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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1874 Introduced in House (IH)]

103d CONGRESS
  1st Session
                                H. R. 1874

 To amend the Employee Retirement Income Security Act of 1974 and the 
  Internal Revenue Code of 1986 in order to increase the adequacy and 
 efficiency of the private pension system (consisting of employer and 
individual retirement plans) by reducing pension vesting requirements, 
 improving the portability of earned pension benefits, and encouraging 
the preservation of pension asset accumulations for use in retirement, 
                        and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             April 28, 1993

 Mr. Gibbons introduced the following bill; which was referred jointly 
      to the Committees on Education and Labor and Ways and Means

_______________________________________________________________________

                                 A BILL

 
 To amend the Employee Retirement Income Security Act of 1974 and the 
  Internal Revenue Code of 1986 in order to increase the adequacy and 
 efficiency of the private pension system (consisting of employer and 
individual retirement plans) by reducing pension vesting requirements, 
 improving the portability of earned pension benefits, and encouraging 
the preservation of pension asset accumulations for use in retirement, 
                        and for other purposes.

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

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    This Act may be cited as ``The Pension Portability Improvement Act 
of 1993''.

                           TABLE OF CONTENTS

Sec. 1. Short Title and Table of Contents.
Sec. 2. Minimum Vesting Standards.
Sec. 3. Portability Requirements for Qualified Plans.
Sec. 4. Prototype Portable Pension Accounts.
Sec. 5. Exemptions for Certain Collectively Bargained Plans.
Sec. 6. Effective Date and Regulations.

SEC. 2. MINIMUM VESTING STANDARDS.

    (a) In General.--Paragraph (2) of section 411(a) of the Internal 
Revenue Code (related to minimum vesting standards) is amended to read 
as follows:
            ``(2) Employer contributions.--A plan satisfies the 
        requirements of this paragraph, if it satisfies the 
        requirements of subparagraphs (A), (B), or (C).--
                    ``(A) Three year vesting.--A plan satisfies the 
                requirements of this subparagraph if an employee who 
                has completed at least three years of service has a 
                nonforfeitable right to 100 percent of the employee's 
                accrued benefit derived from employer contributions.
                    ``(B) One to five year vesting.--A plan satisfies 
                the requirements of this subparagraph if an employee 
                has a nonforfeitable right to a percentage of the 
                employee's accrued benefit derived from employer 
                contributions determined under the following table:

                    ``Years of
                                                         Nonforfeitable
                      Service
                                                           Percentage  
                        1............................                20
                        2............................                40
                        3............................                60
                        4............................                80
                        5 or more....................              100.
                    ``(C) Multiemployer plans.--A plan satisfies the 
                requirements of this subparagraph if--
                            ``(i) the plan is a multiemployer plan 
                        (within the meaning of section 414(f), and
                            ``(ii) under the plan--
                                    ``(I) an employee who is covered 
                                pursuant to a collective bargaining 
                                agreement described in section 414 
                                (f)(1)(B) and who has completed at 
                                least five years of service has a 
                                nonforfeitable right to 100 percent of 
                                the employee's accrued benefits derived 
                                from employer contributions, and
                                    ``(II) the requirements of 
                                subparagraph (A) or (B) are met with 
                                respect to employees not described in 
                                subclause (I).''.
    (b) Amendments to ERISA.--In general.--Paragraph (2) of section 
203(a) of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1053(a)(2)) is amended to read as follows:
            ``(2) A plan satisfies the requirements of this paragraph 
        if it satisfies the following requirements of subparagraph (A), 
        (B), or (C).
                    ``(A) A plan satisfies the requirements of this 
                subparagraph if an employee who has completed at least 
                three years of service has a nonforfeitable right to 
                100 percent of the employee's accrued benefit derived 
                from employer contributions.
                    ``(B) A plan satisfies the requirement of this 
                subparagraph if an employee has a nonforfeitable right 
                to a percentage of the employee's accrued benefit 
                derived from employer contributions determined under 
                the following table:
                    ``Years of
                                                         Nonforfeitable
                    Service
                                                             Percentage
                        1............................                20
                        2............................                40
                        3............................                60
                        4............................                80
                        5 or more....................              100.
                    ``(C) A plan satisfies the requirements of this 
                subparagraph if--
                            ``(i) the plan is a multiemployer plan 
                        (within the meaning of section 3(37)), and
                            ``(ii) under the plan--
                                    ``(I) an employee who is covered 
                                pursuant to a collective bargaining 
                                agreement described in section 
                                414(f)(1)(B) and who has completed at 
                                least five years of service has a 
                                nonforfeitable right to 100 percent of 
                                the employee's accrued benefit derived 
                                from employer contributions, and
                                    ``(II) the requirements of 
                                subparagraph (A) or (B) are met with 
                                respect to employees not described in 
                                subclause (I).''.

SEC. 3. PORTABILITY REQUIREMENTS FOR QUALIFIED PLANS.

    (a) In General.--Part 2 of title I of the Employee Retirement 
Income Security Act of 1974 is amended by inserting after section 
204(h) the following new subsection:
    ``(i) Portability Requirements for Qualified Plans.--
            ``(1) General rules.--
                    ``(A) Qualified plans.--Each qualified plan shall, 
                at the election of an employee upon separation from 
                service, make a direct transfer of the portion of the 
                employee's eligible amount specified in the election to 
                a portable pension account specified in the election.
                    ``(B) Individuals.--An individual may--
                            ``(i) establish a portable pension account 
                        on the individual's own behalf to which 
                        transfers described in paragraph (1)(A), or 
                        transfers from other portable pension accounts, 
                        may be made, and
                            ``(ii) transfer, in a direct transfer, 
                        amounts in a portable pension account 
                        established on the individual's behalf to a 
                        portable pension account maintained by a 
                        qualified plan in which the individual is a 
                        participant or to another portable pension 
                        account established by the individual on the 
                        individual's own behalf.
            ``(2) Portable pension accounts.--For purposes of this 
        section.--
                    ``(A) In general.--The term `portable pension 
                account' means--
                            ``(i) in the case of an employer, an 
                        individual account plan, an individual account 
                        within a qualified plan, or a simplified 
                        employee pension under section 408(k) of the 
                        Internal Revenue Code meeting requirements of 
                        the following paragraphs of this subsection, 
                        and
                            ``(ii) in the case of an individual, an 
                        individual retirement plan meeting such 
                        requirements.
                    ``(B) Distribution requirements.--
                            ``(i) In general.--The requirements of this 
                        paragraph are met if distributions from the 
                        account--
                                    ``(I) may only be made in a 
                                permitted retirement income form, and
                                    ``(II) may only be made with the 
                                consent of the participant.
                            ``(ii) Permitted retirement income form.--
                        For the purposes of subparagraph (A) a 
                        permitted retirement income form means:
                                    ``(I) A lump sum distribution of 
                                the employee's entire earned benefit.
                                    ``(II) A qualified joint and 
                                survivor annuity (within the meaning of 
                                section 205(d)).
                                    ``(III) Any other joint life 
                                annuity (including a cash refund 
                                annuity).
                                    ``(IV) A single life annuity 
                                (including a cash refund annuity).
                                    ``(V) Any series of substantially 
                                equal periodic payments described in 
                                section 72(t)(2)(A)(iv) of the Internal 
                                Revenue Code which are not part of an 
                                annuity described in the preceding 
                                clauses.
                            ``(iii) Spousal consent.--The requirements 
                        of this paragraph shall not be met unless the 
                        account provides that any election as to form 
                        of benefits must meet spousal consent 
                        requirements which are identical to the 
                        requirements of section 205(c)(2).
                    ``(C) Asset control.--The requirements of this 
                paragraph are met if the account provides that 
                participants may elect to exercise control over the 
                assets in their accounts and such control is the same 
                as that described in section 404(c) (as determined 
                under regulations prescribed by the Secretary).
                    ``(D) Notice.--The requirements of this paragraph 
                are met if the account provides that, immediately 
                before any distribution, notice is provided to the 
                recipient with respect to--
                            ``(i) the provisions under which the 
                        distribution may or may not be subject to tax 
                        or penalty under the Internal Revenue Code of 
                        1986, and
                            ``(ii) the terms and conditions of each 
                        permitted retirement income form under 
                        paragraph (B) (including the terms and 
                        conditions of any spousal consent requirements 
                        under subparagraph (B)(iii).
            ``(3) Eligible amount.--For purposes of this section--
                    ``(A) In general.--The term `eligible amount' 
                means, with respect to any participant--
                            ``(i) in the case of a defined benefit plan 
                        that is at least 100 percent funded for 
                        nonforfeitable accrued benefits, 100 percent of 
                        the present value of the participant's 
                        nonforfeitable accrued benefits under the plan,
                            ``(ii) in the case of a defined benefit 
                        plan that is less than 100 percent funded for 
                        nonforfeitable accrued benefits, a percentage 
                        of the present value of the participant's 
                        nonforfeitable accrued benefits under the plan 
                        equal to the plan's percentage of funding for 
                        nonforfeitable accrued benefits, and
                            ``(iii) in the case of a defined 
                        contribution plan, the balance to the credit of 
                        the participant at the time of the distribution 
                        without regard to any reductions on account of 
                        back-end loads, market value adjustments, early 
                        withdrawal charges, or any other charges or 
                        penalties.
                    ``(B) Employee contributions.--The eligible amount 
                shall include employee contributions.
                    ``(C) Present value.--For purposes of subparagraphs 
                (A)(i) and (A)(ii)--
                            ``(i) the present value of the 
                        nonforfeitable accrued benefits of a 
                        participant shall be determined utilizing 
                        formulas published by the Pension Benefit 
                        Guaranty Corporation for lump sum valuations 
                        with the following specifications regarding 
                        their application:
                                    ``(I) For the period commencing 
                                with the normal retirement date for 
                                full benefits under the plan, the 
                                immediate annuity rate as published by 
                                the Pension Benefit Guaranty 
                                Corporation shall be utilized as the 
                                discount rate.
                                    ``(II) For the period commencing 
                                with the date of termination of 
                                employment until the normal retirement 
                                date for full benefits under the plan, 
                                a discount rate of not more than 3 
                                percent shall be utilized. In addition, 
                                for the period between termination of 
                                employment and until the normal 
                                retirement date for full benefits under 
                                the plan, the resulting present value 
                                shall be determined as if the payment 
                                at the normal retirement date is not 
                                contingent on the survival of any 
                                person to that date.
                                    ``(III) The formulas shall utilize 
                                unisex mortality tables constructed to 
                                reflect the experience of the plan 
                                regarding the percentages of males and 
                                females in the plan.
                            ``(ii) Phase-in.--For plan years beginning 
                        in 1995 or 1996, the following percentages 
                        shall be substituted for 3 percent in 
                        subparagraph (i)(b);
                         ``For plan years
                           beginning in
                                                      The percentage is
                            1995.....................                 5
                            1996.....................                4.
            ``(4) Other definitions and rules.--For purposes of this 
        section--
                    ``(A) Qualified plan.--The term `qualified plan' 
                means--
                            ``(i) a plan described in section 401(a) of 
                        the Internal Revenue Code of 1986 which 
                        includes a trust which is exempt from tax under 
                        section 501(a) of such Code,
                            ``(ii) an annuity plan described in section 
                        403(a) of such Code, and
                            ``(iii) an annuity contract described in 
                        section 403(b) of such Code.
                    ``(B) Individual retirement plan.--The term 
                `individual retirement plan' means--
                            ``(i) an individual retirement account 
                        described in section 408(a) of such Code, and
                            ``(ii) an individual retirement annuity 
                        described in section 408(b) of such Code.
                    ``(C) Beneficiaries or alternate payees.--In the 
                case of an individual who is a beneficiary of the 
                participant or an alternate payee (within the meaning 
                of section 206(d)(3)(K) under a plan, such an 
                individual shall be treated in the same manner as a 
                participant in the plan.
    (b) Amendments to the Internal Revenue Code.--Section 411 of the 
Internal Revenue Code of 1986 is amended by inserting at the end 
thereof, the following new subparagraph:
    ``(f) Portability Requirements for Qualified Plans.--
            ``(1) General rules.--
                    ``(A) Qualified plans.--Each qualified plan shall, 
                at the election of an employee upon separation from 
                service, make a direct transfer of the portion of the 
                employee's eligible amount specified in the election to 
                a portable pension account specified in the election.
                    ``(B) Individuals.--An individual may--
                            ``(i) establish a portable pension account 
                        on the individual's own behalf to which 
                        transfers described in paragraph (1)(A), or 
                        transfers from other portable pension accounts, 
                        may be made, and
                            ``(ii) transfer, in a direct transfer, 
                        amounts in a portable pension account 
                        established on the individual's behalf to a 
                        portable pension account maintained by a 
                        qualified plan in which the individual is a 
                        participant or to another portable pension 
                        account established by the individual on the 
                        individual's own behalf.
            ``(2) Portable pension accounts.--For the purposes of this 
        section--
                    ``(A) In general.--The term `portable pension 
                account' means--
                            ``(i) in the case of an employer, an 
                        individual account plan, an individual account 
                        within a qualified plan, or a simplified 
                        employee pension under section 408(k) of the 
                        Internal Revenue Code meeting requirements of 
                        the following paragraphs of this subsection, 
                        and
                            ``(ii) in the case of an individual, an 
                        individual retirement plan meeting such 
                        requirements.
                    ``(B) Distribution requirements.--
                            ``(i) In general.--The requirements of this 
                        paragraph are met if distributions from the 
                        account--
                                    ``(I) may only be made in a 
                                permitted retirement income form, and
                                    ``(II) may only be made with the 
                                consent of the participant.
                            ``(ii) Permitted retirement income form.--
                        For the purposes of subparagraph (i), a 
                        permitted retirement income form means:
                                    ``(I) A lump sum distribution of 
                                the individual's entire earned benefit.
                                    ``(II) A qualified joint and 
                                survivor annuity (within the meaning of 
                                section 205(D)).
                                    ``(III) Any other joint life 
                                annuity (including a cash refund 
                                annuity).
                                    ``(IV) A single life annuity 
                                (including a cash refund annuity).
                                    ``(V) Any series of substantially 
                                equal periodic payments described in 
                                section 72(t)(2)(A)(iv) of the Internal 
                                Revenue Code of 1986 which are not part 
                                of an annuity described in the 
                                preceding clauses.
                            ``(iii) Spousal consent.--The requirements 
                        of this paragraph shall not be met unless the 
                        account provides that any election as to form 
                        of benefit must meet spousal consent 
                        requirements which are identical to the 
                        requirements of section 205(c)(2).
                    ``(C) Asset control.--The requirements of this 
                paragraph are met if the account provides that 
                participants may elect to exercise control over the 
                assets in their accounts and such control is the same 
                as that described in section 404(c) (as determined 
                under regulations prescribed by the Secretary).
                    ``(D) Notice.--The requirements of this paragraph 
                are met if the account provides that, immediately 
                before any distribution, notice is provided to the 
                recipient with respect to--
                            ``(i) the provisions under which the 
                        distribution may or may not be subject to tax 
                        or penalty under the Internal Revenue Code of 
                        1986, and
                            ``(ii) the terms and conditions of each 
                        permitted retirement income form under 
                        paragraph (B)(ii) (including the terms and 
                        conditions of any spousal consent requirements 
                        under paragraph (B)(iii)).
            ``(3) Eligible amount.--For the purposes of this section--
                    ``(A) In general.--The term `eligible amount' 
                means, with respect to any participant--
                            ``(i) in the case of a defined benefit plan 
                        that is at least 100 percent funded for 
                        nonforfeitable accrued benefits, 100 percent of 
                        the present value of the participant's 
                        nonforfeitable accrued benefits under the plan,
                            ``(ii) in the case of a defined benefit 
                        plan that is less than 100 percent funded for 
                        nonforfeitable accrued benefits, a percentage 
                        of the present value of the participant's 
                        nonforfeitable accrued benefits under the plan 
                        equal to the plan's percentage of funding for 
                        nonforfeitable accrued benefits, and
                            ``(iii) in the case of a defined 
                        contribution plan, the balance to the credit of 
                        the participant as of the time of the 
                        distribution without regard to any reductions 
                        on account of back-end loads, market value 
                        adjustments, early withdrawal charges, or any 
                        other charges or penalties.
                    ``(B) Employee contributions.--The eligible amount 
                shall include employee contributions.
                    ``(C) Present value.--For purposes of subparagraphs 
                (A)(i) and (A)(ii)--
                            ``(i) the present value of the 
                        nonforfeitable accrued benefits of a 
                        participant shall be determined utilizing 
                        formulas published by the Pension Benefit 
                        Guaranty Corporation for lump sum valuations 
                        with the following specifications regarding 
                        their application:
                                    ``(I) For the period commencing 
                                with the normal retirement date for 
                                full benefits under the plan, the 
                                immediate annuity rate as published by 
                                the Pension Benefit Corporation shall 
                                be utilized as the discount rate.
                                    ``(II) For the period commencing 
                                with the date of termination from 
                                employment until the normal retirement 
                                date for full benefits under the plan, 
                                a discount rate of not more than 3 
                                percent shall be utilized. In addition, 
                                for the period between termination of 
                                employment and until the normal 
                                retirement date for full benefits under 
                                the plan, the resulting present value 
                                shall be determined as if the payment 
                                at the normal retirement date is not 
                                contingent on the survival of any 
                                person to that date.
                                    ``(III) The formulas shall utilize 
                                unisex mortality tables constructed to 
                                reflect the experience of the plan 
                                regarding the percentages of males and 
                                females in the plan.
                            ``(ii) Phase-in.--For plan years beginning 
                        in 1995 or 1996, the following percentages 
                        shall be substituted for 3 percent in 
                        subparagraph (i)(b)
                         ``For plan years
                             beginning in
                                                      The percentage is
                            1995.....................                 5
                            1996.....................                4.
            ``(4) Other definitions and rules.--For purposes of this 
        subsection.--
                    ``(A) Qualified plan.--The term `qualified plan' 
                means--
                            ``(i) a plan described in section 401(a) of 
                        the Internal Revenue Code of 1986 which 
                        includes a trust which is exempt from tax under 
                        section 501(a) of such Code,
                            ``(ii) an annuity plan described in section 
                        403(a) of such Code, and
                            ``(iii) an annuity contract described in 
                        section 403(b) of such Code.
                    ``(B) Individual retirement plan.--The term 
                `individual retirement plan' means--
                            ``(i) an individual retirement account 
                        described in section 408(a) of such Code, and
                            ``(ii) an individual retirement annuity 
                        described in section 408(b) of such Code.
                    ``(C) Direct transfer.--For the purposes of this 
                section, the term `direct transfer' means a direct 
                rollover from a qualified plan described in 
                Subparagraph 411(f)(4), a trustee-to-trustee transfer 
                between accounts established by individuals in such 
                plans, and transfers between annuity contracts 
                described in sections 403(a) and 403(b) of the Code.
                    ``(D) Beneficiaries or alternate payees.--In the 
                case of an individual who is a beneficiary of the 
                participant or an alternate payee (within the meaning 
                of section 206(d)(3)(K) of the Employee Retirement 
                Income Security Act of 1974) under a plan, such 
                individual shall be treated in the same manner as if a 
                participant under the plan.''.
            (5) Conforming amendments.--
                    (A) Section 204(g)(2) of such Act (29 U.S.C. 
                1054(g)(2)) is amended by adding at the end the 
                following new sentence: ``Except as otherwise provided 
                in regulations of the Secretary of Labor and the 
                Secretary of the Treasury, the requirements of 
                subparagraph (B) shall not be treated as violated in 
                the case of a direct transfer described in subparagraph 
                411(f) of the Internal Revenue Code and Section 204(i) 
                of ERISA.''.
                    (B) section 204(d) of such Act (29 U.S.C. 1054(d)) 
                is amended--
                            (i) in paragraph (1), by striking ``or'',
                            (ii) in paragraph (2), by striking the 
                        period and inserting ``or'', and
                            (iii) by inserting after paragraph (2) the 
                        following new paragraph:
            ``(3) a direct transfer described in subparagraph 411(f) of 
        the Internal Revenue Code and section 205(i) of ERISA.''.
                    (C) The table of contents for part 2 of subtitle B 
                of title I of such Act is amended by inserting after 
                the item relating to section 205 the following new 
                item:
    ``(c) Effective date.--The amendments made by this section shall 
apply to distributions in plan years beginning after December 31, 
1994.''.

SEC. 4. PROTOTYPE PORTABLE PENSION ACCOUNTS.

    (a) In general.--The Secretarys of Labor and the Treasury shall 
prescribe by regulations one or more prototype portable pension 
accounts which would, upon adoption by any plan sponsor, constitute a 
portable pension account meeting the requirements of subsection 204(i) 
of the Employee Retirement Income Security Act of 1974 and subsection 
411(f) of the Internal Revenue Code. Regulations for such prototype 
portable pension accounts shall be issued within twelve months after 
the date of enactment of this Act.
    (b) Account sponsor.--A plan sponsor of a portable pension account 
means any person who has the power to acquire, manage, or dispose of 
any asset of a portable pension account and is at least one of the 
following:
            (1) An employer or organization of employers adopting a 
        portable pension account;
            (2) An association or organization of employees sponsoring 
        a portable pension account on behalf of its members;
            (3) A registered investment advisor under the Investment 
        Advisors Act of 1940;
            (4) A bank, as defined in that Act;
            (5) An insurance company qualified to perform services with 
        respect to a portable pension account but only if participants 
        are fully covered under a State guaranty fund; or
            (6) A savings and loan association regulated by the Office 
        of Thrift Management and empowered by law to perform services 
        with respect to a portable pension account.

SEC. 5. EXEMPTIONS FOR CERTAIN COLLECTIVELY BARGAINED PLANS.

    (a) Any multi-employer plan, as defined by title I, subtitle A, 
section 3 (37)(A) of the Employee Retirement Income Security Act of 
1974, that is established pursuant to a collective bargaining 
agreement, shall be exempt from the provisions of sections 3 and 4 of 
this Act.
    (b) Any plan that is established or maintained pursuant to a 
collective bargaining agreement but that does not qualify as a 
multiemployer plan may seek an exemption from the provisions of 
sections 3 and 4 of this Act by application to the Secretary of Labor 
by the plan administrator and by notice to affected or interested 
parties. The application and notice shall certify and present evidence 
that participants in the plan are eligible to benefit from portability 
provisions in their plan and related plans within their industry. Based 
on evidence that the plan and related plans contain adequate provisions 
for portability of benefits within the industry, the Secretary may 
exempt the applicant from the provisions of sections 3 and 4 of this 
Act.

SEC. 6. EFFECTIVE DATE AND REGULATIONS.

    (a) Effective Date.--The amendments made by this Act shall apply to 
plan years beginning after the date which occurs two years after the 
date of enactment of this Act.
    (b) Regulations.--The Secretary of Labor and the Secretary of the 
Treasury shall, not later than twelve months after the date of 
enactment of this Act, issue such regulations as are necessary to carry 
out the amendments made by this Act.

                                 <all>

HR 1874 IH----2
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