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 the
date of the enactment of this Act.
(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. 402. 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 the
date of the enactment of this Act.
(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. 403. 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 the
date of the enactment of this Act.
SEC. 404. 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 403, 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 the date of
the enactment of this Act.
SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.
(a) PLAN TRANSFERS.—
(1) AMENDMENT
OF
INTERNAL
REVENUE
CODE.—Paragraph (6) of section 411(d) (relating to
accrued benefit not to be decreased by amendment)
is amended by adding at the end the following:
‘‘(D) PLAN TRANSFERS.—
‘‘(i) IN
GENERAL.—A defined con-
tribution plan (in this subparagraph re-
ferred to as the ‘transferee plan’) shall not
be treated as failing to meet the require-
ments of this subsection merely because
the transferee plan does not provide some
or all of the forms of distribution pre-
viously available under another defined
contribution plan (in this subparagraph re-
ferred 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, and
‘‘(V) the transferee plan allows
the participant or beneficiary de-
scribed in subclause (III) to receive
any distribution to which the partici-
pant or beneficiary is entitled under
the transferee plan in the form of a
single sum distribution.
‘‘(ii) EXCEPTION.—Clause (i) shall
apply to plan mergers and other trans-
actions having the effect of a direct trans-
fer, including consolidations of benefits at-
tributable to different employers within a
multiple employer 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) AMENDMENT OF ERISA.—Section 204(g) of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1054(g)) is amended by adding at
the end the following:
‘‘(4)(A) A defined contribution plan (in this subpara-
graph referred to as the ‘transferee plan’) shall not be
treated as failing to meet the requirements of this sub-
section merely because the transferee plan does not pro-
vide 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 avail-
able under the transferor plan applied to the account
of a participant or beneficiary under the transferor
plan that was transferred from the transferor plan
to the transferee plan pursuant to a direct transfer
rather than pursuant to a distribution from the
transferor plan;
‘‘(ii) the terms of both the transferor plan and
the transferee plan authorize the transfer described
in clause (i);
‘‘(iii) the transfer described in clause (i) was
made pursuant to a voluntary election by the partici-
pant or beneficiary whose account was transferred to
the transferee plan;
‘‘(iv) the election described in clause (iii) was
made after the participant or beneficiary received a
notice describing the consequences of making the
election; and
‘‘(v) the transferee plan allows the participant
or beneficiary described 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.
‘‘(B) Subparagraph (A) shall apply to plan mergers
and other transactions having the effect of a direct trans-
fer, including consolidations of benefits attributable to dif-
ferent employers within a multiple employer plan.
‘‘(5) Except to the extent provided in regulations pro-
mulgated by the Secretary of the Treasury, a defined con-
tribution plan shall not be treated as failing to meet the
requirements of this subsection merely because of the
elimination of a form of distribution previously available
thereunder. This paragraph shall not apply to the elimi-
nation of a form of distribution with respect to any partici-
pant unless—
‘‘(A) a single sum payment is available to such
participant at the same time or times as the form
of distribution being eliminated; and
‘‘(B) such single sum payment is based on the
same or greater portion of the participant’s account
as the form of distribution being eliminated.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning
after December 31, 2001.
(b) REGULATIONS.—
(1) AMENDMENT
OF
INTERNAL
REVENUE
CODE.—Paragraph (6)(B) of section 411(d) (relat-
ing to accrued benefit not to be decreased by amend-
ment) is amended by inserting after the second sen-
tence the following new sentence: ‘‘The Secretary
shall by regulations provide that this subparagraph
shall not apply to any plan amendment which re-
duces or eliminates benefits or subsidies which cre-
ate significant burdens or complexities for the plan
and plan participants and does not adversely affect
the rights of any participant in a more than de mini-
mis manner.’’.
(2) AMENDMENT OF ERISA.—Section 204(g)(2)
of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1054(g)(2)) is amended by insert-
ing before the last sentence the following new sen-
tence: ‘‘The Secretary of the Treasury shall by regu-
lations provide that this paragraph shall not apply
to any plan amendment which reduces or eliminates
benefits or subsidies which create significant bur-
dens or complexities for the plan and plan partici-
pants and does not adversely affect the rights of any
participant in a more than de minimis manner.’’.
(3) SECRETARY
DIRECTED.—Not later than
December 31, 2003, the Secretary of the Treasury
is directed to issue regulations under section
411(d)(6) of the Internal Revenue Code of 1986 and
section 204(g) of the Employee Retirement Income
Security Act of 1974, including the regulations re-
quired by the amendment made by this subsection.
Such regulations shall apply to plan years beginning
after December 31, 2003, or such earlier date as is
specified by the Secretary of the Treasury.
SEC. 406. RATIONALIZATION OF RESTRICTIONS ON DIS-
TRIBUTIONS.
(a) MODIFICATION OF SAME DESK EXCEPTION.—
(1) SECTION 401(k).—
(A) Section 401(k)(2)(B)(i)(I) (relating to
qualified cash or deferred arrangements) is
amended by striking ‘‘separation from service’’
and inserting ‘‘severance from employment’’.
(B) 
Subparagraph 
(A) 
of 
section
401(k)(10) (relating to distributions upon ter-
mination of plan or disposition of assets or sub-
sidiary) is amended to read as follows:
‘‘(A) IN GENERAL.—An event described in
this subparagraph is the termination of the
plan without establishment or maintenance of
another defined contribution plan (other than
an employee stock ownership plan as defined in
section 4975(e)(7)).’’.
(C) Section 401(k)(10) is amended—
(i) in subparagraph (B)—
(I) by striking ‘‘An event’’ in
clause (i) and inserting ‘‘A termi-
nation’’; and
(II) by striking ‘‘the event’’ in
clause (i) and inserting ‘‘the termi-
nation’’;
(ii) by striking subparagraph (C); and
(iii) by striking ‘‘OR DISPOSITION OF
ASSETS OR SUBSIDIARY’’ in the heading.
(2) SECTION 403(b).—
(A) Paragraphs (7)(A)(ii) and (11)(A) of
section 403(b) are each amended by striking
‘‘separates from service’’ and inserting ‘‘has a
severance from employment’’.
(B) The heading for paragraph (11) of
section 403(b) is amended by striking ‘‘SEPARA-
TION
FROM
SERVICE’’ and inserting ‘‘SEVER-
ANCE FROM EMPLOYMENT’’.
(3) SECTION
457.—Clause (ii) of section
457(d)(1)(A) is amended by striking ‘‘is separated
from service’’ and inserting ‘‘has a severance from
employment’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after the date of
the enactment of this Act.
SEC. 407. PURCHASE OF SERVICE CREDIT IN GOVERN-
MENTAL DEFINED BENEFIT PLANS.
(a) 403(b) PLANS.—Subsection (b) of section 403 is
amended by adding at the end the following new para-
graph:
‘‘(13) TRUSTEE-TO-TRUSTEE
TRANSFERS
TO
PURCHASE
PERMISSIVE
SERVICE
CREDIT.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer to a defined
benefit governmental plan (as defined in section
414(d)) if such transfer is—
‘‘(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A))
under such plan, or
‘‘(B) a repayment to which section 415
does not apply by reason of subsection (k)(3)
thereof.’’.
(b) 457 PLANS.—Subsection (e) of section 457 is
amended by adding after paragraph (16) the following
new paragraph:
‘‘(17) TRUSTEE-TO-TRUSTEE
TRANSFERS
TO
PURCHASE
PERMISSIVE
SERVICE
CREDIT.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer to a defined
benefit governmental plan (as defined in section
414(d)) if such transfer is—
‘‘(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A))
under such plan, or
‘‘(B) a repayment to which section 415
does not apply by reason of subsection (k)(3)
thereof.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to trustee-to-trustee transfers after
the date of the enactment of this Act.
SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR
PURPOSES OF CASH-OUT AMOUNTS.
(a) QUALIFIED PLANS.—
(1) AMENDMENT
OF
INTERNAL
REVENUE
CODE.—Section 411(a)(11) (relating to restrictions
on certain mandatory distributions) is amended by
adding at the end the following:
‘‘(D) SPECIAL RULE FOR ROLLOVER CON-
TRIBUTIONS.—A plan shall not fail to meet the
requirements of this paragraph if, under the
terms of the plan, the present value of the non-
forfeitable accrued benefit is determined with-
out regard to that portion of such benefit which
is attributable to rollover contributions (and
earnings allocable thereto). For purposes of this
subparagraph, the term ‘rollover contributions’
means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),
and 457(e)(16).’’.
(2) AMENDMENT OF ERISA.—Section 203(e) of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1053(c)) is amended by adding at
the end the following:
‘‘(4) A plan shall not fail to meet the requirements
of this subsection if, under the terms of the plan, the
present value of the nonforfeitable accrued benefit is de-
termined without regard to that portion of such benefit
which is attributable to rollover contributions (and earn-
ings allocable thereto). For purposes of this subparagraph,
the term ‘rollover contributions’ means any rollover con-
tribution under sections 402(c), 403(a)(4), 403(b)(8),
408(d)(3)(A)(ii), and 457(e)(16) of the Internal Revenue
Code of 1986.’’.
(b) ELIGIBLE DEFERRED COMPENSATION PLANS.—
Clause (i) of section 457(e)(9)(A) is amended by striking
‘‘such amount’’ and inserting ‘‘the portion of such amount
which is not attributable to rollover contributions (as de-
fined in section 411(a)(11)(D))’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after December 31,
2001.
SEC. 409. MINIMUM DISTRIBUTION AND INCLUSION RE-
QUIREMENTS FOR SECTION 457 PLANS.
(a) MINIMUM
DISTRIBUTION
REQUIREMENTS.—
Paragraph (2) of section 457(d) (relating to distribution
requirements) is amended to read as follows:
‘‘(2) 
MINIMUM
DISTRIBUTION
REQUIRE-
MENTS.—A plan meets the minimum distribution re-
quirements of this paragraph if such plan meets the
requirements of section 401(a)(9).’’.
(b) INCLUSION IN GROSS INCOME.—
(1) YEAR
OF
INCLUSION.—Subsection (a) of
section 457 (relating to year of inclusion in gross in-
come) is amended to read as follows:
‘‘(a) YEAR OF INCLUSION IN GROSS INCOME.—
‘‘(1) IN GENERAL.—Any amount of compensa-
tion deferred under an eligible deferred compensa-
tion plan, and any income attributable to the
amounts so deferred, shall be includible in gross in-
come only for the taxable year in which such com-
pensation or other income—
‘‘(A) is paid to the participant or other
beneficiary, in the case of a plan of an eligible
employer described in subsection (e)(1)(A), and
‘‘(B) is paid or otherwise made available to
the participant or other beneficiary, in the case
of a plan of an eligible employer described in
subsection (e)(1)(B).
‘‘(2) 
SPECIAL
RULE
FOR
ROLLOVER
AMOUNTS.—To the extent provided in section
72(t)(9), section 72(t) shall apply to any amount in-
cludible in gross income under this subsection.’’.
(2) CONFORMING AMENDMENTS.—
(A) So much of paragraph (9) of section
457(e) as precedes subparagraph (A) is amend-
ed to read as follows:
‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION
PLANS NOT TREATED AS MADE AVAILABLE BY REA-
SON OF CERTAIN ELECTIONS, ETC.—In the case of
an eligible deferred compensation plan of an em-
ployer described in subsection (e)(1)(B)—’’.
(B) Section 457(d) is amended by adding
at the end the following new paragraph:
‘‘(3) SPECIAL RULE FOR GOVERNMENT PLAN.—
An eligible deferred compensation plan of an em-
ployer described in subsection (e)(1)(A) shall not be
treated as failing to meet the requirements of this
subsection solely by reason of making a distribution
described in subsection (e)(9)(A).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after the date of
the enactment of this Act.
TITLE V—STRENGTHENING PEN-
SION 
SECURITY 
AND 
EN-
FORCEMENT
SEC. 501. REPEAL OF PERCENT OF CURRENT LIABILITY
FUNDING LIMIT.
(a) AMENDMENT OF INTERNAL REVENUE CODE.—
Section 412(c)(7) (relating to full-funding limitation) is
amended—
(1) by striking ‘‘the applicable percentage’’ in
subparagraph (A)(i)(I) and inserting ‘‘in the case of
plan years beginning before January 1, 2004, the
applicable percentage’’; and
(2) by amending subparagraph (F) to read as
follows:
‘‘(F) 
APPLICABLE
PERCENTAGE.—For
purposes of subparagraph (A)(i)(I), the applica-
ble percentage shall be determined in accord-
ance with the following table:
‘‘In the case of any plan year
The applicable
beginning in—
percentage is—
2002 .............................................................................
165
2003 .............................................................................
170.’’.
(b) AMENDMENT OF ERISA.—Section 302(c)(7) of
the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1082(c)(7)) is amended—
(1) by striking ‘‘the applicable percentage’’ in
subparagraph (A)(i)(I) and inserting ‘‘in the case of
plan years beginning before January 1, 2004, the
applicable percentage’’; and
(2) by amending subparagraph (F) to read as
follows:
‘‘(F) 
APPLICABLE
PERCENTAGE.—For
purposes of subparagraph (A)(i)(I), the applica-
ble percentage shall be determined in accord-
ance with the following table:
‘‘In the case of any plan year
The applicable
beginning in—
percentage is—
2002 .............................................................................
165
2003 .............................................................................
170.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 2001.
SEC. 502. MAXIMUM CONTRIBUTION DEDUCTION RULES
MODIFIED AND APPLIED TO ALL DEFINED
BENEFIT PLANS.
(a) IN GENERAL.—Subparagraph (D) of section
404(a)(1) (relating to special rule in case of certain plans)
is amended to read as follows:
‘‘(D) SPECIAL RULE IN CASE OF CERTAIN
PLANS.—
‘‘(i) IN GENERAL.—In the case of any
defined benefit plan, except as provided in
regulations, the maximum amount deduct-
ible under the limitations of this paragraph
shall not be less than the unfunded termi-
nation liability (determined as if the pro-
posed termination date referred to in sec-
tion 4041(b)(2)(A)(i)(II) of the Employee
Retirement Income Security Act of 1974
were the last day of the plan year).
‘‘(ii) PLANS
WITH
LESS
THAN
100
PARTICIPANTS.—For purposes of this sub-
paragraph, in the case of a plan which has
less than 100 participants for the plan
year, termination liability shall not include
the liability attributable to benefit in-
creases for highly compensated employees
(as defined in section 414(q)) resulting
from a plan amendment which is made or
becomes effective, whichever is later, within
the last 2 years before the termination
date.
‘‘(iii) RULE FOR DETERMINING NUM-
BER OF PARTICIPANTS.—For purposes of
determining whether a plan has more than
100 participants, all defined benefit plans
maintained by the same employer (or any
member of such employer’s controlled
group (within the meaning of section
412(l)(8)(C))) shall be treated as one plan,
but only employees of such member or em-
ployer shall be taken into account.
‘‘(iv) PLANS MAINTAINED BY PROFES-
SIONAL SERVICE EMPLOYERS.—Clause (i)
shall not apply to a plan described in sec-
tion 4021(b)(13) of the Employee Retire-
ment Income Security Act of 1974.’’.
(b) CONFORMING AMENDMENT.—Paragraph (6) of
section 4972(c) is amended to read as follows:
‘‘(6) EXCEPTIONS.—In determining the amount
of nondeductible contributions for any taxable year,
there shall not be taken into account so much of the
contributions to one or more defined contribution
plans which are not deductible when contributed
solely because of section 404(a)(7) as does not ex-
ceed the greater of—
‘‘(A) the amount of contributions not in
excess of 6 percent of compensation (within the
meaning of section 404(a)) paid or accrued
(during the taxable year for which the contribu-
tions were made) to beneficiaries under the
plans, or
‘‘(B) the sum of—
‘‘(i) the amount of contributions de-
scribed in section 401(m)(4)(A), plus
‘‘(ii) the amount of contributions de-
scribed in section 402(g)(3)(A).
For purposes of this paragraph, the deductible limits
under section 404(a)(7) shall first be applied to
amounts contributed to a defined benefit plan and
then to amounts described in subparagraph (B).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 2001.
SEC. 503. EXCISE TAX RELIEF FOR SOUND PENSION FUND-
ING.
(a) IN GENERAL.—Subsection (c) of section 4972
(relating to nondeductible contributions) is amended by
adding at the end the following new paragraph:
‘‘(7) DEFINED BENEFIT PLAN EXCEPTION.—In
determining the amount of nondeductible contribu-
tions for any taxable year, an employer may elect for
such year not to take into account any contributions
to a defined benefit plan except to the extent that
such contributions exceed the full-funding limitation
(as defined in section 412(c)(7), determined without
regard to subparagraph (A)(i)(I) thereof). For pur-
poses of this paragraph, the deductible limits under
section 404(a)(7) shall first be applied to amounts
contributed to defined contribution plans and then
to amounts described in this paragraph. If an em-
ployer makes an election under this paragraph for a
taxable year, paragraph (6) shall not apply to such
employer for such taxable year.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 2001.
SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY
DEFINED BENEFIT PLANS SIGNIFICANTLY
REDUCING FUTURE BENEFIT ACCRUALS.
(a) AMENDMENT OF INTERNAL REVENUE CODE.—
(1) IN
GENERAL.—Chapter 43 (relating to
qualified pension, etc., plans) is amended by adding
at the end the following new section:
For purposes of the preceding sentence, all multiem-
ployer plans of which the same trust forms a part
shall be treated as one plan. For purposes of this
paragraph, if not all persons who are treated as a
single employer for purposes of this section have the
same taxable year, the taxable years taken into ac-
count shall be determined under principles similar to
the principles of section 1561.
‘‘(2) WAIVER BY SECRETARY.—In the case of a
failure which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all
of the tax imposed by subsection (a) to the extent
that the payment of such tax would be excessive rel-
ative to the failure involved.
‘‘(d) LIABILITY FOR TAX.—The following shall be lia-
ble for the tax imposed by subsection (a):
‘‘(1) In the case of a plan other than a multi-
employer plan, the employer.
‘‘(2) In the case of a multiemployer plan, the
plan.
‘‘(e) NOTICE REQUIREMENTS FOR PLANS SIGNIFI-
CANTLY REDUCING BENEFIT ACCRUALS.—
‘‘(1) IN
GENERAL.—If an applicable pension
plan is amended to provide for a significant reduc-
tion in the rate of future benefit accrual, the plan
ing, by the person to which it would otherwise be
provided.
‘‘(5) NOTICE
BEFORE
ADOPTION
OF
AMEND-
MENT.—A plan shall not be treated as failing to
meet the requirements of paragraph (1) merely be-
cause notice is provided before the adoption of the
plan amendment if no material modification of the
amendment occurs before the amendment is adopt-
ed.
‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) APPLICABLE INDIVIDUAL.—The term ‘ap-
plicable individual’ means, with respect to any plan
amendment—
‘‘(A) each participant in the plan, and
‘‘(B) any beneficiary who is an alternate
payee (within the meaning of section 414(p)(8))
under an applicable qualified domestic relations
order 
(within 
the 
meaning 
of 
section
414(p)(1)(A)),
whose rate of future benefit accrual under the plan
may reasonably be expected to be significantly re-
duced by such plan amendment.
‘‘(2) APPLICABLE
PENSION
PLAN.—The term
‘applicable pension plan’ means—
‘‘(A) any defined benefit plan, or
‘‘(B) an individual account plan which is
subject to the funding standards of section 412.
Such term shall not include a governmental plan
(within the meaning of section 414(d)) or a church
plan (within the meaning of section 414(e)) with re-
spect to which the election provided by section
410(d) has not been made.
‘‘(3) EARLY RETIREMENT.—A plan amendment
which eliminates or significantly reduces any early
retirement benefit or retirement-type subsidy (within
the meaning of section 411(d)(6)(B)(i)) shall be
treated as having the effect of significantly reducing
the rate of future benefit accrual.
‘‘(g) NEW TECHNOLOGIES.—The Secretary may by
regulations allow any notice under subsection (e) to be
provided by using new technologies.’’.
(2) CLERICAL AMENDMENT.—The table of sec-
tions for chapter 43 is amended by adding at the
end the following new item:
‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals
to satisfy notice requirements.’’.
(b) AMENDMENT OF ERISA.—Section 204(h) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1054(h)) is amended by adding at the end the fol-
lowing new paragraphs:
‘‘(3)(A) An applicable pension plan to which para-
graph (1) applies shall not be treated as meeting the re-
quirements of such paragraph unless, in addition to any
notice required to be provided to an individual or organiza-
tion under such paragraph, the plan administrator pro-
vides the notice described in subparagraph (B) to each ap-
plicable individual (and to each employee organization rep-
resenting applicable individuals).
‘‘(B) The notice required by subparagraph (A) shall
be written in a manner calculated to be understood by the
average plan participant and shall provide sufficient infor-
mation (as determined in accordance with regulations pre-
scribed by the Secretary of the Treasury) to allow applica-
ble individuals to understand the effect of the plan amend-
ment. The Secretary of the Treasury may provide a sim-
plified form of notice for, or exempt from any notice re-
quirement, a plan—
‘‘(i) which has fewer than 100 participants who
have accrued a benefit under the plan, or
‘‘(ii) which offers participants the option to
choose between the new benefit formula and the old
benefit formula.
‘‘(C) Except as provided in regulations prescribed by
the Secretary of the Treasury, the notice required by sub-
paragraph (A) shall be provided within a reasonable time
before the effective date of the plan amendment.
‘‘(D) Any notice under subparagraph (A) may be pro-
vided to a person designated, in writing, by the person
to which it would otherwise be provided.
‘‘(E) A plan shall not be treated as failing to meet
the requirements of subparagraph (A) merely because no-
tice is provided before the adoption of the plan amendment
if no material modification of the amendment occurs be-
fore the amendment is adopted.
‘‘(F) The Secretary of the Treasury may by regula-
tions allow any notice under this paragraph to be provided
by using new technologies.
‘‘(4) For purposes of paragraph (3)—
‘‘(A) The term ‘applicable individual’ means,
with respect to any plan amendment—
‘‘(i) each participant in the plan; and
‘‘(ii) any beneficiary who is an alternate
payee 
(within 
the 
meaning 
of 
section
206(d)(3)(K)) under an applicable qualified do-
mestic relations order (within the meaning of
section 206(d)(3)(B)(i)),
whose rate of future benefit accrual under the plan
may reasonably be expected to be significantly re-
duced by such plan amendment.
‘‘(B) The term ‘applicable pension plan’
means—
‘‘(i) any defined benefit plan; or
‘‘(ii) an individual account plan which is
subject to the funding standards of section 412
of the Internal Revenue Code of 1986.
‘‘(C) A plan amendment which eliminates or
significantly reduces any early retirement benefit or
retirement-type subsidy (within the meaning of sub-
section (g)(2)(A)) shall be treated as having the ef-
fect of significantly reducing the rate of future ben-
efit accrual.’’.
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall apply to plan amendments taking
effect on or after the date of the enactment of this
Act.
(2) TRANSITION.—Until such time as the Sec-
retary of the Treasury issues regulations under sec-
tions 4980F(e)(2) and (3) of the Internal Revenue
Code of 1986, and section 204(h)(3) of the Em-
ployee Retirement Income Security Act of 1974, as
added by the amendments made by this section, a
plan shall be treated as meeting the requirements of
such sections if it makes a good faith effort to com-
ply with such requirements.
(3) SPECIAL
NOTICE
RULE.—The period for
providing any notice required by the amendments
made by this section shall not end before the date
which is 3 months after the date of the enactment
of this Act.
(d) STUDY.—The Secretary of the Treasury shall
prepare a report on the effects of conversions of tradi-
tional defined benefit plans to cash balance or hybrid for-
mula plans. Such study shall examine the effect of such
conversions on longer service participants, including the
incidence and effects of ‘‘wear away’’ provisions under
which participants earn no additional benefits for a period
of time after the conversion. As soon as practicable, but
not later than 60 days after the date of the enactment
of this Act, the Secretary shall submit such report, to-
gether with recommendations thereon, to the Committee
on Ways and Means and the Committee on Education and
the Workforce of the House of Representatives and the
Committee on Finance and the Committee on Health,
Education, Labor, and Pensions of the Senate.
SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER
SECTION 415.
(a) COMPENSATION LIMIT.—
(1) IN GENERAL.—Paragraph (11) of section
415(b) (relating to limitation for defined benefit
plans) is amended to read as follows:
‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN-
MENTAL AND MULTIEMPLOYER PLANS.—In the case
of a governmental plan (as defined in section
414(d)) or a multiemployer plan (as defined in sec-
tion 414(f)), subparagraph (B) of paragraph (1)
shall not apply.’’.
(2) 
CONFORMING
AMENDMENT.—Section
415(b)(7) (relating to benefits under certain collec-
tively bargained plans) is amended by inserting
‘‘(other than a multiemployer plan)’’ after ‘‘defined
benefit plan’’ in the matter preceding subparagraph
(A).
(b) COMBINING AND AGGREGATION OF PLANS.—
(1) COMBINING OF PLANS.—Subsection (f) of
section 415 (relating to combining of plans) is
amended by adding at the end the following:
‘‘(3) 
EXCEPTION
FOR
MULTIEMPLOYER
PLANS.—Notwithstanding paragraph (1) and sub-
section (g), a multiemployer plan (as defined in sec-
tion 414(f)) shall not be combined or aggregated
with any other plan maintained by an employer for
purposes of applying the limitations established in
is invested in assets consisting of qualifying em-
ployer securities, qualifying employer real property,
or both, if such assets were acquired before January
1, 1999.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply as if included in the provision of
the Taxpayer Relief Act of 1997 to which it relates.
SEC. 507. PERIODIC PENSION BENEFITS STATEMENTS.
(a) IN GENERAL.—Section 105(a) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1025
(a)) is amended to read as follows:
‘‘(a)(1) Except as provided in paragraph (2)—
‘‘(A) the administrator of an individual account
plan shall furnish a pension benefit statement—
‘‘(i) to a plan participant at least once an-
nually, and
‘‘(ii) to a plan beneficiary upon written re-
quest, and
‘‘(B) the administrator of a defined benefit plan
shall furnish a pension benefit statement—
‘‘(i) at least once every 3 years to each
participant with a nonforfeitable accrued ben-
efit who is employed by the employer maintain-
ing the plan at the time the statement is fur-
nished to participants, and
100
‘‘(ii) to a plan participant or plan bene-
ficiary of the plan upon written request.
‘‘(2) Notwithstanding paragraph (1), the adminis-
trator of a plan to which more than 1 unaffiliated em-
ployer is required to contribute shall only be required to
furnish a pension benefit statement under paragraph (1)
upon the written request of a participant or beneficiary
of the plan.
‘‘(3) A pension benefit statement under paragraph
(1)—
‘‘(A) shall indicate, on the basis of the latest
available information—
‘‘(i) the total benefits accrued, and
‘‘(ii) the nonforfeitable pension benefits, if
any, which have accrued, or the earliest date on
which benefits will become nonforfeitable,
‘‘(B) shall be written in a manner calculated to
be understood by the average plan participant, and
‘‘(C) may be provided in written, electronic, tel-
ephonic, or other appropriate form.
‘‘(4)(A) In the case of a defined benefit plan, the re-
quirements of paragraph (1)(B)(i) shall be treated as met
with respect to a participant if the administrator provides
the participant at least once each year with notice of the
availability of the pension benefit statement and the ways
101
in which the participant may obtain such statement. Such
notice shall be provided in written, electronic, telephonic,
or other appropriate form, and may be included with other
communications to the participant if done in a manner
reasonably designed to attract the attention of the partici-
pant.
‘‘(B) The Secretary may provide that years in which
no employee or former employee benefits (within the
meaning of section 410(b) of the Internal Revenue Code
of 1986) under the plan need not be taken into account
in determining the 3-year period under paragraph
(1)(B)(i).’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 105 of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1025) is
amended by striking subsection (d).
(2) Section 105(b) of such Act (29 U.S.C.
1025(b)) is amended to read as follows:
‘‘(b) In no case shall a participant or beneficiary of
a plan be entitled to more than one statement described
in subsection (a)(1)(A) or (a)(1)(B)(ii), whichever is appli-
cable, in any 12-month period.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 2002.
102
SEC. 508. PROHIBITED ALLOCATIONS OF STOCK IN S COR-
PORATION ESOP.
(a) IN GENERAL.—Section 409 (relating to qualifica-
tions for tax credit employee stock ownership plans) is
amended by redesignating subsection (p) as subsection (q)
and by inserting after subsection (o) the following new
subsection:
‘‘(p) PROHIBITED ALLOCATIONS OF SECURITIES IN
AN S CORPORATION.—
‘‘(1) IN GENERAL.—An employee stock owner-
ship plan holding employer securities consisting of
stock in an S corporation shall provide that no por-
tion of the assets of the plan attributable to (or allo-
cable in lieu of) such employer securities may, dur-
ing a nonallocation year, accrue (or be allocated di-
rectly or indirectly under any plan of the employer
meeting the requirements of section 401(a)) for the
benefit of any disqualified person.
‘‘(2) FAILURE TO MEET REQUIREMENTS.—
‘‘(A) IN GENERAL.—If a plan fails to meet
the requirements of paragraph (1), the plan
shall be treated as having distributed to any
disqualified person the amount allocated to the
account of such person in violation of para-
graph (1) at the time of such allocation.
103
‘‘(B) CROSS REFERENCE.—
‘‘For excise tax relating to violations of paragraph
(1) and ownership of synthetic equity, see section
4979A.
‘‘(3) NONALLOCATION YEAR.—For purposes of
this subsection—
‘‘(A) IN GENERAL.—The term ‘nonalloca-
tion year’ means any plan year of an employee
stock ownership plan if, at any time during
such plan year—
‘‘(i) such plan holds employer securi-
ties consisting of stock in an S corpora-
tion, and
‘‘(ii) disqualified persons own at least
50 percent of the number of shares of
stock in the S corporation.
‘‘(B) ATTRIBUTION RULES.—For purposes
of subparagraph (A)—
‘‘(i) IN GENERAL.—The rules of sec-
tion 318(a) shall apply for purposes of de-
termining ownership, except that—
‘‘(I) in applying paragraph (1)
thereof, the members of an individ-
ual’s family shall include members of
the family described in paragraph
(4)(D), and
104
‘‘(II) paragraph (4) thereof shall
not apply.
‘‘(ii) DEEMED-OWNED SHARES.—Not-
withstanding the employee trust exception
in section 318(a)(2)(B)(i), individual shall
be treated as owning deemed-owned shares
of the individual.
Solely for purposes of applying paragraph (5),
this subparagraph shall be applied after the at-
tribution rules of paragraph (5) have been ap-
plied.
‘‘(4) DISQUALIFIED PERSON.—For purposes of
this subsection—
‘‘(A) IN GENERAL.—The term ‘disqualified
person’ means any person if—
‘‘(i) the aggregate number of deemed-
owned shares of such person and the mem-
bers of such person’s family is at least 20
percent of the number of deemed-owned
shares of stock in the S corporation, or
‘‘(ii) in the case of a person not de-
scribed in clause (i), the number of
deemed-owned shares of such person is at
least 10 percent of the number of deemed-
owned shares of stock in such corporation.
105
‘‘(B) TREATMENT OF FAMILY MEMBERS.—
In the case of a disqualified person described in
subparagraph (A)(i), any member of such per-
son’s family with deemed-owned shares shall be
treated as a disqualified person if not otherwise
treated as a disqualified person under subpara-
graph (A).
‘‘(C) DEEMED-OWNED SHARES.—
‘‘(i) 
IN
GENERAL.—The 
term
‘deemed-owned shares’ means, with respect
to any person—
‘‘(I) the stock in the S corpora-
tion constituting employer securities
of an employee stock ownership plan
which is allocated to such person
under the plan, and
‘‘(II) such person’s share of the
stock in such corporation which is
held by such plan but which is not al-
located under the plan to participants.
‘‘(ii) 
PERSON’S
SHARE
OF
UNALLOCATED
STOCK.—For purposes of
clause 
(i)(II), 
a 
person’s 
share 
of
unallocated S corporation stock held by
such plan is the amount of the unallocated
106
stock which would be allocated to such per-
son if the unallocated stock were allocated
to all participants in the same proportions
as the most recent stock allocation under
the plan.
‘‘(D) MEMBER OF FAMILY.—For purposes
of this paragraph, the term ‘member of the
family’ means, with respect to any individual—
‘‘(i) the spouse of the individual,
‘‘(ii) an ancestor or lineal descendant
of the individual or the individual’s spouse,
‘‘(iii) a brother or sister of the indi-
vidual or the individual’s spouse and any
lineal descendant of the brother or sister,
and
‘‘(iv) the spouse of any individual de-
scribed in clause (ii) or (iii).
A spouse of an individual who is legally sepa-
rated from such individual under a decree of di-
vorce or separate maintenance shall not be
treated as such individual’s spouse for purposes
of this subparagraph.
‘‘(5) TREATMENT OF SYNTHETIC EQUITY.—For
purposes of paragraphs (3) and (4), in the case of
a person who owns synthetic equity in the S corpora-
107
tion, except to the extent provided in regulations, the
shares of stock in such corporation on which such
synthetic equity is based shall be treated as out-
standing stock in such corporation and deemed-
owned shares of such person if such treatment of
synthetic equity of 1 or more such persons results
in—
‘‘(A) the treatment of any person as a dis-
qualified person, or
‘‘(B) the treatment of any year as a non-
allocation year.
For purposes of this paragraph, synthetic equity
shall be treated as owned by a person in the same
manner as stock is treated as owned by a person
under the rules of paragraphs (2) and (3) of section
318(a). If, without regard to this paragraph, a per-
son is treated as a disqualified person or a year is
treated as a nonallocation year, this paragraph shall
not be construed to result in the person or year not
being so treated.
‘‘(6) DEFINITIONS.—For purposes of this
subsection—
‘‘(A) 
EMPLOYEE
STOCK
OWNERSHIP
PLAN.—The term ‘employee stock ownership
108
plan’ has the meaning given such term by sec-
tion 4975(e)(7).
‘‘(B) EMPLOYER SECURITIES.—The term
‘employer security’ has the meaning given such
term by section 409(l).
‘‘(C) SYNTHETIC EQUITY.—The term ‘syn-
thetic equity’ means any stock option, warrant,
restricted stock, deferred issuance stock right,
or similar interest or right that gives the holder
the right to acquire or receive stock of the S
corporation in the future. Except to the extent
provided in regulations, synthetic equity also in-
cludes a stock appreciation right, phantom
stock unit, or similar right to a future cash
payment based on the value of such stock or
appreciation in such value.
‘‘(7) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry
out the purposes of this subsection.’’.
(b) COORDINATION WITH SECTION 4975(e)(7).—The
last sentence of section 4975(e)(7) (defining employee
stock ownership plan) is amended by inserting ‘‘, section
409(p),’’ after ‘‘409(n)’’.
(c) EXCISE TAX.—
109
(1) APPLICATION OF TAX.—Subsection (a) of
section 4979A (relating to tax on certain prohibited
allocations of employer securities) is amended—
(A) by striking ‘‘or’’ at the end of para-
graph (1), and
(B) by striking all that follows paragraph
(2) and inserting the following:
‘‘(3) there is any allocation of employer securi-
ties which violates the provisions of section 409(p),
or a nonallocation year described in subsection
(e)(2)(C) with respect to an employee stock owner-
ship plan, or
‘‘(4) any synthetic equity is owned by a dis-
qualified person in any nonallocation year,
there is hereby imposed a tax on such allocation or owner-
ship equal to 50 percent of the amount involved.’’.
(2) LIABILITY.—Section 4979A(c) (defining li-
ability for tax) is amended to read as follows:
‘‘(c) LIABILITY FOR TAX.—The tax imposed by this
section shall be paid—
‘‘(1) in the case of an allocation referred to in
paragraph (1) or (2) of subsection (a), by—
‘‘(A) the employer sponsoring such plan, or
‘‘(B) the eligible worker-owned cooperative,
110
which made the written statement described in sec-
tion 664(g)(1)(E) or in section 1042(b)(3)(B) (as
the case may be), and
‘‘(2) in the case of an allocation or ownership
referred to in paragraph (3) or (4) of subsection (a),
by the S corporation the stock in which was so allo-
cated or owned.’’.
(3) DEFINITIONS.—Section 4979A(e) (relating
to definitions) is amended to read as follows:
‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) DEFINITIONS.—Except as provided in
paragraph (2), terms used in this section have the
same respective meanings as when used in sections
409 and 4978.
‘‘(2) SPECIAL
RULES
RELATING
TO
TAX
IM-
POSED BY REASON OF PARAGRAPH (3) OR (4) OF
SUBSECTION (a).—
‘‘(A) 
PROHIBITED
ALLOCATIONS.—The
amount involved with respect to any tax im-
posed by reason of subsection (a)(3) is the
amount allocated to the account of any person
in violation of section 409(p)(1).
‘‘(B) SYNTHETIC
EQUITY.—The amount
involved with respect to any tax imposed by rea-
111
son of subsection (a)(4) is the value of the
shares on which the synthetic equity is based.
‘‘(C) SPECIAL RULE DURING FIRST NON-
ALLOCATION YEAR.—For purposes of subpara-
graph (A), the amount involved for the first
nonallocation year of any employee stock owner-
ship plan shall be determined by taking into ac-
count the total value of all the deemed-owned
shares of all disqualified persons with respect to
such plan.
‘‘(D) STATUTE
OF
LIMITATIONS.—The
statutory period for the assessment of any tax
imposed by this section by reason of paragraph
(3) or (4) of subsection (a) shall not expire be-
fore the date which is 3 years from the later
of—
‘‘(i) the allocation or ownership re-
ferred to in such paragraph giving rise to
such tax, or
‘‘(ii) the date on which the Secretary
is notified of such allocation or owner-
ship.’’.
(d) EFFECTIVE DATES.—
112
(1) IN GENERAL.—The amendments made by
this section shall apply to plan years beginning after
December 31, 2004.
(2) EXCEPTION FOR CERTAIN PLANS.—In the
case of any—
(A) employee stock ownership plan estab-
lished after March 14, 2001, or
(B) employee stock ownership plan estab-
lished on or before such date if employer securi-
ties held by the plan consist of stock in a cor-
poration with respect to which an election under
section 1362(a) of the Internal Revenue Code
of 1986 is not in effect on such date,
the amendments made by this section shall apply to
plan years ending after March 14, 2001.
TITLE VI—REDUCING
REGULATORY BURDENS
SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) AMENDMENT OF INTERNAL REVENUE CODE.—
Paragraph (9) of section 412(c)(9) (relating to annual
valuation) is amended to read as follows:
‘‘(9) ANNUAL VALUATION.—
‘‘(A) IN GENERAL.—For purposes of this
section, a determination of experience gains and
losses and a valuation of the plan’s liability
113
shall be made not less frequently than once
every year, except that such determination shall
be made more frequently to the extent required
in particular cases under regulations prescribed
by the Secretary.
‘‘(B) VALUATION DATE.—
‘‘(i) CURRENT YEAR.—Except as pro-
vided in clause (ii), the valuation referred
to in subparagraph (A) shall be made as of
a date within the plan year to which the
valuation refers or within one month prior
to the beginning of such year.
‘‘(ii) ELECTION TO USE PRIOR YEAR
VALUATION.—The valuation referred to in
subparagraph (A) may be made as of a
date within the plan year prior to the year
to which the valuation refers if—
‘‘(I) an election is in effect under
this clause with respect to the plan,
and
‘‘(II) as of such date, the value
of the assets of the plan are not less
than 125 percent of the plan’s current
liability (as defined in paragraph
(7)(B)).
114
‘‘(iii) 
ADJUSTMENTS.—Information
under clause (ii) shall, in accordance with
regulations, be actuarially adjusted to re-
flect significant differences in participants.
‘‘(iv) ELECTION.—An election under
clause (ii), once made, shall be irrevocable
without the consent of the Secretary.’’.
(b) AMENDMENT OF ERISA.—Paragraph (9) of sec-
tion 302(c) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1053(c)) is amended—
(1) by inserting ‘‘(A)’’ after ‘‘(9)’’; and
(2) by adding at the end the following:
‘‘(B)(i) Except as provided in clause (ii), the valu-
ation referred to in subparagraph (A) shall be made as
of a date within the plan year to which the valuation refers
or within one month prior to the beginning of such year.
‘‘(ii) The valuation referred to in subparagraph (A)
may be made as of a date within the plan year prior to
the year to which the valuation refers if—
‘‘(I) an election is in effect under this clause
with respect to the plan; and
‘‘(II) as of such date, the value of the assets of
the plan are not less than 125 percent of the plan’s
current liability (as defined in paragraph (7)(B)).
115
‘‘(iii) Information under clause (ii) shall, in accord-
ance with regulations, be actuarially adjusted to reflect
significant differences in participants.
‘‘(iv) An election under clause (ii), once made, shall
be irrevocable without the consent of the Secretary of the
Treasury.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 2001.
SEC. 602. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT
LOSS OF DIVIDEND DEDUCTION.
(a) IN GENERAL.—Section 404(k)(2)(A) (defining
applicable dividends) is amended by striking ‘‘or’’ at the
end of clause (ii), by redesignating clause (iii) as clause
(iv), and by inserting after clause (ii) the following new
clause:
‘‘(iii) is, at the election of such par-
ticipants or their beneficiaries—
‘‘(I) payable as provided in clause
(i) or (ii), or
‘‘(II) paid to the plan and rein-
vested in qualifying employer securi-
ties, or’’.
116
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 603. REPEAL OF TRANSITION RULE RELATING TO CER-
TAIN HIGHLY COMPENSATED EMPLOYEES.
(a) IN GENERAL.—Paragraph (4) of section 1114(c)
of the Tax Reform Act of 1986 is hereby repealed.
(b) EFFECTIVE DATE.—The repeal made by sub-
section (a) shall apply to plan years beginning after De-
cember 31, 2001.
SEC. 604. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) IN GENERAL.—The Secretary of the Treasury
shall modify Treasury Regulations section 1.410(b)–6(g)
to provide that employees of an organization described in
section 403(b)(1)(A)(i) of the Internal Revenue Code of
1986 who are eligible to make contributions under section
403(b) of such Code pursuant to a salary reduction agree-
ment may be treated as excludable with respect to a plan
under section 401(k) or (m) of such Code that is provided
under the same general arrangement as a plan under such
section 401(k), if—
(1) no employee of an organization described in
section 403(b)(1)(A)(i) of such Code is eligible to
participate in such section 401(k) plan or section
401(m) plan; and
117
(2) 95 percent of the employees who are not
employees of an organization described in section
403(b)(1)(A)(i) of such Code are eligible to partici-
pate in such plan under such section 401(k) or (m).
(b) EFFECTIVE DATE.—The modification required by
subsection (a) shall apply as of the same date set forth
in section 1426(b) of the Small Business Job Protection
Act of 1996.
SEC. 605. CLARIFICATION OF TREATMENT OF EMPLOYER-
PROVIDED RETIREMENT ADVICE.
(a) IN GENERAL.—Subsection (a) of section 132 (re-
lating to exclusion from gross income) is amended by
striking ‘‘or’’ at the end of paragraph (5), by striking the
period at the end of paragraph (6) and inserting ‘‘, or’’,
and by adding at the end the following new paragraph:
‘‘(7) qualified retirement planning services.’’.
(b) QUALIFIED RETIREMENT PLANNING SERVICES
DEFINED.—Section 132 is amended by redesignating sub-
section (m) as subsection (n) and by inserting after sub-
section (l) the following:
‘‘(m) QUALIFIED RETIREMENT PLANNING SERV-
ICES.—
‘‘(1) IN GENERAL.—For purposes of this sec-
tion, the term ‘qualified retirement planning serv-
ices’ means any retirement planning advice or infor-
118
mation provided to an employee and his spouse by
an employer maintaining a qualified employer plan.
‘‘(2) NONDISCRIMINATION
RULE.—Subsection
(a)(7) shall apply in the case of highly compensated
employees only if such services are available on sub-
stantially the same terms to each member of the
group of employees normally provided education and
information regarding the employer’s qualified em-
ployer plan.
‘‘(3) QUALIFIED EMPLOYER PLAN.—For pur-
poses of this subsection, the term ‘qualified employer
plan’ means a plan, contract, pension, or account de-
scribed in section 219(g)(5).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2001.
SEC. 606. REPORTING SIMPLIFICATION.
(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
OWNERS AND THEIR SPOUSES.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the requirements for filing annual
returns with respect to one-participant retirement
plans to ensure that such plans with assets of
$250,000 or less as of the close of the plan year
need not file a return for that year.
119
(2) ONE-PARTICIPANT RETIREMENT PLAN DE-
FINED.—For purposes of this subsection, the term
‘‘one-participant retirement plan’’ means a retire-
ment plan that—
(A) on the first day of the plan year—
(i) covered only the employer (and the
employer’s spouse) and the employer
owned the entire business (whether or not
incorporated); or
(ii) covered only one or more partners
(and their spouses) in a business partner-
ship (including partners in an S or C cor-
poration);
(B) meets the minimum coverage require-
ments of section 410(b) of the Internal Revenue
Code of 1986 without being combined with any
other plan of the business that covers the em-
ployees of the business;
(C) does not provide benefits to anyone ex-
cept the employer (and the employer’s spouse)
or the partners (and their spouses);
(D) does not cover a business that is a
member of an affiliated service group, a con-
trolled group of corporations, or a group of
businesses under common control; and
120
(E) does not cover a business that leases
employees.
(3) OTHER DEFINITIONS.—Terms used in para-
graph (2) which are also used in section 414 of the
Internal Revenue Code of 1986 shall have the re-
spective meanings given such terms by such section.
(b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case
of a retirement plan which covers less than 25 employees
on the first day of the plan year and meets the require-
ments described in subparagraphs (B), (D), and (E) of
subsection (a)(2), the Secretary of the Treasury shall pro-
vide for the filing of a simplified annual return that is
substantially similar to the annual return required to be
filed by a one-participant retirement plan.
(c) EFFECTIVE DATE.—The provisions of this section
shall take effect on January 1, 2002.
SEC. 607. IMPROVEMENT OF EMPLOYEE PLANS COMPLI-
ANCE RESOLUTION SYSTEM.
The Secretary of the Treasury shall continue to up-
date and improve the Employee Plans Compliance Resolu-
tion System (or any successor program) giving special at-
tention to—
121
(1) increasing the awareness and knowledge of
small employers concerning the availability and use
of the program;
(2) taking into account special concerns and
circumstances that small employers face with respect
to compliance and correction of compliance failures;
(3) extending the duration of the self-correction
period under the Administrative Policy Regarding
Self-Correction for significant compliance failures;
(4) expanding the availability to correct insig-
nificant compliance failures under the Administra-
tive Policy Regarding Self-Correction during audit;
and
(5) assuring that any tax, penalty, or sanction
that is imposed by reason of a compliance failure is
not excessive and bears a reasonable relationship to
the nature, extent, and severity of the failure.
SEC. 608. REPEAL OF THE MULTIPLE USE TEST.
(a) IN GENERAL.—Paragraph (9) of section 401(m)
is amended to read as follows:
‘‘(9) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry
out the purposes of this subsection and subsection
(k), including regulations permitting appropriate ag-
gregation of plans and contributions.’’.
122
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 2001.
SEC. 609. FLEXIBILITY IN NONDISCRIMINATION, COV-
ERAGE, AND LINE OF BUSINESS RULES.
(a) NONDISCRIMINATION.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall, by regulation, provide that a plan shall be
deemed to satisfy the requirements of section
401(a)(4) of the Internal Revenue Code of 1986 if
such plan satisfies the facts and circumstances test
under section 401(a)(4) of such Code, as in effect
before January 1, 1994, but only if—
(A) the plan satisfies conditions prescribed
by the Secretary to appropriately limit the
availability of such test; and
(B) the plan is submitted to the Secretary
for a determination of whether it satisfies such
test.
Subparagraph (B) shall only apply to the extent pro-
vided by the Secretary.
(2) EFFECTIVE DATES.—
(A) REGULATIONS.—The regulation re-
quired by paragraph (1) shall apply to years be-
ginning after December 31, 2003.
123
(B) CONDITIONS OF AVAILABILITY.—Any
condition of availability prescribed by the Sec-
retary under paragraph (1)(A) shall not apply
before the first year beginning not less than
120 days after the date on which such condition
is prescribed.
(b) COVERAGE TEST.—
(1) IN GENERAL.—Section 410(b)(1) (relating
to minimum coverage requirements) is amended by
adding at the end the following:
‘‘(D) In the case that the plan fails to
meet the requirements of subparagraphs (A),
(B) and (C), the plan—
‘‘(i) satisfies subparagraph (B), as in
effect immediately before the enactment of
the Tax Reform Act of 1986,
‘‘(ii) is submitted to the Secretary for
a determination of whether it satisfies the
requirement described in clause (i), and
‘‘(iii) satisfies conditions prescribed by
the Secretary by regulation that appro-
priately limit the availability of this sub-
paragraph.
Clause (ii) shall apply only to the extent pro-
vided by the Secretary.’’.
124
(2) EFFECTIVE DATES.—
(A) IN GENERAL.—The amendment made
by paragraph (1) shall apply to years beginning
after December 31, 2003.
(B) CONDITIONS OF AVAILABILITY.—Any
condition of availability prescribed by the Sec-
retary under regulations prescribed by the Sec-
retary under section 410(b)(1)(D) of the Inter-
nal Revenue Code of 1986 shall not apply be-
fore the first year beginning not less than 120
days after the date on which such condition is
prescribed.
(c) LINE OF BUSINESS RULES.—The Secretary of
the Treasury shall, on or before December 31, 2003, mod-
ify the existing regulations issued under section 414(r) of
the Internal Revenue Code of 1986 in order to expand
(to the extent that the Secretary determines appropriate)
the ability of a pension plan to demonstrate compliance
with the line of business requirements based upon the
facts and circumstances surrounding the design and oper-
ation of the plan, even though the plan is unable to satisfy
the mechanical tests currently used to determine compli-
ance.
125
SEC. 610. EXTENSION TO ALL GOVERNMENTAL PLANS OF
MORATORIUM ON APPLICATION OF CERTAIN
NONDISCRIMINATION RULES APPLICABLE TO
STATE AND LOCAL PLANS.
(a) IN GENERAL.—
(1) Subparagraph (G) of section 401(a)(5) and
subparagraph (H) of section 401(a)(26) are each
amended by striking ‘‘section 414(d))’’ and all that
follows and inserting ‘‘section 414(d)).’’.
(2) Subparagraph (G) of section 401(k)(3) and
paragraph (2) of section 1505(d) of the Taxpayer
Relief Act of 1997 are each amended by striking
‘‘maintained by a State or local government or polit-
ical subdivision thereof (or agency or instrumentality
thereof)’’.
(b) CONFORMING AMENDMENTS.—
(1) The heading for subparagraph (G) of sec-
tion 401(a)(5) is amended to read as follows: ‘‘GOV-
ERNMENTAL PLANS’’.
(2) The heading for subparagraph (H) of sec-
tion 401(a)(26) is amended to read as follows: ‘‘EX-
CEPTION FOR GOVERNMENTAL PLANS’’.
(3) Subparagraph (G) of section 401(k)(3) is
amended by inserting ‘‘GOVERNMENTAL PLANS.—’’
after ‘‘(G)’’.
126
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 2001.
SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DIS-
TRIBUTIONS.
(a) EXPANSION OF PERIOD.—
(1) AMENDMENT
OF
INTERNAL
REVENUE
CODE.—
(A) IN
GENERAL.—Subparagraph (A) of
section 417(a)(6) is amended by striking ‘‘90-
day’’ and inserting ‘‘180-day’’.
(B) MODIFICATION
OF
REGULATIONS.—
The Secretary of the Treasury shall modify the
regulations 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 sec-
tions 1.402(f)–1, 1.411(a)–11(c), and 1.417(e)–
1(b).
(2) 
AMENDMENT
OF
ERISA.—Section
205(c)(7)(A) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1055(c)(7)(A)) is
amended by striking ‘‘90-day’’ and inserting ‘‘180-
day’’.
127
(3) EFFECTIVE DATE.—The amendments made
by paragraph (1)(A) and (2) and the modifications
required by paragraph (1)(B) shall apply to years
beginning after December 31, 2001.
(b) CONSENT REGULATION INAPPLICABLE TO CER-
TAIN DISTRIBUTIONS.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the regulations under section
411(a)(11) of the Internal Revenue Code of 1986 to
provide that the description of a participant’s right,
if any, to defer receipt of a distribution shall also de-
scribe the consequences of failing to defer such re-
ceipt.
(2) EFFECTIVE DATE.—The modifications re-
quired by paragraph (1) shall apply to years begin-
ning after December 31, 2001.
SEC. 612. ANNUAL REPORT DISSEMINATION.
(a) REPORT AVAILABLE THROUGH ELECTRONIC
MEANS.—Section 104(b)(3) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1024(b)(3)) is
amended by adding at the end the following new sentence:
‘‘The requirement to furnish information under the pre-
vious sentence shall be satisfied if the administrator makes
such information reasonably available through electronic
means or other new technology.’’.
128
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to reports for years beginning after
December 31, 2000.
SEC. 623. TECHNICAL CORRECTIONS TO SAVER ACT.
Section 517 of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1147) is amended—
(1) in subsection (a), by striking ‘‘2001 and
2005 on or after September 1 of each year involved’’
and inserting ‘‘2001, 2005, and 2009 in the month
of September of each year involved’’;
(2) in subsection (b), by adding at the end the
following new sentence: ‘‘To effectuate the purposes
of this paragraph, the Secretary may enter into a co-
operative agreement, pursuant to the Federal Grant
and Cooperative Agreement Act of 1977 (31 U.S.C.
6301 et seq.), with the American Savings Education
Council.’’;
(3) in subsection (e)(2)—
(A) by striking ‘‘Committee on Labor and
Human Resources’’ in subparagraph (D) and
inserting ‘‘Committee on Health, Education,
Labor, and Pensions’’;
(B) by striking subparagraph (F) and in-
serting the following:
129
‘‘(F) the Chairman and Ranking Member
of the Subcommittee on Labor, Health and
Human Services, and Education of the Com-
mittee on Appropriations of the House of Rep-
resentatives and the Chairman and Ranking
Member of the Subcommittee on Labor, Health
and Human Services, and Education of the
Committee on Appropriations of the Senate;’’;
(C) by redesignating subparagraph (G) as
subparagraph (J); and
(D) by inserting after subparagraph (F)
the following new subparagraphs:
‘‘(G) the Chairman and Ranking Member
of the Committee on Finance of the Senate;
‘‘(H) the Chairman and Ranking Member
of the Committee on Ways and Means of the
House of Representatives;
‘‘(I) the Chairman and Ranking Member
of the Subcommittee on Employer-Employee
Relations of the Committee on Education and
the Workforce of the House of Representatives;
and’’;
(4) in subsection (e)(3)(A)—
(A) by striking ‘‘There shall be no more
than 200 additional participants.’’ and inserting
130
‘‘The participants in the National Summit shall
also include additional participants appointed
under this subparagraph.’’;
(B) by striking ‘‘one-half shall be ap-
pointed by the President,’’ in clause (i) and in-
serting ‘‘not more than 100 participants shall
be appointed under this clause by the Presi-
dent,’’, and by striking ‘‘and’’ at the end of
clause (i);
(C) by striking ‘‘one-half shall be ap-
pointed by the elected leaders of Congress’’ in
clause (ii) and inserting ‘‘not more than 100
participants shall be appointed under this
clause by the elected leaders of Congress’’, and
by striking the period at the end of clause (ii)
and inserting ‘‘; and’’;
(D) by adding at the end the following new
clause:
‘‘(iii) The President, in consultation
with the elected leaders of Congress re-
ferred to in subsection (a), may appoint
under this clause additional participants to
the National Summit. The number of such
additional participants appointed under
this clause may not exceed the lesser of 3
131
percent of the total number of all addi-
tional participants appointed under this
paragraph, or 10. Such additional partici-
pants shall be appointed from persons
nominated by the organization referred to
in subsection (b)(2) which is made up of
private sector businesses and associations
partnered with Government entities to pro-
mote long term financial security in retire-
ment through savings and with which the
Secretary is required thereunder to consult
and cooperate and shall not be Federal,
State, or local government employees.’’;
(5) in subsection (e)(3)(B), by striking ‘‘Janu-
ary 31, 1998’’ in subparagraph (B) and inserting
‘‘May 1, 2001, May 1, 2005, and May 1, 2009, for
each of the subsequent summits, respectively’’;
(6) in subsection (f)(1)(C), by inserting ‘‘, no
later than 90 days prior to the date of the com-
mencement of the National Summit,’’ after ‘‘com-
ment’’ in paragraph (1)(C);
(7) in subsection (g), by inserting ‘‘, in con-
sultation with the congressional leaders specified in
subsection (e)(2),’’ after ‘‘report’’;
(8) in subsection (i)—
132
(A) by striking ‘‘beginning on or after Oc-
tober 1, 1997’’ in paragraph (1) and inserting
‘‘2001, 2005, and 2009’’; and
(B) by adding at the end the following new
paragraph:
‘‘(3) RECEPTION
AND
REPRESENTATION
AU-
THORITY.—The Secretary is hereby granted recep-
tion and representation authority limited specifically
to the events at the National Summit. The Secretary
shall use any private contributions accepted in con-
nection with the National Summit prior to using
funds appropriated for purposes of the National
Summit pursuant to this paragraph.’’; and
(9) in subsection (k)—
(A) by striking ‘‘shall enter into a contract
on a sole-source basis’’ and inserting ‘‘may
enter into a contract on a sole-source basis’’;
and
(B) by striking ‘‘fiscal year 1998’’ and in-
serting ‘‘fiscal years 2001, 2005, and 2009’’.
TITLE VII—OTHER ERISA
PROVISIONS
SEC. 701. MISSING PARTICIPANTS.
(a) IN GENERAL.—Section 4050 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1350)
133
is amended by redesignating subsection (c) as subsection
(e) and by inserting after subsection (b) the following new
subsections:
‘‘(c) MULTIEMPLOYER
PLANS.—The corporation
shall prescribe rules similar to the rules in subsection (a)
for multiemployer plans covered by this title that termi-
nate under section 4041A.
‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—
‘‘(1) TRANSFER TO CORPORATION.—The plan
administrator of a plan described in paragraph (4)
may elect to transfer a missing participant’s benefits
to the corporation upon termination of the plan.
‘‘(2) INFORMATION TO THE CORPORATION.—To
the extent provided in regulations, the plan adminis-
trator of a plan described in paragraph (4) shall,
upon termination of the plan, provide the corpora-
tion information with respect to benefits of a miss-
ing participant if the plan transfers such benefits—
‘‘(A) to the corporation, or
‘‘(B) to an entity other than the corpora-
tion or a plan described in paragraph (4)(B)(ii).
‘‘(3) PAYMENT BY THE CORPORATION.—If ben-
efits of a missing participant were transferred to the
corporation under paragraph (1), the corporation
shall, upon location of the participant or beneficiary,
134
pay to the participant or beneficiary the amount
transferred (or the appropriate survivor benefit)
either—
‘‘(A) in a single sum (plus interest), or
‘‘(B) in such other form as is specified in
regulations of the corporation.
‘‘(4) PLANS DESCRIBED.—A plan is described
in this paragraph if—
‘‘(A) the plan is a pension plan (within the
meaning of section 3(2))—
‘‘(i) to which the provisions of this
section do not apply (without regard to
this subsection), and
‘‘(ii) which is not a plan described in
paragraphs (2) through (11) of section
4021(b), and
‘‘(B) at the time the assets are to be dis-
tributed upon termination, the plan—
‘‘(i) has missing participants, and
‘‘(ii) has not provided for the transfer
of assets to pay the benefits of all missing
participants to another pension plan (with-
in the meaning of section 3(2)).
135
‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—
Subsections (a)(1) and (a)(3) shall not apply to a
plan described in paragraph (4).’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to distributions made after final
regulations implementing subsections (c) and (d) of sec-
tion 4050 of the Employee Retirement Income Security
Act of 1974 (as added by subsection (a)), respectively, are
prescribed.
SEC. 702. REDUCED PBGC PREMIUM FOR NEW PLANS OF
SMALL EMPLOYERS.
(a) IN GENERAL.—Subparagraph (A) of section
4006(a)(3) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1306(a)(3)(A)) is amended—
(1) in clause (i), by inserting ‘‘other than a new
single-employer plan (as defined in subparagraph
(F)) maintained by a small employer (as so de-
fined),’’ after ‘‘single-employer plan,’’,
(2) in clause (iii), by striking the period at the
end and inserting ‘‘, and’’, and
(3) by adding at the end the following new
clause:
‘‘(iv) in the case of a new single-employer plan
(as defined in subparagraph (F)) maintained by a
small employer (as so defined) for the plan year, $5
136
for each individual who is a participant in such plan
during the plan year.’’.
(b) 
DEFINITION
OF
NEW
SINGLE-EMPLOYER
PLAN.—Section 4006(a)(3) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1306(a)(3)) is
amended by adding at the end the following new subpara-
graph:
‘‘(F)(i) For purposes of this paragraph, a single-em-
ployer plan maintained by a contributing sponsor shall be
treated as a new single-employer plan for each of its first
5 plan years if, during the 36-month period ending on the
date of the adoption of such plan, the sponsor or any
member of such sponsor’s controlled group (or any prede-
cessor of either) did not establish or maintain a plan to
which this title applies with respect to which benefits were
accrued for substantially the same employees as are in the
new single-employer plan.
‘‘(ii)(I) For purposes of this paragraph, the term
‘small employer’ means an employer which on the first day
of any plan year has, in aggregation with all members of
the controlled group of such employer, 100 or fewer em-
ployees.
‘‘(II) In the case of a plan maintained by two or more
contributing sponsors that are not part of the same con-
trolled group, the employees of all contributing sponsors
137
and controlled groups of such sponsors shall be aggregated
for purposes of determining whether any contributing
sponsor is a small employer.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plans established after Decem-
ber 31, 2001.
SEC. 703. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR
NEW AND SMALL PLANS.
(a) NEW PLANS.—Subparagraph (E) of section
4006(a)(3) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1306(a)(3)(E)) is amended by
adding at the end the following new clause:
‘‘(v) In the case of a new defined benefit plan, the
amount determined under clause (ii) for any plan year
shall be an amount equal to the product of the amount
determined under clause (ii) and the applicable percent-
age. For purposes of this clause, the term ‘applicable per-
centage’ means—
‘‘(I) 0 percent, for the first plan year.
‘‘(II) 20 percent, for the second plan year.
‘‘(III) 40 percent, for the third plan year.
‘‘(IV) 60 percent, for the fourth plan year.
‘‘(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as de-
fined in section 3(35)) maintained by a contributing spon-
138
sor shall be treated as a new defined benefit plan for each
of its first 5 plan years if, during the 36-month period
ending on the date of the adoption of the plan, the sponsor
and each member of any controlled group including the
sponsor (or any predecessor of either) did not establish
or maintain a plan to which this title applies with respect
to which benefits were accrued for substantially the same
employees as are in the new plan.’’.
(b) SMALL
PLANS.—Paragraph (3) of section
4006(a) of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1306(a)), as amended by section
702(b), is amended—
(1) by striking ‘‘The’’ in subparagraph (E)(i)
and inserting ‘‘Except as provided in subparagraph
(G), the’’, and
(2) by inserting after subparagraph (F) the fol-
lowing new subparagraph:
‘‘(G)(i) In the case of an employer who has 25 or
fewer employees on the first day of the plan year, the addi-
tional premium determined under subparagraph (E) for
each participant shall not exceed $5 multiplied by the
number of participants in the plan as of the close of the
preceding plan year.
‘‘(ii) For purposes of clause (i), whether an employer
has 25 or fewer employees on the first day of the plan
139
year is determined taking into consideration all of the em-
ployees of all members of the contributing sponsor’s con-
trolled group. In the case of a plan maintained by two
or more contributing sponsors, the employees of all con-
tributing sponsors and their controlled groups shall be ag-
gregated for purposes of determining whether the 25-or-
fewer-employees limitation has been satisfied.’’.
(c) EFFECTIVE DATES.—
(1) SUBSECTION (a).—The amendments made
by subsection (a) shall apply to plans established
after December 31, 2001.
(2) SUBSECTION (b).—The amendments made
by subsection (b) shall apply to plan years beginning
after December 31, 2001.
SEC. 704. AUTHORIZATION FOR PBGC TO PAY INTEREST ON
PREMIUM OVERPAYMENT REFUNDS.
(a) IN GENERAL.—Section 4007(b) of the Employ-
ment Retirement Income Security Act of 1974 (29 U.S.C.
1307(b)) is amended—
(1) by striking ‘‘(b)’’ and inserting ‘‘(b)(1)’’,
and
(2) by inserting at the end the following new
paragraph:
‘‘(2) The corporation is authorized to pay, subject to
regulations prescribed by the corporation, interest on the
140
amount of any overpayment of premium refunded to a des-
ignated payor. Interest under this paragraph shall be cal-
culated at the same rate and in the same manner as inter-
est is calculated for underpayments under paragraph
(1).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to interest accruing for periods
beginning not earlier than the date of the enactment of
this Act.
SEC. 705. SUBSTANTIAL OWNER BENEFITS IN TERMINATED
PLANS.
(a) MODIFICATION OF PHASE-IN OF GUARANTEE.—
Section 4022(b)(5) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended
to read as follows:
‘‘(5)(A) For purposes of this paragraph, the term
‘majority owner’ means an individual who, at any time
during the 60-month period ending on the date the deter-
mination is being made—
‘‘(i) owns the entire interest in an unincor-
porated trade or business,
‘‘(ii) in the case of a partnership, is a partner
who owns, directly or indirectly, 50 percent or more
of either the capital interest or the profits interest
in such partnership, or
141
‘‘(iii) in the case of a corporation, owns, directly
or indirectly, 50 percent or more in value of either
the voting stock of that corporation or all the stock
of that corporation.
For purposes of clause (iii), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).
‘‘(B) In the case of a participant who is a majority
owner, the amount of benefits guaranteed under this sec-
tion shall equal the product of—
‘‘(i) a fraction (not to exceed 1) the numerator
of which is the number of years from the later of the
effective date or the adoption date of the plan to the
termination date, and the denominator of which is
10, and
‘‘(ii) the amount of benefits that would be guar-
anteed under this section if the participant were not
a majority owner.’’.
(b) MODIFICATION OF ALLOCATION OF ASSETS.—
(1) Section 4044(a)(4)(B) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1344(a)(4)(B)) is amended by striking ‘‘section
4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.
142
(2) Section 4044(b) of such Act (29 U.S.C.
1344(b)) is amended—
(A) by striking ‘‘(5)’’ in paragraph (2) and
inserting ‘‘(4), (5),’’, and
(B) 
by 
redesignating 
paragraphs 
(3)
through (6) as paragraphs (4) through (7), re-
spectively, and by inserting after paragraph (2)
the following new paragraph:
‘‘(3) If assets available for allocation under
paragraph (4) of subsection (a) are insufficient to
satisfy in full the benefits of all individuals who are
described in that paragraph, the assets shall be allo-
cated first to benefits described in subparagraph (A)
of that paragraph. Any remaining assets shall then
be allocated to benefits described in subparagraph
(B) of that paragraph. If assets allocated to such
subparagraph (B) are insufficient to satisfy in full
the benefits described in that subparagraph, the as-
sets shall be allocated pro rata among individuals on
the basis of the present value (as of the termination
date) of their respective benefits described in that
subparagraph.’’.
(c) CONFORMING AMENDMENTS.—
143
(1) Section 4021 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1321) is
amended—
(A) in subsection (b)(9), by striking ‘‘as
defined in section 4022(b)(6)’’, and
(B) by adding at the end the following new
subsection:
‘‘(d) For purposes of subsection (b)(9), the term ‘sub-
stantial owner’ means an individual who, at any time dur-
ing the 60-month period ending on the date the determina-
tion is being made—
‘‘(1) owns the entire interest in an unincor-
porated trade or business,
‘‘(2) in the case of a partnership, is a partner
who owns, directly or indirectly, more than 10 per-
cent of either the capital interest or the profits inter-
est in such partnership, or
‘‘(3) in the case of a corporation, owns, directly
or indirectly, more than 10 percent in value of either
the voting stock of that corporation or all the stock
of that corporation.
For purposes of paragraph (3), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).’’.
144
(2) Section 4043(c)(7) of such Act (29 U.S.C.
1343(c)(7)) is amended by striking ‘‘section 4022(b)(6)’’
and inserting ‘‘section 4021(d)’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to plan terminations—
(A) under section 4041(c) of the Employee
Retirement Income Security Act of 1974 (29
U.S.C. 1341(c)) with respect to which notices
of intent to terminate are provided under sec-
tion 4041(a)(2) of such Act (29 U.S.C.
1341(a)(2)) after December 31, 2001, and
(B) under section 4042 of such Act (29
U.S.C. 1342) with respect to which proceedings
are instituted by the corporation after such
date.
(2) CONFORMING AMENDMENTS.—The amend-
ments made by subsection (c) shall take effect on
January 1, 2002.
SEC. 706. CIVIL PENALTIES FOR BREACH OF FIDUCIARY
RESPONSIBILITY.
(a) IMPOSITION AND AMOUNT OF PENALTY MADE
DISCRETIONARY.—Section 502(l)(1) of the Employee Re-
145
tirement Income Security Act of 1974 (29 U.S.C.
1132(l)(1)) is amended—
(1) by striking ‘‘shall’’ and inserting ‘‘may’’,
and
(2) by striking ‘‘equal to’’ and inserting ‘‘not
greater than’’.
(b) 
APPLICABLE
RECOVERY
AMOUNT.—Section
502(l)(2) of such Act (29 U.S.C. 1132(l)(2)) is amended
to read as follows:
‘‘(2) For purposes of paragraph (1), the term ‘appli-
cable recovery amount’ means any amount which is recov-
ered from any fiduciary or other person (or from any other
person on behalf of any such fiduciary or other person)
with respect to a breach or violation described in para-
graph (1) on or after the 30th day following receipt by
such fiduciary or other person of written notice from the
Secretary of the violation, whether paid voluntarily or by
order of a court in a judicial proceeding instituted by the
Secretary under subsection (a)(2) or (a)(5). The Secretary
may, in the Secretary’s sole discretion, extend the 30-day
period described in the preceding sentence.’’.
(c) OTHER RULES.—Section 502(l) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1132(l)) is amended by adding at the end the following
new paragraph:
146
‘‘(5) A person shall be jointly and severally liable for
the penalty described in paragraph (1) to the same extent
that such person is jointly and severally liable for the ap-
plicable recovery amount on which the penalty is based.
‘‘(6) No penalty shall be assessed under this sub-
section unless the person against whom the penalty is as-
sessed is given notice and opportunity for a hearing with
respect to the violation and applicable recovery amount.’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall apply to any breach of fiduciary re-
sponsibility or other violation of part 4 of subtitle B
of title I of the Employee Retirement Income Secu-
rity Act of 1974 occurring on or after the date of
enactment of this Act.
(2) 
TRANSITION
RULE.—In 
applying 
the
amendment made by subsection (b) (relating to ap-
plicable recovery amount), a breach or other viola-
tion occurring before the date of enactment of this
Act which continues after the 180th day after such
date (and which may have been discontinued at any
time during its existence) shall be treated as having
occurred after such date of enactment.
147
SEC. 707. BENEFIT SUSPENSION NOTICE.
(a) MODIFICATION OF REGULATION.—The Secretary
of Labor shall modify the regulation under section
203(a)(3)(B) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1053(a)(3)(B)) to provide
that the notification required by such regulation—
(1) in the case of an employee who returns to
work for a former employer after commencement of
payment of benefits under the plan shall—
(A) be made during the first calendar
month or payroll period in which the plan with-
holds payments, and
(B) if a reduced rate of future benefit ac-
cruals will apply to the returning employee (as
of the first date of participation in the plan by
the employee after returning to work), include
a statement that the rate of future benefit ac-
cruals will be reduced, and
(2) in the case of any employee who is not de-
scribed in paragraph (1)—
(A) may be included in the summary plan
description for the plan furnished in accordance
with section 104(b) of such Act (29 U.S.C.
1024(b)), rather than in a separate notice, and
(B) need not include a copy of the relevant
plan provisions.
148
(b) EFFECTIVE
DATE.—The modification made
under this section shall apply to plan years beginning after
December 31, 2001.
TITLE VIII—PLAN AMENDMENTS
SEC. 801. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) IN GENERAL.—If this section applies to any plan
or contract amendment—
(1) such plan or contract shall be treated as
being operated in accordance with the terms of the
plan during the period described in subsection
(b)(2)(A); and
(2) except as provided by the Secretary of the
Treasury, such plan shall not fail to meet the re-
quirements of section 411(d)(6) of the Internal Rev-
enue Code of 1986 or section 204(g) of the Em-
ployee Retirement Income Security Act of 1974 by
reason of such amendment.
(b) AMENDMENTS TO WHICH SECTION APPLIES.—
(1) IN GENERAL.—This section shall apply to
any amendment to any plan or annuity contract
which is made—
(A) pursuant to any amendment made by
this Act, or pursuant to any regulation issued
under this Act; and
149
(B) on or before the last day of the first
plan year beginning on or after January 1,
2004.
In the case of a governmental plan (as defined in
section 414(d) of the Internal Revenue Code of
1986), this paragraph shall be applied by sub-
stituting ‘‘2006’’ for ‘‘2004’’.
(2) CONDITIONS.—This section shall not apply
to any amendment unless—
(A) during the period—
(i) beginning on the date the legisla-
tive or regulatory amendment described in
paragraph (1)(A) takes effect (or in the
case of a plan or contract amendment not
required by such legislative or regulatory
amendment, the effective date specified by
the plan); and
(ii) ending on the date described in
paragraph (1)(B) (or, if earlier, the date
the plan or contract amendment is adopt-
ed),
the plan or contract is operated as if such plan
or contract amendment were in effect; and
150
(B) such plan or contract amendment ap-
plies retroactively for such period.
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