[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 2339 Introduced in Senate (IS)]







105th CONGRESS
  2d Session
                                S. 2339

         To provide for pension reform, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 21, 1998

   Mr. Graham (for himself, Mr. Grassley, Mr. Baucus, Mr. Hatch, Mr. 
  Breaux, Mr. Jeffords, and Mr. Kerry) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
         To provide for pension reform, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

Sec. 1. Short title; table of contents.
             TITLE I--EXPANDING COVERAGE FOR SMALL BUSINESS

Sec. 101. Plan loans for subchapter S owners, partners, and sole 
                            proprietors.
Sec. 102. Contributions to IRAs through payroll deductions.
Sec. 103. Safe annuities and trusts.
Sec. 104. Modification of top-heavy rules.
Sec. 105. Salary reduction only simple plans.
Sec. 106. Credit for small employer pension plan contributions and 
                            start-up costs.
Sec. 107. Increasing limits for deferrals to simple plans.
Sec. 108. Qualified staffing firms.
Sec. 109. Phase-in of additional PBGC premium for new plans.
Sec. 110. Elimination of user fee for requests to IRS regarding new 
                            pension plans.
Sec. 111. Compensation limit not to apply to simple 401(k) 
                            arrangements.
Sec. 112. Elective deferrals not taken into account for purposes of 
                            limits.
Sec. 113. Repeal of coordination requirements for deferred compensation 
                            plans of State and local governments and 
                            tax-exempt organizations.
Sec. 114. Alternative method of meeting nondiscrimination requirements 
                            for opt-out plans.
       TITLE II--INCREASING PENSION ACCESS AND FAIRNESS FOR WOMEN

Sec. 201. Equitable treatment for contributions of employees to defined 
                            contribution plans.
Sec. 202. Faster vesting of certain employer matching contributions.
Sec. 203. Deferred annuities for surviving spouses of Federal 
                            employees.
Sec. 204. Clarification of tax treatment of division of section 457 
                            plan benefits upon divorce.
Sec. 205. Pension right to know proposals.
Sec. 206. Simplify and update the minimum distribution rules.
           TITLE III--INCREASING PORTABILITY OF PENSION PLANS

Sec. 301. Rollovers allowed among various types of plans.
Sec. 302. Rollovers of IRAs into workplace retirement plans.
Sec. 303. Rollovers of after-tax contributions; hardship exception.
Sec. 304. Rationalization of restrictions on distributions from defined 
                            contribution plans.
Sec. 305. Transferee defined contribution plan need not have same 
                            distribution options as transferor defined 
                            contribution plan.
Sec. 306. Purchase of service credit in governmental defined benefit 
                            plans.
Sec. 307. Employers may disregard rollovers for purposes of cash-out 
                            amounts.
        TITLE IV--STRENGTHENING PENSION SECURITY AND ENFORCEMENT

Sec. 401. Repeal of 150 percent of current liability funding limit.
Sec. 402. Extension of missing participants program to multiemployer 
                            plans.
Sec. 403. Civil penalties for breach of fiduciary responsibility.
Sec. 404. Qualified employer plans prohibited from making loans through 
                            credit cards and other revolving credit 
                            arrangements.
Sec. 405. Penalty tax relief for sound pension funding.
Sec. 406. Protection of investment of employee contributions to 401(k) 
                            plans.
               TITLE V--ENCOURAGING RETIREMENT EDUCATION

Sec. 501. Periodic pension benefits statements.
Sec. 502. Small Business Administration advice to small businesses.
Sec. 503. Clarification of treatment of employer-provided retirement 
                            advice.
Sec. 504. Dissemination of government retirement education program 
                            strategies to private companies.
                      TITLE VI--REDUCING RED TAPE

Sec. 601. Intermediate sanctions for inadvertent failures.
Sec. 602. Modification of timing of plan valuations.
Sec. 603. Rules for substantial owners relating to plan terminations.
Sec. 604. ESOP dividends may be reinvested without loss of dividend 
                            deduction.
Sec. 605. Modification of 403(b) exclusion allowance to conform to 415 
                            modification.
Sec. 606. Safety valve from mechanical rules.
Sec. 607. Coverage test flexibility.
Sec. 608. Simplification of cash-out rule.
Sec. 609. Section 457 inapplicable to certain mirror plans.
Sec. 610. Notice and consent period regarding distributions.
Sec. 611. Conforming amendments relating to election to receive taxable 
                            cash compensation in lieu of nontaxable 
                            transportation fringe benefits.
Sec. 612. Repeal of transition rule relating to certain highly 
                            compensated employees.
Sec. 613. Extension to international organizations of moratorium on 
                            application of certain nondiscrimination 
                            rules applicable to State and local plans.
Sec. 614. Annual report dissemination.
Sec. 615. Employees of tax-exempt entities.
Sec. 616. Repeal of the multiple use test.
                       TITLE VII--PLAN AMENDMENTS

Sec. 701. Provisions relating to plan amendments.

             TITLE I--EXPANDING COVERAGE FOR SMALL BUSINESS

SEC. 101. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND SOLE 
              PROPRIETORS.

    (a) Amendments to 1986 Code.--
            (1) In general.--Section 4975(f) (relating to other 
        definitions and special rules) is amended by striking paragraph 
        (6).
            (2) Conforming amendment.--Section 4975(d) (relating to 
        exemptions) is amended by striking ``Except as provided in 
        subsection (f)(6), the prohibitions'' and inserting ``The 
        prohibitions''.
    (b) Amendments to ERISA.--
            (1) In general.--Section 408 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1108(d)) is amended--
                    (A) by striking subsection (d), and
                    (B) by redesignating subsections (e) and (f) as 
                subsections (d) and (e), respectively.
            (2) Conforming amendment.--Section 407(b)(2)(B) of such Act 
        (29 U.S.C. 1107(b)(2)(B)) is amended by striking ``section 
        408(e)'' and inserting ``section 408(d)''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of enactment of this Act.

SEC. 102. CONTRIBUTIONS TO IRAS THROUGH PAYROLL DEDUCTIONS.

    (a) Definitions.--For purposes of this section--
            (1) Contribution certificate.--The term ``contribution 
        certificate'' means a certificate submitted by an eligible 
        employee to the employee's employer which--
                    (A) identifies the employee by name, address, and 
                social security number,
                    (B) includes a certification by the employee that 
                the employee is an eligible employee,
                    (C) identifies the individual retirement plan to 
                which the employee wishes to make contributions through 
                payroll deductions, and
                    (D) identifies the amount of such contributions, 
                not to exceed the amount allowed under section 408 of 
                the Internal Revenue Code of 1986 to an individual 
                retirement plan for such year.
            (2) Eligible employee.--
                    (A) In general.--The term ``eligible employee'' 
                means, with respect to any taxable year, an employee 
                whose employer does not sponsor a qualified retirement 
                plan (as defined in section 4974(c) of the Internal 
                Revenue Code of 1986).
                    (B) Employee.--The term ``employee'' does not 
                include an employee as defined in section 401(c)(1) of 
                such Code.
            (3) Individual retirement plans.--The term ``individual 
        retirement plan'' has the meaning given the term by section 
        7701(a)(37) of the Internal Revenue Code of 1986.
            (4) Secretary.--The term ``Secretary'' means the Secretary 
        of the Treasury.
    (b) Establishment of Payroll Deduction System.--An employer may 
establish a system under which eligible employees, through employer 
payroll deductions, may make contributions to individual retirement 
plans. An employer shall not incur any liability under title I of the 
Employee Retirement Income Security Act of 1974 in providing for such a 
system.
    (c) Contributions to Individual Retirement Plans.--
            (1) In general.--The system established under subsection 
        (b) shall provide that contributions made to an individual 
        retirement plan for any taxable year are--
                    (A) contributions through employer payroll 
                deductions, and
                    (B) if the employer so elects, additional 
                contributions by the employee which, when added to 
                contributions under subparagraph (A), do not exceed the 
                amount allowed under section 408 of the Internal 
                Revenue Code of 1986 for the taxable year.
            (2) Employer payroll deductions.--
                    (A) In general.--The system established under 
                subsection (b) shall provide that an eligible employee 
                may establish and maintain an individual retirement 
                plan simply by--
                            (i) completing a contribution certificate, 
                        and
                            (ii) submitting such certificate to the 
                        eligible employee's employer in the manner 
                        provided under subparagraph (D).
                    (B) Change of amounts.--An eligible employee 
                establishing and maintaining an individual retirement 
                plan under subparagraph (A) may change the amount of an 
                employer payroll deduction in the same manner as under 
                subparagraph (A).
                    (C) Simplified forms.--
                            (i) Contribution certificate.--The 
                        Secretary shall develop a model contribution 
                        certificate for purposes of this paragraph--
                                    (I) which is written in a clear and 
                                easily understandable manner, and
                                    (II) the completion of which by an 
                                eligible employee will constitute the 
                                establishment of an individual 
                                retirement plan and the request for 
                                employer payroll deductions or changes 
                                in such deductions.
                            (ii) Availability.--The Secretary shall 
                        make available to all eligible employees and 
                        employers the forms developed under this 
                        subparagraph, and shall include with such forms 
                        easy to understand explanatory materials.
                    (D) Use of certificate.--Each employer electing to 
                adopt a system under subsection (b) shall, upon receipt 
                of a contribution certificate from an eligible 
employee, deduct the appropriate contribution as determined by such 
certificate from the employee's wages in equal amounts during the 
remaining payroll periods for the taxable year and shall remit such 
amounts for investment in the employee's individual retirement plan not 
later than the close of the 30-day period following the last day of the 
month in which such payroll period occurs.
                    (E) Failure to remit payroll deductions.--For 
                purposes of the Internal Revenue Code of 1986, any 
                amount which an employer fails to remit on behalf of an 
                eligible employee pursuant to a contribution 
                certificate of such employee shall not be allowed as a 
                deduction to the employer under such Code.
    (d) Additional Information.--
            (1) In general.--The system established under subsection 
        (b) shall provide for the furnishing of information to 
        employees of the opportunity of establishing individual 
        retirement plans and of transferring amounts to such plans.
            (2) Investment information.--The employer shall also make 
        available to employees information on how to make informed 
        investment decisions and how to achieve retirement objectives.
            (3) Information not investment advice.--Information 
        provided under this subsection shall not be treated as 
        investment advice for purposes of any Federal or State law.

SEC. 103. SAFE ANNUITIES AND TRUSTS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
(relating to deferred compensation, etc.) is amended by inserting after 
section 408A the following:

``SEC. 408B. SAFE ANNUITIES AND TRUSTS.

    ``(a) Employer Eligibility.--
            ``(1) In general.--An employer may establish and maintain a 
        SAFE annuity or a SAFE 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.
            ``(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--
                            ``(i) a plan under which only elective 
                        deferrals described in section 402(g)(3), 
                        deferred compensation described in section 457, 
                        or employer matching contributions may be made, 
                        and
                            ``(ii) any collectively bargained plan.
    ``(b) SAFE Annuity.--
            ``(1) In general.--For purposes of this title, the term 
        `SAFE 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 (6), and
                    ``(B) the only contributions to such annuity (other 
                than rollover contributions) 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 
        SAFE 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.--The requirements of this paragraph are met 
        if the employee's rights to any benefits are nonforfeitable.
            ``(4) Benefit form.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if the only form of benefit is--
                            ``(i) a benefit payable annually in the 
                        form of a single life annuity with monthly 
                        payments (with no ancillary benefits) beginning 
                        at age 65, or
                            ``(ii) any other form of benefit which is 
                        the actuarial equivalent (based on the 
                        assumptions specified in the SAFE annuity) of 
                        the benefit described in clause (i).
                    ``(B) Direct transfers and rollovers.--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 or a rollover 
                contribution.
            ``(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 3 percent.
                            ``(ii) Election of lower percentage.--An 
                        employer may elect to apply an applicable 
                        percentage of 1 percent, 2 percent or zero 
                        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.
                    ``(C) Compensation limit.--The compensation taken 
                into account under this paragraph for any year shall 
                not exceed the limitation in effect for such year under 
                section 401(a)(17).
                    ``(D) Credit for service before plan adopted.--
                            ``(i) In general.--An employer may elect to 
                        take into account a specified number of years 
                        of service (not greater than 10) performed 
                        before the adoption of the plan (each 
                        hereinafter referred to as a `prior service 
                        year') as service under the plan if the same 
                        specified number of years is available to all 
                        employees eligible to participate in the plan 
                        for the first plan year.
                            ``(ii) Accrual of prior service benefit.--
                        Such an election shall be effective for a prior 
                        service year only if the requirements of this 
                        paragraph are met for an eligible plan year 
                        (with respect to employees entitled to credit 
                        for such prior service year) by doubling the 
                        applicable percentage (if any) for such plan 
                        year. For purposes of the preceding sentence, 
                        an eligible plan year is a plan year in the 
                        period of consecutive plan years (but not more 
                        than the number specified under clause (i)) 
                        beginning with the first plan year that the 
                        plan is in effect.
                            ``(iii) Election may not apply to certain 
                        prior service years.--This subparagraph shall 
                        not apply with respect to any prior service 
                        year of an employee if--
                                    ``(I) for any part of such prior 
                                service year such employee was an 
                                active participant (within the meaning 
                                of section 219(g)(5)) under any defined 
                                benefit plan of the employer (or any 
                                predecessor thereof), or
                                    ``(II) such employee received 
                                during such prior service year less 
                                than $5,000 in compensation from the 
                                employer.
            ``(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 
                        not less than 3 percent and not greater than 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, an employer shall be deemed 
                to have made a contribution on the last day of the 
                preceding taxable year if the payment is on account of 
                such taxable year and is made not later than the time 
                prescribed by law for filing the return for such 
                taxable year (including extensions thereof).
                    ``(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) 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) Treatment of matching contributions.--A rule 
                similar to the rule of section 408(p)(8) shall apply 
                for purposes of this subsection.
    ``(c) SAFE Trust.--
            ``(1) In general.--For purposes of this title, the term 
        `SAFE 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 (other 
                than rollover contributions) 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 plan meets the requirements of this 
        paragraph only if the requirements of subsection (b)(4) are 
        met. For purposes of this paragraph, a plan may satisfy the 
        requirements of subsection (b)(4) by purchasing an annuity 
        contract which meets the requirements of subsection (b)(4).
            ``(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, and
                            ``(ii) 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 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).
                    ``(C) 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.
                    ``(D) 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)(7) shall apply for 
        purposes of this subsection.
    ``(d) Special Rules for SAFE Annuities and Trusts.--
            ``(1) Certain requirements treated as met.--For purposes of 
        section 401(a), a SAFE annuity and a SAFE 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 SAFE annuity or a 
        SAFE trust shall not be taken into account in applying sections 
        404 and 415 to other plans maintained by the employer.
            ``(3) Coordination with maximum limitation under subsection 
        (a).--In the case of any SAFE annuity or SAFE trust, 
        subsections (a)(1) and (b) of section 408 shall be applied by 
        substituting `the dollar amount in effect under section 
        408B(b)(5)(C)' for `$2,000' each place it appears in such 
        subsections.
    ``(e) Rollover Contribution.--For purposes of this section, the 
term `rollover contribution' means any rollover contribution under 
section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16).''
    (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:
    ``(n) Special Rules for SAFE Annuities and Trusts.--
            ``(1) In general.--Employer contributions to a SAFE annuity 
        or SAFE 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:
            ``(5) Special rule for safe annuities.--This section shall 
        not apply with respect to any amount contributed to a SAFE 
        annuity established under section 408A(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:
                            ``(vii) any SAFE annuity (within the 
                        meaning of section 408B), or''.
    (c) Contributions and Distributions.--Section 402 (relating to 
taxability of beneficiary of employees' trust) is amended by adding at 
the end the following:
    ``(l) Treatment of SAFE Annuities.--Rules similar to the rules of 
paragraphs (1) and (3) of subsection (h) shall apply to contributions 
and distributions with respect to a SAFE annuities under section 
408B.''
    (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:
            ``(9) Special rules for safe annuities and trusts.--In the 
        case of any amount received from a SAFE annuity or a SAFE trust 
        (within the meaning of section 408B), paragraph (1) shall be 
        applied by substituting `20 percent' for `10 percent'.''
    (e) Simplified Employer Reports.--
            (1) SAFE annuities.--Section 408(l) (relating to simplified 
        employer reports) is amended by adding at the end the 
        following:
            ``(3) SAFE annuities.--
                    ``(A) Simplified report.--The employer maintaining 
                any SAFE 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 safe annuity.--
                            ``(i) In general.--The issuer of each SAFE 
                        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 SAFE 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) SAFE 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:
    ``(c) SAFE Trusts.--In the case of a SAFE 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) 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:
                    ``(E) a SAFE annuity described in section 408B.''
            (2) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) of 
        section 414 are each amended by inserting ``408B,'' after 
        ``408(p),''.
            (3) 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:
                            ``(v) any SAFE annuity (within the meaning 
                        of section 408B).''
            (4) 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:

                              ``Sec. 408B. SAFE annuities and 
                                        trusts.''.
    (g) Modifications of ERISA.--
            (1) Exemption from insurance coverage.--Subsection (b) of 
        section 4021 of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 1321) is amended by striking ``or'' at the end 
        of paragraph (12), by striking the period at the end of 
        paragraph (13) and inserting ``; or'', and by adding at the end 
        the following:
            ``(14) which is established and maintained as part of a 
        SAFE trust (as defined in section 408B of the Internal Revenue 
        Code of 1986).''
            (2) Reporting requirements.--Section 101 of such Act (29 
        U.S.C. 1021) is amended by redesignating the second subsection 
        (h) as subsection (j) and by inserting after the first 
        subsection (h) the following:
    ``(i) SAFE Annuities.--
            ``(1) No employer reports.--Except as provided in this 
        subsection, no report shall be required under this section by 
        an employer maintaining a SAFE annuity under section 408B(b) of 
        the Internal Revenue Code of 1986.
            ``(2) Summary description.--The issuer of any SAFE 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 SAFE 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) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1998.

SEC. 104. MODIFICATION OF TOP-HEAVY RULES.

    (a) Repeal of Family Aggregation Rules.--Section 416(i)(1)(B)(i)(I) 
(defining 5-percent owner) is amended by inserting ``(without regard to 
subsection (a)(1) thereof)'' after ``section 318''.
    (b) Simplification of Definition of Key Employee.--
            (1) In general.--Section 416(i)(1)(A) (defining key 
        employee) is amended--
                    (A) by striking ``or any of the 4 preceding plan 
                years'' in the matter preceding clause (i),
                    (B) by striking clause (i) and inserting the 
                following:
                            ``(i) an officer of the employer who is a 
                        highly compensated employee described in 
                        section 414(q)(1)(B),'',
                    (C) by striking clause (ii) and redesignating 
                clauses (iii) and (iv) as clauses (ii) and (iii), 
                respectively, and
                    (D) by striking the second sentence in the matter 
                following clause (iii), as redesignated by subparagraph 
                (C).
            (2) Conforming amendment.--Section 416(i)(1)(B)(iii) is 
        amended by striking ``and subparagraph (A)(ii)''.
    (c) Employee Elective Contributions to Plan Not Taken Into 
Account.--
            (1) Definition of top-heavy plan.--Section 416(g)(4) 
        (relating to other special rules) is amended by adding at the 
        end the following:
                    ``(H) Employee elective contributions to plan not 
                taken into account.--At the election of the employer, 
                any employee elective contribution described in section 
                415(c)(3)(D) to a plan (and earnings allocable thereto) 
                shall not be taken into account for purposes of 
                determining whether a plan is a top-heavy plan (or 
                whether any aggregation group which includes such plan 
                is a top-heavy group).''
            (2) Definition of compensation.--Section 416(i)(1)(D) 
        (defining compensation) is amended to read as follows:
                    ``(D) Compensation.--
                            ``(i) In general.--For purposes of this 
                        paragraph, except as provided in clause (ii), 
                        the term `compensation' has the meaning given 
                        such term by section 414(q)(4).
                            ``(ii) Employee elective contributions to 
                        plan not taken into account.--At the election 
                        of the employer, any employee elective 
                        contribution described in section 415(c)(3)(D) 
                        to a plan shall not be taken into account for 
                        purposes of determining compensation.''
    (d) Matching Contributions Taken Into Account for Minimum 
Contribution Requirements.--Section 416(c)(2)(A) (relating to defined 
contribution plans) is amended by adding at the end the following: 
``Employer matching contributions (as defined in section 401(m)(4)(A)) 
shall be taken into account for purposes of this subparagraph.''.
    (e) Distributions During Last Year Before Determination Date Taken 
Into Account.--Section 416(g) is amended--
            (1) in paragraph (3)--
                    (A) by striking ``last 5 years'' in the heading and 
                inserting ``last year before determination date'', and
                    (B) in the matter following subparagraph (B), by 
                striking ``5-year period'' and inserting ``1-year 
                period'', and
            (2) in paragraph (4)(E)--
                    (A) by striking ``last 5 years'' in the heading and 
                inserting ``last year before determination date'', and
                    (B) by striking ``5-year period'' and inserting 
                ``1-year period''.
    (f) Requirements for Qualifications.--Clause (ii) of section 
401(a)(10)(B) (relating to requirements for qualifications for top-
heavy plans) is amended by adding at the end the following new flush 
sentence:
                        ``The preceding sentence shall not apply to a 
                        plan if the plan is not top-heavy and if it is 
                        not reasonable to expect that the plan will 
                        become a top-heavy plan.''
    (g) Definition of Top-Heavy Plans.--
            (1) Exclusion of certain plans from definition of top-heavy 
        plan.--Paragraph (4) of section 416(d) (relating to other 
        special rules for top-heavy plans) is amended by adding at the 
        end the following new subparagraphs:
                    ``(H) Cash or deferred arrangements using 
                alternative methods of meeting nondiscrimination 
                requirements.--The term `top-heavy plan' shall not 
                include a cash or deferred arrangement to the extent 
                that such arrangement meets the requirements of section 
                401(k)(12). This subparagraph shall also apply to 
                contributions that are not required to satisfy the 
                requirements of section 401(k)(12) but are consistent 
                with the purposes of such section, as permitted under 
                regulations which the Secretary shall prescribe.
                    ``(I) Defined contribution plans using alternative 
                methods of meeting nondiscrimination requirements.--The 
                term `top-heavy plan' shall not include a defined 
                contribution plan to the extent that such plan meets 
                the requirements of section 401(m)(11). This 
                subparagraph shall also apply to contributions that are 
                not required to satisfy the requirements of section 
                401(m)(11) but are consistent with the purposes of such 
                section, as permitted under regulations which the 
                Secretary shall prescribe.''
            (2) Aggregation group not required to include certain 
        plans.--Clause (i) of section 416(g)(2)(A) of such Code 
        (relating to required aggregation) is amended by adding at the 
        end the following new flush sentence:
                        ``Such term shall not include a plan or 
                        arrangement described in subparagraph (H) or 
                        (I) of paragraph (4).''
    (h) Effective Deferrals Not Taken Into Account.--Clause (i) of 
section 416(c)(2)(B) (relating to special rule where maximum 
contribution less than 3 percent) is amended by inserting ``(other than 
elective deferrals (as defined in section 402(g)(3))'' after 
``contributions''.
    (i) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1998.

SEC. 105. SALARY REDUCTION ONLY SIMPLE PLANS.

    (a) Simple Retirement Accounts.--
            (1) In general.--Paragraph (2) of section 408(p) is 
        amended--
                    (A) by redesignating subparagraphs (C), (D), and 
                (E) as subparagraphs (D), (E), and (F), respectively, 
                and
                    (B) by inserting after subparagraph (B) the 
                following:
                    ``(C) Employer may elect salary reduction only 
                arrangement.--
                            ``(i) In general.--An employer shall be 
                        treated as meeting the requirements 
of subparagraph (A)(iii) for any year if, in lieu of the contributions 
described in such subparagraph, the employer elects to have 
subparagraph (A)(ii) applied for the year by substituting `$4,000' for 
`$6,000'. If an employer makes an election under this subparagraph for 
any year, the employer shall notify employees of such election within a 
reasonable period of time before the 60-day period for such year under 
paragraph (5)(C).
                            ``(ii) Exception.--This subparagraph shall 
                        not apply to an employer if such employer (or 
                        any predecessor employer) maintained another 
                        qualified plan (as defined in subparagraph 
                        (E)(ii)) with respect to which contributions 
                        were made, or benefits were accrued, for 
                        service during the year in which the 
                        arrangement described in clause (i) became 
                        effective or either of the 2 preceding years. 
                        If only individuals other than employees 
                        described in subparagraph (A) or (B) of section 
                        410(b)(3) are eligible to participate in the 
                        arrangement described in clause (i), then the 
                        preceding sentence shall be applied without 
                        regard to any qualified plan in which only 
                        employees so described are eligible to 
                        participate.
                            ``(iii) Applicable rules.--For purposes of 
                        this subparagraph, rules similar to the rules 
                        of subparagraph (E)(iii) shall apply.''
            (2) Cost-of-living adjustment.--Subparagraph (F) of section 
        408(p)(2) (as so redesignated) is amended by inserting ``and 
        the $4,000 and $6,000 amounts under subparagraph (C)'' after 
        ``subparagraph (A)(ii)''.
            (3) Coordination with maximum limitation.--Paragraph (8) of 
        section 408(p) (relating to coordination with maximum 
        limitation under subsection (a)) is amended by striking 
        ``paragraph (2)(A)(ii) of this subsection'' and inserting 
        ``subparagraph (A)(ii) or (C) of paragraph (2) of this 
        subsection, whichever is applicable,''.
    (b) Adoption of Simple Plan To Meet Nondiscrimination Tests.--
            (1) Simple plan.--Subparagraph (B) of section 401(k)(11) is 
        amended by redesignating clause (iii) as clause (iv) and by 
        inserting after clause (ii) the following new clause:
                            ``(iii) Employer may elect salary reduction 
                        only arrangement.--
                                    ``(I) In general.--An employer 
                                shall be treated as meeting the 
                                requirements of clause (i)(II) for any 
                                year if, in lieu of the contributions 
                                described in such clause, the employer 
                                elects to have clause (i)(I) applied 
                                for the year by substituting `$4,000' 
                                for `$6,000'. If an employer makes an 
                                election under this clause for any 
                                year, the employer shall notify 
                                employees of such election within a 
                                reasonable period of time before the 
                                60-day period for such year under 
                                clause (iv)(II).
                                    ``(II) Exception.--This clause 
                                shall not apply to an employer if such 
                                employer (or any predecessor employer) 
                                maintained another qualified plan (as 
                                defined in section 408(p)(2)(E)(ii)) 
                                with respect to which contributions 
                                were made, or benefits were accrued, 
                                for service during the year in which 
                                the arrangement described in subclause 
                                (I) became effective or either of the 2 
                                preceding years. This subclause shall 
                                not apply if such contributions or 
                                benefits were solely on behalf of 
                                employees who are not eligible to 
                                participate in the arrangement 
                                described in subclause (I).''
            (2) Cost-of-living adjustment.--Subparagraph (E) of section 
        401(k)(11) is amended by inserting ``and the $4,000 and $6,000 
        amounts under subparagraph (B)(iii)'' after ``subparagraph 
        (B)(i)(I)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1998.

SEC. 106. CREDIT FOR SMALL EMPLOYER PENSION PLAN CONTRIBUTIONS AND 
              START-UP COSTS.

    (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 CREDIT.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
eligible employer, the small employer pension plan credit determined 
under this section for any taxable year is an amount equal to the sum 
of--
            ``(1) 50 percent of the qualified employer contributions of 
        the taxpayer for the taxable year, and
            ``(2) the qualified start-up costs paid or incurred by the 
        taxpayer during the taxable year.
    ``(b) Limitations.--
            ``(1) Limits on contributions.--For purposes of subsection 
        (a)(1)--
                    ``(A) qualified employer contributions may only be 
                taken into account for each of the first 5 taxable 
                years ending after the date the employer establishes 
                the qualified employer plan to which the contribution 
                is made, and
                    ``(B) the amount of the qualified employer 
                contributions taken into account with respect to any 
                qualified employee for any such taxable year shall not 
                exceed 3 percent of the compensation (as defined in 
                section 414(s)) of the qualified employee for such 
                taxable year.
            ``(2) Limits on start-up costs.--The amount of the credit 
        determined under subsection (a)(2) for any taxable year shall 
        not exceed--
                    ``(A) $500 for each of the first, second, and third 
                taxable years ending after the date the employer 
                established the qualified employer plan to which such 
                costs relate, and
                    ``(B) zero for each taxable year thereafter.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Eligible employer.--
                    ``(A) In general.--The term `eligible employer'' 
                means, with respect to any year, an employer which has 
                no more than--
                            ``(i) for purposes of subsection (a)(1), 50 
                        employees, and
                            ``(ii) for purposes of subsection (a)(2), 
                        100 employees,
                who received at least $5,000 of compensation from the 
                employer for the preceding year.
                    ``(B) 2-year grace period.--An eligible employer 
                who establishes and maintains a qualified employer plan 
                for 1 or more years and who fails to be an eligible 
                employer for any subsequent year shall be treated as an 
                eligible employer for the 2 years following the last 
                year the employer was an eligible employer.
                    ``(C) Requirement for new qualified employer 
                plans.--Such term shall not include an employer if the 
                employer (or any predecessor employer) established or 
                maintained a qualified employer plan with respect to 
                which contributions were made, or benefits were 
                accrued, for service in the 3 taxable years ending 
                prior to the first taxable year in which the credit 
                under this section is allowed.
            ``(2) Qualified employer contributions.--
                    ``(A) In general.--The term `qualified employer 
                contributions' means, with respect to any taxable year, 
                any employer contributions made on behalf of a 
                qualified employee to a qualified employer plan for a 
                plan year ending with or within the taxable year.
                    ``(B) Employer contributions.--The term `employer 
                contributions' shall not include any elective deferral 
                (within the meaning of section 402(g)(3)).
            ``(3) Qualified employee.--The term `qualified employee' 
        means an individual who--
                    ``(A) is eligible to participate in the qualified 
                employer plan to which the employer contributions are 
                made, and
                    ``(B) is not a highly compensated employee (within 
                the meaning of section 414(q)) for the year for which 
                the contribution is made.
            ``(4) Qualified start-up costs.--The term `qualified start-
        up costs' means any ordinary and necessary expenses of an 
        eligible employer which are paid or incurred in connection 
        with--
                    ``(A) the establishment or maintenance of a 
                qualified employer plan in which qualified employees 
                are eligible to participate, and
                    ``(B) providing educational information to 
                employees regarding participation in such plan and the 
                benefits of establishing an investment plan.
            ``(5) Qualified employer plan.--The term `qualified 
        employer plan' has the meaning given such term in section 
        4972(d).
    ``(d) Special Rules.--
            ``(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 
or qualified contributions 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) of such Code (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 credit 
        determined under section 45D(a).''
    (c) Portion of Credit Refundable.--Section 38(c) of such Code 
(relating to limitation based on amount of tax) is amended by adding at 
the end the following new paragraph:
            ``(4) Portion of small employer pension plan credit 
        refundable.--
                    ``(A) In general.--In the case of the small 
                employer pension plan credit under subsection (b)(13), 
                the aggregate credits allowed under subpart C shall be 
                increased by the lesser of--
                            ``(i) the credit which would be allowed 
                        without regard to this paragraph and the 
                        limitation under paragraph (1), or
                            ``(ii) the amount by which the aggregate 
                        amount of credits allowed by this section 
                        (without regard to this paragraph) would 
                        increase if the limitation under paragraph (1) 
                        were increased by the taxpayer's applicable 
                        payroll taxes for the taxable year.
                    ``(B) Treatment of credit.--The amount of the 
                credit allowed under this paragraph shall not be 
                treated as a credit allowed under this subpart and 
                shall reduce the amount of the credit allowed under 
                this section for the taxable year.
                    ``(C) Applicable payroll taxes.--For purposes of 
                this paragraph--
                            ``(i) In general.--The term `applicable 
                        payroll taxes' means, with respect to any 
                        taxpayer for any taxable year--
                                    ``(I) the amount of the taxes 
                                imposed by sections 3111 and 3221(a) on 
                                compensation paid by the taxpayer 
                                during the taxable year,
                                    ``(II) 50 percent of the taxes 
                                imposed by section 1401 on the self-
                                employment income of the taxpayer 
                                during the taxable year, and
                                    ``(III) 50 percent of the taxes 
                                imposed by section 3211(a)(1) on 
                                amounts received by the taxpayer during 
                                the calendar year in which the taxable 
                                year begins.
                            ``(ii) Agreements regarding foreign 
                        affiliates.--Section 24(d)(5)(C) shall apply 
                        for purposes of clause (i).''
    (d) Conforming Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of such Code is amended by adding 
at the end the following new item:

                              ``Sec. 45D. Small employer pension plan 
                                        credit.''
    (e) Effective Date.--The amendments made by this section shall 
apply to costs paid or incurred or contributions made in connection 
with qualified employer plans established after April 30, 1998.

SEC. 107. INCREASING LIMITS FOR DEFERRALS TO SIMPLE PLANS.

    (a) Simple Retirement Accounts.--
            (1) In general.--Paragraph (2)(A)(ii) of section 408(p) 
        (relating to simple retirement accounts) is amended by striking 
        ``$6,000'' and inserting ``$8,000''.
            (2) Conforming amendments.--
                    (A) Section 408(p)(2)(C)(i), as added by section 
                105, is amended by striking ``$6,000'' and inserting 
                ``$8,000''.
                    (B) Subparagraph (F) of section 408(p)(2) (relating 
                to cost-of-living adjustment), as amended by section 
                105, is amended by striking ``$6,000'' each place it 
                appears and inserting ``$8,000''.
    (b) Nondiscrimination Tests.--
            (1) In general.--Section 401(k)(11)(B)(i)(I) is amended by 
        striking ``$6,000'' and inserting ``$8,000''.
            (2) Conforming amendments.--
                    (A) Section 401(k)(11)(B)(iii)(I), as added by 
                section 105, is amended by striking ``$6,000'' and 
                inserting ``$8,000''.
                    (B) Section 401(k)(11)(E) is amended by striking 
                ``$6,000'' each place it appears and inserting 
                ``$8,000''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1998.

SEC. 108. QUALIFIED STAFFING FIRMS.

    (a) Codification of Employer Status of Qualified Staffing Firm for 
Employment Tax Purposes.--
            (1) Income tax withholding.--Section 3401(d) is amended by 
        striking ``and'' at the end of paragraph (1), by striking the 
        period at the end of paragraph (2) and inserting ``, and'', and 
        by adding at the end the following:
            ``(3) notwithstanding any other provision of this subtitle, 
        if a qualified staffing firm described in section 7701(a)(47) 
        pays wages to an individual performing services for a customer 
        of such qualified staffing firm, the term `employer' means, 
        with respect to such individual for such services, such 
        qualified staffing firm (and not the customer).''
            (2) FICA tax.--Section 3121 is amended by adding at the end 
        the following:
    ``(z) Application to Qualified Staffing Firms.--Notwithstanding any 
other provision of this subtitle, if a qualified staffing firm 
described in section 7701(a)(47) pays wages to an individual performing 
services for a customer of such qualified staffing firm, the term 
`employer' means, with respect to such individual for such services, 
such qualified staffing firm (and not the customer).''
            (3) FUTA tax.--Subsection (a) of section 3306 is amended by 
        adding at the end the following: ``Notwithstanding any other 
        provision of this subtitle, if a qualified staffing firm 
        described in section 7701(a)(47) pays wages to an individual 
        performing services for a customer of such qualified staffing 
        firm, the term `employer' means, with respect to such 
        individual for such services, such qualified staffing firm (and 
        not the customer).''
            (4) Definition--Subsection (a) of section 7701 is amended 
        by adding at the end the following paragraph:
            ``(47) Qualified staffing firm.--
                    ``(A) In general.--The term `qualified staffing 
                firm' means any person which is engaged in providing 
                staffing services to a customer pursuant to a service 
                contract, and which with respect to a worker performing 
                services for the customer who is covered by the 
                contract--
                            ``(i) assumes responsibility for payment of 
                        wages to the worker, without regard to the 
                        receipt or adequacy of payment from the 
                        customer for such services,
                            ``(ii) assumes responsibility for 
                        reporting, withholding, and paying any 
                        applicable taxes under chapters 21, 23, and 24, 
                        with respect to the worker's wages, without 
                        regard to the receipt of adequacy of payment 
                        from the customer for such services,
                            ``(iii) assumes responsibility for any 
                        worker benefits that may be required by the 
                        service contract, without regard to the receipt 
                        or adequacy of payment from the customer for 
                        such services,
                            ``(iv) assumes authority to hire, reassign, 
                        and dismiss the worker and has the contractual 
                        right to exercise this authority independent of 
                        the customer,
                            ``(v) maintains employee records relating 
                        to the worker, and
                            ``(vi) assumes responsibility for 
                        addressing the worker's complaints, claims, 
                        filings, or requests relating to employment, 
                        except as otherwise provided by applicable 
                        collective bargaining agreements, if any, 
                        notwithstanding that some or all of the actions 
                        described in this subparagraph may be shared by 
                        the customer.
                    ``(B) Staffing firm or customer must offer defined 
                contribution plan.--
                            ``(i) In general.--A person shall not be 
                        treated as a qualified staffing firm with 
                        respect to any worker for whom the requirements 
                        of subparagraph (A) are met unless such worker 
                        is eligible to participate in a defined 
                        contribution plan maintained by such person or 
                        the customer for which the worker performs 
                        services.
                            ``(ii) De minimus exception.--Clause (i) 
                        shall not apply to the treatment of any worker 
                        by a person if at least 95 percent of all 
                        workers (other than workers excluded under 
                        clause (iii)) for whom the person seeks to be 
                        treated as a qualified staffing firm under this 
                        paragraph are eligible to participate in a 
                        defined contribution plan described in clause 
                        (i). All persons treated as a single employer 
                        under subsections (b), (c), (m), or (o) of 
                        section 414 shall be treated as one person for 
                        purposes of applying this clause.
                            ``(iii) Exclusions.--Workers may be 
                        excluded from consideration under this 
                        subparagraph if such workers do not meet the 
                        minimum age and service requirements of section 
                        410(a)(1)(A) or such workers are excludable 
                        from consideration under section 410(b)(3).''
    (b) Codification of Employer Status of Qualified Staffing Firm for 
Purposes of Providing Employee Benefits.--
            (1) Paragraph (20) of section 7701(a) is amended--
                    (A) by striking ``For'' and inserting the 
                following:
                    ``(A) Full-time life insurance salesman.--For''; 
                and
                    (B) by adding at the end the following:
                    ``(B) Individual covered by qualified staffing firm 
                contract.--
                            ``(i) In general.--For purposes of applying 
                        any applicable employee benefit provision, the 
                        term `employee' shall include, with respect to 
                        a qualified staffing firm, any individual whose 
                        employer is considered to be the qualified 
                        staffing firm for the purpose of chapters 21, 
                        23, and 24.
                            ``(ii) Change in relationship.--For 
                        purposes of any applicable employee benefit 
                        provision, any change in the employment 
                        relationship between an individual and a 
                        qualified staffing firm or between the 
                        individual and a customer or former customer of 
                        the qualified staffing firm, as the case may 
                        be, which results in the individual becoming or 
                        ceasing to be an employee of the qualified 
                        staffing firm shall be treated as the 
                        termination of employment and separation from 
                        service by the individual from the employment 
                        or service of the qualified staffing firm's 
                        customer or the qualified staffing firm, as the 
                        case may be.
                            ``(iii) Applicable employee benefit 
                        provision.--For purposes of clause (i), the 
                        term `applicable employee benefit provision' 
                        means each of the following:
                                    ``(I) Section 79 with respect to 
                                group-term insurance purchased for 
                                employees.
                                    ``(II) Sections 104, 105, and 106 
                                with respect to accident and health 
                                insurance or plans.
                                    ``(III) The provisions of this 
                                title with respect to contributions 
                                (including elective contributions under 
                                section 401(k) and employee and 
                                matching contributions under section 
                                401) and distributions to and under a 
                                trust which is part of a plan (other 
                                than a defined benefit plan) described 
                                in section 401(a) or 403(a) or with 
                                respect to the tax-exempt status of 
                                such trust.
                                    ``(IV) Sections 125, 127, and 129 
                                with respect to plans and programs 
                                under such sections.
                                    ``(V) Section 414(n) and the 
                                provisions described in paragraph (3) 
                                thereof.''
    (c) Coverage of Leased Employees in Employment Benefit Plans.--
            (1) Application of requirements concerning cash or deferred 
        arrangements, matching contributions, and employee 
        contributions to leased employees.--Section 414(n)(3)(B) is 
        amended by inserting ``401(k), 401(m),'' before ``408(k)''.
            (2) Special rules for leasing organization's plan.--Section 
        414(n) is amended--
                    (A) by renumbering paragraph (6) as paragraph (7); 
                and
                    (B) by inserting the following as paragraph (6):
            ``(6) Leasing organization's plan.--
                    ``(A) Elective disaggregation.--
                            ``(i) General rule.--A leasing organization 
                        that is a qualified staffing firm may elect, 
                        for any year, to have a plan that it sponsors 
                        and that is described in section 401(a) or 
                        403(a) treated as maintained by more than one 
                        employer for purposes of applying sections 
                        410(b) and 401(a)(4). For these purposes, (I) 
                        all the employees who perform services directly 
                        for a recipient and related persons and who 
                        would be treated as leased employees of the 
                        recipient but for the requirements of paragraph 
                        (2)(B), shall be treated as employed by that 
                        recipient, and (II) all employees who do not 
                        meet the requirements of subclause (I) shall be 
treated as employed by the leasing organization. Such leasing 
organization may also elect, for any year, to have a plan that is 
subject to paragraphs (3) and (4) of section 105(h), or to section 
125(c), tested on a comparable basis under paragraphs (3) and (4) of 
section 105(h), or under section 125(c), as the case may be.
                            ``(ii) Special rules.--A leasing 
                        organization electing under this paragraph may, 
                        under regulations prescribed by the Secretary, 
                        elect in the alternative to have subclause (I) 
                        of paragraph (6)(A)(i) applied to (I) all 
                        employees who perform services directly for the 
                        recipient and the related persons, whether or 
                        not they would be treated as leased employees 
                        of the recipient, or (II) only with respect to 
                        selected recipients and related persons. 
                        Notwithstanding the foregoing, in the event 
                        that a five-percent owner (as defined in 
                        section 416(i)) of a recipient is covered by a 
                        plan described in subparagraph (A)(i), then 
                        such leasing organization shall be deemed to 
                        have elected disaggregation in accordance with 
                        subclause (II) of this clause with respect to 
                        such recipient and related persons.
                            ``(iii) Effect of disqualification.--If the 
                        plan of a leasing organization electing under 
                        this subparagraph fails to satisfy the 
                        requirements of section 410(b) or section 
                        401(a)(4) with respect to the person deemed to 
                        be the employer under this paragraph, only that 
                        portion of the plan that is treated under this 
                        subparagraph as maintained by such person shall 
                        be disqualified.
                            ``(iv) Treatment of related persons.--For 
                        purposes of this subparagraph, the term 
                        ``recipient'' shall not include any person that 
                        is a related person with respect to the leasing 
                        organization.
                    ``(B) Highly compensated employees.--Whether or not 
                the leasing organization makes an election under 
                subparagraph (A), section 414(q) shall be applied to 
                employees of a leasing organization that is a qualified 
                staffing firm by treating the employees who perform 
                services for a recipient or related persons and who 
                would be leased employees of the recipient but for the 
                requirements of paragraph (2)(B) as employed by, and 
                receiving compensation from, the recipient or the 
                related person for purposes of determining whether the 
                employees are highly compensated employees of the 
                leasing organization.''
    (d) Revisions to Safe Harbor Provision.--
            (1) Revisions to safe harbor plan requirements.--
        Subparagraph (B) of section 414(n)(5) is amended to read as 
        follows:
    ``(B) Plan requirements.--A plan meets the requirements of this 
subparagraph if--
            ``(i) such plan is a money purchase pension plan or a 
        profit-sharing plan, with a nonintegrated employer contribution 
        rate for each participant which is at least 7.5 percent of that 
        portion of the participant's compensation attributable to 
        services performed for the recipient, and which is not 
        dependent on the current or accumulated points of the leasing 
        organization or on whether the participant makes an elective 
        contribution or employee contribution to such plan,
            ``(ii) such plan provides for full and immediate vesting,
            ``(iii) in the case of a profit-sharing plan, such plan 
        meets the distribution requirements of section 401(k)(2)(B) 
        with respect to all employer contributions, and
            ``(iv) each employee of the leasing organization who 
        performs services for the recipient immediately participates in 
        such plan.''
            (2) Extension of safe harbor rule to additional employee 
        benefits.--Paragraph (5) of section 414(n) is amended by adding 
        at the end the following:
            ``(D) Special rule for additional employee benefits.--To 
        the extent provided for in regulations issued by the Secretary, 
        in the case of a requirement described in subparagraph (C) of 
        paragraph (3), this subsection shall not apply to any leased 
        employee with respect to service performed for a recipient if--
                    ``(i) such employee is covered by a plan for an 
                arrangement that is maintained by the leasing 
                organization and that meets such requirements as the 
                Secretary shall prescribe in regulations, and
                    ``(ii) leased employees (determined without regard 
                to this paragraph) do not constitute more than 20 
                percent of the recipient's nonhighly compensated work 
                force.''
    (e) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        take effect on the date of the enactment of this Act.
            (2) Existing service contracts.--In the case of a plan that 
        covers employees of a qualified staffing firm who are providing 
        services for a customer pursuant to a service contract and that 
        was adopted and in effect before the date of enactment of this 
        Act, such amendments shall not take effect until the first day 
        of the first plan year that begins after the date of enactment 
        of this Act, and the plan shall not be required to be amended 
        to reflect this Act until the end of such plan year.

SEC. 109. PHASE-IN OF ADDITIONAL PBGC PREMIUM FOR NEW PLANS.

    (a) Amendments to ERISA.--Subparagraph (E) of section 4006(a)(3) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)(A)) is amended by adding at the end the following new 
clause:
    ``(v) In the case of a new defined benefit plan, the amount 
determined under clause (ii) for any plan year shall be an amount equal 
to the product derived by multiplying the amount determined under 
clause (ii) by the applicable percentage. For purposes of this clause, 
the term `applicable percentage' means--
            ``(I) 0 percent, for the first plan year.
            ``(II) 20 percent, for the second plan year.
            ``(III) 40 percent, for the third plan year.
            ``(IV) 60 percent, for the fourth plan year.
            ``(V) 80 percent, for the fifth plan year.
            ``(VI) 100 percent, for the sixth plan year, and for each 
        succeeding plan year.
For purposes of this clause, the term `new defined benefit plan' means 
a defined benefit plan (as defined in section 3(35)) maintained by an 
employer if such employer (including any predecessor employer) has not 
established or maintained a plan to which this title applies with 
respect to which contributions were made, or benefits were accrued, for 
service in the 3 preceding plan years.''
    (b) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1998.

SEC. 110. ELIMINATION OF USER FEE FOR REQUESTS TO IRS REGARDING NEW 
              PENSION PLANS.

    (a) Elimination of Certain User Fees.--The Secretary of the 
Treasury or the Secretary's delegate shall not require payment of user 
fees under the program established under section 10511 of the Revenue 
Act of 1987 for requests to the Internal Revenue Service for ruling 
letters, opinion letters, and determination letters or similar requests 
with respect to the qualified status of a new pension benefit plan or 
any trust which is part of the plan.
    (b) New Pension Benefit Plan.--For purposes of this section, the 
term `new pension benefit plan' means a pension, profit-sharing, stock 
bonus, annuity, or employee stock ownership plan which is maintained by 
an employer if such employer (or any predecessor employer) has not made 
a prior request described in subsection (a) for such plan (or any 
predecessor plan).
    (c) Effective Date.--The provisions of this section shall apply 
with respect to requests made after December 31, 1998.

SEC. 111. COMPENSATION LIMIT NOT TO APPLY TO SIMPLE 401(K) 
              ARRANGEMENTS.

    (a) In General.--Section 401(k)(11) (relating to adoption of simple 
plan to meet nondiscrimination tests) is amended by adding at the end 
the following new subparagraph:
                    ``(F) Compensation.--The limitation under 
                subsection (a)(17) shall not apply for purposes of 
                determining compensation taken into account under this 
                paragraph (other than subparagraph (B)(ii)).''
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1998.

SEC. 112. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR PURPOSES OF 
              LIMITS.

    (a) In General.--Section 404 is amended by adding at the end the 
following new subsection:
    ``(o) Elective Deferrals Not Taken Into Account for Purposes of 
Limits.--Elective deferrals (as defined in section 402(g)(3)) shall not 
be subject to any limitations described in this section (other than 
subsection (a)), and such elective deferrals shall not be taken into 
account in applying such limitations to any other contributions.''
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 1998.

SEC. 113. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED COMPENSATION 
              PLANS OF STATE AND LOCAL GOVERNMENTS AND TAX-EXEMPT 
              ORGANIZATIONS.

    (a) In General.--Subsection (c) of section 457 (relating to 
deferred compensation plans of State and local governments and tax-
exempt organizations), as amended by section 609, is amended by 
striking paragraph (2).
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to years beginning after December 31, 1998.

SEC. 114. ALTERNATIVE METHOD OF MEETING NONDISCRIMINATION REQUIREMENTS 
              FOR OPT-OUT PLANS.

    (a) In General.--Section 401(k) (relating to cash or deferred 
arrangement) is amended by adding at the end the following new 
paragraph:
            ``(13) Nondiscrimination requirements for opt-out 
        arrangements.--
                    ``(A) In general.--A cash or deferred arrangement 
                shall be treated as meeting the requirements of 
                paragraph (3)(A)(ii) if such arrangement constitutes a 
                negative election trust (a `NET').
                    ``(B) Negative election trust.--For purposes of 
                this paragraph, the term `negative election trust' 
                means an arrangement--
                            ``(i) under which each employee eligible to 
                        participate in the arrangement is treated as 
                        having elected to have the employer make 
                        elective contributions in an amount equal to 
                        the uniform percentage (not less than 3 
                        percent) provided under the arrangement unless 
                        the employee specifically elects not to have 
                        such contributions made, and
                            ``(ii) which meets the other requirements 
                        of this paragraph.
                    ``(C) Participation.--An arrangement meets the 
                requirements of this subparagraph for any year if, 
                during the plan year or the preceding plan year, 
                elective contributions described in subparagraph (B)(i) 
                are made on behalf of at least 70 percent of employees 
                other than highly compensated employees eligible to 
                participate in the arrangement.
                    ``(D) Matching contributions.--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 50 percent of the elective 
                contributions of the employee to the extent such 
                elective contributions do not exceed 5 percent of 
                compensation. The rules of clauses (ii) and (iii) of 
                paragraph (12)(B) shall apply for purposes of this 
                subparagraph.
                    ``(E) Withdrawal and vesting.--The requirements of 
                this subparagraph are met if the requirements of 
                subparagraphs (B) and (C) of paragraph (2) are met with 
                respect to all employer contributions (including 
                matching contributions) taken into account in 
                determining whether the requirements of subparagraph 
                (B) or (D) are met.
                    ``(F) Notice requirements.--The requirements of 
                this subparagraph are met if each employee eligible to 
                participate in the arrangement--
                            ``(i) receives a notice explaining the 
                        employee's right under the arrangement to elect 
                        not to have elective contributions made on the 
                        employee's behalf, and
                            ``(ii) has a reasonable period of time 
                        after receipt of such notice and before the 
                        first elective contribution is made to make 
                        such election.
                The requirements of clauses (i) and (ii) of paragraph 
                (12)(D) shall be met with respect to such notice.''
    (b) Matching Contributions.--Section 401(m) (relating to 
nondiscrimination test for matching contributions and employee 
contributions) is amended by redesignating paragraph (12) as paragraph 
(13) and by inserting after paragraph (11) the following new paragraph:
            ``(12) Alternative method for opt-out plans.--
                    ``(A) In general.--A defined contribution plan 
                shall be treated as meeting the requirements of 
                paragraph (2) with respect to matching contributions if 
                the plan--
                            ``(i) meets the contribution requirements 
                        of subparagraphs (B)(i) and (D) of subsection 
                        (k)(13),
                            ``(ii) meets the participation requirements 
                        of subsection (k)(13)(C),
                            ``(iii) meets the vesting and notice 
                        requirements of subparagraphs (E) and (F) of 
                        subsection (k)(13), and
                            ``(iv) meets the requirements of clauses 
                        (i) and (ii) of paragraph (11)(B).
                    ``(B) Matching contributions under section 403(b) 
                plans.--An annuity contract under section 403(b) shall 
                be treated as meeting the requirements of paragraph (2) 
                with respect to matching contributions on account of an 
                elective deferral described in section 402(g)(3)(C) if 
                such contract meets requirements similar to the 
                requirements under subparagraph (A).''
    (c) Exclusion From Definition of Top-Heavy Plans.--Paragraph (4) of 
section 416(d) (relating to other special rules for top-heavy plans), 
as amended by section 104(g), is amended by adding at the end the 
following new subparagraph:
                    ``(J) Negative election trust.--The term `top-heavy 
                plan' shall not include a negative election trust under 
                section 401(k)(13).''
    (d) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1998.

       TITLE II--INCREASING PENSION ACCESS AND FAIRNESS FOR WOMEN

SEC. 201. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES TO DEFINED 
              CONTRIBUTION PLANS.

    (a) In General.--
            (1) Subparagraph (B) of section 415(c)(1) (relating to 
        limitation for defined contribution plans) is amended to read 
        as follows:
                    ``(B) the participant's compensation.''
            (2) Conforming amendments.--
                    (A) Subsection (f) of section 72 is amended by 
                striking ``section 403(b)(2)(D)(iii))'' and inserting 
                ``section 403(b)(2)(D)(iii), as in effect on December 
                31, 1998)''.
                    (B)(i) Section 403(b) is amended--
                            (I) by striking ``the exclusion allowance 
                        for such taxable year'' in paragraph (1) and 
                        inserting ``the applicable limit under section 
                        415'', and
                            (II) by striking paragraph (2).
                    (C) Section 404(a)(10)(B) is amended by striking 
                ``, the exclusion allowance under section 403(b)(2),''.
                    (D) Section 415(a)(2) is amended by striking ``, 
                and the amount of the contribution for such portion 
                shall reduce the exclusion allowance as provided in 
                section 403(b)(2)''.
                    (E) Section 415(c)(3) is amended by adding at the 
                end the following new subparagraph:
                    ``(E) Annuity contracts.--In the case of an annuity 
                contract described in section 403(b), the term 
                `participant's compensation' shall mean the 
                participant's includible compensation as determined 
                under regulations prescribed by the Secretary.''
                    (F) Section 415(c) is amended by striking paragraph 
                (4).
                    (G) Section 415(c)(7) is amended to read as 
                follows:
            ``(7) Certain contributions by church plans not treated as 
        exceeding limit.--
                    ``(A) In general.--Notwithstanding any other 
                provision of this subsection, at the election of a 
                participant who is an employee of a church, a 
                convention or association of churches, including an 
                organization described in section 414(e)(3)(B)(ii), 
                contributions and other additions for an annuity 
                contract or retirement income account described in 
                section 403(b) with respect to such participant, when 
                expressed as an annual addition to such participant's 
                account, shall be treated as not exceeding the 
                limitation of paragraph (1) if such annual addition is 
                not in excess of $10,000.
                    ``(B) $40,000 aggregate limitation.--The total 
                amount of additions with respect to any participant 
                which may be taken into account for purposes of this 
                subparagraph for all years may not exceed $40,000.
                    ``(C) Annual addition.--For purposes of this 
                paragraph, the term `annual addition' has the meaning 
                given such term by paragraph (2).''
                    (H) Section 415(e)(5) is amended--
                            (i) by striking ``(except in the case of a 
                        participant who has elected under subsection 
                        (c)(4)(D) to have the provisions of subsection 
                        (c)(4)(C) apply)'', and
                            (ii) by striking the last sentence.
                    (I) Section 415(n)(2)(B) is amended by striking 
                ``percentage''.
                    (J) Subparagraph (B) of section 402(g)(7) is 
                amended by inserting before the period at the end the 
                following: ``(as in effect on the date of the enactment 
                of the Pension Coverage and Portability Act)''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to years beginning after December 31, 1998.
    (b) Special Rules for Sections 403(b) and 408.--Subsection (k) of 
section 415 is amended by adding at the end the following new 
paragraph:
            ``(4) Special rules for sections 403(b) and 408.--For 
        purposes of this section, any annuity contract described in 
        section 403(b) for the benefit of a participant shall be 
        treated as a defined contribution plan maintained by each 
        employer with respect to which the participant has the control 
        required under subsection (b) or (c) of section 414 (as 
        modified by subsection (h)). For purposes of this section, any 
        contribution by an employer to a simplified employee pension 
        plan for an individual for a taxable year shall be treated as 
        an employer contribution to a defined contribution plan for 
        such individual for such year.''
    (c) Deferred Compensation Plans of State and Local Governments and 
Tax-Exempt Organizations.--Subparagraph (B) of section 457(b)(2) 
(relating to salary limitation on eligible deferred compensation 
plans'' is amended by striking ``33\1/3\ percent'' and inserting ``100 
percent''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to years beginning 
        after December 31, 1998.
            (2) Effective date.--The amendment made by subsection (b) 
        shall apply to limitation years beginning after December 31, 
        1999.

SEC. 202. FASTER VESTING OF CERTAIN EMPLOYER MATCHING CONTRIBUTIONS.

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

                                                     The nonforfeitable
``Years of service:                                      percentage is:
    2.............................................                  20 
    3.............................................                  40 
    4.............................................                  60 
    5.............................................                  80 
    6.............................................               100.''
    (b) Amendments to ERISA.--Section 203(a) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1053(a)) is amended--
            (1) in paragraph (2), by striking ``A plan'' and inserting 
        ``Except as provided in paragraph (4), a plan'', and
            (2) by adding at the end the following:
            ``(4) Faster vesting for matching contributions.--In the 
        case of matching contributions (as defined in section 
        401(m)(4)(A) of the Internal Revenue Code of 1986), paragraph 
        (2) shall be applied--
                    ``(A) by substituting `3 years' for `5 years' in 
                subparagraph (A), and
                    ``(B) by substituting the following table for the 
                table contained in subparagraph (B):

                                                     The nonforfeitable
``Years of service:                                      percentage is:
    2.............................................                  20 
    3.............................................                  40 
    4.............................................                  60 
    5.............................................                  80 
    6.............................................               100.''
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to contributions 
        for plan years beginning after December 31, 1998.
            (2) Collective bargaining agreements.--In the case of a 
        plan maintained pursuant to 1 or more collective bargaining 
        agreements between employee representatives and 1 or more 
        employers ratified by the date of enactment of this Act, the 
        amendments made by this section shall not apply to 
        contributions on behalf of employees covered by any such 
        agreement for plan years beginning before the earlier of--
                    (A) the later of--
                            (i) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof on or after such date of enactment), or
                            (ii) January 1, 1999, or
                    (B) January 1, 2003.
            (3) Service required.--With respect to any plan, the 
        amendments made by this section shall not apply to any employee 
        before the date that such employee has 1 hour of service under 
        such plan in any plan year to which the amendments made by this 
        section apply.

SEC. 203. DEFERRED ANNUITIES FOR SURVIVING SPOUSES OF FEDERAL 
              EMPLOYEES.

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

SEC. 204. CLARIFICATION OF TAX TREATMENT OF DIVISION OF SECTION 457 
              PLAN BENEFITS UPON DIVORCE.

    (a) In General.--Section 414(p)(11) (relating to application of 
rules to governmental and church plans) is amended--
            (1) by inserting ``or an eligible deferred compensation 
        plan (within the meaning of section 457(b))'' after 
        ``subsection (e))'',
            (2) in the heading, by striking ``governmental and church 
        plans'' and inserting ``certain other plans'', and
            (3) by adding at the end the following new sentence: ``The 
        rule of section 402(e)(1)(A) shall apply to a payment or 
        distribution of an eligible deferred compensation plan to which 
        this paragraph applies.''
    (b) Waiver of Certain Distribution Requirements.--Section 
414(p)(10) is amended by striking ``and section 409(d)'' and inserting 
``section 409(d), and section 457(d)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transfers after the date of enactment of this Act.

SEC. 205. PENSION RIGHT TO KNOW PROPOSALS.

    (a) Spouse's Right To Know Distribution Information.--
            (1) Amendment of internal revenue code.--Section 417(a)(3) 
        (relating to plan to provide written explanations) 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) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1998.

SEC. 206. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBUTION RULES.

    (a) Required Distributions.--
            (1) In general.--Subparagraphs (C)(i)(I) and (C)(ii)(I) of 
        section 401(a)(9) are each amended by striking ``70\1/2\'' and 
        inserting ``75''.
            (2) Actuarial adjustment of benefit under defined benefit 
        plan.--Clause (iii) of section 401(a)(9)(C) is amended to read 
        as follows:
                            ``(iii) Actuarial adjustment.--
                                    ``(I) In general.--In the case of a 
                                defined benefit plan, an employee's 
                                accrued benefit shall be actuarially 
                                increased to take into account the 
                                period after the applicable date during 
                                which the employee was not eligible to 
                                receive any benefits under the plan.
                                    ``(II) Applicable date.--For 
                                purposes of clause (I), the term 
                                `applicable date' means the 1st April 
                                following the calendar year in which 
                                the employee attains age 70\1/2\.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to years beginning after December 31, 2000.
    (b) Simplification and Finalization of Minimum Distribution 
Requirements.--
            (1) In general.--The Secretary of the Treasury shall--
                    (A) simplify and finalize the regulations relating 
                to minimum distribution requirements under sections 
                401(a)(9), 408(a)(6) and (b)(3), 403(b)(10), and 
                457(d)(2) of the Internal Revenue Code of 1986, and
                    (B) modify such regulations to--
                            (i) reflect increases in life expectancy, 
                        and
                            (ii) revise the required distribution 
                        methods so that, under reasonable assumptions, 
                        the amount of the required minimum distribution 
                        does not decrease over a participant's life 
                        expectancy.
            (2) Fresh start.--Notwithstanding subparagraph (D) of 
        section 401(a)(9) of such Code, during the first year that 
        regulations are in effect under this subsection, required 
        distributions for future years may be redetermined to reflect 
        changes under such regulations. Such redetermination shall 
        include the opportunity to choose a new designated beneficiary 
        and to elect a new method of calculating life expectancy.
            (3) Effective date for regulations.--Regulations referred 
        to in paragraph (1) shall be effective for years beginning 
        after December 31, 2000, and shall apply in such years without 
        regard to whether an individual had previously begun receiving 
        minimum distributions.
    (c) Amount Not Subject to Minimum Distribution Requirements.--
Paragraph (9) of section 401(a) is amended--
            (1) in subparagraph (A), by inserting ``(minus the 
        exclusion amount)'' after ``the entire interest''; and
            (2) by adding at the end the following:
                    ``(H) Exclusion amount.--
                            ``(i) In general.--For purposes of this 
                        paragraph, the term `exclusion amount' means--
                                    ``(I) $300,000 in the case of a 
                                defined contribution plan;
                                    ``(II) $300,000 in the case of an 
                                individual retirement plan; and
                                    ``(III) $0 in the case of a defined 
                                benefit plan.
                            ``(ii) Aggregation of plans.--For purposes 
                        of determining the exclusion amount under 
                        clause (i)--
                                    ``(I) all defined contribution 
                                plans maintained by the same employer 
                                shall be treated as a single plan;
                                    ``(II) all individual retirement 
                                plans (other than Roth IRAs) of the 
                                individual shall be treated as a single 
                                plan; and
                                    ``(III) all Roth IRAs of the 
                                individual shall be treated as a single 
                                plan.
                            ``(iii) Cost-of-living adjustment.--The 
                        Secretary shall adjust the $300,000 exclusion 
                        amount specified in clause (i) at the same time 
                        and in the same manner as under section 415(d), 
                        except that the base period shall be the 
                        calendar quarter ending September 30, 1999.''
            (3) Effective date.--The amendments made by this subsection 
        shall apply to years beginning after December 31, 2000.
    (d) Repeal of Rule Where Distributions Had Begun Before Death 
Occurs.--
            (1) In general.--Subparagraph (B) of section 401(a)(9) is 
        amended by striking clause (i) and redesignating clauses (ii), 
        (iii), and (iv) as clauses (i), (ii), and (iii), respectively.
            (2) Conforming changes.--
                    (A) Clause (i) of section 401(a)(9)(B) (as so 
                redesignated) is amended--
                            (i) by striking ``for other cases'' in the 
                        heading, and
                            (ii) by striking ``the distribution of the 
                        employee's interest has begun in accordance 
                        with subparagraph (A)(ii),'' and inserting 
                        ``his entire interest has been distributed to 
                        him, the remainder of''.
                    (B) Clause (ii) of section 401(a)(9)(B) (as so 
                redesignated) is amended by striking ``clause (ii)'' 
                and inserting ``clause (i)''.
                    (C) Clause (iii) of section 401(a)(9)(B)(iii) (as 
                so redesignated) is amended--
                            (i) by striking ``clause (iii)(I)'' and 
                        inserting ``clause (ii)(I)'',
                            (ii) in subclause (I) by striking ``clause 
                        (iii)(III)'' and inserting ``clause 
                        (ii)(III)'',
                            (iii) in subclause (I) by striking ``the 
                        date on which the employee would have attained 
                        the age 70\1/2\,'' and inserting ``April 1 of 
                        the calendar year following the calendar year 
                        in which the spouse attains 75, and clause (ii) 
                        shall not apply to the exclusion amount,'', and
                            (iv) in subclause (II) by striking ``the 
                        distributions to such spouse begin,'' and 
                        inserting ``his entire interest has been 
                        distributed to him,''.
            (3) Reduction in excise tax.--Subsection (a) of section 
        4974 is amended by striking ``50 percent'' and inserting ``10 
        percent''.
            (4) Effective date.--
                    (A) In general.--Except as provided by subparagraph 
                (B), the amendments made by this subsection shall apply 
                to years beginning after December 31, 2000.
                    (B) Excise tax.--The amendment made by paragraph 
                (3) shall apply to years beginning after December 31, 
                1998.

           TITLE III--INCREASING PORTABILITY OF PENSION PLANS

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

    (a) Rollovers From and To Section 457 Plans.--
            (1) Rollovers from section 457 plans.--
                    (A) In general.--Section 457(e) (relating to other 
                definitions and special rules) is amended by adding at 
                the end the following:
            ``(16) Rollover amounts.--
                    ``(A) General rule.--In the case of an eligible 
                deferred compensation plan, if--
                            ``(i) any portion of the balance to the 
                        credit of an employee in such plan is paid to 
                        such employee in an eligible rollover 
                        distribution (within the meaning of section 
                        402(c)(4)),
                            ``(ii) the employee transfers any portion 
                        of the property such employee receives in such 
                        distribution to an eligible retirement plan 
                        described in section 402(c)(8)(B), and
                            ``(iii) in the case of a distribution of 
                        property other than money, the amount so 
                        transferred consists of the property 
                        distributed,
                then such distribution (to the extent so transferred) 
                shall not be includible in gross income for the taxable 
                year in which paid.
                    ``(B) Certain rules made applicable.--Rules similar 
                to the rules of paragraphs (2) through (7) and (9) of 
                section 402(c) and section 402(f) shall apply for 
                purposes of subparagraph (A).
                    ``(C) Reporting.--Rollovers under this paragraph 
                shall be reported to the Secretary in the same manner 
                as rollovers from qualified retirement plans (as 
                defined in section 4974(c)).''.
                    (B) Deferral limit determined without regard to 
                rollover amounts.--Section 457(b)(2) (defining eligible 
                deferred compensation plan) is amended by inserting 
                ``(other than rollover amounts)'' after ``taxable 
                year''.
            (2) Rollovers to section 457 plans.--
                    (A) Section 402(c)(8)(B) (defining eligible 
                retirement plan) is amended by striking ``and'' at the 
end of clause (iii), by striking the period at the end of clause (iv) 
and inserting ``, and'', and by adding at the end the following:
                            ``(v) an eligible deferred compensation 
                        plan described in section 457(b) of an eligible 
                        employer described in section 457(e)(1)(A).''.
                    (B) Paragraph (9) of section 402(c) is amended by 
                striking ``except that'' and all that follows and 
                inserting ``except that only an account or annuity 
                described in clause (i) or (ii) of paragraph (8)(B) 
                shall be treated as an eligible retirement plan with 
                respect to such distribution.''.
                    (C) Subsection (a) of section 457 (relating to year 
                of inclusion in gross income) is amended by striking 
                ``or otherwise made available''.
    (b) Allowance of Rollovers From and To 403(b) Plans.--
            (1) Rollovers from section 403(b) plans.--Section 
        403(b)(8)(A)(ii) (relating to rollover amounts) is amended by 
        striking ``such distribution'' and all that follows and 
        inserting ``such distribution to an eligible retirement plan 
        described in section 402(c)(8)(B), and''.
            (2) Rollovers to section 403(b) plans.--Section 
        402(c)(8)(B) (defining eligible retirement plan), as amended by 
        subsection (a), is amended by striking ``and'' at the end of 
        clause (iv), by striking the period at the end of clause (v) 
        and inserting ``, and'', and by adding at the end the 
        following:
                            ``(vi) an annuity contract described in 
                        section 403(b).''
    (c) Expanded Explanation to Recipients of Rollover Distributions.--
Paragraph (1) of section 402(f) (relating to written explanation to 
recipients of distributions eligible for rollover treatment) is amended 
by striking ``and'' at the end of subparagraph (C), by striking the 
period at the end of subparagraph (D) and inserting ``, and'', and by 
adding at the end the following new subparagraph:
                    ``(E) of the provisions under which distributions 
                from the eligible retirement plan receiving the 
                distribution may be subject to restrictions and tax 
                consequences which are different from those applicable 
                to distributions from the plan making such 
                distribution.''
    (d) Conforming Amendments.--
            (1) Section 72(o)(4) is amended by striking ``and 
        408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and 
        457(e)(16)''.
            (2) Section 219(d)(2) is amended by striking ``or 
        408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
            (3) Section 401(a)(31)(B) is amended by striking ``and 
        403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and 
        457(e)(16)''.
            (4) Subparagraph (B) of section 403(b)(8) is amended by 
        inserting ``and (9)'' after ``through (7)''.
            (5) Section 408(a)(1) is amended by striking ``or 
        403(b)(8)'' and inserting ``, 403(b)(8), or 457(e)(16)''.
            (6) Subparagraphs (A) and (B) of section 415(b)(2) are each 
        amended by striking ``and 408(d)(3)'' and inserting 
        ``403(b)(8), 408(d)(3), and 457(e)(16)''.
            (7) Section 415(c)(2) is amended by striking ``and 
        408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
            (8) Section 4973(b)(1)(A) is amended by striking ``or 
        408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
    (e) Effective Date; Special Rule.--
            (1) Effective date.--The amendments made by this section 
        shall apply to distributions after December 31, 1998.
            (2) Special rule.--Notwithstanding any other provision of 
        law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
        Reform Act of 1986, and section 402(d) of the Internal Revenue 
        Code of 1986 (as in effect for taxable years beginning before 
        January 1, 2000), shall not apply to any distribution from a 
        defined contribution plan (as defined in section 408(d)(3)(A) 
        of such Code, as amended by section 302) or a defined benefit 
        plan (as so defined) on behalf of an individual if there was a 
        rollover to such plan on behalf of such individual which is 
        permitted solely by reason of any amendment made by this 
        section.

SEC. 302. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.

    (a) In General.--Subparagraph (A) of section 408(d)(3) (relating to 
rollover amounts) is amended by striking ``or'' at the end of clause 
(ii), by striking the period at the end of clause (iii) and inserting a 
semicolon, and by adding at the end the following:
                            ``(iv)(I) the entire amount received 
                        (including money and other property) represents 
                        the entire interest in the account or the 
                        entire value of the annuity,
                            ``(II) no amount in the account and no part 
                        of the value of the annuity is attributable to 
                        any source other than a rollover contribution 
                        from a defined contribution plan or a defined 
                        benefit plan and any earnings on such rollover, 
                        and
                            ``(III) such entire amount received is paid 
                        into a defined contribution plan or a defined 
                        benefit plan (for the benefit of such 
                        individual) not later than the 60th day after 
                        he receives the payment or distribution; or
                            ``(v)(I) the entire amount received 
                        (including money and other property) represents 
                        the entire interest in the account or the 
                        entire value of the annuity,
                            ``(II) no amount in any such account and no 
                        part of the value of any such annuity is 
                        attributable to any source other than a 
                        rollover contribution from such an account or 
                        annuity of such individual (and any earnings on 
                        such contribution),
                            ``(III) all contributions to all individual 
                        retirement accounts, and all amounts paid for 
                        all individual retirement annuities, of such 
                        individual were allowed as a deduction under 
                        section 219, and
                            ``(IV) such entire amount received is paid 
                        (not later than the 60th day after being so 
                        received) into a defined contribution plan or a 
                        defined benefit plan (for the benefit of such 
                        individual) under which amounts are held in 
                        trust by a person described in section 
                        408(a)(2) or in a manner that satisfies section 
                        401(f).
                If a payment or distribution from an individual 
                retirement plan is described in more than one clause of 
                this subparagraph, such payment or distribution shall 
                be treated as described only in the clause specified by 
                the payee or distributee. For purposes of this 
                subparagraph, the term `defined contribution plan' 
                means a defined contribution plan (as defined in 
                section 414(i)) which includes a trust exempt from tax 
                under section 501(a), an annuity plan described in 
                section 403(a), an annuity contract described in 
                section 403(b), and an eligible deferred compensation 
                plan described in section 457(b) of an eligible 
                employer described in section 457(e)(1)(A). For 
                purposes of clause (iv)(II), the term `defined 
                contribution plan' shall also include an eligible 
                deferred compensation plan described in section 457(b) 
                of an eligible employer described in section 
                457(e)(1)(B). For purposes of this subparagraph, the 
                term `defined benefit plan' means a defined benefit 
                plan (as defined in section 414(j)) which includes a 
                trust exempt from tax under section 501(a).''
    (b) Conforming Amendment.--Paragraph (1) of section 403(b) is 
amended by striking ``section 408(d)(3)(A)(iii)'' and inserting 
``clause (iii), (iv), or (v) of section 408(d)(3)(A)''.
    (c) Effective Date; Special Rule.--
            (1) Effective date.--The amendments made by this section 
        shall apply to distributions after December 31, 1998.
            (2) Special rule.--Notwithstanding any other provision of 
        law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
        Reform Act of 1986, and section 402(d) of the Internal Revenue 
        Code of 1986 (as in effect for taxable years beginning before 
        January 1, 2000), shall not apply to any distribution from a 
        defined contribution plan (as defined in section 408(d)(3)(A) 
        of the such Code, as amended by this section) or a defined 
        benefit plan (as so defined) on behalf of an individual if 
        there was a rollover to such plan on behalf of such individual 
        which is permitted solely by reason of the amendments made by 
        this section.

SEC. 303. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS; HARDSHIP EXCEPTION.

    (a) In General.--
            (1) Subsection (c) of section 402 (relating to rules 
        applicable to rollovers from exempt trusts) (as amended by 
        section 301) is amended by striking paragraph (2) and 
        redesignating paragraphs (3) through (10) as paragraphs (2) 
        through (9), respectively.
            (2) Paragraph (31) of section 401(a) (relating to optional 
        direct transfer of eligible rollover distributions) is amended 
        by striking subparagraph (B) and redesignating subparagraphs 
        (C) and (D) as subparagraphs (B) and (C), respectively.
            (3) Subparagraph (B) of section 408(d)(3) (relating to 
        rollover contributions) is amended by striking ``which was not 
        includible in his gross income because of the application of 
        this paragraph'' and inserting ``to which this paragraph 
        applied''.
    (b) Hardship Exception to 60-Day Rule.--
            (1) Paragraph (2) of section 402(c) (as so redesignated) is 
        amended to read as follows:
            ``(2) Transfer must be made within 60 days of receipt.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), paragraph (1) shall not apply to any 
                transfer of a distribution made after the 60th day 
                following the day on which the distributee received the 
                property distributed.
                    ``(B) Hardship exception.--The Secretary may waive 
                the 60-day requirement under subparagraph (A) where the 
                failure to waive such requirement would be against 
                equity or good conscience, including casualty, 
                disaster, or other events beyond the reasonable control 
                of the individual subject to such requirement.''
            (2) Paragraph (3) of section 408(d) (relating to rollover 
        contributions) is amended by adding at the end the following 
        new subparagraph:
                    ``(H) Waiver of 60-day requirement.--The Secretary 
                may waive the 60-day requirement under subparagraphs 
                (A) and (D) where the failure to waive such requirement 
                would be against equity or good conscience, including 
                casualty, disaster, or other events beyond the 
                reasonable control of the individual subject to such 
                requirement.''
    (c) Conforming Amendments.--
            (1) Subparagraph (B) of section 403(a)(4) is amended by 
        striking ``(2) through (7)'' and inserting ``(2) through (6)''.
            (2) Section 403(b)(8)(A)(ii) (as amended by section 301) is 
        amended by striking ``section 402(c)(8)(B)'' and inserting 
        ``section 402(c)(7)(B)''.
            (3) Paragraph (16) of section 457(e) (as added by section 
        301) is amended--
                    (A) in subparagraph (A)(i) by striking 
                ``402(c)(4)'' and inserting ``402(c)(3)'',
                    (B) in subparagraph (A)(ii) by striking 
                ``402(c)(8)(B)'' and inserting ``402(c)(7)(B)'', and
                    (C) in subparagraph (B) by striking ``paragraphs 
                (2) through (7) and (9) of section 402(c)'' and 
                inserting ``paragraphs (2) through (6) and (8) of 
                section 402(c)''.
    (d) Effective Date.--
            (1) In general.--Except as provided by paragraph (2), the 
        amendments made by this section shall apply to distributions 
        made after December 31, 1998.
            (2) Hardship exception.--The amendments made by subsection 
        (b) shall apply to 60-day periods ending after the date of the 
        enactment of this Act.

SEC. 304. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS FROM DEFINED 
              CONTRIBUTION PLANS.

    (a) Distributions Permitted on Severance From Employment.--
            (1) 401(k) plans.--Section 401(k)(2)(B)(i)(I) (relating to 
        qualified cash or deferred arrangements) is amended by striking 
        ``separation from service'' and inserting ``severance from 
        employment''.
            (2) 403(b) contracts.--
                    (A) Clause (ii) of section 403(b)(7)(A) is amended 
                by striking ``separates from service'' and inserting 
                ``severs from employment''.
                    (B) Paragraph (11) of section 403(b) is amended--
                            (i) by striking ``separation from service'' 
                        in the heading and inserting ``severance from 
                        employment'', and
                            (ii) by striking ``separates from service'' 
                        and inserting ``severs from employment''.
            (3) 457 plans.--Clause (ii) of section 457(d)(1)(A) is 
        amended by striking ``is separated from service'' and inserting 
        ``has a severance from employment''.
    (b) Business Sale Requirements Deleted.--
            (1) In general.--Section 401(k)(2)(B)(i)(II) (relating to 
        qualified cash or deferred arrangements) is amended by striking 
        ``an event'' and inserting ``a plan termination''.
            (2) Conforming amendments.--Section 401(k)(10) is amended--
                    (A) by striking subparagraph (A) and inserting the 
                following:
                    ``(A) In general.--A plan termination is described 
                in this paragraph if the termination of the plan does 
                not involve the establishment or maintenance of another 
                defined contribution plan (other than an employee stock 
                ownership plan as defined in section 4975(e)(7)).'',
                    (B) in subparagraph (B)--
                            (i) by striking ``An event'' and inserting 
                        ``A termination'', and
                            (ii) by striking ``the event'' and 
                        inserting ``the termination'',
                    (C) by striking subparagraph (C), and
                    (D) by striking ``or disposition of assets or 
                subsidiary'' in the heading.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 1998.

SEC. 305. TRANSFEREE DEFINED CONTRIBUTION PLAN NEED NOT HAVE SAME 
              DISTRIBUTION OPTIONS AS TRANSFEROR DEFINED CONTRIBUTION 
              PLAN.

    (a) Amendment to 1986 Code.--Section 411(d)(6) (relating to accrued 
benefit not to be decreased by amendment) is amended by adding at the 
end the following new subparagraph:
                    ``(D) Plan transfers.--A defined contribution plan 
                (in this subparagraph referred to as the `transferee 
                plan') shall not be treated as failing to meet the 
                requirements of this paragraph merely because the 
                transferee plan does not provide some or all of the 
                forms of distribution previously available under 
                another defined contribution plan (in this subparagraph 
                referred to as the `transferor plan') to the extent 
                that--
                            ``(i) the forms of distribution previously 
                        available under the transferor plan applied to 
                        the account of a participant or beneficiary 
                        under the transferor plan that was transferred 
                        from the transferor plan to the transferee plan 
                        pursuant to a direct transfer rather than 
                        pursuant to a distribution from the transferor 
                        plan,
                            ``(ii) the terms of both the transferor 
                        plan and the transferee plan authorize the 
                        transfer described in clause (i),
                            ``(iii) the transfer described in clause 
                        (i) was made pursuant to a voluntary election 
                        by the participant or beneficiary whose account 
                        was transferred to the transferee plan,
                            ``(iv) the election described in clause 
                        (iii) was made after the participant or 
                        beneficiary received a notice describing the 
                        consequences of making the election,
                            ``(v) if the transferor plan provides for 
                        an annuity as the normal form of distribution 
                        under the plan in accordance with section 417, 
                        the transfer is made with the consent of the 
                        participant's spouse (if any), and such consent 
                        meets requirements similar to the requirements 
                        imposed by section 417(a)(2), and
                            ``(vi) the transferee plan allows the 
                        participant or beneficiary described in clause 
                        (iii) to receive any distribution to which the 
                        participant or beneficiary is entitled under 
                        transferee plan in the form of a single sum 
                        distribution.''.
    (b) Amendment to ERISA.--Section 204(g) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1054(g)) is amended by adding at 
the end the following new paragraph:
    ``(4) A defined contribution plan (in this paragraph referred to as 
the `transferee plan') shall not be treated as failing to meet the 
requirements of this subsection merely because the transferee plan does 
not provide some or all of the forms of distribution previously 
available under another defined contribution plan (in this paragraph 
referred to as the `transferor plan') to the extent that--
            ``(A) the forms of distribution previously available under 
        the transferor plan applied to the account of a participant or 
        beneficiary under the transferor plan that was transferred from 
        the transferor plan to the transferee plan pursuant to a direct 
        transfer rather than pursuant to a distribution from the 
        transferor plan,
            ``(B) the terms of both the transferor plan and the 
        transferee plan authorize the transfer described in 
        subparagraph (A),
            ``(C) the transfer described in subparagraph (A) was made 
        pursuant to a voluntary election by the participant or 
        beneficiary whose account was transferred to the transferee 
        plan,
            ``(D) the election described in subparagraph (C) was made 
        after the participant or beneficiary received a notice 
        describing the consequences of making the election,
            ``(E) if the transferor plan provides for an annuity as the 
        normal form of distribution under the plan in accordance with 
        section 205, the transfer is made with the consent of the 
        participant's spouse (if any), and such consent meets 
        requirements similar to the requirements imposed by section 
        205(c)(2), and
            ``(F) the transferee plan allows the participant or 
        beneficiary described in subparagraph (C) to receive any 
        distribution to which the participant or beneficiary is 
        entitled under transferee plan in the form of a single sum 
        distribution.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transfers after December 31, 1998.

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

    (a) 403(b) Plans.--Subsection (b) of section 403 is amended by 
adding at the end the following new paragraph:
            ``(13) Trustee-to-trustee transfers to purchase permissive 
        service credit.--No amount shall be includible in gross income 
        by reason of a direct trustee-to-trustee transfer to a defined 
        benefit governmental plan (as defined in section 414(d)) if 
        such transfer is--
                    ``(A) for the purchase of permissive service credit 
                (as defined in section 415(n)(3)(A)) under such plan, 
                or
                    ``(B) a repayment to which section 415 does not 
                apply by reason of subsection (k)(3) thereof.''
    (b) 457 Plans.--
            (1) Subsection (e) of section 457 is amended by adding at 
        the end the following new paragraph:
            ``(17) Trustee-to-trustee transfers to purchase permissive 
        service credit.--No amount shall be includible in gross income 
        by reason of a direct trustee-to-trustee transfer to a defined 
        benefit governmental plan (as defined in section 414(d)) if 
        such transfer is--
                    ``(A) for the purchase of permissive service credit 
                (as defined in section 415(n)(3)(A)) under such plan, 
                or
                    ``(B) a repayment to which section 415 does not 
                apply by reason of subsection (k)(3) thereof.''
            (2) Section 457(b)(2), as amended by section 301, is 
        amended by striking ``(other than rollover amounts)'' and 
        inserting ``(other than rollover amounts and amounts received 
        in a transfer referred to in subsection (e)(17))''.
    (c) Effective Date.--The amendments made by this section shall 
apply to trustee-to-trustee transfers after December 31, 1998.

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

    (a) Amendments to 1986 Code.--
            (1) Section 411(a)(11) (relating to restrictions on certain 
        mandatory distributions) is amended by adding at the end the 
        following:
                    ``(D) Special rule for rollover contributions.--A 
                plan shall not fail to meet the requirements of this 
                paragraph if, under the terms of the plan, the present 
                value of the nonforfeitable accrued benefit is 
                determined without regard to that portion of such 
                benefit which is attributable to rollover contributions 
                (and earnings allocable thereto). For purposes of this 
                subparagraph, the term `rollover contributions' means 
                any rollover contribution under sections 402(c), 
                403(a)(4), 403(b)(8), clause (ii), (iii), or (iv) of 
                408(d)(3)(A), and 457(e)(16).''.
            (2) Clause (i) of section 457(e)(9)(A) is amended by 
        striking ``such amount'' and inserting ``the portion of such 
        amount which is not attributable to rollover contributions (as 
        defined in section 411(a)(11)(D))''.
    (b) Amendment to ERISA.--Section 203(e) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1053(e)) is amended by adding at 
the end the following:
    ``(4) A plan shall not fail to meet the requirements of this 
subsection if, under the terms of the plan, the present value of the 
nonforfeitable accrued benefit is determined without regard to that 
portion of such benefit which is attributable to rollover contributions 
(and earnings allocable thereto). For purposes of this paragraph, the 
term `rollover contributions' means any rollover contribution under 
sections 402(c), 403(a)(4), 403(b)(8), clause (ii), (iii), or (iv) of 
408(d)(3)(A), and 457(e)(16) of the Internal Revenue Code of 1986.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 1998.

        TITLE IV--STRENGTHENING PENSION SECURITY AND ENFORCEMENT

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

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

``In the case of any plan year      The applicable percentage is--
        beginning in--
    1999..........................................                 155 
    2000..........................................                 160 
    2001..........................................                 165 
    2002..........................................               170.''
            (2) ERISA amendment.--Section 302(c)(7) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7)) 
        is amended--
                    (A) by striking ``the applicable percentage'' in 
                subparagraph (A)(i)(I) and inserting ``in the case of 
                plan years beginning before January 1, 2003, the 
                applicable percentage'', and
                    (B) by amending subparagraph (F) to read as 
                follows:
            ``(F) Applicable percentage.--For purposes of subparagraph 
        (A)(i)(I), the applicable percentage shall be determined in 
        accordance with the following table:

``In the case of any plan year      The applicable percentage is--
        beginning in--
    1999..........................................                 155 
    2000..........................................                 160 
    2001..........................................                 165 
    2002..........................................               170.''
            (3) Effective dates.--The amendments made by this 
        subsection shall apply to plan years beginning after December 
        31, 1998.
    (b) Maximum Contribution Deduction Rules Modified and Applied to 
All Defined Benefit Plans.--
            (1) In general.--Section 404(a)(1)(D) (relating to special 
        rule in case of certain plans) is amended--
                    (A) by striking ``which has more than 100 
                participants for the plan year'',
                    (B) by striking ``unfunded current liability 
                determined under section 414(l)'' and inserting 
                ``unfunded termination liability (determined as if the 
                proposed termination date referred to in section 
                4041(b)(2)(A)(i)(II) of the Employee Retirement Income 
                Security Act of 1974 were the last day of the plan 
                year)'',
                    (C) by inserting after the first sentence the 
                following: ``For purposes of this subparagraph, in the 
                case of a plan which has less than 100 participants for 
                the plan year, termination liability shall not include 
                the liability attributable to benefit increases for 
                highly compensated employees (as defined in section 
                414(q)) brought about by plan amendment within the last 
                2 years before the termination date.'', and
                    (D) by striking ``(other than a multiemployer 
                plan)''.
            (2) Effective date.--The amendments made by this subsection 
        shall apply to plan years beginning after the date of enactment 
        of this Act.

SEC. 402. EXTENSION OF MISSING PARTICIPANTS PROGRAM TO MULTIEMPLOYER 
              PLANS.

    (a) In General.--Section 4050 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1350) is amended by redesignating 
subsection (c) as subsection (d) and by inserting after subsection (b) 
the following:
    ``(c) Multiemployer Plans.--The corporation shall prescribe rules 
similar to the rules in subsection (a) for multiemployer plans covered 
by this title that terminate under section 4041A.''
    (b) Conforming Amendment.--Section 206(f) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1056(f)) is amended 
by striking ``the plan shall provide that,''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions made after final regulations implementing 
subsection (c) of section 4050 of the Employee Retirement Income 
Security Act of 1974 (as added by subsection (a)) are prescribed.

SEC. 403. CIVIL PENALTIES FOR BREACH OF FIDUCIARY RESPONSIBILITY.

    (a) Imposition and Amount of Penalty Made Discretionary.--Section 
502(l)(1) of the Employee Retirement Income Security Act of 1974 (29 
U.S.C. 1132(l)(1)) is amended--
            (1) by striking ``shall'' and inserting ``may'', and
            (2) by striking ``equal to'' and inserting ``not greater 
        than''.
    (b) Applicable Recovery Amount.--Section 502(l)(2) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1132(l)(2)) is 
amended to read as follows:
    ``(2) For purposes of paragraph (1), the term `applicable recovery 
amount' means any amount which is recovered from (or on behalf of) any 
fiduciary or other person with respect to a breach or violation 
described in paragraph (1) on or after the 90th day following receipt 
by such fiduciary or other person of written notice from the Secretary 
of the violation, whether paid voluntarily or by order of a court in a 
judicial proceeding instituted by the Secretary under subsection (a)(2) 
or (a)(5). The Secretary may, in the Secretary's sole discretion, 
extend the 90-day period described in the preceding sentence.''
    (c) Other Rules.--Section 502(l) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132(l)) is amended by adding at the 
end the following:
    ``(5) A person shall be jointly and severally liable for the 
penalty described in paragraph (1) to the same extent that such person 
is jointly and severally liable for the applicable recovery amount on 
which the penalty is based.
    ``(6) No penalty shall be assessed under this subsection unless the 
person against whom the penalty is assessed is given notice and 
opportunity for a hearing with respect to the violation and applicable 
recovery amount.''
    (d) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to any breach of fiduciary responsibility or other 
        violation of part 4 of subtitle B of title I of the Employee 
        Retirement Income Security Act of 1974 occurring on or after 
        the date of enactment of this Act.
            (2) Transition rule.--In applying the amendment made by 
        subsection (b) (relating to applicable recovery amount), a 
        breach or other violation occurring before the date of 
        enactment of this Act which continues after the 180th day after 
        such date (and which may have been discontinued at any time 
        during its existence) shall be treated as having occurred after 
        such date of enactment.

SEC. 404. QUALIFIED EMPLOYER PLANS PROHIBITED FROM MAKING LOANS THROUGH 
              CREDIT CARDS AND OTHER REVOLVING CREDIT ARRANGEMENTS.

    (a) In General.--Section 401(a) (relating to qualified pension, 
profit-sharing, and stock bonus plans) is amended by inserting after 
paragraph (34) the following:
            ``(35) Prohibition of loans through credit cards and other 
        intermediaries.--A trust shall not constitute a qualified trust 
        under this section if the plan makes any loan to any 
        beneficiary under the plan through the use of any credit or 
        debit card, any line of credit, or any other revolving credit 
        arrangement.''
    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after the date of enactment of this Act.

SEC. 405. PENALTY TAX RELIEF FOR SOUND PENSION FUNDING.

    (a) In General.--Subsection (c) of section 4972 (relating to 
nondeductible contributions) is amended by adding at the end the 
following:
            ``(7) Defined benefit plan exception.--In determining the 
        amount of nondeductible contributions for any taxable year, an 
        employer may elect for such year not to take into account any 
        contributions to a defined benefit plan except to the extent 
        that such contributions exceed the full-funding limitation (as 
        defined in section 412(c)(7), determined without regard to 
        subparagraph (A)(i)(I) thereof). For purposes of this 
        paragraph, the deductible limits under section 404(a)(7) shall 
        first be applied to amounts contributed to defined contribution 
        plans and then to amounts described in this paragraph. If an 
        employer makes an election under this paragraph for a taxable 
        year, paragraph (6) shall not apply to such employer for such 
        taxable year.''
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1998.

SEC. 406. PROTECTION OF INVESTMENT OF EMPLOYEE CONTRIBUTIONS TO 401(K) 
              PLANS.

    (a) In General.--Section 1524(b) of the Taxpayer Relief Act of 1997 
is amended to read as follows:
    ``(b) Effective Date.--
            ``(1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to elective 
        deferrals for plan years beginning after December 31, 1998.
            ``(2) Nonapplication to previously acquired property.--The 
        amendments made by this section shall not apply to any elective 
        deferral if such deferral is used for the payment of 
        indebtedness incurred before January 1, 1999 (or any 
        refinancing thereof) on the acquisition by the plan of employer 
        securities or employer real property--
                    ``(A) before January 1, 1999, or
                    ``(B) after such date pursuant to a written 
                contract which was binding on such date and at all 
                times thereafter on such plan.''
    (b) Effective Date.--The amendment made by this section shall apply 
as if included in the provision of the Taxpayer Relief Act of 1997 to 
which it relates.

               TITLE V--ENCOURAGING RETIREMENT EDUCATION

SEC. 501. PERIODIC PENSION BENEFITS STATEMENTS.

    (a) In General.--Section 105(a) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1025(a)) is amended by striking ``shall 
furnish to any plan participant or beneficiary who so requests in 
writing, a statement'' and inserting ``shall furnish to each plan 
participant at least once each year (3 years in the case of a defined 
benefit plan) or upon written request of a plan participant or 
beneficiary, a statement in written or electronic form''.
    (b) Rule for Multiemployer Plans.--Section 105(d) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1025(d)) is amended 
to read as follows:
    ``(d) Upon written request of a plan participant or beneficiary, 
each administrator of a plan to which more than 1 unaffiliated employer 
is required to contribute shall furnish a statement described in 
subsection (a) in written or electronic form.''
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after the earlier of--
            (1) the date of issuance by the Secretary of Labor of 
        regulations providing guidance for simplifying defined benefit 
        plan calculations with respect to the information required 
        under section 105 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1025), or
            (2) December 31, 1998.

SEC. 502. SMALL BUSINESS ADMINISTRATION ADVICE TO SMALL BUSINESSES.

    (a) Preparation of Plan.--The Administrator of the Small Business 
Administration shall, not later than 9 months after the date of the 
enactment of this Act, prepare and submit to Congress a plan to--
            (1) increase the awareness of the American people of 
        retirement benefits,
            (2) increase the understanding of the American people of 
        the types of plans and other options available to provide 
        retirement benefits, including simple retirement plans, payroll 
        deduction IRAs, and SAFE annuities and trusts, and
            (3) periodically update small business owners on changes 
        made by Congress and the executive branch in the laws, 
        regulations, and rules governing retirement benefits.
The Administrator shall consult with the Secretary of Labor in 
preparing the plan under this subsection.
    (b) Posting of Information on Internet.--The Administrator of the 
Small Business Administration shall post on the Internet information on 
the types of plans and other options available to provide retirement 
benefits, including simple retirement plans, payroll deduction IRAs, 
and SAFE annuities and trusts.

SEC. 503. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED RETIREMENT 
              ADVICE.

    (a) In General.--Section 132(e) (defining de minimis fringe) is 
amended by adding at the end the following:
            ``(3) Treatment of certain retirement and financial 
        planning services.--The provision of retirement and financial 
        planning services by an employer to employees on an individual 
        basis, to the extent not described in subsection (d), shall be 
        treated as a de minimis fringe. The preceding sentence shall 
        only apply to the extent such services are available on 
        substantially the same terms to each member of the group of 
        employees normally provided education and information regarding 
        the employer's pension plan.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1998.

SEC. 504. DISSEMINATION OF GOVERNMENT RETIREMENT EDUCATION PROGRAM 
              STRATEGIES TO PRIVATE COMPANIES.

    (a) Provision of Strategies.--The Director of the Office of 
Personnel Management shall develop a program under which successful 
Federal Government retirement education program strategies are made 
available to nongovernmental retirement plan sponsors in such written 
and nonwritten formats as the Director determines appropriate.
    (b) Report.--Not later than December 31, 1999, the Director of the 
Office of Personnel Management shall report to Congress on the status 
of the program developed under subsection (a), including any 
recommendations for improving the dissemination of the strategies 
described in subsection (a).

                      TITLE VI--REDUCING RED TAPE

SEC. 601. INTERMEDIATE SANCTIONS FOR INADVERTENT FAILURES.

    (a) In General.--Section 401(a) (relating to qualified pension, 
profit-sharing, and stock bonus plans), as amended by section 404, is 
amended by inserting after paragraph (35) the following:
            ``(36) Protection from disqualification upon timely 
        correction or payment of fine.--A trust shall not fail to 
        constitute a qualified trust under this section if the plan of 
        which such trust is a part has made good faith efforts to meet 
        the requirements of this section, has inadvertently failed to 
        satisfy 1 or more of such requirements, and either--
                    ``(A) substantially corrects (to the extent 
                possible) such failure before the date the plan becomes 
                subject to a plan examination for the applicable year 
                (as determined under rules prescribed by the 
                Secretary), or
                    ``(B) substantially corrects (to the extent 
                possible) such failure on or after such date.
        The Secretary may require the sponsoring employer to make a 
        payment to the Secretary in an amount that does not exceed an 
        amount that bears a reasonable relationship to the severity of 
        the plan's failure to satisfy the requirements of this 
        section.''
    (b) Application to Cash or Deferred Arrangements.--Section 401(k) 
is amended by adding at the end the following:
            ``(13) Protection from disqualification.--Rules similar to 
        the rules set forth in section 401(a)(36) shall apply for 
        purposes of determining whether a cash or deferred arrangement 
        is a qualified cash or deferred arrangement.''
    (c) Application to Section 403(b) Annuity Contracts.--Section 
403(b), as amended by section 306, is amended by adding at the end the 
following:
            ``(14) Correction of errors.--
                    ``(A) In general.--Under distribution and reporting 
                procedures conforming to those applicable under section 
                415, the Secretary shall allow for the correction of 
                elective deferrals (within the meaning of section 
                402(g)(3)(C)) which, as a result of reasonable error, 
                would cause the limitation of section 403(b)(2) to be 
                exceeded.
                    ``(B) Protection from disqualification.--For 
                purposes of determining whether the exclusion from 
                gross income under paragraph (1) is applicable to an 
                employee for any taxable year, rules similar to the 
                rules set forth in section 401(a)(36) shall apply to 
                any annuity contract purchased under this subsection or 
                any plan established to meet the requirements of this 
                subsection.''
    (d) Income Inclusion for Disqualification Not Applicable to 
Nonhighly Compensated Employees.--Section 402(b) (relating to 
taxability of beneficiary of nonexempt trust) is amended by striking 
paragraph (4) and inserting the following:
            ``(4) Income inclusion for disqualification not applicable 
        to nonhighly compensated employees.--Paragraphs (1) and (2) 
        shall not apply to employees who are not highly compensated 
        employees.
            ``(5) Failure to meet requirements of section 401(a)(26) or 
        410(b).--If 1 of the reasons a trust is not exempt from tax 
        under section 501(a) is the failure of the plan to meet the 
        requirements of section 401(a)(26) or 410(b), then a highly 
        compensated employee shall, in lieu of the amount determined 
        under paragraph (1) or (2), include in gross income for the 
        taxable year with or within which the taxable year of the trust 
        ends an amount equal to the vested accrued benefit of such 
        employee (other than the employee's investment in the contract) 
        as of the close of such taxable year of the trust.
            ``(6) Highly compensated employee.--For purposes of this 
        subsection, the term `highly compensated employee' has the 
        meaning given such term by section 414(q).''
    (e) Effective Date.--The amendments made by this section shall take 
effect on the date of enactment of this Act.

SEC. 602. MODIFICATION OF TIMING OF PLAN VALUATIONS.

    (a) In General.--Section 412(c)(9) (relating to annual valuation) 
is amended--
            (1) by striking ``For purposes'' and inserting the 
        following:
                    ``(A) In general.--For purposes'', and
            (2) by adding at the end the following:
                    ``(B) Election to use prior year valuation.--
                            ``(i) In general.--If, for any plan year--
                                    ``(I) an election is in effect 
                                under this subparagraph with respect to 
                                a plan, and
                                    ``(II) the assets of the plan are 
                                not less than 125 percent of the plan's 
                                current liability (as defined in 
                                paragraph (7)(B)), determined as of the 
valuation date for the preceding plan year,
                        then this section shall be applied using the 
                        information available as of such valuation 
                        date.
                            ``(ii) Adjustments.--Information under 
                        clause (i) shall, in accordance with 
                        regulations, be actuarially adjusted to reflect 
                        significant differences in participants.
                            ``(iii) Election.--An election under this 
                        subparagraph, once made, shall be irrevocable 
                        without the consent of the Secretary.''
    (b) Amendments to ERISA.--Paragraph (9) of section 302(c) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1053(c)) is 
amended--
            (1) by inserting ``(A)'' after ``(9)'', and
            (2) by adding at the end the following:
    ``(B)(i) If, for any plan year--
            ``(I) an election is in effect under this subparagraph with 
        respect to a plan, and
            ``(II) the assets of the plan are not less than 125 percent 
        of the plan's current liability (as defined in paragraph 
        (7)(B)), determined as of the valuation date for the preceding 
        plan year,
then this section shall be applied using the information available as 
of such valuation date.
    ``(ii) Information under clause (i) shall, in accordance with 
regulations, be actuarially adjusted to reflect significant differences 
in participants.
    ``(iii) An election under this subparagraph, once made, shall be 
irrevocable without the consent of the Secretary of the Treasury.''
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning on or after the date of enactment of this 
Act.

SEC. 603. RULES FOR SUBSTANTIAL OWNERS RELATING TO PLAN TERMINATIONS.

    (a) Modification of Phase-in of Guarantee.--Section 4022(b)(5) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1322(b)(5)) is amended to read as follows:
    ``(5)(A) For purposes of this paragraph, the term `majority owner' 
means an individual who, at any time during the 60-month period ending 
on the date the determination is being made--
            ``(i) owns the entire interest in an unincorporated trade 
        or business,
            ``(ii) in the case of a partnership, is a partner who owns, 
        directly or indirectly, 50 percent or more of either the 
        capital interest or the profits interest in such partnership, 
        or
            ``(iii) in the case of a corporation, owns, directly or 
        indirectly, 50 percent or more in value of either the voting 
        stock of that corporation or all the stock of that corporation.
For purposes of clause (iii), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 shall apply 
(determined without regard to section 1563(e)(3)(C)).
    ``(B) In the case of a participant who is a majority owner, the 
amount of benefits guaranteed under this section shall not exceed the 
product of--
            ``(i) a fraction (not to exceed 1) the numerator of which 
        is the number of years from the later of the effective date or 
        the adoption date of the plan to the termination date, and the 
        denominator of which is 30, and
            ``(ii) the amount of the majority owner's monthly benefits 
        guaranteed under subsection (a) (as limited by paragraph (3) of 
        this subsection).''
    (b) Modification of Allocation of Assets.--
            (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
        striking ``section 4022(b)(5)'' and inserting ``section 
        4022(b)(5)(B)''.
            (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
        amended--
                    (A) by striking ``(5)'' in paragraph (2) and 
                inserting ``(4), (5),'', and
                    (B) by redesignating paragraphs (3) through (6) as 
                paragraphs (4) through (7), respectively, and by 
                inserting after paragraph (2) the following:
            ``(3) If assets available for allocation under paragraph 
        (4) of subsection (a) are insufficient to satisfy in full the 
        benefits of all individuals who are described in that 
        paragraph, the assets shall be allocated first to benefits 
        described in subparagraph (A) of that paragraph. Any remaining 
        assets shall then be allocated to benefits described in 
        subparagraph (B) of that paragraph. If assets allocated to such 
        subparagraph (B) are insufficient to satisfy in full the 
        benefits described in that subparagraph, the assets shall be 
        allocated pro rata among individuals on the basis of the 
        present value (as of the termination date) of their respective 
        benefits described in that subparagraph.''
    (c) Conforming Amendments.--
            (1) Section 4021 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1321) is amended--
                    (A) in subsection (b)(9), by striking ``as defined 
                in section 4022(b)(6)'', and
                    (B) by adding at the end the following:
    ``(d) For purposes of subsection (b)(9), the term `substantial 
owner' means an individual who, at any time during the 60-month period 
ending on the date the determination is being made--
            ``(1) owns the entire interest in an unincorporated trade 
        or business,
            ``(2) in the case of a partnership, is a partner who owns, 
        directly or indirectly, more than 10 percent of either the 
        capital interest or the profits interest in such partnership, 
        or
            ``(3) in the case of a corporation, owns, directly or 
        indirectly, more than 10 percent in value of either the voting 
        stock of that corporation or all the stock of that corporation.
For purposes of paragraph (3), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 shall apply 
(determined without regard to section 1563(e)(3)(C)).''
            (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) 
        is amended by striking ``section 4022(b)(6)'' and inserting 
        ``section 4021(d)''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to plan 
        terminations--
                    (A) under section 4041(c) of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 
                1341(c)) with respect to which notices of intent to 
                terminate are provided under section 4041(a)(2) of such 
                Act (29 U.S.C. 1341(a)(2)) on or after the date of 
                enactment of this Act, or
                    (B) under section 4042 of such Act (29 U.S.C. 1342) 
                with respect to which proceedings are instituted by the 
                corporation on or after such date.
            (2) Conforming amendments.--The amendments made by 
        subsection (c) shall take effect on the date of enactment of 
        this Act.

SEC. 604. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF DIVIDEND 
              DEDUCTION.

    (a) In General.--Section 404(k)(2)(A) (defining applicable 
dividends) is amended by striking ``or'' at the end of clause (ii), by 
redesignating clause (iii) as clause (iv), and by inserting after 
clause (ii) the following:
                            ``(iii) is, at the election of such 
                        participants or their beneficiaries--
                                    ``(I) payable as provided in clause 
                                (i) or (ii), or
                                    ``(II) paid to the plan and 
                                reinvested in qualifying employer 
                                securities, or''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1998.

SEC. 605. MODIFICATION OF 403(B) EXCLUSION ALLOWANCE TO CONFORM TO 415 
              MODIFICATION.

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

SEC. 606. SAFETY VALVE FROM MECHANICAL RULES.

    (a) In General.--The Secretary of the Treasury shall, by 
regulation, provide that the plan shall be deemed to satisfy the 
requirements of section 401(a)(4) of the Internal Revenue Code of 1986 
if such plan satisfies the facts and circumstances test under section 
401(a)(4) of such Code, as in effect before January 1, 1994, but only 
if--
            (1) the plan satisfies conditions prescribed by the 
        Secretary to appropriately limit the availability of such test, 
        and
            (2) the plan is submitted to the Secretary for a 
        determination of whether it satisfies such test.
Paragraph (2) shall only apply to the extent provided by the Secretary.
    (b) Effective Dates.--
            (1) Regulations.--The regulation required by subsection (a) 
        shall apply to years beginning after December 31, 1999.
            (2) Conditions of availability.--Any condition of 
        availability prescribed by the Secretary under subsection 
        (a)(1) shall not apply before the first year beginning not less 
        than 120 days after the date on which such condition is 
        prescribed.

SEC. 607. COVERAGE TEST FLEXIBILITY.

    (a) In General.--Section 410(b)(1) (relating to minimum coverage 
requirements) is amended by adding at the end the following:
                    ``(D) In the case that the plan fails to meet the 
                requirements of subparagraphs (A), (B) and (C), the 
                plan--
                            ``(i) satisfies subparagraph (B), as in 
                        effect immediately before the enactment of the 
                        Tax Reform Act of 1986,
                            ``(ii) is submitted to the Secretary for a 
                        determination of whether it satisfies the 
                        requirement described in clause (i), and
                            ``(iii) satisfies conditions prescribed by 
                        the Secretary by regulation that appropriately 
                        limit the availability of this subparagraph.
                Clause (ii) shall apply only to the extent provided by 
                the Secretary.''
    (b) Effective Dates.--
            (1) In general.--The amendment made by subsection (a) shall 
        apply to years beginning after December 31, 1999.
            (2) Conditions of availability.--Any condition of 
        availability prescribed by the Secretary under regulations 
        prescribed by the Secretary under section 410(b)(1)(D) of the 
        Internal Revenue Code of 1986 shall not apply before the first 
        year beginning not less than 120 days after the date on which 
        such condition is prescribed.

SEC. 608. SIMPLIFICATION OF CASH-OUT RULE.

    (a) Modification of Regulations.--The Secretary of the Treasury 
shall modify the regulations issued under sections 411(a)(11) and 
417(e) of the Internal Revenue Code of 1986 to delete the rule set 
forth in the last sentence of Treasury Regulation section 1.411(a)-
11(c)(3) and in the last sentence of Treasury Regulation section 
1.417(e)-1(b)(2)(i).
    (b) Effective Date.--The modifications made under subsection (a) 
shall apply to years beginning after December 31, 1998.

SEC. 609. SECTION 457 INAPPLICABLE TO CERTAIN MIRROR PLANS.

    (a) In General.--Subsection (e) of section 457 (relating to 
deferred compensation plans of State and local governments and tax-
exempt organizations), as amended by section 306, is amended by adding 
at the end the following:
            ``(18) This section shall not apply to a plan, program, or 
        arrangement maintained solely for the purposes of providing 
        retirement benefits for employees in excess of the limitations 
        imposed by sections 401(a)(17) or 415.''
    (b) Certain Deferred Compensation Not Taken Into Account.--Section 
457(c) (relating to individuals who are participants in more than 1 
plan), as amended by section 113, is amended by adding at the end the 
following:
            ``(2) Exception for mirror plans.--This section shall be 
        applied without regard to a plan, program, or arrangement 
        described in subsection (e)(18).''
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1998.

SEC. 610. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

    (a) Expansion of Period.--
            (1) In general.--Section 417(a)(6)(A) (defining applicable 
        election period) is amended by striking ``90-day'' and 
        inserting ``one-year''.
            (2) Modification of regulations.--The Secretary of the 
        Treasury shall modify the regulations under sections 402(f), 
        411(a)(11), and 417 of the Internal Revenue Code of 1986 to 
        substitute ``one year'' for ``90 days'' each place it appears 
        in Treasury Regulations sections 1.402(f)-1 Q/A-2, 1.411(a)-
        11T(c)(2), and 1.417(e)-1T(b)(3).
            (3) Effective date.--The amendment made by paragraph (1) 
        and the modifications required by paragraph (2) shall apply to 
        years beginning after December 31, 1998.
    (b) Consent Regulation Inapplicable to Certain Distributions.--
            (1) In general.--The Secretary of the Treasury shall modify 
        the regulations under section 411(a)(11) of the Internal 
        Revenue Code of 1986 to provide that the description of a 
        participant's right, if any, to defer receipt of a distribution 
        shall also describe the consequences of failing to defer such 
        receipt.
            (2) Effective date.--The modifications required by 
        paragraph (1) shall apply to years beginning after December 31, 
        1998.

SEC. 611. CONFORMING AMENDMENTS RELATING TO ELECTION TO RECEIVE TAXABLE 
              CASH COMPENSATION IN LIEU OF NONTAXABLE TRANSPORTATION 
              FRINGE BENEFITS.

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

SEC. 612. REPEAL OF TRANSITION RULE RELATING TO CERTAIN HIGHLY 
              COMPENSATED EMPLOYEES.

    (a) In General.--Paragraph (4) of section 1114(c)(4) of the Tax 
Reform Act of 1986 is hereby repealed.
    (b) Effective Date.--The repeal made by subsection (a) shall apply 
to plan years beginning after December 31, 1998.

SEC. 613. EXTENSION TO INTERNATIONAL ORGANIZATIONS OF MORATORIUM ON 
              APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE 
              TO STATE AND LOCAL PLANS.

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

SEC. 614. ANNUAL REPORT DISSEMINATION.

    (a) In General.--Section 104(b)(3) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1024(b)(3)) is amended by 
striking ``shall furnish'' and inserting ``shall make available for 
examination (and, upon request, shall furnish)''.
    (b) Effective Date.--The amendment made by this section shall apply 
to reports for years beginning after December 31, 1997.

SEC. 615. EMPLOYEES OF TAX-EXEMPT ENTITIES.

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

SEC. 616. REPEAL OF THE MULTIPLE USE TEST.

    (a) In General.--Paragraph (9) of section 401(m) (relating to 
nondiscrimination test for matching contributions and employee 
contributions) is amended to read as follows:
            ``(9) Regulations.--The Secretary shall prescribe such 
        regulations as may be necessary to carry out the purposes of 
        this subsection and subsection (k), including regulations 
        permitting appropriate aggregation of plans and 
        contributions.''
    (b) Effective Date.--The amendment made by this section shall apply 
to years after December 31, 1998.

                       TITLE VII--PLAN AMENDMENTS

SEC. 701. PROVISIONS RELATING TO PLAN AMENDMENTS.

    (a) In General.--If this section applies to any plan or contract 
amendment--
            (1) such plan or contract shall be treated as being 
        operated in accordance with the terms of the plan during the 
        period described in subsection (b)(2)(A), and
            (2) such plan shall not fail to meet the requirements of 
        section 411(d)(6) of the Internal Revenue Code of 1986 or 
        section 204(g) of the Employee Retirement Income Security Act 
        of 1974 (29 U.S.C. 1054(g)) by reason of such amendment.
    (b) Amendments to Which Section Applies.--
            (1) In general.--This section shall apply to any amendment 
        to any plan or annuity contract which is made--
                    (A) pursuant to any amendment made by this Act, or 
                pursuant to any regulation issued under this Act, and
                    (B) before the last day of the first plan year 
                beginning on or after January 1, 2001.
        In the case of a government plan (as defined in section 414(d) 
        of the Internal Revenue Code of 1986 and section 3(32) of the 
        Employee Retirement Income Security Act of 1974), this 
        paragraph shall be applied by substituting ``2003'' for 
        ``2001''.
            (2) Conditions.--This section shall not apply to any 
        amendment unless--
                    (A) during the period--
                            (i) beginning on the date the legislative 
                        or regulatory amendment described in paragraph 
                        (1)(A) takes effect (or in the case of a plan 
                        or contract amendment not required by such 
                        legislative or regulatory amendment, the 
                        effective date specified by the plan), and
                            (ii) ending on the date described in 
                        paragraph (1)(B) (or, if earlier, the date the 
                        plan or contract amendment is adopted),
                the plan or contract is operated as if such plan or 
                contract amendment were in effect, and
                    (B) such plan or contract amendment applies 
                retroactively for such period.
                                 <all>