shall be treated as meeting the requirements of
paragraph 
(3)(A)(ii) 
if 
such 
arrangement
meets—
‘‘(i) the contribution requirements of
subparagraph (B),
‘‘(ii) the exclusive benefit require-
ments of subparagraph (C), and
‘‘(iii) the vesting requirements of sec-
tion 408(p)(3).
‘‘(B) CONTRIBUTION
REQUIREMENTS.—
The requirements of this subparagraph are met
if, under the arrangement—
‘‘(i) an employee may elect to have
the employer make elective contributions
for the year on behalf of the employee to
a trust under the plan in an amount which
is expressed as a percentage of compensa-
tion of the employee but which in no event
exceeds $6,000,
‘‘(ii) the employer is required to make
a matching contribution to the trust for
the year in an amount equal to so much of
the amount the employee elects under
clause (i) as does not exceed 3 percent of
compensation for the year, and
‘‘(iii) no other contributions may be
made other than contributions described in
clause (i) or (ii).
‘‘(C) EXCLUSIVE BENEFIT.—The require-
ments of this subparagraph are met for any
year to which this paragraph applies if no con-
tributions were made, or benefits were accrued,
for services during such year under any quali-
fied plan of the employer on behalf of any em-
ployee eligible to participate in the cash or de-
ferred arrangement, other than contributions
described in subparagraph (B).
‘‘(D) DEFINITIONS AND SPECIAL RULE.—
‘‘(i) DEFINITIONS.—For purposes of
this paragraph, any term used in this
paragraph which is also used in section
408(p) shall have the meaning given such
term by such section.
‘‘(ii) COORDINATION WITH TOP-HEAVY
RULES.—A plan meeting the requirements
of this paragraph for any year shall not be
treated as a top-heavy plan under section
416 for such year.’’.
(b) ALTERNATIVE METHODS OF SATISFYING SEC-
TION
401(m) 
NONDISCRIMINATION
TESTS.—Section
401(m) of such Code (relating to nondiscrimination test
for matching contributions and employee contributions) is
amended by redesignating paragraph (10) as paragraph
(11) and by adding after paragraph (9) the following new
paragraph:
‘‘(10) ALTERNATIVE METHOD OF SATISFYING
TESTS.—A defined contribution plan shall be treated
as meeting the requirements of paragraph (2) with
respect to matching contributions if the plan—
‘‘(A) meets the contribution requirements
of subparagraph (B) of subsection (k)(11),
‘‘(B) meets the exclusive benefit require-
ments of subsection (k)(11)(C), and
‘‘(C) meets the vesting requirements of
section 408(p)(3).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan years beginning after De-
cember 31, 1995.
SEC. 3. CREDIT FOR PENSION PLAN START-UP COSTS OF
SMALL EMPLOYERS.
(a) ALLOWANCE OF CREDIT.—Section 38(b) of the
Internal Revenue Code of 1986 (defining current year
business credit) is amended by striking ‘‘plus’’ at the end
of paragraph (10), by striking the period at the end of
paragraph (11), and inserting ‘‘, plus’’, and by adding at
the end the following new paragraph:
‘‘(12) the small employer pension plan start-up
cost credit.’’.
(b) SMALL EMPLOYER PENSION PLAN START-UP
COST CREDIT.—Subpart D of part IV of subchapter A
of chapter 1 of such Code (relating to business related
credits), as amended by this Act is amended by adding
at the end the following new section:
‘‘SEC. 45C. SMALL EMPLOYER PENSION PLAN START-UP
COST CREDIT.
‘‘(a) AMOUNT OF CREDIT.—For purposes of section
38—
‘‘(1) IN GENERAL.—The small employer pen-
sion plan start-up cost credit for any taxable year is
an amount equal to 50 percent of the qualified start-
up costs of an eligible employer in establishing a
qualified pension plan.
‘‘(2) AGGREGATE LIMITATION.—The amount of
the credit under paragraph (1) for any taxable year
shall not exceed $500, reduced by the aggregate
amount determined under this section for all preced-
ing taxable years of the taxpayer.
‘‘(b) QUALIFIED START-UP COSTS; QUALIFIED PEN-
SION PLAN.—For purposes of this section—
‘‘(1) QUALIFIED START-UP COSTS.—The term
‘qualified start-up costs’ means any ordinary and
necessary expenses of an eligible employer which—
‘‘(A) are paid or incurred in connection
with the establishment of a qualified pension
plan, and
‘‘(B) are of a nonrecurring nature.
‘‘(2) QUALIFIED
PENSION
PLAN.—The term
‘qualified pension plan’ means—
‘‘(A) a qualified salary reduction arrange-
ment described in section 408(p) (relating to
simple retirement accounts), or
‘‘(B) an arrangement described in section
401(k)(11).
‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this
section—
‘‘(1) IN
GENERAL.—The term ‘eligible em-
ployer’ means an employer which did not make any
contributions on behalf of any employee to—
‘‘(A) a qualified pension plan,
‘‘(B) a plan described in section 401(a)
which includes a trust exempt from tax under
section 501(a), or
‘‘(C) a simplified employee pension (as de-
fined in section 408(k)),
sion plan start-up cost credit determined under sec-
tion 45C may be carried back to a taxable year end-
ing before the date of the enactment of section
45C.’’.
(2) The table of sections for subpart D of part
IV of subchapter A of chapter 1 of such Code is
amended by adding at the end the following new
item:
‘‘Sec. 45C. Small employer pension plan start-up cost credit.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to costs incurred after the date
of the enactment of this Act in taxable years ending after
such date.
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HR 2584 IH——2