[Congressional Bills 110th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5160 Introduced in House (IH)]







110th CONGRESS
  2d Session
                                H. R. 5160

  To amend the Internal Revenue Code of 1986 to encourage retirement 
savings by modifying requirements with respect to employer-established 
                     IRAs, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 29, 2008

 Mr. Kind (for himself and Mr. Hulshof) introduced the following bill; 
which was referred to the Committee on Ways and Means, and in addition 
      to the Committee on Education and Labor, 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 encourage retirement 
savings by modifying requirements with respect to employer-established 
                     IRAs, 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.

    This Act may be cited as the ``Small Businesses Add Value for 
Employees Act of 2008'' or the ``SAVE Act of 2008''.

SEC. 2. ELIMINATION OF RESTRICTION ON SIMPLE IRA ROLLOVERS.

    (a) In General.--Paragraph (3) of section 408(d) of the Internal 
Revenue Code of 1986 (relating to rollover contribution) is amended by 
striking subparagraph (G).
    (b) Effective Date.--The amendment made by this section shall apply 
to distributions in taxable years beginning after the date of the 
enactment of this Act.

SEC. 3. ALLOWING MID-YEAR SIMPLE IRA PLAN TERMINATION.

    (a) In General.--Subsection (p) of section 408 of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
paragraph:
            ``(11) Special rules relating to mid-year termination.--
                    ``(A) In general.--An employer may elect to 
                terminate (in such form and manner as the Secretary may 
                provide) the qualified salary reduction arrangement of 
                the employer at any time during the year.
                    ``(B) Proration and application of qualified plan 
                limitation.--In the case of a year during which an 
                employer terminates a qualified salary reduction 
                arrangement before the end of such year--
                            ``(i) the applicable dollar amount in 
                        effect for such year shall be prorated to the 
                        date of such termination,
                            ``(ii) for purposes of determining the 
                        compensation of an employee for such 
                        arrangement for such year, the year of such 
                        termination shall be treated as ending on the 
                        date of such termination, and
                            ``(iii) subparagraph (D) of paragraph (2) 
                        shall not apply with respect to a qualified 
                        plan maintained in such year only after the 
                        date of such termination.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to years beginning after the date of the enactment of this Act.

SEC. 4. ELIMINATION OF HIGHER PENALTY ON EARLY SIMPLE IRA 
              DISTRIBUTIONS.

    (a) In General.--Subsection (t) of section 72 of the Internal 
Revenue Code of 1986 (relating to 10 percent additional tax on early 
distributions from qualified retirement plans) is amended by striking 
paragraph (6).
    (b) Effective Date.--The amendment made by this section shall apply 
to distributions in taxable years beginning after the date of the 
enactment of this Act.

SEC. 5. INCREASE IN CONTRIBUTIONS ALLOWED FOR SIMPLE IRA.

    (a) Additional Nonelective Employer Contributions Allowed.--
            (1) In general.--Subparagraph (A) of section 408(p)(2) of 
        the Internal Revenue Code of 1986 (relating to 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, in addition 
                        to any other contribution under this paragraph, 
                        nonelective contributions of not more than 10 
                        percent of compensation (subject to the 
                        limitation described in subparagraph (B)(ii)) 
                        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) Conforming amendment.--Clause (v) of section 
        408(p)(2)(A) of such Code, as redesignated by this section, is 
        amended by striking ``clause (i) or (iii)'' and inserting 
        ``clause (i), (iii), or (iv)''.
    (b) Increase in Elective Contribution Limitation.--Subparagraph (E) 
of section 408(p)(2) is amended to read as follows:
                    ``(E) Applicable dollar amount.--For purposes of 
                subparagraph (A)(ii), the applicable dollar amount 
                shall be the applicable dollar amount in effect under 
                subparagraph (B) of section 402(g)(1).''.
    (c) SIMPLE IRA Subject to Defined Contribution Plan Limitation.--
Subsection (p) of section 408 of such Code is amended by adding at the 
end the following new paragraph:
            ``(11) Subject to defined contribution plan limitation.--An 
        arrangement shall not be treated as a qualified salary 
        reduction arrangement for any year if contributions with 
        respect to any employee for the year exceed the limitation of 
        paragraph (1) of section 415(c) (relating to limitation for 
        defined contribution plans).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to contributions for taxable years beginning after December 31, 
2007.

SEC. 6. SIMPLE 401(K) PARITY FOR ADDITIONAL NONELECTIVE EMPLOYER 
              CONTRIBUTIONS.

    (a) In General.--Subparagraph (B) of section 401(k)(11) of such 
Code (relating to contribution requirements) is amended by adding at 
the end the following new clause:
                            ``(iv) Special rule for additional 
                        nonelective employer contributions.--An 
                        arrangement shall not be treated as failing to 
                        meet the requirements of this subparagraph 
                        merely because under such arrangement the 
                        employer makes, in addition to any other 
                        contribution under this subparagraph, 
                        nonelective contributions of not more than 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.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to plan years beginning after December 31, 2007.

SEC. 7. AUTOMATIC DEFERRAL IRAS.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
of the Internal Revenue Code of 1986 (relating to pension, profit-
sharing, stock bonus plans, etc.) is amended by inserting after section 
408A the following new section:

``SEC. 408B. AUTOMATIC DEFERRAL IRAS.

    ``(a) In General.--An automatic deferral IRA shall be treated for 
purposes of this title in the same manner as an individual retirement 
plan. An automatic IRA may also be treated as a Roth IRA for purposes 
of this title if it meets the requirements of section 408A.
    ``(b) Automatic Deferral IRA.--For purposes of this section, the 
term `automatic deferral IRA' means an individual retirement plan (as 
defined in section 7701(a)(37)) with respect to which contributions are 
made under an arrangement which satisfies the requirements of 
paragraphs (1) through (4) of subsection (c).
    ``(c) Automatic Deferral IRA Arrangements.--
            ``(1) Enrollment.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if each employee eligible to 
                participate in the arrangement is treated as having 
                elected to have the employer make payments as elective 
                contributions to an automatic deferral IRA on behalf of 
                such employee (which would have otherwise been made to 
                the employee directly in cash) in an amount equal to so 
                much of a qualified percentage of compensation of such 
                employee as does not exceed the deductible amount for 
                such year (within the meaning of section 219(b)).
                    ``(B) Eligibility.--An employee is eligible to 
                participate if such employee is described in paragraph 
                (2) of section 408(k), except that for purposes of 
                determining whether an employee is described in such 
                paragraph, subparagraph (C) thereof shall be applied by 
                substituting `$5,000' for `$450'.
                    ``(C) Election out.--The election treated as having 
                been made under subparagraph (A) shall cease to apply 
                with respect to any employee who makes an affirmative 
                election--
                            ``(i) to not have such elective 
                        contributions made, or
                            ``(ii) not later than the close of the 30-
                        day period beginning on the date of the first 
                        contribution with respect to such employee, to 
                        make elective contributions at a level 
                        specified in such affirmative election.
                    ``(D) Qualified percentage.--For purposes of this 
                paragraph, the term `qualified percentage' means, with 
                respect to any employee, any percentage determined 
                under the trust agreement if such percentage is applied 
                uniformly, is at least 3 percent, and does not exceed 
                10 percent.
            ``(2) Notice.--
                    ``(A) In general.--The requirements of this 
                paragraph are met if, within a reasonable period before 
                the first day an employee is eligible to participate in 
                the arrangement, the employee receives written notice 
                of the employee's rights and obligations under the 
                arrangement which--
                            ``(i) is sufficiently accurate and 
                        comprehensive to apprise the employee of such 
                        rights, and
                            ``(ii) is written in a manner calculated to 
                        be understood by the average employee to whom 
                        the arrangement applies.
                    ``(B) Timing and content.--A notice shall not be 
                treated as meeting the requirements of subparagraph (A) 
                with respect to an employee unless--
                            ``(i) the notice explains the employee's 
                        right 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 notice explains how 
                        contributions made under the arrangement will 
                        be invested in the absence of any investment 
                        election by the employee, and
                            ``(iii) the employee has a reasonable 
                        period of time after receipt of the notice 
                        described in clauses (i) and (ii) and before 
                        the first elective contribution is made to make 
                        either such election.
            ``(3) Default investment arrangement.--The requirements of 
        this paragraph are met if--
                    ``(A) in the absence of an investment election by 
                the employee with respect to the employee's interest in 
                the trust, such interest is invested as provided in 
                regulations prescribed pursuant to subparagraph (A) of 
                section 404(c)(5) of the Employee Retirement Income 
                Security Act of 1974, and
                    ``(B) the employer provides each employee who has 
                an interest in the trust, notice which meets the 
                requirements of subparagraph (B) of such section.
            ``(4) Administrative requirements.--The requirements of 
        this paragraph are met if--
                    ``(A) an employer must make the elective employer 
                contributions under paragraph (1)(A) not later than the 
                close of the 30-day period following the last day of 
                the month with respect to which the contributions are 
                to be made,
                    ``(B) an employee may elect to terminate 
                participation in the arrangement at any time during the 
                year, except that if the employee so terminates, the 
                arrangement may provide that the employee may elect to 
                resume participation until the beginning of the next 
                year, and
                    ``(C) each employee eligible to participate may 
                elect, during the 30-day period before the beginning of 
                any year, or to modify the amount subject to such 
                arrangement, for such year.''.
    (b) Preemption of Conflicting State Laws.--Any law of a State shall 
be superseded if it would directly or indirectly prohibit or restrict 
an employer from creating or organizing an automatic deferral IRA (as 
defined in section 408B of the Internal Revenue Service of 1986).
    (c) Clerical Amendment.--The table of sections for subpart A of 
part I of subchapter D of chapter 1 of the Internal Revenue Code of 
1986 is amended by inserting after the item relating to 408A the 
following new item:

``408B. Automatic deferral IRAs.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2007.

SEC. 8. EXPANDING SMALL EMPLOYER PENSION PLAN STARTUP COST CREDIT.

    (a) In General.--
            (1) Including startup costs for employer-established 
        iras.--Paragraph (2) of section 45E(d) of the Internal Revenue 
        Code of 1986 (defining eligible employer plan) is amended by 
        inserting before the period ``and a plan of which a trust 
        described in section 408(c) is a part''.
            (2) Additional credit amount.--
                    (A) In general.--Subsection (a) of section 45E of 
                such Code is amended by striking ``50 percent of'' and 
                all that follows and inserting ``the sum of--
            ``(1) 50 percent of the qualified startup costs paid or 
        incurred by the taxpayer during the taxable year, plus
            ``(2) $25 multiplied by the number of employees of the 
        employer who participate in any eligible employer plan of the 
        employer for the first time in such taxable year.''.
                    (B) Conforming amendment.--Paragraph (2) of section 
                45E(c) of such Code (defining eligible employer) is 
                amended--
                            (i) by striking ``qualified employer plan'' 
                        in each place it appears and inserting 
                        ``eligible employer plan'', and
                            (ii) by striking ``qualified'' in the 
                        heading thereof and inserting ``eligible''.
    (b) Effective Date.--The amendment made by this section shall apply 
to costs paid or incurred in taxable years beginning after the date of 
the enactment of this Act.

SEC. 9. AMENDMENT TO EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.

    (a) In General.--Section 3(2) of the Employee Retirement Income 
Security Act of 1974 (29 U.S.C. 1002(2)) is amended by adding at the 
end the following new subparagraph:
    ``(C) An individual retirement plan (as defined in section 
7701(a)(37) of the Internal Revenue Code of 1986) shall not be 
considered a pension plan merely because an employer establishes a 
payroll deduction program for the purpose of enabling employees to make 
voluntary contributions to such account or annuity.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.
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