for any taxable year is an amount equal to the applicable
percentage of the qualified startup costs paid or incurred
by the taxpayer during the taxable year.
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of
subsection (a), the applicable percentage is—
‘‘(1) 60 percent for the first credit year, and
‘‘(2) 50 percent for each of the 2 taxable years
immediately following the first credit year, and
‘‘(3) zero for any other taxable year.
‘‘(c) DOLLAR LIMITATION.—The amount of the cred-
it determined under this section for any taxable year shall
not exceed—
‘‘(1) $2,000 for the first credit year,
‘‘(2) $1000 for each of the 2 taxable years im-
mediately following the first credit year, and
‘‘(3) zero for any other taxable year.
‘‘(d) ELIGIBLE EMPLOYER.—For purposes of this
section—
‘‘(1) IN
GENERAL.—The term ‘eligible em-
ployer’ has the meaning given such term by section
408(p)(2)(C)(i).
‘‘(2) EMPLOYERS
MAINTAINING
QUALIFIED
PLANS
DURING
1997
NOT
ELIGIBLE.—Such term
shall not include an employer if such employer (or
any predecessor employer) maintained a qualified
plan (as defined in section 408(p)(2)(D)(ii)) with re-
spect to which contributions were made, or benefits
were accrued, for service in 1997. If only individuals
other than employees described in subparagraph (A)
or (B) of section 410(b)(3) are eligible to participate
in the qualified employer plan referred to in sub-
section (e)(1), then the preceding sentence shall be
applied without regard to any qualified plan in
which only employees so described are eligible to
participate.
‘‘(e) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) QUALIFIED STARTUP COSTS.—
‘‘(A) IN
GENERAL.—The term ‘qualified
startup costs’ means any ordinary and nec-
essary expenses of an eligible employer which
are paid or incurred in connection with—
‘‘(i) the establishment or administra-
tion of an eligible employer plan, or
‘‘(ii) the retirement-related education
of employees with respect to such plan.
‘‘(B) PLAN MUST HAVE AT LEAST 2 PAR-
TICIPANTS.—Such term shall not include any
expense in connection with a plan that does not
have at least 2 individuals who are eligible to
participate.
‘‘(C) PLAN
MUST
BE
ESTABLISHED
BE-
FORE JANUARY 1, 2001.—Such term shall not
include any expense in connection with a plan
established after December 31, 2000.
‘‘(2) ELIGIBLE
EMPLOYER
PLAN.—The term
‘eligible employer plan’ means a qualified employer
plan within the meaning of section 4972(d), or a
qualified payroll deduction arrangement within the
meaning of section 408(q)(1) (whether or not an
election is made under section 408(q)(2)). A quali-
fied payroll deduction arrangement shall be treated
as an eligible employer plan only if all employees of
the employer who—
‘‘(A) have been employed for 90 days, and
‘‘(B) are not described in subparagraph
(A) or (C) of section 410(b)(3),
are eligible to make the election under section
408(q)(1)(A).
‘‘(3) FIRST
CREDIT
YEAR.—The term ‘first
credit year’ means—
‘‘(A) the taxable year which includes the
date that the eligible employer plan to which
such costs relate becomes effective, or
‘‘(B) at the election of the eligible employer, the
taxable year preceding the taxable year referred to
in subparagraph (A).
‘‘(f) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) AGGREGATION RULES.—All persons treat-
ed as a single employer under subsection (a) or (b)
of section 52, or subsection (n) or (o) of section 414,
shall be treated as one person. All eligible employer
plans shall be treated as 1 eligible employer plan.
‘‘(2) DISALLOWANCE OF DEDUCTION.—No de-
duction shall be allowed for that portion of the quali-
fied startup costs paid or incurred for the taxable
year which is equal to the credit determined under
subsection (a).
‘‘(3) ELECTION NOT TO CLAIM CREDIT.—This
section shall not apply to a taxpayer for any taxable
year if such taxpayer elects to have this section not
apply for such taxable year.’’
(b) CREDIT ALLOWED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) (defining current year busi-
ness credit) is amended by striking ‘‘plus’’ at the end of
paragraph (11), by striking the period at the end of para-
graph (12) and inserting ‘‘, plus’’, and by adding at the
end the following new paragraph:
‘‘(13) in the case of an eligible employer (as de-
fined in section 45D(c)), the small employer pension
plan startup cost credit determined under section
45D(a).’’
(c) CONFORMING AMENDMENTS.—
(1) Section 39(d) is amended by adding at the
end the following new paragraph:
‘‘(8) NO
CARRYBACK
OF
SMALL
EMPLOYER
PENSION PLAN STARTUP COST CREDIT BEFORE EF-
FECTIVE DATE.—No portion of the unused business
credit for any taxable year which is attributable to
the small employer pension plan startup cost credit
determined under section 45D may be carried back
to a taxable year ending on or before the date of the
enactment of section 45D.’’
(2) Subsection (c) of section 196 is amended by
striking ‘‘and’’ at the end of paragraph (7), by strik-
ing the period at the end of paragraph (8) and in-
serting ‘‘, and’’, and by adding at the end the follow-
ing new paragraph:
‘‘(9) the small employer pension plan startup
cost credit determined under section 45D(a).’’
(3) The table of sections for subpart D of part
IV of subchapter A of chapter 1 is amended by add-
ing at the end the following new item:
‘‘Sec. 45D. Small employer pension plan startup costs.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to costs paid or incurred in taxable
years ending after the date of the enactment of this Act.
TITLE V—MISCELLANEOUS IM-
PROVEMENTS 
TO 
PENSION
PLANS
SEC. 501. IRA CATCH-UP CONTRIBUTIONS.
(a) IN GENERAL.—Section 408 is amended by redes-
ignating subsection (q) as subsection (r) and by inserting
after subsection (p) the following new subsection:
‘‘(q) DEFINITIONS AND RULES RELATING TO NON-
DEDUCTIBLE CATCH-UP CONTRIBUTIONS.—
‘‘(1) IN GENERAL.—Subject to the provisions of
this subsection, catch-up contributions may be made
on behalf of a qualified individual to an individual
retirement plan.
‘‘(2) CATCH-UP
CONTRIBUTIONS.—For pur-
poses of this subsection—
‘‘(A) IN
GENERAL.—The term ‘catch-up
contribution’ means any contribution to an indi-
vidual retirement plan made during the catch-
up period which is designated (in such manner
as the Secretary may prescribe) as a catch-up
contribution for which a deduction is not allow-
able under section 219. Any such designation
shall be made on the return of tax imposed by
chapter 1 for the taxable year for which such
contribution is made.
‘‘(B) LIMITATIONS.—A contribution may
be designated a catch-up contribution if—
‘‘(i) no contribution was made on be-
half of the individual to a pension, profit-
sharing, or stock bonus plan which con-
stitutes a qualified trust under section
401(a) (other than an individual retire-
ment plan) for any of the 5 taxable years
preceding the calendar year in which the
catch-up period begins,
‘‘(ii) such contribution, when added to
all other contributions designated as catch-
up contributions, does not exceed $2,000
for the taxable year for which such con-
tribution is made
‘‘(C) 
CATCH-UP
CONTRIBUTION.—The
term ‘catch-up period’ means the 5 taxable year
period beginning in the taxable year in which
the individual 1st designates a contribution as
a catch-up contribution.
‘‘(3) QUALIFIED INDIVIDUAL.—For purposes of
paragraph (1)—
‘‘(A) IN
GENERAL.—The term ‘qualified
individual’ means an individual whose modified
adjusted gross income does not exceed $50,000.
‘‘(B) SPECIAL
RULE
FOR
JOINT
RE-
TURN.—In the case of a joint return, adjusted
gross income shall be determined separately for
each spouse as if each spouse had filed a sepa-
rate return.
‘‘(C) MODIFIED
ADJUSTED
GROSS
IN-
COME.—The term ‘modified adjusted gross in-
come’ means adjusted gross income increased
by any amount excluded from gross income
under section 911, 931, or 933.
‘‘(4) NO DEDUCTION ALLOWED.—No deduction
shall be allowed under section 219 for a catch-up
contribution.
‘‘(5) INCREASE
IN
LIMITS.—For purposes of
this subsection—
‘‘(A) IN GENERAL.—The limitation on con-
tributions in subsections (a)(1) and (b)(2)(B)
are hereby increased by the amount of contribu-
tions allowed under this subsection.
‘‘(B) EXCISE
TAX.—In applying section
4973, the amount allowable as a deduction
under section 219 shall be increased by the
amount of contributions allowed under this sub-
section.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to contributions made after De-
cember 31, 1998.
SEC. 502. REPEAL OF 25 PERCENT LIMITATION ON DEFINED
CONTRIBUTION PLANS.
(a) IN GENERAL.—Paragraph (1) of section 415(c)
(relating to general limitation for defined contribution
plans) is amended to read as follows:
‘‘(1) IN
GENERAL.—Contributions and other
additions with respect to a participant exceed the
limitation of this subsection if, when expressed as an
annual addition (within the meaning of paragraph
(2)) to the participant’s account, such annual addi-
tion is greater than $30,000.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (B) of section 402(h)(2),
subparagraph (A) of section 408(d)(5), subsection
(j) of section 408, clause (ii) of section 416(i)(1)(A),
and subparagraph (B) of section 419A(c)(4) are
each amended by striking ‘‘section 415(c)(1)(A)’’
and inserting ‘‘section 415(c)(1)’’.
(2) Paragraph (2) of section 419A(d) is amend-
ed by striking the last sentence.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1998.
SEC. 503. FASTER VESTING OF EMPLOYER MATCHING CON-
TRIBUTIONS.
(a) AMENDMENTS TO 1986 CODE.—Subsection (a) of
section 411 (relating to minimum vesting standards) is
amended—
(1) in paragraph (2), by striking ‘‘A plan’’ and
inserting ‘‘Except as provided in paragraph (12), a
plan’’, and
(2) by adding at the end the following:
‘‘(12) FASTER VESTING FOR MATCHING CON-
TRIBUTIONS.—In the case of matching contributions
(as defined in section 401(m)(4)(A)), paragraph (2)
shall be applied—
‘‘(A) by substituting ‘3 years’ for ‘5 years’
in subparagraph (A), and
‘‘(B) by substituting the following table for
the table contained in subparagraph (B):
The nonforfeitable
‘‘Years of service:
percentage is:
2 ...............................................................................................
3 ...............................................................................................
4 ...............................................................................................
5 ...............................................................................................
6 ...............................................................................................
100.’’
(b) 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
CON-
TRIBUTIONS.—In the case of matching contributions
(as defined in section 401(m)(4)(A) of the Internal
Revenue Code of 1986), paragraph (2) shall be ap-
plied—
‘‘(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.’’
(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, 1998.
(2) COLLECTIVE BARGAINING AGREEMENTS.—
In the case of a plan maintained pursuant to 1 or
more collective bargaining agreements between em-
ployee representatives and 1 or more employers rati-
fied 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 termi-
nates (determined without regard to any
extension thereof on or after such date of
enactment), or
(ii) January 1, 1999, or
(B) January 1, 2003.
(3) PARTICIPATION
REQUIRED.—The amend-
ments made by this section shall not apply to any
employee who does not have 1 hour of service in any
plan year to which the amendments made by this
section apply.
SEC. 504. PERIODIC PENSION BENEFITS STATEMENTS.
(a) IN GENERAL.—Section 105(a) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1025(a)) is amended by striking ‘‘shall furnish to any plan
participant or beneficiary who so requests in writing, a
statement’’ and inserting ‘‘shall furnish to each plan par-
ticipant at least once each year (in the case of a defined
contribution plan) and at least once every three years (in
the case of a defined benefit plan), a statement in written
or electronic form’’.
(b) REQUIRED PERIODIC STATEMENTS FOR PLANS
WITH MORE THAN ONE UNAFFILIATED EMPLOYER.—
Section 105(d) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1025(d)) is repealed.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 1998.
SEC. 505. FAILURE OF PENSION PLANS TO MEET REQUIRE-
MENTS.
(a) IN GENERAL.—Part I of subchapter B of chapter
68 (relating to assessable penalties) is amended by adding
at the end the following new section:
‘‘Sec. 6716. FAILURE OF PENSION PLANS TO MEET RE-
QUIREMENTS.
‘‘(a) IN GENERAL.—If, as a result of a violation of
a provision of this title, the Secretary determines that a
stock bonus, pension, or profit-sharing plan arrangement
would no longer constitute a qualified trust under section
401—
‘‘(1) no sanction may be imposed if the viola-
tion is cured before the close of an audit of such ar-
rangement,
‘‘(2) an intermediate sanction under subsection
(b) may be imposed if the violation is not corrected
before the close of an audit of such arrangement,
and
‘‘(3) after the close of an audit of such arrange-
ment, the Secretary may make a final determination
that such arrangement does not constitute a quali-
fied trust under section 401.
Paragraphs (1) and (2) shall not apply if the Secretary
determines that such violation is known, material, and re-
curring.
‘‘(b) INTERMEDIATE SANCTIONS.—For purposes of
subsection (a) and in accordance with regulations which
the Secretary shall prescribe—
‘‘(1) if the violation is corrected within the pe-
riod that both the Secretary and the taxpayer con-
sent to in writing, the Secretary may impose a pen-
alty in the amount of 20 percent of the actual dam-
ages incurred as a result of such violation, and
‘‘(2) the Secretary may impose a penalty in the
amount of 100 percent of the actual damages in-
curred as a result of such violation if such violation
is not corrected within the period referred to in
paragraph (1).’’.
(b) CLERICAL AMENDMENT.—The table of sections
for part I of subchapter B of chapter 68 (relating to as-
sessable penalties) is amended by adding at the end the
following new item:
‘‘Sec. 6716. Failure of pension plans to meet requirements.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to violations occurring after the
date of the enactment of this Act.
SEC. 506. ASSIGNMENT AND ALIENATION
(a) IN GENERAL.—Subparagraph (C) of section
401(a)(13) (relating to assignment and alienation) is
amended by striking clause (ii) and redesignating clause
(iii) as clause (ii).
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1998.
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