‘‘(p) SIMPLE RETIREMENT ACCOUNTS.—
‘‘(1) IN GENERAL.—For purposes of this title,
the term ‘simple retirement account’ means an indi-
vidual retirement plan—
‘‘(A) with respect to which the require-
ments of paragraphs (3), (4), and (5) are met;
and
‘‘(B) with respect to which the only con-
tributions allowed are contributions under a
qualified salary reduction arrangement.
‘‘(2) QUALIFIED SALARY REDUCTION ARRANGE-
MENT.—
‘‘(A) IN GENERAL.—For purposes of this
subsection, the term ‘qualified salary reduction
arrangement’ means a written arrangement of
an eligible employer under which—
‘‘(i) an employee eligible to participate
in the arrangement may elect to have the
employer make payments—
‘‘(I) as elective employer con-
tributions to a simple retirement ac-
count on behalf of the employee, or
‘‘(II) to the employee directly in
cash,
‘‘(ii) the amount which an employee
may elect under clause (i) for any year is
required to be expressed as a percentage of
compensation and may not exceed a total
of $6,000 for any year,
‘‘(iii) the employer is required to make
a matching contribution to the simple re-
tirement account for any year in an
amount equal to so much of the amount
the employee elects under clause (i)(I) as
does not exceed the applicable percentage
of compensation for the year, and
‘‘(iv) no contributions may be made
other than contributions described in
clause (i) or (iii).
‘‘(B) DEFINITIONS.—For purposes of this
subsection—
‘‘(i) ELIGIBLE EMPLOYER.—The term
‘eligible employer’ means an employer who
normally employs 100 or fewer employees
on any day during the year.
‘‘(ii) APPLICABLE PERCENTAGE.—
‘‘(I) IN
GENERAL.—The term
‘applicable percentage’ means 3 per-
cent.
‘‘(II) ELECTION OF LOWER PER-
CENTAGE.—An employer may elect to
apply a lower percentage (not less
than 1 percent) for any year for all
employees eligible to participate in the
plan for such year if the employer no-
tifies the employees of such lower per-
centage within a reasonable period of
time before the 60-day election period
for such year under paragraph (5)(C).
An employer may not elect a lower
percentage under this subclause for
any year if that election would result
in the applicable percentage being
lower than 3 percent in more than 2
of the years in the 5-year period end-
ing with such year.
‘‘(III) SPECIAL RULE FOR YEARS
ARRANGEMENT
NOT
IN
EFFECT.—If
any year in the 5-year period de-
scribed in subclause (II) is a year
prior to the first year for which any
qualified salary reduction arrange-
ment is in effect with respect to the
employer (or any predecessor), the
employer shall be treated as if the
level of the employer matching con-
tribution was at 3 percent of com-
pensation for such year.
‘‘(C) ARRANGEMENT MAY BE ONLY PLAN
OF EMPLOYER.—
‘‘(i) IN
GENERAL.—An arrangement
shall not be treated as a qualified salary
reduction arrangement for any year if the
employer (or any predecessor employer)
maintained a qualified plan with respect to
which contributions were made, or benefits
were accrued, for service in any year in the
period beginning with the year such ar-
rangement became effective and ending
with the year for which the determination
is being made.
‘‘(ii) QUALIFIED PLAN.—For purposes
of this subparagraph, the term ‘qualified
plan’ means a plan, contract, pension, or
trust described in subparagraph (A) or (B)
of section 219(g)(5).
‘‘(D) NO FEE OR PENALTY ON EMPLOY-
EE’S INITIAL INVESTMENT DETERMINATION.—
An arrangement shall not be treated as a quali-
fied salary reduction arrangement unless it pro-
vides that no fee or penalty will be imposed on
an employee’s initial determination with respect
to the investment of any contribution.
‘‘(E) COST-OF-LIVING ADJUSTMENT.—The
Secretary shall adjust the $6,000 amount under
subparagraph (A)(ii) at the same time and in
the same manner as under section 415(d), ex-
cept that the base period taken into account
shall be the calendar quarter ending September
30, 1995, and any increase under this subpara-
graph which is not a multiple of $500 shall be
rounded to the next lower multiple of $500.
‘‘(3) VESTING
REQUIREMENTS.—The require-
ments of this paragraph are met with respect to a
simple retirement account if the employee’s rights to
any contribution to the simple retirement account
are nonforfeitable. For purposes of this paragraph,
the rules similar to the rules of subsection (k)(4)
shall apply.
‘‘(4) PARTICIPATION REQUIREMENTS.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met with respect to any sim-
ple retirement account for a year only if, under
the qualified salary reduction arrangement, all
employees of the employer who—
‘‘(i) received at least $5,000 in com-
pensation from the employer during each
of the 2 preceding years, and
‘‘(ii) who are reasonably expected to
receive at least $5,000 in compensation
during the year,
are eligible to make the election under para-
graph (2)(A)(i).
‘‘(B) EXCLUDABLE EMPLOYEES.—An em-
ployer may elect to exclude from the require-
ment under subparagraph (A) employees de-
scribed in section 410(b)(3).
‘‘(5) ADMINISTRATIVE
REQUIREMENTS.—The
requirements of this paragraph are met with respect
to any simplified retirement account if, under the
qualified salary reduction arrangement—
‘‘(A) an employer must—
‘‘(i) make the elective employer con-
tributions under paragraph (2)(A)(i) not
later than the close of the 30-day period
following the last day of the month with
respect to which the contributions are to
be made, and
‘‘(ii) make the matching contributions
under paragraph (2)(A)(iii) not later than
the 
date 
described 
in 
section
404(m)(2)(B),
‘‘(B) an employee may elect to terminate
participation in such arrangement at any time
during the year, except that if an employee so
terminates, the arrangement may provide that
the employee may not elect to resume participa-
tion until the beginning of the next year, and
‘‘(C) each employee eligible to participate
may elect, during the 60-day period before the
beginning of any year, to participate in the ar-
rangement, or to modify the amounts subject to
such arrangement, for such year.
‘‘(6) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) COMPENSATION.—
‘‘(i) IN
GENERAL.—The term ‘com-
pensation’ means amounts described in
paragraphs (3) and (8) of section 6051(a).
‘‘(ii) SELF-EMPLOYED.—In the case
of an employee described in subparagraph
(B), compensation means net earnings
from self-employment determined under
section 1402(a) without regard to any con-
tribution under this subsection.
‘‘(B) EMPLOYEE.—The term ‘employee’ in-
cludes an employee as defined in section
401(c)(1).
‘‘(C) YEAR.—The term ‘year’ means the
calendar year.’’.
(b) SIMPLE RETIREMENT ACCOUNTS NOT TREATED
AS PENSION PLANS.—Notwithstanding any other provi-
sion of law, a simplified retirement account or qualified
salary reduction arrangement under section 408(p) of the
Internal Revenue Code of 1986 shall not be treated as an
employee benefit plan or pension plan for purposes of the
Employee Retirement Income Security Act of 1974.
(c) TAX TREATMENT OF SIMPLE RETIREMENT AC-
COUNTS.—
(1) DEDUCTIBILITY OF CONTRIBUTIONS BY EM-
PLOYEES.—
(A) Section 219(b) of such Code (relating
to maximum amount of deduction) is amended
by adding at the end the following new para-
graph:
‘‘(4) SPECIAL RULE FOR SIMPLE RETIREMENT
ACCOUNTS.—This section shall not apply with re-
spect to any amount contributed to a simple retire-
ment account established under section 408(p).’’.
(B) Section 219(g)(5)(A) of such Code
(defining active participant) is amended by
striking ‘‘or’’ at the end of clause (iv) and by
adding at the end the following new clause:
‘‘(vi) any simple retirement account
(within the meaning of section 408(p)),
or’’.
(2) DEDUCTIBILITY OF EMPLOYER CONTRIBU-
TIONS.—Section 404 of such Code (relating to de-
ductions for contributions of an employer to pension,
etc. plans) is amended by adding at the end the fol-
lowing new subsection:
‘‘(m) SPECIAL RULES FOR SIMPLE RETIREMENT AC-
COUNTS.—
‘‘(1) IN GENERAL.—Employer contributions to
a simple retirement account shall be treated as if
they are made to a plan subject to the requirements
of this section.
‘‘(2) TIMING.—
‘‘(A) 
DEDUCTION.—Contributions 
de-
scribed in paragraph (1) shall be deductible in
the taxable year of the employer with or within
which the calendar year for which the contribu-
tions were made ends.
‘‘(B) CONTRIBUTIONS
AFTER
END
OF
YEAR.—For purposes of this subsection, con-
tributions shall be treated as made for a taxable
year if they are made on account of the taxable
year and are made not later than the time pre-
scribed by law for filing the return for the tax-
able year (including extensions thereof).’’.
(3) CONTRIBUTIONS AND DISTRIBUTIONS.—
(A) Section 402 of such Code (relating to
taxability of beneficiary of employees’ trust) is
amended by adding at the end the following
new subsection:
‘‘(k) TREATMENT
OF SIMPLE RETIREMENT AC-
COUNTS.—Rules similar to the rules of paragraphs (1)
and (3) of subsection (h) shall apply to contributions and
distributions with respect to a simple retirement account
under section 408(p).’’.
(B) Section 408(d)(3) of such Code is
amended by adding at the end the following
new subparagraph:
‘‘(G) SIMPLE
RETIREMENT
ACCOUNTS.—
This paragraph shall not apply to any amount
paid or distributed out of a simple retirement