I

103D CONGRESS

1ST SESSION H. R. 2109

To amend the Internal Revenue Code of 1986 to provide for the treatment

of governmental plans under section 415 of such Code.

IN THE HOUSE OF REPRESENTATIVES

MAY 12, 1993

Mr. RUSH (for himself, Mr. GONZALEZ, Mr. FRANK of Massachusetts, Mr.

EVANS, Mr. DURBIN, Mr. PETERSON of Minnesota, Mr. TOWNS, Mr.

GENE GREEN of Texas, Ms. EDDIE BERNICE JOHNSON of Texas, Mr.

STUPAK, Mr. FINGERHUT, Mr. BARLOW, Ms. ROYBAL-ALLARD, Mrs.

MALONEY, Mr. GUTIERREZ, Mr. HINCHEY, Mr. KLEIN, and Mr. HYDE)

introduced the following bill; which was referred to the Committee on

Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

for the treatment of governmental plans under section

415 of such Code.

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.

4 This Act may be cited as the ‘‘Public Pension Sim5 plification Act of 1993’’.
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1 SEC. 2. TREATMENT OF GOVERNMENTAL PLANS UNDER

2 SECTION 415.

3 (a) DEFINITION OF COMPENSATION.—Subsection (k)

4 of section 415 of the Internal Revenue Code of 1986 (re5 garding limitations on benefits and contributions under

6 qualified plans) is amended by adding immediately after

7 paragraph (2) thereof the following new paragraph:

8 ‘‘(3) DEFINITION OF COMPENSATION FOR GOV9 ERNMENTAL PLANS.—For purposes of this section,

10 in the case of a governmental plan (as defined in

11 section 414(d)), the term ‘compensation’ includes, in

12 addition to the amounts described in subsection

13 (c)(3)—

14 ‘‘(A) any elective deferral (as defined in

15 section 402(g)(3)), and

16 ‘‘(B) any amount which is contributed by

17 the employer at the election of the employee

18 and which is not includible in the gross income

19 of an employee under section 125 or 457.’’

20 (b) COMPENSATION LIMIT.—Subsection (b) of sec21 tion 415 of such Code is amended by adding immediately

22 after paragraph (10) the following new paragraph:

23 ‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN24 MENTAL PLANS.—In the case of a governmental

25 plan (as defined in section 414(d)), subparagraph

26 (B) of paragraph (1) shall not apply.’’
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1 (c) TREATMENT OF CERTAIN EXCESS BENEFIT

2 PLANS.—

3 (1) IN GENERAL.—Section 415 of such Code is

4 amended by adding at the end thereof the following

5 new subsection:

6 ‘‘(m) TREATMENT OF QUALIFIED GOVERNMENTAL

7 EXCESS BENEFIT ARRANGEMENTS.—

8 ‘‘(1) GOVERNMENTAL PLAN NOT AFFECTED.—

9 In determining whether a governmental plan (as de10 fined in section 414(d)) meets the requirements of

11 this section, benefits provided under a qualified gov12 ernmental excess benefit arrangement shall not be

13 taken into account. Income accruing to a govern14 mental plan (or to a trust that is maintained solely

15 for the purpose of providing benefits under a quali16 fied governmental excess benefit arrangement) in re17 spect of a qualified governmental excess benefit ar18 rangement shall constitute income derived from the

19 exercise of an essential governmental function upon

20 which such governmental plan (or trust) shall be ex21 empt from tax under section 115.

22 ‘‘(2) TAXATION OF PARTICIPANT.—For pur23 poses of this chapter—

24 ‘‘(A) the taxable year or years for which

25 amounts in respect of a qualified governmental
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1 excess benefit arrangement are includible in

2 gross income by a participant, and

3 ‘‘(B) the treatment of such amounts when

4 so includible by the participant,

5 shall be determined as if such qualified govern6 mental excess benefit arrangement were treated as a

7 plan for the deferral of compensation which is main8 tained by a corporation not exempt from tax under

9 this chapter and which does not meet the require10 ments for qualification under section 401.

11 ‘‘(3) QUALIFIED GOVERNMENTAL EXCESS BEN12 EFIT ARRANGEMENT.—For purposes of this sub13 section, the term ‘qualified governmental excess ben14 efit arrangement’ means a portion of a governmental

15 plan if—

16 ‘‘(A) such portion is maintained solely for

17 the purpose of providing to participants in the

18 plan that part of the participant’s annual bene19 fit otherwise payable under the terms of the

20 plan that exceeds the limitations on benefits im21 posed by this section,

22 ‘‘(B) under such portion no election is pro23 vided at any time to the participant (directly or

24 indirectly) to defer compensation, and
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1 ‘‘(C) benefits described in subparagraph

2 (A) are not paid from a trust forming a part

3 of such governmental plan unless such trust is

4 maintained solely for the purpose of providing

5 such benefits.’’

6 (2) COORDINATION WITH SECTION 457.—Sub7 section (e) of section 457 of such Code is amended

8 by adding at the end thereof the following new para9 graph:

10 ‘‘(15) TREATMENT OF QUALIFIED GOVERN11 MENTAL EXCESS BENEFIT ARRANGEMENTS.—Sub12 sections (b)(2) and (c)(1) shall not apply to any

13 qualified governmental excess benefit arrangement

14 (as defined in section 415(m)(3)), and benefits pro15 vided under such an arrangement shall not be taken

16 into account in determining whether any other plan

17 is an eligible deferred compensation plan.’’

18 (3) CONFORMING AMENDMENT.—Paragraph (2)

19 of section 457(f) of such Code is amended by strik20 ing the word ‘‘and’’ at the end of subparagraph (C),

21 by striking the period after subparagraph (D) and

22 inserting the words ‘‘, and’’, and by inserting imme23 diately thereafter the following new subparagraph:

24 ‘‘(E) a qualified governmental excess bene25 fit arrangement described in section 415(m).’’
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1 (d) EXEMPTION FOR SURVIVOR AND DISABILITY

2 BENEFITS.—Paragraph (2) of section 415(b) of such

3 Code is amended by adding at the end thereof the follow4 ing new subparagraph:

5 ‘‘(I) EXEMPTION FOR SURVIVOR AND DIS6 ABILITY BENEFITS PROVIDED UNDER GOVERN7 MENTAL PLANS.—Subparagraph (B) of para8 graph (1), subparagraph (C) of this paragraph,

9 and paragraph (5) shall not apply to—

10 ‘‘(i) income received from a govern11 mental plan (as defined in section 414(d))

12 as a pension, annuity, or similar allowance

13 as the result of the recipient becoming dis14 abled by reason of personal injuries or

15 sickness, or

16 ‘‘(ii) amounts received from a govern17 mental plan by the beneficiaries, survivors,

18 or the estate of an employee as the result

19 of the death of the employee.’’

20 (e) REVOCATION OF GRANDFATHER ELECTION.—

21 Subparagraph (C) of section 415(b)(10) of such Code is

22 amended by adding at the end thereof the following new

23 sentence: ‘‘An election made pursuant to the preceding

24 sentence to have the provisions of this paragraph applied

25 to the plan may be revoked not later than the last day
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1 of the 3rd plan year beginning after the date of enactment

2 with respect to all plan years as to which such election

3 has been applicable and all subsequent plan years; pro4 vided that any amount paid by the plan in a taxable year

5 ending after revocation of such election in respect of bene6 fits attributable to a taxable year during which such elec7 tion was in effect shall be includible in income by the re8 cipient in accordance with the rules of this chapter in the

9 taxable year in which such amount is received (except that

10 such amount shall be treated as received for purposes of

11 the limitations imposed by this section in the earlier tax12 able year or years to which such amount is attributable).’’

13 (f) EFFECTIVE DATE.—

14 (1) IN GENERAL.—The amendments made by

15 subsections (a), (b), (c), and (d) shall apply to tax16 able years beginning on or after the date of the en17 actment of this Act. The amendments made by sub18 section (e) shall apply with respect to election rev19 ocations adopted after the date of the enactment of

20 this Act.

21 (2) TREATMENT FOR YEARS BEGINNING BE22 FORE DATE OF ENACTMENT.—In the case of a gov23 ernmental plan (as defined in section 414(d) of the

24 Internal Revenue Code of 1986), such plan shall be

25 treated as satisfying the requirements of section 415
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1 of such Code for all taxable years beginning before

2 the date of the enactment of this Act.

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