cent of such employee’s compensation from the em-
ployer for the year.
‘‘(d) QUALIFIED RETIREMENT PLAN.—
‘‘(1) IN GENERAL.—The term ‘qualified retire-
ment plan’ means any plan described in section
401(a) which includes a trust exempt from tax
under section 501(a) if the plan meets—
‘‘(A) the contribution requirements of
paragraph (2),
‘‘(B) the vesting requirements of para-
graph (3), and
‘‘(C) the distributions requirements of
paragraph (4).
‘‘(2) CONTRIBUTION REQUIREMENTS.—
‘‘(A) IN GENERAL.—The requirements of
this paragraph are met if, under the plan—
‘‘(i) the employer is required to make
nonelective contributions of at least 1 per-
cent of compensation (or the equivalent
thereof in the case of a defined benefit
plan) for each nonhighly compensated em-
ployee who is eligible to participate in the
plan, and
‘‘(ii) except in the case of a defined
benefit plan, allocations of nonelective em-
ployer contributions are either in equal dol-
lar amounts for all employees covered by
the plan or bear a uniform relationship to
the total compensation, or the basic or reg-
ular rate of compensation, of the employ-
ees covered by the plan.
‘‘(B) COMPENSATION
LIMITATION.—The
compensation taken into account under sub-
paragraph (A) for any year shall not exceed the
limitation in effect for such year under section
401(a)(17).
‘‘(3) VESTING
REQUIREMENTS.—The require-
ments of this paragraph are met if the plan satisfies
the requirements of subparagraph (A) or (B).
‘‘(A) 3-YEAR
VESTING.—A plan satisfies
the requirements of this subparagraph if an em-
ployee who has completed at least 3 years of
service has a nonforfeitable right to 100 percent
of the employee’s accrued benefit derived from
employer contributions.
‘‘(B) 5-YEAR
GRADED
VESTING.—A plan
satisfies the requirements of this subparagraph
if an employee has a nonforfeitable right to a
percentage of the employee’s accrued benefit de-
rived from employer contributions determined
under the following table:
The nonforfeitable
‘‘Years of service:
percentage is:
1 ...............................................................................................
2 ...............................................................................................
3 ...............................................................................................
4 ...............................................................................................
5 ...............................................................................................
100.
‘‘(4) DISTRIBUTION REQUIREMENTS.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the requirements of this
paragraph are met if, under the plan—
‘‘(i) in the case of a profit-sharing or
stock bonus plan, amounts are distribut-
able 
only 
as 
provided 
in 
section
401(k)(2)(B), and
‘‘(ii) in the case of a pension plan,
amounts are distributable subject to the
limitations applicable to other distributions
from the plan.
‘‘(B) DISTRIBUTIONS
WITHIN
YEARS
AFTER SEPARATION, ETC.—In no event shall a
plan meet the requirements of this paragraph
unless, under the plan, amounts distributed—
‘‘(i) after separation from service or
severance from employment, and
‘‘(ii) within 5 years after the date of
the earliest employer contribution to the
plan,
may be distributed only in a direct trustee-to-
trustee transfer to a plan having the same dis-
tribution restrictions as the distributing plan.
‘‘(e) OTHER DEFINITIONS.—For purposes of this
section—
‘‘(1) ELIGIBLE EMPLOYER.—The term ‘eligible
employer’ has the meaning given such term by sec-
tion 408(p)(2)(C)(i).
‘‘(2) 
NONHIGHLY
COMPENSATED
EMPLOY-
EES.—The term ‘highly compensated employee’ has
the meaning given such term by section 414(q) (de-
termined without regard to section 414(q)(1)(B)(ii)).
‘‘(f) SPECIAL RULES.—
‘‘(1) DISALLOWANCE OF DEDUCTION.—No de-
duction shall be allowed for that portion of the quali-
fied employer contributions paid or incurred for the
taxable year which is equal to the credit determined
under subsection (a).
‘‘(2) 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.
‘‘(g) RECAPTURE OF CREDIT ON FORFEITED CON-
TRIBUTIONS.—If any accrued benefit which is forfeitable
by reason of subsection (d)(3) is forfeited, the employer’s
tax imposed by this chapter for the taxable year in which
the forfeiture occurs shall be increased by 35 percent of
the employer contributions from which such benefit is de-
rived to the extent such contributions were taken into ac-
count in determining the credit under this section.
‘‘(h) REGULATIONS.—The Secretary shall prescribe
such regulations as may be appropriate to carry out the
purposes of this section, including regulations to prevent
the abuse of the purposes of this section through the use
of multiple plans.
‘‘(i) TERMINATION.—This section shall not apply to
any plan established after December 31, 2009.’’
(b) CREDIT ALLOWED AS PART OF GENERAL BUSI-
NESS CREDIT.—Section 38(b) of such Code (defining cur-
rent year business credit) is amended by striking ‘‘plus’’
at the end of paragraph (13), by striking the period at
the end of paragraph (14) and inserting ‘‘, plus’’, and by
adding at the end the following new paragraph:
‘‘(15) in the case of an eligible employer (as de-
fined in section 45F(e)), the small employer pension
plan contribution credit determined under section
45F(a).’’
(c) CONFORMING AMENDMENTS.—
(1) Section 39(d) of such Code is amended by
adding at the end the following new paragraph:
‘‘(11) NO
CARRYBACK
OF
SMALL
EMPLOYER
PENSION PLAN CONTRIBUTION CREDIT BEFORE JAN-
UARY 1, 2002.—No portion of the unused business
credit for any taxable year which is attributable to
the small employer pension plan contribution credit
determined under section 45F may be carried back
to a taxable year beginning before January 1,
2002.’’
(2) Subsection (c) of section 196 of such Code
is amended by striking ‘‘and’’ at the end of para-
graph (9), by striking the period at the end of para-
graph (10) and inserting ‘‘, and’’, and by adding at
the end the following new paragraph:
‘‘(11) the small employer pension plan contribu-
tion credit determined under section 45F(a).’’
(3) The table of sections for subpart D of part
IV of subchapter A of chapter 1 of such Code is
amended by adding at the end the following new
item:
‘‘Sec. 45F. Small employer pension plan contributions.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to contributions paid or incurred
in taxable years beginning after December 31, 2001.
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