I
107TH CONGRESS
1ST SESSION
H. R. 155
To amend the Internal Revenue Code of 1986 to enhance the portability
of retirement benefits, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 3, 2001
Mr. POMEROY (for himself and Mr. KOLBE) introduced the following bill;
which was referred to the Committee on Ways and Means, and in addi-
tion to the Committee on Education and the Workforce, for a period to
be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee
concerned
A BILL
To amend the Internal Revenue Code of 1986 to enhance
the portability of retirement benefits, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Retirement Account Portability Act of 2001’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
SEC. 2. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF
PLANS.
(a) ROLLOVERS
FROM
AND
TO
SECTION
457
PLANS.—
(1) ROLLOVERS FROM SECTION 457 PLANS.—
(A) IN GENERAL.—Section 457(e) (relat-
ing to other definitions and special rules) is
amended by adding at the end the following:
‘‘(16) ROLLOVER AMOUNTS.—
‘‘(A) GENERAL RULE.—In the case of an
eligible deferred compensation plan, if—
‘‘(i) any portion of the balance to the
credit of an employee in such plan is paid
to such employee in an eligible rollover dis-
tribution (within the meaning of section
402(c)(4)),
‘‘(ii) the employee transfers any por-
tion of the property such employee receives
in such distribution to an eligible retire-
ment 
plan 
described 
in 
section
402(c)(8)(B), and
‘‘(iii) in the case of a distribution of
property other than money, the amount so
transferred consists of the property distrib-
uted,
then such distribution (to the extent so trans-
ferred) shall not be includible in gross income
for the taxable year in which paid.
‘‘(B) CERTAIN
RULES
MADE
APPLICA-
BLE.—Rules similar to the rules of paragraphs
(2) through (7) and (9) of section 402(c) and
section 402(f) shall apply for purposes of sub-
paragraph (A).
‘‘(C) REPORTING.—Rollovers under this
paragraph shall be reported to the Secretary in
the same manner as rollovers from qualified re-
tirement plans (as defined in section 4974(c)).’’
(B) DEFERRAL LIMIT DETERMINED WITH-
OUT REGARD TO ROLLOVER AMOUNTS.—Section
457(b)(2) (defining eligible deferred compensa-
tion plan) is amended by inserting ‘‘(other than
rollover amounts)’’ after ‘‘taxable year’’.
(2) ROLLOVERS TO SECTION 457 PLANS.—
(A) Section 402(c)(8)(B) (defining eligible
retirement plan) is amended by striking ‘‘and’’
at the end of clause (iii), by striking the period
at the end of clause (iv) and inserting ‘‘, and’’,
and by adding at the end the following:
‘‘(v) an eligible deferred compensation
plan described in section 457(b) of an eli-
gible 
employer 
described 
in 
section
457(e)(1)(A).’’
(B) Paragraph (9) of section 402(c) is
amended by striking ‘‘except that’’ and all that
follows and inserting ‘‘except that only an ac-
count or annuity described in clause (i) or (ii)
of paragraph (8)(B) shall be treated as an eligi-
ble retirement plan with respect to such dis-
tribution.’’
(C) Subsection (a) of section 457 (relating
to year of inclusion in gross income) is amended
by striking ‘‘or otherwise made available’’.
(b) ALLOWANCE
OF ROLLOVERS FROM
AND TO
403(b) PLANS.—
(1) 
ROLLOVERS
FROM
SECTION
403(b)
PLANS.—Section 403(b)(8)(A)(ii) (relating to roll-
over amounts) is amended by striking ‘‘such dis-
tribution’’ and all that follows and inserting ‘‘such
distribution to an eligible retirement plan described
in section 402(c)(8)(B), and’’.
(2) ROLLOVERS TO SECTION 403(b) PLANS.—
Section 402(c)(8)(B) (defining eligible retirement
plan), as amended by subsection (a), is amended by
striking ‘‘and’’ at the end of clause (iv), by striking
the period at the end of clause (v) and inserting ‘‘,
and’’, and by adding at the end the following:
‘‘(vi) an annuity contract described in
section 403(b).’’
(c) EXPANDED EXPLANATION TO RECIPIENTS OF
ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section
402(f) (relating to written explanation to recipients of dis-
tributions eligible for rollover treatment) is amended by
striking ‘‘and’’ at the end of subparagraph (C), by striking
the period at the end of subparagraph (D) and inserting
‘‘, and’’, and by adding at the end the following new sub-
paragraph:
‘‘(E) of the provisions under which dis-
tributions from the eligible retirement plan re-
ceiving the distribution may be subject to re-
strictions and tax consequences which are dif-
ferent from those applicable to distributions
from the plan making such distribution.’’
(d) CONFORMING AMENDMENTS.—
(1) Section 72(o)(4) is amended by striking
‘‘and 
408(d)(3)’’ 
and 
inserting 
‘‘403(b)(8),
408(d)(3), and 457(e)(16)’’.
(2) Section 219(d)(2) is amended by striking
‘‘or 
408(d)(3)’’ 
and 
inserting 
‘‘408(d)(3), 
or
457(e)(16)’’.
(3) Section 401(a)(31)(B) is amended by strik-
ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),
403(b)(8), and 457(e)(16)’’.
(4) Subparagraph (B) of section 403(b)(8) is
amended by inserting ‘‘and (9)’’ after ‘‘through
(7)’’.
(5) Section 408(a)(1) is amended by striking
‘‘or 403(b)(8)’’ and inserting ‘‘, 403(b)(8), or
457(e)(16)’’.
(6) Subparagraphs (A) and (B) of section
415(b)(2) are each amended by striking ‘‘and
408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and
457(e)(16)’’.
(7) Section 415(c)(2) is amended by striking
‘‘and 408(d)(3)’’ and inserting ‘‘408(d)(3), and
457(e)(16)’’.
(8) Section 4973(b)(1)(A) is amended by strik-
ing ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or
457(e)(16)’’.
(e) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after the
date of the enactment of this Act.
(2) SPECIAL RULE.—Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of
section 1122 of the Tax Reform Act of 1986 shall
not apply to any distribution from an eligible retire-
ment plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986)
on behalf of an individual if there was a rollover to
such plan on behalf of such individual which is per-
mitted solely by reason of any amendment made by
this section.
SEC. 3. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE-
MENT PLANS.
(a) IN GENERAL.—Subparagraph (A) of section
408(d)(3) (relating to rollover amounts) is amended by
striking ‘‘or’’ at the end of clause (ii), by striking the pe-
riod at the end of clause (iii) and inserting a semicolon,
and by adding at the end the following:
‘‘(iv)(I) the entire amount received
(including money and other property) rep-
resents the entire interest in the account
or the entire value of the annuity,
‘‘(II) no amount in the account and
no part of the value of the annuity is at-
tributable to any source other than a roll-
over contribution from an eligible retire-
ment plan and any earnings on such roll-
over, and
‘‘(III) such entire amount received is
paid into an eligible retirement plan (for
the benefit of such individual) not later
than the 60th day after he receives the
payment or distribution; or
‘‘(v) the entire amount received (in-
cluding money and any other property) is
paid into an eligible retirement plan for
the benefit of such individual not later
than the 60th day after the date on which
he receives the payment or distribution.
For purposes of clauses (iv) and (v), the term
‘eligible retirement plan’ has the meaning given
such term by clauses (iii), (iv), (v), and (vi) of
section 402(c)(8)(B), except that for purposes
of clause (iv)(II) of this subparagraph, the term
shall also include an eligible deferred compensa-
tion plan described in section 457(b) of an eligi-
ble 
employer 
described 
in 
section
457(e)(1)(B).’’
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 403(b) is amended
by striking ‘‘section 408(d)(3)(A)(iii)’’ and inserting
‘‘clause (iii), (iv), or (v) of section 408(d)(3)(A)’’.
(2) Clause (i) of section 408(d)(3)(D) is amend-
ed by striking ‘‘or (iii)’’ and inserting ‘‘(iii), (iv), or
(v)’’.
(3) Subparagraph (G) of section 408(d)(3) is
amended to read as follows:
‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—In
the case of any payment or distribution out of
a simple retirement account (as defined in sub-
section (p)) to which section 72(t)(6) applies,
this paragraph shall not apply unless such pay-
ment or distribution is paid into another simple
retirement account.’’
(c) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after the
date of the enactment of this Act.
(2) SPECIAL RULE.—Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of
section 1122 of the Tax Reform Act of 1986 shall
not apply to any distribution from an eligible retire-
ment plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986)
on behalf of an individual if there was a rollover to
such plan on behalf of such individual which is per-
mitted solely by reason of the amendments made by
this section.
SEC. 4. FASTER VESTING OF EMPLOYER MATCHING CON-
TRIBUTIONS.
(a) AMENDMENTS TO 1986 CODE.—Subsection (a) of
section 411 (relating to minimum vesting standards) is
amended—
(1) in paragraph (2), by striking ‘‘A plan’’ and
inserting ‘‘Except as provided in paragraph (12), a
plan’’, and
(2) by adding at the end the following:
‘‘(12) FASTER VESTING FOR MATCHING CON-
TRIBUTIONS.—In the case of matching contributions
(as defined in section 401(m)(4)(A)), paragraph (2)
shall be applied—
‘‘(A) by substituting ‘3 years’ for ‘5 years’
in subparagraph (A), and
‘‘(B) by substituting the following table for
the table contained in subparagraph (B):
The nonforfeitable
‘‘Years of service:
percentage is:
2 ...............................................................................................
The nonforfeitable
‘‘Years of service:
percentage is:
3 ...............................................................................................
4 ...............................................................................................
5 ...............................................................................................
6 ...............................................................................................
100.’’
(b) AMENDMENTS TO ERISA.—Section 203(a) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1053(a)) is amended—
(1) in paragraph (2), by striking ‘‘A plan’’ and
inserting ‘‘Except as provided in paragraph (4), a
plan’’, and
(2) by adding at the end the following:
‘‘(4) FASTER
VESTING
FOR
MATCHING
CON-
TRIBUTIONS.—In the case of matching contributions
(as defined in section 401(m)(4)(A) of the Internal
Revenue Code of 1986), paragraph (2) shall be
applied—
‘‘(A) by substituting ‘3 years’ for ‘5 years’
in subparagraph (A), and
‘‘(B) by substituting the following table for
the table contained in subparagraph (B):
The nonforfeitable
‘‘Years of service:
percentage is:
2 ...............................................................................................
3 ...............................................................................................
4 ...............................................................................................
5 ...............................................................................................
6 ...............................................................................................
100.’’
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to contributions for plan years beginning
after December 31, 2001.
(2) COLLECTIVE BARGAINING AGREEMENTS.—
In the case of a plan maintained pursuant to 1 or
more collective bargaining agreements between em-
ployee representatives and 1 or more employers rati-
fied by the date of enactment of this Act, the
amendments made by this section shall not apply to
contributions on behalf of employees covered by any
such agreement for plan years beginning before the
earlier of—
(A) the later of—
(i) the date on which the last of such
collective bargaining agreements termi-
nates (determined without regard to any
extension thereof on or after such date of
enactment), or
(ii) January 1, 2002, or
(B) January 1, 2006.
(3) PARTICIPATION
REQUIRED.—The amend-
ments made by this section shall not apply to any
employee who does not have 1 hour of service in any
plan year to which the amendments made by this
section apply.
SEC. 5. EXTENSION OF MISSING PARTICIPANTS PROGRAM.
(a) IN GENERAL.—Section 4050 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1350)
is amended by redesignating subsection (c) as subsection
(e) and by inserting after subsection (b) the following new
subsections:
‘‘(c) MULTIEMPLOYER
PLANS.—The corporation
shall prescribe rules similar to the rules in subsection (a)
for multiemployer plans covered by this title that termi-
nate under section 4041A.
‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—
‘‘(1) TRANSFER TO CORPORATION.—The plan
administrator of a plan described in paragraph (4)
may elect to transfer a missing participant’s benefits
to the corporation upon termination of the plan.
‘‘(2) INFORMATION TO THE CORPORATION.—To
the extent provided in regulations, the plan adminis-
trator of a plan described in paragraph (4) shall,
upon termination of the plan, provide the corpora-
tion information with respect to benefits of a miss-
ing participant if the plan transfers such benefits—
‘‘(A) to the corporation, or
‘‘(B) to an entity other than the corpora-
tion or a plan described in paragraph (4)(B)(ii).
‘‘(3) PAYMENT BY THE CORPORATION.—If ben-
efits of a missing participant were transferred to the
corporation under paragraph (1), the corporation
shall, upon location of the participant or beneficiary,
pay to the participant or beneficiary the amount
transferred (or the appropriate survivor benefit)
either—
‘‘(A) in a single sum (plus interest), or
‘‘(B) in such other form as is specified in
regulations of the corporation.
‘‘(4) PLANS DESCRIBED.—A plan is described
in this paragraph if—
‘‘(A) the plan is a pension plan (within the
meaning of section 3(2))—
‘‘(i) to which the provisions of this
section do not apply (without regard to
this subsection), and
‘‘(ii) which is not a plan described in
paragraphs (2) through (11) of section
4021(b), and
‘‘(B) at the time the assets are to be dis-
tributed upon termination, the plan—
‘‘(i) has missing participants, and
‘‘(ii) has not provided for the transfer
of assets to pay the benefits of all missing
participants to another pension plan (with-
in the meaning of section 3(2)).
‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—
Subsections (a)(1) and (a)(3) shall not apply to a
plan described in paragraph (4).’’.
(b) CONFORMING AMENDMENT.—Section 206(f) of
the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1056(f)) is amended by striking ‘‘the plan shall
provide that’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions made after final
regulations implementing subsections (c) and (d) of sec-
tion 4050 of the Employee Retirement Income Security
Act of 1974 (as added by subsection (a)), respectively, are
prescribed.
SEC. 6. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) IN GENERAL.—
(1) Subsection (c) of section 402 (relating to
rules applicable to rollovers from exempt trusts) (as
amended by section 2) is amended by striking para-
graph (2) and redesignating paragraphs (3) through
(10) as paragraphs (2) through (9), respectively.
(2) Paragraph (31) of section 401(a) (relating
to optional direct transfer of eligible rollover dis-
tributions) is amended by striking subparagraph (B)
and redesignating subparagraphs (C) and (D) as
subparagraphs (B) and (C), respectively.
(3) Subparagraph (B) of section 408(d)(3) (re-
lating to rollover contributions) is amended by strik-
ing ‘‘which was not includible in his gross income
because of the application of this paragraph’’ and in-
serting ‘‘to which this paragraph applied’’.
(4) Paragraph (7)(B) of section 402(c) (as re-
designated by subsection (a) and as amended by sec-
tion 2) is amended—
(A) by striking ‘‘The term’’ and inserting
‘‘Except as provided in this subparagraph, the
term’’, and
(B) by adding at the end the following:
‘‘Arrangements described in clauses (iii), (iv)
(v), and (vi) shall not be treated as eligible re-
tirement plans for purposes of receiving a roll-
over contribution of an eligible rollover distribu-
tion to the extent that such eligible rollover dis-
tribution is not includible in gross income (de-
termined without regard to paragraph (1)).’’
(5) Paragraph (2) of section 408(d) is
amended—
(A) by striking ‘‘For purposes’’ and insert-
ing the following:
‘‘(A) IN GENERAL.—Except as provided in
this paragraph, for purposes’’,
(B) by striking ‘‘(A) all’’ and inserting ‘‘(i)
all’’;
(C) by striking ‘‘(B) all’’ and inserting
‘‘(ii) all’’;
(D) by striking ‘‘(C) the’’ and inserting
‘‘(iii) the’’;
(E) by striking ‘‘subparagraph (C)’’ and
inserting ‘‘clause (iii)’’; and
(F) by inserting at the end the following:
‘‘(B) APPLICATION OF SECTION 72.—For
purposes of applying section 72, if—
‘‘(i) a distribution is made from an in-
dividual retirement plan, and
‘‘(ii) a rollover contribution described
in paragraph (3) is made to an eligible re-
tirement 
plan 
described 
in 
section
402(c)(7)(B)(iii), (iv), (v), or (vi) with re-
spect to all or part of such distribution,
the includible amount in the individual’s indi-
vidual retirement plans shall be reduced by the
amount described in subparagraph (C). As of
the close of the calendar year in which the tax-
able year begins, the reduction of all amounts
described in subparagraph (C)(i) shall be ap-
plied prior to the computations described in
subparagraph (A)(iii). The amount of any dis-
tribution with respect to which there is a roll-
over contribution described in clause (ii) shall
not be treated as a distribution for purposes of
subparagraph (A).
‘‘(C) AMOUNT DESCRIBED.—The amount
described in this subparagraph is the sum of—
‘‘(i) the amount of the rollover con-
tribution 
described 
in 
subparagraph
(B)(ii), and
‘‘(ii) in the case of any portion of the
distribution with respect to which there is
not a rollover contribution described in
paragraph (3), the amount of such portion
that is included in gross income under sec-
tion 72.
‘‘(D) INCLUDIBLE AMOUNT.—For purposes
of this paragraph, the term ‘includible amount’
shall mean the amount that is not investment
in the contract (as defined in section 72).’’
(6) Subparagraph (C) of section 402(c)(6) is
amended by inserting after ‘‘other than money’’ the
following: ‘‘or where the amount of the distribution
exceeds the amount of the rollover contribution’’.
(7) Clause (ii) of section 408(d)(3)(A) is
amended—
(A) by striking ‘‘an employee’s trust de-
scribed in section 401(a) which is exempt from
tax under section 501(a) or from an annuity
plan described in section 403(a)’’ and inserting
‘‘an eligible retirement plan (as defined in sec-
tion 402(c)(7)(B)(iii) or (iv))’’, and
(B) by striking ‘‘such trust or annuity
plan’’ and inserting ‘‘such eligible retirement
plan (as defined in section 402(c)(7)(B)(iii) or
(iv))’’.
(8) Clause (iii) of section 408(d)(3)(A) is
amended—
(A) by striking ‘‘an annuity contract de-
scribed in section 403(b)’’ and inserting ‘‘an eli-
gible retirement plan (as defined in section
402(c)(7)(B)(vi))’’, and
(B) by striking ‘‘another annuity contract
described in section 403(b)’’ and inserting ‘‘an-
other eligible retirement plan (as defined in sec-
tion 402(c)(7)(B)(vi))’’.
(b) HARDSHIP EXCEPTION TO 60-DAY RULE.—
(1) Paragraph (2) of section 402(c) (as so re-
designated) is amended to read as follows:
‘‘(2) TRANSFER
MUST
BE
MADE
WITHIN
DAYS OF RECEIPT.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), paragraph (1) shall not
apply to any transfer of a distribution made
after the 60th day following the day on which
the distributee received the property distrib-
uted.
‘‘(B) HARDSHIP
EXCEPTION.—The Sec-
retary may waive the 60-day requirement under
subparagraph (A) where the failure to waive
such requirement would be against equity or
good conscience, including casualty, disaster, or
other events beyond the reasonable control of
the individual subject to such requirement.’’
(2) Paragraph (3) of section 408(d) (relating to
rollover contributions) is amended by adding at the
end the following new subparagraph:
‘‘(H) WAIVER OF 60-DAY REQUIREMENT.—
The Secretary may waive the 60-day require-
ment under subparagraphs (A) and (D) where
the failure to waive such requirement would be
against equity or good conscience, including
casualty, disaster, or other events beyond the
reasonable control of the individual subject to
such requirement.’’
(c) CONFORMING AMENDMENTS.—
(1) Paragraph (5) of section 402(c) is amended
by striking ‘‘(8)(B)’’ and inserting ‘‘(7)(B)’’.
(2) Subparagraph (B) of section 403(a)(4) is
amended by striking ‘‘(2) through (7)’’ and inserting
‘‘(2) through (6)’’.
(3) Section 403(b)(8)(A)(ii) (as amended by
section 
2) 
is 
amended 
by 
striking 
‘‘section
402(c)(8)(B)’’ and inserting ‘‘section 402(c)(7)(B)’’.
(4) Subparagraph (A) of section 408(d)(3) (as
amended by section 3) is amended by striking
‘‘402(c)(8)’’ and inserting ‘‘402(c)(7)’’.
(5) Paragraph (16) of section 457(e) (as added
by section 301) is amended—
(A) in subparagraph (A)(i) by striking
‘‘402(c)(4)’’ and inserting ‘‘402(c)(3)’’,
(B) in subparagraph (A)(ii) by striking
‘‘402(c)(8)(B)’’ and inserting ‘‘402(c)(7)(B)’’,
and
(C) in subparagraph (B) by striking ‘‘para-
graphs (2) through (7) and (9) of section
402(c)’’ and inserting ‘‘paragraphs (2) through
(6) and (8) of section 402(c)’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided by para-
graph (2), the amendments made by this section
shall apply to distributions made after the date of
the enactment of this Act.
(2) HARDSHIP EXCEPTION.—The amendments
made by subsection (b) shall apply to 60-day periods
ending after the date of the enactment of this Act.
SEC. 7. RATIONALIZATION OF RESTRICTIONS ON DISTRIBU-
TIONS 
FROM 
DEFINED 
CONTRIBUTION
PLANS.
(a) DISTRIBUTIONS
PERMITTED
ON
SEVERANCE
FROM EMPLOYMENT.—
(1) 401(k) PLANS.—Section 401(k)(2)(B)(i)(I)
(relating to qualified cash or deferred arrangements)
is amended by striking ‘‘separation from service’’
and inserting ‘‘severance from employment’’.
(2) 403(b) CONTRACTS.—
(A) Clause (ii) of section 403(b)(7)(A) is
amended by striking ‘‘separates from service’’
and inserting ‘‘severs from employment’’.
(B) Paragraph (11) of section 403(b) is
amended—
(i) by striking ‘‘SEPARATION
FROM
SERVICE’’ in the heading and inserting
‘‘SEVERANCE FROM EMPLOYMENT’’, and
(ii) by striking ‘‘separates from serv-
ice’’ and inserting ‘‘severs from employ-
ment’’.
(3) 
457 
PLANS.—Clause 
(ii) 
of 
section
457(d)(1)(A) is amended by striking ‘‘is separated
from service’’ and inserting ‘‘has a severance from
employment’’.
(b) BUSINESS SALE REQUIREMENTS DELETED.—
(1) IN GENERAL.—Section 401(k)(2)(B)(i)(II)
(relating to qualified cash or deferred arrangements)
is amended by striking ‘‘an event’’ and inserting ‘‘a
plan termination’’.
(2) 
CONFORMING
AMENDMENTS.—Section
401(k)(10) is amended—
(A) by striking subparagraph (A) and in-
serting the following:
‘‘(A) IN GENERAL.—A plan termination is
described in this paragraph if the termination
of the plan does not involve the establishment
or maintenance of another defined contribution
plan (other than an employee stock ownership
plan as defined in section 4975(e)(7)).’’,
(B) in subparagraph (B)—
(i) by striking ‘‘An event’’ and insert-
ing ‘‘A termination’’, and
(ii) by striking ‘‘the event’’ and insert-
ing ‘‘the termination’’,
(C) by striking subparagraph (C), and
(D) by striking ‘‘OR DISPOSITION OF AS-
SETS OR SUBSIDIARY’’ in the heading.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after December 31,
2001.
SEC. 8. EMPLOYERS MAY DISREGARD ROLLOVERS FOR
PURPOSES OF CASH-OUT AMOUNTS.
(a) AMENDMENTS TO 1986 CODE.—
(1) Section 411(a)(11) (relating to restrictions
on certain mandatory distributions) is amended by
adding at the end the following:
‘‘(D) SPECIAL RULE FOR ROLLOVER CON-
TRIBUTIONS.—A plan shall not fail to meet the
requirements of this paragraph if, under the
terms of the plan, the present value of the non-
forfeitable accrued benefit is determined with-
out regard to that portion of such benefit which
is attributable to rollover contributions (and
earnings allocable thereto). For purposes of this
subparagraph, the term ‘rollover contributions’
means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), clause (ii), (iii),
or (iv) of 408(d)(3)(A), and 457(e)(16).’’.
(2) Clause (i) of section 457(e)(9)(A) is amend-
ed by striking ‘‘such amount’’ and inserting ‘‘the
portion of such amount which is not attributable to
rollover 
contributions 
(as 
defined 
in 
section
411(a)(11)(D))’’.
(b) AMENDMENT TO ERISA.—Section 203(e) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1053(e)) is amended by adding at the end the fol-
lowing:
‘‘(4) A plan shall not fail to meet the requirements
of this subsection if, under the terms of the plan, the
present value of the nonforfeitable accrued benefit is de-
termined without regard to that portion of such benefit
which is attributable to rollover contributions (and earn-
ings allocable thereto). For purposes of this paragraph,
the term ‘rollover contributions’ means any rollover con-
tribution under sections 402(c), 403(a)(4), 403(b)(8),
clause (ii), (iii), or (iv) of 408(d)(3)(A), and 457(e)(16)
of the Internal Revenue Code of 1986.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after the date of
the enactment of this Act.
SEC. 9. PURCHASE OF SERVICE CREDIT IN GOVERN-
MENTAL DEFINED BENEFIT PLANS.
(a) 403(b) PLANS.—Subsection (b) of section 403 is
amended by adding at the end the following new para-
graph:
‘‘(13) TRUSTEE-TO-TRUSTEE
TRANSFERS
TO
PURCHASE
PERMISSIVE
SERVICE
CREDIT.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer to a defined
benefit governmental plan (as defined in section
414(d)) if such transfer is—
‘‘(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A))
under such plan, or
‘‘(B) a repayment to which section 415
does not apply by reason of subsection (k)(3)
thereof.’’
(b) 457 PLANS.—
(1) Subsection (e) of section 457 is amended by
adding at the end the following new paragraph:
‘‘(17) TRUSTEE-TO-TRUSTEE
TRANSFERS
TO
PURCHASE
PERMISSIVE
SERVICE
CREDIT.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer to a defined
benefit governmental plan (as defined in section
414(d)) if such transfer is—
‘‘(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A))
under such plan, or
‘‘(B) a repayment to which section 415
does not apply by reason of subsection (k)(3)
thereof.’’
(2) Section 457(b)(2), as amended by section 2,
is amended by striking ‘‘(other than rollover
amounts)’’ and inserting ‘‘(other than rollover
amounts and amounts received in a transfer referred
to in subsection (e)(17))’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to trustee-to-trustee transfers after
the date of the enactment of this Act.
SEC. 10. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) IN GENERAL.—If this section applies to any plan
or contract amendment—
(1) such plan or contract shall be treated as
being operated in accordance with the terms of the
plan during the period described in subsection
(b)(2)(A), and
(2) such plan shall not fail to meet the require-
ments of section 411(d)(6) of the Internal Revenue
Code of 1986 or section 204(g) of the Employee Re-
tirement Income Security Act of 1974 by reason of
such amendment.
(b) AMENDMENTS TO WHICH SECTION APPLIES.—
(1) IN GENERAL.—This section shall apply to
any amendment to any plan or annuity contract
which is made—
(A) pursuant to any amendment made by
this Act or pursuant to any guidance issued by
the Secretary of the Treasury (or the Sec-
retary’s delegate) under any such amendment,
and
(B) on or before the last day of the first
plan year beginning on or after January 1,
2004.
In the case of a governmental plan (as defined in
section 414(d) of the Internal Revenue Code of
1986), this paragraph shall be applied by sub-
stituting ‘‘2006’’ for ‘‘2004’’.
(2) CONDITIONS.—This section shall not apply
to any amendment unless—
(A) during the period—
(i) beginning on the date the legisla-
tive amendment or guidance described in
paragraph (1)(A) takes effect (or in the
case of a plan or contract amendment not
required by such legislative amendment or
guidance, the effective date specified by the
plan), and
(ii) ending on the date described in
paragraph (1)(B) (or, if earlier, the date
the 
plan 
or 
contract 
amendment 
is
adopted),
the plan or contract is operated as if such plan
or contract amendment were in effect, and
(B) such plan or contract amendment ap-
plies retroactively for such period.
Æ