‘‘(2) LIMITATION
ON
AMOUNT
OF
ADDITIONAL
DEFERRALS.—A plan shall not permit additional
elective deferrals under paragraph (1) for any year in
an amount greater than the lesser of—
‘‘(A) $5,000, or
‘‘(B) the excess (if any) of—
‘‘(i) the participant’s compensation for
the year, over
‘‘(ii) any other elective deferrals of the
participant for such year which are made
without regard to this subsection.
‘‘(3) TREATMENT
OF
CONTRIBUTIONS.—In the
case of any contribution to a plan under paragraph
(1), such contribution shall not, with respect to the
year in which the contribution is made—
‘‘(A) be subject to any otherwise applicable
limitation 
contained 
in 
section 
402(g),
402(h)(2), 404(a), 404(h), 408(p)(2)(A)(ii), 415,
or 457, or
‘‘(B) be taken into account in applying such
limitations to other contributions or benefits
under such plan or any other such plan.
‘‘(4) ELIGIBLE PARTICIPANT.—For purposes of
this subsection, the term ‘eligible participant’ means,
with respect to any plan year, a participant in a
plan—
‘‘(A) who has attained the age of 50 before
the close of the plan year, and
‘‘(B) with respect to whom no other elective
deferrals may (without regard to this subsection)
be made to the plan for the plan year by reason
of the application of any limitation or other re-
striction described in paragraph (3) or com-
parable limitation contained in the terms of the
plan.
‘‘(5) OTHER
DEFINITIONS
AND
RULES.—For
purposes of this subsection—
‘‘(A) APPLICABLE
EMPLOYER
PLAN.—The
term ‘applicable employer plan’ means—
‘‘(i) an employees’ trust described in
section 401(a) which is exempt from tax
under section 501(a),
‘‘(ii) a plan under which amounts are
contributed by an individual’s employer for
an annuity contract described in section
403(b),
‘‘(iii) an eligible deferred compensation
plan under section 457 of an eligible em-
ployer as defined in section 457(e)(1)(A),
and
‘‘(iv) an arrangement meeting the re-
quirements of section 408 (k) or (p).
‘‘(B) ELECTIVE DEFERRAL.—The term ‘elec-
tive deferral’ has the meaning given such term
by subsection (u)(2)(C).
‘‘(C) EXCEPTION FOR SECTION 457 PLANS.—
This subsection shall not apply to an applicable
employer 
plan 
described 
in 
subparagraph
(A)(iii) for any year to which section 457(b)(3)
applies.
‘‘(D) COST-OF-LIVING
ADJUSTMENT.—For
years beginning after December 31, 2005, the
Secretary shall adjust annually the $5,000
amount in subparagraph (A) for increases in the
cost-of-living at the same time and in the same
manner as adjustments under section 415(d); ex-
cept that the base period shall be the calendar
quarter beginning July 1, 2004, and any in-
crease which is not a multiple of $500 shall be
rounded to the next lowest multiple of $500.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to contributions in taxable years begin-
ning after December 31, 2000.
SEC. 302. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF
EMPLOYEES 
TO 
DEFINED 
CONTRIBUTION
PLANS.
(a) EQUITABLE TREATMENT.—
(1) IN GENERAL.—Subparagraph (B) of section
415(c)(1) (relating to limitation for defined contribu-
tion plans) is amended by striking ‘‘25 percent’’ and
inserting ‘‘100 percent’’.
(2) APPLICATION
TO
SECTION
403(b).—Section
403(b) is amended—
(A) by striking ‘‘the exclusion allowance for
such taxable year’’ in paragraph (1) and insert-
ing ‘‘the applicable limit under section 415’’;
(B) by striking paragraph (2); and
(C) by inserting ‘‘or any amount received
by a former employee after the fifth taxable year
following the taxable year in which such em-
ployee was terminated’’ before the period at the
end of the second sentence of paragraph (3).
(3) CONFORMING AMENDMENTS.—
(A) Subsection (f) of section 72 is amended
by striking ‘‘section 403(b)(2)(D)(iii))’’ and in-
serting ‘‘section 403(b)(2)(D)(iii), as in effect be-
fore the enactment of the Comprehensive Retire-
ment Security and Pension Reform Act of
2000)’’.
(B) Section 404(a)(10)(B) is amended by
striking ‘‘, the exclusion allowance under section
403(b)(2),’’.
(C) Section 415(a)(2) is amended by strik-
ing ‘‘, and the amount of the contribution for
such portion shall reduce the exclusion allowance
as provided in section 403(b)(2)’’.
(D) Section 415(c)(3) is amended by adding
at the end the following new subparagraph:
‘‘(E) ANNUITY CONTRACTS.—In the case of
an annuity contract described in section 403(b),
the term ‘participant’s compensation’ means the
participant’s 
includible 
compensation 
deter-
mined under section 403(b)(3).’’.
(E) Section 415(c) is amended by striking
paragraph (4).
(F) Section 415(c)(7) is amended to read as
follows:
‘‘(7) CERTAIN
CONTRIBUTIONS
BY
CHURCH
PLANS NOT TREATED AS EXCEEDING LIMIT.—
‘‘(A) IN
GENERAL.—Notwithstanding any
other provision of this subsection, at the election
of a participant who is an employee of a church
or a convention or association of churches, in-
cluding an organization described in section
414(e)(3)(B)(ii), contributions and other addi-
tions for an annuity contract or retirement in-
come account described in section 403(b) with re-
spect to such participant, when expressed as an
annual addition to such participant’s account,
shall be treated as not exceeding the limitation
of paragraph (1) if such annual addition is not
in excess of $10,000.
‘‘(B) $40,000 AGGREGATE
LIMITATION.—
The total amount of additions with respect to
any participant which may be taken into ac-
count for purposes of this subparagraph for all
years may not exceed $40,000.
‘‘(C) ANNUAL ADDITION.—For purposes of
this paragraph, the term ‘annual addition’ has
the meaning given such term by paragraph (2).’’.
(G) Subparagraph (B) of section 402(g)(7)
(as redesignated by section 211) is amended by
inserting before the period at the end the fol-
lowing: ‘‘(as in effect before the enactment of the
Comprehensive Retirement Security and Pension
Reform Act of 2000)’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning after
December 31, 2000.
(b) SPECIAL RULES FOR SECTIONS 403(b) AND 408.—
(1) IN GENERAL.—Subsection (k) of section 415
is amended by adding at the end the following new
paragraph:
‘‘(4) SPECIAL RULES FOR SECTIONS 403(b) AND
408.—For purposes of this section, any annuity con-
tract described in section 403(b) for the benefit of a
participant shall be treated as a defined contribution
plan maintained by each employer with respect to
which the participant has the control required under
subsection (b) or (c) of section 414 (as modified by
subsection (h)). For purposes of this section, any con-
tribution by an employer to a simplified employee
pension plan for an individual for a taxable year
shall be treated as an employer contribution to a de-
fined contribution plan for such individual for such
year.’’.
(2) EFFECTIVE DATE.—
(A) IN
GENERAL.—The amendment made
by paragraph (1) shall apply to limitation years
beginning after December 31, 1999.
(B) EXCLUSION ALLOWANCE.—Effective for
limitation years beginning in 2000, in the case
of any annuity contract described in section
403(b) of the Internal Revenue Code of 1986, the
amount of the contribution disqualified by rea-
son of section 415(g) of such Code shall reduce
the exclusion allowance as provided in section
403(b)(2) of such Code.
(3) MODIFICATION OF 403(b) EXCLUSION ALLOW-
ANCE TO CONFORM TO 415 MODIFICATION.—The Sec-
retary of the Treasury shall modify the regulations re-
garding 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 benefit pension plan be treated as previously
excluded amounts for purposes of the exclusion allow-
ance. For taxable years beginning after December 31,
1999, such regulations shall be applied as if such re-
quirement were void.
(c) DEFERRED COMPENSATION PLANS OF STATE AND
LOCAL
GOVERNMENTS
AND
TAX-EXEMPT
ORGANIZA-
TIONS.—
(1) IN GENERAL.—Subparagraph (B) of section
457(b)(2) (relating to salary limitation on eligible de-
ferred compensation plans) is amended by striking
‘‘331⁄3 percent’’ and inserting ‘‘100 percent’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to years beginning after
December 31, 2000.
SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER MATCH-
ING CONTRIBUTIONS.
(a) IN GENERAL.—Section 411(a) (relating to min-
imum vesting standards) is amended—
(1) in paragraph (2), by striking ‘‘A plan’’ and
inserting ‘‘Except as provided in paragraph (12), a
plan’’; and
(2) by adding at the end the following:
‘‘(12) FASTER
VESTING
FOR
MATCHING
CON-
TRIBUTIONS.—In the case of matching contributions
(as defined in section 401(m)(4)(A)), paragraph (2)
shall be applied—
‘‘(A) by substituting ‘3 years’ for ‘5 years’
in subparagraph (A), and
‘‘(B) by substituting the following table for
the table contained in subparagraph (B):
The nonforfeitable
‘‘Years of service:
percentage is:
2 ..........................................................................................
3 ..........................................................................................
4 ..........................................................................................
5 ..........................................................................................
6 ..........................................................................................
100.’’.
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall
apply to contributions for plan years beginning after
December 31, 2000.
(2) COLLECTIVE BARGAINING AGREEMENTS.—In
the case of a plan maintained pursuant to one or
more collective bargaining agreements between em-
ployee representatives and one or more employers
ratified by the date of the enactment of this Act, the
amendments made by this section shall not apply to
contributions on behalf of employees covered by any
such agreement for plan years beginning before the
earlier of—
(A) the later of—
(i) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any exten-
sion thereof on or after such date of the en-
actment); or
(ii) January 1, 2001; or
(B) January 1, 2005.
(3) SERVICE REQUIRED.—With respect to any
plan, the amendments made by this section shall not
apply to any employee before the date that such em-
ployee has 1 hour of service under such plan in any
plan year to which the amendments made by this sec-
tion apply.
SEC. 304. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBU-
TION RULES.
(a) SIMPLIFICATION AND FINALIZATION OF MINIMUM
DISTRIBUTION REQUIREMENTS.—
(1) IN GENERAL.—The Secretary of the Treasury
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 Rev-
enue Code of 1986; and
(B) modify such regulations to—
(i) reflect current 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 beneficiary
and to elect a new method of calculating life expect-
ancy.
(3) EFFECTIVE DATE FOR REGULATIONS.—Regu-
lations referred to in paragraph (1) shall be effective
for years beginning after December 31, 2000, and
shall apply in such years without regard to whether
an individual had previously begun receiving min-
imum distributions.
(b) 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 redes-
ignating 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 accordance
with subparagraph (A)(ii)’’ and inserting
‘‘his entire interest has been distributed 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) (as
so redesignated) is amended—
(i) by striking ‘‘clause (iii)(I)’’ and in-
serting ‘‘clause (ii)(I)’’;
(ii) by striking ‘‘clause (iii)(III)’’ in
subclause 
(I) 
and 
inserting 
‘‘clause
(ii)(III)’’;
(iii) by striking ‘‘the date on which the
employee would have attained age 701⁄2,’’ in
subclause (I) and inserting ‘‘April 1 of the
calendar year following the calendar year
in which the spouse attains 701⁄2,’’; and
(iv) by striking ‘‘the distributions to
such spouse begin,’’ in subclause (II) and
inserting ‘‘his entire interest has been dis-
tributed to him,’’.
(3) EFFECTIVE DATE.—The amendments made
by this subsection shall apply to years beginning after
December 31, 2000.
(c) REDUCTION IN EXCISE TAX.—
(1) IN GENERAL.—Subsection (a) of section 4974
is amended by striking ‘‘50 percent’’ and inserting
‘‘10 percent’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to years beginning after
December 31, 2000.
SEC. 305. CLARIFICATION OF TAX TREATMENT OF DIVISION
OF SECTION 457 PLAN BENEFITS UPON DI-
VORCE.
(a) IN GENERAL.—Section 414(p)(11) (relating to ap-
plication of rules to governmental and church plans) is
amended—
(1) by inserting ‘‘or an eligible deferred com-
pensation plan (within the meaning of section
457(b))’’ after ‘‘subsection (e))’’; and
(2) in the heading, by striking ‘‘GOVERNMENTAL
AND CHURCH PLANS’’ and inserting ‘‘CERTAIN OTHER
PLANS’’.
(b) WAIVER
OF CERTAIN DISTRIBUTION REQUIRE-
MENTS.—Paragraph (10) of section 414(p) is amended by
striking ‘‘and section 409(d)’’ and inserting ‘‘section
409(d), and section 457(d)’’.
(c) TAX TREATMENT OF PAYMENTS FROM A SECTION
457 PLAN.—Subsection (p) of section 414 is amended by
redesignating paragraph (12) as paragraph (13) and in-
serting after paragraph (11) the following new paragraph:
‘‘(12) TAX TREATMENT OF PAYMENTS FROM A
SECTION
457
PLAN.—If a distribution or payment
from an eligible deferred compensation plan described
in section 457(b) is made pursuant to a qualified do-
mestic relations order, rules similar to the rules of
section 402(e)(1)(A) shall apply to such distribution
or payment.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to transfers, distributions, and pay-
ments made after December 31, 2000.
SEC. 306. MODIFICATION OF SAFE HARBOR RELIEF FOR
HARDSHIP WITHDRAWALS FROM CASH OR DE-
FERRED ARRANGEMENTS.
(a) IN GENERAL.—The Secretary of the Treasury shall
revise the regulations relating to hardship distributions
under section 401(k)(2)(B)(i)(IV) of the Internal Revenue
Code of 1986 to provide that the period an employee is pro-
hibited from making elective and employee contributions in
order for a distribution to be deemed necessary to satisfy
financial need shall be equal to 6 months.
(b) EFFECTIVE DATE.—The revised regulations under
subsection (a) shall apply to years beginning after Decem-
ber 31, 2000.
TITLE 
IV—INCREASING 
PORT-
ABILITY FOR PARTICIPANTS
SEC. 401. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF
PLANS.
(a) ROLLOVERS FROM AND TO SECTION 457 PLANS.—
(1) ROLLOVERS FROM SECTION 457 PLANS.—
(A) IN GENERAL.—Section 457(e) (relating
to other definitions and special rules) is amend-
ed by adding at the end the following:
‘‘(16) ROLLOVER AMOUNTS.—
‘‘(A) GENERAL RULE.—In the case of an el-
igible deferred compensation plan established
and maintained by an employer described in
subsection (e)(1)(A), if—
‘‘(i) any portion of the balance to the
credit of an employee in such plan is paid
to such employee in an eligible rollover dis-
tribution (within the meaning of section
402(c)(4) without regard to subparagraph
(C) thereof),
‘‘(ii) the employee transfers any por-
tion of the property such employee receives
in such distribution to an eligible retire-
ment plan described in section 402(c)(8)(B),
and
‘‘(iii) in the case of a distribution of
property other than money, the amount so
transferred consists of the property distrib-
uted,
then such distribution (to the extent so trans-
ferred) shall not be includible in gross income for
the taxable year in which paid.
‘‘(B) CERTAIN RULES MADE APPLICABLE.—
The rules of paragraphs (2) through (7) (other
than paragraph (4)(C)) and (9) of section 402(c)
and section 402(f) shall apply for purposes of
subparagraph (A).
‘‘(C) REPORTING.—Rollovers under this
paragraph shall be reported to the Secretary in
the same manner as rollovers from qualified re-
tirement plans (as defined in section 4974(c)).’’.
(B) DEFERRAL LIMIT DETERMINED WITH-
OUT REGARD TO ROLLOVER AMOUNTS.—Section
457(b)(2) (defining eligible deferred compensa-
tion plan) is amended by inserting ‘‘(other than
rollover amounts)’’ after ‘‘taxable year’’.
(C) DIRECT ROLLOVER.—Paragraph (1) of
section 457(d) is amended by striking ‘‘and’’ at
the end of subparagraph (A), by striking the pe-
riod at the end of subparagraph (B) and insert-
ing ‘‘, and’’, and by inserting after subpara-
graph (B) the following:
‘‘(C) in the case of a plan maintained by
an employer described in subsection (e)(1)(A),
the plan meets requirements similar to the re-
quirements of section 401(a)(31).
Any amount transferred in a direct trustee-to-trustee
transfer in accordance with section 401(a)(31) shall
not be includible in gross income for the taxable year
of transfer.’’.
(D) WITHHOLDING.—
(i) Paragraph (12) of section 3401(a)
is amended by adding at the end the fol-
lowing:
‘‘(E) under or to an eligible deferred com-
pensation plan which, at the time of such pay-
ment, is a plan described in section 457(b)
maintained by an employer described in section
457(e)(1)(A); or’’.
(ii) Paragraph (3) of section 3405(c) is
amended to read as follows:
‘‘(3) ELIGIBLE ROLLOVER DISTRIBUTION.—For
purposes of this subsection, the term ‘eligible rollover
distribution’ has the meaning given such term by sec-
tion 402(f)(2)(A).’’.
(iii) LIABILITY FOR WITHHOLDING.—
Subparagraph (B) of section 3405(d)(2) is
amended by striking ‘‘or’’ at the end of
clause (ii), by striking the period at the end
of clause (iii) and inserting ‘‘, or’’, and by
adding at the end the following:
‘‘(iv) section 457(b).’’.
(2) ROLLOVERS TO SECTION 457 PLANS.—
(A) IN
GENERAL.—Section 402(c)(8)(B)
(defining eligible retirement plan) is amended by
striking ‘‘and’’ at the end of clause (iii), by
striking the period at the end of clause (iv) and
inserting ‘‘, and’’, and by inserting after clause
(iv) the following new clause:
‘‘(v) an eligible deferred compensation
plan described in section 457(b) of an em-
ployer described in section 457(e)(1)(A).’’.
(B) 
SEPARATE
ACCOUNTING.—Section
402(c) is amended by adding at the end the fol-
lowing new paragraph:
‘‘(11) SEPARATE ACCOUNTING.—Unless a plan
described in clause (v) of paragraph (8)(B) agrees to
separately account for amounts rolled into such plan
from eligible retirement plans not described in such
clause, the plan described in such clause may not ac-
cept transfers or rollovers from such retirement
plans.’’.
(C) 10 PERCENT
ADDITIONAL
TAX.—Sub-
section (t) of section 72 (relating to 10-percent
additional tax on early distributions from quali-
fied retirement plans) is amended by adding at
the end the following new paragraph:
‘‘(9) SPECIAL RULE FOR ROLLOVERS TO SECTION
457 PLANS.—For purposes of this subsection, a dis-
tribution from an eligible deferred compensation plan
(as defined in section 457(b)) of an employer de-
scribed in section 457(e)(1)(A) shall be treated as a
distribution from a qualified retirement plan de-
scribed in 4974(c)(1) to the extent that such distribu-
tion is attributable to an amount transferred to an el-
igible deferred compensation plan from a qualified re-
tirement plan (as defined in section 4974(c)).’’.
(b) ALLOWANCE OF ROLLOVERS FROM AND TO 403(b)
PLANS.—
(1) ROLLOVERS FROM SECTION 403(b) PLANS.—
Section 
403(b)(8)(A)(ii) 
(relating 
to 
rollover
amounts) is amended by striking ‘‘such distribution’’
and all that follows and inserting ‘‘such distribution
to an eligible retirement plan described in section
402(c)(8)(B), and’’.
(2) ROLLOVERS TO SECTION 403(b) PLANS.—Sec-
tion 402(c)(8)(B) (defining eligible retirement plan),
as amended by subsection (a), is amended by striking
‘‘and’’ at the end of clause (iv), by striking the period
at the end of clause (v) and inserting ‘‘, and’’, and
by inserting after clause (v) the following new clause:
‘‘(vi) an annuity contract described in
section 403(b).’’.
(c) EXPANDED EXPLANATION
TO RECIPIENTS
OF
ROLLOVER
DISTRIBUTIONS.—Paragraph (1) of section
402(f) (relating to written explanation to recipients of dis-
tributions eligible for rollover treatment) is amended by
striking ‘‘and’’ at the end of subparagraph (C), by striking
the period at the end of subparagraph (D) and inserting
‘‘, and’’, and by adding at the end the following new sub-
paragraph:
‘‘(E) of the provisions under which distribu-
tions from the eligible retirement plan receiving
the distribution may be subject to restrictions
and tax consequences which are different from
those applicable to distributions from the plan
making such distribution.’’.
(d) SPOUSAL ROLLOVERS.—Section 402(c)(9) (relat-
ing to rollover where spouse receives distribution after death
of employee) is amended by striking ‘‘; except that’’ and
all that follows up to the end period.
(e) CONFORMING AMENDMENTS.—
(1) Section 72(o)(4) is amended by striking ‘‘and
408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and
457(e)(16)’’.
(2) Section 219(d)(2) is amended by striking ‘‘or
408(d)(3)’’ and inserting ‘‘408(d)(3), or 457(e)(16)’’.
(3) Section 401(a)(31)(B) is amended by strik-
ing ‘‘and 403(a)(4)’’ and inserting ‘‘, 403(a)(4),
403(b)(8), and 457(e)(16)’’.
(4) Subparagraph (A) of section 402(f)(2) is
amended by striking ‘‘or paragraph (4) of section
403(a)’’ and inserting ‘‘, paragraph (4) of section
403(a), subparagraph (A) of section 403(b)(8), or sub-
paragraph (A) of section 457(e)(16)’’.
(5) Paragraph (1) of section 402(f) is amended
by striking ‘‘from an eligible retirement plan’’.
(6) Subparagraphs (A) and (B) of section
402(f)(1) are amended by striking ‘‘another eligible
retirement plan’’ and inserting ‘‘an eligible retire-
ment plan’’.
(7) Subparagraph (B) of section 403(b)(8) is
amended to read as follows:
‘‘(B) CERTAIN RULES MADE APPLICABLE.—
The rules of paragraphs (2) through (7) and (9)
of section 402(c) and section 402(f) shall apply
for purposes of subparagraph (A), except that
section 402(f) shall be applied to the payor in
lieu of the plan administrator.’’.
(8) Section 408(a)(1) is amended by striking ‘‘or
403(b)(8),’’ and inserting ‘‘403(b)(8), or 457(e)(16)’’.
(9) Subparagraphs (A) and (B) of section
415(b)(2) are each amended by striking ‘‘and
408(d)(3)’’ and inserting ‘‘403(b)(8), 408(d)(3), and
457(e)(16)’’.
(10) Section 415(c)(2) is amended by striking
‘‘and 408(d)(3)’’ and inserting ‘‘408(d)(3), and
457(e)(16)’’.
(11) Section 4973(b)(1)(A) is amended by strik-
ing ‘‘or 408(d)(3)’’ and inserting ‘‘408(d)(3), or
457(e)(16)’’.
(f) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after De-
cember 31, 2000.
(2) SPECIAL RULE.—Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of sec-
tion 1122 of the Tax Reform Act of 1986 shall not
apply to any distribution from an eligible retirement
plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986) on
behalf of an individual if there was a rollover to such
plan on behalf of such individual which is permitted
solely by reason of any amendment made by this sec-
tion.
SEC. 402. ROLLOVERS OF IRAS INTO WORKPLACE RETIRE-
MENT PLANS.
(a) IN
GENERAL.—Subparagraph (A) of section
408(d)(3) (relating to rollover amounts) is amended by add-
ing ‘‘or’’ at the end of clause (i), by striking clauses (ii)
and (iii), and by adding at the end the following:
‘‘(ii) the entire amount received (in-
cluding money and any other property) is
paid into an eligible retirement plan for the
benefit of such individual not later than the
60th day after the date on which the pay-
ment or distribution is received, except that
the maximum amount which may be paid
into such plan may not exceed the portion
of the amount received which is includible
in gross income (determined without regard
to this paragraph).
For purposes of clause (ii), the term ‘eligible re-
tirement plan’ means an eligible retirement plan
described in clause (iii), (iv), (v), or (vi) of sec-
tion 402(c)(8)(B).’’.
(b) CONFORMING AMENDMENTS.—
(1) Paragraph (1) of section 403(b) is amended
by striking ‘‘section 408(d)(3)(A)(iii)’’ and inserting
‘‘section 408(d)(3)(A)(ii)’’.
(2) Clause (i) of section 408(d)(3)(D) is amended
by striking ‘‘(i), (ii), or (iii)’’ and inserting ‘‘(i) or
(ii)’’.
(3) Subparagraph (G) of section 408(d)(3) is
amended to read as follows:
‘‘(G) SIMPLE RETIREMENT ACCOUNTS.—In
the case of any payment or distribution out of
a simple retirement account (as defined in sub-
section (p)) to which section 72(t)(6) applies,
this paragraph shall not apply unless such pay-
ment or distribution is paid into another simple
retirement account.’’.
(c) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to distributions after De-
cember 31, 2000.
(2) SPECIAL RULE.—Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of sec-
tion 1122 of the Tax Reform Act of 1986 shall not
apply to any distribution from an eligible retirement
plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986) on
behalf of an individual if there was a rollover to such
plan on behalf of such individual which is permitted
solely by reason of the amendments made by this sec-
tion.
SEC. 403. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) ROLLOVERS FROM EXEMPT TRUSTS.—Paragraph
(2) of section 402(c) (relating to maximum amount which
may be rolled over) is amended by adding at the end the
following: ‘‘The preceding sentence shall not apply to such
distribution to the extent—
‘‘(A) such portion is transferred in a direct
trustee-to-trustee transfer to a qualified trust
which is part of a plan which is a defined con-
tribution plan and which agrees to separately
account for amounts so transferred, including
separately accounting for the portion of such dis-
tribution which is includible in gross income
and the portion of such distribution which is not
so includible, or
‘‘(B) such portion is transferred to an eligi-
ble retirement plan described in clause (i) or (ii)
of paragraph (8)(B).’’.
(b) OPTIONAL DIRECT TRANSFER OF ELIGIBLE ROLL-
OVER
DISTRIBUTIONS.—Subparagraph (B) of section
401(a)(31) (relating to limitation) is amended by adding
at the end the following: ‘‘The preceding sentence shall not
apply to such distribution if the plan to which such dis-
tribution is transferred—
‘‘(i) agrees to separately account for
amounts so transferred, including sepa-
rately accounting for the portion of such
distribution which is includible in gross in-
come and the portion of such distribution
which is not so includible, or
‘‘(ii) is an eligible retirement plan de-
scribed in clause (i) or (ii) of section
402(c)(8)(B).’’.
(c) RULES FOR APPLYING SECTION 72 TO IRAS.—
Paragraph (3) of section 408(d) (relating to special rules
for applying section 72) is amended by inserting at the end
the following:
‘‘(H) APPLICATION OF SECTION 72.—
‘‘(i) IN GENERAL.—If—
‘‘(I) a distribution is made from
an individual retirement plan, and
‘‘(II) a rollover contribution is
made to an eligible retirement plan de-
scribed in section 402(c)(8)(B)(iii),
(iv), (v), or (vi) with respect to all or
part of such distribution,
then, notwithstanding paragraph (2), the
rules of clause (ii) shall apply for purposes
of applying section 72.
‘‘(ii) APPLICABLE RULES.—In the case
of a distribution described in clause (i)—
‘‘(I) section 72 shall be applied
separately to such distribution,
‘‘(II) notwithstanding the pro
rata allocation of income on, and in-
vestment in, the contract to distribu-
tions under section 72, the portion of
such distribution rolled over to an eli-
gible retirement plan described in
clause (i) shall be treated as from in-
come on the contract (to the extent of
the aggregate income on the contract
from all individual retirement plans of
the distributee), and
‘‘(III) appropriate adjustments
shall be made in applying section 72 to
other distributions in such taxable year
and subsequent taxable years.’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions made after December 31,
2000.
SEC. 404. HARDSHIP EXCEPTION TO 60-DAY RULE.
(a) EXEMPT
TRUSTS.—Paragraph (3) of section
402(c) (relating to transfer must be made within 60 days
of receipt) is amended to read as follows:
‘‘(3) TRANSFER MUST BE MADE WITHIN 60 DAYS
OF RECEIPT.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), paragraph (1) shall not
apply to any transfer of a distribution made
after the 60th day following the day on which the
distributee received the property distributed.
‘‘(B) HARDSHIP
EXCEPTION.—The Sec-
retary may waive the 60-day requirement under
subparagraph (A) where the failure to waive
such requirement would be against equity or
good conscience, including casualty, disaster, or
other events beyond the reasonable control of the
individual subject to such requirement.’’.
(b) IRAS.—Paragraph (3) of section 408(d) (relating
to rollover contributions), as amended by section 403, is
amended by adding after subparagraph (H) the following
new subparagraph:
‘‘(I) WAIVER OF 60-DAY REQUIREMENT.—
The Secretary may waive the 60-day require-
ment under subparagraphs (A) and (D) where
the failure to waive such requirement would be
against equity or good conscience, including cas-
ualty, disaster, or other events beyond the rea-
sonable control of the individual subject to such
requirement.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2000.
SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.
(a) PLAN TRANSFERS.—
(1) IN
GENERAL.—Paragraph (6) of section
411(d) (relating to accrued benefit not to be decreased
by amendment) is amended by adding at the end the
following:
‘‘(D) PLAN TRANSFERS.—
‘‘(i) IN GENERAL.—A defined contribu-
tion 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 subparagraph referred to as the ‘trans-
feror plan’) to the extent that—
‘‘(I) the forms of distribution pre-
viously available under the transferor
plan applied to the account of a par-
ticipant or beneficiary under the
transferor plan that was transferred
from the transferor plan to the trans-
feree plan pursuant to a direct transfer
rather than pursuant to a distribution
from the transferor plan,
‘‘(II) the terms of both the trans-
feror plan and the transferee plan au-
thorize the transfer described in sub-
clause (I),
‘‘(III) the transfer described in
subclause (I) was made pursuant to a
voluntary election by the participant
or beneficiary whose account was
transferred to the transferee plan,
‘‘(IV) the election described in
subclause (III) was made after the par-
ticipant or beneficiary received a no-
tice describing the consequences of
making the election,
‘‘(V) if the transferor plan pro-
vides for an annuity as the normal
form of distribution under the plan in
accordance with section 417, the trans-
fer is made with the consent of the par-
ticipant’s spouse (if any), and such
consent meets requirements similar to
the requirements imposed by section
417(a)(2), and
‘‘(VI) the transferee plan allows
the participant or beneficiary described
in subclause (III) to receive any dis-
tribution to which the participant or
beneficiary is entitled under the trans-
feree plan in the form of a single sum
distribution.
‘‘(ii) EXCEPTION.—Clause (i) shall
apply to plan mergers and other trans-
actions having the effect of a direct transfer,
including consolidations of benefits attrib-
utable to different employers within a mul-
tiple employer plan.
‘‘(E) ELIMINATION OF FORM OF DISTRIBU-
TION.—Except to the extent provided in regula-
tions, a defined contribution plan shall not be
treated as failing to meet the requirements of this
section merely because of the elimination of a
form of distribution previously available there-
under. This subparagraph shall not apply to the
elimination of a form of distribution with re-
spect to any participant unless—
‘‘(i) a single sum payment is available
to such participant at the same time or
times as the form of distribution being
eliminated, and
‘‘(ii) such single sum payment is based
on the same or greater portion of the par-
ticipant’s account as the form of distribu-
tion being eliminated.’’.
(2) EFFECTIVE DATE.—The amendment made by
this subsection shall apply to years beginning after
December 31, 2000.
(b) REGULATIONS.—
(1) IN
GENERAL.—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 shall by regulations
provide that this subparagraph shall not apply to
any plan amendment that does not adversely affect
the rights of participants in a material manner.’’.
(2) SECRETARY DIRECTED.—Not later than De-
cember 31, 2001, the Secretary of the Treasury is di-
rected to issue final regulations under section
411(d)(6) of the Internal Revenue Code of 1986, in-
cluding the regulations required by the amendments
made by this subsection. Such regulations shall apply
to plan years beginning after December 31, 2001, or
such earlier date as is specified by the Secretary of
the Treasury.
SEC. 406. RATIONALIZATION OF RESTRICTIONS ON DIS-
TRIBUTIONS.
(a) MODIFICATION OF SAME DESK EXCEPTION.—
(1) SECTION 401(k).—
(A) Section 401(k)(2)(B)(i)(I) (relating to
qualified cash or deferred arrangements) is
amended by striking ‘‘separation from service’’
and inserting ‘‘severance from employment’’.
(B) Subparagraph (A) of section 401(k)(10)
(relating to distributions upon termination of
plan or disposition of assets or subsidiary) is
amended to read as follows:
‘‘(A) IN GENERAL.—An event described in
this subparagraph is the termination of the plan
without establishment or maintenance of another
defined contribution plan (other than an em-
ployee stock ownership plan as defined in section
4975(e)(7)).’’.
(C) Section 401(k)(10) is amended—
(i) in subparagraph (B)—
(I) by striking ‘‘An event’’ in
clause (i) and inserting ‘‘A termi-
nation’’; and
(II) by striking ‘‘the event’’ in
clause (i) and inserting ‘‘the termi-
nation’’;
(ii) by striking subparagraph (C); and
(iii) by striking ‘‘OR DISPOSITION OF
ASSETS OR SUBSIDIARY’’ in the heading.
(2) SECTION 403(b).—
(A) Paragraphs (7)(A)(ii) and (11)(A) of
section 403(b) are each amended by striking
‘‘separates from service’’ and inserting ‘‘has a
severance from employment’’.
(B) The heading for paragraph (11) of sec-
tion 403(b) is amended by striking ‘‘SEPARATION
FROM
SERVICE’’ and inserting ‘‘SEVERANCE
FROM EMPLOYMENT’’.
(3) 
SECTION
457.—Clause 
(ii) 
of 
section
457(d)(1)(A) is amended by striking ‘‘is separated
from service’’ and inserting ‘‘has a severance from
employment’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2000.
SEC. 407. PURCHASE OF SERVICE CREDIT IN GOVERN-
MENTAL DEFINED BENEFIT PLANS.
(a) 403(b) PLANS.—Subsection (b) of section 403 is
amended by adding at the end the following new paragraph:
‘‘(13) TRUSTEE-TO-TRUSTEE
TRANSFERS
TO
PURCHASE
PERMISSIVE
SERVICE
CREDIT.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer to a defined ben-
efit governmental plan (as defined in section 414(d))
if such transfer is—
‘‘(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A)) under
such plan, or
‘‘(B) a repayment to which section 415 does
not apply by reason of subsection (k)(3) there-
of.’’.
(b) 457 PLANS.—Subsection (e) of section 457 is
amended by adding after paragraph (16) the following new
paragraph:
‘‘(17) TRUSTEE-TO-TRUSTEE
TRANSFERS
TO
PURCHASE
PERMISSIVE
SERVICE
CREDIT.—No
amount shall be includible in gross income by reason
of a direct trustee-to-trustee transfer to a defined ben-
efit governmental plan (as defined in section 414(d))
if such transfer is—
‘‘(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A)) under
such plan, or
‘‘(B) a repayment to which section 415 does
not apply by reason of subsection (k)(3) there-
of.’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to trustee-to-trustee transfers after De-
cember 31, 2000.
SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR
PURPOSES OF CASH-OUT AMOUNTS.
(a) QUALIFIED PLANS.—Section 411(a)(11) (relating
to restrictions on certain mandatory distributions) is
amended by adding at the end the following:
‘‘(D) SPECIAL RULE FOR ROLLOVER CON-
TRIBUTIONS.—A plan shall not fail to meet the
requirements of this paragraph if, under the
terms of the plan, the present value of the non-
forfeitable accrued benefit is determined without
regard to that portion of such benefit which is
attributable to rollover contributions (and earn-
ings allocable thereto). For purposes of this sub-
paragraph, the term ‘rollover contributions’
means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii),
and 457(e)(16).’’.
(b) ELIGIBLE DEFERRED COMPENSATION PLANS.—
Clause (i) of section 457(e)(9)(A) is amended by striking
‘‘such amount’’ and inserting ‘‘the portion of such amount
which is not attributable to rollover contributions (as de-
fined in section 411(a)(11)(D))’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2000.
SEC. 409. MINIMUM DISTRIBUTION AND INCLUSION RE-
QUIREMENTS FOR SECTION 457 PLANS.
(a) MINIMUM DISTRIBUTION REQUIREMENTS.—Para-
graph (2) of section 457(d) (relating to distribution require-
ments) is amended to read as follows:
‘‘(2) MINIMUM DISTRIBUTION REQUIREMENTS.—
A plan meets the minimum distribution requirements
of this paragraph if such plan meets the requirements
of section 401(a)(9).’’.
(b) INCLUSION IN GROSS INCOME.—
(1) YEAR OF INCLUSION.—Subsection (a) of sec-
tion 457 (relating to year of inclusion in gross in-
come) is amended to read as follows:
‘‘(a) YEAR OF INCLUSION IN GROSS INCOME.—
‘‘(1) IN GENERAL.—Any amount of compensa-
tion deferred under an eligible deferred compensation
plan, and any income attributable to the amounts so
deferred, shall be includible in gross income only for
the taxable year in which such compensation or other
income—
‘‘(A) is paid to the participant or other ben-
eficiary, in the case of a plan of an eligible em-
ployer described in subsection (e)(1)(A), and
‘‘(B) is paid or otherwise made available to
the participant or other beneficiary, in the case
of a plan of an eligible employer described in
subsection (e)(1)(B).
‘‘(2) SPECIAL RULE FOR ROLLOVER AMOUNTS.—
To the extent provided in section 72(t)(9), section
72(t) shall apply to any amount includible in gross
income under this subsection.’’.
(2) CONFORMING AMENDMENTS.—
(A) So much of paragraph (9) of section
457(e) as precedes subparagraph (A) is amended
to read as follows:
‘‘(9) BENEFITS OF TAX EXEMPT ORGANIZATION
PLANS NOT TREATED AS MADE AVAILABLE BY REASON
OF CERTAIN ELECTIONS, ETC.—In the case of an eligi-
ble deferred compensation plan of an employer de-
scribed in subsection (e)(1)(B)—’’.
(B) Section 457(d) is amended by adding at
the end the following new paragraph:
‘‘(3) SPECIAL RULE FOR GOVERNMENT PLAN.—
An eligible deferred compensation plan of an em-
ployer described in subsection (e)(1)(A) shall not be
treated as failing to meet the requirements of this sub-
section solely by reason of making a distribution de-
scribed in subsection (e)(9)(A).’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to distributions after December 31, 2000.
TITLE V—STRENGTHENING PEN-
SION 
SECURITY 
AND 
EN-
FORCEMENT
SEC. 501. REPEAL OF 150 PERCENT OF CURRENT LIABILITY
FUNDING LIMIT.
(a) IN GENERAL.—Section 412(c)(7) (relating to full-
funding limitation) is amended—
(1) by striking ‘‘the applicable percentage’’ in
subparagraph (A)(i)(I) and inserting ‘‘in the case of
plan years beginning before January 1, 2004, the ap-
plicable percentage’’; and
(2) by amending subparagraph (F) to read as
follows:
‘‘(F) APPLICABLE PERCENTAGE.—For pur-
poses of subparagraph (A)(i)(I), the applicable
percentage shall be determined in accordance
with the following table:
‘‘In the case of any plan year
The applicable
beginning in—
percentage is—
2001 ....................................................................................
160
2002 ....................................................................................
165
2003 ....................................................................................
170.’’.
(b) EFFECTIVE DATE.—The amendments made by this
section shall apply to plan years beginning after December
31, 2000.
SEC. 502. MAXIMUM CONTRIBUTION DEDUCTION RULES
MODIFIED AND APPLIED TO ALL DEFINED
BENEFIT PLANS.
(a) IN
GENERAL.—Subparagraph (D) of section
404(a)(1) (relating to special rule in case of certain plans)
is amended to read as follows:
‘‘(D) SPECIAL RULE IN CASE OF CERTAIN
PLANS.—
‘‘(i) IN GENERAL.—In the case of any
defined benefit plan, except as provided in
regulations, the maximum amount deduct-
ible under the limitations of this paragraph
shall not be less than the unfunded termi-
nation liability (determined as if the pro-
posed termination date referred to in section
4041(b)(2)(A)(i)(II) of the Employee Retire-
ment Income Security Act of 1974 were the
last day of the plan year).
‘‘(ii) PLANS WITH LESS THAN 100 PAR-
TICIPANTS.—For purposes of this subpara-
graph, in the case of a plan which has less
than 100 participants for the plan year,
termination liability shall not include the
liability attributable to benefit increases for
highly compensated employees (as defined
in section 414(q)) resulting from a plan
amendment which is made or becomes effec-
tive, whichever is later, within the last 2
years before the termination date.
‘‘(iii) RULE FOR DETERMINING NUM-
BER OF PARTICIPANTS.—For purposes of de-
termining whether a plan has more than
100 participants, all defined benefit plans
maintained by the same employer (or any
member of such employer’s controlled group
(within 
the 
meaning 
of 
section
412(l)(8)(C))) shall be treated as one plan,
but only employees of such member or em-
ployer shall be taken into account.
‘‘(iv) PLANS ESTABLISHED AND MAIN-
TAIN BY PROFESSIONAL SERVICE EMPLOY-
ERS.—Clause (i) shall not apply to a plan
described in section 4021(b)(13) of the Em-
ployee Retirement Income Security Act of
1974.’’.
(b) CONFORMING AMENDMENT.—Paragraph (6) of sec-
tion 4972(c) is amended to read as follows:
‘‘(6) EXCEPTIONS.—In determining the amount
of nondeductible contributions for any taxable year,
there shall not be taken into account so much of the
contributions to one or more defined contribution
‘‘(7) DEFINED BENEFIT PLAN EXCEPTION.—In
determining the amount of nondeductible contribu-
tions for any taxable year, an employer may elect for
such year not to take into account any contributions
to a defined benefit plan except to the extent that such
contributions exceed the full-funding limitation (as
defined in section 412(c)(7), determined without re-
gard to subparagraph (A)(i)(I) thereof). For purposes
of this paragraph, the deductible limits under section
404(a)(7) shall first be applied to amounts contrib-
uted to defined contribution plans and then to
amounts described in this paragraph. If an employer
makes an election under this paragraph for a taxable
year, paragraph (6) shall not apply to such employer
for such taxable year.’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to years beginning after December 31,
2000.
SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY
DEFINED BENEFIT PLANS SIGNIFICANTLY RE-
DUCING FUTURE BENEFIT ACCRUALS.
(a) IN GENERAL.—Chapter 43 (relating to qualified
pension, etc., plans) is amended by adding at the end the
following new section:
‘‘SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING
BENEFIT ACCRUALS TO SATISFY NOTICE RE-
QUIREMENTS.
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed a
tax on the failure of any applicable pension plan to meet
the requirements of subsection (e) with respect to any appli-
cable individual.
‘‘(b) AMOUNT OF TAX.—
‘‘(1) IN GENERAL.—The amount of the tax im-
posed by subsection (a) on any failure with respect to
any applicable individual shall be $100 for each day
in the noncompliance period with respect to such fail-
ure.
‘‘(2) NONCOMPLIANCE PERIOD.—For purposes of
this section, the term ‘noncompliance period’ means,
with respect to any failure, the period beginning on
the date the failure first occurs and ending on the
date the failure is corrected.
‘‘(c) LIMITATIONS ON AMOUNT OF TAX.—
‘‘(1) OVERALL LIMITATION FOR UNINTENTIONAL
FAILURES.—In the case of failures that are due to
reasonable cause and not to willful neglect, the tax
imposed by subsection (a) for failures during the tax-
able year of the employer (or, in the case of a multi-
employer plan, the taxable year of the trust forming
part of the plan) shall not exceed $500,000. For pur-
poses of the preceding sentence, all multiemployer
plans of which the same trust forms a part shall be
treated as one plan. For purposes of this paragraph,
if not all persons who are treated as a single em-
ployer for purposes of this section have the same tax-
able year, the taxable years taken into account shall
be determined under principles similar to the prin-
ciples of section 1561.
‘‘(2) WAIVER BY SECRETARY.—In the case of a
failure which is due to reasonable cause and not to
willful neglect, the Secretary may waive part or all
of the tax imposed by subsection (a) to the extent that
the payment of such tax would be excessive relative to
the failure involved.
‘‘(d) LIABILITY FOR TAX.—The following shall be lia-
ble for the tax imposed by subsection (a):
‘‘(1) In the case of a plan other than a multiem-
ployer plan, the employer.
‘‘(2) In the case of a multiemployer plan, the
plan.
‘‘(e) NOTICE REQUIREMENTS
FOR PLANS SIGNIFI-
CANTLY REDUCING BENEFIT ACCRUALS.—
‘‘(1) IN
GENERAL.—If an applicable pension
plan is amended to provide for a significant reduc-
tion in the rate of future benefit accrual, the plan ad-
ministrator shall provide written notice to each ap-
plicable individual (and to each employee organiza-
tion representing applicable individuals).
‘‘(2) NOTICE.—The notice required by paragraph
(1) shall be written in a manner calculated to be un-
derstood by the average plan participant and shall
provide sufficient information (as determined in ac-
cordance with regulations prescribed by the Sec-
retary) to allow applicable individuals to understand
the effect of the plan amendment.
‘‘(3) TIMING OF NOTICE.—Except as provided in
regulations, the notice required by paragraph (1)
shall be provided within a reasonable time before the
effective date of the plan amendment.
‘‘(4) DESIGNEES.—Any notice under paragraph
(1) may be provided to a person designated, in writ-
ing, by the person to which it would otherwise be pro-
vided.
‘‘(5) NOTICE
BEFORE
ADOPTION
OF
AMEND-
MENT.—A plan shall not be treated as failing to meet
the requirements of paragraph (1) merely because no-
tice is provided before the adoption of the plan
amendment if no material modification of the amend-
ment occurs before the amendment is adopted.
‘‘(f) APPLICABLE INDIVIDUAL; APPLICABLE PENSION
PLAN.—For purposes of this section—
‘‘(1) APPLICABLE INDIVIDUAL.—The term ‘appli-
cable individual’ means, with respect to any plan
amendment—
‘‘(A) any participant in the plan, and
‘‘(B) any beneficiary who is an alternate
payee (within the meaning of section 414(p)(8))
under an applicable qualified domestic relations
order 
(within 
the 
meaning 
of 
section
414(p)(1)(A)),
who may reasonably be expected to be affected by such
plan amendment.
‘‘(2) APPLICABLE PENSION PLAN.—The term ‘ap-
plicable pension plan’ means—
‘‘(A) any defined benefit plan, or
‘‘(B) an individual account plan which is
subject to the funding standards of section 412,
which had 100 or more participants who had accrued
a benefit, or with respect to whom contributions were
made, under the plan (whether or not vested) as of the
last day of the plan year preceding the plan year in
which the plan amendment becomes effective. Such
term shall not include a governmental plan (within
the meaning of section 414(d)) or a church plan
(within the meaning of section 414(e)) with respect to
which the election provided by section 410(d) has not
been made.’’.
(b) CLERICAL AMENDMENT.—The table of sections for
chapter 43 is amended by adding at the end the following
new item:
‘‘Sec. 4980F. Failure of applicable plans reducing benefit accruals
to satisfy notice requirements.’’.
(c) EFFECTIVE DATES.—
(1) IN
GENERAL.—The amendments made by
this section shall apply to plan amendments taking
effect on or after the date of the enactment of this Act.
(2) TRANSITION.—Until such time as the Sec-
retary of the Treasury issues regulations under sec-
tions 4980F(e)(2) and (3) of the Internal Revenue
Code of 1986 (as added by the amendments made by
this section), a plan shall be treated as meeting the
requirements of such sections if it makes a good faith
effort to comply with such requirements.
(3) SPECIAL RULE.—The period for providing
any notice required by the amendments made by this
section shall not end before the date which is 3
months after the date of the enactment of this Act.
(d) STUDY.—The Secretary of the Treasury shall pre-
pare a report on the effects of conversions of traditional de-
fined benefit plans to cash balance or hybrid formula plans.
Such study shall examine the effect of such conversions on
longer service participants, including the incidence and ef-
fects of ‘‘wear away’’ provisions under which participants
earn no additional benefits for a period of time after the
conversion. As soon as practicable, but not later than 60
days after the date of the enactment of this Act, the Sec-
retary shall submit such report, together with recommenda-
tions thereon, to the Committee on Ways and Means of the
House of Representatives and the Committee on Finance
of the Senate.
SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER
SECTION 415.
(a) COMPENSATION LIMIT.—Paragraph (11) of section
415(b) (relating to limitation for defined benefit plans) is
amended to read as follows:
‘‘(11) SPECIAL LIMITATION RULE FOR GOVERN-
MENTAL AND MULTIEMPLOYER PLANS.—In the case of
a governmental plan (as defined in section 414(d)) or
a multiemployer plan (as defined in section 414(f)),
subparagraph (B) of paragraph (1) shall not apply.’’.
(b) COMBINING AND AGGREGATION OF PLANS.—
(1) COMBINING OF PLANS.—Subsection (f) of sec-
tion 415 (relating to combining of plans) is amended
by adding at the end the following:
‘‘(3) EXCEPTION FOR MULTIEMPLOYER PLANS.—
Notwithstanding paragraph (1) and subsection (g), a
multiemployer plan (as defined in section 414(f))
shall not be combined or aggregated with any other
plan maintained by an employer for purposes of ap-
plying the limitations established in this section, ex-
cept that such plan shall be combined or aggregated
with another plan which is not such a multiemployer
plan solely for purposes of determining whether such
other plan meets the requirements of subsections
(b)(1)(A) and (c).’’.
(2) CONFORMING AMENDMENT FOR AGGREGATION
OF PLANS.—Subsection (g) of section 415 (relating to
aggregation of plans) is amended by striking ‘‘The
Secretary’’ and inserting ‘‘Except as provided in sub-
section (f)(3), the Secretary’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to years beginning after December 31,
2000.
SEC. 506. PROHIBITED ALLOCATIONS OF STOCK IN S COR-
PORATION ESOP.
(a) IN GENERAL.—Section 409 (relating to qualifica-
tions for tax credit employee stock ownership plans) is
amended by redesignating subsection (p) as subsection (q)
and by inserting after subsection (o) the following new sub-
section:
‘‘(p) PROHIBITED ALLOCATIONS OF SECURITIES IN AN
S CORPORATION.—
‘‘(1) IN GENERAL.—An employee stock ownership
plan holding employer securities consisting of stock in
an S corporation shall provide that no portion of the
assets of the plan attributable to (or allocable in lieu
of) such employer securities may, during a nonalloca-
tion year, accrue (or be allocated directly or indi-
rectly under any plan of the employer meeting the re-
quirements of section 401(a)) for the benefit of any
disqualified person.
‘‘(2) FAILURE TO MEET REQUIREMENTS.—
‘‘(A) IN GENERAL.—If a plan fails to meet
the requirements of paragraph (1), the plan shall
be treated as having distributed to any disquali-
fied person the amount allocated to the account
of such person in violation of paragraph (1) at
the time of such allocation.
‘‘(B) CROSS REFERENCE.—
‘‘For excise tax relating to violations of paragraph
(1) and ownership of synthetic equity, see section
4979A.
‘‘(3) NONALLOCATION
YEAR.—For purposes of
this subsection—
‘‘(A) IN
GENERAL.—The term ‘nonalloca-
tion year’ means any plan year of an employee
stock ownership plan if, at any time during such
plan year—
‘‘(i) such plan holds employer securi-
ties consisting of stock in an S corporation,
and
‘‘(ii) disqualified persons own at least
50 percent of the number of shares of stock
in the S corporation.
‘‘(B) ATTRIBUTION
RULES.—For purposes
of subparagraph (A)—
‘‘(i) IN GENERAL.—The rules of section
318(a) shall apply for purposes of deter-
mining ownership, except that—
‘‘(I) in applying paragraph (1)
thereof, the members of an individual’s
family shall include members of the
family described in paragraph (4)(D),
and
‘‘(II) paragraph (4) thereof shall
not apply.
‘‘(ii) DEEMED-OWNED
SHARES.—Not-
withstanding the employee trust exception
in section 318(a)(2)(B)(i), individual shall
be treated as owning deemed-owned shares
of the individual.
Solely for purposes of applying paragraph (5),
this subparagraph shall be applied after the at-
tribution rules of paragraph (5) have been ap-
plied.
‘‘(4) DISQUALIFIED
PERSON.—For purposes of
this subsection—
‘‘(A) IN GENERAL.—The term ‘disqualified
person’ means any person if—
‘‘(i) the aggregate number of deemed-
owned shares of such person and the mem-
bers of such person’s family is at least 20
percent of the number of deemed-owned
shares of stock in the S corporation, or
‘‘(ii) in the case of a person not de-
scribed in clause (i), the number of deemed-
owned shares of such person is at least 10
percent of the number of deemed-owned
shares of stock in such corporation.
‘‘(B) TREATMENT OF FAMILY MEMBERS.—
In the case of a disqualified person described in
subparagraph (A)(i), any member of such per-
son’s family with deemed-owned shares shall be
treated as a disqualified person if not otherwise
treated as a disqualified person under subpara-
graph (A).
‘‘(C) DEEMED-OWNED SHARES.—
‘‘(i) IN GENERAL.—The term ‘deemed-
owned shares’ means, with respect to any
person—
‘‘(I) the stock in the S corporation
constituting employer securities of an
employee stock ownership plan which
is allocated to such person under the
plan, and
‘‘(II) such person’s share of the
stock in such corporation which is held
by such plan but which is not allocated
under the plan to participants.
‘‘(ii) 
PERSON’S
SHARE
OF
UNALLOCATED
STOCK.—For purposes of
clause 
(i)(II), 
a 
person’s 
share 
of
unallocated S corporation stock held by
such plan is the amount of the unallocated
stock which would be allocated to such per-
son if the unallocated stock were allocated to
all participants in the same proportions as
the most recent stock allocation under the
plan.