[Congressional Bills 113th Congress]
[From the U.S. Government Publishing Office]
[S. 2855 Introduced in Senate (IS)]

113th CONGRESS
  2d Session
                                S. 2855

To amend the nondiscrimination provisions of the Internal Revenue Code 
         of 1986 to protect older, longer service participants.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           September 18, 2014

Mr. Cardin (for himself and Mr. Portman) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 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. SHORT TITLE.

    This Act may be cited as the ``Retirement Security Preservation Act 
of 2014''.

SEC. 2. PROTECTING OLDER, LONGER SERVICE PARTICIPANTS.

    (a) In General.--Subsection (a) of section 401 of the Internal 
Revenue Code of 1986 is amended--
            (1) by striking the semicolon at the end of paragraph (2) 
        and inserting ``; and'',
            (2) by striking ``; and'' at the end of paragraph (3) and 
        inserting a period, and
            (3) by striking paragraph (4) and inserting the following:
            ``(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) A defined benefit plan that provides 
                        benefits, rights, or features to a closed class 
                        of participants shall not fail to satisfy the 
                        requirements of this paragraph by reason of the 
                        composition of such closed class or the 
                        benefits, rights, or features provided to such 
                        closed class, if--
                                    ``(I) such closed class and such 
                                benefits, rights, and features 
                                satisfied the requirements of 
                                subparagraph (A) (without regard to 
                                this clause) as of the date that the 
                                class was closed, and
                                    ``(II) 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 is adopted that does not 
                        meet the requirements of subclause (II), the 
                        plan shall be treated as meeting the 
                        requirements of this paragraph if such plan 
                        satisfied such requirements (without regard to 
                        subclause (II)) as of the effective date of 
                        such amendment. In such cases, subclauses (I) 
                        and (II) shall subsequently be applied by 
                        reference to the effective date of the plan 
                        amendment, rather than by reference to the date 
                        that the class was closed.
                            ``(ii) A defined contribution plan shall be 
                        permitted to be tested on a benefits basis if--
                                    ``(I) the plan provides make-whole 
                                contributions to a closed class of 
                                participants whose defined benefit plan 
                                accruals have been reduced or 
                                eliminated,
                                    ``(II) such closed class of 
                                participants satisfied section 
                                410(b)(2)(A)(i) as of the date that the 
                                class of participants was closed, and
                                    ``(III) 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 is adopted that does not 
                        meet the requirements of subclause (III), the 
                        plan shall be treated as meeting the 
                        requirements of this paragraph if such plan 
                        satisfied such requirements (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 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 clause (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--
                                    ``(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).
                    ``(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 no change had been made 
                        to 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) A defined benefit shall be permitted 
                        to be tested on a benefits basis with one or 
                        more defined contribution plans 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 is adopted that does not 
                        meet the requirements of subclause (III), the 
                        plan shall be treated as meeting the 
                        requirements of this paragraph if such plan 
                        satisfied such requirements (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 date 
                        that the class was closed.
                            ``(ii) 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 that meet the 
                        requirements of subclauses (I), (II), and (III) 
                        of clause (i), 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 to 
                prevent abuse of the plan designs otherwise permitted 
                by reason of subparagraphs (B) and (D). Such rules 
                shall be directed toward abuses under which the defined 
                benefit plan was established within a specified period 
                prior to the date that--
                            ``(i) the closed class of participants 
                        referred to in subparagraph (B)(i), (B)(ii), or 
                        (D)(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 1 year after the 
                date of enactment of the Retirement Security 
                Preservation Act of 2014, 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 shall be 
                deemed to satisfy the requirements of subparagraph (A) 
                if--
                            ``(i) the plan is amended--
                                    ``(I) to cease all benefit 
                                accruals, or
                                    ``(II) to 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 
                specified 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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