I
105TH CONGRESS
2D SESSION
H. R. 3788
To provide for pension reform, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MAY 4, 1998
Mr. PORTMAN (for himself and Mr. CARDIN) 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 provide for pension reform, 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;
TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Retirement Security for the 21st Century Act’’.
(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.
(c) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I—EXPANDING COVERAGE
Sec. 101. Restoration of limits formerly in effect.
Sec. 102. Plan loans for subchapter S owners, partners, and sole proprietors.
Sec. 103. Salary reduction only simple plans.
Sec. 104. Modification of top-heavy rules.
Sec. 105. Qualified staffing firms.
Sec
106. Elective deferrals not taken into account for purposes of limits.
Sec. 107. Phase-in of additional PBGC premium for new plans.
Sec. 108. Repeal of coordination requirements for deferred compensation plans
of State and local governments and tax-exempt organizations.
TITLE II—ENHANCING FAIRNESS FOR WOMEN AND CHILDREN
Sec. 201. Additional salary reduction catch-up contributions.
Sec. 202. Equitable treatment for contributions of employees to defined con-
tribution plans.
Sec. 203. Faster vesting of certain employer matching contributions.
Sec. 204. Deferred annuities for surviving spouses of Federal employees.
Sec. 205. Simplify and update the minimum distribution rules.
Sec. 206. Clarification of tax treatment of division of section 457 plan benefits
upon divorce.
TITLE III—INCREASING PORTABILITY FOR PARTICIPANTS
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. Treatment of forms of distribution.
Sec. 305. Rationalization of restrictions on distributions.
Sec. 306. Purchase of service credit in governmental defined benefit plans.
TITLE IV—STRENGTHENING PENSION SECURITY AND
ENFORCEMENT
Sec. 401. Repeal of 150 percent of current liability funding limit.
Sec. 402. Missing participants.
Sec. 403. Periodic pension benefits statements.
Sec. 404. Civil penalties for breach of fiduciary responsibility.
Sec. 405. Penalty tax relief for sound pension funding.
TITLE V—REDUCING REGULATORY BURDENS
Sec. 501. Intermediate sanctions for inadvertent failures.
Sec. 502. Repeal of the multiple use test.
Sec. 503. Safety valve from mechanical rules.
Sec. 504. Reform of the line of business rules.
Sec. 505. Coverage test flexibility.
Sec. 506. Increase in retirement plan cash-out amount.
Sec. 507. Simplification of cash-out rule.
Sec. 508. Modification of timing of plan valuations.
Sec. 509. Section 457 inapplicable to certain mirror plans.
Sec. 510. Rules for substantial owners relating to plan terminations.
Sec. 511. ESOP dividends may be reinvested without loss of dividend deduc-
tion.
Sec. 512. Modification of 403(b) exclusion allowance to conform to 415 modi-
fication.
Sec. 513. Treatment of multiemployer plans under section 415.
Sec. 514. Elimination of partial termination rules for multiemployer plans.
Sec. 515. Notice and consent period regarding distributions.
Sec. 516. Conforming amendments relating to election to receive taxable cash
compensation in lieu of nontaxable parking benefits.
Sec. 517. Extension to international organizations of moratorium on application
of certain nondiscrimination rules applicable to State and local
plans.
Sec. 518. Employees of tax-exempt entities.
Sec. 519. Permissive aggregation of collective bargaining units.
Sec. 520. Repeal of transition rule relating to certain highly compensated em-
ployees.
Sec. 521. Provisions relating to plan amendments.
TITLE I—EXPANDING COVERAGE
SEC. 101. RESTORATION OF LIMITS FORMERLY IN EFFECT.
(a) DEFINED BENEFIT PLANS.—
(1) DOLLAR LIMIT.—(A) Subparagraph (A) of
section 415(b)(1) (relating to limitation for defined
benefit plans) is amended by striking ‘‘$90,000’’ and
inserting ‘‘$140,000’’.
(B) Subparagraphs (C) and (D) of section
415(b)(2) are each amended by striking ‘‘$90,000’’
each place it appears in the headings and the text
and inserting ‘‘$140,000’’.
(C) Paragraph (7) of section 415(b) (relating to
benefits under certain collectively bargained plans) is
amended by striking ‘‘the greater of $68,212 or one-
half the amount otherwise applicable for such year
under paragraph (1)(A) for ‘$90,000’ ’’ and insert-
ing ‘‘one-half the amount otherwise applicable for
such year under paragraph (1)(A) for ‘$140,000’ ’’.
(2) LIMIT
REDUCED
WHEN
BENEFIT
BEGINS
BEFORE
AGE
62.—Subparagraph (C) of section
415(b)(2) is amended by striking ‘‘the social security
retirement age’’ each place it appears in the heading
and text and inserting ‘‘age 62’’.
(3) LIMIT INCREASED WHEN BENEFIT BEGINS
AFTER
AGE
65.—Subparagraph (D) of section
415(b)(2) is amended by striking ‘‘the social security
retirement age’’ each place it appears in the heading
and text and inserting ‘‘age 65’’.
(4) PLANS MAINTAINED BY GOVERNMENTS AND
TAX
EXEMPT
ORGANIZATIONS.—Subparagraph (F)
of section 415(b)(2) is amended to read as follows:
‘‘(F) PLANS
MAINTAINED
BY
GOVERN-
MENTS AND TAX-EXEMPT ORGANIZATIONS.—
‘‘(i) IN GENERAL.—In the case of a
governmental plan (within the meaning of
section 414(d)), a plan maintained by an
organization (other than a governmental
unit) exempt from tax under this subtitle,
or a qualified merchant marine plan, sub-
paragraph (C) shall be applied as if the
last sentence thereof read as follows: ‘The
reduction under this subparagraph shall
not reduce the limitation of paragraph
(1)(A) below (i) $100,000 if the benefit be-
gins at or after age 55, or (ii) if the bene-
fit begins before age 55, the equivalent of
the $100,000 limitation for age 55.’
‘‘(ii) DEFINITIONS.—For purposes of
this subparagraph—
‘‘(I) QUALIFIED MERCHANT MA-
RINE PLAN.—The term ‘qualified mer-
chant marine plan’ means a plan in
existence on January 1, 1986, the
participants in which are merchant
marine officers holding licenses issued
by the Secretary of Transportation
under title 46, United States Code.
‘‘(II) 
EXEMPT
ORGANIZATION
PLAN COVERING 50 PERCENT OF ITS
EMPLOYEES.—A plan shall be treated
as a plan maintained by an organiza-
tion (other than a governmental unit)
exempt from tax under this subtitle if
at least 50 percent of the employees
benefiting under the plan are employ-
ees of an organization (other than a
governmental unit) exempt from tax
under this subtitle.’’
(5) 
COST-OF-LIVING
ADJUSTMENTS.—Sub-
section (d) of section 415 (related to cost-of-living
adjustments) is amended—
(A) in paragraph (1)(A) by striking
‘‘$90,000’’ and inserting ‘‘$140,000’’, and
(B) in paragraph (3)(A)—
(i) by striking ‘‘$90,000’’ in the head-
ing and inserting ‘‘$140,000’’, and
(ii) by striking ‘‘October 1, 1986’’ and
inserting ‘‘July 1, 1998’’.
(b) DEFINED CONTRIBUTION PLANS.—
(1) DOLLAR LIMIT.—Subparagraph (A) of sec-
tion 415(c)(1) (relating to limitation for defined con-
tribution plans) is amended by striking ‘‘$30,000’’
and inserting ‘‘$45,000’’.
(2) 
COST-OF-LIVING
ADJUSTMENTS.—Sub-
section (d) of section 415 (related to cost-of-living
adjustments) is amended—
(A) in paragraph (1)(C) by striking
‘‘$30,000’’ and inserting ‘‘$45,000’’, and
(B) in paragraph (3)(D)—
(i) by striking ‘‘$30,000’’ in the head-
ing and inserting ‘‘$45,000’’, and
(ii) by striking ‘‘October 1, 1993’’ and
inserting ‘‘July 1, 1998’’.
(c) QUALIFIED TRUSTS.—
(1) 
COMPENSATION
LIMIT.—Sections
401(a)(17), 404(l), 408(k), and 505(b)(7) are each
amended by striking ‘‘$150,000’’ each place it ap-
pears and inserting ‘‘$235,000’’.
(2) BASE PERIOD AND ROUNDING OF COST-OF-
LIVING ADJUSTMENT.—Subparagraph (B) of section
401(a)(17) is amended—
(A) by striking ‘‘October 1, 1993’’ and in-
serting ‘‘July 1, 1998’’, and
(B) by striking ‘‘$10,000’’ both places it
appears and inserting ‘‘$5,000’’.
(d) ELECTIVE DEFERRALS.—
(1) IN GENERAL.—Paragraphs (1) and (5) of
section 402(g) (relating to limitation on exclusion
for elective deferrals) are each amended by striking
‘‘$7,000’’ and inserting ‘‘$15,000’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 402(g) (relating to limitation
on exclusion for elective deferrals), as amended
by paragraph (1), is further amended by strik-
ing paragraph (4) and redesignating para-
graphs (5), (6), (7), (8), and (9) as paragraphs
(4), (5), (6), (7), and (8), respectively.
(B) Paragraph (2) of section 457(c) is
amended by striking ‘‘402(g)(8)(A)(iii)’’ and in-
serting ‘‘402(g)(7)(A)(iii)’’.
(C) Clause (iii) of section 501(c)(18)(D) is
amended by striking ‘‘(other than paragraph
(4) thereof)’’.
(e) DEFERRED COMPENSATION PLANS
OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI-
ZATIONS.—Section 457 (relating to deferred compensation
plans of State and local governments and tax-exempt orga-
nizations) is amended—
(1) in subsections (b)(2)(A), (c)(1), and (e)(15)
by striking ‘‘$7,500’’ each place it appears and in-
serting ‘‘$15,000’’,
(2) 
in 
subsection 
(b)(3)(A) 
by 
striking
‘‘$15,000’’ and inserting ‘‘$30,000’’, and
(3) in subsection (e)(15)—
(A) by inserting ‘‘and the $30,000 amount
specified 
in 
subsection 
(b)(3)(A)’’ 
after
‘‘(c)(1)’’, and
(B) by striking ‘‘September 30, 1994’’ and
inserting ‘‘September 30, 1998’’.
(f) SIMPLE RETIREMENT ACCOUNTS.—
(1) 
LIMITATION.—Sections 
408(p)(2)(A)(ii),
401(k)(11)(B)(i)(I), and 401(k)(11)(E) are each
amended by striking ‘‘$6,000’’ and inserting
‘‘$10,000’’.
(2) BASE PERIOD FOR COST-OF-LIVING ADJUST-
MENT.—Subparagraph (E) of section 408(p)(2) is
amended by striking ‘‘September 30, 1996’’ and in-
serting ‘‘September 30, 1998’’.
(g) COST-OF-LIVING ADJUSTMENTS.—
(1) PLANS MAINTAINED BY GOVERNMENTS AND
TAX
EXEMPT
ORGANIZATIONS.—Paragraph (1) of
section 415(d) (as amended by subsection (b)) is
amended by striking ‘‘and’’ at the end of subpara-
graph (B), by redesignating subparagraph (C) as
subparagraph (D), and by inserting after subpara-
graph (B) the following new subparagraph:
‘‘(C) the $100,000 amount in subsection
(b)(2)(F), and’’.
(2) BASE PERIOD.—Paragraph (3) of section
415(d) (as amended by subsection (b)) is further
amended by redesignating subparagraph (D) as sub-
paragraph (E) and by inserting after subparagraph
(C) the following new subparagraph:
‘‘(D) $100,000 AMOUNT.—The base period
taken into account for purposes of paragraph
(1)(C) is the calendar quarter beginning July 1,
1998.’’
(3) ROUNDING RULE RELATING TO DEFINED
BENEFIT
PLANS
AND
DEFINED
CONTRIBUTION
PLANS.—Paragraph (4) of section 415(d) is amend-
ed to read as follows:
‘‘(4) ROUNDING.—
‘‘(A) $140,000 AMOUNT.—Any increase
under subparagraph (A) of paragraph (1) which
is not a multiple of $5,000 shall be rounded to
the next lowest multiple of $5,000.
‘‘(B) $100,000 AND $45,000 AMOUNTS.—
Any increase under subparagraph (C) or (D) of
paragraph (1) which is not a multiple of $1,000
shall be rounded to the next lowest multiple of
$1,000.’’
(4) CONFORMING AMENDMENT.—Subparagraph
(D) of section 415(d)(3) (as amended by paragraph
(1)) is amended by striking ‘‘paragraph (1)(C)’’ and
inserting ‘‘paragraph (1)(D)’’.
(h) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to years beginning after De-
cember 31, 1998.
(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 or benefits pursuant to any such
agreement for 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, 1999, or
(B) January 1, 2003.
SEC. 102. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART-
NERS, AND SOLE PROPRIETORS.
(a) AMENDMENT TO 1986 CODE.—Subsection (f) of
section 4975 (relating to other definitions and special
rules) is amended by striking paragraph (6).
(b) AMENDMENTS TO ERISA.—
(1) Section 408 of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1108) is
amended—
(A) by striking subsection (d); and
(B) by redesignating subsections (e) and
(f) as subsections (d) and (e), respectively.
(2) Section 407(b)(3)(B) of such Act (29
U.S.C. 1107(b)(3)(B)) is amended by striking ‘‘sec-
tion 408(e)’’ and inserting ‘‘section 408(d)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of enactment of
this Act.
SEC. 103. SALARY REDUCTION ONLY SIMPLE PLANS.
(a) SIMPLE RETIREMENT ACCOUNTS.—
(1) IN
GENERAL.—Paragraph (2) of section
408(p) (as amended by section 101(f)) is further
amended—
(A) by redesignating subparagraphs (C),
(D), and (E) as subparagraphs (D), (E), and
(F), respectively; and
(B) by inserting after subparagraph (B)
the following:
‘‘(C) EMPLOYER MAY ELECT SALARY RE-
DUCTION ONLY ARRANGEMENT.—
‘‘(i) IN GENERAL.—An employer shall
be treated as meeting the requirements of
subparagraph (A)(iii) for any year if, in
lieu of the contributions described in such
subparagraph, the employer elects to limit
the amount which an employee may elect
under subparagraph (A)(i) to a total of
$5,000 for the year. If an employer makes
an election under this subparagraph for
any year, the employer shall notify employ-
ees of such election within a reasonable pe-
riod of time before the 60-day period for
such year under paragraph (5)(C).
‘‘(ii) 
EXCEPTION.—This 
subpara-
graph shall not apply to an employer if
such employer (or any predecessor em-
ployer) maintained another qualified plan
(as defined in subparagraph (D)(ii)) with
respect to which contributions were made,
or benefits were accrued, for service during
the year in which the arrangement de-
scribed in clause (i) became effective or ei-
ther of the 2 preceding years. If only indi-
viduals other than employees described in
subparagraph (A) or (B) of section
410(b)(3) are eligible to participate in the
arrangement described in clause (i), then
the preceding sentence shall be applied
without regard to any qualified plan in
which only employees so described are eli-
gible to participate.
‘‘(iii) APPLICABLE RULES.—For pur-
poses of this subparagraph, rules similar to
the rules of subparagraph (D)(iii) shall
apply.’’
(2) COST-OF-LIVING
ADJUSTMENT.—Subpara-
graph (F) of section 408(p)(2) (as so redesignated)
is amended by inserting ‘‘and the $5,000 amount
under subparagraph (C)’’ after ‘‘subparagraph
(A)(ii)’’.
(3) COORDINATION
WITH
MAXIMUM
LIMITA-
TION.—Paragraph (8) of section 408(p) (relating to
coordination with maximum limitation under sub-
section (a)) is amended by striking ‘‘paragraph
(2)(A)(ii) of this subsection’’ and inserting ‘‘sub-
paragraph (A)(ii) or (C) of paragraph (2) of this
subsection, whichever is applicable,’’.
(b) ADOPTION OF SIMPLE PLAN TO MEET NON-
DISCRIMINATION TESTS.—
(1) SIMPLE PLAN.—Subparagraph (B) of sec-
tion 401(k)(11) is amended by redesignating clause
(iii) as clause (iv) and by inserting after clause (ii)
the following new clause:
‘‘(iii) EMPLOYER MAY ELECT SALARY
REDUCTION ONLY ARRANGEMENT.—
‘‘(I) IN GENERAL.—An employer
shall be treated as meeting the re-
quirements of clause (i)(II) for any
year if, in lieu of the contributions de-
scribed in such clause, the employer
elects to limit the amount which an
employee may elect under clause (i) to
a total of $5,000 for the year. If an
employer makes an election under this
clause for any year, the employer shall
notify employees of such election with-
in a reasonable period of time before
the 60-day period for such year under
clause (iv)(II).
‘‘(II) EXCEPTION.—This clause
shall not apply to an employer if such
employer (or any predecessor em-
ployer) maintained another qualified
plan 
(as 
defined 
in 
section
408(p)(2)(D)(ii)) 
with 
respect 
to
which contributions were made, or
benefits were accrued, for service dur-
ing the year in which the arrangement
described in subclause (I) became ef-
fective or either of the 2 preceding
years. This subclause shall not apply
if such contributions or benefits were
solely on behalf of employees who are
not eligible to participate in the ar-
rangement described in subclause
(I).’’
(2) COST-OF-LIVING
ADJUSTMENT.—Subpara-
graph (E) of section 401(k)(11) is amended by in-
serting ‘‘and the $5,000 amount under subpara-
graph (B)(iii)’’ after ‘‘subparagraph (B)(i)(I)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1998.
SEC. 104. MODIFICATION OF TOP-HEAVY RULES.
(a) REPEAL OF FAMILY AGGREGATION RULES.—
Section 416(i)(1)(B)(i)(I) (defining 5-percent owner) is
amended by inserting ‘‘(without regard to subsection
(a)(1) thereof)’’ after ‘‘section 318’’.
(b) SIMPLIFICATION OF DEFINITION OF KEY EM-
PLOYEE.—
(1) IN GENERAL.—Section 416(i)(1)(A) (defin-
ing key employee) is amended—
(A) by striking ‘‘or any of the 4 preceding
plan years’’ in the matter preceding clause (i),
(B) by striking clause (i) and inserting the
following:
‘‘(i) an officer of the employer who
has compensation from the employer of
more than $150,000,’’,
(C) by striking clause (ii) and redesignat-
ing clauses (iii) and (iv) as clauses (ii) and (iii),
respectively, and
(D) by striking the second sentence in the
matter following clause (iii), as redesignated by
subparagraph (C).
(2) 
CONFORMING
AMENDMENT.—Section
416(i)(1)(B)(iii) is amended by striking ‘‘and sub-
paragraph (A)(ii)’’.
(c) EMPLOYEE ELECTIVE CONTRIBUTIONS TO PLAN
NOT TAKEN INTO ACCOUNT.—
(1) DEFINITION OF TOP-HEAVY PLAN.—Section
416(g)(4) (relating to other special rules) is amend-
ed by adding at the end the following:
‘‘(H) EMPLOYEE
ELECTIVE
CONTRIBU-
TIONS TO PLAN NOT TAKEN INTO ACCOUNT.—
At the election of the employer, any employee
elective 
contribution 
described 
in 
section
415(c)(3)(D) to a plan (and earnings allocable
thereto) shall not be taken into account for pur-
poses of determining whether a plan is a top-
heavy plan (or whether any aggregation group
which includes such plan is a top-heavy
group).’’
(2) DEFINITION
OF
COMPENSATION.—Section
416(i)(1)(D) (defining compensation) is amended to
read as follows:
‘‘(D) COMPENSATION.—
‘‘(i) IN
GENERAL.—For purposes of
this paragraph, except as provided in
clause (ii), the term ‘compensation’ has the
meaning given such term by section
414(q)(4).
‘‘(ii) EMPLOYEE ELECTIVE CONTRIBU-
TIONS
TO
PLAN
NOT
TAKEN
INTO
AC-
COUNT.—At the election of the employer,
any employee elective contribution de-
scribed in section 415(c)(3)(D) to a plan
(B) in the matter following subparagraph
(B), by striking ‘‘5-year period’’ and inserting
‘‘1-year period’’, and
(2) in paragraph (4)(E)—
(A) by striking ‘‘LAST 5 YEARS’’ in the
heading and inserting ‘‘LAST YEAR BEFORE DE-
TERMINATION DATE’’, and
(B) by striking ‘‘5-year period’’ and insert-
ing ‘‘1-year period’’.
(g) DEFINITION OF TOP-HEAVY PLANS.—
(1) EXCLUSION OF CERTAIN PLANS FROM DEFI-
NITION OF TOP-HEAVY PLAN.—Paragraph (4) of sec-
tion 416(d) (relating to other special rules for top-
heavy plans) is amended by adding at the end the
following new subparagraphs:
‘‘(H) CASH OR DEFERRED ARRANGEMENTS
USING
ALTERNATIVE
METHODS
OF
MEETING
NONDISCRIMINATION
REQUIREMENTS.—The
term ‘top-heavy plan’ shall not include a cash
or deferred arrangement to the extent that such
arrangement meets the requirements of section
401(k)(12). This subparagraph shall also apply
to contributions that are not required to satisfy
the requirements of section 401(k)(12) but are
consistent with the purposes of such section, as
permitted under regulations which the Sec-
retary shall prescribe.
‘‘(I) 
DEFINED
CONTRIBUTION
PLANS
USING
ALTERNATIVE
METHODS
OF
MEETING
NONDISCRIMINATION
REQUIREMENTS.—The
term ‘top-heavy plan’ shall not include a de-
fined contribution plan to the extent that such
plan 
meets 
the 
requirements 
of 
section
401(m)(11). This subparagraph shall also apply
to contributions that are not required to satisfy
the requirements of section 401(m)(11) but are
consistent with the purposes of such section, as
permitted under regulations which the Sec-
retary shall prescribe.’’
(2) AGGREGATION GROUP NOT REQUIRED TO
INCLUDE
CERTAIN
PLANS.—Clause (i) of section
416(g)(2)(A) of such Code (relating to required ag-
gregation) is amended by adding at the end the fol-
lowing new flush sentence:
‘‘Such term shall not include a plan or ar-
rangement described in subparagraph (H)
or (I) of paragraph (4).’’
(h) EFFECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT.—Clause (i) of section 416(c)(2)(B) (relating to
special rule where maximum contribution less than 3 per-
cent) is amended by inserting ‘‘(other than elective defer-
rals (as defined in section 402(g)(3))’’ after ‘‘contribu-
tions’’.
(i) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1998.
SEC. 105. QUALIFIED STAFFING FIRMS.
(a) CODIFICATION OF EMPLOYER STATUS OF QUALI-
FIED STAFFING FIRM
FOR EMPLOYMENT TAX PUR-
POSES.—
(1) 
INCOME
TAX
WITHHOLDING.—Section
3401(d) is amended—
(A) in paragraph (1), by striking ‘‘and’’ at
the end;
(B) in paragraph (2), by striking the pe-
riod and inserting ‘‘, and’’; and
(C) by adding at the end the following:
‘‘(3) notwithstanding any provision in this sub-
title to the contrary, in the case of a qualified staff-
ing firm, described in section 7701(a)(47), paying
wages to an individual performing services for a cus-
tomer of such qualified staffing firm, the term ‘em-
ployer’ means such qualified staffing firm (and not
the customer).’’.
(2) FICA TAX.—Section 3121 is amended by
adding at the end the following:
‘‘(z) 
APPLICATION
TO
QUALIFIED
STAFFING
FIRMS.—In the case of a qualified staffing firm, described
in section 7701(a)(47), paying wages to an individual per-
forming services for a customer of such qualified staffing
firm, the term ‘employer’ means such qualified staffing
firm (and not the customer), notwithstanding any provi-
sion in this subtitle to the contrary.’’.
(3) FUTA TAX.—Subsection (a) of section
3306 is amended by adding at the end the following:
‘‘In the case of a qualified staffing firm, described
in section 7701(a)(47), paying wages to an individ-
ual performing services for a customer of such quali-
fied staffing firm, the term ‘employer’ means such
qualified staffing firm (and not the customer), not-
withstanding any provision in this subtitle to the
contrary.’’.
(4) DEFINITION—Subsection (a) of section
7701 is amended by adding at the end the following
paragraph—
‘‘(47) QUALIFIED
STAFFING
FIRM.—The term
‘qualified staffing firm’ means any person that is engaged
in providing staffing services to a customer pursuant to
a service contract, and that with respect to a worker per-
forming services for the customer who is covered by the
contract—
‘‘(A) Assumes responsibility for payment of
wages to the worker, without regard to the receipt
or adequacy of payment from the customer for such
services,
‘‘(B) Assumes responsibility for reporting, with-
holding, and paying any applicable taxes under
Chapters 21, 23, and 24, with respect to the work-
er’s wages, without regard to the receipt of adequacy
of payment from the customer for such services,
‘‘(C) Assumes responsibility for any worker
benefits that may be required by the service con-
tract, without regard to the receipt or adequacy of
payment from the customer for such services,
‘‘(D) Assumes authority to hire, reassign, and
dismiss the worker and has the contractual right to
exercise this authority independent of the customer,
‘‘(E) Maintains employee records relating to the
worker, and
‘‘(F) Assumes responsibility for addressing the
worker’s complaints, claims, filings, or requests re-
lating to employment, except as otherwise provided
by applicable collective bargaining agreements, if
any, notwithstanding that some or all of the actions
described in this subparagraph may be shared by the
customer.’’.
(b) CODIFICATION OF EMPLOYER STATUS OF QUALI-
FIED STAFFING FIRM FOR PURPOSES OF PROVIDING EM-
PLOYEE BENEFITS.—
(1) Paragraph (20) of section 7701(a) is
amended—
(A) by redesignating the text of such para-
graph as subparagraph (A);
(B) by adding the heading ‘‘(A) FULL-
TIME LIFE INSURANCE SALESMAN.—’’ at the
start of new subparagraph (A); and
(C) by adding at the end of paragraph
(20) the following:
‘‘(B) INDIVIDUAL COVERED BY QUALIFIED
STAFFING FIRM CONTRACT.—For the purpose
of applying the provisions of section 79 with re-
spect to group-term insurance purchased for
employees, for the purpose of applying the pro-
visions of sections 104, 105, and 106 with re-
spect to accident and health insurance or acci-
dent and health plans, for the purpose of apply-
ing the provisions of this title with respect to
contributions to or under a trust which is a
part of a plan described in section 401(a)
(other than a defined benefit plan), or to or
under a plan described in section 403(a) (other
than a defined benefit plan), including for this
purpose elective contributions under section
401(k) and employee contributions and match-
ing contributions under section 401(m), with
respect to a tax-exempt status of a trust form-
ing a part of such plan, and with respect to the
tax-exempt status of a trust forming a part of
such plan, and with respect to distributions
under such a plan, or by a trust forming part
of such a plan, for the purpose of applying sec-
tion 125 with respect to cafeteria plans, for the
purpose of applying section 127 with respect to
educational assistance programs, for the pur-
pose of applying section 129 with respect to de-
pendent care assistance programs, for the pur-
pose of applying the provisions of section
414(n), and for the purpose of applying the
provisions listed in section 414(n)(3), with re-
spect to such other benefits, plans, or programs
as are described in section 414(n)(3), the term
‘employee’ shall include, with respect to a quali-
fied staffing firm, any individual whose em-
ployer is considered to be the qualified staffing
firm for the purpose of Chapters 21, 23, and
24. For these purposes, a change in the employ-
ment relationship between an individual and a
qualified staffing firm or between the individual
and a customer or former customer of the
qualified staffing firm, as the cause may be,
whereby the individual becomes or ceases to be
an employee of the qualified staffing firm under
this subparagraph, shall be treated as the ter-
mination of employment and separation from
service by the individual from the employment
or service of the qualified staffing firm’s cus-
tomer or the qualified staffing firm, as the case
may be.’’.
(c) COVERAGE OF LEASED EMPLOYEES IN EMPLOY-
MENT BENEFIT PLANS.—
(1) APPLICATION OF REQUIREMENTS CONCERN-
ING CASH OR DEFERRED ARRANGEMENTS, MATCH-
ING
CONTRIBUTIONS, AND
EMPLOYEE
CONTRIBU-
TIONS
TO
LEASED
EMPLOYEES.—Section
414(n)(3)(B) is amended by inserting ‘‘401(k),
401(m)’’ before ‘‘408(k)’’.
(2) SPECIAL RULES FOR LEASING ORGANIZA-
TION’S PLAN.—Section 414(n) is amended—
(A) by renumbering paragraph (6) as
paragraph (7); and
(B) by inserting the following as para-
graph (6):
‘‘(6) LEASING ORGANIZATION’S PLAN.—
‘‘(A) ELECTIVE DISAGGREGATION.—
‘‘(i) GENERAL RULE.—A leasing orga-
nization that is a qualified staffing firm
may elect, for any year, to have a plan that
it sponsors and that is described in section
401(a) or 403(a) treated as maintained by
more than one employer for purposes of
applying sections 410(b) and 401(a)(4).
For these purposes, (I) all the employees
who perform services directly for a recipi-
ent and related persons and who would be
treated as leased employees of the recipient
but for the requirements of paragraph
(2)(B), shall be treated as employed by
that recipient, and (II) all employees who
do not meet the requirements of subclause
(I) shall be treated as employed by the
leasing organization. Such leasing organi-
zation may also elect, for any year, to have
a plan that is subject to section 105(h)(3)
and (4), or to section 125(c), tested on a
comparable basis under section 105(h)(3)
and (4), or under section 125(c), as the
case may be.
‘‘(ii) SPECIAL RULES.—A leasing or-
ganization electing under this paragraph
(6)(A) may, under regulations prescribed
by the Secretary, elect in the alternative to
have subclause (I) of paragraph (6)(A)(i)
applied (I) to all employees who perform
services directly for the recipient and the
related persons, whether or not they would
be treated as leased employees of the recip-
ient, or (ii) only with respect to selected re-
cipients and related persons. Notwith-
standing the foregoing, in the event that a
five-percent owner (as defined in section
416(i)) of a recipient is covered by a plan
described in paragraph (6)(A)(i), then such
leasing organization shall be deemed to
have elected disaggregation in accordance
with subclause (ii) of this clause with re-
spect to such recipient and related persons.
‘‘(iii) 
EFFECT
OF
DISQUALIFICA-
TION.—If the plan of a leasing organiza-
tion electing under this paragraph (6)(A)
fails to satisfy the requirements of section
410(b) or section 401(a)(4) with respect to
the person deemed to be the employer
under paragraph (6)(A), only that portion
of the plan that is treated under paragraph
(6)(A) as maintained by such person shall
be disqualified.
‘‘(iv) TREATMENT OF RELATED PER-
SONS.—For purposes of this subparagraph
(A), the term ‘‘recipient’’ shall not include
any person that is a related person with
respect to the leasing organization.
‘‘(B) HIGHLY
COMPENSATED
EMPLOY-
EES.—Whether or not the leasing organization
makes an election under subparagraph (A), sec-
tion 414(q) shall be applied to employees of a
leasing organization that is a qualified staffing
firm by treating the employees who perform
services for a recipient or related persons and
who would be leased employees of the recipient
but for the requirements of paragraph (2)(B)
as employed by, and receiving compensation
from, the recipient or the related person for
purposes of determining whether the employees
are highly compensated employees of the leasing
organization.’’.
(d) REVISIONS TO SAFE HARBOR PROVISION.—
(1) REVISIONS
TO
SAFE
HARBOR
PLAN
RE-
QUIREMENTS.—Subparagraph 
(B) 
of 
section
414(n)(5) is amended to read as follows:
‘‘(B) PLAN REQUIREMENTS.—A plan meets the re-
quirements of this subparagraph if—
‘‘(i) such plan is a money purchase pension
plan or a profit-sharing plan, with a nonintegrated
employer contribution rate for each participant
which is at least 7.5 percent of that portion of the
participant’s compensation attributable to services
performed for the recipient, and which is not de-
pendent on the current or accumulated points of the
leasing organization or on whether the participant
makes an elective contribution or employee contribu-
tion to such plan.
‘‘(ii) such plan provides for full and immediate
vesting,
‘‘(iii) if the plan is a profit-sharing plan, such
plan meets the distribution requirements of section
401(k)(2)(B) with respect to all employer contribu-
tions, and
‘‘(iv) each employee of the leasing organization
who performs services for the recipient immediately
participates in such plan.’’.
(2) EXTENSION OF SAFE HARBOR RULE TO AD-
DITIONAL EMPLOYEE BENEFITS.—Paragraph (5) of
Section 414(n) is amended by adding at the end the
following:
‘‘(D) SPECIAL
RULE
FOR
ADDITIONAL
EM-
PLOYEE BENEFITS.—To the extent provided for in
regulations issued by the Secretary, in the case of a
requirement described in subparagraph (C) of para-
graph (3), this subsection shall not apply to any
leased employee with respect to service performed
for a recipient if—
‘‘(i) such employee is covered by a plan for
an arrangement that is maintained by the leas-
ing organization and that meets such require-
ments as the Secretary shall prescribe in regu-
lations, and
‘‘(ii) leased employees (determined without
regard to this paragraph) do not constitute
more than 20 percent of the recipient’s non-
highly compensated work force.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of the enactment
of this Act. In the case of a plan that covers employees
of a qualified staffing firm who are providing services for
a customer pursuant to a service contract and that was
adopted and in effect before the date of enactment of this
Act, such amendments shall not take effect until the first
day of the first plan year that begins after the date of
enactment of this Act, and the plan shall not be required
to be amended to reflect this Act until the end of such
plan year.
SEC. 106. ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF LIMITS.
(a) IN GENERAL.—Section 404 is amended by adding
at the end the following new subsection:
‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF LIMITS.—Elective deferrals (as
defined in section 402(g)(3)) shall not be subject to any
limitations described in this section (other than subsection
(a)), and such elective deferrals shall not be taken into
account in applying such limitations to any other contribu-
tions.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1998.
SEC. 107. PHASE-IN OF ADDITIONAL PBGC PREMIUM FOR
NEW PLANS.
(a) AMENDMENTS TO ERISA.—Subparagraph (E) of
section 4006(a)(3) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is amend-
ed by adding at the end the following new clause:
‘‘(v) In the case of a new defined benefit plan, the
amount determined under clause (ii) for any plan year
shall be an amount equal to the product derived by mul-
tiplying the amount determined under clause (ii) by the
applicable percentage. For purposes of this clause, the
term ‘applicable percentage’ means—
‘‘(I) 0 percent, for the first plan year.
‘‘(II) 20 percent, for the second plan year.
‘‘(III) 40 percent, for the third plan year.
‘‘(IV) 60 percent, for the fourth plan year.
‘‘(V) 80 percent, for the fifth plan year.
‘‘(VI) 100 percent, for the sixth plan year, and
for each succeeding plan year.
‘‘For purposes of this clause, the term ‘new defined
benefit plan’ means a defined benefit plan (as defined in
section 3(35) maintained by an employer if such employer
(including any predecessor employer) has not established
or maintained a plan to which this title applies with re-
spect to which contributions were made, or benefits were
accrued, for service in the 3 preceding taxable years.’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 1998.
SEC. 108. REPEAL OF COORDINATION REQUIREMENTS FOR
DEFERRED COMPENSATION PLANS OF STATE
AND LOCAL GOVERNMENTS AND TAX-EX-
EMPT ORGANIZATIONS.
(a) IN GENERAL.—Subsection (c) of section 457 (re-
lating to deferred compensation plans of State and local
governments and tax-exempt organizations) is amended to
read as follows:
‘‘(c) LIMITATION.—The maximum amount of the
compensation of any one individual which may be deferred
under subsection (a) during any taxable year shall not ex-
ceed $15,000 (as modified by any adjustment provided
under subsection (b)(3)).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to years beginning after Decem-
ber 31, 1998.
TITLE II—ENHANCING FAIRNESS
FOR WOMEN AND CHILDREN
SEC. 201. ADDITIONAL SALARY REDUCTION CATCH-UP CON-
TRIBUTIONS.
(a) LIMITATION ON EXCLUSION FOR ELECTIVE DE-
FERRALS.—
(1) IN
GENERAL.—Subsection (g) of section
402 (as amended by section 101(d)) is further
amended by adding at the end the following:
‘‘(9) CATCH-UP
CONTRIBUTIONS
FOR
THOSE
APPROACHING RETIREMENT.—In the case of an indi-
vidual who has attained age 50 during any taxable
year, the limitation of paragraph (1) for such year,
after the application of paragraph (8), shall be in-
creased by $5,000.’’
(2) COST-OF-LIVING ADJUSTMENT.—Paragraph
(4) of section 402(g) (relating to cost-of-living ad-
justment), as amended by section 101(d), is further
amended by inserting ‘‘and the $5,000 amount
under paragraph (10)’’ after ‘‘paragraph (1)’’.
(b) SIMPLE RETIREMENT ACCOUNTS.—
(1) IN
GENERAL.—Paragraph (2) of section
408(p) (relating to qualified salary reduction ar-
rangement) (as amended by sections 101(f) and
103(a)) is further amended by redesignating sub-
paragraph (F) as subparagraph (G) and by inserting
after subparagraph (E) the following new subpara-
graph:
‘‘(F) 
CATCH-UP
CONTRIBUTIONS
FOR
THOSE
APPROACHING
RETIREMENT.—In the
case of an individual who has attained age 50
during any taxable year, the limitation of sub-
paragraph (A)(ii) for such year shall be in-
creased by $5,000.’’
(2) COST-OF-LIVING
ADJUSTMENT.—Subpara-
graph (G) of section 408(p)(2) (as so redesignated)
is amended by inserting ‘‘and the $5,000 amount
under subparagraph (F)’’ after ‘‘subparagraph
(A)(ii)’’.
(c) DEFERRED COMPENSATION PLANS
OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI-
ZATIONS.—
(1) IN
GENERAL.—Subsection (b) of section
457 (relating to definition of eligible deferred com-
pensation plan) is amended by adding at the end the
following new paragraph:
‘‘(7) CATCH-UP
CONTRIBUTIONS
FOR
THOSE
APPROACHING RETIREMENT.—In the case of an indi-
vidual who has attained age 50 during any taxable
year, the limitation of paragraph (2)(A) for such
year shall be increased by $5,000.’’
(2) COST-OF-LIVING ADJUSTMENT.—Paragraph
(15) of section 457(e) (relating to cost-of-living ad-
justment) is amended by inserting ‘‘, and the $5,000
amount specified in subsection (b)(7),’’ after
‘‘(c)(1)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1998.
SEC. 202. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF
EMPLOYEES 
TO 
DEFINED 
CONTRIBUTION
PLANS.
(a) IN GENERAL.—
(1) Subparagraph (B) of section 415(c)(1) (re-
lating to limitation for defined contribution plans) is
amended to read as follows:
‘‘(B) the participant’s compensation.’’
(2) CONFORMING AMENDMENTS.—
(A) Subsection (f) of section 72 is amend-
ed by striking ‘‘section 403(b)(2)(D)(iii))’’ and
inserting ‘‘section 403(b)(2)(D)(iii), as in effect
on December 31, 1998)’’.
(B)(i) Section 403(b) is amended—
(I) by striking ‘‘the exclusion allow-
ance for such taxable year’’ in paragraph
(1) and inserting ‘‘the applicable limit
under section 415’’, and
(II) by striking paragraph (2).
(C) Section 404(a)(10)(B) is amended by
striking ‘‘, the exclusion allowance under sec-
tion 403(b)(2),’’.
(D) Section 415(a)(2) is amended by strik-
ing ‘‘, and the amount of the contribution for
such portion shall reduce the exclusion allow-
ance as provided in section 403(b)(2)’’.
(E) Section 415(c)(3) is amended by add-
ing at the end the following new subparagraph:
‘‘(E) ANNUITY CONTRACTS.—In the case
of an annuity contract described in section
403(b), the term ‘participant’s compensation’
shall mean the participant’s includible com-
pensation as determined under regulations pre-
scribed by the Secretary.’’
(F) Section 415(c) is amended by striking
paragraph (4).
(G) Section 415(c)(7) is amended to read
as follows:
‘‘(7) CERTAIN
CONTRIBUTIONS
BY
CHURCH
PLANS NOT TREATED AS EXCEEDING LIMIT.—
‘‘(A) IN GENERAL.—Notwithstanding any
other provision of this subsection, at the elec-
tion of a participant who is an employee of a
church, a convention or association of churches,
including an organization described in section
414(e)(3)(B)(ii), contributions and other addi-
tions for an annuity contract or retirement in-
come account described in section 403(b) with
respect to such participant, when expressed as
an annual addition to such participant’s ac-
count, shall be treated as not exceeding the lim-
itation of paragraph (1) if such annual addition
is not in excess of $10,000.
‘‘(B) $40,000 AGGREGATE LIMITATION.—
The total amount of additions with respect to
any participant which may be taken into ac-
count for purposes of this subparagraph for all
years may not exceed $40,000.
‘‘(C) ANNUAL ADDITION.—For purposes of
this paragraph, the term ‘annual addition’ has
the meaning given such term by paragraph
(2).’’
(H) Section 415(e)(5) is amended—
(i) by striking ‘‘(except in the case of
a participant who has elected under sub-
section (c)(4)(D) to have the provisions of
subsection (c)(4)(C) apply)’’, and
(ii) by striking the last sentence.
(I) Section 415(n)(2)(B) is amended by
striking ‘‘percentage’’.
(J) Subparagraph (A) of section 457(c)(2)
is amended by striking ‘‘or 403(b)(2)(A)(ii)’’
and by striking ‘‘or 403(b)(2)(A)(ii), respec-
tively’’.
(K) Subparagraph (B) of section 402(g)(7)
(as amended by section 101(d)) is amended by
inserting before the period at the end the fol-
lowing: ‘‘(as in effect on the date of the enact-
ment of the Retirement Security for the 21st
Century Act)’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning
after December 31, 1998.
(b) SPECIAL RULES
FOR SECTIONS 403(b) AND
408.—
(1) IN
GENERAL.—Subsection (k) of section
415 is amended by adding at the end the following
new paragraph:
‘‘(4) SPECIAL RULES FOR SECTIONS 403(b) AND
408.—For purposes of this section, any annuity con-
tract described in section 403(b) for the benefit of
a participant shall be treated as a defined contribu-
tion plan maintained by each employer with respect
to which the participant has the control required
under subsection (b) or (c) of section 414 (as modi-
fied by subsection (h)). For purposes of this section,
any contribution by an employer to a simplified em-
ployee pension plan for an individual for a taxable
year shall be treated as an employer contribution to
a defined contribution plan for such individual for
such year.’’
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to limitation years be-
ginning after December 31, 1999.
(c) DEFERRED COMPENSATION PLANS
OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI-
ZATIONS.—Subparagraph (B) of section 457(b)(2) (relat-
ing to salary limitation on eligible deferred compensation
plans’’ is amended by striking ‘‘331⁄3 percent’’ and insert-
ing ‘‘100 percent’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1998.
SEC. 
203. 
FASTER 
VESTING 
OF 
CERTAIN 
EMPLOYER
MATCHING CONTRIBUTIONS.
(a) AMENDMENTS TO 1986 CODE.—Section 411(a)
(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:
1 ...............................................................................................
2 ...............................................................................................
3 ...............................................................................................
4 ...............................................................................................
5 ...............................................................................................
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 ap-
plied—
‘‘(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:
1 ...............................................................................................
2 ...............................................................................................
3 ...............................................................................................
4 ...............................................................................................
5 ...............................................................................................
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, 1998.
(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, 1999, or
(B) January 1, 2003.
(3) SERVICE REQUIRED.—With respect to any
plan, the amendments made by this section shall not
apply to any employee before the date that such em-
ployee has 1 hour of service under such plan in any
plan year to which the amendments made by this
section apply.
SEC. 204. DEFERRED ANNUITIES FOR SURVIVING SPOUSES
OF FEDERAL EMPLOYEES.
(a) IN GENERAL.—Section 8341 of title 5, United
States Code, is amended—
(1) in subsection (h)(1), by striking ‘‘section
8338(b) of this title’’ and inserting ‘‘section
8338(b), and a former spouse of a deceased former
employee who separated from the service with title
to a deferred annuity under section 8338 (if they
were married to one another prior to the date of sep-
aration),’’; and
(2) by adding at the end the following:
‘‘(j)(1) If a former employee dies after having sepa-
rated from the service with title to a deferred annuity
under section 8338 but before having established a valid
claim for annuity, and is survived by a spouse to whom
married on the date of separation, the surviving spouse
may elect to receive—
‘‘(A) an annuity, commencing on what would
have been the former employee’s 62d birthday, equal
to 55 percent of the former employee’s deferred an-
nuity;
‘‘(B) an annuity, commencing on the day after
the date of death of the former employee, such that,
to the extent practicable, the present value of the fu-
ture payments of the annuity would be actuarially
equivalent to the present value of the future pay-
ments under subparagraph (A) as of the day after
the former employee’s death; or
‘‘(C) the lump-sum credit, if the surviving
spouse is the individual who would be entitled to the
lump-sum credit and if such surviving spouse files
application therefor.
‘‘(2) An annuity under this subsection and the right
thereto terminate on the last day of the month before the
surviving spouse remarries before becoming 55 years of
age, or dies.’’
(b) CORRESPONDING AMENDMENT
FOR FERS.—
Section 8445(a) of title 5, United States Code, is amend-
ed—
(1) by striking ‘‘(or of a former employee or’’
and inserting ‘‘(or of a former’’; and
(2) by striking ‘‘annuity)’’ and inserting ‘‘annu-
ity, or of a former employee who dies after having
separated from the service with title to a deferred
annuity under section 8413 but before having estab-
lished a valid claim for annuity (if such former
spouse was married to such former employee prior
to the date of separation))’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to surviving spouses
and former spouses (whose marriage, in the case of the
amendments made by subsection (a), terminated after
May 6, 1985) of former employees who die after the date
of the enactment of this Act.
SEC. 205. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU-
TION RULES.
(a) REQUIRED DISTRIBUTIONS.—
(1) IN GENERAL.—Subparagraphs (C)(i)(I) and
(C)(ii)(I) of section 401(a)(9) are each amended by
striking ‘‘701⁄2’’ and inserting ‘‘75’’.
(2) ACTUARIAL
ADJUSTMENT
OF
BENEFIT
UNDER
DEFINED
BENEFIT
PLAN.—Clause (iii) of
section 401(a)(9)(C) is amended to read as follows:
‘‘(iii) ACTUARIAL ADJUSTMENT.—
‘‘(I) IN GENERAL.—In the case
of a defined benefit plan, an employ-
ee’s accrued benefit shall be actuari-
ally increased to take into account the
period after the applicable date during
which the employee was not eligible to
receive any benefits under the plan.
‘‘(II) APPLICABLE
DATE.—For
purposes of clause (I), the term ‘appli-
cable date’ means the 1st April follow-
ing the calendar year in which the em-
ployee attains age 701⁄2.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning
after December 31, 2000.
(b) SIMPLIFICATION AND FINALIZATION OF MINI-
MUM DISTRIBUTION REQUIREMENTS.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall—
(A) simplify and finalize the regulations re-
lating to minimum distribution requirements
under sections 401(a)(9), 408(a)(6) and (b)(3),
403(b)(10), and 457(d)(2) of the Internal Reve-
nue Code of 1986, and
(B) modify such regulations to—
(i) reflect increases in life expectancy,
and
(ii) revise the required distribution
methods so that, under reasonable assump-
tions, the amount of the required minimum
distribution does not decrease over a par-
ticipant’s life expectancy.
(2) FRESH START.—Notwithstanding subpara-
graph (D) of section 401(a)(9) of such Code, during
the first year that regulations are in effect under
this subsection, required distributions for future
years may be redetermined to reflect changes under
such regulations. Such redetermination shall include
the opportunity to choose a new designated bene-
ficiary and to elect a new method of calculating life
expectancy.
(3) EFFECTIVE
DATE
FOR
REGULATIONS.—
Regulations referred to in paragraph (1) shall be ef-
fective for years beginning after December 31, 2000,
and shall apply in such years without regard to
whether an individual had previously begun receiving
minimum distributions.
(c) AMOUNT NOT SUBJECT TO MINIMUM DISTRIBU-
TION REQUIREMENTS.—Paragraph (9) of section 401(a)
is amended—
(1) in subparagraph (A), by inserting ‘‘(minus
the exclusion amount)’’ after ‘‘the entire interest’’;
and
(2) by adding at the end the following:
‘‘(H) EXCLUSION AMOUNT.—
‘‘(i) IN
GENERAL.—For purposes of
this 
paragraph, 
the 
term 
‘exclusion
amount’ means—
‘‘(I) $300,000 in the case of a
defined contribution plan;
‘‘(II) $300,000 in the case of an
individual retirement plan; and
‘‘(III) $0 in the case of a defined
benefit plan.
‘‘(ii) AGGREGATION OF PLANS.—For
purposes of determining the exclusion
amount under clause (i)—
‘‘(I) 
all 
defined 
contribution
plans maintained by the same em-
ployer shall be treated as a single
plan; and
‘‘(II) all individual retirement
plans (other than Roth IRAs) of the
individual shall be treated as a single
plan.
‘‘(iii) 
COST-OF-LIVING
ADJUST-
MENT.—The Secretary shall adjust the
$300,000 exclusion amount specified in
clause (i) at the same time and in the
same manner as under section 415(d), ex-
cept that the base period shall be the cal-
endar 
quarter 
ending 
September 
30,
1999.’’
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning
after December 31, 2000.
(d) REPEAL OF RULE WHERE DISTRIBUTIONS HAD
BEGUN BEFORE DEATH OCCURS.—
(1) IN GENERAL.—Subparagraph (B) of section
401(a)(9) is amended by striking clause (i) and re-
designating clauses (ii), (iii), and (iv) as clauses (i),
(ii), and (iii), respectively.
(2) CONFORMING CHANGES.—
(A) Clause (i) of section 401(a)(9)(B) (as
so redesignated) is amended—
(i) by striking ‘‘FOR OTHER CASES’’ in
the heading, and
(ii) by striking ‘‘the distribution of the
employee’s interest has begun in accord-
ance with subparagraph (A)(ii)’’ and in-
serting ‘‘his entire interest has been dis-
tributed to him,’’.
(B) Clause (ii) of section 401(a)(9)(B) (as
so redesignated) is amended by striking ‘‘clause
(ii)’’ and inserting ‘‘clause (i)’’.
(C) Clause (iii) of section 401(a)(9)(B)(iii)
(as so redesignated) is amended—
(i) by striking ‘‘clause (iii)(I)’’ and in-
serting ‘‘clause (ii)(I)’’,
(ii) in subclause (I) by striking
‘‘clause (iii)(III)’’ and inserting ‘‘clause
(ii)(III)’’,
(iii) in subclause (I) by striking ‘‘the
date on which the employee would have at-
tained the age 701⁄2,’’ and inserting ‘‘April
1 of the calendar year following the cal-
endar year in which the spouse attains 75,
and clause (ii) shall not apply to the exclu-
sion amount,’’, and
(iv) in subclause (II) by striking ‘‘the
distributions to such spouse begin,’’ and
inserting ‘‘his entire interest has been dis-
tributed to him,’’.
(3) REDUCTION
IN
EXCISE
TAX.—Subsection
(a) of section 4974 is amended by striking ‘‘50 per-
cent’’ and inserting ‘‘10 percent’’.
(4) EFFECTIVE DATE.—
(A) IN GENERAL.—Except as provided by
subparagraph (B), the amendments made by
this subsection shall apply to years beginning
after December 31, 2000.
(B) EXCISE TAX.—The amendment made
by paragraph (3) shall apply to years beginning
after December 31, 1998.
SEC. 206. CLARIFICATION OF TAX TREATMENT OF DIVISION
OF SECTION 457 PLAN BENEFITS UPON DI-
VORCE.
(a) IN GENERAL.—Section 414(p)(11) (relating to
application of rules to governmental and church plans) is
amended—
(1) by inserting ‘‘or an eligible deferred com-
pensation plan (within the meaning of section
457(b))’’ after ‘‘subsection (e))’’, and
(2) in the heading, by striking ‘‘GOVERN-
MENTAL AND CHURCH PLANS’’ and inserting ‘‘CER-
TAIN OTHER PLANS’’.
(b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE-
MENTS.—Paragraph (10) of section 414(p) is amended by
striking ‘‘and section 409(d)’’ and inserting ‘‘section
409(d), and section 457(d)’’.
(c) TAX TREATMENT OF PAYMENTS FROM A SEC-
TION 457 PLAN.—Subsection (p) of section 414 is amend-
ed by redesignating paragraph (12) as paragraph (13) and
inserting after paragraph (11) the following new para-
graph:
‘‘(12) TAX TREATMENT OF PAYMENTS FROM A
SECTION 457 PLAN.—If a distribution or payment
from an eligible deferred compensation plan de-
scribed in section 457(b) is made pursuant to a
qualified domestic relations order, rules similar to
the rules of section 402(e)(1)(A) shall apply to such
distribution or payment.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to transfers, distributions, and
payments made after the date of enactment of this Act.
TITLE 
III—INCREASING 
PORT-
ABILITY FOR PARTICIPANTS
SEC. 301. 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 (t) of section 72 (relating
to 10-percent additional tax on early distribu-
tions from qualified retirement plans) is amend-
ed by adding at the end the following new para-
graph:
‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SEC-
TION 457 PLANS.—For purposes of this subsection,
a distribution from an eligible deferred compensation
plan (as defined in section 457(b)) of an employer
described in section 457(e)(1)(A) shall be treated as
a distribution from a qualified retirement plan to the
extent that such distribution is attributable to an
amount transferred to an eligible deferred compensa-
tion plan from a qualified retirement plan (as de-
fined in section 4974(c)). For purposes of this sub-
section, any such distribution shall be treated as if
made from a qualified retirement plan described in
section 4974(c)(1). This paragraph shall only apply
to a transfer that is in excess of $50,000 and that
is permitted by reason of section 402(c)(8)(B)(v) or
section 408(d)(3)(A)(iv).’’
(D) Subsection (a) of section 457 (relating
to year of inclusion in gross income) is amend-
ed—
(i) by striking ‘‘or otherwise made
available’’, and
(ii) by adding at the end the follow-
ing: ‘‘To the extent provided in section
72(t)(9), section 72(t) shall apply to any
amount includible in gross income under
this subsection.’’.
(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 De-
cember 31, 1998.
(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, and
section 402(d) of the Internal Revenue Code of 1986
(as in effect for taxable years beginning before Jan-
uary 1, 2000), shall not apply to any distribution
from an eligible retirement plan on behalf of an indi-
vidual if there was a rollover to such plan on behalf
of such individual which is permitted solely by rea-
son of any amendment made by this section.
SEC. 302. 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 ‘‘; or’’, 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 a defined contribu-
tion plan or a defined benefit plan and any
earnings on such rollover, and
‘‘(III) such entire amount received is
paid into a defined contribution plan or a
defined benefit plan (for the benefit of
such individual) not later than the 60th
day after he receives the payment or dis-
tribution.
If a payment or distribution from an individual
retirement plan is described in more than one
clause of this subparagraph, such payment or
distribution shall be treated as described only in
the clause specified by the payee or distributee.
For purposes of this subparagraph, the term
‘defined contribution plan’ means a defined con-
tribution plan (as defined in section 414(i))
which includes a trust exempt from tax under
section 501(a), an annuity plan described in
section 403(a), an annuity contract described in
section 403(b), and an eligible deferred com-
pensation plan described in section 457(b) of an
eligible 
employer 
described 
in 
section
457(e)(1)(A). For purposes of clause (iv)(II),
the term ‘defined contribution plan’ shall also
include an eligible deferred compensation plan
described in section 457(b) of an eligible em-
ployer described in section 457(e)(1)(B). For
purposes of this subparagraph, the term ‘de-
fined benefit plan’ means a defined benefit plan
(as defined in section 414(j)) which includes a
trust exempt from tax under section 501(a).’’
(b) CONFORMING AMENDMENT.—Paragraph (1) of
section 
403(b) 
is 
amended 
by 
striking 
‘‘section
408(d)(3)(A)(iii)’’ and inserting ‘‘clause (iii) or (iv) of sec-
tion 408(d)(3)(A)’’.
(c) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after De-
cember 31, 1998.
(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, and
section 402(d) of the Internal Revenue Code of 1986
(as in effect for taxable years beginning before Jan-
uary 1, 2000), shall not apply to any distribution
from a defined contribution plan (as defined in sec-
tion 408(d)(3)(A) of the Internal Revenue Code of
1986 (as added by this section)) or a defined benefit
plan (as defined in section 408(d)(3)(A) of the In-
ternal Revenue Code of 1986 (as added by this sec-
tion)) on behalf of an individual if there was a roll-
over to such plan on behalf of such individual which
is permitted solely by reason of the amendments
made by this section.
SEC. 303. 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 301) is amended by striking
paragraph (2) and redesignating paragraphs (3)
through (10) as paragraphs (2) through (9), respec-
tively.
(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’’.
(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) Subparagraph (B) of section 403(a)(4) is
amended by striking ‘‘(2) through (7)’’ and inserting
‘‘(2) through (6)’’.
(2) Section 403(b)(8)(A)(ii) (as amended by
section 301) is amended by striking ‘‘section
402(c)(8)(B)’’ and inserting ‘‘section 402(c)(7)(B)’’.
(3) 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 December 31,
1998.
(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. 304. TREATMENT OF FORMS OF DISTRIBUTION.
(a) IN GENERAL.—Paragraph (6) of section 411(d)
(relating to accrued benefit not to be decreased by amend-
ment) is amended by adding at the end the following:
‘‘(D) PLAN TRANSFERS.—
‘‘(i) A defined contribution plan (in
this subparagraph referred to as the
‘transferee plan’) shall not be treated as
failing to meet the requirements of this
subsection merely because the transferee
plan does not provide some or all of the
forms of distribution previously available
under another defined contribution plan
(in this paragraph referred to as the
‘transferor plan’) to the extent that—
‘‘(I) the forms of distribution
previously available under the trans-
feror plan applied to the account of a
participant or beneficiary under the
transferor plan that was transferred
from the transferor plan to the trans-
feree plan pursuant to a direct trans-
fer rather than pursuant to a distribu-
tion from the transferor plan;
‘‘(II) the terms of both the trans-
feror plan and the transferee plan au-
thorize the transfer described in sub-
clause (I);
‘‘(III) the transfer described in
subclause (I) was made pursuant to a
voluntary election by the participant
or beneficiary whose account was
transferred to the transferee plan;
‘‘(IV) the election described in
subclause (III) was made after the
participant or beneficiary received a
notice describing the consequences of
making the election;
‘‘(V) if the transferor plan pro-
vides for an annuity as the normal
form of distribution under the plan in
accordance with section 417, the
transfer is made with the consent of
the participant’s spouse (if any), and
such consent meets requirements simi-
lar to the requirements imposed by
section 417(a)(2); and
‘‘(VI) the transferee plan allows
the participant or beneficiary de-
scribed in subclause (III) to receive
any distribution to which the partici-
pant or beneficiary is entitled under
the transferee plan in the form of a
single sum distribution.
‘‘(ii) Clause (i) shall apply to a direct
transfer received by a defined benefit plan
(‘transferee plan’) from another defined
benefit plan (‘transferor plan’) except that
for this purpose—
‘‘(I) Subclause (VI) of clause (i)
shall not apply; and
‘‘(II) Clause (i) shall not apply
with respect to the elimination of any
form of distribution with respect to a
participant or beneficiary unless the
transferee plan contains a form of dis-
tribution with respect to such partici-
pant or beneficiary that (a) has an
equal or greater value based on rea-
sonable actuarial assumptions and (b)
is available at the same times and
under the same conditions as the form
of distribution being eliminated.
‘‘(III) Clause (i) shall be applied
by substituting ‘accrued benefit’ for
‘account’ wherever it appears.
‘‘(iii) Clauses (i) and (ii) shall apply
to plan mergers and other transactions
having the effect of a direct transfer, in-
cluding consolidations of benefits attrib-
utable to different employers within a mul-
tiple employer plan.
‘‘(E) ELIMINATION OF FORM OF DISTRIBU-
TION.—Except to the extent provided in regula-
tions, a defined contribution plan shall not be
treated as failing to meet the requirements of
this section merely because of the elimination of
a form of distribution previously available there-
under. This subparagraph shall not apply to the
elimination of a form of distribution with re-
spect to any participant unless—
‘‘(i) a single sum payment is available
to such participant at the same time or
times as the form of distribution being
eliminated; and
‘‘(ii) such single sum payment is
based on the same or greater portion of
the participant’s account as the form of
distribution being eliminated.’’
(b) CONFORMING AMENDMENT.—
(1) Subsection (g) of section 204 of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1054) is amended by adding at the end the
following:
‘‘(4)(A) A defined contribution plan (in this subpara-
graph referred to as the ‘transferee plan’) shall not be
treated as failing to meet the requirements of this sub-
section merely because the transferee plan does not pro-
vide some or all of the forms of distribution previously
available under another defined contribution plan (in this
paragraph referred to as the ‘transferor plan’) to the ex-
tent that—
‘‘(i) the forms of distribution previously avail-
able under the transferor plan applied to the account
of a participant or beneficiary under the transferor
plan that was transferred from the transferor plan
to the transferee plan pursuant to a direct transfer
rather than pursuant to a distribution from the
transferor plan;
‘‘(ii) the terms of both the transferor plan and
the transferee plan authorize the transfer described
in clause (i);
‘‘(iii) the transfer described in clause (i) was
made pursuant to a voluntary election by the partici-
pant or beneficiary whose account was transferred to
the transferee plan;
‘‘(iv) the election described in clause (iii) was
made after the participant or beneficiary received a
notice describing the consequences of making the
election;
‘‘(v) if the transferor plan provides for an annu-
ity as the normal form of distribution under the plan
in accordance with section 205, the transfer is made
with the consent of the participant’s spouse (if any),
and such consent meets requirements similar to the
requirements imposed by section 205(c)(2); and
‘‘(vi) the transferee plan allows the participant
or beneficiary described in clause (iii) to receive any
distribution which the participant or beneficiary is
entitled under transferee plan in the form of a single
sum distribution.
‘‘(B) Subparagraph (A) shall apply to a direct trans-
fer received by a defined benefit plan (‘transferee plan’)
from another defined benefit plan (‘transferor plan’) ex-
cept that for this purpose—
‘‘(i) Clause (vi) of subparagraph (A) shall not
apply;
‘‘(ii) Subparagraph (A) shall not apply with re-
spect to the elimination of any form of distribution
with respect to a participant or beneficiary unless
the transferee plan contains a form of distribution
with respect to such participant or beneficiary that
(I) has an equal or greater value based on reason-
able actuarial assumptions and (II) is available at
the same times and under the same conditions as
the form of distribution being eliminated; and
‘‘(iii) Subparagraph (A) shall be applied by sub-
stituting ‘accrued benefit’ for ‘account’’ wherever it
appears.
‘‘(C) Subparagraphs (A) and (B) shall apply to plan
mergers and other transactions having the effect of a di-
rect transfer, including consolidations of benefits attrib-
utable to different employers within a multiple employer
plan.
‘‘(5) Except to the extent provided in regulations, a
defined contribution plan shall not be treated as failing
to meet the requirements of this section merely because
of the elimination of a form of distribution previously
available thereunder. This paragraph shall not apply to
the elimination of a form of distribution with respect to
any participant unless—
‘‘(A) a single sum payment is available to such
participant at the same time or times as the form
of distribution being eliminated; and
‘‘(B) such single sum payment is based on the
same or greater portion of the participant’s account
as the form of distribution being eliminated.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1998.
SEC. 305. RATIONALIZATION OF RESTRICTIONS ON DIS-
TRIBUTIONS.
(a) MODIFICATION OF SAME DESK EXCEPTION.—
(1) 
SECTION
401(k).—Section
401(k)(2)(B)(i)(I) (relating to qualified cash or de-
ferred arrangements) is amended by striking ‘‘sepa-
ration from service’’ and inserting ‘‘severance from
employment’’.
(2) SECTION 403(b).—
(A) Paragraphs (7)(A)(ii) and (11)(A) of
section 403(b) are each amended by striking
‘‘separates from service’’ and inserting ‘‘has a
severance from employment’’.
(B) The heading for paragraph (11) of
section 403(b) is amended by striking ‘‘SEPARA-
TION
FROM
SERVICE’’ and inserting ‘‘SEVER-
ANCE FROM EMPLOYMENT’’.
(3) SECTION
457.—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 REPEALED.—
(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,
1998.
SEC. 306. 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 (as amended
by section 509) is amended by adding at the end the
following new paragraph:
‘‘(18) 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 sections
101 and 202, is amended by striking ‘‘(other than
rollover amounts)’’ and inserting ‘‘(other than roll-
over amounts and amounts received in a transfer re-
ferred to in subsection (e)(16))’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to trustee-to-trustee transfers after
December 31, 1998.
TITLE 
IV—STRENGTHENING
PENSION SECURITY AND EN-
FORCEMENT
SEC. 401. REPEAL OF 150 PERCENT OF CURRENT LIABILITY
FUNDING LIMIT.
(a) IN GENERAL.—
(1) CODE AMENDMENT.—Section 412(c)(7) (re-
lating to full-funding limitation) is amended—
(A) by striking ‘‘the applicable percentage’’
in subparagraph (A)(i)(I) and inserting ‘‘in the
case of plan years beginning before January 1,
2003, the applicable percentage’’, and
(B) by amending subparagraph (F) to read
as follows:
‘‘(F) 
APPLICABLE
PERCENTAGE.—For
purposes of subparagraph (A)(i)(I), the applica-
ble percentage shall be determined in accord-
ance with the following table:
‘‘In the case of any plan year
beginning in—
The applicable percentage is—
1999 .........................................................................................
155
2000 .........................................................................................
160
2001 .........................................................................................
165
2002 .........................................................................................
170.’’
(2) ERISA AMENDMENT.—Section 302(c)(7) of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1082(c)(7)) is amended—
(A) by striking ‘‘the applicable percentage’’
in subparagraph (A)(i)(I) and inserting ‘‘in the
case of plan years beginning before January 1,
2003, the applicable percentage’’, and
(B) by amending subparagraph (F) to read
as follows:
‘‘(F) APPLICABLE PERCENTAGE.—For purposes
of subparagraph (A)(i)(I), the applicable percentage
shall be determined in accordance with the following
table:
‘‘In the case of any plan year
beginning in—
The applicable percentage is—
1999 .........................................................................................
155
2000 .........................................................................................
160
2001 .........................................................................................
165
2002 .........................................................................................
170.’’
(3) 
EFFECTIVE
DATES.—The 
amendments
made by this subsection shall apply to plan years be-
ginning after December 31, 1998.
(b) MAXIMUM CONTRIBUTION DEDUCTION RULES
MODIFIED
AND APPLIED
TO ALL DEFINED BENEFIT
PLANS.—
(1) IN GENERAL.—Section 404(a)(1)(D) (relat-
ing to special rule in case of certain plans) is amend-
ed—
(A) by striking ‘‘which has more than 100
participants for the plan year’’,
(B) by striking ‘‘unfunded current liability
determined under section 414(l)’’ and inserting
‘‘unfunded termination liability (determined as
if the proposed termination date referred to in
section 4041(b)(2)(A)(i)(II) of the Employee
Retirement Income Security Act of 1974 were
the last day of the plan year)’’,
(C) by inserting after the first sentence the
following: ‘‘For purposes of this subparagraph,
in the case of a plan which has less than 100
participants for the plan year, termination li-
ability shall not include the liability attributable
to benefit increases for highly compensated em-
ployees (as defined in section 414(q)) brought
about by plan amendment within the last 2
years before the termination date.’’, and
(D) by striking ‘‘(other than a multiem-
ployer plan)’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to plan years begin-
ning after the date of enactment of this Act.
SEC. 402. MISSING PARTICIPANTS.
(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:
‘‘(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) ei-
ther—
‘‘(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 AMENDMENTS.—
(1) Section 206(f) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1056(f)) is
amended—
(A) by striking ‘‘title IV’’ and inserting
‘‘section 4050’’, and
(B) by striking ‘‘the plan shall provide
that’’.
(2) Section 401(a)(34) (relating to benefits of
missing participants on plan termination) is amend-
ed by striking ‘‘title IV’’ and inserting ‘‘section
4050’’.
(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. 403. PERIODIC PENSION BENEFITS STATEMENTS.
(a) IN GENERAL.—Section 105(a) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1025(a)) is amended by striking ‘‘shall furnish to any plan
participant or beneficiary who so requests in writing, a
statement’’ and inserting ‘‘shall furnish to each plan par-
ticipant at least once each year (in the case of a defined
contribution plan) and upon written request of a plan par-
ticipant or beneficiary (in the case of a defined benefit
plan), a statement in written or electronic form’’.
(b) REQUIRED PERIODIC STATEMENTS FOR PLANS
WITH MORE THAN ONE UNAFFILIATED EMPLOYER.—
Section 105(d) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1025(d)) is repealed.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 1998.
SEC. 404. CIVIL PENALTIES FOR BREACH OF FIDUCIARY
RESPONSIBILITY.
(a) IMPOSITION AND AMOUNT OF PENALTY MADE
DISCRETIONARY.—Section 502(l)(1) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1132(l)(1)) is amended—
(1) by striking ‘‘shall’’ and inserting ‘‘may’’,
and
(2) by striking ‘‘equal to’’ and inserting ‘‘not
greater than’’.
(b) 
APPLICABLE
RECOVERY
AMOUNT.—Section
502(l)(2) of such Act (29 U.S.C. 1132(l)(2)) is amended
to read as follows:
‘‘(2) For purposes of paragraph (1), the term ‘appli-
cable recovery amount’ means any amount which is recov-
ered from any fiduciary or other person (or from any other
person on behalf of any such fiduciary or other person)
with respect to a breach or violation described in para-
graph (1) on or after the 30th day following receipt by
such fiduciary or other person of written notice from the
Secretary of the violation, whether paid voluntarily or by
order of a court in a judicial proceeding instituted by the
Secretary under subsection (a)(2) or (a)(5). The Secretary
may, in the Secretary’s sole discretion, extend the 30-day
period described in the preceding sentence.’’
(c) OTHER RULES.—Section 502(l) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1132(l)) is amended by adding at the end the following:
‘‘(5) A person shall be jointly and severally liable for
the penalty described in paragraph (1) to the same extent
that such person is jointly and severally liable for the ap-
plicable recovery amount on which the penalty is based.
‘‘(6) No penalty shall be assessed under this sub-
section unless the person against whom the penalty is as-
sessed is given notice and opportunity for a hearing with
respect to the violation and applicable recovery amount.’’
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall apply to any breach of fiduciary re-
sponsibility or other violation of part 4 of subtitle B
of title I of the Employee Retirement Income Secu-
rity Act of 1974 occurring on or after the date of
enactment of this Act.
(2) 
TRANSITION
RULE.—In 
applying 
the
amendment made by subsection (b) (relating to ap-
plicable recovery amount), a breach or other viola-
tion occurring before the date of enactment of this
Act which continues after the 180th day after such
date (and which may have been discontinued at any
time during its existence) shall be treated as having
occurred after such date of enactment.
SEC. 405. PENALTY TAX RELIEF FOR SOUND PENSION
FUNDING.
(a) IN GENERAL.—Subsection (c) of section 4972
(relating to nondeductible contributions) is amended by
adding at the end the following new paragraph:
‘‘(7) DEFINED BENEFIT PLAN EXCEPTION.—In
determining the amount of nondeductible contribu-
tions for any taxable year, an employer may elect for
such year not to take into account any contributions
to a defined benefit plan except to the extent that
such contributions exceed the full-funding limitation
(as defined in section 412(c)(7), determined without
regard to subparagraph (A)(i)(I) thereof). For pur-
poses of this paragraph, the deductible limits under
section 404(a)(7) shall first be applied to amounts
contributed to defined contribution plans and then
to amounts described in this paragraph. If an em-
ployer makes an election under this paragraph for a
taxable year, paragraph (6) shall not apply to such
employer for such taxable year.’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1998.
TITLE V—REDUCING
REGULATORY BURDENS
SEC. 501. INTERMEDIATE SANCTIONS FOR INADVERTENT
FAILURES.
(a) IN GENERAL.—Section 401(a) (relating to quali-
fied pension, profit-sharing, and stock bonus plans) is
amended by inserting after paragraph (34) the following:
‘‘(35) PROTECTION
FROM
DISQUALIFICATION
UPON TIMELY CORRECTION OR PAYMENT OF FINE.—
A trust shall not fail to constitute a qualified trust
under this section if the plan of which such trust is
a part has made good faith efforts to meet the re-
quirements of this section, has inadvertently failed
to satisfy 1 or more of such requirements, and ei-
ther—
‘‘(A) substantially corrects (to the extent
possible) such failure before the date the plan
becomes subject to a plan examination for the
applicable year (as determined under rules pre-
scribed by the Secretary), or
‘‘(B) substantially corrects (to the extent
possible) such failure on or after such date.
If the plan satisfies the requirement under subpara-
graph (B), the Secretary may require the sponsoring
employer to make a payment to the Secretary in an
amount that does not exceed an amount that bears
a reasonable relationship to the severity of the plan’s
failure to satisfy the requirements of this section.’’
(b) APPLICATION TO CASH OR DEFERRED ARRANGE-
MENTS.—Section 401(k) is amended by inserting after
paragraph (12) the following new paragraph:
‘‘(13) PROTECTION FROM DISQUALIFICATION.—
Rules similar to the rules set forth in section
401(a)(35) shall apply for purposes of determining
whether a cash or deferred arrangement is a quali-
fied cash or deferred arrangement.’’
(c) APPLICATION TO SECTION 403(b) ANNUITY CON-
TRACTS.—Section 403(b) is amended by inserting after
paragraph (12) the following:
‘‘(13) CORRECTION OF ERRORS.—
‘‘(A) IN
GENERAL.—Under distribution
and reporting procedures conforming to those
applicable under section 415, the Secretary
shall allow for the correction of elective defer-
rals 
(within 
the 
meaning 
of 
section
402(g)(3)(C)) which, as a result of reasonable
error, would cause the limitation of section
403(b)(2) to be exceeded.
‘‘(B) PROTECTION
FROM
DISQUALIFICA-
TION.—For purposes of determining whether
the exclusion from gross income under para-
graph (1) is applicable to an employee for any
taxable year, rules similar to the rules set forth
in section 401(a)(35) shall apply to any annuity
contract purchased under this subsection or any
plan established to meet the requirements of
this subsection.’’
(d) INCOME INCLUSION FOR DISQUALIFICATION NOT
APPLICABLE
TO NONHIGHLY COMPENSATED EMPLOY-
EES.—Section 402(b) (relating to taxability of beneficiary
of nonexempt trust) is amended by striking paragraph (4)
and inserting the following:
‘‘(4) INCOME
INCLUSION
FOR
DISQUALIFICA-
TION
NOT
APPLICABLE
TO
NONHIGHLY
COM-
PENSATED
EMPLOYEES.—Paragraphs (1) and (2)
shall not apply to employees who are not highly com-
pensated employees.
‘‘(5) FAILURE
TO
MEET
REQUIREMENTS
OF
SECTION 401(a)(26) OR 410(b).—If 1 of the reasons
a trust is not exempt from tax under section 501(a)
is the failure of the plan to meet the requirements
of section 401(a)(26) or 410(b), then a highly com-
pensated employee shall, in lieu of the amount deter-
mined under paragraph (1) or (2), include in gross
income for the taxable year with or within which the
taxable year of the trust ends an amount equal to
the vested accrued benefit of such employee (other
than the employee’s investment in the contract) as
of the close of such taxable year of the trust.
‘‘(6) HIGHLY COMPENSATED EMPLOYEE.—For
purposes of this subsection, the term ‘highly com-
pensated employee’ has the meaning given such term
by section 414(q).’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of enactment of
this Act.
SEC. 502. REPEAL OF THE MULTIPLE USE TEST.
(a) IN GENERAL.—Paragraph (9) of section 401(m)
is amended to read as follows:
‘‘(9) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry
out the purposes of this subsection and subsection
(k), including regulations permitting appropriate ag-
gregation of plans and contributions.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years after December 31, 1998.
SEC. 503. SAFETY VALVE FROM MECHANICAL RULES.
(a) IN GENERAL.—The Secretary of the Treasury, by
regulation, shall provide that the plan shall be deemed to
satisfy the requirements of section 401(a)(4) of the Inter-
nal Revenue Code of 1986 if such plan satisfies the facts
and circumstances test under section 401(a)(4) of such
Code, as in effect before January 1, 1994, if—
(1) the plan satisfies conditions prescribed by
the Secretary to appropriately limit the availability
of such test, and
(2) the plan is submitted to the Secretary for
a determination of whether it satisfies such test.
Paragraph (2) shall only apply to the extent provided by
the Secretary.
(b) EFFECTIVE DATES.—
(1) REGULATIONS.—The regulation required by
subsection (a) shall apply to years beginning after
December 31, 1999.
(2) CONDITIONS OF AVAILABILITY.—Any condi-
tion of availability prescribed by the Secretary under
subsection (a)(1) shall not apply before the first year
beginning not less than 120 days after the date on
which such condition is prescribed.
SEC. 504. REFORM OF THE LINE OF BUSINESS RULES.
(a) REPEAL OF GATEWAY TEST.—Paragraph (5) of
section 410(b) is amended to read as follows:
‘‘(5) LINE OF BUSINESS EXCEPTION.—If, under
section 414(r), an employer is treated as operating
separate lines of business for a year, the employer
may apply the requirements of this subsection for
such year separately with respect to employees in
each separate line of business.’’
(b) REGULATIONS.—The Secretary of the Treasury
shall modify the regulations issued under section 414(r)
of the Internal Revenue Code of 1986 (relating to special
rules for separate line of business) to—
(1) simplify the administrability of the rules for
both the Secretary and plans, and
(2) permit employees to be allocated among
lines of business based on all the facts and cir-
cumstances.
(c) EFFECTIVE DATES.—
(1) REPEAL.—The repeal made by subsection
(a) shall apply to years beginning after December
31, 1999.
(2) REGULATIONS.—The regulations modified
under subsection (b) shall apply to years beginning
after December 31, 1999.
SEC. 505. COVERAGE TEST FLEXIBILITY.
(a) IN GENERAL.—Paragraph (1) of section 410(b)
is amended by adding at the end the following:
‘‘(D) In the case that the plan fails to
meet the requirements of subparagraphs (A),
(B) and (C), the plan—
‘‘(i) satisfies subparagraph (B), as in
effect immediately before the enactment of
the Tax Reform Act of 1986,
‘‘(ii) is submitted to the Secretary for
a determination of whether it satisfies the
requirement described in clause (i), and
‘‘(iii) satisfies conditions prescribed by
the Secretary by regulation that appro-
priately limit the availability of this sub-
paragraph.
Clause (ii) shall apply only to the extent pro-
vided by the Secretary.’’
(b) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendment made by
subsection (a) shall apply to years beginning after
December 31, 1999.
(2) CONDITIONS OF AVAILABILITY.—Any condi-
tion of availability prescribed by the Secretary under
regulations prescribed by the Secretary under sec-
tion 410(a)(1)(D) of the Internal Revenue Code of
1986 shall not apply before the first year beginning
not less than 120 days after the date on which such
condition is prescribed.
SEC. 506. INCREASE IN RETIREMENT PLAN CASH-OUT
AMOUNT.
(a) 
AMENDMENTS
TO
1986 
CODE.—Section
411(a)(11) (relating to restrictions on certain mandatory
distributions) is amended by adding at the end the follow-
ing:
‘‘(D) INFLATION
ADJUSTMENT.—In the
case of any plan year beginning in a calendar
year after 1998, the Secretary shall adjust an-
nually the $5,000 amount contained in subpara-
graph (A) for increases in the cost of living at
the same time and in the same manner as ad-
justments under section 415(d); except that the
base period shall be the calendar quarter ending
September 30, 1997, and any increase which is
not a multiple of $500 shall be rounded to the
next lowest multiple of $500.’’
(b) AMENDMENTS 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) INFLATION ADJUSTMENT.—In the case of any
plan year beginning in a calendar year after 1998, the
Secretary shall adjust annually the $5,000 amount con-
tained in paragraph (1) for increases in the cost of living
at the same time and in the same manner as adjustments
under section 415(d) of the Internal Revenue Code of
1986; except that the base period shall be the calendar
quarter ending September 30, 1997, and any increase
which is not a multiple of $500 shall be rounded to the
next lowest multiple of $500.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning on or after
the date of enactment of this Act.
SEC. 507. SIMPLIFICATION OF CASH-OUT RULE.
(a) MODIFICATION
OF REGULATIONS.—The Sec-
retary of the Treasury shall modify the regulations issued
under sections 411(a)(11) and 417(e) of the Internal Rev-
enue Code of 1986 to delete the rule set forth in the last
sentence of Treasury Regulation section 1.411(a)–
11(c)(3) and in the last sentence of Treasury Regulation
section 1.417(e)–1(b)(2)(i).
(b) EFFECTIVE DATE.—The modifications made
under subsection (a) shall apply to years beginning after
December 31, 1998.
SEC. 508. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) IN GENERAL.—Section 412(c)(9) (relating to an-
nual valuation) is amended—
(1) by striking ‘‘For purposes’’ and inserting
the following:
‘‘(A) IN GENERAL.—For purposes’’, and
(2) by adding at the end the following:
‘‘(B) ELECTION
TO
USE
PRIOR
YEAR
VALUATION.—
‘‘(i) IN GENERAL.—If, for any plan
year—
‘‘(I) an election is in effect under
this subparagraph with respect to a
plan, and
‘‘(II) the assets of the plan are
not less than 125 percent of the
plan’s current liability (as defined in
paragraph (7)(B)), determined as of
the valuation date for the preceding
plan year, then this section shall be
applied using the information avail-
able as of such valuation date.
‘‘(ii) 
ADJUSTMENTS.—Information
under clause (i) shall, in accordance with
regulations, be actuarially adjusted to re-
flect significant differences in participants.
‘‘(iii) ELECTION.—An election under
this subparagraph, once made, shall be ir-
revocable without the consent of the Sec-
retary.’’
(b) AMENDMENTS
TO ERISA.—Paragraph (9) of
section 302(c) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1053(c)) is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(9)’’, and
(2) by adding at the end the following:
‘‘(B)(i) If, for any plan year—
‘‘(I) an election is in effect under this subpara-
graph with respect to a plan, and
‘‘(II) the assets of the plan are not less than
125 percent of the plan’s current liability (as defined
in paragraph (7)(B)), determined as of the valuation
date for the preceding plan year,
then this section shall be applied using the information
available as of such valuation date.
‘‘(ii) Information under clause (i) shall, in accordance
with regulations, be actuarially adjusted to reflect signifi-
cant differences in participants.
‘‘(iii) An election under this subparagraph, once
made, shall be irrevocable without the consent of the Sec-
retary of the Treasury.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning on or after
the date of enactment of this Act.
SEC. 509. SECTION 457 INAPPLICABLE TO CERTAIN MIRROR
PLANS.
(a) IN GENERAL.—Subsection (e) of section 457 (re-
lating to deferred compensation plans of State and local
governments and tax-exempt organizations) is amended by
adding at the end the following new paragraph:
‘‘(17) This section shall not apply to a plan,
program, or arrangement maintained solely for the
purposes of providing retirement benefits for em-
ployees in excess of the limitations imposed by sec-
tions 401(a)(17) or 415.’’
(b) CERTAIN
DEFERRED
COMPENSATION
NOT
TAKEN INTO ACCOUNT.—Subsection (c) of section 457
(relating to individuals who are participants in more than
1 plan) is amended by adding at the end the following
new paragraph:
‘‘(3) This section shall be applied without re-
gard to a plan, program, or arrangement described
in subsection (e)(17).’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1998.
SEC. 510. RULES FOR SUBSTANTIAL OWNERS RELATING TO
PLAN TERMINATIONS.
(a) MODIFICATION OF PHASE-IN OF GUARANTEE.—
Section 4022(b)(5) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended
to read as follows:
‘‘(5)(A) For purposes of this paragraph, the term
‘majority owner’ means an individual who, at any time
during the 60-month period ending on the date the deter-
mination is being made—
‘‘(i) owns the entire interest in an unincor-
porated trade or business,
‘‘(ii) in the case of a partnership, is a partner
who owns, directly or indirectly, 50 percent or more
of either the capital interest or the profits interest
in such partnership, or
‘‘(iii) in the case of a corporation, owns, directly
or indirectly, 50 percent or more in value of either
100
the voting stock of that corporation or all the stock
of that corporation.
For purposes of clause (iii), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).
‘‘(B) In the case of a participant who is a majority
owner, the amount of benefits guaranteed under this sec-
tion shall not exceed the product of—
‘‘(i) a fraction (not to exceed 1) the numerator
of which is the number of years from the later of the
effective date or the adoption date of the plan to the
termination date, and the denominator of which is
30, and
‘‘(ii) the amount of the majority owner’s month-
ly benefits guaranteed under subsection (a) (as lim-
ited by paragraph (3) of this subsection).’’
(b) MODIFICATION OF ALLOCATION OF ASSETS.—
(1) Section 4044(a)(4)(B) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1344(a)(4)(B)) is amended by striking ‘‘section
4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.
(2) Section 4044(b) of such Act (29 U.S.C.
1344(b)) is amended—
101
(A) by striking ‘‘(5)’’ in paragraph (2) and
inserting ‘‘(4), (5),’’, and
(B) 
by 
redesignating 
paragraphs 
(3)
through (6) as paragraphs (4) through (7), re-
spectively, and by inserting after paragraph (2)
the following:
‘‘(3) If assets available for allocation under
paragraph (4) of subsection (a) are insufficient to
satisfy in full the benefits of all individuals who are
described in that paragraph, the assets shall be allo-
cated first to benefits described in subparagraph (A)
of that paragraph. Any remaining assets shall then
be allocated to benefits described in subparagraph
(B) of that paragraph. If assets allocated to such
subparagraph (B) are insufficient to satisfy in full
the benefits described in that subparagraph, the as-
sets shall be allocated pro rata among individuals on
the basis of the present value (as of the termination
date) of their respective benefits described in that
subparagraph.’’
(c) CONFORMING AMENDMENTS.—
(1) Section 4021 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1321) is
amended—
102
(A) in subsection (b)(9), by striking ‘‘as
defined in section 4022(b)(6)’’, and
(B) by adding at the end the following:
‘‘(d) For purposes of subsection (b)(9), the term ‘sub-
stantial owner’ means an individual who, at any time dur-
ing the 60-month period ending on the date the determina-
tion is being made—
‘‘(1) owns the entire interest in an unincor-
porated trade or business,
‘‘(2) in the case of a partnership, is a partner
who owns, directly or indirectly, more than 10 per-
cent of either the capital interest or the profits inter-
est in such partnership, or
‘‘(3) in the case of a corporation, owns, directly
or indirectly, more than 10 percent in value of either
the voting stock of that corporation or all the stock
of that corporation.
For purposes of paragraph (3), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).’’
(2) Section 4043(c)(7) of such Act (29 U.S.C.
1343(c)(7)) 
is 
amended 
by 
striking 
‘‘section
4022(b)(6)’’ and inserting ‘‘section 4021(d)’’.
(d) EFFECTIVE DATES.—
103
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to plan terminations—
(A) under section 4041(c) of the Employee
Retirement Income Security Act of 1974 (29
U.S.C. 1341(c)) with respect to which notices
of intent to terminate are provided under sec-
tion 4041(a)(2) of such Act (29 U.S.C.
1341(a)(2)) on or after the date of enactment
of this Act, or
(B) under section 4042 of such Act (29
U.S.C. 1342) with respect to which proceedings
are instituted by the corporation on or after
such date.
(2) CONFORMING AMENDMENTS.—The amend-
ments made by subsection (c) shall take effect on
the date of enactment of this Act.
SEC. 511. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT
LOSS OF DIVIDEND DEDUCTION.
(a) IN GENERAL.—Section 404(k)(2)(A) (defining
applicable dividends) is amended by striking ‘‘or’’ at the
end of clause (ii), by redesignating clause (iii) as clause
(iv), and by inserting after clause (ii) the following new
clause:
104
‘‘(iii) is, at the election of such par-
ticipants or their beneficiaries—
‘‘(I) payable as provided in clause
(i) or (ii), or
‘‘(II) paid to the plan and rein-
vested in qualifying employer securi-
ties, or’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1998.
SEC. 512. MODIFICATION OF 403(b) EXCLUSION ALLOWANCE
TO CONFORM TO 415 MODIFICATION.
The Secretary of the Treasury shall modify the regu-
lations regarding the exclusion allowance under section
403(b)(2) of the Internal Revenue Code of 1986 to render
void the requirement that contributions to a defined bene-
fit pension plan be treated as previously excluded amounts
for purposes of the exclusion allowance. For taxable years
beginning after December 31, 1999, such regulations shall
be applied as if such requirement were void.
SEC. 513. TREATMENT OF MULTIEMPLOYER PLANS UNDER
SECTION 415.
(a) COMPENSATION LIMIT.—Paragraph (11) of sec-
tion 415(b) (relating to limitation for defined benefit
plans) is amended to read as follows:
105
‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN-
MENTAL AND MULTIEMPLOYER PLANS.—In the case
of a governmental plan (as defined in section
414(d)) or a multiemployer plan (as defined in sec-
tion 414(f)), subparagraph (B) of paragraph (1)
shall not apply.’’
(b) EXEMPTION
FOR SURVIVOR
AND DISABILITY
BENEFITS.—Subparagraph (I) of section 415(b)(2) (relat-
ing to limitation for defined benefit plans) is amended—
(1) by inserting ‘‘or a multiemployer plan (as
defined in section 414(f))’’ after ‘‘section 414(d))’’
in clause (i),
(2) by inserting ‘‘or multiemployer plan’’ after
‘‘governmental plan’’ in clause (ii), and
(3) by inserting ‘‘AND MULTIEMPLOYER’’ after
‘‘GOVERNMENTAL’’ in the heading.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1998.
SEC. 514. ELIMINATION OF PARTIAL TERMINATION RULES
FOR MULTIEMPLOYER PLANS.
(a) PARTIAL TERMINATION RULES FOR MULTIEM-
PLOYER PLANS.—Section 411(d)(3) (relating to termi-
nation or partial termination; discontinuance of contribu-
tions) is amended by adding at the end the following new
106
sentence: ‘‘This paragraph shall not apply in the case of
a partial termination of a multiemployer plan.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to partial terminations beginning
after December 31, 1998.
SEC. 515. NOTICE AND CONSENT PERIOD REGARDING DIS-
TRIBUTIONS.
(a) EXPANSION OF PERIOD.—
(1) IN GENERAL.—Subparagraph (A) of section
417(a)(6) is amended by striking ‘‘90-day’’ and in-
serting ‘‘one-year’’.
(2) MODIFICATION
OF
REGULATIONS.—The
Secretary of the Treasury shall modify the regula-
tions under sections 402(f), 411(a)(11), and 417 of
the Internal Revenue Code of 1986 to substitute
‘‘one year’’ for ‘‘90 days’’ each place it appears in
Treasury Regulations sections 1.402(f)–1 Q/A–2,
1.411(a)–11T(c)(2), and 1.417(e)–1T(b)(3).
(3) EFFECTIVE DATE.—The amendment made
by paragraph (1) and the modifications required by
paragraph (2) shall apply to years beginning after
December 31, 1998.
(b) CONSENT REGULATION INAPPLICABLE TO CER-
TAIN DISTRIBUTIONS.—
107
(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the regulations under section
411(a)(11) of the Internal Revenue Code of 1986 to
provide that the description of a participant’s right,
if any, to defer receipt of a distribution shall also de-
scribe the consequences of failing to defer such re-
ceipt.
(2) EFFECTIVE DATE.—The modifications re-
quired by paragraph (1) shall apply to years begin-
ning after December 31, 1998.
SEC. 516. CONFORMING AMENDMENTS RELATING TO ELEC-
TION TO RECEIVE TAXABLE CASH COM-
PENSATION IN LIEU OF NONTAXABLE PARK-
ING BENEFITS.
(a) IN GENERAL.—
(1) Clause (ii) of section 415(c)(3)(D) and sub-
paragraph (B) of section 403(b)(3) are each amend-
ed by striking ‘‘section 125 or’’ and inserting ‘‘sec-
tion 125, 132(f)(4), or’’.
(2) Paragraph (2) of section 414(s) is amended
by striking ‘‘section 125, 402(e)(3)’’ and inserting
‘‘section 125, 132(f)(4), 402(e)(3)’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall take effect as if included in the
108
amendment made by section 1072 of the Taxpayer Relief
Act of 1997.
SEC. 517. EXTENSION TO INTERNATIONAL ORGANIZATIONS
OF MORATORIUM ON APPLICATION OF CER-
TAIN NONDISCRIMINATION RULES APPLICA-
BLE TO STATE AND LOCAL PLANS.
(a) IN GENERAL.—Subparagraph (g) of section
401(a)(5), subparagraph (h) of section 401(a)(26), sub-
paragraph (G) of section 401(k)(3), and paragraph (2) of
section 1505(d) of the Taxpayer Relief Act of 1997 are
each amended by inserting ‘‘or by an international organi-
zation which is described in section 414(d)’’ after ‘‘or in-
strumentality thereof)’’.
(b) CONFORMING AMENDMENTS.—
(1) The headings for subparagraph (G) of sec-
tion 401(a)(5) and subparagraph (H) of section
401(a)(26) are each amended by inserting ‘‘AND
INTERNATIONAL
ORGANIZATION’’ after ‘‘GOVERN-
MENTAL’’.
(2) Subparagraph (G) of section 401(k)(3) is
amended by inserting ‘‘STATE AND LOCAL GOVERN-
MENTAL
AND
INTERNATIONAL
ORGANIZATION
PLANS.—’’ after ‘‘(G)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect as if included in the amend-
110
in section 1426(b) of the Small Business Job Protection
Act of 1996.
SEC. 519. PERMISSIVE AGGREGATION OF COLLECTIVE BAR-
GAINING UNITS.
(a) IN GENERAL.—Paragraph (3) of section 410(b)
is amended by inserting the following immediately before
the last sentence thereof: ‘‘Solely for purposes of applying
this subsection to employees who are not described in sub-
paragraph (A), an employer may elect to have subpara-
graph (A) not apply to one or more units of employees
who are described in subparagraph (A).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1998.
SEC. 520. REPEAL OF TRANSITION RULE RELATING TO CER-
TAIN HIGHLY COMPENSATED EMPLOYEES.
(a) 
IN
GENERAL.—Paragraph 
(4) 
of 
section
1114(c)(4) of the Tax Reform Act of 1986 is hereby re-
pealed.
(b) EFFECTIVE DATE.—The repeal made by sub-
section (a) shall apply to plan years beginning on or after
January 1, 1999.
SEC. 521. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) IN GENERAL.—If this section applies to any plan
or contract amendment—
111
(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 (29 U.S.C.
1054(g)) 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 regulation issued
under this Act, and
(B) before the last day of the first plan
year beginning on or after January 1, 2001.
In the case of a government plan (as defined in sec-
tion 414(d) of the Internal Revenue Code of 1986
and section 3(32) of the Employee Retirement In-
come Security Act of 1974), this paragraph shall be
applied by substituting ‘‘2003’’ for ‘‘2001’’.
(2) CONDITIONS.—This section shall not apply
to any amendment unless—
112
(A) during the period—
(i) beginning on the date the legisla-
tive or regulatory amendment described in
paragraph (1)(A) takes effect (or in the
case of a plan or contract amendment not
required by such legislative or regulatory
amendment, 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 adopt-
ed),
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.
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