II

Calendar No. 69

107TH CONGRESS

1ST SESSION H. R. 10

IN THE SENATE OF THE UNITED STATES

MAY 3, 2001

Received

JUNE 6, 2001

Read the first time

JUNE 7, 2001

Read the second time and placed on the calendar

AN ACT

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,
2

HR 10 PCS

1 SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CON2 TENTS.

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

4 ‘‘Comprehensive Retirement Security and Pension Reform

5 Act of 2001’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment

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

10 shall be considered to be made to a section or other provi11 sion of the Internal Revenue Code of 1986.

12 (c) TABLE OF CONTENTS.—The table of contents of

13 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.

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.
3

HR 10 PCS

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.

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
4

HR 10 PCS

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 section

6 219(b) (relating to maximum amount of deduction)

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

8 deductible amount’’.

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

10 amended by adding at the end the following new

11 paragraph:

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

13 paragraph (1)(A)—

14 ‘‘(A) IN GENERAL.—The deductible

15 amount shall be determined in accordance with

16 the following table:

‘‘For taxable years The deductible

beginning in: amount is:

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

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

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

HR 10 PCS

1 ‘‘(B) CATCH-UP CONTRIBUTIONS FOR INDI2 VIDUALS 50 OR OLDER.—In the case of an indi3 vidual who has attained the age of 50 before

4 the close of the taxable year, the deductible

5 amount for taxable years beginning in 2002 or

6 2003 shall be $5,000.

7 ‘‘(C) COST-OF-LIVING ADJUSTMENT.—

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

9 taxable year beginning in a calendar year

10 after 2004, the $5,000 amount under sub11 paragraph (A) shall be increased by an

12 amount equal to—

13 ‘‘(I) such dollar amount, multi14 plied by

15 ‘‘(II) the cost-of-living adjust16 ment determined under section

17 1(f )(3) for the calendar year in which

18 the taxable year begins, determined by

19 substituting ‘calendar year 2003’ for

20 ‘calendar year 1992’ in subparagraph

21 (B) thereof.

22 ‘‘(ii) ROUNDING RULES.—If any

23 amount after adjustment under clause (i)

24 is not a multiple of $500, such amount
6

HR 10 PCS

1 shall be rounded to the next lower multiple

2 of $500.’’.

3 (b) CONFORMING AMENDMENTS.—

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

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

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

7 of the amount in effect for such taxable year under

8 section 219(b)(1)(A)’’.

9 (2) Section 408(b)(2)(B) is amended by strik10 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

11 effect under section 219(b)(1)(A)’’.

12 (3) Section 408(b) is amended by striking

13 ‘‘$2,000’’ in the matter following paragraph (4) and

14 inserting ‘‘the dollar amount in effect under section

15 219(b)(1)(A)’’.

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

17 ‘‘$2,000’’.

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

19 ‘‘$2,000’’ and inserting ‘‘the dollar amount in effect

20 under section 219(b)(1)(A)’’.

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

22 this section shall apply to taxable years beginning after

23 December 31, 2001.
7

HR 10 PCS

1 TITLE II—EXPANDING

2 COVERAGE

3 SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION

4 LIMITS.

5 (a) DEFINED BENEFIT PLANS.—

6 (1) DOLLAR LIMIT.—

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

8 (relating to limitation for defined benefit plans)

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

10 ‘‘$160,000’’.

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

12 415(b)(2) are each amended by striking

13 ‘‘$90,000’’ each place it appears in the head14 ings and the text and inserting ‘‘$160,000’’.

15 (C) Paragraph (7) of section 415(b) (relat16 ing to benefits under certain collectively bar17 gained plans) is amended by striking ‘‘the

18 greater of $68,212 or one-half the amount oth19 erwise applicable for such year under paragraph

20 (1)(A) for ‘$90,000’ ’’ and inserting ‘‘one-half

21 the amount otherwise applicable for such year

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

23 (2) LIMIT REDUCED WHEN BENEFIT BEGINS

24 BEFORE AGE 62.—Subparagraph (C) of section

25 415(b)(2) is amended by striking ‘‘the social security
8

HR 10 PCS

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

2 and text and inserting ‘‘age 62’’ and by striking the

3 second sentence.

4 (3) LIMIT INCREASED WHEN BENEFIT BEGINS

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

6 415(b)(2) is amended by striking ‘‘the social security

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

8 and text and inserting ‘‘age 65’’.

9 (4) COST-OF-LIVING ADJUSTMENTS.—Sub10 section (d) of section 415 (related to cost-of-living

11 adjustments) is amended—

12 (A) by striking ‘‘$90,000’’ in paragraph

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

14 (B) in paragraph (3)(A)—

15 (i) by striking ‘‘$90,000’’ in the head16 ing and inserting ‘‘$160,000’’; and

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

18 inserting ‘‘July 1, 2001’’.

19 (5) CONFORMING AMENDMENTS.—

20 (A) Section 415(b)(2) is amended by strik21 ing subparagraph (F).

22 (B) Section 415(b)(9) is amended to read

23 as follows:

24 ‘‘(9) SPECIAL RULE FOR COMMERCIAL AIRLINE

25 PILOTS.—
9

HR 10 PCS

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

2 subparagraph (B), in the case of any partici3 pant who is a commercial airline pilot, if, as of

4 the time of the participant’s retirement, regula5 tions prescribed by the Federal Aviation Admin6 istration require an individual to separate from

7 service as a commercial airline pilot after at8 taining any age occurring on or after age 60

9 and before age 62, paragraph (2)(C) shall be

10 applied by substituting such age for age 62.

11 ‘‘(B) INDIVIDUALS WHO SEPARATE FROM

12 SERVICE BEFORE AGE 60.—If a participant de13 scribed in subparagraph (A) separates from

14 service before age 60, the rules of paragraph

15 (2)(C) shall apply.’’.

16 (C) Section 415(b)(10)(C)(i) is amended

17 by striking ‘‘applied without regard to para18 graph (2)(F)’’.

19 (b) DEFINED CONTRIBUTION PLANS.—

20 (1) DOLLAR LIMIT.—Subparagraph (A) of sec21 tion 415(c)(1) (relating to limitation for defined con22 tribution plans) is amended by striking ‘‘$30,000’’

23 and inserting ‘‘$40,000’’.
10

HR 10 PCS

1 (2) COST-OF-LIVING ADJUSTMENTS.—Sub2 section (d) of section 415 (related to cost-of-living

3 adjustments) is amended—

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

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

6 (B) in paragraph (3)(D)—

7 (i) by striking ‘‘$30,000’’ in the head8 ing and inserting ‘‘$40,000’’; and

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

10 inserting ‘‘July 1, 2001’’.

11 (c) QUALIFIED TRUSTS.—

12 (1) COMPENSATION LIMIT.—Sections

13 401(a)(17), 404(l), 408(k), and 505(b)(7) are each

14 amended by striking ‘‘$150,000’’ each place it ap15 pears and inserting ‘‘$200,000’’.

16 (2) BASE PERIOD AND ROUNDING OF COST-OF17 LIVING ADJUSTMENT.—Subparagraph (B) of section

18 401(a)(17) is amended—

19 (A) by striking ‘‘October 1, 1993’’ and in20 serting ‘‘July 1, 2001’’; and

21 (B) by striking ‘‘$10,000’’ both places it

22 appears and inserting ‘‘$5,000’’.

23 (d) ELECTIVE DEFERRALS.—
11

HR 10 PCS

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

2 402(g) (relating to limitation on exclusion for elec3 tive deferrals) is amended to read as follows:

4 ‘‘(1) IN GENERAL.—

5 ‘‘(A) LIMITATION.—Notwithstanding sub6 sections (e)(3) and (h)(1)(B), the elective defer7 rals of any individual for any taxable year shall

8 be included in such individual’s gross income to

9 the extent the amount of such deferrals for the

10 taxable year exceeds the applicable dollar

11 amount.

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

13 purposes of subparagraph (A), the applicable

14 dollar amount shall be the amount determined

15 in 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.’’.

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

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

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

19 case of taxable years beginning after December 31,

20 2006, the Secretary shall adjust the $15,000

21 amount under paragraph (1)(B) at the same time
12

HR 10 PCS

1 and in the same manner as under section 415(d),

2 except that the base period shall be the calendar

3 quarter beginning July 1, 2005, and any increase

4 under this paragraph which is not a multiple of

5 $500 shall be rounded to the next lowest multiple of

6 $500.’’.

7 (3) CONFORMING AMENDMENTS.—

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

9 on exclusion for elective deferrals), as amended

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

11 by striking paragraph (4) and redesignating

12 paragraphs (5), (6), (7), (8), and (9) as para13 graphs (4), (5), (6), (7), and (8), respectively.

14 (B) Paragraph (2) of section 457(c) is

15 amended by striking ‘‘402(g)(8)(A)(iii)’’ and in16 serting ‘‘402(g)(7)(A)(iii)’’.

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

18 amended by striking ‘‘(other than paragraph

19 (4) thereof)’’.

20 (e) DEFERRED COMPENSATION PLANS OF STATE

21 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI22 ZATIONS.—

23 (1) IN GENERAL.—Section 457 (relating to de24 ferred compensation plans of State and local govern25 ments and tax-exempt organizations) is amended—
13

HR 10 PCS

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

2 striking ‘‘$7,500’’ each place it appears and in3 serting ‘‘the applicable dollar amount’’; and

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

5 ‘‘$15,000’’ and inserting ‘‘twice the dollar

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

7 (2) APPLICABLE DOLLAR AMOUNT; COST-OF8 LIVING ADJUSTMENT.—Paragraph (15) of section

9 457(e) is amended to read as follows:

10 ‘‘(15) APPLICABLE DOLLAR AMOUNT.—

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

12 amount shall be the amount determined in ac13 cordance 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.

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

15 the case of taxable years beginning after De16 cember 31, 2006, the Secretary shall adjust the

17 $15,000 amount under subparagraph (A) at the

18 same time and in the same manner as under

19 section 415(d), except that the base period shall

20 be the calendar quarter beginning July 1, 2005,

21 and any increase under this paragraph which is
14

HR 10 PCS

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

2 next lowest multiple of $500.’’.

3 (f) SIMPLE RETIREMENT ACCOUNTS.—

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

5 408(p)(2)(A) (relating to general rule for qualified

6 salary reduction arrangement) is amended by strik7 ing ‘‘$6,000’’ and inserting ‘‘the applicable dollar

8 amount’’.

9 (2) APPLICABLE DOLLAR AMOUNT.—Subpara10 graph (E) of 408(p)(2) is amended to read as fol11 lows:

12 ‘‘(E) APPLICABLE DOLLAR AMOUNT; COST13 OF-LIVING ADJUSTMENT.—

14 ‘‘(i) IN GENERAL.—For purposes of

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

16 amount shall be the amount determined in

17 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.

18 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

19 In the case of a year beginning after De20 cember 31, 2005, the Secretary shall ad21 just the $10,000 amount under clause (i)

22 at the same time and in the same manner
15

HR 10 PCS

1 as under section 415(d), except that the

2 base period taken into account shall be the

3 calendar quarter beginning July 1, 2004,

4 and any increase under this subparagraph

5 which is not a multiple of $500 shall be

6 rounded to the next lower multiple of

7 $500.’’.

8 (3) CONFORMING AMENDMENTS.—

9 (A) Subclause (I) of section

10 401(k)(11)(B)(i) is amended by striking

11 ‘‘$6,000’’ and inserting ‘‘the amount in effect

12 under section 408(p)(2)(A)(ii)’’.

13 (B) Section 401(k)(11) is amended by

14 striking subparagraph (E).

15 (g) ROUNDING RULE RELATING TO DEFINED BEN16 EFIT PLANS AND DEFINED CONTRIBUTION PLANS.—

17 Paragraph (4) of section 415(d) is amended to read as

18 follows:

19 ‘‘(4) ROUNDING.—

20 ‘‘(A) $160,000 AMOUNT.—Any increase

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

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

23 the next lowest multiple of $5,000.

24 ‘‘(B) $40,000 AMOUNT.—Any increase

25 under subparagraph (C) of paragraph (1) which
16

HR 10 PCS

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

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

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

4 this section shall apply to years beginning after December

5 31, 2001.

6 SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART7 NERS, AND SOLE PROPRIETORS.

8 (a) AMENDMENT OF INTERNAL REVENUE CODE.—

9 Subparagraph (B) of section 4975(f)(6) (relating to ex10 emptions not to apply to certain transactions) is amended

11 by adding at the end the following new clause:

12 ‘‘(iii) LOAN EXCEPTION.—For pur13 poses of subparagraph (A)(i), the term

14 ‘owner-employee’ shall only include a per15 son described in subclause (II) or (III) of

16 clause (i).’’.

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

18 the Employee Retirement Income Security Act of 1974

19 (29 U.S.C. 1108(d)(2)) is amended by adding at the end

20 the following new subparagraph:

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

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

23 clause (ii) or (iii) of subparagraph (A).’’.
17

HR 10 PCS

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

2 this section shall apply to years beginning after December

3 31, 2001.

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

5 (a) SIMPLIFICATION OF DEFINITION OF KEY EM6 PLOYEE.—

7 (1) IN GENERAL.—Section 416(i)(1)(A) (defin8 ing key employee) is amended—

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

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

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

12 following:

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

14 an annual compensation greater than

15 $150,000,’’;

16 (C) by striking clause (ii) and redesig17 nating clauses (iii) and (iv) as clauses (ii) and

18 (iii), respectively; and

19 (D) by striking the second sentence in the

20 matter following clause (iii), as redesignated by

21 subparagraph (C).

22 (2) CONFORMING AMENDMENT.—Section

23 416(i)(1)(B)(iii) is amended by striking ‘‘and sub24 paragraph (A)(ii)’’.
18

HR 10 PCS

1 (b) MATCHING CONTRIBUTIONS TAKEN INTO AC2 COUNT FOR MINIMUM CONTRIBUTION REQUIREMENTS.—

3 Section 416(c)(2)(A) (relating to defined contribution

4 plans) is amended by adding at the end the following:

5 ‘‘Employer matching contributions (as defined in section

6 401(m)(4)(A)) shall be taken into account for purposes

7 of this subparagraph.’’.

8 (c) DISTRIBUTIONS DURING LAST YEAR BEFORE

9 DETERMINATION DATE TAKEN INTO ACCOUNT.—

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

11 416(g) is amended to read as follows:

12 ‘‘(3) DISTRIBUTIONS DURING LAST YEAR BE13 FORE DETERMINATION DATE TAKEN INTO AC14 COUNT.—

15 ‘‘(A) IN GENERAL.—For purposes of

16 determining—

17 ‘‘(i) the present value of the cumu18 lative accrued benefit for any employee, or

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

20 employee,

21 such present value or amount shall be increased

22 by the aggregate distributions made with re23 spect to such employee under the plan during

24 the 1-year period ending on the determination

25 date. The preceding sentence shall also apply to
19

HR 10 PCS

1 distributions under a terminated plan which if

2 it had not been terminated would have been re3 quired to be included in an aggregation group.

4 ‘‘(B) 5-YEAR PERIOD IN CASE OF IN-SERV5 ICE DISTRIBUTION.—In the case of any dis6 tribution made for a reason other than separa7 tion from service, death, or disability, subpara8 graph (A) shall be applied by substituting ‘5-

9 year period’ for ‘1-year period’.’’.

10 (2) BENEFITS NOT TAKEN INTO ACCOUNT.—

11 Subparagraph (E) of section 416(g)(4) is

12 amended—

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

14 heading and inserting ‘‘LAST YEAR BEFORE DE15 TERMINATION DATE’’; and

16 (B) by striking ‘‘5-year period’’ and insert17 ing ‘‘1-year period’’.

18 (d) DEFINITION OF TOP-HEAVY PLANS.—Paragraph

19 (4) of section 416(g) (relating to other special rules for

20 top-heavy plans) is amended by adding at the end the fol21 lowing new subparagraph:

22 ‘‘(H) CASH OR DEFERRED ARRANGEMENTS

23 USING ALTERNATIVE METHODS OF MEETING

24 NONDISCRIMINATION REQUIREMENTS.—The
20

HR 10 PCS

1 term ‘top-heavy plan’ shall not include a plan

2 which consists solely of—

3 ‘‘(i) a cash or deferred arrangement

4 which meets the requirements of section

5 401(k)(12), and

6 ‘‘(ii) matching contributions with re7 spect to which the requirements of section

8 401(m)(11) are met.

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

10 treated as a top-heavy plan because it is a

11 member of an aggregation group which is a top12 heavy group, contributions under the plan may

13 be taken into account in determining whether

14 any other plan in the group meets the require15 ments of subsection (c)(2).’’.

16 (e) FROZEN PLAN EXEMPT FROM MINIMUM BEN17 EFIT REQUIREMENT.—Subparagraph (C) of section

18 416(c)(1) (relating to defined benefit plans) is amended—

19 (A) by striking ‘‘clause (ii)’’ in clause (i)

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

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

22 ‘‘(iii) EXCEPTION FOR FROZEN

23 PLAN.—For purposes of determining an

24 employee’s years of service with the em25 ployer, any service with the employer shall
21

HR 10 PCS

1 be disregarded to the extent that such

2 service occurs during a plan year when the

3 plan benefits (within the meaning of sec4 tion 410(b)) no key employee or former

5 key employee.’’.

6 (f) ELIMINATION OF FAMILY ATTRIBUTION.—Sec7 tion 416(i)(1)(B) (defining 5-percent owner) is amended

8 by adding at the end the following new clause:

9 ‘‘(iv) FAMILY ATTRIBUTION DIS10 REGARDED.—Solely for purposes of apply11 ing this paragraph (and not for purposes

12 of any provision of this title which incor13 porates by reference the definition of a key

14 employee or 5-percent owner under this

15 paragraph), section 318 shall be applied

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

17 in determining whether any person is a 5-

18 percent owner.’’.

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

20 this section shall apply to years beginning after December

21 31, 2001.
22

HR 10 PCS

1 SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO AC2 COUNT FOR PURPOSES OF DEDUCTION LIM3 ITS.

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

5 for contributions of an employer to an employees’ trust

6 or annuity plan and compensation under a deferred pay7 ment plan) is amended by adding at the end the following

8 new subsection:

9 ‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC10 COUNT FOR PURPOSES OF DEDUCTION LIMITS.—Elective

11 deferrals (as defined in section 402(g)(3)) shall not be

12 subject to any limitation contained in paragraph (3), (7),

13 or (9) of subsection (a), and such elective deferrals shall

14 not be taken into account in applying any such limitation

15 to any other contributions.’’.

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

17 this section shall apply to years beginning after December

18 31, 2001.

19 SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR

20 DEFERRED COMPENSATION PLANS OF STATE

21 AND LOCAL GOVERNMENTS AND TAX-EX22 EMPT ORGANIZATIONS.

23 (a) IN GENERAL.—Subsection (c) of section 457 (re24 lating to deferred compensation plans of State and local

25 governments and tax-exempt organizations), as amended

26 by section 201, is amended to read as follows:
23

HR 10 PCS

1 ‘‘(c) LIMITATION.—The maximum amount of the

2 compensation of any one individual which may be deferred

3 under subsection (a) during any taxable year shall not ex4 ceed the amount in effect under subsection (b)(2)(A) (as

5 modified by any adjustment provided under subsection

6 (b)(3)).’’.

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

8 subsection (a) shall apply to years beginning after Decem9 ber 31, 2001.

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

11 IRS REGARDING PENSION PLANS.

12 (a) ELIMINATION OF CERTAIN USER FEES.—The

13 Secretary of the Treasury or the Secretary’s delegate shall

14 not require payment of user fees under the program estab15 lished under section 10511 of the Revenue Act of 1987

16 for requests to the Internal Revenue Service for deter17 mination letters with respect to the qualified status of a

18 pension benefit plan maintained solely by one or more eli19 gible employers or any trust which is part of the plan.

20 The preceding sentence shall not apply to any request—

21 (1) made after the later of—

22 (A) the fifth plan year the pension benefit

23 plan is in existence; or
24

HR 10 PCS

1 (B) the end of any remedial amendment

2 period with respect to the plan beginning within

3 the first 5 plan years; or

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

5 similar plan which the sponsor intends to market to

6 participating employers.

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

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

9 profit-sharing, stock bonus, annuity, or employee stock

10 ownership plan.

11 (c) ELIGIBLE EMPLOYER.—For purposes of this sec12 tion, the term ‘‘eligible employer’’ has the same meaning

13 given such term in section 408(p)(2)(C)(i)(I) of the Inter14 nal Revenue Code of 1986. The determination of whether

15 an employer is an eligible employer under this section shall

16 be made as of the date of the request described in sub17 section (a).

18 (d) DETERMINATION OF AVERAGE FEES

19 CHARGED.—For purposes of any determination of average

20 fees charged, any request to which subsection (a) applies

21 shall not be taken into account.

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

23 shall apply with respect to requests made after December

24 31, 2001.
25

HR 10 PCS

1 SEC. 207. DEDUCTION LIMITS.

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

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

4 404(a)(3)(A)(i) (relating to stock bonus and profit

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

6 and inserting ‘‘20 percent’’.

7 (2) CONFORMING AMENDMENT.—Subparagraph

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

9 percent’’ each place it appears and inserting ‘‘20

10 percent’’.

11 (b) COMPENSATION.—

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

13 general rule) is amended by adding at the end the

14 following:

15 ‘‘(12) DEFINITION OF COMPENSATION.—For

16 purposes of paragraphs (3), (7), (8), and (9), the

17 term ‘compensation otherwise paid or accrued dur18 ing the taxable year’ shall include amounts treated

19 as ‘participant’s compensation’ under subparagraph

20 (C) or (D) of section 415(c)(3).’’.

21 (2) CONFORMING AMENDMENTS.—

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

23 is amended by striking the last sentence.

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

25 amended by striking ‘‘(within the meaning of

26 section 404(a))’’ and inserting ‘‘(within the
26

HR 10 PCS

1 meaning of section 404(a) and as adjusted

2 under section 404(a)(12))’’.

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

4 this section shall apply to years beginning after December

5 31, 2001.

6 SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS

7 AFTER-TAX CONTRIBUTIONS.

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

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

10 is amended by inserting after section 402 the following

11 new section:

12 ‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER13 RALS AS PLUS CONTRIBUTIONS.

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

15 plan includes a qualified plus contribution program—

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

17 an employee pursuant to the program shall be treat18 ed as an elective deferral for purposes of this chap19 ter, except that such contribution shall not be ex20 cludable from gross income, and

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

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

23 meet any requirement of this chapter solely by rea24 son of including such program.
27

HR 10 PCS

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

2 For purposes of this section—

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

4 contribution program’ means a program under which

5 an employee may elect to make designated plus con6 tributions in lieu of all or a portion of elective defer7 rals the employee is otherwise eligible to make under

8 the applicable retirement plan.

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

10 program shall not be treated as a qualified plus con11 tribution program unless the applicable retirement

12 plan—

13 ‘‘(A) establishes separate accounts (‘des14 ignated plus accounts’) for the designated plus

15 contributions of each employee and any earn16 ings properly allocable to the contributions, and

17 ‘‘(B) maintains separate recordkeeping

18 with respect to each account.

19 ‘‘(c) DEFINITIONS AND RULES RELATING TO DES20 IGNATED PLUS CONTRIBUTIONS.—For purposes of this

21 section—

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

23 term ‘designated plus contribution’ means any elec24 tive deferral which—
28

HR 10 PCS

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

2 employee without regard to this section, and

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

4 and in such manner as the Secretary may pre5 scribe) as not being so excludable.

6 ‘‘(2) DESIGNATION LIMITS.—The amount of

7 elective deferrals which an employee may designate

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

9 any) of—

10 ‘‘(A) the maximum amount of elective de11 ferrals excludable from gross income of the em12 ployee for the taxable year (without regard to

13 this section), over

14 ‘‘(B) the aggregate amount of elective de15 ferrals of the employee for the taxable year

16 which the employee does not designate under

17 paragraph (1).

18 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

19 ‘‘(A) IN GENERAL.—A rollover contribu20 tion of any payment or distribution from a des21 ignated plus account which is otherwise allow22 able under this chapter may be made only if the

23 contribution is to—
29

HR 10 PCS

1 ‘‘(i) another designated plus account

2 of the individual from whose account the

3 payment or distribution was made, or

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

5 ‘‘(B) COORDINATION WITH LIMIT.—Any

6 rollover contribution to a designated plus ac7 count under subparagraph (A) shall not be

8 taken into account for purposes of paragraph

9 (1).

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

11 title—

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

13 from a designated plus account shall not be includ14 ible in gross income.

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

16 of this subsection—

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

18 distribution’ has the meaning given such term

19 by section 408A(d)(2)(A) (without regard to

20 clause (iv) thereof).

21 ‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU22 SION PERIOD.—A payment or distribution from

23 a designated plus account shall not be treated

24 as a qualified distribution if such payment or
30

HR 10 PCS

1 distribution is made within the 5-taxable-year

2 period beginning with the earlier of—

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

4 the individual made a designated plus con5 tribution to any designated plus account

6 established for such individual under the

7 same applicable retirement plan, or

8 ‘‘(ii) if a rollover contribution was

9 made to such designated plus account from

10 a designated plus account previously estab11 lished for such individual under another

12 applicable retirement plan, the first taxable

13 year for which the individual made a des14 ignated plus contribution to such pre15 viously established account.

16 ‘‘(C) DISTRIBUTIONS OF EXCESS DEFER17 RALS AND CONTRIBUTIONS AND EARNINGS

18 THEREON.—The term ‘qualified distribution’

19 shall not include any distribution of an excess

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

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

22 income on the excess deferral or contribution.

23 ‘‘(3) TREATMENT OF DISTRIBUTIONS OF CER24 TAIN EXCESS DEFERRALS.—Notwithstanding section

25 72, if any excess deferral under section 402(g)(2) at-
31

HR 10 PCS

1 tributable to a designated plus contribution is not

2 distributed on or before the 1st April 15 following

3 the close of the taxable year in which such excess de4 ferral is made, the amount of such excess deferral

5 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

11 be applied separately with respect to distributions

12 and payments from a designated plus account and

13 other distributions and payments from the plan.

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

15 section—

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

17 term ‘applicable retirement plan’ means—

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

20 section 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).
32

HR 10 PCS

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

2 deferral’ means any elective deferral described in

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

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

5 to limitation on exclusion for elective deferrals) is

6 amended—

7 (1) by adding at the end of paragraph (1)(A)

8 (as added by section 201(d)(1)) the following new

9 sentence: ‘‘The preceding sentence shall not apply to

10 so much of such excess as does not exceed the des11 ignated plus contributions of the individual for the

12 taxable year.’’; and

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

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

15 paragraph (2)(A).

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

17 402(c)(8) is amended by adding at the end the following:

18 ‘‘If any portion of an eligible rollover distribu19 tion is attributable to payments or distributions

20 from a designated plus account (as defined in

21 section 402A), an eligible retirement plan with

22 respect to such portion shall include only an23 other designated plus account and a Roth

24 IRA.’’.

25 (d) REPORTING REQUIREMENTS.—
33

HR 10 PCS

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

2 amended by inserting ‘‘, including the amount of

3 designated plus contributions (as defined in section

4 402A)’’ before the comma at the end.

5 (2) INFORMATION.—Section 6047 is amended

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

7 by inserting after subsection (e) the following new

8 subsection:

9 ‘‘(f) DESIGNATED PLUS CONTRIBUTIONS.—The Sec10 retary shall require the plan administrator of each applica11 ble retirement plan (as defined in section 402A) to make

12 such returns and reports regarding designated plus con13 tributions (as so defined) to the Secretary, participants

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

15 the Secretary may prescribe.’’.

16 (e) CONFORMING AMENDMENTS.—

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

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

19 term includes a rollover contribution described in

20 section 402A(c)(3)(A).’’.

21 (2) The table of sections for subpart A of part

22 I of subchapter D of chapter 1 is amended by insert23 ing after the item relating to section 402 the fol24 lowing new item:

‘‘Sec. 402A. Optional treatment of elective deferrals as plus contributions.’’.
34

HR 10 PCS

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

2 this section shall apply to taxable years beginning after

3 December 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 pur11 poses of this part only (other than sections 419 and

12 419A), this subparagraph shall be applied as if the term

13 ‘trade or business’ for purposes of section 1402 included

14 service described in section 1402(c)(6).’’.

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

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

17 by adding at the end the following new sentence: ‘‘The

18 preceding sentence shall be applied as if the term ‘trade

19 or business’ for purposes of section 1402 included service

20 described in section 1402(c)(6).’’.

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

22 this section shall apply to taxable years beginning after

23 December 31, 2001.
35

HR 10 PCS

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’’

8 after ‘‘section 861(a)(3)’’.

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

10 subsection (a) shall apply to plan years beginning after

11 December 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 defini17 tions and special rules) is amended by adding at the end

18 the following new subsection:

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

20 AGE 50 OR OVER.—

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

22 plan shall not be treated as failing to meet any re23 quirement of this title solely because the plan per24 mits an eligible participant to make additional elec25 tive deferrals in any plan year.
36

HR 10 PCS

1 ‘‘(2) LIMITATION ON AMOUNT OF ADDITIONAL

2 DEFERRALS.—A plan shall not permit additional

3 elective deferrals under paragraph (1) for any year

4 in 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),

19 415, or 457, or

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

21 such limitations to other contributions or bene22 fits under such plan or any other such plan.

23 ‘‘(4) APPLICATION OF NONDISCRIMINATION

24 RULES.—
37

HR 10 PCS

1 ‘‘(A) IN GENERAL.—An applicable em2 ployer plan shall not be treated as failing to

3 meet the nondiscrimination requirements under

4 section 401(a)(4) with respect to benefits,

5 rights, and features if the plan allows all eligi6 ble participants to make the same election with

7 respect to the additional elective deferrals under

8 this subsection.

9 ‘‘(B) AGGREGATION.—For purposes of

10 subparagraph (A), all plans maintained by em11 ployers who are treated as a single employer

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

13 414 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 elec21 tive deferrals may (without regard to this sub22 section) be made to the plan for the plan year

23 by reason of the application of any limitation or

24 other restriction described in paragraph (3) or
38

HR 10 PCS

1 comparable limitation contained in the terms of

2 the 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 compensa15 tion plan under section 457 of an eligible

16 employer as defined in section

17 457(e)(1)(A), and

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

20 ‘‘(B) ELECTIVE DEFERRAL.—The term

21 ‘elective deferral’ has the meaning given such

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

23 ‘‘(C) EXCEPTION FOR SECTION 457

24 PLANS.—This subsection shall not apply to an

25 applicable employer plan described in subpara-
39

HR 10 PCS

1 graph (A)(iii) for any year to which section

2 457(b)(3) applies.

3 ‘‘(D) COST-OF-LIVING ADJUSTMENT.—In

4 the 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 in7 creases in the cost-of-living at the same time

8 and in the same manner as adjustments under

9 section 415(d); except that the base period

10 taken into account shall be the calendar quarter

11 beginning July 1, 2005, and any increase under

12 this subparagraph which is not a multiple of

13 $500 shall be rounded to the next lower mul14 tiple of $500.’’.

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

16 this section shall apply to contributions in taxable years

17 beginning after December 31, 2001.

18 SEC. 302. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF

19 EMPLOYEES TO DEFINED CONTRIBUTION

20 PLANS.

21 (a) EQUITABLE TREATMENT.—

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

23 415(c)(1) (relating to limitation for defined con24 tribution plans) is amended by striking ‘‘25 percent’’

25 and inserting ‘‘100 percent’’.
40

HR 10 PCS

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

2 403(b) is amended—

3 (A) by striking ‘‘the exclusion allowance

4 for such taxable year’’ in paragraph (1) and in5 serting ‘‘the applicable limit under section

6 415’’;

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

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

9 by a former employee after the fifth taxable

10 year following the taxable year in which such

11 employee was terminated’’ before the period at

12 the end of the second sentence of paragraph

13 (3).

14 (3) CONFORMING AMENDMENTS.—

15 (A) Subsection (f) of section 72 is amend16 ed by striking ‘‘section 403(b)(2)(D)(iii))’’ and

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

18 before the enactment of the Comprehensive Re19 tirement Security and Pension Reform Act of

20 2001)’’.

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

22 striking ‘‘, the exclusion allowance under sec23 tion 403(b)(2),’’.

24 (C) Section 404(j) is amended by adding

25 at the end the following new paragraph:
41

HR 10 PCS

1 ‘‘(3) SPECIAL RULE FOR MONEY PURCHASE

2 PLANS.—For purposes of paragraph (1)(B), in the

3 case of a defined contribution plan which is subject

4 to the funding standards of section 412, section

5 415(c)(1)(B) shall be applied by substituting ‘25

6 percent’ for ‘100 percent’.’’.

7 (D) Section 415(a)(2) is amended by strik8 ing ‘‘, and the amount of the contribution for

9 such portion shall reduce the exclusion allow10 ance as provided in section 403(b)(2)’’.

11 (E) Section 415(c)(3) is amended by add12 ing at the end the following new subparagraph:

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

14 of an annuity contract described in section

15 403(b), the term ‘participant’s compensation’

16 means the participant’s includible compensation

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

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

19 paragraph (4).

20 (G) Section 415(c)(7) is amended to read

21 as follows:

22 ‘‘(7) CERTAIN CONTRIBUTIONS BY CHURCH

23 PLANS NOT TREATED AS EXCEEDING LIMIT.—

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

25 other provision of this subsection, at the elec-
42

HR 10 PCS

1 tion of a participant who is an employee of a

2 church or a convention or association of church3 es, including an organization described in sec4 tion 414(e)(3)(B)(ii), contributions and other

5 additions for an annuity contract or retirement

6 income account described in section 403(b) with

7 respect to such participant, when expressed as

8 an annual addition to such participant’s ac9 count, shall be treated as not exceeding the lim10 itation of paragraph (1) if such annual addition

11 is not in excess of $10,000.

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

13 The total amount of additions with respect to

14 any participant which may be taken into ac15 count for purposes of this subparagraph for all

16 years may not exceed $40,000.

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

18 this paragraph, the term ‘annual addition’ has

19 the meaning given such term by paragraph

20 (2).’’.

21 (H) Subparagraph (B) of section

22 402(g)(7) (as redesignated by section 201) is

23 amended by inserting before the period at the

24 end the following: ‘‘(as in effect before the en-
43

HR 10 PCS

1 actment of the Comprehensive Retirement Se2 curity and Pension Reform Act of 2001)’’.

3 (I) Section 664(g) is amended—

4 (i) in paragraph (3)(E) by striking

5 ‘‘limitations under section 415(c)’’ and in6 serting ‘‘applicable limitation under para7 graph (7)’’, and

8 (ii) by adding at the end the following

9 new paragraph:

10 ‘‘(7) APPLICABLE LIMITATION.—

11 ‘‘(A) IN GENERAL.—For purposes of para12 graph (3)(E), the applicable limitation under

13 this paragraph with respect to a participant is

14 an amount equal to the lesser of—

15 ‘‘(i) $30,000, or

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

17 compensation (as defined in section

18 415(c)(3)).

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

20 Secretary shall adjust annually the $30,000

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

22 time and in the same manner as under section

23 415(d), except that the base period shall be the

24 calendar quarter beginning October 1, 1993,

25 and any increase under this subparagraph
44

HR 10 PCS

1 which is not a multiple of $5,000 shall be

2 rounded to the next lowest multiple of $5,000.’’.

3 (4) EFFECTIVE DATE.—The amendments made

4 by this subsection shall apply to years beginning

5 after December 31, 2001.

6 (b) SPECIAL RULES FOR SECTIONS 403(b) AND

7 408.—

8 (1) IN GENERAL.—Subsection (k) of section

9 415 is amended by adding at the end the following

10 new paragraph:

11 ‘‘(4) SPECIAL RULES FOR SECTIONS 403(B)

12 AND 408.—For purposes of this section, any annuity

13 contract described in section 403(b) for the benefit

14 of a participant shall be treated as a defined con15 tribution plan maintained by each employer with re16 spect to which the participant has the control re17 quired under subsection (b) or (c) of section 414 (as

18 modified by subsection (h)). For purposes of this

19 section, any contribution by an employer to a sim20 plified employee pension plan for an individual for a

21 taxable year shall be treated as an employer con22 tribution to a defined contribution plan for such in23 dividual for such year.’’.

24 (2) EFFECTIVE DATE.—
45

HR 10 PCS

1 (A) IN GENERAL.—The amendment made

2 by paragraph (1) shall apply to limitation years

3 beginning after December 31, 1999.

4 (B) EXCLUSION ALLOWANCE.—Effective

5 for limitation years beginning in 2000, in the

6 case of any annuity contract described in sec7 tion 403(b) of the Internal Revenue Code of

8 1986, the amount of the contribution disquali9 fied by reason of section 415(g) of such Code

10 shall reduce the exclusion allowance as provided

11 in section 403(b)(2) of such Code.

12 (3) MODIFICATION OF 403(b) EXCLUSION AL13 LOWANCE TO CONFORM TO 415 MODIFICATION.—The

14 Secretary of the Treasury shall modify the regula15 tions regarding the exclusion allowance under section

16 403(b)(2) of the Internal Revenue Code of 1986 to

17 render void the requirement that contributions to a

18 defined benefit pension plan be treated as previously

19 excluded amounts for purposes of the exclusion al20 lowance. For taxable years beginning after Decem21 ber 31, 1999, such regulations shall be applied as if

22 such requirement were void.

23 (c) DEFERRED COMPENSATION PLANS OF STATE

24 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI25 ZATIONS.—
46

HR 10 PCS

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

2 457(b)(2) (relating to salary limitation on eligible

3 deferred compensation plans) is amended by striking

‘‘331 4 ⁄3 percent’’ and inserting ‘‘100 percent’’.

5 (2) EFFECTIVE DATE.—The amendment made

6 by this subsection shall apply to years beginning

7 after December 31, 2001.

8 SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER

9 MATCHING CONTRIBUTIONS.

10 (a) AMENDMENT OF INTERNAL REVENUE CODE.—

11 Section 411(a) (relating to minimum vesting standards)

12 is amended—

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

14 subparagraph (A), by striking ‘‘A plan’’ and insert15 ing ‘‘Except as provided in paragraph (12), a plan’’;

16 and

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

18 ‘‘(12) FASTER VESTING FOR MATCHING CON19 TRIBUTIONS.—In the case of matching contributions

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

21 shall be applied—

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

23 in subparagraph (A), and

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

25 the table contained in subparagraph (B):
47

HR 10 PCS

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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), in the matter preceding

5 subparagraph (A), by striking ‘‘A plan’’ and insert6 ing ‘‘Except as provided in paragraph (4), a plan’’,

7 and

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

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

10 defined in section 401(m)(4)(A) of the Internal Rev11 enue Code of 1986), paragraph (2) shall be

12 applied—

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

14 in subparagraph (A), and

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

16 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

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

17 (c) EFFECTIVE DATES.—
48

HR 10 PCS

1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendments made by this section

3 shall apply to contributions for plan years beginning

4 after December 31, 2001.

5 (2) COLLECTIVE BARGAINING AGREEMENTS.—

6 In the case of a plan maintained pursuant to one or

7 more collective bargaining agreements between em8 ployee representatives and one or more employers

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

10 amendments made by this section shall not apply to

11 contributions on behalf of employees covered by any

12 such agreement for plan years beginning before the

13 earlier of—

14 (A) the later of—

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

16 collective bargaining agreements termi17 nates (determined without regard to any

18 extension thereof on or after such date of

19 the enactment); or

20 (ii) January 1, 2002; or

21 (B) January 1, 2006.

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

23 plan, the amendments made by this section shall not

24 apply to any employee before the date that such em25 ployee has 1 hour of service under such plan in any
49

HR 10 PCS

1 plan year to which the amendments made by this

2 section apply.

3 SEC. 304. MODIFICATIONS TO MINIMUM DISTRIBUTION

4 RULES.

5 (a) LIFE EXPECTANCY TABLES.—The Secretary of

6 the Treasury shall modify the life expectancy tables under

7 the regulations relating to minimum distribution require8 ments under sections 401(a)(9), 408(a)(6) and (b)(3),

9 403(b)(10), and 457(d)(2) of the Internal Revenue Code

10 to reflect current life expectancy.

11 (b) REPEAL OF RULE WHERE DISTRIBUTIONS HAD

12 BEGUN BEFORE DEATH OCCURS.—

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

14 401(a)(9) is amended by striking clause (i) and re15 designating clauses (ii), (iii), and (iv) as clauses (i),

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

17 (2) CONFORMING CHANGES.—

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

19 so redesignated) is amended—

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

21 the heading; and

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

23 employee’s interest has begun in accord24 ance with subparagraph (A)(ii)’’ and in-
50

HR 10 PCS

1 serting ‘‘his entire interest has been dis2 tributed to him’’.

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

4 so redesignated) is amended by striking ‘‘clause

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

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

7 so redesignated) is amended—

8 (i) by striking ‘‘clause (iii)(I)’’ and in9 serting ‘‘clause (ii)(I)’’;

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

11 subclause (I) and inserting ‘‘clause

12 (ii)(III)’’;

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

14 the employee would have attained age

701 15 ⁄2,’’ in subclause (I) and inserting

16 ‘‘April 1 of the calendar year following the

17 calendar year in which the spouse attains

701 18 ⁄2,’’; and

19 (iv) by striking ‘‘the distributions to

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

21 inserting ‘‘his entire interest has been dis22 tributed to him,’’.

23 (3) EFFECTIVE DATE.—

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

25 subparagraph (B), the amendments made by
51

HR 10 PCS

1 this subsection shall apply to years beginning

2 after December 31, 2001.

3 (B) DISTRIBUTIONS TO SURVIVING

4 SPOUSE.—

5 (i) IN GENERAL.—In the case of an

6 employee described in clause (ii), distribu7 tions to the surviving spouse of the em8 ployee shall not be required to commence

9 prior to the date on which such distribu10 tions would have been required to begin

11 under section 401(a)(9)(B) of the Internal

12 Revenue Code of 1986 (as in effect on the

13 day before the date of the enactment of

14 this Act).

15 (ii) CERTAIN EMPLOYEES.—An em16 ployee is described in this clause if such

17 employee dies before—

18 (I) the date of the enactment of

19 this Act, and

20 (II) the required beginning date

21 (within the meaning of section

22 401(a)(9)(C) of the Internal Revenue

23 Code of 1986) of the employee.

24 (c) REDUCTION IN EXCISE TAX.—
52

HR 10 PCS

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

2 4974 is amended by striking ‘‘50 percent’’ and in3 serting ‘‘10 percent’’.

4 (2) EFFECTIVE DATE.—The amendment made

5 by this subsection shall apply to years beginning

6 after December 31, 2001.

7 SEC. 305. CLARIFICATION OF TAX TREATMENT OF DIVISION

8 OF SECTION 457 PLAN BENEFITS UPON DI9 VORCE.

10 (a) IN GENERAL.—Section 414(p)(11) (relating to

11 application of rules to governmental and church plans) is

12 amended—

13 (1) by inserting ‘‘or an eligible deferred com14 pensation plan (within the meaning of section

15 457(b))’’ after ‘‘subsection (e))’’; and

16 (2) in the heading, by striking ‘‘GOVERN17 MENTAL AND CHURCH PLANS’’ and inserting ‘‘CER18 TAIN OTHER PLANS’’.

19 (b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE20 MENTS.—Paragraph (10) of section 414(p) is amended by

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

22 409(d), and section 457(d)’’.

23 (c) TAX TREATMENT OF PAYMENTS FROM A SEC24 TION 457 PLAN.—Subsection (p) of section 414 is amend25 ed by redesignating paragraph (12) as paragraph (13) and
53

HR 10 PCS

1 inserting after paragraph (11) the following new para2 graph:

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

4 SECTION 457 PLAN.—If a distribution or payment

5 from an eligible deferred compensation plan de6 scribed in section 457(b) is made pursuant to a

7 qualified domestic relations order, rules similar to

8 the rules of section 402(e)(1)(A) shall apply to such

9 distribution or payment.’’.

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

11 this section shall apply to transfers, distributions, and

12 payments made after December 31, 2001.

13 SEC. 306. PROVISIONS RELATING TO HARDSHIP DISTRIBU14 TIONS.

15 (a) SAFE HARBOR RELIEF.—

16 (1) IN GENERAL.—The Secretary of the Treas17 ury shall revise the regulations relating to hardship

18 distributions under section 401(k)(2)(B)(i)(IV) of

19 the Internal Revenue Code of 1986 to provide that

20 the period an employee is prohibited from making

21 elective and employee contributions in order for a

22 distribution to be deemed necessary to satisfy finan23 cial need shall be equal to 6 months.
54

HR 10 PCS

1 (2) EFFECTIVE DATE.—The revised regulations

2 under this subsection shall apply to years beginning

3 after December 31, 2001.

4 (b) HARDSHIP DISTRIBUTIONS NOT TREATED AS

5 ELIGIBLE ROLLOVER DISTRIBUTIONS.—

6 (1) MODIFICATION OF DEFINITION OF ELIGI7 BLE ROLLOVER.—Subparagraph (C) of section

8 402(c)(4) (relating to eligible rollover distribution) is

9 amended to read as follows:

10 ‘‘(C) any distribution which is made upon

11 hardship of the employee.’’.

12 (2) EFFECTIVE DATE.—The amendment made

13 by this subsection shall apply to distributions made

14 after December 31, 2001.

15 SEC. 307. WAIVER OF TAX ON NONDEDUCTIBLE CONTRIBU16 TIONS FOR DOMESTIC OR SIMILAR WORKERS.

17 (a) IN GENERAL.—Section 4972(c)(6) (relating to

18 exceptions to nondeductible contributions), as amended by

19 section 502, is amended by striking ‘‘or’’ at the end of

20 subparagraph (A), by striking the period and inserting ‘‘,

21 and’’ at the end of subparagraph (B), and by inserting

22 after subparagraph (B) the following new subparagraph:

23 ‘‘(C) so much of the contributions to a

24 simple retirement account (within the meaning

25 of section 408(p)) or a simple plan (within the
55

HR 10 PCS

1 meaning of section 401(k)(11)) which are not

2 deductible when contributed solely because such

3 contributions are not made in connection with

4 a trade or business of the employer.’’.

5 (b) EXCLUSION OF CERTAIN CONTRIBUTIONS.—Sec6 tion 4972(c)(6) is amended by adding at the end the fol7 lowing new sentence: ‘‘Subparagraph (C) shall not apply

8 to contributions made on behalf of the employer or a mem9 ber of the employer’s family (as defined in section

10 447(e)(1)).’’.

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

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

13 treatment of nondeductible contributions under the laws

14 in effect before such amendments.

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

16 this section shall apply to taxable years beginning after

17 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 PLANS.—
56

HR 10 PCS

1 (A) IN GENERAL.—Section 457(e) (relat2 ing to other definitions and special rules) is

3 amended by adding at the end the following:

4 ‘‘(16) ROLLOVER AMOUNTS.—

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

6 eligible deferred compensation plan established

7 and maintained by an employer described in

8 subsection (e)(1)(A), if—

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

10 credit of an employee in such plan is paid

11 to such employee in an eligible rollover dis12 tribution (within the meaning of section

13 402(c)(4) without regard to subparagraph

14 (C) thereof),

15 ‘‘(ii) the employee transfers any por16 tion of the property such employee receives

17 in such distribution to an eligible retire18 ment plan described in section

19 402(c)(8)(B), and

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

21 property other than money, the amount so

22 transferred consists of the property distrib23 uted,
57

HR 10 PCS

1 then such distribution (to the extent so trans2 ferred) shall not be includible in gross income

3 for the taxable year in which paid.

4 ‘‘(B) CERTAIN RULES MADE APPLICA5 BLE.—The rules of paragraphs (2) through (7)

6 (other than paragraph (4)(C)) and (9) of sec7 tion 402(c) and section 402(f) shall apply for

8 purposes of subparagraph (A).

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

10 paragraph shall be reported to the Secretary in

11 the same manner as rollovers from qualified re12 tirement plans (as defined in section

13 4974(c)).’’.

14 (B) DEFERRAL LIMIT DETERMINED WITH15 OUT REGARD TO ROLLOVER AMOUNTS.—Section

16 457(b)(2) (defining eligible deferred compensa17 tion plan) is amended by inserting ‘‘(other than

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

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

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

21 the end of subparagraph (A), by striking the

22 period at the end of subparagraph (B) and in23 serting ‘‘, and’’, and by inserting after subpara24 graph (B) the following:
58

HR 10 PCS

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

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

3 the plan meets requirements similar to the re4 quirements of section 401(a)(31).

5 Any amount transferred in a direct trustee-to-trust6 ee transfer in accordance with section 401(a)(31)

7 shall not be includible in gross income for the tax8 able year of transfer.’’.

9 (D) WITHHOLDING.—

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

11 is amended by adding at the end the fol12 lowing:

13 ‘‘(E) under or to an eligible deferred com14 pensation plan which, at the time of such pay15 ment, is a plan described in section 457(b)

16 maintained by an employer described in section

17 457(e)(1)(A); or’’.

18 (ii) Paragraph (3) of section 3405(c)

19 is amended to read as follows:

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

21 purposes of this subsection, the term ‘eligible roll22 over distribution’ has the meaning given such term

23 by section 402(f)(2)(A).’’.

24 (iii) LIABILITY FOR WITHHOLDING.—

25 Subparagraph (B) of section 3405(d)(2) is
59

HR 10 PCS

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

2 clause (ii), by striking the period at the

3 end of clause (iii) and inserting ‘‘, or’’, and

4 by adding at the end the following:

5 ‘‘(iv) section 457(b) and which is

6 maintained by an eligible employer de7 scribed in section 457(e)(1)(A).’’.

8 (2) ROLLOVERS TO SECTION 457 PLANS.—

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

10 (defining eligible retirement plan) is amended

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

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

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

14 (iv) the following new clause:

15 ‘‘(v) an eligible deferred compensation

16 plan described in section 457(b) which is

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

19 (B) SEPARATE ACCOUNTING.—Section

20 402(c) is amended by adding at the end the fol21 lowing new paragraph:

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

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

24 separately account for amounts rolled into such plan

25 from eligible retirement plans not described in such
60

HR 10 PCS

1 clause, the plan described in such clause may not ac2 cept transfers or rollovers from such retirement

3 plans.’’.

4 (C) 10 PERCENT ADDITIONAL TAX.—Sub5 section (t) of section 72 (relating to 10-percent

6 additional tax on early distributions from quali7 fied retirement plans) is amended by adding at

8 the end the following new paragraph:

9 ‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SEC10 TION 457 PLANS.—For purposes of this subsection,

11 a distribution from an eligible deferred compensation

12 plan (as defined in section 457(b)) of an eligible em13 ployer described in section 457(e)(1)(A) shall be

14 treated as a distribution from a qualified retirement

15 plan described in section 4974(c)(1) to the extent

16 that such distribution is attributable to an amount

17 transferred to an eligible deferred compensation plan

18 from a qualified retirement plan (as defined in sec19 tion 4974(c)).’’.

20 (b) ALLOWANCE OF ROLLOVERS FROM AND TO

21 403(b) PLANS.—

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

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

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

25 and all that follows and inserting ‘‘such distribution
61

HR 10 PCS

1 to an eligible retirement plan described in section

2 402(c)(8)(B), and’’.

3 (2) ROLLOVERS TO SECTION 403(b) PLANS.—

4 Section 402(c)(8)(B) (defining eligible retirement

5 plan), as amended by subsection (a), is amended by

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

7 the period at the end of clause (v) and inserting ‘‘,

8 and’’, and by inserting after clause (v) the following

9 new clause:

10 ‘‘(vi) an annuity contract described in

11 section 403(b).’’.

12 (c) EXPANDED EXPLANATION TO RECIPIENTS OF

13 ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section

14 402(f) (relating to written explanation to recipients of dis15 tributions eligible for rollover treatment) is amended by

16 striking ‘‘and’’ at the end of subparagraph (C), by striking

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

18 ‘‘, and’’, and by adding at the end the following new sub19 paragraph:

20 ‘‘(E) of the provisions under which dis21 tributions from the eligible retirement plan re22 ceiving the distribution may be subject to re23 strictions and tax consequences which are dif24 ferent from those applicable to distributions

25 from the plan making such distribution.’’.
62

HR 10 PCS

1 (d) SPOUSAL ROLLOVERS.—Section 402(c)(9) (relat2 ing to rollover where spouse receives distribution after

3 death of employee) is amended by striking ‘‘; except that’’

4 and all that follows up to the end period.

5 (e) CONFORMING AMENDMENTS.—

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

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

8 408(d)(3), and 457(e)(16)’’.

9 (2) Section 219(d)(2) is amended by striking

10 ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or

11 457(e)(16)’’.

12 (3) Section 401(a)(31)(B) is amended by strik13 ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),

14 403(b)(8), and 457(e)(16)’’.

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

16 amended by striking ‘‘or paragraph (4) of section

17 403(a)’’ and inserting ‘‘, paragraph (4) of section

18 403(a), subparagraph (A) of section 403(b)(8), or

19 subparagraph (A) of section 457(e)(16)’’.

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

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

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

23 402(f)(1) are amended by striking ‘‘another eligible

24 retirement plan’’ and inserting ‘‘an eligible retire25 ment plan’’.
63

HR 10 PCS

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

2 amended to read as follows:

3 ‘‘(B) CERTAIN RULES MADE APPLICA4 BLE.—The rules of paragraphs (2) through (7)

5 and (9) of section 402(c) and section 402(f)

6 shall apply for purposes of subparagraph (A),

7 except that section 402(f) shall be applied to

8 the payor in lieu of the plan administrator.’’.

9 (8) Section 408(a)(1) is amended by striking

10 ‘‘or 403(b)(8),’’ and inserting ‘‘403(b)(8), or

11 457(e)(16)’’.

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

13 415(b)(2) are each amended by striking ‘‘and

14 408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and

15 457(e)(16)’’.

16 (10) Section 415(c)(2) is amended by striking

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

18 457(e)(16)’’.

19 (11) Section 4973(b)(1)(A) is amended by

20 striking ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or

21 457(e)(16)’’.

22 (f) EFFECTIVE DATE; SPECIAL RULE.—

23 (1) EFFECTIVE DATE.—The amendments made

24 by this section shall apply to distributions after De25 cember 31, 2001.
64

HR 10 PCS

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

2 imposed on a plan for the failure to provide the in3 formation required by the amendment made by sub4 section (c) with respect to any distribution made be5 fore the date that is 90 days after the date on which

6 the Secretary of the Treasury issues a safe harbor

7 rollover notice after the date of the enactment of

8 this Act, if the administrator of such plan makes a

9 reasonable attempt to comply with such requirement.

10 (3) SPECIAL RULE.—Notwithstanding any other

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

12 section 1122 of the Tax Reform Act of 1986 shall

13 not apply to any distribution from an eligible retire14 ment plan (as defined in clause (iii) or (iv) of section

15 402(c)(8)(B) of the Internal Revenue Code of 1986)

16 on behalf of an individual if there was a rollover to

17 such plan on behalf of such individual which is per18 mitted solely by reason of any amendment made by

19 this section.

20 SEC. 402. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE21 MENT PLANS.

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

23 408(d)(3) (relating to rollover amounts) is amended by

24 adding ‘‘or’’ at the end of clause (i), by striking clauses

25 (ii) and (iii), and by adding at the end the following:
65

HR 10 PCS

1 ‘‘(ii) the entire amount received (in2 cluding money and any other property) is

3 paid into an eligible retirement plan for

4 the benefit of such individual not later

5 than the 60th day after the date on which

6 the payment or distribution is received, ex7 cept that the maximum amount which may

8 be paid into such plan may not exceed the

9 portion of the amount received which is in10 cludible in gross income (determined with11 out regard to this paragraph).

12 For purposes of clause (ii), the term ‘eligible re13 tirement plan’ means an eligible retirement plan

14 described in clause (iii), (iv), (v), or (vi) of sec15 tion 402(c)(8)(B).’’.

16 (b) CONFORMING AMENDMENTS.—

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

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

19 ‘‘section 408(d)(3)(A)(ii)’’.

20 (2) Clause (i) of section 408(d)(3)(D) is amend21 ed by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i)

22 or (ii)’’.

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

24 amended to read as follows:
66

HR 10 PCS

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

2 the case of any payment or distribution out of

3 a simple retirement account (as defined in sub4 section (p)) to which section 72(t)(6) applies,

5 this paragraph shall not apply unless such pay6 ment or distribution is paid into another simple

7 retirement account.’’.

8 (c) EFFECTIVE DATE; SPECIAL RULE.—

9 (1) EFFECTIVE DATE.—The amendments made

10 by this section shall apply to distributions after De11 cember 31, 2001.

12 (2) SPECIAL RULE.—Notwithstanding any other

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

14 section 1122 of the Tax Reform Act of 1986 shall

15 not apply to any distribution from an eligible retire16 ment plan (as defined in clause (iii) or (iv) of section

17 402(c)(8)(B) of the Internal Revenue Code of 1986)

18 on behalf of an individual if there was a rollover to

19 such plan on behalf of such individual which is per20 mitted solely by reason of the amendments made by

21 this section.

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

23 (a) ROLLOVERS FROM EXEMPT TRUSTS.—Para24 graph (2) of section 402(c) (relating to maximum amount

25 which may be rolled over) is amended by adding at the
67

HR 10 PCS

1 end the following: ‘‘The preceding sentence shall not apply

2 to such distribution to the extent—

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

4 trustee-to-trustee transfer to a qualified trust

5 which is part of a plan which is a defined con6 tribution plan and which agrees to separately

7 account for amounts so transferred, including

8 separately accounting for the portion of such

9 distribution which is includible in gross income

10 and the portion of such distribution which is

11 not so includible, or

12 ‘‘(B) such portion is transferred to an eli13 gible retirement plan described in clause (i) or

14 (ii) of paragraph (8)(B).’’.

15 (b) OPTIONAL DIRECT TRANSFER OF ELIGIBLE

16 ROLLOVER DISTRIBUTIONS.—Subparagraph (B) of sec17 tion 401(a)(31) (relating to limitation) is amended by add18 ing at the end the following:

19 ‘‘The preceding sentence shall not apply to such

20 distribution if the plan to which such distribu21 tion is transferred—

22 ‘‘(i) agrees to separately account for

23 amounts so transferred, including sepa24 rately accounting for the portion of such

25 distribution which is includible in gross in-
68

HR 10 PCS

1 come and the portion of such distribution

2 which is not so includible, or

3 ‘‘(ii) is an eligible retirement plan de4 scribed in clause (i) or (ii) of section

5 402(c)(8)(B).’’.

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

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

8 for applying section 72) is amended by inserting at the

9 end the following:

10 ‘‘(H) APPLICATION OF SECTION 72.—

11 ‘‘(i) IN GENERAL.—If—

12 ‘‘(I) a distribution is made from

13 an individual retirement plan, and

14 ‘‘(II) a rollover contribution is

15 made to an eligible retirement plan

16 described in section 402(c)(8)(B)(iii),

17 (iv), (v), or (vi) with respect to all or

18 part of such distribution,

19 then, notwithstanding paragraph (2), the

20 rules of clause (ii) shall apply for purposes

21 of applying section 72.

22 ‘‘(ii) APPLICABLE RULES.—In the

23 case of a distribution described in clause

24 (i)—
69

HR 10 PCS

1 ‘‘(I) section 72 shall be applied

2 separately to such distribution,

3 ‘‘(II) notwithstanding the pro

4 rata allocation of income on, and in5 vestment in, the contract to distribu6 tions under section 72, the portion of

7 such distribution rolled over to an eli8 gible retirement plan described in

9 clause (i) shall be treated as from in10 come on the contract (to the extent of

11 the aggregate income on the contract

12 from all individual retirement plans of

13 the distributee), and

14 ‘‘(III) appropriate adjustments

15 shall be made in applying section 72

16 to other distributions in such taxable

17 year and subsequent taxable years.’’.

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

19 this section shall apply to distributions after December 31,

20 2001.

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

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

23 402(c) (relating to transfer must be made within 60 days

24 of receipt) is amended to read as follows:
70

HR 10 PCS

1 ‘‘(3) TRANSFER MUST BE MADE WITHIN 60

2 DAYS OF RECEIPT.—

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

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

5 apply to any transfer of a distribution made

6 after the 60th day following the day on which

7 the distributee received the property distrib8 uted.

9 ‘‘(B) HARDSHIP EXCEPTION.—The Sec10 retary may waive the 60-day requirement under

11 subparagraph (A) where the failure to waive

12 such requirement would be against equity or

13 good conscience, including casualty, disaster, or

14 other events beyond the reasonable control of

15 the individual subject to such requirement.’’.

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

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

18 amended by adding after subparagraph (H) the following

19 new subparagraph:

20 ‘‘(I) WAIVER OF 60-DAY REQUIREMENT.—

21 The Secretary may waive the 60-day require22 ment under subparagraphs (A) and (D) where

23 the failure to waive such requirement would be

24 against equity or good conscience, including

25 casualty, disaster, or other events beyond the
71

HR 10 PCS

1 reasonable control of the individual subject to

2 such requirement.’’.

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

4 this section shall apply to distributions after December 31,

5 2001.

6 SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.

7 (a) PLAN TRANSFERS.—

8 (1) AMENDMENT OF INTERNAL REVENUE

9 CODE.—Paragraph (6) of section 411(d) (relating to

10 accrued benefit not to be decreased by amendment)

11 is amended by adding at the end the following:

12 ‘‘(D) PLAN TRANSFERS.—

13 ‘‘(i) IN GENERAL.—A defined con14 tribution plan (in this subparagraph re15 ferred to as the ‘transferee plan’) shall not

16 be treated as failing to meet the require17 ments of this subsection merely because

18 the transferee plan does not provide some

19 or all of the forms of distribution pre20 viously available under another defined

21 contribution plan (in this subparagraph re22 ferred to as the ‘transferor plan’) to the

23 extent that—

24 ‘‘(I) the forms of distribution

25 previously available under the trans-
72

HR 10 PCS

1 feror plan applied to the account of a

2 participant or beneficiary under the

3 transferor plan that was transferred

4 from the transferor plan to the trans5 feree plan pursuant to a direct trans6 fer rather than pursuant to a distribu7 tion from the transferor plan,

8 ‘‘(II) the terms of both the trans9 feror plan and the transferee plan au10 thorize the transfer described in sub11 clause (I),

12 ‘‘(III) the transfer described in

13 subclause (I) was made pursuant to a

14 voluntary election by the participant

15 or beneficiary whose account was

16 transferred to the transferee plan,

17 ‘‘(IV) the election described in

18 subclause (III) was made after the

19 participant or beneficiary received a

20 notice describing the consequences of

21 making the election, and

22 ‘‘(V) the transferee plan allows

23 the participant or beneficiary de24 scribed in subclause (III) to receive

25 any distribution to which the partici-
73

HR 10 PCS

1 pant or beneficiary is entitled under

2 the transferee plan in the form of a

3 single sum distribution.

4 ‘‘(ii) EXCEPTION.—Clause (i) shall

5 apply to plan mergers and other trans6 actions having the effect of a direct trans7 fer, including consolidations of benefits at8 tributable to different employers within a

9 multiple employer plan.

10 ‘‘(E) ELIMINATION OF FORM OF DISTRIBU11 TION.—Except to the extent provided in regula12 tions, a defined contribution plan shall not be

13 treated as failing to meet the requirements of

14 this section merely because of the elimination of

15 a form of distribution previously available there16 under. This subparagraph shall not apply to the

17 elimination of a form of distribution with re18 spect to any participant unless—

19 ‘‘(i) a single sum payment is available

20 to such participant at the same time or

21 times as the form of distribution being

22 eliminated, and

23 ‘‘(ii) such single sum payment is

24 based on the same or greater portion of
74

HR 10 PCS

1 the participant’s account as the form of

2 distribution being eliminated.’’.

3 (2) AMENDMENT OF ERISA.—Section 204(g) of

4 the Employee Retirement Income Security Act of

5 1974 (29 U.S.C. 1054(g)) is amended by adding at

6 the end the following:

7 ‘‘(4)(A) A defined contribution plan (in this subpara8 graph referred to as the ‘transferee plan’) shall not be

9 treated as failing to meet the requirements of this sub10 section merely because the transferee plan does not pro11 vide some or all of the forms of distribution previously

12 available under another defined contribution plan (in this

13 subparagraph referred to as the ‘transferor plan’) to the

14 extent that—

15 ‘‘(i) the forms of distribution previously avail16 able under the transferor plan applied to the account

17 of a participant or beneficiary under the transferor

18 plan that was transferred from the transferor plan

19 to the transferee plan pursuant to a direct transfer

20 rather than pursuant to a distribution from the

21 transferor plan;

22 ‘‘(ii) the terms of both the transferor plan and

23 the transferee plan authorize the transfer described

24 in clause (i);
75

HR 10 PCS

1 ‘‘(iii) the transfer described in clause (i) was

2 made pursuant to a voluntary election by the partici3 pant or beneficiary whose account was transferred to

4 the transferee plan;

5 ‘‘(iv) the election described in clause (iii) was

6 made after the participant or beneficiary received a

7 notice describing the consequences of making the

8 election; and

9 ‘‘(v) the transferee plan allows the participant

10 or beneficiary described in clause (iii) to receive any

11 distribution to which the participant or beneficiary is

12 entitled under the transferee plan in the form of a

13 single sum distribution.

14 ‘‘(B) Subparagraph (A) shall apply to plan mergers

15 and other transactions having the effect of a direct trans16 fer, including consolidations of benefits attributable to dif17 ferent employers within a multiple employer plan.

18 ‘‘(5) Except to the extent provided in regulations pro19 mulgated by the Secretary of the Treasury, a defined con20 tribution plan shall not be treated as failing to meet the

21 requirements of this subsection merely because of the

22 elimination of a form of distribution previously available

23 thereunder. This paragraph shall not apply to the elimi24 nation of a form of distribution with respect to any partici25 pant unless—
76

HR 10 PCS

1 ‘‘(A) a single sum payment is available to such

2 participant at the same time or times as the form

3 of distribution being eliminated; and

4 ‘‘(B) such single sum payment is based on the

5 same or greater portion of the participant’s account

6 as the form of distribution being eliminated.’’.

7 (3) EFFECTIVE DATE.—The amendments made

8 by this subsection shall apply to years beginning

9 after December 31, 2001.

10 (b) REGULATIONS.—

11 (1) AMENDMENT OF INTERNAL REVENUE

12 CODE.—Paragraph (6)(B) of section 411(d) (relat13 ing to accrued benefit not to be decreased by amend14 ment) is amended by inserting after the second sen15 tence the following new sentence: ‘‘The Secretary

16 shall by regulations provide that this subparagraph

17 shall not apply to any plan amendment which re18 duces or eliminates benefits or subsidies which cre19 ate significant burdens or complexities for the plan

20 and plan participants and does not adversely affect

21 the rights of any participant in a more than de mini22 mis manner.’’.

23 (2) AMENDMENT OF ERISA.—Section 204(g)(2)

24 of the Employee Retirement Income Security Act of

25 1974 (29 U.S.C. 1054(g)(2)) is amended by insert-
77

HR 10 PCS

1 ing before the last sentence the following new sen2 tence: ‘‘The Secretary of the Treasury shall by regu3 lations provide that this paragraph shall not apply

4 to any plan amendment which reduces or eliminates

5 benefits or subsidies which create significant bur6 dens or complexities for the plan and plan partici7 pants and does not adversely affect the rights of any

8 participant in a more than de minimis manner.’’.

9 (3) SECRETARY DIRECTED.—Not later than

10 December 31, 2003, the Secretary of the Treasury

11 is directed to issue regulations under section

12 411(d)(6) of the Internal Revenue Code of 1986 and

13 section 204(g) of the Employee Retirement Income

14 Security Act of 1974, including the regulations re15 quired by the amendment made by this subsection.

16 Such regulations shall apply to plan years beginning

17 after December 31, 2003, or such earlier date as is

18 specified by the Secretary of the Treasury.

19 SEC. 406. RATIONALIZATION OF RESTRICTIONS ON DIS20 TRIBUTIONS.

21 (a) MODIFICATION OF SAME DESK EXCEPTION.—

22 (1) SECTION 401(k).—

23 (A) Section 401(k)(2)(B)(i)(I) (relating to

24 qualified cash or deferred arrangements) is
78

HR 10 PCS

1 amended by striking ‘‘separation from service’’

2 and inserting ‘‘severance from employment’’.

3 (B) Subparagraph (A) of section

4 401(k)(10) (relating to distributions upon ter5 mination of plan or disposition of assets or sub6 sidiary) is amended to read as follows:

7 ‘‘(A) IN GENERAL.—An event described in

8 this subparagraph is the termination of the

9 plan without establishment or maintenance of

10 another defined contribution plan (other than

11 an employee stock ownership plan as defined in

12 section 4975(e)(7)).’’.

13 (C) Section 401(k)(10) is amended—

14 (i) in subparagraph (B)—

15 (I) by striking ‘‘An event’’ in

16 clause (i) and inserting ‘‘A termi17 nation’’; and

18 (II) by striking ‘‘the event’’ in

19 clause (i) and inserting ‘‘the termi20 nation’’;

21 (ii) by striking subparagraph (C); and

22 (iii) by striking ‘‘OR DISPOSITION OF

23 ASSETS OR SUBSIDIARY’’ in the heading.

24 (2) SECTION 403(b).—
79

HR 10 PCS

1 (A) Paragraphs (7)(A)(ii) and (11)(A) of

2 section 403(b) are each amended by striking

3 ‘‘separates from service’’ and inserting ‘‘has a

4 severance from employment’’.

5 (B) The heading for paragraph (11) of

6 section 403(b) is amended by striking ‘‘SEPARA7 TION FROM SERVICE’’ and inserting ‘‘SEVER8 ANCE FROM EMPLOYMENT’’.

9 (3) SECTION 457.—Clause (ii) of section

10 457(d)(1)(A) is amended by striking ‘‘is separated

11 from service’’ and inserting ‘‘has a severance from

12 employment’’.

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

14 this section shall apply to distributions after December 31,

15 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 para20 graph:

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

22 PURCHASE PERMISSIVE SERVICE CREDIT.—No

23 amount shall be includible in gross income by reason

24 of a direct trustee-to-trustee transfer to a defined
80

HR 10 PCS

1 benefit governmental plan (as defined in section

2 414(d)) if such transfer is—

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

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

5 under such plan, or

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

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

8 thereof.’’.

9 (b) 457 PLANS.—Subsection (e) of section 457 is

10 amended by adding after paragraph (16) the following

11 new paragraph:

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

13 PURCHASE PERMISSIVE SERVICE CREDIT.—No

14 amount shall be includible in gross income by reason

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

16 benefit governmental plan (as defined in section

17 414(d)) if such transfer is—

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

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

20 under such plan, or

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

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

23 thereof.’’.
81

HR 10 PCS

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

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

3 December 31, 2001.

4 SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR

5 PURPOSES OF CASH-OUT AMOUNTS.

6 (a) QUALIFIED PLANS.—

7 (1) AMENDMENT OF INTERNAL REVENUE

8 CODE.—Section 411(a)(11) (relating to restrictions

9 on certain mandatory distributions) is amended by

10 adding at the end the following:

11 ‘‘(D) SPECIAL RULE FOR ROLLOVER CON12 TRIBUTIONS.—A plan shall not fail to meet the

13 requirements of this paragraph if, under the

14 terms of the plan, the present value of the non15 forfeitable accrued benefit is determined with16 out regard to that portion of such benefit which

17 is attributable to rollover contributions (and

18 earnings allocable thereto). For purposes of this

19 subparagraph, the term ‘rollover contributions’

20 means any rollover contribution under sections

21 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),

22 and 457(e)(16).’’.

23 (2) AMENDMENT OF ERISA.—Section 203(e) of

24 the Employee Retirement Income Security Act of
82

HR 10 PCS

1 1974 (29 U.S.C. 1053(c)) is amended by adding at

2 the end the following:

3 ‘‘(4) A plan shall not fail to meet the requirements

4 of this subsection if, under the terms of the plan, the

5 present value of the nonforfeitable accrued benefit is de6 termined without regard to that portion of such benefit

7 which is attributable to rollover contributions (and earn8 ings allocable thereto). For purposes of this subparagraph,

9 the term ‘rollover contributions’ means any rollover con10 tribution under sections 402(c), 403(a)(4), 403(b)(8),

11 408(d)(3)(A)(ii), and 457(e)(16) of the Internal Revenue

12 Code of 1986.’’.

13 (b) ELIGIBLE DEFERRED COMPENSATION PLANS.—

14 Clause (i) of section 457(e)(9)(A) is amended by striking

15 ‘‘such amount’’ and inserting ‘‘the portion of such amount

16 which is not attributable to rollover contributions (as de17 fined in section 411(a)(11)(D))’’.

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

19 this section shall apply to distributions after December 31,

20 2001.

21 SEC. 409. MINIMUM DISTRIBUTION AND INCLUSION RE22 QUIREMENTS FOR SECTION 457 PLANS.

23 (a) MINIMUM DISTRIBUTION REQUIREMENTS.—

24 Paragraph (2) of section 457(d) (relating to distribution

25 requirements) is amended to read as follows:
83

HR 10 PCS

1 ‘‘(2) MINIMUM DISTRIBUTION REQUIRE2 MENTS.—A plan meets the minimum distribution re3 quirements of this paragraph if such plan meets the

4 requirements of section 401(a)(9).’’.

5 (b) INCLUSION IN GROSS INCOME.—

6 (1) YEAR OF INCLUSION.—Subsection (a) of

7 section 457 (relating to year of inclusion in gross in8 come) is amended to read as follows:

9 ‘‘(a) YEAR OF INCLUSION IN GROSS INCOME.—

10 ‘‘(1) IN GENERAL.—Any amount of compensa11 tion deferred under an eligible deferred compensa12 tion plan, and any income attributable to the

13 amounts so deferred, shall be includible in gross in14 come only for the taxable year in which such com15 pensation or other income—

16 ‘‘(A) is paid to the participant or other

17 beneficiary, in the case of a plan of an eligible

18 employer described in subsection (e)(1)(A), and

19 ‘‘(B) is paid or otherwise made available to

20 the participant or other beneficiary, in the case

21 of a plan of an eligible employer described in

22 subsection (e)(1)(B).

23 ‘‘(2) SPECIAL RULE FOR ROLLOVER

24 AMOUNTS.—To the extent provided in section
84

HR 10 PCS

1 72(t)(9), section 72(t) shall apply to any amount in2 cludible in gross income under this subsection.’’.

3 (2) CONFORMING AMENDMENTS.—

4 (A) So much of paragraph (9) of section

5 457(e) as precedes subparagraph (A) is amend6 ed to read as follows:

7 ‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION

8 PLANS NOT TREATED AS MADE AVAILABLE BY REA9 SON OF CERTAIN ELECTIONS, ETC.—In the case of

10 an eligible deferred compensation plan of an em11 ployer described in subsection (e)(1)(B)—’’.

12 (B) Section 457(d) is amended by adding

13 at the end the following new paragraph:

14 ‘‘(3) SPECIAL RULE FOR GOVERNMENT PLAN.—

15 An eligible deferred compensation plan of an em16 ployer described in subsection (e)(1)(A) shall not be

17 treated as failing to meet the requirements of this

18 subsection solely by reason of making a distribution

19 described in subsection (e)(9)(A).’’.

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

21 this section shall apply to distributions after December 31,

22 2001.
85

HR 10 PCS

1 TITLE V—STRENGTHENING PEN2 SION SECURITY AND EN3 FORCEMENT

4 SEC. 501. REPEAL OF PERCENT OF CURRENT LIABILITY

5 FUNDING LIMIT.

6 (a) AMENDMENT OF INTERNAL REVENUE CODE.—

7 Section 412(c)(7) (relating to full-funding limitation) is

8 amended—

9 (1) by striking ‘‘the applicable percentage’’ in

10 subparagraph (A)(i)(I) and inserting ‘‘in the case of

11 plan years beginning before January 1, 2004, the

12 applicable percentage’’; and

13 (2) by amending subparagraph (F) to read as

14 follows:

15 ‘‘(F) APPLICABLE PERCENTAGE.—For

16 purposes of subparagraph (A)(i)(I), the applica17 ble percentage shall be determined in accord18 ance with the following table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

2002 ............................................................................. 165

2003 ............................................................................. 170.’’.

19 (b) AMENDMENT OF ERISA.—Section 302(c)(7) of

20 the Employee Retirement Income Security Act of 1974

21 (29 U.S.C. 1082(c)(7)) is amended—

22 (1) by striking ‘‘the applicable percentage’’ in

23 subparagraph (A)(i)(I) and inserting ‘‘in the case of
86

HR 10 PCS

1 plan years beginning before January 1, 2004, the

2 applicable percentage’’; and

3 (2) by amending subparagraph (F) to read as

4 follows:

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

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

7 shall be determined in accordance with the following

8 table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

2002 ............................................................................. 165

2003 ............................................................................. 170.’’.

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

10 this section shall apply to plan years beginning after De11 cember 31, 2001.

12 SEC. 502. MAXIMUM CONTRIBUTION DEDUCTION RULES

13 MODIFIED AND APPLIED TO ALL DEFINED

14 BENEFIT PLANS.

15 (a) IN GENERAL.—Subparagraph (D) of section

16 404(a)(1) (relating to special rule in case of certain plans)

17 is amended to read as follows:

18 ‘‘(D) SPECIAL RULE IN CASE OF CERTAIN

19 PLANS.—

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

21 defined benefit plan, except as provided in

22 regulations, the maximum amount deduct23 ible under the limitations of this paragraph
87

HR 10 PCS

1 shall not be less than the unfunded termi2 nation liability (determined as if the pro3 posed termination date referred to in sec4 tion 4041(b)(2)(A)(i)(II) of the Employee

5 Retirement Income Security Act of 1974

6 were the last day of the plan year).

7 ‘‘(ii) PLANS WITH LESS THAN 100

8 PARTICIPANTS.—For purposes of this sub9 paragraph, in the case of a plan which has

10 less than 100 participants for the plan

11 year, termination liability shall not include

12 the liability attributable to benefit in13 creases for highly compensated employees

14 (as defined in section 414(q)) resulting

15 from a plan amendment which is made or

16 becomes effective, whichever is later, within

17 the last 2 years before the termination

18 date.

19 ‘‘(iii) RULE FOR DETERMINING NUM20 BER OF PARTICIPANTS.—For purposes of

21 determining whether a plan has more than

22 100 participants, all defined benefit plans

23 maintained by the same employer (or any

24 member of such employer’s controlled

25 group (within the meaning of section
88

HR 10 PCS

1 412(l)(8)(C))) shall be treated as one plan,

2 but only employees of such member or em3 ployer shall be taken into account.

4 ‘‘(iv) PLANS MAINTAINED BY PROFES5 SIONAL SERVICE EMPLOYERS.—Clause (i)

6 shall not apply to a plan described in sec7 tion 4021(b)(13) of the Employee Retire8 ment Income Security Act of 1974.’’.

9 (b) CONFORMING AMENDMENT.—Paragraph (6) of

10 section 4972(c), as amended by section 207, is amended

11 to read as follows:

12 ‘‘(6) EXCEPTIONS.—In determining the amount

13 of nondeductible contributions for any taxable year,

14 there shall not be taken into account so much of the

15 contributions to one or more defined contribution

16 plans which are not deductible when contributed

17 solely because of section 404(a)(7) as does not ex18 ceed the greater of—

19 ‘‘(A) the amount of contributions not in

20 excess of 6 percent of compensation (within the

21 meaning of section 404(a)) paid or accrued

22 (during the taxable year for which the contribu23 tions were made) to beneficiaries under the

24 plans, or

25 ‘‘(B) the sum of—
89

HR 10 PCS

1 ‘‘(i) the amount of contributions de2 scribed in section 401(m)(4)(A), plus

3 ‘‘(ii) the amount of contributions de4 scribed in section 402(g)(3)(A).

5 For purposes of this paragraph, the deductible limits

6 under section 404(a)(7) shall first be applied to

7 amounts contributed to a defined benefit plan and

8 then to amounts described in subparagraph (B).’’.

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

10 this section shall apply to plan years beginning after De11 cember 31, 2001.

12 SEC. 503. EXCISE TAX RELIEF FOR SOUND PENSION FUND13 ING.

14 (a) IN GENERAL.—Subsection (c) of section 4972

15 (relating to nondeductible contributions) is amended by

16 adding at the end the following new paragraph:

17 ‘‘(7) DEFINED BENEFIT PLAN EXCEPTION.—In

18 determining the amount of nondeductible contribu19 tions for any taxable year, an employer may elect for

20 such year not to take into account any contributions

21 to a defined benefit plan except to the extent that

22 such contributions exceed the full-funding limitation

23 (as defined in section 412(c)(7), determined without

24 regard to subparagraph (A)(i)(I) thereof). For pur25 poses of this paragraph, the deductible limits under
90

HR 10 PCS

1 section 404(a)(7) shall first be applied to amounts

2 contributed to defined contribution plans and then

3 to amounts described in this paragraph. If an em4 ployer makes an election under this paragraph for a

5 taxable year, paragraph (6) shall not apply to such

6 employer for such taxable year.’’.

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

8 this section shall apply to years beginning after December

9 31, 2001.

10 SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY

11 DEFINED BENEFIT PLANS SIGNIFICANTLY

12 REDUCING FUTURE BENEFIT ACCRUALS.

13 (a) AMENDMENT OF INTERNAL REVENUE CODE.—

14 (1) IN GENERAL.—Chapter 43 (relating to

15 qualified pension, etc., plans) is amended by adding

16 at the end the following new section:

17 ‘‘SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING

18 BENEFIT ACCRUALS TO SATISFY NOTICE RE19 QUIREMENTS.

20 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed

21 a tax on the failure of any applicable pension plan to meet

22 the requirements of subsection (e) with respect to any ap23 plicable individual.

24 ‘‘(b) AMOUNT OF TAX.—
91

HR 10 PCS

1 ‘‘(1) IN GENERAL.—The amount of the tax im2 posed by subsection (a) on any failure with respect

3 to any applicable individual shall be $100 for each

4 day in the noncompliance period with respect to such

5 failure.

6 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes

7 of this section, the term ‘noncompliance period’

8 means, with respect to any failure, the period begin9 ning on the date the failure first occurs and ending

10 on the date the notice to which the failure relates is

11 provided or the failure is otherwise corrected.

12 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—

13 ‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT

14 DISCOVERED AND REASONABLE DILIGENCE EXER15 CISED.—No tax shall be imposed by subsection (a)

16 on any failure during any period for which it is es17 tablished to the satisfaction of the Secretary that

18 any person subject to liability for the tax under sub19 section (d) did not know that the failure existed and

20 exercised reasonable diligence to meet the require21 ments of subsection (e).

22 ‘‘(2) TAX NOT TO APPLY TO FAILURES COR23 RECTED WITHIN 30 DAYS.—No tax shall be imposed

24 by subsection (a) on any failure if—
92

HR 10 PCS

1 ‘‘(A) any person subject to liability for the

2 tax under subsection (d) exercised reasonable

3 diligence to meet the requirements of subsection

4 (e), and

5 ‘‘(B) such person provides the notice de6 scribed in subsection (e) during the 30-day pe7 riod beginning on the first date such person

8 knew, or exercising reasonable diligence would

9 have known, that such failure existed.

10 ‘‘(3) OVERALL LIMITATION FOR UNINTEN11 TIONAL FAILURES.—

12 ‘‘(A) IN GENERAL.—If the person subject

13 to liability for tax under subsection (d) exer14 cised reasonable diligence to meet the require15 ments of subsection (e), the tax imposed by

16 subsection (a) for failures during the taxable

17 year of the employer (or, in the case of a multi18 employer plan, the taxable year of the trust

19 forming part of the plan) shall not exceed

20 $500,000. For purposes of the preceding sen21 tence, all multiemployer plans of which the

22 same trust forms a part shall be treated as 1

23 plan.

24 ‘‘(B) TAXABLE YEARS IN THE CASE OF

25 CERTAIN CONTROLLED GROUPS.—For purposes
93

HR 10 PCS

1 of this paragraph, if all persons who are treated

2 as a single employer for purposes of this section

3 do not have the same taxable year, the taxable

4 years taken into account shall be determined

5 under principles similar to the principles of sec6 tion 1561.

7 ‘‘(4) WAIVER BY SECRETARY.—In the case of a

8 failure which is due to reasonable cause and not to

9 willful neglect, the Secretary may waive part or all

10 of the tax imposed by subsection (a) to the extent

11 that the payment of such tax would be excessive or

12 otherwise inequitable relative to the failure involved.

13 ‘‘(d) LIABILITY FOR TAX.—The following shall be lia14 ble for the tax imposed by subsection (a):

15 ‘‘(1) In the case of a plan other than a multi16 employer plan, the employer.

17 ‘‘(2) In the case of a multiemployer plan, the

18 plan.

19 ‘‘(e) NOTICE REQUIREMENTS FOR PLANS SIGNIFI20 CANTLY REDUCING BENEFIT ACCRUALS.—

21 ‘‘(1) IN GENERAL.—If an applicable pension

22 plan is amended to provide for a significant reduc23 tion in the rate of future benefit accrual, the plan

24 administrator shall provide written notice to each
94

HR 10 PCS

1 applicable individual (and to each employee organi2 zation representing applicable individuals).

3 ‘‘(2) NOTICE.—The notice required by para4 graph (1) shall be written in a manner calculated to

5 be understood by the average plan participant and

6 shall provide sufficient information (as determined

7 in accordance with regulations prescribed by the

8 Secretary) to allow applicable individuals to under9 stand the effect of the plan amendment. The Sec10 retary may provide a simplified form of notice for,

11 or exempt from any notice requirement, a plan—

12 ‘‘(A) which has fewer than 100 partici13 pants who have accrued a benefit under the

14 plan, or

15 ‘‘(B) which offers participants the option

16 to choose between the new benefit formula and

17 the old benefit formula.

18 ‘‘(3) TIMING OF NOTICE.—Except as provided

19 in regulations, the notice required by paragraph (1)

20 shall be provided within a reasonable time before the

21 effective date of the plan amendment.

22 ‘‘(4) DESIGNEES.—Any notice under paragraph

23 (1) may be provided to a person designated, in writ24 ing, by the person to which it would otherwise be

25 provided.
95

HR 10 PCS

1 ‘‘(5) NOTICE BEFORE ADOPTION OF AMEND2 MENT.—A plan shall not be treated as failing to

3 meet the requirements of paragraph (1) merely be4 cause notice is provided before the adoption of the

5 plan amendment if no material modification of the

6 amendment occurs before the amendment is adopt7 ed.

8 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur9 poses of this section—

10 ‘‘(1) APPLICABLE INDIVIDUAL.—The term ‘ap11 plicable individual’ means, with respect to any plan

12 amendment—

13 ‘‘(A) each participant in the plan, and

14 ‘‘(B) any beneficiary who is an alternate

15 payee (within the meaning of section 414(p)(8))

16 under an applicable qualified domestic relations

17 order (within the meaning of section

18 414(p)(1)(A)),

19 whose rate of future benefit accrual under the plan

20 may reasonably be expected to be significantly re21 duced by such plan amendment.

22 ‘‘(2) APPLICABLE PENSION PLAN.—The term

23 ‘applicable pension plan’ means—

24 ‘‘(A) any defined benefit plan, or
96

HR 10 PCS

1 ‘‘(B) an individual account plan which is

2 subject to the funding standards of section 412.

3 Such term shall not include a governmental plan

4 (within the meaning of section 414(d)) or a church

5 plan (within the meaning of section 414(e)) with re6 spect to which the election provided by section

7 410(d) has not been made.

8 ‘‘(3) EARLY RETIREMENT.—A plan amendment

9 which eliminates or significantly reduces any early

10 retirement benefit or retirement-type subsidy (within

11 the meaning of section 411(d)(6)(B)(i)) shall be

12 treated as having the effect of significantly reducing

13 the rate of future benefit accrual.

14 ‘‘(g) NEW TECHNOLOGIES.—The Secretary may by

15 regulations allow any notice under subsection (e) to be

16 provided by using new technologies.’’.

17 (2) CLERICAL AMENDMENT.—The table of sec18 tions for chapter 43 is amended by adding at the

19 end the following new item:

‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals

to satisfy notice requirements.’’.

20 (b) AMENDMENT OF ERISA.—Section 204(h) of the

21 Employee Retirement Income Security Act of 1974 (29

22 U.S.C. 1054(h)) is amended by adding at the end the fol23 lowing new paragraphs:
97

HR 10 PCS

1 ‘‘(3)(A) An applicable pension plan to which para2 graph (1) applies shall not be treated as meeting the re3 quirements of such paragraph unless, in addition to any

4 notice required to be provided to an individual or organiza5 tion under such paragraph, the plan administrator pro6 vides the notice described in subparagraph (B) to each ap7 plicable individual (and to each employee organization rep8 resenting applicable individuals).

9 ‘‘(B) The notice required by subparagraph (A) shall

10 be written in a manner calculated to be understood by the

11 average plan participant and shall provide sufficient infor12 mation (as determined in accordance with regulations pre13 scribed by the Secretary of the Treasury) to allow applica14 ble individuals to understand the effect of the plan amend15 ment. The Secretary of the Treasury may provide a sim16 plified form of notice for, or exempt from any notice re17 quirement, a plan—

18 ‘‘(i) which has fewer than 100 participants who

19 have accrued a benefit under the plan, or

20 ‘‘(ii) which offers participants the option to

21 choose between the new benefit formula and the old

22 benefit formula.

23 ‘‘(C) Except as provided in regulations prescribed by

24 the Secretary of the Treasury, the notice required by sub-
98

HR 10 PCS

1 paragraph (A) shall be provided within a reasonable time

2 before the effective date of the plan amendment.

3 ‘‘(D) Any notice under subparagraph (A) may be pro4 vided to a person designated, in writing, by the person

5 to which it would otherwise be provided.

6 ‘‘(E) A plan shall not be treated as failing to meet

7 the requirements of subparagraph (A) merely because no8 tice is provided before the adoption of the plan amendment

9 if no material modification of the amendment occurs be10 fore the amendment is adopted.

11 ‘‘(F) The Secretary of the Treasury may by regula12 tions allow any notice under this paragraph to be provided

13 by using new technologies.

14 ‘‘(4) For purposes of paragraph (3)—

15 ‘‘(A) The term ‘applicable individual’ means,

16 with respect to any plan amendment—

17 ‘‘(i) each participant in the plan; and

18 ‘‘(ii) any beneficiary who is an alternate

19 payee (within the meaning of section

20 206(d)(3)(K)) under an applicable qualified do21 mestic relations order (within the meaning of

22 section 206(d)(3)(B)(i)),

23 whose rate of future benefit accrual under the plan

24 may reasonably be expected to be significantly re25 duced by such plan amendment.
99

HR 10 PCS

1 ‘‘(B) The term ‘applicable pension plan’

2 means—

3 ‘‘(i) any defined benefit plan; or

4 ‘‘(ii) an individual account plan which is

5 subject to the funding standards of section 412

6 of the Internal Revenue Code of 1986.

7 ‘‘(C) A plan amendment which eliminates or

8 significantly reduces any early retirement benefit or

9 retirement-type subsidy (within the meaning of sub10 section (g)(2)(A)) shall be treated as having the ef11 fect of significantly reducing the rate of future ben12 efit accrual.’’.

13 (c) EFFECTIVE DATES.—

14 (1) IN GENERAL.—The amendments made by

15 this section shall apply to plan amendments taking

16 effect on or after the date of the enactment of this

17 Act.

18 (2) TRANSITION.—Until such time as the Sec19 retary of the Treasury issues regulations under sec20 tions 4980F(e)(2) and (3) of the Internal Revenue

21 Code of 1986, and section 204(h)(3) of the Em22 ployee Retirement Income Security Act of 1974, as

23 added by the amendments made by this section, a

24 plan shall be treated as meeting the requirements of
100

HR 10 PCS

1 such sections if it makes a good faith effort to com2 ply with such requirements.

3 (3) SPECIAL NOTICE RULE.—

4 (A) IN GENERAL.—The period for pro5 viding any notice required by the amendments

6 made by this section shall not end before the

7 date which is 3 months after the date of the en8 actment of this Act.

9 (B) REASONABLE NOTICE.—The amend10 ments made by this section shall not apply to

11 any plan amendment taking effect on or after

12 the date of the enactment of this Act if, before

13 April 25, 2001, notice was provided to partici14 pants and beneficiaries adversely affected by

15 the plan amendment (or their representatives)

16 which was reasonably expected to notify them

17 of the nature and effective date of the plan

18 amendment.

19 (d) STUDY.—The Secretary of the Treasury shall

20 prepare a report on the effects of conversions of tradi21 tional defined benefit plans to cash balance or hybrid for22 mula plans. Such study shall examine the effect of such

23 conversions on longer service participants, including the

24 incidence and effects of ‘‘wear away’’ provisions under

25 which participants earn no additional benefits for a period
101

HR 10 PCS

1 of time after the conversion. As soon as practicable, but

2 not later than 60 days after the date of the enactment

3 of this Act, the Secretary shall submit such report, to4 gether with recommendations thereon, to the Committee

5 on Ways and Means and the Committee on Education and

6 the Workforce of the House of Representatives and the

7 Committee on Finance and the Committee on Health,

8 Education, Labor, and Pensions of the Senate.

9 SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER

10 SECTION 415.

11 (a) COMPENSATION LIMIT.—

12 (1) IN GENERAL.—Paragraph (11) of section

13 415(b) (relating to limitation for defined benefit

14 plans) is amended to read as follows:

15 ‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN16 MENTAL AND MULTIEMPLOYER PLANS.—In the case

17 of a governmental plan (as defined in section

18 414(d)) or a multiemployer plan (as defined in sec19 tion 414(f)), subparagraph (B) of paragraph (1)

20 shall not apply.’’.

21 (2) CONFORMING AMENDMENT.—Section

22 415(b)(7) (relating to benefits under certain collec23 tively bargained plans) is amended by inserting

24 ‘‘(other than a multiemployer plan)’’ after ‘‘defined
102

HR 10 PCS

1 benefit plan’’ in the matter preceding subparagraph

2 (A).

3 (b) COMBINING AND AGGREGATION OF PLANS.—

4 (1) COMBINING OF PLANS.—Subsection (f) of

5 section 415 (relating to combining of plans) is

6 amended by adding at the end the following:

7 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER

8 PLANS.—Notwithstanding paragraph (1) and sub9 section (g), a multiemployer plan (as defined in sec10 tion 414(f)) shall not be combined or aggregated—

11 ‘‘(A) with any other plan which is not a

12 multiemployer plan for purposes of applying

13 subsection (b)(1)(B) to such other plan, or

14 ‘‘(B) with any other multiemployer plan

15 for purposes of applying the limitations estab16 lished in this section.’’.

17 (2) CONFORMING AMENDMENT FOR AGGREGA18 TION OF PLANS.—Subsection (g) of section 415 (re19 lating to aggregation of plans) is amended by strik20 ing ‘‘The Secretary’’ and inserting ‘‘Except as pro21 vided in subsection (f)(3), the Secretary’’.

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

23 this section shall apply to years beginning after December

24 31, 2001.
103

HR 10 PCS

1 SEC. 506. PROTECTION OF INVESTMENT OF EMPLOYEE

2 CONTRIBUTIONS TO 401(K) PLANS.

3 (a) IN GENERAL.—Section 1524(b) of the Taxpayer

4 Relief Act of 1997 is amended to read as follows:

5 ‘‘(b) EFFECTIVE DATE.—

6 ‘‘(1) IN GENERAL.—Except as provided in para7 graph (2), the amendments made by this section

8 shall apply to elective deferrals for plan years begin9 ning after December 31, 1998.

10 ‘‘(2) NONAPPLICATION TO PREVIOUSLY AC11 QUIRED PROPERTY.—The amendments made by this

12 section shall not apply to any elective deferral which

13 is invested in assets consisting of qualifying em14 ployer securities, qualifying employer real property,

15 or both, if such assets were acquired before January

16 1, 1999.’’.

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

18 this section shall apply as if included in the provision of

19 the Taxpayer Relief Act of 1997 to which it relates.

20 SEC. 507. PERIODIC PENSION BENEFITS STATEMENTS.

21 (a) IN GENERAL.—Section 105(a) of the Employee

22 Retirement Income Security Act of 1974 (29 U.S.C. 1025

23 (a)) is amended to read as follows:

24 ‘‘SEC. 105. (a)(1)(A) The administrator of an indi25 vidual account plan shall furnish a pension benefit

26 statement—
104

HR 10 PCS

1 ‘‘(i) to a plan participant at least once annually,

2 and

3 ‘‘(ii) to a plan beneficiary upon written request.

4 ‘‘(B) The administrator of a defined benefit plan

5 shall furnish a pension benefit statement—

6 ‘‘(i) at least once every 3 years to each

7 participant with a nonforfeitable accrued ben8 efit who is employed by the employer maintain9 ing the plan at the time the statement is fur10 nished to participants, and

11 ‘‘(ii) to a plan participant or plan bene12 ficiary of the plan upon written request.

13 ‘‘(2) A pension benefit statement under paragraph

14 (1)—

15 ‘‘(A) shall indicate, on the basis of the latest

16 available information—

17 ‘‘(i) the total benefits accrued, and

18 ‘‘(ii) the nonforfeitable pension benefits, if

19 any, which have accrued, or the earliest date on

20 which benefits will become nonforfeitable,

21 ‘‘(B) shall be written in a manner calculated to

22 be understood by the average plan participant, and

23 ‘‘(C) may be provided in written, electronic, or

24 other appropriate form.
105

HR 10 PCS

1 ‘‘(3)(A) In the case of a defined benefit plan, the re2 quirements of paragraph (1)(B)(i) shall be treated as met

3 with respect to a participant if the administrator provides

4 the participant at least once each year with notice of the

5 availability of the pension benefit statement and the ways

6 in which the participant may obtain such statement. Such

7 notice shall be provided in written, electronic, or other ap8 propriate form, and may be included with other commu9 nications to the participant if done in a manner reasonably

10 designed to attract the attention of the participant.

11 ‘‘(B) The Secretary may provide that years in which

12 no employee or former employee benefits (within the

13 meaning of section 410(b) of the Internal Revenue Code

14 of 1986) under the plan need not be taken into account

15 in determining the 3-year period under paragraph

16 (1)(B)(i).’’.

17 (b) CONFORMING AMENDMENTS.—

18 (1) Section 105 of the Employee Retirement In19 come Security Act of 1974 (29 U.S.C. 1025) is

20 amended by striking subsection (d).

21 (2) Section 105(b) of such Act (29 U.S.C.

22 1025(b)) is amended to read as follows:

23 ‘‘(b) In no case shall a participant or beneficiary of

24 a plan be entitled to more than one statement described
106

HR 10 PCS

1 in subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is appli2 cable, in any 12-month period.’’.

3 (c) MODEL STATEMENTS.—The Secretary of Labor

4 shall develop a model benefit statement, written in a man5 ner calculated to be understood by the average plan partic6 ipant, that may be used by plan administrators in com7 plying with the requirements of section 105 of the Em8 ployee Retirement Income Security Act of 1974.

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

10 this section shall apply to plan years beginning after De11 cember 31, 2002.

12 SEC. 508. PROHIBITED ALLOCATIONS OF STOCK IN S COR13 PORATION ESOP.

14 (a) IN GENERAL.—Section 409 (relating to qualifica15 tions for tax credit employee stock ownership plans) is

16 amended by redesignating subsection (p) as subsection (q)

17 and by inserting after subsection (o) the following new

18 subsection:

19 ‘‘(p) PROHIBITED ALLOCATIONS OF SECURITIES IN

20 AN S CORPORATION.—

21 ‘‘(1) IN GENERAL.—An employee stock owner22 ship plan holding employer securities consisting of

23 stock in an S corporation shall provide that no por24 tion of the assets of the plan attributable to (or allo25 cable in lieu of) such employer securities may, dur-
107

HR 10 PCS

1 ing a nonallocation year, accrue (or be allocated di2 rectly or indirectly under any plan of the employer

3 meeting the requirements of section 401(a)) for the

4 benefit of any disqualified person.

5 ‘‘(2) FAILURE TO MEET REQUIREMENTS.—

6 ‘‘(A) IN GENERAL.—If a plan fails to meet

7 the requirements of paragraph (1), the plan

8 shall be treated as having distributed to any

9 disqualified person the amount allocated to the

10 account of such person in violation of para11 graph (1) at the time of such allocation.

12 ‘‘(B) CROSS REFERENCE.—

‘‘For excise tax relating to violations of paragraph

(1) and ownership of synthetic equity, see section

4979A.

13 ‘‘(3) NONALLOCATION YEAR.—For purposes of

14 this subsection—

15 ‘‘(A) IN GENERAL.—The term ‘nonalloca16 tion year’ means any plan year of an employee

17 stock ownership plan if, at any time during

18 such plan year—

19 ‘‘(i) such plan holds employer securi20 ties consisting of stock in an S corpora21 tion, and

22 ‘‘(ii) disqualified persons own at least

23 50 percent of the number of shares of

24 stock in the S corporation.
108

HR 10 PCS

1 ‘‘(B) ATTRIBUTION RULES.—For purposes

2 of subparagraph (A)—

3 ‘‘(i) IN GENERAL.—The rules of sec4 tion 318(a) shall apply for purposes of de5 termining ownership, except that—

6 ‘‘(I) in applying paragraph (1)

7 thereof, the members of an individ8 ual’s family shall include members of

9 the family described in paragraph

10 (4)(D), and

11 ‘‘(II) paragraph (4) thereof shall

12 not apply.

13 ‘‘(ii) DEEMED-OWNED SHARES.—Not14 withstanding the employee trust exception

15 in section 318(a)(2)(B)(i), individual shall

16 be treated as owning deemed-owned shares

17 of the individual.

18 Solely for purposes of applying paragraph (5),

19 this subparagraph shall be applied after the at20 tribution rules of paragraph (5) have been ap21 plied.

22 ‘‘(4) DISQUALIFIED PERSON.—For purposes of

23 this subsection—

24 ‘‘(A) IN GENERAL.—The term ‘disqualified

25 person’ means any person if—
109

HR 10 PCS

1 ‘‘(i) the aggregate number of deemed2 owned shares of such person and the mem3 bers of such person’s family is at least 20

4 percent of the number of deemed-owned

5 shares of stock in the S corporation, or

6 ‘‘(ii) in the case of a person not de7 scribed in clause (i), the number of

8 deemed-owned shares of such person is at

9 least 10 percent of the number of deemed10 owned shares of stock in such corporation.

11 ‘‘(B) TREATMENT OF FAMILY MEMBERS.—

12 In the case of a disqualified person described in

13 subparagraph (A)(i), any member of such per14 son’s family with deemed-owned shares shall be

15 treated as a disqualified person if not otherwise

16 treated as a disqualified person under subpara17 graph (A).

18 ‘‘(C) DEEMED-OWNED SHARES.—

19 ‘‘(i) IN GENERAL.—The term

20 ‘deemed-owned shares’ means, with respect

21 to any person—

22 ‘‘(I) the stock in the S corpora23 tion constituting employer securities

24 of an employee stock ownership plan
110

HR 10 PCS

1 which is allocated to such person

2 under the plan, and

3 ‘‘(II) such person’s share of the

4 stock in such corporation which is

5 held by such plan but which is not al6 located under the plan to participants.

7 ‘‘(ii) PERSON’S SHARE OF

8 UNALLOCATED STOCK.—For purposes of

9 clause (i)(II), a person’s share of

10 unallocated S corporation stock held by

11 such plan is the amount of the unallocated

12 stock which would be allocated to such per13 son if the unallocated stock were allocated

14 to all participants in the same proportions

15 as the most recent stock allocation under

16 the plan.

17 ‘‘(D) MEMBER OF FAMILY.—For purposes

18 of this paragraph, the term ‘member of the

19 family’ means, with respect to any individual—

20 ‘‘(i) the spouse of the individual,

21 ‘‘(ii) an ancestor or lineal descendant

22 of the individual or the individual’s spouse,

23 ‘‘(iii) a brother or sister of the indi24 vidual or the individual’s spouse and any
111

HR 10 PCS

1 lineal descendant of the brother or sister,

2 and

3 ‘‘(iv) the spouse of any individual de4 scribed in clause (ii) or (iii).

5 A spouse of an individual who is legally sepa6 rated from such individual under a decree of di7 vorce or separate maintenance shall not be

8 treated as such individual’s spouse for purposes

9 of this subparagraph.

10 ‘‘(5) TREATMENT OF SYNTHETIC EQUITY.—For

11 purposes of paragraphs (3) and (4), in the case of

12 a person who owns synthetic equity in the S corpora13 tion, except to the extent provided in regulations, the

14 shares of stock in such corporation on which such

15 synthetic equity is based shall be treated as out16 standing stock in such corporation and deemed17 owned shares of such person if such treatment of

18 synthetic equity of 1 or more such persons results

19 in—

20 ‘‘(A) the treatment of any person as a dis21 qualified person, or

22 ‘‘(B) the treatment of any year as a non23 allocation year.

24 For purposes of this paragraph, synthetic equity

25 shall be treated as owned by a person in the same
112

HR 10 PCS

1 manner as stock is treated as owned by a person

2 under the rules of paragraphs (2) and (3) of section

3 318(a). If, without regard to this paragraph, a per4 son is treated as a disqualified person or a year is

5 treated as a nonallocation year, this paragraph shall

6 not be construed to result in the person or year not

7 being so treated.

8 ‘‘(6) DEFINITIONS.—For purposes of this

9 subsection—

10 ‘‘(A) EMPLOYEE STOCK OWNERSHIP

11 PLAN.—The term ‘employee stock ownership

12 plan’ has the meaning given such term by sec13 tion 4975(e)(7).

14 ‘‘(B) EMPLOYER SECURITIES.—The term

15 ‘employer security’ has the meaning given such

16 term by section 409(l).

17 ‘‘(C) SYNTHETIC EQUITY.—The term ‘syn18 thetic equity’ means any stock option, warrant,

19 restricted stock, deferred issuance stock right,

20 or similar interest or right that gives the holder

21 the right to acquire or receive stock of the S

22 corporation in the future. Except to the extent

23 provided in regulations, synthetic equity also in24 cludes a stock appreciation right, phantom

25 stock unit, or similar right to a future cash
113

HR 10 PCS

1 payment based on the value of such stock or

2 appreciation in such value.

3 ‘‘(7) REGULATIONS.—The Secretary shall pre4 scribe such regulations as may be necessary to carry

5 out the purposes of this subsection.’’.

6 (b) COORDINATION WITH SECTION 4975(e)(7).—The

7 last sentence of section 4975(e)(7) (defining employee

8 stock ownership plan) is amended by inserting ‘‘, section

9 409(p),’’ after ‘‘409(n)’’.

10 (c) EXCISE TAX.—

11 (1) APPLICATION OF TAX.—Subsection (a) of

12 section 4979A (relating to tax on certain prohibited

13 allocations of employer securities) is amended—

14 (A) by striking ‘‘or’’ at the end of para15 graph (1), and

16 (B) by striking all that follows paragraph

17 (2) and inserting the following:

18 ‘‘(3) there is any allocation of employer securi19 ties which violates the provisions of section 409(p),

20 or a nonallocation year described in subsection

21 (e)(2)(C) with respect to an employee stock owner22 ship plan, or

23 ‘‘(4) any synthetic equity is owned by a dis24 qualified person in any nonallocation year,
114

HR 10 PCS

1 there is hereby imposed a tax on such allocation or owner2 ship equal to 50 percent of the amount involved.’’.

3 (2) LIABILITY.—Section 4979A(c) (defining li4 ability for tax) is amended to read as follows:

5 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

6 section shall be paid—

7 ‘‘(1) in the case of an allocation referred to in

8 paragraph (1) or (2) of subsection (a), by—

9 ‘‘(A) the employer sponsoring such plan, or

10 ‘‘(B) the eligible worker-owned cooperative,

11 which made the written statement described in sec12 tion 664(g)(1)(E) or in section 1042(b)(3)(B) (as

13 the case may be), and

14 ‘‘(2) in the case of an allocation or ownership

15 referred to in paragraph (3) or (4) of subsection (a),

16 by the S corporation the stock in which was so allo17 cated or owned.’’.

18 (3) DEFINITIONS.—Section 4979A(e) (relating

19 to definitions) is amended to read as follows:

20 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur21 poses of this section—

22 ‘‘(1) DEFINITIONS.—Except as provided in

23 paragraph (2), terms used in this section have the

24 same respective meanings as when used in sections

25 409 and 4978.
115

HR 10 PCS

1 ‘‘(2) SPECIAL RULES RELATING TO TAX IM2 POSED BY REASON OF PARAGRAPH (3) OR (4) OF

3 SUBSECTION (a).—

4 ‘‘(A) PROHIBITED ALLOCATIONS.—The

5 amount involved with respect to any tax im6 posed by reason of subsection (a)(3) is the

7 amount allocated to the account of any person

8 in violation of section 409(p)(1).

9 ‘‘(B) SYNTHETIC EQUITY.—The amount

10 involved with respect to any tax imposed by rea11 son of subsection (a)(4) is the value of the

12 shares on which the synthetic equity is based.

13 ‘‘(C) SPECIAL RULE DURING FIRST NON14 ALLOCATION YEAR.—For purposes of subpara15 graph (A), the amount involved for the first

16 nonallocation year of any employee stock owner17 ship plan shall be determined by taking into ac18 count the total value of all the deemed-owned

19 shares of all disqualified persons with respect to

20 such plan.

21 ‘‘(D) STATUTE OF LIMITATIONS.—The

22 statutory period for the assessment of any tax

23 imposed by this section by reason of paragraph

24 (3) or (4) of subsection (a) shall not expire be-
116

HR 10 PCS

1 fore the date which is 3 years from the later

2 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

7 is notified of such allocation or owner8 ship.’’.

9 (d) EFFECTIVE DATES.—

10 (1) IN GENERAL.—The amendments made by

11 this section shall apply to plan years beginning after

12 December 31, 2004.

13 (2) EXCEPTION FOR CERTAIN PLANS.—In the

14 case of any—

15 (A) employee stock ownership plan estab16 lished after March 14, 2001, or

17 (B) employee stock ownership plan estab18 lished on or before such date if employer securi19 ties held by the plan consist of stock in a cor20 poration with respect to which an election under

21 section 1362(a) of the Internal Revenue Code

22 of 1986 is not in effect on such date,

23 the amendments made by this section shall apply to

24 plan years ending after March 14, 2001.
117

HR 10 PCS

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

12 every year, except that such determination shall

13 be made more frequently to the extent required

14 in particular cases under regulations prescribed

15 by 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
118

HR 10 PCS

1 date within the plan year prior to the year

2 to 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

7 of the assets of the plan are not less

8 than 125 percent of the plan’s current

9 liability (as defined in paragraph

10 (7)(B)).

11 ‘‘(iii) ADJUSTMENTS.—Information

12 under clause (ii) shall, in accordance with

13 regulations, be actuarially adjusted to re14 flect significant differences in participants.

15 ‘‘(iv) ELECTION.—An election under

16 clause (ii), once made, shall be irrevocable

17 without the consent of the Secretary.’’.

18 (b) AMENDMENT OF ERISA.—Paragraph (9) of sec19 tion 302(c) of the Employee Retirement Income Security

20 Act of 1974 (29 U.S.C. 1053(c)) is amended—

21 (1) by inserting ‘‘(A)’’ after ‘‘(9)’’; and

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

23 ‘‘(B)(i) Except as provided in clause (ii), the valu24 ation referred to in subparagraph (A) shall be made as
119

HR 10 PCS

1 of a date within the plan year to which the valuation refers

2 or within one month prior to the beginning of such year.

3 ‘‘(ii) The valuation referred to in subparagraph (A)

4 may be made as of a date within the plan year prior to

5 the year to which the valuation refers if—

6 ‘‘(I) an election is in effect under this clause

7 with respect to the plan; and

8 ‘‘(II) as of such date, the value of the assets of

9 the plan are not less than 125 percent of the plan’s

10 current liability (as defined in paragraph (7)(B)).

11 ‘‘(iii) Information under clause (ii) shall, in accord12 ance with regulations, be actuarially adjusted to reflect

13 significant differences in participants.

14 ‘‘(iv) An election under clause (ii), once made, shall

15 be irrevocable without the consent of the Secretary of the

16 Treasury.’’.

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

18 this section shall apply to plan years beginning after De19 cember 31, 2001.

20 SEC. 602. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT

21 LOSS OF DIVIDEND DEDUCTION.

22 (a) IN GENERAL.—Section 404(k)(2)(A) (defining

23 applicable dividends) is amended by striking ‘‘or’’ at the

24 end of clause (ii), by redesignating clause (iii) as clause
120

HR 10 PCS

1 (iv), and by inserting after clause (ii) the following new

2 clause:

3 ‘‘(iii) is, at the election of such par4 ticipants or their beneficiaries—

5 ‘‘(I) payable as provided in clause

6 (i) or (ii), or

7 ‘‘(II) paid to the plan and rein8 vested in qualifying employer securi9 ties, or’’.

10 (b) STANDARDS FOR DISALLOWANCE.—Section

11 404(k)(5)(A) (relating to disallowance of deduction) is

12 amended by inserting ‘‘avoidance or’’ before ‘‘evasion’’.

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

14 this section shall apply to taxable years beginning after

15 December 31, 2001.

16 SEC. 603. REPEAL OF TRANSITION RULE RELATING TO CER17 TAIN HIGHLY COMPENSATED EMPLOYEES.

18 (a) IN GENERAL.—Paragraph (4) of section 1114(c)

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

20 (b) EFFECTIVE DATE.—The repeal made by sub21 section (a) shall apply to plan years beginning after De22 cember 31, 2001.

23 SEC. 604. EMPLOYEES OF TAX-EXEMPT ENTITIES.

24 (a) IN GENERAL.—The Secretary of the Treasury

25 shall modify Treasury Regulations section 1.410(b)–6(g)
121

HR 10 PCS

1 to provide that employees of an organization described in

2 section 403(b)(1)(A)(i) of the Internal Revenue Code of

3 1986 who are eligible to make contributions under section

4 403(b) of such Code pursuant to a salary reduction agree5 ment may be treated as excludable with respect to a plan

6 under section 401(k) or (m) of such Code that is provided

7 under the same general arrangement as a plan under such

8 section 401(k), if—

9 (1) no employee of an organization described in

10 section 403(b)(1)(A)(i) of such Code is eligible to

11 participate in such section 401(k) plan or section

12 401(m) plan; and

13 (2) 95 percent of the employees who are not

14 employees of an organization described in section

15 403(b)(1)(A)(i) of such Code are eligible to partici16 pate in such plan under such section 401(k) or (m).

17 (b) EFFECTIVE DATE.—The modification required by

18 subsection (a) shall apply as of the same date set forth

19 in section 1426(b) of the Small Business Job Protection

20 Act of 1996.

21 SEC. 605. CLARIFICATION OF TREATMENT OF EMPLOYER22 PROVIDED RETIREMENT ADVICE.

23 (a) IN GENERAL.—Subsection (a) of section 132 (re24 lating to exclusion from gross income) is amended by

25 striking ‘‘or’’ at the end of paragraph (5), by striking the
122

HR 10 PCS

1 period at the end of paragraph (6) and inserting ‘‘, or’’,

2 and by adding at the end the following new paragraph:

3 ‘‘(7) qualified retirement planning services.’’.

4 (b) QUALIFIED RETIREMENT PLANNING SERVICES

5 DEFINED.—Section 132 is amended by redesignating sub6 section (m) as subsection (n) and by inserting after sub7 section (l) the following:

8 ‘‘(m) QUALIFIED RETIREMENT PLANNING SERV9 ICES.—

10 ‘‘(1) IN GENERAL.—For purposes of this sec11 tion, the term ‘qualified retirement planning serv12 ices’ means any retirement planning advice or infor13 mation provided to an employee and his spouse by

14 an employer maintaining a qualified employer plan.

15 ‘‘(2) NONDISCRIMINATION RULE.—Subsection

16 (a)(7) shall apply in the case of highly compensated

17 employees only if such services are available on sub18 stantially the same terms to each member of the

19 group of employees normally provided education and

20 information regarding the employer’s qualified em21 ployer plan.

22 ‘‘(3) QUALIFIED EMPLOYER PLAN.—For pur23 poses of this subsection, the term ‘qualified employer

24 plan’ means a plan, contract, pension, or account de25 scribed in section 219(g)(5).’’.
123

HR 10 PCS

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

2 this section shall apply to years beginning after December

3 31, 2001.

4 SEC. 606. REPORTING SIMPLIFICATION.

5 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

6 OWNERS AND THEIR SPOUSES.—

7 (1) IN GENERAL.—The Secretary of the Treas8 ury and the Secretary of Labor shall modify the re9 quirements for filing annual returns with respect to

10 one-participant retirement plans to ensure that such

11 plans with assets of $250,000 or less as of the close

12 of the plan year need not file a return for that year.

13 (2) ONE-PARTICIPANT RETIREMENT PLAN DE14 FINED.—For purposes of this subsection, the term

15 ‘‘one-participant retirement plan’’ means a retire16 ment plan that—

17 (A) on the first day of the plan year—

18 (i) covered only the employer (and the

19 employer’s spouse) and the employer

20 owned the entire business (whether or not

21 incorporated); or

22 (ii) covered only one or more partners

23 (and their spouses) in a business partner24 ship (including partners in an S or C cor25 poration);
124

HR 10 PCS

1 (B) meets the minimum coverage require2 ments of section 410(b) of the Internal Revenue

3 Code of 1986 without being combined with any

4 other plan of the business that covers the em5 ployees of the business;

6 (C) does not provide benefits to anyone ex7 cept the employer (and the employer’s spouse)

8 or the partners (and their spouses);

9 (D) does not cover a business that is a

10 member of an affiliated service group, a con11 trolled group of corporations, or a group of

12 businesses under common control; and

13 (E) does not cover a business that leases

14 employees.

15 (3) OTHER DEFINITIONS.—Terms used in para16 graph (2) which are also used in section 414 of the

17 Internal Revenue Code of 1986 shall have the re18 spective meanings given such terms by such section.

19 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

20 PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case

21 of plan years beginning after December 31, 2002, the Sec22 retary of the Treasury and the Secretary of Labor shall

23 provide for the filing of a simplified annual return for any

24 retirement plan which covers less than 25 employees on

25 the first day of a plan year and which meets the require-
125

HR 10 PCS

1 ments described in subparagraphs (B), (D), and (E) of

2 subsection (a)(2).

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

4 shall take effect on January 1, 2002.

5 SEC. 607. IMPROVEMENT OF EMPLOYEE PLANS COMPLI6 ANCE RESOLUTION SYSTEM.

7 The Secretary of the Treasury shall continue to up8 date and improve the Employee Plans Compliance Resolu9 tion System (or any successor program) giving special at10 tention to—

11 (1) increasing the awareness and knowledge of

12 small employers concerning the availability and use

13 of the program;

14 (2) taking into account special concerns and

15 circumstances that small employers face with respect

16 to compliance and correction of compliance failures;

17 (3) extending the duration of the self-correction

18 period under the Self-Correction Program for signifi19 cant compliance failures;

20 (4) expanding the availability to correct insig21 nificant compliance failures under the Self-Correc22 tion Program during audit; and

23 (5) assuring that any tax, penalty, or sanction

24 that is imposed by reason of a compliance failure is
126

HR 10 PCS

1 not excessive and bears a reasonable relationship to

2 the nature, extent, and severity of the failure.

3 SEC. 608. REPEAL OF THE MULTIPLE USE TEST.

4 (a) IN GENERAL.—Paragraph (9) of section 401(m)

5 is amended to read as follows:

6 ‘‘(9) REGULATIONS.—The Secretary shall pre7 scribe such regulations as may be necessary to carry

8 out the purposes of this subsection and subsection

9 (k), including regulations permitting appropriate ag10 gregation of plans and contributions.’’.

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

12 this section shall apply to years beginning after December

13 31, 2001.

14 SEC. 609. FLEXIBILITY IN NONDISCRIMINATION, COV15 ERAGE, AND LINE OF BUSINESS RULES.

16 (a) NONDISCRIMINATION.—

17 (1) IN GENERAL.—The Secretary of the Treas18 ury shall, by regulation, provide that a plan shall be

19 deemed to satisfy the requirements of section

20 401(a)(4) of the Internal Revenue Code of 1986 if

21 such plan satisfies the facts and circumstances test

22 under section 401(a)(4) of such Code, as in effect

23 before January 1, 1994, but only if—
127

HR 10 PCS

1 (A) the plan satisfies conditions prescribed

2 by the Secretary to appropriately limit the

3 availability of such test; and

4 (B) the plan is submitted to the Secretary

5 for a determination of whether it satisfies such

6 test.

7 Subparagraph (B) shall only apply to the extent pro8 vided by the Secretary.

9 (2) EFFECTIVE DATES.—

10 (A) REGULATIONS.—The regulation re11 quired by paragraph (1) shall apply to years be12 ginning after December 31, 2003.

13 (B) CONDITIONS OF AVAILABILITY.—Any

14 condition of availability prescribed by the Sec15 retary under paragraph (1)(A) shall not apply

16 before the first year beginning not less than

17 120 days after the date on which such condition

18 is prescribed.

19 (b) COVERAGE TEST.—

20 (1) IN GENERAL.—Section 410(b)(1) (relating

21 to minimum coverage requirements) is amended by

22 adding at the end the following:

23 ‘‘(D) In the case that the plan fails to

24 meet the requirements of subparagraphs (A),

25 (B) and (C), the plan—
128

HR 10 PCS

1 ‘‘(i) satisfies subparagraph (B), as in

2 effect immediately before the enactment of

3 the Tax Reform Act of 1986,

4 ‘‘(ii) is submitted to the Secretary for

5 a determination of whether it satisfies the

6 requirement described in clause (i), and

7 ‘‘(iii) satisfies conditions prescribed by

8 the Secretary by regulation that appro9 priately limit the availability of this sub10 paragraph.

11 Clause (ii) shall apply only to the extent pro12 vided by the Secretary.’’.

13 (2) EFFECTIVE DATES.—

14 (A) IN GENERAL.—The amendment made

15 by paragraph (1) shall apply to years beginning

16 after December 31, 2003.

17 (B) CONDITIONS OF AVAILABILITY.—Any

18 condition of availability prescribed by the Sec19 retary under regulations prescribed by the Sec20 retary under section 410(b)(1)(D) of the Inter21 nal Revenue Code of 1986 shall not apply be22 fore the first year beginning not less than 120

23 days after the date on which such condition is

24 prescribed.
129

HR 10 PCS

1 (c) LINE OF BUSINESS RULES.—The Secretary of

2 the Treasury shall, on or before December 31, 2003, mod3 ify the existing regulations issued under section 414(r) of

4 the Internal Revenue Code of 1986 in order to expand

5 (to the extent that the Secretary determines appropriate)

6 the ability of a pension plan to demonstrate compliance

7 with the line of business requirements based upon the

8 facts and circumstances surrounding the design and oper9 ation of the plan, even though the plan is unable to satisfy

10 the mechanical tests currently used to determine compli11 ance.

12 SEC. 610. EXTENSION TO ALL GOVERNMENTAL PLANS OF

13 MORATORIUM ON APPLICATION OF CERTAIN

14 NONDISCRIMINATION RULES APPLICABLE TO

15 STATE AND LOCAL PLANS.

16 (a) IN GENERAL.—

17 (1) Subparagraph (G) of section 401(a)(5) of

18 the Internal Revenue Code of 1986 and subpara19 graph (H) of section 401(a)(26) are each amended

20 by striking ‘‘section 414(d))’’ and all that follows

21 and inserting ‘‘section 414(d)).’’.

22 (2) Subparagraph (G) of section 401(k)(3) and

23 paragraph (2) of section 1505(d) of the Taxpayer

24 Relief Act of 1997 are each amended by striking

25 ‘‘maintained by a State or local government or polit-
130

HR 10 PCS

1 ical subdivision thereof (or agency or instrumentality

2 thereof)’’.

3 (b) CONFORMING AMENDMENTS.—

4 (1) The heading for subparagraph (G) of sec5 tion 401(a)(5) is amended to read as follows: ‘‘GOV6 ERNMENTAL PLANS.—’’.

7 (2) The heading for subparagraph (H) of sec8 tion 401(a)(26) is amended to read as follows: ‘‘EX9 CEPTION FOR GOVERNMENTAL PLANS.—’’.

10 (3) Subparagraph (G) of section 401(k)(3) is

11 amended by inserting ‘‘GOVERNMENTAL PLANS.—’’

12 after ‘‘(G)’’.

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

14 this section shall apply to years beginning after December

15 31, 2001.

16 SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DIS17 TRIBUTIONS.

18 (a) EXPANSION OF PERIOD.—

19 (1) AMENDMENT OF INTERNAL REVENUE

20 CODE.—

21 (A) IN GENERAL.—Subparagraph (A) of

22 section 417(a)(6) is amended by striking ‘‘90-

23 day’’ and inserting ‘‘180-day’’.

24 (B) MODIFICATION OF REGULATIONS.—

25 The Secretary of the Treasury shall modify the
131

HR 10 PCS

1 regulations under sections 402(f), 411(a)(11),

2 and 417 of the Internal Revenue Code of 1986

3 to substitute ‘‘180 days’’ for ‘‘90 days’’ each

4 place it appears in Treasury Regulations sec5 tions 1.402(f)–1, 1.411(a)–11(c), and 1.417(e)–

6 1(b).

7 (2) AMENDMENT OF ERISA.—

8 (A) IN GENERAL.—Section 205(c)(7)(A) of

9 the Employee Retirement Income Security Act

10 of 1974 (29 U.S.C. 1055(c)(7)(A)) is amended

11 by striking ‘‘90-day’’ and inserting ‘‘180-day’’.

12 (B) MODIFICATION OF REGULATIONS.—

13 The Secretary of the Treasury shall modify the

14 regulations under part 2 of subtitle B of title

15 I of the Employee Retirement Income Security

16 Act of 1974 to the extent that they relate to

17 sections 203(e) and 205 of such Act to sub18 stitute ‘‘180 days’’ for ‘‘90 days’’ each place it

19 appears.

20 (3) EFFECTIVE DATE.—The amendments made

21 by paragraph (1)(A) and (2)(A) and the modifica22 tions required by paragraph (1)(B) shall apply to

23 years beginning after December 31, 2001.

24 (b) CONSENT REGULATION INAPPLICABLE TO CER25 TAIN DISTRIBUTIONS.—
132

HR 10 PCS

1 (1) IN GENERAL.—The Secretary of the Treas2 ury shall modify the regulations under section

3 411(a)(11) of the Internal Revenue Code of 1986

4 and under section 205 of the Employee Retirement

5 Income Security Act of 1974 to provide that the de6 scription of a participant’s right, if any, to defer re7 ceipt of a distribution shall also describe the con8 sequences of failing to defer such receipt.

9 (2) EFFECTIVE DATE.—The modifications re10 quired by paragraph (1) shall apply to years begin11 ning after December 31, 2001.

12 SEC. 612. ANNUAL REPORT DISSEMINATION.

13 (a) REPORT AVAILABLE THROUGH ELECTRONIC

14 MEANS.—Section 104(b)(3) of the Employee Retirement

15 Income Security Act of 1974 (29 U.S.C. 1024(b)(3)) is

16 amended by adding at the end the following new sentence:

17 ‘‘The requirement to furnish information under the pre18 vious sentence shall be satisfied if the administrator makes

19 such information reasonably available through electronic

20 means or other new technology.’’.

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

22 this section shall apply to reports for years beginning after

23 December 31, 2000.
133

HR 10 PCS

1 SEC. 613. TECHNICAL CORRECTIONS TO SAVER ACT.

2 Section 517 of the Employee Retirement Income Se3 curity Act of 1974 (29 U.S.C. 1147) is amended—

4 (1) in subsection (a), by striking ‘‘2001 and

5 2005 on or after September 1 of each year involved’’

6 and inserting ‘‘2001, 2005, and 2009 in the month

7 of September of each year involved’’;

8 (2) in subsection (b), by adding at the end the

9 following new sentence: ‘‘To effectuate the purposes

10 of this paragraph, the Secretary may enter into a co11 operative agreement, pursuant to the Federal Grant

12 and Cooperative Agreement Act of 1977 (31 U.S.C.

13 6301 et seq.), with the American Savings Education

14 Council or any other appropriate, qualified entity.’’;

15 (3) in subsection (e)(2)—

16 (A) by striking ‘‘Committee on Labor and

17 Human Resources’’ in subparagraph (D) and

18 inserting ‘‘Committee on Health, Education,

19 Labor, and Pensions’’;

20 (B) by striking subparagraph (F) and in21 serting the following:

22 ‘‘(F) the Chairman and Ranking Member

23 of the Subcommittee on Labor, Health and

24 Human Services, and Education of the Com25 mittee on Appropriations of the House of Rep26 resentatives and the Chairman and Ranking
134

HR 10 PCS

1 Member of the Subcommittee on Labor, Health

2 and Human Services, and Education of the

3 Committee on Appropriations of the Senate;’’;

4 (C) by redesignating subparagraph (G) as

5 subparagraph (J); and

6 (D) by inserting after subparagraph (F)

7 the following new subparagraphs:

8 ‘‘(G) the Chairman and Ranking Member

9 of the Committee on Finance of the Senate;

10 ‘‘(H) the Chairman and Ranking Member

11 of the Committee on Ways and Means of the

12 House of Representatives;

13 ‘‘(I) the Chairman and Ranking Member

14 of the Subcommittee on Employer-Employee

15 Relations of the Committee on Education and

16 the Workforce of the House of Representatives;

17 and’’;

18 (4) in subsection (e)(3)—

19 (A) by striking ‘‘There shall be not more

20 than 200 additional participants.’’ in subpara21 graph (A) and inserting ‘‘The participants in

22 the National Summit shall also include addi23 tional participants appointed under this sub24 paragraph.’’;
135

HR 10 PCS

1 (B) by striking ‘‘one-half shall be ap2 pointed by the President,’’ in subparagraph

3 (A)(i) and inserting ‘‘not more than 100 par4 ticipants shall be appointed under this clause by

5 the President,’’;

6 (C) by striking ‘‘one-half shall be ap7 pointed by the elected leaders of Congress’’ in

8 subparagraph (A)(ii) and inserting ‘‘not more

9 than 100 participants shall be appointed under

10 this clause by the elected leaders of Congress’’;

11 (D) by redesignating subparagraph (B) as

12 subparagraph (C); and

13 (E) by inserting after subparagraph (A)

14 the following new subparagraph:

15 ‘‘(B) PRESIDENTIAL AUTHORITY FOR AD16 DITIONAL APPOINTMENTS.—The President, in

17 consultation with the elected leaders of Con18 gress referred to in subsection (a), may appoint

19 under this subparagraph additional participants

20 to the National Summit. The number of such

21 additional participants appointed under this

22 subparagraph may not exceed the lesser of 3

23 percent of the total number of all additional

24 participants appointed under this paragraph, or

25 10. Such additional participants shall be ap-
136

HR 10 PCS

1 pointed from persons nominated by the organi2 zation referred to in subsection (b)(2) which is

3 made up of private sector businesses and asso4 ciations partnered with Government entities to

5 promote long term financial security in retire6 ment through savings and with which the Sec7 retary is required thereunder to consult and co8 operate and shall not be Federal, State, or local

9 government employees.’’;

10 (5) in subsection (e)(3)(C) (as redesignated), by

11 striking ‘‘January 31, 1998’’ and inserting ‘‘May 1,

12 2001, May 1, 2005, and May 1, 2009, for each of

13 the subsequent summits, respectively’’;

14 (6) in subsection (f)(1)(C), by inserting ‘‘, no

15 later than 90 days prior to the date of the com16 mencement of the National Summit,’’ after ‘‘com17 ment’’;

18 (7) in subsection (g), by inserting ‘‘, in con19 sultation with the congressional leaders specified in

20 subsection (e)(2),’’ after ‘‘report’’ the first place it

21 appears;

22 (8) in subsection (i)—

23 (A) by striking ‘‘beginning on or after Oc24 tober 1, 1997’’ in paragraph (1) and inserting

25 ‘‘2001, 2005, and 2009’’; and
137

HR 10 PCS

1 (B) by adding at the end the following new

2 paragraph:

3 ‘‘(3) RECEPTION AND REPRESENTATION AU4 THORITY.—The Secretary is hereby granted recep5 tion and representation authority limited specifically

6 to the events at the National Summit. The Secretary

7 shall use any private contributions accepted in con8 nection with the National Summit prior to using

9 funds appropriated for purposes of the National

10 Summit pursuant to this paragraph.’’; and

11 (9) in subsection (k)—

12 (A) by striking ‘‘shall enter into a contract

13 on a sole-source basis’’ and inserting ‘‘may

14 enter into a contract on a sole-source basis’’;

15 and

16 (B) by striking ‘‘fiscal year 1998’’ and in17 serting ‘‘fiscal years 2001, 2005, and 2009’’.

18 TITLE VII—OTHER ERISA

19 PROVISIONS

20 SEC. 701. MISSING PARTICIPANTS.

21 (a) IN GENERAL.—Section 4050 of the Employee Re22 tirement Income Security Act of 1974 (29 U.S.C. 1350)

23 is amended by redesignating subsection (c) as subsection

24 (e) and by inserting after subsection (b) the following new

25 subsections:
138

HR 10 PCS

1 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation

2 shall prescribe rules similar to the rules in subsection (a)

3 for multiemployer plans covered by this title that termi4 nate under section 4041A.

5 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—

6 ‘‘(1) TRANSFER TO CORPORATION.—The plan

7 administrator of a plan described in paragraph (4)

8 may elect to transfer a missing participant’s benefits

9 to the corporation upon termination of the plan.

10 ‘‘(2) INFORMATION TO THE CORPORATION.—To

11 the extent provided in regulations, the plan adminis12 trator of a plan described in paragraph (4) shall,

13 upon termination of the plan, provide the corpora14 tion information with respect to benefits of a miss15 ing participant if the plan transfers such benefits—

16 ‘‘(A) to the corporation, or

17 ‘‘(B) to an entity other than the corpora18 tion or a plan described in paragraph (4)(B)(ii).

19 ‘‘(3) PAYMENT BY THE CORPORATION.—If ben20 efits of a missing participant were transferred to the

21 corporation under paragraph (1), the corporation

22 shall, upon location of the participant or beneficiary,

23 pay to the participant or beneficiary the amount

24 transferred (or the appropriate survivor benefit)

25 either—
139

HR 10 PCS

1 ‘‘(A) in a single sum (plus interest), or

2 ‘‘(B) in such other form as is specified in

3 regulations of the corporation.

4 ‘‘(4) PLANS DESCRIBED.—A plan is described

5 in this paragraph if—

6 ‘‘(A) the plan is a pension plan (within the

7 meaning of section 3(2))—

8 ‘‘(i) to which the provisions of this

9 section do not apply (without regard to

10 this subsection), and

11 ‘‘(ii) which is not a plan described in

12 paragraphs (2) through (11) of section

13 4021(b), and

14 ‘‘(B) at the time the assets are to be dis15 tributed upon termination, the plan—

16 ‘‘(i) has missing participants, and

17 ‘‘(ii) has not provided for the transfer

18 of assets to pay the benefits of all missing

19 participants to another pension plan (with20 in the meaning of section 3(2)).

21 ‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—

22 Subsections (a)(1) and (a)(3) shall not apply to a

23 plan described in paragraph (4).’’.

24 (b) CONFORMING AMENDMENTS.—Section 206(f) of

25 such Act (29 U.S.C. 1056(f)) is amended—
140

HR 10 PCS

1 (1) by striking ‘‘title IV’’ and inserting ‘‘section

2 4050’’; and

3 (2) by striking ‘‘the plan shall provide that,’’.

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

5 this section shall apply to distributions made after final

6 regulations implementing subsections (c) and (d) of sec7 tion 4050 of the Employee Retirement Income Security

8 Act of 1974 (as added by subsection (a)), respectively, are

9 prescribed.

10 SEC. 702. REDUCED PBGC PREMIUM FOR NEW PLANS OF

11 SMALL EMPLOYERS.

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

13 4006(a)(3) of the Employee Retirement Income Security

14 Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is amended—

15 (1) in clause (i), by inserting ‘‘other than a new

16 single-employer plan (as defined in subparagraph

17 (F)) maintained by a small employer (as so de18 fined),’’ after ‘‘single-employer plan,’’,

19 (2) in clause (iii), by striking the period at the

20 end and inserting ‘‘, and’’, and

21 (3) by adding at the end the following new

22 clause:

23 ‘‘(iv) in the case of a new single-employer plan

24 (as defined in subparagraph (F)) maintained by a

25 small employer (as so defined) for the plan year, $5
141

HR 10 PCS

1 for each individual who is a participant in such plan

2 during the plan year.’’.

3 (b) DEFINITION OF NEW SINGLE-EMPLOYER

4 PLAN.—Section 4006(a)(3) of the Employee Retirement

5 Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is

6 amended by adding at the end the following new subpara7 graph:

8 ‘‘(F)(i) For purposes of this paragraph, a single-em9 ployer plan maintained by a contributing sponsor shall be

10 treated as a new single-employer plan for each of its first

11 5 plan years if, during the 36-month period ending on the

12 date of the adoption of such plan, the sponsor or any

13 member of such sponsor’s controlled group (or any prede14 cessor of either) did not establish or maintain a plan to

15 which this title applies with respect to which benefits were

16 accrued for substantially the same employees as are in the

17 new single-employer plan.

18 ‘‘(ii)(I) For purposes of this paragraph, the term

19 ‘small employer’ means an employer which on the first day

20 of any plan year has, in aggregation with all members of

21 the controlled group of such employer, 100 or fewer em22 ployees.

23 ‘‘(II) In the case of a plan maintained by two or more

24 contributing sponsors that are not part of the same con25 trolled group, the employees of all contributing sponsors
142

HR 10 PCS

1 and controlled groups of such sponsors shall be aggregated

2 for purposes of determining whether any contributing

3 sponsor is a small employer.’’.

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

5 this section shall apply to plans established after Decem6 ber 31, 2001.

7 SEC. 703. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR

8 NEW AND SMALL PLANS.

9 (a) NEW PLANS.—Subparagraph (E) of section

10 4006(a)(3) of the Employee Retirement Income Security

11 Act of 1974 (29 U.S.C. 1306(a)(3)(E)) is amended by

12 adding at the end the following new clause:

13 ‘‘(v) In the case of a new defined benefit plan, the

14 amount determined under clause (ii) for any plan year

15 shall be an amount equal to the product of the amount

16 determined under clause (ii) and the applicable percent17 age. For purposes of this clause, the term ‘applicable per18 centage’ means—

19 ‘‘(I) 0 percent, for the first plan year.

20 ‘‘(II) 20 percent, for the second plan year.

21 ‘‘(III) 40 percent, for the third plan year.

22 ‘‘(IV) 60 percent, for the fourth plan year.

23 ‘‘(V) 80 percent, for the fifth plan year.

24 For purposes of this clause, a defined benefit plan (as de25 fined in section 3(35)) maintained by a contributing spon-
143

HR 10 PCS

1 sor shall be treated as a new defined benefit plan for each

2 of its first 5 plan years if, during the 36-month period

3 ending on the date of the adoption of the plan, the sponsor

4 and each member of any controlled group including the

5 sponsor (or any predecessor of either) did not establish

6 or maintain a plan to which this title applies with respect

7 to which benefits were accrued for substantially the same

8 employees as are in the new plan.’’.

9 (b) SMALL PLANS.—Paragraph (3) of section

10 4006(a) of the Employee Retirement Income Security Act

11 of 1974 (29 U.S.C. 1306(a)), as amended by section

12 702(b), is amended—

13 (1) by striking ‘‘The’’ in subparagraph (E)(i)

14 and inserting ‘‘Except as provided in subparagraph

15 (G), the’’, and

16 (2) by inserting after subparagraph (F) the fol17 lowing new subparagraph:

18 ‘‘(G)(i) In the case of an employer who has 25 or

19 fewer employees on the first day of the plan year, the addi20 tional premium determined under subparagraph (E) for

21 each participant shall not exceed $5 multiplied by the

22 number of participants in the plan as of the close of the

23 preceding plan year.

24 ‘‘(ii) For purposes of clause (i), whether an employer

25 has 25 or fewer employees on the first day of the plan
144

HR 10 PCS

1 year is determined taking into consideration all of the em2 ployees of all members of the contributing sponsor’s con3 trolled group. In the case of a plan maintained by two

4 or more contributing sponsors, the employees of all con5 tributing sponsors and their controlled groups shall be ag6 gregated for purposes of determining whether the 25-or7 fewer-employees limitation has been satisfied.’’.

8 (c) EFFECTIVE DATES.—

9 (1) SUBSECTION (a).—The amendments made

10 by subsection (a) shall apply to plans established

11 after December 31, 2001.

12 (2) SUBSECTION (b).—The amendments made

13 by subsection (b) shall apply to plan years beginning

14 after December 31, 2001.

15 SEC. 704. AUTHORIZATION FOR PBGC TO PAY INTEREST ON

16 PREMIUM OVERPAYMENT REFUNDS.

17 (a) IN GENERAL.—Section 4007(b) of the Employ18 ment Retirement Income Security Act of 1974 (29 U.S.C.

19 1307(b)) is amended—

20 (1) by striking ‘‘(b)’’ and inserting ‘‘(b)(1)’’,

21 and

22 (2) by inserting at the end the following new

23 paragraph:

24 ‘‘(2) The corporation is authorized to pay, subject to

25 regulations prescribed by the corporation, interest on the
145

HR 10 PCS

1 amount of any overpayment of premium refunded to a des2 ignated payor. Interest under this paragraph shall be cal3 culated at the same rate and in the same manner as inter4 est is calculated for underpayments under paragraph

5 (1).’’.

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

7 subsection (a) shall apply to interest accruing for periods

8 beginning not earlier than the date of the enactment of

9 this Act.

10 SEC. 705. SUBSTANTIAL OWNER BENEFITS IN TERMINATED

11 PLANS.

12 (a) MODIFICATION OF PHASE-IN OF GUARANTEE.—

13 Section 4022(b)(5) of the Employee Retirement Income

14 Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended

15 to read as follows:

16 ‘‘(5)(A) For purposes of this paragraph, the term

17 ‘majority owner’ means an individual who, at any time

18 during the 60-month period ending on the date the deter19 mination is being made—

20 ‘‘(i) owns the entire interest in an unincor21 porated trade or business,

22 ‘‘(ii) in the case of a partnership, is a partner

23 who owns, directly or indirectly, 50 percent or more

24 of either the capital interest or the profits interest

25 in such partnership, or
146

HR 10 PCS

1 ‘‘(iii) in the case of a corporation, owns, directly

2 or indirectly, 50 percent or more in value of either

3 the voting stock of that corporation or all the stock

4 of that corporation.

5 For purposes of clause (iii), the constructive ownership

6 rules of section 1563(e) of the Internal Revenue Code of

7 1986 shall apply (determined without regard to section

8 1563(e)(3)(C)).

9 ‘‘(B) In the case of a participant who is a majority

10 owner, the amount of benefits guaranteed under this sec11 tion shall equal the product of—

12 ‘‘(i) a fraction (not to exceed 1) the numerator

13 of which is the number of years from the later of the

14 effective date or the adoption date of the plan to the

15 termination date, and the denominator of which is

16 10, and

17 ‘‘(ii) the amount of benefits that would be guar18 anteed under this section if the participant were not

19 a majority owner.’’.

20 (b) MODIFICATION OF ALLOCATION OF ASSETS.—

21 (1) Section 4044(a)(4)(B) of the Employee Re22 tirement Income Security Act of 1974 (29 U.S.C.

23 1344(a)(4)(B)) is amended by striking ‘‘section

24 4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.
147

HR 10 PCS

1 (2) Section 4044(b) of such Act (29 U.S.C.

2 1344(b)) is amended—

3 (A) by striking ‘‘(5)’’ in paragraph (2) and

4 inserting ‘‘(4), (5),’’, and

5 (B) by redesignating paragraphs (3)

6 through (6) as paragraphs (4) through (7), re7 spectively, and by inserting after paragraph (2)

8 the following new paragraph:

9 ‘‘(3) If assets available for allocation under

10 paragraph (4) of subsection (a) are insufficient to

11 satisfy in full the benefits of all individuals who are

12 described in that paragraph, the assets shall be allo13 cated first to benefits described in subparagraph (A)

14 of that paragraph. Any remaining assets shall then

15 be allocated to benefits described in subparagraph

16 (B) of that paragraph. If assets allocated to such

17 subparagraph (B) are insufficient to satisfy in full

18 the benefits described in that subparagraph, the as19 sets shall be allocated pro rata among individuals on

20 the basis of the present value (as of the termination

21 date) of their respective benefits described in that

22 subparagraph.’’.

23 (c) CONFORMING AMENDMENTS.—
148

HR 10 PCS

1 (1) Section 4021 of the Employee Retirement

2 Income Security Act of 1974 (29 U.S.C. 1321) is

3 amended—

4 (A) in subsection (b)(9), by striking ‘‘as

5 defined in section 4022(b)(6)’’, and

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

7 subsection:

8 ‘‘(d) For purposes of subsection (b)(9), the term ‘sub9 stantial owner’ means an individual who, at any time dur10 ing the 60-month period ending on the date the determina11 tion is being made—

12 ‘‘(1) owns the entire interest in an unincor13 porated trade or business,

14 ‘‘(2) in the case of a partnership, is a partner

15 who owns, directly or indirectly, more than 10 per16 cent of either the capital interest or the profits inter17 est in such partnership, or

18 ‘‘(3) in the case of a corporation, owns, directly

19 or indirectly, more than 10 percent in value of either

20 the voting stock of that corporation or all the stock

21 of that corporation.

22 For purposes of paragraph (3), the constructive ownership

23 rules of section 1563(e) of the Internal Revenue Code of

24 1986 shall apply (determined without regard to section

25 1563(e)(3)(C)).’’.
149

HR 10 PCS

1 (2) Section 4043(c)(7) of such Act (29 U.S.C.

2 1343(c)(7)) is amended by striking ‘‘section 4022(b)(6)’’

3 and inserting ‘‘section 4021(d)’’.

4 (d) EFFECTIVE DATES.—

5 (1) IN GENERAL.—Except as provided in para6 graph (2), the amendments made by this section

7 shall apply to plan terminations—

8 (A) under section 4041(c) of the Employee

9 Retirement Income Security Act of 1974 (29

10 U.S.C. 1341(c)) with respect to which notices

11 of intent to terminate are provided under sec12 tion 4041(a)(2) of such Act (29 U.S.C.

13 1341(a)(2)) after December 31, 2001, and

14 (B) under section 4042 of such Act (29

15 U.S.C. 1342) with respect to which proceedings

16 are instituted by the corporation after such

17 date.

18 (2) CONFORMING AMENDMENTS.—The amend19 ments made by subsection (c) shall take effect on

20 January 1, 2002.

21 SEC. 706. CIVIL PENALTIES FOR BREACH OF FIDUCIARY

22 RESPONSIBILITY.

23 (a) IMPOSITION AND AMOUNT OF PENALTY MADE

24 DISCRETIONARY.—Section 502(l)(1) of the Employee Re-
150

HR 10 PCS

1 tirement Income Security Act of 1974 (29 U.S.C.

2 1132(l)(1)) 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

9 by inserting after ‘‘fiduciary or other person’’ the fol10 lowing: ‘‘(or from any other person on behalf of any such

11 fiduciary or other person)’’.

12 (c) OTHER RULES.—Section 502(l) of the Employee

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

14 1132(l)) is amended by adding at the end the following

15 new paragraphs:

16 ‘‘(5) A person shall be jointly and severally liable for

17 the penalty described in paragraph (1) to the same extent

18 that such person is jointly and severally liable for the ap19 plicable recovery amount on which the penalty is based.

20 ‘‘(6) No penalty shall be assessed under this sub21 section unless the person against whom the penalty is as22 sessed is given notice and opportunity for a hearing with

23 respect to the violation and applicable recovery amount.’’.

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

25 this section shall apply to any breach of fiduciary responsi-
151

HR 10 PCS

1 bility or other violation of part 4 of subtitle B of title I

2 of the Employee Retirement Income Security Act of 1974

3 occurring on or after the date of the enactment of this

4 Act.

5 SEC. 707. BENEFIT SUSPENSION NOTICE.

6 (a) MODIFICATION OF REGULATION.—The Secretary

7 of Labor shall modify the regulation under subparagraph

8 (B) of section 203(a)(3) of the Employee Retirement In9 come Security Act of 1974 (29 U.S.C. 1053(a)(3)(B)) to

10 provide that the notification required by such regulation

11 in connection with any suspension of benefits described in

12 such subparagraph—

13 (1) in the case of an employee who returns to

14 service under the plan after commencement of pay15 ment of benefits under the plan—

16 (A) shall be made during the first calendar

17 month or payroll period in which the plan with18 holds payments, and

19 (B) if a reduced rate of future benefit ac20 crual will apply to the returning employee (as

21 of the first date of participation in the plan by

22 the employee after returning to work), shall in23 clude a statement that the rate of future benefit

24 accrual will be reduced, and
152

HR 10 PCS

1 (2) in the case of any employee who is not de2 scribed in paragraph (1)—

3 (A) may be included in the summary plan

4 description for the plan furnished in accordance

5 with section 104(b) of such Act (29 U.S.C.

6 1024(b)), rather than in a separate notice, and

7 (B) need not include a copy of the relevant

8 plan provisions.

9 (b) EFFECTIVE DATE.—The modification made

10 under this section shall apply to plan years beginning after

11 December 31, 2001.

12 SEC. 708. STUDIES.

13 (a) MODEL SMALL EMPLOYER GROUP PLANS

14 STUDY.—As soon as practicable after the date of the en15 actment of this Act, the Secretary of Labor, in consulta16 tion with the Secretary of the Treasury, shall conduct a

17 study to determine—

18 (1) the most appropriate form or forms of—

19 (A) employee pension benefit plans which

20 would—

21 (i) be simple in form and easily main22 tained by multiple small employers, and

23 (ii) provide for ready portability of

24 benefits for all participants and bene25 ficiaries,
153

HR 10 PCS

1 (B) alternative arrangements providing

2 comparable benefits which may be established

3 by employee or employer associations, and

4 (C) alternative arrangements providing

5 comparable benefits to which employees may

6 contribute in a manner independent of employer

7 sponsorship, and

8 (2) appropriate methods and strategies for

9 making pension plan coverage described in para10 graph (1) more widely available to American work11 ers.

12 (b) MATTERS TO BE CONSIDERED.—In conducting

13 the study under subsection (a), the Secretary of Labor

14 shall consider the adequacy and availability of existing em15 ployee pension benefit plans and the extent to which exist16 ing models may be modified to be more accessible to both

17 employees and employers.

18 (c) REPORT.—Not later than 18 months after the

19 date of the enactment of this Act, the Secretary of Labor

20 shall report the results of the study under subsection (a),

21 together with the Secretary’s recommendations, to the

22 Committee on Education and the Workforce and the Com23 mittee on Ways and Means of the House of Representa24 tives and the Committee on Health, Education, Labor,

25 and Pensions and the Committee on Finance of the Sen-
154

HR 10 PCS

1 ate. Such recommendations shall include one or more

2 model plans described in subsection (a)(1)(A) and model

3 alternative arrangements described in subsections

4 (a)(1)(B) and (a)(1)(C) which may serve as the basis for

5 appropriate administrative or legislative action.

6 (d) STUDY ON EFFECT OF LEGISLATION.—Not later

7 than 5 years after the date of the enactment of this Act,

8 the Secretary of Labor shall submit to the Committee on

9 Education and the Workforce of the House of Representa10 tives and the Committee on Health, Education, Labor,

11 and Pensions of the Senate a report on the effect of the

12 provisions of this Act on pension plan coverage, including

13 any change in—

14 (1) the extent of pension plan coverage for low

15 and middle-income workers,

16 (2) the levels of pension plan benefits generally,

17 (3) the quality of pension plan coverage gen18 erally,

19 (4) workers’ access to and participation in pen20 sion plans, and

21 (5) retirement security.

22 TITLE VIII—PLAN AMENDMENTS

23 SEC. 801. PROVISIONS RELATING TO PLAN AMENDMENTS.

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

25 or contract amendment—
155

HR 10 PCS

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

2 being operated in accordance with the terms of the

3 plan during the period described in subsection

4 (b)(2)(A); and

5 (2) except as provided by the Secretary of the

6 Treasury, such plan shall not fail to meet the re7 quirements of section 411(d)(6) of the Internal Rev8 enue Code of 1986 or section 204(g) of the Em9 ployee Retirement Income Security Act of 1974 by

10 reason of such amendment.

11 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

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

13 any amendment to any plan or annuity contract

14 which is made—

15 (A) pursuant to any amendment made by

16 this Act, or pursuant to any regulation issued

17 under this Act; and

18 (B) on or before the last day of the first

19 plan year beginning on or after January 1,

20 2004.

21 In the case of a governmental plan (as defined in

22 section 414(d) of the Internal Revenue Code of

23 1986), this paragraph shall be applied by sub24 stituting ‘‘2006’’ for ‘‘2004’’.
156

HR 10 PCS

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

2 to any amendment unless—

3 (A) during the period—

4 (i) beginning on the date the legisla5 tive or regulatory amendment described in

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

7 case of a plan or contract amendment not

8 required by such legislative or regulatory

9 amendment, the effective date specified by

10 the plan); and

11 (ii) ending on the date described in

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

13 the plan or contract amendment is adopt14 ed),

15 the plan or contract is operated as if such plan

16 or contract amendment were in effect; and
157

HR 10 PCS

1 (B) such plan or contract amendment ap2 plies retroactively for such period.

Passed the House of Representatives May 2, 2001.

Attest: JEFF TRANDAHL,

Clerk.

By MARTHA C. MORRISON,

Deputy Clerk.
Calendar No. 69

107TH CONGRESS

1ST SESSION H. R. 10

AN ACT

To provide for pension reform, and for other

purposes.

JUNE 7, 2001

Read the second time and placed on the calendar