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same time and in the same manner as under sec-
tion 415(d), except that the base period shall be
the calendar quarter beginning July 1, 2009,
and any increase under this paragraph which is
not a multiple of $500 shall be rounded to the
next lowest multiple of $500.’’.
(e) SIMPLE RETIREMENT ACCOUNTS.—
(1) 
LIMITATION.—Clause 
(ii) 
of 
section
408(p)(2)(A) (relating to general rule for qualified
salary reduction arrangement) is amended by striking
‘‘$6,000’’ and inserting ‘‘the applicable dollar
amount’’.
(2) APPLICABLE
DOLLAR
AMOUNT.—Subpara-
graph (E) of 408(p)(2) is amended to read as follows:
‘‘(E) APPLICABLE DOLLAR AMOUNT; COST-
OF-LIVING ADJUSTMENT.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A)(ii), the applicable dollar
amount shall be the amount determined in
accordance with the following table:
‘‘For taxable years
The applicable
beginning in
dollar amount is:
calendar year:
2002 and 2003 ...........................................................
$7,000
2004 and 2005 ...........................................................
$8,000
2006 and 2007 ...........................................................
$9,000
2008 or thereafter ......................................................
$10,000.
‘‘(ii) COST-OF-LIVING
ADJUSTMENT.—
In the case of a year beginning after Decem-
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ber 31, 2008, the Secretary shall adjust the
$10,000 amount under clause (i) at the
same time and in the same manner as
under section 415(d), except that the base
period taken into account shall be the cal-
endar quarter beginning July 1, 2007, and
any increase under this subparagraph
which is not a multiple of $500 shall be
rounded to the next lower multiple of
$500.’’.
(3) CONFORMING AMENDMENTS.—
(A) 
Subclause 
(I) 
of 
section
401(k)(11)(B)(i) 
is 
amended 
by 
striking
‘‘$6,000’’ and inserting ‘‘the amount in effect
under section 408(p)(2)(A)(ii)’’.
(B) Section 401(k)(11) is amended by strik-
ing subparagraph (E).
(f) ROUNDING RULE RELATING TO DEFINED BENEFIT
PLANS AND DEFINED CONTRIBUTION PLANS.—Paragraph
(4) of section 415(d) is amended to read as follows:
‘‘(4) ROUNDING.—
‘‘(A) APPLICABLE LIMIT AMOUNT.—Any in-
crease under subparagraph (A) of paragraph (1)
which is not a multiple of $5,000 shall be round-
ed to the next lowest multiple of $5,000.
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‘‘(B) 
$30,000 
AMOUNT.—Any 
increase
under subparagraph (C) of paragraph (1) which
is not a multiple of $1,000 shall be rounded to
the next lowest multiple of $1,000.’’.
(g) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2001.
SEC. 612. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART-
NERS, AND SOLE PROPRIETORS.
(a) IN
GENERAL.—Subparagraph (B) of section
4975(f)(6) (relating to exemptions not to apply to certain
transactions) is amended by adding at the end the following
new clause:
‘‘(iii) LOAN EXCEPTION.—For purposes
of subparagraph (A)(i), the term ‘owner-em-
ployee’ shall only include a person described
in subclause (II) or (III) of clause (i).’’.
(b) AMENDMENT OF ERISA.—Section 408(d)(2) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1108(d)(2)) is amended by adding at the end the
following new subparagraph:
‘‘(C) For purposes of paragraph (1)(A), the term
‘owner-employee’ shall only include a person described in
clause (ii) or (iii) of subparagraph (A).’’.
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(c) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
2001.
SEC. 613. MODIFICATION OF TOP-HEAVY RULES.
(a) SIMPLIFICATION
OF DEFINITION
OF KEY EM-
PLOYEE.—
(1) IN GENERAL.—Section 416(i)(1)(A) (defining
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 having
an annual compensation greater than the
amount 
in 
effect 
under 
section
414(q)(1)(B)(i) for such plan year,’’;
(C) by striking clause (ii) and redesig-
nating clauses (iii) and (iv) as clauses (ii) and
(iii), respectively;
(D) by striking the second sentence in the
matter following clause (iii), as redesignated by
subparagraph (C); and
(E) by adding at the end the following:
‘‘For purposes of this subparagraph, in the case
of an employee who is not employed during the
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preceding plan year or is employed for a portion
of such year, such employee shall be treated as a
key employee if it can be reasonably anticipated
that such employee will be described in 1 of the
preceding clauses for the current plan year.’’.
(2) 
CONFORMING
AMENDMENT.—Section
416(i)(1)(B)(iii) is amended by striking ‘‘and sub-
paragraph (A)(ii)’’.
(b) MATCHING CONTRIBUTIONS TAKEN INTO ACCOUNT
FOR MINIMUM CONTRIBUTION REQUIREMENTS.—Section
416(c)(2)(A) (relating to defined contribution plans) is
amended by adding at the end the following: ‘‘Employer
matching 
contributions 
(as 
defined 
in 
section
401(m)(4)(A)) shall be taken into account for purposes of
this subparagraph.’’.
(c) DISTRIBUTIONS DURING LAST YEAR BEFORE DE-
TERMINATION DATE TAKEN INTO ACCOUNT.—
(1) IN
GENERAL.—Paragraph (3) of section
416(g) is amended to read as follows:
‘‘(3) DISTRIBUTIONS DURING LAST YEAR BEFORE
DETERMINATION DATE TAKEN INTO ACCOUNT.—
‘‘(A) 
IN
GENERAL.—For 
purposes 
of
determining—
‘‘(i) the present value of the cumulative
accrued benefit for any employee, or
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‘‘(ii) the amount of the account of any
employee,
such present value or amount shall be increased
by the aggregate distributions made with respect
to such employee under the plan during the 1-
year period ending on the determination date.
The preceding sentence shall also apply to dis-
tributions under a terminated plan which if it
had not been terminated would have been re-
quired to be included in an aggregation group.
‘‘(B) 5-YEAR PERIOD IN CASE OF IN-SERV-
ICE DISTRIBUTION.—In the case of any distribu-
tion made for a reason other than separation
from service, death, or disability, subparagraph
(A) shall be applied by substituting ‘5-year pe-
riod’ for ‘1-year period’.’’.
(2) BENEFITS NOT TAKEN INTO ACCOUNT.—Sub-
paragraph (E) of section 416(g)(4) is amended—
(A) by striking ‘‘LAST
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’’.
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(d) FROZEN PLAN EXEMPT FROM MINIMUM BENEFIT
REQUIREMENT.—Subparagraph (C) of section 416(c)(1)
(relating to defined benefit plans) is amended—
(A) by striking ‘‘clause (ii)’’ in clause (i)
and inserting ‘‘clause (ii) or (iii)’’; and
(B) by adding at the end the following:
‘‘(iii) 
EXCEPTION
FOR
FROZEN
PLAN.—For purposes of determining an em-
ployee’s years of service with the employer,
any service with the employer shall be dis-
regarded to the extent that such service oc-
curs during a plan year when the plan ben-
efits (within the meaning of section 410(b))
no key employee or former key employee.’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2001.
SEC. 614. ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF DEDUCTION LIM-
ITS.
(a) IN GENERAL.—Section 404 (relating to deduction
for contributions of an employer to an employees’ trust or
annuity plan and compensation under a deferred payment
plan) is amended by adding at the end the following new
subsection:
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‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF DEDUCTION LIMITS.—
‘‘(1) IN GENERAL.—The applicable percentage of
the amount of any elective deferrals (as defined in
section 402(g)(3)) shall not be subject to any limita-
tion contained in paragraph (3), (7), or (9) of sub-
section (a), and such elective deferrals shall not be
taken into account in applying any such limitation
to any other contributions.
‘‘(2) APPLICABLE
PERCENTAGE.—For purposes
of paragraph (1), the applicable percentage shall be
determined in accordance with the following table:
‘‘For taxable years
The applicable
beginning in:
percentage is:
2002 through 2010 .................................................
25 percent
2011 and thereafter ...............................................
100 percent.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
2001.
SEC. 615. REPEAL OF COORDINATION REQUIREMENTS FOR
DEFERRED COMPENSATION PLANS OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS.
(a) IN GENERAL.—Subsection (c) of section 457 (relat-
ing to deferred compensation plans of State and local gov-
ernments and tax-exempt organizations), as amended by
section 611, is amended to read as follows:
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‘‘(c) LIMITATION.—The maximum amount of the com-
pensation of any one individual which may be deferred
under subsection (a) during any taxable year shall not ex-
ceed the amount in effect under subsection (b)(2)(A) (as
modified by any adjustment provided under subsection
(b)(3)).’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to years beginning after December
31, 2001.
SEC. 616. DEDUCTION LIMITS.
(a) MODIFICATION OF LIMITS.—
(1) 
STOCK
BONUS
AND
PROFIT
SHARING
TRUSTS.—
(A) IN GENERAL.—Subclause (I) of section
404(a)(3)(A)(i) (relating to stock bonus and
profit sharing trusts) is amended by striking ‘‘15
percent’’ and inserting ‘‘25 percent’’.
(B) CONFORMING
AMENDMENT.—Subpara-
graph (C) of section 404(h)(1) is amended by
striking ‘‘15 percent’’ each place it appears and
inserting ‘‘25 percent’’.
(2) DEFINED CONTRIBUTION PLANS.—
(A) IN
GENERAL.—Clause (v) of section
404(a)(3)(A) (relating to stock bonus and profit
sharing trusts) is amended to read as follows:
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‘‘(v) DEFINED
CONTRIBUTION
PLANS
SUBJECT TO THE FUNDING STANDARDS.—
Except as provided by the Secretary, a de-
fined contribution plan which is subject to
the funding standards of section 412 shall
be treated in the same manner as a stock
bonus or profit-sharing plan for purposes of
this subparagraph.’’
(B) CONFORMING AMENDMENTS.—
(i) Section 404(a)(1)(A) is amended by
inserting ‘‘(other than a trust to which
paragraph (3) applies)’’ after ‘‘pension
trust’’.
(ii) Section 404(h)(2) is amended by
striking ‘‘stock bonus or profit-sharing
trust’’ and inserting ‘‘trust subject to sub-
section (a)(3)(A)’’.
(iii) The heading of section 404(h)(2)
is amended by striking ‘‘STOCK BONUS AND
PROFIT-SHARING
TRUST’’ and inserting
‘‘CERTAIN TRUSTS’’.
(b) COMPENSATION.—
(1) IN GENERAL.—Section 404(a) (relating to
general rule) is amended by adding at the end the fol-
lowing:
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‘‘(12) DEFINITION OF COMPENSATION.—For pur-
poses of paragraphs (3), (7), (8), and (9), the term
‘compensation’ shall include amounts treated as ‘par-
ticipant’s compensation’ under subparagraph (C) or
(D) of section 415(c)(3).’’.
(2) CONFORMING AMENDMENTS.—
(A) Subparagraph (B) of section 404(a)(3)
is amended by striking the last sentence thereof.
(B) Clause (i) of section 4972(c)(6)(B) is
amended by striking ‘‘(within the meaning of
section 404(a))’’ and inserting ‘‘(within the
meaning of section 404(a) and as adjusted under
section 404(a)(12))’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2001.
SEC. 617. OPTION TO TREAT ELECTIVE DEFERRALS AS
AFTER-TAX ROTH CONTRIBUTIONS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 (relating to deferred compensation, etc.) is
amended by inserting after section 402 the following new
section:
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‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER-
RALS AS ROTH CONTRIBUTIONS.
‘‘(a) GENERAL RULE.—If an applicable retirement
plan includes a qualified Roth contribution program—
‘‘(1) any designated Roth contribution made by
an employee pursuant to the program shall be treated
as an elective deferral for purposes of this chapter, ex-
cept that such contribution shall not be excludable
from gross income, and
‘‘(2) such plan (and any arrangement which is
part of such plan) shall not be treated as failing to
meet any requirement of this chapter solely by reason
of including such program.
‘‘(b) QUALIFIED ROTH CONTRIBUTION PROGRAM.—
For purposes of this section—
‘‘(1) IN
GENERAL.—The term ‘qualified Roth
contribution program’ means a program under which
an employee may elect to make designated Roth con-
tributions in lieu of all or a portion of elective defer-
rals the employee is otherwise eligible to make under
the applicable retirement plan.
‘‘(2) SEPARATE ACCOUNTING REQUIRED.—A pro-
gram shall not be treated as a qualified Roth con-
tribution program unless the applicable retirement
plan—
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‘‘(A) establishes separate accounts (‘des-
ignated Roth accounts’) for the designated Roth
contributions of each employee and any earnings
properly allocable to the contributions, and
‘‘(B) maintains separate recordkeeping with
respect to each account.
‘‘(c) DEFINITIONS AND RULES RELATING TO DES-
IGNATED ROTH CONTRIBUTIONS.—For purposes of this
section—
‘‘(1) DESIGNATED
ROTH
CONTRIBUTION.—The
term ‘designated Roth contribution’ means any elec-
tive deferral which—
‘‘(A) is excludable from gross income of an
employee without regard to this section, and
‘‘(B) the employee designates (at such time
and in such manner as the Secretary may pre-
scribe) as not being so excludable.
‘‘(2) DESIGNATION LIMITS.—The amount of elec-
tive deferrals which an employee may designate under
paragraph (1) shall not exceed the excess (if any) of—
‘‘(A) the maximum amount of elective defer-
rals excludable from gross income of the employee
for the taxable year (without regard to this sec-
tion), over
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‘‘(B) the aggregate amount of elective defer-
rals of the employee for the taxable year which
the employee does not designate under paragraph
(1).
‘‘(3) ROLLOVER CONTRIBUTIONS.—
‘‘(A) IN GENERAL.—A rollover contribution
of any payment or distribution from a des-
ignated Roth account which is otherwise allow-
able under this chapter may be made only if the
contribution is to—
‘‘(i) another designated Roth account
of the individual from whose account the
payment or distribution was made, or
‘‘(ii) a Roth IRA of such individual.
‘‘(B) COORDINATION
WITH
LIMIT.—Any
rollover contribution to a designated Roth ac-
count under subparagraph (A) shall not be taken
into account for purposes of paragraph (1).
‘‘(d) DISTRIBUTION RULES.—For purposes of this
title—
‘‘(1) EXCLUSION.—Any qualified distribution
from a designated Roth account shall not be includ-
ible in gross income.
‘‘(2) QUALIFIED
DISTRIBUTION.—For purposes
of this subsection—
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‘‘(A) IN GENERAL.—The term ‘qualified dis-
tribution’ has the meaning given such term by
section 408A(d)(2)(A) (without regard to clause
(iv) thereof).
‘‘(B) DISTRIBUTIONS
WITHIN
NONEXCLU-
SION PERIOD.—A payment or distribution from
a designated Roth account shall not be treated as
a qualified distribution if such payment or dis-
tribution is made within the 5-taxable-year pe-
riod beginning with the earlier of—
‘‘(i) the first taxable year for which the
individual made a designated Roth con-
tribution to any designated Roth account
established for such individual under the
same applicable retirement plan, or
‘‘(ii) if a rollover contribution was
made to such designated Roth account from
a designated Roth account previously estab-
lished for such individual under another
applicable retirement plan, the first taxable
year for which the individual made a des-
ignated Roth contribution to such pre-
viously established account.
‘‘(C) DISTRIBUTIONS
OF
EXCESS
DEFER-
RALS
AND
CONTRIBUTIONS
AND
EARNINGS
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THEREON.—The term ‘qualified distribution’
shall not include any distribution of any excess
deferral under section 402(g)(2) or any excess
contribution under section 401(k)(8), and any
income on the excess deferral or contribution.
‘‘(3) TREATMENT OF DISTRIBUTIONS OF CERTAIN
EXCESS DEFERRALS.—Notwithstanding section 72, if
any excess deferral under section 402(g)(2) attrib-
utable to a designated Roth contribution is not dis-
tributed on or before the 1st April 15 following the
close of the taxable year in which such excess deferral
is made, the amount of such excess deferral shall—
‘‘(A) not be treated as investment in the
contract, and
‘‘(B) be included in gross income for the
taxable year in which such excess is distributed.
‘‘(4) AGGREGATION RULES.—Section 72 shall be
applied separately with respect to distributions and
payments from a designated Roth account and other
distributions and payments from the plan.
‘‘(e) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) APPLICABLE RETIREMENT PLAN.—The term
‘applicable retirement plan’ means—
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‘‘(A) an employees’ trust described in sec-
tion 401(a) which is exempt from tax under sec-
tion 501(a), and
‘‘(B) a plan under which amounts are con-
tributed by an individual’s employer for an an-
nuity contract described in section 403(b).
‘‘(2) ELECTIVE DEFERRAL.—The term ‘elective
deferral’ means any elective deferral described in sub-
paragraph (A) or (C) of section 402(g)(3).’’.
(b) EXCESS DEFERRALS.—Section 402(g) (relating to
limitation on exclusion for elective deferrals) is amended—
(1) by adding at the end of paragraph (1)(A) (as
added by section 201(c)(1)) the following new sen-
tence: ‘‘The preceding sentence shall not apply the
portion of such excess as does not exceed the des-
ignated Roth contributions of the individual for the
taxable year.’’; and
(2) by inserting ‘‘(or would be included but for
the last sentence thereof)’’ after ‘‘paragraph (1)’’ in
paragraph (2)(A).
(c) 
ROLLOVERS.—Subparagraph 
(B) 
of 
section
402(c)(8) is amended by adding at the end the following:
‘‘If any portion of an eligible rollover distribu-
tion is attributable to payments or distributions
from a designated Roth account (as defined in
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section 402A), an eligible retirement plan with
respect to such portion shall include only another
designated Roth account and a Roth IRA.’’.
(d) REPORTING REQUIREMENTS.—
(1) W–2 INFORMATION.—Section 6051(a)(8) is
amended by inserting ‘‘, including the amount of des-
ignated Roth contributions (as defined in section
402A)’’ before the comma at the end.
(2) INFORMATION.—Section 6047 is amended by
redesignating subsection (f) as subsection (g) and by
inserting after subsection (e) the following new sub-
section:
‘‘(f) DESIGNATED ROTH CONTRIBUTIONS.—The Sec-
retary shall require the plan administrator of each applica-
ble retirement plan (as defined in section 402A) to make
such returns and reports regarding designated Roth con-
tributions (as defined in section 402A) to the Secretary,
participants and beneficiaries of the plan, and such other
persons as the Secretary may prescribe.’’.
(e) CONFORMING AMENDMENTS.—
(1) Section 408A(e) is amended by adding after
the first sentence the following new sentence: ‘‘Such
term includes a rollover contribution described in sec-
tion 402A(c)(3)(A).’’.
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(2) The table of sections for subpart A of part I
of subchapter D of chapter 1 is amended by inserting
after the item relating to section 402 the following
new item:
‘‘Sec. 402A. Optional treatment of elective deferrals as Roth con-
tributions.’’.
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2003.
SEC. 618. NONREFUNDABLE CREDIT TO CERTAIN INDIVID-
UALS FOR ELECTIVE DEFERRALS AND IRA
CONTRIBUTIONS.
(a) IN GENERAL.—Subpart A of part IV of subchapter
A of chapter 1 (relating to nonrefundable personal credits),
as amended by section 432, is amended by inserting after
section 25B the following new section:
‘‘SEC. 25C. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS
BY CERTAIN INDIVIDUALS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eligi-
ble individual, there shall be allowed as a credit against
the tax imposed by this subtitle for the taxable year an
amount equal to the applicable percentage of so much of
the qualified retirement savings contributions of the eligible
individual for the taxable year as do not exceed $2,000.
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‘‘(b) APPLICABLE PERCENTAGE.—For purposes of this
section, the applicable percentage is the percentage deter-
mined in accordance with the following table:
Adjusted Gross Income
Applica-
ble per-
centage
Joint return
Head of a household
All other cases
Over
Not over
Over
Not over
Over
Not over
$0
$30,000
$0
$22,500
$0
$15,000
30,000
32,500
22,500
24,375
15,000
16,250
32,500
50,000
24,375
37,500
16,250
25,000
50,000
37,500
25,000
‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this
section—
‘‘(1) IN
GENERAL.—The term ‘eligible indi-
vidual’ means any individual if such individual has
attained the age of 18 as of the close of the taxable
year.
‘‘(2) DEPENDENTS
AND
FULL-TIME
STUDENTS
NOT ELIGIBLE.—The term ‘eligible individual’ shall
not include—
‘‘(A) any individual with respect to whom
a deduction under section 151 is allowed to an-
other taxpayer for a taxable year beginning in
the calendar year in which such individual’s
taxable year begins, and
‘‘(B) any individual who is a student (as
defined in section 151(c)(4)).
‘‘(d) QUALIFIED RETIREMENT SAVINGS CONTRIBU-
TIONS.—For purposes of this section—
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‘‘(1) IN GENERAL.—The term ‘qualified retire-
ment savings contributions’ means, with respect to
any taxable year, the sum of—
‘‘(A) the amount of the qualified retirement
contributions (as defined in section 219(e)) made
by the eligible individual,
‘‘(B) the amount of—
‘‘(i) any elective deferrals (as defined
in section 402(g)(3)) of such individual,
and
‘‘(ii) any elective deferral of compensa-
tion by such individual under an eligible
deferred compensation plan (as defined in
section 457(b)) of an eligible employer de-
scribed in section 457(e)(1)(A), and
‘‘(C) the amount of voluntary employee con-
tributions by such individual to any qualified
retirement plan (as defined in section 4974(c)).
‘‘(2) 
REDUCTION
FOR
CERTAIN
DISTRIBU-
TIONS.—
‘‘(A) IN
GENERAL.—The qualified retire-
ment savings contributions determined under
paragraph (1) shall be reduced (but not below
zero) by the sum of—
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‘‘(i) any distribution from a qualified
retirement plan (as defined in section
4974(c)), or from an eligible deferred com-
pensation plan (as defined in section
457(b)), received by the individual during
the testing period which is includible in
gross income, and
‘‘(ii) any distribution from a Roth
IRA received by the individual during the
testing period which is not a qualified roll-
over contribution (as defined in section
408A(e)) to a Roth IRA.
‘‘(B) TESTING
PERIOD.—For purposes of
subparagraph (A), the testing period, with re-
spect to a taxable year, is the period which
includes—
‘‘(i) such taxable year,
‘‘(ii) the 2 preceding taxable years,
and
‘‘(iii) the period after such taxable
year and before the due date (including ex-
tensions) for filing the return of tax for such
taxable year.
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‘‘(C) 
EXCEPTED
DISTRIBUTIONS.—There
shall not be taken into account under subpara-
graph (A)—
‘‘(i) any distribution referred to in sec-
tion 72(p), 401(k)(8), 401(m)(6), 402(g)(2),
404(k), or 408(d)(4), and
‘‘(ii) any distribution to which section
408A(d)(3) applies.
‘‘(D) TREATMENT
OF
DISTRIBUTIONS
RE-
CEIVED BY SPOUSE OF INDIVIDUAL.—For pur-
poses of determining distributions received by an
individual under subparagraph (A) for any tax-
able year, any distribution received by the spouse
of such individual shall be treated as received by
such individual if such individual and spouse
file a joint return for such taxable year and for
the taxable year during which the spouse receives
the distribution.
‘‘(e) ADJUSTED GROSS INCOME.—For purposes of this
section, adjusted gross income shall be determined without
regard to sections 911, 931, and 933.
‘‘(f) INVESTMENT
IN
THE
CONTRACT.—Notwith-
standing any other provision of law, a qualified retirement
savings contribution shall not fail to be included in deter-
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mining the investment in the contract for purposes of sec-
tion 72 by reason of the credit under this section.
‘‘(g) TERMINATION.—This section shall not apply to
taxable years beginning after December 31, 2006.’’.
(b) CREDIT ALLOWED AGAINST REGULAR TAX AND
ALTERNATIVE MINIMUM TAX.—
(1) IN GENERAL.—Section 25C, as added by sub-
section (a), is amended by inserting after subsection
(f) the following new subsection:
‘‘(g) LIMITATION BASED ON AMOUNT OF TAX.—The
aggregate credit allowed by this section for the taxable year
shall not exceed the sum of—
‘‘(1) the taxpayer’s regular tax liability for the
taxable year reduced by the sum of the credits allowed
by sections 21, 22, 23, 24, 25, 25A, and 25B plus
‘‘(2) the tax imposed by section 55 for such tax-
able year.’’
(2) CONFORMING AMENDMENTS.—
(A) Section 26(a)(1), as amended by section
201, is amended by inserting ‘‘or section 25C’’
after ‘‘section 24’’.
(B) Section 23(c), as amended by section
201, is amended by striking ‘‘sections 24’’ and
inserting ‘‘sections 24, 25C,’’.
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(C) Section 25(e)(1)(C), as amended by sec-
tion 201, is amended by inserting ‘‘25C,’’ after
‘‘24,’’.
(D) Section 904(h), as amended by section
201, is amended by inserting ‘‘or 25C’’ after
‘‘section 24’’.
(E) Section 1400C(d), as amended by sec-
tion 201, is amended by inserting ‘‘and section
25C’’ after ‘‘section 24’’.
(c) CONFORMING AMENDMENT.—The table of sections
for subpart A of part IV of subchapter A of chapter 1, as
amended by section 432, is amended by inserting after the
item relating to section 25B the following new item:
‘‘Sec. 25C. Elective deferrals and IRA contributions by certain in-
dividuals.’’
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 619. CREDIT FOR QUALIFIED PENSION PLAN CON-
TRIBUTIONS OF SMALL EMPLOYERS.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business related credits) is
amended by adding at the end the following new section:
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‘‘SEC. 45E. SMALL EMPLOYER PENSION PLAN CONTRIBU-
TIONS.
‘‘(a) GENERAL RULE.—For purposes of section 38, in
the case of an eligible employer, the small employer pension
plan contribution credit determined under this section for
any taxable year is an amount equal to 50 percent of the
amount which would (but for subsection (f)(1)) be allowed
as a deduction under section 404 for such taxable year for
qualified employer contributions made to any qualified re-
tirement plan on behalf of any employee who is not a highly
compensated employee.
‘‘(b) CREDIT LIMITED TO 3 YEARS.—The credit allow-
able by this section shall be allowed only with respect to
the period of 3 taxable years beginning with the first taxable
year for which a credit is allowable with respect to a plan
under this section.
‘‘(c) QUALIFIED
EMPLOYER
CONTRIBUTION.—For
purposes of this section—
‘‘(1) DEFINED
CONTRIBUTION
PLANS.—In the
case of a defined contribution plan, the term ‘quali-
fied employer contribution’ means the amount of non-
elective and matching contributions to the plan made
by the employer on behalf of any employee who is not
a highly compensated employee to the extent such
amount does not exceed 3 percent of such employee’s
compensation from the employer for the year.
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‘‘(2) DEFINED BENEFIT PLANS.—In the case of a
defined benefit plan, the term ‘qualified employer con-
tribution’ means the amount of employer contribu-
tions to the plan made on behalf of any employee who
is not a highly compensated employee to the extent
that the accrued benefit of such employee derived from
employer contributions for the year does not exceed
the equivalent (as determined under regulations pre-
scribed by the Secretary and without regard to con-
tributions and benefits under the Social Security Act)
of 3 percent of such employee’s compensation from the
employer for the year.
‘‘(d) QUALIFIED RETIREMENT PLAN.—
‘‘(1) IN GENERAL.—The term ‘qualified retire-
ment plan’ means any plan described in section
401(a) which includes a trust exempt from tax under
section 501(a) if the plan meets—
‘‘(A) the contribution requirements of para-
graph (2),
‘‘(B) the vesting requirements of paragraph
(3), and
‘‘(C) the distribution requirements of para-
graph (4).
‘‘(2) CONTRIBUTION REQUIREMENTS.—
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‘‘(A) IN
GENERAL.—The requirements of
this paragraph are met if, under the plan—
‘‘(i) the employer is required to make
nonelective contributions of at least 1 per-
cent of compensation (or the equivalent
thereof in the case of a defined benefit plan)
for each employee who is not a highly com-
pensated employee who is eligible to partici-
pate in the plan, and
‘‘(ii) allocations of nonelective em-
ployer contributions, in the case of a de-
fined contribution plan, are either in equal
dollar amounts for all employees covered by
the plan or bear a uniform relationship to
the total compensation, or the basic or reg-
ular rate of compensation, of the employees
covered by the plan (and an equivalent re-
quirement is met with respect to a defined
benefit plan).
‘‘(B) 
COMPENSATION
LIMITATION.—The
compensation taken into account under subpara-
graph (A) for any year shall not exceed the limi-
tation in effect for such year under section
401(a)(17).
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‘‘(3) VESTING
REQUIREMENTS.—The require-
ments of this paragraph are met if the plan satisfies
the requirements of either of the following subpara-
graphs:
‘‘(A) 3-YEAR VESTING.—A plan satisfies the
requirements of this subparagraph if an em-
ployee who has completed at least 3 years of
service has a nonforfeitable right to 100 percent
of the employee’s accrued benefit derived from
employer contributions.
‘‘(B) 5-YEAR
GRADED
VESTING.—A plan
satisfies the requirements of this subparagraph if
an employee has a nonforfeitable right to a per-
centage of the employee’s accrued benefit derived
from employer contributions determined under
the following table:
The nonforfeitable
‘‘Years of service:
percentage is:
1 ......................................................................................................
2 ......................................................................................................
3 ......................................................................................................
4 ......................................................................................................
5 ......................................................................................................
100.
‘‘(4) DISTRIBUTION
REQUIREMENTS.—In the
case of a profit-sharing or stock bonus plan, the re-
quirements of this paragraph are met if, under the
plan, qualified employer contributions are distribut-
able only as provided in section 401(k)(2)(B).
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‘‘(e) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) ELIGIBLE EMPLOYER.—
‘‘(A) IN GENERAL.—The term ‘eligible em-
ployer’ means, with respect to any year, an em-
ployer which has no more than 20 employees
who received at least $5,000 of compensation
from the employer for the preceding year.
‘‘(B) REQUIREMENT
FOR
NEW
QUALIFIED
EMPLOYER PLANS.—Such term shall not include
an employer if, during the 3-taxable year period
immediately preceding the 1st taxable year for
which the credit under this section is otherwise
allowable for a qualified employer plan of the
employer, the employer or any member of any
controlled group including the employer (or any
predecessor of either) established or maintained a
qualified employer plan with respect to which
contributions were made, or benefits were ac-
crued, for substantially the same employees as
are in the qualified employer plan.
‘‘(2) HIGHLY
COMPENSATED
EMPLOYEE.—The
term ‘highly compensated employee’ has the meaning
given such term by section 414(q) (determined with-
out regard to section 414(q)(1)(B)(ii)).
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‘‘(f) SPECIAL RULES.—
‘‘(1) DISALLOWANCE OF DEDUCTION.—No deduc-
tion shall be allowed for that portion of the qualified
employer contributions paid or incurred for the tax-
able year which is equal to the credit determined
under subsection (a).
‘‘(2) ELECTION
NOT
TO
CLAIM
CREDIT.—This
section shall not apply to a taxpayer for any taxable
year if such taxpayer elects to have this section not
apply for such taxable year.
‘‘(3) AGGREGATION RULES.—All persons treated
as a single employer under subsection (a) or (b) of
section 52, or subsection (n) or (o) of section 414,
shall be treated as one person. All eligible employer
plans shall be treated as 1 eligible employer plan.
‘‘(g) RECAPTURE OF CREDIT ON FORFEITED CON-
TRIBUTIONS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), if any accrued benefit which is forfeitable
by reason of subsection (d)(3) is forfeited, the employ-
er’s tax imposed by this chapter for the taxable year
in which the forfeiture occurs shall be increased by 35
percent of the employer contributions from which such
benefit is derived to the extent such contributions were
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taken into account in determining the credit under
this section.
‘‘(2) 
REALLOCATED
CONTRIBUTIONS.—Para-
graph (1) shall not apply to any contribution which
is reallocated by the employer under the plan to em-
ployees who are not highly compensated employees.’’.
(b) CREDIT ALLOWED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) (defining current year busi-
ness credit) is amended by striking ‘‘plus’’ at the end of
paragraph (12), by striking the period at the end of para-
graph (13) and inserting ‘‘, plus’’, and by adding at the
end the following new paragraph:
‘‘(14) in the case of an eligible employer (as de-
fined in section 45E(e)), the small employer pension
plan contribution credit determined under section
45E(a).’’
(c) CONFORMING AMENDMENTS.—
(1) Section 39(d) is amended by adding at the
end the following new paragraph:
‘‘(10) NO CARRYBACK OF SMALL EMPLOYER PEN-
SION PLAN CONTRIBUTION CREDIT BEFORE JANUARY
1, 2003.—No portion of the unused business credit for
any taxable year which is attributable to the small
employer pension plan contribution credit determined
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under section 45E may be carried back to a taxable
year beginning before January 1, 2003.’’
(2) Subsection (c) of section 196 is amended by
striking ‘‘and’’ at the end of paragraph (8), by strik-
ing the period at the end of paragraph (9) and insert-
ing ‘‘, and’’, and by adding at the end the following
new paragraph:
‘‘(10) the small employer pension plan contribu-
tion credit determined under section 45E(a).’’
(3) The table of sections for subpart D of part
IV of subchapter A of chapter 1 is amended by adding
at the end the following new item:
‘‘Sec. 45E. Small employer pension plan contributions.’’
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to contributions paid or incurred in tax-
able years beginning after December 31, 2002.
SEC. 620. CREDIT FOR PENSION PLAN STARTUP COSTS OF
SMALL EMPLOYERS.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business related credits), as
amended by section 619, is amended by adding at the end
the following new section:
‘‘SEC. 45F. SMALL EMPLOYER PENSION PLAN STARTUP
COSTS.
‘‘(a) GENERAL RULE.—For purposes of section 38, in
the case of an eligible employer, the small employer pension
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plan startup cost credit determined under this section for
any taxable year is an amount equal to 50 percent of the
qualified startup costs paid or incurred by the taxpayer
during the taxable year.
‘‘(b) DOLLAR LIMITATION.—The amount of the credit
determined under this section for any taxable year shall not
exceed—
‘‘(1) $500 for the first credit year and each of the
2 taxable years immediately following the first credit
year, and
‘‘(2) zero for any other taxable year.
‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this
section—
‘‘(1) IN GENERAL.—The term ‘eligible employer’
has the meaning given such term by section
408(p)(2)(C)(i).
‘‘(2) REQUIREMENT
FOR
NEW
QUALIFIED
EM-
PLOYER PLANS.—Such term shall not include an em-
ployer if, during the 3-taxable year period imme-
diately preceding the 1st taxable year for which the
credit under this section is otherwise allowable for a
qualified employer plan of the employer, the employer
or any member of any controlled group including the
employer (or any predecessor of either) established or
maintained a qualified employer plan with respect to
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which contributions were made, or benefits were ac-
crued, for substantially the same employees as are in
the qualified employer plan.
‘‘(d) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) QUALIFIED STARTUP COSTS.—
‘‘(A) IN
GENERAL.—The term ‘qualified
startup costs’ means any ordinary and necessary
expenses of an eligible employer which are paid
or incurred in connection with—
‘‘(i) the establishment or administra-
tion of an eligible employer plan, or
‘‘(ii) the retirement-related education
of employees with respect to such plan.
‘‘(B) PLAN MUST HAVE AT LEAST 1 PARTICI-
PANT.—Such term shall not include any expense
in connection with a plan that does not have at
least 1 employee eligible to participate who is
not a highly compensated employee.
‘‘(2) ELIGIBLE EMPLOYER PLAN.—The term ‘eli-
gible employer plan’ means a qualified employer plan
within the meaning of section 4972(d).
‘‘(3) FIRST CREDIT YEAR.—The term ‘first credit
year’ means—
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‘‘(A) the taxable year which includes the
date that the eligible employer plan to which
such costs relate becomes effective, or
‘‘(B) at the election of the eligible employer,
the taxable year preceding the taxable year re-
ferred to in subparagraph (A).
‘‘(e) SPECIAL RULES.—For purposes of this section—
‘‘(1) AGGREGATION RULES.—All persons treated
as a single employer under subsection (a) or (b) of
section 52, or subsection (n) or (o) of section 414,
shall be treated as one person. All eligible employer
plans shall be treated as 1 eligible employer plan.
‘‘(2) DISALLOWANCE OF DEDUCTION.—No deduc-
tion shall be allowed for that portion of the qualified
startup costs paid or incurred for the taxable year
which is equal to the credit determined under sub-
section (a).
‘‘(3) ELECTION
NOT
TO
CLAIM
CREDIT.—This
section shall not apply to a taxpayer for any taxable
year if such taxpayer elects to have this section not
apply for such taxable year.’’
(b) CREDIT ALLOWED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) (defining current year busi-
ness credit), as amended by section 619, is amended by
striking ‘‘plus’’ at the end of paragraph (13), by striking
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the period at the end of paragraph (14) and inserting ‘‘,
plus’’, and by adding at the end the following new para-
graph:
‘‘(15) in the case of an eligible employer (as de-
fined in section 45F(c)), the small employer pension
plan startup cost credit determined under section
45F(a).’’
(c) CONFORMING AMENDMENTS.—
(1) Section 39(d), as amended by section 619(c),
is amended by adding at the end the following new
paragraph:
‘‘(11) NO CARRYBACK OF SMALL EMPLOYER PEN-
SION PLAN STARTUP COST CREDIT BEFORE JANUARY
1, 2002.—No portion of the unused business credit for
any taxable year which is attributable to the small
employer pension plan startup cost credit determined
under section 45F may be carried back to a taxable
year beginning before January 1, 2002.’’
(2) Subsection (c) of section 196, as amended by
section 619(c), is amended by striking ‘‘and’’ at the
end of paragraph (9), by striking the period at the
end of paragraph (10) and inserting ‘‘, and’’, and by
adding at the end the following new paragraph:
‘‘(11) the small employer pension plan startup
cost credit determined under section 45F(a).’’
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(3) The table of sections for subpart D of part
IV of subchapter A of chapter 1, as amended by sec-
tion 619(c), is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 45F. Small employer pension plan startup costs.’’
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to costs paid or incurred in taxable
years beginning after December 31, 2001, with respect to
qualified employer plans established after such date.
SEC. 621. ELIMINATION OF USER FEE FOR REQUESTS TO
IRS REGARDING NEW PENSION PLANS.
(a) ELIMINATION OF CERTAIN USER FEES.—The Sec-
retary of the Treasury or the Secretary’s delegate shall not
require payment of user fees under the program established
under section 10511 of the Revenue Act of 1987 for requests
to the Internal Revenue Service for ruling letters, opinion
letters, and determination letters or similar requests with
respect to the qualified status of a new pension benefit plan
or any trust which is part of the plan.
(b) NEW PENSION BENEFIT PLAN.—For purposes of
this section—
(1) IN GENERAL.—The term ‘‘new pension ben-
efit plan’’ means a pension, profit-sharing, stock
bonus, annuity, or employee stock ownership plan
which is maintained by one or more eligible employ-
ers if such employer (or any predecessor employer)
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has not made a prior request described in subsection
(a) for such plan (or any predecessor plan).
(2) ELIGIBLE EMPLOYER.—
(A) IN GENERAL.—The term ‘‘eligible em-
ployer’’ means an employer which has—
(i) no more than 100 employees for the
preceding year, and
(ii) at least one employee who is not a
highly compensated employee (as defined in
section 414(q)) and is participating in the
plan.
(B) NEW PLAN REQUIREMENT.—The term
‘‘eligible employer’’ shall not include an em-
ployer if, during the 3-taxable year period imme-
diately preceding the taxable year in which the
request is made, the employer or any member of
any controlled group including the employer (or
any predecessor of either) established or main-
tained a qualified employer plan with respect to
which contributions were made, or benefits were
accrued for service, for substantially the same
employees as are in the qualified employer plan.
(c) DETERMINATION OF AVERAGE FEES CHARGED.—
For purposes of any determination of average fees charged,
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any request to which subsection (a) applies shall not be
taken into account.
(d) EFFECTIVE DATE.—The provisions of this section
shall apply with respect to requests made after December
31, 2001.
SEC. 622. TREATMENT OF NONRESIDENT ALIENS ENGAGED
IN INTERNATIONAL TRANSPORTATION SERV-
ICES.
(a) EXCLUSION FROM INCOME SOURCING RULES.—
The second sentence of section 861(a)(3) (relating to gross
income from sources within the United States) is amended
by striking ‘‘except for purposes of sections 79 and 105 and
subchapter D,’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to remuneration for services per-
formed in plan years beginning after December 31, 2001.
Subtitle C—Enhancing Fairness for
Women
SEC. 631. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS
AGE 50 OR OVER.
(a) IN GENERAL.—Section 414 (relating to definitions
and special rules) is amended by adding at the end the fol-
lowing new subsection:
‘‘(v) CATCH-UP CONTRIBUTIONS
FOR INDIVIDUALS
AGE 50 OR OVER.—
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‘‘(1) IN GENERAL.—An applicable employer plan
shall not be treated as failing to meet any require-
ment of this title solely because the plan permits an
eligible participant to make additional elective defer-
rals in any plan year.
‘‘(2) LIMITATION
ON
AMOUNT
OF
ADDITIONAL
DEFERRALS.—
‘‘(A) IN GENERAL.—A plan shall not permit
additional elective deferrals under paragraph (1)
for any year in an amount greater than the less-
er of—
‘‘(i) the applicable dollar amount, or
‘‘(ii) the excess (if any) of—
‘‘(I) the participant’s compensa-
tion (as defined in section 415(c)(3))
for the year, over
‘‘(II) any other elective deferrals
of the participant for such year which
are made without regard to this sub-
section.
‘‘(B) APPLICABLE
DOLLAR
AMOUNT.—For
purposes of this paragraph, the applicable dollar
amount shall be determined in accordance with
the following table:
‘‘For taxable years
The applicable
beginning in:
dollar amount is:
2002, 2003, and 2004 ....................................................................
$500
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‘‘For taxable years
The applicable
beginning in:
dollar amount is:
2005 and 2006 ...............................................................................
$1,000
2007 ................................................................................................
$2,000
2008 ................................................................................................
$3,000
2009 ................................................................................................
$4,000
2010 and thereafter ........................................................................
$7,500.
‘‘(3) TREATMENT
OF
CONTRIBUTIONS.—In the
case of any contribution to a plan under paragraph
(1)—
‘‘(A) such contribution shall not, with re-
spect to the year in which the contribution is
made—
‘‘(i) be subject to any otherwise appli-
cable limitation contained in section 402(g),
402(h), 403(b), 404(a), 404(h), 408(k),
408(p), 415, or 457, or
‘‘(ii) be taken into account in applying
such limitations to other contributions or
benefits under such plan or any other such
plan, and
‘‘(B) such plan shall not be treated as fail-
ing to meet the requirements of section 401(a)(4),
401(a)(26), 401(k)(3), 401(k)(11), 401(k)(12),
401(m), 
403(b)(12), 
408(k), 
408(p), 
408B,
410(b), or 416 by reason of the making of (or the
right to make) such contribution.
‘‘(4) ELIGIBLE PARTICIPANT.—For purposes of
this subsection, the term ‘eligible participant’ means,
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with respect to any plan year, a participant in a
plan—
‘‘(A) who has attained the age of 50 before
the close of the plan year, and
‘‘(B) with respect to whom no other elective
deferrals may (without regard to this subsection)
be made to the plan for the plan year by reason
of the application of any limitation or other re-
striction described in paragraph (3) or com-
parable limitation or restriction contained in the
terms of the plan.
‘‘(5) OTHER
DEFINITIONS
AND
RULES.—For
purposes of this subsection—
‘‘(A) APPLICABLE
EMPLOYER
PLAN.—The
term ‘applicable employer plan’ means—
‘‘(i) an employees’ trust described in
section 401(a) which is exempt from tax
under section 501(a),
‘‘(ii) a plan under which amounts are
contributed by an individual’s employer for
an annuity contract described in section
403(b),
‘‘(iii) an eligible deferred compensation
plan under section 457 of an eligible em-
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ployer described in section 457(e)(1)(A),
and
‘‘(iv) an arrangement meeting the re-
quirements of section 408 (k) or (p).
‘‘(B) ELECTIVE DEFERRAL.—The term ‘elec-
tive deferral’ has the meaning given such term
by subsection (u)(2)(C).
‘‘(C) EXCEPTION FOR SECTION 457 PLANS.—
This subsection shall not apply to an applicable
employer 
plan 
described 
in 
subparagraph
(A)(iii) for any year to which section 457(b)(3)
applies.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to contributions in taxable years begin-
ning after December 31, 2001.
SEC. 632. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF
EMPLOYEES 
TO 
DEFINED 
CONTRIBUTION
PLANS.
(a) EQUITABLE TREATMENT.—
(1) IN GENERAL.—Subparagraph (B) of section
415(c)(1) (relating to limitation for defined contribu-
tion plans) is amended by striking ‘‘25 percent’’ and
inserting ‘‘the applicable percentage’’.
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(2) APPLICABLE PERCENTAGE.—Section 415(c)
is amended by adding at the end the following new
paragraph:
‘‘(8) APPLICABLE
PERCENTAGE.—For purposes
of paragraph (1)(B), the applicable percentage shall
be determined in accordance with the following table:
‘‘For years
The applicable
beginning in:
percentage is:
2002 through 2010 ......................................................................... 50 percent
2011 and thereafter ........................................................................ 100 percent.’’.
(3) APPLICATION
TO
SECTION
403(b).—Section
403(b) is amended—
(A) by striking ‘‘the exclusion allowance for
such taxable year’’ in paragraph (1) and insert-
ing ‘‘the applicable limit under section 415’’,
(B) by striking paragraph (2), and
(C) by inserting ‘‘or any amount received
by a former employee after the fifth taxable year
following the taxable year in which such em-
ployee was terminated’’ before the period at the
end of the second sentence of paragraph (3).
(4) CONFORMING AMENDMENTS.—
(A) Subsection (f) of section 72 is amended
by striking ‘‘section 403(b)(2)(D)(iii))’’ and in-
serting ‘‘section 403(b)(2)(D)(iii), as in effect be-
fore the enactment of the Restoring Earnings to
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Lift Individuals and Empower Families Act of
2001)’’.
(B) Section 404(a)(10)(B) is amended by
striking ‘‘, the exclusion allowance under section
403(b)(2),’’.
(C) Section 415(a)(2) is amended by strik-
ing ‘‘, and the amount of the contribution for
such portion shall reduce the exclusion allowance
as provided in section 403(b)(2)’’.
(D) Section 415(c)(3) is amended by adding
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’ means the
participant’s 
includible 
compensation 
deter-
mined under section 403(b)(3).’’.
(E) Section 415(c) is amended by striking
paragraph (4).
(F) 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 election
of a participant who is an employee of a church
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or a convention or association of churches, in-
cluding 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 re-
spect to such participant, when expressed as an
annual addition to such participant’s account,
shall be treated as not exceeding the limitation
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).’’.
(G) Subparagraph (B) of section 402(g)(7)
(as redesignated by section 611(c)(3)) is amend-
ed by inserting before the period at the end the
following: ‘‘(as in effect before the enactment of
the Restoring Earnings to Lift Individuals and
Empower Families Act of 2001)’’.
(H) Section 664(g) is amended—
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(i) in paragraph (3)(E) by striking
‘‘limitations under section 415(c)’’ and in-
serting ‘‘applicable limitation under para-
graph (7)’’, and
(ii) by adding at the end the following
new paragraph:
‘‘(7) APPLICABLE LIMITATION.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (3)(E), the applicable limitation under
this paragraph with respect to a participant is
an amount equal to the lesser of—
‘‘(i) $30,000, or
‘‘(ii) 25 percent of the participant’s
compensation 
(as 
defined 
in 
section
415(c)(3)).
‘‘(B) COST-OF-LIVING
ADJUSTMENT.—The
Secretary shall adjust annually the $30,000
amount under subparagraph (A)(i) at the same
time and in the same manner as under section
415(d), except that the base period shall be the
calendar quarter beginning October 1, 1993, and
any increase under this subparagraph which is
not a multiple of $5,000 shall be rounded to the
next lowest multiple of $5,000.’’.
(5) EFFECTIVE DATE.—
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(A) Except as provided in subparagraph
(B), the amendments made by this subsection
shall apply to years beginning after December
31, 2001.
(B) The amendments made by paragraphs
(3) and (4) shall apply to years beginning after
December 31, 2010.
(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 contribution
plan maintained by each employer with respect to
which the participant has the control required under
subsection (b) or (c) of section 414 (as modified by
subsection (h)). For purposes of this section, any con-
tribution by an employer to a simplified employee
pension plan for an individual for a taxable year
shall be treated as an employer contribution to a de-
fined contribution plan for such individual for such
year.’’.
(2) EFFECTIVE DATE.—
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(A) IN
GENERAL.—The amendment made
by paragraph (1) shall apply to limitation years
beginning after December 31, 2000.
(B) EXCLUSION ALLOWANCE.—Effective for
limitation years beginning in 2001, in the case
of any annuity contract described in section
403(b) of the Internal Revenue Code of 1986, the
amount of the contribution disqualified by rea-
son of section 415(g) of such Code shall reduce
the exclusion allowance as provided in section
403(b)(2) of such Code.
(3) MODIFICATION OF 403(b) EXCLUSION ALLOW-
ANCE TO CONFORM TO 415 MODIFICATION.—The Sec-
retary of the Treasury shall modify the regulations re-
garding 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 benefit pension plan be treated as previously
excluded amounts for purposes of the exclusion allow-
ance. For taxable years beginning after December 31,
2000, such regulations shall be applied as if such re-
quirement were void.
(c) DEFERRED COMPENSATION PLANS OF STATE AND
LOCAL
GOVERNMENTS
AND
TAX-EXEMPT
ORGANIZA-
TIONS.—
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(1) IN GENERAL.—Subparagraph (B) of section
457(b)(2) (relating to salary limitation on eligible de-
ferred compensation plans) is amended by striking
‘‘331⁄3 percent’’ and inserting ‘‘the applicable percent-
age’’.
(2) APPLICABLE PERCENTAGE.—Section 457 is
amended by adding at the end the following new sub-
section:
‘‘(h) APPLICABLE PERCENTAGE.—For purposes of sub-
section (b)(2)(A), the applicable percentage shall be deter-
mined in accordance with the following table:
‘‘For years
The applicable
beginning in:
percentage is:
2002 through 2010 ......................................................................... 50 percent
2011 and thereafter ........................................................................ 100 percent.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning after
December 31, 2001.
SEC. 633. FASTER VESTING OF CERTAIN EMPLOYER MATCH-
ING CONTRIBUTIONS.
(a) IN GENERAL.—Section 411(a) (relating to min-
imum 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:
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‘‘(12) FASTER
VESTING
FOR
MATCHING
CON-
TRIBUTIONS.—In the case of matching contributions
(as defined in section 401(m)(4)(A)), paragraph (2)
shall be applied—
‘‘(A) by substituting ‘3 years’ for ‘5 years’
in subparagraph (A), and
‘‘(B) by substituting the following table for
the table contained in subparagraph (B):
The nonforfeitable
‘‘Years of service:
percentage is:
2 ..........................................................................................
3 ..........................................................................................
4 ..........................................................................................
5 ..........................................................................................
6 ..........................................................................................
100.’’.
(b) AMENDMENT OF 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) In the case of matching contributions (as
defined in section 401(m)(4)(A) of the Internal Rev-
enue Code of 1986), paragraph (2) shall be applied—
‘‘(A) by substituting ‘3 years’ for ‘5 years’
in subparagraph (A), and
‘‘(B) by substituting the following table for
the table contained in subparagraph (B):
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The nonforfeitable
‘‘Years of service:
percentage is:
2 ......................................................................................................
3 ......................................................................................................
4 ......................................................................................................
5 ......................................................................................................
6 ......................................................................................................
100.’’.
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to contributions for plan years beginning after
December 31, 2001.
(2) COLLECTIVE BARGAINING AGREEMENTS.—In
the case of a plan maintained pursuant to one or
more collective bargaining agreements between em-
ployee representatives and one or more employers
ratified by the date of the 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 terminates
(determined without regard to any exten-
sion thereof on or after such date of the en-
actment); or
(ii) January 1, 2002; or
(B) January 1, 2006.
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(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 sec-
tion apply.
SEC. 634. MODIFICATIONS TO MINIMUM DISTRIBUTION
RULES.
(a) LIFE EXPECTANCY TABLES.—The Secretary of the
Treasury shall modify the life expectancy tables under the
regulations relating 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 Revenue Code to reflect cur-
rent life expectancy.
(b) 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 redes-
ignating 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
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(ii) by striking ‘‘the distribution of the
employee’s interest has begun in accordance
with subparagraph (A)(ii)’’ and inserting
‘‘his entire interest has been distributed 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) (as
so redesignated) is amended—
(i) by striking ‘‘clause (iii)(I)’’ and in-
serting ‘‘clause (ii)(I)’’;
(ii) by striking ‘‘clause (iii)(III)’’ in
subclause 
(I) 
and 
inserting 
‘‘clause
(ii)(III)’’;
(iii) by striking ‘‘the date on which the
employee would have attained age 701⁄2,’’ in
subclause (I) and inserting ‘‘April 1 of the
calendar year following the calendar year
in which the spouse attains 701⁄2,’’; and
(iv) by striking ‘‘the distributions to
such spouse begin,’’ in subclause (II) and
inserting ‘‘his entire interest has been dis-
tributed to him,’’.
(3) EFFECTIVE DATE.—
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(A) IN GENERAL.—Except as provided in
subparagraph (B), the amendments made by this
subsection shall apply to years beginning after
December 31, 2001.
(B) 
DISTRIBUTIONS
TO
SURVIVING
SPOUSE.—
(i) IN GENERAL.—In the case of an
employee described in clause (ii), distribu-
tions to the surviving spouse of the employee
shall not be required to commence prior to
the date on which such distributions would
have been required to begin under section
401(a)(9)(B) of the Internal Revenue Code
of 1986 (as in effect on the day before the
date of the enactment of this Act).
(ii) CERTAIN
EMPLOYEES.—An em-
ployee is described in this clause if such em-
ployee dies before—
(I) the date of the enactment of
this Act, and
(II) the required beginning date
(within 
the 
meaning 
of 
section
401(a)(9)(C) of the Internal Revenue
Code of 1986) of the employee.
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SEC. 635. CLARIFICATION OF TAX TREATMENT OF DIVISION
OF SECTION 457 PLAN BENEFITS UPON DI-
VORCE.
(a) IN GENERAL.—Section 414(p)(11) (relating to ap-
plication 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 ‘‘GOVERNMENTAL
AND CHURCH PLANS’’ and inserting ‘‘CERTAIN 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 SECTION
457 PLAN.—Subsection (p) of section 414 is amended by
redesignating paragraph (12) as paragraph (13) and in-
serting after paragraph (11) the following new paragraph:
‘‘(12) TAX TREATMENT OF PAYMENTS FROM A
SECTION
457
PLAN.—If a distribution or payment
from an eligible deferred compensation plan described
in section 457(b) is made pursuant to a qualified do-
mestic relations order, rules similar to the rules of
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section 402(e)(1)(A) shall apply to such distribution
or payment.’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendment made by sub-
section (c) shall apply to transfers, distributions, and
payments made after December 31, 2001.
(2) AMENDMENTS RELATING TO ASSIGNMENTS IN
DIVORCE, 
ETC., 
PROCEEDINGS.—The amendments
made by subsections (a) and (b) shall take effect on
January 1, 2002, except that in the case of a domestic
relations order entered before such date, the plan
administrator—
(A) shall treat such order as a qualified do-
mestic relations order if such administrator is
paying benefits pursuant to such order on such
date, and
(B) may treat any other such order entered
before such date as a qualified domestic relations
order even if such order does not meet the re-
quirements of such amendments.
SEC. 636. PROVISIONS RELATING TO HARDSHIP DISTRIBU-
TIONS.
(a) SAFE HARBOR RELIEF.—
(1) IN GENERAL.—The Secretary of the Treasury
shall revise the regulations relating to hardship dis-
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tributions under section 401(k)(2)(B)(i)(IV) of the In-
ternal Revenue Code of 1986 to provide that the pe-
riod an employee is prohibited from making elective
and employee contributions in order for a distribu-
tion to be deemed necessary to satisfy financial need
shall be equal to 6 months.
(2) EFFECTIVE DATE.—The revised regulations
under this subsection shall apply to years beginning
after December 31, 2001.
(b) HARDSHIP DISTRIBUTIONS NOT TREATED AS ELI-
GIBLE ROLLOVER DISTRIBUTIONS.—
(1) MODIFICATION OF DEFINITION OF ELIGIBLE
ROLLOVER.—Subparagraph (C) of section 402(c)(4)
(relating to eligible rollover distribution) is amended
to read as follows:
‘‘(C) any distribution which is made upon
hardship of the employee.’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to distributions made after
December 31, 2001.
SEC. 637. WAIVER OF TAX ON NONDEDUCTIBLE CONTRIBU-
TIONS FOR DOMESTIC OR SIMILAR WORKERS.
(a) IN GENERAL.—Section 4972(c)(6) (relating to ex-
ceptions to nondeductible contributions), as amended by sec-
tion 502, is amended by striking ‘‘or’’ at the end of subpara-
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graph (A), by striking the period and inserting ‘‘, or’’ at
the end of subparagraph (B), and by inserting after sub-
paragraph (B) the following new subparagraph:
‘‘(C) so much of the contributions to a sim-
ple retirement account (within the meaning of
section 408(p)) or a simple plan (within the
meaning of section 401(k)(11)) which are not de-
ductible when contributed solely because such
contributions are not made in connection with a
trade or business of the employer.’’
(b) EXCLUSION OF CERTAIN CONTRIBUTIONS.—Sec-
tion 4972(c)(6), as amended by subsection (a), is amended
by adding at the end the following new sentence: ‘‘Subpara-
graph (C) shall not apply to contributions made on behalf
of the employer or a member of the employer’s family (as
defined in section 447(e)(1)).’’.
(c) NO INFERENCE.—Nothing in the amendments
made by this section shall be construed to infer the proper
treatment of nondeductible contributions under the laws in
effect before such amendments.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
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Subtitle D—Increasing Portability
for Participants
SEC. 641. 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) (relating
to other definitions and special rules) is amend-
ed by adding at the end the following:
‘‘(16) ROLLOVER AMOUNTS.—
‘‘(A) GENERAL RULE.—In the case of an el-
igible deferred compensation plan established
and maintained by an employer described in
subsection (e)(1)(A), 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) without regard to subparagraph
(C) thereof),
‘‘(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
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‘‘(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 APPLICABLE.—
The rules of paragraphs (2) through (7) and (9)
of section 402(c) and section 402(f) shall apply
for purposes of subparagraph (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’’.
(C) DIRECT ROLLOVER.—Paragraph (1) of
section 457(d) is amended by striking ‘‘and’’ at
the end of subparagraph (A), by striking the pe-
riod at the end of subparagraph (B) and insert-
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ing ‘‘, and’’, and by inserting after subpara-
graph (B) the following:
‘‘(C) in the case of a plan maintained by
an employer described in subsection (e)(1)(A),
the plan meets requirements similar to the re-
quirements of section 401(a)(31).
Any amount transferred in a direct trustee-to-trustee
transfer in accordance with section 401(a)(31) shall
not be includible in gross income for the taxable year
of transfer.’’.
(D) WITHHOLDING.—
(i) Paragraph (12) of section 3401(a)
is amended by adding at the end the fol-
lowing:
‘‘(E) under or to an eligible deferred com-
pensation plan which, at the time of such pay-
ment, is a plan described in section 457(b) which
is maintained by an eligible employer described
in section 457(e)(1)(A), or’’.
(ii) Paragraph (3) of section 3405(c) is
amended to read as follows:
‘‘(3) ELIGIBLE ROLLOVER DISTRIBUTION.—For
purposes of this subsection, the term ‘eligible rollover
distribution’ has the meaning given such term by sec-
tion 402(f)(2)(A).’’.
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(iii) LIABILITY FOR WITHHOLDING.—
Subparagraph (B) of section 3405(d)(2) is
amended by striking ‘‘or’’ at the end of
clause (ii), by striking the period at the end
of clause (iii) and inserting ‘‘, or’’, and by
adding at the end the following:
‘‘(iv) section 457(b) and which is
maintained by an eligible employer de-
scribed in section 457(e)(1)(A).’’.
(2) ROLLOVERS TO SECTION 457 PLANS.—
(A) IN
GENERAL.—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 inserting after clause
(iv) the following new clause:
‘‘(v) an eligible deferred compensation
plan described in section 457(b) which is
maintained by an eligible employer de-
scribed in section 457(e)(1)(A).’’.
(B) 
SEPARATE
ACCOUNTING.—Section
402(c) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(11) SEPARATE ACCOUNTING.—Unless a plan
described in clause (v) of paragraph (8)(B) agrees to
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separately account for amounts rolled into such plan
from eligible retirement plans not described in such
clause, the plan described in such clause may not ac-
cept transfers or rollovers from such retirement
plans.’’.
(C) 10 PERCENT
ADDITIONAL
TAX.—Sub-
section (t) of section 72 (relating to 10-percent
additional tax on early distributions from quali-
fied retirement plans) is amended by adding at
the end the following new paragraph:
‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SECTION
457 PLANS.—For purposes of this subsection, a dis-
tribution from an eligible deferred compensation plan
(as defined in section 457(b)) of an eligible employer
described in section 457(e)(1)(A) shall be treated as a
distribution from a qualified retirement plan de-
scribed in 4974(c)(1) to the extent that such distribu-
tion is attributable to an amount transferred to an el-
igible deferred compensation plan from a qualified re-
tirement plan (as defined in section 4974(c)).’’.
(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 
rollover
amounts) is amended by striking ‘‘such distribution’’
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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.—Sec-
tion 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 inserting after clause (v) the following new clause:
‘‘(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 distribu-
tions from the eligible retirement plan receiving
the distribution may be subject to restrictions
and tax consequences which are different from
those applicable to distributions from the plan
making such distribution.’’.
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(d) SPOUSAL ROLLOVERS.—Section 402(c)(9) (relat-
ing to rollover where spouse receives distribution after death
of employee) is amended by striking ‘‘; except that’’ and
all that follows up to the end period.
(e) 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 (A) of section 402(f)(2) is
amended by striking ‘‘or paragraph (4) of section
403(a)’’ and inserting ‘‘, paragraph (4) of section
403(a), subparagraph (A) of section 403(b)(8), or sub-
paragraph (A) of section 457(e)(16)’’.
(5) Paragraph (1) of section 402(f) is amended
by striking ‘‘from an eligible retirement plan’’.
(6) Subparagraphs (A) and (B) of section
402(f)(1) are amended by striking ‘‘another eligible
retirement plan’’ and inserting ‘‘an eligible retire-
ment plan’’.
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(7) Subparagraph (B) of section 403(b)(8) is
amended to read as follows:
‘‘(B) CERTAIN RULES MADE APPLICABLE.—
The rules of paragraphs (2) through (7) and (9)
of section 402(c) and section 402(f) shall apply
for purposes of subparagraph (A), except that
section 402(f) shall be applied to the payor in
lieu of the plan administrator.’’.
(8) Section 408(a)(1) is amended by striking ‘‘or
403(b)(8),’’ and inserting ‘‘403(b)(8), or 457(e)(16)’’.
(9) 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)’’.
(10) Section 415(c)(2) is amended by striking
‘‘and 408(d)(3)’’ and inserting ‘‘408(d)(3), and
457(e)(16)’’.
(11) Section 4973(b)(1)(A) is amended by strik-
ing ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or
457(e)(16)’’.
(f) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after De-
cember 31, 2001.
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(2) SPECIAL RULE.—Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of sec-
tion 1122 of the Tax Reform Act of 1986 shall not
apply to any distribution from an eligible retirement
plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986) on
behalf of an individual if there was a rollover to such
plan on behalf of such individual which is permitted
solely by reason of any amendment made by this sec-
tion.
SEC. 642. 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 add-
ing ‘‘or’’ at the end of clause (i), by striking clauses (ii)
and (iii), and by adding at the end the following:
‘‘(ii) the entire amount received (in-
cluding money and any other property) is
paid into an eligible retirement plan for the
benefit of such individual not later than the
60th day after the date on which the pay-
ment or distribution is received, except that
the maximum amount which may be paid
into such plan may not exceed the portion
of the amount received which is includible
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in gross income (determined without regard
to this paragraph).
For purposes of clause (ii), the term ‘eligible re-
tirement plan’ means an eligible retirement plan
described in clause (iii), (iv), (v), or (vi) of sec-
tion 402(c)(8)(B).’’.
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 403(b) is amended
by striking ‘‘section 408(d)(3)(A)(iii)’’ and inserting
‘‘section 408(d)(3)(A)(ii)’’.
(2) Clause (i) of section 408(d)(3)(D) is amended
by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i) or
(ii)’’.
(3) Subparagraph (G) of section 408(d)(3) is
amended to read as follows:
‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—In
the case of any payment or distribution out of
a simple retirement account (as defined in sub-
section (p)) to which section 72(t)(6) applies,
this paragraph shall not apply unless such pay-
ment or distribution is paid into another simple
retirement account.’’.
(c) EFFECTIVE DATE; SPECIAL RULE.—
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(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after De-
cember 31, 2001.
(2) SPECIAL RULE.—Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of sec-
tion 1122 of the Tax Reform Act of 1986 shall not
apply to any distribution from an eligible retirement
plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986) on
behalf of an individual if there was a rollover to such
plan on behalf of such individual which is permitted
solely by reason of the amendments made by this sec-
tion.
SEC. 643. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) ROLLOVERS FROM EXEMPT TRUSTS.—Paragraph
(2) of section 402(c) (relating to maximum amount which
may be rolled over) is amended by adding at the end the
following: ‘‘The preceding sentence shall not apply to such
distribution to the extent—
‘‘(A) such portion is transferred in a direct
trustee-to-trustee transfer to a qualified trust
which is part of a plan which is a defined con-
tribution plan and which agrees to separately
account for amounts so transferred, including
separately accounting for the portion of such dis-
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tribution which is includible in gross income
and the portion of such distribution which is not
so includible, or
‘‘(B) such portion is transferred to an eligi-
ble retirement plan described in clause (i) or (ii)
of paragraph (8)(B).’’.
(b) OPTIONAL DIRECT TRANSFER OF ELIGIBLE ROLL-
OVER
DISTRIBUTIONS.—Subparagraph (B) of section
401(a)(31) (relating to limitation) is amended by adding
at the end the following: ‘‘The preceding sentence shall not
apply to such distribution if the plan to which such dis-
tribution is transferred—
‘‘(i) agrees to separately account for
amounts so transferred, including sepa-
rately accounting for the portion of such
distribution which is includible in gross in-
come and the portion of such distribution
which is not so includible, or
‘‘(ii) is an eligible retirement plan de-
scribed in clause (i) or (ii) of section
402(c)(8)(B).’’.
(c) RULES FOR APPLYING SECTION 72 TO IRAS.—
Paragraph (3) of section 408(d) (relating to special rules
for applying section 72) is amended by inserting at the end
the following:
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‘‘(H) APPLICATION OF SECTION 72.—
‘‘(i) IN GENERAL.—If—
‘‘(I) a distribution is made from
an individual retirement plan, and
‘‘(II) a rollover contribution is
made to an eligible retirement plan de-
scribed in section 402(c)(8)(B)(iii),
(iv), (v), or (vi) with respect to all or
part of such distribution,
then, notwithstanding paragraph (2), the
rules of clause (ii) shall apply for purposes
of applying section 72.
‘‘(ii) APPLICABLE RULES.—In the case
of a distribution described in clause (i)—
‘‘(I) section 72 shall be applied
separately to such distribution,
‘‘(II) notwithstanding the pro
rata allocation of income on, and in-
vestment in, the contract to distribu-
tions under section 72, the portion of
such distribution rolled over to an eli-
gible retirement plan described in
clause (i) shall be treated as from in-
come on the contract (to the extent of
the aggregate income on the contract
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from all individual retirement plans of
the distributee), and
‘‘(III) appropriate adjustments
shall be made in applying section 72 to
other distributions in such taxable year
and subsequent taxable years.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions made after December 31,
2001.
SEC. 644. HARDSHIP EXCEPTION TO 60-DAY RULE.
(a) EXEMPT
TRUSTS.—Paragraph (3) of section
402(c) (relating to transfer must be made within 60 days
of receipt) is amended to read as follows:
‘‘(3) TRANSFER MUST BE MADE WITHIN 60 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 distributed.
‘‘(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
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other events beyond the reasonable control of the
individual subject to such requirement.’’.
(b) IRAS.—Paragraph (3) of section 408(d) (relating
to rollover contributions), as amended by section 643, is
amended by adding after subparagraph (H) the following
new subparagraph:
‘‘(I) 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 cas-
ualty, disaster, or other events beyond the rea-
sonable control of the individual subject to such
requirement.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2001.
SEC. 645. TREATMENT OF FORMS OF DISTRIBUTION.
(a) PLAN TRANSFERS.—
(1) 
AMENDMENT
OF
INTERNAL
REVENUE
CODE.—Paragraph (6) of section 411(d) (relating to
accrued benefit not to be decreased by amendment) is
amended by adding at the end the following:
‘‘(D) PLAN TRANSFERS.—
‘‘(i) IN GENERAL.—A defined contribu-
tion plan (in this subparagraph referred to
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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 subparagraph referred to as the ‘trans-
feror plan’) to the extent that—
‘‘(I) the forms of distribution pre-
viously available under the transferor
plan applied to the account of a par-
ticipant or beneficiary under the
transferor plan that was transferred
from the transferor plan to the trans-
feree plan pursuant to a direct transfer
rather than pursuant to a distribution
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
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or beneficiary whose account was
transferred to the transferee plan,
‘‘(IV) the election described in
subclause (III) was made after the par-
ticipant or beneficiary received a no-
tice describing the consequences of
making the election, and
‘‘(V) the transferee plan allows the
participant or beneficiary described in
subclause (III) to receive any distribu-
tion to which the participant or bene-
ficiary is entitled under the transferee
plan in the form of a single sum dis-
tribution.
‘‘(ii) SPECIAL
RULE
FOR
MERGERS,
ETC.—Clause (i) shall apply to plan merg-
ers and other transactions having the effect
of a direct transfer, including consolidations
of benefits attributable to different employ-
ers within a multiple employer plan.’’.
(2) AMENDMENT OF ERISA.—Section 204(g) of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1054(g)) is amended by adding at
the end the following:
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‘‘(4)(A) A defined contribution plan (in this subpara-
graph referred to as the ‘transferee plan’) shall not be treat-
ed 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 subparagraph re-
ferred to as the ‘transferor plan’) to the extent 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 rath-
er 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 elec-
tion; and
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‘‘(v) the transferee plan allows the participant or
beneficiary described in clause (iii) to receive any dis-
tribution to which the participant or beneficiary is
entitled under the transferee plan in the form of a
single sum distribution.
‘‘(B) Subparagraph (A) shall apply to plan mergers
and other transactions having the effect of a direct transfer,
including consolidations of benefits attributable to different
employers within a multiple employer plan.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning after
December 31, 2001.
(b) REGULATIONS.—
(1) 
AMENDMENT
OF
INTERNAL
REVENUE
CODE.—The last sentence of paragraph (6)(B) of sec-
tion 411(d) (relating to accrued benefit not to be de-
creased by amendment) is amended to read as follows:
‘‘The Secretary shall by regulations provide that this
subparagraph shall not apply to any plan amend-
ment which reduces or eliminates benefits or subsidies
which create significant burdens or complexities for
the plan and plan participants, unless such amend-
ment adversely affects the rights of any participant in
a more than de minimis manner.’’.
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(2) AMENDMENT OF ERISA.—The last sentence of
section 204(g)(2) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1054(g)(2)) is
amended to read as follows: ‘‘The Secretary of the
Treasury shall by regulations provide that this para-
graph shall not apply to any plan amendment which
reduces or eliminates benefits or subsidies which cre-
ate significant burdens or complexities for the plan
and plan participants, unless such amendment ad-
versely affects the rights of any participant in a more
than de minimis manner.’’.
(3) SECRETARY DIRECTED.—Not later than De-
cember 31, 2002, the Secretary of the Treasury is di-
rected to issue regulations under section 411(d)(6) of
the Internal Revenue Code of 1986 and section 204(g)
of the Employee Retirement Income Security Act of
1974, including the regulations required by the
amendment made by this subsection. Such regulations
shall apply to plan years beginning after December
31, 2002, or such earlier date as is specified by the
Secretary of the Treasury.
SEC. 646. RATIONALIZATION OF RESTRICTIONS ON DIS-
TRIBUTIONS.
(a) MODIFICATION OF SAME DESK EXCEPTION.—
(1) SECTION 401(k).—
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(A) Section 401(k)(2)(B)(i)(I) (relating to
qualified cash or deferred arrangements) is
amended by striking ‘‘separation from service’’
and inserting ‘‘severance from employment’’.
(B) Subparagraph (A) of section 401(k)(10)
(relating to distributions upon termination of
plan or disposition of assets or subsidiary) is
amended to read as follows:
‘‘(A) IN GENERAL.—An event described in
this subparagraph is the termination of the plan
without establishment or maintenance of another
defined contribution plan (other than an em-
ployee stock ownership plan as defined in section
4975(e)(7)).’’.
(C) Section 401(k)(10) is amended—
(i) in subparagraph (B)—
(I) by striking ‘‘An event’’ in
clause (i) and inserting ‘‘A termi-
nation’’; and
(II) by striking ‘‘the event’’ in
clause (i) and inserting ‘‘the termi-
nation’’;
(ii) by striking subparagraph (C); and
(iii) by striking ‘‘OR DISPOSITION OF
ASSETS OR SUBSIDIARY’’ in the heading.
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(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 sec-
tion 403(b) is amended by striking ‘‘SEPARATION
FROM
SERVICE’’ and inserting ‘‘SEVERANCE
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) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2001.
SEC. 647. 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 paragraph:
‘‘(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 ben-
efit governmental plan (as defined in section 414(d))
if such transfer is—
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‘‘(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) there-
of.’’.
(b) 457 PLANS.—Subsection (e) of section 457, as
amended by section 401, is amended by adding after para-
graph (16) the following new paragraph:
‘‘(17) TRUSTEE-TO-TRUSTEE
TRANSFERS
TO
PURCHASE
PERMISSIVE
SERVICE
CREDIT.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer to a defined ben-
efit 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) there-
of.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to trustee-to-trustee transfers after De-
cember 31, 2001.
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SEC. 648. EMPLOYERS MAY DISREGARD ROLLOVERS FOR
PURPOSES OF CASH-OUT AMOUNTS.
(a) QUALIFIED PLANS.—
(1) 
AMENDMENT
OF
INTERNAL
REVENUE
CODE.—Section 411(a)(11) (relating to restrictions on
certain mandatory distributions) is amended by add-
ing at the end the following:
‘‘(D) SPECIAL RULE FOR ROLLOVER CON-
TRIBUTIONS.—A plan shall not fail to meet the
requirements of this paragraph if, under the
terms of the plan, the present value of the non-
forfeitable accrued benefit is determined without
regard to that portion of such benefit which is
attributable to rollover contributions (and earn-
ings allocable thereto). For purposes of this sub-
paragraph, the term ‘rollover contributions’
means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),
and 457(e)(16).’’.
(2) AMENDMENT OF ERISA.—Section 203(e) of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1053(c)) is amended by adding at
the end the following:
‘‘(4) A plan shall not fail to meet the requirements of
this subsection if, under the terms of the plan, the present
value of the nonforfeitable accrued benefit is determined
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without regard to that portion of such benefit which is at-
tributable to rollover contributions (and earnings allocable
thereto). For purposes of this subparagraph, the term ‘roll-
over contributions’ means any rollover contribution under
sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and
457(e)(16) of the Internal Revenue Code of 1986.’’.
(b) ELIGIBLE DEFERRED COMPENSATION PLANS.—
Clause (i) of section 457(e)(9)(A) is amended by striking
‘‘such amount’’ and inserting ‘‘the portion of such amount
which is not attributable to rollover contributions (as de-
fined in section 411(a)(11)(D))’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2001.
SEC. 649. MINIMUM DISTRIBUTION AND INCLUSION RE-
QUIREMENTS FOR SECTION 457 PLANS.
(a) MINIMUM DISTRIBUTION REQUIREMENTS.—Para-
graph (2) of section 457(d) (relating to distribution require-
ments) is amended to read as follows:
‘‘(2) MINIMUM DISTRIBUTION REQUIREMENTS.—
A plan meets the minimum distribution requirements
of this paragraph if such plan meets the requirements
of section 401(a)(9).’’.
(b) INCLUSION IN GROSS INCOME.—
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(1) YEAR OF INCLUSION.—Subsection (a) of sec-
tion 457 (relating to year of inclusion in gross in-
come) is amended to read as follows:
‘‘(a) YEAR OF INCLUSION IN GROSS INCOME.—
‘‘(1) IN GENERAL.—Any amount of compensa-
tion deferred under an eligible deferred compensation
plan, and any income attributable to the amounts so
deferred, shall be includible in gross income only for
the taxable year in which such compensation or other
income—
‘‘(A) is paid to the participant or other ben-
eficiary, in the case of a plan of an eligible em-
ployer described in subsection (e)(1)(A), and
‘‘(B) is paid or otherwise made available to
the participant or other beneficiary, in the case
of a plan of an eligible employer described in
subsection (e)(1)(B).
‘‘(2) SPECIAL RULE FOR ROLLOVER AMOUNTS.—
To the extent provided in section 72(t)(9), section
72(t) shall apply to any amount includible in gross
income under this subsection.’’.
(2) CONFORMING AMENDMENTS.—
(A) So much of paragraph (9) of section
457(e) as precedes subparagraph (A) is amended
to read as follows:
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‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION
PLANS NOT TREATED AS MADE AVAILABLE BY REASON
OF CERTAIN ELECTIONS, ETC.—In the case of an eligi-
ble deferred compensation plan of an employer de-
scribed 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 sub-
section solely by reason of making a distribution de-
scribed in subsection (e)(9)(A).’’.
(c) MODIFICATION OF TRANSITION RULES FOR EXIST-
ING 457 PLANS.—
(1) IN GENERAL.—Section 1107(c)(3)(B) of the
Tax Reform Act of 1986 is amended by striking ‘‘or’’
at the end of clause (i), by striking the period at the
end of clause (ii) and inserting ‘‘, or’’ and by insert-
ing after clause (ii) the following new clause:
‘‘(iii) are deferred pursuant to an
agreement with an individual covered by an
agreement described in clause (ii), to the ex-
tent the annual amount under such agree-
ment with the individual does not exceed—
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‘‘(I) the amount described in
clause (ii)(II), multiplied by
‘‘(II) the cumulative increase in
the Consumer Price Index (as pub-
lished by the Bureau of Labor Statis-
tics of the Department of Labor).’’.
(2) CONFORMING AMENDMENT.—The fourth sen-
tence of section 1107(c)(3)(B) of the Tax Reform Act
of 1986 is amended by striking ‘‘This subparagraph’’
and inserting ‘‘Clauses (i) and (ii) of this subpara-
graph’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years ending
after the date of the enactment of this Act with respect
to increases in the Consumer Price Index after Sep-
tember 30, 1993.
(d) EFFECTIVE DATE.—The amendments made by
subsections (a) and (b) shall apply to distributions after
December 31, 2001.
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Subtitle E—Strengthening Pension
Security and Enforcement
PART I—GENERAL PROVISIONS
SEC. 651. REPEAL OF 160 PERCENT OF CURRENT LIABILITY
FUNDING LIMIT.
(a) AMENDMENTS TO INTERNAL REVENUE CODE.—
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, 2005, the ap-
plicable percentage’’; and
(2) by amending subparagraph (F) to read as
follows:
‘‘(F) APPLICABLE PERCENTAGE.—For pur-
poses of subparagraph (A)(i)(I), the applicable
percentage shall be determined in accordance
with the following table:
‘‘In the case of any plan year
The applicable
beginning in—
percentage is—
2002 ....................................................................................
160
2003 ....................................................................................
165
2004 ....................................................................................
170.’’.
(b) AMENDMENT OF ERISA.—Section 302(c)(7) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1082(c)(7)) is amended—
(1) by striking ‘‘the applicable percentage’’ in
subparagraph (A)(i)(I) and inserting ‘‘in the case of
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plan years beginning before January 1, 2005, the ap-
plicable percentage’’, and
(2) by amending subparagraph (F) to read as
follows:
‘‘(F) APPLICABLE PERCENTAGE.—For pur-
poses of subparagraph (A)(i)(I), the applicable
percentage shall be determined in accordance
with the following table:
‘‘In the case of any plan year
The applicable
beginning in—
percentage is—
2002 ....................................................................................
160
2003 ....................................................................................
165
2004 ....................................................................................
170.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2001.
SEC. 652. 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
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shall not be less than the unfunded termi-
nation liability (determined as if the pro-
posed termination date referred to in section
4041(b)(2)(A)(i)(II) of the Employee Retire-
ment Income Security Act of 1974 were the
last day of the plan year).
‘‘(ii) PLANS WITH LESS THAN 100 PAR-
TICIPANTS.—For purposes of this subpara-
graph, 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 increases for
highly compensated employees (as defined
in section 414(q)) resulting from a plan
amendment which is made or becomes effec-
tive, whichever is later, within the last 2
years before the termination date.
‘‘(iii) RULE FOR DETERMINING NUM-
BER OF PARTICIPANTS.—For purposes of de-
termining 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,
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but only employees of such member or em-
ployer shall be taken into account.
‘‘(iv) PLANS MAINTAINED BY PROFES-
SIONAL
SERVICE
EMPLOYERS.—Clause (i)
shall not apply to a plan described in sec-
tion 4021(b)(13) of the Employee Retire-
ment Income Security Act of 1974.’’.
(b) CONFORMING AMENDMENT.—Paragraph (6) of sec-
tion 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
contributions to one or more defined contribution
plans which are not deductible when contributed sole-
ly because of section 404(a)(7) as does not exceed the
greater of—
‘‘(A) the amount of contributions not in ex-
cess of 6 percent of compensation (within the
meaning of section 404(a)) paid or accrued (dur-
ing the taxable year for which the contributions
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
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‘‘(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 December
31, 2001.
SEC. 653. EXCISE TAX RELIEF FOR SOUND PENSION FUND-
ING.
(a) IN GENERAL.—Subsection (c) of section 4972 (re-
lating to nondeductible contributions) is amended by add-
ing 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 re-
gard to subparagraph (A)(i)(I) thereof). For purposes
of this paragraph, the deductible limits under section
404(a)(7) shall first be applied to amounts contrib-
uted to defined contribution plans and then to
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amounts described in this paragraph. If an employer
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,
2001.
SEC. 654. TREATMENT OF MULTIEMPLOYER PLANS UNDER
SECTION 415.
(a) COMPENSATION LIMIT.—
(1) IN
GENERAL.—Paragraph (11) of section
415(b) (relating to limitation for defined benefit
plans) is amended to read as follows:
‘‘(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 section 414(f)),
subparagraph (B) of paragraph (1) shall not apply.’’.
(2) 
CONFORMING
AMENDMENT.—Section
415(b)(7) (relating to benefits under certain collec-
tively bargained plans) is amended by inserting
‘‘(other than a multiemployer plan)’’ after ‘‘defined
benefit plan’’ in the matter preceding subparagraph
(A).
(b) COMBINING AND AGGREGATION OF PLANS.—
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(1) COMBINING OF PLANS.—Subsection (f) of sec-
tion 415 (relating to combining of plans) is amended
by adding at the end the following:
‘‘(3) EXCEPTION FOR MULTIEMPLOYER PLANS.—
Notwithstanding paragraph (1) and subsection (g), a
multiemployer plan (as defined in section 414(f))
shall not be combined or aggregated with any other
plan maintained by an employer for purposes of ap-
plying subsection (b)(1)(B) to such plan or any other
such plan.’’.
(2) CONFORMING AMENDMENT FOR AGGREGATION
OF PLANS.—Subsection (g) of section 415 (relating to
aggregation of plans) is amended by striking ‘‘The
Secretary’’ and inserting ‘‘Except as provided in sub-
section (f)(3), the Secretary’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2001.
SEC. 655. PROTECTION OF INVESTMENT OF EMPLOYEE
CONTRIBUTIONS TO 401(k) PLANS.
(a) IN GENERAL.—Section 1524(b) of the Taxpayer
Relief Act of 1997 is amended to read as follows:
‘‘(b) EFFECTIVE DATE.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
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apply to elective deferrals for plan years beginning
after December 31, 1998.
‘‘(2) NONAPPLICATION TO PREVIOUSLY ACQUIRED
PROPERTY.—The amendments made by this section
shall not apply to any elective deferral which is in-
vested in assets consisting of qualifying employer se-
curities, qualifying employer real property, or both, if
such assets were acquired before January 1, 1999.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply as if included in the provision of the
Taxpayer Relief Act of 1997 to which it relates.
SEC. 656. 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 sub-
section:
‘‘(p) PROHIBITED ALLOCATIONS OF SECURITIES IN AN
S CORPORATION.—
‘‘(1) IN GENERAL.—An employee stock ownership
plan holding employer securities consisting of stock in
an S corporation shall provide that no portion of the
assets of the plan attributable to (or allocable in lieu
of) such employer securities may, during a nonalloca-
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tion year, accrue (or be allocated directly or indi-
rectly under any plan of the employer meeting the re-
quirements of section 401(a)) for the benefit of any
disqualified person.
‘‘(2) FAILURE TO MEET REQUIREMENTS.—
‘‘(A) IN GENERAL.—If a plan fails to meet
the requirements of paragraph (1), the plan shall
be treated as having distributed to any disquali-
fied person the amount allocated to the account
of such person in violation of paragraph (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 corporation,
and
‘‘(ii) disqualified persons own at least
50 percent of the number of shares of stock
in the S corporation.
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‘‘(B) ATTRIBUTION
RULES.—For purposes
of subparagraph (A)—
‘‘(i) IN GENERAL.—The rules of section
318(a) shall apply for purposes of deter-
mining ownership, except that—
‘‘(I) in applying paragraph (1)
thereof, the members of an individual’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), an 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—
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‘‘(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
‘‘(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 corporation
constituting employer securities of an
employee stock ownership plan which
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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 allocated
under the plan to participants.
‘‘(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
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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 treat-
ed 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
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rules of paragraphs (2) and (3) of section 318(a). If,
without regard to this paragraph, a person is treated
as a disqualified person or a year is treated as a non-
allocation year, this paragraph shall not be construed
to result in the person or year not being so treated.
‘‘(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 corpora-
tion in the future. Except to the extent provided
in regulations, synthetic equity also includes 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.
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‘‘(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 stock
ownership plan) is amended by inserting ‘‘, section 409(p),’’
after ‘‘409(n)’’.
(c) EXCISE TAX.—
(1) APPLICATION OF TAX.—Subsection (a) of sec-
tion 4979A (relating to tax on certain prohibited allo-
cations 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 ownership 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:
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‘‘(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—
‘‘(A) the employer sponsoring such plan, or
‘‘(B) the eligible worker-owned cooperative,
which made the written statement described in section
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 re-
ferred to in paragraph (3) or (4) of subsection (a), by
the S corporation the stock in which was so allocated
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 para-
graph (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 IMPOSED
BY REASON OF PARAGRAPH (3) OR (4) OF SUBSECTION
(a).—
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‘‘(A) 
PROHIBITED
ALLOCATIONS.—The
amount involved with respect to any tax imposed
by reason of subsection (a)(3) is the amount allo-
cated to the account of any person in violation
of section 409(p)(1).
‘‘(B) SYNTHETIC EQUITY.—The amount in-
volved with respect to any tax imposed by reason
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 non-
allocation year of any employee stock ownership
plan shall be determined by taking into account
the total value of all the deemed-owned shares of
all disqualified persons with respect to such
plan.
‘‘(D) STATUTE OF LIMITATIONS.—The stat-
utory period for the assessment of any tax im-
posed by this section by reason of paragraph (3)
or (4) of subsection (a) shall not expire before 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
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‘‘(ii) the date on which the Secretary is
notified of such allocation or ownership.’’.
(d) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to plan years beginning after
December 31, 2002.
(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.
SEC. 657. AUTOMATIC ROLLOVERS OF CERTAIN MANDA-
TORY DISTRIBUTIONS.
(a) DIRECT TRANSFERS OF MANDATORY DISTRIBU-
TIONS.—
(1) IN GENERAL.—Section 401(a)(31) (relating
to optional direct transfer of eligible rollover distribu-
tions), as amended by section 643, is amended by re-
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designating subparagraphs (B), (C), and (D) as sub-
paragraphs (C), (D), and (E), respectively, and by
inserting after subparagraph (A) the following new
subparagraph:
‘‘(B) 
CERTAIN
MANDATORY
DISTRIBU-
TIONS.—
‘‘(i) IN GENERAL.—In case of a trust
which is part of an eligible plan, such trust
shall not constitute a qualified trust under
this section unless the plan of which such
trust is a part provides that if—
‘‘(I) a distribution described in
clause (ii) in excess of $1,000 is made,
and
‘‘(II) the distributee does not make
an election under subparagraph (A)
and does not elect to receive the dis-
tribution directly,
the plan administrator shall make such
transfer to an individual retirement ac-
count or annuity of a designated trustee or
issuer and shall notify the distributee in
writing (either separately or as part of the
notice under section 402(f)) that the dis-
tribution may be transferred without cost or
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penalty to another individual account or
annuity.
‘‘(ii) ELIGIBLE PLAN.—For purposes of
clause (i), the term ‘eligible plan’ means a
plan which provides that any nonforfeitable
accrued benefit for which the present value
(as determined under section 411(a)(11))
does not exceed $5,000 shall be immediately
distributed to the participant.’’.
(2) CONFORMING AMENDMENTS.—
(A) The heading of section 401(a)(31) is
amended by striking ‘‘OPTIONAL DIRECT’’ and
inserting ‘‘DIRECT’’.
(B) Section 401(a)(31)(C), as redesignated
by paragraph (1), is amended by striking ‘‘Sub-
paragraph (A)’’ and inserting ‘‘Subparagraphs
(A) and (B)’’.
(b) NOTICE REQUIREMENT.—Section 402(f)(1) (relat-
ing to written explanation to recipients of distributions eli-
gible 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 by adding at the end
the following new subparagraph:
‘‘(E) if applicable, of the provision requir-
ing a direct trustee-to-trustee transfer of a dis-
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tribution under section 401(a)(31)(B) unless the
recipient elects otherwise.’’.
(c) FIDUCIARY RULES.—
(1) IN
GENERAL.—Section 404(c) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1104(c)) is amended by adding at the end the
following new paragraph:
‘‘(3) In the case of a pension plan which makes
a transfer to an individual retirement account or an-
nuity of a designated trustee or issuer under section
401(a)(31)(B) of the Internal Revenue Code of 1986,
the participant or beneficiary shall, for purposes of
paragraph (1), be treated as exercising control over
the assets in the account or annuity upon the earlier
of—
‘‘(A) a rollover of all or a portion of the
amount to another individual retirement account
or annuity; or
‘‘(B) one year after the transfer is made.’’.
(2) REGULATIONS.—
(A) AUTOMATIC
ROLLOVER
SAFE
HAR-
BOR.—The Secretary of Labor shall promulgate
regulations to provide guidance regarding meet-
ing the fiduciary requirements of section 404(a)
of the Employee Retirement Income Security Act
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of 1974 (29 U.S.C. 1104(a)) in the case of a pen-
sion plan which makes a transfer under section
401(a)(31)(B) of the Internal Revenue Code of
1986.
(B) USE OF LOW-COST INDIVIDUAL RETIRE-
MENT
PLANS.—The Secretary of the Treasury
and the Secretary of Labor shall promulgate
such regulations as necessary to encourage the
use of low-cost individual retirement plans for
purposes of transfers under section 401(a)(31)(B)
of the Internal Revenue Code of 1986 and for
other uses as appropriate to promote the preser-
vation of assets for retirement income purposes.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions made after final regula-
tions implementing subsection (c) are prescribed.
SEC. 658. CLARIFICATION OF TREATMENT OF CONTRIBU-
TIONS TO MULTIEMPLOYER PLAN.
(a) NOT CONSIDERED METHOD OF ACCOUNTING.—For
purposes of section 446 of the Internal Revenue Code of
1986, a determination under section 404(a)(6) of such Code
regarding the taxable year with respect to which a contribu-
tion to a multiemployer pension plan is deemed made shall
not be treated as a method of accounting of the taxpayer.
No deduction shall be allowed for any taxable year for any
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contribution to a multiemployer pension plan with respect
to which a deduction was previously allowed.
(b) REGULATIONS.—The Secretary of the Treasury
shall promulgate such regulations as necessary to clarify
that a taxpayer shall not be allowed, with respect to any
taxable year, an aggregate amount of deductions for con-
tributions to a multiemployer pension plan which exceeds
the amount of such contributions made or deemed made
under section 404(a)(6) of the Internal Revenue Code of
1986 to such plan.
(c) EFFECTIVE DATE.—Subsection (a), and any regu-
lations promulgated under subsection (b), shall be effective
for years ending after the date of the enactment of this Act.
PART II—TREATMENT OF PLAN AMENDMENTS
REDUCING FUTURE BENEFIT ACCRUALS
SEC. 659. NOTICE REQUIRED FOR PENSION PLAN AMEND-
MENTS HAVING THE EFFECT OF SIGNIFI-
CANTLY REDUCING FUTURE BENEFIT ACCRU-
ALS.
(a) EXCISE TAX.—
(1) IN GENERAL.—Chapter 43 (relating to quali-
fied pension, etc., plans) is amended by adding at the
end the following new section:
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‘‘SEC. 4980F. FAILURE TO PROVIDE NOTICE OF PENSION
PLAN AMENDMENTS REDUCING BENEFIT AC-
CRUALS.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed a
tax on the failure of an applicable pension plan to meet
the requirements of subsection (e) with respect to any appli-
cable 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 fail-
ure.
‘‘(2) NONCOMPLIANCE PERIOD.—For purposes of
this section, the term ‘noncompliance period’ means,
with respect to any failure, the period beginning on
the date the failure first occurs and ending on the
date the notice to which the failure relates is provided
or the failure is otherwise corrected.
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT
DISCOVERED
AND
REASONABLE
DILIGENCE
EXER-
CISED.—No tax shall be imposed by subsection (a) on
any failure during any period for which it is estab-
lished to the satisfaction of the Secretary that any
person subject to liability for the tax under subsection
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(d) did not know that the failure existed and exercised
reasonable diligence to meet the requirements of sub-
section (e).
‘‘(2) TAX
NOT
TO
APPLY
TO
FAILURES
COR-
RECTED WITHIN 30 DAYS.—No tax shall be imposed
by subsection (a) on any failure if—
‘‘(A) any person subject to liability for the
tax under subsection (d) exercised reasonable
diligence to meet the requirements of subsection
(e), and
‘‘(B) such person provides the notice de-
scribed in subsection (e) during the 30-day pe-
riod beginning on the first date such person
knew, or exercising reasonable diligence would
have known, that such failure existed.
‘‘(3) OVERALL LIMITATION FOR UNINTENTIONAL
FAILURES.—
‘‘(A) IN GENERAL.—If the person subject to
liability for tax under subsection (d) exercised
reasonable diligence to meet the requirements of
subsection (e), the tax imposed by subsection (a)
for failures during the taxable year of the em-
ployer (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
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the preceding sentence, all multiemployer plans
of which the same trust forms a part shall be
treated as 1 plan.
‘‘(B) TAXABLE YEARS IN THE CASE OF CER-
TAIN
CONTROLLED
GROUPS.—For purposes of
this paragraph, if all persons who are treated as
a single employer for purposes of this section do
not have the same taxable year, the taxable years
taken into account shall be determined under
principles similar to the principles of section
1561.
‘‘(4) 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 or other-
wise inequitable relative 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 multiem-
ployer plan, the employer.
‘‘(2) In the case of a multiemployer plan, the
plan.
‘‘(e) NOTICE REQUIREMENTS FOR PLAN AMENDMENTS
SIGNIFICANTLY REDUCING BENEFIT ACCRUALS.—
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‘‘(1) IN GENERAL.—If the sponsor of an applica-
ble pension plan adopts an amendment which has the
effect of significantly reducing the rate of future ben-
efit accrual of 1 or more participants, the plan ad-
ministrator shall, not later than the 45th day before
the effective date of the amendment, provide written
notice to each applicable individual (and to each em-
ployee organization representing applicable individ-
uals) which—
‘‘(A) sets forth a summary of the plan
amendment and the effective date of the amend-
ment,
‘‘(B) includes a statement that the plan
amendment is expected to significantly reduce
the rate of future benefit accrual,
‘‘(C) includes a description of the classes of
employees reasonably expected to be affected by
the reduction in the rate of future benefit ac-
crual,
‘‘(D) sets forth examples illustrating how
the plan will change benefits for such classes of
employees,
‘‘(E) if paragraph (2) applies to the plan
amendment, includes a notice that the plan ad-
ministrator will provide a benefit estimation tool
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kit described in paragraph (2)(B) to each appli-
cable individual no later than the date required
under paragraph (2)(A), and
‘‘(F) includes a notice of each applicable in-
dividual’s right under Federal law to receive,
and of the procedures for requesting, an annual
benefit statement.
‘‘(2) REQUIREMENT TO PROVIDE BENEFIT ESTI-
MATION TOOL KIT.—
‘‘(A) IN GENERAL.—If a plan amendment
results in the significant restructuring of the
plan benefit formula (as determined under regu-
lations prescribed by the Secretary), the plan ad-
ministrator shall, not later than the 15th day be-
fore the effective date of the amendment, provide
a benefit estimation tool kit described in sub-
paragraph (B) to each applicable individual. If
such plan amendment occurs within 12 months
of an event described in section 410(b)(6)(C), the
plan administrator shall in no event be required
to provide the benefit estimation tool kit to ap-
plicable individuals affected by the event before
the date which is 12 months after the date on
which notice under paragraph (1) is given to
such applicable individuals.
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‘‘(B) BENEFIT ESTIMATION TOOL KIT.—The
benefit estimation tool kit described in this sub-
paragraph shall include the following informa-
tion:
‘‘(i) Sufficient information to enable
an applicable individual to estimate the in-
dividual’s projected benefits under the terms
of the plan in effect both before and after the
adoption of the amendment.
‘‘(ii) The formulas and actuarial as-
sumptions necessary to estimate under both
such plan terms a single life annuity at ap-
propriate ages, and, when available, a lump
sum distribution.
‘‘(iii) The interest rate used to compute
a lump sum distribution and information
as to whether the value of any early retire-
ment benefit or retirement-type subsidy
(within 
the 
meaning 
of 
section
411(d)(6)(B)(i)) is included in the lump
sum distribution.
‘‘(3) NOTICE TO DESIGNEE.—Any notice under
paragraph (1) or (2) may be provided to a person
designated, in writing, by the person to which it
would otherwise be provided.
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‘‘(4) FORM OF EXPLANATION.—The information
required to be provided under this subsection shall be
provided in a manner calculated to be reasonably un-
derstood by the average plan participant.
‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) APPLICABLE INDIVIDUAL.—
‘‘(A) IN
GENERAL.—The term ‘applicable
individual’ means, with respect to any plan
amendment—
‘‘(i) each participant in the plan, and
‘‘(ii) any beneficiary who is an alter-
nate payee (within the meaning of section
414(p)(8)) under an applicable qualified
domestic relations order (within the mean-
ing of section 414(p)(1)(A)),
whose rate of future benefit accrual under the
plan may reasonably be expected to be signifi-
cantly reduced by such plan amendment.
‘‘(B) EXCEPTION FOR PARTICIPANTS WITH
LESS THAN 1 YEAR OF PARTICIPATION.—Such
term shall not include a participant who has less
than 1 year of participation (within the mean-
ing of section 411(b)(4)) under the plan as of the
effective date of the plan amendment.
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‘‘(2) APPLICABLE PENSION PLAN.—The term ‘ap-
plicable pension plan’ means—
‘‘(A) a defined benefit plan, or
‘‘(B) an individual account plan which is
subject to the funding standards of section 412.
Such term shall not include a governmental plan
(within the meaning of section 414(d)), a church plan
(within the meaning of section 414(e)) with respect to
which an election under section 410(d) has not been
made, or any other plan to which section 204(h) of
the Employee Retirement Income Security Act of
1974 does not apply.
‘‘(3) EARLY RETIREMENT.—A plan amendment
which eliminates or significantly reduces any early
retirement benefit or retirement-type subsidy (within
the meaning of section 411(d)(6)(B)(i)) shall be treat-
ed as having the effect of significantly reducing the
rate of future benefit accrual.
‘‘(g) REGULATIONS.—The Secretary shall, not later
than 1 year after the date of the enactment of this section,
issue—
‘‘(1) the regulations described in subsection
(e)(2)(A) and section 204(h)(2)(A) of the Employee
Retirement Income Security Act of 1974, and
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‘‘(2) guidance for both of the examples described
in subsection (e)(1)(D) and section 204(h)(1)(D) of
the Employee Retirement Income Security Act of
1974 and the benefit estimation tool kit described in
subsection (e)(2)(B) and section 204(h)(2)(B) of the
Employee Retirement Income Security Act of 1974.
‘‘(h) NEW TECHNOLOGIES.—The Secretary may by
regulation allow any notice under paragraph (1) or (2) of
subsection (e) to be provided by using new technologies.
Such regulations shall ensure that at least one option for
providing such notice is not dependent on new tech-
nologies.’’
(2) CONFORMING AMENDMENT.—The table of sec-
tions for chapter 43 is amended by adding at the end
the following new item:
‘‘Sec. 4980F. Failure to provide notice of pension plan amendments
reducing benefit accruals.’’
(b) AMENDMENT OF ERISA.—Section 204(h) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1054(h)) is amended to read as follows:
‘‘(h)(1) If an applicable pension plan is amended so
as to provide a significant reduction in the rate of future
benefit accrual of 1 or more participants, the plan adminis-
trator shall, not later than the 45th day before the effective
date of the amendment, provide written notice to each ap-
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plicable individual (and to each employee organization rep-
resenting applicable individuals) which—
‘‘(A) sets forth a summary of the plan amend-
ment and the effective date of the amendment,
‘‘(B) includes a statement that the plan amend-
ment is expected to significantly reduce the rate of fu-
ture benefit accrual,
‘‘(C) includes a description of the classes of em-
ployees reasonably expected to be affected by the re-
duction in the rate of future benefit accrual,
‘‘(D) sets forth examples illustrating how the
plan will change benefits for such classes of employees,
‘‘(E) if paragraph (2) applies to the plan
amendment, includes a notice that the plan adminis-
trator will provide a benefit estimation tool kit de-
scribed in paragraph (2)(B) to each applicable indi-
vidual no later than the date required under para-
graph (2)(A), and
‘‘(F) includes a notice of each applicable individ-
ual’s right under Federal law to receive, and of the
procedures for requesting, an annual benefit state-
ment.
‘‘(2)(A) If a plan amendment results in the significant
restructuring of the plan benefit formula (as determined
under regulations prescribed by the Secretary of the Treas-
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ury), the plan administrator shall, not later than the 15th
day before the effective date of the amendment, provide a
benefit estimation tool kit described in subparagraph (B)
to each applicable individual. If such plan amendment oc-
curs within 12 months of an event described in section
410(b)(6)(C) of the Internal Revenue Code of 1986, the plan
administrator shall in no event be required to provide the
benefit estimation tool kit to applicable individuals affected
by the event before the date which is 12 months after the
date on which notice under paragraph (1) is given to such
applicable individuals.
‘‘(B) The benefit estimation tool kit described in this
subparagraph shall include the following information:
‘‘(i) Sufficient information to enable an applica-
ble individual to estimate the individual’s projected
benefits under the terms of the plan in effect both be-
fore and after the adoption of the amendment.
‘‘(ii) The formulas and actuarial assumptions
necessary to estimate under both such plan terms a
single life annuity at appropriate ages, and, when
available, a lump sum distribution.
‘‘(iii) The interest rate used to compute a lump
sum distribution and information as to whether the
value of any early retirement benefit or retirement-
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type subsidy (within the meaning of subsection
(g)(2)(A)) is included in the lump sum distribution.
‘‘(3) Any notice under paragraph (1) or (2) may be
provided to a person designated, in writing, by the person
to which it would otherwise be provided.
‘‘(4) The information required to be provided under
this subsection shall be provided in a manner calculated
to be reasonably understood by the average participant.
‘‘(5)(A) In the case of any failure to exercise due dili-
gence in meeting any requirement of this subsection with
respect to any plan amendment, the provisions of the appli-
cable pension plan shall be applied as if such plan amend-
ment entitled all applicable individuals to the greater of—
‘‘(i) the benefits to which they would have been
entitled without regard to such amendment, or
‘‘(ii) the benefits under the plan with regard to
such amendment.
‘‘(B) For purposes of subparagraph (A), there is a fail-
ure to exercise due diligence in meeting the requirements
of this subsection if such failure is within the control of
the plan sponsor and is—
‘‘(i) an intentional failure (including any failure
to promptly provide the required notice or informa-
tion after the plan administrator discovers an unin-
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tentional failure to meet the requirements of this sub-
section),
‘‘(ii) a failure to provide most of the individuals
with most of the information they are entitled to re-
ceive under this subsection, or
‘‘(iii) a failure to exercise due diligence which is
determined under regulations prescribed by the Sec-
retary of the Treasury.
‘‘(C) For excise tax on failure to meet requirements,
see section 4980F of the Internal Revenue Code of 1986.
‘‘(5)(A) For purposes of this subsection, the term ‘ap-
plicable individual’ means, with respect to any plan
amendment—
‘‘(i) each participant in the plan, and
‘‘(ii) any beneficiary who is an alternate payee
(within the meaning of section 206(d)(3)(K)) under
an applicable qualified domestic relations order
(within the meaning of section 206(d)(3)(B)),
whose rate of future benefit accrual under the plan may
reasonably be expected to be significantly reduced by such
plan amendment.
‘‘(B) Such term shall not include a participant who
has less than 1 year of participation (within the meaning
of subsection (b)(4)) under the plan as of the effective date
of the plan amendment.
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‘‘(6) For purposes of this subsection, the term ‘applica-
ble pension plan’ means—
‘‘(A) a defined benefit plan, or
‘‘(B) an individual account plan which is subject
to the funding standards of section 302.
‘‘(7) For purposes of this subsection, a plan amend-
ment which eliminates or significantly reduces any early
retirement benefit or retirement-type subsidy (within the
meaning of section 204(g)(2)(A)) shall be treated as having
the effect of significantly reducing the rate of future benefit
accrual.
‘‘(8) The Secretary of the Treasury may by regulation
allow any notice under this subsection to be provided by
using new technologies. Such regulation shall ensure that
at least one option for providing such notice is not depend-
ent on new technologies.’’
(c) REGULATIONS RELATING TO EARLY RETIREMENT
SUBSIDIES.—The Secretary of the Treasury or the Sec-
retary’s delegate shall, not later than 1 year after the date
of the enactment of this Act, issue regulations relating to
early retirement benefits or retirement-type subsidies de-
scribed in section 411(d)(6)(B)(i) of the Internal Revenue
Code of 1986 and section 204(g)(2)(A) of the Employee Re-
tirement Income Security Act of 1974.
(d) EFFECTIVE DATES.—
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(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-
tion 4980F(e)(2) of the Internal Revenue Code of
1986 and section 204(h)(2) of the Employee Retire-
ment Income Security Act of 1974 (as added by the
amendments made by this section), a plan shall be
treated as meeting the requirements of such sections
if it makes a good faith effort to comply with such re-
quirements.
(3) SPECIAL
NOTICE
RULES.—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 pre-
pare a report on the effects of significant restructurings of
plan benefit formulas of traditional defined benefit plans.
Such study shall examine the effects of such restructurings
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 re-
structuring. As soon as practicable, but not later than one
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year after the date of enactment of this Act, the Secretary
shall submit such report, together with recommendations
thereon, to the Committee on Ways and Means and the
Committee on Education and the Workforce of the House
of Representatives and the Committee on Finance and the
Committee on Health, Education, Labor, and Pensions of
the Senate.
Subtitle F—Reducing Regulatory
Burdens
SEC. 661. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) IN GENERAL.—Paragraph (9) of section 412(c) (re-
lating 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
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
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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 liabil-
ity (as defined in paragraph (7)(B)).
‘‘(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) AMENDMENT OF ERISA.—Paragraph (9) of sec-
tion 302(c) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1053(c)) is amended—
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(1) by inserting ‘‘(A)’’ after ‘‘(9)’’, and
(2) by adding at the end the following:
‘‘(B)(i) Except as provided 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) 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)).
‘‘(iii) Information under clause (ii) shall, in accord-
ance with regulations, be actuarially adjusted to reflect sig-
nificant differences in participants.
‘‘(iv) An election under clause (ii), once made, shall
be irrevocable without the consent of the Secretary of the
Treasury.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2001.
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SEC. 662. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT
LOSS OF DIVIDEND DEDUCTION.
(a) IN GENERAL.—Section 404(k)(2)(A) (defining ap-
plicable 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 partici-
pants 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) LIMITATION ON AMOUNT OF DEDUCTION.—Section
404(k)(1) (relating to deduction for dividends paid on cer-
tain employer securities) is amended to read as follows:
‘‘(1) DEDUCTION ALLOWED.—
‘‘(A) IN GENERAL.—In the case of a C cor-
poration, there shall be allowed as a deduction
for the taxable year an amount equal to—
‘‘(i) the amount of any applicable divi-
dend described in clause (i), (ii), or (iv) of
paragraph (2)(A), and
‘‘(ii) the applicable percentage of any
applicable dividend described in clause (iii),
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paid in cash by such corporation during the tax-
able year with respect to applicable employer se-
curities. Such deduction shall be in addition to
the deduction allowed subsection (a).
‘‘(B) APPLICABLE PERCENTAGE.—For pur-
poses of subparagraph (A), the applicable per-
centage shall be determined in accordance with
the following table:
‘‘For taxable years
The applicable
beginning in:
percentage is:
2002, 2003, and 2004 ............................................
25 percent
2005, 2006, and 2007 ............................................
50 percent
2008, 2009, and 2010 ............................................
75 percent
2011 and thereafter ...............................................
100 percent.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 663. 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 subsection
(a) shall apply to plan years beginning after December 31,
2001.
SEC. 664. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) IN GENERAL.—The Secretary of the Treasury shall
modify Treasury Regulations section 1.410(b)–6(g) to pro-
vide that employees of an organization described in section
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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 agreement 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 par-
ticipate in such section 401(k) plan or section 401(m)
plan; and
(2) 95 percent of the employees who are not em-
ployees 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. 665. CLARIFICATION OF TREATMENT OF EMPLOYER-
PROVIDED RETIREMENT ADVICE.
(a) IN GENERAL.—Subsection (a) of section 132 (relat-
ing to exclusion from gross income) is amended by striking
‘‘or’’ at the end of paragraph (5), by striking the period
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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 DE-
FINED.—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 section,
the term ‘qualified retirement planning services’
means any retirement planning advice or informa-
tion provided to an employee and his spouse by an
employer maintaining 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 infor-
mation regarding the employer’s qualified employer
plan.
‘‘(3) QUALIFIED EMPLOYER PLAN.—For purposes
of this subsection, the term ‘qualified employer plan’
means a plan, contract, pension, or account described
in section 219(g)(5).’’.
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(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2001.
SEC. 666. REPORTING SIMPLIFICATION.
(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
OWNERS AND THEIR SPOUSES.—
(1) IN GENERAL.—The Secretary of the Treasury
shall modify the requirements for filing annual re-
turns 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 and each plan
year beginning on or after January 1, 1994, need not
file a return for that year.
(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 incor-
porated); or
(ii) covered only one or more partners
(and their spouses) in a business partner-
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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 employ-
ees 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 busi-
nesses under common control; and
(E) does not cover a business that leases em-
ployees.
(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 respec-
tive meanings given such terms by such section.
(b) EFFECTIVE DATE.—The provisions of this section
shall take effect on January 1, 2002.
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SEC. 667. IMPROVEMENT OF EMPLOYEE PLANS COMPLI-
ANCE RESOLUTION SYSTEM.
The Secretary of the Treasury shall continue to update
and improve the Employee Plans Compliance Resolution
System (or any successor program) giving special attention
to—
(1) increasing the awareness and knowledge of
small employers concerning the availability and use
of the program;
(2) taking into account special concerns and cir-
cumstances that small employers face with respect to
compliance and correction of compliance failures;
(3) extending the duration of the self-correction
period under the Self-Correction Program for signifi-
cant compliance failures;
(4) expanding the availability to correct insig-
nificant compliance failures under the Self-Correction
Program 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. 668. REPEAL OF THE MULTIPLE USE TEST.
(a) IN GENERAL.—Paragraph (9) of section 401(m) is
amended to read as follows:
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‘‘(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 aggre-
gation of plans and contributions.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
2001.
SEC. 
669. 
FLEXIBILITY 
IN 
NONDISCRIMINATION, 
COV-
ERAGE, AND LINE OF BUSINESS RULES.
(a) NONDISCRIMINATION.—
(1) IN GENERAL.—The Secretary of the Treasury
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 be-
fore 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.
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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, 2001.
(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 add-
ing 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
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‘‘(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.’’.
(2) EFFECTIVE DATES.—
(A) IN
GENERAL.—The amendment made
by paragraph (1) shall apply to years beginning
after December 31, 2001.
(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 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.
(c) LINE OF BUSINESS RULES.—The Secretary of the
Treasury shall, on or before December 31, 2001, modify the
existing regulations issued under section 414(r) of the Inter-
nal 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 cir-
cumstances surrounding the design and operation of the
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plan, even though the plan is unable to satisfy the mechan-
ical tests currently used to determine compliance.
SEC. 670. 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 Re-
lief Act of 1997 are each amended by striking ‘‘main-
tained by a State or local government or political
subdivision thereof (or agency or instrumentality
thereof)’’.
(b) CONFORMING AMENDMENTS.—
(1) The heading for subparagraph (G) of section
401(a)(5) is amended to read as follows: ‘‘GOVERN-
MENTAL PLANS’’.
(2) The heading for subparagraph (H) of section
401(a)(26) is amended to read as follows: ‘‘EXCEP-
TION FOR GOVERNMENTAL PLANS’’.
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(3) Subparagraph (G) of section 401(k)(3) is
amended by inserting ‘‘GOVERNMENTAL
PLANS.—’’
after ‘‘(G)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2001.
Subtitle G—Other ERISA Provisions
SEC. 681. 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 new sub-
section:
‘‘(c) MULTIEMPLOYER PLANS.—The corporation shall
prescribe rules similar to the rules in subsection (a) for mul-
tiemployer plans covered by this title that terminate under
section 4041A.
‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—
‘‘(1) TRANSFER TO CORPORATION.—The plan ad-
ministrator 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,
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upon termination of the plan, provide the corporation
information with respect to benefits of a missing par-
ticipant if the plan transfers such benefits—
‘‘(A) to the corporation, or
‘‘(B) to an entity other than the corporation
or a plan described in paragraph (4)(B)(ii).
‘‘(3) PAYMENT BY THE CORPORATION.—If bene-
fits of a missing participant were transferred to the
corporation under paragraph (1), the corporation
shall, upon location of the participant or beneficiary,
pay to the participant or beneficiary the amount
transferred (or the appropriate survivor benefit)
either—
‘‘(A) in a single sum (plus interest), or
‘‘(B) in such other form as is specified in
regulations of the corporation.
‘‘(4) PLANS DESCRIBED.—A plan is described in
this paragraph if—
‘‘(A) the plan is a pension plan (within the
meaning of section 3(2))—
‘‘(i) to which the provisions of this sec-
tion do not apply (without regard to this
subsection), and
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‘‘(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 distrib-
uted 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.—Sub-
sections (a)(1) and (a)(3) shall not apply to a plan
described in paragraph (4).’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to distributions made after final regula-
tions implementing subsections (c) and (d) of section 4050
of the Employee Retirement Income Security Act of 1974
(as added by subsection (a)), respectively, are prescribed.
SEC. 682. REDUCED PBGC PREMIUM FOR NEW PLANS OF
SMALL EMPLOYERS.
(a) IN
GENERAL.—Subparagraph (A) of section
4006(a)(3) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is amended—
(1) in clause (i), by inserting ‘‘other than a new
single-employer plan (as defined in subparagraph
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(F)) maintained by a small employer (as so de-
fined),’’ after ‘‘single-employer plan,’’,
(2) in clause (iii), by striking the period at the
end and inserting ‘‘, and’’, and
(3) by adding at the end the following new
clause:
‘‘(iv) in the case of a new single-employer plan
(as defined in subparagraph (F)) maintained by a
small employer (as so defined) for the plan year, $5
for each individual who is a participant in such plan
during the plan year.’’.
(b) DEFINITION OF NEW SINGLE-EMPLOYER PLAN.—
Section 4006(a)(3) of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1306(a)(3)) is amended by
adding at the end the following new subparagraph:
‘‘(F)(i) For purposes of this paragraph, a single-em-
ployer plan maintained by a contributing sponsor shall be
treated as a new single-employer plan for each of its first
5 plan years if, during the 36-month period ending on the
date of the adoption of such plan, the sponsor or any mem-
ber of such sponsor’s controlled group (or any predecessor
of either) did not establish or maintain a plan to which
this title applies with respect to which benefits were accrued
for substantially the same employees as are in the new sin-
gle-employer plan.
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‘‘(ii)(I) For purposes of this paragraph, the term
‘small employer’ means an employer which on the first day
of any plan year has, in aggregation with all members of
the controlled group of such employer, 100 or fewer employ-
ees.
‘‘(II) In the case of a plan maintained by two or more
contributing sponsors that are not part of the same con-
trolled group, the employees of all contributing sponsors and
controlled groups of such sponsors shall be aggregated for
purposes of determining whether any contributing sponsor
is a small employer.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to plans established after December 31,
2001.
SEC. 683. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR
NEW AND SMALL PLANS.
(a) NEW
PLANS.—Subparagraph (E) of section
4006(a)(3) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1306(a)(3)(E)) is amended by add-
ing 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 of the amount de-
termined under clause (ii) and the applicable percentage.
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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.
For purposes of this clause, a defined benefit plan (as de-
fined in section 3(35)) maintained by a contributing spon-
sor shall be treated as a new defined benefit plan for each
of its first 5 plan years if, during the 36-month period end-
ing on the date of the adoption of the plan, the sponsor
and each member of any controlled group including the
sponsor (or any predecessor of either) did not establish or
maintain a plan to which this title applies with respect
to which benefits were accrued for substantially the same
employees as are in the new plan.’’.
(b) SMALL PLANS.—Paragraph (3) of section 4006(a)
of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1306(a)), as amended by section 682(b), is
amended—
(1) by striking ‘‘The’’ in subparagraph (E)(i)
and inserting ‘‘Except as provided in subparagraph
(G), the’’, and
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(2) by inserting after subparagraph (F) the fol-
lowing new subparagraph:
‘‘(G)(i) In the case of an employer who has 25 or fewer
employees on the first day of the plan year, the additional
premium determined under subparagraph (E) for each par-
ticipant shall not exceed $5 multiplied by the number of
participants in the plan as of the close of the preceding plan
year.
‘‘(ii) For purposes of clause (i), whether an employer
has 25 or fewer employees on the first day of the plan year
is determined taking into consideration all of the employees
of all members of the contributing sponsor’s controlled
group. In the case of a plan maintained by two or more
contributing sponsors, the employees of all contributing
sponsors and their controlled groups shall be aggregated for
purposes of determining whether the 25-or-fewer-employees
limitation has been satisfied.’’.
(c) EFFECTIVE DATES.—
(1) SUBSECTION (a).—The amendments made by
subsection (a) shall apply to plans established after
December 31, 2001.
(2) SUBSECTION (b).—The amendments made by
subsection (b) shall apply to plan years beginning
after December 31, 2001.
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SEC. 684. AUTHORIZATION FOR PBGC TO PAY INTEREST ON
PREMIUM OVERPAYMENT REFUNDS.
(a) IN GENERAL.—Section 4007(b) of the Employment
Retirement Income Security Act of 1974 (29 U.S.C.
1307(b)) is amended—
(1) by striking ‘‘(b)’’ and inserting ‘‘(b)(1)’’, and
(2) by inserting at the end the following new
paragraph:
‘‘(2) The corporation is authorized to pay, subject to
regulations prescribed by the corporation, interest on the
amount of any overpayment of premium refunded to a des-
ignated payor. Interest under this paragraph shall be cal-
culated at the same rate and in the same manner as interest
is calculated for underpayments under paragraph (1).’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to interest accruing for periods be-
ginning not earlier than the date of the enactment of this
Act.
SEC. 685. SUBSTANTIAL OWNER BENEFITS IN TERMINATED
PLANS.
(a) MODIFICATION OF PHASE-IN OF GUARANTEE.—
Section 4022(b)(5) of the Employee Retirement Income Se-
curity 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 ‘ma-
jority owner’ means an individual who, at any time during
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the 60-month period ending on the date the determination
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 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 section
shall equal 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
10, and
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‘‘(ii) the amount of benefits that would be guar-
anteed under this section if the participant were not
a majority owner.’’.
(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—
(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 new paragraph:
‘‘(3) If assets available for allocation under
paragraph (4) of subsection (a) are insufficient to sat-
isfy in full the benefits of all individuals who are de-
scribed in that paragraph, the assets shall be allocated
first to benefits described in subparagraph (A) of that
paragraph. Any remaining assets shall then be allo-
cated to benefits described in subparagraph (B) of
that paragraph. If assets allocated to such subpara-
graph (B) are insufficient to satisfy in full the bene-
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fits described in that subparagraph, the assets 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 In-
come Security Act of 1974 (29 U.S.C. 1321) is
amended—
(A) in subsection (b)(9), by striking ‘‘as de-
fined in section 4022(b)(6)’’, and
(B) by adding at the end the following new
subsection:
‘‘(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
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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.—
(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 section
4041(a)(2) of such Act (29 U.S.C. 1341(a)(2))
after December 31, 2001, and
(B) under section 4042 of such Act (29
U.S.C. 1342) with respect to which proceedings
are instituted by the corporation after such date.
(2) CONFORMING
AMENDMENTS.—The amend-
ments made by subsection (c) shall take effect on Jan-
uary 1, 2002.
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Subtitle H—Miscellaneous
Provisions
SEC. 691. TAX TREATMENT AND INFORMATION REQUIRE-
MENTS OF ALASKA NATIVE SETTLEMENT
TRUSTS.
(a) TREATMENT
OF ALASKA NATIVE SETTLEMENT
TRUSTS.—Subpart A of part I of subchapter J of chapter
1 (relating to general rules for taxation of trusts and es-
tates) is amended by adding at the end the following new
section:
‘‘SEC. 646. TAX TREATMENT OF ELECTING ALASKA NATIVE
SETTLEMENT TRUSTS.
‘‘(a) IN GENERAL.—If an election under this section
is in effect with respect to any Settlement Trust, the provi-
sions of this section shall apply in determining the income
tax treatment of the Settlement Trust and its beneficiaries
with respect to the Settlement Trust.
‘‘(b) TAXATION OF INCOME OF TRUST.—Except as pro-
vided in subsection (f)(1)(B)(ii)—
‘‘(1) IN GENERAL.—There is hereby imposed on
the taxable income of an electing Settlement Trust,
other than its net capital gain, a tax at the lowest
rate specified in section 1(c).
‘‘(2) CAPITAL GAIN.—In the case of an electing
Settlement Trust with a net capital gain for the tax-
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able year, a tax is hereby imposed on such gain at
the rate of tax which would apply to such gain if the
taxpayer were subject to a tax on its other taxable in-
come at only the lowest rate specified in section 1(c).
Any such tax shall be in lieu of the income tax otherwise
imposed by this chapter on such income or gain.
‘‘(c) ONE-TIME ELECTION.—
‘‘(1) IN
GENERAL.—A Settlement Trust may
elect to have the provisions of this section apply to the
trust and its beneficiaries.
‘‘(2) TIME AND METHOD OF ELECTION.—An elec-
tion under paragraph (1) shall be made by the trustee
of such trust—
‘‘(A) on or before the due date (including
extensions) for filing the Settlement Trust’s re-
turn of tax for the first taxable year of such trust
ending after the date of the enactment of this sec-
tion, and
‘‘(B) by attaching to such return of tax a
statement specifically providing for such election.
‘‘(3) PERIOD ELECTION IN EFFECT.—Except as
provided in subsection (f), an election under this
subsection—
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‘‘(A) shall apply to the first taxable year de-
scribed in paragraph (2)(A) and all subsequent
taxable years, and
‘‘(B) may not be revoked once it is made.
‘‘(d) CONTRIBUTIONS TO TRUST.—
‘‘(1) BENEFICIARIES OF ELECTING TRUST NOT
TAXED ON CONTRIBUTIONS.—In the case of an elect-
ing Settlement Trust, no amount shall be includible
in the gross income of a beneficiary of such trust by
reason of a contribution to such trust.
‘‘(2) EARNINGS
AND
PROFITS.—The earnings
and profits of the sponsoring Native Corporation shall
not be reduced on account of any contribution to such
Settlement Trust:
‘‘(e) TAX TREATMENT OF DISTRIBUTIONS TO BENE-
FICIARIES.—Amounts distributed by an electing Settlement
Trust during any taxable year shall be considered as having
the following characteristics in the hands of the recipient
beneficiary:
‘‘(1) First, as amounts excludable from gross in-
come for the taxable year to the extent of the taxable
income of such trust for such taxable year (decreased
by any income tax paid by the trust with respect to
the income) plus any amount excluded from gross in-
come of the trust under section 103.
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‘‘(2) Second, as amounts excludable from gross
income to the extent of the amount described in para-
graph (1) for all taxable years for which an election
is in effect under subsection (c) with respect to the
trust, and not previously taken into account under
paragraph (1).
‘‘(3) Third, as amounts distributed by the spon-
soring Native Corporation with respect to its stock
(within the meaning of section 301(a)) during such
taxable year and taxable to the recipient beneficiary
as amounts described in section 301(c)(1), to the ex-
tent of current or accumulated earnings and profits
of the sponsoring Native Corporation as of the close
of such taxable year after proper adjustment is made
for all distributions made by the sponsoring Native
Corporation during such taxable year.
‘‘(4) Fourth, as amounts distributed by the trust
in excess of the distributable net income of such trust
for such taxable year.
Amounts distributed to which paragraph (3) applies shall
not be treated as a corporate distribution subject to section
311(b), and for purposes of determining the amount of a
distribution for purposes of paragraph (3) and the basis
to the recipients, section 643(e) and not section 301(b) or
(d) shall apply.
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‘‘(f) SPECIAL RULES WHERE TRANSFER RESTRIC-
TIONS MODIFIED.—
‘‘(1) TRANSFER OF BENEFICIAL INTERESTS.—If,
at any time, a beneficial interest in an electing Set-
tlement Trust may be disposed of to a person in a
manner which would not be permitted by section 7(h)
of the Alaska Native Claims Settlement Act (43
U.S.C. 1606(h)) if such interest were Settlement Com-
mon Stock—
‘‘(A) no election may be made under sub-
section (c) with respect to such trust, and
‘‘(B) if such an election is in effect as of
such time—
‘‘(i) such election shall cease to apply
as of the first day of the taxable year in
which such disposition is first permitted,
‘‘(ii) the provisions of this section shall
not apply to such trust for such taxable
year and all taxable years thereafter, and
‘‘(iii) the distributable net income of
such trust shall be increased by the current
or accumulated earnings and profits of the
sponsoring Native Corporation as of the
close of such taxable year after proper ad-
justment is made for all distributions made
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by the sponsoring Native Corporation dur-
ing such taxable year.
In no event shall the increase under clause (iii) exceed
the fair market value of the trust’s assets as of the
date the beneficial interest of the trust first becomes
so disposable. The earnings and profits of the spon-
soring Native Corporation shall be adjusted as of the
last day of such taxable year by the amount of earn-
ings and profits so included in the distributable net
income of the trust.
‘‘(2) STOCK IN CORPORATION.—If—
‘‘(A) stock in the sponsoring Native Cor-
poration may be disposed of to a person in a
manner which would not be permitted by section
7(h) of the Alaska Native Claims Settlement Act
(43 U.S.C. 1606(h)) if such stock were Settlement
Common Stock, and
‘‘(B) at any time after such disposition of
stock is first permitted, such corporation trans-
fers assets to a Settlement Trust,
paragraph (1)(B) shall be applied to such trust on
and after the date of the transfer in the same manner
as if the trust permitted dispositions of beneficial in-
terests in the trust in a manner not permitted by
such section 7(h).
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‘‘(3) CERTAIN DISTRIBUTIONS.—For purposes of
this section, the surrender of an interest in a Native
Corporation or an electing Settlement Trust in order
to accomplish the whole or partial redemption of the
interest of a shareholder or beneficiary in such cor-
poration or trust, or to accomplish the whole or par-
tial liquidation of such corporation or trust, shall be
deemed to be a transfer permitted by section 7(h) of
the Alaska Native Claims Settlement Act.
‘‘(g) TAXABLE INCOME.—For purposes of this title, the
taxable income of an electing Settlement Trust shall be de-
termined under section 641(b) without regard to any deduc-
tion under section 651 or 661.
‘‘(h) DEFINITIONS.—For purposes of this section—
‘‘(1) ELECTING SETTLEMENT TRUST.—The term
‘electing Settlement Trust’ means a Settlement Trust
which has made the election, effective for a taxable
year, described in subsection (c).
‘‘(2) NATIVE CORPORATION.—The term ‘Native
Corporation’ has the meaning given such term by sec-
tion 3(m) of the Alaska Native Claims Settlement Act
(43 U.S.C. 1602(m)).
‘‘(3) SETTLEMENT COMMON STOCK.—The term
‘Settlement Common Stock’ has the meaning given
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such term by section 3(p) of the Alaska Native Claims
Settlement Act (43 U.S.C. 1602(p)).
‘‘(4) SETTLEMENT TRUST.—The term ‘Settlement
Trust’ means a trust that constitutes a settlement
trust under section 3(t) of the Alaska Native Claims
Settlement Act (43 U.S.C. 1602(t)).
‘‘(5) SPONSORING
NATIVE
CORPORATION.—The
term ‘sponsoring Native Corporation’ means the Na-
tive Corporation which transfers assets to an electing
Settlement Trust.
‘‘(i) SPECIAL LOSS DISALLOWANCE RULE.—Any loss
that would otherwise be recognized by a shareholder upon
a disposition of a share of stock of a sponsoring Native Cor-
poration shall be reduced (but not below zero) by the per
share loss adjustment factor. The per share loss adjustment
factor shall be the aggregate of all contributions to all elect-
ing Settlement Trusts sponsored by such Native Corpora-
tion made on or after the first day each trust is treated
as an electing Settlement Trust expressed on a per share
basis and determined as of the day of each such contribu-
tion.
‘‘(j) CROSS REFERENCE.—
‘‘For information required with respect to electing
Settlement Trusts and sponsoring Native Corpora-
tions, see section 6039H.’’.
(b) REPORTING.—Subpart A of part III of subchapter
A of chapter 61 of subtitle F (relating to information con-
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cerning persons subject to special provisions) is amended
by inserting after section 6039G the following new section:
‘‘SEC. 6039H. INFORMATION WITH RESPECT TO ALASKA NA-
TIVE SETTLEMENT TRUSTS AND SPONSORING
NATIVE CORPORATIONS.
‘‘(a) REQUIREMENT.—The fiduciary of an electing
Settlement Trust (as defined in section 646(h)(1)) shall in-
clude with the return of income of the trust a statement
containing the information required under subsection (c).
‘‘(b) APPLICATION WITH OTHER REQUIREMENTS.—
The filing of any statement under this section shall be in
lieu of the reporting requirements under section 6034A to
furnish any statement to a beneficiary regarding amounts
distributed to such beneficiary (and such other reporting
rules as the Secretary deems appropriate).
‘‘(c) REQUIRED INFORMATION.—The information re-
quired under this subsection shall include—
‘‘(1) the amount of distributions made during
the taxable year to each beneficiary,
‘‘(2) the treatment of such distribution under the
applicable provision of section 646, including the
amount that is excludable from the recipient bene-
ficiary’s gross income under section 646, and
‘‘(3) the amount (if any) of any distribution
during such year that is deemed to have been made
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by the sponsoring Native Corporation (as defined in
section 646(h)(5)).
‘‘(d) SPONSORING NATIVE CORPORATION.—
‘‘(1) IN
GENERAL.—The electing Settlement
Trust shall, on or before the date on which the state-
ment under subsection (a) is required to be filed, fur-
nish such statement to the sponsoring Native Corpora-
tion (as so defined).
‘‘(2) DISTRIBUTEES.—The sponsoring Native
Corporation shall furnish each recipient of a distribu-
tion described in section 646(e)(3) a statement con-
taining the amount deemed to have been distributed
to such recipient by such corporation for the taxable
year.’’.
(c) CLERICAL AMENDMENT.—
(1) The table of sections for subpart A of part I
of subchapter J of chapter 1 of such Code is amended
by adding at the end the following new item:
‘‘Sec. 646. Tax treatment of electing Alaska Native Settlement
Trusts.’’.
(2) The table of sections for subpart A of part III
of subchapter A of chapter 61 of subtitle F of such
Code is amended by inserting after the item relating
to section 6039G the following new item:
‘‘Sec. 6039H. Information with respect to Alaska Native Settlement
Trusts and sponsoring Native Corporations.’’.
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(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years ending after the date
of the enactment of this Act and to contributions made to
electing Settlement Trusts for such year or any subsequent
year.
Subtitle I—Compliance With
Congressional Budget Act
SEC. 695. SUNSET OF PROVISIONS OF TITLE.
All provisions of, and amendments made by, this title
which are in effect on September 30, 2011, shall cease to
apply as of the close of September 30, 2011.
TITLE VII—ALTERNATIVE
MINIMUM TAX
Subtitle A—In General
SEC. 701. INCREASE IN ALTERNATIVE MINIMUM TAX EX-
EMPTION.
(a) IN GENERAL.—
(1) Subparagraph (A) of section 55(d)(1) (relat-
ing to exemption amount for taxpayers other than
corporations) is amended by striking ‘‘$45,000’’ and
inserting ‘‘$45,000 ($49,000 in the case of taxable
years beginning in 2001, 2002, 2003, 2004, 2005, and
2006)’’.
(2) Subparagraph (B) of section 55(d)(1) (relat-
ing to exemption amount for taxpayers other than
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corporations) is amended by striking ‘‘$33,750’’ and
inserting ‘‘$33,750 ($35,750 in the case of taxable
years beginning in 2001, 2002, 2003, 2004, 2005, and
2006)’’.
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 55(d) is amended
by striking ‘‘and’’ at the end of subparagraph (B), by
striking subparagraph (C), and by inserting after
subparagraph (B) the following new subparagraphs:
‘‘(C) 50 percent of the dollar amount appli-
cable under paragraph (1)(A) in the case of a
married individual who files a separate return,
and
‘‘(D) $22,500 in the case of an estate or
trust.’’.
(2) Subparagraph (C) of section 55(d)(3) is
amended by striking ‘‘paragraph (1)(C)’’ and insert-
ing ‘‘subparagraph (C) or (D) of paragraph (1)’’.
(3) The last sentence of section 55(d)(3) is
amended—
(A) by striking ‘‘paragraph (1)(C)(i)’’ and
inserting ‘‘paragraph (1)(C)’’; and
(B) by striking ‘‘$165,000 or (ii) $22,500’’
and inserting ‘‘the minimum amount of such in-
come (as so determined) for which the exemption
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amount under paragraph (1)(C) is zero, or (ii)
such exemption amount (determined without re-
gard to this paragraph)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section title shall apply to taxable years beginning after De-
cember 31, 2000.
Subtitle B—Compliance With
Congressional Budget Act
SEC. 711. SUNSET OF PROVISIONS OF TITLE.
All provisions of, and amendments made by, this title
which are in effect on September 30, 2011, shall cease to
apply as of the close of September 30, 2011.
TITLE VIII—OTHER PROVISIONS
Subtitle A—In General
SEC. 801. TIME FOR PAYMENT OF CORPORATE ESTIMATED
TAXES.
Notwithstanding section 6655 of the Internal Revenue
Code of 1986—
(1) 70 percent of the amount of any required in-
stallment of corporate estimated tax which is other-
wise due in September 2001 shall not be due until Oc-
tober 1, 2001; and
(2) 20 percent of the amount of any required in-
stallment of corporate estimated tax which is other-
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wise due in September 2004 shall not be due until Oc-
tober 1, 2004.
SEC. 802. EXPANSION OF AUTHORITY TO POSTPONE CER-
TAIN TAX-RELATED DEADLINES BY REASON
OF PRESIDENTIALLY DECLARED DISASTER.
(a) IN GENERAL.—Section 7508A (relating to author-
ity to postpone certain tax-related deadlines by reason of
presidentially declared disaster) is amended by adding at
the end the following new subsection:
‘‘(c) DUTIES OF DISASTER RESPONSE TEAM.—The
Secretary shall establish as a permanent office in the na-
tional office of the Internal Revenue Service a disaster re-
sponse team which, in coordination with the Federal Emer-
gency Management Agency, shall assist taxpayers in clari-
fying and resolving Federal tax matters associated with or
resulting from any Presidentially declared disaster (as so
defined). One of the duties of the disaster response team
shall be to extend in appropriate cases the 90-day period
described in subsection (a) by not more than 30 days.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of enactment of this Act.
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SEC. 803. NO FEDERAL INCOME TAX ON RESTITUTION RE-
CEIVED BY VICTIMS OF THE NAZI REGIME OR
THEIR HEIRS OR ESTATES.
(a) IN GENERAL.—For purposes of the Internal Rev-
enue Code of 1986, any excludable restitution payments re-
ceived by an eligible individual (or the individual’s heirs
or estate)—
(1) shall not be included in gross income; and
(2) shall not be taken into account for purposes
of applying any provision of such Code which takes
into account excludable income in computing adjusted
gross income, including section 86 of such Code (relat-
ing to taxation of social security benefits).
For purposes of such Code, the basis of any property re-
ceived by an eligible individual (or the individual’s heirs
or estate) as part of an excludable restitution payment shall
be the fair market value of such property as of the time
of the receipt.
(b) COORDINATION WITH FEDERAL MEANS-TESTED
PROGRAMS.—
(1) IN
GENERAL.—Any excludable restitution
payment shall be disregarded in determining eligi-
bility for, and the amount of benefits or services to be
provided under, any Federal or federally assisted pro-
gram which provides benefits or service based, in
whole or in part, on need.
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(2) PROHIBITION AGAINST RECOVERY OF VALUE
OF EXCESSIVE BENEFITS OR SERVICES.—No officer,
agency, or instrumentality of any government may
attempt to recover the value of excessive benefits or
services provided under a program described in sub-
section (a) before January 1, 2000, by reason of any
failure to take account of excludable restitution pay-
ments received before such date.
(3) NOTICE REQUIRED.—Any agency of govern-
ment that has taken into account excludable restitu-
tion payments in determining eligibility for a pro-
gram described in subsection (a) before January 1,
2000, shall make a good faith effort to notify any in-
dividual who may have been denied eligibility for
benefits or services under the program of the potential
eligibility of the individual for such benefits or serv-
ices.
(4) COORDINATION WITH 1994 ACT.—Nothing in
this Act shall be construed to override any right or re-
quirement under ‘‘An Act to require certain payments
made to victims of Nazi persecution to be disregarded
in determining eligibility for and the amount of bene-
fits or services based on need’’, approved August 1,
1994 (Public Law 103–286; 42 U.S.C. 1437a note),
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and nothing in that Act shall be construed to override
any right or requirement under this Act.
(c) ELIGIBLE INDIVIDUAL.—For purposes of this sec-
tion, the term ‘‘eligible individual’’ means a person who
was persecuted for racial or religious reasons by Nazi Ger-
many, any other Axis regime, or any other Nazi-controlled
or Nazi-allied country.
(d) EXCLUDABLE RESTITUTION PAYMENT.—For pur-
poses of this section, the term ‘‘excludable restitution pay-
ment’’ means any payment or distribution to an individual
(or the individual’s heirs or estate) which—
(1) is payable by reason of the individual’s sta-
tus as an eligible individual, including any amount
payable by any foreign country, the United States of
America, or any other foreign or domestic entity, or
a fund established by any such country or entity, any
amount payable as a result of a final resolution of a
legal action, and any amount payable under a law
providing for payments or restitution of property;
(2) constitutes the direct or indirect return of, or
compensation or reparation for, assets stolen or hid-
den from, or otherwise lost to, the individual before,
during, or immediately after World War II by reason
of the individual’s status as an eligible individual,
including any proceeds of insurance under policies
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issued on eligible individuals by European insurance
companies immediately before and during World War
II; or
(3) consists of interest which is payable as part
of any payment or distribution described in para-
graph (1) or (2).
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—This section shall apply to
any amount received on or after January 1, 2000.
(2) NO INFERENCE.—Nothing in this Act shall
be construed to create any inference with respect to
the proper tax treatment of any amount received be-
fore January 1, 2000.
SEC. 804. REMOVAL OF LIMITATION.
(a) IN GENERAL.—Section 101(h) of the Internal Rev-
enue Code of 1986 (relating to exclusion of survivor benefits
from gross income) is amended by adding after paragraph
(2) the following new paragraph:
‘‘(3) APPLICATION.—This subsection shall apply
to amounts received after December 31, 2000.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall take effect on the date of the enactment of this
Act.
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SEC. 805. CIRCUIT BREAKER.
(a) IN GENERAL.—In any fiscal year beginning with
fiscal year 2004, if the level of debt held by the public at
the end of that fiscal year (as projected by the Office of
Management and Budget sequestration update report on
August 20th preceding the beginning of that fiscal year)
would exceed the level of debt held by the public for that
fiscal year set forth in the concurrent resolution on the
budget for fiscal year 2002 (H. Con. Res. 83, 107th Con-
gress), any Member of Congress may move to proceed to a
bill that would make changes in law to reduce discretionary
spending and direct spending (except for changes in social
security, medicare and COLA’s) and increase revenues in
a manner that would reduce the debt held by the public
for the fiscal year to a level not exceeding the level provided
in that concurrent resolution for that fiscal year.
(b) CONSIDERATION OF LEGISLATION.—A bill consid-
ered under subsection (a) shall be considered as provided
in section 310(e) of the Congressional Budget Act of 1974
(2 U.S.C. 641(e)).
(c) PROCEDURE.—It shall not be in order in the Sen-
ate to consider any bill, joint resolution, motion, amend-
ment, or conference report, pursuant to this section, that
contains any provisions other than those enumerated in sec-
tions 310(a)(1) and 310(a)(2) of the Congressional Budget
Act of 1974. This point of order may be waived or sus-
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pended in the Senate only by the affirmative vote of three-
fifths of the Members duly chosen and sworn. An affirmative
vote of three-fifths of the Members duly chosen and sworn,
shall be required in the Senate to sustain an appeal of the
ruling of the Chair on a point of order raised under this
paragraph.
SEC. 806. DEDUCTION FOR HEALTH INSURANCE COSTS OF
SELF-EMPLOYED INDIVIDUALS INCREASED.
(a) IN GENERAL.—Section 162(l)(1) (relating to spe-
cial rules for health insurance costs of self-employed indi-
viduals) is amended to read as follows:
‘‘(1) ALLOWANCE OF DEDUCTION.—In the case of
an individual who is an employee within the mean-
ing of section 401(c)(1), there shall be allowed as a
deduction under this section an amount equal to the
amount paid during the taxable year for insurance
which constitutes medical care for the taxpayer, the
taxpayer’s spouse, and dependents.’’.
(b) CLARIFICATION OF LIMITATIONS ON OTHER COV-
ERAGE.—The first sentence of section 162(l)(2)(B) (relating
to other coverage) is amended to read as follows: ‘‘Para-
graph (1) shall not apply to any taxpayer for any calendar
month for which the taxpayer participates in any sub-
sidized health plan maintained by any employer (other
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than an employer described in section 401(c)(4)) of the tax-
payer or the spouse of the taxpayer.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 807. DEDUCTION FOR HEALTH INSURANCE COSTS OF
SELF-EMPLOYED INDIVIDUALS INCREASED.
(a) IN GENERAL.—Section 162(l)(1) (relating to spe-
cial rules for health insurance costs of self-employed indi-
viduals) is amended to read as follows:
‘‘(1) ALLOWANCE OF DEDUCTION.—In the case of
an individual who is an employee within the mean-
ing of section 401(c)(1), there shall be allowed as a
deduction under this section an amount equal to the
amount paid during the taxable year for insurance
which constitutes medical care for the taxpayer, the
taxpayer’s spouse, and dependents.’’.
(b) CLARIFICATION OF LIMITATIONS ON OTHER COV-
ERAGE.—The first sentence of section 162(l)(2)(B) (relating
to other coverage) is amended to read as follows: ‘‘Para-
graph (1) shall not apply to any taxpayer for any calendar
month for which the taxpayer participates in any sub-
sidized health plan maintained by any employer (other
than an employer described in section 401(c)(4)) of the tax-
payer or the spouse of the taxpayer.’’.
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(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2001.
SEC. 808. CHARITABLE CONTRIBUTIONS OF CERTAIN ITEMS
CREATED BY THE TAXPAYER.
(a) IN GENERAL.—Subsection (e) of section 170 (relat-
ing to certain contributions of ordinary income and capital
gain property) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(7) SPECIAL
RULE
FOR
CERTAIN
CONTRIBU-
TIONS OF LITERARY, MUSICAL, OR ARTISTIC COMPOSI-
TIONS.—
‘‘(A) IN GENERAL.—In the case of a quali-
fied artistic charitable contribution—
‘‘(i) the amount of such contribution
shall be the fair market value of the prop-
erty contributed (determined at the time of
such contribution), and
‘‘(ii) no reduction in the amount of
such contribution shall be made under
paragraph (1).
‘‘(B) QUALIFIED
ARTISTIC
CHARITABLE
CONTRIBUTION.—For purposes of this para-
graph, the term ‘qualified artistic charitable con-
tribution’ means a charitable contribution of any
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literary, musical, artistic, or scholarly composi-
tion, or similar property, or the copyright there-
on (or both), but only if—
‘‘(i) such property was created by the
personal efforts of the taxpayer making such
contribution no less than 18 months prior
to such contribution,
‘‘(ii) the taxpayer—
‘‘(I) has received a qualified ap-
praisal of the fair market value of such
property in accordance with the regu-
lations under this section, and
‘‘(II) attaches to the taxpayer’s
income tax return for the taxable year
in which such contribution was made a
copy of such appraisal,
‘‘(iii) the donee is an organization de-
scribed in subsection (b)(1)(A),
‘‘(iv) the use of such property by the
donee is related to the purpose or function
constituting the basis for the donee’s exemp-
tion under section 501 (or, in the case of a
governmental unit, to any purpose or func-
tion described under subsection (c)),
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‘‘(v) the taxpayer receives from the
donee a written statement representing that
the donee’s use of the property will be in ac-
cordance with the provisions of clause (iv),
and
‘‘(vi) the written appraisal referred to
in clause (ii) includes evidence of the extent
(if any) to which property created by the
personal efforts of the taxpayer and of the
same type as the donated property is or has
been—
‘‘(I) owned, maintained, and dis-
played by organizations described in
subsection (b)(1)(A), and
‘‘(II) sold to or exchanged by per-
sons other than the taxpayer, donee, or
any related person (as defined in sec-
tion 465(b)(3)(C)).
‘‘(C) MAXIMUM
DOLLAR
LIMITATION; NO
CARRYOVER
OF
INCREASED
DEDUCTION.—The
increase in the deduction under this section by
reason of this paragraph for any taxable year—
‘‘(i) shall not exceed the artistic ad-
justed gross income of the taxpayer for such
taxable year, and
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‘‘(ii) shall not be taken into account in
determining the amount which may be car-
ried from such taxable year under sub-
section (d).
‘‘(D) ARTISTIC ADJUSTED GROSS INCOME.—
For purposes of this paragraph, the term ‘artis-
tic adjusted gross income’ means that portion of
the adjusted gross income of the taxpayer for the
taxable year attributable to—
‘‘(i) income from the sale or use of
property created by the personal efforts of
the taxpayer which is of the same type as
the donated property, and
‘‘(ii) income from teaching, lecturing,
performing, or similar activity with respect
to property described in clause (i).
‘‘(E) PARAGRAPH NOT TO APPLY TO CER-
TAIN CONTRIBUTIONS.—Subparagraph (A) shall
not apply to any charitable contribution of any
letter, memorandum, or similar property which
was written, prepared, or produced by or for an
individual while the individual is an officer or
employee of any person (including any govern-
ment agency or instrumentality) unless such let-
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ter, memorandum, or similar property is en-
tirely personal.
‘‘(F) COPYRIGHT
TREATED
AS
SEPARATE
PROPERTY
FOR
PARTIAL
INTEREST
RULE.—In
the case of a qualified artistic charitable con-
tribution, the tangible literary, musical, artistic,
or scholarly composition, or similar property
and the copyright on such work shall be treated
as separate properties for purposes of this para-
graph and subsection (f)(3).’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to contributions made after the date of
the enactment of this Act in taxable years ending after such
date.
SEC. 809. WAIVER OF STATUTE OF LIMITATION FOR TAXES
ON CERTAIN FARM VALUATIONS.
If on the date of the enactment of this Act (or at any
time within 1 year after the date of the enactment) a refund
or credit of any overpayment of tax resulting from the ap-
plication of section 2032A(c)(7)(E) of the Internal Revenue
Code of 1986 is barred by any law or rule of law, the refund
or credit of such overpayment shall, nevertheless, be made
or allowed if claim therefor is filed before the date 1 year
after the date of the enactment of this Act.
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(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to any tax assessed or penalty im-
posed after June 30, 2000.
Attest:
Secretary.