Sec. 102. Loans from qualified employer plans treated as distributions unless
used to purchase a first home, to pay higher education or fi-
nancially devastating medical expenses, or during periods of
unemployment.
TITLE II—PROMOTION OF AVAILABILITY OF PRIVATE PENSIONS
UPON RETIREMENT
Sec. 201. Availability of defined contribution plan option for participants in de-
fined benefit plans.
Sec. 202. Timely investment of plan contributions.
Sec. 203. Increase in penalty for early distributions from pension plans.
TITLE III—HEALTH COVERAGE FOR RETIRED WORKERS
Sec. 301. Advance notice of material reductions in covered services under group
health plans.
Sec. 302. Continuation of coverage for persons 55 and older until eligible for
Medicare.
Sec. 303. Protections under the Medicare program for retired workers who lose
retiree health benefits.
TITLE IV—APPLICATION OF CERTAIN PROHIBITED
TRANSACTIONS RULES FOR 401(K) PLANS
Sec. 401. Certain prohibited transactions applied to 401(k) plans.
TITLE V—RETIREMENT SAVINGS AND SECURITY
Sec. 500. Amendment of ERISA.
Subtitle A—Expanded Pension Coverage and Simplification
Sec. 501. Elimination of requirement for plan descriptions and the filing re-
quirement for summary plan descriptions and descriptions of
material modifications to a plan; technical corrections.
Sec. 502. Conforming amendment relating to investments in qualified State
prepaid tuition programs.
Subtitle B—Portability
Sec. 511. Missing participants.
Sec. 512. Elimination of special vesting rule for multiemployer plans.
Sec. 513. Treatment of loans during military service.
Subtitle C—Enhanced Security
CHAPTER 1—GENERAL PROVISIONS
Sec. 521. Multiemployer plan benefits guaranteed.
Sec. 522. Reversion report.
Sec. 523. Full funding limitation for multiemployer plans.
Sec. 524. Prohibited transactions.
Sec. 525. Substantial owner benefits.
CHAPTER 2—ERISA ENFORCEMENT
Sec. 531. Short title.
Sec. 532. Repeal of limited scope audit.
Sec. 533. Reporting and enforcement requirements for employee benefit plans.
Sec. 534. Additional requirements for qualified public accountants.
Sec. 535. Clarification of fiduciary penalties.
TITLE VI—EXPANDED INDIVIDUAL RETIREMENT ACCOUNTS TO
INCREASE COVERAGE AND PORTABILITY
Subtitle A—Retirement Savings Incentives
Sec. 601. Increase in income limitations.
Sec. 602. Inflation adjustment for deductible amount and income limitations.
Sec. 603. Coordination of IRA deduction limit with elective deferral limit.
Sec. 604. Establishment of nondeductible tax-free individual retirement ac-
counts.
Subtitle B—Distributions and Investments
Sec. 611. Distributions from IRAs may be used without additional tax to pur-
chase first homes, to pay higher education or financially dev-
astating medical expenses, or by the unemployed.
Sec. 612. Contributions must be held at least 5 years in certain cases.
Sec. 613. Investments in qualified State prepaid tuition programs.
TITLE 
I—RESTRICTIONS 
ON
LOANS FROM QUALIFIED RE-
TIREMENT PLANS
SEC. 101. QUALIFIED EMPLOYER PLANS PROHIBITED FROM
MAKING LOANS THROUGH CREDIT CARDS
AND OTHER INTERMEDIARIES.
(a) IN GENERAL.—Subsection (a) of section 401 of
the Internal Revenue Code of 1986 is amended by adding
at the end the following new paragraph:
‘‘(35) PROHIBITION OF LOANS THROUGH CRED-
IT CARDS AND OTHER INTERMEDIARIES.—A trust
shall not constitute a qualified trust under this sec-
tion if the plan makes any loan to any beneficiary
under the plan through the use of any credit card
or any other intermediary.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to plan years beginning after
the date of the enactment of this Act.
SEC. 102. LOANS FROM QUALIFIED EMPLOYER PLANS
TREATED AS DISTRIBUTIONS UNLESS USED
TO PURCHASE A FIRST HOME, TO PAY HIGH-
ER EDUCATION OR FINANCIALLY DEVASTAT-
ING MEDICAL EXPENSES, OR DURING PERI-
ODS OF UNEMPLOYMENT.
(a) IN GENERAL.—Subsection (p) of section 72 of the
Internal Revenue Code of 1986 (relating to loans treated
as distributions) is amended by redesignating paragraphs
(3), (4), and (5) as paragraphs (4), (5), and (6), respec-
tively, and by inserting after paragraph (2) the following
new paragraph:
‘‘(3) EXCEPTION ONLY TO APPLY TO CERTAIN
LOANS.—Paragraph (2) shall apply to any loan only
if such loan is—
‘‘(A) a qualified first-time homebuyer loan
(as defined in paragraph (7)),
‘‘(B) a qualified higher education loan (as
defined in paragraph (8)),
‘‘(C) a qualified medical expense loan (as
defined in paragraph (9)), or
‘‘(D) a qualified unemployment loan (as
defined in paragraph (10)).’’.
(b) DEFINITIONS.—Subsection (p) of section 72 of
such Code is amended by adding at the end the following
new paragraphs:
‘‘(7) 
QUALIFIED
FIRST-TIME
HOMEBUYER
LOAN.—
‘‘(A) IN GENERAL.—For purposes of para-
graph (3), the term ‘qualified first-time home-
buyer loan’ means any loan received by an indi-
vidual to the extent the amount of the loan is
used within a reasonable period to pay qualified
acquisition costs with respect to a principal res-
idence of a first-time homebuyer who is such in-
dividual, the spouse of such individual, or any
child, grandchild, or ancestor of such individual
or the individual’s spouse.
‘‘(B) QUALIFIED
ACQUISITION
COSTS.—
For purposes of this paragraph, the term
‘qualified acquisition costs’ means the costs of
acquiring, constructing, or reconstructing a res-
idence. Such term includes any usual or reason-
able settlement, financing, or other closing
costs.
‘‘(C) FIRST-TIME
HOMEBUYER; 
OTHER
DEFINITIONS.—For purposes of this para-
graph—
‘‘(i) FIRST-TIME
HOMEBUYER.—The
term ‘first-time homebuyer’ means any in-
dividual if—
‘‘(I) such individual (and if mar-
ried, such individual’s spouse) had no
present ownership interest in a prin-
cipal residence during the 2-year pe-
riod ending on the date of acquisition
of the principal residence to which
this paragraph applies, and
‘‘(II) subsection (h) or (k) of sec-
tion 1034 did not suspend the run-
ning of any period of time specified in
section 1034 with respect to such in-
dividual on the day before the date
the loan is received.
‘‘(ii) 
PRINCIPAL
RESIDENCE.—The
term ‘principal residence’ has the same
meaning as when used in section 1034.
‘‘(iii) DATE
OF
ACQUISITION.—The
term ‘date of acquisition’ means the date—
‘‘(I) on which a binding contract
to acquire the principal residence to
which subparagraph (A) applies is en-
tered into, or
‘‘(II) on which construction or re-
construction of such a principal resi-
dence is commenced.
‘‘(8) QUALIFIED HIGHER EDUCATION LOAN.—
For purposes of paragraph (3)—
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education loan’ means any loan received
by an individual to the extent the amount of the
loan is used within a reasonable period to pay
expenses for tuition, fees, books, supplies, and
equipment required for the enrollment or at-
tendance of—
‘‘(i) the individual,
‘‘(ii) the individual’s spouse, or
‘‘(iii) any child (as defined in section
151(c)(3)), grandchild, or ancestor of the
individual or the individual’s spouse,
at an eligible educational institution (as defined
in section 135(c)(3)).
‘‘(B) COORDINATION WITH SAVINGS BOND
PROVISIONS.—The amount of qualified higher
education expenses for any taxable year shall be
reduced by any amount excludable from gross
income under section 135.
‘‘(9) QUALIFIED
MEDICAL
EXPENSE
LOAN.—
The term ‘qualified medical expense loan’ means any
loan received by an individual to the extent the
amount of the loan does not exceed the amount al-
lowable as a deduction under section 213 to the indi-
vidual for amounts paid during the taxable year for
medical care (determined without regard to whether
the taxpayer itemizes deductions for such taxable
year).
‘‘(10) QUALIFIED UNEMPLOYMENT LOAN.—The
term ‘qualified unemployment loan’ means any loan
to an individual after separation from employment,
if—
‘‘(A) such individual has received unem-
ployment compensation for 12 consecutive
weeks under any Federal or State unemploy-
ment compensation law by reason of such sepa-
ration, and
‘‘(B) such loan is received during any tax-
able year during which such unemployment
compensation is paid or the succeeding taxable
year.
To the extent provided in regulations, a self-em-
ployed individual shall be treated as meeting the re-
quirements of subparagraph (A) if, under Federal or
State law, the individual would have received unem-
ployment compensation but for the fact the individ-
ual was self-employed.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to loans made after the date of
the enactment of this Act.
TITLE II—PROMOTION OF AVAIL-
ABILITY 
OF 
PRIVATE 
PEN-
SIONS UPON RETIREMENT
SEC. 201. AVAILABILITY OF DEFINED CONTRIBUTION PLAN
OPTION FOR PARTICIPANTS IN DEFINED
BENEFIT PLANS.
(a) AMENDMENT TO THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974.—Section 206 of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1056) is amended by adding at the end the follow-
ing new subsection:
‘‘(g) AVAILABILITY
OF DEFINED CONTRIBUTION
PLAN OPTION FOR PARTICIPANTS IN DEFINED BENEFIT
PLANS.—
‘‘(1) IN GENERAL.—Each defined benefit plan
to which an employer makes contributions shall pro-
vide (in such form and manner as may be provided
in regulations prescribed jointly by the Secretary
and the Secretary of the Treasury) for an oppor-
tunity for each participant employed by such em-
ployer to elect, in lieu of coverage under the defined
benefit plan and before any election made by the em-
ployer under such plan pursuant to subsection (c),
coverage under a defined contribution plan main-
tained in whole or in part by the participant’s em-
ployer. An employer making contributions to a de-
fined benefit plan shall maintain for his employees
a defined contribution plan to the extent necessary
to provide for coverage under such defined contribu-
tion plan pursuant to elections under this sub-
section.
‘‘(2) REQUIRED LEVEL OF CONTRIBUTIONS.—
The requirements of paragraph (1) shall not be
treated as met unless the defined contribution plan
with respect to which an election is made under
paragraph (1) provides for contributions (other than
employee contributions (if any)) at least equivalent
to the contributions (other than employee contribu-
tions (if any)) provided for under the terms of the
defined benefit plan.
‘‘(3) REQUIRED
ELECTION
PERIOD.—The re-
quirements of paragraph (1) shall not be treated as
met unless the defined benefit plan provides that an
election under paragraph (1) may be made at any
time during the 90-day period beginning with the
later of—
‘‘(A) the commencement of the first plan
year to which this subsection applies, or
‘‘(B) the commencement of the employee’s
service under the plan.’’.
(b) AMENDMENTS
TO
THE INTERNAL REVENUE
CODE OF 1986.—Subsection (a) of section 401 of the In-
ternal Revenue Code of 1986 (relating to requirements for
qualification) is amended by inserting after paragraph
(34) the following new paragraph:
‘‘(35) AVAILABILITY
OF
DEFINED
CONTRIBU-
TION PLAN OPTION FOR PARTICIPANTS IN DEFINED
BENEFIT PLANS.—
‘‘(A) IN
GENERAL.—A trust forming a
part of a defined benefit plan to which an em-
ployer makes contributions shall not constitute
a qualified trust under this section unless—
‘‘(i) the plan provides (in such form
and manner as may be provided in regula-
tions prescribed jointly by the Secretary
and the Secretary of Labor) for an oppor-
tunity for each participant employed by
such employer to elect, in lieu of coverage
under the defined benefit plan and before
any election made by the employer under
such plan pursuant to section 417, cov-
erage under a defined contribution plan
maintained in whole or in part by the par-
ticipant’s employer, and
‘‘(ii) the defined benefit plan provides
that each employer making contributions
to the plan maintains for his employees a
defined contribution plan to the extent nec-
essary to provide for coverage under such
defined contribution plan pursuant to elec-
tions under this paragraph.
‘‘(B) REQUIRED
LEVEL
OF
CONTRIBU-
TIONS.—The requirements of subparagraph (A)
shall not be treated as met unless the defined
contribution plan with respect to which an elec-
tion is made under subparagraph (A) provides
for contributions (other than employee contribu-
tions (if any)) at least equivalent to the con-
tributions (other than employee contributions
(if any)) provided for under the terms of the
defined benefit plan.
‘‘(C) REQUIRED ELECTION PERIOD.—The
requirements of subparagraph (A) shall not be
treated as met unless the defined benefit plan
provides that an election under subparagraph
(A) may be made at any time during the 90-
day period beginning with the later of—
‘‘(i) the commencement of the first
plan year to which this paragraph applies,
or
‘‘(ii) the commencement of the em-
ployee’s service under the plan.’’.
(c) EFFECTIVE DATES.—
(1) GENERAL RULE.—The amendments made
by this section shall apply to plan years beginning
after December 31, 1997.
(2) SPECIAL RULE FOR COLLECTIVE BARGAIN-
ING AGREEMENTS.—In the case of a defined benefit
plan maintained pursuant to one or more collective
bargaining agreements between employee organiza-
tions and one or more employers ratified before the
date of the enactment of this Act, the amendments
made by this section shall not apply to plan years
beginning before the later of—
(A) the date on which the last of the col-
lective bargaining agreements relating to the
plan terminates (determined without regard to
any extension thereof agreed to after the date
of the enactment of this Act), or
(B) January 1, 1999.
For purposes of subparagraph (A), any plan amend-
ment made pursuant to a collective bargaining
agreement relating to the plan which amends the
plan solely to conform to any requirement added by
this section shall not be treated as a termination of
such collective bargaining agreement.
SEC. 202. TIMELY INVESTMENT OF PLAN CONTRIBUTIONS.
(a) IN GENERAL.—Section 404 of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 1104)
is amended by adding at the end the following new sub-
section:
‘‘(e) Any failure, by a person who is a fiduciary with
respect to a pension plan and who has discretionary au-
thority respecting investment of amounts contributed to
the plan, to ensure that amounts contributed to the plan
are invested, in accordance with the terms of the plan and
this title, before 15 days after the calendar month in which
such amounts are received by the plan, shall be treated
as a breach of fiduciary duties under the plan.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply with respect to plan years begin-
ning on December 31, 1997.
SEC. 203. INCREASE IN PENALTY FOR EARLY DISTRIBU-
TIONS FROM PENSION PLANS.
(a) IN GENERAL.—Paragraph (1) of section 72(t) of
the Internal Revenue Code of 1986 (relating to imposition
of additional tax) is amended by striking ‘‘10 percent’’ and
all that follows and inserting ‘‘100 percent of the portion
of such distribution which would (but for the following
sentence) be includible in gross income. A distribution on
which tax is imposed by the preceding sentence shall not
be includible in gross income.’’
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to distributions after December
31, 1997.
TITLE III—HEALTH COVERAGE
FOR RETIRED WORKERS
SEC. 301. ADVANCE NOTICE OF MATERIAL REDUCTIONS IN
COVERED SERVICES UNDER GROUP HEALTH
PLANS.
(a) ADVANCE NOTICE.—
(1) IN
GENERAL.—Section 104(b)(1) of the
Employee Retirement Income Security Act of 1974
(as amended by section 101(c)(1)(B) of the Health
Insurance Portability and Accountability Act of
1996 (Public Law 104–191)) is amended—
(A) by redesignating subparagraphs (A)
and (B) as clauses (i) and (ii), respectively;
(B) by striking ‘‘(1) The administrator’’
and inserting ‘‘(1)(A) The administrator’’;
(C) by striking ‘‘The administrator’’ the
second place it appears and inserting the follow-
ing:
‘‘(B) The administrator’’;
(D) by striking ‘‘If there is a modification’’
and inserting the following:
‘‘(C) If there is a modification’’; and
(E) by adding at the end the following new
subparagraph:
‘‘(D) Notwithstanding subparagraph (C), a modifica-
tion or change described in section 102(a)(1) in covered
services or benefits provided in the case of a group health
plan (as defined in section 706(a)(1)) relating to retiree
health benefits, a summary description of such modifica-
tion or change shall be furnished to participants and bene-
ficiaries not later than 180 days before the effective date
of the modification or change. In any case in which an
individual first becomes a participant under a group
health plan during any such 180-day period with respect
to such a modification or change or (in the case of any
other beneficiary under the plan) first receives benefits
under the plan during such 180-day period, the require-
ments of the preceding sentence may be met by providing
the summary description of such modification or change
not later than the date on which such individual first be-
comes a participant or such other beneficiary first receives
benefits under the plan.’’.
(2) DETERMINATION BY SECRETARY.—Section
104 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1024) is further amended by
redesignating subsection (d) as subsection (e) and by
inserting after subsection (c) the following new sub-
section:
‘‘(d) A change or modification in covered services or
benefits provided in the case of a group health plan relat-
ing to retiree health benefits that is subject to the require-
ments of subsection (b)(1)(D) may not take effect until
after the Secretary determines that such change or modi-
fication does not violate the plan, including collective bar-
gaining agreements.’’.
(3) ADVANCE NOTICE TO SECRETARY.—Section
104(a)(1)(D) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1024(a)(1)(D)) is
amended by inserting before the period the follow-
ing: ‘‘, or in the case of any such modifications and
changes in covered services or benefits provided in
the case of a group health plan relating to retiree
health benefits, not later than 180 days before the
effective date of such modification or change.’’.
(4) CIVIL PENALTY.—Section 502(c)(1) of such
Act (29 U.S.C. 1132(c)(1)) is amended by striking
‘‘or section 101(e)(1)’’ and inserting ‘‘, section
101(e)(1), or section 104(b)(1)(D)’’.
(b) ENFORCEMENT.—
(1) REQUIREMENTS.—Section 4980B of the In-
ternal Revenue Code of 1986 is amended by redesig-
nating subsection (g) as subsection (h) and by in-
serting after subsection (f) the following new sub-
section:
‘‘(g) NOTICE
OF CHANGE
OR MODIFICATION
IN
HEALTH BENEFITS.—
‘‘(1) IN GENERAL.—A group health plan meets
the requirements of this subsection if—
‘‘(A) the plan sponsor complies with sec-
tion 104(b)(1)(D) of the Employee Retirement
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to plan years ending
after January 1, 1997.
SEC. 302. CONTINUATION OF COVERAGE FOR PERSONS 55
AND OLDER UNTIL ELIGIBLE FOR MEDICARE.
(a) IN GENERAL.—Section 4980B(f)(2) of the Inter-
nal Revenue Code of 1986 is amended by adding at the
end the following:
‘‘(F) COVERAGE
FOR
PERSONS
AND
OLDER
UNTIL
ELIGIBLE
FOR
MEDICARE.—In
the case of a covered employee who has attained
the age of 55 before a qualifying event de-
scribed in paragraph (3)(B)—
‘‘(i) in no event shall the period of
continued coverage under subparagraph
(B)(i) with respect to such event end be-
fore the applicable date under subpara-
graph (B)(iv), and
‘‘(ii) the premium requirements for
any period of continuation of coverage sole-
ly by reason of clause (i) shall be deter-
mined by substituting ‘110 percent’ for
‘102 percent’ in subparagraph (C)(i), un-
less the last sentence of subparagraph (C)
otherwise applies.’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to plan years ending
after January 1, 1997.
SEC. 303. PROTECTIONS UNDER THE MEDICARE PROGRAM
FOR RETIRED WORKERS WHO LOSE RETIREE
HEALTH BENEFITS.
(a) NO PREMIUM PENALTY
FOR LATE ENROLL-
MENT.—The second sentence of section 1839(b) of the So-
cial Security Act (42 U.S.C. 1395r(b)) is amended by in-
serting ‘‘and not pursuant to a special enrollment period
under section 1837(i)(4)’’ after ‘‘section 1837)’’.
(b) SPECIAL MEDICARE ENROLLMENT PERIOD.—
(1) IN GENERAL.—Section 1837(i) of such Act
(42 U.S.C. 1395p(i)) is amended by adding at the
end the following new paragraph:
‘‘(4)(A) In the case of an individual who—
‘‘(i) at the time the individual first satisfies
paragraph (1) or (2) of section 1836—
‘‘(I) is enrolled in a group health plan de-
scribed in section 1862(b)(1)(A)(v) by reason of
the individual’s (or the individual’s spouse’s)
current employment or otherwise, and
‘‘(II) has elected not to enroll (or to be
deemed enrolled) under this section during the
individual’s initial enrollment period; and
‘‘(ii) whose continuous enrollment under such
group health plan is involuntarily terminated at a
time when the enrollment under the plan is not by
reason of the individual’s (or the individual’s
spouse’s) current employment,
there shall be a special enrollment period described in sub-
paragraph (B).
‘‘(B) The special enrollment period referred to in sub-
paragraph (A) is the 6-month period beginning on the date
of the enrollment termination described in subparagraph
(A)(ii).’’.
(2) COVERAGE
PERIOD.—Section 1838(e) of
such Act (42 U.S.C. 1395q(e)) is amended—
(A) by inserting ‘‘or 1837(i)(4)(B)’’ after
‘‘1837(i)(3)’’ the first place it appears, and
(B) by inserting ‘‘or specified in section
1837(i)(4)(A)(i)’’ after ‘‘1837(i)(3)’’ the second
place it appears’’.
(c) PROVIDING FOR MEDIGAP OPEN ENROLLMENT
PERIOD.—Section 1882(s)(2)(A) of such Act (42 U.S.C.
1395ss(s)(2)(A)) is amended—
(1) by inserting ‘‘(i)’’ after ‘‘during’’, and
(2) by inserting before the period at the end the
following: ‘‘or (ii) in the case of an individual who
enrolls in part B pursuant to a special enrollment
period provided under section 1837(i)(4), the 6-
month period beginning with the first month as of
the first day of which the individual is enrolled
under part B pursuant to such enrollment’’.
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—Subject to paragraph (2),
the amendments made by this section shall take ef-
fect on the date of the enactment of this Act and
apply to involuntary terminations of coverage under
a group health plan occurring on or after January
1, 1997.
(2) TRANSITION.—In the case of an involuntary
termination of coverage under a group health plan
that occurred during the period beginning on Janu-
ary 1, 1997, and ending on the date of the enact-
ment of this Act, the special enrollment period under
section 1837(i)(4)(B) of the Social Security Act (as
amended by subsection (b)) is deemed to begin as of
the date of the enactment of this Act.
TITLE IV—APPLICATION OF CER-
TAIN 
PROHIBITED 
TRANS-
ACTIONS RULES FOR 401(k)
PLANS
SEC. 401. CERTAIN PROHIBITED TRANSACTIONS APPLIED
TO 401(k) PLANS.
(a) IN GENERAL.—Paragraph (3) of section 407(d)
of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1107(d)) is amended by adding at the end the
following new sentence: ‘‘Such term also excludes an indi-
vidual account plan that includes a qualified cash or de-
ferred arrangement described in section 401(k) of the In-
ternal Revenue Code of 1986, if such plan, together with
all other individual account plans maintained by the em-
ployer, owns more than 10 percent of the assets owned
by all pension plans maintained by the employer. For pur-
poses of the preceding sentence, the assets of such plan
subject to participant control (within the meaning of sec-
tion 404(c)) shall not be taken into account.’’.
(b) EFFECTIVE DATE; TRANSITION RULE.—
(1) EFFECTIVE DATE.—Except as provided in
paragraph (2), the amendment made by this section
shall apply to plans on and after the date of the en-
actment of this Act.
(2) TRANSITION
RULE
FOR
PLANS
HOLDING
EXCESS SECURITIES OR PROPERTY.—In the case of
a plan which on the date of the enactment of this
Act has holdings of employer securities and employer
real property (as defined in section 407(d) of the
Employee Retirement Income Security Act of 1974
(29 U.S.C. 1107(d)) in excess of the amount speci-
fied in such section 407, the amendment made by
this section shall apply to any acquisition of such se-
curities and property on or after such date of enact-
ment, but shall not apply to the specific holdings
which constitute such excess during the period of
such excess.
TITLE V—RETIREMENT SAVINGS
AND SECURITY
SEC. 500. AMENDMENT OF ERISA.
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 Employee Retirement In-
come Security Act of 1974.
Subtitle A—Expanded Pension
Coverage and Simplification
SEC. 501. ELIMINATION OF REQUIREMENT FOR PLAN DE-
SCRIPTIONS AND THE FILING REQUIREMENT
FOR SUMMARY PLAN DESCRIPTIONS AND DE-
SCRIPTIONS OF MATERIAL MODIFICATIONS
TO A PLAN; TECHNICAL CORRECTIONS.
(a) FILING REQUIREMENTS.—Section 101(b) (29
U.S.C. 1021(b)) is amended by striking paragraphs (1),
(2), and (3) and by redesignating paragraphs (4) and (5)
as paragraphs (1) and (2), respectively.
(b) PLAN DESCRIPTION.—
(1) IN GENERAL.—Section 102(a) (29 U.S.C.
1022(a)) is amended—
(A) by striking paragraph (2), and
(B) by striking ‘‘(a)(1)’’ and inserting
‘‘(a)’’.
(2) CONFORMING AMENDMENTS.—
(A) Section 102(b) (29 U.S.C. 1022(b)) is
amended by striking ‘‘The plan description and
summary plan description shall contain’’ and
inserting ‘‘The summary plan description shall
contain’’.
(B) The heading for section 102 is amend-
ed by striking ‘‘PLAN DESCRIPTION AND’’.
(c) FURNISHING OF REPORTS.—
(1) 
IN
GENERAL.—Section 
104(a)(1) 
(29
U.S.C. 1024(a)(1)) is amended to read as follows:
‘‘SEC. 104. (a)(1) The administrator of any employee
benefit plan subject to this part shall file with the Sec-
retary the annual report for a plan year within 210 days
after the close of such year (or within such time as may
be required by regulations promulgated by the Secretary
in order to reduce duplicative filing). The Secretary shall
make copies of such annual reports available for inspection
in the public document room of the Department of
Labor.’’
(2) SECRETARY MAY REQUEST DOCUMENTS.—
(A) IN
GENERAL.—Section 104(a) (29
U.S.C. 1024(a)) is amended by adding at the
end the following new paragraph:
‘‘(6) The administrator of any employee benefit plan
subject to this part shall furnish to the Secretary, upon
request, any documents relating to the employee benefit
plan, including but not limited to, the latest summary plan
description (including any summaries of plan changes not
contained in the summary plan description), and the bar-
gaining agreement, trust agreement, contract, or other in-
strument under which the plan is established or oper-
ated.’’.
(B) PENALTY.—Section 502(c) (29 U.S.C.
1132(c)) is amended by adding at the end the
following new paragraph:
‘‘(5) If, within 30 days of a request by the Secretary
to a plan administrator for documents under section
104(a)(6), the plan administrator fails to furnish the ma-
terial requested to the Secretary, the Secretary may assess
a civil penalty against the plan administrator of up to
$100 a day from the date of such failure (but in no event
in excess of $1,000 per request). No penalty shall be im-
posed under this paragraph for any failure resulting from
matters reasonably beyond the control of the plan admin-
istrator.’’.
(d) CONFORMING AMENDMENTS.—
(1) Section 104(b)(1) (29 U.S.C. 1024(b)(1)) is
amended by striking ‘‘section 102(a)(1)’’ each place
it appears and inserting ‘‘section 102(a)’’.
(2) Section 104(b)(2) (29 U.S.C. 1024(b)(2)) is
amended by striking ‘‘the plan description and’’ and
inserting ‘‘the latest updated summary plan descrip-
tion and’’.
(3) Section 104(b)(4) (29 U.S.C. 1024(b)(4)) is
amended by striking ‘‘plan description’’.
(4) Section 106(a) (29 U.S.C. 1026(a)) is
amended by striking ‘‘descriptions,’’.
(5) Section 107 (29 U.S.C. 1027) is amended
by striking ‘‘description or’’.
(6) Paragraph (2)(B) of section 108 (29 U.S.C.
1028) is amended to read as follows: ‘‘(B) after pub-
lishing or filing the annual reports,’’.
(7) Section 502(a)(6) (29 U.S.C. 1132(a)(6)) is
amended by striking ‘‘subsection (c)(2) or (i) or (l)’’
and inserting ‘‘paragraph (2), (4), or (5) of sub-
section (c) or subsection (i) or (l)’’.
(e) TECHNICAL CORRECTIONS TO ERISA.—
(1) Section 502(c)(1) (29 U.S.C. 1132(c)(1)) is
amended by adding at the end the following new
sentence: ‘‘For purposes of this paragraph, each vio-
lation described in subparagraph (A) with respect to
any single participant, and each violation described
in subparagraph (B) with respect to any single par-
ticipant or beneficiary, shall be treated as a separate
violation.’’
(2) Section 502(c) (29 U.S.C. 1132(c)) is
amended—
(A) by striking the last two sentences of
paragraph (4), and
(B) by adding at the end the following new
paragraph:
‘‘(5) The Secretary and the Secretary of Health and
Human Services shall maintain such ongoing consultation
as may be necessary and appropriate to coordinate en-
forcement under this subsection with enforcement under
section 1144(c)(9) of the Social Security Act.’’.
(f) EFFECTIVE DATE.—The provisions of this section
shall take effect on the date of the enactment of this Act.
SEC. 502. CONFORMING AMENDMENT RELATING TO IN-
VESTMENTS IN QUALIFIED STATE PREPAID
TUITION PROGRAMS.
(a) IN GENERAL.—Subsection (b) of section 408 is
amended by adding at the end the following new para-
graph:
‘‘(14) any purchase of a qualified State prepaid
tuition program instrument to which section 408(q)
of the Internal Revenue Code of 1986 applies.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall apply to taxable years beginning after
December 31, 1996.
Subtitle B—Portability
SEC. 511. MISSING PARTICIPANTS.
(a) IN GENERAL.—Section 4050 (29 U.S.C. 1350)
is amended by redesignating subsection (c) as subsection
(e) and by inserting after subsection (b) the following new
subsections:
‘‘(c) MULTIEMPLOYER
PLANS.—The corporation
shall prescribe rules similar to the rules in subsection (a)
for multiemployer plans covered by this title that termi-
nate under section 4041A.
‘‘(d) PLANS NOT OTHERWISE SUBJECT TO TITLE.—
‘‘(1) TRANSFER TO CORPORATION.—The plan
administrator of a plan described in paragraph (4)
may elect to transfer a missing participant’s benefits
to the corporation upon termination of the plan.
‘‘(2) INFORMATION TO THE CORPORATION.—To
the extent provided in regulations, the plan adminis-
trator of a plan described in paragraph (4) shall,
upon termination of the plan, provide the corpora-
tion information with respect to benefits of a miss-
ing participant if the plan transfers such benefits—
‘‘(A) to the corporation, or
‘‘(B) to an entity other than the corpora-
tion or a plan described in paragraph (4)(B)(ii).
‘‘(3) PAYMENT BY THE CORPORATION.—If ben-
efits of a missing participant were transferred to the
corporation under paragraph (1), the corporation
shall, upon location of the participant or beneficiary,
pay to the participant or beneficiary the amount
transferred (or the appropriate survivor benefit) ei-
ther—
‘‘(A) in a single sum (plus interest), or
‘‘(B) in such other form as is specified in
regulations of the corporation.
‘‘(4) PLANS DESCRIBED.—A plan is described
in this paragraph if—
‘‘(A) the plan is a pension plan (within the
meaning of section 3(2))—
‘‘(i) to which the provisions of this
section do not apply (without regard to
this subsection), and
‘‘(ii) which is not a plan described in
paragraphs (2) through (11) of section
4021(b), and
‘‘(B) at the time the assets are to be dis-
tributed upon termination, the plan—
‘‘(i) has missing participants, and
‘‘(ii) has not provided for the transfer
of assets to pay the benefits of all missing
participants to another pension plan (with-
in the meaning of section 3(2)).
‘‘(5) CERTAIN PROVISIONS NOT TO APPLY.—
Subsections (a)(1) and (a)(3) shall not apply to a
plan described in paragraph (4).’’.
(b) CONFORMING
AMENDMENTS.—Section 206(f)
(29 U.S.C. 1056(f)) is amended—
(1) by striking ‘‘title IV’’ and inserting ‘‘section
4050’’, and
(2) by striking ‘‘the plan shall provide that’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to distributions made after final
regulations implementing subsections (c) and (d) of sec-
tion 4050 of the Employee Retirement Income Security
Act of 1974 (as added by subsection (a)), respectively, are
prescribed.
SEC. 512. ELIMINATION OF SPECIAL VESTING RULE FOR
MULTIEMPLOYER PLANS.
(a) IN GENERAL.—Paragraph (2) of section 203(a)
(29 U.S.C. 1053(a)) 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, 1997, 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, 1999.
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. 513. TREATMENT OF LOANS DURING MILITARY
SERVICE.
(a) IN GENERAL.—Section 408(b)(1) (29 U.S.C.
1148(b)) is amended by adding at the end the following
new sentence: ‘‘A loan made by a plan shall not fail to
meet the requirements of the preceding sentence by reason
of a loan repayment suspension described under section
414(u)(4) of the Internal Revenue Code of 1986.’’.
(b) EFFECTIVE DATE.—The amendment made by
this section shall be effective as of December 12, 1994.
Subtitle C—Enhanced Security
CHAPTER 1—GENERAL PROVISIONS
SEC. 521. MULTIEMPLOYER PLAN BENEFITS GUARANTEED.
(a) IN GENERAL.—Section 4022A(c) (29 U.S.C.
1322a(c)) is amended—
(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. 522. REVERSION REPORT.
(a) IN GENERAL.—Section 4008 (29 U.S.C. 1308)
is amended by adding at the end the following new sub-
section:
‘‘(b) REVERSION REPORT.—As soon as practicable
after the close of each fiscal year, the Secretary of Labor
(acting in the Secretary’s capacity as chairman of the cor-
poration’s board) shall transmit to the President and the
Congress a report providing information on plans from
which residual assets were distributed to employers pursu-
ant to section 4044(d).’’
(b) CONFORMING AMENDMENT.—Section 4008 (29
U.S.C. 1308) is amended by striking ‘‘SEC. 4008.’’ and
inserting ‘‘SEC. 4008. (a) ANNUAL REPORT.—’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to fiscal years beginning after Sep-
tember 30, 1997.
SEC. 523. FULL FUNDING LIMITATION FOR MULTIEM-
PLOYER PLANS.
(a) 
FULL-FUNDING
LIMITATION.—Section
302(c)(7)(C) (29 U.S.C. 1082(c)(7)(C)) 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 302(c)(9) (29 U.S.C.
1082(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 plan years beginning after De-
cember 31, 1996.
SEC. 524. PROHIBITED TRANSACTIONS.
(a) IN
GENERAL.—Section 502(i) (29 U.S.C.
1132(i)) is amended by striking ‘‘5 percent’’ and inserting
‘‘10 percent’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to prohibited transactions occur-
ring after the date of enactment of this Act.
SEC. 525. 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:
‘‘(B) For purposes of this title, the term ‘majority
owner’ has the same meaning as substantial owner under
subparagraph (A), except that subparagraph (A) shall be
applied by substituting ‘50 percent or more’ for ‘more
than 10 percent’ each place it appears.
‘‘(C) In the case of a participant who is a majority
owner, the amount of benefits guaranteed under this sec-
tion shall not exceed the product of—
‘‘(i) a fraction (not to exceed 1) the numerator
of which is the number of years from the later of the
effective date or the adoption date of the plan to the
termination date, and the denominator of which is
30, and
‘‘(ii) the amount of the majority owner’s month-
ly benefits guaranteed under subsection (a) (as lim-
ited by paragraph (3) of this subsection).’’.
(b) MODIFICATION OF ALLOCATION OF ASSETS.—
(1) 
Section 
4044(a)(4)(B) 
(29 
U.S.C.
1344(a)(4)(B)) is amended by striking ‘‘section
4022(b)(5)’’ and inserting ‘‘section 4022(b)(5)(C)’’.
(2) Section 4044(b) (29 U.S.C. 1344(b)) is
amended—
(A) by striking ‘‘(5)’’ in paragraph (2) and
inserting ‘‘(4), (5),’’, and
(B) 
by 
redesignating 
paragraphs 
(3)
through (6) as paragraphs (4) through (7), re-
spectively, and by inserting after paragraph (2)
the following new paragraph:
‘‘(3) If assets available for allocation under
paragraph (4) of subsection (a) are insufficient to
satisfy in full the benefits of all individuals who are
described in that paragraph, the assets shall be allo-
cated first to benefits described in subparagraph (A)
of that paragraph. Any remaining assets shall then
be allocated to subparagraph (B). If assets allocated
to subparagraph (B) are insufficient to satisfy in full
the benefits in that subparagraph, the assets shall
be allocated pro rata among individuals on the basis
of the present value (as of the termination date) of
their respective benefits described in that subpara-
graph.’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to plan terminations—
(1) under section 4041(c) of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C.
1341(c)) with respect to which notices of intent to
terminate are provided under section 4041(a)(2) of
such Act (29 U.S.C. 1341(a)(2)) on or after the
date of the enactment of this Act, or
(2) under section 4042 of such Act (29 U.S.C.
1342) with respect to which proceedings are insti-
tuted by the corporation on or after such date.
CHAPTER 2—ERISA ENFORCEMENT
SEC. 531. SHORT TITLE.
This chapter may be cited as the ‘‘Pension Audit Im-
provement Act of 1997’’.
SEC. 532. REPEAL OF LIMITED SCOPE AUDIT.
(a) IN GENERAL.—Section 103(a)(3) (29 U.S.C.
1023(a)(3)) is amended by striking subparagraph (C) and
by redesignating subparagraph (D) as subparagraph (C).
(b) CONFORMING AMENDMENTS.—
(1) 
Section 
103(a)(3)(A) 
(29 
U.S.C.
1023(a)(3)(A)) is amended by striking ‘‘Except as
provided in subparagraph (C), the’’ and inserting
‘‘The’’.
(2) 
Section 
104(a)(5)(A) 
(29 
U.S.C.
1024(a)(5)(A)) is amended by striking ‘‘section
103(a)(3)(D)’’ and inserting ‘‘section 103(a)(3)(C)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to opinions required
under section 103(a)(3)(A) of the Employee Retirement
Income Security Act of 1974 for plan years beginning on
or after January 1 of the calendar year following the date
of the enactment of this Act.
SEC. 533. REPORTING AND ENFORCEMENT REQUIREMENTS
FOR EMPLOYEE BENEFIT PLANS.
(a) IN GENERAL.—Part 1 of subtitle B of title I (29
U.S.C. 1021 et seq.) is amended—
(1) by redesignating section 111 as section 112,
and
(2) by inserting after section 110 the following
new section:
‘‘DIRECT REPORTING OF CERTAIN EVENTS
‘‘SEC. 111. (a) REQUIRED NOTIFICATIONS.—
‘‘(1) 
NOTIFICATIONS
BY
PLAN
ADMINIS-
TRATOR.—The administrator of an employee benefit
plan shall, within 5 business days after the adminis-
trator determines that there is evidence (or after the
administrator is notified under paragraph (2)) that
an irregularity may have occurred with respect to
the plan—
‘‘(A) notify the Secretary of the irregular-
ity in writing; and
‘‘(B) furnish a copy of such notification to
the accountant who is currently engaged under
section 103(a)(3)(A).
‘‘(2) NOTIFICATIONS BY ACCOUNTANT.—
‘‘(A) IN
GENERAL.—An accountant en-
gaged by the administrator of an employee ben-
efit plan under section 103(a)(3)(A) shall, with-
in 5 business days after the accountant in con-
nection with such engagement determines that
there is evidence that an irregularity may have
occurred with respect to the plan—
‘‘(i) notify the plan administrator of
the irregularity in writing, or
‘‘(ii) if the accountant determines that
there is evidence that the irregularity may
have involved an individual who is the plan
administrator or who is a senior official of
the plan administrator, notify the Sec-
retary of the irregularity in writing.
‘‘(B) NOTIFICATION
UPON
FAILURE
OF
PLAN ADMINISTRATOR TO NOTIFY.—If an ac-
countant who has provided notification to the
plan administrator pursuant to subparagraph
(A)(i) does not receive a copy of the administra-
tor’s notification to the Secretary required
under paragraph (1)(B) within the 5-business
day period specified therein, the accountant
shall furnish to the Secretary a copy of the ac-
countant’s notification made to the plan admin-
istrator on the next business day following such
period.
‘‘(3) IRREGULARITY DEFINED.—
‘‘(A) For purposes of this subsection, the
term ‘irregularity’ means—
‘‘(i) a theft, embezzlement, or a viola-
tion of section 664 of title 18, United
States Code (relating to theft or embezzle-
ment from an employee benefit plan);
‘‘(ii) an extortion or a violation of sec-
tion 1951 of such title 18 (relating to in-
terference with commerce by threats or vi-
olence);
‘‘(iii) a bribery, a kickback, or a viola-
tion of section 1954 of such title 18 (relat-
ing to offer, acceptance, or solicitation to
influence operations of an employee benefit
plan);
‘‘(iv) a violation of section 1027 of
such title 18 (relating to false statements
and concealment of facts in relation to em-
ployer benefit plan records); or
‘‘(v) a violation of section 411, 501, or
511 of this title (relating to criminal viola-
tions).
‘‘(B) The term ‘irregularity’ shall not in-
clude any act or omission described in this
paragraph involving less than $1,000 unless
there is reason to believe that the act or omis-
sion may bear on the integrity of plan manage-
ment.
‘‘(b) NOTIFICATION UPON TERMINATION
OF EN-
GAGEMENT OF ACCOUNTANT.—
‘‘(1) 
NOTIFICATION
BY
PLAN
ADMINIS-
TRATOR.—Within 5 business days after the termi-
nation of an engagement for auditing services under
section 103(a)(3)(A) with respect to an employee
benefit plan, the administrator of such plan shall—
‘‘(A) notify the Secretary in writing of
such termination, giving the reasons for such
termination, and
‘‘(B) furnish the accountant whose engage-
ment was terminated with a copy of the notifi-
cation sent to the Secretary.
‘‘(2) NOTIFICATION BY ACCOUNTANT.—If the
accountant referred to in paragraph (1)(B) has not
received a copy of the administrator’s notification to
the Secretary as required under paragraph (1)(B),
or if the accountant disagrees with the reasons given
in the notification of termination of the engagement
for auditing services, the accountant shall notify the
Secretary in writing of the termination, giving the
reasons for the termination, within 10 business days
after the termination of the engagement.
‘‘(c) DETERMINATION OF PERIODS REQUIRED FOR
NOTIFICATION.—In determining whether a notification re-
quired under this section with respect to any act or omis-
sion has been made within the required number of busi-
ness days—
‘‘(1) the day on which such act or omission be-
gins shall not be included; and
‘‘(2) Saturdays, Sundays, and legal holidays
shall not be included.
For purposes of this subsection, the term ‘legal holiday’
means any Federal legal holiday and any other day ap-
pointed as a holiday by the State in which the person re-
sponsible for making the notification principally conducts
his business.
‘‘(d) IMMUNITY FOR GOOD FAITH NOTIFICATION.—
Except as provided in this Act, no accountant or plan ad-
ministrator shall be liable to any person for any finding,
conclusion, or statement made in any notification made
pursuant to subsection (a)(2) or (b)(2), or pursuant to any
regulations issued thereunder, if such finding, conclusion,
or statement is made in good faith.’’.
(b) CIVIL PENALTY.—
(1) IN GENERAL.—Section 502(c) (29 U.S.C.
1132(c)), as amended by section 2002, is amended
by redesignating paragraph (6) as paragraph (7)
and by inserting after paragraph (5) the following
new paragraph:
‘‘(6)(A) The Secretary may assess a civil penalty of
up to $100,000 against any administrator who fails to
provide the Secretary with any notification as required
under section 111.
‘‘(B) The Secretary may assess a civil penalty of up
to $100,000 against any accountant who knowingly and
willfully fails to provide the Secretary with any notification
as required under section 111.’’.
(2) 
CONFORMING
AMENDMENT.—Section
502(a)(6) (29 U.S.C. 1132(a)(6)), as amended by
section 2002, is amended by striking ‘‘or (5)’’ and
inserting ‘‘(5), or (6)’’.
(c) CLERICAL AMENDMENTS.—
(1) Section 514(d) (29 U.S.C. 1144(d)) is
amended by striking ‘‘111’’ and inserting ‘‘112’’.
(2) The table of contents in section 1 is amend-
ed by striking the item relating to section 111 and
inserting the following new items:
‘‘Sec. 111. Direct reporting of certain events.
‘‘Sec. 112. Repeal and effective date.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply with respect to any irregularity or
termination of engagement described in such amendments
only if the 5-day period described in such amendments in
connection with such irregularity or termination com-
mences at least 90 days after the date of the enactment
of this Act.
SEC. 534. ADDITIONAL REQUIREMENTS FOR QUALIFIED
PUBLIC ACCOUNTANTS.
(a) IN GENERAL.—Section 103(a)(3)(C) (29 U.S.C.
1023(a)(3)(C)), as redesignated by section 2032, is
amended—
(1) by inserting ‘‘(i)’’ after ‘‘(C)’’;
(2) by inserting ‘‘, with respect to any engage-
ment of an accountant under subparagraph (A)’’
after ‘‘means’’;
(3) by redesignating clauses (i), (ii), and (iii) as
subclauses (I), (II), and (III), respectively;
(4) by striking the period at the end of sub-
clause (III) (as so redesignated) and inserting a
comma;
(5) by adding after subclause (III) (as so redes-
ignated), and flush with clause (i), the following:
‘‘but only if such person meets the requirements of clauses
(ii) and (iii) with respect to such engagement.’’; and
(6) by adding at the end the following new
clauses:
‘‘(ii) A person meets the requirements of this clause
with respect to an engagement of such person as an ac-
countant under subparagraph (A) if such person—
‘‘(I) has in operation an appropriate internal
quality control system;
‘‘(II) has undergone a qualified external quality
control review of the person’s accounting and audit-
ing practices, including such practices relevant to
employee benefit plans (if any), during the 3-year
period immediately preceding such engagement; and
‘‘(III) has completed, within the 2-year period
immediately preceding such engagement, at least 80
hours of continuing education or training which con-
tributes to the accountant’s professional proficiency,
at least 20 hours of which have been completed dur-
ing the 1-year period immediately preceding the en-
gagement, and at least 16 hours of which relate to
employee benefit plan matters.
‘‘(iii) A person meets the requirements of this clause
with respect to an engagement of such person as an ac-
countant under subparagraph (A) if such person meets
such additional requirements and qualifications of regula-
tions which the Secretary deems necessary to ensure the
quality of plan audits.
‘‘(iv) For purposes of clause (ii)(II), an external qual-
ity control review shall be treated as qualified with respect
to a person referred to in clause (ii) if—
‘‘(I) such review is performed in accordance
with the requirements of external quality control re-
view programs of recognized auditing standard-set-
ting bodies, as determined under regulations of the
Secretary, and
‘‘(II) in the case of any such person who has,
during the peer review period, conducted one or
more previous audits of employee benefit plans, such
review includes the review of an appropriate number
(determined as provided in such regulations, but in
no case less than one) of plan audits in relation to
the scale of such person’s auditing practice.
The Secretary shall issue the regulations under subclause
(I) no later than December 31, 1997.’’.
(b) EFFECTIVE DATES.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply with respect to plan years beginning on
or after the date which is 3 years after the date of
the enactment of this Act.
(2) RESTRICTIONS ON CONDUCTING EXAMINA-
TIONS.—Clause (iii) of section 103(a)(3)(C) of the
Employee Retirement Income Security Act of 1974
(as added by subsection (a)(6)) shall take effect on
the date of enactment of this Act.
SEC. 535. CLARIFICATION OF FIDUCIARY PENALTIES.
(a) MODIFICATION OF PROHIBITION OF ASSIGNMENT
OR ALIENATION.—
(1) AMENDMENT
TO
ERISA.—Section 206(d)
(29 U.S.C. 1056(d)) is amended by adding at the
end the following new paragraphs:
‘‘(4) Paragraph (1) shall not apply to any offset of
a participant’s accrued benefit in an employee pension
benefit plan against an amount that the participant is or-
dered or required to pay to the plan if—
‘‘(A) the order or requirement to pay arises—
‘‘(i) under a judgment of conviction for a
crime involving such plan,
‘‘(ii) under a civil judgment (including a
consent order or decree) entered by a court in
an action brought in connection with a violation
(or alleged violation) of part 4 of this subtitle,
or
‘‘(iii) pursuant to a settlement agreement
between the Secretary and the participant, or a
settlement agreement between the Pension Ben-
efit Guaranty Corporation and the participant,
in connection with a violation (or alleged viola-
tion) of part 4 of this subtitle,
‘‘(B) the judgment, order, decree, or settlement
agreement expressly provides for the offset of all or
part of the amount ordered or required to be paid
to the plan against the participant’s accrued benefit
in the plan, and
‘‘(C) if the participant has a spouse at the time
at which the offset is to be made—
‘‘(i) such spouse has consented in writing
to such offset and such consent is witnessed by
a notary public or representative of the plan,
‘‘(ii) such spouse is ordered or required in
such judgment, order, decree, or settlement to
pay an amount to the plan in connection with
a violation of part 4 of this title, or
‘‘(iii) in such judgment, order, decree, or
settlement, such spouse retains the right to re-
ceive the value of the survivor annuity under a
qualified joint and survivor annuity provided
pursuant to section 205(a)(1) and under a
qualified preretirement survivor annuity pro-
vided pursuant to section 205(a)(2), determined
in accordance with paragraph (5).
‘‘(5)(A) The value of the survivor annuity described
in paragraph (4)(C)(iii) shall be determined as if—
‘‘(i) the participant terminated employment on
the date of the offset,
‘‘(ii) there was no offset,
‘‘(iii) the plan permitted retirement only on or
after normal retirement age,
‘‘(iv) the plan provided only the minimum-re-
quired qualified joint and survivor annuity, and
(B) by striking ‘‘equal to’’ and inserting
‘‘not greater than’’.
(2) APPLICABLE RECOVERY AMOUNT.—Section
502(l)(2) (29 U.S.C. 1132(l)(2)) is amended to read
as follows:
‘‘(2) For purposes of paragraph (1), the term ‘appli-
cable recovery amount’ means any amount which is recov-
ered from (or on behalf of) any fiduciary or other person
with respect to a breach or violation described in para-
graph (1) on or after the 30th day following receipt by
such fiduciary or other person of written notice from the
Secretary of the violation, whether paid voluntarily or by
order of a court in a judicial proceeding instituted by the
Secretary under subsection (a)(2) or (a)(5). The Secretary
may, in the Secretary’s sole discretion, extend the 30-day
period described in the preceding sentence.’’.
(3) OTHER RULES.—Section 502(l) (29 U.S.C.
1132(l)) is amended by adding at the end the follow-
ing new paragraphs:
‘‘(5) A person shall be jointly and severally liable for
the penalty described in paragraph (1) to the same extent
that such person is jointly and severally liable for the ap-
plicable recovery amount on which the penalty is based.
‘‘(6) No penalty shall be assessed under this sub-
section unless the person against whom the penalty is as-
sessed is given notice and opportunity for a hearing with
respect to the violation and applicable recovery amount.’’.
(4) EFFECTIVE DATES.—
(A) IN GENERAL.—The amendments made
by this subsection shall apply to any breach of
fiduciary responsibility or other violation of part
4 of subtitle B of title I of the Employee Re-
tirement Income Security Act of 1974 occurring
on or after the date of enactment of this Act.
(B) TRANSITION RULE.—In applying the
amendment made by paragraph (2) (relating to
applicable recovery amount), a breach or other
violation occurring before the date of the enact-
ment of this Act which continues after the
180th day after such date (and which may have
been discontinued at any time during its exist-
ence) shall be treated as having occurred after
such date of enactment.
TITLE VI—EXPANDED INDIVID-
UAL RETIREMENT ACCOUNTS
TO INCREASE COVERAGE AND
PORTABILITY
Subtitle A—Retirement Savings
Incentives
SEC. 601. INCREASE IN INCOME LIMITATIONS.
(a) IN GENERAL.—Subparagraph (B) of section
219(g)(3) is amended—
(1) by striking ‘‘$40,000’’ in clause (i) and in-
serting ‘‘$80,000 ($70,000 in the case of taxable
years beginning in 1997, 1998, or 1999)’’, and
(2) by striking ‘‘$25,000’’ in clause (ii) and in-
serting ‘‘$50,000 ($45,000 in the case of taxable
years beginning in 1997, 1998, or 1999)’’.
(b) PHASEOUT OF LIMITATIONS.—Clause (ii) of sec-
tion 219(g)(2)(A) is amended by striking ‘‘$10,000’’ and
inserting ‘‘an amount equal to 10 times the dollar amount
applicable for the taxable year under subsection
(b)(1)(A)’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
SEC. 602. INFLATION ADJUSTMENT FOR DEDUCTIBLE
AMOUNT AND INCOME LIMITATIONS.
(a) IN GENERAL.—Section 219 is amended by redes-
ignating subsection (h) as subsection (i) and by inserting
after subsection (g) the following new subsection:
‘‘(h) COST-OF-LIVING ADJUSTMENTS.—
‘‘(1) DEDUCTIBLE AMOUNTS.—In the case of
any taxable year beginning in a calendar year after
1997, the $2,000 amounts under subsections
(b)(1)(A) and (c)(2) shall be increased by an amount
equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 1996’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
‘‘(2) APPLICABLE
DOLLAR
AMOUNT.—In the
case of any taxable year beginning in a calendar
year after 1999, the applicable dollar amounts under
subsection (g)(3)(B) shall be increased by an
amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 1998’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
‘‘(3) ROUNDING RULES.—
‘‘(A) 
DEDUCTION
AMOUNTS.—If 
any
amount after adjustment under paragraph (1)
is not a multiple of $500, such amount shall be
rounded to the next lowest multiple of $500.
‘‘(B) APPLICABLE DOLLAR AMOUNTS.—If
any amount after adjustment under paragraph
(2) is not a multiple of $5,000, such amount
shall be rounded to the next lowest multiple of
$5,000.’’.
(b) CONFORMING AMENDMENTS.—
(1) Clause (i) of section 219(c)(2)(A) is amend-
ed to read as follows:
‘‘(i) the sum of $250 and the dollar
amount in effect for the taxable year under
subsection (b)(1)(A), or’’.
(2) Section 408(a)(1) is amended by striking
‘‘in excess of $2,000 on behalf of any individual’’
and inserting ‘‘on behalf of any individual in excess
of the amount in effect for such taxable year under
section 219(b)(1)(A)’’.
(3) Section 408(b)(2)(B) is amended by strik-
ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in
effect under section 219(b)(1)(A)’’.
(4) Subparagraph (A) of section 408(d)(5) is
amended by striking ‘‘$2,250’’ and inserting ‘‘the
dollar amount in effect for the taxable year under
section 219(c)(2)(A)(i)’’.
(5) Section 408(j) is amended by striking
‘‘$2,000’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
SEC. 603. COORDINATION OF IRA DEDUCTION LIMIT WITH
ELECTIVE DEFERRAL LIMIT.
(a) IN GENERAL.—Section 219(b) (relating to maxi-
mum amount of deduction) is amended by adding at the
end the following new paragraph:
‘‘(4) COORDINATION
WITH
ELECTIVE
DEFER-
RAL LIMIT.—The amount determined under para-
graph (1) or subsection (c)(2) with respect to any
individual for any taxable year shall not exceed the
excess (if any) of—
‘‘(A) the limitation applicable for the tax-
able year under section 402(g)(1), over
‘‘(B) the elective deferrals (as defined in
section 402(g)(3)) of such individual for such
taxable year.’’.
(b) CONFORMING AMENDMENT.—Section 219(c) is
amended by adding at the end the following new para-
graph:
‘‘(3) CROSS REFERENCE.—
‘‘For reduction in paragraph (2) amount, see sub-
section (b)(4).’’.
(c) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
SEC. 604. ESTABLISHMENT OF NONDEDUCTIBLE TAX-FREE
INDIVIDUAL RETIREMENT ACCOUNTS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 (relating to pension, profit-sharing, stock
bonus plans, etc.) is amended by inserting after section
408 the following new section:
‘‘SEC. 408A. SPECIAL INDIVIDUAL RETIREMENT ACCOUNTS.
‘‘(a) GENERAL RULE.—Except as provided in this
chapter, a special individual retirement account shall be
treated for purposes of this title in the same manner as
an individual retirement plan.
‘‘(b) 
SPECIAL
INDIVIDUAL
RETIREMENT
AC-
COUNT.—For purposes of this title, the term ‘special indi-
vidual retirement account’ means an individual retirement
plan which is designated at the time of establishment of
the plan as a special individual retirement account.
‘‘(c) TREATMENT OF CONTRIBUTIONS.—
‘‘(1) NO DEDUCTION ALLOWED.—No deduction
shall be allowed under section 219 for a contribution
to a special individual retirement account.
‘‘(2) CONTRIBUTION
LIMIT.—The aggregate
amount of contributions for any taxable year to all
special individual retirement accounts maintained for
the benefit of an individual shall not exceed the ex-
cess (if any) of—
‘‘(A) the maximum amount allowable as a
deduction under section 219 with respect to
such individual for such taxable year, over
‘‘(B) the aggregate amount of contribu-
tions for such taxable year to all individual re-
tirement plans (other than special individual re-
tirement accounts) maintained for the benefit of
the individual.
‘‘(3) SPECIAL RULES FOR QUALIFIED TRANS-
FERS.—
‘‘(A) IN GENERAL.—No rollover contribu-
tion may be made to a special individual retire-
ment account unless it is a qualified transfer.
‘‘(B) LIMIT NOT TO APPLY.—The limita-
tion under paragraph (2) shall not apply to a
qualified transfer to a special individual retire-
ment account.
‘‘(d) TAX TREATMENT OF DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—Except as provided in this
subsection, any amount paid or distributed out of a
special individual retirement account shall not be in-
cluded in the gross income of the distributee.
‘‘(2) EXCEPTION FOR EARNINGS ON CONTRIBU-
TIONS HELD LESS THAN 5 YEARS.—
‘‘(A) IN GENERAL.—Any amount distrib-
uted out of a special individual retirement ac-
count which consists of earnings allocable to
contributions made to the account during the 5-
year period ending on the day before such dis-
tribution shall be included in the gross income
of the distributee for the taxable year in which
the distribution occurs.
‘‘(B) ORDERING RULE.—
‘‘(i) FIRST-IN, FIRST-OUT
RULE.—
Distributions from a special individual re-
tirement account shall be treated as having
been made—
‘‘(I) first from the earliest con-
tribution 
(and 
earnings 
allocable
thereto) remaining in the account at
the time of the distribution, and
‘‘(II) then from other contribu-
tions (and earnings allocable thereto)
in the order in which made.
‘‘(ii) ALLOCATIONS
BETWEEN
CON-
TRIBUTIONS AND EARNINGS.—Any portion
of a distribution allocated to a contribution
(and earnings allocable thereto) shall be
treated as allocated first to the earnings
and then to the contribution.
‘‘(iii) ALLOCATION
OF
EARNINGS.—
Earnings shall be allocated to a contribu-
tion in such manner as the Secretary may
prescribe.
‘‘(iv) AGGREGATIONS
OF
CONTRIBU-
TIONS.—Except as provided by the Sec-
retary, for purposes of this subpara-
graph—
‘‘(I) all contributions made dur-
ing the same taxable year may be
treated as 1 contribution, and
‘‘(II) all contributions made be-
fore the first day of the 5-year period
ending on the day before any distribu-
tion may be treated as 1 contribution.
‘‘(C) CROSS REFERENCE.—
‘‘For additional tax for early withdrawal, see sec-
tion 72(t).
‘‘(3) QUALIFIED TRANSFER.—
‘‘(A) IN
GENERAL.—Paragraph (2) shall
not apply to any distribution which is trans-
ferred in a qualified transfer to another special
individual retirement account.
‘‘(B) CONTRIBUTION
PERIOD.—For pur-
poses of paragraph (2), the special individual
retirement account to which any contributions
are transferred shall be treated as having held
such contributions during any period such con-
tributions were held (or are treated as held
under this subparagraph) by the special individ-
ual retirement account from which transferred.
‘‘(4) SPECIAL
RULES
RELATING
TO
CERTAIN
TRANSFERS.—
‘‘(A) IN GENERAL.—Notwithstanding any
other provision of law, in the case of a qualified
transfer to a special individual retirement ac-
count from an individual retirement plan which
is not a special individual retirement account—
‘‘(i) there shall be included in gross
income any amount which, but for the
qualified transfer, would be includible in
gross income, but
‘‘(ii) section 72(t) shall not apply to
such amount.
‘‘(B) TIME FOR INCLUSION.—In the case
of any qualified transfer which occurs before
January 1, 1998, any amount includible in
gross income under subparagraph (A) with re-
spect to such contribution shall be includible
ratably over the 4-taxable year period beginning
in the taxable year in which the amount was
paid or distributed out of the individual retire-
ment plan. The amount of such qualified trans-
fer taken into account for purposes of section
4980A(c) shall be taken into account ratably
over such period.
‘‘(C) ADDITIONAL REPORTING.—A trustee
of an individual retirement plan shall include
such additional information in any report re-
quired under section 408(i) as the Secretary
may require to insure that amounts described
in subparagraph (B) are included in gross in-
come for the appropriate taxable year.
‘‘(e) QUALIFIED TRANSFER.—For purposes of this
section—
‘‘(1) IN GENERAL.—The term ‘qualified trans-
fer’ means a transfer to a special individual retire-
ment account from another such account or from an
individual retirement plan but only if such transfer
meets the requirements of section 408(d)(3).
‘‘(2) LIMITATION.—
‘‘(A) IN GENERAL.—A transfer otherwise
described in paragraph (1) shall not be treated
as a qualified transfer if the taxpayer’s adjusted
gross income for the taxable year of the trans-
fer exceeds the sum of—
‘‘(i) the applicable dollar amount, plus
‘‘(ii) the dollar amount applicable for
the 
taxable 
year 
under 
section
219(g)(2)(A)(ii).
This subparagraph shall not apply to a transfer
from a special individual retirement account to
another special individual retirement account.
‘‘(B) TRANSITION RULE.—In the case of a
transfer before January 1, 1999, the dollar lim-
itation under subparagraph (A) shall be
$100,000 in the case of a married individual fil-
ing a joint return, zero in the case of a married
individual filing a separate return, and $70,000
in any other case.
‘‘(3) DEFINITIONS.—For purposes of this sub-
section, the terms ‘adjusted gross income’ and ‘ap-
plicable dollar amount’ have the meanings given
such terms by section 219(g)(3), except that ad-
justed gross income shall be determined by taking
into account the deduction under section 219 and
not taking into account any transfer to which para-
graph (2) applies.’’.
(b) ADDITIONAL TAX ON EARLY DISTRIBUTIONS.—
Section 72(t) is amended by adding at the end the follow-
ing new paragraph:
‘‘(6) RULES RELATING TO SPECIAL INDIVIDUAL
RETIREMENT ACCOUNTS.—In the case of a special
individual retirement account under section 408A—
‘‘(A) this subsection shall only apply to
distributions out of such account which consist
of earnings allocable to contributions made to
the account during the 5-year period ending on
the day before such distribution, and
‘‘(B) paragraph (2)(A)(i) shall not apply to
any distribution described in subparagraph
(A).’’.
(c) EXCESS CONTRIBUTIONS.—Section 4973(b) is
amended—
(1) by inserting ‘‘, or a qualified transfer de-
scribed in section 408A(e)’’ after ‘‘408(d)(3)’’ in
paragraph (1)(A), and
(2) by adding at the end the following new sen-
tence: ‘‘For purposes of paragraphs (1)(B) and
(2)(C), the amount allowable as a deduction under
section 219 shall be computed without regard to sec-
tion 408A.’’
(d) REPORTING.—Section 408(i) is amended by strik-
ing ‘‘under regulations’’ and ‘‘in such regulations’’ each
place such terms appear.
(e) CONFORMING AMENDMENT.—The table of sec-
tions for subpart A of part I of subchapter D of chapter
1 is amended by inserting after the item relating to section
408 the following new item:
‘‘Sec. 408A. Special individual retirement accounts.’’.
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 1996.
Subtitle B—Distributions and
Investments
SEC. 611. DISTRIBUTIONS FROM IRAS MAY BE USED WITH-
OUT ADDITIONAL TAX TO PURCHASE FIRST
HOMES, TO PAY HIGHER EDUCATION OR FI-
NANCIALLY 
DEVASTATING 
MEDICAL 
EX-
PENSES, OR BY THE UNEMPLOYED.
(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:
‘‘(D) 
DISTRIBUTIONS
FROM
CERTAIN
PLANS FOR FIRST HOME PURCHASES OR EDU-
CATIONAL EXPENSES.—Distributions to an in-
dividual from an individual retirement plan—
‘‘(i) which are qualified first-time
homebuyer distributions (as defined in
paragraph (7)); or
‘‘(ii) to the extent such distributions
do not exceed the qualified higher edu-
cation expenses (as defined in paragraph
(8)) of the taxpayer for the taxable year.’’.
(b) FINANCIALLY
DEVASTATING
MEDICAL
EX-
PENSES.—
(1) 
IN
GENERAL.—Section 
72(t)(3)(A) 
is
amended by striking ‘‘(B),’’.
(2) CERTAIN LINEAL DESCENDANTS AND AN-
CESTORS
TREATED
AS
DEPENDENTS
AND
LONG-
TERM
CARE
SERVICES
TREATED
AS
MEDICAL
CARE.—Subparagraph (B) of section 72(t)(2) is
amended by striking ‘‘medical care’’ and all that fol-
lows and inserting ‘‘medical care determined—
‘‘(i) without regard to whether the
employee itemizes deductions for such tax-
able year, and
‘‘(ii) in the case of an individual re-
tirement plan—
‘‘(I) by treating such employee’s
dependents as including all children,
grandchildren, and ancestors of the
employee or such employee’s spouse
and
‘‘(II) by treating qualified long-
term care services (as defined in para-
graph (9)) as medical care for pur-
poses of this subparagraph.’’.
(3) CONFORMING AMENDMENT.—Subparagraph
(B) of section 72(t)(2) is amended by striking ‘‘or
(C)’’ and inserting ‘‘, (C), or (D)’’.
(c) DEFINITIONS.—Section 72(t), as amended by this
Act, is amended by adding at the end the following new
paragraphs:
‘‘(7) QUALIFIED FIRST-TIME HOMEBUYER DIS-
TRIBUTIONS.—For 
purposes 
of 
paragraph
(2)(D)(i)—
‘‘(A) IN
GENERAL.—The term ‘qualified
first-time homebuyer distribution’ means any
payment or distribution received by an individ-
ual to the extent such payment or distribution
is used by the individual before the close of the
60th day after the day on which such payment
or distribution is received to pay qualified ac-
quisition costs with respect to a principal resi-
dence of a first-time homebuyer who is such in-
dividual or the spouse, child (as defined in sec-
tion 151(c)(3)), or grandchild of such individ-
ual.
‘‘(B) QUALIFIED
ACQUISITION
COSTS.—
For purposes of this paragraph, the term
‘qualified acquisition costs’ means the costs of
acquiring, constructing, or reconstructing a res-
idence. Such term includes any usual or reason-
able settlement, financing, or other closing
costs.
‘‘(C) FIRST-TIME
HOMEBUYER; 
OTHER
DEFINITIONS.—For purposes of this para-
graph—
‘‘(i) FIRST-TIME
HOMEBUYER.—The
term ‘first-time homebuyer’ means any in-
dividual if—
‘‘(I) such individual (and if mar-
ried, such individual’s spouse) had no
present ownership interest in a prin-
cipal residence during the 3-year pe-
riod ending on the date of acquisition
of the principal residence to which
this paragraph applies, and
‘‘(II) subsection (h) or (k) of sec-
tion 1034 did not suspend the run-
ning of any period of time specified in
section 1034 with respect to such in-
dividual on the day before the date
the distribution is applied pursuant to
subparagraph (A).
In the case of an individual described in
section 143(i)(1)(C) for any year, an own-
ership interest shall not include any inter-
est under a contract of deed described in
such section. An individual who loses an
ownership interest in a principal residence
incident to a divorce or legal separation is
deemed for purposes of this subparagraph
to have had no ownership interest in such
principal residence within the period re-
ferred to in subclause (II).
‘‘(ii) 
PRINCIPAL
RESIDENCE.—The
term ‘principal residence’ has the same
meaning as when used in section 1034.
‘‘(iii) DATE
OF
ACQUISITION.—The
term ‘date of acquisition’ means the date—
‘‘(I) on which a binding contract
to acquire the principal residence to
which subparagraph (A) applies is en-
tered into, or
‘‘(II) on which construction or re-
construction of such a principal resi-
dence is commenced.
‘‘(D) SPECIAL RULE WHERE DELAY IN AC-
QUISITION.—Any portion of any distribution
from any individual retirement plan which fails
to meet the requirements of subparagraph (A)
solely by reason of a delay or cancellation of the
purchase or construction of the residence may
be contributed to an individual retirement plan
as provided in section 408(d)(3)(A)(i) (deter-
mined by substituting ‘120 days’ for ‘60 days’
in such section), except that—
‘‘(i) section 408(d)(3)(B) shall not be
applied to such portion, and
‘‘(ii) such portion shall not be taken
into account in determining whether sec-
tion 408(d)(3)(B) applies to any other
amount.
‘‘(8) QUALIFIED
HIGHER
EDUCATION
EX-
PENSES.—For purposes of paragraph (2)(D)(ii)—
‘‘(A) IN
GENERAL.—The term ‘qualified
higher education expenses’ means tuition and
fees required for the enrollment or attendance
of—
‘‘(i) the taxpayer,
‘‘(ii) the taxpayer’s spouse,
‘‘(iii) a dependent of the taxpayer
with respect to whom the taxpayer is al-
lowed a deduction under section 151, or
‘‘(iv) the taxpayer’s child (as defined
in section 151(c)(3)) or grandchild,
as an eligible student at an institution of higher
education.
‘‘(B) EXCEPTIONS.—The term ‘qualified
higher education expenses’ does not include—
‘‘(i) expenses with respect to any
course or other education involving sports,
games, or hobbies, unless such expenses—
‘‘(I) are part of a degree pro-
gram, or
‘‘(II) are deductible under this
chapter without regard to this section;
or
‘‘(ii) any student activity fees, athletic
fees, insurance expenses, or other expenses
unrelated to a student’s academic course of
instruction.
‘‘(C) COORDINATION WITH SAVINGS BOND
PROVISIONS.—The amount of qualified higher
education expenses for any taxable year shall be
reduced by any amount excludable from gross
income under section 135.
‘‘(D) ELIGIBLE STUDENT.—For purposes
of subparagraph (A), the term ‘eligible student’
means a student who—
‘‘(i) meets the requirements of section
484(a)(1) of the Higher Education Act of
1965 (20 U.S.C. 1091(a)(1)), as in effect
on the date of the enactment of this sec-
tion, and
‘‘(ii)(I) is carrying at least one-half
the normal full-time work load for the
course of study the student is pursuing, as
determined by the institution of higher
education, or
‘‘(II) is enrolled in a course which en-
ables the student to improve the student’s
job skills or to acquire new job skills.
‘‘(E) 
INSTITUTION
OF
HIGHER
EDU-
CATION.—The term ‘institution of higher edu-
cation’ means an institution which—
‘‘(i) is described in section 481 of the
Higher Education Act of 1965 (20 U.S.C.
1088), as in effect on the date of the en-
actment of this section, and
‘‘(ii) is eligible to participate in pro-
grams under title IV of such Act.
‘‘(9) QUALIFIED LONG-TERM CARE SERVICES.—
For purposes of paragraph (2)(B)—
‘‘(A) IN
GENERAL.—The term ‘qualified
long-term care services’ means necessary diag-
nostic, curing, mitigating, treating, preventive,
therapeutic, and rehabilitative services, and
maintenance and personal care services (wheth-
er performed in a residential or nonresidential
setting) which—
‘‘(i) are required by an individual dur-
ing any period the individual is an inca-
pacitated individual (as defined in subpara-
graph (B)),
‘‘(ii) have as their primary purpose—
‘‘(I) the provision of needed as-
sistance with 1 or more activities of
daily living (as defined in subpara-
graph (C)), or
‘‘(II) protection from threats to
health and safety due to severe cog-
nitive impairment, and
‘‘(iii) are provided pursuant to a con-
tinuing plan of care prescribed by a li-
censed professional (as defined in subpara-
graph (D)).
‘‘(B) INCAPACITATED
INDIVIDUAL.—The
term ‘incapacitated individual’ means any indi-
vidual who—
‘‘(i) is unable to perform, without sub-
stantial assistance from another individual
(including assistance involving cueing or
substantial supervision), at least 2 activi-
ties of daily living as defined in subpara-
graph (C), or
‘‘(ii) has severe cognitive impairment
as defined by the Secretary in consultation
with the Secretary of Health and Human
Services.
Such term shall not include any individual oth-
erwise meeting the requirements of the preced-
ing sentence unless, within the preceding 12-
month period, a licensed professional has cer-
tified that such individual meets such require-
ments.
‘‘(C) ACTIVITIES OF DAILY LIVING.—Each
of the following is an activity of daily living:
‘‘(i) Eating.
‘‘(ii) Toileting.
‘‘(iii) Transferring.
‘‘(iv) Bathing.
‘‘(v) Dressing.
‘‘(D) 
LICENSED
PROFESSIONAL.—The
term ‘licensed professional’ means—
‘‘(i) a physician or registered profes-
sional nurse, or
‘‘(ii) any other individual who meets
such requirements as may be prescribed by
the Secretary after consultation with the
Secretary of Health and Human Services.
‘‘(E) 
CERTAIN
SERVICES
NOT
IN-
CLUDED.—The term ‘qualified long-term care
services’ shall not include any services provided
to an individual—
‘‘(i) by a relative (directly or through
a partnership, corporation, or other entity)
unless the relative is a licensed professional
with respect to such services, or
‘‘(ii) by a corporation or partnership
which is related (within the meaning of
section 267(b) or 707(b)) to the individual.
For purposes of this subparagraph, the term
‘relative’ means an individual bearing a rela-
tionship to the individual which is described in
paragraphs (1) through (8) of section 152(a).’’.
(d) DISTRIBUTIONS FOR CERTAIN UNEMPLOYED IN-
DIVIDUALS.—Paragraph (2) of section 72(t) is amended
by adding at the end the following new subparagraph:
‘‘(E) DISTRIBUTIONS TO UNEMPLOYED IN-
DIVIDUALS.—A distribution from an individual
retirement plan to an individual after separa-
tion from employment, if—
‘‘(i) such individual has received un-
employment compensation for 12 consecu-
tive weeks under any Federal or State un-
employment compensation law by reason of
such separation, and
‘‘(ii) such distributions are made dur-
ing any taxable year during which such un-
employment compensation is paid or the
succeeding taxable year.’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to payments and distributions after
December 31, 1996.
SEC. 612. CONTRIBUTIONS MUST BE HELD AT LEAST 5
YEARS IN CERTAIN CASES.
(a) IN GENERAL.—Section 72(t), as amended by this
Act, is amended by adding at the end the following new
paragraph:
‘‘(10) CERTAIN CONTRIBUTIONS MUST BE HELD
5 YEARS.—
‘‘(A) IN
GENERAL.—Paragraph (2)(A)(i)
shall not apply to any amount distributed out
of an individual retirement plan (other than a
special individual retirement account) which is
allocable to contributions made to the plan dur-
ing the 5-year period ending on the date of
such distribution (and earnings on such con-
tributions).
‘‘(B) ORDERING RULE.—For purposes of
this paragraph—
‘‘(i) FIRST-IN, FIRST-OUT
RULE.—
Distributions shall be treated as having
been made—
‘‘(I) first from the earliest con-
tribution 
(and 
earnings 
allocable
thereto) remaining in the account at
the time of the distribution, and
‘‘(II) then from other contribu-
tions (and earnings allocable thereto)
in the order in which made.
‘‘(ii) ALLOCATION
OF
EARNINGS.—
Earnings shall be allocated to contribu-
tions in such manner as the Secretary may
prescribe.
‘‘(iii) AGGREGATIONS
OF
CONTRIBU-
TIONS.—Except as provided by the Sec-
retary, for purposes of this subpara-
graph—