I
104TH CONGRESS
1ST SESSION
H. R. 2037
To amend the Internal Revenue Code of 1986 to simplify the pension laws,
and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JULY 13, 1995
Mr. PORTMAN (for himself and Mr. CARDIN) introduced the following bill;
which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to simplify
the pension laws, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;
TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Pension Simplification Act of 1995’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I—SIMPLIFICATION OF NONDISCRIMINATION PROVISIONS
Sec. 101. Definition of highly compensated employees; repeal of family aggrega-
tion.
Sec. 102. Definition of compensation for section 415 purposes.
Sec. 103. Modification of additional participation requirements.
Sec. 104. Nondiscrimination rules for qualified cash or deferred arrangements
and matching contributions.
TITLE II—SIMPLIFIED DISTRIBUTION RULES
Sec. 201. Repeal of 5-year income averaging for lump-sum distributions.
Sec. 202. Repeal of $5,000 exclusion of employees’ death benefits.
Sec. 203. Simplified method for taxing annuity distributions under certain em-
ployer plans.
Sec. 204. Required distributions.
TITLE III—TARGETED ACCESS TO PENSION PLANS FOR SMALL
EMPLOYERS
Sec. 301. Credit for pension plan start-up costs of small employers.
Sec. 302. Modifications of simplified employee pensions.
Sec. 303. Exemption from top-heavy plan requirements.
Sec. 304. Tax-exempt organizations eligible under section 401(k).
Sec. 305. Regulatory treatment of small employers.
TITLE IV—PAPERWORK REDUCTION
Sec. 401. Repeal of combined section 415 limit.
Sec. 402. Duties of sponsors of certain prototype plans.
TITLE V—MISCELLANEOUS SIMPLIFICATION
Sec. 501. Treatment of leased employees.
Sec. 502. Plans covering self-employed individuals.
Sec. 503. Elimination of special vesting rule for multiemployer plans.
Sec. 504. Full-funding limitation of multiemployer plans.
Sec. 505. Alternative full-funding limitation.
Sec. 506. Affiliated employers.
Sec. 507. Treatment of governmental plans under section 415.
Sec. 508. Treatment of deferred compensation plans of State and local govern-
ments and tax-exempt organizations.
Sec. 509. Contributions on behalf of disabled employees.
Sec. 510. Distributions under rural cooperative plans.
Sec. 511. Special rules for plans covering pilots.
Sec. 512. Tenured faculty.
Sec. 513. Uniform retirement age.
Sec. 514. Uniform penalty provisions to apply to certain pension reporting re-
quirements.
Sec. 515. National Commission on Private Pension Plans.
Sec. 516. Date for adoption of plan amendments.
TITLE 
I—SIMPLIFICATION 
OF
NONDISCRIMINATION PROVI-
SIONS
SEC. 101. DEFINITION OF HIGHLY COMPENSATED EMPLOY-
EES; REPEAL OF FAMILY AGGREGATION.
(a) IN GENERAL.—Paragraph (1) of section 414(q)
(defining highly compensated employee) is amended to
read as follows:
‘‘(1) IN
GENERAL.—The term ‘highly com-
pensated employee’ means any employee who—
‘‘(A) was a 5-percent owner at any time
during the year or the preceding year,
‘‘(B) had compensation for the preceding
year from the employer in excess of $80,000, or
‘‘(C) was the most highly compensated of-
ficer of the employer for the preceding year.
The Secretary shall adjust the $80,000 amount
under subparagraph (B) at the same time and in the
same manner as under section 415(d), except that
the base period shall be the calendar quarter begin-
ning October 1, 1995.’’
(b) SPECIAL RULE WHERE NO EMPLOYEE HAS
COMPENSATION OVER SPECIFIED AMOUNT.—Paragraph
(2) of section 414(q) is amended to read as follows:
‘‘(2) SPECIAL RULE IF NO EMPLOYEE HAS COM-
PENSATION OVER SPECIFIED AMOUNT.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), if a defined benefit plan or
a defined contribution plan meets the require-
ments of sections 401(a)(4) and 410(b) with re-
spect to the availability of contributions, bene-
fits, and other plan features, then for all other
purposes, subparagraphs (A) and (C) of para-
graph (1) shall not apply to such plan.
‘‘(B) 
EXCEPTION.—Subparagraph 
(A)
shall not apply to a plan to the extent provided
in regulations that are prescribed by the Sec-
retary to prevent the evasion of the purposes of
this paragraph.’’
(c) REPEAL OF FAMILY AGGREGATION RULES.—
(1) IN
GENERAL.—Paragraph (6) of section
414(q) is hereby repealed.
(2) COMPENSATION LIMIT.—Paragraph (17)(A)
of section 401(a) is amended by striking the last
sentence.
(3) DEDUCTION.—Subsection (l) of section 404
is amended by striking the last sentence.
(d) CONFORMING AMENDMENTS.—
(1) Paragraphs (4), (5), (8), and (12) of section
414(q) are hereby repealed.
(2)(A) Section 414(r) is amended by adding at
the end the following new paragraph:
‘‘(9) EXCLUDED EMPLOYEES.—For purposes of
this subsection, the following employees shall be ex-
cluded:
‘‘(A) Employees who have not completed 6
months of service.
‘‘(B) Employees who normally work less
than 171⁄2 hours per week.
‘‘(C) Employees who normally work not
more than 6 months during any year.
‘‘(D) Employees who have not attained the
age of 21.
‘‘(E) Except to the extent provided in reg-
ulations, employees who are included in a unit
of employees covered by an agreement which
the Secretary of Labor finds to be a collective
bargaining agreement between employee rep-
resentatives and the employer.
Except as provided by the Secretary, the employer
may elect to apply subparagraph (A), (B), (C), or
(D) by substituting a shorter period of service,
smaller number of hours or months, or lower age for
the period of service, number of hours or months, or
age (as the case may be) specified in such subpara-
graph.’’
(B) Subparagraph (A) of section 414(r)(2) is
amended by striking ‘‘subsection (q)(8)’’ and insert-
ing ‘‘paragraph (9)’’.
(3) Section 1114(c)(4) of the Tax Reform Act
of 1986 is amended by adding at the end the follow-
ing new sentence: ‘‘Any reference in this paragraph
to section 414(q) shall be treated as a reference to
such section as in effect before the Pension Sim-
plification Act of 1995.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after Decem-
ber 31, 1995, except that in determining whether an em-
ployee is a highly compensated employee for years begin-
ning in 1996, such amendments shall be treated as having
been in effect for years beginning in 1995.
SEC. 102. DEFINITION OF COMPENSATION FOR SECTION 415
PURPOSES.
(a) GENERAL RULE.—Section 415(c)(3) (defining
participant’s compensation) is amended by adding at the
end the following new subparagraph:
‘‘(D) CERTAIN
DEFERRALS
INCLUDED.—
The term ‘participant’s compensation’ shall in-
clude—
‘‘(i) any elective deferral (as defined
in section 402(g)(3)), and
‘‘(ii) any amount which is contributed
by the employer of the election of the em-
ployee and which is not includible in the
gross income of the employee under section
125 or 457.’’
(b) CONFORMING AMENDMENTS.—
(1) Section 414(q)(7) is amended to read as fol-
lows:
‘‘(7) COMPENSATION.—For purposes of this
subsection, the term ‘compensation’ has the meaning
given such term by section 415(c)(3).’’
(2) Section 414(s)(2) is amended by inserting
‘‘not’’ after ‘‘elect’’ in the text and heading thereof.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
SEC. 103. MODIFICATION OF ADDITIONAL PARTICIPATION
REQUIREMENTS.
(a) GENERAL RULE.—Section 401(a)(26)(A) (relat-
ing to additional participation requirements) is amended
to read as follows:
‘‘(A) IN
GENERAL.—In the case of a trust
which is a part of a defined benefit plan, such trust
shall not constitute a qualified trust under this sub-
section unless on each day of the plan year such
trust benefits at least the lesser of—
‘‘(i) 50 employees of the employer, or
‘‘(ii) the greater of—
‘‘(I) 40 percent of all employees of the
employer, or
‘‘(II) 2 employees (or if there is only
1 employee, such employee).’’
(b) SEPARATE LINE OF BUSINESS TEST.—Section
401(a)(26)(G) (relating to separate line of business) is
amended by striking ‘‘paragraph (7)’’ and inserting ‘‘para-
graph (2)(A) or (7)’’.
(c) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after Decem-
ber 31, 1995.
SEC. 104. NONDISCRIMINATION RULES FOR QUALIFIED
CASH OR DEFERRED ARRANGEMENTS AND
MATCHING CONTRIBUTIONS.
(a) ALTERNATIVE METHODS OF SATISFYING SEC-
TION
401(k) 
NONDISCRIMINATION
TESTS.—Section
401(k) (relating to cash or deferred arrangements) is
amended by adding at the end the following new para-
graph:
‘‘(11) ALTERNATIVE
METHODS
OF
MEETING
NONDISCRIMINATION REQUIREMENTS.—
‘‘(A) IN GENERAL.—A cash or deferred ar-
rangement shall be treated as meeting the re-
quirements of paragraph (3)(A)(ii) if such ar-
rangement—
‘‘(i) meets the contribution require-
ments of subparagraph (B) or (C), and
‘‘(ii) meets the notice requirements of
subparagraph (D).
‘‘(B) MATCHING CONTRIBUTIONS.—
‘‘(i) IN GENERAL.—The requirements
of this subparagraph are met if, under the
arrangement, the employer makes match-
ing contributions on behalf of each em-
ployee who is not a highly compensated
employee in an amount equal to—
‘‘(I) 100 percent of the elective
contributions of the employee to the
extent such elective contributions do
not exceed 3 percent of the employee’s
compensation, and
‘‘(II) 50 percent of the elective
contributions of the employee to the
extent that such elective contributions
exceed 3 percent but do not exceed 5
percent of the employee’s compensa-
tion.
‘‘(ii) 
RATE
FOR
HIGHLY
COM-
PENSATED
EMPLOYEES.—The 
require-
ments of this subparagraph are not met if,
under the arrangement, the matching con-
tribution with respect to any elective con-
tribution of a highly compensated employee
at any level of compensation is greater
than that with respect to an employee who
is not a highly compensated employee.
‘‘(iii) ALTERNATIVE PLAN DESIGNS.—
If the matching contribution with respect
to any elective contribution at any specific
level of compensation is not equal to the
percentage required under clause (i), an
arrangement shall not be treated as
failing 
to 
meet 
the requirements of
clause (i) if—
‘‘(I) the level of an employer’s
matching contribution does not in-
crease as an employee’s elective con-
tributions increase, and
‘‘(II) the aggregate amount of
matching contributions with respect to
elective contributions not in excess of
such level of compensation is at least
equal to the amount of matching con-
tributions which would be made if
matching contributions were made on
the basis of the percentages described
in clause (i).
‘‘(C) 
NONELECTIVE
CONTRIBUTIONS.—
The requirements of this subparagraph are met
if, under the arrangement, the employer is re-
quired, without regard to whether the employee
makes an elective contribution or employee con-
tribution, to make a contribution to a defined
contribution plan on behalf of each employee
who is not a highly compensated employee and
who is eligible to participate in the arrangement
in an amount equal to at least 3 percent of the
employee’s compensation.
‘‘(D) NOTICE
REQUIREMENT.—An ar-
rangement meets the requirements of this para-
graph if, under the arrangement, each employee
eligible to participate is, within a reasonable pe-
riod before any year, given written notice of the
employee’s rights and obligations under the ar-
rangement which—
‘‘(i) is sufficiently accurate and com-
prehensive to appraise the employee of
such rights and obligations, and
‘‘(ii) is written in a manner calculated
to be understood by the average employee
eligible to participate.
‘‘(E) OTHER REQUIREMENTS.—
‘‘(i) WITHDRAWAL AND VESTING RE-
STRICTIONS.—An arrangement shall not be
treated as meeting the requirements of
subparagraph (B) or (C) unless the re-
quirements of subparagraphs (B) and (C)
of paragraph (2) are met with respect to
all 
employer 
contributions 
(including
matching contributions).
‘‘(ii) SOCIAL SECURITY AND SIMILAR
CONTRIBUTIONS
NOT
TAKEN
INTO
AC-
COUNT.—An arrangement shall not be
treated as meeting the requirements of
subparagraph (B) or (C) unless such re-
quirements are met without regard to sub-
section (l), and, for purposes of subsection
(l), employer contributions under subpara-
graph (B) or (C) shall not be taken into
account.
‘‘(F) OTHER
PLANS.—An arrangement
shall be treated as meeting the requirements
under subparagraph (A)(i) if any other plan
maintained by the employer meets such require-
ments with respect to employees eligible under
the arrangement.’’
(b) ALTERNATIVE METHODS OF SATISFYING SEC-
TION
401(m) 
NONDISCRIMINATION
TESTS.—Section
401(m) (relating to nondiscrimination test for matching
contributions and employee contributions) is amended by
redesignating paragraph (10) as paragraph (11) and by
adding after paragraph (9) the following new paragraph:
‘‘(10) ALTERNATIVE METHOD OF SATISFYING
TESTS.—
‘‘(A) IN GENERAL.—A defined contribution
plan shall be treated as meeting the require-
ments of paragraph (2) with respect to match-
ing contributions if the plan—
‘‘(i) meets the contribution require-
ments of subparagraph (B) or (C) of sub-
section (k)(11),
‘‘(ii) meets the notice requirements of
subsection (k)(11)(D), and
‘‘(iii) meets the requirements of sub-
paragraph (B).
‘‘(B) LIMITATION
ON
MATCHING
CON-
TRIBUTIONS.—The requirements of this sub-
paragraph are met if—
‘‘(i) matching contributions on behalf
of any employee may not be made with
respect to an employee’s contributions or
elective deferrals in excess of 6 percent of
the employee’s compensation,
‘‘(ii) the level of an employer’s match-
ing contribution does not increase as an
employee’s contributions or elective defer-
rals increase, and
‘‘(iii) the matching contribution with
respect to any highly compensated em-
ployee at a specific level of compensation is
not greater than that with respect to an
employee who is not a highly compensated
employee.’’
(c) YEAR
FOR
COMPUTING
NONHIGHLY
COM-
PENSATED EMPLOYEE PERCENTAGE.—
(1) CASH
OR
DEFERRED
ARRANGEMENTS.—
Clause (ii) of section 401(k)(3)(A) is amended—
(A) by striking ‘‘such year’’ and inserting
‘‘the plan year’’, and
(B) by striking ‘‘for such plan year’’ and
inserting ‘‘the preceding plan year’’.
(2) MATCHING
AND
EMPLOYEE
CONTRIBU-
TIONS.—Section 401(m)(2)(A) is amended—
(A) by inserting ‘‘for such plan year’’ after
‘‘highly compensated employee’’, and
(B) by inserting ‘‘for the preceding plan
year’’ after ‘‘eligible employees’’ each place it
appears in clause (i) and clause (ii).
(d) SPECIAL RULE FOR DETERMINING AVERAGE DE-
FERRAL PERCENTAGE FOR FIRST PLAN YEAR, ETC.—
(1) Paragraph (3) of section 401(k) is amended
by adding at the end the following new subpara-
graph:
‘‘(E) For purposes of this paragraph, in
the case of the first plan year of any plan, the
amount taken into account as the actual defer-
ral percentage of nonhighly compensated em-
ployees for the preceding plan year shall be—
‘‘(i) 3 percent, or
‘‘(ii) if the employer makes an election
under this subclause, the actual deferral
percentage of nonhighly compensated em-
ployees determined for such first plan
year.’’
(2) Paragraph (3) of section 401(m) is amend-
ed by adding at the end thereof the following:
‘‘Rules similar to the rules of subsection (k)(3)(E)
shall apply for purposes of this subsection.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
TITLE II—SIMPLIFIED
DISTRIBUTION RULES
SEC. 201. REPEAL OF 5-YEAR INCOME AVERAGING FOR
LUMP-SUM DISTRIBUTIONS.
(a) IN GENERAL.—Subsection (d) of section 402 (re-
lating to taxability of beneficiary of employees’ trust) is
amended to read as follows:
‘‘(d) TAXABILITY
OF BENEFICIARY
OF CERTAIN
FOREIGN SITUS TRUSTS.—For purposes of subsections
(a), (b), and (c), a stock bonus, pension, or profit-sharing
trust which would qualify for exemption from tax under
section 501(a) except for the fact that it is a trust created
or organized outside the United States shall be treated
as if it were a trust exempt from tax under section
501(a).’’
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (D) of section 402(e)(4) (re-
lating to other rules applicable to exempt trusts) is
amended to read as follows:
‘‘(D) LUMP-SUM DISTRIBUTION.—For pur-
poses of this paragraph—
‘‘(i) IN
GENERAL.—The term ‘lump
sum distribution’ means the distribution or
payment within one taxable year of the re-
cipient of the balance to the credit of an
employee which becomes payable to the re-
cipient—
‘‘(I) on account of the employee’s
death,
‘‘(II) after the employee attains
age 591⁄2,
‘‘(III) on account of the employ-
ee’s separation from service, or
‘‘(IV) after the employee has be-
come disabled (within the meaning of
section 72(m)(7)),
from a trust which forms a part of a plan
described in section 401(a) and which is
exempt from tax under section 501 or from
a 
plan 
described 
in 
section 
403(a).
Subclause (III) of this clause shall be ap-
plied only with respect to an individual
who is an employee without regard to sec-
tion 401(c)(1), and subclause (IV) shall be
applied only with respect to an employee
within the meaning of section 401(c)(1).
For purposes of this clause, a distribution
to two or more trusts shall be treated as
a distribution to one recipient. For pur-
poses of this paragraph, the balance to the
credit of the employee does not include the
accumulated deductible employee contribu-
tions under the plan (within the meaning
of section 72(o)(5)).
‘‘(ii) 
AGGREGATION
OF
CERTAIN
TRUSTS AND PLANS.—For purposes of de-
termining the balance to the credit of an
employee under clause (i)—
‘‘(I) all trusts which are part of
a plan shall be treated as a single
trust, all pension plans maintained by
the employer shall be treated as a sin-
gle plan, all profit-sharing plans main-
tained by the employer shall be treat-
ed as a single plan, and all stock
bonus plans maintained by the em-
ployer shall be treated as a single
plan, and
‘‘(II) trusts which are not quali-
fied trusts under section 401(a) and
annuity contracts which do not satisfy
the requirements of section 404(a)(2)
shall not be taken into account.
‘‘(iii) COMMUNITY PROPERTY LAWS.—
The provisions of this paragraph shall be
applied without regard to community prop-
erty laws.
‘‘(iv) AMOUNTS
SUBJECT
TO
PEN-
ALTY.—This paragraph shall not apply to
amounts described in subparagraph (A) of
section 72(m)(5) to the extent that section
72(m)(5) applies to such amounts.
‘‘(v) BALANCE
TO
CREDIT
OF
EM-
PLOYEE NOT TO INCLUDE AMOUNTS PAY-
ABLE UNDER QUALIFIED DOMESTIC RELA-
TIONS ORDER.—For purposes of this para-
graph, the balance to the credit of an em-
ployee shall not include any amount pay-
able to an alternate payee under a quali-
fied domestic relations order (within the
meaning of section 414(p)).
‘‘(vi) TRANSFERS TO COST-OF-LIVING
ARRANGEMENT
NOT
TREATED
AS
DIS-
TRIBUTION.—For purposes of this para-
graph, the balance to the credit of an em-
ployee under a defined contribution plan
shall not include any amount transferred
from such defined contribution plan to a
qualified cost-of-living arrangement (within
the meaning of section 415(k)(2)) under a
defined benefit plan.
‘‘(vii) LUMP-SUM
DISTRIBUTIONS
OF
ALTERNATE PAYEES.—If any distribution
or payment of the balance to the credit of
an employee would be treated as a lump-
sum distribution, then, for purposes of this
paragraph, the payment under a qualified
domestic relations order (within the mean-
ing of section 414(p)) of the balance to the
credit of an alternate payee who is the
spouse or former spouse of the employee
shall be treated as a lump-sum distribu-
tion. For purposes of this clause, the bal-
ance to the credit of the alternate payee
shall not include any amount payable to
the employee.’’
(2) Section 402(c) (relating to rules applicable
to rollovers from exempt trusts) is amended by strik-
ing paragraph (10).
(3) Paragraph (1) of section 55(c) (defining
regular tax) is amended by striking ‘‘shall not in-
clude any tax imposed by section 402(d) and’’.
(4) Paragraph (8) of section 62(a) (relating to
certain portion of lump-sum distributions from pen-
sion plans taxed under section 402(d)) is hereby re-
pealed.
(5) Section 401(a)(28)(B) (relating to coordina-
tion with distribution rules) is amended by striking
clause (v).
(6) Subparagraph (B)(ii) of section 401(k)(10)
(relating to distributions that must be lump-sum dis-
tributions) is amended to read as follows:
‘‘(ii) LUMP-SUM DISTRIBUTION.—For pur-
poses of this subparagraph, the term ‘lump-sum
distribution’ means any distribution of the bal-
ance to the credit of an employee immediately
before the distribution.’’
(7) Section 406(c) (relating to termination of
status as deemed employee not to be treated as sep-
aration from service for purposes of limitation of
tax) is hereby repealed.
(8) Section 407(c) (relating to termination of
status as deemed employee not to be treated as sep-
aration from service for purposes of limitation of
tax) is hereby repealed.
(9) Section 691(c) (relating to deduction for es-
tate tax) is amended by striking paragraph (5).
(10) Paragraph (1) of section 871(b) (relating
to imposition of tax) is amended by striking ‘‘section
1, 55, or 402(d)(1)’’ and inserting ‘‘section 1 or
55’’.
(11) Subsection (b) of section 877 (relating to
alternative tax) is amended by striking ‘‘section 1,
55, or 402(d)(1)’’ and inserting ‘‘section 1 or 55’’.
(12) Section 4980A(c)(4) is amended—
(A) by striking ‘‘to which an election under
section 402(d)(4)(B) applies’’ and inserting
‘‘(as defined in section 402(e)(4)(D)) with re-
spect to which the individual elects to have this
paragraph apply’’,
(B) by adding at the end the following new
flush sentence:
‘‘An individual may elect to have this paragraph
apply to only one lump-sum distribution.’’, and
(C) by striking the heading and inserting:
‘‘(4) SPECIAL ONE-TIME ELECTION.—’’.
(13) Section 402(e) is amended by striking
paragraph (5).
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall apply to taxable years beginning
after December 31, 1995.
(2) RETENTION
OF
CERTAIN
TRANSITION
RULES.—Notwithstanding any other provision of
this section, the amendments made by this section
shall not apply to any distribution for which the tax-
payer elects the benefits of section 1122 (h)(3) or
(h)(5) of the Tax Reform Act of 1986. For purposes
of the preceding sentence, the rules of sections
402(c)(10) and 402(d) of the Internal Revenue Code
of 1986 (as in effect before the amendments made
by this Act) shall apply.
SEC. 202. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES’
DEATH BENEFITS.
(a) IN GENERAL.—Subsection (b) of section 101 is
hereby repealed.
(b) CONFORMING AMENDMENT.—Subsection (c) of
section 101 is amended by striking ‘‘subsection (a) or (b)’’
and inserting ‘‘subsection (a)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 203. SIMPLIFIED METHOD FOR TAXING ANNUITY DIS-
TRIBUTIONS 
UNDER 
CERTAIN 
EMPLOYER
PLANS.
(a) GENERAL RULE.—Subsection (d) of section 72
(relating to annuities; certain proceeds of endowment and
life insurance contracts) is amended to read as follows:
‘‘(d) SPECIAL RULES FOR QUALIFIED EMPLOYER
RETIREMENT PLANS.—
‘‘(1) SIMPLIFIED METHOD OF TAXING ANNUITY
PAYMENTS.—
‘‘(A) IN
GENERAL.—In the case of any
amount received as an annuity under a quali-
fied employer retirement plan—
‘‘(i) subsection (b) shall not apply,
and
‘‘(ii) the investment in the contract
shall be recovered as provided in this para-
graph.
‘‘(B) METHOD
OF
RECOVERING
INVEST-
MENT IN CONTRACT.—
‘‘(i) 
IN
GENERAL.—Gross 
income
shall not include so much of any monthly
annuity payment under a qualified em-
ployer retirement plan as does not exceed
the amount obtained by dividing—
‘‘(I) the investment in the con-
tract (as of the annuity starting date),
by
‘‘(II) the number of anticipated
payments determined under the table
contained in clause (iii) (or, in the
case of a contract to which subsection
(c)(3)(B) applies, the number of
monthly annuity payments under such
contract).
‘‘(ii) CERTAIN RULES MADE APPLICA-
BLE.—Rules similar to the rules of para-
graphs (2) and (3) of subsection (b) shall
apply for purposes of this paragraph.
‘‘(iii) NUMBER OF ANTICIPATED PAY-
MENTS.—
‘‘If the age of the
primary annuitant on
The number
the annuity starting
of anticipated
date is:
payments is:
Not more than 55 ..............................
300
More than 55 but not more than 60
260
More than 60 but not more than 65
240
More than 65 but not more than 70
170
More than 70 .....................................
120
‘‘(C) ADJUSTMENT FOR REFUND FEATURE
NOT APPLICABLE.—For purposes of this para-
graph, investment in the contract shall be de-
termined under subsection (c)(1) without re-
gard to subsection (c)(2).
‘‘(D) SPECIAL
RULE
WHERE
LUMP
SUM
PAID
IN
CONNECTION
WITH
COMMENCEMENT
OF ANNUITY PAYMENTS.—If, in connection with
the commencement of annuity payments under
any qualified employer retirement plan, the tax-
payer receives a lump sum payment—
‘‘(i) such payment shall be taxable
under subsection (e) as if received before
the annuity starting date, and
‘‘(ii) the investment in the contract
for purposes of this paragraph shall be de-
termined as if such payment had been so
received.
‘‘(E) EXCEPTION.—This paragraph shall
not apply in any case where the primary annu-
itant has attained age 75 on the annuity start-
ing date unless there are fewer than 5 years of
guaranteed payments under the annuity.
‘‘(F) ADJUSTMENT WHERE ANNUITY PAY-
MENTS NOT ON MONTHLY BASIS.—In any case
where the annuity payments are not made on a
monthly basis, appropriate adjustments in the
application of this paragraph shall be made to
take into account the period on the basis of
which such payments are made.
‘‘(G) QUALIFIED EMPLOYER RETIREMENT
PLAN.—For purposes of this paragraph, the
term ‘qualified employer retirement plan’ means
any plan or contract described in paragraph
(1), (2), or (3) of section 4974(c).
‘‘(2) TREATMENT
OF
EMPLOYEE
CONTRIBU-
TIONS
UNDER
DEFINED
CONTRIBUTION
PLANS.—
For purposes of this section, employee contributions
(and any income allocable thereto) under a defined
contribution plan may be treated as a separate con-
tract.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply in cases where the annuity starting
date is after December 31, 1995.
SEC. 204. REQUIRED DISTRIBUTIONS.
(a) IN GENERAL.—Section 401(a)(9)(C) (defining re-
quired beginning date) is amended to read as follows:
‘‘(C) REQUIRED
BEGINNING
DATE.—For
purposes of this paragraph—
‘‘(i) IN
GENERAL.—The term ‘re-
quired beginning date’ means April 1 of
the calendar year following the later of—
‘‘(I) the calendar year in which
the employee attains age 701⁄2, or
‘‘(II) the calendar year in which
the employee retires.
‘‘(ii) EXCEPTION.—Subclause (II) of
clause (i) shall not apply—
‘‘(I) except as provided in section
409(d), in the case of an employee
who is a 5-percent owner (as defined
in section 416) with respect to the
plan year ending in the calendar year
in which the employee attains age
701⁄2, or
‘‘(II) for purposes of section 408
(a)(6) or (b)(3).
‘‘(iii) ACTUARIAL
ADJUSTMENT.—In
the case of an employee to whom clause
(i)(II) applies who retires in a calendar
year after the calendar year in which the
employee attains age 701⁄2, the employee’s
accrued benefit shall be actuarially in-
creased to take into account the period
after age 701⁄2 in which the employee was
not receiving any benefits under the plan.
‘‘(iv) 
EXCEPTION
FOR
GOVERN-
MENTAL
AND
CHURCH
PLANS.—Clauses
(ii) and (iii) shall not apply in the case of
a governmental plan or church plan. For
purposes of this clause, the term ‘church
plan’ means a plan maintained by a church
for church employees, and the term
‘church’ means any church (as defined in
section 3121(w)(3)(A)) or qualified church-
controlled organization (as defined in sec-
tion 3121(w)(3)(B)).’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to years beginning after Decem-
ber 31, 1995.
TITLE 
III—TARGETED 
ACCESS
TO 
PENSION 
PLANS 
FOR
SMALL EMPLOYERS
SEC. 301. CREDIT FOR PENSION PLAN START-UP COSTS OF
SMALL EMPLOYERS.
(a) ALLOWANCE OF CREDIT.—Section 38(b) (defin-
ing current year business credit) is amended by striking
‘‘plus’’ at the end of paragraph (10), by striking the period
at the end of paragraph (11) and inserting ‘‘, plus’’, and
by adding at the end the following new paragraph:
‘‘(12) the small employer pension plan start-up
cost credit.’’
(b) SMALL EMPLOYER PENSION PLAN START-UP
COST CREDIT.—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:
‘‘SEC. 45C. SMALL EMPLOYER PENSION PLAN START-UP
COST CREDIT.
‘‘(a) AMOUNT OF CREDIT.—For purposes of section
38—
‘‘(1) IN GENERAL.—The small employer pen-
sion plan start-up cost credit for any taxable year is
an amount equal to the qualified start-up costs of an
eligible employer in establishing a qualified pension
plan.
‘‘(2) AGGREGATE LIMITATION.—The amount of
the credit under paragraph (1) for any taxable year
shall not exceed $1,000, reduced by the aggregate
amount determined under this section for all preced-
ing taxable years of the taxpayer.
‘‘(b) QUALIFIED START-UP COSTS; QUALIFIED PEN-
SION PLAN.—For purposes of this section—
‘‘(1) QUALIFIED START-UP COSTS.—The term
‘qualified start-up costs’ means any ordinary and
necessary expenses of an eligible employer which—
‘‘(A) are paid or incurred in connection
with the establishment of a qualified pension
plan, and
‘‘(B) are of a nonrecurring nature.
‘‘(2) QUALIFIED
PENSION
PLAN.—The term
‘qualified pension plan’ means—
‘‘(A) a plan described in section 401(a)
which includes a trust exempt from tax under
section 501(a), or
‘‘(B) a simplified employee pension (as de-
fined in section 408(k)).
‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this
section—
‘‘(1) IN
GENERAL.—The term ‘eligible em-
ployer’ means an employer which—
‘‘(A) had an average daily number of em-
ployees during the preceding taxable year not in
excess of 50, and
‘‘(B) did not make any contributions on
behalf of any employee to a qualified pension
plan during the 2 taxable years immediately
preceding the taxable year.
‘‘(2) PROFESSIONAL SERVICE EMPLOYERS EX-
CLUDED.—Such term shall not include an employer
substantially all of the activities of which involve the
performance of services in the fields of health, law,
engineering, 
architecture, 
accounting, 
actuarial
science, performing arts, or consulting.
‘‘(d) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) AGGREGATION RULES.—All persons treat-
ed 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.
‘‘(2) DISALLOWANCE OF DEDUCTION.—No de-
duction shall be allowable under this chapter for any
qualified start-up costs for which a credit is allow-
able under subsection (a).’’
(c) CONFORMING AMENDMENTS.—
(1) Section 39(d) is amended by adding at the
end the following new paragraph:
‘‘(7) NO CARRYBACK OF PENSION CREDIT.—No
portion of the unused business credit for any taxable
year which is attributable to the small employer pen-
sion plan start-up cost credit determined under sec-
tion 45C may be carried back to a taxable year end-
ing before the date of the enactment of section
45C.’’
(2) The table of sections for subpart D of part
IV of subchapter A of chapter 1 is amended by add-
ing at the end the following new item:
‘‘Sec. 45C. Small employer pension plan start-up cost credit.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to costs incurred after the date
of the enactment of this Act in taxable years ending after
such date.
SEC. 302. MODIFICATIONS OF SIMPLIFIED EMPLOYEE PEN-
SIONS.
(a) INCREASE IN NUMBER OF ALLOWABLE PARTICI-
PANTS FOR SALARY REDUCTION ARRANGEMENTS.—Sec-
tion 408(k)(6)(B) is amended by striking ‘‘25’’ each place
it appears in the text and heading thereof and inserting
‘‘100’’.
(b) REPEAL OF PARTICIPATION REQUIREMENT.—
(1) IN
GENERAL.—Section 408(k)(6)(A) is
amended by striking clause (ii) and by redesignating
clauses (iii) and (iv) as clauses (ii) and (iii), respec-
tively.
(2) CONFORMING AMENDMENTS.—Clause (ii) of
section 408(k)(6)(C) and clause (ii) of section
408(k)(6)(F) are each amended by striking ‘‘sub-
paragraph (A)(iii)’’ and inserting ‘‘subparagraph
(A)(ii)’’.
(c) ALTERNATIVE TEST.—Clause (ii) of section
408(k)(6)(A), as redesignated by subsection (b)(1), is
amended by adding at the end the following new flush sen-
tence:
‘‘The requirements of the preceding sen-
tence are met if the employer makes con-
tributions to the simplified employee pen-
sion meeting the requirements of sections
401(k)(11) (B) or (C), 401(k)(11)(D), and
401(m)(10)(B).’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
SEC. 303. EXEMPTION FROM TOP-HEAVY PLAN REQUIRE-
MENTS.
(a) EXEMPTION FROM TOP-HEAVY PLAN REQUIRE-
MENTS.—Section 416(g) (defining top-heavy plans) is
amended by adding at the end the following new para-
graph:
‘‘(3) EXEMPTION FOR CERTAIN PLANS.—A plan
shall not be treated as a top-heavy plan if, for such
plan year, the employer has no highly compensated
employees (as defined in section 414(q)) by reason
of section 414(q)(2).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1995.
SEC. 304. TAX-EXEMPT ORGANIZATIONS ELIGIBLE UNDER
SECTION 401(k).
(a) 
GENERAL
RULE.—Clause 
(ii) 
of 
section
401(k)(4)(B) is amended to read as follows:
‘‘(ii) any organization described in
section 501(c)(3) which is exempt from tax
under section 501(a).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to plan years beginning after De-
cember 31, 1995, but shall not apply to any cash or de-
ferred arrangement to which clause (i) of section
1116(f)(2)(B) of the Tax Reform Act of 1986 applies.
SEC. 305. REGULATORY TREATMENT OF SMALL EMPLOY-
ERS.
(a) IN GENERAL.—Section 7805(f) (relating to re-
view of impact of regulations on small business) is amend-
ed by adding at the end the following new subparagraph:
‘‘(4) SPECIAL
RULE
FOR
PENSION
REGULA-
TIONS.—
‘‘(A) IN
GENERAL.—Any regulation pro-
posed to be issued by the Secretary which re-
lates to qualified pension plans shall not take
effect unless the Secretary includes provisions
to address any special needs of the small em-
ployers.
‘‘(B) QUALIFIED
PENSION
PLAN.—For
purposes of this paragraph, the term ‘qualified
pension plan’ means—
‘‘(i) any plan which includes a trust
described in section 401(a) which is ex-
empt from tax under section 501(a), or
‘‘(ii) any simplified employee pension
(as defined in section 408(k)).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to regulations issued after the date
of the enactment of this Act.
SEC. 402. DUTIES OF SPONSORS OF CERTAIN PROTOTYPE
PLANS.
(a) IN GENERAL.—The Secretary of the Treasury
may, as a condition of sponsorship, prescribe rules defin-
ing the duties and responsibilities of sponsors of master
and prototype plans, regional prototype plans, and other
Internal Revenue Service preapproved plans.
(b) DUTIES RELATING TO PLAN AMENDMENT, NOTI-
FICATION OF ADOPTERS, AND PLAN ADMINISTRATION.—
The duties and responsibilities referred to in subsection
(a) may include—
(1) the maintenance of lists of persons adopting
the sponsor’s plans, including the updating of such
lists not less frequently than annually,
(2) the furnishing of notices at least annually
to such persons and to the Secretary or the Sec-
retary’s delegate, in such form and at such time as
the Secretary shall prescribe,
(3) duties relating to administrative services to
such persons in the operation of their plans, and
(4) other duties that the Secretary considers
necessary to ensure that—
(A) the master and prototype, regional
prototype, and other preapproved plans of
adopting employers are timely amended to meet
the requirements of the Internal Revenue Code
of 1986 or of any rule or regulation of the Sec-
retary, and
(B) adopting employers receive timely noti-
fication of amendments and other actions taken
by sponsors with respect to their plans.
TITLE V—MISCELLANEOUS
SIMPLIFICATION
SEC. 501. TREATMENT OF LEASED EMPLOYEES.
(a) GENERAL RULE.—Subparagraph (C) of section
414(n)(2) (defining leased employee) is amended to read
as follows:
‘‘(C) such services are performed under
significant direction or control by the recipi-
ent.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to years beginning after Decem-
ber 31, 1995, but shall not apply to any relationship deter-
mined under an Internal Revenue Service ruling issued be-
fore the date of the enactment of this Act pursuant to
section 414(n)(2)(C) of the Internal Revenue Code of
1986 (as in effect on the day before such date) not to
involve a leased employee.
SEC. 502. PLANS COVERING SELF-EMPLOYED INDIVIDUALS.
(a) AGGREGATION RULES.—Section 401(d) (relating
to additional requirements for qualification of trusts and
plans benefiting owner-employees) is amended to read as
follows:
‘‘(d) CONTRIBUTION LIMIT
ON OWNER-EMPLOY-
EES.—A trust forming part of a pension or profit-sharing
plan which provides contributions or benefits for employ-
ees some or all of whom are owner-employees shall con-
stitute a qualified trust under this section only if, in addi-
tion to meeting the requirements of subsection (a), the
plan provides that contributions on behalf of any owner-
employee may be made only with respect to the earned
income of such owner-employee which is derived from the
trade or business with respect to which such plan is estab-
lished.’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
SEC. 503. ELIMINATION OF SPECIAL VESTING RULE FOR
MULTIEMPLOYER PLANS.
(a) IN GENERAL.—Paragraph (2) of section 411(a)
(relating to minimum vesting standards) is amended—
(1) by striking ‘‘subparagraph (A), (B), or (C)’’
and inserting ‘‘subparagraph (A) or (B)’’; and
(2) by striking subparagraph (C).
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning on or after
the earlier of—
(1) the later of—
(A) January 1, 1996, or
(B) the date on which the last of the col-
lective bargaining agreements pursuant to
which the plan is maintained terminates (deter-
mined without regard to any extension thereof
after the date of the enactment of this Act), or
(2) January 1, 1998.
Such amendments shall not apply to any individual who
does not have more than 1 hour of service under the plan
on or after the 1st day of the 1st plan year to which such
amendments apply.
SEC. 504. FULL-FUNDING LIMITATION OF MULTIEMPLOYER
PLANS.
(a) 
FULL-FUNDING
LIMITATION.—Section
412(c)(7)(C) (relating to full-funding limitation) is
amended—
(1) by inserting ‘‘or in the case of a multiem-
ployer plan,’’ after ‘‘paragraph (6)(B),’’, and
(2) by inserting ‘‘AND MULTIEMPLOYER PLANS’’
after ‘‘PARAGRAPH (6)(B)’’ in the heading thereof.
(b) VALUATION.—Section 412(c)(9) is amended—
(1) by inserting ‘‘(3 years in the case of a mul-
tiemployer plan)’’ after ‘‘year’’, and
(2) by striking ‘‘ANNUAL VALUATION’’ in the
heading and inserting ‘‘VALUATION’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
SEC. 505. ALTERNATIVE FULL-FUNDING LIMITATION.
(a) IN GENERAL.—Subsection (c) of section 412 (re-
lating to minimum funding standards) is amended by re-
designating paragraphs (8) through (12) as paragraphs
(9) through (13), respectively, and by adding after para-
graph (7) the following new paragraph:
‘‘(8) ALTERNATIVE
FULL-FUNDING
LIMITA-
TION.—
‘‘(A) GENERAL RULE.—An employer may
elect the full-funding limitation under this para-
graph with respect to any defined benefit plan
of the employer in lieu of the full-funding limi-
tation determined under paragraph (7) if the
requirements of subparagraphs (C) and (D) are
met.
‘‘(B) ALTERNATIVE FULL-FUNDING LIMI-
TATION.—The full-funding limitation under this
paragraph is the full-funding limitation deter-
mined under paragraph (7) without regard to
subparagraph (A)(i)(I) thereof.
‘‘(C) REQUIREMENTS RELATING TO PLAN
ELIGIBILITY.—
‘‘(i) IN GENERAL.—The requirements
of this subparagraph are met with respect
to a defined benefit plan if—
‘‘(I) as of the 1st day of the elec-
tion period, the average accrued liabil-
ity of participants accruing benefits
under the plan for the 5 immediately
preceding plan years is at least 80
percent of the plan’s total accrued li-
ability,
‘‘(II) the plan is not a top-heavy
plan (as defined in section 416(g)) for
the 1st plan year of the election pe-
riod or either of the 2 preceding plan
years, and
‘‘(III) each defined benefit plan
of the employer (and each defined
benefit plan of each employer who is
a member of any controlled group
which includes such employer) meets
the requirements of subclauses (I) and
(II).
‘‘(ii) FAILURE TO CONTINUE TO MEET
REQUIREMENTS.—
‘‘(I) If any plan fails to meet the
requirement of clause (i)(I) for any
plan year during an election period,
the benefits of the election under this
paragraph shall be phased out under
regulations prescribed by the Sec-
retary.
‘‘(II) If any plan fails to meet
the requirement of clause (i)(II) for
any plan year during an election pe-
riod, such plan shall be treated as not
meeting the requirements of clause (i)
for the remainder of the election pe-
riod.
If there is a failure described in subclause
(I) or (II) with respect to any plan, such
plan (and each plan described in clause
(i)(III) with respect to such plan) shall be
treated as not meeting the requirements of
clause (i) for any of the 10 plan years be-
ginning after the election period.
‘‘(D) REQUIREMENTS RELATING TO ELEC-
TION.—The requirements of this subparagraph
are met with respect to an election if—
‘‘(i) FILING
DATE.—Notice of such
election is filed with the Secretary (in such
form and manner and containing such in-
formation as the Secretary may provide)
by January 1 of any calendar year, and is
effective as of the 1st day of the election
period beginning on or after January 1 of
the following calendar year.
‘‘(ii) CONSISTENT
ELECTION.—Such
an election is made for all defined benefit
plans maintained by the employer or by
any member of a controlled group which
includes the employer.
‘‘(E) TERM OF ELECTION.—Any election
made under this paragraph shall apply for the
election period.
‘‘(F) OTHER
CONSEQUENCES
OF
ELEC-
TION.—
‘‘(i) NO FUNDING WAIVERS.—In the
case of a plan with respect to which an
election is made under this paragraph, no
waiver may be granted under subsection
(d) for any plan year beginning after the
date the election was made and ending at
the close of the election period with respect
thereto.
‘‘(ii) FAILURE TO MAKE SUCCESSIVE
ELECTIONS.—If an election is made under
this paragraph with respect to any plan
and such an election does not apply for
each successive plan year of such plan,
such plan shall be treated as not meeting
the requirements of subparagraph (C) for
the period of 10 plan years beginning after
the close of the last election period for
such plan.
‘‘(G) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) ELECTION
PERIOD.—The term
‘election period’ means the period of 5 con-
secutive plan years beginning with the 1st
plan year for which the election is made.
‘‘(ii) CONTROLLED GROUP.—The term
‘controlled group’ means all persons who
are treated as a single employer under sub-
section (b), (c), (m), or (o) of section
414.’’
(b) ALTERATION OF DISCRETIONARY REGULATORY
AUTHORITY.—Subparagraph (D) of section 412(c)(7) is
amended by striking ‘‘provide—’’ and all that follows
through ‘‘(iii) for’’ and inserting ‘‘provide for’’.
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall take effect on January 1, 1997.
(2) TRANSITION PERIOD.—In the case of a plan
with respect to which a transition period election is
made under section 412(c)(8)(D)(ii) of the Internal
Revenue Code of 1986 (as added by this section),
the amendments made by this section shall take ef-
fect on July 1, 1996.
SEC. 506. AFFILIATED EMPLOYERS.
(a) IN GENERAL.—For purposes of Treasury Regula-
tions section 1.501(c)(9)–2(a)(1), a group of employers
shall be deemed to be affiliated if they are substantially
all section 501(c)(12) organizations which perform serv-
ices (or with respect to which their members perform serv-
ices) which are the same or are directly related to each
other.
(b) SECTION 501(c)(12) ORGANIZATION.—For pur-
poses of this section, the term ‘‘section 501(c)(12) organi-
zation’’ means—
(1) any organization described in section
501(c)(12) of the Internal Revenue Code of 1986,
(2) any organization providing a service which
is the same as a service which is (or could be) pro-
vided by an organization described in paragraph (1),
(3) any organization described in paragraph (4)
or (6) of section 501(c) of such Code, but only if at
least 80 percent of the members of the organization
are organizations described in paragraph (1) or (2),
and
(4) any organization which is a national asso-
ciation of organizations described in paragraph (1),
(2), or (3).
An organization described in paragraph (2) (but not in
paragraph (1)) shall not be treated as a section 501(c)(12)
organization with respect to a voluntary employees’ bene-
ficiary association unless a substantial number of employ-
ers maintaining such association are described in para-
graph (1).
(c) EFFECTIVE DATE.—The provisions of this section
shall apply to years beginning after December 31, 1995.
fit otherwise payable under the terms of the
plan that exceeds the limitations on benefits im-
posed by this section,
‘‘(B) under such portion no election is pro-
vided at any time to the participant (directly or
indirectly) to defer compensation, and
‘‘(C) benefits described in subparagraph
(A) are not paid from a trust forming a part
of such governmental plan unless such trust is
maintained solely for the purpose of providing
such benefits.’’
(2) COORDINATION WITH SECTION 457.—Sub-
section (e) of section 457 is amended by adding at
the end the following new paragraph:
‘‘(14) TREATMENT
OF
QUALIFIED
GOVERN-
MENTAL
EXCESS
BENEFIT
ARRANGEMENTS.—Sub-
sections (b)(2) and (c)(1) shall not apply to any
qualified governmental excess benefit arrangement
(as defined in section 415(m)(3)), and benefits pro-
vided under such an arrangement shall not be taken
into account in determining whether any other plan
is an eligible deferred compensation plan.’’
(3) CONFORMING AMENDMENT.—Paragraph (2)
of section 457(f) is amended by striking the word
‘‘and’’ at the end of subparagraph (C), by striking
the period after subparagraph (D) and inserting ‘‘,
and’’, and by adding at the end the following new
subparagraph:
‘‘(E) a qualified governmental excess bene-
fit arrangement described in section 415(m).’’
(c) EXEMPTION
FOR SURVIVOR
AND DISABILITY
BENEFITS.—Paragraph (2) of section 415(b) is amended
by adding at the end the following new subparagraph:
‘‘(I) EXEMPTION FOR SURVIVOR AND DIS-
ABILITY BENEFITS PROVIDED UNDER GOVERN-
MENTAL
PLANS.—Subparagraph (B) of para-
graph (1), subparagraph (C) of this paragraph,
and paragraph (5) shall not apply to—
‘‘(i) income received from a govern-
mental plan (as defined in section 414(d))
as a pension, annuity, or similar allowance
as the result of the recipient becoming dis-
abled by reason of personal injuries or
sickness, or
‘‘(ii) amounts received from a govern-
mental plan by the beneficiaries, survivors,
or the estate of an employee as the result
of the death of the employee.’’
(d) REVOCATION OF GRANDFATHER ELECTION.—
(1) IN GENERAL.—Subparagraph (C) of section
415(b)(10) is amended by adding at the end the fol-
lowing new clause:
‘‘(ii) REVOCATION OF ELECTION.—An
election under clause (i) may be revoked
not later than the last day of the third
plan year beginning after the date of the
enactment of this clause. The revocation
shall apply to all plan years to which the
election applied and to all subsequent plan
years. Any amount paid by a plan in a tax-
able year ending after the revocation shall
be includible in income in such taxable
year under the rules of this chapter in ef-
fect for such taxable year, except that, for
purposes of applying the limitations im-
posed by this section, any portion of such
amount which is attributable to any tax-
able year during which the election was in
effect shall be treated as received in such
taxable year.’’
(2) CONFORMING AMENDMENT.—Subparagraph
(C) of section 415(b)(10) is amended by striking
‘‘This’’ and inserting:
‘‘(i) IN GENERAL.—This’’.
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
subsections (a), (b), (c), and (d) shall apply to tax-
able years beginning on or after the date of the en-
actment of this Act. The amendments made by sub-
section (e) shall apply with respect to revocations
adopted after the date of the enactment of this Act.
(2) TREATMENT
FOR
YEARS
BEGINNING
BE-
FORE DATE OF ENACTMENT.—A governmental plan
(as defined in section 414(d) of the Internal Reve-
nue Code of 1986) shall be treated as satisfying the
requirements of section 415 of such Code for all tax-
able years beginning before the date of the enact-
ment of this Act.
SEC. 508. TREATMENT OF DEFERRED COMPENSATION
PLANS OF STATE AND LOCAL GOVERNMENTS
AND TAX-EXEMPT ORGANIZATIONS.
(a) SPECIAL RULES FOR PLAN DISTRIBUTIONS.—
Paragraph (9) of section 457(e) (relating to other defini-
tions and special rules) is amended to read as follows:
‘‘(9) BENEFITS NOT TREATED AS MADE AVAIL-
ABLE BY REASON OF CERTAIN ELECTIONS, ETC.—
‘‘(A) TOTAL AMOUNT PAYABLE IS $3,500
OR LESS.—The total amount payable to a par-
ticipant under the plan shall not be treated as
made available merely because the participant
may elect to receive such amount (or the plan
may distribute such amount without the partici-
pant’s consent) if—
‘‘(i) such amount does not exceed
$3,500, and
‘‘(ii) such amount may be distributed
only if—
‘‘(I) no amount has been deferred
under the plan with respect to such
participant during the 2-year period
ending on the date of the distribution,
and
‘‘(II) there has been no prior dis-
tribution under the plan to such par-
ticipant to which this subparagraph
applied.
A plan shall not be treated as failing to
meet the distribution requirements of sub-
section (d) by reason of a distribution to which
this subparagraph applies.
‘‘(B) ELECTION
TO
DEFER
COMMENCE-
MENT OF DISTRIBUTIONS.—The total amount
payable to a participant under the plan shall
not be treated as made available merely because
the participant may elect to defer commence-
ment of distributions under the plan if—
‘‘(i) such election is made after
amounts may be available under the plan
in accordance with subsection (d)(1)(A)
and before commencement of such dis-
tributions, and
‘‘(ii) the participant may make only 1
such election.’’
(b) COST-OF-LIVING ADJUSTMENT OF MAXIMUM DE-
FERRAL AMOUNT.—Subsection (e) of section 457, as
amended by section 507(c)(2), is amended by adding at
the end the following new paragraph:
‘‘(15) COST-OF-LIVING ADJUSTMENT OF MAXI-
MUM DEFERRAL AMOUNT.—The Secretary shall ad-
just the $7,500 amount specified in subsections
(b)(2) and (c)(1) 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, 1994.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
the date of the enactment of this Act.
SEC. 509. CONTRIBUTIONS ON BEHALF OF DISABLED EM-
PLOYEES.
(a) ALL DISABLED PARTICIPANTS RECEIVING CON-
TRIBUTIONS.—Section 415(c)(3)(C) is amended by adding
at the end the following: ‘‘If a defined contribution plan
provides for the continuation of contributions on behalf
of all participants described in clause (i) for a fixed or
determinable period, this subparagraph shall be applied
without regard to clauses (ii) and (iii).’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
SEC. 510. DISTRIBUTIONS UNDER RURAL COOPERATIVE
PLANS.
(a) DISTRIBUTIONS
FOR HARDSHIP
OR AFTER
A
CERTAIN AGE.—Section 401(k)(7) is amended by adding
at the end the following new subparagraph:
‘‘(C) SPECIAL
RULE
FOR
CERTAIN
DIS-
TRIBUTIONS.—A rural cooperative plan which
includes a qualified cash or deferred arrange-
ment shall not be treated as violating the re-
quirements of section 401(a) or of paragraph
(2) merely by reason of a hardship distribution
or a distribution to a participant after attain-
ment of age 591⁄2. For purposes of this section,
the term ‘hardship distribution’ means a dis-
tribution described in paragraph (2)(B)(i)(IV)
(without regard to the limit of its application to
profit-sharing or stock bonus plans).’’
(b) DEFINITION OF RURAL COOPERATIVE PLANS.—
(1) PUBLIC UTILITY DISTRICTS.—Clause (i) of
section 401(k)(7)(B) (defining rural cooperative) is
amended to read as follows:
‘‘(i) any organization which—
‘‘(I) is engaged primarily in pro-
viding electric service on a mutual or
cooperative basis, or
‘‘(II) is engaged primarily in pro-
viding electric service to the public in
its area of service and which is ex-
empt from tax under this subtitle or
which is a State or local government
(or an agency or instrumentality
thereof), other than a municipality (or
an agency or instrumentality there-
of).’’
(2) RELATED ORGANIZATIONS.—Subparagraph
(B) of section 401(k)(7), as amended by paragraph
(1), is amended by striking clause (iv) and inserting
the following new clauses:
‘‘(iv) an organization which is a na-
tional association of organizations de-
scribed in any other clause of this subpara-
graph, or
‘‘(v) any other organization which pro-
vides services which are related to the ac-
tivities of an organization described in
clause (i), (ii), (iii), or (iv), but only in the
case of a plan with respect to which sub-
stantially all of the organizations maintain-
ing it are described in clause (i), (ii), (iii),
or (iv).’’
(c) EFFECTIVE DATES.—
(1) DISTRIBUTIONS.—The amendments made
by subsection (a) shall apply to distributions after
the date of the enactment of this Act.
(2) RURAL
COOPERATIVE.—The amendments
made by subsection (b) shall apply to plan years be-
ginning after December 31, 1984.
SEC. 511. SPECIAL RULES FOR PLANS COVERING PILOTS.
(a) GENERAL RULE.—
(1) Subparagraph (B) of section 410(b)(3) is
amended to read as follows:
‘‘(B) in the case of a plan established or
maintained by one or more employers to provide
contributions or benefits for air pilots employed
by one or more common carriers engaged in
interstate or foreign commerce or air pilots em-
ployed by carriers transporting mail for or
under contract with the United States Govern-
ment, all employees who are not air pilots.’’
(2) Paragraph (3) of section 410(b) is amended
by striking the last sentence and inserting the fol-
lowing new sentence: ‘‘Subparagraph (B) shall not
apply in the case of a plan which provides contribu-
tions or benefits for employees who are not air pilots
or for air pilots whose principal duties are not cus-
tomarily performed aboard aircraft in flight.’’
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall apply to years beginning after Decem-
ber 31, 1995.
SEC. 512. TENURED FACULTY.
(a) IN GENERAL.—Section 457(e)(11) is amended by
inserting ‘‘eligible faculty voluntary retirement incentive
pay,’’ after ‘‘disability pay,’’.
(b) DEFINITION.—Section 457(e), as amended by
sections 507(c)(2) and 508(b), is amended by adding at
the end the following new paragraph:
‘‘(16) DEFINITION OF ELIGIBLE FACULTY VOL-
UNTARY
RETIREMENT
INCENTIVE
PAY.—For pur-
poses of this section, the term ‘eligible faculty vol-
untary retirement incentive pay’ means payments
under a plan established for employees serving under
contracts of unlimited tenure (or similar arrange-
ments providing for unlimited tenure) at an institu-
tion of higher education (as defined in section
1201(a) of the Higher Education Act of 1965 (20
U.S.C. 1141(a))) which—
‘‘(A) provides—
‘‘(i) payment to employees electing to
retire during a specified period of time of
limited duration, or
‘‘(ii) payment to employees who elect
to retire prior to normal retirement age,
‘‘(B) provides that the total amount of
payments to an employee does not exceed the
equivalent of twice the employee’s annual com-
pensation (within the meaning of section
415(c)(3)) during the year immediately preced-
ing the employee’s termination of service, and
‘‘(C) provides that all payments to an em-
ployee must be completed within 5 years after
the employee’s termination of service.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
SEC. 513. UNIFORM RETIREMENT AGE.
(a) DISCRIMINATION TESTING.—Paragraph (5) of
section 401(a) (relating to special rules relating to non-
discrimination requirements) is amended by adding at the
end the following new subparagraph:
‘‘(F) 
SOCIAL
SECURITY
RETIREMENT
AGE.—For purposes of testing for discrimina-
tion under paragraph (4)—
‘‘(i) the social security retirement age
(as defined in section 415(b)(8)) shall be
treated as a uniform retirement age, and
‘‘(ii) subsidized early retirement bene-
fits and joint and survivor annuities shall
not be treated as being unavailable to em-
ployees on the same terms merely because
such benefits or annuities are based in
whole or in part on an employee’s social
security retirement age (as so defined).’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
SEC. 514. UNIFORM PENALTY PROVISIONS TO APPLY TO
CERTAIN 
PENSION 
REPORTING 
REQUIRE-
MENTS.
(a) IN GENERAL.—
(1) Paragraph (1) of section 6724(d) is amend-
ed by striking ‘‘and’’ at the end of subparagraph
(A), by striking the period at the end of subpara-
graph (B) and inserting ‘‘, and’’, and by inserting
after subparagraph (B) the following new subpara-
graph:
‘‘(C) any statement of the amount of pay-
ments to another person required to be made to
the Secretary under—
‘‘(i) section 408(i) (relating to reports
with respect to individual retirement ac-
counts or annuities), or
‘‘(ii) section 6047(d) (relating to re-
ports by employers, plan administrators,
etc.).’’
(2) Paragraph (2) of section 6724(d) is amend-
ed by striking ‘‘or’’ at the end of subparagraph (S),
by striking the period at the end of subparagraph
(T) and inserting a comma, and by inserting after
subparagraph 
(T) 
the 
following 
new
subparagraphs:
‘‘(U) section 408(i) (relating to reports
with respect to individual retirement plans) to
any person other than the Secretary with re-
spect to the amount of payments made to such
person, or
‘‘(V) section 6047(d) (relating to reports
by plan administrators) to any person other
than the Secretary with respect to the amount
of payments made to such person.’’
(b) MODIFICATION
OF REPORTABLE DESIGNATED
DISTRIBUTIONS.—
(1) SECTION 408.—Subsection (i) of section 408
(relating to individual retirement account reports) is
amended by inserting ‘‘aggregating $10 or more in
any calendar year’’ after ‘‘distributions’’.
(2) SECTION 6047.—Paragraph (1) of section
6047(d) (relating to reports by employers, plan ad-
ministrators, etc.) is amended by adding at the end
thereof the following new sentence: ‘‘No return or
report may be required under the preceding sentence
with respect to distributions to any person during
any year unless such distributions aggregate $10 or
more.’’
(c) QUALIFYING ROLLOVER DISTRIBUTIONS.—Sec-
tion 6652(i) is amended—
(1) by striking ‘‘the $10’’ and inserting
‘‘$100’’, and
(2) 
by 
striking 
‘‘$5,000’’ 
and 
inserting
‘‘$50,000’’.
(d) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 6047(f) is amend-
ed to read as follows:
‘‘(1) For provisions relating to penalties for failures
to file returns and reports required under this section, see
sections 6652(e), 6721, and 6722.’’
(2) Subsection (e) of section 6652 is amended
by adding at the end the following new sentence:
‘‘This subsection shall not apply to any return or
statement which is an information return described
in section 6724(d)(1)(C)(ii) or a payee statement de-
scribed in section 6724(d)(2)(V).’’
(3) Subsection (a) of section 6693 is amended
by adding at the end the following new sentence:
‘‘This subsection shall not apply to any report which
is an information return described in section
6724(d)(1)(C)(i) or a payee statement described in
section 6724(d)(2)(U).’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to returns, reports, and other
statements the due date for which (determined without re-
gard to extensions) is after December 31, 1995.
SEC. 515. NATIONAL COMMISSION ON PRIVATE PENSION
PLANS.
(a) IN GENERAL.—Chapter 77 is amended by adding
at the end the following new section:
‘‘SEC. 7524. NATIONAL COMMISSION ON PRIVATE PENSION
PLANS.
‘‘(a) ESTABLISHMENT.—There is hereby established
a commission to be known as the National Commission
on Private Pension Plans (in this section referred to as
the ‘Commission’).
‘‘(b) MEMBERSHIP.—
‘‘(1) The Commission shall consist of—
‘‘(A) 6 members to be appointed by the
President;
‘‘(B) 6 members to be appointed by the
Speaker of the House of Representatives; and
‘‘(C) 6 members to be appointed by the
Majority Leader of the Senate.
‘‘(2) The appointments made pursuant to sub-
paragraphs (B) and (C) of paragraph (1) shall be
made in consultation with the chairmen of the com-
mittees of the House of Representatives and the