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by repealed.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, 1992.
SEC. 118. 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
section’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to remuneration paid after
December 31, 1994.
TITLE II—PENSION
SIMPLIFICATION
Subtitle A—Simplified Distribution
Rules
SEC. 201. 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 to read as follows:
‘‘(d) TAXABILITY
OF BENEFICIARY
OF CERTAIN
FOREIGN SITUS TRUSTS.—For purposes of subsections
(a), (b), and (c), a stock bonus, pension, or profit-sharing
trust which would qualify for exemption from tax under
section 501(a) except for the fact that it is a trust created
or organized outside the United States shall be treated
as if it were a trust exempt from tax under section
501(a).’’
(b) CONFORMING AMENDMENTS.—
(1) Subparagraph (D) of section 402(e)(4) (re-
lating to other rules applicable to exempt trusts) is
amended to read as follows:
‘‘(D) LUMP-SUM DISTRIBUTION.—For pur-
poses of this paragraph—
‘‘(i) IN
GENERAL.—The term ‘lump
sum distribution’ means the distribution or
payment within one taxable year of the re-
cipient of the balance to the credit of an
employee which becomes payable to the re-
cipient—
‘‘(I) on account of the employee’s
death,
‘‘(II) after the employee attains
age 591⁄2,
‘‘(III) on account of the employ-
ee’s separation from service, or
‘‘(IV) after the employee has be-
come disabled (within the meaning of
section 72(m)(7)),
from a trust which forms a part of a plan
described in section 401(a) and which is
exempt from tax under section 501 or from
a 
plan 
described 
in 
section 
403(a).
Subclause (III) of this clause shall be ap-
plied only with respect to an individual
who is an employee without regard to sec-
tion 401(c)(1), and subclause (IV) shall be
applied only with respect to an employee
within the meaning of section 401(c)(1).
For purposes of this clause, a distribution
to two or more trusts shall be treated as
a distribution to one recipient. For pur-
poses of this paragraph, the balance to the
credit of the employee does not include the
accumulated deductible employee contribu-
tions under the plan (within the meaning
of section 72(o)(5)).
‘‘(ii) 
AGGREGATION
OF
CERTAIN
TRUSTS AND PLANS.—For purposes of de-
termining the balance to the credit of an
employee under clause (i)—
‘‘(I) all trusts which are part of
a plan shall be treated as a single
trust, all pension plans maintained by
the employer shall be treated as a sin-
gle plan, all profit-sharing plans main-
tained by the employer shall be treat-
ed as a single plan, and all stock
bonus plans maintained by the em-
ployer shall be treated as a single
plan, and
‘‘(II) trusts which are not quali-
fied trusts under section 401(a) and
annuity contracts which do not satisfy
the requirements of section 404(a)(2)
shall not be taken into account.
‘‘(iii) COMMUNITY PROPERTY LAWS.—
The provisions of this paragraph shall be
applied without regard to community prop-
erty laws.
‘‘(iv) AMOUNTS
SUBJECT
TO
PEN-
ALTY.—This paragraph shall not apply to
amounts described in subparagraph (A) of
section 72(m)(5) to the extent that section
72(m)(5) applies to such amounts.
‘‘(v) BALANCE
TO
CREDIT
OF
EM-
PLOYEE NOT TO INCLUDE AMOUNTS PAY-
ABLE UNDER QUALIFIED DOMESTIC RELA-
TIONS ORDER.—For purposes of this para-
graph, the balance to the credit of an em-
ployee shall not include any amount pay-
able to an alternate payee under a quali-
fied domestic relations order (within the
meaning of section 414(p)).
‘‘(vi) TRANSFERS TO COST-OF-LIVING
ARRANGEMENT
NOT
TREATED
AS
DIS-
TRIBUTION.—For purposes of this para-
graph, the balance to the credit of an em-
ployee under a defined contribution plan
shall not include any amount transferred
from such defined contribution plan to a
qualified cost-of-living arrangement (within
the meaning of section 415(k)(2)) under a
defined benefit plan.
‘‘(vii) LUMP-SUM
DISTRIBUTIONS
OF
ALTERNATE PAYEES.—If any distribution
or payment of the balance to the credit of
an employee would be treated as a lump-
sum distribution, then, for purposes of this
paragraph, the payment under a qualified
domestic relations order (within the mean-
ing of section 414(p)) of the balance to the
credit of an alternate payee who is the
spouse or former spouse of the employee
shall be treated as a lump-sum distribu-
tion. For purposes of this clause, the bal-
(7) Section 406(c) (relating to termination of
status as deemed employee not to be treated as sep-
aration from service for purposes of limitation of
tax) is hereby repealed.
(8) Section 407(c) (relating to termination of
status as deemed employee not to be treated as sep-
aration from service for purposes of limitation of
tax) is hereby repealed.
(9) Section 691(c) (relating to deduction for es-
tate tax) is amended by striking paragraph (5).
(10) Paragraph (1) of section 871(b) (relating
to imposition of tax) is amended by striking ‘‘section
1, 55, or 402(d)(1)’’ and inserting ‘‘section 1 or
55’’.
(11) Subsection (b) of section 877 (relating to
alternative tax) is amended by striking ‘‘section 1,
55, or 402(d)(1)’’ and inserting ‘‘section 1 or 55’’.
(12) Section 4980A(c)(4) is amended—
(A) by striking ‘‘to which an election under
section 402(d)(4)(B) applies’’ and inserting
‘‘(as defined in section 402(e)(4)(D)) with re-
spect to which the individual elects to have this
paragraph apply’’,
(B) by adding at the end the following new
flush sentence:
‘‘An individual may elect to have this paragraph
apply to only one lump-sum distribution.’’, and
(C) by striking the heading and inserting:
‘‘(4) SPECIAL ONE-TIME ELECTION.—’’.
(13) Section 402(e) is amended by striking
paragraph (5).
(c) EFFECTIVE DATES.—
(1) IN GENERAL.—The amendments made by
this section shall apply to taxable years beginning
after December 31, 1993.
(2) RETENTION
OF
CERTAIN
TRANSITION
RULES.—Notwithstanding any other provision of
this section, the amendments made by this section
shall not apply to any distribution for which the tax-
payer elects the benefits of section 1122 (h)(3) or
(h)(5) of the Tax Reform Act of 1986. For purposes
of the preceding sentence, the rules of sections
402(c)(10) and 402(d) of the Internal Revenue Code
of 1986 (as in effect before the amendments made
by this Act) shall apply.
SEC. 202. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES’
DEATH BENEFITS.
(a) IN GENERAL.—Subsection (b) of section 101 is
hereby repealed.
(b) CONFORMING AMENDMENT.—Subsection (c) of
section 101 is amended by striking ‘‘subsection (a) or (b)’’
and inserting ‘‘subsection (a)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1993.
SEC. 203. SIMPLIFIED METHOD FOR TAXING ANNUITY DIS-
TRIBUTIONS 
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.—
‘‘(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).
‘‘(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
‘‘(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
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, 1993.
SEC. 204. 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
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)).’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to years beginning after Decem-
ber 31, 1993.
Subtitle B—Increased Access to
Pension Plans
SEC. 211. MODIFICATIONS OF SIMPLIFIED EMPLOYEE PEN-
SIONS.
(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.—
Section 408(k)(6)(A) is amended by striking clause (ii)
and by redesignating clauses (iii) and (iv) as clauses (ii)
and (iii), respectively.
(c) CONFORMING AMENDMENTS.—Clause (ii) of sec-
tion 408(k)(6)(C) and clause (ii) of section 408(k)(6)(F)
are each amended by striking ‘‘subparagraph (A)(iii)’’ and
inserting ‘‘subparagraph (A)(ii)’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1993.
SEC. 212. TAX EXEMPT ORGANIZATIONS ELIGIBLE UNDER
SECTION 401(k).
(a) GENERAL RULE.—Subparagraph (B) of section
401(k)(4) is amended to read as follows:
‘‘(B) STATE
AND
LOCAL
GOVERNMENTS
NOT ELIGIBLE.—A cash or deferred arrange-
ment shall not be treated as a qualified cash or
deferred arrangement if it is part of a plan
maintained by a State or local government or
political subdivision thereof, or any agency or
instrumentality thereof. 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, 1993, but shall not apply to any cash or de-
ferred arrangement to which clause (i) of section
1116(f)(2)(B) of the Tax Reform Act of 1986 applies.
SEC. 213. DUTIES OF SPONSORS OF CERTAIN PROTOTYPE
PLANS.
(a) IN GENERAL.—The Secretary of the Treasury
may, as a condition of sponsorship, prescribe rules defin-
ing the duties and responsibilities of sponsors of master
and prototype plans, regional prototype plans, and other
Internal Revenue Service preapproved plans.
(b) DUTIES RELATING TO PLAN AMENDMENT, NOTI-
FICATION OF ADOPTERS, AND PLAN ADMINISTRATION.—
The duties and responsibilities referred to in subsection
(a) may include—
(1) the maintenance of lists of persons adopting
the sponsor’s plans, including the updating of such
lists not less frequently than annually,
(2) the furnishing of notices at least annually
to such persons and to the Secretary or his delegate,
in such form and at such time as the Secretary shall
prescribe,
(3) duties relating to administrative services to
such persons in the operation of their plans, and
(4) other duties that the Secretary considers
necessary to ensure that—
(A) the master and prototype, regional
prototype, and other preapproved plans of
adopting employers are timely amended to meet
the requirements of the Internal Revenue Code
of 1986 or of any rule or regulation of the Sec-
retary, and
(B) adopting employers receive timely noti-
fication of amendments and other actions taken
by sponsors with respect to their plans.
Subtitle C—Nondiscrimination
Provisions
SEC. 221. 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 $50,000.
The Secretary shall adjust the $50,000 amount
under subparagraph (B) at the same time and in the
same manner as under section 415(d).’’
(b) SPECIAL RULE WHERE NO EMPLOYEES TREAT-
ED AS HIGHLY COMPENSATED.—Paragraph (2) of section
414(q) is amended to read as follows:
‘‘(2) SPECIAL
RULE
IF
NO
EMPLOYEE
DE-
SCRIBED
IN
PARAGRAPH
(1).—If no employee is
treated as a highly compensated employee under
paragraph (1), the highest paid officer for the year
shall be treated as a highly compensated employee.’’
(c) TREATMENT OF FAMILY MEMBERS.—Paragraph
(6) of section 414(q) is hereby repealed.
(d) CONFORMING AMENDMENTS.—
(1) Paragraphs (4), (5), (8), and (12) of section
414(q) are hereby repealed.
(2)(A) Section 414(r) is amended by adding at
the end thereof the following new paragraph:
‘‘(9) EXCLUDED EMPLOYEES.—For purposes of
this subsection, the following employees shall be ex-
cluded:
‘‘(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
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) Subparagraph (A) of section 401(a)(17) is
amended by striking the last sentence.
(4) Subsection (l) of section 404 is amended by
striking the last sentence.
(5) 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 and Technical Corrections Act of 1993.’’
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1993.
SEC. 222. MODIFICATION OF ADDITIONAL PARTICIPATION
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 sub-
section 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).’’
(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, 1993.
SEC. 223. 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 thereof the following new
paragraph:
‘‘(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).
‘‘(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
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-
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 appraise 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
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
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
respect 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
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 employee’’, 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.—
(1) Paragraph (3) of section 401(k) is amended
by adding at the end thereof the following new sub-
paragraph:
‘‘(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 thereof 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-
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, 1993.
Subtitle D—Miscellaneous
Simplification
SEC. 231. 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, 1993, 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
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. 232. MODIFICATIONS OF COST-OF-LIVING ADJUST-
MENTS.
(a) IN GENERAL.—Section 415(d) (relating to cost-
of-living adjustments) is amended to read as follows:
‘‘(d) COST-OF-LIVING ADJUSTMENTS.—
‘‘(1) IN GENERAL.—The Secretary shall adjust
annually—
‘‘(A) the $90,000 amount in subsection
(b)(1)(A), and
‘‘(B) in the case of a participant who sepa-
rated from service, the amount taken into ac-
count under subsection (b)(1)(B),
for increases in the cost-of-living in accordance with
regulations prescribed by the Secretary.
‘‘(2) METHOD.—
‘‘(A) IN GENERAL.—The regulations pre-
scribed under paragraph (1) shall provide for
adjustment procedures which are similar to the
procedures used to adjust benefit amounts
under section 215(i)(2)(A) of the Social Secu-
rity Act.
‘‘(B) PERIODS FOR ADJUSTMENT OF DOL-
LAR
AMOUNT.—For purposes of paragraph
(1)(A)—
‘‘(i) IN
GENERAL.—The adjustment
with respect to any calendar year shall be
based on the increase in the applicable
index as of the close of the calendar quar-
ter ending September 30 of the preceding
calendar year over such index as of the
close of the base period.
‘‘(ii) BASE PERIOD.—For purposes of
clause (i), the base period is the calendar
quarter beginning October 1, 1986.
‘‘(C) BASE PERIOD FOR SEPARATIONS.—
For purposes of paragraph (1)(B), the base pe-
riod is the last calendar quarter of the calendar
year preceding the calendar year in which the
participant separated from service.
‘‘(3) 
ROUNDING.—Any 
amount 
determined
under paragraph (1) (or by reference to this sub-
section) shall be rounded to the nearest $1,000, ex-
cept that the amounts under sections 402(g)(1),
408(k)(2)(C), and 457(e)(14) shall be rounded to
the nearest $100 and the amount under section
401(a)(17) shall be rounded, to the next lowest mul-
tiple of $10,000.’’
(b) EFFECTIVE DATE.—The amendments made by
this section apply to adjustments with respect to calendar
years beginning after December 31, 1993.
SEC. 233. 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, 1993.
SEC. 234. 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, 1994, 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, 1996.
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.
SEC. 235. FULL-FUNDING 
LIMITATION 
OF 
MULTIEM-
PLOYER PLANS.
(a) 
FULL-FUNDING
LIMITATION.—Section
412(c)(7)(C) (relating to full-funding limitation) is
amended—
(1) by inserting ‘‘or in the case of a multiem-
ployer plan,’’ after ‘‘paragraph (6)(B),’’, and
(2) by inserting ‘‘AND MULTIEMPLOYER PLANS’’
after ‘‘PARAGRAPH (6)(B)’’ in the heading thereof.
(b) VALUATION.—Section 412(c)(9) is amended—
(1) by inserting ‘‘(3 years in the case of a mul-
tiemployer plan)’’ after ‘‘year’’, and
(2) by striking ‘‘ANNUAL VALUATION’’ in the
heading and inserting ‘‘VALUATION’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to years beginning after December
31, 1993.
SEC. 236. ALTERNATIVE FULL-FUNDING LIMITATION.
(a) IN GENERAL.—Subsection (c) of section 412 (re-
lating to minimum funding standards) is amended by re-
designating paragraphs (8) through (11) as paragraphs
(9) through (12), respectively, and by adding after para-
graph (7) the following new paragraph:
‘‘(8) ALTERNATIVE
FULL-FUNDING
LIMITA-
TION.—
‘‘(A) GENERAL RULE.—An employer may
elect the full-funding limitation under this para-
graph with respect to any defined benefit plan
of the employer in lieu of the full-funding limi-
tation determined under paragraph (7) if the
requirements of subparagraphs (C) and (D) are
met.
‘‘(B) ALTERNATIVE FULL-FUNDING LIMI-
TATION.—The full-funding limitation under this
paragraph is the full-funding limitation deter-
mined under paragraph (7) without regard to
subparagraph (A)(i)(I) thereof.
‘‘(C) REQUIREMENTS RELATING TO PLAN
ELIGIBILITY.—
‘‘(i) IN GENERAL.—The requirements
of this subparagraph are met with respect
to a defined benefit plan if—
‘‘(I) as of the 1st day of the elec-
tion period, the average accrued liabil-
ity of participants accruing benefits
under the plan for the 5 immediately
preceding plan years is at least 80
percent of the plan’s total accrued li-
ability,
‘‘(II) the plan is not a top-heavy
plan (as defined in section 416(g)) for
the 1st plan year of the election pe-
riod or either of the 2 preceding plan
years, and
‘‘(III) each defined benefit plan
of the employer (and each defined
benefit plan of each employer who is
a member of any controlled group
which includes such employer) meets
the requirements of subclauses (I) and
(II).
‘‘(ii) FAILURE TO CONTINUE TO MEET
REQUIREMENTS.—
‘‘(I) If any plan fails to meet the
requirement of clause (i)(I) for any
plan year during an election period,
the benefits of the election under this
paragraph shall be phased out under
regulations prescribed by the Sec-
retary.
‘‘(II) If any plan fails to meet
the requirement of clause (i)(II) for
any plan year during an election pe-
riod, such plan shall be treated as not
meeting the requirements of clause (i)
for the remainder of the election
period.
If there is a failure described in subclause
(I) or (II) with respect to any plan, such
plan (and each plan described in clause
(i)(III) with respect to such plan) shall be
treated as not meeting the requirements of
clause (i) for any of the 10 plan years be-
ginning after the election period.
‘‘(D) REQUIREMENTS RELATING TO ELEC-
TION.—
‘‘(i) IN GENERAL.—The requirements
of this subparagraph are met with respect
to an election if—
‘‘(I) FILING
DATE.—Notice of
such election is filed with the Sec-
retary (in such form and manner and
containing such information as the
Secretary may provide) by January 1
of any calendar year, and is effective
as of the 1st day of the election period
beginning on or after January 1 of
the following calendar year.
‘‘(II) CONSISTENT
ELECTION.—
Such an election is made for all de-
fined benefit plans maintained by the
employer or by any member of a con-
trolled group which includes the em-
ployer.
‘‘(ii) TRANSITION
PERIOD.—In the
case of any election period beginning on or
after July 1, 1994, and before January 1,
1995, the requirements of clause (i) shall
not apply and the requirements of this
subparagraph are met with respect to such
election period if—
‘‘(I) FILING
DATE.—Notice of
election is filed with the Secretary by
October 1, 1994.
‘‘(II) INFORMATION.—The notice
sets forth the name and tax identifica-
tion number of the plan sponsor, the
names and tax identification numbers
of the plans to which the election ap-
plies, the limitation under paragraph
(7) (determined with and without re-
gard to this paragraph), and a signed
certification by an officer of the em-