[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5381 Introduced in House (IH)]
113th CONGRESS
2d Session
H. R. 5381
To amend the nondiscrimination provisions of the Internal Revenue Code
of 1986 to protect older, longer service participants.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 31, 2014
Mr. Tiberi (for himself and Mr. Neal) introduced the following bill;
which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the nondiscrimination provisions of the Internal Revenue Code
of 1986 to protect older, longer service participants.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. PROTECTING OLDER, LONGER SERVICE PARTICIPANTS.
(a) In General.--Paragraph (4) of section 401(a) of the Internal
Revenue Code of 1986 is amended to read as follows:
``(4) Nondiscrimination.--
``(A) In general.--A trust shall not constitute a
qualified trust under this section unless the
contributions or benefits provided under the plan do
not discriminate in favor of highly compensated
employees (within the meaning of section 414(q)). For
purposes of this paragraph, there shall be excluded
from consideration employees described in section
410(b)(3) (A) and (C).
``(B) Protection of older, longer service
participants.--
``(i)(I) A defined benefit plan described
in subclause (II) shall not fail to satisfy
this paragraph with respect to plan benefits,
rights, or features by reason of--
``(aa) the composition of the
closed class of participants described
in subclause (II), or
``(bb) the benefits, rights, or
features provided to such closed class.
``(II) A plan is described in this
subclause if--
``(aa) the plan provides benefits,
rights, or features to a closed class
of participants,
``(bb) such closed class and such
benefits, rights, and features satisfy
the requirements of subparagraph (A)
(without regard to this clause) as of
the date that the class was closed, and
``(cc) after the date as of which
the class was closed, any plan
amendments that modify the closed class
or the benefits, rights, and features
provided to such closed class satisfy
subparagraph (A) (without regard to
this clause).
If a plan amendment causes a plan to cease to
be described in this subclause (II) by reason
of subclause (II)(cc), the plan is nevertheless
described in this subclause (II) if such plan
satisfies this subclause (II) (without regard
to subclause (II)(cc)) as of the effective date
of such amendment. In such cases, subclause
(II)(bb) and (cc) shall subsequently be applied
by reference to the effective date of the plan
amendment, rather than by reference to the
original date that the class was closed.
``(ii)(I) A defined contribution plan
described in subclause (II) shall be permitted
to be tested on a benefits basis.
``(II) A defined contribution plan is
described in this subclause if--
``(aa) the plan provides make-whole
contributions to a closed class of
participants whose defined benefit plan
accruals have been reduced or
eliminated,
``(bb) such closed class of
participants satisfies section
410(b)(2)(A)(i) as of the date that the
class of participants was closed, and
``(cc) after the date as of which
the class was closed, any plan
amendments that modify the closed class
or the allocations, benefits, rights,
and features provided to such closed
class satisfy subparagraph (A) (without
regard to this clause).
If a plan amendment causes a plan to cease to
be described in this subclause (II) by reason
of subclause (II)(cc), the plan is nevertheless
described in this subclause (II) if such plan
satisfies this subclause (II) (without regard
to subclause (II)(cc)) as of the effective date
of such amendment. In such cases, subclause
(II)(bb) and (cc) shall subsequently be applied
by reference to the effective date of the plan
amendment, rather than by reference to the
original date that the class was closed.
``(III) In addition to other testing
methodologies otherwise applicable, for
purposes of determining compliance with this
paragraph and with section 410(b) of the
portion of one or more defined contribution
plans described in subclause (II) that provide
make-whole contributions, such portion of such
plans may be aggregated and tested on a
benefits basis with the portion of one or more
defined contribution plans that--
``(aa) provides matching
contributions (as defined in subsection
(m)(4)(A)), or
``(bb) consists of an employee
stock ownership plan within the meaning
of section 4975(e)(7) or a tax credit
employee stock ownership plan within
the meaning of section 409(a).
For such purposes, matching contributions shall
be treated in the same manner as employer
contributions that are made without regard to
whether an employee makes an elective
contribution or employee contribution,
including for purposes of applying the rules of
subsection (l).
``(C) Definitions.--For purposes of this
paragraph--
``(i) Make-whole contributions.--The term
`make-whole contributions' means allocations
for each employee in the class that are
reasonably calculated, in a consistent manner,
to replace some or all of the retirement
benefits that the employee would have received
under the defined benefit plan and any other
plan or arrangement if the employee had
continued to benefit at the same level under
such defined benefit plan and such other plan
or arrangement.
``(ii) References to closed class of
participants.--References to a closed class of
participants and similar references to a closed
class shall include arrangements under which
one or more classes of participants are closed.
``(D) Protecting grandfathered participants in
defined benefit plans.--
``(i) One or more defined benefit plans
described in clause (ii) shall be permitted to
be tested on a benefits basis with one or more
defined contribution plans.
``(ii) A defined benefit plan is described
in this clause if--
``(I) the plan provides benefits to
a closed class of participants,
``(II) the plan and such benefits
satisfy the requirements of
subparagraph (A) (without regard to
this subparagraph) as of the date the
class was closed, and
``(III) after the date as of which
the class was closed, any plan
amendments that modify the closed class
or the benefits provided to such closed
class satisfy subparagraph (A) (without
regard to this subparagraph).
If a plan amendment causes a plan to cease to
be described in this clause (ii) by reason of
subclause (III), the plan is nevertheless
described in this clause (ii) if such plan
satisfies this clause (ii) (without regard to
subclause (III)) as of the effective date of
such amendment. In such cases, subclauses (II)
and (III) shall subsequently be applied by
reference to the effective date of the plan
amendment, rather than by reference to the
original date that the class was closed.
``(iii) In addition to other testing
methodologies otherwise applicable, for
purposes of determining compliance with this
paragraph and with section 410(b) of one or
more defined benefit plans described in clause
(ii), such plans may be aggregated and tested
on a benefits basis with the portion of one or
more defined contribution plans that--
``(I) provides matching
contributions (as defined in subsection
(m)(4)(A)), or
``(II) consists of an employee
stock ownership plan within the meaning
of section 4975(e)(7) or a tax credit
employee stock ownership plan within
the meaning of section 409(a).
For such purposes, matching contributions shall
be treated in the same manner as employer
contributions that are made without regard to
whether an employee makes an elective
contribution or employee contribution,
including for purposes of applying the rules of
subsection (l).
``(E) Rules.--The Secretary may prescribe rules
designed to prevent abuse of the plan designs otherwise
permitted by reason of subparagraphs (B) and (D). Such
rules shall be directed towards abuses under which the
defined benefit plan was established within a specified
period prior to the date that--
``(i) the class of participants described
in subparagraphs (B)(i)(II)(aa),
(B)(ii)(II)(aa), and (D)(ii)(I) is closed, or
``(ii) the defined benefit plan accruals
have been reduced or eliminated, in the case of
the make-whole contributions described in
subparagraph (C).
``(F) Transition rules.--Within one year after the
date of enactment of the Retirement Plan Simplification
and Enhancement Act of 2013, the Secretary shall
prescribe rules that facilitate the use of the
provisions of subparagraphs (B) and (D) without regard
to--
``(i) whether the closing of the class of
participants referred to in such subparagraphs
occurred before or after such date of
enactment, or
``(ii) plan amendments that were adopted or
effective before such date of enactment and
that would not have been necessary if
subparagraphs (B) and (D) had been in
effect.''.
(b) Participation Requirements.--Paragraph (26) of section 401(a)
of the Internal Revenue Code of 1986 is amended by adding at the end
the following new subparagraph:
``(I) Protected participants.--A plan described in
this subparagraph shall be deemed to satisfy the
requirements of subparagraph (A). A plan is described
in this paragraph if--
``(i) the plan is amended to--
``(I) cease all benefit accruals,
or
``(II) provide future benefit
accruals only to a closed class of
participants, and
``(ii) the plan satisfies subparagraph (A)
(without regard to this subparagraph) as of the
effective date of the amendment.
The Secretary may prescribe such rules as are necessary
or appropriate to fulfill the purposes of this
subparagraph, including prevention of abuse of this
subparagraph in the case of plans established within a
specific period prior to the effective date of the
amendment.''.
(c) Effective Date.--The amendments made by this section shall take
effect on the date of the enactment of this Act, without regard to
whether any plan modifications referenced in such amendments are
adopted or effective before, on, or after such date of enactment.
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