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(A) So much of paragraph (9) of section
457(e) as precedes subparagraph (A) is amend-
ed to read as follows:
‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION
PLANS NOT TREATED AS MADE AVAILABLE BY REA-
SON OF CERTAIN ELECTIONS, ETC.—In the case of
an eligible deferred compensation plan of an em-
ployer described in subsection (e)(1)(B)—’’.
(B) Section 457(d) is amended by adding
at the end the following new paragraph:
‘‘(3) SPECIAL RULE FOR GOVERNMENT PLAN.—
An eligible deferred compensation plan of an em-
ployer described in subsection (e)(1)(A) shall not be
treated as failing to meet the requirements of this
subsection solely by reason of making a distribution
described in subsection (e)(9)(A).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after December 31,
2000.
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TITLE V—STRENGTHENING PEN-
SION 
SECURITY 
AND 
EN-
FORCEMENT
SEC. 501. REPEAL OF 150 PERCENT OF CURRENT LIABILITY
FUNDING LIMIT.
(a) IN GENERAL.—Section 412(c)(7) (relating to
full-funding limitation) is amended—
(1) by striking ‘‘the applicable percentage’’ in
subparagraph (A)(i)(I) and inserting ‘‘in the case of
plan years beginning before January 1, 2004, the
applicable percentage’’; and
(2) 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
The applicable
beginning in—
percentage is—
2001 .............................................................................
160
2002 .............................................................................
165
2003 .............................................................................
170.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 2000.
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SEC. 502. MAXIMUM CONTRIBUTION DEDUCTION RULES
MODIFIED AND APPLIED TO ALL DEFINED
BENEFIT PLANS.
(a) IN GENERAL.—Subparagraph (D) of section
404(a)(1) (relating to special rule in case of certain plans)
is amended to read as follows:
‘‘(D) SPECIAL RULE IN CASE OF CERTAIN
PLANS.—
‘‘(i) IN GENERAL.—In the case of any
defined benefit plan, except as provided in
regulations, the maximum amount deduct-
ible under the limitations of this paragraph
shall not be less than the unfunded termi-
nation liability (determined as if the pro-
posed termination date referred to in sec-
tion 4041(b)(2)(A)(i)(II) of the Employee
Retirement Income Security Act of 1974
were the last day of the plan year).
‘‘(ii) PLANS
WITH
LESS
THAN
100
PARTICIPANTS.—For purposes of this sub-
paragraph, in the case of a plan which has
less than 100 participants for the plan
year, termination liability shall not include
the liability attributable to benefit in-
creases for highly compensated employees
(as defined in section 414(q)) resulting
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from a plan amendment which is made or
becomes effective, whichever is later, within
the last 2 years before the termination
date.
‘‘(iii) RULE FOR DETERMINING NUM-
BER OF PARTICIPANTS.—For purposes of
determining whether a plan has more than
100 participants, all defined benefit plans
maintained by the same employer (or any
member of such employer’s controlled
group (within the meaning of section
412(l)(8)(C))) shall be treated as one plan,
but only employees of such member or em-
ployer shall be taken into account.
‘‘(iv) PLANS ESTABLISHED AND MAIN-
TAIN BY PROFESSIONAL SERVICE EMPLOY-
ERS.—Clause (i) shall not apply to a plan
described in section 4021(b)(13) of the
Employee Retirement Income Security Act
of 1974.’’.
(b) CONFORMING AMENDMENT.—Paragraph (6) of
section 4972(c) is amended to read as follows:
‘‘(6) EXCEPTIONS.—In determining the amount
of nondeductible contributions for any taxable year,
there shall not be taken into account so much of the
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contributions to one or more defined contribution
plans which are not deductible when contributed
solely because of section 404(a)(7) as does not ex-
ceed the greater of—
‘‘(A) the amount of contributions not in
excess of 6 percent of compensation (within the
meaning of section 404(a)) paid or accrued
(during the taxable year for which the contribu-
tions were made) to beneficiaries under the
plans, or
‘‘(B) the sum of—
‘‘(i) the amount of contributions de-
scribed in section 401(m)(4)(A), plus
‘‘(ii) the amount of contributions de-
scribed in section 402(g)(3)(A).
For purposes of this paragraph, the deductible limits
under section 404(a)(7) shall first be applied to
amounts contributed to a defined benefit plan and
then to amounts described in subparagraph (B).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 2000.
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SEC. 503. EXCISE TAX RELIEF FOR SOUND PENSION FUND-
ING.
(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 amendment made by
this section shall apply to years beginning after December
31, 2000.
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SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY
DEFINED BENEFIT PLANS SIGNIFICANTLY
REDUCING FUTURE BENEFIT ACCRUALS.
(a) IN GENERAL.—Chapter 43 (relating to qualified
pension, etc., plans) is amended by adding at the end the
following new section:
‘‘SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING
BENEFIT ACCRUALS TO SATISFY NOTICE RE-
QUIREMENTS.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed
a tax on the failure of any applicable pension plan to meet
the requirements of subsection (e) with respect to any ap-
plicable individual.
‘‘(b) AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) on any failure with respect
to any applicable individual shall be $100 for each
day in the noncompliance period with respect to such
failure.
‘‘(2) NONCOMPLIANCE PERIOD.—For purposes
of this section, the term ‘noncompliance period’
means, with respect to any failure, the period begin-
ning on the date the failure first occurs and ending
on the date the failure is corrected.
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
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‘‘(1) OVERALL
LIMITATION
FOR
UNINTEN-
TIONAL FAILURES.—In the case of failures that are
due to reasonable cause and not to willful neglect,
the tax imposed by subsection (a) for failures during
the taxable year of the employer (or, in the case of
a multiemployer plan, the taxable year of the trust
forming part of the plan) shall not exceed $500,000.
For purposes of the preceding sentence, all multiem-
ployer plans of which the same trust forms a part
shall be treated as one plan. For purposes of this
paragraph, if not all persons who are treated as a
single employer for purposes of this section have the
same taxable year, the taxable years taken into ac-
count shall be determined under principles similar to
the principles of section 1561.
‘‘(2) WAIVER BY SECRETARY.—In the case of a
failure which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all
of the tax imposed by subsection (a) to the extent
that the payment of such tax would be excessive rel-
ative to the failure involved.
‘‘(d) LIABILITY FOR TAX.—The following shall be lia-
ble for the tax imposed by subsection (a):
‘‘(1) In the case of a plan other than a multi-
employer plan, the employer.
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‘‘(2) In the case of a multiemployer plan, the
plan.
‘‘(e) NOTICE REQUIREMENTS FOR PLANS SIGNIFI-
CANTLY REDUCING BENEFIT ACCRUALS.—
‘‘(1) IN
GENERAL.—If an applicable pension
plan is amended to provide for a significant reduc-
tion in the rate of future benefit accrual, the plan
administrator shall provide written notice to each
applicable individual (and to each employee organi-
zation representing applicable individuals).
‘‘(2) NOTICE.—The notice required by para-
graph (1) shall be written in a manner calculated to
be understood by the average plan participant and
shall provide sufficient information (as determined
in accordance with regulations prescribed by the
Secretary) to allow applicable individuals to under-
stand the effect of the plan amendment.
‘‘(3) TIMING OF NOTICE.—Except as provided
in regulations, the notice required by paragraph (1)
shall be provided within a reasonable time before the
effective date of the plan amendment.
‘‘(4) DESIGNEES.—Any notice under paragraph
(1) may be provided to a person designated, in writ-
ing, by the person to which it would otherwise be
provided.
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‘‘(5) NOTICE
BEFORE
ADOPTION
OF
AMEND-
MENT.—A plan shall not be treated as failing to
meet the requirements of paragraph (1) merely be-
cause notice is provided before the adoption of the
plan amendment if no material modification of the
amendment occurs before the amendment is adopt-
ed.
‘‘(f) APPLICABLE INDIVIDUAL; APPLICABLE PEN-
SION PLAN.—For purposes of this section—
‘‘(1) APPLICABLE INDIVIDUAL.—The term ‘ap-
plicable individual’ means, with respect to any plan
amendment—
‘‘(A) any participant in the plan, and
‘‘(B) any beneficiary who is an alternate
payee (within the meaning of section 414(p)(8))
under an applicable qualified domestic relations
order 
(within 
the 
meaning 
of 
section
414(p)(1)(A)),
who may reasonably be expected to be affected by
such plan amendment.
‘‘(2) APPLICABLE
PENSION
PLAN.—The term
‘applicable pension plan’ means—
‘‘(A) any defined benefit plan, or
‘‘(B) an individual account plan which is
subject to the funding standards of section 412,
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which had 100 or more participants who had ac-
crued a benefit, or with respect to whom contribu-
tions were made, under the plan (whether or not
vested) as of the last day of the plan year preceding
the plan year in which the plan amendment becomes
effective. Such term shall not include a governmental
plan (within the meaning of section 414(d)) or a
church plan (within the meaning of section 414(e))
with respect to which the election provided by sec-
tion 410(d) has not been made.’’.
(b) CLERICAL AMENDMENT.—The table of sections
for chapter 43 is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals
to satisfy notice requirements.’’.
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall apply to plan amendments taking
effect on or after the date of the enactment of this
Act.
(2) TRANSITION.—Until such time as the Sec-
retary of the Treasury issues regulations under sec-
tions 4980F(e)(2) and (3) of the Internal Revenue
Code of 1986 (as added by the amendments made
by this section), a plan shall be treated as meeting
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the requirements of such sections if it makes a good
faith effort to comply with such requirements.
(3) SPECIAL RULE.—The period for providing
any notice required by the amendments made by this
section shall not end before the date which is 3
months after the date of the enactment of this Act.
(d) STUDY.—The Secretary of the Treasury shall
prepare a report on the effects of conversions of tradi-
tional defined benefit plans to cash balance or hybrid for-
mula plans. Such study shall examine the effect of such
conversions on longer service participants, including the
incidence and effects of ‘‘wear away’’ provisions under
which participants earn no additional benefits for a period
of time after the conversion. As soon as practicable, but
not later than 60 days after the date of the enactment
of this Act, the Secretary shall submit such report, to-
gether with recommendations thereon, to the Committee
on Ways and Means of the House of Representatives and
the Committee on Finance of the Senate.
SEC. 505. 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:
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‘‘(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) COMBINING AND AGGREGATION OF PLANS.—
(1) COMBINING OF PLANS.—Subsection (f) of
section 415 (relating to combining of plans) is
amended by adding at the end the following:
‘‘(3) 
EXCEPTION
FOR
MULTIEMPLOYER
PLANS.—Notwithstanding paragraph (1) and sub-
section (g), a multiemployer plan (as defined in sec-
tion 414(f)) shall not be combined or aggregated
with any other plan maintained by an employer for
purposes of applying the limitations established in
this section, except that such plan shall be combined
or aggregated with another plan which is not such
a multiemployer plan solely for purposes of deter-
mining whether such other plan meets the require-
ments of subsections (b)(1)(A) and (c).’’.
(2) CONFORMING AMENDMENT FOR AGGREGA-
TION OF PLANS.—Subsection (g) of section 415 (re-
lating to aggregation of plans) is amended by strik-
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ing ‘‘The Secretary’’ and inserting ‘‘Except as pro-
vided in subsection (f)(3), the Secretary’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
SEC. 506. PROHIBITED ALLOCATIONS OF STOCK IN S COR-
PORATION ESOP.
(a) IN GENERAL.—Section 409 (relating to qualifica-
tions for tax credit employee stock ownership plans) is
amended by redesignating subsection (p) as subsection (q)
and by inserting after subsection (o) the following new
subsection:
‘‘(p) PROHIBITED ALLOCATIONS OF SECURITIES IN
AN S CORPORATION.—
‘‘(1) IN GENERAL.—An employee stock owner-
ship plan holding employer securities consisting of
stock in an S corporation shall provide that no por-
tion of the assets of the plan attributable to (or allo-
cable in lieu of) such employer securities may, dur-
ing a nonallocation year, accrue (or be allocated di-
rectly or indirectly under any plan of the employer
meeting the requirements of section 401(a)) for the
benefit of any disqualified person.
‘‘(2) FAILURE TO MEET REQUIREMENTS.—
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‘‘(A) IN GENERAL.—If a plan fails to meet
the requirements of paragraph (1), the plan
shall be treated as having distributed to any
disqualified person the amount allocated to the
account of such person in violation of para-
graph (1) at the time of such allocation.
‘‘(B) CROSS REFERENCE.—
‘‘For excise tax relating to violations of paragraph
(1) and ownership of synthetic equity, see section
4979A.
‘‘(3) NONALLOCATION YEAR.—For purposes of
this subsection—
‘‘(A) IN GENERAL.—The term ‘nonalloca-
tion year’ means any plan year of an employee
stock ownership plan if, at any time during
such plan year—
‘‘(i) such plan holds employer securi-
ties consisting of stock in an S corpora-
tion, and
‘‘(ii) disqualified persons own at least
50 percent of the number of shares of
stock in the S corporation.
‘‘(B) ATTRIBUTION RULES.—For purposes
of subparagraph (A)—
‘‘(i) IN GENERAL.—The rules of sec-
tion 318(a) shall apply for purposes of de-
termining ownership, except that—
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‘‘(I) in applying paragraph (1)
thereof, the members of an individ-
ual’s family shall include members of
the family described in paragraph
(4)(D), and
‘‘(II) paragraph (4) thereof shall
not apply.
‘‘(ii) DEEMED-OWNED SHARES.—Not-
withstanding the employee trust exception
in section 318(a)(2)(B)(i), individual shall
be treated as owning deemed-owned shares
of the individual.
Solely for purposes of applying paragraph (5),
this subparagraph shall be applied after the at-
tribution rules of paragraph (5) have been ap-
plied.
‘‘(4) DISQUALIFIED PERSON.—For purposes of
this subsection—
‘‘(A) IN GENERAL.—The term ‘disqualified
person’ means any person if—
‘‘(i) the aggregate number of deemed-
owned shares of such person and the mem-
bers of such person’s family is at least 20
percent of the number of deemed-owned
shares of stock in the S corporation, or
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‘‘(ii) in the case of a person not de-
scribed in clause (i), the number of
deemed-owned shares of such person is at
least 10 percent of the number of deemed-
owned shares of stock in such corporation.
‘‘(B) TREATMENT OF FAMILY MEMBERS.—
In the case of a disqualified person described in
subparagraph (A)(i), any member of such per-
son’s family with deemed-owned shares shall be
treated as a disqualified person if not otherwise
treated as a disqualified person under subpara-
graph (A).
‘‘(C) DEEMED-OWNED SHARES.—
‘‘(i) 
IN
GENERAL.—The 
term
‘deemed-owned shares’ means, with respect
to any person—
‘‘(I) the stock in the S corpora-
tion constituting employer securities
of an employee stock ownership plan
which is allocated to such person
under the plan, and
‘‘(II) such person’s share of the
stock in such corporation which is
held by such plan but which is not al-
located under the plan to participants.
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‘‘(ii) 
PERSON’S
SHARE
OF
UNALLOCATED
STOCK.—For purposes of
clause 
(i)(II), 
a 
person’s 
share 
of
unallocated S corporation stock held by
such plan is the amount of the unallocated
stock which would be allocated to such per-
son if the unallocated stock were allocated
to all participants in the same proportions
as the most recent stock allocation under
the plan.
‘‘(D) MEMBER OF FAMILY.—For purposes
of this paragraph, the term ‘member of the
family’ means, with respect to any individual—
‘‘(i) the spouse of the individual,
‘‘(ii) an ancestor or lineal descendant
of the individual or the individual’s spouse,
‘‘(iii) a brother or sister of the indi-
vidual or the individual’s spouse and any
lineal descendant of the brother or sister,
and
‘‘(iv) the spouse of any individual de-
scribed in clause (ii) or (iii).
A spouse of an individual who is legally sepa-
rated from such individual under a decree of di-
vorce or separate maintenance shall not be
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treated as such individual’s spouse for purposes
of this subparagraph.
‘‘(5) TREATMENT OF SYNTHETIC EQUITY.—For
purposes of paragraphs (3) and (4), in the case of
a person who owns synthetic equity in the S corpora-
tion, except to the extent provided in regulations, the
shares of stock in such corporation on which such
synthetic equity is based shall be treated as out-
standing stock in such corporation and deemed-
owned shares of such person if such treatment of
synthetic equity of 1 or more such persons results
in—
‘‘(A) the treatment of any person as a dis-
qualified person, or
‘‘(B) the treatment of any year as a non-
allocation year.
For purposes of this paragraph, synthetic equity
shall be treated as owned by a person in the same
manner as stock is treated as owned by a person
under the rules of paragraphs (2) and (3) of section
318(a). If, without regard to this paragraph, a per-
son is treated as a disqualified person or a year is
treated as a nonallocation year, this paragraph shall
not be construed to result in the person or year not
being so treated.
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‘‘(6) DEFINITIONS.—For purposes of this
subsection—
‘‘(A) 
EMPLOYEE
STOCK
OWNERSHIP
PLAN.—The term ‘employee stock ownership
plan’ has the meaning given such term by sec-
tion 4975(e)(7).
‘‘(B) EMPLOYER SECURITIES.—The term
‘employer security’ has the meaning given such
term by section 409(l).
‘‘(C) SYNTHETIC EQUITY.—The term ‘syn-
thetic equity’ means any stock option, warrant,
restricted stock, deferred issuance stock right,
or similar interest or right that gives the holder
the right to acquire or receive stock of the S
corporation in the future. Except to the extent
provided in regulations, synthetic equity also in-
cludes a stock appreciation right, phantom
stock unit, or similar right to a future cash
payment based on the value of such stock or
appreciation in such value.
‘‘(7) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry
out the purposes of this subsection.’’.
(b) COORDINATION WITH SECTION 4975(e)(7).—The
last sentence of section 4975(e)(7) (defining employee
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stock ownership plan) is amended by inserting ‘‘, section
409(p),’’ after ‘‘409(n)’’.
(c) EXCISE TAX.—
(1) APPLICATION OF TAX.—Subsection (a) of
section 4979A (relating to tax on certain prohibited
allocations of employer securities) is amended—
(A) by striking ‘‘or’’ at the end of para-
graph (1), and
(B) by striking all that follows paragraph
(2) and inserting the following:
‘‘(3) there is any allocation of employer securi-
ties which violates the provisions of section 409(p),
or a nonallocation year described in subsection
(e)(2)(C) with respect to an employee stock owner-
ship plan, or
‘‘(4) any synthetic equity is owned by a dis-
qualified person in any nonallocation year,
there is hereby imposed a tax on such allocation or owner-
ship equal to 50 percent of the amount involved.’’.
(2) LIABILITY.—Section 4979A(c) (defining li-
ability for tax) is amended to read as follows:
‘‘(c) LIABILITY FOR TAX.—The tax imposed by this
section shall be paid—
‘‘(1) in the case of an allocation referred to in
paragraph (1) or (2) of subsection (a), by—
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‘‘(A) the employer sponsoring such plan, or
‘‘(B) the eligible worker-owned cooperative,
which made the written statement described in sec-
tion 664(g)(1)(E) or in section 1042(b)(3)(B) (as
the case may be), and
‘‘(2) in the case of an allocation or ownership
referred to in paragraph (3) or (4) of subsection (a),
by the S corporation the stock in which was so allo-
cated or owned.’’.
(3) DEFINITIONS.—Section 4979A(e) (relating
to definitions) is amended to read as follows:
‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) DEFINITIONS.—Except as provided in
paragraph (2), terms used in this section have the
same respective meanings as when used in sections
409 and 4978.
‘‘(2) SPECIAL
RULES
RELATING
TO
TAX
IM-
POSED BY REASON OF PARAGRAPH (3) OR (4) OF
SUBSECTION (a).—
‘‘(A) 
PROHIBITED
ALLOCATIONS.—The
amount involved with respect to any tax im-
posed by reason of subsection (a)(3) is the
amount allocated to the account of any person
in violation of section 409(p)(1).
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‘‘(B) SYNTHETIC
EQUITY.—The amount
involved with respect to any tax imposed by rea-
son of subsection (a)(4) is the value of the
shares on which the synthetic equity is based.
‘‘(C) SPECIAL RULE DURING FIRST NON-
ALLOCATION YEAR.—For purposes of subpara-
graph (A), the amount involved for the first
nonallocation year of any employee stock owner-
ship plan shall be determined by taking into ac-
count the total value of all the deemed-owned
shares of all disqualified persons with respect to
such plan.
‘‘(D) STATUTE
OF
LIMITATIONS.—The
statutory period for the assessment of any tax
imposed by this section by reason of paragraph
(3) or (4) of subsection (a) shall not expire be-
fore the date which is 3 years from the later
of—
‘‘(i) the allocation or ownership re-
ferred to in such paragraph giving rise to
such tax, or
‘‘(ii) the date on which the Secretary
is notified of such allocation or owner-
ship.’’.
(d) EFFECTIVE DATES.—
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(1) IN GENERAL.—The amendments made by
this section shall apply to plan years beginning after
December 31, 2001.
(2) EXCEPTION FOR CERTAIN PLANS.—In the
case of any—
(A) employee stock ownership plan estab-
lished after July 11, 2000, or
(B) employee stock ownership plan estab-
lished on or before such date if employer securi-
ties held by the plan consist of stock in a cor-
poration with respect to which an election under
section 1362(a) of the Internal Revenue Code
of 1986 is not in effect on such date,
the amendments made by this section shall apply to
plan years ending after July 11, 2000.
TITLE VI—REDUCING
REGULATORY BURDENS
SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) 
IN
GENERAL.—Paragraph 
(9) 
of 
section
412(c)(9) (relating to annual valuation) is amended to
read as follows:
‘‘(9) ANNUAL VALUATION.—
‘‘(A) IN GENERAL.—For purposes of this
section, a determination of experience gains and
losses and a valuation of the plan’s liability
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shall be made not less frequently than once
every year, except that such determination shall
be made more frequently to the extent required
in particular cases under regulations prescribed
by the Secretary.
‘‘(B) VALUATION DATE.—
‘‘(i) CURRENT YEAR.—Except as pro-
vided in clause (ii), the valuation referred
to in subparagraph (A) shall be made as of
a date within the plan year to which the
valuation refers or within one month prior
to the beginning of such year.
‘‘(ii) ELECTION TO USE PRIOR YEAR
VALUATION.—The valuation referred to in
subparagraph (A) may be made as of a
date within the plan year prior to the year
to which the valuation refers if—
‘‘(I) an election is in effect under
this clause with respect to the plan,
and
‘‘(II) as of such date, the value
of the assets of the plan are not less
than 125 percent of the plan’s current
liability (as defined in paragraph
(7)(B)).
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‘‘(iii) 
ADJUSTMENTS.—Information
under clause (ii) shall, in accordance with
regulations, be actuarially adjusted to re-
flect significant differences in participants.
‘‘(iv) ELECTION.—An election under
clause (ii), once made, shall be irrevocable
without the consent of the Secretary.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 2000.
SEC. 602. 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:
‘‘(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’’.
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(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 603. REPEAL OF TRANSITION RULE RELATING TO CER-
TAIN HIGHLY COMPENSATED EMPLOYEES.
(a) IN GENERAL.—Paragraph (4) of section 1114(c)
of the Tax Reform Act of 1986 is hereby repealed.
(b) EFFECTIVE DATE.—The repeal made by sub-
section (a) shall apply to plan years beginning after De-
cember 31, 2000.
SEC. 604. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) IN GENERAL.—The Secretary of the Treasury
shall modify Treasury Regulations section 1.410(b)–6(g)
to provide that employees of an organization described in
section 403(b)(1)(A)(i) of the Internal Revenue Code of
1986 who are eligible to make contributions under section
403(b) of such Code pursuant to a salary reduction agree-
ment may be treated as excludable with respect to a plan
under section 401(k) or (m) of such Code that is provided
under the same general arrangement as a plan under such
section 401(k), if—
(1) no employee of an organization described in
section 403(b)(1)(A)(i) of such Code is eligible to
participate in such section 401(k) plan or section
401(m) plan; and
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(2) 95 percent of the employees who are not
employees of an organization described in section
403(b)(1)(A)(i) of such Code are eligible to partici-
pate in such plan under such section 401(k) or (m).
(b) EFFECTIVE DATE.—The modification required by
subsection (a) shall apply as of the same date set forth
in section 1426(b) of the Small Business Job Protection
Act of 1996.
SEC. 605. CLARIFICATION OF TREATMENT OF EMPLOYER-
PROVIDED RETIREMENT ADVICE.
(a) IN GENERAL.—Subsection (a) of section 132 (re-
lating to exclusion from gross income) is amended by
striking ‘‘or’’ at the end of paragraph (5), by striking the
period at the end of paragraph (6) and inserting ‘‘, or’’,
and by adding at the end the following new paragraph:
‘‘(7) qualified retirement planning services.’’.
(b) QUALIFIED RETIREMENT PLANNING SERVICES
DEFINED.—Section 132 is amended by redesignating sub-
section (m) as subsection (n) and by inserting after sub-
section (l) the following:
‘‘(m) QUALIFIED RETIREMENT PLANNING SERV-
ICES.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified retirement planning serv-
ices’ means any retirement planning service provided
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to an employee and his spouse by an employer main-
taining a qualified employer plan.
‘‘(2) NONDISCRIMINATION
RULE.—Subsection
(a)(7) shall apply in the case of highly compensated
employees only if such services are available on sub-
stantially the same terms to each member of the
group of employees normally provided education and
information regarding the employer’s qualified em-
ployer plan.
‘‘(3) QUALIFIED EMPLOYER PLAN.—For pur-
poses of this subsection, the term ‘qualified employer
plan’ means a plan, contract, pension, or account de-
scribed in section 219(g)(5).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
SEC. 606. REPORTING SIMPLIFICATION.
(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
OWNERS AND THEIR SPOUSES.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the requirements for filing annual
returns with respect to one-participant retirement
plans to ensure that such plans with assets of
$250,000 or less as of the close of the plan year
need not file a return for that year.
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(2) ONE-PARTICIPANT RETIREMENT PLAN DE-
FINED.—For purposes of this subsection, the term
‘‘one-participant retirement plan’’ means a retire-
ment plan that—
(A) on the first day of the plan year—
(i) covered only the employer (and the
employer’s spouse) and the employer
owned the entire business (whether or not
incorporated); or
(ii) covered only one or more partners
(and their spouses) in a business partner-
ship (including partners in an S or C cor-
poration);
(B) meets the minimum coverage require-
ments of section 410(b) of the Internal Revenue
Code of 1986 without being combined with any
other plan of the business that covers the em-
ployees of the business;
(C) does not provide benefits to anyone ex-
cept the employer (and the employer’s spouse)
or the partners (and their spouses);
(D) does not cover a business that is a
member of an affiliated service group, a con-
trolled group of corporations, or a group of
businesses under common control; and
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(E) does not cover a business that leases
employees.
(3) OTHER DEFINITIONS.—Terms used in para-
graph (2) which are also used in section 414 of the
Internal Revenue Code of 1986 shall have the re-
spective meanings given such terms by such section.
(b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case
of a retirement plan which covers less than 25 employees
on the first day of the plan year and meets the require-
ments described in subparagraphs (B), (D), and (E) of
subsection (a)(2), the Secretary of the Treasury shall pro-
vide for the filing of a simplified annual return that is
substantially similar to the annual return required to be
filed by a one-participant retirement plan.
(c) EFFECTIVE DATE.—The provisions of this section
shall take effect on January 1, 2001.
SEC. 607. IMPROVEMENT OF EMPLOYEE PLANS COMPLI-
ANCE RESOLUTION SYSTEM.
The Secretary of the Treasury shall continue to up-
date and improve the Employee Plans Compliance Resolu-
tion System (or any successor program) giving special at-
tention to—
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(1) increasing the awareness and knowledge of
small employers concerning the availability and use
of the program;
(2) taking into account special concerns and
circumstances that small employers face with respect
to compliance and correction of compliance failures;
(3) extending the duration of the self-correction
period under the Administrative Policy Regarding
Self-Correction for significant compliance failures;
(4) expanding the availability to correct insig-
nificant compliance failures under the Administra-
tive Policy Regarding Self-Correction during audit;
and
(5) assuring that any tax, penalty, or sanction
that is imposed by reason of a compliance failure is
not excessive and bears a reasonable relationship to
the nature, extent, and severity of the failure.
SEC. 608. 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.’’.
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(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 2000.
SEC. 609. FLEXIBILITY IN NONDISCRIMINATION, COV-
ERAGE, AND LINE OF BUSINESS RULES.
(a) NONDISCRIMINATION.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall, by regulation, provide that a plan shall be
deemed to satisfy the requirements of section
401(a)(4) of the Internal 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, but only if—
(A) the plan satisfies conditions prescribed
by the Secretary to appropriately limit the
availability of such test; and
(B) the plan is submitted to the Secretary
for a determination of whether it satisfies such
test.
Subparagraph (B) shall only apply to the extent pro-
vided by the Secretary.
(2) EFFECTIVE DATES.—
(A) REGULATIONS.—The regulation re-
quired by paragraph (1) shall apply to years be-
ginning after December 31, 2000.
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(B) CONDITIONS OF AVAILABILITY.—Any
condition of availability prescribed by the Sec-
retary under paragraph (1)(A) shall not apply
before the first year beginning not less than
120 days after the date on which such condition
is prescribed.
(b) COVERAGE TEST.—
(1) IN GENERAL.—Section 410(b)(1) (relating
to minimum coverage requirements) 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.’’.
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(2) EFFECTIVE DATES.—
(A) IN GENERAL.—The amendment made
by paragraph (1) shall apply to years beginning
after December 31, 2000.
(B) CONDITIONS OF AVAILABILITY.—Any
condition of availability prescribed by the Sec-
retary under regulations prescribed by the Sec-
retary under section 410(b)(1)(D) of the Inter-
nal Revenue Code of 1986 shall not apply be-
fore the first year beginning not less than 120
days after the date on which such condition is
prescribed.
(c) LINE OF BUSINESS RULES.—The Secretary of
the Treasury shall, on or before December 31, 2000, mod-
ify the existing regulations issued under section 414(r) of
the Internal Revenue Code of 1986 in order to expand
(to the extent that the Secretary determines appropriate)
the ability of a pension plan to demonstrate compliance
with the line of business requirements based upon the
facts and circumstances surrounding the design and oper-
ation of the plan, even though the plan is unable to satisfy
the mechanical tests currently used to determine compli-
ance.
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SEC. 610. EXTENSION TO ALL GOVERNMENTAL PLANS OF
MORATORIUM ON APPLICATION OF CERTAIN
NONDISCRIMINATION RULES APPLICABLE TO
STATE AND LOCAL PLANS.
(a) IN GENERAL.—
(1) Subparagraph (G) of section 401(a)(5) and
subparagraph (H) of section 401(a)(26) are each
amended by striking ‘‘section 414(d))’’ and all that
follows and inserting ‘‘section 414(d)).’’.
(2) Subparagraph (G) of section 401(k)(3) and
paragraph (2) of section 1505(d) of the Taxpayer
Relief Act of 1997 are each amended by striking
‘‘maintained by a State or local government or polit-
ical subdivision thereof (or agency or instrumentality
thereof)’’.
(b) CONFORMING AMENDMENTS.—
(1) The heading for subparagraph (G) of sec-
tion 401(a)(5) is amended to read as follows: ‘‘GOV-
ERNMENTAL PLANS’’.
(2) The heading for subparagraph (H) of sec-
tion 401(a)(26) is amended to read as follows: ‘‘EX-
CEPTION FOR GOVERNMENTAL PLANS’’.
(3) Subparagraph (G) of section 401(k)(3) is
amended by inserting ‘‘GOVERNMENTAL PLANS.—’’
after ‘‘(G)’’.
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(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
SEC. 611. 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 ‘‘180-day’’.
(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
‘‘180 days’’ for ‘‘90 days’’ each place it appears in
Treasury Regulations sections 1.402(f)–1, 1.411(a)–
11(c), and 1.417(e)–1(b).
(3) EFFECTIVE DATE.—The amendment made
by paragraph (1) and the modifications required by
paragraph (2) shall apply to years beginning after
December 31, 2000.
(b) CONSENT REGULATION INAPPLICABLE TO CER-
TAIN DISTRIBUTIONS.—
(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
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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, 2000.
TITLE VII—PLAN AMENDMENTS
SEC. 701. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) IN GENERAL.—If this section applies to any plan
or contract amendment—
(1) such plan or contract shall be treated as
being operated in accordance with the terms of the
plan during the period described in subsection
(b)(2)(A); and
(2) such plan shall not fail to meet the require-
ments of section 411(d)(6) of the Internal Revenue
Code of 1986 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
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(B) on or before the last day of the first
plan year beginning on or after January 1,
2003.
In the case of a governmental plan (as defined in
section 414(d) of the Internal Revenue Code of
1986), this paragraph shall be applied by sub-
stituting ‘‘2005’’ for ‘‘2003’’.
(2) CONDITIONS.—This section shall not apply
to any amendment unless—
(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
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(B) such plan or contract amendment ap-
plies retroactively for such period.
Passed the House of Representatives July 19, 2000.
Attest:
JEFF TRANDAHL,
Clerk.