TABLE OF CONTENTS:
Title I: Expanding Coverage for Small Business
Title II: Increasing Pension Access and Fairness for Women
Title III: Increasing Portability of Pension Plans
Title IV: Strengthening Pension Security and Enforcement
Title V: Encouraging Retirement Education
Title VI: Reducing Red Tape
Title VII: Plan Amendments
Pension Coverage and Portability Act - Title I: Expanding Coverage for Small Business - Amends the Internal Revenue Code (IRC) and the Employee Retirement Income Security Act of 1974 (ERISA) to revise requirements relating to pension plan loans for Subchapter S owners, partners, and sole proprietors.
(Sec. 102) Allows an employer to establish payroll deductions for contributions to employee individual retirement plans without incurring ERISA liability.
(Sec. 103) Amends the IRC to allow an eligible employer to establish and maintain a SAFE annuity (an individual retirement annuity) or a SAFE trust (a trust forming part of a defined benefit plan), both to be funded by the employer. Makes the employer contributions deductible without limitation and otherwise provides for the treatment of contributions and distributions. Mandates a penalty for early withdrawals. Requires simplified employer reports for SAFE annuities and simplified actuarial reports for SAFE trusts.
Amends the ERISA to exempt SAFE trusts from coverage requirements and SAFE annuities from certain employer reporting requirements.
(Sec. 104) Amends the IRC to modify definitions applicable to special rules for top-heavy plans. Requires consideration of employer matching contributions in determining whether a defined contribution plan meets minimum contribution requirements. Exempts frozen plans from a minimum benefit requirement. Provides an alternative test for top-heavy plans.
(Sec. 105) Allows employers to elect salary reduction only arrangements under IRC requirements for simple plans.
(Sec. 106) Establishes a small employer pension plan credit.
(Sec. 107) Increases (from $6,000 to $8,000) limits for deferrals to simple plans.
(Sec. 108) Amends ERISA to provide for a phase-in of an additional premium for new plans to pay to the Pension Benefit Guaranty Corporation (PBGC).
(Sec. 109) Provides for a reduced PBGC premium for new plans of small employers.
(Sec. 110) Eliminates user fee requirements for requests to the Internal Revenue Service (IRS) concerning the status of pension plans.
(Sec. 111) Declares the $150,000 compensation limit inapplicable to simple 401(k) arrangements.
(Sec. 112) Provides that elective deferrals shall not be taken into account for purposes of limits on certain plan contributions.
(Sec. 113) Repeals specified coordination requirements under the IRC for deferred compensation plans of State and local governments and tax-exempt organizations.
Title II: Increasing Pension Access and Fairness for Women - Sets forth requirements relating to equitable treatment for contributions of employees to defined contribution plans. Requires that certain contributions by church plans are not to be treated as exceeding a specified limit. Sets forth special rules for annuity contracts and simplified pensions.
(Sec. 202) Provides for faster vesting of certain employer matching contributions under IRC and ERISA.
(Sec. 203) Amends Federal civil service law to revise requirements for deferred annuities for surviving spouses of Federal employees under both the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS).
(Sec. 204) Revises IRC requirements relating to tax treatment of division of section 457 plan benefits upon divorce.
(Sec. 205) Amends the IRC and ERISA to provide for the spouse's right to know specified distribution information relating to survivor annuities.
(Sec. 206) Revises minimum distribution rules under IRC. Revises requirements for actuarial adjustment of benefit under a defined benefit plan.
Directs the Secretary of the Treasury to: (1) simplify and finalize the regulations relating to minimum distribution requirements; and (2) modify such regulations to reflect increases in life expectancy, and revise required distribution methods so that, under reasonable assumptions, the amount of the required minimum distribution does not decrease over a participant's life expectancy. Provides that, during the first year that such revised regulations are in effect, required distributions for future years may be redetermined, with the opportunity to choose a new designated beneficiary and to elect a new method of calculating life expectancy.
Excludes specified amounts from minimum distribution requirements. Repeals a rule relating to distributions begun before death occurs.
(Sec. 207) Directs the Secretary to revise regulations relating to safe harbor relief for hardship withdrawals from cash or deferred arrangements.
Title III: Increasing Portability of Pension Plans - Permits rollovers from and to various types of plans under the IRC.
(Sec. 302) Permits individual retirement plan (IRA) rollovers into workplace retirement plans only if certain conditions are met.
(Sec. 303) Permits rollover of after-tax contributions in an exempt trust under specified conditions. Sets forth a hardship exception to the 60-day rule.
(Sec. 304) Revises restrictions on distributions from defined contribution plans, including the same desk exception. Repeals business sale requirements.
(Sec. 305) Provides that a transferee defined contribution plan shall not be treated as having failed to meet certain requirements because it does not provide for some or all of the distribution forms previously available under a transferor defined contribution plan.
(Sec. 306) Authorizes trustee-to-trustee transfers to purchase permissive service credit with respect to governmental defined benefit plans.
(Sec. 307) Authorizes employers to disregard rollovers for purposes of employee cash-out amounts under the IRC and ERISA.
Title IV: Strengthening Pension Security and Enforcement - Amends the IRC and ERISA to revise the percentage of current liability funding limit. Revises maximum contribution deduction rules and applies them to all defined benefit plan under the IRC.
(Sec. 402) Increases dollar limits for employer-sponsored retirement plans.
(Sec. 403) Makes certain compensation limitations for defined benefit plans inapplicable to governmental and multiemployer plans. Prohibits combining or aggregating a multiemployer plan with any other plan maintained by the employer for the purpose of applying such limitations.
(Sec. 404) Amends ERISA to direct the PBGC to prescribe rules relating to missing participants for multiemployer plans covered by the PBGC that terminate.
(Sec. 405) Amends ERISA to make discretionary the imposition and amount of civil penalties for breach of fiduciary responsibility. Revises requirements for the applicable recovery amount and related rules.
(Sec. 406) Amends the IRC to allow an employer, in determining the amount of nondeductible contributions for any taxable year, to elect not to take into account any contributions to a defined benefit plan except to the extent that they exceed the full-funding limitation.
(Sec. 407) Amends the Taxpayer Relief Act of 1997 to protect investment of employee contributions to 401(k) plans by providing that specified requirements apply to elective deferrals for plan years beginning after December 31, 1998.
(Sec. 408) Bars the Secretaries of Labor and the Treasury from litigating any claim against a person under specified ERISA provisions if: (1) an action against that person with respect to the same plan is resolved by a court-approved settlement; (2) such proposed settlement is served upon the Secretaries at least 90 days before entry of final judgment approving the settlement; and (3) such claim was or could have been brought in such action.
Title V: Encouraging Retirement Education - Requires that pension benefit statements be furnished annually (once every three years for defined benefit plans) or on request. Allows written or electronic statements. Requires multiemployer plans to furnish a statement (written or electronic) on request.
(Sec. 502) Directs the Administrator of the Small Business Administration to prepare a plan to: (1) increase awareness of retirement benefits;(2) update small business owners concerning such benefits; and (3) post information on the Internet on types of retirement benefit plans and other options.
(Sec. 503) Treats the provision of certain retirement planning services by an employer to an employee as a de minimis fringe benefit to the extent it is not treated as a working condition fringe.
Prohibits including an amount in an employee's gross income solely because the employee may choose between any retirement planning fringe and compensation otherwise includible in gross income, providing such choices are available in a way that does not discriminate in favor of highly compensated employees.
Title VI: Reducing Red Tape - Amends the IRC and ERISA to revise requirements relating to timing of plan valuations.
(Sec. 602) Amends ERISA rules for substantial owners relating to plan terminations to revise: (1) the phase-in of the guarantee; and (2) the allocation of assets.
(Sec. 603) Amends IRC requirements for applicable dividends to allow dividends of employee stock ownership plans (ESOPs) to be reinvested without loss of dividend deduction.
(Sec. 604) Directs the Secretary of the Treasury to modify the regulations regarding the exclusion allowance to render void the requirement that contributions to a defined benefit pension plan be treated as previously excluded amounts.
(Sec. 605) Directs the Secretary to provide by regulation that a plan shall be deemed to satisfy specified requirements of the IRC if it satisfies a certain facts and circumstances test, under specified conditions.
(Sec. 606) Grants the Secretary discretion in applying a specified coverage test to a plan.
(Sec. 607) Makes inapplicable to certain mirror plans specified IRC requirements relating to deferred compensation plans of State and local governments and tax-exempt organizations.
(Sec. 608) Revises the notice and consent period regarding distributions. Directs the Secretary to modify certain regulations under the IRC to provide that the description of a participant's right, if any, to defer receipt of a distribution shall also describe the consequences of failing to defer such receipt.
(Sec. 609) Sets forth conforming amendments relating to election to receive taxable cash compensation in lieu of nontaxable transportation fringe benefits.
(Sec. 610) Repeals a transition rule relating to certain highly compensated employees under the Tax Reform Act of 1986.
(Sec. 611) Extends to international organizations the moratorium on application of certain nondiscrimination rules applicable to State and local plans.
(Sec. 612) Revises ERISA requirements for annual report dissemination.
(Sec. 613) Directs the Secretary to modify certain regulations with respect to certain plan participation by employees of tax-exempt entities under the IRC.
(Sec. 614) Repeals a multiple use test. Directs the Secretary prescribe regulations permitting appropriate aggregation of plans and contributions.
Title VII: Plan Amendments - Prescribes requirements for plan amendments or annuity contract amendments under the IRC and ERISA.
[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 741 Introduced in Senate (IS)]
106th CONGRESS
1st Session
S. 741
To provide for pension reform, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 25, 1999
Mr. Graham (for himself, Mr. Grassley, Mr. Baucus, Mr. Hatch, Mr.
Breaux, Mr. Jeffords, Mr. Kerrey, Mr. Robb, Mr. Mack, Mr. Bond, Mr.
Chafee, Mr. Thompson, Mr. Bingaman and Mr. Murkowski) introduced the
following bill; which was read twice and referred to the Committee on
Finance
_______________________________________________________________________
A BILL
To provide for pension reform, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Pension Coverage
and Portability Act''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment 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
provision of the Internal Revenue Code of 1986.
(c) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
TITLE I--EXPANDING COVERAGE FOR SMALL BUSINESS
Sec. 101. Plan loans for subchapter S owners, partners, and sole
proprietors.
Sec. 102. Contributions to IRAs through payroll deductions.
Sec. 103. Safe annuities and trusts.
Sec. 104. Modification of top-heavy rules.
Sec. 105. Salary reduction only simple plans.
Sec. 106. Credit for small employer pension plan contributions and
start-up costs.
Sec. 107. Increasing limits for deferrals to simple plans.
Sec. 108. Phase-in of additional PBGC premium for new plans.
Sec. 109. Reduced PBGC premium for new plans of small employers.
Sec. 110. Elimination of user fee for requests to IRS regarding new
pension plans.
Sec. 111. Compensation limit not to apply to simple 401(k)
arrangements.
Sec. 112. Elective deferrals not taken into account for purposes of
limits.
Sec. 113. Repeal of coordination requirements for deferred compensation
plans of State and local governments and
tax-exempt organizations.
Sec. 114. Alternative method of meeting nondiscrimination requirements
for opt-out plans.
TITLE II--INCREASING PENSION ACCESS AND FAIRNESS FOR WOMEN
Sec. 201. Equitable treatment for contributions of employees to defined
contribution plans.
Sec. 202. Faster vesting of certain employer matching contributions.
Sec. 203. Deferred annuities for surviving spouses of Federal
employees.
Sec. 204. Clarification of tax treatment of division of section 457
plan benefits upon divorce.
Sec. 205. Spouses' right to know proposal.
Sec. 206. Simplify and update the minimum distribution rules.
Sec. 207. Modification of safe harbor relief for hardship withdrawals
from cash or deferred arrangements.
TITLE III--INCREASING PORTABILITY OF PENSION PLANS
Sec. 301. Rollovers allowed among various types of plans.
Sec. 302. Rollovers of IRAs into workplace retirement plans.
Sec. 303. Rollovers of after-tax contributions; hardship exception.
Sec. 304. Rationalization of restrictions on distributions from defined
contribution plans.
Sec. 305. Transferee defined contribution plan need not have same
distribution options as transferor defined
contribution plan.
Sec. 306. Purchase of service credit in governmental defined benefit
plans.
Sec. 307. Employers may disregard rollovers for purposes of cash-out
amounts.
TITLE IV--STRENGTHENING PENSION SECURITY AND ENFORCEMENT
Sec. 401. Repeal of 150 percent of current liability funding limit.
Sec. 402. Increase in limits for employer-sponsored retirement plans.
Sec. 403. Treatment of multiemployer plans under section 415.
Sec. 404. Extension of missing participants program to multiemployer
plans.
Sec. 405. Civil penalties for breach of fiduciary responsibility.
Sec. 406. Penalty tax relief for sound pension funding.
Sec. 407. Protection of investment of employee contributions to 401(k)
plans.
Sec. 408. Elimination of ERISA double jeopardy.
TITLE V--ENCOURAGING RETIREMENT EDUCATION
Sec. 501. Periodic pension benefits statements.
Sec. 502. Small Business Administration advice to small businesses.
Sec. 503. Clarification of treatment of employer-provided retirement
advice.
TITLE VI--REDUCING RED TAPE
Sec. 601. Modification of timing of plan valuations.
Sec. 602. Rules for substantial owners relating to plan terminations.
Sec. 603. ESOP dividends may be reinvested without loss of dividend
deduction.
Sec. 604. Modification of 403(b) exclusion allowance to conform to 415
modification.
Sec. 605. Safety valve from mechanical rules.
Sec. 606. Coverage test flexibility.
Sec. 607. Section 457 inapplicable to certain mirror plans.
Sec. 608. Notice and consent period regarding distributions.
Sec. 609. Conforming amendments relating to election to receive taxable
cash compensation in lieu of nontaxable
transportation fringe benefits.
Sec. 610. Repeal of transition rule relating to certain highly
compensated employees.
Sec. 611. Extension to international organizations of moratorium on
application of certain nondiscrimination
rules applicable to State and local plans.
Sec. 612. Annual report dissemination.
Sec. 613. Employees of tax-exempt entities.
Sec. 614. Repeal of the multiple use test.
TITLE VII--PLAN AMENDMENTS
Sec. 701. Provisions relating to plan amendments.
TITLE I--EXPANDING COVERAGE FOR SMALL BUSINESS
SEC. 101. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND SOLE
PROPRIETORS.
(a) Amendments to 1986 Code.--
(1) In general.--Section 4975(f) (relating to other
definitions and special rules) is amended by striking paragraph
(6).
(2) Conforming amendment.--Section 4975(d) (relating to
exemptions) is amended by striking ``Except as provided in
subsection (f)(6), the prohibitions'' and inserting ``The
prohibitions''.
(b) Amendments to ERISA.--
(1) In general.--Section 408 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1108(d)) is amended--
(A) by striking subsection (d), and
(B) by redesignating subsections (e) and (f) as
subsections (d) and (e), respectively.
(2) Conforming amendment.--Section 407(b)(2)(B) of such Act
(29 U.S.C. 1107(b)(2)(B)) is amended by striking ``section
408(e)'' and inserting ``section 408(d)''.
(c) Effective Date.--The amendments made by this section shall take
effect on the date of enactment of this Act.
SEC. 102. CONTRIBUTIONS TO IRAS THROUGH PAYROLL DEDUCTIONS.
(a) Definitions.--For purposes of this section--
(1) Contribution certificate.--The term ``contribution
certificate'' means a certificate submitted by an employee to
the employee's employer which--
(A) identifies the employee by name, address, and
social security number,
(B) identifies the individual retirement plan to
which the employee wishes to make contributions through
payroll deductions, and
(C) identifies the amount of such contributions,
not to exceed the amount allowed under section 408 of
the Internal Revenue Code of 1986 to an individual
retirement plan for such year.
(2) Employee.--The term ``employee'' does not include an
employee as defined in section 401(c)(1) of such Code.
(3) Individual retirement plans.--The term ``individual
retirement plan'' has the meaning given the term by section
7701(a)(37) of the Internal Revenue Code of 1986.
(4) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
(b) Establishment of Payroll Deduction System.--An employer may
establish a system under which employees, through employer payroll
deductions, may make contributions to individual retirement plans. An
employer shall not incur any liability under title I of the Employee
Retirement Income Security Act of 1974 in providing for such a system.
(c) Contributions to Individual Retirement Plans.--
(1) In general.--The system established under subsection
(b) shall provide that contributions made to an individual
retirement plan for any taxable year are--
(A) contributions through employer payroll
deductions, and
(B) if the employer so elects, additional
contributions by the employee which, when added to
contributions under subparagraph (A), do not exceed the
amount allowed under section 408 of the Internal
Revenue Code of 1986 for the taxable year.
(2) Employer payroll deductions.--
(A) In general.--The system established under
subsection (b) shall provide that an employee may
establish and maintain an individual retirement plan
simply by--
(i) completing a contribution certificate,
and
(ii) submitting such certificate to the
employee's employer in the manner provided
under subparagraph (D).
(B) Change of amounts.--An employee establishing
and maintaining an individual retirement plan under
subparagraph (A) may change the amount of an employer
payroll deduction in the same manner as under
subparagraph (A).
(C) Simplified forms.--
(i) Contribution certificate.--The
Secretary shall develop a model contribution
certificate for purposes of this paragraph--
(I) which is written in a clear and
easily understandable manner, and
(II) the completion of which by an
employee will constitute the
establishment of an individual
retirement plan and the request for
employer payroll deductions or changes
in such deductions.
(ii) Availability.--The Secretary shall
make available to all employees and employers
the forms developed under this subparagraph,
and shall include with such forms easy to
understand explanatory materials.
(D) Use of certificate.--Each employer electing to
adopt a system under subsection (b) shall, upon receipt
of a contribution certificate from an employee, deduct
the appropriate contribution as determined by such
certificate from the employee's wages in equal amounts
during the remaining payroll periods for the taxable
year and shall remit such amounts for investment in the
employee's individual retirement plan not later than
the close of the 30-day period following the last day
of the month in which such payroll period occurs.
(E) Failure to remit payroll deductions.--For
purposes of the Internal Revenue Code of 1986, any
amount which an employer fails to remit on behalf of an
employee pursuant to a contribution certificate of such
employee shall not be allowed as a deduction to the
employer under such Code.
(d) Additional Information.--
(1) In general.--The system established under subsection
(b) shall provide for the furnishing of information to
employees of the opportunity of establishing individual
retirement plans and of transferring amounts to such plans.
(2) Investment information.--The employer shall also make
available to employees information on how to make informed
investment decisions and how to achieve retirement objectives.
(3) Information not investment advice.--Information
provided under this subsection shall not be treated as
investment advice for purposes of any Federal or State law.
SEC. 103. SAFE ANNUITIES AND TRUSTS.
(a) In General.--Subpart A of part I of subchapter D of chapter 1
(relating to deferred compensation, etc.) is amended by inserting after
section 408A the following:
``SEC. 408B. SAFE ANNUITIES AND TRUSTS.
``(a) Employer Eligibility.--
``(1) In general.--An employer may establish and maintain a
SAFE annuity or a SAFE 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 annuity or trust became effective and ending
with the year for which the determination is being
made.
``(2) Definitions.--For purposes of paragraph (1)--
``(A) Qualified plan.--The term `qualified plan'
has the meaning given such term by section
408(p)(2)(D)(ii).
``(B) Permissible plan.--The term `permissible
plan' means--
``(i) a plan under which only elective
deferrals described in section 402(g)(3),
deferred compensation described in section 457,
or employer matching contributions may be made,
and
``(ii) any collectively bargained plan.
``(b) SAFE Annuity.--
``(1) In general.--For purposes of this title, the term
`SAFE annuity' means an individual retirement annuity (as
defined in section 408(b) without regard to paragraph (2)
thereof and without regard to the limitation on aggregate
annual premiums contained in the flush language of section
408(b)) if--
``(A) such annuity meets the requirements of
paragraphs (2) through (6), and
``(B) the only contributions to such annuity (other
than rollover contributions) are employer
contributions.
Nothing in this section shall be construed as preventing an
employer from using a group annuity contract which is divisible
into individual retirement annuities for purposes of providing
SAFE annuities.
``(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
compensation from the employer during any 2
consecutive preceding years, and
``(ii) received at least $5,000 in
compensation during the year,
are entitled to the benefit described in paragraph (5)
for such year.
``(B) Excludable employees.--An employer may elect
to exclude from the requirements under subparagraph (A)
employees described in section 410(b)(3).
``(3) Vesting.--The requirements of this paragraph are met
if the employee's rights to any benefits are nonforfeitable.
``(4) Benefit form.--
``(A) In general.--The requirements of this
paragraph are met if the only form of benefit is--
``(i) a benefit payable annually in the
form of a single life annuity with monthly
payments (with no ancillary benefits) beginning
at age 65, or
``(ii) any other form of benefit which is
the actuarial equivalent (based on the
assumptions specified in the SAFE annuity) of
the benefit described in clause (i).
``(B) Direct transfers and rollovers.--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 or a rollover
contribution.
``(5) Amount of annual accrued benefit.--
``(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 expressed 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 `applicable
percentage' means 3 percent.
``(ii) Election of lower percentage.--An
employer may elect to apply an applicable
percentage of 1 percent, 2 percent or zero
percent for any year for all employees eligible
to participate in the plan for such year if the
employer notifies the employees of such
percentage within a reasonable period before
the beginning of such year.
``(C) Compensation limit.--The compensation taken
into account under this paragraph for any year shall
not exceed the limitation in effect for such year under
section 401(a)(17).
``(D) Credit for service before plan adopted.--
``(i) In general.--An employer may elect to
take into account a specified number of years
of service (not greater than 10) performed
before the adoption of the plan (each
hereinafter referred to as a `prior service
year') as service under the plan if the same
specified number of years is available to all
employees eligible to participate in the plan
for the first plan year.
``(ii) Accrual of prior service benefit.--
Such an election shall be effective for a prior
service year only if the requirements of this
paragraph are met for an eligible plan year
(with respect to employees entitled to credit
for such prior service year) by doubling the
applicable percentage (if any) for such plan
year. For purposes of the preceding sentence,
an eligible plan year is a plan year in the
period of consecutive plan years (but not more
than the number specified under clause
(i)) beginning with the first plan year that the plan is in effect.
``(iii) Election may not apply to certain
prior service years.--This subparagraph shall
not apply with respect to any prior service
year of an employee if--
``(I) for any part of such prior
service year such employee was an
active participant (within the meaning
of section 219(g)(5)) under any defined
benefit plan of the employer (or any
predecessor thereof), or
``(II) such employee received
during such prior service year less
than $5,000 in compensation from the
employer.
``(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 accrued benefit for each participant
entitled to such benefit for such year.
``(B) Actuarial assumptions.--In determining the
amount required to be contributed under subparagraph
(A)--
``(i) the assumed interest rate shall be
not less than 3 percent and not greater than 5
percent per year,
``(ii) the assumed mortality shall be
determined under the applicable mortality table
(as defined in section 417(e)(3), as modified
by the Secretary so that it does not include
any assumption for preretirement mortality),
``(iii) the assumed retirement age shall be
65, and
``(iv) an assumption for reasonable
expenses shall be permitted consistent with
State law.
``(C) Time when contributions deemed made.--For
purposes of this paragraph, an employer shall be deemed
to have made a contribution on the last day of the
preceding taxable year if the payment is on account of
such taxable year and is made not later than the time
prescribed by law for filing the return for such
taxable year (including extensions thereof).
``(D) Penalty for failure to make required
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) 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 institutions.--A
rule similar to the rule of section 408(p)(7) (without
regard to the last sentence thereof) shall apply for
purposes of this subsection.
``(C) Treatment of matching contributions.--A rule
similar to the rule of section 408(p)(8) shall apply
for purposes of this subsection.
``(c) SAFE Trust.--
``(1) In general.--For purposes of this title, the term
`SAFE 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 separate 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 (other
than rollover contributions) 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 requirements of subsection
(b)(3) are met for such year.
``(4) Benefit form.--A plan meets the requirements of this
paragraph only if the requirements of subsection (b)(4) are
met. For purposes of this paragraph, a plan may satisfy the
requirements of subsection (b)(4) by purchasing an annuity
contract which meets the requirements of subsection (b)(4).
``(5) Amount of annual accrued benefit.--A plan meets the
requirements of this paragraph for any year only if the
requirements of subsection (b)(5) are met for such year.
``(6) Funding.--
``(A) In general.--A plan meets the requirements of
this paragraph for any year only if--
``(i) the requirements of subsection (b)(6)
are met for such year, and
``(ii) in the case of a plan which has an
unfunded prior year liability as of the close
of such plan year, the plan requires that the
employer make an additional contribution to
such plan for such year equal to the amount of
such unfunded prior year liability.
``(B) Unfunded prior year liability.--For purposes
of this paragraph, the term `unfunded prior year
liability' means, with respect to any plan year, the
excess (if any) of--
``(i) the aggregate of the accrued
liabilities under the plan as of the close of
the prior plan year, over
``(ii) the value of the plan's assets
determined under section 412(c)(2) as of the
close of the plan year (determined without
regard to any contributions for such plan
year).
Such accrued liabilities shall be determined using the
assumptions specified in subsection (b)(6)(B).
``(C) Changes in mortality table.--If the
applicable mortality table under section 417(e)(3) for
any plan year is not the same as such table for the
prior plan year, the Secretary shall prescribe
regulations which phase in the effect of the changes
over a reasonable period of plan years determined by
the Secretary.
``(D) Disregard assumptions for expenses.--For
purposes of this paragraph, the assumption specified in
subsection (b)(6)(B)(iv) shall be disregarded.
``(7) Separate accounts for participants.--A plan meets the
requirements of this paragraph for any year only if the plan
provides--
``(A) for an individual account for each
participant, and
``(B) for benefits based solely on--
``(i) the amount contributed to the
participant's account, and
``(ii) any income, expenses, gains and
losses, and any forfeitures of accounts of
other participants which may be allocated to
such participant's account.
``(8) Trust may not hold securities which are not readily
tradable.--A plan meets the requirements of this paragraph only
if the plan prohibits the trust from holding directly or
indirectly securities which are not readily tradable on an
established securities market or otherwise. Nothing in this
paragraph shall prohibit the trust from holding insurance
company products regulated by State law.
``(9) Definitions and special rule.--The definitions and
special rule applicable under subsection (b)(7) shall apply for
purposes of this subsection.
``(d) Special Rules for SAFE Annuities and Trusts.--
``(1) Certain requirements treated as met.--For purposes of
section 401(a), a SAFE annuity and a SAFE trust shall be
treated as meeting the requirements of the following
provisions:
``(A) Section 401(a)(4) (relating to
nondiscrimination rules).
``(B) Section 401(a)(26) (relating to minimum
participation).
``(C) Section 410 (relating to minimum
participation and coverage requirements).
``(D) Section 411(b) (relating to accrued benefit
requirements).
``(E) Paragraphs (6) and (7) of section 412(c)
(relating to full funding limitation).
``(F) Section 415 (relating to limitations on
benefits and contributions under qualified plans).
``(G) Section 416 (relating to special rules for
top-heavy plans).
``(2) Contributions not taken into account in applying
limits to other plans.--Contributions to a SAFE annuity or a
SAFE trust shall not be taken into account in applying sections
404 and 415 to other plans maintained by the employer.
``(3) Coordination with maximum limitation under subsection
(a).--In the case of any SAFE annuity or SAFE trust,
subsections (a)(1) and (b) of section 408 shall be applied by
substituting `the dollar amount in effect under section
408B(b)(5)(C)' for `$2,000' each place it appears in such
subsections.
``(e) Rollover Contribution.--For purposes of this section, the
term `rollover contribution' means any rollover contribution under
section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16).''.
(b) Deduction Limits Not To Apply to Employer Contributions.--
(1) In general.--Section 404 (relating to deductions for
contributions of an employer to pension, etc., plans) is
amended by adding at the end the following:
``(n) Special Rules for SAFE Annuities and Trusts.--
``(1) In general.--Employer contributions to a SAFE annuity
or SAFE trust shall be treated as if they are made to a plan
subject to the requirements of this section.
``(2) Timing.--
``(A) Deduction.--Contributions described in
paragraph (1) shall be deductible in the taxable year
of the employer with or within which the calendar year
for which the contributions were made ends.
``(B) Contributions after end of year.--For
purposes of this subsection, contributions shall be
treated as made for a taxable year if they are made on
account of the taxable year and are made not later than
the time prescribed by law for filing the return for
the taxable year (including extensions thereof).''.
(2) Coordination with deduction under section 219.--
(A) Section 219(b) (relating to maximum amount of
deduction) is amended by adding at the end the
following:
``(5) Special rule for safe annuities.--This section shall
not apply with respect to any amount contributed to a SAFE
annuity established under section 408A(B).''.
(B) Section 219(g)(5)(A) (defining active
participant) is amended by striking ``or'' at the end
of clause (v) and by adding at the end the following:
``(vii) any SAFE annuity (within the
meaning of section 408B), or''.
(c) Contributions and Distributions.--Section 402 (relating to
taxability of beneficiary of employees' trust) is amended by adding at
the end the following:
``(l) Treatment of SAFE Annuities.--Rules similar to the rules of
paragraphs (1) and (3) of subsection (h) shall apply to contributions
and distributions with respect to a SAFE annuities under section
408B.''.
(d) Increased Penalty on Early Withdrawals.--Section 72(t)
(relating to additional tax on early distributions) is amended by
adding at the end the following:
``(9) Special rules for safe annuities and trusts.--In the
case of any amount received from a SAFE annuity or a SAFE trust
(within the meaning of section 408B), paragraph (1) shall be
applied by substituting `20 percent' for `10 percent'.''.
(e) Simplified Employer Reports.--
(1) SAFE annuities.--Section 408(l) (relating to simplified
employer reports) is amended by adding at the end the
following:
``(3) SAFE annuities.--
``(A) Simplified report.--The employer maintaining
any SAFE annuity (within the meaning of section 408B)
shall file a simplified annual return with the
Secretary containing only the information described in
subparagraph (B).
``(B) Contents.--The return required by
subparagraph (A) shall set forth--
``(i) the name and address of the employer,
``(ii) the date the plan was adopted,
``(iii) the number of employees of the
employer,
``(iv) the number of such employees who are
eligible to participate in the plan,
``(v) the total amount contributed by the
employer to each such annuity for such year and
the minimum amount required under section 408B
to be so contributed,
``(vi) the percentage elected under section
408B(b)(5)(B), and
``(vii) the number of employees with
respect to whom contributions are required to
be made for such year under section
408B(b)(5)(D).
``(C) Reporting by issuer of safe annuity.--
``(i) In general.--The issuer of each SAFE
annuity shall provide to the owner of the
annuity for each year a statement setting forth
as of the close of such year--
``(I) the benefits guaranteed at
age 65 under the annuity, and
``(II) the cash surrender value of
the annuity.
``(ii) Summary description.--The issuer of
any SAFE annuity shall provide to the employer
maintaining the annuity for each year a
description containing the following
information:
``(I) The name and address of the
employer and the issuer.
``(II) The requirements for
eligibility for participation.
``(III) The benefits provided with
respect to the annuity.
``(IV) The procedures for, and
effects of, withdrawals (including
rollovers) from the annuity.
``(D) Time and manner of reporting.--Any return,
report, or statement required under this paragraph
shall be made in such form and at such time as the
Secretary shall prescribe.''.
(2) SAFE trusts.--Section 6059 (relating to actuarial
reports) is amended by redesignating subsections (c) and (d) as
subsections (d) and (e), respectively, and by inserting after
subsection (b) the following:
``(c) SAFE Trusts.--In the case of a SAFE Trust (within the meaning
of section 408B), the Secretary shall require a simplified actuarial
report which contains information similar to the information required
in section 408(l)(3)(B).''.
(f) Conforming Amendments.--
(1) Section 280G(b)(6) is amended by striking ``or'' at the
end of subparagraph (C), by striking the period at the end of
subparagraph (D) and inserting ``, or'' and by adding after
subparagraph (D) the following:
``(E) a SAFE annuity described in section 408B.''.
(2) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) of
section 414 are each amended by inserting ``408B,'' after
``408(p),''.
(3) Section 4972(d)(1)(A) is amended by striking ``and'' at
the end of clause (iii), by striking the period at the end of
clause (iv) and inserting ``, and'', and by adding after clause
(iv) the following:
``(v) any SAFE annuity (within the meaning
of section 408B).''.
(4) The table of sections for subpart A of part I of
subchapter D of chapter 1 is amended by inserting after the
item relating to section 408A the following:
``Sec. 408B. SAFE annuities and
trusts.''.
(g) Modifications of ERISA.--
(1) Exemption from insurance coverage.--Subsection (b) of
section 4021 of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1321) is amended by striking ``or'' at the end
of paragraph (12), by striking the period at the end of
paragraph (13) and inserting ``; or'', and by adding at the end
the following:
``(14) which is established and maintained as part of a
SAFE trust (as defined in section 408B of the Internal Revenue
Code of 1986).''.
(2) Reporting requirements.--Section 101 of such Act (29
U.S.C. 1021) is amended by redesignating the second subsection
(h) as subsection (j) and by inserting after the first
subsection (h) the following:
``(i) SAFE Annuities.--
``(1) No employer reports.--Except as provided in this
subsection, no report shall be required under this section by
an employer maintaining a SAFE annuity under section 408B(b) of
the Internal Revenue Code of 1986.
``(2) Summary description.--The issuer of any SAFE annuity
shall provide to the employer maintaining the annuity for each
year a description containing the following information:
``(A) The name and address of the employer and the
issuer.
``(B) The requirements for eligibility for
participation.
``(C) The benefits provided with respect to the
annuity.
``(D) The procedures for, and effects of,
withdrawals (including rollovers) from the annuity.
``(3) Employee notification.--The employer shall provide
each employee eligible to participate in the SAFE annuity with
the description described in paragraph (2) at the same time as
the notification required under section 408B(b)(5)(B) of the
Internal Revenue Code of 1986.''.
(h) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1999.
SEC. 104. MODIFICATION OF TOP-HEAVY RULES.
(a) Repeal of Family Aggregation Rules.--Section 416(i)(1)(B)(i)(I)
(defining 5-percent owner) is amended by inserting ``(without regard to
subsection (a)(1) thereof)'' after ``section 318''.
(b) Simplification of Definition of Key Employee.--
(1) In general.--Section 416(i)(1)(A) (defining key
employee) is amended--
(A) by striking ``or any of the 4 preceding plan
years'' in the matter preceding clause (i),
(B) by striking clause (i) and inserting the
following:
``(i) an officer of the employer who is a
highly compensated employee described in
section 414(q)(1)(B),'',
(C) by striking clause (ii) and redesignating
clauses (iii) and (iv) as clauses (ii) and (iii),
respectively, and
(D) by striking the second sentence in the matter
following clause (iii), as redesignated by subparagraph
(C).
(2) Conforming amendment.--Section 416(i)(1)(B)(iii) is
amended by striking ``and subparagraph (A)(ii)''.
(c) Employee Elective Contributions to Plan Not Taken Into
Account.--
(1) Definition of top-heavy plan.--Section 416(g)(4)
(relating to other special rules) is amended by adding at the
end the following:
``(H) Employee elective contributions to plan not
taken into account.--At the election of the employer,
any employee elective contribution described in section
415(c)(3)(D) to a plan (and earnings allocable thereto)
shall not be taken into account for purposes of
determining whether a plan is a top-heavy plan (or
whether any aggregation group which includes such plan
is a top-heavy group).''.
(2) Definition of compensation.--Section 416(i)(1)(D)
(defining compensation) is amended to read as follows:
``(D) Compensation.--
``(i) In general.--For purposes of this
paragraph, except as provided in clause (ii),
the term `compensation' has the meaning given
such term by section 414(q)(4).
``(ii) Employee elective contributions to
plan not taken into account.--At the election
of the employer, any employee elective
contribution described in section 415(c)(3)(D)
to a plan shall not be taken into account for
purposes of determining compensation.''.
(d) Matching Contributions Taken Into Account for Minimum
Contribution Requirements.--Section 416(c)(2)(A) (relating to defined
contribution plans) is amended by adding at the end the following:
``Employer matching contributions (as defined in section 401(m)(4)(A))
shall be taken into account for purposes of this subparagraph.''.
(e) Distributions During Last Year Before Determination Date Taken
Into Account.--Section 416(g) is amended--
(1) in paragraph (3)--
(A) by striking ``last 5 years'' in the heading and
inserting ``last year before determination date'', and
(B) in the matter following subparagraph (B), by
striking ``5-year period'' and inserting ``1-year
period'', and
(2) in paragraph (4)(E)--
(A) by striking ``last 5 years'' in the heading and
inserting ``last year before determination date'', and
(B) by striking ``5-year period'' and inserting
``1-year period''.
(f) Requirements for Qualifications.--Clause (ii) of section
401(a)(10)(B) (relating to requirements for qualifications for top-
heavy plans) is amended by adding at the end the following new flush
sentence:
``The preceding sentence shall not apply to a
plan if the plan is not top-heavy and if it is
not reasonable to expect that the plan will
become a top-heavy plan.''.
(g) Definition of Top-Heavy Plans.--
(1) Exclusion of certain plans from definition of top-heavy
plan.--Section 416(g)(4) (relating to other special rules for
top-heavy plans), as amended by subsection (c), is amended by
adding at the end the following new subparagraph:
``(I) Cash or deferred arrangements and plans using
alternative methods of meeting nondiscrimination
requirements.--The term `top-heavy plan' shall not
include--
``(i) a cash or deferred arrangement to the
extent that such arrangement meets the
requirements of section 401(k)(12), or
``(ii) a defined contribution plan to the
extent that such plan meets the requirements of
section 401(m)(11),
This subparagraph shall also apply to contributions
that are not required to satisfy the requirements of
section 401(k)(12) or 401(m)(11), whichever is
applicable, but are consistent with the purposes of
such section, as permitted under regulations which the
Secretary shall prescribe. Nothing in this subparagraph
shall preclude an employer from taking into account
contributions made under the cash or deferred
arrangement or the defined contribution plan when
determining whether any plan of such employer satisfies
the requirements of this section.''.
(2) Aggregation group not required to include certain
plans.--Clause (i) of section 416(g)(2)(A) of such Code
(relating to required aggregation) is amended by adding at the
end the following new flush sentence:
``Such term shall not include a plan or
arrangement described in subparagraph (I) of
paragraph (4).''.
(h) Effective Deferrals Not Taken Into Account.--Clause (i) of
section 416(c)(2)(B) (relating to special rule where maximum
contribution less than 3 percent) is amended by inserting ``(other than
elective deferrals (as defined in section 402(g)(3))'' after
``contributions''.
(i) Frozen Plan Exempt From Minimum Benefit Requirement.--
(1) In general.--Subparagraph (C) of section 416(c)(1)
(relating to defined benefit plans) is amended--
(A) in clause (i), by striking ``clause (ii)'' and
inserting ``clause (ii) or (iii)'', and
(B) by adding at the end the following:
``(iii) Exception for frozen plan.--For
purposes of determining an employee's years of
service with the employer, any service with the
employer shall be disregarded to the extent
that such service occurs during a plan year
when the plan benefits (within the meaning of
section 410(b)) no employee or former
employee.''.
(2) Conforming amendment.--Subparagraph (A) of section
415(b)(5) is amended by adding at the end the following: ``An
employee shall not be credited with a year of participation in
a defined benefit plan for any year in which the plan does not
benefit (within the meaning of section 410(b)) such
employee.''.
(j) Alternative 60 Percent.--
(1) In general.--Subsection (g) of section 416 (relating to
top heavy plan defined) is amended by adding at the end the
following:
``(5) Alternative 60 percent test.--
``(A) In general.--For any plan year, an employer
may elect for this paragraph to apply to all plans
maintained by such employer. If this paragraph applies
to a plan, the term `top-heavy plan' shall have the
meaning set forth in subparagraph (B) and the term
`top-heavy group' shall have the meaning set forth in
subparagraph (C).
``(B) Top-heavy plan defined.--In the case of any
plan to which this paragraph applies, the term `top-
heavy plan' means, with respect to any plan year--
``(i) any defined benefit plan if, for the
plan year ending on the determination date, the
present value of the accruals for key
employees, exceeds 60 percent of the present
value of the accruals for all employees, and
``(ii) any defined contribution plan if,
for the plan year ending on the determination
date, the annual additions for key employees
exceed 60 percent of the annual additions for
all employees.
``(C) Top-heavy group.--In the case of any plan to
which this paragraph applies, the term `top-heavy
group' means any aggregation group if--
``(i) the sum, for the plan year ending on
the determination date, of--
``(I) the present value of the
accruals for key employees under all
defined benefit plans included in such
group, and
``(II) the aggregate of the annual
additions of key employees under
all defined contribution plans included in such group,
``(ii) exceeds 60 percent of a similar sum
determined for all employees.
``(D) Annual addition.--For purposes of this
paragraph, the term `annual addition' shall have the
same meaning as when used in section 415(c)(2) (without
regard to section 415(l) or section 419A(d)(2)).
``(E) Certain rules not to apply.--Paragraphs (3)
and (4) (other than subparagraphs (B), (C), (D), (E),
and (G) of paragraph (4)) shall not apply for purposes
of this paragraph.''.
(2) Conforming amendments.--
(A) Subparagraph (A) of section 416(g)(1) is
amended by striking ``subparagraph (B)'' and inserting
``subparagraph (B) and paragraph (5)''.
(B) Subparagraph (B) of section 416(g)(2) is
amended by striking ``The term'' and inserting ``Except
as provided in paragraph (5), the term''.
(k) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 1999.
SEC. 105. SALARY REDUCTION ONLY SIMPLE PLANS.
(a) Simple Retirement Accounts.--
(1) In general.--Paragraph (2) of section 408(p) is
amended--
(A) by redesignating subparagraphs (C), (D), and
(E) as subparagraphs (D), (E), and (F), respectively,
and
(B) by inserting after subparagraph (B) the
following:
``(C) Employer may elect salary reduction only
arrangement.--
``(i) In general.--An employer shall be
treated as meeting the requirements of
subparagraph (A)(iii) for any year if, in lieu
of the contributions described in such
subparagraph, the employer elects to have
subparagraph (A)(ii) applied for the year by
substituting `$4,000' for `$6,000'. If an
employer makes an election under this
subparagraph for any year, the employer shall
notify employees of such election within a
reasonable period of time before the 60-day
period for such year under paragraph (5)(C).
``(ii) Exception.--This subparagraph shall
not apply to an employer if such employer (or
any predecessor employer) maintained another
qualified plan (as defined in subparagraph
(E)(ii)) with respect to which contributions
were made, or benefits were accrued, for
service during the year in which the
arrangement described in clause (i) became
effective or either of the 2 preceding years.
If only individuals other than employees
described in subparagraph (A) or (B) of section
410(b)(3) are eligible to participate in the
arrangement described in clause (i), then the
preceding sentence shall be applied without
regard to any qualified plan in which only
employees so described are eligible to
participate.''.
(2) Special rule for acquisitions, dispositions, and
similar transactions.--Subparagraph (B) of section 408(p)(10)
is amended by striking ``and'' at the end of clause (ii), by
striking the period at the end of clause (iii) and inserting
``; and'', and by inserting after clause (iii) the following:
``(iv) the requirement under paragraph
(2)(C) that the employer not have maintained
another qualified plan described therein.''.
(3) Cost-of-living adjustment.--Subparagraph (F) of section
408(p)(2) (as so redesignated) is amended by inserting ``and
the $4,000 and $6,000 amounts under subparagraph (C)'' after
``subparagraph (A)(ii)''.
(4) Coordination with maximum limitation.--Paragraph (8) of
section 408(p) (relating to coordination with maximum
limitation under subsection (a)) is amended by striking
``paragraph (2)(A)(ii) of this subsection'' and inserting
``subparagraph (A)(ii) or (C) of paragraph (2) of this
subsection, whichever is applicable,''.
(b) Adoption of Simple Plan To Meet Nondiscrimination Tests.--
(1) Simple plan.--Subparagraph (B) of section 401(k)(11) is
amended by redesignating clause (iii) as clause (iv) and by
inserting after clause (ii) the following new clause:
``(iii) Employer may elect salary reduction
only arrangement.--
``(I) In general.--An employer
shall be treated as meeting the
requirements of clause (i)(II) for any
year if, in lieu of the contributions
described in such clause, the employer
elects to have clause (i)(I) applied
for the year by substituting `$4,000'
for `$6,000'. If an employer makes an
election under this clause for any
year, the employer shall notify
employees of such election within a
reasonable period of time before the
60-day period for such year under
clause (iv)(II).
``(II) Exception.--This clause
shall not apply to an employer if such
employer (or any predecessor employer)
maintained another qualified plan (as
defined in section 408(p)(2)(E)(ii))
with respect to which contributions
were made, or benefits were accrued,
for service during the year in which
the arrangement described in subclause
(I) became effective or either of the 2
preceding years. This subclause shall
not apply if such contributions or
benefits were solely on behalf of
employees who are not eligible to
participate in the arrangement
described in subclause (I).''.
(2) Cost-of-living adjustment.--Subparagraph (E) of section
401(k)(11) is amended by inserting ``and the $4,000 and $6,000
amounts under subparagraph (B)(iii)'' after ``subparagraph
(B)(i)(I)''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1999.
SEC. 106. CREDIT FOR SMALL EMPLOYER PENSION PLAN CONTRIBUTIONS AND
START-UP COSTS.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business related credits) is amended by adding at the end
the following new section:
``SEC. 45D. SMALL EMPLOYER PENSION PLAN CREDIT.
``(a) General Rule.--For purposes of section 38, in the case of an
eligible employer, the small employer pension plan credit determined
under this section for any taxable year is an amount equal to the sum
of--
``(1) 50 percent of the qualified employer contributions of
the taxpayer for the taxable year, and
``(2) 50 percent of the qualified start-up costs paid or
incurred by the taxpayer during the taxable year.
``(b) Limitations.--
``(1) Limits on contributions.--For purposes of subsection
(a)(1)--
``(A) qualified employer contributions may only be
taken into account for each of the first 5 taxable
years ending after the date the employer establishes
the qualified employer plan to which the contribution
is made, and
``(B) the amount of the qualified employer
contributions taken into account with respect to any
qualified employee for any such taxable year shall not
exceed 3 percent of the compensation (as defined in
section 414(s)) of the qualified employee for such
taxable year.
``(2) Limits on start-up costs.--The amount of the credit
determined under subsection (a)(2) for any taxable year shall
not exceed--
``(A) $2,000 for the first taxable year ending
after the date the employer established the qualified
employer plan to which such costs relate,
``(B) $1,000 for each of the second and third such
taxable years, and
``(C) zero for each taxable year thereafter.
``(c) Definitions.--For purposes of this section--
``(1) Eligible employer.--
``(A) In general.--The term `eligible employer'
means, with respect to any year, an employer which has
no more than--
``(i) for purposes of subsection (a)(1), 50
employees, and
``(ii) for purposes of subsection (a)(2),
100 employees,
who received at least $5,000 of compensation from the
employer for the preceding year.
``(B) 2-year grace period.--An eligible employer
who establishes and maintains a qualified employer plan
for 1 or more years and who fails to be an eligible
employer for any subsequent year shall be treated as an
eligible employer for the 2 years following the last
year the employer was an eligible employer.
``(C) Requirement for new qualified employer
plans.--Such term shall not include an employer if,
during the 3-taxable year period immediately preceding
the 1st taxable year for which the credit under this
section is otherwise allowable for a qualified employer
plan of the employer, the employer and each member of
any controlled group including the employer (or any
predecessor of either) established or maintained a
qualified employer plan with respect to which
contributions were made, or benefits were accrued, for
substantially the same employees as are in the
qualified employer plan.
``(2) Qualified employer contributions.--
``(A) In general.--The term `qualified employer
contributions' means, with respect to any taxable year,
any employer contributions made on behalf of a
qualified employee to a qualified employer plan for a
plan year ending with or within the taxable year.
``(B) Employer contributions.--The term `employer
contributions' shall not include any elective deferral
(within the meaning of section 402(g)(3)).
``(3) Qualified employee.--The term `qualified employee'
means an individual who--
``(A) is eligible to participate in the qualified
employer plan to which the employer contributions are
made, and
``(B) is not a highly compensated employee (within
the meaning of section 414(q)) for the year for which
the contribution is made.
``(4) Qualified start-up costs.--The term `qualified start-
up costs' means any ordinary and necessary expenses of an
eligible employer which are paid or incurred in connection
with--
``(A) the establishment or maintenance of a
qualified employer plan in which qualified employees
are eligible to participate, and
``(B) providing educational information to
employees regarding participation in such plan and the
benefits of establishing an investment plan.
``(5) Qualified employer plan.--The term `qualified
employer plan' has the meaning given such term in section
4972(d).
``(d) Special Rules.--
``(1) Aggregation rules.--All persons treated 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. All qualified employer plans of an employer shall be
treated as a single qualified employer plan.
``(2) Disallowance of deduction.--No deduction shall be
allowable under this chapter for any qualified start-up costs
or qualified contributions for which a credit is determined
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.''.
(b) Credit Allowed as Part of General Business Credit.--Section
38(b) (defining current year business credit) is amended by striking
``plus'' at the end of paragraph (11), by striking the period at the
end of paragraph (12) and inserting ``, plus'', and by adding at the
end the following new paragraph:
``(13) in the case of an eligible employer (as defined in
section 45D(c)), the small employer pension plan credit
determined under section 45D(a).''.
(c) Portion of Credit Refundable.--Section 38(c) (relating to
limitation based on amount of tax) is amended by adding at the end the
following new paragraph:
``(4) Portion of small employer pension plan credit
refundable.--
``(A) In general.--In the case of the small
employer pension plan credit under subsection (b)(13),
the aggregate credits allowed under subpart C shall be
increased by the lesser of--
``(i) the credit which would be allowed
without regard to this paragraph and the
limitation under paragraph (1), or
``(ii) the amount by which the aggregate
amount of credits allowed by this section
(without regard to this paragraph) would
increase if the limitation under paragraph (1)
were increased by the taxpayer's applicable
payroll taxes for the taxable year.
``(B) Treatment of credit.--The amount of the
credit allowed under this paragraph shall not be
treated as a credit allowed under this subpart and
shall reduce the amount of the credit allowed under
this section for the taxable year.
``(C) Applicable payroll taxes.--For purposes of
this paragraph--
``(i) In general.--The term `applicable
payroll taxes' means, with respect to any
taxpayer for any taxable year--
``(I) the amount of the taxes
imposed by sections 3111 and 3221(a) on
compensation paid by the taxpayer
during the taxable year,
``(II) 50 percent of the taxes
imposed by section 1401 on the self-
employment income of the taxpayer
during the taxable year, and
``(III) 50 percent of the taxes
imposed by section 3211(a)(1) on
amounts received by the taxpayer during
the calendar year in which the taxable
year begins.
``(ii) Agreements regarding foreign
affiliates.--Section 24(d)(5)(C) shall apply
for purposes of clause (i).''.
(d) Conforming Amendment.--The table of sections for subpart D of
part IV of subchapter A of chapter 1 is amended by adding at the end
the following new item:
``Sec. 45D. Small employer pension plan
credit.''.
(e) Effective Date.--The amendments made by this section shall
apply to costs paid or incurred or contributions made in connection
with qualified employer plans established after April 30, 1999.
SEC. 107. INCREASING LIMITS FOR DEFERRALS TO SIMPLE PLANS.
(a) Simple Retirement Accounts.--
(1) In general.--Paragraph (2)(A)(ii) of section 408(p)
(relating to simple retirement accounts) is amended by striking
``$6,000'' and inserting ``$8,000''.
(2) Conforming amendments.--
(A) Section 408(p)(2)(C)(i), as added by section
105, is amended by striking ``$6,000'' and inserting
``$8,000''.
(B) Subparagraph (F) of section 408(p)(2) (relating
to cost-of-living adjustment), as amended by section
105, is amended by striking ``$6,000'' each place it
appears and inserting ``$8,000''.
(b) Nondiscrimination Tests.--
(1) In general.--Section 401(k)(11)(B)(i)(I) is amended by
striking ``$6,000'' and inserting ``$8,000''.
(2) Conforming amendments.--
(A) Section 401(k)(11)(B)(iii)(I), as added by
section 105, is amended by striking ``$6,000'' and
inserting ``$8,000''.
(B) Section 401(k)(11)(E), as amended by section
105, is amended by striking ``$6,000'' each place it
appears and inserting ``$8,000''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1999.
SEC. 108. PHASE-IN OF ADDITIONAL PBGC PREMIUM FOR NEW PLANS.
(a) Amendments to ERISA.--Subparagraph (E) of section 4006(a)(3) of
the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1306(a)(3)(E)) is amended by adding at the end the following new
clause:
``(v) In the case of a new defined benefit plan, the amount
determined under clause (ii) for any plan year shall be an amount equal
to the product derived by multiplying the amount determined under
clause (ii) by the applicable percentage. For purposes of this clause,
the term `applicable percentage' means--
``(I) 0 percent, for the first plan year.
``(II) 20 percent, for the second plan year.
``(III) 40 percent, for the third plan year.
``(IV) 60 percent, for the fourth plan year.
``(V) 80 percent, for the fifth plan year.
``(VI) 100 percent, for the sixth plan year, and for each
succeeding plan year.
For purposes of this clause, a defined benefit plan (as defined in
section 3(35)) maintained by an employer shall be treated as a new
defined benefit plan if, during the 36-month period ending on the date
of the adoption of the plan, the employer and each member of any
controlled group including the employer (or any predecessor of either)
did not establish or maintain a plan to which this title applies with
respect to which contributions were made, or benefits were accrued, for
substantially the same employees as are in the new plan.''.
(b) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 1999.
SEC. 109. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL EMPLOYERS.
(a) In General.--Subparagraph (A) of section 4006(a)(3) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)(3))
is amended--
(1) in clause (i), by inserting ``other than a new single-
employer plan (as defined in subparagraph (F)),'' after
``single-employer plan,'',
(2) in clause (iii), by striking the period at the end and
inserting ``, and'', and
(3) by adding at the end the following new clause:
``(iv) in the case of a new single-employer plan (as
defined in subparagraph (F)) maintained by a small employer (as
so defined) for the plan year, $5 for each individual who is a
participant in such plan during the plan year.''.
(b) Definition of New Single-Employer Plan.--Section 4006(a)(3) of
the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1306(a)(3)) is amended by adding at the end the following new
subparagraph:
``(F)(i) For purposes of this paragraph, a single-
employer plan maintained by an employer shall be
treated as a new single-employer plan for each of its
first 5 plan years if, during the 36-month period
ending on the date of the adoption of such plan, the
employer or any member of such employer's controlled
group (or any predecessor of either) had not
established or maintained a plan to which this title
applies with respect to which contributions were made,
or benefits were accrued, for substantially the same
employees as are in the new single-employer plan.
``(ii)(I) For purposes of this paragraph, the term
`small employer' means an employer which on the first
day of any plan year has, in aggregation with all
members of the controlled group of such employer, 100
or fewer employees.
``(II) In the case of a plan maintained by 2 or
more contributing sponsors that are not part of the
same controlled group, the employees of all
contributing sponsors and controlled groups of such
sponsor shall be aggregated for purposes of determining
whether the sponsor is a small employer.''.
(c) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 1999.
SEC. 110. ELIMINATION OF USER FEE FOR REQUESTS TO IRS REGARDING NEW
PENSION PLANS.
(a) Elimination of Certain User Fees.--The Secretary of the
Treasury or the Secretary's delegate shall not require payment of user
fees under the program established under section 10511 of the Revenue
Act of 1987 for requests to the Internal Revenue Service for ruling
letters, opinion letters, and determination letters or similar requests
with respect to the qualified status of a new pension benefit plan or
any trust which is part of the plan.
(b) New Pension Benefit Plan.--For purposes of this section--
(1) In general.--The term ``new pension benefit plan''
means a pension, profit-sharing, stock bonus, annuity, or
employee stock ownership plan which is maintained by one or
more eligible employers if such employer (or any predecessor
employer) has not made a prior request described in subsection
(a) for such plan (or any predecessor plan).
(2) Eligible employer.--The term ``eligible employer''
means an employer (or any predecessor employer) which has not
established or maintained a qualified employer plan with
respect to which contributions were made, or benefits were
accrued for service, in the 3 most recent taxable years ending
prior to the first taxable year in which the request is made.
(c) Effective Date.--The provisions of this section shall apply
with respect to requests made after December 31, 1999.
SEC. 111. COMPENSATION LIMIT NOT TO APPLY TO SIMPLE 401(K)
ARRANGEMENTS.
(a) In General.--Section 401(k)(11) (relating to adoption of simple
plan to meet nondiscrimination tests) is amended by adding at the end
the following new subparagraph:
``(F) Compensation.--The limitation under
subsection (a)(17) shall not apply for purposes of
determining compensation taken into account under this
paragraph (other than subparagraph (B)(ii)).''.
(b) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 1999.
SEC. 112. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF
LIMITS.
(a) In General.--Section 404 is amended by adding at the end the
following new subsection:
``(o) Elective Deferrals Not Taken Into Account for Purposes of
Limits.--Elective deferrals (as defined in section 402(g)(3)) shall not
be subject to any limitations described in this section (other than
subsection (a)), and such elective deferrals shall not be taken into
account in applying such limitations to any other contributions.''.
(b) Conforming Amendment.--Paragraph (3) of section 4972(c) is
amended to read as follows:
``(3) Contributions not taken into account.--In determining
the amount of nondeductible contributions for any taxable year,
there shall not be taken into account--
``(A) any elective deferral (as defined in section
402(g)(3)), or
``(B) any contribution for such taxable year which
is distributed to the employer in a distribution
described in section 4980(c)(2)(B)(ii) if such
distribution is made on or before the last day on which
a contribution may be made for such taxable year under
section 404(a)(6).''.
(c) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 1999.
SEC. 113. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED COMPENSATION
PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS.
(a) In General.--Subsection (c) of section 457 (relating to
deferred compensation plans of State and local governments and tax-
exempt organizations) is amended by striking paragraph (2).
(b) Effective Date.--The amendment made by subsection (a) shall
apply to years beginning after December 31, 1999.
SEC. 114. ALTERNATIVE METHOD OF MEETING NONDISCRIMINATION REQUIREMENTS
FOR OPT-OUT PLANS.
(a) In General.--Section 401(k) (relating to cash or deferred
arrangement) is amended by adding at the end the following new
paragraph:
``(13) Nondiscrimination requirements for opt-out
arrangements.--
``(A) In general.--A cash or deferred arrangement
shall be treated as meeting the requirements of
paragraph (3)(A)(ii) if such arrangement constitutes a
negative election trust (a `NET').
``(B) Negative election trust.--For purposes of
this paragraph, the term `negative election trust'
means an arrangement--
``(i) under which each employee eligible to
participate in the arrangement is treated as
having elected to have the employer make
elective contributions in an amount equal to
the uniform percentage (not less than 3
percent) of compensation provided under the
arrangement unless the employee specifically
elects not to have such contributions made, and
``(ii) which meets the other requirements
of this paragraph.
Clause (i) of this subparagraph shall not apply to any
employee who was eligible to participate in the
arrangement (or a predecessor arrangement) immediately
before the first date on which the arrangement is a
NET. The election treated as having been made under
clause (i) shall cease to apply to compensation paid
after the specific election by the employee.
``(C) Participation.--An arrangement meets the
requirements of this subparagraph for any year if,
during the plan year or the preceding plan year,
elective contributions are made on behalf of at least
70 percent of employees other than highly compensated
employees eligible to participate in the arrangement.
``(D) Matching or nonelective contributions.--The
requirements of this subparagraph are met if, under the
arrangement, the employer--
``(i) makes matching contributions on
behalf of each employee who is not a highly
compensated employee in an amount equal to 50
percent of the elective contributions of the
employee to the extent such elective
contributions do not exceed 5 percent of
compensation, or
``(ii) is required, without regard to
whether the employee makes an elective
contribution or employee contribution, to make
a contribution to a defined contribution plan
on behalf of each employee who is not a highly
compensated employee and who is eligible to
participate in the arrangement in an amount
equal to at least 2 percent of the employee's
compensation.
The rules of clauses (ii), (iii), and (iv) of paragraph
(12)(B) shall apply for purposes of clause (i).
``(E) Withdrawal and vesting.--The requirements of
this subparagraph are met if the requirements of
subparagraphs (B) and (C) of paragraph (2) are met with
respect to all employer contributions (including
matching contributions) taken into account in
determining whether the requirements of subparagraph
(B) or (D) are met.
``(F) Notice requirements.--The requirements of
this subparagraph are met if each employee eligible to
participate in the arrangement--
``(i) receives a notice explaining the
employee's right under the arrangement to elect
not to have elective contributions made on the
employee's behalf, and
``(ii) has a reasonable period of time
after receipt of such notice and before the
first elective contribution is made to make
such election.
The requirements of clauses (i) and (ii) of paragraph
(12)(D) shall be met with respect to such notice.''.
(b) Matching Contributions.--Section 401(m) (relating to
nondiscrimination test for matching contributions and employee
contributions) is amended by redesignating paragraph (12) as paragraph
(13) and by inserting after paragraph (11) the following new paragraph:
``(12) Alternative method for opt-out plans.--
``(A) In general.--A defined contribution plan
shall be treated as meeting the requirements of
paragraph (2) with respect to matching contributions if
the plan--
``(i) meets the contribution requirements
of subparagraphs (B)(i) and (D) of subsection
(k)(13),
``(ii) meets the participation requirements
of subsection (k)(13)(C),
``(iii) meets the vesting and notice
requirements of subparagraphs (E) and (F) of
subsection (k)(13), and
``(iv) meets the requirements of clauses
(i) and (ii) of paragraph (11)(B).
``(B) Matching contributions under section 403(b)
plans.--An annuity contract under section 403(b) shall
be treated as meeting the requirements of paragraph (2)
with respect to matching contributions on account of an
elective deferral described in section 402(g)(3)(C) if
such contract meets requirements similar to the
requirements under subparagraph (A).''.
(c) Exclusion From Definition of Top-Heavy Plans.--Paragraph (4) of
section 416(g) (relating to other special rules for top-heavy plans),
as amended by section 104(g), is amended by adding at the end the
following new subparagraph:
``(J) Negative election trust.--The term `top-heavy
plan' shall not include a negative election trust under
section 401(k)(13). Nothing in this subparagraph shall
preclude an employer from taking into account
contributions made under the negative election trust
when determining whether any plan of such employer
satisfies the requirements of this section.''.
(d) Definition of Compensation.--
(1) In general.--Paragraph (9) of section 401(k) is amended
to read as follows:
``(9) Compensation.--
``(A) In general.--Except as provided in
subparagraph (B), for purposes of this section, the
term `compensation' has the meaning given such term by
section 414(s).
``(B) Use of base pay.--For purposes of paragraph
(12)(B), the term `compensation' means compensation as
defined under the terms of the cash or deferred
arrangement if such compensation--
``(i) meets the requirements of section
414(s), or
``(ii) constitutes base pay.
``(C) Base pay.--For purposes of subparagraph (B),
the term `base pay' means a reasonable definition of
compensation which does not by design favor highly
compensated employees and which excludes on a
consistent basis all irregular or additional
compensation.''.
(2) Negative election trusts.--Paragraph (9)(B) of section
401(k) (as amended by paragraph (1)) is amended by striking
``paragraph (12)(B)'' and inserting ``paragraphs (12)(B),
(13)(B), and (13)(D)(i)''.
(3) Matching contributions.--Paragraph (11) of section
401(m) is amended by adding at the end the following:
``(C) Definition of compensation.--For purposes of
subparagraph (B), the term ``compensation'' has the
meaning given such term by subsection (k)(9)(B).''.
(e) Application by Year or Payroll Period.--
(1) Cash or deferred arrangements.--Subparagraph (B) of
section 401(k)(12) is amended by adding at the end the
following:
``(iv) Application by year or payroll
period.--The requirements of this subparagraph
may be met for a plan year by meeting such
requirements either--
``(I) with respect to the plan year
as a whole, or
``(II) separately with respect to
each payroll period (or other payment
of compensation) taken into account
under the arrangement for the plan
year.''.
(2) Defined contribution plans.--Paragraph (11) of section
401(m) (as amended by this section) is amended by adding at the
end the following:
``(D) Application by year or payroll period.--The
requirements of subparagraph (B) may be met for a plan
year by meeting such requirements either--
``(i) with respect to the plan year as a
whole, or
``(ii) separately with respect to each
payroll period (or other payment of
compensation) taken into account under the plan
for the plan year.''.
(f) Effective Date.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall apply to plan years
beginning after December 31, 1999.
(2) Exception.--The amendments made by subsections (d)(1),
(d)(3), and (e) shall apply to years beginning after December
31, 1998.
TITLE II--INCREASING PENSION ACCESS AND FAIRNESS FOR WOMEN
SEC. 201. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES TO DEFINED
CONTRIBUTION PLANS.
(a) Equitable Treatment.--
(1) In general.--Subparagraph (B) of section 415(c)(1)
(relating to limitation for defined contribution plans) is
amended to read as follows:
``(B) the participant's compensation.''.
(2) Application to section 403(b).--Section 403(b) is
amended--
(A) by striking ``the exclusion allowance for such
taxable year'' in paragraph (1) and inserting ``the
applicable limit under section 415'', and
(B) by striking paragraph (2).
(3) Conforming amendments.--
(A) Subsection (f) of section 72 is amended by
striking ``section 403(b)(2)(D)(iii))'' and inserting
``section 403(b)(2)(D)(iii), as in effect on December
31, 1998)''.
(B) Section 403(b)(3) is amended by inserting ``or
any amount received by a former employee after the 5th
taxable year following the taxable year in which such
employee was terminated'' before the period at the end
of the second sentence.
(C) Section 404(a)(10)(B) is amended by striking
``, the exclusion allowance under section 403(b)(2),''.
(D) Section 415(a)(2) is amended by striking ``,
and the amount of the contribution for such portion
shall reduce the exclusion allowance as provided in
section 403(b)(2)''.
(E) Section 415(c)(3) is amended by adding at the
end the following new subparagraph:
``(E) Annuity contracts.--In the case of an annuity
contract described in section 403(b), the term
`participant's compensation' means the participant's
includible compensation determined under section
403(b)(3).''.
(F) Section 415(c) is amended by striking paragraph
(4) and by redesignating paragraph (6) as paragraph
(4).
(G) Section 415(c) is amended by striking paragraph
(7) and inserting the following new paragraph:
``(5) Certain contributions by church plans not treated as
exceeding limit.--
``(A) In general.--Notwithstanding any other
provision of this subsection, at the election of a
participant who is an employee of a church, a
convention or association of churches, including an
organization described in section 414(e)(3)(B)(ii),
contributions and other additions for an annuity
contract or retirement income account described in
section 403(b) with respect to such participant, when
expressed as an annual addition to such participant's
account, shall be treated as not exceeding the
limitation of paragraph (1) if such annual addition is
not in excess of $10,000.
``(B) $40,000 aggregate limitation.--The total
amount of additions with respect to any participant
which may be taken into account for purposes of this
subparagraph for all years may not exceed $40,000.
``(C) Annual addition.--For purposes of this
paragraph, the term `annual addition' has the meaning
given such term by paragraph (2).''.
(H) Section 415(e)(3)(B) is amended--
(i) by striking ``subsection (c)(6)'' in
clause (i) and inserting ``subsection (c)(4)'',
and
(ii) by striking ``subsection (c)(7)'' in
clause (ii)(II) and inserting ``subsection
(c)(5)''.
(I) Section 415(e)(5) is amended--
(i) by striking ``(except in the case of a
participant who has elected under subsection
(c)(4)(D) to have the provisions of subsection
(c)(4)(C) apply)'', and
(ii) by striking the last sentence.
(J) Section 415(n)(2)(B) is amended by striking
``percentage''.
(K) Subparagraph (B) of section 402(g)(7) is
amended by inserting before the period at the end the
following: ``(as in effect on the date of the enactment
of the Pension Coverage and Portability Act)''.
(b) Special Rules for Sections 403(b) and 408.--Subsection (k) of
section 415 is amended by adding at the end the following new
paragraph:
``(4) Special rules for annuity contracts and simplified
pensions.--For purposes of this section--
``(A) Annuity contracts.--Any annuity contract
described in section 403(b) for the benefit of a
participant shall be treated as a defined contribution
plan maintained by each employer with respect to which
the participant has the control required under
subsection (b) or (c) of section 414 (as modified by
subsection (h)).
``(B) Simplified plans.--Any contribution by an
employer to a simplified employee pension plan for an
individual for a taxable year shall be treated as an
employer contribution to a defined contribution plan
for such individual for such year.''.
(c) Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations.--Subparagraph (B) of section 457(b)(2)
(relating to salary limitation on eligible deferred compensation plans)
is amended by striking ``33\1/3\ percent'' and inserting ``100
percent''.
(d) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1999.
SEC. 202. FASTER VESTING OF CERTAIN EMPLOYER MATCHING CONTRIBUTIONS.
(a) Amendments to 1986 Code.--Section 411(a) (relating to minimum
vesting standards) is amended--
(1) in paragraph (2), by striking ``A plan'' and inserting
``Except as provided in paragraph (12), a plan'', and
(2) by adding at the end the following:
``(12) Faster vesting for matching contributions.--In the
case of matching contributions (as defined in section
401(m)(4)(A)), paragraph (2) shall be applied--
``(A) by substituting `3 years' for `5 years' in
subparagraph (A), and
``(B) by substituting the following table for the
table contained in subparagraph (B):
The nonforfeitable
``Years of service: percentage is:
2............................................. 20
3............................................. 40
4............................................. 60
5............................................. 80
6............................................. 100.''.
(b) Amendments to ERISA.--Section 203(a) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1053(a)) is amended--
(1) in paragraph (2), by striking ``A plan'' and inserting
``Except as provided in paragraph (4), a plan'', and
(2) by adding at the end the following:
``(4) Faster vesting for matching contributions.--In the
case of matching contributions (as defined in section
401(m)(4)(A) of the Internal Revenue Code of 1986), paragraph
(2) shall be applied--
``(A) by substituting `3 years' for `5 years' in
subparagraph (A), and
``(B) by substituting the following table for the
table contained in subparagraph (B):
The nonforfeitable
``Years of service: percentage is:
2............................................. 20
3............................................. 40
4............................................. 60
5............................................. 80
6............................................. 100.''.
(c) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to contributions
for plan years beginning after December 31, 1999.
(2) Collective bargaining agreements.--In the case of a
plan maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers ratified by the date of enactment of this Act, the
amendments made by this section shall not apply to
contributions on behalf of employees covered by any such
agreement for plan years beginning before the earlier of--
(A) the later of--
(i) the date on which the last of such
collective bargaining agreements terminates
(determined without regard to any extension
thereof on or after such date of enactment), or
(ii) January 1, 2000, or
(B) January 1, 2004.
(3) Service required.--With respect to any plan, the
amendments made by this section shall not apply to any employee
before the date that such employee has 1 hour of service under
such plan in any plan year to which the amendments made by this
section apply.
SEC. 203. DEFERRED ANNUITIES FOR SURVIVING SPOUSES OF FEDERAL
EMPLOYEES.
(a) In General.--Section 8341 of title 5, United States Code, is
amended--
(1) in subsection (h)(1), by striking ``section 8338(b) of
this title'' and inserting ``section 8338(b), and a former
spouse of a deceased former employee who separated from the
service with title to a deferred annuity under section 8338 (if
they were married to one another prior to the date of
separation),''; and
(2) by adding at the end the following:
``(j)(1) If a former employee dies after having separated from the
service with title to a deferred annuity under section 8338 but before
having established a valid claim for annuity, and is survived by a
spouse to whom married on the date of separation, the surviving spouse
may elect to receive--
``(A) an annuity, commencing on what would have been the
former employee's 62d birthday, equal to 55 percent of the
former employee's deferred annuity;
``(B) an annuity, commencing on the day after the date of
death of the former employee, such that, to the extent
practicable, the present value of the future payments of the
annuity would be actuarially equivalent to the present value of
the future payments under subparagraph (A) as of the day after
the former employee's death; or
``(C) the lump-sum credit, if the surviving spouse is the
individual who would be entitled to the lump-sum credit and if
such surviving spouse files application therefor.
``(2) An annuity under this subsection and the right thereto
terminate on the last day of the month before the surviving spouse
remarries before becoming 55 years of age, or dies.''.
(b) Corresponding Amendment for FERS.--Section 8445(a) of title 5,
United States Code, is amended--
(1) by striking ``(or of a former employee or'' and
inserting ``(or of a former''; and
(2) by striking ``annuity)'' and inserting ``annuity, or of
a former employee who dies after having separated from the
service with title to a deferred annuity under section 8413 but
before having established a valid claim for annuity (if such
former spouse was married to such former employee prior to the
date of separation))''.
(c) Effective Date.--The amendments made by this section shall
apply with respect to surviving spouses and former spouses (whose
marriage, in the case of the amendments made by subsection (a),
terminated after May 6, 1985) of former employees who die after the
date of the enactment of this Act.
SEC. 204. CLARIFICATION OF TAX TREATMENT OF DIVISION OF SECTION 457
PLAN BENEFITS UPON DIVORCE.
(a) In General.--Section 414(p)(11) (relating to application of
rules to governmental and church plans) is amended--
(1) by inserting ``or an eligible deferred compensation
plan (within the meaning of section 457(b))'' after
``subsection (e))'', and
(2) in the heading, by striking ``governmental and church
plans'' and inserting ``certain other plans''.
(b) Waiver of Certain Distribution Requirements.--Section
414(p)(10) is amended by striking ``and section 409(d)'' and inserting
``section 409(d), and section 457(d)''.
(c) Tax Treatment of Payments From a Section 457 Plan.--Subsection
(p) of section 414 is amended by redesignating paragraph (12) as
paragraph (13) and inserting after paragraph (11) the following new
paragraph:
``(12) Tax treatment of payments from a section 457 plan.--
If a distribution or payment from an eligible deferred
compensation plan described in section 457(b) is made pursuant
to a qualified domestic relations order, rules similar to the
rules of section 402(e)(1)(A) shall apply to such distribution
or payment.''.
(d) Effective Date.--The amendments made by this section shall
apply to transfers, payments, and distribution after the date of the
enactment of this Act.
SEC. 205. SPOUSES' RIGHT TO KNOW PROPOSAL.
(a) Spouse's Right To Know Distribution Information.--
(1) Amendment of internal revenue code.--Section 417(a)(3)
(relating to plan to provide written explanations) is amended
by adding at the end the following new subparagraph:
``(C) Explanation to spouse.--At the time a plan
provides a participant with a written explanation under
subparagraph (A) or (B), such plan shall provide a copy
of such explanation to such participant's spouse. If
the last known address of the spouse is the same as the
last known address of the participant, the requirement
of the preceding sentence shall be treated as met if
the copy referred to in the preceding sentence is
included in a single mailing made to such address and
addressed to both such participant and spouse.''.
(2) Amendment of erisa.--Paragraph (3) of section 205(c) of
Employee Retirement Income Security Act of 1974 is amended by
adding at the end the following new subparagraph:
``(C) Explanation to spouse.--At the time a plan
provides a participant with a written explanation under
subparagraph (A) or (B), such plan shall provide a copy
of such explanation to such participant's spouse. If
the last known address of the spouse is the same as the
last known address of the participant, the requirement
of the preceding sentence shall be treated as met if
the copy referred to in the preceding sentence is
included in a single mailing made to such address and
addressed to both such participant and spouse.''.
(b) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1999.
SEC. 206. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBUTION RULES.
(a) Required Distributions.--
(1) In general.--Subparagraphs (C)(i)(I) and (C)(ii)(I) of
section 401(a)(9) are each amended by striking ``70\1/2\'' and
inserting ``75''.
(2) Actuarial adjustment of benefit under defined benefit
plan.--Clause (iii) of section 401(a)(9)(C) is amended to read
as follows:
``(iii) Actuarial adjustment.--In the case
of a defined benefit plan, an employee's
accrued benefit shall be actuarially increased
to take into account any period--
``(I) which occurs after April 1 of
the calendar year following the
calendar year in which the employee
attains age 70\1/2\, and
``(II) during which the employee
was not eligible to receive any
benefits under the plan.''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2000.
(b) Simplification and Finalization of Minimum Distribution
Requirements.--
(1) In general.--The Secretary of the Treasury shall--
(A) simplify and finalize the regulations relating
to minimum distribution requirements under sections
401(a)(9), 408(a)(6) and (b)(3), 403(b)(10), and
457(d)(2) of the Internal Revenue Code of 1986, and
(B) modify such regulations to--
(i) reflect increases in life expectancy,
and
(ii) revise the required distribution
methods so that, under reasonable assumptions,
the amount of the required minimum distribution
does not decrease over a participant's life
expectancy.
(2) Fresh start.--Notwithstanding subparagraph (D) of
section 401(a)(9) of such Code, during the first year that
regulations are in effect under this subsection, required
distributions for future years may be redetermined to reflect
changes under such regulations. Such redetermination shall
include the opportunity to choose a new designated beneficiary
and to elect a new method of calculating life expectancy.
(3) Effective date for regulations.--Regulations referred
to in paragraph (1) shall be effective for years beginning
after December 31, 2000, and shall apply in such years without
regard to whether an individual had previously begun receiving
minimum distributions.
(c) Amount Not Subject to Minimum Distribution Requirements.--
Paragraph (9) of section 401(a) is amended--
(1) in subparagraph (A), by inserting ``(minus the
exclusion amount)'' after ``the entire interest'', and
(2) by adding at the end the following:
``(H) Exclusion amount.--
``(i) In general.--For purposes of this
paragraph, the term `exclusion amount' means--
``(I) $100,000 in the case of a
defined contribution plan,
``(II) $100,000 in the case of an
individual retirement plan, and
``(III) $0 in the case of a defined
benefit plan.
``(ii) Aggregation of plans.--For purposes
of determining the exclusion amount under
clause (i)--
``(I) all defined contribution
plans maintained by the same employer
shall be treated as a single plan,
``(II) all individual retirement
plans (other than Roth IRAs) of the
individual shall be treated as a single
plan, and
``(III) all Roth IRAs of the
individual shall be treated as a single
plan.
``(iii) Cost-of-living adjustment.--The
Secretary shall adjust each of the $100,000
amounts specified in clause (i) at the same
time and in the same manner as under section
415(d), except that the base period shall be
the calendar quarter ending September 30,
1999.''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2000.
(d) Repeal of Rule Where Distributions Had Begun Before Death
Occurs.--
(1) In general.--Subparagraph (B) of section 401(a)(9) is
amended by striking clause (i) and redesignating clauses (ii),
(iii), and (iv) as clauses (i), (ii), and (iii), respectively.
(2) Conforming changes.--
(A) Clause (i) of section 401(a)(9)(B) (as so
redesignated) is amended--
(i) by striking ``for other cases'' in the
heading, and
(ii) by striking ``the distribution of the
employee's interest has begun in accordance
with subparagraph (A)(ii),'' and inserting
``the employee's entire interest has been
distributed to such employee, the remainder
of''.
(B) Clause (ii) of section 401(a)(9)(B) (as so
redesignated) is amended by striking ``clause (ii)''
and inserting ``clause (i)''.
(C) Clause (iii) of section 401(a)(9)(B) (as so
redesignated) is amended--
(i) by striking ``clause (iii)(I)'' and
inserting ``clause (ii)(I)'',
(ii) in subclause (I), by striking ``clause
(iii)(III)'' and inserting ``clause
(ii)(III)'',
(iii) in subclause (I), by striking ``the
date on which the employee would have attained
the age 70\1/2\,'' and inserting ``April 1 of
the calendar year following the calendar year
in which the spouse attains 75, and clause (ii)
shall not apply to the exclusion amount,'', and
(iv) in subclause (II), by striking ``the
distributions to such spouse begin,'' and
inserting ``such spouse's entire interest has
been distributed to such spouse,''.
(3) Reduction in excise tax.--Subsection (a) of section
4974 is amended by striking ``50 percent'' and inserting ``10
percent''.
(4) Effective date.--
(A) In general.--Except as provided by subparagraph
(B), the amendments made by this subsection shall apply
to years beginning after December 31, 2000.
(B) Excise tax.--The amendment made by paragraph
(3) shall apply to years beginning after December 31,
1999.
SEC. 207. MODIFICATION OF SAFE HARBOR RELIEF FOR HARDSHIP WITHDRAWALS
FROM CASH OR DEFERRED ARRANGEMENTS.
(a) In General.--The Secretary of the Treasury shall revise the
regulations relating to hardship distributions under section
401(k)(2)(B)(i)(IV) of the Internal Revenue Code of 1986 to provide
that the period an employee is prohibited from making elective and
employee contributions in order for a distribution to be deemed
necessary to satisfy financial need shall be equal to 6 months.
(b) Effective Date.--The revised regulations under subsection (a)
shall apply to years beginning after December 31, 1999.
TITLE III--INCREASING PORTABILITY OF PENSION PLANS
SEC. 301. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.
(a) Rollovers From and To Section 457 Plans.--
(1) Rollovers from section 457 plans.--
(A) In general.--Section 457(e) (relating to other
definitions and special rules) is amended by adding at
the end the following:
``(16) Rollover amounts.--
``(A) General rule.--In the case of an eligible
deferred compensation plan, if--
``(i) any portion of the balance to the
credit of an employee in such plan is paid to
such employee in an eligible rollover
distribution,
``(ii) the employee transfers any portion
of the property such employee receives in such
distribution to an eligible retirement plan
described in section 402(c)(8)(B), and
``(iii) in the case of a distribution of
property other than money, the amount so
transferred consists of the property
distributed,
then such distribution (to the extent so transferred)
shall not be includible in gross income for the taxable
year in which paid.
``(B) Certain rules made applicable.--Rules similar
to the rules of paragraphs (2) through (7) (other than
paragraph (4)(C)) and (9) of section 402(c) and section
402(f) shall apply for purposes of subparagraph (A).
``(C) Reporting.--Rollovers under this paragraph
shall be reported to the Secretary in the same manner
as rollovers from qualified retirement plans (as
defined in section 4974(c)).''.
(B) Deferral limit determined without regard to
rollover amounts.--Section 457(b)(2) (defining eligible
deferred compensation plan) is amended by inserting
``(other than rollover amounts)'' after ``taxable
year''.
(C) Direct rollover.--Paragraph (1) of section
457(d) is amended by striking ``and'' at the end of
subparagraph (A), by striking the period at the end of
subparagraph (B) and inserting ``, and'', and by
inserting after subparagraph (B) the following:
``(C) the plan meets requirements similar to the
requirements of section 401(a)(31).
Any amount transferred in a direct trustee-to-trustee transfer
in accordance with section 401(a)(31) shall not be includible
in gross income for the taxable year of transfer.''.
(D) Withholding.--
(i) Paragraph (12) of section 3401(a) is
amended by adding at the end the following:
``(E) under or to an eligible deferred compensation
plan which, at the time of such payment, is a plan
described in section 457(b); or''.
(ii) Paragraph (5) of section 3405(e) is
amended by adding at the end the following:
``Such term shall include an eligible deferred
compensation plan described in section
457(b).''.
(iii) Paragraph (3) of section 3405(c) is
amended to read as follows:
``(3) Eligible rollover distribution.--For purposes of this
subsection, the term `eligible rollover distribution' has the
meaning given such term by section 402(f)(2)(A).''.
(iv) Liability for withholding.--
Subparagraph (B) of section 3405(d)(2) is
amended by striking ``or'' at the end of clause
(ii), by striking the period at the end of
clause (iii) and inserting ``, or'', and by
adding at the end the following:
``(iv) section 457(b).''.
(2) Rollovers to section 457 plans.--
(A) Section 402(c)(8)(B) (defining eligible
retirement plan) is amended by striking ``and'' at the
end of clause (iii), by striking the period at the end
of clause (iv) and inserting ``, and'', and by adding
at the end the following:
``(v) an eligible deferred compensation
plan described in section 457(b) of an eligible
employer described in section 457(e)(1)(A).''.
(B) Paragraph (9) of section 402(c) is amended by
striking ``except that'' and all that follows and
inserting ``except that only an account or annuity
described in clause (i) or (ii) of paragraph (8)(B)
shall be treated as an eligible retirement plan with
respect to such distribution.''.
(C) Subsection (a) of section 457 (relating to year
of inclusion in gross income) is amended by striking
``or otherwise made available''.
(3) Minimum distributions.--Paragraph (2) of section 457(d)
is amended to read as follows:
``(2) Minimum distribution requirements.--A plan meets the
distribution requirements of this paragraph if the plan meets
the requirements of section 401(a)(9).''.
(b) Allowance of Rollovers From and To 403(b) Plans.--
(1) Rollovers from section 403(b) plans.--Section
403(b)(8)(A)(ii) (relating to rollover amounts) is amended by
striking ``such distribution'' and all that follows and
inserting ``such distribution to an eligible retirement plan
described in section 402(c)(8)(B), and''.
(2) Rollovers to section 403(b) plans.--Section
402(c)(8)(B) (defining eligible retirement plan), as amended by
subsection (a), is amended by striking ``and'' at the end of
clause (iv), by striking the period at the end of clause (v)
and inserting ``, and'', and by adding at the end the
following:
``(vi) an annuity contract described in
section 403(b).''.
(3) Conforming amendment.--Subparagraph (B) of section
403(b)(8) is amended by striking ``Rules similar to the'' and
inserting ``The''.
(c) Expanded Explanation to Recipients of Rollover Distributions.--
Paragraph (1) of section 402(f) (relating to written explanation to
recipients of distributions eligible for rollover treatment) is amended
by striking ``and'' at the end of subparagraph (C), by striking the
period at the end of subparagraph (D) and inserting ``, and'', and by
adding at the end the following new subparagraph:
``(E) of the provisions under which distributions
from the eligible retirement plan receiving the
distribution may be subject to restrictions and tax
consequences which are different from those applicable
to distributions from the plan making such
distribution.''.
(d) Conforming Amendments.--
(1) Section 72(o)(4) is amended by striking ``and
408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and
457(e)(16)''.
(2) Section 219(d)(2) is amended by striking ``or
408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
(3) Section 401(a)(31)(B) is amended by striking ``and
403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and
457(e)(16)''.
(4) Subparagraph (A) of section 402(f)(2) is amended by
striking ``or paragraph (4) of section 403(a)'' and inserting
``, paragraph (4) of section 403(a), subparagraph (A) of
section 403(b)(8), or subparagraph (A) of section 457(e)(16)''.
(5) Paragraph (1) of section 402(f) is amended by striking
``from an eligible retirement plan''.
(6) Subparagraphs (A) and (B) of section 402(f)(1) are
amended by striking ``another eligible retirement plan'' and
inserting ``an eligible retirement plan''.
(7) Subparagraph (B) of section 403(b)(8) is amended by
striking ``shall apply for purposes of subparagraph (A)'' and
inserting ``and section 402(f) shall apply for purposes of
subparagraph (A), except that section 402(f) shall be applied
to the payor in lieu of the plan administrator''.
(8) Subparagraph (B) of section 403(b)(8) is amended by
inserting ``and (9)'' after ``through (7)''.
(9) Section 408(a)(1) is amended by striking ``or
403(b)(8)'' and inserting ``, 403(b)(8), or 457(e)(16)''.
(10) Subparagraphs (A) and (B) of section 415(b)(2) are
each amended by striking ``and 408(d)(3)'' and inserting
``403(b)(8), 408(d)(3), and 457(e)(16)''.
(11) Section 415(c)(2) is amended by striking ``and
408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
(12) Section 4973(b)(1)(A) is amended by striking ``or
408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
(e) Effective Date; Special Rule.--
(1) Effective date.--The amendments made by this section
shall apply to distributions after December 31, 1999.
(2) Special rule.--Notwithstanding any other provision of
law, subsections (h)(3) and (h)(5) of section 1122 of the Tax
Reform Act of 1986, and section 402(d) of the Internal Revenue
Code of 1986 (as in effect for taxable years beginning before
January 1, 2000), shall not apply to any distribution from a
defined contribution plan (as defined in section 408(d)(3)(A)
of such Code, as amended by section 302) or a defined benefit
plan (as so defined) on behalf of an individual if there was a
rollover to such plan on behalf of such individual which is
permitted solely by reason of any amendment made by this
section.
SEC. 302. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.
(a) In General.--Subparagraph (A) of section 408(d)(3) (relating to
rollover amounts) is amended by striking ``or'' at the end of clause
(ii), by striking the period at the end of clause (iii) and inserting a
semicolon, and by adding at the end the following:
``(iv)(I) the entire amount received
(including money and other property) represents
the entire interest in the account or the
entire value of the annuity,
``(II) no amount in the account and no part
of the value of the annuity is attributable to
any source other than a rollover contribution
from a defined contribution plan or a defined
benefit plan and any earnings on such rollover,
and
``(III) such entire amount received is paid
into a defined contribution plan or a defined
benefit plan (for the benefit of such
individual) not later than the 60th day after
he receives the payment or distribution; or
``(v)(I) the entire amount received
(including money and other property) represents
the entire interest in the account or the
entire value of the annuity,
``(II) no amount in any such account and no
part of the value of any such annuity is
attributable to any source other than a
rollover contribution from such an account or annuity of such
individual (and any earnings on such contribution),
``(III) all contributions to all individual
retirement accounts, and all amounts paid for
all individual retirement annuities, of such
individual were allowed as a deduction under
section 219, and
``(IV) such entire amount received is paid
(not later than the 60th day after being so
received) into a defined contribution plan or a
defined benefit plan (for the benefit of such
individual) under which amounts are held in
trust by a person described in section
408(a)(2) or in a manner that satisfies section
401(f).
If a payment or distribution from an individual
retirement plan is described in more than one clause of
this subparagraph, such payment or distribution shall
be treated as described only in the clause specified by
the payee or distributee. For purposes of this
subparagraph, the term `defined contribution plan'
means a defined contribution plan (as defined in
section 414(i)) which includes a trust exempt from tax
under section 501(a), an annuity plan described in
section 403(a), an annuity contract described in
section 403(b), and an eligible deferred compensation
plan described in section 457(b) of an eligible
employer described in section 457(e)(1)(A). For
purposes of clause (iv)(II), the term `defined
contribution plan' shall also include an eligible
deferred compensation plan described in section 457(b)
of an eligible employer described in section
457(e)(1)(B). For purposes of this subparagraph, the
term `defined benefit plan' means a defined benefit
plan (as defined in section 414(j)) which includes a
trust exempt from tax under section 501(a).''.
(b) Conforming Amendment.--Paragraph (1) of section 403(b) is
amended by striking ``section 408(d)(3)(A)(iii)'' and inserting
``clause (iii), (iv), or (v) of section 408(d)(3)(A)''.
(c) Effective Date; Special Rule.--
(1) Effective date.--The amendments made by this section
shall apply to distributions after December 31, 1999.
(2) Special rule.--Notwithstanding any other provision of
law, subsections (h)(3) and (h)(5) of section 1122 of the Tax
Reform Act of 1986, and section 402(d) of the Internal Revenue
Code of 1986 (as in effect for taxable years beginning before
January 1, 2000), shall not apply to any distribution from a
defined contribution plan (as defined in section 408(d)(3)(A)
of the such Code, as amended by this section) or a defined
benefit plan (as so defined) on behalf of an individual if
there was a rollover to such plan on behalf of such individual
which is permitted solely by reason of the amendments made by
this section.
SEC. 303. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS; HARDSHIP EXCEPTION.
(a) Rollovers of After-Tax Contributions.--
(1) In general.--Subsection (c) of section 402 (relating to
rules applicable to rollovers from exempt trusts) (as amended
by section 301) is amended by striking paragraph (2) and
redesignating paragraphs (3) through (10) as paragraphs (2)
through (9), respectively.
(2) Direct transfers.--Paragraph (31) of section 401(a)
(relating to optional direct transfer of eligible rollover
distributions) is amended by striking subparagraph (B) and
redesignating subparagraphs (C) and (D) as subparagraphs (B)
and (C), respectively.
(3) Annuities.--Subparagraph (B) of section 408(d)(3)
(relating to rollover contributions) is amended by striking
``which was not includible in his gross income because of the
application of this paragraph'' and inserting ``to which this
paragraph applied''.
(b) Hardship Exception to 60-Day Rule.--
(1) Plan rollovers.--Paragraph (2) of section 402(c) (as so
redesignated) is amended to read as follows:
``(2) Transfer must be made within 60 days of receipt.--
``(A) In general.--Except as provided in
subparagraph (B), paragraph (1) shall not apply to any
transfer of a distribution made after the 60th day
following the day on which the distributee received the
property distributed.
``(B) Hardship exception.--The Secretary may waive
the 60-day requirement under subparagraph (A) where the
failure to waive such requirement would be against
equity or good conscience, including casualty,
disaster, or other events beyond the reasonable control
of the individual subject to such requirement.''.
(2) IRA rollovers.--Paragraph (3) of section 408(d)
(relating to rollover contributions) is amended by adding at
the end the following new subparagraph:
``(H) Waiver of 60-day requirement.--The Secretary
may waive the 60-day requirement under subparagraphs
(A) and (D) where the failure to waive such requirement
would be against equity or good conscience, including
casualty, disaster, or other events beyond the
reasonable control of the individual subject to such
requirement.''.
(c) Conforming Amendments.--
(1) Paragraph (4) of section 402(c) (as redesignated by
subsection (a)(1)) is amended by striking ``(8)(B)'' and
inserting ``(7)(B)''.
(2) Subparagraph (B) of section 403(a)(4) is amended by
striking ``(2) through (7)'' and inserting ``(2) through (6)''.
(3) Section 403(b)(8)(A)(ii) (as amended by section 301) is
amended by striking ``section 402(c)(8)(B)'' and inserting
``section 402(c)(7)(B)''.
(4) Subparagraph (B) of section 403(b)(8) (as amended by
section 301) is amended by striking ``(2) through (7) and (9)
of section 402(c)'' and inserting ``(2) through (6) and (8) of
section 402(c)''.
(5) Paragraph (16) of section 457(e) (as added by section
301) is amended--
(A) in subparagraph (A)(i) by striking
``402(c)(4)'' and inserting ``402(c)(3)'',
(B) in subparagraph (A)(ii) by striking
``402(c)(8)(B)'' and inserting ``402(c)(7)(B)'', and
(C) in subparagraph (B) by striking ``paragraphs
(2) through (7) and (9) of section 402(c)'' and
inserting ``paragraphs (2) through (6) and (8) of
section 402(c)''.
(d) Effective Date.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall apply to distributions
made after December 31, 1999.
(2) Hardship exception.--The amendments made by subsection
(b) shall apply to 60-day periods ending after the date of the
enactment of this Act.
SEC. 304. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS FROM DEFINED
CONTRIBUTION PLANS.
(a) Distributions Permitted on Severance From Employment.--
(1) 401(k) plans.--Section 401(k)(2)(B)(i)(I) (relating to
qualified cash or deferred arrangements) is amended by striking
``separation from service'' and inserting ``severance from
employment''.
(2) 403(b) contracts.--
(A) Clause (ii) of section 403(b)(7)(A) is amended
by striking ``separates from service'' and inserting
``severs from employment''.
(B) Paragraph (11) of section 403(b) is amended--
(i) by striking ``separation from service''
in the heading and inserting ``severance from
employment'', and
(ii) by striking ``separates from service''
and inserting ``severs from employment''.
(3) 457 plans.--Clause (ii) of section 457(d)(1)(A) is
amended by striking ``is separated from service'' and inserting
``has a severance from employment''.
(b) Business Sale Requirements Deleted.--
(1) In general.--Section 401(k)(2)(B)(i)(II) (relating to
qualified cash or deferred arrangements) is amended by striking
``an event'' and inserting ``a plan termination''.
(2) Conforming amendments.--Section 401(k)(10) is amended--
(A) by striking subparagraph (A) and inserting the
following:
``(A) In general.--A plan termination is described
in this paragraph if the termination of the plan does
not involve the establishment or maintenance of another
defined contribution plan (other than an employee stock
ownership plan as defined in section 4975(e)(7)).'',
(B) in subparagraph (B)--
(i) by striking ``An event'' and inserting
``A termination'', and
(ii) by striking ``the event'' and
inserting ``the termination'',
(C) by striking subparagraph (C), and
(D) by striking ``or disposition of assets or
subsidiary'' in the heading.
(c) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 1999.
SEC. 305. TRANSFEREE DEFINED CONTRIBUTION PLAN NEED NOT HAVE SAME
DISTRIBUTION OPTIONS AS TRANSFEROR DEFINED CONTRIBUTION
PLAN.
(a) Amendment to 1986 Code.--Section 411(d)(6) (relating to accrued
benefit not to be decreased by amendment) is amended by adding at the
end the following new subparagraph:
``(D) Plan transfers.--A defined contribution plan
(in this subparagraph referred to as the `transferee
plan') shall not be treated as failing to meet the
requirements of this paragraph merely because the
transferee plan does not provide some or all of the
forms of distribution previously available under
another defined contribution plan (in this subparagraph
referred to as the `transferor plan') to the extent
that--
``(i) the forms of distribution previously
available under the transferor plan applied to
the account of a participant or beneficiary
under the transferor plan that was transferred
from the transferor plan to the transferee plan
pursuant to a direct transfer rather than
pursuant to a distribution from the transferor
plan,
``(ii) the terms of both the transferor
plan and the transferee plan authorize the
transfer described in clause (i),
``(iii) the transfer described in clause
(i) was made pursuant to a voluntary election
by the participant or beneficiary whose account
was transferred to the transferee plan,
``(iv) the election described in clause
(iii) was made after the participant or
beneficiary received a notice describing the
consequences of making the election,
``(v) if the transferor plan provides for
an annuity as the normal form of distribution
under the plan in accordance with section 417,
the transfer is made with the consent of the
participant's spouse (if any), and such consent
meets requirements similar to the requirements
imposed by section 417(a)(2), and
``(vi) the transferee plan allows the
participant or beneficiary described in clause
(iii) to receive any distribution to which the
participant or beneficiary is entitled under
transferee plan in the form of a single sum
distribution.''.
(b) Amendment to ERISA.--Section 204(g) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1054(g)) is amended by adding at
the end the following new paragraph:
``(4) A defined contribution plan (in this paragraph referred to as
the `transferee plan') shall not be treated as failing to meet the
requirements of this subsection merely because the transferee plan does
not provide some or all of the forms of distribution previously
available under another defined contribution plan (in this paragraph
referred to as the `transferor plan') to the extent that--
``(A) the forms of distribution previously available under
the transferor plan applied to the account of a participant or
beneficiary under the transferor plan that was transferred from
the transferor plan to the transferee plan pursuant to a direct
transfer rather than pursuant to a distribution from the
transferor plan,
``(B) the terms of both the transferor plan and the
transferee plan authorize the transfer described in
subparagraph (A),
``(C) the transfer described in subparagraph (A) was made
pursuant to a voluntary election by the participant or
beneficiary whose account was transferred to the transferee
plan,
``(D) the election described in subparagraph (C) was made
after the participant or beneficiary received a notice
describing the consequences of making the election,
``(E) if the transferor plan provides for an annuity as the
normal form of distribution under the plan in accordance with
section 205, the transfer is made with the consent of the
participant's spouse (if any), and such consent meets
requirements similar to the requirements imposed by section
205(c)(2), and
``(F) the transferee plan allows the participant or
beneficiary described in subparagraph (C) to receive any
distribution to which the participant or beneficiary is
entitled under transferee plan in the form of a single sum
distribution.''.
(b) Effective Date.--The amendments made by this section shall
apply to transfers after December 31, 1999.
SEC. 306. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED BENEFIT
PLANS.
(a) 403(b) Plans.--Subsection (b) of section 403 is amended by
adding at the end the following new paragraph:
``(13) Trustee-to-trustee transfers to purchase permissive
service credit.--No amount shall be includible in gross income
by reason of a direct trustee-to-trustee transfer to a defined
benefit governmental plan (as defined in section 414(d)) if
such transfer is--
``(A) for the purchase of permissive service credit
(as defined in section 415(n)(3)(A)) under such plan,
or
``(B) a repayment to which section 415 does not
apply by reason of subsection (k)(3) thereof.''.
(b) 457 Plans.--
(1) Subsection (e) of section 457 is amended by adding at
the end the following new paragraph:
``(17) Trustee-to-trustee transfers to purchase permissive
service credit.--No amount shall be includible in gross income
by reason of a direct trustee-to-trustee transfer to a defined
benefit governmental plan (as defined in section 414(d)) if
such transfer is--
``(A) for the purchase of permissive service credit
(as defined in section 415(n)(3)(A)) under such plan,
or
``(B) a repayment to which section 415 does not
apply by reason of subsection (k)(3) thereof.''.
(2) Section 457(b)(2), as amended by section 301(a)(1)(B),
is amended by striking ``(other than rollover amounts)'' and
inserting ``(other than rollover amounts and amounts received
in a transfer referred to in subsection (e)(17))''.
(c) Effective Date.--The amendments made by this section shall
apply to trustee-to-trustee transfers after December 31, 1999.
SEC. 307. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF CASH-OUT
AMOUNTS.
(a) Amendments to 1986 Code.--
(1) Section 411(a)(11) (relating to restrictions on certain
mandatory distributions) is amended by adding at the end the
following:
``(D) Special rule for rollover contributions.--A
plan shall not fail to meet the requirements of this
paragraph if, under the terms of the plan, the present
value of the nonforfeitable accrued benefit is
determined without regard to that portion of such
benefit which is attributable to rollover contributions
(and earnings allocable thereto). For purposes of this
subparagraph, the term `rollover contributions' means
any rollover contribution under sections 402(c),
403(a)(4), 403(b)(8), 408(d)(3)(A) (ii), (iii), or
(iv), and 457(e)(16).''.
(2) Clause (i) of section 457(e)(9)(A) is amended by
striking ``such amount'' and inserting ``the portion of such
amount which is not attributable to rollover contributions (as
defined in section 411(a)(11)(D))''.
(b) Amendment to ERISA.--Section 203(e) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1053(e)) is amended by adding at
the end the following:
``(4) A plan shall not fail to meet the requirements of this
subsection if, under the terms of the plan, the present value of the
nonforfeitable accrued benefit is determined without regard to that
portion of such benefit which is attributable to rollover contributions
(and earnings allocable thereto). For purposes of this paragraph, the
term `rollover contributions' means any rollover contribution under
sections 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A) (ii), (iii), or
(iv), and 457(e)(16) of the Internal Revenue Code of 1986.''.
(c) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 1999.
TITLE IV--STRENGTHENING PENSION SECURITY AND ENFORCEMENT
SEC. 401. REPEAL OF 150 PERCENT OF CURRENT LIABILITY FUNDING LIMIT.
(a) In General.--
(1) Code amendment.--Section 412(c)(7) (relating to full-
funding limitation) is amended--
(A) by striking ``the applicable percentage'' in
subparagraph (A)(i)(I) and inserting ``in the case of
plan years beginning before January 1, 2003, the
applicable percentage'', and
(B) by amending subparagraph (F) to read as
follows:
``(F) Applicable percentage.--For purposes of
subparagraph (A)(i)(I), the applicable percentage shall
be determined in accordance with the following table:
``In the case of any plan year The applicable percentage is--
beginning in--
1999.......................................... 155
2000.......................................... 160
2001.......................................... 165
2002.......................................... 170.''.
(2) ERISA amendment.--Section 302(c)(7) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7))
is amended--
(A) by striking ``the applicable percentage'' in
subparagraph (A)(i)(I) and inserting ``in the case of
plan years beginning before January 1, 2003, the
applicable percentage'', and
(B) by amending subparagraph (F) to read as
follows:
``(F) Applicable percentage.--For purposes of subparagraph
(A)(i)(I), the applicable percentage shall be determined in
accordance with the following table:
``In the case of any plan year The applicable percentage is--
beginning in--
1999.......................................... 155
2000.......................................... 160
2001.......................................... 165
2002.......................................... 170.''.
(3) Effective dates.--The amendments made by this
subsection shall apply to plan years beginning after December
31, 1998.
(b) Maximum Contribution Deduction Rules Modified and Applied to
All Defined Benefit Plans.--
(1) In general.--Section 404(a)(1)(D) (relating to special
rule in case of certain plans) is amended--
(A) by striking ``which has more than 100
participants for the plan year'',
(B) by striking ``unfunded current liability
determined under section 414(l)'' and inserting
``unfunded termination liability (determined as if the
proposed termination date referred to in section
4041(b)(2)(A)(i)(II) of the Employee Retirement Income
Security Act of 1974 were the last day of the plan
year)'',
(C) by inserting after the first sentence the
following: ``For purposes of this subparagraph, in the
case of a plan which has less than 100 participants for
the plan year, termination liability shall not include
the liability attributable to benefit increases for
highly compensated employees (as defined in section
414(q)) brought about by plan amendment within the last
2 years before the termination date.'', and
(D) by striking ``(other than a multiemployer
plan)''.
(2) Conforming amendment.--Paragraph (6) of section 4972(c)
is amended by striking the sentence preceding the last sentence
thereof.
(3) Effective date.--The amendments made by this subsection
shall apply to plan years beginning after the date of enactment
of this Act.
SEC. 402. INCREASE IN LIMITS FOR EMPLOYER-SPONSORED RETIREMENT PLANS.
(a) Defined Benefit Plans.--
(1) Dollar limit.--
(A) Subparagraph (A) of section 415(b)(1) (relating
to limitation for defined benefit plans) is amended by
striking ``$90,000'' and inserting ``$160,000''.
(B) Subparagraphs (C) and (D) of section 415(b)(2)
are each amended by striking ``$90,000'' each place it
appears in the headings and the text and inserting
``$160,000''.
(C) Paragraph (7) of section 415(b) (relating to
benefits under certain collectively bargained plans) is
amended by striking ``the greater of $68,212 or one-
half the amount otherwise applicable for such year
under paragraph (1)(A) for `$90,000''' and inserting
``one-half the amount otherwise applicable for such
year under paragraph (1)(A) for `$160,000'''.
(2) Limit reduced when benefit begins before age 62.--
Subparagraph (C) of section 415(b)(2) is amended--
(A) by striking the last sentence and inserting the
following: ``The reduction under this subparagraph
shall not reduce the limitation of paragraph (1)(A)
below (i) $75,000 if the benefit begins at or after age
55, or (ii) if the benefit begins before age 55, the
equivalent of the $75,000 limitation for age 55.'',
(B) by striking ``the social security retirement
age'' each place it appears and inserting ``age 62'',
and
(C) by striking ``the social security retirement
age'' in the heading and inserting ``age 62''.
(3) Limit increased when benefit begins after age 65.--
Subparagraph (D) of section 415(b)(2) is amended--
(A) by striking ``the social security retirement
age'' each place it appears and inserting ``age 65'',
and
(B) by striking ``the social security retirement
age'' in the heading and inserting ``age 65''.
(4) Multiemployer plans and plans maintained by governments
and tax exempt organizations.--Subparagraph (F) of section
415(b)(2) is amended to read as follows:
``(F) Multiemployer plans and plans maintained by
governments and tax exempt organizations.--
``(i) In general.--Subparagraph (C) shall
apply in the case of a governmental plan
(within the meaning of section 414(d)), a plan
maintained by an organization (other than a
governmental unit) exempt from tax under this
subtitle, a multiemployer plan (as defined in
section 414(f)), or a qualified merchant marine
plan.
``(ii) Qualified merchant marine plan.--For
purposes of clause (i), the term `qualified
merchant marine plan' means a plan in existence
on January 1, 1986, the participants in which
are merchant marine officers holding licenses
issued by the Secretary of Transportation under
title 46, United States Code.''.
(5) Cost-of-living adjustments.--Subsection (d) of section
415 (related to cost-of-living adjustments) is amended--
(A) in paragraph (1)(A) by striking ``$90,000'' and
inserting ``$160,000'',
(B) in paragraph (3)(A)--
(i) by striking ``$90,000'' in the heading
and inserting ``$160,000'', and
(ii) by striking ``October 1, 1986'' and
inserting ``July 1, 1999'', and
(C) by striking paragraph (4) and inserting the
following:
``(4) Rounding.--Any increase under subparagraph (A) or (C)
of paragraph (1) which is not a multiple of $5,000 shall be
rounded to the next lowest multiple of $5,000.''.
(b) Qualified Trusts.--
(1) Compensation limit.--Sections 401(a)(17), 404(l),
408(k), and 505(b)(7) are each amended by striking ``$150,000''
each place it appears and inserting ``$200,000''.
(2) Base period and rounding of cost-of-living
adjustment.--Subparagraph (B) of section 401(a)(17) is
amended--
(A) by striking ``October 1, 1993'' and inserting
``July 1, 1999'', and
(B) by striking ``$10,000'' both places it appears
and inserting ``$5,000''.
(c) Elective Deferrals.--
(1) In general.--Paragraphs (1) and (5) of section 402(g)
(relating to limitation on exclusion for elective deferrals)
are each amended by striking ``$7,000'' and inserting
``$12,000''.
(2) Conforming amendments.--
(A) Section 402(g) (relating to limitation on
exclusion for elective deferrals), as amended by
paragraph (1), is amended by striking paragraph (4) and
redesignating paragraphs (5), (6), (7), (8), and (9) as
paragraphs (4), (5), (6), (7), and (8), respectively.
(B) Clause (iii) of section 501(c)(18)(D) is
amended by striking ``(other than paragraph (4)
thereof)''.
(d) Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations.--Section 457 (relating to deferred
compensation plans of State and local governments and tax-exempt
organizations) is amended--
(1) in subsections (b)(2)(A), (c)(1), and (e)(15) by
striking ``$7,500'' each place it appears and inserting
``$10,000'', and
(2) in subsection (e)(15), by striking ``September 30,
1994'' and inserting ``September 30, 1999''.
(e) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1999.
SEC. 403. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) Compensation Limit.--Paragraph (11) of section 415(b) (relating
to limitation for defined benefit plans) is amended to read as follows:
``(11) Special limitation rule for governmental and
multiemployer plans.--In the case of a governmental plan (as
defined in section 414(d)) or a multiemployer plan (as defined
in section 414(f)), subparagraph (B) of paragraph (1) shall not
apply.''.
(b) Combining and Aggregation of Plans.--
(1) Combining of plans.--Subsection (f) of section 415
(relating to combining of plans) is amended by adding at the
end the following:
``(3) Exception for multiemployer plans.--Notwithstanding
paragraph (1) and subsection (g), a multiemployer plan (as
defined in section 414(f)) shall not be combined or aggregated
with any other plan maintained by an employer for purposes of
applying the limitations established in this section. The
preceding sentence shall not apply for purposes of applying
subsection (b)(1)(A) to a plan which is not a multiemployer
plan.''.
(2) Conforming amendment for aggregation of plans.--
Subsection (g) of section 415 (relating to aggregation of
plans) is amended by striking ``The Secretary'' and inserting
``Except as provided in subsection (f)(3), the Secretary''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1999.
SEC. 404. EXTENSION OF MISSING PARTICIPANTS PROGRAM TO MULTIEMPLOYER
PLANS.
(a) In General.--Section 4050 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1350) is amended by redesignating
subsection (c) as subsection (d) and by inserting after subsection (b)
the following:
``(c) Multiemployer Plans.--The corporation shall prescribe rules
similar to the rules in subsection (a) for multiemployer plans covered
by this title that terminate under section 4041A.''.
(b) Conforming Amendment.--Section 206(f) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1056(f)) is amended
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
subsection (c) of section 4050 of the Employee Retirement Income
Security Act of 1974 (as added by subsection (a)) are prescribed.
SEC. 405. CIVIL PENALTIES FOR BREACH OF FIDUCIARY RESPONSIBILITY.
(a) Imposition and Amount of Penalty Made Discretionary.--Section
502(l)(1) of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1132(l)(1)) is amended--
(1) by striking ``shall'' and inserting ``may'', and
(2) by striking ``equal to'' and inserting ``not greater
than''.
(b) Applicable Recovery Amount.--Section 502(l)(2) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1132(l)(2)) is
amended to read as follows:
``(2) For purposes of paragraph (1), the term `applicable recovery
amount' means any amount which is recovered from (or on behalf of) any
fiduciary or other person with respect to a breach or violation
described in paragraph (1) on or after the 90th 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 90-day period described in the preceding sentence.''.
(c) Other Rules.--Section 502(l) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1132(l)) is amended by adding at the
end the following:
``(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 applicable recovery amount on
which the penalty is based.
``(6) No penalty shall be assessed under this subsection unless the
person against whom the penalty is assessed is given notice and
opportunity for a hearing with respect to the violation and applicable
recovery amount.''.
(d) Effective Date.--The amendments made by this section shall
apply to any action or claim, including any action or claim commenced
by the Secretary of Labor, pending on or after the date of enactment of
this Act.
SEC. 406. PENALTY TAX RELIEF FOR SOUND PENSION FUNDING.
(a) In General.--Subsection (c) of section 4972 (relating to
nondeductible contributions) is amended by adding at the end the
following:
``(7) Defined benefit plan exception.--In determining the
amount of nondeductible contributions for any taxable year, an
employer may elect for such year not to take into account any
contributions to a defined benefit plan except to the extent
that such contributions exceed the full-funding limitation (as
defined in section 412(c)(7), determined without regard to
subparagraph (A)(i)(I) thereof). For purposes of this
paragraph, the deductible limits under section 404(a)(7) shall
first be applied to amounts contributed to defined contribution
plans and then to amounts described in this paragraph. If an
employer makes an election under this paragraph for a taxable
year, paragraph (6) shall not apply to such employer for such
taxable year.''.
(b) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1999.
SEC. 407. PROTECTION OF INVESTMENT OF EMPLOYEE CONTRIBUTIONS TO 401(K)
PLANS.
(a) In General.--Section 1524(b) of the Taxpayer Relief Act of 1997
is amended to read as follows:
``(b) Effective Date.--
``(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to elective
deferrals for plan years beginning after December 31, 1998.
``(2) Nonapplication to previously acquired property.--The
amendments made by this section shall not apply to any elective
deferral used to acquire an interest in the income or gain from
employer securities or employer real property acquired--
``(A) before January 1, 1999, or
``(B) after such date pursuant to a written
contract which was binding on such date and at all
times thereafter on such plan.''.
(b) Effective Date.--The amendment made by this section shall apply
as if included in the provision of the Taxpayer Relief Act of 1997 to
which it relates.
SEC. 408. ELIMINATION OF ERISA DOUBLE JEOPARDY.
(a) In General.--Section 502(h) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1132(h)) is amended--
(1) by inserting ``(1)'' after ``(h)'', and
(2) by adding at the end the following:
``(2) If a complaint in an action brought against a person under
subsection (a)(2) is served in accordance with paragraph (1), and
``(A) the action is resolved by a court-approved
settlement, and
``(B) the proposed settlement is served upon the Secretary
and the Secretary of the Treasury at least 90 days before the
date of the entry of the final judgment approving such
settlement,
either Secretary shall be barred from litigating any claim against such
person under subsection (a)(2) that was, or could have been, brought in
that action with respect to the same plan.''.
(b) Effective Date.--The amendments made by this section shall
apply to any action or claim, including any action or claim commenced
by the Secretary of Labor or the Secretary of the Treasury, pending on
or after the date of enactment of this Act.
TITLE V--ENCOURAGING RETIREMENT EDUCATION
SEC. 501. PERIODIC PENSION BENEFITS STATEMENTS.
(a) In General.--Section 105(a) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1025 (a)) is amended to read as
follows:
``(a)(1) Except as provided in paragraph (2)--
``(A) The administrator of an individual account plan shall
furnish a pension benefit statement--
``(i) to a plan participant at least once annually,
and
``(ii) to a plan beneficiary upon written request.
``(B) The administrator of a defined benefit plan shall
furnish a pension benefit statement--
``(i) at least once every 3 years to each
participant with a nonforfeitable accrued benefit who
is employed by the employer maintaining the plan at the
time the statement is furnished to participants, and
``(ii) to a participant or beneficiary of the plan
upon written request.
``(2) Notwithstanding paragraph (1), the administrator of a plan to
which more than 1 unaffiliated employer is required to contribute shall
only be required to furnish a pension benefit statement under paragraph
(1) upon the written request of a participant or beneficiary of the
plan.
``(3) A pension benefit statement under paragraph (1)--
``(A) shall indicate, on the basis of the latest available
information--
``(i) the total benefits accrued, and
``(ii) the nonforfeitable pension benefits, if any,
which have accrued, or the earliest date on which
benefits will become nonforfeitable,
``(B) shall be written in a manner calculated to be
understood by the average plan participant, and
``(C) may be provided in written, electronic, telephonic,
or other appropriate form.
``(4) In the case of a defined benefit plan, the requirements of
paragraph (1)(B)(i) shall be treated as met with respect to a
participant if the administrator provides the participant at least once
each year with notice of the availability of the pension benefit
statement and the ways in which the participant may obtain such
statement. Such notice shall be provided in written, electronic,
telephonic, or other appropriate form, and may be included with other
communications to the participant if done in a manner reasonably
designed to attract the attention of the participant.''.
(b) Conforming Amendments.--
(1) Section 105 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1025) is amended by striking subsection
(d).
(2) Section 105(b) of such Act (29 U.S.C. 1025(b)) is
amended to read as follows:
``(b) In no case shall a participant or beneficiary of a plan be
entitled to more than one statement described in subsection (a)(1)(A)
or (a)(1)(B)(ii), whichever is applicable, in any 12-month period.''.
(c) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2000.
SEC. 502. SMALL BUSINESS ADMINISTRATION ADVICE TO SMALL BUSINESSES.
(a) Preparation of Plan.--The Administrator of the Small Business
Administration shall, not later than 9 months after the date of the
enactment of this Act, prepare and submit to Congress a plan to--
(1) increase the awareness of the American people of
retirement benefits,
(2) increase the understanding of the American people of
the types of plans and other options available to provide
retirement benefits, including simple retirement plans, payroll
deduction IRAs, and SAFE annuities and trusts, and
(3) periodically update small business owners on changes
made by Congress and the executive branch in the laws,
regulations, and rules governing retirement benefits.
The Administrator shall consult with the Secretary of Labor in
preparing the plan under this subsection.
(b) Posting of Information on Internet.--The Administrator of the
Small Business Administration shall post on the Internet information on
the types of plans and other options available to provide retirement
benefits, including simple retirement plans, payroll deduction IRAs,
and SAFE annuities and trusts.
SEC. 503. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED RETIREMENT
ADVICE.
(a) In General.--Section 132(e) (defining de minimis fringe) is
amended by adding at the end the following:
``(3) Treatment of certain retirement planning services.--
The provision of retirement planning services by an employer to
employees shall be treated as a de minimis fringe to the extent
not treated as a working condition fringe under subsection
(d).''.
(b) No Constructive Receipt.--Section 132 is amended by
redesignating subsection (m) as subsection (n) and by inserting after
subsection (l) the following:
``(m) Retirement Planning.--
``(1) In general.--No amount shall be included in the gross
income of an employee solely because the employee may choose
between any retirement planning fringe and compensation which
would otherwise be includible in the gross income of such
employee.
``(2) Nondiscrimination requirement.--Paragraph (1) shall
apply to a highly compensated employee only if the choice
described in such paragraph is available on substantially the
same terms to each member of a group of employees which is
defined under a reasonable classification set up by the
employer which does not discriminate in favor of highly
compensated employees.
``(3) Retirement planning fringe.--For purposes of this
subsection, the term `retirement planning fringe' means any
retirement planning services provided by an employer to an
employee which are not included in the gross income of the
employee by reason of subsection (d) or (e).''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1999.
TITLE VI--REDUCING RED TAPE
SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) In General.--Section 412(c)(9) (relating to annual valuation)
is amended--
(1) by striking ``For purposes'' and inserting the
following:
``(A) In general.--For purposes'', and
(2) by adding at the end the following:
``(B) Election to use prior year valuation.--
``(i) In general.--If, for any plan year--
``(I) an election is in effect
under this subparagraph with respect to
a plan, and
``(II) the assets of the plan are
not less than 125 percent of the plan's
current liability (as defined in
paragraph (7)(B)), determined as of the
valuation date for the preceding plan
year,
then this section shall be applied using the
information available as of such valuation
date.
``(ii) Adjustments.--Information under
clause (i) shall, in accordance with
regulations, be actuarially adjusted to reflect
significant differences in participants.
``(iii) Election.--An election under this
subparagraph, once made, shall be irrevocable
without the consent of the Secretary.''.
(b) Amendments to ERISA.--Paragraph (9) of section 302(c) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) is
amended--
(1) by inserting ``(A)'' after ``(9)'', and
(2) by adding at the end the following:
``(B)(i) If, for any plan year--
``(I) an election is in effect under this subparagraph with
respect to a plan, and
``(II) the assets of the plan are not less than 125 percent
of the plan's current liability (as defined in paragraph
(7)(B)), determined as of the valuation date for the preceding
plan year,
then this section shall be applied using the information available as
of such valuation date.
``(ii) Information under clause (i) shall, in accordance with
regulations, be actuarially adjusted to reflect significant differences
in participants.
``(iii) An election under this subparagraph, once made, shall be
irrevocable without the consent of the Secretary of the Treasury.''.
(c) Effective Date.--The amendments made by this section shall
apply to plan years beginning on or after the date of enactment of this
Act.
SEC. 602. RULES FOR SUBSTANTIAL OWNERS RELATING TO PLAN TERMINATIONS.
(a) Modification of Phase-in of Guarantee.--Section 4022(b)(5) of
the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1322(b)(5)) is amended to read as follows:
``(5)(A) For purposes of this paragraph, the term `majority owner'
means an individual who, at any time during the 60-month period ending
on the date the determination is being made--
``(i) owns the entire interest in an unincorporated trade
or business,
``(ii) in the case of a partnership, is a partner who owns,
directly or indirectly, 50 percent or more of either the
capital interest or the profits interest in such partnership,
or
``(iii) in the case of a corporation, owns, directly or
indirectly, 50 percent or more in value of either the voting
stock of that corporation or all the stock of that corporation.
For purposes of clause (iii), the constructive ownership rules of
section 1563(e) of the Internal Revenue Code of 1986 shall apply
(determined without regard to section 1563(e)(3)(C)).
``(B) In the case of a participant who is a majority owner, the
amount of benefits guaranteed under this section 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 monthly benefits
guaranteed under subsection (a) (as limited by paragraph (3) of
this subsection).''.
(b) Modification of Allocation of Assets.--
(1) Section 4044(a)(4)(B) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by
striking ``section 4022(b)(5)'' and inserting ``section
4022(b)(5)(B)''.
(2) Section 4044(b) of such Act (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), respectively, and by
inserting after paragraph (2) the following:
``(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 allocated first to benefits
described in subparagraph (A) of that paragraph. Any remaining
assets shall then be allocated to benefits described in
subparagraph (B) of that paragraph. If assets allocated to such
subparagraph (B) are insufficient to satisfy in full the
benefits described 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 subparagraph.''.
(c) Conforming Amendments.--
(1) Section 4021 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1321) is amended--
(A) in subsection (b)(9), by striking ``as defined
in section 4022(b)(6)'', and
(B) by adding at the end the following:
``(d) For purposes of subsection (b)(9), the term `substantial
owner' means an individual who, at any time during the 60-month period
ending on the date the determination is being made--
``(1) owns the entire interest in an unincorporated trade
or business,
``(2) in the case of a partnership, is a partner who owns,
directly or indirectly, more than 10 percent of either the
capital interest or the profits interest in such partnership,
or
``(3) in the case of a corporation, owns, directly or
indirectly, more than 10 percent in value of either the voting
stock of that corporation or all the stock of that corporation.
For purposes of paragraph (3), the constructive ownership rules of
section 1563(e) of the Internal Revenue Code of 1986 shall apply
(determined without regard to section 1563(e)(3)(C)).''.
(2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7))
is amended by striking ``section 4022(b)(6)'' and inserting
``section 4021(d)''.
(d) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to plan
terminations--
(A) under section 4041(c) of the Employee
Retirement 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
enactment of this Act, or
(B) under section 4042 of such Act (29 U.S.C. 1342)
with respect to which proceedings are instituted by the
corporation on or after such date.
(2) Conforming amendments.--The amendments made by
subsection (c) shall take effect on the date of enactment of
this Act.
SEC. 603. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF DIVIDEND
DEDUCTION.
(a) In General.--Section 404(k)(2)(A) (defining applicable
dividends) is amended by striking ``or'' at the end of clause (ii), by
redesignating clause (iii) as clause (iv), and by inserting after
clause (ii) the following:
``(iii) is, at the election of such
participants or their beneficiaries--
``(I) payable as provided in clause
(i) or (ii), or
``(II) paid to the plan and
reinvested in qualifying employer
securities, or''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 1999.
SEC. 604. MODIFICATION OF 403(B) EXCLUSION ALLOWANCE TO CONFORM TO 415
MODIFICATION.
(a) In General.--The Secretary of the Treasury shall modify the
regulations regarding the exclusion allowance under section 403(b)(2)
of the Internal Revenue Code of 1986 to repeal the requirement that
contributions to a defined benefit pension plan be treated as
previously excluded amounts for purposes of the exclusion allowance.
(b) Effective Date.--The revised regulations under subsection (a)
shall apply to taxable years beginning after December 31, 1999.
SEC. 605. SAFETY VALVE FROM MECHANICAL RULES.
(a) In General.--The Secretary of the Treasury shall, by
regulation, provide that a plan shall be deemed to satisfy the
requirements of section 401(a)(4) of the Internal Revenue Code of 1986
if such plan satisfies the facts and circumstances test under section
401(a)(4) of such Code, as in effect before January 1, 1994, but only
if--
(1) the plan satisfies conditions prescribed by the
Secretary to appropriately limit the availability of such test,
and
(2) the plan is submitted to the Secretary for a
determination of whether it satisfies such test.
Paragraph (2) shall only apply to the extent provided by the Secretary.
(b) Effective Dates.--
(1) Regulations.--The regulation required by subsection (a)
shall apply to years beginning after December 31, 1999.
(2) Conditions of availability.--Any condition of
availability prescribed by the Secretary under subsection
(a)(1) shall not apply before the first year beginning not less
than 120 days after the date on which such condition is
prescribed.
SEC. 606. COVERAGE TEST FLEXIBILITY.
(a) In General.--Section 410(b)(1) (relating to minimum coverage
requirements) is amended by adding at the end the following:
``(D) In the case that the plan fails to meet the
requirements of subparagraphs (A), (B) and (C), the
plan--
``(i) satisfies subparagraph (B), as in
effect immediately before the enactment of the
Tax Reform Act of 1986,
``(ii) is submitted to the Secretary for a
determination of whether it satisfies the
requirement described in clause (i), and
``(iii) satisfies conditions prescribed by
the Secretary by regulation that appropriately
limit the availability of this subparagraph.
Clause (ii) shall apply only to the extent provided by
the Secretary.''.
(b) Effective Dates.--
(1) In general.--The amendment made by subsection (a) shall
apply to years beginning after December 31, 1999.
(2) Conditions of availability.--Any condition of
availability prescribed by the Secretary under regulations
prescribed by the Secretary under section 410(b)(1)(D) of the
Internal Revenue Code of 1986 shall not apply before the first
year beginning not less than 120 days after the date on which
such condition is prescribed.
SEC. 607. SECTION 457 INAPPLICABLE TO CERTAIN MIRROR PLANS.
(a) In General.--Subsection (e) of section 457 (relating to
deferred compensation plans of State and local governments and tax-
exempt organizations), as amended by section 306, is amended by adding
at the end the following:
``(18) This section shall not apply to a plan, program, or
arrangement maintained solely for the purposes of providing
retirement benefits for employees in excess of the limitations
imposed by sections 401(a)(17) or 415.''.
(b) Certain Deferred Compensation Not Taken Into Account.--Section
457(c) (relating to individuals who are participants in more than 1
plan), as amended by section 113, is amended by adding at the end the
following:
``(2) Exception for mirror plans.--This section shall be
applied without regard to a plan, program, or arrangement
described in subsection (e)(18).''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 1999.
SEC. 608. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.
(a) Expansion of Period.--
(1) In general.--
(A) Section 417(a)(6)(A) (defining applicable
election period) is amended by striking ``90-day'' and
inserting ``one-year''.
(B) Subparagraph (A) of section 205(c)(7) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1055) is amended by striking ``90-day'' and
inserting ``one-year''.
(2) Modification of regulations.--The Secretary of the
Treasury shall modify the regulations under sections 402(f),
411(a)(11), and 417 of the Internal Revenue Code of 1986 to
substitute ``one year'' for ``90 days'' each place it appears
in Treasury Regulations sections 1.402(f)-1 Q/A-2, 1.411(a)-
11T(c)(2), and 1.417(e)-1T(b)(3).
(3) Effective date.--The amendment made by paragraph (1)
and the modifications required by paragraph (2) shall apply to
years beginning after December 31, 1999.
(b) Consent Regulation Inapplicable to Certain Distributions.--
(1) In general.--The Secretary of the Treasury shall modify
the regulations under section 411(a)(11) of the Internal
Revenue Code of 1986 to provide that the description of a
participant's right, if any, to defer receipt of a distribution
shall also describe the consequences of failing to defer such
receipt.
(2) Effective date.--The modifications required by
paragraph (1) shall apply to years beginning after December 31,
1999.
SEC. 609. CONFORMING AMENDMENTS RELATING TO ELECTION TO RECEIVE TAXABLE
CASH COMPENSATION IN LIEU OF NONTAXABLE TRANSPORTATION
FRINGE BENEFITS.
(a) In General.--
(1) Clause (ii) of section 415(c)(3)(D) and subparagraph
(B) of section 403(b)(3) are each amended by striking ``section
125 or'' and inserting ``section 125, 132(f)(4), or''.
(2) Paragraph (2) of section 414(s) is amended by striking
``section 125, 402(e)(3)'' and inserting ``section 125,
132(f)(4), 402(e)(3)''.
(b) Effective Date.--The amendments made by subsection (a) shall
take effect as if included in the amendment made by section 1072 of the
Taxpayer Relief Act of 1997.
SEC. 610. REPEAL OF TRANSITION RULE RELATING TO CERTAIN HIGHLY
COMPENSATED EMPLOYEES.
(a) In General.--Paragraph (4) of section 1114(c)(4) of the Tax
Reform Act of 1986 is hereby repealed.
(b) Effective Date.--The repeal made by subsection (a) shall apply
to plan years beginning after December 31, 1999.
SEC. 611. EXTENSION TO INTERNATIONAL ORGANIZATIONS OF MORATORIUM ON
APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE
TO STATE AND LOCAL PLANS.
(a) In General.--Subparagraph (G) of section 401(a)(5),
subparagraph (H) of section 401(a)(26), subparagraph (G) of section
401(k)(3), and paragraph (2) of section 1505(d) of the Taxpayer Relief
Act of 1997 are each amended by inserting ``or by an international
organization which is described in section 414(d)'' after ``or
instrumentality thereof)''.
(b) Conforming Amendments.--
(1) The headings for subparagraph (G) of section 401(a)(5)
and subparagraph (H) of section 401(a)(26) are each amended by
inserting ``and international organization'' after
``governmental''.
(2) Subparagraph (G) of section 401(k)(3) is amended by
inserting ``State and local governmental and international
organization plans.--'' after ``(G)''.
(c) Effective Date.--The amendments made by this section shall take
effect as if included in the amendment made by section 1505 of the
Taxpayer Relief Act of 1997.
SEC. 612. ANNUAL REPORT DISSEMINATION.
(a) In General.--Section 104(b)(3) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1024(b)(3)) is amended by
striking ``shall furnish'' and inserting ``shall make available for
examination (and, upon request, shall furnish)''.
(b) Effective Date.--The amendment made by this section shall apply
to reports for years beginning after December 31, 1998.
SEC. 613. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) In General.--The Secretary of the Treasury shall modify
Treasury Regulations section 1.410(b)-6(g) to provide that employees of
an organization described in section 403(b)(1)(A)(i) of the Internal
Revenue Code of 1986 who are eligible to make contributions under
section 403(b) pursuant to a salary reduction agreement may be treated
as excludable with respect to a plan under section 401(k) or section
401(m) of such Code that is provided under the same general arrangement
as a plan under such section 401(k), if--
(1) no employee of an organization described in section
403(b)(1)(A)(i) of such Code is eligible to participate in such
section 401(k) plan or section 401(m) plan, and
(2) 95 percent of the employees who are not employees of an
organization described in section 403(b)(1)(A)(i) of such Code
are eligible to participate in such section 401(k) plan or
section 401(m) plan.
(b) Effective Date.--The modification required by subsection (a)
shall apply as of the same date set forth in section 1426(b) of the
Small Business Job Protection Act of 1996.
SEC. 614. REPEAL OF THE MULTIPLE USE TEST.
(a) In General.--Paragraph (9) of section 401(m) (relating to
nondiscrimination test for matching contributions and employee
contributions) is amended to read as follows:
``(9) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of
this subsection and subsection (k), including regulations
permitting appropriate aggregation of plans and
contributions.''.
(b) Effective Date.--The amendment made by this section shall apply
to years after December 31, 1999.
TITLE VII--PLAN AMENDMENTS
SEC. 701. PROVISIONS RELATING TO PLAN AMENDMENTS.
(a) In General.--If this section applies to any plan or contract
amendment--
(1) such plan or contract shall be treated as being
operated in accordance with the terms of the plan during the
period described in subsection (b)(2)(A), and
(2) such plan shall not fail to meet the requirements of
section 411(d)(6) of the Internal Revenue Code of 1986 or
section 204(g) of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1054(g)) by reason of such amendment.
(b) Amendments to Which Section Applies.--
(1) In general.--This section shall apply to any amendment
to any plan or annuity contract which is made--
(A) pursuant to any amendment made by this Act, or
pursuant to any regulation issued under this Act, and
(B) on or before the last day of the first plan
year beginning on or after January 1, 2003.
In the case of a government plan (as defined in section 414(d)
of the Internal Revenue Code of 1986 and section 3(32) of the
Employee Retirement Income Security Act of 1974), this
paragraph shall be applied by substituting ``2004'' for
``2003''.
(2) Conditions.--This section shall not apply to any
amendment unless--
(A) during the period--
(i) beginning on the date the legislative
or regulatory amendment described in paragraph
(1)(A) takes effect (or in the case of a plan
or contract amendment not required by such
legislative or regulatory amendment, the
effective date specified by the plan), and
(ii) ending on the date described in
paragraph (1)(B) (or, if earlier, the date the
plan or contract amendment is adopted),
the plan or contract is operated as if such plan or
contract amendment were in effect, and
(B) such plan or contract amendment applies
retroactively for such period.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S3472-3473)
Read twice and referred to the Committee on Finance.
Committee on Finance. Hearings held.
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