I

107TH CONGRESS

1ST SESSION H. R. 10

To provide for pension reform, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 14, 2001

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Carolina, Mr. KANJORSKI, Mrs. KELLY, Mr. KENNEDY of Rhode Island,

Mr. KILDEE, Mr. KIND, Mr. KING, Mr. KINGSTON, Mr. KIRK, Mr.

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

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

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

Mr. LATOURETTE, Mr. LEACH, Mr. LEWIS of Kentucky, Mr. LOBIONDO,
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Ms. LOFGREN, Mrs. LOWEY, Mr. LUCAS of Oklahoma, Mr. LUCAS of

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Alaska) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Education and the Workforce, for a period to be subsequently determined by

the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

A BILL

To provide for pension reform, and for other purposes.

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

TITLE III—ENHANCING FAIRNESS FOR WOMEN

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

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

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

Sec. 304. Simplify and update the minimum distribution rules.

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

upon divorce.
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Sec. 306. Modification of safe harbor relief for hardship withdrawals from cash

or deferred arrangements.

TITLE IV—INCREASING PORTABILITY FOR PARTICIPANTS

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

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

Sec. 403. Rollovers of after-tax contributions.

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

Sec. 405. Treatment of forms of distribution.

Sec. 406. Rationalization of restrictions on distributions.

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

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

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

plans.

TITLE V—STRENGTHENING PENSION SECURITY AND

ENFORCEMENT

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

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

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

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

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

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

Sec. 507. Periodic pension benefits statements.

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

TITLE VI—REDUCING REGULATORY BURDENS

Sec. 601. Modification of timing of plan valuations.

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

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

Sec. 604. Employees of tax-exempt entities.

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

Sec. 606. Reporting simplification.

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

Sec. 608. Repeal of the multiple use test.

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

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

certain nondiscrimination rules applicable to State and local

plans.

Sec. 611. Notice and consent period regarding distributions.

Sec. 612. Annual report dissemination.

Sec. 613. Technical corrections to SAVER Act.

TITLE VII—OTHER ERISA PROVISIONS

Sec. 701. Missing participants.

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

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

Sec. 704. Authorization for PBGC to pay interest on premium overpayment refunds.
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Sec. 705. Substantial owner benefits in terminated plans.

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

Sec. 707. Benefit suspension notice.

TITLE VIII—PLAN AMENDMENTS

Sec. 801. Provisions relating to plan amendments.

1 TITLE I—INDIVIDUAL

2 RETIREMENT ACCOUNTS

3 SEC. 101. MODIFICATION OF IRA CONTRIBUTION LIMITS.

4 (a) INCREASE IN CONTRIBUTION LIMIT.—

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:

2001 ............................................................................. $3,000

2002 ............................................................................. $4,000

2003 and thereafter ..................................................... $5,000.

17 ‘‘(B) CATCH-UP CONTRIBUTIONS FOR INDI18 VIDUALS 50 OR OLDER.—In the case of an indi19 vidual who has attained the age of 50 before
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1 the close of the taxable year, the deductible

2 amount for taxable years beginning in 2001 or

3 2002 shall be $5,000.

4 ‘‘(C) COST-OF-LIVING ADJUSTMENT.—

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

6 taxable year beginning in a calendar year

7 after 2003, the $5,000 amount under sub8 paragraph (A) shall be increased by an

9 amount equal to—

10 ‘‘(I) such dollar amount, multi11 plied by

12 ‘‘(II) the cost-of-living adjust13 ment determined under section

14 1(f )(3) for the calendar year in which

15 the taxable year begins, determined by

16 substituting ‘calendar year 2002’ for

17 ‘calendar year 1992’ in subparagraph

18 (B) thereof.

19 ‘‘(ii) ROUNDING RULES.—If any

20 amount after adjustment under clause (i)

21 is not a multiple of $500, such amount

22 shall be rounded to the next lower multiple

23 of $500.’’.

24 (b) CONFORMING AMENDMENTS.—
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1 (1) Section 408(a)(1) is amended by striking

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

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

4 of the amount in effect for such taxable year under

5 section 219(b)(1)(A)’’.

6 (2) Section 408(b)(2)(B) is amended by strik7 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

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

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

10 ‘‘$2,000’’ in the matter following paragraph (4) and

11 inserting ‘‘the dollar amount in effect under section

12 219(b)(1)(A)’’.

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

14 ‘‘$2,000’’.

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

16 ‘‘$2,000’’ and inserting ‘‘the dollar amount in effect

17 under section 219(b)(1)(A)’’.

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

19 this section shall apply to taxable years beginning after

20 December 31, 2000.

21 TITLE II—EXPANDING

22 COVERAGE

23 SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION

24 LIMITS.

25 (a) DEFINED BENEFIT PLANS.—
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1 (1) DOLLAR LIMIT.—

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

3 (relating to limitation for defined benefit plans)

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

5 ‘‘$160,000’’.

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

7 415(b)(2) are each amended by striking

8 ‘‘$90,000’’ each place it appears in the head9 ings and the text and inserting ‘‘$160,000’’.

10 (C) Paragraph (7) of section 415(b) (relat11 ing to benefits under certain collectively bar12 gained plans) is amended by striking ‘‘the

13 greater of $68,212 or one-half the amount oth14 erwise applicable for such year under paragraph

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

16 the amount otherwise applicable for such year

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

18 (2) LIMIT REDUCED WHEN BENEFIT BEGINS

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

20 415(b)(2) is amended by striking ‘‘the social security

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

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

23 second sentence.

24 (3) LIMIT INCREASED WHEN BENEFIT BEGINS

25 AFTER AGE 65.—Subparagraph (D) of section
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1 415(b)(2) is amended by striking ‘‘the social security

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

3 and text and inserting ‘‘age 65’’.

4 (4) COST-OF-LIVING ADJUSTMENTS.—Sub5 section (d) of section 415 (related to cost-of-living

6 adjustments) is amended—

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

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

9 (B) in paragraph (3)(A)—

10 (i) by striking ‘‘$90,000’’ in the head11 ing and inserting ‘‘$160,000’’; and

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

13 inserting ‘‘July 1, 2000’’.

14 (5) CONFORMING AMENDMENTS.—

15 (A) Section 415(b)(2) is amended by strik16 ing subparagraph (F).

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

18 as follows:

19 ‘‘(9) SPECIAL RULE FOR COMMERCIAL AIR20 LINE PILOTS.—

21 ‘‘(A) IN GENERAL.—Except as pro22 vided in subparagraph (B), in the case of

23 any participant who is a commercial airline

24 pilot, if, as of the time of the participant’s

25 retirement, regulations prescribed by the
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1 Federal Aviation Administration require an

2 individual to separate from service as a

3 commercial airline pilot after attaining any

4 age occurring on or after age 60 and be5 fore age 62, paragraph (2)(C) shall be ap6 plied by substituting such age for age 62.

7 ‘‘(B) INDIVIDUALS WHO SEPARATE

8 FROM SERVICE BEFORE AGE 60.—If a par9 ticipant described in subparagraph (A)

10 separates from service before age 60, the

11 rules of paragraph (2)(C) shall apply.’’.

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

13 by striking ‘‘applied without regard to para14 graph (2)(F)’’.

15 (b) DEFINED CONTRIBUTION PLANS.—

16 (1) DOLLAR LIMIT.—Subparagraph (A) of sec17 tion 415(c)(1) (relating to limitation for defined con18 tribution plans) is amended by striking ‘‘$30,000’’

19 and inserting ‘‘$40,000’’.

20 (2) COST-OF-LIVING ADJUSTMENTS.—Sub21 section (d) of section 415 (related to cost-of-living

22 adjustments) is amended—

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

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

25 (B) in paragraph (3)(D)—
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1 (i) by striking ‘‘$30,000’’ in the head2 ing and inserting ‘‘$40,000’’; and

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

4 inserting ‘‘July 1, 2000’’.

5 (c) QUALIFIED TRUSTS.—

6 (1) COMPENSATION LIMIT.—Sections

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

8 amended by striking ‘‘$150,000’’ each place it ap9 pears and inserting ‘‘$200,000’’.

10 (2) BASE PERIOD AND ROUNDING OF COST-OF11 LIVING ADJUSTMENT.—Subparagraph (B) of section

12 401(a)(17) is amended—

13 (A) by striking ‘‘October 1, 1993’’ and in14 serting ‘‘July 1, 2000’’; and

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

16 appears and inserting ‘‘$5,000’’.

17 (d) ELECTIVE DEFERRALS.—

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

19 402(g) (relating to limitation on exclusion for elec20 tive deferrals) is amended to read as follows:

21 ‘‘(1) IN GENERAL.—

22 ‘‘(A) LIMITATION.—Notwithstanding sub23 sections (e)(3) and (h)(1)(B), the elective defer24 rals of any individual for any taxable year shall

25 be included in such individual’s gross income to
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1 the extent the amount of such deferrals for the

2 taxable year exceeds the applicable dollar

3 amount.

4 ‘‘(B) APPLICABLE DOLLAR AMOUNT.—For

5 purposes of subparagraph (A), the applicable

6 dollar amount shall be the amount determined

7 in accordance with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 ............................................................................. $11,000

2002 ............................................................................. $12,000

2003 ............................................................................. $13,000

2004 ............................................................................. $14,000

2005 or thereafter ........................................................ $15,000.’’.

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

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

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

11 case of taxable years beginning after December 31,

12 2005, the Secretary shall adjust the $15,000

13 amount under paragraph (1)(B) at the same time

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

15 except that the base period shall be the calendar

16 quarter beginning July 1, 2004, and any increase

17 under this paragraph which is not a multiple of

18 $500 shall be rounded to the next lowest multiple of

19 $500.’’.

20 (3) CONFORMING AMENDMENTS.—
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1 (A) Section 402(g) (relating to limitation

2 on exclusion for elective deferrals), as amended

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

4 by striking paragraph (4) and redesignating

5 paragraphs (5), (6), (7), (8), and (9) as para6 graphs (4), (5), (6), (7), and (8), respectively.

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

8 amended by striking ‘‘402(g)(8)(A)(iii)’’ and in9 serting ‘‘402(g)(7)(A)(iii)’’.

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

11 amended by striking ‘‘(other than paragraph

12 (4) thereof)’’.

13 (e) DEFERRED COMPENSATION PLANS OF STATE

14 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI15 ZATIONS.—

16 (1) IN GENERAL.—Section 457 (relating to de17 ferred compensation plans of State and local govern18 ments and tax-exempt organizations) is amended—

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

20 striking ‘‘$7,500’’ each place it appears and in21 serting ‘‘the applicable dollar amount’’; and

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

23 ‘‘$15,000’’ and inserting ‘‘twice the dollar

24 amount in effect under subsection (b)(2)(A)’’.
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1 (2) APPLICABLE DOLLAR AMOUNT; COST-OF2 LIVING ADJUSTMENT.—Paragraph (15) of section

3 457(e) is amended to read as follows:

4 ‘‘(15) APPLICABLE DOLLAR AMOUNT.—

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

6 amount shall be the amount determined in ac7 cordance with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 ............................................................................. $11,000

2002 ............................................................................. $12,000

2003 ............................................................................. $13,000

2004 ............................................................................. $14,000

2005 or thereafter ........................................................ $15,000.

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

9 the case of taxable years beginning after De10 cember 31, 2005, the Secretary shall adjust the

11 $15,000 amount under subparagraph (A) at the

12 same time and in the same manner as under

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

14 be the calendar quarter beginning July 1, 2004,

15 and any increase under this paragraph which is

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

17 next lowest multiple of $500.’’.

18 (f) SIMPLE RETIREMENT ACCOUNTS.—

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

20 408(p)(2)(A) (relating to general rule for qualified

21 salary reduction arrangement) is amended by strik-
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1 ing ‘‘$6,000’’ and inserting ‘‘the applicable dollar

2 amount’’.

3 (2) APPLICABLE DOLLAR AMOUNT.—Subpara4 graph (E) of 408(p)(2) is amended to read as fol5 lows:

6 ‘‘(E) APPLICABLE DOLLAR AMOUNT; COST7 OF-LIVING ADJUSTMENT.—

8 ‘‘(i) IN GENERAL.—For purposes of

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

10 amount shall be the amount determined in

11 accordance with the following table:

‘‘For taxable years The applicable

beginning in dollar amount:

calendar year:

2001 ...................................................................... $7,000

2002 ...................................................................... $8,000

2003 ...................................................................... $9,000

2004 or thereafter ................................................ $10,000.

12 ‘‘(ii) COST-OF-LIVING ADJUSTMENT.—

13 In the case of a year beginning after De14 cember 31, 2004, the Secretary shall ad15 just the $10,000 amount under clause (i)

16 at the same time and in the same manner

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

18 base period taken into account shall be the

19 calendar quarter beginning July 1, 2003,

20 and any increase under this subparagraph

21 which is not a multiple of $500 shall be
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1 rounded to the next lower multiple of

2 $500.’’.

3 (3) CONFORMING AMENDMENTS.—

4 (A) Subclause (I) of section

5 401(k)(11)(B)(i) is amended by striking

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

7 under section 408(p)(2)(A)(ii)’’.

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

9 striking subparagraph (E).

10 (g) ROUNDING RULE RELATING TO DEFINED BEN11 EFIT PLANS AND DEFINED CONTRIBUTION PLANS.—

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

13 follows:

14 ‘‘(4) ROUNDING.—

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

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

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

18 the next lowest multiple of $5,000.

19 ‘‘(B) $40,000 AMOUNT.—Any increase

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

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

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

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

24 this section shall apply to years beginning after December

25 31, 2000.
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1 SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART2 NERS, AND SOLE PROPRIETORS.

3 (a) AMENDMENT OF INTERNAL REVENUE CODE.—

4 Subparagraph (B) of section 4975(f)(6) (relating to ex5 emptions not to apply to certain transactions) is amended

6 by adding at the end the following new clause:

7 ‘‘(iii) LOAN EXCEPTION.—For pur8 poses of subparagraph (A)(i), the term

9 ‘owner-employee’ shall only include a per10 son described in subclause (II) or (III) of

11 clause (i).’’.

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

13 the Employee Retirement Income Security Act of 1974

14 (29 U.S.C. 1108(d)(2)) is amended by adding at the end

15 the following new subparagraph:

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

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

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

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

20 this section shall apply to years beginning after December

21 31, 2001.

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

23 (a) SIMPLIFICATION OF DEFINITION OF KEY EM24 PLOYEE.—

25 (1) IN GENERAL.—Section 416(i)(1)(A) (defin26 ing key employee) is amended—
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1 (A) by striking ‘‘or any of the 4 preceding

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

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

4 following:

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

6 an annual compensation greater than

7 $150,000,’’;

8 (C) by striking clause (ii) and redesig9 nating clauses (iii) and (iv) as clauses (ii) and

10 (iii), respectively; and

11 (D) by striking the second sentence in the

12 matter following clause (iii), as redesignated by

13 subparagraph (C).

14 (2) CONFORMING AMENDMENT.—Section

15 416(i)(1)(B)(iii) is amended by striking ‘‘and sub16 paragraph (A)(ii)’’.

17 (b) MATCHING CONTRIBUTIONS TAKEN INTO AC18 COUNT FOR MINIMUM CONTRIBUTION REQUIREMENTS.—

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

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

21 ‘‘Employer matching contributions (as defined in section

22 401(m)(4)(A)) shall be taken into account for purposes

23 of this subparagraph.’’.

24 (c) DISTRIBUTIONS DURING LAST YEAR BEFORE

25 DETERMINATION DATE TAKEN INTO ACCOUNT.—
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1 (1) IN GENERAL.—Paragraph (3) of section

2 416(g) is amended to read as follows:

3 ‘‘(3) DISTRIBUTIONS DURING LAST YEAR BE4 FORE DETERMINATION DATE TAKEN INTO AC5 COUNT.—

6 ‘‘(A) IN GENERAL.—For purposes of

7 determining—

8 ‘‘(i) the present value of the cumu9 lative accrued benefit for any employee, or

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

11 employee,

12 such present value or amount shall be increased

13 by the aggregate distributions made with re14 spect to such employee under the plan during

15 the 1-year period ending on the determination

16 date. The preceding sentence shall also apply to

17 distributions under a terminated plan which if

18 it had not been terminated would have been re19 quired to be included in an aggregation group.

20 ‘‘(B) 5-YEAR PERIOD IN CASE OF IN-SERV21 ICE DISTRIBUTION.—In the case of any dis22 tribution made for a reason other than separa23 tion from service, death, or disability, subpara24 graph (A) shall be applied by substituting ‘5-

25 year period’ for ‘1-year period’.’’.
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1 (2) BENEFITS NOT TAKEN INTO ACCOUNT.—

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

3 amended—

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

5 heading and inserting ‘‘LAST YEAR BEFORE DE6 TERMINATION DATE’’; and

7 (B) by striking ‘‘5-year period’’ and insert8 ing ‘‘1-year period’’.

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

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

11 top-heavy plans) is amended by adding at the end the fol12 lowing new subparagraph:

13 ‘‘(H) CASH OR DEFERRED ARRANGEMENTS

14 USING ALTERNATIVE METHODS OF MEETING

15 NONDISCRIMINATION REQUIREMENTS.—The

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

17 which consists solely of—

18 ‘‘(i) a cash or deferred arrangement

19 which meets the requirements of section

20 401(k)(12), and

21 ‘‘(ii) matching contributions with re22 spect to which the requirements of section

23 401(m)(11) are met.

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

25 treated as a top-heavy plan because it is a
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1 member of an aggregation group which is a top2 heavy group, contributions under the plan may

3 be taken into account in determining whether

4 any other plan in the group meets the require5 ments of subsection (c)(2).’’.

6 (e) FROZEN PLAN EXEMPT FROM MINIMUM BEN7 EFIT REQUIREMENT.—Subparagraph (C) of section

8 416(c)(1) (relating to defined benefit plans) is amended—

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

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

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

12 ‘‘(iii) EXCEPTION FOR FROZEN

13 PLAN.—For purposes of determining an

14 employee’s years of service with the em15 ployer, any service with the employer shall

16 be disregarded to the extent that such

17 service occurs during a plan year when the

18 plan benefits (within the meaning of sec19 tion 410(b)) no key employee or former

20 key employee.’’.

21 (f) ELIMINATION OF FAMILY ATTRIBUTION.—Sec22 tion 416(i)(1)(B) (defining 5-percent owner) is amended

23 by adding at the end the following new clause:

24 ‘‘(iv) FAMILY ATTRIBUTION DIS25 REGARDED.—Solely for purposes of apply-
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1 ing this paragraph (and not for purposes

2 of any provision of this title which incor3 porates by reference the definition of a key

4 employee or 5-percent owner under this

5 paragraph), section 318 shall be applied

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

7 in determining whether any person is a 5-

8 percent owner.’’.

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

10 this section shall apply to years beginning after December

11 31, 2001.

12 SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO AC13 COUNT FOR PURPOSES OF DEDUCTION LIM14 ITS.

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

16 for contributions of an employer to an employees’ trust

17 or annuity plan and compensation under a deferred pay18 ment plan) is amended by adding at the end the following

19 new subsection:

20 ‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC21 COUNT FOR PURPOSES OF DEDUCTION LIMITS.—Elective

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

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

24 or (9) of subsection (a), and such elective deferrals shall
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1 not be taken into account in applying any such limitation

2 to any other contributions.’’.

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

4 this section shall apply to years beginning after December

5 31, 2001.

6 SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR

7 DEFERRED COMPENSATION PLANS OF STATE

8 AND LOCAL GOVERNMENTS AND TAX-EX9 EMPT ORGANIZATIONS.

10 (a) IN GENERAL.—Subsection (c) of section 457 (re11 lating to deferred compensation plans of State and local

12 governments and tax-exempt organizations), as amended

13 by section 201, is amended to read as follows:

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

15 compensation of any one individual which may be deferred

16 under subsection (a) during any taxable year shall not ex17 ceed the amount in effect under subsection (b)(2)(A) (as

18 modified by any adjustment provided under subsection

19 (b)(3)).’’.

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

21 subsection (a) shall apply to years beginning after Decem22 ber 31, 2001.
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1 SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO

2 IRS REGARDING PENSION PLANS.

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

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

5 not require payment of user fees under the program estab6 lished under section 10511 of the Revenue Act of 1987

7 for requests to the Internal Revenue Service for deter8 mination letters with respect to the qualified status of a

9 pension benefit plan maintained solely by one or more eli10 gible employers or any trust which is part of the plan.

11 The preceding sentence shall not apply to any request—

12 (1) made after the later of—

13 (A) the fifth plan year the pension benefit

14 plan is in existence; or

15 (B) the end of any remedial amendment

16 period with respect to the plan beginning within

17 the first 5 plan years; or

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

19 similar plan which the sponsor intends to market to

20 participating employers.

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

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

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

24 ownership plan.

25 (c) ELIGIBLE EMPLOYER.—For purposes of this sec26 tion, the term ‘‘eligible employer’’ has the same meaning
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1 given such term in section 408(p)(2)(C)(i)(I) of the Inter2 nal Revenue Code of 1986. The determination of whether

3 an employer is an eligible employer under this section shall

4 be made as of the date of the request described in sub5 section (a).

6 (d) DETERMINATION OF AVERAGE FEES

7 CHARGED.—For purposes of any determination of average

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

9 shall not be taken into account.

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

11 shall apply with respect to requests made after December

12 31, 2001.

13 SEC. 207. DEDUCTION LIMITS.

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

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

16 404(a)(3)(A)(i) (relating to stock bonus and profit

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

18 and inserting ‘‘20 percent’’.

19 (2) CONFORMING AMENDMENT.—Subparagraph

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

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

22 percent’’.

23 (b) COMPENSATION.—
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1 (1) IN GENERAL.—Section 404(a) (relating to

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

3 following:

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

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

6 term ‘compensation otherwise paid or accrued dur7 ing the taxable year’ shall include amounts treated

8 as ‘participant’s compensation’ under subparagraph

9 (C) or (D) of section 415(c)(3).’’.

10 (2) CONFORMING AMENDMENTS.—

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

12 is amended by striking the last sentence there13 of.

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

15 amended by striking ‘‘(within the meaning of

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

17 meaning of section 404(a) and as adjusted

18 under section 404(a)(12))’’.

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

20 this section shall apply to years beginning after December

21 31, 2001.

22 SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS

23 AFTER-TAX CONTRIBUTIONS.

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

25 D of chapter 1 (relating to deferred compensation, etc.)
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1 is amended by inserting after section 402 the following

2 new section:

3 ‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER4 RALS AS PLUS CONTRIBUTIONS.

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

6 plan includes a qualified plus contribution program—

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

8 an employee pursuant to the program shall be treat9 ed as an elective deferral for purposes of this chap10 ter, except that such contribution shall not be ex11 cludable from gross income, and

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

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

14 meet any requirement of this chapter solely by rea15 son of including such program.

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

17 For purposes of this section—

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

19 contribution program’ means a program under which

20 an employee may elect to make designated plus con21 tributions in lieu of all or a portion of elective defer22 rals the employee is otherwise eligible to make under

23 the applicable retirement plan.

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

25 program shall not be treated as a qualified plus con-
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1 tribution program unless the applicable retirement

2 plan—

3 ‘‘(A) establishes separate accounts (‘des4 ignated plus accounts’) for the designated plus

5 contributions of each employee and any earn6 ings properly allocable to the contributions, and

7 ‘‘(B) maintains separate recordkeeping

8 with respect to each account.

9 ‘‘(c) DEFINITIONS AND RULES RELATING TO DES10 IGNATED PLUS CONTRIBUTIONS.—For purposes of this

11 section—

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

13 term ‘designated plus contribution’ means any elec14 tive deferral which—

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

16 employee without regard to this section, and

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

18 and in such manner as the Secretary may pre19 scribe) as not being so excludable.

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

21 elective deferrals which an employee may designate

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

23 any) of—

24 ‘‘(A) the maximum amount of elective de25 ferrals excludable from gross income of the em-
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1 ployee for the taxable year (without regard to

2 this section), over

3 ‘‘(B) the aggregate amount of elective de4 ferrals of the employee for the taxable year

5 which the employee does not designate under

6 paragraph (1).

7 ‘‘(3) ROLLOVER CONTRIBUTIONS.—

8 ‘‘(A) IN GENERAL.—A rollover contribu9 tion of any payment or distribution from a des10 ignated plus account which is otherwise allow11 able under this chapter may be made only if the

12 contribution is to—

13 ‘‘(i) another designated plus account

14 of the individual from whose account the

15 payment or distribution was made, or

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

17 ‘‘(B) COORDINATION WITH LIMIT.—Any

18 rollover contribution to a designated plus ac19 count under subparagraph (A) shall not be

20 taken into account for purposes of paragraph

21 (1).

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

23 title—
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1 ‘‘(1) EXCLUSION.—Any qualified distribution

2 from a designated plus account shall not be includ3 ible in gross income.

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

5 of this subsection—

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

7 distribution’ has the meaning given such term

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

9 clause (iv) thereof).

10 ‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU11 SION PERIOD.—A payment or distribution from

12 a designated plus account shall not be treated

13 as a qualified distribution if such payment or

14 distribution is made within the 5-taxable-year

15 period beginning with the earlier of—

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

17 the individual made a designated plus con18 tribution to any designated plus account

19 established for such individual under the

20 same applicable retirement plan, or

21 ‘‘(ii) if a rollover contribution was

22 made to such designated plus account from

23 a designated plus account previously estab24 lished for such individual under another

25 applicable retirement plan, the first taxable
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1 year for which the individual made a des2 ignated plus contribution to such pre3 viously established account.

4 ‘‘(C) DISTRIBUTIONS OF EXCESS DEFER5 RALS AND EARNINGS.—The term ‘qualified dis6 tribution’ shall not include any distribution of

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

8 any income on the excess deferral.

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

10 be applied separately with respect to distributions

11 and payments from a designated plus account and

12 other distributions and payments from the plan.

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

14 section—

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

16 term ‘applicable retirement plan’ means—

17 ‘‘(A) an employees’ trust described in sec18 tion 401(a) which is exempt from tax under

19 section 501(a), and

20 ‘‘(B) a plan under which amounts are con21 tributed by an individual’s employer for an an22 nuity contract described in section 403(b).

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

24 deferral’ means any elective deferral described in

25 subparagraph (A) or (C) of section 402(g)(3).’’.
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1 (b) EXCESS DEFERRALS.—Section 402(g) (relating

2 to limitation on exclusion for elective deferrals) is

3 amended—

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

5 following new sentence: ‘‘The preceding sentence

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

7 not exceed the designated plus contributions of the

8 individual for the taxable year.’’; and

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

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

11 paragraph (2)(A).

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

13 402(c)(8) is amended by adding at the end the following:

14 ‘‘If any portion of an eligible rollover distribu15 tion is attributable to payments or distributions

16 from a designated plus account (as defined in

17 section 402A), an eligible retirement plan with

18 respect to such portion shall include only an19 other designated plus account and a Roth

20 IRA.’’.

21 (d) REPORTING REQUIREMENTS.—

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

23 amended by inserting ‘‘, including the amount of

24 designated plus contributions (as defined in section

25 402A)’’ before the comma at the end.
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1 (2) INFORMATION.—Section 6047 is amended

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

3 by inserting after subsection (e) the following new

4 subsection:

5 ‘‘(f) DESIGNATED PLUS CONTRIBUTIONS.—The Sec6 retary shall require the plan administrator of each applica7 ble retirement plan (as defined in section 402A) to make

8 such returns and reports regarding designated plus con9 tributions (as so defined) to the Secretary, participants

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

11 the Secretary may prescribe.’’.

12 (e) CONFORMING AMENDMENTS.—

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

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

15 term includes a rollover contribution described in

16 section 402A(c)(3)(A).’’.

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

18 I of subchapter D of chapter 1 is amended by insert19 ing after the item relating to section 402 the fol20 lowing new item:

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

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

22 this section shall apply to taxable years beginning after

23 December 31, 2001.
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1 TITLE III—ENHANCING

2 FAIRNESS FOR WOMEN

3 SEC. 301. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS

4 AGE 50 OR OVER.

5 (a) IN GENERAL.—Section 414 (relating to defini6 tions and special rules) is amended by adding at the end

7 the following new subsection:

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

9 AGE 50 OR OVER.—

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

11 plan shall not be treated as failing to meet any re12 quirement of this title solely because the plan per13 mits an eligible participant to make additional elec14 tive deferrals in any plan year.

15 ‘‘(2) LIMITATION ON AMOUNT OF ADDITIONAL

16 DEFERRALS.—A plan shall not permit additional

17 elective deferrals under paragraph (1) for any year

18 in an amount greater than the lesser of—

19 ‘‘(A) $5,000, or

20 ‘‘(B) the excess (if any) of—

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

22 the year, over

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

24 participant for such year which are made

25 without regard to this subsection.
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1 ‘‘(3) TREATMENT OF CONTRIBUTIONS.—In the

2 case of any contribution to a plan under paragraph

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

4 year in which the contribution is made—

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

6 limitation contained in section 402(g),

7 402(h)(2), 404(a), 404(h), 408(p)(2)(A)(ii),

8 415, or 457, or

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

10 such limitations to other contributions or bene11 fits under such plan or any other such plan.

12 ‘‘(4) APPLICATION OF NONDISCRIMINATION

13 RULES.—

14 ‘‘(A) IN GENERAL.—An applicable em15 ployer plan shall not be treated as failing to

16 meet the nondiscrimination requirements under

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

18 rights, and features if the plan allows all eligi19 ble participants to make the same election with

20 respect to the additional elective deferrals under

21 this subsection.

22 ‘‘(B) AGGREGATION.—For purposes of

23 subparagraph (A), all plans maintained by em24 ployers who are treated as a single employer
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1 under subsection (b), (c), (m), or (o) of section

2 414 shall be treated as 1 plan.

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

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

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

6 plan—

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

8 the close of the plan year, and

9 ‘‘(B) with respect to whom no other elec10 tive deferrals may (without regard to this sub11 section) be made to the plan for the plan year

12 by reason of the application of any limitation or

13 other restriction described in paragraph (3) or

14 comparable limitation contained in the terms of

15 the plan.

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

17 purposes of this subsection—

18 ‘‘(A) APPLICABLE EMPLOYER PLAN.—The

19 term ‘applicable employer plan’ means—

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

21 section 401(a) which is exempt from tax

22 under section 501(a),

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

24 contributed by an individual’s employer for
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1 an annuity contract described in section

2 403(b),

3 ‘‘(iii) an eligible deferred compensa4 tion plan under section 457 of an eligible

5 employer as defined in section

6 457(e)(1)(A), and

7 ‘‘(iv) an arrangement meeting the re8 quirements of section 408 (k) or (p).

9 ‘‘(B) ELECTIVE DEFERRAL.—The term

10 ‘elective deferral’ has the meaning given such

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

12 ‘‘(C) EXCEPTION FOR SECTION 457

13 PLANS.—This subsection shall not apply to an

14 applicable employer plan described in subpara15 graph (A)(iii) for any year to which section

16 457(b)(3) applies.

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

18 the case of a year beginning after December 31,

19 2005, the Secretary shall adjust annually the

20 $5,000 amount in paragraph (2)(A) for in21 creases in the cost-of-living at the same time

22 and in the same manner as adjustments under

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

24 taken into account shall be the calendar quarter

25 beginning July 1, 2004, and any increase under
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1 this subparagraph which is not a multiple of

2 $500 shall be rounded to the next lower mul3 tiple of $500.’’.

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

5 this section shall apply to contributions in taxable years

6 beginning after December 31, 2000.

7 SEC. 302. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF

8 EMPLOYEES TO DEFINED CONTRIBUTION

9 PLANS.

10 (a) EQUITABLE TREATMENT.—

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

12 415(c)(1) (relating to limitation for defined con13 tribution plans) is amended by striking ‘‘25 percent’’

14 and inserting ‘‘100 percent’’.

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

16 403(b) is amended—

17 (A) by striking ‘‘the exclusion allowance

18 for such taxable year’’ in paragraph (1) and in19 serting ‘‘the applicable limit under section

20 415’’;

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

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

23 by a former employee after the fifth taxable

24 year following the taxable year in which such

25 employee was terminated’’ before the period at
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1 the end of the second sentence of paragraph

2 (3).

3 (3) CONFORMING AMENDMENTS.—

4 (A) Subsection (f) of section 72 is amend5 ed by striking ‘‘section 403(b)(2)(D)(iii))’’ and

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

7 before the enactment of the Comprehensive Re8 tirement Security and Pension Reform Act of

9 2001)’’.

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

11 striking ‘‘, the exclusion allowance under sec12 tion 403(b)(2),’’.

13 (C) Section 415(a)(2) is amended by strik14 ing ‘‘, and the amount of the contribution for

15 such portion shall reduce the exclusion allow16 ance as provided in section 403(b)(2)’’.

17 (D) Section 415(c)(3) is amended by add18 ing at the end the following new subparagraph:

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

20 of an annuity contract described in section

21 403(b), the term ‘participant’s compensation’

22 means the participant’s includible compensation

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

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

25 paragraph (4).
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1 (F) Section 415(c)(7) is amended to read

2 as follows:

3 ‘‘(7) CERTAIN CONTRIBUTIONS BY CHURCH

4 PLANS NOT TREATED AS EXCEEDING LIMIT.—

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

6 other provision of this subsection, at the elec7 tion of a participant who is an employee of a

8 church or a convention or association of church9 es, including an organization described in sec10 tion 414(e)(3)(B)(ii), contributions and other

11 additions for an annuity contract or retirement

12 income account described in section 403(b) with

13 respect to such participant, when expressed as

14 an annual addition to such participant’s ac15 count, shall be treated as not exceeding the lim16 itation of paragraph (1) if such annual addition

17 is not in excess of $10,000.

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

19 The total amount of additions with respect to

20 any participant which may be taken into ac21 count for purposes of this subparagraph for all

22 years may not exceed $40,000.

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

24 this paragraph, the term ‘annual addition’ has
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1 the meaning given such term by paragraph

2 (2).’’.

3 (G) Subparagraph (B) of section 402(g)(7)

4 (as redesignated by section 201) is amended by

5 inserting before the period at the end the fol6 lowing: ‘‘(as in effect before the enactment of

7 the Comprehensive Retirement Security and

8 Pension Reform Act of 2001)’’.

9 (H) Section 664(g) is amended—

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

11 ‘‘limitations under section 415(c)’’ and in12 serting ‘‘applicable limitation under para13 graph (7)’’, and

14 (ii) by adding at the end the following

15 new paragraph:

16 ‘‘(7) APPLICABLE LIMITATION.—

17 ‘‘(A) IN GENERAL.—For purposes of para18 graph (3)(E), the applicable limitation under

19 this paragraph with respect to a participant is

20 an amount equal to the lesser of—

21 ‘‘(i) $30,000, or

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

23 compensation (as defined in section

24 415(c)(3)).
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1 ‘‘(B) COST-OF-LIVING ADJUSTMENT.—The

2 Secretary shall adjust annually the $30,000

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

4 time and in the same manner as under section

5 415(d), except that the base period shall be the

6 calendar quarter beginning October 1, 1993,

7 and any increase under this subparagraph

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

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

10 (3) EFFECTIVE DATE.—The amendments made

11 by this subsection shall apply to years beginning

12 after December 31, 2000.

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

14 408.—

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

16 415 is amended by adding at the end the following

17 new paragraph:

18 ‘‘(4) SPECIAL RULES FOR SECTIONS 403(b)

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

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

21 of a participant shall be treated as a defined con22 tribution plan maintained by each employer with re23 spect to which the participant has the control re24 quired under subsection (b) or (c) of section 414 (as

25 modified by subsection (h)). For purposes of this
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1 section, any contribution by an employer to a sim2 plified employee pension plan for an individual for a

3 taxable year shall be treated as an employer con4 tribution to a defined contribution plan for such in5 dividual for such year.’’.

6 (2) EFFECTIVE DATE.—

7 (A) IN GENERAL.—The amendment made

8 by paragraph (1) shall apply to limitation years

9 beginning after December 31, 1999.

10 (B) EXCLUSION ALLOWANCE.—Effective

11 for limitation years beginning in 2000, in the

12 case of any annuity contract described in sec13 tion 403(b) of the Internal Revenue Code of

14 1986, the amount of the contribution disquali15 fied by reason of section 415(g) of such Code

16 shall reduce the exclusion allowance as provided

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

18 (3) MODIFICATION OF 403(b) EXCLUSION AL19 LOWANCE TO CONFORM TO 415 MODIFICATION.—The

20 Secretary of the Treasury shall modify the regula21 tions regarding the exclusion allowance under section

22 403(b)(2) of the Internal Revenue Code of 1986 to

23 render void the requirement that contributions to a

24 defined benefit pension plan be treated as previously

25 excluded amounts for purposes of the exclusion al-
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1 lowance. For taxable years beginning after Decem2 ber 31, 1999, such regulations shall be applied as if

3 such requirement were void.

4 (c) DEFERRED COMPENSATION PLANS OF STATE

5 AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI6 ZATIONS.—

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

8 457(b)(2) (relating to salary limitation on eligible

9 deferred compensation plans) is amended by striking

‘‘331 10 ⁄3 percent’’ and inserting ‘‘100 percent’’.

11 (2) EFFECTIVE DATE.—The amendment made

12 by this subsection shall apply to years beginning

13 after December 31, 2000.

14 SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER

15 MATCHING CONTRIBUTIONS.

16 (a) AMENDMENT OF INTERNAL REVENUE CODE.—

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

18 is amended—

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

20 inserting ‘‘Except as provided in paragraph (12), a

21 plan’’; and

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

23 ‘‘(12) FASTER VESTING FOR MATCHING CON24 TRIBUTIONS.—In the case of matching contributions
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1 (as defined in section 401(m)(4)(A)), paragraph (2)

2 shall be applied—

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

4 in subparagraph (A), and

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

6 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

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

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

8 Employee Retirement Income Security Act of 1974 (29

9 U.S.C. 1053(a)) is amended—

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

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

12 plan’’, and

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

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

15 defined in section 401(m)(4)(A) of the Internal Rev16 enue Code of 1986), paragraph (2) shall be

17 applied—

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

19 in subparagraph (A), and

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

21 the table contained in subparagraph (B):
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The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

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

1 (c) EFFECTIVE DATES.—

2 (1) IN GENERAL.—Except as provided in para3 graph (2), the amendments made by this section

4 shall apply to contributions for plan years beginning

5 after December 31, 2001.

6 (2) COLLECTIVE BARGAINING AGREEMENTS.—

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

8 more collective bargaining agreements between em9 ployee representatives and one or more employers

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

11 amendments made by this section shall not apply to

12 contributions on behalf of employees covered by any

13 such agreement for plan years beginning before the

14 earlier of—

15 (A) the later of—

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

17 collective bargaining agreements termi18 nates (determined without regard to any

19 extension thereof on or after such date of

20 the enactment); or

21 (ii) January 1, 2002; or

22 (B) January 1, 2006.
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1 (3) SERVICE REQUIRED.—With respect to any

2 plan, the amendments made by this section shall not

3 apply to any employee before the date that such em4 ployee has 1 hour of service under such plan in any

5 plan year to which the amendments made by this

6 section apply.

7 SEC. 304. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU8 TION RULES.

9 (a) SIMPLIFICATION AND FINALIZATION OF MIN10 IMUM DISTRIBUTION REQUIREMENTS.—

11 (1) IN GENERAL.—The Secretary of the Treas12 ury shall—

13 (A) simplify and finalize the regulations re14 lating to minimum distribution requirements

15 under sections 401(a)(9), 408(a)(6) and (b)(3),

16 403(b)(10), and 457(d)(2) of the Internal Rev17 enue Code of 1986; and

18 (B) modify such regulations to—

19 (i) reflect current life expectancy; and

20 (ii) revise the required distribution

21 methods so that, under reasonable assump22 tions, the amount of the required minimum

23 distribution does not decrease over a par24 ticipant’s life expectancy.
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1 (2) FRESH START.—Notwithstanding subpara2 graph (D) of section 401(a)(9) of such Code, during

3 the first year that regulations are in effect under

4 this subsection, required distributions for future

5 years may be redetermined to reflect changes under

6 such regulations. Such redetermination shall include

7 the opportunity to choose a new designated bene8 ficiary and to elect a new method of calculating life

9 expectancy.

10 (3) DATE FOR REGULATIONS.—Not later than

11 December 31, 2002, the Secretary shall issue final

12 regulations described in paragraph (1) and such reg13 ulations shall apply without regard to whether an in14 dividual had previously begun receiving minimum

15 distributions.

16 (b) REPEAL OF RULE WHERE DISTRIBUTIONS HAD

17 BEGUN BEFORE DEATH OCCURS.—

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

19 401(a)(9) is amended by striking clause (i) and re20 designating clauses (ii), (iii), and (iv) as clauses (i),

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

22 (2) CONFORMING CHANGES.—

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

24 so redesignated) is amended—
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1 (i) by striking ‘‘FOR OTHER CASES’’ in

2 the heading; and

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

4 employee’s interest has begun in accord5 ance with subparagraph (A)(ii)’’ and in6 serting ‘‘his entire interest has been dis7 tributed to him’’.

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

9 so redesignated) is amended by striking ‘‘clause

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

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

12 so redesignated) is amended—

13 (i) by striking ‘‘clause (iii)(I)’’ and in14 serting ‘‘clause (ii)(I)’’;

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

16 subclause (I) and inserting ‘‘clause

17 (ii)(III)’’;

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

19 the employee would have attained age

701 20 ⁄2,’’ in subclause (I) and inserting

21 ‘‘April 1 of the calendar year following the

22 calendar year in which the spouse attains

701 23 ⁄2,’’; and

24 (iv) by striking ‘‘the distributions to

25 such spouse begin,’’ in subclause (II) and
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1 inserting ‘‘his entire interest has been dis2 tributed to him,’’.

3 (3) EFFECTIVE DATE.—

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

5 subparagraph (B), the amendments made by

6 this subsection shall apply to years beginning

7 after December 31, 2001.

8 (B) DISTRIBUTIONS TO SURVIVING

9 SPOUSE.—

10 (i) IN GENERAL.—In the case of an

11 employee described in clause (ii), distribu12 tions to the surviving spouse of the em13 ployee shall not be required to commence

14 prior to the date on which such distribu15 tions would have been required to begin

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

17 Revenue Code of 1986 (as in effect on the

18 day before the date of the enactment of

19 this Act).

20 (ii) CERTAIN EMPLOYEES.—An em21 ployee is described in this clause if such

22 employee dies before—

23 (I) the date of the enactment of

24 this Act, and
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1 (II) the required beginning date

2 (within the meaning of section

3 401(a)(9)(C) of the Internal Revenue

4 Code of 1986) of the employee.

5 (c) REDUCTION IN EXCISE TAX.—

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

7 4974 is amended by striking ‘‘50 percent’’ and in8 serting ‘‘10 percent’’.

9 (2) EFFECTIVE DATE.—The amendment made

10 by this subsection shall apply to years beginning

11 after December 31, 2001.

12 SEC. 305. CLARIFICATION OF TAX TREATMENT OF DIVISION

13 OF SECTION 457 PLAN BENEFITS UPON DI14 VORCE.

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

16 application of rules to governmental and church plans) is

17 amended—

18 (1) by inserting ‘‘or an eligible deferred com19 pensation plan (within the meaning of section

20 457(b))’’ after ‘‘subsection (e))’’; and

21 (2) in the heading, by striking ‘‘GOVERN22 MENTAL AND CHURCH PLANS’’ and inserting ‘‘CER23 TAIN OTHER PLANS’’.

24 (b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE25 MENTS.—Paragraph (10) of section 414(p) is amended by
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1 striking ‘‘and section 409(d)’’ and inserting ‘‘section

2 409(d), and section 457(d)’’.

3 (c) TAX TREATMENT OF PAYMENTS FROM A SEC4 TION 457 PLAN.—Subsection (p) of section 414 is amend5 ed by redesignating paragraph (12) as paragraph (13) and

6 inserting after paragraph (11) the following new para7 graph:

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

9 SECTION 457 PLAN.—If a distribution or payment

10 from an eligible deferred compensation plan de11 scribed in section 457(b) is made pursuant to a

12 qualified domestic relations order, rules similar to

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

14 distribution or payment.’’.

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

16 this section shall apply to transfers, distributions, and

17 payments made after December 31, 2001.

18 SEC. 306. MODIFICATION OF SAFE HARBOR RELIEF FOR

19 HARDSHIP WITHDRAWALS FROM CASH OR

20 DEFERRED ARRANGEMENTS.

21 (a) IN GENERAL.—The Secretary of the Treasury

22 shall revise the regulations relating to hardship distribu23 tions under section 401(k)(2)(B)(i)(IV) of the Internal

24 Revenue Code of 1986 to provide that the period an em25 ployee is prohibited from making elective and employee
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1 contributions in order for a distribution to be deemed nec2 essary to satisfy financial need shall be equal to 6 months.

3 (b) EFFECTIVE DATE.—The revised regulations

4 under subsection (a) shall apply to years beginning after

5 December 31, 2001.

6 TITLE IV—INCREASING PORT7 ABILITY FOR PARTICIPANTS

8 SEC. 401. ROLLOVERS ALLOWED AMONG VARIOUS TYPES

9 OF PLANS.

10 (a) ROLLOVERS FROM AND TO SECTION 457

11 PLANS.—

12 (1) ROLLOVERS FROM SECTION 457 PLANS.—

13 (A) IN GENERAL.—Section 457(e) (relat14 ing to other definitions and special rules) is

15 amended by adding at the end the following:

16 ‘‘(16) ROLLOVER AMOUNTS.—

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

18 eligible deferred compensation plan established

19 and maintained by an employer described in

20 subsection (e)(1)(A), if—

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

22 credit of an employee in such plan is paid

23 to such employee in an eligible rollover dis24 tribution (within the meaning of section
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1 402(c)(4) without regard to subparagraph

2 (C) thereof),

3 ‘‘(ii) the employee transfers any por4 tion of the property such employee receives

5 in such distribution to an eligible retire6 ment plan described in section

7 402(c)(8)(B), and

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

9 property other than money, the amount so

10 transferred consists of the property distrib11 uted,

12 then such distribution (to the extent so trans13 ferred) shall not be includible in gross income

14 for the taxable year in which paid.

15 ‘‘(B) CERTAIN RULES MADE APPLICA16 BLE.—The rules of paragraphs (2) through (7)

17 (other than paragraph (4)(C)) and (9) of sec18 tion 402(c) and section 402(f) shall apply for

19 purposes of subparagraph (A).

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

21 paragraph shall be reported to the Secretary in

22 the same manner as rollovers from qualified re23 tirement plans (as defined in section

24 4974(c)).’’.
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1 (B) DEFERRAL LIMIT DETERMINED WITH2 OUT REGARD TO ROLLOVER AMOUNTS.—Section

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

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

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

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

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

9 period at the end of subparagraph (B) and in10 serting ‘‘, and’’, and by inserting after subpara11 graph (B) the following:

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

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

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

16 Any amount transferred in a direct trustee-to-trust17 ee transfer in accordance with section 401(a)(31)

18 shall not be includible in gross income for the tax19 able year of transfer.’’.

20 (D) WITHHOLDING.—

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

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

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

2 maintained by an employer described in section

3 457(e)(1)(A); or’’.

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

5 is amended to read as follows:

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

7 purposes of this subsection, the term ‘eligible roll8 over distribution’ has the meaning given such term

9 by section 402(f)(2)(A).’’.

10 (iii) LIABILITY FOR WITHHOLDING.—

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

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

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

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

15 by adding at the end the following:

16 ‘‘(iv) section 457(b) and which is

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

19 (2) ROLLOVERS TO SECTION 457 PLANS.—

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

21 (defining eligible retirement plan) is amended

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

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

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

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

2 plan described in section 457(b) which is

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

5 (B) SEPARATE ACCOUNTING.—Section

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

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

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

10 separately account for amounts rolled into such plan

11 from eligible retirement plans not described in such

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

14 plans.’’.

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

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

19 the end the following new paragraph:

20 ‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SEC21 TION 457 PLANS.—For purposes of this subsection,

22 a distribution from an eligible deferred compensation

23 plan (as defined in section 457(b)) of an eligible em24 ployer described in section 457(e)(1)(A) shall be

25 treated as a distribution from a qualified retirement
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1 plan described in 4974(c)(1) to the extent that such

2 distribution is attributable to an amount transferred

3 to an eligible deferred compensation plan from a

4 qualified retirement plan (as defined in section

5 4974(c)).’’.

6 (b) ALLOWANCE OF ROLLOVERS FROM AND TO

7 403(b) PLANS.—

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

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

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

11 and all that follows and inserting ‘‘such distribution

12 to an eligible retirement plan described in section

13 402(c)(8)(B), and’’.

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

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

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

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

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

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

20 new clause:

21 ‘‘(vi) an annuity contract described in

22 section 403(b).’’.

23 (c) EXPANDED EXPLANATION TO RECIPIENTS OF

24 ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section

25 402(f) (relating to written explanation to recipients of dis-
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1 tributions eligible for rollover treatment) is amended by

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

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

4 ‘‘, and’’, and by adding at the end the following new sub5 paragraph:

6 ‘‘(E) of the provisions under which dis7 tributions from the eligible retirement plan re8 ceiving the distribution may be subject to re9 strictions and tax consequences which are dif10 ferent from those applicable to distributions

11 from the plan making such distribution.’’.

12 (d) SPOUSAL ROLLOVERS.—Section 402(c)(9) (relat13 ing to rollover where spouse receives distribution after

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

15 and all that follows up to the end period.

16 (e) CONFORMING AMENDMENTS.—

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

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

19 408(d)(3), and 457(e)(16)’’.

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

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

22 457(e)(16)’’.

23 (3) Section 401(a)(31)(B) is amended by strik24 ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),

25 403(b)(8), and 457(e)(16)’’.
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1 (4) Subparagraph (A) of section 402(f)(2) is

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

3 403(a)’’ and inserting ‘‘, paragraph (4) of section

4 403(a), subparagraph (A) of section 403(b)(8), or

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

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

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

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

9 402(f)(1) are amended by striking ‘‘another eligible

10 retirement plan’’ and inserting ‘‘an eligible retire11 ment plan’’.

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

13 amended to read as follows:

14 ‘‘(B) CERTAIN RULES MADE APPLICA15 BLE.—The rules of paragraphs (2) through (7)

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

17 shall apply for purposes of subparagraph (A),

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

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

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

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

22 457(e)(16)’’.

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

24 415(b)(2) are each amended by striking ‘‘and
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1 408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and

2 457(e)(16)’’.

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

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

5 457(e)(16)’’.

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

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

8 457(e)(16)’’.

9 (f) EFFECTIVE DATE; SPECIAL RULE.—

10 (1) EFFECTIVE DATE.—The amendments made

11 by this section shall apply to distributions after the

12 date of the enactment of this Act.

13 (2) SPECIAL RULE.—Notwithstanding any other

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

15 section 1122 of the Tax Reform Act of 1986 shall

16 not apply to any distribution from an eligible retire17 ment plan (as defined in clause (iii) or (iv) of section

18 402(c)(8)(B) of the Internal Revenue Code of 1986)

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

20 such plan on behalf of such individual which is per21 mitted solely by reason of any amendment made by

22 this section.
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1 SEC. 402. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE2 MENT PLANS.

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

4 408(d)(3) (relating to rollover amounts) is amended by

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

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

7 ‘‘(ii) the entire amount received (in8 cluding money and any other property) is

9 paid into an eligible retirement plan for

10 the benefit of such individual not later

11 than the 60th day after the date on which

12 the payment or distribution is received, ex13 cept that the maximum amount which may

14 be paid into such plan may not exceed the

15 portion of the amount received which is in16 cludible in gross income (determined with17 out regard to this paragraph).

18 For purposes of clause (ii), the term ‘eligible re19 tirement plan’ means an eligible retirement plan

20 described in clause (iii), (iv), (v), or (vi) of sec21 tion 402(c)(8)(B).’’.

22 (b) CONFORMING AMENDMENTS.—

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

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

25 ‘‘section 408(d)(3)(A)(ii)’’.
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1 (2) Clause (i) of section 408(d)(3)(D) is amend2 ed by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i)

3 or (ii)’’.

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

5 amended to read as follows:

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

7 the case of any payment or distribution out of

8 a simple retirement account (as defined in sub9 section (p)) to which section 72(t)(6) applies,

10 this paragraph shall not apply unless such pay11 ment or distribution is paid into another simple

12 retirement account.’’.

13 (c) EFFECTIVE DATE; SPECIAL RULE.—

14 (1) EFFECTIVE DATE.—The amendments made

15 by this section shall apply to distributions after the

16 date of the enactment of this Act.

17 (2) SPECIAL RULE.—Notwithstanding any other

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

19 section 1122 of the Tax Reform Act of 1986 shall

20 not apply to any distribution from an eligible retire21 ment plan (as defined in clause (iii) or (iv) of section

22 402(c)(8)(B) of the Internal Revenue Code of 1986)

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

24 such plan on behalf of such individual which is per-
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1 mitted solely by reason of the amendments made by

2 this section.

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

4 (a) ROLLOVERS FROM EXEMPT TRUSTS.—Para5 graph (2) of section 402(c) (relating to maximum amount

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

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

8 to such distribution to the extent—

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

10 trustee-to-trustee transfer to a qualified trust

11 which is part of a plan which is a defined con12 tribution plan and which agrees to separately

13 account for amounts so transferred, including

14 separately accounting for the portion of such

15 distribution which is includible in gross income

16 and the portion of such distribution which is

17 not so includible, or

18 ‘‘(B) such portion is transferred to an eli19 gible retirement plan described in clause (i) or

20 (ii) of paragraph (8)(B).’’.

21 (b) OPTIONAL DIRECT TRANSFER OF ELIGIBLE

22 ROLLOVER DISTRIBUTIONS.—Subparagraph (B) of sec23 tion 401(a)(31) (relating to limitation) is amended by add24 ing at the end the following: ‘‘The preceding sentence shall
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1 not apply to such distribution if the plan to which such

2 distribution is transferred—

3 ‘‘(i) agrees to separately account for

4 amounts so transferred, including sepa5 rately accounting for the portion of such

6 distribution which is includible in gross in7 come and the portion of such distribution

8 which is not so includible, or

9 ‘‘(ii) is an eligible retirement plan de10 scribed in clause (i) or (ii) of section

11 402(c)(8)(B).’’.

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

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

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

15 end the following:

16 ‘‘(H) APPLICATION OF SECTION 72.—

17 ‘‘(i) IN GENERAL.—If—

18 ‘‘(I) a distribution is made from

19 an individual retirement plan, and

20 ‘‘(II) a rollover contribution is

21 made to an eligible retirement plan

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

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

24 part of such distribution,
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1 then, notwithstanding paragraph (2), the

2 rules of clause (ii) shall apply for purposes

3 of applying section 72.

4 ‘‘(ii) APPLICABLE RULES.—In the

5 case of a distribution described in clause

6 (i)—

7 ‘‘(I) section 72 shall be applied

8 separately to such distribution,

9 ‘‘(II) notwithstanding the pro

10 rata allocation of income on, and in11 vestment in, the contract to distribu12 tions under section 72, the portion of

13 such distribution rolled over to an eli14 gible retirement plan described in

15 clause (i) shall be treated as from in16 come on the contract (to the extent of

17 the aggregate income on the contract

18 from all individual retirement plans of

19 the distributee), and

20 ‘‘(III) appropriate adjustments

21 shall be made in applying section 72

22 to other distributions in such taxable

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

2 this section shall apply to distributions made after the

3 date of the enactment of this Act.

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

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

6 402(c) (relating to transfer must be made within 60 days

7 of receipt) is amended to read as follows:

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

9 DAYS OF RECEIPT.—

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

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

12 apply to any transfer of a distribution made

13 after the 60th day following the day on which

14 the distributee received the property distrib15 uted.

16 ‘‘(B) HARDSHIP EXCEPTION.—The Sec17 retary may waive the 60-day requirement under

18 subparagraph (A) where the failure to waive

19 such requirement would be against equity or

20 good conscience, including casualty, disaster, or

21 other events beyond the reasonable control of

22 the individual subject to such requirement.’’.

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

24 to rollover contributions), as amended by section 403, is
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1 amended by adding after subparagraph (H) the following

2 new subparagraph:

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

4 The Secretary may waive the 60-day require5 ment under subparagraphs (A) and (D) where

6 the failure to waive such requirement would be

7 against equity or good conscience, including

8 casualty, disaster, or other events beyond the

9 reasonable control of the individual subject to

10 such requirement.’’.

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

12 this section shall apply to distributions after the date of

13 the enactment of this Act.

14 SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.

15 (a) PLAN TRANSFERS.—

16 (1) AMENDMENT OF INTERNAL REVENUE

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

18 accrued benefit not to be decreased by amendment)

19 is amended by adding at the end the following:

20 ‘‘(D) PLAN TRANSFERS.—

21 ‘‘(i) IN GENERAL.—A defined con22 tribution plan (in this subparagraph re23 ferred to as the ‘transferee plan’) shall not

24 be treated as failing to meet the require25 ments of this subsection merely because
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1 the transferee plan does not provide some

2 or all of the forms of distribution pre3 viously available under another defined

4 contribution plan (in this subparagraph re5 ferred to as the ‘transferor plan’) to the

6 extent that—

7 ‘‘(I) the forms of distribution

8 previously available under the trans9 feror plan applied to the account of a

10 participant or beneficiary under the

11 transferor plan that was transferred

12 from the transferor plan to the trans13 feree plan pursuant to a direct trans14 fer rather than pursuant to a distribu15 tion from the transferor plan,

16 ‘‘(II) the terms of both the trans17 feror plan and the transferee plan au18 thorize the transfer described in sub19 clause (I),

20 ‘‘(III) the transfer described in

21 subclause (I) was made pursuant to a

22 voluntary election by the participant

23 or beneficiary whose account was

24 transferred to the transferee plan,
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1 ‘‘(IV) the election described in

2 subclause (III) was made after the

3 participant or beneficiary received a

4 notice describing the consequences of

5 making the election, and

6 ‘‘(V) the transferee plan allows

7 the participant or beneficiary de8 scribed in subclause (III) to receive

9 any distribution to which the partici10 pant or beneficiary is entitled under

11 the transferee plan in the form of a

12 single sum distribution.

13 ‘‘(ii) EXCEPTION.—Clause (i) shall

14 apply to plan mergers and other trans15 actions having the effect of a direct trans16 fer, including consolidations of benefits at17 tributable to different employers within a

18 multiple employer plan.

19 ‘‘(E) ELIMINATION OF FORM OF DISTRIBU20 TION.—Except to the extent provided in regula21 tions, a defined contribution plan shall not be

22 treated as failing to meet the requirements of

23 this section merely because of the elimination of

24 a form of distribution previously available there25 under. This subparagraph shall not apply to the
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1 elimination of a form of distribution with re2 spect to any participant unless—

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

4 to such participant at the same time or

5 times as the form of distribution being

6 eliminated, and

7 ‘‘(ii) such single sum payment is

8 based on the same or greater portion of

9 the participant’s account as the form of

10 distribution being eliminated.’’.

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

12 the Employee Retirement Income Security Act of

13 1974 (29 U.S.C. 1054(g)) is amended by adding at

14 the end the following:

15 ‘‘(4)(A) A defined contribution plan (in this subpara16 graph referred to as the ‘transferee plan’) shall not be

17 treated as failing to meet the requirements of this sub18 section merely because the transferee plan does not pro19 vide some or all of the forms of distribution previously

20 available under another defined contribution plan (in this

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

22 extent that—

23 ‘‘(i) the forms of distribution previously avail24 able under the transferor plan applied to the account

25 of a participant or beneficiary under the transferor
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1 plan that was transferred from the transferor plan

2 to the transferee plan pursuant to a direct transfer

3 rather than pursuant to a distribution from the

4 transferor plan;

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

6 the transferee plan authorize the transfer described

7 in clause (i);

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

9 made pursuant to a voluntary election by the partici10 pant or beneficiary whose account was transferred to

11 the transferee plan;

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

13 made after the participant or beneficiary received a

14 notice describing the consequences of making the

15 election; and

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

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

18 distribution to which the participant or beneficiary is

19 entitled under the transferee plan in the form of a

20 single sum distribution.

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

22 and other transactions having the effect of a direct trans23 fer, including consolidations of benefits attributable to dif24 ferent employers within a multiple employer plan.
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1 ‘‘(5) Except to the extent provided in regulations pro2 mulgated by the Secretary of the Treasury, a defined con3 tribution plan shall not be treated as failing to meet the

4 requirements of this subsection merely because of the

5 elimination of a form of distribution previously available

6 thereunder. This paragraph shall not apply to the elimi7 nation of a form of distribution with respect to any partici8 pant unless—

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

10 participant at the same time or times as the form

11 of distribution being eliminated; and

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

13 same or greater portion of the participant’s account

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

15 (3) EFFECTIVE DATE.—The amendments made

16 by this subsection shall apply to years beginning

17 after December 31, 2001.

18 (b) REGULATIONS.—

19 (1) AMENDMENT OF INTERNAL REVENUE

20 CODE.—Paragraph (6)(B) of section 411(d) (relat21 ing to accrued benefit not to be decreased by amend22 ment) is amended by inserting after the second sen23 tence the following new sentence: ‘‘The Secretary

24 shall by regulations provide that this subparagraph

25 shall not apply to any plan amendment which re-
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1 duces or eliminates benefits or subsidies which cre2 ate significant burdens or complexities for the plan

3 and plan participants and does not adversely affect

4 the rights of any participant in a more than de mini5 mis manner.’’.

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

7 of the Employee Retirement Income Security Act of

8 1974 (29 U.S.C. 1054(g)(2)) is amended by insert9 ing before the last sentence the following new sen10 tence: ‘‘The Secretary of the Treasury shall by regu11 lations provide that this paragraph shall not apply

12 to any plan amendment which reduces or eliminates

13 benefits or subsidies which create significant bur14 dens or complexities for the plan and plan partici15 pants and does not adversely affect the rights of any

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

17 (3) SECRETARY DIRECTED.—Not later than

18 December 31, 2003, the Secretary of the Treasury

19 is directed to issue regulations under section

20 411(d)(6) of the Internal Revenue Code of 1986 and

21 section 204(g) of the Employee Retirement Income

22 Security Act of 1974, including the regulations re23 quired by the amendment made by this subsection.

24 Such regulations shall apply to plan years beginning
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1 after December 31, 2003, or such earlier date as is

2 specified by the Secretary of the Treasury.

3 SEC. 406. RATIONALIZATION OF RESTRICTIONS ON DIS4 TRIBUTIONS.

5 (a) MODIFICATION OF SAME DESK EXCEPTION.—

6 (1) SECTION 401(k).—

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

8 qualified cash or deferred arrangements) is

9 amended by striking ‘‘separation from service’’

10 and inserting ‘‘severance from employment’’.

11 (B) Subparagraph (A) of section

12 401(k)(10) (relating to distributions upon ter13 mination of plan or disposition of assets or sub14 sidiary) is amended to read as follows:

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

16 this subparagraph is the termination of the

17 plan without establishment or maintenance of

18 another defined contribution plan (other than

19 an employee stock ownership plan as defined in

20 section 4975(e)(7)).’’.

21 (C) Section 401(k)(10) is amended—

22 (i) in subparagraph (B)—

23 (I) by striking ‘‘An event’’ in

24 clause (i) and inserting ‘‘A termi25 nation’’; and
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1 (II) by striking ‘‘the event’’ in

2 clause (i) and inserting ‘‘the termi3 nation’’;

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

5 (iii) by striking ‘‘OR DISPOSITION OF

6 ASSETS OR SUBSIDIARY’’ in the heading.

7 (2) SECTION 403(b).—

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

9 section 403(b) are each amended by striking

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

11 severance from employment’’.

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

13 section 403(b) is amended by striking ‘‘SEPARA14 TION FROM SERVICE’’ and inserting ‘‘SEVER15 ANCE FROM EMPLOYMENT’’.

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

17 457(d)(1)(A) is amended by striking ‘‘is separated

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

19 employment’’.

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

21 this section shall apply to distributions after the date of

22 the enactment of this Act.
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1 SEC. 407. PURCHASE OF SERVICE CREDIT IN GOVERN2 MENTAL DEFINED BENEFIT PLANS.

3 (a) 403(b) PLANS.—Subsection (b) of section 403 is

4 amended by adding at the end the following new para5 graph:

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

7 PURCHASE PERMISSIVE SERVICE CREDIT.—No

8 amount shall be includible in gross income by reason

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

10 benefit governmental plan (as defined in section

11 414(d)) if such transfer is—

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

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

14 under such plan, or

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

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

17 thereof.’’.

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

19 amended by adding after paragraph (16) the following

20 new paragraph:

21 ‘‘(17) 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

25 benefit governmental plan (as defined in section

26 414(d)) if such transfer is—
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1 ‘‘(A) for the purchase of permissive service

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

3 under such plan, or

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

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

6 thereof.’’.

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

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

9 the date of the enactment of this Act.

10 SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR

11 PURPOSES OF CASH-OUT AMOUNTS.

12 (a) QUALIFIED PLANS.—

13 (1) AMENDMENT OF INTERNAL REVENUE

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

15 on certain mandatory distributions) is amended by

16 adding at the end the following:

17 ‘‘(D) SPECIAL RULE FOR ROLLOVER CON18 TRIBUTIONS.—A plan shall not fail to meet the

19 requirements of this paragraph if, under the

20 terms of the plan, the present value of the non21 forfeitable accrued benefit is determined with22 out regard to that portion of such benefit which

23 is attributable to rollover contributions (and

24 earnings allocable thereto). For purposes of this

25 subparagraph, the term ‘rollover contributions’
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1 means any rollover contribution under sections

2 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),

3 and 457(e)(16).’’.

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

5 the Employee Retirement Income Security Act of

6 1974 (29 U.S.C. 1053(c)) is amended by adding at

7 the end the following:

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

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

10 present value of the nonforfeitable accrued benefit is de11 termined without regard to that portion of such benefit

12 which is attributable to rollover contributions (and earn13 ings allocable thereto). For purposes of this subparagraph,

14 the term ‘rollover contributions’ means any rollover con15 tribution under sections 402(c), 403(a)(4), 403(b)(8),

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

17 Code of 1986.’’.

18 (b) ELIGIBLE DEFERRED COMPENSATION PLANS.—

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

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

21 which is not attributable to rollover contributions (as de22 fined in section 411(a)(11)(D))’’.

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

24 this section shall apply to distributions after December 31,

25 2001.
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1 SEC. 409. MINIMUM DISTRIBUTION AND INCLUSION RE2 QUIREMENTS FOR SECTION 457 PLANS.

3 (a) MINIMUM DISTRIBUTION REQUIREMENTS.—

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

5 requirements) is amended to read as follows:

6 ‘‘(2) MINIMUM DISTRIBUTION REQUIRE7 MENTS.—A plan meets the minimum distribution re8 quirements of this paragraph if such plan meets the

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

10 (b) INCLUSION IN GROSS INCOME.—

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

12 section 457 (relating to year of inclusion in gross in13 come) is amended to read as follows:

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

15 ‘‘(1) IN GENERAL.—Any amount of compensa16 tion deferred under an eligible deferred compensa17 tion plan, and any income attributable to the

18 amounts so deferred, shall be includible in gross in19 come only for the taxable year in which such com20 pensation or other income—

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

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

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

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

25 the participant or other beneficiary, in the case
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1 of a plan of an eligible employer described in

2 subsection (e)(1)(B).

3 ‘‘(2) SPECIAL RULE FOR ROLLOVER

4 AMOUNTS.—To the extent provided in section

5 72(t)(9), section 72(t) shall apply to any amount in6 cludible in gross income under this subsection.’’.

7 (2) CONFORMING AMENDMENTS.—

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

9 457(e) as precedes subparagraph (A) is amend10 ed to read as follows:

11 ‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION

12 PLANS NOT TREATED AS MADE AVAILABLE BY REA13 SON OF CERTAIN ELECTIONS, ETC.—In the case of

14 an eligible deferred compensation plan of an em15 ployer described in subsection (e)(1)(B)—’’.

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

17 at the end the following new paragraph:

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

19 An eligible deferred compensation plan of an em20 ployer described in subsection (e)(1)(A) shall not be

21 treated as failing to meet the requirements of this

22 subsection solely by reason of making a distribution

23 described in subsection (e)(9)(A).’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to distributions after the date of

3 the enactment of this Act.

4 TITLE V—STRENGTHENING PEN5 SION SECURITY AND EN6 FORCEMENT

7 SEC. 501. REPEAL OF PERCENT OF CURRENT LIABILITY

8 FUNDING LIMIT.

9 (a) AMENDMENT OF INTERNAL REVENUE CODE.—

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

11 amended—

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

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

14 plan years beginning before January 1, 2004, the

15 applicable percentage’’; and

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

17 follows:

18 ‘‘(F) APPLICABLE PERCENTAGE.—For

19 purposes of subparagraph (A)(i)(I), the applica20 ble percentage shall be determined in accord21 ance with the following table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

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

2003 ............................................................................. 170.’’.
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1 (b) AMENDMENT OF ERISA.—Section 302(c)(7) of

2 the Employee Retirement Income Security Act of 1974

3 (29 U.S.C. 1082(c)(7)) is amended—

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

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

6 plan years beginning before January 1, 2004, the

7 applicable percentage’’; and

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

9 follows:

10 ‘‘(F) APPLICABLE PERCENTAGE.—For

11 purposes of subparagraph (A)(i)(I), the applica12 ble percentage shall be determined in accord13 ance with the following table:

‘‘In the case of any plan year The applicable

beginning in— percentage is—

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

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

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

15 this section shall apply to plan years beginning after De16 cember 31, 2001.

17 SEC. 502. MAXIMUM CONTRIBUTION DEDUCTION RULES

18 MODIFIED AND APPLIED TO ALL DEFINED

19 BENEFIT PLANS.

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

21 404(a)(1) (relating to special rule in case of certain plans)

22 is amended to read as follows:
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1 ‘‘(D) SPECIAL RULE IN CASE OF CERTAIN

2 PLANS.—

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

4 defined benefit plan, except as provided in

5 regulations, the maximum amount deduct6 ible under the limitations of this paragraph

7 shall not be less than the unfunded termi8 nation liability (determined as if the pro9 posed termination date referred to in sec10 tion 4041(b)(2)(A)(i)(II) of the Employee

11 Retirement Income Security Act of 1974

12 were the last day of the plan year).

13 ‘‘(ii) PLANS WITH LESS THAN 100

14 PARTICIPANTS.—For purposes of this sub15 paragraph, in the case of a plan which has

16 less than 100 participants for the plan

17 year, termination liability shall not include

18 the liability attributable to benefit in19 creases for highly compensated employees

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

21 from a plan amendment which is made or

22 becomes effective, whichever is later, within

23 the last 2 years before the termination

24 date.
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1 ‘‘(iii) RULE FOR DETERMINING NUM2 BER OF PARTICIPANTS.—For purposes of

3 determining whether a plan has more than

4 100 participants, all defined benefit plans

5 maintained by the same employer (or any

6 member of such employer’s controlled

7 group (within the meaning of section

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

9 but only employees of such member or em10 ployer shall be taken into account.

11 ‘‘(iv) PLANS MAINTAINED BY PROFES12 SIONAL SERVICE EMPLOYERS.—Clause (i)

13 shall not apply to a plan described in sec14 tion 4021(b)(13) of the Employee Retire15 ment Income Security Act of 1974.’’.

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

17 section 4972(c) is amended to read as follows:

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

19 of nondeductible contributions for any taxable year,

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

21 contributions to one or more defined contribution

22 plans which are not deductible when contributed

23 solely because of section 404(a)(7) as does not ex24 ceed the greater of—
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1 ‘‘(A) the amount of contributions not in

2 excess of 6 percent of compensation (within the

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

4 (during the taxable year for which the contribu5 tions were made) to beneficiaries under the

6 plans, or

7 ‘‘(B) the sum of—

8 ‘‘(i) the amount of contributions de9 scribed in section 401(m)(4)(A), plus

10 ‘‘(ii) the amount of contributions de11 scribed in section 402(g)(3)(A).

12 For purposes of this paragraph, the deductible limits

13 under section 404(a)(7) shall first be applied to

14 amounts contributed to a defined benefit plan and

15 then to amounts described in subparagraph (B).’’.

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

17 this section shall apply to plan years beginning after De18 cember 31, 2001.

19 SEC. 503. EXCISE TAX RELIEF FOR SOUND PENSION FUND20 ING.

21 (a) IN GENERAL.—Subsection (c) of section 4972

22 (relating to nondeductible contributions) is amended by

23 adding at the end the following new paragraph:

24 ‘‘(7) DEFINED BENEFIT PLAN EXCEPTION.—In

25 determining the amount of nondeductible contribu-
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1 tions for any taxable year, an employer may elect for

2 such year not to take into account any contributions

3 to a defined benefit plan except to the extent that

4 such contributions exceed the full-funding limitation

5 (as defined in section 412(c)(7), determined without

6 regard to subparagraph (A)(i)(I) thereof). For pur7 poses of this paragraph, the deductible limits under

8 section 404(a)(7) shall first be applied to amounts

9 contributed to defined contribution plans and then

10 to amounts described in this paragraph. If an em11 ployer makes an election under this paragraph for a

12 taxable year, paragraph (6) shall not apply to such

13 employer for such taxable year.’’.

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

15 this section shall apply to years beginning after December

16 31, 2001.

17 SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY

18 DEFINED BENEFIT PLANS SIGNIFICANTLY

19 REDUCING FUTURE BENEFIT ACCRUALS.

20 (a) AMENDMENT OF INTERNAL REVENUE CODE.—

21 (1) IN GENERAL.—Chapter 43 (relating to

22 qualified pension, etc., plans) is amended by adding

23 at the end the following new section:
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1 ‘‘SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING

2 BENEFIT ACCRUALS TO SATISFY NOTICE RE3 QUIREMENTS.

4 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed

5 a tax on the failure of any applicable pension plan to meet

6 the requirements of subsection (e) with respect to any ap7 plicable individual.

8 ‘‘(b) AMOUNT OF TAX.—

9 ‘‘(1) IN GENERAL.—The amount of the tax im10 posed by subsection (a) on any failure with respect

11 to any applicable individual shall be $100 for each

12 day in the noncompliance period with respect to such

13 failure.

14 ‘‘(2) NONCOMPLIANCE PERIOD.—For purposes

15 of this section, the term ‘noncompliance period’

16 means, with respect to any failure, the period begin17 ning on the date the failure first occurs and ending

18 on the date the failure is corrected.

19 ‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—

20 ‘‘(1) OVERALL LIMITATION FOR UNINTEN21 TIONAL FAILURES.—In the case of failures that are

22 due to reasonable cause and not to willful neglect,

23 the tax imposed by subsection (a) for failures during

24 the taxable year of the employer (or, in the case of

25 a multiemployer plan, the taxable year of the trust

26 forming part of the plan) shall not exceed $500,000.
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1 For purposes of the preceding sentence, all multiem2 ployer plans of which the same trust forms a part

3 shall be treated as one plan. For purposes of this

4 paragraph, if not all persons who are treated as a

5 single employer for purposes of this section have the

6 same taxable year, the taxable years taken into ac7 count shall be determined under principles similar to

8 the principles of section 1561.

9 ‘‘(2) WAIVER BY SECRETARY.—In the case of a

10 failure which is due to reasonable cause and not to

11 willful neglect, the Secretary may waive part or all

12 of the tax imposed by subsection (a) to the extent

13 that the payment of such tax would be excessive rel14 ative to the failure involved.

15 ‘‘(d) LIABILITY FOR TAX.—The following shall be lia16 ble for the tax imposed by subsection (a):

17 ‘‘(1) In the case of a plan other than a multi18 employer plan, the employer.

19 ‘‘(2) In the case of a multiemployer plan, the

20 plan.

21 ‘‘(e) NOTICE REQUIREMENTS FOR PLANS SIGNIFI22 CANTLY REDUCING BENEFIT ACCRUALS.—

23 ‘‘(1) IN GENERAL.—If an applicable pension

24 plan is amended to provide for a significant reduc25 tion in the rate of future benefit accrual, the plan
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1 administrator shall provide written notice to each

2 applicable individual (and to each employee organi3 zation representing applicable individuals).

4 ‘‘(2) NOTICE.—The notice required by para5 graph (1) shall be written in a manner calculated to

6 be understood by the average plan participant and

7 shall provide sufficient information (as determined

8 in accordance with regulations prescribed by the

9 Secretary) to allow applicable individuals to under10 stand the effect of the plan amendment. The Sec11 retary may provide a simplified form of notice for,

12 or exempt from any notice requirement, a plan—

13 ‘‘(A) which has fewer than 100 partici14 pants who have accrued a benefit under the

15 plan, or

16 ‘‘(B) which offers participants the option

17 to choose between the new benefit formula and

18 the old benefit formula.

19 ‘‘(3) TIMING OF NOTICE.—Except as provided

20 in regulations, the notice required by paragraph (1)

21 shall be provided within a reasonable time before the

22 effective date of the plan amendment.

23 ‘‘(4) DESIGNEES.—Any notice under paragraph

24 (1) may be provided to a person designated, in writ-
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1 ing, by the person to which it would otherwise be

2 provided.

3 ‘‘(5) NOTICE BEFORE ADOPTION OF AMEND4 MENT.—A plan shall not be treated as failing to

5 meet the requirements of paragraph (1) merely be6 cause notice is provided before the adoption of the

7 plan amendment if no material modification of the

8 amendment occurs before the amendment is adopt9 ed.

10 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur11 poses of this section—

12 ‘‘(1) APPLICABLE INDIVIDUAL.—The term ‘ap13 plicable individual’ means, with respect to any plan

14 amendment—

15 ‘‘(A) each participant in the plan, and

16 ‘‘(B) any beneficiary who is an alternate

17 payee (within the meaning of section 414(p)(8))

18 under an applicable qualified domestic relations

19 order (within the meaning of section

20 414(p)(1)(A)),

21 whose rate of future benefit accrual under the plan

22 may reasonably be expected to be significantly re23 duced by such plan amendment.

24 ‘‘(2) APPLICABLE PENSION PLAN.—The term

25 ‘applicable pension plan’ means—
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1 ‘‘(A) any defined benefit plan, or

2 ‘‘(B) an individual account plan which is

3 subject to the funding standards of section 412.

4 Such term shall not include a governmental plan

5 (within the meaning of section 414(d)) or a church

6 plan (within the meaning of section 414(e)) with re7 spect to which the election provided by section

8 410(d) has not been made.

9 ‘‘(3) EARLY RETIREMENT.—A plan amendment

10 which eliminates or significantly reduces any early

11 retirement benefit or retirement-type subsidy (within

12 the meaning of section 411(d)(6)(B)(i)) shall be

13 treated as having the effect of significantly reducing

14 the rate of future benefit accrual.

15 ‘‘(g) NEW TECHNOLOGIES.—The Secretary may by

16 regulations allow any notice under subsection (e) to be

17 provided by using new technologies.’’.

18 (2) CLERICAL AMENDMENT.—The table of sec19 tions for chapter 43 is amended by adding at the

20 end the following new item:

‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals

to satisfy notice requirements.’’.

21 (b) AMENDMENT OF ERISA.—Section 204(h) of the

22 Employee Retirement Income Security Act of 1974 (29

23 U.S.C. 1054(h)) is amended by adding at the end the fol24 lowing new paragraphs:
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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-
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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.
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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
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1 such sections if it makes a good faith effort to com2 ply with such requirements.

3 (3) SPECIAL NOTICE RULE.—The period for

4 providing any notice required by the amendments

5 made by this section shall not end before the date

6 which is 3 months after the date of the enactment

7 of this Act.

8 (d) STUDY.—The Secretary of the Treasury shall

9 prepare a report on the effects of conversions of tradi10 tional defined benefit plans to cash balance or hybrid for11 mula plans. Such study shall examine the effect of such

12 conversions on longer service participants, including the

13 incidence and effects of ‘‘wear away’’ provisions under

14 which participants earn no additional benefits for a period

15 of time after the conversion. As soon as practicable, but

16 not later than 60 days after the date of the enactment

17 of this Act, the Secretary shall submit such report, to18 gether with recommendations thereon, to the Committee

19 on Ways and Means and the Committee on Education and

20 the Workforce of the House of Representatives and the

21 Committee on Finance and the Committee on Health,

22 Education, Labor, and Pensions of the Senate.

23 SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER

24 SECTION 415.

25 (a) COMPENSATION LIMIT.—
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1 (1) IN GENERAL.—Paragraph (11) of section

2 415(b) (relating to limitation for defined benefit

3 plans) is amended to read as follows:

4 ‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN5 MENTAL AND MULTIEMPLOYER PLANS.—In the case

6 of a governmental plan (as defined in section

7 414(d)) or a multiemployer plan (as defined in sec8 tion 414(f)), subparagraph (B) of paragraph (1)

9 shall not apply.’’.

10 (2) CONFORMING AMENDMENT.—Section

11 415(b)(7) (relating to benefits under certain collec12 tively bargained plans) is amended by inserting

13 ‘‘(other than a multiemployer plan)’’ after ‘‘defined

14 benefit plan’’ in the matter preceding subparagraph

15 (A).

16 (b) COMBINING AND AGGREGATION OF PLANS.—

17 (1) COMBINING OF PLANS.—Subsection (f) of

18 section 415 (relating to combining of plans) is

19 amended by adding at the end the following:

20 ‘‘(3) EXCEPTION FOR MULTIEMPLOYER

21 PLANS.—Notwithstanding paragraph (1) and sub22 section (g), a multiemployer plan (as defined in sec23 tion 414(f)) shall not be combined or aggregated

24 with any other plan maintained by an employer for

25 purposes of applying the limitations established in
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1 this section, except that such plan shall be combined

2 or aggregated with another plan which is not such

3 a multiemployer plan solely for purposes of deter4 mining whether such other plan meets the require5 ments of subsections (b)(1)(A) and (c).’’.

6 (2) CONFORMING AMENDMENT FOR AGGREGA7 TION OF PLANS.—Subsection (g) of section 415 (re8 lating to aggregation of plans) is amended by strik9 ing ‘‘The Secretary’’ and inserting ‘‘Except as pro10 vided in subsection (f)(3), the Secretary’’.

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

12 this section shall apply to years beginning after December

13 31, 2001.

14 SEC. 506. PROTECTION OF INVESTMENT OF EMPLOYEE

15 CONTRIBUTIONS TO 401(K) PLANS.

16 (a) IN GENERAL.—Section 1524(b) of the Taxpayer

17 Relief Act of 1997 is amended to read as follows:

18 ‘‘(b) EFFECTIVE DATE.—

19 ‘‘(1) IN GENERAL.—Except as provided in para20 graph (2), the amendments made by this section

21 shall apply to elective deferrals for plan years begin22 ning after December 31, 1998.

23 ‘‘(2) NONAPPLICATION TO PREVIOUSLY AC24 QUIRED PROPERTY.—The amendments made by this

25 section shall not apply to any elective deferral which
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1 is invested in assets consisting of qualifying em2 ployer securities, qualifying employer real property,

3 or both, if such assets were acquired before January

4 1, 1999.’’.

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

6 this section shall apply as if included in the provision of

7 the Taxpayer Relief Act of 1997 to which it relates.

8 SEC. 507. PERIODIC PENSION BENEFITS STATEMENTS.

9 (a) IN GENERAL.—Section 105(a) of the Employee

10 Retirement Income Security Act of 1974 (29 U.S.C. 1025

11 (a)) is amended to read as follows:

12 ‘‘(a)(1) Except as provided in paragraph (2)—

13 ‘‘(A) the administrator of an individual account

14 plan shall furnish a pension benefit statement—

15 ‘‘(i) to a plan participant at least once an16 nually, and

17 ‘‘(ii) to a plan beneficiary upon written re18 quest, and

19 ‘‘(B) the administrator of a defined benefit plan

20 shall furnish a pension benefit statement—

21 ‘‘(i) at least once every 3 years to each

22 participant with a nonforfeitable accrued ben23 efit who is employed by the employer maintain24 ing the plan at the time the statement is fur25 nished to participants, and
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1 ‘‘(ii) to a plan participant or plan bene2 ficiary of the plan upon written request.

3 ‘‘(2) Notwithstanding paragraph (1), the adminis4 trator of a plan to which more than 1 unaffiliated em5 ployer is required to contribute shall only be required to

6 furnish a pension benefit statement under paragraph (1)

7 upon the written request of a participant or beneficiary

8 of the plan.

9 ‘‘(3) A pension benefit statement under paragraph

10 (1)—

11 ‘‘(A) shall indicate, on the basis of the latest

12 available information—

13 ‘‘(i) the total benefits accrued, and

14 ‘‘(ii) the nonforfeitable pension benefits, if

15 any, which have accrued, or the earliest date on

16 which benefits will become nonforfeitable,

17 ‘‘(B) shall be written in a manner calculated to

18 be understood by the average plan participant, and

19 ‘‘(C) may be provided in written, electronic, tel20 ephonic, or other appropriate form.

21 ‘‘(4)(A) In the case of a defined benefit plan, the re22 quirements of paragraph (1)(B)(i) shall be treated as met

23 with respect to a participant if the administrator provides

24 the participant at least once each year with notice of the

25 availability of the pension benefit statement and the ways
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1 in which the participant may obtain such statement. Such

2 notice shall be provided in written, electronic, telephonic,

3 or other appropriate form, and may be included with other

4 communications to the participant if done in a manner

5 reasonably designed to attract the attention of the partici6 pant.

7 ‘‘(B) The Secretary may provide that years in which

8 no employee or former employee benefits (within the

9 meaning of section 410(b) of the Internal Revenue Code

10 of 1986) under the plan need not be taken into account

11 in determining the 3-year period under paragraph

12 (1)(B)(i).’’.

13 (b) CONFORMING AMENDMENTS.—

14 (1) Section 105 of the Employee Retirement In15 come Security Act of 1974 (29 U.S.C. 1025) is

16 amended by striking subsection (d).

17 (2) Section 105(b) of such Act (29 U.S.C.

18 1025(b)) is amended to read as follows:

19 ‘‘(b) In no case shall a participant or beneficiary of

20 a plan be entitled to more than one statement described

21 in subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is appli22 cable, in any 12-month period.’’.

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

24 this section shall apply to plan years beginning after De25 cember 31, 2002.
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1 SEC. 508. PROHIBITED ALLOCATIONS OF STOCK IN S COR2 PORATION ESOP.

3 (a) IN GENERAL.—Section 409 (relating to qualifica4 tions for tax credit employee stock ownership plans) is

5 amended by redesignating subsection (p) as subsection (q)

6 and by inserting after subsection (o) the following new

7 subsection:

8 ‘‘(p) PROHIBITED ALLOCATIONS OF SECURITIES IN

9 AN S CORPORATION.—

10 ‘‘(1) IN GENERAL.—An employee stock owner11 ship plan holding employer securities consisting of

12 stock in an S corporation shall provide that no por13 tion of the assets of the plan attributable to (or allo14 cable in lieu of) such employer securities may, dur15 ing a nonallocation year, accrue (or be allocated di16 rectly or indirectly under any plan of the employer

17 meeting the requirements of section 401(a)) for the

18 benefit of any disqualified person.

19 ‘‘(2) FAILURE TO MEET REQUIREMENTS.—

20 ‘‘(A) IN GENERAL.—If a plan fails to meet

21 the requirements of paragraph (1), the plan

22 shall be treated as having distributed to any

23 disqualified person the amount allocated to the

24 account of such person in violation of para25 graph (1) at the time of such allocation.
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1 ‘‘(B) CROSS REFERENCE.—

‘‘For excise tax relating to violations of paragraph

(1) and ownership of synthetic equity, see section

4979A.

2 ‘‘(3) NONALLOCATION YEAR.—For purposes of

3 this subsection—

4 ‘‘(A) IN GENERAL.—The term ‘nonalloca5 tion year’ means any plan year of an employee

6 stock ownership plan if, at any time during

7 such plan year—

8 ‘‘(i) such plan holds employer securi9 ties consisting of stock in an S corpora10 tion, and

11 ‘‘(ii) disqualified persons own at least

12 50 percent of the number of shares of

13 stock in the S corporation.

14 ‘‘(B) ATTRIBUTION RULES.—For purposes

15 of subparagraph (A)—

16 ‘‘(i) IN GENERAL.—The rules of sec17 tion 318(a) shall apply for purposes of de18 termining ownership, except that—

19 ‘‘(I) in applying paragraph (1)

20 thereof, the members of an individ21 ual’s family shall include members of

22 the family described in paragraph

23 (4)(D), and
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1 ‘‘(II) paragraph (4) thereof shall

2 not apply.

3 ‘‘(ii) DEEMED-OWNED SHARES.—Not4 withstanding the employee trust exception

5 in section 318(a)(2)(B)(i), individual shall

6 be treated as owning deemed-owned shares

7 of the individual.

8 Solely for purposes of applying paragraph (5),

9 this subparagraph shall be applied after the at10 tribution rules of paragraph (5) have been ap11 plied.

12 ‘‘(4) DISQUALIFIED PERSON.—For purposes of

13 this subsection—

14 ‘‘(A) IN GENERAL.—The term ‘disqualified

15 person’ means any person if—

16 ‘‘(i) the aggregate number of deemed17 owned shares of such person and the mem18 bers of such person’s family is at least 20

19 percent of the number of deemed-owned

20 shares of stock in the S corporation, or

21 ‘‘(ii) in the case of a person not de22 scribed in clause (i), the number of

23 deemed-owned shares of such person is at

24 least 10 percent of the number of deemed25 owned shares of stock in such corporation.
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1 ‘‘(B) TREATMENT OF FAMILY MEMBERS.—

2 In the case of a disqualified person described in

3 subparagraph (A)(i), any member of such per4 son’s family with deemed-owned shares shall be

5 treated as a disqualified person if not otherwise

6 treated as a disqualified person under subpara7 graph (A).

8 ‘‘(C) DEEMED-OWNED SHARES.—

9 ‘‘(i) IN GENERAL.—The term

10 ‘deemed-owned shares’ means, with respect

11 to any person—

12 ‘‘(I) the stock in the S corpora13 tion constituting employer securities

14 of an employee stock ownership plan

15 which is allocated to such person

16 under the plan, and

17 ‘‘(II) such person’s share of the

18 stock in such corporation which is

19 held by such plan but which is not al20 located under the plan to participants.

21 ‘‘(ii) PERSON’S SHARE OF

22 UNALLOCATED STOCK.—For purposes of

23 clause (i)(II), a person’s share of

24 unallocated S corporation stock held by

25 such plan is the amount of the unallocated
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1 stock which would be allocated to such per2 son if the unallocated stock were allocated

3 to all participants in the same proportions

4 as the most recent stock allocation under

5 the plan.

6 ‘‘(D) MEMBER OF FAMILY.—For purposes

7 of this paragraph, the term ‘member of the

8 family’ means, with respect to any individual—

9 ‘‘(i) the spouse of the individual,

10 ‘‘(ii) an ancestor or lineal descendant

11 of the individual or the individual’s spouse,

12 ‘‘(iii) a brother or sister of the indi13 vidual or the individual’s spouse and any

14 lineal descendant of the brother or sister,

15 and

16 ‘‘(iv) the spouse of any individual de17 scribed in clause (ii) or (iii).

18 A spouse of an individual who is legally sepa19 rated from such individual under a decree of di20 vorce or separate maintenance shall not be

21 treated as such individual’s spouse for purposes

22 of this subparagraph.

23 ‘‘(5) TREATMENT OF SYNTHETIC EQUITY.—For

24 purposes of paragraphs (3) and (4), in the case of

25 a person who owns synthetic equity in the S corpora-
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1 tion, except to the extent provided in regulations, the

2 shares of stock in such corporation on which such

3 synthetic equity is based shall be treated as out4 standing stock in such corporation and deemed5 owned shares of such person if such treatment of

6 synthetic equity of 1 or more such persons results

7 in—

8 ‘‘(A) the treatment of any person as a dis9 qualified person, or

10 ‘‘(B) the treatment of any year as a non11 allocation year.

12 For purposes of this paragraph, synthetic equity

13 shall be treated as owned by a person in the same

14 manner as stock is treated as owned by a person

15 under the rules of paragraphs (2) and (3) of section

16 318(a). If, without regard to this paragraph, a per17 son is treated as a disqualified person or a year is

18 treated as a nonallocation year, this paragraph shall

19 not be construed to result in the person or year not

20 being so treated.

21 ‘‘(6) DEFINITIONS.—For purposes of this

22 subsection—

23 ‘‘(A) EMPLOYEE STOCK OWNERSHIP

24 PLAN.—The term ‘employee stock ownership
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1 plan’ has the meaning given such term by sec2 tion 4975(e)(7).

3 ‘‘(B) EMPLOYER SECURITIES.—The term

4 ‘employer security’ has the meaning given such

5 term by section 409(l).

6 ‘‘(C) SYNTHETIC EQUITY.—The term ‘syn7 thetic equity’ means any stock option, warrant,

8 restricted stock, deferred issuance stock right,

9 or similar interest or right that gives the holder

10 the right to acquire or receive stock of the S

11 corporation in the future. Except to the extent

12 provided in regulations, synthetic equity also in13 cludes a stock appreciation right, phantom

14 stock unit, or similar right to a future cash

15 payment based on the value of such stock or

16 appreciation in such value.

17 ‘‘(7) REGULATIONS.—The Secretary shall pre18 scribe such regulations as may be necessary to carry

19 out the purposes of this subsection.’’.

20 (b) COORDINATION WITH SECTION 4975(e)(7).—The

21 last sentence of section 4975(e)(7) (defining employee

22 stock ownership plan) is amended by inserting ‘‘, section

23 409(p),’’ after ‘‘409(n)’’.

24 (c) EXCISE TAX.—
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1 (1) APPLICATION OF TAX.—Subsection (a) of

2 section 4979A (relating to tax on certain prohibited

3 allocations of employer securities) is amended—

4 (A) by striking ‘‘or’’ at the end of para5 graph (1), and

6 (B) by striking all that follows paragraph

7 (2) and inserting the following:

8 ‘‘(3) there is any allocation of employer securi9 ties which violates the provisions of section 409(p),

10 or a nonallocation year described in subsection

11 (e)(2)(C) with respect to an employee stock owner12 ship plan, or

13 ‘‘(4) any synthetic equity is owned by a dis14 qualified person in any nonallocation year,

15 there is hereby imposed a tax on such allocation or owner16 ship equal to 50 percent of the amount involved.’’.

17 (2) LIABILITY.—Section 4979A(c) (defining li18 ability for tax) is amended to read as follows:

19 ‘‘(c) LIABILITY FOR TAX.—The tax imposed by this

20 section shall be paid—

21 ‘‘(1) in the case of an allocation referred to in

22 paragraph (1) or (2) of subsection (a), by—

23 ‘‘(A) the employer sponsoring such plan, or

24 ‘‘(B) the eligible worker-owned cooperative,
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1 which made the written statement described in sec2 tion 664(g)(1)(E) or in section 1042(b)(3)(B) (as

3 the case may be), and

4 ‘‘(2) in the case of an allocation or ownership

5 referred to in paragraph (3) or (4) of subsection (a),

6 by the S corporation the stock in which was so allo7 cated or owned.’’.

8 (3) DEFINITIONS.—Section 4979A(e) (relating

9 to definitions) is amended to read as follows:

10 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur11 poses of this section—

12 ‘‘(1) DEFINITIONS.—Except as provided in

13 paragraph (2), terms used in this section have the

14 same respective meanings as when used in sections

15 409 and 4978.

16 ‘‘(2) SPECIAL RULES RELATING TO TAX IM17 POSED BY REASON OF PARAGRAPH (3) OR (4) OF

18 SUBSECTION (a).—

19 ‘‘(A) PROHIBITED ALLOCATIONS.—The

20 amount involved with respect to any tax im21 posed by reason of subsection (a)(3) is the

22 amount allocated to the account of any person

23 in violation of section 409(p)(1).

24 ‘‘(B) SYNTHETIC EQUITY.—The amount

25 involved with respect to any tax imposed by rea-
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1 son of subsection (a)(4) is the value of the

2 shares on which the synthetic equity is based.

3 ‘‘(C) SPECIAL RULE DURING FIRST NON4 ALLOCATION YEAR.—For purposes of subpara5 graph (A), the amount involved for the first

6 nonallocation year of any employee stock owner7 ship plan shall be determined by taking into ac8 count the total value of all the deemed-owned

9 shares of all disqualified persons with respect to

10 such plan.

11 ‘‘(D) STATUTE OF LIMITATIONS.—The

12 statutory period for the assessment of any tax

13 imposed by this section by reason of paragraph

14 (3) or (4) of subsection (a) shall not expire be15 fore the date which is 3 years from the later

16 of—

17 ‘‘(i) the allocation or ownership re18 ferred to in such paragraph giving rise to

19 such tax, or

20 ‘‘(ii) the date on which the Secretary

21 is notified of such allocation or owner22 ship.’’.

23 (d) EFFECTIVE DATES.—
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1 (1) IN GENERAL.—The amendments made by

2 this section shall apply to plan years beginning after

3 December 31, 2004.

4 (2) EXCEPTION FOR CERTAIN PLANS.—In the

5 case of any—

6 (A) employee stock ownership plan estab7 lished after March 14, 2001, or

8 (B) employee stock ownership plan estab9 lished on or before such date if employer securi10 ties held by the plan consist of stock in a cor11 poration with respect to which an election under

12 section 1362(a) of the Internal Revenue Code

13 of 1986 is not in effect on such date,

14 the amendments made by this section shall apply to

15 plan years ending after March 14, 2001.

16 TITLE VI—REDUCING

17 REGULATORY BURDENS

18 SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.

19 (a) AMENDMENT OF INTERNAL REVENUE CODE.—

20 Paragraph (9) of section 412(c)(9) (relating to annual

21 valuation) is amended to read as follows:

22 ‘‘(9) ANNUAL VALUATION.—

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

24 section, a determination of experience gains and

25 losses and a valuation of the plan’s liability
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1 shall be made not less frequently than once

2 every year, except that such determination shall

3 be made more frequently to the extent required

4 in particular cases under regulations prescribed

5 by the Secretary.

6 ‘‘(B) VALUATION DATE.—

7 ‘‘(i) CURRENT YEAR.—Except as pro8 vided in clause (ii), the valuation referred

9 to in subparagraph (A) shall be made as of

10 a date within the plan year to which the

11 valuation refers or within one month prior

12 to the beginning of such year.

13 ‘‘(ii) ELECTION TO USE PRIOR YEAR

14 VALUATION.—The valuation referred to in

15 subparagraph (A) may be made as of a

16 date within the plan year prior to the year

17 to which the valuation refers if—

18 ‘‘(I) an election is in effect under

19 this clause with respect to the plan,

20 and

21 ‘‘(II) as of such date, the value

22 of the assets of the plan are not less

23 than 125 percent of the plan’s current

24 liability (as defined in paragraph

25 (7)(B)).
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1 ‘‘(iii) ADJUSTMENTS.—Information

2 under clause (ii) shall, in accordance with

3 regulations, be actuarially adjusted to re4 flect significant differences in participants.

5 ‘‘(iv) ELECTION.—An election under

6 clause (ii), once made, shall be irrevocable

7 without the consent of the Secretary.’’.

8 (b) AMENDMENT OF ERISA.—Paragraph (9) of sec9 tion 302(c) of the Employee Retirement Income Security

10 Act of 1974 (29 U.S.C. 1053(c)) is amended—

11 (1) by inserting ‘‘(A)’’ after ‘‘(9)’’; and

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

13 ‘‘(B)(i) Except as provided in clause (ii), the valu14 ation referred to in subparagraph (A) shall be made as

15 of a date within the plan year to which the valuation refers

16 or within one month prior to the beginning of such year.

17 ‘‘(ii) The valuation referred to in subparagraph (A)

18 may be made as of a date within the plan year prior to

19 the year to which the valuation refers if—

20 ‘‘(I) an election is in effect under this clause

21 with respect to the plan; and

22 ‘‘(II) as of such date, the value of the assets of

23 the plan are not less than 125 percent of the plan’s

24 current liability (as defined in paragraph (7)(B)).
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1 ‘‘(iii) Information under clause (ii) shall, in accord2 ance with regulations, be actuarially adjusted to reflect

3 significant differences in participants.

4 ‘‘(iv) An election under clause (ii), once made, shall

5 be irrevocable without the consent of the Secretary of the

6 Treasury.’’.

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

8 this section shall apply to plan years beginning after De9 cember 31, 2001.

10 SEC. 602. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT

11 LOSS OF DIVIDEND DEDUCTION.

12 (a) IN GENERAL.—Section 404(k)(2)(A) (defining

13 applicable dividends) is amended by striking ‘‘or’’ at the

14 end of clause (ii), by redesignating clause (iii) as clause

15 (iv), and by inserting after clause (ii) the following new

16 clause:

17 ‘‘(iii) is, at the election of such par18 ticipants or their beneficiaries—

19 ‘‘(I) payable as provided in clause

20 (i) or (ii), or

21 ‘‘(II) paid to the plan and rein22 vested in qualifying employer securi23 ties, or’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to taxable years beginning after

3 December 31, 2000.

4 SEC. 603. REPEAL OF TRANSITION RULE RELATING TO CER5 TAIN HIGHLY COMPENSATED EMPLOYEES.

6 (a) IN GENERAL.—Paragraph (4) of section 1114(c)

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

8 (b) EFFECTIVE DATE.—The repeal made by sub9 section (a) shall apply to plan years beginning after De10 cember 31, 2001.

11 SEC. 604. EMPLOYEES OF TAX-EXEMPT ENTITIES.

12 (a) IN GENERAL.—The Secretary of the Treasury

13 shall modify Treasury Regulations section 1.410(b)–6(g)

14 to provide that employees of an organization described in

15 section 403(b)(1)(A)(i) of the Internal Revenue Code of

16 1986 who are eligible to make contributions under section

17 403(b) of such Code pursuant to a salary reduction agree18 ment may be treated as excludable with respect to a plan

19 under section 401(k) or (m) of such Code that is provided

20 under the same general arrangement as a plan under such

21 section 401(k), if—

22 (1) no employee of an organization described in

23 section 403(b)(1)(A)(i) of such Code is eligible to

24 participate in such section 401(k) plan or section

25 401(m) plan; and
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1 (2) 95 percent of the employees who are not

2 employees of an organization described in section

3 403(b)(1)(A)(i) of such Code are eligible to partici4 pate in such plan under such section 401(k) or (m).

5 (b) EFFECTIVE DATE.—The modification required by

6 subsection (a) shall apply as of the same date set forth

7 in section 1426(b) of the Small Business Job Protection

8 Act of 1996.

9 SEC. 605. CLARIFICATION OF TREATMENT OF EMPLOYER10 PROVIDED RETIREMENT ADVICE.

11 (a) IN GENERAL.—Subsection (a) of section 132 (re12 lating to exclusion from gross income) is amended by

13 striking ‘‘or’’ at the end of paragraph (5), by striking the

14 period at the end of paragraph (6) and inserting ‘‘, or’’,

15 and by adding at the end the following new paragraph:

16 ‘‘(7) qualified retirement planning services.’’.

17 (b) QUALIFIED RETIREMENT PLANNING SERVICES

18 DEFINED.—Section 132 is amended by redesignating sub19 section (m) as subsection (n) and by inserting after sub20 section (l) the following:

21 ‘‘(m) QUALIFIED RETIREMENT PLANNING SERV22 ICES.—

23 ‘‘(1) IN GENERAL.—For purposes of this sec24 tion, the term ‘qualified retirement planning serv25 ices’ means any retirement planning advice or infor-
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1 mation provided to an employee and his spouse by

2 an employer maintaining a qualified employer plan.

3 ‘‘(2) NONDISCRIMINATION RULE.—Subsection

4 (a)(7) shall apply in the case of highly compensated

5 employees only if such services are available on sub6 stantially the same terms to each member of the

7 group of employees normally provided education and

8 information regarding the employer’s qualified em9 ployer plan.

10 ‘‘(3) QUALIFIED EMPLOYER PLAN.—For pur11 poses of this subsection, the term ‘qualified employer

12 plan’ means a plan, contract, pension, or account de13 scribed in section 219(g)(5).’’.

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

15 this section shall apply to years beginning after December

16 31, 2001.

17 SEC. 606. REPORTING SIMPLIFICATION.

18 (a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

19 OWNERS AND THEIR SPOUSES.—

20 (1) IN GENERAL.—The Secretary of the Treas21 ury shall modify the requirements for filing annual

22 returns with respect to one-participant retirement

23 plans to ensure that such plans with assets of

24 $250,000 or less as of the close of the plan year

25 need not file a return for that year.
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1 (2) ONE-PARTICIPANT RETIREMENT PLAN DE2 FINED.—For purposes of this subsection, the term

3 ‘‘one-participant retirement plan’’ means a retire4 ment plan that—

5 (A) on the first day of the plan year—

6 (i) covered only the employer (and the

7 employer’s spouse) and the employer

8 owned the entire business (whether or not

9 incorporated); or

10 (ii) covered only one or more partners

11 (and their spouses) in a business partner12 ship (including partners in an S or C cor13 poration);

14 (B) meets the minimum coverage require15 ments of section 410(b) of the Internal Revenue

16 Code of 1986 without being combined with any

17 other plan of the business that covers the em18 ployees of the business;

19 (C) does not provide benefits to anyone ex20 cept the employer (and the employer’s spouse)

21 or the partners (and their spouses);

22 (D) does not cover a business that is a

23 member of an affiliated service group, a con24 trolled group of corporations, or a group of

25 businesses under common control; and
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1 (E) does not cover a business that leases

2 employees.

3 (3) OTHER DEFINITIONS.—Terms used in para4 graph (2) which are also used in section 414 of the

5 Internal Revenue Code of 1986 shall have the re6 spective meanings given such terms by such section.

7 (b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR

8 PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case

9 of a retirement plan which covers less than 25 employees

10 on the first day of the plan year and meets the require11 ments described in subparagraphs (B), (D), and (E) of

12 subsection (a)(2), the Secretary of the Treasury shall pro13 vide for the filing of a simplified annual return that is

14 substantially similar to the annual return required to be

15 filed by a one-participant retirement plan.

16 (c) EFFECTIVE DATE.—The provisions of this section

17 shall take effect on January 1, 2002.

18 SEC. 607. IMPROVEMENT OF EMPLOYEE PLANS COMPLI19 ANCE RESOLUTION SYSTEM.

20 The Secretary of the Treasury shall continue to up21 date and improve the Employee Plans Compliance Resolu22 tion System (or any successor program) giving special at23 tention to—
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1 (1) increasing the awareness and knowledge of

2 small employers concerning the availability and use

3 of the program;

4 (2) taking into account special concerns and

5 circumstances that small employers face with respect

6 to compliance and correction of compliance failures;

7 (3) extending the duration of the self-correction

8 period under the Administrative Policy Regarding

9 Self-Correction for significant compliance failures;

10 (4) expanding the availability to correct insig11 nificant compliance failures under the Administra12 tive Policy Regarding Self-Correction during audit;

13 and

14 (5) assuring that any tax, penalty, or sanction

15 that is imposed by reason of a compliance failure is

16 not excessive and bears a reasonable relationship to

17 the nature, extent, and severity of the failure.

18 SEC. 608. REPEAL OF THE MULTIPLE USE TEST.

19 (a) IN GENERAL.—Paragraph (9) of section 401(m)

20 is amended to read as follows:

21 ‘‘(9) REGULATIONS.—The Secretary shall pre22 scribe such regulations as may be necessary to carry

23 out the purposes of this subsection and subsection

24 (k), including regulations permitting appropriate ag25 gregation of plans and contributions.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to years beginning after December

3 31, 2001.

4 SEC. 609. FLEXIBILITY IN NONDISCRIMINATION, COV5 ERAGE, AND LINE OF BUSINESS RULES.

6 (a) NONDISCRIMINATION.—

7 (1) IN GENERAL.—The Secretary of the Treas8 ury shall, by regulation, provide that a plan shall be

9 deemed to satisfy the requirements of section

10 401(a)(4) of the Internal Revenue Code of 1986 if

11 such plan satisfies the facts and circumstances test

12 under section 401(a)(4) of such Code, as in effect

13 before January 1, 1994, but only if—

14 (A) the plan satisfies conditions prescribed

15 by the Secretary to appropriately limit the

16 availability of such test; and

17 (B) the plan is submitted to the Secretary

18 for a determination of whether it satisfies such

19 test.

20 Subparagraph (B) shall only apply to the extent pro21 vided by the Secretary.

22 (2) EFFECTIVE DATES.—

23 (A) REGULATIONS.—The regulation re24 quired by paragraph (1) shall apply to years be25 ginning after December 31, 2003.
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1 (B) CONDITIONS OF AVAILABILITY.—Any

2 condition of availability prescribed by the Sec3 retary under paragraph (1)(A) shall not apply

4 before the first year beginning not less than

5 120 days after the date on which such condition

6 is prescribed.

7 (b) COVERAGE TEST.—

8 (1) IN GENERAL.—Section 410(b)(1) (relating

9 to minimum coverage requirements) is amended by

10 adding at the end the following:

11 ‘‘(D) In the case that the plan fails to

12 meet the requirements of subparagraphs (A),

13 (B) and (C), the plan—

14 ‘‘(i) satisfies subparagraph (B), as in

15 effect immediately before the enactment of

16 the Tax Reform Act of 1986,

17 ‘‘(ii) is submitted to the Secretary for

18 a determination of whether it satisfies the

19 requirement described in clause (i), and

20 ‘‘(iii) satisfies conditions prescribed by

21 the Secretary by regulation that appro22 priately limit the availability of this sub23 paragraph.

24 Clause (ii) shall apply only to the extent pro25 vided by the Secretary.’’.
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1 (2) EFFECTIVE DATES.—

2 (A) IN GENERAL.—The amendment made

3 by paragraph (1) shall apply to years beginning

4 after December 31, 2003.

5 (B) CONDITIONS OF AVAILABILITY.—Any

6 condition of availability prescribed by the Sec7 retary under regulations prescribed by the Sec8 retary under section 410(b)(1)(D) of the Inter9 nal Revenue Code of 1986 shall not apply be10 fore the first year beginning not less than 120

11 days after the date on which such condition is

12 prescribed.

13 (c) LINE OF BUSINESS RULES.—The Secretary of

14 the Treasury shall, on or before December 31, 2003, mod15 ify the existing regulations issued under section 414(r) of

16 the Internal Revenue Code of 1986 in order to expand

17 (to the extent that the Secretary determines appropriate)

18 the ability of a pension plan to demonstrate compliance

19 with the line of business requirements based upon the

20 facts and circumstances surrounding the design and oper21 ation of the plan, even though the plan is unable to satisfy

22 the mechanical tests currently used to determine compli23 ance.
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1 SEC. 610. EXTENSION TO ALL GOVERNMENTAL PLANS OF

2 MORATORIUM ON APPLICATION OF CERTAIN

3 NONDISCRIMINATION RULES APPLICABLE TO

4 STATE AND LOCAL PLANS.

5 (a) IN GENERAL.—

6 (1) Subparagraph (G) of section 401(a)(5) and

7 subparagraph (H) of section 401(a)(26) are each

8 amended by striking ‘‘section 414(d))’’ and all that

9 follows and inserting ‘‘section 414(d)).’’.

10 (2) Subparagraph (G) of section 401(k)(3) and

11 paragraph (2) of section 1505(d) of the Taxpayer

12 Relief Act of 1997 are each amended by striking

13 ‘‘maintained by a State or local government or polit14 ical subdivision thereof (or agency or instrumentality

15 thereof)’’.

16 (b) CONFORMING AMENDMENTS.—

17 (1) The heading for subparagraph (G) of sec18 tion 401(a)(5) is amended to read as follows: ‘‘GOV19 ERNMENTAL PLANS’’.

20 (2) The heading for subparagraph (H) of sec21 tion 401(a)(26) is amended to read as follows: ‘‘EX22 CEPTION FOR GOVERNMENTAL PLANS’’.

23 (3) Subparagraph (G) of section 401(k)(3) is

24 amended by inserting ‘‘GOVERNMENTAL PLANS.—’’

25 after ‘‘(G)’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to years beginning after December

3 31, 2001.

4 SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DIS5 TRIBUTIONS.

6 (a) EXPANSION OF PERIOD.—

7 (1) AMENDMENT OF INTERNAL REVENUE

8 CODE.—

9 (A) IN GENERAL.—Subparagraph (A) of

10 section 417(a)(6) is amended by striking ‘‘90-

11 day’’ and inserting ‘‘180-day’’.

12 (B) MODIFICATION OF REGULATIONS.—

13 The Secretary of the Treasury shall modify the

14 regulations under sections 402(f), 411(a)(11),

15 and 417 of the Internal Revenue Code of 1986

16 to substitute ‘‘180 days’’ for ‘‘90 days’’ each

17 place it appears in Treasury Regulations sec18 tions 1.402(f)–1, 1.411(a)–11(c), and 1.417(e)–

19 1(b).

20 (2) AMENDMENT OF ERISA.—Section

21 205(c)(7)(A) of the Employee Retirement Income

22 Security Act of 1974 (29 U.S.C. 1055(c)(7)(A)) is

23 amended by striking ‘‘90-day’’ and inserting ‘‘180-

24 day’’.
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1 (3) EFFECTIVE DATE.—The amendments made

2 by paragraph (1)(A) and (2) and the modifications

3 required by paragraph (1)(B) shall apply to years

4 beginning after December 31, 2001.

5 (b) CONSENT REGULATION INAPPLICABLE TO CER6 TAIN DISTRIBUTIONS.—

7 (1) IN GENERAL.—The Secretary of the Treas8 ury shall modify the regulations under section

9 411(a)(11) of the Internal Revenue Code of 1986 to

10 provide that the description of a participant’s right,

11 if any, to defer receipt of a distribution shall also de12 scribe the consequences of failing to defer such re13 ceipt.

14 (2) EFFECTIVE DATE.—The modifications re15 quired by paragraph (1) shall apply to years begin16 ning after December 31, 2001.

17 SEC. 612. ANNUAL REPORT DISSEMINATION.

18 (a) REPORT AVAILABLE THROUGH ELECTRONIC

19 MEANS.—Section 104(b)(3) of the Employee Retirement

20 Income Security Act of 1974 (29 U.S.C. 1024(b)(3)) is

21 amended by adding at the end the following new sentence:

22 ‘‘The requirement to furnish information under the pre23 vious sentence shall be satisfied if the administrator makes

24 such information reasonably available through electronic

25 means or other new technology.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to reports for years beginning after

3 December 31, 2000.

4 SEC. 623. TECHNICAL CORRECTIONS TO SAVER ACT.

5 Section 517 of the Employee Retirement Income Se6 curity Act of 1974 (29 U.S.C. 1147) is amended—

7 (1) in subsection (a), by striking ‘‘2001 and

8 2005 on or after September 1 of each year involved’’

9 and inserting ‘‘2001, 2005, and 2009 in the month

10 of September of each year involved’’;

11 (2) in subsection (b), by adding at the end the

12 following new sentence: ‘‘To effectuate the purposes

13 of this paragraph, the Secretary may enter into a co14 operative agreement, pursuant to the Federal Grant

15 and Cooperative Agreement Act of 1977 (31 U.S.C.

16 6301 et seq.), with the American Savings Education

17 Council.’’;

18 (3) in subsection (e)(2)—

19 (A) by striking ‘‘Committee on Labor and

20 Human Resources’’ in subparagraph (D) and

21 inserting ‘‘Committee on Health, Education,

22 Labor, and Pensions’’;

23 (B) by striking subparagraph (F) and in24 serting the following:
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1 ‘‘(F) the Chairman and Ranking Member

2 of the Subcommittee on Labor, Health and

3 Human Services, and Education of the Com4 mittee on Appropriations of the House of Rep5 resentatives and the Chairman and Ranking

6 Member of the Subcommittee on Labor, Health

7 and Human Services, and Education of the

8 Committee on Appropriations of the Senate;’’;

9 (C) by redesignating subparagraph (G) as

10 subparagraph (J); and

11 (D) by inserting after subparagraph (F)

12 the following new subparagraphs:

13 ‘‘(G) the Chairman and Ranking Member

14 of the Committee on Finance of the Senate;

15 ‘‘(H) the Chairman and Ranking Member

16 of the Committee on Ways and Means of the

17 House of Representatives;

18 ‘‘(I) the Chairman and Ranking Member

19 of the Subcommittee on Employer-Employee

20 Relations of the Committee on Education and

21 the Workforce of the House of Representatives;

22 and’’;

23 (4) in subsection (e)(3)(A)—

24 (A) by striking ‘‘There shall be no more

25 than 200 additional participants.’’ and inserting
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1 ‘‘The participants in the National Summit shall

2 also include additional participants appointed

3 under this subparagraph.’’;

4 (B) by striking ‘‘one-half shall be ap5 pointed by the President,’’ in clause (i) and in6 serting ‘‘not more than 100 participants shall

7 be appointed under this clause by the Presi8 dent,’’, and by striking ‘‘and’’ at the end of

9 clause (i);

10 (C) by striking ‘‘one-half shall be ap11 pointed by the elected leaders of Congress’’ in

12 clause (ii) and inserting ‘‘not more than 100

13 participants shall be appointed under this

14 clause by the elected leaders of Congress’’, and

15 by striking the period at the end of clause (ii)

16 and inserting ‘‘; and’’;

17 (D) by adding at the end the following new

18 clause:

19 ‘‘(iii) The President, in consultation

20 with the elected leaders of Congress re21 ferred to in subsection (a), may appoint

22 under this clause additional participants to

23 the National Summit. The number of such

24 additional participants appointed under

25 this clause may not exceed the lesser of 3
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1 percent of the total number of all addi2 tional participants appointed under this

3 paragraph, or 10. Such additional partici4 pants shall be appointed from persons

5 nominated by the organization referred to

6 in subsection (b)(2) which is made up of

7 private sector businesses and associations

8 partnered with Government entities to pro9 mote long term financial security in retire10 ment through savings and with which the

11 Secretary is required thereunder to consult

12 and cooperate and shall not be Federal,

13 State, or local government employees.’’;

14 (5) in subsection (e)(3)(B), by striking ‘‘Janu15 ary 31, 1998’’ in subparagraph (B) and inserting

16 ‘‘May 1, 2001, May 1, 2005, and May 1, 2009, for

17 each of the subsequent summits, respectively’’;

18 (6) in subsection (f)(1)(C), by inserting ‘‘, no

19 later than 90 days prior to the date of the com20 mencement of the National Summit,’’ after ‘‘com21 ment’’ in paragraph (1)(C);

22 (7) in subsection (g), by inserting ‘‘, in con23 sultation with the congressional leaders specified in

24 subsection (e)(2),’’ after ‘‘report’’;

25 (8) in subsection (i)—
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1 (A) by striking ‘‘beginning on or after Oc2 tober 1, 1997’’ in paragraph (1) and inserting

3 ‘‘2001, 2005, and 2009’’; and

4 (B) by adding at the end the following new

5 paragraph:

6 ‘‘(3) RECEPTION AND REPRESENTATION AU7 THORITY.—The Secretary is hereby granted recep8 tion and representation authority limited specifically

9 to the events at the National Summit. The Secretary

10 shall use any private contributions accepted in con11 nection with the National Summit prior to using

12 funds appropriated for purposes of the National

13 Summit pursuant to this paragraph.’’; and

14 (9) in subsection (k)—

15 (A) by striking ‘‘shall enter into a contract

16 on a sole-source basis’’ and inserting ‘‘may

17 enter into a contract on a sole-source basis’’;

18 and

19 (B) by striking ‘‘fiscal year 1998’’ and in20 serting ‘‘fiscal years 2001, 2005, and 2009’’.

21 TITLE VII—OTHER ERISA

22 PROVISIONS

23 SEC. 701. MISSING PARTICIPANTS.

24 (a) IN GENERAL.—Section 4050 of the Employee Re25 tirement Income Security Act of 1974 (29 U.S.C. 1350)
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1 is amended by redesignating subsection (c) as subsection

2 (e) and by inserting after subsection (b) the following new

3 subsections:

4 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation

5 shall prescribe rules similar to the rules in subsection (a)

6 for multiemployer plans covered by this title that termi7 nate under section 4041A.

8 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—

9 ‘‘(1) TRANSFER TO CORPORATION.—The plan

10 administrator of a plan described in paragraph (4)

11 may elect to transfer a missing participant’s benefits

12 to the corporation upon termination of the plan.

13 ‘‘(2) INFORMATION TO THE CORPORATION.—To

14 the extent provided in regulations, the plan adminis15 trator of a plan described in paragraph (4) shall,

16 upon termination of the plan, provide the corpora17 tion information with respect to benefits of a miss18 ing participant if the plan transfers such benefits—

19 ‘‘(A) to the corporation, or

20 ‘‘(B) to an entity other than the corpora21 tion or a plan described in paragraph (4)(B)(ii).

22 ‘‘(3) PAYMENT BY THE CORPORATION.—If ben23 efits of a missing participant were transferred to the

24 corporation under paragraph (1), the corporation

25 shall, upon location of the participant or beneficiary,
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1 pay to the participant or beneficiary the amount

2 transferred (or the appropriate survivor benefit)

3 either—

4 ‘‘(A) in a single sum (plus interest), or

5 ‘‘(B) in such other form as is specified in

6 regulations of the corporation.

7 ‘‘(4) PLANS DESCRIBED.—A plan is described

8 in this paragraph if—

9 ‘‘(A) the plan is a pension plan (within the

10 meaning of section 3(2))—

11 ‘‘(i) to which the provisions of this

12 section do not apply (without regard to

13 this subsection), and

14 ‘‘(ii) which is not a plan described in

15 paragraphs (2) through (11) of section

16 4021(b), and

17 ‘‘(B) at the time the assets are to be dis18 tributed upon termination, the plan—

19 ‘‘(i) has missing participants, and

20 ‘‘(ii) has not provided for the transfer

21 of assets to pay the benefits of all missing

22 participants to another pension plan (with23 in the meaning of section 3(2)).
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1 ‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—

2 Subsections (a)(1) and (a)(3) shall not apply to a

3 plan described in paragraph (4).’’.

4 (b) 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
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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
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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-
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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
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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
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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
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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)’’.
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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.—
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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)).’’.
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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-
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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 to read as follows:

10 ‘‘(2) For purposes of paragraph (1), the term ‘appli11 cable recovery amount’ means any amount which is recov12 ered from any fiduciary or other person (or from any other

13 person on behalf of any such fiduciary or other person)

14 with respect to a breach or violation described in para15 graph (1) on or after the 30th day following receipt by

16 such fiduciary or other person of written notice from the

17 Secretary of the violation, whether paid voluntarily or by

18 order of a court in a judicial proceeding instituted by the

19 Secretary under subsection (a)(2) or (a)(5). The Secretary

20 may, in the Secretary’s sole discretion, extend the 30-day

21 period described in the preceding sentence.’’.

22 (c) OTHER RULES.—Section 502(l) of the Employee

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

24 1132(l)) is amended by adding at the end the following

25 new paragraph:
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1 ‘‘(5) A person shall be jointly and severally liable for

2 the penalty described in paragraph (1) to the same extent

3 that such person is jointly and severally liable for the ap4 plicable recovery amount on which the penalty is based.

5 ‘‘(6) No penalty shall be assessed under this sub6 section unless the person against whom the penalty is as7 sessed is given notice and opportunity for a hearing with

8 respect to the violation and applicable recovery amount.’’.

9 (d) EFFECTIVE DATES.—

10 (1) IN GENERAL.—The amendments made by

11 this section shall apply to any breach of fiduciary re12 sponsibility or other violation of part 4 of subtitle B

13 of title I of the Employee Retirement Income Secu14 rity Act of 1974 occurring on or after the date of

15 enactment of this Act.

16 (2) TRANSITION RULE.—In applying the

17 amendment made by subsection (b) (relating to ap18 plicable recovery amount), a breach or other viola19 tion occurring before the date of enactment of this

20 Act which continues after the 180th day after such

21 date (and which may have been discontinued at any

22 time during its existence) shall be treated as having

23 occurred after such date of enactment.
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1 SEC. 707. BENEFIT SUSPENSION NOTICE.

2 (a) MODIFICATION OF REGULATION.—The Secretary

3 of Labor shall modify the regulation under section

4 203(a)(3)(B) of the Employee Retirement Income Secu5 rity Act of 1974 (29 U.S.C. 1053(a)(3)(B)) to provide

6 that the notification required by such regulation—

7 (1) in the case of an employee who returns to

8 work for a former employer after commencement of

9 payment of benefits under the plan shall—

10 (A) be made during the first calendar

11 month or payroll period in which the plan with12 holds payments, and

13 (B) if a reduced rate of future benefit ac14 cruals will apply to the returning employee (as

15 of the first date of participation in the plan by

16 the employee after returning to work), include

17 a statement that the rate of future benefit ac18 cruals will be reduced, and

19 (2) in the case of any employee who is not de20 scribed in paragraph (1)—

21 (A) may be included in the summary plan

22 description for the plan furnished in accordance

23 with section 104(b) of such Act (29 U.S.C.

24 1024(b)), rather than in a separate notice, and

25 (B) need not include a copy of the relevant

26 plan provisions.
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1 (b) EFFECTIVE DATE.—The modification made

2 under this section shall apply to plan years beginning after

3 December 31, 2001.

4 TITLE VIII—PLAN AMENDMENTS

5 SEC. 801. PROVISIONS RELATING TO PLAN AMENDMENTS.

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

7 or contract amendment—

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

9 being operated in accordance with the terms of the

10 plan during the period described in subsection

11 (b)(2)(A); and

12 (2) except as provided by the Secretary of the

13 Treasury, such plan shall not fail to meet the re14 quirements of section 411(d)(6) of the Internal Rev15 enue Code of 1986 or section 204(g) of the Em16 ployee Retirement Income Security Act of 1974 by

17 reason of such amendment.

18 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

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

20 any amendment to any plan or annuity contract

21 which is made—

22 (A) pursuant to any amendment made by

23 this Act, or pursuant to any regulation issued

24 under this Act; and
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1 (B) on or before the last day of the first

2 plan year beginning on or after January 1,

3 2004.

4 In the case of a governmental plan (as defined in

5 section 414(d) of the Internal Revenue Code of

6 1986), this paragraph shall be applied by sub7 stituting ‘‘2006’’ for ‘‘2004’’.

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

9 to any amendment unless—

10 (A) during the period—

11 (i) beginning on the date the legisla12 tive or regulatory amendment described in

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

14 case of a plan or contract amendment not

15 required by such legislative or regulatory

16 amendment, the effective date specified by

17 the plan); and

18 (ii) ending on the date described in

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

20 the plan or contract amendment is adopt21 ed),

22 the plan or contract is operated as if such plan

23 or contract amendment were in effect; and
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1 (B) such plan or contract amendment ap2 plies retroactively for such period.

Æ