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tion 2(a), or a head of household as defined in section 2(b))
a tax determined in accordance with the following table:’’.
(c) BASIC STANDARD DEDUCTION FOR UNMARRIED IN-
DIVIDUALS MADE APPLICABLE.—Subparagraph (C) of sec-
tion 63(c)(2) is amended to read as follows:
‘‘(C) $3,000 in the case of an individual
other than—
‘‘(i) a married individual filing a re-
turn which is not a combined return under
section 6013A,
‘‘(ii) a surviving spouse, or
‘‘(iii) a head of household, or’’.
(d) CLERICAL AMENDMENT.—The table of sections for
subpart B of part II of subchapter A of chapter 61 is
amended by inserting after the item relating to section 6013
the following:
‘‘Sec. 6013A. Combined return with separate rates.’’.
(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2004.
SEC. 202. MARRIAGE PENALTY RELIEF FOR EARNED IN-
COME CREDIT.
(a) IN GENERAL.—Paragraph (2) of section 32(b) (re-
lating to percentages and amounts) is amended—
(1) by striking ‘‘AMOUNTS.—The earned’’ and
inserting ‘‘AMOUNTS.—
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‘‘(A) IN
GENERAL.—Subject to subpara-
graph (B), the earned’’, and
(2) by adding at the end the following new sub-
paragraph:
‘‘(B) JOINT
RETURNS.—In the case of a
joint return, the phaseout amount determined
under subparagraph (A) shall be increased by
$2,000.’’.
(b) INFLATION ADJUSTMENT.—Paragraph (1)(B) of
section 32(j) (relating to inflation adjustments) is amended
to read as follows:
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar year
in which the taxable year begins, determined—
‘‘(i) in the case of amounts in sub-
sections (b)(1)(A) and (i)(1), by sub-
stituting ‘calendar year 1995’ for ‘calendar
year 1992’ in subparagraph (B) thereof,
and
‘‘(ii) in the case of the $2,000 amount
in subsection (b)(1)(B), by substituting ‘cal-
endar year 2004’ for ‘calendar year 1992’
in subparagraph (B) of such section 1.’’.
(c) ROUNDING.—Section 32(j)(2)(A) (relating to
rounding) is amended by striking ‘‘subsection (b)(2)’’ and
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inserting ‘‘subsection (b)(2)(A) (after being increased under
subparagraph (B) thereof)’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2004.
SEC. 203. EXCLUSION FOR FOSTER CARE PAYMENTS TO
APPLY TO PAYMENTS BY QUALIFIED PLACE-
MENT AGENCIES.
(a) IN GENERAL.—The matter preceding subpara-
graph (B) of section 131(b)(1) (defining qualified foster care
payment) is amended to read as follows:
‘‘(1) IN
GENERAL.—The term ‘qualified foster
care payment’ means any payment made pursuant to
a foster care program of a State or political subdivi-
sion thereof—
‘‘(A) which is paid by—
‘‘(i) the State or political subdivision
thereof, or
‘‘(ii) a qualified foster care placement
agency of such State or political subdivi-
sion, and’’.
(b) QUALIFIED FOSTER INDIVIDUALS TO INCLUDE IN-
DIVIDUALS PLACED
BY QUALIFIED PLACEMENT AGEN-
CIES.—Subparagraph (B) of section 131(b)(2) (defining
qualified foster individual) is amended to read as follows:
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‘‘(B) a qualified foster care placement agen-
cy.’’.
(c) QUALIFIED FOSTER CARE PLACEMENT AGENCY
DEFINED.—Subsection (b) of section 131 is amended by re-
designating paragraph (3) as paragraph (4) and by insert-
ing after paragraph (2) the following new paragraph:
‘‘(3) QUALIFIED
FOSTER
CARE
PLACEMENT
AGENCY.—The term ‘qualified foster care placement
agency’ means any placement agency which is li-
censed or certified by—
‘‘(A) a State or political subdivision thereof,
or
‘‘(B) an entity designated by a State or po-
litical subdivision thereof,
to make foster care payments under the foster care
program of such State or political subdivision to pro-
viders of foster care.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1999.
SEC. 204. MODIFICATION OF DEPENDENT CARE CREDIT.
(a) INCREASE IN PERCENTAGE OF EMPLOYMENT-RE-
LATED EXPENSES TAKEN INTO ACCOUNT.—Subsection
(a)(2) of section 21 (relating to expenses for household and
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dependent care services necessary for gainful employment)
is amended—
(1) by striking ‘‘30 percent’’ and inserting ‘‘40
percent’’,
(2) by striking ‘‘$2,000’’ and inserting ‘‘$1,000’’,
and
(3) 
by 
striking 
‘‘$10,000’’ 
and 
inserting
‘‘$30,000’’.
(b) INDEXING OF LIMIT ON EMPLOYMENT-RELATED
EXPENSES.—Section 21(c) (relating to dollar limit on
amount creditable) is amended to read as follows:
‘‘(c) DOLLAR LIMIT ON AMOUNT CREDITABLE.—
‘‘(1) IN GENERAL.—The amount of the employ-
ment-related expenses incurred during any taxable
year which may be taken into account under sub-
section (a) shall not exceed—
‘‘(A) an amount equal to 50 percent of the
amount determined under subparagraph (B) if
there is 1 qualifying individual with respect to
the taxpayer for such taxable year, or
‘‘(B) $4,800 if there are 2 or more quali-
fying individuals with respect to the taxpayer
for such taxable year.
The amount determined under subparagraph (A) or
(B) (whichever is applicable) shall be reduced by the
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aggregate amount excludable from gross income under
section 129 for the taxable year.
‘‘(2) COST-OF-LIVING ADJUSTMENT.—
‘‘(A) IN GENERAL.—In the case of a taxable
year beginning after 2000, the $4,800 amount
under paragraph (1)(B) shall be increased by an
amount equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins, determined by substituting ‘calendar
year 1999’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof.
‘‘(B) ROUNDING
RULES.—If any amount
after adjustment under subparagraph (A) is not
a multiple of $50, such amount shall be rounded
to the next lower multiple of $50.’’.
(c) MINIMUM DEPENDENT CARE CREDIT ALLOWED
FOR STAY-AT-HOME PARENTS.—Section 21(e) (relating to
special rules) is amended by adding at the end the fol-
lowing:
‘‘(11) MINIMUM CREDIT ALLOWED FOR STAY-AT-
HOME PARENTS.—
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‘‘(A) IN
GENERAL.—Notwithstanding sub-
section (d), in the case of any taxpayer with 1
or more qualifying individuals described in sub-
section (b)(1)(A) under the age of 1, such tax-
payer shall be deemed to have employment-re-
lated expenses for the taxable year with respect
to each such qualifying individual in an amount
equal to the sum of—
‘‘(i) $200 for each month in such tax-
able year during which such qualifying in-
dividual is under the age of 1, and
‘‘(ii) the amount of employment-related
expenses otherwise incurred for such quali-
fying individual for the taxable year (deter-
mined under this section without regard to
this paragraph).
‘‘(B) ELECTION TO NOT APPLY THIS PARA-
GRAPH.—This paragraph shall not apply with
respect to any qualifying individual for any tax-
able year if the taxpayer elects to not have this
paragraph apply to such qualifying individual
for such taxable year.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
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SEC. 205. ALLOWANCE OF CREDIT FOR EMPLOYER EX-
PENSES FOR CHILD CARE ASSISTANCE.
(a) IN GENERAL.—Subpart D of part IV of subchapter
A of chapter 1 (relating to business related credits) is
amended by adding at the end the following new section:
‘‘SEC. 45D. EMPLOYER-PROVIDED CHILD CARE CREDIT.
‘‘(a) ALLOWANCE OF CREDIT.—For purposes of section
38, the employer-provided child care credit determined
under this section for the taxable year is an amount equal
to the sum of—
‘‘(1) 25 percent of the qualified child care ex-
penditures, and
‘‘(2) 10 percent of the qualified child care re-
source and referral expenditures,
of the taxpayer for such taxable year.
‘‘(b) DOLLAR
LIMITATION.—The credit allowable
under subsection (a) for any taxable year shall not exceed
$150,000.
‘‘(c) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED CHILD CARE EXPENDITURE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
child care expenditure’ means any amount paid
or incurred—
‘‘(i) to acquire, construct, rehabilitate,
or expand property—
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‘‘(I) which is to be used as part of
an eligible qualified child care facility
of the taxpayer,
‘‘(II) with respect to which a de-
duction for depreciation (or amortiza-
tion in lieu of depreciation) is allow-
able, and
‘‘(III) which does not constitute
part of the principal residence (within
the meaning of section 121) of the tax-
payer or any employee of the taxpayer,
‘‘(ii) for the operating costs of an eligi-
ble qualified child care facility of the tax-
payer, including costs related to the train-
ing of employees of the child care facility, to
scholarship programs, to the providing of
differential 
compensation 
to 
employees
based on level of child care training, and to
expenses associated with achieving accredi-
tation, or
‘‘(iii) under a contract with a quali-
fied child care facility to provide child care
services to employees of the taxpayer.
‘‘(B) EXCLUSION FOR AMOUNTS FUNDED BY
GRANTS, ETC.—The term ‘qualified child care ex-
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penditure’ shall not include any amount to the
extent such amount is funded by any grant, con-
tract, or otherwise by another person (or any
governmental entity).
‘‘(C) 
NONDISCRIMINATION.—The 
term
‘qualified child care expenditure’ shall not in-
clude any amount expended in relation to any
child care services unless the providing of such
services to employees of the taxpayer does not
discriminate in favor of highly compensated em-
ployees (within the meaning of section 404(q)).
‘‘(2) QUALIFIED CHILD CARE FACILITY.—
‘‘(A) IN
GENERAL.—The term ‘qualified
child care facility’ means a facility—
‘‘(i) the principal use of which is to
provide child care assistance, and
‘‘(ii) which meets the requirements of
all applicable laws and regulations of the
State or local government in which it is lo-
cated, including, but not limited to, the li-
censing of the facility as a child care facil-
ity.
Clause (i) shall not apply to a facility which is
the principal residence (within the meaning of
section 121) of the operator of the facility.
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‘‘(B) ELIGIBLE QUALIFIED CHILD CARE FA-
CILITY.—A qualified child care facility shall be
treated as an eligible qualified child care facility
with respect to the taxpayer if—
‘‘(i) enrollment in the facility is open
to employees of the taxpayer during the tax-
able year,
‘‘(ii) the facility is not the principal
trade or business of the taxpayer, and
‘‘(iii) at least 30 percent of the enroll-
ees of such facility are dependents of em-
ployees of the taxpayer.
‘‘(C) 
APPLICATION
OF
SUBPARAGRAPH
(B).—In the case of a new facility, the facility
shall be treated as meeting the requirement of
subparagraph (B)(iii) if not later than 2 years
after placing such facility in service at least 30
percent of the enrollees of such facility are de-
pendents of employees of the taxpayer.
‘‘(3) QUALIFIED CHILD CARE RESOURCE AND RE-
FERRAL EXPENDITURE.—
‘‘(A) IN
GENERAL.—The term ‘qualified
child care resource and referral expenditure’
means any amount paid or incurred under a
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contract to provide child care resource and refer-
ral services to employees of the taxpayer.
‘‘(B) EXCLUSION FOR AMOUNTS FUNDED BY
GRANTS, ETC.—The term ‘qualified child care re-
source and referral expenditure’ shall not include
any amount to the extent such amount is funded
by any grant, contract, or otherwise by another
person (or any governmental entity).
‘‘(C) 
NONDISCRIMINATION.—The 
term
‘qualified child care resource and referral ex-
penditure’ shall not include any amount ex-
pended in relation to any child care resource
and referral services unless the providing of such
services to employees of the taxpayer does not
discriminate in favor of highly compensated em-
ployees (within the meaning of section 404(q)).
‘‘(d) RECAPTURE OF ACQUISITION AND CONSTRUCTION
CREDIT.—
‘‘(1) IN GENERAL.—If, as of the close of any tax-
able year, there is a recapture event with respect to
any eligible qualified child care facility of the tax-
payer, then the tax of the taxpayer under this chapter
for such taxable year shall be increased by an amount
equal to the product of—
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‘‘(A) the applicable recapture percentage,
and
‘‘(B) the aggregate decrease in the credits
allowed under section 38 for all prior taxable
years which would have resulted if the qualified
child care expenditures of the taxpayer described
in subsection (c)(1)(A) with respect to such facil-
ity had been zero.
‘‘(2) APPLICABLE RECAPTURE PERCENTAGE.—
‘‘(A) IN
GENERAL.—For purposes of this
subsection, the applicable recapture percentage
shall be determined from the following table:
The applicable
recapture
‘‘If the recapture event occurs in:
percentage is:
Year 1 ..............................................................................
100
Year 2 ..............................................................................
Year 3 ..............................................................................
Year 4 ..............................................................................
Year 5 ..............................................................................
Years 6 and thereafter ...................................................
0.
‘‘(B) YEARS.—For purposes of subpara-
graph (A), year 1 shall begin on the first day of
the taxable year in which the eligible qualified
child care facility is placed in service by the tax-
payer.
‘‘(3) RECAPTURE
EVENT
DEFINED.—For pur-
poses of this subsection, the term ‘recapture event’
means—
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‘‘(A) CESSATION OF OPERATION.—The ces-
sation of the operation of the facility as an eligi-
ble qualified child care facility.
‘‘(B) CHANGE IN OWNERSHIP.—
‘‘(i) IN GENERAL.—Except as provided
in clause (ii), the disposition of a tax-
payer’s interest in an eligible qualified
child care facility with respect to which the
credit described in subsection (a) was allow-
able.
‘‘(ii) AGREEMENT TO ASSUME RECAP-
TURE
LIABILITY.—Clause (i) shall not
apply if the person acquiring such interest
in the facility agrees in writing to assume
the recapture liability of the person dis-
posing of such interest in effect immediately
before such disposition. In the event of such
an assumption, the person acquiring the in-
terest in the facility shall be treated as the
taxpayer for purposes of assessing any re-
capture liability (computed as if there had
been no change in ownership).
‘‘(4) SPECIAL RULES.—
‘‘(A) TAX BENEFIT RULE.—The tax for the
taxable year shall be increased under paragraph
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(1) only with respect to credits allowed by reason
of this section which were used to reduce tax li-
ability. In the case of credits not so used to re-
duce tax liability, the carryforwards and
carrybacks under section 39 shall be appro-
priately adjusted.
‘‘(B) NO CREDITS AGAINST TAX.—Any in-
crease in tax under this subsection shall not be
treated as a tax imposed by this chapter for pur-
poses of determining the amount of any credit
under subpart A, B, or D of this part.
‘‘(C) NO RECAPTURE BY REASON OF CAS-
UALTY LOSS.—The increase in tax under this
subsection shall not apply to a cessation of oper-
ation of the facility as a qualified child care fa-
cility by reason of a casualty loss to the extent
such loss is restored by reconstruction or replace-
ment within a reasonable period established by
the Secretary.
‘‘(e) SPECIAL RULES.—For purposes of this section—
‘‘(1) AGGREGATION RULES.—All persons which
are treated as a single employer under subsections (a)
and (b) of section 52 shall be treated as a single tax-
payer.
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‘‘(2) PASS-THRU IN THE CASE OF ESTATES AND
TRUSTS.—Under regulations prescribed by the Sec-
retary, rules similar to the rules of subsection (d) of
section 52 shall apply.
‘‘(3) ALLOCATION
IN
THE
CASE
OF
PARTNER-
SHIPS.—In the case of partnerships, the credit shall
be allocated among partners under regulations pre-
scribed by the Secretary.
‘‘(f) NO DOUBLE BENEFIT.—
‘‘(1) REDUCTION IN BASIS.—For purposes of this
subtitle—
‘‘(A) IN
GENERAL.—If a credit is deter-
mined under this section with respect to any
property by reason of expenditures described in
subsection (c)(1)(A), the basis of such property
shall be reduced by the amount of the credit so
determined.
‘‘(B) CERTAIN
DISPOSITIONS.—If during
any taxable year there is a recapture amount de-
termined with respect to any property the basis
of which was reduced under subparagraph (A),
the basis of such property (immediately before
the event resulting in such recapture) shall be in-
creased by an amount equal to such recapture
amount. For purposes of the preceding sentence,
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SEC. 206. MODIFICATION OF ALTERNATIVE MINIMUM TAX
FOR INDIVIDUALS.
(a) NONREFUNDABLE PERSONAL CREDITS FULLY AL-
LOWED AGAINST REGULAR TAX LIABILITY.—
(1) IN GENERAL.—Subsection (a) of section 26
(relating to limitation based on amount of tax) is
amended to read as follows:
‘‘(a) LIMITATION BASED ON AMOUNT OF TAX.—The
aggregate amount of credits allowed by this subpart for the
taxable year shall not exceed the taxpayer’s regular tax li-
ability for the taxable year.’’.
(2) CHILD CREDIT.—Subsection (d) of section 24
is amended by striking paragraph (2) and by redesig-
nating paragraph (3) as paragraph (2).
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 1998.
(b) PERSONAL EXEMPTIONS ALLOWED IN COMPUTING
MINIMUM TAX.—
(1) IN GENERAL.—Subparagraph (E) of section
56(b)(1) is amended to read as follows:
‘‘(E) SPECIAL RULE FOR CERTAIN DEDUC-
TIONS.—The standard deduction under section
63(c) shall not be allowed and the deduction for
personal exemptions under section 151 and the
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deduction under section 642(b) shall each be al-
lowed, but shall each be reduced by $250.’’.
(2) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to taxable years begin-
ning after December 31, 2005.
SEC. 207. LONG-TERM CAPITAL GAINS DEDUCTION FOR IN-
DIVIDUALS.
(a) GENERAL RULE.—Part I of subchapter P of chap-
ter 1 (relating to treatment of capital gains) is amended
by redesignating section 1202 as section 1203 and by insert-
ing after section 1201 the following new section:
‘‘SEC. 1202. CAPITAL GAINS DEDUCTION FOR INDIVIDUALS.
‘‘(a) IN GENERAL.—In the case of an individual, there
shall be allowed as a deduction for the taxable year an
amount equal to the lesser of—
‘‘(1) the net capital gain of the taxpayer for the
taxable year, or
‘‘(2) $1,000.
‘‘(b) SALES BETWEEN RELATED PARTIES.—Gains
from sales and exchanges to any related person (within the
meaning of section 267(b) or 707(b)(1)) shall not be taken
into account in determining net capital gain.
‘‘(c) SPECIAL RULE FOR SECTION 1250 PROPERTY.—
Solely for purposes of this section, in applying section 1250
to any disposition of section 1250 property, all depreciation
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adjustments in respect of the property shall be treated as
additional depreciation.
‘‘(d) SECTION NOT TO APPLY
TO CERTAIN TAX-
PAYERS.—No deduction shall be allowed under this section
to—
‘‘(1) an individual with respect to whom a de-
duction under section 151 is allowable to another tax-
payer for a taxable year beginning in the calendar
year in which such individual’s taxable year begins,
‘‘(2) a married individual (within the meaning
of section 7703) filing a separate return for the tax-
able year, or
‘‘(3) an estate or trust.
‘‘(e) SPECIAL RULE FOR PASS-THRU ENTITIES.—
‘‘(1) IN
GENERAL.—In applying this section
with respect to any pass-thru entity, the determina-
tion of when the sale or exchange occurs shall be made
at the entity level.
‘‘(2) PASS-THRU
ENTITY
DEFINED.—For pur-
poses of paragraph (1), the term ‘pass-thru entity’
means—
‘‘(A) a regulated investment company,
‘‘(B) a real estate investment trust,
‘‘(C) an S corporation,
‘‘(D) a partnership,
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‘‘(E) an estate or trust, and
‘‘(F) a common trust fund.’’.
(b) COORDINATION WITH MAXIMUM CAPITAL GAINS
RATE.—Paragraph (3) of section 1(h) (relating to max-
imum capital gains rate) is amended to read as follows:
‘‘(3) COORDINATION WITH OTHER PROVISIONS.—
For purposes of this subsection, the amount of the net
capital gain shall be reduced (but not below zero) by
the sum of—
‘‘(A) the amount of the net capital gain
taken into account under section 1202(a) for the
taxable year, plus
‘‘(B) the amount which the taxpayer elects
to take into account as investment income for the
taxable year under section 163(d)(4)(B)(iii).’’.
(c) DEDUCTION ALLOWABLE IN COMPUTING ADJUSTED
GROSS INCOME.—Subsection (a) of section 62 (defining ad-
justed gross income) is amended by inserting after para-
graph (17) the following new paragraph:
‘‘(18) LONG-TERM CAPITAL GAINS.—The deduc-
tion allowed by section 1202.’’.
(d) TREATMENT OF COLLECTIBLES.—
(1) IN
GENERAL.—Section 1222 (relating to
other terms relating to capital gains and losses) is
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amended by inserting after paragraph (11) the fol-
lowing new paragraph:
‘‘(12) SPECIAL RULE FOR COLLECTIBLES.—
‘‘(A) IN GENERAL.—Any gain or loss from
the sale or exchange of a collectible shall be treat-
ed as a short-term capital gain or loss (as the
case may be), without regard to the period such
asset was held. The preceding sentence shall
apply only to the extent the gain or loss is taken
into account in computing taxable income.
‘‘(B) TREATMENT OF CERTAIN SALES OF IN-
TEREST IN PARTNERSHIP, ETC.—For purposes of
subparagraph (A), any gain from the sale or ex-
change of an interest in a partnership, S cor-
poration, or trust which is attributable to unre-
alized appreciation in the value of collectibles
held by such entity shall be treated as gain from
the sale or exchange of a collectible. Rules simi-
lar to the rules of section 751(f) shall apply for
purposes of the preceding sentence.
‘‘(C) COLLECTIBLE.—For purposes of this
paragraph, the term ‘collectible’ means any cap-
ital asset which is a collectible (as defined in sec-
tion 408(m) without regard to paragraph (3)
thereof).’’.
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(2) CHARITABLE DEDUCTION NOT AFFECTED.—
(A) Paragraph (1) of section 170(e) is
amended by adding at the end the following new
sentence: ‘‘For purposes of this paragraph, sec-
tion 1222 shall be applied without regard to
paragraph (12) thereof (relating to special rule
for collectibles).’’.
(B) Clause (iv) of section 170(b)(1)(C) is
amended by inserting before the period at the
end the following: ‘‘and section 1222 shall be ap-
plied without regard to paragraph (12) thereof
(relating to special rule for collectibles)’’.
(e) CONFORMING AMENDMENTS.—
(1) Section 57(a)(7) is amended by striking
‘‘1202’’ and inserting ‘‘1203’’.
(2) Clause (iii) of section 163(d)(4)(B) is amend-
ed to read as follows:
‘‘(iii) the sum of—
‘‘(I) the portion of the net capital
gain referred to in clause (ii)(II) (or,
if lesser, the net capital gain referred
to in clause (ii)(I)) taken into account
under section 1202, reduced by the
amount of the deduction allowed with
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respect to such gain under section
1202, plus
‘‘(II) so much of the gain de-
scribed in subclause (I) which is not
taken into account under section 1202
and which the taxpayer elects to take
into account under this clause.’’.
(3) Subparagraph (B) of section 172(d)(2) is
amended to read as follows:
‘‘(B) the deduction under section 1202 and
the exclusion under section 1203 shall not be al-
lowed.’’.
(4) Section 642(c)(4) is amended by striking
‘‘1202’’ and inserting ‘‘1203’’.
(5) Section 643(a)(3) is amended by striking
‘‘1202’’ and inserting ‘‘1203’’.
(6) Paragraph (4) of section 691(c) is amended
inserting ‘‘1203,’’ after ‘‘1202,’’.
(7) The second sentence of section 871(a)(2) is
amended by inserting ‘‘or 1203’’ after ‘‘section 1202’’.
(8) The last sentence of section 1044(d) is
amended by striking ‘‘1202’’ and inserting ‘‘1203’’.
(9) Paragraph (1) of section 1402(i) is amended
by inserting ‘‘, and the deduction provided by section
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1202 and the exclusion provided by section 1203 shall
not apply’’ before the period at the end.
(10) Section 121 is amended by adding at the
end the following new subsection:
‘‘(h) CROSS REFERENCE.—
‘‘For treatment of eligible gain not excluded under
subsection (a), see section 1202.’’.
(11) Section 1203, as redesignated by subsection
(a), is amended by adding at the end the following
new subsection:
‘‘(l) CROSS REFERENCE.—
‘‘For treatment of eligible gain not excluded under
subsection (a), see section 1202.’’.
(12) The table of sections for part I of subchapter
P of chapter 1 is amended by striking the item relat-
ing to section 1202 and by inserting after the item re-
lating to section 1201 the following new items:
‘‘Sec. 1202. Capital gains deduction.
‘‘Sec. 1203. 50-percent exclusion for gain from certain small busi-
ness stock.’’.
(f) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to taxable years beginning after December 31,
2005.
(2) COLLECTIBLES.—The amendments made by
subsection (d) shall apply to sales and exchanges after
December 31, 2005.
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SEC. 208. CREDIT FOR INTEREST ON HIGHER EDUCATION
LOANS.
(a) IN GENERAL.—Subpart A of part IV of subchapter
A of chapter 1 (relating to nonrefundable personal credits)
is amended by inserting after section 25A the following new
section:
‘‘SEC. 25B. INTEREST ON HIGHER EDUCATION LOANS.
‘‘(a) ALLOWANCE OF CREDIT.—In the case of an indi-
vidual, there shall be allowed as a credit against the tax
imposed by this chapter for the taxable year an amount
equal to the interest paid by the taxpayer during the taxable
year on any qualified education loan.
‘‘(b) MAXIMUM CREDIT.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the credit allowed by subsection (a) for the
taxable year shall not exceed $1,500.
‘‘(2) LIMITATION BASED ON MODIFIED ADJUSTED
GROSS INCOME.—
‘‘(A) IN GENERAL.—If the modified adjusted
gross income of the taxpayer for the taxable year
exceeds $50,000 ($80,000 in the case of a joint
return), the amount which would (but for this
paragraph) be allowable as a credit under this
section shall be reduced (but not below zero) by
the amount which bears the same ratio to the
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amount which would be so allowable as such ex-
cess bears to $20,000.
‘‘(B) MODIFIED
ADJUSTED
GROSS
IN-
COME.—The term ‘modified adjusted gross in-
come’ means adjusted gross income determined
without regard to sections 911, 931, and 933.
‘‘(C) INFLATION ADJUSTMENT.—In the case
of any taxable year beginning after 2005, the
$50,000 and $80,000 amounts referred to in sub-
paragraph (A) shall be increased by an amount
equal to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under section (1)(f)(3) for the cal-
endar year in which the taxable year be-
gins, by substituting ‘2004’ for ‘1992’.
‘‘(D) ROUNDING.—If any amount as ad-
justed under subparagraph (C) is not a multiple
of $50, such amount shall be rounded to the
nearest multiple of $50.
‘‘(c) DEPENDENTS NOT ELIGIBLE FOR CREDIT.—No
credit shall be allowed by this section to an individual for
the taxable year if a deduction under section 151 with re-
spect to such individual is allowed to another taxpayer for
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the taxable year beginning in the calendar year in which
such individual’s taxable year begins.
‘‘(d) LIMIT ON PERIOD CREDIT ALLOWED.—A credit
shall be allowed under this section only with respect to in-
terest paid on any qualified education loan during the first
60 months (whether or not consecutive) in which interest
payments are required. For purposes of this paragraph, any
loan and all refinancings of such loan shall be treated as
1 loan.
‘‘(e) DEFINITIONS.—For purposes of this section—
‘‘(1) QUALIFIED
EDUCATION
LOAN.—The term
‘qualified education loan’ has the meaning given such
term by section 221(e)(1).
‘‘(2) DEPENDENT.—The term ‘dependent’ has the
meaning given such term by section 152.
‘‘(f) SPECIAL RULES.—
‘‘(1) DENIAL OF DOUBLE BENEFIT.—No credit
shall be allowed under this section for any amount
taken into account for any deduction under any other
provision of this chapter.
‘‘(2) MARRIED COUPLES MUST FILE JOINT RE-
TURN.—If the taxpayer is married at the close of the
taxable year, the credit shall be allowed under sub-
section (a) only if the taxpayer and the taxpayer’s
spouse file a joint return for the taxable year.
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‘‘(3) MARITAL STATUS.—Marital status shall be
determined in accordance with section 7703.’’.
(b) CONFORMING AMENDMENT.—The table of sections
for subpart A of part IV of subchapter A of chapter 1 is
amended by inserting after the item relating to section 25A
the following new item:
‘‘Sec. 25B. Interest on higher education loans.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to any qualified education loan (as de-
fined in section 25B(e)(1) of the Internal Revenue Code of
1986, as added by this section) incurred on, before, or after
the date of the enactment of this Act, but only with respect
to any loan interest payment due after December 31, 2004.
SEC. 209. ELIMINATION OF MARRIAGE PENALTY IN STAND-
ARD DEDUCTION.
(a) IN GENERAL.—Paragraph (2) of section 63(c) (re-
lating to standard deduction) is amended—
(1) by striking ‘‘$5,000’’ in subparagraph (A)
and inserting ‘‘twice the dollar amount in effect
under subparagraph (C) for the taxable year’’,
(2) by adding ‘‘or’’ at the end of subparagraph
(B),
(3) by striking ‘‘in the case of’’ and all that fol-
lows in subparagraph (C) and inserting ‘‘in any
other case.’’, and
(4) by striking subparagraph (D).
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(b) PHASE-IN.—Subsection (c) of section 63 is amend-
ed by adding at the end the following new paragraph:
‘‘(7) PHASE-IN OF INCREASE IN BASIC STANDARD
DEDUCTION.—In the case of taxable years beginning
before January 1, 2008—
‘‘(A) paragraph (2)(A) shall be applied by
substituting for ‘twice’—
‘‘(i) ‘1.671 times’ in the case of taxable
years beginning during 2001,
‘‘(ii) ‘1.70 times’ in the case of taxable
years beginning during 2002,
‘‘(iii) ‘1.727 times’ in the case of tax-
able years beginning during 2003,
‘‘(iv) ‘1.837 times’ in the case of tax-
able years beginning during 2004,
‘‘(v) ‘1.951 times’ in the case of taxable
years beginning during 2005,
‘‘(vi) ‘1.953 times’ in the case of tax-
able years beginning during 2006, and
‘‘(vii) ‘1.973 times’ in the case of tax-
able years beginning during 2007, and
‘‘(B) the basic standard deduction for a
married individual filing a separate return shall
be one-half of the amount applicable under para-
graph (2)(A).
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If any amount determined under subparagraph (A) is
not a multiple of $50, such amount shall be rounded
to the next lowest multiple of $50.’’.
(c) TECHNICAL AMENDMENTS.—
(1) Subparagraph (B) of section 1(f)(6) is
amended by striking ‘‘(other than with’’ and all that
follows through ‘‘shall be applied’’ and inserting
‘‘(other than with respect to sections 63(c)(4) and
151(d)(4)(A)) shall be applied’’.
(2) Paragraph (4) of section 63(c) is amended by
adding at the end the following flush sentence:
‘‘The preceding sentence shall not apply to the
amount referred to in paragraph (2)(A).’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 210. EXPANSION OF ADOPTION CREDIT.
(a) IN GENERAL.—Section 23(a)(1) (relating to allow-
ance of credit) is amended to read as follows:
‘‘(1) IN GENERAL.—In the case of an individual,
there shall be allowed as a credit against the tax im-
posed by this chapter—
‘‘(A) in the case of an adoption of a child
other than a child with special needs, the
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amount of the qualified adoption expenses paid
or incurred by the taxpayer, and
‘‘(B) in the case of an adoption of a child
with special needs, $10,000.’’.
(b) 
DOLLAR
LIMITATION.—Section 
23(b)(1) 
is
amended—
(1) by striking ‘‘($6,000, in the case of a child
with special needs)’’, and
(2) by striking ‘‘subsection (a)’’ and inserting
‘‘subsection (a)(1)’’.
(c) YEAR CREDIT ALLOWED.—Section 23(a)(2) is
amended by adding at the end the following new flush sen-
tence:
‘‘In the case of the adoption of a child with special
needs, the credit allowed under paragraph (1) shall be
allowed for the taxable year in which the adoption be-
comes final.’’.
(d) 
DEFINITION
OF
ELIGIBLE
CHILD.—Section
23(d)(2) is amended to read as follows:
‘‘(2) ELIGIBLE CHILD.—The term ‘eligible child’
means any individual who—
‘‘(A) has not attained age 18, or
‘‘(B) is physically or mentally incapable of
caring for himself.’’.
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(e) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 211. MODIFICATION OF TAX RATES FOR TRUSTS FOR
INDIVIDUALS WHO ARE DISABLED.
(a) IN GENERAL.—Section 1(e) (relating to tax im-
posed on estates and trusts) is amended to read as follows:
‘‘(e) ESTATES AND TRUSTS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), there is hereby imposed on the taxable in-
come of—
‘‘(A) every estate, and
‘‘(B) every trust,
taxable under this subsection a tax determined in ac-
cordance with the following table:
‘‘If taxable income is:
The tax is:
Not over $1,500 ................................
15% of taxable income.
Over $1,500 but not over $3,500 .....
$225, plus 28% of the excess over
$1,500.
Over $3,500 but not over $5,500 .....
$785, plus 31% of the excess over
$3,500.
Over $5,500 but not over $7,500 .....
$1,405, plus 36% of the excess over
$5,500.
Over $7,500 .......................................
$2,125, plus 39.6% of the excess over
$7,500.
‘‘(2) SPECIAL RULE FOR TRUSTS FOR DISABLED
INDIVIDUALS.—
‘‘(A) IN
GENERAL.—There is hereby im-
posed on the taxable income of an eligible trust
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taxable under this subsection a tax determined
in the same manner as under subsection (c).
‘‘(B) ELIGIBLE
TRUST.—For purposes of
subparagraph (A), a trust shall be treated as an
eligible trust for any taxable year if, at all times
during such year during which the trust is in ex-
istence, the exclusive purpose of the trust is to
provide reasonable amounts for the support and
maintenance of 1 beneficiary who is perma-
nently and totally disabled (within the meaning
of section 22(e)(3)). A trust shall not fail to meet
the requirements of this subparagraph merely be-
cause the corpus of the trust may revert to the
grantor or a member of the grantor’s family
upon the death of the beneficiary.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2006.
TITLE III—RETIREMENT
SAVINGS TAX RELIEF
Subtitle A—Individual Retirement
Arrangements
SEC. 301. MODIFICATION OF DEDUCTION LIMITS FOR IRA
CONTRIBUTIONS.
(a) INCREASE IN CONTRIBUTION LIMIT.—
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(1) IN GENERAL.—Paragraph (1)(A) of section
219(b) (relating to maximum amount of deduction) is
amended by striking ‘‘$2,000’’ and inserting ‘‘the de-
ductible amount’’.
(2) DEDUCTIBLE
AMOUNT.—Section 219(b) is
amended by adding at the end the following new
paragraph:
‘‘(5) DEDUCTIBLE
AMOUNT.—For purposes of
paragraph (1)(A)—
‘‘(A) IN GENERAL.—The deductible amount
shall be determined in accordance with the fol-
lowing table:
‘‘For taxable years
The deductible
beginning in:
amount is:
2001 ................................................................................................
$3,000
2002 ................................................................................................
$4,000
2003 and thereafter ........................................................................
$5,000.
‘‘(B) COST-OF-LIVING ADJUSTMENT.—
‘‘(i) IN GENERAL.—In the case of any
taxable year beginning in a calendar year
after 2003, the $5,000 amount under sub-
paragraph (A) shall be increased by an
amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjustment
determined under section 1(f)(3) for
the calendar year in which the taxable
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year begins, determined by substituting
‘calendar year 2002’ for ‘calendar year
1992’ in subparagraph (B) thereof.
‘‘(ii) 
ROUNDING
RULES.—If 
any
amount after adjustment under clause (i) is
not a multiple of $100, such amount shall
be rounded to the next lower multiple of
$100.’’.
(b) INCREASE IN ADJUSTED GROSS INCOME LIMITS
FOR ACTIVE PARTICIPANTS.—
(1) IN GENERAL.—Subparagraph (B) of section
219(g)(3) (relating to applicable dollar amount) is
amended to read as follows:
‘‘(B) APPLICABLE
DOLLAR
AMOUNT.—The
term ‘applicable dollar amount’ means the fol-
lowing:
‘‘(i) In the case of a taxpayer filing a
joint return:
‘‘For taxable years
The applicable
beginning in:
dollar amount is:
2001 ................................................................................................
$53,000
2002 ................................................................................................
$54,000
2003 ................................................................................................
$60,000
2004 ................................................................................................
$65,000
2005 ................................................................................................
$70,000
2006 ................................................................................................
$75,000
2007 ................................................................................................
$80,000
2008 ................................................................................................
$84,000
2009 ................................................................................................
$89,000
2010 and thereafter ........................................................................
$94,000.
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‘‘(ii) In the case of any other taxpayer
(other than a married individual filing a
separate return):
‘‘For taxable years
The applicable
beginning in:
dollar amount is:
2001 ................................................................................................
$33,000
2002 ................................................................................................
$34,000
2003 ................................................................................................
$40,000
2004 ................................................................................................
$45,000
2005, 2006, and 2007 ....................................................................
$50,000
2008 ................................................................................................
$52,000
2009 ................................................................................................
$54,500
2010 and thereafter ........................................................................
$57,000.’’.
(2) 
COST-OF-LIVING
ADJUSTMENT.—Section
219(g)(3) is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(C) COST-OF-LIVING ADJUSTMENT.—
‘‘(i) IN GENERAL.—In the case of any
taxable year beginning in a calendar year
after 2010, the $94,000 amount in subpara-
graph (B)(i) and the $57,000 amount in
subparagraph(B)(ii) shall each be increased
by an amount equal to—
‘‘(I) such dollar amount, multi-
plied by
‘‘(II) the cost-of-living adjustment
determined under section 1(f)(3) for
the calendar year in which the taxable
year begins, determined by substituting
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‘calendar year 2009’ for ‘calendar year
1992’ in subparagraph (B) thereof.
‘‘(ii) 
ROUNDING
RULES.—If 
any
amount after adjustment under clause (i) is
not a multiple of $1,000, such amount shall
be reduced to the next lowest multiple of
$1,000.’’.
(c) CONFORMING AMENDMENTS.—
(1) Section 408(a)(1) is amended by striking ‘‘in
excess of $2,000 on behalf of any individual’’ and in-
serting ‘‘on behalf of any individual in excess of the
amount in effect for such taxable year under section
219(b)(1)(A)’’.
(2) Section 408(b)(2)(B) is amended by striking
‘‘$2,000’’ and inserting ‘‘the dollar amount in effect
under section 219(b)(1)(A)’’.
(3) Section 408(b) is amended by striking
‘‘$2,000’’ in the matter following paragraph (4) and
inserting ‘‘the dollar amount in effect under section
219(b)(1)(A)’’.
(4) Section 408(j) is amended by striking
‘‘$2,000’’.
(5) Section 408(p)(8) is amended by striking
‘‘$2,000’’ and inserting ‘‘the dollar amount in effect
under section 219(b)(1)(A)’’
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(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 302. MODIFICATION OF INCOME LIMITS ON CONTRIBU-
TIONS AND ROLLOVERS TO ROTH IRAS.
(a) REPEAL OF AGI LIMIT ON CONTRIBUTIONS.—Sec-
tion 408A(c)(3) (relating to limits based on modified ad-
justed gross income) is amended by striking subparagraph
(A) and by redesignating subparagraphs (B), (C), and (D)
as subparagraphs (A), (B), and (C), respectively.
(b) INCREASE IN AGI LIMIT FOR ROLLOVER CON-
TRIBUTIONS.—Section 408A(c)(3)(A) (relating to rollover
from IRA), as redesignated by subsection (a), is amended
to read as follows:
‘‘(A) ROLLOVER
FROM
IRA.—A taxpayer
shall not be allowed to make a qualified rollover
contribution from an individual retirement plan
other than a Roth IRA during any taxable year
if, for the taxable year of the distribution to
which the contribution relates, the taxpayer’s ad-
justed gross income exceeds $1,000,000.’’.
(c) CONFORMING AMENDMENTS.—
(1) Subparagraph (B) of section 408A(c)(3), as
redesignated by subsection (a) and as in effect before
and after the amendments made by the Internal Rev-
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enue Service Restructuring and Reform Act of 1998,
is amended to read as follows:
‘‘(B) DEFINITION OF ADJUSTED GROSS IN-
COME.—For purposes of subparagraph (A), ad-
justed gross income shall be determined—
‘‘(i) after application of sections 86
and 469, and
‘‘(ii) without regard to sections 135,
137, 221, and 911, the deduction allowable
under section 219, or any amount included
in gross income under subsection (d)(3).’’.
(2) Subparagraph (B) of section 408A(c)(3), as
amended by paragraph (1), is amended by inserting
‘‘or by reason of a required distribution under a pro-
vision described in paragraph (5)’’ before the period
at the end.
(d) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to taxable years beginning
after December 31, 2002.
(2) ROLLOVERS.—The amendment made by sub-
section (b) shall apply to taxable years beginning
after December 31, 2002.
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(3) ADJUSTED GROSS INCOME.—The amendment
made by subsection (c)(2) shall apply to taxable years
beginning after December 31, 2004.
SEC. 303. DEEMED IRAS UNDER EMPLOYER PLANS.
(a) IN GENERAL.—Section 408 (relating to individual
retirement accounts) is amended by redesignating sub-
section (q) as subsection (r) and by inserting after sub-
section (p) the following new subsection:
‘‘(q) DEEMED IRAS UNDER QUALIFIED EMPLOYER
PLANS.—
‘‘(1) GENERAL RULE.—If—
‘‘(A) a qualified employer plan elects to
allow employees to make voluntary employee
contributions to a separate account or annuity
established under the plan, and
‘‘(B) under the terms of the qualified em-
ployer plan, such account or annuity meets the
applicable requirements of this section or section
408A for an individual retirement account or
annuity,
then such account or annuity shall be treated for pur-
poses of this title in the same manner as an indi-
vidual retirement plan (and contributions to such ac-
count or annuity as contributions to an individual
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retirement plan). For purposes of subparagraph (B),
the requirements of subsection (a)(5) shall not apply.
‘‘(2) SPECIAL RULES FOR QUALIFIED EMPLOYER
PLANS.—For purposes of this title—
‘‘(A) a qualified employer plan shall not
fail to meet any requirement of this title solely
by reason of establishing and maintaining a pro-
gram described in paragraph (1), and
‘‘(B) any account or annuity described in
paragraph (1), and any contribution to the ac-
count or annuity, shall not be subject to any re-
quirement of this title applicable to a qualified
employer plan or taken into account in applying
any such requirement to any other contributions
under the plan.
‘‘(3) 
DEFINITIONS.—For 
purposes 
of 
this
subsection—
‘‘(A) QUALIFIED
EMPLOYER
PLAN.—The
term ‘qualified employer plan’ has the meaning
given such term by section 72(p)(4).
‘‘(B) VOLUNTARY
EMPLOYEE
CONTRIBU-
TION.—The term ‘voluntary employee contribu-
tion’ means any contribution (other than a man-
datory contribution within the meaning of sec-
tion 411(c)(2)(C))—
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‘‘(i) which is made by an individual as
an employee under a qualified employer
plan which allows employees to elect to
make contributions described in paragraph
(1), and
‘‘(ii) with respect to which the indi-
vidual has designated the contribution as a
contribution to which this subsection ap-
plies.’’.
(b) AMENDMENT OF ERISA.—
(1) IN GENERAL.—Section 4 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1003) is amended by adding at the end the following
new subsection:
‘‘(c) If a pension plan allows an employee to elect to
make voluntary employee contributions to accounts and an-
nuities as provided in section 408(q) of the Internal Rev-
enue Code of 1986, such accounts and annuities (and con-
tributions thereto) shall not be treated as part of such plan
(or as a separate pension plan) for purposes of any provi-
sion of this title other than section 403(c), 404, or 405 (re-
lating to exclusive benefit, and fiduciary and co-fiduciary
responsibilities).’’.
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(2) CONFORMING AMENDMENT.—Section 4(a) of
such Act (29 U.S.C. 1003(a)) is amended by inserting
‘‘or (c)’’ after ‘‘subsection (b)’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 1999.
SEC. 304. TAX CREDIT FOR MATCHING CONTRIBUTIONS TO
INDIVIDUAL DEVELOPMENT ACCOUNTS.
(a) IN GENERAL.—Subchapter F of chapter 1 (relating
to exempt organizations) is amended by adding at the end
the following new part:
‘‘PART IX—INDIVIDUAL DEVELOPMENT
ACCOUNTS
‘‘Sec. 530A. Individual development accounts.
‘‘SEC. 530A. INDIVIDUAL DEVELOPMENT ACCOUNTS.
‘‘(a) INDIVIDUAL DEVELOPMENT ACCOUNT.—For pur-
poses of this section, the term ‘Individual Development Ac-
count’ means a custodial account established for the exclu-
sive benefit of an eligible individual or such individual’s
beneficiaries, but only if the written governing instrument
creating the account meets the following requirements:
‘‘(1) Except in the case of a qualified rollover (as
defined in subsection (c)(2)(E))—
‘‘(A) no contribution will be accepted unless
it is in cash, and
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‘‘(B) contributions will not be accepted for
the taxable year in excess of the lesser of—
‘‘(i) $350, or
‘‘(ii) an amount equal to the com-
pensation includible in the eligible individ-
ual’s gross income for such taxable year.
‘‘(2) The custodian of the account is a qualified
financial institution.
‘‘(3) The interest of an eligible individual in the
balance of the account (determined without regard to
any such matching contribution or earnings thereon)
is nonforfeitable.
‘‘(4) The assets of the account will not be com-
mingled with other property except in a common
trust fund or common investment fund.
‘‘(5) Except as provided in subsection (c), any
amount in the account may be paid out only for
qualified expense distributions.
‘‘(b) MATCHING CONTRIBUTIONS WITH RESPECT TO
INDIVIDUAL DEVELOPMENT ACCOUNTS.—
‘‘(1) IN GENERAL.—If an eligible individual es-
tablishes an Individual Development Account with a
qualified financial institution, the qualified financial
institution may deposit into a separate, parallel, in-
dividual or pooled matching account an eligible
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‘‘(B) LIMITATION
BASED
ON
AMOUNT
OF
TAX.—The credit allowed under subparagraph
(A) for any taxable year shall not exceed the ex-
cess of—
‘‘(i) the sum of the regular tax liability
(as defined in section 26(b)) plus the tax
imposed by section 55, over
‘‘(ii) the sum of the credits allowable
under part IV of subchapter A of this chap-
ter.
‘‘(C) CREDIT TREATED AS ALLOWED UNDER
PART IV OF SUBCHAPTER A.—For purposes of
subtitle F, the credit allowed under subpara-
graph (A) shall be treated as a credit allowable
under part IV of subchapter A of this chapter.
‘‘(4) FORFEITURE OF MATCHING FUNDS.—
‘‘(A) IN GENERAL.—Amounts in the match-
ing account established under this subsection for
an eligible individual shall be reduced by the
amount of any distribution from an Individual
Development Account of such individual which is
not a qualified expense distribution and which is
not recontributed as part of a qualified rollover
(as defined in subsection (c)(2)(E)).
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‘‘(B) USE OF FORFEITED FUNDS.—Eligible
matching contributions which are forfeited by an
eligible individual under subparagraph (A) shall
be used by the qualified financial institution to
make eligible matching contributions for other
Individual Development Account contributions
by eligible individuals.
‘‘(5) EXCLUSION FROM INCOME.—Gross income
of an eligible individual shall not include any eligible
matching contribution and the earnings thereon de-
posited into a matching account under paragraph (1)
on behalf of such individual.
‘‘(6) REGULAR REPORTING OF MATCHING CON-
TRIBUTIONS.—Any qualified financial institution
shall report eligible matching contributions to eligible
individuals with Individual Development Accounts on
not less than a quarterly basis.
‘‘(7) TERMINATION.—No eligible matching con-
tribution may be made for any taxable year begin-
ning after December 31, 2005.
‘‘(c) QUALIFIED EXPENSE DISTRIBUTION.—For pur-
poses of this section—
‘‘(1) IN GENERAL.—The term ‘qualified expense
distribution’ means any amount paid or distributed
out of an Individual Development Account and the
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matching account established under subsection (b) for
an eligible individual if such amount—
‘‘(A) is used exclusively to pay the qualified
expenses of such individual or such individual’s
spouse or dependents,
‘‘(B) is paid by the qualified financial in-
stitution directly to the person to whom the
amount is due or to another Individual Develop-
ment Account, and
‘‘(C) is paid after the holder of the Indi-
vidual Development Account has completed an
economic literacy course offered by the qualified
financial institution, a nonprofit organization,
or a government entity.
‘‘(2) QUALIFIED EXPENSES.—
‘‘(A) IN GENERAL.—The term ‘qualified ex-
penses’ means any of the following:
‘‘(i) Qualified higher education ex-
penses.
‘‘(ii) Qualified first-time homebuyer
costs.
‘‘(iii) Qualified business capitalization
costs.
‘‘(iv) Qualified rollovers.
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‘‘(B) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—
‘‘(i) IN GENERAL.—The term ‘qualified
higher education expenses’ has the meaning
given such term by section 72(t)(7), deter-
mined by treating postsecondary vocational
educational schools as eligible educational
institutions.
‘‘(ii) 
POSTSECONDARY
VOCATIONAL
EDUCATION
SCHOOL.—The term ‘postsec-
ondary 
vocational 
educational 
school’
means an area vocational education school
(as defined in subparagraph (C) or (D) of
section 521(4) of the Carl D. Perkins Voca-
tional and Applied Technology Education
Act (20 U.S.C. 2471(4))) which is in any
State (as defined in section 521(33) of such
Act), as such sections are in effect on the
date of the enactment of this section.
‘‘(iii) COORDINATION
WITH
OTHER
BENEFITS.—The amount of qualified higher
education expenses for any taxable year
shall be reduced as provided in section
25A(g)(2) and by the amount of such ex-
penses for which a credit or exclusion is al-
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lowed under this chapter for such taxable
year.
‘‘(C) QUALIFIED
FIRST-TIME
HOMEBUYER
COSTS.—The term ‘qualified first-time home-
buyer costs’ means qualified acquisition costs (as
defined in section 72(t)(8) without regard to sub-
paragraph (B) thereof) with respect to a prin-
cipal residence (within the meaning of section
121) for a qualified first-time homebuyer (as de-
fined in section 72(t)(8)).
‘‘(D) QUALIFIED BUSINESS CAPITALIZATION
COSTS.—
‘‘(i) IN GENERAL.—The term ‘qualified
business capitalization costs’ means quali-
fied expenditures for the capitalization of a
qualified business pursuant to a qualified
business plan.
‘‘(ii) QUALIFIED EXPENDITURES.—The
term ‘qualified expenditures’ means expend-
itures included in a qualified business plan,
including capital, plant, equipment, work-
ing capital and inventory expenses.
‘‘(iii) 
QUALIFIED
BUSINESS.—The
term ‘qualified business’ means any busi-
ness that does not contravene any law.
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‘‘(iv) QUALIFIED
BUSINESS
PLAN.—
The term ‘qualified business plan’ means a
business plan which meets such require-
ments as the Secretary of Housing and
Urban Development may specify.
‘‘(E) QUALIFIED
ROLLOVERS.—The term
‘qualified rollover’ means, with respect to any
distribution from an Individual Development
Account, the payment, within 120 days of such
distribution, of all or a portion of such distribu-
tion to such account or to another Individual
Development Account established in another
qualified financial institution for the benefit of
the eligible individual. Rules similar to the rules
of section 408(d)(3) (other than subparagraph
(C) thereof) shall apply for purposes of this sub-
paragraph.
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) ELIGIBLE INDIVIDUAL.—
‘‘(A) IN GENERAL.—The term ‘eligible indi-
vidual’ means an individual who—
‘‘(i) has attained the age of 18 years,
‘‘(ii) is a citizen or legal resident of the
United States, and
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‘‘(iii) is a member of a household—
‘‘(I) which is eligible for the
earned income tax credit under section
32,
‘‘(II) which is eligible for assist-
ance under a State program funded
under part A of title IV of the Social
Security Act, or
‘‘(III) the gross income of which
does not exceed 60 percent of the area
median income (as determined by the
Department of Housing and Urban Af-
fairs) and the net worth of which does
not exceed $10,000.
‘‘(B) HOUSEHOLD.—The term ‘household’
means all individuals who share use of a dwell-
ing unit as primary quarters for living and eat-
ing separate from other individuals.
‘‘(C) DETERMINATION OF NET WORTH.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A)(iii)(III), the net worth of
a household is the amount equal to—
‘‘(I) the aggregate fair market
value of all assets that are owned in
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whole or in part by any member of a
household, minus
‘‘(II) the obligations or debts of
any member of the household.
‘‘(ii) 
CERTAIN
ASSETS
DIS-
REGARDED.—For purposes of determining
the net worth of a household, a household’s
assets shall not be considered to include the
primary dwelling unit and 1 motor vehicle
owned by the household.
‘‘(D) PROOF OF COMPENSATION AND STA-
TUS AS AN ELIGIBLE INDIVIDUAL.—Statements
under section 6051 and other forms specified by
the Secretary proving the eligible individual’s
wages and other compensation and the status of
the individual as an eligible individual shall be
presented to the custodian at the time of the es-
tablishment of the Individual Development Ac-
count and at least once annually thereafter.
‘‘(2) QUALIFIED
FINANCIAL
INSTITUTION.—The
term ‘qualified financial institution’ means any per-
son authorized to be a trustee of any individual re-
tirement account under section 408(a)(2).
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‘‘(3) TREATMENT
OF
MORE
THAN
ONE
AC-
COUNT.—All Individual Development Accounts of an
individual shall be treated as one account.
‘‘(4) OTHER RULES TO APPLY.—Rules similar to
the rules of paragraphs (1), (2), and (3) of section
219(f), section 220(f)(8), paragraphs (4) and (6) of
section 408(d), and section 408(m) shall apply for
purposes of this section.
‘‘(5) REPORTS.—The custodian of an Individual
Development Account shall make such reports regard-
ing such account to the Secretary and to the indi-
vidual for whom the account is maintained with re-
spect to contributions (and the years to which they re-
late), distributions, and such other matters as the Sec-
retary may require under regulations. The reports re-
quired by this paragraph—
‘‘(A) shall be filed at such time and in such
manner as the Secretary prescribes in such regu-
lations, and
‘‘(B) shall be furnished to individuals—
‘‘(i) not later than January 31 of the
calendar year following the calendar year to
which such reports relate, and
‘‘(ii) in such manner as the Secretary
prescribes in such regulations.
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‘‘(e) APPLICATION OF SECTION.—This section shall
apply to amounts paid to an Individual Development Ac-
count for any taxable year beginning after December 31,
2000, and before January 1, 2006.’’.
(b) TAX ON EXCESS CONTRIBUTIONS.—
(1) TAX
IMPOSED.—Subsection (a) of section
4973 is amended by striking ‘‘or’’ at the end of para-
graph (3), adding ‘‘or’’ at the end of paragraph (4),
and inserting after paragraph (4) the following new
paragraph:
‘‘(5) an Individual Development Account (within
the meaning of section 530A(a)),’’.
(2) EXCESS
CONTRIBUTIONS.—Section 4973 is
amended by adding at the end the following new sub-
section:
‘‘(g) INDIVIDUAL
DEVELOPMENT
ACCOUNTS.—For
purposes of this section, in the case of Individual Develop-
ment Accounts, the term ‘excess contributions’ means the
excess (if any) of—
‘‘(1) the amount contributed for the taxable year
to the accounts (other than a qualified rollover, as de-
fined in section 530A(c)(2)(E)), over
‘‘(2) the amount allowable as a contribution
under section 530A.
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For purposes of this subsection, any contribution which is
distributed from the Individual Development Account in a
distribution to which rules similar to the rules of section
408(d)(4) apply by reason of section 530A(d)(4) shall be
treated as an amount not contributed.’’.
(c) INFORMATION RELATING TO CERTAIN TRUSTS AND
ANNUITY
PLANS.—Subsection (c) of section 6047 is
amended—
(1) by inserting ‘‘or section 530A’’ after ‘‘section
219’’; and
(2) by inserting ‘‘, of any Individual Develop-
ment Account described in section 530A(a),’’, after
‘‘section 408(a)’’.
(d) FAILURE TO PROVIDE REPORTS ON INDIVIDUAL
DEVELOPMENT
ACCOUNTS.—Paragraph (2) of section
6693(a) is amended by striking ‘‘and’’ at the end of sub-
paragraph (C), by striking the period and inserting ‘‘, and’’
at the end of subparagraph (D), and by adding at the end
the following new subparagraph:
‘‘(E) section 530(d)(5) (relating to Indi-
vidual Development Accounts).’’.
(e) CLERICAL AMENDMENT.—The table of parts for
subchapter F of chapter 1 is amended by adding at the end
the following new item:
‘‘Part IX. Individual development accounts.’’.
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(f) FUNDS IN ACCOUNTS DISREGARDED FOR PUR-
POSES
OF
CERTAIN
MEANS-TESTED
FEDERAL
PRO-
GRAMS.—Notwithstanding any other provision of the Inter-
nal Revenue Code of 1986 or the Social Security Act that
requires consideration of 1 or more financial circumstances
of an individual, for the purpose of determining eligibility
to receive, or the amount of, any assistance or benefit au-
thorized by such provision to be provided to or for the ben-
efit of such individual, contributions (including earnings
thereon) in any Individual Development Account and ap-
plicable matching account under section 530A of such Code
shall be disregarded for such purpose.
(g) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 305. CERTAIN COINS NOT TREATED AS COLLECTIBLES.
(a) IN
GENERAL.—Subparagraph (A) of section
408(m)(3) (relating to exception for certain coins and bul-
lion) is amended to read as follows:
‘‘(A) any coin certified by a recognized
grading service and traded on a nationally rec-
ognized electronic network, or listed by a recog-
nized wholesale reporting service, and—
‘‘(i) which is or was at any time legal
tender in the United States, or
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‘‘(ii) issued under the laws of any
State, or’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1999.
Subtitle B—Expanding Coverage
SEC. 311. 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 treated
as an elective deferral for purposes of this chapter, ex-
cept that such contribution shall not be excludable
from gross income, and
‘‘(2) such plan (and any arrangement which is
part of such plan) shall not be treated as failing to
meet any requirement of this chapter solely by reason
of including such program.
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‘‘(b) QUALIFIED PLUS CONTRIBUTION PROGRAM.—
For purposes of this section—
‘‘(1) IN GENERAL.—The term ‘qualified plus con-
tribution program’ means a program under which an
employee may elect to make designated plus contribu-
tions in lieu of all or a portion of elective deferrals
the employee is otherwise eligible to make under the
applicable retirement plan.
‘‘(2) SEPARATE ACCOUNTING REQUIRED.—A pro-
gram shall not be treated as a qualified plus contribu-
tion program unless the applicable retirement plan—
‘‘(A) establishes separate accounts (‘des-
ignated plus accounts’) for the designated plus
contributions of each employee and any earnings
properly allocable to the contributions, and
‘‘(B) maintains separate recordkeeping with
respect to each account.
‘‘(c) DEFINITIONS AND RULES RELATING TO DES-
IGNATED 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
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‘‘(B) the employee designates (at such time
and in such manner as the Secretary may pre-
scribe) as not being so excludable.
‘‘(2) DESIGNATION LIMITS.—The amount of elec-
tive deferrals which an employee may designate under
paragraph (1) shall not exceed the excess (if any) of—
‘‘(A) the maximum amount of elective defer-
rals excludable from gross income of the employee
for the taxable year (without regard to this sec-
tion), over
‘‘(B) the aggregate amount of elective defer-
rals of the employee for the taxable year which
the employee does not designate under paragraph
(1).
‘‘(3) ROLLOVER CONTRIBUTIONS.—
‘‘(A) IN GENERAL.—A rollover contribution
of any payment or distribution from a des-
ignated 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 pay-
ment or distribution was made, or
‘‘(ii) a Roth IRA of such individual.
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‘‘(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 includible
in gross income.
‘‘(2) QUALIFIED
DISTRIBUTION.—For purposes
of this subsection—
‘‘(A) IN GENERAL.—The term ‘qualified dis-
tribution’ has the meaning given such term by
section 408A(d)(2)(A) (without regard to clause
(iv) thereof).
‘‘(B) DISTRIBUTIONS
WITHIN
NONEXCLU-
SION PERIOD.—A payment or distribution from
a designated plus account shall not be treated as
a qualified distribution if such payment or dis-
tribution is made within the 5-taxable-year pe-
riod beginning with the earlier of—
‘‘(i) the 1st taxable year for which the
individual made a designated plus con-
tribution to any designated plus account es-
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tablished 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 1st taxable
year for which the individual made a des-
ignated plus contribution to such previously
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—
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‘‘(A) an employees’ trust described in sec-
tion 401(a) which is exempt from tax under sec-
tion 501(a), and
‘‘(B) a plan under which amounts are con-
tributed by an individual’s employer for an an-
nuity contract described in section 403(b).
‘‘(2) ELECTIVE DEFERRAL.—The term ‘elective
deferral’ means any elective deferral described in sub-
paragraph (A) or (C) of section 402(g)(3).’’.
(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
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respect to such portion shall include only another
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 des-
ignated 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 sub-
section:
‘‘(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 Sec-
retary may prescribe.’’.
(e) CONFORMING AMENDMENTS.—
(1) Section 408A(e) is amended by adding after
the first sentence the following new sentence: ‘‘Such
term includes a rollover contribution described in sec-
tion 402A(c)(3)(A).’’.
(2) The table of sections for subpart A of part I
of subchapter D of chapter 1 is amended by inserting
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after the item relating to section 402 the following
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 Decem-
ber 31, 2000.
SEC. 312. INCREASE IN ELECTIVE CONTRIBUTION LIMITS.
(a) ELECTIVE DEFERRALS.—
(1) IN
GENERAL.—Paragraph (1) of section
402(g) (relating to limitation on exclusion for elective
deferrals) is amended to read as follows:
‘‘(1) IN GENERAL.—
‘‘(A) LIMITATION.—Notwithstanding sub-
sections (e)(3) and (h)(1)(B), the elective defer-
rals of any individual for any taxable year shall
be included in such individual’s gross income to
the extent the amount of such deferrals for the
taxable year exceeds the applicable dollar
amount.
‘‘(B) APPLICABLE
DOLLAR
AMOUNT.—For
purposes of subparagraph (A), the applicable
dollar amount shall be the amount determined in
accordance with the following table:
‘‘For taxable years
The applicable dollar
beginning in calendar year:
amount is:
2001 ................................................................................................
$11,000
2002 ................................................................................................
$12,000
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‘‘For taxable years
The applicable dollar
beginning in calendar year:
amount is:
2003 ................................................................................................
$13,000
2004 ................................................................................................
$14,000
2005 or thereafter ..........................................................................
$15,000.’’.
(2) COST-OF-LIVING
ADJUSTMENT.—Paragraph
(5) of section 402(g) is amended to read as follows:
‘‘(5) COST-OF-LIVING ADJUSTMENT.—In the case
of taxable years beginning after December 31, 2005,
the Secretary shall adjust the $15,000 amount under
paragraph (1)(B) at the same time and in the same
manner as under section 415(d); except that the base
period shall be the calendar quarter beginning July 1,
2004, and any increase under this paragraph which
is not a multiple of $500 shall be rounded to the next
lowest multiple of $500.’’.
(3) CONFORMING AMENDMENTS.—
(A) Section 402(g) (relating to limitation
on exclusion for elective deferrals), as amended
by paragraphs (1) and (2), is further amended
by striking paragraph (4) and redesignating
paragraphs (5), (6), (7), (8), and (9) as para-
graphs (4), (5), (6), (7), and (8), respectively.
(B) Paragraph (2) of section 457(c) is
amended by striking ‘‘402(g)(8)(A)(iii)’’ and in-
serting ‘‘402(g)(7)(A)(iii)’’.
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(C) Clause (iii) of section 501(c)(18)(D) is
amended by striking ‘‘(other than paragraph (4)
thereof)’’.
(b) DEFERRED COMPENSATION PLANS OF STATE AND
LOCAL
GOVERNMENTS
AND
TAX-EXEMPT
ORGANIZA-
TIONS.—
(1) IN GENERAL.—Section 457 (relating to de-
ferred compensation plans of State and local govern-
ments and tax-exempt organizations) is amended—
(A) by striking ‘‘$7,500’’ each place it ap-
pears in subsections (b)(2)(A) and (c)(1) and in-
serting ‘‘the applicable dollar amount’’, and
(B) by striking ‘‘$15,000’’ in subsection
(b)(3)(A) and inserting ‘‘twice the dollar amount
in effect under subsection (b)(2)(A)’’.
(2) APPLICABLE DOLLAR AMOUNT; COST-OF-LIV-
ING ADJUSTMENT.—Paragraph (15) of section 457(e)
is amended to read as follows:
‘‘(15) APPLICABLE DOLLAR AMOUNT.—
‘‘(A) IN GENERAL.—The applicable dollar
amount shall be the amount determined in ac-
cordance with the following table:
‘‘For taxable years
The applicable dollar
beginning in calendar year:
amount is:
2001 ................................................................................................
$9,000
2002 ................................................................................................
$10,000
2003 ................................................................................................
$11,000
2004 or thereafter ..........................................................................
$12,000.
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‘‘(B) COST-OF-LIVING
ADJUSTMENTS.—In
the case of taxable years beginning after Decem-
ber 31, 2004, the Secretary shall adjust the
$12,000 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 quarter begin-
ning 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.’’.
(c) SIMPLE RETIREMENT ACCOUNTS.—
(1) 
LIMITATION.—Clause 
(ii) 
of 
section
408(p)(2)(A) (relating to general rule for qualified
salary reduction arrangement) is amended by striking
‘‘$6,000’’ and inserting ‘‘the applicable dollar
amount’’.
(2) APPLICABLE
DOLLAR
AMOUNT.—Subpara-
graph (E) of 408(p)(2) is amended to read as follows:
‘‘(E) APPLICABLE DOLLAR AMOUNT; COST-
OF-LIVING ADJUSTMENT.—
‘‘(i) IN
GENERAL.—For purposes of
subparagraph (A)(ii), the applicable dollar
amount shall be the amount determined in
accordance with the following table:
‘‘For taxable years
The applicable dollar
beginning in calendar year:
amount is:
2001 ................................................................................................
$7,000
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‘‘For taxable years
The applicable dollar
beginning in calendar year:
amount is:
2002 ................................................................................................
$8,000
2003 ................................................................................................
$9,000
2004 or thereafter ..........................................................................
$10,000.
‘‘(ii) COST-OF-LIVING
ADJUSTMENT.—
In the case of a year beginning after Decem-
ber 31, 2004, the Secretary shall adjust the
$10,000 amount under clause (i) at the
same time and in the same manner as
under section 415(d), except that the base
period taken into account shall be the cal-
endar quarter beginning July 1, 2003, and
any increase under this subparagraph
which is not a multiple of $500 shall be
rounded to the next lower multiple of
$500.’’.
(3) CONFORMING AMENDMENTS.—
(A) 
Subclause 
(I) 
of 
section
401(k)(11)(B)(i) 
is 
amended 
by 
striking
‘‘$6,000’’ and inserting ‘‘the amount in effect
under section 408(p)(2)(A)(ii)’’.
(B) Section 401(k)(11) is amended by strik-
ing subparagraph (E).
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
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SEC. 313. 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 purposes
of subparagraph (A)(i), the term ‘owner-em-
ployee’ shall only include a person described
in subclause (II) or (III) of clause (i).’’.
(b) AMENDMENT TO ERISA.—Section 408(d)(2) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1108(d)(2)) is amended by adding at the end the
following new subparagraph:
‘‘(C) For purposes of paragraph (1)(A), the term
‘owner-employee’ shall only include a person described in
clause (ii) or (iii) of subparagraph (A).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to loans made after December 31, 2000.
SEC. 314. ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF DEDUCTION LIM-
ITS.
(a) IN GENERAL.—Section 404 (relating to deduction
for contributions of an employer to an employees’ trust or
annuity plan and compensation under a deferred payment
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plan) is amended by adding at the end the following new
subsection:
‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF DEDUCTION LIMITS.—Elective
deferrals (as defined in section 402(g)(3)) shall not be sub-
ject to any limitation contained in paragraph (3), (7), or
(9) of subsection (a), and such elective deferrals shall not
be taken into account in applying any such limitation to
any other contributions.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
2000.
SEC. 315. 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:
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‘‘(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
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 Se-
curity Act of 1974 (29 U.S.C. 1306(a)(3)) is amended by
adding at the end the following new subparagraph:
‘‘(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 mem-
ber of such sponsor’s controlled group (or any predecessor
of either) had not established or maintained a plan to which
this title applies with respect to which benefits were accrued
for substantially the same employees as are in the new sin-
gle-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 employ-
ees.
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‘‘(II) In the case of a plan maintained by 2 or more
contributing sponsors that are not part of the same con-
trolled group, the employees of all contributing sponsors 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 December 31,
2000.
SEC. 316. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR
NEW PLANS.
(a) IN
GENERAL.—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 add-
ing 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 de-
termined under clause (ii) and the applicable percentage.
For purposes of this clause, the term ‘applicable percentage’
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.
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‘‘(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-
sor shall be treated as a new defined benefit plan for 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 bene-
fits were accrued for substantially the same employees as
are in the new plan.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to plans established after December 31,
2000.
SEC. 317. ELIMINATION OF USER FEE FOR REQUESTS TO
IRS REGARDING NEW PENSION PLANS.
(a) ELIMINATION OF CERTAIN USER FEES.—The Sec-
retary of the Treasury or the Secretary’s delegate shall not
require payment of user fees under the program established
under section 7527 of the Internal Revenue Code of 1986
for requests to the Internal Revenue Service for ruling let-
ters, opinion letters, and determination letters or similar
requests with respect to the qualified status of a new pension
benefit plan or any trust which is part of the plan.
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(b) NEW PENSION BENEFIT PLAN.—For purposes of
this section—
(1) IN GENERAL.—The term ‘‘new pension ben-
efit plan’’ means a pension, profit-sharing, stock
bonus, annuity, or employee stock ownership plan
which is maintained by one or more eligible employ-
ers if such employer (or any predecessor employer)
has not made a prior request described in subsection
(a) for such plan (or any predecessor plan).
(2) ELIGIBLE
EMPLOYER.—The term ‘‘eligible
employer’’ means an employer (or any predecessor
employer) which has not established or maintained a
qualified employer plan with respect to which con-
tributions were made, or benefits were accrued for
service, in the 3 most recent taxable years ending
prior to the first taxable year in which the request is
made.
(c) EFFECTIVE DATE.—The provisions of this section
shall apply with respect to requests made after December
31, 2000.
SEC. 318. SAFE ANNUITIES AND TRUSTS.
(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 408A the following new
section:
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‘‘SEC. 408B. SAFE ANNUITIES AND TRUSTS.
‘‘(a) EMPLOYER ELIGIBILITY.—
‘‘(1) IN GENERAL.—An employer may establish
and maintain a SAFE annuity or a SAFE trust for
any year only if—
‘‘(A) the employer is an eligible employer
(as defined in section 408(p)(2)(C)), and
‘‘(B) the employer does not maintain (and
no predecessor of the employer maintains) a
qualified plan (other than a permissible plan)
with respect to which contributions were made,
or benefits were accrued, for service in any year
in the period beginning with the year such an-
nuity or trust became effective and ending with
the year for which the determination is being
made.
‘‘(2) DEFINITIONS.—For purposes of paragraph
(1)—
‘‘(A) QUALIFIED PLAN.—The term ‘qualified
plan’ has the meaning given such term by sec-
tion 408(p)(2)(D)(ii).
‘‘(B) PERMISSIBLE PLAN.—The term ‘per-
missible plan’ means—
‘‘(i) a SIMPLE plan described in sec-
tion 408(p),
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‘‘(ii) a SIMPLE 401(k) plan described
in section 401(k)(11),
‘‘(iii) an eligible deferred compensation
plan described in section 457(b),
‘‘(iv) a collectively bargained plan but
only if the employees eligible to participate
in such plan are not also entitled to a ben-
efit described in subsection (b)(5) or (c)(5),
or
‘‘(v) a plan under which there may be
made only—
‘‘(I) elective deferrals described in
section 402(g)(3), and
‘‘(II) employer matching contribu-
tions not in excess of the amounts de-
scribed in subclauses (I) and (II) of
section 401(k)(12)(B)(i).
‘‘(b) SAFE ANNUITY.—
‘‘(1) IN GENERAL.—For purposes of this title, the
term ‘SAFE annuity’ means an individual retire-
ment annuity (as defined in section 408(b) without
regard to paragraph (2) thereof and without regard
to the limitation on aggregate annual premiums con-
tained in the flush language of section 408(b)) if—
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‘‘(A) such annuity meets the requirements of
paragraphs (2) through (7), and
‘‘(B) the only contributions to such annuity
(other than rollover contributions) are employer
contributions.
Nothing in this section shall be construed as pre-
venting an employer from using a group annuity con-
tract which is divisible into individual retirement an-
nuities for purposes of providing SAFE annuities.
‘‘(2) PARTICIPATION REQUIREMENTS.—
‘‘(A) IN
GENERAL.—The requirements of
this paragraph are met for any year only if all
employees of the employer who—
‘‘(i) received at least $5,000 in com-
pensation from the employer during any 2
consecutive preceding years, and
‘‘(ii) received at least $5,000 in com-
pensation during the year,
are entitled to the benefit described in paragraph
(5) for such year.
‘‘(B) EXCLUDABLE
EMPLOYEES.—An em-
ployer may elect to exclude from the require-
ments under subparagraph (A) employees de-
scribed in section 410(b)(3).
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‘‘(3) VESTING.—The requirements of this para-
graph are met if the employee’s rights to any benefits
under the annuity are nonforfeitable.
‘‘(4) BENEFIT FORM.—
‘‘(A) IN
GENERAL.—The requirements of
this paragraph are met if the only form of ben-
efit is—
‘‘(i) a benefit payable annually in the
form of a single life annuity with monthly
payments (with no ancillary benefits) be-
ginning at age 65, or
‘‘(ii) at the election of the participant,
any other form of benefit which is the actu-
arial equivalent (based on the assumptions
specified in the SAFE annuity) of the ben-
efit described in clause (i).
The requirements of sections 401(a)(11) and
411(b)(1)(H) shall apply to the benefits described
in this subparagraph.
‘‘(B) 
DIRECT
TRANSFERS
AND
ROLL-
OVERS.—A plan shall not fail to meet the re-
quirements of this paragraph by reason of per-
mitting, at the election of the employee, a trust-
ee-to-trustee transfer or a rollover contribution.
‘‘(5) AMOUNT OF ANNUAL ACCRUED BENEFIT.—
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‘‘(A) IN
GENERAL.—The requirements of
this paragraph are met for any year if the ac-
crued benefit of each participant derived from
employer contributions for such year, when ex-
pressed as a benefit described in paragraph
(4)(A), is not less than the applicable percentage
of the participant’s compensation for such year.
‘‘(B) APPLICABLE PERCENTAGE.—For pur-
poses of this paragraph—
‘‘(i) IN GENERAL.—The term ‘applica-
ble percentage’ means 3 percent.
‘‘(ii) ELECTION OF LOWER PERCENT-
AGE.—An employer may elect to apply an
applicable percentage of 1 percent, 2 percent
or zero percent for any plan year for all
employees eligible to participate in the plan
for such year if the employer notifies the
employees of such percentage within a rea-
sonable period before the beginning of such
year.
‘‘(C) 
COMPENSATION
LIMIT.—The 
com-
pensation taken into account under this para-
graph for any year shall not exceed the limita-
tion in effect for such year under section
401(a)(17).
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‘‘(D) CREDIT FOR SERVICE BEFORE PLAN
ADOPTED.—
‘‘(i) IN GENERAL.—An employer may
elect to take into account a specified number
of years of service (not greater than 10) per-
formed before the adoption of the plan (each
hereinafter referred to as a ‘prior service
year’) as service under the plan if the same
specified number of years is available to all
employees eligible to participate in the plan
for the first plan year.
‘‘(ii) ACCRUAL OF PRIOR SERVICE BEN-
EFIT.—Such an election shall be effective for
a prior service year only if the requirements
of this paragraph are met for an eligible
plan year (with respect to employees enti-
tled to credit for such prior service year) by
doubling the applicable percentage (if any)
for such plan year. For purposes of the pre-
ceding sentence, an eligible plan year is a
plan year in the period of consecutive plan
years (but not more than the number speci-
fied under clause (i)) beginning with the
first plan year that the plan is in effect.
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‘‘(iii) ELECTION MAY NOT APPLY TO
CERTAIN PRIOR SERVICE YEARS.—This sub-
paragraph shall not apply with respect to
any prior service year of an employee if—
‘‘(I) for any part of such prior
service year such employee was an ac-
tive participant (within the meaning
of section 219(g)(5)) under any defined
benefit plan of the employer (or any
predecessor thereof), or
‘‘(II) such employee received dur-
ing such prior service year less than
$5,000 in compensation from the em-
ployer.
‘‘(6) FUNDING.—
‘‘(A) IN
GENERAL.—The requirements of
this paragraph are met only if the employer is
required to contribute to the annuity for each
plan year the amount necessary to purchase a
SAFE annuity in the amount of the benefit ac-
crued for such year for each participant entitled
to such benefit.
‘‘(B) TIME WHEN CONTRIBUTIONS DEEMED
MADE.—For purposes of this paragraph, an em-
ployer shall be deemed to have made a contribu-
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tion on the last day of the preceding taxable year
if the payment is on account of such taxable year
and is made not later than the time prescribed
by law for filing the return for such taxable year
(including extensions thereof).
‘‘(C) PENALTY FOR FAILURE TO MAKE RE-
QUIRED CONTRIBUTION.—The taxes imposed by
section 4971 shall apply to a failure to make the
contribution required by this paragraph in the
same manner as if the amount of the failure
were an accumulated funding deficiency to
which such section applies.
‘‘(7) LIMITATION
ON
DISTRIBUTIONS.—The re-
quirements of this paragraph are met only if pay-
ments under the contract may be made only after the
employee attains age 65 or when the employee sepa-
rates from service, dies, or becomes disabled (within
the meaning of section 72(m)(7)).
‘‘(c) SAFE TRUST.—
‘‘(1) IN GENERAL.—For purposes of this title, the
term ‘SAFE trust’ means a trust forming part of a
defined benefit plan if—
‘‘(A) such trust meets the requirements of
section 401(a) as modified by subsection (d),
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‘‘(B) a participant’s benefits under the plan
are based solely on the balance of a separate ac-
count in such plan of such participant,
‘‘(C) such plan meets the requirements of
paragraphs (2) through (8), and
‘‘(D) the only contributions to such trust
(other than rollover contributions) are employer
contributions.
‘‘(2) PARTICIPATION
REQUIREMENTS.—A plan
meets the requirements of this paragraph for any year
only if the requirements of subsection (b)(2) are met
for such year.
‘‘(3) VESTING.—A plan meets the requirements
of this paragraph for any year only if the require-
ments of subsection (b)(3) are met for such year.
‘‘(4) BENEFIT FORM.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), a plan meets the requirements
of this paragraph only if the trustee distributes
a SAFE annuity that satisfies subsection (b)(4)
where the annual benefit described in subsection
(b)(4)(A) is not less than the accrued benefit de-
termined under paragraph (5).
‘‘(B) DIRECT
TRANSFERS
TO
INDIVIDUAL
RETIREMENT PLAN OR SAFE ANNUITY.—A plan
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shall not fail to meet the requirements of this
paragraph by reason of permitting, as an op-
tional form of benefit, the distribution of the en-
tire balance to the credit of the employee. If the
employee is under age 65, such distribution must
be in the form of a direct trustee-to-trustee trans-
fer to a SAFE annuity, another SAFE trust, or
a SAFE rollover plan (or, in the case of a dis-
tribution that does not exceed the dollar limit in
effect under section 411(a)(11)(A), any other in-
dividual retirement plan).
‘‘(C) SAFE ROLLOVER PLAN.—For purposes
of this section, the term ‘SAFE rollover plan’
means an individual retirement plan for the
benefit of the employee to which a rollover was
made from a SAFE annuity, SAFE trust, or an-
other SAFE rollover plan.
‘‘(5) AMOUNT OF ANNUAL ACCRUED BENEFIT.—
A plan meets the requirements of this paragraph for
any year only if the requirements of subsection (b)(5)
are met for such year.
‘‘(6) FUNDING.—
‘‘(A) IN GENERAL.—A plan meets the re-
quirements of this paragraph for any year only
if—
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‘‘(i) the requirements of subsection
(b)(6) are met for such year,
‘‘(ii) in the case of a plan which has
an unfunded annuity amount with respect
to the account of any participant, the plan
requires that the employer make an addi-
tional contribution to such plan (at the
time the annuity contract to which such
amount relates is purchased) equal to the
unfunded annuity amount, and
‘‘(iii) in the case of a plan which has
an unfunded prior year liability as of the
close of such plan year, the plan requires
that the employer make an additional con-
tribution to such plan for such year equal
to the amount of such unfunded prior year
liability no later than 81⁄2 months following
the end of the plan year.
‘‘(B) UNFUNDED
ANNUITY
AMOUNT.—For
purposes of this paragraph, the term ‘unfunded
annuity amount’ means, with respect to the ac-
count of any participant for whom an annuity
is being purchased, the excess (if any) of—
‘‘(i) the amount necessary to purchase
an annuity contract which meets the re-
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quirements of subsection (b)(4) in the
amount of the participant’s accrued benefit
determined under paragraph (5), over
‘‘(ii) the balance in such account at the
time such contract is purchased.
‘‘(C) UNFUNDED PRIOR YEAR LIABILITY.—
For purposes of this paragraph, the term ‘un-
funded prior year liability’ means, with respect
to any plan year, the excess (if any) of—
‘‘(i) the aggregate of the present value
of the accrued liabilities under the plan as
of the close of the prior plan year, over
‘‘(ii) the value of the plan’s assets de-
termined under section 412(c)(2) as of the
close of the plan year (determined without
regard to any contributions for such plan
year).
Such present value shall be determined using the
assumptions specified in subparagraph (D).
‘‘(D) ACTUARIAL ASSUMPTIONS.—In deter-
mining the amount required to be contributed
under subparagraph (A)—
‘‘(i) the assumed interest rate shall be
not less than 3 percent, and not greater
than 5 percent, per year,
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‘‘(ii) the assumed mortality shall be de-
termined under the applicable mortality
table (as defined in section 417(e)(3), as
modified by the Secretary so that it does not
include any assumption for preretirement
mortality), and
‘‘(iii) the assumed retirement age shall
be 65.
‘‘(E) CHANGES IN MORTALITY TABLE.—If,
for purposes of this subsection, the applicable
mortality table under section 417(e)(3) for any
plan year is not the same as such table for the
prior plan year, the Secretary shall prescribe
regulations for such purposes which phase in the
effect of the changes over a reasonable period of
plan years determined by the Secretary.
‘‘(F) PENALTY FOR FAILURE TO MAKE RE-
QUIRED CONTRIBUTION.—The taxes imposed by
section 4971 shall apply to a failure to make the
contribution required by this paragraph in the
same manner as if the amount of the failure
were an accumulated funding deficiency to
which such section applies.
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‘‘(7) SEPARATE ACCOUNTS FOR PARTICIPANTS.—
A plan meets the requirements of this paragraph for
any year only if the plan provides—
‘‘(A) for an individual account for each
participant, and
‘‘(B) for benefits based solely on—
‘‘(i) the amount contributed to the par-
ticipant’s account,
‘‘(ii) any income, expenses, gains and
losses, and any forfeitures of accounts of
other participants which may be allocated
to such participant’s account, and
‘‘(iii) the amount of any unfunded an-
nuity amount with respect to the partici-
pant.
‘‘(8) TRUST MAY NOT HOLD SECURITIES WHICH
ARE NOT READILY TRADABLE.—A plan meets the re-
quirements of this paragraph only if the plan pro-
hibits the trust from holding directly or indirectly se-
curities which are not readily tradable on an estab-
lished securities market or otherwise. Nothing in this
paragraph shall prohibit the trust from holding in-
surance company products regulated by State law.
‘‘(d) SPECIAL RULES
FOR SAFE ANNUITIES
AND
TRUSTS.—
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‘‘(1) CERTAIN
REQUIREMENTS
TREATED
AS
MET.—For purposes of section 401(a), a SAFE annu-
ity and a SAFE trust shall be treated as meeting the
requirements of the following provisions:
‘‘(A) Section 401(a)(4) (relating to non-
discrimination rules).
‘‘(B) Section 401(a)(26) (relating to min-
imum participation).
‘‘(C) Section 410 (relating to minimum
participation and coverage requirements).
‘‘(D) Except as provided in subsection
(b)(4(A), section 411(b) (relating to accrued ben-
efit requirements).
‘‘(E) Section 412 (relating to minimum
funding standards).
‘‘(F) Section 415 (relating to limitations on
benefits 
and 
contributions 
under 
qualified
plans).
‘‘(G) Section 416 (relating to special rules
for top-heavy plans).
‘‘(2) CONTRIBUTIONS NOT TAKEN INTO ACCOUNT
IN APPLYING LIMITS TO OTHER PLANS.—
‘‘(A) DEDUCTION LIMITS.—Contributions to
a SAFE annuity or a SAFE trust shall not be
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taken into account in applying sections 404 to
other plans maintained by the employer.
‘‘(B) BENEFIT LIMITS.—A SAFE annuity
or a SAFE trust shall be treated as a defined
benefit plan for purposes of section 415.
‘‘(3) USE OF DESIGNATED FINANCIAL INSTITU-
TIONS.—A rule similar to the rule of section
408(p)(7) (without regard to the last sentence thereof)
shall apply for purposes of this section.
‘‘(4) DEFINITIONS.—The definitions in section
408(p)(6) shall apply for purposes of this section.’’.
(b) DEDUCTION LIMITS NOT TO APPLY TO EMPLOYER
CONTRIBUTIONS.—
(1) IN GENERAL.—Section 404 (relating to de-
ductions for contributions of an employer to pension,
etc., plans), as amended by section 314, is amended
by adding at the end the following new subsection:
‘‘(o) SPECIAL RULES FOR SAFE ANNUITIES.—
‘‘(1) IN GENERAL.—Employer contributions to a
SAFE annuity shall be treated as if they are made
to a plan subject to the requirements of this section.
‘‘(2) DEDUCTIBLE LIMIT.—For purposes of sub-
section (a)(1)(A)(i), the amount necessary to satisfy
the 
minimum 
funding 
requirement 
of 
section
408B(b)(6) or (c)(6) shall be treated as the amount
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necessary to satisfy the minimum funding require-
ment of section 412.’’.
(2) COORDINATION
WITH
DEDUCTION
UNDER
SECTION 219.—
(A) Section 219(b) (relating to maximum
amount of deduction), as amended by section
301, is amended by adding at the end the fol-
lowing new paragraph:
‘‘(6) SPECIAL RULE FOR SAFE ANNUITIES.—This
section shall not apply with respect to any amount
contributed to a SAFE annuity established under sec-
tion 408B(b).’’.
(B) Section 219(g)(5)(A) (defining active
participant) is amended by striking ‘‘or’’ at the
end of clause (v) and by adding at the end the
following new clause:
‘‘(vii) any SAFE annuity (within the
meaning of section 408B), or’’.
(c) CONTRIBUTIONS AND DISTRIBUTIONS.—
(1) Section 402 (relating to taxability of bene-
ficiary of employees’ trust) is amended by adding at
the end the following new subsection:
‘‘(l) TREATMENT OF SAFE ANNUITIES.—Rules simi-
lar to the rules of paragraphs (1) and (3) of subsection (h)
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shall apply to contributions and distributions with respect
to a SAFE annuities under section 408B.’’.
(2) Section 408(d)(3) is amended by adding at
the end the following new subparagraph:
‘‘(H) SAFE ANNUITIES.—This paragraph
shall not apply to any amount paid or distrib-
uted out of a SAFE annuity (as defined in sec-
tion 408B) unless it is paid in a trustee-to-trust-
ee transfer into another SAFE annuity.’’.
(d) INCREASED PENALTY ON EARLY WITHDRAWALS.—
Section 72(t) (relating to additional tax on early distribu-
tions) is amended by adding at the end the following new
paragraph:
‘‘(7) SPECIAL RULES FOR SAFE ANNUITIES AND
TRUSTS.—In the case of any amount received from a
SAFE annuity or a SAFE trust (within the meaning
of section 408B), paragraph (1) shall be applied by
substituting ‘20 percent’ for ‘10 percent’.’’.
(e) SIMPLIFIED EMPLOYER REPORTS.—
(1) SAFE ANNUITIES.—Section 408(l) (relating
to simplified employer reports) is amended by adding
at the end the following new paragraph:
‘‘(3) SAFE ANNUITIES.—
‘‘(A) SIMPLIFIED
REPORT.—The employer
maintaining any SAFE annuity (within the
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meaning of section 408B) shall file a simplified
annual return with the Secretary containing
only the information described in subparagraph
(B).
‘‘(B) CONTENTS.—The return required by
subparagraph (A) shall set forth—
‘‘(i) the name and address of the em-
ployer,
‘‘(ii) the date the plan was adopted,
‘‘(iii) the number of employees of the
employer,
‘‘(iv) the number of such employees
who are eligible to participate in the plan,
‘‘(v) the total amount contributed by
the employer to each such annuity for such
year and the minimum amount required
under section 408B to be so contributed,
‘‘(vi) the percentage elected under sec-
tion 408B(b)(5)(B), and
‘‘(vii) the number of employees with re-
spect to whom contributions are required to
be made for such year under section
408B(b)(5)(D).
‘‘(C) REPORTING BY ISSUER OF SAFE ANNU-
ITY.—
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‘‘(i) IN GENERAL.—The issuer of each
SAFE annuity shall provide to the owner of
the annuity for each year a statement set-
ting forth as of the close of such year—
‘‘(I) the benefits guaranteed at age
65 under the annuity, and
‘‘(II) the cash surrender value of
the annuity.
‘‘(ii) 
SUMMARY
DESCRIPTION.—The
issuer of any SAFE annuity shall provide
to the employer maintaining the annuity
for each year a description containing the
following information:
‘‘(I) The name and address of the
employer and the issuer.
‘‘(II) The requirements for eligi-
bility for participation.
‘‘(III) The benefits provided with
respect to the annuity.
‘‘(IV) The procedures for, and ef-
fects of, withdrawals (including roll-
overs) from the annuity.
‘‘(D) TIME AND MANNER OF REPORTING.—
Any return, report, or statement required under
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this paragraph shall be made in such form and
at such time as the Secretary shall prescribe.’’.
(2) SAFE TRUSTS.—Section 6059 (relating to
actuarial reports) is amended by redesignating sub-
sections (c) and (d) as subsections (d) and (e), respec-
tively, and by inserting after subsection (b) the fol-
lowing new subsection:
‘‘(c) SAFE TRUSTS.—In the case of a SAFE trust
(within the meaning of section 408B), the Secretary shall
require a simplified actuarial report which contains infor-
mation similar to the information required in section
408(l)(3)(B).’’.
(f) CONFORMING AMENDMENTS.—
(1) Section 280G(b)(6) is amended by striking
‘‘or’’ at the end of subparagraph (C), by striking the
period at the end of subparagraph (D) and inserting
‘‘, or’’ and by adding after subparagraph (D) the fol-
lowing new subparagraph:
‘‘(E) a SAFE annuity described in section
408B.’’.
(2) Clause (ii) of section 408(p)(2)(D) is amend-
ed by inserting before the period ‘‘(other than clause
(vii) of such subparagraph (A))’’.
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(3) Subsections (b), (c), (m)(4)(B), and (n)(3)(B)
of section 414 are each amended by inserting ‘‘408B,’’
after ‘‘408(p),’’.
(4) Section 4972(d)(1)(A) 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 adding after clause (iv) the following new clause:
‘‘(v) any SAFE annuity (within the
meaning of section 408B).’’.
(5) The table of sections for subpart A of part I
of subchapter D of chapter 1 is amended by inserting
after the item relating to section 408A the following
new item:
‘‘Sec. 408B. SAFE annuities and trusts.’’.
(g) MODIFICATIONS OF ERISA.—
(1) EXEMPTION FROM INSURANCE COVERAGE.—
Subsection (b) of section 4021 of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1321)
is amended by striking ‘‘or’’ at the end of paragraph
(12), by striking the period at the end of paragraph
(13) and inserting ‘‘; or’’, and by adding at the end
the following new paragraph:
‘‘(14) which is established and maintained as
part of a SAFE trust (as defined in section 408B of
the Internal Revenue Code of 1986).’’.
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(2) REPORTING REQUIREMENTS.—Section 101 of
such Act (29 U.S.C. 1021) is amended by redesig-
nating the second subsection (h) as subsection (j) and
by inserting after the first subsection (h) the following
new subsection:
‘‘(i) SAFE ANNUITIES.—
‘‘(1) NO EMPLOYER REPORTS.—Except as pro-
vided in this subsection, no report shall be required
under this section by an employer maintaining a
SAFE annuity under section 408B(b) of the Internal
Revenue Code of 1986.
‘‘(2) SUMMARY DESCRIPTION.—The issuer of any
SAFE annuity shall provide to the employer main-
taining the annuity for each year a description con-
taining the following information:
‘‘(A) The name and address of the employer
and the issuer.
‘‘(B) The requirements for eligibility for
participation.
‘‘(C) The benefits provided with respect to
the annuity.
‘‘(D) The procedures for, and effects of,
withdrawals (including rollovers) from the annu-
ity.
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‘‘(3) EMPLOYEE
NOTIFICATION.—The employer
shall provide each employee eligible to participate in
the SAFE annuity with the description described in
paragraph (2) at the same time as the notification re-
quired under section 408B(b)(5)(B) of the Internal
Revenue Code of 1986.’’.
(3) WAIVER OF FUNDING STANDARDS.—Section
301(a) of such Act (29 U.S.C. 1081) is amended by
striking ‘‘or’’ at the end of paragraph (9), by striking
the period at the end of paragraph (10) and inserting
‘‘; or’’, and by adding at the end the following new
paragraph:
‘‘(11) any plan providing for the purchase of
any SAFE annuity or any SAFE trust (as such
terms are defined in section 408B of such Code).’’.
(h) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 319. MODIFICATION OF TOP-HEAVY RULES.
(a) MATCHING CONTRIBUTIONS TAKEN INTO ACCOUNT
FOR MINIMUM CONTRIBUTION REQUIREMENTS.—Section
416(c)(2)(A) (relating to defined contribution plans) is
amended by adding at the end the following: ‘‘Employer
matching 
contributions 
(as 
defined 
in 
section
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401(m)(4)(A)) shall be taken into account for purposes of
this subparagraph.’’.
(b) ELIMINATION OF FAMILY ATTRIBUTION.—Section
416(i)(1)(B) (defining 5-percent owner) is amended by add-
ing at the end the following new clause:
‘‘(iv) 
FAMILY
ATTRIBUTION
DIS-
REGARDED.—Solely for purposes of apply-
ing this paragraph (and not for purposes of
any provision of this title which incor-
porates by reference the definition of a key
employee or 5-percent owner under this
paragraph), section 318 shall be applied
without regard to subsection (a)(1) thereof
in determining whether any person is a 5-
percent owner.’’.
(c) DEFINITION OF TOP-HEAVY PLANS.—Paragraph
(4) of section 416(g) (relating to other special rules for top-
heavy plans) is amended by adding at the end the following
new subparagraph:
‘‘(H) CASH OR DEFERRED ARRANGEMENTS
USING ALTERNATIVE METHODS OF MEETING NON-
DISCRIMINATION
REQUIREMENTS.—The 
term
‘top-heavy plan’ shall not include a plan which
consists solely of—
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‘‘(i) a cash or deferred arrangement
which meets the requirements of section
401(k)(12), and
‘‘(ii) matching contributions with re-
spect to which the requirements of section
401(m)(11) are met.
If, but for this subparagraph, a plan would be
treated as a top-heavy plan because it is a mem-
ber of an aggregation group which is a top-heavy
group, contributions under the plan may be
taken into account in determining whether any
other plan in the group meets the requirements
of subsection (c)(2).’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2000.
Subtitle C—Enhancing Fairness for
Women
SEC. 321. CATCHUP CONTRIBUTIONS FOR INDIVIDUALS AGE
50 OR OVER.
(a) ELECTIVE DEFERRALS.—Section 414 (relating to
definitions and special rules) is amended by adding at the
end the following new subsection:
‘‘(v) CATCHUP CONTRIBUTIONS FOR INDIVIDUALS AGE
50 OR OVER.—
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‘‘(1) IN GENERAL.—An applicable employer plan
shall not be treated as failing to meet any require-
ment of this title solely because the plan permits an
eligible participant to make additional elective defer-
rals in any plan year.
‘‘(2) LIMITATION
ON
AMOUNT
OF
ADDITIONAL
DEFERRALS.—
‘‘(A) IN GENERAL.—A plan shall not permit
additional elective deferrals under paragraph (1)
for any year in an amount greater than the less-
er of—
‘‘(i) the applicable percentage of the
applicable dollar amount for such elective
deferrals for such year, or
‘‘(ii) the excess (if any) of—
‘‘(I) the participant’s compensa-
tion 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 pur-
poses of this paragraph, the applicable percent-
age shall be determined in accordance with the
following table:
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‘‘For taxable years
The applicable
beginning in:
percentage is:
2001 ................................................................................................
10 percent
2002 ................................................................................................
20 percent
2003 ................................................................................................
30 percent
2004 ................................................................................................
40 percent
2005 and thereafter ........................................................................
50 percent.
‘‘(3) TREATMENT
OF
CONTRIBUTIONS.—In the
case of any contribution to a plan under paragraph
(1)—
‘‘(A) such contribution shall not, with re-
spect to the year in which the contribution is
made—
‘‘(i) be subject to any otherwise appli-
cable limitation contained in section 402(g),
402(h), 403(b), 404(a), 404(h), 408, 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 contribution.
‘‘(4) ELIGIBLE PARTICIPANT.—For purposes of
this subsection, the term ‘eligible participant’ means,
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with respect to any plan year, a participant in a
plan—
‘‘(A) who has attained the age of 50 before
the close of the plan year, and
‘‘(B) with respect to whom no other elective
deferrals may (without regard to this subsection)
be made to the plan for the plan year by reason
of the application of any limitation or other re-
striction described in paragraph (3) or contained
in the terms of the plan.
‘‘(5) OTHER
DEFINITIONS
AND
RULES.—For
purposes of this subsection—
‘‘(A) APPLICABLE
DOLLAR
AMOUNT.—The
term ‘applicable dollar amount’ means, with re-
spect to any year, the amount in effect under
section 
402(g)(1)(B), 
408(p)(2)(E)(i), 
or
457(e)(15)(A), whichever is applicable to an ap-
plicable employer plan, for such year.
‘‘(B) APPLICABLE
EMPLOYER
PLAN.—The
term ‘applicable employer plan’ means—
‘‘(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
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an annuity contract described in section
403(b),
‘‘(iii) an eligible deferred compensation
plan under section 457 of an eligible em-
ployer 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 ‘elec-
tive deferral’ has the meaning given such term
by subsection (u)(2)(C).
‘‘(D) EXCEPTION FOR SECTION 457 PLANS.—
This subsection shall not apply to an applicable
employer 
plan 
described 
in 
paragraph
(5)(B)(iii) for any year to which section
457(b)(3) applies.’’.
(b) INDIVIDUAL RETIREMENT PLANS.—Section 219(b),
as amended by sections 301 and 318, is amended by adding
at the end the following new paragraph:
‘‘(7) CATCHUP CONTRIBUTIONS.—
‘‘(A) IN GENERAL.—In the case of an indi-
vidual who has attained the age of 50 before the
close of the taxable year, the dollar amount in ef-
fect under paragraph (1)(A) for such taxable
year shall be equal to the applicable percentage
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of such amount determined without regard to
this paragraph.
‘‘(B) APPLICABLE PERCENTAGE.—For pur-
poses of this paragraph, the applicable percent-
age shall be determined in accordance with the
following table:
‘‘For taxable years
The applicable
beginning in:
percentage is:
2001 ................................................................................................ 110 percent
2002 ................................................................................................ 120 percent
2003 ................................................................................................ 130 percent
2004 ................................................................................................ 140 percent
2005 and thereafter ........................................................................ 150 percent.’’.
(c) EFFECTIVE DATE.—The amendment made by this
section shall apply to contributions in taxable years begin-
ning after December 31, 2000.
SEC. 322. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF
EMPLOYEES 
TO 
DEFINED 
CONTRIBUTION
PLANS.
(a) EQUITABLE TREATMENT.—
(1) IN GENERAL.—Subparagraph (B) of section
415(c)(1) (relating to limitation for defined contribu-
tion plans) is amended by striking ‘‘25 percent’’ and
inserting ‘‘100 percent’’.
(2) APPLICATION
TO
SECTION
403(b).—Section
403(b) is amended—
(A) by striking ‘‘the exclusion allowance for
such taxable year’’ in paragraph (1) and insert-
ing ‘‘the applicable limit under section 415’’,
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(B) by striking paragraph (2), and
(C) by inserting ‘‘or any amount received
by a former employee after the 5th taxable year
following the taxable year in which such em-
ployee was terminated’’ before the period at the
end of the second sentence of paragraph (3).
(3) CONFORMING AMENDMENTS.—
(A) Subsection (f) of section 72 is amended
by striking ‘‘section 403(b)(2)(D)(iii))’’ and in-
serting ‘‘section 403(b)(2)(D)(iii), as in effect be-
fore the enactment of the Taxpayer Refund Act
of 1999)’’.
(B) Section 404(a)(10)(B) is amended by
striking ‘‘, the exclusion allowance under section
403(b)(2),’’.
(C) Section 415(a)(2) is amended by strik-
ing ‘‘, and the amount of the contribution for
such portion shall reduce the exclusion allowance
as provided in section 403(b)(2)’’.
(D) Section 415(c)(3) is amended by adding
at the end the following new subparagraph:
‘‘(E) ANNUITY CONTRACTS.—In the case of
an annuity contract described in section 403(b),
the term ‘participant’s compensation’ means the
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participant’s 
includible 
compensation 
deter-
mined under section 403(b)(3).’’.
(E) Section 415(c) is amended by striking
paragraph (4).
(F) Section 415(c)(7) is amended to read as
follows:
‘‘(7) CERTAIN
CONTRIBUTIONS
BY
CHURCH
PLANS NOT TREATED AS EXCEEDING LIMIT.—
‘‘(A) IN
GENERAL.—Notwithstanding any
other provision of this subsection, at the election
of a participant who is an employee of a church
or a convention or association of churches, in-
cluding an organization described in section
414(e)(3)(B)(ii), contributions and other addi-
tions for an annuity contract or retirement in-
come account described in section 403(b) with re-
spect to such participant, when expressed as an
annual addition to such participant’s account,
shall be treated as not exceeding the limitation
of paragraph (1) if such annual addition is not
in excess of $10,000.
‘‘(B) $40,000 AGGREGATE
LIMITATION.—
The total amount of additions with respect to
any participant which may be taken into ac-
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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 312(a)) is amended
by inserting before the period at the end the fol-
lowing: ‘‘(as in effect before the enactment of the
Taxpayer Refund Act of 1999)’’.
(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 contribution
plan maintained by each employer with respect to
which the participant has the control required under
subsection (b) or (c) of section 414 (as modified by
subsection (h)). For purposes of this section, any con-
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tribution by an employer to a simplified employee
pension plan for an individual for a taxable year
shall be treated as an employer contribution to a de-
fined contribution plan for such individual for such
year.’’.
(2) EFFECTIVE DATE.—The amendments made
by paragraph (1) shall apply to limitation years be-
ginning after December 31, 2000.
(c) DEFERRED COMPENSATION PLANS OF STATE AND
LOCAL
GOVERNMENTS
AND
TAX-EXEMPT
ORGANIZA-
TIONS.—
(1) IN GENERAL.—Subparagraph (B) of section
457(b)(2) (relating to salary limitation on eligible de-
ferred compensation plans) is amended by striking
‘‘331⁄3 percent’’ and inserting ‘‘100 percent’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to years beginning after
December 31, 2000.
SEC. 323. CLARIFICATION OF TAX TREATMENT OF DIVISION
OF SECTION 457 PLAN BENEFITS UPON DI-
VORCE.
(a) IN GENERAL.—Section 414(p)(11) (relating to ap-
plication of rules to governmental and church plans) is
amended—
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(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 ‘‘GOVERNMENTAL
AND CHURCH PLANS’’ and inserting ‘‘CERTAIN 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 SECTION
457 PLAN.—Subsection (p) of section 414 is amended by
redesignating paragraph (12) as paragraph (13) and in-
serting after paragraph (11) the following new paragraph:
‘‘(12) TAX TREATMENT OF PAYMENTS FROM A
SECTION
457
PLAN.—If a distribution or payment
from an eligible deferred compensation plan described
in section 457(b) is made pursuant to a qualified do-
mestic 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 pay-
ments made after December 31, 2000.
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SEC. 324. MODIFICATION OF SAFE HARBOR RELIEF FOR
HARDSHIP WITHDRAWALS FROM CASH OR DE-
FERRED ARRANGEMENTS.
(a) IN GENERAL.—The Secretary of the Treasury shall
revise the regulations relating to hardship distributions
under section 401(k)(2)(B)(i)(IV) of the Internal Revenue
Code of 1986 to provide that the period an employee is pro-
hibited from making elective and employee contributions in
order for a distribution to be deemed necessary 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 Decem-
ber 31, 2000.
SEC. 325. FASTER VESTING OF CERTAIN EMPLOYER MATCH-
ING CONTRIBUTIONS.
(a) AMENDMENTS TO 1986 CODE.—Section 411(a) (re-
lating 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—
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‘‘(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) AMENDMENTS TO ERISA.—Section 203(a) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1053(a)) is amended—
(1) in paragraph (2), by striking ‘‘A plan’’ and
inserting ‘‘Except as provided in paragraph (4), a
plan’’, and
(2) by adding at the end the following:
‘‘(4) FASTER VESTING FOR MATCHING CONTRIBU-
TIONS.—In the case of matching contributions (as de-
fined in section 401(m)(4)(A) of the Internal Revenue
Code of 1986), 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 ......................................................................................................
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The nonforfeitable
‘‘Years of service:
percentage is:
5 ......................................................................................................
6 ......................................................................................................
100.’’.
(c) 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 1 or more
collective bargaining agreements between employee
representatives and 1 or more employers ratified by
the date of 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 terminates
(determined without regard to any exten-
sion thereof on or after such date of enact-
ment), 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
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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 sec-
tion apply.
Subtitle D—Increasing Portability
for Participants
SEC. 331. 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) (relating
to other definitions and special rules) is amend-
ed by adding at the end the following:
‘‘(16) ROLLOVER AMOUNTS.—
‘‘(A) GENERAL RULE.—In the case of an el-
igible 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),
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‘‘(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 APPLICABLE.—
The rules of paragraphs (2) through (7) (other
than paragraph (4)(C)) and (9) of section 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-
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tion plan) is amended by inserting ‘‘(other than
rollover amounts)’’ after ‘‘taxable year’’.
(C) DIRECT ROLLOVER.—Paragraph (1) of
section 457(d) is amended by striking ‘‘and’’ at
the end of subparagraph (A), by striking the pe-
riod at the end of subparagraph (B) and insert-
ing ‘‘, and’’, and by inserting after subpara-
graph (B) the following:
‘‘(C) in the case of a plan maintained by
an employer described in subsection (e)(1)(A),
the plan meets requirements similar to the re-
quirements of section 401(a)(31).
Any amount transferred in a direct trustee-to-trustee
transfer in accordance with section 401(a)(31) shall
not be includible in gross income for the taxable year
of transfer.’’.
(D) WITHHOLDING.—
(i) Paragraph (12) of section 3401(a)
is amended by adding at the end the fol-
lowing:
‘‘(E) under or to an eligible deferred com-
pensation plan which, at the time of such pay-
ment, is a plan described in section 457(b)
maintained by an employer described in section
457(e)(1)(A); or’’.
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(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 rollover
distribution’ has the meaning given such term by sec-
tion 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).’’.
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(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 SECTION
457 PLANS.—For purposes of this subsection, a dis-
tribution from an eligible deferred compensation plan
(as defined in section 457(b)) of an employer de-
scribed 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 distribu-
tion is attributable to an amount transferred to an el-
igible deferred compensation plan from a qualified re-
tirement plan (as defined in section 4974(c)).’’.
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(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 
rollover
amounts) is amended by striking ‘‘such distribution’’
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.—Sec-
tion 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 fol-
lowing 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:
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‘‘(E) of the provisions under which distribu-
tions from the eligible retirement plan receiving
the distribution may be subject to restrictions
and tax consequences which are different 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 sub-
paragraph (A) of section 457(e)(16)’’.
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(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 APPLICABLE.—
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)’’.
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(11) Section 4973(b)(1)(A) is amended by strik-
ing ‘‘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 sec-
tion 1122 of the Tax Reform Act of 1986 shall not
apply to any distribution from an eligible retirement
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 permitted
solely by reason of any amendment made by this sec-
tion.
SEC. 332. 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 add-
ing ‘‘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
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paid into an eligible retirement plan for the
benefit of such individual not later than the
60th day after the date on which the pay-
ment or distribution is received, except that
the maximum amount which may be paid
into such plan may not exceed the portion
of the amount received which is includible
in gross income (determined without 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 amended
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-
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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 sec-
tion 1122 of the Tax Reform Act of 1986 shall not
apply to any distribution from an eligible retirement
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 permitted
solely by reason of the amendments made by this sec-
tion.
SEC. 333. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) ROLLOVERS FROM EXEMPT TRUSTS.—Paragraph
(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—
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‘‘(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 dis-
tribution 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 eligi-
ble retirement plan described in clause (i) or (ii)
of paragraph (8)(B).’’.
(b) OPTIONAL DIRECT TRANSFER OF ELIGIBLE ROLL-
OVER
DISTRIBUTIONS.—Subparagraph (B) of section
401(a)(31) (relating to limitation) is amended by adding
at the end the following: ‘‘The preceding sentence shall not
apply to such distribution if the plan to which such dis-
tribution 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
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‘‘(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 de-
scribed 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-
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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 December 31,
2000.
SEC. 334. 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 60 DAYS
OF RECEIPT.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), paragraph (1) shall not
apply to any transfer of a distribution made
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after the 60th day following the day on which the
distributee received the property distributed.
‘‘(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 333, 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 cas-
ualty, disaster, or other events beyond the rea-
sonable 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. 335. TREATMENT OF FORMS OF DISTRIBUTION.
(a) PLAN TRANSFERS.—
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(1) AMENDMENT TO INTERNAL REVENUE CODE
OF 1986.—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) A defined contribution plan (in
this subparagraph referred to as the ‘trans-
feree 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 distribu-
tion previously available under another de-
fined contribution plan (in this subpara-
graph referred to as the ‘transferor plan’) to
the extent that—
‘‘(I) the forms of distribution pre-
viously available under the transferor
plan applied to the account of a par-
ticipant or beneficiary under the
transferor plan that was transferred
from the transferor plan to the trans-
feree plan pursuant to a direct transfer
rather than pursuant to a distribution
from the transferor plan,
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‘‘(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 par-
ticipant or beneficiary received a no-
tice 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 trans-
fer is made with the consent of the par-
ticipant’s spouse (if any), and such
consent meets requirements similar to
the requirements imposed by section
417(a)(2), and
‘‘(VI) the transferee plan allows
the participant or beneficiary described
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in subclause (III) to receive any dis-
tribution to which the participant or
beneficiary is entitled under the trans-
feree 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 consoli-
dations of benefits attributable 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 par-
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ticipant’s account as the form of distribu-
tion being eliminated.’’.
(2) AMENDMENT TO 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 treat-
ed 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 paragraph re-
ferred 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 rath-
er 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-
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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 elec-
tion;
‘‘(v) if the transferor plan provides for an annu-
ity 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 similar to the
requirements imposed by section 417(a)(2); and
‘‘(vi) the transferee plan allows the participant
or beneficiary described in subclause (III) to receive
any distribution to which the participant or bene-
ficiary 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 transfer,
including consolidations of benefits attributable to different
employers within a multiple employer plan.
‘‘(5) ELIMINATION OF FORM OF DISTRIBUTION.—Ex-
cept to the extent provided in regulations, a defined con-
tribution plan shall not be treated as failing to meet the
requirements of this section merely because of the elimi-
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nation of a form of distribution previously available there-
under. This paragraph shall not apply to the elimination
of a form of distribution with respect to any participant
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, 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 may by regulations provide that
this subparagraph shall not apply to any plan
amendment that does not adversely affect the rights of
participants in a material manner.’’.
(2) AMENDMENT TO ERISA.—The last sentence of
section 204(g)(2) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1054(g)(2)) is
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amended to read as follows: ‘‘The Secretary of the
Treasury may by regulations provide that this para-
graph shall not apply to any plan amendment that
does not adversely affect the rights of participants in
a material manner.’’.
(3) SECRETARY DIRECTED.—Not later than De-
cember 31, 2001, the Secretary of the Treasury is di-
rected to issue final regulations under section
411(d)(6) of the Internal Revenue Code of 1986 and
section 204(g)(2) of the Employee Retirement Income
Security Act of 1974. Such regulations shall apply to
plan years beginning after December 31, 2001, or
such earlier date as is specified by the Secretary of
the Treasury.
SEC. 336. 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 termination of
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plan or disposition of assets or subsidiary) 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 em-
ployee 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’’.
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(B) The heading for paragraph (11) of sec-
tion 403(b) is amended by striking ‘‘SEPARATION
FROM
SERVICE’’ and inserting ‘‘SEVERANCE
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 December 31, 2000.
SEC. 337. 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 paragraph:
‘‘(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 ben-
efit 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
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‘‘(B) a repayment to which section 415 does
not apply by reason of subsection (k)(3) there-
of.’’.
(b) 457 PLANS.—
(1) Subsection (e) of section 457 is amended by
adding after paragraph (17) the following new para-
graph:
‘‘(18) 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 ben-
efit 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) there-
of.’’.
(2) Section 457(b)(2) is amended by striking
‘‘(other than rollover amounts)’’ and inserting ‘‘(other
than rollover amounts and amounts received in a
transfer referred to in subsection (e)(16))’’.
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(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to trustee-to-trustee transfers after De-
cember 31, 2000.
SEC. 338. EMPLOYERS MAY DISREGARD ROLLOVERS FOR
PURPOSES OF CASH-OUT AMOUNTS.
(a) QUALIFIED PLANS.—
(1) AMENDMENT TO INTERNAL REVENUE CODE
OF 1986.—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 without
regard to that portion of such benefit which is
attributable to rollover contributions (and earn-
ings allocable thereto). For purposes of this sub-
paragraph, 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 TO ERISA.—Section 203(e) of
the Employee Retirement Income Security Act of
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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 determined
without regard to that portion of such benefit which is at-
tributable to rollover contributions (and earnings allocable
thereto). For purposes of this subparagraph, the term ‘roll-
over contributions’ means any rollover contribution 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, 2000.
SEC. 339. INCLUSION REQUIREMENTS FOR SECTION 457
PLANS.
(a) YEAR OF INCLUSION.—Subsection (a) of section
457 (relating to year of inclusion in gross income) is
amended to read as follows:
‘‘(a) YEAR OF INCLUSION IN GROSS INCOME.—
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‘‘(1) IN GENERAL.—Any amount of compensa-
tion deferred under an eligible deferred compensation
plan, and any income attributable to the amounts so
deferred, shall be includible in gross income only for
the taxable year in which such compensation or other
income—
‘‘(A) is paid to the participant or other ben-
eficiary, in the case of a plan of an eligible em-
ployer 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 includible in gross
income under this subsection.’’.
(b) CONFORMING AMENDMENT.—So much of para-
graph (9) of section 457(e) as precedes subparagraph (A)
is amended to read as follows:
‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION
PLANS NOT TREATED AS MADE AVAILABLE BY REASON
OF CERTAIN ELECTIONS, ETC.—In the case of an eligi-
ble deferred compensation plan of an employer de-
scribed in paragraph (1)(B)—’’.
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(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2000.
Subtitle E—Strengthening Pension
Security and Enforcement
SEC. 341. REPEAL OF 150 PERCENT OF CURRENT LIABILITY
FUNDING LIMIT.
(a) AMENDMENT TO INTERNAL REVENUE CODE OF
1986.—Section 412(c)(7) (relating to full-funding limita-
tion) 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 ap-
plicable percentage’’, and
(2) by amending subparagraph (F) to read as
follows:
‘‘(F) APPLICABLE PERCENTAGE.—For pur-
poses of subparagraph (A)(i)(I), the applicable
percentage shall be determined in accordance
with the following table:
‘‘In the case of any plan year
The applicable
beginning in—
percentage is—
2001 ....................................................................................
160
2002 ....................................................................................
165
2003 ....................................................................................
170.’’.
(b) AMENDMENT TO ERISA.—Section 302(c)(7) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1082(c)(7)) is amended—
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(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 ap-
plicable percentage’’, and
(2) by amending subparagraph (F) to read as
follows:
‘‘(F) APPLICABLE PERCENTAGE.—For pur-
poses of subparagraph (A)(i)(I), the applicable
percentage shall be determined in accordance
with the following table:
‘‘In the case of any plan year
The applicable
beginning in—
percentage is—
2001 ....................................................................................
160
2002 ....................................................................................
165
2003 ....................................................................................
170.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2000.
SEC. 342. EXTENSION OF MISSING PARTICIPANTS PROGRAM
TO MULTIEMPLOYER PLANS.
(a) IN GENERAL.—Section 4050 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1350) is
amended by redesignating subsection (c) as subsection (d)
and by inserting after subsection (b) the following:
‘‘(c) MULTIEMPLOYER PLANS.—The corporation shall
prescribe rules similar to the rules in subsection (a) for mul-
tiemployer plans covered by this title that terminate under
section 4041A.’’.
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(b) CONFORMING AMENDMENT.—Section 206(f) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1056(f)) is amended by striking ‘‘the plan shall pro-
vide that,’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions made after final regula-
tions implementing subsection (c) of section 4050 of the
Employee Retirement Income Security Act of 1974 (as
added by subsection (a)) are prescribed.
SEC. 343. EXCISE TAX RELIEF FOR SOUND PENSION FUND-
ING.
(a) IN GENERAL.—Subsection (c) of section 4972 (re-
lating to nondeductible contributions) is amended by add-
ing 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 re-
gard to subparagraph (A)(i)(I) thereof). For purposes
of this paragraph, the deductible limits under section
404(a)(7) shall first be applied to amounts contrib-
uted to defined contribution plans and then to
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amounts described in this paragraph. If an employer
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 amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 344. FAILURE TO PROVIDE NOTICE BY DEFINED BEN-
EFIT PLANS SIGNIFICANTLY REDUCING FU-
TURE BENEFIT ACCRUALS.
(a) EXCISE TAX.—
(1) IN GENERAL.—Chapter 43 of subtitle D (re-
lating to qualified pension, etc., plans) is amended by
adding at the end the following new section:
‘‘SEC. 4980F. FAILURE OF DEFINED BENEFIT PLANS REDUC-
ING BENEFIT ACCRUALS TO SATISFY NOTICE
REQUIREMENTS.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed a
tax on the failure of an applicable pension plan to meet
the requirements of subsection (e) with respect to any appli-
cable individual.
‘‘(b) AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) on any failure with respect to
any applicable individual shall be $100 for each day
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in the noncompliance period with respect to such fail-
ure.
‘‘(2) NONCOMPLIANCE PERIOD.—For purposes of
this section, the term ‘noncompliance period’ means,
with respect to any failure, the period beginning on
the date the failure first occurs and ending on the
date the failure is corrected.
‘‘(3) MINIMUM TAX FOR NONCOMPLIANCE PERIOD
WHERE FAILURE DISCOVERED AFTER NOTICE OF EX-
AMINATION.—Notwithstanding paragraphs (1) and
(2) of subsection (c)—
‘‘(A) IN GENERAL.—In the case of 1 or more
failures 
with 
respect 
to 
an 
applicable
individual—
‘‘(i) which are not corrected before the
date a notice of examination of income tax
liability is sent to the employer, and
‘‘(ii) which occurred or continued dur-
ing the period under examination,
the amount of tax imposed by subsection (a) by
reason of such failures with respect to such bene-
ficiary shall not be less than the lesser of $2,500
or the amount of tax which would be imposed by
subsection (a) without regard to such para-
graphs.
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‘‘(B) HIGHER MINIMUM TAX WHERE VIOLA-
TIONS ARE MORE THAN DE MINIMIS.—To the ex-
tent violations by the employer (or the plan in
the case of a multiemployer plan) for any year
are more than de minimis, subparagraph (A)
shall be applied by substituting ‘$15,000’ for
‘$2,500’ with respect to the employer (or such
plan).
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
‘‘(1) TAX NOT TO APPLY WHERE FAILURE NOT
DISCOVERED EXERCISING REASONABLE DILIGENCE.—
No tax shall be imposed by subsection (a) on any fail-
ure during any period for which it is established to
the satisfaction of the Secretary that none of the per-
sons referred to in subsection (d) knew, or exercising
reasonable diligence would have known, that the fail-
ure existed.
‘‘(2) TAX
NOT
TO
APPLY
TO
FAILURES
COR-
RECTED WITHIN 30 DAYS.—No tax shall be imposed
by subsection (a) on any failure if—
‘‘(A) such failure was due to reasonable
cause and not to willful neglect, and
‘‘(B) such failure is corrected during the 30-
day period beginning on the first date any of the
persons referred to in subsection (d) knew, or ex-
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ercising reasonable diligence would have known,
that such failure existed.
‘‘(3) OVERALL LIMITATION FOR UNINTENTIONAL
FAILURES.—
‘‘(A) IN GENERAL.—In the case of failures
that are due to reasonable cause and not to will-
ful neglect, the tax imposed by subsection (a) for
failures during the taxable year of the employer
(or, in the case of a multiemployer plan, the tax-
able year of the trust forming part of the plan)
shall not exceed $500,000. For purposes of the
preceding sentence, all multiemployer plans of
which the same trust forms a part shall be treat-
ed as 1 plan.
‘‘(B) TAXABLE YEARS IN THE CASE OF CER-
TAIN
CONTROLLED
GROUPS.—For purposes of
this paragraph, if all persons who are treated as
a single employer for purposes of this section do
not have the same taxable year, the taxable years
taken into account shall be determined under
principles similar to the principles of section
1561.
‘‘(4) 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
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of the tax imposed by subsection (a) to the extent that
the payment of such tax would be excessive relative 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 multiem-
ployer 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 a defined benefit plan
adopts an amendment which has the effect of signifi-
cantly reducing the rate of future benefit accrual of
1 or more participants (including any elimination or
reduction of an early retirement benefit or retirement-
type subsidy), the plan administrator shall, not later
than the 30th day before the effective date of the
amendment, provide written notice to each applicable
individual (and to each employee organization rep-
resenting applicable individuals) which—
‘‘(A) sets forth the plan amendment and its
effective date, and
‘‘(B) includes sufficient information (as de-
termined in accordance with regulations pre-
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scribed by the Secretary) to allow such partici-
pants and beneficiaries to understand how the
amendment generally affects different classes of
employees.
‘‘(2) ADDITIONAL NOTICE REQUIRED IN CERTAIN
CASES.—
‘‘(A) IN GENERAL.—If a plan amendment
to which paragraph (1) applies—
‘‘(i) either—
‘‘(I) provides for a significant
change in the manner in which the ac-
crued benefit of an applicable indi-
vidual is determined under the plan,
or
‘‘(II) requires an applicable indi-
vidual to choose between 2 or more
benefit formulas, and
‘‘(ii) may reasonably be expected to af-
fect such applicable individual,
the plan shall, not later than the date which is
6 months after the effective date of the amend-
ment, provide written notice to such applicable
individual which includes the information de-
scribed in subparagraph (B).
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‘‘(B) ADDITIONAL INFORMATION.—The no-
tice under subparagraph (A) shall include the
following information:
‘‘(i) The accrued benefit (and if the
amendment adds the option of an imme-
diate lump sum distribution, the present
value of the accrued benefit) as of the effec-
tive date, determined under the terms of the
plan in effect immediately before the effec-
tive date.
‘‘(ii) The accrued benefit as of the effec-
tive date, determined under the terms of the
plan in effect on the effective date and with-
out regard to any minimum accrued benefit
required by reason of section 411(d)(6).
‘‘(iii) Sufficient information (as deter-
mined in accordance with regulations pre-
scribed by the Secretary) for an applicable
individual to compute their projected ac-
crued benefit under the terms of the plan in
effect on the effective date or to acquire in-
formation necessary to compute such pro-
jected accrued benefit.
‘‘(C) OPTION TO PROVIDE PROJECTED AC-
CRUED BENEFIT.—A plan may, in lieu of the in-
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formation described in subparagraph (B)(iii),
include a determination of an applicable indi-
vidual’s projected accrued benefit under the
terms of the plan in effect on the effective date.
Such determination shall include a disclosure of
the assumptions used by the plan in determining
such benefit and such assumptions must be rea-
sonable in the aggregate.
‘‘(D) RULES FOR COMPUTING BENEFITS.—
For purposes of this paragraph, an applicable
individual’s accrued benefit and projected ac-
crued benefit shall be computed—
‘‘(i) as if the accrued benefit were in
the form of a single life annuity com-
mencing at normal retirement age (and by
taking into account any early retirement
subsidy), and
‘‘(ii) by using the applicable mortality
table and the applicable interest rate under
section 417(e)(3)(A).
‘‘(3) SECRETARY MAY CHANGE NOTICE AND TIME
FOR NOTICE.—If a plan amendment to which para-
graph (1) applies requires an applicable individual to
choose between 2 or more benefit formulas, the Sec-
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retary may, after consultation with the Secretary of
Labor—
‘‘(A) require additional information to be
provided in either of the notices described in
paragraph (1) or (2), and
‘‘(B) require either of such notices to be pro-
vided at a time other than the time required
under either such paragraph.
‘‘(4) NOTICE
BEFORE
ADOPTION
OF
AMEND-
MENT.—A plan shall not be treated as failing to meet
the requirements of paragraph (1) or (2) 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 adopted.
‘‘(5) NOTICE TO DESIGNEE.—Any notice under
paragraph (1) or (2) may be provided to a person
designated, in writing, by the person to which it
would otherwise be provided.
‘‘(f) APPLICABLE INDIVIDUAL.—For purposes of this
section—
‘‘(1) IN GENERAL.—The term ‘applicable indi-
vidual’ 
means, 
with 
respect 
to 
any 
plan
amendment—
‘‘(A) any participant in the plan, and
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‘‘(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)).
‘‘(2) EXCEPTION FOR PARTICIPANTS WITH LESS
THAN 1 YEAR OF PARTICIPATION.—Such term shall
not include a participant who has less than 1 year
of participation (within the meaning of section
411(b)(4)) under the plan as of the effective date of
the plan amendment.
‘‘(3) PARTICIPANTS GETTING HIGHER OF BENE-
FITS.—Such term shall not include a participant or
beneficiary who, under the terms of the plan as of the
effective date of the plan amendment, is entitled to the
greater of the accrued benefit under such terms or the
accrued benefit under the terms of the plan in effect
immediately before the effective date.
‘‘(g) APPLICABLE PENSION PLAN.—For purposes of
this section, the term ‘applicable pension plan’ means—
‘‘(1) a defined benefit plan, or
‘‘(2) 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
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the meaning of section 414(e)) with respect to which an elec-
tion under section 410(d) has not been made.’’.
(2) CONFORMING AMENDMENT.—The table of sec-
tions for chapter 43 of subtitle D is amended by add-
ing at the end the following new item:
‘‘Sec. 4980F. Failure of defined benefit plans reducing benefit ac-
cruals to satisfy notice requirements.’’.
(b) AMENDMENT TO ERISA.—Section 204(h) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1054(h)) is amended to read as follows:
‘‘(h)(1) An applicable pension plan may not adopt an
amendment which has the effect of significantly reducing
the rate of future benefit accrual of 1 or more participants
(including any elimination or reduction of an early retire-
ment benefit or retirement-type subsidy) unless the plan ad-
ministrator provides, not later than the 30th day before the
effective date of the amendment, written notice to each ap-
plicable individual (and to each employee organization rep-
resenting applicable individuals) which—
‘‘(A) sets forth the plan amendment and its effec-
tive date, and
‘‘(B) includes sufficient information (as deter-
mined in accordance with regulations prescribed by
the Secretary of the Treasury) to allow applicable in-
dividuals to understand how the amendment gen-
erally affects different classes of employees.
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‘‘(2)(A) If a plan amendment to which paragraph (1)
applies—
‘‘(i) either—
‘‘(I) provides for a significant change in the
manner in which the accrued benefit is deter-
mined under the plan, or
‘‘(II) requires an applicable individual to
choose between 2 or more benefit formulas, and
‘‘(ii) may reasonably be expected to affect such
applicable individual,
the plan shall, not later than the date which is 6 months
after the effective date of the amendment, provide written
notice to such applicable individual which includes the in-
formation described in subparagraph (B).
‘‘(B) The notice under subparagraph (A) shall include
the following information:
‘‘(i) The accrued benefit (and if the amendment
adds the option of an immediate lump sum distribu-
tion, the present value of the accrued benefit) as of the
effective date, determined under the terms of the plan
in effect immediately before the effective date.
‘‘(ii) The accrued benefit as of the effective date,
determined under the terms of the plan in effect on
the effective date and without regard to any min-
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imum accrued benefit required by reason of section
204(g).
‘‘(iii) Sufficient information (as determined in
accordance with regulations prescribed by the Sec-
retary of the Treasury) for an applicable individual
to compute their projected accrued benefit under the
terms of the plan in effect on the effective date or to
acquire information necessary to compute such pro-
jected accrued benefit.
‘‘(C) A plan may, in lieu of the information described
in subparagraph (B)(iii), include a determination of an
applicable individual’s projected accrued benefit under the
terms of the plan in effect on the effective date. Such deter-
mination shall include a disclosure of the assumptions used
by the plan in determining such benefit and such assump-
tions must be reasonable in the aggregate.
‘‘(D) For purposes of this paragraph, an applicable
individual’s accrued benefit and projected accrued benefit
shall be computed—
‘‘(i) as if the accrued benefit were in the form of
a single life annuity commencing at normal retire-
ment age (and by taking into account any early re-
tirement subsidy), and
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‘‘(ii) by using the applicable mortality table and
the 
applicable 
interest 
rate 
under 
section
205(g)(3)(A).
‘‘(3) If a plan amendment to which paragraph (1) ap-
plies requires an applicable individual to choose between
2 or more benefit formulas, the Secretary of the Treasury
may, after consultation with the Secretary—
‘‘(A) require additional information to be pro-
vided in either of the notices described in paragraph
(1) or (2), and
‘‘(B) require either of such notices to be provided
at a time other than the time required under either
such paragraph.
‘‘(4) A plan shall not be treated as failing to meet the
requirements of paragraph (1) or (2) merely because notice
is provided before the adoption of the plan amendment if
no material modification of the amendment occurs before
the amendment is adopted.
‘‘(5) Any notice under paragraph (1) or (2) may be
provided to a person designated, in writing, by the person
to which it would otherwise be provided.
‘‘(6)(A) For purposes of this subsection, the term ‘ap-
plicable individual’ means, with respect to any plan
amendment—
‘‘(i) any participant in the plan, and
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‘‘(ii) any beneficiary who is an alternate payee
(within the meaning of section 206(d)(3)(K)) under
an applicable qualified domestic relations order
(within the meaning of section 206(d)(3)(B)).
‘‘(B) Such term shall not include a participant who
has less than 1 year of participation (within the meaning
of section 204(b)(4)) under the plan as of the effective date
of the plan amendment.
‘‘(C) Such term shall not include a participant or ben-
eficiary who, under the terms of the plan as of the effective
date of the plan amendment, is entitled to the greater of
the accrued benefit under such terms or the accrued benefit
under the terms of the plan in effect immediately before the
effective date.
‘‘(7) For purposes of this subsection, the term ‘applica-
ble pension plan’ means—
‘‘(A) a defined benefit plan, or
‘‘(B) an individual account plan which is subject
to the funding standards of section 302.
Such term shall not include a governmental plan (within
the meaning of section 3(32)) or a church plan (within the
meaning of section 3(33)) with respect to which an election
under section 410(d) of the Internal Revenue Code of 1986
has not been made.’’.
(c) EFFECTIVE DATES.—
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(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) SPECIAL
RULE
FOR
COLLECTIVELY
BAR-
GAINED PLANS.—In the case of a plan maintained
pursuant to 1 or more collective bargaining agree-
ments between employee representatives and 1 or
more employers ratified by the date of the enactment
of this Act, the amendments made by this section shall
not apply to plan amendments taking effect before the
earlier of—
(A) the later of—
(i) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any exten-
sion thereof on or after such date of enact-
ment), or
(ii) January 1, 2000, or
(B) January 1, 2002.
(3) SPECIAL 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.
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SEC. 345. PROTECTION OF INVESTMENT OF EMPLOYEE
CONTRIBUTIONS TO 401(K) PLANS.
(a) IN GENERAL.—Section 1524(b) of the Taxpayer
Relief Act of 1997 is amended to read as follows:
‘‘(b) EFFECTIVE DATE.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to elective deferrals for plan years beginning
after December 31, 1998.
‘‘(2) NONAPPLICATION TO PREVIOUSLY ACQUIRED
PROPERTY.—The amendments made by this section
shall not apply to any elective deferral used to ac-
quire an interest in the income or gain from employer
securities or employer real property acquired—
‘‘(A) before January 1, 1999, or
‘‘(B) after such date pursuant to a written
contract which was binding on such date and at
all times thereafter on such plan.’’.
(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. 346. TREATMENT OF MULTIEMPLOYER PLANS UNDER
SECTION 415.
(a) COMPENSATION LIMIT.—Paragraph (11) of section
415(b) (relating to limitation for defined benefit plans) is
amended to read as follows:
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‘‘(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 section 414(f)),
subparagraph (B) of paragraph (1) shall not apply.’’.
(b) COMBINING AND AGGREGATION OF PLANS.—
(1) COMBINING OF PLANS.—Subsection (f) of sec-
tion 415 (relating to combining of plans) is amended
by adding at the end the following:
‘‘(3) EXCEPTION FOR MULTIEMPLOYER PLANS.—
Notwithstanding paragraph (1) and subsection (g), a
multiemployer plan (as defined in section 414(f))
shall not be combined or aggregated with any other
plan maintained by an employer for purposes of ap-
plying the limitations established in this section. The
preceding sentence shall not apply for purposes of ap-
plying subsection (b)(1)(A) to a plan which is not a
multiemployer plan.’’.
(2) CONFORMING AMENDMENT FOR AGGREGATION
OF PLANS.—Subsection (g) of section 415 (relating to
aggregation of plans) is amended by striking ‘‘The
Secretary’’ and inserting ‘‘Except as provided in sub-
section (f)(3), the Secretary’’.
(c) APPLICATION OF SPECIAL EARLY RETIREMENT
RULES.—Section 415(b)(2)(F) (relating to plans main-
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tained by governments and tax-exempt organizations) is
amended—
(1) by inserting ‘‘a multiemployer plan (within
the meaning of section 414(f)),’’ after ‘‘section
414(d)),’’, and
(2) by striking the heading and inserting:
‘‘(F) SPECIAL EARLY RETIREMENT RULES
FOR CERTAIN PLANS.—’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
1999.
SEC. 347. 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-
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posed termination date referred to in section
4041(b)(2)(A)(i)(II) of the Employee Retire-
ment Income Security Act of 1974 were the
last day of the plan year).
‘‘(ii) PLANS WITH LESS THAN 100 PAR-
TICIPANTS.—For purposes of this subpara-
graph, 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 increases for
highly compensated employees (as defined
in section 414(q)) resulting from a plan
amendment which is made or becomes effec-
tive, whichever is later, within the last 2
years before the termination date.
‘‘(iii) RULE FOR DETERMINING NUM-
BER OF PARTICIPANTS.—For purposes of de-
termining 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 1 plan, but
only employees of such member or employer
shall be taken into account.
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‘‘(iv) PLANS ESTABLISHED AND MAIN-
TAIN BY PROFESSIONAL SERVICE EMPLOY-
ERS.—Clause (i) shall not apply to a plan
described in section 4021(b)(13) of the Em-
ployee Retirement Income Security Act of
1974.’’.
(b) CONFORMING AMENDMENT.—Paragraph (6) of sec-
tion 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 1 or more defined contribution plans
which are not deductible when contributed solely be-
cause of section 404(a)(7) as does not exceed the great-
er of—
‘‘(A) the amount of contributions not in ex-
cess of 6 percent of compensation (within the
meaning of section 404(a)) paid or accrued (dur-
ing the taxable year for which the contributions
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).
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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 December
31, 2000.
SEC. 348. INCREASE IN SECTION 415 EARLY RETIREMENT
LIMIT 
FOR 
GOVERNMENTAL 
AND 
OTHER
PLANS.
(a) 
IN
GENERAL.—Subclause 
(II) 
of 
section
415(b)(2)(F)(i), as amended by section 346(c), is
amended—
(1) by striking ‘‘$75,000’’ and inserting ‘‘80 per-
cent of the dollar amount in effect under paragraph
(1)(A)’’, and
(2) by striking ‘‘the $75,000 limitation’’ and in-
serting ‘‘80 percent of such dollar amount’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
1999.
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Subtitle F—Encouraging
Retirement Education
SEC. 351. PERIODIC PENSION BENEFITS STATEMENTS.
(a) IN GENERAL.—Section 105(a) of the Employee Re-
tirement 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 par-
ticipant with a nonforfeitable accrued benefit
who is employed by the employer maintaining
the plan at the time the statement is furnished
to participants, and
‘‘(ii) to a participant or beneficiary of the
plan upon written request.
‘‘(2) Notwithstanding paragraph (1), the adminis-
trator of a plan to which more than 1 unaffiliated employer
is required to contribute shall only be required to furnish
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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, tele-
phonic, or other appropriate form.
‘‘(4) In the case of a defined benefit plan, the require-
ments 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 avail-
ability of the pension benefit statement and the ways in
which the participant may obtain such statement. Such no-
tice 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.’’.
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(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 applica-
ble, in any 12-month period.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2000.
SEC. 352. CLARIFICATION OF TREATMENT OF EMPLOYER-
PROVIDED RETIREMENT ADVICE.
(a) IN GENERAL.—Subsection (a) of section 132 (relat-
ing 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 DE-
FINED.—Section 132 is amended by redesignating sub-
section (m) as subsection (n) and by inserting after sub-
section (l) the following:
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‘‘(m) QUALIFIED
RETIREMENT
PLANNING
SERV-
ICES.—
‘‘(1) IN GENERAL.—For purposes of this section,
the term ‘qualified retirement planning services’
means any retirement planning service provided to
an employee and his spouse by an employer main-
taining 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 infor-
mation regarding the employer’s qualified employer
plan.
‘‘(3) QUALIFIED EMPLOYER PLAN.—For purposes
of this subsection, the term ‘qualified employer plan’
means a plan, contract, pension, or account described
in section 219(g)(5).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
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Subtitle G—Reducing Regulatory
Burdens
SEC. 361. FLEXIBILITY IN NONDISCRIMINATION AND COV-
ERAGE RULES.
(a) NONDISCRIMINATION.—
(1) IN GENERAL.—The Secretary of the Treasury
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 be-
fore 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 subsection (a) shall apply to years be-
ginning after December 31, 2000.
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(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 add-
ing 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.’’.
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(2) EFFECTIVE DATES.—
(A) IN
GENERAL.—The amendment made
by subsection (a) shall apply to years beginning
after December 31, 2000.
(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 Internal
Revenue Code of 1986 shall not apply before the
first year beginning not less than 120 days after
the date on which such condition is prescribed.
SEC. 362. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) IN GENERAL.—Section 412(c)(9) (relating to an-
nual valuation) is amended—
(1) by striking ‘‘For purposes’’ and inserting the
following:
‘‘(A) IN GENERAL.—For purposes’’, and
(2) by adding at the end the following:
‘‘(B) ELECTION TO USE PRIOR YEAR VALU-
ATION.—
‘‘(i) IN GENERAL.—Except as provided
in clause (ii), if, for any plan year—
‘‘(I) an election is in effect under
this subparagraph with respect to a
plan, and
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‘‘(II) the assets of the plan are not
less than 125 percent of the plan’s cur-
rent liability (as defined in paragraph
(7)(B)), determined as of the valuation
date for the preceding plan year,
then this section shall be applied using the
information available as of such valuation
date.
‘‘(ii) EXCEPTIONS.—
‘‘(I) ACTUAL VALUATION EVERY 3
YEARS.—Clause (i) shall not apply for
more than 2 consecutive plan years
and valuation shall be under subpara-
graph (A) with respect to any plan
year to which clause (i) does not apply
by reason of this subclause.
‘‘(II) REGULATIONS.—Clause (i)
shall not apply to the extent that more
frequent valuations are required under
the regulations under subparagraph
(A).
‘‘(iii) 
ADJUSTMENTS.—Information
under clause (i) shall, in accordance with
regulations, be actuarially adjusted to re-
flect significant differences in participants.
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‘‘(iv) ELECTION.—An election under
this subparagraph, once made, shall be ir-
revocable without the consent of the Sec-
retary.’’.
(b) AMENDMENTS TO 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), if, for any
plan year—
‘‘(I) an election is in effect under this subpara-
graph with respect to a plan, and
‘‘(II) the assets of the plan are not less than 125
percent of the plan’s current liability (as defined in
paragraph (7)(B)), determined as of the valuation
date for the preceding plan year,
then this section shall be applied using the information
available as of such valuation date.
‘‘(ii)(I) Clause (i) shall not apply for more than 2 con-
secutive plan years and valuation shall be under subpara-
graph (A) with respect to any plan year to which clause
(i) does not apply by reason of this subclause.
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‘‘(II) Clause (i) shall not apply to the extent that more
frequent valuations are required under the regulations
under subparagraph (A).
‘‘(iii) Information under clause (i) shall, in accord-
ance with regulations, be actuarially adjusted to reflect sig-
nificant differences in participants.
‘‘(iv) An election under this subparagraph, 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 December
31, 2000.
SEC. 363. SUBSTANTIAL OWNER BENEFITS IN TERMINATED
PLANS.
(a) MODIFICATION OF PHASE-IN OF GUARANTEE.—
Section 4022(b)(5) of the Employee Retirement Income Se-
curity 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 ‘ma-
jority owner’ means an individual who, at any time during
the 60-month period ending on the date the determination
is being made—
‘‘(i) owns the entire interest in an unincor-
porated trade or business,
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(c) CONFORMING AMENDMENTS.—
(1) Section 4021 of the Employee Retirement In-
come Security Act of 1974 (29 U.S.C. 1321) is
amended—
(A) in subsection (b)(9), by striking ‘‘as de-
fined in section 4022(b)(6)’’, and
(B) by adding at the end the following:
‘‘(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)).’’.
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(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 section
4041(a)(2) of such Act (29 U.S.C. 1341(a)(2))
after December 31, 2000, 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 the
date of enactment of this Act.
SEC. 364. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT
LOSS OF DIVIDEND DEDUCTION.
(a) IN GENERAL.—Section 404(k)(2)(A) (defining ap-
plicable 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:
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‘‘(iii) is, at the election of such partici-
pants 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’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after Decem-
ber 31, 2000.
SEC. 365. NOTICE AND CONSENT PERIOD REGARDING DIS-
TRIBUTIONS.
(a) EXPANSION OF PERIOD.—
(1) IN GENERAL.—
(A) AMENDMENT
OF
INTERNAL
REVENUE
CODE
OF
1986.—Subparagraph (A) of section
417(a)(6) is amended by striking ‘‘90-day’’ and
inserting ‘‘1-year’’.
(B) AMENDMENT TO ERISA.—Subparagraph
(A) of section 205(c)(7) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C.
1055(c)(7)) is amended by striking ‘‘90-day’’
and inserting ‘‘1-year’’.
(2) MODIFICATION OF REGULATIONS.—The Sec-
retary of the Treasury shall modify the regulations
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under sections 402(f), 411(a)(11), and 417 of the In-
ternal Revenue Code of 1986 to substitute ‘‘1-year’’
for ‘‘90 days’’ each place it appears in Treasury Reg-
ulations sections 1.402(f)–1, 1.411(a)–11(c), and
1.417(e)–1(b).
(3) EFFECTIVE DATE.—The amendments made
by paragraph (1) and the modifications required by
paragraph (2) shall apply to years beginning after
December 31, 2000.
(b) CONSENT REGULATION INAPPLICABLE TO CERTAIN
DISTRIBUTIONS.—
(1) IN GENERAL.—The Secretary of the Treasury
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 describe the
consequences of failing to defer such receipt.
(2) EFFECTIVE
DATE.—The modifications re-
quired by paragraph (1) shall apply to years begin-
ning after December 31, 2000.
SEC. 366. 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.
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(b) EFFECTIVE DATE.—The repeal made by subsection
(a) shall apply to plan years beginning after December 31,
1999.
SEC. 367. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) IN GENERAL.—The Secretary of the Treasury shall
modify Treasury Regulations section 1.410(b)–6(g) to pro-
vide 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 agreement 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 par-
ticipate in such section 401(k) plan or section 401(m)
plan, and
(2) 95 percent of the employees who are not em-
ployees 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
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section 1426(b) of the Small Business Job Protection Act
of 1996.
SEC. 368. EXTENSION TO INTERNATIONAL ORGANIZATIONS
OF MORATORIUM ON APPLICATION OF CER-
TAIN NONDISCRIMINATION RULES APPLICA-
BLE TO STATE AND LOCAL PLANS.
(a) IN
GENERAL.—Subparagraph (G) of section
401(a)(5), subparagraph (H) of section 401(a)(26), sub-
paragraph (G) of section 401(k)(3), and paragraph (2) of
section 1505(d) of the Taxpayer Relief Act of 1997 are each
amended by inserting ‘‘or by an international organization
which is described in section 414(d)’’ after ‘‘or instrumen-
tality thereof)’’.
(b) CONFORMING AMENDMENTS.—
(1) The headings for subparagraph (G) of section
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)’’.
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(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 369. ANNUAL REPORT DISSEMINATION.
(a) IN GENERAL.—Section 104(b)(3) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1024(b)(3)) is amended by striking ‘‘shall furnish’’ and in-
serting ‘‘shall make available for examination (and, upon
request, shall furnish)’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to reports for years beginning after De-
cember 31, 1998.
SEC. 370. MODIFICATION OF EXCLUSION FOR EMPLOYER
PROVIDED 
TRANSIT 
PASSES 
AND 
PAS-
SENGERS PERMITTED TO UTILIZE OTHER-
WISE EMPTY SEATS ON AIRCRAFT.
(a) IN GENERAL.—Section 132(f)(3) (relating to cash
reimbursements) is amended by striking the last sentence.
(b) Subsection (h) of section 132 of the Internal Rev-
enue Code of 1986 (relating to certain fringe benefits) is
amended by adding at the end thereof the following new
paragraph:
‘‘(4) SPECIAL
RULE
FOR
PASSENGERS
TRAV-
ELING ON NONCOMMERCIAL AIRCRAFT.—Any use of
noncommercial air transportation by an individual
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shall be treated as use by an employee if no regularly
scheduled commercial flight is available that day from
the air facility at the individual’s location.’’.
(c) Subsection (j) of section 132 of the Internal Rev-
enue Code of 1986 (relating to certain fringe benefits) is
amended by adding at the end thereof the following new
paragraph:
‘‘(9) SPECIAL RULE FOR CERTAIN NONCOMMER-
CIAL AIR TRANSPORTATION.—For the purposes of sub-
section (b) the term ‘no-additional-cost service’ in-
cludes the value of transportation provided by an em-
ployer to an employee on a noncommercially operated
aircraft if—
‘‘(A) such transportation is provided on a
flight made in the ordinary course of the trade
or business of the employer owning or leasing
such aircraft for use in such trade or business,
‘‘(B) the flight on which the transportation
is provided by the employer would have been
made whether or not such employee was trans-
ported on the flight, and
‘‘(C) the employer incurs no substantial ad-
ditional cost in providing such transportation to
such employee.
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For purposes of this paragraph, an aircraft is non-
commercially operated if transportation provided by
the employer is not provided or made available to the
general public by purchase of a ticket or other fare.’’.
(d) EFFECTIVE DATE.—The amendment made by this
section shall apply to taxable years beginning after Decem-
ber 31, 1999.
SEC. 371. REPORTING SIMPLIFICATION.
(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
OWNERS AND THEIR SPOUSES.—
(1) IN GENERAL.—The Secretary of the Treasury
shall modify the requirements for filing annual re-
turns with respect to one-participant retirement plans
to ensure that such plans with assets of $500,000 or
less as of the close of the plan year need not file a
return for that year.
(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 incor-
porated), or
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(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 employ-
ees 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 busi-
nesses under common control, and
(E) does not cover a business that leases em-
ployees.
(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 respec-
tive 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