116
amount in effect for such taxable year under section
219(b)(1)(A)’’.
(2) Section 408(b)(2)(B) is amended by striking
‘‘$2,000’’ and inserting ‘‘the dollar amount in effect
under section 219(b)(1)(A)’’.
(3) Section 408(b) is amended by striking
‘‘$2,000’’ in the matter following paragraph (4) and
inserting ‘‘the dollar amount in effect under section
219(b)(1)(A)’’.
(4) Section 408(j) is amended by striking
‘‘$2,000’’.
(5) Section 408(p)(8) is amended by striking
‘‘$2,000’’ and inserting ‘‘the dollar amount in effect
under section 219(b)(1)(A)’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 102. DEEMED IRAS UNDER EMPLOYER PLANS.
(a) IN GENERAL.—Section 408 (relating to individual
retirement accounts) is amended by redesignating sub-
section (q) as subsection (r) and by inserting after sub-
section (p) the following new subsection:
‘‘(q) DEEMED IRAS UNDER QUALIFIED EMPLOYER
PLANS.—
‘‘(1) GENERAL RULE.—If—
117
‘‘(A) a qualified employer plan elects to
allow employees to make voluntary employee
contributions to a separate account or annuity
established under the plan, and
‘‘(B) under the terms of the qualified em-
ployer plan, such account or annuity meets the
applicable requirements of this section or section
408A for an individual retirement account or
annuity,
then such account or annuity shall be treated for pur-
poses of this title in the same manner as an indi-
vidual retirement plan and not as a qualified em-
ployer plan (and contributions to such account or an-
nuity as contributions to an individual retirement
plan and not to the qualified employer plan). For
purposes of subparagraph (B), the requirements of
subsection (a)(5) shall not apply.
‘‘(2) SPECIAL RULES FOR QUALIFIED EMPLOYER
PLANS.—For purposes of this title, a qualified em-
ployer plan shall not fail to meet any requirement of
this title solely by reason of establishing and main-
taining a program described in paragraph (1).
‘‘(3) 
DEFINITIONS.—For 
purposes 
of 
this
subsection—
118
‘‘(A) QUALIFIED
EMPLOYER
PLAN.—The
term ‘qualified employer plan’ has the meaning
given such term by section 72(p)(4); except such
term shall only include an eligible deferred com-
pensation plan (as defined in section 457(b))
which is maintained by an eligible employer de-
scribed in section 457(e)(1)(A).
‘‘(B) VOLUNTARY
EMPLOYEE
CONTRIBU-
TION.—The term ‘voluntary employee contribu-
tion’ means any contribution (other than a man-
datory contribution within the meaning of sec-
tion 411(c)(2)(C))—
‘‘(i) which is made by an individual as
an employee under a qualified employer
plan which allows employees to elect to
make contributions described in paragraph
(1), and
‘‘(ii) with respect to which the indi-
vidual has designated the contribution as a
contribution to which this subsection ap-
plies.’’.
(b) AMENDMENT OF ERISA.—
(1) IN GENERAL.—Section 4 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
119
1003) is amended by adding at the end the following
new subsection:
‘‘(c) If a pension plan allows an employee to elect to
make voluntary employee contributions to accounts and an-
nuities as provided in section 408(q) of the Internal Rev-
enue Code of 1986, such accounts and annuities (and con-
tributions thereto) shall not be treated as part of such plan
(or as a separate pension plan) for purposes of any provi-
sion of this title other than section 403(c), 404, or 405 (re-
lating to exclusive benefit, and fiduciary and co-fiduciary
responsibilities).’’.
(2) CONFORMING AMENDMENT.—Section 4(a) of
such Act (29 U.S.C. 1003(a)) is amended by inserting
‘‘or (c)’’ after ‘‘subsection (b)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2001.
SEC. 103. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RE-
TIREMENT ACCOUNTS FOR CHARITABLE PUR-
POSES.
(a) IN GENERAL.—Subsection (d) of section 408 (relat-
ing to individual retirement accounts) is amended by add-
ing at the end the following new paragraph:
‘‘(8) DISTRIBUTIONS
FOR
CHARITABLE
PUR-
POSES.—
120
‘‘(A) IN GENERAL.—In the case of a quali-
fied charitable distribution from an individual
retirement account to an organization described
in section 170(c), no amount shall be includible
in the gross income of the account holder or bene-
ficiary.
‘‘(B) SPECIAL RULES RELATING TO CHARI-
TABLE
REMAINDER
TRUSTS, POOLED
INCOME
FUNDS, AND CHARITABLE GIFT ANNUITIES.—
‘‘(i) IN GENERAL.—In the case of a
qualified charitable distribution from an in-
dividual retirement account—
‘‘(I) to a charitable remainder an-
nuity trust or a charitable remainder
unitrust (as such terms are defined in
section 664(d)),
‘‘(II) to a pooled income fund (as
defined in section 642(c)(5)), or
‘‘(III) for the issuance of a chari-
table gift annuity (as defined in sec-
tion 501(m)(5)),
no amount shall be includible in gross in-
come of the account holder or beneficiary.
The preceding sentence shall apply only if
no person holds any interest in the amounts
121
in the trust, fund, or annuity attributable
to such distribution other than one or more
of the following: the individual for whose
benefit such account is maintained, the
spouse of such individual, or any organiza-
tion described in section 170(c).
‘‘(ii) DETERMINATION
OF
INCLUSION
OF
AMOUNTS
DISTRIBUTED.—In 
deter-
mining the amount includible in the gross
income of the distributee of a distribution
from a trust described in clause (i)(I) or an
annuity (as described in clause (i)(III)), the
portion of any qualified charitable distribu-
tion to such trust or for such annuity which
would (but for this subparagraph) have been
includible in gross income—
‘‘(I) in the case of any such trust,
shall be treated as income described in
section 664(b)(1), or
‘‘(II) in the case of any such an-
nuity, shall not be treated as an invest-
ment in the contract.
‘‘(iii) NO
INCLUSION
FOR
DISTRIBU-
TION
TO
POOLED
INCOME
FUND.—No
amount shall be includible in the gross in-
122
come of a pooled income fund (as so de-
fined) by reason of a qualified charitable
distribution to such fund.
‘‘(C) QUALIFIED
CHARITABLE
DISTRIBU-
TION.—For purposes of this paragraph, the term
‘qualified charitable distribution’ means any dis-
tribution 
from 
an 
individual 
retirement
account—
‘‘(i) which is made on or after the date
that the individual for whose benefit the ac-
count is maintained has attained age 701⁄2,
and
‘‘(ii) which is a charitable contribution
(as defined in section 170(c)) made directly
from the account to—
‘‘(I) an organization described in
section 170(c), or
‘‘(II) a trust, fund, or annuity de-
scribed in subparagraph (B).
‘‘(D) DENIAL OF DEDUCTION.—The amount
allowable as a deduction to the taxpayer for the
taxable year under section 170 for qualified
charitable distributions shall be reduced (but not
below zero) by the sum of the amounts of the
qualified charitable distributions during such
123
year which (but for this paragraph) would have
been includible in the gross income of the tax-
payer for such year.’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to taxable years beginning after De-
cember 31, 2000.
SEC. 104. MODIFICATION OF AGI LIMITS FOR ROTH IRAS.
(a) INCREASE IN AGI LIMIT FOR ROTH IRA CON-
TRIBUTIONS.—
(1) IN GENERAL.—Section 408A(c)(3)(C)(ii) (re-
lating to limits based on modified adjusted gross in-
come) is amended to read as follows:
‘‘(ii) the applicable dollar amount is—
‘‘(I) in the case of a taxpayer fil-
ing a joint return, $190,000, and
‘‘(II) in the case of any other tax-
payer, $95,000.’’.
(2) PHASEOUT AMOUNT.—Clause (ii) of section
408A(c)(3)(A) is amended to read as follows:
‘‘(ii) $15,000 ($30,000 in the case of a
joint return).’’
(b) INCREASE IN AGI LIMIT FOR ROTH IRA CONVER-
SIONS.—Section 408A(c)(3)(B) (relating to rollover from
IRA) is amended by striking ‘‘relates’’ and all that follows
124
and inserting ‘‘relates, the taxpayer’s adjusted gross income
exceeds $100,000 ($200,000 in the case of a joint return).’’.
(c) CONFORMING AMENDMENT.—Section 408A(c)(3) is
amended by striking subparagraph (D).
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
TITLE II—EXPANDING
COVERAGE
SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION LIM-
ITS.
(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
‘‘$160,000’’.
(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 ‘‘$160,000’’.
(C) Paragraph (7) of section 415(b) (relat-
ing to benefits under certain collectively bar-
gained plans) is amended by striking ‘‘the great-
er of $68,212 or one-half the amount otherwise
125
applicable for such year under paragraph (1)(A)
for ‘$90,000’ ’’ and inserting ‘‘one-half the
amount otherwise applicable for such year under
paragraph (1)(A) for ‘$160,000’ ’’.
(2) LIMIT REDUCED WHEN BENEFIT BEGINS BE-
FORE 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’’ and by striking the second
sentence.
(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) COST-OF-LIVING ADJUSTMENTS.—Subsection
(d) of section 415 (related to cost-of-living adjust-
ments) is amended—
(A) by striking ‘‘$90,000’’ in paragraph
(1)(A) and inserting ‘‘$160,000’’; and
(B) in paragraph (3)(A)—
(i) by striking ‘‘$90,000’’ in the head-
ing and inserting ‘‘$160,000’’; and
(ii) by striking ‘‘October 1, 1986’’ and
inserting ‘‘July 1, 2000’’.
126
(5) CONFORMING AMENDMENTS.—
(A) Section 415(b)(2) is amended by strik-
ing subparagraph (F).
(B) Section 415(b)(9) is amended to read as
follows:
‘‘(9) SPECIAL RULE FOR COMMERCIAL AIR-
LINE PILOTS.—In the case of any participant
who is a commercial airline pilot, if, as of the
time of the participant’s retirement, regulations
prescribed by the Federal Aviation Administra-
tion require an individual to separate from serv-
ice as a commercial airline pilot after attaining
any age occurring on or after age 60 and before
age 62, paragraph (2)(C) (after application of
clause (i)) shall be applied by substituting such
age for age 62.’’.
(C) Section 415(b)(10)(C)(i) is amended by
striking ‘‘applied without regard to paragraph
(2)(F)’’.
(b) 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 appears and insert-
ing ‘‘$200,000’’.
127
(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, 2000’’; and
(B) by striking ‘‘$10,000’’ both places it ap-
pears and inserting ‘‘$5,000’’.
(c) ELECTIVE DEFERRALS.—
(1) IN
GENERAL.—Paragraph (1) of section
402(g) (relating to limitation on exclusion for elective
deferrals) is amended to read as follows:
‘‘(1) IN GENERAL.—
‘‘(A) LIMITATION.—Notwithstanding sub-
sections (e)(3) and (h)(1)(B), the elective defer-
rals of any individual for any taxable year shall
be included in such individual’s gross income to
the extent the amount of such deferrals for the
taxable year exceeds the applicable dollar
amount.
‘‘(B) APPLICABLE
DOLLAR
AMOUNT.—For
purposes of subparagraph (A), the applicable
dollar amount shall be the amount determined in
accordance with the following table:
‘‘For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2001 ....................................................................................
$11,000
2002 ....................................................................................
$12,000
128
2003 ....................................................................................
$13,000
2004 ....................................................................................
$14,000
2005 or thereafter ..............................................................
$15,000.’’.
(2) COST-OF-LIVING
ADJUSTMENT.—Paragraph
(5) of section 402(g) is amended to read as follows:
‘‘(5) COST-OF-LIVING ADJUSTMENT.—In the case
of taxable years beginning after December 31, 2005,
the Secretary shall adjust the $15,000 amount under
paragraph (1)(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 beginning July 1,
2004, and any increase under this paragraph which
is not a multiple of $500 shall be rounded to the next
lowest multiple of $500.’’.
(3) CONFORMING AMENDMENTS.—
(A) Section 402(g) (relating to limitation
on exclusion for elective deferrals), as amended
by paragraphs (1) and (2), is further amended
by striking paragraph (4) and redesignating
paragraphs (5), (6), (7), (8), and (9) as para-
graphs (4), (5), (6), (7), and (8), respectively.
(B) Paragraph (2) of section 457(c) is
amended by striking ‘‘402(g)(8)(A)(iii)’’ and in-
serting ‘‘402(g)(7)(A)(iii)’’.
(C) Clause (iii) of section 501(c)(18)(D) is
amended by striking ‘‘(other than paragraph (4)
thereof)’’.
129
(d) DEFERRED COMPENSATION PLANS OF STATE AND
LOCAL
GOVERNMENTS
AND
TAX-EXEMPT
ORGANIZA-
TIONS.—
(1) IN GENERAL.—Section 457 (relating to de-
ferred compensation plans of State and local govern-
ments and tax-exempt organizations) is amended—
(A) in subsections (b)(2)(A) and (c)(1) by
striking ‘‘$7,500’’ each place it appears and in-
serting ‘‘the applicable dollar amount’’; and
(B) in subsection (b)(3)(A) by striking
‘‘$15,000’’ and inserting ‘‘twice the dollar
amount in effect under subsection (b)(2)(A)’’.
(2) APPLICABLE DOLLAR AMOUNT; COST-OF-LIV-
ING ADJUSTMENT.—Paragraph (15) of section 457(e)
is amended to read as follows:
‘‘(15) APPLICABLE DOLLAR AMOUNT.—
‘‘(A) IN GENERAL.—The applicable dollar
amount shall be the amount determined in ac-
cordance with the following table:
‘‘For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2001 ....................................................................................
$11,000
2002 ....................................................................................
$12,000
2003 ....................................................................................
$13,000
2004 ....................................................................................
$14,000
2005 or thereafter ..............................................................
$15,000.
‘‘(B) COST-OF-LIVING
ADJUSTMENTS.—In
the case of taxable years beginning after Decem-
130
ber 31, 2005, the Secretary shall adjust the
$15,000 amount under subparagraph (A) at the
same time and in the same manner as under sec-
tion 415(d), except that the base period shall be
the calendar quarter beginning July 1, 2004,
and any increase under this paragraph which is
not a multiple of $500 shall be rounded to the
next lowest multiple of $500.’’.
(e) SIMPLE RETIREMENT ACCOUNTS.—
(1) 
LIMITATION.—Clause 
(ii) 
of 
section
408(p)(2)(A) (relating to general rule for qualified
salary reduction arrangement) is amended by striking
‘‘$6,000’’ and inserting ‘‘the applicable dollar
amount’’.
(2) APPLICABLE
DOLLAR
AMOUNT.—Subpara-
graph (E) of 408(p)(2) is amended to read as follows:
‘‘(E) APPLICABLE DOLLAR AMOUNT; COST-
OF-LIVING ADJUSTMENT.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A)(ii), the applicable dollar
amount shall be the amount determined in
accordance with the following table:
‘‘For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2001 ............................................................................
$7,000
2002 ............................................................................
$8,000
2003 ............................................................................
$9,000
2004 or thereafter ......................................................
$10,000.
131
‘‘(ii) COST-OF-LIVING
ADJUSTMENT.—
In the case of a year beginning after Decem-
ber 31, 2004, the Secretary shall adjust the
$10,000 amount under clause (i) at the
same time and in the same manner as
under section 415(d), except that the base
period taken into account shall be the cal-
endar quarter beginning July 1, 2003, and
any increase under this subparagraph
which is not a multiple of $500 shall be
rounded to the next lower multiple of
$500.’’.
(3) CONFORMING AMENDMENTS.—
(A) 
Subclause 
(I) 
of 
section
401(k)(11)(B)(i) 
is 
amended 
by 
striking
‘‘$6,000’’ and inserting ‘‘the amount in effect
under section 408(p)(2)(A)(ii)’’.
(B) Section 401(k)(11) is amended by strik-
ing subparagraph (E).
(f) ROUNDING RULE RELATING TO DEFINED BENEFIT
PLANS AND DEFINED CONTRIBUTION PLANS.—Paragraph
(4) of section 415(d) is amended to read as follows:
‘‘(4) ROUNDING.—
‘‘(A) 
$160,000 
AMOUNT.—Any 
increase
under subparagraph (A) of paragraph (1) which
132
is not a multiple of $5,000 shall be rounded to
the next lowest multiple of $5,000.
‘‘(B) 
$30,000 
AMOUNT.—Any 
increase
under subparagraph (C) of paragraph (1) which
is not a multiple of $1,000 shall be rounded to
the next lowest multiple of $1,000.’’.
(g) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PART-
NERS, AND SOLE PROPRIETORS.
(a) IN
GENERAL.—Subparagraph (B) of section
4975(f)(6) (relating to exemptions not to apply to certain
transactions) is amended by adding at the end the following
new clause:
‘‘(iii) LOAN EXCEPTION.—For purposes
of subparagraph (A)(i), the term ‘owner-em-
ployee’ shall only include a person described
in subclause (II) or (III) of clause (i).’’.
(b) AMENDMENT TO ERISA.—Section 408(d)(2) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1108(d)(2)) is amended by adding at the end the
following new subparagraph:
133
‘‘(C) For purposes of paragraph (1)(A), the term
‘owner-employee’ shall only include a person described in
clause (ii) or (iii) of subparagraph (A).’’.
(c) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
2000.
SEC. 203. MODIFICATION OF TOP-HEAVY RULES.
(a) SIMPLIFICATION
OF DEFINITION
OF KEY EM-
PLOYEE.—
(1) IN GENERAL.—Section 416(i)(1)(A) (defining
key employee) is amended—
(A) by striking ‘‘plan year or any of the 4
preceding plan years’’ and inserting ‘‘preceding
plan year’’ in the matter preceding clause (i);
(B) by striking clause (i) and inserting the
following:
‘‘(i) an officer of the employer having
an annual compensation greater than the
amount 
in 
effect 
under 
section
414(q)(1)(B)(i) for such plan year,’’;
(C) by striking clause (ii) and redesig-
nating clauses (iii) and (iv) as clauses (ii) and
(iii), respectively;
134
(D) by striking the second sentence in the
matter following clause (iii), as redesignated by
subparagraph (C); and
(E) by adding at the end the following:
‘‘For purposes of this subparagraph, in the case
of an employee who is not employed during the
preceding plan year or is employed for a portion
of such year, such employee shall be treated as a
key employee if it can be reasonably anticipated
that such employee will be described in 1 of the
preceding clauses for the current plan year.’’.
(2) 
CONFORMING
AMENDMENT.—Section
416(i)(1)(B)(iii) is amended by striking ‘‘and sub-
paragraph (A)(ii)’’.
(b) MATCHING CONTRIBUTIONS TAKEN INTO ACCOUNT
FOR MINIMUM CONTRIBUTION REQUIREMENTS.—Section
416(c)(2)(A) (relating to defined contribution plans) is
amended by adding at the end the following: ‘‘Employer
matching 
contributions 
(as 
defined 
in 
section
401(m)(4)(A)) shall be taken into account for purposes of
this subparagraph.’’.
(c) DISTRIBUTIONS DURING LAST YEAR BEFORE DE-
TERMINATION DATE TAKEN INTO ACCOUNT.—
(1) IN
GENERAL.—Paragraph (3) of section
416(g) is amended to read as follows:
135
‘‘(3) DISTRIBUTIONS DURING LAST YEAR BEFORE
DETERMINATION DATE TAKEN INTO ACCOUNT.—
‘‘(A) 
IN
GENERAL.—For 
purposes 
of
determining—
‘‘(i) the present value of the cumulative
accrued benefit for any employee, or
‘‘(ii) the amount of the account of any
employee,
such present value or amount shall be increased
by the aggregate distributions made with respect
to such employee under the plan during the 1-
year period ending on the determination date.
The preceding sentence shall also apply to dis-
tributions under a terminated plan which if it
had not been terminated would have been re-
quired to be included in an aggregation group.
‘‘(B) 5-YEAR PERIOD IN CASE OF IN-SERV-
ICE DISTRIBUTION.—In the case of any distribu-
tion made for a reason other than separation
from service, death, or disability, subparagraph
(A) shall be applied by substituting ‘5-year pe-
riod’ for ‘1-year period’.’’.
(2) BENEFITS NOT TAKEN INTO ACCOUNT.—Sub-
paragraph (E) of section 416(g)(4) is amended—
136
(A) by striking ‘‘LAST
YEARS’’ in the
heading and inserting ‘‘LAST YEAR BEFORE DE-
TERMINATION DATE’’; and
(B) by striking ‘‘5-year period’’ and insert-
ing ‘‘1-year period’’.
(d) DEFINITION OF TOP-HEAVY PLANS.—Paragraph
(4) of section 416(g) (relating to other special rules for top-
heavy plans) is amended by adding at the end the following
new subparagraph:
‘‘(H) CASH OR DEFERRED ARRANGEMENTS
USING ALTERNATIVE METHODS OF MEETING NON-
DISCRIMINATION
REQUIREMENTS.—The 
term
‘top-heavy plan’ shall not include a plan which
consists solely of—
‘‘(i) a cash or deferred arrangement
which meets the requirements of section
401(k)(12), and
‘‘(ii) matching contributions with re-
spect to which the requirements of section
401(m)(11) are met.
If, but for this subparagraph, a plan would be
treated as a top-heavy plan because it is a mem-
ber of an aggregation group which is a top-heavy
group, contributions under the plan may be
taken into account in determining whether any
137
other plan in the group meets the requirements
of subsection (c)(2).’’.
(e) FROZEN PLAN EXEMPT FROM MINIMUM BENEFIT
REQUIREMENT.—Subparagraph (C) of section 416(c)(1)
(relating to defined benefit plans) is amended—
(A) by striking ‘‘clause (ii)’’ in clause (i)
and inserting ‘‘clause (ii) or (iii)’’; and
(B) by adding at the end the following:
‘‘(iii) 
EXCEPTION
FOR
FROZEN
PLAN.—For purposes of determining an em-
ployee’s years of service with the employer,
any service with the employer shall be dis-
regarded to the extent that such service oc-
curs during a plan year when the plan ben-
efits (within the meaning of section 410(b))
no key employee or former key employee.’’.
(f) ELIMINATION OF FAMILY ATTRIBUTION.—Section
416(i)(1)(B) (defining 5-percent owner) is amended by add-
ing at the end the following new clause:
‘‘(iv) 
FAMILY
ATTRIBUTION
DIS-
REGARDED.—Solely for purposes of apply-
ing this paragraph (and not for purposes of
any provision of this title which incor-
porates by reference the definition of a key
employee or 5-percent owner under this
138
paragraph), section 318 shall be applied
without regard to subsection (a)(1) thereof
in determining whether any person is a 5-
percent owner.’’.
(g) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF DEDUCTION LIM-
ITS.
(a) IN GENERAL.—Section 404 (relating to deduction
for contributions of an employer to an employees’ trust or
annuity plan and compensation under a deferred payment
plan) is amended by adding at the end the following new
subsection:
‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF DEDUCTION LIMITS.—Elective
deferrals (as defined in section 402(g)(3)) shall not be sub-
ject to any limitation contained in paragraph (3), (7), or
(9) of subsection (a), and such elective deferrals shall not
be taken into account in applying any such limitation to
any other contributions.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
2000.
139
SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR
DEFERRED COMPENSATION PLANS OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS.
(a) IN GENERAL.—Subsection (c) of section 457 (relat-
ing to deferred compensation plans of State and local gov-
ernments and tax-exempt organizations), as amended by
section 201, is amended to read as follows:
‘‘(c) LIMITATION.—The maximum amount of the com-
pensation of any one individual which may be deferred
under subsection (a) during any taxable year shall not ex-
ceed the amount in effect under subsection (b)(2)(A) (as
modified by any adjustment provided under subsection
(b)(3)).’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to years beginning after December
31, 2000.
SEC. 206. DEDUCTION LIMITS.
(a) INCREASE IN PERCENTAGE.—
(1) 
STOCK
BONUS
AND
PROFIT
SHARING
TRUSTS.—
(A) IN GENERAL.—Subclause (I) of section
404(a)(3)(A)(i) (relating to stock bonus and
profit sharing trusts) is amended by striking ‘‘15
percent’’ and inserting ‘‘25 percent’’.
140
(B) CONFORMING
AMENDMENT.—Subpara-
graph (C) of section 404(h)(1) is amended by
striking ‘‘15 percent’’ each place it appears and
inserting ‘‘25 percent’’.
(2) DEFINED CONTRIBUTION PLANS.—
(A) IN
GENERAL.—Clause (v) of section
404(a)(3)(A) (relating to stock bonus and profit
sharing trusts) is amended to read as follows:
‘‘(v) DEFINED
CONTRIBUTION
PLANS
SUBJECT TO THE FUNDING STANDARDS.—
Except as provided by the Secretary, a de-
fined contribution plan which is subject to
the funding standards of section 412 shall
be treated in the same manner as a stock
bonus or profit-sharing plan for purposes of
this subparagraph.’’
(B) CONFORMING AMENDMENTS.—
(i) Section 404(h)(2) is amended by
striking ‘‘stock bonus or profit-sharing
trust’’ and inserting ‘‘trust subject to sub-
section (a)(3)(A)’’.
(ii) The heading of section 404(h)(2) is
amended by striking ‘‘STOCK BONUS AND
PROFIT-SHARING
TRUST’’ and inserting
‘‘CERTAIN TRUSTS’’.
141
(b) COMPENSATION.—
(1) IN GENERAL.—Section 404(a) (relating to
general rule) is amended by adding at the end the fol-
lowing:
‘‘(12) DEFINITION OF COMPENSATION.—For pur-
poses of paragraphs (3), (7), (8), and (9), the term
‘compensation otherwise paid or accrued during the
taxable year’ shall include amounts treated as ‘par-
ticipant’s compensation’ under subparagraph (C) or
(D) of section 415(c)(3).’’.
(2) CONFORMING AMENDMENTS.—
(A) Subparagraph (B) of section 404(a)(3)
is amended by striking the last sentence thereof.
(B) Clause (i) of section 4972(c)(6)(B) is
amended by striking ‘‘(within the meaning of
section 404(a))’’ and inserting ‘‘(within the
meaning of section 404(a) and as adjusted under
section 404(a)(12))’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 207. OPTION TO TREAT ELECTIVE DEFERRALS AS
AFTER-TAX ROTH CONTRIBUTIONS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 (relating to deferred compensation, etc.) is
142
amended by inserting after section 402 the following new
section:
‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER-
RALS AS ROTH CONTRIBUTIONS.
‘‘(a) GENERAL RULE.—If an applicable retirement
plan includes a qualified Roth contribution program—
‘‘(1) any designated Roth contribution made by
an employee pursuant to the program shall be treated
as an elective deferral for purposes of this chapter, ex-
cept that such contribution shall not be excludable
from gross income, and
‘‘(2) such plan (and any arrangement which is
part of such plan) shall not be treated as failing to
meet any requirement of this chapter solely by reason
of including such program.
‘‘(b) QUALIFIED ROTH CONTRIBUTION PROGRAM.—
For purposes of this section—
‘‘(1) IN
GENERAL.—The term ‘qualified Roth
contribution program’ means a program under which
an employee may elect to make designated Roth con-
tributions in lieu of all or a portion of elective defer-
rals the employee is otherwise eligible to make under
the applicable retirement plan.
‘‘(2) SEPARATE ACCOUNTING REQUIRED.—A pro-
gram shall not be treated as a qualified Roth con-
143
tribution program unless the applicable retirement
plan—
‘‘(A) establishes separate accounts (‘des-
ignated Roth accounts’) for the designated Roth
contributions of each employee and any earnings
properly allocable to the contributions, and
‘‘(B) maintains separate recordkeeping with
respect to each account.
‘‘(c) DEFINITIONS AND RULES RELATING TO DES-
IGNATED ROTH CONTRIBUTIONS.—For purposes of this
section—
‘‘(1) DESIGNATED ROTH
CONTRIBUTION.—The
term ‘designated Roth contribution’ means any elec-
tive deferral which—
‘‘(A) is excludable from gross income of an
employee without regard to this section, and
‘‘(B) the employee designates (at such time
and in such manner as the Secretary may pre-
scribe) as not being so excludable.
‘‘(2) DESIGNATION LIMITS.—The amount of elec-
tive deferrals which an employee may designate under
paragraph (1) shall not exceed the excess (if any) of—
‘‘(A) the maximum amount of elective defer-
rals excludable from gross income of the employee
144
for the taxable year (without regard to this sec-
tion), over
‘‘(B) the aggregate amount of elective defer-
rals of the employee for the taxable year which
the employee does not designate under paragraph
(1).
‘‘(3) ROLLOVER CONTRIBUTIONS.—
‘‘(A) IN GENERAL.—A rollover contribution
of any payment or distribution from a des-
ignated Roth account which is otherwise allow-
able under this chapter may be made only if the
contribution is to—
‘‘(i) another designated Roth account
of the individual from whose account the
payment or distribution was made, or
‘‘(ii) a Roth IRA of such individual.
‘‘(B) COORDINATION
WITH
LIMIT.—Any
rollover contribution to a designated Roth ac-
count under subparagraph (A) shall not be taken
into account for purposes of paragraph (1).
‘‘(d) DISTRIBUTION RULES.—For purposes of this
title—
‘‘(1) EXCLUSION.—Any qualified distribution
from a designated Roth account shall not be includ-
ible in gross income.
145
‘‘(2) QUALIFIED
DISTRIBUTION.—For purposes
of this subsection—
‘‘(A) IN GENERAL.—The term ‘qualified dis-
tribution’ has the meaning given such term by
section 408A(d)(2)(A) (without regard to clause
(iv) thereof).
‘‘(B) DISTRIBUTIONS
WITHIN
NONEXCLU-
SION PERIOD.—A payment or distribution from
a designated Roth account shall not be treated as
a qualified distribution if such payment or dis-
tribution is made within the 5-taxable-year pe-
riod beginning with the earlier of—
‘‘(i) the first taxable year for which the
individual made a designated Roth con-
tribution to any designated Roth account
established for such individual under the
same applicable retirement plan, or
‘‘(ii) if a rollover contribution was
made to such designated Roth account from
a designated Roth account previously estab-
lished for such individual under another
applicable retirement plan, the first taxable
year for which the individual made a des-
ignated Roth contribution to such pre-
viously established account.
146
‘‘(C) DISTRIBUTIONS
OF
EXCESS
DEFER-
RALS
AND
CONTRIBUTIONS
AND
EARNINGS
THEREON.—The term ‘qualified distribution’
shall not include any distribution of any excess
deferral under section 402(g)(2) or any excess
contribution under section 401(k)(8), and any
income on the excess deferral or contribution.
‘‘(3) AGGREGATION RULES.—Section 72 shall be
applied separately with respect to distributions and
payments from a designated Roth account and other
distributions and payments from the plan.
‘‘(e) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) APPLICABLE RETIREMENT PLAN.—The term
‘applicable retirement plan’ means—
‘‘(A) an employees’ trust described in sec-
tion 401(a) which is exempt from tax under sec-
tion 501(a), and
‘‘(B) a plan under which amounts are con-
tributed by an individual’s employer for an an-
nuity contract described in section 403(b).
‘‘(2) ELECTIVE DEFERRAL.—The term ‘elective
deferral’ means any elective deferral described in sub-
paragraph (A) or (C) of section 402(g)(3).’’.
147
(b) EXCESS DEFERRALS.—Section 402(g) (relating to
limitation on exclusion for elective deferrals) is amended—
(1) by adding at the end of paragraph (1)(A) (as
added by section 201(c)(1)) the following new sen-
tence: ‘‘The preceding sentence shall not apply to so
much of such excess as does not exceed the designated
Roth contributions of the individual for the taxable
year.’’; and
(2) by inserting ‘‘(or would be included but for
the last sentence thereof)’’ after ‘‘paragraph (1)’’ in
paragraph (2)(A).
(c) 
ROLLOVERS.—Subparagraph 
(B) 
of 
section
402(c)(8) is amended by adding at the end the following:
‘‘If any portion of an eligible rollover distribu-
tion is attributable to payments or distributions
from a designated Roth account (as defined in
section 402A), an eligible retirement plan with
respect to such portion shall include only another
designated Roth account and a Roth IRA.’’.
(d) REPORTING REQUIREMENTS.—
(1) W–2 INFORMATION.—Section 6051(a)(8) is
amended by inserting ‘‘, including the amount of des-
ignated Roth contributions (as defined in section
402A)’’ before the comma at the end.
148
(2) INFORMATION.—Section 6047 is amended by
redesignating subsection (f) as subsection (g) and by
inserting after subsection (e) the following new sub-
section:
‘‘(f) DESIGNATED ROTH CONTRIBUTIONS.—The Sec-
retary shall require the plan administrator of each applica-
ble retirement plan (as defined in section 402A) to make
such returns and reports regarding designated Roth con-
tributions (as defined in section 402A) to the Secretary,
participants and beneficiaries of the plan, and such other
persons as the Secretary may prescribe.’’.
(e) CONFORMING AMENDMENTS.—
(1) Section 408A(e) is amended by adding after
the first sentence the following new sentence: ‘‘Such
term includes a rollover contribution described in sec-
tion 402A(c)(3)(A).’’.
(2) The table of sections for subpart A of part I
of subchapter D of chapter 1 is amended by inserting
after the item relating to section 402 the following
new item:
‘‘Sec. 402A. Optional treatment of elective deferrals as Roth con-
tributions.’’.
(f) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
149
SEC. 208. NONREFUNDABLE CREDIT TO CERTAIN INDIVID-
UALS FOR ELECTIVE DEFERRALS AND IRA
CONTRIBUTIONS.
(a) IN GENERAL.—Subpart A of part IV of subchapter
A of chapter 1 (relating to nonrefundable personal credits)
is amended by inserting after section 25A the following new
section:
‘‘SEC. 25B. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS
BY CERTAIN INDIVIDUALS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an eligi-
ble individual, there shall be allowed as a credit against
the tax imposed by this subtitle for the taxable year an
amount equal to the applicable percentage of so much of
the qualified retirement savings contributions of the eligible
individual for the taxable year as do not exceed $2,000.
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of this
section, the applicable percentage is the percentage deter-
mined in accordance with the following table:
Adjusted Gross Income
Applica-
ble per-
centage
Joint return
Head of a household
All other cases
Over
Not over
Over
Not over
Over
Not over
$0
$20,000
$0
$15,000
$0
$10,000
20,000
25,000
15,000
18,750
10,000
12,500
25,000
30,000
18,750
22,500
12,500
15,000
30,000
35,000
22,500
26,250
15,000
17,500
35,000
40,000
26,250
30,000
17,500
20,000
40,000
45,000
30,000
33,750
20,000
22,500
45,000
50,000
33,750
37,500
22,500
25,000
50,000
37,500
25,000
150
‘‘(c) ELIGIBLE INDIVIDUAL.—For purposes of this
section—
‘‘(1) IN
GENERAL.—The term ‘eligible indi-
vidual’ means any individual if such individual has
attained the age of 18 as of the close of the taxable
year.
‘‘(2) DEPENDENTS
AND
FULL-TIME
STUDENTS
NOT ELIGIBLE.—The term ‘eligible individual’ shall
not include—
‘‘(A) any individual with respect to whom
a deduction under section 151 is allowed to an-
other taxpayer for a taxable year beginning in
the calendar year in which such individual’s
taxable year begins, and
‘‘(B) any individual who is a student (as
defined in section 151(c)(4)).
‘‘(d) QUALIFIED RETIREMENT SAVINGS CONTRIBU-
TIONS.—For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified retire-
ment savings contributions’ means, with respect to
any taxable year, the sum of—
‘‘(A) the amount of the qualified retirement
contributions (as defined in section 219(e)) made
by the eligible individual,
‘‘(B) the amount of—
151
‘‘(i) any elective deferrals (as defined
in section 402(g)(3)) of such individual,
and
‘‘(ii) any elective deferral of compensa-
tion by such individual under an eligible
deferred compensation plan (as defined in
section 457(b)) of an eligible employer de-
scribed in section 457(e)(1)(A), and
‘‘(C) the amount of voluntary employee con-
tributions by such individual to any qualified
retirement plan (as defined in section 4974(c)).
‘‘(2) 
REDUCTION
FOR
CERTAIN
DISTRIBU-
TIONS.—
‘‘(A) IN
GENERAL.—The qualified retire-
ment savings contributions determined under
paragraph (1) shall be reduced (but not below
zero) by the sum of—
‘‘(i) any distribution from a qualified
retirement plan (as defined in section
4974(c)), or from an eligible deferred com-
pensation plan (as defined in section
457(b)), received by the individual during
the testing period which is includible in
gross income, and
152
‘‘(ii) any distribution from a Roth
IRA received by the individual during the
testing period which is not a qualified roll-
over contribution (as defined in section
408A(e)) to a Roth IRA.
‘‘(B) TESTING
PERIOD.—For purposes of
subparagraph (A), the testing period, with re-
spect to a taxable year, is the period which
includes—
‘‘(i) such taxable year,
‘‘(ii) the 2 preceding taxable years,
and
‘‘(iii) the period after such taxable
year and before the due date (including ex-
tensions) for filing the return of tax for such
taxable year.
‘‘(C) 
EXCEPTED
DISTRIBUTIONS.—There
shall not be taken into account under subpara-
graph (A)—
‘‘(i) any distribution referred to in sec-
tion 72(p), 401(k)(8), 401(m)(6), 402(g)(2),
404(k), or 408(d)(4), and
‘‘(ii) any distribution to which section
408A(d)(3) applies.
153
‘‘(D) TREATMENT
OF
DISTRIBUTIONS
RE-
CEIVED BY SPOUSE OF INDIVIDUAL.—For pur-
poses of determining distributions received by an
individual under subparagraph (A) for any tax-
able year, any distribution received by the spouse
of such individual shall be treated as received by
such individual if such individual and spouse
file a joint return for such taxable year and for
the taxable year during which the spouse receives
the distribution.
‘‘(e) ADJUSTED GROSS INCOME.—For purposes of this
section, adjusted gross income shall be determined without
regard to sections 911, 931, and 933.
‘‘(f) INVESTMENT
IN
THE
CONTRACT.—Notwith-
standing any other provision of law, a qualified retirement
savings contribution shall not fail to be included in deter-
mining the investment in the contract for purposes of sec-
tion 72 by reason of the credit under this section.’’
(b) CREDIT ALLOWED AGAINST REGULAR TAX AND
ALTERNATIVE MINIMUM TAX.—
(1) IN GENERAL.—Subsection (a) of section 26 is
amended by inserting ‘‘(other than the credit allowed
by section 25B)’’ after ‘‘credits allowed by this sub-
part’’.
154
(2) CONFORMING AMENDMENT.—Section 25B, as
added by subsection (a), is amended by inserting after
subsection (f) the following new subsection:
‘‘(g) LIMITATION BASED ON AMOUNT OF TAX.—The
aggregate credit allowed by this section for the taxable year
shall not exceed the sum of—
‘‘(1) the taxpayer’s regular tax liability for the
taxable year reduced by the sum of the credits allowed
by sections 21, 22, 23, 24, 25, and 25A, plus
‘‘(2) the tax imposed by section 55 for such tax-
able year.’’
(c) ANNUAL REPORT.—The Comptroller General of the
United States shall submit a report annually to the Com-
mittee on Ways and Means of the House of Representatives
and the Committee on Finance of the Senate regarding the
number of taxpayers receiving the credit allowed under sec-
tion 25B of the Internal Revenue Code of 1986, as added
by subsection (a).
(d) CONFORMING AMENDMENT.—The table of sections
for subpart A of part IV of subchapter A of chapter 1 is
amended by inserting after the item relating to section 25A
the following new item:
‘‘Sec. 25B. Elective deferrals and IRA contributions by certain in-
dividuals.’’
(e) EFFECTIVE DATES.—
155
(1) IN
GENERAL.—The amendments made by
subsections (a) and (d) shall apply to taxable years
beginning after December 31, 2000, and before Janu-
ary 1, 2006.
(2) ALTERNATIVE MINIMUM TAX.—The amend-
ments made by subsection (b) shall apply to taxable
years beginning after December 31, 2001, and before
January 1, 2006.
SEC. 209. CREDIT FOR QUALIFIED PENSION PLAN CON-
TRIBUTIONS OF SMALL EMPLOYERS.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business related credits) is
amended by adding at the end the following new section:
‘‘SEC. 45D. SMALL EMPLOYER PENSION PLAN CONTRIBU-
TIONS.
‘‘(a) GENERAL RULE.—For purposes of section 38, in
the case of an eligible employer, the small employer pension
plan contribution credit determined under this section for
any taxable year is an amount equal to 50 percent of the
amount which would (but for subsection (f)(1)) be allowed
as a deduction under section 404 for such taxable year for
qualified employer contributions made to any qualified re-
tirement plan on behalf of any employee who is not a highly
compensated employee.
156
‘‘(b) CREDIT LIMITED TO 3 YEARS.—The credit allow-
able by this section shall be allowed only with respect to
the period of 3 taxable years beginning with the first taxable
year for which a credit is allowable with respect to a plan
under this section.
‘‘(c) QUALIFIED
EMPLOYER
CONTRIBUTION.—For
purposes of this section—
‘‘(1) DEFINED
CONTRIBUTION
PLANS.—In the
case of a defined contribution plan, the term ‘quali-
fied employer contribution’ means the amount of non-
elective and matching contributions to the plan made
by the employer on behalf of any employee who is not
a highly compensated employee to the extent such
amount does not exceed 3 percent of such employee’s
compensation from the employer for the year.
‘‘(2) DEFINED BENEFIT PLANS.—In the case of a
defined benefit plan, the term ‘qualified employer con-
tribution’ means the amount of employer contribu-
tions to the plan made on behalf of any employee who
is not a highly compensated employee to the extent
that the accrued benefit of such employee derived from
employer contributions for the year does not exceed
the equivalent (as determined under regulations pre-
scribed by the Secretary and without regard to con-
tributions and benefits under the Social Security Act)
157
of 3 percent of such employee’s compensation from the
employer for the year.
‘‘(d) QUALIFIED RETIREMENT PLAN.—
‘‘(1) IN GENERAL.—The term ‘qualified retire-
ment plan’ means any plan described in section
401(a) which includes a trust exempt from tax under
section 501(a) if the plan meets—
‘‘(A) the contribution requirements of para-
graph (2),
‘‘(B) the vesting requirements of paragraph
(3), and
‘‘(C) the distributions requirements of para-
graph (4).
‘‘(2) CONTRIBUTION REQUIREMENTS.—
‘‘(A) IN
GENERAL.—The requirements of
this paragraph are met if, under the plan—
‘‘(i) the employer is required to make
nonelective contributions of at least 1 per-
cent of compensation (or the equivalent
thereof in the case of a defined benefit plan)
for each employee who is not a highly com-
pensated employee who is eligible to partici-
pate in the plan, and
‘‘(ii) allocations of nonelective em-
ployer contributions are either in equal dol-
158
lar amounts for all employees covered by the
plan or bear a uniform relationship to the
total compensation, or the basic or regular
rate of compensation, of the employees cov-
ered by the plan.
‘‘(B) 
COMPENSATION
LIMITATION.—The
compensation taken into account under subpara-
graph (A) for any year shall not exceed the limi-
tation in effect for such year under section
401(a)(17).
‘‘(3) VESTING
REQUIREMENTS.—The require-
ments of this paragraph are met if the plan satisfies
the requirements of subparagraph (A) or (B).
‘‘(A) 3-YEAR VESTING.—A plan satisfies the
requirements of this subparagraph if an em-
ployee who has completed at least 3 years of
service has a nonforfeitable right to 100 percent
of the employee’s accrued benefit derived from
employer contributions.
‘‘(B) 5-YEAR
GRADED
VESTING.—A plan
satisfies the requirements of this subparagraph if
an employee has a nonforfeitable right to a per-
centage of the employee’s accrued benefit derived
from employer contributions determined under
the following table:
159
The nonforfeitable
‘‘Years of service:
percentage is:
1 ......................................................................................................
2 ......................................................................................................
3 ......................................................................................................
4 ......................................................................................................
5 ......................................................................................................
100.
‘‘(4) DISTRIBUTION
REQUIREMENTS.—In the
case of a profit-sharing or stock bonus plan, the re-
quirements of this paragraph are met if, under the
plan, qualified employer contributions are distribut-
able only as provided in section 401(k)(2)(B).
‘‘(e) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) ELIGIBLE EMPLOYER.—
‘‘(A) IN GENERAL.—The term ‘eligible em-
ployer’ means, with respect to any year, an em-
ployer which has no more than 50 employees
who received at least $5,000 of compensation
from the employer for the preceding year.
‘‘(B) REQUIREMENT
FOR
NEW
QUALIFIED
EMPLOYER PLANS.—Such term shall not include
an employer if, during the 3-taxable year period
immediately preceding the 1st taxable year for
which the credit under this section is otherwise
allowable for a qualified employer plan of the
employer, the employer or any member of any
controlled group including the employer (or any
predecessor of either) established or maintained a
160
qualified employer plan with respect to which
contributions were made, or benefits were ac-
crued, for substantially the same employees as
are in the qualified employer plan.
‘‘(2) HIGHLY
COMPENSATED
EMPLOYEE.—The
term ‘highly compensated employee’ has the meaning
given such term by section 414(q) (determined with-
out regard to section 414(q)(1)(B)(ii)).
‘‘(f) SPECIAL RULES.—
‘‘(1) DISALLOWANCE OF DEDUCTION.—No deduc-
tion shall be allowed for that portion of the qualified
employer contributions paid or incurred for the tax-
able year which is equal to the credit determined
under subsection (a).
‘‘(2) ELECTION
NOT
TO
CLAIM
CREDIT.—This
section shall not apply to a taxpayer for any taxable
year if such taxpayer elects to have this section not
apply for such taxable year.
‘‘(3) AGGREGATION RULES.—All persons treated
as a single employer under subsection (a) or (b) of
section 52, or subsection (n) or (o) of section 414,
shall be treated as one person. All eligible employer
plans shall be treated as 1 eligible employer plan.
‘‘(g) RECAPTURE OF CREDIT ON FORFEITED CON-
TRIBUTIONS.—
161
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), if any accrued benefit which is forfeitable
by reason of subsection (d)(3) is forfeited, the employ-
er’s tax imposed by this chapter for the taxable year
in which the forfeiture occurs shall be increased by 35
percent of the employer contributions from which such
benefit is derived to the extent such contributions were
taken into account in determining the credit under
this section.
‘‘(2) 
REALLOCATED
CONTRIBUTIONS.—Para-
graph (1) shall not apply to any contribution which
is reallocated by the employer under the plan to em-
ployees who are not highly compensated employees.’’.
(b) CREDIT ALLOWED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) (defining current year busi-
ness credit) is amended by striking ‘‘plus’’ at the end of
paragraph (11), by striking the period at the end of para-
graph (12) and inserting ‘‘, plus’’, and by adding at the
end the following new paragraph:
‘‘(13) in the case of an eligible employer (as de-
fined in section 45D(e)), the small employer pension
plan contribution credit determined under section
45D(a).’’
(c) CONFORMING AMENDMENTS.—
162
(1) Section 39(d) is amended by adding at the
end the following new paragraph:
‘‘(9) NO CARRYBACK OF SMALL EMPLOYER PEN-
SION PLAN CONTRIBUTION CREDIT BEFORE JANUARY
1, 2001.—No portion of the unused business credit for
any taxable year which is attributable to the small
employer pension plan contribution credit determined
under section 45D may be carried back to a taxable
year beginning before January 1, 2001.’’
(2) Subsection (c) of section 196 is amended by
striking ‘‘and’’ at the end of paragraph (7), by strik-
ing the period at the end of paragraph (8) and insert-
ing ‘‘, and’’, and by adding at the end the following
new paragraph:
‘‘(9) the small employer pension plan contribu-
tion credit determined under section 45D(a).’’
(3) The table of sections for subpart D of part
IV of subchapter A of chapter 1 is amended by adding
at the end the following new item:
‘‘Sec. 45D. Small employer pension plan contributions.’’
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to contributions paid or incurred in tax-
able years beginning after December 31, 2000.
164
‘‘(2) REQUIREMENT
FOR
NEW
QUALIFIED
EM-
PLOYER PLANS.—Such term shall not include an em-
ployer if, during the 3-taxable year period imme-
diately preceding the 1st taxable year for which the
credit under this section is otherwise allowable for a
qualified employer plan of the employer, the employer
or any member of any controlled group including the
employer (or any predecessor of either) established or
maintained a qualified employer plan with respect to
which contributions were made, or benefits were ac-
crued, for substantially the same employees as are in
the qualified employer plan.
‘‘(d) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) QUALIFIED STARTUP COSTS.—
‘‘(A) IN
GENERAL.—The term ‘qualified
startup costs’ means any ordinary and necessary
expenses of an eligible employer which are paid
or incurred in connection with—
‘‘(i) the establishment or administra-
tion of an eligible employer plan, or
‘‘(ii) the retirement-related education
of employees with respect to such plan.
‘‘(B) PLAN MUST HAVE AT LEAST 1 PARTICI-
PANT.—Such term shall not include any expense
165
in connection with a plan that does not have at
least 1 employee eligible to participate who is
not a highly compensated employee.
‘‘(2) ELIGIBLE EMPLOYER PLAN.—The term ‘eli-
gible employer plan’ means a qualified employer plan
within the meaning of section 4972(d).
‘‘(3) FIRST CREDIT YEAR.—The term ‘first credit
year’ means—
‘‘(A) the taxable year which includes the
date that the eligible employer plan to which
such costs relate becomes effective, or
‘‘(B) at the election of the eligible employer,
the taxable year preceding the taxable year re-
ferred to in subparagraph (A).
‘‘(e) SPECIAL RULES.—For purposes of this section—
‘‘(1) AGGREGATION RULES.—All persons treated
as a single employer under subsection (a) or (b) of
section 52, or subsection (n) or (o) of section 414,
shall be treated as one person. All eligible employer
plans shall be treated as 1 eligible employer plan.
‘‘(2) DISALLOWANCE OF DEDUCTION.—No deduc-
tion shall be allowed for that portion of the qualified
startup costs paid or incurred for the taxable year
which is equal to the credit determined under sub-
section (a).
166
‘‘(3) ELECTION
NOT
TO
CLAIM
CREDIT.—This
section shall not apply to a taxpayer for any taxable
year if such taxpayer elects to have this section not
apply for such taxable year.’’
(b) CREDIT ALLOWED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) (defining current year busi-
ness credit), as amended by section 209, is amended by
striking ‘‘plus’’ at the end of paragraph (12), by striking
the period at the end of paragraph (13) and inserting ‘‘,
plus’’, and by adding at the end the following new para-
graph:
‘‘(14) in the case of an eligible employer (as de-
fined in section 45D(c)), the small employer pension
plan startup cost credit determined under section
45E(a).’’
(c) CONFORMING AMENDMENTS.—
(1) Section 39(d), as amended by section 209(c),
is amended by adding at the end the following new
paragraph:
‘‘(10) NO CARRYBACK OF SMALL EMPLOYER PEN-
SION PLAN STARTUP COST CREDIT BEFORE JANUARY
1, 2001.—No portion of the unused business credit for
any taxable year which is attributable to the small
employer pension plan startup cost credit determined
167
under section 45E may be carried back to a taxable
year beginning before January 1, 2001.’’
(2) Subsection (c) of section 196, as amended by
section 209(c), is amended by striking ‘‘and’’ at the
end of paragraph (8), by striking the period at the
end of paragraph (9) and inserting ‘‘, and’’, and by
adding at the end the following new paragraph:
‘‘(10) the small employer pension plan startup
cost credit determined under section 45E(a).’’
(3) The table of sections for subpart D of part
IV of subchapter A of chapter 1, as amended by sec-
tion 209(c), is amended by adding at the end the fol-
lowing new item:
‘‘Sec. 45E. Small employer pension plan startup costs.’’
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to costs paid or incurred in taxable
years beginning after December 31, 2000, with respect to
qualified employer plans established after such date.
TITLE III—ENHANCING
FAIRNESS FOR WOMEN
SEC. 301. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS
AGE 50 OR OVER.
(a) IN GENERAL.—Section 414 (relating to definitions
and special rules) is amended by adding at the end the fol-
lowing new subsection:
168
‘‘(v) CATCHUP CONTRIBUTIONS FOR INDIVIDUALS AGE
50 OR OVER.—
‘‘(1) IN GENERAL.—An applicable employer plan
shall not be treated as failing to meet any require-
ment of this title solely because the plan permits an
eligible participant to make additional elective defer-
rals in any plan year.
‘‘(2) LIMITATION
ON
AMOUNT
OF
ADDITIONAL
DEFERRALS.—
‘‘(A) IN GENERAL.—A plan shall not permit
additional elective deferrals under paragraph (1)
for any year in an amount greater than the less-
er of—
‘‘(i) the applicable percentage of the
applicable dollar amount for such elective
deferrals for such year, or
‘‘(ii) the excess (if any) of—
‘‘(I) the participant’s compensa-
tion (as defined in section 415(c)(3))
for the year, over
‘‘(II) any other elective deferrals
of the participant for such year which
are made without regard to this sub-
section.
169
‘‘(B) APPLICABLE PERCENTAGE.—For pur-
poses of this paragraph, the applicable percent-
age shall be determined in accordance with the
following table:
‘‘For taxable years
The applicable
beginning in:
percentage is:
2001 ................................................................................................
10 percent
2002 ................................................................................................
20 percent
2003 ................................................................................................
30 percent
2004 ................................................................................................
40 percent
2005 and thereafter ........................................................................
50 percent.
‘‘(3) TREATMENT
OF
CONTRIBUTIONS.—In the
case of any contribution to a plan under paragraph
(1)—
‘‘(A) such contribution shall not, with re-
spect to the year in which the contribution is
made—
‘‘(i) be subject to any otherwise appli-
cable limitation contained in section 402(g),
402(h), 403(b), 404(a), 404(h), 408(k),
408(p), 415, or 457, or
‘‘(ii) be taken into account in applying
such limitations to other contributions or
benefits under such plan or any other such
plan, and
‘‘(B) such plan shall not be treated as fail-
ing to meet the requirements of section 401(a)(4),
401(a)(26), 401(k)(3), 401(k)(11), 401(k)(12),
401(m), 
403(b)(12), 
408(k), 
408(p), 
408B,
170
410(b), or 416 by reason of the making of (or the
right to make) such contribution.
‘‘(4) ELIGIBLE PARTICIPANT.—For purposes of
this subsection, the term ‘eligible participant’ means,
with respect to any plan year, a participant in a
plan—
‘‘(A) who has attained the age of 50 before
the close of the plan year, and
‘‘(B) with respect to whom no other elective
deferrals may (without regard to this subsection)
be made to the plan for the plan year by reason
of the application of any limitation or other re-
striction described in paragraph (3) or contained
in the terms of the plan.
‘‘(5) OTHER
DEFINITIONS
AND
RULES.—For
purposes of this subsection—
‘‘(A) APPLICABLE
DOLLAR
AMOUNT.—The
term ‘applicable dollar amount’ means, with re-
spect to any year, the amount in effect under
section 
402(g)(1)(B), 
408(p)(2)(E)(i), 
or
457(e)(15)(A), whichever is applicable to an ap-
plicable employer plan, for such year.
‘‘(B) APPLICABLE
EMPLOYER
PLAN.—The
term ‘applicable employer plan’ means—
171
‘‘(i) an employees’ trust described in
section 401(a) which is exempt from tax
under section 501(a),
‘‘(ii) a plan under which amounts are
contributed by an individual’s employer for
an annuity contract described in section
403(b),
‘‘(iii) an eligible deferred compensation
plan under section 457 of an eligible em-
ployer described in section 457(e)(1)(A),
and
‘‘(iv) an arrangement meeting the re-
quirements of section 408 (k) or (p).
‘‘(C) ELECTIVE DEFERRAL.—The term ‘elec-
tive deferral’ has the meaning given such term
by subsection (u)(2)(C).
‘‘(D) EXCEPTION FOR SECTION 457 PLANS.—
This subsection shall not apply to an applicable
employer 
plan 
described 
in 
subparagraph
(B)(iii) for any year to which section 457(b)(3)
applies.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to contributions in taxable years begin-
ning after December 31, 2000.
172
SEC. 302. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF
EMPLOYEES 
TO 
DEFINED 
CONTRIBUTION
PLANS.
(a) EQUITABLE TREATMENT.—
(1) IN GENERAL.—Subparagraph (B) of section
415(c)(1) (relating to limitation for defined contribu-
tion plans) is amended by striking ‘‘25 percent’’ and
inserting ‘‘100 percent’’.
(2) APPLICATION
TO
SECTION
403(b).—Section
403(b) is amended—
(A) by striking ‘‘the exclusion allowance for
such taxable year’’ in paragraph (1) and insert-
ing ‘‘the applicable limit under section 415’’;
(B) by striking paragraph (2); and
(C) by inserting ‘‘or any amount received
by a former employee after the fifth taxable year
following the taxable year in which such em-
ployee was terminated’’ before the period at the
end of the second sentence of paragraph (3).
(3) CONFORMING AMENDMENTS.—
(A) Subsection (f) of section 72 is amended
by striking ‘‘section 403(b)(2)(D)(iii))’’ and in-
serting ‘‘section 403(b)(2)(D)(iii), as in effect be-
fore the enactment of the Retirement Security
and Savings Act of 2000)’’.
173
(B) Section 404(a)(10)(B) is amended by
striking ‘‘, the exclusion allowance under section
403(b)(2),’’.
(C) Section 415(a)(2) is amended by strik-
ing ‘‘, and the amount of the contribution for
such portion shall reduce the exclusion allowance
as provided in section 403(b)(2)’’.
(D) Section 415(c)(3) is amended by adding
at the end the following new subparagraph:
‘‘(E) ANNUITY CONTRACTS.—In the case of
an annuity contract described in section 403(b),
the term ‘participant’s compensation’ means the
participant’s 
includible 
compensation 
deter-
mined under section 403(b)(3).’’.
(E) Section 415(c) is amended by striking
paragraph (4).
(F) Section 415(c)(7) is amended to read as
follows:
‘‘(7) CERTAIN
CONTRIBUTIONS
BY
CHURCH
PLANS NOT TREATED AS EXCEEDING LIMIT.—
‘‘(A) IN
GENERAL.—Notwithstanding any
other provision of this subsection, at the election
of a participant who is an employee of a church
or a convention or association of churches, in-
cluding an organization described in section
174
414(e)(3)(B)(ii), contributions and other addi-
tions for an annuity contract or retirement in-
come account described in section 403(b) with re-
spect to such participant, when expressed as an
annual addition to such participant’s account,
shall be treated as not exceeding the limitation
of paragraph (1) if such annual addition is not
in excess of $10,000.
‘‘(B) $40,000 AGGREGATE
LIMITATION.—
The total amount of additions with respect to
any participant which may be taken into ac-
count for purposes of this subparagraph for all
years may not exceed $40,000.
‘‘(C) ANNUAL ADDITION.—For purposes of
this paragraph, the term ‘annual addition’ has
the meaning given such term by paragraph (2).’’.
(G) Subparagraph (B) of section 402(g)(7)
(as redesignated by section 211) is amended by
inserting before the period at the end the fol-
lowing: ‘‘(as in effect before the enactment of the
Retirement Security and Savings Act of 2000)’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning after
December 31, 2000.
(b) SPECIAL RULES FOR SECTIONS 403(b) AND 408.—
175
(1) IN GENERAL.—Subsection (k) of section 415
is amended by adding at the end the following new
paragraph:
‘‘(4) SPECIAL RULES FOR SECTIONS 403(b) AND
408.—For purposes of this section, any annuity con-
tract described in section 403(b) for the benefit of a
participant shall be treated as a defined contribution
plan maintained by each employer with respect to
which the participant has the control required under
subsection (b) or (c) of section 414 (as modified by
subsection (h)). For purposes of this section, any con-
tribution by an employer to a simplified employee
pension plan for an individual for a taxable year
shall be treated as an employer contribution to a de-
fined contribution plan for such individual for such
year.’’.
(2) EFFECTIVE DATE.—
(A) IN
GENERAL.—The amendment made
by paragraph (1) shall apply to limitation years
beginning after December 31, 1999.
(B) EXCLUSION ALLOWANCE.—Effective for
limitation years beginning in 2000, in the case
of any annuity contract described in section
403(b) of the Internal Revenue Code of 1986, the
amount of the contribution disqualified by rea-
176
son of section 415(g) of such Code shall reduce
the exclusion allowance as provided in section
403(b)(2) of such Code.
(3) MODIFICATION OF 403(b) EXCLUSION ALLOW-
ANCE TO CONFORM TO 415 MODIFICATION.—The Sec-
retary of the Treasury shall modify the regulations re-
garding the exclusion allowance under section
403(b)(2) of the Internal Revenue Code of 1986 to
render void the requirement that contributions to a
defined benefit pension plan be treated as previously
excluded amounts for purposes of the exclusion allow-
ance. For taxable years beginning after December 31,
1999, such regulations shall be applied as if such re-
quirement were void.
(c) DEFERRED COMPENSATION PLANS OF STATE AND
LOCAL
GOVERNMENTS
AND
TAX-EXEMPT
ORGANIZA-
TIONS.—
(1) IN GENERAL.—Subparagraph (B) of section
457(b)(2) (relating to salary limitation on eligible de-
ferred compensation plans) is amended by striking
‘‘331⁄3 percent’’ and inserting ‘‘100 percent’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to years beginning after
December 31, 2000.