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[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4823 Introduced in House (IH)]

  2d Session
                                H. R. 4823

 To amend the Internal Revenue Code of 1986 to provide for retirement 
                     savings for the 21st century.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                            October 13, 1998

Mr. Kolbe (for himself and Mr. Stenholm) 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 provide for retirement 
                     savings for the 21st century.

    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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``21st Century 
Retirement Savings Act''.
    (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.
    (c) Table of Contents.--

Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I--NEW EMPLOYER PENSION PLANS MUST BE 401(k) PLANS AND NOT 403(b) 
                              OR 457 PLANS

Sec. 101. New employer pension plans must be 401(k) plans and not 
                            403(b) or 457 plans.
                  TITLE II--SAFE ANNUITIES AND TRUSTS

Sec. 201. Safe annuities and trusts.
          TITLE III--ENHANCED PORTABILITY OF RETIREMENT PLANS

Sec. 301. Rollovers allowed among various types of plans.
Sec. 302. Rollovers of IRAs into workplace retirement plans.
Sec. 303. Rollovers of after-tax contributions.
Sec. 304. Rationalize the restrictions on distributions from defined 
                            contribution plans.
Sec. 305. Transferee defined contribution plan need not have same 
                            distribution options as transferor defined 
                            contribution plan.
Sec. 306. Allowance of employers to disregard rollovers for purposes of 
                            cash-out amounts.
Sec. 307. Purchase of service credit in governmental defined benefit 
                            plans.
   TITLE IV--CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL EMPLOYERS

Sec. 401. Credit for pension plan startup costs of small employers.
          TITLE V--MISCELLANEOUS IMPROVEMENTS TO PENSION PLANS

Sec. 501. IRA catch-up contributions.
Sec. 502. Repeal of 25 percent limitation on defined contribution 
                            plans.
Sec. 503. Faster vesting of employer matching contributions.
Sec. 504. Periodic pension benefits statements.
Sec. 505. Failure of pension plans to meet requirements.
Sec. 506. Assignment and alienation.

TITLE I--NEW EMPLOYER PENSION PLANS MUST BE 401(k) PLANS AND NOT 403(b) 
                              OR 457 PLANS

SEC. 101. NEW EMPLOYER PENSION PLANS MUST BE 401(K) PLANS AND NOT 
              403(B) OR 457 PLANS.

    (a) 401(k) Plans.--Paragraph (4) of section 401(k) (relating to 
other requirements for cash or deferred arrangements) is amended by 
striking subparagraph (B) and redesignating subparagraph (C) as 
subparagraph (B).
    (b) 403(b) Plans.--Subsection (b) of section 403 (relating to 
taxability of beneficiary under annuity purchased by section 501(c)(3) 
organization or public school) is amended by adding at the end the 
following new paragraph:
            ``(13) Termination.--Paragraph (1) shall not apply to an 
        annuity plan, contract, or other arrangement entered into after 
        December 31, 1998.''.
    (c) 457 Plans.--Section 457 (relating to deferred compensation 
plans of State and local governments and tax-exempt organizations) is 
amended by adding at the end the following new subsection:
    ``(g) Termination.--Subsection (a) shall not apply to any plan or 
other arrangement entered into after December 31, 1998.''.
    (d) Conforming Amendment.--Subparagraph (C) of section 7701(j)(1) 
is amended by striking ``section 401(k)(4)(B) and''.
    (e) Effective Date.--The amendments made by this section shall 
apply to years beginning after the date of the enactment of this Act.

                  TITLE II--SAFE ANNUITIES AND TRUSTS

SEC. 201. SAFE ANNUITIES AND TRUSTS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
is amended by inserting after section 408A the following new section:

``SEC. 408B. SAFE ANNUITIES AND TRUSTS.

    ``(a) Employer Eligibility.--
            ``(1) In general.--An employer may establish and maintain a 
        SAFE annuity or a SAFE trust for any year only if--
                    ``(A) the employer is an eligible employer (as 
                defined in section 408(p)(2)(C)), and
                    ``(B) the employer does not maintain (and no 
                predecessor of the employer maintains) a qualified plan 
                (other than a permissible plan) with respect to which 
                contributions were made, or benefits were accrued, for 
                service in any year in the period beginning with the 
                year such annuity or trust became effective and ending 
                with the year for which the determination is being 
                made.
            ``(2) Definitions.--For purposes of paragraph (1)--
                    ``(A) Qualified plan.--The term `qualified plan' 
                has the meaning given such term by section 
                408(p)(2)(D)(ii).
                    ``(B) Permissible plan.--The term `permissible 
                plan' means--
                            ``(i) a plan under which only elective 
                        deferrals described in section 402(g)(3), 
                        deferred compensation described in section 457, 
                        or employer matching contributions may be made, 
                        and
                            ``(ii) any collectively bargained plan.
    ``(b) SAFE Annuity.--
            ``(1) In general.--For purposes of this title, the term 
        `SAFE annuity' means an individual retirement annuity (as 
        defined in section 408(b) without regard to paragraph (2) 
        thereof and without regard to the limitation on aggregate 
        annual premiums contained in the flush language of section 
        408(b)) if--
                    ``(A) such annuity meets the requirements of 
                paragraphs (2) through (6), and
                    ``(B) the only contributions to such annuity are 
                employer contributions.
        Nothing in this section shall be construed as preventing an 
        employer from using a group annuity contract which is divisible 
        into individual retirement annuities for purposes of providing 
        SAFE annuities.
            ``(2) Participation requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met for any year only if all employees of 
                the employer who received compensation from the 
                employer during any 2 consecutive preceding years, and 
                received at least $5,000 in compensation during the 
                year, are entitled to the benefit described in 
                paragraph (5) for such year.
                    ``(B) Excludable employees.--An employer may elect 
                to exclude from the requirements under subparagraph (A) 
                employees described in section 410(b)(3).
            ``(3) Vesting.--The requirements of this paragraph are met 
        if the employee's rights to any benefits are nonforfeitable.
            ``(4) Benefit form.--The requirements of this paragraph are 
        met if the only form of benefit is--
                    ``(A) a benefit payable annually in the form of a 
                single life annuity with monthly payments (with no 
                ancillary benefits) beginning at age 65, or
                    ``(B) any other form of benefit which is the 
                actuarial equivalent (based on the assumptions 
                specified in the SAFE annuity) of the benefit described 
                in subparagraph (A).
            ``(5) Amount of annual accrued benefit.--
                    ``(A) In general.--The requirements of this 
                paragraph are met for any plan year if the accrued 
                benefit of each participant derived from employer 
                contributions for such year, when expressed as a 
                benefit described in paragraph (4)(A), equals the 
                applicable percentage of the participant's compensation 
                for such year.
                    ``(B) Applicable percentage.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `applicable 
                        percentage' means 2 percent.
                            ``(ii) Election of different percentage.--
                        An employer may elect to apply an applicable 
                        percentage of 1 percent for any year for all 
                        employees eligible to participate in the plan 
                        for such year, if the employer notifies the 
                        employees of such percentage within a 
                        reasonable period before the beginning of such 
                        year. An employer may also elect to apply an 
                        applicable percentage of 3 percent for any of 
                        the first 5 years that the plan is effective 
                        for all employees eligible to participate in 
                        the plan for such year, if the employer so 
                        notifies the employees.
                    ``(C) Compensation limit.--The compensation taken 
                into account under this paragraph for any year shall 
                not exceed the limitation in effect for such year under 
                section 401(a)(17).
                    ``(D) Credit for service before plan adopted.--
                            ``(i) In general.--An employer may elect to 
                        take into account a specified number of years 
                        of service (not greater than 5) performed 
                        before the adoption of the plan (each 
                        hereinafter referred to as a `prior service 
                        year') as service under the plan if the same 
                        specified number of years is available to all 
                        employees eligible to participate in the plan 
                        for the first plan year.
                            ``(ii) Accrual of prior service benefit.--
                        Such an election shall be effective for a prior 
                        service year only if the requirements of this 
                        paragraph are met for an eligible plan year 
                        (with respect to employees entitled to credit 
                        for such prior service year) by doubling the 
                        applicable percentage (if any) for such plan 
                        year. For purposes of the preceding sentence, 
                        an eligible plan year is a plan year in the 
                        period of consecutive plan years (but not more 
                        than the number specified under clause (i)) 
                        beginning with the first plan year that the 
                        plan is in effect.
                            ``(iii) Election may not apply to certain 
                        prior service years.--This subparagraph shall 
                        not apply with respect to any prior service 
                        year of an employee if--
                                    ``(I) for any part of such prior 
                                service year such employee was an 
                                active participant (within the meaning 
                                of section 219(g)(5) under any defined 
                                benefit plan of the employer (or any 
                                predecessor thereof), or
                                    ``(II) such employee received 
                                during such prior service year less 
                                than $5,000 in compensation from the 
                                employer.
            ``(6) Funding.--
                    ``(A) In general.--The requirements of this 
                paragraph are met only if the employer is required to 
                contribute to the annuity for each plan year the amount 
                necessary (determined in accordance with subparagraph 
                (B)) to fund the accrued benefit for each participant 
                entitled to such benefit for such year.
                    ``(B) Actuarial assumptions.--In determining the 
                amount required to be contributed under subparagraph 
                (A)--
                            ``(i) the assumed interest rate shall be 5 
                        percent per year,
                            ``(ii) the assumed mortality shall be 
                        determined under the applicable mortality table 
                        (as defined in section 417(e)(3), as modified 
                        by the Secretary so that it does not include 
                        any assumption for preretirement mortality),
                            ``(iii) the assumed retirement age shall be 
                        65, and
                            ``(iv) an assumption for reasonable 
                        expenses shall be permitted consistent with 
                        State law.
                    ``(C) Time when contributions deemed made.--For 
                purposes of this paragraph, any contribution made for a 
                plan year during the 8\1/2\-month period beginning on 
                the day after the last day of such plan year shall be 
                deemed to have been made on such last day.
                    ``(D) Penalty for failure to make required 
                contribution.--The taxes imposed by section 4971 shall 
                apply to a failure to make the contribution required by 
                this paragraph in the same manner as if the amount of 
                the failure were an accumulated funding deficiency to 
                which such section applies.
            ``(7) Definitions and special rule.--
                    ``(A) Definitions.--The definitions in section 
                408(p)(6) shall apply for purposes of this subsection.
                    ``(B) Use of designated financial institutions.--A 
                rule similar to the rule of section 408(p)(7) (without 
                regard to the last sentence thereof) shall apply for 
                purposes of this subsection.
    ``(c) SAFE Trust.--
            ``(1) In general.--For purposes of this title, the term 
        `SAFE trust' means a trust forming part of a defined benefit 
        plan if--
                    ``(A) such trust meets the requirements of section 
                401(a) as modified by subsection (d),
                    ``(B) a participant's benefits under the plan are 
                based solely on the balance of a separate account in 
                such plan of such participant,
                    ``(C) such plan meets the requirements of 
                paragraphs (2) through (8), and
                    ``(D) the only contributions to such trust are 
                employer contributions.
            ``(2) Participation requirements.--A plan meets the 
        requirements of this paragraph for any year only if the 
        requirements of subsection (b)(2) are met for such year.
            ``(3) Vesting.--A plan meets the requirements of this 
        paragraph for any year only if the requirements of subsection 
        (b)(3) are met for such year.
            ``(4) Benefit form.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a plan meets the requirements of this 
                paragraph only if the requirements of subsection (b)(4) 
                are met. For purposes of this subparagraph, a plan may 
                satisfy the requirements of subsection (b)(4) by 
                purchasing an annuity contract which meets the 
                requirements of subsection (b)(4).
                    ``(B) Direct transfers to individual retirement 
                plan or safe annuity.--A plan shall not fail to meet 
                the requirements of this paragraph by reason of 
                permitting, at the election of the employee, a trustee-
                to-trustee transfer of the entire balance to the credit 
                of the employee to an individual retirement account 
                described in section 408(a), an individual retirement 
                annuity described in section 408(b) (other than an 
                endowment contract), or a SAFE annuity.
            ``(5) Amount of annual accrued benefit.--A plan meets the 
        requirements of this paragraph for any year only if the 
        requirements of subsection (b)(5) are met for such year.
            ``(6) Funding.--
                    ``(A) In general.--A plan meets the requirements of 
                this paragraph for any year only if--
                            ``(i) the requirements of subsection (b)(6) 
                        are met for such year, and
                            ``(ii) in the case of a plan which has an 
                        unfunded prior year liability as of the close 
                        of such plan year, the plan requires that the 
                        employer make an additional contribution to 
                        such plan for such year equal to the amount of 
                        such unfunded prior year liability.
                    ``(B) Unfunded prior year liability.--For purposes 
                of this paragraph, the term `unfunded prior year 
                liability' means, with respect to any plan year, the 
                excess (if any) of--
                            ``(i) the aggregate of the accrued 
                        liabilities under the plan as of the close of 
                        the prior plan year, over
                            ``(ii) the value of the plan's assets 
                        determined under section 412(c)(2) as of the 
                        close of the plan year (determined without 
                        regard to any contributions for such plan 
                        year).
                Such accrued liabilities shall be determined using the 
                assumptions specified in subsection (b)(6)(B).
                    ``(C) Changes in mortality table.--If the 
                applicable mortality table under section 417(e)(3) for 
                any plan year is not the same as such table for the 
                prior plan year, the Secretary shall prescribe 
                regulations which phase in the effect of the changes 
                over a reasonable period of plan years determined by 
                the Secretary.
                    ``(D) Disregard assumptions for expenses.--For 
                purposes of this paragraph, the assumption specified in 
                subsection (b)(6)(B)(iv) shall be disregarded.
            ``(7) Separate accounts for participants.--A plan meets the 
        requirements of this paragraph for any year only if the plan 
        provides--
                    ``(A) for an individual account for each 
                participant, and
                    ``(B) for benefits based solely on--
                            ``(i) the amount contributed to the 
                        participant's account, and
                            ``(ii) any income, expenses, gains and 
                        losses, and any forfeitures of accounts of 
                        other participants which may be allocated to 
                        such participant's account.
            ``(8) Trust may not hold securities which are not readily 
        tradable.--A plan meets the requirements of this paragraph only 
        if the plan prohibits the trust from holding directly or 
        indirectly securities which are not readily tradable on an 
        established securities market or otherwise. Nothing in this 
        paragraph shall prohibit the trust from holding insurance 
        company products regulated by State law.
            ``(9) Definitions and special rule.--The definitions and 
        special rule applicable under subsection (b)(7) shall apply for 
        purposes of this subsection.
    ``(d) Special Rules for SAFE Annuities and Trusts.--
            ``(1) Certain requirements treated as met.--For purposes of 
        section 401(a), a SAFE annuity and a SAFE trust shall be 
        treated as meeting the requirements of the following 
        provisions:
                    ``(A) Section 401(a)(4) (relating to 
                nondiscrimination rules).
                    ``(B) Section 401(a)(26) (relating to minimum 
                participation).
                    ``(C) Section 410 (relating to minimum 
                participation and coverage requirements).
                    ``(D) Section 411(b) (relating to accrued benefit 
                requirements).
                    ``(E) Paragraphs (6) and (7) of section 412(c) 
                (relating to full funding limitation).
                    ``(F) Section 415 (relating to limitations on 
                benefits and contributions under qualified plans).
                    ``(G) Section 416 (relating to special rules for 
                top-heavy plans).
            ``(2) Contributions not taken into account in applying 
        limits to other plans.--Contributions to a SAFE annuity or a 
        SAFE trust shall not be taken into account in applying sections 
        404 and 415 to other plans maintained by the employer.''
    (b) Deduction Limits Not To Apply to Employer Contributions.--
            (1) In general.--Section 404 (relating to deductions for 
        contributions of an employer to pension, etc., plans) is 
        amended by adding at the end the following new subsection:
    ``(n) Special Rules for SAFE Annuities and Trusts.--
            ``(1) In general.--Employer contributions to a SAFE annuity 
        or SAFE trust shall be treated as if they are made to a plan 
        subject to the requirements of this section.
            ``(2) Timing.--
                    ``(A) Deduction.--Contributions described in 
                paragraph (1) shall be deductible in the taxable year 
                of the employer with or within which the calendar year 
                for which the contributions were made ends.
                    ``(B) Contributions after end of year.--For 
                purposes of this subsection, contributions shall be 
                treated as made for a taxable year if they are made on 
                account of the taxable year and are made not later than 
                the time prescribed by law for filing the return for 
                the taxable year (including extensions thereof).''
            (2) Coordination with deduction under section 219.--
                    (A) Section 219(b) (relating to maximum amount of 
                deduction) is amended by adding at the end the 
                following new paragraph:
            ``(5) Special rule for safe annuities.--This section shall 
        not apply with respect to any amount contributed to a SAFE 
        annuity established under section 408B(b).''
                    (B) Section 219(g)(5)(A) (defining active 
                participant) is amended by striking ``or'' at the end 
of clause (v) and by adding at the end the following new clause:
                            ``(vii) any SAFE annuity (within the 
                        meaning of section 408B), or''.
    (c) Contributions and Distributions.--
            (1) Section 402 (relating to taxability of beneficiary of 
        employees' trust) is amended by adding at the end the following 
        new subsection:
    ``(l) Treatment of SAFE Annuities.--Rules similar to the rules of 
paragraphs (1) and (3) of subsection (h) shall apply to contributions 
and distributions with respect to SAFE annuities under section 408B.''
            (2) Section 408(d)(3) is amended by adding at the end the 
        following new subparagraph:
                    ``(H) SAFE annuities.--This paragraph shall not 
                apply to any amount paid or distributed out of a SAFE 
                annuity (as defined in section 408B) unless it is paid 
                in a trustee-to-trustee transfer into another SAFE 
                annuity.''
    (d) Increased Penalty on Early Withdrawals.--Section 72(t) 
(relating to additional tax on early distributions) is amended by 
adding at the end the following new paragraph:
            ``(9) Special rules for safe annuities and trusts.--In the 
        case of any amount received from a SAFE annuity or a SAFE trust 
        (within the meaning of section 408B), paragraph (1) shall be 
        applied by substituting `20 percent' for `10 percent'.''
    (e) Simplified Employer Reports.--
            (1) SAFE annuities.--Section 408(l) (relating to simplified 
        employer reports) is amended by adding at the end the following 
        new paragraph:
            ``(3) SAFE annuities.--
                    ``(A) Simplified report.--The employer maintaining 
                any SAFE annuity (within the meaning of section 408B) 
                shall file a simplified annual return with the 
                Secretary containing only the information described in 
                subparagraph (B).
                    ``(B) Contents.--The return required by 
                subparagraph (A) shall set forth--
                            ``(i) the name and address of the employer,
                            ``(ii) the date the plan was adopted,
                            ``(iii) the number of employees of the 
                        employer,
                            ``(iv) the number of such employees who are 
                        eligible to participate in the plan,
                            ``(v) the total amount contributed by the 
                        employer to each such annuity for such year and 
                        the minimum amount required under section 408B 
                        to be so contributed,
                            ``(vi) the percentage elected under section 
                        408B(b)(5)(B), and
                            ``(vii) the number of employees which 
                        respect to whom contributions are required to 
                        be made for such year under section 
                        408B(b)(5)(D).
                    ``(C) Reporting by issuer of safe annuity.--
                            ``(i) In general.--The issuer of each SAFE 
                        annuity shall provide to the owner of the 
                        annuity for each year a statement setting forth 
                        as of the close of such year--
                                    ``(I) the benefits guaranteed at 
                                age 65 under the annuity, and
                                    ``(II) the cash surrender value of 
                                the annuity.
                            ``(ii) Summary description.--The issuer of 
                        any SAFE annuity shall provide to the employer 
                        maintaining the annuity for each year a 
                        description containing the following 
                        information:
                                    ``(I) The name and address of the 
                                employer and the issuer.
                                    ``(II) The requirements for 
                                eligibility for participation.
                                    ``(III) The benefits provided with 
                                respect to the annuity.
                                    ``(IV) The procedures for, and 
                                effects of, withdrawals (including 
                                rollovers) from the annuity.
                    ``(D) Time and manner of reporting.--Any return, 
                report, or statement required under this paragraph 
                shall be made in such form and at such time as the 
                Secretary shall prescribe.''
            (2) SAFE trusts.--Section 6059 (relating to actuarial 
        reports) is amended by redesignating subsections (c) and (d) as 
        subsections (d) and (e), respectively, and by inserting after 
        subsection (b) the following new subsection:
    ``(c) SAFE Trusts.--In the case of a SAFE Trust (within the meaning 
of section 408B), the Secretary shall require a simplified actuarial 
report which contains information similar to the information required 
in section 408(l)(3)(B).''
    (f) Conforming Amendments.--
            (1) Section 280G(b)(6) is amended by striking ``or'' at the 
        end of subparagraph (C), by striking the period at the end of 
        subparagraph (D) and inserting ``, or'' and by adding after 
        subparagraph (D) the following new subparagraph:
                    ``(E) a SAFE annuity described in section 408B.''
            (2) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) of 
        section 414 are each amended by inserting ``408B,'' after 
        ``408(p),''.
            (3) Section 4972(d)(1)(A) 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 after clause 
        (iv) the following new clause:
                            ``(v) any SAFE annuity (within the meaning 
                        of section 408B).''
    (g) Modifications of ERISA.--
            (1) Exemption from insurance coverage.--Subsection (b) of 
        section 4021 of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 1321) is amended by striking ``or'' at the end 
        of paragraph (12), by striking the period at the end of 
        paragraph (13) and inserting ``; or'', and by adding at the end 
        the following new paragraph:
            ``(14) which is established and maintained as part of a 
        SAFE trust (as defined in section 408B of the Internal Revenue 
        Code of 1986).''
            (2) Reporting requirements.--Section 101 of such Act (29 
        U.S.C. 1021) is amended by redesignating subsection (h) as 
        subsection (i) and by inserting after subsection (g) the 
        following new subsection:
    ``(h) SAFE Annuities.--
            ``(1) No employer reports.--Except as provided in this 
        subsection, no report shall be required under this section by 
        an employer maintaining a SAFE annuity under section 408B(b) of 
        the Internal Revenue Code of 1986.
            ``(2) Summary description.--The issuer of any SAFE annuity 
        shall provide to the employer maintaining the annuity for each 
        year a description containing the following information:
                    ``(A) The name and address of the employer and the 
                issuer.
                    ``(B) The requirements for eligibility for 
                participation.
                    ``(C) The benefits provided with respect to the 
                annuity.
                    ``(D) The procedures for, and effects of, 
                withdrawals (including rollovers) from the annuity.''
            (3) Employee notification.--The employer shall provide each 
        employee eligible to participate in the SAFE annuity with the 
        description described in paragraph (2) at the same time as the 
        notification required under section 408B(b)(5)(B) of the 
        Internal Revenue Code of 1986.''
    (h) Clerical Amendment.--The table of sections for subpart A of 
part I of subchapter D of chapter 1 is amended by inserting after the 
item relating to section 408A the following new item:

                              ``Sec. 408B. SAFE annuities and trusts.''
    (i) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1998.

          TITLE III--ENHANCED PORTABILITY OF RETIREMENT PLANS

SEC. 301. 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 of an eligible employer 
                described in paragraph (1)(A), 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.''.
    (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 December 31, 1998.
            (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 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. For purposes of the preceding sentence, the term 
        ``eligible retirement plan'' has the meaning given such term by 
        section 402(c)(8)(B) of the Internal Revenue Code of 1986; 
        except that such term shall not include any individual 
        retirement plan described in section 408(d)(3)(A)(ii) of such 
        Code.

SEC. 302. 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 a defined contribution plan and any 
                        earnings on such rollover, and
                            ``(III) such entire amount received is paid 
                        into another defined contribution plan (for the 
benefit of such individual) not later than the 60th day after he 
receives the payment or distribution; or
                            ``(v)(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 any such account and no 
                        part of the value of any such annuity is 
                        attributable to any source other than a 
                        rollover contribution from such an account or 
                        annuity of such individual (and any earnings on 
                        such contribution),
                            ``(III) all contributions to all individual 
                        retirement accounts, and all amounts paid for 
                        all individual retirement annuities, of such 
                        individual were allowed as a deduction under 
                        section 219, and
                            ``(IV) such entire amount received is paid 
                        (not later than the 60th day after being so 
                        received) into a defined contribution plan (for 
                        the benefit of such individual) under which 
                        amounts are held in trust by a person described 
                        in section 408(a)(2) or in a manner that 
                        satisfies section 401(f).
                If a payment or distribution from an individual 
                retirement plan is described in more than 1 clause of 
                this subparagraph, such payment or distribution shall 
                be treated as described only in the clause specified by 
                the payee or distributee. For purposes of this 
                subparagraph, the term `defined contribution plan' 
                means a defined contribution plan (as defined in 
                section 414(i)) which includes a trust exempt from tax 
                under section 501(a), an annuity plan described in 
                section 403(a), an annuity contract described in 
                section 403(b), and an eligible deferred compensation 
                plan described in section 457(b) of an eligible 
                employer described in section 457(e)(1)(A).''
    (b) Conforming Amendment.--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)''.
    (c) Effective Date; Special Rule.--
            (1) Effective date.--The amendments made by this section 
        shall apply to distributions after December 31, 1998.
            (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 a 
        defined contribution plan (as defined in section 408(d)(3)(A) 
        of the Internal Revenue Code of 1986 (as added by this section) 
        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. 303. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

    (a) In General.--Paragraph (2) of section 402(c) (relating to rules 
applicable to rollovers from exempt trusts) is amended by adding at the 
end the following new sentence: ``In accordance with rules prescribed 
by the Secretary, the preceding sentence shall not apply to any 
distribution if--
                    ``(A) the portion of the distribution which would 
                be so includible is reported by the trustee, and
                    ``(B) the eligible retirement plan to which it is 
                paid agrees to report such amount in any subsequent 
                distribution.''
    (b) Conforming Amendments.--
            (1) Subparagraph (B) of section 401(a)(31) is amended by 
        adding at the end the following new sentence: ``In accordance 
        with rules prescribed by the Secretary, the preceding sentence 
        shall not apply to any distribution if--
                            ``(i) the portion of the distribution which 
                        would be so includible is reported by the 
                        trustee, and
                            ``(ii) the eligible retirement plan to 
                        which it is paid agrees to report such amount 
                        in any subsequent distribution.''
            (2) Subparagraph (B) of section 408(d)(3) is amended--
                    (A) by striking ``Limitation.--'' in the heading 
                and inserting ``Limitations.--'', and
                    (B) by adding at the end the following: ``In 
                addition, this paragraph does not apply unless rules 
                similar to the rules of section 402(c)(2) are 
                satisfied, except that the rollover contribution may 
                exceed the amount includible in income to the extent 
                the rollover contribution consists of nondeductible 
                contributions described in subsection (o).''
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions made after December 31, 1998.

SEC. 304. RATIONALIZE THE 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, 1998.

SEC. 305. TRANSFEREE DEFINED CONTRIBUTION PLAN NEED NOT HAVE SAME 
              DISTRIBUTION OPTIONS AS TRANSFEROR DEFINED CONTRIBUTION 
              PLAN.

    (a) In General.--Section 411(d)(6) (relating to accrued benefit not 
to be decreased by amendment) is amended by adding at the end the 
following new subparagraph:
                    ``(D) Plan transfers.--A defined contribution plan 
                (in this subparagraph referred to as the `transferee 
                plan') shall not be treated as failing to meet the 
                requirements of this paragraph merely because the 
                transferee plan does not provide some or all of the 
                forms of distribution previously available under 
                another defined contribution plan (in this subparagraph 
                referred to as the `transferor plan') to the extent 
                that--
                            ``(i) the forms of distribution previously 
                        available under the transferor plan applied to 
                        the account of a participant or beneficiary 
                        under the transferor plan that was transferred 
                        from the transferor plan to the transferee plan 
                        pursuant to a direct transfer rather than 
                        pursuant to a distribution from the transferor 
                        plan,
                            ``(ii) the terms of both the transferor 
                        plan and the transferee plan authorize the 
                        transfer described in clause (i),
                            ``(iii) the transfer described in clause 
                        (i) was made pursuant to a voluntary election 
                        by the participant or beneficiary whose account 
                        was transferred to the transferee plan,
                            ``(iv) the election described in clause 
                        (iii) was made after the participant or 
                        beneficiary received a notice describing the 
                        consequences of making the election,
                            ``(v) if the transferor plan provides for 
                        an annuity as the normal form of distribution 
                        under the plan in accordance with section 417, 
                        the transfer is made with the consent of the 
                        participant's spouse (if any), and such consent 
                        meets requirements similar to the requirements 
                        imposed by section 417(a)(2), and
                            ``(vi) the transferee plan allows the 
                        participant or beneficiary described in clause 
                        (iii) to receive any distribution to which the 
                        participant or beneficiary is entitled under 
                        transferee plan in the form of a single sum 
                        distribution.''.
    (b) Conforming Amendment.--Section 204(g) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is amended 
by adding at the end the following new paragraph:
    ``(4) A defined contribution plan (in this paragraph referred to as 
the `transferee plan') shall not be treated as failing to meet the 
requirements of this subsection merely because the transferee plan does 
not provide some or all of the forms of distribution previously 
available under another defined contribution plan (in this paragraph 
referred to as the `transferor plan') to the extent that--
            ``(A) the forms of distribution previously available under 
        the transferor plan applied to the account of a participant or 
        beneficiary under the transferor plan that was transferred from 
        the transferor plan to the transferee plan pursuant to a direct 
        transfer rather than pursuant to a distribution from the 
        transferor plan,
            ``(B) the terms of both the transferor plan and the 
        transferee plan authorize the transfer described in 
        subparagraph (A),
            ``(C) the transfer described in subparagraph (A) was made 
        pursuant to a voluntary election by the participant or 
        beneficiary whose account was transferred to the transferee 
        plan,
            ``(D) the election described in subparagraph (C) was made 
        after the participant or beneficiary received a notice 
        describing the consequences of making the election,
            ``(E) if the transferor plan provides for an annuity as the 
        normal form of distribution under the plan in accordance with 
        section 205, the transfer is made with the consent of the 
        participant's spouse (if any), and such consent meets 
        requirements similar to the requirements imposed by section 
        205(c)(2), and
            ``(F) the transferee plan allows the participant or 
        beneficiary described in subparagraph (C) to receive any 
        distribution to which the participant or beneficiary is 
        entitled under transferee plan in the form of a single sum 
        distribution.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transfers after December 31, 1998.

SEC. 306. ALLOWANCE OF EMPLOYERS TO 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 December 31, 1998.

SEC. 307. 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)(16))''.
    (c) Effective Date.--The amendments made by this section shall 
apply to trustee-to-trustee transfers after December 31, 1998.

   TITLE IV--CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL EMPLOYERS

SEC. 401. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL EMPLOYERS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business related credits) is amended by adding at the end 
the following new section:

``SEC. 45D. SMALL EMPLOYER PENSION PLAN STARTUP COSTS.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
eligible employer, the small employer pension plan startup cost credit 
determined under this section for any taxable year is an amount equal 
to the applicable percentage of the qualified startup costs paid or 
incurred by the taxpayer during the taxable year.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage is--
            ``(1) 60 percent for the first credit year, and
            ``(2) 50 percent for each of the 2 taxable years 
        immediately following the first credit year, and
            ``(3) zero for any other taxable year.
    ``(c) Dollar Limitation.--The amount of the credit determined under 
this section for any taxable year shall not exceed--
            ``(1) $2,000 for the first credit year,
            ``(2) $1000 for each of the 2 taxable years immediately 
        following the first credit year, and
            ``(3) zero for any other taxable year.
    ``(d) Eligible Employer.--For purposes of this section--
            ``(1) In general.--The term `eligible employer' has the 
        meaning given such term by section 408(p)(2)(C)(i).
            ``(2) Employers maintaining qualified plans during 1997 not 
        eligible.--Such term shall not include an employer if such 
        employer (or any predecessor employer) maintained a qualified 
        plan (as defined in section 408(p)(2)(D)(ii)) with respect to 
        which contributions were made, or benefits were accrued, for 
        service in 1997. If only individuals other than employees 
        described in subparagraph (A) or (B) of section 410(b)(3) are 
        eligible to participate in the qualified employer plan referred 
        to in subsection (e)(1), then the preceding sentence shall be 
        applied without regard to any qualified plan in which only 
        employees so described are eligible to participate.
    ``(e) Other Definitions.--For purposes of this section--
            ``(1) Qualified startup costs.--
                    ``(A) In general.--The term `qualified startup 
                costs' means any ordinary and necessary expenses of an 
                eligible employer which are paid or incurred in 
                connection with--
                            ``(i) the establishment or administration 
                        of an eligible employer plan, or
                            ``(ii) the retirement-related education of 
                        employees with respect to such plan.
                    ``(B) Plan must have at least 2 participants.--Such 
                term shall not include any expense in connection with a 
                plan that does not have at least 2 individuals who are 
                eligible to participate.
                    ``(C) Plan must be established before january 1, 
                2001.--Such term shall not include any expense in 
                connection with a plan established after December 31, 
                2000.
            ``(2) Eligible employer plan.--The term `eligible employer 
        plan' means a qualified employer plan within the meaning of 
        section 4972(d), or a qualified payroll deduction arrangement 
        within the meaning of section 408(q)(1) (whether or not an 
        election is made under section 408(q)(2)). A qualified payroll 
        deduction arrangement shall be treated as an eligible employer 
        plan only if all employees of the employer who--
                    ``(A) have been employed for 90 days, and
                    ``(B) are not described in subparagraph (A) or (C) 
                of section 410(b)(3),
        are eligible to make the election under section 408(q)(1)(A).
            ``(3) First credit year.--The term `first credit year' 
        means--
                    ``(A) the taxable year which includes the date that 
                the eligible employer plan to which such costs relate 
                becomes effective, or
            ``(B) at the election of the eligible employer, the taxable 
        year preceding the taxable year referred to in subparagraph 
        (A).
    ``(f) Special Rules.--For purposes of this section--
            ``(1) Aggregation rules.--All persons treated as a single 
        employer under subsection (a) or (b) of section 52, or 
        subsection (n) or (o) of section 414, shall be treated as one 
        person. All eligible employer plans shall be treated as 1 
        eligible employer plan.
            ``(2) Disallowance of deduction.--No deduction shall be 
        allowed for that portion of the qualified startup costs paid or 
        incurred for the taxable year which is equal to the credit 
        determined under subsection (a).
            ``(3) Election not to claim credit.--This section shall not 
        apply to a taxpayer for any taxable year if such taxpayer 
        elects to have this section not apply for such taxable year.''
    (b) Credit Allowed as Part of General Business Credit.--Section 
38(b) (defining current year business credit) is amended by striking 
``plus'' at the end of paragraph (11), by striking the period at the 
end of paragraph (12) and inserting ``, plus'', and by adding at the 
end the following new paragraph:
            ``(13) in the case of an eligible employer (as defined in 
        section 45D(c)), the small employer pension plan startup cost 
        credit determined under section 45D(a).''
    (c) Conforming Amendments.--
            (1) Section 39(d) is amended by adding at the end the 
        following new paragraph:
            ``(8) No carryback of small employer pension plan startup 
        cost credit before effective date.--No portion of the unused 
        business credit for any taxable year which is attributable to 
        the small employer pension plan startup cost credit determined 
        under section 45D may be carried back to a taxable year ending 
        on or before the date of the enactment of section 45D.''
            (2) Subsection (c) of section 196 is amended by striking 
        ``and'' at the end of paragraph (7), by striking the period at 
        the end of paragraph (8) and inserting ``, and'', and by adding 
        at the end the following new paragraph:
            ``(9) the small employer pension plan startup cost credit 
        determined under section 45D(a).''
            (3) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 is amended by adding at the end the 
        following new item:

                              ``Sec. 45D. Small employer pension plan 
                                        startup costs.''
    (d) Effective Date.--The amendments made by this section shall 
apply to costs paid or incurred in taxable years ending after the date 
of the enactment of this Act.

          TITLE V--MISCELLANEOUS IMPROVEMENTS TO PENSION PLANS

SEC. 501. IRA CATCH-UP CONTRIBUTIONS.

    (a) In General.--Section 408 is amended by redesignating subsection 
(q) as subsection (r) and by inserting after subsection (p) the 
following new subsection:
    ``(q) Definitions and Rules Relating to Nondeductible Catch-Up 
Contributions.--
            ``(1) In general.--Subject to the provisions of this 
        subsection, catch-up contributions may be made on behalf of a 
        qualified individual to an individual retirement plan.
            ``(2) Catch-up contributions.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `catch-up contribution' 
                means any contribution to an individual retirement plan 
                made during the catch-up period which is designated (in 
                such manner as the Secretary may prescribe) as a catch-
                up contribution for which a deduction is not allowable 
                under section 219. Any such designation shall be made 
                on the return of tax imposed by chapter 1 for the 
                taxable year for which such contribution is made.
                    ``(B) Limitations.--A contribution may be 
                designated a catch-up contribution if--
                            ``(i) no contribution was made on behalf of 
                        the individual to a pension, profit-sharing, or 
                        stock bonus plan which constitutes a qualified 
                        trust under section 401(a) (other than an 
                        individual retirement plan) for any of the 5 
                        taxable years preceding the calendar year in 
                        which the catch-up period begins,
                            ``(ii) such contribution, when added to all 
                        other contributions designated as catch-up 
                        contributions, does not exceed $2,000 for the 
                        taxable year for which such contribution is 
                        made
                    ``(C) Catch-up contribution.--The term `catch-up 
                period' means the 5 taxable year period beginning in 
                the taxable year in which the individual 1st designates 
                a contribution as a catch-up contribution.
            ``(3) Qualified individual.--For purposes of paragraph 
        (1)--
                    ``(A) In general.--The term `qualified individual' 
                means an individual whose modified adjusted gross 
                income does not exceed $50,000.
                    ``(B) Special rule for joint return.--In the case 
                of a joint return, adjusted gross income shall be 
                determined separately for each spouse as if each spouse 
                had filed a separate return.
                    ``(C) Modified adjusted gross income.--The term 
                `modified adjusted gross income' means adjusted gross 
                income increased by any amount excluded from gross 
                income under section 911, 931, or 933.
            ``(4)  No deduction allowed.--No deduction shall be allowed 
        under section 219 for a catch-up contribution.
            ``(5) Increase in limits.--For purposes of this 
        subsection--
                    ``(A) In general.--The limitation on contributions 
                in subsections (a)(1) and (b)(2)(B) are hereby 
                increased by the amount of contributions allowed under 
                this subsection.
                    ``(B) Excise tax.--In applying section 4973, the 
                amount allowable as a deduction under section 219 shall 
                be increased by the amount of contributions allowed 
                under this subsection.''
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made after December 31, 1998.

SEC. 502. REPEAL OF 25 PERCENT LIMITATION ON DEFINED CONTRIBUTION 
              PLANS.

    (a) In General.--Paragraph (1) of section 415(c) (relating to 
general limitation for defined contribution plans) is amended to read 
as follows:
            ``(1) In general.--Contributions and other additions with 
        respect to a participant exceed the limitation of this 
        subsection if, when expressed as an annual addition (within the 
        meaning of paragraph (2)) to the participant's account, such 
        annual addition is greater than $30,000.''.
    (b) Conforming Amendments.--
            (1) Subparagraph (B) of section 402(h)(2), subparagraph (A) 
        of section 408(d)(5), subsection (j) of section 408, clause 
        (ii) of section 416(i)(1)(A), and subparagraph (B) of section 
        419A(c)(4) are each amended by striking ``section 
        415(c)(1)(A)'' and inserting ``section 415(c)(1)''.
            (2) Paragraph (2) of section 419A(d) is amended by striking 
        the last sentence.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1998.

SEC. 503. 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, 1998.
            (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, 1999, or
                    (B) January 1, 2003.
            (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. 504. PERIODIC PENSION BENEFITS STATEMENTS.

    (a) In General.--Section 105(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1025(a)) is amended by striking ``shall 
furnish to any plan participant or beneficiary who so requests in 
writing, a statement'' and inserting ``shall furnish to each plan 
participant at least once each year (in the case of a defined 
contribution plan) and at least once every three years (in the case of 
a defined benefit plan), a statement in written or electronic form''.
    (b) Required Periodic Statements for Plans With More Than One 
Unaffiliated Employer.--Section 105(d) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1025(d)) is repealed.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1998.

SEC. 505. FAILURE OF PENSION PLANS TO MEET REQUIREMENTS.

    (a) In General.--Part I of subchapter B of chapter 68 (relating to 
assessable penalties) is amended by adding at the end the following new 
section:

``SEC. 6716. FAILURE OF PENSION PLANS TO MEET REQUIREMENTS.

    ``(a) In General.--If, as a result of a violation of a provision of 
this title, the Secretary determines that a stock bonus, pension, or 
profit-sharing plan arrangement would no longer constitute a qualified 
trust under section 401--
            ``(1) no sanction may be imposed if the violation is cured 
        before the close of an audit of such arrangement,
            ``(2) an intermediate sanction under subsection (b) may be 
        imposed if the violation is not corrected before the close of 
        an audit of such arrangement, and
            ``(3) after the close of an audit of such arrangement, the 
        Secretary may make a final determination that such arrangement 
        does not constitute a qualified trust under section 401.
Paragraphs (1) and (2) shall not apply if the Secretary determines that 
such violation is known, material, and recurring.
    ``(b) Intermediate Sanctions.--For purposes of subsection (a) and 
in accordance with regulations which the Secretary shall prescribe--
            ``(1) if the violation is corrected within the period that 
        both the Secretary and the taxpayer consent to in writing, the 
        Secretary may impose a penalty in the amount of 20 percent of 
        the actual damages incurred as a result of such violation, and
            ``(2) the Secretary may impose a penalty in the amount of 
        100 percent of the actual damages incurred as a result of such 
        violation if such violation is not corrected within the period 
        referred to in paragraph (1).''.
    (b) Clerical Amendment.--The table of sections for part I of 
subchapter B of chapter 68 (relating to assessable penalties) is 
amended by adding at the end the following new item:

                              ``Sec. 6716. Failure of pension plans to 
                                        meet requirements.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to violations occurring after the date of the enactment of this 
Act.

SEC. 506. ASSIGNMENT AND ALIENATION

    (a) In General.--Subparagraph (C) of section 401(a)(13) (relating 
to assignment and alienation) is amended by striking clause (ii) and 
redesignating clause (iii) as clause (ii).
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1998.
                                 <all>
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