer plan for each of its first

13 5 plan years if, during the 36-month period ending on the

14 date of the adoption of such plan, the sponsor or any mem15 ber of such sponsor’s controlled group (or any predecessor

16 of either) did not establish or maintain a plan to which

17 this title applies with respect to which benefits were accrued

18 for substantially the same employees as are in the new sin19 gle-employer plan.

20 ‘‘(ii)(I) For purposes of this paragraph, the term

21 ‘small employer’ means an employer which on the first day

22 of any plan year has, in aggregation with all members of

23 the controlled group of such employer, 100 or fewer employ24 ees.
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1 ‘‘(II) In the case of a plan maintained by two or more

2 contributing sponsors that are not part of the same con3 trolled group, the employees of all contributing sponsors and

4 controlled groups of such sponsors shall be aggregated for

5 purposes of determining whether any contributing sponsor

6 is a small employer.’’.

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

8 section shall apply to plans established after December 31,

9 2001.

10 SEC. 703. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR

11 NEW AND SMALL PLANS.

12 (a) NEW PLANS.—Subparagraph (E) of section

13 4006(a)(3) of the Employee Retirement Income Security

14 Act of 1974 (29 U.S.C. 1306(a)(3)(E)) is amended by add15 ing at the end the following new clause:

16 ‘‘(v) In the case of a new defined benefit plan, the

17 amount determined under clause (ii) for any plan year

18 shall be an amount equal to the product of the amount de19 termined under clause (ii) and the applicable percentage.

20 For purposes of this clause, the term ‘applicable percentage’

21 means—

22 ‘‘(I) 0 percent, for the first plan year.

23 ‘‘(II) 20 percent, for the second plan year.

24 ‘‘(III) 40 percent, for the third plan year.

25 ‘‘(IV) 60 percent, for the fourth plan year.
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1 ‘‘(V) 80 percent, for the fifth plan year.

2 For purposes of this clause, a defined benefit plan (as de3 fined in section 3(35)) maintained by a contributing spon4 sor shall be treated as a new defined benefit plan for each

5 of its first 5 plan years if, during the 36-month period end6 ing on the date of the adoption of the plan, the sponsor

7 and each member of any controlled group including the

8 sponsor (or any predecessor of either) did not establish or

9 maintain a plan to which this title applies with respect

10 to which benefits were accrued for substantially the same

11 employees as are in the new plan.’’.

12 (b) SMALL PLANS.—Paragraph (3) of section 4006(a)

13 of the Employee Retirement Income Security Act of 1974

14 (29 U.S.C. 1306(a)), as amended by section 702(b), is

15 amended—

16 (1) by striking ‘‘The’’ in subparagraph (E)(i)

17 and inserting ‘‘Except as provided in subparagraph

18 (G), the’’, and

19 (2) by inserting after subparagraph (F) the fol20 lowing new subparagraph:

21 ‘‘(G)(i) In the case of an employer who has 25 or fewer

22 employees on the first day of the plan year, the additional

23 premium determined under subparagraph (E) for each par24 ticipant shall not exceed $5 multiplied by the number of
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1 participants in the plan as of the close of the preceding plan

2 year.

3 ‘‘(ii) For purposes of clause (i), whether an employer

4 has 25 or fewer employees on the first day of the plan year

5 is determined taking into consideration all of the employees

6 of all members of the contributing sponsor’s controlled

7 group. In the case of a plan maintained by two or more

8 contributing sponsors, the employees of all contributing

9 sponsors and their controlled groups shall be aggregated for

10 purposes of determining whether the 25-or-fewer-employees

11 limitation has been satisfied.’’.

12 (c) EFFECTIVE DATES.—

13 (1) SUBSECTION (a).—The amendments made by

14 subsection (a) shall apply to plans established after

15 December 31, 2001.

16 (2) SUBSECTION (b).—The amendments made by

17 subsection (b) shall apply to plan years beginning

18 after December 31, 2001.

19 SEC. 704. AUTHORIZATION FOR PBGC TO PAY INTEREST ON

20 PREMIUM OVERPAYMENT REFUNDS.

21 (a) IN GENERAL.—Section 4007(b) of the Employment

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

23 1307(b)) is amended—

24 (1) by striking ‘‘(b)’’ and inserting ‘‘(b)(1)’’, and
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1 (2) by inserting at the end the following new

2 paragraph:

3 ‘‘(2) The corporation is authorized to pay, subject to

4 regulations prescribed by the corporation, interest on the

5 amount of any overpayment of premium refunded to a des6 ignated payor. Interest under this paragraph shall be cal7 culated at the same rate and in the same manner as interest

8 is calculated for underpayments under paragraph (1).’’.

9 (b) EFFECTIVE DATE.—The amendment made by sub10 section (a) shall apply to interest accruing for periods be11 ginning not earlier than the date of the enactment of this

12 Act.

13 SEC. 705. SUBSTANTIAL OWNER BENEFITS IN TERMINATED

14 PLANS.

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

16 Section 4022(b)(5) of the Employee Retirement Income Se17 curity Act of 1974 (29 U.S.C. 1322(b)(5)) is amended to

18 read as follows:

19 ‘‘(5)(A) For purposes of this paragraph, the term ‘ma20 jority owner’ means an individual who, at any time during

21 the 60-month period ending on the date the determination

22 is being made—

23 ‘‘(i) owns the entire interest in an unincor24 porated trade or business,
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1 ‘‘(ii) in the case of a partnership, is a partner

2 who owns, directly or indirectly, 50 percent or more

3 of either the capital interest or the profits interest in

4 such partnership, or

5 ‘‘(iii) in the case of a corporation, owns, directly

6 or indirectly, 50 percent or more in value of either the

7 voting stock of that corporation or all the stock of that

8 corporation.

9 For purposes of clause (iii), the constructive ownership

10 rules of section 1563(e) of the Internal Revenue Code of

11 1986 shall apply (determined without regard to section

12 1563(e)(3)(C)).

13 ‘‘(B) In the case of a participant who is a majority

14 owner, the amount of benefits guaranteed under this section

15 shall equal the product of—

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

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

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

19 termination date, and the denominator of which is

20 10, and

21 ‘‘(ii) the amount of benefits that would be guar22 anteed under this section if the participant were not

23 a majority owner.’’.

24 (b) MODIFICATION OF ALLOCATION OF ASSETS.—
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1 (1) Section 4044(a)(4)(B) of the Employee Re2 tirement Income Security Act of 1974 (29 U.S.C.

3 1344(a)(4)(B)) is amended by striking ‘‘section

4 4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.

5 (2) Section 4044(b) of such Act (29 U.S.C.

6 1344(b)) is amended—

7 (A) by striking ‘‘(5)’’ in paragraph (2) and

8 inserting ‘‘(4), (5),’’, and

9 (B) by redesignating paragraphs (3)

10 through (6) as paragraphs (4) through (7), re11 spectively, and by inserting after paragraph (2)

12 the following new paragraph:

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

14 paragraph (4) of subsection (a) are insufficient to sat15 isfy in full the benefits of all individuals who are de16 scribed in that paragraph, the assets shall be allocated

17 first to benefits described in subparagraph (A) of that

18 paragraph. Any remaining assets shall then be allo19 cated to benefits described in subparagraph (B) of

20 that paragraph. If assets allocated to such subpara21 graph (B) are insufficient to satisfy in full the bene22 fits described in that subparagraph, the assets shall be

23 allocated pro rata among individuals on the basis of

24 the present value (as of the termination date) of their

25 respective benefits described in that subparagraph.’’.
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1 (c) CONFORMING AMENDMENTS.—

2 (1) Section 4021 of the Employee Retirement In3 come Security Act of 1974 (29 U.S.C. 1321) is

4 amended—

5 (A) in subsection (b)(9), by striking ‘‘as de6 fined in section 4022(b)(6)’’, and

7 (B) by adding at the end the following new

8 subsection:

9 ‘‘(d) For purposes of subsection (b)(9), the term ‘sub10 stantial owner’ means an individual who, at any time dur11 ing the 60-month period ending on the date the determina12 tion is being made—

13 ‘‘(1) owns the entire interest in an unincor14 porated trade or business,

15 ‘‘(2) in the case of a partnership, is a partner

16 who owns, directly or indirectly, more than 10 per17 cent of either the capital interest or the profits inter18 est in such partnership, or

19 ‘‘(3) in the case of a corporation, owns, directly

20 or indirectly, more than 10 percent in value of either

21 the voting stock of that corporation or all the stock of

22 that corporation.

23 For purposes of paragraph (3), the constructive ownership

24 rules of section 1563(e) of the Internal Revenue Code of
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1 1986 shall apply (determined without regard to section

2 1563(e)(3)(C)).’’.

3 (2) Section 4043(c)(7) of such Act (29 U.S.C.

4 1343(c)(7)) is amended by striking ‘‘section 4022(b)(6)’’

5 and inserting ‘‘section 4021(d)’’.

6 (d) EFFECTIVE DATES.—

7 (1) IN GENERAL.—Except as provided in para8 graph (2), the amendments made by this section shall

9 apply to plan terminations—

10 (A) under section 4041(c) of the Employee

11 Retirement Income Security Act of 1974 (29

12 U.S.C. 1341(c)) with respect to which notices of

13 intent to terminate are provided under section

14 4041(a)(2) of such Act (29 U.S.C. 1341(a)(2))

15 after December 31, 2001, and

16 (B) under section 4042 of such Act (29

17 U.S.C. 1342) with respect to which proceedings

18 are instituted by the corporation after such date.

19 (2) CONFORMING AMENDMENTS.—The amend20 ments made by subsection (c) shall take effect on Jan21 uary 1, 2002.

22 SEC. 706. CIVIL PENALTIES FOR BREACH OF FIDUCIARY RE23 SPONSIBILITY.

24 (a) IMPOSITION AND AMOUNT OF PENALTY MADE DIS25 CRETIONARY.—Section 502(l)(1) of the Employee Retire-
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1 ment Income Security Act of 1974 (29 U.S.C. 1132(l)(1))

2 is amended—

3 (1) by striking ‘‘shall’’ and inserting ‘‘may’’,

4 and

5 (2) by striking ‘‘equal to’’ and inserting ‘‘not

6 greater than’’.

7 (b) APPLICABLE RECOVERY AMOUNT.—Section

8 502(l)(2) of such Act (29 U.S.C. 1132(l)(2)) is amended to

9 read as follows:

10 ‘‘(2) For purposes of paragraph (1), the term ‘applica11 ble recovery amount’ means any amount which is recovered

12 from any fiduciary or other person (or from any other per13 son on behalf of any such fiduciary or other person) with

14 respect to a breach or violation described in paragraph (1)

15 on or after the 30th day following receipt by such fiduciary

16 or other person of written notice from the Secretary of the

17 violation, whether paid voluntarily or by order of a court

18 in a judicial proceeding instituted by the Secretary under

19 subsection (a)(2) or (a)(5). The Secretary may, in the Sec20 retary’s sole discretion, extend the 30-day period described

21 in the preceding sentence.’’.

22 (c) OTHER RULES.—Section 502(l) of the Employee

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

24 1132(l)) is amended by adding at the end the following new

25 paragraph:
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1 ‘‘(5) A person shall be jointly and severally liable for

2 the penalty described in paragraph (1) to the same extent

3 that such person is jointly and severally liable for the appli4 cable recovery amount on which the penalty is based.

5 ‘‘(6) No penalty shall be assessed under this subsection

6 unless the person against whom the penalty is assessed is

7 given notice and opportunity for a hearing with respect to

8 the violation and applicable recovery amount.’’.

9 (d) EFFECTIVE DATES.—

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

11 this section shall apply to any breach of fiduciary re12 sponsibility or other violation of part 4 of subtitle B

13 of title I of the Employee Retirement Income Security

14 Act of 1974 occurring on or after the date of enact15 ment of this Act.

16 (2) TRANSITION RULE.—In applying the amend17 ment made by subsection (b) (relating to applicable

18 recovery amount), a breach or other violation occur19 ring before the date of enactment of this Act which

20 continues after the 180th day after such date (and

21 which may have been discontinued at any time dur22 ing its existence) shall be treated as having occurred

23 after such date of enactment.
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1 SEC. 707. BENEFIT SUSPENSION NOTICE.

2 (a) MODIFICATION OF REGULATION.—The Secretary of

3 Labor shall modify the regulation under section

4 203(a)(3)(B) of the Employee Retirement Income Security

5 Act of 1974 (29 U.S.C. 1053(a)(3)(B)) to provide that the

6 notification required by such regulation—

7 (1) in the case of an employee who returns to

8 work for a former employer after commencement of

9 payment of benefits under the plan shall—

10 (A) be made during the first calendar

11 month or payroll period in which the plan with12 holds payments, and

13 (B) if a reduced rate of future benefit accru14 als will apply to the returning employee (as of

15 the first date of participation in the plan by the

16 employee after returning to work), include a

17 statement that the rate of future benefit accruals

18 will be reduced, and

19 (2) in the case of any employee who is not de20 scribed in paragraph (1)—

21 (A) may be included in the summary plan

22 description for the plan furnished in accordance

23 with section 104(b) of such Act (29 U.S.C.

24 1024(b)), rather than in a separate notice, and

25 (B) need not include a copy of the relevant

26 plan provisions.
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1 (b) EFFECTIVE DATE.—The modification made under

2 this section shall apply to plan years beginning after De3 cember 31, 2001.

4 TITLE VIII—PLAN AMENDMENTS

5 SEC. 801. PROVISIONS RELATING TO PLAN AMENDMENTS.

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

7 or contract amendment—

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

9 being operated in accordance with the terms of the

10 plan during the period described in subsection

11 (b)(2)(A); and

12 (2) except as provided by the Secretary of the

13 Treasury, such plan shall not fail to meet the require14 ments of section 411(d)(6) of the Internal Revenue

15 Code of 1986 or section 204(g) of the Employee Re16 tirement Income Security Act of 1974 by reason of

17 such amendment.

18 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

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

20 any amendment to any plan or annuity contract

21 which is made—

22 (A) pursuant to any amendment made by

23 this Act, or pursuant to any regulation issued

24 under this Act; and
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1 (B) on or before the last day of the first

2 plan year beginning on or after January 1,

3 2004.

4 In the case of a governmental plan (as defined in sec5 tion 414(d) of the Internal Revenue Code of 1986),

6 this paragraph shall be applied by substituting

7 ‘‘2006’’ for ‘‘2004’’.

8 (2) CONDITIONS.—This section shall not apply to

9 any amendment unless—

10 (A) during the period—

11 (i) beginning on the date the legislative

12 or regulatory amendment described in para13 graph (1)(A) takes effect (or in the case of

14 a plan or contract amendment not required

15 by such legislative or regulatory amend16 ment, the effective date specified by the

17 plan); and

18 (ii) ending on the date described in

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

20 plan or contract amendment is adopted),

21 the plan or contract is operated as if such plan

22 or contract amendment were in effect; and

23 (B) such plan or contract amendment ap24 plies retroactively for such period.
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1 SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CON2 TENTS.

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

4 the ‘‘Comprehensive Retirement Security and

5 Pension Reform Act of 2001’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as

7 otherwise expressly provided, whenever in

8 this Act an amendment or repeal is expressed

9 in terms of an amendment to, or repeal of, a

10 section or other provision, the reference shall

11 be considered to be made to a section or other

12 provision of the Internal Revenue Code of

13 1986.

14 (c) TABLE OF CONTENTS.—The table of con15 tents of this Act is as follows:

Sec. 1. Short title; references; table of contents.

TITLE I—INDIVIDUAL RETIREMENT ACCOUNT

PROVISIONS

Sec. 101. Modification of IRA contribution limits.

TITLE II—EXPANDING COVERAGE

Sec. 201. Increase in benefit and contribution limits.

Sec. 202. Plan loans for subchapter S owners, partners, and

sole proprietors.

Sec. 203. Modification of top-heavy rules.

Sec. 204. Elective deferrals not taken into account for purposes of deduction limits.

Sec. 205. Repeal of coordination requirements for deferred

compensation plans of State and local governments and tax-exempt organizations.

Sec. 206. Elimination of user fee for requests to IRS regarding

pension plans.

Sec. 207. Deduction limits.

Sec. 208. Option to treat elective deferrals as after-tax contributions.
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TITLE III—ENHANCING FAIRNESS FOR WOMEN

Sec. 301. Catch-up contributions for individuals age 50 or over.

Sec. 302. Equitable treatment for contributions of employees to

defined contribution plans.

Sec. 303. Faster vesting of certain employer matching contributions.

Sec. 304. Simplify and update the minimum distribution rules.

Sec. 305. Clarification of tax treatment of division of section

457 plan benefits upon divorce.

Sec. 306. Modification of safe harbor relief for hardship withdrawals from cash or deferred arrangements.

TITLE IV—INCREASING PORTABILITY FOR PARTICIPANTS

Sec. 401. Rollovers allowed among various types of plans.

Sec. 402. Rollovers of IRAs into workplace retirement plans.

Sec. 403. Rollovers of after-tax contributions.

Sec. 404. Hardship exception to 60-day rule.

Sec. 405. Treatment of forms of distribution.

Sec. 406. Rationalization of restrictions on distributions.

Sec. 407. Purchase of service credit in governmental defined

benefit plans.

Sec. 408. Employers may disregard rollovers for purposes of

cash-out amounts.

Sec. 409. Minimum distribution and inclusion requirements for

section 457 plans.

TITLE V—STRENGTHENING PENSION SECURITY AND

ENFORCEMENT

Sec. 501. Repeal of percent of current liability funding limit.

Sec. 502. Maximum contribution deduction rules modified and

applied to all defined benefit plans.

Sec. 503. Excise tax relief for sound pension funding.

Sec. 504. Excise tax on failure to provide notice by defined

benefit plans significantly reducing future benefit

accruals.

Sec. 505. Treatment of multiemployer plans under section 415.

Sec. 506. Protection of investment of employee contributions

to 401(k) plans.

Sec. 507. Periodic pension benefits statements.

Sec. 508. Prohibited allocations of stock in S corporation

ESOP.

TITLE VI—REDUCING REGULATORY BURDENS

Sec. 601. Modification of timing of plan valuations.

Sec. 602. ESOP dividends may be reinvested without loss of

dividend deduction.

Sec. 603. Repeal of transition rule relating to certain highly

compensated employees.

Sec. 604. Employees of tax-exempt entities.

Sec. 605. Clarification of treatment of employer-provided retirement advice.

Sec. 606. Reporting simplification.
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Sec. 607. Improvement of employee plans compliance resolution system.

Sec. 608. Repeal of the multiple use test.

Sec. 609. Flexibility in nondiscrimination, coverage, and line of

business rules.

Sec. 610. Extension to all governmental plans of moratorium

on application of certain nondiscrimination rules

applicable to State and local plans.

Sec. 611. Notice and consent period regarding distributions.

Sec. 612. Annual report dissemination.

Sec. 613. Technical corrections to SAVER Act.

TITLE VII—OTHER ERISA PROVISIONS

Sec. 701. Missing participants.

Sec. 702. Reduced PBGC premium for new plans of small employers.

Sec. 703. Reduction of additional PBGC premium for new and

small plans.

Sec. 704. Authorization for PBGC to pay interest on premium

overpayment refunds.

Sec. 705. Substantial owner benefits in terminated plans.

Sec. 706. Civil penalties for breach of fiduciary responsibility.

Sec. 707. Benefit suspension notice.

Sec. 708. Studies.

TITLE VIII—PLAN AMENDMENTS

Sec. 801. Provisions relating to plan amendments.

1 TITLE I—INDIVIDUAL

2 RETIREMENT ACCOUNTS

3 SEC. 101. MODIFICATION OF IRA CONTRIBUTION LIMITS.

4 (a) INCREASE IN CONTRIBUTION LIMIT.—

5 (1) IN GENERAL.—Paragraph (1)(A) of

6 section 219(b) (relating to maximum

7 amount of deduction) is amended by

8 striking ‘‘$2,000’’ and inserting ‘‘the de9 ductible amount’’.

10 (2) DEDUCTIBLE AMOUNT.—Section

11 219(b) is amended by adding at the end

12 the following new paragraph:
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1 ‘‘(5) DEDUCTIBLE AMOUNT.—For pur2 poses of paragraph (1)(A)—

3 ‘‘(A) IN GENERAL.—The deductible

4 amount shall be determined in ac5 cordance with the following table:

‘‘For taxable years The deductible

beginning in: amount is:

2001 ....................................................................... $3,000

2002 ....................................................................... $4,000

2003 and thereafter ........................................... $5,000.

6 ‘‘(B) CATCH-UP CONTRIBUTIONS FOR

7 INDIVIDUALS 50 OR OLDER.—In the case

8 of an individual who has attained the

9 age of 50 before the close of the tax10 able year, the deductible amount for

11 taxable years beginning in 2001 or

12 2002 shall be $5,000.

13 ‘‘(C) COST-OF-LIVING ADJUSTMENT.—

14 ‘‘(i) IN GENERAL.—In the case

15 of any taxable year beginning in a

16 calendar year after 2003, the

17 $5,000 amount under subpara18 graph (A) shall be increased by an

19 amount equal to—

20 ‘‘(I) such dollar amount,

21 multiplied by

22 ‘‘(II) the cost-of-living ad23 justment determined under
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1 section 1(f )(3) for the cal2 endar year in which the tax3 able year begins, determined

4 by substituting ‘calendar year

5 2002’ for ‘calendar year 1992’

6 in subparagraph (B) thereof.

7 ‘‘(ii) ROUNDING RULES.—If any

8 amount after adjustment under

9 clause (i) is not a multiple of $500,

10 such amount shall be rounded to

11 the next lower multiple of $500.’’.

12 (b) CONFORMING AMENDMENTS.—

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

14 striking ‘‘in excess of $2,000 on behalf of

15 any individual’’ and inserting ‘‘on behalf

16 of any individual in excess of the amount

17 in effect for such taxable year under sec18 tion 219(b)(1)(A)’’.

19 (2) Section 408(b)(2)(B) is amended by

20 striking ‘‘$2,000’’ and inserting ‘‘the dollar

21 amount in effect under section

22 219(b)(1)(A)’’.

23 (3) Section 408(b) is amended by

24 striking ‘‘$2,000’’ in the matter following

25 paragraph (4) and inserting ‘‘the dollar
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1 amount in effect under section

2 219(b)(1)(A)’’.

3 (4) Section 408( j) is amended by strik4 ing ‘‘$2,000’’.

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

6 striking ‘‘$2,000’’ and inserting ‘‘the dollar

7 amount in effect under section

8 219(b)(1)(A)’’.

9 (c) EFFECTIVE DATE.—The amendments

10 made by this section shall apply to taxable

11 years beginning after December 31, 2000.

12 TITLE II—EXPANDING

13 COVERAGE

14 SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION LIM15 ITS.

16 (a) DEFINED BENEFIT PLANS.—

17 (1) DOLLAR LIMIT.—

18 (A) Subparagraph (A) of section

19 415(b)(1) (relating to limitation for de20 fined benefit plans) is amended by

21 striking ‘‘$90,000’’ and inserting

22 ‘‘$160,000’’.

23 (B) Subparagraphs (C) and (D) of

24 section 415(b)(2) are each amended by

25 striking ‘‘$90,000’’ each place it ap-
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1 pears in the headings and the text

2 and inserting ‘‘$160,000’’.

3 (C) Paragraph (7) of section

4 415(b) (relating to benefits under cer5 tain collectively bargained plans) is

6 amended by striking ‘‘the greater of

7 $68,212 or one-half the amount other8 wise applicable for such year under

9 paragraph (1)(A) for ‘$90,000’ ’’ and in10 serting ‘‘one-half the amount other11 wise applicable for such year under

12 paragraph (1)(A) for ‘$160,000’ ’’.

13 (2) LIMIT REDUCED WHEN BENEFIT BE14 GINS BEFORE AGE 62.—Subparagraph (C) of

15 section 415(b)(2) is amended by striking

16 ‘‘the social security retirement age’’ each

17 place it appears in the heading and text

18 and inserting ‘‘age 62’’ and by striking the

19 second sentence.

20 (3) LIMIT INCREASED WHEN BENEFIT BE21 GINS AFTER AGE 65.—Subparagraph (D) of

22 section 415(b)(2) is amended by striking

23 ‘‘the social security retirement age’’ each

24 place it appears in the heading and text

25 and inserting ‘‘age 65’’.
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1 (4) COST-OF-LIVING ADJUSTMENTS.—

2 Subsection (d) of section 415 (related to

3 cost-of-living adjustments) is amended—

4 (A) by striking ‘‘$90,000’’ in para5 graph (1)(A) and inserting ‘‘$160,000’’;

6 and

7 (B) in paragraph (3)(A)—

8 (i) by striking ‘‘$90,000’’ in the

9 heading and inserting ‘‘$160,000’’;

10 and

11 (ii) by striking ‘‘October 1,

12 1986’’ and inserting ‘‘July 1, 2000’’.

13 (5) CONFORMING AMENDMENTS.—

14 (A) Section 415(b)(2) is amended

15 by striking subparagraph (F).

16 (B) Section 415(b)(9) is amended

17 to read as follows:

18 ‘‘(9) SPECIAL RULE FOR COMMERCIAL

19 AIRLINE PILOTS.—

20 ‘‘(A) IN GENERAL.—Except as

21 provided in subparagraph (B), in

22 the case of any participant who is

23 a commercial airline pilot, if, as of

24 the time of the participant’s re25 tirement, regulations prescribed
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1 by the Federal Aviation Adminis2 tration require an individual to

3 separate from service as a com4 mercial airline pilot after attain5 ing any age occurring on or after

6 age 60 and before age 62, para7 graph (2)(C) shall be applied by

8 substituting such age for age 62.

9 ‘‘(B) INDIVIDUALS WHO SEPA10 RATE FROM SERVICE BEFORE AGE

11 60.—If a participant described in

12 subparagraph (A) separates from

13 service before age 60, the rules of

14 paragraph (2)(C) shall apply.’’.

15 (C) Section 415(b)(10)(C)(i) is

16 amended by striking ‘‘applied without

17 regard to paragraph (2)(F)’’.

18 (b) DEFINED CONTRIBUTION PLANS.—

19 (1) DOLLAR LIMIT.—Subparagraph (A)

20 of section 415(c)(1) (relating to limitation

21 for defined contribution plans) is amend22 ed by striking ‘‘$30,000’’ and inserting

23 ‘‘$40,000’’.
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1 (2) COST-OF-LIVING ADJUSTMENTS.—

2 Subsection (d) of section 415 (related to

3 cost-of-living adjustments) is amended—

4 (A) by striking ‘‘$30,000’’ in para5 graph (1)(C) and inserting ‘‘$40,000’’;

6 and

7 (B) in paragraph (3)(D)—

8 (i) by striking ‘‘$30,000’’ in the

9 heading and inserting ‘‘$40,000’’;

10 and

11 (ii) by striking ‘‘October 1,

12 1993’’ and inserting ‘‘July 1, 2000’’.

13 (c) QUALIFIED TRUSTS.—

14 (1) COMPENSATION LIMIT.—Sections

15 401(a)(17), 404(l), 408(k), and 505(b)(7) are

16 each amended by striking ‘‘$150,000’’ each

17 place it appears and inserting ‘‘$200,000’’.

18 (2) BASE PERIOD AND ROUNDING OF

19 COST-OF-LIVING ADJUSTMENT.—Subpara20 graph (B) of section 401(a)(17) is

21 amended—

22 (A) by striking ‘‘October 1, 1993’’

23 and inserting ‘‘July 1, 2000’’; and
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1 (B) by striking ‘‘$10,000’’ both

2 places it appears and inserting

3 ‘‘$5,000’’.

4 (d) ELECTIVE DEFERRALS.—

5 (1) IN GENERAL.—Paragraph (1) of sec6 tion 402(g) (relating to limitation on ex7 clusion for elective deferrals) is amended

8 to read as follows:

9 ‘‘(1) IN GENERAL.—

10 ‘‘(A) LIMITATION.—Notwith11 standing subsections (e)(3) and

12 (h)(1)(B), the elective deferrals of any

13 individual for any taxable year shall

14 be included in such individual’s gross

15 income to the extent the amount of

16 such deferrals for the taxable year ex17 ceeds the applicable dollar amount.

18 ‘‘(B) APPLICABLE DOLLAR AMOUNT.—

19 For purposes of subparagraph (A),

20 the applicable dollar amount shall be

21 the amount determined in accord22 ance with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 ....................................................................... $11,000

2002 ....................................................................... $12,000

2003 ....................................................................... $13,000
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2004 ....................................................................... $14,000

2005 or thereafter .............................................. $15,000.’’.

1 (2) COST-OF-LIVING ADJUSTMENT.—

2 Paragraph (5) of section 402(g) is amend3 ed to read as follows:

4 ‘‘(5) COST-OF-LIVING ADJUSTMENT.—In

5 the case of taxable years beginning after

6 December 31, 2005, the Secretary shall

7 adjust the $15,000 amount under para8 graph (1)(B) at the same time and in the

9 same manner as under section 415(d), ex10 cept that the base period shall be the cal11 endar quarter beginning July 1, 2004, and

12 any increase under this paragraph which

13 is not a multiple of $500 shall be rounded

14 to the next lowest multiple of $500.’’.

15 (3) CONFORMING AMENDMENTS.—

16 (A) Section 402(g) (relating to lim17 itation on exclusion for elective defer18 rals), as amended by paragraphs (1)

19 and (2), is further amended by strik20 ing paragraph (4) and redesignating

21 paragraphs (5), (6), (7), (8), and (9) as

22 paragraphs (4), (5), (6), (7), and (8), re23 spectively.
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1 (B) Paragraph (2) of section 457(c)

2 is amended by striking

3 ‘‘402(g)(8)(A)(iii)’’ and inserting

4 ‘‘402(g)(7)(A)(iii)’’.

5 (C) Clause (iii) of section

6 501(c)(18)(D) is amended by striking

7 ‘‘(other than paragraph (4) thereof)’’.

8 (e) DEFERRED COMPENSATION PLANS OF

9 STATE AND LOCAL GOVERNMENTS AND TAX-EX10 EMPT ORGANIZATIONS.—

11 (1) IN GENERAL.—Section 457 (relating

12 to deferred compensation plans of State

13 and local governments and tax-exempt

14 organizations) is amended—

15 (A) in subsections (b)(2)(A) and

16 (c)(1) by striking ‘‘$7,500’’ each place

17 it appears and inserting ‘‘the applica18 ble dollar amount’’; and

19 (B) in subsection (b)(3)(A) by

20 striking ‘‘$15,000’’ and inserting

21 ‘‘twice the dollar amount in effect

22 under subsection (b)(2)(A)’’.

23 (2) APPLICABLE DOLLAR AMOUNT; COST24 OF-LIVING ADJUSTMENT.—Paragraph (15) of
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1 section 457(e) is amended to read as fol2 lows:

3 ‘‘(15) APPLICABLE DOLLAR AMOUNT.—

4 ‘‘(A) IN GENERAL.—The applicable

5 dollar amount shall be the amount

6 determined in accordance with the

7 following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 ....................................................................... $11,000

2002 ....................................................................... $12,000

2003 ....................................................................... $13,000

2004 ....................................................................... $14,000

2005 or thereafter .............................................. $15,000.

8 ‘‘(B) COST-OF-LIVING ADJUST9 MENTS.—In the case of taxable years

10 beginning after December 31, 2005,

11 the Secretary shall adjust the $15,000

12 amount under subparagraph (A) at

13 the same time and in the same man14 ner as under section 415(d), except

15 that the base period shall be the cal16 endar quarter beginning July 1, 2004,

17 and any increase under this para18 graph which is not a multiple of $500

19 shall be rounded to the next lowest

20 multiple of $500.’’.

21 (f) SIMPLE RETIREMENT ACCOUNTS.—
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1 (1) LIMITATION.—Clause (ii) of section

2 408(p)(2)(A) (relating to general rule for

3 qualified salary reduction arrangement)

4 is amended by striking ‘‘$6,000’’ and in5 serting ‘‘the applicable dollar amount’’.

6 (2) APPLICABLE DOLLAR AMOUNT.—Sub7 paragraph (E) of 408(p)(2) is amended to

8 read as follows:

9 ‘‘(E) APPLICABLE DOLLAR AMOUNT;

10 COST-OF-LIVING ADJUSTMENT.—

11 ‘‘(i) IN GENERAL.—For purposes

12 of subparagraph (A)(ii), the appli13 cable dollar amount shall be the

14 amount determined in accordance

15 with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 ................................................................ $7,000

2002 ................................................................ $8,000

2003 ................................................................ $9,000

2004 or thereafter ....................................... $10,000.

16 ‘‘(ii) COST-OF-LIVING ADJUST17 MENT.—In the case of a year be18 ginning after December 31, 2004,

19 the Secretary shall adjust the

20 $10,000 amount under clause (i) at

21 the same time and in the same

22 manner as under section 415(d),
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1 except that the base period taken

2 into account shall be the calendar

3 quarter beginning July 1, 2003,

4 and any increase under this sub5 paragraph which is not a multiple

6 of $500 shall be rounded to the

7 next lower multiple of $500.’’.

8 (3) CONFORMING AMENDMENTS.—

9 (A) Subclause (I) of section

10 401(k)(11)(B)(i) is amended by strik11 ing ‘‘$6,000’’ and inserting ‘‘the

12 amount in effect under section

13 408(p)(2)(A)(ii)’’.

14 (B) Section 401(k)(11) is amended

15 by striking subparagraph (E).

16 (g) ROUNDING RULE RELATING TO DEFINED

17 BENEFIT PLANS AND DEFINED CONTRIBUTION

18 PLANS.—Paragraph (4) of section 415(d) is

19 amended to read as follows:

20 ‘‘(4) ROUNDING.—

21 ‘‘(A) $160,000 AMOUNT.—Any in22 crease under subparagraph (A) of

23 paragraph (1) which is not a multiple

24 of $5,000 shall be rounded to the next

25 lowest multiple of $5,000.
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1 ‘‘(B) $40,000 AMOUNT.—Any in2 crease under subparagraph (C) of

3 paragraph (1) which is not a multiple

4 of $1,000 shall be rounded to the next

5 lowest multiple of $1,000.’’.

6 (h) EFFECTIVE DATE.—The amendments

7 made by this section shall apply to years be8 ginning after December 31, 2000.

9 SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART10 NERS, AND SOLE PROPRIETORS.

11 (a) AMENDMENT OF INTERNAL REVENUE

12 CODE.—Subparagraph (B) of section 4975(f)(6)

13 (relating to exemptions not to apply to certain

14 transactions) is amended by adding at the end

15 the following new clause:

16 ‘‘(iii) LOAN EXCEPTION.—For

17 purposes of subparagraph (A)(i),

18 the term ‘owner-employee’ shall

19 only include a person described

20 in subclause (II) or (III) of clause

21 (i).’’.

22 (b) AMENDMENT OF ERISA.—Section

23 408(d)(2) of the Employee Retirement Income

24 Security Act of 1974 (29 U.S.C. 1108(d)(2)) is
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1 amended by adding at the end the following

2 new subparagraph:

3 ‘‘(C) For purposes of paragraph (1)(A), the

4 term ‘owner-employee’ shall only include a

5 person described in clause (ii) or (iii) of sub6 paragraph (A).’’.

7 (c) EFFECTIVE DATE.—The amendments

8 made by this section shall apply to years be9 ginning after December 31, 2001.

10 SEC. 203. MODIFICATION OF TOP-HEAVY RULES.

11 (a) SIMPLIFICATION OF DEFINITION OF KEY

12 EMPLOYEE.—

13 (1) IN GENERAL.—Section 416(i)(1)(A)

14 (defining key employee) is amended—

15 (A) by striking ‘‘or any of the 4

16 preceding plan years’’ in the matter

17 preceding clause (i);

18 (B) by striking clause (i) and in19 serting the following:

20 ‘‘(i) an officer of the employer

21 having an annual compensation

22 greater than $150,000,’’;

23 (C) by striking clause (ii) and re24 designating clauses (iii) and (iv) as

25 clauses (ii) and (iii), respectively; and
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1 (D) by striking the second sen2 tence in the matter following clause

3 (iii), as redesignated by subparagraph

4 (C).

5 (2) CONFORMING AMENDMENT.—Section

6 416(i)(1)(B)(iii) is amended by striking

7 ‘‘and subparagraph (A)(ii)’’.

8 (b) MATCHING CONTRIBUTIONS TAKEN INTO

9 ACCOUNT FOR MINIMUM CONTRIBUTION RE10 QUIREMENTS.—Section 416(c)(2)(A) (relating to

11 defined contribution plans) is amended by

12 adding at the end the following: ‘‘Employer

13 matching contributions (as defined in section

14 401(m)(4)(A)) shall be taken into account for

15 purposes of this subparagraph.’’.

16 (c) DISTRIBUTIONS DURING LAST YEAR BE17 FORE DETERMINATION DATE TAKEN INTO AC18 COUNT.—

19 (1) IN GENERAL.—Paragraph (3) of sec20 tion 416(g) is amended to read as follows:

21 ‘‘(3) DISTRIBUTIONS DURING LAST YEAR

22 BEFORE DETERMINATION DATE TAKEN INTO

23 ACCOUNT.—

24 ‘‘(A) IN GENERAL.—For purposes of

25 determining—
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1 ‘‘(i) the present value of the

2 cumulative accrued benefit for

3 any employee, or

4 ‘‘(ii) the amount of the ac5 count of any employee,

6 such present value or amount shall

7 be increased by the aggregate dis8 tributions made with respect to such

9 employee under the plan during the

10 1-year period ending on the deter11 mination date. The preceding sen12 tence shall also apply to distributions

13 under a terminated plan which if it

14 had not been terminated would have

15 been required to be included in an

16 aggregation group.

17 ‘‘(B) 5-YEAR PERIOD IN CASE OF IN18 SERVICE DISTRIBUTION.—In the case of

19 any distribution made for a reason

20 other than separation from service,

21 death, or disability, subparagraph (A)

22 shall be applied by substituting ‘5-

23 year period’ for ‘1-year period’.’’.
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1 (2) BENEFITS NOT TAKEN INTO AC2 COUNT.—Subparagraph (E) of section

3 416(g)(4) is amended—

4 (A) by striking ‘‘LAST 5 YEARS’’ in

5 the heading and inserting ‘‘LAST YEAR

6 BEFORE DETERMINATION DATE’’; and

7 (B) by striking ‘‘5-year period’’

8 and inserting ‘‘1-year period’’.

9 (d) DEFINITION OF TOP-HEAVY PLANS.—

10 Paragraph (4) of section 416(g) (relating to

11 other special rules for top-heavy plans) is

12 amended by adding at the end the following

13 new subparagraph:

14 ‘‘(H) CASH OR DEFERRED ARRANGE15 MENTS USING ALTERNATIVE METHODS OF

16 MEETING NONDISCRIMINATION REQUIRE17 MENTS.—The term ‘top-heavy plan’

18 shall not include a plan which con19 sists solely of—

20 ‘‘(i) a cash or deferred ar21 rangement which meets the re22 quirements of section 401(k)(12),

23 and

24 ‘‘(ii) matching contributions

25 with respect to which the require-
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1 ments of section 401(m)(11) are

2 met.

3 If, but for this subparagraph, a plan

4 would be treated as a top-heavy plan

5 because it is a member of an aggrega6 tion group which is a top-heavy

7 group, contributions under the plan

8 may be taken into account in deter9 mining whether any other plan in the

10 group meets the requirements of sub11 section (c)(2).’’.

12 (e) FROZEN PLAN EXEMPT FROM MINIMUM

13 BENEFIT REQUIREMENT.—Subparagraph (C) of

14 section 416(c)(1) (relating to defined benefit

15 plans) is amended—

16 (A) by striking ‘‘clause (ii)’’ in

17 clause (i) and inserting ‘‘clause (ii) or

18 (iii)’’; and

19 (B) by adding at the end the fol20 lowing:

21 ‘‘(iii) EXCEPTION FOR FROZEN

22 PLAN.—For purposes of deter23 mining an employee’s years of

24 service with the employer, any

25 service with the employer shall be
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1 disregarded to the extent that

2 such service occurs during a plan

3 year when the plan benefits

4 (within the meaning of section

5 410(b)) no key employee or former

6 key employee.’’.

7 (f) ELIMINATION OF FAMILY ATTRIBUTION.—

8 Section 416(i)(1)(B) (defining 5-percent

9 owner) is amended by adding at the end the

10 following new clause:

11 ‘‘(iv) FAMILY ATTRIBUTION DIS12 REGARDED.—Solely for purposes of

13 applying this paragraph (and not

14 for purposes of any provision of

15 this title which incorporates by

16 reference the definition of a key

17 employee or 5-percent owner

18 under this paragraph), section

19 318 shall be applied without re20 gard to subsection (a)(1) thereof

21 in determining whether any per22 son is a 5-percent owner.’’.

23 (g) EFFECTIVE DATE.—The amendments

24 made by this section shall apply to years be25 ginning after December 31, 2001.
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1 SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO AC2 COUNT FOR PURPOSES OF DEDUCTION LIM3 ITS.

4 (a) IN GENERAL.—Section 404 (relating to

5 deduction for contributions of an employer to

6 an employees’ trust or annuity plan and com7 pensation under a deferred payment plan) is

8 amended by adding at the end the following

9 new subsection:

10 ‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO

11 ACCOUNT FOR PURPOSES OF DEDUCTION LIM12 ITS.—Elective deferrals (as defined in section

13 402(g)(3)) shall not be subject to any limita14 tion contained in paragraph (3), (7), or (9) of

15 subsection (a), and such elective deferrals

16 shall not be taken into account in applying

17 any such limitation to any other contribu18 tions.’’.

19 (b) EFFECTIVE DATE.—The amendment

20 made by this section shall apply to years be21 ginning after December 31, 2001.
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1 SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR

2 DEFERRED COMPENSATION PLANS OF STATE

3 AND LOCAL GOVERNMENTS AND TAX-EX4 EMPT ORGANIZATIONS.

5 (a) IN GENERAL.—Subsection (c) of section

6 457 (relating to deferred compensation plans

7 of State and local governments and tax-ex8 empt organizations), as amended by section

9 201, is amended to read as follows:

10 ‘‘(c) LIMITATION.—The maximum amount of

11 the compensation of any one individual which

12 may be deferred under subsection (a) during

13 any taxable year shall not exceed the amount

14 in effect under subsection (b)(2)(A) (as modi15 fied by any adjustment provided under sub16 section (b)(3)).’’.

17 (b) EFFECTIVE DATE.—The amendment

18 made by subsection (a) shall apply to years

19 beginning after December 31, 2001.

20 SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO

21 IRS REGARDING PENSION PLANS.

22 (a) ELIMINATION OF CERTAIN USER FEES.—

23 The Secretary of the Treasury or the Sec24 retary’s delegate shall not require payment of

25 user fees under the program established

26 under section 10511 of the Revenue Act of
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1 1987 for requests to the Internal Revenue

2 Service for determination letters with respect

3 to the qualified status of a pension benefit

4 plan maintained solely by one or more eligible

5 employers or any trust which is part of the

6 plan. The preceding sentence shall not apply

7 to any request—

8 (1) made after the later of—

9 (A) the fifth plan year the pension

10 benefit plan is in existence; or

11 (B) the end of any remedial

12 amendment period with respect to

13 the plan beginning within the first 5

14 plan years; or

15 (2) made by the sponsor of any proto16 type or similar plan which the sponsor

17 intends to market to participating em18 ployers.

19 (b) PENSION BENEFIT PLAN.—For purposes

20 of this section, the term ‘‘pension benefit

21 plan’’ means a pension, profit-sharing, stock

22 bonus, annuity, or employee stock ownership

23 plan.

24 (c) ELIGIBLE EMPLOYER.—For purposes of

25 this section, the term ‘‘eligible employer’’ has
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1 the same meaning given such term in section

2 408(p)(2)(C)(i)(I) of the Internal Revenue Code

3 of 1986. The determination of whether an em4 ployer is an eligible employer under this sec5 tion shall be made as of the date of the re6 quest described in subsection (a).

7 (d) DETERMINATION OF AVERAGE FEES

8 CHARGED.—For purposes of any determina9 tion of average fees charged, any request to

10 which subsection (a) applies shall not be

11 taken into account.

12 (e) EFFECTIVE DATE.—The provisions of

13 this section shall apply with respect to re14 quests made after December 31, 2001.

15 SEC. 207. DEDUCTION LIMITS.

16 (a) STOCK BONUS AND PROFIT SHARING

17 TRUSTS.—

18 (1) IN GENERAL.—Subclause (I) of sec19 tion 404(a)(3)(A)(i) (relating to stock

20 bonus and profit sharing trusts) is

21 amended by striking ‘‘15 percent’’ and in22 serting ‘‘20 percent’’.

23 (2) CONFORMING AMENDMENT.—Sub24 paragraph (C) of section 404(h)(1) is

25 amended by striking ‘‘15 percent’’ each
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1 place it appears and inserting ‘‘20 per2 cent’’.

3 (b) COMPENSATION.—

4 (1) IN GENERAL.—Section 404(a) (relat5 ing to general rule) is amended by adding

6 at the end the following:

7 ‘‘(12) DEFINITION OF COMPENSATION.—

8 For purposes of paragraphs (3), (7), (8),

9 and (9), the term ‘compensation other10 wise paid or accrued during the taxable

11 year’ shall include amounts treated as

12 ‘participant’s compensation’ under sub13 paragraph (C) or (D) of section 415(c)(3).’’.

14 (2) CONFORMING AMENDMENTS.—

15 (A) Subparagraph (B) of section

16 404(a)(3) is amended by striking the

17 last sentence thereof.

18 (B) Clause (i) of section

19 4972(c)(6)(B) is amended by striking

20 ‘‘(within the meaning of section

21 404(a))’’ and inserting ‘‘(within the

22 meaning of section 404(a) and as ad23 justed under section 404(a)(12))’’.
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1 (c) EFFECTIVE DATE.—The amendments

2 made by this section shall apply to years be3 ginning after December 31, 2001.

4 SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS

5 AFTER-TAX CONTRIBUTIONS.

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

7 subchapter D of chapter 1 (relating to de8 ferred compensation, etc.) is amended by in9 serting after section 402 the following new

10 section:

11 ‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER12 RALS AS PLUS CONTRIBUTIONS.

13 ‘‘(a) GENERAL RULE.—If an applicable re14 tirement plan includes a qualified plus con15 tribution program—

16 ‘‘(1) any designated plus contribution

17 made by an employee pursuant to the

18 program shall be treated as an elective

19 deferral for purposes of this chapter, ex20 cept that such contribution shall not be

21 excludable from gross income, and

22 ‘‘(2) such plan (and any arrangement

23 which is part of such plan) shall not be

24 treated as failing to meet any require-
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1 ment of this chapter solely by reason of

2 including such program.

3 ‘‘(b) QUALIFIED PLUS CONTRIBUTION PRO4 GRAM.—For purposes of this section—

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

6 plus contribution program’ means a pro7 gram under which an employee may elect

8 to make designated plus contributions in

9 lieu of all or a portion of elective defer10 rals the employee is otherwise eligible to

11 make under the applicable retirement

12 plan.

13 ‘‘(2) SEPARATE ACCOUNTING RE14 QUIRED.—A program shall not be treated

15 as a qualified plus contribution program

16 unless the applicable retirement plan—

17 ‘‘(A) establishes separate accounts

18 (‘designated plus accounts’) for the

19 designated plus contributions of each

20 employee and any earnings properly

21 allocable to the contributions, and

22 ‘‘(B) maintains separate record23 keeping with respect to each account.
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1 ‘‘(c) DEFINITIONS AND RULES RELATING TO

2 DESIGNATED PLUS CONTRIBUTIONS.—For pur3 poses of this section—

4 ‘‘(1) DESIGNATED PLUS CONTRIBUTION.—

5 The term ‘designated plus contribution’

6 means any elective deferral which—

7 ‘‘(A) is excludable from gross in8 come of an employee without regard

9 to this section, and

10 ‘‘(B) the employee designates (at

11 such time and in such manner as the

12 Secretary may prescribe) as not being

13 so excludable.

14 ‘‘(2) DESIGNATION LIMITS.—The amount

15 of elective deferrals which an employee

16 may designate under paragraph (1) shall

17 not exceed the excess (if any) of—

18 ‘‘(A) the maximum amount of elec19 tive deferrals excludable from gross

20 income of the employee for the tax21 able year (without regard to this sec22 tion), over

23 ‘‘(B) the aggregate amount of elec24 tive deferrals of the employee for the
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1 taxable year which the employee does

2 not designate under paragraph (1).

3 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

4 ‘‘(A) IN GENERAL.—A rollover con5 tribution of any payment or distribu6 tion from a designated plus account

7 which is otherwise allowable under

8 this chapter may be made only if the

9 contribution is to—

10 ‘‘(i) another designated plus

11 account of the individual from

12 whose account the payment or

13 distribution was made, or

14 ‘‘(ii) a Roth IRA of such indi15 vidual.

16 ‘‘(B) COORDINATION WITH LIMIT.—

17 Any rollover contribution to a des18 ignated plus account under subpara19 graph (A) shall not be taken into ac20 count for purposes of paragraph (1).

21 ‘‘(d) DISTRIBUTION RULES.—For purposes of

22 this title—

23 ‘‘(1) EXCLUSION.—Any qualified dis24 tribution from a designated plus account

25 shall not be includible in gross income.
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1 ‘‘(2) QUALIFIED DISTRIBUTION.—For

2 purposes of this subsection—

3 ‘‘(A) IN GENERAL.—The term ‘quali4 fied distribution’ has the meaning

5 given such term by section

6 408A(d)(2)(A) (without regard to

7 clause (iv) thereof).

8 ‘‘(B) DISTRIBUTIONS WITHIN NON9 EXCLUSION PERIOD.—A payment or dis10 tribution from a designated plus ac11 count shall not be treated as a quali12 fied distribution if such payment or

13 distribution is made within the 5-tax14 able-year period beginning with the

15 earlier of—

16 ‘‘(i) the first taxable year for

17 which the individual made a des18 ignated plus contribution to any

19 designated plus account estab20 lished for such individual under

21 the same applicable retirement

22 plan, or

23 ‘‘(ii) if a rollover contribution

24 was made to such designated plus

25 account from a designated plus
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1 account previously established

2 for such individual under another

3 applicable retirement plan, the

4 first taxable year for which the

5 individual made a designated

6 plus contribution to such pre7 viously established account.

8 ‘‘(C) DISTRIBUTIONS OF EXCESS DE9 FERRALS AND EARNINGS.—The term

10 ‘qualified distribution’ shall not in11 clude any distribution of any excess

12 deferral under section 402(g)(2) and

13 any income on the excess deferral.

14 ‘‘(3) AGGREGATION RULES.—Section 72

15 shall be applied separately with respect

16 to distributions and payments from a des17 ignated plus account and other distribu18 tions and payments from the plan.

19 ‘‘(e) OTHER DEFINITIONS.—For purposes of

20 this section—

21 ‘‘(1) APPLICABLE RETIREMENT PLAN.—

22 The term ‘applicable retirement plan’

23 means—
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1 ‘‘(A) an employees’ trust described

2 in section 401(a) which is exempt

3 from tax under section 501(a), and

4 ‘‘(B) a plan under which amounts

5 are contributed by an individual’s

6 employer for an annuity contract de7 scribed in section 403(b).

8 ‘‘(2) ELECTIVE DEFERRAL.—The term

9 ‘elective deferral’ means any elective de10 ferral described in subparagraph (A) or

11 (C) of section 402(g)(3).’’.

12 (b) EXCESS DEFERRALS.—Section 402(g) (re13 lating to limitation on exclusion for elective

14 deferrals) is amended—

15 (1) by adding at the end of paragraph

16 (1) the following new sentence: ‘‘The pre17 ceding sentence shall not apply to so

18 much of such excess as does not exceed

19 the designated plus contributions of the

20 individual for the taxable year.’’; and

21 (2) by inserting ‘‘(or would be in22 cluded but for the last sentence thereof)’’

23 after ‘‘paragraph (1)’’ in paragraph (2)(A).
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1 (c) ROLLOVERS.—Subparagraph (B) of sec2 tion 402(c)(8) is amended by adding at the end

3 the following:

4 ‘‘If any portion of an eligible rollover

5 distribution is attributable to pay6 ments or distributions from a des7 ignated plus account (as defined in

8 section 402A), an eligible retirement

9 plan with respect to such portion

10 shall include only another designated

11 plus account and a Roth IRA.’’.

12 (d) REPORTING REQUIREMENTS.—

13 (1) W–2 INFORMATION.—Section

14 6051(a)(8) is amended by inserting ‘‘, in15 cluding the amount of designated plus

16 contributions (as defined in section

17 402A)’’ before the comma at the end.

18 (2) INFORMATION.—Section 6047 is

19 amended by redesignating subsection (f)

20 as subsection (g) and by inserting after

21 subsection (e) the following new sub22 section:

23 ‘‘(f) DESIGNATED PLUS CONTRIBUTIONS.—

24 The Secretary shall require the plan adminis25 trator of each applicable retirement plan (as
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1 defined in section 402A) to make such returns

2 and reports regarding designated plus con3 tributions (as so defined) to the Secretary,

4 participants and beneficiaries of the plan, and

5 such other persons as the Secretary may pre6 scribe.’’.

7 (e) CONFORMING AMENDMENTS.—

8 (1) Section 408A(e) is amended by

9 adding after the first sentence the fol10 lowing new sentence: ‘‘Such term in11 cludes a rollover contribution described

12 in section 402A(c)(3)(A).’’.

13 (2) The table of sections for subpart A

14 of part I of subchapter D of chapter 1 is

15 amended by inserting after the item re16 lating to section 402 the following new

17 item:

‘‘Sec. 402A. Optional treatment of elective deferrals

as plus contributions.’’.

18 (f) EFFECTIVE DATE.—The amendments

19 made by this section shall apply to taxable

20 years beginning after December 31, 2001.
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1 TITLE III—ENHANCING

2 FAIRNESS FOR WOMEN

3 SEC. 301. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS

4 AGE 50 OR OVER.

5 (a) IN GENERAL.—Section 414 (relating to

6 definitions and special rules) is amended by

7 adding at the end the following new sub8 section:

9 ‘‘(v) CATCH-UP CONTRIBUTIONS FOR INDIVID10 UALS AGE 50 OR OVER.—

11 ‘‘(1) IN GENERAL.—An applicable em12 ployer plan shall not be treated as failing

13 to meet any requirement of this title sole14 ly because the plan permits an eligible

15 participant to make additional elective

16 deferrals in any plan year.

17 ‘‘(2) LIMITATION ON AMOUNT OF ADDI18 TIONAL DEFERRALS.—A plan shall not per19 mit additional elective deferrals under

20 paragraph (1) for any year in an amount

21 greater than the lesser of—

22 ‘‘(A) $5,000, or

23 ‘‘(B) the excess (if any) of—

24 ‘‘(i) the participant’s com25 pensation for the year, over
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1 ‘‘(ii) any other elective defer2 rals of the participant for such

3 year which are made without re4 gard to this subsection.

5 ‘‘(3) TREATMENT OF CONTRIBUTIONS.—In

6 the case of any contribution to a plan

7 under paragraph (1), such contribution

8 shall not, with respect to the year in

9 which the contribution is made—

10 ‘‘(A) be subject to any otherwise

11 applicable limitation contained in

12 section 402(g), 402(h)(2), 404(a),

13 404(h), 408(p)(2)(A)(ii), 415, or 457, or

14 ‘‘(B) be taken into account in ap15 plying such limitations to other con16 tributions or benefits under such

17 plan or any other such plan.

18 ‘‘(4) APPLICATION OF NONDISCRIMINA19 TION RULES.—

20 ‘‘(A) IN GENERAL.—An applicable

21 employer plan shall not be treated as

22 failing to meet the nondiscrimination

23 requirements under section 401(a)(4)

24 with respect to benefits, rights, and

25 features if the plan allows all eligible
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1 participants to make the same elec2 tion with respect to the additional

3 elective deferrals under this sub4 section.

5 ‘‘(B) AGGREGATION.—For purposes

6 of subparagraph (A), all plans main7 tained by employers who are treated

8 as a single employer under sub9 section (b), (c), (m), or (o) of section

10 414 shall be treated as 1 plan.

11 ‘‘(5) ELIGIBLE PARTICIPANT.—For pur12 poses of this subsection, the term ‘eligible

13 participant’ means, with respect to any

14 plan year, a participant in a plan—

15 ‘‘(A) who has attained the age of

16 50 before the close of the plan year,

17 and

18 ‘‘(B) with respect to whom no

19 other elective deferrals may (without

20 regard to this subsection) be made to

21 the plan for the plan year by reason

22 of the application of any limitation or

23 other restriction described in para24 graph (3) or comparable limitation

25 contained in the terms of the plan.
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1 ‘‘(6) OTHER DEFINITIONS AND RULES.—

2 For purposes of this subsection—

3 ‘‘(A) APPLICABLE EMPLOYER PLAN.—

4 The term ‘applicable employer plan’

5 means—

6 ‘‘(i) an employees’ trust de7 scribed in section 401(a) which is

8 exempt from tax under section

9 501(a),

10 ‘‘(ii) a plan under which

11 amounts are contributed by an in12 dividual’s employer for an annu13 ity contract described in section

14 403(b),

15 ‘‘(iii) an eligible deferred com16 pensation plan under section 457

17 of an eligible employer as defined

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

19 ‘‘(iv) an arrangement meeting

20 the requirements of section 408

21 (k) or (p).

22 ‘‘(B) ELECTIVE DEFERRAL.—The

23 term ‘elective deferral’ has the mean24 ing given such term by subsection

25 (u)(2)(C).
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1 ‘‘(C) EXCEPTION FOR SECTION 457

2 PLANS.—This subsection shall not

3 apply to an applicable employer plan

4 described in subparagraph (A)(iii) for

5 any year to which section 457(b)(3)

6 applies.

7 ‘‘(D) COST-OF-LIVING ADJUSTMENT.—

8 In the case of a year beginning after

9 December 31, 2005, the Secretary

10 shall adjust annually the $5,000

11 amount in paragraph (2)(A) for in12 creases in the cost-of-living at the

13 same time and in the same manner as

14 adjustments under section 415(d); ex15 cept that the base period taken into

16 account shall be the calendar quarter

17 beginning July 1, 2004, and any in18 crease under this subparagraph

19 which is not a multiple of $500 shall

20 be rounded to the next lower multiple

21 of $500.’’.

22 (b) EFFECTIVE DATE.—The amendment

23 made by this section shall apply to contribu24 tions in taxable years beginning after Decem25 ber 31, 2000.
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1 SEC. 302. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF

2 EMPLOYEES TO DEFINED CONTRIBUTION

3 PLANS.

4 (a) EQUITABLE TREATMENT.—

5 (1) IN GENERAL.—Subparagraph (B) of

6 section 415(c)(1) (relating to limitation

7 for defined contribution plans) is amend8 ed by striking ‘‘25 percent’’ and inserting

9 ‘‘100 percent’’.

10 (2) APPLICATION TO SECTION 403(b).—

11 Section 403(b) is amended—

12 (A) by striking ‘‘the exclusion al13 lowance for such taxable year’’ in

14 paragraph (1) and inserting ‘‘the ap15 plicable limit under section 415’’;

16 (B) by striking paragraph (2); and

17 (C) by inserting ‘‘or any amount

18 received by a former employee after

19 the fifth taxable year following the

20 taxable year in which such employee

21 was terminated’’ before the period at

22 the end of the second sentence of

23 paragraph (3).

24 (3) CONFORMING AMENDMENTS.—

25 (A) Subsection (f) of section 72 is

26 amended by striking ‘‘section
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1 403(b)(2)(D)(iii))’’ and inserting ‘‘sec2 tion 403(b)(2)(D)(iii), as in effect be3 fore the enactment of the Comprehen4 sive Retirement Security and Pension

5 Reform Act of 2001)’’.

6 (B) Section 404(a)(10)(B) is

7 amended by striking ‘‘, the exclusion

8 allowance under section 403(b)(2),’’.

9 (C) Section 415(a)(2) is amended

10 by striking ‘‘, and the amount of the

11 contribution for such portion shall re12 duce the exclusion allowance as pro13 vided in section 403(b)(2)’’.

14 (D) Section 415(c)(3) is amended

15 by adding at the end the following

16 new subparagraph:

17 ‘‘(E) ANNUITY CONTRACTS.—In the

18 case of an annuity contract described

19 in section 403(b), the term ‘partici20 pant’s compensation’ means the par21 ticipant’s includible compensation de22 termined under section 403(b)(3).’’.

23 (E) Section 415(c) is amended by

24 striking paragraph (4).
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1 (F) Section 415(c)(7) is amended

2 to read as follows:

3 ‘‘(7) CERTAIN CONTRIBUTIONS BY

4 CHURCH PLANS NOT TREATED AS EXCEEDING

5 LIMIT.—

6 ‘‘(A) IN GENERAL.—Notwith7 standing any other provision of this

8 subsection, at the election of a partic9 ipant who is an employee of a church

10 or a convention or association of

11 churches, including an organization

12 described in section 414(e)(3)(B)(ii),

13 contributions and other additions for

14 an annuity contract or retirement in15 come account described in section

16 403(b) with respect to such partici17 pant, when expressed as an annual

18 addition to such participant’s ac19 count, shall be treated as not exceed20 ing the limitation of paragraph (1) if

21 such annual addition is not in excess

22 of $10,000.

23 ‘‘(B) $40,000 AGGREGATE LIMITA24 TION.—The total amount of additions

25 with respect to any participant which
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1 may be taken into account for pur2 poses of this subparagraph for all

3 years may not exceed $40,000.

4 ‘‘(C) ANNUAL ADDITION.—For pur5 poses of this paragraph, the term ‘an6 nual addition’ has the meaning given

7 such term by paragraph (2).’’.

8 (G) Subparagraph (B) of section

9 402(g)(7) (as redesignated by section

10 201) is amended by inserting before

11 the period at the end the following:

12 ‘‘(as in effect before the enactment of

13 the Comprehensive Retirement Secu14 rity and Pension Reform Act of

15 2001)’’.

16 (H) Section 664(g) is amended—

17 (i) in paragraph (3)(E) by

18 striking ‘‘limitations under sec19 tion 415(c)’’ and inserting ‘‘appli20 cable limitation under paragraph

21 (7)’’, and

22 (ii) by adding at the end the

23 following new paragraph:

24 ‘‘(7) APPLICABLE LIMITATION.—
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1 ‘‘(A) IN GENERAL.—For purposes of

2 paragraph (3)(E), the applicable limi3 tation under this paragraph with re4 spect to a participant is an amount

5 equal to the lesser of—

6 ‘‘(i) $30,000, or

7 ‘‘(ii) 25 percent of the partici8 pant’s compensation (as defined

9 in section 415(c)(3)).

10 ‘‘(B) COST-OF-LIVING ADJUSTMENT.—

11 The Secretary shall adjust annually

12 the $30,000 amount under subpara13 graph (A)(i) at the same time and in

14 the same manner as under section

15 415(d), except that the base period

16 shall be the calendar quarter begin17 ning October 1, 1993, and any in18 crease under this subparagraph

19 which is not a multiple of $5,000 shall

20 be rounded to the next lowest mul21 tiple of $5,000.’’.

22 (3) EFFECTIVE DATE.—The amendments

23 made by this subsection shall apply to

24 years beginning after December 31, 2000.
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1 (b) SPECIAL RULES FOR SECTIONS 403(b) AND

2 408.—

3 (1) IN GENERAL.—Subsection (k) of sec4 tion 415 is amended by adding at the end

5 the following new paragraph:

6 ‘‘(4) SPECIAL RULES FOR SECTIONS

7 403(b) AND 408.—For purposes of this sec8 tion, any annuity contract described in

9 section 403(b) for the benefit of a partici10 pant shall be treated as a defined con11 tribution plan maintained by each em12 ployer with respect to which the partici13 pant has the control required under sub14 section (b) or (c) of section 414 (as modi15 fied by subsection (h)). For purposes of

16 this section, any contribution by an em17 ployer to a simplified employee pension

18 plan for an individual for a taxable year

19 shall be treated as an employer contribu20 tion to a defined contribution plan for

21 such individual for such year.’’.

22 (2) EFFECTIVE DATE.—

23 (A) IN GENERAL.—The amendment

24 made by paragraph (1) shall apply to
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1 limitation years beginning after De2 cember 31, 1999.

3 (B) EXCLUSION ALLOWANCE.—Effec4 tive for limitation years beginning in

5 2000, in the case of any annuity con6 tract described in section 403(b) of

7 the Internal Revenue Code of 1986,

8 the amount of the contribution dis9 qualified by reason of section 415(g)

10 of such Code shall reduce the exclu11 sion allowance as provided in section

12 403(b)(2) of such Code.

13 (3) MODIFICATION OF 403(b) EXCLUSION

14 ALLOWANCE TO CONFORM TO 415 MODIFICA15 TION.—The Secretary of the Treasury

16 shall modify the regulations regarding

17 the exclusion allowance under section

18 403(b)(2) of the Internal Revenue Code of

19 1986 to render void the requirement that

20 contributions to a defined benefit pen21 sion plan be treated as previously ex22 cluded amounts for purposes of the exclu23 sion allowance. For taxable years begin24 ning after December 31, 1999, such regu-
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1 lations shall be applied as if such re2 quirement were void.

3 (c) DEFERRED COMPENSATION PLANS OF

4 STATE AND LOCAL GOVERNMENTS AND TAX-EX5 EMPT ORGANIZATIONS.—

6 (1) IN GENERAL.—Subparagraph (B) of

7 section 457(b)(2) (relating to salary limi8 tation on eligible deferred compensation

plans) is amended by striking ‘‘331 9 ⁄3 per10 cent’’ and inserting ‘‘100 percent’’.

11 (2) EFFECTIVE DATE.—The amendment

12 made by this subsection shall apply to

13 years beginning after December 31, 2000.

14 SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER

15 MATCHING CONTRIBUTIONS.

16 (a) AMENDMENT OF INTERNAL REVENUE

17 CODE.—Section 411(a) (relating to minimum

18 vesting standards) is amended—

19 (1) in paragraph (2), by striking ‘‘A

20 plan’’ and inserting ‘‘Except as provided

21 in paragraph (12), a plan’’; and

22 (2) by adding at the end the fol23 lowing:

24 ‘‘(12) FASTER VESTING FOR MATCHING

25 CONTRIBUTIONS.—In the case of matching
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1 contributions (as defined in section

2 401(m)(4)(A)), paragraph (2) shall be

3 applied—

4 ‘‘(A) by substituting ‘3 years’ for ‘5

5 years’ in subparagraph (A), and

6 ‘‘(B) by substituting the following

7 table for the table contained in sub8 paragraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

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

9 (b) AMENDMENT OF ERISA.—Section 203(a)

10 of the Employee Retirement Income Security

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

12 (1) in paragraph (2), in the matter

13 preceding subparagraph (A), by striking

14 ‘‘A plan’’ and inserting ‘‘Except as pro15 vided in paragraph (4), a plan’’, and

16 (2) by adding at the end the fol17 lowing:

18 ‘‘(4) In the case of matching contribu19 tions (as defined in section 401(m)(4)(A)

20 of the Internal Revenue Code of 1986),

21 paragraph (2) shall be applied—
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1 ‘‘(A) by substituting ‘3 years’ for ‘5

2 years’ in subparagraph (A), and

3 ‘‘(B) by substituting the following

4 table for the table contained in sub5 paragraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

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

6 (c) EFFECTIVE DATES.—

7 (1) IN GENERAL.—Except as provided

8 in paragraph (2), the amendments made

9 by this section shall apply to contribu10 tions for plan years beginning after De11 cember 31, 2001.

12 (2) COLLECTIVE BARGAINING AGREE13 MENTS.—In the case of a plan maintained

14 pursuant to one or more collective bar15 gaining agreements between employee

16 representatives and one or more employ17 ers ratified by the date of the enactment

18 of this Act, the amendments made by this

19 section shall not apply to contributions

20 on behalf of employees covered by any

21 such agreement for plan years beginning

22 before the earlier of—
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1 (A) the later of—

2 (i) the date on which the last

3 of such collective bargaining

4 agreements terminates (deter5 mined without regard to any ex6 tension thereof on or after such

7 date of the enactment); or

8 (ii) January 1, 2002; or

9 (B) January 1, 2006.

10 (3) SERVICE REQUIRED.—With respect

11 to any plan, the amendments made by

12 this section shall not apply to any em13 ployee before the date that such em14 ployee has 1 hour of service under such

15 plan in any plan year to which the

16 amendments made by this section apply.

17 SEC. 304. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU18 TION RULES.

19 (a) SIMPLIFICATION AND FINALIZATION OF

20 MINIMUM DISTRIBUTION REQUIREMENTS.—

21 (1) IN GENERAL.—The Secretary of the

22 Treasury shall—

23 (A) simplify and finalize the regu24 lations relating to minimum distribu25 tion requirements under sections
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1 401(a)(9), 408(a)(6) and (b)(3),

2 403(b)(10), and 457(d)(2) of the Inter3 nal Revenue Code of 1986; and

4 (B) modify such regulations to—

5 (i) reflect current life expect6 ancy; and

7 (ii) revise the required dis8 tribution methods so that, under

9 reasonable assumptions, the

10 amount of the required minimum

11 distribution does not decrease

12 over a participant’s life expect13 ancy.

14 (2) FRESH START.—Notwithstanding

15 subparagraph (D) of section 401(a)(9) of

16 such Code, during the first year that reg17 ulations are in effect under this sub18 section, required distributions for future

19 years may be redetermined to reflect

20 changes under such regulations. Such re21 determination shall include the oppor22 tunity to choose a new designated bene23 ficiary and to elect a new method of cal24 culating life expectancy.
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1 (3) DATE FOR REGULATIONS.—Not later

2 than December 31, 2002, the Secretary

3 shall issue final regulations described in

4 paragraph (1) and such regulations shall

5 apply without regard to whether an indi6 vidual had previously begun receiving

7 minimum distributions.

8 (b) REPEAL OF RULE WHERE DISTRIBUTIONS

9 HAD BEGUN BEFORE DEATH OCCURS.—

10 (1) IN GENERAL.—Subparagraph (B) of

11 section 401(a)(9) is amended by striking

12 clause (i) and redesignating clauses (ii),

13 (iii), and (iv) as clauses (i), (ii), and (iii),

14 respectively.

15 (2) CONFORMING CHANGES.—

16 (A) Clause (i) of section

17 401(a)(9)(B) (as so redesignated) is

18 amended—

19 (i) by striking ‘‘FOR OTHER

20 CASES’’ in the heading; and

21 (ii) by striking ‘‘the distribu22 tion of the employee’s interest has

23 begun in accordance with sub24 paragraph (A)(ii)’’ and inserting
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1 ‘‘his entire interest has been dis2 tributed to him’’.

3 (B) Clause (ii) of section

4 401(a)(9)(B) (as so redesignated) is

5 amended by striking ‘‘clause (ii)’’ and

6 inserting ‘‘clause (i)’’.

7 (C) Clause (iii) of section

8 401(a)(9)(B) (as so redesignated) is

9 amended—

10 (i) by striking ‘‘clause (iii)(I)’’

11 and inserting ‘‘clause (ii)(I)’’;

12 (ii) by striking ‘‘clause

13 (iii)(III)’’ in subclause (I) and in14 serting ‘‘clause (ii)(III)’’;

15 (iii) by striking ‘‘the date on

16 which the employee would have

attained age 701 17 ⁄2,

’’ in subclause

18 (I) and inserting ‘‘April 1 of the

19 calendar year following the cal20 endar year in which the spouse

attains 701 21 ⁄2,

’’; and

22 (iv) by striking ‘‘the distribu23 tions to such spouse begin,’’ in

24 subclause (II) and inserting ‘‘his
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1 entire interest has been distrib2 uted to him,’’.

3 (3) EFFECTIVE DATE.—

4 (A) IN GENERAL.—Except as pro5 vided in subparagraph (B), the

6 amendments made by this subsection

7 shall apply to years beginning after

8 December 31, 2001.

9 (B) DISTRIBUTIONS TO SURVIVING

10 SPOUSE.—

11 (i) IN GENERAL.—In the case of

12 an employee described in clause

13 (ii), distributions to the surviving

14 spouse of the employee shall not

15 be required to commence prior to

16 the date on which such distribu17 tions would have been required to

18 begin under section 401(a)(9)(B)

19 of the Internal Revenue Code of

20 1986 (as in effect on the day be21 fore the date of the enactment of

22 this Act).

23 (ii) CERTAIN EMPLOYEES.—An

24 employee is described in this
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1 clause if such employee dies

2 before—

3 (I) the date of the enact4 ment of this Act, and

5 (II) the required begin6 ning date (within the meaning

7 of section 401(a)(9)(C) of the

8 Internal Revenue Code of

9 1986) of the employee.

10 (c) REDUCTION IN EXCISE TAX.—

11 (1) IN GENERAL.—Subsection (a) of sec12 tion 4974 is amended by striking ‘‘50 per13 cent’’ and inserting ‘‘10 percent’’.

14 (2) EFFECTIVE DATE.—The amendment

15 made by this subsection shall apply to

16 years beginning after December 31, 2001.

17 SEC. 305. CLARIFICATION OF TAX TREATMENT OF DIVISION

18 OF SECTION 457 PLAN BENEFITS UPON DI19 VORCE.

20 (a) IN GENERAL.—Section 414(p)(11) (relat21 ing to application of rules to governmental

22 and church plans) is amended—

23 (1) by inserting ‘‘or an eligible de24 ferred compensation plan (within the
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1 meaning of section 457(b))’’ after ‘‘sub2 section (e))’’; and

3 (2) in the heading, by striking ‘‘GOV4 ERNMENTAL AND CHURCH PLANS’’ and in5 serting ‘‘CERTAIN OTHER PLANS’’.

6 (b) WAIVER OF CERTAIN DISTRIBUTION RE7 QUIREMENTS.—Paragraph (10) of section 414(p)

8 is amended by striking ‘‘and section 409(d)’’

9 and inserting ‘‘section 409(d), and section

10 457(d)’’.

11 (c) TAX TREATMENT OF PAYMENTS FROM A

12 SECTION 457 PLAN.—Subsection (p) of section

13 414 is amended by redesignating paragraph

14 (12) as paragraph (13) and inserting after

15 paragraph (11) the following new paragraph:

16 ‘‘(12) TAX TREATMENT OF PAYMENTS

17 FROM A SECTION 457 PLAN.—If a distribu18 tion or payment from an eligible deferred

19 compensation plan described in section

20 457(b) is made pursuant to a qualified do21 mestic relations order, rules similar to

22 the rules of section 402(e)(1)(A) shall

23 apply to such distribution or payment.’’.

24 (d) EFFECTIVE DATE.—The amendments

25 made by this section shall apply to transfers,
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1 distributions, and payments made after De2 cember 31, 2001.

3 SEC. 306. MODIFICATION OF SAFE HARBOR RELIEF FOR

4 HARDSHIP WITHDRAWALS FROM CASH OR

5 DEFERRED ARRANGEMENTS.

6 (a) IN GENERAL.—The Secretary of the

7 Treasury shall revise the regulations relating

8 to hardship distributions under section

9 401(k)(2)(B)(i)(IV) of the Internal Revenue

10 Code of 1986 to provide that the period an em11 ployee is prohibited from making elective and

12 employee contributions in order for a dis13 tribution to be deemed necessary to satisfy fi14 nancial need shall be equal to 6 months.

15 (b) EFFECTIVE DATE.—The revised regula16 tions under subsection (a) shall apply to years

17 beginning after December 31, 2001.

18 TITLE IV—INCREASING PORT19 ABILITY FOR PARTICIPANTS

20 SEC. 401. ROLLOVERS ALLOWED AMONG VARIOUS TYPES

21 OF PLANS.

22 (a) ROLLOVERS FROM AND TO SECTION 457

23 PLANS.—

24 (1) ROLLOVERS FROM SECTION 457

25 PLANS.—
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1 (A) IN GENERAL.—Section 457(e)

2 (relating to other definitions and spe3 cial rules) is amended by adding at

4 the end the following:

5 ‘‘(16) ROLLOVER AMOUNTS.—

6 ‘‘(A) GENERAL RULE.—In the case

7 of an eligible deferred compensation

8 plan established and maintained by

9 an employer described in subsection

10 (e)(1)(A), if—

11 ‘‘(i) any portion of the balance

12 to the credit of an employee in

13 such plan is paid to such em14 ployee in an eligible rollover dis15 tribution (within the meaning of

16 section 402(c)(4) without regard

17 to subparagraph (C) thereof),

18 ‘‘(ii) the employee transfers

19 any portion of the property such

20 employee receives in such dis21 tribution to an eligible retirement

22 plan described in section

23 402(c)(8)(B), and

24 ‘‘(iii) in the case of a distribu25 tion of property other than
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1 money, the amount so transferred

2 consists of the property distrib3 uted,

4 then such distribution (to the extent

5 so transferred) shall not be includible

6 in gross income for the taxable year

7 in which paid.

8 ‘‘(B) CERTAIN RULES MADE APPLICA9 BLE.—The rules of paragraphs (2)

10 through (7) (other than paragraph

11 (4)(C)) and (9) of section 402(c) and

12 section 402(f) shall apply for purposes

13 of subparagraph (A).

14 ‘‘(C) REPORTING.—Rollovers under

15 this paragraph shall be reported to

16 the Secretary in the same manner as

17 rollovers from qualified retirement

18 plans (as defined in section 4974(c)).’’.

19 (B) DEFERRAL LIMIT DETERMINED

20 WITHOUT REGARD TO ROLLOVER

21 AMOUNTS.—Section 457(b)(2) (defining

22 eligible deferred compensation plan)

23 is amended by inserting ‘‘(other than

24 rollover amounts)’’ after ‘‘taxable

25 year’’.
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1 (C) DIRECT ROLLOVER.—Paragraph

2 (1) of section 457(d) is amended by

3 striking ‘‘and’’ at the end of subpara4 graph (A), by striking the period at

5 the end of subparagraph (B) and in6 serting ‘‘, and’’, and by inserting after

7 subparagraph (B) the following:

8 ‘‘(C) in the case of a plan main9 tained by an employer described in

10 subsection (e)(1)(A), the plan meets

11 requirements similar to the require12 ments of section 401(a)(31).

13 Any amount transferred in a direct trust14 ee-to-trustee transfer in accordance with

15 section 401(a)(31) shall not be includible

16 in gross income for the taxable year of

17 transfer.’’.

18 (D) WITHHOLDING.—

19 (i) Paragraph (12) of section

20 3401(a) is amended by adding at

21 the end the following:

22 ‘‘(E) under or to an eligible de23 ferred compensation plan which, at

24 the time of such payment, is a plan

25 described in section 457(b) main-
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1 tained by an employer described in

2 section 457(e)(1)(A); or’’.

3 (ii) Paragraph (3) of section

4 3405(c) is amended to read as fol5 lows:

6 ‘‘(3) ELIGIBLE ROLLOVER DISTRIBU7 TION.—For purposes of this subsection,

8 the term ‘eligible rollover distribution’

9 has the meaning given such term by sec10 tion 402(f)(2)(A).’’.

11 (iii) LIABILITY FOR WITH12 HOLDING.—Subparagraph (B) of

13 section 3405(d)(2) is amended by

14 striking ‘‘or’’ at the end of clause

15 (ii), by striking the period at the

16 end of clause (iii) and inserting ‘‘,

17 or’’, and by adding at the end the

18 following:

19 ‘‘(iv) section 457(b) and which

20 is maintained by an eligible em21 ployer described in section

22 457(e)(1)(A).’’.

23 (2) ROLLOVERS TO SECTION 457 PLANS.—

24 (A) IN GENERAL.—Section

25 402(c)(8)(B) (defining eligible retire-
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1 ment plan) is amended by striking

2 ‘‘and’’ at the end of clause (iii), by

3 striking the period at the end of

4 clause (iv) and inserting ‘‘, and’’, and

5 by inserting after clause (iv) the fol6 lowing new clause:

7 ‘‘(v) an eligible deferred com8 pensation plan described in sec9 tion 457(b) which is maintained

10 by an eligible employer described

11 in section 457(e)(1)(A).’’.

12 (B) SEPARATE ACCOUNTING.—Sec13 tion 402(c) is amended by adding at

14 the end the following new paragraph:

15 ‘‘(11) SEPARATE ACCOUNTING.—Unless a

16 plan described in clause (v) of paragraph

17 (8)(B) agrees to separately account for

18 amounts rolled into such plan from eligi19 ble retirement plans not described in

20 such clause, the plan described in such

21 clause may not accept transfers or roll22 overs from such retirement plans.’’.

23 (C) 10 PERCENT ADDITIONAL TAX.—

24 Subsection (t) of section 72 (relating

25 to 10-percent additional tax on early
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1 distributions from qualified retire2 ment plans) is amended by adding at

3 the end the following new paragraph:

4 ‘‘(9) SPECIAL RULE FOR ROLLOVERS TO

5 SECTION 457 PLANS.—For purposes of this

6 subsection, a distribution from an eligible

7 deferred compensation plan (as defined

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

9 described in section 457(e)(1)(A) shall be

10 treated as a distribution from a qualified

11 retirement plan described in 4974(c)(1) to

12 the extent that such distribution is at13 tributable to an amount transferred to an

14 eligible deferred compensation plan from

15 a qualified retirement plan (as defined in

16 section 4974(c)).’’.

17 (b) ALLOWANCE OF ROLLOVERS FROM AND TO

18 403(b) PLANS.—

19 (1) ROLLOVERS FROM SECTION 403(b)

20 PLANS.—Section 403(b)(8)(A)(ii) (relating

21 to rollover amounts) is amended by strik22 ing ‘‘such distribution’’ and all that fol23 lows and inserting ‘‘such distribution to

24 an eligible retirement plan described in

25 section 402(c)(8)(B), and’’.
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1 (2) ROLLOVERS TO SECTION 403(b)

2 PLANS.—Section 402(c)(8)(B) (defining eli3 gible retirement plan), as amended by

4 subsection (a), is amended by striking

5 ‘‘and’’ at the end of clause (iv), by striking

6 the period at the end of clause (v) and in7 serting ‘‘, and’’, and by inserting after

8 clause (v) the following new clause:

9 ‘‘(vi) an annuity contract de10 scribed in section 403(b).’’.

11 (c) EXPANDED EXPLANATION TO RECIPIENTS

12 OF ROLLOVER DISTRIBUTIONS.—Paragraph (1)

13 of section 402(f) (relating to written expla14 nation to recipients of distributions eligible

15 for rollover treatment) is amended by striking

16 ‘‘and’’ at the end of subparagraph (C), by

17 striking the period at the end of subpara18 graph (D) and inserting ‘‘, and’’, and by adding

19 at the end the following new subparagraph:

20 ‘‘(E) of the provisions under

21 which distributions from the eligible

22 retirement plan receiving the dis23 tribution may be subject to restric24 tions and tax consequences which are

25 different from those applicable to dis-
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1 tributions from the plan making such

2 distribution.’’.

3 (d) SPOUSAL ROLLOVERS.—Section 402(c)(9)

4 (relating to rollover where spouse receives

5 distribution after death of employee) is

6 amended by striking ‘‘; except that’’ and all

7 that follows up to the end period.

8 (e) CONFORMING AMENDMENTS.—

9 (1) Section 72(o)(4) is amended by

10 striking ‘‘and 408(d)(3)’’ and inserting

11 ‘‘403(b)(8), 408(d)(3), and 457(e)(16)’’.

12 (2) Section 219(d)(2) is amended by

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

14 ‘‘408(d)(3), or 457(e)(16)’’.

15 (3) Section 401(a)(31)(B) is amended

16 by striking ‘‘and 403(a)(4)’’ and inserting

17 ‘‘, 403(a)(4), 403(b)(8), and 457(e)(16)’’.

18 (4) Subparagraph (A) of section

19 402(f)(2) is amended by striking ‘‘or para20 graph (4) of section 403(a)’’ and inserting

21 ‘‘, paragraph (4) of section 403(a), sub22 paragraph (A) of section 403(b)(8), or sub23 paragraph (A) of section 457(e)(16)’’.
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1 (5) Paragraph (1) of section 402(f) is

2 amended by striking ‘‘from an eligible re3 tirement plan’’.

4 (6) Subparagraphs (A) and (B) of sec5 tion 402(f)(1) are amended by striking

6 ‘‘another eligible retirement plan’’ and in7 serting ‘‘an eligible retirement plan’’.

8 (7) Subparagraph (B) of section

9 403(b)(8) is amended to read as follows:

10 ‘‘(B) CERTAIN RULES MADE APPLICA11 BLE.—The rules of paragraphs (2)

12 through (7) and (9) of section 402(c)

13 and section 402(f) shall apply for pur14 poses of subparagraph (A), except

15 that section 402(f) shall be applied to

16 the payor in lieu of the plan adminis17 trator.’’.

18 (8) Section 408(a)(1) is amended by

19 striking ‘‘or 403(b)(8),’’ and inserting

20 ‘‘403(b)(8), or 457(e)(16)’’.

21 (9) Subparagraphs (A) and (B) of sec22 tion 415(b)(2) are each amended by strik23 ing ‘‘and 408(d)(3)’’ and inserting

24 ‘‘403(b)(8), 408(d)(3), and 457(e)(16)’’.
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1 (10) Section 415(c)(2) is amended by

2 striking ‘‘and 408(d)(3)’’ and inserting

3 ‘‘408(d)(3), and 457(e)(16)’’.

4 (11) Section 4973(b)(1)(A) is amended

5 by striking ‘‘or 408(d)(3)’’ and inserting

6 ‘‘408(d)(3), or 457(e)(16)’’.

7 (f) EFFECTIVE DATE; SPECIAL RULE.—

8 (1) EFFECTIVE DATE.—The amendments

9 made by this section shall apply to dis10 tributions after the date of the enactment

11 of this Act.

12 (2) SPECIAL RULE.—Notwithstanding

13 any other provision of law, subsections

14 (h)(3) and (h)(5) of section 1122 of the Tax

15 Reform Act of 1986 shall not apply to any

16 distribution from an eligible retirement

17 plan (as defined in clause (iii) or (iv) of

18 section 402(c)(8)(B) of the Internal Rev19 enue Code of 1986) on behalf of an indi20 vidual if there was a rollover to such

21 plan on behalf of such individual which

22 is permitted solely by reason of any

23 amendment made by this section.
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1 SEC. 402. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE2 MENT PLANS.

3 (a) IN GENERAL.—Subparagraph (A) of sec4 tion 408(d)(3) (relating to rollover amounts) is

5 amended by adding ‘‘or’’ at the end of clause

6 (i), by striking clauses (ii) and (iii), and by

7 adding at the end the following:

8 ‘‘(ii) the entire amount re9 ceived (including money and any

10 other property) is paid into an eli11 gible retirement plan for the ben12 efit of such individual not later

13 than the 60th day after the date

14 on which the payment or distribu15 tion is received, except that the

16 maximum amount which may be

17 paid into such plan may not ex18 ceed the portion of the amount

19 received which is includible in

20 gross income (determined without

21 regard to this paragraph).

22 For purposes of clause (ii), the term

23 ‘eligible retirement plan’ means an el24 igible retirement plan described in

25 clause (iii), (iv), (v), or (vi) of section

26 402(c)(8)(B).’’.
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1 (b) CONFORMING AMENDMENTS.—

2 (1) Paragraph (1) of section 403(b) is

3 amended by striking ‘‘section

4 408(d)(3)(A)(iii)’’ and inserting ‘‘section

5 408(d)(3)(A)(ii)’’.

6 (2) Clause (i) of section 408(d)(3)(D) is

7 amended by striking ‘‘(i), (ii), or (iii)’’ and

8 inserting ‘‘(i) or (ii)’’.

9 (3) Subparagraph (G) of section

10 408(d)(3) is amended to read as follows:

11 ‘‘(G) SIMPLE RETIREMENT AC12 COUNTS.—In the case of any payment

13 or distribution out of a simple retire14 ment account (as defined in sub15 section (p)) to which section 72(t)(6)

16 applies, this paragraph shall not

17 apply unless such payment or dis18 tribution is paid into another simple

19 retirement account.’’.

20 (c) EFFECTIVE DATE; SPECIAL RULE.—

21 (1) EFFECTIVE DATE.—The amendments

22 made by this section shall apply to dis23 tributions after the date of the enactment

24 of this Act.
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1 (2) SPECIAL RULE.—Notwithstanding

2 any other provision of law, subsections

3 (h)(3) and (h)(5) of section 1122 of the Tax

4 Reform Act of 1986 shall not apply to any

5 distribution from an eligible retirement

6 plan (as defined in clause (iii) or (iv) of

7 section 402(c)(8)(B) of the Internal Rev8 enue Code of 1986) on behalf of an indi9 vidual if there was a rollover to such

10 plan on behalf of such individual which

11 is permitted solely by reason of the

12 amendments made by this section.

13 SEC. 403. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

14 (a) ROLLOVERS FROM EXEMPT TRUSTS.—

15 Paragraph (2) of section 402(c) (relating to

16 maximum amount which may be rolled over)

17 is amended by adding at the end the fol18 lowing: ‘‘The preceding sentence shall not

19 apply to such distribution to the extent—

20 ‘‘(A) such portion is transferred in

21 a direct trustee-to-trustee transfer to

22 a qualified trust which is part of a

23 plan which is a defined contribution

24 plan and which agrees to separately

25 account for amounts so transferred,
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1 including separately accounting for

2 the portion of such distribution

3 which is includible in gross income

4 and the portion of such distribution

5 which is not so includible, or

6 ‘‘(B) such portion is transferred to

7 an eligible retirement plan described

8 in clause (i) or (ii) of paragraph

9 (8)(B).’’.

10 (b) OPTIONAL DIRECT TRANSFER OF ELIGI11 BLE ROLLOVER DISTRIBUTIONS.—Subparagraph

12 (B) of section 401(a)(31) (relating to limita13 tion) is amended by adding at the end the fol14 lowing: ‘‘The preceding sentence shall not

15 apply to such distribution if the plan to which

16 such distribution is transferred—

17 ‘‘(i) agrees to separately ac18 count for amounts so transferred,

19 including separately accounting

20 for the portion of such distribu21 tion which is includible in gross

22 income and the portion of such

23 distribution which is not so in24 cludible, or
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1 ‘‘(ii) is an eligible retirement

2 plan described in clause (i) or (ii)

3 of section 402(c)(8)(B).’’.

4 (c) RULES FOR APPLYING SECTION 72 TO

5 IRAS.—Paragraph (3) of section 408(d) (relat6 ing to special rules for applying section 72) is

7 amended by inserting at the end the fol8 lowing:

9 ‘‘(H) APPLICATION OF SECTION 72.—

10 ‘‘(i) IN GENERAL.—If—

11 ‘‘(I) a distribution is made

12 from an individual retirement

13 plan, and

14 ‘‘(II) a rollover contribu15 tion is made to an eligible re16 tirement plan described in

17 section 402(c)(8)(B)(iii), (iv),

18 (v), or (vi) with respect to all

19 or part of such distribution,

20 then, notwithstanding paragraph

21 (2), the rules of clause (ii) shall

22 apply for purposes of applying

23 section 72.
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1 ‘‘(ii) APPLICABLE RULES.—In

2 the case of a distribution de3 scribed in clause (i)—

4 ‘‘(I) section 72 shall be ap5 plied separately to such dis6 tribution,

7 ‘‘(II) notwithstanding the

8 pro rata allocation of income

9 on, and investment in, the

10 contract to distributions

11 under section 72, the portion

12 of such distribution rolled

13 over to an eligible retirement

14 plan described in clause (i)

15 shall be treated as from in16 come on the contract (to the

17 extent of the aggregate in18 come on the contract from all

19 individual retirement plans of

20 the distributee), and

21 ‘‘(III) appropriate adjust22 ments shall be made in apply23 ing section 72 to other dis24 tributions in such taxable
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1 year and subsequent taxable

2 years.’’.

3 (d) EFFECTIVE DATE.—The amendments

4 made by this section shall apply to distribu5 tions made after the date of the enactment of

6 this Act.

7 SEC. 404. HARDSHIP EXCEPTION TO 60-DAY RULE.

8 (a) EXEMPT TRUSTS.—Paragraph (3) of sec9 tion 402(c) (relating to transfer must be made

10 within 60 days of receipt) is amended to read

11 as follows:

12 ‘‘(3) TRANSFER MUST BE MADE WITHIN 60

13 DAYS OF RECEIPT.—

14 ‘‘(A) IN GENERAL.—Except as pro15 vided in subparagraph (B), paragraph

16 (1) shall not apply to any transfer of

17 a distribution made after the 60th

18 day following the day on which the

19 distributee received the property dis20 tributed.

21 ‘‘(B) HARDSHIP EXCEPTION.—The

22 Secretary may waive the 60-day re23 quirement under subparagraph (A)

24 where the failure to waive such re25 quirement would be against equity or
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1 good conscience, including casualty,

2 disaster, or other events beyond the

3 reasonable control of the individual

4 subject to such requirement.’’.

5 (b) IRAS.—Paragraph (3) of section 408(d)

6 (relating to rollover contributions), as amend7 ed by section 403, is amended by adding after

8 subparagraph (H) the following new subpara9 graph:

10 ‘‘(I) WAIVER OF 60-DAY REQUIRE11 MENT.—The Secretary may waive the

12 60-day requirement under subpara13 graphs (A) and (D) where the failure

14 to waive such requirement would be

15 against equity or good conscience, in16 cluding casualty, disaster, or other

17 events beyond the reasonable control

18 of the individual subject to such re19 quirement.’’.

20 (c) EFFECTIVE DATE.—The amendments

21 made by this section shall apply to distribu22 tions after the date of the enactment of this

23 Act.

24 SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.

25 (a) PLAN TRANSFERS.—
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1 (1) AMENDMENT OF INTERNAL REVENUE

2 CODE.—Paragraph (6) of section 411(d)

3 (relating to accrued benefit not to be de4 creased by amendment) is amended by

5 adding at the end the following:

6 ‘‘(D) PLAN TRANSFERS.—

7 ‘‘(i) IN GENERAL.—A defined

8 contribution plan (in this sub9 paragraph referred to as the

10 ‘transferee plan’) shall not be

11 treated as failing to meet the re12 quirements of this subsection

13 merely because the transferee

14 plan does not provide some or all

15 of the forms of distribution pre16 viously available under another

17 defined contribution plan (in this

18 subparagraph referred to as the

19 ‘transferor plan’) to the extent

20 that—

21 ‘‘(I) the forms of distribu22 tion previously available

23 under the transferor plan ap24 plied to the account of a par25 ticipant or beneficiary under
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1 the transferor plan that was

2 transferred from the trans3 feror plan to the transferee

4 plan pursuant to a direct

5 transfer rather than pursuant

6 to a distribution from the

7 transferor plan,

8 ‘‘(II) the terms of both the

9 transferor plan and the trans10 feree plan authorize the

11 transfer described in sub12 clause (I),

13 ‘‘(III) the transfer de14 scribed in subclause (I) was

15 made pursuant to a voluntary

16 election by the participant or

17 beneficiary whose account

18 was transferred to the trans19 feree plan,

20 ‘‘(IV) the election de21 scribed in subclause (III) was

22 made after the participant or

23 beneficiary received a notice

24 describing the consequences

25 of making the election, and
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1 ‘‘(V) the transferee plan

2 allows the participant or ben3 eficiary described in sub4 clause (III) to receive any dis5 tribution to which the partici6 pant or beneficiary is entitled

7 under the transferee plan in

8 the form of a single sum dis9 tribution.

10 ‘‘(ii) EXCEPTION.—Clause (i)

11 shall apply to plan mergers and

12 other transactions having the ef13 fect of a direct transfer, including

14 consolidations of benefits attrib15 utable to different employers

16 within a multiple employer plan.

17 ‘‘(E) ELIMINATION OF FORM OF DIS18 TRIBUTION.—Except to the extent pro19 vided in regulations, a defined con20 tribution plan shall not be treated as

21 failing to meet the requirements of

22 this section merely because of the

23 elimination of a form of distribution

24 previously available thereunder. This

25 subparagraph shall not apply to the
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1 elimination of a form of distribution

2 with respect to any participant

3 unless—

4 ‘‘(i) a single sum payment is

5 available to such participant at

6 the same time or times as the

7 form of distribution being elimi8 nated, and

9 ‘‘(ii) such single sum payment

10 is based on the same or greater

11 portion of the participant’s ac12 count as the form of distribution

13 being eliminated.’’.

14 (2) AMENDMENT OF ERISA.—Section

15 204(g) of the Employee Retirement In16 come Security Act of 1974 (29 U.S.C.

17 1054(g)) is amended by adding at the end

18 the following:

19 ‘‘(4)(A) A defined contribution plan (in

20 this subparagraph referred to as the ‘trans21 feree plan’) shall not be treated as failing to

22 meet the requirements of this subsection

23 merely because the transferee plan does not

24 provide some or all of the forms of distribu25 tion previously available under another de-
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1 fined contribution plan (in this subparagraph

2 referred to as the ‘transferor plan’) to the ex3 tent that—

4 ‘‘(i) the forms of distribution pre5 viously available under the transferor

6 plan applied to the account of a partici7 pant or beneficiary under the transferor

8 plan that was transferred from the trans9 feror plan to the transferee plan pursu10 ant to a direct transfer rather than pur11 suant to a distribution from the trans12 feror plan;

13 ‘‘(ii) the terms of both the transferor

14 plan and the transferee plan authorize

15 the transfer described in clause (i);

16 ‘‘(iii) the transfer described in clause

17 (i) was made pursuant to a voluntary

18 election by the participant or beneficiary

19 whose account was transferred to the

20 transferee plan;

21 ‘‘(iv) the election described in clause

22 (iii) was made after the participant or

23 beneficiary received a notice describing

24 the consequences of making the election;

25 and
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1 ‘‘(v) the transferee plan allows the

2 participant or beneficiary described in

3 clause (iii) to receive any distribution to

4 which the participant or beneficiary is

5 entitled under the transferee plan in the

6 form of a single sum distribution.

7 ‘‘(B) Subparagraph (A) shall apply to plan

8 mergers and other transactions having the ef9 fect of a direct transfer, including consolida10 tions of benefits attributable to different em11 ployers within a multiple employer plan.

12 ‘‘(5) Except to the extent provided in regu13 lations promulgated by the Secretary of the

14 Treasury, a defined contribution plan shall

15 not be treated as failing to meet the require16 ments of this subsection merely because of

17 the elimination of a form of distribution pre18 viously available thereunder. This paragraph

19 shall not apply to the elimination of a form of

20 distribution with respect to any participant

21 unless—

22 ‘‘(A) a single sum payment is available

23 to such participant at the same time or

24 times as the form of distribution being

25 eliminated; and
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1 ‘‘(B) such single sum payment is

2 based on the same or greater portion of

3 the participant’s account as the form of

4 distribution being eliminated.’’.

5 (3) EFFECTIVE DATE.—The amendments

6 made by this subsection shall apply to

7 years beginning after December 31, 2001.

8 (b) REGULATIONS.—

9 (1) AMENDMENT OF INTERNAL REVENUE

10 CODE.—Paragraph (6)(B) of section 411(d)

11 (relating to accrued benefit not to be de12 creased by amendment) is amended by

13 inserting after the second sentence the

14 following new sentence: ‘‘The Secretary

15 shall by regulations provide that this sub16 paragraph shall not apply to any plan

17 amendment which reduces or eliminates

18 benefits or subsidies which create signifi19 cant burdens or complexities for the plan

20 and plan participants and does not ad21 versely affect the rights of any partici22 pant in a more than de minimis manner.’’.

23 (2) AMENDMENT OF ERISA.—Section

24 204(g)(2) of the Employee Retirement In25 come Security Act of 1974 (29 U.S.C.
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1 1054(g)(2)) is amended by inserting before

2 the last sentence the following new sen3 tence: ‘‘The Secretary of the Treasury

4 shall by regulations provide that this

5 paragraph shall not apply to any plan

6 amendment which reduces or eliminates

7 benefits or subsidies which create signifi8 cant burdens or complexities for the plan

9 and plan participants and does not ad10 versely affect the rights of any partici11 pant in a more than de minimis manner.’’.

12 (3) SECRETARY DIRECTED.—Not later

13 than December 31, 2003, the Secretary of

14 the Treasury is directed to issue regula15 tions under section 411(d)(6) of the Inter16 nal Revenue Code of 1986 and section

17 204(g) of the Employee Retirement In18 come Security Act of 1974, including the

19 regulations required by the amendment

20 made by this subsection. Such regula21 tions shall apply to plan years beginning

22 after December 31, 2003, or such earlier

23 date as is specified by the Secretary of

24 the Treasury.
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1 SEC. 406. RATIONALIZATION OF RESTRICTIONS ON DIS2 TRIBUTIONS.

3 (a) MODIFICATION OF SAME DESK EXCEP4 TION.—

5 (1) SECTION 401(k).—

6 (A) Section 401(k)(2)(B)(i)(I) (re7 lating to qualified cash or deferred

8 arrangements) is amended by strik9 ing ‘‘separation from service’’ and in10 serting ‘‘severance from employ11 ment’’.

12 (B) Subparagraph (A) of section

13 401(k)(10) (relating to distributions

14 upon termination of plan or disposi15 tion of assets or subsidiary) is amend16 ed to read as follows:

17 ‘‘(A) IN GENERAL.—An event de18 scribed in this subparagraph is the

19 termination of the plan without es20 tablishment or maintenance of an21 other defined contribution plan

22 (other than an employee stock owner23 ship plan as defined in section

24 4975(e)(7)).’’.

25 (C) Section 401(k)(10) is

26 amended—
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1 (i) in subparagraph (B)—

2 (I) by striking ‘‘An event’’

3 in clause (i) and inserting ‘‘A

4 termination’’; and

5 (II) by striking ‘‘the event’’

6 in clause (i) and inserting ‘‘the

7 termination’’;

8 (ii) by striking subparagraph

9 (C); and

10 (iii) by striking ‘‘OR DISPOSI11 TION OF ASSETS OR SUBSIDIARY’’ in

12 the heading.

13 (2) SECTION 403(b).—

14 (A) Paragraphs (7)(A)(ii) and

15 (11)(A) of section 403(b) are each

16 amended by striking ‘‘separates from

17 service’’ and inserting ‘‘has a sever18 ance from employment’’.

19 (B) The heading for paragraph

20 (11) of section 403(b) is amended by

21 striking ‘‘SEPARATION FROM SERVICE’’

22 and inserting ‘‘SEVERANCE FROM EM23 PLOYMENT’’.

24 (3) SECTION 457.—Clause (ii) of section

25 457(d)(1)(A) is amended by striking ‘‘is
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1 separated from service’’ and inserting

2 ‘‘has a severance from employment’’.

3 (b) EFFECTIVE DATE.—The amendments

4 made by this section shall apply to distribu5 tions after the date of the enactment of this

6 Act.

7 SEC. 407. PURCHASE OF SERVICE CREDIT IN GOVERN8 MENTAL DEFINED BENEFIT PLANS.

9 (a) 403(b) PLANS.—Subsection (b) of sec10 tion 403 is amended by adding at the end the

11 following new paragraph:

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

13 TO PURCHASE PERMISSIVE SERVICE CREDIT.—

14 No amount shall be includible in gross in15 come by reason of a direct trustee-to16 trustee transfer to a defined benefit gov17 ernmental plan (as defined in section

18 414(d)) if such transfer is—

19 ‘‘(A) for the purchase of permis20 sive service credit (as defined in sec21 tion 415(n)(3)(A)) under such plan, or

22 ‘‘(B) a repayment to which section

23 415 does not apply by reason of sub24 section (k)(3) thereof.’’.
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1 (b) 457 PLANS.—Subsection (e) of section

2 457 is amended by adding after paragraph

3 (16) the following new paragraph:

4 ‘‘(17) TRUSTEE-TO-TRUSTEE TRANSFERS

5 TO PURCHASE PERMISSIVE SERVICE CREDIT.—

6 No amount shall be includible in gross in7 come by reason of a direct trustee-to8 trustee transfer to a defined benefit gov9 ernmental plan (as defined in section

10 414(d)) if such transfer is—

11 ‘‘(A) for the purchase of permis12 sive service credit (as defined in sec13 tion 415(n)(3)(A)) under such plan, or

14 ‘‘(B) a repayment to which section

15 415 does not apply by reason of sub16 section (k)(3) thereof.’’.

17 (c) EFFECTIVE DATE.—The amendments

18 made by this section shall apply to trustee-to19 trustee transfers after the date of the enact20 ment of this Act.

21 SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR

22 PURPOSES OF CASH-OUT AMOUNTS.

23 (a) QUALIFIED PLANS.—

24 (1) AMENDMENT OF INTERNAL REVENUE

25 CODE.—Section 411(a)(11) (relating to re-
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1 strictions on certain mandatory distribu2 tions) is amended by adding at the end

3 the following:

4 ‘‘(D) SPECIAL RULE FOR ROLLOVER

5 CONTRIBUTIONS.—A plan shall not fail

6 to meet the requirements of this para7 graph if, under the terms of the plan,

8 the present value of the nonforfeit9 able accrued benefit is determined

10 without regard to that portion of

11 such benefit which is attributable to

12 rollover contributions (and earnings

13 allocable thereto). For purposes of

14 this subparagraph, the term ‘rollover

15 contributions’ means any rollover

16 contribution under sections 402(c),

17 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),

18 and 457(e)(16).’’.

19 (2) AMENDMENT OF ERISA.—Section

20 203(e) of the Employee Retirement In21 come Security Act of 1974 (29 U.S.C.

22 1053(c)) is amended by adding at the end

23 the following:

24 ‘‘(4) A plan shall not fail to meet the re25 quirements of this subsection if, under the
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1 terms of the plan, the present value of the

2 nonforfeitable accrued benefit is determined

3 without regard to that portion of such benefit

4 which is attributable to rollover contributions

5 (and earnings allocable thereto). For purposes

6 of this subparagraph, the term ‘rollover con7 tributions’ means any rollover contribution

8 under sections 402(c), 403(a)(4), 403(b)(8),

9 408(d)(3)(A)(ii), and 457(e)(16) of the Internal

10 Revenue Code of 1986.’’.

11 (b) ELIGIBLE DEFERRED COMPENSATION

12 PLANS.—Clause (i) of section 457(e)(9)(A) is

13 amended by striking ‘‘such amount’’ and in14 serting ‘‘the portion of such amount which is

15 not attributable to rollover contributions (as

16 defined in section 411(a)(11)(D))’’.

17 (c) EFFECTIVE DATE.—The amendments

18 made by this section shall apply to distribu19 tions after December 31, 2001.

20 SEC. 409. MINIMUM DISTRIBUTION AND INCLUSION RE21 QUIREMENTS FOR SECTION 457 PLANS.

22 (a) MINIMUM DISTRIBUTION REQUIRE23 MENTS.—Paragraph (2) of section 457(d) (relat24 ing to distribution requirements) is amended

25 to read as follows:
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1 ‘‘(2) MINIMUM DISTRIBUTION REQUIRE2 MENTS.—A plan meets the minimum dis3 tribution requirements of this paragraph

4 if such plan meets the requirements of

5 section 401(a)(9).’’.

6 (b) INCLUSION IN GROSS INCOME.—

7 (1) YEAR OF INCLUSION.—Subsection (a)

8 of section 457 (relating to year of inclu9 sion in gross income) is amended to read

10 as follows:

11 ‘‘(a) YEAR OF INCLUSION IN GROSS INCOME.—

12 ‘‘(1) IN GENERAL.—Any amount of com13 pensation deferred under an eligible de14 ferred compensation plan, and any in15 come attributable to the amounts so de16 ferred, shall be includible in gross in17 come only for the taxable year in which

18 such compensation or other income—

19 ‘‘(A) is paid to the participant or

20 other beneficiary, in the case of a

21 plan of an eligible employer de22 scribed in subsection (e)(1)(A), and

23 ‘‘(B) is paid or otherwise made

24 available to the participant or other

25 beneficiary, in the case of a plan of
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1 an eligible employer described in sub2 section (e)(1)(B).

3 ‘‘(2) SPECIAL RULE FOR ROLLOVER

4 AMOUNTS.—To the extent provided in sec5 tion 72(t)(9), section 72(t) shall apply to

6 any amount includible in gross income

7 under this subsection.’’.

8 (2) CONFORMING AMENDMENTS.—

9 (A) So much of paragraph (9) of

10 section 457(e) as precedes subpara11 graph (A) is amended to read as fol12 lows:

13 ‘‘(9) BENEFITS OF TAX EXEMPT ORGANI14 ZATION PLANS NOT TREATED AS MADE AVAIL15 ABLE BY REASON OF CERTAIN ELECTIONS,

16 ETC.—In the case of an eligible deferred

17 compensation plan of an employer de18 scribed in subsection (e)(1)(B)—’’.

19 (B) Section 457(d) is amended by

20 adding at the end the following new

21 paragraph:

22 ‘‘(3) SPECIAL RULE FOR GOVERNMENT

23 PLAN.—An eligible deferred compensation

24 plan of an employer described in sub25 section (e)(1)(A) shall not be treated as
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1 failing to meet the requirements of this

2 subsection solely by reason of making a

3 distribution described in subsection

4 (e)(9)(A).’’.

5 (c) EFFECTIVE DATE.—The amendments

6 made by this section shall apply to distribu7 tions after the date of the enactment of this

8 Act.

9 TITLE V—STRENGTHENING PEN10 SION SECURITY AND EN11 FORCEMENT

12 SEC. 501. REPEAL OF PERCENT OF CURRENT LIABILITY

13 FUNDING LIMIT.

14 (a) AMENDMENT OF INTERNAL REVENUE

15 CODE.—Section 412(c)(7) (relating to full-fund16 ing limitation) is amended—

17 (1) by striking ‘‘the applicable per18 centage’’ in subparagraph (A)(i)(I) and in19 serting ‘‘in the case of plan years begin20 ning before January 1, 2004, the applica21 ble percentage’’; and

22 (2) by amending subparagraph (F) to

23 read as follows:

24 ‘‘(F) APPLICABLE PERCENTAGE.—For

25 purposes of subparagraph (A)(i)(I),
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1 the applicable percentage shall be de2 termined in accordance with the fol3 lowing table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

2002 ....................................................................... 165

2003 ....................................................................... 170.’’.

4 (b) AMENDMENT OF ERISA.—Section

5 302(c)(7) of the Employee Retirement Income

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

7 amended—

8 (1) by striking ‘‘the applicable per9 centage’’ in subparagraph (A)(i)(I) and in10 serting ‘‘in the case of plan years begin11 ning before January 1, 2004, the applica12 ble percentage’’; and

13 (2) by amending subparagraph (F) to

14 read as follows:

15 ‘‘(F) APPLICABLE PERCENTAGE.—For

16 purposes of subparagraph (A)(i)(I), the

17 applicable percentage shall be deter18 mined in accordance with the following

19 table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

2002 ....................................................................... 165

2003 ....................................................................... 170.’’.
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1 (c) EFFECTIVE DATE.—The amendments

2 made by this section shall apply to plan years

3 beginning after December 31, 2001.

4 SEC. 502. MAXIMUM CONTRIBUTION DEDUCTION RULES

5 MODIFIED AND APPLIED TO ALL DEFINED

6 BENEFIT PLANS.

7 (a) IN GENERAL.—Subparagraph (D) of sec8 tion 404(a)(1) (relating to special rule in case

9 of certain plans) is amended to read as fol10 lows:

11 ‘‘(D) SPECIAL RULE IN CASE OF CER12 TAIN PLANS.—

13 ‘‘(i) IN GENERAL.—In the case

14 of any defined benefit plan, ex15 cept as provided in regulations,

16 the maximum amount deductible

17 under the limitations of this para18 graph shall not be less than the

19 unfunded termination liability

20 (determined as if the proposed

21 termination date referred to in

22 section 4041(b)(2)(A)(i)(II) of the

23 Employee Retirement Income Se24 curity Act of 1974 were the last

25 day of the plan year).
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1 ‘‘(ii) PLANS WITH LESS THAN 100

2 PARTICIPANTS.—For purposes of

3 this subparagraph, in the case of

4 a plan which has less than 100

5 participants for the plan year,

6 termination liability shall not in7 clude the liability attributable to

8 benefit increases for highly com9 pensated employees (as defined in

10 section 414(q)) resulting from a

11 plan amendment which is made

12 or becomes effective, whichever is

13 later, within the last 2 years be14 fore the termination date.

15 ‘‘(iii) RULE FOR DETERMINING

16 NUMBER OF PARTICIPANTS.—For

17 purposes of determining whether

18 a plan has more than 100 partici19 pants, all defined benefit plans

20 maintained by the same employer

21 (or any member of such employ22 er’s controlled group (within the

23 meaning of section 412(l)(8)(C)))

24 shall be treated as one plan, but

25 only employees of such member
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1 or employer shall be taken into

2 account.

3 ‘‘(iv) PLANS MAINTAINED BY

4 PROFESSIONAL SERVICE EMPLOY5 ERS.—Clause (i) shall not apply to

6 a plan described in section

7 4021(b)(13) of the Employee Re8 tirement Income Security Act of

9 1974.’’.

10 (b) CONFORMING AMENDMENT.—Paragraph

11 (6) of section 4972(c) is amended to read as fol12 lows:

13 ‘‘(6) EXCEPTIONS.—In determining the

14 amount of nondeductible contributions

15 for any taxable year, there shall not be

16 taken into account so much of the con17 tributions to one or more defined con18 tribution plans which are not deductible

19 when contributed solely because of sec20 tion 404(a)(7) as does not exceed the

21 greater of—

22 ‘‘(A) the amount of contributions

23 not in excess of 6 percent of com24 pensation (within the meaning of sec25 tion 404(a)) paid or accrued (during
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1 the taxable year for which the con2 tributions were made) to bene3 ficiaries under the plans, or

4 ‘‘(B) the sum of—

5 ‘‘(i) the amount of contribu6 tions described in section

7 401(m)(4)(A), plus

8 ‘‘(ii) the amount of contribu9 tions described in section

10 402(g)(3)(A).

11 For purposes of this paragraph, the de12 ductible limits under section 404(a)(7)

13 shall first be applied to amounts contrib14 uted to a defined benefit plan and then to

15 amounts described in subparagraph (B).’’.

16 (c) EFFECTIVE DATE.—The amendments

17 made by this section shall apply to plan years

18 beginning after December 31, 2001.

19 SEC. 503. EXCISE TAX RELIEF FOR SOUND PENSION FUND20 ING.

21 (a) IN GENERAL.—Subsection (c) of section

22 4972 (relating to nondeductible contributions)

23 is amended by adding at the end the following

24 new paragraph:
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1 ‘‘(7) DEFINED BENEFIT PLAN EXCEP2 TION.—In determining the amount of non3 deductible contributions for any taxable

4 year, an employer may elect for such year

5 not to take into account any contribu6 tions to a defined benefit plan except to

7 the extent that such contributions exceed

8 the full-funding limitation (as defined in

9 section 412(c)(7), determined without re10 gard to subparagraph (A)(i)(I) thereof).

11 For purposes of this paragraph, the de12 ductible limits under section 404(a)(7)

13 shall first be applied to amounts contrib14 uted to defined contribution plans and

15 then to amounts described in this para16 graph. If an employer makes an election

17 under this paragraph for a taxable year,

18 paragraph (6) shall not apply to such em19 ployer for such taxable year.’’.

20 (b) EFFECTIVE DATE.—The amendment

21 made by this section shall apply to years be22 ginning after December 31, 2001.
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1 SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY

2 DEFINED BENEFIT PLANS SIGNIFICANTLY

3 REDUCING FUTURE BENEFIT ACCRUALS.

4 (a) AMENDMENT OF INTERNAL REVENUE

5 CODE.—

6 (1) IN GENERAL.—Chapter 43 (relating

7 to qualified pension, etc., plans) is

8 amended by adding at the end the fol9 lowing new section:

10 ‘‘SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING

11 BENEFIT ACCRUALS TO SATISFY NOTICE RE12 QUIREMENTS.

13 ‘‘(a) IMPOSITION OF TAX.—There is hereby

14 imposed a tax on the failure of any applicable

15 pension plan to meet the requirements of sub16 section (e) with respect to any applicable indi17 vidual.

18 ‘‘(b) AMOUNT OF TAX.—

19 ‘‘(1) IN GENERAL.—The amount of the

20 tax imposed by subsection (a) on any fail21 ure with respect to any applicable indi22 vidual shall be $100 for each day in the

23 noncompliance period with respect to

24 such failure.

25 ‘‘(2) NONCOMPLIANCE PERIOD.—For pur26 poses of this section, the term ‘non-
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1 compliance period’ means, with respect

2 to any failure, the period beginning on

3 the date the failure first occurs and end4 ing on the date the failure is corrected.

5 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—

6 ‘‘(1) OVERALL LIMITATION FOR UNINTEN7 TIONAL FAILURES.—In the case of failures

8 that are due to reasonable cause and not

9 to willful neglect, the tax imposed by sub10 section (a) for failures during the taxable

11 year of the employer (or, in the case of a

12 multiemployer plan, the taxable year of

13 the trust forming part of the plan) shall

14 not exceed $500,000. For purposes of the

15 preceding sentence, all multiemployer

16 plans of which the same trust forms a

17 part shall be treated as one plan. For

18 purposes of this paragraph, if not all per19 sons who are treated as a single employer

20 for purposes of this section have the

21 same taxable year, the taxable years

22 taken into account shall be determined

23 under principles similar to the principles

24 of section 1561.
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1 ‘‘(2) WAIVER BY SECRETARY.—In the

2 case of a failure which is due to reason3 able cause and not to willful neglect, the

4 Secretary may waive part or all of the tax

5 imposed by subsection (a) to the extent

6 that the payment of such tax would be

7 excessive relative to the failure involved.

8 ‘‘(d) LIABILITY FOR TAX.—The following

9 shall be liable for the tax imposed by sub10 section (a):

11 ‘‘(1) In the case of a plan other than a

12 multiemployer plan, the employer.

13 ‘‘(2) In the case of a multiemployer

14 plan, the plan.

15 ‘‘(e) NOTICE REQUIREMENTS FOR PLANS SIG16 NIFICANTLY REDUCING BENEFIT ACCRUALS.—

17 ‘‘(1) IN GENERAL.—If an applicable

18 pension plan is amended to provide for a

19 significant reduction in the rate of future

20 benefit accrual, the plan administrator

21 shall provide written notice to each ap22 plicable individual (and to each employee

23 organization representing applicable in24 dividuals).
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1 ‘‘(2) NOTICE.—The notice required by

2 paragraph (1) shall be written in a man3 ner calculated to be understood by the

4 average plan participant and shall pro5 vide sufficient information (as deter6 mined in accordance with regulations

7 prescribed by the Secretary) to allow ap8 plicable individuals to understand the ef9 fect of the plan amendment. The Sec10 retary may provide a simplified form of

11 notice for, or exempt from any notice re12 quirement, a plan—

13 ‘‘(A) which has fewer than 100

14 participants who have accrued a ben15 efit under the plan, or

16 ‘‘(B) which offers participants the

17 option to choose between the new

18 benefit formula and the old benefit

19 formula.

20 ‘‘(3) TIMING OF NOTICE.—Except as pro21 vided in regulations, the notice required

22 by paragraph (1) shall be provided within

23 a reasonable time before the effective

24 date of the plan amendment.
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1 ‘‘(4) DESIGNEES.—Any notice under

2 paragraph (1) may be provided to a per3 son designated, in writing, by the person

4 to which it would otherwise be provided.

5 ‘‘(5) NOTICE BEFORE ADOPTION OF

6 AMENDMENT.—A plan shall not be treated

7 as failing to meet the requirements of

8 paragraph (1) merely because notice is

9 provided before the adoption of the plan

10 amendment if no material modification of

11 the amendment occurs before the amend12 ment is adopted.

13 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For

14 purposes of this section—

15 ‘‘(1) APPLICABLE INDIVIDUAL.—The

16 term ‘applicable individual’ means, with

17 respect to any plan amendment—

18 ‘‘(A) each participant in the plan,

19 and

20 ‘‘(B) any beneficiary who is an al21 ternate payee (within the meaning of

22 section 414(p)(8)) under an applicable

23 qualified domestic relations order

24 (within the meaning of section

25 414(p)(1)(A)),
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1 whose rate of future benefit accrual

2 under the plan may reasonably be ex3 pected to be significantly reduced by

4 such plan amendment.

5 ‘‘(2) APPLICABLE PENSION PLAN.—The

6 term ‘applicable pension plan’ means—

7 ‘‘(A) any defined benefit plan, or

8 ‘‘(B) an individual account plan

9 which is subject to the funding stand10 ards of section 412.

11 Such term shall not include a govern12 mental plan (within the meaning of sec13 tion 414(d)) or a church plan (within the

14 meaning of section 414(e)) with respect to

15 which the election provided by section

16 410(d) has not been made.

17 ‘‘(3) EARLY RETIREMENT.—A plan

18 amendment which eliminates or signifi19 cantly reduces any early retirement ben20 efit or retirement-type subsidy (within

21 the meaning of section 411(d)(6)(B)(i))

22 shall be treated as having the effect of

23 significantly reducing the rate of future

24 benefit accrual.
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1 ‘‘(g) NEW TECHNOLOGIES.—The Secretary

2 may by regulations allow any notice under

3 subsection (e) to be provided by using new

4 technologies.’’.

5 (2) CLERICAL AMENDMENT.—The table

6 of sections for chapter 43 is amended by

7 adding at the end the following new item:

‘‘Sec. 4980F. Failure of applicable plans reducing

benefit accruals to satisfy notice requirements.’’.

8 (b) AMENDMENT OF ERISA.—Section 204(h)

9 of the Employee Retirement Income Security

10 Act of 1974 (29 U.S.C. 1054(h)) is amended by

11 adding at the end the following new para12 graphs:

13 ‘‘(3)(A) An applicable pension plan to

14 which paragraph (1) applies shall not be

15 treated as meeting the requirements of such

16 paragraph unless, in addition to any notice

17 required to be provided to an individual or

18 organization under such paragraph, the plan

19 administrator provides the notice described

20 in subparagraph (B) to each applicable indi21 vidual (and to each employee organization

22 representing applicable individuals).

23 ‘‘(B) The notice required by subparagraph

24 (A) shall be written in a manner calculated to
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1 be understood by the average plan partici2 pant and shall provide sufficient information

3 (as determined in accordance with regula4 tions prescribed by the Secretary of the

5 Treasury) to allow applicable individuals to

6 understand the effect of the plan amendment.

7 The Secretary of the Treasury may provide a

8 simplified form of notice for, or exempt from

9 any notice requirement, a plan—

10 ‘‘(i) which has fewer than 100 partici11 pants who have accrued a benefit under

12 the plan, or

13 ‘‘(ii) which offers participants the op14 tion to choose between the new benefit

15 formula and the old benefit formula.

16 ‘‘(C) Except as provided in regulations

17 prescribed by the Secretary of the Treasury,

18 the notice required by subparagraph (A) shall

19 be provided within a reasonable time before

20 the effective date of the plan amendment.

21 ‘‘(D) Any notice under subparagraph (A)

22 may be provided to a person designated, in

23 writing, by the person to which it would oth24 erwise be provided.
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1 ‘‘(E) A plan shall not be treated as failing

2 to meet the requirements of subparagraph (A)

3 merely because notice is provided before the

4 adoption of the plan amendment if no mate5 rial modification of the amendment occurs be6 fore the amendment is adopted.

7 ‘‘(F) The Secretary of the Treasury may by

8 regulations allow any notice under this para9 graph to be provided by using new tech10 nologies.

11 ‘‘(4) For purposes of paragraph (3)—

12 ‘‘(A) The term ‘applicable individual’

13 means, with respect to any plan

14 amendment—

15 ‘‘(i) each participant in the plan;

16 and

17 ‘‘(ii) any beneficiary who is an al18 ternate payee (within the meaning of

19 section 206(d)(3)(K)) under an appli20 cable qualified domestic relations

21 order (within the meaning of section

22 206(d)(3)(B)(i)),

23 whose rate of future benefit accrual

24 under the plan may reasonably be ex-
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1 pected to be significantly reduced by

2 such plan amendment.

3 ‘‘(B) The term ‘applicable pension

4 plan’ means—

5 ‘‘(i) any defined benefit plan; or

6 ‘‘(ii) an individual account plan

7 which is subject to the funding stand8 ards of section 412 of the Internal

9 Revenue Code of 1986.

10 ‘‘(C) A plan amendment which elimi11 nates or significantly reduces any early

12 retirement benefit or retirement-type

13 subsidy (within the meaning of sub14 section (g)(2)(A)) shall be treated as hav15 ing the effect of significantly reducing

16 the rate of future benefit accrual.’’.

17 (c) EFFECTIVE DATES.—

18 (1) IN GENERAL.—The amendments

19 made by this section shall apply to plan

20 amendments taking effect on or after the

21 date of the enactment of this Act.

22 (2) TRANSITION.—Until such time as

23 the Secretary of the Treasury issues regu24 lations under sections 4980F(e)(2) and (3)

25 of the Internal Revenue Code of 1986, and
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1 section 204(h)(3) of the Employee Retire2 ment Income Security Act of 1974, as

3 added by the amendments made by this

4 section, a plan shall be treated as meet5 ing the requirements of such sections if it

6 makes a good faith effort to comply with

7 such requirements.

8 (3) SPECIAL NOTICE RULE.—The period

9 for providing any notice required by the

10 amendments made by this section shall

11 not end before the date which is 3

12 months after the date of the enactment of

13 this Act.

14 (4) REASONABLE NOTICE.—The amend15 ments made by this section shall not

16 apply to any plan amendment taking ef17 fect on or after the date of the enactment

18 of this Act if, before April 25, 2001, notice

19 was provided to participants and bene20 ficiaries adversely affected by the plan

21 amendment (or their representatives)

22 which was reasonably expected to notify

23 them of the nature and effective date of

24 the plan amendment.
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1 (d) STUDY.—The Secretary of the Treasury

2 shall prepare a report on the effects of con3 versions of traditional defined benefit plans

4 to cash balance or hybrid formula plans. Such

5 study shall examine the effect of such conver6 sions on longer service participants, includ7 ing the incidence and effects of ‘‘wear away’’

8 provisions under which participants earn no

9 additional benefits for a period of time after

10 the conversion. As soon as practicable, but

11 not later than 60 days after the date of the en12 actment of this Act, the Secretary shall submit

13 such report, together with recommendations

14 thereon, to the Committee on Ways and Means

15 and the Committee on Education and the

16 Workforce of the House of Representatives

17 and the Committee on Finance and the Com18 mittee on Health, Education, Labor, and Pen19 sions of the Senate.

20 SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER

21 SECTION 415.

22 (a) COMPENSATION LIMIT.—

23 (1) IN GENERAL.—Paragraph (11) of

24 section 415(b) (relating to limitation for
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1 defined benefit plans) is amended to read

2 as follows:

3 ‘‘(11) SPECIAL LIMITATION RULE FOR

4 GOVERNMENTAL AND MULTIEMPLOYER

5 PLANS.—In the case of a governmental

6 plan (as defined in section 414(d)) or a

7 multiemployer plan (as defined in section

8 414(f)), subparagraph (B) of paragraph (1)

9 shall not apply.’’.

10 (2) CONFORMING AMENDMENT.—Section

11 415(b)(7) (relating to benefits under cer12 tain collectively bargained plans) is

13 amended by inserting ‘‘(other than a mul14 tiemployer plan)’’ after ‘‘defined benefit

15 plan’’ in the matter preceding subpara16 graph (A).

17 (b) COMBINING AND AGGREGATION OF

18 PLANS.—

19 (1) COMBINING OF PLANS.—Subsection

20 (f) of section 415 (relating to combining of

21 plans) is amended by adding at the end

22 the following:

23 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER

24 PLANS.—Notwithstanding paragraph (1)

25 and subsection (g), a multiemployer plan
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1 (as defined in section 414(f)) shall not be

2 combined or aggregated with any other

3 plan maintained by an employer for pur4 poses of applying the limitations estab5 lished in this section, except that such

6 plan shall be combined or aggregated

7 with another plan which is not such a

8 multiemployer plan solely for purposes of

9 determining whether such other plan

10 meets the requirements of subsections

11 (b)(1)(A) and (c).’’.

12 (2) CONFORMING AMENDMENT FOR AG13 GREGATION OF PLANS.—Subsection (g) of

14 section 415 (relating to aggregation of

15 plans) is amended by striking ‘‘The Sec16 retary’’ and inserting ‘‘Except as provided

17 in subsection (f)(3), the Secretary’’.

18 (c) EFFECTIVE DATE.—The amendments

19 made by this section shall apply to years be20 ginning after December 31, 2001.

21 SEC. 506. PROTECTION OF INVESTMENT OF EMPLOYEE

22 CONTRIBUTIONS TO 401(K) PLANS.

23 (a) IN GENERAL.—Section 1524(b) of the

24 Taxpayer Relief Act of 1997 is amended to

25 read as follows:
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1 ‘‘(b) EFFECTIVE DATE.—

2 ‘‘(1) IN GENERAL.—Except as provided

3 in paragraph (2), the amendments made

4 by this section shall apply to elective de5 ferrals for plan years beginning after De6 cember 31, 1998.

7 ‘‘(2) NONAPPLICATION TO PREVIOUSLY

8 ACQUIRED PROPERTY.—The amendments

9 made by this section shall not apply to

10 any elective deferral which is invested in

11 assets consisting of qualifying employer

12 securities, qualifying employer real prop13 erty, or both, if such assets were acquired

14 before January 1, 1999.’’.

15 (b) EFFECTIVE DATE.—The amendment

16 made by this section shall apply as if included

17 in the provision of the Taxpayer Relief Act of

18 1997 to which it relates.

19 SEC. 507. PERIODIC PENSION BENEFITS STATEMENTS.

20 (a) IN GENERAL.—Section 105(a) of the Em21 ployee Retirement Income Security Act of

22 1974 (29 U.S.C. 1025 (a)) is amended to read as

23 follows:
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1 ‘‘SEC. 105. (a)(1)(A) The administrator of

2 an individual account plan shall furnish a

3 pension benefit statement—

4 ‘‘(i) to a plan participant at least once

5 annually, and

6 ‘‘(ii) to a plan beneficiary upon writ7 ten request.

8 ‘‘(B) The administrator of a defined ben9 efit plan shall furnish a pension benefit

10 statement—

11 ‘‘(i) at least once every 3 years to each

12 participant with a nonforfeitable accrued

13 benefit who is employed by the employer

14 maintaining the plan at the time the

15 statement is furnished to participants,

16 and

17 ‘‘(ii) to a plan participant or plan ben18 eficiary of the plan upon written request.

19 ‘‘(2) A pension benefit statement under

20 paragraph (1)—

21 ‘‘(A) shall indicate, on the basis of the

22 latest available information—

23 ‘‘(i) the total benefits accrued, and

24 ‘‘(ii) the nonforfeitable pension

25 benefits, if any, which have accrued,
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1 or the earliest date on which benefits

2 will become nonforfeitable,

3 ‘‘(B) shall be written in a manner cal4 culated to be understood by the average

5 plan participant, and

6 ‘‘(C) may be provided in written, elec7 tronic, or other appropriate form.

8 ‘‘(3)(A) In the case of a defined benefit

9 plan, the requirements of paragraph (1)(B)(i)

10 shall be treated as met with respect to a par11 ticipant if the administrator provides the par12 ticipant at least once each year with notice of

13 the availability of the pension benefit state14 ment and the ways in which the participant

15 may obtain such statement. Such notice shall

16 be provided in written, electronic, or other

17 appropriate form, and may be included with

18 other communications to the participant if

19 done in a manner reasonably designed to at20 tract the attention of the participant.

21 ‘‘(B) The Secretary may provide that years

22 in which no employee or former employee

23 benefits (within the meaning of section 410(b)

24 of the Internal Revenue Code of 1986) under

25 the plan need not be taken into account in de-
271

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1 termining the 3-year period under paragraph

2 (1)(B)(i).’’.

3 (b) CONFORMING AMENDMENTS.—

4 (1) Section 105 of the Employee Re5 tirement Income Security Act of 1974 (29

6 U.S.C. 1025) is amended by striking sub7 section (d).

8 (2) Section 105(b) of such Act (29

9 U.S.C. 1025(b)) is amended to read as fol10 lows:

11 ‘‘(b) In no case shall a participant or bene12 ficiary of a plan be entitled to more than one

13 statement described in subsection (a)(1)(A) or

14 (a)(1)(B)(ii), whichever is applicable, in any

15 12-month period.’’.

16 (c) MODEL STATEMENTS.—The Secretary of

17 Labor shall develop a model benefit state18 ment, written in a manner calculated to be

19 understood by the average plan participant,

20 that may be used by plan administrators in

21 complying with the requirements of section

22 105 of the Employee Retirement Income Secu23 rity Act of 1974.
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1 (d) EFFECTIVE DATE.—The amendments

2 made by this section shall apply to plan years

3 beginning after December 31, 2002.

4 SEC. 508. PROHIBITED ALLOCATIONS OF STOCK IN S COR5 PORATION ESOP.

6 (a) IN GENERAL.—Section 409 (relating to

7 qualifications for tax credit employee stock

8 ownership plans) is amended by redesig9 nating subsection (p) as subsection (q) and by

10 inserting after subsection (o) the following

11 new subsection:

12 ‘‘(p) PROHIBITED ALLOCATIONS OF SECURI13 TIES IN AN S CORPORATION.—

14 ‘‘(1) IN GENERAL.—An employee stock

15 ownership plan holding employer securi16 ties consisting of stock in an S corpora17 tion shall provide that no portion of the

18 assets of the plan attributable to (or allo19 cable in lieu of) such employer securities

20 may, during a nonallocation year, accrue

21 (or be allocated directly or indirectly

22 under any plan of the employer meeting

23 the requirements of section 401(a)) for

24 the benefit of any disqualified person.

25 ‘‘(2) FAILURE TO MEET REQUIREMENTS.—
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1 ‘‘(A) IN GENERAL.—If a plan fails to

2 meet the requirements of paragraph

3 (1), the plan shall be treated as hav4 ing distributed to any disqualified

5 person the amount allocated to the

6 account of such person in violation of

7 paragraph (1) at the time of such allo8 cation.

9 ‘‘(B) CROSS REFERENCE.—

‘‘For excise tax relating to violations of paragraph

(1) and ownership of synthetic equity, see section

4979A.

10 ‘‘(3) NONALLOCATION YEAR.—For pur11 poses of this subsection—

12 ‘‘(A) IN GENERAL.—The term ‘non13 allocation year’ means any plan year

14 of an employee stock ownership plan

15 if, at any time during such plan

16 year—

17 ‘‘(i) such plan holds employer

18 securities consisting of stock in

19 an S corporation, and

20 ‘‘(ii) disqualified persons own

21 at least 50 percent of the number

22 of shares of stock in the S cor23 poration.
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1 ‘‘(B) ATTRIBUTION RULES.—For pur2 poses of subparagraph (A)—

3 ‘‘(i) IN GENERAL.—The rules of

4 section 318(a) shall apply for pur5 poses of determining ownership,

6 except that—

7 ‘‘(I) in applying paragraph

8 (1) thereof, the members of an

9 individual’s family shall in10 clude members of the family

11 described in paragraph (4)(D),

12 and

13 ‘‘(II) paragraph (4) thereof

14 shall not apply.

15 ‘‘(ii) DEEMED-OWNED SHARES.—

16 Notwithstanding the employee

17 trust exception in section

18 318(a)(2)(B)(i), individual shall be

19 treated as owning deemed-owned

20 shares of the individual.

21 Solely for purposes of applying para22 graph (5), this subparagraph shall be

23 applied after the attribution rules of

24 paragraph (5) have been applied.
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1 ‘‘(4) DISQUALIFIED PERSON.—For pur2 poses of this subsection—

3 ‘‘(A) IN GENERAL.—The term ‘dis4 qualified person’ means any person

5 if—

6 ‘‘(i) the aggregate number of

7 deemed-owned shares of such

8 person and the members of such

9 person’s family is at least 20 per10 cent of the number of deemed11 owned shares of stock in the S

12 corporation, or

13 ‘‘(ii) in the case of a person

14 not described in clause (i), the

15 number of deemed-owned shares

16 of such person is at least 10 per17 cent of the number of deemed18 owned shares of stock in such

19 corporation.

20 ‘‘(B) TREATMENT OF FAMILY MEM21 BERS.—In the case of a disqualified

22 person described in subparagraph

23 (A)(i), any member of such person’s

24 family with deemed-owned shares

25 shall be treated as a disqualified per-
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1 son if not otherwise treated as a dis2 qualified person under subparagraph

3 (A).

4 ‘‘(C) DEEMED-OWNED SHARES.—

5 ‘‘(i) IN GENERAL.—The term

6 ‘deemed-owned shares’ means,

7 with respect to any person—

8 ‘‘(I) the stock in the S cor9 poration constituting em10 ployer securities of an em11 ployee stock ownership plan

12 which is allocated to such

13 person under the plan, and

14 ‘‘(II) such person’s share

15 of the stock in such corpora16 tion which is held by such

17 plan but which is not allo18 cated under the plan to par19 ticipants.

20 ‘‘(ii) PERSON’S SHARE OF

21 UNALLOCATED STOCK.—For pur22 poses of clause (i)(II), a person’s

23 share of unallocated S corpora24 tion stock held by such plan is the

25 amount of the unallocated stock
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1 which would be allocated to such

2 person if the unallocated stock

3 were allocated to all participants

4 in the same proportions as the

5 most recent stock allocation

6 under the plan.

7 ‘‘(D) MEMBER OF FAMILY.—For pur8 poses of this paragraph, the term

9 ‘member of the family’ means, with

10 respect to any individual—

11 ‘‘(i) the spouse of the indi12 vidual,

13 ‘‘(ii) an ancestor or lineal de14 scendant of the individual or the

15 individual’s spouse,

16 ‘‘(iii) a brother or sister of the

17 individual or the individual’s

18 spouse and any lineal descendant

19 of the brother or sister, and

20 ‘‘(iv) the spouse of any indi21 vidual described in clause (ii) or

22 (iii).

23 A spouse of an individual who is le24 gally separated from such individual

25 under a decree of divorce or separate
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1 maintenance shall not be treated as

2 such individual’s spouse for purposes

3 of this subparagraph.

4 ‘‘(5) TREATMENT OF SYNTHETIC EQ5 UITY.—For purposes of paragraphs (3) and

6 (4), in the case of a person who owns syn7 thetic equity in the S corporation, except

8 to the extent provided in regulations, the

9 shares of stock in such corporation on

10 which such synthetic equity is based

11 shall be treated as outstanding stock in

12 such corporation and deemed-owned

13 shares of such person if such treatment

14 of synthetic equity of 1 or more such per15 sons results in—

16 ‘‘(A) the treatment of any person

17 as a disqualified person, or

18 ‘‘(B) the treatment of any year as

19 a nonallocation year.

20 For purposes of this paragraph, synthetic

21 equity shall be treated as owned by a per22 son in the same manner as stock is treat23 ed as owned by a person under the rules

24 of paragraphs (2) and (3) of section

25 318(a). If, without regard to this para-
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1 graph, a person is treated as a disquali2 fied person or a year is treated as a non3 allocation year, this paragraph shall not

4 be construed to result in the person or

5 year not being so treated.

6 ‘‘(6) DEFINITIONS.—For purposes of

7 this subsection—

8 ‘‘(A) EMPLOYEE STOCK OWNERSHIP

9 PLAN.—The term ‘employee stock own10 ership plan’ has the meaning given

11 such term by section 4975(e)(7).

12 ‘‘(B) EMPLOYER SECURITIES.—The

13 term ‘employer security’ has the

14 meaning given such term by section

15 409(l).

16 ‘‘(C) SYNTHETIC EQUITY.—The term

17 ‘synthetic equity’ means any stock op18 tion, warrant, restricted stock, de19 ferred issuance stock right, or similar

20 interest or right that gives the holder

21 the right to acquire or receive stock

22 of the S corporation in the future. Ex23 cept to the extent provided in regula24 tions, synthetic equity also includes a

25 stock appreciation right, phantom
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1 stock unit, or similar right to a future

2 cash payment based on the value of

3 such stock or appreciation in such

4 value.

5 ‘‘(7) REGULATIONS.—The Secretary

6 shall prescribe such regulations as may

7 be necessary to carry out the purposes of

8 this subsection.’’.

9 (b) COORDINATION WITH SECTION

10 4975(e)(7).—The last sentence of section

11 4975(e)(7) (defining employee stock owner12 ship plan) is amended by inserting ‘‘, section

13 409(p),’’ after ‘‘409(n)’’.

14 (c) EXCISE TAX.—

15 (1) APPLICATION OF TAX.—Subsection

16 (a) of section 4979A (relating to tax on

17 certain prohibited allocations of em18 ployer securities) is amended—

19 (A) by striking ‘‘or’’ at the end of

20 paragraph (1), and

21 (B) by striking all that follows

22 paragraph (2) and inserting the fol23 lowing:

24 ‘‘(3) there is any allocation of em25 ployer securities which violates the pro-
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1 visions of section 409(p), or a nonalloca2 tion year described in subsection (e)(2)(C)

3 with respect to an employee stock owner4 ship plan, or

5 ‘‘(4) any synthetic equity is owned by

6 a disqualified person in any nonalloca7 tion year,

8 there is hereby imposed a tax on such alloca9 tion or ownership equal to 50 percent of the

10 amount involved.’’.

11 (2) LIABILITY.—Section 4979A(c) (de12 fining liability for tax) is amended to

13 read as follows:

14 ‘‘(c) LIABILITY FOR TAX.—The tax imposed

15 by this section shall be paid—

16 ‘‘(1) in the case of an allocation re17 ferred to in paragraph (1) or (2) of sub18 section (a), by—

19 ‘‘(A) the employer sponsoring

20 such plan, or

21 ‘‘(B) the eligible worker-owned co22 operative,

23 which made the written statement de24 scribed in section 664(g)(1)(E) or in sec-
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1 tion 1042(b)(3)(B) (as the case may be),

2 and

3 ‘‘(2) in the case of an allocation or

4 ownership referred to in paragraph (3) or

5 (4) of subsection (a), by the S corporation

6 the stock in which was so allocated or

7 owned.’’.

8 (3) DEFINITIONS.—Section 4979A(e) (re9 lating to definitions) is amended to read

10 as follows:

11 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For

12 purposes of this section—

13 ‘‘(1) DEFINITIONS.—Except as provided

14 in paragraph (2), terms used in this sec15 tion have the same respective meanings

16 as when used in sections 409 and 4978.

17 ‘‘(2) SPECIAL RULES RELATING TO TAX

18 IMPOSED BY REASON OF PARAGRAPH (3) OR (4)

19 OF SUBSECTION (a).—

20 ‘‘(A) PROHIBITED ALLOCATIONS.—

21 The amount involved with respect to

22 any tax imposed by reason of sub23 section (a)(3) is the amount allocated

24 to the account of any person in viola25 tion of section 409(p)(1).
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1 ‘‘(B) SYNTHETIC EQUITY.—The

2 amount involved with respect to any

3 tax imposed by reason of subsection

4 (a)(4) is the value of the shares on

5 which the synthetic equity is based.

6 ‘‘(C) SPECIAL RULE DURING FIRST

7 NONALLOCATION YEAR.—For purposes

8 of subparagraph (A), the amount in9 volved for the first nonallocation year

10 of any employee stock ownership

11 plan shall be determined by taking

12 into account the total value of all the

13 deemed-owned shares of all disquali14 fied persons with respect to such

15 plan.

16 ‘‘(D) STATUTE OF LIMITATIONS.—The

17 statutory period for the assessment of

18 any tax imposed by this section by

19 reason of paragraph (3) or (4) of sub20 section (a) shall not expire before the

21 date which is 3 years from the later

22 of—

23 ‘‘(i) the allocation or owner24 ship referred to in such para25 graph giving rise to such tax, or
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1 ‘‘(ii) the date on which the

2 Secretary is notified of such allo3 cation or ownership.’’.

4 (d) EFFECTIVE DATES.—

5 (1) IN GENERAL.—The amendments

6 made by this section shall apply to plan

7 years beginning after December 31, 2004.

8 (2) EXCEPTION FOR CERTAIN PLANS.—In

9 the case of any—

10 (A) employee stock ownership

11 plan established after March 14, 2001,

12 or

13 (B) employee stock ownership

14 plan established on or before such

15 date if employer securities held by

16 the plan consist of stock in a corpora17 tion with respect to which an election

18 under section 1362(a) of the Internal

19 Revenue Code of 1986 is not in effect

20 on such date,

21 the amendments made by this section

22 shall apply to plan years ending after

23 March 14, 2001.
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1 TITLE VI—REDUCING

2 REGULATORY BURDENS

3 SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.

4 (a) AMENDMENT OF INTERNAL REVENUE

5 CODE.—Paragraph (9) of section 412(c)(9) (re6 lating to annual valuation) is amended to

7 read as follows:

8 ‘‘(9) ANNUAL VALUATION.—

9 ‘‘(A) IN GENERAL.—For purposes of

10 this section, a determination of expe11 rience gains and losses and a valu12 ation of the plan’s liability shall be

13 made not less frequently than once

14 every year, except that such deter15 mination shall be made more fre16 quently to the extent required in par17 ticular cases under regulations pre18 scribed by the Secretary.

19 ‘‘(B) VALUATION DATE.—

20 ‘‘(i) CURRENT YEAR.—Except as

21 provided in clause (ii), the valu22 ation referred to in subparagraph

23 (A) shall be made as of a date

24 within the plan year to which the

25 valuation refers or within one
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1 month prior to the beginning of

2 such year.

3 ‘‘(ii) ELECTION TO USE PRIOR

4 YEAR VALUATION.—The valuation

5 referred to in subparagraph (A)

6 may be made as of a date within

7 the plan year prior to the year to

8 which the valuation refers if—

9 ‘‘(I) an election is in effect

10 under this clause with respect

11 to the plan, and

12 ‘‘(II) as of such date, the

13 value of the assets of the plan

14 are not less than 125 percent

15 of the plan’s current liability

16 (as defined in paragraph

17 (7)(B)).

18 ‘‘(iii) ADJUSTMENTS.—Informa19 tion under clause (ii) shall, in ac20 cordance with regulations, be ac21 tuarially adjusted to reflect sig22 nificant differences in partici23 pants.

24 ‘‘(iv) ELECTION.—An election

25 under clause (ii), once made, shall
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1 be irrevocable without the con2 sent of the Secretary.’’.

3 (b) AMENDMENT OF ERISA.—Paragraph (9)

4 of section 302(c) of the Employee Retirement

5 Income Security Act of 1974 (29 U.S.C. 1053(c))

6 is amended—

7 (1) by inserting ‘‘(A)’’ after ‘‘(9)’’; and

8 (2) by adding at the end the fol9 lowing:

10 ‘‘(B)(i) Except as provided in clause (ii),

11 the valuation referred to in subparagraph (A)

12 shall be made as of a date within the plan

13 year to which the valuation refers or within

14 one month prior to the beginning of such

15 year.

16 ‘‘(ii) The valuation referred to in subpara17 graph (A) may be made as of a date within the

18 plan year prior to the year to which the valu19 ation refers if—

20 ‘‘(I) an election is in effect under this

21 clause with respect to the plan; and

22 ‘‘(II) as of such date, the value of the

23 assets of the plan are not less than 125

24 percent of the plan’s current liability (as

25 defined in paragraph (7)(B)).
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1 ‘‘(iii) Information under clause (ii) shall,

2 in accordance with regulations, be actuarially

3 adjusted to reflect significant differences in

4 participants.

5 ‘‘(iv) An election under clause (ii), once

6 made, shall be irrevocable without the con7 sent of the Secretary of the Treasury.’’.

8 (c) EFFECTIVE DATE.—The amendments

9 made by this section shall apply to plan years

10 beginning after December 31, 2001.

11 SEC. 602. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT

12 LOSS OF DIVIDEND DEDUCTION.

13 (a) IN GENERAL.—Section 404(k)(2)(A) (de14 fining applicable dividends) is amended by

15 striking ‘‘or’’ at the end of clause (ii), by redes16 ignating clause (iii) as clause (iv), and by in17 serting after clause (ii) the following new

18 clause:

19 ‘‘(iii) is, at the election of such

20 participants or their

21 beneficiaries—

22 ‘‘(I) payable as provided in

23 clause (i) or (ii), or
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1 ‘‘(II) paid to the plan and

2 reinvested in qualifying em3 ployer securities, or’’.

4 (b) EFFECTIVE DATE.—The amendments

5 made by this section shall apply to taxable

6 years beginning after December 31, 2000.

7 SEC. 603. REPEAL OF TRANSITION RULE RELATING TO CER8 TAIN HIGHLY COMPENSATED EMPLOYEES.

9 (a) IN GENERAL.—Paragraph (4) of section

10 1114(c) of the Tax Reform Act of 1986 is here11 by repealed.

12 (b) EFFECTIVE DATE.—The repeal made by

13 subsection (a) shall apply to plan years begin14 ning after December 31, 2001.

15 SEC. 604. EMPLOYEES OF TAX-EXEMPT ENTITIES.

16 (a) IN GENERAL.—The Secretary of the

17 Treasury shall modify Treasury Regulations

18 section 1.410(b)–6(g) to provide that employ19 ees of an organization described in section

20 403(b)(1)(A)(i) of the Internal Revenue Code of

21 1986 who are eligible to make contributions

22 under section 403(b) of such Code pursuant to

23 a salary reduction agreement may be treated

24 as excludable with respect to a plan under

25 section 401(k) or (m) of such Code that is pro-
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1 vided under the same general arrangement as

2 a plan under such section 401(k), if—

3 (1) no employee of an organization

4 described in section 403(b)(1)(A)(i) of

5 such Code is eligible to participate in

6 such section 401(k) plan or section 401(m)

7 plan; and

8 (2) 95 percent of the employees who

9 are not employees of an organization de10 scribed in section 403(b)(1)(A)(i) of such

11 Code are eligible to participate in such

12 plan under such section 401(k) or (m).

13 (b) EFFECTIVE DATE.—The modification re14 quired by subsection (a) shall apply as of the

15 same date set forth in section 1426(b) of the

16 Small Business Job Protection Act of 1996.

17 SEC. 605. CLARIFICATION OF TREATMENT OF EMPLOYER18 PROVIDED RETIREMENT ADVICE.

19 (a) IN GENERAL.—Subsection (a) of section

20 132 (relating to exclusion from gross income)

21 is amended by striking ‘‘or’’ at the end of para22 graph (5), by striking the period at the end of

23 paragraph (6) and inserting ‘‘, or’’, and by add24 ing at the end the following new paragraph:
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1 ‘‘(7) qualified retirement planning

2 services.’’.

3 (b) QUALIFIED RETIREMENT PLANNING SERV4 ICES DEFINED.—Section 132 is amended by re5 designating subsection (m) as subsection (n)

6 and by inserting after subsection (l) the fol7 lowing:

8 ‘‘(m) QUALIFIED RETIREMENT PLANNING

9 SERVICES.—

10 ‘‘(1) IN GENERAL.—For purposes of this

11 section, the term ‘qualified retirement

12 planning services’ means any retirement

13 planning advice or information provided

14 to an employee and his spouse by an em15 ployer maintaining a qualified employer

16 plan.

17 ‘‘(2) NONDISCRIMINATION RULE.—Sub18 section (a)(7) shall apply in the case of

19 highly compensated employees only if

20 such services are available on substan21 tially the same terms to each member of

22 the group of employees normally pro23 vided education and information regard24 ing the employer’s qualified employer

25 plan.
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1 ‘‘(3) QUALIFIED EMPLOYER PLAN.—For

2 purposes of this subsection, the term

3 ‘qualified employer plan’ means a plan,

4 contract, pension, or account described

5 in section 219(g)(5).’’.

6 (c) EFFECTIVE DATE.—The amendments

7 made by this section shall apply to years be8 ginning after December 31, 2001.

9 SEC. 606. REPORTING SIMPLIFICATION.

10 (a) SIMPLIFIED ANNUAL FILING REQUIRE11 MENT FOR OWNERS AND THEIR SPOUSES.—

12 (1) IN GENERAL.—The Secretary of the

13 Treasury and the Secretary of Labor

14 shall modify the requirements for filing

15 annual returns with respect to one-par16 ticipant retirement plans to ensure that

17 such plans with assets of $250,000 or less

18 as of the close of the plan year need not

19 file a return for that year.

20 (2) ONE-PARTICIPANT RETIREMENT PLAN

21 DEFINED.—For purposes of this sub22 section, the term ‘‘one-participant retire23 ment plan’’ means a retirement plan

24 that—
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1 (A) on the first day of the plan

2 year—

3 (i) covered only the employer

4 (and the employer’s spouse) and

5 the employer owned the entire

6 business (whether or not incor7 porated); or

8 (ii) covered only one or more

9 partners (and their spouses) in a

10 business partnership (including

11 partners in an S or C corpora12 tion);

13 (B) meets the minimum coverage

14 requirements of section 410(b) of the

15 Internal Revenue Code of 1986 with16 out being combined with any other

17 plan of the business that covers the

18 employees of the business;

19 (C) does not provide benefits to

20 anyone except the employer (and the

21 employer’s spouse) or the partners

22 (and their spouses);

23 (D) does not cover a business that

24 is a member of an affiliated service

25 group, a controlled group of corpora-
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1 tions, or a group of businesses under

2 common control; and

3 (E) does not cover a business that

4 leases employees.

5 (3) OTHER DEFINITIONS.—Terms used

6 in paragraph (2) which are also used in

7 section 414 of the Internal Revenue Code

8 of 1986 shall have the respective mean9 ings given such terms by such section.

10 (b) SIMPLIFIED ANNUAL FILING REQUIRE11 MENT FOR PLANS WITH FEWER THAN 25 EMPLOY12 EES.—In the case of plan years beginning after

13 December 31, 2002, the Secretary of the Treas14 ury and the Secretary of Labor shall provide

15 for the filing of a simplified annual return for

16 any retirement plan which covers less than 25

17 employees on the first day of a plan year and

18 which meets the requirements described in

19 subparagraphs (B), (D), and (E) of subsection

20 (a)(2).

21 (c) EFFECTIVE DATE.—The provisions of

22 this section shall take effect on January 1,

23 2002.
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1 SEC. 607. IMPROVEMENT OF EMPLOYEE PLANS COMPLI2 ANCE RESOLUTION SYSTEM.

3 The Secretary of the Treasury shall con4 tinue to update and improve the Employee

5 Plans Compliance Resolution System (or any

6 successor program) giving special attention

7 to—

8 (1) increasing the awareness and

9 knowledge of small employers concerning

10 the availability and use of the program;

11 (2) taking into account special con12 cerns and circumstances that small em13 ployers face with respect to compliance

14 and correction of compliance failures;

15 (3) extending the duration of the self16 correction period under the Administra17 tive Policy Regarding Self-Correction for

18 significant compliance failures;

19 (4) expanding the availability to cor20 rect insignificant compliance failures

21 under the Administrative Policy Regard22 ing Self-Correction during audit; and

23 (5) assuring that any tax, penalty, or

24 sanction that is imposed by reason of a

25 compliance failure is not excessive and
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1 bears a reasonable relationship to the na2 ture, extent, and severity of the failure.

3 SEC. 608. REPEAL OF THE MULTIPLE USE TEST.

4 (a) IN GENERAL.—Paragraph (9) of section

5 401(m) is amended to read as follows:

6 ‘‘(9) REGULATIONS.—The Secretary

7 shall prescribe such regulations as may

8 be necessary to carry out the purposes of

9 this subsection and subsection (k), in10 cluding regulations permitting appro11 priate aggregation of plans and contribu12 tions.’’.

13 (b) EFFECTIVE DATE.—The amendment

14 made by this section shall apply to years be15 ginning after December 31, 2001.

16 SEC. 609. FLEXIBILITY IN NONDISCRIMINATION, COV17 ERAGE, AND LINE OF BUSINESS RULES.

18 (a) NONDISCRIMINATION.—

19 (1) IN GENERAL.—The Secretary of the

20 Treasury shall, by regulation, provide

21 that a plan shall be deemed to satisfy the

22 requirements of section 401(a)(4) of the

23 Internal Revenue Code of 1986 if such

24 plan satisfies the facts and circumstances

25 test under section 401(a)(4) of such Code,
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1 as in effect before January 1, 1994, but

2 only if—

3 (A) the plan satisfies conditions

4 prescribed by the Secretary to appro5 priately limit the availability of such

6 test; and

7 (B) the plan is submitted to the

8 Secretary for a determination of

9 whether it satisfies such test.

10 Subparagraph (B) shall only apply to the

11 extent provided by the Secretary.

12 (2) EFFECTIVE DATES.—

13 (A) REGULATIONS.—The regulation

14 required by paragraph (1) shall apply

15 to years beginning after December 31,

16 2003.

17 (B) CONDITIONS OF AVAILABILITY.—

18 Any condition of availability pre19 scribed by the Secretary under para20 graph (1)(A) shall not apply before

21 the first year beginning not less than

22 120 days after the date on which such

23 condition is prescribed.

24 (b) COVERAGE TEST.—
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1 (1) IN GENERAL.—Section 410(b)(1) (re2 lating to minimum coverage require3 ments) is amended by adding at the end

4 the following:

5 ‘‘(D) In the case that the plan fails

6 to meet the requirements of subpara7 graphs (A), (B) and (C), the plan—

8 ‘‘(i) satisfies subparagraph

9 (B), as in effect immediately be10 fore the enactment of the Tax Re11 form Act of 1986,

12 ‘‘(ii) is submitted to the Sec13 retary for a determination of

14 whether it satisfies the require15 ment described in clause (i), and

16 ‘‘(iii) satisfies conditions pre17 scribed by the Secretary by regu18 lation that appropriately limit the

19 availability of this subparagraph.

20 Clause (ii) shall apply only to the ex21 tent provided by the Secretary.’’.

22 (2) EFFECTIVE DATES.—

23 (A) IN GENERAL.—The amendment

24 made by paragraph (1) shall apply to
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1 years beginning after December 31,

2 2003.

3 (B) CONDITIONS OF AVAILABILITY.—

4 Any condition of availability pre5 scribed by the Secretary under regu6 lations prescribed by the Secretary

7 under section 410(b)(1)(D) of the In8 ternal Revenue Code of 1986 shall not

9 apply before the first year beginning

10 not less than 120 days after the date

11 on which such condition is pre12 scribed.

13 (c) LINE OF BUSINESS RULES.—The Sec14 retary of the Treasury shall, on or before De15 cember 31, 2003, modify the existing regula16 tions issued under section 414(r) of the Inter17 nal Revenue Code of 1986 in order to expand

18 (to the extent that the Secretary determines

19 appropriate) the ability of a pension plan to

20 demonstrate compliance with the line of busi21 ness requirements based upon the facts and

22 circumstances surrounding the design and

23 operation of the plan, even though the plan is

24 unable to satisfy the mechanical tests cur25 rently used to determine compliance.
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1 SEC. 610. EXTENSION TO ALL GOVERNMENTAL PLANS OF

2 MORATORIUM ON APPLICATION OF CERTAIN

3 NONDISCRIMINATION RULES APPLICABLE TO

4 STATE AND LOCAL PLANS.

5 (a) IN GENERAL.—

6 (1) Subparagraph (G) of section

7 401(a)(5) and subparagraph (H) of section

8 401(a)(26) are each amended by striking

9 ‘‘section 414(d))’’ and all that follows and

10 inserting ‘‘section 414(d)).’’.

11 (2) Subparagraph (G) of section

12 401(k)(3) and paragraph (2) of section

13 1505(d) of the Taxpayer Relief Act of 1997

14 are each amended by striking ‘‘main15 tained by a State or local government or

16 political subdivision thereof (or agency

17 or instrumentality thereof)’’.

18 (b) CONFORMING AMENDMENTS.—

19 (1) The heading for subparagraph (G)

20 of section 401(a)(5) is amended to read as

21 follows: ‘‘GOVERNMENTAL PLANS’’.

22 (2) The heading for subparagraph (H)

23 of section 401(a)(26) is amended to read

24 as follows: ‘‘EXCEPTION FOR GOVERNMENTAL

25 PLANS’’.
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1 (3) Subparagraph (G) of section

2 401(k)(3) is amended by inserting ‘‘GOV3 ERNMENTAL PLANS.—’’ after ‘‘(G)’’.

4 (c) EFFECTIVE DATE.—The amendments

5 made by this section shall apply to years be6 ginning after December 31, 2001.

7 SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DIS8 TRIBUTIONS.

9 (a) EXPANSION OF PERIOD.—

10 (1) AMENDMENT OF INTERNAL REVENUE

11 CODE.—

12 (A) IN GENERAL.—Subparagraph

13 (A) of section 417(a)(6) is amended by

14 striking ‘‘90-day’’ and inserting ‘‘180-

15 day’’.

16 (B) MODIFICATION OF REGULA17 TIONS.—The Secretary of the Treasury

18 shall modify the regulations under

19 sections 402(f), 411(a)(11), and 417 of

20 the Internal Revenue Code of 1986 to

21 substitute ‘‘180 days’’ for ‘‘90 days’’

22 each place it appears in Treasury

23 Regulations sections 1.402(f)–1,

24 1.411(a)–11(c), and 1.417(e)–1(b).

25 (2) AMENDMENT OF ERISA.—
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1 (A) IN GENERAL.—Section

2 205(c)(7)(A) of the Employee Retire3 ment Income Security Act of 1974 (29

4 U.S.C. 1055(c)(7)(A)) is amended by

5 striking ‘‘90-day’’ and inserting ‘‘180-

6 day’’.

7 (B) MODIFICATION OF REGULA8 TIONS.—The Secretary of the Treasury

9 shall modify the regulations under

10 part 2 of subtitle B of title I of the

11 Employee Retirement Income Secu12 rity Act of 1974 to the extent that

13 they relate to sections 203(e) and 205

14 of such Act to substitute ‘‘180 days’’

15 for ‘‘90 days’’ each place it appears.

16 (3) EFFECTIVE DATE.—The amendments

17 made by paragraph (1)(A) and (2) and the

18 modifications required by paragraph

19 (1)(B) shall apply to years beginning after

20 December 31, 2001.

21 (b) CONSENT REGULATION INAPPLICABLE TO

22 CERTAIN DISTRIBUTIONS.—

23 (1) IN GENERAL.—The Secretary of the

24 Treasury shall modify the regulations

25 under section 411(a)(11) of the Internal
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1 Revenue Code of 1986 and under section

2 205 of the Employee Retirement Income

3 Security Act of 1974 to provide that the

4 description of a participant’s right, if

5 any, to defer receipt of a distribution

6 shall also describe the consequences of

7 failing to defer such receipt.

8 (2) EFFECTIVE DATE.—The modifica9 tions required by paragraph (1) shall

10 apply to years beginning after December

11 31, 2001.

12 SEC. 612. ANNUAL REPORT DISSEMINATION.

13 (a) REPORT AVAILABLE THROUGH ELEC14 TRONIC MEANS.—Section 104(b)(3) of the Em15 ployee Retirement Income Security Act of

16 1974 (29 U.S.C. 1024(b)(3)) is amended by add17 ing at the end the following new sentence:

18 ‘‘The requirement to furnish information

19 under the previous sentence shall be satisfied

20 if the administrator makes such information

21 reasonably available through electronic

22 means or other new technology.’’.

23 (b) EFFECTIVE DATE.—The amendment

24 made by this section shall apply to reports for

25 years beginning after December 31, 2000.
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1 SEC. 613. TECHNICAL CORRECTIONS TO SAVER ACT.

2 Section 517 of the Employee Retirement

3 Income Security Act of 1974 (29 U.S.C. 1147)

4 is amended—

5 (1) in subsection (a), by striking ‘‘2001

6 and 2005 on or after September 1 of each

7 year involved’’ and inserting ‘‘2001, 2005,

8 and 2009 in the month of September of

9 each year involved’’;

10 (2) in subsection (b), by adding at the

11 end the following new sentence: ‘‘To ef12 fectuate the purposes of this paragraph,

13 the Secretary may enter into a coopera14 tive agreement, pursuant to the Federal

15 Grant and Cooperative Agreement Act of

16 1977 (31 U.S.C. 6301 et seq.), with the

17 American Savings Education Council or

18 any other appropriate, qualified entity.’’;

19 (3) in subsection (e)(2)—

20 (A) by striking ‘‘Committee on

21 Labor and Human Resources’’ in sub22 paragraph (D) and inserting ‘‘Com23 mittee on Health, Education, Labor,

24 and Pensions’’;

25 (B) by striking subparagraph (F)

26 and inserting the following:
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1 ‘‘(F) the Chairman and Ranking

2 Member of the Subcommittee on

3 Labor, Health and Human Services,

4 and Education of the Committee on

5 Appropriations of the House of Rep6 resentatives and the Chairman and

7 Ranking Member of the Sub8 committee on Labor, Health and

9 Human Services, and Education of

10 the Committee on Appropriations of

11 the Senate;’’;

12 (C) by redesignating subpara13 graph (G) as subparagraph (J); and

14 (D) by inserting after subpara15 graph (F) the following new subpara16 graphs:

17 ‘‘(G) the Chairman and Ranking

18 Member of the Committee on Finance

19 of the Senate;

20 ‘‘(H) the Chairman and Ranking

21 Member of the Committee on Ways

22 and Means of the House of Represent23 atives;

24 ‘‘(I) the Chairman and Ranking

25 Member of the Subcommittee on Em-
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1 ployer-Employee Relations of the

2 Committee on Education and the

3 Workforce of the House of Represent4 atives; and’’;

5 (4) in subsection (e)(3)—

6 (A) by striking ‘‘There shall be not

7 more than 200 additional partici8 pants.’’ in subparagraph (A) and in9 serting ‘‘The participants in the Na10 tional Summit shall also include addi11 tional participants appointed under

12 this subparagraph.’’;

13 (B) by striking ‘‘one-half shall be

14 appointed by the President,’’ in sub15 paragraph (A)(i) and inserting ‘‘not

16 more than 100 participants shall be

17 appointed under this clause by the

18 President,’’;

19 (C) by striking ‘‘one-half shall be

20 appointed by the elected leaders of

21 Congress’’ in subparagraph (A)(ii) and

22 inserting ‘‘not more than 100 partici23 pants shall be appointed under this

24 clause by the elected leaders of Con25 gress’’;
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1 (D) by redesignating subpara2 graph (B) as subparagraph (C); and

3 (E) by inserting after subpara4 graph (A) the following new subpara5 graph:

6 ‘‘(B) PRESIDENTIAL AUTHORITY FOR

7 ADDITIONAL APPOINTMENTS.—The Presi8 dent, in consultation with the elected

9 leaders of Congress referred to in

10 subsection (a), may appoint under

11 this subparagraph additional partici12 pants to the National Summit. The

13 number of such additional partici14 pants appointed under this subpara15 graph may not exceed the lesser of 3

16 percent of the total number of all ad17 ditional participants appointed under

18 this paragraph, or 10. Such additional

19 participants shall be appointed from

20 persons nominated by the organiza21 tion referred to in subsection (b)(2)

22 which is made up of private sector

23 businesses and associations

24 partnered with Government entities

25 to promote long term financial secu-
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1 rity in retirement through savings

2 and with which the Secretary is re3 quired thereunder to consult and co4 operate and shall not be Federal,

5 State, or local government employ6 ees.’’;

7 (5) in subsection (e)(3)(C) (as redesig8 nated), by striking ‘‘January 31, 1998’’

9 and inserting ‘‘May 1, 2001, May 1, 2005,

10 and May 1, 2009, for each of the subse11 quent summits, respectively’’;

12 (6) in subsection (f)(1)(C), by inserting

13 ‘‘, no later than 90 days prior to the date

14 of the commencement of the National

15 Summit,’’ after ‘‘comment’’;

16 (7) in subsection (g), by inserting ‘‘, in

17 consultation with the congressional lead18 ers specified in subsection (e)(2),’’ after

19 ‘‘report’’ the first place it appears;

20 (8) in subsection (i)—

21 (A) by striking ‘‘beginning on or

22 after October 1, 1997’’ in paragraph

23 (1) and inserting ‘‘2001, 2005, and

24 2009’’; and
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1 (B) by adding at the end the fol2 lowing new paragraph:

3 ‘‘(3) RECEPTION AND REPRESENTATION

4 AUTHORITY.—The Secretary is hereby

5 granted reception and representation au6 thority limited specifically to the events

7 at the National Summit. The Secretary

8 shall use any private contributions ac9 cepted in connection with the National

10 Summit prior to using funds appro11 priated for purposes of the National Sum12 mit pursuant to this paragraph.’’; and

13 (9) in subsection (k)—

14 (A) by striking ‘‘shall enter into a

15 contract on a sole-source basis’’ and

16 inserting ‘‘may enter into a contract

17 on a sole-source basis’’; and

18 (B) by striking ‘‘fiscal year 1998’’

19 and inserting ‘‘fiscal years 2001, 2005,

20 and 2009’’.

21 TITLE VII—OTHER ERISA

22 PROVISIONS

23 SEC. 701. MISSING PARTICIPANTS.

24 (a) IN GENERAL.—Section 4050 of the Em25 ployee Retirement Income Security Act of
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1 1974 (29 U.S.C. 1350) is amended by redesig2 nating subsection (c) as subsection (e) and by

3 inserting after subsection (b) the following

4 new subsections:

5 ‘‘(c) MULTIEMPLOYER PLANS.—The corpora6 tion shall prescribe rules similar to the rules

7 in subsection (a) for multiemployer plans cov8 ered by this title that terminate under section

9 4041A.

10 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO

11 TITLE.—

12 ‘‘(1) TRANSFER TO CORPORATION.—The

13 plan administrator of a plan described in

14 paragraph (4) may elect to transfer a

15 missing participant’s benefits to the cor16 poration upon termination of the plan.

17 ‘‘(2) INFORMATION TO THE CORPORA18 TION.—To the extent provided in regula19 tions, the plan administrator of a plan de20 scribed in paragraph (4) shall, upon ter21 mination of the plan, provide the cor22 poration information with respect to ben23 efits of a missing participant if the plan

24 transfers such benefits—

25 ‘‘(A) to the corporation, or
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1 ‘‘(B) to an entity other than the

2 corporation or a plan described in

3 paragraph (4)(B)(ii).

4 ‘‘(3) PAYMENT BY THE CORPORATION.—If

5 benefits of a missing participant were

6 transferred to the corporation under

7 paragraph (1), the corporation shall,

8 upon location of the participant or bene9 ficiary, pay to the participant or bene10 ficiary the amount transferred (or the ap11 propriate survivor benefit) either—

12 ‘‘(A) in a single sum (plus inter13 est), or

14 ‘‘(B) in such other form as is spec15 ified in regulations of the corpora16 tion.

17 ‘‘(4) PLANS DESCRIBED.—A plan is de18 scribed in this paragraph if—

19 ‘‘(A) the plan is a pension plan

20 (within the meaning of section 3(2))—

21 ‘‘(i) to which the provisions of

22 this section do not apply (without

23 regard to this subsection), and
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1 ‘‘(ii) which is not a plan de2 scribed in paragraphs (2) through

3 (11) of section 4021(b), and

4 ‘‘(B) at the time the assets are to

5 be distributed upon termination, the

6 plan—

7 ‘‘(i) has missing participants,

8 and

9 ‘‘(ii) has not provided for the

10 transfer of assets to pay the bene11 fits of all missing participants to

12 another pension plan (within the

13 meaning of section 3(2)).

14 ‘‘(5) CERTAIN PROVISIONS NOT TO

15 APPLY.—Subsections (a)(1) and (a)(3) shall

16 not apply to a plan described in para17 graph (4).’’.

18 (b) CONFORMING AMENDMENTS.—Section

19 206(f) of such Act (29 U.S.C. 1056(f)) is

20 amended—

21 (1) by striking ‘‘title IV’’ and inserting

22 ‘‘section 4050’’; and

23 (2) by striking ‘‘the plan shall provide

24 that,’’.
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1 (c) EFFECTIVE DATE.—The amendments

2 made by this section shall apply to distribu3 tions made after final regulations imple4 menting subsections (c) and (d) of section

5 4050 of the Employee Retirement Income Se6 curity Act of 1974 (as added by subsection (a)),

7 respectively, are prescribed.

8 SEC. 702. REDUCED PBGC PREMIUM FOR NEW PLANS OF

9 SMALL EMPLOYERS.

10 (a) IN GENERAL.—Subparagraph (A) of sec11 tion 4006(a)(3) of the Employee Retirement In12 come Security Act of 1974 (29 U.S.C.

13 1306(a)(3)(A)) is amended—

14 (1) in clause (i), by inserting ‘‘other

15 than a new single-employer plan (as de16 fined in subparagraph (F)) maintained by

17 a small employer (as so defined),’’ after

18 ‘‘single-employer plan,’’,

19 (2) in clause (iii), by striking the pe20 riod at the end and inserting ‘‘, and’’, and

21 (3) by adding at the end the following

22 new clause:

23 ‘‘(iv) in the case of a new single-em24 ployer plan (as defined in subparagraph

25 (F)) maintained by a small employer (as
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1 so defined) for the plan year, $5 for each

2 individual who is a participant in such

3 plan during the plan year.’’.

4 (b) DEFINITION OF NEW SINGLE-EMPLOYER

5 PLAN.—Section 4006(a)(3) of the Employee Re6 tirement Income Security Act of 1974 (29

7 U.S.C. 1306(a)(3)) is amended by adding at the

8 end the following new subparagraph:

9 ‘‘(F)(i) For purposes of this paragraph, a

10 single-employer plan maintained by a contrib11 uting sponsor shall be treated as a new single12 employer plan for each of its first 5 plan years

13 if, during the 36-month period ending on the

14 date of the adoption of such plan, the sponsor

15 or any member of such sponsor’s controlled

16 group (or any predecessor of either) did not

17 establish or maintain a plan to which this title

18 applies with respect to which benefits were

19 accrued for substantially the same employees

20 as are in the new single-employer plan.

21 ‘‘(ii)(I) For purposes of this paragraph, the

22 term ‘small employer’ means an employer

23 which on the first day of any plan year has,

24 in aggregation with all members of the con-
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1 trolled group of such employer, 100 or fewer

2 employees.

3 ‘‘(II) In the case of a plan maintained by

4 two or more contributing sponsors that are

5 not part of the same controlled group, the em6 ployees of all contributing sponsors and con7 trolled groups of such sponsors shall be ag8 gregated for purposes of determining whether

9 any contributing sponsor is a small em10 ployer.’’.

11 (c) EFFECTIVE DATE.—The amendments

12 made by this section shall apply to plans es13 tablished after December 31, 2001.

14 SEC. 703. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR

15 NEW AND SMALL PLANS.

16 (a) NEW PLANS.—Subparagraph (E) of sec17 tion 4006(a)(3) of the Employee Retirement In18 come Security Act of 1974 (29 U.S.C.

19 1306(a)(3)(E)) is amended by adding at the

20 end the following new clause:

21 ‘‘(v) In the case of a new defined benefit

22 plan, the amount determined under clause (ii)

23 for any plan year shall be an amount equal to

24 the product of the amount determined under

25 clause (ii) and the applicable percentage. For
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1 purposes of this clause, the term ‘applicable

2 percentage’ means—

3 ‘‘(I) 0 percent, for the first plan year.

4 ‘‘(II) 20 percent, for the second plan

5 year.

6 ‘‘(III) 40 percent, for the third plan

7 year.

8 ‘‘(IV) 60 percent, for the fourth plan

9 year.

10 ‘‘(V) 80 percent, for the fifth plan

11 year.

12 For purposes of this clause, a defined benefit

13 plan (as defined in section 3(35)) maintained

14 by a contributing sponsor shall be treated as

15 a new defined benefit plan for each of its first

16 5 plan years if, during the 36-month period

17 ending on the date of the adoption of the plan,

18 the sponsor and each member of any con19 trolled group including the sponsor (or any

20 predecessor of either) did not establish or

21 maintain a plan to which this title applies

22 with respect to which benefits were accrued

23 for substantially the same employees as are in

24 the new plan.’’.
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1 (b) SMALL PLANS.—Paragraph (3) of sec2 tion 4006(a) of the Employee Retirement In3 come Security Act of 1974 (29 U.S.C. 1306(a)),

4 as amended by section 702(b), is amended—

5 (1) by striking ‘‘The’’ in subparagraph

6 (E)(i) and inserting ‘‘Except as provided

7 in subparagraph (G), the’’, and

8 (2) by inserting after subparagraph

9 (F) the following new subparagraph:

10 ‘‘(G)(i) In the case of an employer who has

11 25 or fewer employees on the first day of the

12 plan year, the additional premium deter13 mined under subparagraph (E) for each par14 ticipant shall not exceed $5 multiplied by the

15 number of participants in the plan as of the

16 close of the preceding plan year.

17 ‘‘(ii) For purposes of clause (i), whether an

18 employer has 25 or fewer employees on the

19 first day of the plan year is determined taking

20 into consideration all of the employees of all

21 members of the contributing sponsor’s con22 trolled group. In the case of a plan main23 tained by two or more contributing sponsors,

24 the employees of all contributing sponsors

25 and their controlled groups shall be aggre-
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1 gated for purposes of determining whether

2 the 25-or-fewer-employees limitation has been

3 satisfied.’’.

4 (c) EFFECTIVE DATES.—

5 (1) SUBSECTION (a).—The amendments

6 made by subsection (a) shall apply to

7 plans established after December 31,

8 2001.

9 (2) SUBSECTION (b).—The amendments

10 made by subsection (b) shall apply to

11 plan years beginning after December 31,

12 2001.

13 SEC. 704. AUTHORIZATION FOR PBGC TO PAY INTEREST ON

14 PREMIUM OVERPAYMENT REFUNDS.

15 (a) IN GENERAL.—Section 4007(b) of the

16 Employment Retirement Income Security Act

17 of 1974 (29 U.S.C. 1307(b)) is amended—

18 (1) by striking ‘‘(b)’’ and inserting

19 ‘‘(b)(1)’’, and

20 (2) by inserting at the end the fol21 lowing new paragraph:

22 ‘‘(2) The corporation is authorized to pay,

23 subject to regulations prescribed by the cor24 poration, interest on the amount of any over25 payment of premium refunded to a des-
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1 ignated payor. Interest under this paragraph

2 shall be calculated at the same rate and in the

3 same manner as interest is calculated for un4 derpayments under paragraph (1).’’.

5 (b) EFFECTIVE DATE.—The amendment

6 made by subsection (a) shall apply to interest

7 accruing for periods beginning not earlier

8 than the date of the enactment of this Act.

9 SEC. 705. SUBSTANTIAL OWNER BENEFITS IN TERMINATED

10 PLANS.

11 (a) MODIFICATION OF PHASE-IN OF GUAR12 ANTEE.—Section 4022(b)(5) of the Employee

13 Retirement Income Security Act of 1974 (29

14 U.S.C. 1322(b)(5)) is amended to read as fol15 lows:

16 ‘‘(5)(A) For purposes of this paragraph,

17 the term ‘majority owner’ means an indi18 vidual who, at any time during the 60-month

19 period ending on the date the determination

20 is being made—

21 ‘‘(i) owns the entire interest in an un22 incorporated trade or business,

23 ‘‘(ii) in the case of a partnership, is a

24 partner who owns, directly or indirectly,

25 50 percent or more of either the capital
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1 interest or the profits interest in such

2 partnership, or

3 ‘‘(iii) in the case of a corporation,

4 owns, directly or indirectly, 50 percent or

5 more in value of either the voting stock

6 of that corporation or all the stock of

7 that corporation.

8 For purposes of clause (iii), the constructive

9 ownership rules of section 1563(e) of the In10 ternal Revenue Code of 1986 shall apply (de11 termined without regard to section

12 1563(e)(3)(C)).

13 ‘‘(B) In the case of a participant who is a

14 majority owner, the amount of benefits guar15 anteed under this section shall equal the

16 product of—

17 ‘‘(i) a fraction (not to exceed 1) the

18 numerator of which is the number of

19 years from the later of the effective date

20 or the adoption date of the plan to the

21 termination date, and the denominator of

22 which is 10, and

23 ‘‘(ii) the amount of benefits that

24 would be guaranteed under this section if
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1 the participant were not a majority

2 owner.’’.

3 (b) MODIFICATION OF ALLOCATION OF AS4 SETS.—

5 (1) Section 4044(a)(4)(B) of the Em6 ployee Retirement Income Security Act of

7 1974 (29 U.S.C. 1344(a)(4)(B)) is amended

8 by striking ‘‘section 4022(b)(5)’’ and in9 serting ‘‘section 4022(b)(5)(B)’’.

10 (2) Section 4044(b) of such Act (29

11 U.S.C. 1344(b)) is amended—

12 (A) by striking ‘‘(5)’’ in paragraph

13 (2) and inserting ‘‘(4), (5),’’, and

14 (B) by redesignating paragraphs

15 (3) through (6) as paragraphs (4)

16 through (7), respectively, and by in17 serting after paragraph (2) the fol18 lowing new paragraph:

19 ‘‘(3) If assets available for allocation

20 under paragraph (4) of subsection (a) are

21 insufficient to satisfy in full the benefits

22 of all individuals who are described in

23 that paragraph, the assets shall be allo24 cated first to benefits described in sub25 paragraph (A) of that paragraph. Any re-
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1 maining assets shall then be allocated to

2 benefits described in subparagraph (B) of

3 that paragraph. If assets allocated to

4 such subparagraph (B) are insufficient to

5 satisfy in full the benefits described in

6 that subparagraph, the assets shall be al7 located pro rata among individuals on

8 the basis of the present value (as of the

9 termination date) of their respective ben10 efits described in that subparagraph.’’.

11 (c) CONFORMING AMENDMENTS.—

12 (1) Section 4021 of the Employee Re13 tirement Income Security Act of 1974 (29

14 U.S.C. 1321) is amended—

15 (A) in subsection (b)(9), by strik16 ing ‘‘as defined in section 4022(b)(6)’’

,

17 and

18 (B) by adding at the end the fol19 lowing new subsection:

20 ‘‘(d) For purposes of subsection (b)(9), the

21 term ‘substantial owner’ means an individual

22 who, at any time during the 60-month period

23 ending on the date the determination is being

24 made—
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1 ‘‘(1) owns the entire interest in an un2 incorporated trade or business,

3 ‘‘(2) in the case of a partnership, is a

4 partner who owns, directly or indirectly,

5 more than 10 percent of either the capital

6 interest or the profits interest in such

7 partnership, or

8 ‘‘(3) in the case of a corporation,

9 owns, directly or indirectly, more than 10

10 percent in value of either the voting

11 stock of that corporation or all the stock

12 of that corporation.

13 For purposes of paragraph (3), the construc14 tive ownership rules of section 1563(e) of the

15 Internal Revenue Code of 1986 shall apply

16 (determined without regard to section

17 1563(e)(3)(C)).’’.

18 (2) Section 4043(c)(7) of such Act (29 U.S.C.

19 1343(c)(7)) is amended by striking ‘‘section

20 4022(b)(6)’’ and inserting ‘‘section 4021(d)’’.

21 (d) EFFECTIVE DATES.—

22 (1) IN GENERAL.—Except as provided

23 in paragraph (2), the amendments made

24 by this section shall apply to plan

25 terminations—
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1 (A) under section 4041(c) of the

2 Employee Retirement Income Secu3 rity Act of 1974 (29 U.S.C. 1341(c))

4 with respect to which notices of in5 tent to terminate are provided under

6 section 4041(a)(2) of such Act (29

7 U.S.C. 1341(a)(2)) after December 31,

8 2001, and

9 (B) under section 4042 of such Act

10 (29 U.S.C. 1342) with respect to which

11 proceedings are instituted by the cor12 poration after such date.

13 (2) CONFORMING AMENDMENTS.—The

14 amendments made by subsection (c) shall

15 take effect on January 1, 2002.

16 SEC. 706. CIVIL PENALTIES FOR BREACH OF FIDUCIARY

17 RESPONSIBILITY.

18 (a) IMPOSITION AND AMOUNT OF PENALTY

19 MADE DISCRETIONARY.—Section 502(l)(1) of the

20 Employee Retirement Income Security Act of

21 1974 (29 U.S.C. 1132(l)(1)) is amended—

22 (1) by striking ‘‘shall’’ and inserting

23 ‘‘may’’, and

24 (2) by striking ‘‘equal to’’ and insert25 ing ‘‘not greater than’’.
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1 (b) APPLICABLE RECOVERY AMOUNT.—Sec2 tion 502(l)(2) of such Act (29 U.S.C. 1132(l)(2))

3 is amended by inserting after ‘‘fiduciary or

4 other person’’ the following: ‘‘(or from any

5 other person on behalf of any such fiduciary

6 or other person)’’.

7 (c) OTHER RULES.—Section 502(l) of the

8 Employee Retirement Income Security Act of

9 1974 (29 U.S.C. 1132(l)) is amended by adding

10 at the end the following new paragraphs:

11 ‘‘(5) A person shall be jointly and severally

12 liable for the penalty described in paragraph

13 (1) to the same extent that such person is

14 jointly and severally liable for the applicable

15 recovery amount on which the penalty is

16 based.

17 ‘‘(6) No penalty shall be assessed under

18 this subsection unless the person against

19 whom the penalty is assessed is given notice

20 and opportunity for a hearing with respect to

21 the violation and applicable recovery

22 amount.’’.

23 (d) EFFECTIVE DATE.—The amendments

24 made by this section shall apply to any breach

25 of fiduciary responsibility or other violation
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1 of part 4 of subtitle B of title I of the Employee

2 Retirement Income Security Act of 1974 oc3 curring on or after the date of the enactment

4 of this Act.

5 SEC. 707. BENEFIT SUSPENSION NOTICE.

6 (a) MODIFICATION OF REGULATION.—The

7 Secretary of Labor shall modify the regula8 tion under subparagraph (B) of section

9 203(a)(3) of the Employee Retirement Income

10 Security Act of 1974 (29 U.S.C. 1053(a)(3)(B))

11 to provide that the notification required by

12 such regulation in connection with any sus13 pension of benefits described in such

14 subparagraph—

15 (1) in the case of an employee who re16 turns to service under the plan after com17 mencement of payment of benefits under

18 the plan—

19 (A) shall be made during the first

20 calendar month or payroll period in

21 which the plan withholds payments,

22 and

23 (B) if a reduced rate of future

24 benefit accrual will apply to the re25 turning employee (as of the first date
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1 of participation in the plan by the

2 employee after returning to work),

3 shall include a statement that the

4 rate of future benefit accrual will be

5 reduced, and

6 (2) in the case of any employee who is

7 not described in paragraph (1)—

8 (A) may be included in the sum9 mary plan description for the plan

10 furnished in accordance with section

11 104(b) of such Act (29 U.S.C. 1024(b)),

12 rather than in a separate notice, and

13 (B) need not include a copy of the

14 relevant plan provisions.

15 (b) EFFECTIVE DATE.—The modification

16 made under this section shall apply to plan

17 years beginning after December 31, 2001.

18 SEC. 708. STUDIES.

19 (a) MODEL SMALL EMPLOYER GROUP PLANS

20 STUDY.—As soon as practicable after the date

21 of the enactment of this Act, the Secretary of

22 Labor, in consultation with the Secretary of

23 the Treasury, shall conduct a study to

24 determine—
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1 (1) the most appropriate form or

2 forms of—

3 (A) employee pension benefit

4 plans which would—

5 (i) be simple in form and eas6 ily maintained by multiple small

7 employers, and

8 (ii) provide for ready port9 ability of benefits for all partici10 pants and beneficiaries,

11 (B) alternative arrangements pro12 viding comparable benefits which

13 may be established by employee or

14 employer associations, and

15 (C) alternative arrangements pro16 viding comparable benefits to which

17 employees may contribute in a man18 ner independent of employer sponsor19 ship, and

20 (2) appropriate methods and strate21 gies for making pension plan coverage

22 described in paragraph (1) more widely

23 available to American workers.

24 (b) MATTERS TO BE CONSIDERED.—In con25 ducting the study under subsection (a), the
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1 Secretary of Labor shall consider the ade2 quacy and availability of existing employee

3 pension benefit plans and the extent to which

4 existing models may be modified to be more

5 accessible to both employees and employers.

6 (c) REPORT.—Not later than 18 months

7 after the date of the enactment of this Act, the

8 Secretary of Labor shall report the results of

9 the study under subsection (a), together with

10 the Secretary’s recommendations, to the Com11 mittee on Education and the Workforce and

12 the Committee on Ways and Means of the

13 House of Representatives and the Committee

14 on Health, Education, Labor, and Pensions

15 and the Committee on Finance of the Senate.

16 Such recommendations shall include one or

17 more model plans described in subsection

18 (a)(1)(A) and model alternative arrangements

19 described in subsections (a)(1)(B) and

20 (a)(1)(C) which may serve as the basis for ap21 propriate administrative or legislative action.

22 (d) STUDY ON EFFECT OF LEGISLATION.—Not

23 later than 5 years after the date of the enact24 ment of this Act, the Secretary of Labor shall

25 submit to the Committee on Education and
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1 the Workforce of the House of Representa2 tives and the Committee on Health, Edu3 cation, Labor, and Pensions of the Senate a

4 report on the effect of the provisions of this

5 Act on pension plan coverage, including any

6 change in—

7 (1) the extent of pension plan cov8 erage for low and middle-income work9 ers,

10 (2) the levels of pension plan benefits

11 generally,

12 (3) the quality of pension plan cov13 erage generally,

14 (4) workers’ access to and participa15 tion in pension plans, and

16 (5) retirement security.

17 TITLE VIII—PLAN AMENDMENTS

18 SEC. 801. PROVISIONS RELATING TO PLAN AMENDMENTS.

19 (a) IN GENERAL.—If this section applies to

20 any plan or contract amendment—

21 (1) such plan or contract shall be

22 treated as being operated in accordance

23 with the terms of the plan during the pe24 riod described in subsection (b)(2)(A);

25 and
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1 (2) except as provided by the Sec2 retary of the Treasury, such plan shall

3 not fail to meet the requirements of sec4 tion 411(d)(6) of the Internal Revenue

5 Code of 1986 or section 204(g) of the Em6 ployee Retirement Income Security Act of

7 1974 by reason of such amendment.

8 (b) AMENDMENTS TO WHICH SECTION AP9 PLIES.—

10 (1) IN GENERAL.—This section shall

11 apply to any amendment to any plan or

12 annuity contract which is made—

13 (A) pursuant to any amendment

14 made by this Act, or pursuant to any

15 regulation issued under this Act; and

16 (B) on or before the last day of

17 the first plan year beginning on or

18 after January 1, 2004.

19 In the case of a governmental plan (as de20 fined in section 414(d) of the Internal

21 Revenue Code of 1986), this paragraph

22 shall be applied by substituting ‘‘2006’’ for

23 ‘‘2004’’.

24 (2) CONDITIONS.—This section shall

25 not apply to any amendment unless—
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1 (A) during the period—

2 (i) beginning on the date the

3 legislative or regulatory amend4 ment described in paragraph

5 (1)(A) takes effect (or in the case

6 of a plan or contract amendment

7 not required by such legislative

8 or regulatory amendment, the ef9 fective date specified by the

10 plan); and

11 (ii) ending on the date de12 scribed in paragraph (1)(B) (or, if

13 earlier, the date the plan or con14 tract amendment is adopted),

15 the plan or contract is operated as if

16 such plan or contract amendment

17 were in effect; and

18 (B) such plan or contract amend19 ment applies retroactively for such

20 period.

Union Calendar No. 33

107TH CONGRESS

1ST SESSION H. R. 10

[Report No. 107–51, Parts I and II]

A BILL

To provide for pension reform, and for other

purposes.

MAY 1, 2001

Reported from the Committee on Education and the

Workforce with an amendment; committed to the Committee of the Whole House on the State of the Union,and ordered to be printed