‘‘(i) any defined benefit plan if, for
the plan year ending on the determination
date, the present value of the accruals for
key employees exceeds 60 percent of the
present value of the accruals for all em-
ployees, and
‘‘(ii) any defined contribution plan if,
for the plan year ending on the determina-
tion date, the annual additions for key em-
ployees exceed 60 percent of the annual
additions for all employees.
‘‘(C) TOP-HEAVY GROUP.—In the case of
any plan to which this paragraph applies, the
term ‘top-heavy group’ means any aggregation
group if—
‘‘(i) the sum, for the plan year ending
on the determination date, of—
‘‘(I) the present value of the ac-
cruals for key employees under all de-
fined benefit plans included in such
group, and
‘‘(II) the aggregate of the annual
additions of key employees under all
defined contribution plans included in
such group,
‘‘(ii) exceeds 60 percent of a similar
sum determined for all employees.
‘‘(D) ANNUAL ADDITION.—For purposes of
this paragraph, the term ‘annual addition’ shall
have the same meaning as when used in section
415(c)(2) (without regard to section 415(l) or
section 419A(d)(2)).
‘‘(E) CERTAIN RULES NOT TO APPLY.—
Paragraphs (3) and (4) (other than subpara-
graphs (B), (C), (D), (E), and (G) of para-
graph (4)) shall not apply for purposes of this
paragraph.’’.
(k) CONFORMING AMENDMENTS.—
(1) Subparagraph (A) of section 416(g)(1) is
amended by striking ‘‘subparagraph (B)’’ and insert-
ing ‘‘subparagraph (B) and paragraph (5)’’.
(2) Subparagraph (B) of section 416(g)(2) is
amended by striking ‘‘The term’’ and inserting ‘‘Ex-
cept as provided in paragraph (5), the term’’.
(3) Subparagraph (A) of section 415(b)(5) is
amended by adding at the end the following: ‘‘An
employee shall not be credited with a year of partici-
pation in a defined benefit plan for any year in
which such employee does not benefit under the plan
within the meaning of section 410(b).’’.
(l) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1999.
SEC. 105. ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF LIMITS.
(a) IN GENERAL.—Section 404 is amended by adding
at the end the following new subsection:
‘‘(n) ELECTIVE DEFERRALS NOT TAKEN INTO AC-
COUNT FOR PURPOSES OF LIMITS.—Elective deferrals (as
defined in section 402(g)(3)) shall not be subject to any
limitations described in this section (other than subsection
(a)), and such elective deferrals shall not be taken into
account in applying such limitations to any other contribu-
tions.’’.
(b) CONFORMING AMENDMENTS.—Paragraph (3) of
section 4972(c) is amended to read as follows:
‘‘(3) CONTRIBUTIONS
NOT
TAKEN
INTO
AC-
COUNT.—In determining the amount of nondeduct-
ible contributions for any taxable year, there shall
not be taken into account—
‘‘(A) any elective deferral (as defined in
section 402(g)(3)), or
‘‘(B) any contribution for such taxable
year which is distributed to the employer in a
distribution 
described 
in 
section
4980(c)(2)(B)(ii) if such distribution is made
on or before the last day on which a contribu-
tion may be made for such taxable year under
section 404(a)(6).’’.
(c) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1999.
SEC. 106. 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) by inserting ‘‘other than a new single-em-
ployer plan of a small employer (as defined in clause
(iv)),’’ after ‘‘in the case of a single-employer plan,’’
in clause (i),
(2) by striking the period at the end of clause
(iii) and inserting ‘‘; and’’, and
(3) by inserting after clause (iii) the following
new clause:
‘‘(iv) in the case of a new single-employer plan
of a small employer, $5 for each individual who is
a participant in such plan during the plan year. For
purposes of this clause (iv):
‘‘(I) The term ‘new single-employer plan’
means a single-employer plan during its first
five plan years; provided, however, that a sin-
gle-employer plan is not a new single-employer
plan if any contributing sponsor or any member
of its controlled group (including any prede-
cessor of a contributing sponsor or member of
such predecessor’s controlled group) had estab-
lished or maintained a plan to which this title
applied that included substantially the same
employees as such new plan, at any time within
the 36-month period preceding the adoption of
such new plan.
‘‘(II) The term ‘small employer‘ means a
contributing sponsor that on the first day of the
plan year has, in combination with all members
of its controlled group, 100 or fewer employees.
‘‘(III) In the case of a plan maintained by
two or more contributing sponsors that are not
part of the same controlled group, the employ-
ees of all contributing sponsors and their con-
trolled groups shall be aggregated for purposes
of determining whether the plan shall be consid-
ered to be a plan of a small employer.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 1999.
SEC. 107. PHASE-IN OF ADDITIONAL 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—
(1) by inserting ‘‘(or, in the case of a new sin-
gle-employer plan described in clause (vi), the
amount determined under clause (v))’’ after ‘‘deter-
mined under clause (ii)’’ in clause (i), and
(2) by inserting after clause (iv) the following
new clauses:
‘‘(v) The amount determined under this clause for
any plan year of a new single-employer plan (as described
in clause (vi)) shall be an amount equal to the product
derived by multiplying the amount determined under
clause (ii) by the applicable percentage. For purposes of
this clause (v), 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, and
‘‘(V) 80 percent, for the fifth plan year.
‘‘(vi) For purposes of clause (v), the term ‘new single-
employer plan’ means a single-employer plan during its
first five plan years; provided, however, that a single-em-
ployer plan is not a new single-employer plan if any con-
tributing sponsor or any member of its controlled group
(including any predecessor of a contributing sponsor or
member of such predecessor’s controlled group) had estab-
lished or maintained a plan to which this title applied that
included substantially the same employees as such new
plan, at any time within the 36-month period preceding
the adoption of such new plan.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 1999.
SEC. 108. REPEAL OF COORDINATION REQUIREMENTS FOR
DEFERRED COMPENSATION PLANS OF STATE
AND LOCAL GOVERNMENTS AND TAX-EX-
EMPT ORGANIZATIONS.
(a) IN GENERAL.—Subsection (c) of section 457 (re-
lating to deferred compensation plans of State and local
governments and tax-exempt organizations) is amended to
read as follows:
‘‘(c) LIMITATION.—The maximum amount of the
compensation of any one individual which may be deferred
under subsection (a) during any taxable year shall not ex-
ceed $15,000 (as modified by any adjustment provided
under subsection (b)(3)).’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to years beginning after Decem-
ber 31, 1999.
SEC. 109. ELIMINATION OF USER FEE FOR REQUESTS TO
IRS REGARDING PENSION PLANS.
(a) ELIMINATION OF CERTAIN USER FEES.—The
Secretary of the Treasury or the Secretary’s delegate shall
not require payment of user fees under the program estab-
lished under section 10511 of the Revenue Act of 1987
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 pension
benefit plan maintained solely by one or more eligible em-
ployers or any trust which is part of the plan.
(b) PENSION BENEFIT PLAN.—For purposes of this
section, the term ‘pension benefit plan’ means a pension,
profit-sharing, stock bonus, annuity, or employee stock
ownership plan.
(c) ELIGIBLE EMPLOYER.—For purposes of this sec-
tion, the term ‘‘eligible employer’’ has the same meaning
given such term in section 408(p)(2)(C)(i)(I) of the Inter-
nal Revenue Code of 1986. The determination of whether
an employer is an eligible employer under this section shall
be made as of the date of the request described in sub-
section (a).
(d) EFFECTIVE DATE.—The provisions of this sec-
tion shall apply with respect to requests made after De-
cember 31, 1999.
SEC. 110. ALTERNATIVE METHOD OF MEETING NON-
DISCRIMINATION REQUIREMENTS FOR AUTO-
MATIC CONTRIBUTION TRUST.
(a) IN GENERAL.—Section 401(k) (relating to cash
or deferred arrangement) is amended by adding at the end
the following new paragraph:
‘‘(13) 
NONDISCRIMINATION
REQUIREMENTS
FOR AUTOMATIC CONTRIBUTION TRUSTS.—
‘‘(A) IN GENERAL.—A cash or deferred ar-
rangement shall be treated as meeting the re-
quirements of paragraph (3)(A)(ii) if such ar-
rangement constitutes an automatic contribu-
tion trust.
‘‘(B) AUTOMATIC CONTRIBUTION TRUST.—
For purposes of this paragraph, the term ‘auto-
matic 
contribution 
trust’ 
means 
an
arrangement—
‘‘(i) under which each employee eligi-
ble to participate in the arrangement is
treated as having elected to have the em-
ployer make elective contributions in an
amount equal to the uniform percentage
(not less than 3 percent) of compensation
provided under the arrangement until the
employee specifically elects not to have
such contributions made, and
‘‘(ii) which meets the other require-
ments of this paragraph.
Clause (i) of this subparagraph shall not apply
to any employee who was eligible to participate
in the arrangement (or a predecessor arrange-
ment) immediately before the first date on
which the arrangement is an automatic con-
tribution trust. The election treated as having
been made under clause (i) shall cease to apply
to compensation paid after the specific election
by the employee.
‘‘(C) PARTICIPATION.—
‘‘(i) Except as provided in clause (ii),
an arrangement meets the requirements of
this subparagraph for any year if, during
the plan year or the preceding plan year,
elective contributions are made on behalf
of at least 70 percent of employees other
than highly compensated employees eligible
to participate in the arrangement.
‘‘(ii) An arrangement (other than a
successor arrangement) shall be treated as
meeting the requirements of this subpara-
graph with respect to the first plan year in
which the arrangement is effective.
‘‘(D) MATCHING
OR
NONELECTIVE
CON-
TRIBUTIONS.—The requirements of this sub-
paragraph are met if, under the arrangement,
the employer—
‘‘(i) makes matching contributions on
behalf of each employee who is not a highly
compensated employee in an amount equal
to 50 percent of the elective contributions
of the employee to the extent such elective
contributions do not exceed 5 percent of
compensation, or
‘‘(ii) is required, without regard to
whether the employee makes an elective
contribution or employee contribution, to
make a contribution to a defined contribu-
tion plan on behalf of each employee who
is not a highly compensated employee and
who is eligible to participate in the ar-
rangement in an amount equal to at least
2 percent of the employee’s compensation.
The rules of clauses (ii), (iii), and (iv) of para-
graph (12)(B) shall apply for purposes of clause
(i).
‘‘(E) VESTING.—The requirements of this
subparagraph are met if the requirements of
subparagraph (C) of paragraph (2) are met
with respect to all employer contributions (in-
cluding matching contributions) taken into ac-
count in determining whether the requirements
of subparagraph (B) or (C) are met.
‘‘(F) NOTICE REQUIREMENTS.—
‘‘(i) IN GENERAL.—The requirements
of this subparagraph are met if the re-
quirements of clauses (ii) and (iii) are met.
‘‘(ii) REASONABLE PERIOD TO MAKE
ELECTION.—The 
requirements 
of 
this
clause are met if each employee to whom
subparagraph (B)(i) applies—
‘‘(I) receives a notice explaining
the employee’s right under the ar-
rangement to elect not to have elective
contributions made on the employee’s
behalf, and
‘‘(II) has a reasonable period of
time after receipt of such notice and
before the first elective contribution is
made to make such election.
‘‘(iii) ANNUAL
NOTICE
OF
RIGHTS
AND OBLIGATIONS.—The requirements of
this clause are met if each employee eligi-
ble to participate in the arrangement is,
within a reasonable period before any year,
given notice of the employee’s rights and
obligations under the arrangement.
The requirements of clauses (i) and (ii) of para-
graph (12)(D) shall be met with respect to the
notices described in clauses (ii) and (iii) of this
subparagraph.’’.
(b) MATCHING CONTRIBUTIONS.—Section 401(m)
(relating to nondiscrimination test for matching contribu-
tions and employee contributions) is amended by redesig-
nating paragraph (12) as paragraph (13) and by inserting
after paragraph (11) the following new paragraph:
‘‘(12) ALTERNATIVE METHOD FOR AUTOMATIC
CONTRIBUTION TRUSTS.—
‘‘(A) IN GENERAL.—A defined contribution
plan shall be treated as meeting the require-
ments of paragraph (2) with respect to match-
ing contributions if the plan—
‘‘(i) meets the contribution require-
ments of subparagraphs (B)(i) and (D) of
subsection (k)(13),
‘‘(ii) meets the participation require-
ments of subsection (k)(13)(C),
‘‘(iii) meets the vesting and notice re-
quirements of subparagraphs (E) and (F)
of subsection (k)(13), and
‘‘(iv) meets the requirements of para-
graph (11)(B).
‘‘(B) MATCHING CONTRIBUTIONS.—An an-
nuity contract under section 403(b) shall be
treated as meeting the requirements of para-
graph (2) with respect to matching contribu-
tions if such contract meets requirements simi-
lar to the requirements under subparagraph
(A).’’.
(c) EXCLUSION FROM DEFINITION OF TOP-HEAVY
PLANS.—Paragraph (4) of section 416(d) (relating to
other special rules for top-heavy plans), as amended by
section 104(g), is amended by adding at the end the fol-
lowing new subparagraph:
‘‘(J) AUTOMATIC CONTRIBUTION TRUST.—
The term ‘top-heavy plan’ shall not include an
automatic contribution trust under section
401(k)(13). Nothing in this subparagraph shall
preclude an employer from taking into account
contributions made under the automatic con-
tribution trust when determining whether any
plan of such employer satisfies the requirements
of this section.’’.
(d) DEFINITION OF COMPENSATION.—
(1) IN
GENERAL.—Paragraph (9) of section
401(k) is amended to read as follows:
‘‘(9) COMPENSATION.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), for purposes of this section,
the term ‘compensation’ has the meaning given
such term by section 414(s).
‘‘(B) USE OF BASE PAY.—For purposes of
paragraph (12)(B), the term ‘compensation’
means the definition of compensation used by
the cash or deferred arrangement if such
compensation—
‘‘(i) meets the requirements of section
414(s), or
‘‘(ii) constitutes base pay.
‘‘(C) BASE
PAY.—For purposes of sub-
paragraph (B), the term ‘base pay’ means a
reasonable definition of compensation that does
not by design favor highly compensated employ-
ees and that excludes on a consistent basis all
irregular or additional compensation.’’.
(2) AUTOMATIC CONTRIBUTION TRUSTS.—Para-
graph (9)(B) of section 401(k) (as amended by
paragraph (1)) is amended by striking ‘‘paragraph
(12)(B)’’ 
and 
inserting 
‘‘paragraphs 
(12)(B),
(13)(B), and (13)(D)(i)’’.
(3) MATCHING
CONTRIBUTIONS.—Paragraph
(11) of section 401(m) is amended by adding at the
end the following:
‘‘(C) DEFINITION
OF
COMPENSATION.—
For purposes of subparagraph (B), the term
‘‘compensation’’ has the meaning given such
term by subsection (k)(9)(B).’’.
(e) APPLICATION BY YEAR OR PAYROLL PERIOD.—
(1) CASH
OR
DEFERRED
ARRANGEMENTS.—
Subparagraph (B) of section 401(k)(12) is amended
by adding at the end the following:
‘‘(iv) APPLICATION BY YEAR OR PAY-
ROLL PERIOD.—The requirements of this
subparagraph may be met for a plan year
by meeting such requirements either—
‘‘(I) with respect to the plan year
as a whole, or
‘‘(II) separately with respect to
each payroll period (or other payment
of compensation) taken into account
under the arrangement for the plan
year.’’.
(2) DEFINED
CONTRIBUTION
PLANS.—Para-
graph (11) of section 401(m) (as amended by this
section) is amended by adding at the end the follow-
ing:
‘‘(D) APPLICATION BY YEAR OR PAYROLL
PERIOD.—The requirements of subparagraph
(B) may be met for a plan year by meeting
such requirements either—
‘‘(i) with respect to the plan year as
a whole, or
‘‘(ii) separately with respect to each
payroll period (or other payment of com-
pensation) taken into account under the
plan for the plan year.’’.
(f) SECTION 403(b) CONTRACTS.—Paragraph (11) of
section 401(m) (as amended by this section) is amended
by adding at the end the following:
‘‘(E) SECTION 403(B) CONTRACTS.—An an-
nuity contract under section 403(b) shall be
treated as meeting the requirements of para-
graph (2) with respect to matching contribu-
tions if such contract meets requirements simi-
lar to the requirements under subparagraph
(A).’’.
(e) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided by para-
graph (2), the amendments made by this section
shall apply to plan years beginning after December
31, 1999.
(2) EXCEPTION.—The amendments made by
subsections (d)(1), (d)(3), (e), and (f) shall apply to
years beginning after December 31, 1998.
SEC. 111. DEDUCTION LIMITS.
(a) IN GENERAL.—
(1) STOCK
BONUS
AND
PROFIT
SHARING
TRUSTS.—Subclause (I) of section 404(a)(3)(A)(i)
(relating to stock bonus and profit sharing trusts) is
amended by striking ‘‘15 percent’’ and inserting ‘‘25
percent’’.
(2) COMPENSATION.—Section 404(a) (relating
to general rule) is amended by adding at the end the
following:
‘‘(12) DEFINITION
OF
COMPENSATION.—For
purposes of paragraphs (3), (7), and (9), the term
‘compensation otherwise paid or accrued during the
taxable year’ shall include amounts treated as ‘par-
ticipant’s compensation’ under subparagraph (C) or
(D) of section 415(c)(3).’’.
(3) DEFINED CONTRIBUTION PLANS.—Subpara-
graph (A) of section 404(a)(3) (relating to stock
bonus and profit sharing trusts) is amended by add-
ing at the end the following:
‘‘(vi) DEFINED CONTRIBUTION PLANS
SUBJECT TO THE FUNDING STANDARDS.—
Except as provided by the Secretary, for
purposes of this subparagraph, a defined
contribution plan which is subject to the
funding standards of section 412 shall be
treated in the same manner as a stock
bonus or profit-sharing plan.’’.
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (A) of section 404(a)(3) is
amended by striking clause (v) and by redesignating
clause (vi) (as added by subsection (a)(3) of this sec-
tion) as clause (v).
(2) Subparagraph (B) of section 404(a)(3) is
amended by striking the last sentence thereof.
(3) Subparagraph (D) of section 404(a)(8) is
amended by striking the period at the end and in-
serting the following: ‘‘, except that such earned in-
come shall be adjusted under rules similar to the
rules of paragraph (12).’’.
(4) Subparagraph (C) of section 404(h)(1) is
amended by striking ‘‘15 percent’’ each place it ap-
pears and inserting ‘‘25 percent’’.
(5) Paragraph (2) of section 404(h) is amended
by striking ‘‘stock bonus or profit-sharing trust’’ and
inserting ‘‘trust subject to subsection (a)(3)(A)’’.
(6) Clause (i) of section 4972(c)(6)(B) is
amended by striking ‘‘(within the meaning of section
404(a))’’ and inserting ‘‘(within the meaning of sec-
tion 
404(a) 
and 
as 
adjusted 
under 
section
404(a)(12))’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1999.
SEC. 112. OPTION TO TREAT ELECTIVE DEFERRALS AS
AFTER-TAX CONTRIBUTIONS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 (relating to deferred compensation, etc.)
is amended by inserting after section 402 the following
new section:
‘‘SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFER-
RALS AS PLUS CONTRIBUTIONS.
‘‘(a) GENERAL RULE.—If an applicable retirement
plan includes a qualified plus contribution program—
‘‘(1) any designated plus contribution made by
an employee pursuant to the program shall be treat-
ed as an elective deferral for purposes of this chap-
ter, except that such contribution shall not be ex-
cludable from gross income, and
‘‘(2) such plan (and any arrangement which is
part of such plan) shall not be treated as failing to
meet any requirement of this chapter solely by rea-
son of including such program.
‘‘(b) QUALIFIED PLUS CONTRIBUTION PROGRAM.—
For purposes of this section—
‘‘(1) IN
GENERAL.—The term ‘qualified plus
contribution program’ means a program under which
an employee may elect to make designated plus con-
tributions in lieu of all or a portion of elective defer-
rals the employee is otherwise eligible to make under
the applicable retirement plan.
‘‘(2) SEPARATE
ACCOUNTING
REQUIRED.—A
program shall not be treated as a qualified plus con-
tribution program unless the applicable retirement
plan—
‘‘(A) establishes separate accounts (‘des-
ignated plus accounts’) for the designated plus
contributions of each employee and any earn-
ings properly allocable to the contributions, and
‘‘(B) maintains separate recordkeeping
with respect to each account.
‘‘(c) DEFINITIONS AND RULES RELATING TO DES-
IGNATED PLUS CONTRIBUTIONS.—For purposes of this
section—
‘‘(1) DESIGNATED PLUS CONTRIBUTION.—The
term ‘designated plus contribution’ means any elec-
tive deferral which—
‘‘(A) is excludable from gross income of an
employee without regard to this section, and
‘‘(B) the employee designates (at such time
and in such manner as the Secretary may pre-
scribe) as not being so excludable.
‘‘(2) DESIGNATION
LIMITS.—The amount of
elective deferrals which an employee may designate
under paragraph (1) shall not exceed the excess (if
any) of—
‘‘(A) the maximum amount of elective de-
ferrals excludable from gross income of the em-
ployee for the taxable year (without regard to
this section), over
‘‘(B) the aggregate amount of elective de-
ferrals of the employee for the taxable year
which the employee does not designate under
paragraph (1).
‘‘(3) ROLLOVER CONTRIBUTIONS.—
‘‘(A) IN
GENERAL.—A rollover contribu-
tion of any payment or distribution from a des-
ignated plus account which is otherwise allow-
able under this chapter may be made only if the
contribution is to—
‘‘(i) another designated plus account
of the individual from whose account the
payment or distribution was made, or
‘‘(ii) a Roth IRA of such individual.
‘‘(B) COORDINATION
WITH
LIMIT.—Any
rollover contribution to a designated plus ac-
count under subparagraph (A) shall not be
taken into account for purposes of paragraph
(1).
‘‘(d) DISTRIBUTION RULES.—For purposes of this
title—
‘‘(1) EXCLUSION.—Any qualified distribution
from a designated plus account shall not be includ-
ible in gross income.
‘‘(2) QUALIFIED DISTRIBUTION.—For purposes
of this subsection—
‘‘(A) IN
GENERAL.—The term ‘qualified
distribution’ has the meaning given such term
by section 408A(d)(2)(A).
‘‘(B) DISTRIBUTIONS WITHIN NONEXCLU-
SION PERIOD.—A payment or distribution from
a designated plus account shall not be treated
as a qualified distribution if such payment or
distribution is made within the 5-taxable-year
period beginning with the earlier of—
‘‘(i) the earlier of—
‘‘(I) the 1st taxable year for
which the individual made a des-
ignated plus contribution to any des-
ignated plus account established for
such individual under the same appli-
cable retirement plan, or
‘‘(II) if a rollover contribution
was made to such designated plus ac-
count from a designated plus account
previously established for such individ-
ual under another applicable retire-
ment plan, the 1st taxable year for
which the individual made a des-
ignated plus contribution to such pre-
viously established account), or
‘‘(ii) the 1st taxable year for which
the individual (or the individual’s spouse)
made a contribution to a Roth IRA estab-
lished for such individual.
‘‘(C) DISTRIBUTIONS OF EXCESS DEFER-
RALS AND EARNINGS.—The term ‘qualified dis-
tribution’ shall not include any distribution of
any excess deferral under section 402(g)(2) and
any income on the excess deferral.
‘‘(3) AGGREGATION RULES.—Section 72 shall
be applied separately with respect to distributions
and payments from a designated plus account and
other distributions and payments from the plan.
‘‘(e) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) APPLICABLE
RETIREMENT
PLAN.—The
term ‘applicable retirement plan’ means—
‘‘(A) an employees’ trust described in sec-
tion 401(a) which is exempt from tax under
section 501(a), and
‘‘(B) a plan under which amounts are con-
tributed by an individual’s employer for an an-
nuity contract described in section 403(b).
‘‘(2) ELECTIVE DEFERRAL.—The term ‘elective
deferral’ means any elective deferral described in
subparagraph (A) or (C) of section 402(g)(3).’’
(b) EXCESS DEFERRALS.—Section 402(g) (relating
to limitation on exclusion for elective deferrals) is
amended—
(1) by adding at the end of paragraph (1) the
following new sentence: ‘‘The preceding sentence
shall not apply to so much of such excess as does
not exceed the designated plus contributions of the
individual for the taxable year.’’, and
(2) by inserting ‘‘(or would be included but for
the last sentence thereof)’’ after ‘‘paragraph (1)’’ in
paragraph (2)(A).
(c) ROLLOVERS.—Subparagraph (B) of section
402(c)(7) (as amended by sections 301 and 302) is
amended by adding at the end the following:
‘‘Without regard to the foregoing provisions of
this paragraph, if any portion of an eligible roll-
over distribution is attributable to payments or
distributions from a designated plus account (as
defined in section 402A), an eligible retirement
plan with respect to such portion shall include
only 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
designated plus contributions (as defined in section
402A)’’ before the comma at the end.
(2) INFORMATION.—Section 6047 is amended
by redesignating subsection (f) as subsection (g) and
by inserting after subsection (e) the following new
subsection:
‘‘(f) DESIGNATED PLUS CONTRIBUTIONS.—The Sec-
retary shall require the plan administrator of each applica-
ble retirement plan (as defined in section 402A) to make
such returns and reports regarding designated plus con-
tributions (as so defined) to the Secretary, participants
and beneficiaries of the plan, and such other persons as
the Secretary may prescribe.’’
(e) CONFORMING AMENDMENTS.—
(1) Section 408A(e) is amended by adding after
the first sentence the following new sentence: ‘‘Such
term includes a rollover contribution described in
section 402A(c)(3)(A).’’
(2) The table of sections for subpart A of part
I of subchapter D of chapter 1 is amended by insert-
ing after the item relating to section 402 the follow-
ing new item:
‘‘Sec. 402A. Optional treatment of elective deferrals as plus contributions.’’
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
SEC. 113. CREDIT FOR PENSION PLAN STARTUP COSTS OF
SMALL EMPLOYERS.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business related cred-
its) is amended by adding at the end the following new
section:
‘‘SEC. 45D. SMALL EMPLOYER PENSION PLAN STARTUP
COSTS.
‘‘(a) GENERAL RULE.—For purposes of section 38,
in the case of an eligible employer, the small employer pen-
sion plan startup cost credit determined under this section
for any taxable year is an amount equal to 50 percent
of the qualified startup costs paid or incurred by the tax-
payer during the taxable year.
‘‘(b) DOLLAR LIMITATION.—The amount of the cred-
it determined under this section for any taxable year shall
not exceed—
‘‘(1) $1,000 for the first credit year,
‘‘(2) $500 for each of the 2 taxable years imme-
diately following the first credit year, and
‘‘(3) zero for any other taxable year.
‘‘(c) 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
1998
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 1998. If only individuals
other than employees described in subparagraph (A)
of section 410(b)(3) are eligible to participate in the
qualified employer plan referred to in subsection
(d)(1), then the preceding sentence shall be applied
without regard to any qualified plan in which only
employees so described are eligible to participate.
‘‘(d) 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, 2002.—Such term shall not
include any expense in connection with a plan
established after December 31, 2001.
‘‘(2) ELIGIBLE
EMPLOYER
PLAN.—The term
‘eligible employer plan’ means a qualified employer
plan within the meaning of section 4972(d).
‘‘(3) FIRST
CREDIT
YEAR.—The term ‘first
credit year’ means—
‘‘(A) the taxable year which includes the
date that the eligible employer plan to which
such costs relate becomes effective, or
‘‘(B) at the election of the eligible em-
ployer, the taxable year preceding the taxable
year referred to in subparagraph (A).
‘‘(e) 
SPECIAL
RULES.—For 
purposes 
of 
this
section—
‘‘(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 II—ENHANCING FAIRNESS
FOR WOMEN AND CHILDREN
SEC. 201. ADDITIONAL SALARY REDUCTION CATCH-UP CON-
TRIBUTIONS.
(a) LIMITATION ON EXCLUSION FOR ELECTIVE DE-
FERRALS.—
(1) IN
GENERAL.—Subsection (g) of section
402 (as amended by section 101(d)) is further
amended by adding at the end the following:
‘‘(9) CATCH-UP
CONTRIBUTIONS
FOR
THOSE
APPROACHING RETIREMENT.—In the case of an indi-
vidual who has attained age 50 during any taxable
year, the limitation of paragraph (1) for such year,
after the application of paragraph (8), shall be in-
creased by $5,000.’’.
(2) COST-OF-LIVING ADJUSTMENT.—Paragraph
(4) of section 402(g) (relating to cost-of-living ad-
justment), as amended by section 101(d), is further
(1) IN
GENERAL.—Subsection (b) of section
457 (relating to definition of eligible deferred com-
pensation plan) is amended by adding at the end the
following new paragraph:
‘‘(7) CATCH-UP
CONTRIBUTIONS
FOR
THOSE
APPROACHING RETIREMENT.—In the case of an indi-
vidual who has attained age 50 during any taxable
year, the limitation of paragraph (2)(A) for such
year shall be increased by $5,000.’’.
(2) COST-OF-LIVING ADJUSTMENT.—Paragraph
(15) of section 457(e) (relating to cost-of-living ad-
justment) is amended by inserting ‘‘, and the $5,000
amount specified in subsection (b)(7),’’ after
‘‘(c)(1)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1999.
SEC. 202. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF
EMPLOYEES 
TO 
DEFINED 
CONTRIBUTION
PLANS.
(a) IN GENERAL.—
(1) Subparagraph (B) of section 415(c)(1) (re-
lating to limitation for defined contribution plans) is
amended to read as follows:
‘‘(B) the participant’s compensation.’’.
(2) CONFORMING AMENDMENTS.—
(A) Subsection (f) of section 72 is amend-
ed by striking ‘‘section 403(b)(2)(D)(iii))’’ and
inserting ‘‘section 403(b)(2)(D)(iii), as in effect
on December 31, 1998)’’.
(B) Section 403(b) is amended—
(i) by striking ‘‘the exclusion allow-
ance for such taxable year’’ in paragraph
(1) and inserting ‘‘the applicable limit
under section 415’’,
(ii) by striking paragraph (2), and
(iii) by inserting ‘‘or any amount re-
ceived by a former employee after the 5th
taxable year following the taxable year in
which such employee was terminated’’ be-
fore the period at the end of the second
sentence of paragraph (3).
(C) Section 404(a)(10)(B) is amended by
striking ‘‘, the exclusion allowance under sec-
tion 403(b)(2),’’.
(D) Section 415(a)(2) is amended by strik-
ing ‘‘, and the amount of the contribution for
such portion shall reduce the exclusion allow-
ance as provided in section 403(b)(2)’’.
(E) Section 415(c)(3) is amended by add-
ing at the end the following new subparagraph:
‘‘(E) ANNUITY CONTRACTS.—In the case
of an annuity contract described in section
403(b), the term ‘participant’s compensation’
means the participant’s includible compensation
determined under section 403(b)(3).’’.
(F) Section 415(c) is amended by striking
paragraph (4).
(G) Section 415(c)(7) is amended to read
as follows:
‘‘(7) CERTAIN
CONTRIBUTIONS
BY
CHURCH
PLANS NOT TREATED AS EXCEEDING LIMIT.—
‘‘(A) IN GENERAL.—Notwithstanding any
other provision of this subsection, at the elec-
tion of a participant who is an employee of a
church, a convention or association of churches,
including 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
respect to such participant, when expressed as
an annual addition to such participant’s ac-
count, shall be treated as not exceeding the lim-
itation of paragraph (1) if such annual addition
is not in excess of $10,000.
‘‘(B) $40,000 AGGREGATE LIMITATION.—
The total amount of additions with respect to
any participant which may be taken into ac-
count for purposes of this subparagraph for all
years may not exceed $40,000.
‘‘(C) ANNUAL ADDITION.—For purposes of
this paragraph, the term ‘annual addition’ has
the meaning given such term by paragraph
(2).’’.
(H) Section 415(e)(5) is amended—
(i) by striking ‘‘(except in the case of
a participant who has elected under sub-
section (c)(4)(D) to have the provisions of
subsection (c)(4)(C) apply)’’, and
(ii) by striking the last sentence.
(I) Section 415(n)(2)(B) is amended by
striking ‘‘percentage’’.
(J) Subparagraph (B) of section 402(g)(7)
(as amended by section 101(d)) is amended by
inserting before the period at the end the fol-
lowing: ‘‘(as in effect on the date of the enact-
ment of the Retirement Security for the 21st
Century Act)’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning
after December 31, 1999.
(b) SPECIAL RULES
FOR SECTIONS 403(b) AND
408.—
(1) IN
GENERAL.—Subsection (k) of section
415 is amended by adding at the end the following
new paragraph:
‘‘(4) SPECIAL RULES FOR SECTIONS 403(b) AND
408.—For purposes of this section, any annuity con-
tract described in section 403(b) for the benefit of
a participant shall be treated as a defined contribu-
tion plan maintained by each employer with respect
to which the participant has the control required
under subsection (b) or (c) of section 414 (as modi-
fied by subsection (h)). For purposes of this section,
any contribution by an employer to a simplified em-
ployee pension plan for an individual for a taxable
year shall be treated as an employer contribution to
a defined contribution plan for such individual for
such year.’’.
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to limitation years be-
ginning after December 31, 1999.
(c) DEFERRED COMPENSATION PLANS
OF STATE
AND LOCAL GOVERNMENTS AND TAX-EXEMPT ORGANI-
ZATIONS.—Subparagraph (B) of section 457(b)(2) (relat-
ing to salary limitation on eligible deferred compensation
plans) is amended by striking ‘‘331⁄3 percent’’ and insert-
ing ‘‘100 percent’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1999.
SEC. 
203. 
FASTER 
VESTING 
OF 
CERTAIN 
EMPLOYER
MATCHING CONTRIBUTIONS.
(a) AMENDMENTS TO 1986 CODE.—Section 411(a)
(relating to minimum vesting standards) is amended—
(1) in paragraph (2), by striking ‘‘A plan’’ and
inserting ‘‘Except as provided in paragraph (12), a
plan’’, and
(2) by adding at the end the following:
‘‘(12) FASTER VESTING FOR MATCHING CON-
TRIBUTIONS.—In the case of matching contributions
(as defined in section 401(m)(4)(A)), paragraph (2)
shall be applied—
‘‘(A) by substituting ‘3 years’ for ‘5 years’
in subparagraph (A), and
‘‘(B) by substituting the following table for
the table contained in subparagraph (B):
The nonforfeitable
‘‘Years of service:
percentage is:
1 ...................................................................................
2 ...................................................................................
3 ...................................................................................
4 ...................................................................................
5 ...................................................................................
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) In the case of matching contributions (as
defined in section 401(m)(4)(A) of the Internal Rev-
enue 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:
1 ...................................................................................
2 ...................................................................................
3 ...................................................................................
4 ...................................................................................
5 ...................................................................................
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, 1999.
(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, 2000, or
(B) January 1, 2004.
(3) SERVICE REQUIRED.—With respect to any
plan, the amendments made by this section shall not
apply to any employee before the date that such em-
ployee has 1 hour of service under such plan in any
plan year to which the amendments made by this
section apply.
SEC. 204. DEFERRED ANNUITIES FOR SURVIVING SPOUSES
OF FEDERAL EMPLOYEES.
(a) IN GENERAL.—Section 8341 of title 5, United
States Code, is amended—
(1) in subsection (h)(1), by striking ‘‘section
8338(b) of this title’’ and inserting ‘‘section
8338(b), and a former spouse of a deceased former
employee who separated from the service with title
to a deferred annuity under section 8338 (if they
were married to one another prior to the date of sep-
aration),’’; and
(2) by adding at the end the following:
‘‘(j)(1) If a former employee dies after having sepa-
rated from the service with title to a deferred annuity
under section 8338 but before having established a valid
claim for annuity, and is survived by a spouse to whom
married on the date of separation, the surviving spouse
may elect to receive—
‘‘(A) an annuity, commencing on what would
have been the former employee’s 62d birthday, equal
to 55 percent of the former employee’s deferred an-
nuity;
‘‘(B) an annuity, commencing on the day after
the date of death of the former employee, such that,
to the extent practicable, the present value of the fu-
ture payments of the annuity would be actuarially
equivalent to the present value of the future pay-
ments under subparagraph (A) as of the day after
the former employee’s death; or
‘‘(C) the lump-sum credit, if the surviving
spouse is the individual who would be entitled to the
lump-sum credit and if such surviving spouse files
application therefor.
‘‘(2) An annuity under this subsection and the right
thereto terminate on the last day of the month before the
surviving spouse remarries before becoming 55 years of
age, or dies.’’.
(b) CORRESPONDING AMENDMENT
FOR FERS.—
Section 8445(a) of title 5, United States Code, is
amended—
(1) by striking ‘‘(or of a former employee or’’
and inserting ‘‘(or of a former’’; and
(2) by striking ‘‘annuity)’’ and inserting ‘‘annu-
ity, or of a former employee who dies after having
separated from the service with title to a deferred
annuity under section 8413 but before having estab-
lished a valid claim for annuity (if such former
spouse was married to such former employee prior
to the date of separation))’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to surviving spouses
and former spouses (whose marriage, in the case of the
amendments made by subsection (a), terminated after
May 6, 1985) of former employees who die after the date
of the enactment of this Act.
SEC. 205. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU-
TION RULES.
(a) SIMPLIFICATION AND FINALIZATION OF MINI-
MUM DISTRIBUTION REQUIREMENTS.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall—
(A) simplify and finalize the regulations re-
lating to minimum distribution requirements
under sections 401(a)(9), 408(a)(6) and (b)(3),
403(b)(10), and 457(d)(2) of the Internal Reve-
nue Code of 1986, and
(B) modify such regulations to—
(i) reflect increases in life expectancy,
and
(ii) revise the required distribution
methods so that, under reasonable assump-
tions, the amount of the required minimum
distribution does not decrease over a par-
ticipant’s life expectancy.
(2) FRESH START.—Notwithstanding subpara-
graph (D) of section 401(a)(9) of such Code, during
the first year that regulations are in effect under
this subsection, required distributions for future
years may be redetermined to reflect changes under
such regulations. Such redetermination shall include
the opportunity to choose a new designated bene-
ficiary and to elect a new method of calculating life
expectancy.
(3) EFFECTIVE
DATE
FOR
REGULATIONS.—
Regulations referred to in paragraph (1) shall be ef-
fective for years beginning after December 31, 2000,
and shall apply in such years without regard to
whether an individual had previously begun receiving
minimum distributions.
(b) AMOUNT NOT SUBJECT TO MINIMUM DISTRIBU-
TION REQUIREMENTS.—Paragraph (9) of section 401(a)
is amended—
(1) in subparagraph (A), by inserting ‘‘(minus
the exclusion amount)’’ after ‘‘the entire interest’’;
and
(2) by adding at the end the following:
‘‘(H) EXCLUSION AMOUNT.—
‘‘(i) IN
GENERAL.—For purposes of
this 
paragraph, 
the 
term 
‘exclusion
amount’ means—
‘‘(I) $100,000 in the case of a
defined contribution plan;
‘‘(II) $100,000 in the case of an
individual retirement plan; and
‘‘(III) $0 in the case of a defined
benefit plan.
‘‘(ii) AGGREGATION OF PLANS.—For
purposes of determining the exclusion
amount under clause (i)—
‘‘(I) 
all 
defined 
contribution
plans maintained by the same em-
ployer shall be treated as a single
plan; and
‘‘(II) all individual retirement
plans (other than Roth IRAs) of the
individual shall be treated as a single
plan.
‘‘(iii) 
COST-OF-LIVING
ADJUST-
MENT.—The Secretary shall adjust the
$100,000 exclusion amount specified in
clause (i) at the same time and in the
same manner as under section 415(d), ex-
cept that the base period shall be the cal-
endar 
quarter 
ending 
September 
30,
1999.’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning
after December 31, 2000.
(c) REPEAL OF RULE WHERE DISTRIBUTIONS HAD
BEGUN BEFORE DEATH OCCURS.—
(1) IN GENERAL.—Subparagraph (B) of section
401(a)(9) is amended by striking clause (i) and re-
designating clauses (ii), (iii), and (iv) as clauses (i),
(ii), and (iii), respectively.
(2) CONFORMING CHANGES.—
(A) Clause (i) of section 401(a)(9)(B) (as
so redesignated) is amended—
(i) by striking ‘‘FOR OTHER CASES’’ in
the heading, and
(ii) by striking ‘‘the distribution of the
employee’s interest has begun in accord-
ance with subparagraph (A)(ii)’’ and in-
serting ‘‘his entire interest has been dis-
tributed to him,’’.
(B) Clause (ii) of section 401(a)(9)(B) (as
so redesignated) is amended by striking ‘‘clause
(ii)’’ and inserting ‘‘clause (i)’’.
(C) Clause (iii) of section 401(a)(9)(B)(iii)
(as so redesignated) is amended—
(i) by striking ‘‘clause (iii)(I)’’ and in-
serting ‘‘clause (ii)(I)’’,
(ii) in subclause (I) by striking
‘‘clause (iii)(III)’’ and inserting ‘‘clause
(ii)(III)’’,
(iii) in subclause (I) by striking ‘‘the
date on which the employee would have at-
tained the age 701⁄2,’’ and inserting ‘‘April
1 of the calendar year following the cal-
endar year in which the spouse attains
701⁄2, and clause (ii) shall not apply to the
exclusion amount,’’, and
(iv) in subclause (II) by striking ‘‘the
distributions to such spouse begin,’’ and
inserting ‘‘his entire interest has been dis-
tributed to him,’’.
(3) REDUCTION
IN
EXCISE
TAX.—Subsection
(a) of section 4974 is amended by striking ‘‘50 per-
cent’’ and inserting ‘‘10 percent’’.
(4) EFFECTIVE DATE.—
(A) IN GENERAL.—Except as provided by
subparagraph (B), the amendments made by
this subsection shall apply to years beginning
after December 31, 2000.
(B) EXCISE TAX.—The amendment made
by paragraph (3) shall apply to years beginning
after December 31, 1999.
SEC. 206. CLARIFICATION OF TAX TREATMENT OF DIVISION
OF SECTION 457 PLAN BENEFITS UPON DI-
VORCE.
(a) IN GENERAL.—Section 414(p)(11) (relating to
application of rules to governmental and church plans) is
amended—
(1) by inserting ‘‘or an eligible deferred com-
pensation plan (within the meaning of section
457(b))’’ after ‘‘subsection (e))’’, and
(2) in the heading, by striking ‘‘GOVERN-
MENTAL AND CHURCH PLANS’’ and inserting ‘‘CER-
TAIN OTHER PLANS’’.
(b) WAIVER OF CERTAIN DISTRIBUTION REQUIRE-
MENTS.—Paragraph (10) of section 414(p) is amended by
striking ‘‘and section 409(d)’’ and inserting ‘‘section
409(d), and section 457(d)’’.
(c) TAX TREATMENT OF PAYMENTS FROM A SEC-
TION 457 PLAN.—Subsection (p) of section 414 is amend-
ed by redesignating paragraph (12) as paragraph (13) and
inserting after paragraph (11) the following new para-
graph:
‘‘(12) TAX TREATMENT OF PAYMENTS FROM A
SECTION 457 PLAN.—If a distribution or payment
from an eligible deferred compensation plan de-
scribed in section 457(b) is made pursuant to a
qualified domestic relations order, rules similar to
the rules of section 402(e)(1)(A) shall apply to such
distribution or payment.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to transfers, distributions, and
payments made after the date of enactment of this Act.
SEC. 207. PERCENTAGE LIMITATIONS ON CONTRIBUTIONS.
(a) AMENDMENTS RELATING TO FERS.—
(1) IN GENERAL.—
(A) Subsection (a) of section 8432 of title
5, United States Code, is amended by striking
‘‘10 percent of ’’.
(B) Subsection (d) of section 8432 of title
5, United States Code, is amended by striking
‘‘section 
415’’ 
and 
inserting 
‘‘section
401(a)(30) or 415’’.
(2) JUSTICES AND JUDGES.—Subsection (b) of
section 8440a of title 5, United States Code, is
amended—
(A) by striking paragraph (2) and by re-
designating paragraphs (3) through (7) as
paragraphs (2) through (6), respectively; and
(B) in paragraph (6) (as so redesignated
by subparagraph (A)) by striking ‘‘paragraphs
(4) and (5)’’ and inserting ‘‘paragraphs (3) and
(4)’’.
(3) 
BANKRUPTCY
JUDGES
AND
MAG-
ISTRATES.—Subsection (b) of section 8440b of title
5, United States Code, is amended—
(A) by striking paragraph (2) and by re-
designating paragraphs (3) through (8) as
paragraphs (2) through (7), respectively;
(B) in paragraph (4) (as so redesignated
by subparagraph (A)) by striking ‘‘paragraph
(4)(A), (B), or (C)’’ and inserting ‘‘paragraph
(3)(A), (B), or (C)’’; and
(C) in paragraph (7) (as so redesignated
by subparagraph (A)) by striking ‘‘Notwith-
standing paragraph (4),’’ and inserting ‘‘Not-
withstanding paragraph (3),’’.
(4) COURT
OF
FEDERAL
CLAIMS
JUDGES.—
Subsection (b) of section 8440c of title 5, United
States Code, is amended—
(A) by striking paragraph (2) and by re-
designating paragraphs (3) through (8) as
paragraphs (2) through (7), respectively;
(B) in paragraph (4) (as so redesignated
by subparagraph (A)) by striking ‘‘paragraph
(4)(A) or (B)’’ and inserting ‘‘paragraph (3)(A)
or (B)’’; and
(C) in paragraph (7) (as so redesignated
by subparagraph (A)) by striking ‘‘Notwith-
standing paragraph (4),’’ and inserting ‘‘Not-
withstanding paragraph (3),’’.
(5) JUDGES OF THE UNITED STATES COURT OF
VETERANS
APPEALS.—Paragraph (2) of section
8440d(b) of title 5, United States Code, is amended
to read as follows:
‘‘(2) For purposes of contributions made to the Thrift
Savings Fund, basic pay does not include any retired pay
paid pursuant to section 7296 of title 38.’’.
(b) AMENDMENTS RELATING TO CSRS.—Paragraph
(2) of section 8351(b) of title 5, United States Code, is
amended by striking ‘‘5 percent of ’’.
(c) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
this section shall take effect on the date of enact-
ment of this Act.
(2) COORDINATION
WITH
ELECTION
PERI-
ODS.—The Executive Director shall by regulation
determine the first election period in which elections
may be made consistent with the amendments made
by this section.
(3) 
DEFINITIONS.—For 
purposes 
of 
this
section—
(A) the term ‘‘election period’’ means a pe-
riod afforded under section 8432(b) of title 5,
United States Code; and
(B) the term ‘‘Executive Director’’ has the
meaning given such term by section 8401(13)
of title 5, United States Code.
SEC. 208. ELIGIBLE ROLLOVER DISTRIBUTIONS.
Section 8432 of title 5, United States Code, is
amended by adding at the end the following:
‘‘(j)(1) For the purpose of this subsection—
‘‘(A) the term ‘eligible rollover distribution’ has
the meaning given such term by section 402(c)(3) of
the Internal Revenue Code of 1986; and
‘‘(B) the term ‘eligible retirement plan’ has the
meaning given such term by section 402(c)(7) of the
Internal Revenue Code of 1986.
‘‘(2) An employee or Member may contribute to the
Thrift Savings Fund an eligible rollover distribution from
an eligible retirement plan. A contribution made under
this subsection shall be made by means of a direct rollover
from an eligible retirement plan in a manner that is simi-
lar to a direct rollover under section 401(a)(31) of the In-
ternal Revenue Code of 1986. In the case of an eligible
rollover distribution, the maximum amount transferred to
the Thrift Savings Fund shall not exceed the amount
which would otherwise have been included in the employ-
ee’s or Member’s gross income for Federal income tax pur-
poses.
‘‘(3) The Executive Director shall prescribe regula-
tions to carry out this subsection.’’.
SEC. 209. IMMEDIATE PARTICIPATION IN THE THRIFT SAV-
INGS PLAN.
(a) ELIMINATION OF CERTAIN WAITING PERIODS
FOR PURPOSES OF EMPLOYEE CONTRIBUTIONS.—Para-
graph (4) of section 8432(b) of title 5, United States
Code, is amended to read as follows:
‘‘(4) The Executive Director shall prescribe such reg-
ulations as may be necessary to carry out the following:
‘‘(A) Notwithstanding subparagraph (A) of
paragraph (2), an employee or Member described in
such subparagraph shall be afforded a reasonable
opportunity to first make an election under this sub-
section beginning on the date of commencing service
or, if that is not administratively feasible, beginning
on the earliest date thereafter that such an election
becomes administratively feasible, as determined by
the Executive Director.
‘‘(B) An employee or Member described in sub-
paragraph (B) of paragraph (2) shall be afforded a
reasonable opportunity to first make an election
under this subsection (based on the appointment or
election described in such subparagraph) beginning
on the date of commencing service pursuant to such
appointment or election or, if that is not administra-
tively feasible, beginning on the earliest date there-
after that such an election becomes administratively
feasible, as determined by the Executive Director.
‘‘(C) Notwithstanding the preceding provisions
of this paragraph, contributions under paragraphs
(1) and (2) of subsection (c) shall not be payable
with respect to any pay period before the earliest
pay period for which such contributions would other-
wise be allowable under this subsection if this para-
graph had not been enacted.
‘‘(D) 
Sections 
8351(a)(2), 
8440a(a)(2),
8440b(a)(2), 8440c(a)(2), and 8440d(a)(2) shall be
applied in a manner consistent with the purposes of
subparagraphs (A) and (B), to the extent those sub-
paragraphs can be applied with respect thereto.
‘‘(E) Nothing in this paragraph shall affect
paragraph (3).’’.
(b) TECHNICAL AND CONFORMING AMENDMENTS.—
(1) Section 8432(a) of title 5, United States Code, is
amended—
(A) in the first sentence by striking ‘‘(b)(1)’’
and inserting ‘‘(b)’’; and
(B) by amending the second sentence to read as
follows: ‘‘Contributions under this subsection pursu-
ant to such an election shall, with respect to each
pay period for which such election remains in effect,
be made in accordance with a program of regular
contributions provided in regulations prescribed by
the Executive Director.’’.
(2) Section 8432(b)(1)(B) of title 5, United States
Code, is amended by inserting ‘‘(or any election allowable
by virtue of paragraph (4))’’ after ‘‘subparagraph (A)’’.
(3) Section 8432(b)(3) of title 5, United States Code,
is amended by striking ‘‘Notwithstanding paragraph
(2)(A), an’’ and inserting ‘‘An’’.
(4) Section 8432(i)(1)(B)(ii) of title 5, United States
Code, is amended by striking ‘‘either elected to terminate
individual contributions to the Thrift Savings Fund within
2 months before commencing military service or’’.
(5) Section 8439(a)(1) of title 5, United States Code,
is amended by inserting ‘‘who makes contributions or’’
after ‘‘for each individual’’ and by striking ‘‘section
8432(c)(1)’’ and inserting ‘‘section 8432’’.
(6) Section 8439(c)(2) of title 5, United States Code,
is amended by adding at the end the following: ‘‘Nothing
in this paragraph shall be considered to limit the dissemi-
nation of information only to the times required under the
preceding sentence.’’.
(7) Sections 8440a(a)(2) and 8440d(a)(2) of title 5,
United States Code, are amended by striking all after
‘‘subject to’’ and inserting ‘‘this chapter.’’.
(c) EFFECTIVE DATE.—This section shall take effect
6 months after the date of enactment of this Act or such
earlier date as the Executive Director (within the meaning
of section 8401(13) of title 5, United States Code) may
by regulation prescribe.
TITLE 
III—INCREASING 
PORT-
ABILITY FOR PARTICIPANTS
SEC. 301. ROLLOVERS ALLOWED AMONG VARIOUS TYPES
OF PLANS.
(a) ROLLOVERS
FROM
AND
TO
SECTION
457
PLANS.—
(1) ROLLOVERS FROM SECTION 457 PLANS.—
(A) IN GENERAL.—Section 457(e) (relat-
ing to other definitions and special rules) is
amended by adding at the end the following:
‘‘(16) ROLLOVER AMOUNTS.—
‘‘(A) GENERAL RULE.—In the case of an
eligible deferred compensation plan, 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) 
(other 
than 
section
402(c)(4)(C)),
‘‘(ii) the employee transfers any por-
tion of the property such employee receives
in such distribution to an eligible retire-
ment 
plan 
described 
in 
section
402(c)(8)(B), and
‘‘(iii) in the case of a distribution of
property other than money, the amount so
transferred consists of the property distrib-
uted,
then such distribution (to the extent so trans-
ferred) shall not be includible in gross income
for the taxable year in which paid.
‘‘(B) CERTAIN
RULES
MADE
APPLICA-
BLE.—The rules of paragraphs (2) through (7)
(other than paragraph (4)(C)) and (9) of sec-
tion 402(c) and section 402(f) shall apply for
purposes of subparagraph (A).
‘‘(C) REPORTING.—Rollovers under this
paragraph shall be reported to the Secretary in
the same manner as rollovers from qualified re-
tirement 
plans 
(as 
defined 
in 
section
4974(c)).’’.
(B) DEFERRAL LIMIT DETERMINED WITH-
OUT REGARD TO ROLLOVER AMOUNTS.—Section
457(b)(2) (defining eligible deferred compensa-
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
period at the end of subparagraph (B) and in-
serting ‘‘, and’’, and by inserting after subpara-
graph (B) the following:
‘‘(C) the plan meets requirements similar
to the requirements of section 401(a)(31).
Any amount transferred in a direct trustee-to-trust-
ee transfer in accordance with section 401(a)(31)
shall not be includible in gross income for the tax-
able 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);’’.
(ii) Paragraph (5) of section 3405(e)
is amended by adding at the end the fol-
lowing: ‘‘Such term shall include an eligible
deferred compensation plan described in
section 457(b).’’.
(iii) Paragraph (3) of section 3405(c)
is amended to read as follows:
‘‘(3) ELIGIBLE ROLLOVER DISTRIBUTION.—For
purposes of this subsection, the term ‘eligible roll-
over distribution’ has the meaning given such term
by section 402(f)(2)(A).’’.
(iv) 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) 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 adding at the end the following:
‘‘(v) an eligible deferred compensation
plan described in section 457(b) of an eli-
gible 
employer 
described 
in 
section
457(e)(1)(A).’’.
(B) Paragraph (9) of section 402(c) is
amended by striking ‘‘except that’’ and all that
follows and inserting ‘‘except that only an ac-
count or annuity described in clause (i) or (ii)
of paragraph (8)(B) shall be treated as an eligi-
ble retirement plan with respect to such dis-
tribution.’’.
(C) Subsection (t) of section 72 (relating
to 10-percent additional tax on early distribu-
tions from qualified retirement plans) is amend-
ed by adding at the end the following new para-
graph:
‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SEC-
TION 457 PLANS.—For purposes of this subsection,
a distribution from an eligible deferred compensation
plan (as defined in section 457(b)) of an employer
described in section 457(e)(1)(A) shall be treated as
a distribution from a qualified retirement plan to the
extent that such distribution is attributable to an
amount transferred to an eligible deferred compensa-
tion plan from a qualified retirement plan (as de-
fined in section 4974(c)). For purposes of this sub-
section, any such distribution shall be treated as if
made from a qualified retirement plan described in
section 4974(c)(1). This paragraph shall only apply
to a transfer that is in excess of $50,000 and that
is permitted by reason of section 402(c)(8)(B)(v) or
section 408(d)(3)(A)(ii).’’.
(D) Subsection (a) of section 457 (relating
to year of inclusion in gross income) is
amended—
(i) by striking ‘‘or otherwise made
available’’, and
(ii) by adding at the end the follow-
ing: ‘‘To the extent provided in section
72(t)(9), section 72(t) shall apply to any
amount includible in gross income under
this subsection.’’.
(3) MINIMUM DISTRIBUTIONS.—Paragraph (2)
of section 457(d) is amended to read as follows:
‘‘(2) 
MINIMUM
DISTRIBUTION
REQUIRE-
MENTS.—A plan meets the distribution requirements
of this paragraph if the plan meets the requirements
of section 401(a)(9).’’.
(4) CONFORMING AMENDMENT.—Paragraph (9)
of section 457(e) is amended to read as follows:
‘‘(9) BENEFITS NOT TREATED AS FAILING TO
MEET
DISTRIBUTION
REQUIREMENTS
OF
SUB-
SECTION (d).—A plan shall not be treated as failing
to meet the distribution requirements of subsection
(d) by reason of a distribution of the total amount
payable to a participant under the plan if—
‘‘(A) such amount does not exceed the dol-
lar limit under section 411(a)(11)(A), and
‘‘(B) such amount may be distributed only
if—
‘‘(i) no amount has been deferred
under the plan with respect to such partici-
pant during the 2-year period ending on
the date of the distribution, and
‘‘(ii) there has been no prior distribu-
tion under the plan to such participant to
which this paragraph applied.’’.
(b) ALLOWANCE
OF ROLLOVERS FROM
AND
TO
403(b) PLANS.—
(1) 
ROLLOVERS
FROM
SECTION
403(b)
PLANS.—Section 403(b)(8)(A)(ii) (relating to roll-
over amounts) is amended by striking ‘‘such dis-
tribution’’ and all that follows and inserting ‘‘such
distribution to an eligible retirement plan described
in section 402(c)(8)(B), and’’.
(2) ROLLOVERS TO SECTION 403(b) PLANS.—
Section 402(c)(8)(B) (defining eligible retirement
plan), as amended by subsection (a), is amended by
striking ‘‘and’’ at the end of clause (iv), by striking
the period at the end of clause (v) and inserting
‘‘, and’’, and by adding at the end the following:
‘‘(vi) an annuity contract described in
section 403(b).’’
(3) CONFORMING AMENDMENT.—Subparagraph
(B) of section 403(b)(8) is amended by striking
‘‘Rules similar to the’’ and inserting ‘‘The’’.
(c) EXPANDED EXPLANATION TO RECIPIENTS OF
ROLLOVER DISTRIBUTIONS.—Paragraph (1) of section
402(f) (relating to written explanation to recipients of dis-
tributions eligible for rollover treatment) is amended by
striking ‘‘and’’ at the end of subparagraph (C), by striking
the period at the end of subparagraph (D) and inserting
‘‘, and’’, and by adding at the end the following new sub-
paragraph:
‘‘(E) of the provisions under which dis-
tributions from the eligible retirement plan re-
ceiving the distribution may be subject to re-
strictions and tax consequences which are dif-
ferent from those applicable to distributions
from the plan making such distribution.’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 72(o)(4) is amended by striking
‘‘and 
408(d)(3)’’ 
and 
inserting 
‘‘403(b)(8),
408(d)(3), and 457(e)(16)’’.
(2) Section 219(d)(2) is amended by striking
‘‘or 
408(d)(3)’’ 
and 
inserting 
‘‘408(d)(3), 
or
457(e)(16)’’.
(3) Section 401(a)(31)(B) is amended by strik-
ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),
403(b)(8), and 457(e)(16)’’.
(4) Subparagraph (A) of section 402(f)(2) is
amended by striking ‘‘or paragraph (4) of section
403(a)’’ and inserting ‘‘, paragraph (4) of section
403(a), subparagraph (A) of section 403(b)(8), or
subparagraph (A) of section 457(e)(16)’’.
(5) Paragraph (1) of section 402(f) is amended
by striking ‘‘from an eligible retirement plan’’.
(6) Subparagraphs (A) and (B) of section
402(f)(1) are amended by striking ‘‘another eligible
retirement plan’’ and inserting ‘‘an eligible retire-
ment plan’’.
(7) Subparagraph (B) of section 403(b)(8) is
amended by striking ‘‘shall apply for purposes of
subparagraph (A)’’ and inserting ‘‘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) Subparagraph (B) of section 403(b)(8) is
amended by inserting ‘‘and (9)’’ after ‘‘through
(7)’’.
(9) Section 408(a)(1) is amended by striking
‘‘or 403(b)(8)’’ and inserting ‘‘, 403(b)(8), or
457(e)(16)’’.
(10) 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)’’.
(11) Section 415(c)(2) is amended by striking
‘‘and 408(d)(3)’’ and inserting ‘‘408(d)(3), and
457(e)(16)’’.
(12) Section 4973(b)(1)(A) is amended by
striking ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or
457(e)(16)’’.
(e) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after De-
cember 31, 1999.
(2) SPECIAL RULE.—Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of
section 1122 of the Tax Reform Act of 1986 shall
not apply to any distribution from an eligible retire-
ment plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986)
on behalf of an individual if there was a rollover to
such plan on behalf of such individual which is per-
mitted solely by reason of any amendment made by
this section.
SEC. 302. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE-
MENT PLANS.
(a) IN GENERAL.—Subparagraph (A) of section
408(d)(3) (relating to rollover amounts) is amended by
adding ‘‘or’’ at the end of clause (i), by striking clauses
(ii) and (iii), and by adding at the end the following:
‘‘(ii) the entire amount received (in-
cluding money and any other property) is
paid into an eligible retirement plan for
the benefit of such individual not later
than the 60th day after the date on which
he receives the payment or distribution.
For purposes of clause (ii), the term ‘eligible re-
tirement plan’ has the meaning given such term
by clauses (iii), (iv), (v), and (vi) of section
402(c)(8)(B).’’.
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 403(b) is amended
by striking ‘‘section 408(d)(3)(A)(iii)’’ and inserting
‘‘section 408(d)(3)(A)(ii)’’.
(2) Clause (i) of section 408(d)(3)(D) is amend-
ed by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i)
or (ii)’’.
(3) Subparagraph (G) of section 408(d)(3) is
amended to read as follows:
‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—In
the case of any payment or distribution out of
a simple retirement account (as defined in sub-
section (p)) to which section 72(t)(6) applies,
this paragraph shall not apply unless such pay-
ment or distribution is paid into another simple
retirement account.’’.
(c) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after De-
cember 31, 1999.
(2) SPECIAL RULE.—Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of
section 1122 of the Tax Reform Act of 1986 shall
not apply to any distribution from an eligible retire-
ment plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986)
on behalf of an individual if there was a rollover to
such plan on behalf of such individual which is per-
mitted solely by reason of the amendments made by
this section.
SEC. 303. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) IN GENERAL.—
(1) Subsection (c) of section 402 (relating to
rules applicable to rollovers from exempt trusts) (as
amended by section 2) is amended by striking para-
graph (2) and redesignating paragraphs (3) through
(10) as paragraphs (2) through (9), respectively.
(2) Paragraph (31) of section 401(a) (relating
to optional direct transfer of eligible rollover dis-
tributions) is amended by striking subparagraph (B)
and redesignating subparagraphs (C) and (D) as
subparagraphs (B) and (C), respectively.
(3) Subparagraph (B) of section 408(d)(3) (re-
lating to rollover contributions) is amended by strik-
ing ‘‘which was not includible in his gross income
because of the application of this paragraph’’ and in-
serting ‘‘to which this paragraph applied’’.
(4) Paragraph (7)(B) of section 402(c) (as re-
designated by subsection (a)(1) and as amended by
section 301) is amended—
(A) by striking ‘‘The term’’ and inserting
‘‘Except as provided in this subparagraph, the
term’’, and
(B) by adding at the end the following:
‘‘Arrangements described in clauses (iii), (iv)
(v), and (vi) shall not be treated as eligible re-
tirement plans for purposes of receiving a roll-
over contribution of an eligible rollover distribu-
tion to the extent that such eligible rollover dis-
tribution is not includible in gross income (de-
termined without regard to paragraph (1)).’’.
(5) Paragraph (2) of section 408(d) is
amended—
(A) by striking ‘‘For purposes’’ and insert-
ing the following:
‘‘(A) IN GENERAL.—Except as provided in
this paragraph, for purposes’’,
(B) by striking ‘‘(A) all’’ and inserting ‘‘(i)
all’’;
(C) by striking ‘‘(B) all’’ and inserting
‘‘(ii) all’’;
(D) by striking ‘‘(C) the’’ and inserting
‘‘(iii) the’’,
(E) by striking ‘‘subparagraph (C)’’ and
inserting ‘‘clause (iii)’’, and
(F) by inserting at the end the following:
‘‘(B) APPLICATION OF SECTION 72.—For
purposes of applying section 72, if—
‘‘(i) a distribution is made from an in-
dividual retirement plan, and
‘‘(ii) a rollover contribution described
in paragraph (3) is made to an eligible re-
tirement 
plan 
described 
in 
section
402(c)(7)(B)(iii), (iv), (v), or (vi) with re-
spect to all or part of such distribution,
the includible amount in the individual’s indi-
vidual retirement plans shall be reduced by the
amount described in subparagraph (C). As of
the close of the calendar year in which the tax-
able year begins, the reduction of all amounts
described in subparagraph (C)(i) shall be ap-
plied prior to the computations described in
subparagraph (A)(iii). The amount of any dis-
tribution with respect to which there is a roll-
over contribution described in clause (ii) shall
not be treated as a distribution for purposes of
subparagraph (A).
‘‘(C) AMOUNT
DESCRIBED.—The amount
described in this subparagraph is the sum of—
‘‘(i) the amount of the rollover con-
tribution 
described 
in 
subparagraph
(B)(ii), and
‘‘(ii) in the case of any portion of the
distribution with respect to which there is
not a rollover contribution described in
paragraph (3), the amount of such portion
that is included in gross income under sec-
tion 72.
‘‘(D) INCLUDIBLE AMOUNT.—For purposes
of this paragraph, the term ‘includible amount’
shall mean the amount that is not investment
in the contract (as defined in section 72).’’.
(6) Subparagraph (C) of section 402(c)(5) (as
redesignated by subsection (a)(1)) is amended by in-
serting after ‘‘other than money’’ the following: ‘‘or
where the amount of the distribution exceeds the
amount of the rollover contribution’’.
(b) HARDSHIP EXCEPTION TO 60-DAY RULE.—
(1) Paragraph (2) of section 402(c) (as so re-
designated) is amended to read as follows:
‘‘(2) TRANSFER
MUST
BE
MADE
WITHIN
DAYS OF RECEIPT.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), paragraph (1) shall not
apply to any transfer of a distribution made
after the 60th day following the day on which
the distributee received the property distrib-
uted.
‘‘(B) HARDSHIP
EXCEPTION.—The Sec-
retary may waive the 60-day requirement under
subparagraph (A) where the failure to waive
such requirement would be against equity or
good conscience, including casualty, disaster, or
other events beyond the reasonable control of
the individual subject to such requirement.’’.
100
(2) Paragraph (3) of section 408(d) (relating to
rollover contributions) is amended by adding at the
end the following new subparagraph:
‘‘(H) WAIVER OF 60-DAY REQUIREMENT.—
The Secretary may waive the 60-day require-
ment under subparagraphs (A) and (D) where
the failure to waive such requirement would be
against equity or good conscience, including
casualty, disaster, or other events beyond the
reasonable control of the individual subject to
such requirement.’’.
(c) CONFORMING AMENDMENTS.—
(1) Paragraph (4) of section 402(c) (as redesig-
nated by subsection (a)(1)) is amended by striking
‘‘(8)(B)’’ and inserting ‘‘(7)(B)’’.
(2) Subparagraph (B) of section 403(a)(4) is
amended by striking ‘‘(2) through (7)’’ and inserting
‘‘(2) through (6)’’.
(3) Section 403(b)(8)(A)(ii) (as amended by
section 301) is amended by striking ‘‘section
402(c)(8)(B)’’ and inserting ‘‘section 402(c)(7)(B)’’.
(4) Subparagraph (B) of section 403(b)(8) (as
amended by section 301) is amended by striking
‘‘(2) through (7) and (9) of section 402(c) (includ-
ing paragraph (4)(C) thereof)’’ and inserting ‘‘(2)
101
through (6) and (8) of section 402(c) (including
paragraph (3)(C) thereof)’’.
(5) Subparagraph (A) of section 408(d)(3) (as
amended by section 302) is amended by striking
‘‘402(c)(8)’’ and inserting ‘‘402(c)(7)’’.
(6) Paragraph (16) of section 457(e) (as added
by section 301) is amended—
(A) in subparagraph (A)(i) by striking
‘‘402(c)(4) (other than section 402(c)(4)(C))’’
and inserting ‘‘section 402(c)(3) (other than
section 402(c)(3)(C))’’,
(B) in subparagraph (A)(ii) by striking
‘‘402(c)(8)(B)’’ and inserting ‘‘402(c)(7)(B)’’,
and
(C) in subparagraph (B) by striking ‘‘para-
graphs (2) through (7) (other than paragraph
(4)(C)) and (9) of section 402(c)’’ and inserting
‘‘paragraphs (2) through (6) (other than para-
graph (3)(C)) and (8) of section 402(c)’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided by para-
graph (2), the amendments made by this section
shall apply to distributions made after December 31,
1999.
102
(2) HARDSHIP EXCEPTION.—The amendments
made by subsection (b) shall apply to 60-day periods
ending after the date of the enactment of this Act.
SEC. 304. TREATMENT OF FORMS OF DISTRIBUTION.
(a) IN GENERAL.—
(1) PLAN TRANSFERS.—Paragraph (6) of sec-
tion 411(d) (relating to accrued benefit not to be de-
creased 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
‘transferee plan’) shall not be treated as
failing to meet the requirements of this
subsection merely because the transferee
plan does not provide some or all of the
forms of distribution previously available
under another defined contribution plan
(in this paragraph referred to as the
‘transferor plan’) to the extent that—
‘‘(I) the forms of distribution
previously available under the trans-
feror plan applied to the account of a
participant or beneficiary under the
transferor plan that was transferred
103
from the transferor plan to the trans-
feree plan pursuant to a direct trans-
fer rather than pursuant to a distribu-
tion from the transferor plan;
‘‘(II) the terms of both the trans-
feror plan and the transferee plan au-
thorize the transfer described in sub-
clause (I);
‘‘(III) the transfer described in
subclause (I) was made pursuant to a
voluntary election by the participant
or beneficiary whose account was
transferred to the transferee plan;
‘‘(IV) the election described in
subclause (III) was made after the
participant or beneficiary received a
notice describing the consequences of
making the election;
‘‘(V) if the transferor plan pro-
vides for an annuity as the normal
form of distribution under the plan in
accordance with section 417, the
transfer is made with the consent of
the participant’s spouse (if any), and
such consent meets requirements simi-
104
lar to the requirements imposed by
section 417(a)(2); and
‘‘(VI) the transferee plan allows
the participant or beneficiary de-
scribed in subclause (III) to receive
any distribution to which the partici-
pant or beneficiary is entitled under
the transferee plan in the form of a
single sum distribution.
‘‘(ii) Clause (i) shall apply to plan
mergers and other transactions having the
effect of a direct transfer, including con-
solidations of benefits attributable to dif-
ferent employers within a multiple em-
ployer plan.
‘‘(E) ELIMINATION OF FORM OF DISTRIBU-
TION.—Except to the extent provided in regula-
tions, a defined contribution plan shall not be
treated as failing to meet the requirements of
this section merely because of the elimination of
a form of distribution previously available there-
under. This subparagraph shall not apply to the
elimination of a form of distribution with re-
spect to any participant unless—
105
‘‘(i) a single sum payment is available
to such participant at the same time or
times as the form of distribution being
eliminated; and
‘‘(ii) such single sum payment is
based on the same or greater portion of
the participant’s account as the form of
distribution being eliminated.’’.
(2) REGULATIONS.—The last sentence of para-
graph (6)(B) of section 411(d) (relating to accrued
benefit not to be decreased by amendment) is
amended to read as follows: ‘‘The Secretary may by
regulations provide that this subparagraph shall not
apply to any plan amendment that does not ad-
versely affect the rights of participants in a material
manner.
(3) SECRETARY
DIRECTED.—Not later than
December 31, 2001, the Secretary of the Treasury
is directed to issue final regulations under section
411(d)(6) of the Internal Revenue Code of 1986.
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. Under
such regulations, section 411(d)(6) of such Code
shall not apply to plan amendments that do not ad-
106
versely affect the rights of participants in a material
manner. In determining whether a plan amendment
has such a materially adverse effect on a participant,
the factors taken into account shall include—
(A) all of the participant’s early retirement
benefits, retirement-type subsidies, and optional
forms of benefit that are reduced or eliminated
by the plan amendment,
(B) the extent to which early retirement
benefits, retirement-type subsidies, and optional
forms of benefit in effect with respect to a par-
ticipant after the effective date of the plan
amendment provide rights that are comparable
to the rights that are reduced or eliminated by
the plan amendment,
(C) the number of years before the partici-
pant attains normal retirement age under the
plan (or early retirement age, as applicable),
(D) the size of the participant’s benefit
that is affected by the plan amendment, in rela-
tion to the amount of the participant’s com-
pensation, and
(E) the number of years before the plan
amendment is effective.
107
The regulations described in this paragraph are in-
tended to permit the elimination or reduction of
early retirement benefits, retirement-type subsidies,
and optional forms of benefit that do not have a ma-
terial value for a plan’s participants but create sig-
nificant burdens and complexities for the plan and
its participants.
(b) CONFORMING AMENDMENT.—(1) Subsection (g)
of section 204 of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1054) is amended by adding
at the end the following:
‘‘(4)(A) A defined contribution plan (in this subpara-
graph referred to as the ‘transferee plan’) shall not be
treated as failing to meet the requirements of this sub-
section merely because the transferee plan does not pro-
vide some or all of the forms of distribution previously
available under another defined contribution plan (in this
paragraph referred to as the ‘transferor plan’) to the ex-
tent 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
108
rather than pursuant to a distribution from the
transferor plan;
‘‘(ii) the terms of both the transferor plan and
the transferee plan authorize the transfer described
in clause (i);
‘‘(iii) the transfer described in clause (i) was
made pursuant to a voluntary election by the partici-
pant or beneficiary whose account was transferred to
the transferee plan;
‘‘(iv) the election described in clause (iii) was
made after the participant or beneficiary received a
notice describing the consequences of making the
election;
‘‘(v) if the transferor plan provides for an annu-
ity as the normal form of distribution under the plan
in accordance with section 205, 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 205(c)(2); and
‘‘(vi) the transferee plan allows the participant
or beneficiary described in clause (iii) to receive any
distribution which the participant or beneficiary is
entitled under transferee plan in the form of a single
sum distribution.
109
‘‘(B) Subparagraph (A) shall apply to plan mergers
and other transactions having the effect of a direct trans-
fer, including consolidations of benefits attributable to dif-
ferent employers within a multiple employer plan.
‘‘(5) Except to the extent provided in regulations, 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 thereunder. 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.’’.
(2) Paragraph (2) of section 204(g) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054)
is amended by striking the last sentence and inserting the
following: ‘‘The Secretary of the Treasury may by regula-
tions provide that this paragraph shall not apply to any
plan amendment that does not adversely affect the rights
of participants in a material manner.’’.
110
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1999.
SEC. 305. RATIONALIZATION OF RESTRICTIONS ON DIS-
TRIBUTIONS.
(a) MODIFICATION OF SAME DESK EXCEPTION.—
(1) 
SECTION
401(k).—Section
401(k)(2)(B)(i)(I) (relating to qualified cash or de-
ferred arrangements) is amended by striking ‘‘sepa-
ration from service’’ and inserting ‘‘severance from
employment’’.
(2) SECTION 403(b).—
(A) Paragraphs (7)(A)(ii) and (11)(A) of
section 403(b) are each amended by striking
‘‘separates from service’’ and inserting ‘‘has a
severance from employment’’.
(B) The heading for paragraph (11) of
section 403(b) is amended by striking ‘‘SEPARA-
TION
FROM
SERVICE’’ and inserting ‘‘SEVER-
ANCE FROM EMPLOYMENT’’.
(3) SECTION
457.—Clause (ii) of section
457(d)(1)(A) is amended by striking ‘‘is separated
from service’’ and inserting ‘‘has a severance from
employment’’.
(b) BUSINESS SALE REQUIREMENTS REPEALED.—
111
(1) IN GENERAL.—Section 401(k)(2)(B)(i)(II)
(relating to qualified cash or deferred arrangements)
is amended by striking ‘‘an event’’ and inserting ‘‘a
plan termination’’.
(2) 
CONFORMING
AMENDMENTS.—Section
401(k)(10) is amended—
(A) by striking subparagraph (A) and in-
serting the following:
‘‘(A) IN GENERAL.—A plan termination is
described in this paragraph if the termination
of the plan does not involve the establishment
or maintenance of another defined contribution
plan (other than an employee stock ownership
plan as defined in section 4975(e)(7)).’’,
(B) in subparagraph (B)—
(i) by striking ‘‘An event’’ and insert-
ing ‘‘A termination’’, and
(ii) by striking ‘‘the event’’ and insert-
ing ‘‘the termination’’,
(C) by striking subparagraph (C), and
(D) by striking ‘‘OR DISPOSITION OF AS-
SETS OR SUBSIDIARY’’ in the heading.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after December 31,
1999.
112
SEC. 306. PURCHASE OF SERVICE CREDIT IN GOVERN-
MENTAL DEFINED BENEFIT PLANS.
(a) 403(b) PLANS.—Subsection (b) of section 403 (as
amended by section 501) is amended by adding at the end
the following new paragraph:
‘‘(14) TRUSTEE-TO-TRUSTEE
TRANSFERS
TO
PURCHASE
PERMISSIVE
SERVICE
CREDIT.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer to a defined
benefit governmental plan (as defined in section
414(d)) if such transfer is—
‘‘(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A))
under such plan, or
‘‘(B) a repayment to which section 415
does not apply by reason of subsection (k)(3)
thereof.’’.
(b) 457 PLANS.—
(1) Subsection (e) of section 457 (as amended
by section 509) is amended by adding at the end the
following new paragraph:
‘‘(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
113
benefit governmental plan (as defined in section
414(d)) if such transfer is—
‘‘(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A))
under such plan, or
‘‘(B) a repayment to which section 415
does not apply by reason of subsection (k)(3)
thereof.’’.
(2) Section 457(b)(2), as amended by sections
101, 202, and 301, 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))’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to trustee-to-trustee transfers after
December 31, 1999.
SEC. 307. EMPLOYERS MAY DISREGARD ROLLOVERS FOR
PURPOSES OF CASH-OUT AMOUNTS.
(a) AMENDMENTS TO 1986 CODE.—
(1) 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
114
terms of the plan, the present value of the non-
forfeitable accrued benefit is determined with-
out regard to that portion of such benefit which
is attributable to rollover contributions (and
earnings allocable thereto). For purposes of this
subparagraph, the term ‘rollover contributions’
means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), clause (ii), (iii),
or (iv) of 408(d)(3)(A), and 457(e)(16).’’.
(2) Clause (i) of section 457(e)(9)(A) is amend-
ed by striking ‘‘such amount’’ and inserting ‘‘the
portion of such amount which is not attributable to
rollover 
contributions 
(as 
defined 
in 
section
411(a)(11)(D))’’.
(b) AMENDMENT TO ERISA.—Section 203(e) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1053(e)) is amended by adding at the end the fol-
lowing:
‘‘(4) A plan shall not fail to meet the requirements
of this subsection if, under the terms of the plan, the
present value of the nonforfeitable accrued benefit is de-
termined without regard to that portion of such benefit
which is attributable to rollover contributions (and earn-
ings allocable thereto). For purposes of this paragraph,
the term ‘rollover contributions’ means any rollover con-
115
tribution under sections 402(c), 403(a)(4), 403(b)(8),
clause (ii), (iii), or (iv) of 408(d)(3)(A), and 457(e)(16)
of the Internal Revenue Code of 1986.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after December 31,
1999.
TITLE 
IV—STRENGTHENING
PENSION SECURITY AND EN-
FORCEMENT
SEC. 401. REPEAL OF 150 PERCENT OF CURRENT LIABILITY
FUNDING LIMIT.
(a) IN GENERAL.—
(1) CODE AMENDMENT.—Section 412(c)(7) (re-
lating to full-funding limitation) is amended—
(A) by striking ‘‘the applicable percentage’’
in subparagraph (A)(i)(I) and inserting ‘‘in the
case of plan years beginning before January 1,
2003, the applicable percentage’’, and
(B) by amending subparagraph (F) to read
as follows:
‘‘(F) 
APPLICABLE
PERCENTAGE.—For
purposes of subparagraph (A)(i)(I), the applica-
ble percentage shall be determined in accord-
ance with the following table:
‘‘In the case of any plan year
The applicable
beginning in—
percentage is—
2000 .............................................................................
160
116
2001 .............................................................................
165
2002 .............................................................................
170.’’.
(2) ERISA AMENDMENT.—Section 302(c)(7) of
the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1082(c)(7)) is amended—
(A) by striking ‘‘the applicable percentage’’
in subparagraph (A)(i)(I) and inserting ‘‘in the
case of plan years beginning before January 1,
2003, the applicable percentage’’, and
(B) by amending subparagraph (F) to read
as follows:
‘‘(F) APPLICABLE PERCENTAGE.—For purposes
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—
2000 .............................................................................
160
2001 .............................................................................
165
2002 .............................................................................
170.’’.
(3) 
EFFECTIVE
DATES.—The 
amendments
made by this subsection shall apply to plan years be-
ginning after December 31, 1999.
(b) MAXIMUM CONTRIBUTION DEDUCTION RULES
MODIFIED
AND APPLIED
TO ALL DEFINED BENEFIT
PLANS.—
117
(1) IN GENERAL.—Section 404(a)(1)(D) (relat-
ing to special rule in case of certain plans) is
amended—
(A) by striking ‘‘which has more than 100
participants for the plan year’’,
(B) by striking ‘‘unfunded current liability
determined under section 414(l)’’ and inserting
‘‘unfunded termination liability (determined as
if the proposed termination date referred to in
section 4041(b)(2)(A)(i)(II) of the Employee
Retirement Income Security Act of 1974 were
the last day of the plan year)’’,
(C) by inserting after the first sentence the
following: ‘‘For purposes of this subparagraph,
in the case of a plan which has less than 100
participants for the plan year, termination li-
ability shall not include the liability attributable
to benefit increases for highly compensated em-
ployees (as defined in section 414(q)) brought
about by plan amendment within the last 2
years before the termination date.’’, and
(D) by striking ‘‘(other than a multiem-
ployer plan)’’.
118
(2) CONFORMING AMENDMENT.—Paragraph (6)
of section 4972(c) is amended by striking the sen-
tence preceding the last sentence thereof.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to plan years begin-
ning after the date of enactment of this Act.
SEC. 402. MISSING PARTICIPANTS.
(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
(e) and by inserting after subsection (b) the following:
‘‘(c) MULTIEMPLOYER
PLANS.—The corporation
shall prescribe rules similar to the rules in subsection (a)
for multiemployer plans covered by this title that termi-
nate under section 4041A.
‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—
‘‘(1) TRANSFER TO CORPORATION.—The plan
administrator of a plan described in paragraph (4)
may elect to transfer a missing participant’s benefits
to the corporation upon termination of the plan.
‘‘(2) INFORMATION TO THE CORPORATION.—To
the extent provided in regulations, the plan adminis-
trator of a plan described in paragraph (4) shall,
upon termination of the plan, provide the corpora-
119
tion information with respect to benefits of a miss-
ing participant if the plan transfers such benefits—
‘‘(A) to the corporation, or
‘‘(B) to an entity other than the corpora-
tion or a plan described in paragraph (4)(B)(ii).
‘‘(3) PAYMENT BY THE CORPORATION.—If ben-
efits of a missing participant were transferred to the
corporation under paragraph (1), the corporation
shall, upon location of the participant or beneficiary,
pay to the participant or beneficiary the amount
transferred (or the appropriate survivor benefit)
either—
‘‘(A) in a single sum (plus interest), or
‘‘(B) in such other form as is specified in
regulations of the corporation.
‘‘(4) PLANS DESCRIBED.—A plan is described
in this paragraph if—
‘‘(A) the plan is a pension plan (within the
meaning of section 3(2))—
‘‘(i) to which the provisions of this
section do not apply (without regard to
this subsection), and
‘‘(ii) which is not a plan described in
paragraphs (2) through (11) of section
4021(b), and
120
‘‘(B) at the time the assets are to be dis-
tributed upon termination, the plan—
‘‘(i) has missing participants, and
‘‘(ii) has not provided for the transfer
of assets to pay the benefits of all missing
participants to another pension plan (with-
in the meaning of section 3(2)).
‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—
Subsections (a)(1) and (a)(3) shall not apply to a
plan described in paragraph (4).’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 206(f) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1056(f)) is
amended—
(A) by striking ‘‘title IV’’ and inserting
‘‘section 4050’’, and
(B) by striking ‘‘the plan shall provide
that’’.
(2) Section 401(a)(34) of such Act (relating to
benefits of missing participants on plan termination)
is amended by striking ‘‘title IV’’ and inserting ‘‘sec-
tion 4050’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions made after final
regulations implementing subsections (c) and (d) of sec-
121
tion 4050 of the Employee Retirement Income Security
Act of 1974 (as added by subsection (a)), respectively, are
prescribed.
SEC. 403. 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 upon written request of a plan par-
ticipant or beneficiary (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, 1999.
SEC. 404. CIVIL PENALTIES FOR BREACH OF FIDUCIARY
RESPONSIBILITY.
(a) IMPOSITION AND AMOUNT OF PENALTY MADE
DISCRETIONARY.—Section 502(l)(1) of the Employee Re-
122
tirement Income Security Act of 1974 (29 U.S.C.
1132(l)(1)) is amended—
(1) by striking ‘‘shall’’ and inserting ‘‘may’’,
and
(2) by striking ‘‘equal to’’ and inserting ‘‘not
greater than’’.
(b) 
APPLICABLE
RECOVERY
AMOUNT.—Section
502(l)(2) of such Act (29 U.S.C. 1132(l)(2)) is amended
to read as follows:
‘‘(2) For purposes of paragraph (1), the term ‘appli-
cable recovery amount’ means any amount which is recov-
ered from any fiduciary or other person (or from any other
person on behalf of any such fiduciary or other person)
with respect to a breach or violation described in para-
graph (1) on or after the 30th day following receipt by
such fiduciary or other person of written notice from the
Secretary of the violation, whether paid voluntarily or by
order of a court in a judicial proceeding instituted by the
Secretary under subsection (a)(2) or (a)(5). The Secretary
may, in the Secretary’s sole discretion, extend the 30-day
period described in the preceding sentence.’’.
(c) OTHER RULES.—Section 502(l) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1132(l)) is amended by adding at the end the following:
123
‘‘(5) A person shall be jointly and severally liable for
the penalty described in paragraph (1) to the same extent
that such person is jointly and severally liable for the ap-
plicable recovery amount on which the penalty is based.
‘‘(6) No penalty shall be assessed under this sub-
section unless the person against whom the penalty is as-
sessed is given notice and opportunity for a hearing with
respect to the violation and applicable recovery amount.’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall apply to any breach of fiduciary re-
sponsibility or other violation of part 4 of subtitle B
of title I of the Employee Retirement Income Secu-
rity Act of 1974 occurring on or after the date of
enactment of this Act.
(2) 
TRANSITION
RULE.—In 
applying 
the
amendment made by subsection (b) (relating to ap-
plicable recovery amount), a breach or other viola-
tion occurring before the date of enactment of this
Act which continues after the 180th day after such
date (and which may have been discontinued at any
time during its existence) shall be treated as having
occurred after such date of enactment.
124
SEC. 405. PENALTY TAX RELIEF FOR SOUND PENSION
FUNDING.
(a) IN GENERAL.—Subsection (c) of section 4972
(relating to nondeductible contributions) is amended by
adding at the end the following new paragraph:
‘‘(7) DEFINED BENEFIT PLAN EXCEPTION.—In
determining the amount of nondeductible contribu-
tions for any taxable year, an employer may elect for
such year not to take into account any contributions
to a defined benefit plan except to the extent that
such contributions exceed the full-funding limitation
(as defined in section 412(c)(7), determined without
regard to subparagraph (A)(i)(I) thereof). For pur-
poses of this paragraph, the deductible limits under
section 404(a)(7) shall first be applied to amounts
contributed to defined contribution plans and then
to amounts described in this paragraph. If an em-
ployer makes an election under this paragraph for a
taxable year, paragraph (6) shall not apply to such
employer for such taxable year.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1999.
125
SEC. 406. 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 begin-
ning after December 31, 1998.
‘‘(2) NONAPPLICATION
TO
PREVIOUSLY
AC-
QUIRED PROPERTY.—The amendments made by this
section shall not apply to any elective deferral if
such deferral is used for the payment of indebted-
ness incurred before January 1, 1999 (or any refi-
nancing thereof) on the acquisition by the plan of
employer securities or employer real property—
‘‘(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.
126
SEC. 407. NOTICE OF SIGNIFICANT REDUCTION IN BENEFIT
ACCRUALS.
(a) IN GENERAL.—Subsection (h) of section 204 of
the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1054) is amended to read as follows:
‘‘(h) NOTICE OF SIGNIFICANT REDUCTION IN BENE-
FIT ACCRUALS.—
‘‘(1) If a plan described in paragraph (4) is
amended to provide for a significant reduction in the
rate of future benefit accrual, the plan administrator
shall provide a notice to—
‘‘(A) each affected participant in the plan,
‘‘(B) each affected beneficiary who is an
alternate payee (within the meaning of section
206(d)(3)(K)) under an applicable qualified do-
mestic relations order (within the meaning of
section 206(d)(3)(B)(i)), and
‘‘(C) each employee organization represent-
ing affected participants in the plan, except
that such notice shall instead be provided to a
person designated to receive such notice on be-
half of any person referred to in paragraph (A),
(B), or (C). For purposes of this paragraph, an
affected participant or beneficiary is a partici-
pant or beneficiary to whom the significant re-
127
duction described in this paragraph is reason-
ably expected to apply.
‘‘(2) The notice required by paragraph (1)
shall—
‘‘(A) include the plan amendment, or a
summary of such plan amendment, and its ef-
fective date, and
‘‘(B) provide a notification and description
of the reduction described in paragraph (1).
A notification and description shall not fail to satisfy
paragraph (2)(B) by reason of a failure to provide
the specific amount of the reduction with respect to
any participant or beneficiary.
‘‘(3) The notice required by paragraph (1) shall
be provided no less than 30 days prior to the effec-
tive date of the plan amendment.
‘‘(4) A plan is described in this paragraph if
such plan is—
‘‘(A) a defined benefit plan, or
‘‘(B) an individual account plan which is
subject to the funding standards of section 302.
‘‘(5) In the case of a material failure to comply
with requirements of this subsection with respect to
more than a de minimis number of persons described
in paragraph (1), the plan amendment to which the
128
failure relates shall not be effective with respect to
such persons for any period prior to the expiration
of 30 days following the date on which a notice is
provided in accordance with this subsection. For
purposes of this paragraph, the term ‘material fail-
ure’ includes any failure that results in materially
less information being provided to the persons de-
scribed in paragraph (1).’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan amendments that are
adopted more than 120 days after the date of enactment
of this Act.
TITLE V—REDUCING
REGULATORY BURDENS
SEC. 501. INTERMEDIATE SANCTIONS FOR INADVERTENT
FAILURES.
(a) IN GENERAL.—Section 401(a) (relating to quali-
fied pension, profit-sharing, and stock bonus plans) is
amended by inserting after paragraph (34) the following:
‘‘(35) PROTECTION
FROM
DISQUALIFICATION
UPON TIMELY CORRECTION OR PAYMENT OF FINE.—
A trust shall not fail to constitute a qualified trust
under this section if the plan of which such trust is
a part has made good faith efforts to meet the re-
quirements of this section, has inadvertently failed
129
to satisfy 1 or more of such requirements, and
either—
‘‘(A) substantially corrects (to the extent
possible) such failure before the date the plan
becomes subject to a plan examination for the
applicable year (as determined under rules pre-
scribed by the Secretary), or
‘‘(B) substantially corrects (to the extent
possible) such failure on or after such date.
If the plan satisfies the requirement under subpara-
graph (B), the Secretary may require the sponsoring
employer to make a payment to the Secretary in an
amount that does not exceed an amount that bears
a reasonable relationship to the severity of the plan’s
failure to satisfy the requirements of this section.’’.
(b) APPLICATION TO CASH OR DEFERRED ARRANGE-
MENTS.—Section 401(k) is amended by inserting after
paragraph (12) the following new paragraph:
‘‘(13) PROTECTION FROM DISQUALIFICATION.—
Rules similar to the rules set forth in section
401(a)(35) shall apply for purposes of determining
whether a cash or deferred arrangement is a quali-
fied cash or deferred arrangement.’’.
130
(c) APPLICATION TO SECTION 403(b) ANNUITY CON-
TRACTS.—Section 403(b) is amended by inserting after
paragraph (12) the following:
‘‘(13) CORRECTION OF ERRORS.—For purposes
of determining whether the exclusion from gross in-
come under paragraph (1) is applicable to an em-
ployee for any taxable year, rules similar to the rules
set forth in section 401(a)(35) shall apply to any an-
nuity contract purchased under this subsection or
any plan established to meet the requirements of
this subsection.’’.
(d) INCOME INCLUSION FOR DISQUALIFICATION NOT
APPLICABLE
TO NONHIGHLY COMPENSATED EMPLOY-
EES.—Section 402(b) (relating to taxability of beneficiary
of nonexempt trust) is amended by striking paragraph (4)
and inserting the following:
‘‘(4) INCOME
INCLUSION
FOR
DISQUALIFICA-
TION
NOT
APPLICABLE
TO
NONHIGHLY
COM-
PENSATED
EMPLOYEES.—Paragraphs (1) and (2)
shall not apply to employees who are not highly com-
pensated employees.
‘‘(5) FAILURE
TO
MEET
REQUIREMENTS
OF
SECTION 401(a)(26) OR 410(b).—If 1 of the reasons
a trust is not exempt from tax under section 501(a)
is the failure of the plan to meet the requirements
131
of section 401(a)(26) or 410(b), then a highly com-
pensated employee shall, in lieu of the amount deter-
mined under paragraph (1) or (2), include in gross
income for the taxable year with or within which the
taxable year of the trust ends an amount equal to
the vested accrued benefit of such employee (other
than the employee’s investment in the contract) as
of the close of such taxable year of the trust.
‘‘(6) HIGHLY COMPENSATED EMPLOYEE.—For
purposes of this subsection, the term ‘highly com-
pensated employee’ has the meaning given such term
by section 414(q).’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the date of enactment of
this Act.
SEC. 502. REPEAL OF THE MULTIPLE USE TEST.
(a) IN GENERAL.—Paragraph (9) of section 401(m)
is amended to read as follows:
‘‘(9) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary to carry
out the purposes of this subsection and subsection
(k), including regulations permitting appropriate ag-
gregation of plans and contributions.’’.
132
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1999.
SEC. 503. SAFETY VALVE FROM MECHANICAL RULES.
(a) IN GENERAL.—The Secretary of the Treasury, by
regulation, shall provide that the plan shall be deemed to
satisfy the requirements of section 401(a)(4) of the Inter-
nal Revenue Code of 1986 if such plan satisfies the facts
and circumstances test under section 401(a)(4) of such
Code, as in effect before January 1, 1994, if—
(1) the plan satisfies conditions prescribed by
the Secretary to appropriately limit the availability
of such test, and
(2) the plan is submitted to the Secretary for
a determination of whether it satisfies such test.
Paragraph (2) shall only apply to the extent provided by
the Secretary.
(b) EFFECTIVE DATES.—
(1) REGULATIONS.—The regulation required by
subsection (a) shall apply to years beginning after
December 31, 2000.
(2) CONDITIONS OF AVAILABILITY.—Any condi-
tion of availability prescribed by the Secretary under
subsection (a)(1) shall not apply before the first year
133
beginning not less than 120 days after the date on
which such condition is prescribed.
SEC. 504. REFORM OF THE LINE OF BUSINESS RULES.
(a) REPEAL OF GATEWAY TEST.—Paragraph (5) of
section 410(b) is amended to read as follows:
‘‘(5) LINE OF BUSINESS EXCEPTION.—If, under
section 414(r), an employer is treated as operating
separate lines of business for a year, the employer
may apply the requirements of this subsection for
such year separately with respect to employees in
each separate line of business.’’.
(b) REGULATIONS.—The Secretary of the Treasury
shall modify the regulations issued under section 414(r)
of the Internal Revenue Code of 1986 (relating to special
rules for separate line of business) to—
(1) simplify the administrability of the rules for
both the Secretary and plans, and
(2) permit employees to be allocated among
lines of business based on all the facts and cir-
cumstances.
(c) EFFECTIVE DATES.—
(1) REPEAL.—The repeal made by subsection
(a) shall apply to years beginning after December
31, 2000.
134
(2) REGULATIONS.—The regulations modified
under subsection (b) shall apply to years beginning
after December 31, 2000.
SEC. 505. COVERAGE TEST FLEXIBILITY.
(a) IN GENERAL.—Paragraph (1) of section 410(b)
is amended by adding at the end the following:
‘‘(D) In the case that the plan fails to
meet the requirements of subparagraphs (A),
(B) and (C), the plan—
‘‘(i) satisfies subparagraph (B), as in
effect immediately before the enactment of
the Tax Reform Act of 1986,
‘‘(ii) is submitted to the Secretary for
a determination of whether it satisfies the
requirement described in clause (i), and
‘‘(iii) satisfies conditions prescribed by
the Secretary by regulation that appro-
priately limit the availability of this sub-
paragraph.
Clause (ii) shall apply only to the extent pro-
vided by the Secretary.’’.
(b) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendment made by
subsection (a) shall apply to years beginning after
December 31, 2000.
135
(2) CONDITIONS OF AVAILABILITY.—Any condi-
tion of availability prescribed by the Secretary under
regulations prescribed by the Secretary under sec-
tion 410(a)(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. 506. INCREASE IN RETIREMENT PLAN CASH-OUT
AMOUNT.
(a) 
AMENDMENTS
TO
1986 
CODE.—Section
411(a)(11) (relating to restrictions on certain mandatory
distributions) is amended by adding at the end the follow-
ing:
‘‘(D) INFLATION
ADJUSTMENT.—In the
case of any plan year beginning in a calendar
year after 1999, the Secretary shall adjust an-
nually the $5,000 amount contained in subpara-
graph (A) for increases in the cost of living at
the same time and in the same manner as ad-
justments under section 415(d); except that the
base period shall be the calendar quarter ending
September 30, 1999, and any increase which is
not a multiple of $500 shall be rounded to the
next lowest multiple of $500.’’.
136
(b) AMENDMENTS TO ERISA.—Section 203(e) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1053(e)) is amended by adding at the end the fol-
lowing:
‘‘(4) INFLATION ADJUSTMENT.—In the case of any
plan year beginning in a calendar year after 1999, the
Secretary shall adjust annually the $5,000 amount con-
tained in paragraph (1) for increases in the cost of living
at the same time and in the same manner as adjustments
under section 415(d) of the Internal Revenue Code of
1986; except that the base period shall be the calendar
quarter ending September 30, 1999, and any increase
which is not a multiple of $500 shall be rounded to the
next lowest multiple of $500.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning on or after
the date of enactment of this Act.
SEC. 507. 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:
137
‘‘(B) ELECTION
TO
USE
PRIOR
YEAR
VALUATION.—
‘‘(i) IN GENERAL.—If, for any plan
year—
‘‘(I) an election is in effect under
this subparagraph 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 avail-
able as of such valuation date.
‘‘(ii) 
ADJUSTMENTS.—Information
under clause (i) shall, in accordance with
regulations, be actuarially adjusted to re-
flect significant differences in participants.
‘‘(iii) ELECTION.—An election under
this subparagraph, once made, shall be ir-
revocable without the consent of the Sec-
retary.’’.
138
(b) AMENDMENTS
TO ERISA.—Paragraph (9) of
section 302(c) of the Employee Retirement Income Secu-
rity 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) 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) Information under clause (i) shall, in accordance
with regulations, be actuarially adjusted to reflect signifi-
cant differences in participants.
‘‘(iii) An election under this subparagraph, once
made, shall be irrevocable without the consent of the Sec-
retary of the Treasury.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning on or after
the date of enactment of this Act.
139
SEC. 508. SECTION 457 INAPPLICABLE TO CERTAIN MIRROR
PLANS.
(a) IN GENERAL.—Subsection (e) of section 457 (re-
lating to deferred compensation plans of State and local
governments and tax-exempt organizations) is amended by
adding at the end the following new paragraph:
‘‘(17) This section shall not apply to a plan,
program, or arrangement maintained solely for the
purposes of providing retirement benefits for em-
ployees in excess of the limitations imposed by sec-
tions 401(a)(17) or 415.’’.
(b) CERTAIN
DEFERRED
COMPENSATION
NOT
TAKEN INTO ACCOUNT.—Subsection (c) of section 457
(relating to individuals who are participants in more than
1 plan) (as amended by section 108(a)) is amended by
adding at the end the following: ‘‘This section shall be ap-
plied without regard to a plan, program, or arrangement
described in subsection (e)(17).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1999.
SEC. 509. SUBSTANTIAL OWNER BENEFITS IN TERMINATED
PLANS.
(a) MODIFICATION OF PHASE-IN OF GUARANTEE.—
Section 4022(b)(5) of the Employee Retirement Income
140
Security Act of 1974 (29 U.S.C. 1322(b)(5)) is amended
to read as follows:
‘‘(5)(A) For purposes of this paragraph, the term
‘majority owner’ means an individual who, at any time
during the 60-month period ending on the date the deter-
mination is being made—
‘‘(i) owns the entire interest in an unincor-
porated trade or business,
‘‘(ii) in the case of a partnership, is a partner
who owns, directly or indirectly, 50 percent or more
of either the capital interest or the profits interest
in such partnership, or
‘‘(iii) in the case of a corporation, owns, directly
or indirectly, 50 percent or more in value of either
the voting stock of that corporation or all the stock
of that corporation.
For purposes of clause (iii), the constructive ownership
rules of section 1563(e) of the Internal Revenue Code of
1986 shall apply (determined without regard to section
1563(e)(3)(C)).
‘‘(B) In the case of a participant who is a majority
owner, the amount of benefits guaranteed under this sec-
tion shall equal the product of—
‘‘(i) a fraction (not to exceed 1) the numerator
of which is the number of years from the later of the
141
effective date or the adoption date of the plan to the
termination date, and the denominator of which is
10, and
‘‘(ii) the amount of benefits that would be guar-
anteed under this section if the participant were not
a majority owner.’’.
(b) MODIFICATION OF ALLOCATION OF ASSETS.—
(1) Section 4044(a)(4)(B) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1344(a)(4)(B)) is amended by striking ‘‘section
4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(B)’’.
(2) Section 4044(b) of such Act (29 U.S.C.
1344(b)) is amended—
(A) by striking ‘‘(5)’’ in paragraph (2) and
inserting ‘‘(4), (5),’’, and
(B) 
by 
redesignating 
paragraphs 
(3)
through (6) as paragraphs (4) through (7), re-
spectively, and by inserting after paragraph (2)
the following:
‘‘(3) If assets available for allocation under
paragraph (4) of subsection (a) are insufficient to
satisfy in full the benefits of all individuals who are
described in that paragraph, the assets shall be allo-
cated first to benefits described in subparagraph (A)
of that paragraph. Any remaining assets shall then
142
be allocated to benefits described in subparagraph
(B) of that paragraph. If assets allocated to such
subparagraph (B) are insufficient to satisfy in full
the benefits described in that subparagraph, the as-
sets shall be allocated pro rata among individuals on
the basis of the present value (as of the termination
date) of their respective benefits described in that
subparagraph.’’.
(c) CONFORMING AMENDMENTS.—
(1) Section 4021 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1321) is
amended—
(A) in subsection (b)(9), by striking ‘‘as
defined in section 4022(b)(6)’’, and
(B) by adding at the end the following:
‘‘(d) For purposes of subsection (b)(9), the term
‘‘substantial owner’’ means an individual who, at any time
during the 60-month period ending on the date the deter-
mination 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
143
‘‘(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)).’’.
(2) Section 4043(c)(7) of such Act (29 U.S.C.
1343(c)(7)) is amended by striking ‘‘section 4022(b)(6)’’
and inserting ‘‘section 4021(d)’’.
(d) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to plan terminations—
(A) under section 4041(c) of the Employee
Retirement Income Security Act of 1974 (29
U.S.C. 1341(c)) with respect to which notices
of intent to terminate are provided under sec-
tion 4041(a)(2) of such Act (29 U.S.C.
1341(a)(2)) on or after the date of enactment
of this Act, and
(B) under section 4042 of such Act (29
U.S.C. 1342) with respect to which proceedings
144
are instituted by the corporation on or 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. 510. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT
LOSS OF DIVIDEND DEDUCTION.
(a) IN GENERAL.—Section 404(k)(2)(A) (defining
applicable dividends) is amended by striking ‘‘or’’ at the
end of clause (ii), by redesignating clause (iii) as clause
(iv), and by inserting after clause (ii) the following new
clause:
‘‘(iii) is, at the election of such par-
ticipants or their beneficiaries—
‘‘(I) payable as provided in clause
(i) or (ii), or
‘‘(II) paid to the plan and rein-
vested in qualifying employer securi-
ties, or’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1999.
145
SEC. 511. MODIFICATION OF 403(b) EXCLUSION ALLOWANCE
TO CONFORM TO 415 MODIFICATION.
The Secretary of the Treasury shall modify the regu-
lations regarding the exclusion allowance under section
403(b)(2) of the Internal Revenue Code of 1986 to render
void the requirement that contributions to a defined bene-
fit pension plan be treated as previously excluded amounts
for purposes of the exclusion allowance. For taxable years
beginning after December 31, 1999, such regulations shall
be applied as if such requirement were void.
SEC. 512. TREATMENT OF MULTIEMPLOYER PLANS UNDER
SECTION 415.
(a) COMPENSATION LIMIT.—Paragraph (11) of sec-
tion 415(b) (relating to limitation for defined benefit
plans) is amended to read as follows:
‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN-
MENTAL AND MULTIEMPLOYER PLANS.—In the case
of a governmental plan (as defined in section
414(d)) or a multiemployer plan (as defined in sec-
tion 414(f)), subparagraph (B) of paragraph (1)
shall not apply.’’.
(b) EXEMPTION
FOR SURVIVOR
AND DISABILITY
BENEFITS.—Subparagraph (I) of section 415(b)(2) (relat-
ing to limitation for defined benefit plans) is amended—
146
(1) by inserting ‘‘or a multiemployer plan (as
defined in section 414(f))’’ after ‘‘section 414(d))’’
in clause (i),
(2) by inserting ‘‘or multiemployer plan’’ after
‘‘governmental plan’’ in clause (ii), and
(3) by inserting ‘‘AND MULTIEMPLOYER’’ after
‘‘GOVERNMENTAL’’ in the heading.
(c) COMBINING AND AGGREGATION OF PLANS.—
(1) COMBINING OF PLANS.—Subsection (f) of
section 415 (relating to combining of plans) is
amended by adding at the end the following:
‘‘(3) 
EXCEPTION
FOR
MULTIEMPLOYER
PLANS.—Notwithstanding paragraph (1) and sub-
section (g), a multiemployer plan (as defined in sec-
tion 414(f)) shall not be combined or aggregated
with any other plan maintained by an employer for
purposes of applying the limitations established in
this section.’’.
(2) CONFORMING AMENDMENT FOR AGGREGA-
TION OF PLANS.—Subsection (g) of section 415 (re-
lating to aggregation of plans) is amended by strik-
ing ‘‘The Secretary’’ and inserting ‘‘Except as pro-
vided in subsection (f)(3), the Secretary’’.
147
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1999.
SEC. 513. ELIMINATION OF PARTIAL TERMINATION RULES
FOR MULTIEMPLOYER PLANS.
(a) PARTIAL TERMINATION RULES FOR MULTIEM-
PLOYER PLANS.—Section 411(d)(3) (relating to termi-
nation or partial termination; discontinuance of contribu-
tions) is amended by adding at the end the following new
sentence: ‘‘This paragraph shall not apply in the case of
a partial termination of a multiemployer plan.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to partial terminations beginning
after December 31, 1999.
SEC. 514. NOTICE AND CONSENT PERIOD REGARDING DIS-
TRIBUTIONS.
(a) EXPANSION OF PERIOD.—
(1) IN GENERAL.—
(A) Subparagraph (A) of section 417(a)(6)
is amended by striking ‘‘90-day’’ and inserting
‘‘one-year’’.
(B) Subparagraph (A) of section 205(c)(7)
of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1055) is amended by
striking ‘‘90-day’’ and inserting ‘‘one-year’’.
148
(2) MODIFICATION
OF
REGULATIONS.—The
Secretary of the Treasury shall modify the regula-
tions under sections 402(f), 411(a)(11), and 417 of
the Internal Revenue Code of 1986 to substitute
‘‘one year’’ for ‘‘90 days’’ each place it appears in
Treasury Regulations sections 1.402(f)–1, 1.411(a)–
11(c), and 1.417(e)–1(b).
(3) EFFECTIVE DATE.—The amendments made
by paragraph (1) and the modifications required by
paragraph (2) shall apply to years beginning after
December 31, 1999.
(b) CONSENT REGULATION INAPPLICABLE TO CER-
TAIN DISTRIBUTIONS.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the regulations under section
411(a)(11) of the Internal Revenue Code of 1986 to
provide that the description of a participant’s right,
if any, to defer receipt of a distribution shall also de-
scribe the consequences of failing to defer such re-
ceipt.
(2) EFFECTIVE DATE.—The modifications re-
quired by paragraph (1) shall apply to years begin-
ning after December 31, 1999.
149
SEC. 515. CONFORMING AMENDMENTS RELATING TO ELEC-
TION TO RECEIVE TAXABLE CASH COM-
PENSATION IN LIEU OF NONTAXABLE PARK-
ING BENEFITS.
(a) IN GENERAL.—
(1) Clause (ii) of section 415(c)(3)(D) and sub-
paragraph (B) of section 403(b)(3) are each amend-
ed by striking ‘‘section 125 or’’ and inserting ‘‘sec-
tion 125, 132(f)(4), or’’.
(2) Paragraph (2) of section 414(s) is amended
by striking ‘‘section 125, 402(e)(3)’’ and inserting
‘‘section 125, 132(f)(4), 402(e)(3)’’.
(b) EFFECTIVE DATE.—The amendments made by
subsection (a) shall take effect as if included in the
amendment made by section 1072 of the Taxpayer Relief
Act of 1997.
SEC. 516. 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 organi-
150
zation which is described in section 414(d)’’ after ‘‘or in-
strumentality thereof)’’.
(b) CONFORMING AMENDMENTS.—
(1) The headings for subparagraph (G) of sec-
tion 401(a)(5) and subparagraph (H) of section
401(a)(26) are each amended by inserting ‘‘AND
INTERNATIONAL
ORGANIZATION’’ after ‘‘GOVERN-
MENTAL’’.
(2) Subparagraph (G) of section 401(k)(3) is
amended by inserting ‘‘STATE AND LOCAL GOVERN-
MENTAL
AND
INTERNATIONAL
ORGANIZATION
PLANS.—’’ after ‘‘(G)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall take effect as if included in the amend-
ment made by section 1505 of the Taxpayer Relief Act
of 1997.
SEC. 517. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) IN GENERAL.—The Secretary of the Treasury
shall modify Treasury Regulations section 1.410(b)–6(g)
to provide that employees of an organization described in
section 403(b)(1)(A)(i) of the Internal Revenue Code of
1986 who are eligible to make contributions under section
403(b) pursuant to a salary reduction agreement may be
treated as excludable with respect to a plan under section
401(k), or section 401(m) of such Code that is provided
151
under the same general arrangement as a plan under such
section 401(k), if—
(1) no employee of an organization described in
section 403(b)(1)(A)(i) of such Code is eligible to
participate in such section 401(k) plan or section
401(m) plan, and
(2) 95 percent of the employees who are not
employees of an organization described in section
403(b)(1)(A)(i) of such Code are eligible to partici-
pate in such section 401(k) plan or section 401(m)
plan.
(b) EFFECTIVE DATE.—The modification required by
subsection (a) shall apply as of the same date set forth
in section 1426(b) of the Small Business Job Protection
Act of 1996.
SEC. 518. PERMISSIVE AGGREGATION OF COLLECTIVE BAR-
GAINING UNITS.
(a) IN GENERAL.—Paragraph (3) of section 410(b)
is amended by inserting the following immediately before
the last sentence thereof: ‘‘Solely for purposes of applying
this subsection to employees who are not described in sub-
paragraph (A), an employer may elect to have subpara-
graph (A) not apply to one or more units of employees
who are described in subparagraph (A).’’.
152
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1999.
SEC. 519. REPEAL OF TRANSITION RULE RELATING TO CER-
TAIN HIGHLY COMPENSATED EMPLOYEES.
(a) 
IN
GENERAL.—Paragraph 
(4) 
of 
section
1114(c)(4) of the Tax Reform Act of 1986 is hereby re-
pealed.
(b) EFFECTIVE DATE.—The repeal made by sub-
section (a) shall apply to plan years beginning on or after
January 1, 2000.
SEC. 520. CLARIFICATION OF TREATMENT OF EMPLOYER-
PROVIDED RETIREMENT ADVICE.
(a) IN GENERAL.—Section 132(e) (defining de mini-
mis fringe) is amended by adding at the end the following:
‘‘(3) TREATMENT
OF
CERTAIN
RETIREMENT
PLANNING SERVICES.—The provision of retirement
planning services by an employer to employees, to
the extent not described in subsection (d), shall be
treated as a de minimis fringe.’’.
(b) NO CONSTRUCTIVE RECEIPT.—Section 132 is
amended by redesignating subsection (m) as subsection
(n) and by inserting after subsection (l) the following:
‘‘(m) RETIREMENT PLANNING.—
153
‘‘(1) IN
GENERAL.—No amount shall be in-
cluded in the gross income of an employee solely be-
cause the employee may choose between any retire-
ment planning fringe and compensation which would
otherwise be includible in the gross income of such
employee.
‘‘(2) 
NONDISCRIMINATION
REQUIREMENT.—
Paragraph (1) shall apply to a highly compensated
employee only if the choice described in such para-
graph is available on substantially the same terms to
each member of a group of employees which is de-
fined under a reasonable classification set up by the
employer which does not discriminate in favor of
highly compensated employees.
‘‘(3) RETIREMENT
PLANNING
FRINGE.—For
purposes of this subsection, the term ‘retirement
planning fringe’ means any retirement planning
services provided by an employer to an employee
which are not included in the gross income of the
employee by reason of subsection (d) or (e).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1999.
154
SEC. 521. ANNUAL REPORT DISSEMINATION.
(a) IN GENERAL.—Section 104(b)(3) of the Em-
ployee Retirement Income Security Act of 1974 (29
U.S.C. 1024(b)(3)) is amended by striking ‘‘shall furnish’’
and inserting ‘‘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
December 31, 1998.
SEC. 522. EXCESS BENEFIT PLANS.
(a) IN GENERAL.—Section 3(36) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C.
1002(36)) is amended to read as follows:
‘‘(36) The term ‘excess benefit plan’ means a
plan, without regard to whether such plan is funded,
maintained by an employer solely for the purpose of
providing benefits to employees in excess of the limi-
tations imposed by 1 or more of sections 401(a)(17),
401(k), 401(m), 402(g), 403(b), 408(k), 408(p), or
415 of the Internal Revenue Code of 1986 or any
other limitation on contributions or benefits in such
Code on plans to which any of such sections apply.
To the extent that a separable part of a plan (as de-
termined by the Secretary of Labor) maintained by
an employer is maintained for such purpose, that
155
part shall be treated as a separate plan which is an
excess benefit plan.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1999.
SEC. 523. BENEFIT SUSPENSION NOTICE.
(a) MODIFICATION OF REGULATION.—The Secretary
of Labor shall modify the regulation under section
203(a)(3)(B) of the Employee Retirement Income Secu-
rity Act of 1974 (29 U.S.C. 1053(a)(3)(B)) to provide
that the notification required by such regulation—
(1) may be included in the summary plan de-
scription for the plan furnished in accordance with
section 104(b) of such Act (29 U.S.C. 1024(b)),
rather than in a separate notice, and
(2) need not include a copy of the relevant plan
provisions.
(b) EFFECTIVE
DATE.—The modification made
under subsection (a) shall apply to plan years beginning
after December 31, 1999.
SEC. 524. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) IN GENERAL.—If this section applies to any plan
or contract amendment—
(1) such plan or contract shall be treated as
being operated in accordance with the terms of the
156
plan during the period described in subsection
(b)(2)(A), and
(2) such plan shall not fail to meet the require-
ments of section 411(d)(6) of the Internal Revenue
Code of 1986 or section 204(g) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1054(g)) by reason of such amendment.
(b) AMENDMENTS TO WHICH SECTION APPLIES.—
(1) IN GENERAL.—This section shall apply to
any amendment to any plan or annuity contract
which is made—
(A) pursuant to any amendment made by
this Act, or pursuant to any regulation issued
under this Act, and
(B) on or before the last day of the first
plan year beginning on or after January 1,
2002.
In the case of a government plan (as defined in sec-
tion 414(d) of the Internal Revenue Code of 1986
and section 3(32) of the Employee Retirement In-
come Security Act of 1974), this paragraph shall be
applied by substituting ‘‘2004’’ for ‘‘2002’’.
(2) CONDITIONS.—This section shall not apply
to any amendment unless—
(A) during the period—
157
(i) beginning on the date the legisla-
tive or regulatory amendment described in
paragraph (1)(A) takes effect (or in the
case of a plan or contract amendment not
required by such legislative or regulatory
amendment, the effective date specified by
the plan), and
(ii) ending on the date described in
paragraph (1)(B) (or, if earlier, the date
the plan or contract amendment is adopt-
ed),
the plan or contract is operated as if such plan
or contract amendment were in effect, and
(B) such plan or contract amendment ap-
plies retroactively for such period.
SEC. 525. REPORTING SIMPLIFICATION.
(a) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
OWNERS AND THEIR SPOUSES.—
(1) IN GENERAL.—The Secretary of the Treas-
ury shall modify the requirements for filing annual
returns with respect to one-participant retirement
plans to ensure that such plans with assets of
$500,000 or less as of the close of the plan year
need not file a return for that year.
158
(2) ONE-PARTICIPANT RETIREMENT PLAN DE-
FINED.—For purposes of this subsection, the term
‘‘one-participant retirement plan’’ means a retire-
ment plan that—
(A) on the first day of the plan year—
(i) covered only the employer (and the
employer’s spouse) and the employer
owned the entire business (whether or not
incorporated), or
(ii) covered only one or more partners
(and their spouses) in a business partner-
ship (including partners in an S or C cor-
poration),
(B) meets the minimum coverage require-
ments of section 410(b) of the Internal Revenue
Code of 1986 without being combined with any
other plan of the business that covers the em-
ployees of the business,
(C) does not provide benefits to anyone ex-
cept the employer (and the employer’s spouse)
or the partners (and their spouses),
(D) does not cover a business that is a
member of an affiliated service group, a con-
trolled group of corporations, or a group of
businesses under common control, and
159
(E) does not cover a business that leases
employees.
(3) OTHER DEFINITIONS.—Terms used in para-
graph (2) which are also used in section 414 of the
Internal Revenue Code of 1986 shall have the re-
spective meanings given such terms by such section.
(b) SIMPLIFIED ANNUAL FILING REQUIREMENT FOR
PLANS WITH FEWER THAN 25 EMPLOYEES.—In the case
of a retirement plan which covers less than 25 employees
on the 1st day of the plan year and meets the require-
ments described in subparagraphs (B), (D), and (E) of
subsection (a)(2), the Secretary of the Treasury shall pro-
vide for the filing of a simplified annual return that is
substantially similar to the annual return required to be
filed by a one-participant retirement plan.
SEC. 526. MODEL PLANS FOR SMALL BUSINESSES.
(a) IN GENERAL.—Not later than December 31,
2000, the Secretary of the Treasury is directed to issue
at least one model defined contribution plan and at least
one model defined benefit plan that fit the needs of small
businesses and that shall be treated as meeting the re-
quirements of section 401(a) of the Internal Revenue Code
of 1986 with respect to the form of the plan. To the extent
that the requirements of section 401(a) of such Code are
modified after the issuance of such plans, the Secretary
160
of the Treasury shall, in a timely manner, issue model
amendments that, if adopted in a timely manner by an
employer that has a model plan in effect, shall cause such
model plan to be treated as meeting the requirements of
section 401(a) of such Code, as modified, with respect to
the form of the plan.
(b) MASTER
AND
PROTOTYPE
PLAN
ALTER-
NATIVE.—The Secretary of the Treasury may, in its dis-
cretion, satisfy the requirements of subsection (a) through
the enhancement and simplification of the Secretary’s pro-
grams for master and prototype plans in such a manner
as to achieve the purposes of subsection (a).
Æ