I

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.

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

3 SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.

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

5 ‘‘Retirement Account Portability 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
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1 to, or repeal of, a section or other provision, the reference

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986.

4 SEC. 2. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF

5 PLANS.

6 (a) ROLLOVERS FROM AND TO SECTION 457

7 PLANS.—

8 (1) ROLLOVERS FROM SECTION 457 PLANS.—

9 (A) IN GENERAL.—Section 457(e) (relat10 ing to other definitions and special rules) is

11 amended by adding at the end the following:

12 ‘‘(16) ROLLOVER AMOUNTS.—

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

14 eligible deferred compensation plan, if—

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

16 credit of an employee in such plan is paid

17 to such employee in an eligible rollover dis18 tribution (within the meaning of section

19 402(c)(4)),

20 ‘‘(ii) the employee transfers any por21 tion of the property such employee receives

22 in such distribution to an eligible retire23 ment plan described in section

24 402(c)(8)(B), and
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1 ‘‘(iii) in the case of a distribution of

2 property other than money, the amount so

3 transferred consists of the property distrib4 uted,

5 then such distribution (to the extent so trans6 ferred) shall not be includible in gross income

7 for the taxable year in which paid.

8 ‘‘(B) CERTAIN RULES MADE APPLICA9 BLE.—Rules similar to the rules of paragraphs

10 (2) through (7) and (9) of section 402(c) and

11 section 402(f) shall apply for purposes of sub12 paragraph (A).

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

14 paragraph shall be reported to the Secretary in

15 the same manner as rollovers from qualified re16 tirement plans (as defined in section 4974(c)).’’

17 (B) DEFERRAL LIMIT DETERMINED WITH18 OUT REGARD TO ROLLOVER AMOUNTS.—Section

19 457(b)(2) (defining eligible deferred compensa20 tion plan) is amended by inserting ‘‘(other than

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

22 (2) ROLLOVERS TO SECTION 457 PLANS.—

23 (A) Section 402(c)(8)(B) (defining eligible

24 retirement plan) is amended by striking ‘‘and’’

25 at the end of clause (iii), by striking the period
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1 at the end of clause (iv) and inserting ‘‘, and’’,

2 and by adding at the end the following:

3 ‘‘(v) an eligible deferred compensation

4 plan described in section 457(b) of an eli5 gible employer described in section

6 457(e)(1)(A).’’

7 (B) Paragraph (9) of section 402(c) is

8 amended by striking ‘‘except that’’ and all that

9 follows and inserting ‘‘except that only an ac10 count or annuity described in clause (i) or (ii)

11 of paragraph (8)(B) shall be treated as an eligi12 ble retirement plan with respect to such dis13 tribution.’’

14 (C) Subsection (a) of section 457 (relating

15 to year of inclusion in gross income) is amended

16 by striking ‘‘or otherwise made available’’.

17 (b) ALLOWANCE OF ROLLOVERS FROM AND TO

18 403(b) PLANS.—

19 (1) ROLLOVERS FROM SECTION 403(b)

20 PLANS.—Section 403(b)(8)(A)(ii) (relating to roll21 over amounts) is amended by striking ‘‘such dis22 tribution’’ and all that follows and inserting ‘‘such

23 distribution to an eligible retirement plan described

24 in section 402(c)(8)(B), and’’.
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1 (2) ROLLOVERS TO SECTION 403(b) PLANS.—

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

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

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

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

6 and’’, and by adding at the end the following:

7 ‘‘(vi) an annuity contract described in

8 section 403(b).’’

9 (c) EXPANDED EXPLANATION TO RECIPIENTS OF

10 ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section

11 402(f) (relating to written explanation to recipients of dis12 tributions eligible for rollover treatment) is amended by

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

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

15 ‘‘, and’’, and by adding at the end the following new sub16 paragraph:

17 ‘‘(E) of the provisions under which dis18 tributions from the eligible retirement plan re19 ceiving the distribution may be subject to re20 strictions and tax consequences which are dif21 ferent from those applicable to distributions

22 from the plan making such distribution.’’

23 (d) CONFORMING AMENDMENTS.—
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1 (1) Section 72(o)(4) is amended by striking

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

3 408(d)(3), and 457(e)(16)’’.

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

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

6 457(e)(16)’’.

7 (3) Section 401(a)(31)(B) is amended by strik8 ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),

9 403(b)(8), and 457(e)(16)’’.

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

11 amended by inserting ‘‘and (9)’’ after ‘‘through

12 (7)’’.

13 (5) Section 408(a)(1) is amended by striking

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

15 457(e)(16)’’.

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

17 415(b)(2) are each amended by striking ‘‘and

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

19 457(e)(16)’’.

20 (7) Section 415(c)(2) is amended by striking

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

22 457(e)(16)’’.

23 (8) Section 4973(b)(1)(A) is amended by strik24 ing ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or

25 457(e)(16)’’.
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1 (e) EFFECTIVE DATE; SPECIAL RULE.—

2 (1) EFFECTIVE DATE.—The amendments made

3 by this section shall apply to distributions after the

4 date of the enactment of this Act.

5 (2) SPECIAL RULE.—Notwithstanding any other

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

7 section 1122 of the Tax Reform Act of 1986 shall

8 not apply to any distribution from an eligible retire9 ment plan (as defined in clause (iii) or (iv) of section

10 402(c)(8)(B) of the Internal Revenue Code of 1986)

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

12 such plan on behalf of such individual which is per13 mitted solely by reason of any amendment made by

14 this section.

15 SEC. 3. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE16 MENT PLANS.

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

18 408(d)(3) (relating to rollover amounts) is amended by

19 striking ‘‘or’’ at the end of clause (ii), by striking the pe20 riod at the end of clause (iii) and inserting a semicolon,

21 and by adding at the end the following:

22 ‘‘(iv)(I) the entire amount received

23 (including money and other property) rep24 resents the entire interest in the account

25 or the entire value of the annuity,
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1 ‘‘(II) no amount in the account and

2 no part of the value of the annuity is at3 tributable to any source other than a roll4 over contribution from an eligible retire5 ment plan and any earnings on such roll6 over, and

7 ‘‘(III) such entire amount received is

8 paid into an eligible retirement plan (for

9 the benefit of such individual) not later

10 than the 60th day after he receives the

11 payment or distribution; or

12 ‘‘(v) the entire amount received (in13 cluding money and any other property) is

14 paid into an eligible retirement plan for

15 the benefit of such individual not later

16 than the 60th day after the date on which

17 he receives the payment or distribution.

18 For purposes of clauses (iv) and (v), the term

19 ‘eligible retirement plan’ has the meaning given

20 such term by clauses (iii), (iv), (v), and (vi) of

21 section 402(c)(8)(B), except that for purposes

22 of clause (iv)(II) of this subparagraph, the term

23 shall also include an eligible deferred compensa24 tion plan described in section 457(b) of an eligi-
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1 ble employer described in section

2 457(e)(1)(B).’’

3 (b) CONFORMING AMENDMENTS.—

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

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

6 ‘‘clause (iii), (iv), or (v) of section 408(d)(3)(A)’’.

7 (2) Clause (i) of section 408(d)(3)(D) is amend8 ed by striking ‘‘or (iii)’’ and inserting ‘‘(iii), (iv), or

9 (v)’’.

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

11 amended to read as follows:

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

13 the case of any payment or distribution out of

14 a simple retirement account (as defined in sub15 section (p)) to which section 72(t)(6) applies,

16 this paragraph shall not apply unless such pay17 ment or distribution is paid into another simple

18 retirement account.’’

19 (c) EFFECTIVE DATE; SPECIAL RULE.—

20 (1) EFFECTIVE DATE.—The amendments made

21 by this section shall apply to distributions after the

22 date of the enactment of this Act.

23 (2) SPECIAL RULE.—Notwithstanding any other

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

25 section 1122 of the Tax Reform Act of 1986 shall
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1 not apply to any distribution from an eligible retire2 ment plan (as defined in clause (iii) or (iv) of section

3 402(c)(8)(B) of the Internal Revenue Code of 1986)

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

5 such plan on behalf of such individual which is per6 mitted solely by reason of the amendments made by

7 this section.

8 SEC. 4. FASTER VESTING OF EMPLOYER MATCHING CON9 TRIBUTIONS.

10 (a) AMENDMENTS TO 1986 CODE.—Subsection (a) of

11 section 411 (relating to minimum vesting standards) is

12 amended—

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

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

15 plan’’, and

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

17 ‘‘(12) FASTER VESTING FOR MATCHING CON18 TRIBUTIONS.—In the case of matching contributions

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

20 shall be applied—

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

22 in subparagraph (A), and

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

24 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

2 ............................................................................................... 20
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The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

1 (b) AMENDMENTS TO ERISA.—Section 203(a) of the

2 Employee Retirement Income Security Act of 1974 (29

3 U.S.C. 1053(a)) is amended—

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

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

6 plan’’, and

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

8 ‘‘(4) FASTER VESTING FOR MATCHING CON9 TRIBUTIONS.—In the case of matching contributions

10 (as defined in section 401(m)(4)(A) of the Internal

11 Revenue Code of 1986), paragraph (2) shall be

12 applied—

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

14 in subparagraph (A), and

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

16 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

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

17 (c) EFFECTIVE DATES.—

18 (1) IN GENERAL.—Except as provided in para19 graph (2), the amendments made by this section
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1 shall apply to contributions for plan years beginning

2 after December 31, 2001.

3 (2) COLLECTIVE BARGAINING AGREEMENTS.—

4 In the case of a plan maintained pursuant to 1 or

5 more collective bargaining agreements between em6 ployee representatives and 1 or more employers rati7 fied by the date of enactment of this Act, the

8 amendments made by this section shall not apply to

9 contributions on behalf of employees covered by any

10 such agreement for plan years beginning before the

11 earlier of—

12 (A) the later of—

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

14 collective bargaining agreements termi15 nates (determined without regard to any

16 extension thereof on or after such date of

17 enactment), or

18 (ii) January 1, 2002, or

19 (B) January 1, 2006.

20 (3) PARTICIPATION REQUIRED.—The amend21 ments made by this section shall not apply to any

22 employee who does not have 1 hour of service in any

23 plan year to which the amendments made by this

24 section apply.
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1 SEC. 5. EXTENSION OF MISSING PARTICIPANTS PROGRAM.

2 (a) IN GENERAL.—Section 4050 of the Employee Re3 tirement Income Security Act of 1974 (29 U.S.C. 1350)

4 is amended by redesignating subsection (c) as subsection

5 (e) and by inserting after subsection (b) the following new

6 subsections:

7 ‘‘(c) MULTIEMPLOYER PLANS.—The corporation

8 shall prescribe rules similar to the rules in subsection (a)

9 for multiemployer plans covered by this title that termi10 nate under section 4041A.

11 ‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—

12 ‘‘(1) TRANSFER TO CORPORATION.—The plan

13 administrator of a plan described in paragraph (4)

14 may elect to transfer a missing participant’s benefits

15 to the corporation upon termination of the plan.

16 ‘‘(2) INFORMATION TO THE CORPORATION.—To

17 the extent provided in regulations, the plan adminis18 trator of a plan described in paragraph (4) shall,

19 upon termination of the plan, provide the corpora20 tion information with respect to benefits of a miss21 ing participant if the plan transfers such benefits—

22 ‘‘(A) to the corporation, or

23 ‘‘(B) to an entity other than the corpora24 tion or a plan described in paragraph (4)(B)(ii).

25 ‘‘(3) PAYMENT BY THE CORPORATION.—If ben26 efits of a missing participant were transferred to the
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1 corporation under paragraph (1), the corporation

2 shall, upon location of the participant or beneficiary,

3 pay to the participant or beneficiary the amount

4 transferred (or the appropriate survivor benefit)

5 either—

6 ‘‘(A) in a single sum (plus interest), or

7 ‘‘(B) in such other form as is specified in

8 regulations of the corporation.

9 ‘‘(4) PLANS DESCRIBED.—A plan is described

10 in this paragraph if—

11 ‘‘(A) the plan is a pension plan (within the

12 meaning of section 3(2))—

13 ‘‘(i) to which the provisions of this

14 section do not apply (without regard to

15 this subsection), and

16 ‘‘(ii) which is not a plan described in

17 paragraphs (2) through (11) of section

18 4021(b), and

19 ‘‘(B) at the time the assets are to be dis20 tributed upon termination, the plan—

21 ‘‘(i) has missing participants, and

22 ‘‘(ii) has not provided for the transfer

23 of assets to pay the benefits of all missing

24 participants to another pension plan (with25 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) CONFORMING AMENDMENT.—Section 206(f) of

5 the Employee Retirement Income Security Act of 1974

6 (29 U.S.C. 1056(f)) is amended by striking ‘‘the plan shall

7 provide that’’.

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

9 this section shall apply to distributions made after final

10 regulations implementing subsections (c) and (d) of sec11 tion 4050 of the Employee Retirement Income Security

12 Act of 1974 (as added by subsection (a)), respectively, are

13 prescribed.

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

15 (a) IN GENERAL.—

16 (1) Subsection (c) of section 402 (relating to

17 rules applicable to rollovers from exempt trusts) (as

18 amended by section 2) is amended by striking para19 graph (2) and redesignating paragraphs (3) through

20 (10) as paragraphs (2) through (9), respectively.

21 (2) Paragraph (31) of section 401(a) (relating

22 to optional direct transfer of eligible rollover dis23 tributions) is amended by striking subparagraph (B)

24 and redesignating subparagraphs (C) and (D) as

25 subparagraphs (B) and (C), respectively.
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1 (3) Subparagraph (B) of section 408(d)(3) (re2 lating to rollover contributions) is amended by strik3 ing ‘‘which was not includible in his gross income

4 because of the application of this paragraph’’ and in5 serting ‘‘to which this paragraph applied’’.

6 (4) Paragraph (7)(B) of section 402(c) (as re7 designated by subsection (a) and as amended by sec8 tion 2) is amended—

9 (A) by striking ‘‘The term’’ and inserting

10 ‘‘Except as provided in this subparagraph, the

11 term’’, and

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

13 ‘‘Arrangements described in clauses (iii), (iv)

14 (v), and (vi) shall not be treated as eligible re15 tirement plans for purposes of receiving a roll16 over contribution of an eligible rollover distribu17 tion to the extent that such eligible rollover dis18 tribution is not includible in gross income (de19 termined without regard to paragraph (1)).’’

20 (5) Paragraph (2) of section 408(d) is

21 amended—

22 (A) by striking ‘‘For purposes’’ and insert23 ing the following:

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

25 this paragraph, for purposes’’,
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1 (B) by striking ‘‘(A) all’’ and inserting ‘‘(i)

2 all’’;

3 (C) by striking ‘‘(B) all’’ and inserting

4 ‘‘(ii) all’’;

5 (D) by striking ‘‘(C) the’’ and inserting

6 ‘‘(iii) the’’;

7 (E) by striking ‘‘subparagraph (C)’’ and

8 inserting ‘‘clause (iii)’’; and

9 (F) by inserting at the end the following:

10 ‘‘(B) APPLICATION OF SECTION 72.—For

11 purposes of applying section 72, if—

12 ‘‘(i) a distribution is made from an in13 dividual retirement plan, and

14 ‘‘(ii) a rollover contribution described

15 in paragraph (3) is made to an eligible re16 tirement plan described in section

17 402(c)(7)(B)(iii), (iv), (v), or (vi) with re18 spect to all or part of such distribution,

19 the includible amount in the individual’s indi20 vidual retirement plans shall be reduced by the

21 amount described in subparagraph (C). As of

22 the close of the calendar year in which the tax23 able year begins, the reduction of all amounts

24 described in subparagraph (C)(i) shall be ap25 plied prior to the computations described in
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1 subparagraph (A)(iii). The amount of any dis2 tribution with respect to which there is a roll3 over contribution described in clause (ii) shall

4 not be treated as a distribution for purposes of

5 subparagraph (A).

6 ‘‘(C) AMOUNT DESCRIBED.—The amount

7 described in this subparagraph is the sum of—

8 ‘‘(i) the amount of the rollover con9 tribution described in subparagraph

10 (B)(ii), and

11 ‘‘(ii) in the case of any portion of the

12 distribution with respect to which there is

13 not a rollover contribution described in

14 paragraph (3), the amount of such portion

15 that is included in gross income under sec16 tion 72.

17 ‘‘(D) INCLUDIBLE AMOUNT.—For purposes

18 of this paragraph, the term ‘includible amount’

19 shall mean the amount that is not investment

20 in the contract (as defined in section 72).’’

21 (6) Subparagraph (C) of section 402(c)(6) is

22 amended by inserting after ‘‘other than money’’ the

23 following: ‘‘or where the amount of the distribution

24 exceeds the amount of the rollover contribution’’.
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1 (7) Clause (ii) of section 408(d)(3)(A) is

2 amended—

3 (A) by striking ‘‘an employee’s trust de4 scribed in section 401(a) which is exempt from

5 tax under section 501(a) or from an annuity

6 plan described in section 403(a)’’ and inserting

7 ‘‘an eligible retirement plan (as defined in sec8 tion 402(c)(7)(B)(iii) or (iv))’’, and

9 (B) by striking ‘‘such trust or annuity

10 plan’’ and inserting ‘‘such eligible retirement

11 plan (as defined in section 402(c)(7)(B)(iii) or

12 (iv))’’.

13 (8) Clause (iii) of section 408(d)(3)(A) is

14 amended—

15 (A) by striking ‘‘an annuity contract de16 scribed in section 403(b)’’ and inserting ‘‘an eli17 gible retirement plan (as defined in section

18 402(c)(7)(B)(vi))’’, and

19 (B) by striking ‘‘another annuity contract

20 described in section 403(b)’’ and inserting ‘‘an21 other eligible retirement plan (as defined in sec22 tion 402(c)(7)(B)(vi))’’.

23 (b) HARDSHIP EXCEPTION TO 60-DAY RULE.—

24 (1) Paragraph (2) of section 402(c) (as so re25 designated) is amended to read as follows:
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1 ‘‘(2) TRANSFER MUST BE MADE WITHIN 60

2 DAYS OF RECEIPT.—

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

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

5 apply to any transfer of a distribution made

6 after the 60th day following the day on which

7 the distributee received the property distrib8 uted.

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

11 subparagraph (A) where the failure to waive

12 such requirement would be against equity or

13 good conscience, including casualty, disaster, or

14 other events beyond the reasonable control of

15 the individual subject to such requirement.’’

16 (2) Paragraph (3) of section 408(d) (relating to

17 rollover contributions) is amended by adding at the

18 end the following new subparagraph:

19 ‘‘(H) WAIVER OF 60-DAY REQUIREMENT.—

20 The Secretary may waive the 60-day require21 ment under subparagraphs (A) and (D) where

22 the failure to waive such requirement would be

23 against equity or good conscience, including

24 casualty, disaster, or other events beyond the
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1 reasonable control of the individual subject to

2 such requirement.’’

3 (c) CONFORMING AMENDMENTS.—

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

5 by striking ‘‘(8)(B)’’ and inserting ‘‘(7)(B)’’.

6 (2) Subparagraph (B) of section 403(a)(4) is

7 amended by striking ‘‘(2) through (7)’’ and inserting

8 ‘‘(2) through (6)’’.

9 (3) Section 403(b)(8)(A)(ii) (as amended by

10 section 2) is amended by striking ‘‘section

11 402(c)(8)(B)’’ and inserting ‘‘section 402(c)(7)(B)’’.

12 (4) Subparagraph (A) of section 408(d)(3) (as

13 amended by section 3) is amended by striking

14 ‘‘402(c)(8)’’ and inserting ‘‘402(c)(7)’’.

15 (5) Paragraph (16) of section 457(e) (as added

16 by section 301) is amended—

17 (A) in subparagraph (A)(i) by striking

18 ‘‘402(c)(4)’’ and inserting ‘‘402(c)(3)’’,

19 (B) in subparagraph (A)(ii) by striking

20 ‘‘402(c)(8)(B)’’ and inserting ‘‘402(c)(7)(B)’’,

21 and

22 (C) in subparagraph (B) by striking ‘‘para23 graphs (2) through (7) and (9) of section

24 402(c)’’ and inserting ‘‘paragraphs (2) through

25 (6) and (8) of section 402(c)’’.
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1 (d) EFFECTIVE DATE.—

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

4 shall apply to distributions made after the date of

5 the enactment of this Act.

6 (2) HARDSHIP EXCEPTION.—The amendments

7 made by subsection (b) shall apply to 60-day periods

8 ending after the date of the enactment of this Act.

9 SEC. 7. RATIONALIZATION OF RESTRICTIONS ON DISTRIBU10 TIONS FROM DEFINED CONTRIBUTION

11 PLANS.

12 (a) DISTRIBUTIONS PERMITTED ON SEVERANCE

13 FROM EMPLOYMENT.—

14 (1) 401(k) PLANS.—Section 401(k)(2)(B)(i)(I)

15 (relating to qualified cash or deferred arrangements)

16 is amended by striking ‘‘separation from service’’

17 and inserting ‘‘severance from employment’’.

18 (2) 403(b) CONTRACTS.—

19 (A) Clause (ii) of section 403(b)(7)(A) is

20 amended by striking ‘‘separates from service’’

21 and inserting ‘‘severs from employment’’.

22 (B) Paragraph (11) of section 403(b) is

23 amended—
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1 (i) by striking ‘‘SEPARATION FROM

2 SERVICE’’ in the heading and inserting

3 ‘‘SEVERANCE FROM EMPLOYMENT’’, and

4 (ii) by striking ‘‘separates from serv5 ice’’ and inserting ‘‘severs from employ6 ment’’.

7 (3) 457 PLANS.—Clause (ii) of section

8 457(d)(1)(A) is amended by striking ‘‘is separated

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

10 employment’’.

11 (b) BUSINESS SALE REQUIREMENTS DELETED.—

12 (1) IN GENERAL.—Section 401(k)(2)(B)(i)(II)

13 (relating to qualified cash or deferred arrangements)

14 is amended by striking ‘‘an event’’ and inserting ‘‘a

15 plan termination’’.

16 (2) CONFORMING AMENDMENTS.—Section

17 401(k)(10) is amended—

18 (A) by striking subparagraph (A) and in19 serting the following:

20 ‘‘(A) IN GENERAL.—A plan termination is

21 described in this paragraph if the termination

22 of the plan does not involve the establishment

23 or maintenance of another defined contribution

24 plan (other than an employee stock ownership

25 plan as defined in section 4975(e)(7)).’’,
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1 (B) in subparagraph (B)—

2 (i) by striking ‘‘An event’’ and insert3 ing ‘‘A termination’’, and

4 (ii) by striking ‘‘the event’’ and insert5 ing ‘‘the termination’’,

6 (C) by striking subparagraph (C), and

7 (D) by striking ‘‘OR DISPOSITION OF AS8 SETS OR SUBSIDIARY’’ in the heading.

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

10 this section shall apply to distributions after December 31,

11 2001.

12 SEC. 8. EMPLOYERS MAY DISREGARD ROLLOVERS FOR

13 PURPOSES OF CASH-OUT AMOUNTS.

14 (a) AMENDMENTS TO 1986 CODE.—

15 (1) Section 411(a)(11) (relating to restrictions

16 on certain mandatory distributions) is amended by

17 adding at the end the following:

18 ‘‘(D) SPECIAL RULE FOR ROLLOVER CON19 TRIBUTIONS.—A plan shall not fail to meet the

20 requirements of this paragraph if, under the

21 terms of the plan, the present value of the non22 forfeitable accrued benefit is determined with23 out regard to that portion of such benefit which

24 is attributable to rollover contributions (and

25 earnings allocable thereto). For purposes of this
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1 subparagraph, the term ‘rollover contributions’

2 means any rollover contribution under sections

3 402(c), 403(a)(4), 403(b)(8), clause (ii), (iii),

4 or (iv) of 408(d)(3)(A), and 457(e)(16).’’.

5 (2) Clause (i) of section 457(e)(9)(A) is amend6 ed by striking ‘‘such amount’’ and inserting ‘‘the

7 portion of such amount which is not attributable to

8 rollover contributions (as defined in section

9 411(a)(11)(D))’’.

10 (b) AMENDMENT TO ERISA.—Section 203(e) of the

11 Employee Retirement Income Security Act of 1974 (29

12 U.S.C. 1053(e)) is amended by adding at the end the fol13 lowing:

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

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

16 present value of the nonforfeitable accrued benefit is de17 termined without regard to that portion of such benefit

18 which is attributable to rollover contributions (and earn19 ings allocable thereto). For purposes of this paragraph,

20 the term ‘rollover contributions’ means any rollover con21 tribution under sections 402(c), 403(a)(4), 403(b)(8),

22 clause (ii), (iii), or (iv) of 408(d)(3)(A), and 457(e)(16)

23 of the Internal Revenue Code of 1986.’’.
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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 SEC. 9. PURCHASE OF SERVICE CREDIT IN GOVERN5 MENTAL DEFINED BENEFIT PLANS.

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

7 amended by adding at the end the following new para8 graph:

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

10 PURCHASE PERMISSIVE SERVICE CREDIT.—No

11 amount shall be includible in gross income by reason

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

13 benefit governmental plan (as defined in section

14 414(d)) if such transfer is—

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

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

17 under such plan, or

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

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

20 thereof.’’

21 (b) 457 PLANS.—

22 (1) Subsection (e) of section 457 is amended by

23 adding at the end the following new paragraph:

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

25 PURCHASE PERMISSIVE SERVICE CREDIT.—No
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1 amount shall be includible in gross income by reason

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

3 benefit governmental plan (as defined in section

4 414(d)) if such transfer is—

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

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

7 under such plan, or

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

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

10 thereof.’’

11 (2) Section 457(b)(2), as amended by section 2,

12 is amended by striking ‘‘(other than rollover

13 amounts)’’ and inserting ‘‘(other than rollover

14 amounts and amounts received in a transfer referred

15 to in subsection (e)(17))’’.

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

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

18 the date of the enactment of this Act.

19 SEC. 10. PROVISIONS RELATING TO PLAN AMENDMENTS.

20 (a) IN GENERAL.—If this section applies to any plan

21 or contract amendment—

22 (1) such plan or contract shall be treated as

23 being operated in accordance with the terms of the

24 plan during the period described in subsection

25 (b)(2)(A), and
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1 (2) such plan shall not fail to meet the require2 ments of section 411(d)(6) of the Internal Revenue

3 Code of 1986 or section 204(g) of the Employee Re4 tirement Income Security Act of 1974 by reason of

5 such amendment.

6 (b) AMENDMENTS TO WHICH SECTION APPLIES.—

7 (1) IN GENERAL.—This section shall apply to

8 any amendment to any plan or annuity contract

9 which is made—

10 (A) pursuant to any amendment made by

11 this Act or pursuant to any guidance issued by

12 the Secretary of the Treasury (or the Sec13 retary’s delegate) under any such amendment,

14 and

15 (B) on or before the last day of the first

16 plan year beginning on or after January 1,

17 2004.

18 In the case of a governmental plan (as defined in

19 section 414(d) of the Internal Revenue Code of

20 1986), this paragraph shall be applied by sub21 stituting ‘‘2006’’ for ‘‘2004’’.

22 (2) CONDITIONS.—This section shall not apply

23 to any amendment unless—

24 (A) during the period—
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1 (i) beginning on the date the legisla2 tive amendment or guidance described in

3 paragraph (1)(A) takes effect (or in the

4 case of a plan or contract amendment not

5 required by such legislative amendment or

6 guidance, the effective date specified by the

7 plan), and

8 (ii) ending on the date described in

9 paragraph (1)(B) (or, if earlier, the date

10 the plan or contract amendment is

11 adopted),

12 the plan or contract is operated as if such plan

13 or contract amendment were in effect, and

14 (B) such plan or contract amendment ap15 plies retroactively for such period.

Æ