933
tion 908 of the Electronic Fund Transfer Act
(15 U.S.C. 1693f), the Secretary is authorized
to provide such amount to such person as a
credit to that person’s credit card or debit card
account through the applicable credit card or
debit card system.
‘‘(e) CONFIDENTIALITY OF INFORMATION.—
‘‘(1) IN
GENERAL.—Except as otherwise au-
thorized by this subsection, no person may use or
disclose any information relating to credit or debit
card transactions obtained pursuant to section
6103(k)(8) other than for purposes directly related
to the processing of such transactions, or the billing
or collection of amounts charged or debited pursuant
thereto.
‘‘(2) EXCEPTIONS.—
‘‘(A) Debit or credit card issuers or others
acting on behalf of such issuers may also use
and disclose such information for purposes di-
rectly related to servicing an issuer’s accounts.
‘‘(B) Debit or credit card issuers or others
directly involved in the processing of credit or
debit card transactions or the billing or collec-
tion of amounts charged or debited thereto may
934
also use and disclose such information for pur-
poses directly related to—
‘‘(i) statistical risk and profitability
assessment;
‘‘(ii) 
transferring 
receivables, 
ac-
counts, or interest therein;
‘‘(iii) auditing the account informa-
tion;
‘‘(iv) complying with Federal, State,
or local law; and
‘‘(v) properly authorized civil, crimi-
nal, or regulatory investigation by Federal,
State, or local authorities.
‘‘(3) PROCEDURES.—Use and disclosure of in-
formation under this paragraph shall be made only
to the extent authorized by written procedures pro-
mulgated by the Secretary.
‘‘(4) CROSS REFERENCE.—
‘‘For provision providing for civil damages for vio-
lation of paragraph (1), see section 7431.’’
(b) CLERICAL AMENDMENT.—The table of sections
for subchapter B of chapter 64 is amended by striking
the item relating to section 6311 and inserting the follow-
ing:
‘‘Sec. 6311. Payment of tax by commercially acceptable means.’’
935
(c) AMENDMENTS
TO SECTIONS 6103 AND 7431
WITH RESPECT TO DISCLOSURE AUTHORIZATION.—
(1) Subsection (k) of section 6103 (relating to
confidentiality and disclosure of returns and return
information) is amended by adding at the end the
following new paragraph:
‘‘(8) DISCLOSURE OF INFORMATION TO ADMIN-
ISTER SECTION 6311.—The Secretary may disclose
returns or return information to financial institu-
tions and others to the extent the Secretary deems
necessary for the administration of section 6311.
Disclosures of information for purposes other than
to accept payments by checks or money orders shall
be made only to the extent authorized by written
procedures promulgated by the Secretary.’’
(2) Section 7431 (relating to civil damages for
unauthorized disclosure of returns and return infor-
mation) is amended by adding at the end the follow-
ing new subsection:
‘‘(g) SPECIAL RULE FOR INFORMATION OBTAINED
UNDER SECTION 6103(k)(8).—For purposes of this sec-
tion, any reference to section 6103 shall be treated as in-
cluding a reference to section 6311(e).’’
(3) Section 6103(p)(3)(A) is amended by strik-
ing ‘‘or (6)’’ and inserting ‘‘(6), or (8)’’.
936
(d) EFFECTIVE DATE.—The amendments made by
this section shall take effect on the day 9 months after
the date of the enactment of this Act.
SEC. 14112. SIMPLIFIED FOREIGN TAX CREDIT LIMITATION
FOR INDIVIDUALS.
(a) GENERAL RULE.—Section 904 (relating to limi-
tations on foreign tax credit) is amended by redesignating
subsection (j) as subsection (k) and by inserting after sub-
section (i) the following new subsection:
‘‘(j) SIMPLIFIED LIMITATION FOR CERTAIN INDIVID-
UALS.—
‘‘(1) IN GENERAL.—In the case of an individual
to whom this subsection applies for any taxable year,
the limitation of subsection (a) shall be the lesser
of—
‘‘(A) 25 percent of such individual’s gross
income for the taxable year from sources with-
out the United States, or
‘‘(B) the amount of the creditable foreign
taxes paid or accrued by the individual during
the taxable year (determined without regard to
subsection (c)).
No taxes paid or accrued by the individual during
such taxable year may be deemed paid or accrued in
any other taxable year under subsection (c).
937
‘‘(2) INDIVIDUALS TO WHOM SUBSECTION AP-
PLIES.—This subsection shall apply to an individual
for any taxable year if—
‘‘(A) the entire amount of such individual’s
gross income for the taxable year from sources
without the United States consists of qualified
passive income,
‘‘(B) the amount of the creditable foreign
taxes paid or accrued by the individual during
the taxable year does not exceed $200 ($400 in
the case of a joint return), and
‘‘(C) such individual elects to have this
subsection apply for the taxable year.
‘‘(3) DEFINITIONS.—For purposes of this sub-
section—
‘‘(A) QUALIFIED
PASSIVE
INCOME.—The
term ‘qualified passive income’ means any item
of gross income if—
‘‘(i) such item of income is passive in-
come (as defined in subsection (d)(2)(A)
without regard to clause (iii) thereof), and
‘‘(ii) such item of income is shown on
a payee statement furnished to the individ-
ual.
938
‘‘(B) CREDITABLE FOREIGN TAXES.—The
term ‘creditable foreign taxes’ means any taxes
for which a credit is allowable under section
901; except that such term shall not include
any tax unless such tax is shown on a payee
statement furnished to such individual.
‘‘(C) 
PAYEE
STATEMENT.—The 
term
‘payee statement’ has the meaning given to
such term by section 6724(d)(2).
‘‘(D) ESTATES
AND
TRUSTS
NOT
ELIGI-
BLE.—This subsection shall not apply to any
estate or trust.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years beginning after
December 31, 1995.
SEC. 14113. TREATMENT OF PERSONAL TRANSACTIONS BY
INDIVIDUALS UNDER FOREIGN CURRENCY
RULES.
(a) GENERAL RULE.—Subsection (e) of section 988
(relating to application to individuals) is amended to read
as follows:
‘‘(e) APPLICATION TO INDIVIDUALS.—
‘‘(1) IN GENERAL.—The preceding provisions of
this section shall not apply to any section 988 trans-
939
action entered into by an individual which is a per-
sonal transaction.
‘‘(2) EXCLUSION
FOR
CERTAIN
PERSONAL
TRANSACTIONS.—If—
‘‘(A) nonfunctional currency is disposed of
by an individual in any transaction, and
‘‘(B) such transaction is a personal trans-
action,
no gain shall be recognized for purposes of this sub-
title by reason of changes in exchange rates after
such currency was acquired by such individual and
before such disposition. The preceding sentence shall
not apply if the gain which would otherwise be rec-
ognized exceeds $200.
‘‘(3) PERSONAL TRANSACTIONS.—For purposes
of this subsection, the term ‘personal transaction’
means any transaction entered into by an individual,
except that such term shall not include any trans-
action to the extent that expenses properly allocable
to such transaction meet the requirements of section
162 or 212 (other than that part of section 212
dealing with expenses incurred in connection with
taxes).’’
940
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 14114. TREATMENT OF CERTAIN REIMBURSED EX-
PENSES OF RURAL MAIL CARRIERS.
(a) IN GENERAL.—Section 162 (relating to trade or
business expenses) is amended by redesignating subsection
(o) as subsection (p) and by inserting after subsection (n)
the following new subsection:
‘‘(o) TREATMENT
OF CERTAIN REIMBURSED EX-
PENSES OF RURAL MAIL CARRIERS.—
‘‘(1) GENERAL RULE.—In the case of any em-
ployee of the United States Postal Service who per-
forms services involving the collection and delivery of
mail on a rural route and who receives qualified re-
imbursements for the expenses incurred by such em-
ployee for the use of a vehicle in performing such
services—
‘‘(A) the amount allowable as a deduction
under this chapter for the use of a vehicle in
performing such services shall be equal to the
amount of such qualified reimbursements; and
‘‘(B) such qualified reimbursements shall
be treated as paid under a reimbursement or
other expense allowance arrangement for pur-
941
poses of section 62(a)(2)(A) (and section 62(c)
shall not apply to such qualified reimburse-
ments).
‘‘(2) DEFINITION OF QUALIFIED REIMBURSE-
MENTS.—For purposes of this subsection, the term
‘qualified reimbursements’ means the amounts paid
by the United States Postal Service to employees as
an equipment maintenance allowance under the
1991 collective bargaining agreement between the
United States Postal Service and the National Rural
Letter Carriers’ Association. Amounts paid as an
equipment maintenance allowance by such Postal
Service under later collective bargaining agreements
that supersede the 1991 agreement shall be consid-
ered qualified reimbursements if such amounts do
not exceed the amounts that would have been paid
under the 1991 agreement, adjusted for changes in
the Consumer Price Index (as defined in section
1(f)(5)) since 1991.’’
(b) TECHNICAL AMENDMENT.—Section 6008 of the
Technical and Miscellaneous Revenue Act of 1988 is here-
by repealed.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
942
SEC. 14115. EXCLUSION OF COMBAT PAY FROM WITHHOLD-
ING 
LIMITED 
TO 
AMOUNT 
EXCLUDABLE
FROM GROSS INCOME.
(a) IN GENERAL.—Paragraph (1) of section 3401(a)
(defining wages) is amended by inserting before the semi-
colon the following: ‘‘to the extent remuneration for such
service is excludable from gross income under such sec-
tion’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to remuneration paid after De-
cember 31, 1995.
SEC. 14116. TREATMENT OF TRAVELING EXPENSES OF CER-
TAIN FEDERAL EMPLOYEES ENGAGED IN
CRIMINAL INVESTIGATIONS.
(a) IN GENERAL.—Subsection (a) of section 162 is
amended by adding at the end the following new sentence:
‘‘The preceding sentence shall not apply to any Federal
employee during any period for which such employee is
certified by the Attorney General (or the designee thereof)
as traveling on behalf of the United States in temporary
duty status to investigate, or provide support services for
the investigation of, a Federal crime.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to taxable years ending after
the date of the enactment of this Act.
943
Subtitle B—Pension Simplification
PART I—SIMPLIFIED DISTRIBUTION RULES
SEC. 14201. REPEAL OF 5-YEAR INCOME AVERAGING FOR
LUMP-SUM DISTRIBUTIONS.
(a) IN GENERAL.—Subsection (d) of section 402 (re-
lating to taxability of beneficiary of employees’ trust) is
amended by adding at the end the following new para-
graph:
‘‘(8) TERMINATION.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), this subsection shall not
apply to any taxable year beginning after De-
cember 31, 1995.
‘‘(B) RETENTION OF CERTAIN TRANSITION
RULES.—Subparagraph (A) shall not apply to
any distribution for which the taxpayer elects
the benefits of section 1122 (h)(3) or (h)(5) of
the Tax Reform Act of 1986.’’
SEC. 14202. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES’
DEATH BENEFITS.
(a) IN GENERAL.—Subsection (b) of section 101 is
hereby repealed.
(b) CONFORMING AMENDMENTS.—
944
(1) Subsection (c) of section 101 is amended by
striking ‘‘subsection (a) or (b)’’ and inserting ‘‘sub-
section (a)’’.
(2) Sections 406(e) and 407(e) are each amend-
ed by striking paragraph (2) and by redesignating
paragraph (3) as paragraph (2).
(3) Section 7701(a)(20) is amended by striking
‘‘, for the purposes of applying the provisions of sec-
tion 101(b) with respect to employees’ death bene-
fits’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 14203. SIMPLIFIED METHOD FOR TAXING ANNUITY
DISTRIBUTIONS UNDER CERTAIN EMPLOYER
PLANS.
(a) GENERAL RULE.—Subsection (d) of section 72
(relating to annuities; certain proceeds of endowment and
life insurance contracts) is amended to read as follows:
‘‘(d) SPECIAL RULES FOR QUALIFIED EMPLOYER
RETIREMENT PLANS.—
‘‘(1) SIMPLIFIED METHOD OF TAXING ANNUITY
PAYMENTS.—
945
‘‘(A) IN
GENERAL.—In the case of any
amount received as an annuity under a quali-
fied employer retirement plan—
‘‘(i) subsection (b) shall not apply,
and
‘‘(ii) the investment in the contract
shall be recovered as provided in this para-
graph.
‘‘(B) METHOD
OF
RECOVERING
INVEST-
MENT IN CONTRACT.—
‘‘(i) 
IN
GENERAL.—Gross 
income
shall not include so much of any monthly
annuity payment under a qualified em-
ployer retirement plan as does not exceed
the amount obtained by dividing—
‘‘(I) the investment in the con-
tract (as of the annuity starting date),
by
‘‘(II) the number of anticipated
payments determined under the table
contained in clause (iii) (or, in the
case of a contract to which subsection
(c)(3)(B) applies, the number of
monthly annuity payments under such
contract).
946
‘‘(ii) CERTAIN RULES MADE APPLICA-
BLE.—Rules similar to the rules of para-
graphs (2) and (3) of subsection (b) shall
apply for purposes of this paragraph.
‘‘(iii) NUMBER OF ANTICIPATED PAY-
MENTS.—
‘‘If the age of the
primary annuitant on
The number
the annuity starting
of anticipated
date is:
payments is:
Not more than 55 ..................................
300
More than 55 but not more than 60 .....
260
More than 60 but not more than 65 .....
240
More than 65 but not more than 70 .....
170
More than 70 .........................................
120
‘‘(C) ADJUSTMENT FOR REFUND FEATURE
NOT APPLICABLE.—For purposes of this para-
graph, investment in the contract shall be de-
termined under subsection (c)(1) without re-
gard to subsection (c)(2).
‘‘(D) SPECIAL
RULE
WHERE
LUMP
SUM
PAID
IN
CONNECTION
WITH
COMMENCEMENT
OF ANNUITY PAYMENTS.—If, in connection with
the commencement of annuity payments under
any qualified employer retirement plan, the tax-
payer receives a lump sum payment—
‘‘(i) such payment shall be taxable
under subsection (e) as if received before
the annuity starting date, and
947
‘‘(ii) the investment in the contract
for purposes of this paragraph shall be de-
termined as if such payment had been so
received.
‘‘(E) EXCEPTION.—This paragraph shall
not apply in any case where the primary annu-
itant has attained age 75 on the annuity start-
ing date unless there are fewer than 5 years of
guaranteed payments under the annuity.
‘‘(F) ADJUSTMENT WHERE ANNUITY PAY-
MENTS NOT ON MONTHLY BASIS.—In any case
where the annuity payments are not made on a
monthly basis, appropriate adjustments in the
application of this paragraph shall be made to
take into account the period on the basis of
which such payments are made.
‘‘(G) QUALIFIED EMPLOYER RETIREMENT
PLAN.—For purposes of this paragraph, the
term ‘qualified employer retirement plan’ means
any plan or contract described in paragraph
(1), (2), or (3) of section 4974(c).
‘‘(2) TREATMENT
OF
EMPLOYEE
CONTRIBU-
TIONS
UNDER
DEFINED
CONTRIBUTION
PLANS.—
For purposes of this section, employee contributions
(and any income allocable thereto) under a defined
948
contribution plan may be treated as a separate con-
tract.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply in cases where the annuity start-
ing date is after December 31, 1995.
SEC. 14204. REQUIRED DISTRIBUTIONS.
(a) IN GENERAL.—Section 401(a)(9)(C) (defining re-
quired beginning date) is amended to read as follows:
‘‘(C) REQUIRED
BEGINNING
DATE.—For
purposes of this paragraph—
‘‘(i) IN
GENERAL.—The term ‘re-
quired beginning date’ means April 1 of
the calendar year following the later of—
‘‘(I) the calendar year in which
the employee attains age 701⁄2, or
‘‘(II) the calendar year in which
the employee retires.
‘‘(ii) EXCEPTION.—Subclause (II) of
clause (i) shall not apply—
‘‘(I) except as provided in section
409(d), in the case of an employee
who is a 5-percent owner (as defined
in section 416) with respect to the
plan year ending in the calendar year
949
in which the employee attains age
701⁄2, or
‘‘(II) for purposes of section 408
(a)(6) or (b)(3).
‘‘(iii) ACTUARIAL
ADJUSTMENT.—In
the case of an employee to whom clause
(i)(II) applies who retires in a calendar
year after the calendar year in which the
employee attains age 701⁄2, the employee’s
accrued benefit shall be actuarially in-
creased to take into account the period
after age 701⁄2 in which the employee was
not receiving any benefits under the plan.
‘‘(iv) 
EXCEPTION
FOR
GOVERN-
MENTAL
AND
CHURCH
PLANS.—Clauses
(ii) and (iii) shall not apply in the case of
a governmental plan or church plan. For
purposes of this clause, the term ‘church
plan’ means a plan maintained by a church
for church employees, and the term
‘church’ means any church (as defined in
section 3121(w)(3)(A)) or qualified church-
controlled organization (as defined in sec-
tion 3121(w)(3)(B)).’’
950
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to years beginning after Decem-
ber 31, 1995.
PART II—INCREASED ACCESS TO PENSION
PLANS
SEC. 14211. MODIFICATIONS OF SIMPLIFIED EMPLOYEE
PENSIONS.
(a) INCREASE IN NUMBER OF ALLOWABLE PARTICI-
PANTS FOR SALARY REDUCTION ARRANGEMENTS.—Sec-
tion 408(k)(6)(B) is amended by striking ‘‘25’’ each place
it appears in the text and heading thereof and inserting
‘‘100’’.
(b) REPEAL OF PARTICIPATION REQUIREMENT.—
(1) IN
GENERAL.—Section 408(k)(6)(A) is
amended by striking clause (ii) and by redesignating
clauses (iii) and (iv) as clauses (ii) and (iii), respec-
tively.
(2) CONFORMING AMENDMENTS.—Clause (ii) of
section 408(k)(6)(C) and clause (ii) of section
408(k)(6)(F) are each amended by striking ‘‘sub-
paragraph (A)(iii)’’ and inserting ‘‘subparagraph
(A)(ii)’’.
(c) ALTERNATIVE TEST.—Clause (ii) of section
408(k)(6)(A), as redesignated by subsection (b)(1), is
951
amended by adding at the end the following new flush sen-
tence:
‘‘The requirements of the preceding sen-
tence are met if the employer makes con-
tributions to the simplified employee pen-
sion meeting the requirements of sections
401(k)(11) (B) or (C), 401(k)(11)(D), and
401(m)(10)(B).’’
(d) YEAR
FOR
COMPUTING
NONHIGHLY
COM-
PENSATED EMPLOYEE PERCENTAGE.—Clause (ii) of sec-
tion 408(k)(6)(A), as redesignated by subsection (b)(1),
is amended—
(1) by striking ‘‘such year’’ in subclause (I) and
inserting ‘‘the preceding year’’, and
(2) by adding at the end the following new
flush sentence:
‘‘In the case of the first plan year for
which an employer makes contributions to
a simplified employee pension, rules similar
to the rules of section 401(k)(3)(E) shall
apply.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
952
SEC. 14212. STATE AND LOCAL GOVERNMENTS AND TAX-EX-
EMPT 
ORGANIZATIONS 
ELIGIBLE 
UNDER
SECTION 401(k).
(a) IN GENERAL.—Subparagraph (B) of section
401(k)(4) is amended to read as follows:
‘‘(B) ELIGIBILITY OF STATE AND LOCAL
GOVERNMENTS
AND
TAX-EXEMPT
ORGANIZA-
TIONS.—Any—
‘‘(i) State or local government or po-
litical subdivision thereof, or any agency or
instrumentality thereof, and
‘‘(ii) any organization exempt from
tax under this subtitle,
may include a qualified cash or deferred ar-
rangement as part of a plan maintained by it
unless the entity maintains an eligible deferred
compensation plan (as defined in section
457(b)). This subparagraph shall not apply to
a rural cooperative plan.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to plan years beginning after De-
cember 31, 1996, but shall not apply to any cash or de-
ferred arrangement to which clause (i) or (ii) of section
1116(f)(2)(B) of the Tax Reform Act of 1986 applies.
953
PART III—NONDISCRIMINATION PROVISIONS
SEC. 14221. DEFINITION OF HIGHLY COMPENSATED EM-
PLOYEES.
(a) IN GENERAL.—Paragraph (1) of section 414(q)
(defining highly compensated employee) is amended to
read as follows:
‘‘(1) IN
GENERAL.—The term ‘highly com-
pensated employee’ means any employee who—
‘‘(A) was a 5-percent owner at any time
during the year or the preceding year, or
‘‘(B) had compensation for the preceding
year from the employer in excess of $80,000.
The Secretary shall adjust the $80,000 amount
under subparagraph (B) at the same time and in the
same manner as under section 415(d), except that
the base period in applying such section for purposes
of this paragraph shall be the calendar quarter end-
ing September 30, 1995.’’
(b) CONFORMING AMENDMENTS.—
(1)(A) Subsection (q) of section 414 is amended
by striking paragraphs (2), (4), (5), (8), and (12)
and by redesignating paragraphs (3), (6), (7), (9),
(10), and (11) as paragraphs (2) through (7), re-
spectively.
(B) Section 129(d)(8)(B), 401(a)(5)(D)(ii),
408(k)(2)(C), and 416(i)(1)(D) are each amended
954
by striking ‘‘section 414(q)(7)’’ and inserting ‘‘sec-
tion 414(q)(4)’’.
(C) Sections 401(a)(17) and 404(l) are each
amended by striking ‘‘section 414(q)(6)’’ and insert-
ing ‘‘section 414(q)(3)’’.
(D) Section 416(i)(1)(A) is amended by strik-
ing ‘‘section 414(q)(8)’’ and inserting ‘‘section
414(r)(9)’’.
(2)(A) Section 414(r) is amended by adding at
the end the following new paragraph:
‘‘(9) EXCLUDED EMPLOYEES.—For purposes of
paragraph (2)(A), the following employees shall be
excluded:
‘‘(A) Employees who have not completed 6
months of service.
‘‘(B) Employees who normally work less
than 171⁄2 hours per week.
‘‘(C) Employees who normally work not
more than 6 months during any year.
‘‘(D) Employees who have not attained the
age of 21.
‘‘(E) Except to the extent provided in reg-
ulations, employees who are included in a unit
of employees covered by an agreement which
the Secretary of Labor finds to be a collective
955
bargaining agreement between employee rep-
resentatives and the employer.
Except as provided by the Secretary, the employer
may elect to apply subparagraph (A), (B), (C), or
(D) by substituting a shorter period of service,
smaller number of hours or months, or lower age for
the period of service, number of hours or months, or
age (as the case may be) specified in such subpara-
graph.’’
(B) Subparagraph (A) of section 414(r)(2) is
amended by striking ‘‘subsection (q)(8)’’ and insert-
ing ‘‘paragraph (9)’’.
(3) Section 1114(c)(4) of the Tax Reform Act
of 1986 is amended by adding at the end the follow-
ing new sentence: ‘‘Any reference in this paragraph
to section 414(q) shall be treated as a reference to
such section as in effect before the Tax Simplifica-
tion Act of 1995’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
SEC. 14222. REPEAL OF FAMILY AGGREGATION RULES.
(a) IN GENERAL.—Paragraph (6) of section 414(q)
is hereby repealed.
956
(b) COMPENSATION LIMIT.—Subparagraph (A) of
section 401(a)(17) is amended by striking the last sen-
tence.
(c) DEDUCTION.—Subsection (l) of section 404 is
amended by striking the last sentence.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
SEC. 14223. MODIFICATION OF ADDITIONAL PARTICIPA-
TION REQUIREMENTS.
(a) GENERAL RULE.—Section 401(a)(26)(A) (relat-
ing to additional participation requirements) is amended
to read as follows:
‘‘(A) IN GENERAL.—In the case of a trust
which is a part of a defined benefit plan, such
trust shall not constitute a qualified trust under
this subsection unless on each day of the plan
year such trust benefits at least the lesser of—
‘‘(i) 50 employees of the employer, or
‘‘(ii) the greater of—
‘‘(I) 40 percent of all employees
of the employer, or
‘‘(II) 2 employees (or if there is
only 1 employee, such employee).’’
957
(b) SEPARATE LINE OF BUSINESS TEST.—Section
401(a)(26)(G) (relating to separate line of business) is
amended by striking ‘‘paragraph (7)’’ and inserting ‘‘para-
graph (2)(A) or (7)’’.
(c) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1995.
SEC. 14224. NONDISCRIMINATION RULES FOR QUALIFIED
CASH OR DEFERRED ARRANGEMENTS AND
MATCHING CONTRIBUTIONS.
(a) ALTERNATIVE METHODS OF SATISFYING SEC-
TION
401(k) 
NONDISCRIMINATION
TESTS.—Section
401(k) (relating to cash or deferred arrangements) is
amended by adding at the end the following new para-
graph:
‘‘(11) ALTERNATIVE
METHODS
OF
MEETING
NONDISCRIMINATION REQUIREMENTS.—
‘‘(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—
‘‘(i) meets the contribution require-
ments of subparagraph (B) or (C), and
‘‘(ii) meets the notice requirements of
subparagraph (D).
958
‘‘(B) MATCHING CONTRIBUTIONS.—
‘‘(i) IN GENERAL.—The requirements
of this subparagraph are met if, under the
arrangement, the employer makes match-
ing contributions on behalf of each em-
ployee who is not a highly compensated
employee in an amount equal to—
‘‘(I) 100 percent of the elective
contributions of the employee to the
extent such elective contributions do
not exceed 3 percent of the employee’s
compensation, and
‘‘(II) 50 percent of the elective
contributions of the employee to the
extent that such elective contributions
exceed 3 percent but do not exceed 5
percent of the employee’s compensa-
tion.
‘‘(ii) 
RATE
FOR
HIGHLY
COM-
PENSATED
EMPLOYEES.—The 
require-
ments of this subparagraph are not met if,
under the arrangement, the matching con-
tribution with respect to any elective con-
tribution of a highly compensated employee
at any level of compensation is greater
959
than that with respect to an employee who
is not a highly compensated employee.
‘‘(iii) ALTERNATIVE PLAN DESIGNS.—
If the matching contribution with respect
to any elective contribution at any specific
level of compensation is not equal to the
percentage required under clause (i), an
arrangement shall not be treated as failing
to meet the requirements of clause (i) if—
‘‘(I) the level of an employer’s
matching contribution does not in-
crease as an employee’s elective con-
tributions increase, and
‘‘(II) the aggregate amount of
matching contributions with respect to
elective contributions not in excess of
such level of compensation is at least
equal to the amount of matching con-
tributions which would be made if
matching contributions were made on
the basis of the percentages described
in clause (i).
‘‘(C) 
NONELECTIVE
CONTRIBUTIONS.—
The requirements of this subparagraph are met
if, under the arrangement, the employer is re-
960
quired, without regard to whether the employee
makes an elective contribution or employee con-
tribution, to make a contribution to a defined
contribution plan on behalf of each employee
who is not a highly compensated employee and
who is eligible to participate in the arrangement
in an amount equal to at least 3 percent of the
employee’s compensation.
‘‘(D) NOTICE
REQUIREMENT.—An ar-
rangement meets the requirements of this para-
graph if, under the arrangement, each employee
eligible to participate is, within a reasonable pe-
riod before any year, given written notice of the
employee’s rights and obligations under the ar-
rangement which—
‘‘(i) is sufficiently accurate and com-
prehensive to apprise the employee of such
rights and obligations, and
‘‘(ii) is written in a manner calculated
to be understood by the average employee
eligible to participate.
‘‘(E) OTHER REQUIREMENTS.—
‘‘(i) WITHDRAWAL AND VESTING RE-
STRICTIONS.—An arrangement shall not be
treated as meeting the requirements of
961
subparagraph (B) or (C) unless the re-
quirements of subparagraphs (B) and (C)
of paragraph (2) are met with respect to
all 
employer 
contributions 
(including
matching contributions).
‘‘(ii) SOCIAL SECURITY AND SIMILAR
CONTRIBUTIONS
NOT
TAKEN
INTO
AC-
COUNT.—An arrangement shall not be
treated as meeting the requirements of
subparagraph (B) or (C) unless such re-
quirements are met without regard to sub-
section (l), and, for purposes of subsection
(l), employer contributions under subpara-
graph (B) or (C) shall not be taken into
account.
‘‘(F) OTHER
PLANS.—An arrangement
shall be treated as meeting the requirements
under subparagraph (A)(i) if any other plan
maintained by the employer meets such require-
ments with respect to employees eligible under
the arrangement.’’
(b) ALTERNATIVE METHODS OF SATISFYING SEC-
TION
401(m) 
NONDISCRIMINATION
TESTS.—Section
401(m) (relating to nondiscrimination test for matching
contributions and employee contributions) is amended by
962
redesignating paragraph (10) as paragraph (11) and by
adding after paragraph (9) the following new paragraph:
‘‘(10) ALTERNATIVE METHOD OF SATISFYING
TESTS.—
‘‘(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 subparagraph (B) or (C) of sub-
section (k)(11),
‘‘(ii) meets the notice requirements of
subsection (k)(11)(D), and
‘‘(iii) meets the requirements of sub-
paragraph (B).
‘‘(B) LIMITATION
ON
MATCHING
CON-
TRIBUTIONS.—The requirements of this sub-
paragraph are met if—
‘‘(i) matching contributions on behalf
of any employee may not be made with re-
spect to an employee’s contributions or
elective deferrals in excess of 6 percent of
the employee’s compensation,
‘‘(ii) the level of an employer’s match-
ing contribution does not increase as an
963
employee’s contributions or elective defer-
rals increase, and
‘‘(iii) the matching contribution with
respect to any highly compensated em-
ployee at a specific level of compensation is
not greater than that with respect to an
employee who is not a highly compensated
employee.’’
(c) YEAR
FOR
COMPUTING
NONHIGHLY
COM-
PENSATED EMPLOYEE PERCENTAGE.—
(1) CASH
OR
DEFERRED
ARRANGEMENTS.—
Clause (ii) of section 401(k)(3)(A) is amended—
(A) by striking ‘‘such year’’ and inserting
‘‘the plan year’’, and
(B) by striking ‘‘for such plan year’’ and
inserting ‘‘the preceding plan year’’.
(2) MATCHING
AND
EMPLOYEE
CONTRIBU-
TIONS.—Section 401(m)(2)(A) is amended—
(A) by inserting ‘‘for such plan year’’ after
‘‘highly compensated employees’’, and
(B) by inserting ‘‘for the preceding plan
year’’ after ‘‘eligible employees’’ each place it
appears in clause (i) and clause (ii).
(d) SPECIAL RULE FOR DETERMINING AVERAGE DE-
FERRAL PERCENTAGE FOR FIRST PLAN YEAR, ETC.—
964
(1) Paragraph (3) of section 401(k) is amended
by adding at the end the following new subpara-
graph:
‘‘(E) For purposes of this paragraph, in
the case of the first plan year of any plan, the
amount taken into account as the actual defer-
ral percentage of nonhighly compensated em-
ployees for the preceding plan year shall be—
‘‘(i) 3 percent, or
‘‘(ii) if the employer makes an election
under this subclause, the actual deferral
percentage of nonhighly compensated em-
ployees determined for such first plan
year.’’
(2) Paragraph (3) of section 401(m) is amend-
ed by adding at the end the following: ‘‘Rules similar
to the rules of subsection (k)(3)(E) shall apply for
purposes of this subsection.’’
(e) DISTRIBUTION OF EXCESS CONTRIBUTIONS.—
(1) Subparagraph (C) of section 401(k)(8) (re-
lating to arrangement not disqualified if excess con-
tributions distributed) is amended by striking ‘‘on
the basis of the respective portions of the excess con-
tributions attributable to each of such employees’’
and inserting ‘‘on the basis of the amount of con-
965
tributions by, or on behalf of, each of such employ-
ees’’.
(2) Subparagraph (C) of section 401(m)(6) (re-
lating to method of distributing excess aggregate
contributions) is amended by striking ‘‘on the basis
of the respective portions of such amounts attrib-
utable to each of such employees’’ and inserting ‘‘on
the basis of the amount of contributions on behalf
of, or by, each such employee’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
PART IV—MISCELLANEOUS SIMPLIFICATION
SEC. 14231. TREATMENT OF LEASED EMPLOYEES.
(a) GENERAL RULE.—Subparagraph (C) of section
414(n)(2) (defining leased employee) is amended to read
as follows:
‘‘(C) such services are performed under
significant direction or control by the recipi-
ent.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to years beginning after Decem-
ber 31, 1995, but shall not apply to any relationship deter-
mined under an Internal Revenue Service ruling issued be-
fore the date of the enactment of this Act pursuant to
966
section 414(n)(2)(C) of the Internal Revenue Code of
1986 (as in effect on the day before such date) not to
involve a leased employee.
SEC. 14232. PLANS COVERING SELF-EMPLOYED INDIVID-
UALS.
(a) AGGREGATION RULES.—Section 401(d) (relating
to additional requirements for qualification of trusts and
plans benefiting owner-employees) is amended to read as
follows:
‘‘(d) CONTRIBUTION LIMIT
ON OWNER-EMPLOY-
EES.—A trust forming part of a pension or profit-sharing
plan which provides contributions or benefits for employ-
ees some or all of whom are owner-employees shall con-
stitute a qualified trust under this section only if, in addi-
tion to meeting the requirements of subsection (a), the
plan provides that contributions on behalf of any owner-
employee may be made only with respect to the earned
income of such owner-employee which is derived from the
trade or business with respect to which such plan is
established.’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1995.
967
SEC. 14233. ELIMINATION OF SPECIAL VESTING RULE FOR
MULTIEMPLOYER PLANS.
(a) IN GENERAL.—Paragraph (2) of section 411(a)
(relating to minimum vesting standards) is amended—
(1) by striking ‘‘subparagraph (A), (B), or (C)’’
and inserting ‘‘subparagraph (A) or (B)’’; and
(2) by striking subparagraph (C).
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning on or after
the earlier of—
(1) the later of—
(A) January 1, 1996, or
(B) the date on which the last of the col-
lective bargaining agreements pursuant to
which the plan is maintained terminates (deter-
mined without regard to any extension thereof
after the date of the enactment of this Act), or
(2) January 1, 1998.
Such amendments shall not apply to any individual who
does not have more than 1 hour of service under the plan
on or after the 1st day of the 1st plan year to which such
amendments apply.
968
SEC. 14234. DISTRIBUTIONS UNDER RURAL COOPERATIVE
PLANS.
(a) DISTRIBUTIONS AFTER CERTAIN AGE.—Section
401(k)(7) is amended by adding at the end the following
new subparagraph:
‘‘(C) SPECIAL
RULE
FOR
CERTAIN
DIS-
TRIBUTIONS.—A rural cooperative plan which
includes a qualified cash or deferred arrange-
ment shall not be treated as violating the re-
quirements of section 401(a) merely by reason
of a distribution to a participant after attain-
ment of age 591⁄2.’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to distributions after December 31,
1995.
SEC. 
14235. 
TREATMENT 
OF 
GOVERNMENTAL 
PLANS
UNDER SECTION 415.
(a) DEFINITION OF COMPENSATION.—Subsection (k)
of section 415 (regarding limitations on benefits and con-
tributions under qualified plans) is amended by adding im-
mediately after paragraph (2) the following new para-
graph:
‘‘(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
969
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 is amended by adding immediately after para-
graph (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 is amended by
adding at the end 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-
970
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.
971
‘‘(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 is amended by adding at
the end the following new paragraph:
‘‘(15) TREATMENT
OF
QUALIFIED
GOVERN-
MENTAL
EXCESS
BENEFIT
ARRANGEMENTS.—Sub-
sections (b)(2) and (c)(1) shall not apply to any
972
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) 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 inserting immediately 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) is amended
by adding at the end the following 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-
973
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.—
(1) IN GENERAL.—Subparagraph (C) of section
415(b)(10) is amended by adding at the end the fol-
lowing new clause:
‘‘(ii) REVOCATION OF ELECTION.—An
election under clause (i) may be revoked
not later than the last day of the third
plan year beginning after the date of the
enactment of this clause. The revocation
shall apply to all plan years to which the
election applied and to all subsequent plan
years. Any amount paid by a plan in a tax-
able year ending after the revocation shall
be includible in income in such taxable
year under the rules of this chapter in ef-
fect for such taxable year, except that, for
purposes of applying the limitations im-
posed by this section, any portion of such
amount which is attributable to any tax-
974
able year during which the election was in
effect shall be treated as received in such
taxable year.’’
(2) CONFORMING AMENDMENT.—Subparagraph
(C) of section 415(b)(10) is amended by striking
‘‘This’’ and inserting:
‘‘(i) IN GENERAL.—This’’.
(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 amendment 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.
SEC. 14236. UNIFORM RETIREMENT AGE.
(a) DISCRIMINATION TESTING.—Paragraph (5) of
section 401(a) (relating to special rules relating to non
975
discrimination requirements) is amended by adding at the
end the following new subparagraph:
‘‘(F) 
SOCIAL
SECURITY
RETIREMENT
AGE.—For purposes of testing for discrimina-
tion under paragraph (4)—
‘‘(i) the social security retirement age
(as defined in section 415(b)(8)) shall be
treated as a uniform retirement age, and
‘‘(ii) subsidized early retirement bene-
fits and joint and survivor annuities shall
not be treated as being unavailable to em-
ployees on the same terms merely because
such benefits or annuities are based in
whole or in part on an employee’s social
security retirement age (as so defined).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1995.
SEC. 14237. UNIFORM PENALTY PROVISIONS TO APPLY TO
CERTAIN 
PENSION 
REPORTING 
REQUIRE-
MENTS.
(a) PENALTIES.—
(1) STATEMENTS.—Paragraph (1) of section
6724(d) is amended by striking ‘‘and’’ at the end of
subparagraph (A), by striking the period at the end
976
of subparagraph (B) and inserting ‘‘, and’’, and by
inserting after subparagraph (B) the following new
subparagraph:
‘‘(C) any statement of the amount of pay-
ments to another person required to be made to
the Secretary under—
‘‘(i) section 408(i) (relating to reports
with respect to individual retirement ac-
counts or annuities), or
‘‘(ii) section 6047(d) (relating to re-
ports by employers, plan administrators,
etc.).’’
(2) 
REPORTS.—Paragraph 
(2) 
of 
section
6724(d) is amended by striking ‘‘or’’ at the end of
subparagraph (S), by striking the period at the end
of subparagraph (T) and inserting a comma, and by
inserting after subparagraph (T) the following new
subparagraphs:
‘‘(U) section 408(i) (relating to reports
with respect to individual retirement plans) to
any person other than the Secretary with re-
spect to the amount of payments made to such
person, or
‘‘(V) section 6047(d) (relating to reports
by plan administrators) to any person other
977
than the Secretary with respect to the amount
of payments made to such person.’’
(b) MODIFICATION
OF REPORTABLE DESIGNATED
DISTRIBUTIONS.—
(1) SECTION 408.—Subsection (i) of section 408
(relating to individual retirement account reports) is
amended by inserting ‘‘aggregating $10 or more in
any calendar year’’ after ‘‘distributions’’.
(2) SECTION 6047.—Paragraph (1) of section
6047(d) (relating to reports by employers, plan ad-
ministrators, etc.) is amended by adding at the end
the following new sentence: ‘‘No return or report
may be required under the preceding sentence with
respect to distributions to any person during any
year unless such distributions aggregate $10 or
more.’’
(c) QUALIFYING ROLLOVER DISTRIBUTIONS.—Sec-
tion 6652(i) is amended—
(1) by striking ‘‘the $10’’ and inserting
‘‘$100’’, and
(2) 
by 
striking 
‘‘$5,000’’ 
and 
inserting
‘‘$50,000’’.
(d) CONFORMING AMENDMENTS.—
978
(1) Paragraph (1) of section 6047(f) is amend-
ed to read as follows:
‘‘(1) For provisions relating to penalties for fail-
ures to file returns and reports required under this
section, see sections 6652(e), 6721, and 6722.’’
(2) Subsection (e) of section 6652 is amended
by adding at the end the following new sentence:
‘‘This subsection shall not apply to any return or
statement which is an information return described
in section 6724(d)(1)(C)(ii) or a payee statement de-
scribed in section 6724(d)(2)(U).’’
(3) Subsection (a) of section 6693 is amended
by adding at the end the following new sentence:
‘‘This subsection shall not apply to any report which
is an information return described in section
6724(d)(1)(C)(i) or a payee statement described in
section 6724(d)(2)(T).’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to returns, reports, and other
statements the due date for which (determined without re-
gard to extensions) is after December 31, 1995.
SEC. 14238. CONTRIBUTIONS ON BEHALF OF DISABLED EM-
PLOYEES.
(a) ALL DISABLED PARTICIPANTS RECEIVING CON-
TRIBUTIONS.—Section 415(c)(3)(C) is amended by adding
at the end the following: ‘‘If a defined contribution plan
provides for the continuation of contributions on behalf
979
of all participants described in clause (i) for a fixed or
determinable period, this subparagraph shall be applied
without regard to clauses (ii) and (iii).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to years beginning after December
31, 1995.
SEC. 14239. TREATMENT OF DEFERRED COMPENSATION
PLANS OF STATE AND LOCAL GOVERNMENTS
AND TAX-EXEMPT ORGANIZATIONS.
(a) SPECIAL RULES FOR PLAN DISTRIBUTIONS.—
Paragraph (9) of section 457(e) (relating to other defini-
tions and special rules) is amended to read as follows:
‘‘(9) BENEFITS NOT TREATED AS MADE AVAIL-
ABLE BY REASON OF CERTAIN ELECTIONS, ETC.—
‘‘(A) TOTAL AMOUNT PAYABLE IS $3,500
OR LESS.—The total amount payable to a par-
ticipant under the plan shall not be treated as
made available merely because the participant
may elect to receive such amount (or the plan
may distribute such amount without the partici-
pant’s consent) if—
‘‘(i) such amount does not exceed
$3,500, and
‘‘(ii) such amount may be distributed
only if—
980
‘‘(I) no amount has been deferred
under the plan with respect to such
participant during the 2-year period
ending on the date of the distribution,
and
‘‘(II) there has been no prior dis-
tribution under the plan to such par-
ticipant to which this subparagraph
applied.
A plan shall not be treated as failing to meet
the distribution requirements of subsection (d)
by reason of a distribution to which this sub-
paragraph applies.
‘‘(B) ELECTION
TO
DEFER
COMMENCE-
MENT OF DISTRIBUTIONS.—The total amount
payable to a participant under the plan shall
not be treated as made available merely because
the participant may elect to defer commence-
ment of distributions under the plan if—
‘‘(i) such election is made after
amounts may be available under the plan
in accordance with subsection (d)(1)(A)
and before commencement of such dis-
tributions, and
981
‘‘(ii) the participant may make only 1
such election.’’
(b) COST-OF-LIVING ADJUSTMENT OF MAXIMUM DE-
FERRAL AMOUNT.—Subsection (e) of section 457 is
amended by adding at the end the following new para-
graph:
‘‘(14) COST-OF-LIVING ADJUSTMENT OF MAXI-
MUM DEFERRAL AMOUNT.—The Secretary shall ad-
just the $7,500 amount specified in subsections
(b)(2) and (c)(1) at the same time and in the same
manner as under section 415(d) (determined without
regard to paragraph (4)), except that the base pe-
riod in applying such section for purposes of this
paragraph shall be the calendar quarter ending Sep-
tember 30, 1994.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1995.
SEC. 14240. TRUST REQUIREMENT FOR DEFERRED COM-
PENSATION PLANS OF STATE AND LOCAL
GOVERNMENTS.
(a) IN GENERAL.—Section 457 is amended by adding
at the end the following new subsection:
‘‘(g) GOVERNMENTAL PLANS MUST MAINTAIN SET
ASIDES FOR EXCLUSIVE BENEFIT OF PARTICIPANTS.—
982
‘‘(1) IN GENERAL.—A plan maintained by an
eligible employer described in subsection (e)(1)(A)
shall not be treated as an eligible deferred com-
pensation plan unless all assets and income of the
plan described in subsection (b)(6) are held in trust
for the exclusive benefit of participants and their
beneficiaries.
‘‘(2) TAXABILITY
OF
TRUSTS
AND
PARTICI-
PANTS.—For purposes of this title—
‘‘(A) a trust described in paragraph (1)
shall be treated as an organization exempt from
taxation under section 501(a), and
‘‘(B) notwithstanding any other provision
of this title, amounts in the trust shall be in-
cludible in the gross income of participants and
beneficiaries only to the extent, and at the time,
provided in this section.
‘‘(3) CUSTODIAL ACCOUNTS AND CONTRACTS.—
For purposes of this subsection, custodial accounts
and contracts described in section 401(f) shall be
treated as trusts under rules similar to the rules
under section 401(f).’’
(b) CONFORMING AMENDMENT.—Paragraph (6) of
section 457(b) is amended by inserting ‘‘except as pro-
vided in subsection (g),’’ before ‘‘which provides that’’.
983
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to assets and income described in section
457(b)(6) of the Internal Revenue Code of 1986
held by a plan on and after the date of the enact-
ment of this Act.
(2) TRANSITION RULE.—In the case of assets
and income described in paragraph (1) held by a
plan before the 90th day after the date of the enact-
ment of this Act, a trust need not be established by
reason of the amendments made by this section be-
fore such 90th day.
SEC. 14241. TRANSITION RULE FOR COMPUTING MAXIMUM
BENEFITS UNDER SECTION 415 LIMITATIONS.
(a) IN GENERAL.—Subparagraph (A) of section
767(d)(3) of the Uruguay Round Agreements Act is
amended to read as follows:
‘‘(A) EXCEPTION.—A plan that was adopt-
ed and in effect before December 8, 1994, shall
not be required to apply the amendments made
by subsection (b) with respect to benefits ac-
crued before the earlier of—
984
‘‘(i) the later of the date a plan
amendment applying such amendment is
adopted or made effective, or
‘‘(ii) the first day of the first limita-
tion year beginning after December 31,
1999.
Determinations under section 415(b)(2)(E) of
the Internal Revenue Code of 1986 shall be
made with respect to such benefits on the basis
of such section as in effect on December 7,
1994, and the provisions of the plan as in effect
on December 7, 1994, but only if such provi-
sions of the plan meet the requirements of such
section (as so in effect).’’
(b) EFFECTIVE DATE.—The amendment made by
this section shall take effect as if included in the provisions
of section 767 of the Uruguay Round Agreements Act.
(c) TRANSITIONAL RULE.—In the case of a plan that
was adopted and in effect before December 8, 1994, if—
(1) a plan amendment was adopted or made ef-
fective on or before the date of the enactment of this
Act applying the amendments made by section
767(b) of the Uruguay Round Agreements Act, and
(2) within 1 year after the date of the enact-
ment of this Act, a plan amendment is adopted