I
107TH CONGRESS
1ST SESSION
H. R. 546
To amend the Internal Revenue Code of 1986 to provide tax benefits for
small businesses, to amend the Fair Labor Standards Act of 1938
to increase the minimum wage, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
FEBRUARY 8, 2001
Mr. QUINN introduced the following bill; which was referred to the Committee
on Ways and Means, and in addition to the Committee on Education and
the Workforce, for a period to be subsequently determined by the Speak-
er, in each case for consideration of such provisions as fall within the ju-
risdiction of the committee concerned
A BILL
To amend the Internal Revenue Code of 1986 to provide
tax benefits for small businesses, to amend the Fair
Labor Standards Act of 1938 to increase the minimum
wage, 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; REFERENCES; TABLE OF CON-
TENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Small Business Tax Fairness Act of 2001’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—The table of contents of
this Act is as follows:
Sec. 1. Short title; references; table of contents.
TITLE I—SMALL BUSINESS PROVISIONS
Sec. 101. Deduction for 100 percent of health insurance costs of self-employed
individuals.
Sec. 102. Increase in expense treatment for small businesses.
Sec. 103. Increased deduction for meal expenses.
Sec. 104. Increased deductibility of business meal expenses for individuals sub-
ject to Federal limitations on hours of service.
Sec. 105. Income averaging for farmers and fishermen not to increase alter-
native minimum tax liability.
Sec. 106. Repeal of occupational taxes relating to distilled spirits, wine, and
beer.
TITLE II—PENSION PROVISIONS
Subtitle A—Expanding Coverage
Sec. 201. Increase in benefit and contribution limits.
Sec. 202. Plan loans for subchapter S owners, partners, and sole proprietors.
Sec. 203. Modification of top-heavy rules.
Sec. 204. Elective deferrals not taken into account for purposes of deduction
limits.
Sec. 205. Repeal of coordination requirements for deferred compensation plans
of State and local governments and tax-exempt organizations.
Sec. 206. Elimination of user fee for requests to IRS regarding pension plans.
Sec. 207. Deduction limits.
Sec. 208. Option to treat elective deferrals as after-tax contributions.
Subtitle B—Enhancing Fairness for Women
Sec. 221. Catchup contributions for individuals age 50 or over.
Sec. 222. Equitable treatment for contributions of employees to defined con-
tribution plans.
Sec. 223. Faster vesting of certain employer matching contributions.
Sec. 224. Simplify and update the minimum distribution rules.
Sec. 225. Clarification of tax treatment of division of section 457 plan benefits
upon divorce.
Sec. 226. Modification of safe harbor relief for hardship withdrawals from cash
or deferred arrangements.
Subtitle C—Increasing Portability for Participants
Sec. 231. Rollovers allowed among various types of plans.
Sec. 232. Rollovers of IRAs into workplace retirement plans.
Sec. 233. Rollovers of after-tax contributions.
Sec. 234. Hardship exception to 60-day rule.
Sec. 235. Treatment of forms of distribution.
Sec. 236. Rationalization of restrictions on distributions.
Sec. 237. Purchase of service credit in governmental defined benefit plans.
Sec. 238. Employers may disregard rollovers for purposes of cash-out amounts.
Sec. 239. Minimum distribution and inclusion requirements for section 457
plans.
Subtitle D—Strengthening Pension Security and Enforcement
Sec. 241. Repeal of 150 percent of current liability funding limit.
Sec. 242. Maximum contribution deduction rules modified and applied to all de-
fined benefit plans.
Sec. 243. Excise tax relief for sound pension funding.
Sec. 244. Excise tax on failure to provide notice by defined benefit plans sig-
nificantly reducing future benefit accruals.
Sec. 245. Treatment of multiemployer plans under section 415.
Subtitle E—Reducing Regulatory Burdens
Sec. 261. Modification of timing of plan valuations.
Sec. 262. ESOP dividends may be reinvested without loss of dividend deduc-
tion.
Sec. 263. Repeal of transition rule relating to certain highly compensated em-
ployees.
Sec. 264. Employees of tax-exempt entities.
Sec. 265. Clarification of treatment of employer-provided retirement advice.
Sec. 266. Reporting simplification.
Sec. 267. Improvement of employee plans compliance resolution system.
Sec. 268. Modification of exclusion for employer provided transit passes.
Sec. 269. Repeal of the multiple use test.
Sec. 270. Flexibility in nondiscrimination, coverage, and line of business rules.
Sec. 271. Extension to international organizations of moratorium on application
of certain nondiscrimination rules applicable to State and local
plans.
Sec. 272. Notice and consent period regarding distributions.
Subtitle F—Plan Amendments
Sec. 281. Provisions relating to plan amendments.
TITLE III—ESTATE TAX RELIEF
Subtitle A—Reductions of Estate and Gift Tax Rates
Sec. 301. Reductions of estate and gift tax rates.
Sec. 302. Sense of the Congress concerning repeal of the death tax.
Subtitle B—Unified Credit Replaced With Unified Exemption Amount
Sec. 311. Unified credit against estate and gift taxes replaced with unified ex-
emption amount.
Subtitle C—Modifications of Generation-Skipping Transfer Tax
Sec. 321. Deemed allocation of GST exemption to lifetime transfers to trusts;
retroactive allocations.
Sec. 322. Severing of trusts.
Sec. 323. Modification of certain valuation rules.
Sec. 324. Relief provisions.
Subtitle D—Conservation Easements
Sec. 331. Expansion of estate tax rule for conservation easements.
TITLE IV—TIMBER INCENTIVE
Sec. 401. Temporary suspension of maximum amount of amortizable reforest-
ation expenditures.
TITLE V—REAL ESTATE PROVISIONS
Subtitle A—Private Activity Bond Volume Cap
Sec. 501. Acceleration of phase-in of increase in volume cap on private activity
bonds.
Subtitle B—Exclusion From Gross Income for Certain Forgiven Mortgage
Obligations
Sec. 502. Exclusion from gross income for certain forgiven mortgage obliga-
tions.
TITLE VI—AMENDMENTS TO THE FAIR LABOR STANDARDS ACT
OF 1938
Sec. 601. Short title.
Sec. 602. Minimum Wage.
Sec. 603. Exemption for computer professionals.
Sec. 604. Exemption for certain sales employees.
Sec. 605. Exemption for funeral directors.
TITLE I—SMALL BUSINESS
PROVISIONS
SEC. 101. DEDUCTION FOR 100 PERCENT OF HEALTH IN-
SURANCE COSTS OF SELF-EMPLOYED INDI-
VIDUALS.
(a) IN GENERAL.—Paragraph (1) of section 162(l)
is amended to read as follows:
‘‘(1) ALLOWANCE OF DEDUCTION.—In the case
of an individual who is an employee within the
meaning of section 401(c)(1), there shall be allowed
as a deduction under this section an amount equal
to 100 percent of the amount paid during the tax-
able year for insurance which constitutes medical
care for the taxpayer and the taxpayer’s spouse and
dependents.’’.
(b) CLARIFICATION OF LIMITATIONS ON OTHER COV-
ERAGE.—The first sentence of section 162(l)(2)(B) is
amended to read as follows: ‘‘Paragraph (1) shall not
apply to any taxpayer for any calendar month for which
the taxpayer participates in any subsidized health plan
maintained by any employer (other than an employer de-
scribed in section 401(c)(4)) of the taxpayer or the spouse
of the taxpayer.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 102. INCREASE IN EXPENSE TREATMENT FOR SMALL
BUSINESSES.
(a) IN GENERAL.—Paragraph (1) of section 179(b)
(relating to dollar limitation) is amended to read as fol-
lows:
‘‘(1) DOLLAR LIMITATION.—The aggregate cost
which may be taken into account under subsection
(a) for any taxable year shall not exceed $30,000.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 103. INCREASED DEDUCTION FOR MEAL EXPENSES.
(a) IN GENERAL.—Paragraph (1) of section 274(n)
(relating to only 50 percent of meal and entertainment
expenses allowed as deduction) is amended by striking ‘‘50
percent’’ in the text and inserting ‘‘the allowable percent-
age’’.
(b) ALLOWABLE PERCENTAGES.—Subsection (n) of
section 274 is amended by redesignating paragraphs (2)
and (3) as paragraphs (3) and (4), respectively, and by
inserting after paragraph (1) the following new paragraph:
‘‘(2) ALLOWABLE PERCENTAGE.—For purposes
of paragraph (1), the allowable percentage is—
‘‘(A) in the case of amounts for items de-
scribed in paragraph (1)(B), 50 percent, and
‘‘(B) in the case of expenses for food or
beverages, 60 percent (55 percent for taxable
years beginning during 2001).’’.
(c) CONFORMING AMENDMENT.—The heading for
subsection (n) of section 274 is amended by striking ‘‘50
PERCENT’’ and inserting ‘‘LIMITED PERCENTAGES’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 104. INCREASED DEDUCTIBILITY OF BUSINESS MEAL
EXPENSES FOR INDIVIDUALS SUBJECT TO
FEDERAL LIMITATIONS ON HOURS OF SERV-
ICE.
(a) IN GENERAL.—Paragraph (4) of section 274(n)
(relating to limited percentages of meal and entertainment
expenses allowed as deduction), as redesignated by section
103, is amended to read as follows:
‘‘(4) SPECIAL RULE FOR INDIVIDUALS SUBJECT
TO FEDERAL HOURS OF SERVICE.—In the case of
any expenses for food or beverages consumed while
away from home (within the meaning of section
162(a)(2)) by an individual during, or incident to,
the period of duty subject to the hours of service
limitations of the Department of Transportation,
paragraph (2)(B) shall be applied by substituting
‘80 percent’ for the percentage otherwise applicable
under paragraph (2)(B).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 2000.
SEC. 105. INCOME AVERAGING FOR FARMERS AND FISHER-
MEN NOT TO INCREASE ALTERNATIVE MIN-
IMUM TAX LIABILITY.
(a) IN GENERAL.—Section 55(c) (defining regular
tax) is amended by redesignating paragraph (2) as para-
graph (3) and by inserting after paragraph (1) the fol-
lowing:
‘‘(2) COORDINATION WITH INCOME AVERAGING
FOR
FARMERS
AND
FISHERMEN.—Solely for pur-
poses of this section, section 1301 (relating to aver-
aging of farm and fishing income) shall not apply in
computing the regular tax.’’.
(b) ALLOWING INCOME AVERAGING
FOR FISHER-
MEN.—
(1) IN GENERAL.—Section 1301(a) is amended
by striking ‘‘farming business’’ and inserting ‘‘farm-
ing business or fishing business,’’.
(2) DEFINITION OF ELECTED FARM INCOME.—
(A) IN
GENERAL.—Clause (i) of section
1301(b)(1)(A) is amended by inserting ‘‘or fish-
ing business’’ before the semicolon.
(B) CONFORMING AMENDMENT.—Subpara-
graph (B) of section 1301(b)(1) is amended by
inserting ‘‘or fishing business’’ after ‘‘farming
business’’ both places it occurs.
(3) DEFINITION OF FISHING BUSINESS.—Sec-
tion 1301(b) is amended by adding at the end the
following new paragraph:
‘‘(4) FISHING
BUSINESS.—The term ‘fishing
business’ means the conduct of commercial fishing
as defined in section 3 of the Magnuson-Stevens
Fishery Conservation and Management Act (16
U.S.C. 1802).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 106. REPEAL OF OCCUPATIONAL TAXES RELATING TO
DISTILLED SPIRITS, WINE, AND BEER.
(a) REPEAL OF OCCUPATIONAL TAXES.—
(1) IN GENERAL.—The following provisions of
part II of subchapter A of chapter 51 of the Internal
Revenue Code of 1986 (relating to occupational
taxes) are hereby repealed:
(A) Subpart A (relating to proprietors of
distilled spirits plants, bonded wine cellars,
etc.).
(B) Subpart B (relating to brewer).
(C) Subpart D (relating to wholesale deal-
ers) (other than sections 5114 and 5116).
(D) Subpart E (relating to retail dealers)
(other than section 5124).
(E) Subpart G (relating to general provi-
sions) (other than sections 5142, 5143, 5145,
and 5146).
(2) NONBEVERAGE
DOMESTIC
DRAWBACK.—
Section 5131 is amended by striking ‘‘, on payment
of a special tax per annum,’’.
(3) INDUSTRIAL USE OF DISTILLED SPIRITS.—
Section 5276 is hereby repealed.
(b) CONFORMING AMENDMENTS.—
(1)(A) The heading for part II of subchapter A
of chapter 51 and the table of subparts for such
part are amended to read as follows:
‘‘PART II—MISCELLANEOUS PROVISIONS
‘‘Subpart A. Manufacturers of stills.
‘‘Subpart B. Nonbeverage domestic drawback claimants.
‘‘Subpart C. Recordkeeping by dealers.
‘‘Subpart D. Other provisions.’’.
(B) The table of parts for such subchapter A
is amended by striking the item relating to part II
and inserting the following new item:
‘‘Part II. Miscellaneous provisions.’’.
(2) Subpart C of part II of such subchapter
(relating to manufacturers of stills) is redesignated
as subpart A.
(3)(A) Subpart F of such part II (relating to
nonbeverage domestic drawback claimants) is redes-
ignated as subpart B and sections 5131 through
5134 are redesignated as sections 5111 through
5114, respectively.
(B) The table of sections for such subpart B,
as so redesignated, is amended—
(i) by redesignating the items relating to
sections 5131 through 5134 as relating to sec-
tions 5111 through 5114, respectively; and
(ii) by striking ‘‘and rate of tax’’ in the
item relating to section 5111, as so redesig-
nated.
(C) Section 5111, as redesignated by subpara-
graph (A), is amended—
(i) by striking ‘‘AND RATE OF TAX’’ in
the section heading;
(ii) by striking ‘‘(a) ELIGIBILITY
FOR
DRAWBACK.—’’; and
(iii) by striking subsection (b).
(4) Part II of subchapter A of chapter 51 is
amended by adding after subpart B, as redesignated
by paragraph (3), the following new subpart:
‘‘Subpart C—Recordkeeping by Dealers
‘‘Sec. 5121. Recordkeeping by wholesale dealers.
‘‘Sec. 5122. Recordkeeping by retail dealers.
‘‘Sec. 5123. Preservation and inspection of records, and entry of
premises for inspection.’’.
(5)(A) Section 5114 (relating to records) is
moved to subpart C of such part II and inserted
after the table of sections for such subpart.
(B) Section 5114 is amended—
(i) by striking the section heading and in-
serting the following new heading:
‘‘SEC. 5121. RECORDKEEPING BY WHOLESALE DEALERS.’’;
and
(ii) by redesignating subsection (c) as sub-
section (d) and by inserting after subsection (b)
the following new subsection:
‘‘(c) WHOLESALE DEALERS.—For purposes of this
part—
‘‘(1) WHOLESALE DEALER IN LIQUORS.—The
term ‘wholesale dealer in liquors’ means any dealer
(other than a wholesale dealer in beer) who sells, or
offers for sale, distilled spirits, wines, or beer, to an-
other dealer.
‘‘(2) WHOLESALE DEALER IN BEER.—The term
‘wholesale dealer in beer’ means any dealer who
sells, or offers for sale, beer, but not distilled spirits
or wines, to another dealer.
‘‘(3) DEALER.—The term ‘dealer’ means any
person who sells, or offers for sale, any distilled spir-
its, wines, or beer.
‘‘(4) PRESUMPTION IN CASE OF SALE OF 20
WINE GALLONS OR MORE.—The sale, or offer for
sale, of distilled spirits, wines, or beer, in quantities
of 20 wine gallons or more to the same person at
the same time, shall be presumptive evidence that
the person making such sale, or offer for sale, is en-
gaged in or carrying on the business of a wholesale
dealer in liquors or a wholesale dealer in beer, as the
case may be. Such presumption may be overcome by
evidence satisfactorily showing that such sale, or
offer for sale, was made to a person other than a
dealer.’’.
(C) Paragraph (3) of section 5121(d), as so re-
designated, is amended by striking ‘‘section 5146’’
and inserting ‘‘section 5123’’.
(6)(A) Section 5124 (relating to records) is
moved to subpart C of part II of subchapter A of
chapter 51 and inserted after section 5121.
(B) Section 5124 is amended—
(i) by striking the section heading and in-
serting the following new heading:
‘‘SEC. 5122. RECORDKEEPING BY RETAIL DEALERS.’’;
(ii) by striking ‘‘section 5146’’ in sub-
section (c) and inserting ‘‘section 5123’’; and
(iii) by redesignating subsection (c) as sub-
section (d) and inserting after subsection (b)
the following new subsection:
‘‘(c) RETAIL
DEALERS.—For purposes of this
section—
‘‘(1) RETAIL DEALER IN LIQUORS.—The term
‘retail dealer in liquors’ means any dealer (other
than a retail dealer in beer) who sells, or offers for
sale, distilled spirits, wines, or beer, to any person
other than a dealer.
‘‘(2) RETAIL DEALER IN BEER.—The term ‘re-
tail dealer in beer’ means any dealer who sells, or of-
fers for sale, beer, but not distilled spirits or wines,
to any person other than a dealer.
‘‘(3) DEALER.—The term ‘dealer’ has the
meaning given such term by section 5121(c)(3).’’.
(7) Section 5146 is moved to subpart C of part
II of subchapter A of chapter 51, inserted after sec-
tion 5122, and redesignated as section 5123.
(8) Part II of subchapter A of chapter 51 is
amended by inserting after subpart C the following
new subpart:
‘‘Subpart D—Other Provisions
‘‘Sec. 5131. Packaging distilled spirits for industrial uses.
‘‘Sec. 5132. Prohibited purchases by dealers.’’.
(9) Section 5116 is moved to subpart D of part
II of subchapter A of chapter 51, inserted after the
table of sections, redesignated as section 5131, and
amended by inserting ‘‘(as defined in section
5121(c))’’ after ‘‘dealer’’ in subsection (a).
(10) Subpart D of part II of subchapter A of
chapter 51 is amended by adding at the end thereof
the following new section:
‘‘SEC. 5132. PROHIBITED PURCHASES BY DEALERS.
‘‘(a) IN GENERAL.—Except as provided in regula-
tions prescribed by the Secretary, it shall be unlawful for
a dealer to purchase distilled spirits from any person other
than a wholesale dealer in liquors who is required to keep
the records prescribed by section 5121.
‘‘(b) PENALTY AND FORFEITURE.—
‘‘For penalty and forfeiture provisions applicable
to violations of subsection (a), see sections 5687 and
7302.’’.
(11) Subsection (b) of section 5002 is
amended—
(A) by striking ‘‘section 5112(a)’’ and in-
serting ‘‘section 5121(c)(3)’’;
(B) by striking ‘‘section 5112’’ and insert-
ing ‘‘section 5121(c)’’; and
(C) by striking ‘‘section 5122’’ and insert-
ing ‘‘section 5122(c)’’.
(12) Subparagraph (A) of section 5010(c)(2) is
amended by striking ‘‘section 5134’’ and inserting
‘‘section 5114’’.
(13) Subsection (d) of section 5052 is amended
to read as follows:
‘‘(d) BREWER.—For purposes of this chapter, the
term ‘brewer’ means any person who brews beer or pro-
duces beer for sale. Such term shall not include any person
who produces only beer exempt from tax under section
5053(e).’’.
(14) The text of section 5182 is amended to
read as follows:
‘‘For 
provisions 
requiring 
recordkeeping 
by
wholesale liquor dealers, see section 5112, and by
retail liquor dealers, see section 5122.’’.
(15) Subsection (b) of section 5402 is amended
by striking ‘‘section 5092’’ and inserting ‘‘section
5052(d)’’.
(16) Section 5671 is amended by striking ‘‘or
5091’’.
(17)(A) Part V of subchapter J of chapter 51
is hereby repealed.
(B) The table of parts for such subchapter J is
amended by striking the item relating to part V.
(18)(A) Sections 5142, 5143, and 5145 are
moved to subchapter D of chapter 52, inserted after
section 5731, redesignated as sections 5732, 5733,
and 5734, respectively, and amended—
(i) by striking ‘‘this part’’ each place it ap-
pears and inserting ‘‘this subchapter’’; and
(ii) by striking ‘‘this subpart’’ in section
5732(c)(2) (as so redesignated) and inserting
‘‘this subchapter’’.
(B) Section 5732, as redesignated by subpara-
graph (A), is amended by striking ‘‘(except the tax
imposed by section 5131)’’ each place it appears.
(C) Subsection (c) of section 5733, as redesig-
nated by subparagraph (A), is amended by striking
paragraph (2) and by redesignating paragraph (3)
as paragraph (2).
(D) The table of sections for subchapter D of
chapter 52 is amended by adding at the end thereof
the following:
‘‘Sec. 5732. Payment of tax.
‘‘Sec. 5733. Provisions relating to liability for occupational taxes.
‘‘Sec. 5734. Application of State laws.’’.
(E) Section 5731 is amended by striking sub-
section (c) and by redesignating subsection (d) as
subsection (c).
(19) Subsection (c) of section 6071 is amended
by striking ‘‘section 5142’’ and inserting ‘‘section
5732’’.
(20) Paragraph (1) of section 7652(g) is
amended—
(A) by striking ‘‘subpart F’’ and inserting
‘‘subpart B’’; and
(B) by striking ‘‘section 5131(a)’’ and in-
serting ‘‘section 5111(a)’’.
(21) The table of sections for subchapter D of
chapter 51 is amended by striking the item relating
to section 5276.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect on July 1, 2001, but shall
not apply to taxes imposed for periods before such date.
TITLE II—PENSION PROVISIONS
Subtitle A—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 head-
ings 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
greater of $68,212 or one-half the amount oth-
erwise 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
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) 
COST-OF-LIVING
ADJUSTMENTS.—Sub-
section (d) of section 415 (related to cost-of-living
adjustments) 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’’.
(5) 
CONFORMING
AMENDMENT.—Section
415(b)(2) is amended by striking subparagraph (F).
(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 ‘‘$40,000’’.
(2) 
COST-OF-LIVING
ADJUSTMENTS.—Sub-
section (d) of section 415 (related to cost-of-living
adjustments) is amended—
(A) by striking ‘‘$30,000’’ in paragraph
(1)(C) and inserting ‘‘$40,000’’; and
(B) in paragraph (3)(D)—
(i) by striking ‘‘$30,000’’ in the head-
ing and inserting ‘‘$40,000’’; and
(ii) by striking ‘‘October 1, 1993’’ and
inserting ‘‘July 1, 2000’’.
(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 ‘‘$200,000’’.
(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, 2000’’; and
(B) by striking ‘‘$10,000’’ both places it
appears and inserting ‘‘$5,000’’.
(d) ELECTIVE DEFERRALS.—
(1) IN
GENERAL.—Paragraph (1) of section
402(g) (relating to limitation on exclusion for elec-
tive 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
2003 ............................................................................. $13,000
2004 or thereafter ........................................................ $14,000.’’.
(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,
2004, the Secretary shall adjust the $14,000
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, 2003, 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)’’.
(e) DEFERRED COMPENSATION PLANS
OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI-
ZATIONS.—
(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-
LIVING
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 or thereafter ........................................................
$14,000.
‘‘(B) COST-OF-LIVING ADJUSTMENTS.—In
the case of taxable years beginning after De-
cember 31, 2004, the Secretary shall adjust the
$14,000 amount specified in the table in sub-
paragraph (A) at the same time and in the
same manner as under section 415(d), except
that the base period shall be the calendar quar-
ter beginning July 1, 2003, and any increase
under this paragraph which is not a multiple of
$500 shall be rounded to the next lowest mul-
tiple of $500.’’.
(f) 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 strik-
ing ‘‘$6,000’’ and inserting ‘‘the applicable dollar
amount’’.
(A) Clause (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
striking subparagraph (E).
(g) ROUNDING RULE RELATING TO DEFINED BEN-
EFIT 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
is not a multiple of $5,000 shall be rounded to
the next lowest multiple of $5,000.
‘‘(B) $40,000 
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.’’.
(h) 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) AMENDMENT
TO 1986 CODE.—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 pur-
poses of subparagraph (A)(i), the term
‘owner-employee’ shall only include a per-
son described in subclause (II) or (III) of
clause (i).’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to loans made 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) (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 having
an annual compensation greater than
$150,000,’’;
(C) by striking clause (ii) and redesig-
nating 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)’’.
(b) 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.’’.
(c) DISTRIBUTIONS DURING LAST YEAR BEFORE
DETERMINATION DATE TAKEN INTO ACCOUNT.—
(1) IN
GENERAL.—Paragraph (3) of section
416(g) is amended to read as follows:
‘‘(3) DISTRIBUTIONS DURING LAST YEAR BE-
FORE
DETERMINATION
DATE
TAKEN
INTO
AC-
COUNT.—
‘‘(A) IN
GENERAL.—For purposes of
determining—
‘‘(i) the present value of the cumu-
lative 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 re-
spect to such employee under the plan during
the 1-year period ending on the determination
date. The preceding sentence shall also apply to
distributions 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 dis-
tribution made for a reason other than separa-
tion from service, death, or disability, subpara-
graph (A) shall be applied by substituting ‘5-
year period’ for ‘1-year period’.’’.
(2) BENEFITS NOT TAKEN INTO ACCOUNT.—
Subparagraph 
(E) 
of 
section 
416(g)(4) 
is
amended—
(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’’.
(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 fol-
lowing new subparagraph:
‘‘(H) CASH OR DEFERRED ARRANGEMENTS
USING
ALTERNATIVE
METHODS
OF
MEETING
NONDISCRIMINATION
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
member of an aggregation group which is a top-
heavy group, contributions under the plan may
be taken into account in determining whether
any other plan in the group meets the require-
ments of subsection (c)(2).’’.
(e) FROZEN PLAN EXEMPT FROM MINIMUM BEN-
EFIT
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
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 the
plan benefits (within the meaning of sec-
tion 410(b)) no employee or former em-
ployee.’’.
(f) ELIMINATION OF FAMILY ATTRIBUTION.—Sec-
tion 416(i)(1)(B) (defining 5-percent owner) is amended
by adding 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
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 pay-
ment 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
subject 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.
SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR
DEFERRED COMPENSATION PLANS OF STATE
AND LOCAL GOVERNMENTS AND TAX-EX-
EMPT ORGANIZATIONS.
(a) IN GENERAL.—Subsection (c) of section 457 (re-
lating to deferred compensation plans of State and local
governments and tax-exempt organizations), as amended
by section 211, is amended to read as follows:
‘‘(c) LIMITATION.—The maximum amount of the
compensation 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
subsection (a) shall apply to years beginning after Decem-
ber 31, 2000.
SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO
IRS REGARDING PENSION PLANS.
(a) ELIMINATION OF CERTAIN USER FEES.—The
Secretary of the Treasury or the Secretary’s delegate shall
not require payment of user fees under the program estab-
lished under section 7527 of the Internal Revenue Code
of 1986 for requests to the Internal Revenue Service for
determination letters with respect to the qualified status
of a pension benefit plan maintained solely by one or more
eligible employers or any trust which is part of the plan.
The preceding sentence shall not apply to any request—
(1) made after the fifth plan year the pension
benefit plan is in existence; or
(2) made by the sponsor of any prototype or
similar plan which the sponsor intends to market to
participating employers.
(b) PENSION BENEFIT PLAN.—For purposes of this
section, the term ‘‘pension benefit plan’’ means a pension,
profit-sharing, stock bonus, annuity, or employee stock
ownership plan.
(c) ELIGIBLE EMPLOYER.—For purposes of this sec-
tion, the term ‘‘eligible employer’’ has the same meaning
given such term in section 408(p)(2)(C)(i)(I) of the Inter-
nal Revenue Code of 1986. The determination of whether
an employer is an eligible employer under this section shall
be made as of the date of the request described in sub-
section (a).
(d) EFFECTIVE DATE.—The provisions of this sec-
tion shall apply with respect to requests made after De-
cember 31, 2000.
SEC. 207. DEDUCTION LIMITS.
(a) IN GENERAL.—Section 404(a) (relating to gen-
eral rule) is amended by adding at the end the following:
‘‘(12) DEFINITION
OF
COMPENSATION.—For
purposes of paragraphs (3), (7), (8), and (9), the
term ‘compensation’ shall include amounts treated
as participant’s compensation under subparagraph
(C) or (D) of section 415(c)(3).’’.
(b) CONFORMING AMENDMENT.—Subparagraph (B)
of section 404(a)(3) is amended by striking the last sen-
tence thereof.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS
AFTER-TAX CONTRIBUTIONS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 (relating to deferred compensation, etc.)
is amended by inserting after section 402 the following
new section:
‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER-
RALS AS PLUS CONTRIBUTIONS.
‘‘(a) GENERAL RULE.—If an applicable retirement
plan includes a qualified plus contribution program—
‘‘(1) any designated plus contribution made by
an employee pursuant to the program shall be treat-
ed as an elective deferral for purposes of this chap-
ter, except that such contribution shall not be ex-
cludable 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 rea-
son of including such program.
‘‘(b) QUALIFIED PLUS CONTRIBUTION PROGRAM.—
For purposes of this section—
‘‘(1) IN
GENERAL.—The term ‘qualified plus
contribution program’ means a program under which
an employee may elect to make designated plus 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
program shall not be treated as a qualified plus con-
tribution program unless the applicable retirement
plan—
‘‘(A) establishes separate accounts (‘des-
ignated plus accounts’) for the designated plus
contributions of each employee and any earn-
ings properly allocable to the contributions, and
‘‘(B) maintains separate recordkeeping
with respect to each account.
‘‘(c) DEFINITIONS AND RULES RELATING TO DES-
IGNATED PLUS CONTRIBUTIONS.—For purposes of this
section—
‘‘(1) DESIGNATED PLUS CONTRIBUTION.—The
term ‘designated plus 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
elective deferrals which an employee may designate
under paragraph (1) shall not exceed the excess (if
any) of—
‘‘(A) the maximum amount of elective de-
ferrals excludable from gross income of the em-
ployee for the taxable year (without regard to
this section), over
‘‘(B) the aggregate amount of elective de-
ferrals of the employee for the taxable year
which the employee does not designate under
paragraph (1).
‘‘(3) ROLLOVER CONTRIBUTIONS.—
‘‘(A) IN
GENERAL.—A rollover contribu-
tion of any payment or distribution from a des-
ignated plus account which is otherwise allow-
able under this chapter may be made only if the
contribution is to—
‘‘(i) another designated plus 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 plus 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 plus account shall not be includ-
ible in gross income.
‘‘(2) QUALIFIED DISTRIBUTION.—For purposes
of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
distribution’ 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 plus account shall not be treated
as a qualified distribution if such payment or
distribution is made within the 5-taxable-year
period beginning with the earlier of—
‘‘(i) the first taxable year for which
the individual made a designated plus con-
tribution to any designated plus account
established for such individual under the
same applicable retirement plan, or
‘‘(ii) if a rollover contribution was
made to such designated plus account from
a designated plus account previously estab-
lished for such individual under another
applicable retirement plan, the first taxable
year for which the individual made a des-
ignated plus contribution to such pre-
viously established account.
‘‘(C) DISTRIBUTIONS OF EXCESS DEFER-
RALS AND EARNINGS.—The term ‘qualified dis-
tribution’ shall not include any distribution of
any excess deferral under section 402(g)(2) and
any income on the excess deferral.
‘‘(3) AGGREGATION RULES.—Section 72 shall
be applied separately with respect to distributions
and payments from a designated plus 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
section 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
subparagraph (A) or (C) of section 402(g)(3).’’.
(b) EXCESS DEFERRALS.—Section 402(g) (relating
to limitation on exclusion for elective deferrals) is
amended—
(1) by adding at the end of paragraph (1) the
following new sentence: ‘‘The preceding sentence
shall not apply to so much of such excess as does
not exceed the designated plus 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 plus account (as defined in
section 402A), an eligible retirement plan with
respect to such portion shall include only an-
other designated plus account and a Roth
IRA.’’.
(d) REPORTING REQUIREMENTS.—
(1) W–2 INFORMATION.—Section 6051(a)(8) is
amended by inserting ‘‘, including the amount of
designated plus contributions (as defined in section
402A)’’ before the comma at the end.
(2) INFORMATION.—Section 6047 is amended
by redesignating subsection (f) as subsection (g) and
by inserting after subsection (e) the following new
subsection:
‘‘(f) DESIGNATED PLUS 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 plus con-
tributions (as so defined) 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
section 402A(c)(3)(A).’’.
(2) The table of sections for subpart A of part
I of subchapter D of chapter 1 is amended by insert-
ing after the item relating to section 402 the fol-
lowing new item:
‘‘Sec. 402A. Optional treatment of elective deferrals as plus con-
tributions.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
Subtitle B—Enhancing Fairness for
Women
SEC. 221. CATCHUP CONTRIBUTIONS FOR INDIVIDUALS
AGE 50 OR OVER.
(a) IN GENERAL.—Section 414 (relating to defini-
tions and special rules) is amended by adding at the end
the following new subsection:
‘‘(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 re-
quirement of this title solely because the plan per-
mits an eligible participant to make additional elec-
tive deferrals in any plan year.
‘‘(2) LIMITATION ON AMOUNT OF ADDITIONAL
DEFERRALS.—
‘‘(A) IN GENERAL.—A plan shall not per-
mit additional elective deferrals under para-
graph (1) for any year in an amount greater
than the lesser 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 for the year, over
‘‘(II) any other elective deferrals
of the participant for such year which
are made without regard to this sub-
section.
‘‘(B) 
APPLICABLE
PERCENTAGE.—For
purposes of this paragraph, the applicable per-
centage 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 and thereafter .................................................................
40 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, 415, or 457, or
‘‘(ii) be taken into account in applying
such limitations to other contributions or
benefits under such plan or any other such
plan, and
‘‘(B) such plan shall not be treated as fail-
ing to meet the requirements of section
401(a)(4), 401(a)(26), 401(k)(3), 401(k)(11),
401(k)(12), 
401(m), 
403(b)(12), 
408(k),
408(p), 408B, 410(b), or 416 by reason of the
making of (or the right to make) such contribu-
tion.
‘‘(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 elec-
tive deferrals may (without regard to this sub-
section) be made to the plan for the plan year
by reason of the application of any limitation or
other restriction 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—
‘‘(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 compensa-
tion plan under section 457 of an eligible
employer 
as 
defined 
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
‘elective 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 subpara-
graph (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
beginning after December 31, 2000.
SEC. 222. 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 con-
tribution 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 in-
serting ‘‘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
employee 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 amend-
ed by striking ‘‘section 403(b)(2)(D)(iii))’’ and
inserting ‘‘section 403(b)(2)(D)(iii), as in effect
before the enactment of the Small Business Tax
Fairness Act of 2001)’’.
(B) Section 404(a)(10)(B) is amended by
striking ‘‘, the exclusion allowance under sec-
tion 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 allow-
ance as provided in section 403(b)(2)’’.
(D) Section 415(c)(3) is amended by add-
ing 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
determined 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 elec-
tion of a participant who is an employee of a
church or a convention or association of church-
es, including an organization described in sec-
tion 414(e)(3)(B)(ii), contributions and other
additions for an annuity contract or retirement
income account described in section 403(b) with
respect to such participant, when expressed as
an annual addition to such participant’s ac-
count, shall be treated as not exceeding the lim-
itation 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 Small Business Tax Fairness Act of
2001)’’.
(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.—
(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 contribu-
tion plan maintained by each employer with respect
to which the participant has the control required
under subsection (b) or (c) of section 414 (as modi-
fied by subsection (h)). For purposes of this section,
any contribution by an employer to a simplified em-
ployee pension plan for an individual for a taxable
year shall be treated as an employer contribution to
a defined 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 sec-
tion 403(b) of the Internal Revenue Code of
1986, the amount of the contribution disquali-
fied by reason 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 AL-
LOWANCE TO CONFORM TO 415 MODIFICATION.—The
Secretary of the Treasury shall modify the regula-
tions regarding 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 al-
lowance. For taxable years beginning after Decem-
ber 31, 1999, such regulations shall be applied as if
such requirement were void.
(c) DEFERRED COMPENSATION PLANS
OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI-
ZATIONS.—
(1) IN GENERAL.—Subparagraph (B) of section
457(b)(2) (relating to salary limitation on eligible
deferred 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.
SEC. 
223. 
FASTER 
VESTING 
OF 
CERTAIN 
EMPLOYER
MATCHING CONTRIBUTIONS.
(a) AMENDMENTS TO 1986 CODE.—Section 411(a)
(relating to minimum vesting standards) is amended—
(1) in paragraph (2), by striking ‘‘A plan’’ and
inserting ‘‘Except as provided in paragraph (12), a
plan’’; and
(2) by adding at the end the following:
‘‘(12) FASTER VESTING FOR MATCHING CON-
TRIBUTIONS.—In the case of matching contributions
(as defined in section 401(m)(4)(A)), paragraph (2)
shall be applied—
‘‘(A) by substituting ‘3 years’ for ‘5 years’
in subparagraph (A), and
‘‘(B) by substituting the following table for
the table contained in subparagraph (B):
The nonforfeitable
‘‘Years of service:
percentage is:
2 ...............................................................................................
3 ...............................................................................................
4 ...............................................................................................
5 ...............................................................................................
6 ...............................................................................................
100.’’.
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to contributions for plan years beginning
after December 31, 2000.
(2) COLLECTIVE BARGAINING AGREEMENTS.—
In the case of a plan maintained pursuant to one or
more collective bargaining agreements between em-
ployee representatives and one or more employers
ratified by the date of the enactment of this Act, the
amendments made by this section shall not apply to
contributions on behalf of employees covered by any
such agreement for plan years beginning before the
earlier of—
(A) the later of—
(i) the date on which the last of such
collective bargaining agreements termi-
nates (determined without regard to any
extension thereof on or after such date of
the enactment); or
(ii) January 1, 2001; or
(B) January 1, 2005.
(3) SERVICE REQUIRED.—With respect to any
plan, the amendments made by this section shall not
apply to any employee before the date that such em-
ployee has 1 hour of service under such plan in any
plan year to which the amendments made by this
section apply.
SEC. 224. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU-
TION RULES.
(a) SIMPLIFICATION
AND FINALIZATION
OF MIN-
IMUM DISTRIBUTION REQUIREMENTS.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall—
(A) simplify and finalize the regulations re-
lating to minimum distribution requirements
under sections 401(a)(9), 408(a)(6) and (b)(3),
403(b)(10), and 457(d)(2) of the Internal Rev-
enue Code of 1986; and
(B) modify such regulations to—
(i) reflect current life expectancy; and
(ii) revise the required distribution
methods so that, under reasonable assump-
tions, the amount of the required minimum
distribution does not decrease over a par-
ticipant’s life expectancy.
(2) FRESH START.—Notwithstanding subpara-
graph (D) of section 401(a)(9) of such Code, during
the first year that regulations are in effect under
this subsection, required distributions for future
years may be redetermined to reflect changes under
such regulations. Such redetermination shall include
the opportunity to choose a new designated bene-
ficiary and to elect a new method of calculating life
expectancy.
(3) EFFECTIVE
DATE
FOR
REGULATIONS.—
Regulations referred to in paragraph (1) shall be ef-
fective for years beginning after December 31, 2000,
and shall apply in such years without regard to
whether an individual had previously begun receiving
minimum distributions.
(b) REPEAL OF RULE WHERE DISTRIBUTIONS HAD
BEGUN BEFORE DEATH OCCURS.—
(1) IN GENERAL.—Subparagraph (B) of section
401(a)(9) is amended by striking clause (i) and re-
designating clauses (ii), (iii), and (iv) as clauses (i),
(ii), and (iii), respectively.
(2) CONFORMING CHANGES.—
(A) Clause (i) of section 401(a)(9)(B) (as
so redesignated) is amended—
(i) by striking ‘‘FOR OTHER CASES’’ in
the heading; and
(ii) by striking ‘‘the distribution of the
employee’s interest has begun in accord-
ance with subparagraph (A)(ii)’’ and in-
serting ‘‘his entire interest has been dis-
tributed to him,’’.
(B) Clause (ii) of section 401(a)(9)(B) (as
so redesignated) is amended by striking ‘‘clause
(ii)’’ and inserting ‘‘clause (i)’’.
(C) Clause (iii) of section 401(a)(9)(B) (as
so redesignated) is amended—
(i) by striking ‘‘clause (iii)(I)’’ and in-
serting ‘‘clause (ii)(I)’’;
(ii) by striking ‘‘clause (iii)(III)’’ in
subclause 
(I) 
and 
inserting 
‘‘clause
(ii)(III)’’;
(iii) by striking ‘‘the date on which
the employee would have attained the age
701⁄2,’’ in subclause (I) and inserting
‘‘April 1 of the calendar year following the
calendar year in which the spouse attains
701⁄2,’’; and
(iv) by striking ‘‘the distributions to
such spouse begin,’’ in subclause (II) and
inserting ‘‘his entire interest has been dis-
tributed to him,’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning
after December 31, 2000.
(c) REDUCTION IN EXCISE TAX.—
(1) IN
GENERAL.—Subsection (a) of section
4974 is amended by striking ‘‘50 percent’’ and in-
serting ‘‘10 percent’’.
(2) EFFECTIVE DATE.—The amendment made
by this subsection shall apply to years beginning
after December 31, 2000.
SEC. 225. CLARIFICATION OF TAX TREATMENT OF DIVISION
OF SECTION 457 PLAN BENEFITS UPON DI-
VORCE.
(a) IN GENERAL.—Section 414(p)(11) (relating to
application of rules to governmental and church plans) is
amended—
(1) by inserting ‘‘or an eligible deferred com-
pensation plan (within the meaning of section
457(b))’’ after ‘‘subsection (e))’’; and
(2) in the heading, by striking ‘‘GOVERN-
MENTAL AND CHURCH PLANS’’ and inserting ‘‘CER-
TAIN OTHER PLANS’’.
(b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE-
MENTS.—Paragraph (10) of section 414(p) is amended by
striking ‘‘and section 409(d)’’ and inserting ‘‘section
409(d), and section 457(d)’’.
(c) TAX TREATMENT OF PAYMENTS FROM A SEC-
TION 457 PLAN.—Subsection (p) of section 414 is amend-
ed by redesignating paragraph (12) as paragraph (13) and
inserting after paragraph (11) the following new para-
graph:
‘‘(12) TAX TREATMENT OF PAYMENTS FROM A
SECTION 457 PLAN.—If a distribution or payment
from an eligible deferred compensation plan de-
scribed in section 457(b) is made pursuant to a
qualified domestic relations order, rules similar to
the rules of section 402(e)(1)(A) shall apply to such
distribution or payment.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to transfers, distributions, and
payments made after December 31, 2000.
SEC. 226. MODIFICATION OF SAFE HARBOR RELIEF FOR
HARDSHIP WITHDRAWALS FROM CASH OR
DEFERRED ARRANGEMENTS.
(a) IN GENERAL.—The Secretary of the Treasury
shall revise the regulations relating to hardship distribu-
tions under section 401(k)(2)(B)(i)(IV) of the Internal
Revenue Code of 1986 to provide that the period an em-
ployee is prohibited from making elective and employee
contributions in order for a distribution to be deemed nec-
essary to satisfy financial need shall be equal to 6 months.
(b) EFFECTIVE
DATE.—The revised regulations
under subsection (a) shall apply to years beginning after
December 31, 2000.
Subtitle C—Increasing Portability
for Participants
SEC. 231. ROLLOVERS ALLOWED AMONG VARIOUS TYPES
OF PLANS.
(a) ROLLOVERS
FROM
AND
TO
SECTION
457
PLANS.—
(1) ROLLOVERS FROM SECTION 457 PLANS.—
(A) IN GENERAL.—Section 457(e) (relat-
ing to other definitions and special rules) is
amended by adding at the end the following:
‘‘(16) ROLLOVER AMOUNTS.—
‘‘(A) GENERAL RULE.—In the case of an
eligible deferred compensation plan established
and maintained by an employer described in
subsection (e)(1)(A), if—
‘‘(i) any portion of the balance to the
credit of an employee in such plan is paid
to such employee in an eligible rollover dis-
tribution (within the meaning of section
402(c)(4) without regard to subparagraph
(C) thereof),
‘‘(ii) the employee transfers any por-
tion of the property such employee receives
in such distribution to an eligible retire-
ment 
plan 
described 
in 
section
402(c)(8)(B), and
‘‘(iii) in the case of a distribution of
property other than money, the amount so
transferred consists of the property distrib-
uted,
then such distribution (to the extent so trans-
ferred) shall not be includible in gross income
for the taxable year in which paid.
‘‘(B) CERTAIN
RULES
MADE
APPLICA-
BLE.—The rules of paragraphs (2) through (7)
(other than paragraph (4)(C)) and (9) of sec-
tion 402(c) and section 402(f) shall apply for
purposes of subparagraph (A).
‘‘(C) REPORTING.—Rollovers under this
paragraph shall be reported to the Secretary in
the same manner as rollovers from qualified re-
tirement 
plans 
(as 
defined 
in 
section
4974(c)).’’.
(B) DEFERRAL LIMIT DETERMINED WITH-
OUT REGARD TO ROLLOVER AMOUNTS.—Section
457(b)(2) (defining eligible deferred compensa-
(ii) Paragraph (3) of section 3405(c)
is amended to read as follows:
‘‘(3) ELIGIBLE ROLLOVER DISTRIBUTION.—For
purposes of this subsection, the term ‘eligible roll-
over distribution’ has the meaning given such term
by section 402(f)(2)(A).’’.
(iii) LIABILITY FOR WITHHOLDING.—
Subparagraph (B) of section 3405(d)(2) is
amended by striking ‘‘or’’ at the end of
clause (ii), by striking the period at the
end of clause (iii) and inserting ‘‘, or’’, and
by adding at the end the following:
‘‘(iv) section 457(b).’’.
(2) ROLLOVERS TO SECTION 457 PLANS.—
(A) IN
GENERAL.—Section 402(c)(8)(B)
(defining eligible retirement plan) is amended
by striking ‘‘and’’ at the end of clause (iii), by
striking the period at the end of clause (iv) and
inserting ‘‘, and’’, and by inserting after clause
(iv) the following new clause:
‘‘(v) an eligible deferred compensation
plan described in section 457(b) of an em-
ployer described in section 457(e)(1)(A).’’.
(B) 
SEPARATE
ACCOUNTING.—Section
402(c) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(11) SEPARATE ACCOUNTING.—Unless a plan
described in clause (v) of paragraph (8)(B) agrees to
separately account for amounts rolled into such plan
from eligible retirement plans not described in such
clause, the plan described in such clause may not ac-
cept transfers or rollovers from such retirement
plans.’’.
(C) 10 PERCENT ADDITIONAL TAX.—Sub-
section (t) of section 72 (relating to 10-percent
additional tax on early distributions from quali-
fied retirement plans) is amended by adding at
the end the following new paragraph:
‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SEC-
TION 457 PLANS.—For purposes of this subsection,
a distribution from an eligible deferred compensation
plan (as defined in section 457(b)) of an employer
described in section 457(e)(1)(A) shall be treated as
a distribution from a qualified retirement plan de-
scribed in 4974(c)(1) to the extent that such dis-
tribution is attributable to an amount transferred to
an eligible deferred compensation plan from a quali-
fied 
retirement 
plan 
(as 
defined 
in 
section
4974(c)).’’.
(b) ALLOWANCE
OF ROLLOVERS FROM
AND
TO
403(b) PLANS.—
(1) 
ROLLOVERS
FROM
SECTION
403(b)
PLANS.—Section 403(b)(8)(A)(ii) (relating to roll-
over amounts) is amended by striking ‘‘such dis-
tribution’’ and all that follows and inserting ‘‘such
distribution to an eligible retirement plan described
in section 402(c)(8)(B), and’’.
(2) ROLLOVERS TO SECTION 403(b) PLANS.—
Section 402(c)(8)(B) (defining eligible retirement
plan), as amended by subsection (a), is amended by
striking ‘‘and’’ at the end of clause (iv), by striking
the period at the end of clause (v) and inserting ‘‘,
and’’, and by inserting after clause (v) the following
new clause:
‘‘(vi) an annuity contract described in
section 403(b).’’.
(c) EXPANDED EXPLANATION TO RECIPIENTS OF
ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section
402(f) (relating to written explanation to recipients of dis-
tributions eligible for rollover treatment) is amended by
striking ‘‘and’’ at the end of subparagraph (C), by striking
the period at the end of subparagraph (D) and inserting
‘‘, and’’, and by adding at the end the following new sub-
paragraph:
‘‘(E) of the provisions under which dis-
tributions from the eligible retirement plan re-
ceiving the distribution may be subject to re-
strictions and tax consequences which are dif-
ferent from those applicable to distributions
from the plan making such distribution.’’.
(d) SPOUSAL ROLLOVERS.—Section 402(c)(9) (relat-
ing to rollover where spouse receives distribution after
death of employee) is amended by striking ‘‘; except that’’
and all that follows up to the end period.
(e) CONFORMING AMENDMENTS.—
(1) Section 72(o)(4) is amended by striking
‘‘and 
408(d)(3)’’ 
and 
inserting 
‘‘403(b)(8),
408(d)(3), and 457(e)(16)’’.
(2) Section 219(d)(2) is amended by striking
‘‘or 
408(d)(3)’’ 
and 
inserting 
‘‘408(d)(3), 
or
457(e)(16)’’.
(3) Section 401(a)(31)(B) is amended by strik-
ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),
403(b)(8), and 457(e)(16)’’.
(4) Subparagraph (A) of section 402(f)(2) is
amended by striking ‘‘or paragraph (4) of section
403(a)’’ and inserting ‘‘, paragraph (4) of section
403(a), subparagraph (A) of section 403(b)(8), or
subparagraph (A) of section 457(e)(16)’’.
(5) Paragraph (1) of section 402(f) is amended
by striking ‘‘from an eligible retirement plan’’.
(6) Subparagraphs (A) and (B) of section
402(f)(1) are amended by striking ‘‘another eligible
retirement plan’’ and inserting ‘‘an eligible retire-
ment plan’’.
(7) Subparagraph (B) of section 403(b)(8) is
amended to read as follows:
‘‘(B) CERTAIN
RULES
MADE
APPLICA-
BLE.—The rules of paragraphs (2) through (7)
and (9) of section 402(c) and section 402(f)
shall apply for purposes of subparagraph (A),
except that section 402(f) shall be applied to
the payor in lieu of the plan administrator.’’.
(8) Section 408(a)(1) is amended by striking
‘‘or 403(b)(8)’’ and inserting ‘‘, 403(b)(8), or
457(e)(16)’’.
(9) Subparagraphs (A) and (B) of section
415(b)(2) are each amended by striking ‘‘and
408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and
457(e)(16)’’.
(10) Section 415(c)(2) is amended by striking
‘‘and 408(d)(3)’’ and inserting ‘‘408(d)(3), and
457(e)(16)’’.
(11) Section 4973(b)(1)(A) is amended by
striking ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or
457(e)(16)’’.
(f) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after De-
cember 31, 2000.
(2) SPECIAL RULE.—Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of
section 1122 of the Tax Reform Act of 1986 shall
not apply to any distribution from an eligible retire-
ment plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986)
on behalf of an individual if there was a rollover to
such plan on behalf of such individual which is per-
mitted solely by reason of any amendment made by
this section.
SEC. 232. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE-
MENT PLANS.
(a) IN GENERAL.—Subparagraph (A) of section
408(d)(3) (relating to rollover amounts) is amended by
adding ‘‘or’’ at the end of clause (i), by striking clauses
(ii) and (iii), and by adding at the end the following:
‘‘(ii) the entire amount received (in-
cluding money and any other property) is
paid into an eligible retirement plan for
the benefit of such individual not later
than the 60th day after the date on which
the payment or distribution is received, ex-
cept that the maximum amount which may
be paid into such plan may not exceed the
portion of the amount received which is in-
cludible in gross income (determined with-
out regard to this paragraph).
For purposes of clause (ii), the term ‘eligible re-
tirement plan’ means an eligible retirement plan
described in clause (iii), (iv), (v), or (vi) of sec-
tion 402(c)(8)(B).’’.
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 403(b) is amended
by striking ‘‘section 408(d)(3)(A)(iii)’’ and inserting
‘‘section 408(d)(3)(A)(ii)’’.
(2) Clause (i) of section 408(d)(3)(D) is amend-
ed by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i)
or (ii)’’.
(3) Subparagraph (G) of section 408(d)(3) is
amended to read as follows:
‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—In
the case of any payment or distribution out of
a simple retirement account (as defined in sub-
section (p)) to which section 72(t)(6) applies,
this paragraph shall not apply unless such pay-
ment or distribution is paid into another simple
retirement account.’’.
(c) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after De-
cember 31, 2000.
(2) SPECIAL RULE.—Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of
section 1122 of the Tax Reform Act of 1986 shall
not apply to any distribution from an eligible retire-
ment plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986)
on behalf of an individual if there was a rollover to
such plan on behalf of such individual which is per-
mitted solely by reason of the amendments made by
this section.
SEC. 233. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) ROLLOVERS FROM EXEMPT TRUSTS.—Para-
graph (2) of section 402(c) (relating to maximum amount
which may be rolled over) is amended by adding at the
end the following: ‘‘The preceding sentence shall not apply
to such distribution to the extent—
‘‘(A) such portion is transferred in a direct
trustee-to-trustee transfer to a qualified trust
which is part of a plan which is a defined con-
tribution plan and which agrees to separately
account for amounts so transferred, including
separately accounting for the portion of such
distribution which is includible in gross income
and the portion of such distribution which is
not so includible, or
‘‘(B) such portion is transferred to an eli-
gible retirement plan described in clause (i) or
(ii) of paragraph (8)(B).’’.
(b) OPTIONAL DIRECT TRANSFER
OF ELIGIBLE
ROLLOVER DISTRIBUTIONS.—Subparagraph (B) of sec-
tion 401(a)(31) (relating to limitation) is amended by add-
ing at the end the following: ‘‘The preceding sentence shall
not apply to such distribution if the plan to which such
distribution is transferred—
‘‘(i) agrees to separately account for
amounts so transferred, including sepa-
rately accounting for the portion of such
distribution which is includible in gross in-
come and the portion of such distribution
which is not so includible, or
‘‘(ii) is an eligible retirement plan de-
scribed in clause (i) or (ii) of section
402(c)(8)(B).’’.
(c) RULES FOR APPLYING SECTION 72 TO IRAS.—
Paragraph (3) of section 408(d) (relating to special rules
for applying section 72) is amended by inserting at the
end the following:
‘‘(H) APPLICATION OF SECTION 72.—
‘‘(i) IN GENERAL.—If—
‘‘(I) a distribution is made from
an individual retirement plan, and
‘‘(II) a rollover contribution is
made to an eligible retirement plan
described in section 402(c)(8)(B)(iii),
(iv), (v), or (vi) with respect to all or
part of such distribution,
then, notwithstanding paragraph (2), the
rules of clause (ii) shall apply for purposes
of applying section 72.
‘‘(ii) APPLICABLE
RULES.—In the
case of a distribution described in clause
(i)—
‘‘(I) section 72 shall be applied
separately to such distribution,
‘‘(II) notwithstanding the pro
rata allocation of income on, and in-
vestment in, the contract to distribu-
tions under section 72, the portion of
such distribution rolled over to an eli-
gible retirement plan described in
clause (i) shall be treated as from in-
come on the contract (to the extent of
the aggregate income on the contract
from all individual retirement plans of
the distributee), and
‘‘(III) appropriate adjustments
shall be made in applying section 72
to other distributions in such taxable
year and subsequent taxable years.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions made after Decem-
ber 31, 2000.
SEC. 234. HARDSHIP EXCEPTION TO 60-DAY RULE.
(a) EXEMPT TRUSTS.—Paragraph (3) of section
402(c) (relating to transfer must be made within 60 days
of receipt) is amended to read as follows:
‘‘(3) TRANSFER
MUST
BE
MADE
WITHIN
DAYS OF RECEIPT.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), paragraph (1) shall not
apply to any transfer of a distribution made
after the 60th day following the day on which
the distributee received the property distrib-
uted.
‘‘(B) HARDSHIP
EXCEPTION.—The Sec-
retary may waive the 60-day requirement under
subparagraph (A) where the failure to waive
such requirement would be against equity or
good conscience, including casualty, disaster, or
other events beyond the reasonable control of
the individual subject to such requirement.’’.
(b) IRAS.—Paragraph (3) of section 408(d) (relating
to rollover contributions), as amended by section 233, is
amended by adding after subparagraph (H) the following
new subparagraph:
‘‘(I) WAIVER OF 60-DAY REQUIREMENT.—
The Secretary may waive the 60-day require-
ment under subparagraphs (A) and (D) where
the failure to waive such requirement would be
against equity or good conscience, including
casualty, disaster, or other events beyond the
reasonable control of the individual subject to
such requirement.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after December 31,
2000.
SEC. 235. TREATMENT OF FORMS OF DISTRIBUTION.
(a) PLAN TRANSFERS.—
(1) AMENDMENT TO INTERNAL REVENUE CODE
OF 1986.—Paragraph (6) of section 411(d) (relating
to accrued benefit not to be decreased by amend-
ment) is amended by adding at the end the fol-
lowing:
‘‘(D) PLAN TRANSFERS.—
‘‘(i) A defined contribution plan (in
this subparagraph referred to as the
‘transferee plan’) shall not be treated as
failing to meet the requirements of this
subsection merely because the transferee
plan does not provide some or all of the
forms of distribution previously available
under another defined contribution plan
(in this subparagraph referred to as the
‘transferor plan’) to the extent that—
‘‘(I) the forms of distribution
previously available under the trans-
feror plan applied to the account of a
participant or beneficiary under the
transferor plan that was transferred
from the transferor plan to the trans-
feree plan pursuant to a direct trans-
fer rather than pursuant to a distribu-
tion from the transferor plan,
‘‘(II) the terms of both the trans-
feror plan and the transferee plan au-
thorize the transfer described in sub-
clause (I),
‘‘(III) the transfer described in
subclause (I) was made pursuant to a
voluntary election by the participant
or beneficiary whose account was
transferred to the transferee plan,
‘‘(IV) the election described in
subclause (III) was made after the
participant or beneficiary received a
notice describing the consequences of
making the election,
‘‘(V) if the transferor plan pro-
vides for an annuity as the normal
form of distribution under the plan in
accordance with section 417, the
transfer is made with the consent of
the participant’s spouse (if any), and
such consent meets requirements simi-
lar to the requirements imposed by
section 417(a)(2), and
‘‘(VI) the transferee plan allows
the participant or beneficiary de-
scribed in clause (iii) to receive any
distribution to which the participant
or beneficiary is entitled under the
transferee plan in the form of a single
sum distribution.
‘‘(ii) Clause (i) shall apply to plan
mergers and other transactions having the
effect of a direct transfer, including con-
solidations of benefits attributable to dif-
ferent employers within a multiple em-
ployer plan.
‘‘(E) ELIMINATION OF FORM OF DISTRIBU-
TION.—Except to the extent provided in regula-
tions, a defined contribution plan shall not be
treated as failing to meet the requirements of
this section merely because of the elimination of
a form of distribution previously available there-
under. This subparagraph shall not apply to the
elimination of a form of distribution with re-
spect to any participant unless—
‘‘(i) a single sum payment is available
to such participant at the same time or
times as the form of distribution being
eliminated, and
‘‘(ii) such single sum payment is
based on the same or greater portion of
the participant’s account as the form of
distribution being eliminated.’’.
(2) EFFECTIVE DATE.—The amendment made
by this subsection shall apply to years beginning
after December 31, 2000.
(b) REGULATIONS.—
(1) AMENDMENT TO INTERNAL REVENUE CODE
OF 1986.—The last sentence of paragraph (6)(B) of
section 411(d) (relating to accrued benefit not to be
decreased by amendment) is amended to read as fol-
lows: ‘‘The Secretary shall by regulations provide
that this subparagraph shall not apply to any plan
108
(1) The headings for subparagraph (G) of sec-
tion 401(a)(5) and subparagraph (H) of section
401(a)(26) are each amended by inserting ‘‘AND
INTERNATIONAL
ORGANIZATION’’ after ‘‘GOVERN-
MENTAL’’.
(2) Subparagraph (G) of section 401(k)(3) is
amended by inserting ‘‘STATE AND LOCAL GOVERN-
MENTAL
AND
INTERNATIONAL
ORGANIZATION
PLANS.—’’ after ‘‘(G)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2000.
SEC. 272. NOTICE AND CONSENT PERIOD REGARDING DIS-
TRIBUTIONS.
(a) EXPANSION OF PERIOD.—
(1) AMENDMENT
TO
1986
CODE.—Subpara-
graph (A) of section 417(a)(6) is amended by strik-
ing ‘‘90-day’’ and inserting ‘‘180-day’’.
(2) MODIFICATION
OF
REGULATIONS.—The
Secretary of the Treasury shall modify the regula-
tions under sections 402(f), 411(a)(11), and 417 of
the Internal Revenue Code of 1986 to substitute
‘‘180 days’’ for ‘‘90 days’’ each place it appears in
Treasury Regulations sections 1.402(f)–1, 1.411(a)–
11(c), and 1.417(e)–1(b).