[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5553 Introduced in House (IH)]
107th CONGRESS
2d Session
H. R. 5553
To amend the Internal Revenue Code of 1986 to preserve retirement
security by accelerating increases in retirement plan contribution
limits and by eliminating rules that force depletion of retirement
savings, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
October 3, 2002
Mr. Portman (for himself and Mr. Cardin) introduced the following bill;
which was referred to the Committee on Ways and Means, and in addition
to the Committee on Government Reform, for a period to be subsequently
determined by the Speaker, in each case for consideration of such
provisions as fall within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to preserve retirement
security by accelerating increases in retirement plan contribution
limits and by eliminating rules that force depletion of retirement
savings, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; AMENDMENT OF 1986 CODE.
(a) Short Title.--This Act may be cited as the ``Protecting
America's Savings Act of 2002''.
(b) Amendment of 1986 Code.--Except as otherwise expressly
provided, whenever in this Act an amendment or repeal is expressed in
terms of an amendment to, or repeal of, a section or other provision,
the reference shall be considered to be made to a section or other
provision of the Internal Revenue Code of 1986.
SEC. 2. ACCELERATION OF INCREASES IN IRA CONTRIBUTION LIMIT.
(a) Deductible Amount.--Subparagraph (A) of section 219(b)(1) is
amended to read as follows:
``(A) $5,000, or''.
(b) Catch-Up Amount.--Paragraph (5) of section 219(b) is amended to
read as follows:
``(5) Catch-up contributions for individuals 50 or older.--
In the case of an individual who has attained the age of 50
before the close of the taxable year, the dollar amount in
effect under paragraph (1)(A) for such taxable year (determined
without regard to this paragraph) shall be increased by
$1,000.''.
(c) Cost-of-Living Adjustment.--Subsection (b) of section 219 is
amended by adding at the end the following new paragraph:
``(6) Cost-of-living adjustment.--
``(A) In general.--In the case of any taxable year
beginning in a calendar year after 2002, the $5,000
amount under paragraph (1)(A) shall be increased by an
amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which the taxable year begins,
determined by substituting `calendar year 2001'
for `calendar year 1992' in subparagraph (B)
thereof.
``(B) Rounding rules.--If any amount after
adjustment under subparagraph (A) is not a multiple of
$500, such amount shall be rounded to the next lower
multiple of $500.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2001.
SEC. 3. ACCELERATION OF SCHEDULED INCREASES IN ELIGIBILITY FOR
DEDUCTIBLE IRAS AND ELIMINATION OF MARRIAGE PENALTY;
SIMPLIFICATION OF RULES.
(a) Deductible IRAs.--
(1) Increase in phaseout amounts.--
(A) In general.--Subclause (II) of section
219(g)(2)(A)(i) is amended to read as follows:
``(II) $50,000 ($100,000 in the
case of a joint return and zero in the
case of a married individual filing a
separate return), bears to''.
(B) Conforming amendment.--Paragraph (3) of section
219(g) is amended to read as follows:
``(3) Adjusted gross income.--For purposes of this
subsection, adjusted gross income of any taxpayer shall be
determined--
``(A) after application of sections 86 and 469, and
``(B) without regard to sections 135, 137, 221,
222, and 911 or the deduction allowable under this
section.''.
(2) Increase in phaseout range.--Clause (ii) of section
219(g)(2)(A) is amended by striking ``for a taxable year
beginning after December 31, 2006''.
(b) Roth IRAs.--Subclause (I) of section 408A(c)(3)(C)(ii) is
amended by striking ``$150,000'' and inserting ``$190,000''.
(c) Elimination of Marriage Penalty on IRA Deduction for Active
Pension Plan Participants.--Section 219(g) is amended--
(1) by striking ``or the individual's spouse'' in paragraph
(1), and
(2) by striking paragraph (7).
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2002.
SEC. 4. ACCELERATION OF SCHEDULED INCREASES IN PENSION PLAN
CONTRIBUTION LIMITS.
(a) Elective Deferrals.--
(1) In general.--Section 402(g)(1) is amended--
(A) in subparagraph (A) by striking ``the
applicable dollar amount'' and inserting ``$15,000'',
(B) by striking subparagraph (B) and redesignating
subparagraph (C) as subparagraph (B).
(2) Conforming amendments.--
(A) Section 402(g)(1)(B) (as redesignated by
paragraph (1)) is amended by striking ``applicable
dollar amount under subparagraph (B)'' and inserting
``amount in effect under subparagraph (A)''.
(B) Section 402(g)(4) is amended--
(i) by striking ``2006'' and inserting
``2003'',
(ii) by striking ``paragraph (1)(B)'' and
inserting ``paragraph (1)(A)'', and
(iii) by striking ``2005'' and inserting
``2002''.
(b) Deferred Compensation Plans of State and Local Governments and
Tax-Exempt Organizations.--
(1) In general.--Subsection (b)(2)(A) of section 457 is
amended by striking ``the applicable dollar amount'' and
inserting ``$15,000''.
(2) Conforming amendment.--Paragraph (15) of section 457(e)
is amended to read as follows:
``(15) Cost-of-living adjustments.--In the case of taxable
years beginning after December 31, 2003, the Secretary shall
adjust the $15,000 amount in subsection (b)(2)(A) at the same
time and in the same manner as under section 415(d), except
that the base period shall be the calendar quarter beginning
July 1, 2002, and any increase under this paragraph which is
not a multiple of $500 shall be rounded to the next lowest
multiple of $500.''.
(c) Simple Retirement Accounts.--
(1) In general.--Clause (ii) of section 408(p)(2)(A)
(relating to general rule for qualified salary reduction
arrangement) is amended by striking ``the applicable dollar
amount'' and inserting ``$10,000''.
(2) Conforming amendment.--Subparagraph (E) of section
408(p)(2) is amended to read as follows:
``(E) Cost-of-living adjustment.--In the case of a
year beginning after December 31, 2003, the Secretary
shall adjust the $10,000 amount in subparagraph (A)(ii)
at the same time and in the same manner as under
section 415(d), except that the base period taken into
account shall be the calendar quarter beginning July 1,
2002, and any increase under this subparagraph which is
not a multiple of $500 shall be rounded to the next
lower multiple of $500.''.
(d) Catch-Up Contributions.--
(1) In general.--Subparagraph (B) of section 414(v)(2) is
amended--
(A) in clause (i) by striking ``shall be'' and all
that follows and inserting ``is $5,000.'', and
(B) in clause (ii) by striking ``shall be'' and all
that follows and inserting ``is $2,500.''.
(2) Conforming amendments.--Section 414(v)(2)(C) is
amended--
(A) by striking ``2006'' and inserting ``2003'',
and
(B) by striking ``2005'' and inserting ``2002''.
(e) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2002.
SEC. 5. CATCH-UP CONTRIBUTIONS FOR FEDERAL EMPLOYEES.
(a) Civil Service Retirement System.--Paragraph (2) of section
8351(b) of title 5, United States Code, is amended by adding at the end
the following:
``(C) Notwithstanding any limitation under this paragraph, an
eligible participant (as defined by section 414(v) of the Internal
Revenue Code of 1986) may make such additional contributions to the
Thrift Savings Fund as are permitted by such section 414(v) and
regulations of the Executive Director consistent therewith.''.
(b) Federal Employees' Retirement System.--
(1) Provision applicable to employees generally.--
Subsection (a) of section 8432 of title 5, United States Code,
is amended by adding at the end the following:
``(3) Notwithstanding any limitation under this subsection, an
eligible participant (as defined by section 414(v) of the Internal
Revenue Code of 1986) may make such additional contributions to the
Thrift Savings Fund as are permitted by such section 414(v) and
regulations of the Executive Director consistent therewith.''.
(2) Provision applicable to certain other individuals.--
Section 8440f of title 5, United States Code, is amended--
(A) by striking ``The maximum'' and inserting ``(a)
The maximum''; and
(B) by adding at the end the following:
``(b) Notwithstanding any limitation under this section, an
eligible participant (as defined by section 414(v) of the Internal
Revenue Code of 1986) may make such additional contributions to the
Thrift Savings Fund as are permitted by such section 414(v) and
regulations of the Executive Director consistent therewith.''.
(c) Effective Date.--The amendments made by this section shall take
effect as of the earliest practicable date, as determined by the
Executive Director (appointed under section 8474(a) of title 5, United
States Code) in regulations.
SEC. 6. EXTENSION AND EXPANSION OF CREDIT FOR CERTAIN INDIVIDUALS FOR
ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS.
(a) Extension.--Section 25B (relating to elective deferrals and IRA
contributions by certain individuals) is amended by striking subsection
(h).
(b) Expansion.--The table contained in subsection (b) of section
25B (relating to applicable percentage) is amended to read as follows:
------------------------------------------------------------------------
``Adjusted Gross Income
---------------------------------------------------------
Joint return Head of a All other cases Applicable
------------------- household ------------------ percentage
-------------------- Not
Over Not over Over Not over Over over
------------------------------------------------------------------------
$30,000 ........ $22,500 ....... $15,000 60
30,000 40,000 22,500 30,000 15,000 20,000 35
40,000 50,000 30,000 37,500 20,000 25,000 20
50,000 65,000 37,500 48,750 25,000 32,500 10
65,000 ........ 48,750 ........ 32,500 ....... 0''.
------------------------------------------------------------------------
(c) EGTRRA Sunset Not To Apply.--Title IX of the Economic Growth
and Tax Relief Reconciliation Act of 2001 shall not apply with respect
to section 25B of the Internal Revenue Code of 1986.
(d) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2002.
SEC. 7. SIMPLIFICATION AND UPDATING OF THE MINIMUM DISTRIBUTION RULES.
(a) Required Distributions.--
(1) Increase in age for required beginning date.--
Subparagraphs (C)(i)(I) and (C)(ii)(I) of section 401(a)(9) are
each amended by striking ``70\1/2\'' and inserting ``75''.
(2) Actuarial adjustment of benefit under defined benefit
plan.--Clause (iii) of section 401(a)(9)(C) is amended to read
as follows:
``(iii) Actuarial adjustment.--
``(I) In general.--In the case of a
defined benefit plan, an employee's
accrued benefit shall be actuarially
increased to take into account the
period after the applicable date during
which the employee was not eligible to
receive any benefits under the plan.
``(II) Applicable date.--For
purposes of clause (I), the term
`applicable date' means the April 1st
following the calendar year in which
the employee attains age 70\1/2\.''.
(b) Amount Not Subject to Minimum Distribution Requirements.--
Paragraph (9) of section 401(a) is amended--
(1) in subparagraph (A), by inserting ``(minus the
exclusion amount)'' after ``the entire interest'', and
(2) by adding at the end the following:
``(H) Exclusion amount.--
``(i) In general.--For purposes of this
paragraph, the term `exclusion amount' means--
``(I) $300,000 in the case of a
defined contribution plan,
``(II) $300,000 in the case of an
individual retirement plan, and
``(III) $0 in the case of a defined
benefit plan.
``(ii) Aggregation of plans.--For purposes
of determining the exclusion amount under
clause (i)--
``(I) all defined contribution
plans maintained by the same employer
shall be treated as a single plan, and
``(II) all individual retirement
plans (other than Roth IRAs) of the
individual shall be treated as a single
plan.
``(iii) Cost-of-living adjustment.--The
Secretary shall adjust the $300,000 exclusion
amount specified in clause (i) at the same time
and in the same manner as under section 415(d),
except that the base period shall be the
calendar quarter beginning July 1, 2002.''
(c) Reduction in Excise Tax.--Subsection (a) of section 4974 is
amended by striking ``50 percent'' and inserting ``25 percent''.
(d) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2002.
SEC. 8. ALLOW ROLLOVERS TO SPOUSE'S RETIREMENT PLANS.
(a) Exempt Trusts.--Paragraph (9) of section 402(c) (relating to
rollover where spouse receives distribution after death of employee) is
amended--
(1) by inserting ``or transferred by the employee to the
spouse'' after ``after the employee's death'' in the text, and
(2) by amending the heading to read as follows: ``Rollover
where spouse of employee receives distribution.--''.
(b) IRAs.--Paragraph (3) of section 408(d) (relating to rollover
contributions) is amended by adding at the end the following:
``(J) Rollovers to spouse's account.--For purposes
of this paragraph, rules similar to the rules of
section 402(c)(9) shall apply, except that the term
`individual' shall be applied in lieu of `employee'.''.
(c) Employee Annuities.--Subparagraph (B) of section 403(a)(4)
(relating to rollover amounts) is amended by inserting ``and (9)''
after ``through (7)''.
(d) Effective Date.--The amendments made by this section shall
apply to years beginning after the date of the enactment of this Act.
SEC. 9. ROLLOVERS BY NONSPOUSE BENEFICIARIES.
(a) In General.--
(1) Qualified plans.--Section 402(c) (relating to rollovers
from exempt trusts) is amended by adding at the end the
following new paragraph:
``(11) Rollover where nonspouse beneficiary receives
distribution after death of employee.--If any distribution
attributable to an employee is paid to a designated beneficiary
(as defined by section 401(a)(9)(E)) other than the surviving
spouse of the employee after the employee's death, the
preceding provisions of this subsection shall apply to such
distribution in the same manner as if the designated beneficiary were
the employee, except that only a plan described in clause (i) or (ii)
of paragraph (8)(B) that is established in the name of the employee for
the benefit of the designated beneficiary shall be treated as an
eligible retirement plan with respect to such distribution.''.
(2) Section 403(a) plans.--Subparagraph (B) of section
403(a)(4) (as amended by section 8) is further amended by
striking ``and (9)'' and inserting ``, (9), and (11)''.
(3) Section 403(b) plans.--Subparagraph (B) of section
403(b)(8) is amended by striking ``and (9)'' and inserting ``,
(9), and (10)''.
(4) Section 457 plans.--Subparagraph (B) of section
457(e)(16) is amended by striking ``and (9)'' and inserting ``,
(9), and (10)''.
(b) Effective Date.--The amendments made by this section shall
apply to distributions after December 31, 2002.
SEC. 10. FAIR TREATMENT UNDER SUBSTANTIALLY EQUAL PERIODIC PAYMENTS
RULE.
Not later than 30 days after the date of enactment of this Act, the
Secretary of Treasury shall issue rules under sections 72(t)(2)(A)(iv)
and 72(t)(4)(A) of the Internal Revenue Code of 1986 which provide that
if--
(1) a taxpayer changes from one permissible method of
determining substantially equal periodic payments to another
permissible method for purposes of such determination, and
(2) such change results in an initial reduction in the
amount of payments made,
such change shall not be treated as a modification under section
72(t)(4)(A)(ii) of such Code.
SEC. 11. ADDITIONAL NONELECTIVE EMPLOYER CONTRIBUTIONS TO SIMPLE PLANS.
(a) In General.--
(1) Modification to definition.--Subparagraph (A) of
section 408(p)(2) is amended by striking ``and'' at the end of
clause (iii), by redesignating clause (iv) as clause (v), and
by inserting after clause (iii) the following new clause:
``(iv) the employer may make nonelective
contributions of a uniform percentage (up to 10
percent) of compensation for each employee who
is eligible to participate in the arrangement
and who has at least $5,000 of compensation
from the employer for the year, and''.
(2) Limitation.--Subparagraph (A) of section 408(p)(2) is
amended by adding at the end the following: ``The compensation
taken into account under clause (iv) for any year shall not
exceed the limitation in effect for such year under section
401(a)(17).''.
(b) Conforming Amendments.--
(1) Section 408(p)(2)(A)(v), as redesignated by subsection
(a), is amended by striking ``or (iii)'' and inserting ``,
(iii), or (iv)''.
(2) Paragraph (8) of section 408(p) is amended by inserting
after ``paragraph (2)(A)(ii) of this subsection'' the
following: ``, the employer contribution actually made under
paragraph (2)(A)(iv) of this subsection,''.
(3) Section 401(k)(11)(B)(i) is amended by striking ``and''
at the end of subclause (II), by redesignating subclause (III)
as subclause (IV), and by inserting after subclause (II) the
following new subclause:
``(III) the employer may make
nonelective contributions of a uniform
percentage (up to 10 percent) of
compensation for each employee who is
eligible to participate in the
arrangement and who has at least $5,000
of compensation from the employer for
the year, and''
(4) Section 401(k)(11)(B)(i)(IV), as redesignated by
paragraph (2), is amended by striking ``or (II)'' and inserting
``, (II), or (III)''.
(c) Effective Date.--The amendments made by this section shall
apply to years beginning after December 31, 2002.
SEC 12. GOLDEN PARACHUTE EXCISE TAX TO APPLY TO EXCESSIVE EMPLOYEE
REMUNERATION PAID BY CORPORATION AFTER DECLARTION OF
BANKRUPTCY.
(a) In General.--Section 4999 of the Internal Revenue Code of 1986
(relating to golden parachute payments) is amended by redesignating
subsection (c) as subsection (d) and by inserting after subsection (b)
the following new subsection:
``(c) Tax on Excessive Employee Remuneration in the Case of
Bankruptcy.--
``(1) In general.--There is hereby imposed a tax on any
person who is a covered employee equal to 50 percent of any
payment of excessive employee remuneration from a corporation
which becomes a debtor in a title 11 or similar case (as
defined in section 368(a)(3)(A) of this title, but not
including a case under chapter 12 of title 11, United States
Code). The tax imposed under subsection (a) shall not apply to the
extent that a tax is imposed under this subsection.
``(2) Special rules relating to excessive employee
remuneration.--For purposes of this subsection--
``(A) Excess employee remuneration defined.--The
term `excess employee remuneration' means remuneration
paid directly or indirectly to a covered employee
during the bankruptcy period--
``(i) for which a deduction is not allowed
under chapter 1 by reason of the application of
section 162(m) or would not be allowed if
section 162(m) applied to the covered employee
at the time of payment, or
``(ii) in the case of remuneration to a
covered employee of a corporation that is not a
publicly held corporation described in section
162(m)(2), that exceeds $1,000,000, other than
remuneration that meets requirements similar to
the standards for performance-based
compensation under section 162(m)(4)(C).
``(B) Such term shall not include--
``(i) remuneration that, on the date
immediately prior to the beginning of the
bankruptcy period, was payable to the covered
employee under a binding obligation and not
subject to a substantial risk of forfeiture,
``(ii) remuneration attributable to
contributions to or benefits from an excess
retirement plan to the extent that such plan is
maintained solely for the purpose of providing
benefits to employees in excess of the
limitations imposed by 1 or more of sections
401(a)(17), 401(k), 401(m), and 415,
``(iii) contributions to or benefits from a
qualified employer plan (as defined in section
132(m)), or
``(iv) any payment that is avoided or
approved by a bankruptcy trustee.
``(C) Bankruptcy period.--The term `bankruptcy
period' means any time during the period beginning 2
years before the date on which the corporation becomes
a debtor described in paragraph (1) and ending on the
date such corporation ceases to be such a debtor.
``(D) Covered employee.--The term `covered
employee'--
``(i) has the meaning given such term by
section 162(m)(3), except that such term shall
include an individual who is not a covered
employee under section 162(m)(3) for the
taxable year in which such remuneration is paid
but who previously was a covered employee
within the meaning of section 162(m)(3) during
the bankruptcy period, and
``(ii) with respect to an employee of a
corporation that is not subject to section
162(m), includes any employee of such
corporation who would be subject to the
requirement described in section 162(m)(3)(B)
(as modified by this paragraph) if such
corporation were a publicly held corporation
(as defined in section 162(m)(2)).
``(E) 100 percent tax for gross up payments.--
Subsection (b) shall be applied by substituting `100
percent' for `50 percent' to the extent that any
payment is made during the bankruptcy period that is
contingent upon a tax being imposed under this section.
``(E) Change in ownership contingency not to
apply.--Subsection (b) shall be applied without regard
to clause (i) of section 280G(b)(2)(A).''.
(b) Effective Date.--The amendment made this section shall apply to
payments received after the date of the enactment of this Act with
respect to any title 11 or similar case (as defined in section 4999(c)
of the Internal Revenue Code of 1986) commenced after such date.
SEC. 13. STUDY CONCERNING DEFINED CONTRIBUTION PLAN LOSSES DUE TO
MARKET VOLATILITY.
(a) In General.--The Secretary of the Treasury shall conduct a
study to evaluate possible ways to lessen defined contribution plan
losses due volatility of the economic markets.
(b) Requirements.--In conducting the study, the Secretary shall
investigate--
(1) the extent to which both long- and short-term stock
market volatility affects defined contribution savings;
(2) the effect that this volatility has on the continuation
and creation of defined contribution plans;
(3) investment alternatives and lifetime distribution
options for defined contribution plans that may help to
ameliorate market risks; and
(4) what legislative or administrative steps may be taken
to lessen defined contribution plan losses in the future.
(c) Report.--The Secretary shall transmit to the Committee on Ways
and Means of the House of Representatives and the Committee on Finance
of the Senate, within 1 year after the date of enactment of this Act, a
report containing the findings and conclusions of such study, together
with recommendations for any legislation or administrative actions
which the Secretary considers appropriate.
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