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106th Congress                                            Rept. 106-331
                        HOUSE OF REPRESENTATIVES
 1st Session                                                     Part 1

======================================================================



 
        COMPREHENSIVE RETIREMENT SECURITY AND PENSION REFORM ACT


                                _______


               September 24, 1999.--Ordered to be printed

                                _______
                                

   Mr. Goodling, from the Committee on Education and the Workforce, 
                        submitted the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 1102]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Education and the Workforce, to whom was 
referred the bill (H.R. 1102) to provide for pension reform, 
and for other purposes, having considered the same, report 
favorably thereon with an amendment and recommend that the bill 
as amended do pass.
    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Comprehensive 
Retirement Security and Pension Reform Act''.
  (b) Amendment of 1986 Code.--Except as otherwise expressly provided, 
whenever in this Act an amendment or repeal is expressed in terms of an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of the 
Internal Revenue Code of 1986.
  (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.

                      TITLE I--EXPANDING COVERAGE

Sec. 101. Restoration of limits formerly in effect.
Sec. 102. Plan loans for subchapter S owners, partners, and sole 
proprietors.
Sec. 103. Salary reduction only simple plans.
Sec. 104. Modification of top-heavy rules.
Sec. 105. Elective deferrals not taken into account for purposes of 
limits.
Sec. 106. Repeal of coordination requirements for deferred compensation 
plans of State and local governments and tax-exempt organizations.
Sec. 107. Elimination of user fee for requests to IRS regarding pension 
plans.
Sec. 108. Alternative method of meeting nondiscrimination requirements 
for automatic contribution trust.
Sec. 109. Deduction limits.
Sec. 110. Option to treat elective deferrals as after-tax 
contributions.
Sec. 111. Credit for pension plan startup costs of small employers.

          TITLE II--ENHANCING FAIRNESS FOR WOMEN AND CHILDREN

Sec. 201. Additional salary reduction catch-up contributions.
Sec. 202. Equitable treatment for contributions of employees to defined 
contribution plans.
Sec. 203. Faster vesting of certain employer matching contributions.
Sec. 204. Deferred annuities for surviving spouses of Federal 
employees.
Sec. 205. Simplify and update the minimum distribution rules.
Sec. 206. Clarification of tax treatment of division of section 457 
plan benefits upon divorce.
Sec. 207. Percentage limitations on contributions.
Sec. 208. Eligible rollover distributions.
Sec. 209. Immediate participation in the Thrift Savings Plan.

           TITLE III--INCREASING PORTABILITY FOR PARTICIPANTS

Sec. 301. Rollovers allowed among various types of plans.
Sec. 302. Rollovers of IRAs into workplace retirement plans.
Sec. 303. Rollovers of after-tax contributions.
Sec. 304. Treatment of forms of distribution.
Sec. 305. Rationalization of restrictions on distributions.
Sec. 306. Purchase of service credit in governmental defined benefit 
plans.
Sec. 307. Employers may disregard rollovers for purposes of cash-out 
amounts.

        TITLE IV--STRENGTHENING PENSION SECURITY AND ENFORCEMENT

Sec. 401. Repeal of 150 percent of current liability funding limit.
Sec. 402. Penalty tax relief for sound pension funding.

                  TITLE V--REDUCING REGULATORY BURDENS

Sec. 501. Intermediate sanctions for inadvertent failures.
Sec. 502. Repeal of the multiple use test.
Sec. 503. Safety valve from mechanical rules.
Sec. 504. Reform of the line of business rules.
Sec. 505. Coverage test flexibility.
Sec. 506. Increase in retirement plan cash-out amount.
Sec. 507. Modification of timing of plan valuations.
Sec. 508. Section 457 inapplicable to certain mirror plans.
Sec. 509. ESOP dividends may be reinvested without loss of dividend 
deduction.
Sec. 510. Modification of 403(b) exclusion allowance to conform to 415 
modification.
Sec. 511. Treatment of multiemployer plans under section 415.
Sec. 512. Elimination of partial termination rules for multiemployer 
plans.
Sec. 513. Notice and consent period regarding distributions.
Sec. 514. Conforming amendments relating to election to receive taxable 
cash compensation in lieu of nontaxable parking benefits.
Sec. 515. Extension to international organizations of moratorium on 
application of certain nondiscrimination rules applicable to State and 
local plans.
Sec. 516. Employees of tax-exempt entities.
Sec. 517. Permissive aggregation of collective bargaining units.
Sec. 518. Repeal of transition rule relating to certain highly 
compensated employees.
Sec. 519. Clarification of treatment of employer-provided retirement 
advice.
Sec. 520. Provisions relating to plan amendments.
Sec. 521. Reporting simplification.
Sec. 522. Model plans for small businesses.

TITLE VI--AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 
                                  1974

       Subtitle A--Expanding Coverage and Increasing Portability

Sec. 601. Plan loans for subchapter S owners, partners, and sole 
proprietors.
Sec. 602. Reduced PBGC premium for new plans of small employers.
Sec. 603. Reduction of additional PBGC premium for new and small plans.
Sec. 604. Faster vesting of certain employer matching contributions.
Sec. 605. Treatment of forms of distribution.
Sec. 606. Employers may disregard rollovers for purposes of cash-out 
amounts.

       Subtitle B--Strengthening Pension Security and Enforcement

Sec. 611. Repeal of 150 percent of current liability funding limit.
Sec. 612. Missing participants.
Sec. 613. Periodic pension benefits statements.
Sec. 614. Civil penalties for breach of fiduciary responsibility.
Sec. 615. Protection of investment of employee contributions to 401(k) 
plans.
Sec. 616. Notice of significant reduction in benefit accruals.
Sec. 617. Technical corrections to Saver Act.
Sec. 618. Conforming amendments relating to transfer of excess defined 
benefit plan assets for retiree health benefits.
Sec. 619. Model spousal consent language and qualified domestic 
relations order.
Sec. 620. Elimination of ERISA double jeopardy.

                Subtitle C--Reducing Regulatory Burdens

Sec. 621. Modification of timing of plan valuations.
Sec. 622. Substantial owner benefits in terminated plans.
Sec. 623. Notice and consent period regarding distributions.
Sec. 624. Annual report dissemination.
Sec. 625. Excess benefit plans.
Sec. 626. Benefit suspension notice.
Sec. 627. Provisions relating to plan amendments.
Sec. 628. Simplified annual filing requirement for plans with fewer 
than 25 employees.

                      TITLE I--EXPANDING COVERAGE

SEC. 101. RESTORATION OF LIMITS FORMERLY IN EFFECT.

  (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 ``$180,000''.
          (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 ``$180,000''.
          (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 `$180,000' 
        ''.
          (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''.
          (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) Multiemployer plans and plans maintained by governments 
        and tax exempt organizations.--Subparagraph (F) of section 
        415(b)(2) is amended to read as follows:
                  ``(F) Multiemployer plans and plans maintained by 
                governments and tax exempt organizations.--
                          ``(i) In general.--In the case of a 
                        governmental plan (within the meaning of 
                        section 414(d)), a plan maintained by an 
                        organization (other than a governmental unit) 
                        exempt from tax under this subtitle, a 
                        multiemployer plan (as defined in section 
                        414(f)), or a qualified merchant marine plan, 
                        subparagraph (C) shall be applied as if the 
                        last sentence thereof read as follows: `The 
                        reduction under this subparagraph shall not 
                        reduce the limitation of paragraph (1)(A) below 
                        (i) $130,000 if the benefit begins at or after 
                        age 55, or (ii) if the benefit begins before 
                        age 55, the equivalent of the $130,000 
                        limitation for age 55.'
                          ``(ii) Definitions.--For purposes of this 
                        subparagraph--
                                  ``(I) Qualified merchant marine 
                                plan.--The term `qualified merchant 
                                marine plan' means a plan in existence 
                                on January 1, 1986, the participants in 
                                which are merchant marine officers 
                                holding licenses issued by the 
                                Secretary of Transportation under title 
                                46, United States Code.
                                  ``(II) Exempt organization plan 
                                covering 50 percent of its employees.--
                                A plan shall be treated as a plan 
                                maintained by an organization (other 
                                than a governmental unit) exempt from 
                                tax under this subtitle if at least 50 
                                percent of the employees benefiting 
                                under the plan are employees of an 
                                organization (other than a governmental 
                                unit) exempt from tax under this 
                                subtitle. If less than 50 percent of 
                                the employees benefiting under a plan 
                                are employees of an organization (other 
                                than a governmental unit) exempt from 
                                tax under this subtitle, the plan shall 
                                be treated as a plan maintained by an 
                                organization (other than a governmental 
                                unit) exempt from tax under this 
                                subtitle only with respect to employees 
                                of such an organization.''.
          (5) Cost-of-living adjustments.--Subsection (d) of section 
        415 (related to cost-of-living adjustments) is amended--
                  (A) in paragraph (1)(A) by striking ``$90,000'' and 
                inserting ``$180,000'', and
                  (B) in paragraph (3)(A)--
                          (i) by striking ``$90,000'' in the heading 
                        and inserting ``$180,000'', and
                          (ii) by striking ``October 1, 1986'' and 
                        inserting ``July 1, 1999''.
  (b) Defined Contribution Plans.--
          (1) Dollar limit.--Subparagraph (A) of section 415(c)(1) 
        (relating to limitation for defined contribution plans) is 
        amended by striking ``$30,000'' and inserting ``$45,000''.
          (2) Cost-of-living adjustments.--Subsection (d) of section 
        415 (related to cost-of-living adjustments) is amended--
                  (A) in paragraph (1)(C) by striking ``$30,000'' and 
                inserting ``$45,000'', and
                  (B) in paragraph (3)(D)--
                          (i) by striking ``$30,000'' in the heading 
                        and inserting ``$45,000'', and
                          (ii) by striking ``October 1, 1993'' and 
                        inserting ``July 1, 1999''.
  (c) Qualified Trusts.--
          (1) Compensation limit.--Sections 401(a)(17), 404(l), 408(k), 
        and 505(b)(7) are each amended by striking ``$150,000'' each 
        place it appears and inserting ``$235,000''.
          (2) Base period and rounding of cost-of-living adjustment.--
        Subparagraph (B) of section 401(a)(17) is amended--
                  (A) by striking ``October 1, 1993'' and inserting 
                ``July 1, 1999'', and
                  (B) by striking ``$10,000'' both places it appears 
                and inserting ``$5,000''.
  (d) Elective Deferrals.--
          (1) In general.--Paragraphs (1) and (5) of section 402(g) 
        (relating to limitation on exclusion for elective deferrals) 
        are each amended by striking ``$7,000'' and inserting 
        ``$15,000''.
          (2) Conforming amendments.--
                  (A) Section 402(g) (relating to limitation on 
                exclusion for elective deferrals), as amended by 
                paragraph (1), 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) Clause (iii) of section 501(c)(18)(D) is amended 
                by striking ``(other than paragraph (4) thereof)''.
  (e) Deferred Compensation Plans of State and Local Governments and 
Tax-Exempt Organizations.--Section 457 (relating to deferred 
compensation plans of State and local governments and tax-exempt 
organizations) is amended--
          (1) in subsections (b)(2)(A), (c)(1), and (e)(15) by striking 
        ``$7,500'' each place it appears and inserting ``$15,000'',
          (2) in subsection (b)(3)(A) by striking ``$15,000'' and 
        inserting ``$30,000'', and
          (3) in subsection (e)(15)--
                  (A) by inserting ``and the $30,000 amount specified 
                in subsection (b)(3)(A)'' after ``(c)(1)'', and
                  (B) by striking ``September 30, 1994'' and inserting 
                ``September 30, 1999''.
  (f) Simple Retirement Accounts.--
          (1) Limitation.--Sections 408(p)(2)(A)(ii), 408(p)(2)(E), 
        401(k)(11)(B)(i)(I), and 401(k)(11)(E) are each amended by 
        striking ``$6,000'' and inserting ``$10,000''.
          (2) Base period for cost-of-living adjustment.--Subparagraph 
        (E) of section 408(p)(2) is amended by striking ``September 30, 
        1996'' and inserting ``September 30, 1999''.
  (g) Cost-of-Living Adjustments.--
          (1) Plans maintained by governments and tax exempt 
        organizations.--Paragraph (1) of section 415(d) (as amended by 
        subsection (b)) is amended by striking ``and'' at the end of 
        subparagraph (B), by redesignating subparagraph (C) as 
        subparagraph (D), and by inserting after subparagraph (B) the 
        following new subparagraph:
                  ``(C) the $130,000 amount in subsection (b)(2)(F), 
                and''.
          (2) Base period.--Paragraph (3) of section 415(d) (as amended 
        by subsection (b)) is further amended by redesignating 
        subparagraph (D) as subparagraph (E) and by inserting after 
        subparagraph (C) the following new subparagraph:
                  ``(D) $130,000 amount.--The base period taken into 
                account for purposes of paragraph (1)(C) is the 
                calendar quarter beginning July 1, 1999.''.
          (3) 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) $180,000 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) $130,000 and $45,000 amounts.--Any increase 
                under subparagraph (C) or (D) of paragraph (1) which is 
                not a multiple of $1,000 shall be rounded to the next 
                lowest multiple of $1,000.''.
          (4) Conforming amendment.--Subparagraph (D) of section 
        415(d)(3) (as amended by paragraph (2)) is amended by striking 
        ``paragraph (1)(C)'' and inserting ``paragraph (1)(D)''.
  (h) Increase in Amount of Deductible IRA Contributions.--
          (1) Increase in maximum amount of deduction.--Subparagraph 
        (A) of section 219(b)(1) (relating to maximum amount of 
        deduction) is amended by striking ``$2,000'' and inserting 
        ``$5,000''.
          (2) Conforming amendments.--
                  (A) Subsections (a)(1), (b)(2), (j), and (p)(8) of 
                section 408 are each amended by striking ``$2,000'' 
                each place it appears and inserting ``$5,000''.
                  (B) Clause (i) of section 408(o)(2)(B) is amended by 
                inserting ``the lesser of $2,000, or'' after ``means''.
                  (C) Paragraph (2) of section 408A(c) is amended by 
                inserting ``the lesser of $2,000, or'' after ``shall 
                not exceed''.
                  (D) Subparagraph (B) of section 4973(b)(1) is amended 
                by inserting ``(or in the case of a nondeductible 
                individual retirement plan, the amount allowable as a 
                contribution under section 408(o))'' after 
                ``contributions,''.
  (i) Effective Date.--
          (1) In general.--The amendments made by this section shall 
        apply to years beginning after December 31, 1999.
          (2) Collective bargaining agreements.--In the case of a plan 
        maintained pursuant to 1 or more collective bargaining 
        agreements between employee representatives and 1 or more 
        employers ratified by the date of enactment of this Act, the 
        amendments made by this section shall not apply to 
        contributions or benefits pursuant to any such agreement for 
        years beginning before the earlier of--
                  (A) the later of--
                          (i) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof on or after such date of enactment), or
                          (ii) January 1, 2000, or
                  (B) January 1, 2004.

SEC. 102. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND SOLE 
                    PROPRIETORS.

  (a) Amendment to 1986 Code.--Subsection (f) of section 4975 (relating 
to other definitions and special rules) is amended by striking 
paragraph (6).
  (b) Effective Date.--The amendment made by this section shall take 
effect on the date of enactment of this Act.

SEC. 103. SALARY REDUCTION ONLY SIMPLE PLANS.

  (a) Simple Retirement Accounts.--
          (1) In general.--Paragraph (2) of section 408(p) (as amended 
        by section 101(f)) is further amended--
                  (A) by redesignating subparagraphs (C), (D), and (E) 
                as subparagraphs (D), (E), and (F), respectively; and
                  (B) by inserting after subparagraph (B) the 
                following:
                  ``(C) Employer may elect salary reduction only 
                arrangement.--
                          ``(i) In general.--An employer shall be 
                        treated as meeting the requirements of 
                        subparagraph (A)(iii) for any year if, in lieu 
                        of the contributions described in such 
                        subparagraph, the employer elects to limit the 
                        amount which an employee may elect under 
                        subparagraph (A)(i) to a total of $5,000 for 
                        the year. If an employer makes an election 
                        under this subparagraph for any year, the 
                        employer shall notify employees of such 
                        election within a reasonable period of time 
                        before the 60-day period for such year under 
                        paragraph (5)(C).
                          ``(ii) Exception.--This subparagraph shall 
                        not apply to an employer if such employer (or 
                        any predecessor employer) maintained another 
                        qualified plan (as defined in subparagraph 
                        (D)(ii)) with respect to which contributions 
                        were made, or benefits were accrued, for 
                        service during the year in which the 
                        arrangement described in clause (i) became 
                        effective or either of the 2 preceding years. 
                        If only individuals other than employees 
                        described in subparagraph (A) of section 
                        410(b)(3) are eligible to participate in the 
                        arrangement described in clause (i), then the 
                        preceding sentence shall be applied without 
                        regard to any qualified plan in which only 
                        employees so described are eligible to 
                        participate.''.
          (2) Special rule for acquisitions, dispositions, and similar 
        transactions.--Subparagraph (B) of section 408(p)(10) is 
        amended by striking ``and'' at the end of clause (ii), by 
        striking the period at the end of clause (iii) and inserting 
        ``; and'', and by inserting after clause (iii) the following:
                          ``(iv) the requirement under paragraph (2)(C) 
                        that the employer not have maintained another 
                        qualified plan described therein.''.
          (3) Cost-of-living adjustment.--Subparagraph (F) of section 
        408(p)(2) (as so redesignated) is amended by inserting ``and 
        the $5,000 amount under subparagraph (C)'' after ``subparagraph 
        (A)(ii)''.
          (4) Coordination with maximum limitation.--Paragraph (8) of 
        section 408(p) (relating to coordination with maximum 
        limitation under subsection (a)) is amended by striking 
        ``paragraph (2)(A)(ii) of this subsection'' and inserting 
        ``subparagraph (A)(ii) or (C) of paragraph (2) of this 
        subsection, whichever is applicable,''.
          (5) Conforming amendment.--Clause (ii) of section 
        408(p)(10)(B) is amended by striking ``paragraph (2)(D)'' and 
        inserting ``paragraph (2)(E)''.
  (b) Adoption of Simple Plan To Meet Nondiscrimination Tests.--
          (1) Simple plan.--Subparagraph (B) of section 401(k)(11) is 
        amended by redesignating clause (iii) as clause (iv) and by 
        inserting after clause (ii) the following new clause:
                          ``(iii) Employer may elect salary reduction 
                        only arrangement.--
                                  ``(I) In general.--An employer shall 
                                be treated as meeting the requirements 
                                of clause (i)(II) for any year if, in 
                                lieu of the contributions described in 
                                such clause, the employer elects to 
                                limit the amount which an employee may 
                                elect under clause (i) to a total of 
                                $5,000 for the year. If an employer 
                                makes an election under this clause for 
                                any year, the employer shall notify 
                                employees of such election within a 
                                reasonable period of time before the 
                                60-day period for such year under 
                                clause (iv)(II).
                                  ``(II) Exception.--This clause shall 
                                not apply to an employer if such 
                                employer (or any predecessor employer) 
                                maintained another qualified plan (as 
                                defined in section 408(p)(2)(D)(ii)) 
                                with respect to which contributions 
                                were made, or benefits were accrued, 
                                for service during the year in which 
                                the arrangement described in subclause 
                                (I) became effective or either of the 2 
                                preceding years. This subclause shall 
                                not apply if such contributions or 
                                benefits were solely on behalf of 
                                employees who are not eligible to 
                                participate in the arrangement 
                                described in subclause (I).''.
          (2) Cost-of-living adjustment.--Subparagraph (E) of section 
        401(k)(11) is amended by inserting ``and the $5,000 amount 
        under subparagraph (B)(iii)'' after ``subparagraph (B)(i)(I)''.
  (c) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 1999.

SEC. 104. MODIFICATION OF TOP-HEAVY RULES.

  (a) Repeal of Family Aggregation Rules.--Section 416(i)(1)(B)(i)(I) 
(defining 5-percent owner) is amended by inserting ``(without regard to 
subsection (a)(1) thereof)'' after ``section 318''.
  (b) Simplification of Definition of Key Employee.--
          (1) In general.--Section 416(i)(1)(A) (defining key employee) 
        is amended--
                  (A) by striking ``or any of the 4 preceding plan 
                years'' in the matter preceding clause (i),
                  (B) by striking clause (i) and inserting the 
                following:
                          ``(i) an officer of the employer who has 
                        compensation from the employer of more than 
                        $150,000,'',
                  (C) by striking clause (ii) and redesignating clauses 
                (iii) and (iv) as clauses (ii) and (iii), respectively, 
                and
                  (D) by striking the second sentence in the matter 
                following clause (iii), as redesignated by subparagraph 
                (C).
          (2) Conforming amendment.--Section 416(i)(1)(B)(iii) is 
        amended by striking ``and subparagraph (A)(ii)''.
  (c) Employee Elective Contributions to Plan Not Taken Into Account.--
          (1) Definition of top-heavy plan.--Section 416(g)(4) 
        (relating to other special rules) is amended by adding at the 
        end the following:
                  ``(H) Employee elective contributions to plan not 
                taken into account.--At the election of the employer, 
                any employee elective contribution described in section 
                415(c)(3)(D) to a plan (and earnings allocable thereto) 
                shall not be taken into account for purposes of 
                determining whether a plan is a top-heavy plan (or 
                whether any aggregation group which includes such plan 
                is a top-heavy group).''.
          (2) Definition of compensation.--Section 416(i)(1)(D) 
        (defining compensation) is amended to read as follows:
                  ``(D) Compensation.--
                          ``(i) In general.--For purposes of this 
                        paragraph, except as provided in clause (ii), 
                        the term `compensation' has the meaning given 
                        such term by section 414(q)(4).
                          ``(ii) Employee elective contributions to 
                        plan not taken into account.--At the election 
                        of the employer, any employee elective 
                        contribution described in section 415(c)(3)(D) 
                        to a plan shall not be taken into account for 
                        purposes of determining compensation.''.
  (d) Matching Contributions Taken Into Account for Minimum 
Contribution Requirements.--Section 416(c)(2)(A) (relating to defined 
contribution plans) is amended by adding at the end the following: 
``Employer matching contributions (as defined in section 401(m)(4)(A)) 
shall be taken into account for purposes of this subparagraph.''.
  (e) Requirements for Qualifications.--Clause (ii) of section 
401(a)(10)(B) (relating to requirements for qualifications for top-
heavy plans) is amended by adding at the end the following new flush 
sentence:
                        ``The preceding sentence shall not apply to a 
                        plan if the plan is not top-heavy and if it is 
                        not reasonable to expect that the plan will 
                        become top-heavy.''.
  (f) Distributions During Last Year Before Determination Date Taken 
Into Account.--Section 416(g) is amended--
          (1) in paragraph (3)--
                  (A) by striking ``last 5 years'' in the heading and 
                inserting ``last year before determination date'', and
                  (B) in the matter following subparagraph (B), by 
                striking ``5-year period'' and inserting ``1-year 
                period'', and
          (2) in paragraph (4)(E)--
                  (A) by striking ``last 5 years'' in the heading and 
                inserting ``last year before determination date'', and
                  (B) by striking ``5-year period'' and inserting ``1-
                year period''.
  (g) Definition of Top-Heavy Plans.--
          (1) Exclusion of certain plans from definition of top-heavy 
        plan.--Paragraph (4) of section 416(d) (relating to other 
        special rules for top-heavy plans) is amended by adding at the 
        end the following new subparagraphs:
                  ``(H) Cash or deferred arrangements using alternative 
                methods of meeting nondiscrimination requirements.--The 
                term `top-heavy plan' shall not include a cash or 
                deferred arrangement to the extent that such 
                arrangement meets the requirements of section 
                401(k)(12). This subparagraph shall also apply to 
                contributions that are not required to satisfy the 
                requirements of section 401(k)(12) but are consistent 
                with the purposes of such section, as permitted under 
                regulations which the Secretary shall prescribe. 
                Nothing in this subparagraph shall preclude an employer 
                from taking into account contributions made under the 
                cash or deferred arrangement when determining whether 
                any plan of such employer satisfies the requirements of 
                this section.
                  ``(I) Defined contribution plans using alternative 
                methods of meeting nondiscrimination requirements.--The 
                term `top-heavy plan' shall not include a defined 
                contribution plan to the extent that such plan meets 
                the requirements of section 401(m)(11). This 
                subparagraph shall also apply to contributions that are 
                not required to satisfy the requirements of section 
                401(m)(11) but are consistent with the purposes of such 
                section, as permitted under regulations which the 
                Secretary shall prescribe. Nothing in this subparagraph 
                shall preclude an employer from taking into account 
                contributions made under the defined contribution plan 
                when determining whether any plan of such employer 
                satisfies the requirements of this section.''.
          (2) Aggregation group not required to include certain 
        plans.--Clause (i) of section 416(g)(2)(A) of such Code 
        (relating to required aggregation) is amended by adding at the 
        end the following new flush sentence:
                        ``Such term shall not include a plan or 
                        arrangement described in subparagraph (H) or 
                        (I) of paragraph (4).''.
  (h) Elective Deferrals Not Taken Into Account.--Clause (i) of section 
416(c)(2)(B) (relating to special rule where maximum contribution less 
than 3 percent) is amended by inserting ``(other than elective 
deferrals (as defined in section 402(g)(3))'' after ``contributions''.
  (i) Frozen Plan Exempt From Minimum Benefit Requirement.--
Subparagraph (C) of section 416(c)(1) (relating to defined benefit 
plans) is amended--
          (1) in clause (i) by striking ``clause (ii)'' and inserting 
        ``clause (ii) or (iii)'', and
          (2) by adding at the end the following:
                          ``(iii) 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 no employee or 
                        former employee benefits under the plan within 
                        the meaning of section 410(b).''.
  (j) Alternative 60 Percent.--Subsection (g) of section 416 (relating 
to top heavy plan defined) is amended by adding at the end the 
following:
          ``(5) Alternative 60 percent test.--
                  ``(A) In general.--For any plan year, an employer may 
                elect for this paragraph to apply to all plans 
                maintained by such employer. If this paragraph applies 
                to a plan, the term `top-heavy plan' shall have the 
                meaning set forth in subparagraph (B) and the term 
                `top-heavy group' shall have the meaning set forth in 
                subparagraph (C).
                  ``(B) Top-heavy plan defined.--In the case of any 
                plan to which this paragraph applies, the term `top-
                heavy plan' means, with respect to any plan year--
                          ``(i) any defined benefit plan if, for the 
                        plan year ending on the determination date, the 
                        present value of the accruals for key employees 
                        exceeds 60 percent of the present value of the 
                        accruals for all employees, and
                          ``(ii) any defined contribution plan if, for 
                        the plan year ending on the determination date, 
                        the annual additions for key employees exceed 
                        60 percent of the annual additions for all 
                        employees.
                  ``(C) Top-heavy group.--In the case of any plan to 
                which this paragraph applies, the term `top-heavy 
                group' means any aggregation group if--
                          ``(i) the sum, for the plan year ending on 
                        the determination date, of--
                                  ``(I) the present value of the 
                                accruals for key employees under all 
                                defined benefit plans included in such 
                                group, and
                                  ``(II) the aggregate of the annual 
                                additions of key employees under all 
                                defined contribution plans included in 
                                such group,
                          ``(ii) exceeds 60 percent of a similar sum 
                        determined for all employees.
                  ``(D) Annual addition.--For purposes of this 
                paragraph, the term `annual addition' shall have the 
                same meaning as when used in section 415(c)(2) (without 
                regard to section 415(l) or section 419A(d)(2)).
                  ``(E) Certain rules not to apply.--Paragraphs (3) and 
                (4) (other than subparagraphs (B), (C), (D), (E), and 
                (G) of paragraph (4)) shall not apply for purposes of 
                this paragraph.''.
  (k) Conforming Amendments.--
          (1) Subparagraph (A) of section 416(g)(1) is amended by 
        striking ``subparagraph (B)'' and inserting ``subparagraph (B) 
        and paragraph (5)''.
          (2) Subparagraph (B) of section 416(g)(2) is amended by 
        striking ``The term'' and inserting ``Except as provided in 
        paragraph (5), the term''.
          (3) Subparagraph (A) of section 415(b)(5) is amended by 
        adding at the end the following: ``An employee shall not be 
        credited with a year of participation in a defined benefit plan 
        for any year in which such employee does not benefit under the 
        plan within the meaning of section 410(b).''.
  (l) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 1999.

SEC. 105. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF 
                    LIMITS.

  (a) In General.--Section 404 is amended by adding at the end the 
following new subsection:
  ``(n) Elective Deferrals Not Taken Into Account for Purposes of 
Limits.--Elective deferrals (as defined in section 402(g)(3)) shall not 
be subject to any limitations described in this section (other than 
subsection (a)), and such elective deferrals shall not be taken into 
account in applying such limitations to any other contributions.''.
  (b) Conforming Amendments.--Paragraph (3) of section 4972(c) is 
amended to read as follows:
          ``(3) Contributions not taken into account.--In determining 
        the amount of nondeductible contributions for any taxable year, 
        there shall not be taken into account--
                  ``(A) any elective deferral (as defined in section 
                402(g)(3)), or
                  ``(B) any contribution for such taxable year which is 
                distributed to the employer in a distribution described 
                in section 4980(c)(2)(B)(ii) if such distribution is 
                made on or before the last day on which a contribution 
                may be made for such taxable year under section 
                404(a)(6).''.
  (c) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1999.

SEC. 106. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED COMPENSATION 
                    PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT 
                    ORGANIZATIONS.

  (a) In General.--Subsection (c) of section 457 (relating to deferred 
compensation plans of State and local governments and tax-exempt 
organizations) is amended 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 $15,000 (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, 1999.

SEC. 107. ELIMINATION OF USER FEE FOR REQUESTS TO IRS REGARDING PENSION 
                    PLANS.

  (a) Elimination of Certain User Fees.--The Secretary of the Treasury 
or the Secretary's delegate shall not require payment of user fees 
under the program established under section 10511 of the Revenue Act of 
1987 for requests to the Internal Revenue Service for ruling letters, 
opinion letters, and determination letters or similar requests with 
respect to the qualified status of a pension benefit plan maintained 
solely by one or more eligible employers or any trust which is part of 
the plan.
  (b) Pension Benefit Plan.--For purposes of this section, the term 
`pension benefit plan' means a pension, profit-sharing, stock bonus, 
annuity, or employee stock ownership plan.
  (c) Eligible Employer.--For purposes of this section, the term 
``eligible employer'' has the same meaning given such term in section 
408(p)(2)(C)(i)(I) of the Internal Revenue Code of 1986. The 
determination of whether an employer is an eligible employer under this 
section shall be made as of the date of the request described in 
subsection (a).
  (d) Effective Date.--The provisions of this section shall apply with 
respect to requests made after December 31, 1999.

SEC. 108. ALTERNATIVE METHOD OF MEETING NONDISCRIMINATION REQUIREMENTS 
                    FOR AUTOMATIC CONTRIBUTION TRUST.

  (a) In General.--Section 401(k) (relating to cash or deferred 
arrangement) is amended by adding at the end the following new 
paragraph:
          ``(13) Nondiscrimination requirements for automatic 
        contribution trusts.--
                  ``(A) In general.--A cash or deferred arrangement 
                shall be treated as meeting the requirements of 
                paragraph (3)(A)(ii) if such arrangement constitutes an 
                automatic contribution trust.
                  ``(B) Automatic contribution trust.--For purposes of 
                this paragraph, the term `automatic contribution trust' 
                means an arrangement--
                          ``(i) under which each employee eligible to 
                        participate in the arrangement is treated as 
                        having elected to have the employer make 
                        elective contributions in an amount equal to 
                        the uniform percentage (not less than 3 
                        percent) of compensation provided under the 
                        arrangement until the employee specifically 
                        elects not to have such contributions made, and
                          ``(ii) which meets the other requirements of 
                        this paragraph.
                Clause (i) of this subparagraph shall not apply to any 
                employee who was eligible to participate in the 
                arrangement (or a predecessor arrangement) immediately 
                before the first date on which the arrangement is an 
                automatic contribution trust. The election treated as 
                having been made under clause (i) shall cease to apply 
                to compensation paid after the specific election by the 
                employee.
                  ``(C) Participation.--
                          ``(i) Except as provided in clause (ii), an 
                        arrangement meets the requirements of this 
                        subparagraph for any year if, during the plan 
                        year or the preceding plan year, elective 
                        contributions are made on behalf of at least 70 
                        percent of employees other than highly 
                        compensated employees eligible to participate 
                        in the arrangement.
                          ``(ii) An arrangement (other than a successor 
                        arrangement) shall be treated as meeting the 
                        requirements of this subparagraph with respect 
                        to the first plan year in which the arrangement 
                        is effective.
                  ``(D) Matching or nonelective contributions.--The 
                requirements of this subparagraph are met if, under the 
                arrangement, the employer--
                          ``(i) makes matching contributions on behalf 
                        of each employee who is not a highly 
                        compensated employee in an amount equal to 50 
                        percent of the elective contributions of the 
                        employee to the extent such elective 
                        contributions do not exceed 5 percent of 
                        compensation, or
                          ``(ii) is required, without regard to whether 
                        the employee makes an elective contribution or 
                        employee contribution, to make a contribution 
                        to a defined contribution plan on behalf of 
                        each employee who is not a highly compensated 
                        employee and who is eligible to participate in 
                        the arrangement in an amount equal to at least 
                        2 percent of the employee's compensation.
                The rules of clauses (ii), (iii), and (iv) of paragraph 
                (12)(B) shall apply for purposes of clause (i).
                  ``(E) Vesting.--The requirements of this subparagraph 
                are met if the requirements of subparagraph (C) of 
                paragraph (2) are met with respect to all employer 
                contributions (including matching contributions) taken 
                into account in determining whether the requirements of 
                subparagraph (B) or (C) are met.
                  ``(F) Notice requirements.--
                          ``(i) In general.--The requirements of this 
                        subparagraph are met if the requirements of 
                        clauses (ii) and (iii) are met.
                          ``(ii) Reasonable period to make election.--
                        The requirements of this clause are met if each 
                        employee to whom subparagraph (B)(i) applies--
                                  ``(I) receives a notice explaining 
                                the employee's right under the 
                                arrangement to elect not to have 
                                elective contributions made on the 
                                employee's behalf, and
                                  ``(II) has a reasonable period of 
                                time after receipt of such notice and 
                                before the first elective contribution 
                                is made to make such election.
                          ``(iii) Annual notice of rights and 
                        obligations.--The requirements of this clause 
                        are met if each employee eligible to 
                        participate in the arrangement is, within a 
                        reasonable period before any year, given notice 
                        of the employee's rights and obligations under 
                        the arrangement.
                The requirements of clauses (i) and (ii) of paragraph 
                (12)(D) shall be met with respect to the notices 
                described in clauses (ii) and (iii) of this 
                subparagraph.''.
  (b) Matching Contributions.--Section 401(m) (relating to 
nondiscrimination test for matching contributions and employee 
contributions) is amended by redesignating paragraph (12) as paragraph 
(13) and by inserting after paragraph (11) the following new paragraph:
          ``(12) Alternative method for automatic contribution 
        trusts.--
                  ``(A) In general.--A defined contribution plan shall 
                be treated as meeting the requirements of paragraph (2) 
                with respect to matching contributions if the plan--
                          ``(i) meets the contribution requirements of 
                        subparagraphs (B)(i) and (D) of subsection 
                        (k)(13),
                          ``(ii) meets the participation requirements 
                        of subsection (k)(13)(C),
                          ``(iii) meets the vesting and notice 
                        requirements of subparagraphs (E) and (F) of 
                        subsection (k)(13), and
                          ``(iv) meets the requirements of paragraph 
                        (11)(B).
                  ``(B) Matching contributions.--An annuity contract 
                under section 403(b) shall be treated as meeting the 
                requirements of paragraph (2) with respect to matching 
                contributions if such contract meets requirements 
                similar to the requirements under subparagraph (A).''.
  (c) Exclusion From Definition of Top-Heavy Plans.--Paragraph (4) of 
section 416(d) (relating to other special rules for top-heavy plans), 
as amended by section 104(g), is amended by adding at the end the 
following new subparagraph:
                  ``(J) Automatic contribution trust.--The term `top-
                heavy plan' shall not include an automatic contribution 
                trust under section 401(k)(13). Nothing in this 
                subparagraph shall preclude an employer from taking 
                into account contributions made under the automatic 
                contribution trust when determining whether any plan of 
                such employer satisfies the requirements of this 
                section.''.
  (d) Definition of Compensation.--
          (1) In general.--Paragraph (9) of section 401(k) is amended 
        to read as follows:
          ``(9) Compensation.--
                  ``(A) In general.--Except as provided in subparagraph 
                (B), for purposes of this section, the term 
                `compensation' has the meaning given such term by 
                section 414(s).
                  ``(B) Use of base pay.--For purposes of paragraph 
                (12)(B), the term `compensation' means the definition 
                of compensation used by the cash or deferred 
                arrangement if such compensation--
                          ``(i) meets the requirements of section 
                        414(s), or
                          ``(ii) constitutes base pay.
                  ``(C) Base pay.--For purposes of subparagraph (B), 
                the term `base pay' means a reasonable definition of 
                compensation that does not by design favor highly 
                compensated employees and that excludes on a consistent 
                basis all irregular or additional compensation.''.
          (2) Automatic contribution trusts.--Paragraph (9)(B) of 
        section 401(k) (as amended by paragraph (1)) is amended by 
        striking ``paragraph (12)(B)'' and inserting ``paragraphs 
        (12)(B), (13)(B), and (13)(D)(i)''.
          (3) Matching contributions.--Paragraph (11) of section 401(m) 
        is amended by adding at the end the following:
                  ``(C) Definition of compensation.--For purposes of 
                subparagraph (B), the term `compensation' has the 
                meaning given such term by subsection (k)(9)(B).''.
  (e) Application by Year or Payroll Period.--
          (1) Cash or deferred arrangements.--Subparagraph (B) of 
        section 401(k)(12) is amended by adding at the end the 
        following:
                          ``(iv) Application by year or payroll 
                        period.--The requirements of this subparagraph 
                        may be met for a plan year by meeting such 
                        requirements either--
                                  ``(I) with respect to the plan year 
                                as a whole, or
                                  ``(II) separately with respect to 
                                each payroll period (or other payment 
                                of compensation) taken into account 
                                under the arrangement for the plan 
                                year.''.
          (2) Defined contribution plans.--Paragraph (11) of section 
        401(m) (as amended by this section) is amended by adding at the 
        end the following:
                  ``(D) Application by year or payroll period.--The 
                requirements of subparagraph (B) may be met for a plan 
                year by meeting such requirements either--
                          ``(i) with respect to the plan year as a 
                        whole, or
                          ``(ii) separately with respect to each 
                        payroll period (or other payment of 
                        compensation) taken into account under the plan 
                        for the plan year.''.
  (f) Section 403(b) Contracts.--Paragraph (11) of section 401(m) (as 
amended by this section) is amended by adding at the end the following:
                  ``(E) Section 403(b) contracts.--An annuity contract 
                under section 403(b) shall be treated as meeting the 
                requirements of paragraph (2) with respect to matching 
                contributions if such contract meets requirements 
                similar to the requirements under subparagraph (A).''.
  (e) Effective Date.--
          (1) In general.--Except as provided by paragraph (2), the 
        amendments made by this section shall apply to plan years 
        beginning after December 31, 1999.
          (2) Exception.--The amendments made by subsections (d)(1), 
        (d)(3), (e), and (f) shall apply to years beginning after 
        December 31, 1998.

SEC. 109. DEDUCTION LIMITS.

  (a) In General.--
          (1) Stock bonus and profit sharing trusts.--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''.
          (2) Compensation.--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), and (9), the term `compensation otherwise 
        paid or accrued during the taxable year' shall include amounts 
        treated as `participant's compensation' under subparagraph (C) 
        or (D) of section 415(c)(3).''.
          (3) Defined contribution plans.--Subparagraph (A) of section 
        404(a)(3) (relating to stock bonus and profit sharing trusts) 
        is amended by adding at the end the following:
                          ``(vi) Defined contribution plans subject to 
                        the funding standards.--Except as provided by 
                        the Secretary, for purposes of this 
                        subparagraph, 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.''.
  (b) Conforming Amendments.--
          (1) Subparagraph (A) of section 404(a)(3) is amended by 
        striking clause (v) and by redesignating clause (vi) (as added 
        by subsection (a)(3) of this section) as clause (v).
          (2) Subparagraph (B) of section 404(a)(3) is amended by 
        striking the last sentence thereof.
          (3) Subparagraph (D) of section 404(a)(8) is amended by 
        striking the period at the end and inserting the following: ``, 
        except that such earned income shall be adjusted under rules 
        similar to the rules of paragraph (12).''.
          (4) Subparagraph (C) of section 404(h)(1) is amended by 
        striking ``15 percent'' each place it appears and inserting 
        ``25 percent''.
          (5) Paragraph (2) of section 404(h) is amended by striking 
        ``stock bonus or profit-sharing trust'' and inserting ``trust 
        subject to subsection (a)(3)(A)''.
          (6) 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, 1999.

SEC. 110. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX 
                    CONTRIBUTIONS.

  (a) In General.--Subpart A of part I of subchapter D of chapter 1 
(relating to deferred compensation, etc.) is amended by inserting after 
section 402 the following new section:

``SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS PLUS 
                    CONTRIBUTIONS.

  ``(a) General Rule.--If an applicable retirement plan includes a 
qualified plus contribution program--
          ``(1) any designated plus contribution made by an employee 
        pursuant to the program shall be treated as an elective 
        deferral for purposes of this chapter, except that such 
        contribution shall not be excludable from gross income, and
          ``(2) such plan (and any arrangement which is part of such 
        plan) shall not be treated as failing to meet any requirement 
        of this chapter solely by reason of including such program.
  ``(b) Qualified Plus Contribution Program.--For purposes of this 
section--
          ``(1) In general.--The term `qualified plus contribution 
        program' means a program under which an employee may elect to 
        make designated plus contributions in lieu of all or a portion 
        of elective deferrals the employee is otherwise eligible to 
        make under the applicable retirement plan.
          ``(2) Separate accounting required.--A program shall not be 
        treated as a qualified plus contribution program unless the 
        applicable retirement plan--
                  ``(A) establishes separate accounts (`designated plus 
                accounts') for the designated plus contributions of 
                each employee and any earnings properly allocable to 
                the contributions, and
                  ``(B) maintains separate recordkeeping with respect 
                to each account.
  ``(c) Definitions and Rules Relating to Designated Plus 
Contributions.--For purposes of this section--
          ``(1) Designated plus contribution.--The term `designated 
        plus contribution' means any elective deferral which--
                  ``(A) is excludable from gross income of an employee 
                without regard to this section, and
                  ``(B) the employee designates (at such time and in 
                such manner as the Secretary may prescribe) as not 
                being so excludable.
          ``(2) Designation limits.--The amount of elective deferrals 
        which an employee may designate under paragraph (1) shall not 
        exceed the excess (if any) of--
                  ``(A) the maximum amount of elective deferrals 
                excludable from gross income of the employee for the 
                taxable year (without regard to this section), over
                  ``(B) the aggregate amount of elective deferrals of 
                the employee for the taxable year which the employee 
                does not designate under paragraph (1).
          ``(3) Rollover contributions.--
                  ``(A) In general.--A rollover contribution of any 
                payment or distribution from a designated plus account 
                which is otherwise allowable under this chapter may be 
                made only if the contribution is to--
                          ``(i) another designated plus account of the 
                        individual from whose account the payment or 
                        distribution was made, or
                          ``(ii) a Roth IRA of such individual.
                  ``(B) Coordination with limit.--Any rollover 
                contribution to a designated plus account under 
                subparagraph (A) shall not be taken into account for 
                purposes of paragraph (1).
  ``(d) Distribution Rules.--For purposes of this title--
          ``(1) Exclusion.--Any qualified distribution from a 
        designated plus account shall not be includible in gross 
        income.
          ``(2) Qualified distribution.--For purposes of this 
        subsection--
                  ``(A) In general.--The term `qualified distribution' 
                has the meaning given such term by section 
                408A(d)(2)(A).
                  ``(B) Distributions within nonexclusion period.--A 
                payment or distribution from a designated plus account 
                shall not be treated as a qualified distribution if 
                such payment or distribution is made within the 5-
                taxable-year period beginning with the earlier of--
                          ``(i) the earlier of--
                                  ``(I) the 1st taxable year for which 
                                the individual made a designated plus 
                                contribution to any designated plus 
                                account established for such individual 
                                under the same applicable retirement 
                                plan, or
                                  ``(II) if a rollover contribution was 
                                made to such designated plus account 
                                from a designated plus account 
                                previously established for such 
                                individual under another applicable 
                                retirement plan, the 1st taxable year 
                                for which the individual made a 
                                designated plus contribution to such 
                                previously established account), or
                          ``(ii) the 1st taxable year for which the 
                        individual (or the individual's spouse) made a 
                        contribution to a Roth IRA established for such 
                        individual.
                  ``(C) Distributions of excess deferrals and 
                earnings.--The term `qualified distribution' shall not 
                include any distribution of any excess deferral under 
                section 402(g)(2) and any income on the excess 
                deferral.
          ``(3) Aggregation rules.--Section 72 shall be applied 
        separately with respect to distributions and payments from a 
        designated plus account and other distributions and payments 
        from the plan.
  ``(e) Other Definitions.--For purposes of this section--
          ``(1) Applicable retirement plan.--The term `applicable 
        retirement plan' means--
                  ``(A) an employees' trust described in section 401(a) 
                which is exempt from tax under section 501(a), and
                  ``(B) a plan under which amounts are contributed by 
                an individual's employer for an annuity contract 
                described in section 403(b).
          ``(2) Elective deferral.--The term `elective deferral' means 
        any elective deferral described in subparagraph (A) or (C) of 
        section 402(g)(3).''
  (b) Excess Deferrals.--Section 402(g) (relating to limitation on 
exclusion for elective deferrals) is amended--
          (1) by adding at the end of paragraph (1) the following new 
        sentence: ``The preceding sentence shall not apply to so much 
        of such excess as does not exceed the designated plus 
        contributions of the individual for the taxable year.'', and
          (2) by inserting ``(or would be included but for the last 
        sentence thereof)'' after ``paragraph (1)'' in paragraph 
        (2)(A).
  (c) Rollovers.--Subparagraph (B) of section 402(c)(7) (as amended by 
sections 301 and 302) is amended by adding at the end the following:
                ``Without regard to the foregoing provisions of this 
                paragraph, if any portion of an eligible rollover 
                distribution is attributable to payments or 
                distributions from a designated plus account (as 
                defined in section 402A), an eligible retirement plan 
                with respect to such portion shall include only another 
                designated plus account and a Roth IRA.''
  (d) Reporting Requirements.--
          (1) W-2 information.--Section 6051(a)(8) is amended by 
        inserting ``, including the amount of designated plus 
        contributions (as defined in section 402A)'' before the comma 
        at the end.
          (2) Information.--Section 6047 is amended by redesignating 
        subsection (f) as subsection (g) and by inserting after 
        subsection (e) the following new subsection:
  ``(f) Designated Plus Contributions.--The Secretary shall require the 
plan administrator of each applicable retirement plan (as defined in 
section 402A) to make such returns and reports regarding designated 
plus contributions (as so defined) to the Secretary, participants and 
beneficiaries of the plan, and such other persons as the Secretary may 
prescribe.''
  (e) Conforming Amendments.--
          (1) Section 408A(e) is amended by adding after the first 
        sentence the following new sentence: ``Such term includes a 
        rollover contribution described in section 402A(c)(3)(A).''
          (2) The table of sections for subpart A of part I of 
        subchapter D of chapter 1 is amended by inserting after the 
        item relating to section 402 the following new item:

``Sec. 402A. Optional treatment of elective deferrals as plus 
contributions.''

  (f) Effective Date.--The amendments made by this section shall apply 
to taxable years beginning after December 31, 2000.

SEC. 111. 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) is amended by adding at the end 
the following new section:

``SEC. 45D. SMALL EMPLOYER PENSION PLAN STARTUP COSTS.

  ``(a) General Rule.--For purposes of section 38, in the case of an 
eligible employer, the small employer pension plan startup cost credit 
determined under this section for any taxable year is an amount equal 
to 50 percent of the qualified startup costs paid or incurred by the 
taxpayer during the taxable year.
  ``(b) Dollar Limitation.--The amount of the credit determined under 
this section for any taxable year shall not exceed--
          ``(1) $1,000 for the first credit year,
          ``(2) $500 for each of the 2 taxable years immediately 
        following the first credit year, and
          ``(3) zero for any other taxable year.
  ``(c) Eligible Employer.--For purposes of this section--
          ``(1) In general.--The term `eligible employer' has the 
        meaning given such term by section 408(p)(2)(C)(i).
          ``(2) Employers maintaining qualified plans during 1998 not 
        eligible.--Such term shall not include an employer if such 
        employer (or any predecessor employer) maintained a qualified 
        plan (as defined in section 408(p)(2)(D)(ii)) with respect to 
        which contributions were made, or benefits were accrued, for 
        service in 1998. If only individuals other than employees 
        described in subparagraph (A) of section 410(b)(3) are eligible 
        to participate in the qualified employer plan referred to in 
        subsection (d)(1), then the preceding sentence shall be applied 
        without regard to any qualified plan in which only employees so 
        described are eligible to participate.
  ``(d) Other Definitions.--For purposes of this section--
          ``(1) Qualified startup costs.--
                  ``(A) In general.--The term `qualified startup costs' 
                means any ordinary and necessary expenses of an 
                eligible employer which are paid or incurred in 
                connection with--
                          ``(i) the establishment or administration of 
                        an eligible employer plan, or
                          ``(ii) the retirement-related education of 
                        employees with respect to such plan.
                  ``(B) Plan must have at least 2 participants.--Such 
                term shall not include any expense in connection with a 
                plan that does not have at least 2 individuals who are 
                eligible to participate.
                  ``(C) Plan must be established before january 1, 
                2002.--Such term shall not include any expense in 
                connection with a plan established after December 31, 
                2001.
          ``(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) is amended by striking ``plus'' 
at the end of paragraph (11), by striking the period at the end of 
paragraph (12) and inserting ``, plus'', and by adding at the end the 
following new paragraph:
          ``(13) in the case of an eligible employer (as defined in 
        section 45D(c)), the small employer pension plan startup cost 
        credit determined under section 45D(a).''
  (c) Conforming Amendments.--
          (1) Section 39(d) is amended by adding at the end the 
        following new paragraph:
          ``(8) No carryback of small employer pension plan startup 
        cost credit before effective date.--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 45D may be carried back to a taxable year ending 
        on or before the date of the enactment of section 45D.''
          (2) Subsection (c) of section 196 is amended by striking 
        ``and'' at the end of paragraph (7), by striking the period at 
        the end of paragraph (8) and inserting ``, and'', and by adding 
        at the end the following new paragraph:
          ``(9) the small employer pension plan startup cost credit 
        determined under section 45D(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. 45D. 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 ending after the date of the 
enactment of this Act.

          TITLE II--ENHANCING FAIRNESS FOR WOMEN AND CHILDREN

SEC. 201. ADDITIONAL SALARY REDUCTION CATCH-UP CONTRIBUTIONS.

  (a) Limitation on Exclusion for Elective Deferrals.--
          (1) In general.--Subsection (g) of section 402 (as amended by 
        section 101(d)) is further amended by adding at the end the 
        following:
          ``(9) Catch-up contributions for those approaching 
        retirement.--In the case of an individual who has attained age 
        50 during any taxable year, the limitation of paragraph (1) for 
        such year, after the application of paragraph (8), shall be 
        increased by $5,000.''.
          (2) Cost-of-living adjustment.--Paragraph (4) of section 
        402(g) (relating to cost-of-living adjustment), as amended by 
        section 101(d), is further amended by inserting ``and the 
        $5,000 amount under paragraph (9)'' after ``paragraph (1)''.
  (b) Simple Retirement Accounts.--
          (1) In general.--Paragraph (2) of section 408(p) (relating to 
        qualified salary reduction arrangement) (as amended by sections 
        101(f) and 103(a)) is further amended by redesignating 
        subparagraph (F) as subparagraph (G) and by inserting after 
        subparagraph (E) the following new subparagraph:
                  ``(F) Catch-up contributions for those approaching 
                retirement.--In the case of an individual who has 
                attained age 50 during any taxable year, the limitation 
                of subparagraph (A)(ii) for such year shall be 
                increased by $5,000.''.
          (2) Cost-of-living adjustment.--Subparagraph (G) of section 
        408(p)(2) (as so redesignated) is amended by inserting ``and 
        the $5,000 amount under subparagraph (F)'' after ``subparagraph 
        (A)(ii)''.
  (c) Deferred Compensation Plans of State and Local Governments and 
Tax-Exempt Organizations.--
          (1) In general.--Subsection (b) of section 457 (relating to 
        definition of eligible deferred compensation plan) is amended 
        by adding at the end the following new paragraph:
          ``(7) Catch-up contributions for those approaching 
        retirement.--In the case of an individual who has attained age 
        50 during any taxable year, the limitation of paragraph (2)(A) 
        for such year shall be increased by $5,000''.
          (2) Cost-of-living adjustment.--Paragraph (15) of section 
        457(e) (relating to cost-of-living adjustment) is amended by 
        inserting ``, and the $5,000 amount specified in subsection 
        (b)(7),'' after ``(c)(1)''.
  (d) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 1999.

SEC. 202. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES TO DEFINED 
                    CONTRIBUTION PLANS.

  (a) In General.--
          (1) Subparagraph (B) of section 415(c)(1) (relating to 
        limitation for defined contribution plans) is amended to read 
        as follows:
                  ``(B) the participant's compensation.''.
          (2) Conforming amendments.--
                  (A) Subsection (f) of section 72 is amended by 
                striking ``section 403(b)(2)(D)(iii))'' and inserting 
                ``section 403(b)(2)(D)(iii), as in effect on December 
                31, 1998)''.
                  (B) Section 403(b) is amended--
                          (i) by striking ``the exclusion allowance for 
                        such taxable year'' in paragraph (1) and 
                        inserting ``the applicable limit under section 
                        415'',
                          (ii) by striking paragraph (2), and
                          (iii) by inserting ``or any amount received 
                        by a former employee after the 5th taxable year 
                        following the taxable year in which such 
                        employee was terminated'' before the period at 
                        the end of the second sentence of paragraph 
                        (3).
                  (C) Section 404(a)(10)(B) is amended by striking ``, 
                the exclusion allowance under section 403(b)(2),''.
                  (D) Section 415(a)(2) is amended by striking ``, and 
                the amount of the contribution for such portion shall 
                reduce the exclusion allowance as provided in section 
                403(b)(2)''.
                  (E) Section 415(c)(3) is amended by adding at the end 
                the following new subparagraph:
                  ``(E) Annuity contracts.--In the case of an annuity 
                contract described in section 403(b), the term 
                `participant's compensation' means the participant's 
                includible compensation determined under section 
                403(b)(3).''.
                  (F) Section 415(c) is amended by striking paragraph 
                (4).
                  (G) Section 415(c)(7) is amended to read as follows:
          ``(7) Certain contributions by church plans not treated as 
        exceeding limit.--
                  ``(A) In general.--Notwithstanding any other 
                provision of this subsection, at the election of a 
                participant who is an employee of a church, a 
                convention or association of churches, including an 
                organization described in section 414(e)(3)(B)(ii), 
                contributions and other additions for an annuity 
                contract or retirement income account described in 
                section 403(b) with respect to such participant, when 
                expressed as an annual addition to such participant's 
                account, shall be treated as not exceeding the 
                limitation of paragraph (1) if such annual addition is 
                not in excess of $10,000.
                  ``(B) $40,000 aggregate limitation.--The total amount 
                of additions with respect to any participant which may 
                be taken into account for purposes of this subparagraph 
                for all years may not exceed $40,000.
                  ``(C) Annual addition.--For purposes of this 
                paragraph, the term `annual addition' has the meaning 
                given such term by paragraph (2).''.
                  (H) Section 415(e)(5) is amended--
                          (i) by striking ``(except in the case of a 
                        participant who has elected under subsection 
                        (c)(4)(D) to have the provisions of subsection 
                        (c)(4)(C) apply)'', and
                          (ii) by striking the last sentence.
                  (I) Section 415(n)(2)(B) is amended by striking 
                ``percentage''.
                  (J) Subparagraph (B) of section 402(g)(7) (as amended 
                by section 101(d)) is amended by inserting before the 
                period at the end the following: ``(as in effect on the 
                date of the enactment of the Retirement Security for 
                the 21st Century Act)''.
          (3) Effective date.--The amendments made by this subsection 
        shall apply to years beginning after December 31, 1999.
  (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.--The amendment made by paragraph (1) 
        shall apply to limitation years beginning after December 31, 
        1999.
  (c) Deferred Compensation Plans of State and Local Governments and 
Tax-Exempt Organizations.--Subparagraph (B) of section 457(b)(2) 
(relating to salary limitation on eligible deferred compensation plans) 
is amended by striking ``33\1/3\ percent'' and inserting ``100 
percent''.
  (d) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 1999.

SEC. 203. FASTER VESTING OF CERTAIN EMPLOYER MATCHING CONTRIBUTIONS.

  (a) Amendments to 1986 Code.--Section 411(a) (relating to minimum 
vesting standards) is amended--
          (1) in paragraph (2), by striking ``A plan'' and inserting 
        ``Except as provided in paragraph (12), a plan'', and
          (2) by adding at the end the following:
          ``(12) Faster vesting for matching contributions.--In the 
        case of matching contributions (as defined in section 
        401(m)(4)(A)), paragraph (2) shall be applied--
                  ``(A) by substituting `3 years' for `5 years' in 
                subparagraph (A), and
                  ``(B) by substituting the following table for the 
                table contained in subparagraph (B):

                  
                                                     The nonforfeitable
                ``Years of service:
                                                       percentage is:  
                        1..................................         20 
                        2..................................         40 
                        3..................................         60 
                        4..................................         80 
                        5..................................     100.''.

  (b) Effective Dates.--
          (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to contributions 
        for plan years beginning after December 31, 1999.
          (2) Collective bargaining agreements.--In the case of a plan 
        maintained pursuant to 1 or more collective bargaining 
        agreements between employee representatives and 1 or more 
        employers ratified by the date of enactment of this Act, the 
        amendments made by this section shall not apply to 
        contributions on behalf of employees covered by any such 
        agreement for plan years beginning before the earlier of--
                  (A) the later of--
                          (i) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof on or after such date of enactment), or
                          (ii) January 1, 2000, or
                  (B) January 1, 2004.
          (3) Service required.--With respect to any plan, the 
        amendments made by this section shall not apply to any employee 
        before the date that such employee has 1 hour of service under 
        such plan in any plan year to which the amendments made by this 
        section apply.

SEC. 204. DEFERRED ANNUITIES FOR SURVIVING SPOUSES OF FEDERAL 
                    EMPLOYEES.

  (a) In General.--Section 8341 of title 5, United States Code, is 
amended--
          (1) in subsection (h)(1), by striking ``section 8338(b) of 
        this title'' and inserting ``section 8338(b), and a former 
        spouse of a deceased former employee who separated from the 
        service with title to a deferred annuity under section 8338 (if 
        they were married to one another prior to the date of 
        separation),''; and
          (2) by adding at the end the following:
  ``(j)(1) If a former employee dies after having separated from the 
service with title to a deferred annuity under section 8338 but before 
having established a valid claim for annuity, and is survived by a 
spouse to whom married on the date of separation, the surviving spouse 
may elect to receive--
          ``(A) an annuity, commencing on what would have been the 
        former employee's 62d birthday, equal to 55 percent of the 
        former employee's deferred annuity;
          ``(B) an annuity, commencing on the day after the date of 
        death of the former employee, such that, to the extent 
        practicable, the present value of the future payments of the 
        annuity would be actuarially equivalent to the present value of 
        the future payments under subparagraph (A) as of the day after 
        the former employee's death; or
          ``(C) the lump-sum credit, if the surviving spouse is the 
        individual who would be entitled to the lump-sum credit and if 
        such surviving spouse files application therefor.
  ``(2) An annuity under this subsection and the right thereto 
terminate on the last day of the month before the surviving spouse 
remarries before becoming 55 years of age, or dies.''.
  (b) Corresponding Amendment for FERS.--Section 8445(a) of title 5, 
United States Code, is amended--
          (1) by striking ``(or of a former employee or'' and inserting 
        ``(or of a former''; and
          (2) by striking ``annuity)'' and inserting ``annuity, or of a 
        former employee who dies after having separated from the 
        service with title to a deferred annuity under section 8413 but 
        before having established a valid claim for annuity (if such 
        former spouse was married to such former employee prior to the 
        date of separation))''.
  (c) Effective Date.--The amendments made by this section shall apply 
with respect to surviving spouses and former spouses (whose marriage, 
in the case of the amendments made by subsection (a), terminated after 
May 6, 1985) of former employees who die after the date of the 
enactment of this Act.

SEC. 205. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBUTION RULES.

  (a) Simplification and Finalization of Minimum Distribution 
Requirements.--
          (1) In general.--The Secretary of the Treasury shall--
                  (A) simplify and finalize the regulations relating to 
                minimum distribution requirements under sections 
                401(a)(9), 408(a)(6) and (b)(3), 403(b)(10), and 
                457(d)(2) of the Internal Revenue Code of 1986, and
                  (B) modify such regulations to--
                          (i) reflect increases in life expectancy, and
                          (ii) revise the required distribution methods 
                        so that, under reasonable assumptions, the 
                        amount of the required minimum distribution 
                        does not decrease over a participant's life 
                        expectancy.
          (2) Fresh start.--Notwithstanding subparagraph (D) of section 
        401(a)(9) of such Code, during the first year that regulations 
        are in effect under this subsection, required distributions for 
        future years may be redetermined to reflect changes under such 
        regulations. Such redetermination shall include the opportunity 
        to choose a new designated beneficiary and to elect a new 
        method of calculating life expectancy.
          (3) Effective date for regulations.--Regulations referred to 
        in paragraph (1) shall be effective for years beginning after 
        December 31, 2000, and shall apply in such years without regard 
        to whether an individual had previously begun receiving minimum 
        distributions.
  (b) Amount Not Subject to Minimum Distribution Requirements.--
Paragraph (9) of section 401(a) is amended--
          (1) in subparagraph (A), by inserting ``(minus the exclusion 
        amount)'' after ``the entire interest''; and
          (2) by adding at the end the following:
                  ``(H) Exclusion amount.--
                          ``(i) In general.--For purposes of this 
                        paragraph, the term `exclusion amount' means--
                                  ``(I) $100,000 in the case of a 
                                defined contribution plan;
                                  ``(II) $100,000 in the case of an 
                                individual retirement plan; and
                                  ``(III) $0 in the case of a defined 
                                benefit plan.
                          ``(ii) Aggregation of plans.--For purposes of 
                        determining the exclusion amount under clause 
                        (i)--
                                  ``(I) all defined contribution plans 
                                maintained by the same employer shall 
                                be treated as a single plan; and
                                  ``(II) all individual retirement 
                                plans (other than Roth IRAs) of the 
                                individual shall be treated as a single 
                                plan.
                          ``(iii) Cost-of-living adjustment.--The 
                        Secretary shall adjust the $100,000 exclusion 
                        amount specified in clause (i) at the same time 
                        and in the same manner as under section 415(d), 
                        except that the base period shall be the 
                        calendar quarter ending September 30, 1999.''.
          (3) Effective date.--The amendments made by this subsection 
        shall apply to years beginning after December 31, 2000.
  (c) 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)(iii) (as so 
                redesignated) is amended--
                          (i) by striking ``clause (iii)(I)'' and 
                        inserting ``clause (ii)(I)'',
                          (ii) in subclause (I) by striking ``clause 
                        (iii)(III)'' and inserting ``clause 
                        (ii)(III)'',
                          (iii) in subclause (I) by striking ``the date 
                        on which the employee would have attained the 
                        age 70\1/2\,'' and inserting ``April 1 of the 
                        calendar year following the calendar year in 
                        which the spouse attains 70\1/2\, and clause 
                        (ii) shall not apply to the exclusion 
                        amount,'', and
                          (iv) in subclause (II) by striking ``the 
                        distributions to such spouse begin,'' and 
                        inserting ``his entire interest has been 
                        distributed to him,''.
          (3) Reduction in excise tax.--Subsection (a) of section 4974 
        is amended by striking ``50 percent'' and inserting ``10 
        percent''.
          (4) Effective date.--
                  (A) In general.--Except as provided by subparagraph 
                (B), the amendments made by this subsection shall apply 
                to years beginning after December 31, 2000.
                  (B) Excise tax.--The amendment made by paragraph (3) 
                shall apply to years beginning after December 31, 1999.

SEC. 206. CLARIFICATION OF TAX TREATMENT OF DIVISION OF SECTION 457 
                    PLAN BENEFITS UPON DIVORCE.

  (a) In General.--Section 414(p)(11) (relating to application of rules 
to governmental and church plans) is amended--
          (1) by inserting ``or an eligible deferred compensation plan 
        (within the meaning of section 457(b))'' after ``subsection 
        (e))'', and
          (2) in the heading, by striking ``governmental and church 
        plans'' and inserting ``certain other plans''.
  (b) Waiver of Certain Distribution Requirements.--Paragraph (10) of 
section 414(p) is amended by striking ``and section 409(d)'' and 
inserting ``section 409(d), and section 457(d)''.
  (c) Tax Treatment of Payments From a Section 457 Plan.--Subsection 
(p) of section 414 is amended by redesignating paragraph (12) as 
paragraph (13) and inserting after paragraph (11) the following new 
paragraph:
          ``(12) Tax treatment of payments from a section 457 plan.--If 
        a distribution or payment from an eligible deferred 
        compensation plan described in section 457(b) is made pursuant 
        to a qualified domestic relations order, rules similar to the 
        rules of section 402(e)(1)(A) shall apply to such distribution 
        or payment.''.
  (d) Effective Date.--The amendments made by this section shall apply 
to transfers, distributions, and payments made after the date of 
enactment of this Act.

SEC. 207. PERCENTAGE LIMITATIONS ON CONTRIBUTIONS.

  (a) Amendments Relating to FERS.--
          (1) In general.--
                  (A) Subsection (a) of section 8432 of title 5, United 
                States Code, is amended by striking ``10 percent of ''.
                  (B) Subsection (d) of section 8432 of title 5, United 
                States Code, is amended by striking ``section 415'' and 
                inserting ``section 401(a)(30) or 415''.
          (2) Justices and judges.--Subsection (b) of section 8440a of 
        title 5, United States Code, is amended--
                  (A) by striking paragraph (2) and by redesignating 
                paragraphs (3) through (7) as paragraphs (2) through 
                (6), respectively; and
                  (B) in paragraph (6) (as so redesignated by 
                subparagraph (A)) by striking ``paragraphs (4) and 
                (5)'' and inserting ``paragraphs (3) and (4)''.
          (3) Bankruptcy judges and magistrates.--Subsection (b) of 
        section 8440b of title 5, United States Code, is amended--
                  (A) by striking paragraph (2) and by redesignating 
                paragraphs (3) through (8) as paragraphs (2) through 
                (7), respectively;
                  (B) in paragraph (4) (as so redesignated by 
                subparagraph (A)) by striking ``paragraph (4)(A), (B), 
                or (C)'' and inserting ``paragraph (3)(A), (B), or 
                (C)''; and
                  (C) in paragraph (7) (as so redesignated by 
                subparagraph (A)) by striking ``Notwithstanding 
                paragraph (4),'' and inserting ``Notwithstanding 
                paragraph (3),''.
          (4) Court of federal claims judges.--Subsection (b) of 
        section 8440c of title 5, United States Code, is amended--
                  (A) by striking paragraph (2) and by redesignating 
                paragraphs (3) through (8) as paragraphs (2) through 
                (7), respectively;
                  (B) in paragraph (4) (as so redesignated by 
                subparagraph (A)) by striking ``paragraph (4)(A) or 
                (B)'' and inserting ``paragraph (3)(A) or (B)''; and
                  (C) in paragraph (7) (as so redesignated by 
                subparagraph (A)) by striking ``Notwithstanding 
                paragraph (4),'' and inserting ``Notwithstanding 
                paragraph (3),''.
          (5) Judges of the united states court of veterans appeals.--
        Paragraph (2) of section 8440d(b) of title 5, United States 
        Code, is amended to read as follows:
  ``(2) For purposes of contributions made to the Thrift Savings Fund, 
basic pay does not include any retired pay paid pursuant to section 
7296 of title 38.''.
  (b) Amendments Relating to CSRS.--Paragraph (2) of section 8351(b) of 
title 5, United States Code, is amended by striking ``5 percent of ''.
  (c) Effective Date.--
          (1) In general.--The amendments made by this section shall 
        take effect on the date of enactment of this Act.
          (2) Coordination with election periods.--The Executive 
        Director shall by regulation determine the first election 
        period in which elections may be made consistent with the 
        amendments made by this section.
          (3) Definitions.--For purposes of this section--
                  (A) the term ``election period'' means a period 
                afforded under section 8432(b) of title 5, United 
                States Code; and
                  (B) the term ``Executive Director'' has the meaning 
                given such term by section 8401(13) of title 5, United 
                States Code.

SEC. 208. ELIGIBLE ROLLOVER DISTRIBUTIONS.

  Section 8432 of title 5, United States Code, is amended by adding at 
the end the following:
  ``(j)(1) For the purpose of this subsection--
          ``(A) the term `eligible rollover distribution' has the 
        meaning given such term by section 402(c)(3) of the Internal 
        Revenue Code of 1986; and
          ``(B) the term `eligible retirement plan' has the meaning 
        given such term by section 402(c)(7) of the Internal Revenue 
        Code of 1986.
  ``(2) An employee or Member may contribute to the Thrift Savings Fund 
an eligible rollover distribution from an eligible retirement plan. A 
contribution made under this subsection shall be made by means of a 
direct rollover from an eligible retirement plan in a manner that is 
similar to a direct rollover under section 401(a)(31) of the Internal 
Revenue Code of 1986. In the case of an eligible rollover distribution, 
the maximum amount transferred to the Thrift Savings Fund shall not 
exceed the amount which would otherwise have been included in the 
employee's or Member's gross income for Federal income tax purposes.
  ``(3) The Executive Director shall prescribe regulations to carry out 
this subsection.''.

SEC. 209. IMMEDIATE PARTICIPATION IN THE THRIFT SAVINGS PLAN.

  (a) Elimination of Certain Waiting Periods for Purposes of Employee 
Contributions.--Paragraph (4) of section 8432(b) of title 5, United 
States Code, is amended to read as follows:
  ``(4) The Executive Director shall prescribe such regulations as may 
be necessary to carry out the following:
          ``(A) Notwithstanding subparagraph (A) of paragraph (2), an 
        employee or Member described in such subparagraph shall be 
        afforded a reasonable opportunity to first make an election 
        under this subsection beginning on the date of commencing 
        service or, if that is not administratively feasible, beginning 
        on the earliest date thereafter that such an election becomes 
        administratively feasible, as determined by the Executive 
        Director.
          ``(B) An employee or Member described in subparagraph (B) of 
        paragraph (2) shall be afforded a reasonable opportunity to 
        first make an election under this subsection (based on the 
        appointment or election described in such subparagraph) 
        beginning on the date of commencing service pursuant to such 
        appointment or election or, if that is not administratively 
        feasible, beginning on the earliest date thereafter that such 
        an election becomes administratively feasible, as determined by 
        the Executive Director.
          ``(C) Notwithstanding the preceding provisions of this 
        paragraph, contributions under paragraphs (1) and (2) of 
        subsection (c) shall not be payable with respect to any pay 
        period before the earliest pay period for which such 
        contributions would otherwise be allowable under this 
        subsection if this paragraph had not been enacted.
          ``(D) Sections 8351(a)(2), 8440a(a)(2), 8440b(a)(2), 
        8440c(a)(2), and 8440d(a)(2) shall be applied in a manner 
        consistent with the purposes of subparagraphs (A) and (B), to 
        the extent those subparagraphs can be applied with respect 
        thereto.
          ``(E) Nothing in this paragraph shall affect paragraph 
        (3).''.
  (b) Technical and Conforming Amendments.--(1) Section 8432(a) of 
title 5, United States Code, is amended--
          (A) in the first sentence by striking ``(b)(1)'' and 
        inserting ``(b)''; and
          (B) by amending the second sentence to read as follows: 
        ``Contributions under this subsection pursuant to such an 
        election shall, with respect to each pay period for which such 
        election remains in effect, be made in accordance with a 
        program of regular contributions provided in regulations 
        prescribed by the Executive Director.''.
  (2) Section 8432(b)(1)(B) of title 5, United States Code, is amended 
by inserting ``(or any election allowable by virtue of paragraph (4))'' 
after ``subparagraph (A)''.
  (3) Section 8432(b)(3) of title 5, United States Code, is amended by 
striking ``Notwithstanding paragraph (2)(A), an'' and inserting ``An''.
  (4) Section 8432(i)(1)(B)(ii) of title 5, United States Code, is 
amended by striking ``either elected to terminate individual 
contributions to the Thrift Savings Fund within 2 months before 
commencing military service or''.
  (5) Section 8439(a)(1) of title 5, United States Code, is amended by 
inserting ``who makes contributions or'' after ``for each individual'' 
and by striking ``section 8432(c)(1)'' and inserting ``section 8432''.
  (6) Section 8439(c)(2) of title 5, United States Code, is amended by 
adding at the end the following: ``Nothing in this paragraph shall be 
considered to limit the dissemination of information only to the times 
required under the preceding sentence.''.
  (7) Sections 8440a(a)(2) and 8440d(a)(2) of title 5, United States 
Code, are amended by striking all after ``subject to'' and inserting 
``this chapter.''.
  (c) Effective Date.--This section shall take effect 6 months after 
the date of enactment of this Act or such earlier date as the Executive 
Director (within the meaning of section 8401(13) of title 5, United 
States Code) may by regulation prescribe.

           TITLE III--INCREASING PORTABILITY FOR PARTICIPANTS

SEC. 301. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.

  (a) Rollovers From and to Section 457 Plans.--
          (1) Rollovers from section 457 plans.--
                  (A) In general.--Section 457(e) (relating to other 
                definitions and special rules) is amended by adding at 
                the end the following:
          ``(16) Rollover amounts.--
                  ``(A) General rule.--In the case of an eligible 
                deferred compensation plan, if--
                          ``(i) any portion of the balance to the 
                        credit of an employee in such plan is paid to 
                        such employee in an eligible rollover 
                        distribution (within the meaning of section 
                        402(c)(4) (other than section 402(c)(4)(C)),
                          ``(ii) the employee transfers any portion of 
                        the property such employee receives in such 
                        distribution to an eligible retirement plan 
                        described in section 402(c)(8)(B), and
                          ``(iii) in the case of a distribution of 
                        property other than money, the amount so 
                        transferred consists of the property 
                        distributed,
                then such distribution (to the extent so transferred) 
                shall not be includible in gross income for the taxable 
                year in which paid.
                  ``(B) Certain rules made applicable.--The rules of 
                paragraphs (2) through (7) (other than paragraph 
                (4)(C)) and (9) of section 402(c) and section 402(f) 
                shall apply for purposes of subparagraph (A).
                  ``(C) Reporting.--Rollovers under this paragraph 
                shall be reported to the Secretary in the same manner 
                as rollovers from qualified retirement plans (as 
                defined in section 4974(c)).''.
                  (B) Deferral limit determined without regard to 
                rollover amounts.--Section 457(b)(2) (defining eligible 
                deferred compensation plan) is amended by inserting 
                ``(other than rollover amounts)'' after ``taxable 
                year''.
                  (C) Direct rollover.--Paragraph (1) of section 457(d) 
                is amended by striking ``and'' at the end of 
                subparagraph (A), by striking the period at the end of 
                subparagraph (B) and inserting ``, and'', and by 
                inserting after subparagraph (B) the following:
                  ``(C) 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);''.
                          (ii) Paragraph (5) of section 3405(e) is 
                        amended by adding at the end the following: 
                        ``Such term shall include an eligible deferred 
                        compensation plan described in section 
                        457(b).''.
                          (iii) Paragraph (3) of section 3405(c) is 
                        amended to read as follows:
          ``(3) Eligible rollover distribution.--For purposes of this 
        subsection, the term `eligible rollover distribution' has the 
        meaning given such term by section 402(f)(2)(A).''.
                          (iv) Liability for withholding.--Subparagraph 
                        (B) of section 3405(d)(2) is amended by 
                        striking ``or'' at the end of clause (ii), by 
                        striking the period at the end of clause (iii) 
                        and inserting ``, or'', and by adding at the 
                        end the following:
                          `(iv) section 457(b).''.
          (2) Rollovers to section 457 plans.--
                  (A) Section 402(c)(8)(B) (defining eligible 
                retirement plan) is amended by striking ``and'' at the 
                end of clause (iii), by striking the period at the end 
                of clause (iv) and inserting ``, and'', and by adding 
                at the end the following:
                          ``(v) an eligible deferred compensation plan 
                        described in section 457(b) of an eligible 
                        employer described in section 457(e)(1)(A).''.
                  (B) Paragraph (9) of section 402(c) is amended by 
                striking ``except that'' and all that follows and 
                inserting ``except that only an account or annuity 
                described in clause (i) or (ii) of paragraph (8)(B) 
                shall be treated as an eligible retirement plan with 
                respect to such distribution.''.
                  (C) Subsection (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 
        employer described in section 457(e)(1)(A) shall be treated as 
        a distribution from a qualified retirement plan 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)). For purposes 
        of this subsection, any such distribution shall be treated as 
        if made from a qualified retirement plan described in section 
        4974(c)(1). This paragraph shall only apply to a transfer that 
        is in excess of $50,000 and that is permitted by reason of 
        section 402(c)(8)(B)(v) or section 408(d)(3)(A)(ii).''.
                  (D) Subsection (a) of section 457 (relating to year 
                of inclusion in gross income) is amended--
                          (i) by striking ``or otherwise made 
                        available'', and
                          (ii) by adding at the end the following: ``To 
                        the extent provided in section 72(t)(9), 
                        section 72(t) shall apply to any amount 
                        includible in gross income under this 
                        subsection.''.
          (3) Minimum distributions.--Paragraph (2) of section 457(d) 
        is amended to read as follows:
          ``(2) Minimum distribution requirements.--A plan meets the 
        distribution requirements of this paragraph if the plan meets 
        the requirements of section 401(a)(9).''.
          (4) Conforming amendment.--Paragraph (9) of section 457(e) is 
        amended to read as follows:
          ``(9) Benefits not treated as failing to meet distribution 
        requirements of subsection (d).--A plan shall not be treated as 
        failing to meet the distribution requirements of subsection (d) 
        by reason of a distribution of the total amount payable to a 
        participant under the plan if--
                  ``(A) such amount does not exceed the dollar limit 
                under section 411(a)(11)(A), and
                  ``(B) such amount may be distributed only if--
                          ``(i) no amount has been deferred under the 
                        plan with respect to such participant during 
                        the 2-year period ending on the date of the 
                        distribution, and
                          ``(ii) there has been no prior distribution 
                        under the plan to such participant to which 
                        this paragraph applied.''.
  (b) Allowance of Rollovers From and to 403(b) Plans.--
          (1) Rollovers from section 403(b) plans.--Section 
        403(b)(8)(A)(ii) (relating to rollover amounts) is amended by 
        striking ``such distribution'' and all that follows and 
        inserting ``such distribution to an eligible retirement plan 
        described in section 402(c)(8)(B), and''.
          (2) Rollovers to section 403(b) plans.--Section 402(c)(8)(B) 
        (defining eligible retirement plan), as amended by subsection 
        (a), is amended by striking ``and'' at the end of clause (iv), 
        by striking the period at the end of clause (v) and inserting 
        ``, and'', and by adding at the end the following:
                          ``(vi) an annuity contract described in 
                        section 403(b).''
          (3) Conforming amendment.--Subparagraph (B) of section 
        403(b)(8) is amended by striking ``Rules similar to the'' and 
        inserting ``The''.
  (c) Expanded Explanation to Recipients of Rollover Distributions.--
Paragraph (1) of section 402(f) (relating to written explanation to 
recipients of distributions eligible for rollover treatment) is amended 
by striking ``and'' at the end of subparagraph (C), by striking the 
period at the end of subparagraph (D) and inserting ``, and'', and by 
adding at the end the following new subparagraph:
                  ``(E) of the provisions under which distributions 
                from the eligible retirement plan receiving the 
                distribution may be subject to restrictions and tax 
                consequences which are different from those applicable 
                to distributions from the plan making such 
                distribution.''.
  (d) Conforming Amendments.--
          (1) Section 72(o)(4) is amended by striking ``and 408(d)(3)'' 
        and inserting ``403(b)(8), 408(d)(3), and 457(e)(16)''.
          (2) Section 219(d)(2) is amended by striking ``or 408(d)(3)'' 
        and inserting ``408(d)(3), or 457(e)(16)''.
          (3) Section 401(a)(31)(B) is amended by striking ``and 
        403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and 
        457(e)(16)''.
          (4) Subparagraph (A) of section 402(f)(2) is amended by 
        striking ``or paragraph (4) of section 403(a)'' and inserting 
        ``, paragraph (4) of section 403(a), subparagraph (A) of 
        section 403(b)(8), or subparagraph (A) of section 457(e)(16)''.
          (5) Paragraph (1) of section 402(f) is amended by striking 
        ``from an eligible retirement plan''.
          (6) Subparagraphs (A) and (B) of section 402(f)(1) are 
        amended by striking ``another eligible retirement plan'' and 
        inserting ``an eligible retirement plan''.
          (7) Subparagraph (B) of section 403(b)(8) is amended by 
        striking ``shall apply for purposes of subparagraph (A)'' and 
        inserting ``and section 402(f) shall apply for purposes of 
        subparagraph (A), except that section 402(f) shall be applied 
        to the payor in lieu of the plan administrator''.
          (8) Subparagraph (B) of section 403(b)(8) is amended by 
        inserting ``and (9)'' after ``through (7)''.
          (9) Section 408(a)(1) is amended by striking ``or 403(b)(8)'' 
        and inserting ``, 403(b)(8), or 457(e)(16)''.
          (10) Subparagraphs (A) and (B) of section 415(b)(2) are each 
        amended by striking ``and 408(d)(3)'' and inserting 
        ``403(b)(8), 408(d)(3), and 457(e)(16)''.
          (11) Section 415(c)(2) is amended by striking ``and 
        408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
          (12) Section 4973(b)(1)(A) is amended by striking ``or 
        408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
  (e) Effective Date; Special Rule.--
          (1) Effective date.--The amendments made by this section 
        shall apply to distributions after December 31, 1999.
          (2) Special rule.--Notwithstanding any other provision of 
        law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
        Reform Act of 1986 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. 302. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.

  (a) In General.--Subparagraph (A) of section 408(d)(3) (relating to 
rollover amounts) is amended by 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 he receives the payment 
                        or distribution.
                For purposes of clause (ii), the term `eligible 
                retirement plan' has the meaning given such term by 
                clauses (iii), (iv), (v), and (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, 1999.
          (2) Special rule.--Notwithstanding any other provision of 
        law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
        Reform Act of 1986 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. 303. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.

  (a) In General.--
          (1) Subsection (c) of section 402 (relating to rules 
        applicable to rollovers from exempt trusts) (as amended by 
        section 2) is amended by striking paragraph (2) and 
        redesignating paragraphs (3) through (10) as paragraphs (2) 
        through (9), respectively.
          (2) Paragraph (31) of section 401(a) (relating to optional 
        direct transfer of eligible rollover distributions) is amended 
        by striking subparagraph (B) and redesignating subparagraphs 
        (C) and (D) as subparagraphs (B) and (C), respectively.
          (3) Subparagraph (B) of section 408(d)(3) (relating to 
        rollover contributions) is amended by striking ``which was not 
        includible in his gross income because of the application of 
        this paragraph'' and inserting ``to which this paragraph 
        applied''.
          (4) Paragraph (7)(B) of section 402(c) (as redesignated by 
        subsection (a)(1) and as amended by section 301) is amended--
                  (A) by striking ``The term'' and inserting ``Except 
                as provided in this subparagraph, the term'', and
                  (B) by adding at the end the following:
                ``Arrangements described in clauses (iii), (iv) (v), 
                and (vi) shall not be treated as eligible retirement 
                plans for purposes of receiving a rollover contribution 
                of an eligible rollover distribution to the extent that 
                such eligible rollover distribution is not includible 
                in gross income (determined without regard to paragraph 
                (1)).''.
          (5) Paragraph (2) of section 408(d) is amended--
                  (A) by striking ``For purposes'' and inserting the 
                following:
                  ``(A) In general.--Except as provided in this 
                paragraph, for purposes'',
                  (B) by striking ``(A) all'' and inserting ``(i) 
                all'';
                  (C) by striking ``(B) all'' and inserting ``(ii) 
                all'';
                  (D) by striking ``(C) the'' and inserting ``(iii) 
                the'',
                  (E) by striking ``subparagraph (C)'' and inserting 
                ``clause (iii)'', and
                  (F) by inserting at the end the following:
                  ``(B) Application of section 72.--For purposes of 
                applying section 72, if--
                          ``(i) a distribution is made from an 
                        individual retirement plan, and
                          ``(ii) a rollover contribution described in 
                        paragraph (3) is made to an eligible retirement 
                        plan described in section 402(c)(7)(B)(iii), 
                        (iv), (v), or (vi) with respect to all or part 
                        of such distribution,
                the includible amount in the individual's individual 
                retirement plans shall be reduced by the amount 
                described in subparagraph (C). As of the close of the 
                calendar year in which the taxable year begins, the 
                reduction of all amounts described in subparagraph 
                (C)(i) shall be applied prior to the computations 
                described in subparagraph (A)(iii). The amount of any 
                distribution with respect to which there is a rollover 
                contribution described in clause (ii) shall not be 
                treated as a distribution for purposes of subparagraph 
                (A).
                  ``(C) Amount described.--The amount described in this 
                subparagraph is the sum of--
                          ``(i) the amount of the rollover contribution 
                        described in subparagraph (B)(ii), and
                          ``(ii) in the case of any portion of the 
                        distribution with respect to which there is not 
                        a rollover contribution described in paragraph 
                        (3), the amount of such portion that is 
                        included in gross income under section 72.
                  ``(D) Includible amount.--For purposes of this 
                paragraph, the term `includible amount' shall mean the 
                amount that is not investment in the contract (as 
                defined in section 72).''.
          (6) Subparagraph (C) of section 402(c)(5) (as redesignated by 
        subsection (a)(1)) is amended by inserting after ``other than 
        money'' the following: ``or where the amount of the 
        distribution exceeds the amount of the rollover contribution''.
  (b) Hardship Exception to 60-Day Rule.--
          (1) Paragraph (2) of section 402(c) (as so redesignated) is 
        amended to read as follows:
          ``(2) Transfer must be made within 60 days of receipt.--
                  ``(A) In general.--Except as provided in subparagraph 
                (B), paragraph (1) shall not apply to any transfer of a 
                distribution made after the 60th day following the day 
                on which the distributee received the property 
                distributed.
                  ``(B) Hardship exception.--The Secretary may waive 
                the 60-day requirement under subparagraph (A) where the 
                failure to waive such requirement would be against 
                equity or good conscience, including casualty, 
                disaster, or other events beyond the reasonable control 
                of the individual subject to such requirement.''.
          (2) Paragraph (3) of section 408(d) (relating to rollover 
        contributions) is amended by adding at the end the following 
        new subparagraph:
                  ``(H) Waiver of 60-day requirement.--The Secretary 
                may waive the 60-day requirement under subparagraphs 
                (A) and (D) where the failure to waive such requirement 
                would be against equity or good conscience, including 
                casualty, disaster, or other events beyond the 
                reasonable control of the individual subject to such 
                requirement.''.
  (c) Conforming Amendments.--
          (1) Paragraph (4) of section 402(c) (as redesignated by 
        subsection (a)(1)) is amended by striking ``(8)(B)'' and 
        inserting ``(7)(B)''.
          (2) Subparagraph (B) of section 403(a)(4) is amended by 
        striking ``(2) through (7)'' and inserting ``(2) through (6)''.
          (3) Section 403(b)(8)(A)(ii) (as amended by section 301) is 
        amended by striking ``section 402(c)(8)(B)'' and inserting 
        ``section 402(c)(7)(B)''.
          (4) Subparagraph (B) of section 403(b)(8) (as amended by 
        section 301) is amended by striking ``(2) through (7) and (9) 
        of section 402(c) (including paragraph (4)(C) thereof)'' and 
        inserting ``(2) through (6) and (8) of section 402(c) 
        (including paragraph (3)(C) thereof)''.
          (5) Subparagraph (A) of section 408(d)(3) (as amended by 
        section 302) is amended by striking ``402(c)(8)'' and inserting 
        ``402(c)(7)''.
          (6) Paragraph (16) of section 457(e) (as added by section 
        301) is amended--
                  (A) in subparagraph (A)(i) by striking ``402(c)(4) 
                (other than section 402(c)(4)(C))'' and inserting 
                ``section 402(c)(3) (other than section 
                402(c)(3)(C))'',
                  (B) in subparagraph (A)(ii) by striking 
                ``402(c)(8)(B)'' and inserting ``402(c)(7)(B)'', and
                  (C) in subparagraph (B) by striking ``paragraphs (2) 
                through (7) (other than paragraph (4)(C)) and (9) of 
                section 402(c)'' and inserting ``paragraphs (2) through 
                (6) (other than paragraph (3)(C)) and (8) of section 
                402(c)''.
  (d) Effective Date.--
          (1) In general.--Except as provided by paragraph (2), the 
        amendments made by this section shall apply to distributions 
        made after December 31, 1999.
          (2) Hardship exception.--The amendments made by subsection 
        (b) shall apply to 60-day periods ending after the date of the 
        enactment of this Act.

SEC. 304. TREATMENT OF FORMS OF DISTRIBUTION.

  (a) In General.--
          (1) Plan transfers.--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) 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 paragraph 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;
                                  ``(V) if the transferor plan provides 
                                for an annuity as the normal form of 
                                distribution under the plan in 
                                accordance with section 417, the 
                                transfer is made with the consent of 
                                the participant's spouse (if any), and 
                                such consent meets requirements similar 
                                to the requirements imposed by section 
                                417(a)(2); and
                                  ``(VI) the transferee plan allows the 
                                participant or beneficiary described in 
                                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) Clause (i) shall apply to plan mergers 
                        and other transactions having the effect of a 
                        direct transfer, including consolidations of 
                        benefits attributable to different employers 
                        within a multiple employer plan.
                  ``(E) Elimination of form of distribution.--Except to 
                the extent provided in regulations, a defined 
                contribution plan shall not be treated as failing to 
                meet the requirements of this section merely because of 
                the elimination of a form of distribution previously 
                available thereunder. This subparagraph shall not apply 
                to the elimination of a form of distribution with 
                respect to any participant unless--
                          ``(i) a single sum payment is available to 
                        such participant at the same time or times as 
                        the form of distribution being eliminated; and
                          ``(ii) such single sum payment is based on 
                        the same or greater portion of the 
                        participant's account as the form of 
                        distribution being eliminated.''.
          (2) Regulations.--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 
        may by regulations provide that this subparagraph shall not 
        apply to any plan amendment that does not adversely affect the 
        rights of participants in a material manner.
          (3) Secretary directed.--Not later than December 31, 2001, 
        the Secretary of the Treasury is directed to issue final 
        regulations under section 411(d)(6) of the Internal Revenue 
        Code of 1986. Such regulations shall apply to plan years 
        beginning after December 31, 2001 or such earlier date as is 
        specified by the Secretary of the Treasury. Under such 
        regulations, section 411(d)(6) of such Code shall not apply to 
        plan amendments that do not adversely affect the rights of 
        participants in a material manner. In determining whether a 
        plan amendment has such a materially adverse effect on a 
        participant, the factors taken into account shall include--
                  (A) all of the participant's early retirement 
                benefits, retirement-type subsidies, and optional forms 
                of benefit that are reduced or eliminated by the plan 
                amendment,
                  (B) the extent to which early retirement benefits, 
                retirement-type subsidies, and optional forms of 
                benefit in effect with respect to a participant after 
                the effective date of the plan amendment provide rights 
                that are comparable to the rights that are reduced or 
                eliminated by the plan amendment,
                  (C) the number of years before the participant 
                attains normal retirement age under the plan (or early 
                retirement age, as applicable),
                  (D) the size of the participant's benefit that is 
                affected by the plan amendment, in relation to the 
                amount of the participant's compensation, and
                  (E) the number of years before the plan amendment is 
                effective.
        The regulations described in this paragraph are intended to 
        permit the elimination or reduction of early retirement 
        benefits, retirement-type subsidies, and optional forms of 
        benefit that do not have a material value for a plan's 
        participants but create significant burdens and complexities 
        for the plan and its participants.
  (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1999.

SEC. 305. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.

  (a) Modification of Same Desk Exception.--
          (1) Section 401(k).--Section 401(k)(2)(B)(i)(I) (relating to 
        qualified cash or deferred arrangements) is amended by striking 
        ``separation from service'' and inserting ``severance from 
        employment''.
          (2) 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) Business Sale Requirements Repealed.--
          (1) In general.--Section 401(k)(2)(B)(i)(II) (relating to 
        qualified cash or deferred arrangements) is amended by striking 
        ``an event'' and inserting ``a plan termination''.
          (2) Conforming amendments.--Section 401(k)(10) is amended--
                  (A) by striking subparagraph (A) and inserting the 
                following:
                  ``(A) In general.--A plan termination is described in 
                this paragraph if the termination of the plan does not 
                involve the establishment or maintenance of another 
                defined contribution plan (other than an employee stock 
                ownership plan as defined in section 4975(e)(7)).'',
                  (B) in subparagraph (B)--
                          (i) by striking ``An event'' and inserting 
                        ``A termination'', and
                          (ii) by striking ``the event'' and inserting 
                        ``the termination'',
                  (C) by striking subparagraph (C), and
                  (D) by striking ``or disposition of assets or 
                subsidiary'' in the heading.
  (c) Effective Date.--The amendments made by this section shall apply 
to distributions after December 31, 1999.

SEC. 306. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED BENEFIT 
                    PLANS.

  (a) 403(b) Plans.--Subsection (b) of section 403 (as amended by 
section 501) is amended by adding at the end the following new 
paragraph:
          ``(14) Trustee-to-trustee transfers to purchase permissive 
        service credit.--No amount shall be includible in gross income 
        by reason of a direct trustee-to-trustee transfer to a defined 
        benefit governmental plan (as defined in section 414(d)) if 
        such transfer is--
                  ``(A) for the purchase of permissive service credit 
                (as defined in section 415(n)(3)(A)) under such plan, 
                or
                  ``(B) a repayment to which section 415 does not apply 
                by reason of subsection (k)(3) thereof.''.
  (b) 457 Plans.--
          (1) Subsection (e) of section 457 (as amended by section 509) 
        is amended by adding at the end the following new paragraph:
          ``(18) Trustee-to-trustee transfers to purchase permissive 
        service credit.--No amount shall be includible in gross income 
        by reason of a direct trustee-to-trustee transfer to a defined 
        benefit governmental plan (as defined in section 414(d)) if 
        such transfer is--
                  ``(A) for the purchase of permissive service credit 
                (as defined in section 415(n)(3)(A)) under such plan, 
                or
                  ``(B) a repayment to which section 415 does not apply 
                by reason of subsection (k)(3) thereof.''.
          (2) Section 457(b)(2), as amended by sections 101, 202, and 
        301, is amended by striking ``(other than rollover amounts)'' 
        and inserting ``(other than rollover amounts and amounts 
        received in a transfer referred to in subsection (e)(16))''.
  (c) Effective Date.--The amendments made by this section shall apply 
to trustee-to-trustee transfers after December 31, 1999.

SEC. 307. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF CASH-OUT 
                    AMOUNTS.

(a) Amendments to 1986 Code.--
          (1) Section 411(a)(11) (relating to restrictions on certain 
        mandatory distributions) is amended by adding at the end the 
        following:
                  ``(D) Special rule for rollover contributions.--A 
                plan shall not fail to meet the requirements of this 
                paragraph if, under the terms of the plan, the present 
                value of the nonforfeitable accrued benefit is 
                determined without regard to that portion of such 
                benefit which is attributable to rollover contributions 
                (and earnings allocable thereto). For purposes of this 
                subparagraph, the term `rollover contributions' means 
                any rollover contribution under sections 402(c), 
                403(a)(4), 403(b)(8), clause (ii), (iii), or (iv) of 
                408(d)(3)(A), and 457(e)(16).''.
          (2) Clause (i) of section 457(e)(9)(A) is amended by striking 
        ``such amount'' and inserting ``the portion of such amount 
        which is not attributable to rollover contributions (as defined 
        in section 411(a)(11)(D))''.
  (b) Effective Date.--The amendment made by this section shall apply 
to distributions after December 31, 1999.

        TITLE IV--STRENGTHENING PENSION SECURITY AND ENFORCEMENT

SEC. 401. REPEAL OF 150 PERCENT OF CURRENT LIABILITY FUNDING LIMIT.

  (a) In General.--
          (1) Code amendment.--Section 412(c)(7) (relating to full-
        funding limitation) is amended--
                  (A) by striking ``the applicable percentage'' in 
                subparagraph (A)(i)(I) and inserting ``in the case of 
                plan years beginning before January 1, 2003, the 
                applicable percentage'', and
                  (B) by amending subparagraph (F) to read as follows:
                  ``(F) Applicable percentage.--For purposes of 
                subparagraph (A)(i)(I), the applicable percentage shall 
                be determined in accordance with the following table:

                ``In the case of any plan year
                                                         The applicable
                  beginning in--
                                                        percentage is--
                        2000...............................       160  
                        2001...............................       165  
                        2002...............................   170.''.  

          (2) Effective dates.--The amendments made by this subsection 
        shall apply to plan years beginning after December 31, 1999.
  (b) Maximum Contribution Deduction Rules Modified and Applied to All 
Defined Benefit Plans.--
          (1) In general.--Section 404(a)(1)(D) (relating to special 
        rule in case of certain plans) is amended--
                  (A) by striking ``which has more than 100 
                participants for the plan year'',
                  (B) by striking ``unfunded current liability 
                determined under section 414(l)'' and inserting 
                ``unfunded termination liability (determined as if the 
                proposed termination date referred to in section 
                4041(b)(2)(A)(i)(II) of the Employee Retirement Income 
                Security Act of 1974 were the last day of the plan 
                year)'',
                  (C) by inserting after the first sentence the 
                following: ``For purposes of this subparagraph, in the 
                case of a plan which has less than 100 participants for 
                the plan year, termination liability shall not include 
                the liability attributable to benefit increases for 
                highly compensated employees (as defined in section 
                414(q)) brought about by plan amendment within the last 
                2 years before the termination date.'', and
                  (D) by striking ``(other than a multiemployer 
                plan)''.
          (2) Conforming amendment.--Paragraph (6) of section 4972(c) 
        is amended by striking the sentence preceding the last sentence 
        thereof.
          (3) Effective date.--The amendments made by this subsection 
        shall apply to plan years beginning after the date of enactment 
        of this Act.

SEC. 402. PENALTY TAX RELIEF FOR SOUND PENSION FUNDING.

  (a) In General.--Subsection (c) of section 4972 (relating to 
nondeductible contributions) is amended by adding at the end the 
following 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 amendments made by this section shall apply 
to years beginning after December 31, 1999.

                  TITLE V--REDUCING REGULATORY BURDENS

SEC. 501. INTERMEDIATE SANCTIONS FOR INADVERTENT FAILURES.

  (a) In General.--Section 401(a) (relating to qualified pension, 
profit-sharing, and stock bonus plans) is amended by inserting after 
paragraph (34) the following:
          ``(35) Protection from disqualification upon timely 
        correction or payment of fine.--A trust shall not fail to 
        constitute a qualified trust under this section if the plan of 
        which such trust is a part has made good faith efforts to meet 
        the requirements of this section, has inadvertently failed to 
        satisfy 1 or more of such requirements, and either--
                  ``(A) substantially corrects (to the extent possible) 
                such failure before the date the plan becomes subject 
                to a plan examination for the applicable year (as 
                determined under rules prescribed by the Secretary), or
                  ``(B) substantially corrects (to the extent possible) 
                such failure on or after such date.
        If the plan satisfies the requirement under subparagraph (B), 
        the Secretary may require the sponsoring employer to make a 
        payment to the Secretary in an amount that does not exceed an 
        amount that bears a reasonable relationship to the severity of 
        the plan's failure to satisfy the requirements of this 
        section.''.
  (b) Application to Cash or Deferred Arrangements.--Section 401(k) is 
amended by inserting after paragraph (12) the following new paragraph:
          ``(13) Protection from disqualification.--Rules similar to 
        the rules set forth in section 401(a)(35) shall apply for 
        purposes of determining whether a cash or deferred arrangement 
        is a qualified cash or deferred arrangement.''.
  (c) Application to Section 403(b) Annuity Contracts.--Section 403(b) 
is amended by inserting after paragraph (12) the following:
          ``(13) Correction of errors.--For purposes of determining 
        whether the exclusion from gross income under paragraph (1) is 
        applicable to an employee for any taxable year, rules similar 
        to the rules set forth in section 401(a)(35) shall apply to any 
        annuity contract purchased under this subsection or any plan 
        established to meet the requirements of this subsection.''.
  (d) Income Inclusion for Disqualification Not Applicable to Nonhighly 
Compensated Employees.--Section 402(b) (relating to taxability of 
beneficiary of nonexempt trust) is amended by striking paragraph (4) 
and inserting the following:
          ``(4) Income inclusion for disqualification not applicable to 
        nonhighly compensated employees.--Paragraphs (1) and (2) shall 
        not apply to employees who are not highly compensated 
        employees.
          ``(5) Failure to meet requirements of section 401(a)(26) or 
        410(b).--If 1 of the reasons a trust is not exempt from tax 
        under section 501(a) is the failure of the plan to meet the 
        requirements of section 401(a)(26) or 410(b), then a highly 
        compensated employee shall, in lieu of the amount determined 
        under paragraph (1) or (2), include in gross income for the 
        taxable year with or within which the taxable year of the trust 
        ends an amount equal to the vested accrued benefit of such 
        employee (other than the employee's investment in the contract) 
        as of the close of such taxable year of the trust.
          ``(6) Highly compensated employee.--For purposes of this 
        subsection, the term `highly compensated employee' has the 
        meaning given such term by section 414(q).''.
  (e) Effective Date.--The amendments made by this section shall take 
effect on the date of enactment of this Act.

SEC. 502. 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, 1999.

SEC. 503. SAFETY VALVE FROM MECHANICAL RULES.

  (a) In General.--The Secretary of the Treasury, by regulation, shall 
provide that the 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, if--
          (1) the plan satisfies conditions prescribed by the Secretary 
        to appropriately limit the availability of such test, and
          (2) the plan is submitted to the Secretary for a 
        determination of whether it satisfies such test.
Paragraph (2) shall only apply to the extent provided by the Secretary.
  (b) Effective Dates.--
          (1) Regulations.--The regulation required by subsection (a) 
        shall apply to years beginning after December 31, 2000.
          (2) Conditions of availability.--Any condition of 
        availability prescribed by the Secretary under subsection 
        (a)(1) shall not apply before the first year beginning not less 
        than 120 days after the date on which such condition is 
        prescribed.

SEC. 504. REFORM OF THE LINE OF BUSINESS RULES.

  (a) Repeal of Gateway Test.--Paragraph (5) of section 410(b) is 
amended to read as follows:
          ``(5) Line of business exception.--If, under section 414(r), 
        an employer is treated as operating separate lines of business 
        for a year, the employer may apply the requirements of this 
        subsection for such year separately with respect to employees 
        in each separate line of business.''.
  (b) Regulations.--The Secretary of the Treasury shall modify the 
regulations issued under section 414(r) of the Internal Revenue Code of 
1986 (relating to special rules for separate line of business) to--
          (1) simplify the administrability of the rules for both the 
        Secretary and plans, and
          (2) permit employees to be allocated among lines of business 
        based on all the facts and circumstances.
  (c) Effective Dates.--
          (1) Repeal.--The repeal made by subsection (a) shall apply to 
        years beginning after December 31, 2000.
          (2) Regulations.--The regulations modified under subsection 
        (b) shall apply to years beginning after December 31, 2000.

SEC. 505. COVERAGE TEST FLEXIBILITY.

  (a) In General.--Paragraph (1) of section 410(b) is amended by adding 
at the end the following:
                  ``(D) In the case that the plan fails to meet the 
                requirements of subparagraphs (A), (B) and (C), the 
                plan--
                          ``(i) satisfies subparagraph (B), as in 
                        effect immediately before the enactment of the 
                        Tax Reform Act of 1986,
                          ``(ii) is submitted to the Secretary for a 
                        determination of whether it satisfies the 
                        requirement described in clause (i), and
                          ``(iii) satisfies conditions prescribed by 
                        the Secretary by regulation that appropriately 
                        limit the availability of this subparagraph.
                Clause (ii) shall apply only to the extent provided by 
                the Secretary.''.
  (b) Effective Dates.--
          (1) In general.--The amendment made by subsection (a) shall 
        apply to years beginning after December 31, 2000.
          (2) Conditions of availability.--Any condition of 
        availability prescribed by the Secretary under regulations 
        prescribed by the Secretary under section 410(a)(1)(D) of the 
        Internal Revenue Code of 1986 shall not apply before the first 
        year beginning not less than 120 days after the date on which 
        such condition is prescribed.

SEC. 506. INCREASE IN RETIREMENT PLAN CASH-OUT AMOUNT.

  (a) Amendment to 1986 Code.--Section 411(a)(11) (relating to 
restrictions on certain mandatory distributions) is amended by adding 
at the end the following:
                  ``(D) Inflation adjustment.--In the case of any plan 
                year beginning in a calendar year after 1999, the 
                Secretary shall adjust annually the $5,000 amount 
                contained in subparagraph (A) for increases in the cost 
                of living at the same time and in the same manner as 
                adjustments under section 415(d); except that the base 
                period shall be the calendar quarter ending September 
                30, 1999, and any increase which is not a multiple of 
                $500 shall be rounded to the next lowest multiple of 
                $500.''.
  (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning on or after the date of enactment of this Act.

SEC. 507. MODIFICATION OF TIMING OF PLAN VALUATIONS.

  (a) In General.--Section 412(c)(9) (relating to annual valuation) is 
amended--
          (1) by striking ``For purposes'' and inserting the following:
                  ``(A) In general.--For purposes'', and
          (2) by adding at the end the following:
                  ``(B) Election to use prior year valuation.--
                          ``(i) In general.--If, for any plan year--
                                  ``(I) an election is in effect under 
                                this subparagraph with respect to a 
                                plan, and
                                  ``(II) the assets of the plan are not 
                                less than 125 percent of the plan's 
                                current liability (as defined in 
                                paragraph (7)(B)), determined as of the 
                                valuation date for the preceding plan 
                                year, then this section shall be 
                                applied using the information available 
                                as of such valuation date.
                          ``(ii) Adjustments.--Information under clause 
                        (i) shall, in accordance with regulations, be 
                        actuarially adjusted to reflect significant 
                        differences in participants.
                          ``(iii) Election.--An election under this 
                        subparagraph, once made, shall be irrevocable 
                        without the consent of the Secretary.''.
  (b) Effective Date.--The amendments made by this section shall apply 
to plan years beginning on or after the date of enactment of this Act.

SEC. 508. SECTION 457 INAPPLICABLE TO CERTAIN MIRROR PLANS.

  (a) In General.--Subsection (e) of section 457 (relating to deferred 
compensation plans of State and local governments and tax-exempt 
organizations) is amended by adding at the end the following new 
paragraph:
          ``(17) This section shall not apply to a plan, program, or 
        arrangement maintained solely for the purposes of providing 
        retirement benefits for employees in excess of the limitations 
        imposed by sections 401(a)(17) or 415.''.
  (b) Certain Deferred Compensation Not Taken Into Account.--Subsection 
(c) of section 457 (relating to individuals who are participants in 
more than 1 plan) (as amended by section 108(a)) is amended by adding 
at the end the following: ``This section shall be applied without 
regard to a plan, program, or arrangement described in subsection 
(e)(17).''.
  (c) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 1999.

SEC. 509. 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, 1999.

SEC. 510. MODIFICATION OF 403(B) EXCLUSION ALLOWANCE TO CONFORM TO 415 
                    MODIFICATION.

  The Secretary of the Treasury shall modify the regulations regarding 
the exclusion allowance under section 403(b)(2) of the Internal Revenue 
Code of 1986 to render void the requirement that contributions to a 
defined benefit pension plan be treated as previously excluded amounts 
for purposes of the exclusion allowance. For taxable years beginning 
after December 31, 1999, such regulations shall be applied as if such 
requirement were void.

SEC. 511. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.

  (a) Compensation Limit.--Paragraph (11) of section 415(b) (relating 
to limitation for defined benefit plans) is amended to read as follows:
          ``(11) Special limitation rule for governmental and 
        multiemployer plans.--In the case of a governmental plan (as 
        defined in section 414(d)) or a multiemployer plan (as defined 
        in section 414(f)), subparagraph (B) of paragraph (1) shall not 
        apply.''.
  (b) Exemption for Survivor and Disability Benefits.--Subparagraph (I) 
of section 415(b)(2) (relating to limitation for defined benefit plans) 
is amended--
          (1) by inserting ``or a multiemployer plan (as defined in 
        section 414(f))'' after ``section 414(d))'' in clause (i),
          (2) by inserting ``or multiemployer plan'' after 
        ``governmental plan'' in clause (ii), and
          (3) by inserting ``and multiemployer'' after ``governmental'' 
        in the heading.
  (c) Combining and Aggregation of Plans.--
          (1) Combining of plans.--Subsection (f) of section 415 
        (relating to combining of plans) is amended by adding at the 
        end the following:
          ``(3) Exception for multiemployer plans.--Notwithstanding 
        paragraph (1) and subsection (g), a multiemployer plan (as 
        defined in section 414(f)) shall not be combined or aggregated 
        with any other plan maintained by an employer for purposes of 
        applying the limitations established in this section.''.
          (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''.
  (d) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 1999.

SEC. 512. ELIMINATION OF PARTIAL TERMINATION RULES FOR MULTIEMPLOYER 
                    PLANS.

  (a) Partial Termination Rules for Multiemployer Plans.--Section 
411(d)(3) (relating to termination or partial termination; 
discontinuance of contributions) is amended by adding at the end the 
following new sentence: ``This paragraph shall not apply in the case of 
a partial termination of a multiemployer plan.''.
  (b) Effective Date.--The amendment made by this section shall apply 
to partial terminations beginning after December 31, 1999.

SEC. 513. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

  (a) Expansion of Period.--
          (1) In general.--Subparagraph (A) of section 417(a)(6) is 
        amended by striking ``90-day'' and inserting ``one-year''.
          (2) Modification of regulations.--The Secretary of the 
        Treasury shall modify the regulations under sections 402(f), 
        411(a)(11), and 417 of the Internal Revenue Code of 1986 to 
        substitute ``one year'' for ``90 days'' each place it appears 
        in Treasury Regulations sections 1.402(f)-1, 1.411(a)-11(c), 
        and 1.417(e)-1(b).
          (3) Effective date.--The amendment made by paragraph (1) and 
        the modifications required by paragraph (2) shall apply to 
        years beginning after December 31, 1999.
  (b) Consent Regulation Inapplicable to Certain Distributions.--
          (1) In general.--The Secretary of the Treasury shall modify 
        the regulations under section 411(a)(11) of the Internal 
        Revenue Code of 1986 to provide that the description of a 
        participant's right, if any, to defer receipt of a distribution 
        shall also describe the consequences of failing to defer such 
        receipt.
          (2) Effective date.--The modifications required by paragraph 
        (1) shall apply to years beginning after December 31, 1999.

SEC. 514. CONFORMING AMENDMENTS RELATING TO ELECTION TO RECEIVE TAXABLE 
                    CASH COMPENSATION IN LIEU OF NONTAXABLE PARKING 
                    BENEFITS.

  (a) In General.--
          (1) Clause (ii) of section 415(c)(3)(D) and subparagraph (B) 
        of section 403(b)(3) are each amended by striking ``section 125 
        or'' and inserting ``section 125, 132(f)(4), or''.
          (2) Paragraph (2) of section 414(s) is amended by striking 
        ``section 125, 402(e)(3)'' and inserting ``section 125, 
        132(f)(4), 402(e)(3)''.
  (b) Effective Date.--The amendments made by subsection (a) shall take 
effect as if included in the amendment made by section 1072 of the 
Taxpayer Relief Act of 1997.

SEC. 515. EXTENSION TO INTERNATIONAL ORGANIZATIONS OF MORATORIUM ON 
                    APPLICATION OF CERTAIN NONDISCRIMINATION RULES 
                    APPLICABLE TO STATE AND LOCAL PLANS.

  (a) In General.--Subparagraph (G) of section 401(a)(5), subparagraph 
(H) of section 401(a)(26), subparagraph (G) of section 401(k)(3), and 
paragraph (2) of section 1505(d) of the Taxpayer Relief Act of 1997 are 
each amended by inserting ``or by an international organization which 
is described in section 414(d)'' after ``or instrumentality thereof)''.
  (b) Conforming Amendments.--
          (1) The headings for subparagraph (G) of section 401(a)(5) 
        and subparagraph (H) of section 401(a)(26) are each amended by 
        inserting ``and international organization'' after 
        ``governmental''.
          (2) Subparagraph (G) of section 401(k)(3) is amended by 
        inserting ``State and local governmental and international 
        organization plans.--'' after ``(G)''.
  (c) Effective Date.--The amendments made by this section shall take 
effect as if included in the amendment made by section 1505 of the 
Taxpayer Relief Act of 1997.

SEC. 516. EMPLOYEES OF TAX-EXEMPT ENTITIES.

  (a) In General.--The Secretary of the Treasury shall modify Treasury 
Regulations section 1.410(b)-6(g) to provide that employees of an 
organization described in section 403(b)(1)(A)(i) of the Internal 
Revenue Code of 1986 who are eligible to make contributions under 
section 403(b) pursuant to a salary reduction agreement may be treated 
as excludable with respect to a plan under section 401(k), or section 
401(m) of such Code that is provided under the same general arrangement 
as a plan under such section 401(k), if--
          (1) no employee of an organization described in section 
        403(b)(1)(A)(i) of such Code is eligible to participate in such 
        section 401(k) plan or section 401(m) plan, and
          (2) 95 percent of the employees who are not employees of an 
        organization described in section 403(b)(1)(A)(i) of such Code 
        are eligible to participate in such section 401(k) plan or 
        section 401(m) plan.
  (b) Effective Date.--The modification required by subsection (a) 
shall apply as of the same date set forth in section 1426(b) of the 
Small Business Job Protection Act of 1996.

SEC. 517. PERMISSIVE AGGREGATION OF COLLECTIVE BARGAINING UNITS.

  (a) In General.--Paragraph (3) of section 410(b) is amended by 
inserting the following immediately before the last sentence thereof: 
``Solely for purposes of applying this subsection to employees who are 
not described in subparagraph (A), an employer may elect to have 
subparagraph (A) not apply to one or more units of employees who are 
described in subparagraph (A).''.
  (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1999.

SEC. 518. REPEAL OF TRANSITION RULE RELATING TO CERTAIN HIGHLY 
                    COMPENSATED EMPLOYEES.

  (a) In General.--Paragraph (4) of section 1114(c)(4) of the Tax 
Reform Act of 1986 is hereby repealed.
  (b) Effective Date.--The repeal made by subsection (a) shall apply to 
plan years beginning on or after January 1, 2000.

SEC. 519. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED RETIREMENT 
                    ADVICE.

  (a) In General.--Section 132(e) (defining de minimis fringe) is 
amended by adding at the end the following:
          ``(3) Treatment of certain retirement planning services.--The 
        provision of retirement planning services by an employer to 
        employees, to the extent not described in subsection (d), shall 
        be treated as a de minimis fringe.''.
  (b) No Constructive Receipt.--Section 132 is amended by redesignating 
subsection (m) as subsection (n) and by inserting after subsection (l) 
the following:
  ``(m) Retirement Planning.--
          ``(1) In general.--No amount shall be included in the gross 
        income of an employee solely because the employee may choose 
        between any retirement planning fringe and compensation which 
        would otherwise be includible in the gross income of such 
        employee.
          ``(2) Nondiscrimination requirement.--Paragraph (1) shall 
        apply to a highly compensated employee only if the choice 
        described in such paragraph is available on substantially the 
        same terms to each member of a group of employees which is 
        defined under a reasonable classification set up by the 
        employer which does not discriminate in favor of highly 
        compensated employees.
          ``(3) Retirement planning fringe.--For purposes of this 
        subsection, the term `retirement planning fringe' means any 
        retirement planning services provided by an employer to an 
        employee which are not included in the gross income of the 
        employee by reason of subsection (d) or (e).''.
  (c) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 1999.

SEC. 520. PROVISIONS RELATING TO PLAN AMENDMENTS.

  (a) In General.--If this section applies to any plan or contract 
amendment--
          (1) such plan or contract shall be treated as being operated 
        in accordance with the terms of the plan during the period 
        described in subsection (b)(2)(A), and
          (2) such plan shall not fail to meet the requirements of 
        section 411(d)(6) of the Internal Revenue Code of 1986 or 
        section 204(g) of the Employee Retirement Income Security Act 
        of 1974 (29 U.S.C. 1054(g)) by reason of such amendment.
  (b) Amendments to Which Section Applies.--
          (1) In general.--This section shall apply to any amendment to 
        any plan or annuity contract which is made--
                  (A) pursuant to any amendment made by this Act (other 
                than title VI), or pursuant to any regulation issued 
                under this Act (other than title VI), and
                  (B) on or before the last day of the first plan year 
                beginning on or after January 1, 2002.
        In the case of a government plan (as defined in section 414(d) 
        of the Internal Revenue Code of 1986), this paragraph shall be 
        applied by substituting ``2004'' for ``2002''.
          (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.

SEC. 521. 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 $500,000 or less as of the close of the plan year 
        need not file a return for that year.
          (2) One-participant retirement plan defined.--For purposes of 
        this subsection, the term ``one-participant retirement plan'' 
        means a retirement plan that--
                  (A) on the first day of the plan year--
                          (i) covered only the employer (and the 
                        employer's spouse) and the employer owned the 
                        entire business (whether or not incorporated), 
                        or
                          (ii) covered only one or more partners (and 
                        their spouses) in a business partnership 
                        (including partners in an S or C corporation),
                  (B) meets the minimum coverage requirements of 
                section 410(b) of the Internal Revenue Code of 1986 
                without being combined with any other plan of the 
                business that covers the employees of the business,
                  (C) does not provide benefits to anyone except the 
                employer (and the employer's spouse) or the partners 
                (and their spouses),
                  (D) does not cover a business that is a member of an 
                affiliated service group, a controlled group of 
                corporations, or a group of businesses under common 
                control, and
                  (E) does not cover a business that leases employees.
          (3) Other definitions.--Terms used in paragraph (2) which are 
        also used in section 414 of the Internal Revenue Code of 1986 
        shall have the respective meanings given such terms by such 
        section.
  (b) Simplified Annual Filing Requirement for Plans With Fewer Than 25 
Employees.--In the case of a retirement plan which covers less than 25 
employees on the 1st day of the plan year and meets the requirements 
described in subparagraphs (B), (D), and (E) of subsection (a)(2), the 
Secretary of the Treasury shall provide for the filing of a simplified 
annual return that is substantially similar to the annual return 
required to be filed by a one-participant retirement plan.
  (c) Treatment of Annual Reports Required Under ERISA.--Section 629 
shall apply with respect to annual reports required under sections 103 
and 4065 of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1023 and 1365).

SEC. 522. MODEL PLANS FOR SMALL BUSINESSES.

  (a) In General.--Not later than December 31, 2000, the Secretary of 
the Treasury is directed to issue at least one model defined 
contribution plan and at least one model defined benefit plan that fit 
the needs of small businesses and that shall be treated as meeting the 
requirements of section 401(a) of the Internal Revenue Code of 1986 
with respect to the form of the plan. To the extent that the 
requirements of section 401(a) of such Code are modified after the 
issuance of such plans, the Secretary of the Treasury shall, in a 
timely manner, issue model amendments that, if adopted in a timely 
manner by an employer that has a model plan in effect, shall cause such 
model plan to be treated as meeting the requirements of section 401(a) 
of such Code, as modified, with respect to the form of the plan.
  (b) Master and Prototype Plan Alternative.--The Secretary of the 
Treasury may, in its discretion, satisfy the requirements of subsection 
(a) through the enhancement and simplification of the Secretary's 
programs for master and prototype plans in such a manner as to achieve 
the purposes of subsection (a).

TITLE VI--AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 
                                  1974

       Subtitle A--Expanding Coverage and Increasing Portability

SEC. 601. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND SOLE 
                    PROPRIETORS.

  (a) In General.--Paragraph (2) of section 408(d) 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 paragraph (1)(A), the term `owner-employee' shall 
only include a person described in clause (ii) or (iii) of subparagraph 
(A).''
  (b) Effective Date.--The amendment made by this section shall apply 
to loans made after December 31, 2000.

SEC. 602. 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) had not established or maintained 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 2 or more contributing 
sponsors that are not part of the same controlled group, the employees 
of all contributing sponsors and controlled groups of such 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, 2000.

SEC. 603. 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 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)) is amended--
          (1) in subparagraph (E)(i) by striking ``The'' 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 2 or more contributing sponsors, the employees of all 
contributing sponsors and their controlled groups shall be aggregated 
for purposes of determining whether 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, 2000.
          (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to plan years beginning after December 31, 2000.

SEC. 604. FASTER VESTING OF CERTAIN EMPLOYER MATCHING CONTRIBUTIONS.

  (a) In General.--Section 203(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1053(a)) is amended--
          (1) in paragraph (2), by striking ``A plan'' and inserting 
        ``Except as provided in paragraph (4), a plan'', and
          (2) by adding at the end the following:
          ``(4) Faster vesting for matching contributions.--In the case 
        of matching contributions (as defined in section 401(m)(4)(A) 
        of the Internal Revenue Code of 1986), paragraph (2) shall be 
        applied--
                  ``(A) by substituting `3 years' for `5 years' in 
                subparagraph (A), and
                  ``(B) by substituting the following table for the 
                table contained in subparagraph (B):

                                                     The nonforfeitable
``Years of service:                                      percentage is:
    2.............................................                  20 
    3.............................................                  40 
    4.............................................                  60 
    5.............................................                  80 
    6 or more.....................................              100.''.

  (b) Effective Dates.--
          (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to plan years 
        beginning after December 31, 2000.
          (2) Collective bargaining agreements.--In the case of a plan 
        maintained pursuant to 1 or more collective bargaining 
        agreements between employee representatives and 1 or more 
        employers ratified by the date of enactment of this Act, the 
        amendments made by this section shall not apply to plan years 
        beginning before the earlier of--
                  (A) the later of--
                          (i) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof on or after such date of enactment), or
                          (ii) January 1, 2001, or
                  (B) January 1, 2005.
          (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. 605. TREATMENT OF FORMS OF DISTRIBUTION.

  (a) In General.--Subsection (g) of section 204 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1054) is amended--
          (1) in paragraph (2), by striking the last sentence and 
        inserting the following: ``The Secretary of the Treasury may by 
        regulations provide that this paragraph shall not apply to any 
        plan amendment that does not adversely affect the rights of 
        participants in a material manner.''; and
          (2) 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 paragraph 
referred to as the `transferor plan') to the extent that--
          ``(i) the forms of distribution previously available under 
        the transferor plan applied to the account of a participant or 
        beneficiary under the transferor plan that was transferred from 
        the transferor plan to the transferee plan pursuant to a direct 
        transfer rather than pursuant to a distribution from the 
        transferor plan;
          ``(ii) the terms of both the transferor plan and the 
        transferee plan authorize the transfer described in clause (i);
          ``(iii) the transfer described in clause (i) was made 
        pursuant to a voluntary election by the participant or 
        beneficiary whose account was transferred to the transferee 
        plan;
          ``(iv) the election described in clause (iii) was made after 
        the participant or beneficiary received a notice describing the 
        consequences of making the election;
          ``(v) if the transferor plan provides for an annuity as the 
        normal form of distribution under the plan in accordance with 
        section 205, the transfer is made with the consent of the 
        participant's spouse (if any), and such consent meets 
        requirements similar to the requirements imposed by section 
        205(c)(2); and
          ``(vi) the transferee plan allows the participant or 
        beneficiary described in clause (iii) to receive any 
        distribution which the participant or beneficiary is entitled 
        under the transferee plan in the form of a single sum 
        distribution.
  ``(B) Subparagraph (A) shall apply to plan mergers and other 
transactions having the effect of a direct transfer, including 
consolidations of benefits attributable to different employers within a 
multiple employer plan.
  ``(5) Except to the extent provided in regulations, a defined 
contribution plan shall not be treated as failing to meet the 
requirements of this section merely because of the elimination of a 
form of distribution previously available thereunder. This paragraph 
shall not apply to the elimination of a form of distribution with 
respect to any participant unless--
          ``(A) a single sum payment is available to such participant 
        at the same time or times as the form of distribution being 
        eliminated; and
          ``(B) such single sum payment is based on the same or greater 
        portion of the participant's account as the form of 
        distribution being eliminated.''.
  (b) Regulations.--Not later than December 31, 2001, the Secretary of 
the Treasury is directed to issue final regulations under section 
204(g) of the Employee Retirement Income Security Act of 1974. Such 
regulations shall apply to plan years beginning after December 31, 2001 
or such earlier date as is specified by the Secretary of the Treasury.
  (c) Effective Date.--The amendments made by this section shall apply 
to years beginning after December 31, 2000.

SEC. 606. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF CASH-OUT 
                    AMOUNTS.

  (a) In General.--Section 203(e) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1053(e)) is amended by adding at the 
end the following:
  ``(4) A plan shall not fail to meet the requirements of this 
subsection if, under the terms of the plan, the present value of the 
nonforfeitable accrued benefit is determined without regard to that 
portion of such benefit which is attributable to rollover contributions 
(and earnings allocable thereto). For purposes of this paragraph, the 
term `rollover contributions' means any rollover contribution under 
section 402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), or 457(e)(16) 
of the Internal Revenue Code of 1986.''.
  (b) Effective Date.--The amendments made by this section shall apply 
to distributions after December 31, 2000.

       Subtitle B--Strengthening Pension Security and Enforcement

SEC. 611. REPEAL OF 150 PERCENT OF CURRENT LIABILITY FUNDING LIMIT.

  (a) In General.--Section 302(c)(7) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1082(c)(7)) is amended--
          (1) by striking ``the applicable percentage'' in subparagraph 
        (A)(i)(I) and inserting ``in the case of plan years beginning 
        before January 1, 2004, the applicable percentage'', and
          (2) by amending subparagraph (F) to read as follows:
          ``(F) Applicable percentage.--For purposes of subparagraph 
        (A)(i)(I), the applicable percentage shall be determined in 
        accordance with the following table:

                ``In the case of any plan year
                                                         The applicable
                  beginning in--
                                                        percentage is--
                        2001...............................        160 
                        2002...............................        165 
                        2003...............................     170.''.

  (b) Effective Date.--The amendments made by this section shall apply 
to plan years beginning after December 31, 2000.

SEC. 612. 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:
  ``(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) Conforming Amendments.--Section 206(f) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1056(f)) is amended--
          (1) by striking ``title IV'' and inserting ``section 4050''; 
        and
          (2) by striking ``the plan shall provide that,''.
  (c) Effective Date.--The amendments made by this section shall apply 
to distributions made after final regulations implementing 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. 613. PERIODIC PENSION BENEFITS STATEMENTS.

  (a) In General.--Section 105(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1025 (a)) is amended to read as 
follows:
  ``(a)(1) Except as provided in paragraph (2)--
          ``(A) The administrator of an individual account plan shall 
        furnish a pension benefit statement--
                  ``(i) to a plan participant at least once annually, 
                and
                  ``(ii) to a plan beneficiary upon written request.
          ``(B) The administrator of a defined benefit plan shall 
        furnish a pension benefit statement--
                  ``(i) at least once every 3 years to each participant 
                with a nonforfeitable accrued benefit who is employed 
                by the employer maintaining the plan at the time the 
                statement is furnished to participants, and
                  ``(ii) to a participant or beneficiary of the plan 
                upon written request.
  ``(2) Notwithstanding paragraph (1), the administrator of a plan to 
which more than 1 unaffiliated employer is required to contribute shall 
only be required to furnish a pension benefit statement under paragraph 
(1) upon the written request of a participant or beneficiary of the 
plan.
  ``(3) A pension benefit statement under paragraph (1)--
          ``(A) shall indicate, on the basis of the latest available 
        information--
                  ``(i) the total benefits accrued, and
                  ``(ii) the nonforfeitable pension benefits, if any, 
                which have accrued, or the earliest date on which 
                benefits will become nonforfeitable,
          ``(B) shall be communicated in a manner calculated to be 
        understood by the average plan participant, and
          ``(C) may be provided in written, electronic, telephonic, or 
        other appropriate form.
  ``(4) In the case of a defined benefit plan, the requirements of 
paragraph (1)(B)(i) shall be treated as met with respect to a 
participant if the administrator provides the participant at least once 
each year with notice of the availability of the pension benefit 
statement and the ways in which the participant may obtain such 
statement. Such notice shall be provided in written, electronic, 
telephonic, or other appropriate form, and may be included with other 
communications to the participant if done in a manner reasonably 
designed to attract the attention of the participant.''.
  (b) Conforming Amendments.--
          (1) Section 105 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1025) is amended by striking subsection 
        (d).
          (2) Section 105(b) of such Act (29 U.S.C. 1025(b)) is amended 
        to read as follows:
  ``(b) In no case shall a participant or beneficiary of a plan be 
entitled to more than one statement described in subsection (a)(1)(A) 
or (a)(1)(B)(ii), whichever is applicable, in any 12-month period.''.
  (c) Effective Date.--The amendments made by this section shall apply 
to plan years beginning after December 31, 2000.

SEC. 614. CIVIL PENALTIES FOR BREACH OF FIDUCIARY RESPONSIBILITY.

  (a) Imposition and Amount of Penalty Made Discretionary.--Section 
502(l)(1) of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1132(l)(1)) is amended--
          (1) by striking ``shall'' and inserting ``may'', and
          (2) by striking ``equal to'' and inserting ``not greater 
        than''.
  (b) Applicable Recovery Amount.--Section 502(l)(2) of such Act (29 
U.S.C. 1132(l)(2)) is amended to read as follows:
  ``(2) For purposes of paragraph (1), the term `applicable recovery 
amount' means any amount which is recovered from any fiduciary or other 
person (or from any other person on behalf of any such fiduciary or 
other person) with respect to a breach or violation described in 
paragraph (1) on or after the 30th day following receipt by such 
fiduciary or other person of written notice from the Secretary of the 
violation, whether paid voluntarily or by order of a court in a 
judicial proceeding instituted by the Secretary under subsection (a)(2) 
or (a)(5). The Secretary may, in the Secretary's sole discretion, 
extend the 30-day period described in the preceding sentence.''.
  (c) Other Rules.--Section 502(l) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132(l)) is amended by adding at the 
end the following:
  ``(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. 615. 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 that is invested in assets consisting of qualifying 
        employer securities, qualifying employer real property, or 
        both, if such assets were acquired by the plan 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. 616. NOTICE OF SIGNIFICANT REDUCTION IN BENEFIT ACCRUALS.

  (a) In General.--Subsection (h) of section 204 of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1054) is amended to 
read as follows:
  ``(h) Notice of Significant Reduction in Benefit Accruals.--
          ``(1) If a plan described in paragraph (4) is amended to 
        provide for a significant reduction in the rate of future 
        benefit accrual, the plan administrator shall provide a notice 
        to--
                  ``(A) each affected participant in the plan,
                  ``(B) each affected beneficiary who is an alternate 
                payee (within the meaning of section 206(d)(3)(K)) 
                under an applicable qualified domestic relations order 
                (within the meaning of section 206(d)(3)(B)(i)), and
                  ``(C) each employee organization representing 
                affected participants in the plan,
        except that such notice shall instead be provided to a person 
        designated to receive such notice on behalf of any person 
        referred to in paragraph (A), (B), or (C). For purposes of this 
        paragraph, an affected participant or beneficiary is a 
        participant or beneficiary to whom the significant reduction 
        described in this paragraph is reasonably expected to apply.
          ``(2) The notice required by paragraph (1) shall--
                  ``(A) include the plan amendment, or a summary of 
                such plan amendment, and its effective date, and
                  ``(B) provide a notification and description of the 
                reduction described in paragraph (1).
        A notification and description shall not fail to satisfy 
        paragraph (2)(B) by reason of a failure to provide the specific 
        amount of the reduction with respect to any participant or 
        beneficiary.
          ``(3) The notice required by paragraph (1) shall be provided 
        no less than 30 days prior to the effective date of the plan 
        amendment.
          ``(4) A plan is described in this paragraph if such plan is--
                  ``(A) a defined benefit plan, or
                  ``(B) an individual account plan which is subject to 
                the funding standards of section 302.
          ``(5) In the case of a material failure to comply with 
        requirements of this subsection with respect to more than a de 
        minimis number of persons described in paragraph (1), the plan 
        amendment to which the failure relates shall not be effective 
        with respect to such persons for any period prior to the 
        expiration of 30 days following the date on which a notice is 
        provided in accordance with this subsection. For purposes of 
        this paragraph, the term `material failure' includes any 
        failure that results in materially less information being 
        provided to the persons described in paragraph (1).''.
  (b) Effective Date.--The amendments made by this section shall apply 
to plan amendments that are adopted more than 120 days after the date 
of enactment of this Act.

SEC. 617. 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 subparagraph (D) and inserting the 
                following:
                  ``(D) 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;'';
                  (B) by redesignating subparagraph (G) as subparagraph 
                (J); and
                  (C) 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 received 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. 618. CONFORMING AMENDMENTS RELATING TO TRANSFER OF EXCESS DEFINED 
                    BENEFIT PLAN ASSETS FOR RETIREE HEALTH BENEFITS.

  (a) In General.--Title I of the Employee Retirement Income Security 
Act of 1974 is amended--
          (1) in section 101(e)(3) (29 U.S.C. 1021(e)(3)), by striking 
        ``1995'' and inserting ``2001'';
          (2) in section 403(c)(1) (29 U.S.C. 1103(c)(1)), by striking 
        ``1995'' and inserting ``2001''; and
          (3) in section 408(b)(13) (29 U.S.C. 1108(b)(13))--
                  (A) by striking ``in a taxable year beginning before 
                January 1, 2001'' and inserting ``made before October 
                1, 2009''; and
                  (B) by striking ``1995'' and inserting ``2001''.
  (b) Effective Date.--The amendments made by this section shall apply 
with respect to taxable years beginning after December 31, 2000.

SEC. 619. MODEL SPOUSAL CONSENT LANGUAGE AND QUALIFIED DOMESTIC 
                    RELATIONS ORDER.

  (a) Model Spousal Consent Language.--Section 205(c) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1055(c)) is amended 
by adding at the end the following new paragraph:
  ``(9) Not later than January 1, 2001, the Secretary of Labor shall 
develop model language for the spousal consent required under paragraph 
(2) which--
          ``(A) is written in a manner calculated to be understood by 
        the average person, and
          ``(B) discloses in plain terms whether--
                  ``(i) the waiver is irrevocable, and
                  ``(ii) the waiver may be revoked by a qualified 
                domestic relations order.''.
  (b) Model Qualified Domestic Relations Order.--Section 206(d)(3) of 
such Act (29 U.S.C. 1056(d)(3)) is amended by adding at the end the 
following new subparagraph:
  ``(O) Not later than January 1, 2001, the Secretary shall develop 
language for a qualified domestic relations order which meets--
          ``(i) the requirements of subparagraph (B)(i), and
          ``(ii) the requirements of this Act related to the need to 
        consider the treatment of any lump sum payment, qualified joint 
        and survivor annuity, or qualified preretirement survivor 
        annuity.''.
  (c) Publicity.--The Secretary of Labor shall include publicity for 
the model language required by the amendments made by this section in 
the pension outreach efforts undertaken by each Secretary.

SEC. 620. ELIMINATION OF ERISA DOUBLE JEOPARDY.

  (a) Elimination of Second Lawsuits by the Secretary.--Section 502(h) 
of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1132(h)) is amended--
          (1) by inserting ``(1)'' after ``(h)'', and
          (2) by adding at the end the following:
  ``(2) In any case in which--
          ``(A) a complaint in an action brought against a person under 
        subsection (a)(2) is served in accordance with paragraph (1), 
        and
          ``(B) the action is maintained as a class action or 
        derivative action under the Federal Rules of Civil Procedure,
          ``(C) the action is resolved by a court-approved settlement 
        agreement,
          ``(D) the complaint is served upon the Secretary at least 90 
        days prior to final court approval of the settlement agreement, 
        and
          ``(E) the Secretary receives a fully executed copy of the 
        settlement agreement within the time established by the court 
        for notifying the plan's participants of the proposed 
        compromise pursuant to Rule 23 or 23.1 of the Federal Rules of 
        Civil Procedure,
the Secretary shall be barred from litigating any claim against such 
person under subsection (a)(2) that was, or could have been, brought in 
that action with respect to the same plan. Notwithstanding this 
paragraph, the Secretary shall not be barred from litigating any claim 
against such person under subsection (a)(2) if the Secretary filed a 
complaint under subsection (a)(2) prior to the final court approval of 
the settlement agreement.''.
  (b) Effective Date.--The amendments made by this section are 
effective with respect to all actions or claims commenced by the 
Secretary that are pending on or after the date of the enactment of 
this Act.

                Subtitle C--Reducing Regulatory Burdens

SEC. 621. MODIFICATION OF TIMING OF PLAN VALUATIONS.

  (a) In General.--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), if, for any plan year--
          ``(I) an election is in effect under this subparagraph with 
        respect to a plan, and
          ``(II) the assets of the plan are not less than 125 percent 
        of the plan's current liability (as defined in paragraph 
        (7)(B)), determined as of the valuation date for the preceding 
        plan year,
then this section shall be applied using the information available as 
of such valuation date.
  ``(ii)(I) Clause (i) shall not apply for more than 2 consecutive plan 
years and valuation shall be under subparagraph (A) with respect to any 
plan year to which clause (i) does not apply by reason of this clause.
  ``(II) Subclause (I) shall not apply to the extent that more frequent 
valuations are required under the regulations under subparagraph (A).
  ``(iii) Information under clause (i) shall, in accordance with 
regulations, be actuarially adjusted to reflect significant differences 
in participants.
  ``(iv) An election under this subparagraph, once made, shall be 
irrevocable without the consent of the Secretary of the Treasury.''.
  (b) Effective Date.--The amendments made by this section shall apply 
to plan years beginning after December 31, 2000.

SEC. 622. 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:
          ``(3) If assets available for allocation under paragraph (4) 
        of subsection (a) are insufficient to satisfy in full the 
        benefits of all individuals who are described in that 
        paragraph, the assets shall be allocated first to benefits 
        described in subparagraph (A) of that paragraph. Any remaining 
        assets shall then be allocated to benefits described in 
        subparagraph (B) of that paragraph. If assets allocated to such 
        subparagraph (B) are insufficient to satisfy in full the 
        benefits described in that subparagraph, the assets shall be 
        allocated pro rata among individuals on the basis of the 
        present value (as of the termination date) of their respective 
        benefits described in that subparagraph.''.
  (c) Conforming Amendments.--
          (1) Section 4021 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1321) is amended--
                  (A) in subsection (b)(9), by striking ``as defined in 
                section 4022(b)(6)'', and
                  (B) by adding at the end the following:
  ``(d) For purposes of subsection (b)(9), the term ``substantial 
owner'' means an individual who, at any time during the 60-month period 
ending on the date the determination is being made--
          ``(1) owns the entire interest in an unincorporated trade or 
        business,
          ``(2) in the case of a partnership, is a partner who owns, 
        directly or indirectly, more than 10 percent of either the 
        capital interest or the profits interest in such partnership, 
        or
          ``(3) in the case of a corporation, owns, directly or 
        indirectly, more than 10 percent in value of either the voting 
        stock of that corporation or all the stock of that corporation.
For purposes of paragraph (3), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 shall apply 
(determined without regard to section 1563(e)(3)(C)).''.
  (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) is amended 
by striking ``section 4022(b)(6)'' and inserting ``section 4021(d)''.
  (d) Effective Dates.--
          (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to plan 
        terminations--
                  (A) under section 4041(c) of the Employee Retirement 
                Income Security Act of 1974 (29 U.S.C. 1341(c)) with 
                respect to which notices of intent to terminate are 
                provided under section 4041(a)(2) of such Act (29 
                U.S.C. 1341(a)(2)) after the December 31, 2000, and
                  (B) under section 4042 of such Act (29 U.S.C. 1342) 
                with respect to which proceedings are instituted by the 
                corporation on or after such date.
          (2) Conforming amendments.--The amendments made by subsection 
        (c) shall take effect on the date of enactment of this Act.

SEC. 623. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

  (a) Expansion of Period.--
          (1) In general.--Subparagraph (A) of section 205(c)(7) of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1055) is amended by striking ``90-day'' and inserting ``180-
        day''.
          (2) Modification of regulations.--The Secretary of the 
        Treasury shall modify the regulations of such Secretary under 
        part 2 of subtitle B of title I of the Employee Retirement 
        Income Security Act of 1974 to the extent that they relate to 
        sections 203(e) and 205 of such Act to substitute ``180 days'' 
        for ``90 days'' each place it appears.
          (3) Effective date.--The amendments made by paragraph (1) and 
        the modifications required by paragraph (2) shall apply to 
        years beginning after December 31, 2000.
  (b) Consent Regulation Inapplicable to Certain Distributions.--
          (1) In general.--The Secretary of the Treasury shall modify 
        the regulations under section 205 of the Employee Retirement 
        Income Security Act of 1974 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, 2000.

SEC. 624. ANNUAL REPORT DISSEMINATION.

  (a) In General.--Section 104(b)(3) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1024(b)(3)) is amended by striking 
``shall furnish'' and inserting ``shall make available for examination 
(and, upon request, shall furnish)''.
  (b) Effective Date.--The amendment made by this section shall apply 
to reports for years beginning after December 31, 1998.

SEC. 625. EXCESS BENEFIT PLANS.

  (a) In General.--Section 3(36) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1002(36)) is amended to read as 
follows:
  ``(36) The term `excess benefit plan' means a plan, without regard to 
whether such plan is funded, maintained by an employer solely for the 
purpose of providing benefits to employees in excess of any limitation 
imposed by section 401(a)(17) or 415 of the Internal Revenue Code of 
1986 or any other limitation on contributions or benefits in such Code 
on plans to which any of such sections apply. To the extent that a 
separable part of a plan (as determined by the Secretary of Labor) 
maintained by an employer is maintained for such purpose, that part 
shall be treated as a separate plan which is an excess benefit plan.''.
  (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1999.

SEC. 626. 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, 
except in the case of employment, subsequent to the commencement of 
payment of benefits, with a former employer, the notification required 
by such regulation--
          (1) 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
          (2) 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, 1999.

SEC. 627. PROVISIONS RELATING TO PLAN AMENDMENTS.

  (a) In General.--If this section applies to any plan or contract 
amendment--
          (1) such plan or contract shall be treated as being operated 
        in accordance with the terms of the plan during the period 
        described in subsection (b)(2)(A), and
          (2) such plan shall not fail to meet the requirements of 
        section 204(g) of the Employee Retirement Income Security Act 
        of 1974 (29 U.S.C. 1054(g)) by reason of such amendment.
  (b) Amendments to Which Section Applies.--
          (1) In general.--This section shall apply to any amendment to 
        any plan or annuity contract which is made--
                  (A) pursuant to any amendment made by this Act, or 
                pursuant to any regulation issued under this Act, and
                  (B) on or before the last day of the first plan year 
                beginning on or after January 1, 2003.
          (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.

SEC. 628. SIMPLIFIED ANNUAL FILING REQUIREMENT FOR PLANS WITH FEWER 
                    THAN 25 EMPLOYEES.

  (a) In General.--In the case of a retirement plan which covers less 
than 25 employees on the first day of the plan year and meets the 
requirements described in subsection (b), the Secretary of the Treasury 
shall provide for the filing of a simplified annual return that is 
substantially similar to the annual return required to be filed by a 
one-participant retirement plan.
  (b) Requirements.--A plan meets the requirements of this subsection 
if it--
          (1) 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,
          (2) 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
          (3) does not cover a business that leases employees.

 AMENDMENTS TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT TO PROMOTE 
                          RETIREMENT SECURITY


                                Purpose

    The purpose of H.R. 1102, the ``Comprehensive Retirement 
Security and Pension Reform Act of 1999,'' is to makes 
retirement security more available to millions of workers by 
(1) expanding small business retirement plans, (2) allowing 
workers to save more, (3) addressing the needs of an 
increasingly mobile workforce through greater portability and 
other changes, (4) making pensions more secure, and (5) cutting 
the red tape that has hamstrung employers who want to establish 
pension plans for their workers.

                            Committee Action

    H.R. 1102 was introduced by Representative Rob Portman, 
with the lead co-sponsorship of Representative Ben Cardin, on 
March 11, 1999. The bill has 136 cosponsors--72 Republicans and 
64 Democrats, including Committee Chairman Bill Goodling, 
Subcommittee on Employer-Employee Relations Chairman John 
Boehner (an original cosponsor), and Subcommittee Ranking 
Member Rob Andrews. The Subcommittee on Employer-Employee 
Relations held a legislative hearing on the bill on June 29, 
1999. At the hearing, entitled ``Enhancing Retirement Security: 
A Hearing on H.R. 1102, The `Comprehensive Retirement Security 
and Pension Reform Act of 1999,' '' testimony was received from 
the bill's authors, Representatives Portman and Cardin.
    On July 14, 1999, the Committee on Education and the 
Workforce approved H.R. 1102, as amended, by a voice vote, a 
quorum being present, and by voice vote ordered the bill 
favorably reported.
    Fifteen provisions of Title VI of the bill, containing 
amendments to the Employee Retirement Income Security Act 
(ERISA), were added to H.R. 2488, the ``Taxpayer Refund and 
Relief Act of 1999,'' which passed the House and Senate on 
August 5, 1999. The tax bill passed by Congress included 
provisions either identical or similar to sections 601-606, 
611-612, 615-616, 618, 621-622, and 627-628 of H.R. 1102, as 
reported.
    Two Committee bills relating to retirement security and 
pensions were enacted into law in the 105th Congress. The 
Savings Are Vital to Everyone's Retirement (SAVER) Act, P.L. 
105-92, initiated a public-private partnership to educate 
American workers about retirement savings and directed the 
Department of Labor to maintain an ongoing program of public 
information and outreach. The bill also convened a National 
Summit on Retirement Savings held June 4-5, 1998 (and to be 
held again in 2001 and 2005), co-hosted by the President and 
the Congressional leadership.
    The 105th Congress also passed P.L. 105-72, legislation 
that permits small investment advisers who are registered only 
with state security regulators to continue to serve as 
investment managers for pension plans. Without this bill, the 
practices of thousands of small investment advisers--and the 
pension plans of their clients--would have been seriously 
disrupted as an unintended result of 1996 security reform 
legislation.
    During the last three years, the Subcommittee on Employer-
Employee Relations has held a series of hearings on the subject 
of promoting the retirement security of American workers: 
``Preparing Americans For Retirement: The Roadblocks To 
Increased Savings,'' June 2, 1998 (jointly with the Senate 
Special Committee on Aging); ``Defusing the Retirement Time 
Bomb: Encouraging Pension Savings,'' February 12, 1997; ``Early 
Retirement in Higher Education,'' May 22, 1997 (which led to 
enactment of the Faculty Retirement Incentive Act as Title IX, 
Part D of P.L. 105-244); ``Issues In Pension Reform,'' June 26, 
1996; and ``Retirement Crisis Ahead?: Exploring Ways to 
Simplify and Expand Pensions,'' June 6, 1996.
    The Committee was also involved in crafting the ERISA 
pension provisions contained in the Small Business Job 
Protection Act of 1996, P.L. 104-188, and the Taxpayer Relief 
Act of 1997, P.L. 105-34.

                     Committee Statement and Views


Title VI--Amendments to the Employee Retirement Income Security Act of 
                                1974 \1\


       Subtitle A--Expanding Coverage and Increasing Portability


  Section 601--Plan Loans for Subchapter S Owners, Partners and Sole 
                              Proprietors

Current law

    A qualified retirement plan or Internal Revenue Code 
section 403(b) arrangement is permitted to make loans to 
participants. However, the statutory exemption from ERISA 
prohibited transaction rules for participant loans, sec. 408 
(with a counterpart in the Internal Revenue Code),\2\ generally 
does not apply to small business owners if the business is 
unincorporated (i.e., partnerships and sole-proprietorships) or 
has made an election to be taxed under the provisions of Code 
subchapter S.
---------------------------------------------------------------------------
    \1\ This report only contains Committee views on those provisions 
of H.R. 1102 within the Committee's jurisdiction.
    \2\ Note all section references are to the Employee Retirement 
Income Security Act of 1974 (ERISA), 29 U.S.C. Sec. 1001, et seq., 
unless otherwise indicated.
---------------------------------------------------------------------------
    The statutory exemptions to the prohibited transaction 
rules do not apply to certain transactions in which the plan 
makes a loan to an owner-employee. For purposes of the 
prohibited transaction rules, an owner-employee means (1) a 
sole proprietor, (2) a partner who owns more than 10 percent of 
either the capital interest or the profits interest in the 
partnership, (3) an employee or officer of a Code subchapter S 
corporation who owns more than 5 percent of the outstanding 
stock of the corporation, and (4) the owner of an individual 
retirement arrangement (``IRA''). The term owner-employee also 
includes certain family members of an owner-employee and 
certain corporations owned by an owner-employee.

Explanation of provision

    The sec. 408 prohibited transaction rules are amended to 
provide equal access to participant loans for all employees, 
including the owners of small businesses that are 
unincorporated or that choose to be taxed under Code subchapter 
S.
    Effective Date--The provision is effective with respect to 
loans made after December 31, 2000.

Rationale

    The Committee believes that the present-law prohibited 
transaction rules regarding loans unfairly discriminate against 
the owners of unincorporated businesses and subchapter S 
corporations. For example, under present law, the sole 
shareholder of a C corporation may take advantage of the 
statutory exemption to the prohibited transaction rules for 
loans, but an individual who does business as a sole proprietor 
may not. The restrictions on loans to owner-employees also 
reduce the incentive to establish plans and, for plans in 
existence, make it less likely that an affected plan will offer 
a loan feature.
    The provision generally eliminates the special present-law 
rules relating to plan loans made to an owner-employee. Thus, 
the general statutory exemption applies to such transactions. 
Present law continues to apply with respect to IRAs.

   Section 602--Reduced PBGC Premium for New Plans of Small Employers

Current law

    Under present-law sec. 4006, the Pension Benefit Guaranty 
Corporation (``PBGC'') provides insurance protection for 
participants and beneficiaries under certain defined benefit 
pension plans by guaranteeing certain basic benefits under the 
plan in the event the plan is terminated with insufficient 
assets to pay benefits promised under the plan. The guaranteed 
benefits are funded in part by premium payments from employers 
who sponsor defined benefit plans. The amount of the required 
annual PBGC premium for a single-employer plan is generally a 
flat rate premium of $19 per participant and an additional 
variable rate premium based on a charge of $9 per $1,000 of 
unfunded vested benefits. Unfunded vested benefits under a plan 
generally means (1) the unfunded current liability for vested 
benefits under the plan, over (2) the value of the plan's 
assets. No variable rate premium is imposed for a year if 
contributions to the plan were at least equal to the full 
funding limit.

Explanation of provision

    Under the provision, for the first five plan years of a new 
single-employer plan of a small employer, the flat-rate PBGC 
premium is $5 per plan participant.
    A small employer is a contributing sponsor that, on the 
first day of the plan year, has 100 or fewer employees. For 
this purpose, all employees of the members of the controlled 
group of the contributing sponsor are taken into account. In 
the case of a plan to which more than one unrelated 
contributing sponsor contributes, employees of all contributing 
sponsors (and their controlled group members) are taken into 
account in determining whether the plan is a plan of a small 
employer.
    A new plan means a defined benefit plan maintained by a 
contributing sponsor if, during the 36-month period ending on 
the date of adoption of the plan, such contributing sponsor (or 
controlled group member or a predecessor of either) has not 
established or maintained a plan subject to PBGC coverage with 
respect to which benefits were accrued for substantially the 
same employees as are in the new plan.
    Effective Date--The provisions relating to new plans are 
effective for plans established after December 31, 2000.

Rationale

    The Committee believes that reducing the PBGC premiums for 
new and small plans will help encourage the establishment of 
defined benefit pension plans. The number of single-employer 
defined benefit plans covered by PBGC has declined dramatically 
in recent years--from 112,000 in 1985 to 43,000 in 1997. Most 
of the decline is because of the termination of small plans. An 
employer incurs a number of one-time costs to establish a plan. 
The proposal is intended to remove the PBGC premium as a 
disincentive to the establishment of a defined benefit plan by 
a small employer.

  Section 603--Reduction of Additional PBGC Premium for New and Small 
                                 Plans

Current law

    Under present law, the PBGC provides insurance protection 
for participants and beneficiaries under certain defined 
benefit pension plans by guaranteeing certain basic benefits 
under the plan in the event the plan is terminated with 
insufficient assets to pay benefits promised under the plan. 
The guaranteed benefits are funded in part by premium payments 
from employers who sponsor defined benefit plans. The amount of 
the required annual PBGC premium for a single-employer plan is 
generally a flat rate premium of $19 per participant and an 
additional variable rate premium based on a charge of $9 per 
$1,000 of unfunded vested benefits. Unfunded vested benefits 
under a plan generally means (1) the unfunded current liability 
for vested benefits under the plan, over (2) the value of the 
plan's assets. No variable rate premium is imposed for a year 
if contributions to the plan were at least equal to the full 
funding limit.
    The PBGC guarantee is phased in ratably in the case of 
plans that have been in effect for less than 5 years, and with 
respect to benefit increases from a plan amendment that was in 
effect for less than 5 years before termination of the plan.

Explanation of provision

    The provision amends sec. 4006(a)(3) to provide that the 
variable premium is phased in for new defined benefit plans 
over a six-year period starting with the plan's first plan 
year. The amount of the variable premium is a percentage of the 
variable premium otherwise due, as follows: 0 percent of the 
otherwise applicable variable premium in the first plan year; 
20 percent in the second plan year; 40 percent in the third 
plan year; 60 percent in the fourth plan year; 80 percent in 
the fifth plan year; and 100 percent in the sixth plan year 
(and thereafter).
    A new defined benefit plan is defined as in section 602 of 
this Act (relating to reduced PBGC premiums for new small 
employer plans).
    The provision also provides that, in the case of any plan 
(not just a new plan) of an employer with 25 or fewer 
employees, the variable-rate premium, with respect to any 
participant, is no more than $5 multiplied by the number of 
plan participants in the plan at the close of the preceding 
year.
    Effective Date--The provision reducing the PBGC variable 
premium for small plans is effective for years beginning after 
December 31, 2000.

Rationale

    The Committee believes this provision will help encourage 
the establishment of defined benefit pension plans. The number 
of single-employer defined benefit plans covered by PBGC has 
declined dramatically in recent years--from 112,000 in 1985 to 
43,000 in 1997. Moreover, employers that establish plans are 
not choosing defined benefit plans. The PBGC variable rate 
premium can be a disincentive to some employers.

 Section 604--Faster Vesting of Certain Employer Matching Contributions

Current law

    Section 203(a) requires a participant's employer-provided 
benefit to vest in one of two ways: (1) a participant acquires 
a nonforfeitable right to 100 percent of the participant's 
accrued benefit derived from employer contributions upon the 
completion of 5 years of service; or (2) a participant has a 
nonforfeitable right to at least 20 percent of the 
participant's accrued benefit derived from employer 
contributions after 3 years of service, 40 percent after 4 
years of service, 60 percent after 5 years of service, 80 
percent after 6 years of service, and 100 percent after 7 years 
of service.

Explanation of provision

    The provision applies an expedited vesting schedules to 
employer matching contributions. Under the provision, employer 
matching contributions have to vest in one of 2 accelerated 
ways: (1) a participant acquires a nonforfeitable right to 100 
percent of employer matching contributions upon the completion 
of 3 years of service; or (2) a participant has a 
nonforfeitable right to 20 percent of employer matching 
contributions for each year of service beginning with the 
participant's second year of service and ending with 100 
percent after 6 years of service.
    Effective Date--The provision is effective for plan years 
beginning after December 31, 2000, with a delayed effective 
date for plans maintained pursuant to a collective bargaining 
agreement. The provision does not apply to any employee until 
the employee has an hour of service after the effective date. 
In applying the new vesting schedule, service before the 
effective date is taken into account.

Rationale

    The Committee understands that many employees, particularly 
lower- and middle-income employees, do not take full advantage 
of the retirement savings opportunities provided by their 
employer's 401(k) plan. The Committee believes that providing 
faster vesting for matching contributions will make section 
401(k) plans more attractive for employees, particularly lower- 
and middle-income employees, and will encourage workers to save 
more for their own retirement. In addition, faster vesting for 
matching contributions will enable short-service employees to 
accumulate greater retirement savings. Given the increasingly 
mobile nature of today's workforce, there is a growing risk 
that many participants will leave employment before vesting in 
their matching contributions.

            Section 605--Treatment of Forms of Distributions

Current law

    The sec. 204(g) ``anti-cutback rule'' generally provides 
that when a participant's benefits are transferred from one 
plan to another, the transferee plan must preserve all forms of 
distribution that were available under the transferor plan. The 
anti-cutback rule also generally provides that, without regard 
to a transfer, a plan may not eliminate forms of distribution. 
An amendment is treated as reducing an accrued benefit if, with 
respect to benefits accrued before the amendment is adopted, 
the amendment has the effect of either (1) eliminating or 
reducing an early retirement benefit or a retirement-type 
subsidy, or (2) except as provided by Department of Treasury 
regulations, eliminating an optional form of benefit. The 
prohibition against the elimination of an optional form of 
benefit applies to plan mergers, spinoffs, transfers, and 
transactions amending or having the effect of amending a plan 
or plans to transfer plan benefits.

Explanation of provision

    A defined contribution plan to which benefits are 
transferred is not treated as reducing a participant's or 
beneficiary's accrued benefit even though it does not provide 
all of the forms of distribution previously available under the 
transferor plan if (1) the plan receives from another defined 
contribution plan a direct transfer of the participant's or 
beneficiary's benefit accrued under the transferor plan, or the 
plan results from a merger or other transaction that has the 
effect of a direct transfer (including consolidations of 
benefits attributable to different employers within a multiple 
employer plan), (2) the terms of both the transferor plan and 
the transferee plan authorize the transfer, (3) the transfer 
occurs pursuant to a voluntary election by the participant or 
beneficiary that is made after the participant or beneficiary 
received a notice describing the consequences of making the 
election, (4) if the transferor plan provides for an annuity as 
the normal form of distribution in accordance with the joint 
and survivor annuity rules (sec. 205), the participant's spouse 
(if any) consents to the transfer in a manner similar to the 
consent required by section 205, and (5) the transferee plan 
allows the participant or beneficiary to receive distribution 
of his or her benefit under the transferee plan in the form of 
a single sum distribution.
    In addition, except to the extent provided by the Secretary 
of the Treasury in regulations, a defined contribution plan is 
not treated as reducing a participant's accrued benefit if (1) 
a plan amendment eliminates a form of distribution previously 
available under the plan, (2) a single sum distribution is 
available to the participant at the same time or times as the 
form of distribution eliminated by the amendment, and (3) the 
single sum distribution is based on the same or greater portion 
of the participant's accrued benefit as the form of 
distribution eliminated by the amendment.
    The Secretary is directed to issue, not later than December 
31, 2001, final regulations under section 204(g) implementing 
the provision.
    Furthermore, the provision authorizes the Secretary of the 
Treasury to provide by regulations that the prohibitions 
against eliminating or reducing an early retirement benefit, a 
retirement-type subsidy, or an optional form of benefit not 
apply to plan amendments that do not adversely affect the 
rights of participants in a material manner but that do 
eliminate or reduce early retirement benefits, retirement-type 
subsidies, and optional forms of benefit that create 
significant burdens and complexities for a plan and its 
participants.
    It is intended that the factors to be considered in 
determining whether an amendment has a materially adverse 
effect on a participant would include (1) all of the 
participant's early retirement benefits, retirement-type 
subsidies, and optional forms of benefits that are reduced or 
eliminated by the amendment, (2) the extent to which early 
retirement benefits, retirement-type subsidies, and optional 
forms of benefit in effect with respect to a participant after 
the amendment effective date provide rights that are comparable 
to the rights that are reduced or eliminated by the plan 
amendment, (3) the number of years before the participant 
attains normal retirement age under the plan (or early 
retirement age, as applicable), (4) the size of the 
participant's benefit that is affected by the plan amendment, 
in relation to the amount of the participant's compensation, 
and (5) the number of years before the plan amendment is 
effective.
    Effective Date--The provision is effective for years 
beginning after December 31, 2000.

Rationale

    The Committee understands that the application of the 
prohibition against the elimination of any optional form of 
benefit to plan mergers and transfers with respect to defined 
contribution plans frequently results in complexity and 
confusion, especially in the context of business acquisitions 
and similar transactions. In addition, the Committee 
understands that a defined contribution plan participant who is 
entitled to receive a single sum distribution generally may 
roll over such a distribution to an IRA and control the manner 
of distribution from the IRA.
    The requirement that a plan preserve all forms of 
distribution can significantly increase the cost of plan 
administration. This requirement also causes confusion among 
plan participants who can have separate parts of their 
retirement benefits subject to very different plan provisions.

Section 606--Employers May Disregard Rollovers for Purposes of Cash-Out 
                                Amounts

Current law

    Under sec. 203(e), if a retirement plan participant ceases 
to be employed by the employer that maintains the plan, the 
plan may distribute the participant's nonforfeitable accrued 
benefit without the consent of the participant and, if 
applicable, the participant's spouse, if the present value of 
the benefit does not exceed $5,000. For purposes of calculating 
the accrued benefit of an individual, amounts rolled over from 
another employer's retirement plan or an IRA are taken into 
account in calculating the $5,000 limit.

Explanation of provision

    In determining whether an employee's benefit level falls 
below the $5,000 cash-out threshold, a plan is permitted to 
exclude any benefits attributable to amounts that have been 
rolled over by the employee from another employer's plan or an 
IRA (and any earnings on such rollovers).
    Effective Date--The provision is effective for 
distributions after December 31, 2000.

Rationale

    Keeping track of and managing small account balances of 
former employees creates administrative burdens for plans. The 
Committee is concerned that, in some cases, the cash-out rule 
may discourage plans from accepting rollovers because the 
rollover will increase participants' benefits to above the 
cash-out amount, and increase administrative burdens. The 
Committee believes that disregarding rollovers for purposes of 
the cash-out rule will further the intent of the cash-out rule 
by removing a possible disincentive for plans to accept 
rollovers.

       Subtitle B--Strengthening Pension Security and Enforcement


 Section 611--Repeal of 150 Percent of Current Liability Funding Limit

Current law

    Under present law, defined benefit pension plans are 
subject to minimum funding requirements designed to ensure that 
pension plans have sufficient assets to pay benefits. A defined 
benefit pension plan is funded using one of a number of 
acceptable actuarial cost methods. No contribution is required 
under the minimum funding rules in excess of the full funding 
limit. The full funding limit is generally defined by sec. 
302(c)(7) as the excess, if any, of (1) the lesser of (a) the 
accrued liability under the plan (including normal cost) or (b) 
155 percent of the plan's current liability, over (2) the value 
of the plan's assets. In general, current liability is all 
liabilities to plan participants and beneficiaries accrued to 
date, whereas the accrued liability full funding limit is based 
on projected benefits. The current liability full funding limit 
is scheduled to increase as follows: 160 percent for plan years 
beginning in 2001 and 2002, 165 percent for plan years 
beginning in 2003 and 2004, and 170 percent for plan years 
beginning in 2005 and thereafter. In no event is a plan's full 
funding limit less than 90 percent of the plan's current 
liability over the value of the plan's assets.

Explanation of provision

    The arbitrary funding limitation based on current liability 
would be phased-out more quickly. The provision gradually 
increases and then repeals the current liability full funding 
limit. The current liability full funding limit will be 160 
percent of current liability for plan years beginning in 2001, 
165 percent for plan years beginning in 2002, and 170 percent 
for plan years beginning in 2003. The current liability full 
funding limit is repealed for plan years beginning in 2004 and 
thereafter.
    Effective Date--The provision is effective for plan years 
beginning after December 31, 2000.

Rationale

    The Committee is concerned that the current liability full 
funding limit may result in inadequate funding of pension plans 
and thus jeopardize pension security. The current-liability 
limitation was added in 1987, primarily to raise additional 
revenue. This funding limit--even at higher levels--can lead to 
systematic plan underfunding as well as erratic and unstable 
contribution patterns.

                   Section 612--Missing Participants

Current law

    The plan administrator of a defined benefit pension plan 
that is subject to Title IV of ERISA, is maintained by a single 
employer, and terminates under a standard termination is 
required to distribute the assets of the plan. With respect to 
a participant whom the plan administrator cannot locate after a 
diligent search, the plan administrator satisfies the 
distribution requirement only by purchasing irrevocable 
commitments from an insurer to provide all benefit liabilities 
under the plan or transferring the participant's designated 
benefit to the PBGC, which holds the benefit of the missing 
participant as trustee until the PBGC locates the missing 
participant and distributes the benefit. The PBGC missing 
participant program is not available to multiemployer plans or 
defined contribution plans and other plans not covered by Title 
IV of ERISA.

Explanation of provision

    The PBGC is directed to prescribe for terminating 
multiemployer plans rules similar to the present-law missing 
participant rules applicable to terminating single employer 
plans that are subject to Title IV of ERISA. The missing 
participants program is also extended to defined contribution 
plans, defined benefit plans that do not have more than 25 
active participants and are maintained by professional service 
employers, and the portions of defined benefit plans that 
provide benefits based upon the separate accounts of 
participants and therefore are treated as defined contribution 
plans under ERISA.
    Effective Date--The provision is effective for 
distributions from terminating plans that occur after the PBGC 
adopts final regulations implementing the provision.

Rationale

    By allowing plan sponsors the option of transferring 
pension funds to PBGC, the chances will be increased that a 
missing participant will be able to recover benefits. Sponsors 
of terminated multiemployer plans and plans that are not 
covered by Title IV face uncertainty with respect to missing 
participants due to a lack of statutory or regulatory guidance. 
The Committee believes that it is appropriate to extend the 
established PBGC missing participant program to these plans in 
order to reduce uncertainty for plan sponsors and increase the 
likelihood that missing participants will receive their 
retirement benefits.

           Section 613--Periodic Pension Benefits Statements

Current law

    Section 105 provides that a pension plan administrator must 
furnish a benefit statement to any participant or beneficiary 
who makes a written request for such a statement. This 
statement must indicate, on the basis of the latest available 
information, (1) the participant's or beneficiary's total 
accrued benefit, and (2) the participant's or beneficiary's 
vested accrued benefit or the earliest date on which the 
accrued benefit will become vested. A participant or 
beneficiary is not entitled to receive more than 1 benefit 
statement during any 12-month period.

Explanation of provision

    A plan administrator of a defined contribution plan 
generally would be required to furnish a benefit statement to 
each participant at least once annually and to a beneficiary 
upon written request.
    In addition to providing a benefit statement to a 
beneficiary upon written request, the plan administrator of a 
defined benefit plan generally would be required either (1) to 
furnish a benefit statement at least once every 3 years to each 
participant who has a vested accrued benefit and who is 
employed by the employer at the time the plan administrator 
furnishes the benefit statements to participants, or (2) to 
annually furnish written, electronic, telephonic, or other 
appropriate notice to each participant of the availability of 
and the manner in which the participant may obtain the benefit 
statement. The plan administrator of a multiemployer plan or a 
multiple employer plan would be required to furnish a benefit 
statement only upon written request of a participant or 
beneficiary.
    The plan administrator would be required to write the 
benefit statement in a manner calculated to be understood by 
the average plan participant and would be permitted to furnish 
the statement in written, electronic, telephonic, or other 
appropriate form.
    Effective Date--The changes would apply to plan years 
beginning after December 31, 2000.

Rationale

    Benefit statements provide meaningful information that each 
participant should receive regularly in order to evaluate his 
or her retirement benefits. This will encourage better 
awareness by plan participants of their overall retirement 
preparedness.

  Section 614--Civil Penalties for Breach of Fiduciary Responsibility

Current law

    Section 502(l) was added to ERISA by the Omnibus Budget 
Reconciliation Act of 1989. In its current form, section 502(l) 
requires the Secretary of Labor to assess a civil penalty 
against (1) a fiduciary who breaches a fiduciary responsibility 
under, or commits a violation of, part 4 of Title I of ERISA, 
or (2) any other person who knowingly participates in such a 
breach or violation. The penalty is equal to 20 percent of the 
``applicable recovery amount'' that is paid pursuant to a 
settlement agreement with the Secretary or that a court orders 
to be paid in a judicial proceeding brought by the Secretary to 
enforce ERISA's fiduciary responsibility provisions. The 
Secretary may waive or reduce the penalty only if the Secretary 
finds in writing that either (1) the fiduciary or other person 
acted reasonably and in good faith, or (2) it is reasonable to 
expect that the fiduciary or other person cannot restore all 
the losses without severe financial hardship unless the waiver 
or reduction is granted.

Explanation of provision

    ERISA section 502(l) is amended to make the assessment of 
the penalty discretionary with the Secretary of Labor, rather 
than mandatory. This change will allow the Secretary to refrain 
from imposing the penalty in certain cases as well as to assess 
a penalty of less than 20 percent of the applicable recovery 
amount. The requirement of a settlement agreement would also be 
eliminated. The applicable recovery amount would be any amount 
recovered by a plan or by a participant or beneficiary more 
than 30 days after the fiduciary's or other person's receipt of 
a written notice of the violation from the Department of Labor 
(DOL). Payments made after the grace period, whether they are 
made pursuant to a settlement agreement, or simply to 
discourage the DOL from bringing a legal action, would be 
subject to the penalty, as would amounts recovered pursuant to 
a court order. ERISA section 502(l) is also amended to clarify 
that the term ``applicable recovery amount'' includes payments 
by third parties that are made on behalf of the relevant 
fiduciary or other persons liable for the amount that is 
recovered, including those who did not actually pay. These 
changes prevent avoidance of the penalty by having an unrelated 
third party pay the recovery amount.
    Effective Date--This section applies to any breach of 
fiduciary responsibility or other violation of part 4 of Title 
I of ERISA occurring on or after the date of enactment. The 
change with respect to ``applicable recovery amount'' includes 
a transition rule whereby a breach or other violation occurring 
before the date of enactment which continues past the 180th day 
from enactment (and which may have been discontinued during 
that period) is treated as having occurred after the date of 
enactment (to avoid having to make a complex determination 
regarding how much of the applicable recovery amount for such 
continuing violations should be attributed to the post-
enactment part of the violation).

Rationale

    The current statutory scheme of mandatory penalties creates 
disincentives to settlement and discourages parties from 
quickly settling claims of violations that the DOL brings to 
their attention.

  section 615--protection of investment of employee contributions to 
                              401(k) plans


Current law

    Section 1524 of the Taxpayer Relief Act of 1997 (``TRA''), 
P.L. 105-34, amended ERISA to prohibit certain employee benefit 
plans from acquiring securities or real property of the 
employer who sponsors the plan if, after the acquisition, the 
fair market value of such securities and property exceeds 10 
percent of the fair market value of plan assets. The 10-percent 
limitation does not apply to any ``eligible individual account 
plans'' that specifically authorize such investments. 
Generally, eligible individual account plans are defined 
contribution plans, including plans containing a cash or 
deferred arrangement (401(k) plans).
    The term ``eligible individual account plan'' does not 
include the portion of a plan that consists of elective 
deferrals made under section 401(k) if elective deferrals equal 
to more than 1 percent of any employee's eligible compensation 
are required to be invested in employer securities and employer 
real property. The rule excluding elective deferrals from the 
definition of individual account plan does not apply if 
individual account plans are a small part of the employer's 
retirement plans. In particular, that rule does not apply to an 
individual account plan for a plan year if the value of the 
assets of all individual account plans maintained by the 
employer do not exceed 10 percent of the value of the assets of 
all pension plans maintained by the employer (determined as of 
the last day of the preceding plan year).
    The rule excluding elective deferrals from the definition 
of individual account plan applies to elective deferrals for 
plan years beginning after December 31, 1998. It does not apply 
with respect to earnings on elective deferrals for plan years 
beginning before January 1, 1999.

Explanation of provision

    The provision modifies the effective date of the rule 
excluding certain elective deferrals from the definition of 
individual account plan by providing that the rule does not 
apply to any elective deferral invested in assets consisting of 
qualifying employer securities, qualifying employer real 
property, or both, if such assets were acquired by the plan 
before January 1, 1999.
    Effective Date--The section is effective as if included in 
the section of the Taxpayer Relief Act of 1997 that contained 
the rule excluding certain elective deferrals.

Rationale

    The change would correct a technical problem with the 
application of section 1524 of the TRA. The Committee believes 
that the effective date provided in the TRA with respect to the 
rule excluding certain elective deferrals from the definition 
of individual account plan has produced unintended results.

    Section 616--Notice of Significant Reduction in Benefit Accruals

Current law

    Under section 204(h), a defined benefit plan or a money 
purchase pension plan may not be amended so as to provide for a 
significant reduction in the rate of future benefit accrual 
unless, after the adoption of the plan amendment and not less 
than 15 days before the effective date of the plan amendment, 
the plan administrator satisfies a notice requirement. Under 
such requirement, the plan administrator must provide a written 
notice to participants and alternate payees, other than those 
whose rate of future benefit accrual is reasonably expected not 
to be reduced by the amendment, and to each employee 
organization that represents a participant to whom a section 
204(h) notice is required to be provided.
    The written notice must set forth the plan amendment and 
its effective date. Alternatively, under the applicable 
regulations, the notice may contain:

a summary of the amendment, rather than the text of the 
amendment, if the summary is written in a manner calculated to 
be understood by the average plan participant and contains the 
effective date. The summary need not explain how the individual 
benefit of each participant or alternate payee will be affected 
by the amendment.

    Under the applicable regulations, in general, an amendment 
that significantly reduces the rate of future benefit accrual 
is effective with respect to participants and alternate payees 
with respect to whom a proper notice is provided in a timely 
manner. This rule applies even if certain participants and 
alternate payees do not receive a timely notice, provided that 
the plan administrator made a ``good faith effort to comply 
with the requirements of section 204(h).''
    The applicable regulations also provide that, under certain 
circumstances, an amendment that significantly reduces the rate 
of future benefit accrual is effective with respect to all 
affected persons--even those who are entitled to a notice but 
do not receive one--if the plan administrator ``made a good 
faith effort to comply'' and failed to provide a notice to ``no 
more than a de minimis percentage of participants and alternate 
payees to whom [a] section 204(h) notice is required to be 
provided.''

Explanation of provision

    Under the provision, a section 204(h) notice must include, 
in addition to the information required under current law, a 
notification and description of the significant reduction in 
the rate of future benefit accrual. Such notification and 
description, which must be prepared in a manner calculated to 
be understood by the average employee eligible to participate, 
must clearly convey the significant reduction to affected 
participants, to any employee organization representing such 
participants, and to affected alternate payees. Accordingly, if 
a participant's projected benefits at normal retirement age, 
based on assumed service and compensation until such date, are 
reasonably expected to be significantly reduced, the section 
204(h) notice must clearly convey this. Similarly, if a 
participant's benefits are reasonably expected to be frozen for 
a significant period of time (such as one year), this also must 
be clearly conveyed. As under present law, there would not be a 
required format for a section 204(h) notice; any format may be 
used, provided that it clearly conveys the required 
information.
    Under the provision, a notification and description would 
not fail to satisfy the requirements of section 204(h) by 
reason of not setting forth the specific amount of the 
significant reduction in the rate of future benefit accrual 
that applies to any participant or alternate payee.
    It is not intended that a plan would be able to avoid the 
provision of a meaningful notification and description through 
the use of a two-step approach to modifying the benefit 
formula. For example, a plan may be amended to freeze benefit 
accruals as of a certain date; subsequently, the plan may be 
amended retroactively to the same date to apply a new benefit 
formula. In order to comply with section 204(h), as amended by 
this provision, there must be a notification and description 
that communicates any significant reduction that occurs by 
reason of changing from the ``pre-freeze'' benefit formula to 
the new benefit formula.
    Under the provision, the notice must be provided no less 
than 30 days prior to the effective date of the plan amendment. 
The requirement that the notice be provided after the adoption 
of the plan amendment is deleted. The provision also deletes 
the requirement that the notice be in writing; any form of 
notice, such as electronic, or a combination of different forms 
would be permissible, provided that, under the facts and 
circumstances, such form or forms are an effective and reliable 
means of conveying information to the persons required to 
receive the notice.
    The bill would generally codify the rules set forth in the 
currently applicable regulations regarding the effect of a 
failure to provide a required section 204(h) notice, such as 
the ``de minimis rule'' set forth in Treasury Regulation sec. 
1.411(d)-6 Q/A-14. The bill would also provide that a failure 
to comply with section 204(h) that is not a material failure 
would not result in a plan amendment being rendered 
ineffective. For this purpose, a ``material failure'' is any 
failure that results in materially less information being 
provided to required recipients. For example, if the provision 
of a section 204(h) notice is reasonably delayed and is 
provided 28 days before the effective date of a plan amendment, 
such a failure would not render the amendment ineffective nor 
would it cause the effective date of the plan amendment to be 
delayed. On the other hand, if a section 204(h) notice is 
provided unreasonably late, such as five days before the stated 
effective date, such a failure would result in the effective 
date of the plan amendment being delayed until 30 days after 
the provision of the notice.
    Under another example, assume that an employer chooses to 
convey the significant reduction through a set of illustrative 
examples that are reasonably designed to enable participants 
and alternate payees to estimate the effect of the plan 
amendment on them. Assume further that there is an inadvertent 
failure to provide a sufficient number of examples with respect 
to a small (but not de minimis) subset of employees, so that 
the effect of the amendment on such employees cannot be 
reasonably estimated. In such a case, the plan amendment would 
not be rendered ineffective. The failure does not affect a 
substantial number of individuals. More importantly, all of 
those individuals can reasonably determine or infer that they 
may be significantly affected by the plan amendment, which 
serves the underlying purpose of section 204(h). Of course, in 
order for the plan amendment to be effective with respect to 
the subset of individuals, the plan administrator must correct 
the notice as soon as the administrator becomes aware of the 
deficiency in the notice.
    Effective Date--The changes would apply to plan amendments 
that are adopted more than 120 days after the date of 
enactment.

Rationale

    The Committee is aware of recent significant publicity 
concerning conversions of traditional defined benefit pension 
plans to ``cash balance'' plans, with particular focus on the 
impact such conversions have on affected workers. Legislation 
has been introduced to address some of the issues relating to 
such conversions. (See, e.g., H.R. 1176 introduced by 
Congressman Weller, with companion legislation, S. 659, 
introduced by Senator Moynihan; see also, the conceptual 
proposal released by the Administration on July 13, 1999.)
    The Committee believes that employees are entitled to 
meaningful disclosure concerning plan amendments that may 
result in reductions of future benefit accruals. The Committee 
has determined that present law does not require employers to 
provide such disclosure, particularly in cases where 
traditional defined benefit plans are converted to cash balance 
plans. The Committee also believes that any disclosure 
requirements applicable to plan amendments should strike a 
balance between providing meaningful disclosure and avoiding 
the imposition of unnecessary administrative burdens on 
employers.
    This section was included in H.R. 1102 with the 
anticipation that it would be refined through bipartisan 
discussions regarding an appropriate enhancement to sec. 
204(h). The Committee had hoped to negotiate a mutually 
acceptable disclosure provision with the Administration prior 
to the markup. Committee staff and the staff of Ways and Means, 
Senate Finance, and Senate Labor have all been in discussions 
with the Administration (DOL, Treasury, and PBGC) for about 2 
months. Despite repeated promises that a unified proposal from 
the Administration would be forthcoming shortly, no legislative 
proposal has ever arrived. The night before the markup the 
Administration finally offered something--but only ``general 
principles,'' not legislative language. Thus, the Committee has 
elected to retain this language, while continuing to discuss 
additional modification to sec. 204(h) regarding the specific 
situation of conversions to a cash balance plan.

          Section 617--Technical Corrections to the SAVER Act

Current law

    The Savings Are Vital to Everyone's Retirement (SAVER) Act 
of 1997 (P.L. 105-92), in addition to establishing an ongoing 
program by the DOL on retirement savings education and outreach 
(sec. 516), convenes a National Summit on Retirement Savings at 
the White House, cohosted by the President and the bipartisan 
Congressional leadership, in 1998 and again in 2001 and 2005 
(sec. 517). The National Summit brings together experts in the 
fields of employee benefits and retirement savings, key leaders 
of government, and interested parties from the private sector 
and general public. The delegates are selected by the 
Congressional leadership and the President. The National Summit 
is a public-private partnership, receiving substantial funding 
from private sector contributions. The National Summits' goals 
are to: (1) advance the public's knowledge and understanding of 
retirement savings and facilitate the development of a broad-
based, public education program; (2) identify the barriers 
which hinder workers from setting aside adequate savings for 
retirement and impede employers, especially small employers, 
from assisting their workers in accumulating retirement 
savings; and (3) develop specific recommendations for 
legislative, executive, and private sector actions to promote 
retirement income savings among American workers.

Explanation of provision

    This section makes technical amendments to the SAVER Act 
regarding the administration of future statutorily created 
National Summits on Retirement Savings. It clarifies that 
National Summits shall be held in the month of September in 
2001 and 2005, and adds an additional National Summit in 2009. 
To facilitate the administration of future National Summits, 
the DOL is given authority to enter into cooperative agreements 
(pursuant to the Federal Grant and Cooperative Agreement Act of 
1977) with its 1998 summit partner, the American Savings 
Education Council.
    Six new statutory delegates are added to future summits: 
the Chairman and Ranking Member of the House Ways and Means 
Committee, the Senate Finance Committee, and the Subcommittee 
on Employer-Employee Relations of the House Education and the 
Workforce Committee, respectively. Further, the President, in 
consultation with the Congressional leadership, may appoint up 
to 3% of the delegates (not to exceed 10) from a list of 
nominees provided by the private sector partner in Summit 
administration. The section also clarifies that new delegates 
are to be appointed for each future National Summit (as was the 
intent of the original legislation) and sets deadlines for 
their appointment.
    The section also sets deadlines for DOL to publish the 
Summit agenda, gives DOL limited reception and representation 
authority, and mandates that DOL consult with the Congressional 
leadership in drafting the post-Summit report.
    Effective Date--The section is effective upon date of 
enactment.

Rationale

    This section clarifies the administration of future 
National Summits and is designed to assist in their planning 
and execution. It is also intended to clarify issues regarding 
the selection of delegates to future National Summits.

   Section 618--Conforming Amendments Relating to Transfer of Excess 
        Defined Benefit Plan Assets for Retiree Health Benefits

Current law

    Defined benefit pension plan assets generally may not 
revert to an employer prior to the termination of the plan and 
the satisfaction of all plan liabilities. A reversion prior to 
plan termination may constitute a prohibited transaction. 
However, a pension plan may provide medical benefits to retired 
employees through an Internal Revenue Code section 401(h) 
account that is a part of such plan. A qualified transfer of 
excess assets of a defined benefit pension plan (other than a 
multiemployer plan) into a section 401(h) account that is a 
part of such plan does not result in a prohibited transaction. 
Section 101(e) provides that plan participants, the Secretaries 
of Treasury and Labor, the plan administrator, and each 
employee organization representing plan participants must be 
notified 60 days before a qualified transfer of excess assets 
to a retiree health benefits account occurs. ERISA also 
provides that a qualified transfer is not a prohibited 
transaction (sec. 408(b)(13)) or a prohibited reversion of 
assets to the employer (sec. 403(c)(1)). For purposes of these 
provisions, a qualified transfer is generally defined as a 
transfer pursuant to section 420 of the Internal Revenue Code, 
as in effect on January 1, 1995. The provision permitting a 
qualified transfer of excess pension assets to pay qualified 
current retiree health liabilities expires for taxable years 
beginning after December 31, 2000.

Explanation of provision

    The present-law provision permitting qualified transfers of 
excess defined benefit pension plan assets to provide retiree 
health benefits under a Code section 401(h) account is extended 
through September 30, 2009.
    Effective Date--The provision is effective with respect to 
qualified transfers of excess defined benefit pension plan 
assets to Code section 401(h) accounts after December 31, 2000, 
and before October 1, 2009.

Rationale

    The Committee believes that it is appropriate to provide a 
temporary extension of the present-law rule permitting an 
employer to make a qualified transfer of excess pension assets 
to a Code section 401(h) account for retiree health benefits as 
long as the security of employees' pension benefits is not 
threatened by the transfer.

  Section 619--Model Spousal Consent Language and Qualified Domestic 
                            Relations Order

Current law

    Under sec. 205, pension plans must provide (1) in the case 
of a vested participant who does not die before the annuity 
starting date, the accrued benefit payable in the form of a 
qualified joint and survivor annuity, and (2) in the case of a 
vested participant who dies before the annuity starting date 
and who has a surviving spouse, a qualified pre-retirement 
survivor annuity payable to the surviving spouse of such 
participant. A participant may elect at any time during the 
applicable election period to waive the qualified joint and 
survivor annuity form of benefit or the qualified pre-
retirement survivor annuity form of benefit (or both). However, 
plans must provide that such an election is ineffective unless 
(1) the spouse of the participant consents in writing to such 
election, (2) such election designates a beneficiary (or a form 
of benefits) which may not be changed without spousal consent 
(or the consent of the spouse expressly permits designations by 
the participant without any requirement of further consent by 
the spouse), and (3) the spouse's consent acknowledges the 
effect of such election and is witnessed by a plan 
representative or a notary public.
    Under sec. 206(d), pension plans must provide that benefits 
provided under the plan may not be assigned or alienated, 
including the creation, assignment, or recognition of a right 
to any benefit payable with respect to a participant pursuant 
to a domestic relations order, unless the order is determined 
to be a qualified domestic relations order. Pension plans must 
provide for the payment of benefits in accordance with the 
applicable requirements of any qualified domestic relations 
order (as defined by sec. 206(d)(3)).

Explanation of provision

    This section requires the Secretary of Labor to develop 
model language for the spousal consent required under sec. 
205(c) by January 1, 2001. The model language must be written 
in a manner calculated to be understood by the average person, 
and disclose in plain terms whether the waiver is irrevocable 
and whether the waiver may be revoked by a qualified domestic 
relations order.
    This section also requires the Secretary of Labor to 
develop model language for qualified domestic relations orders 
by January 1, 2001. Such model language must meet the 
requirements of sec. 206(d)(3)(B)(i) and the ERISA requirements 
related to the need to consider the treatment of any lump sum 
payment, qualified joint and survivor annuity, or qualified 
preretirement survivor annuity. This also includes a 
requirement for the Secretary of Labor to undertake publicity 
for the model language as part of the Secretary's pension 
outreach efforts.
    Effective Date--The section is effective upon date of 
enactment.

Rationale

    The Committee believes that DOL's development of model 
language for spousal consent and qualified domestic relations 
orders will ensure the provision of better information to 
spouses involved in a divorce proceeding. These models will 
help individuals better understand rights they are being asked 
to waive.

           Section 620--Elimination of ERISA Double Jeopardy

Current law

    If a fiduciary of an employee benefits plan breaches a duty 
or responsibility owed to the plan, the fiduciary is personally 
liable under sec. 409 to ``make good to such plan any losses to 
the plan resulting from each such breach.'' Section 502(a)(2) 
grants a participant, a beneficiary or a fiduciary, as well as 
the Secretary of Labor, standing to sue on behalf of an injured 
plan for the relief provided in sec. 409. When suit is brought 
by a participant, a beneficiary or a fiduciary, sec. 502(h) 
requires the private plaintiff to notify the Secretary of the 
action. Section 502(h) also provides the Secretary a statutory 
right to intervene in the private suit.
    Neither sec. 502 nor any other ERISA provision expressly 
states what happens if the Secretary fails to intervene in a 
private suit prior to a final court-approved settlement 
agreement. A federal appellate court recently held that the 
Secretary may sue a settling fiduciary for money damages on 
behalf of an ERISA plan even after an identical claim brought 
by a class of all participants was the subject of a court-
approved settlement. Herman v. South Carolina National Bank, 
140 F. 3d 1413 (11th Cir. 1998).

Explanation of provision

    This section amends sec. 502(h) by applying the doctrine of 
claim preclusion (res judicata) to bar the Secretary from re-
litigating claims under sec. 502(a)(2) against a fiduciary for 
monetary damages under the following circumstances: (1) the 
complaint in the action is served upon the Secretary at least 
90 days prior to final court approval of the settlement 
agreement, (2) the action is maintained as a class action or 
derivative action under the Federal Rules of Civil Procedure, 
(3) the action is resolved by a court-approved settlement 
agreement, and (4) the Secretary receives a fully executed copy 
of the settlement agreement within the time established by the 
court for notifying the plan's participants of the proposed 
compromise pursuant to Rule 23 or 23.1 of the Federal Rules of 
Civil Procedure.
    This bars the Secretary from litigating any claim against 
such person that was or could have been brought in that action 
with respect to the same plan, consistent with the 
jurisprudence of res judicata. See, e.g., Rivet v. Regions Bank 
of Louisiana, 522 U.S. 470, 139 L. Ed. 912, 919 (1998); 
Restatement (2nd) of Judgments sec. 24 (1982). However, this 
section does not bar the Secretary from filing a second action 
against such person under sec. 502(a)(2) if the complaint was 
filed prior to the final court approval of the private suit 
settlement agreement.
    Effective Date--The amendments made by this section are 
effective with respect to all actions or claims commenced by 
the Secretary that are pending on or after the date of the 
enactment of this Act.

Rationale

    The Committee believes that subjecting a fiduciary to a 
subsequent suit for monetary damages by the Secretary of Labor, 
following the settlement of a suit by private parties on the 
same grounds and upon proper notice to the Secretary, violates 
the principles of res judicata and effectively results in 
double jeopardy. If the interpretation of the Eleventh Circuit 
in South Carolina National Bank were to prevail, settlement of 
ERISA litigation would be discouraged and plan participants and 
beneficiaries would be hindered in their ability to recover 
monetary damages for the plan. If a settlement of a private 
action brings no guarantee of foreclosure of future litigation 
of the identical claim, fiduciary defendants will have 
significantly less incentive to settle, or they will settle 
only for reduced amounts. This will only serve to increase 
litigation costs and reduce the amount of monetary recovery for 
plans.
    This section continues to protect the institutional 
interests of the Secretary of Labor. The Secretary receives two 
notices of the private litigation before the bar applies: one 
when the suit commences and one when a proposed settlement is 
reached. And the Secretary receives notice of settlement 
comparable to that which all members of the class are entitled 
before they become bound by it. The Secretary has the ability 
to independently investigate the transaction at issue in the 
suit and then either intervene or file a separate action. This 
provision specifically preserves the Secretary's right to an 
independent action if timely filed.
    The Secretary is only barred from bringing a subsequent 
action for monetary damages where the monetary interests of all 
plan participants and beneficiaries have been vindicated in the 
original suit. Proceeds from the type of private actions 
covered by this provision are paid to the plan for the benefit 
of all plan participants. Thus, the Secretary would never have 
a need to proceed with an action to vindicate the rights of 
persons not represented in the original suit. The Secretary 
still could proceed with an action for broader equitable relief 
under sec. 502(a)(5), including claims for equitable 
restitution. Barring a government agency from bringing a second 
suit for monetary (as opposed to equitable) relief for the same 
parties is consistent with judicial precedent as well as the 
doctrine of res judicata. See, e.g., EEOC v. United States 
Steel Corp., 921 F.2d 489 (3d Cir. 1990) (EEOC barred from 
asserting claim for monetary relief on behalf of individual age 
discrimination claimants who previously settled with employer).
    The bar against a repetitive action by the Secretary only 
applies when the private settlement has been reviewed and 
approved by a federal judge under the ``fairness'' procedures 
mandated generally for all class and derivative action 
settlements by Rules 23 and 23.1 of the Federal Rules of Civil 
procedure. Nothing in this provision prevents the Secretary 
from seeking to reopen court-approved settlements that she 
believes were the product of fraud or collusion. Nor does 
anything in this provision limit the exposure of plan 
fiduciaries to criminal or civil liability under Part 5 of 
Title I of ERISA or under Title 18 of the U.S. Code, or to 
prohibited transaction excise tax penalties under section 4975 
of the Internal Revenue Code.

                Subtitle C--Reducing Regulatory Burdens


         Section 621--Modification of Timing of Plan Valuations

Current law

    Under present law, in the case of plans subject to the 
minimum funding rules, a plan valuation is generally required 
annually. Prior to the Retirement Protection Act of 1994 (P.L. 
103-465), plan valuations generally were required at least once 
every three years. The valuation date for a defined benefit 
plan for a plan year must generally be in the same plan year.

Explanation of provision

    The provision allows an employer to elect to use the prior 
year's plan valuation in certain cases. The election may be 
made only with respect to a defined benefit plan with assets of 
at least 125 percent of current liability (determined as of the 
valuation date for the preceding year). If the prior year's 
valuation is used, it must be adjusted, as provided in 
regulations, to reflect significant differences in 
participants. An election made under the provision may be 
revoked only with the consent of the Secretary of the Treasury. 
In any event, a plan valuation is required once every three 
years.
    Effective Date--The provision is effective for plan years 
beginning after December 31, 2000.

Rationale

    The Committee believes that while plan valuations are 
necessary to ensure adequate funding of defined benefit pension 
plans, they also create administrative burdens for employers. 
Requiring valuations at least once every three years in the 
case of well-funded plans strikes an appropriate balance 
between funding concerns and employer concerns about plan 
administrative costs. Because valuations can be quite time 
consuming, the current-law rule means that a plan's minimum 
funding requirements, deductible limits, and full-funding 
limitation for a year are not known until after the beginning 
of the year, sometimes well into the year, and in extreme cases 
even after the year is over. This prevents accurate advance 
budgeting for pension contributions.

      Section 622--Substantial Owner Benefits in Terminated Plans

Current law

    The PBGC provides participants and beneficiaries in a 
defined benefit pension plan with certain minimal guarantees as 
to the receipt of benefits under the plan in case of plan 
termination. The employer sponsoring the defined benefit 
pension plan is required to pay premiums to the PBGC to provide 
insurance for the guaranteed benefits. In general, the PBGC 
will guarantee all basic benefits which are payable in periodic 
installments for the life (or lives) of the participant and his 
or her beneficiaries and are non-forfeitable at the time of 
plan termination. The amount of the guaranteed benefit is 
subject to certain limitations. One limitation is that the plan 
(or an amendment to the plan which increases benefits) must be 
in effect for 60 months before termination for the PBGC to 
guarantee the full amount of basic benefits for a plan 
participant. In the case of a substantial owner, the guaranteed 
basic benefit is phased in over 30 years beginning with 
participation in the plan. A substantial owner is one who owns, 
directly or indirectly, more than 10 percent of the voting 
stock of a corporation or all the stock of a corporation. 
Special rules restricting the amount of benefit guaranteed and 
the allocation of assets also apply to substantial owners.

Explanation of provision

    The provision provides that the 60 month phase-in of 
guaranteed benefits applies to a substantial owner with less 
than 50 percent ownership interest. For a substantial owner 
with a 50 percent or more ownership interest (``majority 
owner''), the guarantee is phased in over the first 10 years of 
the plans existence (after that, the majority owner's guarantee 
is the same as other participants guarantee). In addition, the 
majority owner's guaranteed benefit is limited so that it may 
not be more than the amount for other participants. The rules 
regarding allocation of assets apply to substantial owners, 
other than majority owners, in the same manner as other 
participants.
    Effective Date--The provision is effective for plan 
terminations with respect to which notices of intent to 
terminate are provided, or for which proceedings for 
termination are instituted by the PBGC, after December 31, 
2000.

Rationale

    The Committee believes that the present-law rules 
concerning limitations on guaranteed benefits for substantial 
owners are overly complicated and restrictive and thus may 
discourage some small business owners from establishing defined 
benefit pension plans. Moreover, the current special 
substantial owner rules are inordinately complex and require 
plan documents going back as far as 30 years, which are often 
difficult or impossible to obtain.

     Section 623--Notice and Consent Period Regarding Distributions

Current law

    Notice and consent requirements in sec. 205 apply to 
certain distributions from qualified retirement plans. These 
requirements relate to the content and timing of information 
that a plan must provide to a participant prior to a 
distribution, and to whether the plan must obtain the 
participant's consent to the distribution. The nature and 
extent of the notice and consent requirements applicable to a 
distribution depend upon the value of the participant's vested 
accrued benefit and whether the joint and survivor annuity 
requirements apply to the participant.
    If the present value of the participant's vested accrued 
benefit exceeds $5,000, the plan may not distribute the 
participant's benefit without the written consent of the 
participant. The participant's consent to a distribution is not 
valid unless the participant has received from the plan a 
notice that contains a written explanation of: (1) the material 
features and the relative values of the optional forms of 
benefit available under the plan, (2) the participant's right, 
if any, to have the distribution directly transferred to 
another retirement plan or IRA, and (3) the rules concerning 
the taxation of a distribution. If the joint and survivor 
annuity requirements apply to the participant, this notice also 
must contain a written explanation of (1) the terms and 
conditions of the qualified joint and survivor annuity 
(``QJSA''), (2) the participant's right to make, and the effect 
of, an election to waive the QJSA, (3) the rights of the 
participant's spouse with respect to a participant's waiver of 
the QJSA, and (4) the right to make, and the effect of, a 
revocation of a waiver of the QJSA. The plan generally must 
provide this notice to the participant no less than 30 and no 
more than 90 days before the date distribution commences.
    If the participant's vested accrued benefit does not exceed 
$5,000, the terms of the plan may provide for distribution 
without the participant's consent. The plan generally is 
required, however, to provide to the participant a notice that 
contains a written explanation of: (1) the participant's right, 
if any, to have the distribution directly transferred to 
another retirement plan or IRA, and (2) the rules concerning 
the taxation of a distribution. The plan generally must provide 
this notice to the participant no less than 30 and no more than 
90 days before the date distribution commences.

Explanation of provision

    A qualified retirement plan is required to provide the 
applicable distribution notice no less than 30 days and no more 
than 180 days before the date distribution commences. The 
Secretary of the Treasury is directed to modify the applicable 
regulations to reflect the extension of the notice period to 6 
months and 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.
    Effective Date--The provision is effective for years 
beginning after December 31, 2000.

Rationale

    The Committee understands that an employee is not always 
able to evaluate distribution alternatives, select the most 
appropriate alternative, and notify the plan of the selection 
within a 90-day period. The Committee believes that requiring a 
plan to furnish multiple distribution notices to an employee 
who does not make a distribution election within 90 days is 
administratively burdensome. In addition, the Committee 
believes that participants who are entitled to defer 
distributions should be informed of the impact of a decision 
not to defer distribution on the taxation and accumulation of 
their retirement benefits.

                Section 624--Annual Report Dissemination

Current law

    Section 104(b)(3) requires that within nine months after 
the close of each plan year, the plan administrator must 
``furnish'' a summary annual report to each plan participant 
and to each beneficiary receiving benefits. The summary annual 
report is a summary of the annual report filed with the DOL 
regarding the financial position and management of the plan.

Explanation of provision

    The requirement that plan administrators ``furnish'' a 
summary annual report would be changed to a requirement that 
plan administrators make the report ``available for 
examination.'' A summary annual report must also be provided 
upon request.
    Effective Date--The change applies to reports for years 
beginning after December 31, 1998.

Rationale

    The Committee believes that simplification of the summary 
annual report requirement will reduce the burden and cost of 
plan administration and disclosure, thereby encouraging more 
employers to establish and maintain retirement plans, without 
denying participants the opportunity to obtain information 
concerning plan status and operation. A paper copy of the 
report will still be available upon request, protecting those 
who wish to examine the report.

                   Section 625--Excess Benefit Plans

Current law

    ERISA defines an ``excess benefit plan'' as a plan 
maintained by an employer solely for the purpose of providing 
benefits for certain employees in excess of the limitations on 
contributions and benefits imposed by Internal Revenue Code 
section 415 on plans to which that section applies without 
regard to whether the plan is funded. ERISA does not apply to a 
nonqualified plan that provides benefits in excess of the Code 
section 415 limits. The rules governing such excess benefit 
plans have historically been useful in structuring arrangements 
that potentially benefit a significant range of employees, 
albeit without the tax advantages afforded to qualified plans. 
Separate provisions of ERISA provide exemptions from numerous 
ERISA requirements (including the trust requirement) for so-
called ``top-hat'' plans that cover a select group of 
management or highly compensated employees. Since ERISA was 
enacted in 1974, a number of limits and rules comparable to the 
section 415 limits have been added to the Internal Revenue 
Code, including section 401(a)(17).

Explanation of provision

    The sec. 3(36) definition of an ``excess benefit plan'' 
would be expanded to include Internal Revenue Code section 
401(a)(17), the annual compensation limit.
    Effective Date--The change applies to years beginning after 
December 31, 1999.

Rationale

    The Committee believes that the current-law ERISA 
provisions governing excess plans should be expanded. For 
employers wanting to provide retirement benefits to employees 
that wrap around the existing Code limits and rules, the 
current rules create a level of uncertainty. The change will 
expand the group of employees able to participate in so-called 
mirror plans.

                 Section 626--Benefit Suspension Notice

Current law

    Section 203(a)(3)(B) provides that a plan will not fail to 
satisfy the vesting requirements with respect to a participant 
by reason of suspending payment of the participant's benefits 
while such participant is employed. Under the applicable DOL 
regulations, such a suspension is only permissible if the plan 
notifies the participant during the first calendar month or 
payroll period in which the plan withholds benefit payments. 
Such notice must provide certain information and must also 
include a copy of the plan's provisions relating to the 
suspension of payments.
    In the case of a plan that does not pay benefits to active 
participants upon attainment of normal retirement age, the 
employer must monitor plan participants to determine when any 
participant who is still employed attains normal retirement 
age. In order to ``suspend'' payment of such a participant's 
benefits, generally a plan must, as noted above, promptly 
provide the participant with a suspension notice.

Explanation of provision

    This section permits the information currently required to 
be set forth in a suspension notice to be included in the 
summary plan description, rather than in a separate notice. In 
addition, the section deletes the requirement that the 
suspension notice (or the summary plan description) include a 
copy of the plan's provisions relating to suspension of 
payments. However, individuals reentering the workforce to 
resume work with a former employer, after they have begun to 
receive benefits, would still receive the existing notification 
of the suspension of benefits.
    Effective Date--The change applies to plan years beginning 
after December 31, 1999.

Rationale

    The Committee believes that the present-law rules regarding 
suspension notices create unjustified burdens on defined 
benefit plans that do not pay benefits to active participants 
upon attainment of normal retirement age when they continue to 
draw pay. This dispenses with individual notices going to 
employees at the time they attain the normal retirement age--a 
practice which often unduly alarms workers who believe they are 
being encouraged to retire by their employer.

          Section 627--Provisions Relating to Plan Amendments

Current law

    Plan amendments to reflect amendments to the law generally 
must be made by the time prescribed by law for filing the 
income tax return of the employer for the employer's taxable 
year in which the change in law occurs.

Explanation of provision

    Any amendments to a plan or annuity contract required to be 
made by the provisions of this Act are not required to be made 
before the last day of the first plan year beginning on or 
after January 1, 2003.
    Effective Date--The provision is effective on the date of 
enactment.

Rationale

    The Committee believes that plan sponsors should have 
adequate time to amend their plans to reflect amendments to the 
law.

Section 628--Simplified Annual Filing Requirement for Plans With Fewer 
                           Than 25 Employees

Current law

    A plan administrator of a pension, annuity, stock bonus, 
profit-sharing or other funded plan of deferred compensation 
generally must file with the Secretary of Labor, the Secretary 
of the Treasury, and the PBGC an annual return for each plan 
year containing certain information with respect to the 
qualification, financial condition, and operation of the plan. 
The plan administrator must use the Form 5500 series as the 
format for the required annual return. The Form 5500 series 
annual return/report, which consists of a primary form and 
various schedules, includes the information required to be 
filed with all three agencies. The plan administrator satisfies 
the reporting requirement with respect to each agency by filing 
the Form 5500 series annual return/report with the Internal 
Revenue Service, which forwards the form to the Department of 
Labor and the PBGC.
    The Form 5500 series consists of 3 different forms: Form 
5500, Form 5500-C/R, and Form 5500-EZ. Form 5500 is the most 
comprehensive of the forms and requires the most detailed 
financial information. Form 5500-C/R requires less information 
than Form 5500, and Form 5500-EZ, which consists of only 1 
page, is the simplest of the forms. The size of the plan 
determines which form a plan administrator must file. If the 
plan has more than 100 participants at the beginning of the 
plan year, the plan administrator generally must file Form 
5500. If the plan has fewer than 100 participants at the 
beginning of the plan year, the plan administrator generally 
may file Form 5500-C/R. A plan administrator generally may file 
Form 5500-EZ if (1) the only participants in the plan are the 
sole owner of a business that maintains the plan (and such 
owner's spouse), or partners in a partnership that maintains 
the plan (and such partners' spouses), (2) the plan is not 
aggregated with another plan in order to satisfy the minimum 
coverage requirements of Internal Revenue Code section 410(b), 
(3) the employer is not a member of a related group of 
employers, and (4) the employer does not receive the services 
of leased employees. If the plan satisfies the eligibility 
requirements for Form 5500-EZ and the total value of the plan 
assets as of the end of the plan year and all prior plan years 
does not exceed $100,000, the plan administrator is not 
required to file a return.

Explanation of provision

    The Secretary of the Treasury is directed to provide for 
the filing of a simplified annual return substantially similar 
to the Form 5500-EZ by a plan that (1) covers less than 25 
employees on the first day of the plan year, (2) is not 
aggregated with another plan in order to satisfy the minimum 
coverage requirements of Internal Revenue Code section 410(b), 
(3) is maintained by an employer that is not a member of a 
related group of employers, and (4) is maintained by an 
employer that does not receive the services of leased 
employees.
    Effective Date--The provision is effective on the date of 
enactment.

Rationale

    The Committee believes that simplification of the reporting 
requirements applicable to plans of small employers will 
encourage such employers to provide retirement benefits for 
their employees.

                                Summary

    The ERISA provisions (Title VI) of the ``Comprehensive 
Retirement Security and Pension Reform Act of 1999,'' H.R. 
1102, as amended, will directly improve the retirement security 
of American workers by expanding small business retirement 
plans, allowing workers to save more, making pensions more 
secure, and cutting the red tape that has hamstrung employers 
who want to establish pension plans for their employees.

    Section-by-Section Analysis of Title VI of H.R. 1102, as Amended


Section 601. Participant Loans for Small Business Owners

    Generally, plans may make loans to participants. But, 
prohibited transaction rules prevent sole proprietors, 
partners, and Subchapter S corporation shareholders from taking 
participant loans. The prohibited transaction rules would be 
modified under this section to allow for participant loans to 
sole proprietors, partners, and subchapter S corporation 
shareholders.

Sec. 602. Reduced PBGC Premiums for New Plans

    Defined benefit plans are subject to a flat-rate premium of 
$19 per participant. Underfunded defined benefit plans are 
subject to an additional variable rate premium. There is no 
variable rate premium for the first year of a new defined 
benefit plan. Under this provision, new defined benefit plans 
established by employers with 100 employees or less would only 
have to pay a $5 per participant PBGC premium for the first 5 
years of the plan. No variable rate premium would be assessed 
during this period.

Sec. 603. Reduction of Additional PBGC Premiums

    Defined benefit plans are subject to a flat-rate premium of 
$19 per participant. Underfunded defined benefit plans are 
subject to an additional variable rate premium. There is no 
variable rate premium for the first year of a new defined 
benefit plan. Under this section, any variable rate premium 
that might be assessed against a new defined benefit plan 
established by a larger employer would be phased-in as follows: 
0% for the first plan year; 20% for the second; 40% for the 
third; 60% for the fourth; 80% for the fifth, and 100% for the 
sixth and succeeding plan years. For employers who have 25 or 
fewer employees on the first day of the plan year, the 
additional premium for each participant would not exceed $5 
multiplied by the number of participants in the plan as of the 
close of the preceding plan year.

Sec. 604. Faster Vesting of Employer Matching Contributions

    Employee contributions to a qualified plan are immediately 
vested. Employer matching contributions either must be fully 
vested after the employee has completed 5 years of service, or 
must become vested in increments of 20% for each year beginning 
with the third year of service, with full vesting after the 
employee has completed seven years of service. Under this 
section, employer matching contributions would have to be 
vested under a maximum 3-year cliff or 6-year graded vesting 
schedule. In the case of graded vesting, vesting would have to 
begin with the employee's second year of service.

Sec. 605. Treatment of Forms of Distribution

    Under the ``anti-cutback rule,'' when a participant's 
benefits are transferred from one plan to another, the 
transferee plan must preserve all forms of distribution that 
were available under the transferor plan. The anti-cutback rule 
also provides that, without regard to a transfer, a plan may 
not eliminate forms of distribution. Under this section, an 
employee may elect to transfer benefits from one plan to 
another without requiring the transferee plan to preserve 
optional forms of benefits if the following requirements are 
satisfied: (1) the transfer was a direct transfer; (2) the 
transfer was authorized under the terms of both plans; (3) the 
transfer was pursuant to a voluntary election by the 
participant upon receipt of proper notice; (4) spousal consent 
for the transfer, if required, was obtained; and (5) the 
participant could have elected a lump sum distribution. In 
addition, under the provision, except to the extent provided in 
regulations, a form of distribution in a DC plan may be 
eliminated with respect to a participant if: (1) a lump sum 
distribution is available when the distribution form is being 
eliminated, and (2) such lump sum is based on the same or 
greater portion of the participant's account as the 
distribution form being eliminated. Treasury would also be 
directed to issue regulations.

Sec. 606. Employers May Disregard Rollovers for Purposes of Cash-Out 
        Amounts

    Terminated participants' benefits may be cashed out if the 
nonforfeitable present value of such benefits does not exceed 
$5,000. The provision permits a plan to ignore amounts 
attributable to rollover contributions when determining the 
cash-out amount.

Sec. 611. Repeal of 150% of Current Liability Funding Limit

    Contributions to a defined benefit plan that exceed 150% of 
current liability are not tax deductible. This limit will phase 
up to 170% by 2005. Under this section, the limit would be 
phased-up in 5% increments beginning with the 2001 plan year. 
For plan years beginning after December 31, 2003, the current 
liability full funding limit would be completely repealed.

Sec. 612. Expansion of Missing Participants Program

    The PBGC acts as a clearinghouse for benefits due to 
participants who cannot be located. When a defined benefit plan 
terminates, the plan may transfer the benefits of the missing 
participant to the PBGC, which then attempts to locate the 
participant. Under this section, the PBGC's missing participant 
program would be expanded to cover multiemployer plans. The 
program would also be expanded to include small professional 
service employees and defined contribution plans. This 
expansion would be voluntary at the election of the plan 
sponsor.

Sec. 613. Periodic Pension Benefits Statements

    Upon the request of a participant, the plan administrator 
must provide a summary of the participant's benefits under the 
plan. A participant is not entitled to more than one benefit 
statement per year. Under this provision, a benefit statement 
would have to be given to a defined contribution plan 
participant at least once a year. Statements would have to be 
provided to defined benefit plan participants at least once 
every three years. Alternatively, in the case of defined 
benefit plans, the employer could provide participants with 
notice of their right to request a benefit statement at least 
once a year.

Sec. 614. Waiver of Civil Penalties for Breach of Fiduciary 
        Responsibility

    Section 502(l) requires DOL to assess a 20% penalty for 
violations of part 4 of Title I of ERISA for breaches of 
fiduciary duty. The DOL is limited in its ability to reduce 
this penalty. Under the provision, ERISA section 502(l) would 
be amended to make the assessment discretionary with DOL rather 
than mandatory. This change would allow DOL to refrain from 
assessing the 20% penalty in certain cases or to assess a lower 
amount.

Sec. 615. Protection of Investment of Employee Contributions to 401(k) 
        Plans

    Section 1524 of the Taxpayer Relief Act of 1997 places 
certain limits on investment of employee salary reduction 
contributions in employer stock or employer real property. The 
section modifies the effective date of the rule excluding 
certain elective deferrals from the definition of individual 
account plan by providing that the rule does not apply to any 
elective deferral invested in assets consisting of qualifying 
employer securities, qualifying employer real property, or 
both, if such assets were acquired by the plan before January 
1, 1999.

Sec. 616. Notice of Significant Reduction in Benefit Accruals

    Participants must be notified of a plan amendment 
significantly reducing future benefit accruals at least 15 days 
before such amendment takes effect. The notice must be given 
after the plan sponsor has formally adopted the amendment. 
Treasury regulations provide that participants need not be 
given an individual statement detailing how their own benefits 
will be affected by the amendment. This provision modifies 
ERISA Section 204(h) to require that affected participants be 
given a notice of a plan amendment significantly reducing 
future benefit accruals at least 30 days before the amendment 
takes effect. Such notice must include at least a summary of 
the amendment and a description of the reduction, but does not 
require an individual comparison statement. Further, the notice 
could be provided before the plan amendment is formally 
adopted.

Sec. 617. Technical Corrections to the SAVER Act

    The Savings Are Vital to Everyone's Retirement (SAVER) Act 
of 1997 convenes a National Summit on Retirement Savings at the 
White House, cohosted by the executive and legislative branches 
in 1998 and again in 2001 and 2005. The National Summit brings 
together experts in the fields of employee benefits and 
retirement savings, key leaders of government, and interested 
parties from the private sector and general public. The 
delegates are selected by the Congressional leadership and the 
President. The National Summit is a public-private partnership, 
receiving substantial funding from private sector 
contributions. This section provides for technical amendments 
to the SAVER Act, regarding the administration of and delegate 
selection to future statutorily created National Summits on 
Retirement Savings.

Sec. 618. Transfer of Excess Defined Benefit Plan Assets for Retiree 
        Health Benefits

    Under ERISA sections 101(e)(3), 403(c)(1), and 408(b), an 
employer may--subject to specific limitations and other 
requirements--transfer excess defined benefit plan assets to a 
retiree ``health benefits account'' without causing the 
transferred assets to be included in the employer's gross 
income and without subjecting the employer to the excise tax on 
reversions. This provision is set to expire on December 31, 
2000. This amendment would extend the provision until October 
1, 2009.

Sec. 619. Model Spousal Consent Language and Qualified Domestic 
        Relations Order

    Plans must seek spousal consent for the waiver of a 
qualified joint and survivor annuity form of benefit or a 
qualified pre-retirement survivor annuity form of benefit. 
Plans must pay benefits in accordance with Qualified Domestic 
Relations Orders. This provision requires the Secretary of 
Labor to develop model language for spousal consent and for 
qualified domestic relations orders.

Sec. 620. Elimination of ERISA Double Jeopardy

    ERISA allows the DOL, a participant, a beneficiary or 
fiduciary to bring suit to recover losses to an employee 
benefit plan. If a claim is brought by a party other than the 
DOL, the DOL must be informed and may intervene in the case or 
may move independently against the party. Under this section, 
if the complaint in a suit brought on behalf of an employee 
benefit plan is served upon the DOL at least 90 days before the 
date of entry of final judgement and the DOL receives 
settlement notice consistent with Federal Rule 23, then the DOL 
would be barred from later litigating any claim against such 
person that was, or could have been, brought in that action 
with respect to the same plan.

Sec. 621. Modification of Timing of Plan Valuations

    The valuation date for a defined benefit plan for a plan 
year must generally be in the same plan year. Under this 
section, defined benefit plans would be permitted to use a 
valuation date up to one year prior to the beginning of the 
plan year. The change would apply at the election of the 
employer but would not be available to an underfunded plan.

Sec. 622. Substantial Owner Benefits in Terminated Plans

    ``Substantial owners'' are individuals who own more than 
10% of a business. ERISA contains complicated rules governing 
the benefit earned by substantial owners when a plan is 
terminating. Under this section, the same five-year phase-in 
that currently applies to a participant who is not a 
substantial owner would apply to a substantial owner with less 
than a 50% ownership interest. For a majority owner, the same 
phase-in rules would apply once the plan had been in existence 
for 10 years. For the first 10 years, the guarantee would be 
phased in \1/10\ per year.

Sec. 623. Notice and Consent Period Regarding Distributions

    Generally, benefits cannot be distributed before the later 
of age 62 or normal retirement age unless the participant 
consents no more than 90 days before benefit commencement. 
Also, information on the tax implications of rollovers must be 
given to the employee within 90 days of distribution. Under 
this provision, the notice and consent period regarding 
distributions would be expanded from 90 days to 180 days.

Sec. 624. Summary Annual Reports

    Within 210 days after the close of a plan's fiscal year, 
the plan administrator must provide certain information to 
participants in a summary annual report (SAR). Under this 
section, SARs would no longer have to be distributed. Instead 
they would only have to be made available upon request.

Sec. 625. Excess Benefit Plans

    Unfunded excess benefit plans are exempt from ERISA. 
Currently, excess benefit plans are defined as plans which 
provide benefits in excess of the Internal Revenue Code section 
415 limits. Under this provision, the definition of excess 
benefit plans would be revised to include plans which provide 
benefits in excess of the Code section 401(a)(17) or 415 
limits.

Sec. 626. Benefit Suspension Notice

    When an employee continues to work beyond normal retirement 
age, or is reemployed after commencing benefits, a defined 
benefit plan may provide for a suspension of pension payments 
during the post normal retirement age employment period. DOL 
regulations require that affected participants be notified in 
writing of such suspension and that such notice include a copy 
of the relevant plan provisions. Under this section, DOL would 
be required to modify its regulations regarding suspension of 
benefits rules to eliminate the requirement of a written 
individual notice and instead require that the suspension of 
benefits rules be outlined in the summary plan description, 
except for individuals reentering the workforce. Those 
rejoining a former employer would still receive the existing 
notice of suspension.

Sec. 627. Provisions Relating to Plan Amendments

    Generally, there is a short time within which to make plan 
amendments to reflect amendments to the law. In addition, the 
anti-cutback rules can have the unintended consequence of 
preventing an employer from amending its plan to reflect a 
change in the law. Under this section, amendments to a plan or 
annuity contract made pursuant to any amendment made by the Act 
would not be required to be made before the last day of the 
first plan year beginning on or after January 1, 2003. 
Operational compliance would, of course, be required with 
respect to all plans as of the applicable effective date of any 
amendment made by the Act. In addition, timely amendments to a 
plan or annuity contract made pursuant to any amendment made by 
the Act would be deemed to satisfy the anti-cutback rules.

Sec. 628. Reporting Simplification for Small Plans

    A ``one-participant retirement plan'' that is not exempt 
from the annual report filing requirement is only required to 
file a simplified form, i.e., Form 5500-EZ. A one-participant 
plan is a plan that covers and benefits only certain owners (or 
such owners and their spouses) of the sponsoring employer and 
meets the following requirements: (1) the plan satisfies the 
section 410(b) coverage requirements without being aggregated 
with any other plan; (2) the plan does not cover a business 
that is a member of an affiliated service group, a controlled 
group of employers, or a group of businesses under common 
control; and (3) the plan does not cover a business that leases 
employees. Under this section, a plan that covers fewer than 25 
employees on the first day of the plan year would only be 
required to file a Form 5500-EZ, provided that the plan meets 
the three requirements with respect to the definition of a one-
participant plan.

                       Explanation of Amendments

    The provisions of the substitute are explained in this 
report.

              Application of Law to the Legislative Branch

    Section 102(b)(3) of Public Law 104-1 requires a 
description of the application of this bill to the legislative 
branch. This bill initiates pension reform amendments to the 
Employee Retirement Income Security Act (ERISA). Since ERISA 
excludes governmental plans, the bill does not apply to 
legislative branch employees. As public employees, legislative 
branch employees are eligible to participate in the Federal 
Employee Retirement System.

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget and Impoundment 
Control Act (as amended by Section 101(a)(2) of the Unfunded 
Mandates Reform Act, P.L. 104-4) requires a statement of 
whether the provisions of the reported bill include unfunded 
mandates. This bill initiates pension reform amendments to the 
Employee Retirement Income Security Act (ERISA), and makes 
retirement security more available to millions of workers by 
expanding small business retirement plans, allowing workers to 
save more, addressing the needs of an increasingly mobile 
workforce through greater portability and other changes, making 
pensions more secure, and cutting the red tape that has 
hamstrung employers who want to establish pension plans for 
their workers. As such, the bill does not contain any unfunded 
mandates.


                             Correspondence

          Committee on Education and the Workforce,
                             U.S. House of Representatives,
                                     Washington, DC, July 22, 1999.
Hon. Bill Archer,
Chairman, Committee on Ways and Means, Washington, DC.
    Dear Chairman Archer: Thank you for your letter and for 
working with me regarding H.R. 2488, the Financial Freedom Act. 
As you have correctly noted, Title XII of H.R. 2488, as 
reported, contains numerous pension provisions designed to 
improve retirement security. As you also know, on July 14, 
1999, the Committee on Education and the Workforce ordered 
favorably reported H.R. 1102, ``Comprehensive Retirement 
Security an Pension Reform Act.'' The bill, as introduced, was 
referred to the Committee on Ways and Means, and in addition, 
to the Committee on Education and the Workforce, and Committee 
on Government Reform. Titles 1-V of the bill, as reported by 
the Committee on Education and the Workforce, contain many of 
the tax provisions included in H.R. 2488, and Title VI contains 
amendments to the Employee Retirement Income Security Act 
(ERISA).
    As you know, I intended to have Rules Committee make in 
order the provisions in H.R. 1102, regarding ERISA; however, in 
order to expedite consideration of H.R. 2488 and with the 
understanding as outlined in your letter, I did not make such a 
request. I appreciate your working with me to include those 
pension provisions within the jurisdiction of the Committee on 
Education and the Workforce in the final conference agreement 
on H.R. 2488. I appreciate your support in my request to the 
Speaker for the appointment of conferees from my Committee with 
respect to matters within the jurisdiction of my committee when 
a conference with the Senate is convened on this legislation.
    Thank you for agreeing to include this exchange of letters 
in the Congressional Record during the House debate on H.R. 
2488. Again, I thank you for working with me in developing this 
legislation and I look forward to working with you on these 
issues in the future.
             Sincerely,
                                           Bill Goodling, Chairman.
                                ------                                

          Committee on Education and the Workforce,
                             U.S. House of Representatives,
                                    Washington, DC, August 2, 1999.
Hon. J. Dennis Hastert,
Speaker, U.S. House of Representatives, Washington, DC.
    Dear Mr. Speaker: I am writing with regard to the 
forthcoming Conference on H.R. 2488, the ``Financial Freedom 
Act of 1999'', and the Senate amendment thereto. The Senate 
Amendment contains a number of provisions amending the Employee 
Retirement Income Security Act (ERISA), which are within the 
jurisdiction of the Committee on Education and the Workforce. 
As such, I am requesting that Members of the Committee on 
Education and the Workforce be appointed to the Conference 
Committee on these provisions.
    As you may recall, on July 14, 1999, the Committee on 
Education and the Workforce ordered favorably reported the 
bill, H.R. 1102, the ``Comprehensive Retirement Security and 
Pension Reform Act.'' Title VI of the Committee reported bill 
contains a number of pension reform changes to ERISA, several 
of these provisions are the same or similar to provisions 
contained in the Senate Amendment. You may also recall that I 
had intended to ask the Committee on Rules to make the 
provisions regarding ERISA in order as an amendment to H.R. 
2488, during the House Floor consideration; however, in order 
to expedite consideration of that bill and with the 
understanding that Members of the Education and the Workforce 
Committee would be appointed as conferees to matters within our 
jurisdiction, I withheld that request. Chairman Archer and I 
engaged in an exchange of letters dated July 21st and July 
22nd, respectfully, regarding this understanding.
    As such the Committee on Education and the Workforce has 
jurisdiction over the following sections of the Senate 
Amendment:
          Sec. 313. Plan loans for suchapter S owners, 
        partners, and sole proprietors
          Sec. 315. Reduced PBGC premium for new plans of small 
        employers
          Sec. 316. Reduction of additional PBGC premium for 
        new plans
          Sec. 318. SAFE annuities and trusts
          Sec. 325. Faster vesting of certain employer matching 
        contributions
          Sec. 335. Treatment of forms of distribution
          Sec. 338. Employers may disregard rollovers for 
        purposes of cash-out amounts
          Sec. 341. Repeal of 150 percent of current liability 
        funding limit
          Sec. 342. Extension of missing participants program 
        to multiemployer plans
          Sec. 344. Failure to provide notice by defined plans 
        significantly reducing future benefit accruals
          Sec. 345. Protection of investment of employee 
        contributions to 401(k) plans
          Sec. 351. Periodic pension benefits statements
          Sec. 362. Modification of timing of plan valuations
          Sec. 363. Substantial owner benefits in terminated 
        plans
          Sec. 365. Notice and consent period regarding 
        distributions
          Sec. 369. Annual report dissemination
          Sec. 371. Reporting Simplification
          Sec. 381. Provisions relating to plan amendments
          Sec. 1305. Transfer of excess defined benefit plan 
        assets for retiree health benefits
          Sec. 1406. Technical Corrections to SAVER Act
    In addition H.R. 2248 includes one freestanding provision 
that is also within the jurisdiction of the Committee on 
Education and the Workforce: Section 1261, ``Simplified Annual 
Filing Requirement for Plans with Fewer than 25 Employees.''
    If I may be of further assistance please do not hesitate to 
contact me. I thank you for your attention to this matter and 
look forward to working with the Conference Committee on these 
issues.
            Sincerely,
                                           Bill Goodling, Chairman.

  Statement of Oversight Findings and Recommendations of the Committee

    In compliance with clause 3(c)(1) of rule XIII and clause 
(2)(b)(1) of rule X of the Rules of the House of 
Representatives, the Committee's oversight findings and 
recommendations are reflected in the body of this report.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the House of Representatives and section 308(a) of the 
Congressional Budget Act of 1974 and with respect to 
requirements of 3(c)(3) of rule XIII of the House of 
Representatives and section 402 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for H.R. 1102 from the Director of the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                Washington, DC, September 15, 1999.
Hon. William F. Goodling,
Chairman, Committee on Education and the Workforce,
U.S. House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1102, the 
Comprehensive Retirement Security and Pension Reform Act.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Eric 
Rollins and Tamara Ohler.
            Sincerely,
                                          Barry B. Anderson
                                    (For Dan L. Crippen, Director).

               Congressional Budget Office Cost Estimate


H.R. 1102.--Comprehensive Retirement Security and Pension Reform Act

    Summary: H.R. 1102 would make numerous changes to the 
Internal Revenue Code (IRC) and the Employee Retirement Income 
Security Act of 1974 (ERISA) that would affect the taxation and 
operation of private pension plans.
    CBO and the Joint Committee on Taxation (JCT) estimate that 
the bill would reduce federal tax revenues by $27 billion over 
the 2000-2004 period. CBO estimates that the bill would reduce 
direct spending by $3 million over the same period. Since this 
bill would affect direct spending and revenues, pay-as-you-go 
procedures would apply.
    JCT and CBO have determined that H.R. 1102 contains no 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act (UMRA) and would not affect the 
budgets of state, local, or tribal governments.
    Estimated Cost to the Federal Government: The estimated 
budgetary impact of H.R. 1102 is shown in the following table. 
The costs of this legislation would fall within budget 
functions 600 (income security) and 800 (general government).


----------------------------------------------------------------------------------------------------------------
                                                              By fiscal year, in millions of dollars
                                                ----------------------------------------------------------------
                                                     2000         2001         2002         2003         2004
----------------------------------------------------------------------------------------------------------------
CHANGES IN DIRECT SPENDING

IRS User Fees..................................           -1           -2           -1           -1       -(\1\)
Federal Retirement Benefits....................           -3           -3           -3           -2           -2
Department of Labor Civil Penalties............            1            1            1            1            2
Reduced PBGC Flat-Rate Premiums................            0            0        (\1\)        (\1\)        (\1\)
Reduced PBGC Variable Premiums.................            0            0            3            3            3
Missing Participants in Terminated Plans.......        (\1\)        (\1\)        (\1\)        (\1\)        (\1\)
Substantial Owner Benefits.....................        (\1\)        (\1\)        (\1\)        (\1\)        (\1\)
                                                ----------------------------------------------------------------
    Total Direct Spending......................           -3           -4        (\1\)            1            3

CHANGES IN REVENUES

IRS User Fees..................................           -9          -29          -11          -12            0
Other Estimated Revenues.......................       -2,104       -5,355       -5,931       -6,493       -7,097
                                                ----------------------------------------------------------------
    Total Revenues.............................       -2,113       -5,384       -5,942       -6,505       -7,097

TOTAL CHANGES

Direct Spending and Revenues...................        2,110        5,380        5,942        6,506        7,100
----------------------------------------------------------------------------------------------------------------
\1\ Less than $500,000.

NOTE: The Joint Committee on Taxation prepared the estimates of changes in revenues other than IRS user fees.

Basis of estimate

            Direct spending
    IRS User Fees.--The Internal Revenue Service (IRS) has the 
authority to retain and spend without further appropriation 
action a small portion of the fees it collects from taxpayers 
for certain rulings and determinations by the office of the 
chief counsel and by the office for employee plans and exempt 
organizations. Because H.R. 1102 would eliminate the fee paid 
by small businesses for rulings and determinations, the bill 
would also reduce the amounts available for the IRS to spend. 
CBO estimates that eliminating the fee would decrease direct 
spending by a total of $5 million over the 2000-2004 period.
    Federal Retirement Benefits.--Most federal employees who 
were hired before 1984 are covered by the Civil Service 
Retirement Systems (CSRS). Under CSRS, employees must have five 
years of service in order to qualify for retirement benefits. 
Employees who have qualified for retirement benefits but leave 
government service before retirement are eligible for a 
deferred annuity when they turn 62. If a former employee dies 
before reaching age 62, his or her retirement contributions are 
refunded in a lump sum, usually to the surviving spouse. The 
surviving spouse is not eligible to receive a survivor benefit. 
(by comparison, surviving spouses of current employees and 
annuitants are eligible for survivor benefits.)
    Section 204 of the bill would allow these surviving spouses 
to receive survivor benefits. Surviving spouses would select 
one or two types of survivor benefit. The first type of benefit 
would be equal to 50 percent of the former employee's deferred 
annuity and payment would begin when the former employee would 
have turned 62. Under the second type of benefit, benefit 
payments would begin immediately after the former employee's 
death, but the amount of the benefit would be reduced to make 
it actuarially equivalent to the first type of benefit. Instead 
of a survivor benefit, surviving spouses would also be able to 
receive the refund of retirement contributions now available 
under current law.
    According to the Office of Personnel Management, about 
34,000 former CSRS employees are entitled to a deferred annuity 
but have not reached age 62. Based on Census data on marriage 
and mortality rates, CBO estimates that about 170 surviving 
spouses annually would be affected by this provision. The 
survivor benefits offered by the bill would be significantly 
more valuable than a refund of retirement contributions, so CBO 
assumes that all surviving spouses would opt for a survivor 
benefit, with half choosing a deferred benefit and half 
choosing an immediate benefit.
    CBO estimates that this provision would reduce spending on 
CSRS retirement benefits by $13 million over the 2000-2004 
period. Initially, outlays would decrease because surviving 
spouses would receive annual benefits of about $2,000 instead 
of a one-time payment of about $17,000 under current law. By 
2007, spending on retirement benefits would be higher than 
under current law.
    Department of Labor Civil Penalties.--Under current law, 
the Department of Labor (DoL) is responsible for administering 
ERISA's reporting, disclosure, and fiduciary conduct 
requirements for private pension plans. In cases of fiduciary 
misconduct, DoL is required to assess a civil penalty equal to 
20 percent of any amount that is restored to a pension plan as 
part of a settlement or court judgment. These penalties, which 
totaled $3 million in 1998, are recorded as offsetting 
receipts.
    Section 614 of the bill would allow DoL to assess these 
civil penalties at its discretion and to assess penalties that 
could be less than 20 percent of the recovered amount. With 
this more flexible authority, DoL has indicated that it would 
no longer assess penalties in cases where companies comply 
voluntarily with DoL's enforcement efforts. According to DoL, 
these cases comprise about a third of the total. The full 20-
percent penalty would still be assessed in the remaining cases, 
which are typically resolved through litigation. CBO estimates 
that this provision would reduce penalties collected by about a 
third relative to current law, and that the drop in penalties 
would total $6 million over the 2000-2004 period.
    Reduced PBGC Flat-Rate Premium.--Under current law, single-
employer defined benefit pension plans pay two types of annual 
premiums to the Pension Benefit Guaranty Corporation (PBGC). 
All covered plans are subject to a flat-rate premium of $19 per 
participant. In addition, underfunded plans must also pay a 
variable premium that depends on the amount by which the plan's 
liabilities exceed its assets.
    The bill would reduce the flat-rate premium from $19 to $5 
per participant for plans established by employers with 100 or 
fewer employees during the first five years of the plan's 
operation. According to information obtained from the PBGC, 
approximately 3,000 plans would qualify for this reduction. 
Those plans contain an average of about 10 participants each. 
CBO estimates that the change would reduce PBGC's premium 
income, which is classified as on offsetting collection, by 
about $400,000 annually beginning in 2002 and by about $1.3 
million over the 2000-2004 period.
    Reduced PBGC Variable Premiums.--The bill would make two 
changes affecting the variable-rate premium paid by underfunded 
plans. First, for all new plans that are underfunded, the bill 
would phase in the variable-rate premium. In the first year, 
plans would pay nothing. In the succeeding four years, they 
would pay 20 percent, 40 percent, 60 percent, and 80 percent, 
respectively, of the full amount. In the sixth and later years, 
they would pay the full variable-rate premium determined by 
their funding status. On the basis of information on premium 
payments to the PBGC in 1996 and 1997, CBO estimates that this 
change would affect the premiums of approximately 400 plans 
each year. It would reduce PBGC's total premium receipts by 
about $4 million over the 2000-2004 period.
    The bill would also reduce the variable-rate premium paid 
by all underfunded plans (not just new plans) established by 
employers with 25 or fewer employees. Under the bill, the 
variable-rate premium per participant paid by those plans would 
not exceed $5 multiplied by the number of participants in the 
plan. CBO estimates that approximately 8,300 plans would have 
their premium payments to PBGC reduced by this provision 
beginning in 2002. Premium receipts by the PBGC would decline 
by $1.5 million in 2002 and by $5 million over the 2002-2004 
period.
    Missing Participants in Terminated Plans.--The legislation 
would expand the missing participant program. The retirement 
Protection Act of 1994 established a missing participant 
program at PBGC for terminating defined benefit plans. The bill 
would expand the program to include terminating multiemployer 
plans, defined benefit plans not covered by PBGC, and defined 
contribution plans.
    The budgetary impact of this provision would be less than 
$500,000 annually. PBGC does not expect a high volume of 
missing participants as a result of this proposal, and the 
administrative costs of expanding the program would not be 
high. The next budgetary effect of increased benefit payments 
would also be small. Amounts paid by a pension plan to PBGC for 
missing participants are held in PBGC's trust fund, which is 
off-budget. Amounts paid by PBGC to participants at the time 
they are located are funded in the same manner as benefit 
payments to participants in plans for which PBGC is the 
trustee--partially by the trust fund and partially by on-budget 
revolving funds.
    Substantial Owner Benefits in Terminated Plans.--The 
legislation would simplify the rules by which the PBGC pays 
benefits to substantial owners (those with an ownership 
interest of at least 10 percent) of terminated pension plans. 
Only about one-third of the plans taken over by PBGC involve 
substantial owners, and the change in benefits paid by PBGC to 
owner-employee under this provision would be less than $500,000 
annually.
            Revenues
    IRS User Fees.--H.R. 1102 would eliminate the fee that the 
IRS charges small businesses for providing ruling, opinion, and 
determination letters regarding the companies' pension plans. 
This provision would take effect on December 31, 1999. Based on 
the amount of recent fees and on information from the IRS, CBO 
estimates that eliminating the fee would decrease governmental 
receipts by a total of $61 million over fiscal years 2000 
through 2003. Under current law, the IRS's authority to charge 
such fees will expire at the end of fiscal year 2003, so the 
provision would have no impact on receipts beyond 2003.
    Other Estimated Revenues.--JCT estimates that the bill's 
amendments to the Internal Revenue Code would reduce federal 
revenues by $27 billion over the 2000-2004 period. This revenue 
loss is attributable primarily to provisions that would 
increase the amount of contributions to an Individual 
Retirement Account that are tax-deductible from $2,000 per 
person to $5,000 ($14.4 billion in lower revenues over the 
2000-2004 period), exempt $100,000 in assets from the minimum 
distribution rules that apply to defined contribution 
retirement plans ($5.6 billion in lower revenues), and increase 
the limit on annual contributions to 401(k) plans from $10,000 
to $15,000 ($2.6 billion in lower revenues).
    Pay-as-you-go considerations: the Balanced Budget and 
emergency Deficit Control Act sets up pay-as-you-go procedures 
for legislation affecting direct spending or receipts. The net 
changes in outlays and governmental receipts that are subject 
to pay-as-you-go procedures are shown in the following table. 
For the purposes of enforcing pay-as-you-go procedures, only 
the effects in the current year, the budget year, and the 
succeeding four years are counted.


--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in millions of dollars
                                         ---------------------------------------------------------------------------------------------------------------
                                            1999      2000      2001      2002      2003      2004      2005      2006      2007      2008       2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays......................         0        -3        -4         0         1         3         4         4         5         6           7
Changes in receipts.....................         0    -2,113    -5,384    -5,942    -6,505    -7,097    -7,742    -8,391    -9,033    -9,604     -10,233
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Intergovernmental and private-sector impact: JCT and CBO 
have determined that H.R. 1102 contains no intergovernmental or 
private-sector mandates as defined in UMRA and would not affect 
the budget of state, local, or tribal governments.
    Estimate prepared by: Federal Benefits and DoL Civil 
Penalties: Eric Rolling. Pension Benefit guaranty Corporation: 
Tamara Ohler. IRS User Fees (direct spending): John Righter. 
IRS User Fees (revenues): Hester Grippando.
    Estimate approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

 Statement of Oversight Findings of the Committee on Government Reform

    With respect to the requirement of clause 3(c)(4) of rule 
XIII of the Rules of the House of Representatives, the 
Committee has received no report of oversight findings and 
recommendations from the Committee on Government Reform on the 
subject of H.R. 1102.

                   Constitutional Authority Statement

    Under clause 3(d)(1) of rule XIII of the Rules of the House 
of Representatives, the Committee must include a statement 
citing the specific powers granted to Congress in the 
Constitution to enact the law proposed by H.R. 1102.
    The Employee Retirement Income Security Act (ERISA) has 
been determined by the federal courts to be within Congress' 
Constitutional authority. In Commercial Mortgage Insurance, 
Inc. v. Citizens National Bank of Dallas, 526 F.Supp. 510 (N.D. 
Tex. 1981), the court held that Congress legitimately concluded 
that employee benefit plans so affected interstate commerce as 
to be within the scope of Congressional powers under Article 1, 
Section 8, Clause 3 of the Constitution of the United States. 
In Murphy v. Wal-Mart Associates' Group Health Plan, 928 
F.Supp. 700 (E.D. Tex 1996), the court upheld the preemption 
provisions of ERISA. Because H.R. 1102 modifies but does not 
extend the federal regulation of pensions, the Committee 
believes that the Act falls within the same scope of 
Congressional authority as ERISA.

                           Committee Estimate

    Clauses 3(d)(2) of Rule XIII of the rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs that would be incurred in carrying out 
H.R. 1102. However, clause 3(d)(3)(B) of that rule provides 
that this requirement does not apply when the Committee has 
included in its report a timely submitted cost estimate of the 
bill prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act.

         Changes in Existing Law Made by the Bill, as Reported

    Pursuant to the terms of the referral of the bill to the 
Committee, the effect of the amendment adopted by the Committee 
is to strike all provisions relating to the Employee Retirement 
Income Security Act of 1974 from titles I through V of the bill 
and to add a new title VI to the bill comprised of all 
provisions relating to that Act. The Committee otherwise took 
no action on the provisions of titles I through V affecting 
existing law.
    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
title VI of the bill, as reported, are shown as follows 
(existing law proposed to be omitted is enclosed in black 
brackets, new matter is printed in italic, existing law in 
which no change is proposed is shown in roman):

            EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974

           *       *       *       *       *       *       *



             TITLE I--PROTECTION OF EMPLOYEE BENEFIT RIGHTS


Subtitle A--General Provisions

           *       *       *       *       *       *       *



                              DEFINITIONS

  Sec. 3. For purposes of this title:
  (1) * * *

           *       *       *       *       *       *       *

  [(36) The term ``excess benefit plan'' means a plan 
maintained by an employer solely for the purpose of providing 
benefits for certain employees in excess of the limitations on 
contributions and benefits imposed by section 415 of the 
Internal Revenue Code of 1986 on plans to which that section 
applies, without regard to whether the plan is funded. To the 
extent that a separable part of a plan (as determined by the 
Secretary of Labor) maintained by an employer is maintained for 
such purpose, that part shall be treated as a separate plan 
which is an excess benefit plan.]
  (36) The term ``excess benefit plan'' means a plan, without 
regard to whether such plan is funded, maintained by an 
employer solely for the purpose of providing benefits to 
employees in excess of any limitation imposed by section 
401(a)(17) or 415 of the Internal Revenue Code of 1986 or any 
other limitation on contributions or benefits in such Code on 
plans to which any of such sections apply. To the extent that a 
separable part of a plan (as determined by the Secretary of 
Labor) maintained by an employer is maintained for such 
purpose, that part shall be treated as a separate plan which is 
an excess benefit plan.

           *       *       *       *       *       *       *


                   Subtitle B--Regulatory Provisions 

                    Part 1--Reporting and Disclosure

                    duty of disclosure and reporting

  Sec. 101. (a) * * *

           *       *       *       *       *       *       *

  (e) Notice of Transfer of Excess Pension Assets to Health 
Benefits Accounts.--
          (1) * * *

           *       *       *       *       *       *       *

          (3) Definitions.--For purposes of paragraph (1), any 
        term used in such paragraph which is also used in 
        section 420 of the Internal Revenue Code of 1986 (as in 
        effect on January 1, [1995] 2001) shall have the same 
        meaning as when used in such section.

           *       *       *       *       *       *       *


    filing with secretary and furnishing information to participants

  Sec. 104. (a) * * *

           *       *       *       *       *       *       *

  (b) Publication of the summary plan descriptions and annual 
reports shall be made to participants and beneficiaries of the 
particular plan as follows:
          (1) * * *

           *       *       *       *       *       *       *

          (3) Within 210 days after the close of the fiscal 
        year of the plan, the administrators [shall furnish] 
        shall make available for examination (and, upon 
        request, shall furnish) to each participant, and to 
        each beneficiary receiving benefits under the plan, a 
        copy of the statements and schedules, for such fiscal 
        year, described in subparagraphs (A) and (B) of section 
        103(b)(3) and such other material (including the 
        percentage determined under section 103(d)(11)) as is 
        necessary to fairly summarize the latest annual report.

           *       *       *       *       *       *       *


               REPORTING OF PARTICIPANT'S BENEFIT RIGHTS

  Sec. 105. [(a) Each administrator of an employee pension 
benefit plan shall furnish to any plan participant or 
beneficiary who so requests in writing, a statement indicating, 
on the basis of the latest available information--
          [(1) the total benefits accrued, and
          [(2) the nonforfeitable pension benefits, if any, 
        which have accrued, or the earliest date on which 
        benefits will become nonforfeitable.
  [(b) In no case shall a participant or beneficiary be 
entitled under this section to receive more than one report 
described in subsection (a) during any one 12-month period.]
  (a)(1) Except as provided in paragraph (2)--
          (A) The administrator of an individual account plan 
        shall furnish a pension benefit statement--
                  (i) to a plan participant at least once 
                annually, and
                  (ii) to a plan beneficiary upon written 
                request.
          (B) The administrator of a defined benefit plan shall 
        furnish a pension benefit statement--
                  (i) at least once every 3 years to each 
                participant with a nonforfeitable accrued 
                benefit who is employed by the employer 
                maintaining the plan at the time the statement 
                is furnished to participants, and
                  (ii) to a participant or beneficiary of the 
                plan upon written request.
  (2) Notwithstanding paragraph (1), the administrator of a 
plan to which more than 1 unaffiliated employer is required to 
contribute shall only be required to furnish a pension benefit 
statement under paragraph (1) upon the written request of a 
participant or beneficiary of the plan.
  (3) A pension benefit statement under paragraph (1)--
          (A) shall indicate, on the basis of the latest 
        available information--
                  (i) the total benefits accrued, and
                  (ii) the nonforfeitable pension benefits, if 
                any, which have accrued, or the earliest date 
                on which benefits will become nonforfeitable,
          (B) shall be communicated in a manner calculated to 
        be understood by the average plan participant, and
          (C) may be provided in written, electronic, 
        telephonic, or other appropriate form.
  (4) In the case of a defined benefit plan, the requirements 
of paragraph (1)(B)(i) shall be treated as met with respect to 
a participant if the administrator provides the participant at 
least once each year with notice of the availability of the 
pension benefit statement and the ways in which the participant 
may obtain such statement. Such notice shall be provided in 
written, electronic, telephonic, or other appropriate form, and 
may be included with other communications to the participant if 
done in a manner reasonably designed to attract the attention 
of the participant.
  (b) 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.

           *       *       *       *       *       *       *

  [(d) Subsection (a) of this section shall apply to a plan to 
which more than one unaffiliated employer is required to 
contribute only to the extent provided in regulations 
prescribed by the Secretary in coordination with the Secretary 
of the Treasury.]

           *       *       *       *       *       *       *


                   Part 2--Participation and Vesting

                                COVERAGE

           *       *       *       *       *       *       *


                       MINIMUM VESTING STANDARDS

  Sec. 203. (a) Each pension plan shall provide that an 
employee's right to his normal retirement benefit is 
nonforfeitable upon the attainment of normal retirement age and 
in addition shall satisfy the requirements of paragraphs (1) 
and (2) of this subsection.

           *       *       *       *       *       *       *

          (2) [A plan] Except as provided in paragraph (4), a 
        plan satisfies the requirements of this paragraph if it 
        satisfies the requirements of subparagraph (A) or (B).

           *       *       *       *       *       *       *

          (4) Faster vesting for matching contributions.--In 
        the case of matching contributions (as defined in 
        section 401(m)(4)(A) of the Internal Revenue Code of 
        1986), paragraph (2) shall be applied--
                  (A) by substituting ``3 years'' for ``5 
                years'' in subparagraph (A), and
                  (B) by substituting the following table for 
                the table contained in subparagraph (B):
                                                      The nonforfeitable
Years of service:                                         percentage is:
    2.........................................................       20 
    3.........................................................       40 
    4.........................................................       60 
    5.........................................................       80 
100.or more.................................................

           *       *       *       *       *       *       *

  (e)(1) * * *

           *       *       *       *       *       *       *

  (4) A plan shall not fail to meet the requirements of this 
subsection if, under the terms of the plan, the present value 
of the nonforfeitable accrued benefit is determined without 
regard to that portion of such benefit which is attributable to 
rollover contributions (and earnings allocable thereto). For 
purposes of this paragraph, the term ``rollover contributions'' 
means any rollover contribution under section 402(c), 
403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), or 457(e)(16) of the 
Internal Revenue Code of 1986.

           *       *       *       *       *       *       *


                      BENEFIT ACCRUAL REQUIREMENTS

  Sec. 204. (a) * * *

           *       *       *       *       *       *       *

  (g)(1) * * *
  (2) For purposes of paragraph (1), a plan amendment which has 
the effect of--
          (A) eliminating or reducing an early retirement 
        benefit or a retirement-type subsidy (as defined in 
        regulations), or
          (B) eliminating an optional form of benefit,
with respect to benefits attributable to service before the 
amendment shall be treated as reducing accrued benefits. In the 
case of a retirement-type subsidy, the preceding sentence shall 
apply only with respect to a participant who satisfies (either 
before or after the amendment) the preamendment conditions for 
the subsidy. [The Secretary of the Treasury may by regulations 
provide that this subparagraph shall not apply to a plan 
amendment described in subparagraph (B) (other than a plan 
amendment having an effect described in subparagraph (A)).] The 
Secretary of the Treasury may by regulations provide that this 
paragraph shall not apply to any plan amendment that does not 
adversely affect the rights of participants in a material 
manner.

           *       *       *       *       *       *       *

  (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 paragraph referred to as the 
``transferor plan'') to the extent that--
          (i) the forms of distribution previously available 
        under the transferor plan applied to the account of a 
        participant or beneficiary under the transferor plan 
        that was transferred from the transferor plan to the 
        transferee plan pursuant to a direct transfer rather 
        than pursuant to a distribution from the transferor 
        plan;
          (ii) the terms of both the transferor plan and the 
        transferee plan authorize the transfer described in 
        clause (i);
          (iii) the transfer described in clause (i) was made 
        pursuant to a voluntary election by the participant or 
        beneficiary whose account was transferred to the 
        transferee plan;
          (iv) the election described in clause (iii) was made 
        after the participant or beneficiary received a notice 
        describing the consequences of making the election;
          (v) if the transferor plan provides for an annuity as 
        the normal form of distribution under the plan in 
        accordance with section 205, the transfer is made with 
        the consent of the participant's spouse (if any), and 
        such consent meets requirements similar to the 
        requirements imposed by section 205(c)(2); and
          (vi) the transferee plan allows the participant or 
        beneficiary described in clause (iii) to receive any 
        distribution which the participant or beneficiary is 
        entitled under the transferee plan in the form of a 
        single sum distribution.
  (B) Subparagraph (A) shall apply to plan mergers and other 
transactions having the effect of a direct transfer, including 
consolidations of benefits attributable to different employers 
within a multiple employer plan.
  (5) Except to the extent provided in regulations, a defined 
contribution plan shall not be treated as failing to meet the 
requirements of this section merely because of the elimination 
of a form of distribution previously available thereunder. This 
paragraph shall not apply to the elimination of a form of 
distribution with respect to any participant unless--
          (A) a single sum payment is available to such 
        participant at the same time or times as the form of 
        distribution being eliminated; and
          (B) such single sum payment is based on the same or 
        greater portion of the participant's account as the 
        form of distribution being eliminated.
  [(h)(1) A plan described in paragraph (2) may not be amended 
so as to provide for a significant reduction in the rate of 
future benefit accrual, unless, after adoption of the plan 
amendment and not less than 15 days before the effective date 
of the plan amendment, the plan administrator provides a 
written notice, setting forth the plan amendment and its 
effective date, to--
          [(A) each participant in the plan,
          [(B) each beneficiary who is an alternate payee 
        (within the meaning of section 206(d)(3)(K)) under an 
        applicable qualified domestic relations order (within 
        the meaning of section 206(d)(3)(B)(i)), and
          [(C) each employee organization representing 
        participants in the plan,
except that such notice shall instead be provided to a person 
designated, in writing, to receive such notice on behalf of any 
person referred to in subparagraph (A), (B), or (C).
  [(2) A plan is described in this paragraph if such plan is--
          [(A) a defined benefit plan, or
          [(B) an individual account plan which is subject to 
        the funding standards of section 302.]
  (h) Notice of Significant Reduction in Benefit Accruals.--
          (1) If a plan described in paragraph (4) is amended 
        to provide for a significant reduction in the rate of 
        future benefit accrual, the plan administrator shall 
        provide a notice to--
                  (A) each affected participant in the plan,
                  (B) each affected beneficiary who is an 
                alternate payee (within the meaning of section 
                206(d)(3)(K)) under an applicable qualified 
                domestic relations order (within the meaning of 
                section 206(d)(3)(B)(i)), and
                  (C) each employee organization representing 
                affected participants in the plan,
        except that such notice shall instead be provided to a 
        person designated to receive such notice on behalf of 
        any person referred to in paragraph (A), (B), or (C). 
        For purposes of this paragraph, an affected participant 
        or beneficiary is a participant or beneficiary to whom 
        the significant reduction described in this paragraph 
        is reasonably expected to apply.
          (2) The notice required by paragraph (1) shall--
                  (A) include the plan amendment, or a summary 
                of such plan amendment, and its effective date, 
                and
                  (B) provide a notification and description of 
                the reduction described in paragraph (1).
        A notification and description shall not fail to 
        satisfy paragraph (2)(B) by reason of a failure to 
        provide the specific amount of the reduction with 
        respect to any participant or beneficiary.
          (3) The notice required by paragraph (1) shall be 
        provided no less than 30 days prior to the effective 
        date of the plan amendment.
          (4) A plan is described in this paragraph if such 
        plan is--
                  (A) a defined benefit plan, or
                  (B) an individual account plan which is 
                subject to the funding standards of section 
                302.
          (5) In the case of a material failure to comply with 
        requirements of this subsection with respect to more 
        than a de minimis number of persons described in 
        paragraph (1), the plan amendment to which the failure 
        relates shall not be effective with respect to such 
        persons for any period prior to the expiration of 30 
        days following the date on which a notice is provided 
        in accordance with this subsection. For purposes of 
        this paragraph, the term ``material failure'' includes 
        any failure that results in materially less information 
        being provided to the persons described in paragraph 
        (1).

           *       *       *       *       *       *       *


 requirement of joint and survivor annuity and preretirement survivor 
                                annuity

  Sec. 205. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) A plan meets the requirements of this section only 
if--

           *       *       *       *       *       *       *

  (7) For purposes of this subsection, the term ``applicable 
election period'' means--
          (A) in the case of an election to waive the qualified 
        joint and survivor annuity form of benefit, the [90-
        day] 180-day period ending on the annuity starting 
        date, or

           *       *       *       *       *       *       *

  (9) Not later than January 1, 2001, the Secretary of Labor 
shall develop model language for the spousal consent required 
under paragraph (2) which--
          (A) is written in a manner calculated to be 
        understood by the average person, and
          (B) discloses in plain terms whether--
                  (i) the waiver is irrevocable, and
                  (ii) the waiver may be revoked by a qualified 
                domestic relations order.

           *       *       *       *       *       *       *


       other provisions relating to form and payment of benefits

  Sec. 206. (a) * * *

           *       *       *       *       *       *       *

  (d)(1) Each pension plan shall provide that benefits provided 
under the plan may not be assigned or alienated.

           *       *       *       *       *       *       *

  (3)(A) * * *

           *       *       *       *       *       *       *

  (O) Not later than January 1, 2001, the Secretary shall 
develop language for a qualified domestic relations order which 
meets--
          (i) the requirements of subparagraph (B)(i), and
          (ii) the requirements of this Act related to the need 
        to consider the treatment of any lump sum payment, 
        qualified joint and survivor annuity, or qualified 
        preretirement survivor annuity.

           *       *       *       *       *       *       *

  (f) Missing Participants in Terminated Plans.--In the case of 
a plan covered by [title IV] section 4050, [the plan shall 
provide that,] upon termination of the plan, benefits of 
missing participants shall be treated in accordance with 
section 4050.

           *       *       *       *       *       *       *


                            Part 3--Funding

                               COVERAGE

           *       *       *       *       *       *       *


                       minimum funding standards

  Sec. 302. (a)(1) * * *

           *       *       *       *       *       *       *

  (c)(1) For purposes of this part, normal costs, accrued 
liability, past service liabilities, and experience gains and 
losses shall be determined under the funding method used to 
determine costs under the plan.

           *       *       *       *       *       *       *

  (7) Full-funding limitation.--
          (A) In general.--For purposes of paragraph (6), the 
        term ``full-funding limitation'' means the excess (if 
        any) of--
                  (i) the lesser of (I) [the applicable 
                percentage] in the case of plan years beginning 
                before January 1, 2004, the applicable 
                percentage of current liability (including the 
                expected increase in current liability due to 
                benefits accruing during the plan year), or 
                (II) the accrued liability (including normal 
                cost) under the plan (determined under the 
                entry age normal funding method if such accrued 
                liability cannot be directly calculated under 
                the funding method used for the plan), over

           *       *       *       *       *       *       *

          [(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--
    1999 or 2000..............................................     155  
    2001 or 2002..............................................     160  
    2003 or 2004..............................................     165  
    2005 and succeeding years.................................   170.]  
          (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--
            2001..............................................     160  
            2002..............................................     165  
170.      2003..............................................

           *       *       *       *       *       *       *

  (9)(A) For purposes of this part, 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 of the Treasury.
  (B)(i) Except as provided in clause (ii), if, for any plan 
year--
          (I) an election is in effect under this subparagraph 
        with respect to a plan, and
          (II) the assets of the plan are not less than 125 
        percent of the plan's current liability (as defined in 
        paragraph (7)(B)), determined as of the valuation date 
        for the preceding plan year,
then this section shall be applied using the information 
available as of such valuation date.
  (ii)(I) Clause (i) shall not apply for more than 2 
consecutive plan years and valuation shall be under 
subparagraph (A) with respect to any plan year to which clause 
(i) does not apply by reason of this clause.
  (II) Subclause (I) shall not apply to the extent that more 
frequent valuations are required under the regulations under 
subparagraph (A).
  (iii) Information under clause (i) shall, in accordance with 
regulations, be actuarially adjusted to reflect significant 
differences in participants.
  (iv) An election under this subparagraph, once made, shall be 
irrevocable without the consent of the Secretary of the 
Treasury.

           *       *       *       *       *       *       *


                   Part 4--Fiduciary Responsibility

           *       *       *       *       *       *       *


                         ESTABLISHMENT OF TRUST

  Sec. 403. (a) * * *

           *       *       *       *       *       *       *

  (c)(1) Except as provided in paragraph (2), (3), or (4) or 
subsection (d), or under section 4042 and 4044 (relating to 
termination of insured plans), or under section 420 of the 
Internal Revenue Code of 1986 (as in effect on January 1, 
[1995] 2001), the assets of a plan shall never inure to the 
benefit of any employer and shall be held for the exclusive 
purposes of providing benefits to participants in the plan and 
their beneficiaries and defraying reasonable expenses of 
administering the plan.

           *       *       *       *       *       *       *


                EXEMPTIONS FROM PROHIBITED TRANSACTIONS

  Sec. 408. (a) * * *

           *       *       *       *       *       *       *

  (b) The prohibitions provided in section 406 shall not apply 
to any of the following transactions:

           *       *       *       *       *       *       *

          (13) Any transfer [in a taxable year beginning before 
        January 1, 2001] made before October 1, 2009, of excess 
        pension assets from a defined benefit plan to a retiree 
        health account in a qualified transfer permitted under 
        section 420 of the Internal Revenue Code of 1986 (as in 
        effect on January 1, [1995] 2001).

           *       *       *       *       *       *       *

  (d)(1) * * *

           *       *       *       *       *       *       *

  (2)(A) For purposes of paragraph (1), the following shall be 
treated as owner-employees:

           *       *       *       *       *       *       *

  (C) For purposes paragraph (1)(A), the term ``owner-
employee'' shall only include a person described in clause (ii) 
or (iii) of subparagraph (A).

           *       *       *       *       *       *       *


                 Part 5--Administration and Enforcement

                          CRIMINAL PENALTIES

           *       *       *       *       *       *       *


                           civil enforcement

  Sec. 502. (a) * * *

           *       *       *       *       *       *       *

  (h)(1) A copy of the complaint in any action under this title 
by a participant, beneficiary, or fiduciary (other than an 
action brought by one or more participants or beneficiaries 
under subsection (a)(1)(B) which is solely for the purpose of 
recovering benefits due such participants under the terms of 
the plan) shall be served upon the Secretary and the Secretary 
of the Treasury by certified mail. Either Secretary shall have 
the right in his discretion to intervene in any action, except 
that the Secretary of the Treasury may not intervene in any 
action under part 4 of this subtitle. If the Secretary brings 
an action under subsection (a) on behalf of a participant or 
beneficiary, he shall notify the Secretary of the Treasury.
  (2) In any case in which--
          (A) a complaint in an action brought against a person 
        under subsection (a)(2) is served in accordance with 
        paragraph (1),
          (B) the action is maintained as a class action or 
        derivative action under the Federal Rules of Civil 
        Procedure,
          (C) the action is resolved by a court-approved 
        settlement agreement,
          (D) the complaint is served upon the Secretary at 
        least 90 days prior to final court approval of the 
        settlement agreement, and
          (E) the Secretary receives a fully executed copy of 
        the settlement agreement within the time established by 
        the court for notifying the plan's participants of the 
        proposed compromise pursuant to Rule 23 or 23.1 of the 
        Federal Rules of Civil Procedure,
the Secretary shall be barred from litigating any claim against 
such person under subsection (a)(2) that was, or could have 
been, brought in that action with respect to the same plan. 
Notwithstanding this paragraph, the Secretary shall not be 
barred from litigating any claim against such person under 
subsection (a)(2) if the Secretary filed a complaint under 
subsection (a)(2) prior to the final court approval of the 
settlement agreement.

           *       *       *       *       *       *       *

  (l)(1) In the case of--
          (A) any breach of fiduciary responsibility under (or 
        other violation of) part 4 by a fiduciary, or
          (B) any knowing participation in such a breach or 
        violation by any other person,
the Secretary [shall] may assess a civil penalty against such 
fiduciary or other person in an amount [equal to] not greater 
than 20 percent of the applicable recovery amount.
  [(2) For purposes of paragraph (1), the term ``applicable 
recovery amount'' means any amount which is recovered from a 
fiduciary or other person with respect to a breach or violation 
described in paragraph (1)--
          [(A) pursuant to any settlement agreement with the 
        Secretary, or
          [(B) ordered by a court to be paid by such fiduciary 
        or other person to a plan or its participants and 
        beneficiaries in a judicial proceeding instituted by 
        the Secretary under subsection (a)(2) or (a)(5).]
  (2) For purposes of paragraph (1), the term ``applicable 
recovery amount'' means any amount which is recovered from any 
fiduciary or other person (or from any other person on behalf 
of any such fiduciary or other person) with respect to a breach 
or violation described in paragraph (1) on or after the 30th 
day following receipt by such fiduciary or other person of 
written notice from the Secretary of the violation, whether 
paid voluntarily or by order of a court in a judicial 
proceeding instituted by the Secretary under subsection (a)(2) 
or (a)(5). The Secretary may, in the Secretary's sole 
discretion, extend the 30-day period described in the preceding 
sentence.

           *       *       *       *       *       *       *

  (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.

           *       *       *       *       *       *       *


                 national summit on retirement savings

  Sec. 517. (a) Authority To Call Summit.--Not later than July 
15, 1998, the President shall convene a National Summit on 
Retirement Income Savings at the White House, to be co-hosted 
by the President and the Speaker and the Minority Leader of the 
House of Representatives and the Majority Leader and Minority 
Leader of the Senate. Such a National Summit shall be convened 
thereafter in [2001 and 2005 on or after September 1 of each 
year involved] 2001, 2005, and 2009 in the month of September 
of each year involved. Such a National Summit shall--

           *       *       *       *       *       *       *

  (b) Planning and Direction.--The National Summit shall be 
planned and conducted under the direction of the Secretary, in 
consultation with, and with the assistance of, the heads of 
such other Federal departments and agencies as the President 
may designate. Such assistance may include the assignment of 
personnel. The Secretary shall, in planning and conducting the 
National Summit, consult with the congressional leaders 
specified in subsection (e)(2). The Secretary shall also, in 
carrying out the Secretary's duties under this subsection, 
consult and coordinate with at least one organization made up 
of private sector businesses and associations partnered with 
Government entities to promote long-term financial security in 
retirement through savings. 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.

           *       *       *       *       *       *       *

  (e) National Summit Participants.--
          (1) * * *

           *       *       *       *       *       *       *

          (2) Statutorily required participation.--The 
        participants in the National Summit shall include the 
        following individuals or their designees:
                  (A) * * *

           *       *       *       *       *       *       *

                  [(D) the Chairman and ranking Member of the 
                Committee on Labor and Human Resources of the 
                Senate;]
                  (D) 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;

           *       *       *       *       *       *       *

                  (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
                  [(G)] (J) the parties referred to in 
                subsection (b).
          (3) Additional participants.--
                  (A) In general.--[There shall be not more 
                than 200 additional participants.] The 
                participants in the National Summit shall also 
                include additional participants appointed under 
                this subparagraph. Of such additional 
                participants--
                          (i) [one-half shall be appointed by 
                        the President,] not more than 100 
                        participants shall be appointed under 
                        this clause by the President, in 
                        consultation with the elected leaders 
                        of the President's party in Congress 
                        (either the Speaker of the House of 
                        Representatives or the Minority Leader 
                        of the House of Representatives, and 
                        either the Majority Leader or the 
                        Minority Leader of the Senate; [and]
                          (ii) [one-half shall be appointed by 
                        the elected leaders of Congress] not 
                        more than 100 participants shall be 
                        appointed under this clause by the 
                        elected leaders of Congress of the 
                        party to which the President does not 
                        belong (one-half of that allotment to 
                        be appointed by either the Speaker of 
                        the House of Representatives or the 
                        Minority Leader of the House of 
                        Representatives, and one-half of that 
                        allotment to be appointed by either the 
                        Majority Leader or the Minority Leader 
                        of the Senate)[.]; and
                          (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.
                  (B) Appointment requirements.--The additional 
                participants described in subparagraph (A) 
                shall be--
                          (i) appointed not later than [January 
                        31, 1998] May 1, 2001, May 1, 2005, and 
                        May 1, 2009, for each of the subsequent 
                        summits, respectively;

           *       *       *       *       *       *       *

  (f) National Summit Administration.--
          (1) Administration.--In administering this section, 
        the Secretary shall--
                  (A) * * *

           *       *       *       *       *       *       *

                  (C) make available for public comment, no 
                later than 90 days prior to the date of the 
                commencement of the National Summit, a proposed 
                agenda for the National Summit that reflects to 
                the greatest extent possible the purposes for 
                the National Summit set out in this section;

           *       *       *       *       *       *       *

  (g) Report.--The Secretary shall prepare a report, in 
consultation with the congressional leaders specified in 
subsection (e)(2), describing the activities of the National 
Summit and shall submit the report to the President, the 
Speaker and Minority Leader of the House of Representatives, 
the Majority and Minority Leaders of the Senate, and the chief 
executive officers of the States not later than 90 days after 
the date on which the National Summit is adjourned.

           *       *       *       *       *       *       *

  (i) Authorization of Appropriations.--
          (1) In general.--There is authorized to be 
        appropriated for fiscal years [beginning on or after 
        October 1, 1997] 2001, 2005, and 2009, such sums as are 
        necessary to carry out this section.

           *       *       *       *       *       *       *

          (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 received in connection with 
        the National Summit prior to using funds appropriated 
        for purposes of the National Summit pursuant to this 
        paragraph.

           *       *       *       *       *       *       *

  (k) Contracts.--The Secretary may enter into contracts to 
carry out the Secretary's responsibilities under this section. 
The Secretary [shall enter into a contract on a sole-source 
basis] may enter into a contract on a sole-source basis to 
ensure the timely completion of the National Summit in [fiscal 
year 1998] fiscal years 2001, 2005, and 2009.

           *       *       *       *       *       *       *


                  TITLE IV--PLAN TERMINATION INSURANCE

            Subtitle A--Pension Benefit Guaranty Corporation

                              DEFINITIONS

           *       *       *       *       *       *       *


                             PREMIUM RATES

  Sec. 4006. (a)(1) * * *

           *       *       *       *       *       *       *

  (3)(A) Except as provided in subparagraph (C), the annual 
premium rate payable to the corporation by all plans for basic 
benefits guaranteed under this title is--
          (i) in the case of a single-employer plan, other than 
        a new single-employer plan (as defined in subparagraph 
        (F)) maintained by a small employer (as so defined), 
        for plan years beginning after December 31, 1990, an 
        amount equal to the sum of $19 plus the additional 
        premium (if any) determined under subparagraph (E) for 
        each individual who is a participant in such plan 
        during the plan year;

           *       *       *       *       *       *       *

          (iii) in the case of a multiemployer plan, for plan 
        years beginning after the date of enactment of the 
        Multiemployer Pension Plan Amendments Act of 1980 
        [September 26, 1980], an amount equal to--
                  (I) $1.40 for each participant, for the 
                first, second, third, and fourth plan years,
                  (II) $1.80 for each participant, for the 
                fifth and sixth plan years,
                  (III) $2.20 for each participant, for the 
                seventh and eighth plan years, and
                  (IV) $2.60 for each participant, for the 
                ninth plan year, and for each succeeding plan 
                year[.], and
          (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.

           *       *       *       *       *       *       *

  (E)(i) [The] Except as provided in subparagraph (G), the 
additional premium determined under this subparagraph with 
respect to any plan for any plan year shall be an amount equal 
to the amount determined under clause (ii) divided by the 
number of participants in such plan as of the close of the 
preceding plan year.

           *       *       *       *       *       *       *

  (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 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.
  (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) had not 
established or maintained 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 2 or more 
contributing sponsors that are not part of the same controlled 
group, the employees of all contributing sponsors and 
controlled groups of such sponsors shall be aggregated for 
purposes of determining whether any contributing sponsor is a 
small employer.
  (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 2 or more contributing 
sponsors, the employees of all contributing sponsors and their 
controlled groups shall be aggregated for purposes of 
determining whether 25-or-fewer-employees limitation has been 
satisfied.

           *       *       *       *       *       *       *


                          Subtitle B--Coverage

                             PLANS COVERED

  Sec. 4021. (a)  * * *

           *       *       *       *       *       *       *

  (b) This section does not apply to any plan--
          (1) * * *

           *       *       *       *       *       *       *

          (9) which is established and maintained exclusively 
        for substantial owners [as defined in section 
        4022(b)(6)];

           *       *       *       *       *       *       *

  (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)).

           *       *       *       *       *       *       *


                SINGLE-EMPLOYER PLAN BENEFITS GUARANTEED

  Sec. 4022. (a) * * *
  (b)(1) Except to the extent provided in paragraph (7)--
          (A)  * * *

           *       *       *       *       *       *       *

  [(5)(A) For purposes of this title, the term ``substantial 
owner'' means an individual who--
          [(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, more than 10 percent of 
        either the capital interest or the profits interest in 
        such partnership, or
          [(iii) 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 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)). For 
purposes of this title an individual is also treated as a 
substantial owner with respect to a plan if, at any time within 
the 60 months preceding the date on which the determination is 
made, he was a substantial owner under the plan.
  [(B) In the case of a participant in a plan under which 
benefits have not been increased by reason of any plan 
amendments and who is covered by the plan as a substantial 
owner, the amount of benefits guaranteed under this section 
shall not exceed the product of--
          [(i) a fraction (not to exceed 1) the numerator of 
        which is the number of years the substantial owner was 
        an active participant in the plan, and the denominator 
        of which is 30, and
          [(ii) the amount of the substantial owner's monthly 
        benefits guaranteed under subsection (a) (as limited 
        under paragraph (3) of this subsection).
  [(C) In the case of a participant in a plan, other than a 
plan described in subparagraph (B), who is covered by the plan 
as a substantial owner, the amount of the benefit guaranteed 
under this section shall, under regulations prescribed by the 
corporation, treat each benefit increase attributable to a plan 
amendment as if it were provided under a new plan. The benefits 
guaranteed under this section with respect to all such 
amendments shall not exceed the amount which would be 
determined under subparagraph (B) if subparagraph (B) applied.]
  (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.

           *       *       *       *       *       *       *


                        Subtitle C--Terminations

           *       *       *       *       *       *       *


                           REPORTABLE EVENTS

  Sec. 4043. (a)  * * *

           *       *       *       *       *       *       *

  (c) For purposes of this section a reportable event occurs--
          (1) * * *

           *       *       *       *       *       *       *

          (7) when there is a distribution under the plan to a 
        participant who is a substantial owner as defined in 
        section [4022(b)(6)] 4021(d) if--

           *       *       *       *       *       *       *


                          ALLOCATION OF ASSETS

  Sec. 4044. (a) In the case of the termination of a single-
employer plan, the plan administrator shall allocate the assets 
of the plan (available to provide benefits) among the 
participants and beneficiaries of the plan in the following 
order:
          (1) * * *

           *       *       *       *       *       *       *

          (4) Fourth--
                  (A) to all other benefits (if any) of 
                individuals under the plan guaranteed under 
                this title (determined without regard to 
                section 4022B(a)), and
                  (B) to the additional benefits (if any) which 
                would be determined under subparagraph (A) if 
                section [4022(b)(5)] 4022(b)(5)(B) did not 
                apply.

           *       *       *       *       *       *       *

  (b) For purposes of subsection (a)--
          (1) * * *
          (2) If the assets available for allocation under any 
        paragraph of subsection (a) (other than paragraphs 
        [(5)] (4), (5), and (6)) are insufficient to satisfy in 
        full the benefits of all individuals which are 
        described in that paragraph, the assets shall be 
        allocated pro rata among such individuals on the basis 
        of the present value (as of the termination date) of 
        their respective benefits described in that 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.
          [(3)] (4) This paragraph applies if the assets 
        available for allocation under paragraph (5) of 
        subsection (a) are not sufficient to satisfy in full 
        the benefits of individuals described in that 
        paragraph.

           *       *       *       *       *       *       *

          [(4)] (5) If the Secretary of the Treasury determines 
        that the allocation made pursuant to this section 
        (without regard to this paragraph) results in 
        discrimination prohibited by section 401(a)(4) of the 
        Internal Revenue Code of 1986 then, if required to 
        prevent the disqualification of the plan (or any trust 
        under the plan) under section 401(a) or 403(a) of such 
        Code, the assets allocated under subsections (a)(4)(B), 
        (a)(5), and (a)(6) shall be reallocated to the extent 
        necessary to avoid such discrimination.
          [(5)] (6) The term ``mandatory contributions'' means 
        amounts contributed to the plan by a participant which 
        are required as a condition of employment, as a 
        condition of participation in such plan, or as a 
        condition of obtaining benefits under the plan 
        attributable to employer contributions. For this 
        purpose, the total amount of mandatory contributions of 
        a participant is the amount of such contributions 
        reduced (but not below zero) by the sum of the amounts 
        paid or distributed to him under the plan before its 
        termination.
          [(6)] (7) A plan may establish subclasses and 
        categories within the classes described in paragraphs 
        (1) through (6) of subsection (a) in accordance with 
        regulations prescribed by the corporation.

           *       *       *       *       *       *       *


SEC. 4050. MISSING PARTICIPANTS.

  (a) * * *

           *       *       *       *       *       *       *

  (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).
  [(c)] (e) Regulatory Authority.--The corporation shall 
prescribe such regulations as are necessary to carry out the 
purposes of this section, including rules relating to what will 
be considered a diligent search, the amount payable to the 
corporation, and the amount to be paid by the corporation.

           *       *       *       *       *       *       *

                              ----------                              


                      TAXPAYER RELIEF ACT OF 1997

           *       *       *       *       *       *       *


                TITLE XV--PENSIONS AND EMPLOYEE BENEFITS

           *       *       *       *       *       *       *


Subtitle B--Other Provisions Relating to Pensions and Employee Benefits

           *       *       *       *       *       *       *


SEC. 1524. DIVERSIFICATION OF SECTION 401(K) PLAN INVESTMENTS.

  (a) * * *

           *       *       *       *       *       *       *

  [(b) Effective Date.--The amendments made by this section 
shall apply to elective deferrals for plan years beginning 
after December 31, 1998.]
  (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 that is invested in assets 
        consisting of qualifying employer securities, 
        qualifying employer real property, or both, if such 
        assets were acquired by the plan before January 1, 
        1999.

                            ADDITIONAL VIEWS

    In recent years there has been a growing recognition of the 
importance of retirement issues in our society. Americans are 
living longer, and are therefore more likely to reach a point 
in their lives where they cannot or do not want to continue to 
work. It has been a long-standing element of our national 
retirement policy that we want individuals to retire at an 
appropriate point in their lives, and to live out their 
remaining years with adequate income. Through the Social 
Security program, more than 90% of Americans are able to retire 
between 62-65, receiving, on average, slightly less than 40% of 
their pre-retirement income in monthly benefits. State and 
local government employees who are covered by state pension 
systems are not included in this coverage rate. Most retirement 
experts believe that somewhere between 65-85% of pre-retirement 
income is necessary to maintain a decent standard of living in 
retirement. The challenge is to adopt national policies that 
provide individuals the remaining 25-45% of retirement income 
that they need.
    For the past several decades, policy-makers have tried to 
do that through the encouragement of employer sponsored pension 
plans that provide supplemental income in retirement (as well 
as individual savings). In 1974, Congress enacted the Employee 
Retirement Income Security Act (ERISA) which established 
standards for the adoption and maintenance of employer 
sponsored pension plans. ERISA established requirements for 
reporting and disclosure, participation and vesting, funding, 
fiduciary responsibility, administration and enforcement. 
Congress has amended ERISA numerous times over the ensuing 
years seeking to further improve the operation of the law.
    On some levels, ERISA has been an important success. 
According to the Social Security Administration, in 1998, 
approximately 28% of private sector retirees have at least 20% 
of retirement income. Regrettably, the percent of the workforce 
who do not have pension coverage has hovered either slightly 
above or slightly below 50% for the past twenty-five years. Low 
income workers, part-time workers (primarily women), and 
employees of small businesses are the most likely not to have 
pension coverage. According to the Center on Budget and Policy 
Priorities, only 8% of full-time workers with earnings below 
$10,000, and only 27% of those with earnings between $10,000 
and $15,000 are covered by pensions. On the other hand, 81% of 
those with earnings above $75,000 have coverage. According to 
the Congressional Research Service, pension coverage for full-
time workers averages 61%, but only 27% for part-time or part 
year workers. As of 1996, 42% of full-time employees working 
for firms with fewer than 100 employees had pension coverage, 
but only 20% of employees working for firms with fewer than 25 
employees had pension coverage.
    Even during this period of strong economic growth, more 
workers are joining the workforce than are receiving pension 
coverage. And for the half of the workforce covered by a 
pension plan, there is reason to believe that it will not 
provide them with an adequate level of supplemental income in 
retirement. Although there is insufficient data to measure 
contributions to and benefits received from pension plans, data 
from the Federal Reserve shows pension plan contributions 
declining by 50% in recent years. And the increased shift from 
employer funded plans, such as traditional defined benefit 
plans, to employee funded arrangements, such as 401(k) plans, 
further brings into question whether future retirees will have 
adequate private pension income (the average pension account is 
$25-35,000 which will barely provide more than a few years of 
retirement income).
    The challenge before this Committee is to put forth 
legislative reforms that address these growing retirement 
issues. While the Committee has held several hearings in recent 
years on these issues, few of the recommendations made were 
considered or adopted as part of this legislation.
    With respect to H.R. 1102, the Comprehensive Retirement 
Security and Pension Reform Act of 1999, the bulk of the bill 
contains amendments to the Internal Revenue Code which affect 
the tax deductibility of contributions to employer sponsored 
pension plans. Because this is not within the jurisdiction of 
the Committee, the entire bill was not considered. However, the 
minority members of the Committee expressed concerns about the 
overall balance and content of the entire bill. The bill 
includes a number of provisions which improve current 
protections for workers and retirees, such as reducing vesting 
to three years for 401(k) plan matching contributions, 
encouraging rollovers of pension plan monies by workers 
switching employment, and eliminating compensation caps that 
unfairly affect the pension benefits of rank and file workers. 
The bill also contains a number of provisions that primarily 
benefit employers and upper income employees and may or may not 
benefit lower income workers.
    With respect to the specific amendments within the 
jurisdiction of the Committee, we offer the following comments 
and concerns.

 Section 604--Faster Vesting of Certain Employer Matching Contributions

    We support reducing from 5 to 3 years vesting of certain 
employer matching contributions (Section 604). Currently, 
employer contributions to a plan, including matching 
contributions to a 401(k) plan, are required to become vested 
only after five years (or seven years if vesting is phased in). 
If an employee switches jobs after four years, all employer 
matching contributions could be forfeited. Current plan vesting 
requirements also have an adverse impact on women who are more 
likely to have shorter job tenure. In the interests of fairness 
and simplicity, this provision should be extended to all 
employer matching contributions, not just 401(k) contributions.

                   Section 612--Missing Participants

    Extending the Missing Participant's Program to multi-
employer, defined contribution, and other non-covered plans 
(Section 612) is another provision that we support. Presently, 
the Pension Benefit Guaranty Corporation (PBGC) operates a 
clearinghouse for benefits due to missing participants under 
defined benefit plans. When a defined benefit plan terminates, 
the plan may transfer the benefits of the missing participant 
to the PBGC. The PBGC then attempts to find the missing 
participant. Section 612 would expand the PBGC missing 
participant program to most other types of pension plans. This 
expansion would be voluntary at the election of the plan's 
sponsor. We support this provision because it helps ensure that 
participants and beneficiaries receive their entitled benefits.

    Section 616--Notice of Significant Reduction in Accrual Benefits

    This innocuous sounding provision deals with the most 
controversial pension issue occurring now--the conversion of 
traditional defined benefit plans to cash balance plans. Though 
cash balance plans were created during the 1980's, it has only 
been in the past two years that large numbers of employees have 
moved to convert their traditional defined benefit plans. 
According to Pensions and Investments, over 300 of the largest 
employers have converted to cash balance plans. Although the 
details vary somewhat from employer to employer, the primary 
change involves the plans' benefit formula calculation of 
future retirement benefits from a final pay formula to a career 
average formula. In addition, the employer expresses the career 
benefits in the form of a hypothetical ``account'' so that 
workers can see their benefits as a lump sum amount that 
increases with an assumed rate of earnings each year. The plan 
remains a defined benefit plan under which the employer 
provides a defined future benefit provided workers meet the 
necessary conditions, the employer guarantees a rate of return, 
and in the case of termination, the plan remains guaranteed by 
the Pension Benefit Guaranty Corporation (PBGC). As employers 
argue, in many ways a cash balance plan is fairer to younger 
workers since benefits accrue more evenly throughout a workers' 
career, instead of earning most benefits at the end of one's 
work service.
    The controversy primarily arises when an employer converts 
an existing traditional defined benefit plan to a cash balance 
plan. Three major issues have arisen in this context. First, 
the adequacy of the notice of the change that must be provided 
to workers. Under section 204(h) of ERISA, employers must 
provide participants and beneficiaries notice of a significant 
reduction of benefit accrual fifteen days before the change. 
Employers are not required to explain the effect of the 
amendment. They may simply give employees a copy of the 
amendment. In cash balance conversions, there has been 
considerable controversy not only that employers are not 
adequately explaining to their employees the effect on their 
retirement benefits of the change, but also that some employers 
may be intentionally hiding the negative effects from workers. 
There have been numerous documented statements by benefit 
consultants that one of the many benefits of cash balance 
conversions is that employers need not explain the effects to 
workers and workers are unlikely to understand the changes 
until it is too late.
    Second, the effects on older workers. Many employers who 
convert to cash balance plans include an aspect known as wear-
away. Under wear-away, employees whose accrued benefit under 
the plan before the conversion is greater than the benefit they 
would have accrued under the converted plan do not accrue new 
benefits until their former and new benefit levels are equal. 
For many older workers, up to 50% of their expected pension 
benefits can be lost. Since it primarily is older workers who 
have greater accrued benefits, this provision primarily affects 
older workers and has been alleged to be illegal age 
discrimination. In addition, since an important protection 
under ERISA is the protection of workers' accrued benefits, it 
also is alleged to be an undermining of the principle that 
accrued benefits cannot be reduced. There also are issues 
related to employer usage of differing interest rates that 
result in underestimating the value of older workers' benefits. 
Legislation and litigation is pending on these issues.
    Third is the issue of employee choice to remain under the 
former plan formula. A number of employers that have converted 
to cash balance plans have afforded all or vested workers the 
opportunity to remain covered by the prior plan formula. It 
also has been recommended that employers be required to provide 
workers an election option. As the majority notes, the language 
included in the Committee adopted bill is a placeholder. To 
date, the Committee has not fully discussed or resolved what 
legislative changes should be adopted to address the issues 
raised by cash balance conversions. Several bills have been 
introduced which address the above discussed issues. In 
addition, at the mark-up session on this bill, an amendment was 
offered to make clear that in cash balance conversions, all 
pension plan participants, including older participants, must 
receive future pension benefit accruals. The amendment was 
withdrawn after the majority committed to work bipartisanly to 
find a solution on the issue. To date, the majority has not 
initiated discussions with the minority on this matter.
    We believe that Section 616 does not go for enough in 
notifying and disclosing to participants that there is a plan 
amendment that would significantly reduce future benefit 
accruals. In addition, we do not support the majority's view 
that employers need not apprise workers of the amount of their 
benefit reductions. Nor do we believe electronic means are 
sufficient to convey this level of important and sensitive 
information to participants. The majority criticizes the 
Administration for not working with them on legislative 
language. There have been several legislative drafting sessions 
on the Administration's proposal to which the majority was 
invited, but did not attend. This is one of the most important 
pension issues facing Congress today. We urge the Committee to 
hold hearings and that the majority work with us to develop 
legislation that fairly protect the pension benefits of workers 
and retirees.

    Section 619--Model Spousal Consent Form and Qualified Domestic 
                            Relations Order

    We support the model consent from and qualified domestic 
relations order provisions. A qualified domestic relations 
order is a order that creates or recognizes the existence of an 
alternate payee's right to receive all or a portion of the 
benefits payable with respect to a participant under a 
qualified retirement plan. Many times during divorce 
proceedings, a husband or wife does not realize that he or she 
may have signed away his or her rights as a beneficiary to 
their spouse's pension plan. It may not be until years later 
that a spouse realizes that he or she is not entitled to his or 
her ex-spouse's pension benefits as they originally thought. 
Similar situations also occur for widowed spouses. This 
provision requires the Secretary to develop language that would 
facilitate better understanding by spouses when they waive 
their spousal pension rights.

           Section 620--Elimination of ERISA Double Jeopardy

    Some Committee members are concerned about this provision 
which would limit the Department of Labor's legal authority. 
The Department has strongly objected to this provision. Under 
current law, the Secretary is provided an independent right to 
bring suit under Sec. 502(a)(2) of ERISA in order to protect 
the public interest. According to the Department, under settled 
principles of res judicata, the government is not generally 
bound by private litigation to which it was not a party when 
the litigation implicates the public interest in the 
enforcement of federal statutes. See, e.g., Hathorn v. Lovorn, 
457 U.S. 255, 268 n.23 (1982); City of Richmond v. United 
States, 422 U.S. 358, 373 n.6 (1975); and Sam Fox Publ'g Co., 
Inc. v. United States, 366 U.S. 683, 689-90 (1961). The law 
does not impose the significant burden of monitoring each and 
every one of the thousands of ERISA cases brought each year to 
ensure that they are not mishandled. The Department argues that 
it could not realistically intervene in each and every such 
case, nor would the courts uniformly permit intervention as 
late as settlement in light of the Federal Rules of Civil 
Procedure Rule 24's timeliness requirements. See, e.g., 
Campbell v. Hall-Mark Electronics Corp., 808 F.2d 775 (11th 
Cir. 1987).
    The Department believes this provision responds to a 
problem that does not exist and has been raised by individuals 
interested in a specific case. The Secretary has brought 
lawsuits after private settlement in only a handful cases in 
which the parties have settled for a small fraction of the 
plan's losses and wholly failed to promote the public interest 
in enforcement of ERISA. The Secretary argues that section 620 
would bar the Secretary from pursuing claims which were not 
raised in the private action, were undisclosed by the parties 
and were unknown to the Secretary. Nor would the Department 
have sufficient time to assess settlement proposals involving 
complex financial transactions. The Secretary is not given any 
right to object to the proposed settlement, or to stay 
proceedings pending an investigation. The Department believes 
this provision would promote collusive or inadequate 
settlements designed to defeat the public interest in vigorous 
enforcement of ERISA. It would bar the Secretary from seeking a 
recovery even for participants who were never represented in 
the private action. It would unfairly apply retroactively to 
pending actions brought by the Secretary. Under current law, no 
defendant faces the risk of double jeopardy or double damages 
because the plan's losses are offset by the value of the 
private settlement and the Secretary retains the right to make 
the plan whole, not to recover excess damages. Not all members 
agree with the views of the Department of Labor, and we believe 
additional hearings are needed to fully consider the merits of 
this matter.

                Section 624--Annual Report Dissemination

    There is also a disturbing provision that would curtail the 
distribution of the Summary Annual Report (SAR) (Section 624). 
Under present law, within 210 days after the close of a plan's 
fiscal year, the plan administrator must provide certain 
information in a Summary Annual Report. Employers argue that 
this is a burdensome and unnecessary requirement. Section 624 
provides that SARs would no longer have to be distributed to 
participants. They would only be available upon request. We are 
strongly opposed to this provision because we believe that 
workers should be routinely provided basic information about 
their plan. The SAR is the only document participants receive 
that provides them with information about their plan's 
financial condition, including funding levels, investment 
experience, administrative expenses, and benefit payments. The 
information is an easy to prepare summary compiled from 
information on the form 5500 which employers are required to 
file with the government. Elimination of the SAR would 
undermine the ability of a participant to know about plan 
performance, and to detect financial improprieties. The 
Department of Labor has also expressed opposition to section 
624 (letter attached).

                 Section 626--Benefit Suspension Notice

    Another disturbing provision would cut back on the issuance 
of Suspension of Benefit Notices (Section 626). When an 
employee continues to work beyond normal retirement age, or is 
re-employed after commencing benefits, a defined benefit plan 
may provide for a suspension of pension payments during the 
past normal retirement age employment period. Department of 
Labor (DOL) regulations require that affected participants be 
notified in writing of such suspension and that such notice 
include a copy of the relevant plan provisions. Section 626 
would eliminate the requirement of a written individual notice 
and instead require that the suspension of benefits rules be 
outlined in the Summary Plan Description (SPD). The SPD is a 
booklet that describes the plan's provisions and the 
participants' benefits, rights, and obligations in simple 
language. The SPD is a document that workers receive when they 
first start a job. It is inconceivable to think that a worker 
who started employment at age 30 would recall the fine-points 
of the suspension of benefits rules, by the time they he or she 
reaches age 65. The bill's authors contend that the production 
and distribution of the SAR is burdensome on the employer. We 
believe, however, that they are vital to the employees' 
understanding of their pension plan's status and their 
benefits. The requirements governing their issuance should not 
be changed. For these reasons, we do not support the 
elimination of the suspension of benefits notice.
    The Department of Labor also opposes elimination of the 
benefit suspension notice. The Department believes that 
employees who forgo such payments should receive individual 
notices explaining the effect of his or her continued 
employment. This information will permit employees to make 
informed decisions concerning whether, or how long, to continue 
to work for the same employer. Providing the information in the 
summary plan description would result in more employees not 
having sufficient and timely information they need in order to 
make their retirement decisions.

           Section 628--Simplified Annual Filing Requirement

    The Department of Labor has expressed reservations about 
section 628 of the bill. The fundamental problem with section 
628 is that the IRS Form 5500-EZ is a tax return filed by sole 
proprietors and partnerships regarding pension benefits given 
to the business owners and their spouses--it does not contain 
the financial and other disclosures that employees deserve 
regarding their retirement savings and that the Department of 
Labor needs to effectively satisfy its enforcement 
responsibilities under ERISA.
    Currently, under ERISA and the Internal Revenue Code, 
pension plans generally must file each year the Form 5500, and 
for plans covering fewer than 100 participants, a simplified 
version called the Form 5500-C/R, to report on the 
administration, operation, funding, assets and investments of 
the plan. The Form 5500 and 5500-C/R information is an integral 
part of the government's enforcement, research and policy 
development programs and a source of data for Congress and the 
private sector in assessing employee benefit, tax, and economic 
trends and policies. The return/reports also serve as the 
primary means by which the operations and estimated $3.5 
trillion in plan assets can be monitored by participants, 
beneficiaries, the general public, as well as the Department of 
Labor.
    The Department of Labor is nearing completion of a 
comprehensive project, started in 1995, with the other pension 
agencies (Internal Revenue Service, Pension Benefit Guaranty 
Corporation) to overhaul the Form 5500 and Form 5500-C/R. The 
agencies are also completing a new ERISA Filing Acceptance 
System (or ``EFAST'') that will rely on computer scannable 
forms and electronic filing technologies. The public has been 
following these developments and provided input, and the 
Department believes it could be disruptive to propose further 
modifications to annual reporting requirements at this time.
                                   William L. Clay.
                                   Dale E. Kildee.
                                   Major R. Owens.
                                   Patsy T. Mink.
                                   Lynn Woolsey.
                                   Carolyn McCarthy.
                                   Harold E. Ford, Jr.
                                   David Wu.
                                   Matthew G. Martinez.
                                   Robert E. Andrews.
                                   Bobby C. Scott.
                                   Loretta Sanchez.
                                   Dennis J. Kucinich.
                                   Rush Holt.

                          U.S. Department of Labor,
                                        Secretary of Labor,
                                Washington, DC, September 14, 1999.
Hon. William Clay,
Committee on Education and the Workforce,
House of Representatives, Washington, DC.
    Dear Representative Clay: This is to provide the Department 
of Labor's views on proposals that would amend the summary 
annual report (SAR) provisions in section 104 of the Employee 
Retirement Income Security Act of 1974 (ERISA). Specifically, 
the proposals would eliminate the requirement that plan 
administrators annually distribute a summary report of the 
plan's financial condition to plan participants, and instead 
require that SARs only be made available for examination with 
copies furnished only upon request. The Department of Labor 
opposes such a change because it would be inconsistent with a 
fundamental policy of ERISA to help protect workers by 
requiring disclosures of financial and other information about 
their employee benefit plans.
    When Congress enacted ERISA in 1974, it contemplated that 
pension plan participants, as well as the Department of Labor, 
would have ready access to plan financial information. This 
dual approach, based on timely and accurate disclosure of plan 
information, has enhanced worker confidence in the private 
pension system. The SAR is the only routine report participants 
received without cost that provides them with information about 
their plan's financial condition, including the amount of plan 
assets, the plan's investment experience, administrative 
expenses, and benefits paid. The SAR provides plan participants 
with a measure of assurance that their retirement plans are 
secure.
    The SAR summarizes key financial information that was 
disclosed to the government on the plan's Form 5500 Series 
Annual Return/Report. Plan administrators prepare the SAR based 
on information in the Form 5500. Since this information has 
already been compiled, it is not burdensome for plan 
administrators to prepare a SAR. In addition, under guidance 
published by the Department, plan administrators are permitted 
to disseminate the SAR through electronic means, including e-
mail and the Internet, which are efficient and cost-effective 
ways of disseminating information to plan participants.
    As you know, if current trends continue, more workers will 
rely on defined contribution plans to provide a larger and 
larger part of their retirement income. Benefits provided by 
defined contribution plans, unlike those provide by defined 
benefit plans, are not insured. The amount available to pay 
retirement benefits in defined contribution plans largely 
depends upon their investment performance net of expenses. 
Therefore, providing a worker with information concerning the 
financial condition of his or her plan is likely to become 
more, rather than less important. In this connection, receiving 
a SAR can function as an annual reminder to workers to monitor 
and evaluate their retirement plan. Information in the SAR may 
prompt plan participants to request additional information from 
their plan administrator including the more detailed Form 5500.
    We believe it is not sound retirement policy to reduce 
workers' access to plan financial information at the same time 
we are asking them to take more responsibility for their 
retirement planning. Timely and accurate disclosure of plan 
financial information is critical to assuring workers that 
their pensions are secure. The SAR is a cost-effective and 
appropriate method of providing important financial 
disclosures.
    Thank you for the opportunity to express our views on this 
important issue affecting workers' retirement security. I look 
forward to working closely with you to advance meaningful 
pension reform legislation that protects workers' rights to 
fundamental plan information.
    The Office of Management and Budget has advised that there 
is no objection to the presentation of this report from the 
standpoint of the Administration's program.
            Sincerely,
                                                  Alexis M. Herman.
                                ------                                  


                          U.S. Department of Labor,
                                        Secretary of Labor,
                                Washington, DC, September 14, 1999.
Hon. William F. Goodling,
Chairman, Committee on Education and the Workforce,
House of Representatives, Washington, DC.
    Dear Chairman Goodling: This is to provide the Department 
of Labor's views on proposals that would amend the summary 
annual report (SAR) provisions in section 104 of the Employee 
Retirement Income Security Act of 1974 (ERISA). Specifically, 
the proposals would eliminate the requirement that plan 
administrators annually distribute a summary report of the 
plan's financial condition to plan participants, and instead 
require that SARs only be made available for examination with 
copies furnished only upon request. The Department of Labor 
opposes such a change because it would be inconsistent with a 
fundamental policy of ERISA to help protect workers by 
requiring disclosures of financial and other information about 
their employee benefit plans.
    When Congress enacted ERISA in 1974, it contemplated that 
pension plan participants, as well as the Department of Labor, 
would have ready access to plan financial information. This 
dual approach, based on timely and accurate disclosure of plan 
information, has enhanced work confidence in the private 
pension system. The SAR is the only routine report participants 
receive without cost that provides them with information about 
their plan's financial condition, including the amount of plan 
assets, the plan's investment experience, administrative 
expenses, and benefits paid. The SAR provides plan participants 
with a measure of assurance that their retirement plans are 
secure.
    The SAR summarizes key financial information that was 
disclosed to the government on the plan's Form 5500 Series 
Annual Return/Report. Plan administrators prepare the SAR based 
on information in the Form 5500. Since this information has 
already been compiled, it is not burdensome for plan 
administrators to prepare a SAR. In addition, under guidance 
published by the SAR through electronic means, including e-mail 
and the Internet, which are efficient and cost-effective ways 
of disseminating information to plan participants.
    As you know, if current trends continue, more workers will 
rely on defined contribution plans to provide a larger and 
larger part of their retirement income. Benefits provided by 
defined contribution plans, unlike those provided by defined 
benefit plans, are not insured. The amount available to pay 
retirement benefits in defined contribution plans largely 
depends upon their investment performance net of expenses. 
Therefore, providing a worker with information concerning the 
financial condition of his or her plan is likely to become 
more, rather than less important. In this connection, receiving 
a SAR can function as an annual reminder to workers to monitor 
and evaluate their retirement plan. Information in the SAR may 
prompt plan participants to request additional information from 
their plan administrator including the more detailed Form 5500.
    We believe it is not sound retirement policy to reduce 
workers' access to plan financial information at the same time 
we are asking them to take more responsibility for their 
retirement planning. Timely and accurate disclosure of plan 
financial information is critical to assuring workers that 
their pensions are secure. The SAR is a cost-effective and 
appropriate method of providing important financial 
disclosures.
    Thank you for the opportunity to express our views on this 
important issue affecting workers' retirement security. I look 
forward to working closely with you to advance meaningful 
pension reform legislation that protects workers' rights to 
fundamental plan information.
    The Office of Management and Budget has advised that there 
is no objection to the presentation of this report from the 
standpoint of the Administration's program.
            Sincerely,
                                                  Alexis M. Herman.
                          ADDITIONAL VIEWS II

    H.R. 1102 contains numerous provisions that primarily 
benefit employers and upper income employees without any 
corresponding assistance for lower income workers. Two-thirds 
of current pension tax preferences accrue to individuals in the 
top fifth of the income scale. These are not the people who 
need financial incentives or more plan options to save for 
retirement. Every study shows that individuals who have 
discretionary income save, and tax incentives simply cause them 
to shift from taxable to non-taxable savings. The people who 
need help are the overwhelming majority of workers who either 
cannot afford to save anything or save very little for 
retirement.
    According to the Center on Budget and Policy Priorities, 
20% of the individuals with the highest incomes would receive 
77% of the tax breaks H.R. 1102 provides. In addition, the 
Center reports that the 5% of individuals with the highest 
incomes would receive 42% of the tax benefits provided. By 
contrast, the bottom 60% of wage earners would receive just 
4.3% of the benefits. Therefore, the bill exacerbates the 
disparity in tax preferences that already exists in our pension 
system where two-thirds of the benefits of current tax 
preferences accrue to families with incomes of $100,000 or more 
a year.
    The Congressional Budget Office and Joint Committee on 
Taxation's estimate of the cost of H.R. 1102 estimated that it 
would reduce federal revenues by $27 billion over five years 
and $72 billion over ten years. That $72 billion could be spent 
on other national priorities such as education and health. The 
underlying theory of this bill speculates that benefits 
provided to the top wage earners will ``trickle down'' to rank-
and-file workers. The contention is that employers will either 
retain or create plans that provide benefits to all of their 
workers. But, based on past experience, gains in pension 
coverage are more the result of direct improvements in the 
coverage rules, not increases in deductible amounts. 
Furthermore, the bill includes exemptions from current pension 
and top heavy plan rules that may result in the exclusion of 
additional workers from pension plans. Again, we reiterate that 
although the bill contains provisions which we support, it also 
raises some serious concerns.
                                   William L. Clay.
                                   Dale E. Kildee.
                                   Major R. Owens.
                                   Patsy T. Mink.
                                   Lynn Woolsey.
                                   Chaka Fattah.
                                   Carolyn McCarthy.
                                   George Miller.
                                   Donald M. Payne.
                                   Robert E. Andrews.
                                   Bobby C. Scott.