[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[S. 1006 Introduced in Senate (IS)]

  1st Session
                                S. 1006

  To amend the Internal Revenue Code of 1986 to simplify the pension 
                     laws, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                June 30 (legislative day, June 19), 1995

     Mr. Pryor (for himself, Mr. Hatch, Mr. Breaux, and Mr. Leahy) 
introduced the following bill; which was read twice and referred to the 
                          Committee on Finance

_______________________________________________________________________

                                 A BILL


 
  To amend the Internal Revenue Code of 1986 to simplify the pension 
                     laws, and for other purposes.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

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

    (a) Short Title.--This Act may be cited as the ``Pension 
Simplification Act of 1995''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.
        TITLE I--SIMPLIFICATION OF NONDISCRIMINATION PROVISIONS

Sec. 101. Definition of highly compensated employees; repeal of family 
                            aggregation.
Sec. 102. Definition of compensation for section 415 purposes.
Sec. 103. Modification of additional participation requirements.
Sec. 104. Nondiscrimination rules for qualified cash or deferred 
                            arrangements and matching contributions.
                TITLE II--SIMPLIFIED DISTRIBUTION RULES

Sec. 201. Repeal of 5-year income averaging for lump-sum distributions.
Sec. 202. Repeal of $5,000 exclusion of employees' death benefits.
Sec. 203. Simplified method for taxing annuity distributions under 
                            certain employer plans.
Sec. 204. Required distributions.
    TITLE III--TARGETED ACCESS TO PENSION PLANS FOR SMALL EMPLOYERS

Sec. 301. Credit for pension plan start-up costs of small employers.
Sec. 302. Modifications of simplified employee pensions.
Sec. 303. Exemption from top-heavy plan requirements.
Sec. 304. Tax-exempt organizations eligible under section 401(k).
Sec. 305. Regulatory treatment of small employers.
                     TITLE IV--PAPERWORK REDUCTION

Sec. 401. Repeal of combined section 415 limit.
Sec. 402. Duties of sponsors of certain prototype plans.
                 TITLE V--MISCELLANEOUS SIMPLIFICATION

Sec. 501. Treatment of leased employees.
Sec. 502. Plans covering self-employed individuals.
Sec. 503. Elimination of special vesting rule for multiemployer plans.
Sec. 504. Full-funding limitation of multiemployer plans.
Sec. 505. Alternative full-funding limitation.
Sec. 506. Affiliated employers.
Sec. 507. Treatment of governmental plans under section 415.
Sec. 508. Treatment of deferred compensation plans of State and local 
                            governments and tax-exempt organizations.
Sec. 509. Contributions on behalf of disabled employees.
Sec. 510. Distributions under rural cooperative plans.
Sec. 511. Special rules for plans covering pilots.
Sec. 512. Tenured faculty.
Sec. 513. Uniform retirement age.
Sec. 514. Uniform penalty provisions to apply to certain pension 
                            reporting requirements.
Sec. 515. National Commission on Private Pension Plans.
Sec. 516. Date for adoption of plan amendments.
        TITLE I--SIMPLIFICATION OF NONDISCRIMINATION PROVISIONS

SEC. 101. DEFINITION OF HIGHLY COMPENSATED EMPLOYEES; REPEAL OF FAMILY 
              AGGREGATION.

    (a) In General.--Paragraph (1) of section 414(q) (defining highly 
compensated employee) is amended to read as follows:
            ``(1) In general.--The term `highly compensated employee' 
        means any employee who--
                    ``(A) was a 5-percent owner at any time during the 
                year or the preceding year,
                    ``(B) had compensation for the preceding year from 
                the employer in excess of $80,000, or
                    ``(C) was the most highly compensated officer of 
                the employer for the preceding year.
        The Secretary shall adjust the $80,000 amount under 
        subparagraph (B) at the same time and in the same manner as 
        under section 415(d), except that the base period shall be the 
        calendar quarter beginning October 1, 1995.''
    (b) Special Rule Where No Employee Has Compensation Over Specified 
Amount.--Paragraph (2) of section 414(q) is amended to read as follows:
            ``(2) Special rule if no employee has compensation over 
        specified amount.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), if a defined benefit plan or a 
                defined contribution plan meets the requirements of 
                sections 401(a)(4) and 410(b) with respect to the 
                availability of contributions, benefits, and other plan 
                features, then for all other purposes, subparagraphs 
                (A) and (C) of paragraph (1) shall not apply to such 
                plan.
                    ``(B) Exception.--Subparagraph (A) shall not apply 
                to a plan to the extent provided in regulations that 
                are prescribed by the Secretary to prevent the evasion 
                of the purposes of this paragraph.''
    (c) Repeal of Family Aggregation Rules.--
            (1) In general.--Paragraph (6) of section 414(q) is hereby 
        repealed.
            (2) Compensation limit.--Paragraph (17)(A) of section 
        401(a) is amended by striking the last sentence.
            (3) Deduction.--Subsection (l) of section 404 is amended by 
        striking the last sentence.
    (d) Conforming Amendments.--
            (1) Paragraphs (4), (5), (8), and (12) of section 414(q) 
        are hereby repealed.
            (2)(A) Section 414(r) is amended by adding at the end the 
        following new paragraph:
            ``(9) Excluded employees.--For purposes of this subsection, 
        the following employees shall be excluded:
                    ``(A) Employees who have not completed 6 months of 
                service.
                    ``(B) Employees who normally work less than 17\1/2\ 
                hours per week.
                    ``(C) Employees who normally work not more than 6 
                months during any year.
                    ``(D) Employees who have not attained the age of 
                21.
                    ``(E) Except to the extent provided in regulations, 
                employees who are included in a unit of employees 
                covered by an agreement which the Secretary of Labor 
                finds to be a collective bargaining agreement between 
                employee representatives and the employer.
        Except as provided by the Secretary, the employer may elect to 
        apply subparagraph (A), (B), (C), or (D) by substituting a 
        shorter period of service, smaller number of hours or months, 
        or lower age for the period of service, number of hours or 
        months, or age (as the case may be) specified in such 
        subparagraph.''
            (B) Subparagraph (A) of section 414(r)(2) is amended by 
        striking ``subsection (q)(8)'' and inserting ``paragraph (9)''.
            (3) Section 1114(c)(4) of the Tax Reform Act of 1986 is 
        amended by adding at the end the following new sentence: ``Any 
        reference in this paragraph to section 414(q) shall be treated 
        as a reference to such section as in effect before the Pension 
        Simplification Act of 1995.''
    (e) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995, except that in 
determining whether an employee is a highly compensated employee for 
years beginning in 1996, such amendments shall be treated as having 
been in effect for years beginning in 1995.
SEC. 102. DEFINITION OF COMPENSATION FOR SECTION 415 PURPOSES.

    (a) General Rule.--Section 415(c)(3) (defining participant's 
compensation) is amended by adding at the end the following new 
subparagraph:
                    ``(D) Certain deferrals included.--The term 
                `participant's compensation' shall include--
                            ``(i) any elective deferral (as defined in 
                        section 402(g)(3)), and
                            ``(ii) any amount which is contributed by 
                        the employer of the election of the employee 
                        and which is not includible in the gross income 
                        of the employee under section 125 or 457.''
    (b) Conforming Amendments.--
            (1) Section 414(q)(7) is amended to read as follows:
            ``(7) Compensation.--For purposes of this subsection, the 
        term `compensation' has the meaning given such term by section 
        415(c)(3).''
            (2) Section 414(s)(2) is amended by inserting ``not'' after 
        ``elect'' in the text and heading thereof.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.

SEC. 103. MODIFICATION OF ADDITIONAL PARTICIPATION REQUIREMENTS.

    (a) General Rule.--Section 401(a)(26)(A) (relating to additional 
participation requirements) is amended to read as follows:
            ``(A) In general.--In the case of a trust which is a part 
        of a defined benefit plan, such trust shall not constitute a 
        qualified trust under this subsection unless on each day of the 
        plan year such trust benefits at least the lesser of--
                    ``(i) 50 employees of the employer, or
                    ``(ii) the greater of--
                            ``(I) 40 percent of all employees of the 
                        employer, or
                            ``(II) 2 employees (or if there is only 1 
                        employee, such employee).''
    (b) Separate Line of Business Test.--Section 401(a)(26)(G) 
(relating to separate line of business) is amended by striking 
``paragraph (7)'' and inserting ``paragraph (2)(A) or (7)''.
    (c) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1995.

SEC. 104. NONDISCRIMINATION RULES FOR QUALIFIED CASH OR DEFERRED 
              ARRANGEMENTS AND MATCHING CONTRIBUTIONS.

    (a) Alternative Methods of Satisfying Section 401(k) 
Nondiscrimination Tests.--Section 401(k) (relating to cash or deferred 
arrangements) is amended by adding at the end the following new 
paragraph:
            ``(11) Alternative methods of meeting nondiscrimination 
        requirements.--
                    ``(A) In general.--A cash or deferred arrangement 
                shall be treated as meeting the requirements of 
                paragraph (3)(A)(ii) if such arrangement--
                            ``(i) meets the contribution requirements 
                        of subparagraph (B) or (C), and
                            ``(ii) meets the notice requirements of 
                        subparagraph (D).
                    ``(B) Matching contributions.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if, under the arrangement, 
                        the employer makes matching contributions on 
                        behalf of each employee who is not a highly 
                        compensated employee in an amount equal to--
                                    ``(I) 100 percent of the elective 
                                contributions of the employee to the 
                                extent such elective contributions do 
                                not exceed 3 percent of the employee's 
                                compensation, and
                                    ``(II) 50 percent of the elective 
                                contributions of the employee to the 
                                extent that such elective contributions 
                                exceed 3 percent but do not exceed 5 
                                percent of the employee's compensation.
                            ``(ii) Rate for highly compensated 
                        employees.--The requirements of this 
                        subparagraph are not met if, under the 
                        arrangement, the matching contribution with 
                        respect to any elective contribution of a 
                        highly compensated employee at any level of 
                        compensation is greater than that with respect 
                        to an employee who is not a highly compensated 
                        employee.
                            ``(iii) Alternative plan designs.--If the 
                        matching contribution with respect to any 
                        elective contribution at any specific level of 
                        compensation is not equal to the percentage 
                        required under clause (i), an arrangement shall 
                        not be treated as failing to meet the 
                        requirements of clause (i) if--
                                    ``(I) the level of an employer's 
                                matching contribution does not increase 
                                as an employee's elective contributions 
                                increase, and
                                    ``(II) the aggregate amount of 
                                matching contributions with respect to 
                                elective contributions not in excess of 
                                such level of compensation is at least 
                                equal to the amount of matching 
                                contributions which would be made if 
                                matching contributions were made on the 
                                basis of the percentages described in 
                                clause (i).
                    ``(C) Nonelective contributions.--The requirements 
                of this subparagraph are met if, under the arrangement, 
                the employer 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 3 percent of the employee's compensation.
                    ``(D) Notice requirement.--An arrangement meets the 
                requirements of this paragraph if, under the 
                arrangement, each employee eligible to participate is, 
                within a reasonable period before any year, given 
                written notice of the employee's rights and obligations 
                under the arrangement which--
                            ``(i) is sufficiently accurate and 
                        comprehensive to appraise the employee of such 
                        rights and obligations, and
                            ``(ii) is written in a manner calculated to 
                        be understood by the average employee eligible 
                        to participate.
                    ``(E) Other requirements.--
                            ``(i) Withdrawal and vesting 
                        restrictions.--An arrangement shall not be 
                        treated as meeting the requirements of 
                        subparagraph (B) or (C) unless the requirements 
                        of subparagraphs (B) and (C) of paragraph (2) 
                        are met with respect to all employer 
                        contributions (including matching 
                        contributions).
                            ``(ii) Social security and similar 
                        contributions not taken into account.--An 
                        arrangement shall not be treated as meeting the 
                        requirements of subparagraph (B) or (C) unless 
                        such requirements are met without regard to 
                        subsection (l), and, for purposes of subsection 
                        (l), employer contributions under subparagraph 
                        (B) or (C) shall not be taken into account.
                    ``(F) Other plans.--An arrangement shall be treated 
                as meeting the requirements under subparagraph (A)(i) 
                if any other plan maintained by the employer meets such 
                requirements with respect to employees eligible under 
                the arrangement.''
    (b) Alternative Methods of Satisfying Section 401(m) 
Nondiscrimination Tests.--Section 401(m) (relating to nondiscrimination 
test for matching contributions and employee contributions) is amended 
by redesignating paragraph (10) as paragraph (11) and by adding after 
paragraph (9) the following new paragraph:
            ``(10) Alternative method of satisfying tests.--
                    ``(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 subparagraph (B) or (C) of subsection 
                        (k)(11),
                            ``(ii) meets the notice requirements of 
                        subsection (k)(11)(D), and
                            ``(iii) meets the requirements of 
                        subparagraph (B).
                    ``(B) Limitation on matching contributions.--The 
                requirements of this subparagraph are met if--
                            ``(i) matching contributions on behalf of 
                        any employee may not be made with respect to an 
                        employee's contributions or elective deferrals 
                        in excess of 6 percent of the employee's 
                        compensation,
                            ``(ii) the level of an employer's matching 
                        contribution does not increase as an employee's 
                        contributions or elective deferrals increase, 
                        and
                            ``(iii) the matching contribution with 
                        respect to any highly compensated employee at a 
                        specific level of compensation is not greater 
                        than that with respect to an employee who is 
                        not a highly compensated employee.''
    (c) Year for Computing Nonhighly Compensated Employee Percentage.--
            (1) Cash or deferred arrangements.--Clause (ii) of section 
        401(k)(3)(A) is amended--
                    (A) by striking ``such year'' and inserting ``the 
                plan year'', and
                    (B) by striking ``for such plan year'' and 
                inserting ``the preceding plan year''.
            (2) Matching and employee contributions.--Section 
        401(m)(2)(A) is amended--
                    (A) by inserting ``for such plan year'' after 
                ``highly compensated employee'', and
                    (B) by inserting ``for the preceding plan year'' 
                after ``eligible employees'' each place it appears in 
                clause (i) and clause (ii).
    (d) Special Rule for Determining Average Deferral Percentage for 
First Plan Year, Etc.--
            (1) Paragraph (3) of section 401(k) is amended by adding at 
        the end the following new subparagraph:
                    ``(E) For purposes of this paragraph, in the case 
                of the first plan year of any plan, the amount taken 
                into account as the actual deferral percentage of 
                nonhighly compensated employees for the preceding plan 
                year shall be--
                            ``(i) 3 percent, or
                            ``(ii) if the employer makes an election 
                        under this subclause, the actual deferral 
                        percentage of nonhighly compensated employees 
                        determined for such first plan year.''
            (2) Paragraph (3) of section 401(m) is amended by adding at 
        the end thereof the following: ``Rules similar to the rules of 
        subsection (k)(3)(E) shall apply for purposes of this 
        subsection.''
    (e) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.

                TITLE II--SIMPLIFIED DISTRIBUTION RULES

SEC. 201. REPEAL OF 5-YEAR INCOME AVERAGING FOR LUMP-SUM DISTRIBUTIONS.

    (a) In General.--Subsection (d) of section 402 (relating to 
taxability of beneficiary of employees' trust) is amended to read as 
follows:
    ``(d) Taxability of Beneficiary of Certain Foreign Situs Trusts.--
For purposes of subsections (a), (b), and (c), a stock bonus, pension, 
or profit-sharing trust which would qualify for exemption from tax 
under section 501(a) except for the fact that it is a trust created or 
organized outside the United States shall be treated as if it were a 
trust exempt from tax under section 501(a).''
    (b) Conforming Amendments.--
            (1) Subparagraph (D) of section 402(e)(4) (relating to 
        other rules applicable to exempt trusts) is amended to read as 
        follows:
                    ``(D) Lump-sum distribution.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `lump sum 
                        distribution' means the distribution or payment 
                        within one taxable year of the recipient of the 
                        balance to the credit of an employee which 
                        becomes payable to the recipient--
                                    ``(I) on account of the employee's 
                                death,
                                    ``(II) after the employee attains 
                                age 59\1/2\,
                                    ``(III) on account of the 
                                employee's separation from service, or
                                    ``(IV) after the employee has 
                                become disabled (within the meaning of 
                                section 72(m)(7)),
                        from a trust which forms a part of a plan 
                        described in section 401(a) and which is exempt 
                        from tax under section 501 or from a plan 
                        described in section 403(a). Subclause (III) of 
                        this clause shall be applied only with respect 
                        to an individual who is an employee without 
                        regard to section 401(c)(1), and subclause (IV) 
                        shall be applied only with respect to an 
                        employee within the meaning of section 
                        401(c)(1). For purposes of this clause, a 
                        distribution to two or more trusts shall be 
                        treated as a distribution to one recipient. For 
                        purposes of this paragraph, the balance to the 
                        credit of the employee does not include the 
                        accumulated deductible employee contributions 
                        under the plan (within the meaning of section 
                        72(o)(5)).
                            ``(ii) Aggregation of certain trusts and 
                        plans.--For purposes of
                         determining the balance to the credit of an 
employee under clause (i)--
                                    ``(I) all trusts which are part of 
                                a plan shall be treated as a single 
                                trust, all pension plans maintained by 
                                the employer shall be treated as a 
                                single plan, all profit-sharing plans 
                                maintained by the employer shall be 
                                treated as a single plan, and all stock 
                                bonus plans maintained by the employer 
                                shall be treated as a single plan, and
                                    ``(II) trusts which are not 
                                qualified trusts under section 401(a) 
                                and annuity contracts which do not 
                                satisfy the requirements of section 
                                404(a)(2) shall not be taken into 
                                account.
                            ``(iii) Community property laws.--The 
                        provisions of this paragraph shall be applied 
                        without regard to community property laws.
                            ``(iv) Amounts subject to penalty.--This 
                        paragraph shall not apply to amounts described 
                        in subparagraph (A) of section 72(m)(5) to the 
                        extent that section 72(m)(5) applies to such 
                        amounts.
                            ``(v) Balance to credit of employee not to 
                        include amounts payable under qualified 
                        domestic relations order.--For purposes of this 
                        paragraph, the balance to the credit of an 
                        employee shall not include any amount payable 
                        to an alternate payee under a qualified 
                        domestic relations order (within the meaning of 
                        section 414(p)).
                            ``(vi) Transfers to cost-of-living 
                        arrangement not treated as distribution.--For 
                        purposes of this paragraph, the balance to the 
                        credit of an employee under a defined 
                        contribution plan shall not include any amount 
                        transferred from such defined contribution plan 
                        to a qualified cost-of-living arrangement 
                        (within the meaning of section 415(k)(2)) under 
                        a defined benefit plan.
                            ``(vii) Lump-sum distributions of alternate 
                        payees.--If any distribution or payment of the 
                        balance to the credit of an employee would be 
                        treated as a lump-sum distribution, then, for 
                        purposes of this paragraph, the payment under a 
                        qualified domestic relations order (within the 
                        meaning of section 414(p)) of the balance to 
                        the credit of an alternate payee who is the 
                        spouse or former spouse of the employee shall 
                        be treated as a lump-sum distribution. For 
                        purposes of this clause, the balance to the 
                        credit of the alternate payee shall not include 
                        any amount payable to the employee.''
            (2) Section 402(c) (relating to rules applicable to 
        rollovers from exempt trusts) is amended by striking paragraph 
        (10).
            (3) Paragraph (1) of section 55(c) (defining regular tax) 
        is amended by striking ``shall not include any tax imposed by 
        section 402(d) and''.
            (4) Paragraph (8) of section 62(a) (relating to certain 
        portion of lump-sum distributions from pension plans taxed 
        under section 402(d)) is hereby repealed.
            (5) Section 401(a)(28)(B) (relating to coordination with 
        distribution rules) is amended by striking clause (v).
            (6) Subparagraph (B)(ii) of section 401(k)(10) (relating to 
        distributions that must be lump-sum distributions) is amended 
        to read as follows:
                    ``(ii) Lump-sum distribution.--For purposes of this 
                subparagraph, the term `lump-sum distribution' means 
                any distribution of the balance to the credit of an 
                employee immediately before the distribution.''
            (7) Section 406(c) (relating to termination of status as 
        deemed employee not to be treated as separation from service 
        for purposes of limitation of tax) is hereby repealed.
            (8) Section 407(c) (relating to termination of status as 
        deemed employee not to be treated as separation from service 
        for purposes of limitation of tax) is hereby repealed.
            (9) Section 691(c) (relating to deduction for estate tax) 
        is amended by striking paragraph (5).
            (10) Paragraph (1) of section 871(b) (relating to 
        imposition of tax) is amended by striking ``section 1, 55, or 
        402(d)(1)'' and inserting ``section 1 or 55''.
            (11) Subsection (b) of section 877 (relating to alternative 
        tax) is amended by striking ``section 1, 55, or 402(d)(1)'' and 
        inserting ``section 1 or 55''.
            (12) Section 4980A(c)(4) is amended--
                    (A) by striking ``to which an election under 
                section 402(d)(4)(B) applies'' and inserting ``(as 
                defined in section 402(e)(4)(D)) with respect to which 
                the individual elects to have this paragraph apply'',
                    (B) by adding at the end the following new flush 
                sentence:
        ``An individual may elect to have this paragraph apply to only 
        one lump-sum distribution.'', and
                    (C) by striking the heading and inserting:
            ``(4) Special one-time election.--''.
            (13) Section 402(e) is amended by striking paragraph (5).
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 1995.
            (2) Retention of certain transition rules.--Notwithstanding 
        any other provision of this section, the amendments made by 
        this section shall not apply to any distribution for which the 
        taxpayer elects the benefits of section 1122 (h)(3) or (h)(5) 
        of the Tax Reform Act of 1986. For purposes of the preceding 
        sentence, the rules of sections 402(c)(10) and 402(d) of the 
        Internal Revenue Code of 1986 (as in effect before the 
        amendments made by this Act) shall apply.

SEC. 202. REPEAL OF $5,000 EXCLUSION OF EMPLOYEES' DEATH BENEFITS.

    (a) In General.--Subsection (b) of section 101 is hereby repealed.
    (b) Conforming Amendment.--Subsection (c) of section 101 is amended 
by striking ``subsection (a) or (b)'' and inserting ``subsection (a)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1995.

SEC. 203. SIMPLIFIED METHOD FOR TAXING ANNUITY DISTRIBUTIONS UNDER 
              CERTAIN EMPLOYER PLANS.

    (a) General Rule.--Subsection (d) of section 72 (relating to 
annuities; certain proceeds of endowment and life insurance contracts) 
is amended to read as follows:
    ``(d) Special Rules for Qualified Employer Retirement Plans.--
            ``(1) Simplified method of taxing annuity payments.--
                    ``(A) In general.--In the case of any amount 
                received as an annuity under a qualified employer 
                retirement plan--
                            ``(i) subsection (b) shall not apply, and
                            ``(ii) the investment in the contract shall 
                        be recovered as provided in this paragraph.
                    ``(B) Method of recovering investment in 
                contract.--
                            ``(i) In general.--Gross income shall not 
                        include so much of any monthly annuity payment 
                        under a qualified employer retirement plan as 
                        does not exceed the amount obtained by 
                        dividing--
                                    ``(I) the investment in the 
                                contract (as of the annuity starting 
                                date), by
                                    ``(II) the number of anticipated 
                                payments determined under the table 
                                contained in clause (iii) (or, in the 
                                case of a contract to which subsection 
                                (c)(3)(B) applies, the number of 
                                monthly annuity payments under such 
                                contract).
                            ``(ii) Certain rules made applicable.--
                        Rules similar to the rules of paragraphs (2) 
                        and (3) of subsection (b) shall apply for 
                        purposes of this paragraph.
                            ``(iii) Number of anticipated payments.--

                         ``If the age of the
                                                                       
                           primary annuitant on
                                                             The number
                           the annuity starting
                                                         of anticipated
                           date is:
                                                           payments is:
                               Not more than 55......           300    
                               More than 55 but not             260    
                            more than 60.
                               More than 60 but not             240    
                            more than 65.
                               More than 65 but not             170    
                            more than 70.
                               More than 70..........           120    
                    ``(C) Adjustment for refund feature not 
                applicable.--For purposes of this paragraph, investment 
                in the contract shall be determined under subsection 
                (c)(1) without regard to subsection (c)(2).
                    ``(D) Special rule where lump sum paid in 
                connection with commencement of annuity payments.--If, 
                in connection with the commencement of annuity payments 
                under any qualified employer retirement plan, the 
                taxpayer receives a lump sum payment--
                            ``(i) such payment shall be taxable under 
                        subsection (e) as if received before the 
                        annuity starting date, and
                            ``(ii) the investment in the contract for 
                        purposes of this paragraph shall be determined 
                        as if such payment had been so received.
                    ``(E) Exception.--This paragraph shall not apply in 
                any case where the primary annuitant has attained age 
                75 on the annuity starting date unless there are fewer 
                than 5 years of guaranteed payments under the annuity.
                    ``(F) Adjustment where annuity payments not on 
                monthly basis.--In any case where the annuity payments 
                are not made on a monthly basis, appropriate 
                adjustments in the application of this paragraph shall 
                be made to take into account the period on the basis of 
                which such payments are made.
                    ``(G) Qualified employer retirement plan.--For 
                purposes of this paragraph, the term `qualified 
                employer retirement plan' means any plan or contract 
                described in paragraph (1), (2), or (3) of section 
                4974(c).
            ``(2) Treatment of employee contributions under defined 
        contribution plans.--For purposes of this section, employee 
        contributions (and any income allocable thereto) under a 
        defined contribution plan may be treated as a separate 
        contract.''
    (b) Effective Date.--The amendment made by this section shall apply 
in cases where the annuity starting date is after December 31, 1995.

SEC. 204. REQUIRED DISTRIBUTIONS.

    (a) In General.--Section 401(a)(9)(C) (defining required beginning 
date) is amended to read as follows:
                    ``(C) Required beginning date.--For purposes of 
                this paragraph--
                            ``(i) In general.--The term `required 
                        beginning date' means April 1 of the calendar 
                        year following the later of--
                                    ``(I) the calendar year in which 
                                the employee attains age 70\1/2\, or
                                    ``(II) the calendar year in which 
                                the employee retires.
                            ``(ii) Exception.--Subclause (II) of clause 
                        (i) shall not apply--
                                    ``(I) except as provided in section 
                                409(d), in the case of an employee who 
                                is a 5-percent owner (as defined in 
                                section 416) with respect to the plan 
                                year ending in the calendar year in 
                                which the employee attains age 70\1/2\, 
                                or
                                    ``(II) for purposes of section 408 
                                (a)(6) or (b)(3).
                            ``(iii) Actuarial adjustment.--In the case 
                        of an employee to whom clause (i)(II) applies 
                        who retires in a calendar year after the 
                        calendar year in which the employee attains age 
                        70\1/2\, the employee's accrued benefit shall 
                        be actuarially increased to take into account 
                        the period after age 70\1/2\ in which the 
                        employee was not receiving any benefits under 
                        the plan.
                            ``(iv) Exception for governmental and 
                        church plans.--Clauses (ii) and (iii) shall not 
                        apply in the case of a governmental plan or 
                        church plan. For purposes of this clause, the 
                        term `church plan' means a plan maintained by a 
                        church for church employees, and the term 
                        `church' means any church (as defined in 
                        section 3121(w)(3)(A)) or qualified church-
                        controlled organization (as defined in section 
                        3121(w)(3)(B)).''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to years beginning after December 31, 1995.

    TITLE III--TARGETED ACCESS TO PENSION PLANS FOR SMALL EMPLOYERS

SEC. 301. CREDIT FOR PENSION PLAN START-UP COSTS OF SMALL EMPLOYERS.

    (a) Allowance of Credit.--Section 38(b) (defining current year 
business credit) is amended by striking ``plus'' at the end of 
paragraph (10), by striking the period at the end of paragraph (11) and 
inserting ``, plus'', and by adding at the end the following new 
paragraph:
            ``(12) the small employer pension plan start-up cost 
        credit.''
    (b) Small Employer Pension Plan Start-Up Cost Credit.--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. 45C. SMALL EMPLOYER PENSION PLAN START-UP COST CREDIT.

    ``(a) Amount of Credit.--For purposes of section 38--
            ``(1) In general.--The small employer pension plan start-up 
        cost credit for any taxable year is an amount equal to the 
        qualified start-up costs of an eligible employer in 
        establishing a qualified pension plan.
            ``(2) Aggregate limitation.--The amount of the credit under 
        paragraph (1) for any taxable year shall not exceed $1,000, 
        reduced by the aggregate amount determined under this section 
        for all preceding taxable years of the taxpayer.
    ``(b) Qualified Start-Up Costs; Qualified Pension Plan.--For 
purposes of this section--
            ``(1) Qualified start-up costs.--The term `qualified start-
        up costs' means any ordinary and necessary expenses of an 
        eligible employer which--
                    ``(A) are paid or incurred in connection with the 
                establishment of a qualified pension plan, and
                    ``(B) are of a nonrecurring nature.
            ``(2) Qualified pension plan.--The term `qualified pension 
        plan' means--
                    ``(A) a plan described in section 401(a) which 
                includes a trust exempt from tax under section 501(a), 
                or
                    ``(B) a simplified employee pension (as defined in 
                section 408(k)).
    ``(c) Eligible Employer.--For purposes of this section--
            ``(1) In general.--The term `eligible employer' means an 
        employer which--
                    ``(A) had an average daily number of employees 
                during the preceding taxable year not in excess of 50, 
                and
                    ``(B) did not make any contributions on behalf of 
                any employee to a qualified pension plan during the 2 
                taxable years immediately preceding the taxable year.
            ``(2) Professional service employers excluded.--Such term 
        shall not include an employer substantially all of the 
        activities of which involve the performance of services in the 
        fields of health, law, engineering, architecture, accounting, 
        actuarial science, performing arts, or consulting.
    ``(d) 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.
            ``(2) Disallowance of deduction.--No deduction shall be 
        allowable under this chapter for any qualified start-up costs 
        for which a credit is allowable under subsection (a).''
    (c) Conforming Amendments.--
            (1) Section 39(d) is amended by adding at the end the 
        following new paragraph:
            ``(7) No carryback of pension credit.--No portion of the 
        unused business credit for any taxable year which is 
        attributable to the small employer pension plan start-up cost 
        credit determined under section 45C may be carried back to a 
        taxable year ending before the date of the enactment of section 
        45C.''
            (2) 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. 45C. Small employer pension plan start-up cost credit.''
    (d) Effective Date.--The amendments made by this section shall 
apply to costs incurred after the date of the enactment of this Act in 
taxable years ending after such date.

SEC. 302. MODIFICATIONS OF SIMPLIFIED EMPLOYEE PENSIONS.

    (a) Increase in Number of Allowable Participants for Salary 
Reduction Arrangements.--Section 408(k)(6)(B) is amended by striking 
``25'' each place it appears in the text and heading thereof and 
inserting ``100''.
    (b) Repeal of Participation Requirement.--
            (1) In general.--Section 408(k)(6)(A) is amended by 
        striking clause (ii) and by redesignating clauses (iii) and 
        (iv) as clauses (ii) and (iii), respectively.
            (2) Conforming amendments.--Clause (ii) of section 
        408(k)(6)(C) and clause (ii) of section 408(k)(6)(F) are each 
        amended by striking ``subparagraph (A)(iii)'' and inserting 
        ``subparagraph (A)(ii)''.
    (c) Alternative Test.--Clause (ii) of section 408(k)(6)(A), as 
redesignated by subsection (b)(1), is amended by adding at the end the 
following new flush sentence:
                        ``The requirements of the preceding sentence 
                        are met if the employer makes contributions to 
                        the simplified employee pension meeting the 
                        requirements of sections 401(k)(11) (B) or (C), 
                        401(k)(11)(D), and 401(m)(10)(B).''
    (d) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.
SEC. 303. EXEMPTION FROM TOP-HEAVY PLAN REQUIREMENTS.

    (a) Exemption From Top-Heavy Plan Requirements.--Section 416(g) 
(defining top-heavy plans) is amended by adding at the end the 
following new paragraph:
            ``(3) Exemption for certain plans.--A plan shall not be 
        treated as a top-heavy plan if, for such plan year, the 
        employer has no highly compensated employees (as defined in 
        section 414(q)) by reason of section 414(q)(2).''
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1995.

SEC. 304. TAX-EXEMPT ORGANIZATIONS ELIGIBLE UNDER SECTION 401(k).

    (a) General Rule.--Clause (ii) of section 401(k)(4)(B) is amended 
to read as follows:
                            ``(ii) any organization described in 
                        section 501(c)(3) which is exempt from tax 
                        under section 501(a).''
    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 1995, but shall not apply to 
any cash or deferred arrangement to which clause (i) of section 
1116(f)(2)(B) of the Tax Reform Act of 1986 applies.

SEC. 305. REGULATORY TREATMENT OF SMALL EMPLOYERS.

    (a) In General.--Section 7805(f) (relating to review of impact of 
regulations on small business) is amended by adding at the end the 
following new subparagraph:
            ``(4) Special rule for pension regulations.--
                    ``(A) In general.--Any regulation proposed to be 
                issued by the Secretary which relates to qualified 
                pension plans shall not take effect unless the 
                Secretary includes provisions to address any special 
                needs of the small employers.
                    ``(B) Qualified pension plan.--For purposes of this 
                paragraph, the term `qualified pension plan' means--
                            ``(i) any plan which includes a trust 
                        described in section 401(a) which is exempt 
                        from tax under section 501(a), or
                            ``(ii) any simplified employee pension (as 
                        defined in section 408(k)).''
    (b) Effective Date.--The amendment made by this section shall apply 
to regulations issued after the date of the enactment of this Act.

                     TITLE IV--PAPERWORK REDUCTION

SEC. 401. REPEAL OF COMBINED SECTION 415 LIMIT.

    (a) In General.--Section 415(e) (relating to limitation in case of 
defined benefit plan and defined contribution plan for same employee) 
is hereby repealed.
    (b) Conforming Amendments.--
            (1) Subparagraph (B) of section 415(b)(5) is amended by 
        striking ``and subsection (e)''.
            (2) Section 415(f)(1) is amended by striking ``, (c), and 
        (e)'' and inserting ``and (c)''.
            (3) Section 415(g) is amended by striking ``subsections (e) 
        and (f)'' and inserting ``subsection (f)''.
            (4) Section 415(k)(2)(A) is amended--
                    (A) by striking clause (i) and inserting:
                            ``(i) any contribution made directly by an 
                        employee under such arrangement shall not be 
                        treated as an annual addition for purposes of 
                        subsection (c), and'', and
                    (B) by striking ``subsections (c) and (e)'' in 
                clause (ii) and inserting ``subsection (c)''.
            (5) Section 416(h) is hereby repealed.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.
SEC. 402. DUTIES OF SPONSORS OF CERTAIN PROTOTYPE PLANS.

    (a) In General.--The Secretary of the Treasury may, as a condition 
of sponsorship, prescribe rules defining the duties and 
responsibilities of sponsors of master and prototype plans, regional 
prototype plans, and other Internal Revenue Service preapproved plans.
    (b) Duties Relating to Plan Amendment, Notification of Adopters, 
and Plan Administration.--The duties and responsibilities referred to 
in subsection (a) may include--
            (1) the maintenance of lists of persons adopting the 
        sponsor's plans, including the updating of such lists not less 
        frequently than annually,
            (2) the furnishing of notices at least annually to such 
        persons and to the Secretary or the Secretary's delegate, in 
        such form and at such time as the Secretary shall prescribe,
            (3) duties relating to administrative services to such 
        persons in the operation of their plans, and
            (4) other duties that the Secretary considers necessary to 
        ensure that--
                    (A) the master and prototype, regional prototype, 
                and other preapproved plans of adopting employers are 
                timely amended to meet the requirements of the Internal 
                Revenue Code of 1986 or of any rule or regulation of 
                the Secretary, and
                    (B) adopting employers receive timely notification 
                of amendments and other actions taken by sponsors with 
                respect to their plans.

                 TITLE V--MISCELLANEOUS SIMPLIFICATION

SEC. 501. TREATMENT OF LEASED EMPLOYEES.

    (a) General Rule.--Subparagraph (C) of section 414(n)(2) (defining 
leased employee) is amended to read as follows:
                    ``(C) such services are performed under significant 
                direction or control by the recipient.''
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to years beginning after December 31, 1995, but shall not apply 
to any relationship determined under an Internal Revenue Service ruling 
issued before the date of the enactment of this Act pursuant to section 
414(n)(2)(C) of the Internal Revenue Code of 1986 (as in effect on the 
day before such date) not to involve a leased employee.

SEC. 502. PLANS COVERING SELF-EMPLOYED INDIVIDUALS.

    (a) Aggregation Rules.--Section 401(d) (relating to additional 
requirements for qualification of trusts and plans benefiting owner-
employees) is amended to read as follows:
    ``(d) Contribution Limit on Owner-Employees.--A trust forming part 
of a pension or profit-sharing plan which provides contributions or 
benefits for employees some or all of whom are owner-employees shall 
constitute a qualified trust under this section only if, in addition to 
meeting the requirements of subsection (a), the plan provides that 
contributions on behalf of any owner-employee may be made only with 
respect to the earned income of such owner-employee which is derived 
from the trade or business with respect to which such plan is 
established.''
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.

SEC. 503. ELIMINATION OF SPECIAL VESTING RULE FOR MULTIEMPLOYER PLANS.

    (a) In General.--Paragraph (2) of section 411(a) (relating to 
minimum vesting standards) is amended--
            (1) by striking ``subparagraph (A), (B), or (C)'' and 
        inserting ``subparagraph (A) or (B)''; and
            (2) by striking subparagraph (C).
    (b) Effective Date.--The amendments made by this section shall 
apply to plan years beginning on or after the earlier of--
            (1) the later of--
                    (A) January 1, 1996, or
                    (B) the date on which the last of the collective 
                bargaining agreements pursuant to which the plan is 
                maintained terminates (determined without regard to any 
                extension thereof after the date of the enactment of 
                this Act), or
            (2) January 1, 1998.
Such amendments shall not apply to any individual who does not have 
more than 1 hour of service under the plan on or after the 1st day of 
the 1st plan year to which such amendments apply.

SEC. 504. FULL-FUNDING LIMITATION OF MULTIEMPLOYER PLANS.

    (a) Full-Funding Limitation.--Section 412(c)(7)(C) (relating to 
full-funding limitation) is amended--
            (1) by inserting ``or in the case of a multiemployer 
        plan,'' after ``paragraph (6)(B),'', and
            (2) by inserting ``and multiemployer plans'' after 
        ``paragraph (6)(b)'' in the heading thereof.
    (b) Valuation.--Section 412(c)(9) is amended--
            (1) by inserting ``(3 years in the case of a multiemployer 
        plan)'' after ``year'', and
            (2) by striking ``Annual valuation'' in the heading and 
        inserting ``Valuation''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.

SEC. 505. ALTERNATIVE FULL-FUNDING LIMITATION.

    (a) In General.--Subsection (c) of section 412 (relating to minimum 
funding standards) is amended by redesignating paragraphs (8) through 
(12) as paragraphs (9) through (13), respectively, and by adding after 
paragraph (7) the following new paragraph:
            ``(8) Alternative full-funding limitation.--
                    ``(A) General rule.--An employer may elect the 
                full-funding limitation under this paragraph with 
                respect to any defined benefit plan of the employer in 
                lieu of the full-funding limitation determined under 
                paragraph (7) if the requirements of subparagraphs (C) 
                and (D) are met.
                    ``(B) Alternative full-funding limitation.--The 
                full-funding limitation under this paragraph is the 
                full-funding limitation determined under paragraph (7) 
                without regard to subparagraph (A)(i)(I) thereof.
                    ``(C) Requirements relating to plan eligibility.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met with respect to a defined 
                        benefit plan if--
                                    ``(I) as of the 1st day of the 
                                election period, the average accrued 
                                liability of participants accruing 
                                benefits under the plan for the 5 
                                immediately preceding plan years is at 
                                least 80 percent of the plan's total 
                                accrued liability,
                                    ``(II) the plan is not a top-heavy 
                                plan (as defined in section 416(g)) for 
                                the 1st plan year of the election 
                                period or either of the 2 preceding 
                                plan years, and
                                    ``(III) each defined benefit plan 
                                of the employer (and each defined 
                                benefit plan of each employer who is a 
                                member of any controlled group which 
                                includes such employer) meets the 
                                requirements of subclauses (I) and 
                                (II).
                            ``(ii) Failure to continue to meet 
                        requirements.--
                                    ``(I) If any plan fails to meet the 
                                requirement of clause (i)(I) for any 
                                plan year during an election period, 
                                the benefits of the election under this 
                                paragraph shall be phased out under 
                                regulations prescribed by the 
                                Secretary.
                                    ``(II) If any plan fails to meet 
                                the requirement of clause (i)(II) for 
                                any plan year during an election 
                                period, such plan shall be treated as 
                                not meeting the requirements of clause 
                                (i) for the remainder of the election 
                                period.
                        If there is a failure described in subclause 
                        (I) or (II) with respect to any plan, such plan 
                        (and each plan described in clause (i)(III) 
                        with respect to such plan) shall be treated as 
                        not meeting the requirements of clause (i) for 
                        any of the 10 plan years beginning after the 
                        election period.
                    ``(D) Requirements relating to election.--The 
                requirements of this subparagraph are met with respect 
                to an election if--
                            ``(i) Filing date.--Notice of such election 
                        is filed with the Secretary (in such form and 
                        manner and containing such information as the 
                        Secretary may provide) by January 1 of any 
                        calendar year, and is effective as of the 1st 
                        day of the election period beginning on or 
                        after January 1 of the following calendar year.
                            ``(ii) Consistent election.--Such an 
                        election is made for all defined benefit plans 
                        maintained by the employer or by any member of 
                        a controlled group which includes the employer.
                    ``(E) Term of election.--Any election made under 
                this paragraph shall apply for the election period.
                    ``(F) Other consequences of election.--
                            ``(i) No funding waivers.--In the case of a 
                        plan with respect to which an election is made 
                        under this paragraph, no waiver may be granted 
                        under subsection (d) for any plan year 
                        beginning after the date the election was made 
                        and ending at the close of the election period 
                        with respect thereto.
                            ``(ii) Failure to make successive 
                        elections.--If an election is made under this 
                        paragraph with respect to any plan and such an 
                        election does not apply for each successive 
                        plan year of such plan, such plan shall be 
                        treated as not meeting the requirements of 
                        subparagraph (C) for the period of 10 plan 
                        years beginning after the close of the last 
                        election period for such plan.
                    ``(G) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Election period.--The term `election 
                        period' means the period of 5 consecutive plan 
                        years beginning with the 1st plan year for 
                        which the election is made.
                            ``(ii) Controlled group.--The term 
                        `controlled group' means all persons who are 
                        treated as a single employer under subsection 
                        (b), (c), (m), or (o) of section 414.''
    (b) Alteration of Discretionary Regulatory Authority.--Subparagraph 
(D) of section 412(c)(7) is amended by striking ``provide--'' and all 
that follows through ``(iii) for'' and inserting ``provide for''.
    (c) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        take effect on January 1, 1997.
            (2) Transition period.--In the case of a plan with respect 
        to which a transition period election is made under section 
        412(c)(8)(D)(ii) of the Internal Revenue Code of 1986 (as added 
        by this section), the amendments made by this section shall 
        take effect on July 1, 1996.

SEC. 506. AFFILIATED EMPLOYERS.

    (a) In General.--For purposes of Treasury Regulations section 
1.501(c)(9)-2(a)(1), a group of employers shall be deemed to be 
affiliated if they are substantially all section 501(c)(12) 
organizations which perform services (or with respect to which their 
members perform services) which are the same or are directly related to 
each other.
    (b) Section 501(c)(12) Organization.--For purposes of this section, 
the term ``section 501(c)(12) organization'' means--
            (1) any organization described in section 501(c)(12) of the 
        Internal Revenue Code of 1986,
            (2) any organization providing a service which is the same 
        as a service which is (or could be) provided by an organization 
        described in paragraph (1),
            (3) any organization described in paragraph (4) or (6) of 
        section 501(c) of such Code, but only if at least 80 percent of 
        the members of the organization are organizations described in 
        paragraph (1) or (2), and
            (4) any organization which is a national association of 
        organizations described in paragraph (1), (2), or (3).
An organization described in paragraph (2) (but not in paragraph (1)) 
shall not be treated as a section 501(c)(12) organization with respect 
to a voluntary employees' beneficiary association unless a substantial 
number of employers maintaining such association are described in 
paragraph (1).
    (c) Effective Date.--The provisions of this section shall apply to 
years beginning after December 31, 1995.
SEC. 507. TREATMENT OF GOVERNMENTAL PLANS UNDER SECTION 415.

    (a) Compensation Limit.--Subsection (b) of section 415 is amended 
by adding immediately after paragraph (10) the following new paragraph:
            ``(11) Special limitation rule for governmental plans.--In 
        the case of a governmental plan (as defined in section 414(d)), 
        subparagraph (B) of paragraph (1) shall not apply.''
    (b) Treatment of Certain Excess Benefit Plans.--
            (1) In general.--Section 415 is amended by adding at the 
        end the following new subsection:
    ``(m) Treatment of Qualified Governmental Excess Benefit 
Arrangements.--
            ``(1) Governmental plan not affected.--In determining 
        whether a governmental plan (as defined in section 414(d)) 
        meets the requirements of this section, benefits provided under 
        a qualified governmental excess benefit arrangement shall not 
        be taken into account. Income accruing to a governmental plan 
        (or to a trust that is maintained solely for the purpose of 
        providing benefits under a qualified governmental excess 
        benefit arrangement) in respect of a qualified governmental 
        excess benefit arrangement shall constitute income derived from 
        the exercise of an essential governmental function upon which 
        such governmental plan (or trust) shall be exempt from tax 
        under section 115.
            ``(2) Taxation of participant.--For purposes of this 
        chapter--
                    ``(A) the taxable year or years for which amounts 
                in respect of a qualified governmental excess benefit 
                arrangement are includible in gross income by a 
                participant, and
                    ``(B) the treatment of such amounts when so 
                includible by the participant,
        shall be determined as if such qualified governmental excess 
        benefit arrangement were treated as a plan for the deferral of 
        compensation which is maintained by a corporation not exempt 
        from tax under this chapter and which does not meet the 
        requirements for qualification under section 401.
            ``(3) Qualified governmental excess benefit arrangement.--
        For purposes of this subsection, the term `qualified 
        governmental excess benefit arrangement' means a portion of a 
        governmental plan if--
                    ``(A) such portion is maintained solely for the 
                purpose of providing to participants in the plan that 
                part of the participant's annual benefit otherwise 
                payable under the terms of the plan that exceeds the 
                limitations on benefits imposed by this section,
                    ``(B) under such portion no election is provided at 
                any time to the participant (directly or indirectly) to 
                defer compensation, and
                    ``(C) benefits described in subparagraph (A) are 
                not paid from a trust forming a part of such 
                governmental plan unless such trust is maintained 
                solely for the purpose of providing such benefits.''
            (2) Coordination with section 457.--Subsection (e) of 
        section 457 is amended by adding at the end the following new 
        paragraph:
            ``(14) Treatment of qualified governmental excess benefit 
        arrangements.--Subsections (b)(2) and (c)(1) shall not apply to 
        any qualified governmental excess benefit arrangement (as 
        defined in section 415(m)(3)), and benefits provided under such 
        an arrangement shall not be taken into account in determining 
        whether any other plan is an eligible deferred compensation 
        plan.''
            (3) Conforming amendment.--Paragraph (2) of section 457(f) 
        is amended by striking the word ``and'' at the end of 
        subparagraph (C), by striking the period after subparagraph (D) 
        and inserting ``, and'', and by adding at the end the following 
        new subparagraph:
                    ``(E) a qualified governmental excess benefit 
                arrangement described in section 415(m).''
    (c) Exemption for Survivor and Disability Benefits.--Paragraph (2) 
of section 415(b) is amended by adding at the end the following new 
subparagraph:
                    ``(I) Exemption for survivor and disability 
                benefits provided under governmental plans.--
                Subparagraph (B) of paragraph (1), subparagraph (C) of 
                this paragraph, and paragraph (5) shall not apply to--
                            ``(i) income received from a governmental 
                        plan (as defined in section 414(d)) as a 
                        pension, annuity, or similar allowance as the 
                        result of the recipient becoming disabled by 
                        reason of personal injuries or sickness, or
                            ``(ii) amounts received from a governmental 
                        plan by the beneficiaries, survivors, or the 
                        estate of an employee as the result of the 
                        death of the employee.''
    (d) Revocation of Grandfather Election.--
            (1) In general.--Subparagraph (C) of section 415(b)(10) is 
        amended by adding at the end the following new clause:
                            ``(ii) Revocation of election.--An election 
                        under clause (i) may be revoked not later than 
                        the last day of the third plan year beginning 
                        after the date of the enactment of this clause. 
                        The revocation shall apply to all plan years to 
                        which the election applied and to all 
                        subsequent plan years. Any amount paid by a 
                        plan in a taxable year ending after the 
                        revocation shall be includible in income in 
                        such taxable year under the rules of this 
                        chapter in effect for such taxable year, except 
                        that, for purposes of applying the limitations 
                        imposed by this section, any portion of such 
                        amount which is attributable to any taxable 
                        year during which the election was in effect 
                        shall be treated as received in such taxable 
                        year.''
            (2) Conforming amendment.--Subparagraph (C) of section 
        415(b)(10) is amended by striking ``This'' and inserting:
                            ``(i) In general.--This''.
    (e) Effective Date.--
            (1) In general.--The amendments made by subsections (a), 
        (b), (c), and (d) shall apply to taxable years beginning on or 
        after the date of the enactment of this Act. The amendments 
        made by subsection (e) shall apply with respect to revocations 
        adopted after the date of the enactment of this Act.
            (2) Treatment for years beginning before date of 
        enactment.--A governmental plan (as defined in section 414(d) 
        of the Internal Revenue Code of 1986) shall be treated as 
        satisfying the requirements of section 415 of such Code for all 
        taxable years beginning before the date of the enactment of 
        this Act.

SEC. 508. TREATMENT OF DEFERRED COMPENSATION PLANS OF STATE AND LOCAL 
              GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.

    (a) Special Rules for Plan Distributions.--Paragraph (9) of section 
457(e) (relating to other definitions and special rules) is amended to 
read as follows:
            ``(9) Benefits not treated as made available by reason of 
        certain elections, etc.--
                    ``(A) Total amount payable is $3,500 or less.--The 
                total amount payable to a participant under the plan 
                shall not be treated as made available merely because 
                the participant may elect to receive such amount (or 
                the plan may distribute such amount without the 
                participant's consent) if--
                            ``(i) such amount does not exceed $3,500, 
                        and
                            ``(ii) 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 subparagraph 
                                applied.
                A plan shall not be treated as failing to meet the 
                distribution requirements of subsection (d) by reason 
                of a distribution to which this subparagraph applies.
                    ``(B) Election to defer commencement of 
                distributions.--The total amount payable to a 
                participant under the plan shall not be treated as made 
                available merely because the participant may elect to 
                defer commencement of distributions under the plan if--
                            ``(i) such election is made after amounts 
                        may be available under the plan in accordance 
                        with subsection (d)(1)(A) and before 
                        commencement of such distributions, and
                            ``(ii) the participant may make only 1 such 
                        election.''
    (b) Cost-of-Living Adjustment of Maximum Deferral Amount.--
Subsection (e) of section 457, as amended by section 507(c)(2), is 
amended by adding at the end the following new paragraph:
            ``(15) Cost-of-living adjustment of maximum deferral 
        amount.--The Secretary shall adjust the $7,500 amount specified 
        in subsections (b)(2) and (c)(1) at the same time and in the 
        same manner as under section 415(d), except that the base 
        period shall be the calendar quarter beginning October 1, 
        1994.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
SEC. 509. CONTRIBUTIONS ON BEHALF OF DISABLED EMPLOYEES.

    (a) All Disabled Participants Receiving Contributions.--Section 
415(c)(3)(C) is amended by adding at the end the following: ``If a 
defined contribution plan provides for the continuation of 
contributions on behalf of all participants described in clause (i) for 
a fixed or determinable period, this subparagraph shall be applied 
without regard to clauses (ii) and (iii).''
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.

SEC. 510. DISTRIBUTIONS UNDER RURAL COOPERATIVE PLANS.

    (a) Distributions for Hardship or After a Certain Age.--Section 
401(k)(7) is amended by adding at the end the following new 
subparagraph:
                    ``(C) Special rule for certain distributions.--A 
                rural cooperative plan which includes a qualified cash 
                or deferred arrangement shall not be treated as 
                violating the requirements of section 401(a) or of 
                paragraph (2) merely by reason of a hardship 
                distribution or a distribution to a participant after 
                attainment of age 59\1/2\. For purposes of this 
                section, the term `hardship distribution' means a 
                distribution described in paragraph (2)(B)(i)(IV) 
                (without regard to the limit of its application to 
                profit-sharing or stock bonus plans).''
    (b) Definition of Rural Cooperative Plans.--
            (1) Public utility districts.--Clause (i) of section 
        401(k)(7)(B) (defining rural cooperative) is amended to read as 
        follows:
                            ``(i) any organization which--
                                    ``(I) is engaged primarily in 
                                providing electric service on a mutual 
                                or cooperative basis, or
                                    ``(II) is engaged primarily in 
                                providing electric service to the 
                                public in its area of service and which 
                                is exempt from tax under this subtitle 
                                or which is a State or local government 
                                (or an agency or instrumentality 
                                thereof), other than a municipality (or 
                                an agency or instrumentality 
                                thereof).''
            (2) Related organizations.--Subparagraph (B) of section 
        401(k)(7), as amended by paragraph (1), is amended by striking 
        clause (iv) and inserting the following new clauses:
                            ``(iv) an organization which is a national 
                        association of organizations described in any 
                        other clause of this subparagraph, or
                            ``(v) any other organization which provides 
                        services which are related to the activities of 
                        an organization described in clause (i), (ii), 
                        (iii), or (iv), but only in the case of a plan 
                        with respect to which substantially all of the 
                        organizations maintaining it are described in 
                        clause (i), (ii), (iii), or (iv).''
    (c) Effective Dates.--
            (1) Distributions.--The amendments made by subsection (a) 
        shall apply to distributions after the date of the enactment of 
        this Act.
            (2) Rural cooperative.--The amendments made by subsection 
        (b) shall apply to plan years beginning after December 31, 
        1984.

SEC. 511. SPECIAL RULES FOR PLANS COVERING PILOTS.

    (a) General Rule.--
            (1) Subparagraph (B) of section 410(b)(3) is amended to 
        read as follows:
                    ``(B) in the case of a plan established or 
                maintained by one or more employers to provide 
                contributions or benefits for air pilots employed by 
                one or more common carriers engaged in interstate or 
                foreign commerce or air pilots employed by carriers 
                transporting mail for or under contract with the United 
                States Government, all employees who are not air 
                pilots.''
            (2) Paragraph (3) of section 410(b) is amended by striking 
        the last sentence and inserting the following new sentence: 
        ``Subparagraph (B) shall not apply in the case of a plan which 
        provides contributions or benefits for employees who are not 
        air pilots or for air pilots whose principal duties are not 
        customarily performed aboard aircraft in flight.''
    (b) Effective Date.--The amendments made by subsection (a) shall 
apply to years beginning after December 31, 1995.

SEC. 512. TENURED FACULTY.

    (a) In General.--Section 457(e)(11) is amended by inserting 
``eligible faculty voluntary retirement incentive pay,'' after 
``disability pay,''.
    (b) Definition.--Section 457(e), as amended by sections 507(c)(2) 
and 508(b), is amended by adding at the end the following new 
paragraph:
            ``(16) Definition of eligible faculty voluntary retirement 
        incentive pay.--For purposes of this section, the term 
        `eligible faculty voluntary retirement incentive pay' means 
        payments under a plan established for employees serving under 
        contracts of unlimited tenure (or similar arrangements 
        providing for unlimited tenure) at an institution of higher 
        education (as defined in section 1201(a) of the Higher 
        Education Act of 1965 (20 U.S.C. 1141(a))) which--
                    ``(A) provides--
                            ``(i) payment to employees electing to 
                        retire during a specified period of time of 
                        limited duration, or
                            ``(ii) payment to employees who elect to 
                        retire prior to normal retirement age,
                    ``(B) provides that the total amount of payments to 
                an employee does not exceed the equivalent of twice the 
                employee's annual compensation (within the meaning of 
                section 415(c)(3)) during the year immediately 
                preceding the employee's termination of service, and
                    ``(C) provides that all payments to an employee 
                must be completed within 5 years after the employee's 
                termination of service.''
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.

SEC. 513. UNIFORM RETIREMENT AGE.

    (a) Discrimination Testing.--Paragraph (5) of section 401(a) 
(relating to special rules relating to nondiscrimination requirements) 
is amended by adding at the end the following new subparagraph:
                    ``(F) Social security retirement age.--For purposes 
                of testing for discrimination under paragraph (4)--
                            ``(i) the social security retirement age 
                        (as defined in section 415(b)(8)) shall be 
                        treated as a uniform retirement age, and
                            ``(ii) subsidized early retirement benefits 
                        and joint and survivor annuities shall not be 
                        treated as being unavailable to employees on 
                        the same terms merely because such benefits or 
                        annuities are based in whole or in part on an 
                        employee's social security retirement age (as 
                        so defined).''
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1995.

SEC. 514. UNIFORM PENALTY PROVISIONS TO APPLY TO CERTAIN PENSION 
              REPORTING REQUIREMENTS.

    (a) In General.--
            (1) Paragraph (1) of section 6724(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 new 
        subparagraph:
                    ``(C) any statement of the amount of payments to 
                another person required to be made to the Secretary 
                under--
                            ``(i) section 408(i) (relating to reports 
                        with respect to individual retirement accounts 
                        or annuities), or
                            ``(ii) section 6047(d) (relating to reports 
                        by employers, plan administrators, etc.).''
            (2) Paragraph (2) of section 6724(d) is amended by striking 
        ``or'' at the end of subparagraph (S), by striking the period 
        at the end of subparagraph (T) and inserting a comma, and by 
        inserting after subparagraph (T) the following new 
        subparagraphs:
                    ``(U) section 408(i) (relating to reports with 
                respect to individual retirement plans) to any person 
                other than the Secretary with respect to the amount of 
                payments made to such person, or
                    ``(V) section 6047(d) (relating to reports by plan 
                administrators) to any person other than the Secretary 
                with respect to the amount of payments made to such 
                person.''
    (b) Modification of Reportable Designated Distributions.--
            (1) Section 408.--Subsection (i) of section 408 (relating 
        to individual retirement account reports) is amended by 
        inserting ``aggregating $10 or more in any calendar year'' 
        after ``distributions''.
            (2) Section 6047.--Paragraph (1) of section 6047(d) 
        (relating to reports by employers, plan administrators, etc.) 
        is amended by adding at the end thereof the following new 
        sentence: ``No return or report may be required under the 
        preceding sentence with respect to distributions to any person 
        during any year unless such distributions aggregate $10 or 
        more.''
    (c) Qualifying Rollover Distributions.--Section 6652(i) is 
amended--
            (1) by striking ``the $10'' and inserting ``$100'', and
            (2) by striking ``$5,000'' and inserting ``$50,000''.
    (d) Conforming Amendments.--
            (1) Paragraph (1) of section 6047(f) is amended to read as 
        follows:
    ``(1) For provisions relating to penalties for failures to file 
returns and reports required under this section, see sections 6652(e), 
6721, and 6722.''
            (2) Subsection (e) of section 6652 is amended by adding at 
        the end the following new sentence: ``This subsection shall not 
        apply to any return or statement which is an information return 
        described in section 6724(d)(1)(C)(ii) or a payee statement 
        described in section 6724(d)(2)(V).''
            (3) Subsection (a) of section 6693 is amended by adding at 
        the end the following new sentence: ``This subsection shall not 
        apply to any report which is an information return described in 
        section 6724(d)(1)(C)(i) or a payee statement described in 
        section 6724(d)(2)(U).''
    (e) Effective Date.--The amendments made by this section shall 
apply to returns, reports, and other statements the due date for which 
(determined without regard to extensions) is after December 31, 1995.

SEC. 515. NATIONAL COMMISSION ON PRIVATE PENSION PLANS.

    (a) In General.--Chapter 77 is amended by adding at the end the 
following new section:

``SEC. 7524. NATIONAL COMMISSION ON PRIVATE PENSION PLANS.

    ``(a) Establishment.--There is hereby established a commission to 
be known as the National Commission on Private Pension Plans (in this 
section referred to as the `Commission').
    ``(b) Membership.--
            ``(1) The Commission shall consist of--
                    ``(A) 6 members to be appointed by the President;
                    ``(B) 6 members to be appointed by the Speaker of 
                the House of Representatives; and
                    ``(C) 6 members to be appointed by the Majority 
                Leader of the Senate.
            ``(2) The appointments made pursuant to subparagraphs (B) 
        and (C) of paragraph (1) shall be made in consultation with the 
        chairmen of the committees of the House of Representatives and 
        the Senate, respectively, having jurisdiction over relevant 
        Federal pension programs.
    ``(c) Duties and Functions of Commission; Public Hearings in 
Different Geographical Areas; Broad Spectrum of Witnesses and 
Testimony.--
            ``(1) It shall be the duty and function of the Commission 
        to conduct the studies and issue the report required by 
        subsection (d).
            ``(2) The Commission (and any committees that it may form) 
        may conduct public hearings in order to receive the views of a 
        broad spectrum of the public on the status of the Nation's 
        private retirement system.
    ``(d) Report to the President and Congress; Recommendations.--The 
Commission shall submit to the President, to the Majority Leader and 
the Minority Leader of the Senate, and to the Majority Leader and the 
Minority Leader of the House of Representatives a report no later than 
September 1, 1996, reviewing existing Federal incentives and programs 
that encourage and protect private retirement savings. The final report 
shall also set forth recommendations where appropriate for increasing 
the level and security of private retirement savings.
    ``(e) Time of Appointment of Members; Vacancies; Election of 
Chairman; Quorum; Calling of Meetings; Number of Meetings; Voting; 
Compensation and Expenses.--
            ``(1)(A) Members of the Commission shall be appointed for 
        terms ending on September 1, 1996.
            ``(B) A vacancy in the Commission shall not affect its 
        powers, but shall be filled in the same manner as the vacant 
        position was first filled.
            ``(2) The Commission shall elect 1 of its members to serve 
        as Chairman of the Commission.
            ``(3) A majority of the members of the Commission shall 
        constitute a quorum for the transaction of business.
            ``(4) The Commission shall meet at the call of the 
        Chairman.
            ``(5) Decisions of the Commission shall be according to the 
        vote of a simple majority of those present and voting at a 
        properly called meeting.
            ``(6) Members of the Commission shall serve without 
        compensation, but shall be reimbursed for travel, subsistence, 
        and other necessary expenses incurred in the performance of 
        their duties as members of the Commission.
    ``(f) Executive Director and Additional Personnel; Appointment and 
Compensation; Consultants.--
            ``(1) The Commission shall appoint an Executive Director of 
        the Commission. In addition to the Executive Director, the 
        Commission may appoint and fix the compensation of such 
        personnel as it deems advisable. Such appointments and 
        compensation may be made without regard to the provisions of 
        title 5, United States Code, that govern appointments in the 
        competitive service, and the provisions of chapter 51 and 
        subchapter III of chapter 53 of such title that relate to 
        classifications and the General Schedule pay rates.
            ``(2) The Commission may procure such temporary and 
        intermittent services of consultants under section 3109(b) of 
        title 5, United States Code, as the Commission determines to be 
        necessary to carry out the duties of the Commission.
    ``(g) Time and Place of Hearings and Nature of Testimony 
Authorized.--In carrying out its duties, the Commission, or any duly 
organized committee thereof, is authorized to hold such hearings, sit 
and act at such times and places, and take such testimony, with respect 
to matters for which it has a responsibility under this section, as the 
Commission or committee may deem advisable.
    ``(h) Data and Information From Other Agencies and Departments.--
            ``(1) The Commission may secure directly from any 
        department or agency of the United States such data and 
        information as may be necessary to carry out its 
        responsibilities.
            ``(2) Upon request of the Commission, any such department 
        or agency shall furnish any such data or information.
    ``(i) Support Services by General Services Administration.--The 
General Services Administration shall provide to the Commission, on a 
reimbursable basis, such administrative support services as the 
Commission may request.
    ``(j) Authorization of Appropriations.--There are authorized to be 
appropriated for each of fiscal years 1995 and 1996, such sums as may 
be necessary to carry out this section.
    ``(k) Donations Accepted and Deposited in Treasury in Separate 
Fund; Expenditures.--
            ``(1) The Commission is authorized to accept donations of 
        money, property, or personal services. Funds received from 
        donations shall be deposited in the Treasury in a separate fund 
        created for this purpose. Funds appropriated for the Commission 
        and donated funds may be expended for such purposes as official 
        reception and representation expenses, public surveys, public 
        service announcements, preparation of special papers, analyses, 
        and documentaries, and for such other purposes as determined by 
        the Commission to be in furtherance of its mission to review 
        national issues affecting private pension plans.
            ``(2) Expenditures of appropriated and donated funds shall 
        be subject to such rules and regulations as may be adopted by 
        the Commission and shall not be subject to Federal procurement 
        requirements.
    ``(l) Public Surveys.--The Commission is authorized to conduct such 
public surveys as it deems necessary in support of its review of 
national issues affecting private pension plans and, in conducting such 
surveys, the Commission shall not be deemed to be an ``agency'' for the 
purpose of section 3502 of title 44, United States Code.''
    (b) Conforming Amendment.--The table of sections for chapter 77 is 
amended by adding at the end the following new item:

``Sec. 7524. National Commission on Private Pension Plans.''
SEC. 516. DATE FOR ADOPTION OF PLAN AMENDMENTS.

    If any amendment made by this Act requires an amendment to any 
plan, such plan amendment shall not be required to be made before the 
first day of the first plan year beginning on or after January 1, 1997, 
if--
            (1) during the period after such amendment takes effect and 
        before such first plan year, the plan is operated in accordance 
        with the requirements of such amendment, and
            (2) such plan amendment applies retroactively to such 
        period.
In the case of a governmental plan (as defined in section 414(d) of the 
Internal Revenue Code of 1986), this section shall be applied by 
substituting ``1999'' for ``1997''.
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