[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1498 Introduced in House (IH)]
107th CONGRESS
1st Session
H. R. 1498
To amend the Internal Revenue Code of 1986 to allow individuals a
refundable credit for elective deferrals and IRA contributions and to
allow small employers credits for pension plan startup costs and for
pension plan contributions.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
April 4, 2001
Mr. Neal of Massachusetts (for himself, Mr. Rangel, Mr. Matsui, Mr.
Coyne, and Mr. Andrews) introduced the following bill; which was
referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to allow individuals a
refundable credit for elective deferrals and IRA contributions and to
allow small employers credits for pension plan startup costs and for
pension plan contributions.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Retirement Security Act of 2001''.
SEC. 2. REFUNDABLE CREDIT TO CERTAIN INDIVIDUALS FOR ELECTIVE DEFERRALS
AND IRA CONTRIBUTIONS.
(a) In General.--Subpart C of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to refundable credits)
is amended by redesignating section 35 as section 36 and by inserting
after section 34 the following new section:
``SEC. 35. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY CERTAIN
INDIVIDUALS.
``(a) Allowance of Credit.--In the case of an eligible individual,
there shall be allowed as a credit against the tax imposed by this
subtitle for the taxable year an amount equal to the applicable
percentage of so much of the qualified retirement savings contributions
of the eligible individual for the taxable year as do not exceed
$2,000.
``(b) Applicable Percentage.--For purposes of this section, the
applicable percentage is the percentage determined in accordance with
the following table:
------------------------------------------------------------------------
Adjusted Gross Income
-------------------------------------------------------------
Joint return Head of a All other cases Applicable
--------------------- household -------------------- percentage
--------------------
Over Not over Over Not over Over Not over
------------------------------------------------------------------------
$0 $25,000 $0 $18,750 $0 $12,500 50
25,000 35,000 18,750 26,250 12,500 17,500 45
35,000 45,000 26,250 33,750 17,500 22,500 35
45,000 55,000 33,750 41,250 22,500 27,500 25
55,000 75,000 41,250 56,250 27,500 37,500 15
75,000 ......... 56,250 ........ 37,500 ........ 0
------------------------------------------------------------------------
``(c) Eligible Individual.--For purposes of this section--
``(1) In general.--The term `eligible individual' means any
individual if--
``(A) such individual has attained the age of 18 as
of the close of the taxable year, and
``(B) the compensation (as defined in section
219(f)(1)) includible in the gross income of the
individual (or, in the case of a joint return, of the
taxpayer) for such taxable year is at least $5,000.
``(2) Dependents and full-time students not eligible.--The
term `eligible individual' shall not include--
``(A) any individual with respect to whom a
deduction under section 151 is allowable to another
taxpayer for a taxable year beginning in the calendar
year in which such individual's taxable year begins,
and
``(B) any individual who is a student (as defined
in section 151(c)(4)).
``(3) Individuals receiving certain retirement
distributions not eligible.--
``(A) In general.--The term `eligible individual'
shall not include, with respect to a taxable year, any
individual who received during the testing period--
``(i) any distribution from a qualified
retirement plan (as defined in section
4974(c)), or from an eligible deferred
compensation plan (as defined in section
457(b)), which is includible in gross income,
or
``(ii) any distribution from a Roth IRA
which is not a qualified rollover contribution
(as defined in section 408A(e)) to a Roth IRA.
``(B) Testing period.--For purposes of subparagraph
(A), the testing period, with respect to a taxable
year, is the period which includes--
``(i) such taxable year,
``(ii) the preceding taxable year, and
``(iii) the period after such taxable year
and before the due date (without extensions)
for filing the return of tax for such taxable
year.
``(C) Excepted distributions.--There shall not be
taken into account under subparagraph (A)--
``(i) any distribution referred to in
section 72(p), 401(k)(8), 401(m)(6), 402(g)(2),
404(k), or 408(d)(4),
``(ii) any distribution to which section
408A(d)(3) applies, and
``(iii) any distribution before January 1,
2002.
``(D) Treatment of distributions received by spouse
of individual.--For purposes of determining whether an
individual is an eligible individual for any taxable
year, any distribution received by the spouse of such
individual shall be treated as received by such
individual if such individual and spouse file a joint
return for such taxable year and for the taxable year
during which the spouse receives the distribution.
``(d) Qualified Retirement Savings Contributions.--For purposes of
this section, the term `qualified retirement savings contributions'
means the sum of--
``(1) the amount of the qualified retirement contributions
(as defined in section 219(e)) made by the eligible individual,
``(2) the amount of--
``(A) any elective deferrals (as defined in section
402(g)(3)) of such individual, and
``(B) any elective deferral of compensation by such
individual under an eligible deferred compensation plan
(as defined in section 457(b)) of an eligible employer
described in section 457(e)(1)(A), and
``(3) the amount of voluntary employee contributions by
such individual to any qualified retirement plan (as defined in
section 4974(c)).
``(e) Adjusted Gross Income.--For purposes of this section,
adjusted gross income shall be determined without regard to sections
911, 931, and 933.
``(f) Investment in the Contract.--Notwithstanding any other
provision of law, a qualified retirement savings contribution shall not
fail to be included in determining the investment in the contract for
purposes of section 72 by reason of the credit under this section.
``(g) Transitional Rules.--In the case of taxable years beginning
before January 1, 2008--
``(1) Contribution limit.--Subsection (a) shall be applied
by substituting for `$2,000'--
``(A) $600 in the case of taxable years beginning
in 2002, 2003, or 2004, and
``(B) $1,000 in the case of taxable years beginning
in 2005, 2006, or 2007.
``(2) Applicable percentage.--The applicable percentage
shall be determined under the following table (in lieu of the
table in subsection (b)):
------------------------------------------------------------------------
Adjusted Gross Income
-------------------------------------------------------------
Joint return Head of a All other cases Applicable
--------------------- household -------------------- percentage
--------------------
Over Not over Over Not over Over Not over
------------------------------------------------------------------------
$0 $20,000 $0 $15,000 $0 $10,000 50
20,000 25,000 15,000 18,750 10,000 12,500 45
25,000 30,000 18,750 22,500 12,500 15,000 35
30,000 35,000 22,500 26,250 15,000 17,500 25
35,000 40,000 26,250 30,000 17,500 20,000 15
40,000 ......... 30,000 ........ 20,000 ........ 0.''
------------------------------------------------------------------------
(b) Conforming Amendments.--
(1) Paragraph (2) of section 1324(b) of title 31, United
States Code, is amended by inserting before the period ``, or
from section 35 of such Code''.
(2) The table of sections for subpart C of part IV of
subchapter A of chapter 1 of such Code is amended by striking
the last item and inserting the following new items:
``Sec. 35. Elective deferrals and IRA
contributions by certain
individuals.
``Sec. 36. Overpayments of tax.''
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.
SEC. 3. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL EMPLOYERS.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to business related
credits) is amended by adding at the end the following new section:
``SEC. 45E. SMALL EMPLOYER PENSION PLAN STARTUP COSTS.
``(a) General Rule.--For purposes of section 38, in the case of an
eligible employer, the small employer pension plan startup cost credit
determined under this section for any taxable year is an amount equal
to 50 percent of the qualified startup costs paid or incurred by the
taxpayer during the taxable year.
``(b) Dollar Limitation.--The amount of the credit determined under
this section for any taxable year shall not exceed--
``(1) $1,000 for the first credit year,
``(2) $500 for each of the 2 taxable years immediately
following the first credit year, and
``(3) zero for any other taxable year.
``(c) Eligible Employer.--For purposes of this section--
``(1) In general.--The term `eligible employer' has the
meaning given such term by section 408(p)(2)(C)(i).
``(2) Employers maintaining qualified plans during 1998 not
eligible.--Such term shall not include an employer if such
employer (or any predecessor employer) maintained a qualified
plan (as defined in section 408(p)(2)(D)(ii)) with respect to
which contributions were made, or benefits were accrued, for
service in 1998. If only individuals other than employees
described in subparagraph (A) or (B) of section 410(b)(3) are
eligible to participate in the qualified employer plan referred
to in subsection (d)(1), then the preceding sentence shall be
applied without regard to any qualified plan in which only
employees so described are eligible to participate.
``(d) Other Definitions.--For purposes of this section--
``(1) Qualified startup costs.--
``(A) In general.--The term `qualified startup
costs' means any ordinary and necessary expenses of an
eligible employer which are paid or incurred in
connection with--
``(i) the establishment or administration
of an eligible employer plan, or
``(ii) the retirement-related education of
employees with respect to such plan.
``(B) Plan must have at least 2 participants.--Such
term shall not include any expense in connection with a
plan that does not have at least 2 individuals who are
eligible to participate.
``(C) Plan must be established before january 1,
2010.--Such term shall not include any expense in
connection with a plan established after December 31,
2009.
``(2) Eligible employer plan.--The term `eligible employer
plan' means a qualified employer plan within the meaning of
section 4972(d), or a qualified payroll deduction arrangement
within the meaning of section 408(q)(1) (whether or not an
election is made under section 408(q)(2)). A qualified payroll
deduction arrangement shall be treated as an eligible employer
plan only if all employees of the employer who--
``(A) have been employed for 90 days, and
``(B) are not described in subparagraph (A) or (C)
of section 410(b)(3),
are eligible to make the election under section 408(q)(1)(A).
``(3) First credit year.--The term `first credit year'
means--
``(A) the taxable year which includes the date that
the eligible employer plan to which such costs relate
becomes effective, or
``(B) at the election of the eligible employer, the
taxable year preceding the taxable year referred to in
subparagraph (A).
``(e) Special Rules.--For purposes of this section--
``(1) Aggregation rules.--All persons treated as a single
employer under subsection (a) or (b) of section 52, or
subsection (n) or (o) of section 414, shall be treated as one
person. All eligible employer plans shall be treated as 1
eligible employer plan.
``(2) Disallowance of deduction.--No deduction shall be
allowed for that portion of the qualified startup costs paid or
incurred for the taxable year which is equal to the credit
determined under subsection (a).
``(3) Election not to claim credit.--This section shall not
apply to a taxpayer for any taxable year if such taxpayer
elects to have this section not apply for such taxable year.''
(b) Credit Allowed as Part of General Business Credit.--Section
38(b) of such Code (defining current year business credit) is amended
by striking ``plus'' at the end of paragraph (12), by striking the
period at the end of paragraph (13) and inserting ``, plus'', and by
adding at the end the following new paragraph:
``(14) in the case of an eligible employer (as defined in
section 45E(c)), the small employer pension plan startup cost
credit determined under section 45E(a).''
(c) Conforming Amendments.--
(1) Section 39(d) of such Code is amended by adding at the
end the following new paragraph:
``(10) No carryback of small employer pension plan startup
cost credit before january 1, 2002.--No portion of the unused
business credit for any taxable year which is attributable to
the small employer pension plan startup cost credit determined
under section 45E may be carried back to a taxable year
beginning before January 1, 2002.''
(2) Subsection (c) of section 196 of such Code is amended
by striking ``and'' at the end of paragraph (8), by striking
the period at the end of paragraph (9) and inserting ``, and'',
and by adding at the end the following new paragraph:
``(10) the small employer pension plan startup cost credit
determined under section 45E(a).''
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1 of such Code is amended by adding at
the end the following new item:
``Sec. 45E. Small employer pension plan
startup costs.''
(d) Effective Date.--The amendments made by this section shall
apply to costs paid or incurred in taxable years beginning after
December 31, 2001.
SEC. 4. CREDIT FOR QUALIFIED PENSION PLAN CONTRIBUTIONS OF SMALL
EMPLOYERS.
(a) In General.--Subpart D of part IV of subchapter A of chapter 1
of the Internal Revenue Code of 1986 (relating to business related
credits) is amended by adding at the end the following new section:
``SEC. 45F. SMALL EMPLOYER PENSION PLAN CONTRIBUTIONS.
``(a) General Rule.--For purposes of section 38, in the case of an
eligible employer, the small employer pension plan contribution credit
determined under this section for any taxable year is an amount equal
to 50 percent of the amount which would (but for subsection (f)(1)) be
allowed as a deduction under section 404 for such taxable year for
qualified employer contributions made to any qualified retirement plan
on behalf of any nonhighly compensated employee.
``(b) Credit Limited to 3 Years.--The credit allowable by this
section shall be allowed only with respect to the period of 3 taxable
years beginning with the taxable year in which the qualified retirement
plan becomes effective.
``(c) Qualified Employer Contribution.--For purposes of this
section--
``(1) Defined contribution plans.--In the case of a defined
contribution plan, the term `qualified employer contribution'
means the amount of nonelective and matching contributions to
the plan made by the employer on behalf of any nonhighly
compensated employee to the extent such amount does not exceed
3 percent of such employee's compensation from the employer for
the year.
``(2) Defined benefit plans.--In the case of a defined
benefit plan, the term `qualified employer contribution' means
the amount of employer contributions to the plan made on behalf
of any nonhighly compensated employee to the extent that the
accrued benefit of such employee derived from such
contributions for the year do not exceed the equivalent (as
determined under regulations prescribed by the Secretary and
without regard to contributions and benefits under the Social
Security Act) of 3 percent of such employee's compensation from
the employer for the year.
``(d) Qualified Retirement Plan.--
``(1) In general.--The term `qualified retirement plan'
means any plan described in section 401(a) which includes a
trust exempt from tax under section 501(a) if the plan meets--
``(A) the contribution requirements of paragraph
(2),
``(B) the vesting requirements of paragraph (3),
and
``(C) the distributions requirements of paragraph
(4).
``(2) Contribution requirements.--
``(A) In general.--The requirements of this
paragraph are met if, under the plan--
``(i) the employer is required to make
nonelective contributions of at least 1 percent
of compensation (or the equivalent thereof in
the case of a defined benefit plan) for each nonhighly compensated
employee who is eligible to participate in the plan, and
``(ii) except in the case of a defined
benefit plan, allocations of nonelective
employer contributions are either in equal
dollar amounts for all employees covered by the
plan or bear a uniform relationship to the
total compensation, or the basic or regular
rate of compensation, of the employees covered
by the plan.
``(B) Compensation limitation.--The compensation
taken into account under subparagraph (A) for any year
shall not exceed the limitation in effect for such year
under section 401(a)(17).
``(3) Vesting requirements.--The requirements of this
paragraph are met if the plan satisfies the requirements of
subparagraph (A) or (B).
``(A) 3-year vesting.--A plan satisfies the
requirements of this subparagraph if an employee who
has completed at least 3 years of service has a
nonforfeitable right to 100 percent of the employee's
accrued benefit derived from employer contributions.
``(B) 5-year graded vesting.--A plan satisfies the
requirements of this subparagraph if an employee has a
nonforfeitable right to a percentage of the employee's
accrued benefit derived from employer contributions
determined under the following table:
The nonforfeitable
``Years of service: percentage is:
1............................................. 20
2............................................. 40
3............................................. 60
4............................................. 80
5............................................. 100.
``(4) Distribution requirements.--
``(A) In general.--Except as provided in
subparagraph (B), the requirements of this paragraph
are met if, under the plan--
``(i) in the case of a profit-sharing or
stock bonus plan, amounts are distributable
only as provided in section 401(k)(2)(B), and
``(ii) in the case of a pension plan,
amounts are distributable subject to the
limitations applicable to other distributions
from the plan.
``(B) Distributions within 5 years after
separation, etc.--In no event shall a plan meet the
requirements of this paragraph unless, under the plan,
amounts distributed--
``(i) after separation from service or
severance from employment, and
``(ii) within 5 years after the date of the
earliest employer contribution to the plan,
may be distributed only in a direct trustee-to-trustee
transfer to a plan having the same distribution
restrictions as the distributing plan.
``(e) Other Definitions.--For purposes of this section--
``(1) Eligible employer.--The term `eligible employer' has
the meaning given such term by section 408(p)(2)(C)(i).
``(2) Nonhighly compensated employees.--The term `highly
compensated employee' has the meaning given such term by
section 414(q) (determined without regard to section
414(q)(1)(B)(ii)).
``(f) Special Rules.--
``(1) Disallowance of deduction.--No deduction shall be
allowed for that portion of the qualified employer
contributions paid or incurred for the taxable year which is
equal to the credit determined under subsection (a).
``(2) Election not to claim credit.--This section shall not
apply to a taxpayer for any taxable year if such taxpayer
elects to have this section not apply for such taxable year.
``(g) Recapture of Credit on Forfeited Contributions.--If any
accrued benefit which is forfeitable by reason of subsection (d)(3) is
forfeited, the employer's tax imposed by this chapter for the taxable
year in which the forfeiture occurs shall be increased by 35 percent of
the employer contributions from which such benefit is derived to the
extent such contributions were taken into account in determining the
credit under this section.
``(h) Regulations.--The Secretary shall prescribe such regulations
as may be appropriate to carry out the purposes of this section,
including regulations to prevent the abuse of the purposes of this
section through the use of multiple plans.
``(i) Termination.--This section shall not apply to any plan
established after December 31, 2009.''
(b) Credit Allowed as Part of General Business Credit.--Section
38(b) of such Code (defining current year business credit) is amended
by striking ``plus'' at the end of paragraph (13), by striking the
period at the end of paragraph (14) and inserting ``, plus'', and by
adding at the end the following new paragraph:
``(15) in the case of an eligible employer (as defined in
section 45F(e)), the small employer pension plan contribution
credit determined under section 45F(a).''
(c) Conforming Amendments.--
(1) Section 39(d) of such Code is amended by adding at the
end the following new paragraph:
``(11) No carryback of small employer pension plan
contribution credit before january 1, 2002.--No portion of the
unused business credit for any taxable year which is
attributable to the small employer pension plan contribution
credit determined under section 45F may be carried back to a
taxable year beginning before January 1, 2002.''
(2) Subsection (c) of section 196 of such Code is amended
by striking ``and'' at the end of paragraph (9), by striking
the period at the end of paragraph (10) and inserting ``,
and'', and by adding at the end the following new paragraph:
``(11) the small employer pension plan contribution credit
determined under section 45F(a).''
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1 of such Code is amended by adding at
the end the following new item:
``Sec. 45F. Small employer pension plan
contributions.''
(d) Effective Date.--The amendments made by this section shall
apply to contributions paid or incurred in taxable years beginning
after December 31, 2001.
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