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[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 155 Introduced in House (IH)]

107th CONGRESS
  1st Session
                                H. R. 155

 To amend the Internal Revenue Code of 1986 to enhance the portability 
            of retirement benefits, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            January 3, 2001

Mr. Pomeroy (for himself and Mr. Kolbe) 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 amend the Internal Revenue Code of 1986 to enhance the portability 
            of retirement benefits, and for other purposes.

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

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Retirement Account 
Portability Act of 2001''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

SEC. 2. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.

    (a) Rollovers From and To Section 457 Plans.--
            (1) Rollovers from section 457 plans.--
                    (A) In general.--Section 457(e) (relating to other 
                definitions and special rules) is amended by adding at 
                the end the following:
            ``(16) Rollover amounts.--
                    ``(A) General rule.--In the case of an eligible 
                deferred compensation plan, if--
                            ``(i) any portion of the balance to the 
                        credit of an employee in such plan is paid to 
                        such employee in an eligible rollover 
                        distribution (within the meaning of section 
                        402(c)(4)),
                            ``(ii) the employee transfers any portion 
                        of the property such employee receives in such 
                        distribution to an eligible retirement plan 
                        described in section 402(c)(8)(B), and
                            ``(iii) in the case of a distribution of 
                        property other than money, the amount so 
                        transferred consists of the property 
                        distributed,
                then such distribution (to the extent so transferred) 
                shall not be includible in gross income for the taxable 
                year in which paid.
                    ``(B) Certain rules made applicable.--Rules similar 
                to the rules of paragraphs (2) through (7) and (9) of 
                section 402(c) and section 402(f) shall apply for 
                purposes of subparagraph (A).
                    ``(C) Reporting.--Rollovers under this paragraph 
                shall be reported to the Secretary in the same manner 
                as rollovers from qualified retirement plans (as 
                defined in section 4974(c)).''
                    (B) Deferral limit determined without regard to 
                rollover amounts.--Section 457(b)(2) (defining eligible 
                deferred compensation plan) is amended by inserting 
                ``(other than rollover amounts)'' after ``taxable 
                year''.
            (2) Rollovers to section 457 plans.--
                    (A) Section 402(c)(8)(B) (defining eligible 
                retirement plan) is amended by striking ``and'' at the 
                end of clause (iii), by striking the period at the end 
                of clause (iv) and inserting ``, and'', and by adding 
                at the end the following:
                            ``(v) an eligible deferred compensation 
                        plan described in section 457(b) of an eligible 
                        employer described in section 457(e)(1)(A).''
                    (B) Paragraph (9) of section 402(c) is amended by 
                striking ``except that'' and all that follows and 
                inserting ``except that only an account or annuity 
                described in clause (i) or (ii) of paragraph (8)(B) 
                shall be treated as an eligible retirement plan with 
                respect to such distribution.''
                    (C) Subsection (a) of section 457 (relating to year 
                of inclusion in gross income) is amended by striking 
                ``or otherwise made available''.
    (b) Allowance of Rollovers From and To 403(b) Plans.--
            (1) Rollovers from section 403(b) plans.--Section 
        403(b)(8)(A)(ii) (relating to rollover amounts) is amended by 
        striking ``such distribution'' and all that follows and 
        inserting ``such distribution to an eligible retirement plan 
described in section 402(c)(8)(B), and''.
            (2) Rollovers to section 403(b) plans.--Section 
        402(c)(8)(B) (defining eligible retirement plan), as amended by 
        subsection (a), is amended by striking ``and'' at the end of 
        clause (iv), by striking the period at the end of clause (v) 
        and inserting ``, and'', and by adding at the end the 
        following:
                            ``(vi) an annuity contract described in 
                        section 403(b).''
    (c) Expanded Explanation to Recipients of Rollover Distributions.--
Paragraph (1) of section 402(f) (relating to written explanation to 
recipients of distributions eligible for rollover treatment) is amended 
by striking ``and'' at the end of subparagraph (C), by striking the 
period at the end of subparagraph (D) and inserting ``, and'', and by 
adding at the end the following new subparagraph:
                    ``(E) of the provisions under which distributions 
                from the eligible retirement plan receiving the 
                distribution may be subject to restrictions and tax 
                consequences which are different from those applicable 
                to distributions from the plan making such 
                distribution.''
    (d) Conforming Amendments.--
            (1) Section 72(o)(4) is amended by striking ``and 
        408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and 
        457(e)(16)''.
            (2) Section 219(d)(2) is amended by striking ``or 
        408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
            (3) Section 401(a)(31)(B) is amended by striking ``and 
        403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and 
        457(e)(16)''.
            (4) Subparagraph (B) of section 403(b)(8) is amended by 
        inserting ``and (9)'' after ``through (7)''.
            (5) Section 408(a)(1) is amended by striking ``or 
        403(b)(8)'' and inserting ``, 403(b)(8), or 457(e)(16)''.
            (6) Subparagraphs (A) and (B) of section 415(b)(2) are each 
        amended by striking ``and 408(d)(3)'' and inserting 
        ``403(b)(8), 408(d)(3), and 457(e)(16)''.
            (7) Section 415(c)(2) is amended by striking ``and 
        408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
            (8) Section 4973(b)(1)(A) is amended by striking ``or 
        408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
    (e) Effective Date; Special Rule.--
            (1) Effective date.--The amendments made by this section 
        shall apply to distributions after the date of the enactment of 
        this Act.
            (2) Special rule.--Notwithstanding any other provision of 
        law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
        Reform Act of 1986 shall not apply to any distribution from an 
        eligible retirement plan (as defined in clause (iii) or (iv) of 
        section 402(c)(8)(B) of the Internal Revenue Code of 1986) on 
        behalf of an individual if there was a rollover to such plan on 
        behalf of such individual which is permitted solely by reason 
        of any amendment made by this section.

SEC. 3. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.

    (a) In General.--Subparagraph (A) of section 408(d)(3) (relating to 
rollover amounts) is amended by striking ``or'' at the end of clause 
(ii), by striking the period at the end of clause (iii) and inserting a 
semicolon, and by adding at the end the following:
                            ``(iv)(I) the entire amount received 
                        (including money and other property) represents 
                        the entire interest in the account or the 
                        entire value of the annuity,
                            ``(II) no amount in the account and no part 
                        of the value of the annuity is attributable to 
                        any source other than a rollover contribution 
                        from an eligible retirement plan and any 
                        earnings on such rollover, and
                            ``(III) such entire amount received is paid 
                        into an eligible retirement plan (for the 
                        benefit of such individual) not later than the 
                        60th day after he receives the payment or 
                        distribution; or
                            ``(v) the entire amount received (including 
                        money and any other property) is paid into an 
                        eligible retirement plan for the benefit of 
                        such individual not later than the 60th day 
                        after the date on which he receives the payment 
                        or distribution.
                For purposes of clauses (iv) and (v), the term 
                `eligible retirement plan' has the meaning given such 
                term by clauses (iii), (iv), (v), and (vi) of section 
                402(c)(8)(B), except that for purposes of clause 
                (iv)(II) of this subparagraph, the term shall also 
                include an eligible deferred compensation plan 
                described in section 457(b) of an eligible employer 
                described in section 457(e)(1)(B).''
    (b) Conforming Amendments.--
            (1) Paragraph (1) of section 403(b) is amended by striking 
        ``section 408(d)(3)(A)(iii)'' and inserting ``clause (iii), 
        (iv), or (v) of section 408(d)(3)(A)''.
            (2) Clause (i) of section 408(d)(3)(D) is amended by 
        striking ``or (iii)'' and inserting ``(iii), (iv), or (v)''.
            (3) Subparagraph (G) of section 408(d)(3) is amended to 
        read as follows:
                    ``(G) Simple retirement accounts.--In the case of 
                any payment or distribution out of a simple retirement 
                account (as defined in subsection (p)) to which section 
                72(t)(6) applies, this paragraph shall not apply unless 
                such payment or distribution is paid into another 
                simple retirement account.''
    (c) Effective Date; Special Rule.--
            (1) Effective date.--The amendments made by this section 
        shall apply to distributions after the date of the enactment of 
        this Act.
            (2) Special rule.--Notwithstanding any other provision of 
        law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
        Reform Act of 1986 shall not apply to any distribution from an 
eligible retirement plan (as defined in clause (iii) or (iv) of section 
402(c)(8)(B) of the Internal Revenue Code of 1986) on behalf of an 
individual if there was a rollover to such plan on behalf of such 
individual which is permitted solely by reason of the amendments made 
by this section.

SEC. 4. FASTER VESTING OF EMPLOYER MATCHING CONTRIBUTIONS.

    (a) Amendments to 1986 Code.--Subsection (a) of section 411 
(relating to minimum vesting standards) is amended--
            (1) in paragraph (2), by striking ``A plan'' and inserting 
        ``Except as provided in paragraph (12), a plan'', and
            (2) by adding at the end the following:
            ``(12) Faster vesting for matching contributions.--In the 
        case of matching contributions (as defined in section 
        401(m)(4)(A)), paragraph (2) shall be applied--
                    ``(A) by substituting `3 years' for `5 years' in 
                subparagraph (A), and
                    ``(B) by substituting the following table for the 
                table contained in subparagraph (B):

                                                     The nonforfeitable
``Years of service:                                      percentage is:
    2.............................................                  20 
    3.............................................                  40 
    4.............................................                  60 
    5.............................................                  80 
    6.............................................               100.''
    (b) Amendments to ERISA.--Section 203(a) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1053(a)) is amended--
            (1) in paragraph (2), by striking ``A plan'' and inserting 
        ``Except as provided in paragraph (4), a plan'', and
            (2) by adding at the end the following:
            ``(4) Faster vesting for matching contributions.--In the 
        case of matching contributions (as defined in section 
        401(m)(4)(A) of the Internal Revenue Code of 1986), paragraph 
        (2) shall be applied--
                    ``(A) by substituting `3 years' for `5 years' in 
                subparagraph (A), and
                    ``(B) by substituting the following table for the 
                table contained in subparagraph (B):

                                                     The nonforfeitable
``Years of service:                                      percentage is:
    2.............................................                  20 
    3.............................................                  40 
    4.............................................                  60 
    5.............................................                  80 
    6.............................................               100.''
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to contributions 
        for plan years beginning after December 31, 2001.
            (2) Collective bargaining agreements.--In the case of a 
        plan maintained pursuant to 1 or more collective bargaining 
        agreements between employee representatives and 1 or more 
        employers ratified by the date of enactment of this Act, the 
        amendments made by this section shall not apply to 
        contributions on behalf of employees covered by any such 
        agreement for plan years beginning before the earlier of--
                    (A) the later of--
                            (i) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof on or after such date of enactment), or
                            (ii) January 1, 2002, or
                    (B) January 1, 2006.
            (3) Participation required.--The amendments made by this 
        section shall not apply to any employee who does not have 1 
        hour of service in any plan year to which the amendments made 
        by this section apply.

SEC. 5. EXTENSION OF MISSING PARTICIPANTS PROGRAM.

    (a) In General.--Section 4050 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1350) is amended by redesignating 
subsection (c) as subsection (e) and by inserting after subsection (b) 
the following new subsections:
    ``(c) Multiemployer Plans.--The corporation shall prescribe rules 
similar to the rules in subsection (a) for multiemployer plans covered 
by this title that terminate under section 4041A.
    ``(d) Plans Not Otherwise Subject to Title.--
            ``(1) Transfer to corporation.--The plan administrator of a 
        plan described in paragraph (4) may elect to transfer a missing 
        participant's benefits to the corporation upon termination of 
        the plan.
            ``(2) Information to the corporation.--To the extent 
        provided in regulations, the plan administrator of a plan 
        described in paragraph (4) shall, upon termination of the plan, 
        provide the corporation information with respect to benefits of 
        a missing participant if the plan transfers such benefits--
                    ``(A) to the corporation, or
                    ``(B) to an entity other than the corporation or a 
                plan described in paragraph (4)(B)(ii).
            ``(3) Payment by the corporation.--If benefits of a missing 
        participant were transferred to the corporation under paragraph 
(1), the corporation shall, upon location of the participant or 
beneficiary, pay to the participant or beneficiary the amount 
transferred (or the appropriate survivor benefit) either--
                    ``(A) in a single sum (plus interest), or
                    ``(B) in such other form as is specified in 
                regulations of the corporation.
            ``(4) Plans described.--A plan is described in this 
        paragraph if--
                    ``(A) the plan is a pension plan (within the 
                meaning of section 3(2))--
                            ``(i) to which the provisions of this 
                        section do not apply (without regard to this 
                        subsection), and
                            ``(ii) which is not a plan described in 
                        paragraphs (2) through (11) of section 4021(b), 
                        and
                    ``(B) at the time the assets are to be distributed 
                upon termination, the plan--
                            ``(i) has missing participants, and
                            ``(ii) has not provided for the transfer of 
                        assets to pay the benefits of all missing 
                        participants to another pension plan (within 
                        the meaning of section 3(2)).
            ``(5) Certain provisions not to apply.--Subsections (a)(1) 
        and (a)(3) shall not apply to a plan described in paragraph 
        (4).''.
    (b) Conforming Amendment.--Section 206(f) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1056(f)) is amended 
by striking ``the plan shall provide that''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions made after final regulations implementing 
subsections (c) and (d) of section 4050 of the Employee Retirement 
Income Security Act of 1974 (as added by subsection (a)), respectively, 
are prescribed.

SEC. 6. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

    (a) In General.--
            (1) Subsection (c) of section 402 (relating to rules 
        applicable to rollovers from exempt trusts) (as amended by 
        section 2) is amended by striking paragraph (2) and 
        redesignating paragraphs (3) through (10) as paragraphs (2) 
        through (9), respectively.
            (2) Paragraph (31) of section 401(a) (relating to optional 
        direct transfer of eligible rollover distributions) is amended 
        by striking subparagraph (B) and redesignating subparagraphs 
        (C) and (D) as subparagraphs (B) and (C), respectively.
            (3) Subparagraph (B) of section 408(d)(3) (relating to 
        rollover contributions) is amended by striking ``which was not 
        includible in his gross income because of the application of 
        this paragraph'' and inserting ``to which this paragraph 
        applied''.
            (4) Paragraph (7)(B) of section 402(c) (as redesignated by 
        subsection (a) and as amended by section 2) is amended--
                    (A) by striking ``The term'' and inserting ``Except 
                as provided in this subparagraph, the term'', and
                    (B) by adding at the end the following:
                ``Arrangements described in clauses (iii), (iv) (v), 
                and (vi) shall not be treated as eligible retirement 
                plans for purposes of receiving a rollover contribution 
                of an eligible rollover distribution to the extent that 
                such eligible rollover distribution is not includible 
                in gross income (determined without regard to paragraph 
                (1)).''
            (5) Paragraph (2) of section 408(d) is amended--
                    (A) by striking ``For purposes'' and inserting the 
                following:
                    ``(A) In general.--Except as provided in this 
                paragraph, for purposes'',
                    (B) by striking ``(A) all'' and inserting ``(i) 
                all'';
                    (C) by striking ``(B) all'' and inserting ``(ii) 
                all'';
                    (D) by striking ``(C) the'' and inserting ``(iii) 
                the'';
                    (E) by striking ``subparagraph (C)'' and inserting 
                ``clause (iii)''; and
                    (F) by inserting at the end the following:
                    ``(B) Application of section 72.--For purposes of 
                applying section 72, if--
                            ``(i) a distribution is made from an 
                        individual retirement plan, and
                            ``(ii) a rollover contribution described in 
                        paragraph (3) is made to an eligible retirement 
                        plan described in section 402(c)(7)(B)(iii), 
                        (iv), (v), or (vi) with respect to all or part 
                        of such distribution,
                the includible amount in the individual's individual 
                retirement plans shall be reduced by the amount 
                described in subparagraph (C). As of the close of the 
                calendar year in which the taxable year begins, the 
                reduction of all amounts described in subparagraph 
                (C)(i) shall be applied prior to the computations 
                described in subparagraph (A)(iii). The amount of any 
                distribution with respect to which there is a rollover 
                contribution described in clause (ii) shall not be 
                treated as a distribution for purposes of subparagraph 
                (A).
                    ``(C) Amount described.--The amount described in 
                this subparagraph is the sum of--
                            ``(i) the amount of the rollover 
                        contribution described in subparagraph (B)(ii), 
                        and
                            ``(ii) in the case of any portion of the 
                        distribution with respect to which there is not 
                        a rollover contribution described in paragraph 
                        (3), the amount of such portion that is 
                        included in gross income under section 72.
                    ``(D) Includible amount.--For purposes of this 
                paragraph, the term `includible amount' shall mean the 
                amount that is not investment in the contract (as 
                defined in section 72).''
            (6) Subparagraph (C) of section 402(c)(6) is amended by 
        inserting after ``other than money'' the following: ``or where 
        the amount of the distribution exceeds the amount of the 
        rollover contribution''.
            (7) Clause (ii) of section 408(d)(3)(A) is amended--
                    (A) by striking ``an employee's trust described in 
                section 401(a) which is exempt from tax under section 
                501(a) or from an annuity plan described in section 
                403(a)'' and inserting ``an eligible retirement plan 
                (as defined in section 402(c)(7)(B)(iii) or (iv))'', 
                and
                    (B) by striking ``such trust or annuity plan'' and 
                inserting ``such eligible retirement plan (as defined 
                in section 402(c)(7)(B)(iii) or (iv))''.
            (8) Clause (iii) of section 408(d)(3)(A) is amended--
                    (A) by striking ``an annuity contract described in 
                section 403(b)'' and inserting ``an eligible retirement 
                plan (as defined in section 402(c)(7)(B)(vi))'', and
                    (B) by striking ``another annuity contract 
                described in section 403(b)'' and inserting ``another 
                eligible retirement plan (as defined in section 
                402(c)(7)(B)(vi))''.
    (b) Hardship Exception to 60-Day Rule.--
            (1) Paragraph (2) of section 402(c) (as so redesignated) is 
        amended to read as follows:
            ``(2) Transfer must be made within 60 days of receipt.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), paragraph (1) shall not apply to any 
                transfer of a distribution made after the 60th day 
                following the day on which the distributee received the 
                property distributed.
                    ``(B) Hardship exception.--The Secretary may waive 
                the 60-day requirement under subparagraph (A) where the 
                failure to waive such requirement would be against 
                equity or good conscience, including casualty, 
                disaster, or other events beyond the reasonable control 
                of the individual subject to such requirement.''
            (2) Paragraph (3) of section 408(d) (relating to rollover 
        contributions) is amended by adding at the end the following 
        new subparagraph:
                    ``(H) Waiver of 60-day requirement.--The Secretary 
                may waive the 60-day requirement under subparagraphs 
                (A) and (D) where the failure to waive such requirement 
                would be against equity or good conscience, including 
                casualty, disaster, or other events beyond the 
                reasonable control of the individual subject to such 
                requirement.''
    (c) Conforming Amendments.--
            (1) Paragraph (5) of section 402(c) is amended by striking 
        ``(8)(B)'' and inserting ``(7)(B)''.
            (2) Subparagraph (B) of section 403(a)(4) is amended by 
        striking ``(2) through (7)'' and inserting ``(2) through (6)''.
            (3) Section 403(b)(8)(A)(ii) (as amended by section 2) is 
        amended by striking ``section 402(c)(8)(B)'' and inserting 
        ``section 402(c)(7)(B)''.
            (4) Subparagraph (A) of section 408(d)(3) (as amended by 
        section 3) is amended by striking ``402(c)(8)'' and inserting 
        ``402(c)(7)''.
            (5) Paragraph (16) of section 457(e) (as added by section 
        301) is amended--
                    (A) in subparagraph (A)(i) by striking 
                ``402(c)(4)'' and inserting ``402(c)(3)'',
                    (B) in subparagraph (A)(ii) by striking 
                ``402(c)(8)(B)'' and inserting ``402(c)(7)(B)'', and
                    (C) in subparagraph (B) by striking ``paragraphs 
                (2) through (7) and (9) of section 402(c)'' and 
                inserting ``paragraphs (2) through (6) and (8) of 
                section 402(c)''.
    (d) Effective Date.--
            (1) In general.--Except as provided by paragraph (2), the 
        amendments made by this section shall apply to distributions 
        made after the date of the enactment of this Act.
            (2) Hardship exception.--The amendments made by subsection 
        (b) shall apply to 60-day periods ending after the date of the 
        enactment of this Act.

SEC. 7. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS FROM DEFINED 
              CONTRIBUTION PLANS.

    (a) Distributions Permitted on Severance From Employment.--
            (1) 401(k) plans.--Section 401(k)(2)(B)(i)(I) (relating to 
        qualified cash or deferred arrangements) is amended by striking 
        ``separation from service'' and inserting ``severance from 
        employment''.
            (2) 403(b) contracts.--
                    (A) Clause (ii) of section 403(b)(7)(A) is amended 
                by striking ``separates from service'' and inserting 
                ``severs from employment''.
                    (B) Paragraph (11) of section 403(b) is amended--
                            (i) by striking ``separation from service'' 
                        in the heading and inserting ``severance from 
                        employment'', and
                            (ii) by striking ``separates from service'' 
                        and inserting ``severs from employment''.
            (3) 457 plans.--Clause (ii) of section 457(d)(1)(A) is 
        amended by striking ``is separated from service'' and inserting 
        ``has a severance from employment''.
    (b) Business Sale Requirements Deleted.--
            (1) In general.--Section 401(k)(2)(B)(i)(II) (relating to 
        qualified cash or deferred arrangements) is amended by striking 
        ``an event'' and inserting ``a plan termination''.
            (2) Conforming amendments.--Section 401(k)(10) is amended--
                    (A) by striking subparagraph (A) and inserting the 
                following:
                    ``(A) In general.--A plan termination is described 
                in this paragraph if the termination of the plan does 
                not involve the establishment or maintenance of another 
                defined contribution plan (other than an employee stock 
                ownership plan as defined in section 4975(e)(7)).'',
                    (B) in subparagraph (B)--
                            (i) by striking ``An event'' and inserting 
                        ``A termination'', and
                            (ii) by striking ``the event'' and 
                        inserting ``the termination'',
                    (C) by striking subparagraph (C), and
                    (D) by striking ``or disposition of assets or 
                subsidiary'' in the heading.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2001.

SEC. 8. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF CASH-OUT 
              AMOUNTS.

    (a) Amendments to 1986 Code.--
            (1) Section 411(a)(11) (relating to restrictions on certain 
        mandatory distributions) is amended by adding at the end the 
        following:
                    ``(D) Special rule for rollover contributions.--A 
                plan shall not fail to meet the requirements of this 
                paragraph if, under the terms of the plan, the present 
                value of the nonforfeitable accrued benefit is 
                determined without regard to that portion of such 
                benefit which is attributable to rollover contributions 
                (and earnings allocable thereto). For purposes of 
this subparagraph, the term `rollover contributions' means any rollover 
contribution under sections 402(c), 403(a)(4), 403(b)(8), clause (ii), 
(iii), or (iv) of 408(d)(3)(A), and 457(e)(16).''.
            (2) Clause (i) of section 457(e)(9)(A) is amended by 
        striking ``such amount'' and inserting ``the portion of such 
        amount which is not attributable to rollover contributions (as 
        defined in section 411(a)(11)(D))''.
    (b) Amendment to ERISA.--Section 203(e) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1053(e)) is amended by adding at 
the end the following:
    ``(4) A plan shall not fail to meet the requirements of this 
subsection if, under the terms of the plan, the present value of the 
nonforfeitable accrued benefit is determined without regard to that 
portion of such benefit which is attributable to rollover contributions 
(and earnings allocable thereto). For purposes of this paragraph, the 
term `rollover contributions' means any rollover contribution under 
sections 402(c), 403(a)(4), 403(b)(8), clause (ii), (iii), or (iv) of 
408(d)(3)(A), and 457(e)(16) of the Internal Revenue Code of 1986.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions after the date of the enactment of this Act.

SEC. 9. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED BENEFIT 
              PLANS.

    (a) 403(b) Plans.--Subsection (b) of section 403 is amended by 
adding at the end the following new paragraph:
            ``(13) Trustee-to-trustee transfers to purchase permissive 
        service credit.--No amount shall be includible in gross income 
        by reason of a direct trustee-to-trustee transfer to a defined 
        benefit governmental plan (as defined in section 414(d)) if 
        such transfer is--
                    ``(A) for the purchase of permissive service credit 
                (as defined in section 415(n)(3)(A)) under such plan, 
                or
                    ``(B) a repayment to which section 415 does not 
                apply by reason of subsection (k)(3) thereof.''
    (b) 457 Plans.--
            (1) Subsection (e) of section 457 is amended by adding at 
        the end the following new paragraph:
            ``(17) Trustee-to-trustee transfers to purchase permissive 
        service credit.--No amount shall be includible in gross income 
        by reason of a direct trustee-to-trustee transfer to a defined 
        benefit governmental plan (as defined in section 414(d)) if 
        such transfer is--
                    ``(A) for the purchase of permissive service credit 
                (as defined in section 415(n)(3)(A)) under such plan, 
                or
                    ``(B) a repayment to which section 415 does not 
                apply by reason of subsection (k)(3) thereof.''
            (2) Section 457(b)(2), as amended by section 2, is amended 
        by striking ``(other than rollover amounts)'' and inserting 
        ``(other than rollover amounts and amounts received in a 
        transfer referred to in subsection (e)(17))''.
    (c) Effective Date.--The amendments made by this section shall 
apply to trustee-to-trustee transfers after the date of the enactment 
of this Act.

SEC. 10. PROVISIONS RELATING TO PLAN AMENDMENTS.

    (a) In General.--If this section applies to any plan or contract 
amendment--
            (1) such plan or contract shall be treated as being 
        operated in accordance with the terms of the plan during the 
        period described in subsection (b)(2)(A), and
            (2) such plan shall not fail to meet the requirements of 
        section 411(d)(6) of the Internal Revenue Code of 1986 or 
        section 204(g) of the Employee Retirement Income Security Act 
        of 1974 by reason of such amendment.
    (b) Amendments to Which Section Applies.--
            (1) In general.--This section shall apply to any amendment 
        to any plan or annuity contract which is made--
                    (A) pursuant to any amendment made by this Act or 
                pursuant to any guidance issued by the Secretary of the 
                Treasury (or the Secretary's delegate) under any such 
                amendment, and
                    (B) on or before the last day of the first plan 
                year beginning on or after January 1, 2004.
        In the case of a governmental plan (as defined in section 
        414(d) of the Internal Revenue Code of 1986), this paragraph 
        shall be applied by substituting ``2006'' for ``2004''.
            (2) Conditions.--This section shall not apply to any 
        amendment unless--
                    (A) during the period--
                            (i) beginning on the date the legislative 
                        amendment or guidance described in paragraph 
                        (1)(A) takes effect (or in the case of a plan 
                        or contract amendment not required by such 
                        legislative amendment or guidance, the 
                        effective date specified by the plan), and
                            (ii) ending on the date described in 
                        paragraph (1)(B) (or, if earlier, the date the 
                        plan or contract amendment is 
                        adopted),
                the plan or contract is operated as if such plan or 
                contract amendment were in effect, and
                    (B) such plan or contract amendment applies 
                retroactively for such period.
                                 <all>
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