[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 742 Introduced in Senate (IS)]
107th CONGRESS
1st Session
S. 742
To provide for pension reform, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 6, 2001
Mr. Grassley (for himself, Mr. Baucus, Mr. Graham, Mr. Hatch, Mr.
Breaux, Mr. Murkowski, Mr. Kerry, Mr. Jeffords, Mr. Torricelli, Mr.
Kyl, Mrs. Lincoln, Mr. Hutchinson, Mr. Johnson, Mr. Hagel, Mr. Durbin,
Mr. Gregg, Mr. Schumer, Mrs. Hutchison, Mr. Bayh, Mr. Chafee, and Mr.
Reid) introduced the following bill; which was read twice and referred
to the Committee on Finance
_______________________________________________________________________
A BILL
To provide for pension reform, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Retirement
Security and Savings 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 ACCOUNTS
Sec. 101. Modification of IRA contribution limits.
Sec. 102. Deemed IRAs under employer plans.
Sec. 103. Tax-free distributions from individual retirement accounts
for charitable purposes.
Sec. 104. Modification of AGI limits for Roth IRAs.
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. Deduction limits.
Sec. 207. Option to treat elective deferrals as after-tax Roth
contributions.
Sec. 208. Nonrefundable credit to certain individuals for elective
deferrals and IRA contributions.
Sec. 209. Credit for qualified pension plan contributions of small
employers.
Sec. 210. Credit for pension plan startup costs of small employers.
Sec. 211. Elimination of user fee for requests to IRS regarding new
pension plans.
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. 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
Subtitle A--General Provisions
Sec. 501. Repeal of 155 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. Treatment of multiemployer plans under section 415.
Sec. 505. Protection of investment of employee contributions to 401(k)
plans.
Sec. 506. Periodic pension benefits statements.
Sec. 507. Prohibited allocations of stock in S Corporation ESOP.
Sec. 508. Automatic rollovers of certain mandatory distributions.
Subtitle B--Treatment of Plan Amendments Reducing Future Benefit
Accruals
Sec. 521. Notice required for pension plan amendments having the effect
of significantly reducing future benefit
accruals.
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.
Sec. 614. Studies.
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.
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 such taxable year shall be an
amount equal to 150 percent of such amount determined without regard to
this subparagraph.
``(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) Increase in AGI Limits for Active Participants.--
(1) Joint returns.--The table in clause (i) of section
219(g)(3)(B) (relating to applicable dollar amount) is amended
to read as follows:
``For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2002................................... $56,000
2003................................... $60,000
2004................................... $64,000
2005................................... $68,000
2006................................... $72,000
2007................................... $76,000
2008 or thereafter..................... $80,000.''.
(2) Other taxpayers.--Section 219(g)(3)(B) (relating to
applicable dollar amount) is amended by striking clauses (ii)
and (iii) and inserting the following:
``(ii) In the case of any other taxpayer:
``For taxable years
The applicable
beginning in
dollar amount:
calendar year:
2002................................... $36,000
2003................................... $40,000
2004................................... $44,000
2005................................... $48,000
2006 or thereafter..................... $50,000.''.
(c) 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)''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.
SEC. 102. DEEMED IRAS UNDER EMPLOYER PLANS.
(a) In General.--Section 408 (relating to individual retirement
accounts) is amended by redesignating subsection (q) as subsection (r)
and by inserting after subsection (p) the following new subsection:
``(q) Deemed IRAs Under Qualified Employer Plans.--
``(1) General rule.--If--
``(A) a qualified employer plan elects to allow
employees to make voluntary employee contributions to a
separate account or annuity established under the plan,
and
``(B) under the terms of the qualified employer
plan, such account or annuity meets the applicable
requirements of this section or section 408A for an
individual retirement account or annuity,
then such account or annuity shall be treated for purposes of
this title in the same manner as an individual retirement plan
and not as a qualified employer plan (and contributions to such
account or annuity as contributions to an individual retirement
plan and not to the qualified employer plan). For purposes of
subparagraph (B), the requirements of subsection (a)(5) shall
not apply.
``(2) Special rules for qualified employer plans.--For
purposes of this title, a qualified employer plan shall not
fail to meet any requirement of this title solely by reason of
establishing and maintaining a program described in paragraph
(1).
``(3) Definitions.--For purposes of this subsection--
``(A) Qualified employer plan.--The term `qualified
employer plan' has the meaning given such term by
section 72(p)(4); except such term shall only include
an eligible deferred compensation plan (as defined in
section 457(b)) which is maintained by an eligible
employer described in section 457(e)(1)(A).
``(B) Voluntary employee contribution.--The term
`voluntary employee contribution' means any
contribution (other than a mandatory contribution
within the meaning of section 411(c)(2)(C))--
``(i) which is made by an individual as an
employee under a qualified employer plan which
allows employees to elect to make contributions
described in paragraph (1), and
``(ii) with respect to which the individual
has designated the contribution as a
contribution to which this subsection
applies.''.
(b) Amendment of ERISA.--
(1) In general.--Section 4 of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1003) is amended by
adding at the end the following new subsection:
``(c) If a pension plan allows an employee to elect to make
voluntary employee contributions to accounts and annuities as provided
in section 408(q) of the Internal Revenue Code of 1986, such accounts
and annuities (and contributions thereto) shall not be treated as part
of such plan (or as a separate pension plan) for purposes of any
provision of this title other than section 403(c), 404, or 405
(relating to exclusive benefit, and fiduciary and co-fiduciary
responsibilities).''.
(2) Conforming amendment.--Section 4(a) of such Act (29
U.S.C. 1003(a)) is amended by inserting ``or (c)'' after
``subsection (b)''.
(c) Effective Date.--The amendments made by this section shall
apply to plan years beginning after December 31, 2002.
SEC. 103. TAX-FREE DISTRIBUTIONS FROM INDIVIDUAL RETIREMENT ACCOUNTS
FOR CHARITABLE PURPOSES.
(a) In General.--Subsection (d) of section 408 (relating to
individual retirement accounts) is amended by adding at the end the
following new paragraph:
``(8) Distributions for charitable purposes.--
``(A) In general.--In the case of a qualified
charitable distribution from an individual retirement
account to an organization described in section 170(c),
no amount shall be includible in the gross income of
the account holder or beneficiary.
``(B) Special rules relating to charitable
remainder trusts, pooled income funds, and charitable
gift annuities.--
``(i) In general.--In the case of a
qualified charitable distribution from an
individual retirement account--
``(I) to a charitable remainder
annuity trust or a charitable remainder
unitrust (as such terms are defined in
section 664(d)),
``(II) to a pooled income fund (as
defined in section 642(c)(5)), or
``(III) for the issuance of a
charitable gift annuity (as defined in
section 501(m)(5)),
no amount shall be includible in gross income
of the account holder or beneficiary. The
preceding sentence shall apply only if no
person holds any interest in the amounts in the
trust, fund, or annuity attributable to such
distribution other than one or more of the
following: the individual for whose benefit
such account is maintained, the spouse of such
individual, or any organization described in
section 170(c).
``(ii) Determination of inclusion of
amounts distributed.--In determining the amount
includible in the gross income of the
distributee of a distribution from a trust
described in clause (i)(I) or an annuity
described in clause (i)(III), the portion of
any qualified charitable distribution to such
trust or for such annuity which would (but for
this subparagraph) have been includible in
gross income--
``(I) in the case of any such
trust, shall be treated as income
described in section 664(b)(1), or
``(II) in the case of any such
annuity, shall not be treated as an
investment in the contract.
``(iii) No inclusion for distribution to
pooled income fund.--No amount shall be
includible in the gross income of a pooled
income fund (as so defined) by reason of a
qualified charitable distribution to such fund.
``(C) Qualified charitable distribution.--For
purposes of this paragraph, the term `qualified
charitable distribution' means any distribution from an
individual retirement account--
``(i) which is made on or after the date
that the individual for whose benefit the
account is maintained has attained age 70\1/2\,
and
``(ii) which is a charitable contribution
(as defined in section 170(c)) made directly
from the account to--
``(I) an organization described in
section 170(c), or
``(II) a trust, fund, or annuity
described in subparagraph (B).
``(D) Denial of deduction.--The amount allowable as
a deduction to the taxpayer for the taxable year under
section 170 (before the application of section 170(b))
for qualified charitable distributions shall be reduced
(but not below zero) by the sum of the amounts of the
qualified charitable distributions during such year
which (but for this paragraph) would have been
includible in the gross income of the taxpayer for such
year.''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to taxable years beginning after December 31, 2001.
SEC. 104. MODIFICATION OF AGI LIMITS FOR ROTH IRAS.
(a) Increase in AGI Limit for Roth IRA Contributions.--
(1) In general.--Section 408A(c)(3)(C)(ii) (relating to
limits based on modified adjusted gross income) is amended to
read as follows:
``(ii) the applicable dollar amount is--
``(I) in the case of a taxpayer
filing a joint return, $190,000, and
``(II) in the case of any other
taxpayer, $95,000.''.
(2) Phaseout amount.--Clause (ii) of section 408A(c)(3)(A)
is amended to read as follows:
``(ii) $15,000 ($30,000 in the case of a
joint return).''
(b) Increase in AGI Limit for Roth IRA Conversions.--Section
408A(c)(3)(B) (relating to rollover from IRA) is amended by striking
``relates'' and all that follows and inserting ``relates, the
taxpayer's adjusted gross income exceeds $100,000 ($200,000 in the case
of a joint return).''.
(c) Conforming Amendment.--Section 408A(c)(3) is amended by
striking subparagraph (D).
(d) 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.--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.''.
(C) Section 415(b)(10)(C)(i) is amended by striking
``applied without regard to paragraph (2)(F)''.
(b) Qualified Trusts.--
(1) Compensation limit.--Sections 401(a)(17), 404(l),
408(k), and 505(b)(7) are each amended by striking ``$150,000''
each place it appears and inserting ``$200,000''.
(2) Base period and rounding of cost-of-living
adjustment.--Subparagraph (B) of section 401(a)(17) is
amended--
(A) by striking ``October 1, 1993'' and inserting
``July 1, 2001''; and
(B) by striking ``$10,000'' both places it appears
and inserting ``$5,000''.
(c) 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)''.
(d) 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.''.
(e) 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).
(f) 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) $30,000 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.''.
(g) 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) In General.--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 amendment 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 the amount in
effect under section 414(q)(1)(B)(i) for such
plan year,'';
(C) by striking clause (ii) and redesignating
clauses (iii) and (iv) as clauses (ii) and (iii),
respectively;
(D) by striking the second sentence in the matter
following clause (iii), as redesignated by subparagraph
(C); and
(E) by adding at the end the following: ``For
purposes of this subparagraph, in the case of an
employee who is not employed during the preceding plan
year or is employed for a portion of such year, such
employee shall be treated as a key employee if it can
be reasonably anticipated that such employee will be
described in 1 of the preceding clauses for the current
plan year.''.
(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) 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.''.
(e) 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. DEDUCTION LIMITS.
(a) Modification of Limits.--
(1) Stock bonus and profit sharing trusts.--
(A) 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 ``25 percent''.
(B) Conforming amendment.--Subparagraph (C) of
section 404(h)(1) is amended by striking ``15 percent''
each place it appears and inserting ``25 percent''.
(2) Defined contribution plans.--
(A) In general.--Clause (v) of section 404(a)(3)(A)
(relating to stock bonus and profit sharing trusts) is
amended to read as follows:
``(v) Defined contribution plans subject to
the funding standards.--Except as provided by
the Secretary, a defined contribution plan
which is subject to the funding standards of
section 412 shall be treated in the same manner
as a stock bonus or profit-sharing plan for
purposes of this subparagraph.''
(B) Conforming amendments.--
(i) Section 404(a)(1)(A) is amended by
inserting ``(other than a trust to which
paragraph (3) applies)'' after ``pension
trust''.
(ii) Section 404(h)(2) is amended by
striking ``stock bonus or profit-sharing
trust'' and inserting ``trust subject to
subsection (a)(3)(A)''.
(iii) The heading of section 404(h)(2) is
amended by striking ``stock bonus and profit-
sharing trust'' and inserting ``certain
trusts''.
(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'
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 thereof.
(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. 207. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX ROTH
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 ROTH
CONTRIBUTIONS.
``(a) General Rule.--If an applicable retirement plan includes a
qualified Roth contribution program--
``(1) any designated Roth 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 Roth Contribution Program.--For purposes of this
section--
``(1) In general.--The term `qualified Roth contribution
program' means a program under which an employee may elect to
make designated Roth 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 Roth contribution program unless the
applicable retirement plan--
``(A) establishes separate accounts (`designated
Roth accounts') for the designated Roth 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 Roth
Contributions.--For purposes of this section--
``(1) Designated roth contribution.--The term `designated
Roth 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 Roth account
which is otherwise allowable under this chapter may be
made only if the contribution is to--
``(i) another designated Roth 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 Roth 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 Roth 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 Roth 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 Roth contribution
to any designated Roth account established for
such individual under the same applicable
retirement plan, or
``(ii) if a rollover contribution was made
to such designated Roth account from a
designated Roth account previously established
for such individual under another applicable
retirement plan, the first taxable year for
which the individual made a designated Roth
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 any 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 Roth
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 Roth 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(c)(1)) the following new sentence: ``The preceding
sentence shall not apply the portion of such excess as does not
exceed the designated Roth 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 Roth account (as defined in section 402A),
an eligible retirement plan with respect to such
portion shall include only another designated Roth
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 Roth
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 roth 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
Roth contributions (as defined in section 402A) 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 Roth
contributions.''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.
SEC. 208. NONREFUNDABLE CREDIT TO CERTAIN INDIVIDUALS FOR ELECTIVE
DEFERRALS AND IRA CONTRIBUTIONS.
(a) In General.--Subpart A of part IV of subchapter A of chapter 1
(relating to nonrefundable personal credits) is amended by inserting
after section 25A the following new section:
``SEC. 25B. 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 All other cases Applicable
--------------------- household -------------------- percentage
--------------------
Over Not over Over Not over Over Not over
------------------------------------------------------------------------
$0 $30,000 $0 $22,500 $0 $15,000 50
30,000 32,500 22,500 24,375 15,000 16,250 20
32,500 50,000 24,375 37,500 16,250 25,000 10
50,000 ......... 37,500 ........ 25,000 ........ 0
------------------------------------------------------------------------
``(c) Eligible Individual.--For purposes of this section--
``(1) In general.--The term `eligible individual' means any
individual if such individual has attained the age of 18 as of
the close of the taxable year.
``(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 allowed 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)).
``(d) Qualified Retirement Savings Contributions.--For purposes of
this section--
``(1) In general.--The term `qualified retirement savings
contributions' means, with respect to any taxable year, the sum
of--
``(A) the amount of the qualified retirement
contributions (as defined in section 219(e)) made by
the eligible individual,
``(B) the amount of--
``(i) any elective deferrals (as defined in
section 402(g)(3)) of such individual, and
``(ii) 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
``(C) the amount of voluntary employee
contributions by such individual to any qualified
retirement plan (as defined in section 4974(c)).
``(2) Reduction for certain distributions.--
``(A) In general.--The qualified retirement savings
contributions determined under paragraph (1) shall be
reduced (but not below zero) by the sum of--
``(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)), received by the individual during the
testing period which is includible in gross
income, and
``(ii) any distribution from a Roth IRA
received by the individual during the testing
period 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 2 preceding taxable years, and
``(iii) the period after such taxable year
and before the due date (including 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), and
``(ii) any distribution to which section
408A(d)(3) applies.
``(D) Treatment of distributions received by spouse
of individual.--For purposes of determining
distributions received by an individual under
subparagraph (A) 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.
``(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.''
(b) Credit Allowed Against Regular Tax and Alternative Minimum
Tax.--
(1) In general.--Subsection (a) of section 26 is amended by
inserting ``(other than the credit allowed by section 25B)''
after ``credits allowed by this subpart''.
(2) Conforming amendment.--Section 25B, as added by
subsection (a), is amended by inserting after subsection (f)
the following new subsection:
``(g) Limitation Based on Amount of Tax.--The aggregate credit
allowed by this section for the taxable year shall not exceed the sum
of--
``(1) the taxpayer's regular tax liability for the taxable
year reduced by the sum of the credits allowed by sections 21,
22, 23, 24, 25, and 25A, plus
``(2) the tax imposed by section 55 for such taxable
year.''
(c) Annual Report.--The Comptroller General of the United States
shall submit a report annually to the Committee on Ways and Means of
the House of Representatives and the Committee on Finance of the Senate
regarding the number of taxpayers receiving the credit allowed under
section 25B of the Internal Revenue Code of 1986, as added by
subsection (a).
(d) Conforming Amendment.--The table of sections for subpart A of
part IV of subchapter A of chapter 1 is amended by inserting after the
item relating to section 25A the following new item:
``Sec. 25B. Elective deferrals and IRA
contributions by certain
individuals.''
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001, and before
January 1, 2007.
SEC. 209. CREDIT FOR QUALIFIED PENSION PLAN CONTRIBUTIONS OF SMALL
EMPLOYERS.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business related credits) is amended by adding at the end
the following new section:
``SEC. 45E. 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 employee who is not a highly 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 first taxable year for which a credit is
allowable with respect to a plan under this section.
``(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 employee who is
not a highly 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 employee who is not a highly compensated employee to the
extent that the accrued benefit of such employee derived from
employer contributions for the year does 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 distribution 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 equivalent thereof in
the case of a defined benefit plan) for each
employee who is not a highly compensated
employee who is eligible to participate in the
plan, and
``(ii) 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.--In the case of a profit-
sharing or stock bonus plan, the requirements of this paragraph
are met if, under the plan, qualified employer contributions
are distributable only as provided in section 401(k)(2)(B).
``(e) Other Definitions.--For purposes of this section--
``(1) Eligible employer.--
``(A) In general.--The term `eligible employer'
means, with respect to any year, an employer which has
no more than 50 employees who received at least $5,000
of compensation from the employer for the preceding
year.
``(B) Requirement for new qualified employer
plans.--Such term shall not include an employer if,
during the 3-taxable year period immediately preceding
the 1st taxable year for which the credit under this
section is otherwise allowable for a qualified employer
plan of the employer, the employer or any member of any
controlled group including the employer (or any
predecessor of either) established or maintained a
qualified employer plan with respect to which
contributions were made, or benefits were accrued, for
substantially the same employees as are in the
qualified employer plan.
``(2) Highly compensated employee.--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.
``(3) 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.
``(g) Recapture of Credit on Forfeited Contributions.--
``(1) In general.--Except as provided in paragraph (2), 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.
``(2) Reallocated contributions.--Paragraph (1) shall not
apply to any contribution which is reallocated by the employer
under the plan to employees who are not highly compensated
employees.''.
(b) Credit Allowed as Part of General Business Credit.--Section
38(b) (defining current year business credit) is amended by striking
``plus'' at the end of paragraph (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(e)), the small employer pension plan contribution
credit determined under section 45E(a).''
(c) Conforming Amendments.--
(1) Section 39(d) is amended by adding at the end the
following new paragraph:
``(10) 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 45E may be carried back to a
taxable year beginning before January 1, 2002.''
(2) Subsection (c) of section 196 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 contribution credit
determined under section 45E(a).''
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by adding at the end the
following new item:
``Sec. 45E. 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.
SEC. 210. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL EMPLOYERS.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
(relating to business related credits), as amended by section 209, is
amended by adding at the end the following new section:
``SEC. 45F. 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) $500 for the first credit year and each of the 2
taxable years immediately following the first credit year, and
``(2) 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) Requirement for new qualified employer plans.--Such
term shall not include an employer if, during the 3-taxable
year period immediately preceding the 1st taxable year for
which the credit under this section is otherwise allowable for
a qualified employer plan of the employer, the employer or any
member of any controlled group including the employer (or any
predecessor of either) established or maintained a qualified
employer plan with respect to which contributions were made, or
benefits were accrued, for substantially the same employees as
are in the qualified employer plan.
``(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 1 participant.--Such
term shall not include any expense in connection with a
plan that does not have at least 1 employee eligible to
participate who is not a highly compensated employee.
``(2) Eligible employer plan.--The term `eligible employer
plan' means a qualified employer plan within the meaning of
section 4972(d).
``(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) (defining current year business credit), as amended by section
209, 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 45E(c)), the small employer pension plan startup cost
credit determined under section 45F(a).''
(c) Conforming Amendments.--
(1) Section 39(d), as amended by section 209(c), is amended
by adding at the end the following new paragraph:
``(11) 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 45F may be carried back to a taxable year
beginning before January 1, 2002.''
(2) Subsection (c) of section 196, as amended by section
209(c), 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 startup cost credit
determined under section 45F(a).''
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1, as amended by section 209(c), is
amended by adding at the end the following new item:
``Sec. 45F. 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, with respect to qualified employer plans established
after such date.
SEC. 211. ELIMINATION OF USER FEE FOR REQUESTS TO IRS REGARDING NEW
PENSION PLANS.
(a) Elimination of Certain User Fees.--The Secretary of the
Treasury or the Secretary's delegate shall not require payment of user
fees under the program established under section 10511 of the Revenue
Act of 1987 for requests to the Internal Revenue Service for ruling
letters, opinion letters, and determination letters or similar requests
with respect to the qualified status of a new pension benefit plan or
any trust which is part of the plan.
(b) New Pension Benefit Plan.--For purposes of this section--
(1) In general.--The term ``new pension benefit plan''
means a pension, profit-sharing, stock bonus, annuity, or
employee stock ownership plan which is maintained by one or
more eligible employers if such employer (or any predecessor
employer) has not made a prior request described in subsection
(a) for such plan (or any predecessor plan).
(2) Eligible employer.--The term ``eligible employer''
shall not include an employer if, during the 3-taxable year
period immediately preceding the taxable year in which the
request is made, the employer or any member of any controlled
group including the employer (or any predecessor of either)
established or maintained a qualified employer plan with
respect to which contributions were made, or benefits were
accrued for service, for substantially the same employees as
are in the qualified employer plan.
(c) Effective Date.--The provisions of this section shall apply
with respect to requests made 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) In general.--A plan shall not permit
additional elective deferrals under paragraph (1) for
any year in an amount greater than the lesser of--
``(i) the applicable percentage of the
applicable dollar amount for such elective
deferrals for such year, or
``(ii) the excess (if any) of--
``(I) the participant's
compensation (as defined in section
415(c)(3)) for the year, over
``(II) any other elective deferrals
of the participant for such year which
are made without regard to this
subsection.
``(B) Applicable percentage.--For purposes of this
paragraph, the applicable percentage shall be
determined in accordance with the following table:
``For taxable years The applicable
beginning in: percentage is:
2002.......................................... 10 percent
2003.......................................... 20 percent
2004.......................................... 30 percent
2005.......................................... 40 percent
2006 and thereafter........................... 50 percent.
``(3) Treatment of contributions.--In the case of any
contribution to a plan under paragraph (1)--
``(A) such contribution shall not, with respect to
the year in which the contribution is made--
``(i) be subject to any otherwise
applicable limitation contained in section
402(g), 402(h), 403(b), 404(a), 404(h), 408(k),
408(p), 415, or 457, or
``(ii) be taken into account in applying
such limitations to other contributions or
benefits under such plan or any other such
plan, and
``(B) such plan shall not be treated as failing to
meet the requirements of section 401(a)(4), 401(a)(26),
401(k)(3), 401(k)(11), 401(k)(12), 401(m), 403(b)(12),
408(k), 408(p), 408B, 410(b), or 416 by reason of the
making of (or the right to make) such contribution.
``(4) 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 or
restriction contained in the terms of the plan.
``(5) Other definitions and rules.--For purposes of this
subsection--
``(A) Applicable dollar amount.--The term
`applicable dollar amount' means, with respect to any
year, the amount in effect under section 402(g)(1)(B),
408(p)(2)(E)(i), or 457(e)(15)(A), whichever is
applicable to an applicable employer plan, for such
year.
``(B) 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
described in section 457(e)(1)(A), and
``(iv) an arrangement meeting the
requirements of section 408 (k) or (p).
``(C) Elective deferral.--The term `elective
deferral' has the meaning given such term by subsection
(u)(2)(C).
``(D) Exception for section 457 plans.--This
subsection shall not apply to an applicable employer
plan described in subparagraph (B)(iii) for any year to
which section 457(b)(3) applies.''.
(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 Retirement Security and Savings Act of
2001)''.
(B) Section 404(a)(10)(B) is amended by striking
``, the exclusion allowance under section 403(b)(2),''.
(C) 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)''.
(D) 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).''.
(E) Section 415(c) is amended by striking paragraph
(4).
(F) 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).''.
(G) Subparagraph (B) of section 402(g)(7) (as
redesignated by section 201(c)(3)) is amended by
inserting before the period at the end the following:
``(as in effect before the enactment of the Retirement
Security and Savings Act of 2001)''.
(H) 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.''.
(3) 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, 2000.
(B) Exclusion allowance.--Effective for limitation
years beginning in 2001, 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, 2000, 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) In General.--Section 411(a) (relating to minimum vesting
standards) is amended--
(1) in paragraph (2), by striking ``A plan'' and inserting
``Except as provided in paragraph (12), a plan''; and
(2) by adding at the end the following:
``(12) Faster vesting for matching contributions.--In the
case of matching contributions (as defined in section
401(m)(4)(A)), paragraph (2) shall be applied--
``(A) by substituting `3 years' for `5 years' in
subparagraph (A), and
``(B) by substituting the following table for the
table contained in subparagraph (B):
The nonforfeitable
``Years of service:
percentage is:
2...................................... 20
3...................................... 40
4...................................... 60
5...................................... 80
6...................................... 100.''.
(b) 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. MINIMUM DISTRIBUTION RULES.
(a) 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.
(b) 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.--
(1) In general.--The amendment made by subsection (c) shall
apply to transfers, distributions, and payments made after
December 31, 2001.
(2) Amendments relating to assignments in divorce, etc.,
proceedings.--The amendments made by subsections (a) and (b)
shall take effect on January 1, 2002, except that in the case
of a domestic relations order entered before such date, the
plan administrator--
(A) shall treat such order as a qualified domestic
relations order if such administrator is paying
benefits pursuant to such order on such date, and
(B) may treat any other such order entered before
such date as a qualified domestic relations order even
if such order does not meet the requirements of such
amendments.
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.--
Section 402(c)(4)(C) (relating to eligible rollover
distribution) is amended by striking ``described in section
401(k)(2)(B)(i)(IV)'' and inserting ``under the terms of the
plan''.
(2) Effective date.--The amendment made by this subsection
shall apply to distributions made after December 31, 2002,
unless a plan administrator elects to apply such amendment 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 ``or'' at the end of subparagraph (A), by striking the period
and inserting ``, or'' 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), as
amended by subsection (a), 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) 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) which is maintained by an
eligible 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:
``(11) 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 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) 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 made 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) Special rule for mergers, etc.--
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.''.
(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.''.
(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.--The last sentence
of paragraph (6)(B) of section 411(d) (relating to accrued
benefit not to be decreased by amendment) is amended to read as
follows: ``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, unless such amendment adversely affects the
rights of any participant in a more than de minimis manner.''.
(2) Amendment of erisa.--The last sentence of section
204(g)(2) of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1054(g)(2)) is amended to read as follows:
``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, unless such amendment adversely affects the
rights of any participant in a more than de minimis manner.''.
(3) Secretary directed.--Not later than December 31, 2002,
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, 2002, 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, as amended by
section 401, 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) Modification of Transition Rules for Existing 457 Plans.--
(1) In general.--Section 1107(c)(3)(B) of the Tax Reform
Act of 1986 is amended by striking ``or'' at the end of clause
(i), by striking the period at the end of clause (ii) and
inserting ``, or'' and by inserting after clause (ii) the
following new clause:
``(iii) are deferred pursuant to an
agreement with an individual covered by an
agreement described in clause (ii), to the
extent the annual amount under such agreement
with the individual does not exceed--
``(I) the amount described in
clause (ii)(II), multiplied by
``(II) the cumulative increase in
the Consumer Price Index (as published
by the Bureau of Labor Statistics of
the Department of Labor).''.
(2) Conforming amendment.--The fourth sentence of section
1107(c)(3)(B) of the Tax Reform Act of 1986 is amended by
striking ``This subparagraph'' and inserting ``Clauses (i) and
(ii) of this subparagraph''.
(3) Effective date.--The amendments made by this subsection
shall apply to taxable years ending after the date of the
enactment of this Act with respect to increases in the Consumer
Price Index after September 30, 1993.
(d) Effective Date.--The amendments made by subsections (a) and (b)
shall apply to distributions after December 31, 2001.
TITLE V--STRENGTHENING PENSION SECURITY AND ENFORCEMENT
Subtitle A--General Provisions
SEC. 501. REPEAL OF 155 PERCENT OF CURRENT LIABILITY FUNDING LIMIT.
(a) Amendments to 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, 2005, 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................................... 160
2003................................... 165
2004................................... 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, 2005, 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................................... 160
2003................................... 165
2004................................... 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) 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. 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
with any other plan maintained by an employer for purposes of
applying subsection (b)(1)(B) to such plan or any other such
plan.''.
(2) Conforming amendment for aggregation of plans.--
Subsection (g) of section 415 (relating to aggregation of
plans) is amended by striking ``The Secretary'' and inserting
``Except as provided in subsection (f)(3), the Secretary''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2001.
SEC. 505. 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. 506. 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, 2001.
SEC. 507. 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), an 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, 2002.
(2) Exception for certain plans.--In the case of any--
(A) employee stock ownership plan established after
July 11, 2000, 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 July 11, 2000.
SEC. 508. AUTOMATIC ROLLOVERS OF CERTAIN MANDATORY DISTRIBUTIONS.
(a) Direct Transfers of Mandatory Distributions.--
(1) In general.--Section 401(a)(31) (relating to optional
direct transfer of eligible rollover distributions), as amended
by section 403, is amended by redesignating subparagraphs (B),
(C), and (D) as subparagraphs (C), (D), and (E), respectively,
and by inserting after subparagraph (A) the following new
subparagraph:
``(B) Certain mandatory distributions.--
``(i) In general.--In case of a trust which
is part of an eligible plan, such trust shall
not constitute a qualified trust under this
section unless the plan of which such trust is
a part provides that if--
``(I) a distribution described in
clause (ii) in excess of $1,000 is
made, and
``(II) the distributee does not
make an election under subparagraph (A)
and does not elect to receive the
distribution directly,
the plan administrator shall make such transfer
to an individual retirement account or annuity
of a designated trustee or issuer and shall
notify the distributee in writing (either
separately or as part of the notice under
section 402(f)) that the distribution may be
transferred without cost or penalty to another
individual account or annuity.
``(ii) Eligible plan.--For purposes of
clause (i), the term `eligible plan' means a
plan which provides that any nonforfeitable
accrued benefit for which the present value (as
determined under section 411(a)(11)) does not
exceed $5,000 shall be immediately distributed
to the participant.''.
(2) Conforming amendments.--
(A) The heading of section 401(a)(31) is amended by
striking ``Optional direct'' and inserting ``Direct''.
(B) Section 401(a)(31)(C), as redesignated by
paragraph (1), is amended by striking ``Subparagraph
(A)'' and inserting ``Subparagraphs (A) and (B)''.
(b) Notice Requirement.--Section 402(f)(1) (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 by
adding at the end the following new subparagraph:
``(E) if applicable, of the provision requiring a
direct trustee-to-trustee transfer of a distribution
under section 401(a)(31)(B) unless the recipient elects
otherwise.''.
(c) Fiduciary Rules.--Section 404(c) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1104(c)) is amended by adding at
the end the following new paragraph:
``(3) In the case of a pension plan which makes a transfer
to an individual retirement account or annuity of a designated
trustee or issuer under section 401(a)(31)(B) of the Internal
Revenue Code of 1986, the participant or beneficiary shall, for
purposes of paragraph (1), be treated as exercising control
over the assets in the account or annuity upon the earlier of--
``(A) a rollover of all or a portion of the amount
to another individual retirement account or annuity; or
``(B) one year after the transfer is made.''.
(d) Effective Date.--The amendments made by this section shall
apply to distributions made after December 31, 2001.
Subtitle B--Treatment of Plan Amendments Reducing Future Benefit
Accruals
SEC. 521. NOTICE REQUIRED FOR PENSION PLAN AMENDMENTS HAVING THE EFFECT
OF SIGNIFICANTLY REDUCING FUTURE BENEFIT ACCRUALS.
(a) Excise Tax.--
(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 TO PROVIDE NOTICE OF PENSION PLAN AMENDMENTS
REDUCING BENEFIT ACCRUALS.
``(a) Imposition of Tax.--There is hereby imposed a tax on the
failure of an 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 Plan Amendments Significantly
Reducing Benefit Accruals.--
``(1) In general.--If the sponsor of an applicable pension
plan adopts an amendment which has the effect of significantly
reducing the rate of future benefit accrual of 1 or more
participants, the plan administrator shall, not later than the
45th day before the effective date of the amendment, provide
written notice to each applicable individual (and to each
employee organization representing applicable individuals)
which--
``(A) sets forth a summary of the plan amendment
and the effective date of the amendment,
``(B) includes a statement that the plan amendment
is expected to significantly reduce the rate of future
benefit accrual,
``(C) includes a description of the classes of
employees reasonably expected to be affected by the
reduction in the rate of future benefit accrual,
``(D) sets forth examples illustrating how the plan
will change benefits for such classes of employees,
``(E) if paragraph (2) applies to the plan
amendment, includes a notice that the plan
administrator will provide a benefit estimation tool
kit described in paragraph (2)(B) to each applicable
individual no later than the date required under
paragraph (2)(A), and
``(F) includes a notice of each applicable
individual's right under Federal law to receive, and of
the procedures for requesting, an annual benefit
statement.
``(2) Requirement to provide benefit estimation tool kit.--
``(A) In general.--If a plan amendment results in
the significant restructuring of the plan benefit
formula (as determined under regulations prescribed by
the Secretary), the plan administrator shall, not later
than the 15th day before the effective date of the
amendment, provide a benefit estimation tool kit
described in subparagraph (B) to each applicable
individual. If such plan amendment occurs within 12
months of an event described in section 410(b)(6)(C),
the plan administrator shall in no event be required to
provide the benefit estimation tool kit to applicable
individuals affected by the event before the date which
is 12 months after the date on which notice under
paragraph (1) is given to such applicable individuals.
``(B) Benefit estimation tool kit.--The benefit
estimation tool kit described in this subparagraph
shall include the following information:
``(i) Sufficient information to enable an
applicable individual to estimate the
individual's projected benefits under the terms
of the plan in effect both before and after the
adoption of the amendment.
``(ii) The formulas and actuarial
assumptions necessary to estimate under both
such plan terms a single life annuity at
appropriate ages, and, when available, a lump
sum distribution.
``(iii) The interest rate used to compute a
lump sum distribution and information as to
whether the value of any early retirement
benefit or retirement-type subsidy (within the
meaning of section 411(d)(6)(B)(i)) is included
in the lump sum distribution.
``(3) Notice to designee.--Any notice under paragraph (1)
or (2) may be provided to a person designated, in writing, by
the person to which it would otherwise be provided.
``(4) Form of explanation.--The information required to be
provided under this subsection shall be provided in a manner
calculated to be reasonably understood by the average plan
participant.
``(f) Definitions and Special Rules.--For purposes of this
section--
``(1) Applicable individual.--
``(A) In general.--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 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.
``(B) Exception for participants with less than 1
year of participation.--Such term shall not include a
participant who has less than 1 year of participation
(within the meaning of section 411(b)(4)) under the
plan as of the effective date of the plan amendment.
``(2) Applicable pension plan.--The term `applicable
pension plan' means--
``(A) a 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)), a church plan (within the meaning of
section 414(e)) with respect to which an election under section 410(d)
has not been made, or any other plan to which section 204(h) of the
Employee Retirement Income Security Act of 1974 does not apply.
``(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) Regulations.--The Secretary shall, not later than 1 year
after the date of the enactment of this section, issue--
``(1) the regulations described in subsection (e)(2)(A) and
section 204(h)(2)(A) of the Employee Retirement Income Security
Act of 1974, and
``(2) guidance for both of the examples described in
subsection (e)(1)(D) and section 204(h)(1)(D) of the Employee
Retirement Income Security Act of 1974 and the benefit
estimation tool kit described in subsection (e)(2)(B) and
section 204(h)(2)(B) of the Employee Retirement Income Security
Act of 1974.
``(h) New Technologies.--The Secretary may by regulation allow any
notice under paragraph (1) or (2) of subsection (e) to be provided by
using new technologies. Such regulations shall ensure that at least one
option for providing such notice is not dependent on new
technologies.''
(2) Conforming amendment.--The table of sections for
chapter 43 is amended by adding at the end the following new
item:
``Sec. 4980F. Failure to provide notice
of pension plan amendments
reducing benefit accruals.''
(b) Amendment of ERISA.--Section 204(h) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1054(h)) is amended to read as
follows:
``(h)(1) If an applicable pension plan is amended so as to provide
a significant reduction in the rate of future benefit accrual of 1 or
more participants, the plan administrator shall, not later than the
45th day before the effective date of the amendment, provide written
notice to each applicable individual (and to each employee organization
representing applicable individuals) which--
``(A) sets forth a summary of the plan amendment and the
effective date of the amendment,
``(B) includes a statement that the plan amendment is
expected to significantly reduce the rate of future benefit
accrual,
``(C) includes a description of the classes of employees
reasonably expected to be affected by the reduction in the rate
of future benefit accrual,
``(D) sets forth examples illustrating how the plan will
change benefits for such classes of employees,
``(E) if paragraph (2) applies to the plan amendment,
includes a notice that the plan administrator will provide a
benefit estimation tool kit described in paragraph (2)(B) to
each applicable individual no later than the date required
under paragraph (2)(A), and
``(F) includes a notice of each applicable individual's
right under Federal law to receive, and of the procedures for
requesting, an annual benefit statement.
``(2)(A) If a plan amendment results in the significant
restructuring of the plan benefit formula (as determined under
regulations prescribed by the Secretary of the Treasury), the plan
administrator shall, not later than the 15th day before the effective
date of the amendment, provide a benefit estimation tool kit described
in subparagraph (B) to each applicable individual. If such plan
amendment occurs within 12 months of an event described in section
410(b)(6)(C) of the Internal Revenue Code of 1986, the plan
administrator shall in no event be required to provide the benefit
estimation tool kit to applicable individuals affected by the event
before the date which is 12 months after the date on which notice under
paragraph (1) is given to such applicable individuals.
``(B) The benefit estimation tool kit described in this
subparagraph shall include the following information:
``(i) Sufficient information to enable an applicable
individual to estimate the individual's projected benefits
under the terms of the plan in effect both before and after the
adoption of the amendment.
``(ii) The formulas and actuarial assumptions necessary to
estimate under both such plan terms a single life annuity at
appropriate ages, and, when available, a lump sum distribution.
``(iii) The interest rate used to compute a lump sum
distribution and information as to whether the value of any
early retirement benefit or retirement-type subsidy (within the
meaning of subsection (g)(2)(A)) is included in the lump sum
distribution.
``(3) Any notice under paragraph (1) or (2) may be provided to a
person designated, in writing, by the person to which it would
otherwise be provided.
``(4) The information required to be provided under this subsection
shall be provided in a manner calculated to be reasonably understood by
the average participant.
``(5)(A) In the case of any failure to exercise due diligence in
meeting any requirement of this subsection with respect to any plan
amendment, the provisions of the applicable pension plan shall be
applied as if such plan amendment entitled all applicable individuals
to the greater of--
``(i) the benefits to which they would have been entitled
without regard to such amendment, or
``(ii) the benefits under the plan with regard to such
amendment.
``(B) For purposes of subparagraph (A), there is a failure to
exercise due diligence in meeting the requirements of this subsection
if such failure is within the control of the plan sponsor and is--
``(i) an intentional failure (including any failure to
promptly provide the required notice or information after the
plan administrator discovers an unintentional failure to meet
the requirements of this subsection),
``(ii) a failure to provide most of the individuals with
most of the information they are entitled to receive under this
subsection, or
``(iii) a failure to exercise due diligence which is
determined under regulations prescribed by the Secretary of the
Treasury.
``(C) For excise tax on failure to meet requirements, see section
4980F of the Internal Revenue Code of 1986.
``(5)(A) For purposes of this subsection, 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)),
whose rate of future benefit accrual under the plan may reasonably be
expected to be significantly reduced by such plan amendment.
``(B) Such term shall not include a participant who has less than 1
year of participation (within the meaning of subsection (b)(4)) under
the plan as of the effective date of the plan amendment.
``(6) For purposes of this subsection, the term `applicable pension
plan' means--
``(A) a defined benefit plan, or
``(B) an individual account plan which is subject to the
funding standards of section 302.
``(7) For purposes of this subsection, a plan amendment which
eliminates or significantly reduces any early retirement benefit or
retirement-type subsidy (within the meaning of section 204(g)(2)(A))
shall be treated as having the effect of significantly reducing the
rate of future benefit accrual.
``(8) The Secretary of the Treasury may by regulation allow any
notice under this subsection to be provided by using new technologies.
Such regulation shall ensure that at least one option for providing
such notice is not dependent on new technologies.''
(c) Regulations Relating to Early Retirement Subsidies.--The
Secretary of the Treasury or the Secretary's delegate shall, not later
than 1 year after the date of the enactment of this Act, issue
regulations relating to early retirement benefits or retirement-type
subsidies described in section 411(d)(6)(B)(i) of the Internal Revenue
Code of 1986 and section 204(g)(2)(A) of the Employee Retirement Income
Security Act of 1974.
(d) 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 section 4980F(e)(2) of the
Internal Revenue Code of 1986 and section 204(h)(2) 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 rules.--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.
(d) Study.--The Secretary of the Treasury shall prepare a report on
the effects of significant restructurings of plan benefit formulas of
traditional defined benefit plans. Such study shall examine the effects
of such restructurings 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
restructuring. As soon as practicable, but not later than one year
after the date of 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.
TITLE VI--REDUCING REGULATORY BURDENS
SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) In General.--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) 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 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) 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, 2001.
(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,
2001.
(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, 2001, 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) 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 paragraphs
(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.
(c) Disclosure of Optional Forms of Benefits.--
(1) Amendment of internal revenue code.--Section 417(a)(3)
(relating to plan to provide written explanation) is amended by
adding at the end the following:
``(C) Explanation of optional forms of benefits.--
``(i) In general.--If--
``(I) a plan provides optional
forms of benefits, and
``(II) the present values of such
forms of benefits are not actuarially
equivalent as of the annuity starting
date,
then each written explanation required to be
provided under subparagraph (A) shall include
the information described in clause (ii).
``(ii) Information.--A plan to which this
subparagraph applies shall include sufficient
information (as determined in accordance with
regulations prescribed by the Secretary) to
allow the participant to understand the
differences in the present values of the
optional forms of benefits provided by the plan
and the effect the participant's election as to
the form of benefit will have on the value of
the benefits available under the plan. Any such
information shall be provided in a manner
calculated to be reasonably understood by the
average plan participant.''
(2) Amendment of erisa.--Section 205(c)(3) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1055(c)(3))
is amended by adding at the end the following:
``(C)(i) If--
``(I) a plan provides optional forms of benefits, and
``(II) the present values of such forms of benefits are not
actuarially equivalent as of the annuity starting date,
then such plan shall include the information described in clause (ii)
with each written explanation required to be provided under
subparagraph (A).
``(ii) A plan to which this subparagraph applies shall include
sufficient information (as determined in accordance with regulations
prescribed by the Secretary of the Treasury) to allow the participant
to understand the differences in the present values of the optional
forms of benefits provided by the plan and the effect the participant's
election as to the form of benefit will have on the value of the
benefits available under the plan. Any such information shall be
provided in a manner calculated to be reasonably understood by the
average plan participant.''
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2001.
SEC. 612. ANNUAL REPORT DISSEMINATION.
(a) In General.--Section 104(b)(3) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1024(b)(3)) is amended by
striking ``shall furnish'' and inserting ``shall make available for
examination (and, upon request, shall furnish)''.
(b) Effective Date.--The amendment made by this section shall apply
to reports for years beginning after December 31, 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''; 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''.
SEC. 614. STUDIES.
(a) Report on Pension Coverage.--Not later than 5 years after the
date of the enactment of this Act, the Secretary of the Treasury shall
submit a report to the Committee on Ways and Means of the House of
Representatives and the Committee on Finance of the Senate a report on
the effect of the provisions of the Retirement Security and Savings Act
of 2001 on pension coverage, including--
(1) any expansion of coverage for low- and middle-income
workers;
(2) levels of pension benefits;
(3) quality of pension coverage;
(4) worker's access to and participation in plans; and
(5) retirement security.
(b) Study of Preretirement Use of Benefits.--
(1) In general.--The Secretary of the Treasury shall
conduct a study of--
(A) current tax provisions allowing individuals to
access individual retirement plans and qualified
retirement plan benefits of such individual prior to
retirement, including an analysis of--
(i) the extent of use of such current
provisions by individuals; and
(ii) the extent to which such provisions
undermine the goal of accumulating adequate
resources for retirement; and
(B) the types of investment decisions made by
individual retirement plan beneficiaries and
participants in self-directed qualified retirement
plans, including an analysis of--
(i) current restrictions on investments;
and
(ii) the extent to which additional
restrictions on investments would facilitate
the accumulation of adequate income for
retirement.
(2) Report.--Not later than January 1, 2003, the Secretary
of the Treasury shall submit a report to the Committee on Ways
and Means of the House of Representatives and the Committee on
Finance of the Senate containing the results of the study
conducted under paragraph (1) and any recommendations.
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 subsection:
``(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 paragraph (2) or
(5) of subsection (a). 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.
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, 2005.
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 ``2007'' for ``2005''.
(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.
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