[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1776 Introduced in House (IH)]
108th CONGRESS
1st Session
H. R. 1776
To amend the Internal Revenue Code of 1986 to make today's retirement
savings opportunities permanent, to expand and improve retirement
savings vehicles, to extend pension coverage through regulatory
simplification and small business incentives, to enhance fairness and
pension portability, to revitalize defined benefit plans, to provide
additional defined contribution plan protections, to assist individuals
in preserving their income throughout retirement, and for other
purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 11, 2003
Mr. Portman (for himself, Mr. Cardin, Mrs. Johnson of Connecticut, Mr.
Pomeroy, Mr. Blunt, Mr. Moore, Mr. Upton, Mrs. Tauscher, Mr. Gallegly,
and Mr. Wynn) introduced the following bill; which was referred to the
Committee on Ways and Means, and in addition to the Committee on
Education and the Workforce, for a period to be subsequently determined
by the Speaker, in each case for consideration of such provisions as
fall within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to make today's retirement
savings opportunities permanent, to expand and improve retirement
savings vehicles, to extend pension coverage through regulatory
simplification and small business incentives, to enhance fairness and
pension portability, to revitalize defined benefit plans, to provide
additional defined contribution plan protections, to assist individuals
in preserving their income throughout retirement, 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; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Pension
Preservation and Savings Expansion Act of 2003''.
(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 of this Act is as
follows:
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I--MAKING TODAY'S RETIREMENT SAVINGS OPPORTUNITIES PERMANENT
Sec. 101. Pensions and individual retirement arrangement provisions of
Economic Growth and Tax Relief
Reconciliation Act of 2001 made permanent.
Sec. 102. Saver's credit made permanent.
TITLE II--PRESERVING RETIREMENT ASSETS
Sec. 201. Simplification and updating of the minimum distribution
rules.
Sec. 202. Treatment of unclaimed benefits.
Sec. 203. Facilitation under fiduciary rules of certain rollovers and
annuity distributions.
Sec. 204. Equalizing treatment of defined benefit plans and defined
contribution plans.
Sec. 205. Study concerning defined contribution plan losses due to
market volatility.
TITLE III--ENHANCING FAIRNESS AND PENSION PORTABILITY
Sec. 301. Allow transfers to spouse's retirement plans.
Sec. 302. Faster vesting of employer nonelective contributions.
Sec. 303. Rollovers by nonspouse beneficiaries.
Sec. 304. Allow direct rollovers from retirement plans to ROTH IRAs.
Sec. 305. Exclusion of percentage of lifetime annuity payments.
Sec. 306. Rollover of after-tax amounts in annuity contracts.
Sec. 307. Fair treatment under substantially equal periodic payments
rule.
Sec. 308. Treatment of subsequent qualified domestic relations orders.
Sec. 309. Treatment of delayed qualified domestic relations orders.
Sec. 310. Treatment of annuity contracts.
Sec. 311. Preservation of pension plans.
Sec. 312. Certain plan transfers and mergers.
TITLE IV--INCREASING RETIREMENT PLAN PARTICIPATION AND SAVINGS
Sec. 401. Expansion of the Saver's credit.
Sec. 402. Acceleration of scheduled increases in pension plan
contribution limits.
Sec. 403. Removing barriers to automatic contribution trust
arrangements.
Sec. 404. Disposition of unused health benefits in cafeteria plans and
flexible spending arrangements.
Sec. 405. Updating deduction rules for combination of plans.
TITLE V--EXPANDING RETIREMENT PLAN COVERAGE TO EMPLOYEES OF SMALL
BUSINESSES
Sec. 501. Additional nonelective employer contributions to simple
plans.
Sec. 502. Matching contribution rules for Simple IRAs and Simple
401(k)s conformed.
Sec. 503. Salary-reduction only Simple plans.
Sec. 504. Permit a mid-year change from a Simple plan to another plan.
Sec. 505. Elimination of higher penalty on certain Simple
distributions.
Sec. 506. Simple plan portability.
Sec. 507. Correction of Simplified Employee Pension compensation
inconsistency.
Sec. 508. Equalization of tax treatment of retirement plan
contributions of the self-employed.
TITLE VI--STRENGTHENING INDIVIDUAL RETIREMENT ARRANGEMENTS
Sec. 601. Acceleration of increases in IRA contribution limits.
Sec. 602. Acceleration and expansion of certain scheduled increases in
eligibility for IRAs and elimination of IRA
marriage penalty.
Sec. 603. IRA eligibility for the disabled.
Sec. 604. Protecting IRA assets.
TITLE VII--REVITALIZING DEFINED BENEFIT PLANS
Sec. 701. Multiple employer plans permitted to elect separate or
aggregate treatment for purposes of
applying the funding rules and deduction
limitations.
Sec. 702. Treatment of employee contributions to contributory defined
benefit plans.
Sec. 703. Reform of the minimum participation rule.
Sec. 704. Plan valuation data collection.
Sec. 705. Replacement of interest rate on 30-year Treasury securities
with interest rate on conservatively-
invested long-term corporate bonds.
Sec. 706. Interest rate range for additional funding requirements.
Sec. 707. Asset valuation.
Sec. 708. Multiemployer plan emergency investment loss rule.
Sec. 709. Mortality table adjustment.
TITLE VIII--SIMPLIFY AND STREAMLINE RETIREMENT PLAN RULES
Sec. 801. Excise tax on excess contributions.
Sec. 802. Excess benefit plans.
Sec. 803. Paperless technologies in retirement plans.
Sec. 804. Elimination of unintended consequences attributable to use of
base pay or rate of pay.
Sec. 805. Repeal of the gateway test.
Sec. 806. Intermediate sanctions for inadvertent failures.
Sec. 807. Qualified preretirement survivor annuity.
Sec. 808. Cost-of-living adjustment of $5,000 cash-out amount.
Sec. 809. Catch-up contributions.
Sec. 810. Reverse match salary reduction arrangement simplified
employee annuity.
Sec. 811. Level dollar contributions to SEPs.
Sec. 812. Tax on nondeductible contributions not to apply to certain
nontrade or business SEP contributions.
Sec. 813. Clarification of fiduciary duty.
Sec. 814. Multiemployer plan clarification.
Sec. 815. Clarification of status of Young Men's Christian Association
Retirement Fund.
TITLE IX--EXPANDING RETIREMENT SAVINGS OPPORTUNITIES FOR EMPLOYEES OF
TAX-EXEMPT ORGANIZATIONS AND GOVERNMENTS
Sec. 901. Deferred compensation plans of tax-exempt organizations.
Sec. 902. Inapplicability of 10 percent additional tax on early
distributions of pension plans of public
safety employees.
Sec. 903. Clarifications regarding purchase of permissive service
credit.
Sec. 904. Certain rollovers of benefits permitted
Sec. 905. Minimum distribution rules.
Sec. 906. Church plan rule.
Sec. 907. Plans maintained by governments and tax-exempt organizations.
TITLE X--RESTRICTING EXCESSIVE REMUNERATION
Sec. 1001. Golden parachute excise tax to apply to excessive employee
remuneration paid by corporation after
declaration of bankruptcy.
TITLE XI--DEFINED CONTRIBUTION PLAN PROTECTIONS
Sec. 1101. Provision of investment education notices to participants.
Sec. 1102. Notice of blackout periods to participant or beneficiary
under defined contribution plan.
Sec. 1103. Diversification requirements for defined contribution plans
that hold employer securities.
Sec. 1104. Treatment of qualified retirement planning services.
Sec. 1105. Special rules.
TITLE XII--OTHER TAX PROVISIONS RELATING TO PENSIONS
Sec. 1201. Amendments to Retirement Protection Act of 1994.
Sec. 1202. Reporting simplification.
Sec. 1203. Improvement of employee plans compliance resolution system.
Sec. 1204. Extension to all governmental plans of moratorium on
application of certain nondiscrimination
rules applicable to State and local plans.
Sec. 1205. Notice and consent period regarding distributions.
Sec. 1206. Reduced PBGC premium for new plans of small employers.
Sec. 1207. Reduction of additional PBGC premium for new and small
plans.
Sec. 1208. Authorization for PBGC to pay interest on premium
overpayment refunds.
Sec. 1209. Substantial owner benefits in terminated plans.
Sec. 1210. Qualified group legal services plans.
Sec. 1211. Studies.
TITLE XIII--STOCK OPTIONS
Sec. 1301. Exclusion of incentive stock options and employee stock
purchase plan stock options from wages.
TITLE XIV--OTHER ELEMENTS OF RETIREMENT SECURITY
Sec. 1401. Employee pre-tax payments for retiree health.
Sec. 1402. Encouraging employers to maintain retiree health plans.
TITLE XV--REDUCING REGULATORY BURDENS
Sec. 1501. Provisions relating to plan amendments.
TITLE XVI--SOCIAL SECURITY AND MEDICARE HELD HARMLESS
Sec. 1601. Protection of Social Security and Medicare.
TITLE I--MAKING TODAY'S RETIREMENT SAVINGS OPPORTUNITIES PERMANENT
SEC. 101. PENSIONS AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS OF
ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001
MADE PERMANENT.
(a) In General.--Section 901 of the Economic Growth and Tax Relief
Reconciliation Act of 2001 is amended by adding at the end the
following new subsection:
``(c) Exception.--Subsections (a) and (b) shall not apply to the
provisions of, and amendments made by, subtitles (A) through (F) of
title VI (relating to pension and individual retirement arrangement
provisions).''.
(b) Conforming Amendments.--Section 901(b) of such Act is amended--
(1) by striking ``and the Employee Retirement Income
Security Act of 1974'' in the text, and
(2) by striking ``of Certain Laws'' in the heading.
SEC. 102. SAVER'S CREDIT MADE PERMANENT.
(a) In General.--Section 25B (relating to elective deferrals and
IRA contributions by certain individuals) is amended by striking
subsection (h).
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2003.
TITLE II--PRESERVING RETIREMENT ASSETS
SEC. 201. SIMPLIFICATION AND UPDATING OF THE MINIMUM DISTRIBUTION
RULES.
(a) Required Distributions.--
(1) Increase in age for required beginning date.--Clauses
(i) and (ii) of section 401(a)(9)(C) (relating to required
beginning date) are amended by striking ``age 70\1/2\'' each
place it appears and inserting ``the applicable age''.
(2) Mandatory Distribution Age.--Paragraph (9) of section
401(a) (relating to required distributions) is amended by
inserting at the end the following new subparagraph:
``(H) Applicable age.--For purposes of this
paragraph, the applicable age shall be determined in
accordance with the following table:
``Calendar year:
Applicable age is:
2004 and 2005.......................... 72
2006 and 2007.......................... 73
2008 and 2009.......................... 74
2010 and thereafter.................... 75.''.
(3) Spouse beneficiaries.--Subclause (I) of section
401(a)(9)(B)(iv) (relating to special rule for surviving spouse
of employee) is amended by striking ``age 70\1/2\'' and
inserting ``the applicable age''.
(4) Actuarial adjustment of benefit under defined benefit
plan.--Clause (iii) of section 401(a)(9)(C) (relating to
actuarial adjustment) is amended to read as follows:
``(iii) Actuarial adjustment.--
``(I) In general.--In the case of a
defined benefit plan, an employee's
accrued benefit shall be actuarially
increased to take into account the
period after the applicable date during
which the employee was not receiving
any benefits under the plan.
``(II) Applicable date.--For
purposes of clause (I), the term
`applicable date' means April 1 of the
calendar year following the calendar
year in which the employee attains age
70\1/2\.''.
(b) Preventing Two Required Distributions in a Year.--
(1) In general.--The portion of clause (i) of section
401(a)(9)(C) that precedes subclause (I) is amended to read as
follows:
``(i) In general.--The term `required
beginning date' means the December 31 of the
later of--''.
(2) Date of retirement.--Clause (i) of section 401(a)(9)(C)
is amended by adding at the end the following: ``Solely for
purposes of subclause (II), an employee who retires during
December of a calendar year shall be treated as retiring in the
following calendar year.''.
(c) Reduction in Excise Tax.--Subsection (a) of section 4974
(relating to excise tax on certain accumulations in qualified
retirement plans) is amended by striking ``50 percent'' and inserting
``20 percent''.
(d) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to years beginning
after December 31, 2003.
(2) Special rule.--In the case of a participant who attains
age 70\1/2\ prior to January 1, 2004, the amendments made by
this section shall apply to years beginning after December 31,
2003, as if such amendments had been effective in years
beginning before January 1, 2004.
SEC. 202. TREATMENT OF UNCLAIMED BENEFITS.
(a) Amendments to Internal Revenue Code of 1986.--
(1) Amendment to section 401(a)(34).--Section 401(a)(34)
(relating to benefits of missing participants) is amended to
read as follows:
``(34) Unclaimed benefits.--A trust forming part of a plan
shall not be treated as failing to constitute a qualified trust
under this section merely because the plan of which such trust
is a part treats unclaimed benefits in a manner that satisfies
the requirements of section 414(y).''.
(2) Amendment to section 414.--Section 414 (relating to
definitions and special rules) (as amended by this Act) is
amended by adding at the end the following new subsection:
``(y) Unclaimed Benefits.--
``(1) In general.--A plan meets the requirements of this
subsection only if--
``(A) Ongoing plans.--In the case of an ongoing
plan, the plan provides for one or more of the
following with respect to unclaimed benefits:
``(i) In the case of an unclaimed benefit
to which section 401(a)(31)(B) applies, a
transfer under section 401(a)(31)(B).
``(ii) A transfer to the Pension Benefit
Guaranty Corporation, in accordance with
section 4050(e) of the Employee Retirement
Income Security Act of 1974.
``(iii) Any other treatment permitted under
rules prescribed by the Secretary.
``(B) Terminated plans.--In the case of a
terminated plan, the plan provides for the following
with respect to unclaimed benefits:
``(i) Defined benefit plans.--In the case
of a defined benefit plan, one or more of the
following:
``(I) In the case of an unclaimed
benefit to which section 401(a)(31)(B)
applies, a transfer under section
401(a)(31)(B).
``(II) A transfer of the unclaimed
benefit to another defined benefit plan
maintained by the employer.
``(III) The purchase of an annuity
contract to provide for an individual's
unclaimed benefit.
``(IV) A transfer to the Pension
Benefit Guaranty Corporation in
accordance with section 4050(a) or
4050(e) (as applicable) of the Employee
Retirement Income Security Act of 1974.
``(V) Any other treatment permitted
under rules prescribed by the
Secretary.
``(ii) Defined contribution plans.--In the
case of a defined contribution plan, one or
more of the following:
``(I) In the case of an unclaimed
benefit to which section 401(a)(31)(B)
applies, a transfer under section
401(a)(31)(B).
``(II) A transfer of the unclaimed
benefit to another defined contribution
plan maintained by the employer.
``(III) The purchase of an annuity
contract to provide for an individual's
unclaimed benefit.
``(IV) A transfer to the Pension
Benefit Guaranty Corporation in
accordance with section 4050(d) or
4050(e) (as applicable) of the Employee
Retirement Income Security Act of 1974.
``(V) Any other treatment permitted
under rules prescribed by the
Secretary.
``(2) Treatment of transfers to pension benefit guaranty
corporation.--
``(A) Transfers to pbgc.--Amounts transferred from
a plan to the Pension Benefit Guaranty Corporation
pursuant to paragraph (1) shall be treated as a
transfer under section 401(a)(31)(A).
``(B) Distributions from pbgc.--Except as provided
in rules prescribed by the Secretary, amounts
distributed by the Pension Benefit Guaranty Corporation
shall be treated as distributed by an individual
retirement plan under section 408(d) (without regard to
paragraphs (4), (5) and (7) thereof). Rules similar to
the rules of section 402(c)(4) shall apply.
``(3) Definitions.--For purposes of this subsection--
``(A) Unclaimed benefit.--The term `unclaimed
benefit' means--
``(i) any benefit of a participant or
beneficiary which is distributable under the
terms of the plan to the participant or
beneficiary, if the distribution of the benefit
has not commenced within 1 year after the later
of the date on which the benefit first became
so distributable or the participant's severance
from employment;
``(ii) any benefit or other amount of a
participant or beneficiary which is
distributable under the terms of the plan with
respect to a missing participant, or
``(iii) any benefit to which section
401(a)(31)(B) applies or would apply if
subclause (I) of section 401(a)(31)(B)(i) did
not require the distribution to exceed $1,000.
A benefit otherwise described in clause (i) shall not
be treated as an unclaimed benefit under clause (i) if
the participant or beneficiary elects not to have such
treatment apply. Any such participant or beneficiary
shall be given reasonable notice of the opportunity to
make such an election. If the participant or
beneficiary fails to make such an election within a
reasonable period specified in the notice, any
subsequent election shall not be given effect and the
benefit shall be treated as an unclaimed benefit. A
notice mailed to the last known address of the
participant or beneficiary shall be treated as a notice
to the participant or beneficiary for purposes of this
paragraph.
``(B) Ongoing plan.--The term `ongoing plan' means
any plan which has neither terminated nor is in the
process of terminating.
``(C) Terminated plan.--The term `terminated plan'
means any plan which has terminated or is in the
process of terminating.
``(D) Missing participant.--The term `missing
participant' shall have the meaning given to such term
by section 4050(b)(1) of the Employee Retirement Income
Security Act of 1974.''.
(3) Conforming amendment.--Subparagraph (B) of section
401(a)(31) is amended by adding at the end the following:
``(iii) Other permitted transfers.--A plan
administrator shall be treated as having
complied with the requirements of this
subparagraph if such plan administrator
complies with the requirements of section
414(y).''.
(b) Amendments to Employee Retirement Income Security Act of
1974.--
(1) In general.--Subsection (b) of section 4050 of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1350) is amended by adding at the end the following paragraph:
``(3) Unclaimed benefit.--The term `unclaimed benefit'
means--
``(A) any benefit of a participant or beneficiary
which is distributable under the terms of the plan to
the participant or beneficiary, if the distribution of
the benefit has not commenced within 1 year after the
later of the date on which the benefit first became so
distributable or the participant's severance from
employment;
``(B) any benefit or other amount of a participant
or beneficiary which is distributable under the terms
of the plan with respect to a missing participant, or
``(C) any benefit to which section 401(a)(31)(B) of
the Internal Revenue Code of 1986 applies or would
apply if subclause (I) of section 401(a)(31)(B)(i) of
such Code did not require the distribution to exceed
$1,000.
A benefit otherwise described in subparagraph (A) shall not be
treated as an unclaimed benefit under subparagraph (A) if the
participant or beneficiary elects not to have such treatment
apply. Any such participant or beneficiary shall be given
reasonable notice of the opportunity to make such an election.
If the participant or beneficiary fails to make such an
election within a reasonable period specified in the notice,
any subsequent election shall not be given effect and the
benefit shall be treated as an unclaimed benefit. A notice
mailed to the last known address of the participant or
beneficiary shall be treated as a notice to the participant or
beneficiary for purposes of this paragraph.''.
(2) Other amendments.--Section 4050 of such Act is amended
by redesignating subsection (c) as subsection (f) and by
inserting after subsection (b) the following new subsections:
``(c) Multiemployer Plans.--The corporation shall prescribe rules
similar to the rules in subsection (a) for multiemployer plans covered
by this title that terminate under section 4041A.
``(d) Plans Not Otherwise Subject to Title.--
``(1) Transfer to corporation.--The plan administrator of a
plan described in paragraph (4) may elect to transfer a missing
participant's benefits to the corporation upon termination of
the plan.
``(2) Information to the corporation.--To the extent
provided in regulations, the plan administrator of a plan
described in paragraph (4) shall, upon termination of the plan,
provide the corporation information with respect to the
benefits of a missing participant if the plan transfers such
benefits--
``(A) to the corporation, or
``(B) to an entity other than the corporation or a
plan described in paragraph (4)(B)(ii).
``(3) Payment by the corporation.--If benefits of a missing
participant were transferred to the corporation under paragraph
(1), the corporation shall, upon location of the participant or
beneficiary, pay to the participant or beneficiary the amount
transferred (or the appropriate survivor benefit) either--
``(A) in a single sum (plus interest), or
``(B) in such other form as is specified in
regulations of the corporation.
``(4) Plans described.--A plan is described in this
paragraph if--
``(A) the plan is a pension plan (within the
meaning of section 3(2))--
``(i) to which the provisions of this
section do not apply (without regard to this
subsection), and
``(ii) which is not a plan described in
paragraphs (2) through (11) of section 4021(b),
and
``(B) at the time the assets are to be distributed
upon termination, the plan--
``(i) has missing participants, and
``(ii) has not provided for the transfer of
assets to pay the benefits of all missing
participants to another pension plan (within
the meaning of section 3(2)).
``(5) Certain provisions not to apply.--Subsections
(a)(1) and (a)(3) shall not apply to a plan described
in paragraph (4).
``(e) Unclaimed Benefits.--
``(1) Transfer to corporation.--The plan administrator of a
plan described in paragraph (6) may elect to transfer unclaimed
benefits to the corporation.
``(2) Information to the corporation.--The corporation may
impose such conditions on transfers of unclaimed benefits to
the corporation as the corporation determines are necessary to
facilitate administration of this subsection and are not
inconsistent with the purposes of this subsection. Such
conditions may include requirements that the transferring plan
provide to the corporation specified information and
documentation.
``(3) Payment to the corporation.--With respect to any
participant, any transfer of an unclaimed benefit to the
corporation shall--
``(A) in the case of a defined benefit plan, be a
transfer of the participant's designated benefit, or
``(B) in the case of an individual account plan, be
a transfer of the participant's vested account balance
under the plan.
``(4) Payment by the corporation.--Subject to such
reasonable restrictions as may be prescribed in regulations of
the corporation (relating to investment limitations and
otherwise)--
``(A) unclaimed benefits of a participant or
beneficiary which are transferred to the corporation
pursuant to this subsection shall be distributed by the
corporation to the participant or beneficiary not later
than upon application filed by the participant or
beneficiary with the corporation in such form and
manner as may be prescribed in regulations of the
corporation, and
``(B) such benefits shall--
``(i) in the case of an individual account
plan, be paid in a single sum (plus interest)
or in such other form as is specified in
regulations of the corporation, or
``(ii) in the case of a defined benefit
plan, be paid--
``(I) in an amount based on the
designated benefit and the assumptions
prescribed by the corporation at the
time that the corporation received the
benefit, and
``(II) in a form determined under
regulations of the corporation.
``(5) Notice.--Any transfer of unclaimed benefits of a
participant or beneficiary to the corporation pursuant to this
subsection may occur only after reasonable advance notice of
such transfer is provided by the plan administrator to the
participant or beneficiary. The plan administrator shall also
provide to the participant or beneficiary notice of any such
transfer not later than 30 days after the date of the transfer.
Notice mailed to the last known address of the participant or
beneficiary shall be treated as a notice to the participant or
beneficiary for purposes of this paragraph. Any such notice
shall include information regarding procedures for obtaining
the distribution of benefits from the corporation in accordance
with paragraph (4).
``(6) Plans described.--A plan is described in this
paragraph if the plan is a pension plan (within the meaning of
section 3(2)--
``(A)(i) which has neither terminated nor is in the
process of terminating, or
``(ii) in the case of an unclaimed benefit to which
section 401(a)(31)(B) of the Internal Revenue Code of
1986 applies (other than an unclaimed benefit of a
missing participant), which has terminated or is in the
process of terminating, and
``(B) which is not a plan described in paragraphs
(2) through (11) of section 4021(b).
``(6) Certain provisions not to apply.--Subsections (a)(1)
and (a)(3) shall not apply to a plan described in paragraph
(6).''.
(3) Conforming amendment.--Section 4021(b) of such Act (29
U.S.C. 1321(b)(1)) is amended by striking ``This'' and
inserting ``Except to the extent provided in subsections (d)
and (e) of section 4050, this''.
(c) Escheat Laws Superseded.--Section 514(b) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1144 (b) (as amended
by this Act) is further amended--
(1) by redesignating paragraph (10) as paragraph (11), and
(2) by inserting after paragraph (9) the following new
paragraph:
``(10) Any escheat or similar law of any State shall be
superseded to the extent inconsistent with any transfer or
other treatment of unclaimed benefits (as defined in section
4050(b)(3)) permitted under the Internal Revenue Code of
1986.''.
(d) Effective Dates and Related Rules.--
(1) In general.--The amendments made by subsections (a) and
(b) shall apply to years beginning after December 31, 2004.
(2) Regulations.--The Pension Benefit Guaranty Corporation
shall issue regulations necessary to carry out the amendments
made by subsection (b) not later than December 31, 2004.
(3) Escheat laws superseded.--The amendment made by
subsection (c) shall apply as of the date of enactment of this
Act.
SEC. 203. FACILITATION UNDER FIDUCIARY RULES OF CERTAIN ROLLOVERS AND
ANNUITY DISTRIBUTIONS.
(a) In General.--Section 404(c) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1104(c)) is amended by adding at the
end the following new paragraph:
``(4)(A) In the case of a pension plan which makes a transfer under
section 401(a)(31)(A) of the Internal Revenue Code of 1986 to an
individual retirement plan (as defined in section 7701(a)(37) of such
Code) in connection with a participant or beneficiary or makes a
distribution to a participant or beneficiary of an annuity contract
described in subparagraph (B), the participant or beneficiary shall,
for purposes of paragraph (1), be treated as exercising control over
the transfer or distribution if--
``(i) the participant or beneficiary elected such transfer
or distribution, and
``(ii) in connection with such election, the participant or
beneficiary was given an opportunity to elect any other
individual retirement plan (in the case of a transfer) or any
other annuity contract described in subparagraph (B) (in the
case of a distribution).
``(B) An annuity contract is described in this subparagraph if it
provides, either on an immediate or deferred basis, a series of
substantially equal periodic payments (not less frequently than
annually) for the life of the participant or beneficiary or the joint
lives of the participant or beneficiary and such individual's
designated beneficiary. Annuity payments shall not fail to be treated
as part of a series of substantially equal periodic payments because
the amount of the periodic payments may vary in accordance with
investment experience, reallocations among investment options,
actuarial gains or losses, cost of living indices, or similar
fluctuating criteria. The availability of a commutation benefit, a
minimum period of payments certain, or a minimum amount to be paid in
any event shall not affect the treatment of an annuity contract as an
annuity contract described in this subparagraph.
``(C) Under regulations prescribed by the Secretary, this paragraph
shall apply without regard to whether the particular individual
retirement plan receiving the transfer or the particular annuity
contract being distributed is specifically identified by the pension
plan as available to the participant or beneficiary.
``(D) Notwithstanding the preceding provisions of this paragraph,
paragraph (1)(B) shall not apply with respect to liability under
section 406 in connection with the specific identification of any
individual retirement plan or annuity contract as being available to
the participant or beneficiary.''.
(b) Effective Date and Related Rules.--
(1) Effective date.--The amendment made by this section
shall take effect on the date of the enactment of this Act.
(2) Issuance of final regulations.--Final regulations under
section 404(c)(4) of the Employee Retirement Income Security
Act of 1974 (added by this section) shall be issued no later
than 1 year after the date of the enactment of this Act.
SEC. 204. EQUALIZING TREATMENT OF DEFINED BENEFIT PLANS AND DEFINED
CONTRIBUTION PLANS.
The Secretary of Treasury would be directed to permit defined
benefit plans to satisfy the required distribution rules of section
401(a)(9) of the Internal Revenue Code of 1986 (and provisions which
cross reference section 401(a)(9) of such Code) by satisfying Temporary
Treasury Regulation 1.401(a)(9)-6T Q&A 4(b) (the rules applicable to
annuity contracts distributed under defined contribution plans) or by
satisfying any final regulations to the extent that such final
regulations permit additional means of satisfying section 401(a)(9) of
such Code.
SEC. 205. STUDY CONCERNING DEFINED CONTRIBUTION PLAN LOSSES DUE TO
MARKET VOLATILITY.
(a) In General.--The Secretary of the Treasury shall conduct a
study to evaluate possible ways to lessen defined contribution plan
losses due volatility of the economic markets.
(b) Requirements.--In conducting the study, the Secretary shall
investigate--
(1) the extent to which both long- and short-term stock
market volatility affects defined contribution savings,
(2) the effect that this volatility has on the continuation
and creation of defined contribution plans,
(3) investment alternatives and lifetime distribution
options for defined contribution plans that may help to
ameliorate market risks, and
(4) what legislative or administrative steps may be taken
to lessen defined contribution plan losses in the future.
(c) Report.--The Secretary shall transmit to the Committee on Ways
and Means of the House of Representatives and the Committee on Finance
of the Senate, within 1 year after the date of enactment of this Act, a
report containing the findings and conclusions of such study, together
with recommendations for any legislation or administrative actions
which the Secretary considers appropriate.
TITLE III--ENHANCING FAIRNESS AND PENSION PORTABILITY
SEC. 301. ALLOW TRANSFERS TO SPOUSE'S RETIREMENT PLANS.
(a) In General.--Paragraph (6) of section 408(d) (relating to
transfers incident to divorce) is amended by--
(1) striking ``his spouse or former spouse under a divorce
or separation instrument described in subparagraph (A) of
section 71(b)(2)'' and inserting ``his spouse (or his former
spouse under a divorce or separation instrument described in
subparagraph (A) of section 71(b)(2))'', and
(2) striking the heading and inserting ``Transfer of
account to spouse or former spouse.--''.
(b) Effective Date.--The amendments made by this section shall
apply to years beginning after the date of the enactment of this Act.
SEC. 302. FASTER VESTING OF EMPLOYER NONELECTIVE CONTRIBUTIONS.
(a) Amendments to the Internal Revenue Code of 1986.--
(1) In general.--Paragraph (2) of section 411(a) (relating
to employer contributions) is amended to read as follows:
``(2) Employer contributions.--
``(A) Defined benefit plans.--
``(i) In general.--In the case of a defined
benefit plan, a plan satisfies the requirements
of this paragraph if it satisfies the
requirements of clause (ii) or (iii).
``(ii) 5-year vesting.--A plan satisfies
the requirements of this clause if an employee
who has completed at least 5 years of service
has a nonforfeitable right to 100 percent of
the employee's accrued benefit derived from
employer contributions.
``(iii) 3 to 7 year vesting.--A plan
satisfies the requirements of this clause if an
employee has a nonforfeitable right to a
percentage of the employee's accrued benefit
derived from employer contributions determined
under the following table:
The nonforfeitable
``Years of service:
percentage is:
3...................................... 20
4...................................... 40
5...................................... 60
6...................................... 80
7 or more.............................. 100.
``(B) Defined contribution plans.--
``(i) In general.--In the case of a defined
contribution plan, a plan satisfies the
requirements of this paragraph if it satisfies
the requirements of clause (ii) or (iii).
``(ii) 3-year vesting.--A plan satisfies
the requirements of this clause if an employee
who has completed at least 3 years of service
has a nonforfeitable right to 100 percent of
the employee's accrued benefit derived from
employer contributions.
``(iii) 2 to 6 year vesting.--A plan
satisfies the requirements of this clause if an
employee has a nonforfeitable right to a
percentage of the employee's accrued benefit
derived from employer contributions determined
under the following table:
The nonforfeitable
``Years of service:
percentage is:
2...................................... 20
3...................................... 40
4...................................... 60
5...................................... 80
6...................................... 100.''.
(2) Conforming amendment.--Section 411(a) (relating to
general rule for minimum vesting standards) is amended by
striking paragraph (12).
(b) Amendments to the Employee Retirement Income Security Act of
1974.--
(1) In general.--Paragraph (2) of section 203(a) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1053(a)(2)) is amended to read as follows:
``(2)(A)(i) In the case of a defined benefit plan, a plan
satisfies the requirements of this paragraph if it satisfies
the requirements of clause (ii) or (iii).
``(ii) A plan satisfies the requirements of this clause if
an employee who has completed at least 5 years of service has a
nonforfeitable right to 100 percent of the employee's accrued
benefit derived from employer contributions.
``(iii) A plan satisfies the requirements of this clause if
an employee has a nonforfeitable right to a percentage of the
employee's accrued benefit derived from employer contributions
determined under the following table:
The nonforfeitable
``Years of service:
percentage is:
3...................................... 20
4...................................... 40
5...................................... 60
6...................................... 80
7 or more.............................. 100.
``(B)(i) In the case of an individual account plan, a plan
satisfies the requirements of this paragraph if it satisfies
the requirements of clause (ii) or (iii).
``(ii) A plan satisfies the requirements of this clause if
an employee who has completed at least 3 years of service has a
nonforfeitable right to 100 percent of the employee's accrued
benefit derived from employer contributions.
``(iii) A plan satisfies the requirements of this clause if
an employee has a nonforfeitable right to a percentage of the
employee's accrued benefit derived from employer contributions
determined under the following table:
The nonforfeitable
``Years of service:
percentage is:
2...................................... 20
3...................................... 40
4...................................... 60
5...................................... 80
6...................................... 100.''.
(2) Conforming amendment.--Section 203(a) of such Act is
amended by striking paragraph (4).
(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, 2003.
(2) Collective bargaining agreements.--In the case of a
plan maintained pursuant to one or more collective bargaining
agreements between employee representatives and one or more
employers ratified by the date of the 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 the
enactment); or
(ii) January 1, 2004; or
(B) January 1, 2008.
(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. 303. ROLLOVERS BY NONSPOUSE BENEFICIARIES.
(a) In General.--
(1) Qualified plans.--Section 402(c) (relating to rollovers
from exempt trusts) is amended by adding at the end the
following new paragraph:
``(11) Rollover where nonspouse beneficiary receives
distribution after death of employee.--
``(A) In general.--If any distribution attributable
to an employee is paid to a designated beneficiary (as
defined by section 401(a)(9)(E)) other than the
surviving spouse of the employee after the employee's
death, the preceding provisions of this subsection
shall apply to such distribution in the same manner as
if the designated beneficiary were the employee, except
that only a plan described in clause (i) or (ii) of
paragraph (8)(B) that is established in the name of the
employee for the benefit of the designated beneficiary
shall be treated as an eligible retirement plan with
respect to such distribution.
``(B) Special rules.--
``(i) Death of employee before entire
interest distributed.--An eligible retirement
plan that receives a transfer described in this
paragraph shall, with respect to amounts
attributable to such transferred amount, be
subject to rules similar to clauses (ii) and
(iii) of section 401(a)(9)(B).
``(ii) Distributions attributed to
employee.--For purposes of this subsection, any
distribution from the eligible retirement plan
of amounts attributable to such transferred
amount shall be treated as a distribution
attributable to the employee, not as a
distribution attributable to the designated
beneficiary.
``(iii) Certain trusts treated as
beneficiaries.--For purposes of this paragraph,
to the extent provided in rules prescribed by
the Secretary, a trust maintained for the
benefit of one or more designated beneficiaries
shall be treated in the same manner as a
designated beneficiary.''.
(2) Section 403(a) plans.--Subparagraph (B) of section
403(a)(4) (relating to rollover amounts) is further amended by
striking ``and (9)'' and inserting ``, (9), and (11)''.
(3) Section 403(b) plans.--Subparagraph (B) of section
403(b)(8) (relating to rollover amounts) is amended by striking
``and (9)'' and inserting ``, (9), and (11)''.
(4) Section 457 plans.--Subparagraph (B) of section
457(e)(16) (relating to rollover amounts) is amended by
striking ``and (9)'' and inserting ``, (9), and (11)''.
(b) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 2003.
SEC. 304. ALLOW DIRECT ROLLOVERS FROM RETIREMENT PLANS TO ROTH IRAS.
(a) In General.--Subsection (e) of section 408A (defining qualified
rollover contribution) is amended to read as follows:
``(e) Qualified Rollover Contribution.--For purposes of this
section, the term `qualified rollover contribution' means a rollover
contribution--
``(1) to a Roth IRA from another such account,
``(2) from an eligible retirement plan, but only if--
``(A) in the case of an individual retirement plan,
such rollover contribution meets the requirements of
section 408(d)(3), and
``(B) in the case of any eligible retirement plan
(as defined in section 402(c)(8)(B) other than clauses
(i) and (ii) thereof), such rollover contribution meets
the requirements of section 402(c), 403(b)(8), or
457(e)(16), as applicable.
For purposes of section 408(d)(3)(B), there shall be disregarded any
qualified rollover contribution from an individual retirement plan
(other than a Roth IRA) to a Roth IRA.''.
(b) Conforming Amendments.--
(1) Section 408A(c)(3)(B) is amended--
(A) in the text by striking ``individual retirement
plan'' and inserting ``an eligible retirement plan (as
defined by section 402(c)(8)(B))'', and
(B) in the heading by striking ``IRA'' and
inserting ``eligible retirement plan''.
(2) Section 408A(d)(3) is amended--
(A) in subparagraph (A) by striking ``section
408(d)(3)'' inserting ``sections 402(c), 403(b)(8),
408(d)(3), and 457(e)(16)'',
(B) in subparagraph (B) by striking ``individual
retirement plan'' and inserting ``eligible retirement
plan (as defined by section 402(c)(8)(B))'',
(C) in subparagraph (D) by striking ``or 6047''
after ``408(i)'',
(D) in subparagraph (D) by striking ``or both'' and
inserting ``persons subject to section 6047(d)(1), or
all of the foregoing persons'', and
(E) in the heading by striking ``IRA'' and
inserting ``eligible retirement plan''.
(c) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 2003.
SEC. 305. EXCLUSION OF PERCENTAGE OF LIFETIME ANNUITY PAYMENTS.
(a) In General.--
(1) Qualified plans.--Subsection (e) of section 402
(relating to exempt trusts) is amended by adding at the end the
following new paragraph:
``(7) Exclusion of percentage of lifetime annuity
payments.--
``(A) In general.--In the case of a lifetime
annuity payment from a qualified trust (within the
meaning of subsection (c)(8)(A)) to a qualified
distributee, gross income shall not include the
applicable percentage of the amount otherwise
includible in gross income (determined without regard
to this paragraph).
``(B) Applicable percentage.--For purposes of
subparagraph (A), applicable percentage shall be
determined in accordance with the following table:
``For taxable years beginning
The applicable
in calendar year--
percentage is--
2004, 2005, 2006, and 2007............. 5
2008 and thereafter.................... 10.
``(C) Limitation.--With respect to any qualified
distributee, subparagraph (A) shall not apply to any
lifetime annuity payment to the extent that such
payments, when added to all previous payments under
such annuity to such qualified distributee during the
taxable year, exceed 50 percent of the applicable
amount for such year under section 415(c)(1)(A). For
purposes of this subparagraph, all lifetime annuity
payments received by a qualified distributee shall be
taken into account to the extent that such payments are
subject to this paragraph or to rules similar to the
rules of this paragraph.
``(D) Definitions.--For purposes of this
paragraph--
``(i) Lifetime annuity payment.--
``(I) In general.--The term
`lifetime annuity payment' means a
distribution which is a part of a
series of substantially equal periodic
payments (made not less frequently than
annually) made over the life of the
qualified distributee or the joint
lives of the qualified distributee and
the qualified distributee's designated
beneficiary.
``(II) Exceptions.--Annuity
payments shall not fail to be treated
as part of a series of substantially
equal periodic payments because the
amount of the periodic payments may
vary in accordance with investment
experience, reallocations among
investment options, actuarial gains or
losses, cost of living indices, or
similar fluctuating criteria. The
availability of a commutation benefit,
a minimum period of payments certain,
or a minimum amount to be paid in any
event shall not affect the treatment of
a distribution as a lifetime annuity
payment. In the case of lifetime
annuity payments being made to a
qualified trust, payments by the
qualified trust to a qualified
distributee of the entire amount
received by the qualified trust with
respect to the qualified distributee
shall constitute lifetime annuity
payments.
``(ii) Qualified distributee.--The term
`qualified distributee' means the employee, the
surviving spouse of the employee, and an
alternate payee who is the spouse or former
spouse of the employee.
``(E) Recapture tax.--
``(i) In general.--If--
``(I) the applicable percentage of
a lifetime annuity payment is not
includible in gross income by reason of
subparagraph (A), and
``(II) the series of payments of
which such payment is a part is
subsequently modified (other than by
reason of death or disability) so that
some or all future payments are not
lifetime annuity payments,
the qualified distributee's gross income for
the first taxable year in which such
modification occurs shall be increased by an
amount, determined under rules prescribed by
the Secretary, equal to the amount which (but
for subparagraph (A)) would have been
includible in the qualified distributee's gross
income if the modification had been in effect
at all times, plus interest for the deferral
period.
``(ii) Deferral period.--For purposes of
this subparagraph, the term `deferral period'
means the period beginning with the taxable
year in which (without regard to subparagraph
(A)) the payment would have been includible in
gross income and ending with the taxable year
in which the modification described in clause
(i)(II) occurs.
``(F) Phase-out of exclusion.--
``(i) In general.--In any taxable year, the
exclusion from gross income for any qualified
distributee under this paragraph and under
rules similar to the rules of this paragraph
shall not exceed the income-adjusted limit.
``(ii) Income-adjusted limit.--For purposes
of this subparagraph, the income-adjusted limit
shall be--
``(I) the product of the applicable
percentage described in subparagraph
(B) and the limitation described in
subparagraph (C), reduced (but not
below zero) by
``(II) the amount determined under
clause (iii).
``(iii) Amount determined.--The amount
determined under this clause shall be the
amount which bears the same ratio to the amount
described in clause (ii)(I) as--
``(I) the excess of the taxpayer's
adjusted gross income for such taxable
year over the applicable dollar amount,
bears to
``(II) $15,000 ($30,000 for a joint
return).
``(iv) Limitation on reduction.--The
income-adjusted limit shall not be reduced
below $200 by clause (ii)(II) unless (without
regard to this clause) such limit is reduced to
zero.
``(v) Rounding rule.--Any income-adjusted
limit determined under this subparagraph which
is not a multiple of $10 shall be rounded to
the next lowest multiple of $10.
``(vi) Adjusted gross income.--For purposes
of this subparagraph, adjusted gross income of
any taxpayer shall be determined in the same
manner as under section 408A(c)(3)(C)(i) except
that section 408A(c)(3)(C)(i)(II) shall not
apply for this purpose.
``(vii) Applicable dollar limit.--For
purposes of this subparagraph, the applicable
dollar amount is--
``(I) in the case of a taxpayer
filing a joint return, $150,000,
``(II) in the case of any other
taxpayer (other than a married
individual filing a separate return),
$75,000, and
``(III) in the case of a married
individual filing a separate return,
zero.
``(viii) Special rule for married
individuals filing separately and living
apart.--Section 219(g)(4) shall apply for
purposes of this subparagraph.''.
(2) Section 403(a) plans.--Paragraph (4) of section 403(a)
(relating to qualified annuity plans) is amended by adding at
the end the following new subparagraph:
``(C) Exclusion of percentage of lifetime annuity
payments.--Rules similar to the rules of section
402(e)(7) shall apply to distributions under any
annuity contract to which this subsection applies.''.
(3) Section 403(b) plans.--Section 403(b) (relating to
purchased annuities) is amended by adding at the end the
following new paragraph:
``(14) Exclusion of percentage of lifetime annuity
payments.--Rules similar to the rules of section 402(e)(7)
shall apply to distributions under any annuity contract or
custodial account to which this subsection applies.''.
(4) IRAs.--Section 408(d) (relating to tax treatment of
distributions) is amended by adding at the end the following
new paragraph:
``(8) Exclusion of percentage of lifetime annuity
payments.--Rules similar to the rules of section 402(e)(7)
shall apply to distributions out of an individual retirement
plan.''.
(5) Section 457 plans.--Section 457(e) (relating to special
rules for deferred compensation plans) is amended by adding at
the end the following new paragraph:
``(18) Exclusion of percentage of lifetime annuity
payments.--Rules similar to the rules of section 402(e)(7)
shall apply to distributions from an eligible deferred
compensation plan of an eligible employer described in
subsection (e)(1)(A).''.
(b) Effective Date.--The amendments made by this section shall
apply to distributions made after December 31, 2003.
SEC. 306. ROLLOVER OF AFTER-TAX AMOUNTS IN ANNUITY CONTRACTS.
(a) In General.--Subparagraph (A) of section 402(c)(2) (maximum
amount which may be rolled over) is amended by striking ``and which''
and inserting ``or to an annuity contract described in section 403(b)
and such plan or contract''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2003.
SEC. 307. FAIR TREATMENT UNDER SUBSTANTIALLY EQUAL PERIODIC PAYMENTS
RULE.
(a) In General.--Paragraph (4) of section 72(t) (relating to change
in substantially equal payments) is amended by inserting at the end the
following new subparagraphs:
``(C) Change in permissible methods.--If--
``(i) the taxpayer changes from one
permissible method of determining substantially
equal periodic payments to another permissible
method for purposes of such determination, and
``(ii) such change results in an initial
reduction in the amount of payments required to
be made,
such change shall not be treated as a modification
under subparagraph (A)(ii).
``(D) Rollovers to subsequent plan.--If--
``(i) payments satisfying paragraph
(2)(A)(iv) are being made from a qualified
retirement plan,
``(ii) a transfer or a rollover from the
qualified retirement plan is made to another
qualified retirement plan of all or a portion
of the taxpayer's benefit under the transferor
plan, and
``(iii) distributions from the transferor
and transferee plans would in combination
continue to satisfy paragraph (2)(A)(iv) if
made only from the transferor plan,
such transfer or rollover shall not be treated as a
modification under subparagraph (A)(ii) and compliance
with paragraph (2)(A)(iv) shall be determined on the
basis of the combined distributions described in clause
(iii).
``(E) Interest rate.--Any reasonable interest rate
may be used in determining whether payments are
substantially equal under paragraph (2)(A)(iv).''.
(b) Effective Date.--The amendments made by this section shall
apply to any series of payments commencing on or after the date of
enactment of this Act.
SEC. 308. TREATMENT OF SUBSEQUENT QUALIFIED DOMESTIC RELATIONS ORDERS.
(a) Amendment to ERISA.--Section 206(d)(3)(B) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1056(d)(3)(B)) is
amended by adding at the end of the following flush sentence: ``A
domestic relations order otherwise meeting the requirements to be
treated as a qualified domestic relations order shall not fail to be so
treated solely because it is issued after, or revises, another
qualified domestic relations order, but only with respect to amounts
payable after the date the order is determined to be qualified.''.
(b) Amendment to Internal Revenue Code.--Section 414(p)(1)(A) is
amended by adding at the end the following flush sentence: ``A domestic
relations order otherwise meeting the requirements to be treated as a
qualified domestic relations order shall not fail to be so treated
solely because it is issued after, or revises, another qualified
domestic relations order, but only with respect to amounts payable
after the date the order is determined to be qualified.''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to transfers made after December 31, 2003.
(2) Prior transfers.--Transfers made prior to January 1,
2004 under qualified domestic relations orders that were issued
after, or that revised, a prior qualified domestic relations
order shall not be deemed invalid by reason of the amendments
made by this section.
SEC. 309. TREATMENT OF DELAYED QUALIFIED DOMESTIC RELATIONS ORDERS.
(a) Amendment to ERISA.--Section 206(d)(3)(B) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1056(d)(3)) (as
amended by this Act) is amended by adding at the end the following
flush sentence: ``A domestic relations order otherwise meeting the
requirements to be treated as a qualified domestic relations order
shall not fail to be to be treated (subject to subparagraph (H)) solely
because of the time at which it is issued.''.
(b) Amendment to Internal Revenue Code.--Section 414(p)(1)(A) (as
amended by this Act) is amended by adding at the end the following
flush sentence: ``A domestic relations order otherwise meeting the
requirements to be treated as a qualified domestic relations order
shall not fail to be so treated (subject to paragraph (7)) solely
because of the time at which it is issued.''.
(c) Effective Date.--
(1) In general.--The amendments made by this section apply
to transfers made after December 31, 2003.
(2) Prior orders.--Transfers made prior to January 1, 2004
under qualified domestic relations orders that were issued
subsequent to the events giving rise to such orders shall not
be deemed invalid by reason of the amendments made by this
section.
SEC. 310. TREATMENT OF ANNUITY CONTRACTS.
(a) In General.--Clause (i) of section 402(e)(4)(D) is amended by
adding after ``section 401(c)(1).'' the following: ``A distribution of
an annuity contract from a trust or annuity plan referred to in the
first sentence of this clause may be treated as a part of a lump sum
distribution.''.
(b) Effective Date.--The amendment made by this section shall take
effect as if included in section 1401(b)(1) of the Small Business Job
Protection Act of 1996.
SEC. 311. PRESERVATION OF PENSION PLANS.
(a) Section 1612 of the Social Security Act is amended--
(1) in subsection (b)--
(A) in paragraph (21), by striking ``; and'' and
inserting ``;'';
(B) by striking the period at the end of paragraph
(22) and -inserting ``; and'';
(C) by adding at the end the following paragraph:
``(23) except as otherwise provided in this paragraph,
retirement benefits to which the individual is or may become
entitled, including any balances credited to the individual's
account and any other accrued benefits, under a qualifying
retirement plan.''; and
(2) adding at the end the following new subsection:
``rules relating to qualified retirement plans
``(c)(1) For purposes of subsection (b)(23), a qualifying
retirement plan is a qualified retirement plan as defined in section
4974(c) of the Internal Revenue Code of 1986, an eligible deferred
compensation plan under section 457(b) of such Code, or a trust as
described in section 501(c)(18) of such Code.
``(2) Subsection (b)(23) shall not require the Commissioner to
exclude the aggregate value of qualifying retirement plan balances of
an individual to the extent they exceed $75,000.
``(3) Except as provided in paragraph (4), in the case of an
individual who has attained the age specified in section 72(t)(2)(A)(i)
of the Internal Revenue Code of 1986, subsection (b)(23) shall not
require the Commissioner to exclude an amount up to the monthly annuity
value of the current aggregate value of qualifying retirement plan
balances of the individual as determined under a schedule issued by the
Commissioner.
``(4) Upon determining that an applicant for or recipient of
benefits has attained the age specified in section 72(t)(2)(A)(i) of
the Internal Revenue Code of 1986 and is entitled to benefits under a
qualifying retirement plan, the Commissioner shall--
``(A) notify the applicant or recipient of the provisions
of this subsection and of the importance of obtaining competent
financial advice on the possibility of converting the value of
the plan into an annuity;
``(B) continue to exclude the value of the qualifying
retirement plan without regard to paragraph (3) for a period of
one year following the provision of the notice specified in
subparagraph (A).
``(C) after the period specified in subparagraph (B), not
count as monthly income more than the monthly annuity value of
any current balance of the qualifying retirement plan as
determined under a schedule issued by the Commissioner.
``(5) Nothing in subsection (b)(23) shall be construed to authorize
or require any benefits to be reduced or denied to any individual
because of a qualifying retirement plan (including defined benefit
retirement plans) whose consideration is excluded under any other
provision of law.''.
(b) Section 1613 of the Social Security Act is amended--
(1) in subsection (a)--
(A) in paragraph (12), by striking ``; and'' and
inserting ``;'';
(B) by striking the period at the end of paragraph
(13) and -inserting ``; and''; and
(C) by adding after paragraph (13) the following
paragraph:
``(14) benefits to which the individual is or may become
entitled, including any balances credited to the individual's
account and any other accrued benefits, qualifying retirement
plan.''; and
(2) by adding at the end the following new subsection:
``rules relating to qualified retirement plans
``(f)(1) For purposes of subsection (a)(14) a qualifying retirement
plan is a qualified retirement plan as defined in section 4974(c) of
the Internal Revenue Code of 1986, an eligible deferred compensation
plan under section 457(b) of such Code, or a trust as described in
section 501(c)(18) of such Code.
``(2) Subsection (a)(14) shall not require the Commissioner to
exclude--
``(A) funds that have been distributed from a qualifying
retirement plan; or
``(B) the value of a qualifying retirement plan to the
extent the aggregate value of qualifying retirement plan
balances of an individual exceed $75,000.
``(3) Nothing in subsection (a)(14) shall be construed to authorize
or require any benefits to be reduced or denied to any individual
because of a qualifying retirement plan (including defined benefit
retirement plans) whose consideration is excluded under any other
provision of law.''.
(c) Effective Date.--The amendments made by this section shall
apply as of the date of enactment of this Act.
SEC. 312. CERTAIN PLAN TRANSERS AND MERGERS.
(a) Amendment to the Internal Revenue Code of 1986.--Section 414
(relating to definitions and special rules) (as amended by this Act) is
amended by adding at the end the following new subsection:
``(z) Certain Plan Transfers and Mergers.--
``(1) In general.--Under rules prescribed by the Secretary,
no amount shall be includible in gross income by reason of--
``(A) a transfer of all or a portion of the account
balance of a participant or beneficiary, whether or not
vested, from a defined contribution plan described in
section 401(a) or section 403(a) to an annuity contract
described in section 403(b),
``(B) a transfer of all or a portion of the account
balance of a participant or beneficiary, whether or not
vested, from an annuity contract described in section
403(b) to a defined contribution plan described in
section 401(a) or section 403(a), or
``(C) a merger of a defined contribution plan
described in section 401(a) or section 403(a) with an
annuity contract described in section 403(b),
so long as the transfer or merger does not cause a reduction in
the vested benefit or total benefit (including non-vested
benefit) of any participant or beneficiary. A plan or contract
shall not fail to be considered to be described in sections
401(a), 403(a), or 403(b) (as applicable) merely because such
plan or contract engages in a transfer or merger described in
this paragraph.
``(2) Distributions.--Except to the extent provided in
paragraphs (3) and (4), amounts transferred or merged pursuant
to paragraph (1) shall be distributed solely in accordance with
the terms of the transferee or merged plan.
``(3) Spousal consent and anti-cutback protection.--In the
case of a transfer or merger described in paragraph (1),
amounts in the transferee or merged plan that are attributable
to the transferor or predecessor plan shall--
``(A)(i) be treated in the same manner as amounts
in a plan to which section 401(a)(11) or section 205 of
the Employee Retirement Income Security Act of 1974
applies to the extent that such sections applied to
such amounts in the transferor or predecessor plan, or
``(ii) be required to satisfy the requirements of
section 401(a)(11)(B)(iii)(I) or section
205(b)(1)(C)(i) of the Employee Retirement Income
Security Act of 1974 to the extent that such section
applied to such amounts in the transferor or
predecessor plan, and
``(B) be treated as subject to section 411(d)(6)
and section 204(g) of the Employee Retirement Income
Security Act of 1974 to the extent that such amounts
were subject to such sections in the transferor or
predecessor plan.
``(4) Special rules.--Under rules prescribed by the
Secretary, to the extent amounts transferred or merged pursuant
to paragraph (1) were otherwise entitled to grandfather
treatment under the transferor or predecessor plan, such
amounts (and income or loss attributable thereto) shall remain
entitled to such treatment under the transferee or merged plan.
The rules prescribed by the Secretary shall require that such
amounts be separately accounted for by the transferee or merged
plan. For purposes of this paragraph, `grandfather treatment'
shall mean special treatment under the Internal Revenue Code of
1986 or the Employee Retirement Income Security Act of 1974
that is provided for prior benefits, prior periods of time, or
certain individuals in connection with a change in the
applicable law.
``(5) Consent.--In the case of an annuity contract
described in section 403(b) with respect to which transfers may
be made only with the consent of a participant or beneficiary
pursuant to the terms of such contract or pursuant to
applicable law, a transfer from such contract pursuant to
paragraph (1) may be made only if such participant or
beneficiary consents to such transfer. For purposes of this
paragraph, a merger of an annuity contract described in section
403(b) with a plan described in section 401(a) or 403(a) shall
be treated as a transfer from the predecessor plan or contract
to the merged plan or contract. Nothing in this subsection
shall affect the application of contract or plan terms
otherwise applicable in the case of a withdrawal from the
contract or plan.''.
(b) Amendment to the Employee Retirement Income Security Act of
1974.--Section 4 of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1003) is amended by adding at the end the following new
subsection:
``(d) This title shall apply to any plan or contract described in
section 414(z) of the Internal Revenue Code of 1986 to the extent
necessary to comply with the requirements of such section. Transfers or
mergers permitted under such section shall be treated as satisfying the
requirements of this title.''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to years beginning after the Secretary of the Treasury
prescribes rules under section 414(z) of the Internal Revenue
Code of 1986.
(2) Rules.--The Secretary of the Treasury shall issue rules
under section 414(z) of the Internal Code of 1986 within 1 year
after the date of enactment of this Act.
TITLE IV--INCREASING RETIREMENT PLAN PARTICIPATION AND SAVINGS
SEC. 401. EXPANSION OF THE SAVER'S CREDIT.
(a) In General.--The table contained in subsection (b) of section
25B (relating to applicable percentage) is amended to read as follows:
------------------------------------------------------------------------
``Adjusted Gross Income
---------------------------------------------------------
Joint return Head of a All other cases Applicable
------------------- household ------------------ percentage
-------------------- Not
Over Not over Over Not over Over over
------------------------------------------------------------------------
$30,000 ........ $22,500 ....... $15,000 55
30,000 40,000 22,500 30,000 15,000 20,000 25
40,000 50,000 30,000 37,500 20,000 25,000 20
50,000 60,000 37,500 45,000 25,000 30,000 10
60,000 ........ 45,000 ........ 30,000 ....... 0''.
------------------------------------------------------------------------
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2003.
SEC. 402. ACCELERATION OF SCHEDULED INCREASES IN PENSION PLAN
CONTRIBUTION LIMITS.
(a) Elective Deferrals.--
(1) In general.--Section 402(g)(1) (relating to general
rule for limitation on exclusion for elective deferrals) is
amended--
(A) in subparagraph (A) by striking ``the
applicable dollar amount'' and inserting ``$15,000'',
(B) by striking subparagraph (B) and redesignating
subparagraph (C) as subparagraph (B).
(2) Conforming amendments.--
(A) Section 402(g)(1)(B) (as redesignated by
paragraph (1)) is amended by striking ``applicable
dollar amount under subparagraph (B)'' and inserting
``amount in effect under subparagraph (A)''.
(B) Section 402(g)(4) is amended--
(i) by striking ``2006'' and inserting
``2004'',
(ii) by striking ``paragraph (1)(B)'' and
inserting ``paragraph (1)(A)'', and
(iii) by striking ``2005'' and inserting
``2003''.
(b) Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations.--
(1) In general.--Subsection (b)(2)(A) of section 457
(defining eligible deferred compensation plan) is amended by
striking ``the applicable dollar amount'' and inserting
``$15,000''.
(2) Conforming amendment.--Paragraph (15) of section 457(e)
is amended to read as follows:
``(15) Cost-of-living adjustments.--In the case of taxable
years beginning after December 31, 2003, the Secretary shall
adjust the $15,000 amount in subsection (b)(2)(A) at the same
time and in the same manner as under section 415(d), except
that the base period shall be the calendar quarter beginning
July 1, 2002, and any increase under this paragraph which is
not a multiple of $500 shall be rounded to the next lowest
multiple of $500.''.
(c) Simple Retirement Accounts.--
(1) In general.--Clause (ii) of section 408(p)(2)(A)
(relating to general rule for qualified salary reduction
arrangement) is amended by striking ``the applicable dollar
amount'' and inserting ``$10,000''.
(2) Conforming amendment.--Subparagraph (E) of section
408(p)(2) is amended to read as follows:
``(E) Cost-of-living adjustment.--In the case of a
year beginning after December 31, 2003, the Secretary
shall adjust the $10,000 amount in subparagraph (A)(ii)
at the same time and in the same manner as under
section 415(d), except that the base period taken into
account shall be the calendar quarter beginning July 1,
2002, and any increase under this subparagraph which is
not a multiple of $500 shall be rounded to the next
lower multiple of $500.''.
(d) Catch-Up Contributions.--
(1) In general.--Subparagraph (B) of section 414(v)(2)
(relating to applicable dollar amount) is amended--
(A) in clause (i) by striking ``shall be'' and all
that follows and inserting ``is $5,000.'', and
(B) in clause (ii) by striking ``shall be'' and all
that follows and inserting ``is $2,500.''.
(2) Conforming amendments.--Section 414(v)(2)(C) is
amended--
(A) by striking ``2006'' and inserting ``2003'',
and
(B) by striking ``2005'' and inserting ``2002''.
(e) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2003.
SEC. 403. REMOVING BARRIERS TO AUTOMATIC CONTRIBUTION TRUST
ARRANGEMENTS.
(a) In General.--
(1) Control deemed to have been exercised with respect to
amount of automatic contributions.--Section 404(c) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1104(c)) (as amended by this Act) is amended by adding at the
end the following new paragraph:
``(5)(A) A participant in an individual account plan shall, for
purposes of paragraph (1), be treated as exercising control over the
assets in the account with respect to the amount of contributions made
under an automatic contribution trust arrangement.
``(B) For purposes this paragraph, the term `automatic contribution
trust arrangement' means an arrangement--
``(i) which meets the requirements of subparagraph (C),
``(ii) under which a participant may elect to have the
employer make payments as contributions to a trust under the
plan on behalf of the participant, or to the participant directly in
cash,
``(iii) under which the participant is treated as having
elected to have the employer make such contributions in an
amount equal to a uniform percentage of compensation provided
under the plan until the participant specifically elects not to
have such contributions made (or specifically elects to have
such contributions made at a different percentage), and
``(iv) under which contributions described in clause (iii)
are invested in accordance with regulations prescribed by the
Secretary.
``(C)(i) The administrator of an individual account plan shall,
within a reasonable period before each plan year, give to each employee
to whom an automatic contribution trust arrangement applies for such
plan year notice of the employee's rights and obligations under the
arrangement which--
``(I) is sufficiently accurate and comprehensive to
appraise the employee of such rights and obligations, and
``(II) is written in a manner calculated to be understood
by the average employee to whom the arrangement applies.
``(ii) A notice shall not be treated as meeting the requirements of
clause (i) with respect to an employee unless--
``(I) the notice includes a notice explaining the
employee's right under the arrangement to elect not to have
elective contributions made on the employee's behalf (or to
elect to have such contributions made at a different
percentage),
``(II) the employee has a reasonable period of time after
receipt of the notice described in subclause (I) and before the
first elective contribution is made to make such election, and
``(III) the notice explains how contributions made under
the arrangement will be invested in the absence of any
investment election by the employee.''.
(2) Preemption of conflicting state regulation.--Section
514(b) of such Act (29 U.S.C. 1144(b)) is amended--
(A) by redesignating paragraph (9) as paragraph
(10); and
(B) by inserting after paragraph (8) the following
new paragraph:
``(9) Any law of a State which would directly or indirectly
prohibit or restrict the inclusion in any plan of an automatic
contribution trust arrangement (as defined in section 404(c)(4)(B))
shall be superseded. The Secretary may prescribe regulations which
would establish minimum standards that such arrangements would be
required to satisfy in order for this paragraph to apply.''.
(b) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2003.
(2) Regulations.--Final regulations under section
404(c)(5)(B)(iv) of the Employee Retirement Income Security Act
of 1974 (added by this section) shall be issued no later than 1
year after the date of enactment of this Act.
SEC. 404. DISPOSITION OF UNUSED HEALTH BENEFITS IN CAFETERIA PLANS AND
FLEXIBLE SPENDING ARRANGEMENTS.
(a) In General.--Section 125 (relating to cafeteria plans) is
amended by redesignating subsections (h) and (i) as subsections (i) and
(j), respectively, and by inserting after subsection (g) the following:
``(h) Contributions of Certain Unused Health Benefits.--
``(1) In general.--For purposes of this title, a plan or
other arrangement shall not fail to be treated as a cafeteria
plan solely because qualified benefits under such plan include
a health flexible spending arrangement under which not more
than $500 of unused health benefits may be contributed on
behalf of an employee to a qualified retirement plan (as
defined in section 4974(c)) or an eligible deferred
compensation plan (as defined in section 457(b)).
``(2) Contribution of unused health benefits on behalf of
employee.--For purposes of this title, contributions on behalf
of an employee described in paragraph (1) shall be treated as
elective contributions made pursuant to a choice by the
employee between such contributions and compensation which
would otherwise be includible in the gross income of the
employee. Contributions described in paragraph (1) shall be
excluded from the gross income of the employee, or included in
the gross income of the employee and allowed as a deduction by
the employee, to the extent that elective contributions would
be treated in that manner under this title.
``(3) Health flexible spending arrangement.--For purposes
of this subsection, the term `health flexible spending
arrangement' means a flexible spending arrangement (as defined
in section 106(c)) that is a qualified benefit and only permits
reimbursement for expenses for medical care (as defined in
section 213(d)(1) (without regard to subparagraphs (C) and (D)
thereof).
``(4) Unused health benefits.--For purposes of this
subsection, with respect to an employee, the term `unused
health benefits' means the excess of--
``(A) the maximum amount of reimbursement allowable
to the employee during a plan year under a health
flexible spending arrangement, taking into account any
election by the employee, over
``(B) the actual amount of reimbursement during
such year under such arrangement.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2003.
SEC. 405. UPDATING DEDUCTION RULES FOR COMBINATION OF PLANS.
(a) In General.--Subparagraph (C) of section 404(a)(7) (relating to
limitation on deductions where combination of defined contribution plan
and defined benefit plan) is amended by adding after clause (ii) the
following new clause:
``(iii) In the case of employer
contributions to 1 or more defined contribution
plans, this paragraph shall only apply to the
extent that such contributions (other than
elective deferrals (as defined in section
402(g)(3)) exceed 6 percent of the compensation
otherwise paid or accrued during the taxable
year to the beneficiaries under such plans. For
purposes of this clause, amounts carried over
from preceding taxable years under subparagraph
(B) shall be treated as employer contributions
to 1 or more defined contributions to the
extent attributable to employer contributions
to such plans in such preceding taxable
years.''.
(b) Conforming Amendments.--Subparagraph (A) of section 4972(c)(6)
(relating to nondeductible contributions) is amended to read as
follows:
``(A) so much of the contributions to 1 or more
defined contribution plans which are not deductible
when contributed solely because of section 404(a)(7) as
does not exceed the sum of--
``(i) the amount of contributions described
in section 401(m)(4)(A), plus
``(ii) the amount of contributions
described in section 402(g)(3)(A), or''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2003.
TITLE V--EXPANDING RETIREMENT PLAN COVERAGE TO EMPLOYEES OF SMALL
BUSINESSES
SEC. 501. ADDITIONAL NONELECTIVE EMPLOYER CONTRIBUTIONS TO SIMPLE
PLANS.
(a) In General.--
(1) Modification to definition.--Subparagraph (A) of
section 408(p)(2) (defining qualified salary reduction
arrangement) is amended by striking ``and'' at the end of
clause (iii), by redesignating clause (iv) as clause (v), and
by inserting after clause (iii) the following new clause:
``(iv) the employer may make nonelective
contributions of a uniform percentage (up to 10
percent) of compensation for each employee who
is eligible to participate in the arrangement
and who has at least $5,000 of compensation
from the employer for the year, and''.
(2) Limitation.--Subparagraph (A) of section 408(p)(2) (defining
qualified salary reduction arrangement) is amended by adding at the end
the following: ``The compensation taken into account under clause (iv)
for any year shall not exceed the limitation in effect for such year
under section 401(a)(17).''.
(b) Conforming Amendments.--
(1) Section 408(p)(2)(A)(v), as redesignated by subsection
(a), is amended by striking ``or (iii)'' and inserting ``,
(iii), or (iv)''.
(2) Paragraph (8) of section 408(p) is amended by inserting
``, the employer contribution actually made under paragraph
(2)(A)(iv) of this subsection,'' after ``paragraph (2)(A)(ii)
of this subsection''.
(3) Section 401(k)(11)(B)(i) is amended by striking ``and''
at the end of subclause (II), by redesignating subclause (III)
as subclause (IV), and by inserting after subclause (II) the
following new subclause:
``(III) the employer may make
nonelective contributions of a uniform
percentage (up to 10 percent) of
compensation for each employee who is
eligible to participate in the
arrangement and who has at least $5,000
of compensation from the employer for
the year, and''
(4) Section 401(k)(11)(B)(i)(IV), as redesignated by
paragraph (2), is amended by striking ``or (II)'' and inserting
``, (II), or (III)''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2003.
SEC. 502. MATCHING CONTRIBUTION RULES FOR SIMPLE IRAS AND SIMPLE
401(K)S CONFORMED.
(a) In General.--Subclause (II) of section 401(k)(11)(B)(i)
(relating to general rule for contribution requirements) is amended by
striking ``3 percent'' and inserting ``the applicable percentage (as
defined in section 408(p)(2)(C)(ii))''.
(b) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 2003.
SEC. 503. SALARY-REDUCTION ONLY SIMPLE PLANS.
(a) Simple Retirement Accounts.--
(1) In general.--Paragraph (2) of section 408(p) (defining
qualified salary reduction arrangement) 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 limit the
amount which an employee may elect under
subparagraph (A)(i) to a total of $5,000 for
the year. 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) of section
410(b)(3) are eligible to participate in the
arrangement described in clause (i), 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)
(relating to special rules for acquisitions, dispositions, and
similar transactions) 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 striking ``In''
and inserting ``(i) In'' and by adding after clause (i) the
following new clause:
``(ii) In the case of a year beginning
after December 31, 2004, the Secretary shall
adjust the $5,000 amount in subparagraph (C)(i)
at the same time and in the same manner as
under section 415(d), except that the base
period taken into account shall be the calendar
quarter beginning July 1, 2003, and any
increase under this subparagraph which is not a
multiple of $500 shall be rounded to the next
lower multiple of $500.''.
(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,''.
(5) Conforming amendment.--Clause (ii) of section
408(p)(10)(B) is amended by striking ``paragraph (2)(D)'' and
inserting ``paragraph (2)(E)''.
(b) Adoption of Simple Plan To Meet Nondiscrimination Tests.--
Subparagraph (B) of section 401(k)(11) (relating to contribution
requirements) 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 limit the amount which an
employee may elect under clause (i) to
the amount in effect under section
408(p)(2)(C)(i) for the year. 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).''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2004.
SEC. 504. PERMIT A MID-YEAR CHANGE FROM A SIMPLE PLAN TO ANOTHER PLAN.
(a) In General.--Clause (i) of section 408(p)(2)(E) (relating to
arrangement may be only plan of employer) is amended by striking ``An
arrangement'' and inserting ``Except as provided in regulations
prescribed by the Secretary, an arrangement''.
(b) Conforming Amendment.--Section 401(k)(11)(C) is amended by
inserting ``, except as provided in regulations prescribed by the
Secretary,'' after ``if''.
(c) Regulations.--Not later than December 31, 2004, the Secretary
shall issue final regulations under which an employer can cease to
maintain a qualified salary reduction arrangement in a year and begin
maintaining a qualified plan (within the meaning of section
408(p)(2)(E)(ii) of the Internal Revenue Code of 1986). Such
regulations shall provide safeguards to ensure that changing from such
an arrangement to such a plan during a year is not used to circumvent
otherwise applicable limits or rules.
(d) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2004.
SEC. 505. ELIMINATION OF HIGHER PENALTY ON CERTAIN SIMPLE
DISTRIBUTIONS.
(a) In General.--Subsection (t) of section 72 (relating to 10-
percent additional tax on early distributions from qualified retirement
plans) is amended by striking paragraph (6) and redesignating
paragraphs (7), (8), and (9) as paragraphs (6), (7), and (8),
respectively.
(b) Conforming Amendments.--
(1) Section 72(t)(2)(E) is amended by striking ``paragraph
(7)'' and inserting ``paragraph (6)''.
(2) Section 72(t)(2)(F) is amended by striking ``paragraph
(8)'' and inserting ``paragraph (7)''.
(3) Section 408(d)(3)(G) is amended by striking ``applies''
and inserting ``applied on the day before the date of the
enactment of the Pension Preservation and Savings Expansion Act
of 2003)''.
(4) Section 457(a)(2) is amended by striking ``section
72(t)(9)'' and inserting ``section 72(t)(8)''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2003.
SEC. 506. SIMPLE PLAN PORTABILITY.
(a) Repeal of Limitation.--Paragraph (3) of section 408(d)
(relating to rollover contributions), as amended by this Act, is
amended by striking subparagraph (G) and redesignating subparagraph (H)
as subparagraph (G).
(b) Section 402(c)(8)(B) is amended by adding at the end the
following new sentence: ``Individual retirement accounts and individual
retirement annuities described in clauses (i) and (ii) shall be treated
as eligible retirement plans without regard to whether they are part of
a simplified employee pension (within the meaning of section 408(k)) or
a simplified retirement account (within the meaning of section
408(p)).''.
(c) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 2003.
SEC. 507. CORRECTION OF SIMPLIFIED EMPLOYEE PENSION COMPENSATION
INCONSISTENCY.
(a) In General.--Subparagraph (A) of section 402(h)(2) (relating to
limitations on employer contributions) is amended by striking ``414(s))
from such employer includible in the employee's gross income'' and
inserting ``415(c)(3)) from such employer''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2003.
SEC. 508. EQUALIZATION OF TAX TREATMENT OF RETIREMENT PLAN
CONTRIBUTIONS OF THE SELF-EMPLOYED.
(a) In General.--Subsection (b) of section 1402 (defining self-
employment income) is amended by striking ``or'' at the end of
paragraph (1), by striking the period at the end of paragraph (2) and
inserting ``; or'', and by inserting after paragraph (2) the following:
``(3) any payment made to, or on behalf of, an individual--
``(A) from or to a trust described in section
401(a) which is exempt from tax under section 501(a) at
the time of such payment unless--
``(i) such payment is made to the
individual by the trust as remuneration for
services rendered and not as a beneficiary of
the trust, or
``(ii) such payment is treated as an
employer contribution under a qualified cash or
deferred arrangement (as defined in section
401(k)) to the extent not included in gross
income by reason of section 402(e)(3),
``(B) under or to an annuity plan which, at the
time of such payment, is a plan described in section
403(a), other than any elective deferrals (within the
meaning of section 402(g)(3)),
``(C) under a simplified employee pension (as
defined in section 408(k)(1)), other than any
contributions described in section 408(k)(6) or
408(k)(7),
``(D) under or to an annuity contract described in
section 403(b), other than a payment for the purchase
of such contract which is made by reason of a salary
reduction agreement (whether evidenced by a written
instrument or otherwise), or
``(E) under an arrangement to which section 408(p)
applies, other than any elective contributions under
paragraph (2)(A)(i) thereof.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2003.
TITLE VI--STRENGTHENING INDIVIDUAL RETIREMENT ARRANGEMENTS
SEC. 601. ACCELERATION OF INCREASES IN IRA CONTRIBUTION LIMITS.
(a) Deductible Amount.--The table in subparagraph (A) of section
219(b)(5) (relating to general rule for deductible amount) is amended
to read as follows:
``For taxable years
The deductible
beginning in:
amount is:
2002 through 2003...................... $3,000
2004 and thereafter.................... $5,000.''.
(b) Catch-Up Contributions.--The table in clause (ii) of section
219(b)(5)(B) (relating to applicable amount) is amended to read as
follows:
``For taxable years
The applicable
beginning in:
amount is:
2002 through 2003...................... $500
2004 and thereafter.................... $1,000.''.
(c) Conforming Amendments.--Section 219(b)(5)(C) is amended--
(1) by striking ``2007'' and inserting ``2003'', and
(2) by striking ``2008'' and inserting ``2004''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2003.
SEC. 602. ACCELERATION AND EXPANSION OF CERTAIN SCHEDULED INCREASES IN
ELIGIBILITY FOR IRAS AND ELIMINATION OF IRA MARRIAGE
PENALTY.
(a) Increase in Limitation on Deduction for Active Participants in
Certain Pension Plans.--The table in clause (i) of section 219(g)(3)(B)
(defining applicable dollar amount for taxpayers filing joint returns)
is amended to read as follows:
The applicable
``For taxable years beginning in: dollar amount is:
2003.......................................... $60,000
2004.......................................... $70,000
2005.......................................... $75,000
2006.......................................... $80,000
2007.......................................... $85,000
2008.......................................... $90,000
2009.......................................... $95,000
2010 and thereafter........................... $100,000.''.
(b) Roth IRA Increase in Applicable Dollar Amount for Taxpayers
Filing Joint Returns.--
(1) In general.--Subclause (I) of section 408A(c)(3)(C)(ii)
(defining applicable dollar amount) is amended by striking
``$150,000'' and inserting ``$190,000''.
(2) Phase-out range.--Clause (ii) of section 408A(c)(3)(A)
is amended to read as follows:
``(ii) $15,000 ($30,000 in the case of a
joint return).
(c) Elimination of Marriage Penalty on IRA Deduction for Active
Pension Plan Participants.--Section 219(g) (relating to limitation on
deduction for active participants in certain pension plans) is
amended--
(1) by striking ``or the individual's spouse'' in paragraph
(1), and
(2) by striking paragraph (7).
(d) Effective Dates.--
(1) Subsections (a) and (b).--The amendments made by
subsection (a) shall apply to taxable years beginning after
December 31, 2003.
(2) Subsection (c).--The amendments made by subsection (c)
shall apply to taxable years beginning after December 31, 2006.
SEC. 603. IRA ELIGIBILITY FOR THE DISABLED.
(a) In General.--Subsection (f) of section 219 (relating to other
definitions and special rules) is amended by adding at the end the
following:
``(8) Special rule for certain disabled individuals.--In
the case of an individual--
``(A) who is disabled (within the meaning of
section 72(m)(7)), and
``(B) who has not attained age 70\1/2\ before the
close of the taxable year,
subparagraph (B) of subsection (b)(1) shall not apply.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2003.
SEC. 604. PROTECTING IRA ASSETS.
The Secretary of the Treasury shall, no later than December 31,
2004, establish a correction procedure that specifically allows an
individual to rescind one or more distributions from an individual
retirement plan (as defined in section 7701(a)(37) of the Internal
Revenue Code of 1986) (whether or not in the same taxable year) to
correct errors that result from the individual's misunderstanding of
applicable rules or an error of the trustee, custodian, or issuer of
the individual retirement plan in processing a transaction in the form
of a distribution rather than a transfer, rollover, or similar
transaction. Such procedure shall provide for rescission of
distributions without a filing with the Secretary in the case of errors
that are corrected within a reasonable time as defined by the Secretary
and may provide for other self-correction safe harbors. Such procedure
shall also include appropriate conditions on the correction procedure
to prevent abuse.
TITLE VII--REVITALIZING DEFINED BENEFIT PLANS
SEC. 701. MULTIPLE EMPLOYER PLANS PERMITTED TO ELECT SEPARATE OR
AGGREGATE TREATMENT FOR PURPOSES OF APPLYING THE FUNDING
RULES AND DEDUCTION LIMITATIONS.
(a) In General.--Paragraph (4) of section 413(c) (relating to
funding) is amended--
(1) in subparagraph (A) by striking ``In the case of'' and
inserting ``Except as provided in subparagraph (C), in the case
of'', and
(2) in subparagraph (B)--
(A) by striking ``In the case of'' and inserting
``Except as provided in subparagraph (C), in the case
of'',
(B) by striking ``unless'' and all that follows and
inserting a period, and
(C) by inserting after subparagraph (B) the
following:
``(C) Election to be treated as separate or
aggregate plan.--The plan administrator may elect with
respect to a plan--
``(i) to have subparagraph (A) apply to the
plan, or
``(ii) to have the requirements of section
412 be determined as if all participants in the
plan were employed by a single employer.
An election under the preceding sentence shall take
effect for the plan year in which made and, once made,
may be revoked only with the consent of the
Secretary.''.
(b) Conforming Amendments.--
(1) Paragraph (6) of section 413(c) is amended--
(A) by striking ``In the case of'' and inserting
``Except provided in subparagraph (C), in the case
of'', and
(B) by adding at the end the following new
subparagraph:
``(C) Election.--If with respect to a plan--
``(i) paragraph (4)(A) applies,
subparagraph (A) of this paragraph shall apply,
and
``(ii) paragraph (4)(B) applies,
subparagraph (B) of this paragraph shall apply.
(2) Section 413(c)(6)(B)(i) is amended by striking
``except'' and all that follows and inserting ``except as
provided in subparagraph (C).''.
(3) Section 210(a)(3) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1060(a)(3)) is amended by
striking ``The'' and inserting ``Except as provided in section
413(c)(4) of the Internal Revenue Code of 1986, the''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2003.
SEC. 702. TREATMENT OF EMPLOYEE CONTRIBUTIONS TO CONTRIBUTORY DEFINED
BENEFIT PLANS.
(a) Amendment to the Internal Revenue Code of 1986.--Subsection (e)
of section 402 (relating to other rules applicable to exempt trusts) is
amended by adding at the end the following new paragraph:
``(7) Contributory defined benefit plans.--For purposes of
sections 72 and 451, an amount shall not be treated as received
by an employee if such amount is--
``(A) contributed--
``(i) to an employee's trust described in
section 401(a) which is maintained in
connection with a defined benefit plan, or
``(ii) under a defined benefit plan
described in section 403(a), and
``(B) such contributions would be described in
section 414(h)(2) if the plan were established by an
entity described therein.
(b) Effective Date.--The amendment made by this section shall apply
to contributions made in years beginning after December 31, 2003.
SEC. 703. REFORM OF THE MINIMUM PARTICIPATION RULE.
(a) In General.--Subparagraph (A) of section 401(a)(26) (relating
to additional participation requirements) is amended by striking ``In
the case of'' and inserting ```To the extent provided in regulations
prescribed by the Secretary, in the case of''.
(b) Regulations.--Not later than December 31, 2003, the Secretary
of the Treasury shall issue final regulations under which the
application of section 401(a)(26) of the Internal Revenue Code of 1986
is restricted to--
(1) arrangements described in section 1.401(a)(26)-
2(d)(1)(iii) of the Treasury Regulations (as in effect on the
date of the enactment of this Act), and
(2) other arrangements that use multiple defined benefit
plans in a manner inconsistent with the purposes of the
nondiscrimination rules or with the intended nature of a defined
benefit plan.
(c) Effective Date.--The amendment made by subsection (a) shall
take effect on the date of enactment of this Act.
SEC. 704. PLAN VALUATION DATA COLLECTION.
(a) Amendment to the Internal Revenue Code of 1986.--
(1) Plan's liability.--
(A) In general.--Subparagraph (B) of section
412(c)(9) (relating to annual valuation) is amended by
adding at the end the following:
``(v) Valuation of plan's liability.--
Valuation of the plan's liability for purposes
of this paragraph may be based on data
determined as of a date within the plan year to
which the valuation refers or as of a date
within the plan year prior to the year to which
the valuation refers.''.
(B) Conforming amendment.--The heading for section
412(c)(9)(B) is amended by striking ``Valuation date''
and inserting ``Valuation of experience gains and
losses''.
(2) Plan's assets.--Subparagraph (B) of section 412(c)(9)
(relating to annual valuation) is amended by adding at the end
the following:
``(vi) Valuation of plan's assets.--The
valuation of a plan's assets may be made as of
a date later than the date as of which the
plan's liabilities are valued if--
``(I) the asset valuation date is
not later than the end of the plan year
to which the valuation refers, and
``(II) the value of such assets is
adjusted back to the date as of which
the plan's liabilities are valued based
on the interest rate in subsection
(b)(5)(A) or (b)(5)(B), as applicable,
and adjusting for cash flows that are
not taken into account in the interest
assumption and that occur between the
date that the liabilities are valued
and the date that the assets are
valued.''.
(b) Amendment to the Employee Retirement Income Security Act of
1974.--
(1) Plan's liability.--Subparagraph (B) of section
302(c)(9) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1082(c)(9)(B)) is amended by adding at the end
the following:
``(iv) Valuation of the plan's liability for purposes of this
paragraph may be based on data determined as of a date within the plan
year to which the valuation refers or as of a date within the plan year
prior to the year to which the valuation refers.''.
(2) Plan's assets.--Subparagraph (B) of section 302(c)(9)
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1082(c)(9)(B)) is amended by adding at the end the
following:
``(v) The valuation of a plan's assets may be made as of a date
later than the date as of which the plan's liabilities are valued if--
``(I) the asset valuation date is not later than the end of
the plan year to which the valuation refers, and
``(II) the value of such assets is adjusted back to the
date as of which the plan's liabilities are valued based on the
interest rate in subsection (b)(5)(A) or (b)(5)(B), as
applicable, and adjusting for cash flows that are not taken
into account in the interest assumption and that occur between
the date that the liabilities are valued and the date that the
assets are valued.''.
(c) Effective Date.--
(1) In general.--The amendments made by sections (a)(2) and
(b)(2) shall apply to years beginning after December 31, 2002.
(2) Special rule.--The amendments made by subsections
(a)(1) and (b)(1) shall take effect as if included in section
661(a) of the Economic Growth and Tax Relief Reconciliation Act
of 2001.
SEC. 705. REPLACEMENT OF INTEREST RATE ON 30-YEAR TREASURY SECURITIES
WITH INTEREST RATE ON CONSERVATIVELY-INVESTED LONG-TERM
CORPORATE BONDS.
(a) Internal Revenue Code of 1986.--
(1) In general.--Subclause (I) of section 412(b)(5)(B)(ii)
and subclause (II) of section 417(e)(3)(A)(ii) are each amended
by striking ``30-year Treasury securities'' and inserting
``amounts conservatively invested in long-term corporate
bonds''.
(2) Regulations.--
(A) Subclause (I) of section 412(b)(5)(B)(ii) is
amended by adding at the end the following: ``The
Secretary shall, by regulation, prescribe a method for
determining the rate of interest on amounts
conservatively invested in long-term corporate bonds,
based on one or more indices, as determined from time
to time by the Secretary.''.
(B) Subclause (II) of section 417(e)(3)(A)(ii) is
amended by adding at the end the following: ``The
Secretary shall, by regulations, prescribe a method for
determining this interest rate based on one or more
indices, as determined from time to time by the
Secretary.''.
(3) Conforming amendments.--
(A) Section 412(b)(5)(B)(iii)(II) is amended to
read as follows:
``(II) consistent with the rate of
return with respect to amounts
conservatively invested in long-term
corporate bonds.''.
(B) Section 415(b)(2)(E)(ii) is amended by striking
``the applicable interest rate (as defined in section
417(e)(3))'' and inserting ``5.5 percent''.
(4) Phasein of interest rate on long-term corporate
bonds.--Section 417(e)(3)(A)(ii) is amended by adding at the
end the following:
``(III) Phasein of interest rate on
long-term corporate bonds.--In the case
of a plan year specified in the table
in subclause (IV), the interest rate
for purposes of subclause (II) shall be
the lower of (aa) the rate specified in
subclause (II) (without regard to this
subclause), or (bb) the 30-year
Treasury securities rate plus the
applicable percentage of the excess of
the rate specified in subclause (II)
(without regard to this subclause) over
the 30-year Treasury securities rate.
``(IV) Applicable percentage.--For
purposes of subclause (III), the
applicable percentage shall be
determined in accordance with the
following table:
``Plan year beginning in calendar year:
Applicable
percentage:
2006................................... 20
2007................................... 40
2008................................... 60
2009................................... 80.
``(V) Special rule for collectively
bargained plans.--In the case of a plan
maintained pursuant to one or more
collective bargaining agreements
between employee representatives and
one or more employers ratified by the
date of the enactment of this
subclause, in lieu of the 4 calendar
years specified in subclause (IV), the
years corresponding to the applicable
percentages in subclause (IV) shall be
the first 4 years in which subclause
(III) applies to employees covered by
any such agreement. This subclause
shall only apply to such employees.''.
(b) Employee Retirement Income Security Act of 1974.--
(1) In general.--Subclause (II) of section
205(g)(3)(A)(ii), subclause (I) of section 302(b)(5)(B)(ii),
and subclause (II) of section 4006(a)(3)(E)(iii) of the
Employee Retirement Income Security Act of 1974 are each
amended by striking ``30-year Treasury securities'' and
inserting ``amounts conservatively invested in long-term
corporate bonds''.
(2) Regulations.--
(A) Subclause (II) of section 205(g)(3)(A)(ii) of
the Employee Retirement Income Security Act of 1974 is
amended by adding at the end the following: ``The
Secretary of the Treasury shall, by regulation,
prescribe a method for determining this interest rate
based on one or more indices, as determined from time
to time by the Secretary of the Treasury.''.
(B) Subclause (I) of section 302(b)(5)(B)(ii) of
the Employee Retirement Income Act of 1974 is amended
by adding at the end the following: ``The Secretary of
the Treasury shall, by regulation, prescribe a method
for determining the rate of interest on amounts
conservatively invested in long-term corporate bonds,
based on one or more indices, as determined from time
to time by the Secretary of the Treasury.''.
(C) Subclause (II) of section 4006(a)(3)(E)(iii) of
the Employee Retirement Income Security Act of 1974 is
amended by adding at the end the following: ``The
Secretary of the Treasury shall, by regulation,
prescribe a method for determining such annual yield
based on one or more indices, as determined from time
by the Secretary of the Treasury.''.
(3) Conforming amendment.--Section 302(b)(5)(B)(iii)(II) of
such Act is amended to read as follows:
``(II) consistent with the rate of
return with respect to amounts
conservatively invested in long-term
corporate bonds.''.
(4) Phasein of interest rate on long-term corporate
bonds.--Section 205(g)(3)(A)(ii) is amended by adding at the
end the following:
``(III) In the case of a plan year specified in the
table in subclause (IV), the interest rate for purposes
of subclause (II) shall be the lower of (aa) the rate
specified in subclause (II) (without regard to this
subclause), or (bb) the 30-year Treasury securities
rate plus the applicable percentage of the excess of
the rate specified in subclause (II) (without regard to
this subclause) over the 30-year Treasury securities
rate.
``(IV) For purposes of subclause (III), the
applicable percentage shall be determined in accordance
with the following table:
``Plan year beginning in calendar year:
Applicable
percentage:
2006................................... 20
2007................................... 40
2008................................... 60
2009................................... 80.
``(V) Special rule for collectively bargained
plans.--In the case of a plan maintained pursuant to
one or more collective bargaining agreements between
employee representatives and one or more employers
ratified by the date of the enactment of this
subclause, in lieu of the 4 calendar years specified in
subclause (IV), the years corresponding to the
applicable percentages in subclause (IV) shall be the
first 4 years in which subclause (III) applies to
employees covered by any such agreement. This subclause
shall only apply to such employees.''.
(d) Effective Date.--
(1) In general.--Except as provided in paragraphs (2), (3),
(4), and (5), the amendments made by this section shall apply
to years beginning after December 31, 2003.
(2) Survivor annuities.--Except as provided in paragraphs
(3) and (4), in the case of amendments made by this section to
section 417(e)(3)(A)(ii) of the Internal Revenue Code of 1986
and to section 205(g)(3)(A)(ii) of the Employee Retirement
Income Security Act of 1974, and for purposes of section
411(a)(11)(B) of the Internal Revenue Code of 1986 and section
203(e)(2) of the Employee Retirement Income Security Act of
1974, such amendments shall apply to years beginning after
December 31, 2005.
(3) Lookback rules.--For purposes of applying all
applicable lookback rules in years beginning on or after the
otherwise applicable effective date determined under paragraph
(1), (2), or (4), the amendments made by this section shall be
applied as if such amendments had been in effect for all years
beginning before such effective date. For purposes of this
paragraph, a lookback rule is a rule that uses data from a
prior year in determining requirements applicable to the
current year.
(4) Collective bargaining agreements.--Except as provided
in paragraph (3), in the case of a plan maintained pursuant to
one or more collective bargaining agreements between employee
representatives and one or more employers ratified by the date
of the enactment of this Act, the amendments described in
paragraph (2) shall not apply to 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 the
enactment); or
(ii) January 1, 2006, or
(B) January 1, 2008.
(5) No reduction required.--In the case of any participant
or beneficiary, the amount payable under any form of benefit
subject to section 417(e)(3) of the Internal Revenue Code of
1986 shall not be required to be reduced below the amount
determined as of the last day of the last plan year beginning
before January 1, 2004, merely because of the amendments made
by subsection (a)(3)(B).
SEC. 706. INTEREST RATE RANGE FOR ADDITIONAL FUNDING REQUIREMENTS.
(a) Amendments to the Internal Revenue Code of 1986.--
(1) Special rule.--Subclause (III) of section
412(1)(7)(C)(i) is amended--
(A) by striking ``2002 or 2003'' in the text and
inserting ``2001, 2002, or 2003'', and
(B) by striking ``2002 and 2003'' in the heading
and inserting ``2001, 2002, and 2003''.
(2) Quarterly contributions.--Paragraph (7) of section
412(m) is amended to read as follows:
``(7) Special rule for 2002.--In any case in which the
interest rate used to determine current liability is determined
under subsection (1)(7)(C)(i)(III), for purposes of applying
paragraphs (1) and (4)(B)(ii) for plan years beginning in 2002,
the current liability for the preceding plan year shall be
redetermined using 120 percent as the specified percentage
determined under subsection (1)(7)(C)(i)(II).''
(b) Amendments to the Employee Retirement Income Security ---Act of
1974.--
(1) Special rule.--Subclause (III) of section
302(d)(7)(C)(i) of the Employee Retirement Income Security Act
of 1974 (29 U.S.C. 1082(d)(7)(C))(i)) is amended--
(A) by striking ``2002 or 2003'' in the text and
inserting ``2001, 2002, or 2003'', and
(B) by striking ``2002 and 2003'' in the heading
and inserting ``2001, 2002, and 2003''.
(2) Quarterly contributions.--Paragraph (7) of section
302(e) is amended to read as follows:
``(7) Special rule for 2002.--In any case in which the
interest rate used to determine current liability is determined
under subsection (d)(7)(C)(i)(III), for purposes of applying
paragraphs (1) and (4)(B)(ii) for plan years beginning in 2002,
the current liability for the preceding plan year shall be
redetermined using 120 percent as the specified percentage
determined under subsection (d)(7)(C)(i)(II).''
(c) PBGC.--Subclause (IV) of section 4006(a)(3)(E)(iii) of such Act
(29 U.S.C. 1306(a)(3)(E)(iii)) is amended to read as follows:
``(IV) In the case of plan years
beginning after December 31, 2001, and
before January 1, 2004, subclause (II)
shall be applied by substituting `100
percent' for `85 percent' and by
substituting `115 percent' for `100
percent'. Subclause (III) shall be
applied -----for such years without
regard to the preceding sentence.
(d) Effective Date.--The amendments made by this section shall take
effect as if included in the amendments made by section 405 of the Job
Creation and Worker Assistance Act of 2002.
SEC. 707. ASSET VALUATION.
(a) In General.--Clause (iv) of section 4006(a)(3)(E) is amended by
striking ``1986'' and inserting ``1986 (determined without regard to
subclause (I) of section 412(c)(7)(A)(ii) of such Code)''.
(b) Effective Date.--The amendment made by this section shall apply
to the determination of premiums for plan years ending after December
31, 2003.
SEC. 708. MULTIEMPLOYER PLAN EMERGENCY INVESTMENT LOSS RULE.
(a) Amendment to the Internal Revenue Code of 1986.--Paragraph (7)
of section 412(b) (relating to special rules for multiemployer plans)
is amended by adding at the end the following new subparagraph:
``(F) Emergency investment loss method.--
``(i) In general.--In lieu of amortizing
its experience loss as prescribed in paragraph
(2)(B)(iv), a multiemployer plan may elect to
use the emergency investment loss method
described in this subparagraph, starting with
the first plan year in which it has an
emergency investment loss.
``(ii) Emergency investment loss.--An
emergency investment loss is the difference
between the market value of the plan's assets
as of the last day of a plan year beginning on
or after July 1, 1999 and ending before January
1, 2004, and what that market value would have
been if the plan's earnings had been equal to
the projected ---investment return based on the
actuarial interest rate under paragraph (5)(A)
for the plan year, applied to the market value
of assets as of the beginning of the year and
noninvestment cash flows during the year.
``(iii) Amortization of emergency
investment loss.--The funding standard account
shall be charged with the amounts necessary to
amortize in equal annual installments (until
fully amortized) the plan's emergency
investment loss, over a period of 30 plan
years.
``(iv) Adjusted net actuarial experience.--
The adjusted net actuarial experience is the
amount produced by subtracting the emergency
investment loss from the net experience gain or
loss for the plan year as otherwise determined
for purposes of paragraph (2)(B)(iv) or
(3)(B)(ii) of this subsection.
``(v) Amortization of adjusted net
actuarial experience.--The adjusted net
actuarial experience is treated as a net
experience gain or loss and charged or credited
to the funding standard account under paragraph
(2)(B)(iv) or (3)(B)(ii), as applicable.''.
(b) Amendment to the Employee Retirement Income Security Act of
1974.--Paragraph (7) of section 302(b) of the Employee Retirement
Income Security Act of 1974 is amended by adding at the end the
following new subparagraph:
``(F)(i) In lieu of amortizing its experience loss as prescribed in
paragraph (2)(B)(iv), a multiemployer plan may elect to use the
emergency investment loss method described in this subparagraph,
starting with the first plan year in which it has an emergency
investment loss.
``(ii) An emergency investment loss is the difference between the
market value of the plan's assets as of the last day of a plan year
beginning on or after July 1, 1999 and ending before January 1, 2004,
and what that market value would have been if the plan's earnings had
been equal to the projected investment return based on the actuarial
interest rate under paragraph (5)(A) for the plan year, applied to the
market value of assets as of the beginning of the year and
noninvestment cash flows during the year.
``(iii) The funding standard account shall be charged with the
amounts necessary to amortize in equal annual installments (until fully
amortized) the plan's emergency investment loss, over a period of 30
plan years.
``(iv) The adjusted net actuarial experience is the amount produced
by subtracting the emergency investment loss from the net experience
gain or loss for the plan year as otherwise determined for purposes of
paragraph (2)(B)(iv) or (3)(B)(ii) of this subsection.
``(v) The adjusted net actuarial experience is treated as a net
experience gain or loss and charged or credited to the funding standard
account under paragraph (2)(B)(iv) or (3)(B)(ii), as applicable.''.
(c) Election Procedure.--
(1) In general.--The Secretary shall prescribe a procedure
under which multiemployer plans that elect to use the emergency
investment loss method, as described in section 412(b)(7)(F) of
the Internal Revenue Code of 1986 and section 302(b)(7)(F) of
the Employee Retirement Income Security Act of 1974, may do so
either by starting the special amortization periods in the
actuarial valuations for each of the affected plan years or by
starting with a cumulative emergency investment loss and
adjusted net actuarial experience (based on the outstanding
balance of the experience gain bases for the affected plan
years, reduced by the cumulative emergency investment loss) in
the actuarial valuation for the last plan year ending before
January 1, 2004.
(2) Filing period.--The procedures described in paragraph
(1) shall provide a period of not less than 210 days after the
date of enactment of this Act for multiemployer plans to file
Schedule Bs to the Form 5500 Annual Reports for the plan years
for which the emergency investment loss method is elected,
including amended Schedule Bs for annual reports previously
filed.
(d) Effective Date.--The amendments made by this section shall
apply to years beginning after June 30, 1999.
SEC. 709. MORTALITY TABLE ADJUSTMENT.
(a) Amendment to the Internal Revenue Code.--Subparagraph (C) of
section 412(l)(7) is amended by adding at the end the following clause:
``(iv) Separate mortality tables for blue-
collar workers.--Notwithstanding clause (ii),
in the case of plan years beginning after
December 31, 2003, the Secretary shall
establish mortality tables which may be used
(in lieu of the tables under clause (ii)) to
determine current liability under this
subsection for individuals who are blue-collar
workers (as defined under rules prescribed by
the Secretary). For this purpose, the Secretary
shall take into account the Society of
Actuaries RP-2000 Mortality Table, as adjusted
to take into account the collar adjustment
prescribed in such Table to reflect the
workforce covered by the plan.''.
(b) Amendment to the Employee Retirement Income Security Act of
1974.--Subparagraph (C) of section 302(d)(7) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1082(d)(7)) is amended by adding
at the end the following clause:
``(iv) Separate mortality tables for blue-
collar workers.--Notwithstanding clause (ii),
in the case of plan years beginning after
December 31, 2003, the Secretary shall
establish mortality tables which may be used
(in lieu of the tables under clause (ii)) to
determine current liability under this
subsection for individuals who are blue-collar
workers (as defined under rules prescribed by
the Secretary). For this purpose, the Secretary
shall take into account the Society of
Actuaries RP-2000 Mortality Table, as adjusted
to take into account the collar adjustment
prescribed in such Table to reflect the
workforce covered by the plan.''.
(c) Effective Date.--The amendments made by this section shall be
effective as of the date of enactment of this Act.
TITLE VIII--SIMPLIFY AND STREAMLINE RETIREMENT PLAN RULES
SEC. 801. EXCISE TAX ON EXCESS CONTRIBUTIONS.
(a) Expansion of Corrective Distribution Period.--Subsection (f) of
section 4979 is amended--
(1) in paragraph (1) by striking ``2\1/2\ months'' and
inserting ``6 months'', and
(2) in the heading by striking ``2\1/2\ Months'' and
inserting ``6 Months''.
(b) Increase in de minimis distribution amount.--Subparagraph (B)
of section 4979(f)(2) is amended by striking ``$100'' and inserting
``$1,000''.
(c) Modification of De Minimis Rule.--Subparagraph (B) of section
4972(f)(2) is amended by striking ``If'' and inserting ``To the extent
that'' and by striking ``are less than'' and inserting ``do not
exceed''.
(d) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2003.
SEC. 802. EXCESS BENEFIT PLANS.
(a) In General.--Section 3(36) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1002(36)) is amended to read as
follows:
``(36) The term `excess benefit plan' means a plan, without regard
to whether such plan is funded, maintained by an employer solely for
the purpose of providing benefits to employees in excess of any
limitation imposed by section 401(a)(17), 401(k)(3)(A)(ii), 401(m)(2),
or 415 of the Internal Revenue Code of 1986. To the extent that a
separable part of a plan (as determined by the Secretary of Labor)
maintained by an employer is maintained for such purpose, that part
shall be treated as a separate plan which is an excess benefit plan.''.
(b) Effective Date.--The amendment made by this section shall apply
to plan years beginning after December 31, 2003.
SEC. 803. PAPERLESS TECHNOLOGIES IN RETIREMENT PLANS.
(a) Paperless Technologies.--Not later than December 31, 2004,
except as provided in subsection (c), the Secretary of the Treasury and
the Secretary of Labor shall, by regulation, allow the use of paperless
technologies for purposes of--
(1) notices, elections, and spousal consents required under
sections 401(a)(11) and 417 of the Internal Revenue Code of
1986 and section 205 of Employee Retirement Income Security Act
of 1974,
(2) providing information to satisfy the conditions for a
hardship distribution under section 401(k)(2)(B)(i)(IV) of such
Code, and
(3) other plan transactions for which the Secretaries
determine that the use of paperless technologies is
appropriate.
(b) Condition of Using Paperless Technologies.--Technologies
permitted pursuant to subsection (a) shall not--
(1) undermine the rights of any participant, any spouse of
a participant, or any other beneficiary, or
(2) weaken the policy purposes of any rule for which such
technologies are permitted.
(c) Report in Cases Where Paperless Technology Not Used.--
(1) In general.--Not later than December 31, 2004, if the
Secretary of the Treasury or the Secretary of Labor determines
that permitting the use of paperless technologies for a
particular purpose is unworkable or would jeopardize
individuals' rights or public policy objectives, the applicable
Secretary shall not permit the use of paperless technologies
for such purpose, but rather shall submit a report to the
Committee on Ways and Means and the Committee on Education and
the Workforce of the House of Representatives and the Committee
on Finance and the Committee on Health, Education, Labor and
Pensions of the Senate.
(2) Contents of report.--The applicable Secretary shall set
forth in the report required by subsection (a) the
determination with respect to each such purpose and
recommendations for any changes in law that would facilitate
the greater use of paperless technologies.
SEC. 804. ELIMINATION OF UNINTENDED CONSEQUENCES ATTRIBUTABLE TO USE OF
BASE PAY OR RATE OF PAY.
Not later than December 31, 2003, the Secretary of the Treasury
shall issue final regulations under which the rules in Treasury
Regulation 1.414(s)-1 (without regard to paragraph (d)(3) thereof)
apply for purposes of the safe harbor rules under Treasury Regulation
1.401(a)(4)-3(b).
SEC. 805. REPEAL OF THE GATEWAY TEST.
(a) In General.--Paragraph (5) of section 410(b) (relating to line
of business exception) is amended to read as follows:
``(5) Line of business exception.--If, under section
414(r), an employer is treated as operating separate lines of
business for a year, the employer may apply the requirements of
this subsection for such year separately with respect to
employees in each separate line of business.''.
(b) Effective Date.--The amendment made by this subsection shall
apply to years beginning after December 31, 2003.
SEC. 806. INTERMEDIATE SANCTIONS FOR INADVERTENT FAILURES.
(a) In General.--Section 401(a) (relating to qualified pension,
profit-sharing, and stock bonus plans) is amended by inserting after
paragraph (34) the following:
``(35) Protection from disqualification upon timely
correction or payment of fine.--A trust shall not fail to
constitute a qualified trust under this section if the plan of
which such trust is a part has made good faith efforts to meet
the requirements of this section, has inadvertently failed to
satisfy 1 or more of such requirements, and either--
``(A) substantially corrects (to the extent
possible) such failure before the date the plan becomes
subject to a plan examination for the applicable year
(as determined under rules prescribed by the
Secretary), or
``(B) substantially corrects (to the extent
possible) such failure on or after such date.
If the plan satisfies the requirement under subparagraph (B),
the Secretary may require the sponsoring employer to make a
payment to the Secretary in an amount that does not exceed an
amount that bears a reasonable relationship to the severity of
the plan's failure to satisfy the requirements of this
section.''.
(b) Application to Cash or Deferred Arrangements.--Section 401(k)
is amended by inserting after paragraph (12) the following new
paragraph:
``(13) Protection from disqualification.--Rules similar to
the rules set forth in section 401(a)(35) shall apply for
purposes of determining whether a cash or deferred arrangement
is a qualified cash or deferred arrangement.''.
(c) Application to Section 403(b) Annuity Contracts.--Section
403(b) is amended by inserting after paragraph (12) the following:
``(13) Correction of errors.--For purposes of determining
whether the exclusion from gross income under paragraph (1) is
applicable to an employee for any taxable year, rules similar
to the rules set forth in section 401(a)(35) shall apply to any
annuity contract purchased under this subsection or any plan
established to meet the requirements of this subsection.''.
(d) Income Inclusion for Disqualification Not Applicable to
Nonhighly Compensated Employees.--Section 402(b) (relating to
taxability of beneficiary of nonexempt trust) is amended by striking
paragraph (4) and inserting the following:
``(4) Income inclusion for disqualification not applicable
to nonhighly compensated employees.--Paragraphs (1) and (2)
shall not apply to employees who are not highly compensated
employees.
``(5) Failure to meet requirements of section 401(a)(26) or
410(b).--If 1 of the reasons a trust is not exempt from tax
under section 501(a) is the failure of the plan to meet the
requirements of section 401(a)(26) or 410(b), then a highly
compensated employee shall, in lieu of the amount determined
under paragraph (1) or (2), include in gross income for the
taxable year with or within which the taxable year of the trust
ends an amount equal to the vested accrued benefit of such
employee (other than the employee's investment in the contract)
as of the close of such taxable year of the trust.
``(6) Highly compensated employee.--For purposes of this
subsection, the term `highly compensated employee' has the
meaning given such term by section 414(q).''.
(e) Effective Date.--The amendments made by this section shall take
effect on the date of enactment of this Act.
SEC. 807. QUALIFIED PRERETIREMENT SURVIVOR ANNUITY.
(a) Amendments to the Internal Revenue Code of 1986.--
(1) Repeal of age 35 waiver limitation.--Subparagraph (B)
of section 417(a)(6) (defining applicable election period) is
amended by striking ``the plan year in which the participant
attains age 35'' and inserting ``plan participation''.
(2) Conforming amendments.--
(A) Section 417(a)(6) is amended by striking the
last sentence.
(B) Section 417(a)(3)(B) is amended--
(i) in clause (ii) by striking subclause
(I) and redesignating subclause (II), (III),
and (IV) as subclause (I), (II), and (III),
respectively, and
(ii) striking the last sentence.
(b) Amendments to the Employee Retirement Income Security Act of
1974.--
(1) Repeal of age 35 waiver limitation.--Subparagraph (B)
of section 205(c)(7) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1055(c)(7)(B)) is amended by striking
``the plan year in which the participant attains age 35'' and
inserting ``plan participation''.
(2) Conforming amendments.--
(A) Section 205(c)(7) of such Act is amended by
striking the last sentence.
(B) Section 205(c)(3)(B) of such Act is amended--
(i) in clause (ii) by striking subclause
(I) and redesignating subclause (II), (III),
and (IV) as subclause (I), (II), and (III),
respectively, and
(ii) striking the last sentence.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to years beginning after December 31, 2003.
(2) Special rules.--A plan shall not be treated as having
failed to comply with section 417(a)(3)(B) of the Internal
Revenue Code of 1986 and section 205(c)(3)(B) of the Employee
Retirement Income Security Act of 1974 due to the failure to
provide an explanation required by reason of the amendments
made by this section if such explanation is provided by a date
that is one year after the date of enactment of this Act or by
a later date (not later than 3 years after the date of
enactment of this Act) determined under rules prescribed by the
Secretary of the Treasury. With respect to a participant, if an
explanation required by such section 417(a)(3)(B) and such
section 205(c)(3)(B) is permitted to be provided at a later
date by reason of the preceding sentence, an election under
section 417(a)(1)(A)(i) of such Code and section
205(c)(1)(A)(i) of the Employee Retirement Income Security Act
of 1974 to waive a qualified preretirement survivor annuity
shall not take effect unless such explanation has been provided
with respect to such participant by a date that is no later
than a reasonable period prior to the date of the election.
SEC. 808. COST-OF-LIVING ADJUSTMENT OF $5,000 CASH-OUT AMOUNT.
(a) Amendments to the Internal Revenue Code of 1986.--
(1) In general.--Paragraph (11) of section 411(a) (relating
to restrictions on certain mandatory distributions) is amended
by adding at the end the following new subparagraph:
``(E) Cost-of-living adjustment.--The Secretary
shall adjust annually the $5,000 amount in subparagraph
(A) for increases in the cost-of-living at the same
time and in the same manner as adjustments under
section 415(d); except that the base period shall be
the calendar quarter beginning July 1, 2003, and any
increase which is not a multiple of $500 shall be
rounded to the next lowest multiple of $500.''.
(2) Conforming amendment.--Clause (ii) of section
401(a)(31)(B) is amended by striking ``$5,000'' and inserting
``the amount in effect under section 411(a)(11)(A)''.
(b) Amendment to the Employee Retirement Income Security Act of
1974.--Subsection (e) of section 203 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1053(e)) is amended by adding at the
end the following new paragraph:
``(5) The Secretary of the Treasury shall adjust annually the
$5,000 amount in paragraph (1) for increases in the cost-of-living at
the same time and in the same manner as adjustments under section
415(d) of the Internal Revenue Code of 1986; except that the base
period shall be the calendar quarter beginning July 1, 2003, and any
increase which is not a multiple of $500 shall be rounded to the next
lowest multiple of $500.''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2003.
SEC. 809. CATCH-UP CONTRIBUTIONS.
(a) Nondiscrimination Requirement Moved.--
(1) In general.--Paragraph (4) of section 401(a) (relating
to nondiscrimination requirements for qualification) is amended
to read as follows:
``(4) Nondiscrimination.--
``(A) In general.--If the contributions or benefits
provided under the plan do not discriminate in favor of
highly compensated employees (within the meaning of
section 414(q)).
``(B) Certain employees excluded.--For purposes of
this paragraph, there shall be excluded from
consideration employees described in section
410(b)(3)(A) and (C).
``(C) Special rules relating to catch-up
contributions.--
``(i) In general.--An applicable employer
plan shall be treated as failing to meet the
nondiscrimination requirements under
subparagraph (A) with respect to benefits,
rights, and features unless the plan allows all
eligible participants to make the same election
with respect to the additional elective
deferrals under section 414(v).
``(ii) Aggregation.--Except as provided in
regulations prescribed by the Secretary, for
purposes of clause (i), all plans maintained by
employers who are treated as a single employer
under subsection (b), (c), (m), or (o) of
section 414 shall be treated as 1 plan, except
that a plan described in clause (i) of section
410(b)(6)(C) shall not be treated as a plan of
the employer until the expiration of the
transition period with respect to such plan (as
determined under clause (ii) of such section).
``(iii) Definitions.--For purposes of this
subparagraph, the terms `applicable employer
plan', `eligible participants', and `elective
deferral' have the meaning given such terms by
section 414(v).''.
(2) Conforming amendment.--Section 414(v) is amended by
striking paragraph (4) and redesignating paragraphs (5) and (6)
as paragraphs (4) and (5), respectively.
(b) Effective Date.--The amendments made by this section shall take
effect as if included in section 631(a) of the Economic Growth and Tax
Relief Reconciliation Act of 2001.
SEC. 810. REVERSE MATCH SALARY REDUCTION ARRANGEMENT SIMPLIFIED
EMPLOYEE ANNUITY.
(a) In General.--Subsection (k) of section 408 (defining simplified
employee pension) is amended by redesignating paragraphs (7), (8), and
(9) as paragraphs (8), (9), and (10), respectively, and by inserting
after paragraph (6) the following new paragraph:
``(7) Reverse match salary reduction arrangement simplified
employee annuity.--
``(A) Employee may elect salary reduction
arrangement.--
``(i) In general.--A simplified employee
pension shall not fail to meet the requirements
of this subsection for a year merely because,
under the terms of the pension, an employee may
elect to have the employer make payments--
``(I) as elective employer
contributions to the simplified
employee pension on behalf of the
employee, or
``(II) to the employee directly in
cash.
``(ii) Limitations on elective deferrals.--
Clause (i) shall not apply to a simplified
employee pension unless the requirements of
section 401(a)(30) are met.
``(B) Exception where more than 25 employees.--This
paragraph shall not apply with respect to any year in
the case of a simplified employee pension maintained by
an employer with more than 25 employees who were
eligible to participate (or would have been required to
be eligible to participate if a pension was maintained)
at any time during the preceding year. For purposes of
this subparagraph, rules similar to the rules of
sections 408(p)(2)(C)(ii) and 408(p)(10) shall apply.
``(C) Deferral percentage.--
``(i) In general.--The deferral percentage
for any employee for a year may not exceed
double the percentage which is the ratio that--
``(I) the amount of employer
contributions (other than elective or
matching contributions) actually paid
over to the simplified employee pension
on behalf of the employee for the year,
bears to
``(II) the employee's compensation
(not in excess of the amount in effect
under paragraph (6)(D)(ii)) for the
year.
``(ii) Definition.--For purposes of this
paragraph, the deferral percentage of an
employee for a year shall be the ratio which--
``(I) the amount of elective
employer contributions actually paid
over to the simplified employee pension
on behalf of the employee for the year,
bears to
``(II) the employee's compensation
(not in excess of the amount in effect
under paragraph (6)(D)(ii)) for the
year.
``(D) Exception for State and local and tax-exempt
pensions.--This paragraph shall not apply to a
simplified employee pension maintained by a State or
local government or political subdivision thereof, or
any agency or instrumentality thereof.''.
(b) Conforming Amendments.--
(1) Subparagraph (B) of section 402(h)(1) is amended by
striking ``408(k)(6)'' and inserting ``408(k)(6) or
408(k)(7)''.
(2) Paragraph (2) of section 408(k) is amended by striking
``subsection (k)(6)'' and inserting ``subsection (k)(6) or
(k)(7)''.
(3) Subparagraphs (C) and (D) of section 408(k)(3) are each
amended by striking ``paragraph (6)'' and inserting ``paragraph
(6) or (7)''.
(4) Subpargraph (C) of section 414(u)(1) is amended by
striking ``408(k)(6)'' and inserting ``408(k)(6), 408(k)(7)''.
(5) Subparagraph (C) of section 3121(a)(5) is amended by
striking ``408(k)(6)'' and inserting ``408(k)(6) or
408(k)(7)''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2003.
SEC. 811. LEVEL DOLLAR CONTRIBUTIONS TO SEPS.
(a) In General.--Subparagraph (C) of section 408(k)(3) (relating to
contributions must bear uniform relationship to total compensation) is
amended by inserting before the period at the end the following: ``or
unless such contributions are a uniform dollar amount on behalf of each
such employee.''.
(b) Effective Date.--The amendment made by this section shall apply
to years beginning after December 31, 2003.
SEC. 812. TAX ON NONDEDUCTIBLE CONTRIBUTIONS NOT TO APPLY TO CERTAIN
NONTRADE OR BUSINESS SEP CONTRIBUTIONS.
(a) In General.--Subparagraph (B) of section 4972(c)(6) (relating
to exceptions) is amended--
(1) by striking ``408(p) or'' and inserting ``408(p),'',
and
(2) by inserting after ``401(k)(11))'' the following: ``,
or a simplified employee pension (within the meaning of section
408(k))''.
(b) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2003.
SEC. 813. CLARIFICATION OF FIDUCIARY DUTY.
(a) In General.--Paragraph (3) of section 404(c) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1104(c)(3)) is
amended to read as follows:
``(3) In the case of a pension plan which makes a transfer
to an individual retirement account or annuity of a designated
trustee or issuer under section 401(a)(31)(B) of the Internal
Revenue Code of 1986, the fiduciary who selects the individual
retirement account or annuity and the initial investments
thereunder shall be subject to this part only with respect to
such initial selections. Such fiduciary shall have no liability
under this title if such selections are made in a manner
consistent with guidance provided by the Secretary.''.
(b) Effective Date.--The amendment made this section shall take
effect as if included in section 657 of the Economic Growth and Tax
Relief Reconciliation Act of 2001.
SEC. 814. MULTIEMPLOYER PLAN CLARIFICATION.
(a) In General.--Subsection (b) of section 413 is amended by adding
at the end the following:
``(10) Treament as not an employer plan.--The Secretary may
prescribe rules under which, for purposes of one or more
specified provisions of this part relating directly or
indirectly to nondiscrimination in benefits or coverage, a plan
described in section 414(f) is not treated as a plan of or
maintained by the employers of the participating employees.''.
(b) Effective Date.--The amendment made by this section shall apply
as of the date of enactment of this Act.
SEC. 815. CLARIFICATION OF STATUS OF YOUNG MEN'S CHRISTIAN ASSOCIATION
RETIREMENT FUND.
(a) In General.--Section 1012(c)(4)(C)(i) of the Tax Reform Act of
1986 (100 Stat. 2394) is amended by adding before the comma at the end
thereof the following: ``(whose retirement plans (including the reserve
accounts for such plans) are deemed to be plans described in section
403(b)(9)(B) of the Internal Revenue Code of 1986 for years beginning
on or after January 1, 2003)''.
(b) Clarification of Scope of Church Plan Status.--
(1) Nondiscrimination testing.--Any fund or plan described
in subsection (a) shall be subject to the nondiscrimination
requirements of section 403(b)(12) of such Code and shall not
be treated as a contract purchased by a church for purposes of
section 403(b)(1)(D) of such Code.
(2) Applicability of 403(b)(9) rules generally.--Nothing in
this section shall exempt the retirement fund of the YMCA from
complying with the rules otherwise applicable to a plan
described in section 403(b)(9)(B) of such Code in order for the
treatment described in section 403(b)(1) of such Code to apply.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2002.
TITLE IX--EXPANDING RETIREMENT SAVINGS OPPORTUNITIES FOR EMPLOYEES OF
TAX-EXEMPT ORGANIZATIONS AND GOVERNMENTS
SEC. 901. DEFERRED COMPENSATION PLANS OF TAX-EXEMPT ORGANIZATIONS.
(a) In General.--Subpart B of part II of subchapter E of chapter 1
(relating to taxable year for which items of gross income included) is
amended by inserting after section 458 the following new section:
``SEC. 459. DEFERRED COMPENSATION PLANS OF TAX-EXEMPT ORGANIZATIONS.
``(a) In General.--In the case of a plan of an organization (other
than a governmental unit) exempt from tax under this subtitle providing
for a deferral of compensation--
``(1) the excess deferred compensation shall be included in
the gross income of the participant or beneficiary for the 1st
taxable year in which there is no substantial risk of
forfeiture of the rights to such compensation, and
``(2) the tax treatment of any amount made available under
the plan to a participant or beneficiary shall be determined
under section 72 (relating to annuities, etc.).
``(b) Exceptions.--Subsection (a) shall not apply to--
``(1) a plan described in section 401(a) which includes a
trust exempt from tax under section 501(a),
``(2) an annuity plan or contract described in section 403,
``(3) that portion of any plan which consists of a transfer
of property described in section 83, and
``(4) that portion of any plan which consists of a trust to
which section 402(b) applies.
``(c) Definitions and Special Rules.--For purposes of this
section--
``(1) Excess deferred compensation.--The term `excess
deferred compensation' means with respect to a participant for
any taxable year the excess of the present value of the
participant's deferred compensation for such year over the
greater of--
``(A) one third of the sum of such value plus the
participant's compensation (as defined in Code section
415(c)(3)) for such year, or
``(B) the amount in effect for such year under
section 457(b)(2) (as modified by any adjustment
permitted under subsection (b)(3) or section 414(v)).
``(2) Plan includes arrangements, etc.--The term `plan'
includes any agreement or arrangement.
``(3) Substantial risk of forfeiture.--The rights of a
person to compensation are subject to a substantial risk of
forfeiture if such person's rights to such compensation are
conditioned upon the future performance of substantial services
by any individual.
``(4) Special rules.--Rules similar to the rules of section
457(b)(6) and paragraphs (2), (3), (4), (6), (7), (8), (9) (as
in effect before the enactment of the Pension Preservation and
Savings Expansion Act of 2003), (10), (11), (12), and (13) of
section 457(e) shall apply for purposes of this section.''.
(b) Conforming Amendments.--
(1) The heading for section 457 is amended by striking
``AND TAX-EXEMPT ORGANIZATIONS''.
(2) Section 457(a)(1) is amended by striking ``income--''
and inserting ``and all that follows and inserting the
following: ``income is paid to the participant or other
beneficiary.''.
(3) Section 457(b) is amended by striking ``which is
established and maintained by an employer which is described in
subsection (e)(1)(A) and''.
(4) Section 457(d)(1)(C) is amended by striking ``in the
case of a plan maintained by an employer described in
subsection (e)(1)(A),''.
(5) Section 457(d)(3) is amended--
(A) by striking ``of an employer described in
subsection (e)(1)(A)'', and
(B) by striking ``for government plan''.
(6) Paragraph (9) of section 457(e) is amended to read as
follows:
``(9) Exception to distribution requirements.--
``(A) A plan shall not be treated as failing to
meet the distribution requirements of subsection (d) by
reason of a distribution to which this paragraph
applies.
``(B) This paragraph applies to a distribution if--
``(i) the distribution includes the total
amount payable to a participant under the plan,
``(ii) the portion of such amount which is
not attributable to rollover contributions (as
defined in section 411(a)(11)(D)) does not
exceed the dollar limit under section
411(a)(11)(A),
``(iii) no amount has been deferred under
the plan with respect to such participant
during the 2-year period ending on the date of
the distribution, and
``(iv) there has been no prior distribution
under the plan to which this paragraph
applied.''.
(7) Section 457(e)(1) is amended to read as follows:
``(1) Eligible employer.--The term `eligible employer'
means a State, political subdivision of a State, and any agency
or instrumentality of a State or political subdivision of a
State.''.
(8) Section 457(e)(16)(A) is amended by striking
``established and maintained by an employer described in
subsection (e)(1)(A)''.
(9) Section 457(g) is amended--
(A) in paragraph (1) by striking ``maintained by an
eligible employer described in subsection (e)(1)(A)'',
and
(B) in the heading by striking ``Governmental''.
(10) Section 25B(d)(1)(B)(ii) is amended by striking ``of
an eligible employer described in section 457(e)(1)(A)''.
(11) Section 72(t)(9) is amended by striking ``of an
eligible employer described in section 457(e)(1)(A)''.
(12) Section 402(c)(8)(B)(v) is amended by striking ``which
is maintained by an eligible employer described in section
457(e)(1)(A)''.
(13) Section 408(q)(3)(A) is amended by striking ``of an
eligible employer described in section 457(e)(1)(A)''.
(14) Section 414(v)(6)(A)(iii) is amended by striking ``of
an eligible employer described in section 457(e)(1)(A)''.
(15) Section 3401(a)(12)(E) is amended by striking ``which
is maintained by an eligible employer described in section
457(e)(1)(A)''.
(16) Section 3405(d)(2)(B)(iv) is amended by striking ``and
which is maintained by an eligible employer described in
section 457(e)(1)(A)''.
(17) Section 4980G(f)(2)(B) (as added by this Act) is
amended by striking ``of an eligible employer described in
section 457(e)(1)(A)''.
(18) Section 414(w)(5)(B)(ii) (as added by this Act) is
amended by striking ``of an eligible employer described in
section 457(e)(1)(A)''.
(19) Section 414(x)(8(A)(ii) is amended by striking ``of an
eligible employer described in section 457(e)(1)(A)''.
(c) Clerical Amendments.--
(1) The table of sections for subpart B of part II of
subchapter E of chapter 1 is amended by inserting after the
item relating to section 458 the following new item:
``Sec. 459. Deferred compensation plans
of tax-exempt organizations.''.
(2) The item in the table of sections for subpart B of part
II of subchapter E of chapter 1 relating to section 457 is
amended to read as follows:
``Sec. 457. Deferred compensation plans
of State and local
governments.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2003.
SEC. 902. INAPPLICABILITY OF 10 PERCENT ADDITIONAL TAX ON EARLY
DISTRIBUTIONS OF PENSION PLANS OF PUBLIC SAFETY
EMPLOYEES.
(a) In General.--Section 72(t)(2) of the Internal Revenue Code of
1986 (relating to subsection not to apply to certain distributions) is
amended by adding at the end the following new subsection:
``(G) DROP distributions to qualified public safety
employees in governmental plans.--
``(i) In general.--Distributions to an
individual who is a qualified public safety
employee from a governmental plan within the
meaning of section 414(d) to the extent such
distributions are attributable to a DROP
benefit.
``(ii) Definitions.--For purposes of this
subparagraph--
``(I) The term `DROP benefit' means
a feature of a governmental plan under
which an employee elects to receive
credits to an account (including a
notional account) in the plan in lieu
of increases in the employee's accrued
pension benefit based on years of
service after the effective date of the
DROP election.
``(II) The term `qualified public
safety employee' means any employee of
any police department or fire
department organized and operated by a
State or political subdivision of a
State if the employee provides police
protection, firefighting services, or
emergency medical services for any area
within the jurisdiction of such State
or political subdivision.''.
(b) Effective Date.--The amendments made by this section shall
apply to distributions after the date of enactment of this Act.
SEC. 903. CLARIFICATIONS REGARDING PURCHASE OF PERMISSIVE SERVICE
CREDIT.
(a) In General.--Subparagraph (A) of section 457(e)(17) (relating
to trustee-to-trustee transfers to purchase permissive service credit),
and subparagraph (A) of section 403(b)(13) (relating to trustee-to-
trustee transfers to purchase permissive service credit), are both
amended by striking ``section 415(n)(3)(A)'' and inserting ``section
415(n)(3) (without regard to subparagraphs (B) and (C) thereof)''.
(b) Transfers May Be From Any Governmental Plan.--Section
457(e)(17), and section 403(b)(13), are both amended by inserting
``from any governmental plan (as so defined)'' after ``414(d))'' and by
adding at the end the following sentence: ``Amounts transferred under
this paragraph shall be distributed solely in accordance with the terms
of such defined benefit plan.''.
(c) Service Credit.--Clause (ii) of section 415(n)(3)(A) is amended
to read as follows:
``(ii) which relates to benefits with
respect to which such -participant is not
otherwise entitled, and''.
(d) Effective Date.--The amendments made by this section shall take
effect as if included in the amendments made by section 647 of the
Economic Growth and Tax Relief Reconciliation Act of 2001.
SEC. 904. CERTAIN ROLLOVERS OF BENEFITS PERMITTED.
(a) In General.--Paragraph (10) of section 457(e) is amended--
(1) by striking ``A participant'' and inserting ``(A)
Exclusion from income.--A participant'', and
(2) by adding at the end the following:
``(B) Transfers permitted.--A transfer from one
such plan to another such plan of the entire benefit of
one or more participants shall not fail to be permitted
solely because all assets of the transferor plan are
not transferred to the transferee plan.''.
(b) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2003.
(2) Special rule.--An individual shall not be precluded
from participating in an eligible deferred compensation plan by
reason of having received a distribution under Code section
457(e)(9) as in effect prior to the enactment of the Small
Business Job Protection Act of 1996.
SEC. 905. MINIMUM DISTRIBUTION RULES.
The Secretary of the Treasury shall issue regulations under which a
governmental plan (as defined in section 414(d) of the Internal Revenue
Code of 1986) shall, for all years to which section 401(a)(9) of such
Code applies to such plan, be treated as having complied with such
section 401(a)(9) if such plan complies with a reasonable good faith
interpretation of such section 401(a)(9).
SEC. 906. CHURCH PLAN RULE.
(a) In General.--Paragraph (11) of section 415(b) is amended by
adding at the end the following: ``Subparagraph (B) of paragraph (1)
shall not apply to a plan maintained by an organization described in
section 3121(w)(3)(A) except with respect to highly compensated
benefits. For purposes of this paragraph, the term `highly compensated
benefits' means any benefits accrued for an employee in any year on or
after the first year in which such employee is a highly compensated
employee (as defined in section 414(q)) of the organization described
in section 3121(w)(3)(A). For purposes of applying paragraph (1)(B) to
highly compensated benefits, all benefits of the employee otherwise
taken into account (without regard to this paragraph) shall be taken
into account.''.
(b) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2003.
SEC. 907. PLANS MAINTAINED BY GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.
(a) In General.--Subparagraph (F) of section 415(b)(2) is amended
to read as follows:
``(F) Plans maintained by governments and tax
exempt organizations.--
``(i) In general.--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, or a
qualified merchant marine plan, subparagraph
(C) shall be applied as if the following
sentence were added at the end: `The reduction
under this subparagraph shall not reduce the
limitation of paragraph (1)(A) below (i)
$130,000 if the benefit begins at or after age
55, or (ii) if the benefit begins before age
55, the equivalent of the $130,000 limitation
at age 55.'.
``(ii) Definitions.--For purposes of this
subparagraph--
``(I) Qualified merchant marine
plan.--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.
``(II) Exempt organization plan.--A
plan shall be treated as a plan
maintained by an organization (other
than a governmental unit) exempt from
tax under this subtitle if at least 50
percent of the employees benefiting
under the plan are employees of an
organization (other than governmental
unit) exempt from tax under this
subtitle. If less than 50 percent of
the employees benefiting under a plan
are employees of an organization (other
than a governmental unit) exempt from
tax under this subtitle, the plan shall
be treated as a plan maintained by an
organization (other than a governmental
unit) exempt from tax under this
subtitle only with respect to employees
of such an organization.''.
(b) Cost-of-Living Adjustments.--
(1) Plans maintained by governments and tax exempt
organizations.--Paragraph (1) of section 415(d) is amended by
striking ``and'' at the end of subparagraph (B), by
redesignating subparagraph (C) as subparagraph (D), and by
inserting after subparagraph (B) the following new
subparagraph:
``(C) the $130,000 amount in subsection (b)(2)(F),
and''.
(2) Base period.--Paragraph (3) of section 415(d) is
amended by redesignating subparagraph (D) as subparagraph (E)
and by inserting after subparagraph (C) the following new
subparagraph:
``(D) $130,000 Amount.--The base period taken into
account for purposes of paragraph (1)(C) is the
calendar quarter beginning July 1, 2003.''.
(3) Rounding rule relating to defined benefit plans.--
Subparagraph (B) of section 415(d)(4) is amended to read as
follows:
``(B) $130,000 and $40,000 amounts.--Any increase
under subparagraph (C) or (D) of paragraph (1) which is
not a multiple of $1,000 shall be rounded to the next
lowest multiple of $1,000.''.
(4) Conforming amendment.--Subparagraph (E) of section
415(d)(3) (as amended by paragraph (2)) is amended by striking
``paragraph (1)(C)'' and inserting ``paragraph (1)(D)''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2003.
TITLE X--RESTRICTING EXCESSIVE REMUNERATION
SEC 1001. GOLDEN PARACHUTE EXCISE TAX TO APPLY TO EXCESSIVE EMPLOYEE
REMUNERATION PAID BY CORPORATION AFTER DECLARATION OF
BANKRUPTCY.
(a) In General.--Section 4999 (relating to golden parachute
payments) is amended by redesignating subsection (c) as subsection (d)
and by inserting after subsection (b) the following new subsection:
``(c) Tax on Excessive Employee Remuneration in the Case of
Bankruptcy.--
``(1) In general.--There is hereby imposed a tax on any
person who is a covered employee equal to 50 percent of any
payment of excessive employee remuneration from a corporation
which becomes a debtor in a title 11 or similar case (as
defined in section 368(a)(3)(A) of this title, but not
including a case under chapter 12 of title 11, United States
Code). The tax imposed under subsection (a) shall not apply to
the extent that a tax is imposed under this subsection.
``(2) Special rules relating to excessive employee
remuneration.--For purposes of this subsection--
``(A) Excess employee remuneration defined.--The
term `excess employee remuneration' means remuneration
paid directly or indirectly to a covered employee
during the bankruptcy period--
``(i) for which a deduction is not allowed
under chapter 1 by reason of the application of
section 162(m) or would not be allowed if
section 162(m) applied to the covered employee
at the time of payment, or
``(ii) in the case of remuneration to a
covered employee of a corporation that is not a
publicly held corporation described in section
162(m)(2), that exceeds $1,000,000, other than
remuneration that meets requirements similar to
the standards for performance-based compensation under section
162(m)(4)(C).
``(B) Such term shall not include--
``(i) remuneration that, on the date
immediately prior to the beginning of the
bankruptcy period, was payable to the covered
employee under a binding obligation and not
subject to a substantial risk of forfeiture,
``(ii) remuneration attributable to
contributions to or benefits from an excess
retirement plan to the extent that such plan is
maintained solely for the purpose of providing
benefits to employees in excess of the
limitations imposed by 1 or more of sections
401(a)(17), 401(k), 401(m), and 415,
``(iii) contributions to or benefits from a
qualified employer plan (as defined in section
132(m)), or
``(iv) any payment that is avoided or
approved by a bankruptcy trustee.
``(C) Bankruptcy period.--The term `bankruptcy
period' means any time during the period beginning 2
years before the date on which the corporation becomes
a debtor described in paragraph (1) and ending on the
date such corporation ceases to be such a debtor.
``(D) Covered employee.--The term `covered
employee'--
``(i) has the meaning given such term by
section 162(m)(3), except that such term shall
include an individual who is not a covered
employee under section 162(m)(3) for the
taxable year in which such remuneration is paid
but who previously was a covered employee
within the meaning of section 162(m)(3) during
the bankruptcy period, and
``(ii) with respect to an employee of a
corporation that is not subject to section
162(m), includes any employee of such
corporation who would be subject to the
requirement described in section 162(m)(3)(B)
(as modified by this paragraph) if such
corporation were a publicly held corporation
(as defined in section 162(m)(2)).
``(E) 100 percent tax for gross up payments.--
Subsection (b) shall be applied by substituting `100
percent' for `50 percent' to the extent that any
payment is made during the bankruptcy period that is
contingent upon a tax being imposed under this section.
``(F) Change in ownership contingency not to
apply.--Subsection (b) shall be applied without regard
to clause (i) of section 280G(b)(2)(A).''.
(b) Effective Date.--The amendment made this section shall apply to
payments received after the date of the enactment of this Act with
respect to any title 11 or similar case (as defined in section 4999(c)
of the Internal Revenue Code of 1986) commenced after such date.
TITLE XI--DEFINED CONTRIBUTION PLAN PROTECTIONS
SEC. 1101. PROVISION OF INVESTMENT EDUCATION NOTICES TO PARTICIPANTS.
(a) In General.--Section 414 (relating to definitions and -special
rules) is amended by adding at the end the following:
``(w) Provision of investment education notices to
participants.--
``(1) In general.--The plan administrator of an applicable
pension plan shall provide to each applicable individual an
investment education notice described in paragraph (2) at the
time of the enrollment of the applicable individual in the plan
and not less often than quarterly thereafter.
``(2) Investment education notice.--An investment education
notice is described in this paragraph if such notice contains--
``(A) an explanation, for the long-term retirement
security of participants and beneficiaries, of
generally accepted investment principles, including
principles of risk management and diversification, and
``(B) a discussion of the risk of holding
substantial portions of a portfolio in the security of
any one entity, such as employer securities.
``(3) Understandability.--Each notice required by paragraph
(1) shall be written in a manner calculated to be understood by
the average plan participant and shall provide sufficient
information (as determined in accordance with guidance provided
by the Secretary) to allow recipients to understand such
notice.
``(4) Form and manner of notices.--The notices required by
this subsection shall be in writing, except that such notices
may be in electronic or other form to the extent that such form
is reasonably accessible to the applicable individual.
``(5) Definitions.--For purposes of this subsection--
``(A) Applicable individual.--The term `applicable
individual' means--
``(i) any participant in the applicable
pension plan,
``(ii) any beneficiary who is an alternate
payee (within the meaning of section 414(p)(8))
under a qualified domestic relations order
(within the meaning of section 414(p)(1)(A)),
and
``(iii) any beneficiary of a deceased
participant or alternate payee.
``(B) Applicable pension plan.--The term
`applicable pension plan' means--
``(i) a plan described in clause (i), (ii),
or (iv) of section 219(g)(5)(A), and
``(ii) an eligible deferred compensation
plan (as defined in section 457(b)) of
an eligible employer described in section 457(e)(1)(A),
which permits any participant to direct the investment
of some or all of his account in the plan or under
which the accrued benefit of any participant depends in
whole or in part on hypothetical investments directed
by the participant. Such term shall not include a one-
participant retirement plan.
``(C) One-participant retirement plan defined.--The
term `one-participant retirement plan' means a
retirement plan that--
``(i) on the first day of the plan year--
``(I) covered only the employer
(and the employer's spouse) and the
employer owned the entire business
(whether or not incorporated), or
``(II) covered only one or more
partners (and their spouses) in a
business partnership (including
partners in an S or C corporation),
``(ii) meets the minimum coverage
requirements of section 410(b) without being
combined with any other plan of the business
that covers the employees of the business,
``(iii) does not provide benefits to anyone
except the employer (and the employer's spouse)
or the partners (and their spouses),
``(iv) does not cover a business that is a
member of an affiliated service group, a
controlled group of corporations, or a group of
businesses under common control, and
``(v) does not cover a business that leases
employees.
``(6) Cross reference.--For provisions relating to penalty
for failure to provide the notice required by this subsection,
see section 6652(m).''.
(b) Penalty for Failure To Provide Notice.--Section 6652 (relating
to failure to file certain information returns, registration
statements, etc.) is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (1) the -following new
subsection:
``(m) Failure To Provide Investment Education Notices to
Participants in Certain Plans.--In the case of each failure to provide
a notice as required by section 414(w) with respect to an applicable
individual (as defined in such section), at the time prescribed
therefore, unless it is shown that such failure is due to reasonable
cause and not to willful neglect, there shall be paid, on notice and
demand of the Secretary and in the same manner as tax, by the person
failing to provide such notice, an amount equal to $100 for each such
failure, but the total amount imposed on such person for all such
failures during any calendar year shall not exceed $500,000.''.
(c) Effective Dates.--
(1) In general.--Except as provided in paragraph (3), the
amendments made by this section shall apply with respect to
plan years beginning after December 31, 2003.
(2) Model investment principles.--Not later than the
earlier of January 1, 2004, or 120 days after the date of the
enactment of this Act, the Secretary of the Treasury, in
consultation with the Secretary of Labor, shall issue guidance
and model notices which meet the requirements of section 414(w)
of the Internal Revenue Code of 1986 (as added by this
section).
(3) Governmental plans.--In the case of a governmental plan
(as defined in section 414(d) of the Internal Revenue Code of
1986), the amendments made by this section shall apply with
respect to plan years beginning after December 31, 2005.
SEC. 1102. NOTICE OF BLACKOUT PERIODS TO PARTICIPANT OR BENEFICIARY
UNDER DEFINED CONTRIBUTION PLAN.
(a) In General.--Section 414 (relating to definitions and special
rules) (as amended by this Act) is amended by adding at the end the
following:
``(x) Notice of Blackout Periods to Participant or Beneficiary
Under Applicable Pension Plan.--
``(1) Duties of plan administrator.--In advance of the
commencement of any blackout period with respect to an
applicable pension plan, the plan administrator shall notify
the plan participants and beneficiaries who are affected by
such action in accordance with this subsection.
``(2) Notice requirements.--
``(A) In general.--The notices described in
paragraph (1) shall be written in a manner calculated
to be understood by the average plan participant and
shall include--
``(i) the reasons for the blackout period,
``(ii) an identification of the investments
and other rights affected,
``(iii) the expected beginning date and
length of the blackout period,
``(iv) in the case of investments affected,
a statement that the participant or beneficiary
should evaluate the appropriateness of their
current investment decisions in light of their
inability to direct or diversify assets
credited to their accounts during the blackout
period, and
``(v) such other matters as the Secretary
may require by regulation.
``(B) Notice to participants and beneficiaries.--
Except as otherwise provided in this subsection,
notices described in paragraph (1) shall be furnished
to all participants and beneficiaries under the plan to
whom the blackout period applies at least 30 days in
advance of the blackout period.
``(C) Exception to 30-day notice requirement.--In
any case in which--
``(i) a deferral of the blackout period
would violate the requirements of subparagraph
(A) or (B) of section 404(a)(1) of the Employee
Retirement Income Security Act of 1974, and a
fiduciary of the plan reasonably so determines
in writing, or
``(ii) the inability to provide the 30-day
advance notice is due to events that were
unforeseeable or circumstances beyond the
reasonable control of the plan administrator,
and a fiduciary of the plan reasonably so
determines in writing,
subparagraph (B) shall not apply, and the notice shall
be furnished to all participants and beneficiaries
under the plan to whom the blackout period applies as
soon as reasonably possible under the circumstances
unless such a notice in advance of the termination of
the blackout period is impracticable.
``(D) Written notice.--The notice required to be
provided under this subsection shall be in writing,
except that such notice may be in electronic or other
form to the extent that such form is reasonably
accessible to the recipient.
``(E) Notice to issuers of employer securities
subject to blackout period.--In the case of any
blackout period in connection with an applicable
pension plan, the plan administrator shall provide timely notice of
such blackout period to the issuer of any employer securities subject
to such blackout period.
``(3) Exception for blackout periods with limited
applicability.--In any case in which the blackout period
applies only to 1 or more participants or beneficiaries in
connection with a merger, acquisition, divestiture, or similar
transaction involving the plan or plan sponsor and occurs
solely in connection with becoming or ceasing to be a
participant or beneficiary under the plan by reason of such
merger, acquisition, divestiture, or transaction, the
requirement of this subsection that the notice be provided to
all participants and beneficiaries shall be treated as met if
the notice required under paragraph (1) is provided to such
participants or beneficiaries to whom the blackout period
applies as soon as reasonably practicable.
``(4) Changes in length of blackout period.--If, following
the furnishing of the notice pursuant to this subsection, there
is a change in the beginning date or length of the blackout
period (specified in such notice pursuant to paragraph
(2)(A)(iii)), the administrator shall provide affected
participants and beneficiaries notice of the change as soon as
reasonably practicable. In relation to the extended blackout
period, such notice shall meet the requirements of paragraph
(2)(D) and shall specify any material change in the matters
referred to in clauses (i) through (v) of paragraph (2)(A).
``(5) Regulatory exceptions.--The Secretary may provide by
regulation for additional exceptions to the requirements of
this subsection which the Secretary determines are in the
interests of participants and beneficiaries.
``(6) Guidance and model notices.--The Secretary shall
issue guidance and model notices which meet the requirements of
this subsection.
``(7) Blackout period.--For purposes of this subsection--
``(A) In general.--The term `blackout period'
means, in connection with an applicable pension plan,
any period for which any ability of participants or
beneficiaries under the plan, which is otherwise
available under the terms of such plan, to direct or
diversify assets credited to their accounts, to obtain
loans from the plan, or to obtain distributions from
the plan is temporarily suspended, limited, or
restricted, if such suspension, limitation, or
restriction is for any period of more than 3
consecutive business days.
``(B) Exclusions.--The term `blackout period' does
not include a suspension, limitation, or restriction--
``(i) which occurs by reason of the
application of the securities laws (as defined
in section 3(a)(47) of the Securities Exchange
Act of 1934),
``(ii) which is a change to the plan which
provides for a regularly scheduled suspension,
limitation, or restriction which is disclosed
to participants or beneficiaries through any
summary of material modifications, any
materials describing specific investment
alternatives under the plan, or any changes
thereto, or
``(iii) which applies only to 1 or more
individuals, each of whom is the participant,
an alternate payee (as defined in section
414(p)(8), or any other beneficiary pursuant to
a qualified domestic relations order (as
defined in section 414(p)(1)(A)).
``(8) Applicable pension plan.--
``(A) In general.--For purposes of this subsection,
the term `applicable pension plan' means--
``(i) a plan described in clause (i), (ii),
or (iv) of section 219(g)(5)(A), and
``(ii) an eligible deferred compensation
plan (as defined in section 457(b)) of an
eligible employer described in section
457(e)(1)(A),
which maintains accounts for participants under the
plan or under which the accrued benefit of any
participant depends in whole or in part on hypothetical
investments directed by the participant.--
``(B) Exceptions.--Such term shall not include a
one-participant retirement plan or a plan to which
section 101(i) of the Employee Retirement Income
Security Act of 1974 applies.
``(C) One-participant retirement plan.--For
purposes of this paragraph, the term `one-participant
retirement plan' means a retirement plan that--
``(i) on the first day of the plan year--
``(I) covered only the employer
(and the employer's spouse) and the
employer owned the entire business
(whether or not incorporated), or
``(II) covered only one or more
partners (and their spouses) in a
business partnership (including
partners in an S or C corporation (as
defined in section 1361(a)),
``(ii) meets the minimum coverage
requirements of section 410(b) (as in effect on
the date of the enactment of the Sarbanes-Oxley
Act of 2002) without being combined with any
other plan of the business that covers the
employees of the business,
``(iii) does not provide benefits to anyone
except the employer (and the employer's spouse)
or the partners (and their spouses),
``(iv) does not cover a business that is a
member of an affiliated service group, a
controlled group of corporations, or a group of
businesses under common control, and
``(v) does not cover a business that leases
employees.''.
``(9) Cross reference.--For provisions relating to penalty
for failure to provide the notice required by this section, see
section 6652(n).''.
(b) Penalty for Failure To Provide Notice.--Section 6652 (relating
to failure to file certain information returns, registration
statements, etc.) (as amended by this Act) is amended by redesignating
subsection (n) as subsection (o) and by inserting after subsection (m)
the following new subsection:
``(n) Failure To Provide Blackout Period Notice to Participants or
Beneficiaries.--In the case of each failure to provide a notice as
required by section 414(x) with respect to a participant or beneficiary
entitled to such a notice under such section, at the time prescribed
therefor, unless it is shown that such failure is due to reasonable
cause and not to willful neglect, there shall be paid, on notice and
demand of -the Secretary and in the same manner as tax, by the person
failing to provide such notice, an amount equal to $100 for such
failure but the total amount imposed on such person for all such
failures during any calendar year shall not exceed $500,000.''.
(c) Plan Amendments.--If any amendment made by this subsection
requires an amendment to any plan, such plan amendment shall not be
required to be made before the third plan year beginning on or after
the effective date of this section, if--
(1) during the period after such amendment made by this
subsection takes effect and before such third plan year, the
plan is operated in good faith compliance with the requirements
of such amendment made by this subsection, and
(2) such plan amendment applies retroactively to the period
after such amendment made by this subsection takes effect and
before such third plan year.
(d) Effective Date.--The provisions of this section (including the
amendments made thereby) shall take effect two years after the date of
the enactment of this Act.
SEC. 1103. DIVERSIFICATION REQUIREMENTS FOR DEFINED CONTRIBUTION PLANS
THAT HOLD EMPLOYER SECURITIES.
(a) In General.--Subsection (a) of section 401 (relating to
requirements for qualification) is amended by adding at the end the
following new paragraph:
``(35) Diversification requirements for defined
contribution plans that hold employer securities.--
``(A) In general.--In the case of a defined
contribution plan described in this subsection that
includes a trust which is exempt from tax under section
501(a) and which holds employer securities that are
readily tradable on an established securities market,
such trust shall not constitute a qualified trust under
this section unless such plan meets the requirements of
subparagraphs (B), (C), and (D).
``(B) Elective deferrals and employee contributions
invested in employer securities.--In the case of the
portion of the account attributable to elective
deferrals and employee contributions which is invested
in employer securities, a plan meets the requirements
of this subparagraph if each applicable individual in
such plan may elect to direct the plan to divest up to
the applicable percentage of such securities in the
individual's account and to reinvest an equivalent
amount in other investment options which meet the
requirements of subparagraph (E).
``(C) Matching and certain other contributions.--
``(i) In general.--In the case of the
portion of the account attributable to
contributions to which this subparagraph
applies and which is invested in employer
securities, a plan meets the requirements of
this subparagraph if each applicable 3-year
individual in the plan may elect to direct the
plan to divest up to the applicable percentage
of such securities in the individual's account
and to reinvest an equivalent amount in other
investment options which meet the requirements
of subparagraph (E).
``(ii) Contributions to which this
subparagraph applies.--This subparagraph shall
apply to--
``(I) matching contributions (as
defined in subsection (m)(4)(A)),
``(II) qualified nonelective
contributions (as defined in subsection
(m)(4)(C)), and
``(III) contributions made in order
to meet the requirements of subsection
(k)(12)(C).
``(iii) Applicable 3-year individual.--For
purposes of clause (i), the term `applicable 3-
year individual' means any individual who would
be an applicable individual if only
participants in the plan who have completed at
least 3 years of service (as determined under
section 411(a)) were taken into account under
subparagraph (G)(i)(I).
``(D) Other employer contributions.--
``(i) In general.--In the case of the
portion of the account attributable to employer
contributions (other than contributions to
which subparagraph (B) or (C) applies) which is
invested in employer securities, a plan meets
the requirements of this subparagraph if each
applicable 5-year individual described in
clause (ii) may elect to direct the plan to
divest up to the applicable percentage of such
securities in the individual's account and to
reinvest an equivalent amount in other
investment options which meet the requirements
of subparagraph (E).
``(ii) Applicable 5-year individual.--For
purposes of clause (i), the term `5-year
individual' means any individual who would be
an applicable individual if only participants
in the plan who have completed at least 5 years
of service (as determined under section 411(a))
were taken into account under subparagraph
(G)(i)(I).
``(E) Investment options.--The requirements of this
subparagraph are met if the plan offers not less than 3
investment options (not inconsistent with regulations
prescribed by the Secretary) other than employer
securities.
``(F) Election.--Elections under this paragraph
maybe made not less frequently than quarterly.
``(G) Other definitions and rules.--For purposes of
this paragraph--
``(i) Applicable individual.--The term
`applicable individual' means--
``(I) any participant in the plan,
``(II) any beneficiary who is an
alternate payee (within the meaning of
section 414(p)(8)) under an applicable
qualified domestic relations order
(within the meaning of section
414(p)(1)(A)), and
``(III) any beneficiary of a
deceased participant or alternate
payee.
``(ii) Elective deferrals.--The term
`elective deferrals' means an employer
contribution described in section 402(g)(3)(A).
``(iii) Employer securities.--The term
`employer securities' shall have the meaning
given such term by section 407(d)(1) of the
Employee Retirement Income Security Act of
1974.
``(iv) Employee stock ownership plan.--The
term `employee stock ownership plan' shall have
the same meaning given to such term by section
4975(e)(7).
``(v) Applicable percentage.--
``(I) In general.--The applicable
percentage shall be as follows:
``Plan years Applicable
beginning in: percentage:
2004................. 20
2005................. 40
2006................. 60
2007................. 80
2008 or thereafter... 100.
``(II) Elective deferrals treated
as separate plan not individual account
plan.--In the case of elective
deferrals and employee contributions
(and any earnings allocable thereto)
held within a plan treated as a
separate plan as of the date of the
enactment of this paragraph under
section 407(b)(2) of the Employee
Retirement Income Security Act of 1974,
for purposes of subparagraph (B) the
applicable percentage shall be 100
percent.
``(III) Contributions held within
an esop.--In the case of contributions
(other than elective deferrals and
employee contributions) held within an
employee stock ownership plan, in the
case of years 2004 and 2005, the
applicable percentage shall be the
greater of the amount determined under
subclause (I) or the percentage
determined under paragraph (28)
(determined as if paragraph (28)
applied to a plan described in this
paragraph).
``(vi) Coordination with paragraph (28).--
Subparagraphs (B), (C), and (D) shall apply to
the extent that the amount attributable to the
applicable percentage under such subparagraph
exceeds the amount to which a prior election
under such subparagraph or paragraph (28)
applies.
``(H) Exception for certain esops.--This paragraph
shall apply to an employee stock ownership plan only if
the plan holds amounts attributable to deferrals or
contributions to which subparagraph (B) or (C)
apply.''.
(b) Conforming Amendments.--
(1) Section 401(a)(28) is amended by adding at the end the
following new subparagraph:
``(D) Application.--This paragraph shall not apply
to a plan to which paragraph (35) applies.''.
(2) Section 409(h)(7) is amended by inserting before the
period at the end ``or subparagraph (B), (C), or (D) of section
401(a)(35)''.
(3) Section 4980(c)(3)(A) is amended by striking ``if--''
and all that follows and inserting ``if the requirements of
subparagraphs (B), (C), and (D) are met.''.
(c) Effective Date.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to plan years
beginning after December 31, 2003.
(2) Exception.--The amendments made by this section shall
not apply to employer securities held by an employee stock
ownership plan which are not subject to section 401(a)(28) of
the Internal Revenue Code of 1986 by reason of section
1175(a)(2) of the Tax Reform Act of 1986 (100 Stat. 2519).
SEC. 1104. TREATMENT OF QUALIFIED RETIREMENT PLANNING SERVICES.
(a) In General.--Subsection (m) of section 132 (defining qualified
retirement services) is amended by adding at the end the following new
paragraph:
``(4) No constructive receipt.--No amount shall be included
in the gross income of any employee solely because the employee
may choose between any qualified retirement planning services
provided by a qualified investment advisor and compensation
which would otherwise be includible in the gross income of such
employee. The preceding sentence shall apply to highly
compensated employees only if the choice described in such
sentence is available on substantially the same terms to each
member of the group of employees normally provided education
and information regarding the employer's qualified employer
plan.''.
(b) Conforming Amendments.--
(1) Section 403(b)(3)(B) is amended by inserting
``132(m)(4),'' after ``132(f)(4),''.
(2) Section 414(s)(2) is amended by inserting
``132(m)(4),'' after ``132(f)(4),''.
(3) Section 415(c)(3)(D)(ii) is amended by inserting
``132(m)(4),'' after ``132(f)(4),''.
(c) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2003.
SEC. 1105. SPECIAL RULES.
In the case of a plan maintained pursuant to 1 or more collective
bargaining agreements between employee representatives and 1 or more
employers ratified on or before the date of the enactment of this Act,
the amendments made by this title shall not apply to plan years
beginning before the earlier of--
(1) the later of--
(A) January 1, 2005, or
(B) the date on which the last of such collective
bargaining agreements terminates (determined without
regard to any extension thereof after the date of the
enactment of this Act), or
(2) January 1, 2006.
TITLE XII--OTHER TAX PROVISIONS RELATING TO PENSIONS
SEC. 1201. AMENDMENTS TO RETIREMENT PROTECTION ACT OF 1994.
(a) Transition Rule Made Permanent.--Paragraph (1) of section
769(c) of the Retirement Protection Act of 1994 is amended--
(1) by striking ``transition'' each place it appears in the
heading and the text, and
(2) by striking ``for any plan year beginning after 1996
and before 2010''.
(b) Special Rules.--Paragraph (2) of section 769(c) of the
Retirement Protection Act of 1994 is amended to read as follows:
``(2) Special rules.--The rules described in this paragraph
are as follows:
``(A) For purposes of section 412(l)(9)(A) of the
Internal Revenue Code of 1986 and section 302(d)(9)(A)
of the Employee Retirement Income Security Act of 1974,
the funded current liability percentage for any plan
year shall be treated as not less than 90 percent.
``(B) For purposes of section 412(m) of the
Internal Revenue Code of 1986 and section 302(e) of the
Employee Retirement Income Security Act of 1974, the
funded current liability percentage for any plan year
shall be treated as not less than 100 percent.
``(C) For purposes of determining unfunded vested
benefits under section 4006(a)(3)(E)(iii) of the
Employee Retirement Income Security Act of 1974, the
mortality table shall be the mortality table used by
the plan.''.
(c) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2002.
SEC. 1202. REPORTING SIMPLIFICATION.
(a) Simplified Annual Filing Requirement for Owners and Their
Spouses.--
(1) In general.--The Secretary of the Treasury and the
Secretary of Labor shall modify the requirements for filing
annual returns with respect to one-participant retirement plans
to ensure that such plans with assets of $250,000 or less as of
the close of the plan year need not file a return for that
year.
(2) One-participant retirement plan defined.--For purposes
of this subsection, the term ``one-participant retirement
plan'' means a retirement plan that--
(A) on the first day of the plan year--
(i) covered only the employer (and the
employer's spouse) and the employer owned the
entire business (whether or not incorporated);
or
(ii) covered only one or more partners (and
their spouses) in a business partnership
(including partners in an S or C corporation);
(B) meets the minimum coverage requirements of
section 410(b) of the Internal Revenue Code of 1986
without being combined with any other plan of the
business that covers the employees of the business;
(C) does not provide benefits to anyone except the
employer (and the employer's spouse) or the partners
(and their spouses);
(D) does not cover a business that is a member of
an affiliated service group, a controlled group of
corporations, or a group of businesses under common
control; and
(E) does not cover a business that leases
employees.
(3) Other definitions.--Terms used in paragraph (2) which
are also used in section 414 of the Internal Revenue Code of
1986 shall have the respective meanings given such terms by
such section.
(4) Effective date.--The provisions of this subsection
shall apply to plan years beginning on or after January 1,
2003.
(b) Simplified Annual Filing Requirement for Plans With Fewer Than
25 Employees.--In the case of plan years beginning after December 31,
2004, the Secretary of the Treasury and the Secretary of Labor shall
provide for the filing of a simplified annual return for any retirement
plan which covers less than 25 employees on the first day of a plan
year and which meets the requirements described in subparagraphs (B),
(D), and (E) of subsection (a)(2).
SEC. 1203. IMPROVEMENT OF EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM.
The Secretary of the Treasury shall continue to update and improve
the Employee Plans Compliance Resolution System (or any successor
program) giving special attention to--
(1) increasing the awareness and knowledge of small
employers concerning the availability and use of the program;
(2) taking into account special concerns and circumstances
that small employers face with respect to compliance and
correction of compliance failures;
(3) extending the duration of the self-correction period
under the Self-Correction Program for significant compliance
failures;
(4) expanding the availability to correct insignificant
compliance failures under the Self-Correction Program during
audit; and
(5) assuring that any tax, penalty, or sanction that is
imposed by reason of a compliance failure is not excessive and
bears a reasonable relationship to the nature, extent, and
severity of the failure.
The Secretary of the Treasury shall have full authority to effectuate
the foregoing with respect to the Employee Plans Compliance Resolution
System (or any successor program) and any other employee plans
correction policies, including the authority to waive income, excise,
or other taxes to ensure that any tax, penalty, or sanction is not
excessive and bears a reasonable relationship to the nature, extent,
and severity of the failure.
SEC. 1204. EXTENSION TO ALL GOVERNMENTAL PLANS OF MORATORIUM ON
APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE
TO STATE AND LOCAL PLANS.
(a) In General.--
(1) Subparagraph (G) of section 401(a)(5) and subparagraph
(H) of section 401(a)(26) are each amended by striking
``section 414(d))'' and all that follows and inserting
``section 414(d)).''.
(2) 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 striking ``maintained by a State or local government
or political subdivision thereof (or agency or instrumentality
thereof)''.
(b) Conforming Amendments.--
(1) The heading for subparagraph (G) of section 401(a)(5)
is amended to read as follows: ``Governmental plans.--''.
(2) The heading for subparagraph (H) of section 401(a)(26)
is amended to read as follows: ``Exception for governmental
plans.--''.
(3) Subparagraph (G) of section 401(k)(3) is amended by
inserting ``Governmental plans.--'' after ``(G)''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2003.
SEC. 1205. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.
(a) Expansion of Period.--
(1) Amendment of internal revenue code.--
(A) In general.--Subparagraph (A) of section
417(a)(6) is amended by striking ``90-day'' and
inserting ``180-day''.
(B) 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 ``180 days'' for
``90 days'' each place it appears in Treasury
Regulations sections 1.402(f)-1, 1.411(a)-11(c), and
1.417(e)-1(b).
(2) Effective date.--The amendment made by paragraph (1)(A)
and the modifications required by paragraph (1)(B) shall apply
to years beginning after December 31, 2003.
(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.--
(A) In general.--The modifications required by
paragraph (1) shall apply to years beginning after
December 31, 2003.
(B) Reasonable notice.--In the case of any
description of such consequences made before the date
that is 90 days after the date on which the Secretary
of the Treasury issues a safe harbor description under
paragraph (1), a plan shall not be treated as failing
to satisfy the requirements of section 411(a)(11) of
such Code by reason of the failure to provide the
information required by the modifications made under
paragraph (1) if the Administrator of such plan makes a
reasonable attempt to comply with such requirements.
SEC. 1206. 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)(A)) is amended--
(1) in clause (i), by inserting ``other than a new single-
employer plan (as defined in subparagraph (F)) maintained by a
small employer (as so defined),'' 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 a contributing sponsor 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
sponsor or any member of such sponsor's controlled group (or any
predecessor of either) did not establish or maintain a plan to which
this title applies with respect to which 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 two or more contributing
sponsors that are not part of the same controlled group, the employees
of all contributing sponsors and controlled groups of such sponsors
shall be aggregated for purposes of determining whether any
contributing sponsor is a small employer.''.
(c) Effective Date.--The amendments made by this section shall
apply to plans established after December 31, 2002.
SEC. 1207. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND SMALL
PLANS.
(a) New Plans.--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 of the amount determined under clause (ii) and 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.
For purposes of this clause, a defined benefit plan (as defined in
section 3(35)) maintained by a contributing sponsor shall be treated as
a new defined benefit plan for each of its first 5 plan years if,
during the 36-month period ending on the date of the adoption of the
plan, the sponsor and each member of any controlled group including the
sponsor (or any predecessor of either) did not establish or maintain a
plan to which this title applies with respect to which benefits were
accrued for substantially the same employees as are in the new plan.''.
(b) Small Plans.--Paragraph (3) of section 4006(a) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)), as amended
by section 207(b), is amended--
(1) by striking ``The'' in subparagraph (E)(i) and
inserting ``Except as provided in subparagraph (G), the'', and
(2) by inserting after subparagraph (F) the following new
subparagraph:
``(G)(i) In the case of an employer who has 25 or fewer employees
on the first day of the plan year, the additional premium determined
under subparagraph (E) for each participant shall not exceed $5
multiplied by the number of participants in the plan as of the close of
the preceding plan year.
``(ii) For purposes of clause (i), whether an employer has 25 or
fewer employees on the first day of the plan year is determined taking
into consideration all of the employees of all members of the
contributing sponsor's controlled group. In the case of a plan
maintained by two or more contributing sponsors, the employees of all
contributing sponsors and their controlled groups shall be aggregated
for purposes of determining whether the 25-or-fewer-employees
limitation has been satisfied.''.
(c) Effective Dates.--
(1) Subsection (a).--The amendments made by subsection (a)
shall apply to plans established after December 31, 2002.
(2) Subsection (b).--The amendments made by subsection (b)
shall apply to plan years beginning after December 31, 2003.
SEC. 1208. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM
OVERPAYMENT REFUNDS.
(a) In General.--Section 4007(b) of the Employment Retirement
Income Security Act of 1974 (29 U.S.C. 1307(b)) is amended--
(1) by striking ``(b)'' and inserting ``(b)(1)'', and
(2) by inserting at the end the following new paragraph:
``(2) The corporation is authorized to pay, subject to regulations
prescribed by the corporation, interest on the amount of any
overpayment of premium refunded to a designated payor. Interest under
this paragraph shall be calculated at the same rate and in the same
manner as interest is calculated for underpayments under paragraph
(1).''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to interest accruing for periods beginning not earlier than the
date of the enactment of this Act.
SEC. 1209. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.
(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 equal 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 10, and
``(ii) the amount of benefits that would be guaranteed
under this section if the participant were not a majority
owner.''.
(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 new
paragraph:
``(3) If assets available for allocation under paragraph
(4) of subsection (a) are insufficient to satisfy in full the
benefits of all individuals who are described in that
paragraph, the assets shall be 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 new
subsection:
``(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)) after December 31, 2002, and
(B) under section 4042 of such Act (29 U.S.C. 1342)
with respect to which proceedings are instituted by the
corporation after such date.
(2) Conforming amendments.--The amendments made by
subsection (c) shall take effect on January 1, 2004.
SEC. 1210. QUALIFIED GROUP LEGAL SERVICES PLANS.
(a) In General.--Subsection (e) of section 120 of the Internal
Revenue Code of 1986 is amended to read as follows:
``(e) Application of Section.--This section and section 501(c)(20)
shall apply to taxable years beginning--
``(1) after December 31, 1976, and before July 1, 1992, and
``(2) after December 31, 2003, and before January 1,
2009.''.
(b) Increase in Maximum Exclusion.--The last sentence of section
120(a) of such Code is amended by striking ``$70'' and inserting
``$150''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2003.
SEC. 1211. STUDIES.
(a) Model Small Employer Group Plans Study.--As soon as practicable
after the date of the enactment of this Act, the Secretary of Labor, in
consultation with the Secretary of the Treasury, shall conduct a study
to determine--
(1) the most appropriate form or forms of--
(A) employee pension benefit plans which would--
(i) be simple in form and easily maintained
by multiple small employers, and
(ii) provide for ready portability of
benefits for all participants and
beneficiaries,
(B) alternative arrangements providing comparable
benefits which may be established by employee or
employer associations, and
(C) alternative arrangements providing comparable
benefits to which employees may contribute in a manner
independent of employer sponsorship, and
(2) appropriate methods and strategies for making pension
plan coverage described in paragraph (1) more widely available
to American workers.
(b) Matters To Be Considered.--In conducting the study under
subsection (a), the Secretary of Labor shall consider the adequacy and
availability of existing employee pension benefit plans and the extent
to which existing models may be modified to be more accessible to both
employees and employers.
(c) Report.--Not later than 18 months after the date of the
enactment of this Act, the Secretary of Labor shall report the results
of the study under subsection (a), together with the Secretary's
recommendations, to the Committee on Education and the Workforce and
the Committee on Ways and Means of the House of Representatives and the
Committee on Health, Education, Labor, and Pensions and the Committee
on Finance of the Senate. Such recommendations shall include one or
more model plans described in subsection (a)(1)(A) and model
alternative arrangements described in subsections (a)(1)(B) and
(a)(1)(C) which may serve as the basis for appropriate administrative
or legislative action.
(d) Study on Effect of Legislation.--Not later than 5 years after
the date of the enactment of this Act, the Secretary of Labor shall
submit to the Committee on Education and the Workforce of the House of
Representatives and the Committee on Health, Education, Labor, and
Pensions of the Senate a report on the effect of the provisions of this
Act and title VI of the Economic Growth and Tax Relief Reconciliation
Act of 2001 on pension plan coverage, including any change in--
(1) the extent of pension plan coverage for low and middle-
income workers,
(2) the levels of pension plan benefits generally,
(3) the quality of pension plan coverage generally,
(4) workers' access to and participation in pension plans,
and
(5) retirement security.
TITLE XIII--STOCK OPTIONS
SEC. 1301. EXCLUSION OF INCENTIVE STOCK OPTIONS AND EMPLOYEE STOCK
PURCHASE PLAN STOCK OPTIONS FROM WAGES.
(a) Exclusion From Employment Taxes.--
(1) Social security taxes.--
(A) Section 3121(a) (relating to definition of
wages) is amended by striking ``or'' at the end of
paragraph (20), by striking the period at the end of
paragraph (21) and inserting ``; or'', and by inserting
after paragraph (21) the following new paragraph:
``(22) remuneration on account of--
``(A) a transfer of a share of stock to any
individual pursuant to an exercise of an incentive
stock option (as defined in section 422(b)) or under an
employee stock purchase plan (as defined in section
423(b)), or
``(B) any disposition by the individual of such
stock.''.
(B) Section 209(a) of the Social Security Act is
amended by striking ``or'' at the end of paragraph
(17), by striking the period at the end of paragraph
(18) and inserting ``; or'', and by inserting after
paragraph (18) the following new paragraph:
``(19) Remuneration on account of--
``(A) a transfer of a share of stock to any
individual pursuant to an exercise of an incentive
stock option (as defined in section 422(b) of the
Internal Revenue Code of 1986) or under an employee
stock purchase plan (as defined in section 423(b) of
such Code), or
``(B) any disposition by the individual of such
stock.''.
(2) Railroad retirement taxes.--Subsection (e) of section
3231 is amended by adding at the end the following new
paragraph:
``(11) Qualified stock options.--The term `compensation'
shall not include any remuneration on account of--
``(A) a transfer of a share of stock to any
individual pursuant to an exercise of an incentive
stock option (as defined in section 422(b)) or under an
employee stock purchase plan (as defined in section
423(b)), or
``(B) any disposition by the individual of such
stock.''.
(3) Unemployment taxes.--Section 3306(b) (relating to
definition of wages) is amended by striking ``or'' at the end
of paragraph (16), by striking the period at the end of
paragraph (17) and inserting ``; or'', and by inserting after
paragraph (17) the following new paragraph:
``(18) remuneration on account of--
``(A) a transfer of a share of stock to any
individual pursuant to an exercise of an incentive
stock option (as defined in section 422(b)) or under an
employee stock purchase plan (as defined in section
423(b)), or
``(B) any disposition by the individual of such
stock.''.
(b) Wage Withholding Not Required on Disqualifying Dispositions.--
Section 421(b) (relating to effect of disqualifying dispositions) is
amended by adding at the end the following new sentence: ``No amount
shall be required to be deducted and withheld under chapter 24 with
respect to any increase in income attributable to a disposition
described in the preceding sentence.''.
(c) Wage Withholding Not Required on Compensation Where Option
Price is Between 85 Percent and 100 Percent of Value of Stock.--Section
423(c) (relating to special rule where option price is between 85
percent and 100 percent of value of stock) is amended by adding at the
end the following new sentence: ``No amount shall be required to be
deducted and withheld under chapter 24 with respect to any amount
treated as compensation under this subsection.''.
(d) Effective Date.--The amendments made by this section shall
apply to stock acquired pursuant to options exercised after the date of
the enactment of this Act.
TITLE XIV--OTHER ELEMENTS OF RETIREMENT SECURITY
SEC. 1401. EMPLOYEE PRE-TAX PAYMENTS FOR RETIREE HEALTH.
(a) In General.--Section 106 (relating to contributions by employer
to accident and health plans) is amended by adding at the end the
following new subsection:
``(d) Employer-Provided Coverage of Former Employees.--
``(1) In general.--Coverage under an accident or health
plan maintained by an employer which is provided to a former
employee of the employer shall be treated as employer-provided
coverage under an accident or health plan for purposes of
subsection (a) to the extent such coverage is paid for by the
former employee pursuant to a qualified election. No amount
shall be included in the gross income of any former employee
solely because the former employee may make the choice
described in paragraph (3).
``(2) Applicable limitation.--
``(A) In general.--In the case of taxable years
beginning before January 1, 2010, the amount of
benefits under an eligible retirement plan (as defined
in clauses (iii), (iv), (v), and (vi) of section
402(c)(8)(B)) of an employer which may be excluded from
the gross income of an individual by reason of
paragraph (1) shall not exceed the applicable
limitation.
``(B) Applicable limitation.--For purposes of
subparagraph (A), the applicable limitation shall be
determined in accordance with the following table:
The applicable
``For taxable years beginning in: limitation is:
2004 and 2005................................. $500
2006 and 2007................................. $1,000
2008 and 2009................................. $2,000.
``(3) Qualified election.--For purposes of paragraph (1), a
qualified election is an election made by the former employee
to have benefits otherwise payable to the former employee under
an eligible retirement plan (as defined in clauses (iii), (iv),
(v), and (vi) of section 402(c)(8)(B)) (or under an annuity
contract distributed by such a plan) used to pay for coverage
described in paragraph (1).
``(4) Special rules.--For purposes of this subsection--
``(A) all eligible retirement plans of an employer
shall be treated as a single plan, and
``(B) with respect to an eligible retirement plan
of an employer, a beneficiary or alternate payee (as
defined in section 414(p)(8)) of a former employee
shall be treated in the same manner as the former
employee.
``(5) Treatment as distribution.--For purposes of this
title, any payment under this subsection from an eligible
retirement plan for coverage under an accident or health plan
on behalf of a former employee shall be treated as a
distribution from the eligible retirement plan to the former
employee, except to the extent that such treatment is
inconsistent with this subsection. Such a payment shall be
treated as a permissible distribution from the eligible
retirement plan to the former employee to the same extent that
a cash distribution to the former employee would be
permissible.''.
(b) Conforming Amendment.--The portion of subsection (h) of section
401 that precedes section 401(h)(1) is amended by striking ``but only
if'' and inserting ``but only if provided pursuant to a qualified
election described in section 106(d) or if''.
(c) Effective Date.--The amendments made by this section shall
apply to amounts paid for coverage under an accident health plan in
years beginning after December 31, 2003.
SEC. 1402. ENCOURAGING EMPLOYERS TO MAINTAIN RETIREE HEALTH PLANS.
(a) In General.--The first sentence of subsection (h) of section
401 (relating to medical, etc., benefits for retired employees and
their spouses and dependents) is amended by striking ``pension or
annuity plan'' and inserting ``pension, annuity, profit-sharing, or
stock bonus plan''.
(b) Phase-In of Permissible Contributions From Profit-Sharing and
Stock Bonus Plans.--Subsection (h) of section 401 (relating to medical,
etc., benefits for retired employees and their spouses and dependents)
is amended by adding at the end the following new sentence: ``For
purposes of the preceding sentence, in the case of contributions to a
profit-sharing or stock bonus plan for plan years before plan years
beginning in 2010, the `applicable percentage' shall be substituted for
`25 percent', and the term `applicable percentage' means 5 percent for
plan years beginning in 2004 and 2005, 10 percent for plan years
beginning in 2006 and 2007, and 20 percent for plan years beginning in
2008 and 2009.''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2003.
TITLE XV--REDUCING REGULATORY BURDENS
SEC. 1501. 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) except as provided by the Secretary of the Treasury,
such plan shall not fail to meet the requirements of section
411(d)(6) of the Internal Revenue Code of 1986 and section
204(g) of the Employee Retirement Income Security Act of 1974
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
title VI of the Economic Growth and Tax Relief
Reconciliation Act of 2001, or pursuant to any
regulation issued by the Secretary of the Treasury or
the Secretary of Labor under this Act or such title VI,
and
(B) on or before the last day of the first plan
year beginning on or after January 1, 2006.
In the case of a governmental plan (as defined in section
414(d) of the Internal Revenue Code of 1986), this paragraph
shall be applied by substituting ``2008'' for ``2006''.
(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.
TITLE XVI--SOCIAL SECURITY AND MEDICARE HELD HARMLESS
SEC. 1601. PROTECTION OF SOCIAL SECURITY AND MEDICARE.
The amounts transferred to any trust fund under the Social Security
Act shall be determined as if this Act had not been enacted.
<all>
Introduced in House
Introduced in House
Referred to the Committee on Ways and Means, and in addition to the Committee on Education and the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Ways and Means, and in addition to the Committee on Education and the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Committee on Ways and Means, and in addition to the Committee on Education and the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Referred to the Subcommittee on Employer-Employee Relations.
Committee Consideration and Mark-up Session Held.
Ordered to be Reported (Amended) by Voice Vote.
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