[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1776 Introduced in House (IH)]







108th CONGRESS
  1st Session
                                H. R. 1776

 To amend the Internal Revenue Code of 1986 to make today's retirement 
   savings opportunities permanent, to expand and improve retirement 
    savings vehicles, to extend pension coverage through regulatory 
 simplification and small business incentives, to enhance fairness and 
 pension portability, to revitalize defined benefit plans, to provide 
additional defined contribution plan protections, to assist individuals 
    in preserving their income throughout retirement, and for other 
                               purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 11, 2003

Mr. Portman (for himself, Mr. Cardin, Mrs. Johnson of Connecticut, Mr. 
Pomeroy, Mr. Blunt, Mr. Moore, Mr. Upton, Mrs. Tauscher, Mr. Gallegly, 
and Mr. Wynn) introduced the following bill; which was referred to the 
   Committee on Ways and Means, and in addition to the Committee on 
Education and the Workforce, 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 make today's retirement 
   savings opportunities permanent, to expand and improve retirement 
    savings vehicles, to extend pension coverage through regulatory 
 simplification and small business incentives, to enhance fairness and 
 pension portability, to revitalize defined benefit plans, to provide 
additional defined contribution plan protections, to assist individuals 
    in preserving their income throughout retirement, 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; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Pension 
Preservation and Savings Expansion Act of 2003''.
    (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.
    (c) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; amendment of 1986 Code; table of contents.
   TITLE I--MAKING TODAY'S RETIREMENT SAVINGS OPPORTUNITIES PERMANENT

Sec. 101. Pensions and individual retirement arrangement provisions of 
                            Economic Growth and Tax Relief 
                            Reconciliation Act of 2001 made permanent.
Sec. 102. Saver's credit made permanent.
                 TITLE II--PRESERVING RETIREMENT ASSETS

Sec. 201. Simplification and updating of the minimum distribution 
                            rules.
Sec. 202. Treatment of unclaimed benefits.
Sec. 203. Facilitation under fiduciary rules of certain rollovers and 
                            annuity distributions.
Sec. 204. Equalizing treatment of defined benefit plans and defined 
                            contribution plans.
Sec. 205. Study concerning defined contribution plan losses due to 
                            market volatility.
         TITLE III--ENHANCING FAIRNESS AND PENSION PORTABILITY

Sec. 301. Allow transfers to spouse's retirement plans.
Sec. 302. Faster vesting of employer nonelective contributions.
Sec. 303. Rollovers by nonspouse beneficiaries.
Sec. 304. Allow direct rollovers from retirement plans to ROTH IRAs.
Sec. 305. Exclusion of percentage of lifetime annuity payments.
Sec. 306. Rollover of after-tax amounts in annuity contracts.
Sec. 307. Fair treatment under substantially equal periodic payments 
                            rule.
Sec. 308. Treatment of subsequent qualified domestic relations orders.
Sec. 309. Treatment of delayed qualified domestic relations orders.
Sec. 310. Treatment of annuity contracts.
Sec. 311. Preservation of pension plans.
Sec. 312. Certain plan transfers and mergers.
     TITLE IV--INCREASING RETIREMENT PLAN PARTICIPATION AND SAVINGS

Sec. 401. Expansion of the Saver's credit.
Sec. 402. Acceleration of scheduled increases in pension plan 
                            contribution limits.
Sec. 403. Removing barriers to automatic contribution trust 
                            arrangements.
Sec. 404. Disposition of unused health benefits in cafeteria plans and 
                            flexible spending arrangements.
Sec. 405. Updating deduction rules for combination of plans.
   TITLE V--EXPANDING RETIREMENT PLAN COVERAGE TO EMPLOYEES OF SMALL 
                               BUSINESSES

Sec. 501. Additional nonelective employer contributions to simple 
                            plans.
Sec. 502. Matching contribution rules for Simple IRAs and Simple 
                            401(k)s conformed.
Sec. 503. Salary-reduction only Simple plans.
Sec. 504. Permit a mid-year change from a Simple plan to another plan.
Sec. 505. Elimination of higher penalty on certain Simple 
                            distributions.
Sec. 506. Simple plan portability.
Sec. 507. Correction of Simplified Employee Pension compensation 
                            inconsistency.
Sec. 508. Equalization of tax treatment of retirement plan 
                            contributions of the self-employed.
       TITLE VI--STRENGTHENING INDIVIDUAL RETIREMENT ARRANGEMENTS

Sec. 601. Acceleration of increases in IRA contribution limits.
Sec. 602. Acceleration and expansion of certain scheduled increases in 
                            eligibility for IRAs and elimination of IRA 
                            marriage penalty.
Sec. 603. IRA eligibility for the disabled.
Sec. 604. Protecting IRA assets.
             TITLE VII--REVITALIZING DEFINED BENEFIT PLANS

Sec. 701. Multiple employer plans permitted to elect separate or 
                            aggregate treatment for purposes of 
                            applying the funding rules and deduction 
                            limitations.
Sec. 702. Treatment of employee contributions to contributory defined 
                            benefit plans.
Sec. 703. Reform of the minimum participation rule.
Sec. 704. Plan valuation data collection.
Sec. 705. Replacement of interest rate on 30-year Treasury securities 
                            with interest rate on conservatively-
                            invested long-term corporate bonds.
Sec. 706. Interest rate range for additional funding requirements.
Sec. 707. Asset valuation.
Sec. 708. Multiemployer plan emergency investment loss rule.
Sec. 709. Mortality table adjustment.
       TITLE VIII--SIMPLIFY AND STREAMLINE RETIREMENT PLAN RULES

Sec. 801. Excise tax on excess contributions.
Sec. 802. Excess benefit plans.
Sec. 803. Paperless technologies in retirement plans.
Sec. 804. Elimination of unintended consequences attributable to use of 
                            base pay or rate of pay.
Sec. 805. Repeal of the gateway test.
Sec. 806. Intermediate sanctions for inadvertent failures.
Sec. 807. Qualified preretirement survivor annuity.
Sec. 808. Cost-of-living adjustment of $5,000 cash-out amount.
Sec. 809. Catch-up contributions.
Sec. 810. Reverse match salary reduction arrangement simplified 
                            employee annuity.
Sec. 811. Level dollar contributions to SEPs.
Sec. 812. Tax on nondeductible contributions not to apply to certain 
                            nontrade or business SEP contributions.
Sec. 813. Clarification of fiduciary duty.
Sec. 814. Multiemployer plan clarification.
Sec. 815. Clarification of status of Young Men's Christian Association 
                            Retirement Fund.
 TITLE IX--EXPANDING RETIREMENT SAVINGS OPPORTUNITIES FOR EMPLOYEES OF 
                TAX-EXEMPT ORGANIZATIONS AND GOVERNMENTS

Sec. 901. Deferred compensation plans of tax-exempt organizations.
Sec. 902. Inapplicability of 10 percent additional tax on early 
                            distributions of pension plans of public 
                            safety employees.
Sec. 903. Clarifications regarding purchase of permissive service 
                            credit.
Sec. 904. Certain rollovers of benefits permitted
Sec. 905. Minimum distribution rules.
Sec. 906. Church plan rule.
Sec. 907. Plans maintained by governments and tax-exempt organizations.
              TITLE X--RESTRICTING EXCESSIVE REMUNERATION

Sec. 1001. Golden parachute excise tax to apply to excessive employee 
                            remuneration paid by corporation after 
                            declaration of bankruptcy.
            TITLE XI--DEFINED CONTRIBUTION PLAN PROTECTIONS

Sec. 1101. Provision of investment education notices to participants.
Sec. 1102. Notice of blackout periods to participant or beneficiary 
                            under defined contribution plan.
Sec. 1103. Diversification requirements for defined contribution plans 
                            that hold employer securities.
Sec. 1104. Treatment of qualified retirement planning services.
Sec. 1105. Special rules.
          TITLE XII--OTHER TAX PROVISIONS RELATING TO PENSIONS

Sec. 1201. Amendments to Retirement Protection Act of 1994.
Sec. 1202. Reporting simplification.
Sec. 1203. Improvement of employee plans compliance resolution system.
Sec. 1204. Extension to all governmental plans of moratorium on 
                            application of certain nondiscrimination 
                            rules applicable to State and local plans.
Sec. 1205. Notice and consent period regarding distributions.
Sec. 1206. Reduced PBGC premium for new plans of small employers.
Sec. 1207. Reduction of additional PBGC premium for new and small 
                            plans.
Sec. 1208. Authorization for PBGC to pay interest on premium 
                            overpayment refunds.
Sec. 1209. Substantial owner benefits in terminated plans.
Sec. 1210. Qualified group legal services plans.
Sec. 1211. Studies.
                       TITLE XIII--STOCK OPTIONS

Sec. 1301. Exclusion of incentive stock options and employee stock 
                            purchase plan stock options from wages.
            TITLE XIV--OTHER ELEMENTS OF RETIREMENT SECURITY

Sec. 1401. Employee pre-tax payments for retiree health.
Sec. 1402. Encouraging employers to maintain retiree health plans.
                 TITLE XV--REDUCING REGULATORY BURDENS

Sec. 1501. Provisions relating to plan amendments.
         TITLE XVI--SOCIAL SECURITY AND MEDICARE HELD HARMLESS

Sec. 1601. Protection of Social Security and Medicare.

   TITLE I--MAKING TODAY'S RETIREMENT SAVINGS OPPORTUNITIES PERMANENT

SEC. 101. PENSIONS AND INDIVIDUAL RETIREMENT ARRANGEMENT PROVISIONS OF 
              ECONOMIC GROWTH AND TAX RELIEF RECONCILIATION ACT OF 2001 
              MADE PERMANENT.

    (a) In General.--Section 901 of the Economic Growth and Tax Relief 
Reconciliation Act of 2001 is amended by adding at the end the 
following new subsection:
    ``(c) Exception.--Subsections (a) and (b) shall not apply to the 
provisions of, and amendments made by, subtitles (A) through (F) of 
title VI (relating to pension and individual retirement arrangement 
provisions).''.
    (b) Conforming Amendments.--Section 901(b) of such Act is amended--
            (1) by striking ``and the Employee Retirement Income 
        Security Act of 1974'' in the text, and
            (2) by striking ``of Certain Laws'' in the heading.

SEC. 102. SAVER'S CREDIT MADE PERMANENT.

    (a) In General.--Section 25B (relating to elective deferrals and 
IRA contributions by certain individuals) is amended by striking 
subsection (h).
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

                 TITLE II--PRESERVING RETIREMENT ASSETS

SEC. 201. SIMPLIFICATION AND UPDATING OF THE MINIMUM DISTRIBUTION 
              RULES.

    (a) Required Distributions.--
            (1) Increase in age for required beginning date.--Clauses 
        (i) and (ii) of section 401(a)(9)(C) (relating to required 
        beginning date) are amended by striking ``age 70\1/2\'' each 
        place it appears and inserting ``the applicable age''.
            (2) Mandatory Distribution Age.--Paragraph (9) of section 
        401(a) (relating to required distributions) is amended by 
        inserting at the end the following new subparagraph:
                    ``(H) Applicable age.--For purposes of this 
                paragraph, the applicable age shall be determined in 
                accordance with the following table:

                ``Calendar year:
                                                     Applicable age is:
                    2004 and 2005..........................         72 
                    2006 and 2007..........................         73 
                    2008 and 2009..........................         74 
                    2010 and thereafter....................      75.''.
            (3) Spouse beneficiaries.--Subclause (I) of section 
        401(a)(9)(B)(iv) (relating to special rule for surviving spouse 
        of employee) is amended by striking ``age 70\1/2\'' and 
        inserting ``the applicable age''.
            (4) Actuarial adjustment of benefit under defined benefit 
        plan.--Clause (iii) of section 401(a)(9)(C) (relating to 
        actuarial adjustment) 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 receiving 
                                any benefits under the plan.
                                    ``(II) Applicable date.--For 
                                purposes of clause (I), the term 
                                `applicable date' means April 1 of the 
                                calendar year following the calendar 
                                year in which the employee attains age 
                                70\1/2\.''.
    (b) Preventing Two Required Distributions in a Year.--
            (1) In general.--The portion of clause (i) of section 
        401(a)(9)(C) that precedes subclause (I) is amended to read as 
        follows:
                            ``(i) In general.--The term `required 
                        beginning date' means the December 31 of the 
                        later of--''.
            (2) Date of retirement.--Clause (i) of section 401(a)(9)(C) 
        is amended by adding at the end the following: ``Solely for 
        purposes of subclause (II), an employee who retires during 
        December of a calendar year shall be treated as retiring in the 
        following calendar year.''.
    (c) Reduction in Excise Tax.--Subsection (a) of section 4974 
(relating to excise tax on certain accumulations in qualified 
retirement plans) is amended by striking ``50 percent'' and inserting 
``20 percent''.
    (d) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to years beginning 
        after December 31, 2003.
            (2) Special rule.--In the case of a participant who attains 
        age 70\1/2\ prior to January 1, 2004, the amendments made by 
        this section shall apply to years beginning after December 31, 
        2003, as if such amendments had been effective in years 
        beginning before January 1, 2004.

SEC. 202. TREATMENT OF UNCLAIMED BENEFITS.

    (a) Amendments to Internal Revenue Code of 1986.--
            (1) Amendment to section 401(a)(34).--Section 401(a)(34) 
        (relating to benefits of missing participants) is amended to 
        read as follows:
            ``(34) Unclaimed benefits.--A trust forming part of a plan 
        shall not be treated as failing to constitute a qualified trust 
        under this section merely because the plan of which such trust 
        is a part treats unclaimed benefits in a manner that satisfies 
the requirements of section 414(y).''.
            (2) Amendment to section 414.--Section 414 (relating to 
        definitions and special rules) (as amended by this Act) is 
        amended by adding at the end the following new subsection:
    ``(y) Unclaimed Benefits.--
            ``(1) In general.--A plan meets the requirements of this 
        subsection only if--
                    ``(A) Ongoing plans.--In the case of an ongoing 
                plan, the plan provides for one or more of the 
                following with respect to unclaimed benefits:
                            ``(i) In the case of an unclaimed benefit 
                        to which section 401(a)(31)(B) applies, a 
                        transfer under section 401(a)(31)(B).
                            ``(ii) A transfer to the Pension Benefit 
                        Guaranty Corporation, in accordance with 
                        section 4050(e) of the Employee Retirement 
                        Income Security Act of 1974.
                            ``(iii) Any other treatment permitted under 
                        rules prescribed by the Secretary.
                    ``(B) Terminated plans.--In the case of a 
                terminated plan, the plan provides for the following 
                with respect to unclaimed benefits:
                            ``(i) Defined benefit plans.--In the case 
                        of a defined benefit plan, one or more of the 
                        following:
                                    ``(I) In the case of an unclaimed 
                                benefit to which section 401(a)(31)(B) 
                                applies, a transfer under section 
                                401(a)(31)(B).
                                    ``(II) A transfer of the unclaimed 
                                benefit to another defined benefit plan 
                                maintained by the employer.
                                    ``(III) The purchase of an annuity 
                                contract to provide for an individual's 
                                unclaimed benefit.
                                    ``(IV) A transfer to the Pension 
                                Benefit Guaranty Corporation in 
                                accordance with section 4050(a) or 
                                4050(e) (as applicable) of the Employee 
                                Retirement Income Security Act of 1974.
                                    ``(V) Any other treatment permitted 
                                under rules prescribed by the 
                                Secretary.
                            ``(ii) Defined contribution plans.--In the 
                        case of a defined contribution plan, one or 
                        more of the following:
                                    ``(I) In the case of an unclaimed 
                                benefit to which section 401(a)(31)(B) 
                                applies, a transfer under section 
                                401(a)(31)(B).
                                    ``(II) A transfer of the unclaimed 
                                benefit to another defined contribution 
                                plan maintained by the employer.
                                    ``(III) The purchase of an annuity 
                                contract to provide for an individual's 
                                unclaimed benefit.
                                    ``(IV) A transfer to the Pension 
                                Benefit Guaranty Corporation in 
                                accordance with section 4050(d) or 
                                4050(e) (as applicable) of the Employee 
                                Retirement Income Security Act of 1974.
                                    ``(V) Any other treatment permitted 
                                under rules prescribed by the 
                                Secretary.
            ``(2) Treatment of transfers to pension benefit guaranty 
        corporation.--
                    ``(A) Transfers to pbgc.--Amounts transferred from 
                a plan to the Pension Benefit Guaranty Corporation 
                pursuant to paragraph (1) shall be treated as a 
                transfer under section 401(a)(31)(A).
                    ``(B) Distributions from pbgc.--Except as provided 
                in rules prescribed by the Secretary, amounts 
                distributed by the Pension Benefit Guaranty Corporation 
                shall be treated as distributed by an individual 
                retirement plan under section 408(d) (without regard to 
                paragraphs (4), (5) and (7) thereof). Rules similar to 
                the rules of section 402(c)(4) shall apply.
            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Unclaimed benefit.--The term `unclaimed 
                benefit' means--
                            ``(i) any benefit of a participant or 
                        beneficiary which is distributable under the 
                        terms of the plan to the participant or 
                        beneficiary, if the distribution of the benefit 
                        has not commenced within 1 year after the later 
                        of the date on which the benefit first became 
                        so distributable or the participant's severance 
                        from employment;
                            ``(ii) any benefit or other amount of a 
                        participant or beneficiary which is 
                        distributable under the terms of the plan with 
                        respect to a missing participant, or
                            ``(iii) any benefit to which section 
                        401(a)(31)(B) applies or would apply if 
                        subclause (I) of section 401(a)(31)(B)(i) did 
                        not require the distribution to exceed $1,000.
                A benefit otherwise described in clause (i) shall not 
                be treated as an unclaimed benefit under clause (i) if 
                the participant or beneficiary elects not to have such 
                treatment apply. Any such participant or beneficiary 
                shall be given reasonable notice of the opportunity to 
                make such an election. If the participant or 
                beneficiary fails to make such an election within a 
                reasonable period specified in the notice, any 
                subsequent election shall not be given effect and the 
                benefit shall be treated as an unclaimed benefit. A 
                notice mailed to the last known address of the 
                participant or beneficiary shall be treated as a notice 
                to the participant or beneficiary for purposes of this 
                paragraph.
                    ``(B) Ongoing plan.--The term `ongoing plan' means 
                any plan which has neither terminated nor is in the 
                process of terminating.
                    ``(C) Terminated plan.--The term `terminated plan' 
                means any plan which has terminated or is in the 
                process of terminating.
                    ``(D) Missing participant.--The term `missing 
                participant' shall have the meaning given to such term 
                by section 4050(b)(1) of the Employee Retirement Income 
                Security Act of 1974.''.
            (3) Conforming amendment.--Subparagraph (B) of section 
        401(a)(31) is amended by adding at the end the following:
                            ``(iii) Other permitted transfers.--A plan 
                        administrator shall be treated as having 
                        complied with the requirements of this 
                        subparagraph if such plan administrator 
                        complies with the requirements of section 
                        414(y).''.
    (b) Amendments to Employee Retirement Income Security Act of 
1974.--
            (1) In general.--Subsection (b) of section 4050 of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1350) is amended by adding at the end the following paragraph:
            ``(3) Unclaimed benefit.--The term `unclaimed benefit' 
        means--
                    ``(A) any benefit of a participant or beneficiary 
                which is distributable under the terms of the plan to 
                the participant or beneficiary, if the distribution of 
                the benefit has not commenced within 1 year after the 
                later of the date on which the benefit first became so 
                distributable or the participant's severance from 
                employment;
                    ``(B) any benefit or other amount of a participant 
                or beneficiary which is distributable under the terms 
                of the plan with respect to a missing participant, or
                    ``(C) any benefit to which section 401(a)(31)(B) of 
                the Internal Revenue Code of 1986 applies or would 
                apply if subclause (I) of section 401(a)(31)(B)(i) of 
                such Code did not require the distribution to exceed 
                $1,000.
        A benefit otherwise described in subparagraph (A) shall not be 
        treated as an unclaimed benefit under subparagraph (A) if the 
        participant or beneficiary elects not to have such treatment 
        apply. Any such participant or beneficiary shall be given 
        reasonable notice of the opportunity to make such an election. 
        If the participant or beneficiary fails to make such an 
        election within a reasonable period specified in the notice, 
        any subsequent election shall not be given effect and the 
        benefit shall be treated as an unclaimed benefit. A notice 
        mailed to the last known address of the participant or 
        beneficiary shall be treated as a notice to the participant or 
        beneficiary for purposes of this paragraph.''.
            (2) Other amendments.--Section 4050 of such Act is amended 
        by redesignating subsection (c) as subsection (f) and by 
        inserting after subsection (b) the following new subsections:
    ``(c) Multiemployer Plans.--The corporation shall prescribe rules 
similar to the rules in subsection (a) for multiemployer plans covered 
by this title that terminate under section 4041A.
    ``(d) Plans Not Otherwise Subject to Title.--
            ``(1) Transfer to corporation.--The plan administrator of a 
        plan described in paragraph (4) may elect to transfer a missing 
        participant's benefits to the corporation upon termination of 
        the plan.
            ``(2) Information to the corporation.--To the extent 
        provided in regulations, the plan administrator of a plan 
        described in paragraph (4) shall, upon termination of the plan, 
        provide the corporation information with respect to the 
        benefits of a missing participant if the plan transfers such 
        benefits--
                    ``(A) to the corporation, or
                    ``(B) to an entity other than the corporation or a 
                plan described in paragraph (4)(B)(ii).
            ``(3) Payment by the corporation.--If benefits of a missing 
        participant were transferred to the corporation under paragraph 
        (1), the corporation shall, upon location of the participant or 
        beneficiary, pay to the participant or beneficiary the amount 
        transferred (or the appropriate survivor benefit) either--
                    ``(A) in a single sum (plus interest), or
                    ``(B) in such other form as is specified in 
                regulations of the corporation.
            ``(4) Plans described.--A plan is described in this 
        paragraph if--
                    ``(A) the plan is a pension plan (within the 
                meaning of section 3(2))--
                            ``(i) to which the provisions of this 
                        section do not apply (without regard to this 
                        subsection), and
                            ``(ii) which is not a plan described in 
                        paragraphs (2) through (11) of section 4021(b), 
                        and
                    ``(B) at the time the assets are to be distributed 
                upon termination, the plan--
                            ``(i) has missing participants, and
                            ``(ii) has not provided for the transfer of 
                        assets to pay the benefits of all missing 
                        participants to another pension plan (within 
                        the meaning of section 3(2)).
                    ``(5) Certain provisions not to apply.--Subsections 
                (a)(1) and (a)(3) shall not apply to a plan described 
                in paragraph (4).
    ``(e) Unclaimed Benefits.--
            ``(1) Transfer to corporation.--The plan administrator of a 
        plan described in paragraph (6) may elect to transfer unclaimed 
        benefits to the corporation.
            ``(2) Information to the corporation.--The corporation may 
        impose such conditions on transfers of unclaimed benefits to 
        the corporation as the corporation determines are necessary to 
        facilitate administration of this subsection and are not 
        inconsistent with the purposes of this subsection. Such 
        conditions may include requirements that the transferring plan 
        provide to the corporation specified information and 
        documentation.
            ``(3) Payment to the corporation.--With respect to any 
        participant, any transfer of an unclaimed benefit to the 
        corporation shall--
                    ``(A) in the case of a defined benefit plan, be a 
                transfer of the participant's designated benefit, or
                    ``(B) in the case of an individual account plan, be 
                a transfer of the participant's vested account balance 
                under the plan.
            ``(4) Payment by the corporation.--Subject to such 
        reasonable restrictions as may be prescribed in regulations of 
        the corporation (relating to investment limitations and 
        otherwise)--
                    ``(A) unclaimed benefits of a participant or 
                beneficiary which are transferred to the corporation 
                pursuant to this subsection shall be distributed by the 
                corporation to the participant or beneficiary not later 
                than upon application filed by the participant or 
                beneficiary with the corporation in such form and 
                manner as may be prescribed in regulations of the 
                corporation, and
                    ``(B) such benefits shall--
                            ``(i) in the case of an individual account 
                        plan, be paid in a single sum (plus interest) 
                        or in such other form as is specified in 
                        regulations of the corporation, or
                            ``(ii) in the case of a defined benefit 
                        plan, be paid--
                                    ``(I) in an amount based on the 
                                designated benefit and the assumptions 
                                prescribed by the corporation at the 
                                time that the corporation received the 
                                benefit, and
                                    ``(II) in a form determined under 
                                regulations of the corporation.
            ``(5) Notice.--Any transfer of unclaimed benefits of a 
        participant or beneficiary to the corporation pursuant to this 
        subsection may occur only after reasonable advance notice of 
        such transfer is provided by the plan administrator to the 
        participant or beneficiary. The plan administrator shall also 
        provide to the participant or beneficiary notice of any such 
        transfer not later than 30 days after the date of the transfer. 
        Notice mailed to the last known address of the participant or 
        beneficiary shall be treated as a notice to the participant or 
        beneficiary for purposes of this paragraph. Any such notice 
        shall include information regarding procedures for obtaining 
        the distribution of benefits from the corporation in accordance 
        with paragraph (4).
            ``(6) Plans described.--A plan is described in this 
        paragraph if the plan is a pension plan (within the meaning of 
        section 3(2)--
                    ``(A)(i) which has neither terminated nor is in the 
                process of terminating, or
                    ``(ii) in the case of an unclaimed benefit to which 
                section 401(a)(31)(B) of the Internal Revenue Code of 
                1986 applies (other than an unclaimed benefit of a 
                missing participant), which has terminated or is in the 
                process of terminating, and
                    ``(B) which is not a plan described in paragraphs 
                (2) through (11) of section 4021(b).
            ``(6) Certain provisions not to apply.--Subsections (a)(1) 
        and (a)(3) shall not apply to a plan described in paragraph 
        (6).''.
            (3) Conforming amendment.--Section 4021(b) of such Act (29 
        U.S.C. 1321(b)(1)) is amended by striking ``This'' and 
        inserting ``Except to the extent provided in subsections (d) 
        and (e) of section 4050, this''.
    (c) Escheat Laws Superseded.--Section 514(b) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1144 (b) (as amended 
by this Act) is further amended--
            (1) by redesignating paragraph (10) as paragraph (11), and
            (2) by inserting after paragraph (9) the following new 
        paragraph:
            ``(10) Any escheat or similar law of any State shall be 
        superseded to the extent inconsistent with any transfer or 
        other treatment of unclaimed benefits (as defined in section 
        4050(b)(3)) permitted under the Internal Revenue Code of 
        1986.''.
    (d) Effective Dates and Related Rules.--
            (1) In general.--The amendments made by subsections (a) and 
        (b) shall apply to years beginning after December 31, 2004.
            (2) Regulations.--The Pension Benefit Guaranty Corporation 
        shall issue regulations necessary to carry out the amendments 
        made by subsection (b) not later than December 31, 2004.
            (3) Escheat laws superseded.--The amendment made by 
        subsection (c) shall apply as of the date of enactment of this 
        Act.

SEC. 203. FACILITATION UNDER FIDUCIARY RULES OF CERTAIN ROLLOVERS AND 
              ANNUITY DISTRIBUTIONS.

    (a) In General.--Section 404(c) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1104(c)) is amended by adding at the 
end the following new paragraph:
    ``(4)(A) In the case of a pension plan which makes a transfer under 
section 401(a)(31)(A) of the Internal Revenue Code of 1986 to an 
individual retirement plan (as defined in section 7701(a)(37) of such 
Code) in connection with a participant or beneficiary or makes a 
distribution to a participant or beneficiary of an annuity contract 
described in subparagraph (B), the participant or beneficiary shall, 
for purposes of paragraph (1), be treated as exercising control over 
the transfer or distribution if--
            ``(i) the participant or beneficiary elected such transfer 
        or distribution, and
            ``(ii) in connection with such election, the participant or 
        beneficiary was given an opportunity to elect any other 
        individual retirement plan (in the case of a transfer) or any 
        other annuity contract described in subparagraph (B) (in the 
        case of a distribution).
    ``(B) An annuity contract is described in this subparagraph if it 
provides, either on an immediate or deferred basis, a series of 
substantially equal periodic payments (not less frequently than 
annually) for the life of the participant or beneficiary or the joint 
lives of the participant or beneficiary and such individual's 
designated beneficiary. Annuity payments shall not fail to be treated 
as part of a series of substantially equal periodic payments because 
the amount of the periodic payments may vary in accordance with 
investment experience, reallocations among investment options, 
actuarial gains or losses, cost of living indices, or similar 
fluctuating criteria. The availability of a commutation benefit, a 
minimum period of payments certain, or a minimum amount to be paid in 
any event shall not affect the treatment of an annuity contract as an 
annuity contract described in this subparagraph.
    ``(C) Under regulations prescribed by the Secretary, this paragraph 
shall apply without regard to whether the particular individual 
retirement plan receiving the transfer or the particular annuity 
contract being distributed is specifically identified by the pension 
plan as available to the participant or beneficiary.
    ``(D) Notwithstanding the preceding provisions of this paragraph, 
paragraph (1)(B) shall not apply with respect to liability under 
section 406 in connection with the specific identification of any 
individual retirement plan or annuity contract as being available to 
the participant or beneficiary.''.
    (b) Effective Date and Related Rules.--
            (1) Effective date.--The amendment made by this section 
        shall take effect on the date of the enactment of this Act.
            (2) Issuance of final regulations.--Final regulations under 
        section 404(c)(4) of the Employee Retirement Income Security 
        Act of 1974 (added by this section) shall be issued no later 
        than 1 year after the date of the enactment of this Act.

SEC. 204. EQUALIZING TREATMENT OF DEFINED BENEFIT PLANS AND DEFINED 
              CONTRIBUTION PLANS.

    The Secretary of Treasury would be directed to permit defined 
benefit plans to satisfy the required distribution rules of section 
401(a)(9) of the Internal Revenue Code of 1986 (and provisions which 
cross reference section 401(a)(9) of such Code) by satisfying Temporary 
Treasury Regulation 1.401(a)(9)-6T Q&A 4(b) (the rules applicable to 
annuity contracts distributed under defined contribution plans) or by 
satisfying any final regulations to the extent that such final 
regulations permit additional means of satisfying section 401(a)(9) of 
such Code.

SEC. 205. 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.

         TITLE III--ENHANCING FAIRNESS AND PENSION PORTABILITY

SEC. 301. ALLOW TRANSFERS TO SPOUSE'S RETIREMENT PLANS.

    (a) In General.--Paragraph (6) of section 408(d) (relating to 
transfers incident to divorce) is amended by--
            (1) striking ``his spouse or former spouse under a divorce 
        or separation instrument described in subparagraph (A) of 
        section 71(b)(2)'' and inserting ``his spouse (or his former 
        spouse under a divorce or separation instrument described in 
        subparagraph (A) of section 71(b)(2))'', and
            (2) striking the heading and inserting ``Transfer of 
        account to spouse or former spouse.--''.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after the date of the enactment of this Act.

SEC. 302. FASTER VESTING OF EMPLOYER NONELECTIVE CONTRIBUTIONS.

    (a) Amendments to the Internal Revenue Code of 1986.--
            (1) In general.--Paragraph (2) of section 411(a) (relating 
        to employer contributions) is amended to read as follows:
            ``(2) Employer contributions.--
                    ``(A) Defined benefit plans.--
                            ``(i) In general.--In the case of a defined 
                        benefit plan, a plan satisfies the requirements 
                        of this paragraph if it satisfies the 
                        requirements of clause (ii) or (iii).
                            ``(ii) 5-year vesting.--A plan satisfies 
                        the requirements of this clause if an employee 
                        who has completed at least 5 years of service 
                        has a nonforfeitable right to 100 percent of 
                        the employee's accrued benefit derived from 
                        employer contributions.
                            ``(iii) 3 to 7 year vesting.--A plan 
                        satisfies the requirements of this clause 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:  
                    3......................................         20 
                    4......................................         40 
                    5......................................         60 
                    6......................................         80 
                    7 or more..............................        100.
                    ``(B) Defined contribution plans.--
                            ``(i) In general.--In the case of a defined 
                        contribution plan, a plan satisfies the 
                        requirements of this paragraph if it satisfies 
                        the requirements of clause (ii) or (iii).
                            ``(ii) 3-year vesting.--A plan satisfies 
                        the requirements of this clause 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.
                            ``(iii) 2 to 6 year vesting.--A plan 
                        satisfies the requirements of this clause 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:  
                    2......................................         20 
                    3......................................         40 
                    4......................................         60 
                    5......................................         80 
                    6......................................     100.''.

            (2) Conforming amendment.--Section 411(a) (relating to 
        general rule for minimum vesting standards) is amended by 
        striking paragraph (12).
    (b) Amendments to the Employee Retirement Income Security Act of 
1974.--
            (1) In general.--Paragraph (2) of section 203(a) of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1053(a)(2)) is amended to read as follows:
            ``(2)(A)(i) In the case of a defined benefit plan, a plan 
        satisfies the requirements of this paragraph if it satisfies 
        the requirements of clause (ii) or (iii).
            ``(ii) A plan satisfies the requirements of this clause if 
        an employee who has completed at least 5 years of service has a 
        nonforfeitable right to 100 percent of the employee's accrued 
        benefit derived from employer contributions.
            ``(iii) A plan satisfies the requirements of this clause 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:  
                    3......................................         20 
                    4......................................         40 
                    5......................................         60 
                    6......................................         80 
                    7 or more..............................        100.

            ``(B)(i) In the case of an individual account plan, a plan 
        satisfies the requirements of this paragraph if it satisfies 
        the requirements of clause (ii) or (iii).
            ``(ii) A plan satisfies the requirements of this clause 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.
            ``(iii) A plan satisfies the requirements of this clause 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:  
                    2......................................         20 
                    3......................................         40 
                    4......................................         60 
                    5......................................         80 
                    6......................................     100.''.
            (2) Conforming amendment.--Section 203(a) of such Act is 
        amended by striking paragraph (4).
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to contributions 
        for plan years beginning after December 31, 2003.
            (2) Collective bargaining agreements.--In the case of a 
        plan maintained pursuant to one or more collective bargaining 
        agreements between employee representatives and one or more 
        employers ratified by the date of the enactment of this Act, 
        the amendments made by this section shall not apply to 
        contributions on behalf of employees covered by any such 
        agreement for plan years beginning before the earlier of--
                    (A) the later of--
                            (i) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof on or after such date of the 
                        enactment); or
                            (ii) January 1, 2004; or
                    (B) January 1, 2008.
            (3) Service required.--With respect to any plan, the 
        amendments made by this section shall not apply to any employee 
        before the date that such employee has 1 hour of service under 
        such plan in any plan year to which the amendments made by this 
        section apply.

SEC. 303. 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.--
                    ``(A) In general.--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.
                    ``(B) Special rules.--
                            ``(i) Death of employee before entire 
                        interest distributed.--An eligible retirement 
                        plan that receives a transfer described in this 
                        paragraph shall, with respect to amounts 
                        attributable to such transferred amount, be 
                        subject to rules similar to clauses (ii) and 
                        (iii) of section 401(a)(9)(B).
                            ``(ii) Distributions attributed to 
                        employee.--For purposes of this subsection, any 
                        distribution from the eligible retirement plan 
                        of amounts attributable to such transferred 
                        amount shall be treated as a distribution 
                        attributable to the employee, not as a 
                        distribution attributable to the designated 
                        beneficiary.
                            ``(iii) Certain trusts treated as 
                        beneficiaries.--For purposes of this paragraph, 
                        to the extent provided in rules prescribed by 
                        the Secretary, a trust maintained for the 
                        benefit of one or more designated beneficiaries 
                        shall be treated in the same manner as a 
                        designated beneficiary.''.
            (2) Section 403(a) plans.--Subparagraph (B) of section 
        403(a)(4) (relating to rollover amounts) is further amended by 
        striking ``and (9)'' and inserting ``, (9), and (11)''.
            (3) Section 403(b) plans.--Subparagraph (B) of section 
        403(b)(8) (relating to rollover amounts) is amended by striking 
        ``and (9)'' and inserting ``, (9), and (11)''.
            (4) Section 457 plans.--Subparagraph (B) of section 
        457(e)(16) (relating to rollover amounts) is amended by 
        striking ``and (9)'' and inserting ``, (9), and (11)''.
    (b) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2003.

SEC. 304. ALLOW DIRECT ROLLOVERS FROM RETIREMENT PLANS TO ROTH IRAS.

    (a) In General.--Subsection (e) of section 408A (defining qualified 
rollover contribution) is amended to read as follows:
    ``(e) Qualified Rollover Contribution.--For purposes of this 
section, the term `qualified rollover contribution' means a rollover 
contribution--
            ``(1) to a Roth IRA from another such account,
            ``(2) from an eligible retirement plan, but only if--
                    ``(A) in the case of an individual retirement plan, 
                such rollover contribution meets the requirements of 
                section 408(d)(3), and
                    ``(B) in the case of any eligible retirement plan 
                (as defined in section 402(c)(8)(B) other than clauses 
                (i) and (ii) thereof), such rollover contribution meets 
                the requirements of section 402(c), 403(b)(8), or 
                457(e)(16), as applicable.
For purposes of section 408(d)(3)(B), there shall be disregarded any 
qualified rollover contribution from an individual retirement plan 
(other than a Roth IRA) to a Roth IRA.''.
    (b) Conforming Amendments.--
            (1) Section 408A(c)(3)(B) is amended--
                    (A) in the text by striking ``individual retirement 
                plan'' and inserting ``an eligible retirement plan (as 
                defined by section 402(c)(8)(B))'', and
                    (B) in the heading by striking ``IRA'' and 
                inserting ``eligible retirement plan''.
            (2) Section 408A(d)(3) is amended--
                    (A) in subparagraph (A) by striking ``section 
                408(d)(3)'' inserting ``sections 402(c), 403(b)(8), 
                408(d)(3), and 457(e)(16)'',
                    (B) in subparagraph (B) by striking ``individual 
                retirement plan'' and inserting ``eligible retirement 
                plan (as defined by section 402(c)(8)(B))'',
                    (C) in subparagraph (D) by striking ``or 6047'' 
                after ``408(i)'',
                    (D) in subparagraph (D) by striking ``or both'' and 
                inserting ``persons subject to section 6047(d)(1), or 
                all of the foregoing persons'', and
                    (E) in the heading by striking ``IRA'' and 
                inserting ``eligible retirement plan''.
    (c) Effective Date.--The amendments made by this section shall 
apply to distributions after December 31, 2003.

SEC. 305. EXCLUSION OF PERCENTAGE OF LIFETIME ANNUITY PAYMENTS.

    (a) In General.--
            (1) Qualified plans.--Subsection (e) of section 402 
        (relating to exempt trusts) is amended by adding at the end the 
        following new paragraph:
            ``(7) Exclusion of percentage of lifetime annuity 
        payments.--
                    ``(A) In general.--In the case of a lifetime 
                annuity payment from a qualified trust (within the 
                meaning of subsection (c)(8)(A)) to a qualified 
                distributee, gross income shall not include the 
                applicable percentage of the amount otherwise 
                includible in gross income (determined without regard 
                to this paragraph).
                    ``(B) Applicable percentage.--For purposes of 
                subparagraph (A), applicable percentage shall be 
                determined in accordance with the following table:

                ``For taxable years beginning
                                                         The applicable
                  in calendar year--
                                                        percentage is--
                    2004, 2005, 2006, and 2007.............          5 
                    2008 and thereafter....................         10.

                    ``(C) Limitation.--With respect to any qualified 
                distributee, subparagraph (A) shall not apply to any 
                lifetime annuity payment to the extent that such 
                payments, when added to all previous payments under 
                such annuity to such qualified distributee during the 
                taxable year, exceed 50 percent of the applicable 
                amount for such year under section 415(c)(1)(A). For 
                purposes of this subparagraph, all lifetime annuity 
                payments received by a qualified distributee shall be 
                taken into account to the extent that such payments are 
                subject to this paragraph or to rules similar to the 
                rules of this paragraph.
                    ``(D) Definitions.--For purposes of this 
                paragraph--
                            ``(i) Lifetime annuity payment.--
                                    ``(I) In general.--The term 
                                `lifetime annuity payment' means a 
                                distribution which is a part of a 
                                series of substantially equal periodic 
                                payments (made not less frequently than 
                                annually) made over the life of the 
                                qualified distributee or the joint 
                                lives of the qualified distributee and 
                                the qualified distributee's designated 
                                beneficiary.
                                    ``(II) Exceptions.--Annuity 
                                payments shall not fail to be treated 
                                as part of a series of substantially 
                                equal periodic payments because the 
                                amount of the periodic payments may 
                                vary in accordance with investment 
                                experience, reallocations among 
                                investment options, actuarial gains or 
                                losses, cost of living indices, or 
                                similar fluctuating criteria. The 
                                availability of a commutation benefit, 
                                a minimum period of payments certain, 
                                or a minimum amount to be paid in any 
                                event shall not affect the treatment of 
                                a distribution as a lifetime annuity 
                                payment. In the case of lifetime 
                                annuity payments being made to a 
                                qualified trust, payments by the 
                                qualified trust to a qualified 
                                distributee of the entire amount 
                                received by the qualified trust with 
                                respect to the qualified distributee 
                                shall constitute lifetime annuity 
                                payments.
                            ``(ii) Qualified distributee.--The term 
                        `qualified distributee' means the employee, the 
                        surviving spouse of the employee, and an 
                        alternate payee who is the spouse or former 
                        spouse of the employee.
                    ``(E) Recapture tax.--
                            ``(i) In general.--If--
                                    ``(I) the applicable percentage of 
                                a lifetime annuity payment is not 
                                includible in gross income by reason of 
                                subparagraph (A), and
                                    ``(II) the series of payments of 
                                which such payment is a part is 
                                subsequently modified (other than by 
                                reason of death or disability) so that 
                                some or all future payments are not 
                                lifetime annuity payments,
                        the qualified distributee's gross income for 
                        the first taxable year in which such 
                        modification occurs shall be increased by an 
                        amount, determined under rules prescribed by 
                        the Secretary, equal to the amount which (but 
                        for subparagraph (A)) would have been 
                        includible in the qualified distributee's gross 
                        income if the modification had been in effect 
                        at all times, plus interest for the deferral 
                        period.
                            ``(ii) Deferral period.--For purposes of 
                        this subparagraph, the term `deferral period' 
                        means the period beginning with the taxable 
                        year in which (without regard to subparagraph 
                        (A)) the payment would have been includible in 
                        gross income and ending with the taxable year 
                        in which the modification described in clause 
                        (i)(II) occurs.
                    ``(F) Phase-out of exclusion.--
                            ``(i) In general.--In any taxable year, the 
                        exclusion from gross income for any qualified 
                        distributee under this paragraph and under 
                        rules similar to the rules of this paragraph 
                        shall not exceed the income-adjusted limit.
                            ``(ii) Income-adjusted limit.--For purposes 
                        of this subparagraph, the income-adjusted limit 
                        shall be--
                                    ``(I) the product of the applicable 
                                percentage described in subparagraph 
                                (B) and the limitation described in 
                                subparagraph (C), reduced (but not 
                                below zero) by
                                    ``(II) the amount determined under 
                                clause (iii).
                            ``(iii) Amount determined.--The amount 
                        determined under this clause shall be the 
                        amount which bears the same ratio to the amount 
                        described in clause (ii)(I) as--
                                    ``(I) the excess of the taxpayer's 
                                adjusted gross income for such taxable 
                                year over the applicable dollar amount, 
                                bears to
                                    ``(II) $15,000 ($30,000 for a joint 
                                return).
                            ``(iv) Limitation on reduction.--The 
                        income-adjusted limit shall not be reduced 
                        below $200 by clause (ii)(II) unless (without 
                        regard to this clause) such limit is reduced to 
                        zero.
                            ``(v) Rounding rule.--Any income-adjusted 
                        limit determined under this subparagraph which 
                        is not a multiple of $10 shall be rounded to 
                        the next lowest multiple of $10.
                            ``(vi) Adjusted gross income.--For purposes 
                        of this subparagraph, adjusted gross income of 
                        any taxpayer shall be determined in the same 
                        manner as under section 408A(c)(3)(C)(i) except 
                        that section 408A(c)(3)(C)(i)(II) shall not 
                        apply for this purpose.
                            ``(vii) Applicable dollar limit.--For 
                        purposes of this subparagraph, the applicable 
                        dollar amount is--
                                    ``(I) in the case of a taxpayer 
                                filing a joint return, $150,000,
                                    ``(II) in the case of any other 
                                taxpayer (other than a married 
                                individual filing a separate return), 
                                $75,000, and
                                    ``(III) in the case of a married 
                                individual filing a separate return, 
                                zero.
                            ``(viii) Special rule for married 
                        individuals filing separately and living 
                        apart.--Section 219(g)(4) shall apply for 
                        purposes of this subparagraph.''.
            (2) Section 403(a) plans.--Paragraph (4) of section 403(a) 
        (relating to qualified annuity plans) is amended by adding at 
        the end the following new subparagraph:
                    ``(C) Exclusion of percentage of lifetime annuity 
                payments.--Rules similar to the rules of section 
                402(e)(7) shall apply to distributions under any 
                annuity contract to which this subsection applies.''.
            (3) Section 403(b) plans.--Section 403(b) (relating to 
        purchased annuities) is amended by adding at the end the 
        following new paragraph:
            ``(14) Exclusion of percentage of lifetime annuity 
        payments.--Rules similar to the rules of section 402(e)(7) 
        shall apply to distributions under any annuity contract or 
        custodial account to which this subsection applies.''.
            (4) IRAs.--Section 408(d) (relating to tax treatment of 
        distributions) is amended by adding at the end the following 
        new paragraph:
            ``(8) Exclusion of percentage of lifetime annuity 
        payments.--Rules similar to the rules of section 402(e)(7) 
        shall apply to distributions out of an individual retirement 
        plan.''.
            (5) Section 457 plans.--Section 457(e) (relating to special 
        rules for deferred compensation plans) is amended by adding at 
        the end the following new paragraph:
            ``(18) Exclusion of percentage of lifetime annuity 
        payments.--Rules similar to the rules of section 402(e)(7) 
        shall apply to distributions from an eligible deferred 
        compensation plan of an eligible employer described in 
        subsection (e)(1)(A).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to distributions made after December 31, 2003.

SEC. 306. ROLLOVER OF AFTER-TAX AMOUNTS IN ANNUITY CONTRACTS.

    (a) In General.--Subparagraph (A) of section 402(c)(2) (maximum 
amount which may be rolled over) is amended by striking ``and which'' 
and inserting ``or to an annuity contract described in section 403(b) 
and such plan or contract''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2003.

SEC. 307. FAIR TREATMENT UNDER SUBSTANTIALLY EQUAL PERIODIC PAYMENTS 
              RULE.

    (a) In General.--Paragraph (4) of section 72(t) (relating to change 
in substantially equal payments) is amended by inserting at the end the 
following new subparagraphs:
                    ``(C) Change in permissible methods.--If--
                            ``(i) the taxpayer changes from one 
                        permissible method of determining substantially 
                        equal periodic payments to another permissible 
                        method for purposes of such determination, and
                            ``(ii) such change results in an initial 
                        reduction in the amount of payments required to 
                        be made,
                such change shall not be treated as a modification 
                under subparagraph (A)(ii).
                    ``(D) Rollovers to subsequent plan.--If--
                            ``(i) payments satisfying paragraph 
                        (2)(A)(iv) are being made from a qualified 
                        retirement plan,
                            ``(ii) a transfer or a rollover from the 
                        qualified retirement plan is made to another 
                        qualified retirement plan of all or a portion 
                        of the taxpayer's benefit under the transferor 
                        plan, and
                            ``(iii) distributions from the transferor 
                        and transferee plans would in combination 
                        continue to satisfy paragraph (2)(A)(iv) if 
                        made only from the transferor plan,
                such transfer or rollover shall not be treated as a 
                modification under subparagraph (A)(ii) and compliance 
                with paragraph (2)(A)(iv) shall be determined on the 
                basis of the combined distributions described in clause 
                (iii).
                    ``(E) Interest rate.--Any reasonable interest rate 
                may be used in determining whether payments are 
                substantially equal under paragraph (2)(A)(iv).''.
    (b) Effective Date.--The amendments made by this section shall 
apply to any series of payments commencing on or after the date of 
enactment of this Act.

SEC. 308. TREATMENT OF SUBSEQUENT QUALIFIED DOMESTIC RELATIONS ORDERS.

    (a) Amendment to ERISA.--Section 206(d)(3)(B) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1056(d)(3)(B)) is 
amended by adding at the end of the following flush sentence: ``A 
domestic relations order otherwise meeting the requirements to be 
treated as a qualified domestic relations order shall not fail to be so 
treated solely because it is issued after, or revises, another 
qualified domestic relations order, but only with respect to amounts 
payable after the date the order is determined to be qualified.''.
    (b) Amendment to Internal Revenue Code.--Section 414(p)(1)(A) is 
amended by adding at the end the following flush sentence: ``A domestic 
relations order otherwise meeting the requirements to be treated as a 
qualified domestic relations order shall not fail to be so treated 
solely because it is issued after, or revises, another qualified 
domestic relations order, but only with respect to amounts payable 
after the date the order is determined to be qualified.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to transfers made after December 31, 2003.
            (2) Prior transfers.--Transfers made prior to January 1, 
        2004 under qualified domestic relations orders that were issued 
        after, or that revised, a prior qualified domestic relations 
        order shall not be deemed invalid by reason of the amendments 
        made by this section.

SEC. 309. TREATMENT OF DELAYED QUALIFIED DOMESTIC RELATIONS ORDERS.

    (a) Amendment to ERISA.--Section 206(d)(3)(B) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1056(d)(3)) (as 
amended by this Act) is amended by adding at the end the following 
flush sentence: ``A domestic relations order otherwise meeting the 
requirements to be treated as a qualified domestic relations order 
shall not fail to be to be treated (subject to subparagraph (H)) solely 
because of the time at which it is issued.''.
    (b) Amendment to Internal Revenue Code.--Section 414(p)(1)(A) (as 
amended by this Act) is amended by adding at the end the following 
flush sentence: ``A domestic relations order otherwise meeting the 
requirements to be treated as a qualified domestic relations order 
shall not fail to be so treated (subject to paragraph (7)) solely 
because of the time at which it is issued.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section apply 
        to transfers made after December 31, 2003.
            (2) Prior orders.--Transfers made prior to January 1, 2004 
        under qualified domestic relations orders that were issued 
        subsequent to the events giving rise to such orders shall not 
        be deemed invalid by reason of the amendments made by this 
        section.

SEC. 310. TREATMENT OF ANNUITY CONTRACTS.

    (a) In General.--Clause (i) of section 402(e)(4)(D) is amended by 
adding after ``section 401(c)(1).'' the following: ``A distribution of 
an annuity contract from a trust or annuity plan referred to in the 
first sentence of this clause may be treated as a part of a lump sum 
distribution.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect as if included in section 1401(b)(1) of the Small Business Job 
Protection Act of 1996.

SEC. 311. PRESERVATION OF PENSION PLANS.

    (a) Section 1612 of the Social Security Act is amended--
            (1) in subsection (b)--
                    (A) in paragraph (21), by striking ``; and'' and 
                inserting ``;'';
                    (B) by striking the period at the end of paragraph 
                (22) and -inserting ``; and'';
                    (C) by adding at the end the following paragraph:
            ``(23) except as otherwise provided in this paragraph, 
        retirement benefits to which the individual is or may become 
        entitled, including any balances credited to the individual's 
        account and any other accrued benefits, under a qualifying 
        retirement plan.''; and
            (2) adding at the end the following new subsection:

             ``rules relating to qualified retirement plans

    ``(c)(1) For purposes of subsection (b)(23), a qualifying 
retirement plan is a qualified retirement plan as defined in section 
4974(c) of the Internal Revenue Code of 1986, an eligible deferred 
compensation plan under section 457(b) of such Code, or a trust as 
described in section 501(c)(18) of such Code.
    ``(2) Subsection (b)(23) shall not require the Commissioner to 
exclude the aggregate value of qualifying retirement plan balances of 
an individual to the extent they exceed $75,000.
    ``(3) Except as provided in paragraph (4), in the case of an 
individual who has attained the age specified in section 72(t)(2)(A)(i) 
of the Internal Revenue Code of 1986, subsection (b)(23) shall not 
require the Commissioner to exclude an amount up to the monthly annuity 
value of the current aggregate value of qualifying retirement plan 
balances of the individual as determined under a schedule issued by the 
Commissioner.
    ``(4) Upon determining that an applicant for or recipient of 
benefits has attained the age specified in section 72(t)(2)(A)(i) of 
the Internal Revenue Code of 1986 and is entitled to benefits under a 
qualifying retirement plan, the Commissioner shall--
            ``(A) notify the applicant or recipient of the provisions 
        of this subsection and of the importance of obtaining competent 
        financial advice on the possibility of converting the value of 
        the plan into an annuity;
            ``(B) continue to exclude the value of the qualifying 
        retirement plan without regard to paragraph (3) for a period of 
        one year following the provision of the notice specified in 
        subparagraph (A).
            ``(C) after the period specified in subparagraph (B), not 
        count as monthly income more than the monthly annuity value of 
        any current balance of the qualifying retirement plan as 
        determined under a schedule issued by the Commissioner.
    ``(5) Nothing in subsection (b)(23) shall be construed to authorize 
or require any benefits to be reduced or denied to any individual 
because of a qualifying retirement plan (including defined benefit 
retirement plans) whose consideration is excluded under any other 
provision of law.''.
    (b) Section 1613 of the Social Security Act is amended--
            (1) in subsection (a)--
                    (A) in paragraph (12), by striking ``; and'' and 
                inserting ``;'';
                    (B) by striking the period at the end of paragraph 
                (13) and -inserting ``; and''; and
                    (C) by adding after paragraph (13) the following 
                paragraph:
            ``(14) benefits to which the individual is or may become 
        entitled, including any balances credited to the individual's 
        account and any other accrued benefits, qualifying retirement 
        plan.''; and
            (2) by adding at the end the following new subsection:

             ``rules relating to qualified retirement plans

    ``(f)(1) For purposes of subsection (a)(14) a qualifying retirement 
plan is a qualified retirement plan as defined in section 4974(c) of 
the Internal Revenue Code of 1986, an eligible deferred compensation 
plan under section 457(b) of such Code, or a trust as described in 
section 501(c)(18) of such Code.
    ``(2) Subsection (a)(14) shall not require the Commissioner to 
exclude--
            ``(A) funds that have been distributed from a qualifying 
        retirement plan; or
            ``(B) the value of a qualifying retirement plan to the 
        extent the aggregate value of qualifying retirement plan 
        balances of an individual exceed $75,000.
    ``(3) Nothing in subsection (a)(14) shall be construed to authorize 
or require any benefits to be reduced or denied to any individual 
because of a qualifying retirement plan (including defined benefit 
retirement plans) whose consideration is excluded under any other 
provision of law.''.
    (c) Effective Date.--The amendments made by this section shall 
apply as of the date of enactment of this Act.

SEC. 312. CERTAIN PLAN TRANSERS AND MERGERS.

    (a) Amendment to the Internal Revenue Code of 1986.--Section 414 
(relating to definitions and special rules) (as amended by this Act) is 
amended by adding at the end the following new subsection:
    ``(z) Certain Plan Transfers and Mergers.--
            ``(1) In general.--Under rules prescribed by the Secretary, 
        no amount shall be includible in gross income by reason of--
                    ``(A) a transfer of all or a portion of the account 
                balance of a participant or beneficiary, whether or not 
                vested, from a defined contribution plan described in 
                section 401(a) or section 403(a) to an annuity contract 
                described in section 403(b),
                    ``(B) a transfer of all or a portion of the account 
                balance of a participant or beneficiary, whether or not 
                vested, from an annuity contract described in section 
                403(b) to a defined contribution plan described in 
                section 401(a) or section 403(a), or
                    ``(C) a merger of a defined contribution plan 
                described in section 401(a) or section 403(a) with an 
                annuity contract described in section 403(b),
        so long as the transfer or merger does not cause a reduction in 
        the vested benefit or total benefit (including non-vested 
        benefit) of any participant or beneficiary. A plan or contract 
        shall not fail to be considered to be described in sections 
        401(a), 403(a), or 403(b) (as applicable) merely because such 
        plan or contract engages in a transfer or merger described in 
        this paragraph.
            ``(2) Distributions.--Except to the extent provided in 
        paragraphs (3) and (4), amounts transferred or merged pursuant 
        to paragraph (1) shall be distributed solely in accordance with 
        the terms of the transferee or merged plan.
            ``(3) Spousal consent and anti-cutback protection.--In the 
        case of a transfer or merger described in paragraph (1), 
        amounts in the transferee or merged plan that are attributable 
        to the transferor or predecessor plan shall--
                    ``(A)(i) be treated in the same manner as amounts 
                in a plan to which section 401(a)(11) or section 205 of 
                the Employee Retirement Income Security Act of 1974 
                applies to the extent that such sections applied to 
                such amounts in the transferor or predecessor plan, or
                    ``(ii) be required to satisfy the requirements of 
                section 401(a)(11)(B)(iii)(I) or section 
                205(b)(1)(C)(i) of the Employee Retirement Income 
                Security Act of 1974 to the extent that such section 
                applied to such amounts in the transferor or 
                predecessor plan, and
                    ``(B) be treated as subject to section 411(d)(6) 
                and section 204(g) of the Employee Retirement Income 
                Security Act of 1974 to the extent that such amounts 
                were subject to such sections in the transferor or 
                predecessor plan.
            ``(4) Special rules.--Under rules prescribed by the 
        Secretary, to the extent amounts transferred or merged pursuant 
        to paragraph (1) were otherwise entitled to grandfather 
        treatment under the transferor or predecessor plan, such 
        amounts (and income or loss attributable thereto) shall remain 
        entitled to such treatment under the transferee or merged plan. 
        The rules prescribed by the Secretary shall require that such 
        amounts be separately accounted for by the transferee or merged 
        plan. For purposes of this paragraph, `grandfather treatment' 
        shall mean special treatment under the Internal Revenue Code of 
        1986 or the Employee Retirement Income Security Act of 1974 
        that is provided for prior benefits, prior periods of time, or 
        certain individuals in connection with a change in the 
        applicable law.
            ``(5) Consent.--In the case of an annuity contract 
        described in section 403(b) with respect to which transfers may 
        be made only with the consent of a participant or beneficiary 
        pursuant to the terms of such contract or pursuant to 
        applicable law, a transfer from such contract pursuant to 
        paragraph (1) may be made only if such participant or 
        beneficiary consents to such transfer. For purposes of this 
        paragraph, a merger of an annuity contract described in section 
        403(b) with a plan described in section 401(a) or 403(a) shall 
        be treated as a transfer from the predecessor plan or contract 
        to the merged plan or contract. Nothing in this subsection 
        shall affect the application of contract or plan terms 
        otherwise applicable in the case of a withdrawal from the 
        contract or plan.''.
    (b) Amendment to the Employee Retirement Income Security Act of 
1974.--Section 4 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1003) is amended by adding at the end the following new 
subsection:
    ``(d) This title shall apply to any plan or contract described in 
section 414(z) of the Internal Revenue Code of 1986 to the extent 
necessary to comply with the requirements of such section. Transfers or 
mergers permitted under such section shall be treated as satisfying the 
requirements of this title.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to years beginning after the Secretary of the Treasury 
        prescribes rules under section 414(z) of the Internal Revenue 
        Code of 1986.
            (2) Rules.--The Secretary of the Treasury shall issue rules 
        under section 414(z) of the Internal Code of 1986 within 1 year 
        after the date of enactment of this Act.

     TITLE IV--INCREASING RETIREMENT PLAN PARTICIPATION AND SAVINGS

SEC. 401. EXPANSION OF THE SAVER'S CREDIT.

    (a) In General.--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              55
 30,000    40,000    22,500    30,000    15,000   20,000              25
 40,000    50,000    30,000    37,500    20,000   25,000              20
 50,000    60,000    37,500    45,000    25,000   30,000              10
 60,000   ........   45,000   ........   30,000  .......            0''.
------------------------------------------------------------------------


    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

SEC. 402. ACCELERATION OF SCHEDULED INCREASES IN PENSION PLAN 
              CONTRIBUTION LIMITS.

    (a) Elective Deferrals.--
            (1) In general.--Section 402(g)(1) (relating to general 
        rule for limitation on exclusion for elective deferrals) 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 
                        ``2004'',
                            (ii) by striking ``paragraph (1)(B)'' and 
                        inserting ``paragraph (1)(A)'', and
                            (iii) by striking ``2005'' and inserting 
                        ``2003''.
    (b) Deferred Compensation Plans of State and Local Governments and 
Tax-Exempt Organizations.--
            (1) In general.--Subsection (b)(2)(A) of section 457 
        (defining eligible deferred compensation plan) 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) 
        (relating to applicable dollar amount) 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, 2003.

SEC. 403. REMOVING BARRIERS TO AUTOMATIC CONTRIBUTION TRUST 
              ARRANGEMENTS.

    (a) In General.--
            (1) Control deemed to have been exercised with respect to 
        amount of automatic contributions.--Section 404(c) of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 
        1104(c)) (as amended by this Act) is amended by adding at the 
        end the following new paragraph:
    ``(5)(A) A participant in an individual account plan shall, for 
purposes of paragraph (1), be treated as exercising control over the 
assets in the account with respect to the amount of contributions made 
under an automatic contribution trust arrangement.
    ``(B) For purposes this paragraph, the term `automatic contribution 
trust arrangement' means an arrangement--
            ``(i) which meets the requirements of subparagraph (C),
            ``(ii) under which a participant may elect to have the 
        employer make payments as contributions to a trust under the 
plan on behalf of the participant, or to the participant directly in 
cash,
            ``(iii) under which the participant is treated as having 
        elected to have the employer make such contributions in an 
        amount equal to a uniform percentage of compensation provided 
        under the plan until the participant specifically elects not to 
        have such contributions made (or specifically elects to have 
        such contributions made at a different percentage), and
            ``(iv) under which contributions described in clause (iii) 
        are invested in accordance with regulations prescribed by the 
        Secretary.
    ``(C)(i) The administrator of an individual account plan shall, 
within a reasonable period before each plan year, give to each employee 
to whom an automatic contribution trust arrangement applies for such 
plan year notice of the employee's rights and obligations under the 
arrangement which--
            ``(I) is sufficiently accurate and comprehensive to 
        appraise the employee of such rights and obligations, and
            ``(II) is written in a manner calculated to be understood 
        by the average employee to whom the arrangement applies.
    ``(ii) A notice shall not be treated as meeting the requirements of 
clause (i) with respect to an employee unless--
            ``(I) the notice includes a notice explaining the 
        employee's right under the arrangement to elect not to have 
        elective contributions made on the employee's behalf (or to 
        elect to have such contributions made at a different 
        percentage),
            ``(II) the employee has a reasonable period of time after 
        receipt of the notice described in subclause (I) and before the 
        first elective contribution is made to make such election, and
            ``(III) the notice explains how contributions made under 
        the arrangement will be invested in the absence of any 
        investment election by the employee.''.
            (2) Preemption of conflicting state regulation.--Section 
        514(b) of such Act (29 U.S.C. 1144(b)) is amended--
                    (A) by redesignating paragraph (9) as paragraph 
                (10); and
                    (B) by inserting after paragraph (8) the following 
                new paragraph:
    ``(9) Any law of a State which would directly or indirectly 
prohibit or restrict the inclusion in any plan of an automatic 
contribution trust arrangement (as defined in section 404(c)(4)(B)) 
shall be superseded. The Secretary may prescribe regulations which 
would establish minimum standards that such arrangements would be 
required to satisfy in order for this paragraph to apply.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to plan years beginning after December 31, 2003.
            (2) Regulations.--Final regulations under section 
        404(c)(5)(B)(iv) of the Employee Retirement Income Security Act 
        of 1974 (added by this section) shall be issued no later than 1 
        year after the date of enactment of this Act.

SEC. 404. DISPOSITION OF UNUSED HEALTH BENEFITS IN CAFETERIA PLANS AND 
              FLEXIBLE SPENDING ARRANGEMENTS.

    (a) In General.--Section 125 (relating to cafeteria plans) is 
amended by redesignating subsections (h) and (i) as subsections (i) and 
(j), respectively, and by inserting after subsection (g) the following:
    ``(h) Contributions of Certain Unused Health Benefits.--
            ``(1) In general.--For purposes of this title, a plan or 
        other arrangement shall not fail to be treated as a cafeteria 
        plan solely because qualified benefits under such plan include 
        a health flexible spending arrangement under which not more 
        than $500 of unused health benefits may be contributed on 
        behalf of an employee to a qualified retirement plan (as 
        defined in section 4974(c)) or an eligible deferred 
        compensation plan (as defined in section 457(b)).
            ``(2) Contribution of unused health benefits on behalf of 
        employee.--For purposes of this title, contributions on behalf 
        of an employee described in paragraph (1) shall be treated as 
        elective contributions made pursuant to a choice by the 
        employee between such contributions and compensation which 
        would otherwise be includible in the gross income of the 
        employee. Contributions described in paragraph (1) shall be 
        excluded from the gross income of the employee, or included in 
        the gross income of the employee and allowed as a deduction by 
        the employee, to the extent that elective contributions would 
        be treated in that manner under this title.
            ``(3) Health flexible spending arrangement.--For purposes 
        of this subsection, the term `health flexible spending 
        arrangement' means a flexible spending arrangement (as defined 
        in section 106(c)) that is a qualified benefit and only permits 
        reimbursement for expenses for medical care (as defined in 
        section 213(d)(1) (without regard to subparagraphs (C) and (D) 
        thereof).
            ``(4) Unused health benefits.--For purposes of this 
        subsection, with respect to an employee, the term `unused 
        health benefits' means the excess of--
                    ``(A) the maximum amount of reimbursement allowable 
                to the employee during a plan year under a health 
                flexible spending arrangement, taking into account any 
                election by the employee, over
                    ``(B) the actual amount of reimbursement during 
                such year under such arrangement.''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to taxable years beginning after December 31, 2003.

SEC. 405. UPDATING DEDUCTION RULES FOR COMBINATION OF PLANS.

    (a) In General.--Subparagraph (C) of section 404(a)(7) (relating to 
limitation on deductions where combination of defined contribution plan 
and defined benefit plan) is amended by adding after clause (ii) the 
following new clause:
                            ``(iii) In the case of employer 
                        contributions to 1 or more defined contribution 
                        plans, this paragraph shall only apply to the 
                        extent that such contributions (other than 
                        elective deferrals (as defined in section 
                        402(g)(3)) exceed 6 percent of the compensation 
                        otherwise paid or accrued during the taxable 
                        year to the beneficiaries under such plans. For 
                        purposes of this clause, amounts carried over 
                        from preceding taxable years under subparagraph 
                        (B) shall be treated as employer contributions 
                        to 1 or more defined contributions to the 
                        extent attributable to employer contributions 
                        to such plans in such preceding taxable 
                        years.''.
    (b) Conforming Amendments.--Subparagraph (A) of section 4972(c)(6) 
(relating to nondeductible contributions) is amended to read as 
follows:
                    ``(A) so much of the contributions to 1 or more 
                defined contribution plans which are not deductible 
                when contributed solely because of section 404(a)(7) as 
                does not exceed the sum of--
                            ``(i) the amount of contributions described 
                        in section 401(m)(4)(A), plus
                            ``(ii) the amount of contributions 
                        described in section 402(g)(3)(A), or''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2003.

   TITLE V--EXPANDING RETIREMENT PLAN COVERAGE TO EMPLOYEES OF SMALL 
                               BUSINESSES

SEC. 501. ADDITIONAL NONELECTIVE EMPLOYER CONTRIBUTIONS TO SIMPLE 
              PLANS.

    (a) In General.--
            (1) Modification to definition.--Subparagraph (A) of 
        section 408(p)(2) (defining qualified salary reduction 
        arrangement) 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) (defining 
qualified salary reduction arrangement) 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 
        ``, the employer contribution actually made under paragraph 
        (2)(A)(iv) of this subsection,'' after ``paragraph (2)(A)(ii) 
        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, 2003.

SEC. 502. MATCHING CONTRIBUTION RULES FOR SIMPLE IRAS AND SIMPLE 
              401(K)S CONFORMED.

    (a) In General.--Subclause (II) of section 401(k)(11)(B)(i) 
(relating to general rule for contribution requirements) is amended by 
striking ``3 percent'' and inserting ``the applicable percentage (as 
defined in section 408(p)(2)(C)(ii))''.
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 2003.

SEC. 503. SALARY-REDUCTION ONLY SIMPLE PLANS.

    (a) Simple Retirement Accounts.--
            (1) In general.--Paragraph (2) of section 408(p) (defining 
        qualified salary reduction arrangement) is amended--
                    (A) by redesignating subparagraphs (C), (D), and 
                (E) as subparagraphs (D), (E), and (F), respectively; 
                and
                    (B) by inserting after subparagraph (B) the 
                following:
                    ``(C) Employer may elect salary reduction only 
                arrangement.--
                            ``(i) In general.--An employer shall be 
                        treated as meeting the requirements of 
                        subparagraph (A)(iii) for any year if, in lieu 
                        of the contributions described in such 
                        subparagraph, the employer elects to limit the 
                        amount which an employee may elect under 
                        subparagraph (A)(i) to a total of $5,000 for 
                        the year. If an employer makes an election 
                        under this subparagraph for any year, the 
                        employer shall notify employees of such 
                        election within a reasonable period of time 
                        before the 60-day period for such year under 
                        paragraph (5)(C).
                            ``(ii) Exception.--This subparagraph shall 
                        not apply to an employer if such employer (or 
                        any predecessor employer) maintained another 
                        qualified plan (as defined in subparagraph 
                        (E)(ii)) with respect to which contributions 
                        were made, or benefits were accrued, for 
                        service during the year in which the 
                        arrangement described in clause (i) became 
                        effective or either of the 2 preceding years. 
                        If only individuals other than employees 
                        described in subparagraph (A) of section 
                        410(b)(3) are eligible to participate in the 
                        arrangement described in clause (i), the 
                        preceding sentence shall be applied without 
                        regard to any qualified plan in which only 
                        employees so described are eligible to 
                        participate.''.
            (2) Special rule for acquisitions, dispositions, and 
        similar transactions.--Subparagraph (B) of section 408(p)(10) 
        (relating to special rules for acquisitions, dispositions, and 
        similar transactions) is amended by striking ``and'' at the end 
        of clause (ii), by striking the period at the end of clause 
        (iii) and inserting ``; and'', and by inserting after clause 
        (iii) the following:
                            ``(iv) the requirement under paragraph 
                        (2)(C) that the employer not have maintained 
                        another qualified plan described therein.''.
            (3) Cost-of-living adjustment.--Subparagraph (F) of section 
        408(p)(2) (as so redesignated) is amended by striking ``In'' 
        and inserting ``(i) In'' and by adding after clause (i) the 
        following new clause:
                            ``(ii) In the case of a year beginning 
                        after December 31, 2004, the Secretary shall 
                        adjust the $5,000 amount in subparagraph (C)(i) 
                        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, 2003, and any 
                        increase under this subparagraph which is not a 
                        multiple of $500 shall be rounded to the next 
                        lower multiple of $500.''.
            (4) Coordination with maximum limitation.--Paragraph (8) of 
        section 408(p) (relating to coordination with maximum 
        limitation under subsection (a)) is amended by striking 
        ``paragraph (2)(A)(ii) of this subsection'' and inserting 
        ``subparagraph (A)(ii) or (C) of paragraph (2) of this 
        subsection, whichever is applicable,''.
            (5) Conforming amendment.--Clause (ii) of section 
        408(p)(10)(B) is amended by striking ``paragraph (2)(D)'' and 
        inserting ``paragraph (2)(E)''.
    (b) Adoption of Simple Plan To Meet Nondiscrimination Tests.--
Subparagraph (B) of section 401(k)(11) (relating to contribution 
requirements) is amended by redesignating clause (iii) as clause (iv) 
and by inserting after clause (ii) the following new clause:
                            ``(iii) Employer may elect salary reduction 
                        only arrangement.--
                                    ``(I) In general.--An employer 
                                shall be treated as meeting the 
                                requirements of clause (i)(II) for any 
                                year if, in lieu of the contributions 
                                described in such clause, the employer 
                                elects to limit the amount which an 
                                employee may elect under clause (i) to 
                                the amount in effect under section 
                                408(p)(2)(C)(i) for the year. If an 
                                employer makes an election under this 
                                clause for any year, the employer shall 
                                notify employees of such election 
                                within a reasonable period of time 
                                before the 60-day period for such year 
                                under clause (iv)(II).
                                    ``(II) Exception.--This clause 
                                shall not apply to an employer if such 
                                employer (or any predecessor employer) 
                                maintained another qualified plan (as 
                                defined in section 408(p)(2)(E)(ii)) 
                                with respect to which contributions 
                                were made, or benefits were accrued, 
                                for service during the year in which 
                                the arrangement described in subclause 
                                (I) became effective or either of the 2 
                                preceding years. This subclause shall 
                                not apply if such contributions or 
                                benefits were solely on behalf of 
                                employees who are not eligible to 
                                participate in the arrangement 
                                described in subclause (I).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2004.

SEC. 504. PERMIT A MID-YEAR CHANGE FROM A SIMPLE PLAN TO ANOTHER PLAN.

    (a) In General.--Clause (i) of section 408(p)(2)(E) (relating to 
arrangement may be only plan of employer) is amended by striking ``An 
arrangement'' and inserting ``Except as provided in regulations 
prescribed by the Secretary, an arrangement''.
    (b) Conforming Amendment.--Section 401(k)(11)(C) is amended by 
inserting ``, except as provided in regulations prescribed by the 
Secretary,'' after ``if''.
    (c) Regulations.--Not later than December 31, 2004, the Secretary 
shall issue final regulations under which an employer can cease to 
maintain a qualified salary reduction arrangement in a year and begin 
maintaining a qualified plan (within the meaning of section 
408(p)(2)(E)(ii) of the Internal Revenue Code of 1986). Such 
regulations shall provide safeguards to ensure that changing from such 
an arrangement to such a plan during a year is not used to circumvent 
otherwise applicable limits or rules.
    (d) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2004.

SEC. 505. ELIMINATION OF HIGHER PENALTY ON CERTAIN SIMPLE 
              DISTRIBUTIONS.

    (a) In General.--Subsection (t) of section 72 (relating to 10-
percent additional tax on early distributions from qualified retirement 
plans) is amended by striking paragraph (6) and redesignating 
paragraphs (7), (8), and (9) as paragraphs (6), (7), and (8), 
respectively.
    (b) Conforming Amendments.--
            (1) Section 72(t)(2)(E) is amended by striking ``paragraph 
        (7)'' and inserting ``paragraph (6)''.
            (2) Section 72(t)(2)(F) is amended by striking ``paragraph 
        (8)'' and inserting ``paragraph (7)''.
            (3) Section 408(d)(3)(G) is amended by striking ``applies'' 
        and inserting ``applied on the day before the date of the 
        enactment of the Pension Preservation and Savings Expansion Act 
        of 2003)''.
            (4) Section 457(a)(2) is amended by striking ``section 
        72(t)(9)'' and inserting ``section 72(t)(8)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2003.

SEC. 506. SIMPLE PLAN PORTABILITY.

    (a) Repeal of Limitation.--Paragraph (3) of section 408(d) 
(relating to rollover contributions), as amended by this Act, is 
amended by striking subparagraph (G) and redesignating subparagraph (H) 
as subparagraph (G).
    (b) Section 402(c)(8)(B) is amended by adding at the end the 
following new sentence: ``Individual retirement accounts and individual 
retirement annuities described in clauses (i) and (ii) shall be treated 
as eligible retirement plans without regard to whether they are part of 
a simplified employee pension (within the meaning of section 408(k)) or 
a simplified retirement account (within the meaning of section 
408(p)).''.
    (c) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 2003.

SEC. 507. CORRECTION OF SIMPLIFIED EMPLOYEE PENSION COMPENSATION 
              INCONSISTENCY.

    (a) In General.--Subparagraph (A) of section 402(h)(2) (relating to 
limitations on employer contributions) is amended by striking ``414(s)) 
from such employer includible in the employee's gross income'' and 
inserting ``415(c)(3)) from such employer''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

SEC. 508. EQUALIZATION OF TAX TREATMENT OF RETIREMENT PLAN 
              CONTRIBUTIONS OF THE SELF-EMPLOYED.

    (a) In General.--Subsection (b) of section 1402 (defining self-
employment income) is amended by striking ``or'' at the end of 
paragraph (1), by striking the period at the end of paragraph (2) and 
inserting ``; or'', and by inserting after paragraph (2) the following:
            ``(3) any payment made to, or on behalf of, an individual--
                    ``(A) from or to a trust described in section 
                401(a) which is exempt from tax under section 501(a) at 
                the time of such payment unless--
                            ``(i) such payment is made to the 
                        individual by the trust as remuneration for 
                        services rendered and not as a beneficiary of 
                        the trust, or
                            ``(ii) such payment is treated as an 
                        employer contribution under a qualified cash or 
                        deferred arrangement (as defined in section 
                        401(k)) to the extent not included in gross 
                        income by reason of section 402(e)(3),
                    ``(B) under or to an annuity plan which, at the 
                time of such payment, is a plan described in section 
                403(a), other than any elective deferrals (within the 
                meaning of section 402(g)(3)),
                    ``(C) under a simplified employee pension (as 
                defined in section 408(k)(1)), other than any 
                contributions described in section 408(k)(6) or 
                408(k)(7),
                    ``(D) under or to an annuity contract described in 
                section 403(b), other than a payment for the purchase 
                of such contract which is made by reason of a salary 
                reduction agreement (whether evidenced by a written 
                instrument or otherwise), or
                    ``(E) under an arrangement to which section 408(p) 
                applies, other than any elective contributions under 
                paragraph (2)(A)(i) thereof.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

       TITLE VI--STRENGTHENING INDIVIDUAL RETIREMENT ARRANGEMENTS

SEC. 601. ACCELERATION OF INCREASES IN IRA CONTRIBUTION LIMITS.

    (a) Deductible Amount.--The table in subparagraph (A) of section 
219(b)(5) (relating to general rule for deductible amount) is amended 
to read as follows:

                ``For taxable years
                                                         The deductible
                  beginning in:
                                                           amount is:  
                    2002 through 2003......................     $3,000 
                    2004 and thereafter....................  $5,000.''.

    (b) Catch-Up Contributions.--The table in clause (ii) of section 
219(b)(5)(B) (relating to applicable amount) is amended to read as 
follows:

                ``For taxable years
                                                         The applicable
                  beginning in:
                                                           amount is:  
                    2002 through 2003......................       $500 
                    2004 and thereafter....................  $1,000.''.

    (c) Conforming Amendments.--Section 219(b)(5)(C) is amended--
            (1) by striking ``2007'' and inserting ``2003'', and
            (2) by striking ``2008'' and inserting ``2004''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 602. ACCELERATION AND EXPANSION OF CERTAIN SCHEDULED INCREASES IN 
              ELIGIBILITY FOR IRAS AND ELIMINATION OF IRA MARRIAGE 
              PENALTY.

    (a) Increase in Limitation on Deduction for Active Participants in 
Certain Pension Plans.--The table in clause (i) of section 219(g)(3)(B) 
(defining applicable dollar amount for taxpayers filing joint returns) 
is amended to read as follows:

                                                         The applicable
``For taxable years beginning in:                     dollar amount is:
    2003..........................................             $60,000 
    2004..........................................             $70,000 
    2005..........................................             $75,000 
    2006..........................................             $80,000 
    2007..........................................             $85,000 
    2008..........................................             $90,000 
    2009..........................................             $95,000 
    2010 and thereafter...........................         $100,000.''.

    (b) Roth IRA Increase in Applicable Dollar Amount for Taxpayers 
Filing Joint Returns.--
            (1) In general.--Subclause (I) of section 408A(c)(3)(C)(ii) 
        (defining applicable dollar amount) is amended by striking 
        ``$150,000'' and inserting ``$190,000''.
            (2) Phase-out range.--Clause (ii) of section 408A(c)(3)(A) 
        is amended to read as follows:
                            ``(ii) $15,000 ($30,000 in the case of a 
                        joint return).
    (c) Elimination of Marriage Penalty on IRA Deduction for Active 
Pension Plan Participants.--Section 219(g) (relating to limitation on 
deduction for active participants in certain pension plans) is 
amended--
            (1) by striking ``or the individual's spouse'' in paragraph 
        (1), and
            (2) by striking paragraph (7).
    (d) Effective Dates.--
            (1) Subsections (a) and (b).--The amendments made by 
        subsection (a) shall apply to taxable years beginning after 
        December 31, 2003.
            (2) Subsection (c).--The amendments made by subsection (c) 
        shall apply to taxable years beginning after December 31, 2006.

SEC. 603. IRA ELIGIBILITY FOR THE DISABLED.

    (a) In General.--Subsection (f) of section 219 (relating to other 
definitions and special rules) is amended by adding at the end the 
following:
            ``(8) Special rule for certain disabled individuals.--In 
        the case of an individual--
                    ``(A) who is disabled (within the meaning of 
                section 72(m)(7)), and
                    ``(B) who has not attained age 70\1/2\ before the 
                close of the taxable year,
        subparagraph (B) of subsection (b)(1) shall not apply.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

SEC. 604. PROTECTING IRA ASSETS.

    The Secretary of the Treasury shall, no later than December 31, 
2004, establish a correction procedure that specifically allows an 
individual to rescind one or more distributions from an individual 
retirement plan (as defined in section 7701(a)(37) of the Internal 
Revenue Code of 1986) (whether or not in the same taxable year) to 
correct errors that result from the individual's misunderstanding of 
applicable rules or an error of the trustee, custodian, or issuer of 
the individual retirement plan in processing a transaction in the form 
of a distribution rather than a transfer, rollover, or similar 
transaction. Such procedure shall provide for rescission of 
distributions without a filing with the Secretary in the case of errors 
that are corrected within a reasonable time as defined by the Secretary 
and may provide for other self-correction safe harbors. Such procedure 
shall also include appropriate conditions on the correction procedure 
to prevent abuse.

             TITLE VII--REVITALIZING DEFINED BENEFIT PLANS

SEC. 701. MULTIPLE EMPLOYER PLANS PERMITTED TO ELECT SEPARATE OR 
              AGGREGATE TREATMENT FOR PURPOSES OF APPLYING THE FUNDING 
              RULES AND DEDUCTION LIMITATIONS.

    (a) In General.--Paragraph (4) of section 413(c) (relating to 
funding) is amended--
            (1) in subparagraph (A) by striking ``In the case of'' and 
        inserting ``Except as provided in subparagraph (C), in the case 
        of'', and
            (2) in subparagraph (B)--
                    (A) by striking ``In the case of'' and inserting 
                ``Except as provided in subparagraph (C), in the case 
                of'',
                    (B) by striking ``unless'' and all that follows and 
                inserting a period, and
                    (C) by inserting after subparagraph (B) the 
                following:
                    ``(C) Election to be treated as separate or 
                aggregate plan.--The plan administrator may elect with 
                respect to a plan--
                            ``(i) to have subparagraph (A) apply to the 
                        plan, or
                            ``(ii) to have the requirements of section 
                        412 be determined as if all participants in the 
                        plan were employed by a single employer.
                An election under the preceding sentence shall take 
                effect for the plan year in which made and, once made, 
                may be revoked only with the consent of the 
                Secretary.''.
    (b) Conforming Amendments.--
            (1) Paragraph (6) of section 413(c) is amended--
                    (A) by striking ``In the case of'' and inserting 
                ``Except provided in subparagraph (C), in the case 
                of'', and
                    (B) by adding at the end the following new 
                subparagraph:
                    ``(C) Election.--If with respect to a plan--
                            ``(i) paragraph (4)(A) applies, 
                        subparagraph (A) of this paragraph shall apply, 
                        and
                            ``(ii) paragraph (4)(B) applies, 
                        subparagraph (B) of this paragraph shall apply.
            (2) Section 413(c)(6)(B)(i) is amended by striking 
        ``except'' and all that follows and inserting ``except as 
        provided in subparagraph (C).''.
            (3) Section 210(a)(3) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1060(a)(3)) is amended by 
        striking ``The'' and inserting ``Except as provided in section 
        413(c)(4) of the Internal Revenue Code of 1986, the''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2003.

SEC. 702. TREATMENT OF EMPLOYEE CONTRIBUTIONS TO CONTRIBUTORY DEFINED 
              BENEFIT PLANS.

    (a) Amendment to the Internal Revenue Code of 1986.--Subsection (e) 
of section 402 (relating to other rules applicable to exempt trusts) is 
amended by adding at the end the following new paragraph:
            ``(7) Contributory defined benefit plans.--For purposes of 
        sections 72 and 451, an amount shall not be treated as received 
        by an employee if such amount is--
                    ``(A) contributed--
                            ``(i) to an employee's trust described in 
                        section 401(a) which is maintained in 
                        connection with a defined benefit plan, or
                            ``(ii) under a defined benefit plan 
                        described in section 403(a), and
                    ``(B) such contributions would be described in 
                section 414(h)(2) if the plan were established by an 
                entity described therein.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made in years beginning after December 31, 2003.

SEC. 703. REFORM OF THE MINIMUM PARTICIPATION RULE.

    (a) In General.--Subparagraph (A) of section 401(a)(26) (relating 
to additional participation requirements) is amended by striking ``In 
the case of'' and inserting ```To the extent provided in regulations 
prescribed by the Secretary, in the case of''.
    (b) Regulations.--Not later than December 31, 2003, the Secretary 
of the Treasury shall issue final regulations under which the 
application of section 401(a)(26) of the Internal Revenue Code of 1986 
is restricted to--
            (1) arrangements described in section 1.401(a)(26)-
        2(d)(1)(iii) of the Treasury Regulations (as in effect on the 
        date of the enactment of this Act), and
            (2) other arrangements that use multiple defined benefit 
        plans in a manner inconsistent with the purposes of the 
nondiscrimination rules or with the intended nature of a defined 
benefit plan.
    (c) Effective Date.--The amendment made by subsection (a) shall 
take effect on the date of enactment of this Act.

SEC. 704. PLAN VALUATION DATA COLLECTION.

    (a) Amendment to the Internal Revenue Code of 1986.--
            (1) Plan's liability.--
                    (A) In general.--Subparagraph (B) of section 
                412(c)(9) (relating to annual valuation) is amended by 
                adding at the end the following:
                            ``(v) Valuation of plan's liability.--
                        Valuation of the plan's liability for purposes 
                        of this paragraph may be based on data 
                        determined as of a date within the plan year to 
                        which the valuation refers or as of a date 
                        within the plan year prior to the year to which 
                        the valuation refers.''.
                    (B) Conforming amendment.--The heading for section 
                412(c)(9)(B) is amended by striking ``Valuation date'' 
                and inserting ``Valuation of experience gains and 
                losses''.
            (2) Plan's assets.--Subparagraph (B) of section 412(c)(9) 
        (relating to annual valuation) is amended by adding at the end 
        the following:
                            ``(vi) Valuation of plan's assets.--The 
                        valuation of a plan's assets may be made as of 
                        a date later than the date as of which the 
                        plan's liabilities are valued if--
                                    ``(I) the asset valuation date is 
                                not later than the end of the plan year 
                                to which the valuation refers, and
                                    ``(II) the value of such assets is 
                                adjusted back to the date as of which 
                                the plan's liabilities are valued based 
                                on the interest rate in subsection 
                                (b)(5)(A) or (b)(5)(B), as applicable, 
                                and adjusting for cash flows that are 
                                not taken into account in the interest 
                                assumption and that occur between the 
                                date that the liabilities are valued 
                                and the date that the assets are 
                                valued.''.
    (b) Amendment to the Employee Retirement Income Security Act of 
1974.--
            (1) Plan's liability.--Subparagraph (B) of section 
        302(c)(9) of the Employee Retirement Income Security Act of 
        1974 (29 U.S.C. 1082(c)(9)(B)) is amended by adding at the end 
        the following:
    ``(iv) Valuation of the plan's liability for purposes of this 
paragraph may be based on data determined as of a date within the plan 
year to which the valuation refers or as of a date within the plan year 
prior to the year to which the valuation refers.''.
            (2) Plan's assets.--Subparagraph (B) of section 302(c)(9) 
        of the Employee Retirement Income Security Act of 1974 (29 
        U.S.C. 1082(c)(9)(B)) is amended by adding at the end the 
        following:
    ``(v) The valuation of a plan's assets may be made as of a date 
later than the date as of which the plan's liabilities are valued if--
            ``(I) the asset valuation date is not later than the end of 
        the plan year to which the valuation refers, and
            ``(II) the value of such assets is adjusted back to the 
        date as of which the plan's liabilities are valued based on the 
        interest rate in subsection (b)(5)(A) or (b)(5)(B), as 
        applicable, and adjusting for cash flows that are not taken 
        into account in the interest assumption and that occur between 
        the date that the liabilities are valued and the date that the 
        assets are valued.''.
    (c) Effective Date.--
            (1) In general.--The amendments made by sections (a)(2) and 
        (b)(2) shall apply to years beginning after December 31, 2002.
            (2) Special rule.--The amendments made by subsections 
        (a)(1) and (b)(1) shall take effect as if included in section 
        661(a) of the Economic Growth and Tax Relief Reconciliation Act 
        of 2001.

SEC. 705. REPLACEMENT OF INTEREST RATE ON 30-YEAR TREASURY SECURITIES 
              WITH INTEREST RATE ON CONSERVATIVELY-INVESTED LONG-TERM 
              CORPORATE BONDS.

    (a) Internal Revenue Code of 1986.--
            (1) In general.--Subclause (I) of section 412(b)(5)(B)(ii) 
        and subclause (II) of section 417(e)(3)(A)(ii) are each amended 
        by striking ``30-year Treasury securities'' and inserting 
        ``amounts conservatively invested in long-term corporate 
        bonds''.
            (2) Regulations.--
                    (A) Subclause (I) of section 412(b)(5)(B)(ii) is 
                amended by adding at the end the following: ``The 
                Secretary shall, by regulation, prescribe a method for 
                determining the rate of interest on amounts 
                conservatively invested in long-term corporate bonds, 
                based on one or more indices, as determined from time 
                to time by the Secretary.''.
                    (B) Subclause (II) of section 417(e)(3)(A)(ii) is 
                amended by adding at the end the following: ``The 
                Secretary shall, by regulations, prescribe a method for 
                determining this interest rate based on one or more 
                indices, as determined from time to time by the 
                Secretary.''.
            (3) Conforming amendments.--
                    (A) Section 412(b)(5)(B)(iii)(II) is amended to 
                read as follows:
                                    ``(II) consistent with the rate of 
                                return with respect to amounts 
                                conservatively invested in long-term 
                                corporate bonds.''.
                    (B) Section 415(b)(2)(E)(ii) is amended by striking 
                ``the applicable interest rate (as defined in section 
                417(e)(3))'' and inserting ``5.5 percent''.
            (4) Phasein of interest rate on long-term corporate 
        bonds.--Section 417(e)(3)(A)(ii) is amended by adding at the 
        end the following:
                                    ``(III) Phasein of interest rate on 
                                long-term corporate bonds.--In the case 
                                of a plan year specified in the table 
                                in subclause (IV), the interest rate 
                                for purposes of subclause (II) shall be 
                                the lower of (aa) the rate specified in 
                                subclause (II) (without regard to this 
                                subclause), or (bb) the 30-year 
                                Treasury securities rate plus the 
                                applicable percentage of the excess of 
                                the rate specified in subclause (II) 
                                (without regard to this subclause) over 
                                the 30-year Treasury securities rate.
                                    ``(IV) Applicable percentage.--For 
                                purposes of subclause (III), the 
                                applicable percentage shall be 
                                determined in accordance with the 
                                following table:

                ``Plan year beginning in calendar year:
                                                             Applicable
                  
                                                            percentage:
                    2006...................................         20 
                    2007...................................         40 
                    2008...................................         60 
                    2009...................................         80.
                                    ``(V) Special rule for collectively 
                                bargained plans.--In the case of a plan 
                                maintained pursuant to one or more 
                                collective bargaining agreements 
                                between employee representatives and 
                                one or more employers ratified by the 
                                date of the enactment of this 
                                subclause, in lieu of the 4 calendar 
                                years specified in subclause (IV), the 
                                years corresponding to the applicable 
                                percentages in subclause (IV) shall be 
                                the first 4 years in which subclause 
                                (III) applies to employees covered by 
                                any such agreement. This subclause 
                                shall only apply to such employees.''.
    (b) Employee Retirement Income Security Act of 1974.--
            (1) In general.--Subclause (II) of section 
        205(g)(3)(A)(ii), subclause (I) of section 302(b)(5)(B)(ii), 
        and subclause (II) of section 4006(a)(3)(E)(iii) of the 
        Employee Retirement Income Security Act of 1974 are each 
        amended by striking ``30-year Treasury securities'' and 
        inserting ``amounts conservatively invested in long-term 
        corporate bonds''.
            (2) Regulations.--
                    (A) Subclause (II) of section 205(g)(3)(A)(ii) of 
                the Employee Retirement Income Security Act of 1974 is 
                amended by adding at the end the following: ``The 
                Secretary of the Treasury shall, by regulation, 
                prescribe a method for determining this interest rate 
                based on one or more indices, as determined from time 
                to time by the Secretary of the Treasury.''.
                    (B) Subclause (I) of section 302(b)(5)(B)(ii) of 
                the Employee Retirement Income Act of 1974 is amended 
                by adding at the end the following: ``The Secretary of 
                the Treasury shall, by regulation, prescribe a method 
                for determining the rate of interest on amounts 
                conservatively invested in long-term corporate bonds, 
                based on one or more indices, as determined from time 
                to time by the Secretary of the Treasury.''.
                    (C) Subclause (II) of section 4006(a)(3)(E)(iii) of 
                the Employee Retirement Income Security Act of 1974 is 
                amended by adding at the end the following: ``The 
                Secretary of the Treasury shall, by regulation, 
                prescribe a method for determining such annual yield 
                based on one or more indices, as determined from time 
                by the Secretary of the Treasury.''.
            (3) Conforming amendment.--Section 302(b)(5)(B)(iii)(II) of 
        such Act is amended to read as follows:
                                    ``(II) consistent with the rate of 
                                return with respect to amounts 
                                conservatively invested in long-term 
                                corporate bonds.''.
            (4) Phasein of interest rate on long-term corporate 
        bonds.--Section 205(g)(3)(A)(ii) is amended by adding at the 
        end the following:
                    ``(III) In the case of a plan year specified in the 
                table in subclause (IV), the interest rate for purposes 
                of subclause (II) shall be the lower of (aa) the rate 
                specified in subclause (II) (without regard to this 
                subclause), or (bb) the 30-year Treasury securities 
                rate plus the applicable percentage of the excess of 
                the rate specified in subclause (II) (without regard to 
                this subclause) over the 30-year Treasury securities 
                rate.
                    ``(IV) For purposes of subclause (III), the 
                applicable percentage shall be determined in accordance 
                with the following table:

                ``Plan year beginning in calendar year:
                                                             Applicable
                  
                                                            percentage:
                    2006...................................         20 
                    2007...................................         40 
                    2008...................................         60 
                    2009...................................         80.
                    ``(V) Special rule for collectively bargained 
                plans.--In the case of a plan maintained pursuant to 
                one or more collective bargaining agreements between 
                employee representatives and one or more employers 
                ratified by the date of the enactment of this 
                subclause, in lieu of the 4 calendar years specified in 
                subclause (IV), the years corresponding to the 
                applicable percentages in subclause (IV) shall be the 
                first 4 years in which subclause (III) applies to 
                employees covered by any such agreement. This subclause 
                shall only apply to such employees.''.
    (d) Effective Date.--
            (1) In general.--Except as provided in paragraphs (2), (3), 
        (4), and (5), the amendments made by this section shall apply 
        to years beginning after December 31, 2003.
            (2) Survivor annuities.--Except as provided in paragraphs 
        (3) and (4), in the case of amendments made by this section to 
        section 417(e)(3)(A)(ii) of the Internal Revenue Code of 1986 
        and to section 205(g)(3)(A)(ii) of the Employee Retirement 
        Income Security Act of 1974, and for purposes of section 
        411(a)(11)(B) of the Internal Revenue Code of 1986 and section 
        203(e)(2) of the Employee Retirement Income Security Act of 
        1974, such amendments shall apply to years beginning after 
        December 31, 2005.
            (3) Lookback rules.--For purposes of applying all 
        applicable lookback rules in years beginning on or after the 
        otherwise applicable effective date determined under paragraph 
        (1), (2), or (4), the amendments made by this section shall be 
        applied as if such amendments had been in effect for all years 
        beginning before such effective date. For purposes of this 
        paragraph, a lookback rule is a rule that uses data from a 
        prior year in determining requirements applicable to the 
        current year.
            (4) Collective bargaining agreements.--Except as provided 
        in paragraph (3), in the case of a plan maintained pursuant to 
        one or more collective bargaining agreements between employee 
        representatives and one or more employers ratified by the date 
        of the enactment of this Act, the amendments described in 
        paragraph (2) shall not apply to employees covered by any such 
        agreement for plan years beginning before the earlier of--
                    (A) the later of--
                            (i) the date on which the last of such 
                        collective bargaining agreements terminates 
                        (determined without regard to any extension 
                        thereof on or after such date of the 
                        enactment); or
                            (ii) January 1, 2006, or
                    (B) January 1, 2008.
            (5) No reduction required.--In the case of any participant 
        or beneficiary, the amount payable under any form of benefit 
        subject to section 417(e)(3) of the Internal Revenue Code of 
        1986 shall not be required to be reduced below the amount 
        determined as of the last day of the last plan year beginning 
        before January 1, 2004, merely because of the amendments made 
        by subsection (a)(3)(B).

SEC. 706. INTEREST RATE RANGE FOR ADDITIONAL FUNDING REQUIREMENTS.

    (a) Amendments to the Internal Revenue Code of 1986.--
            (1) Special rule.--Subclause (III) of section 
        412(1)(7)(C)(i) is amended--
                    (A) by striking ``2002 or 2003'' in the text and 
                inserting ``2001, 2002, or 2003'', and
                    (B) by striking ``2002 and 2003'' in the heading 
                and inserting ``2001, 2002, and 2003''.
            (2) Quarterly contributions.--Paragraph (7) of section 
        412(m) is amended to read as follows:
            ``(7) Special rule for 2002.--In any case in which the 
        interest rate used to determine current liability is determined 
        under subsection (1)(7)(C)(i)(III), for purposes of applying 
        paragraphs (1) and (4)(B)(ii) for plan years beginning in 2002, 
        the current liability for the preceding plan year shall be 
        redetermined using 120 percent as the specified percentage 
        determined under subsection (1)(7)(C)(i)(II).''
    (b) Amendments to the Employee Retirement Income Security ---Act of 
1974.--
            (1) Special rule.--Subclause (III) of section 
        302(d)(7)(C)(i) of the Employee Retirement Income Security Act 
        of 1974 (29 U.S.C. 1082(d)(7)(C))(i)) is amended--
                    (A) by striking ``2002 or 2003'' in the text and 
                inserting ``2001, 2002, or 2003'', and
                    (B) by striking ``2002 and 2003'' in the heading 
                and inserting ``2001, 2002, and 2003''.
            (2) Quarterly contributions.--Paragraph (7) of section 
        302(e) is amended to read as follows:
            ``(7) Special rule for 2002.--In any case in which the 
        interest rate used to determine current liability is determined 
        under subsection (d)(7)(C)(i)(III), for purposes of applying 
        paragraphs (1) and (4)(B)(ii) for plan years beginning in 2002, 
        the current liability for the preceding plan year shall be 
        redetermined using 120 percent as the specified percentage 
        determined under subsection (d)(7)(C)(i)(II).''
    (c) PBGC.--Subclause (IV) of section 4006(a)(3)(E)(iii) of such Act 
(29 U.S.C. 1306(a)(3)(E)(iii)) is amended to read as follows:
                                    ``(IV) In the case of plan years 
                                beginning after December 31, 2001, and 
                                before January 1, 2004, subclause (II) 
                                shall be applied by substituting `100 
                                percent' for `85 percent' and by 
                                substituting `115 percent' for `100 
                                percent'. Subclause (III) shall be 
                                applied -----for such years without 
                                regard to the preceding sentence.
    (d) Effective Date.--The amendments made by this section shall take 
effect as if included in the amendments made by section 405 of the Job 
Creation and Worker Assistance Act of 2002.

SEC. 707. ASSET VALUATION.

    (a) In General.--Clause (iv) of section 4006(a)(3)(E) is amended by 
striking ``1986'' and inserting ``1986 (determined without regard to 
subclause (I) of section 412(c)(7)(A)(ii) of such Code)''.
    (b) Effective Date.--The amendment made by this section shall apply 
to the determination of premiums for plan years ending after December 
31, 2003.

SEC. 708. MULTIEMPLOYER PLAN EMERGENCY INVESTMENT LOSS RULE.

    (a) Amendment to the Internal Revenue Code of 1986.--Paragraph (7) 
of section 412(b) (relating to special rules for multiemployer plans) 
is amended by adding at the end the following new subparagraph:
                    ``(F) Emergency investment loss method.--
                            ``(i) In general.--In lieu of amortizing 
                        its experience loss as prescribed in paragraph 
                        (2)(B)(iv), a multiemployer plan may elect to 
                        use the emergency investment loss method 
                        described in this subparagraph, starting with 
                        the first plan year in which it has an 
                        emergency investment loss.
                            ``(ii) Emergency investment loss.--An 
                        emergency investment loss is the difference 
                        between the market value of the plan's assets 
                        as of the last day of a plan year beginning on 
                        or after July 1, 1999 and ending before January 
                        1, 2004, and what that market value would have 
                        been if the plan's earnings had been equal to 
                        the projected ---investment return based on the 
                        actuarial interest rate under paragraph (5)(A) 
                        for the plan year, applied to the market value 
                        of assets as of the beginning of the year and 
                        noninvestment cash flows during the year.
                            ``(iii) Amortization of emergency 
                        investment loss.--The funding standard account 
                        shall be charged with the amounts necessary to 
                        amortize in equal annual installments (until 
                        fully amortized) the plan's emergency 
                        investment loss, over a period of 30 plan 
                        years.
                            ``(iv) Adjusted net actuarial experience.--
                        The adjusted net actuarial experience is the 
                        amount produced by subtracting the emergency 
                        investment loss from the net experience gain or 
                        loss for the plan year as otherwise determined 
                        for purposes of paragraph (2)(B)(iv) or 
                        (3)(B)(ii) of this subsection.
                            ``(v) Amortization of adjusted net 
                        actuarial experience.--The adjusted net 
                        actuarial experience is treated as a net 
                        experience gain or loss and charged or credited 
                        to the funding standard account under paragraph 
                        (2)(B)(iv) or (3)(B)(ii), as applicable.''.
    (b) Amendment to the Employee Retirement Income Security Act of 
1974.--Paragraph (7) of section 302(b) of the Employee Retirement 
Income Security Act of 1974 is amended by adding at the end the 
following new subparagraph:
    ``(F)(i) In lieu of amortizing its experience loss as prescribed in 
paragraph (2)(B)(iv), a multiemployer plan may elect to use the 
emergency investment loss method described in this subparagraph, 
starting with the first plan year in which it has an emergency 
investment loss.
    ``(ii) An emergency investment loss is the difference between the 
market value of the plan's assets as of the last day of a plan year 
beginning on or after July 1, 1999 and ending before January 1, 2004, 
and what that market value would have been if the plan's earnings had 
been equal to the projected investment return based on the actuarial 
interest rate under paragraph (5)(A) for the plan year, applied to the 
market value of assets as of the beginning of the year and 
noninvestment cash flows during the year.
    ``(iii) The funding standard account shall be charged with the 
amounts necessary to amortize in equal annual installments (until fully 
amortized) the plan's emergency investment loss, over a period of 30 
plan years.
    ``(iv) The adjusted net actuarial experience is the amount produced 
by subtracting the emergency investment loss from the net experience 
gain or loss for the plan year as otherwise determined for purposes of 
paragraph (2)(B)(iv) or (3)(B)(ii) of this subsection.
    ``(v) The adjusted net actuarial experience is treated as a net 
experience gain or loss and charged or credited to the funding standard 
account under paragraph (2)(B)(iv) or (3)(B)(ii), as applicable.''.
    (c) Election Procedure.--
            (1) In general.--The Secretary shall prescribe a procedure 
        under which multiemployer plans that elect to use the emergency 
        investment loss method, as described in section 412(b)(7)(F) of 
        the Internal Revenue Code of 1986 and section 302(b)(7)(F) of 
        the Employee Retirement Income Security Act of 1974, may do so 
        either by starting the special amortization periods in the 
        actuarial valuations for each of the affected plan years or by 
        starting with a cumulative emergency investment loss and 
        adjusted net actuarial experience (based on the outstanding 
        balance of the experience gain bases for the affected plan 
        years, reduced by the cumulative emergency investment loss) in 
        the actuarial valuation for the last plan year ending before 
        January 1, 2004.
            (2) Filing period.--The procedures described in paragraph 
        (1) shall provide a period of not less than 210 days after the 
        date of enactment of this Act for multiemployer plans to file 
        Schedule Bs to the Form 5500 Annual Reports for the plan years 
        for which the emergency investment loss method is elected, 
        including amended Schedule Bs for annual reports previously 
        filed.
    (d) Effective Date.--The amendments made by this section shall 
apply to years beginning after June 30, 1999.

SEC. 709. MORTALITY TABLE ADJUSTMENT.

    (a) Amendment to the Internal Revenue Code.--Subparagraph (C) of 
section 412(l)(7) is amended by adding at the end the following clause:
                            ``(iv) Separate mortality tables for blue-
                        collar workers.--Notwithstanding clause (ii), 
                        in the case of plan years beginning after 
                        December 31, 2003, the Secretary shall 
                        establish mortality tables which may be used 
                        (in lieu of the tables under clause (ii)) to 
                        determine current liability under this 
                        subsection for individuals who are blue-collar 
                        workers (as defined under rules prescribed by 
                        the Secretary). For this purpose, the Secretary 
                        shall take into account the Society of 
                        Actuaries RP-2000 Mortality Table, as adjusted 
                        to take into account the collar adjustment 
                        prescribed in such Table to reflect the 
                        workforce covered by the plan.''.
    (b) Amendment to the Employee Retirement Income Security Act of 
1974.--Subparagraph (C) of section 302(d)(7) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1082(d)(7)) is amended by adding 
at the end the following clause:
                            ``(iv) Separate mortality tables for blue-
                        collar workers.--Notwithstanding clause (ii), 
                        in the case of plan years beginning after 
                        December 31, 2003, the Secretary shall 
                        establish mortality tables which may be used 
                        (in lieu of the tables under clause (ii)) to 
                        determine current liability under this 
                        subsection for individuals who are blue-collar 
                        workers (as defined under rules prescribed by 
                        the Secretary). For this purpose, the Secretary 
                        shall take into account the Society of 
                        Actuaries RP-2000 Mortality Table, as adjusted 
                        to take into account the collar adjustment 
                        prescribed in such Table to reflect the 
                        workforce covered by the plan.''.
    (c) Effective Date.--The amendments made by this section shall be 
effective as of the date of enactment of this Act.

       TITLE VIII--SIMPLIFY AND STREAMLINE RETIREMENT PLAN RULES

SEC. 801. EXCISE TAX ON EXCESS CONTRIBUTIONS.

    (a) Expansion of Corrective Distribution Period.--Subsection (f) of 
section 4979 is amended--
            (1) in paragraph (1) by striking ``2\1/2\ months'' and 
        inserting ``6 months'', and
            (2) in the heading by striking ``2\1/2\ Months'' and 
        inserting ``6 Months''.
    (b) Increase in de minimis distribution amount.--Subparagraph (B) 
of section 4979(f)(2) is amended by striking ``$100'' and inserting 
``$1,000''.
    (c) Modification of De Minimis Rule.--Subparagraph (B) of section 
4972(f)(2) is amended by striking ``If'' and inserting ``To the extent 
that'' and by striking ``are less than'' and inserting ``do not 
exceed''.
    (d) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2003.

SEC. 802. EXCESS BENEFIT PLANS.

    (a) In General.--Section 3(36) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1002(36)) is amended to read as 
follows:
    ``(36) The term `excess benefit plan' means a plan, without regard 
to whether such plan is funded, maintained by an employer solely for 
the purpose of providing benefits to employees in excess of any 
limitation imposed by section 401(a)(17), 401(k)(3)(A)(ii), 401(m)(2), 
or 415 of the Internal Revenue Code of 1986. To the extent that a 
separable part of a plan (as determined by the Secretary of Labor) 
maintained by an employer is maintained for such purpose, that part 
shall be treated as a separate plan which is an excess benefit plan.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 2003.

SEC. 803. PAPERLESS TECHNOLOGIES IN RETIREMENT PLANS.

    (a) Paperless Technologies.--Not later than December 31, 2004, 
except as provided in subsection (c), the Secretary of the Treasury and 
the Secretary of Labor shall, by regulation, allow the use of paperless 
technologies for purposes of--
            (1) notices, elections, and spousal consents required under 
        sections 401(a)(11) and 417 of the Internal Revenue Code of 
        1986 and section 205 of Employee Retirement Income Security Act 
        of 1974,
            (2) providing information to satisfy the conditions for a 
        hardship distribution under section 401(k)(2)(B)(i)(IV) of such 
        Code, and
            (3) other plan transactions for which the Secretaries 
        determine that the use of paperless technologies is 
        appropriate.
    (b) Condition of Using Paperless Technologies.--Technologies 
permitted pursuant to subsection (a) shall not--
            (1) undermine the rights of any participant, any spouse of 
        a participant, or any other beneficiary, or
            (2) weaken the policy purposes of any rule for which such 
        technologies are permitted.
    (c) Report in Cases Where Paperless Technology Not Used.--
            (1) In general.--Not later than December 31, 2004, if the 
        Secretary of the Treasury or the Secretary of Labor determines 
        that permitting the use of paperless technologies for a 
        particular purpose is unworkable or would jeopardize 
        individuals' rights or public policy objectives, the applicable 
        Secretary shall not permit the use of paperless technologies 
        for such purpose, but rather shall submit a report to the 
        Committee on Ways and Means and the Committee on Education and 
        the Workforce of the House of Representatives and the Committee 
        on Finance and the Committee on Health, Education, Labor and 
        Pensions of the Senate.
            (2) Contents of report.--The applicable Secretary shall set 
        forth in the report required by subsection (a) the 
        determination with respect to each such purpose and 
        recommendations for any changes in law that would facilitate 
        the greater use of paperless technologies.

SEC. 804. ELIMINATION OF UNINTENDED CONSEQUENCES ATTRIBUTABLE TO USE OF 
              BASE PAY OR RATE OF PAY.

    Not later than December 31, 2003, the Secretary of the Treasury 
shall issue final regulations under which the rules in Treasury 
Regulation 1.414(s)-1 (without regard to paragraph (d)(3) thereof) 
apply for purposes of the safe harbor rules under Treasury Regulation 
1.401(a)(4)-3(b).

SEC. 805. REPEAL OF THE GATEWAY TEST.

    (a) In General.--Paragraph (5) of section 410(b) (relating to line 
of business exception) is amended to read as follows:
            ``(5) Line of business exception.--If, under section 
        414(r), an employer is treated as operating separate lines of 
        business for a year, the employer may apply the requirements of 
        this subsection for such year separately with respect to 
        employees in each separate line of business.''.
    (b) Effective Date.--The amendment made by this subsection shall 
apply to years beginning after December 31, 2003.

SEC. 806. INTERMEDIATE SANCTIONS FOR INADVERTENT FAILURES.

    (a) In General.--Section 401(a) (relating to qualified pension, 
profit-sharing, and stock bonus plans) is amended by inserting after 
paragraph (34) the following:
            ``(35) Protection from disqualification upon timely 
        correction or payment of fine.--A trust shall not fail to 
        constitute a qualified trust under this section if the plan of 
        which such trust is a part has made good faith efforts to meet 
        the requirements of this section, has inadvertently failed to 
        satisfy 1 or more of such requirements, and either--
                    ``(A) substantially corrects (to the extent 
                possible) such failure before the date the plan becomes 
                subject to a plan examination for the applicable year 
                (as determined under rules prescribed by the 
                Secretary), or
                    ``(B) substantially corrects (to the extent 
                possible) such failure on or after such date.
        If the plan satisfies the requirement under subparagraph (B), 
        the Secretary may require the sponsoring employer to make a 
        payment to the Secretary in an amount that does not exceed an 
        amount that bears a reasonable relationship to the severity of 
        the plan's failure to satisfy the requirements of this 
        section.''.
    (b) Application to Cash or Deferred Arrangements.--Section 401(k) 
is amended by inserting after paragraph (12) the following new 
paragraph:
            ``(13) Protection from disqualification.--Rules similar to 
        the rules set forth in section 401(a)(35) shall apply for 
        purposes of determining whether a cash or deferred arrangement 
        is a qualified cash or deferred arrangement.''.
    (c) Application to Section 403(b) Annuity Contracts.--Section 
403(b) is amended by inserting after paragraph (12) the following:
            ``(13) Correction of errors.--For purposes of determining 
        whether the exclusion from gross income under paragraph (1) is 
        applicable to an employee for any taxable year, rules similar 
        to the rules set forth in section 401(a)(35) shall apply to any 
        annuity contract purchased under this subsection or any plan 
        established to meet the requirements of this subsection.''.
    (d) Income Inclusion for Disqualification Not Applicable to 
Nonhighly Compensated Employees.--Section 402(b) (relating to 
taxability of beneficiary of nonexempt trust) is amended by striking 
paragraph (4) and inserting the following:
            ``(4) Income inclusion for disqualification not applicable 
        to nonhighly compensated employees.--Paragraphs (1) and (2) 
        shall not apply to employees who are not highly compensated 
        employees.
            ``(5) Failure to meet requirements of section 401(a)(26) or 
        410(b).--If 1 of the reasons a trust is not exempt from tax 
        under section 501(a) is the failure of the plan to meet the 
        requirements of section 401(a)(26) or 410(b), then a highly 
        compensated employee shall, in lieu of the amount determined 
        under paragraph (1) or (2), include in gross income for the 
        taxable year with or within which the taxable year of the trust 
        ends an amount equal to the vested accrued benefit of such 
        employee (other than the employee's investment in the contract) 
        as of the close of such taxable year of the trust.
            ``(6) Highly compensated employee.--For purposes of this 
        subsection, the term `highly compensated employee' has the 
        meaning given such term by section 414(q).''.
    (e) Effective Date.--The amendments made by this section shall take 
effect on the date of enactment of this Act.

SEC. 807. QUALIFIED PRERETIREMENT SURVIVOR ANNUITY.

    (a) Amendments to the Internal Revenue Code of 1986.--
            (1) Repeal of age 35 waiver limitation.--Subparagraph (B) 
        of section 417(a)(6) (defining applicable election period) is 
        amended by striking ``the plan year in which the participant 
        attains age 35'' and inserting ``plan participation''.
            (2) Conforming amendments.--
                    (A) Section 417(a)(6) is amended by striking the 
                last sentence.
                    (B) Section 417(a)(3)(B) is amended--
                            (i) in clause (ii) by striking subclause 
                        (I) and redesignating subclause (II), (III), 
                        and (IV) as subclause (I), (II), and (III), 
                        respectively, and
                            (ii) striking the last sentence.
    (b) Amendments to the Employee Retirement Income Security Act of 
1974.--
            (1) Repeal of age 35 waiver limitation.--Subparagraph (B) 
        of section 205(c)(7) of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1055(c)(7)(B)) is amended by striking 
        ``the plan year in which the participant attains age 35'' and 
        inserting ``plan participation''.
            (2) Conforming amendments.--
                    (A) Section 205(c)(7) of such Act is amended by 
                striking the last sentence.
                    (B) Section 205(c)(3)(B) of such Act is amended--
                            (i) in clause (ii) by striking subclause 
                        (I) and redesignating subclause (II), (III), 
                        and (IV) as subclause (I), (II), and (III), 
                        respectively, and
                            (ii) striking the last sentence.
    (c) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to years beginning after December 31, 2003.
            (2) Special rules.--A plan shall not be treated as having 
        failed to comply with section 417(a)(3)(B) of the Internal 
        Revenue Code of 1986 and section 205(c)(3)(B) of the Employee 
        Retirement Income Security Act of 1974 due to the failure to 
        provide an explanation required by reason of the amendments 
        made by this section if such explanation is provided by a date 
        that is one year after the date of enactment of this Act or by 
        a later date (not later than 3 years after the date of 
        enactment of this Act) determined under rules prescribed by the 
        Secretary of the Treasury. With respect to a participant, if an 
        explanation required by such section 417(a)(3)(B) and such 
        section 205(c)(3)(B) is permitted to be provided at a later 
        date by reason of the preceding sentence, an election under 
        section 417(a)(1)(A)(i) of such Code and section 
        205(c)(1)(A)(i) of the Employee Retirement Income Security Act 
        of 1974 to waive a qualified preretirement survivor annuity 
        shall not take effect unless such explanation has been provided 
        with respect to such participant by a date that is no later 
        than a reasonable period prior to the date of the election.

SEC. 808. COST-OF-LIVING ADJUSTMENT OF $5,000 CASH-OUT AMOUNT.

    (a) Amendments to the Internal Revenue Code of 1986.--
            (1) In general.--Paragraph (11) of section 411(a) (relating 
        to restrictions on certain mandatory distributions) is amended 
        by adding at the end the following new subparagraph:
                    ``(E) Cost-of-living adjustment.--The Secretary 
                shall adjust annually the $5,000 amount in subparagraph 
                (A) for increases in the cost-of-living at the same 
                time and in the same manner as adjustments under 
                section 415(d); except that the base period shall be 
                the calendar quarter beginning July 1, 2003, and any 
                increase which is not a multiple of $500 shall be 
                rounded to the next lowest multiple of $500.''.
            (2) Conforming amendment.--Clause (ii) of section 
        401(a)(31)(B) is amended by striking ``$5,000'' and inserting 
        ``the amount in effect under section 411(a)(11)(A)''.
    (b) Amendment to the Employee Retirement Income Security Act of 
1974.--Subsection (e) of section 203 of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1053(e)) is amended by adding at the 
end the following new paragraph:
    ``(5) The Secretary of the Treasury shall adjust annually the 
$5,000 amount in paragraph (1) for increases in the cost-of-living at 
the same time and in the same manner as adjustments under section 
415(d) of the Internal Revenue Code of 1986; except that the base 
period shall be the calendar quarter beginning July 1, 2003, and any 
increase which is not a multiple of $500 shall be rounded to the next 
lowest multiple of $500.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2003.

SEC. 809. CATCH-UP CONTRIBUTIONS.

    (a) Nondiscrimination Requirement Moved.--
            (1) In general.--Paragraph (4) of section 401(a) (relating 
        to nondiscrimination requirements for qualification) is amended 
        to read as follows:
            ``(4) Nondiscrimination.--
                    ``(A) In general.--If the contributions or benefits 
                provided under the plan do not discriminate in favor of 
                highly compensated employees (within the meaning of 
                section 414(q)).
                    ``(B) Certain employees excluded.--For purposes of 
                this paragraph, there shall be excluded from 
                consideration employees described in section 
                410(b)(3)(A) and (C).
                    ``(C) Special rules relating to catch-up 
                contributions.--
                            ``(i) In general.--An applicable employer 
                        plan shall be treated as failing to meet the 
                        nondiscrimination requirements under 
                        subparagraph (A) with respect to benefits, 
                        rights, and features unless the plan allows all 
                        eligible participants to make the same election 
                        with respect to the additional elective 
                        deferrals under section 414(v).
                            ``(ii) Aggregation.--Except as provided in 
                        regulations prescribed by the Secretary, for 
                        purposes of clause (i), all plans maintained by 
                        employers who are treated as a single employer 
                        under subsection (b), (c), (m), or (o) of 
                        section 414 shall be treated as 1 plan, except 
                        that a plan described in clause (i) of section 
                        410(b)(6)(C) shall not be treated as a plan of 
                        the employer until the expiration of the 
                        transition period with respect to such plan (as 
                        determined under clause (ii) of such section).
                            ``(iii) Definitions.--For purposes of this 
                        subparagraph, the terms `applicable employer 
                        plan', `eligible participants', and `elective 
                        deferral' have the meaning given such terms by 
                        section 414(v).''.
            (2) Conforming amendment.--Section 414(v) is amended by 
        striking paragraph (4) and redesignating paragraphs (5) and (6) 
        as paragraphs (4) and (5), respectively.
    (b) Effective Date.--The amendments made by this section shall take 
effect as if included in section 631(a) of the Economic Growth and Tax 
Relief Reconciliation Act of 2001.

SEC. 810. REVERSE MATCH SALARY REDUCTION ARRANGEMENT SIMPLIFIED 
              EMPLOYEE ANNUITY.

    (a) In General.--Subsection (k) of section 408 (defining simplified 
employee pension) is amended by redesignating paragraphs (7), (8), and 
(9) as paragraphs (8), (9), and (10), respectively, and by inserting 
after paragraph (6) the following new paragraph:
            ``(7) Reverse match salary reduction arrangement simplified 
        employee annuity.--
                    ``(A) Employee may elect salary reduction 
                arrangement.--
                            ``(i) In general.--A simplified employee 
                        pension shall not fail to meet the requirements 
                        of this subsection for a year merely because, 
                        under the terms of the pension, an employee may 
                        elect to have the employer make payments--
                                    ``(I) as elective employer 
                                contributions to the simplified 
                                employee pension on behalf of the 
                                employee, or
                                    ``(II) to the employee directly in 
                                cash.
                            ``(ii) Limitations on elective deferrals.--
                        Clause (i) shall not apply to a simplified 
                        employee pension unless the requirements of 
                        section 401(a)(30) are met.
                    ``(B) Exception where more than 25 employees.--This 
                paragraph shall not apply with respect to any year in 
                the case of a simplified employee pension maintained by 
                an employer with more than 25 employees who were 
                eligible to participate (or would have been required to 
                be eligible to participate if a pension was maintained) 
                at any time during the preceding year. For purposes of 
                this subparagraph, rules similar to the rules of 
                sections 408(p)(2)(C)(ii) and 408(p)(10) shall apply.
                    ``(C) Deferral percentage.--
                            ``(i) In general.--The deferral percentage 
                        for any employee for a year may not exceed 
                        double the percentage which is the ratio that--
                                    ``(I) the amount of employer 
                                contributions (other than elective or 
                                matching contributions) actually paid 
                                over to the simplified employee pension 
                                on behalf of the employee for the year, 
                                bears to
                                    ``(II) the employee's compensation 
                                (not in excess of the amount in effect 
                                under paragraph (6)(D)(ii)) for the 
                                year.
                            ``(ii) Definition.--For purposes of this 
                        paragraph, the deferral percentage of an 
                        employee for a year shall be the ratio which--
                                    ``(I) the amount of elective 
                                employer contributions actually paid 
                                over to the simplified employee pension 
                                on behalf of the employee for the year, 
                                bears to
                                    ``(II) the employee's compensation 
                                (not in excess of the amount in effect 
                                under paragraph (6)(D)(ii)) for the 
                                year.
                    ``(D) Exception for State and local and tax-exempt 
                pensions.--This paragraph shall not apply to a 
                simplified employee pension maintained by a State or 
                local government or political subdivision thereof, or 
                any agency or instrumentality thereof.''.
    (b) Conforming Amendments.--
            (1) Subparagraph (B) of section 402(h)(1) is amended by 
        striking ``408(k)(6)'' and inserting ``408(k)(6) or 
        408(k)(7)''.
            (2) Paragraph (2) of section 408(k) is amended by striking 
        ``subsection (k)(6)'' and inserting ``subsection (k)(6) or 
        (k)(7)''.
            (3) Subparagraphs (C) and (D) of section 408(k)(3) are each 
        amended by striking ``paragraph (6)'' and inserting ``paragraph 
        (6) or (7)''.
            (4) Subpargraph (C) of section 414(u)(1) is amended by 
        striking ``408(k)(6)'' and inserting ``408(k)(6), 408(k)(7)''.
            (5) Subparagraph (C) of section 3121(a)(5) is amended by 
        striking ``408(k)(6)'' and inserting ``408(k)(6) or 
        408(k)(7)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2003.

SEC. 811. LEVEL DOLLAR CONTRIBUTIONS TO SEPS.

    (a) In General.--Subparagraph (C) of section 408(k)(3) (relating to 
contributions must bear uniform relationship to total compensation) is 
amended by inserting before the period at the end the following: ``or 
unless such contributions are a uniform dollar amount on behalf of each 
such employee.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to years beginning after December 31, 2003.

SEC. 812. TAX ON NONDEDUCTIBLE CONTRIBUTIONS NOT TO APPLY TO CERTAIN 
              NONTRADE OR BUSINESS SEP CONTRIBUTIONS.

    (a) In General.--Subparagraph (B) of section 4972(c)(6) (relating 
to exceptions) is amended--
            (1) by striking ``408(p) or'' and inserting ``408(p),'', 
        and
            (2) by inserting after ``401(k)(11))'' the following: ``, 
        or a simplified employee pension (within the meaning of section 
        408(k))''.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2003.

SEC. 813. CLARIFICATION OF FIDUCIARY DUTY.

    (a) In General.--Paragraph (3) of section 404(c) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1104(c)(3)) is 
amended to read as follows:
            ``(3) In the case of a pension plan which makes a transfer 
        to an individual retirement account or annuity of a designated 
        trustee or issuer under section 401(a)(31)(B) of the Internal 
        Revenue Code of 1986, the fiduciary who selects the individual 
        retirement account or annuity and the initial investments 
        thereunder shall be subject to this part only with respect to 
        such initial selections. Such fiduciary shall have no liability 
        under this title if such selections are made in a manner 
        consistent with guidance provided by the Secretary.''.
    (b) Effective Date.--The amendment made this section shall take 
effect as if included in section 657 of the Economic Growth and Tax 
Relief Reconciliation Act of 2001.

SEC. 814. MULTIEMPLOYER PLAN CLARIFICATION.

    (a) In General.--Subsection (b) of section 413 is amended by adding 
at the end the following:
            ``(10) Treament as not an employer plan.--The Secretary may 
        prescribe rules under which, for purposes of one or more 
        specified provisions of this part relating directly or 
        indirectly to nondiscrimination in benefits or coverage, a plan 
        described in section 414(f) is not treated as a plan of or 
        maintained by the employers of the participating employees.''.
    (b) Effective Date.--The amendment made by this section shall apply 
as of the date of enactment of this Act.

SEC. 815. CLARIFICATION OF STATUS OF YOUNG MEN'S CHRISTIAN ASSOCIATION 
              RETIREMENT FUND.

    (a) In General.--Section 1012(c)(4)(C)(i) of the Tax Reform Act of 
1986 (100 Stat. 2394) is amended by adding before the comma at the end 
thereof the following: ``(whose retirement plans (including the reserve 
accounts for such plans) are deemed to be plans described in section 
403(b)(9)(B) of the Internal Revenue Code of 1986 for years beginning 
on or after January 1, 2003)''.
    (b) Clarification of Scope of Church Plan Status.--
            (1) Nondiscrimination testing.--Any fund or plan described 
        in subsection (a) shall be subject to the nondiscrimination 
        requirements of section 403(b)(12) of such Code and shall not 
        be treated as a contract purchased by a church for purposes of 
        section 403(b)(1)(D) of such Code.
            (2) Applicability of 403(b)(9) rules generally.--Nothing in 
        this section shall exempt the retirement fund of the YMCA from 
        complying with the rules otherwise applicable to a plan 
        described in section 403(b)(9)(B) of such Code in order for the 
        treatment described in section 403(b)(1) of such Code to apply.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2002.

 TITLE IX--EXPANDING RETIREMENT SAVINGS OPPORTUNITIES FOR EMPLOYEES OF 
                TAX-EXEMPT ORGANIZATIONS AND GOVERNMENTS

SEC. 901. DEFERRED COMPENSATION PLANS OF TAX-EXEMPT ORGANIZATIONS.

    (a) In General.--Subpart B of part II of subchapter E of chapter 1 
(relating to taxable year for which items of gross income included) is 
amended by inserting after section 458 the following new section:

``SEC. 459. DEFERRED COMPENSATION PLANS OF TAX-EXEMPT ORGANIZATIONS.

    ``(a) In General.--In the case of a plan of an organization (other 
than a governmental unit) exempt from tax under this subtitle providing 
for a deferral of compensation--
            ``(1) the excess deferred compensation shall be included in 
        the gross income of the participant or beneficiary for the 1st 
        taxable year in which there is no substantial risk of 
        forfeiture of the rights to such compensation, and
            ``(2) the tax treatment of any amount made available under 
        the plan to a participant or beneficiary shall be determined 
        under section 72 (relating to annuities, etc.).
    ``(b) Exceptions.--Subsection (a) shall not apply to--
            ``(1) a plan described in section 401(a) which includes a 
        trust exempt from tax under section 501(a),
            ``(2) an annuity plan or contract described in section 403,
            ``(3) that portion of any plan which consists of a transfer 
        of property described in section 83, and
            ``(4) that portion of any plan which consists of a trust to 
        which section 402(b) applies.
    ``(c) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Excess deferred compensation.--The term `excess 
        deferred compensation' means with respect to a participant for 
        any taxable year the excess of the present value of the 
        participant's deferred compensation for such year over the 
        greater of--
                    ``(A) one third of the sum of such value plus the 
                participant's compensation (as defined in Code section 
                415(c)(3)) for such year, or
                    ``(B) the amount in effect for such year under 
                section 457(b)(2) (as modified by any adjustment 
                permitted under subsection (b)(3) or section 414(v)).
            ``(2) Plan includes arrangements, etc.--The term `plan' 
        includes any agreement or arrangement.
            ``(3) Substantial risk of forfeiture.--The rights of a 
        person to compensation are subject to a substantial risk of 
        forfeiture if such person's rights to such compensation are 
        conditioned upon the future performance of substantial services 
        by any individual.
            ``(4) Special rules.--Rules similar to the rules of section 
        457(b)(6) and paragraphs (2), (3), (4), (6), (7), (8), (9) (as 
        in effect before the enactment of the Pension Preservation and 
        Savings Expansion Act of 2003), (10), (11), (12), and (13) of 
        section 457(e) shall apply for purposes of this section.''.
    (b) Conforming Amendments.--
            (1) The heading for section 457 is amended by striking 
        ``AND TAX-EXEMPT ORGANIZATIONS''.
            (2) Section 457(a)(1) is amended by striking ``income--'' 
        and inserting ``and all that follows and inserting the 
        following: ``income is paid to the participant or other 
        beneficiary.''.
            (3) Section 457(b) is amended by striking ``which is 
        established and maintained by an employer which is described in 
        subsection (e)(1)(A) and''.
            (4) Section 457(d)(1)(C) is amended by striking ``in the 
        case of a plan maintained by an employer described in 
        subsection (e)(1)(A),''.
            (5) Section 457(d)(3) is amended--
                    (A) by striking ``of an employer described in 
                subsection (e)(1)(A)'', and
                    (B) by striking ``for government plan''.
            (6) Paragraph (9) of section 457(e) is amended to read as 
        follows:
            ``(9) Exception to distribution requirements.--
                    ``(A) A plan shall not be treated as failing to 
                meet the distribution requirements of subsection (d) by 
                reason of a distribution to which this paragraph 
                applies.
                    ``(B) This paragraph applies to a distribution if--
                            ``(i) the distribution includes the total 
                        amount payable to a participant under the plan,
                            ``(ii) the portion of such amount which is 
                        not attributable to rollover contributions (as 
                        defined in section 411(a)(11)(D)) does not 
                        exceed the dollar limit under section 
                        411(a)(11)(A),
                            ``(iii) no amount has been deferred under 
                        the plan with respect to such participant 
                        during the 2-year period ending on the date of 
                        the distribution, and
                            ``(iv) there has been no prior distribution 
                        under the plan to which this paragraph 
                        applied.''.
            (7) Section 457(e)(1) is amended to read as follows:
            ``(1) Eligible employer.--The term `eligible employer' 
        means a State, political subdivision of a State, and any agency 
        or instrumentality of a State or political subdivision of a 
        State.''.
            (8) Section 457(e)(16)(A) is amended by striking 
        ``established and maintained by an employer described in 
        subsection (e)(1)(A)''.
            (9) Section 457(g) is amended--
                    (A) in paragraph (1) by striking ``maintained by an 
                eligible employer described in subsection (e)(1)(A)'', 
                and
                    (B) in the heading by striking ``Governmental''.
            (10) Section 25B(d)(1)(B)(ii) is amended by striking ``of 
        an eligible employer described in section 457(e)(1)(A)''.
            (11) Section 72(t)(9) is amended by striking ``of an 
        eligible employer described in section 457(e)(1)(A)''.
            (12) Section 402(c)(8)(B)(v) is amended by striking ``which 
        is maintained by an eligible employer described in section 
        457(e)(1)(A)''.
            (13) Section 408(q)(3)(A) is amended by striking ``of an 
        eligible employer described in section 457(e)(1)(A)''.
            (14) Section 414(v)(6)(A)(iii) is amended by striking ``of 
        an eligible employer described in section 457(e)(1)(A)''.
            (15) Section 3401(a)(12)(E) is amended by striking ``which 
        is maintained by an eligible employer described in section 
        457(e)(1)(A)''.
            (16) Section 3405(d)(2)(B)(iv) is amended by striking ``and 
        which is maintained by an eligible employer described in 
        section 457(e)(1)(A)''.
            (17) Section 4980G(f)(2)(B) (as added by this Act) is 
        amended by striking ``of an eligible employer described in 
        section 457(e)(1)(A)''.
            (18) Section 414(w)(5)(B)(ii) (as added by this Act) is 
        amended by striking ``of an eligible employer described in 
        section 457(e)(1)(A)''.
            (19) Section 414(x)(8(A)(ii) is amended by striking ``of an 
        eligible employer described in section 457(e)(1)(A)''.
    (c) Clerical Amendments.--
            (1) The table of sections for subpart B of part II of 
        subchapter E of chapter 1 is amended by inserting after the 
        item relating to section 458 the following new item:

                              ``Sec. 459. Deferred compensation plans 
                                        of tax-exempt organizations.''.
            (2) The item in the table of sections for subpart B of part 
        II of subchapter E of chapter 1 relating to section 457 is 
        amended to read as follows:

                              ``Sec. 457. Deferred compensation plans 
                                        of State and local 
                                        governments.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 902. INAPPLICABILITY OF 10 PERCENT ADDITIONAL TAX ON EARLY 
              DISTRIBUTIONS OF PENSION PLANS OF PUBLIC SAFETY 
              EMPLOYEES.

    (a) In General.--Section 72(t)(2) of the Internal Revenue Code of 
1986 (relating to subsection not to apply to certain distributions) is 
amended by adding at the end the following new subsection:
                    ``(G) DROP distributions to qualified public safety 
                employees in governmental plans.--
                            ``(i) In general.--Distributions to an 
                        individual who is a qualified public safety 
                        employee from a governmental plan within the 
                        meaning of section 414(d) to the extent such 
                        distributions are attributable to a DROP 
                        benefit.
                            ``(ii) Definitions.--For purposes of this 
                        subparagraph--
                                    ``(I) The term `DROP benefit' means 
                                a feature of a governmental plan under 
                                which an employee elects to receive 
                                credits to an account (including a 
                                notional account) in the plan in lieu 
                                of increases in the employee's accrued 
                                pension benefit based on years of 
                                service after the effective date of the 
                                DROP election.
                                    ``(II) The term `qualified public 
                                safety employee' means any employee of 
                                any police department or fire 
                                department organized and operated by a 
                                State or political subdivision of a 
                                State if the employee provides police 
                                protection, firefighting services, or 
                                emergency medical services for any area 
                                within the jurisdiction of such State 
                                or political subdivision.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to distributions after the date of enactment of this Act.

SEC. 903. CLARIFICATIONS REGARDING PURCHASE OF PERMISSIVE SERVICE 
              CREDIT.

    (a) In General.--Subparagraph (A) of section 457(e)(17) (relating 
to trustee-to-trustee transfers to purchase permissive service credit), 
and subparagraph (A) of section 403(b)(13) (relating to trustee-to-
trustee transfers to purchase permissive service credit), are both 
amended by striking ``section 415(n)(3)(A)'' and inserting ``section 
415(n)(3) (without regard to subparagraphs (B) and (C) thereof)''.
    (b) Transfers May Be From Any Governmental Plan.--Section 
457(e)(17), and section 403(b)(13), are both amended by inserting 
``from any governmental plan (as so defined)'' after ``414(d))'' and by 
adding at the end the following sentence: ``Amounts transferred under 
this paragraph shall be distributed solely in accordance with the terms 
of such defined benefit plan.''.
    (c) Service Credit.--Clause (ii) of section 415(n)(3)(A) is amended 
to read as follows:
                            ``(ii) which relates to benefits with 
                        respect to which such -participant is not 
                        otherwise entitled, and''.
    (d) Effective Date.--The amendments made by this section shall take 
effect as if included in the amendments made by section 647 of the 
Economic Growth and Tax Relief Reconciliation Act of 2001.

SEC. 904. CERTAIN ROLLOVERS OF BENEFITS PERMITTED.

    (a) In General.--Paragraph (10) of section 457(e) is amended--
            (1) by striking ``A participant'' and inserting ``(A) 
        Exclusion from income.--A participant'', and
            (2) by adding at the end the following:
                    ``(B) Transfers permitted.--A transfer from one 
                such plan to another such plan of the entire benefit of 
                one or more participants shall not fail to be permitted 
                solely because all assets of the transferor plan are 
                not transferred to the transferee plan.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2003.
            (2) Special rule.--An individual shall not be precluded 
        from participating in an eligible deferred compensation plan by 
        reason of having received a distribution under Code section 
        457(e)(9) as in effect prior to the enactment of the Small 
        Business Job Protection Act of 1996.

SEC. 905. MINIMUM DISTRIBUTION RULES.

    The Secretary of the Treasury shall issue regulations under which a 
governmental plan (as defined in section 414(d) of the Internal Revenue 
Code of 1986) shall, for all years to which section 401(a)(9) of such 
Code applies to such plan, be treated as having complied with such 
section 401(a)(9) if such plan complies with a reasonable good faith 
interpretation of such section 401(a)(9).

SEC. 906. CHURCH PLAN RULE.

    (a) In General.--Paragraph (11) of section 415(b) is amended by 
adding at the end the following: ``Subparagraph (B) of paragraph (1) 
shall not apply to a plan maintained by an organization described in 
section 3121(w)(3)(A) except with respect to highly compensated 
benefits. For purposes of this paragraph, the term `highly compensated 
benefits' means any benefits accrued for an employee in any year on or 
after the first year in which such employee is a highly compensated 
employee (as defined in section 414(q)) of the organization described 
in section 3121(w)(3)(A). For purposes of applying paragraph (1)(B) to 
highly compensated benefits, all benefits of the employee otherwise 
taken into account (without regard to this paragraph) shall be taken 
into account.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2003.

SEC. 907. PLANS MAINTAINED BY GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.

    (a) In General.--Subparagraph (F) of section 415(b)(2) is amended 
to read as follows:
                    ``(F) Plans maintained by governments and tax 
                exempt organizations.--
                            ``(i) In general.--In the case of a 
                        governmental plan (within the meaning of 
                        section 414(d)), a plan maintained by an 
                        organization (other than a governmental unit) 
                        exempt from tax under this subtitle, or a 
                        qualified merchant marine plan, subparagraph 
                        (C) shall be applied as if the following 
                        sentence were added at the end: `The reduction 
                        under this subparagraph shall not reduce the 
                        limitation of paragraph (1)(A) below (i) 
                        $130,000 if the benefit begins at or after age 
                        55, or (ii) if the benefit begins before age 
                        55, the equivalent of the $130,000 limitation 
                        at age 55.'.
                            ``(ii) Definitions.--For purposes of this 
                        subparagraph--
                                    ``(I) Qualified merchant marine 
                                plan.--The term `qualified merchant 
                                marine plan' means a plan in existence 
                                on January 1, 1986, the participants in 
                                which are merchant marine officers 
                                holding licenses issued by the 
                                Secretary of Transportation under title 
                                46, United States Code.
                                    ``(II) Exempt organization plan.--A 
                                plan shall be treated as a plan 
                                maintained by an organization (other 
                                than a governmental unit) exempt from 
                                tax under this subtitle if at least 50 
                                percent of the employees benefiting 
                                under the plan are employees of an 
                                organization (other than governmental 
                                unit) exempt from tax under this 
                                subtitle. If less than 50 percent of 
                                the employees benefiting under a plan 
                                are employees of an organization (other 
                                than a governmental unit) exempt from 
                                tax under this subtitle, the plan shall 
                                be treated as a plan maintained by an 
                                organization (other than a governmental 
                                unit) exempt from tax under this 
                                subtitle only with respect to employees 
                                of such an organization.''.
    (b) Cost-of-Living Adjustments.--
            (1) Plans maintained by governments and tax exempt 
        organizations.--Paragraph (1) of section 415(d) is amended by 
        striking ``and'' at the end of subparagraph (B), by 
        redesignating subparagraph (C) as subparagraph (D), and by 
        inserting after subparagraph (B) the following new 
        subparagraph:
                    ``(C) the $130,000 amount in subsection (b)(2)(F), 
                and''.
            (2) Base period.--Paragraph (3) of section 415(d) is 
        amended by redesignating subparagraph (D) as subparagraph (E) 
        and by inserting after subparagraph (C) the following new 
        subparagraph:
                    ``(D) $130,000 Amount.--The base period taken into 
                account for purposes of paragraph (1)(C) is the 
                calendar quarter beginning July 1, 2003.''.
            (3) Rounding rule relating to defined benefit plans.--
        Subparagraph (B) of section 415(d)(4) is amended to read as 
        follows:
                    ``(B) $130,000 and $40,000 amounts.--Any increase 
                under subparagraph (C) or (D) of paragraph (1) which is 
                not a multiple of $1,000 shall be rounded to the next 
                lowest multiple of $1,000.''.
            (4) Conforming amendment.--Subparagraph (E) of section 
        415(d)(3) (as amended by paragraph (2)) is amended by striking 
        ``paragraph (1)(C)'' and inserting ``paragraph (1)(D)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2003.

              TITLE X--RESTRICTING EXCESSIVE REMUNERATION

SEC 1001. GOLDEN PARACHUTE EXCISE TAX TO APPLY TO EXCESSIVE EMPLOYEE 
              REMUNERATION PAID BY CORPORATION AFTER DECLARATION OF 
              BANKRUPTCY.

    (a) In General.--Section 4999 (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.
                    ``(F) 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.

            TITLE XI--DEFINED CONTRIBUTION PLAN PROTECTIONS

SEC. 1101. PROVISION OF INVESTMENT EDUCATION NOTICES TO PARTICIPANTS.

    (a) In General.--Section 414 (relating to definitions and -special 
rules) is amended by adding at the end the following:
            ``(w) Provision of investment education notices to 
        participants.--
            ``(1) In general.--The plan administrator of an applicable 
        pension plan shall provide to each applicable individual an 
        investment education notice described in paragraph (2) at the 
        time of the enrollment of the applicable individual in the plan 
        and not less often than quarterly thereafter.
            ``(2) Investment education notice.--An investment education 
        notice is described in this paragraph if such notice contains--
                    ``(A) an explanation, for the long-term retirement 
                security of participants and beneficiaries, of 
                generally accepted investment principles, including 
                principles of risk management and diversification, and
                    ``(B) a discussion of the risk of holding 
                substantial portions of a portfolio in the security of 
                any one entity, such as employer securities.
            ``(3) Understandability.--Each notice required by paragraph 
        (1) shall be written in a manner calculated to be understood by 
        the average plan participant and shall provide sufficient 
        information (as determined in accordance with guidance provided 
        by the Secretary) to allow recipients to understand such 
        notice.
            ``(4) Form and manner of notices.--The notices required by 
        this subsection shall be in writing, except that such notices 
        may be in electronic or other form to the extent that such form 
        is reasonably accessible to the applicable individual.
            ``(5) Definitions.--For purposes of this subsection--
                    ``(A) Applicable individual.--The term `applicable 
                individual' means--
                            ``(i) any participant in the applicable 
                        pension plan,
                            ``(ii) any beneficiary who is an alternate 
                        payee (within the meaning of section 414(p)(8)) 
                        under a qualified domestic relations order 
                        (within the meaning of section 414(p)(1)(A)), 
                        and
                            ``(iii) any beneficiary of a deceased 
                        participant or alternate payee.
                    ``(B) Applicable pension plan.--The term 
                `applicable pension plan' means--
                            ``(i) a plan described in clause (i), (ii), 
                        or (iv) of section 219(g)(5)(A), and
                            ``(ii) an eligible deferred compensation 
                        plan (as defined in section 457(b)) of 
an eligible employer described in section 457(e)(1)(A),
                which permits any participant to direct the investment 
                of some or all of his account in the plan or under 
                which the accrued benefit of any participant depends in 
                whole or in part on hypothetical investments directed 
                by the participant. Such term shall not include a one-
                participant retirement plan.
                    ``(C) One-participant retirement plan defined.--The 
                term `one-participant retirement plan' means a 
                retirement plan that--
                            ``(i) on the first day of the plan year--
                                    ``(I) covered only the employer 
                                (and the employer's spouse) and the 
                                employer owned the entire business 
                                (whether or not incorporated), or
                                    ``(II) covered only one or more 
                                partners (and their spouses) in a 
                                business partnership (including 
                                partners in an S or C corporation),
                            ``(ii) meets the minimum coverage 
                        requirements of section 410(b) without being 
                        combined with any other plan of the business 
                        that covers the employees of the business,
                            ``(iii) does not provide benefits to anyone 
                        except the employer (and the employer's spouse) 
                        or the partners (and their spouses),
                            ``(iv) does not cover a business that is a 
                        member of an affiliated service group, a 
                        controlled group of corporations, or a group of 
                        businesses under common control, and
                            ``(v) does not cover a business that leases 
                        employees.
            ``(6) Cross reference.--For provisions relating to penalty 
        for failure to provide the notice required by this subsection, 
        see section 6652(m).''.
    (b) Penalty for Failure To Provide Notice.--Section 6652 (relating 
to failure to file certain information returns, registration 
statements, etc.) is amended by redesignating subsection (m) as 
subsection (n) and by inserting after subsection (1) the -following new 
subsection:
    ``(m) Failure To Provide Investment Education Notices to 
Participants in Certain Plans.--In the case of each failure to provide 
a notice as required by section 414(w) with respect to an applicable 
individual (as defined in such section), at the time prescribed 
therefore, unless it is shown that such failure is due to reasonable 
cause and not to willful neglect, there shall be paid, on notice and 
demand of the Secretary and in the same manner as tax, by the person 
failing to provide such notice, an amount equal to $100 for each such 
failure, but the total amount imposed on such person for all such 
failures during any calendar year shall not exceed $500,000.''.
    (c) Effective Dates.--
            (1) In general.--Except as provided in paragraph (3), the 
        amendments made by this section shall apply with respect to 
        plan years beginning after December 31, 2003.
            (2) Model investment principles.--Not later than the 
        earlier of January 1, 2004, or 120 days after the date of the 
        enactment of this Act, the Secretary of the Treasury, in 
        consultation with the Secretary of Labor, shall issue guidance 
        and model notices which meet the requirements of section 414(w) 
        of the Internal Revenue Code of 1986 (as added by this 
        section).
            (3) Governmental plans.--In the case of a governmental plan 
        (as defined in section 414(d) of the Internal Revenue Code of 
        1986), the amendments made by this section shall apply with 
        respect to plan years beginning after December 31, 2005.

SEC. 1102. NOTICE OF BLACKOUT PERIODS TO PARTICIPANT OR BENEFICIARY 
              UNDER DEFINED CONTRIBUTION PLAN.

    (a) In General.--Section 414 (relating to definitions and special 
rules) (as amended by this Act) is amended by adding at the end the 
following:
    ``(x) Notice of Blackout Periods to Participant or Beneficiary 
Under Applicable Pension Plan.--
            ``(1) Duties of plan administrator.--In advance of the 
        commencement of any blackout period with respect to an 
        applicable pension plan, the plan administrator shall notify 
        the plan participants and beneficiaries who are affected by 
        such action in accordance with this subsection.
            ``(2) Notice requirements.--
                    ``(A) In general.--The notices described in 
                paragraph (1) shall be written in a manner calculated 
                to be understood by the average plan participant and 
                shall include--
                            ``(i) the reasons for the blackout period,
                            ``(ii) an identification of the investments 
                        and other rights affected,
                            ``(iii) the expected beginning date and 
                        length of the blackout period,
                            ``(iv) in the case of investments affected, 
                        a statement that the participant or beneficiary 
                        should evaluate the appropriateness of their 
                        current investment decisions in light of their 
                        inability to direct or diversify assets 
                        credited to their accounts during the blackout 
                        period, and
                            ``(v) such other matters as the Secretary 
                        may require by regulation.
                    ``(B) Notice to participants and beneficiaries.--
                Except as otherwise provided in this subsection, 
                notices described in paragraph (1) shall be furnished 
                to all participants and beneficiaries under the plan to 
                whom the blackout period applies at least 30 days in 
                advance of the blackout period.
                    ``(C) Exception to 30-day notice requirement.--In 
                any case in which--
                            ``(i) a deferral of the blackout period 
                        would violate the requirements of subparagraph 
                        (A) or (B) of section 404(a)(1) of the Employee 
                        Retirement Income Security Act of 1974, and a 
                        fiduciary of the plan reasonably so determines 
                        in writing, or
                            ``(ii) the inability to provide the 30-day 
                        advance notice is due to events that were 
                        unforeseeable or circumstances beyond the 
                        reasonable control of the plan administrator, 
                        and a fiduciary of the plan reasonably so 
                        determines in writing,
                subparagraph (B) shall not apply, and the notice shall 
                be furnished to all participants and beneficiaries 
                under the plan to whom the blackout period applies as 
                soon as reasonably possible under the circumstances 
                unless such a notice in advance of the termination of 
                the blackout period is impracticable.
                    ``(D) Written notice.--The notice required to be 
                provided under this subsection shall be in writing, 
                except that such notice may be in electronic or other 
                form to the extent that such form is reasonably 
                accessible to the recipient.
                    ``(E) Notice to issuers of employer securities 
                subject to blackout period.--In the case of any 
                blackout period in connection with an applicable 
pension plan, the plan administrator shall provide timely notice of 
such blackout period to the issuer of any employer securities subject 
to such blackout period.
            ``(3) Exception for blackout periods with limited 
        applicability.--In any case in which the blackout period 
        applies only to 1 or more participants or beneficiaries in 
        connection with a merger, acquisition, divestiture, or similar 
        transaction involving the plan or plan sponsor and occurs 
        solely in connection with becoming or ceasing to be a 
        participant or beneficiary under the plan by reason of such 
        merger, acquisition, divestiture, or transaction, the 
        requirement of this subsection that the notice be provided to 
        all participants and beneficiaries shall be treated as met if 
        the notice required under paragraph (1) is provided to such 
        participants or beneficiaries to whom the blackout period 
        applies as soon as reasonably practicable.
            ``(4) Changes in length of blackout period.--If, following 
        the furnishing of the notice pursuant to this subsection, there 
        is a change in the beginning date or length of the blackout 
        period (specified in such notice pursuant to paragraph 
        (2)(A)(iii)), the administrator shall provide affected 
        participants and beneficiaries notice of the change as soon as 
        reasonably practicable. In relation to the extended blackout 
        period, such notice shall meet the requirements of paragraph 
        (2)(D) and shall specify any material change in the matters 
        referred to in clauses (i) through (v) of paragraph (2)(A).
            ``(5) Regulatory exceptions.--The Secretary may provide by 
        regulation for additional exceptions to the requirements of 
        this subsection which the Secretary determines are in the 
        interests of participants and beneficiaries.
            ``(6) Guidance and model notices.--The Secretary shall 
        issue guidance and model notices which meet the requirements of 
        this subsection.
            ``(7) Blackout period.--For purposes of this subsection--
                    ``(A) In general.--The term `blackout period' 
                means, in connection with an applicable pension plan, 
                any period for which any ability of participants or 
                beneficiaries under the plan, which is otherwise 
                available under the terms of such plan, to direct or 
                diversify assets credited to their accounts, to obtain 
                loans from the plan, or to obtain distributions from 
                the plan is temporarily suspended, limited, or 
                restricted, if such suspension, limitation, or 
                restriction is for any period of more than 3 
                consecutive business days.
                    ``(B) Exclusions.--The term `blackout period' does 
                not include a suspension, limitation, or restriction--
                            ``(i) which occurs by reason of the 
                        application of the securities laws (as defined 
                        in section 3(a)(47) of the Securities Exchange 
                        Act of 1934),
                            ``(ii) which is a change to the plan which 
                        provides for a regularly scheduled suspension, 
                        limitation, or restriction which is disclosed 
                        to participants or beneficiaries through any 
                        summary of material modifications, any 
                        materials describing specific investment 
                        alternatives under the plan, or any changes 
                        thereto, or
                            ``(iii) which applies only to 1 or more 
                        individuals, each of whom is the participant, 
                        an alternate payee (as defined in section 
                        414(p)(8), or any other beneficiary pursuant to 
                        a qualified domestic relations order (as 
                        defined in section 414(p)(1)(A)).
            ``(8) Applicable pension plan.--
                    ``(A) In general.--For purposes of this subsection, 
                the term `applicable pension plan' means--
                            ``(i) a plan described in clause (i), (ii), 
                        or (iv) of section 219(g)(5)(A), and
                            ``(ii) an eligible deferred compensation 
                        plan (as defined in section 457(b)) of an 
                        eligible employer described in section 
                        457(e)(1)(A),
                which maintains accounts for participants under the 
                plan or under which the accrued benefit of any 
                participant depends in whole or in part on hypothetical 
                investments directed by the participant.--
                    ``(B) Exceptions.--Such term shall not include a 
                one-participant retirement plan or a plan to which 
                section 101(i) of the Employee Retirement Income 
                Security Act of 1974 applies.
                    ``(C) One-participant retirement plan.--For 
                purposes of this paragraph, the term `one-participant 
                retirement plan' means a retirement plan that--
                            ``(i) on the first day of the plan year--
                                    ``(I) covered only the employer 
                                (and the employer's spouse) and the 
                                employer owned the entire business 
                                (whether or not incorporated), or
                                    ``(II) covered only one or more 
                                partners (and their spouses) in a 
                                business partnership (including 
                                partners in an S or C corporation (as 
                                defined in section 1361(a)),
                            ``(ii) meets the minimum coverage 
                        requirements of section 410(b) (as in effect on 
                        the date of the enactment of the Sarbanes-Oxley 
                        Act of 2002) without being combined with any 
                        other plan of the business that covers the 
                        employees of the business,
                            ``(iii) does not provide benefits to anyone 
                        except the employer (and the employer's spouse) 
                        or the partners (and their spouses),
                            ``(iv) does not cover a business that is a 
                        member of an affiliated service group, a 
                        controlled group of corporations, or a group of 
                        businesses under common control, and
                            ``(v) does not cover a business that leases 
                        employees.''.
            ``(9) Cross reference.--For provisions relating to penalty 
        for failure to provide the notice required by this section, see 
        section 6652(n).''.
    (b) Penalty for Failure To Provide Notice.--Section 6652 (relating 
to failure to file certain information returns, registration 
statements, etc.) (as amended by this Act) is amended by redesignating 
subsection (n) as subsection (o) and by inserting after subsection (m) 
the following new subsection:
    ``(n) Failure To Provide Blackout Period Notice to Participants or 
Beneficiaries.--In the case of each failure to provide a notice as 
required by section 414(x) with respect to a participant or beneficiary 
entitled to such a notice under such section, at the time prescribed 
therefor, unless it is shown that such failure is due to reasonable 
cause and not to willful neglect, there shall be paid, on notice and 
demand of -the Secretary and in the same manner as tax, by the person 
failing to provide such notice, an amount equal to $100 for such 
failure but the total amount imposed on such person for all such 
failures during any calendar year shall not exceed $500,000.''.
    (c) Plan Amendments.--If any amendment made by this subsection 
requires an amendment to any plan, such plan amendment shall not be 
required to be made before the third plan year beginning on or after 
the effective date of this section, if--
            (1) during the period after such amendment made by this 
        subsection takes effect and before such third plan year, the 
        plan is operated in good faith compliance with the requirements 
        of such amendment made by this subsection, and
            (2) such plan amendment applies retroactively to the period 
        after such amendment made by this subsection takes effect and 
        before such third plan year.
    (d) Effective Date.--The provisions of this section (including the 
amendments made thereby) shall take effect two years after the date of 
the enactment of this Act.

SEC. 1103. DIVERSIFICATION REQUIREMENTS FOR DEFINED CONTRIBUTION PLANS 
              THAT HOLD EMPLOYER SECURITIES.

    (a) In General.--Subsection (a) of section 401 (relating to 
requirements for qualification) is amended by adding at the end the 
following new paragraph:
            ``(35) Diversification requirements for defined 
        contribution plans that hold employer securities.--
                    ``(A) In general.--In the case of a defined 
                contribution plan described in this subsection that 
                includes a trust which is exempt from tax under section 
                501(a) and which holds employer securities that are 
                readily tradable on an established securities market, 
                such trust shall not constitute a qualified trust under 
                this section unless such plan meets the requirements of 
                subparagraphs (B), (C), and (D).
                    ``(B) Elective deferrals and employee contributions 
                invested in employer securities.--In the case of the 
                portion of the account attributable to elective 
                deferrals and employee contributions which is invested 
                in employer securities, a plan meets the requirements 
                of this subparagraph if each applicable individual in 
                such plan may elect to direct the plan to divest up to 
                the applicable percentage of such securities in the 
                individual's account and to reinvest an equivalent 
                amount in other investment options which meet the 
                requirements of subparagraph (E).
                    ``(C) Matching and certain other contributions.--
                            ``(i) In general.--In the case of the 
                        portion of the account attributable to 
                        contributions to which this subparagraph 
                        applies and which is invested in employer 
                        securities, a plan meets the requirements of 
                        this subparagraph if each applicable 3-year 
                        individual in the plan may elect to direct the 
                        plan to divest up to the applicable percentage 
                        of such securities in the individual's account 
                        and to reinvest an equivalent amount in other 
                        investment options which meet the requirements 
                        of subparagraph (E).
                            ``(ii) Contributions to which this 
                        subparagraph applies.--This subparagraph shall 
                        apply to--
                                    ``(I) matching contributions (as 
                                defined in subsection (m)(4)(A)),
                                    ``(II) qualified nonelective 
                                contributions (as defined in subsection 
                                (m)(4)(C)), and
                                    ``(III) contributions made in order 
                                to meet the requirements of subsection 
                                (k)(12)(C).
                            ``(iii) Applicable 3-year individual.--For 
                        purposes of clause (i), the term `applicable 3-
                        year individual' means any individual who would 
                        be an applicable individual if only 
                        participants in the plan who have completed at 
                        least 3 years of service (as determined under 
                        section 411(a)) were taken into account under 
                        subparagraph (G)(i)(I).
                    ``(D) Other employer contributions.--
                            ``(i) In general.--In the case of the 
                        portion of the account attributable to employer 
                        contributions (other than contributions to 
                        which subparagraph (B) or (C) applies) which is 
                        invested in employer securities, a plan meets 
                        the requirements of this subparagraph if each 
                        applicable 5-year individual described in 
                        clause (ii) may elect to direct the plan to 
                        divest up to the applicable percentage of such 
                        securities in the individual's account and to 
                        reinvest an equivalent amount in other 
                        investment options which meet the requirements 
                        of subparagraph (E).
                            ``(ii) Applicable 5-year individual.--For 
                        purposes of clause (i), the term `5-year 
                        individual' means any individual who would be 
                        an applicable individual if only participants 
                        in the plan who have completed at least 5 years 
                        of service (as determined under section 411(a)) 
                        were taken into account under subparagraph 
                        (G)(i)(I).
                    ``(E) Investment options.--The requirements of this 
                subparagraph are met if the plan offers not less than 3 
                investment options (not inconsistent with regulations 
                prescribed by the Secretary) other than employer 
                securities.
                    ``(F) Election.--Elections under this paragraph 
                maybe made not less frequently than quarterly.
                    ``(G) Other definitions and rules.--For purposes of 
                this paragraph--
                            ``(i) Applicable individual.--The term 
                        `applicable individual' means--
                                    ``(I) any participant in the plan,
                                    ``(II) any beneficiary who is an 
                                alternate payee (within the meaning of 
                                section 414(p)(8)) under an applicable 
                                qualified domestic relations order 
                                (within the meaning of section 
                                414(p)(1)(A)), and
                                    ``(III) any beneficiary of a 
                                deceased participant or alternate 
                                payee.
                            ``(ii) Elective deferrals.--The term 
                        `elective deferrals' means an employer 
                        contribution described in section 402(g)(3)(A).
                            ``(iii) Employer securities.--The term 
                        `employer securities' shall have the meaning 
                        given such term by section 407(d)(1) of the 
                        Employee Retirement Income Security Act of 
                        1974.
                            ``(iv) Employee stock ownership plan.--The 
                        term `employee stock ownership plan' shall have 
                        the same meaning given to such term by section 
                        4975(e)(7).
                            ``(v) Applicable percentage.--
                                    ``(I) In general.--The applicable 
                                percentage shall be as follows:

                        ``Plan years                         Applicable
                        beginning in:                       percentage:
                                2004.................              20  
                                2005.................              40  
                                2006.................              60  
                                2007.................              80  
                                2008 or thereafter...            100.  
                                    ``(II) Elective deferrals treated 
                                as separate plan not individual account 
                                plan.--In the case of elective 
                                deferrals and employee contributions 
                                (and any earnings allocable thereto) 
                                held within a plan treated as a 
                                separate plan as of the date of the 
                                enactment of this paragraph under 
                                section 407(b)(2) of the Employee 
                                Retirement Income Security Act of 1974, 
                                for purposes of subparagraph (B) the 
                                applicable percentage shall be 100 
                                percent.
                                    ``(III) Contributions held within 
                                an esop.--In the case of contributions 
                                (other than elective deferrals and 
                                employee contributions) held within an 
                                employee stock ownership plan, in the 
                                case of years 2004 and 2005, the 
                                applicable percentage shall be the 
                                greater of the amount determined under 
                                subclause (I) or the percentage 
                                determined under paragraph (28) 
                                (determined as if paragraph (28) 
                                applied to a plan described in this 
                                paragraph).
                            ``(vi) Coordination with paragraph (28).--
                        Subparagraphs (B), (C), and (D) shall apply to 
                        the extent that the amount attributable to the 
                        applicable percentage under such subparagraph 
                        exceeds the amount to which a prior election 
                        under such subparagraph or paragraph (28) 
                        applies.
                    ``(H) Exception for certain esops.--This paragraph 
                shall apply to an employee stock ownership plan only if 
                the plan holds amounts attributable to deferrals or 
                contributions to which subparagraph (B) or (C) 
                apply.''.
    (b) Conforming Amendments.--
            (1) Section 401(a)(28) is amended by adding at the end the 
        following new subparagraph:
                    ``(D) Application.--This paragraph shall not apply 
                to a plan to which paragraph (35) applies.''.
            (2) Section 409(h)(7) is amended by inserting before the 
        period at the end ``or subparagraph (B), (C), or (D) of section 
        401(a)(35)''.
            (3) Section 4980(c)(3)(A) is amended by striking ``if--'' 
        and all that follows and inserting ``if the requirements of 
        subparagraphs (B), (C), and (D) are met.''.
    (c) Effective Date.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to plan years 
        beginning after December 31, 2003.
            (2) Exception.--The amendments made by this section shall 
        not apply to employer securities held by an employee stock 
        ownership plan which are not subject to section 401(a)(28) of 
        the Internal Revenue Code of 1986 by reason of section 
        1175(a)(2) of the Tax Reform Act of 1986 (100 Stat. 2519).

SEC. 1104. TREATMENT OF QUALIFIED RETIREMENT PLANNING SERVICES.

    (a) In General.--Subsection (m) of section 132 (defining qualified 
retirement services) is amended by adding at the end the following new 
paragraph:
            ``(4) No constructive receipt.--No amount shall be included 
        in the gross income of any employee solely because the employee 
        may choose between any qualified retirement planning services 
        provided by a qualified investment advisor and compensation 
        which would otherwise be includible in the gross income of such 
        employee. The preceding sentence shall apply to highly 
        compensated employees only if the choice described in such 
        sentence is available on substantially the same terms to each 
        member of the group of employees normally provided education 
        and information regarding the employer's qualified employer 
        plan.''.
    (b) Conforming Amendments.--
            (1) Section 403(b)(3)(B) is amended by inserting 
        ``132(m)(4),'' after ``132(f)(4),''.
            (2) Section 414(s)(2) is amended by inserting 
        ``132(m)(4),'' after ``132(f)(4),''.
            (3) Section 415(c)(3)(D)(ii) is amended by inserting 
        ``132(m)(4),'' after ``132(f)(4),''.
    (c) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2003.

SEC. 1105. SPECIAL RULES.

    In the case of a plan maintained pursuant to 1 or more collective 
bargaining agreements between employee representatives and 1 or more 
employers ratified on or before the date of the enactment of this Act, 
the amendments made by this title shall not apply to plan years 
beginning before the earlier of--
            (1) the later of--
                    (A) January 1, 2005, or
                    (B) the date on which the last of such collective 
                bargaining agreements terminates (determined without 
                regard to any extension thereof after the date of the 
                enactment of this Act), or
            (2) January 1, 2006.

          TITLE XII--OTHER TAX PROVISIONS RELATING TO PENSIONS

SEC. 1201. AMENDMENTS TO RETIREMENT PROTECTION ACT OF 1994.

    (a) Transition Rule Made Permanent.--Paragraph (1) of section 
769(c) of the Retirement Protection Act of 1994 is amended--
            (1) by striking ``transition'' each place it appears in the 
        heading and the text, and
            (2) by striking ``for any plan year beginning after 1996 
        and before 2010''.
    (b) Special Rules.--Paragraph (2) of section 769(c) of the 
Retirement Protection Act of 1994 is amended to read as follows:
            ``(2) Special rules.--The rules described in this paragraph 
        are as follows:
                    ``(A) For purposes of section 412(l)(9)(A) of the 
                Internal Revenue Code of 1986 and section 302(d)(9)(A) 
                of the Employee Retirement Income Security Act of 1974, 
                the funded current liability percentage for any plan 
                year shall be treated as not less than 90 percent.
                    ``(B) For purposes of section 412(m) of the 
                Internal Revenue Code of 1986 and section 302(e) of the 
                Employee Retirement Income Security Act of 1974, the 
                funded current liability percentage for any plan year 
                shall be treated as not less than 100 percent.
                    ``(C) For purposes of determining unfunded vested 
                benefits under section 4006(a)(3)(E)(iii) of the 
                Employee Retirement Income Security Act of 1974, the 
                mortality table shall be the mortality table used by 
                the plan.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plan years beginning after December 31, 2002.

SEC. 1202. REPORTING SIMPLIFICATION.

    (a) Simplified Annual Filing Requirement for Owners and Their 
Spouses.--
            (1) In general.--The Secretary of the Treasury and the 
        Secretary of Labor shall modify the requirements for filing 
        annual returns with respect to one-participant retirement plans 
        to ensure that such plans with assets of $250,000 or less as of 
        the close of the plan year need not file a return for that 
        year.
            (2) One-participant retirement plan defined.--For purposes 
        of this subsection, the term ``one-participant retirement 
        plan'' means a retirement plan that--
                    (A) on the first day of the plan year--
                            (i) covered only the employer (and the 
                        employer's spouse) and the employer owned the 
                        entire business (whether or not incorporated); 
                        or
                            (ii) covered only one or more partners (and 
                        their spouses) in a business partnership 
                        (including partners in an S or C corporation);
                    (B) meets the minimum coverage requirements of 
                section 410(b) of the Internal Revenue Code of 1986 
                without being combined with any other plan of the 
                business that covers the employees of the business;
                    (C) does not provide benefits to anyone except the 
                employer (and the employer's spouse) or the partners 
                (and their spouses);
                    (D) does not cover a business that is a member of 
                an affiliated service group, a controlled group of 
                corporations, or a group of businesses under common 
                control; and
                    (E) does not cover a business that leases 
                employees.
            (3) Other definitions.--Terms used in paragraph (2) which 
        are also used in section 414 of the Internal Revenue Code of 
        1986 shall have the respective meanings given such terms by 
        such section.
            (4) Effective date.--The provisions of this subsection 
        shall apply to plan years beginning on or after January 1, 
        2003.
    (b) Simplified Annual Filing Requirement for Plans With Fewer Than 
25 Employees.--In the case of plan years beginning after December 31, 
2004, the Secretary of the Treasury and the Secretary of Labor shall 
provide for the filing of a simplified annual return for any retirement 
plan which covers less than 25 employees on the first day of a plan 
year and which meets the requirements described in subparagraphs (B), 
(D), and (E) of subsection (a)(2).

SEC. 1203. IMPROVEMENT OF EMPLOYEE PLANS COMPLIANCE RESOLUTION SYSTEM.

    The Secretary of the Treasury shall continue to update and improve 
the Employee Plans Compliance Resolution System (or any successor 
program) giving special attention to--
            (1) increasing the awareness and knowledge of small 
        employers concerning the availability and use of the program;
            (2) taking into account special concerns and circumstances 
        that small employers face with respect to compliance and 
        correction of compliance failures;
            (3) extending the duration of the self-correction period 
        under the Self-Correction Program for significant compliance 
        failures;
            (4) expanding the availability to correct insignificant 
        compliance failures under the Self-Correction Program during 
        audit; and
            (5) assuring that any tax, penalty, or sanction that is 
        imposed by reason of a compliance failure is not excessive and 
        bears a reasonable relationship to the nature, extent, and 
        severity of the failure.
The Secretary of the Treasury shall have full authority to effectuate 
the foregoing with respect to the Employee Plans Compliance Resolution 
System (or any successor program) and any other employee plans 
correction policies, including the authority to waive income, excise, 
or other taxes to ensure that any tax, penalty, or sanction is not 
excessive and bears a reasonable relationship to the nature, extent, 
and severity of the failure.

SEC. 1204. EXTENSION TO ALL GOVERNMENTAL PLANS OF MORATORIUM ON 
              APPLICATION OF CERTAIN NONDISCRIMINATION RULES APPLICABLE 
              TO STATE AND LOCAL PLANS.

    (a) In General.--
            (1) Subparagraph (G) of section 401(a)(5) and subparagraph 
        (H) of section 401(a)(26) are each amended by striking 
        ``section 414(d))'' and all that follows and inserting 
        ``section 414(d)).''.
            (2) Subparagraph (G) of section 401(k)(3) and paragraph (2) 
        of section 1505(d) of the Taxpayer Relief Act of 1997 are each 
        amended by striking ``maintained by a State or local government 
        or political subdivision thereof (or agency or instrumentality 
        thereof)''.
    (b) Conforming Amendments.--
            (1) The heading for subparagraph (G) of section 401(a)(5) 
        is amended to read as follows: ``Governmental plans.--''.
            (2) The heading for subparagraph (H) of section 401(a)(26) 
        is amended to read as follows: ``Exception for governmental 
        plans.--''.
            (3) Subparagraph (G) of section 401(k)(3) is amended by 
        inserting ``Governmental plans.--'' after ``(G)''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2003.

SEC. 1205. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.

    (a) Expansion of Period.--
            (1) Amendment of internal revenue code.--
                    (A) In general.--Subparagraph (A) of section 
                417(a)(6) is amended by striking ``90-day'' and 
                inserting ``180-day''.
                    (B) Modification of regulations.--The Secretary of 
                the Treasury shall modify the regulations under 
                sections 402(f), 411(a)(11), and 417 of the Internal 
                Revenue Code of 1986 to substitute ``180 days'' for 
                ``90 days'' each place it appears in Treasury 
                Regulations sections 1.402(f)-1, 1.411(a)-11(c), and 
                1.417(e)-1(b).
            (2) Effective date.--The amendment made by paragraph (1)(A) 
        and the modifications required by paragraph (1)(B) shall apply 
        to years beginning after December 31, 2003.
    (b) Consent Regulation Inapplicable to Certain Distributions.--
            (1) In general.--The Secretary of the Treasury shall modify 
        the regulations under section 411(a)(11) of the Internal 
        Revenue Code of 1986 to provide that the description of a 
        participant's right, if any, to defer receipt of a distribution 
        shall also describe the consequences of failing to defer such 
        receipt.
            (2) Effective date.--
                    (A) In general.--The modifications required by 
                paragraph (1) shall apply to years beginning after 
                December 31, 2003.
                    (B) Reasonable notice.--In the case of any 
                description of such consequences made before the date 
                that is 90 days after the date on which the Secretary 
                of the Treasury issues a safe harbor description under 
                paragraph (1), a plan shall not be treated as failing 
                to satisfy the requirements of section 411(a)(11) of 
                such Code by reason of the failure to provide the 
                information required by the modifications made under 
                paragraph (1) if the Administrator of such plan makes a 
                reasonable attempt to comply with such requirements.

SEC. 1206. REDUCED PBGC PREMIUM FOR NEW PLANS OF SMALL EMPLOYERS.

    (a) In General.--Subparagraph (A) of section 4006(a)(3) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)(A)) is amended--
            (1) in clause (i), by inserting ``other than a new single-
        employer plan (as defined in subparagraph (F)) maintained by a 
        small employer (as so defined),'' after ``single-employer 
        plan,'',
            (2) in clause (iii), by striking the period at the end and 
        inserting ``, and'', and
            (3) by adding at the end the following new clause:
            ``(iv) in the case of a new single-employer plan (as 
        defined in subparagraph (F)) maintained by a small employer (as 
        so defined) for the plan year, $5 for each individual who is a 
        participant in such plan during the plan year.''.
    (b) Definition of New Single-Employer Plan.--Section 4006(a)(3) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)) is amended by adding at the end the following new 
subparagraph:
    ``(F)(i) For purposes of this paragraph, a single-employer plan 
maintained by a contributing sponsor shall be treated as a new single-
employer plan for each of its first 5 plan years if, during the 36-
month period ending on the date of the adoption of such plan, the 
sponsor or any member of such sponsor's controlled group (or any 
predecessor of either) did not establish or maintain a plan to which 
this title applies with respect to which benefits were accrued for 
substantially the same employees as are in the new single-employer 
plan.
    ``(ii)(I) For purposes of this paragraph, the term `small employer' 
means an employer which on the first day of any plan year has, in 
aggregation with all members of the controlled group of such employer, 
100 or fewer employees.
    ``(II) In the case of a plan maintained by two or more contributing 
sponsors that are not part of the same controlled group, the employees 
of all contributing sponsors and controlled groups of such sponsors 
shall be aggregated for purposes of determining whether any 
contributing sponsor is a small employer.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to plans established after December 31, 2002.

SEC. 1207. REDUCTION OF ADDITIONAL PBGC PREMIUM FOR NEW AND SMALL 
              PLANS.

    (a) New Plans.--Subparagraph (E) of section 4006(a)(3) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1306(a)(3)(E)) is amended by adding at the end the following new 
clause:
    ``(v) In the case of a new defined benefit plan, the amount 
determined under clause (ii) for any plan year shall be an amount equal 
to the product of the amount determined under clause (ii) and the 
applicable percentage. For purposes of this clause, the term 
`applicable percentage' means--
            ``(I) 0 percent, for the first plan year.
            ``(II) 20 percent, for the second plan year.
            ``(III) 40 percent, for the third plan year.
            ``(IV) 60 percent, for the fourth plan year.
            ``(V) 80 percent, for the fifth plan year.
For purposes of this clause, a defined benefit plan (as defined in 
section 3(35)) maintained by a contributing sponsor shall be treated as 
a new defined benefit plan for each of its first 5 plan years if, 
during the 36-month period ending on the date of the adoption of the 
plan, the sponsor and each member of any controlled group including the 
sponsor (or any predecessor of either) did not establish or maintain a 
plan to which this title applies with respect to which benefits were 
accrued for substantially the same employees as are in the new plan.''.
    (b) Small Plans.--Paragraph (3) of section 4006(a) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1306(a)), as amended 
by section 207(b), is amended--
            (1) by striking ``The'' in subparagraph (E)(i) and 
        inserting ``Except as provided in subparagraph (G), the'', and
            (2) by inserting after subparagraph (F) the following new 
        subparagraph:
    ``(G)(i) In the case of an employer who has 25 or fewer employees 
on the first day of the plan year, the additional premium determined 
under subparagraph (E) for each participant shall not exceed $5 
multiplied by the number of participants in the plan as of the close of 
the preceding plan year.
    ``(ii) For purposes of clause (i), whether an employer has 25 or 
fewer employees on the first day of the plan year is determined taking 
into consideration all of the employees of all members of the 
contributing sponsor's controlled group. In the case of a plan 
maintained by two or more contributing sponsors, the employees of all 
contributing sponsors and their controlled groups shall be aggregated 
for purposes of determining whether the 25-or-fewer-employees 
limitation has been satisfied.''.
    (c) Effective Dates.--
            (1) Subsection (a).--The amendments made by subsection (a) 
        shall apply to plans established after December 31, 2002.
            (2) Subsection (b).--The amendments made by subsection (b) 
        shall apply to plan years beginning after December 31, 2003.

SEC. 1208. AUTHORIZATION FOR PBGC TO PAY INTEREST ON PREMIUM 
              OVERPAYMENT REFUNDS.

    (a) In General.--Section 4007(b) of the Employment Retirement 
Income Security Act of 1974 (29 U.S.C. 1307(b)) is amended--
            (1) by striking ``(b)'' and inserting ``(b)(1)'', and
            (2) by inserting at the end the following new paragraph:
    ``(2) The corporation is authorized to pay, subject to regulations 
prescribed by the corporation, interest on the amount of any 
overpayment of premium refunded to a designated payor. Interest under 
this paragraph shall be calculated at the same rate and in the same 
manner as interest is calculated for underpayments under paragraph 
(1).''.
    (b) Effective Date.--The amendment made by subsection (a) shall 
apply to interest accruing for periods beginning not earlier than the 
date of the enactment of this Act.

SEC. 1209. SUBSTANTIAL OWNER BENEFITS IN TERMINATED PLANS.

    (a) Modification of Phase-In of Guarantee.--Section 4022(b)(5) of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 
1322(b)(5)) is amended to read as follows:
    ``(5)(A) For purposes of this paragraph, the term `majority owner' 
means an individual who, at any time during the 60-month period ending 
on the date the determination is being made--
            ``(i) owns the entire interest in an unincorporated trade 
        or business,
            ``(ii) in the case of a partnership, is a partner who owns, 
        directly or indirectly, 50 percent or more of either the 
        capital interest or the profits interest in such partnership, 
        or
            ``(iii) in the case of a corporation, owns, directly or 
        indirectly, 50 percent or more in value of either the voting 
        stock of that corporation or all the stock of that corporation.
For purposes of clause (iii), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 shall apply 
(determined without regard to section 1563(e)(3)(C)).
    ``(B) In the case of a participant who is a majority owner, the 
amount of benefits guaranteed under this section shall equal the 
product of--
            ``(i) a fraction (not to exceed 1) the numerator of which 
        is the number of years from the later of the effective date or 
        the adoption date of the plan to the termination date, and the 
        denominator of which is 10, and
            ``(ii) the amount of benefits that would be guaranteed 
        under this section if the participant were not a majority 
        owner.''.
    (b) Modification of Allocation of Assets.--
            (1) Section 4044(a)(4)(B) of the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1344(a)(4)(B)) is amended by 
        striking ``section 4022(b)(5)'' and inserting ``section 
        4022(b)(5)(B)''.
            (2) Section 4044(b) of such Act (29 U.S.C. 1344(b)) is 
        amended--
                    (A) by striking ``(5)'' in paragraph (2) and 
                inserting ``(4), (5),'', and
                    (B) by redesignating paragraphs (3) through (6) as 
                paragraphs (4) through (7), respectively, and by 
                inserting after paragraph (2) the following new 
                paragraph:
            ``(3) If assets available for allocation under paragraph 
        (4) of subsection (a) are insufficient to satisfy in full the 
        benefits of all individuals who are described in that 
        paragraph, the assets shall be allocated first to benefits 
        described in subparagraph (A) of that paragraph. Any remaining 
        assets shall then be allocated to benefits described in 
        subparagraph (B) of that paragraph. If assets allocated to such 
        subparagraph (B) are insufficient to satisfy in full the 
        benefits described in that subparagraph, the assets shall be 
        allocated pro rata among individuals on the basis of the 
        present value (as of the termination date) of their respective 
        benefits described in that subparagraph.''.
    (c) Conforming Amendments.--
            (1) Section 4021 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1321) is amended--
                    (A) in subsection (b)(9), by striking ``as defined 
                in section 4022(b)(6)'', and
                    (B) by adding at the end the following new 
                subsection:
    ``(d) For purposes of subsection (b)(9), the term `substantial 
owner' means an individual who, at any time during the 60-month period 
ending on the date the determination is being made--
            ``(1) owns the entire interest in an unincorporated trade 
        or business,
            ``(2) in the case of a partnership, is a partner who owns, 
        directly or indirectly, more than 10 percent of either the 
        capital interest or the profits interest in such partnership, 
        or
            ``(3) in the case of a corporation, owns, directly or 
        indirectly, more than 10 percent in value of either the voting 
        stock of that corporation or all the stock of that corporation.
For purposes of paragraph (3), the constructive ownership rules of 
section 1563(e) of the Internal Revenue Code of 1986 shall apply 
(determined without regard to section 1563(e)(3)(C)).''.
            (2) Section 4043(c)(7) of such Act (29 U.S.C. 1343(c)(7)) 
        is amended by striking ``section 4022(b)(6)'' and inserting 
        ``section 4021(d)''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall apply to plan 
        terminations--
                    (A) under section 4041(c) of the Employee 
                Retirement Income Security Act of 1974 (29 U.S.C. 
                1341(c)) with respect to which notices of intent to 
                terminate are provided under section 4041(a)(2) of such 
                Act (29 U.S.C. 1341(a)(2)) after December 31, 2002, and
                    (B) under section 4042 of such Act (29 U.S.C. 1342) 
                with respect to which proceedings are instituted by the 
                corporation after such date.
            (2) Conforming amendments.--The amendments made by 
        subsection (c) shall take effect on January 1, 2004.

SEC. 1210. QUALIFIED GROUP LEGAL SERVICES PLANS.

    (a) In General.--Subsection (e) of section 120 of the Internal 
Revenue Code of 1986 is amended to read as follows:
    ``(e) Application of Section.--This section and section 501(c)(20) 
shall apply to taxable years beginning--
            ``(1) after December 31, 1976, and before July 1, 1992, and
            ``(2) after December 31, 2003, and before January 1, 
        2009.''.
    (b) Increase in Maximum Exclusion.--The last sentence of section 
120(a) of such Code is amended by striking ``$70'' and inserting 
``$150''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2003.

SEC. 1211. STUDIES.

    (a) Model Small Employer Group Plans Study.--As soon as practicable 
after the date of the enactment of this Act, the Secretary of Labor, in 
consultation with the Secretary of the Treasury, shall conduct a study 
to determine--
            (1) the most appropriate form or forms of--
                    (A) employee pension benefit plans which would--
                            (i) be simple in form and easily maintained 
                        by multiple small employers, and
                            (ii) provide for ready portability of 
                        benefits for all participants and 
                        beneficiaries,
                    (B) alternative arrangements providing comparable 
                benefits which may be established by employee or 
                employer associations, and
                    (C) alternative arrangements providing comparable 
                benefits to which employees may contribute in a manner 
                independent of employer sponsorship, and
            (2) appropriate methods and strategies for making pension 
        plan coverage described in paragraph (1) more widely available 
        to American workers.
    (b) Matters To Be Considered.--In conducting the study under 
subsection (a), the Secretary of Labor shall consider the adequacy and 
availability of existing employee pension benefit plans and the extent 
to which existing models may be modified to be more accessible to both 
employees and employers.
    (c) Report.--Not later than 18 months after the date of the 
enactment of this Act, the Secretary of Labor shall report the results 
of the study under subsection (a), together with the Secretary's 
recommendations, to the Committee on Education and the Workforce and 
the Committee on Ways and Means of the House of Representatives and the 
Committee on Health, Education, Labor, and Pensions and the Committee 
on Finance of the Senate. Such recommendations shall include one or 
more model plans described in subsection (a)(1)(A) and model 
alternative arrangements described in subsections (a)(1)(B) and 
(a)(1)(C) which may serve as the basis for appropriate administrative 
or legislative action.
    (d) Study on Effect of Legislation.--Not later than 5 years after 
the date of the enactment of this Act, the Secretary of Labor shall 
submit to the Committee on Education and the Workforce of the House of 
Representatives and the Committee on Health, Education, Labor, and 
Pensions of the Senate a report on the effect of the provisions of this 
Act and title VI of the Economic Growth and Tax Relief Reconciliation 
Act of 2001 on pension plan coverage, including any change in--
            (1) the extent of pension plan coverage for low and middle-
        income workers,
            (2) the levels of pension plan benefits generally,
            (3) the quality of pension plan coverage generally,
            (4) workers' access to and participation in pension plans, 
        and
            (5) retirement security.

                       TITLE XIII--STOCK OPTIONS

SEC. 1301. EXCLUSION OF INCENTIVE STOCK OPTIONS AND EMPLOYEE STOCK 
              PURCHASE PLAN STOCK OPTIONS FROM WAGES.

    (a) Exclusion From Employment Taxes.--
            (1) Social security taxes.--
                    (A) Section 3121(a) (relating to definition of 
                wages) is amended by striking ``or'' at the end of 
                paragraph (20), by striking the period at the end of 
                paragraph (21) and inserting ``; or'', and by inserting 
                after paragraph (21) the following new paragraph:
            ``(22) remuneration on account of--
                    ``(A) a transfer of a share of stock to any 
                individual pursuant to an exercise of an incentive 
                stock option (as defined in section 422(b)) or under an 
                employee stock purchase plan (as defined in section 
                423(b)), or
                    ``(B) any disposition by the individual of such 
                stock.''.
                    (B) Section 209(a) of the Social Security Act is 
                amended by striking ``or'' at the end of paragraph 
                (17), by striking the period at the end of paragraph 
                (18) and inserting ``; or'', and by inserting after 
                paragraph (18) the following new paragraph:
            ``(19) Remuneration on account of--
                    ``(A) a transfer of a share of stock to any 
                individual pursuant to an exercise of an incentive 
                stock option (as defined in section 422(b) of the 
                Internal Revenue Code of 1986) or under an employee 
                stock purchase plan (as defined in section 423(b) of 
                such Code), or
                    ``(B) any disposition by the individual of such 
                stock.''.
            (2) Railroad retirement taxes.--Subsection (e) of section 
        3231 is amended by adding at the end the following new 
        paragraph:
            ``(11) Qualified stock options.--The term `compensation' 
        shall not include any remuneration on account of--
                    ``(A) a transfer of a share of stock to any 
                individual pursuant to an exercise of an incentive 
                stock option (as defined in section 422(b)) or under an 
                employee stock purchase plan (as defined in section 
                423(b)), or
                    ``(B) any disposition by the individual of such 
                stock.''.
            (3) Unemployment taxes.--Section 3306(b) (relating to 
        definition of wages) is amended by striking ``or'' at the end 
        of paragraph (16), by striking the period at the end of 
        paragraph (17) and inserting ``; or'', and by inserting after 
        paragraph (17) the following new paragraph:
            ``(18) remuneration on account of--
                    ``(A) a transfer of a share of stock to any 
                individual pursuant to an exercise of an incentive 
                stock option (as defined in section 422(b)) or under an 
                employee stock purchase plan (as defined in section 
                423(b)), or
                    ``(B) any disposition by the individual of such 
                stock.''.
    (b) Wage Withholding Not Required on Disqualifying Dispositions.--
Section 421(b) (relating to effect of disqualifying dispositions) is 
amended by adding at the end the following new sentence: ``No amount 
shall be required to be deducted and withheld under chapter 24 with 
respect to any increase in income attributable to a disposition 
described in the preceding sentence.''.
    (c) Wage Withholding Not Required on Compensation Where Option 
Price is Between 85 Percent and 100 Percent of Value of Stock.--Section 
423(c) (relating to special rule where option price is between 85 
percent and 100 percent of value of stock) is amended by adding at the 
end the following new sentence: ``No amount shall be required to be 
deducted and withheld under chapter 24 with respect to any amount 
treated as compensation under this subsection.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to stock acquired pursuant to options exercised after the date of 
the enactment of this Act.

            TITLE XIV--OTHER ELEMENTS OF RETIREMENT SECURITY

SEC. 1401. EMPLOYEE PRE-TAX PAYMENTS FOR RETIREE HEALTH.

    (a) In General.--Section 106 (relating to contributions by employer 
to accident and health plans) is amended by adding at the end the 
following new subsection:
    ``(d) Employer-Provided Coverage of Former Employees.--
            ``(1) In general.--Coverage under an accident or health 
        plan maintained by an employer which is provided to a former 
        employee of the employer shall be treated as employer-provided 
        coverage under an accident or health plan for purposes of 
        subsection (a) to the extent such coverage is paid for by the 
        former employee pursuant to a qualified election. No amount 
        shall be included in the gross income of any former employee 
        solely because the former employee may make the choice 
        described in paragraph (3).
            ``(2) Applicable limitation.--
                    ``(A) In general.--In the case of taxable years 
                beginning before January 1, 2010, the amount of 
                benefits under an eligible retirement plan (as defined 
                in clauses (iii), (iv), (v), and (vi) of section 
                402(c)(8)(B)) of an employer which may be excluded from 
                the gross income of an individual by reason of 
                paragraph (1) shall not exceed the applicable 
                limitation.
                    ``(B) Applicable limitation.--For purposes of 
                subparagraph (A), the applicable limitation shall be 
                determined in accordance with the following table:

                                                         The applicable
``For taxable years beginning in:                        limitation is:
    2004 and 2005.................................                $500 
    2006 and 2007.................................              $1,000 
    2008 and 2009.................................              $2,000.

            ``(3) Qualified election.--For purposes of paragraph (1), a 
        qualified election is an election made by the former employee 
        to have benefits otherwise payable to the former employee under 
        an eligible retirement plan (as defined in clauses (iii), (iv), 
        (v), and (vi) of section 402(c)(8)(B)) (or under an annuity 
        contract distributed by such a plan) used to pay for coverage 
        described in paragraph (1).
            ``(4) Special rules.--For purposes of this subsection--
                    ``(A) all eligible retirement plans of an employer 
                shall be treated as a single plan, and
                    ``(B) with respect to an eligible retirement plan 
                of an employer, a beneficiary or alternate payee (as 
                defined in section 414(p)(8)) of a former employee 
                shall be treated in the same manner as the former 
                employee.
            ``(5) Treatment as distribution.--For purposes of this 
        title, any payment under this subsection from an eligible 
        retirement plan for coverage under an accident or health plan 
        on behalf of a former employee shall be treated as a 
        distribution from the eligible retirement plan to the former 
        employee, except to the extent that such treatment is 
        inconsistent with this subsection. Such a payment shall be 
        treated as a permissible distribution from the eligible 
        retirement plan to the former employee to the same extent that 
        a cash distribution to the former employee would be 
        permissible.''.
    (b) Conforming Amendment.--The portion of subsection (h) of section 
401 that precedes section 401(h)(1) is amended by striking ``but only 
if'' and inserting ``but only if provided pursuant to a qualified 
election described in section 106(d) or if''.
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts paid for coverage under an accident health plan in 
years beginning after December 31, 2003.

SEC. 1402. ENCOURAGING EMPLOYERS TO MAINTAIN RETIREE HEALTH PLANS.

    (a) In General.--The first sentence of subsection (h) of section 
401 (relating to medical, etc., benefits for retired employees and 
their spouses and dependents) is amended by striking ``pension or 
annuity plan'' and inserting ``pension, annuity, profit-sharing, or 
stock bonus plan''.
    (b) Phase-In of Permissible Contributions From Profit-Sharing and 
Stock Bonus Plans.--Subsection (h) of section 401 (relating to medical, 
etc., benefits for retired employees and their spouses and dependents) 
is amended by adding at the end the following new sentence: ``For 
purposes of the preceding sentence, in the case of contributions to a 
profit-sharing or stock bonus plan for plan years before plan years 
beginning in 2010, the `applicable percentage' shall be substituted for 
`25 percent', and the term `applicable percentage' means 5 percent for 
plan years beginning in 2004 and 2005, 10 percent for plan years 
beginning in 2006 and 2007, and 20 percent for plan years beginning in 
2008 and 2009.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to years beginning after December 31, 2003.

                 TITLE XV--REDUCING REGULATORY BURDENS

SEC. 1501. PROVISIONS RELATING TO PLAN AMENDMENTS.

    (a) In General.--If this section applies to any plan or contract 
amendment--
            (1) such plan or contract shall be treated as being 
        operated in accordance with the terms of the plan during the 
        period described in subsection (b)(2)(A), and
            (2) except as provided by the Secretary of the Treasury, 
        such plan shall not fail to meet the requirements of section 
        411(d)(6) of the Internal Revenue Code of 1986 and section 
        204(g) of the Employee Retirement Income Security Act of 1974 
        by reason of such amendment.
    (b) Amendments to Which Section Applies.--
            (1) In general.--This section shall apply to any amendment 
        to any plan or annuity contract which is made--
                    (A) pursuant to any amendment made by this Act or 
                title VI of the Economic Growth and Tax Relief 
                Reconciliation Act of 2001, or pursuant to any 
                regulation issued by the Secretary of the Treasury or 
                the Secretary of Labor under this Act or such title VI, 
                and
                    (B) on or before the last day of the first plan 
                year beginning on or after January 1, 2006.
        In the case of a governmental plan (as defined in section 
        414(d) of the Internal Revenue Code of 1986), this paragraph 
        shall be applied by substituting ``2008'' for ``2006''.
            (2) Conditions.--This section shall not apply to any 
        amendment unless--
                    (A) during the period--
                            (i) beginning on the date the legislative 
                        or regulatory amendment described in paragraph 
                        (1)(A) takes effect (or in the case of a plan 
                        or contract amendment not required by such 
                        legislative or regulatory amendment, the 
                        effective date specified by the plan), and
                            (ii) ending on the date described in 
                        paragraph (1)(B) (or, if earlier, the date the 
                        plan or contract amendment is adopted),
                the plan or contract is operated as if such plan or 
                contract amendment were in effect; and
                    (B) such plan or contract amendment applies 
                retroactively for such period.

         TITLE XVI--SOCIAL SECURITY AND MEDICARE HELD HARMLESS

SEC. 1601. PROTECTION OF SOCIAL SECURITY AND MEDICARE.

    The amounts transferred to any trust fund under the Social Security 
Act shall be determined as if this Act had not been enacted.
                                 <all>