I
106TH CONGRESS
1ST SESSION
H. R. 1102
To provide for pension reform, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
MARCH 11, 1999
Mr. PORTMAN (for himself, Mr. CARDIN, Mrs. JOHNSON of Connecticut, Mr.
HOUGHTON, Mr. LEWIS of Georgia, Mr. WELLER, Mr. TANNER, Mr.
BLUNT, Mr. BOEHNER, Mr. POMEROY, Mr. BENTSEN, Mr. KOLBE, Mrs.
MORELLA, Mr. NUSSLE, Mr. MCCRERY, and Mr. RAMSTAD) introduced
the following bill; which was referred to the Committee on Ways and
Means, and in addition to the Committees on Education and the Work-
force, and Government Reform, for a period to be subsequently deter-
mined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
A BILL
To provide for pension reform, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE;
TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Comprehensive Retirement Security and Pension Reform
Act’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—The table of contents for
this Act is as follows:
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I—EXPANDING COVERAGE
Sec. 101. Restoration of limits formerly in effect.
Sec. 102. Plan loans for subchapter S owners, partners, and sole proprietors.
Sec. 103. Salary reduction only simple plans.
Sec. 104. Modification of top-heavy rules.
Sec. 105. Elective deferrals not taken into account for purposes of limits.
Sec. 106. Reduced PBGC premium for new plans of small employers.
Sec. 107. Phase-in of additional premium for new plans.
Sec. 108. Repeal of coordination requirements for deferred compensation plans
of State and local governments and tax-exempt organizations.
Sec. 109. Elimination of user fee for requests to IRS regarding pension plans.
Sec. 110. Alternative method of meeting nondiscrimination requirements for
automatic contribution trust.
Sec. 111. Deduction limits.
Sec. 112. Option to treat elective deferrals as after-tax contributions.
Sec. 113. Credit for pension plan startup costs of small employers.
TITLE II—ENHANCING FAIRNESS FOR WOMEN AND CHILDREN
Sec. 201. Additional salary reduction catch-up contributions.
Sec. 202. Equitable treatment for contributions of employees to defined con-
tribution plans.
Sec. 203. Faster vesting of certain employer matching contributions.
Sec. 204. Deferred annuities for surviving spouses of Federal employees.
Sec. 205. Simplify and update the minimum distribution rules.
Sec. 206. Clarification of tax treatment of division of section 457 plan benefits
upon divorce.
Sec. 207. Percentage limitations on contributions.
Sec. 208. Eligible rollover distributions.
Sec. 209. Immediate participation in the Thrift Savings Plan.
TITLE III—INCREASING PORTABILITY FOR PARTICIPANTS
Sec. 301. Rollovers allowed among various types of plans.
Sec. 302. Rollovers of IRAs into workplace retirement plans.
Sec. 303. Rollovers of after-tax contributions.
Sec. 304. Treatment of forms of distribution.
Sec. 305. Rationalization of restrictions on distributions.
Sec. 306. Purchase of service credit in governmental defined benefit plans.
Sec. 307. Employers may disregard rollovers for purposes of cash-out amounts.
TITLE IV—STRENGTHENING PENSION SECURITY AND
ENFORCEMENT
Sec. 401. Repeal of 150 percent of current liability funding limit.
Sec. 402. Missing participants.
Sec. 403. Periodic pension benefits statements.
Sec. 404. Civil penalties for breach of fiduciary responsibility.
Sec. 405. Penalty tax relief for sound pension funding.
Sec. 406. Protection of investment of employee contributions to 401(k) plans.
Sec. 407. Notice of significant reduction in benefit accruals.
TITLE V—REDUCING REGULATORY BURDENS
Sec. 501. Intermediate sanctions for inadvertent failures.
Sec. 502. Repeal of the multiple use test.
Sec. 503. Safety valve from mechanical rules.
Sec. 504. Reform of the line of business rules.
Sec. 505. Coverage test flexibility.
Sec. 506. Increase in retirement plan cash-out amount.
Sec. 507. Modification of timing of plan valuations.
Sec. 508. Section 457 inapplicable to certain mirror plans.
Sec. 509. Substantial owner benefits in terminated plans.
Sec. 510. ESOP dividends may be reinvested without loss of dividend deduc-
tion.
Sec. 511. Modification of 403(b) exclusion allowance to conform to 415 modi-
fication.
Sec. 512. Treatment of multiemployer plans under section 415.
Sec. 513. Elimination of partial termination rules for multiemployer plans.
Sec. 514. Notice and consent period regarding distributions.
Sec. 515. Conforming amendments relating to election to receive taxable cash
compensation in lieu of nontaxable parking benefits.
Sec. 516. Extension to international organizations of moratorium on application
of certain nondiscrimination rules applicable to State and local
plans.
Sec. 517. Employees of tax-exempt entities.
Sec. 518. Permissive aggregation of collective bargaining units.
Sec. 519. Repeal of transition rule relating to certain highly compensated em-
ployees.
Sec. 520. Clarification of treatment of employer-provided retirement advice.
Sec. 521. Annual report dissemination.
Sec. 522. Excess benefit plans.
Sec. 523. Benefit suspension notice.
Sec. 524. Provisions relating to plan amendments.
Sec. 525. Reporting simplification.
Sec. 526. Model plans for small businesses.
TITLE I—EXPANDING COVERAGE
SEC. 101. RESTORATION OF LIMITS FORMERLY IN EFFECT.
(a) DEFINED BENEFIT PLANS.—
(1) DOLLAR LIMIT.—(A) Subparagraph (A) of
section 415(b)(1) (relating to limitation for defined
benefit plans) is amended by striking ‘‘$90,000’’ and
inserting ‘‘$180,000’’.
(B) Subparagraphs (C) and (D) of section
415(b)(2) are each amended by striking ‘‘$90,000’’
each place it appears in the headings and the text
and inserting ‘‘$180,000’’.
(C) Paragraph (7) of section 415(b) (relating to
benefits under certain collectively bargained plans) is
amended by striking ‘‘the greater of $68,212 or one-
half the amount otherwise applicable for such year
under paragraph (1)(A) for ‘$90,000’ ’’ and insert-
ing ‘‘one-half the amount otherwise applicable for
such year under paragraph (1)(A) for ‘$180,000’ ’’.
(2) LIMIT
REDUCED
WHEN
BENEFIT
BEGINS
BEFORE
AGE
62.—Subparagraph (C) of section
415(b)(2) is amended by striking ‘‘the social security
retirement age’’ each place it appears in the heading
and text and inserting ‘‘age 62’’.
(3) LIMIT INCREASED WHEN BENEFIT BEGINS
AFTER
AGE
65.—Subparagraph (D) of section
415(b)(2) is amended by striking ‘‘the social security
retirement age’’ each place it appears in the heading
and text and inserting ‘‘age 65’’.
(4) MULTIEMPLOYER PLANS AND PLANS MAIN-
TAINED BY GOVERNMENTS AND TAX EXEMPT ORGA-
NIZATIONS.—Subparagraph (F) of section 415(b)(2)
is amended to read as follows:
‘‘(F) MULTIEMPLOYER PLANS AND PLANS
MAINTAINED BY GOVERNMENTS AND TAX EX-
EMPT ORGANIZATIONS.—
‘‘(i) IN GENERAL.—In the case of a
governmental plan (within the meaning of
section 414(d)), a plan maintained by an
organization (other than a governmental
unit) exempt from tax under this subtitle,
a multiemployer plan (as defined in section
414(f)), or a qualified merchant marine
plan, subparagraph (C) shall be applied as
if the last sentence thereof read as follows:
‘The reduction under this subparagraph
shall not reduce the limitation of para-
graph (1)(A) below (i) $130,000 if the
benefit begins at or after age 55, or (ii) if
the benefit begins before age 55, the equiv-
alent of the $130,000 limitation for age
55.’
‘‘(ii) DEFINITIONS.—For purposes of
this subparagraph—
‘‘(I) QUALIFIED MERCHANT MA-
RINE PLAN.—The term ‘qualified mer-
chant marine plan’ means a plan in
existence on January 1, 1986, the
participants in which are merchant
marine officers holding licenses issued
by the Secretary of Transportation
under title 46, United States Code.
‘‘(II) 
EXEMPT
ORGANIZATION
PLAN COVERING 50 PERCENT OF ITS
EMPLOYEES.—A plan shall be treated
as a plan maintained by an organiza-
tion (other than a governmental unit)
exempt from tax under this subtitle if
at least 50 percent of the employees
benefiting under the plan are employ-
ees of an organization (other than a
governmental unit) exempt from tax
under this subtitle. If less than 50
percent of the employees benefiting
under a plan are employees of an or-
ganization (other than a governmental
unit) exempt from tax under this sub-
title, the plan shall be treated as a
plan maintained by an organization
(other than a governmental unit) ex-
empt from tax under this subtitle only
with respect to employees of such an
organization.’’.
(5) 
COST-OF-LIVING
ADJUSTMENTS.—Sub-
section (d) of section 415 (related to cost-of-living
adjustments) is amended—
(A) in paragraph (1)(A) by striking
‘‘$90,000’’ and inserting ‘‘$180,000’’, and
(B) in paragraph (3)(A)—
(i) by striking ‘‘$90,000’’ in the head-
ing and inserting ‘‘$180,000’’, and
(ii) by striking ‘‘October 1, 1986’’ and
inserting ‘‘July 1, 1999’’.
(b) DEFINED CONTRIBUTION PLANS.—
(1) DOLLAR LIMIT.—Subparagraph (A) of sec-
tion 415(c)(1) (relating to limitation for defined con-
tribution plans) is amended by striking ‘‘$30,000’’
and inserting ‘‘$45,000’’.
(2) 
COST-OF-LIVING
ADJUSTMENTS.—Sub-
section (d) of section 415 (related to cost-of-living
adjustments) is amended—
(A) in paragraph (1)(C) by striking
‘‘$30,000’’ and inserting ‘‘$45,000’’, and
(B) in paragraph (3)(D)—
(i) by striking ‘‘$30,000’’ in the head-
ing and inserting ‘‘$45,000’’, and
(ii) by striking ‘‘October 1, 1993’’ and
inserting ‘‘July 1, 1999’’.
(c) QUALIFIED TRUSTS.—
(1) 
COMPENSATION
LIMIT.—Sections
401(a)(17), 404(l), 408(k), and 505(b)(7) are each
amended by striking ‘‘$150,000’’ each place it ap-
pears and inserting ‘‘$235,000’’.
(2) BASE PERIOD AND ROUNDING OF COST-OF-
LIVING ADJUSTMENT.—Subparagraph (B) of section
401(a)(17) is amended—
(A) by striking ‘‘October 1, 1993’’ and in-
serting ‘‘July 1, 1999’’, and
(B) by striking ‘‘$10,000’’ both places it
appears and inserting ‘‘$5,000’’.
(d) ELECTIVE DEFERRALS.—
(1) IN GENERAL.—Paragraphs (1) and (5) of
section 402(g) (relating to limitation on exclusion
for elective deferrals) are each amended by striking
‘‘$7,000’’ and inserting ‘‘$15,000’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 402(g) (relating to limitation
on exclusion for elective deferrals), as amended
by paragraph (1), is further amended by strik-
ing paragraph (4) and redesignating para-
graphs (5), (6), (7), (8), and (9) as paragraphs
(4), (5), (6), (7), and (8), respectively.
(B) Clause (iii) of section 501(c)(18)(D) is
amended by striking ‘‘(other than paragraph
(4) thereof)’’.
(e) DEFERRED COMPENSATION PLANS
OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI-
ZATIONS.—Section 457 (relating to deferred compensation
plans of State and local governments and tax-exempt orga-
nizations) is amended—
(1) in subsections (b)(2)(A), (c)(1), and (e)(15)
by striking ‘‘$7,500’’ each place it appears and in-
serting ‘‘$15,000’’,
(2) 
in 
subsection 
(b)(3)(A) 
by 
striking
‘‘$15,000’’ and inserting ‘‘$30,000’’, and
(3) in subsection (e)(15)—
(A) by inserting ‘‘and the $30,000 amount
specified 
in 
subsection 
(b)(3)(A)’’ 
after
‘‘(c)(1)’’, and
(B) by striking ‘‘September 30, 1994’’ and
inserting ‘‘September 30, 1999’’.
(f) SIMPLE RETIREMENT ACCOUNTS.—
(1) 
LIMITATION.—Sections 
408(p)(2)(A)(ii),
408(p)(2)(E), 
401(k)(11)(B)(i)(I), 
and
401(k)(11)(E) are each amended by striking
‘‘$6,000’’ and inserting ‘‘$10,000’’.
(2) BASE PERIOD FOR COST-OF-LIVING ADJUST-
MENT.—Subparagraph (E) of section 408(p)(2) is
amended by striking ‘‘September 30, 1996’’ and in-
serting ‘‘September 30, 1999’’.
(g) COST-OF-LIVING ADJUSTMENTS.—
(1) PLANS MAINTAINED BY GOVERNMENTS AND
TAX
EXEMPT
ORGANIZATIONS.—Paragraph (1) of
section 415(d) (as amended by subsection (b)) is
amended by striking ‘‘and’’ at the end of subpara-
graph (B), by redesignating subparagraph (C) as
subparagraph (D), and by inserting after subpara-
graph (B) the following new subparagraph:
‘‘(C) the $130,000 amount in subsection
(b)(2)(F), and’’.
(2) BASE PERIOD.—Paragraph (3) of section
415(d) (as amended by subsection (b)) is further
amended by redesignating subparagraph (D) as sub-
paragraph (E) and by inserting after subparagraph
(C) the following new subparagraph:
‘‘(D) $130,000 AMOUNT.—The base period
taken into account for purposes of paragraph
(1)(C) is the calendar quarter beginning July 1,
1999.’’.
(3) ROUNDING RULE RELATING TO DEFINED
BENEFIT
PLANS
AND
DEFINED
CONTRIBUTION
PLANS.—Paragraph (4) of section 415(d) is amend-
ed to read as follows:
‘‘(4) ROUNDING.—
‘‘(A) $180,000 AMOUNT.—Any increase
under subparagraph (A) of paragraph (1) which
is not a multiple of $5,000 shall be rounded to
the next lowest multiple of $5,000.
‘‘(B) $130,000 AND
$45,000
AMOUNTS.—
Any increase under subparagraph (C) or (D) of
paragraph (1) which is not a multiple of $1,000
shall be rounded to the next lowest multiple of
$1,000.’’.
(4) CONFORMING AMENDMENT.—Subparagraph
(D) of section 415(d)(3) (as amended by paragraph
(2)) is amended by striking ‘‘paragraph (1)(C)’’ and
inserting ‘‘paragraph (1)(D)’’.
(h) INCREASE
IN AMOUNT
OF DEDUCTIBLE IRA
CONTRIBUTIONS.—
(1) INCREASE IN MAXIMUM AMOUNT OF DEDUC-
TION.—Subparagraph (A) of section 219(b)(1) (re-
lating to maximum amount of deduction) is amended
by striking ‘‘$2,000’’ and inserting ‘‘$5,000’’.
(2) CONFORMING AMENDMENTS.—
(A) Subsections (a)(1), (b)(2), (j), and
(p)(8) of section 408 are each amended by
striking ‘‘$2,000’’ each place it appears and in-
serting ‘‘$5,000’’.
(B) Clause (i) of section 408(o)(2)(B) is
amended by inserting ‘‘the lesser of $2,000, or’’
after ‘‘means’’.
(C) Paragraph (2) of section 408A(c) is
amended by inserting ‘‘the lesser of $2,000, or’’
after ‘‘shall not exceed’’.
(D) 
Subparagraph 
(B) 
of 
section
4973(b)(1) is amended by inserting ‘‘(or in the
case of a nondeductible individual retirement
plan, the amount allowable as a contribution
under section 408(o))’’ after ‘‘contributions,’’.
(i) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall apply to years beginning after De-
cember 31, 1999.
(2) COLLECTIVE BARGAINING AGREEMENTS.—
In the case of a plan maintained pursuant to 1 or
more collective bargaining agreements between em-
ployee representatives and 1 or more employers rati-
fied by the date of enactment of this Act, the
amendments made by this section shall not apply to
contributions or benefits pursuant to any such
agreement for years beginning before the earlier
of—
(A) the later of—
(i) the date on which the last of such
collective bargaining agreements termi-
nates (determined without regard to any
extension thereof on or after such date of
enactment), or
(ii) January 1, 2000, or
(B) January 1, 2004.
SEC. 102. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART-
NERS, AND SOLE PROPRIETORS.
(a) AMENDMENT TO 1986 CODE.—Subsection (f) of
section 4975 (relating to other definitions and special
rules) is amended by striking paragraph (6).
(b) AMENDMENTS TO ERISA.—
(1) Section 408 of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1108) is
amended—
(A) by striking subsection (d); and
(B) by redesignating subsections (e) and
(f) as subsections (d) and (e), respectively.
(2) Section 407(b)(3)(B) of such Act (29
U.S.C. 1107(b)(3)(B)) is amended by striking ‘‘sec-
tion 408(e)’’ and inserting ‘‘section 408(d)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of enactment of
this Act.
SEC. 103. SALARY REDUCTION ONLY SIMPLE PLANS.
(a) SIMPLE RETIREMENT ACCOUNTS.—
(1) IN
GENERAL.—Paragraph (2) of section
408(p) (as amended by section 101(f)) is further
amended—
(A) by redesignating subparagraphs (C),
(D), and (E) as subparagraphs (D), (E), and
(F), respectively; and
(B) by inserting after subparagraph (B)
the following:
‘‘(C) EMPLOYER MAY ELECT SALARY RE-
DUCTION ONLY ARRANGEMENT.—
‘‘(i) IN GENERAL.—An employer shall
be treated as meeting the requirements of
subparagraph (A)(iii) for any year if, in
lieu of the contributions described in such
subparagraph, the employer elects to limit
the amount which an employee may elect
under subparagraph (A)(i) to a total of
$5,000 for the year. If an employer makes
an election under this subparagraph for
any year, the employer shall notify employ-
ees of such election within a reasonable pe-
riod of time before the 60-day period for
such year under paragraph (5)(C).
‘‘(ii) 
EXCEPTION.—This 
subpara-
graph shall not apply to an employer if
such employer (or any predecessor em-
ployer) maintained another qualified plan
(as defined in subparagraph (D)(ii)) with
respect to which contributions were made,
or benefits were accrued, for service during
the year in which the arrangement de-
scribed in clause (i) became effective or ei-
ther of the 2 preceding years. If only indi-
viduals other than employees described in
subparagraph (A) of section 410(b)(3) are
eligible to participate in the arrangement
described in clause (i), then the preceding
sentence shall be applied without regard to
any qualified plan in which only employees
so described are eligible to participate.’’.
(2) SPECIAL RULE FOR ACQUISITIONS, DISPOSI-
TIONS, 
AND
SIMILAR
TRANSACTIONS.—Subpara-
graph (B) of section 408(p)(10) is amended by
striking ‘‘and’’ at the end of clause (ii), by striking
the period at the end of clause (iii) and inserting
‘‘; and’’, and by inserting after clause (iii) the fol-
lowing:
‘‘(iv) the requirement under para-
graph (2)(C) that the employer not have
maintained another qualified plan de-
scribed therein.’’.
(3) COST-OF-LIVING
ADJUSTMENT.—Subpara-
graph (F) of section 408(p)(2) (as so redesignated)
is amended by inserting ‘‘and the $5,000 amount
under subparagraph (C)’’ after ‘‘subparagraph
(A)(ii)’’.
(4) COORDINATION
WITH
MAXIMUM
LIMITA-
TION.—Paragraph (8) of section 408(p) (relating to
coordination with maximum limitation under sub-
section (a)) is amended by striking ‘‘paragraph
(2)(A)(ii) of this subsection’’ and inserting ‘‘sub-
paragraph (A)(ii) or (C) of paragraph (2) of this
subsection, whichever is applicable,’’.
(5) CONFORMING AMENDMENT.—Clause (ii) of
section 408(p)(10)(B) is amended by striking ‘‘para-
graph (2)(D)’’ and inserting ‘‘paragraph (2)(E)’’.
(b) ADOPTION OF SIMPLE PLAN TO MEET NON-
DISCRIMINATION TESTS.—
(1) SIMPLE PLAN.—Subparagraph (B) of sec-
tion 401(k)(11) is amended by redesignating clause
(iii) as clause (iv) and by inserting after clause (ii)
the following new clause:
‘‘(iii) EMPLOYER MAY ELECT SALARY
REDUCTION ONLY ARRANGEMENT.—
‘‘(I) IN GENERAL.—An employer
shall be treated as meeting the re-
quirements of clause (i)(II) for any
year if, in lieu of the contributions de-
scribed in such clause, the employer
elects to limit the amount which an
employee may elect under clause (i) to
a total of $5,000 for the year. If an
employer makes an election under this
clause for any year, the employer shall
notify employees of such election with-
in a reasonable period of time before
the 60-day period for such year under
clause (iv)(II).
‘‘(II) EXCEPTION.—This clause
shall not apply to an employer if such
employer (or any predecessor em-
ployer) maintained another qualified
plan 
(as 
defined 
in 
section
408(p)(2)(D)(ii)) 
with 
respect 
to
which contributions were made, or
benefits were accrued, for service dur-
ing the year in which the arrangement
described in subclause (I) became ef-
fective or either of the 2 preceding
years. This subclause shall not apply
if such contributions or benefits were
solely on behalf of employees who are
not eligible to participate in the ar-
rangement described in subclause
(I).’’.
(2) COST-OF-LIVING
ADJUSTMENT.—Subpara-
graph (E) of section 401(k)(11) is amended by in-
serting ‘‘and the $5,000 amount under subpara-
graph (B)(iii)’’ after ‘‘subparagraph (B)(i)(I)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1999.
SEC. 104. MODIFICATION OF TOP-HEAVY RULES.
(a) REPEAL OF FAMILY AGGREGATION RULES.—
Section 416(i)(1)(B)(i)(I) (defining 5-percent owner) is
amended by inserting ‘‘(without regard to subsection
(a)(1) thereof)’’ after ‘‘section 318’’.
(b) SIMPLIFICATION OF DEFINITION OF KEY EM-
PLOYEE.—
(1) IN GENERAL.—Section 416(i)(1)(A) (defin-
ing key employee) is amended—
(A) by striking ‘‘or any of the 4 preceding
plan years’’ in the matter preceding clause (i),
(B) by striking clause (i) and inserting the
following:
‘‘(i) an officer of the employer who
has compensation from the employer of
more than $150,000,’’,
(C) by striking clause (ii) and redesignat-
ing clauses (iii) and (iv) as clauses (ii) and (iii),
respectively, and
(D) by striking the second sentence in the
matter following clause (iii), as redesignated by
subparagraph (C).
(2) 
CONFORMING
AMENDMENT.—Section
416(i)(1)(B)(iii) is amended by striking ‘‘and sub-
paragraph (A)(ii)’’.
(c) EMPLOYEE ELECTIVE CONTRIBUTIONS TO PLAN
NOT TAKEN INTO ACCOUNT.—
(1) DEFINITION OF TOP-HEAVY PLAN.—Section
416(g)(4) (relating to other special rules) is amend-
ed by adding at the end the following:
‘‘(H) EMPLOYEE
ELECTIVE
CONTRIBU-
TIONS TO PLAN NOT TAKEN INTO ACCOUNT.—
At the election of the employer, any employee
elective 
contribution 
described 
in 
section
415(c)(3)(D) to a plan (and earnings allocable
thereto) shall not be taken into account for pur-
poses of determining whether a plan is a top-
heavy plan (or whether any aggregation group
which includes such plan is a top-heavy
group).’’.
(2) DEFINITION
OF
COMPENSATION.—Section
416(i)(1)(D) (defining compensation) is amended to
read as follows:
‘‘(D) COMPENSATION.—
‘‘(i) IN
GENERAL.—For purposes of
this paragraph, except as provided in
clause (ii), the term ‘compensation’ has the
meaning given such term by section
414(q)(4).
‘‘(ii) EMPLOYEE ELECTIVE CONTRIBU-
TIONS
TO
PLAN
NOT
TAKEN
INTO
AC-
COUNT.—At the election of the employer,
any employee elective contribution de-
scribed in section 415(c)(3)(D) to a plan
shall not be taken into account for pur-
poses of determining compensation.’’.
(d) MATCHING CONTRIBUTIONS TAKEN INTO AC-
COUNT 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.’’.
(e) REQUIREMENTS FOR QUALIFICATIONS.—Clause
(ii) of section 401(a)(10)(B) (relating to requirements for
qualifications for top-heavy plans) is amended by adding
at the end the following new flush sentence:
‘‘The preceding sentence shall not apply to
a plan if the plan is not top-heavy and if
it is not reasonable to expect that the plan
will become top-heavy.’’.
(f) DISTRIBUTIONS DURING LAST YEAR BEFORE
DETERMINATION DATE TAKEN INTO ACCOUNT.—Section
416(g) is amended—
(1) in paragraph (3)—
(A) by striking ‘‘LAST 5 YEARS’’ in the
heading and inserting ‘‘LAST YEAR BEFORE DE-
TERMINATION DATE’’, and
(B) in the matter following subparagraph
(B), by striking ‘‘5-year period’’ and inserting
‘‘1-year period’’, and
(2) in paragraph (4)(E)—
(A) by striking ‘‘LAST 5 YEARS’’ in the
heading and inserting ‘‘LAST YEAR BEFORE DE-
TERMINATION DATE’’, and
(B) by striking ‘‘5-year period’’ and insert-
ing ‘‘1-year period’’.
(g) DEFINITION OF TOP-HEAVY PLANS.—
(1) EXCLUSION OF CERTAIN PLANS FROM DEFI-
NITION OF TOP-HEAVY PLAN.—Paragraph (4) of sec-
tion 416(d) (relating to other special rules for top-
heavy plans) is amended by adding at the end the
following new subparagraphs:
‘‘(H) CASH OR DEFERRED ARRANGEMENTS
USING
ALTERNATIVE
METHODS
OF
MEETING
NONDISCRIMINATION
REQUIREMENTS.—The
term ‘top-heavy plan’ shall not include a cash
or deferred arrangement to the extent that such
arrangement meets the requirements of section
401(k)(12). This subparagraph shall also apply
to contributions that are not required to satisfy
the requirements of section 401(k)(12) but are
consistent with the purposes of such section, as
permitted under regulations which the Sec-
retary shall prescribe. Nothing in this subpara-
graph shall preclude an employer from taking
into account contributions made under the cash
or deferred arrangement when determining
whether any plan of such employer satisfies the
requirements of this section.
‘‘(I) 
DEFINED
CONTRIBUTION
PLANS
USING
ALTERNATIVE
METHODS
OF
MEETING
NONDISCRIMINATION
REQUIREMENTS.—The
term ‘top-heavy plan’ shall not include a de-
fined contribution plan to the extent that such
plan 
meets 
the 
requirements 
of 
section
401(m)(11). This subparagraph shall also apply
to contributions that are not required to satisfy
the requirements of section 401(m)(11) but are
consistent with the purposes of such section, as
permitted under regulations which the Sec-
retary shall prescribe. Nothing in this subpara-
graph shall preclude an employer from taking
into account contributions made under the de-
fined contribution plan when determining
whether any plan of such employer satisfies the
requirements of this section.’’.
(2) AGGREGATION GROUP NOT REQUIRED TO
INCLUDE
CERTAIN
PLANS.—Clause (i) of section
416(g)(2)(A) of such Code (relating to required ag-
gregation) is amended by adding at the end the fol-
lowing new flush sentence:
‘‘Such term shall not include a plan or ar-
rangement described in subparagraph (H)
or (I) of paragraph (4).’’.
(h) ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT.—Clause (i) of section 416(c)(2)(B) (relating to
special rule where maximum contribution less than 3 per-
cent) is amended by inserting ‘‘(other than elective defer-
rals (as defined in section 402(g)(3))’’ after ‘‘contribu-
tions’’.
(i) FROZEN PLAN EXEMPT FROM MINIMUM BENE-
FIT
REQUIREMENT.—Subparagraph 
(C) 
of 
section
416(c)(1) (relating to defined benefit plans) is amended—
(1) in clause (i) by striking ‘‘clause (ii)’’ and in-
serting ‘‘clause (ii) or (iii)’’, and
(2) by adding at the end the following:
‘‘(iii) For purposes of determining an
employee’s years of service with the em-
ployer, any service with the employer shall
be disregarded to the extent that such
service occurs during a plan year when no
employee or former employee benefits
under the plan within the meaning of sec-
tion 410(b).’’.
(j) ALTERNATIVE 60 PERCENT.—Subsection (g) of
section 416 (relating to top heavy plan defined) is amend-
ed by adding at the end the following:
‘‘(5) ALTERNATIVE 60 PERCENT TEST.—
‘‘(A) IN GENERAL.—For any plan year, an
employer may elect for this paragraph to apply
to all plans maintained by such employer. If
this paragraph applies to a plan, the term ‘top-
heavy plan’ shall have the meaning set forth in
subparagraph (B) and the term ‘top-heavy
group’ shall have the meaning set forth in sub-
paragraph (C).
‘‘(B) TOP-HEAVY PLAN DEFINED.—In the
case of any plan to which this paragraph ap-
plies, the term ‘top-heavy plan’ means, with re-
spect to any plan year—
amended by inserting ‘‘and the $5,000 amount
under paragraph (9)’’ after ‘‘paragraph (1)’’.
(b) SIMPLE RETIREMENT ACCOUNTS.—
(1) IN
GENERAL.—Paragraph (2) of section
408(p) (relating to qualified salary reduction ar-
rangement) (as amended by sections 101(f) and
103(a)) is further amended by redesignating sub-
paragraph (F) as subparagraph (G) and by inserting
after subparagraph (E) the following new subpara-
graph:
‘‘(F) 
CATCH-UP
CONTRIBUTIONS
FOR
THOSE
APPROACHING
RETIREMENT.—In the
case of an individual who has attained age 50
during any taxable year, the limitation of sub-
paragraph (A)(ii) for such year shall be in-
creased by $5,000.’’.
(2) COST-OF-LIVING
ADJUSTMENT.—Subpara-
graph (G) of section 408(p)(2) (as so redesignated)
is amended by inserting ‘‘and the $5,000 amount
under subparagraph (F)’’ after ‘‘subparagraph
(A)(ii)’’.
(c) DEFERRED COMPENSATION PLANS
OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI-
ZATIONS.—