I
104TH CONGRESS
1ST SESSION
H. R. 1504
To amend the Internal Revenue Code of 1986 to modify the treatment
of governmental plans under the rules governing retirement plans.
IN THE HOUSE OF REPRESENTATIVES
APRIL 7, 1995
Mr. MATSUI (for himself, Mr. CRANE, Mrs. JOHNSON of Connecticut, Mr. JA-
COBS, Mr. LEVIN, Mr. PORTMAN, Mr. CHRISTENSEN, Mr. STARK, Mr.
SAM JOHNSON of Texas, Mr. KLECZKA, Mr. ENGLISH of Pennsylvania,
Mrs. KENNELLY, Ms. ROS-LEHTINEN, and Mr. BENTSEN) introduced the
following bill; which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to modify
the treatment of governmental plans under the rules
governing retirement plans.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Public Pension Equity
Restoration Act of 1995’’.
SEC. 2. TREATMENT OF GOVERNMENTAL PLANS UNDER
SECTION 415.
(a) DEFINITION OF COMPENSATION.—Subsection (k)
of section 415 of the Internal Revenue Code of 1986 (re-
garding limitations on benefits and contributions under
qualified plans) is amended by adding immediately after
paragraph (2) thereof the following new paragraph:
‘‘(3) DEFINITION OF COMPENSATION FOR GOV-
ERNMENTAL PLANS.—For purposes of this section,
in the case of a governmental plan (as defined in
section 414(d)), the term ‘compensation’ includes, in
addition to the amounts described in subsection
(c)(3)—
‘‘(A) any elective deferral (as defined in
section 402(g)(3)), and
‘‘(B) any amount which is contributed by
the employer at the election of the employee
and which is not includible in the gross income
of an employee under section 125 or 457.’’
(b) COMPENSATION LIMIT.—Subsection (b) of sec-
tion 415 of such Code is amended by adding immediately
after paragraph (10) the following new paragraph:
‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN-
MENTAL
PLANS.—In the case of a governmental
plan (as defined in section 414(d)), subparagraph
(B) of paragraph (1) shall not apply.’’
(c) TREATMENT
OF CERTAIN EXCESS BENEFIT
PLANS.—
(1) IN GENERAL.—Section 415 of such Code is
amended by adding at the end thereof the following
new subsection:
‘‘(m) TREATMENT OF QUALIFIED GOVERNMENTAL
EXCESS BENEFIT ARRANGEMENTS.—
‘‘(1) GOVERNMENTAL PLAN NOT AFFECTED.—
In determining whether a governmental plan (as de-
fined in section 414(d)) meets the requirements of
this section, benefits provided under a qualified gov-
ernmental excess benefit arrangement shall not be
taken into account. Income accruing to a govern-
mental plan (or to a trust that is maintained solely
for the purpose of providing benefits under a quali-
fied governmental excess benefit arrangement) in re-
spect of a qualified governmental excess benefit ar-
rangement shall constitute income derived from the
exercise of an essential governmental function upon
which such governmental plan (or trust) shall be ex-
empt from tax under section 115.
‘‘(2) TAXATION
OF
PARTICIPANT.—For pur-
poses of this chapter—
‘‘(A) the taxable year or years for which
amounts in respect of a qualified governmental
excess benefit arrangement are includible in
gross income by a participant, and
‘‘(B) the treatment of such amounts when
so includible by the participant,
shall be determined as if such qualified govern-
mental excess benefit arrangement were treated as a
plan for the deferral of compensation which is main-
tained by a corporation not exempt from tax under
this chapter and which does not meet the require-
ments for qualification under section 401.
‘‘(3) QUALIFIED GOVERNMENTAL EXCESS BEN-
EFIT
ARRANGEMENT.—For purposes of this sub-
section, the term ‘qualified governmental excess ben-
efit arrangement’ means a portion of a governmental
plan if—
‘‘(A) such portion is maintained solely for
the purpose of providing to participants in the
plan that part of the participant’s annual bene-
fit otherwise payable under the terms of the
plan that exceeds the limitations on benefits im-
posed by this section,
‘‘(B) under such portion no election is pro-
vided at any time to the participant (directly or
indirectly) to defer compensation, and
‘‘(C) benefits described in subparagraph
(A) are not paid from a trust forming a part
of such governmental plan unless such trust is
maintained solely for the purpose of providing
such benefits.’’
(2) COORDINATION WITH SECTION 457.—Sub-
section (e) of section 457 of such Code is amended
by adding at the end thereof the following new para-
graph:
‘‘(15) TREATMENT
OF
QUALIFIED
GOVERN-
MENTAL
EXCESS
BENEFIT
ARRANGEMENTS.—Sub-
sections (b)(2) and (c)(1) shall not apply to any
qualified governmental excess benefit arrangement
(as defined in section 415(m)(3)), and benefits pro-
vided under such an arrangement shall not be taken
into account in determining whether any other plan
is an eligible deferred compensation plan.’’
(3) CONFORMING AMENDMENT.—Paragraph (2)
of section 457(f) of such Code is amended by strik-
ing the word ‘‘and’’ at the end of subparagraph (C),
by striking the period after subparagraph (D) and
inserting the words ‘‘, and’’, and by inserting imme-
diately thereafter the following new subparagraph:
‘‘(E) a qualified governmental excess bene-
fit arrangement described in section 415(m).’’
(d) EXEMPTION
FOR SURVIVOR
AND DISABILITY
BENEFITS.—Paragraph (2) of section 415(b) of such
Code is amended by adding at the end thereof the follow-
ing new subparagraph:
‘‘(I) EXEMPTION FOR SURVIVOR AND DIS-
ABILITY BENEFITS PROVIDED UNDER GOVERN-
MENTAL
PLANS.—Subparagraph (B) of para-
graph (1), subparagraph (C) of this paragraph,
and paragraph (5) shall not apply to—
‘‘(i) income received from a govern-
mental plan (as defined in section 414(d))
as a pension, annuity, or similar allowance
as the result of the recipient becoming dis-
abled by reason of personal injuries or
sickness, or
‘‘(ii) amounts received from a govern-
mental plan by the beneficiaries, survivors,
or the estate of an employee as the result
of the death of the employee.’’
(e) REVOCATION
OF GRANDFATHER ELECTION.—
Subparagraph (C) of section 415(b)(10) of such Code is
amended by adding at the end thereof the following new
sentence: ‘‘An election made pursuant to the preceding
sentence to have the provisions of this paragraph applied
to the plan may be revoked not later than the last day
of the 3rd plan year beginning after the date of enactment
with respect to all plan years as to which such election
has been applicable and all subsequent plan years: Pro-
vided, That any amount paid by the plan in a taxable year
ending after revocation of such election in respect of bene-
fits attributable to a taxable year during which such elec-
tion was in effect shall be includible in income by the re-
cipient in accordance with the rules of this chapter in the
taxable year in which such amount is received (except that
such amount shall be treated as received for purposes of
the limitations imposed by this section in the earlier tax-
able year or years to which such amount is attributable).’’
(f) EFFECTIVE DATE.—
(1) IN GENERAL.—The amendments made by
subsections (a), (b), (c), and (d) shall apply to tax-
able years beginning on or after the date of the en-
actment of this Act. The amendments made by sub-
section (e) shall apply with respect to election rev-
ocations adopted after the date of the enactment of
this Act.
(2) TREATMENT
FOR
YEARS
BEGINNING
BE-
FORE DATE OF ENACTMENT.—In the case of a gov-
ernmental plan (as defined in section 414(d) of the
Internal Revenue Code of 1986), such plan shall be
treated as satisfying the requirements of section 415
of such Code for all taxable years beginning before
the date of the enactment of this Act.
Æ