[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2370 Introduced in House (IH)]
107th CONGRESS
1st Session
H. R. 2370
To amend the Internal Revenue Code of 1986 to modify the exception from
the treatment of welfare benefit funds for 10-or-more employer plans.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
June 28, 2001
Mr. Weller (for himself and Mr. Neal of Massachusetts) introduced the
following bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to modify the exception from
the treatment of welfare benefit funds for 10-or-more employer plans.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Welfare Benefits
Protection Act''.
SEC. 2. MODIFICATION OF EXCEPTION FOR 10-OR-MORE EMPLOYER PLANS FROM
TREATMENT OF WELFARE BENEFIT FUNDS.
(a) In General.--Paragraph (6) of section 419A(f) of the Internal
Revenue Code of 1986 (relating to exception for 10-or-more employer
plans) is amended by adding at the end the following new subparagraphs:
``(C) Experience-rating arrangement.--For purposes
of subparagraph (A), a plan does not maintain an
experience-rating arrangement if it provides that, at
all times, all plan assets are available as a single,
undivided pool to provide benefits to the covered
employees of all individual employers participating in
the plan.
``(D) Antidiscrimination rule.--Subparagraph (A)
shall not apply to a 10 or more employer plan unless--
``(i) benefits under the plan are available
to all covered employees under the same
formula,
``(ii) the plan benefits each employee who
has attained at least the age of 21, who works
1,000 hours or more annually, and who has
completed at least 1 year of service (as
defined in section 410(a)(3)),
``(iii) all benefit formulas under the plan
provide a uniform multiple of compensation to
all participants, except that highly
compensated employees can have a lower benefit
than the uniform multiple of compensation
provided,
``(iv) upon employer termination from the
trust--
``(I) all eligible employees are
entitled to a pro rata share of the
plan's assets, and
``(II) benefit payments include
payment to all former eligible
employees terminated 24 months or less
prior to employer termination from the
trust,
``(v) for each employer group, there is at
least 1 employee participating in the plan who
is not an owner-employee for every 2 owner-
employees participating in the plan, and
``(vi) the trust maintains a ratio of plan
participants that is at least 3 employees who
are not owner-employees to each owner-employee.
For purposes of this subparagraph, the term `owner-
employee' has the meaning given to such term by section
416(i).
``(E) Distribution of benefits and plan assets.--
Subparagraph (A) shall not apply to a 10 or more
employer plan unless--
``(i) none of the assets of the plan may
revert to any employer,
``(ii) no loan may be made under the plan
to any employee, and
``(iii) upon termination of employer
participation in the trust--
``(I) for plans without severance
benefits, an employer may terminate
participation in the trust only if all
employees of the employer receive a pro
rata share of the benefits,
``(II) for plans with severance
benefits, plan assets used to fund
severance benefits can be distributed
only for severance benefits which are
limited to 200 percent of so much of
the annual compensation as does not
exceed the limitation under section
401(a)(17), and payable over not more
than 24 months, or other benefits as
provided under the plan, and
``(III) for plans with post-
retirement medical benefits, plan
assets used to fund post-retirement
medical benefits can be distributed
only for post-retirement medical
benefits.
If any plan participant, including an owner, dies prior
to using all the post-retirement medical benefits to
which he or she is entitled under the plan, the unused
amounts revert to the trust (a forfeiture). If a
participating business owner terminates participation
in the plan due to insolvency, sale, merger-acquisition
or other Treasury-approved event, plan assets
attributable to post-retirement medical benefits must
remain in the plan until/unless they are paid in the
form of medical expense reimbursement post-retirement.
``(F) Rollover.--Subparagraph (A) shall not apply
to a 10 or more employer plan unless the plan permits
plan participants to transfer benefits from such plan
to a similar multiple employer welfare benefit plan. No
amount shall be includible in the gross income of a
plan participant by reason of such a transfer.
``(G) Benefit limitations.--Subparagraph (A) shall
not apply to a 10 or more employer plan unless benefits
payable to plan participants are limited to the
following:
``(i) Death benefits.--Minimum death
benefit amounts are determined either by the
plan formula or, if greater, by the minimum
issue amounts determined by the plan's life
insurance provider.
``(ii) Severance benefits.--Maximum
severance benefits are determined in accordance
with Department of Labor regulations and may
not exceed 200 percent of so much of the annual
compensation as does not exceed the limitation
under section 401(a)(17).
``(iii) Post-retirement medical benefits.--
Benefits may not be paid prior to normal
retirement age. Normal retirement age would be
the year of eligibility for medicare, or total
and permanent disability as defined under the
Social Security Act. Assets funding post-
retirement medical benefits revert to the plan
if not paid prior to death to a participating
eligible employee. Assets used to fund post-
retirement medical benefits are payable to the
estate of a deceased eligible participating
employee to pay any uncovered medical expenses
of the deceased employee participant's estate.
``(H) Deduction limitations.--Deductions for
contributions to a 10 or more employer plan trust shall
not exceed--
``(i) for insured death benefits, of which
the plan trustee is the sole life insurance
policy owner--
``(I) in the case of term
insurance, the annual term premium,
``(II) in the case of a whole life
insurance policy, the level annual
premium to normal retirement age, or
``(III) in the case of universal
life insurance, the guideline level
annual premium (as defined in section
7702),
``(ii) for severance benefits, an amount
determined using reasonable actuarial
principles needed to fund the purchase of the
level of benefits as stated in the plan
document, but no prefunding of the benefit in
excess of the amount needed to fund the current
benefit amount would be permitted, and
``(iii) for medical, health, and disability
benefits, an amount required to pay an
insurance company premium, or in the case of a
self-funded plan, amounts needed to cover the
anticipated liability, but such contributions
would be forfeited to the welfare benefit trust
if the employer plan participant dies or
terminates prior to payment of these benefits,
or if the employer terminates participation in
the welfare benefit trust.
``(I) Forfeiture pool.--Subparagraph (A) shall not
apply to a 10 or more employer plan unless all assets
in the forfeiture pool are used in a nondiscriminatory
manner for the benefit of participating employees.''
(b) Effective Date.--The amendment made by this section shall take
effect on the date of first committee action, but benefits earned as of
that date may be funded at the level at which they exist as of such
date with deductible contributions if the plans are brought into
compliance with the rules of such amendment within 24 months after such
date of enactment.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
Sponsor introductory remarks on measure. (CR E1261)
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