‘‘(i) expenses with respect to any
course or other education involving sports,
games, or hobbies, unless such expenses—
‘‘(I) are part of a degree pro-
gram, or
‘‘(II) are deductible under this
chapter without regard to this section;
or
‘‘(ii) any student activity fees, athletic
fees, insurance expenses, or other expenses
unrelated to a student’s academic course of
instruction.
‘‘(C) COORDINATION WITH SAVINGS BOND
PROVISIONS.—The amount of qualified higher
education expenses for any taxable year shall be
reduced by any amount excludable from gross
income under section 135.
‘‘(D) ELIGIBLE STUDENT.—For purposes
of subparagraph (A), the term ‘eligible student’
means a student who—
‘‘(i) meets the requirements of section
484(a)(1) of the Higher Education Act of
1965 (20 U.S.C. 1091(a)(1)), as in effect
on the date of the enactment of this sec-
tion, and
‘‘(ii)(I) is carrying at least one-half
the normal full-time work load for the
course of study the student is pursuing, as
determined by the institution of higher
education, or
‘‘(II) is enrolled in a course which en-
ables the student to improve the student’s
job skills or to acquire new job skills.
‘‘(E) 
INSTITUTION
OF
HIGHER
EDU-
CATION.—The term ‘institution of higher edu-
cation’ means an institution which—
‘‘(i) is described in section 481 of the
Higher Education Act of 1965 (20 U.S.C.
1088), as in effect on the date of the en-
actment of this section, and
‘‘(ii) is eligible to participate in pro-
grams under title IV of such Act.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments and distributions after
December 31, 1996.
SEC. 132. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE
USED WITHOUT PENALTY DURING PERIODS
OF UNEMPLOYMENT.
(a) IN GENERAL.—Paragraph (2) of section 72(t)
(relating to exceptions to 10-percent additional tax on
early distributions from qualified retirement plans), as
amended by section 131, is further amended by adding
at the end the following new subparagraph:
‘‘(F) ADDITIONAL DISTRIBUTIONS TO UN-
EMPLOYED INDIVIDUALS.—
‘‘(i) IN GENERAL.—Distributions from
an individual retirement plan, or from
amounts attributable to employer contribu-
tions made pursuant to elective deferrals
described in subparagraph (A) or (C) of
section 
402(g)(3) 
or 
section
501(c)(18)(D)(iii), to an individual after
separation from employment if—
‘‘(I) such individual has received
unemployment compensation for 12
consecutive weeks under any Federal
or State unemployment compensation
law by reason of such separation, and
‘‘(II) such distributions are made
during the 1-year period beginning on
the date of such separation.
‘‘(ii) DISTRIBUTIONS
AFTER
REEM-
PLOYMENT.—Clause (i) shall not apply to
any distribution made after the individual
has been employed for at least 60 days
after the separation from employment to
which clause (i) applies.
‘‘(iii) COORDINATION WITH SUBPARA-
GRAPH
(D).—Distributions during the 1-
year period described in clause (i)(II) shall
not be taken into account in applying the
limitation 
under 
subparagraph
(D)(i)(III).’’
(b) CONFORMING AMENDMENTS.—
(1) Section 401(k)(2)(B)(i) of such Code is
amended by striking ‘‘or’’ at the end of subclause
(III), by striking ‘‘and’’ at the end of subclause (IV)
and inserting ‘‘or’’, and by inserting after subclause
(IV) the following new subclause:
‘‘(V) the date on which a period
referred to in section 72(t)(2)(F) be-
gins, and’’.
(2) Section 403(b)(11) of such Code is amend-
ed by striking ‘‘or’’ at the end of subparagraph (A),
by striking the period at the end of subparagraph
(B) and inserting ‘‘, or’’, and by inserting after sub-
paragraph (B) the following new subparagraph:
‘‘(C) for distributions to which section
72(t)(2)(F) applies.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after the date of
the enactment of this Act.
SEC. 133. CONTRIBUTIONS MUST BE HELD AT LEAST 5
YEARS IN CERTAIN CASES.
(a) IN GENERAL.—Section 72(t), as amended by sec-
tion 131(c), is amended by adding at the end the following
new paragraph:
‘‘(9) CERTAIN CONTRIBUTIONS MUST BE HELD
5 YEARS.—
‘‘(A) IN
GENERAL.—Paragraph (2)(A)(i)
shall not apply to any amount distributed out
of an individual retirement plan which is alloca-
ble to contributions made to the plan during the
5-year period ending on the date of such dis-
tribution (and earnings on such contributions).
‘‘(B) ORDERING RULE.—For purposes of
this paragraph—
‘‘(i) FIRST-IN, FIRST-OUT
RULE.—
Distributions shall be treated as having
been made—
‘‘(I) first from the earliest con-
tribution 
(and 
earnings 
allocable
thereto) remaining in the account at
the time of the distribution, and
‘‘(II) then from other contribu-
tions (and earnings allocable thereto)
in the order in which made.
‘‘(ii) ALLOCATION
OF
EARNINGS.—
Earnings shall be allocated to contribu-
tions in such manner as the Secretary may
prescribe.
‘‘(iii) AGGREGATIONS
OF
CONTRIBU-
TIONS.—Except as provided by the Sec-
retary, for purposes of this subpara-
graph—
‘‘(I) all contributions made dur-
ing the same taxable year may be
treated as 1 contribution, and
‘‘(II) all contributions made be-
fore the first day of the 5-year period
ending on the day before any distribu-
tion may be treated as 1 contribution.
‘‘(C) SPECIAL RULE FOR ROLLOVERS.—
‘‘(i) PENSION PLANS.—Subparagraph
(A) shall not apply to distributions out of
an individual retirement plan which are al-
locable to rollover contributions to which
section 402(c), 403(a)(4), or 403(b)(8) ap-
plied.
‘‘(ii) CONTRIBUTION
PERIOD.—For
purposes of subparagraph (A), amounts
shall be treated as having been held by a
plan during any period such contributions
were held (or are treated as held under
this clause) by any individual retirement
plan from which transferred.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to contributions (and earnings allo-
cable thereto) which are made after December 31, 1996.
CHAPTER 4—PERIODIC PENSION
BENEFITS STATEMENTS
SEC. 141. PERIODIC PENSION BENEFITS STATEMENTS.
(a) IN GENERAL.—Subsection (a) of section 105 of
the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1025) is amended by striking ‘‘shall furnish
to any plan participant or beneficiary who so requests in
writing,’’ and inserting ‘‘shall furnish at least once every
3 years, in the case of a defined benefit plan, and annu-
ally, in the case of a defined contribution plan, to each
plan participant, and shall furnish to any plan participant
or beneficiary who so requests,’’.
(b) RULE FOR MULTIEMPLOYER PLANS.—Subsection
(d) of section 105 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1025) is amended to read
as follows:
‘‘(d) Each administrator of a plan to which more than
1 unaffiliated employer is required to contribute shall fur-
nish to any plan participant or beneficiary who so requests
in writing, a statement described in subsection (a).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after the
earlier of—
(1) the date of issuance by the Secretary of
Labor of regulations providing guidance for simplify-
ing defined benefit plan calculations with respect to
the information required under section 105 of the
Employee Retirement Income Security Act of 1974
(29 U.S.C. 1025), or
(2) December 31, 1997.
Subtitle B—Improved Fairness in
Retirement Plan Benefits
SEC. 151. AMENDMENTS TO SIMPLE RETIREMENT AC-
COUNTS.
(a) MINIMUM CONTRIBUTION REQUIREMENT.—
(1) IN
GENERAL.—Paragraph (2) of section
408(p) (defining qualified salary reduction arrange-
ment) is amended—
(A) by striking clauses (iii) and (iv) of sub-
paragraph (A) and inserting the following new
clauses:
‘‘(iii) the employer is required to make
a matching contribution to the simple re-
tirement account for any year in an
amount equal to—
‘‘(I) so much of the amount the
employee elects under clause (i)(I) as
does not exceed 3 percent of com-
pensation for the year, and
‘‘(II) 
a 
uniform 
percentage
(which is at least 50 percent but not
more than 100 percent) of the amount
the employee elects under clause (i)(I)
to the extent that such amount ex-
ceeds 3 percent but does not exceed 5
percent of the employee’s compensa-
tion,
‘‘(iv) the employer is required to make
nonelective contributions of 1 percent of
compensation for each employee eligible to
participate in the arrangement who has at
least $5,000 of compensation from the em-
ployer for the year, and
‘‘(v) no contributions may be made
other than contributions described in
clause (i), (iii), or (iv).’’, and
(B) by striking subparagraph (B) and in-
serting the following new subparagraph:
‘‘(B) CONTRIBUTION RULES.—
‘‘(i) EMPLOYER
MAY
ELECT
3-PER-
CENT
NONELECTIVE
CONTRIBUTION.—An
employer shall be treated as meeting the
requirements of clauses (iii) and (iv) of
subparagraph (A) for any year if, in lieu of
the contributions described in such clauses,
the employer elects to make nonelective
contributions of 3 percent of compensation
for each employee who is eligible to partici-
pate in the arrangement and who has at
least $5,000 of compensation from the em-
ployer for the year. If an employer makes
an election under this clause for any year,
the employer shall notify employees of such
election within a reasonable period of time
before the 60-day period for such year
under paragraph (5)(C).
‘‘(ii) 
DISCRETIONARY
CONTRIBU-
TIONS.—A plan shall not be treated as fail-
ing to meet the requirements of subpara-
graph (A)(v) merely because, pursuant to
the terms of the plan, an employer makes
nonelective contributions under subpara-
graph (A)(iv) or clause (i) of this subpara-
graph in excess of 1 percent or 3 percent
of compensation, respectively, but only if
all such contributions bear a uniform rela-
tionship to the compensation of each eligi-
ble employee and do not exceed 5 percent
of compensation for any eligible employee.
‘‘(iii) COMPENSATION
LIMITATION.—
The compensation taken into account
under this paragraph for any year shall
not exceed the limitation in effect for such
year under section 401(a)(17).’’.
(2) 
MATCHING
CONTRIBUTIONS.—Subpara-
graph (B) of section 401(k)(11) (relating to adop-
tion of simple plan to meet nondiscrimination tests)
is amended—
(A) by striking subclauses (II) and (III) of
clause (i) and inserting the following new sub-
clauses:
‘‘(II) the employer is required to
make a matching contribution to the
trust for any year in an amount equal
to—
‘‘(aa) 
so 
much 
of 
the
amount 
the 
employee 
elects
under subclause (I) as does not
exceed 3 percent of compensation
for the year, and
‘‘(bb) a uniform percentage
(which is at least 50 percent but
not more than 100 percent) of
the amount the employee elects
under subclause (I) to the extent
that such amount exceeds 3 per-
cent but does not exceed 5 per-
cent of the employee’s compensa-
tion,
‘‘(III) the employer is required to
make nonelective contributions of 1
percent of compensation for each em-
ployee eligible to participate in the ar-
rangement who has at least $5,000 of
compensation from the employer for
the year, and
‘‘(IV) no other contributions may
be made other than contributions de-
scribed in subclause (I), (II), or
(III).’’, and
(B) by striking clause (ii) and inserting the
following new clause:
‘‘(ii) CONTRIBUTION RULES.—
‘‘(I) EMPLOYER
MAY
ELECT
3-
PERCENT
NONELECTIVE
CONTRIBU-
TION.—An employer shall be treated
as meeting the requirements of sub-
clauses (II) and (III) of clause (i) for
any year if, in lieu of the contribu-
tions described in such subclauses, the
employer elects to make nonelective
contributions of 3 percent of com-
pensation for each employee who is el-
igible to participate in the arrange-
ment and who has at least $5,000 of
compensation from the employer for
the year. If an employer makes an
election under this subclause for any
year, the employer shall notify em-
ployees of such election within a rea-
sonable period of time before the 60th
day before the beginning of such year.
‘‘(II) DISCRETIONARY CONTRIBU-
TIONS.—A plan shall not be treated
as failing to meet the requirements of
clause (i)(IV) merely because, pursu-
ant to the terms of the plan, an em-
ployer makes nonelective contributions
under clause (i)(III) or subclause (I)
of this clause in excess of 1 percent or
3 percent of compensation, respec-
tively, but only if all such contribu-
tions bear a uniform relationship to
the compensation of each eligible em-
ployee and do not exceed 5 percent of
compensation for any eligible em-
ployee.’’.
(b) OPTION TO SUSPEND CONTRIBUTIONS.—Section
408(p) (relating to simple retirement accounts) is amend-
ed by adding at the end the following new paragraph:
‘‘(8) SUSPENSION
OF
PLAN.—Except as pro-
vided by the Secretary, a plan shall not be treated
as failing to meet the requirements of this sub-
section if, under the plan, the employer may suspend
all elective, matching, and nonelective contributions
under the plan after notifying employees eligible to
participate in the arrangement of such suspension in
writing at least 30 days in advance. Such suspension
shall apply to contributions with respect to com-
pensation earned after the effective date of the sus-
pension. Only 1 suspension under this paragraph
may take effect during any year.’’.
(c) 
CONFORMING
AMENDMENTS.—Section
408(p)(2)(C), as so added, is amended—
(1) by striking clause (ii),
(2) by striking ‘‘DEFINITIONS’’ in the heading
and inserting ‘‘ELIGIBLE EMPLOYER’’,
(3) by striking ‘‘(i) ELIGIBLE EMPLOYER.—’’,
and
(4) by redesignating subclauses (I) and (II) as
clauses (i) and (ii), respectively.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to taxable years beginning after Decem-
ber 31, 1997.
(2) DELAYED EFFECTIVE DATE FOR PLANS ES-
TABLISHED IN 1997.—In the case of plans estab-
lished in 1997 under section 408(p) of the Internal
Revenue Code of 1986, as in effect on January 1,
1997, the amendments made by this section shall
apply to taxable years beginning after December 31,
2002.
SEC. 152. NONDISCRIMINATION RULES FOR QUALIFIED
CASH OR DEFERRED ARRANGEMENTS AND
MATCHING CONTRIBUTIONS.
(a) ALTERNATIVE METHODS OF SATISFYING SEC-
TION
401(k) NONDISCRIMINATION
TESTS.—Subpara-
graph (B) of section 401(k)(12) (relating to alternative
methods of meeting nondiscrimination requirements) is
amended to read as follows:
‘‘(B) NONELECTIVE AND MATCHING CON-
TRIBUTIONS.—
‘‘(i) IN GENERAL.—The requirements
of this subparagraph are met if the re-
quirements of clauses (ii) and (iii) are met.
‘‘(ii) 
NONELECTIVE
CONTRIBU-
TIONS.—The requirements of this clause
are met if, under the arrangement, the em-
ployer is required, without regard to
whether the employee makes an elective
contribution or employee contribution, to
make a contribution to a defined contribu-
tion plan on behalf of each employee who
is not a highly compensated employee and
who is eligible to participate in the ar-
rangement in an amount equal to at least
1 percent of the employee’s compensation.
‘‘(iii) MATCHING
CONTRIBUTIONS.—
The requirements of this clause are met if,
under the arrangement, the employer
makes matching contributions on behalf of
each employee who is not a highly com-
pensated employee in an amount equal
to—
‘‘(I) 100 percent of the elective
contributions of the employee to the
extent such elective contributions do
not exceed 3 percent of the employee’s
compensation, and
‘‘(II) 50 percent of the elective
contributions of the employee to the
extent that such elective contributions
exceed 3 percent but do not exceed 5
percent of the employee’s compensa-
tion.
‘‘(iv) 
RATE
FOR
HIGHLY
COM-
PENSATED
EMPLOYEES.—The 
require-
ments of clause (iii) are not met if, under
the arrangement, the rate of matching con-
tribution with respect to any rate of elec-