[House Report 107-53]
[From the U.S. Government Publishing Office]
107th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 107-53
======================================================================
PROVIDING FOR CONSIDERATION OF H.R. 10, THE COMPREHENSIVE RETIREMENT
SECURITY AND PENSION REFORM ACT OF 2001
_______
May 1, 2001.--Referred to the House Calendar and ordered to be printed
_______
Mr. Reynolds, from the Committee on Rules, submitted the following
R E P O R T
[To accompany H. Res. 127]
The Committee on Rules, having had under consideration
House Resolution 127, by a nonrecord vote, report the same to
the House with the recommendation that the resolution be
adopted.
SUMMARY OF PROVISIONS OF THE RESOLUTION
The resolution provides for the consideration in the House
of H.R. 10, the Comprehensive Retirement Security and Pension
Reform Act of 2001, under a modified closed rule. The rule
provides ninety minutes of debate, with sixty minutes equally
divided and controlled by the chairman and ranking minority
member of the Committee on Ways and Means and thirty minutes
equally divided and controlled by the chairman and ranking
minority member of the Committee on Education and the
Workforce.
The rule provides that, in lieu of the amendments
recommended by the Committee on Ways and Means and the
Committee on Education and the Workforce now printed in the
bill, the amendment in the nature of a substitute printed in
the Congressional Record and numbered one shall be considered
as adopted. The rule waives all points of order against
consideration of the bill as amended.
The rule provides for consideration of the amendment in the
nature of a substitute printed in this report, if offered by
Representative Rangel or his designee, which shall be
considered as read and shall be separately debatable for one
hour equally divided and controlled by the proponent and an
opponent. The rules waives all points of order against the
amendment. Finally, the rule provides one motion to recommit
with or without instructions.
The waiver of all points of order includes a waiver of
clause 4(a) of rule XIII (requiring a three-day layover of the
committee report), a waiver of clause 3(h) of rule XIII
(requiring the inclusion in the report of a tax complexity
analysis for a bill reported by the Committee on Ways and
Means) and section 303 of the Congressional Budget Act of 1974
(prohibiting consideration of legislation, as reported,
providing new budget authority, changes in revenues, or changes
in the public debt for a fiscal year until the budget
resolution for that year has been agreed to).
The waiver of clause 4(a) of rule XIII is needed because
the reports were not filed until Tuesday, May 1, and the bill
may be considered by the House as early as Wednesday, May 2.
The waiver of clause 3(h) of rule XIII is needed because the
report failed to include a sufficient tax complexity statement.
The waiver of section 303 is necessary because Congress has not
yet completed consideration of a budget resolution for FY 2002
and, according to the Joint Committee on Taxation, the bill
would decrease revenues and increase direct spending in FY
2002.
The waiver of all points of order against consideration of
the minority substitute is necessary for the same general
reasons as are necessary for the bill.
COMMITTEE VOTES
Pursuant to clause 3(b) of House rule XIII the results of
each record vote on an amendment or motion to report, together
with the names of those voting for and against, are printed
below:
Rules Committee Record Vote No. 9
Date: May 1, 2001.
Measure: H.R. 10, the Comprehensive Retirement Security and
Pension Reform Act of 2001.
Motion By: Mr. Frost.
Summary of Motion: Make in order the Morella amendment to
provide the same Internal Revenue Code treatment to the Thrift
Savings Plan for federal employees regarding ``catch-up''
contributions that would be provided to all other qualified
public and private sector plans.
Results: Defeated 2 to 7.
Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay;
Hastings--Nay; Myrick--Nay; Sessions--Nay; Frost--Yea; Hall--
Yea; Dreier--Nay.
Summary of Amendments Made In Order
Amendment printed in the Congressional Record and to be considered as
adopted
Thomas/Boehner: Amendment in the nature of a substitute.
Combines the provisions of the bill as reported from both the
Committees on Ways and Means and the Committee on Education and
the Workforce.
Amendment to be made in order
Rangel: Amendment in the nature of a substitute. Includes
the text of the bill as reported and provides a refundable tax
credit to low- and middle-income workers of up to 50% of annual
contributions made to a traditional IRA or an employer-
sponsored pension plan such as a section 401(k), section
403(b), or 457 plan, with eligible annual contributions limited
to $2,000 and a maximum credit of $1,000; makes small employers
(no more than 100 employers) eligible to claim a 3-year tax
credit for an amount equal to 50% of the costs incurred as a
result of establishing a new qualifying plan; and make small
employers eligible for a tax credit equal to 50% of certain
qualifying employer contributions made to a qualifying
retirement plan on behalf of non-highly compensated employees.
TEXT OF AMENDMENT MADE IN ORDER
An Amendment To Be Offered by Representative Rangel of New York, or a
Designee, Debatable for 60 Minutes
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the
``Comprehensive Retirement Security and Pension Reform Act of
2001''.
(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; references; table of contents.
TITLE I--INDIVIDUAL RETIREMENT ACCOUNT PROVISIONS
Sec. 101. Modification of IRA contribution limits.
TITLE II--EXPANDING COVERAGE
Sec. 201. Increase in benefit and contribution limits.
Sec. 202. Plan loans for subchapter S owners, partners, and sole
proprietors.
Sec. 203. Modification of top-heavy rules.
Sec. 204. Elective deferrals not taken into account for purposes of
deduction limits.
Sec. 205. Repeal of coordination requirements for deferred compensation
plans of State and local governments and tax-exempt
organizations.
Sec. 206. Elimination of user fee for requests to IRS regarding pension
plans.
Sec. 207. Deduction limits.
Sec. 208. Option to treat elective deferrals as after-tax contributions.
Sec. 209. Availability of qualified plans to self-employed individuals
who are exempt from the self-employment tax by reason of their
religious beliefs.
Sec. 210. Certain nonresident aliens excluded in applying minimum
coverage requirements.
Sec. 211. Refundable credit to certain individuals for elective
deferrals and IRA contributions.
Sec. 212. Credit for pension plan startup costs of small employers.
Sec. 213. Credit for qualified pension plan contributions of small
employers.
TITLE III--ENHANCING FAIRNESS FOR WOMEN
Sec. 301. Catch-up contributions for individuals age 50 or over.
Sec. 302. Equitable treatment for contributions of employees to defined
contribution plans.
Sec. 303. Faster vesting of certain employer matching contributions.
Sec. 304. Modifications to minimum distribution rules.
Sec. 305. Clarification of tax treatment of division of section 457 plan
benefits upon divorce.
Sec. 306. Provisions relating to hardship distributions.
Sec. 307. Waiver of tax on nondeductible contributions for domestic or
similar workers.
TITLE IV--INCREASING PORTABILITY FOR PARTICIPANTS
Sec. 401. Rollovers allowed among various types of plans.
Sec. 402. Rollovers of IRAs into workplace retirement plans.
Sec. 403. Rollovers of after-tax contributions.
Sec. 404. Hardship exception to 60-day rule.
Sec. 405. Treatment of forms of distribution.
Sec. 406. Rationalization of restrictions on distributions.
Sec. 407. Purchase of service credit in governmental defined benefit
plans.
Sec. 408. Employers may disregard rollovers for purposes of cash-out
amounts.
Sec. 409. Minimum distribution and inclusion requirements for section
457 plans.
TITLE V--STRENGTHENING PENSION SECURITY AND ENFORCEMENT
Sec. 501. Repeal of percent of current liability funding limit.
Sec. 502. Maximum contribution deduction rules modified and applied to
all defined benefit plans.
Sec. 503. Excise tax relief for sound pension funding.
Sec. 504. Excise tax on failure to provide notice by defined benefit
plans significantly reducing future benefit accruals.
Sec. 505. Treatment of multiemployer plans under section 415.
Sec. 506. Protection of investment of employee contributions to 401(k)
plans.
Sec. 507. Periodic pension benefits statements.
Sec. 508. Prohibited allocations of stock in S corporation ESOP.
TITLE VI--REDUCING REGULATORY BURDENS
Sec. 601. Modification of timing of plan valuations.
Sec. 602. ESOP dividends may be reinvested without loss of dividend
deduction.
Sec. 603. Repeal of transition rule relating to certain highly
compensated employees.
Sec. 604. Employees of tax-exempt entities.
Sec. 605. Clarification of treatment of employer-provided retirement
advice.
Sec. 606. Reporting simplification.
Sec. 607. Improvement of employee plans compliance resolution system.
Sec. 608. Repeal of the multiple use test.
Sec. 609. Flexibility in nondiscrimination, coverage, and line of
business rules.
Sec. 610. Extension to all governmental plans of moratorium on
application of certain nondiscrimination rules applicable to
State and local plans.
Sec. 611. Notice and consent period regarding distributions.
Sec. 612. Annual report dissemination.
Sec. 613. Technical corrections to SAVER Act.
TITLE VII--OTHER ERISA PROVISIONS
Sec. 701. Missing participants.
Sec. 702. Reduced PBGC premium for new plans of small employers.
Sec. 703. Reduction of additional PBGC premium for new and small plans.
Sec. 704. Authorization for PBGC to pay interest on premium overpayment
refunds.
Sec. 705. Substantial owner benefits in terminated plans.
Sec. 706. Civil penalties for breach of fiduciary responsibility.
Sec. 707. Benefit suspension notice.
Sec. 708. Studies.
TITLE VIII--PLAN AMENDMENTS
Sec. 801. Provisions relating to plan amendments.
TITLE I--INDIVIDUAL RETIREMENT ACCOUNTS
SEC. 101. MODIFICATION OF IRA CONTRIBUTION LIMITS.
(a) Increase in Contribution Limit.--
(1) In general.--Paragraph (1)(A) of section 219(b)
(relating to maximum amount of deduction) is amended by
striking ``$2,000'' and inserting ``the deductible
amount''.
(2) Deductible amount.--Section 219(b) is amended by
adding at the end the following new paragraph:
``(5) Deductible amount.--For purposes of paragraph
(1)(A)--
``(A) In general.--The deductible amount
shall be determined in accordance with the
following table:
``For taxable years The deductible
beginning in: amount is:
2002........................................ $3,000
2003........................................ $4,000
2004 and thereafter......................... $5,000.
``(B) Catch-up contributions for individuals
50 or older.--In the case of an individual who
has attained the age of 50 before the close of
the taxable year, the deductible amount for
taxable years beginning in 2002 or 2003 shall
be $5,000.
``(C) Cost-of-living adjustment.--
``(i) In general.--In the case of any
taxable year beginning in a calendar
year after 2004, the $5,000 amount
under subparagraph (A) shall be
increased by an amount equal to--
``(I) such dollar amount,
multiplied by
``(II) the cost-of-living
adjustment determined under
section 1(f )(3) for the
calendar year in which the
taxable year begins, determined
by substituting `calendar year
2003' for `calendar year 1992'
in subparagraph (B) thereof.
``(ii) Rounding rules.--If any amount
after adjustment under clause (i) is
not a multiple of $500, such amount
shall be rounded to the next lower
multiple of $500.''.
(b) Conforming Amendments.--
(1) Section 408(a)(1) is amended by striking ``in
excess of $2,000 on behalf of any individual'' and
inserting ``on behalf of any individual in excess of
the amount in effect for such taxable year under
section 219(b)(1)(A)''.
(2) Section 408(b)(2)(B) is amended by striking
``$2,000'' and inserting ``the dollar amount in effect
under section 219(b)(1)(A)''.
(3) Section 408(b) is amended by striking ``$2,000''
in the matter following paragraph (4) and inserting
``the dollar amount in effect under section
219(b)(1)(A)''.
(4) Section 408( j) is amended by striking
``$2,000''.
(5) Section 408(p)(8) is amended by striking
``$2,000'' and inserting ``the dollar amount in effect
under section 219(b)(1)(A)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2001.
TITLE II--EXPANDING COVERAGE
SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION LIMITS.
(a) Defined Benefit Plans.--
(1) Dollar limit.--
(A) Subparagraph (A) of section 415(b)(1)
(relating to limitation for defined benefit
plans) is amended by striking ``$90,000'' and
inserting ``$160,000''.
(B) Subparagraphs (C) and (D) of section
415(b)(2) are each amended by striking
``$90,000'' each place it appears in the
headings and the text and inserting
``$160,000''.
(C) Paragraph (7) of section 415(b) (relating
to benefits under certain collectively
bargained plans) is amended by striking ``the
greater of $68,212 or one-half the amount
otherwise applicable for such year under
paragraph (1)(A) for `$90,000' '' and inserting
``one-half the amount otherwise applicable for
such year under paragraph (1)(A) for `$160,000'
''.
(2) Limit reduced when benefit begins before age
62.--Subparagraph (C) of section 415(b)(2) is amended
by striking ``the social security retirement age'' each
place it appears in the heading and text and inserting
``age 62'' and by striking the second sentence.
(3) Limit increased when benefit begins after age
65.--Subparagraph (D) of section 415(b)(2) is amended
by striking ``the social security retirement age'' each
place it appears in the heading and text and inserting
``age 65''.
(4) Cost-of-living adjustments.--Subsection (d) of
section 415 (related to cost-of-living adjustments) is
amended--
(A) by striking ``$90,000'' in paragraph
(1)(A) and inserting ``$160,000''; and
(B) in paragraph (3)(A)--
(i) by striking ``$90,000'' in the
heading and inserting ``$160,000''; and
(ii) by striking ``October 1, 1986''
and inserting ``July 1, 2001''.
(5) Conforming amendments.--
(A) Section 415(b)(2) is amended by striking
subparagraph (F).
(B) Section 415(b)(9) is amended to read as
follows:
``(9) Special rule for commercial airline pilots.--
``(A) In general.--Except as provided in
subparagraph (B), in the case of any
participant who is a commercial airline pilot,
if, as of the time of the participant's
retirement, regulations prescribed by the
Federal Aviation Administration require an
individual to separate from service as a
commercial airline pilot after attaining any
age occurring on or after age 60 and before age
62, paragraph (2)(C) shall be applied by
substituting such age for age 62.
``(B) Individuals who separate from service
before age 60.--If a participant described in
subparagraph (A) separates from service before
age 60, the rules of paragraph (2)(C) shall
apply.''.
(C) Section 415(b)(10)(C)(i) is amended by
striking ``applied without regard to paragraph
(2)(F)''.
(b) Defined Contribution Plans.--
(1) Dollar limit.--Subparagraph (A) of section
415(c)(1) (relating to limitation for defined
contribution plans) is amended by striking ``$30,000''
and inserting ``$40,000''.
(2) Cost-of-living adjustments.--Subsection (d) of
section 415 (related to cost-of-living adjustments) is
amended--
(A) by striking ``$30,000'' in paragraph
(1)(C) and inserting ``$40,000''; and
(B) in paragraph (3)(D)--
(i) by striking ``$30,000'' in the
heading and inserting ``$40,000''; and
(ii) by striking ``October 1, 1993''
and inserting ``July 1, 2001''.
(c) Qualified Trusts.--
(1) Compensation limit.--Sections 401(a)(17), 404(l),
408(k), and 505(b)(7) are each amended by striking
``$150,000'' each place it appears and inserting
``$200,000''.
(2) Base period and rounding of cost-of-living
adjustment.--Subparagraph (B) of section 401(a)(17) is
amended--
(A) by striking ``October 1, 1993'' and
inserting ``July 1, 2001''; and
(B) by striking ``$10,000'' both places it
appears and inserting ``$5,000''.
(d) Elective Deferrals.--
(1) In general.--Paragraph (1) of section 402(g)
(relating to limitation on exclusion for elective
deferrals) is amended to read as follows:
``(1) In general.--
``(A) Limitation.--Notwithstanding
subsections (e)(3) and (h)(1)(B), the elective
deferrals of any individual for any taxable
year shall be included in such individual's
gross income to the extent the amount of such
deferrals for the taxable year exceeds the
applicable dollar amount.
``(B) Applicable dollar amount.--For purposes
of subparagraph (A), the applicable dollar
amount shall be the amount determined in
accordance with the following table:
``For taxable years The applicable
beginning in dollar amount:
calendar year:
2002........................................ $11,000
2003........................................ $12,000
2004........................................ $13,000
2005........................................ $14,000
2006 or thereafter.........................$15,000.''.
(2) Cost-of-living adjustment.--Paragraph (5) of
section 402(g) is amended to read as follows:
``(5) Cost-of-living adjustment.--In the case of
taxable years beginning after December 31, 2006, the
Secretary shall adjust the $15,000 amount under
paragraph (1)(B) 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,
2005, and any increase under this paragraph which is
not a multiple of $500 shall be rounded to the next
lowest multiple of $500.''.
(3) Conforming amendments.--
(A) Section 402(g) (relating to limitation on
exclusion for elective deferrals), as amended
by paragraphs (1) and (2), is further amended
by striking paragraph (4) and redesignating
paragraphs (5), (6), (7), (8), and (9) as
paragraphs (4), (5), (6), (7), and (8),
respectively.
(B) Paragraph (2) of section 457(c) is
amended by striking ``402(g)(8)(A)(iii)'' and
inserting ``402(g)(7)(A)(iii)''.
(C) Clause (iii) of section 501(c)(18)(D) is
amended by striking ``(other than paragraph (4)
thereof)''.
(e) Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations.--
(1) In general.--Section 457 (relating to deferred
compensation plans of State and local governments and
tax-exempt organizations) is amended--
(A) in subsections (b)(2)(A) and (c)(1) by
striking ``$7,500'' each place it appears and
inserting ``the applicable dollar amount''; and
(B) in subsection (b)(3)(A) by striking
``$15,000'' and inserting ``twice the dollar
amount in effect under subsection (b)(2)(A)''.
(2) Applicable dollar amount; cost-of-living
adjustment.--Paragraph (15) of section 457(e) is
amended to read as follows:
``(15) Applicable dollar amount.--
``(A) In general.--The applicable dollar
amount shall be the amount determined in
accordance with the following table:
``For taxable years The applicable
beginning in dollar amount:
calendar year:
2002........................................ $11,000
2003........................................ $12,000
2004........................................ $13,000
2005........................................ $14,000
2006 or thereafter.......................... $15,000.
``(B) Cost-of-living adjustments.--In the
case of taxable years beginning after December
31, 2006, the Secretary shall adjust the
$15,000 amount under subparagraph (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,
2005, and any increase under this paragraph
which is not a multiple of $500 shall be
rounded to the next lowest multiple of $500.''.
(f) Simple Retirement Accounts.--
(1) Limitation.--Clause (ii) of section 408(p)(2)(A)
(relating to general rule for qualified salary
reduction arrangement) is amended by striking
``$6,000'' and inserting ``the applicable dollar
amount''.
(2) Applicable dollar amount.--Subparagraph (E) of
408(p)(2) is amended to read as follows:
``(E) Applicable dollar amount; cost-of-
living adjustment.--
``(i) In general.--For purposes of
subparagraph (A)(ii), the applicable
dollar amount shall be the amount
determined in accordance with the
following table:
``For taxable years The applicable
beginning in dollar amount:
calendar year:
2002.................................. $7,000
2003.................................. $8,000
2004.................................. $9,000
2005 or thereafter.................... $10,000.
``(ii) Cost-of-living adjustment.--In
the case of a year beginning after
December 31, 2005, the Secretary shall
adjust the $10,000 amount under clause
(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, 2004, and any increase under
this subparagraph which is not a
multiple of $500 shall be rounded to
the next lower multiple of $500.''.
(3) Conforming amendments.--
(A) Subclause (I) of section 401(k)(11)(B)(i)
is amended by striking ``$6,000'' and inserting
``the amount in effect under section
408(p)(2)(A)(ii)''.
(B) Section 401(k)(11) is amended by striking
subparagraph (E).
(g) Rounding Rule Relating to Defined Benefit Plans and
Defined Contribution Plans.--Paragraph (4) of section 415(d) is
amended to read as follows:
``(4) Rounding.--
``(A) $160,000 amount.--Any increase under
subparagraph (A) of paragraph (1) which is not
a multiple of $5,000 shall be rounded to the
next lowest multiple of $5,000.
``(B) $40,000 amount.--Any increase under
subparagraph (C) of paragraph (1) which is not
a multiple of $1,000 shall be rounded to the
next lowest multiple of $1,000.''.
(h) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2001.
SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND SOLE
PROPRIETORS.
(a) Amendment of Internal Revenue Code.--Subparagraph (B) of
section 4975(f)(6) (relating to exemptions not to apply to
certain transactions) is amended by adding at the end the
following new clause:
``(iii) Loan exception.--For purposes
of subparagraph (A)(i), the term
`owner-employee' shall only include a
person described in subclause (II) or
(III) of clause (i).''.
(b) Amendment of ERISA.--Section 408(d)(2) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1108(d)(2))
is amended by adding at the end the following new subparagraph:
``(C) For purposes of paragraph (1)(A), the term `owner-
employee' shall only include a person described in clause (ii)
or (iii) of subparagraph (A).''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2001.
SEC. 203. MODIFICATION OF TOP-HEAVY RULES.
(a) Simplification of Definition of Key Employee.--
(1) In general.--Section 416(i)(1)(A) (defining key
employee) is amended--
(A) by striking ``or any of the 4 preceding
plan years'' in the matter preceding clause
(i);
(B) by striking clause (i) and inserting the
following:
``(i) an officer of the employer
having an annual compensation greater
than $150,000,'';
(C) by striking clause (ii) and redesignating
clauses (iii) and (iv) as clauses (ii) and
(iii), respectively; and
(D) by striking the second sentence in the
matter following clause (iii), as redesignated
by subparagraph (C).
(2) Conforming amendment.--Section 416(i)(1)(B)(iii)
is amended by striking ``and subparagraph (A)(ii)''.
(b) Matching Contributions Taken Into Account for Minimum
Contribution Requirements.--Section 416(c)(2)(A) (relating to
defined contribution plans) is amended by adding at the end the
following: ``Employer matching contributions (as defined in
section 401(m)(4)(A)) shall be taken into account for purposes
of this subparagraph.''.
(c) Distributions During Last Year Before Determination Date
Taken Into Account.--
(1) In general.--Paragraph (3) of section 416(g) is
amended to read as follows:
``(3) Distributions during last year before
determination date taken into account.--
``(A) In general.--For purposes of
determining--
``(i) the present value of the
cumulative accrued benefit for any
employee, or
``(ii) the amount of the account of
any employee,
such present value or amount shall be increased
by the aggregate distributions made with
respect to such employee under the plan during
the 1-year period ending on the determination
date. The preceding sentence shall also apply
to distributions under a terminated plan which
if it had not been terminated would have been
required to be included in an aggregation
group.
``(B) 5-year period in case of in-service
distribution.--In the case of any distribution
made for a reason other than separation from
service, death, or disability, subparagraph (A)
shall be applied by substituting `5-year
period' for `1-year period'.''.
(2) Benefits not taken into account.--Subparagraph
(E) of section 416(g)(4) is amended--
(A) by striking ``last 5 years'' in the
heading and inserting ``last year before
determination date''; and
(B) by striking ``5-year period'' and
inserting ``1-year period''.
(d) Definition of Top-Heavy Plans.--Paragraph (4) of section
416(g) (relating to other special rules for top-heavy plans) is
amended by adding at the end the following new subparagraph:
``(H) Cash or deferred arrangements using
alternative methods of meeting
nondiscrimination requirements.--The term `top-
heavy plan' shall not include a plan which
consists solely of--
``(i) a cash or deferred arrangement
which meets the requirements of section
401(k)(12), and
``(ii) matching contributions with
respect to which the requirements of
section 401(m)(11) are met.
If, but for this subparagraph, a plan would be
treated as a top-heavy plan because it is a
member of an aggregation group which is a top-
heavy group, contributions under the plan may
be taken into account in determining whether
any other plan in the group meets the
requirements of subsection (c)(2).''.
(e) Frozen Plan Exempt From Minimum Benefit Requirement.--
Subparagraph (C) of section 416(c)(1) (relating to defined
benefit plans) is amended--
(A) by striking ``clause (ii)'' in clause (i)
and inserting ``clause (ii) or (iii)''; and
(B) by adding at the end the following:
``(iii) Exception for frozen plan.--
For purposes of determining an
employee's years of service with the
employer, any service with the employer
shall be disregarded to the extent that
such service occurs during a plan year
when the plan benefits (within the
meaning of section 410(b)) no key
employee or former key employee.''.
(f) Elimination of Family Attribution.--Section 416(i)(1)(B)
(defining 5-percent owner) is amended by adding at the end the
following new clause:
``(iv) Family attribution
disregarded.--Solely for purposes of
applying this paragraph (and not for
purposes of any provision of this title
which incorporates by reference the
definition of a key employee or 5-
percent owner under this paragraph),
section 318 shall be applied without
regard to subsection (a)(1) thereof in
determining whether any person is a 5-
percent owner.''.
(g) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2001.
SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF
DEDUCTION LIMITS.
(a) In General.--Section 404 (relating to deduction for
contributions of an employer to an employees' trust or annuity
plan and compensation under a deferred payment plan) is amended
by adding at the end the following new subsection:
``(n) Elective Deferrals Not Taken Into Account for Purposes
of Deduction Limits.--Elective deferrals (as defined in section
402(g)(3)) shall not be subject to any limitation contained in
paragraph (3), (7), or (9) of subsection (a), and such elective
deferrals shall not be taken into account in applying any such
limitation to any other contributions.''.
(b) Effective Date.--The amendment made by this section shall
apply to years beginning after December 31, 2001.
SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED COMPENSATION
PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT
ORGANIZATIONS.
(a) In General.--Subsection (c) of section 457 (relating to
deferred compensation plans of State and local governments and
tax-exempt organizations), as amended by section 201, is
amended to read as follows:
``(c) Limitation.--The maximum amount of the compensation of
any one individual which may be deferred under subsection (a)
during any taxable year shall not exceed the amount in effect
under subsection (b)(2)(A) (as modified by any adjustment
provided under subsection (b)(3)).''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to years beginning after December 31, 2001.
SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO IRS REGARDING PENSION
PLANS.
(a) Elimination of Certain User Fees.--The Secretary of the
Treasury or the Secretary's delegate shall not require payment
of user fees under the program established under section 10511
of the Revenue Act of 1987 for requests to the Internal Revenue
Service for determination letters with respect to the qualified
status of a pension benefit plan maintained solely by one or
more eligible employers or any trust which is part of the plan.
The preceding sentence shall not apply to any request--
(1) made after the later of--
(A) the fifth plan year the pension benefit
plan is in existence; or
(B) the end of any remedial amendment period
with respect to the plan beginning within the
first 5 plan years; or
(2) made by the sponsor of any prototype or similar
plan which the sponsor intends to market to
participating employers.
(b) Pension Benefit Plan.--For purposes of this section, the
term ``pension benefit plan'' means a pension, profit-sharing,
stock bonus, annuity, or employee stock ownership plan.
(c) Eligible Employer.--For purposes of this section, the
term ``eligible employer'' has the same meaning given such term
in section 408(p)(2)(C)(i)(I) of the Internal Revenue Code of
1986. The determination of whether an employer is an eligible
employer under this section shall be made as of the date of the
request described in subsection (a).
(d) Determination of Average Fees Charged.--For purposes of
any determination of average fees charged, any request to which
subsection (a) applies shall not be taken into account.
(e) Effective Date.--The provisions of this section shall
apply with respect to requests made after December 31, 2001.
SEC. 207. DEDUCTION LIMITS.
(a) Stock Bonus and Profit Sharing Trusts.--
(1) In general.--Subclause (I) of section
404(a)(3)(A)(i) (relating to stock bonus and profit
sharing trusts) is amended by striking ``15 percent''
and inserting ``20 percent''.
(2) Conforming amendment.--Subparagraph (C) of
section 404(h)(1) is amended by striking ``15 percent''
each place it appears and inserting ``20 percent''.
(b) Compensation.--
(1) In general.--Section 404(a) (relating to general
rule) is amended by adding at the end the following:
``(12) Definition of compensation.--For purposes of
paragraphs (3), (7), (8), and (9), the term
`compensation otherwise paid or accrued during the
taxable year' shall include amounts treated as
`participant's compensation' under subparagraph (C) or
(D) of section 415(c)(3).''.
(2) Conforming amendments.--
(A) Subparagraph (B) of section 404(a)(3) is
amended by striking the last sentence.
(B) Clause (i) of section 4972(c)(6)(B) is
amended by striking ``(within the meaning of
section 404(a))'' and inserting ``(within the
meaning of section 404(a) and as adjusted under
section 404(a)(12))''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2001.
SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX
CONTRIBUTIONS.
(a) In General.--Subpart A of part I of subchapter D of
chapter 1 (relating to deferred compensation, etc.) is amended
by inserting after section 402 the following new section:
``SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS PLUS
CONTRIBUTIONS.
``(a) General Rule.--If an applicable retirement plan
includes a qualified plus contribution program--
``(1) any designated plus contribution made by an
employee pursuant to the program shall be treated as an
elective deferral for purposes of this chapter, except
that such contribution shall not be excludable from
gross income, and
``(2) such plan (and any arrangement which is part of
such plan) shall not be treated as failing to meet any
requirement of this chapter solely by reason of
including such program.
``(b) Qualified Plus Contribution Program.--For purposes of
this section--
``(1) In general.--The term `qualified plus
contribution program' means a program under which an
employee may elect to make designated plus
contributions in lieu of all or a portion of elective
deferrals the employee is otherwise eligible to make
under the applicable retirement plan.
``(2) Separate accounting required.--A program shall
not be treated as a qualified plus contribution program
unless the applicable retirement plan--
``(A) establishes separate accounts
(`designated plus accounts') for the designated
plus contributions of each employee and any
earnings properly allocable to the
contributions, and
``(B) maintains separate recordkeeping with
respect to each account.
``(c) Definitions and Rules Relating to Designated Plus
Contributions.--For purposes of this section--
``(1) Designated plus contribution.--The term
`designated plus contribution' means any elective
deferral which--
``(A) is excludable from gross income of an
employee without regard to this section, and
``(B) the employee designates (at such time
and in such manner as the Secretary may
prescribe) as not being so excludable.
``(2) Designation limits.--The amount of elective
deferrals which an employee may designate under
paragraph (1) shall not exceed the excess (if any) of--
``(A) the maximum amount of elective
deferrals excludable from gross income of the
employee for the taxable year (without regard
to this section), over
``(B) the aggregate amount of elective
deferrals of the employee for the taxable year
which the employee does not designate under
paragraph (1).
``(3) Rollover contributions.--
``(A) In general.--A rollover contribution of
any payment or distribution from a designated
plus account which is otherwise allowable under
this chapter may be made only if the
contribution is to--
``(i) another designated plus account
of the individual from whose account
the payment or distribution was made,
or
``(ii) a Roth IRA of such individual.
``(B) Coordination with limit.--Any rollover
contribution to a designated plus account under
subparagraph (A) shall not be taken into
account for purposes of paragraph (1).
``(d) Distribution Rules.--For purposes of this title--
``(1) Exclusion.--Any qualified distribution from a
designated plus account shall not be includible in
gross income.
``(2) Qualified distribution.--For purposes of this
subsection--
``(A) In general.--The term `qualified
distribution' has the meaning given such term
by section 408A(d)(2)(A) (without regard to
clause (iv) thereof).
``(B) Distributions within nonexclusion
period.--A payment or distribution from a
designated plus account shall not be treated as
a qualified distribution if such payment or
distribution is made within the 5-taxable-year
period beginning with the earlier of--
``(i) the first taxable year for
which the individual made a designated
plus contribution to any designated
plus account established for such
individual under the same applicable
retirement plan, or
``(ii) if a rollover contribution was
made to such designated plus account
from a designated plus account
previously established for such
individual under another applicable
retirement plan, the first taxable year
for which the individual made a
designated plus contribution to such
previously established account.
``(C) Distributions of excess deferrals and
contributions and earnings thereon.--The term
`qualified distribution' shall not include any
distribution of an excess deferral under
section 402(g)(2) or any excess contribution
under section 401(k)(8), and any income on the
excess deferral or contribution.
``(3) Treatment of distributions of certain excess
deferrals.--Notwithstanding section 72, if any excess
deferral under section 402(g)(2) attributable to a
designated plus contribution is not distributed on or
before the 1st April 15 following the close of the
taxable year in which such excess deferral is made, the
amount of such excess deferral shall--
``(A) not be treated as investment in the
contract, and
``(B) be included in gross income for the
taxable year in which such excess is
distributed.
``(4) Aggregation rules.--Section 72 shall be applied
separately with respect to distributions and payments
from a designated plus account and other distributions
and payments from the plan.
``(e) Other Definitions.--For purposes of this section--
``(1) Applicable retirement plan.--The term
`applicable retirement plan' means--
``(A) an employees' trust described in
section 401(a) which is exempt from tax under
section 501(a), and
``(B) a plan under which amounts are
contributed by an individual's employer for an
annuity contract described in section 403(b).
``(2) Elective deferral.--The term `elective
deferral' means any elective deferral described in
subparagraph (A) or (C) of section 402(g)(3).''.
(b) Excess Deferrals.--Section 402(g) (relating to limitation
on exclusion for elective deferrals) is amended--
(1) by adding at the end of paragraph (1)(A) (as
added by section 201(d)(1)) the following new sentence:
``The preceding sentence shall not apply to so much of
such excess as does not exceed the designated plus
contributions of the individual for the taxable
year.''; and
(2) by inserting ``(or would be included but for the
last sentence thereof)'' after ``paragraph (1)'' in
paragraph (2)(A).
(c) Rollovers.--Subparagraph (B) of section 402(c)(8) is
amended by adding at the end the following:
``If any portion of an eligible rollover
distribution is attributable to payments or
distributions from a designated plus account
(as defined in section 402A), an eligible
retirement plan with respect to such portion
shall include only another designated plus
account and a Roth IRA.''.
(d) Reporting Requirements.--
(1) W-2 information.--Section 6051(a)(8) is amended
by inserting ``, including the amount of designated
plus contributions (as defined in section 402A)''
before the comma at the end.
(2) Information.--Section 6047 is amended by
redesignating subsection (f) as subsection (g) and by
inserting after subsection (e) the following new
subsection:
``(f) Designated Plus Contributions.--The Secretary shall
require the plan administrator of each applicable retirement
plan (as defined in section 402A) to make such returns and
reports regarding designated plus contributions (as so defined)
to the Secretary, participants and beneficiaries of the plan,
and such other persons as the Secretary may prescribe.''.
(e) Conforming Amendments.--
(1) Section 408A(e) is amended by adding after the
first sentence the following new sentence: ``Such term
includes a rollover contribution described in section
402A(c)(3)(A).''.
(2) The table of sections for subpart A of part I of
subchapter D of chapter 1 is amended by inserting after
the item relating to section 402 the following new
item:
``Sec. 402A. Optional treatment of elective deferrals as plus
contributions.''.
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2001.
SEC. 209. AVAILABILITY OF QUALIFIED PLANS TO SELF-EMPLOYED INDIVIDUALS
WHO ARE EXEMPT FROM THE SELF-EMPLOYMENT TAX BY
REASON OF THEIR RELIGIOUS BELIEFS.
(a) In General.--Subparagraph (A) of section 401(c)(2)
(defining earned income) is amended by adding at the end
thereof the following new sentence: ``For purposes of this part
only (other than sections 419 and 419A), this subparagraph
shall be applied as if the term `trade or business' for
purposes of section 1402 included service described in section
1402(c)(6).''.
(b) Simple Retirement Accounts.--Clause (ii) of section
408(p)(6)(A) (defining self-employed) is amended by adding at
the end the following new sentence: ``The preceding sentence
shall be applied as if the term `trade or business' for
purposes of section 1402 included service described in section
1402(c)(6).''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2001.
SEC. 210. CERTAIN NONRESIDENT ALIENS EXCLUDED IN APPLYING MINIMUM
COVERAGE REQUIREMENTS.
(a) In General.--Subparagraph (C) of section 410(b)(3)
(relating to exclusion of certain employees) is amended by
inserting ``, determined without regard to the reference to
subchapter D in the last sentence thereof'' after ``section
861(a)(3)''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to plan years beginning after December 31, 2001.
SEC. 211. REFUNDABLE CREDIT TO CERTAIN INDIVIDUALS FOR ELECTIVE
DEFERRALS AND IRA CONTRIBUTIONS.
(a) In General.--Subpart C of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to
refundable credits) is amended by redesignating section 35 as
section 36 and by inserting after section 34 the following new
section:
``SEC. 35. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY CERTAIN
INDIVIDUALS.
``(a) Allowance of Credit.--In the case of an eligible
individual, there shall be allowed as a credit against the tax
imposed by this subtitle for the taxable year an amount equal
to the applicable percentage of so much of the qualified
retirement savings contributions of the eligible individual for
the taxable year as do not exceed $2,000.
``(b) Applicable Percentage.--For purposes of this section,
the applicable percentage is the percentage determined in
accordance with the following table:
----------------------------------------------------------------------------------------------------------------
Adjusted Gross Income
-------------------------------------------------------------------------------------------------
Joint return Head of a household All other cases Applicable
------------------------------------------------------------------------------------------------- percentage
Over Not over Over Not over Over Not over
----------------------------------------------------------------------------------------------------------------
$0 $25,000 $0 $18,750 $0 $12,500 50
25,000 35,000 18,750 26,250 12,500 17,500 45
35,000 45,000 26,250 33,750 17,500 22,500 35
45,000 55,000 33,750 41,250 22,500 27,500 25
55,000 75,000 41,250 56,250 27,500 37,500 15
75,000 ............... 56,250 .............. 37,500 .............. 0
----------------------------------------------------------------------------------------------------------------
``(c) Eligible Individual.--For purposes of this section--
``(1) In general.--The term `eligible individual'
means any individual if--
``(A) such individual has attained the age of
18 as of the close of the taxable year, and
``(B) the compensation (as defined in section
219(f)(1)) includible in the gross income of
the individual (or, in the case of a joint
return, of the taxpayer) for such taxable year
is at least $5,000.
``(2) Dependents and full-time students not
eligible.--The term `eligible individual' shall not
include--
``(A) any individual with respect to whom a
deduction under section 151 is allowable to
another taxpayer for a taxable year beginning
in the calendar year in which such individual's
taxable year begins, and
``(B) any individual who is a student (as
defined in section 151(c)(4)).
``(3) Individuals receiving certain retirement
distributions not eligible.--
``(A) In general.--The term `eligible
individual' shall not include, with respect to
a taxable year, any individual who received
during the testing period--
``(i) any distribution from a
qualified retirement plan (as defined
in section 4974(c)), or from an
eligible deferred compensation plan (as
defined in section 457(b)), which is
includible in gross income, or
``(ii) any distribution from a Roth
IRA which is not a qualified rollover
contribution (as defined in section
408A(e)) to a Roth IRA.
``(B) Testing period.--For purposes of
subparagraph (A), the testing period, with
respect to a taxable year, is the period which
includes--
``(i) such taxable year,
``(ii) the preceding taxable year,
and
``(iii) the period after such taxable
year and before the due date (without
extensions) for filing the return of
tax for such taxable year.
``(C) Excepted distributions.--There shall
not be taken into account under subparagraph
(A)--
``(i) any distribution referred to in
section 72(p), 401(k)(8), 401(m)(6),
402(g)(2), 404(k), or 408(d)(4),
``(ii) any distribution to which
section 408A(d)(3) applies, and
``(iii) any distribution before
January 1, 2002.
``(D) Treatment of distributions received by
spouse of individual.--For purposes of
determining whether an individual is an
eligible individual for any taxable year, any
distribution received by the spouse of such
individual shall be treated as received by such
individual if such individual and spouse file a
joint return for such taxable year and for the
taxable year during which the spouse receives
the distribution.
``(d) Qualified Retirement Savings Contributions.--For
purposes of this section, the term `qualified retirement
savings contributions' means the sum of--
``(1) the amount of the qualified retirement
contributions (as defined in section 219(e)) made by
the eligible individual,
``(2) the amount of--
``(A) any elective deferrals (as defined in
section 402(g)(3)) of such individual, and
``(B) any elective deferral of compensation
by such individual under an eligible deferred
compensation plan (as defined in section
457(b)) of an eligible employer described in
section 457(e)(1)(A), and
``(3) the amount of voluntary employee contributions
by such individual to any qualified retirement plan (as
defined in section 4974(c)).
``(e) Adjusted Gross Income.--For purposes of this section,
adjusted gross income shall be determined without regard to
sections 911, 931, and 933.
``(f) Investment in the Contract.--Notwithstanding any other
provision of law, a qualified retirement savings contribution
shall not fail to be included in determining the investment in
the contract for purposes of section 72 by reason of the credit
under this section.
``(g) Transitional Rules.--In the case of taxable years
beginning before January 1, 2008--
``(1) Contribution limit.--Subsection (a) shall be
applied by substituting for `$2,000'--
``(A) $600 in the case of taxable years
beginning in 2002, 2003, or 2004, and
``(B) $1,000 in the case of taxable years
beginning in 2005, 2006, or 2007.
``(2) Applicable percentage.--The applicable
percentage shall be determined under the following
table (in lieu of the table in subsection (b)):
----------------------------------------------------------------------------------------------------------------
Adjusted Gross Income
-------------------------------------------------------------------------------------------------
Joint return Head of a household All other cases Applicable
------------------------------------------------------------------------------------------------- percentage
Over Not over Over Not over Over Not over
----------------------------------------------------------------------------------------------------------------
$0 $20,000 $0 $15,000 $0 $10,000 50
20,000 25,000 15,000 18,750 10,000 12,500 45
25,000 30,000 18,750 22,500 12,500 15,000 35
30,000 35,000 22,500 26,250 15,000 17,500 25
35,000 40,000 26,250 30,000 17,500 20,000 15
40,000 ............... 30,000 .............. 20,000 .............. 0.''
----------------------------------------------------------------------------------------------------------------
(b) Conforming Amendments.--
(1) Paragraph (2) of section 1324(b) of title 31,
United States Code, is amended by inserting before the
period ``, or from section 35 of such Code''.
(2) The table of sections for subpart C of part IV of
subchapter A of chapter 1 of such Code is amended by
striking the last item and inserting the following new
items:
``Sec. 35. Elective deferrals and IRA contributions by certain
individuals.
``Sec. 36. Overpayments of tax.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2001.
SEC. 212. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL EMPLOYERS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to
business related credits) is amended by adding at the end the
following new section:
``SEC. 45E. SMALL EMPLOYER PENSION PLAN STARTUP COSTS.
``(a) General Rule.--For purposes of section 38, in the case
of an eligible employer, the small employer pension plan
startup cost credit determined under this section for any
taxable year is an amount equal to 50 percent of the qualified
startup costs paid or incurred by the taxpayer during the
taxable year.
``(b) Dollar Limitation.--The amount of the credit determined
under this section for any taxable year shall not exceed--
``(1) $1,000 for the first credit year,
``(2) $500 for each of the 2 taxable years
immediately following the first credit year, and
``(3) zero for any other taxable year.
``(c) Eligible Employer.--For purposes of this section--
``(1) In general.--The term `eligible employer' has
the meaning given such term by section 408(p)(2)(C)(i).
``(2) Employers maintaining qualified plans during
1998 not eligible.--Such term shall not include an
employer if such employer (or any predecessor employer)
maintained a qualified plan (as defined in section
408(p)(2)(D)(ii)) with respect to which contributions
were made, or benefits were accrued, for service in
1998. If only individuals other than employees
described in subparagraph (A) or (B) of section
410(b)(3) are eligible to participate in the qualified
employer plan referred to in subsection (d)(1), then
the preceding sentence shall be applied without regard
to any qualified plan in which only employees so
described are eligible to participate.
``(d) Other Definitions.--For purposes of this section--
``(1) Qualified startup costs.--
``(A) In general.--The term `qualified
startup costs' means any ordinary and necessary
expenses of an eligible employer which are paid
or incurred in connection with--
``(i) the establishment or
administration of an eligible employer
plan, or
``(ii) the retirement-related
education of employees with respect to
such plan.
``(B) Plan must have at least 2
participants.--Such term shall not include any
expense in connection with a plan that does not
have at least 2 individuals who are eligible to
participate.
``(C) Plan must be established before january
1, 2010.--Such term shall not include any
expense in connection with a plan established
after December 31, 2009.
``(2) Eligible employer plan.--The term `eligible
employer plan' means a qualified employer plan within
the meaning of section 4972(d), or a qualified payroll
deduction arrangement within the meaning of section
408(q)(1) (whether or not an election is made under
section 408(q)(2)). A qualified payroll deduction
arrangement shall be treated as an eligible employer
plan only if all employees of the employer who--
``(A) have been employed for 90 days, and
``(B) are not described in subparagraph (A)
or (C) of section 410(b)(3),
are eligible to make the election under section
408(q)(1)(A).
``(3) First credit year.--The term `first credit
year' means--
``(A) the taxable year which includes the
date that the eligible employer plan to which
such costs relate becomes effective, or
``(B) at the election of the eligible
employer, the taxable year preceding the
taxable year referred to in subparagraph (A).
``(e) Special Rules.--For purposes of this section--
``(1) Aggregation rules.--All persons treated as a
single employer under subsection (a) or (b) of section
52, or subsection (n) or (o) of section 414, shall be
treated as one person. All eligible employer plans
shall be treated as 1 eligible employer plan.
``(2) Disallowance of deduction.--No deduction shall
be allowed for that portion of the qualified startup
costs paid or incurred for the taxable year which is
equal to the credit determined under subsection (a).
``(3) Election not to claim credit.--This section
shall not apply to a taxpayer for any taxable year if
such taxpayer elects to have this section not apply for
such taxable year.''
(b) Credit Allowed as Part of General Business Credit.--
Section 38(b) of such Code (defining current year business
credit) is amended by striking ``plus'' at the end of paragraph
(12), by striking the period at the end of paragraph (13) and
inserting ``, plus'', and by adding at the end the following
new paragraph:
``(14) in the case of an eligible employer (as
defined in section 45E(c)), the small employer pension
plan startup cost credit determined under section
45E(a).''
(c) Conforming Amendments.--
(1) Section 39(d) of such Code is amended by adding
at the end the following new paragraph:
``(10) No carryback of small employer pension plan
startup cost credit before january 1, 2002.--No portion
of the unused business credit for any taxable year
which is attributable to the small employer pension
plan startup cost credit determined under section 45E
may be carried back to a taxable year beginning before
January 1, 2002.''
(2) Subsection (c) of section 196 of such Code is
amended by striking ``and'' at the end of paragraph
(8), by striking the period at the end of paragraph (9)
and inserting ``, and'', and by adding at the end the
following new paragraph:
``(10) the small employer pension plan startup cost
credit determined under section 45E(a).''
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1 of such Code is amended by
adding at the end the following new item:
``Sec. 45E. Small employer pension plan startup costs.''
(d) Effective Date.--The amendments made by this section
shall apply to costs paid or incurred in taxable years
beginning after December 31, 2001.
SEC. 213. CREDIT FOR QUALIFIED PENSION PLAN CONTRIBUTIONS OF SMALL
EMPLOYERS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to
business related credits) is amended by adding at the end the
following new section:
``SEC. 45F. SMALL EMPLOYER PENSION PLAN CONTRIBUTIONS.
``(a) General Rule.--For purposes of section 38, in the case
of an eligible employer, the small employer pension plan
contribution credit determined under this section for any
taxable year is an amount equal to 50 percent of the amount
which would (but for subsection (f)(1)) be allowed as a
deduction under section 404 for such taxable year for qualified
employer contributions made to any qualified retirement plan on
behalf of any nonhighly compensated employee.
``(b) Credit Limited to 3 Years.--The credit allowable by
this section shall be allowed only with respect to the period
of 3 taxable years beginning with the taxable year in which the
qualified retirement plan becomes effective.
``(c) Qualified Employer Contribution.--For purposes of this
section--
``(1) Defined contribution plans.--In the case of a
defined contribution plan, the term `qualified employer
contribution' means the amount of nonelective and
matching contributions to the plan made by the employer
on behalf of any nonhighly compensated employee to the
extent such amount does not exceed 3 percent of such
employee's compensation from the employer for the year.
``(2) Defined benefit plans.--In the case of a
defined benefit plan, the term `qualified employer
contribution' means the amount of employer
contributions to the plan made on behalf of any
nonhighly compensated employee to the extent that the
accrued benefit of such employee derived from such
contributions for the year do not exceed the equivalent
(as determined under regulations prescribed by the
Secretary and without regard to contributions and
benefits under the Social Security Act) of 3 percent of
such employee's compensation from the employer for the
year.
``(d) Qualified Retirement Plan.--
``(1) In general.--The term `qualified retirement
plan' means any plan described in section 401(a) which
includes a trust exempt from tax under section 501(a)
if the plan meets--
``(A) the contribution requirements of
paragraph (2),
``(B) the vesting requirements of paragraph
(3), and
``(C) the distributions requirements of
paragraph (4).
``(2) Contribution requirements.--
``(A) In general.--The requirements of this
paragraph are met if, under the plan--
``(i) the employer is required to
make nonelective contributions of at
least 1 percent of compensation (or the
equivalentthereof in the case of a
defined benefit plan) for each nonhighly compensated employee who is
eligible to participate in the plan, and
``(ii) except in the case of a
defined benefit plan, allocations of
nonelective employer contributions are
either in equal dollar amounts for all
employees covered by the plan or bear a
uniform relationship to the total
compensation, or the basic or regular
rate of compensation, of the employees
covered by the plan.
``(B) Compensation limitation.--The
compensation taken into account under
subparagraph (A) for any year shall not exceed
the limitation in effect for such year under
section 401(a)(17).
``(3) Vesting requirements.--The requirements of this
paragraph are met if the plan satisfies the
requirements of subparagraph (A) or (B).
``(A) 3-year vesting.--A plan satisfies the
requirements of this subparagraph if an
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.
``(B) 5-year graded vesting.--A plan
satisfies the requirements of this subparagraph
if an employee has a nonforfeitable right to a
percentage of the employee's accrued benefit
derived from employer contributions determined
under the following table:
The nonforfeitable
``Years of service: percentage is:
1............................................... 20
2............................................... 40
3............................................... 60
4............................................... 80
5............................................... 100.
``(4) Distribution requirements.--
``(A) In general.--Except as provided in
subparagraph (B), the requirements of this
paragraph are met if, under the plan--
``(i) in the case of a profit-sharing
or stock bonus plan, amounts are
distributable only as provided in
section 401(k)(2)(B), and
``(ii) in the case of a pension plan,
amounts are distributable subject to
the limitations applicable to other
distributions from the plan.
``(B) Distributions within 5 years after
separation, etc.--In no event shall a plan meet
the requirements of this paragraph unless,
under the plan, amounts distributed--
``(i) after separation from service
or severance from employment, and
``(ii) within 5 years after the date
of the earliest employer contribution
to the plan,
may be distributed only in a direct trustee-to-
trustee transfer to a plan having the same
distribution restrictions as the distributing
plan.
``(e) Other Definitions.--For purposes of this section--
``(1) Eligible employer.--The term `eligible
employer' has the meaning given such term by section
408(p)(2)(C)(i).
``(2) Nonhighly compensated employees.--The term
`highly compensated employee' has the meaning given
such term by section 414(q) (determined without regard
to section 414(q)(1)(B)(ii)).
``(f) Special Rules.--
``(1) Disallowance of deduction.--No deduction shall
be allowed for that portion of the qualified employer
contributions paid or incurred for the taxable year
which is equal to the credit determined under
subsection (a).
``(2) Election not to claim credit.--This section
shall not apply to a taxpayer for any taxable year if
such taxpayer elects to have this section not apply for
such taxable year.
``(g) Recapture of Credit on Forfeited Contributions.--If any
accrued benefit which is forfeitable by reason of subsection
(d)(3) is forfeited, the employer's tax imposed by this chapter
for the taxable year in which the forfeiture occurs shall be
increased by 35 percent of the employer contributions from
which such benefit is derived to the extent such contributions
were taken into account in determining the credit under this
section.
``(h) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to carry out the purposes of
this section, including regulations to prevent the abuse of the
purposes of this section through the use of multiple plans.
``(i) Termination.--This section shall not apply to any plan
established after December 31, 2009.''
(b) Credit Allowed as Part of General Business Credit.--
Section 38(b) of such Code (defining current year business
credit) is amended by striking ``plus'' at the end of paragraph
(13), by striking the period at the end of paragraph (14) and
inserting ``, plus'', and by adding at the end the following
new paragraph:
``(15) in the case of an eligible employer (as
defined in section 45F(e)), the small employer pension
plan contribution credit determined under section
45F(a).''
(c) Conforming Amendments.--
(1) Section 39(d) of such Code is amended by adding
at the end the following new paragraph:
``(11) No carryback of small employer pension plan
contribution credit before january 1, 2002.--No portion
of the unused business credit for any taxable year
which is attributable to the small employer pension
plan contribution credit determined under section 45F
may be carried back to a taxable year beginning before
January 1, 2002.''
(2) Subsection (c) of section 196 of such Code is
amended by striking ``and'' at the end of paragraph
(9), by striking the period at the end of paragraph
(10) and inserting ``, and'', and by adding at the end
the following new paragraph:
``(11) the small employer pension plan contribution
credit determined under section 45F(a).''
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1 of such Code is amended by
adding at the end the following new item:
``Sec. 45F. Small employer pension plan contributions.''
(d) Effective Date.--The amendments made by this section
shall apply to contributions paid or incurred in taxable years
beginning after December 31, 2001.
TITLE III--ENHANCING FAIRNESS FOR WOMEN
SEC. 301. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS AGE 50 OR OVER.
(a) In General.--Section 414 (relating to definitions and
special rules) is amended by adding at the end the following
new subsection:
``(v) Catch-up Contributions for Individuals Age 50 or
Over.--
``(1) In general.--An applicable employer plan shall
not be treated as failing to meet any requirement of
this title solely because the plan permits an eligible
participant to make additional elective deferrals in
any plan year.
``(2) Limitation on amount of additional deferrals.--
A plan shall not permit additional elective deferrals
under paragraph (1) for any year in an amount greater
than the lesser of--
``(A) $5,000, or
``(B) the excess (if any) of--
``(i) the participant's compensation
for the year, over
``(ii) any other elective deferrals
of the participant for such year which
are made without regard to this
subsection.
``(3) Treatment of contributions.--In the case of any
contribution to a plan under paragraph (1), such
contribution shall not, with respect to the year in
which the contribution is made--
``(A) be subject to any otherwise applicable
limitation contained in section 402(g),
402(h)(2), 404(a), 404(h), 408(p)(2)(A)(ii),
415, or 457, or
``(B) be taken into account in applying such
limitations to other contributions or benefits
under such plan or any other such plan.
``(4) Application of nondiscrimination rules.--
``(A) In general.--An applicable employer
plan shall not be treated as failing to meet
the nondiscrimination requirements under
section 401(a)(4) with respect to benefits,
rights, and features if the plan allows all
eligible participants to make the same election
with respect to the additional elective
deferrals under this subsection.
``(B) Aggregation.--For purposes of
subparagraph (A), 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.
``(5) Eligible participant.--For purposes of this
subsection, the term `eligible participant' means, with
respect to any plan year, a participant in a plan--
``(A) who has attained the age of 50 before
the close of the plan year, and
``(B) with respect to whom no other elective
deferrals may (without regard to this
subsection) be made to the plan for the plan
year by reason of the application of any
limitation or other restriction described in
paragraph (3) or comparable limitation
contained in the terms of the plan.
``(6) Other definitions and rules.--For purposes of
this subsection--
``(A) Applicable employer plan.--The term
`applicable employer plan' means--
``(i) an employees' trust described
in section 401(a) which is exempt from
tax under section 501(a),
``(ii) a plan under which amounts are
contributed by an individual's employer
for an annuity contract described in
section 403(b),
``(iii) an eligible deferred
compensation plan under section 457 of
an eligible employer as defined in
section 457(e)(1)(A), and
``(iv) an arrangement meeting the
requirements of section 408 (k) or (p).
``(B) Elective deferral.--The term `elective
deferral' has the meaning given such term by
subsection (u)(2)(C).
``(C) Exception for section 457 plans.--This
subsection shall not apply to an applicable
employer plan described in subparagraph
(A)(iii) for any year to which section
457(b)(3) applies.
``(D) Cost-of-living adjustment.--In the case
of a year beginning after December 31, 2006,
the Secretary shall adjust annually the $5,000
amount in paragraph (2)(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 taken into account
shall be the calendar quarter beginning July 1,
2005, and any increase under this subparagraph
which is not a multiple of $500 shall be
rounded to the next lower multiple of $500.''.
(b) Effective Date.--The amendment made by this section shall
apply to contributions in taxable years beginning after
December 31, 2001.
SEC. 302. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES TO DEFINED
CONTRIBUTION PLANS.
(a) Equitable Treatment.--
(1) In general.--Subparagraph (B) of section
415(c)(1) (relating to limitation for defined
contribution plans) is amended by striking ``25
percent'' and inserting ``100 percent''.
(2) Application to section 403(b).--Section 403(b) is
amended--
(A) by striking ``the exclusion allowance for
such taxable year'' in paragraph (1) and
inserting ``the applicable limit under section
415'';
(B) by striking paragraph (2); and
(C) by inserting ``or any amount received by
a former employee after the fifth taxable year
following the taxable year in which such
employee was terminated'' before the period at
the end of the second sentence of paragraph
(3).
(3) Conforming amendments.--
(A) Subsection (f) of section 72 is amended
by striking ``section 403(b)(2)(D)(iii))'' and
inserting ``section 403(b)(2)(D)(iii), as in
effect before the enactment of the
Comprehensive Retirement Security and Pension
Reform Act of 2001)''.
(B) Section 404(a)(10)(B) is amended by
striking ``, the exclusion allowance under
section 403(b)(2),''.
(C) Section 404(j) is amended by adding at
the end the following new paragraph:
``(3) Special rule for money purchase plans.--For
purposes of paragraph (1)(B), in the case of a defined
contribution plan which is subject to the funding
standards of section 412, section 415(c)(1)(B) shall be
applied by substituting `25 percent' for `100
percent'.''.
(D) Section 415(a)(2) is amended by striking
``, and the amount of the contribution for such
portion shall reduce the exclusion allowance as
provided in section 403(b)(2)''.
(E) Section 415(c)(3) is amended by adding at
the end the following new subparagraph:
``(E) Annuity contracts.--In the case of an
annuity contract described in section 403(b),
the term `participant's compensation' means the
participant's includible compensation
determined under section 403(b)(3).''.
(F) Section 415(c) is amended by striking
paragraph (4).
(G) Section 415(c)(7) is amended to read as
follows:
``(7) Certain contributions by church plans not
treated as exceeding limit.--
``(A) In general.--Notwithstanding any other
provision of this subsection, at the election
of a participant who is an employee of a church
or a convention or association of churches,
including an organization described in section
414(e)(3)(B)(ii), contributions and other
additions for an annuity contract or retirement
income account described in section 403(b) with
respect to such participant, when expressed as
an annual addition to such participant's
account, shall be treated as not exceeding the
limitation of paragraph (1) if such annual
addition is not in excess of $10,000.
``(B) $40,000 aggregate limitation.--The
total amount of additions with respect to any
participant which may be taken into account for
purposes of this subparagraph for all years may
not exceed $40,000.
``(C) Annual addition.--For purposes of this
paragraph, the term `annual addition' has the
meaning given such term by paragraph (2).''.
(H) Subparagraph (B) of section 402(g)(7) (as
redesignated by section 201) is amended by
inserting before the period at the end the
following: ``(as in effect before the enactment
of the Comprehensive Retirement Security and
Pension Reform Act of 2001)''.
(I) Section 664(g) is amended--
(i) in paragraph (3)(E) by striking
``limitations under section 415(c)''
and inserting ``applicable limitation
under paragraph (7)'', and
(ii) by adding at the end the
following new paragraph:
``(7) Applicable limitation.--
``(A) In general.--For purposes of paragraph
(3)(E), the applicable limitation under this
paragraph with respect to a participant is an
amount equal to the lesser of--
``(i) $30,000, or
``(ii) 25 percent of the
participant's compensation (as defined
in section 415(c)(3)).
``(B) Cost-of-living adjustment.--The
Secretary shall adjust annually the $30,000
amount under subparagraph (A)(i) at the same
time and in the same manner as under section
415(d), except that the base period shall be
the calendar quarter beginning October 1, 1993,
and any increase under this subparagraph which
is not a multiple of $5,000 shall be rounded to
the next lowest multiple of $5,000.''.
(4) Effective date.--The amendments made by this
subsection shall apply to years beginning after
December 31, 2001.
(b) Special Rules for Sections 403(b) and 408.--
(1) In general.--Subsection (k) of section 415 is
amended by adding at the end the following new
paragraph:
``(4) Special rules for sections 403(b) and 408.--For
purposes of this section, any annuity contract
described in section 403(b) for the benefit of a
participant shall be treated as a defined contribution
plan maintained by each employer with respect to which
the participant has the control required under
subsection (b) or (c) of section 414 (as modified by
subsection (h)). For purposes of this section, any
contribution by an employer to a simplified employee
pension plan for an individual for a taxable year shall
be treated as an employer contribution to a defined
contribution plan for such individual for such year.''.
(2) Effective date.--
(A) In general.--The amendment made by
paragraph (1) shall apply to limitation years
beginning after December 31, 1999.
(B) Exclusion allowance.--Effective for
limitation years beginning in 2000, in the case
of any annuity contract described in section
403(b) of the Internal Revenue Code of 1986,
the amount of the contribution disqualified by
reason of section 415(g) of such Code shall
reduce the exclusion allowance as provided in
section 403(b)(2) of such Code.
(3) Modification of 403(b) exclusion allowance to
conform to 415 modification.--The Secretary of the
Treasury shall modify the regulations regarding the
exclusion allowance under section 403(b)(2) of the
Internal Revenue Code of 1986 to render void the
requirement that contributions to a defined benefit
pension plan be treated as previously excluded amounts
for purposes of the exclusion allowance. For taxable
years beginning after December 31, 1999, such
regulations shall be applied as if such requirement
were void.
(c) Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations.--
(1) In general.--Subparagraph (B) of section
457(b)(2) (relating to salary limitation on eligible
deferred compensation plans) is amended by striking
``33\1/3\ percent'' and inserting ``100 percent''.
(2) Effective date.--The amendment made by this
subsection shall apply to years beginning after
December 31, 2001.
SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER MATCHING CONTRIBUTIONS.
(a) Amendment of Internal Revenue Code.--Section 411(a)
(relating to minimum vesting standards) is amended--
(1) in paragraph (2) in the matter preceding
subparagraph (A), by striking ``A plan'' and inserting
``Except as provided in paragraph (12), a plan''; and
(2) by adding at the end the following:
``(12) Faster vesting for matching contributions.--In
the case of matching contributions (as defined in
section 401(m)(4)(A)), paragraph (2) shall be applied--
``(A) by substituting `3 years' for `5 years'
in subparagraph (A), and
``(B) by substituting the following table for
the table contained in subparagraph (B):
The nonforfeitable
``Years of service: percentage is:
2........................................... 20
3........................................... 40
4........................................... 60
5........................................... 80
6........................................... 100.''.
(b) Amendment of ERISA.--Section 203(a) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1053(a)) is
amended--
(1) in paragraph (2), by striking ``A plan'' and
inserting ``Except as provided in paragraph (4), a
plan'', and
(2) by adding at the end the following:
``(4) In the case of matching contributions (as
defined in section 401(m)(4)(A) of the Internal Revenue
Code of 1986), paragraph (2) shall be applied--
``(A) by substituting `3 years' for `5 years'
in subparagraph (A), and
``(B) by substituting the following table for
the table contained in subparagraph (B):
The nonforfeitable
``Years of service: percentage is:
2........................................... 20
3........................................... 40
4........................................... 60
5........................................... 80
6........................................... 100.''.
(c) Effective Dates.--
(1) In general.--Except as provided in paragraph (2),
the amendments made by this section shall apply to
contributions for plan years beginning after December
31, 2001.
(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, 2002; or
(B) January 1, 2006.
(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. 304. MODIFICATIONS TO MINIMUM DISTRIBUTION RULES.
(a) Life Expectancy Tables.--The Secretary of the Treasury
shall modify the life expectancy tables under the regulations
relating to minimum distribution requirements under sections
401(a)(9), 408(a)(6) and (b)(3), 403(b)(10), and 457(d)(2) of
the Internal Revenue Code to reflect current life expectancy.
(b) Repeal of Rule Where Distributions Had Begun Before Death
Occurs.--
(1) In general.--Subparagraph (B) of section
401(a)(9) is amended by striking clause (i) and
redesignating clauses (ii), (iii), and (iv) as clauses
(i), (ii), and (iii), respectively.
(2) Conforming changes.--
(A) Clause (i) of section 401(a)(9)(B) (as so
redesignated) is amended--
(i) by striking ``for other cases''
in the heading; and
(ii) by striking ``the distribution
of the employee's interest has begun in
accordance with subparagraph (A)(ii)''
and inserting ``his entire interest has
been distributed to him''.
(B) Clause (ii) of section 401(a)(9)(B) (as
so redesignated) is amended by striking
``clause (ii)'' and inserting ``clause (i)''.
(C) Clause (iii) of section 401(a)(9)(B) (as
so redesignated) is amended--
(i) by striking ``clause (iii)(I)''
and inserting ``clause (ii)(I)'';
(ii) by striking ``clause
(iii)(III)'' in subclause (I) and
inserting ``clause (ii)(III)'';
(iii) by striking ``the date on which
the employee would have attained age
70\1/2\,'' in subclause (I) and
inserting ``April 1 of the calendar
year following the calendar year in
which the spouse attains 70\1/2\,'';
and
(iv) by striking ``the distributions
to such spouse begin,'' in subclause
(II) and inserting ``his entire
interest has been distributed to
him,''.
(3) Effective date.--
(A) In general.--Except as provided in
subparagraph (B), the amendments made by this
subsection shall apply to years beginning after
December 31, 2001.
(B) Distributions to surviving spouse.--
(i) In general.--In the case of an
employee described in clause (ii),
distributions to the surviving spouse
of the employee shall not be required
to commence prior to the date on which
such distributions would have been
required to begin under section
401(a)(9)(B) of the Internal Revenue
Code of 1986 (as in effect on the day
before the date of the enactment of
this Act).
(ii) Certain employees.--An employee
is described in this clause if such
employee dies before--
(I) the date of the enactment
of this Act, and
(II) the required beginning
date (within the meaning of
section 401(a)(9)(C) of the
Internal Revenue Code of 1986)
of the employee.
(c) Reduction in Excise Tax.--
(1) In general.--Subsection (a) of section 4974 is
amended by striking ``50 percent'' and inserting ``10
percent''.
(2) Effective date.--The amendment made by this
subsection shall apply to years beginning after
December 31, 2001.
SEC. 305. CLARIFICATION OF TAX TREATMENT OF DIVISION OF SECTION 457
PLAN BENEFITS UPON DIVORCE.
(a) In General.--Section 414(p)(11) (relating to application
of rules to governmental and church plans) is amended--
(1) by inserting ``or an eligible deferred
compensation plan (within the meaning of section
457(b))'' after ``subsection (e))''; and
(2) in the heading, by striking ``governmental and
church plans'' and inserting ``certain other plans''.
(b) Waiver of Certain Distribution Requirements.--Paragraph
(10) of section 414(p) is amended by striking ``and section
409(d)'' and inserting ``section 409(d), and section 457(d)''.
(c) Tax Treatment of Payments From a Section 457 Plan.--
Subsection (p) of section 414 is amended by redesignating
paragraph (12) as paragraph (13) and inserting after paragraph
(11) the following new paragraph:
``(12) Tax treatment of payments from a section 457
plan.--If a distribution or payment from an eligible
deferred compensation plan described in section 457(b)
is made pursuant to a qualified domestic relations
order, rules similar to the rules of section
402(e)(1)(A) shall apply to such distribution or
payment.''.
(d) Effective Date.--The amendments made by this section
shall apply to transfers, distributions, and payments made
after December 31, 2001.
SEC. 306. PROVISIONS RELATING TO HARDSHIP DISTRIBUTIONS.
(a) Safe Harbor Relief.--
(1) In general.--The Secretary of the Treasury shall
revise the regulations relating to hardship
distributions under section 401(k)(2)(B)(i)(IV) of the
Internal Revenue Code of 1986 to provide that the
period an employee is prohibited from making elective
and employee contributions in order for a distribution
to be deemed necessary to satisfy financial need shall
be equal to 6 months.
(2) Effective date.--The revised regulations under
this subsection shall apply to years beginning after
December 31, 2001.
(b) Hardship Distributions Not Treated as Eligible Rollover
Distributions.--
(1) Modification of definition of eligible
rollover.--Subparagraph (C) of section 402(c)(4)
(relating to eligible rollover distribution) is amended
to read as follows:
``(C) any distribution which is made upon
hardship of the employee.''.
(2) Effective date.--The amendment made by this
subsection shall apply to distributions made after
December 31, 2001.
SEC. 307. WAIVER OF TAX ON NONDEDUCTIBLE CONTRIBUTIONS FOR DOMESTIC OR
SIMILAR WORKERS.
(a) In General.--Section 4972(c)(6) (relating to exceptions
to nondeductible contributions), as amended by section 502, is
amended by striking ``and'' at the end of subparagraph (A), by
striking the period and inserting ``, and'' at the end of
subparagraph (B), and by inserting after subparagraph (B) the
following new subparagraph:
``(C) so much of the contributions to a
simple retirement account (within the meaning
of section 408(p)) or a simple plan (within the
meaning of section 401(k)(11)) which are not
deductible when contributed solely because such
contributions are not made in connection with a
trade or business of the employer.''
(b) Exclusion of Certain Contributions.--Section 4972(c)(6)
is amended by adding at the end the following new sentence:
``Subparagraph (C) shall not apply to contributions made on
behalf of the employer or a member of the employer's family (as
defined in section 447(e)(1)).''.
(c) No Inference.--Nothing in the amendments made by this
section shall be construed to infer the proper treatment of
nondeductible contributions under the laws in effect before
such amendments.
(d) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2001.
TITLE IV--INCREASING PORTABILITY FOR PARTICIPANTS
SEC. 401. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.
(a) Rollovers From and to Section 457 Plans.--
(1) Rollovers from section 457 plans.--
(A) In general.--Section 457(e) (relating to
other definitions and special rules) is amended
by adding at the end the following:
``(16) Rollover amounts.--
``(A) General rule.--In the case of an
eligible deferred compensation plan established
and maintained by an employer described in
subsection (e)(1)(A), if--
``(i) any portion of the balance to
the credit of an employee in such plan
is paid to such employee in an eligible
rollover distribution (within the
meaning of section 402(c)(4) without
regard to subparagraph (C) thereof),
``(ii) the employee transfers any
portion of the property such employee
receives in such distribution to an
eligible retirement plan described in
section 402(c)(8)(B), and
``(iii) in the case of a distribution
of property other than money, the
amount so transferred consists of the
property distributed,
then such distribution (to the extent so
transferred) shall not be includible in gross
income for the taxable year in which paid.
``(B) Certain rules made applicable.--The
rules of paragraphs (2) through (7) (other than
paragraph (4)(C)) and (9) of section 402(c) and
section 402(f) shall apply for purposes of
subparagraph (A).
``(C) Reporting.--Rollovers under this
paragraph shall be reported to the Secretary in
the same manner as rollovers from qualified
retirement plans (as defined in section
4974(c)).''.
(B) Deferral limit determined without regard
to rollover amounts.--Section 457(b)(2)
(defining eligible deferred compensation plan)
is amended by inserting ``(other than rollover
amounts)'' after ``taxable year''.
(C) Direct rollover.--Paragraph (1) of
section 457(d) is amended by striking ``and''
at the end of subparagraph (A), by striking the
period at the end of subparagraph (B) and
inserting ``, and'', and by inserting after
subparagraph (B) the following:
``(C) in the case of a plan maintained by an
employer described in subsection (e)(1)(A), the
plan meets requirements similar to the
requirements of section 401(a)(31).
Any amount transferred in a direct trustee-to-trustee
transfer in accordance with section 401(a)(31) shall
not be includible in gross income for the taxable year
of transfer.''.
(D) Withholding.--
(i) Paragraph (12) of section 3401(a)
is amended by adding at the end the
following:
``(E) under or to an eligible deferred
compensation plan which, at the time of such
payment, is a plan described in section 457(b)
maintained by an employer described in section
457(e)(1)(A); or''.
(ii) Paragraph (3) of section 3405(c)
is amended to read as follows:
``(3) Eligible rollover distribution.--For purposes
of this subsection, the term `eligible rollover
distribution' has the meaning given such term by
section 402(f)(2)(A).''.
(iii) Liability for withholding.--
Subparagraph (B) of section 3405(d)(2)
is amended by striking ``or'' at the
end of clause (ii), by striking the
period at the end of clause (iii) and
inserting ``, or'', and by adding at
the end the following:
``(iv) section 457(b) and which is
maintained by an eligible employer
described in section 457(e)(1)(A).''.
(2) Rollovers to section 457 plans.--
(A) In general.--Section 402(c)(8)(B)
(defining eligible retirement plan) is amended
by striking ``and'' at the end of clause (iii),
by striking the period at the end of clause
(iv) and inserting ``, and'', and by inserting
after clause (iv) the following new clause:
``(v) an eligible deferred
compensation plan described in section
457(b) which is maintained by an
eligible employer described in section
457(e)(1)(A).''.
(B) Separate accounting.--Section 402(c) is
amended by adding at the end the following new
paragraph:
``(10) Separate accounting.--Unless a plan described
in clause (v) of paragraph (8)(B) agrees to separately
account for amounts rolled into such plan from eligible
retirement plans not described in such clause, the plan
described in such clause may not accept transfers or
rollovers from such retirement plans.''.
(C) 10 percent additional tax.--Subsection
(t) of section 72 (relating to 10-percent
additional tax on early distributions from
qualified retirement plans) is amended by
adding at the end the following new paragraph:
``(9) Special rule for rollovers to section 457
plans.--For purposes of this subsection, a distribution
from an eligible deferred compensation plan (as defined
in section 457(b)) of an eligible employer described in
section 457(e)(1)(A) shall be treated as a distribution
from a qualified retirement plan described in section
4974(c)(1) to the extent that such distribution is
attributable to an amount transferred to an eligible
deferred compensation plan from a qualified retirement
plan (as defined in section 4974(c)).''.
(b) Allowance of Rollovers From and to 403(b) Plans.--
(1) Rollovers from section 403(b) plans.--Section
403(b)(8)(A)(ii) (relating to rollover amounts) is
amended by striking ``such distribution'' and all that
follows and inserting ``such distribution to an
eligible retirement plan described in section
402(c)(8)(B), and''.
(2) Rollovers to section 403(b) plans.--Section
402(c)(8)(B) (defining eligible retirement plan), as
amended by subsection (a), is amended by striking
``and'' at the end of clause (iv), by striking the
period at the end of clause (v) and inserting ``,
and'', and by inserting after clause (v) the following
new clause:
``(vi) an annuity contract described
in section 403(b).''.
(c) Expanded Explanation to Recipients of Rollover
Distributions.--Paragraph (1) of section 402(f) (relating to
written explanation to recipients of distributions eligible for
rollover treatment) is amended by striking ``and'' at the end
of subparagraph (C), by striking the period at the end of
subparagraph (D) and inserting ``, and'', and by adding at the
end the following new subparagraph:
``(E) of the provisions under which
distributions from the eligible retirement plan
receiving the distribution may be subject to
restrictions and tax consequences which are
different from those applicable to
distributions from the plan making such
distribution.''.
(d) Spousal Rollovers.--Section 402(c)(9) (relating to
rollover where spouse receives distribution after death of
employee) is amended by striking ``; except that'' and all that
follows up to the end period.
(e) Conforming Amendments.--
(1) Section 72(o)(4) is amended by striking ``and
408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and
457(e)(16)''.
(2) Section 219(d)(2) is amended by striking ``or
408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
(3) Section 401(a)(31)(B) is amended by striking
``and 403(a)(4)'' and inserting ``, 403(a)(4),
403(b)(8), and 457(e)(16)''.
(4) Subparagraph (A) of section 402(f)(2) is amended
by striking ``or paragraph (4) of section 403(a)'' and
inserting ``, paragraph (4) of section 403(a),
subparagraph (A) of section 403(b)(8), or subparagraph
(A) of section 457(e)(16)''.
(5) Paragraph (1) of section 402(f) is amended by
striking ``from an eligible retirement plan''.
(6) Subparagraphs (A) and (B) of section 402(f)(1)
are amended by striking ``another eligible retirement
plan'' and inserting ``an eligible retirement plan''.
(7) Subparagraph (B) of section 403(b)(8) is amended
to read as follows:
``(B) Certain rules made applicable.--The
rules of paragraphs (2) through (7) and (9) of
section 402(c) and section 402(f) shall apply
for purposes of subparagraph (A), except that
section 402(f) shall be applied to the payor in
lieu of the plan administrator.''.
(8) Section 408(a)(1) is amended by striking ``or
403(b)(8),'' and inserting ``403(b)(8), or
457(e)(16)''.
(9) Subparagraphs (A) and (B) of section 415(b)(2)
are each amended by striking ``and 408(d)(3)'' and
inserting ``403(b)(8), 408(d)(3), and 457(e)(16)''.
(10) Section 415(c)(2) is amended by striking ``and
408(d)(3)'' and inserting ``408(d)(3), and
457(e)(16)''.
(11) Section 4973(b)(1)(A) is amended by striking
``or 408(d)(3)'' and inserting ``408(d)(3), or
457(e)(16)''.
(f) Effective Date; Special Rule.--
(1) Effective date.--The amendments made by this
section shall apply to distributions after December 31,
2001.
(2) Reasonable notice.--No penalty shall be imposed
on a plan for the failure to provide the information
required by the amendment made by subsection (c) with
respect to any distribution made before the date that
is 90 days after the date on which the Secretary of the
Treasury issues a safe harbor rollover notice after the
date of the enactment of this Act, if the administrator
of such plan makes a reasonable attempt to comply with
such requirement.
(3) Special rule.--Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of
section 1122 of the Tax Reform Act of 1986 shall not
apply to any distribution from an eligible retirement
plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986) on
behalf of an individual if there was a rollover to such
plan on behalf of such individual which is permitted
solely by reason of any amendment made by this section.
SEC. 402. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.
(a) In General.--Subparagraph (A) of section 408(d)(3)
(relating to rollover amounts) is amended by adding ``or'' at
the end of clause (i), by striking clauses (ii) and (iii), and
by adding at the end the following:
``(ii) the entire amount received
(including money and any other
property) is paid into an eligible
retirement plan for the benefit of such
individual not later than the 60th day
after the date on which the payment or
distribution is received, except that
the maximum amount which may be paid
into such plan may not exceed the
portion of the amount received which is
includible in gross income (determined
without regard to this paragraph).
For purposes of clause (ii), the term `eligible
retirement plan' means an eligible retirement
plan described in clause (iii), (iv), (v), or
(vi) of section 402(c)(8)(B).''.
(b) Conforming Amendments.--
(1) Paragraph (1) of section 403(b) is amended by
striking ``section 408(d)(3)(A)(iii)'' and inserting
``section 408(d)(3)(A)(ii)''.
(2) Clause (i) of section 408(d)(3)(D) is amended by
striking ``(i), (ii), or (iii)'' and inserting ``(i) or
(ii)''.
(3) Subparagraph (G) of section 408(d)(3) is amended
to read as follows:
``(G) Simple retirement accounts.--In the
case of any payment or distribution out of a
simple retirement account (as defined in
subsection (p)) to which section 72(t)(6)
applies, this paragraph shall not apply unless
such payment or distribution is paid into
another simple retirement account.''.
(c) Effective Date; Special Rule.--
(1) Effective date.--The amendments made by this
section shall apply to distributions after December 31,
2001.
(2) Special rule.--Notwithstanding any other
provision of law, subsections (h)(3) and (h)(5) of
section 1122 of the Tax Reform Act of 1986 shall not
apply to any distribution from an eligible retirement
plan (as defined in clause (iii) or (iv) of section
402(c)(8)(B) of the Internal Revenue Code of 1986) on
behalf of an individual if there was a rollover to such
plan on behalf of such individual which is permitted
solely by reason of the amendments made by this
section.
SEC. 403. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) Rollovers From Exempt Trusts.--Paragraph (2) of section
402(c) (relating to maximum amount which may be rolled over) is
amended by adding at the end the following: ``The preceding
sentence shall not apply to such distribution to the extent--
``(A) such portion is transferred in a direct
trustee-to-trustee transfer to a qualified
trust which is part of a plan which is a
defined contribution plan and which agrees to
separately account for amounts so transferred,
including separately accounting for the portion
of such distribution which is includible in
gross income and the portion of such
distribution which is not so includible, or
``(B) such portion is transferred to an
eligible retirement plan described in clause
(i) or (ii) of paragraph (8)(B).''.
(b) Optional Direct Transfer of Eligible Rollover
Distributions.--Subparagraph (B) of section 401(a)(31)
(relating to limitation) is amended by adding at the end the
following:
``The preceding sentence shall not apply to
such distribution if the plan to which such
distribution is transferred--
``(i) agrees to separately account
for amounts so transferred, including
separately accounting for the portion
of such distribution which is
includible in gross income and the
portion of such distribution which is
not so includible, or
``(ii) is an eligible retirement plan
described in clause (i) or (ii) of
section 402(c)(8)(B).''.
(c) Rules for Applying Section 72 to IRAs.--Paragraph (3) of
section 408(d) (relating to special rules for applying section
72) is amended by inserting at the end the following:
``(H) Application of section 72.--
``(i) In general.--If--
``(I) a distribution is made
from an individual retirement
plan, and
``(II) a rollover
contribution is made to an
eligible retirement plan
described in section
402(c)(8)(B)(iii), (iv), (v),
or (vi) with respect to all or
part of such distribution,
then, notwithstanding paragraph (2),
the rules of clause (ii) shall apply
for purposes of applying section 72.
``(ii) Applicable rules.--In the case
of a distribution described in clause
(i)--
``(I) section 72 shall be
applied separately to such
distribution,
``(II) notwithstanding the
pro rata allocation of income
on, and investment in, the
contract to distributions under
section 72, the portion of such
distribution rolled over to an
eligible retirement plan
described in clause (i) shall
be treated as from income on
the contract (to the extent of
the aggregate income on the
contract from all individual
retirement plans of the
distributee), and
``(III) appropriate
adjustments shall be made in
applying section 72 to other
distributions in such taxable
year and subsequent taxable
years.''.
(d) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2001.
SEC. 404. HARDSHIP EXCEPTION TO 60-DAY RULE.
(a) Exempt Trusts.--Paragraph (3) of section 402(c) (relating
to transfer must be made within 60 days of receipt) is amended
to read as follows:
``(3) Transfer must be made within 60 days of
receipt.--
``(A) In general.--Except as provided in
subparagraph (B), paragraph (1) shall not apply
to any transfer of a distribution made after
the 60th day following the day on which the
distributee received the property distributed.
``(B) Hardship exception.--The Secretary may
waive the 60-day requirement under subparagraph
(A) where the failure to waive such requirement
would be against equity or good conscience,
including casualty, disaster, or other events
beyond the reasonable control of the individual
subject to such requirement.''.
(b) IRAs.--Paragraph (3) of section 408(d) (relating to
rollover contributions), as amended by section 403, is amended
by adding after subparagraph (H) the following new
subparagraph:
``(I) Waiver of 60-day requirement.--The
Secretary may waive the 60-day requirement
under subparagraphs (A) and (D) where the
failure to waive such requirement would be
against equity or good conscience, including
casualty, disaster, or other events beyond the
reasonable control of the individual subject to
such requirement.''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2001.
SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.
(a) Plan Transfers.--
(1) Amendment of internal revenue code.--Paragraph
(6) of section 411(d) (relating to accrued benefit not
to be decreased by amendment) is amended by adding at
the end the following:
``(D) Plan transfers.--
``(i) In general.--A defined
contribution plan (in this subparagraph
referred to as the `transferee plan')
shall not be treated as failing to meet
the requirements of this subsection
merely because the transferee plan does
not provide some or all of the forms of
distribution previously available under
another defined contribution plan (in
this subparagraph referred to as the
`transferor plan') to the extent that--
``(I) the forms of
distribution previously
available under the transferor
plan applied to the account of
a participant or beneficiary
under the transferor plan that
was transferred from the
transferor plan to the
transferee plan pursuant to a
direct transfer rather than
pursuant to a distribution from
the transferor plan,
``(II) the terms of both the
transferor plan and the
transferee plan authorize the
transfer described in subclause
(I),
``(III) the transfer
described in subclause (I) was
made pursuant to a voluntary
election by the participant or
beneficiary whose account was
transferred to the transferee
plan,
``(IV) the election described
in subclause (III) was made
after the participant or
beneficiary received a notice
describing the consequences of
making the election, and
``(V) the transferee plan
allows the participant or
beneficiary described in
subclause (III) to receive any
distribution to which the
participant or beneficiary is
entitled under the transferee
plan in the form of a single
sum distribution.
``(ii) Exception.--Clause (i) shall
apply to plan mergers and other
transactions having the effect of a
direct transfer, including
consolidations of benefits attributable
to different employers within a
multiple employer plan.
``(E) Elimination of form of distribution.--
Except to the extent provided in regulations, a
defined contribution plan shall not be treated
as failing to meet the requirements of this
section merely because of the elimination of a
form of distribution previously available
thereunder. This subparagraph shall not apply
to the elimination of a form of distribution
with respect to any participant unless--
``(i) a single sum payment is
available to such participant at the
same time or times as the form of
distribution being eliminated, and
``(ii) such single sum payment is
based on the same or greater portion of
the participant's account as the form
of distribution being eliminated.''.
(2) Amendment of erisa.--Section 204(g) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1054(g)) is amended by adding at the end the
following:
``(4)(A) A defined contribution plan (in this subparagraph
referred to as the `transferee plan') shall not be treated as
failing to meet the requirements of this subsection merely
because the transferee plan does not provide some or all of the
forms of distribution previously available under another
defined contribution plan (in this subparagraph referred to as
the `transferor plan') to the extent that--
``(i) the forms of distribution previously available
under the transferor plan applied to the account of a
participant or beneficiary under the transferor plan
that was transferred from the transferor plan to the
transferee plan pursuant to a direct transfer rather
than pursuant to a distribution from the transferor
plan;
``(ii) the terms of both the transferor plan and the
transferee plan authorize the transfer described in
clause (i);
``(iii) the transfer described in clause (i) was made
pursuant to a voluntary election by the participant or
beneficiary whose account was transferred to the
transferee plan;
``(iv) the election described in clause (iii) was
made after the participant or beneficiary received a
notice describing the consequences of making the
election; and
``(v) the transferee plan allows the participant or
beneficiary described in clause (iii) to receive any
distribution to which the participant or beneficiary is
entitled under the transferee plan in the form of a
single sum distribution.
``(B) Subparagraph (A) shall apply to plan mergers and other
transactions having the effect of a direct transfer, including
consolidations of benefits attributable to different employers
within a multiple employer plan.
``(5) Except to the extent provided in regulations
promulgated by the Secretary of the Treasury, a defined
contribution plan shall not be treated as failing to meet the
requirements of this subsection merely because of the
elimination of a form of distribution previously available
thereunder. This paragraph shall not apply to the elimination
of a form of distribution with respect to any participant
unless--
``(A) a single sum payment is available to such
participant at the same time or times as the form of
distribution being eliminated; and
``(B) such single sum payment is based on the same or
greater portion of the participant's account as the
form of distribution being eliminated.''.
(3) Effective date.--The amendments made by this
subsection shall apply to years beginning after
December 31, 2001.
(b) Regulations.--
(1) Amendment of internal revenue code.--Paragraph
(6)(B) of section 411(d) (relating to accrued benefit
not to be decreased by amendment) is amended by
inserting after the second sentence the following new
sentence: ``The Secretary shall by regulations provide
that this subparagraph shall not apply to any plan
amendment which reduces or eliminates benefits or
subsidies which create significant burdens or
complexities for the plan and plan participants and
does not adversely affect the rights of any participant
in a more than de minimis manner.''.
(2) Amendment of erisa.--Section 204(g)(2) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1054(g)(2)) is amended by inserting before the
last sentence the following new sentence: ``The
Secretary of the Treasury shall by regulations provide
that this paragraph shall not apply to any plan
amendment which reduces or eliminates benefits or
subsidies which create significant burdens or
complexities for the plan and plan participants and
does not adversely affect the rights of any participant
in a more than de minimis manner.''.
(3) Secretary directed.--Not later than December 31,
2003, the Secretary of the Treasury is directed to
issue regulations under section 411(d)(6) of the
Internal Revenue Code of 1986 and section 204(g) of the
Employee Retirement Income Security Act of 1974,
including the regulations required by the amendment
made by this subsection. Such regulations shall apply
to plan years beginning after December 31, 2003, or
such earlier date as is specified by the Secretary of
the Treasury.
SEC. 406. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.
(a) Modification of Same Desk Exception.--
(1) Section 401(k).--
(A) Section 401(k)(2)(B)(i)(I) (relating to
qualified cash or deferred arrangements) is
amended by striking ``separation from service''
and inserting ``severance from employment''.
(B) Subparagraph (A) of section 401(k)(10)
(relating to distributions upon termination of
plan or disposition of assets or subsidiary) is
amended to read as follows:
``(A) In general.--An event described in this
subparagraph is the termination of the plan
without establishment or maintenance of another
defined contribution plan (other than an
employee stock ownership plan as defined in
section 4975(e)(7)).''.
(C) Section 401(k)(10) is amended--
(i) in subparagraph (B)--
(I) by striking ``An event''
in clause (i) and inserting ``A
termination''; and
(II) by striking ``the
event'' in clause (i) and
inserting ``the termination'';
(ii) by striking subparagraph (C);
and
(iii) by striking ``or disposition of
assets or subsidiary'' in the heading.
(2) Section 403(b).--
(A) Paragraphs (7)(A)(ii) and (11)(A) of
section 403(b) are each amended by striking
``separates from service'' and inserting ``has
a severance from employment''.
(B) The heading for paragraph (11) of section
403(b) is amended by striking ``separation from
service'' and inserting ``severance from
employment''.
(3) Section 457.--Clause (ii) of section 457(d)(1)(A)
is amended by striking ``is separated from service''
and inserting ``has a severance from employment''.
(b) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2001.
SEC. 407. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED BENEFIT
PLANS.
(a) 403(b) Plans.--Subsection (b) of section 403 is amended
by adding at the end the following new paragraph:
``(13) Trustee-to-trustee transfers to purchase
permissive service credit.--No amount shall be
includible in gross income by reason of a direct
trustee-to-trustee transfer to a defined benefit
governmental plan (as defined in section 414(d)) if
such transfer is--
``(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A))
under such plan, or
``(B) a repayment to which section 415 does
not apply by reason of subsection (k)(3)
thereof.''.
(b) 457 Plans.--Subsection (e) of section 457 is amended by
adding after paragraph (16) the following new paragraph:
``(17) Trustee-to-trustee transfers to purchase
permissive service credit.--No amount shall be
includible in gross income by reason of a direct
trustee-to-trustee transfer to a defined benefit
governmental plan (as defined in section 414(d)) if
such transfer is--
``(A) for the purchase of permissive service
credit (as defined in section 415(n)(3)(A))
under such plan, or
``(B) a repayment to which section 415 does
not apply by reason of subsection (k)(3)
thereof.''.
(c) Effective Date.--The amendments made by this section
shall apply to trustee-to-trustee transfers after December 31,
2001.
SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF CASH-OUT
AMOUNTS.
(a) Qualified Plans.--
(1) Amendment of internal revenue code.--Section
411(a)(11) (relating to restrictions on certain
mandatory distributions) is amended by adding at the
end the following:
``(D) Special rule for rollover
contributions.--A plan shall not fail to meet
the requirements of this paragraph if, under
the terms of the plan, the present value of the
nonforfeitable accrued benefit is determined
without regard to that portion of such benefit
which is attributable to rollover contributions
(and earnings allocable thereto). For purposes
of this subparagraph, the term `rollover
contributions' means any rollover contribution
under sections 402(c), 403(a)(4), 403(b)(8),
408(d)(3)(A)(ii), and 457(e)(16).''.
(2) Amendment of erisa.--Section 203(e) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1053(c)) is amended by adding at the end the
following:
``(4) A plan shall not fail to meet the requirements of this
subsection if, under the terms of the plan, the present value
of the nonforfeitable accrued benefit is determined without
regard to that portion of such benefit which is attributable to
rollover contributions (and earnings allocable thereto). For
purposes of this subparagraph, the term `rollover
contributions' means any rollover contribution under sections
402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 457(e)(16)
of the Internal Revenue Code of 1986.''.
(b) Eligible Deferred Compensation Plans.--Clause (i) of
section 457(e)(9)(A) is amended by striking ``such amount'' and
inserting ``the portion of such amount which is not
attributable to rollover contributions (as defined in section
411(a)(11)(D))''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2001.
SEC. 409. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS FOR SECTION
457 PLANS.
(a) Minimum Distribution Requirements.--Paragraph (2) of
section 457(d) (relating to distribution requirements) is
amended to read as follows:
``(2) Minimum distribution requirements.--A plan
meets the minimum distribution requirements of this
paragraph if such plan meets the requirements of
section 401(a)(9).''.
(b) Inclusion in Gross Income.--
(1) Year of inclusion.--Subsection (a) of section 457
(relating to year of inclusion in gross income) is
amended to read as follows:
``(a) Year of inclusion in gross income.--
``(1) In general.--Any amount of compensation
deferred under an eligible deferred compensation plan,
and any income attributable to the amounts so deferred,
shall be includible in gross income only for the
taxable year in which such compensation or other
income--
``(A) is paid to the participant or other
beneficiary, in the case of a plan of an
eligible employer described in subsection
(e)(1)(A), and
``(B) is paid or otherwise made available to
the participant or other beneficiary, in the
case of a plan of an eligible employer
described in subsection (e)(1)(B).
``(2) Special rule for rollover amounts.--To the
extent provided in section 72(t)(9), section 72(t)
shall apply to any amount includible in gross income
under this subsection.''.
(2) Conforming amendments.--
(A) So much of paragraph (9) of section
457(e) as precedes subparagraph (A) is amended
to read as follows:
``(9) Benefits of tax exempt organization plans not
treated as made available by reason of certain
elections, etc.--In the case of an eligible deferred
compensation plan of an employer described in
subsection (e)(1)(B)--''.
(B) Section 457(d) is amended by adding at
the end the following new paragraph:
``(3) Special rule for government plan.--An eligible
deferred compensation plan of an employer described in
subsection (e)(1)(A) shall not be treated as failing to
meet the requirements of this subsection solely by
reason of making a distribution described in subsection
(e)(9)(A).''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2001.
TITLE V--STRENGTHENING PENSION SECURITY AND ENFORCEMENT
SEC. 501. REPEAL OF PERCENT OF CURRENT LIABILITY FUNDING LIMIT.
(a) Amendment of Internal Revenue Code.--Section 412(c)(7)
(relating to full-funding limitation) is amended--
(1) by striking ``the applicable percentage'' in
subparagraph (A)(i)(I) and inserting ``in the case of
plan years beginning before January 1, 2004, the
applicable percentage''; and
(2) by amending subparagraph (F) to read as follows:
``(F) Applicable percentage.--For purposes of
subparagraph (A)(i)(I), the applicable
percentage shall be determined in accordance
with the following table:
``In the case of any plan year The applicable
beginning in-- percentage is--
2002........................................ 165
2003........................................ 170.''.
(b) Amendment of ERISA.--Section 302(c)(7) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7))
is amended--
(1) by striking ``the applicable percentage'' in
subparagraph (A)(i)(I) and inserting ``in the case of
plan years beginning before January 1, 2004, the
applicable percentage''; and
(2) by amending subparagraph (F) to read as follows:
``(F) Applicable percentage.--For purposes of
subparagraph (A)(i)(I), the applicable
percentage shall be determined in accordance
with the following table:
``In the case of any plan year The applicable
beginning in-- percentage is--
2002........................................ 165
2003........................................ 170.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2001.
SEC. 502. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND APPLIED TO
ALL DEFINED BENEFIT PLANS.
(a) In General.--Subparagraph (D) of section 404(a)(1)
(relating to special rule in case of certain plans) is amended
to read as follows:
``(D) Special rule in case of certain
plans.--
``(i) In general.--In the case of any
defined benefit plan, except as
provided in regulations, the maximum
amount deductible under the limitations
of this paragraph shall not be less
than the unfunded termination liability
(determined as if the proposed
termination date referred to in section
4041(b)(2)(A)(i)(II) of the Employee
Retirement Income Security Act of 1974
were the last day of the plan year).
``(ii) Plans with less than 100
participants.--For purposes of this
subparagraph, in the case of a plan
which has less than 100 participants
for the plan year, termination
liability shall not include the
liability attributable to benefit
increases for highly compensated
employees (as defined in section
414(q)) resulting from a plan amendment
which is made or becomes effective,
whichever is later, within the last 2
years before the termination date.
``(iii) Rule for determining number
of participants.--For purposes of
determining whether a plan has more
than 100 participants, all defined
benefit plans maintained by the same
employer (or any member of such
employer's controlled group (within the
meaning of section 412(l)(8)(C))) shall
be treated as one plan, but only
employees of such member or employer
shall be taken into account.
``(iv) Plans maintained by
professional service employers.--Clause
(i) shall not apply to a plan described
in section 4021(b)(13) of the Employee
Retirement Income Security Act of
1974.''.
(b) Conforming Amendment.--Paragraph (6) of section 4972(c),
as amended by section 207, is amended to read as follows:
``(6) Exceptions.--In determining the amount of
nondeductible contributions for any taxable year, there
shall not be taken into account so much of the
contributions to one or more defined contribution plans
which are not deductible when contributed solely
because of section 404(a)(7) as does not exceed the
greater of--
``(A) the amount of contributions not in
excess of 6 percent of compensation (within the
meaning of section 404(a)) paid or accrued
(during the taxable year for which the
contributions were made) to beneficiaries under
the plans, or
``(B) 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).
For purposes of this paragraph, the deductible limits
under section 404(a)(7) shall first be applied to
amounts contributed to a defined benefit plan and then
to amounts described in subparagraph (B).''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2001.
SEC. 503. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.
(a) In General.--Subsection (c) of section 4972 (relating to
nondeductible contributions) is amended by adding at the end
the following new paragraph:
``(7) Defined benefit plan exception.--In determining
the amount of nondeductible contributions for any
taxable year, an employer may elect for such year not
to take into account any contributions to a defined
benefit plan except to the extent that such
contributions exceed the full-funding limitation (as
defined in section 412(c)(7), determined without regard
to subparagraph (A)(i)(I) thereof). For purposes of
this paragraph, the deductible limits under section
404(a)(7) shall first be applied to amounts contributed
to defined contribution plans and then to amounts
described in this paragraph. If an employer makes an
election under this paragraph for a taxable year,
paragraph (6) shall not apply to such employer for such
taxable year.''.
(b) Effective Date.--The amendment made by this section shall
apply to years beginning after December 31, 2001.
SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED BENEFIT
PLANS SIGNIFICANTLY REDUCING FUTURE BENEFIT
ACCRUALS.
(a) Amendment of Internal Revenue Code.--
(1) In general.--Chapter 43 (relating to qualified
pension, etc., plans) is amended by adding at the end
the following new section:
``SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING BENEFIT ACCRUALS TO
SATISFY NOTICE REQUIREMENTS.
``(a) Imposition of Tax.--There is hereby imposed a tax on
the failure of any applicable pension plan to meet the
requirements of subsection (e) with respect to any applicable
individual.
``(b) Amount of Tax.--
``(1) In general.--The amount of the tax imposed by
subsection (a) on any failure with respect to any
applicable individual shall be $100 for each day in the
noncompliance period with respect to such failure.
``(2) Noncompliance period.--For purposes of this
section, the term `noncompliance period' means, with
respect to any failure, the period beginning on the
date the failure first occurs and ending on the date
the notice to which the failure relates is provided or
the failure is otherwise corrected.
``(c) Limitations on Amount of Tax.--
``(1) Tax not to apply where failure not discovered
and reasonable diligence exercised.--No tax shall be
imposed by subsection (a) on any failure during any
period for which it is established to the satisfaction
of the Secretary that any person subject to liability
for the tax under subsection (d) did not know that the
failure existed and exercised reasonable diligence to
meet the requirements of subsection (e).
``(2) Tax not to apply to failures corrected within
30 days.--No tax shall be imposed by subsection (a) on
any failure if--
``(A) any person subject to liability for the
tax under subsection (d) exercised reasonable
diligence to meet the requirements of
subsection (e), and
``(B) such person provides the notice
described in subsection (e) during the 30-day
period beginning on the first date such person
knew, or exercising reasonable diligence would
have known, that such failure existed.
``(3) Overall limitation for unintentional
failures.--
``(A) In general.--If the person subject to
liability for tax under subsection (d)
exercised reasonable diligence to meet the
requirements of subsection (e), the tax imposed
by subsection (a) for failures during the
taxable year of the employer (or, in the case
of a multiemployer plan, the taxable year of
the trust forming part of the plan) shall not
exceed $500,000. For purposes of the preceding
sentence, all multiemployer plans of which the
same trust forms a part shall be treated as 1
plan.
``(B) Taxable years in the case of certain
controlled groups.--For purposes of this
paragraph, if all persons who are treated as a
single employer for purposes of this section do
not have the same taxable year, the taxable
years taken into account shall be determined
under principles similar to the principles of
section 1561.
``(4) Waiver by secretary.--In the case of a failure
which is due to reasonable cause and not to willful
neglect, the Secretary may waive part or all of the tax
imposed by subsection (a) to the extent that the
payment of such tax would be excessive or otherwise
inequitable relative to the failure involved.
``(d) Liability for Tax.--The following shall be liable for
the tax imposed by subsection (a):
``(1) In the case of a plan other than a
multiemployer plan, the employer.
``(2) In the case of a multiemployer plan, the plan.
``(e) Notice Requirements for Plans Significantly Reducing
Benefit Accruals.--
``(1) In general.--If an applicable pension plan is
amended to provide for a significant reduction in the
rate of future benefit accrual, the plan administrator
shall provide written notice to each applicable
individual (and to each employee organization
representing applicable individuals).
``(2) Notice.--The 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 regulations prescribed by the
Secretary) to allow applicable individuals to
understand the effect of the plan amendment. The
Secretary may provide a simplified form of notice for,
or exempt from any notice requirement, a plan--
``(A) which has fewer than 100 participants
who have accrued a benefit under the plan, or
``(B) which offers participants the option to
choose between the new benefit formula and the
old benefit formula.
``(3) Timing of notice.--Except as provided in
regulations, the notice required by paragraph (1) shall
be provided within a reasonable time before the
effective date of the plan amendment.
``(4) Designees.--Any notice under paragraph (1) may
be provided to a person designated, in writing, by the
person to which it would otherwise be provided.
``(5) Notice before adoption of amendment.--A plan
shall not be treated as failing to meet the
requirements of paragraph (1) merely because notice is
provided before the adoption of the plan amendment if
no material modification of the amendment occurs before
the amendment is adopted.
``(f) Definitions and Special Rules.--For purposes of this
section--
``(1) Applicable individual.--The term `applicable
individual' means, with respect to any plan amendment--
``(A) each participant in the plan, and
``(B) 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)),
whose rate of future benefit accrual under the plan may
reasonably be expected to be significantly reduced by
such plan amendment.
``(2) Applicable pension plan.--The term `applicable
pension plan' means--
``(A) any defined benefit plan, or
``(B) an individual account plan which is
subject to the funding standards of section
412.
Such term shall not include a governmental plan (within
the meaning of section 414(d)) or a church plan (within
the meaning of section 414(e)) with respect to which
the election provided by section 410(d) has not been
made.
``(3) Early retirement.--A plan amendment which
eliminates or significantly reduces any early
retirement benefit or retirement-type subsidy (within
the meaning of section 411(d)(6)(B)(i)) shall be
treated as having the effect of significantly reducing
the rate of future benefit accrual.
``(g) New Technologies.--The Secretary may by regulations
allow any notice under subsection (e) to be provided by using
new technologies.''.
(2) Clerical amendment.--The table of sections for
chapter 43 is amended by adding at the end the
following new item:
``Sec. 4980F. Failure of applicable plans reducing benefit
accruals to satisfy notice requirements.''.
(b) Amendment of ERISA.--Section 204(h) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054(h)) is
amended by adding at the end the following new paragraphs:
``(3)(A) An applicable pension plan to which paragraph (1)
applies shall not be treated as meeting the requirements of
such paragraph unless, in addition to any notice required to be
provided to an individual or organization under such paragraph,
the plan administrator provides the notice described in
subparagraph (B) to each applicable individual (and to each
employee organization representing applicable individuals).
``(B) The notice required by subparagraph (A) 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 regulations prescribed by the
Secretary of the Treasury) to allow applicable individuals to
understand the effect of the plan amendment. The Secretary of
the Treasury may provide a simplified form of notice for, or
exempt from any notice requirement, a plan--
``(i) which has fewer than 100 participants who have
accrued a benefit under the plan, or
``(ii) which offers participants the option to choose
between the new benefit formula and the old benefit
formula.
``(C) Except as provided in regulations prescribed by the
Secretary of the Treasury, the notice required by subparagraph
(A) shall be provided within a reasonable time before the
effective date of the plan amendment.
``(D) Any notice under subparagraph (A) may be provided to a
person designated, in writing, by the person to which it would
otherwise be provided.
``(E) A plan shall not be treated as failing to meet the
requirements of subparagraph (A) merely because notice is
provided before the adoption of the plan amendment if no
material modification of the amendment occurs before the
amendment is adopted.
``(F) The Secretary of the Treasury may by regulations allow
any notice under this paragraph to be provided by using new
technologies.
``(4) For purposes of paragraph (3)--
``(A) The term `applicable individual' means, with
respect to any plan amendment--
``(i) each participant in the plan; and
``(ii) any beneficiary who is an alternate
payee (within the meaning of section
206(d)(3)(K)) under an applicable qualified
domestic relations order (within the meaning of
section 206(d)(3)(B)(i)),
whose rate of future benefit accrual under the plan may
reasonably be expected to be significantly reduced by
such plan amendment.
``(B) The term `applicable pension plan' means--
``(i) any defined benefit plan; or
``(ii) an individual account plan which is
subject to the funding standards of section 412
of the Internal Revenue Code of 1986.
``(C) A plan amendment which eliminates or
significantly reduces any early retirement benefit or
retirement-type subsidy (within the meaning of
subsection (g)(2)(A)) shall be treated as having the
effect of significantly reducing the rate of future
benefit accrual.''.
(c) Effective Dates.--
(1) In general.--The amendments made by this section
shall apply to plan amendments taking effect on or
after the date of the enactment of this Act.
(2) Transition.--Until such time as the Secretary of
the Treasury issues regulations under sections
4980F(e)(2) and (3) of the Internal Revenue Code of
1986, and section 204(h)(3) of the Employee Retirement
Income Security Act of 1974, as added by the amendments
made by this section, a plan shall be treated as
meeting the requirements of such sections if it makes a
good faith effort to comply with such requirements.
(3) Special notice rule.--
(A) In general.--The period for providing any
notice required by the amendments made by this
section shall not end before the date which is
3 months after the date of the enactment of
this Act.
(B) Reasonable notice.--The amendments made
by this section shall not apply to any plan
amendment taking effect on or after the date of
the enactment of this Act if, before April 25,
2001, notice was provided to participants and
beneficiaries adversely affected by the plan
amendment (or their representatives) which was
reasonably expected to notify them of the
nature and effective date of the plan
amendment.
(d) Study.--The Secretary of the Treasury shall prepare a
report on the effects of conversions of traditional defined
benefit plans to cash balance or hybrid formula plans. Such
study shall examine the effect of such conversions on longer
service participants, including the incidence and effects of
``wear away'' provisions under which participants earn no
additional benefits for a period of time after the conversion.
As soon as practicable, but not later than 60 days after the
date of the enactment of this Act, the Secretary shall submit
such report, together with recommendations thereon, 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.
SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) Compensation Limit.--
(1) In general.--Paragraph (11) of section 415(b)
(relating to limitation for defined benefit plans) is
amended to read as follows:
``(11) Special limitation rule for governmental and
multiemployer plans.--In the case of a governmental
plan (as defined in section 414(d)) or a multiemployer
plan (as defined in section 414(f)), subparagraph (B)
of paragraph (1) shall not apply.''.
(2) Conforming amendment.--Section 415(b)(7)
(relating to benefits under certain collectively
bargained plans) is amended by inserting ``(other than
a multiemployer plan)'' after ``defined benefit plan''
in the matter preceding subparagraph (A).
(b) Combining and Aggregation of Plans.--
(1) Combining of plans.--Subsection (f) of section
415 (relating to combining of plans) is amended by
adding at the end the following:
``(3) Exception for multiemployer plans.--
Notwithstanding paragraph (1) and subsection (g), a
multiemployer plan (as defined in section 414(f)) shall
not be combined or aggregated--
``(A) with any other plan which is not a
multiemployer plan for purposes of applying
subsection (b)(1)(B) to such other plan, or
``(B) with any other multiemployer plan for
purposes of applying the limitations
established in this section.''.
(2) Conforming amendment for aggregation of plans.--
Subsection (g) of section 415 (relating to aggregation
of plans) is amended by striking ``The Secretary'' and
inserting ``Except as provided in subsection (f)(3),
the Secretary''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2001.
SEC. 506. PROTECTION OF INVESTMENT OF EMPLOYEE CONTRIBUTIONS TO 401(K)
PLANS.
(a) In General.--Section 1524(b) of the Taxpayer Relief Act
of 1997 is amended to read as follows:
``(b) Effective Date.--
``(1) In general.--Except as provided in paragraph
(2), the amendments made by this section shall apply to
elective deferrals for plan years beginning after
December 31, 1998.
``(2) Nonapplication to previously acquired
property.--The amendments made by this section shall
not apply to any elective deferral which is invested in
assets consisting of qualifying employer securities,
qualifying employer real property, or both, if such
assets were acquired before January 1, 1999.''.
(b) Effective Date.--The amendment made by this section shall
apply as if included in the provision of the Taxpayer Relief
Act of 1997 to which it relates.
SEC. 507. PERIODIC PENSION BENEFITS STATEMENTS.
(a) In General.--Section 105(a) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1025 (a)) is amended to
read as follows:
``(a)(1) Except as provided in paragraph (2)--
``(A) the administrator of an individual account plan
shall furnish a pension benefit statement--
``(i) to a plan participant at least once
annually, and
``(ii) to a plan beneficiary upon written
request, and
``(B) the administrator of a defined benefit plan
shall furnish a pension benefit statement--
``(i) at least once every 3 years to each
participant with a nonforfeitable accrued
benefit who is employed by the employer
maintaining the plan at the time the statement
is furnished to participants, and
``(ii) to a plan participant or plan
beneficiary of the plan upon written request.
``(2) Notwithstanding paragraph (1), the administrator of a
plan to which more than 1 unaffiliated employer is required to
contribute shall only be required to furnish a pension benefit
statement under paragraph (1) upon the written request of a
participant or beneficiary of the plan.
``(3) A pension benefit statement under paragraph (1)--
``(A) shall indicate, on the basis of the latest
available information--
``(i) the total benefits accrued, and
``(ii) the nonforfeitable pension benefits,
if any, which have accrued, or the earliest
date on which benefits will become
nonforfeitable,
``(B) shall be written in a manner calculated to be
understood by the average plan participant, and
``(C) may be provided in written, electronic,
telephonic, or other appropriate form.
``(4)(A) In the case of a defined benefit plan, the
requirements of paragraph (1)(B)(i) shall be treated as met
with respect to a participant if the administrator provides the
participant at least once each year with notice of the
availability of the pension benefit statement and the ways in
which the participant may obtain such statement. Such notice
shall be provided in written, electronic, telephonic, or other
appropriate form, and may be included with other communications
to the participant if done in a manner reasonably designed to
attract the attention of the participant.
``(B) The Secretary may provide that years in which no
employee or former employee benefits (within the meaning of
section 410(b) of the Internal Revenue Code of 1986) under the
plan need not be taken into account in determining the 3-year
period under paragraph (1)(B)(i).''.
(b) Conforming Amendments.--
(1) Section 105 of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1025) is amended by
striking subsection (d).
(2) Section 105(b) of such Act (29 U.S.C. 1025(b)) is
amended to read as follows:
``(b) In no case shall a participant or beneficiary of a plan
be entitled to more than one statement described in subsection
(a)(1)(A) or (a)(1)(B)(ii), whichever is applicable, in any 12-
month period.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2002.
SEC. 508. PROHIBITED ALLOCATIONS OF STOCK IN S CORPORATION ESOP.
(a) In General.--Section 409 (relating to qualifications for
tax credit employee stock ownership plans) is amended by
redesignating subsection (p) as subsection (q) and by inserting
after subsection (o) the following new subsection:
``(p) Prohibited Allocations of Securities in an S
Corporation.--
``(1) In general.--An employee stock ownership plan
holding employer securities consisting of stock in an S
corporation shall provide that no portion of the assets
of the plan attributable to (or allocable in lieu of)
such employer securities may, during a nonallocation
year, accrue (or be allocated directly or indirectly
under any plan of the employer meeting the requirements
of section 401(a)) for the benefit of any disqualified
person.
``(2) Failure to meet requirements.--
``(A) In general.--If a plan fails to meet
the requirements of paragraph (1), the plan
shall be treated as having distributed to any
disqualified person the amount allocated to the
account of such person in violation of
paragraph (1) at the time of such allocation.
``(B) Cross reference.--
``For excise tax relating to violations of paragraph (1) and
ownership of synthetic equity, see section 4979A.
``(3) Nonallocation year.--For purposes of this
subsection--
``(A) In general.--The term `nonallocation
year' means any plan year of an employee stock
ownership plan if, at any time during such plan
year--
``(i) such plan holds employer
securities consisting of stock in an S
corporation, and
``(ii) disqualified persons own at
least 50 percent of the number of
shares of stock in the S corporation.
``(B) Attribution rules.--For purposes of
subparagraph (A)--
``(i) In general.--The rules of
section 318(a) shall apply for purposes
of determining ownership, except that--
``(I) in applying paragraph
(1) thereof, the members of an
individual's family shall
include members of the family
described in paragraph (4)(D),
and
``(II) paragraph (4) thereof
shall not apply.
``(ii) Deemed-owned shares.--
Notwithstanding the employee trust
exception in section 318(a)(2)(B)(i),
individual shall be treated as owning
deemed-owned shares of the individual.
Solely for purposes of applying paragraph (5),
this subparagraph shall be applied after the
attribution rules of paragraph (5) have been
applied.
``(4) Disqualified person.--For purposes of this
subsection--
``(A) In general.--The term `disqualified
person' means any person if--
``(i) the aggregate number of deemed-
owned shares of such person and the
members of such person's family is at
least 20 percent of the number of
deemed-owned shares of stock in the S
corporation, or
``(ii) in the case of a person not
described in clause (i), the number of
deemed-owned shares of such person is
at least 10 percent of the number of
deemed-owned shares of stock in such
corporation.
``(B) Treatment of family members.--In the
case of a disqualified person described in
subparagraph (A)(i), any member of such
person's family with deemed-owned shares shall
be treated as a disqualified person if not
otherwise treated as a disqualified person
under subparagraph (A).
``(C) Deemed-owned shares.--
``(i) In general.--The term `deemed-
owned shares' means, with respect to
any person--
``(I) the stock in the S
corporation constituting
employer securities of an
employee stock ownership plan
which is allocated to such
person under the plan, and
``(II) such person's share of
the stock in such corporation
which is held by such plan but
which is not allocated under
the plan to participants.
``(ii) Person's share of unallocated
stock.--For purposes of clause (i)(II),
a person's share of unallocated S
corporation stock held by such plan is
the amount of the unallocated stock
which would be allocated to such person
if the unallocated stock were allocated
to all participants in the same
proportions as the most recent stock
allocation under the plan.
``(D) Member of family.--For purposes of this
paragraph, the term `member of the family'
means, with respect to any individual--
``(i) the spouse of the individual,
``(ii) an ancestor or lineal
descendant of the individual or the
individual's spouse,
``(iii) a brother or sister of the
individual or the individual's spouse
and any lineal descendant of the
brother or sister, and
``(iv) the spouse of any individual
described in clause (ii) or (iii).
A spouse of an individual who is legally
separated from such individual under a decree
of divorce or separate maintenance shall not be
treated as such individual's spouse for
purposes of this subparagraph.
``(5) Treatment of synthetic equity.--For purposes of
paragraphs (3) and (4), in the case of a person who
owns synthetic equity in the S corporation, except to
the extent provided in regulations, the shares of stock
in such corporation on which such synthetic equity is
based shall be treated as outstanding stock in such
corporation and deemed-owned shares of such person if
such treatment of synthetic equity of 1 or more such
persons results in--
``(A) the treatment of any person as a
disqualified person, or
``(B) the treatment of any year as a
nonallocation year.
For purposes of this paragraph, synthetic equity shall
be treated as owned by a person in the same manner as
stock is treated as owned by a person under the rules
of paragraphs (2) and (3) of section 318(a). If,
without regard to this paragraph, a person is treated
as a disqualified person or a year is treated as a
nonallocation year, this paragraph shall not be
construed to result in the person or year not being so
treated.
``(6) Definitions.--For purposes of this subsection--
``(A) Employee stock ownership plan.--The
term `employee stock ownership plan' has the
meaning given such term by section 4975(e)(7).
``(B) Employer securities.--The term
`employer security' has the meaning given such
term by section 409(l).
``(C) Synthetic equity.--The term `synthetic
equity' means any stock option, warrant,
restricted stock, deferred issuance stock
right, or similar interest or right that gives
the holder the right to acquire or receive
stock of the S corporation in the future.
Except to the extent provided in regulations,
synthetic equity also includes a stock
appreciation right, phantom stock unit, or
similar right to a future cash payment based on
the value of such stock or appreciation in such
value.
``(7) Regulations.--The Secretary shall prescribe
such regulations as may be necessary to carry out the
purposes of this subsection.''.
(b) Coordination With Section 4975(e)(7).--The last sentence
of section 4975(e)(7) (defining employee stock ownership plan)
is amended by inserting ``, section 409(p),'' after ``409(n)''.
(c) Excise Tax.--
(1) Application of tax.--Subsection (a) of section
4979A (relating to tax on certain prohibited
allocations of employer securities) is amended--
(A) by striking ``or'' at the end of
paragraph (1), and
(B) by striking all that follows paragraph
(2) and inserting the following:
``(3) there is any allocation of employer securities
which violates the provisions of section 409(p), or a
nonallocation year described in subsection (e)(2)(C)
with respect to an employee stock ownership plan, or
``(4) any synthetic equity is owned by a disqualified
person in any nonallocation year,
there is hereby imposed a tax on such allocation or ownership
equal to 50 percent of the amount involved.''.
(2) Liability.--Section 4979A(c) (defining liability
for tax) is amended to read as follows:
``(c) Liability for Tax.--The tax imposed by this section
shall be paid--
``(1) in the case of an allocation referred to in
paragraph (1) or (2) of subsection (a), by--
``(A) the employer sponsoring such plan, or
``(B) the eligible worker-owned cooperative,
which made the written statement described in section
664(g)(1)(E) or in section 1042(b)(3)(B) (as the case
may be), and
``(2) in the case of an allocation or ownership
referred to in paragraph (3) or (4) of subsection (a),
by the S corporation the stock in which was so
allocated or owned.''.
(3) Definitions.--Section 4979A(e) (relating to
definitions) is amended to read as follows:
``(e) Definitions and Special Rules.--For purposes of this
section--
``(1) Definitions.--Except as provided in paragraph
(2), terms used in this section have the same
respective meanings as when used in sections 409 and
4978.
``(2) Special rules relating to tax imposed by reason
of paragraph (3) or (4) of subsection (a).--
``(A) Prohibited allocations.--The amount
involved with respect to any tax imposed by
reason of subsection (a)(3) is the amount
allocated to the account of any person in
violation of section 409(p)(1).
``(B) Synthetic equity.--The amount involved
with respect to any tax imposed by reason of
subsection (a)(4) is the value of the shares on
which the synthetic equity is based.
``(C) Special rule during first nonallocation
year.--For purposes of subparagraph (A), the
amount involved for the first nonallocation
year of any employee stock ownership plan shall
be determined by taking into account the total
value of all the deemed-owned shares of all
disqualified persons with respect to such plan.
``(D) Statute of limitations.--The statutory
period for the assessment of any tax imposed by
this section by reason of paragraph (3) or (4)
of subsection (a) shall not expire before the
date which is 3 years from the later of--
``(i) the allocation or ownership
referred to in such paragraph giving
rise to such tax, or
``(ii) the date on which the
Secretary is notified of such
allocation or ownership.''.
(d) Effective Dates.--
(1) In general.--The amendments made by this section
shall apply to plan years beginning after December 31,
2004.
(2) Exception for certain plans.--In the case of
any--
(A) employee stock ownership plan established
after March 14, 2001, or
(B) employee stock ownership plan established
on or before such date if employer securities
held by the plan consist of stock in a
corporation with respect to which an election
under section 1362(a) of the Internal Revenue
Code of 1986 is not in effect on such date,
the amendments made by this section shall apply to plan
years ending after March 14, 2001.
TITLE VI--REDUCING REGULATORY BURDENS
SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) Amendment of Internal Revenue Code.--Paragraph (9) of
section 412(c) (relating to annual valuation) is amended to
read as follows:
``(9) Annual valuation.--
``(A) In general.--For purposes of this
section, a determination of experience gains
and losses and a valuation of the plan's
liability shall be made not less frequently
than once every year, except that such
determination shall be made more frequently to
the extent required in particular cases under
regulations prescribed by the Secretary.
``(B) Valuation date.--
``(i) Current year.--Except as
provided in clause (ii), the valuation
referred to in subparagraph (A) shall
be made as of a date within the plan
year to which the valuation refers or
within one month prior to the beginning
of such year.
``(ii) Election to use prior year
valuation.--The valuation referred to
in subparagraph (A) may be made as of a
date within the plan year prior to the
year to which the valuation refers if--
``(I) an election is in
effect under this clause with
respect to the plan, and
``(II) as of such date, the
value of the assets of the plan
are not less than 125 percent
of the plan's current liability
(as defined in paragraph
(7)(B)).
``(iii) Adjustments.--Information
under clause (ii) shall, in accordance
with regulations, be actuarially
adjusted to reflect significant
differences in participants.
``(iv) Election.--An election under
clause (ii), once made, shall be
irrevocable without the consent of the
Secretary.''.
(b) Amendment of ERISA.--Paragraph (9) of section 302(c) of
the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1053(c)) is amended--
(1) by inserting ``(A)'' after ``(9)''; and
(2) by adding at the end the following:
``(B)(i) Except as provided in clause (ii), the valuation
referred to in subparagraph (A) shall be made as of a date
within the plan year to which the valuation refers or within
one month prior to the beginning of such year.
``(ii) The valuation referred to in subparagraph (A) may be
made as of a date within the plan year prior to the year to
which the valuation refers if--
``(I) an election is in effect under this clause with
respect to the plan; and
``(II) as of such date, the value of the assets of
the plan are not less than 125 percent of the plan's
current liability (as defined in paragraph (7)(B)).
``(iii) Information under clause (ii) shall, in accordance
with regulations, be actuarially adjusted to reflect
significant differences in participants.
``(iv) An election under clause (ii), once made, shall be
irrevocable without the consent of the Secretary of the
Treasury.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2001.
SEC. 602. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF DIVIDEND
DEDUCTION.
(a) In General.--Section 404(k)(2)(A) (defining applicable
dividends) is amended by striking ``or'' at the end of clause
(ii), by redesignating clause (iii) as clause (iv), and by
inserting after clause (ii) the following new clause:
``(iii) is, at the election of such
participants or their beneficiaries--
``(I) payable as provided in
clause (i) or (ii), or
``(II) paid to the plan and
reinvested in qualifying
employer securities, or''.
(b) Standards for Disallowance.--Section 404(k)(5)(A)
(relating to disallowance of deduction) is amended by inserting
``avoidance or'' before ``evasion''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31, 2001.
SEC. 603. REPEAL OF TRANSITION RULE RELATING TO CERTAIN HIGHLY
COMPENSATED EMPLOYEES.
(a) In General.--Paragraph (4) of section 1114(c) of the Tax
Reform Act of 1986 is hereby repealed.
(b) Effective Date.--The repeal made by subsection (a) shall
apply to plan years beginning after December 31, 2001.
SEC. 604. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) In General.--The Secretary of the Treasury shall modify
Treasury Regulations section 1.410(b)-6(g) to provide that
employees of an organization described in section
403(b)(1)(A)(i) of the Internal Revenue Code of 1986 who are
eligible to make contributions under section 403(b) of such
Code pursuant to a salary reduction agreement may be treated as
excludable with respect to a plan under section 401(k) or (m)
of such Code that is provided under the same general
arrangement as a plan under such section 401(k), if--
(1) no employee of an organization described in
section 403(b)(1)(A)(i) of such Code is eligible to
participate in such section 401(k) plan or section
401(m) plan; and
(2) 95 percent of the employees who are not employees
of an organization described in section 403(b)(1)(A)(i)
of such Code are eligible to participate in such plan
under such section 401(k) or (m).
(b) Effective Date.--The modification required by subsection
(a) shall apply as of the same date set forth in section
1426(b) of the Small Business Job Protection Act of 1996.
SEC. 605. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED RETIREMENT
ADVICE.
(a) In General.--Subsection (a) of section 132 (relating to
exclusion from gross income) is amended by striking ``or'' at
the end of paragraph (5), by striking the period at the end of
paragraph (6) and inserting ``, or'', and by adding at the end
the following new paragraph:
``(7) qualified retirement planning services.''.
(b) Qualified Retirement Planning Services Defined.--Section
132 is amended by redesignating subsection (m) as subsection
(n) and by inserting after subsection (l) the following:
``(m) Qualified Retirement Planning Services.--
``(1) In general.--For purposes of this section, the
term `qualified retirement planning services' means any
retirement planning advice or information provided to
an employee and his spouse by an employer maintaining a
qualified employer plan.
``(2) Nondiscrimination rule.--Subsection (a)(7)
shall apply in the case of highly compensated employees
only if such services are 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.
``(3) Qualified employer plan.--For purposes of this
subsection, the term `qualified employer plan' means a
plan, contract, pension, or account described in
section 219(g)(5).''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2001.
SEC. 606. 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.
(b) Simplified Annual Filing Requirement for Plans With Fewer
Than 25 Employees.--In the case of plan years beginning after
December 31, 2002, 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).
(c) Effective Date.--The provisions of this section shall
take effect on January 1, 2002.
SEC. 607. 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 Administrative Policy Regarding Self-
Correction for significant compliance failures;
(4) expanding the availability to correct
insignificant compliance failures under the
Administrative Policy Regarding Self-Correction 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.
SEC. 608. REPEAL OF THE MULTIPLE USE TEST.
(a) In General.--Paragraph (9) of section 401(m) is amended
to read as follows:
``(9) Regulations.--The Secretary shall prescribe
such regulations as may be necessary to carry out the
purposes of this subsection and subsection (k),
including regulations permitting appropriate
aggregation of plans and contributions.''.
(b) Effective Date.--The amendment made by this section shall
apply to years beginning after December 31, 2001.
SEC. 609. FLEXIBILITY IN NONDISCRIMINATION, COVERAGE, AND LINE OF
BUSINESS RULES.
(a) Nondiscrimination.--
(1) In general.--The Secretary of the Treasury shall,
by regulation, provide that a plan shall be deemed to
satisfy the requirements of section 401(a)(4) of the
Internal Revenue Code of 1986 if such plan satisfies
the facts and circumstances test under section
401(a)(4) of such Code, as in effect before January 1,
1994, but only if--
(A) the plan satisfies conditions prescribed
by the Secretary to appropriately limit the
availability of such test; and
(B) the plan is submitted to the Secretary
for a determination of whether it satisfies
such test.
Subparagraph (B) shall only apply to the extent
provided by the Secretary.
(2) Effective dates.--
(A) Regulations.--The regulation required by
paragraph (1) shall apply to years beginning
after December 31, 2003.
(B) Conditions of availability.--Any
condition of availability prescribed by the
Secretary under paragraph (1)(A) shall not
apply before the first year beginning not less
than 120 days after the date on which such
condition is prescribed.
(b) Coverage Test.--
(1) In general.--Section 410(b)(1) (relating to
minimum coverage requirements) is amended by adding at
the end the following:
``(D) In the case that the plan fails to meet
the requirements of subparagraphs (A), (B) and
(C), the plan--
``(i) satisfies subparagraph (B), as
in effect immediately before the
enactment of the Tax Reform Act of
1986,
``(ii) is submitted to the Secretary
for a determination of whether it
satisfies the requirement described in
clause (i), and
``(iii) satisfies conditions
prescribed by the Secretary by
regulation that appropriately limit the
availability of this subparagraph.
Clause (ii) shall apply only to the extent
provided by the Secretary.''.
(2) Effective dates.--
(A) In general.--The amendment made by
paragraph (1) shall apply to years beginning
after December 31, 2003.
(B) Conditions of availability.--Any
condition of availability prescribed by the
Secretary under regulations prescribed by the
Secretary under section 410(b)(1)(D) of the
Internal Revenue Code of 1986 shall not apply
before the first year beginning not less than
120 days after the date on which such condition
is prescribed.
(c) Line of Business Rules.--The Secretary of the Treasury
shall, on or before December 31, 2003, modify the existing
regulations issued under section 414(r) of the Internal Revenue
Code of 1986 in order to expand (to the extent that the
Secretary determines appropriate) the ability of a pension plan
to demonstrate compliance with the line of business
requirements based upon the facts and circumstances surrounding
the design and operation of the plan, even though the plan is
unable to satisfy the mechanical tests currently used to
determine compliance.
SEC. 610. 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) of the
Internal Revenue Code of 1986 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, 2001.
SEC. 611. 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) Amendment of erisa.--Section 205(c)(7)(A) of the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1055(c)(7)(A)) is amended by striking ``90-day''
and inserting ``180-day''.
(3) Effective date.--The amendments made by paragraph
(1)(A) and (2) and the modifications required by
paragraph (1)(B) shall apply to years beginning after
December 31, 2001.
(b) Consent Regulation Inapplicable to Certain
Distributions.--
(1) In general.--The Secretary of the Treasury shall
modify the regulations under section 411(a)(11) of the
Internal Revenue Code of 1986 to provide that the
description of a participant's right, if any, to defer
receipt of a distribution shall also describe the
consequences of failing to defer such receipt.
(2) Effective date.--The modifications required by
paragraph (1) shall apply to years beginning after
December 31, 2001.
SEC. 612. ANNUAL REPORT DISSEMINATION.
(a) Report Available Through Electronic Means.--Section
104(b)(3) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1024(b)(3)) is amended by adding at the end the
following new sentence: ``The requirement to furnish
information under the previous sentence shall be satisfied if
the administrator makes such information reasonably available
through electronic means or other new technology.''.
(b) Effective Date.--The amendment made by this section shall
apply to reports for years beginning after December 31, 2000.
SEC. 613. TECHNICAL CORRECTIONS TO SAVER ACT.
Section 517 of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1147) is amended--
(1) in subsection (a), by striking ``2001 and 2005 on
or after September 1 of each year involved'' and
inserting ``2001, 2005, and 2009 in the month of
September of each year involved'';
(2) in subsection (b), by adding at the end the
following new sentence: ``To effectuate the purposes of
this paragraph, the Secretary may enter into a
cooperative agreement, pursuant to the Federal Grant
and Cooperative Agreement Act of 1977 (31 U.S.C. 6301
et seq.), with the American Savings Education
Council.'';
(3) in subsection (e)(2)--
(A) by striking ``Committee on Labor and
Human Resources'' in subparagraph (D) and
inserting ``Committee on Health, Education,
Labor, and Pensions'';
(B) by striking subparagraph (F) and
inserting the following:
``(F) the Chairman and Ranking Member of the
Subcommittee on Labor, Health and Human
Services, and Education of the Committee on
Appropriations of the House of Representatives
and the Chairman and Ranking Member of the
Subcommittee on Labor, Health and Human
Services, and Education of the Committee on
Appropriations of the Senate;'';
(C) by redesignating subparagraph (G) as
subparagraph (J); and
(D) by inserting after subparagraph (F) the
following new subparagraphs:
``(G) the Chairman and Ranking Member of the
Committee on Finance of the Senate;
``(H) the Chairman and Ranking Member of the
Committee on Ways and Means of the House of
Representatives;
``(I) the Chairman and Ranking Member of the
Subcommittee on Employer-Employee Relations of
the Committee on Education and the Workforce of
the House of Representatives; and'';
(4) in subsection (e)(3)(A)--
(A) by striking ``There shall be no more than
200 additional participants.'' and inserting
``The participants in the National Summit shall
also include additional participants appointed
under this subparagraph.'';
(B) by striking ``one-half shall be appointed
by the President,'' in clause (i) and inserting
``not more than 100 participants shall be
appointed under this clause by the
President,'', and by striking ``and'' at the
end of clause (i);
(C) by striking ``one-half shall be appointed
by the elected leaders of Congress'' in clause
(ii) and inserting ``not more than 100
participants shall be appointed under this
clause by the elected leaders of Congress'',
and by striking the period at the end of clause
(ii) and inserting ``; and'';
(D) by adding at the end the following new
clause:
``(iii) The President, in
consultation with the elected leaders
of Congress referred to in subsection
(a), may appoint under this clause
additional participants to the National
Summit. The number of such additional
participants appointed under this
clause may not exceed the lesser of 3
percent of the total number of all
additional participants appointed under
this paragraph, or 10. Such additional
participants shall be appointed from
persons nominated by the organization
referred to in subsection (b)(2) which
is made up of private sector businesses
and associations partnered with
Government entities to promote long
term financial security in retirement
through savings and with which the
Secretary is required thereunder to
consult and cooperate and shall not be
Federal, State, or local government
employees.'';
(5) in subsection (e)(3)(B), by striking ``January
31, 1998'' in subparagraph (B) and inserting ``May 1,
2001, May 1, 2005, and May 1, 2009, for each of the
subsequent summits, respectively'';
(6) in subsection (f)(1)(C), by inserting ``, no
later than 90 days prior to the date of the
commencement of the National Summit,'' after
``comment'' in paragraph (1)(C);
(7) in subsection (g), by inserting ``, in
consultation with the congressional leaders specified
in subsection (e)(2),'' after ``report'';
(8) in subsection (i)--
(A) by striking ``beginning on or after
October 1, 1997'' in paragraph (1) and
inserting ``2001, 2005, and 2009''; and
(B) by adding at the end the following new
paragraph:
``(3) Reception and representation authority.--The
Secretary is hereby granted reception and
representation authority limited specifically to the
events at the National Summit. The Secretary shall use
any private contributions accepted in connection with
the National Summit prior to using funds appropriated
for purposes of the National Summit pursuant to this
paragraph.''; and
(9) in subsection (k)--
(A) by striking ``shall enter into a contract
on a sole-source basis'' and inserting ``may
enter into a contract on a sole-source basis'';
and
(B) by striking ``fiscal year 1998'' and
inserting ``fiscal years 2001, 2005, and
2009''.
TITLE VII--OTHER ERISA PROVISIONS
SEC. 701. MISSING PARTICIPANTS.
(a) In General.--Section 4050 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1350) is amended by
redesignating subsection (c) as subsection (e) 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 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).''.
(b) Effective Date.--The amendment made by this section shall
apply to distributions made after final regulations
implementing subsections (c) and (d) of section 4050 of the
Employee Retirement Income Security Act of 1974 (as added by
subsection (a)), respectively, are prescribed.
SEC. 702. 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, 2001.
SEC. 703. 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 702(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, 2001.
(2) Subsection (b).--The amendments made by
subsection (b) shall apply to plan years beginning
after December 31, 2001.
SEC. 704. 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. 705. 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, 2001, 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, 2002.
SEC. 706. CIVIL PENALTIES FOR BREACH OF FIDUCIARY RESPONSIBILITY.
(a) Imposition and Amount of Penalty Made Discretionary.--
Section 502(l)(1) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1132(l)(1)) is amended--
(1) by striking ``shall'' and inserting ``may'', and
(2) by striking ``equal to'' and inserting ``not
greater than''.
(b) Applicable Recovery Amount.--Section 502(l)(2) of such
Act (29 U.S.C. 1132(l)(2)) is amended to read as follows:
``(2) For purposes of paragraph (1), the term `applicable
recovery amount' means any amount which is recovered from any
fiduciary or other person (or from any other person on behalf
of any such fiduciary or other person) with respect to a breach
or violation described in paragraph (1) on or after the 30th
day following receipt by such fiduciary or other person of
written notice from the Secretary of the violation, whether
paid voluntarily or by order of a court in a judicial
proceeding instituted by the Secretary under subsection (a)(2)
or (a)(5). The Secretary may, in the Secretary's sole
discretion, extend the 30-day period described in the preceding
sentence.''.
(c) Other Rules.--Section 502(l) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1132(l)) is amended by
adding at the end the following new paragraph:
``(5) A person shall be jointly and severally liable for the
penalty described in paragraph (1) to the same extent that such
person is jointly and severally liable for the applicable
recovery amount on which the penalty is based.
``(6) No penalty shall be assessed under this subsection
unless the person against whom the penalty is assessed is given
notice and opportunity for a hearing with respect to the
violation and applicable recovery amount.''.
(d) Effective Dates.--
(1) In general.--The amendments made by this section
shall apply to any breach of fiduciary responsibility
or other violation of part 4 of subtitle B of title I
of the Employee Retirement Income Security Act of 1974
occurring on or after the date of enactment of this
Act.
(2) Transition rule.--In applying the amendment made
by subsection (b) (relating to applicable recovery
amount), a breach or other violation occurring before
the date of enactment of this Act which continues after
the 180th day after such date (and which may have been
discontinued at any time during its existence) shall be
treated as having occurred after such date of
enactment.
SEC. 707. BENEFIT SUSPENSION NOTICE.
(a) Modification of Regulation.--The Secretary of Labor shall
modify the regulation under section 203(a)(3)(B) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1053(a)(3)(B)) to provide that the notification required by
such regulation--
(1) in the case of an employee who returns to work
for a former employer after commencement of payment of
benefits under the plan shall--
(A) be made during the first calendar month
or payroll period in which the plan withholds
payments, and
(B) if a reduced rate of future benefit
accruals will apply to the returning employee
(as of the first date of participation in the
plan by the employee after returning to work),
include a statement that the rate of future
benefit accruals will be reduced, and
(2) in the case of any employee who is not described
in paragraph (1)--
(A) may be included in the summary plan
description for the plan furnished in
accordance with section 104(b) of such Act (29
U.S.C. 1024(b)), rather than in a separate
notice, and
(B) need not include a copy of the relevant
plan provisions.
(b) Effective Date.--The modification made under this section
shall apply to plan years beginning after December 31, 2001.
SEC. 708. 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 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 VIII--PLAN AMENDMENTS
SEC. 801. 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 or 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 pursuant to any regulation issued under
this Act; and
(B) on or before the last day of the first
plan year beginning on or after January 1,
2004.
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
``2006'' for ``2004''.
(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.