ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) TABLE OF CONTENTS.—
Sec. 1. Short title; amendment of 1986 Code.
Sec. 2. Payroll deduction for retirement savings.
Sec. 3. Credit for pension plan startup costs of small employers.
Sec. 4. Secure money annuity or retirement (SMART) trusts.
Sec. 5. Faster vesting of employer matching contributions.
Sec. 6. Pension right to know proposals.
Sec. 7. Mandatory 1 percent employer contribution required under alternative
methods of meeting nondiscrimination requirements for 401(k)
plans.
Sec. 8. Definition of highly compensated employees.
Sec. 9. Treatment of multiemployer plans under section 415.
Sec. 10. Full funding limitation for multiemployer plans.
Sec. 11. Elimination of partial termination rules for multiemployer plans.
SEC. 2. PAYROLL DEDUCTION FOR RETIREMENT SAVINGS.
(a) IN GENERAL.—Section 219 (relating to retire-
ment savings) is amended by redesignating subsection (h)
as subsection (i) and by inserting after subsection (g) the
following new subsection:
‘‘(h) EXCLUSION
IN LIEU
OF DEDUCTION
FOR
AMOUNTS DEDUCTED AND WITHHELD FROM WAGES.—
‘‘(1) IN GENERAL.—If—
‘‘(A) an employee submits a written re-
quest to such employee’s employer to deduct
and withhold amounts from the wages paid by
such employer to such employee which are to be
deposited by the employer into an individual re-
tirement plan maintained for the benefit of such
employee which is designated by such employee,
and
‘‘(B) the aggregate amount to be deducted
and withheld during a calendar year pursuant
to such request does not exceed the lesser of—
‘‘(i) $2,000, or
‘‘(ii) the amount that the employee
certifies to the employer in such request as
being the amount which would (but for
paragraph (3)) be allowed as deduction to
such employee for contributions to such ac-
count for such employee’s last taxable year
beginning in such calendar year,
the gross income of such employee shall not include
the amount so deducted and withheld on wages paid
during such calendar year which is paid (not later
than the time prescribed by the Secretary) into such
individual retirement plan.
‘‘(2) MAXIMUM EXCLUSION.—The amount ex-
cluded from gross income under paragraph (1) for
any taxable year shall not exceed the limitation ap-
plicable under subsection (b)(1)(A) to such employee
for such year.
‘‘(3) DENIAL
OF
DEDUCTION.—No deduction
shall be allowed under this section for amounts ex-
cluded from gross income under paragraph (1).’’
(b) EXEMPTION FROM WITHHOLDING.—Subsection
(a) of section 3401 (defining wages) is amended by strik-
ing ‘‘or’’ at the end of paragraph (20), by striking the
period at the end of paragraph (21) and inserting ‘‘; or’’,
and by inserting after paragraph (21) the following new
paragraph:
‘‘(22) for any payment made for the benefit of
the employee to an individual retirement plan if the
amount of such payment was deducted and withheld
under section 219(h).’’
(c) EXCLUSION SHOWN ON W–2.—Subsection (a) of
section 6051 (relating to receipts for employees) is amend-
ed by striking ‘‘and’’ at the end of paragraph (10), by
striking the period at the end of paragraph (11) and in-
serting ‘‘, and’’, and by inserting after paragraph (11) the
following new paragraph:
‘‘(12) the total amount deducted and withheld
pursuant to section 219(h).’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to remuneration paid after Decem-
ber 31, 1998.
SEC. 3. CREDIT FOR PENSION PLAN STARTUP COSTS OF
SMALL EMPLOYERS.
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 (relating to business related cred-
its) is amended by adding at the end the following new
section:
‘‘SEC. 45D. SMALL EMPLOYER PENSION PLAN STARTUP
COSTS.
‘‘(a) GENERAL RULE.—For purposes of section 38,
in the case of an eligible employer, the small employer pen-
sion plan startup cost credit determined under this section
for any taxable year is an amount equal to 50 percent
of the qualified startup costs paid or incurred by the tax-
payer during the taxable year.
‘‘(b) DOLLAR LIMITATION.—The amount of the cred-
it determined under this section for any taxable year shall
not exceed—
‘‘(1) $1,000 for the first taxable year ending
after the date the employer established the qualified
employer plan to which such costs relate,
‘‘(2) $500 for each of the second and third tax-
able years ending after such date, and
‘‘(3) zero for each taxable year thereafter.
‘‘(c) ELIGIBLE EMPLOYER.—For purposes of this
section—
‘‘(1) IN
GENERAL.—The term ‘eligible em-
ployer’ has the meaning given such term by section
408(p)(2)(C)(i).
‘‘(2) EMPLOYERS
MAINTAINING
QUALIFIED
PLANS
DURING
1997
NOT
ELIGIBLE.—Such term
shall not include an employer if such employer (or
any predecessor employer) maintained a qualified
plan (as defined in section 408(p)(2)(D)(ii)) with re-
spect to which contributions were made, or benefits
were accrued, for service in 1997. If only individuals
other than employees described in subparagraph (A)
or (B) of section 410(b)(3) are eligible to participate
in the qualified employer plan referred to in sub-
section (d)(1), then the preceding sentence shall be
applied without regard to any qualified plan in
which only employees so described are eligible to
participate.
‘‘(d) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) QUALIFIED STARTUP COSTS.—
‘‘(A) IN
GENERAL.—The term ‘qualified
startup costs’ means any ordinary and nec-
essary expenses of an eligible employer which—
‘‘(i) are paid or incurred in connection
with the establishment of a qualified em-
ployer plan in which at least 2 individuals
are eligible to participate, and
‘‘(ii) are of a nonrecurring nature.
‘‘(B) PLAN
MUST
BE
ESTABLISHED
BE-
FORE JANUARY 1, 2001.—Such term shall not
include any expense in connection with a plan
established after December 31, 2000.
‘‘(2) QUALIFIED EMPLOYER PLAN.—The term
‘qualified employer plan’ has the meaning given to
such term by section 4972(d).
‘‘(e) SPECIAL RULES.—For purposes of this sec-
tion—
‘‘(1) AGGREGATION RULES.—All persons treat-
ed as a single employer under subsection (a) or (b)
of section 52, or subsection (n) or (o) of section 414,
shall be treated as one person.
‘‘(2) DISALLOWANCE OF DEDUCTION.—No de-
duction shall be allowable under this chapter for any
qualified startup costs for which a credit is deter-
mined under subsection (a).
‘‘(3) ELECTION NOT TO CLAIM CREDIT.—This
section shall not apply to a taxpayer for any taxable
year if such taxpayer elects to have this section not
apply for such taxable year.’’.
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to costs paid or incurred in taxable
years ending after the date of the enactment of this Act.
SEC. 4. SECURE MONEY ANNUITY OR RETIREMENT (SMART)
TRUSTS.
(a) IN GENERAL.—Subpart A of part I of subchapter
D of chapter 1 is amended by inserting after section 408A
the following new section:
‘‘SEC. 408B. SMART PLANS.
‘‘(a) EMPLOYER ELIGIBILITY.—
‘‘(1) IN GENERAL.—An employer may establish
and maintain a SMART annuity or a SMART trust
for any year only if—
‘‘(A) the employer is an eligible employer
(as defined in section 408(p)(2)(C)), and
‘‘(B) the employer does not maintain (and
no predecessor of the employer maintains) a
qualified plan (other than a permissible plan)
with respect to which contributions were made,
or benefits were accrued, for service in any year
in the period beginning with the year such an-
nuity or trust became effective and ending with
the year for which the determination is being
made.
The period described in subparagraph (B) shall in-
clude the period of 5 years before the year such
trust or annuity became effective with respect to
qualified plans which are defined benefit plans or
money purchase pension plans.
‘‘(2) DEFINITIONS.—For purposes of paragraph
(1)—
‘‘(A) QUALIFIED PLAN.—The term ‘quali-
fied plan’ has the meaning given such term by
section 408(p)(2)(D)(ii).
‘‘(B) PERMISSIBLE PLAN.—The term ‘per-
missible plan’ means a plan under which there
may be made only—
‘‘(i) elective deferrals described in sec-
tion 402(g)(3), and
‘‘(ii) employer matching contributions
not in excess of the amounts permitted
under subclauses (I) and (II) of section
401(k)(12)(B)(i).
‘‘(b) SMART ANNUITY.—
‘‘(1) IN GENERAL.—For purposes of this title,
the term ‘SMART annuity’ means an individual re-
tirement annuity (as defined in section 408(b) with-
out regard to paragraph (2) thereof and without re-
gard to the limitation on aggregate annual pre-
miums contained in the flush language of section
408(b)) if—
‘‘(A) such annuity meets the requirements
of paragraphs (2) through (7), and
‘‘(B) the only contributions to such annu-
ity are employer contributions.
Nothing in this section shall be construed as pre-
venting an employer from using a group annuity
contract which is divisible into individual retirement
annuities for purposes of providing SMART annu-
ities.
‘‘(2) PARTICIPATION REQUIREMENTS.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met for any year only if all
employees of the employer who—
‘‘(i) received at least $5,000 in com-
pensation from the employer during any 2
consecutive preceding years, and
‘‘(ii) received at least $5,000 in com-
pensation during the year,
are entitled to the benefit described in para-
graph (5) for such year.
‘‘(B) EXCLUDABLE EMPLOYEES.—An em-
ployer may elect to exclude from the require-
ments under subparagraph (A) employees de-
scribed in section 410(b)(3).
‘‘(3) VESTING.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met if the employee’s rights
to any benefits are nonforfeitable.
‘‘(B) RESTRICTIONS ON CERTAIN MANDA-
TORY
DISTRIBUTIONS.—If the present value
(determined in accordance with paragraph (6))
of an employee’s account balance exceeds the
dollar 
limit 
in 
effect 
under 
section
411(a)(11)(A), the requirements of this para-
graph are met only if the plan provides that
such benefit may not be immediately distributed
without the consent of the employee.
‘‘(4) BENEFIT
FORM.—The requirements of
this paragraph are met if the only form of benefit
is—
‘‘(A) a benefit payable annually in the
form of a single life annuity with monthly pay-
ments (with no ancillary benefits) beginning at
age 65, or
‘‘(B) any other form of benefit which is the
actuarial equivalent (based on the assumptions
specified in the SMART annuity) of the benefit
described in subparagraph (A).
‘‘(5) AMOUNT
OF
ANNUAL
ACCRUED
BENE-
FIT.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met for any plan year if the
accrued benefit of each participant derived from
employer contributions for such year, when ex-
pressed as a benefit described in paragraph
(4)(A), equals the applicable percentage of the
participant’s compensation for such year.
‘‘(B) 
APPLICABLE
PERCENTAGE.—For
purposes of this paragraph—
‘‘(i) IN GENERAL.—The term ‘applica-
ble percentage’ means 1 percent.
‘‘(ii) ELECTION OF HIGHER PERCENT-
AGE.—An employer may elect to apply an
applicable percentage of 2 percent for any
year for all employees eligible to partici-
pate in the plan for such year, if the em-
ployer notifies the employees of such per-
centage within a reasonable period before
the beginning of such year. An employer
may also elect to apply an applicable per-
centage of 3 percent for any of the first 5
years that the plan is effective for all em-
ployees eligible to participate in the plan
for such year, if the employer so notifies
the employees.
‘‘(C) COMPENSATION LIMIT.—
‘‘(i) IN GENERAL.—The compensation
taken into account under this paragraph
for any year shall not exceed $100,000.
‘‘(ii) COST-OF-LIVING ADJUSTMENT.—
The Secretary shall adjust annually the
$100,000 amount in clause (i) for in-
creases in the cost-of-living at the same
time and in the same manner as adjust-
ments under section 415(d); except that
the base period shall be the calendar quar-
ter beginning October 1, 1998, and any in-
crease which is not a multiple of $10,000
shall be rounded to the next lowest mul-
tiple of $10,000.
‘‘(6) FUNDING.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met only if the employer is
required to contribute to the annuity for each
plan year the amount necessary (determined in
accordance with subparagraph (B)) to fund the
‘‘(D) PENALTY FOR FAILURE TO MAKE RE-
QUIRED CONTRIBUTION.—The taxes imposed by
section 4971 shall apply to a failure to make
the contribution required by this paragraph in
the same manner as if the amount of the failure
were an accumulated funding deficiency to
which such section applies.
‘‘(7) LIMITATION ON DISTRIBUTIONS.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met only if distributions
may be paid only when the employee attains
age 65, separates from service, dies, or becomes
disabled 
(within 
the 
meaning 
of 
section
72(m)(7)).
‘‘(B) LIMITATION ON DISTRIBUTIONS ON
SEPARATION
FROM
SERVICE
OF
EMPLOYEES
WHO HAVE NOT ATTAINED AGE 65.—Subpara-
graph (A) shall apply to a distribution on sepa-
ration of service of an employee who has not at-
tained age 65 only if—
‘‘(i) the present value (determined in
accordance with paragraph (6)) of an em-
ployee’s account balance does not exceed
the dollar limit in effect under section
411(a)(11)(A), or
‘‘(ii) the distribution is a direct trust-
ee-to-trustee transfer of the entire balance
to the credit of the employee to a SMART
account or a SMART annuity for the bene-
fit of such employee.
‘‘(C) SMART ACCOUNT.—For purposes of
this paragraph, the term ‘SMART account’
means an individual retirement account for the
benefit of the employee if such employee elects
to have the limitations of this paragraph apply
to such account.
‘‘(8) DEFINITIONS AND SPECIAL RULE.—
‘‘(A) DEFINITIONS.—The definitions in
section 408(p)(6) shall apply for purposes of
this subsection.
‘‘(B) USE OF DESIGNATED FINANCIAL IN-
STITUTIONS.—A rule similar to the rule of sec-
tion 408(p)(7) (without regard to the last sen-
tence thereof) shall apply for purposes of this
subsection.
‘‘(c) SMART TRUST.—
‘‘(1) IN GENERAL.—For purposes of this title,
the term ‘SMART trust’ means a trust forming part
of a defined benefit plan if—
‘‘(A) such trust meets the requirements of
section 401(a) as modified by subsection (d),
‘‘(B) a participant’s benefits under the
plan are based solely on the balance of a sepa-
rate account in such plan of such participant,
‘‘(C) such plan meets the requirements of
paragraphs (2) through (8), and
‘‘(D) the only contributions to such trust
are employer contributions.
‘‘(2) PARTICIPATION REQUIREMENTS.—A plan
meets the requirements of this paragraph for any
year only if the requirements of subsection (b)(2)
are met for such year.
‘‘(3) VESTING.—A plan meets the requirements
of this paragraph for any year only if the require-
ments of subsection (b)(3) are met for such year.
‘‘(4) BENEFIT FORM.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), a plan meets the require-
ments of this paragraph only if the require-
ments of subsection (b)(4) are met. For pur-
poses of this subparagraph, a plan may satisfy
the requirements of subsection (b)(4) by pur-
chasing an annuity contract which meets the re-
quirements of subsection (b)(4).
‘‘(B) DIRECT TRANSFERS TO INDIVIDUAL
RETIREMENT
PLAN
OR
SMART
ANNUITY.—A
plan shall not fail to meet the requirements of
this paragraph by reason of permitting, at the
election of the employee, a trustee-to-trustee
transfer of the entire balance to the credit of
the employee to an individual retirement ac-
count described in section 408(a), an individual
retirement annuity described in section 408(b)
(other than an endowment contract), or a
SMART annuity.
‘‘(5) AMOUNT
OF
ANNUAL
ACCRUED
BENE-
FIT.—A plan meets the requirements of this para-
graph for any year only if the requirements of sub-
section (b)(5) are met for such year.
‘‘(6) FUNDING.—
‘‘(A) IN GENERAL.—A plan meets the re-
quirements of this paragraph for any year only
if—
‘‘(i) the requirements of subsection
(b)(6) are met for such year,
‘‘(ii) in the case of a plan which has
an unfunded annuity amount with respect
to the account of any participant, the plan
requires that the employer make an addi-