[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.
                                 <all>