[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 889 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 889

         To provide for pension reform, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 12, 1997

Mr. Graham  (for himself, Mr. Grassley, Mr. Hatch, Mrs. Boxer, and Mr. 
   Jeffords) 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; AMENDMENT OF 1986 CODE.

    (a) Short Title.--This Act may be cited as the ``Retirement 
Security for the 21st Century Act''.
    (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents; amendment of 1986 Code.
               TITLE I--EXPANDING SMALL BUSINESS COVERAGE

Sec. 101. Matching contributions of self-employed individuals not 
                            treated as elective deferrals.
Sec. 102. Plan loans for subchapter S owners, partners, and sole 
                            proprietors.
Sec. 103. Contributions to IRAs through payroll deductions.
Sec. 104. SAFE annuities and trusts.
Sec. 105. Modification of top-heavy rules.
          TITLE II--ENHANCING FAIRNESS FOR WOMEN AND FAMILIES

Sec. 201. Individual's participation in plan not treated as 
                            participation by spouse.
Sec. 202. Elimination of percentage of salary limitation for elective 
                            deferrals of nonhighly compensated 
                            employees.
Sec. 203. Make-up elective contributions for periods of maternity or 
                            paternity leave.
Sec. 204. Faster vesting of certain employer matching contributions.
Sec. 205. Deferred annuities for surviving spouses of Federal 
                            employees.
Sec. 206. Clarification of tax treatment of division of section 457 
                            plan benefits upon divorce.
           TITLE III--INCREASING PORTABILITY FOR PARTICIPANTS

Sec. 301. General rules for rollovers.
Sec. 302. Plans not disqualified merely by accepting rollover 
                            contributions.
Sec. 303. Treatment of transfers between defined contribution plans.
Sec. 304. Rationalization of restrictions on distributions from 401(k) 
                            plans.
        TITLE IV--STRENGTHENING PENSION SECURITY AND ENFORCEMENT

Sec. 401. Repeal of 150 percent of current liability funding limit.
Sec. 402. Missing participants.
Sec. 403. Modification of prohibition of assignment or alienation.
Sec. 404. Prohibited transactions.
Sec. 405. Diversification in section 401(k) plan investments.
Sec. 406. Periodic pension benefits statements.
Sec. 407. Civil penalties for breach of fiduciary responsibility.
Sec. 408. Modification of 10 percent tax for nondeductible 
                            contributions.
Sec. 409. Qualified employer plans prohibited from making loans through 
                            credit cards and other revolving credit 
                            arrangements.
                  TITLE V--REDUCING REGULATORY BURDENS

Sec. 501. Modifications to nondiscrimination and minimum participation 
                            rules with respect to governmental plans.
Sec. 502. Intermediate sanctions for inadvertent failures.
Sec. 503. Elimination of paperwork burdens on plans.
Sec. 504. New technologies in retirement plans.
Sec. 505. Increase in retirement plan cash-out amount.
Sec. 506. Modification of timing of plan valuations.
Sec. 507. Rules for substantial owners relating to plan terminations.
Sec. 508. ESOP dividends may be reinvested without loss of dividend 
                            deduction.
Sec. 509. Modification of 403(b) exclusion allowance to conform to 415 
                            modifications.
    (c) 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.

               TITLE I--EXPANDING SMALL BUSINESS COVERAGE

SEC. 101. MATCHING CONTRIBUTIONS OF SELF-EMPLOYED INDIVIDUALS NOT 
              TREATED AS ELECTIVE DEFERRALS.

    (a) In General.--Section 402(g) (relating to limitation on 
exclusion for elective deferrals) is amended by adding at the end the 
following:
            ``(9) Matching contributions on behalf of self-employed 
        individuals not treated as elective deferrals.--Any matching 
        contribution described in section 401(m)(4)(A)) which is made 
        on behalf of a self-employed individual (as defined in section 
        401(c)) shall not be treated as an elective deferral for 
        purposes of this subsection.''.
    (b) Conforming Amendment for Simple Retirement Accounts.--Section 
408(p) (relating to simple retirement accounts) is amended by adding at 
the end the following:
            ``(8) Matching contributions on behalf of self-employed 
        individuals not treated as elective deferrals.--Any matching 
        contribution described in paragraph (2)(A)(iii) which is made 
        on behalf of a self-employed individual (as defined in section 
        401(c)) shall not be treated as an elective deferral for 
        purposes of this subsection.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1996.

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

    (a) Amendment to 1986 Code.--Section 4975(d) (relating to 
exemptions) is amended by striking the last 2 sentences.
    (b) Amendments to ERISA.--
            (1) 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) 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. 103. 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,
                    (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) Ease of administration.--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. 104. 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 408 the following:

``SEC. 408A. 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 described in section 402A) 
                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 described in section 402A.
            ``(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 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 described in section 402A) 
                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 subparagraph, 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 
        408A(b)(5)(C)' for `$,2000'.''.
    (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 408A), 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 
408A.''.
    (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:
            ``(7) 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 408A), 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 408A) 
                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 408A 
                        to be so contributed,
                            ``(vi) the percentage elected under section 
                        408A(b)(5)(B), and
                            ``(vii) the number of employees which 
                        respect to whom contributions are required to 
                        be made for such year under section 
                        408A(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 408A), 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 408A.''.
            (2) Subsections (b), (c), (m)(4)(B), and (n)(3)(B) of 
        section 414 are each amended by inserting ``408A,'' 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 408A).''.
            (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 408 the following:

                              ``Sec. 408A. 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 408A of the Internal Revenue 
        Code of 1986).''.
            (2) Reporting requirements.--Section 101 of such Act (29 
        U.S.C. 1021) is amended by redesignating subsection (h) as 
        subsection (i) and by inserting after subsection (g) the 
        following:
    ``(h) 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 408A(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 408A(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, 1997.

SEC. 105. 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 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),'',
                    (B) by striking clause (ii),
                    (C) by 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) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 1997.

          TITLE II--ENHANCING FAIRNESS FOR WOMEN AND CHILDREN

SEC. 201. INDIVIDUAL'S PARTICIPATION IN PLAN NOT TREATED AS 
              PARTICIPATION BY SPOUSE.

    (a) In General.--Section 219(g)(1) of the Internal Revenue Code of 
1986 (relating to limitation on deduction for active participants in 
certain pension plans) is amended by striking ``or the individual's 
spouse''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 1996.

SEC. 202. ELIMINATION OF PERCENTAGE OF SALARY LIMITATION FOR ELECTIVE 
              DEFERRALS OF NONHIGHLY COMPENSATED EMPLOYEES.

    (a) In General.--Section 415(c) (relating to limitation for defined 
contribution plans) is amended by adding at the end the following:
            ``(8) Special rule for elective deferrals.--In the case of 
        any elective deferral (as defined in section 402(g)(3))--
                    ``(A) the limitation of paragraph (1)(B) shall not 
                apply to such deferral, and
                    ``(B) such deferral shall not be taken into account 
                in determining whether such limitation applies to any 
                other annual addition.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 1997.

SEC. 203. MAKE-UP ELECTIVE CONTRIBUTIONS FOR PERIODS OF MATERNITY OR 
              PATERNITY LEAVE.

    (a) In General.--Section 414 (relating to definitions and special 
rules) is amended by adding at the end the following:
    ``(v) Right To Make Contributions With Respect to Periods of 
Maternity and Paternity Leave.--
            ``(1) In general.--For purposes of this title--
                    ``(A) a trust which forms part of a plan shall not 
                constitute a qualified trust under section 401(a),
                    ``(B) a plan shall not be treated as described in 
                section 403(b),
                    ``(C) a plan shall not be treated as an eligible 
                deferred compensation plan under section 457, and
                    ``(D) an arrangement shall not be treated as 
                meeting the requirements of section 408 (k) or (p),
        unless such plan or arrangement permits participants who were 
        on eligible maternity or paternity leave to make additional 
        elective deferrals under the plan or arrangement with respect 
        to periods of such leave.
            ``(2) Treatment of contributions.--
                    ``(A) In general.--In the case of any contribution 
                to a plan under paragraph (1) (and any employer 
                matching contribution with respect thereto)--
                            ``(i) such contribution shall not, with 
                        respect to the year in which the contribution 
                        is made--
                                    ``(I) be subject to any otherwise 
                                applicable limitation contained in 
                                section 402(g), 402(h), 403(b), 404(a), 
                                404(h), 408, 415, or 457, or
                                    ``(II) be taken into account in 
                                applying such limitations to other 
                                contributions or benefits under such 
                                plan or any other such plan,
                            ``(ii) such contribution may not exceed the 
                        lesser of--
                                    ``(I) the excess of the applicable 
                                limitation contained in section 402(g) 
                                over any other elective deferrals 
                                contributed with respect to the year to 
                                which the contribution relates, or
                                    ``(II) the excess of the applicable 
                                limitation contained in section 415(c) 
                                over any other contributions made with 
                                respect to such year,
                            ``(iii) such contribution shall not be 
                        subject to the limitations referred to in 
                        clause (i) and not referred to in clause (ii) 
                        with respect to the year to which the 
                        contribution relates, and
                            ``(iv) except as provided in subparagraph 
                        (B)(i), such plan shall not be treated as 
                        failing to meet the requirements of section 
                        401(a)(4), 401(a)(26), 401(k)(3), 401(k)(11), 
                        401(k)(12), 401(m), 403(b)(12), 408(k), 408(p), 
                        410(b), or 416 by reason of the making of (or 
                        the right to make) such contribution.
                    ``(B) Matching contributions.--Nothing in 
                subparagraph (A) shall require an employer to make any 
                matching contribution with respect to any additional 
                elective deferrals under paragraph (1), but if the 
                employer elects to make any such matching 
                contribution--
                            ``(i) the requirements of section 401(a)(4) 
                        shall be applied separately to all such 
                        matching contributions made during a year, and
                            ``(ii) the amount of any such matching 
                        contribution may not exceed the maximum amount 
                        which would have been required had such 
                        deferral actually been made during the period 
                        of eligible maternity and paternity leave.
            ``(3) Amount and timing of elective deferrals.--A plan 
        shall not be treated as meeting the requirements of paragraph 
        (1) unless the plan provides the following:
                    ``(A) Amount.--The amount of any elective deferral 
                under paragraph (1) which any employee is permitted to 
                make with respect to any period of eligible maternity 
                and paternity leave shall not exceed the maximum amount 
                of the elective deferrals that the employee would have 
                been permitted to make during such period in accordance 
                with the limitations referred to in paragraph (2)(A)(i) 
                if the individual--
                            ``(i) had not been on eligible maternity 
                        and paternity leave during such period, and
                            ``(ii) had received compensation in an 
                        amount determined under rules similar to the 
                        rules under subsection (u)(7).
                Proper adjustment shall be made to the amount 
                determined under the preceding sentence for any 
                elective deferrals actually made during such period.
                    ``(B) Timing.--An employee may make an elective 
                deferral to which paragraph (1) applies at any time 
                during the 3-year period beginning on the date on which 
                the eligible maternity or paternity leave ends. Any 
                matching contribution with respect to any such elective 
                deferral shall be made not later than the due date 
                (including extensions) for the filing of the employer's 
                return for the taxable year in which such elective 
                deferral is made.
            ``(4) Eligible maternity and paternity leave.--For purposes 
        of this subsection--
                    ``(A) In general.--The term `eligible maternity or 
                paternity leave' means any unpaid absence of an 
                individual from work for any period--
                            ``(i) by reason of the pregnancy of the 
                        individual,
                            ``(ii) by reason of the birth of a child of 
                        the individual,
                            ``(iii) by reason of the placement of a 
                        child with the individual in connection with 
                        the adoption of the child by the individual, or
                            ``(iv) for purposes of caring for such 
                        child for a period beginning immediately 
                        following such birth or placement.
                    ``(B) Limitation.--Such period may not--
                            ``(i) be less than 2 weeks, nor
                            ``(ii) more than 24 months with respect to 
                        any child.
            ``(5) Other definitions and rules.--For purposes of this 
        subsection--
                    ``(A) Elective deferral.--The term `elective 
                deferral' has the meaning given such term by subsection 
                (u)(2)(C). Such term shall also include any after-tax 
                employee contributions described in subsection 
                (u)(2)(D).
                    ``(B) Plan.--The term `plan' includes any 
                arrangement under section 408 (k) or (p).
                    ``(C) Certain retroactive adjustments not 
                required.--For purposes of this subchapter and 
                subchapter E, the rules of subsection (u)(3) shall 
                apply.
                    ``(D) Loan repayment suspensions permitted.--In the 
                case of any plan or arrangement to which paragraph (1) 
                applies, the rules of subsection (u)(4) shall apply to 
                any loan repayment suspension during any period of 
                eligible maternity and paternity leave.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to periods of eligible maternity and paternity leave beginning after 
December 31, 1997.

SEC. 204. 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 contribution under 
        section 401(k) plans.--
                    ``(A) In general.--In the case of matching 
                contributions (as defined in section 401(m)(4)(A)) 
                under a qualified cash or deferred arrangement (as 
                defined in section 401(k)), paragraph (2) shall be 
                applied--
                            ``(i) by substituting `3 years' for `5 
                        years' in subparagraph (A), and
                            ``(ii) by substituting the following table 
                        for the table contained in subparagraph (B):

                                                     The nonforfeitable
``Years of service:                                      percentage is:
    1.............................................                  20 
    2.............................................                  40 
    3.............................................                  60 
    4.............................................                  80 
    5.............................................                 100.
                ``(B) Treatment of employer matching contributions.--
                For purposes of this paragraph--
                            ``(i) matching contributions (as so 
                        defined) shall be taken into account regardless 
                        of whether the matching contributions are made 
to the same plan as the contributions made under section 401(k), and
                            ``(ii) matching contributions under any 
                        plan which are made with respect to after-tax 
                        employee contributions shall be taken into 
                        account if the employer's limit on matching 
                        contributions with respect to such after-tax 
                        employee contributions is coordinated with the 
                        employer's limit on matching contributions with 
                        respect to contributions under section 
                        401(k).''.
    (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 contribution under 
        section 401(k) plans.--
                    ``(A) In general.--In the case of matching 
                contributions (as defined in section 401(m)(4)(A) of 
                the Internal Revenue Code of 1986) under a qualified 
                cash or deferred arrangement (as defined in section 
                401(k) of such Code), paragraph (2) shall be applied--
                            ``(i) by substituting `3 years' for `5 
                        years' in subparagraph (A), and
                            ``(ii) by substituting the following table 
                        for the table contained in subparagraph (B):

                                                     The nonforfeitable
``Years of service:                                      percentage is:
    1.............................................                  20 
    2.............................................                  40 
    3.............................................                  60 
    4.............................................                  80 
    5.............................................                 100.
                ``(B) Treatment of employer matching contributions.--
                For purposes of this paragraph--
                            ``(i) matching contributions (as so 
                        defined) shall be taken into account regardless 
                        of whether the matching contributions are made 
                        to the same plan as the contributions made 
                        under section 401(k) of such Code, and
                            ``(ii) matching contributions under any 
                        plan which are made with respect to after-tax 
                        employee contributions shall be taken into 
                        account if the employer's limit on matching 
                        contributions with respect to such after-tax 
                        employee contributions is coordinated with the 
                        employer's limit on matching contributions with 
                        respect to contributions under section 401(k) 
                        of such Code.''.
    (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, 1997.
            (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, 1998, or
                    (B) January 1, 2002.

SEC. 205. 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. 206. CLARIFICATION OF TAX TREATMENT OF DIVISION OF SECTION 457 
              PLAN BENEFITS UPON DIVORCE.

    (a) In General.--Section 414(p)(11) (relating to application of 
rules to governmental and church plans) is amended--
            (1) by inserting ``or an eligible deferred compensation 
        plan (within the meaning of section 457(b))'' after 
        ``subsection (e))'', and
            (2) in the heading, by striking ``governmental and church 
        plans'' and inserting ``certain other plans''.
    (b) Effective Date.--The amendments made by this section shall 
apply to transfers after the date of enactment of this Act.

           TITLE III--INCREASING PORTABILITY FOR PARTICIPANTS

SEC. 301. GENERAL RULES FOR ROLLOVERS.

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

``SEC. 402A. RULES APPLICABLE TO ROLLOVERS.

    ``(a) Exclusion From Income.--
            ``(1) In general.--If--
                    ``(A) any portion of the balance to the credit of 
                an individual in an eligible retirement plan is paid to 
                the individual in an eligible rollover distribution,
                    ``(B) the distributee transfers any portion of the 
                property received in such distribution to an eligible 
                retirement plan which permits such transfer (in this 
                title, referred to as a `rollover contribution'), and
                    ``(C) 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.
            ``(2) Direct trustee-to-trustee transfers.--Any amount 
        transferred in a direct trustee-to-trustee transfer from 1 
        eligible retirement plan to another (under rules similar to the 
        rules in section 401(a)(31)) shall not be includible in gross 
        income for the taxable year of such transfer.
    ``(b) Transfer Must Be Made Within 60 Days of Receipt.--
            ``(1) In general.--Except as provided in paragraph (2), 
        subsection (a)(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.
            ``(2) Hardship exception.--The Secretary may waive the 60-
        day requirement under paragraph (1) under circumstances similar 
        to the circumstances described in section 6654(e)(3).
    ``(c) Sales of Distributed Property.--For purposes of this 
section--
            ``(1) Transfer of proceeds from sale of distributed 
        property treated as transfer of distributed property.--The 
        transfer of an amount equal to any portion of the proceeds from 
        the sale of property received in the distribution shall be 
        treated as the transfer of property received in the 
        distribution.
            ``(2) Proceeds attributable to increase in value.--The 
        excess of fair market value of property on sale over its fair 
        market value on distribution shall be treated as property 
        received in the distribution.
            ``(3) Nonrecognition of gain or loss.--No gain or loss 
        shall be recognized on any sale described in paragraph (1) to 
        the extent that an amount equal to the proceeds is transferred 
        pursuant to subsection (a).
    ``(d) Rollover Where Spouse Receives Distribution After Death of 
Individual.--If any distribution attributable to an individual is paid 
to the spouse of the individual after the individual's death, the 
preceding provisions of this section shall apply to such distribution 
in the same manner as if the spouse were the individual; except that a 
trust or plan described in clause (iii) or (iv) of subsection (g)(1)(A) 
shall not be treated as an eligible retirement plan with respect to 
such distribution.
    ``(e) Written Explanation to Recipients of Distributions Eligible 
for Rollover Treatment.--The plan administrator of any eligible 
retirement plan shall, within a reasonable period of time before making 
an eligible rollover distribution from an eligible retirement plan, 
provide a written explanation to the recipient--
            ``(1) of the provisions under which the recipient may have 
        the distribution directly transferred to another eligible 
        retirement plan,
            ``(2) of the provision which requires the withholding of 
        tax on the distribution if it is not directly transferred to 
        another eligible retirement plan,
            ``(3) of the provisions under which the distribution will 
        not be subject to tax if transferred to an eligible retirement 
        plan within 60 days after the date on which the recipient 
        received the distribution, and
            ``(4) if applicable, of the provisions of subsections (d) 
        and (e) of section 402.
    ``(f) Special Rules.--
            ``(1) Capital gains and 10-year averaging only apply to 
        qualified trusts.--Notwithstanding any other provision of law, 
        if any portion of any distribution from a qualified trust is 
        attributable to any eligible rollover distribution to such 
        qualified trust from an eligible retirement plan other than a 
        qualified trust (and earnings allocable thereto), subsections 
        (h)(3) and (h)(5) of section 1122 of the Tax Reform Act of 1986 
        shall not apply to that portion.
            ``(2) Frozen deposits.--
                    ``(A) In general.--The 60-day period described in 
                subsection (b)(1) shall not--
                            ``(i) include any period during which the 
                        amount transferred to the individual is a 
                        frozen deposit, or
                            ``(ii) end earlier than 10 days after such 
                        amount ceases to be a frozen deposit.
                    ``(B) Frozen deposits.--For purposes of this 
                paragraph, the term `frozen deposit' means any deposit 
                which may not be withdrawn because of--
                            ``(i) the bankruptcy or insolvency of any 
                        financial institution, or
                            ``(ii) any requirement imposed by the State 
                        in which such institution is located by reason 
                        of the bankruptcy or insolvency (or threat 
                        thereof) of 1 or more financial institutions in 
                        such State.
                A deposit shall not be treated as a frozen deposit 
                unless on at least 1 day during the 60-day period 
                described in subsection (b)(1) (without regard to this 
                paragraph) such deposit is described in the preceding 
                sentence.
    ``(g) Definitions.--For purposes of this section--
            ``(1) Eligible retirement plan.--
                    ``(A) In general.--The term `eligible retirement 
                plan' means--
                            ``(i) an individual retirement account 
                        described in section 408(a),
                            ``(ii) an individual retirement annuity 
                        described in section 408(b) (other than an 
                        endowment contract),
                            ``(iii) a qualified trust,
                            ``(iv) an annuity plan described in section 
                        403(a), and
                            ``(v) an eligible deferred compensation 
                        plan described in section 457(b).
                    ``(B) Qualified trust.--The term `qualified trust' 
                means an employees' trust described in section 401(a) 
                which is exempt from tax under section 501(a).
                    ``(C) Treatment of inherited individual retirement 
                account or annuity.--
                            ``(i) In general.--The term `individual 
                        retirement account' or `individual retirement 
                        annuity' does not include an inherited 
                        individual retirement account or inherited 
                        individual retirement annuity, respectively.
                            ``(ii) Inherited individual retirement 
                        account or annuity.--An individual retirement 
                        account or individual retirement annuity shall 
                        be treated as inherited if--
                                    ``(I) the individual for whose 
                                benefit the account or annuity is 
                                maintained acquired such account by 
                                reason of the death of another 
                                individual, and
                                    ``(II) such individual was not the 
                                surviving spouse of such other 
                                individual.
            ``(2) Eligible Rollover Distribution.--The term `eligible 
        rollover distribution' means any distribution to an individual 
        of all or any portion of the balance to the credit of the 
        individual in an eligible retirement plan; except that such 
        term shall not include--
                    ``(A) any distribution which is 1 of a series of 
                substantially equal periodic payments (not less 
                frequently than annually) made--
                            ``(i) for the life (or life expectancy) of 
                        the individual or the joint lives (or joint 
                        life expectancies) of the individual and the 
                        individual's designated beneficiary, or
                            ``(ii) for a specified period of 10 years 
                        or more,
                    ``(B) any distribution to the extent such 
                distribution is required under section 401(a)(9), 
                403(b)(10), 408(a)(6), 408(b)(3), or 457(d)(2), and
                    ``(C) any distribution received by an individual 
                from an individual retirement account or individual 
                retirement annuity if at any time during the 1-year 
                period ending on the day of such receipt such 
                individual received any other eligible rollover 
                distribution from an individual retirement account or 
                an individual retirement annuity which was not 
                includible in the individual's gross income because of 
                the application of subsection (a).
    ``(h) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary or appropriate to carry out the purposes of this 
section, including regulations to provide rules for--
            ``(1) separate accounting,
            ``(2) determining the origin of any distribution, and
            ``(3) allocating investment in the contract and earnings to 
        distributions.''.
    (b) Conforming Amendments.--
            (1) Section 72(o)(4) is amended by striking ``sections 
        402(c), 403(a)(4), and 408(d)(3)'' and inserting ``section 
        402A''.
            (2) Section 219(d)(2) is amended by striking ``section 
        402(c), 403(a)(4), 403(b)(8), or 408(d)(3)'' and inserting 
        ``section 402A''.
            (3) Section 219(f)(6)(B)(ii) is amended by inserting 
        ``described in section 402A'' after ``rollover contribution''.
            (4) Section 401(a)(31) is amended--
                    (A) in subparagraph (B), by striking ``sections 
                402(c) and 403(a)(4)'' and inserting ``section 402A'',
                    (B) in subparagraph (C), by striking ``section 
                402(f)(2)(A)'' and inserting ``section 402A(g)(2)'', 
                and
                    (C) in subparagraph (D), by striking ``section 
                402(c)(8)(B)'' and all that follows and inserting 
                ``section 402A(g)(1)''.
            (5) Subsections (c) and (f) of section 402 are repealed.
            (6) Section 402(e) is amended by striking paragraph (6).
            (7) Section 403(a)(4) is amended to read as follows:
            ``(4) Rollover amounts.--For rules regarding rollover 
        amounts, see section 402A.''.
            (8) Section 403(b)(1) is amended by striking ``paragraph 
        (8) of this subsection or section 408(d)(3)(A)(iii)'' and 
        inserting ``section 402A''.
            (9) Section 403(b)(8) is amended to read as follows:
            ``(8) Rollover amounts and direct trustee-to-trustee 
        transfers.--For rules regarding rollover amounts and direct 
        trustee-to-trustee transfers, see section 402A.''.
            (10) Section 408(a)(1) is amended by striking ``subsection 
        (d)(3), in section 402(c), 403(a)(4) or 403(b)(8)'' and 
        inserting ``section 402A''.
            (11) Section 408(d)(3) is amended to read as follows:
            ``(3) Rollover amounts and direct trustee-to-trustee 
        transfers.--For rules regarding rollover amounts and direct 
        trustee-to-trustee transfers, see section 402A.''.
            (12) Section 408(d)(5)(A) is amended by inserting 
        ``described in section 402A'' after ``rollover contributions''.
            (13) Section 408(d)(5)(B) is amended by inserting 
        ``described in section 402A'' after ``rollover contribution''.
            (14) Section 414(b)(2) is amended--
                    (A) in subparagraph (A), by striking ``(as defined 
                in sections 402(c), 403(a)(4), and 408(d)(3))'' and 
                inserting ``described in section 402A'', and
                    (B) in subparagraph (B), by striking ``(as defined 
                in sections 402(c), 403(a)(4), and 408(d)(3))'' and 
                inserting ``described in section 402A''.
            (15) Section 415(c)(2) is amended by striking ``(as defined 
        in sections 402(c), 403(a)(4), 403(b)(8), and 408(d)(3))'' and 
        inserting ``described in section 402A''.
            (16) Section 416(g)(4)(A) is amended by inserting 
        ``described in section 402A'' after ``rollover contribution''.
            (17) Section 457(b)(2) is amended by inserting ``(other 
        than rollover contributions described in section 402A)'' after 
        ``taxable year''.
            (18) Section 457(e) is amended by adding at the end the 
        following:
            ``(16) Rollover amounts and direct trustee-to-trustee 
        transfers.--For rules regarding rollover amounts and direct 
        trustee-to-trustee transfers, see section 402A.''.
            (19) Section 3405(c) is amended--
                    (A) in paragraph (1), by inserting ``described in 
                section 402A'' after ``eligible rollover 
                distribution'', and
                    (B) by striking paragraph 3.
            (20) Section 4973(b)(1)(A) is amended by striking ``section 
        402(c), 403(a)(4), 403(b)(8), or 408(d)(3)'' and inserting 
        ``section 402A''.
            (21) Section 4973(c)(1) is amended by striking ``section 
        403(b)(8) or 408(d)(3)(A)(iii)'' and inserting ``section 
        402A''.
            (22) Section 4980A(c)(2)(D) is amended by inserting 
        ``described in section 402A'' after ``rollover contribution''.
            (23) Section 6058(d)(2)(A) is amended by inserting 
        ``described in section 402A'' after ``rollover contributions''.
            (24) Section 6652(i) is amended by striking ``section 
        402(f)'' and inserting ``section 402A(e)''.

SEC. 302. PLANS NOT DISQUALIFIED MERELY BY ACCEPTING ROLLOVER 
              CONTRIBUTIONS.

    (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) Plans not disqualified merely by accepting rollover 
        contributions.--A trust which is part of a plan shall not fail 
        to be a qualified trust under this section solely because the 
        plan accepts a contribution of an eligible rollover 
        distribution as described in section 402A from another plan 
        without such a qualified trust if, at the time of the transfer, 
        the trustee of the other plan provided notice of the other 
        plan's intention to have such a qualified trust.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to rollover contributions made after December 31, 1997.

SEC. 303. TREATMENT OF TRANSFERS BETWEEN DEFINED CONTRIBUTION PLANS.

    (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:
                    ``(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:
    ``(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.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to transfers after December 31, 1997.

SEC. 304. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS FROM 401(K) 
              PLANS.

    (a) Modification of Same Desk Exception.--Section 
401(k)(2)(B)(i)(I) (relating to qualified cash or deferred 
arrangements) is amended by striking ``separation from service'' and 
inserting ``severance from employment''.
    (b) Business Sale Requirements Repealed.--
            (1) In general.--Section 401(k)(2)(B)(i)(II) (relating to 
        qualified cash or deferred arrangements) is amended by striking 
        ``an event'' and inserting ``a plan termination''.
            (2) Conforming amendments.--Section 401(k)(10) is amended--
                    (A) by striking subparagraph (A) and inserting the 
                following:
                    ``(A) In general.--A plan termination is described 
                in this paragraph if the termination of the plan does 
                not involve the establishment or maintenance of another 
                defined contribution plan (other than an employee stock 
                ownership plan as defined in section 4975(e)(7)).'',
                    (B) in subparagraph (B)--
                            (i) by striking ``An event'' and inserting 
                        ``A termination'', and
                            (ii) by striking ``the event'' and 
                        inserting ``the termination'',
                    (C) by striking subparagraph (C), and
                    (D) by striking ``or disposition of assets or 
                subsidiary'' in the heading.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 1997.

        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 ``150 percent'' in subparagraph 
                (A)(i)(I) and inserting ``in the case of plan years 
                beginning before January 1, 2007, the applicable 
                percentage'', and
                    (B) by adding at the end the following:
                    ``(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 or 2000..................................                 155 
    2001 or 2002..................................                 160 
    2003 or 2004..................................                 165 
    2005 or 2006..................................              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 ``150 percent'' in subparagraph 
                (A)(i)(I) and inserting ``in the case of plan years 
                beginning before January 1, 2007, the applicable 
                percentage'', and
                    (B) by adding at the end the following:
            ``(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 or 2000..................................                 155 
    2001 or 2002..................................                 160 
    2003 or 2004..................................                 165 
    2005 or 2006..................................              170.''.
    (b) Special Amortization Rule.--
            (1) Code amendment.--Section 412(b)(2) 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 inserting after subparagraph (D) the following:
                    ``(E) the amount necessary to amortize in equal 
                annual installments (until fully amortized) over a 
                period of 20 years the contributions which would be 
                required to be made under the plan but for the 
                provisions of subsection (c)(7)(A)(i)(I).''.
            (2) ERISA amendment.--Section 302(b)(2) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1082(b)(2)) 
        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 inserting after subparagraph (D) 
        the following:
            ``(E) the amount necessary to amortize in equal annual 
        installments (until fully amortized) over a period of 20 years 
        the contributions which would be required to be made under the 
        plan but for the provisions of subsection (c)(7)(A)(i)(I).''.
            (3) Conforming amendments.--
                    (A) Section 412(c)(7)(D) is amended by adding 
                ``and'' at the end of clause (i), by striking ``, and'' 
                at the end of clause (ii) and inserting a period, and 
                by striking clause (iii).
                    (B) Section 302(c)(7)(D) of the Employee Retirement 
                Income Security Act of 1974 (29 U.S.C. 1082(c)(7)(D)) 
                is amended by adding ``and'' at the end of clause (i), 
                by striking ``, and'' at the end of clause (ii) and 
                inserting a period, and by striking clause (iii).
            (3) Effective dates.--
                    (A) In general.--The amendments made by this 
                subsection shall apply to plan years beginning after 
                December 31, 1998.
                    (B) Special rule for 1999.--In the case of a plan's 
                first year beginning in 1999, there shall be added to 
                the amount required to be amortized under section 
                412(b)(2)(E) of the Internal Revenue Code of 1986 and 
                section 302(b)(2)(E) of the Employee Retirement Income 
                Security Act of 1974 (as added by paragraph (1)) over 
                the 20-year period beginning with such year, the 
                unamortized balance (as of the close of the preceding 
                plan year) of any amount required to be amortized under 
                section 412(c)(7)(D)(iii) of such Code and section 
                302(c)(7)(D)(iii) of such Act (as repealed by paragraph 
                (2)) for plan years beginning before 1999.
    (c) 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 under 
                section 4041(b)(2)(A)(i)(II) of the Employee Retirement 
                Income Security Act of 1974 as if the proposed 
                termination date were the last day of the plan year)'', 
                and
                    (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.''.
            (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. MISSING PARTICIPANTS.

    (a) In General.--Section 4050 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1350) is amended by redesignating 
subsection (c) as subsection (e) and by inserting after subsection (b) 
the following:
    ``(c) Multiemployer Plans.--The corporation shall prescribe rules 
similar to the rules in subsection (a) for multiemployer plans covered 
by this title that terminate under section 4041A.
    ``(d) Plans Not Otherwise Subject to Title.--
            ``(1) Transfer to corporation.--The plan administrator of a 
        plan described in paragraph (4) may elect to transfer a missing 
        participant's benefits to the corporation upon termination of 
        the plan.
            ``(2) Information to the corporation.--To the extent 
        provided in regulations, the plan administrator of a plan 
        described in paragraph (4) shall, upon termination of the plan, 
        provide the corporation information with respect to benefits of 
        a missing participant if the plan transfers such benefits--
                    ``(A) to the corporation, or
                    ``(B) to an entity other than the corporation or a 
                plan described in paragraph (4)(B)(ii).
            ``(3) Payment by the corporation.--If benefits of a missing 
        participant were transferred to the corporation under paragraph 
        (1), the corporation shall, upon location of the participant or 
        beneficiary, pay to the participant or beneficiary the amount 
        transferred (or the appropriate survivor benefit) either--
                    ``(A) in a single sum (plus interest), or
                    ``(B) in such other form as is specified in 
                regulations of the corporation.
            ``(4) Plans described.--A plan is described in this 
        paragraph if--
                    ``(A) the plan is a pension plan (within the 
                meaning of section 3(2))--
                            ``(i) to which the provisions of this 
                        section do not apply (without regard to this 
                        subsection), and
                            ``(ii) which is not a plan described in 
                        paragraphs (2) through (11) of section 4021(b), 
                        and
                    ``(B) at the time the assets are to be distributed 
                upon termination, the plan--
                            ``(i) has missing participants, and
                            ``(ii) has not provided for the transfer of 
                        assets to pay the benefits of all missing 
                        participants to another pension plan (within 
                        the meaning of section 3(2)).
            ``(5) Certain provisions not to apply.--Subsections (a)(1) 
        and (a)(3) shall not apply to a plan described in paragraph 
        (4).''.
    (b) Conforming Amendments.--
            (1) Section 206(f) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1056(f)) is amended--
                    (A) by striking ``title IV'' and inserting 
                ``section 4050'', and
                    (B) by striking ``the plan shall provide that''.
            (2) Section 401(a)(34) (relating to benefits of missing 
        participants on plan termination) is amended by striking 
        ``title IV'' and inserting ``section 4050''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions made after final regulations implementing 
subsections (c) and (d) of section 4050 of the Employee Retirement 
Income Security Act of 1974 (as added by subsection (a)), respectively, 
are prescribed.

SEC. 403. MODIFICATION OF PROHIBITION OF ASSIGNMENT OR ALIENATION.

    (a) Amendment to ERISA.--Section 206(d) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1056(d)) is amended by adding at 
the end the following:
    ``(4) Paragraph (1) shall not apply to any offset of a 
participant's accrued benefit in an employee pension benefit plan 
against an amount that the participant is ordered or required to pay to 
the plan if--
            ``(A) the order or requirement to pay arises--
                    ``(i) under a judgment of conviction for a crime 
                involving such plan,
                    ``(ii) under a civil judgment (including a consent 
                order or decree) entered by a court in an action 
                brought in connection with a violation (or alleged 
                violation) of part 4 of this subtitle, or
                    ``(iii) pursuant to a settlement agreement between 
                the Secretary and the participant, or a settlement 
                agreement between the Pension Benefit Guaranty 
                Corporation and the participant, in connection with a 
                violation (or alleged violation) of part 4 of this 
                subtitle by a fiduciary or any other person,
            ``(B) the judgment, order, decree, or settlement agreement 
        expressly provides for the offset of all or part of the amount 
        ordered or required to be paid to the plan against the 
        participant's accrued benefit in the plan, and
            ``(C) if the participant has a spouse at the time at which 
        the offset is to be made--
                    ``(i) such spouse has consented in writing to such 
                offset and such consent is witnessed by a notary public 
                or representative of the plan,
                    ``(ii) such spouse is ordered or required in such 
                judgment, order, decree, or settlement to pay an amount 
                to the plan in connection with a violation of part 4 of 
                this subtitle, or
                    ``(iii) in such judgment, order, decree, or 
                settlement, such spouse retains the right to receive 
                the value of the survivor annuity under a qualified 
                joint and survivor annuity provided pursuant to section 
                205(a)(1) and under a qualified preretirement survivor 
                annuity provided pursuant to section 205(a)(2), 
                determined in accordance with paragraph (5).
    ``(5)(A) The value of the survivor annuity described in paragraph 
(4)(C)(iii) shall be determined as if--
            ``(i) the participant terminated employment on the date of 
        the offset,
            ``(ii) there was no offset,
            ``(iii) the plan permitted retirement only on or after 
        normal retirement age,
            ``(iv) the plan provided only the minimum-required 
        qualified joint and survivor annuity, and
            ``(v) the amount of the qualified preretirement survivor 
        annuity under the plan is equal to the amount of the survivor 
        annuity payable under the minimum-required qualified joint and 
        survivor annuity.
    ``(B) For purposes of this paragraph, the term `minimum-required 
qualified joint and survivor annuity' means the qualified joint and 
survivor annuity which is the actuarial equivalent of a single annuity 
for the life of the participant and under which the survivor annuity is 
50 percent of the amount of the annuity which is payable during the 
joint lives of the participant and the spouse.''.
    (b) Amendment to 1986 Code.--Section 401(a)(13) (relating to 
assignment and alienation) is made by adding at the end the following:
                    ``(C) Special rule for certain judgments and 
                settlements.--Subparagraph (A) shall not apply to any 
                offset of a participant's accrued benefit in an 
                employee pension benefit plan against an amount that 
                the participant is ordered or required to pay to the 
                plan if--
                            ``(i) the order or requirement to pay 
                        arises--
                                    ``(I) under a judgment of 
                                conviction for a crime involving such 
                                plan,
                                    ``(II) under a civil judgment 
                                (including a consent order or decree) 
                                entered by a court in an action brought 
                                in connection with a violation (or 
                                alleged violation) of part 4 of 
                                subtitle B of title I of the Employee 
                                Retirement Income Security Act of 1974, 
                                or
                                    ``(III) pursuant to a settlement 
                                agreement between the Secretary and the 
                                participant, or a settlement agreement 
                                between the Pension Benefit Guaranty 
                                Corporation and the participant, in 
                                connection with a violation (or alleged 
                                violation) of part 4 of such subtitle 
                                by a fiduciary or any other person,
                            ``(ii) the judgment, order, decree, or 
                        settlement agreement expressly provides for the 
                        offset of all or part of the amount ordered or 
                        required to be paid to the plan against the 
                        participant's accrued benefit in the plan, and
                            ``(iii) if the participant has a spouse at 
                        the time at which the offset is to be made--
                                    ``(I) such spouse has consented in 
                                writing to such offset and such consent 
                                is witnessed by a notary public or 
                                representative of the plan,
                                    ``(II) such spouse is ordered or 
                                required in such judgment, order, 
                                decree, or settlement to pay an amount 
                                to the plan in connection with a 
                                violation of part 4 of such subtitle, 
                                or
                                    ``(III) in such judgment, order, 
                                decree, or settlement, such spouse 
                                retains the right to receive the value 
                                of the survivor annuity under a 
                                qualified joint and survivor annuity 
                                provided pursuant to section 
                                401(a)(11)(A)(i) and under a qualified 
                                preretirement survivor annuity provided 
                                pursuant to section 401(a)(11)(A)(ii), 
                                determined in accordance with 
                                subparagraph (D).
                    ``(D) Valuation of survivor annuity.--
                            ``(i) In general.--The value of the 
                        survivor annuity described in subparagraph 
                        (C)(iii)(III) shall be determined as if--
                                    ``(I) the participant terminated 
                                employment on the date of the offset,
                                    ``(II) there was no offset,
                                    ``(III) the plan permitted 
                                retirement only on or after normal 
                                retirement age,
                                    ``(IV) the plan provided only the 
                                minimum-required qualified joint and 
                                survivor annuity, and
                                    ``(V) the amount of the qualified 
                                preretirement survivor annuity under 
                                the plan is equal to the amount of the 
                                survivor annuity payable under the 
                                minimum-required qualified joint and 
                                survivor annuity.
                            ``(ii) Definition.--For purposes of this 
                        subparagraph, the term `minimum-required 
                        qualified joint and survivor annuity' means the 
                        qualified joint and survivor annuity which is 
                        the actuarial equivalent of a single annuity 
                        for the life of the participant and under which 
                        the survivor annuity is 50 percent of the 
                        amount of the annuity which is payable during 
                        the joint lives of the participant and the 
                        spouse.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to judgments, orders, and decrees issued, and settlement 
agreements entered into, on or after the date of the enactment of this 
Act.

SEC. 404. PROHIBITED TRANSACTIONS.

    (a) In General.--Section 502(i) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132(i)) is amended by striking ``5 
percent'' and inserting ``10 percent''.
    (b) Effective Date.--The amendment made by this section shall apply 
to prohibited transactions occurring after the date of enactment of 
this Act.

SEC. 405. DIVERSIFICATION IN SECTION 401(K) PLAN INVESTMENTS.

    (a) Limitations on Investment in Employer Securities and Employer 
Real Property by Cash or Deferred Arrangements.--Section 407(d)(3) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1107(d)(3)) is amended by adding at the end the following:
            ``(D)(i) The term `eligible individual account plan' does 
        not include that portion of an individual account plan that 
        consists of elective deferrals (as defined in section 402(g)(3) 
        of the Internal Revenue Code of 1986) pursuant to a qualified 
        cash or deferred arrangement as defined in section 401(k) of 
        the Internal Revenue Code of 1986 (and earnings allocable 
        thereto), if such elective deferrals (or earnings allocable 
        thereto) are required to be invested in qualifying employer 
        securities or qualifying employer real property or both 
        pursuant to the documents and instruments governing the plan or 
        at the direction of a person other than the participant on 
        whose behalf such elective deferrals are made to the plan (or 
        the participant's beneficiary).
            ``(ii) For purposes of subsection (a), such portion shall 
        be treated as a separate plan.
            ``(iii) This subparagraph shall not apply to an individual 
        account plan if the fair market value of the assets of all 
        individual account plans maintained by the employer equals not 
        more than 10 percent of the fair market value of the assets of 
        all pension plans maintained by the employer.
            ``(iv) This subparagraph shall not apply to an individual 
        account plan that is an employee stock ownership plan as 
        defined in section 409(a) or 4975(e)(7) of the Internal Revenue 
        Code or that is a stock bonus plan.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to employer securities and employer real property 
        acquired after the beginning of the first plan year beginning 
        after the 90th day after the date of enactment of this Act.
            (2) Special rule for certain acquisitions.--Employer 
        securities and employer real property acquired pursuant to a 
        binding written contract to acquire such securities and real 
        property in effect on the date of enactment of this Act and at 
        all times thereafter, shall be treated as acquired immediately 
        before such date.

SEC. 406. 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, 1997.

SEC. 407. 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 30th day following receipt 
by such fiduciary or other person of written notice from the Secretary 
of the violation, whether paid voluntarily or by order of a court in a 
judicial proceeding instituted by the Secretary under subsection (a)(2) 
or (a)(5). The Secretary may, in the Secretary's sole discretion, 
extend the 30-day period described in the preceding sentence.''.
    (c) Other Rules.--Section 502(l) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1132(l)) is amended by adding at the 
end the following:
    ``(5) A person shall be jointly and severally liable for the 
penalty described in paragraph (1) to the same extent that such person 
is jointly and severally liable for the applicable recovery amount on 
which the penalty is based.
    ``(6) No penalty shall be assessed under this subsection unless the 
person against whom the penalty is assessed is given notice and 
opportunity for a hearing with respect to the violation and applicable 
recovery amount.''.
    (d) Effective Dates.--
            (1) In general.--The amendments made by this section shall 
        apply to any breach of fiduciary responsibility or other 
        violation of part 4 of subtitle B of title I of the Employee 
        Retirement Income Security Act of 1974 occurring on or after 
        the date of enactment of this Act.
            (2) Transition rule.--In applying the amendment made by 
        subsection (b) (relating to applicable recovery amount), a 
        breach or other violation occurring before the date of 
        enactment of this Act which continues after the 180th day after 
        such date (and which may have been discontinued at any time 
        during its existence) shall be treated as having occurred after 
        such date of enactment.

SEC. 408. MODIFICATION OF 10 PERCENT TAX FOR NONDEDUCTIBLE 
              CONTRIBUTIONS.

    (a) In General.--Section 4972(c)(6)(B) (relating to exceptions) is 
amended to read as follows:
                    ``(B) so much of the contributions to 1 or more 
                defined contribution plans which are not deductible 
                when contributed solely because of section 404(a)(7) as 
                does not exceed the greater of--
                            ``(i) the amount of contributions not in 
                        excess of 6 percent of compensation (within the 
                        meaning of section 404(a)) paid or accrued 
                        (during the taxable year for which the 
                        contributions were made) to beneficiaries under 
                        the plans, or
                            ``(ii) the sum of--
                                    ``(I) the amount of contributions 
                                described in section 401(m)(4)(A), plus
                                    ``(II) the amount of contributions 
                                described in section 402(g)(3)(A).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1996.

SEC. 409. 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), as amended by section 302, is 
amended by inserting after paragraph (35) the following:
            ``(36) 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.

                  TITLE V--REDUCING REGULATORY BURDENS

SEC. 501. MODIFICATIONS TO NONDISCRIMINATION AND MINIMUM PARTICIPATION 
              RULES WITH RESPECT TO GOVERNMENTAL PLANS.

    (a) General Nondiscrimination and Participation Rules.--
            (1) Nondiscrimination requirements.--Section 401(a)(5) 
        (relating to qualified pension, profit-sharing, and stock bonus 
        plans) is amended by adding at the end the following:
                    ``(G) Governmental plans.--Paragraphs (3) and (4) 
                shall not apply to a governmental plan (within the 
                meaning of section 414(d)).''.
            (2) Additional participation requirements.--Section 
        401(a)(26)(H) (relating to additional participation 
        requirements) is amended to read as follows:
                    ``(H) Exception for governmental plans.--This 
                paragraph shall not apply to a governmental plan 
                (within the meaning of section 414(d)).''.
            (3) Minimum participation standards.--Section 410(c)(2) 
        (relating to application of participation standards to certain 
        plans) is amended to read as follows:
            ``(2) A plan described in paragraph (1) shall be treated as 
        meeting the requirements of this section for purposes of 
        section 401(a), except that in the case of a plan described in 
        subparagraph (B), (C), or (D) of paragraph (1), this paragraph 
        shall only apply if such plan meets the requirements of section 
        401(a)(3) (as in effect on September 1, 1974).''.
    (b) Participation Standards for Qualified Cash or Deferred 
Arrangements.--Section 401(k)(3) (relating to application of 
participation and discrimination standards) is amended by adding at the 
end the following:
                    ``(G) The requirements of subparagraph (A)(i) and 
                (C) shall not apply to a governmental plan (within the 
                meaning of section 414(d)).''.
    (c) Nondiscrimination Rules for Section 403(b) Plans.--Section 
403(b)(12) (relating to nondiscrimination requirements) is amended by 
adding at the end the following:
                    ``(C) Governmental plans.--For purposes of 
                paragraph (1)(D), the requirements of subparagraph 
                (A)(i) shall not apply to a governmental plan (within 
                the meaning of section 414(d)).''.
    (d) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning on or after the date of 
        enactment of this Act.
            (2) Treatment for years beginning before date of 
        enactment.--A governmental plan (within the meaning of section 
        414(d) of the Internal Revenue Code of 1986) shall be treated 
        as satisfying the requirements of sections 401(a)(3), 
        401(a)(4), 401(a)(26), 401(k), 401(m), 403 (b)(1)(D) and 
        (b)(12), and 410 of such Code for all taxable years beginning 
        before the date of enactment of this Act.

SEC. 502. 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 409, is 
amended by inserting after paragraph (36) the following:
            ``(37) 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 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 such failure on or 
                after such date.
        If the plan satisfies the requirement under subparagraph (B), 
        the Secretary may require the sponsoring employer to make a 
        payment to the Secretary in an amount that does not exceed an 
        amount that bears a reasonable relationship to the severity of 
        the plan's failure to satisfy the requirements of this 
        section.''.
    (b) 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).''.
    (c) Effective Date.--The amendments made by this section shall take 
effect on the date of enactment of this Act.

SEC. 503. ELIMINATION OF PAPERWORK BURDENS ON PLANS.

    (a) Elimination of Unnecessary Filing Requirements.--Section 101(b) 
of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1021(b)) is amended by striking paragraphs (1), (2), and (3) and by 
redesignating paragraphs (4) and (5) as paragraphs (1) and (2), 
respectively.
    (b) Elimination of Plan Description.--
            (1) In general.--Section 102(a) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1022(a)) is amended--
                    (A) by striking paragraph (2), and
                    (B) by striking ``(a)(1)'' and inserting ``(a)''.
            (2) Conforming amendments.--
                    (A) Section 102(b) of such Act (29 U.S.C. 1022(b)) 
                is amended by striking ``The plan description and 
                summary plan description shall contain'' and inserting 
                ``The summary plan description shall contain''.
                    (B) The heading for section 102 of such Act is 
                amended by striking ``plan description and''.
    (c) Furnishing of Reports.--
            (1) In general.--Section 104(a)(1) of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1024(a)(1)) 
        is amended to read as follows:
    ``Sec. 104. (a)(1) The administrator of any employee benefit plan 
subject to this part shall file with the Secretary the annual report 
for a plan year within 210 days after the close of such year (or within 
such time as may be required by regulations promulgated by the 
Secretary in order to reduce duplicative filing). The Secretary shall 
make copies of such annual reports available for inspection in the 
public document room of the Department of Labor.''.
            (2) Secretary may request documents.--
                    (A) In general.--Section 104(a) of such Act (29 
                U.S.C. 1024(a)) is amended by adding at the end the 
                following:
    ``(6) The administrator of any employee benefit plan subject to 
this part shall furnish to the Secretary, upon request, any documents 
relating to the employee benefit plan, including but not limited to, 
the latest summary plan description (including any summaries of plan 
changes not contained in the summary plan description), and the 
bargaining agreement, trust agreement, contract, or other instrument 
under which the plan is established or operated.''.
                    (B) Penalty.--Section 502(c) of such Act (29 U.S.C. 
                1132(c)) is amended by redesignating paragraph (6) as 
                paragraph (7) and by inserting after paragraph (5) the 
                following:
    ``(6) If, within 30 days of a request by the Secretary to a plan 
administrator for documents under section 104(a)(6), the plan 
administrator fails to furnish the material requested to the Secretary, 
the Secretary may assess a civil penalty against the plan administrator 
of up to $100 a day from the date of such failure (but in no event in 
excess of $1,000 per request). No penalty shall be imposed under this 
paragraph for any failure resulting from matters reasonably beyond the 
control of the plan administrator.''.
    (d) Conforming Amendments.--
            (1) Section 104(b)(1) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1024(b)(1)) is amended by 
        striking ``section 102(a)(1)'' each place it appears and 
        inserting ``section 102(a)''.
            (2) Section 104(b)(2) of such Act (29 U.S.C. 1024(b)(2)) is 
        amended by striking ``the plan description and'' and inserting 
        ``the latest updated summary plan description and''.
            (3) Section 104(b)(4) of such Act (29 U.S.C. 1024(b)(4)) is 
        amended by striking ``plan description''.
            (4) Section 106(a) of such Act (29 U.S.C. 1026(a)) is 
        amended by striking ``descriptions,''.
            (5) Section 107 of such Act (29 U.S.C. 1027) is amended by 
        striking ``description or''.
            (6) Paragraph (2)(B) of section 108 of such Act (29 U.S.C. 
        1028) is amended to read as follows: ``(B) after publishing or 
        filing the annual reports,''.
            (7) Section 502(a)(6) of such Act (29 U.S.C. 1132(a)(6)) is 
        amended by striking ``or (5)'' and inserting ``(5), or (6)''.
    (e) Technical Correction.--Section 1144(c) of the Social Security 
Act (42 U.S.C. 1320b-14(c)) is amended by redesignating paragraph (9) 
as paragraph (8).

SEC. 504. NEW TECHNOLOGIES IN RETIREMENT PLANS.

    (a) In General.--Not later than July 1, 1998, the Secretary of the 
Treasury and the Secretary of Labor shall issue coordinated guidance 
which is designed to--
            (1) modify notice, election, consent, recordkeeping, and 
        other operational and time requirements applicable to 
        retirement plans in order to permit the use of new technologies 
        by plan sponsors and administrators while maintaining the 
        protection of the rights of participants and beneficiaries, and
            (2) clarify the extent to which State laws requiring paper 
        transactions with respect to retirement plans are preempted and 
        the extent to which writing requirements under the Internal 
        Revenue Code of 1986 shall be interpreted to permit paperless 
        transactions.
    (b) Applicability of Final Regulations.--With respect to the 
guidance regarding new technologies described in subsection (a), plan 
sponsors and administrators may operate retirement plans in accordance 
with a reasonable, good faith interpretation of the law until the first 
plan year beginning at least 6 months after the issuance of final 
regulations applicable to such guidance.

SEC. 505. INCREASE IN RETIREMENT PLAN CASH-OUT AMOUNT.

    (a) Amendments to 1986 Code.--
            (1) In general.--Section 411(a)(11) (relating to 
        restrictions on certain mandatory distributions) is amended--
                    (A) in subparagraph (A), by striking ``$3,500'' and 
                inserting ``$5,000'', and
                    (B) by adding at the end the following:
                    ``(D) Inflation adjustment.--In the case of any 
                plan year beginning in a calendar year after 1997, the 
                Secretary shall adjust annually the $5,000 amount 
                contained in subparagraph (A) for increases in the 
                cost-of-living at the same time and in the same manner 
                as adjustments under section 415(d); except that the 
                base period shall be the calendar quarter ending 
                September 30, 1996, and any increase which is not a 
                multiple of $500 shall be rounded to the next lowest 
                multiple of $500.''.
            (2) Conforming amendments.--
                    (A) Section 411(a)(7) is amended by striking 
                ``$3,500'' and inserting ``the amount in effect for the 
                plan year under paragraph (11)(A)''.
                    (B) Section 417(e)(1) is amended--
                            (i) by striking ``$3,500'' and inserting 
                        ``the amount in effect for the plan year under 
                        section 411(a)(11)(A)'', and
                            (ii) in the heading, by striking ``$3,500'' 
                        and inserting ``applicable amount''.
                    (C) Section 417(e)(2) is amended--
                            (i) in subparagraph (A), by striking 
                        ``$3,500'' and inserting ``the amount in effect 
                        for the plan year under section 
                        411(a)(11)(A)'', and
                            (ii) in the heading, by striking ``$3,500'' 
                        and inserting ``applicable amount''.
                    (D) Section 457(e)(9)(A) is amended--
                            (i) in clause (i), by striking ``$3,500'' 
                        and inserting ``the amount in effect for the 
                        plan year under section 411(a)(11)(A)'', and
                            (ii) in the heading, by striking ``$3,500'' 
                        and inserting ``applicable amount''.
    (b) Amendments to ERISA.--
            (1) In general.--Section 203(e) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1053(e)) is amended--
                    (A) in paragraph (1), by striking ``$3,500'' and 
                inserting ``$5,000'', and
                    (B) by adding at the end the following:
            ``(4) Inflation adjustment.--In the case of any plan year 
        beginning in a calendar year after 1997, the Secretary shall 
        adjust annually the $5,000 amount contained in paragraph (1) 
        for increases in the cost-of-living at the same time and in the 
        same manner as adjustments under section 415(d) of the Internal 
        Revenue Code of 1986; except that the base period shall be the 
        calendar quarter ending September 30, 1996, and any increase 
        which is not a multiple of $500 shall be rounded to the next 
        lowest multiple of $500.''.
            (2) Conforming amendments.--
                    (A) Section 204(d)(1) of such Act (29 U.S.C. 
                1054(d)(1)) is amended by striking ``$3,500'' and 
                inserting ``the amount in effect for the plan year 
                under section 203(e)(1)''.
                    (B) Section 205(g)(1) of such Act (29 U.S.C. 
                1055(g)(1)) is amended by striking ``$3,500'' and 
                inserting ``the amount in effect for the plan year 
                under section 203(e)(1)''.
                    (C) Section 205(g)(2) of such Act (29 U.S.C. 
                1055(g)(2)) is amended by striking ``$3,500'' and 
                inserting ``the amount in effect for the plan year 
                under section 203(e)(1)''.
    (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. 506. MODIFICATION OF TIMING OF PLAN VALUATIONS.

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

SEC. 507. 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 subparagraph (B) of that 
        paragraph. If assets allocated to such subparagraph (B) are 
        insufficient to satisfy in full the benefits 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. 508. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF DIVIDEND 
              DEDUCTION.

    (a) In General.--Section 404(k)(2)(A) (defining applicable 
dividends) is amended by striking ``or'' at the end of clause (ii), by 
redesignating clause (iii) as clause (iv), and by inserting after 
clause (ii) the following new clause:
                            ``(iii) is, at the election of such 
                        participants or their beneficiaries--
                                    ``(I) payable as provided in clause 
                                (i) or (ii), or
                                    ``(II) paid to the plan and 
                                reinvested in qualifying employer 
                                securities, or''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 1997.

SEC. 509. MODIFICATION OF 403(B) EXCLUSION ALLOWANCE TO CONFORM TO 415 
              MODIFICATIONS.

    (a) Definition of Compensation.--
            (1) In general.--Section 403(b)(3) (defining includible 
        compensation) is amended by adding at the end the following: 
        ``Such term includes--
                    ``(A) any elective deferral (as defined in section 
                402(g)(3)), and
                    ``(B) any amount which is contributed or deferred 
                by the employer at the election of the employee and 
                which is not includible in the gross income of the 
                employee by reason of section 125 or 457.
            (2) Effective date.--The amendment made by this subsection 
        shall apply to years beginning after December 31, 1997.
    (b) Repeal of Rules in Section 415(e).--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 reflect 
the amendment made by section 1452(a) of the Small Business Job 
Protection Act of 1996. Such modification shall take effect for 
limitation years beginning after December 31, 1999.
                                 <all>