I
106TH CONGRESS
1ST SESSION
H. R. 1590
To provide retirement security for all Americans.
IN THE HOUSE OF REPRESENTATIVES
APRIL 28, 1999
Mr. GEJDENSON (for himself, Mr. GEPHARDT, Mr. BONIOR, Mr. RANGEL, Mr.
CLAY, Mr. ANDREWS, Mr. NEAL of Massachusetts, Mr. POMEROY, Mr.
FROST, Mr. MENENDEZ, Ms. DELAURO, Mr. KENNEDY of Rhode Island,
Mr. NADLER, Mr. CROWLEY, Mr. BRADY of Pennsylvania, Ms. NORTON,
Mrs. CAPPS, Mr. BROWN of Ohio, Mr. GREEN of Texas, Mr. VENTO, Mr.
BALDACCI, Mr. FILNER, Mr. MCGOVERN, Ms. PELOSI, Mr. DIXON, Mr.
DEFAZIO, Mr. UNDERWOOD, Mr. PALLONE, Mr. SHOWS, Mr. OBERSTAR,
Mrs. MINK of Hawaii, Mr. FALEOMAVAEGA, Ms. SCHAKOWSKY, Mr. KIL-
DEE, Mr. OLVER, Mr. STRICKLAND, Ms. LOFGREN, Mr. GEORGE MILLER
of California, Mr. KLECZKA, Mr. JEFFERSON, Mr. LAFALCE, Mr.
SANDLIN, Mr. FORD, Mr. LEWIS of Georgia, Mr. INSLEE, Mr. HILLIARD,
Mr. MCNULTY, Ms. KILPATRICK, Mr. FRANK of Massachusetts, Ms.
KAPTUR, Mr. WEINER, Mr. MOORE, Mr. PRICE of North Carolina, Mr.
HINCHEY, Mr. DELAHUNT, Ms. BERKLEY, Mrs. MEEK of Florida, Mr.
WYNN, Mr. RAHALL, Mr. BOUCHER, Mr. CUMMINGS, Mr. GUTIERREZ,
Mr. DOYLE, Mr. KUCINICH, Mr. MOAKLEY, Mr. WISE, Mr. CLYBURN,
Mr. ACKERMAN, Ms. BROWN of Florida, Ms. LEE, Mrs. MALONEY of
New York, Mr. BERMAN, Ms. STABENOW, Mr. TIERNEY, Mr. MALONEY
of Connecticut, Mr. WAXMAN, Ms. MILLENDER-MCDONALD, Ms. EDDIE
BERNICE JOHNSON of Texas, Mr. LAMPSON, Mr. MARTINEZ, Mr. GON-
ZALEZ, Mr. WEXLER, Ms. JACKSON-LEE of Texas, Mr. DINGELL, Mrs.
LOWEY, Mr. CAPUANO, Mr. ALLEN, Mr. STARK, Ms. WOOLSEY, Mr.
EVANS, Mrs. THURMAN, Mr. MARKEY, Mr. SABO, Ms. WATERS, Mr.
HASTINGS of Florida, Mr. BLAGOJEVICH, Mr. ENGEL, Ms. ROYBAL-AL-
LARD, and Mrs. NAPOLITANO) introduced the following bill; which was re-
ferred to the Committee on Ways and Means, and in addition to the
Committees on Education and the Workforce, Government Reform, and
Transportation and Infrastructure, for a period to be subsequently deter-
mined by the Speaker, in each case for consideration of such provisions
as fall within the jurisdiction of the committee concerned
A BILL
To provide retirement security for all Americans.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Retirement Security
Act of 1999’’.
SEC. 2. TABLE OF CONTENTS.
The table of contents for this Act is as follows:
Sec. 1. Short title.
Sec. 2. Table of contents.
TITLE I—PENSION ACCESS AND COVERAGE
Sec. 100. Amendment of 1986 Code.
Subtitle A—Improved Access to Individual Retirement Savings
Sec. 101. Credit for pension plan startup costs of small employers.
Sec. 102. Exclusion for payroll deduction contributions to IRAs.
Sec. 103. Nonrefundable tax credit for contributions to individual retirement
plans.
Sec. 104. Distributions from certain plans may be used without penalty during
periods of unemployment.
Subtitle B—Secure Money Annuity or Retirement (SMART) Trusts
Sec. 111. Secure money annuity or retirement (SMART) trusts.
Subtitle C—Improved Fairness in Retirement Plan Benefits
Sec. 121. Amendments to SIMPLE retirement accounts.
Sec. 122. Nondiscrimination rules for qualified cash or deferred arrangements
and matching contributions.
Sec. 123. Definition of highly compensated employees.
Sec. 124. Treatment of multiemployer plans under section 415.
Sec. 125. Exemption of mirror plans from section 457 limits.
Sec. 126. Immediate participation in the thrift savings plan for Federal employ-
ees.
Sec. 127. Full funding limitation for multiemployer plans.
Sec. 128. Elimination of partial termination rules for multiemployer plans.
Sec. 129. Repeal of 150 percent of current liability funding limit.
TITLE II—SECURITY
Sec. 200. Amendment of ERISA.
Subtitle A—General Provisions
Sec. 201. Periodic pension benefits statements.
Sec. 202. Requirement of annual, detailed investment reports applied to certain
401(k) plans.
Sec. 203. Information required to be provided to investment managers of
401(k) plans.
Sec. 204. Study on investments in collectibles.
Sec. 205. Qualified employer plans prohibited from making loans through credit
cards and other intermediaries.
Sec. 206. Multiemployer plan benefits guaranteed.
Sec. 207. Prohibited transactions.
Sec. 208. Substantial owner benefits.
Sec. 209. Reversion report.
Subtitle B—ERISA Enforcement
Sec. 211. Civil penalties for breach of fiduciary responsibilities made discre-
tionary, etc.
Sec. 212. Reporting and enforcement requirements for employee benefit plans.
Sec. 213. Additional requirements for qualified public accountants.
Sec. 214. Inspector General study.
Subtitle C—Increase in Excise Tax on Employer Reversions
Sec. 221. Increase in excise tax.
TITLE III—PORTABILITY
Sec. 301. Faster vesting of employer matching contributions.
Sec. 302. Rationalization of the restrictions on distributions from 401(k) plans.
Sec. 303. Treatment of transfers between defined contribution plans.
Sec. 304. Missing participants.
Sec. 305. Allowance of rollovers from and to 403(b) plans.
Sec. 306. Rollover contributions from deferred compensation plans of State and
local governments.
Sec. 307. Extension of 60-day rollover period in the case of Presidentially de-
clared disasters and service in combat zone.
Sec. 308. Purchase of service credit in governmental defined benefit plans.
TITLE IV—COMPREHENSIVE WOMEN’S PENSION PROTECTION
Subtitle A—Pension Reform
Sec. 401. Pension right to know proposals.
Sec. 402. Women’s pension toll-free phone number.
Sec. 403. Modification of government pension offset.
Sec. 404. Family leave provisions.
Sec. 405. Pension integration rules.
Sec. 406. Division of pension benefits upon divorce.
Sec. 407. Entitlement of divorced spouses to railroad retirement annuities inde-
pendent of actual entitlement of employee.
Sec. 408. Effective dates.
Subtitle B—Protection of Rights of Former Spouses to Pension Benefits
Under Certain Government and Government-Sponsored Retirement Programs
Sec. 411. Extension of tier II railroad retirement benefits to surviving former
spouses pursuant to divorce agreements.
Sec. 412. Survivor annuities for widows, widowers, and former spouses of Fed-
eral employees who die before attaining age for deferred annu-
ity under civil service retirement system.
Sec. 413. Payment of lump-sum benefits to former spouses of Federal employ-
ees.
Subtitle C—Modifications of Joint and Survivor Annuity Requirements
Sec. 421. Modifications of joint and survivor annuity requirements.
Sec. 422. Spousal consent required for distributions from defined contribution
plans.
TITLE V—DATE FOR ADOPTION OF PLAN AMENDMENTS
Sec. 501. Date for adoption of plan amendments.
TITLE I—PENSION ACCESS AND
COVERAGE
SEC. 100. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in
this title an amendment or repeal is expressed in terms
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a
section or other provision of the Internal Revenue Code
of 1986.
Subtitle A—Improved Access to
Individual Retirement Savings
SEC. 101. CREDIT FOR PENSION PLAN STARTUP COSTS OF
SMALL EMPLOYERS.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business related cred-
its) is amended by adding at the end the following new
section:
‘‘SEC. 45D. SMALL EMPLOYER PENSION PLAN STARTUP
COSTS.
‘‘(a) GENERAL RULE.—For purposes of section 38,
in the case of an eligible employer, the small employer pen-
sion plan startup cost credit determined under this section
for any taxable year is an amount equal to 50 percent
of the qualified startup costs paid or incurred by the tax-
payer during the taxable year.
‘‘(b) DOLLAR LIMITATION.—The amount of the cred-
it determined under this section for any taxable year shall
not exceed—
‘‘(1) $1,000 for the first credit year,
‘‘(2) $500 for each of the 2 taxable years imme-
diately following the first credit year, and
‘‘(3) zero for any other taxable year.
‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this
section—
‘‘(1) IN
GENERAL.—The term ‘eligible em-
ployer’ has the meaning given such term by section
408(p)(2)(C)(i).
‘‘(2) EMPLOYERS
MAINTAINING
QUALIFIED
PLANS
DURING
1997
NOT
ELIGIBLE.—Such term
shall not include an employer if such employer (or
any predecessor employer) maintained a qualified
plan (as defined in section 408(p)(2)(D)(ii)) with re-
spect to which contributions were made, or benefits
were accrued, for service in 1997. If only individuals
other than employees described in subparagraph (A)
or (B) of section 410(b)(3) are eligible to participate
in the qualified employer plan referred to in sub-
section (d)(1), then the preceding sentence shall be
applied without regard to any qualified plan in
which only employees so described are eligible to
participate.
‘‘(d) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) QUALIFIED STARTUP COSTS.—
‘‘(A) IN
GENERAL.—The term ‘qualified
startup costs’ means any ordinary and nec-
essary expenses of an eligible employer which
are paid or incurred in connection with—
‘‘(i) the establishment or administra-
tion of an eligible employer plan, or
‘‘(ii) the retirement-related education
of employees with respect to such plan.
‘‘(B) PLAN MUST HAVE AT LEAST 2 PAR-
TICIPANTS.—Such term shall not include any
expense in connection with a plan that does not
have at least 2 individuals who are eligible to
participate.
‘‘(C) PLAN
MUST
BE
ESTABLISHED
BE-
FORE JANUARY 1, 2002.—Such term shall not
include any expense in connection with a plan
established after December 31, 2001.
‘‘(2) ELIGIBLE
EMPLOYER
PLAN.—The term
‘eligible employer plan’ means a qualified employer
plan within the meaning of section 4972(d), or a
qualified payroll deduction arrangement within the
meaning of section 408(q)(1) (whether or not an
election is made under section 408(q)(2)). A quali-
fied payroll deduction arrangement shall be treated
as an eligible employer plan only if all employees of
the employer who—
‘‘(A) have been employed for 90 days, and
‘‘(B) are not described in subparagraph
(A) or (C) of section 410(b)(3),
are eligible to make the election under section
408(q)(1)(A).
‘‘(3) FIRST
CREDIT
YEAR.—The term ‘first
credit year’ means—
‘‘(A) the taxable year which includes the
date that the eligible employer plan to which
such costs relate becomes effective, or
‘‘(B) at the election of the eligible em-
ployer, the taxable year preceding the taxable
year referred to in subparagraph (A).
‘‘(e) 
SPECIAL
RULES.—For 
purposes 
of 
this
section—
‘‘(1) AGGREGATION RULES.—All persons treat-
ed as a single employer under subsection (a) or (b)
of section 52, or subsection (n) or (o) of section 414,
shall be treated as one person. All eligible employer
plans shall be treated as 1 eligible employer plan.
‘‘(2) DISALLOWANCE OF DEDUCTION.—No de-
duction shall be allowed for that portion of the quali-
fied startup costs paid or incurred for the taxable
year which is equal to the credit determined under
subsection (a).
‘‘(3) ELECTION NOT TO CLAIM CREDIT.—This
section shall not apply to a taxpayer for any taxable
year if such taxpayer elects to have this section not
apply for such taxable year.’’
(b) CREDIT ALLOWED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) (defining current year busi-
ness credit) is amended by striking ‘‘plus’’ at the end of
paragraph (11), by striking the period at the end of para-
graph (12) and inserting ‘‘, plus’’, and by adding at the
end the following new paragraph:
‘‘(13) in the case of an eligible employer (as de-
fined in section 45D(c)), the small employer pension
plan startup cost credit determined under section
45D(a).’’
(c) CONFORMING AMENDMENTS.—
(1) Section 39(d) is amended by adding at the
end the following new paragraph:
‘‘(8) NO
CARRYBACK
OF
SMALL
EMPLOYER
PENSION PLAN STARTUP COST CREDIT BEFORE EF-
FECTIVE DATE.—No portion of the unused business
credit for any taxable year which is attributable to
the small employer pension plan startup cost credit
determined under section 45D may be carried back
to a taxable year ending on or before the date of
the enactment of section 45D.’’
(2) Subsection (c) of section 196 is amended by
striking ‘‘and’’ at the end of paragraph (7), by strik-
ing the period at the end of paragraph (8) and in-
serting ‘‘, and’’, and by adding at the end the fol-
lowing new paragraph:
‘‘(9) the small employer pension plan startup
cost credit determined under section 45D(a).’’
(3) The table of sections for subpart D of part
IV of subchapter A of chapter 1 is amended by add-
ing at the end the following new item:
‘‘Sec. 45D. Small employer pension plan startup costs.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to costs paid or incurred in taxable
years ending after the date of the enactment of this Act.
SEC. 102. EXCLUSION FOR PAYROLL DEDUCTION CON-
TRIBUTIONS TO IRAS.
(a) IN GENERAL.—Section 408 (relating to individual
retirement accounts) is amended by redesignating sub-
section (q) as subsection (r) and by inserting after sub-
section (p) the following new subsection:
‘‘(q) QUALIFIED PAYROLL DEDUCTION ARRANGE-
MENT FOR IRA CONTRIBUTIONS.—
‘‘(1) IN GENERAL.—For purposes of this title,
the term ‘qualified payroll deduction arrangement’
means a written arrangement of an employer under
which—
‘‘(A) an employee eligible to participate in
the arrangement may elect to have the employer
make payments—
‘‘(i) to the employee directly in cash,
or
‘‘(ii) as elective employer contributions
to an individual retirement plan (as de-
fined in section 7701(a)(37)), other than
an individual retirement plan described in
section 408(k), 408(p), or 408A(b), on be-
half of the employee for the taxable year in
which the payments otherwise would have
been made to the employee directly in
cash,
‘‘(B) the amount which the employee may
elect under subparagraph (A) for any year may
not exceed a total of $2,000,
‘‘(C) no other contributions may be made
other than contributions described in subpara-
graph (A),
‘‘(D) the employee’s rights to any contribu-
tions made to an individual retirement plan are
nonforfeitable (for this purpose, rules similar to
the rules of subsection (k)(4) shall apply), and
‘‘(E) the employer makes the elective em-
ployer contributions under subparagraph (A)
not later than the close of the 30-day period
following the last day of the month with respect
to which the contributions are to be made.
‘‘(2) ELECTION
NOT
TO
HAVE
SUBSECTION
APPLY.—An employer that maintains an arrange-
ment otherwise described in paragraph (1) may elect
to have contributions treated as though they were
not made under such an arrangement. If an em-
ployer does not make an election described in the
preceding sentence, an employee may elect, before
any contributions are made for the calendar year, to
have contributions on behalf of the employee treated
as though they were not made under an arrange-
ment described in paragraph (1). An employer shall
be deemed to have made an election under this para-
graph for a year if the employer maintained a quali-
fied plan with respect to which contributions were
made or benefits were accrued for such year. For
purposes of the preceding sentence, the term ‘quali-
fied plan’ means a plan, contract, pension, or trust
described in subparagraph (A) or (B) of section
219(g)(5).’’.
(b) TAX TREATMENT OF EMPLOYER CONTRIBUTIONS
MADE UNDER A QUALIFIED PAYROLL DEDUCTION AR-
RANGEMENT.—
(1) COORDINATION
WITH
DEDUCTION
UNDER
SECTION 219.—
(A) Section 219(b) (relating to maximum
amount of deduction) is amended by adding at
the end the following new paragraph:
‘‘(5) SPECIAL
RULE
FOR
CONTRIBUTIONS
UNDER
A
QUALIFIED
PAYROLL
DEDUCTION
AR-
RANGEMENT.—This section shall not apply with re-
spect to any amount contributed under a qualified
‘‘(n) SPECIAL RULES FOR CONTRIBUTIONS UNDER
A QUALIFIED PAYROLL DEDUCTION ARRANGEMENT.—
Rules similar to the rules of subsection (m) shall apply
to employer contributions made under a qualified payroll
deduction arrangement described in section 408(q)(1) (for
which an election has not been made under section
408(q)(2)).’’.
(3) CONTRIBUTIONS
AND
DISTRIBUTIONS.—
Section 402 (relating to taxability of beneficiary of
employees’ trust) is amended by adding at the end
the following new subsection:
‘‘(l) TREATMENT
OF CONTRIBUTIONS
AND DIS-
TRIBUTIONS UNDER A QUALIFIED PAYROLL DEDUCTION
ARRANGEMENT.—Rules similar to the rules of paragraphs
(1) and (3) of subsection (h) shall apply to contributions
and distributions made with respect to an individual re-
tirement plan under a qualified payroll deduction arrange-
ment described in section 408(q)(1) (for which an election
has not been made under section 408(q)(2)), except that
contributions made by an employer on behalf of an em-
ployee for a taxable year shall be excluded from income
only to the extent such contributions would have been de-
ductible for such taxable year under section 219, if such
section applied, without regard to section 219(g)(1)(B).
Contributions that are not excluded from income under
the preceding sentence shall be treated as designated non-
deductible contributions under section 408(o).’’.
(c) EXEMPTION FROM WITHHOLDING.—Subsection
(a) of section 3401 (defining wages) is amended by strik-
ing ‘‘or’’ at the end of paragraph (20), by striking the
period at the end of paragraph (21) and inserting ‘‘; or’’,
and by inserting after paragraph (21) the following new
paragraph:
‘‘(22) for any payment made for the benefit of
the employee to an individual retirement plan if the
amount of such payment was deducted and withheld
under section 408(q).’’.
(d) EXCLUSION SHOWN ON W–2.—Subsection (a) of
section 6051 (relating to receipts for employees) is amend-
ed by striking ‘‘and’’ at the end of paragraph (10), by
striking the period at the end of paragraph (11) and in-
serting ‘‘, and’’, and by inserting after paragraph (11) the
following new paragraph:
‘‘(12) the total amount deducted and withheld
pursuant to section 408(q).’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to remuneration paid after Decem-
ber 31, 1999.
SEC. 103. NONREFUNDABLE TAX CREDIT FOR CONTRIBU-
TIONS TO INDIVIDUAL RETIREMENT PLANS.
(a) IN GENERAL.—Subpart A of part IV of sub-
chapter A of chapter 1 (relating to nonrefundable personal
credits) is amended by inserting after section 25A the fol-
lowing new section:
‘‘SEC. 25B. RETIREMENT SAVINGS.
‘‘(a) ALLOWANCE OF CREDIT.—There shall be al-
lowed as a credit against the tax imposed by this chapter
so much of the qualified retirement contributions of the
taxpayer for the taxable year as does not exceed the appli-
cable amount of the adjusted gross income of the taxpayer
for such year.
‘‘(b) APPLICABLE AMOUNT.—For purposes of sub-
section (a), the applicable amount is determined in accord-
ance with the following table:
‘‘If adjusted gross income is:
The applicable amount is:
Not over $15,000 ..........................
$450.
Over 
$15,000 
but 
not 
over
$20,000.
$400.
Over 
$20,000 
but 
not 
over
$25,000.
$350.
Over 
$25,000 
but 
not 
over
$30,000.
$300.
Over $30,000 .................................
$0.
‘‘(c) SECTION NOT TO APPLY TO CERTAIN CON-
TRIBUTIONS.—This section shall not apply with respect
to—
‘‘(1) an employer contribution to a simplified
employee pension,
‘‘(2) any amount contributed to a simple retire-
ment account established under section 408(p),
‘‘(3) any amount contributed to a Roth IRA,
and
‘‘(4) any designated nondeductible contribution
(as defined in section 408(o)(2)(C)).
‘‘(d) OTHER LIMITATIONS AND RESTRICTIONS.—
‘‘(1) BENEFICIARY
MUST
BE
UNDER
AGE
701⁄2.—No credit shall be allowed under this section
with respect to any qualified retirement contribution
for the benefit of an individual if such individual has
attained age 701⁄2 before the close of such individ-
ual’s taxable year for which the contribution was
made.
‘‘(2) RECONTRIBUTED
AMOUNTS.—No credit
shall be allowed under this section with respect to a
rollover contribution described in section 402(c),
403(a)(4), 403(b)(8), or 408(d)(3).
‘‘(3) AMOUNTS CONTRIBUTED UNDER ENDOW-
MENT
CONTRACT.—In the case of an endowment
contract described in section 408(b), no credit shall
be allowed under this section for that portion of the
amounts paid under the contract for the taxable
year which is properly allocable, under regulations
prescribed by the Secretary, to the cost of life insur-
ance.
‘‘(4) DENIAL
OF
CREDIT
FOR
AMOUNT
CON-
TRIBUTED
TO
INHERITED
ANNUITIES
OR
AC-
COUNTS.—No credit shall be allowed under this sec-
tion with respect to any amount paid to an inherited
individual retirement account or individual retire-
ment annuity (within the meaning of section
408(d)(3)(C)(ii)).
‘‘(5) NO DOUBLE BENEFIT.—No credit shall be
allowed under this section for any taxable year with
respect to the amount of any qualified retirement
contribution for the benefit of an individual if such
individual takes a deduction with respect to such
amount under section 219 for such taxable year.
‘‘(e) QUALIFIED RETIREMENT CONTRIBUTION.—For
purposes of this section, the term ‘qualified retirement
contribution’ means—
‘‘(1) any amount paid in cash for the taxable
year by or on behalf of an individual to an individual
retirement plan for such individual’s benefit, and
‘‘(2) any amount contributed on behalf of any
individual to a plan described in section 501(c)(18).
‘‘(f) OTHER DEFINITIONS AND SPECIAL RULES.—
‘‘(1) COMPENSATION.—For purposes of this
section, the term ‘compensation’ has the meaning
given in section 219(f)(1).
‘‘(2) MARRIED COUPLES MUST FILE JOINT RE-
TURN.—If the taxpayer is married at the close of
the taxable year, the credit shall be allowed under
subsection (a) only if the taxpayer and the tax-
payer’s spouse file a joint return for the taxable
year.
‘‘(3) TIME
WHEN
CONTRIBUTIONS
DEEMED
MADE.—For purposes of this section, a taxpayer
shall be deemed to have made a contribution to an
individual retirement plan on the last day of the pre-
ceding taxable year if the contribution is made on
account of such taxable year and is made not later
than the time prescribed by law for filing the return
for such taxable year (not including extensions
thereof).
‘‘(4) EMPLOYER PAYMENTS.—For purposes of
this title, any amount paid by an employer to an in-
dividual retirement plan shall be treated as payment
of compensation to the employee (other than a self-
employed individual who is an employee within the
meaning of section 401(c)(1)) includible in his gross
income in the taxable year for which the amount was
contributed, whether or not a credit for such pay-
ment is allowable under this section to the em-
ployee.’’
(b) CONFORMING AMENDMENTS.—
(1) Section 86(f) is amended by redesignating
paragraphs (2), (3), and (4) as paragraphs (3), (4),
and (5), respectively, and by inserting after para-
graph (1) the following new paragraph:
‘‘(2) section 25B(f)(1) (defining compensa-
tion),’’.
(2) Clause (i) of section 501(c)(18)(D) is
amended by inserting ‘‘which may be taken into ac-
count in computing the credit allowable under sec-
tion 25B or’’ before ‘‘with respect’’.
(3) Section 6047(c) is amended by inserting
‘‘section 25B or’’ before ‘‘section 219’’.
(4) Section 6652(g) is amended by inserting
‘‘CREDITABLE’’ before ‘‘DEDUCTIBLE’’ in the head-
ing thereof.
(5) The table of sections for subpart A of part
IV of subchapter A of chapter 1 is amended by in-
serting after the item relating to section 25A the fol-
lowing new item:
‘‘Sec. 25B. Retirement savings.’’
(c) EFFECTIVE DATE.—The amendments made by
this section apply to taxable years beginning after Decem-
ber 31, 1999.
SEC. 104. DISTRIBUTIONS FROM CERTAIN PLANS MAY BE
USED WITHOUT PENALTY DURING PERIODS
OF UNEMPLOYMENT.
(a) IN GENERAL.—Paragraph (2) of section 72(t)
(relating to exceptions to 10-percent additional tax on
early distributions from qualified retirement plans) is
amended by adding at the end the following new subpara-
graph:
‘‘(G) ADDITIONAL DISTRIBUTIONS TO UN-
EMPLOYED INDIVIDUALS.—
‘‘(i) IN GENERAL.—Distributions from
an individual retirement plan, or from
amounts attributable to employer contribu-
tions made pursuant to elective deferrals
described in subparagraph (A) or (C) of
section 
402(g)(3) 
or 
section
501(c)(18)(D)(iii), to an individual after
separation from employment if—
‘‘(I) such individual has received
unemployment compensation for 12
consecutive weeks under any Federal
or State unemployment compensation
law by reason of such separation, and
‘‘(II) such distributions are made
during the 1-year period beginning on
the date of such separation.
‘‘(ii) DISTRIBUTIONS
AFTER
REEM-
PLOYMENT.—Clause (i) shall not apply to
any distribution made after the individual
has been employed for at least 60 days
after the separation from employment to
which clause (i) applies.
‘‘(iii) COORDINATION WITH SUBPARA-
GRAPH
(D).—Distributions during the 1-
year period described in clause (i)(II) shall
not be taken into account in applying the
limitation 
under 
subparagraph
(D)(i)(III).’’
(b) CONFORMING AMENDMENTS.—
(1) Section 401(k)(2)(B)(i) is amended by
striking ‘‘or’’ at the end of subclause (III), by strik-
ing ‘‘and’’ at the end of subclause (IV) and inserting
‘‘or’’, and by inserting after subclause (IV) the fol-
lowing new subclause:
‘‘(V) the date on which a period
referred to in section 72(t)(2)(G) be-
gins, and’’.
(2) Section 403(b)(11) is amended by striking
‘‘or’’ at the end of subparagraph (A), by striking the
period at the end of subparagraph (B) and inserting
‘‘, or’’, and by inserting after subparagraph (B) the
following new subparagraph:
‘‘(C) for distributions to which section
72(t)(2)(G) applies.’’
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions after the date of
the enactment of this Act.
Subtitle B—Secure Money Annuity
or Retirement (SMART) Trusts
SEC. 111. SECURE MONEY ANNUITY OR RETIREMENT
(SMART) TRUSTS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 is amended by inserting after section 408A
the following new section:
‘‘SEC. 408B. SMART PLANS.
‘‘(a) EMPLOYER ELIGIBILITY.—
‘‘(1) IN GENERAL.—An employer may establish
and maintain a SMART annuity or a SMART trust
for any year only if—
‘‘(A) the employer is an eligible employer
(as defined in section 408(p)(2)(C)), and
‘‘(B) the employer does not maintain (and
no predecessor of the employer maintains) a
qualified plan (other than a permissible plan)
with respect to which contributions were made,
or benefits were accrued, for service in any year
in the period beginning with the year such an-
nuity or trust became effective and ending with
the year for which the determination is being
made.
The period described in subparagraph (B) shall in-
clude the period of 5 years before the year such
trust or annuity became effective with respect to
qualified plans which are defined benefit plans or
money purchase pension plans.
‘‘(2) DEFINITIONS.—For purposes of paragraph
(1)—
‘‘(A) QUALIFIED PLAN.—The term ‘quali-
fied plan’ has the meaning given such term by
section 408(p)(2)(D)(ii).
‘‘(B) PERMISSIBLE PLAN.—The term ‘per-
missible plan’ means—
‘‘(i) a SIMPLE plan described in sec-
tion 408(p),
‘‘(ii) a SIMPLE 401(k) plan de-
scribed in section 401(k)(11),
‘‘(iii) an eligible deferred compensa-
tion plan described in section 457(b),
‘‘(iv) a collectively bargained plan but
only if the employees eligible to participate
in such plan are not also entitled to a ben-
efit described in subsection (b)(5) or
(c)(5), or
‘‘(v) a plan under which there may be
made only—
‘‘(I) elective deferrals described
in section 402(g)(3), and
‘‘(II) employer matching con-
tributions 
not 
in 
excess 
of 
the
amounts described in subclauses (I)
and (II) of section 401(k)(12)(B)(i).
‘‘(b) SMART ANNUITY.—
‘‘(1) IN GENERAL.—For purposes of this title,
the term ‘SMART annuity’ means an individual re-
tirement annuity (as defined in section 408(b) with-
out regard to paragraph (2) thereof and without re-
gard to the limitation on aggregate annual pre-
miums contained in the flush language of section
408(b)) if—
‘‘(A) such annuity meets the requirements
of paragraphs (2) through (7), and
‘‘(B) the only contributions to such annu-
ity are employer contributions.
Nothing in this section shall be construed as pre-
venting an employer from using a group annuity
contract which is divisible into individual retirement
annuities for purposes of providing SMART annu-
ities.
‘‘(2) PARTICIPATION REQUIREMENTS.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met for any year only if all
employees of the employer who—
‘‘(i) received at least $5,000 in com-
pensation from the employer during any 2
consecutive preceding years, and
‘‘(ii) received at least $5,000 in com-
pensation during the year,
are entitled to the benefit described in para-
graph (5) for such year.
‘‘(B) EXCLUDABLE EMPLOYEES.—An em-
ployer may elect to exclude from the require-
ments under subparagraph (A) employees de-
scribed in subparagraph (A) or (C) of section
410(b)(3).
‘‘(3) VESTING.—The requirements of this para-
graph are met if the employee’s rights to any bene-
fits under the annuity are nonforfeitable.
‘‘(4) BENEFIT
FORM.—The requirements of
this paragraph are met if the only form of benefit
is—
‘‘(A) a benefit payable annually in the
form of a single life annuity with monthly pay-
ments (with no ancillary benefits) beginning at
age 65, or
‘‘(B) any other form of benefit which is the
actuarial equivalent (based on the assumptions
specified in the SMART annuity) of the benefit
described in subparagraph (A).
‘‘(5) AMOUNT
OF
ANNUAL
ACCRUED
BEN-
EFIT.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met for any plan year if the
accrued benefit of each participant derived from
employer contributions for such year, when ex-
pressed as a benefit described in paragraph
(4)(A), equals the applicable percentage of the
participant’s compensation for such year.
‘‘(B) 
APPLICABLE
PERCENTAGE.—For
purposes of this paragraph—
‘‘(i) IN GENERAL.—The term ‘applica-
ble percentage’ means 2 percent.
‘‘(ii) ELECTION OF HIGHER PERCENT-
AGE.—An employer may elect to apply an
applicable percentage of 1 percent for any
year for all employees eligible to partici-
pate in the plan for such year, if the em-
ployer notifies the employees of such per-
centage within a reasonable period before
the beginning of such year. An employer
may also elect to apply an applicable per-
centage of 3 percent for any of the first 5
years that the plan is effective for all em-
ployees eligible to participate in the plan
for such year, if the employer so notifies
the employees.
‘‘(C) COMPENSATION LIMIT.—
‘‘(i) IN GENERAL.—The compensation
taken into account under this paragraph
for any year shall not exceed $100,000.
‘‘(ii) COST-OF-LIVING ADJUSTMENT.—
The Secretary shall adjust annually the
$100,000 amount in clause (i) for in-
creases in the cost-of-living at the same
time and in the same manner as adjust-
ments under section 415(d); except that
the base period shall be the calendar quar-
ter beginning October 1, 1999, and any in-
crease which is not a multiple of $5,000
shall be rounded to the next lowest mul-
tiple of $5,000.
‘‘(6) FUNDING.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met only if the employer is
required to contribute to the annuity for each
plan year the amount necessary to purchase a
SMART annuity in the amount of the benefit
accrued for such year for each participant enti-
tled to such benefit. Such contribution must be
made no later than 81⁄2 months after the end
of the plan year.
‘‘(B) PENALTY FOR FAILURE TO MAKE RE-
QUIRED CONTRIBUTION.—The taxes imposed by
section 4971 shall apply to a failure to make
the contribution required by this paragraph in
the same manner as if the amount of the failure
were an accumulated funding deficiency to
which such section applies.
‘‘(7) LIMITATION ON DISTRIBUTIONS.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met only if distributions
may be paid only when the employee attains
age 65, separates from service, dies, or becomes
disabled 
(within 
the 
meaning 
of 
section
72(m)(7)).
‘‘(B) LIMITATION ON DISTRIBUTIONS ON
SEPARATION
FROM
SERVICE
OF
EMPLOYEES
WHO HAVE NOT ATTAINED AGE 65.—Subpara-
graph (A) shall apply to a distribution on sepa-
ration of service of an employee who has not
attained age 65 only if—
‘‘(i) the aggregate cash value of an
employee’s SMART annuity does not ex-
ceed the dollar limit in effect under section
411(a)(11)(A), or
‘‘(ii) the distribution is a direct trust-
ee-to-trustee transfer of the entire balance
to the credit of the employee to a SMART
trust 
described 
in 
subsection 
(c), 
a
SMART rollover plan, or a SMART annu-
ity for the benefit of such employee.
‘‘(8) JOINT AND SURVIVOR ANNUITY RULES AP-
PLICABLE.—The requirements of this paragraph are
met only if the annuity satisfies section 401(a)(11).
‘‘(9) DEFINITIONS AND SPECIAL RULE.—
‘‘(A) DEFINITIONS.—The definitions in
section 408(p)(6) shall apply for purposes of
this subsection.
‘‘(B) USE OF DESIGNATED FINANCIAL IN-
STITUTIONS.—A rule similar to the rule of sec-
tion 408(p)(7) (without regard to the last sen-
tence thereof) shall apply for purposes of this
subsection.
‘‘(C) SMART ROLLOVER PLAN.—For pur-
poses of this section, the term ‘SMART rollover
plan’ means an individual retirement plan for
the benefit of the employee to which a rollover
was made from a SMART Annuity, SMART
trust, or another SMART Rollover plan.
‘‘(c) SMART TRUST.—
‘‘(1) IN GENERAL.—For purposes of this title,
the term ‘SMART trust’ means a trust forming part
of a defined benefit plan if—
‘‘(A) such trust meets the requirements of
section 401(a) as modified by subsection (d),
‘‘(B) such plan meets the requirements of
paragraphs (2) through (8), and
‘‘(C) the only contributions to such trust
are employer contributions.
‘‘(2) PARTICIPATION REQUIREMENTS.—A plan
meets the requirements of this paragraph for any
year only if the requirements of subsection (b)(2)
are met for such year.
‘‘(3) VESTING.—A plan meets the requirements
of this paragraph for any year only if the require-
ments of subsection (b)(3) are met for such year.
‘‘(4) BENEFIT FORM.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), a plan meets the require-
ments of this paragraph only if the trustee dis-
tributes a SMART annuity that satisfies sub-
section (b)(4) where the annual benefit de-
scribed in subsection (b)(4)(A) is no less than
the accrued benefit determined under para-
graph (5).
‘‘(B) DIRECT TRANSFERS TO INDIVIDUAL
RETIREMENT
PLAN
OR
SMART
ANNUITY.—A
plan shall not fail to meet the requirements of
this paragraph by reason of permitting, as an
optional form of benefit, the distribution of the
entire balance to the credit of the employee. If
the employee is under age 65, such distribution
must be in the form of a direct trustee-to-trust-
ee transfer to a SMART annuity, another
‘‘(3) Section 410 (relating to minimum partici-
pation and coverage requirements).
‘‘(4) Section 411(b) (relating to accrued benefit
requirements).
‘‘(5) Section 416 (relating to special rules for
top-heavy plans).’’
(b) DEDUCTION RULES.—
(1) IN
GENERAL.—Section 404 is further
amended by adding at the end the following new
subsection:
‘‘(o) SPECIAL RULES FOR SMART ANNUITIES AND
TRUSTS.—
‘‘(1) IN GENERAL.—Employer contributions to
a SMART annuity shall be treated as if they are
made to a plan described in paragraph (1) of sub-
section (a).
‘‘(2) DEDUCTIBLE LIMIT.—For purposes of sec-
tion 404(a)(1)(A)(i), the amount necessary to satisfy
the minimum funding requirement of section
408B(b)(6) or (c)(6) shall be treated as the amount
necessary to satisfy the minimum funding require-
ment of section 412.’’
(2) COORDINATION
WITH
DEDUCTION
UNDER
SECTION 219.—
(1) by striking ‘‘$5’’ each place it appears in
paragraph (1) and inserting ‘‘$11’’,
(2) by striking ‘‘$15’’ in paragraph (1) and in-
serting ‘‘$33’’, and
(3) by striking paragraphs (2), (5), and (6) and
by redesignating paragraphs (3) and (4) as para-
graphs (2) and (3), respectively.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to any multiemployer plan that has
not received financial assistance (within the meaning of
section 4261 of the Employee Retirement Income Security
Act of 1974) within the 1-year period ending on the date
of the enactment of this Act.
SEC. 207. PROHIBITED TRANSACTIONS.
(a) IN
GENERAL.—Section 502(i) (29 U.S.C.
1132(i)) is amended by striking ‘‘5 percent’’ and inserting
‘‘15 percent’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to prohibited transactions occur-
ring after the date of the enactment of this Act.
SEC. 208. SUBSTANTIAL OWNER BENEFITS.
(a) MODIFICATION OF PHASE-IN OF GUARANTEE.—
Subparagraphs (B) and (C) of section 4022(b)(5) (29
U.S.C. 1322(b)(5)) are amended to read as follows: