I

105TH CONGRESS

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.

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 TABLE OF CONTENTS.

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

6 ‘‘21st Century Retirement Savings Act’’.

7 (b) AMENDMENT OF 1986 CODE.—Except as other8 wise expressly provided, whenever in this Act an amend-
2

•HR 4823 IH

1 ment or repeal is expressed in terms of an amendment

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

3 shall be considered to be made to a section or other provi4 sion of the Internal Revenue Code of 1986.

5 (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 cashout 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.
3

•HR 4823 IH

1 TITLE I—NEW EMPLOYER PEN2 SION PLANS MUST BE 401(k)

3 PLANS AND NOT 403(b) OR 457

4 PLANS

5 SEC. 101. NEW EMPLOYER PENSION PLANS MUST BE 401(k)

6 PLANS AND NOT 403(b) OR 457 PLANS.

7 (a) 401(k) PLANS.—Paragraph (4) of section 401(k)

8 (relating to other requirements for cash or deferred ar9 rangements) is amended by striking subparagraph (B)

10 and redesignating subparagraph (C) as subparagraph (B).

11 (b) 403(b) PLANS.—Subsection (b) of section 403

12 (relating to taxability of beneficiary under annuity pur13 chased by section 501(c)(3) organization or public school)

14 is amended by adding at the end the following new para15 graph:

16 ‘‘(13) TERMINATION.—Paragraph (1) shall not

17 apply to an annuity plan, contract, or other arrange18 ment entered into after December 31, 1998.’’.

19 (c) 457 PLANS.—Section 457 (relating to deferred

20 compensation plans of State and local governments and

21 tax-exempt organizations) is amended by adding at the

22 end the following new subsection:

23 ‘‘(g) TERMINATION.—Subsection (a) shall not apply

24 to any plan or other arrangement entered into after De25 cember 31, 1998.’’.
4

•HR 4823 IH

1 (d) CONFORMING AMENDMENT.—Subparagraph (C)

2 of section 7701(j)(1) is amended by striking ‘‘section

3 401(k)(4)(B) and’’.

4 (e) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to years beginning after the date

6 of the enactment of this Act.

7 TITLE II—SAFE ANNUITIES AND

8 TRUSTS

9 SEC. 201. SAFE ANNUITIES AND TRUSTS.

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

11 D of chapter 1 is amended by inserting after section 408A

12 the following new section:

13 ‘‘SEC. 408B. SAFE ANNUITIES AND TRUSTS.

14 ‘‘(a) EMPLOYER ELIGIBILITY.—

15 ‘‘(1) IN GENERAL.—An employer may establish

16 and maintain a SAFE annuity or a SAFE trust for

17 any year only if—

18 ‘‘(A) the employer is an eligible employer

19 (as defined in section 408(p)(2)(C)), and

20 ‘‘(B) the employer does not maintain (and

21 no predecessor of the employer maintains) a

22 qualified plan (other than a permissible plan)

23 with respect to which contributions were made,

24 or benefits were accrued, for service in any year

25 in the period beginning with the year such an-
5

•HR 4823 IH

1 nuity or trust became effective and ending with

2 the year for which the determination is being

3 made.

4 ‘‘(2) DEFINITIONS.—For purposes of paragraph

5 (1)—

6 ‘‘(A) QUALIFIED PLAN.—The term ‘quali7 fied plan’ has the meaning given such term by

8 section 408(p)(2)(D)(ii).

9 ‘‘(B) PERMISSIBLE PLAN.—The term ‘per10 missible plan’ means—

11 ‘‘(i) a plan under which only elective

12 deferrals described in section 402(g)(3),

13 deferred compensation described in section

14 457, or employer matching contributions

15 may be made, and

16 ‘‘(ii) any collectively bargained plan.

17 ‘‘(b) SAFE ANNUITY.—

18 ‘‘(1) IN GENERAL.—For purposes of this title,

19 the term ‘SAFE annuity’ means an individual retire20 ment annuity (as defined in section 408(b) without

21 regard to paragraph (2) thereof and without regard

22 to the limitation on aggregate annual premiums con23 tained in the flush language of section 408(b)) if—

24 ‘‘(A) such annuity meets the requirements

25 of paragraphs (2) through (6), and
6

•HR 4823 IH

1 ‘‘(B) the only contributions to such annu2 ity are employer contributions.

3 Nothing in this section shall be construed as pre4 venting an employer from using a group annuity

5 contract which is divisible into individual retirement

6 annuities for purposes of providing SAFE annuities.

7 ‘‘(2) PARTICIPATION REQUIREMENTS.—

8 ‘‘(A) IN GENERAL.—The requirements of

9 this paragraph are met for any year only if all

10 employees of the employer who received com11 pensation from the employer during any 2 con12 secutive preceding years, and received at least

13 $5,000 in compensation during the year, are

14 entitled to the benefit described in paragraph

15 (5) for such year.

16 ‘‘(B) EXCLUDABLE EMPLOYEES.—An em17 ployer may elect to exclude from the require18 ments under subparagraph (A) employees de19 scribed in section 410(b)(3).

20 ‘‘(3) VESTING.—The requirements of this para21 graph are met if the employee’s rights to any bene22 fits are nonforfeitable.

23 ‘‘(4) BENEFIT FORM.—The requirements of

24 this paragraph are met if the only form of benefit

25 is—
7

•HR 4823 IH

1 ‘‘(A) a benefit payable annually in the

2 form of a single life annuity with monthly pay3 ments (with no ancillary benefits) beginning at

4 age 65, or

5 ‘‘(B) any other form of benefit which is the

6 actuarial equivalent (based on the assumptions

7 specified in the SAFE annuity) of the benefit

8 described in subparagraph (A).

9 ‘‘(5) AMOUNT OF ANNUAL ACCRUED BENE10 FIT.—

11 ‘‘(A) IN GENERAL.—The requirements of

12 this paragraph are met for any plan year if the

13 accrued benefit of each participant derived from

14 employer contributions for such year, when ex15 pressed as a benefit described in paragraph

16 (4)(A), equals the applicable percentage of the

17 participant’s compensation for such year.

18 ‘‘(B) APPLICABLE PERCENTAGE.—For

19 purposes of this paragraph—

20 ‘‘(i) IN GENERAL.—The term ‘applica21 ble percentage’ means 2 percent.

22 ‘‘(ii) ELECTION OF DIFFERENT PER23 CENTAGE.—An employer may elect to

24 apply an applicable percentage of 1 percent

25 for any year for all employees eligible to
8

•HR 4823 IH

1 participate in the plan for such year, if the

2 employer notifies the employees of such

3 percentage within a reasonable period be4 fore the beginning of such year. An em5 ployer may also elect to apply an applicable

6 percentage of 3 percent for any of the first

7 5 years that the plan is effective for all

8 employees eligible to participate in the plan

9 for such year, if the employer so notifies

10 the employees.

11 ‘‘(C) COMPENSATION LIMIT.—The com12 pensation taken into account under this para13 graph for any year shall not exceed the limita14 tion in effect for such year under section

15 401(a)(17).

16 ‘‘(D) CREDIT FOR SERVICE BEFORE PLAN

17 ADOPTED.—

18 ‘‘(i) IN GENERAL.—An employer may

19 elect to take into account a specified num20 ber of years of service (not greater than 5)

21 performed before the adoption of the plan

22 (each hereinafter referred to as a ‘prior

23 service year’) as service under the plan if

24 the same specified number of years is
9

•HR 4823 IH

1 available to all employees eligible to par2 ticipate in the plan for the first plan year.

3 ‘‘(ii) ACCRUAL OF PRIOR SERVICE

4 BENEFIT.—Such an election shall be effec5 tive for a prior service year only if the re6 quirements of this paragraph are met for

7 an eligible plan year (with respect to em8 ployees entitled to credit for such prior

9 service year) by doubling the applicable

10 percentage (if any) for such plan year. For

11 purposes of the preceding sentence, an eli12 gible plan year is a plan year in the period

13 of consecutive plan years (but not more

14 than the number specified under clause (i))

15 beginning with the first plan year that the

16 plan is in effect.

17 ‘‘(iii) ELECTION MAY NOT APPLY TO

18 CERTAIN PRIOR SERVICE YEARS.—This

19 subparagraph shall not apply with respect

20 to any prior service year of an employee

21 if—

22 ‘‘(I) for any part of such prior

23 service year such employee was an ac24 tive participant (within the meaning

25 of section 219(g)(5) under any de-
10

•HR 4823 IH

1 fined benefit plan of the employer (or

2 any predecessor thereof), or

3 ‘‘(II) such employee received dur4 ing such prior service year less than

5 $5,000 in compensation from the em6 ployer.

7 ‘‘(6) FUNDING.—

8 ‘‘(A) IN GENERAL.—The requirements of

9 this paragraph are met only if the employer is

10 required to contribute to the annuity for each

11 plan year the amount necessary (determined in

12 accordance with subparagraph (B)) to fund the

13 accrued benefit for each participant entitled to

14 such benefit for such year.

15 ‘‘(B) ACTUARIAL ASSUMPTIONS.—In deter16 mining the amount required to be contributed

17 under subparagraph (A)—

18 ‘‘(i) the assumed interest rate shall be

19 5 percent per year,

20 ‘‘(ii) the assumed mortality shall be

21 determined under the applicable mortality

22 table (as defined in section 417(e)(3), as

23 modified by the Secretary so that it does

24 not include any assumption for preretire25 ment mortality),
11

•HR 4823 IH

1 ‘‘(iii) the assumed retirement age

2 shall be 65, and

3 ‘‘(iv) an assumption for reasonable ex4 penses shall be permitted consistent with

5 State law.

6 ‘‘(C) TIME WHEN CONTRIBUTIONS

7 DEEMED MADE.—For purposes of this para8 graph, any contribution made for a plan year

during the 81 9 ⁄2-month period beginning on the

10 day after the last day of such plan year shall

11 be deemed to have been made on such last day.

12 ‘‘(D) PENALTY FOR FAILURE TO MAKE RE13 QUIRED CONTRIBUTION.—The taxes imposed by

14 section 4971 shall apply to a failure to make

15 the contribution required by this paragraph in

16 the same manner as if the amount of the failure

17 were an accumulated funding deficiency to

18 which such section applies.

19 ‘‘(7) DEFINITIONS AND SPECIAL RULE.—

20 ‘‘(A) DEFINITIONS.—The definitions in

21 section 408(p)(6) shall apply for purposes of

22 this subsection.

23 ‘‘(B) USE OF DESIGNATED FINANCIAL IN24 STITUTIONS.—A rule similar to the rule of sec25 tion 408(p)(7) (without regard to the last sen-
12

•HR 4823 IH

1 tence thereof) shall apply for purposes of this

2 subsection.

3 ‘‘(c) SAFE TRUST.—

4 ‘‘(1) IN GENERAL.—For purposes of this title,

5 the term ‘SAFE trust’ means a trust forming part

6 of a defined benefit plan if—

7 ‘‘(A) such trust meets the requirements of

8 section 401(a) as modified by subsection (d),

9 ‘‘(B) a participant’s benefits under the

10 plan are based solely on the balance of a sepa11 rate account in such plan of such participant,

12 ‘‘(C) such plan meets the requirements of

13 paragraphs (2) through (8), and

14 ‘‘(D) the only contributions to such trust

15 are employer contributions.

16 ‘‘(2) PARTICIPATION REQUIREMENTS.—A plan

17 meets the requirements of this paragraph for any

18 year only if the requirements of subsection (b)(2)

19 are met for such year.

20 ‘‘(3) VESTING.—A plan meets the requirements

21 of this paragraph for any year only if the require22 ments of subsection (b)(3) are met for such year.

23 ‘‘(4) BENEFIT FORM.—

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

25 subparagraph (B), a plan meets the require-
13

•HR 4823 IH

1 ments of this paragraph only if the require2 ments of subsection (b)(4) are met. For pur3 poses of this subparagraph, a plan may satisfy

4 the requirements of subsection (b)(4) by pur5 chasing an annuity contract which meets the re6 quirements of subsection (b)(4).

7 ‘‘(B) DIRECT TRANSFERS TO INDIVIDUAL

8 RETIREMENT PLAN OR SAFE ANNUITY.—A plan

9 shall not fail to meet the requirements of this

10 paragraph by reason of permitting, at the elec11 tion of the employee, a trustee-to-trustee trans12 fer of the entire balance to the credit of the em13 ployee to an individual retirement account de14 scribed in section 408(a), an individual retire15 ment annuity described in section 408(b) (other

16 than an endowment contract), or a SAFE an17 nuity.

18 ‘‘(5) AMOUNT OF ANNUAL ACCRUED BENE19 FIT.—A plan meets the requirements of this para20 graph for any year only if the requirements of sub21 section (b)(5) are met for such year.

22 ‘‘(6) FUNDING.—

23 ‘‘(A) IN GENERAL.—A plan meets the re24 quirements of this paragraph for any year only

25 if—
14

•HR 4823 IH

1 ‘‘(i) the requirements of subsection

2 (b)(6) are met for such year, and

3 ‘‘(ii) in the case of a plan which has

4 an unfunded prior year liability as of the

5 close of such plan year, the plan requires

6 that the employer make an additional con7 tribution to such plan for such year equal

8 to the amount of such unfunded prior year

9 liability.

10 ‘‘(B) UNFUNDED PRIOR YEAR LIABIL11 ITY.—For purposes of this paragraph, the term

12 ‘unfunded prior year liability’ means, with re13 spect to any plan year, the excess (if any) of—

14 ‘‘(i) the aggregate of the accrued li15 abilities under the plan as of the close of

16 the prior plan year, over

17 ‘‘(ii) the value of the plan’s assets de18 termined under section 412(c)(2) as of the

19 close of the plan year (determined without

20 regard to any contributions for such plan

21 year).

22 Such accrued liabilities shall be determined

23 using the assumptions specified in subsection

24 (b)(6)(B).
15

•HR 4823 IH

1 ‘‘(C) CHANGES IN MORTALITY TABLE.—If

2 the applicable mortality table under section

3 417(e)(3) for any plan year is not the same as

4 such table for the prior plan year, the Secretary

5 shall prescribe regulations which phase in the

6 effect of the changes over a reasonable period

7 of plan years determined by the Secretary.

8 ‘‘(D) DISREGARD ASSUMPTIONS FOR EX9 PENSES.—For purposes of this paragraph, the

10 assumption specified in subsection (b)(6)(B)(iv)

11 shall be disregarded.

12 ‘‘(7) SEPARATE ACCOUNTS FOR PARTICI13 PANTS.—A plan meets the requirements of this

14 paragraph for any year only if the plan provides—

15 ‘‘(A) for an individual account for each

16 participant, and

17 ‘‘(B) for benefits based solely on—

18 ‘‘(i) the amount contributed to the

19 participant’s account, and

20 ‘‘(ii) any income, expenses, gains and

21 losses, and any forfeitures of accounts of

22 other participants which may be allocated

23 to such participant’s account.

24 ‘‘(8) TRUST MAY NOT HOLD SECURITIES WHICH

25 ARE NOT READILY TRADABLE.—A plan meets the
16

•HR 4823 IH

1 requirements of this paragraph only if the plan pro2 hibits the trust from holding directly or indirectly se3 curities which are not readily tradable on an estab4 lished securities market or otherwise. Nothing in

5 this paragraph shall prohibit the trust from holding

6 insurance company products regulated by State law.

7 ‘‘(9) DEFINITIONS AND SPECIAL RULE.—The

8 definitions and special rule applicable under sub9 section (b)(7) shall apply for purposes of this sub10 section.

11 ‘‘(d) SPECIAL RULES FOR SAFE ANNUITIES AND

12 TRUSTS.—

13 ‘‘(1) CERTAIN REQUIREMENTS TREATED AS

14 MET.—For purposes of section 401(a), a SAFE an15 nuity and a SAFE trust shall be treated as meeting

16 the requirements of the following provisions:

17 ‘‘(A) Section 401(a)(4) (relating to non18 discrimination rules).

19 ‘‘(B) Section 401(a)(26) (relating to mini20 mum participation).

21 ‘‘(C) Section 410 (relating to minimum

22 participation and coverage requirements).

23 ‘‘(D) Section 411(b) (relating to accrued

24 benefit requirements).
17

•HR 4823 IH

1 ‘‘(E) Paragraphs (6) and (7) of section

2 412(c) (relating to full funding limitation).

3 ‘‘(F) Section 415 (relating to limitations

4 on benefits and contributions under qualified

5 plans).

6 ‘‘(G) Section 416 (relating to special rules

7 for top-heavy plans).

8 ‘‘(2) CONTRIBUTIONS NOT TAKEN INTO AC9 COUNT IN APPLYING LIMITS TO OTHER PLANS.—

10 Contributions to a SAFE annuity or a SAFE trust

11 shall not be taken into account in applying sections

12 404 and 415 to other plans maintained by the em13 ployer.’’

14 (b) DEDUCTION LIMITS NOT TO APPLY TO EM15 PLOYER CONTRIBUTIONS.—

16 (1) IN GENERAL.—Section 404 (relating to de17 ductions for contributions of an employer to pension,

18 etc., plans) is amended by adding at the end the fol19 lowing new subsection:

20 ‘‘(n) SPECIAL RULES FOR SAFE ANNUITIES AND

21 TRUSTS.—

22 ‘‘(1) IN GENERAL.—Employer contributions to

23 a SAFE annuity or SAFE trust shall be treated as

24 if they are made to a plan subject to the require25 ments of this section.
18

•HR 4823 IH

1 ‘‘(2) TIMING.—

2 ‘‘(A) DEDUCTION.—Contributions de3 scribed in paragraph (1) shall be deductible in

4 the taxable year of the employer with or within

5 which the calendar year for which the contribu6 tions were made ends.

7 ‘‘(B) CONTRIBUTIONS AFTER END OF

8 YEAR.—For purposes of this subsection, con9 tributions shall be treated as made for a taxable

10 year if they are made on account of the taxable

11 year and are made not later than the time pre12 scribed by law for filing the return for the tax13 able year (including extensions thereof).’’

14 (2) COORDINATION WITH DEDUCTION UNDER

15 SECTION 219.—

16 (A) Section 219(b) (relating to maximum

17 amount of deduction) is amended by adding at

18 the end the following new paragraph:

19 ‘‘(5) SPECIAL RULE FOR SAFE ANNUITIES.—

20 This section shall not apply with respect to any

21 amount contributed to a SAFE annuity established

22 under section 408B(b).’’

23 (B) Section 219(g)(5)(A) (defining active

24 participant) is amended by striking ‘‘or’’ at the
19

•HR 4823 IH

1 end of clause (v) and by adding at the end the

2 following new clause:

3 ‘‘(vii) any SAFE annuity (within the

4 meaning of section 408B), or’’.

5 (c) CONTRIBUTIONS AND DISTRIBUTIONS.—

6 (1) Section 402 (relating to taxability of bene7 ficiary of employees’ trust) is amended by adding at

8 the end the following new subsection:

9 ‘‘(l) TREATMENT OF SAFE ANNUITIES.—Rules simi10 lar to the rules of paragraphs (1) and (3) of subsection

11 (h) shall apply to contributions and distributions with re12 spect to SAFE annuities under section 408B.’’

13 (2) Section 408(d)(3) is amended by adding at

14 the end the following new subparagraph:

15 ‘‘(H) SAFE ANNUITIES.—This paragraph

16 shall not apply to any amount paid or distrib17 uted out of a SAFE annuity (as defined in sec18 tion 408B) unless it is paid in a trustee-to19 trustee transfer into another SAFE annuity.’’

20 (d) INCREASED PENALTY ON EARLY WITHDRAW21 ALS.—Section 72(t) (relating to additional tax on early

22 distributions) is amended by adding at the end the follow23 ing new paragraph:

24 ‘‘(9) SPECIAL RULES FOR SAFE ANNUITIES AND

25 TRUSTS.—In the case of any amount received from
20

•HR 4823 IH

1 a SAFE annuity or a SAFE trust (within the mean2 ing of section 408B), paragraph (1) shall be applied

3 by substituting ‘20 percent’ for ‘10 percent’.’’

4 (e) SIMPLIFIED EMPLOYER REPORTS.—

5 (1) SAFE ANNUITIES.—Section 408(l) (relating

6 to simplified employer reports) is amended by add7 ing at the end the following new paragraph:

8 ‘‘(3) SAFE ANNUITIES.—

9 ‘‘(A) SIMPLIFIED REPORT.—The employer

10 maintaining any SAFE annuity (within the

11 meaning of section 408B) shall file a simplified

12 annual return with the Secretary containing

13 only the information described in subparagraph

14 (B).

15 ‘‘(B) CONTENTS.—The return required by

16 subparagraph (A) shall set forth—

17 ‘‘(i) the name and address of the em18 ployer,

19 ‘‘(ii) the date the plan was adopted,

20 ‘‘(iii) the number of employees of the

21 employer,

22 ‘‘(iv) the number of such employees

23 who are eligible to participate in the plan,

24 ‘‘(v) the total amount contributed by

25 the employer to each such annuity for such
21

•HR 4823 IH

1 year and the minimum amount required

2 under section 408B to be so contributed,

3 ‘‘(vi) the percentage elected under sec4 tion 408B(b)(5)(B), and

5 ‘‘(vii) the number of employees which

6 respect to whom contributions are required

7 to be made for such year under section

8 408B(b)(5)(D).

9 ‘‘(C) REPORTING BY ISSUER OF SAFE AN10 NUITY.—

11 ‘‘(i) IN GENERAL.—The issuer of each

12 SAFE annuity shall provide to the owner

13 of the annuity for each year a statement

14 setting forth as of the close of such year—

15 ‘‘(I) the benefits guaranteed at

16 age 65 under the annuity, and

17 ‘‘(II) the cash surrender value of

18 the annuity.

19 ‘‘(ii) SUMMARY DESCRIPTION.—The

20 issuer of any SAFE annuity shall provide

21 to the employer maintaining the annuity

22 for each year a description containing the

23 following information:

24 ‘‘(I) The name and address of

25 the employer and the issuer.
22

•HR 4823 IH

1 ‘‘(II) The requirements for eligi2 bility for participation.

3 ‘‘(III) The benefits provided with

4 respect to the annuity.

5 ‘‘(IV) The procedures for, and ef6 fects of, withdrawals (including roll7 overs) from the annuity.

8 ‘‘(D) TIME AND MANNER OF REPORT9 ING.—Any return, report, or statement required

10 under this paragraph shall be made in such

11 form and at such time as the Secretary shall

12 prescribe.’’

13 (2) SAFE TRUSTS.—Section 6059 (relating to

14 actuarial reports) is amended by redesignating sub15 sections (c) and (d) as subsections (d) and (e), re16 spectively, and by inserting after subsection (b) the

17 following new subsection:

18 ‘‘(c) SAFE TRUSTS.—In the case of a SAFE Trust

19 (within the meaning of section 408B), the Secretary shall

20 require a simplified actuarial report which contains infor21 mation similar to the information required in section

22 408(l)(3)(B).’’

23 (f) CONFORMING AMENDMENTS.—

24 (1) Section 280G(b)(6) is amended by striking

25 ‘‘or’’ at the end of subparagraph (C), by striking the
23

•HR 4823 IH

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

2 ‘‘, or’’ and by adding after subparagraph (D) the

3 following new subparagraph:

4 ‘‘(E) a SAFE annuity described in section

5 408B.’’

6 (2) Subsections (b), (c), (m)(4)(B), and

7 (n)(3)(B) of section 414 are each amended by in8 serting ‘‘408B,’’ after ‘‘408(p),’’.

9 (3) Section 4972(d)(1)(A) is amended by strik10 ing ‘‘and’’ at the end of clause (iii), by striking the

11 period at the end of clause (iv) and inserting ‘‘,

12 and’’, and by adding after clause (iv) the following

13 new clause:

14 ‘‘(v) any SAFE annuity (within the

15 meaning of section 408B).’’

16 (g) MODIFICATIONS OF ERISA.—

17 (1) EXEMPTION FROM INSURANCE COV18 ERAGE.—Subsection (b) of section 4021 of the Em19 ployee Retirement Income Security Act of 1974 (29

20 U.S.C. 1321) is amended by striking ‘‘or’’ at the end

21 of paragraph (12), by striking the period at the end

22 of paragraph (13) and inserting ‘‘; or’’, and by add23 ing at the end the following new paragraph:
24

•HR 4823 IH

1 ‘‘(14) which is established and maintained as

2 part of a SAFE trust (as defined in section 408B

3 of the Internal Revenue Code of 1986).’’

4 (2) REPORTING REQUIREMENTS.—Section 101

5 of such Act (29 U.S.C. 1021) is amended by redes6 ignating subsection (h) as subsection (i) and by in7 serting after subsection (g) the following new sub8 section:

9 ‘‘(h) SAFE ANNUITIES.—

10 ‘‘(1) NO EMPLOYER REPORTS.—Except as pro11 vided in this subsection, no report shall be required

12 under this section by an employer maintaining a

13 SAFE annuity under section 408B(b) of the Inter14 nal Revenue Code of 1986.

15 ‘‘(2) SUMMARY DESCRIPTION.—The issuer of

16 any SAFE annuity shall provide to the employer

17 maintaining the annuity for each year a description

18 containing the following information:

19 ‘‘(A) The name and address of the em20 ployer and the issuer.

21 ‘‘(B) The requirements for eligibility for

22 participation.

23 ‘‘(C) The benefits provided with respect to

24 the annuity.
25

•HR 4823 IH

1 ‘‘(D) The procedures for, and effects of,

2 withdrawals (including rollovers) from the an3 nuity.’’

4 (3) EMPLOYEE NOTIFICATION.—The employer

5 shall provide each employee eligible to participate in

6 the SAFE annuity with the description described in

7 paragraph (2) at the same time as the notification

8 required under section 408B(b)(5)(B) of the Inter9 nal Revenue Code of 1986.’’

10 (h) CLERICAL AMENDMENT.—The table of sections

11 for subpart A of part I of subchapter D of chapter 1 is

12 amended by inserting after the item relating to section

13 408A the following new item:

‘‘Sec. 408B. SAFE annuities and trusts.’’

14 (i) EFFECTIVE DATE.—The amendments made by

15 this section shall apply to years beginning after December

16 31, 1998.

17 TITLE III—ENHANCED PORT18 ABILITY OF RETIREMENT

19 PLANS

20 SEC. 301. ROLLOVERS ALLOWED AMONG VARIOUS TYPES

21 OF PLANS.

22 (a) ROLLOVERS FROM AND TO SECTION 457

23 PLANS.—

24 (1) ROLLOVERS FROM SECTION 457 PLANS.—
26

•HR 4823 IH

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

3 amended by adding at the end the following:

4 ‘‘(16) ROLLOVER AMOUNTS.—

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

6 eligible deferred compensation plan of an eligi7 ble employer described in paragraph (1)(A),

8 if—

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

10 credit of an employee in such plan is paid

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

13 402(c)(4)),

14 ‘‘(ii) the employee transfers any por15 tion of the property such employee receives

16 in such distribution to an eligible retire17 ment plan described in section

18 402(c)(8)(B), and

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

20 property other than money, the amount so

21 transferred consists of the property distrib22 uted,

23 then such distribution (to the extent so trans24 ferred) shall not be includible in gross income

25 for the taxable year in which paid.
27

•HR 4823 IH

1 ‘‘(B) CERTAIN RULES MADE APPLICA2 BLE.—Rules similar to the rules of paragraphs

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

4 section 402(f) shall apply for purposes of sub5 paragraph (A).

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

7 paragraph shall be reported to the Secretary in

8 the same manner as rollovers from qualified re9 tirement plans (as defined in section

10 4974(c)).’’.

11 (B) DEFERRAL LIMIT DETERMINED WITH12 OUT REGARD TO ROLLOVER AMOUNTS.—Section

13 457(b)(2) (defining eligible deferred compensa14 tion plan) is amended by inserting ‘‘(other than

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

16 (2) ROLLOVERS TO SECTION 457 PLANS.—

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

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

19 at the end of clause (iii), by striking the period

20 at the end of clause (iv) and inserting ‘‘, and’’,

21 and by adding at the end the following:

22 ‘‘(v) an eligible deferred compensation

23 plan described in section 457(b) of an eli24 gible employer described in section

25 457(e)(1)(A).’’.
28

•HR 4823 IH

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

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

3 follows and inserting ‘‘except that only an ac4 count or annuity described in clause (i) or (ii)

5 of paragraph (8)(B) shall be treated as an eligi6 ble retirement plan with respect to such dis7 tribution.’’.

8 (b) ALLOWANCE OF ROLLOVERS FROM AND TO

9 403(b) PLANS.—

10 (1) ROLLOVERS FROM SECTION 403(b)

11 PLANS.—Section 403(b)(8)(A)(ii) (relating to roll12 over amounts) is amended by striking ‘‘such dis13 tribution’’ and all that follows and inserting ‘‘such

14 distribution to an eligible retirement plan described

15 in section 402(c)(8)(B), and’’.

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

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

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

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

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

21 and’’, and by adding at the end the following

22 ‘‘(vi) an annuity contract described in

23 section 403(b).’’

24 (c) EXPANDED EXPLANATION TO RECIPIENTS OF

25 ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section
29

•HR 4823 IH

1 402(f) (relating to written explanation to recipients of dis2 tributions eligible for rollover treatment) is amended by

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

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

5 ‘‘, and’’, and by adding at the end the following new sub6 paragraph:

7 ‘‘(E) of the provisions under which dis8 tributions from the eligible retirement plan re9 ceiving the distribution may be subject to re10 strictions and tax consequences which are dif11 ferent from those applicable to distributions

12 from the plan making such distribution.’’

13 (d) CONFORMING AMENDMENTS.—

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

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

16 408(d)(3), and 457(e)(16)’’.

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

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

19 457(e)(16)’’.

20 (3) Section 401(a)(31)(B) is amended by strik21 ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),

22 403(b)(8), and 457(e)(16)’’.

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

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

25 (7)’’.
30

•HR 4823 IH

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

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

3 457(e)(16)’’.

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

5 415(b)(2) are each amended by striking ‘‘and

6 408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and

7 457(e)(16)’’.

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

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

10 457(e)(16)’’.

11 (8) Section 4973(b)(1)(A) is amended by strik12 ing ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or

13 457(e)(16)’’.

14 (e) EFFECTIVE DATE; SPECIAL RULE.—

15 (1) EFFECTIVE DATE.—The amendments made

16 by this section shall apply to distributions after De17 cember 31, 1998.

18 (2) SPECIAL RULE.—Notwithstanding any other

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

20 section 1122 of the Tax Reform Act of 1986 shall

21 not apply to any distribution from an eligible retire22 ment plan on behalf of an individual if there was a

23 rollover to such plan on behalf of such individual

24 which is permitted solely by reason of any amend25 ment made by this section. For purposes of the pre-
31

•HR 4823 IH

1 ceding sentence, the term ‘‘eligible retirement plan’’

2 has the meaning given such term by section

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

4 except that such term shall not include any individ5 ual retirement plan described in section

6 408(d)(3)(A)(ii) of such Code.

7 SEC. 302. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE8 MENT PLANS.

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

10 408(d)(3) (relating to rollover amounts) is amended by

11 striking ‘‘or’’ at the end of clause (ii), by striking the pe12 riod at the end of clause (iii) and inserting a semicolon,

13 and by adding at the end the following:

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

15 (including money and other property) rep16 resents the entire interest in the account

17 or the entire value of the annuity,

18 ‘‘(II) no amount in the account and

19 no part of the value of the annuity is at20 tributable to any source other than a roll21 over contribution from a defined contribu22 tion plan and any earnings on such roll23 over, and

24 ‘‘(III) such entire amount received is

25 paid into another defined contribution plan
32

•HR 4823 IH

1 (for the benefit of such individual) not

2 later than the 60th day after he receives

3 the payment or distribution; or

4 ‘‘(v)(I) the entire amount received (in5 cluding money and other property) rep6 resents the entire interest in the account

7 or the entire value of the annuity,

8 ‘‘(II) no amount in any such account

9 and no part of the value of any such annu10 ity is attributable to any source other than

11 a rollover contribution from such an ac12 count or annuity of such individual (and

13 any earnings on such contribution),

14 ‘‘(III) all contributions to all individ15 ual retirement accounts, and all amounts

16 paid for all individual retirement annuities,

17 of such individual were allowed as a deduc18 tion under section 219, and

19 ‘‘(IV) such entire amount received is

20 paid (not later than the 60th day after

21 being so received) into a defined contribu22 tion plan (for the benefit of such individ23 ual) under which amounts are held in trust

24 by a person described in section 408(a)(2)
33

•HR 4823 IH

1 or in a manner that satisfies section

2 401(f).

3 If a payment or distribution from an individual

4 retirement plan is described in more than 1

5 clause of this subparagraph, such payment or

6 distribution shall be treated as described only in

7 the clause specified by the payee or distributee.

8 For purposes of this subparagraph, the term

9 ‘defined contribution plan’ means a defined con10 tribution plan (as defined in section 414(i))

11 which includes a trust exempt from tax under

12 section 501(a), an annuity plan described in

13 section 403(a), an annuity contract described in

14 section 403(b), and an eligible deferred com15 pensation plan described in section 457(b) of an

16 eligible employer described in section

17 457(e)(1)(A).’’

18 (b) CONFORMING AMENDMENT.—Paragraph (1) of

19 section 403(b) is amended by striking ‘‘section

20 408(d)(3)(A)(iii)’’ and inserting ‘‘clause (iii), (iv), or (v)

21 of section 408(d)(3)(A)’’.

22 (c) EFFECTIVE DATE; SPECIAL RULE.—

23 (1) EFFECTIVE DATE.—The amendments made

24 by this section shall apply to distributions after De25 cember 31, 1998.
34

•HR 4823 IH

1 (2) SPECIAL RULE.—Notwithstanding any other

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

3 section 1122 of the Tax Reform Act of 1986 shall

4 not apply to any distribution from a defined con5 tribution plan (as defined in section 408(d)(3)(A) of

6 the Internal Revenue Code of 1986 (as added by

7 this section) on behalf of an individual if there was

8 a rollover to such plan on behalf of such individual

9 which is permitted solely by reason of the amend10 ments made by this section.

11 SEC. 303. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

12 (a) IN GENERAL.—Paragraph (2) of section 402(c)

13 (relating to rules applicable to rollovers from exempt

14 trusts) is amended by adding at the end the following new

15 sentence: ‘‘In accordance with rules prescribed by the Sec16 retary, the preceding sentence shall not apply to any dis17 tribution if—

18 ‘‘(A) the portion of the distribution which

19 would be so includible is reported by the trust20 ee, and

21 ‘‘(B) the eligible retirement plan to which

22 it is paid agrees to report such amount in any

23 subsequent distribution.’’

24 (b) CONFORMING AMENDMENTS.—
35

•HR 4823 IH

1 (1) Subparagraph (B) of section 401(a)(31) is

2 amended by adding at the end the following new

3 sentence: ‘‘In accordance with rules prescribed by

4 the Secretary, the preceding sentence shall not apply

5 to any distribution if—

6 ‘‘(i) the portion of the distribution

7 which would be so includible is reported by

8 the trustee, and

9 ‘‘(ii) the eligible retirement plan to

10 which it is paid agrees to report such

11 amount in any subsequent distribution.’’

12 (2) Subparagraph (B) of section 408(d)(3) is

13 amended—

14 (A) by striking ‘‘LIMITATION.—’’ in the

15 heading and inserting ‘‘LIMITATIONS.—’’, and

16 (B) by adding at the end the following: ‘‘In

17 addition, this paragraph does not apply unless

18 rules similar to the rules of section 402(c)(2)

19 are satisfied, except that the rollover contribu20 tion may exceed the amount includible in in21 come to the extent the rollover contribution con22 sists of nondeductible contributions described in

23 subsection (o).’’
36

•HR 4823 IH

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

2 this section shall apply to distributions made after Decem3 ber 31, 1998.

4 SEC. 304. RATIONALIZE THE RESTRICTIONS ON DISTRIBU5 TIONS FROM DEFINED CONTRIBUTION

6 PLANS.

7 (a) DISTRIBUTIONS PERMITTED ON SEVERANCE

8 FROM EMPLOYMENT.—

9 (1) 401(k) PLANS.—Section 401(k)(2)(B)(i)(I)

10 (relating to qualified cash or deferred arrangements)

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

12 and inserting ‘‘severance from employment’’.

13 (2) 403(b) CONTRACTS.—

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

15 amended by striking ‘‘separates from service’’

16 and inserting ‘‘severs from employment’’.

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

18 amended—

19 (i) by striking ‘‘SEPARATION FROM

20 SERVICE’’ in the heading and inserting

21 ‘‘SEVERANCE FROM EMPLOYMENT’’, and

22 (ii) by striking ‘‘separates from serv23 ice’’ and inserting ‘‘severs from employ24 ment’’.
37

•HR 4823 IH

1 (3) 457 PLANS.—Clause (ii) of section

2 457(d)(1)(A) is amended by striking ‘‘is separated

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

4 employment’’.

5 (b) BUSINESS SALE REQUIREMENTS DELETED.—

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

7 (relating to qualified cash or deferred arrangements)

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

9 plan termination’’.

10 (2) CONFORMING AMENDMENTS.—Section

11 401(k)(10) is amended—

12 (A) by striking subparagraph (A) and in13 serting the following:

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

15 described in this paragraph if the termination

16 of the plan does not involve the establishment

17 or maintenance of another defined contribution

18 plan (other than an employee stock ownership

19 plan as defined in section 4975(e)(7)).’’,

20 (B) in subparagraph (B)—

21 (i) by striking ‘‘An event’’ and insert22 ing ‘‘A termination’’, and

23 (ii) by striking ‘‘the event’’ and insert24 ing ‘‘the termination’’,

25 (C) by striking subparagraph (C), and
38

•HR 4823 IH

1 (D) by striking ‘‘OR DISPOSITION OF AS2 SETS OR SUBSIDIARY’’ in the heading.

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

4 this section shall apply to distributions after December 31,

5 1998.

6 SEC. 305. TRANSFEREE DEFINED CONTRIBUTION PLAN

7 NEED NOT HAVE SAME DISTRIBUTION OP8 TIONS AS TRANSFEROR DEFINED CONTRIBU9 TION PLAN.

10 (a) IN GENERAL.—Section 411(d)(6) (relating to ac11 crued benefit not to be decreased by amendment) is

12 amended by adding at the end the following new subpara13 graph:

14 ‘‘(D) PLAN TRANSFERS.—A defined con15 tribution plan (in this subparagraph referred to

16 as the ‘transferee plan’) shall not be treated as

17 failing to meet the requirements of this para18 graph merely because the transferee plan does

19 not provide some or all of the forms of distribu20 tion previously available under another defined

21 contribution plan (in this subparagraph referred

22 to as the ‘transferor plan’) to the extent that—

23 ‘‘(i) the forms of distribution pre24 viously available under the transferor plan

25 applied to the account of a participant or
39

•HR 4823 IH

1 beneficiary under the transferor plan that

2 was transferred from the transferor plan to

3 the transferee plan pursuant to a direct

4 transfer rather than pursuant to a dis5 tribution from the transferor plan,

6 ‘‘(ii) the terms of both the transferor

7 plan and the transferee plan authorize the

8 transfer described in clause (i),

9 ‘‘(iii) the transfer described in clause

10 (i) was made pursuant to a voluntary elec11 tion by the participant or beneficiary

12 whose account was transferred to the

13 transferee plan,

14 ‘‘(iv) the election described in clause

15 (iii) was made after the participant or ben16 eficiary received a notice describing the

17 consequences of making the election,

18 ‘‘(v) if the transferor plan provides for

19 an annuity as the normal form of distribu20 tion under the plan in accordance with sec21 tion 417, the transfer is made with the

22 consent of the participant’s spouse (if

23 any), and such consent meets requirements

24 similar to the requirements imposed by

25 section 417(a)(2), and
40

•HR 4823 IH

1 ‘‘(vi) the transferee plan allows the

2 participant or beneficiary described in

3 clause (iii) to receive any distribution to

4 which the participant or beneficiary is enti5 tled under transferee plan in the form of

6 a single sum distribution.’’.

7 (b) CONFORMING AMENDMENT.—Section 204(g) of

8 the Employee Retirement Income Security Act of 1974

9 (29 U.S.C. 1054(g)) is amended by adding at the end the

10 following new paragraph:

11 ‘‘(4) A defined contribution plan (in this paragraph

12 referred to as the ‘transferee plan’) shall not be treated

13 as failing to meet the requirements of this subsection

14 merely because the transferee plan does not provide some

15 or all of the forms of distribution previously available

16 under another defined contribution plan (in this para17 graph referred to as the ‘transferor plan’) to the extent

18 that—

19 ‘‘(A) the forms of distribution previously avail20 able under the transferor plan applied to the account

21 of a participant or beneficiary under the transferor

22 plan that was transferred from the transferor plan

23 to the transferee plan pursuant to a direct transfer

24 rather than pursuant to a distribution from the

25 transferor plan,
41

•HR 4823 IH

1 ‘‘(B) the terms of both the transferor plan and

2 the transferee plan authorize the transfer described

3 in subparagraph (A),

4 ‘‘(C) the transfer described in subparagraph

5 (A) was made pursuant to a voluntary election by

6 the participant or beneficiary whose account was

7 transferred to the transferee plan,

8 ‘‘(D) the election described in subparagraph (C)

9 was made after the participant or beneficiary re10 ceived a notice describing the consequences of mak11 ing the election,

12 ‘‘(E) if the transferor plan provides for an an13 nuity as the normal form of distribution under the

14 plan in accordance with section 205, the transfer is

15 made with the consent of the participant’s spouse (if

16 any), and such consent meets requirements similar

17 to the requirements imposed by section 205(c)(2),

18 and

19 ‘‘(F) the transferee plan allows the participant

20 or beneficiary described in subparagraph (C) to re21 ceive any distribution to which the participant or

22 beneficiary is entitled under transferee plan in the

23 form of a single sum distribution.’’.
42

•HR 4823 IH

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

2 this section shall apply to transfers after December 31,

3 1998.

4 SEC. 306. ALLOWANCE OF EMPLOYERS TO DISREGARD

5 ROLLOVERS FOR PURPOSES OF CASH-OUT

6 AMOUNTS.

7 (a) AMENDMENTS TO 1986 CODE.—

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

9 on certain mandatory distributions) is amended by

10 adding at the end the following:

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

13 requirements of this paragraph if, under the

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

17 is attributable to rollover contributions (and

18 earnings allocable thereto). For purposes of this

19 subparagraph, the term ‘rollover contributions’

20 means any rollover contribution under sections

21 402(c), 403(a)(4), 403(b)(8), clause (ii), (iii),

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

23 (2) Clause (i) of section 457(e)(9)(A) is amend24 ed by striking ‘‘such amount’’ and inserting ‘‘the

25 portion of such amount which is not attributable to
43

•HR 4823 IH

1 rollover contributions (as defined in section

2 411(a)(11)(D))’’.

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

4 Employee Retirement Income Security Act of 1974 (29

5 U.S.C. 1053(e)) is amended by adding at the end the fol6 lowing:

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

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

9 present value of the nonforfeitable accrued benefit is de10 termined without regard to that portion of such benefit

11 which is attributable to rollover contributions (and earn12 ings allocable thereto). For purposes of this paragraph,

13 the term ‘rollover contributions’ means any rollover con14 tribution under sections 402(c), 403(a)(4), 403(b)(8),

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

16 of the Internal Revenue Code of 1986.’’.

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

18 this section shall apply to distributions after December 31,

19 1998.

20 SEC. 307. PURCHASE OF SERVICE CREDIT IN GOVERN21 MENTAL DEFINED BENEFIT PLANS.

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

23 amended by adding at the end the following new para24 graph:
44

•HR 4823 IH

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

2 PURCHASE PERMISSIVE SERVICE CREDIT.—No

3 amount shall be includible in gross income by reason

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

5 benefit governmental plan (as defined in section

6 414(d)) if such transfer is—

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

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

9 under such plan, or

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

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

12 thereof.’’

13 (b) 457 PLANS.—

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

15 adding at the end the following new paragraph:

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

17 PURCHASE PERMISSIVE SERVICE CREDIT.—No

18 amount shall be includible in gross income by reason

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

20 benefit governmental plan (as defined in section

21 414(d)) if such transfer is—

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

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

24 under such plan, or
45

•HR 4823 IH

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

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

3 thereof.’’

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

5 is amended by striking ‘‘(other than rollover

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

7 amounts and amounts received in a transfer referred

8 to in subsection (e)(16))’’.

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

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

11 December 31, 1998.

12 TITLE IV—CREDIT FOR PENSION

13 PLAN STARTUP COSTS OF

14 SMALL EMPLOYERS

15 SEC. 401. CREDIT FOR PENSION PLAN STARTUP COSTS OF

16 SMALL EMPLOYERS.

17 (a) IN GENERAL.—Subpart D of part IV of sub18 chapter A of chapter 1 (relating to business related cred19 its) is amended by adding at the end the following new

20 section:

21 ‘‘SEC. 45D. SMALL EMPLOYER PENSION PLAN STARTUP

22 COSTS.

23 ‘‘(a) GENERAL RULE.—For purposes of section 38,

24 in the case of an eligible employer, the small employer pen25 sion plan startup cost credit determined under this section
46

•HR 4823 IH

1 for any taxable year is an amount equal to the applicable

2 percentage of the qualified startup costs paid or incurred

3 by the taxpayer during the taxable year.

4 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of

5 subsection (a), the applicable percentage is—

6 ‘‘(1) 60 percent for the first credit year, and

7 ‘‘(2) 50 percent for each of the 2 taxable years

8 immediately following the first credit year, and

9 ‘‘(3) zero for any other taxable year.

10 ‘‘(c) DOLLAR LIMITATION.—The amount of the cred11 it determined under this section for any taxable year shall

12 not exceed—

13 ‘‘(1) $2,000 for the first credit year,

14 ‘‘(2) $1000 for each of the 2 taxable years im15 mediately following the first credit year, and

16 ‘‘(3) zero for any other taxable year.

17 ‘‘(d) ELIGIBLE EMPLOYER.—For purposes of this

18 section—

19 ‘‘(1) IN GENERAL.—The term ‘eligible em20 ployer’ has the meaning given such term by section

21 408(p)(2)(C)(i).

22 ‘‘(2) EMPLOYERS MAINTAINING QUALIFIED

23 PLANS DURING 1997 NOT ELIGIBLE.—Such term

24 shall not include an employer if such employer (or

25 any predecessor employer) maintained a qualified
47

•HR 4823 IH

1 plan (as defined in section 408(p)(2)(D)(ii)) with re2 spect to which contributions were made, or benefits

3 were accrued, for service in 1997. If only individuals

4 other than employees described in subparagraph (A)

5 or (B) of section 410(b)(3) are eligible to participate

6 in the qualified employer plan referred to in sub7 section (e)(1), then the preceding sentence shall be

8 applied without regard to any qualified plan in

9 which only employees so described are eligible to

10 participate.

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

12 section—

13 ‘‘(1) QUALIFIED STARTUP COSTS.—

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

15 startup costs’ means any ordinary and nec16 essary expenses of an eligible employer which

17 are paid or incurred in connection with—

18 ‘‘(i) the establishment or administra19 tion of an eligible employer plan, or

20 ‘‘(ii) the retirement-related education

21 of employees with respect to such plan.

22 ‘‘(B) PLAN MUST HAVE AT LEAST 2 PAR23 TICIPANTS.—Such term shall not include any

24 expense in connection with a plan that does not
48

•HR 4823 IH

1 have at least 2 individuals who are eligible to

2 participate.

3 ‘‘(C) PLAN MUST BE ESTABLISHED BE4 FORE JANUARY 1, 2001.—Such term shall not

5 include any expense in connection with a plan

6 established after December 31, 2000.

7 ‘‘(2) ELIGIBLE EMPLOYER PLAN.—The term

8 ‘eligible employer plan’ means a qualified employer

9 plan within the meaning of section 4972(d), or a

10 qualified payroll deduction arrangement within the

11 meaning of section 408(q)(1) (whether or not an

12 election is made under section 408(q)(2)). A quali13 fied payroll deduction arrangement shall be treated

14 as an eligible employer plan only if all employees of

15 the employer who—

16 ‘‘(A) have been employed for 90 days, and

17 ‘‘(B) are not described in subparagraph

18 (A) or (C) of section 410(b)(3),

19 are eligible to make the election under section

20 408(q)(1)(A).

21 ‘‘(3) FIRST CREDIT YEAR.—The term ‘first

22 credit year’ means—

23 ‘‘(A) the taxable year which includes the

24 date that the eligible employer plan to which

25 such costs relate becomes effective, or
49

•HR 4823 IH

1 ‘‘(B) at the election of the eligible employer, the

2 taxable year preceding the taxable year referred to

3 in subparagraph (A).

4 ‘‘(f) SPECIAL RULES.—For purposes of this sec5 tion—

6 ‘‘(1) AGGREGATION RULES.—All persons treat7 ed as a single employer under subsection (a) or (b)

8 of section 52, or subsection (n) or (o) of section 414,

9 shall be treated as one person. All eligible employer

10 plans shall be treated as 1 eligible employer plan.

11 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No de12 duction shall be allowed for that portion of the quali13 fied startup costs paid or incurred for the taxable

14 year which is equal to the credit determined under

15 subsection (a).

16 ‘‘(3) ELECTION NOT TO CLAIM CREDIT.—This

17 section shall not apply to a taxpayer for any taxable

18 year if such taxpayer elects to have this section not

19 apply for such taxable year.’’

20 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI21 NESS CREDIT.—Section 38(b) (defining current year busi22 ness credit) is amended by striking ‘‘plus’’ at the end of

23 paragraph (11), by striking the period at the end of para24 graph (12) and inserting ‘‘, plus’’, and by adding at the

25 end the following new paragraph:
50

•HR 4823 IH

1 ‘‘(13) in the case of an eligible employer (as de2 fined in section 45D(c)), the small employer pension

3 plan startup cost credit determined under section

4 45D(a).’’

5 (c) CONFORMING AMENDMENTS.—

6 (1) Section 39(d) is amended by adding at the

7 end the following new paragraph:

8 ‘‘(8) NO CARRYBACK OF SMALL EMPLOYER

9 PENSION PLAN STARTUP COST CREDIT BEFORE EF10 FECTIVE DATE.—No portion of the unused business

11 credit for any taxable year which is attributable to

12 the small employer pension plan startup cost credit

13 determined under section 45D may be carried back

14 to a taxable year ending on or before the date of the

15 enactment of section 45D.’’

16 (2) Subsection (c) of section 196 is amended by

17 striking ‘‘and’’ at the end of paragraph (7), by strik18 ing the period at the end of paragraph (8) and in19 serting ‘‘, and’’, and by adding at the end the follow20 ing new paragraph:

21 ‘‘(9) the small employer pension plan startup

22 cost credit determined under section 45D(a).’’

23 (3) The table of sections for subpart D of part

24 IV of subchapter A of chapter 1 is amended by add25 ing at the end the following new item:

‘‘Sec. 45D. Small employer pension plan startup costs.’’
51

•HR 4823 IH

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

2 this section shall apply to costs paid or incurred in taxable

3 years ending after the date of the enactment of this Act.

4 TITLE V—MISCELLANEOUS IM5 PROVEMENTS TO PENSION

6 PLANS

7 SEC. 501. IRA CATCH-UP CONTRIBUTIONS.

8 (a) IN GENERAL.—Section 408 is amended by redes9 ignating subsection (q) as subsection (r) and by inserting

10 after subsection (p) the following new subsection:

11 ‘‘(q) DEFINITIONS AND RULES RELATING TO NON12 DEDUCTIBLE CATCH-UP CONTRIBUTIONS.—

13 ‘‘(1) IN GENERAL.—Subject to the provisions of

14 this subsection, catch-up contributions may be made

15 on behalf of a qualified individual to an individual

16 retirement plan.

17 ‘‘(2) CATCH-UP CONTRIBUTIONS.—For pur18 poses of this subsection—

19 ‘‘(A) IN GENERAL.—The term ‘catch-up

20 contribution’ means any contribution to an indi21 vidual retirement plan made during the catch22 up period which is designated (in such manner

23 as the Secretary may prescribe) as a catch-up

24 contribution for which a deduction is not allow25 able under section 219. Any such designation
52

•HR 4823 IH

1 shall be made on the return of tax imposed by

2 chapter 1 for the taxable year for which such

3 contribution is made.

4 ‘‘(B) LIMITATIONS.—A contribution may

5 be designated a catch-up contribution if—

6 ‘‘(i) no contribution was made on be7 half of the individual to a pension, profit8 sharing, or stock bonus plan which con9 stitutes a qualified trust under section

10 401(a) (other than an individual retire11 ment plan) for any of the 5 taxable years

12 preceding the calendar year in which the

13 catch-up period begins,

14 ‘‘(ii) such contribution, when added to

15 all other contributions designated as catch16 up contributions, does not exceed $2,000

17 for the taxable year for which such con18 tribution is made

19 ‘‘(C) CATCH-UP CONTRIBUTION.—The

20 term ‘catch-up period’ means the 5 taxable year

21 period beginning in the taxable year in which

22 the individual 1st designates a contribution as

23 a catch-up contribution.

24 ‘‘(3) QUALIFIED INDIVIDUAL.—For purposes of

25 paragraph (1)—
53

•HR 4823 IH

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

2 individual’ means an individual whose modified

3 adjusted gross income does not exceed $50,000.

4 ‘‘(B) SPECIAL RULE FOR JOINT RE5 TURN.—In the case of a joint return, adjusted

6 gross income shall be determined separately for

7 each spouse as if each spouse had filed a sepa8 rate return.

9 ‘‘(C) MODIFIED ADJUSTED GROSS IN10 COME.—The term ‘modified adjusted gross in11 come’ means adjusted gross income increased

12 by any amount excluded from gross income

13 under section 911, 931, or 933.

14 ‘‘(4) NO DEDUCTION ALLOWED.—No deduction

15 shall be allowed under section 219 for a catch-up

16 contribution.

17 ‘‘(5) INCREASE IN LIMITS.—For purposes of

18 this subsection—

19 ‘‘(A) IN GENERAL.—The limitation on con20 tributions in subsections (a)(1) and (b)(2)(B)

21 are hereby increased by the amount of contribu22 tions allowed under this subsection.

23 ‘‘(B) EXCISE TAX.—In applying section

24 4973, the amount allowable as a deduction

25 under section 219 shall be increased by the
54

•HR 4823 IH

1 amount of contributions allowed under this sub2 section.’’

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

4 this section shall apply to contributions made after De5 cember 31, 1998.

6 SEC. 502. REPEAL OF 25 PERCENT LIMITATION ON DEFINED

7 CONTRIBUTION PLANS.

8 (a) IN GENERAL.—Paragraph (1) of section 415(c)

9 (relating to general limitation for defined contribution

10 plans) is amended to read as follows:

11 ‘‘(1) IN GENERAL.—Contributions and other

12 additions with respect to a participant exceed the

13 limitation of this subsection if, when expressed as an

14 annual addition (within the meaning of paragraph

15 (2)) to the participant’s account, such annual addi16 tion is greater than $30,000.’’.

17 (b) CONFORMING AMENDMENTS.—

18 (1) Subparagraph (B) of section 402(h)(2),

19 subparagraph (A) of section 408(d)(5), subsection

20 (j) of section 408, clause (ii) of section 416(i)(1)(A),

21 and subparagraph (B) of section 419A(c)(4) are

22 each amended by striking ‘‘section 415(c)(1)(A)’’

23 and inserting ‘‘section 415(c)(1)’’.

24 (2) Paragraph (2) of section 419A(d) is amend25 ed by striking the last sentence.
55

•HR 4823 IH

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

2 this section shall apply to years beginning after December

3 31, 1998.

4 SEC. 503. FASTER VESTING OF EMPLOYER MATCHING CON5 TRIBUTIONS.

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

7 section 411 (relating to minimum vesting standards) is

8 amended—

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

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

11 plan’’, and

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

13 ‘‘(12) FASTER VESTING FOR MATCHING CON14 TRIBUTIONS.—In the case of matching contributions

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

16 shall be applied—

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

18 in subparagraph (A), and

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

20 the table contained in subparagraph (B):

The nonforfeitable

‘‘Years of service: percentage is:

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

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

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

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

6 ............................................................................................... 100.’’
56

•HR 4823 IH

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 ap12 plied—

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

20 shall apply to contributions for plan years beginning

21 after December 31, 1998.
57

•HR 4823 IH

1 (2) COLLECTIVE BARGAINING AGREEMENTS.—

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

3 more collective bargaining agreements between em4 ployee representatives and 1 or more employers rati5 fied by the date of enactment of this Act, the

6 amendments made by this section shall not apply to

7 contributions on behalf of employees covered by any

8 such agreement for plan years beginning before the

9 earlier of—

10 (A) the later of—

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

12 collective bargaining agreements termi13 nates (determined without regard to any

14 extension thereof on or after such date of

15 enactment), or

16 (ii) January 1, 1999, or

17 (B) January 1, 2003.

18 (3) PARTICIPATION REQUIRED.—The amend19 ments made by this section shall not apply to any

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

21 plan year to which the amendments made by this

22 section apply.

23 SEC. 504. PERIODIC PENSION BENEFITS STATEMENTS.

24 (a) IN GENERAL.—Section 105(a) of the Employee

25 Retirement Income Security Act of 1974 (29 U.S.C.
58

•HR 4823 IH

1 1025(a)) is amended by striking ‘‘shall furnish to any plan

2 participant or beneficiary who so requests in writing, a

3 statement’’ and inserting ‘‘shall furnish to each plan par4 ticipant at least once each year (in the case of a defined

5 contribution plan) and at least once every three years (in

6 the case of a defined benefit plan), a statement in written

7 or electronic form’’.

8 (b) REQUIRED PERIODIC STATEMENTS FOR PLANS

9 WITH MORE THAN ONE UNAFFILIATED EMPLOYER.—

10 Section 105(d) of the Employee Retirement Income Secu11 rity Act of 1974 (29 U.S.C. 1025(d)) is repealed.

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

13 this section shall apply to plan years beginning after De14 cember 31, 1998.

15 SEC. 505. FAILURE OF PENSION PLANS TO MEET REQUIRE16 MENTS.

17 (a) IN GENERAL.—Part I of subchapter B of chapter

18 68 (relating to assessable penalties) is amended by adding

19 at the end the following new section:

20 ‘‘Sec. 6716. FAILURE OF PENSION PLANS TO MEET RE21 QUIREMENTS.

22 ‘‘(a) IN GENERAL.—If, as a result of a violation of

23 a provision of this title, the Secretary determines that a

24 stock bonus, pension, or profit-sharing plan arrangement
59

•HR 4823 IH

1 would no longer constitute a qualified trust under section

2 401—

3 ‘‘(1) no sanction may be imposed if the viola4 tion is cured before the close of an audit of such ar5 rangement,

6 ‘‘(2) an intermediate sanction under subsection

7 (b) may be imposed if the violation is not corrected

8 before the close of an audit of such arrangement,

9 and

10 ‘‘(3) after the close of an audit of such arrange11 ment, the Secretary may make a final determination

12 that such arrangement does not constitute a quali13 fied trust under section 401.

14 Paragraphs (1) and (2) shall not apply if the Secretary

15 determines that such violation is known, material, and re16 curring.

17 ‘‘(b) INTERMEDIATE SANCTIONS.—For purposes of

18 subsection (a) and in accordance with regulations which

19 the Secretary shall prescribe—

20 ‘‘(1) if the violation is corrected within the pe21 riod that both the Secretary and the taxpayer con22 sent to in writing, the Secretary may impose a pen23 alty in the amount of 20 percent of the actual dam24 ages incurred as a result of such violation, and
60

•HR 4823 IH

1 ‘‘(2) the Secretary may impose a penalty in the

2 amount of 100 percent of the actual damages in3 curred as a result of such violation if such violation

4 is not corrected within the period referred to in

5 paragraph (1).’’.

6 (b) CLERICAL AMENDMENT.—The table of sections

7 for part I of subchapter B of chapter 68 (relating to as8 sessable penalties) is amended by adding at the end the

9 following new item:

‘‘Sec. 6716. Failure of pension plans to meet requirements.’’.

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

11 this section shall apply to violations occurring after the

12 date of the enactment of this Act.

13 SEC. 506. ASSIGNMENT AND ALIENATION

14 (a) IN GENERAL.—Subparagraph (C) of section

15 401(a)(13) (relating to assignment and alienation) is

16 amended by striking clause (ii) and redesignating clause

17 (iii) as clause (ii).

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

19 this section shall apply to years beginning after December

20 31, 1998.

Æ