[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 2733 Introduced in Senate (IS)]







107th CONGRESS
  2d Session
                                S. 2733

To amend the Internal Revenue Code of 1986 to expand retirement savings 
     for moderate and lower income workers, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 16, 2002

 Mr. Bingaman introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to expand retirement savings 
     for moderate and lower income workers, 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; ETC.

    (a) Short Title.--This Act may be cited as the ``Retirement 
Security for All Americans Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.

SEC. 2. EXPANSION OF RETIREMENT SAVINGS CREDIT.

    (a) Credit To Be Refundable; Expansion of Eligibility; Credit Made 
Permanent.--Subpart C of part IV of subchapter A of chapter 1 (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 INDIVIDUAL RETIREMENT PLAN ACCOUNT 
              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--
            ``(1) In general.---The applicable percentage is 50 
        percent, reduced (but not below zero) by the percentage 
        determined under paragraph (2).
            ``(2) Amount of reduction.-- The percentage determined 
        under this paragraph shall be equal to the ratio that--
                    ``(A) the excess of--
                            ``(i) the taxpayer's adjusted gross income 
                        for such taxable year, over
                            ``(ii) the applicable dollar amount, bears 
                        to
                    ``(B) the phaseout range.
            ``(3) Applicable dollar amount.--The applicable dollar 
        amount equals $30,000 in the case of a taxpayer filing a joint 
        return, $22,500 in the case of a taxpayer filing as a head of a 
        household (as defined in section 2(b)), and $15,000 in the case 
        of all other taxpayers.
            ``(4) Phaseout range.--The phaseout range equals $25,000 in 
        the case of a taxpayer filing a joint return, $18,750 in the 
        case of a taxpayer filing as a head of a household (as so 
        defined), and $12,500 in the case of all other taxpayers.
    ``(c) Eligible Individual.--For purposes of this section--
            ``(1) In general.--The term `eligible individual' means any 
        individual if such individual has attained the age of 18 as of 
        the close of the taxable year.
            ``(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 allowed 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)).
    ``(d) Qualified Retirement Savings Contributions.--For purposes of 
this section--
            ``(1) In general.--The term `qualified retirement savings 
        contributions' means, with respect to any taxable year, the sum 
        of--
                    ``(A) the amount of the qualified retirement 
                contributions (as defined in section 219(e)) made by 
                the eligible individual,
                    ``(B) the amount of--
                            ``(i) any elective deferrals (as defined in 
                        section 402(g)(3)) of such individual, and
                            ``(ii) 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
                    ``(C) the amount of voluntary employee 
                contributions by such individual to any qualified 
                retirement plan (as defined in section 4974(c)).
            ``(2) Reduction for certain distributions.--
                    ``(A) In general.--The qualified retirement savings 
                contributions determined under paragraph (1) shall be 
                reduced (but not below zero) by the aggregate 
                distributions received by the individual during the 
                testing period from any entity of a type to which 
                contributions under paragraph (1) may be made. The 
                preceding sentence shall not apply to the portion of 
                any distribution which is not includible in gross 
                income by reason of a trustee-to-trustee transfer or a 
                rollover distribution.
                    ``(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 2 preceding taxable years, and
                            ``(iii) the period after such taxable year 
                        and before the due date (including 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), and
                            ``(ii) any distribution to which section 
                        408A(d)(3) applies.
                    ``(D) Treatment of distributions received by spouse 
                of individual.--For purposes of determining 
                distributions received by an individual under 
                subparagraph (A) 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.
    ``(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.''.
    (b) Credit Treated as Overpayment of Tax.--Section 6401(b) 
(relating to excessive credits) is amended--
            (1) by striking ``If'' in paragraph (1) and inserting 
        ``Except as provided in paragraph (3)'', and
            (2) by adding at the end the following new paragraph:
            ``(3) Special rule for credit under section 35.--If the 
        amount allowable as a credit under section 35 (relating to 
        retirement savings credit) for any taxable year exceeds the tax 
        imposed for such taxable year by subtitle A (reduced by the 
        credits allowable under subparts A, B, D, and G of part IV of 
        subchapter A of chapter 1), the amount of such excess shall be 
        considered an overpayment and shall be subject to the 
        provisions of section 6401(1).''.
    (c) Transfer of Overpayment to Secure Retirement Savings Bond.--
Section 6402 (relating to authority to make credits or refunds) is 
amended at the end the following new subsection:
    ``(l) Transfer of Overpayment to Secure Retirement Savings Bond.--
            ``(1) In general.--In the case of any overpayment described 
        in section 6401(b)(3), the Secretary shall, in the name of the 
        taxpayer, issue a Secure Retirement savings bond under section 
        3105(f)(1) of title 31, United States Code, in an amount equal 
        to such overpayment.
            ``(2) Joint returns.--In the case of a taxpayer filing a 
        joint return, any overpayment described in section 6401(b)(3) 
        shall be divided equally among both spouses, and the Secretary 
        shall, separately in the name of each spouse, issue a Secure 
        Retirement savings bond under section 3105(f)(1) of title 31, 
        United States Code, in an amount equal to such overpayments.''.
    (d) Secure Retirement Savings Bonds.--Section 3105 of title 31, 
United States Code, is amended by adding at the end the following new 
subsection:
    ``(f)(1) The Secretary shall issue Secure Retirement savings bonds 
as required under section 6402(l) of the Internal Revenue Code of 1986.
    ``(2) For purposes of paragraph (1), a Secure Retirement savings 
bond is an inflation-indexed savings bond otherwise authorized to be 
issued under this section, except that, notwithstanding any other 
provision of this section, such bond shall not mature before the 
earlier of the date on which the bondholder--
            ``(A) dies;
            ``(B) becomes disabled (within the meaning of section 
        72(m)(7) of the Internal Revenue Code of 1986); or
            ``(C) attains social security retirement age under section 
        216(l)(2) of the Social Security Act (without regard to any 
        early retirement age permitted under such section).
    ``(3) The Secretary may, in lieu of actually issuing Secure 
Retirement savings bonds, provide an annual account statement to the 
bondholder reflecting the current value of the bonds, including accrued 
interest, nominally issued on behalf of such bondholder.''.
    (e) Repeal of Nonrefundable Credit.--
            (1) Section 25B is hereby repealed.
            (2) Subparagraph (B) of section 25(b)(3) is amended by 
        striking ``and 25B''.
            (3) Subparagraph (C) of section 25(e)(1) is amended by 
        striking ``25B,''.
            (4) Sections 26(a)(1), 901(h), and 1400C are each amended 
        by striking ``24, and 25B'' and inserting ``and 24''.
            (5) The table of sections for subpart A of part IV of 
        subchapter A of chapter 1 is amended by striking the item 
        relating to section 25B.
    (f) Technical 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 is amended by striking the last item 
        and inserting the following new items:

                              ``Sec. 35. Elective deferrals and 
                                        individual retirement plan 
                                        account contributions by 
                                        certain individuals.
                              ``Sec. 36. Overpayments of tax.''.
    (g) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.

SEC. 3. UNIVERSAL ACCESS TO DIRECT DEPOSIT RETIREMENT SAVINGS.

    (a) In General.--Chapter 43 (relating to qualified pension, etc., 
plans) is amended by adding at the end the following new section:

``SEC. 4980G. REQUIREMENTS FOR EMPLOYERS TO PROVIDE EMPLOYEES ACCESS TO 
              SALARY REDUCTION CONTRIBUTIONS TO INDIVIDUAL RETIREMENT 
              PLANS.

    ``(a) General Rule.--There is hereby imposed a tax on any failure 
by an employer to meet the requirements of subsection (d) for a 
calendar year.
    ``(b) Amount.--The amount of the tax imposed by subsection (a) on 
any failure for any calendar year shall be $100 with respect to each 
employee to whom such failure relates.
    ``(c) Procedures for Notice and Grace Period.--Not later than 6 
months after the date of the enactment of this section, the Secretary 
shall prescribe and initiate implementation of procedures for obtaining 
from employers confirmation that such employers are in compliance with 
the requirements of subsection (d). The Secretary, in the Secretary's 
discretion, may prescribe that the confirmation shall be obtained on an 
annual or less frequent basis, and may use for this purpose the annual 
report or quarterly report for employment taxes, or such other means as 
the Secretary may deem advisable. The tax imposed by subsection (a) 
shall not be imposed with respect to any failure that ends before the 
expiration of 90 days after the employer has responded or has had a 
reasonable opportunity to respond to a request for confirmation of 
compliance.
    ``(d) Employee Access to Salary Reduction Contributions to 
Individual Retirement Plans.--
            ``(1) In general.--Every employer which does not maintain a 
        qualified plan or arrangement for a calendar year shall provide 
        a salary reduction arrangement for the calendar year which 
        meets the requirements of paragraphs (3), (4) and (5).
            ``(2) Qualified plan or arrangement.--For purposes of this 
        section, an employer is treated as maintaining a qualified plan 
        or arrangement for a calendar year if the employer maintains 
        for such year a plan, contract, pension, or trust described in 
        subparagraph (A) or (B) of section 219(g)(5) or an eligible 
        deferred compensation plan (within the meaning of section 
        457(b)) with respect to which contributions are made, or 
        benefits are accrued, for service in such year.
            ``(3) Salary reduction arrangement.--For purposes of this 
        section, the term `salary reduction arrangement' means a 
        written arrangement of an employer under which--
                    ``(A) an employee eligible to participate in the 
                arrangement may elect to--
                            ``(i) contribute to an individual 
                        retirement plan established by or on behalf of 
                        the employee by having the employer make direct 
                        deposit payments to the plan by payroll 
                        deduction, or
                            ``(ii) receive the amounts directly as cash 
                        compensation, and
                    ``(B) no other contributions may be made under the 
                arrangement.
            ``(4) Participation requirements.--
                    ``(A) In general.--The requirements of this 
                paragraph are met with respect to a salary reduction 
                arrangement for a year only if, under the arrangement, 
                all employees of the employer are eligible to make the 
                election under paragraph (3)(A).
                    ``(B) Excludable employees.--An employer may 
                exclude from the requirement under paragraph (3) 
                employees described in section 410(b)(3) and any 
                employee who has not completed hours of service for the 
                employer on a regular basis during a period of at least 
                30 consecutive days during the calendar year.
            ``(5) Administrative requirements.--The requirements of 
        this paragraph are met with respect to any salary reduction 
        arrangement if, under the arrangement--
                    ``(A) the employer must make the payments elected 
                under paragraph (3)(A) not later than the close of the 
                30-day period following the last day of the month with 
                respect to which the contributions are to be made, or, 
                if later, the deadline under applicable rules and 
                regulations for the employer to deposit tax under 
                section 3102 for wages paid in that month,
                    ``(B) an employee may elect to terminate 
                participation in the arrangement at any time during the 
                year, except that if an employee so terminates, the 
                arrangement may provide that the employee may not elect 
                to resume participation until the beginning of the next 
                year,
                    ``(C) each employee eligible to participate may 
                elect, during the 60-day period before the beginning of 
                any year (and the 60-day period before the first day 
                the employee is eligible to participate), to 
                participate in the arrangement, or to modify the 
amounts subject to the arrangement, for such year, and
                    ``(D) immediately before the period for which an 
                election described in paragraph (3)(A) may be made, the 
                employer provides a notice to each employee of the 
                employee's opportunity to make the election and the 
                maximum amount which may be contributed to an 
                individual retirement plan on an annual basis.
            ``(6) Exception for certain small employers.--The 
        requirements of this subsection shall not apply for any 
        calendar year to an employer which had not more than 10 
        employees who received at least $5,000 of compensation from the 
        employer for the preceding calendar year.
            ``(7) Use of designated financial institution.--An employer 
        shall not be treated as failing to satisfy the requirements of 
        this subsection or any other provision of this title merely 
        because the employer makes all contributions (or all 
        contributions on behalf of employees who do not specify an 
        individual retirement plan, trustee, or issuer to receive the 
        contributions) to individual retirement plans of a designated 
        trustee or issuer. The preceding sentence shall not apply 
        unless each participant is notified in writing that the 
        participant's balance may be transferred without cost or 
        penalty to another individual retirement plan in accordance 
        with subsection (d)(3).
            ``(8) Model notice.--The Secretary shall provide a model 
        notice, written in a manner calculated to be understandable to 
        the average worker, that employers may use to satisfy the 
        requirement of paragraphs (5)(D) and (7). Model notices shall 
        be provided in English, in Spanish, and in any other language 
        deemed appropriate by the Secretary.
    ``(e) Salary Reduction Contributions Treated Like Other 
Contributions to Individual Retirement Plans.--
            ``(1) Tax treatment unaffected.--The fact that a 
        contribution to an individual retirement plan is made on behalf 
        of an employee under a salary reduction arrangement instead of 
        being made directly by the employee shall not affect the 
        deductibility or other income tax treatment of the contribution 
        or of other amounts under this title.
            ``(2) Salary reduction contributions taken into account.--
        Any contribution made on behalf of an employee under a salary 
        reduction arrangement shall be taken into account in applying 
        the limitations on contributions to individual retirement plans 
        and the other provisions of this title applicable to individual 
        retirement plans as if the contribution had been made to the 
        plan directly by the employee.''.
    (b) Credit for Small Employers Maintaining Salary Reduction 
Arrangements Facilitating Employee Contributions to Individual 
Retirement Plans.--
            (1) In general.--Subpart D of part IV of subchapter A of 
        chapter 1 (relating to business related credits) is amended by 
        adding at the end the following new section:

``SEC. 45G. SMALL EMPLOYER SALARY REDUCTION COSTS.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
eligible employer, the small employer salary reduction cost credit 
determined under this section for any taxable year is the amount 
determined under subsection (b).
    ``(b) Amount of Credit.--The amount of the credit determined under 
this section for any taxable year with respect to an eligible employer 
shall be--
            ``(1) $200 for the taxable year which includes the date 
        that the arrangement referred to subsection (a) becomes 
        effective, and
            ``(2) $50 for each subsequent taxable year during which the 
        arrangement is in effect.
    ``(c) Eligible Employer.--For purposes of this section, the term 
`eligible employer' means, with respect to any calendar year in which 
the taxable year begins, an employer which maintains a salary reduction 
arrangement meeting the requirements of section 4980G(d) and which did 
not maintain a qualified plan or arrangement (within the meaning of 
section 4980G(d)(2)) for the preceding 2 calendar years.''.
            (2) Credit allowed as part of general business credit.--
        Section 38(b) (defining current year business credit) is 
        amended by striking ``plus'' at the end of paragraph (14), by 
        striking the period at the end of paragraph (15) and inserting 
        ``, plus'', and by adding at the end the following new 
        paragraph:
            ``(16) in the case of an eligible employer (as defined in 
        section 45G(c)), the small employer salary reduction cost 
        credit determined under section 45G(a).''.
    (c) Clerical Amendments.--
            (1) The table of sections for chapter 43 is amended by 
        adding at the end the following new item:

                              ``Sec. 4980G. Requirements for employers 
                                        to provide employees access to 
                                        salary reduction contributions 
                                        to individual retirement 
                                        plans.''.
            (2) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1 is amended by adding at the end the 
        following new item:

                              ``Sec. 45G. Small employer salary 
                                        reduction costs.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2002.

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 
(relating to business related credits), as amended by section 3(b)(1), 
is amended by adding at the end the following new section:

``SEC. 45H. 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 employee who is not a highly 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 first taxable year for which a credit is 
allowable with respect to a plan under this section.
    ``(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 employee who is 
        not a highly 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 employee who is not a highly compensated employee to the 
        extent that the accrued benefit of such employee derived from 
        employer contributions for the year does 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 distribution 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 
                        employee who is not a highly compensated 
                        employee who is eligible to participate in the 
                        plan, and
                            ``(ii) allocations of nonelective employer 
                        contributions, in the case of a defined 
                        contribution plan, 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 (and an equivalent requirement is met with 
                        respect to a defined benefit 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 
        either of the following subparagraphs:
                    ``(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.--In the case of a profit-
        sharing or stock bonus plan, the requirements of this paragraph 
        are met if, under the plan, qualified employer contributions 
        are distributable only as provided in section 401(k)(2)(B).
    ``(e) Other Definitions.--For purposes of this section--
            ``(1) Eligible employer.--
                    ``(A) In general.--The term `eligible employer' 
                means, with respect to any year, an employer which has 
                no more than 20 employees who received at least $5,000 
                of compensation from the employer for the preceding 
                year.
                    ``(B) Requirement for new qualified employer 
                plans.--Such term shall not include an employer if, 
                during the 3-taxable year period immediately preceding 
the 1st taxable year for which the credit under this section is 
otherwise allowable for a qualified employer plan of the employer, the 
employer or any member of any controlled group including the employer 
(or any predecessor of either) established or maintained a qualified 
employer plan with respect to which contributions were made, or 
benefits were accrued, for substantially the same employees as are in 
the qualified employer plan.
            ``(2) Highly compensated employee.--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.
            ``(3) 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.
    ``(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.''.
    (b) Credit Allowed as Part of General Business Credit.--Section 
38(b) (defining current year business credit), as amended by section 
3(b)(2), is amended by striking ``plus'' at the end of paragraph (15), 
by striking the period at the end of paragraph (16) and inserting ``, 
plus'', and by adding at the end the following new paragraph:
            ``(17) in the case of an eligible employer (as defined in 
        section 45H(e)), the small employer pension plan contribution 
        credit determined under section 45H(a).''.
    (c) Conforming Amendments.--
            (1) Section 39(d) is amended by adding at the end the 
        following new paragraph:
            ``(11) No carryback of small employer pension plan 
        contribution credit before january 1, 2003.--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 45H may be carried back to a 
        taxable year beginning before January 1, 2003.''.
            (2) Subsection (c) of section 196 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 45H(a).''.
            (3) The table of sections for subpart D of part IV of 
        subchapter A of chapter 1, as amended by section 3(c)(2), is 
        amended by adding at the end the following new item:

                              ``Sec. 45H. 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, 2002.
                                 <all>