[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3672 Introduced in House (IH)]







105th CONGRESS
  2d Session
                                H. R. 3672

    To amend the Internal Revenue Code of 1986 to promote expanded 
                          retirement savings.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 1, 1998

  Mr. Neal of Massachusetts (for himself, Mr. Rangel, Mr. Coyne, Mr. 
 Matsui, Mr. Levin, Mr. McDermott, Mr. Gejdenson, Mr. Pomeroy, and Ms. 
  Stabenow) introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committee on 
Education and the Workforce, for a period to be subsequently determined 
 by the Speaker, in each case for consideration of such provisions as 
        fall within the jurisdiction of the committee concerned

_______________________________________________________________________

                                 A BILL


 
    To amend the Internal Revenue Code of 1986 to promote expanded 
                          retirement savings.

    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.

    (a) Short Title.--This Act may be cited as the ``Employee Pension 
Portability and Accountability Act of 1998''.
    (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.--

Sec. 1. Short title; amendment of 1986 Code.
Sec. 2. Payroll deduction for retirement savings.
Sec. 3. Credit for pension plan startup costs of small employers.
Sec. 4. Secure money annuity or retirement (SMART) trusts.
Sec. 5. Faster vesting of employer matching contributions.
Sec. 6. Pension right to know proposals.
Sec. 7. Mandatory 1 percent employer contribution required under 
                            alternative methods of meeting 
                            nondiscrimination requirements for 401(k) 
                            plans.
Sec. 8. Definition of highly compensated employees.
Sec. 9. Treatment of multiemployer plans under section 415.
Sec. 10. Full funding limitation for multiemployer plans.
Sec. 11. Elimination of partial termination rules for multiemployer 
                            plans.

SEC. 2. PAYROLL DEDUCTION FOR RETIREMENT SAVINGS.

    (a) In General.--Section 219 (relating to retirement savings) is 
amended by redesignating subsection (h) as subsection (i) and by 
inserting after subsection (g) the following new subsection:
    ``(h) Exclusion in Lieu of Deduction for Amounts Deducted and 
Withheld From Wages.--
            ``(1) In general.--If--
                    ``(A) an employee submits a written request to such 
                employee's employer to deduct and withhold amounts from 
                the wages paid by such employer to such employee which 
                are to be deposited by the employer into an individual 
                retirement plan maintained for the benefit of such 
                employee which is designated by such employee, and
                    ``(B) the aggregate amount to be deducted and 
                withheld during a calendar year pursuant to such 
                request does not exceed the lesser of--
                            ``(i) $2,000, or
                            ``(ii) the amount that the employee 
                        certifies to the employer in such request as 
                        being the amount which would (but for paragraph 
                        (3)) be allowed as deduction to such employee 
                        for contributions to such account for such 
                        employee's last taxable year beginning in such 
                        calendar year,
        the gross income of such employee shall not include the amount 
        so deducted and withheld on wages paid during such calendar 
        year which is paid (not later than the time prescribed by the 
        Secretary) into such individual retirement plan.
            ``(2) Maximum exclusion.--The amount excluded from gross 
        income under paragraph (1) for any taxable year shall not 
        exceed the limitation applicable under subsection (b)(1)(A) to 
        such employee for such year.
            ``(3) Denial of deduction.--No deduction shall be allowed 
        under this section for amounts excluded from gross income under 
        paragraph (1).''
    (b) Exemption from Withholding.--Subsection (a) of section 3401 
(defining wages) is amended by striking ``or'' at the end of paragraph 
(20), by striking the period at the end of paragraph (21) and inserting 
``; or'', and by inserting after paragraph (21) the following new 
paragraph:
            ``(22) for any payment made for the benefit of the employee 
        to an individual retirement plan if the amount of such payment 
        was deducted and withheld under section 219(h).''
    (c) Exclusion Shown on W-2.--Subsection (a) of section 6051 
(relating to receipts for employees) is amended by striking ``and'' at 
the end of paragraph (10), by striking the period at the end of 
paragraph (11) and inserting ``, and'', and by inserting after 
paragraph (11) the following new paragraph:
            ``(12) the total amount deducted and withheld pursuant to 
        section 219(h).''
    (d) Effective Date.--The amendments made by this section shall 
apply to remuneration paid after December 31, 1998.

SEC. 3. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL EMPLOYERS.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
(relating to business related credits) is amended by adding at the end 
the following new section:

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

    ``(a) General Rule.--For purposes of section 38, in the case of an 
eligible employer, the small employer pension plan startup cost credit 
determined under this section for any taxable year is an amount equal 
to 50 percent of the qualified startup costs paid or incurred by the 
taxpayer during the taxable year.
    ``(b) Dollar Limitation.--The amount of the credit determined under 
this section for any taxable year shall not exceed--
            ``(1) $1,000 for the first taxable year ending after the 
        date the employer established the qualified employer plan to 
        which such costs relate,
            ``(2) $500 for each of the second and third taxable years 
        ending after such date, and
            ``(3) zero for each taxable year thereafter.
    ``(c) Eligible Employer.--For purposes of this section--
            ``(1) In general.--The term `eligible employer' has the 
        meaning given such term by section 408(p)(2)(C)(i).
            ``(2) Employers maintaining qualified plans during 1997 not 
        eligible.--Such term shall not include an employer if such 
        employer (or any predecessor employer) maintained a qualified 
        plan (as defined in section 408(p)(2)(D)(ii)) with respect to 
        which contributions were made, or benefits were accrued, for 
        service in 1997. If only individuals other than employees 
        described in subparagraph (A) or (B) of section 410(b)(3) are 
        eligible to participate in the qualified employer plan referred 
        to in subsection (d)(1), then the preceding sentence shall be 
        applied without regard to any qualified plan in which only 
        employees so described are eligible to participate.
    ``(d) Other Definitions.--For purposes of this section--
            ``(1) Qualified startup costs.--
                    ``(A) In general.--The term `qualified startup 
                costs' means any ordinary and necessary expenses of an 
                eligible employer which--
                            ``(i) are paid or incurred in connection 
                        with the establishment of a qualified employer 
                        plan in which at least 2 individuals are 
                        eligible to participate, and
                            ``(ii) are of a nonrecurring nature.
                    ``(B) Plan must be established before january 1, 
                2001.--Such term shall not include any expense in 
                connection with a plan established after December 31, 
                2000.
            ``(2) Qualified employer plan.--The term `qualified 
        employer plan' has the meaning given to such term by section 
        4972(d).
    ``(e) Special Rules.--For purposes of this section--
            ``(1) Aggregation rules.--All persons treated as a single 
        employer under subsection (a) or (b) of section 52, or 
        subsection (n) or (o) of section 414, shall be treated as one 
        person.
            ``(2) Disallowance of deduction.--No deduction shall be 
        allowable under this chapter for any qualified startup costs 
        for which a credit is determined under subsection (a).
            ``(3) Election not to claim credit.--This section shall not 
        apply to a taxpayer for any taxable year if such taxpayer 
        elects to have this section not apply for such taxable year.''.
    (b) Credit Allowed as Part of General Business Credit.--Section 
38(b) (defining current year business credit) is amended by striking 
``plus'' at the end of paragraph (11), by striking the period at the 
end of paragraph (12) and inserting ``, plus'', and by adding at the 
end the following new paragraph:
            ``(13) in the case of an eligible employer (as defined in 
        section 45D(c)), the small employer pension plan startup cost 
        credit determined under section 45D(a).''.
    (c) Conforming Amendments.--
            (1) Section 39(d) is amended by adding at the end the 
        following new paragraph:
            ``(8) No carryback of small employer pension plan startup 
        cost credit before effective date.--No portion of the unused 
        business credit for any taxable year which is attributable to 
        the small employer pension plan startup cost credit determined 
        under section 45D may be carried back to a taxable year ending 
        on or before the date of the enactment of section 45D.''.
            (2) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 is amended by adding at the end the 
        following new item:

                              ``Sec. 45D. Small employer pension plan 
                                        startup costs.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to costs paid or incurred in taxable years ending after the date 
of the enactment of this Act.

SEC. 4. SECURE MONEY ANNUITY OR RETIREMENT (SMART) TRUSTS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
is amended by inserting after section 408A the following new section:

``SEC. 408B. SMART PLANS.

    ``(a) Employer Eligibility.--
            ``(1) In general.--An employer may establish and maintain a 
        SMART annuity or a SMART trust for any year only if--
                    ``(A) the employer is an eligible employer (as 
                defined in section 408(p)(2)(C)), and
                    ``(B) the employer does not maintain (and no 
                predecessor of the employer maintains) a qualified plan 
                (other than a permissible plan) with respect to which 
                contributions were made, or benefits were accrued, for 
                service in any year in the period beginning with the 
                year such annuity or trust became effective and ending 
                with the year for which the determination is being 
                made.
        The period described in subparagraph (B) shall include the 
        period of 5 years before the year such trust or annuity became 
        effective with respect to qualified plans which are defined 
        benefit plans or money purchase pension plans.
            ``(2) Definitions.--For purposes of paragraph (1)--
                    ``(A) Qualified plan.--The term `qualified plan' 
                has the meaning given such term by section 
                408(p)(2)(D)(ii).
                    ``(B) Permissible plan.--The term `permissible 
                plan' means a plan under which there may be made only--
                            ``(i) elective deferrals described in 
                        section 402(g)(3), and
                            ``(ii) employer matching contributions not 
                        in excess of the amounts permitted under 
                        subclauses (I) and (II) of section 
                        401(k)(12)(B)(i).
    ``(b) SMART Annuity.--
            ``(1) In general.--For purposes of this title, the term 
        `SMART annuity' means an individual retirement annuity (as 
        defined in section 408(b) without regard to paragraph (2) 
        thereof and without regard to the limitation on aggregate 
        annual premiums contained in the flush language of section 
        408(b)) if--
                    ``(A) such annuity meets the requirements of 
                paragraphs (2) through (7), and
                    ``(B) the only contributions to such annuity are 
                employer contributions.
        Nothing in this section shall be construed as preventing an 
        employer from using a group annuity contract which is divisible 
        into individual retirement annuities for purposes of providing 
        SMART annuities.
            ``(2) Participation requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met for any year only if all employees of 
                the employer who--
                            ``(i) received at least $5,000 in 
                        compensation from the employer during any 2 
                        consecutive preceding years, and
                            ``(ii) received at least $5,000 in 
                        compensation during the year,
                are entitled to the benefit described in paragraph (5) 
                for such year.
                    ``(B) Excludable employees.--An employer may elect 
                to exclude from the requirements under subparagraph (A) 
                employees described in section 410(b)(3).
            ``(3) Vesting.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if the employee's rights to any 
                benefits are nonforfeitable.
                    ``(B) Restrictions on certain mandatory 
                distributions.--If the present value (determined in 
                accordance with paragraph (6)) of an employee's account 
                balance exceeds the dollar limit in effect under 
                section 411(a)(11)(A), the requirements of this 
                paragraph are met only if the plan provides that such 
                benefit may not be immediately distributed without the 
                consent of the employee.
            ``(4) Benefit form.--The requirements of this paragraph are 
        met if the only form of benefit is--
                    ``(A) a benefit payable annually in the form of a 
                single life annuity with monthly payments (with no 
                ancillary benefits) beginning at age 65, or
                    ``(B) any other form of benefit which is the 
                actuarial equivalent (based on the assumptions 
                specified in the SMART annuity) of the benefit 
                described in subparagraph (A).
            ``(5) Amount of annual accrued benefit.--
                    ``(A) In general.--The requirements of this 
                paragraph are met for any plan year if the accrued 
                benefit of each participant derived from employer 
                contributions for such year, when expressed as a 
                benefit described in paragraph (4)(A), equals the 
                applicable percentage of the participant's compensation 
                for such year.
                    ``(B) Applicable percentage.--For purposes of this 
                paragraph--
                            ``(i) In general.--The term `applicable 
                        percentage' means 1 percent.
                            ``(ii) Election of higher percentage.--An 
                        employer may elect to apply an applicable 
                        percentage of 2 percent for any year for all 
                        employees eligible to participate in the plan 
                        for such year, if the employer notifies the 
                        employees of such percentage within a 
                        reasonable period before the beginning of such 
                        year. An employer may also elect to apply an 
                        applicable percentage of 3 percent for any of 
                        the first 5 years that the plan is effective 
                        for all employees eligible to participate in 
                        the plan for such year, if the employer so 
                        notifies the employees.
                    ``(C) Compensation limit.--
                            ``(i) In general.--The compensation taken 
                        into account under this paragraph for any year 
                        shall not exceed $100,000.
                            ``(ii) Cost-of-living adjustment.--The 
                        Secretary shall adjust annually the $100,000 
                        amount in clause (i) for increases in the cost-
                        of-living at the same time and in the same 
                        manner as adjustments under section 415(d); 
                        except that the base period shall be the 
                        calendar quarter beginning October 1, 1998, and 
                        any increase which is not a multiple of $10,000 
                        shall be rounded to the next lowest multiple of 
                        $10,000.
            ``(6) Funding.--
                    ``(A) In general.--The requirements of this 
                paragraph are met only if the employer is required to 
                contribute to the annuity for each plan year the amount 
                necessary (determined in accordance with subparagraph 
                (B)) to fund the accrued benefit for each participant 
entitled to such benefit for such year.
                    ``(B) Actuarial assumptions.--In determining the 
                amount required to be contributed under subparagraph 
                (A)--
                            ``(i) the assumed interest rate shall be 5 
                        percent per year,
                            ``(ii) the assumed mortality shall be 
                        determined under the applicable mortality table 
                        (as defined in section 417(e)(3), as modified 
                        by the Secretary so that it does not include 
                        any assumption for preretirement mortality),
                            ``(iii) the assumed retirement age shall be 
                        65, and
                            ``(iv) an assumption for reasonable 
                        expenses shall be permitted consistent with 
                        State law.
                    ``(C) Time when contributions deemed made.--For 
                purposes of this paragraph, any contribution made for a 
                plan year during the 8\1/2\-month period beginning on 
                the day after the last day of such plan year shall be 
                deemed to have been made on such last day.
                    ``(D) Penalty for failure to make required 
                contribution.--The taxes imposed by section 4971 shall 
                apply to a failure to make the contribution required by 
                this paragraph in the same manner as if the amount of 
                the failure were an accumulated funding deficiency to 
                which such section applies.
            ``(7) Limitation on distributions.--
                    ``(A) In general.--The requirements of this 
                paragraph are met only if distributions may be paid 
                only when the employee attains age 65, separates from 
                service, dies, or becomes disabled (within the meaning 
                of section 72(m)(7)).
                    ``(B) Limitation on distributions on separation 
                from service of employees who have not attained age 
                65.--Subparagraph (A) shall apply to a distribution on 
                separation of service of an employee who has not 
                attained age 65 only if--
                            ``(i) the present value (determined in 
                        accordance with paragraph (6)) of an employee's 
                        account balance does not exceed the dollar 
                        limit in effect under section 411(a)(11)(A), or
                            ``(ii) the distribution is a direct 
                        trustee-to-trustee transfer of the entire 
                        balance to the credit of the employee to a 
                        SMART account or a SMART annuity for the 
                        benefit of such employee.
                    ``(C) SMART account.--For purposes of this 
                paragraph, the term `SMART account' means an individual 
                retirement account for the benefit of the employee if 
                such employee elects to have the limitations of this 
                paragraph apply to such account.
            ``(8) Definitions and special rule.--
                    ``(A) Definitions.--The definitions in section 
                408(p)(6) shall apply for purposes of this subsection.
                    ``(B) Use of designated financial institutions.--A 
                rule similar to the rule of section 408(p)(7) (without 
                regard to the last sentence thereof) shall apply for 
                purposes of this subsection.
    ``(c) SMART Trust.--
            ``(1) In general.--For purposes of this title, the term 
        `SMART trust' means a trust forming part of a defined benefit 
        plan if--
                    ``(A) such trust meets the requirements of section 
                401(a) as modified by subsection (d),
                    ``(B) a participant's benefits under the plan are 
                based solely on the balance of a separate account in 
                such plan of such participant,
                    ``(C) such plan meets the requirements of 
                paragraphs (2) through (8), and
                    ``(D) the only contributions to such trust are 
                employer contributions.
            ``(2) Participation requirements.--A plan meets the 
        requirements of this paragraph for any year only if the 
        requirements of subsection (b)(2) are met for such year.
            ``(3) Vesting.--A plan meets the requirements of this 
        paragraph for any year only if the requirements of subsection 
        (b)(3) are met for such year.
            ``(4) Benefit form.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), a plan meets the requirements of this 
                paragraph only if the requirements of subsection (b)(4) 
                are met. For purposes of this subparagraph, a plan may 
                satisfy the requirements of subsection (b)(4) by 
                purchasing an annuity contract which meets the 
                requirements of subsection (b)(4).
                    ``(B) Direct transfers to individual retirement 
                plan or smart annuity.--A plan shall not fail to meet 
                the requirements of this paragraph by reason of 
                permitting, at the election of the employee, a trustee-
                to-trustee transfer of the entire balance to the credit 
                of the employee to an individual retirement account 
                described in section 408(a), an individual retirement 
                annuity described in section 408(b) (other than an 
                endowment contract), or a SMART annuity.
            ``(5) Amount of annual accrued benefit.--A plan meets the 
        requirements of this paragraph for any year only if the 
        requirements of subsection (b)(5) are met for such year.
            ``(6) Funding.--
                    ``(A) In general.--A plan meets the requirements of 
                this paragraph for any year only if--
                            ``(i) the requirements of subsection (b)(6) 
                        are met for such year,
                            ``(ii) in the case of a plan which has an 
                        unfunded annuity amount with respect to the 
                        account of any participant, the plan requires 
                        that the employer make an additional 
                        contribution to such plan (at the time the 
                        annuity contract to which such amount relates 
                        is purchased) equal to the unfunded annuity 
                        amount, and
                            ``(iii) in the case of a plan which has an 
                        unfunded prior year liability as of the close 
                        of such plan year, the plan requires that the 
                        employer make an additional contribution to 
                        such plan for such year equal to the amount of 
                        such unfunded prior year liability.
                    ``(B) Unfunded annuity amount.--For purposes of 
                this paragraph, the term `unfunded annuity amount' 
                means, with respect to the account of any participant, 
                the excess (if any) of--
                            ``(i) the amount necessary to purchase an 
                        annuity contract which meets the requirements 
                        of subsection (b)(4), over
                            ``(ii) the balance in such account at the 
                        time such contract is purchased.
                    ``(C) Unfunded prior year liability.--For purposes 
                of this paragraph, the term `unfunded prior year 
                liability' means, with respect to any plan year, the 
                excess (if any) of--
                            ``(i) the aggregate of the accrued 
                        liabilities under the plan as of the close of 
                        the prior plan year, over
                            ``(ii) the value of the plan's assets 
                        determined under section 412(c)(2) as of the 
                        close of the plan year (determined without 
                        regard to any contributions for such plan 
                        year).
                Such accrued liabilities shall be determined using the 
                assumptions specified in subsection (b)(6)(B).
                    ``(D) Changes in mortality table.--If the 
                applicable mortality table under section 417(e)(3) for 
                any plan year is not the same as such table for the 
                prior plan year, the Secretary shall prescribe 
                regulations which phase in the effect of the changes 
                over a reasonable period of plan years determined by 
                the Secretary.
                    ``(E) Disregard assumptions for expenses.--For 
                purposes of this paragraph, the assumption specified in 
                subsection (b)(6)(B)(iv) shall be disregarded.
            ``(7) Separate accounts for participants.--A plan meets the 
        requirements of this paragraph for any year only if the plan 
        provides--
                    ``(A) for an individual account for each 
                participant, and
                    ``(B) for benefits based solely on--
                            ``(i) the amount contributed to the 
                        participant's account, and
                            ``(ii) any income, expenses, gains and 
                        losses, and any forfeitures of accounts of 
                        other participants which may be allocated to 
                        such participant's account.
            ``(8) Trust may not hold securities which are not readily 
        tradable.--A plan meets the requirements of this paragraph only 
        if the plan prohibits the trust from holding directly or 
        indirectly securities which are not readily tradable on an 
        established securities market or otherwise. Nothing in this 
        paragraph shall prohibit the trust from holding insurance 
        company products regulated by State law.
            ``(9) Definitions and special rule.--The definitions and 
        special rule applicable under subsection (b)(8) shall apply for 
        purposes of this subsection.
    ``(d) Special Rules for SMART Annuities and Trusts.--
            ``(1) Certain requirements treated as met.--For purposes of 
        section 401(a), a SMART annuity and a SMART trust shall be 
        treated as meeting the requirements of the following 
        provisions:
                    ``(A) Section 401(a)(4) (relating to 
                nondiscrimination rules).
                    ``(B) Section 401(a)(26) (relating to minimum 
                participation).
                    ``(C) Section 410 (relating to minimum 
                participation and coverage requirements).
                    ``(D) Section 411(b) (relating to accrued benefit 
                requirements).
                    ``(E) Paragraphs (6) and (7) of section 412(c) 
                (relating to full funding limitation).
                    ``(F) Section 415 (relating to limitations on 
                benefits and contributions under qualified plans).
                    ``(G) Section 416 (relating to special rules for 
                top-heavy plans).
            ``(2) Contributions not taken into account in applying 
        limits to other plans.--Contributions to a SMART annuity or a 
        SMART trust shall not be taken into account in applying 
        sections 404 and 415 to other plans maintained by the 
        employer.''
    (b) Deduction Limits Not To Apply to Employer Contributions.--
            (1) In general.--Section 404 (relating to deductions for 
        contributions of an employer to pension, etc., plans) is 
        amended by adding at the end the following new subsection:
    ``(n) Special Rules for SMART Annuities and Trusts.--
            ``(1) In general.--Employer contributions to a SMART 
        annuity or a SMART trust shall be treated as if they are made 
        to a plan subject to the requirements of this section.
            ``(2) Timing.--
                    ``(A) Deduction.--Contributions described in 
                paragraph (1) shall be deductible in the taxable year 
                of the employer with or within which the calendar year 
                for which the contributions were made ends.
                    ``(B) Contributions after end of year.--For 
                purposes of this subsection, contributions shall be 
                treated as made for a taxable year if they are made on 
                account of the taxable year and are made not later than 
                the time prescribed by law for filing the return for 
                the taxable year (including extensions thereof).''
            (2) Coordination with deduction under section 219.--
                    (A) Section 219(b) (relating to maximum amount of 
                deduction) is amended by adding at the end the 
                following new paragraph:
            ``(5) Special rule for smart annuities.--This section shall 
        not apply with respect to any amount contributed to a SMART 
        annuity established under section 408B(b).''
                    (B) Section 219(g)(5)(A) (defining active 
                participant) is amended by striking ``or'' at the end 
                of clause (v) and by adding at the end the following 
                new clause:
                            ``(vii) any SMART annuity (within the 
                        meaning of section 408B), or''.
    (c) Contributions and Distributions.--
            (1) Section 402 (relating to taxability of beneficiary of 
        employees' trust) is amended by adding at the end the following 
        new subsection:
    ``(l) Treatment of SMART Annuities.--Rules similar to the rules of 
paragraphs (1) and (3) of subsection (h) shall apply to contributions 
and distributions with respect to SMART annuities under section 408B.''
            (2) Section 408(d)(3) is amended by adding at the end the 
        following new subparagraph:
                    ``(H) SMART annuities.--This paragraph shall not 
                apply to any amount paid or distributed out of a SMART 
                annuity (as defined in section 408B) unless it is paid 
                in a trustee-to-trustee transfer into another SMART 
                annuity.''
    (d) Increased Penalty on Early Withdrawals.--Section 72(t) 
(relating to additional tax on early distributions) is amended by 
adding at the end the following new paragraph:
            ``(9) Special rules for smart annuities and trusts.--In the 
        case of--
                    ``(A) any amount received from a SMART annuity or a 
                SMART trust (within the meaning of section 408B), and
                    ``(B) any individual retirement plan if any amount 
                was received by such plan from a such an annuity or 
                trust,
        paragraph (1) shall be applied by substituting `20 percent' for 
        `10 percent' and paragraph (2) shall be applied by substituting 
        `age 65' for `age 59\1/2\'.''
    (e) Simplified Employer Reports.--
            (1) SMART annuities.--Section 408(l) (relating to 
        simplified employer reports) is amended by adding at the end 
        the following new paragraph:
            ``(3) SMART annuities.--
                    ``(A) Simplified report.--The employer maintaining 
                any SMART annuity (within the meaning of section 408B) 
                shall file a simplified annual return with the 
                Secretary containing only the information described in 
                subparagraph (B).
                    ``(B) Contents.--The return required by 
                subparagraph (A) shall set forth--
                            ``(i) the name and address of the employer,
                            ``(ii) the date the plan was adopted,
                            ``(iii) the number of employees of the 
                        employer,
                            ``(iv) the number of such employees who are 
                        eligible to participate in the plan,
                            ``(v) the total amount contributed by the 
                        employer to each such annuity for such year and 
                        the minimum amount required under section 408B 
                        to be so contributed,
                            ``(vi) the percentage elected under section 
                        408B(b)(5)(B), and
                            ``(vii) the number of employees with 
                        respect to whom contributions are required to 
                        be made for such year under section 
                        408B(b)(5)(D).
                    ``(C) Reporting by issuer of smart annuity.--
                            ``(i) In general.--The issuer of each SMART 
                        annuity shall provide to the owner of the 
                        annuity for each year a statement setting forth 
                        as of the close of such year--
                                    ``(I) the benefits guaranteed at 
                                age 65 under the annuity, and
                                    ``(II) the cash surrender value of 
                                the annuity.
                            ``(ii) Summary description.--The issuer of 
                        any SMART annuity shall provide to the employer 
                        maintaining the annuity for each year a 
                        description containing the following 
                        information:
                                    ``(I) The name and address of the 
                                employer and the issuer.
                                    ``(II) The requirements for 
                                eligibility for participation.
                                    ``(III) The benefits provided with 
                                respect to the annuity.
                                    ``(IV) The procedures for, and 
                                effects of, withdrawals (including 
                                rollovers) from the annuity.
                    ``(D) Time and manner of reporting.--Any return, 
                report, or statement required under this paragraph 
                shall be made in such form and at such time as the 
                Secretary shall prescribe.''
            (2) SMART trusts.--Section 6059 (relating to actuarial 
        reports) is amended by redesignating subsections (c) and (d) as 
        subsections (d) and (e), respectively, and by inserting after 
        subsection (b) the following new subsection:
    ``(c) SMART Trusts.--In the case of a SMART Trust (within the 
meaning of section 408B), the Secretary shall require a simplified 
actuarial report which contains information similar to the information 
required in section 408(l)(3)(B).''
    (f) Conforming Amendments.--
            (1) Subparagraph (A) of section 219(b)(5) is amended by 
        striking ``or'' at the end of clause (v) and by inserting after 
        clause (vi) the following new clause:
                            ``(vii) any SMART trust or SMART annuity 
                        (within the meaning of section 408B), or''.
            (2) Section 280G(b)(6) is amended by striking ``or'' at the 
        end of subparagraph (C), by striking the period at the end of 
        subparagraph (D) and inserting ``, or'' and by adding after 
        subparagraph (D) the following new subparagraph:
                    ``(E) a SMART annuity described in section 408B.''
            (3) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) of 
        section 414 are each amended by inserting ``408B,'' after 
        ``408(p),''.
            (4) Section 4972(d)(1)(A) is amended by striking ``and'' at 
        the end of clause (iii), by striking the period at the end of 
        clause (iv) and inserting ``, and'', and by adding after clause 
        (iv) the following new clause:
                            ``(v) any SMART annuity (within the meaning 
                        of section 408B).''
    (g) Reporting Requirements Under ERISA.--Section 101 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1021) is 
amended by redesignating subsection (h) as subsection (i) and by 
inserting after subsection (g) the following new subsection:
    ``(h) SMART Annuities.--
            ``(1) No employer reports.--Except as provided in this 
        subsection, no report shall be required under this section by 
        an employer maintaining a SMART annuity under section 408B(b) 
        of the Internal Revenue Code of 1986.
            ``(2) Summary description.--The issuer of any SMART annuity 
        shall provide to the employer maintaining the annuity for each 
        year a description containing the following information:
                    ``(A) The name and address of the employer and the 
                issuer.
                    ``(B) The requirements for eligibility for 
                participation.
                    ``(C) The benefits provided with respect to the 
                annuity.
                    ``(D) The procedures for, and effects of, 
                withdrawals (including rollovers) from the annuity.''
            ``(3) Employee notification.--The employer shall provide 
        each employee eligible to participate in the SMART annuity with 
        the description described in paragraph (2) at the same time as 
        the notification required under section 408B(b)(5)(B) of the 
        Internal Revenue Code of 1986.''
    (h) Clerical Amendment.--The table of sections for subpart A of 
part I of subchapter D of chapter 1 is amended by inserting after the 
item relating to section 408A the following new item:

                              ``Sec. 408B. SMART plans.''
    (i) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1998.

SEC. 5. FASTER VESTING OF EMPLOYER MATCHING CONTRIBUTIONS.

    (a) Amendment of Internal Revenue Code.--Paragraph (2) of section 
411(a) (relating to employer contributions) is amended--
            (1) by inserting ``, and, if applicable, (C)'' after ``or 
        (B)'', and
            (2) by adding at the end the following new subparagraph:
                    ``(C) Matching contributions.--In the case of a 
                plan that includes an accrued benefit derived from 
                matching contributions (as defined in section 
                401(m)(4)(A)), the plan satisfies the requirements of 
                this subparagraph if--
                            ``(i) if an employee who has completed at 
                        least 3 years of service has a nonforfeitable 
                        right to 100 percent of the employee's accrued 
                        benefit derived from such matching 
                        contributions, or
                            ``(ii) an employee has a nonforfeitable 
                        right to a percentage of the employee's accrued 
                        benefit derived from employer matching 
                        contributions (as so defined) determined under 
                        the following table:

                                                     The nonforfeitable
``Years of service:                                      percentage is:
    2.............................................                  20 
    3.............................................                  40 
    4.............................................                  60 
    5.............................................                  80 
    6.............................................                 100.
                For purposes of this subparagraph, matching 
                contributions shall be taken into account regardless of 
                whether the matching contributions are made to the same 
                plan as the contributions being matched, and matching 
                contributions to any plan shall be taken into account 
                if such matching contributions are made with respect to 
                after-tax employee contributions and if the employer's 
                limit on matching contributions with respect to such 
                after-tax employee contributions is coordinated with 
                the employer's limit on matching contributions with 
                respect to contributions under such section.''.
    (b) Amendment of ERISA.--Paragraph (2) of section 203(a) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1053(a)) is 
amended--
            (1) by inserting ``, and, if applicable, (C)'' after ``or 
        (B)'', and
            (2) by adding at the end the following new subparagraph:
                    ``(C) Matching contributions.--In the case of a 
                plan that includes an accrued benefit derived from 
                matching contributions (as defined in section 
                401(m)(4)(A) of the Internal Revenue Code of 1986), the 
                plan satisfies the requirements of this subparagraph 
                if--
                            ``(i) if an employee who has completed at 
                        least 3 years of service has a nonforfeitable 
                        right to 100 percent of the employee's accrued 
                        benefit derived from such matching 
                        contributions, or
                            ``(ii) an employee has a nonforfeitable 
                        right to a percentage of the employee's accrued 
                        benefit derived from employer matching 
                        contributions (as so defined) determined under 
                        the following table:

                                                     The nonforfeitable
``Years of service:                                      percentage is:
    2.............................................                  20 
    3.............................................                  40 
    4.............................................                  60 
    5.............................................                  80 
    6.............................................                 100.
                For purposes of this subparagraph, matching 
                contributions shall be taken into account regardless of 
                whether the matching contributions are made to the same 
                plan as the contributions being matched, and matching 
                contributions to any plan shall be taken into account 
                if such matching contributions are made with respect to 
                after-tax employee contributions includible in gross 
                income and if the employer's limit on matching 
                contributions with respect to such includible employee 
                contributions is coordinated with the employer's limit 
                on matching contributions with respect to contributions 
                under such section.''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraphs (2) and 
        (3), the amendments made by this section shall apply to plan 
        years beginning after December 31, 1998.
            (2) Application to current employees.--The amendments made 
        by this section shall not apply to any employee who does not 
        have at least 1 hour of service in any plan year beginning 
        after December 31, 1998.
            (3) Collective bargaining agreements.--In the case of a 
        plan maintained pursuant to 1 or more collective bargaining 
        agreements between employee representatives and 1 or more 
        employers ratified by the date of the enactment of this Act, 
        the amendments made by this section shall not apply to 
        employees covered by any such agreement in plan years beginning 
        before the earlier of--
                    (A) the later of--
                            (i) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof on or after such date of enactment), or
                            (ii) January 1, 1999, or
                    (B) January 1, 2003.

SEC. 6. PENSION RIGHT TO KNOW PROPOSALS.

    (a) Spouse's Right To Know Distribution Information.--
            (1) Amendment of internal revenue code.--Paragraph (3) of 
        section 417(a) (relating to definitions and special rules for 
        purposes of minimum survivor annuity requirements) is amended 
        by adding at the end the following new subparagraph:
                    ``(C) Explanation to spouse.--At the time a plan 
                provides a participant with a written explanation under 
                subparagraph (A) or (B), such plan shall provide a copy 
                of such explanation to such participant's spouse. If 
                the last known address of the spouse is the same as the 
                last known address of the participant, the requirement 
                of the preceding sentence shall be treated as met if 
                the copy referred to in the preceding sentence is 
                included in a single mailing made to such address and 
                addressed to both such participant and spouse.''.
            (2) Amendment of erisa.--Paragraph (3) of section 205(c) of 
        Employee Retirement Income Security Act of 1974 is amended by 
        adding at the end the following new subparagraph:
                    ``(C) Explanation to spouse.--At the time a plan 
                provides a participant with a written explanation under 
                subparagraph (A) or (B), such plan shall provide a copy 
                of such explanation to such participant's spouse. If 
                the last known address of the spouse is the same as the 
                last known address of the participant, the requirement 
                of the preceding sentence shall be treated as met if 
                the copy referred to in the preceding sentence is 
                included in a single mailing made to such address and 
                addressed to both such participant and spouse.''.
    (b) Employee's Right To Know of Opportunity for Elective 
Contributions Under 401(k) Plans.--Subparagraph (D) of section 
401(k)(12) (relating to notice requirements) is amended--
            (1) by striking ``, within a reasonable period before any 
        year,'' and inserting ``before the 60th day before the 
        beginning of any year'', and
            (2) by adding at the end the following new flush sentence:
                ``The requirements of paragraph (11)(B)(iii) shall 
                apply for purposes of this subparagraph.''
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1998.

SEC. 7. MANDATORY 1 PERCENT EMPLOYER CONTRIBUTION REQUIRED UNDER 
              ALTERNATIVE METHOD OF MEETING NONDISCRIMINATION 
              REQUIREMENTS FOR 401(K) PLANS.

    (a) In General.--Subparagraph (B) of section 401(k)(12) (relating 
to alternative methods of meeting nondiscrimination requirements) is 
amended to read as follows:
                    ``(B) Nonelective and matching contributions.--
                            ``(i) In general.--The requirements of this 
                        subparagraph are met if the requirements of 
                        clauses (ii) and (iii) are met.
                            ``(ii) Nonelective contributions.--The 
                        requirements of this clause 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 
1 percent of the employee's compensation.
                            ``(iii) Matching contributions.--The 
                        requirements of this clause 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.
                            ``(iv) Rate for highly compensated 
                        employees.--The requirements of clause (iii) 
                        are not met if, under the arrangement, the rate 
                        of matching contribution with respect to any 
                        rate of elective contribution of a highly 
                        compensated employee is greater than that with 
                        respect to an employee who is not a highly 
                        compensated employee.
                            ``(v) Alternative plan designs.--If the 
                        rate of matching contribution with respect to 
                        any rate of elective contribution is not equal 
                        to the percentage required under clause (iii), 
                        an arrangement shall not be treated as failing 
                        to meet the requirements of clause (iii) if--
                                    ``(I) the rate of an employer's 
                                matching contribution does not increase 
                                as an employee's rate of elective 
                                contribution increase, and
                                    ``(II) the aggregate amount of 
                                matching contributions at such rate of 
                                elective contribution is at least equal 
                                to the aggregate amount of matching 
                                contributions which would be made if 
                                matching contributions were made on the 
                                basis of the percentages described in 
                                clause (iii).''.
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1998.

SEC. 8. DEFINITION OF HIGHLY COMPENSATED EMPLOYEES.

    (a) In General.--Subparagraph (B) of section 414(q)(1) (defining 
highly compensated employee) is amended to read as follows:
                    ``(B) for the preceding year had compensation from 
                the employer in excess of $80,000.''.
    (b) Conforming Amendments.--
            (1)(A) Subsection (q) of section 414 is amended by striking 
        paragraphs (3), (5), and (7) and by redesignating paragraphs 
        (4), (6), (8), and (9) as paragraphs (3) through (6), 
        respectively.
            (B) Sections 129(d)(8)(B), 401(a)(5)(D)(ii), 408(k)(2)(C), 
        and 416(i)(1)(D) are each amended by striking ``section 
        414(q)(4)'' and inserting ``section 414(q)(3)''.
            (C) Section 416(i)(1)(A) is amended by striking ``section 
        414(q)(5)'' and inserting ``section 414(r)(9)''.
            (2)(A) Section 414(r) is amended by adding at the end the 
        following new paragraph:
            ``(9) Excluded employees.--For purposes of paragraph 
        (2)(A), 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 during 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.''.
            (B) Subparagraph (A) of section 414(r)(2) is amended by 
        striking ``subsection (q)(5)'' and inserting ``paragraph (9)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1998.

SEC. 9. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.

    (a) Compensation Limit.--Paragraph (11) of section 415(b) (relating 
to limitation for defined benefit plans) is amended to read as follows:
            ``(11) Special limitation rule for governmental and 
        multiemployer plans.--In the case of a governmental plan (as 
        defined in section 414(d)) or a multiemployer plan (as defined 
        in section 414(f)), subparagraph (B) of paragraph (1) shall not 
        apply.''.
    (b) Exemption for Survivor and Disability Benefits.--Subparagraph 
(I) of section 415(b)(2) (relating to limitation for defined benefit 
plans) is amended--
            (1) by inserting ``or a multiemployer plan (as defined in 
        section 414(f))'' after ``section 414(d))'' in clause (i),
            (2) by inserting ``or multiemployer plan'' after 
        ``governmental plan'' in clause (ii), and
            (3) by inserting ``and multiemployer'' after 
        ``governmental'' in the heading.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1998.

SEC. 10. FULL FUNDING LIMITATION FOR MULTIEMPLOYER PLANS.

    (a) Amendments to Code.--
            (1) Full funding limitation.--Section 412(c)(7)(C) 
        (relating to full funding limitation) is amended--
                    (A) by inserting ``or in the case of a 
                multiemployer plan,'' after ``paragraph (6)(B),'', and
                    (B) by inserting ``and multiemployer plans'' after 
                ``paragraph (6)(b)'' in the heading thereof.
            (2) Valuation.--Section 412(c)(9) (relating to annual 
        valuation) is amended--
                    (A) by inserting ``(3 years in the case of a 
                multiemployer plan)'' after ``year'', and
                    (B) by striking ``Annual valuation'' in the heading 
                and inserting ``Valuation''.
    (b) Amendments to ERISA.--
            (1) Full funding limitation.--Section 302(c)(7)(C) of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1082(c)(7)(C)) is amended--
                    (A) by inserting ``or in the case of a 
                multiemployer plan,'' after ``paragraph (6)(B),'', and
                    (B) by inserting ``and multiemployer plans'' after 
                ``paragraph (6)(b)'' in the heading thereof.
            (2) Valuation.--Section 302(c)(9) of such Act (29 U.S.C. 
        1082(c)(9)) is amended--
                    (A) by inserting ``(3 years in the case of a 
                multiemployer plan)'' after ``year'', and
                    (B) by striking ``Annual valuation'' in the heading 
                and inserting ``Valuation''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1998.

SEC. 11. ELIMINATION OF PARTIAL TERMINATION RULES FOR MULTIEMPLOYER 
              PLANS.

    (a) Partial Termination Rules for Multiemployer Plans.--Section 
411(d)(3) (relating to termination or partial termination; 
discontinuance of contributions) is amended by adding at the end the 
following new sentence: ``This paragraph shall not apply in the case of 
a partial termination of a multiemployer plan.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to partial terminations beginning after December 31, 1998.
                                 <all>