[Congressional Record Volume 145, Number 98 (Tuesday, July 13, 1999)]
[Senate]
[Pages S8378-S8382]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. JEFFORDS:
  s. 1357. A. bill to amend the Internal Revenue Code of 1986 to 
enhance the portability of retirement benefits, and for other purposes; 
to the Committee on Finance.


                 the retirement account portability act

  Mr. JEFFORDS. Mr. President, today I am introducing S. 1357, the 
Retirement Account Portability (RAP) Act. This bill is a close 
companion to H.R. 738, the bill introduced by Congressman Earl Pomeroy 
of North Dakota. It was also included as title III of the Pension 
Coverage and Portability Act, S. 741, introduced earlier this year by 
myself and Senators Graham and Grassley. Generally this bill is 
intended to be a further iteration of the concepts embodied in both of 
those bills.
  The RAP Act standardizes the rules in the Internal Revenue Code (IRC) 
which regulate how portable a worker's retirement savings account is, 
and while it does not make portability of pension benefits perfect, it 
greatly improves the status quo. No employer will be ``required'' to 
accept rollovers from other plans, however. A rollover will occur when 
the employee offers, and the employer agrees to accept, a rollover from 
another plan.

[[Page S8379]]

  Under current law, it is not possible for an individual to move an 
accumulated retirement savings account from a section 401(k) (for-
profit) plan to a section 457 (state and local government) deferred 
compensation plan, to an Individual Retirement Account (IRA), then to a 
section 403(b) (non-profit organization or public school) deferred 
annuity plan and ultimately back into a section 401(k) plan, without 
violating various restrictions on the movement of their money. The RAP 
Act will make it possible for workers to take their retirement savings 
with them when they change jobs regardless of the type of employer for 
which they work.
  This bill will also help make IRAs more portable and will improve the 
use of conduit IRAs. Conduit IRAs are individual retirement accounts to 
which certain distributions from a qualified retirement plan or from 
another individual retirement account have been transferred. RAP 
changes the rules regulating these IRAs so that workers leaving the 
for-profit, non-profit or governmental field can use a conduit IRA as a 
parking spot for a pre-retirement distribution. These special accounts 
are needed by many workers until they have another employer-sponsored 
plan in which to rollover their savings.
  In many instances, this bill will allow an individual to rollover an 
IRA consisting exclusively of tax-deductible contributions into a 
retirement plan at his or her new place of employment, thus helping the 
individual consolidate retirement savings in a single account. Under 
certain circumstances, the RAP Act will also allow workers to rollover 
any after-tax contributions made at his or her previous workplace, into 
a new retirement plan. Under the provisions of the bill as drafted, 
after-tax contributions will be rollable from a plan to an IRA and from 
an IRA to an IRA, but not from a IRA to a plan, nor on a direct plan to 
plan basis. I am open to recommendations on how we can improve the 
treatment of after-tax rollovers and I look forward to hearing from my 
colleagues and the public on that topic.
  Current law requires a worker who changes jobs to face a deadline of 
60 days within which to roll over any retirement savings benefits 
either into an Individual Retirement Account, or into the retirement 
plan of his or her new employer. Failure to meet the deadline can 
result in both income and excise taxes being imposed on the account. We 
believe that this deadline should be waived under certain circumstances 
and we have outlined them in the bill. Consistent with the Pomeroy 
bill, in case of a Presidentially-declared natural disaster or military 
service in a combat zone, the Treasury Department will have the 
authority to disallow imposition of any tax penalty for the account 
holder. Consistent with the additional changes incorporated by 
Congressman Pomeroy this year, however, we have included a waiver of 
tax penalties in the case of undue hardship, such as a serious personal 
injury or illness and we have given the Department of the Treasury the 
authority to waive the deadline.

  The Retirement Account Portability Act will also change two 
complicated rules which harm both plan sponsors and plan participants; 
one dealing with certain business sales (the so-called ``same desk'' 
rule) and the other dealing with retirement plan distribution options. 
Each of these rules has impeded true portability of pensions and we 
believe they ought to be changed.
  In addition, this bill will extend the Pension Benefit Guaranty 
Corporation's (PBGC) Missing Participant program to defined benefit 
multiemployer pension plans. Under current law, the PBGC has 
jurisdiction over both single-employer and multiemployer defined 
benefit pension plans. A few years ago, the agency initiated a program 
to locate missing participants from terminated, single-employer plans. 
The program attempts to locate individuals who are due a benefit, but 
who have not filed for benefits owed to them, or who have attempted to 
find their former employer but failed to receive their benefits. This 
bill expands the missing participant program to multiemployer pension 
plans.
  I know of no reason why individuals covered by a multiemployer 
pension plans should not have the same protections as participants of 
single-employer pension plans and this change will help more former 
employees receive all the benefits to which they are entitled. This 
bill does not expand the missing participants program to defined 
contribution plans. Supervision of defined contribution plans is 
outside the statutory jurisdiction of the PBGC and I have not heard 
strong arguments for including those plans within the jurisdiction of 
the agency. I would be pleased to hear the recommendations of any of my 
colleagues on this matter.
  In a particularly important provision, the Retirement Account 
Portability bill will allow public school teachers and other state and 
local employees who move between different states and localities to use 
their savings in their section 403(b) plan or section 457 deferred 
compensation arrangement to purchase ``service credit'' in the defined 
benefit plan in which they are currently participating, and thus obtain 
greater pension benefits in the plan in which they conclude their 
career.
  As a final note, this bill, this bill does not reduce the vesting 
schedule from the current five year cliff vesting (or seven year 
graded) to a three year cliff or six year graded vesting schedule that 
has been contained in other bills. I support the shorter vesting 
schedules, but I feel that the abbreviated schedule makes a dramatic 
change to tax law without removing some of the disincentives to 
maintaining a pension plan that businesses--especially small 
businesses--desperately need. More discussion of this matter is needed.
  Mr. President, I ask unanimous consent that a copy of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1357

       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.

       (a) Short Title.--This Act may be cited as the ``Retirement 
     Account Portability Act of 1999''.
       (b) Amendment of 1986 Code.--Except as otherwise expressly 
     provided, whenever in this Act an amendment or repeal is 
     expressed in terms of an amendment to, or repeal of, a 
     section or other provision, the reference shall be considered 
     to be made to a section or other provision of the Internal 
     Revenue Code of 1986.

     SEC. 2. ROLLOVERS ALLOWED AMONG VARIOUS TYPES OF PLANS.

       (a) Rollovers From and to Section 457 Plans.--
       (1) Rollovers from section 457 plans.--
       (A) In general.--Section 457(e) (relating to other 
     definitions and special rules) is amended by adding at the 
     end the following:
       ``(16) Rollover amounts.--
       ``(A) General rule.--In the case of an eligible deferred 
     compensation plan, if--
       ``(i) any portion of the balance to the credit of an 
     employee in such plan is paid to such employee in an eligible 
     rollover distribution (within the meaning of section 
     402(c)(4) without regard to subparagraph (C) thereof),
       ``(ii) the employee transfers any portion of the property 
     such employee receives in such distribution to an eligible 
     retirement plan described in section 402(c)(8)(B), and
       ``(iii) in the case of a distribution of property other 
     than money, the amount so transferred consists of the 
     property distributed,
     then such distribution (to the extent so transferred) shall 
     not be includible in gross income for the taxable year in 
     which paid.
       ``(B) Certain rules made applicable.--The rules of 
     paragraphs (2) through (7) (other than paragraph (4)(C)) and 
     (9) of section 402(c) and section 402(f) shall apply for 
     purposes of subparagraph (A).
       ``(C) Reporting.--Rollovers under this paragraph shall be 
     reported to the Secretary in the same manner as rollovers 
     from qualified retirement plans (as defined in section 
     4974(c)).''
       (B) Deferral limit determined without regard to rollover 
     amounts.--Section 457(b)(2) (defining eligible deferred 
     compensation plan) is amended by inserting ``(other than 
     rollover amounts)'' after ``taxable year''.
       (C) Direct rollover.--Paragraph (1) of section 457(d) is 
     amended by striking ``and'' at the end of subparagraph (A), 
     by striking the period at the end of subparagraph (B) and 
     inserting ``, and'', and by inserting after subparagraph (B) 
     the following:
       ``(C) the plan meets requirements similar to the 
     requirements of section 401(a)(31).

     Any amount transferred in a direct trustee-to-trustee 
     transfer in accordance with section 401(a)(31) shall not be 
     includible in gross income for the taxable year of 
     transfer.''
       (D) Withholding.--
       (i) Paragraph (12) of section 3401(a) is amended by adding 
     at the end the following:
       ``(E) under or to an eligible deferred compensation plan 
     which, at the time of such payment, is a plan described in 
     section 457(b); or''.

[[Page S8380]]

       (ii) Paragraph (5) of section 3405(e) is amended by adding 
     at the end the following: ``Such term shall include an 
     eligible deferred compensation plan described in section 
     457(b).''
       (iii) Paragraph (3) of section 3405(c) is amended to read 
     as follows:
       ``(3) Eligible rollover distribution.--For purposes of this 
     subsection, the term `eligible rollover distribution' has the 
     meaning given such term by section 402(f)(2)(A).''
       (iv) Liability for withholding.--Subparagraph (B) of 
     section 3405(d)(2) is amended by striking ``or'' at the end 
     of clause (ii), by striking the period at the end of clause 
     (iii) and inserting ``, or'', and by adding at the end the 
     following:
       `(iv) section 457(b).''
       (2) Rollovers to section 457 plans.--
       (A) Section 402(c)(8)(B) (defining eligible retirement 
     plan) is amended by striking ``and'' at the end of clause 
     (iii), by striking the period at the end of clause (iv) and 
     inserting ``, and'', and by adding at the end the following:
       ``(v) an eligible deferred compensation plan described in 
     section 457(b) of an eligible employer described in section 
     457(e)(1)(A).''
       (B) Paragraph (9) of section 402(c) is amended by striking 
     ``except that'' and all that follows and inserting ``except 
     that only an account or annuity described in clause (i) or 
     (ii) of paragraph (8)(B) shall be treated as an eligible 
     retirement plan with respect to such distribution.''
       (C) Subsection (a) of section 457 (relating to year of 
     inclusion in gross income) is amended by striking ``or 
     otherwise made available''.
       (3) Minimum distributions.--Paragraph (2) of section 457(d) 
     is amended to read as follows:
       ``(2) Minimum distribution requirements.--A plan meets the 
     distribution requirements of this paragraph if the plan meets 
     the requirements of section 401(a)(9).''
       (4) Conforming amendment.--Paragraph (9) of section 457(e) 
     is amended to read as follows:
       ``(9) Benefits not treated as failing to meet distribution 
     requirements of subsection (d).--A plan shall not be treated 
     as failing to meet the distribution requirements of 
     subsection (d) by reason of a distribution of the total 
     amount payable to a participant under the plan if--
       ``(A) such amount does not exceed the dollar limit under 
     section 411(a)(11)(A), and
       ``(B) such amount may be distributed only if--
       ``(i) 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
       ``(ii) there has been no prior distribution under the plan 
     to such participant to which this paragraph applied.''
       (b) Allowance of Rollovers From and to 403(b) Plans.--
       (1) Rollovers from section 403(b) plans.--Section 
     403(b)(8)(A)(ii) (relating to rollover amounts) is amended by 
     striking ``such distribution'' and all that follows and 
     inserting ``such distribution to an eligible retirement plan 
     described in section 402(c)(8)(B), and''.
       (2) Rollovers to section 403(b) plans.--Section 
     402(c)(8)(B) (defining eligible retirement plan), as amended 
     by subsection (a), is amended by striking ``and'' at the end 
     of clause (iv), by striking the period at the end of clause 
     (v) and inserting ``, and'', and by adding at the end the 
     following:
       ``(vi) an annuity contract described in section 403(b).''
       (3) Conforming amendment.--Subparagraph (B) of section 
     403(b)(8) is amended by striking ``Rules similar to the'' and 
     inserting ``The''.
       (c) Expanded Explanation to Recipients of Rollover 
     Distributions.--Paragraph (1) of section 402(f) (relating to 
     written explanation to recipients of distributions eligible 
     for rollover treatment) is amended by striking ``and'' at the 
     end of subparagraph (C), by striking the period at the end of 
     subparagraph (D) and inserting ``, and'', and by adding at 
     the end the following new subparagraph:
       ``(E) of the provisions under which distributions from the 
     eligible retirement plan receiving the distribution may be 
     subject to restrictions and tax consequences which are 
     different from those applicable to distributions from the 
     plan making such distribution.''
       (d) Conforming Amendments.--
       (1) Section 72(o)(4) is amended by striking ``and 
     408(d)(3)'' and inserting ``403(b)(8), 408(d)(3), and 
     457(e)(16)''.
       (2) Section 219(d)(2) is amended by striking ``or 
     408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
       (3) Section 401(a)(31)(B) is amended by striking ``and 
     403(a)(4)'' and inserting ``, 403(a)(4), 403(b)(8), and 
     457(e)(16)''.
       (4) Subparagraph (A) of section 402(f)(2) is amended by 
     striking ``or paragraph (4) of section 403(a)'' and inserting 
     ``, paragraph (4) of section 403(a), subparagraph (A) of 
     section 403(b)(8), or subparagraph (A) of section 
     457(e)(16)''.
       (5) Paragraph (1) of section 402(f) is amended by striking 
     ``from an eligible retirement plan''.
       (6) Subparagraphs (A) and (B) of section 402(f)(1) are 
     amended by striking ``another eligible retirement plan'' and 
     inserting ``an eligible retirement plan''.
       (7) Subparagraph (B) of section 403(b)(8) is amended by 
     striking ``shall apply for purposes of subparagraph (A)'' and 
     inserting ``and section 402(f) shall apply for purposes of 
     subparagraph (A), except that section 402(f) shall be applied 
     to the payor in lieu of the plan administrator''.
       (8) Subparagraph (B) of section 403(b)(8) is amended by 
     inserting ``and (9)'' after ``through (7)''.
       (9) Section 408(a)(1) is amended by striking ``or 
     403(b)(8)'' and inserting ``, 403(b)(8), or 457(e)(16)''.
       (10) Subparagraphs (A) and (B) of section 415(b)(2) are 
     each amended by striking ``and 408(d)(3)'' and inserting 
     ``403(b)(8), 408(d)(3), and 457(e)(16)''.
       (11) Section 415(c)(2) is amended by striking ``and 
     408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
       (12) Section 4973(b)(1)(A) is amended by striking ``or 
     408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
       (e) Effective Date; Special Rule.--
       (1) Effective date.--The amendments made by this section 
     shall apply to distributions after December 31, 1999.
       (2) Special rule.--Notwithstanding any other provision of 
     law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
     Reform Act of 1986 shall not apply to any distribution from 
     an eligible retirement plan described in clause (iii) or (iv) 
     of section 402(c)(8)(B) of the Internal Revenue Code of 1986 
     on behalf of an individual if there was a rollover to such 
     plan on behalf of such individual which is permitted solely 
     by reason of any amendment made by this section.

     SEC. 3. ROLLOVERS OF IRAS INTO WORKPLACE RETIREMENT PLANS.

       (a) In General.--Subparagraph (A) of section 408(d)(3) 
     (relating to rollover amounts) is amended by adding ``or'' at 
     the end of clause (i), by striking clauses (ii) and (iii), 
     and by adding at the end the following:
       ``(ii) the entire amount received (including money and any 
     other property) is paid into an eligible retirement plan for 
     the benefit of such individual not later than the 60th day 
     after the date on which the individual receives the payment 
     or distribution.

     For purposes of clause (ii), the term `eligible retirement 
     plan' means an eligible retirement plan described in clause 
     (iii), (iv), (v), or (vi) of section 402(c)(8)(B).''
       (b) Conforming Amendments.--
       (1) Paragraph (1) of section 403(b) is amended by striking 
     ``section 408(d)(3)(A)(iii)'' and inserting ``section 
     408(d)(3)(A)(ii)''.
       (2) Clause (i) of section 408(d)(3)(D) is amended by 
     striking ``(i), (ii), or (iii)'' and inserting ``(i) or 
     (ii)''.
       (3) Subparagraph (G) of section 408(d)(3) is amended to 
     read as follows:
       ``(G) Simple retirement accounts.--In the case of any 
     payment or distribution out of a simple retirement account 
     (as defined in subsection (p)) to which section 72(t)(6) 
     applies, this paragraph shall not apply unless such payment 
     or distribution is paid into another simple retirement 
     account.''
       (c) Effective Date; Special Rule.--
       (1) Effective date.--The amendments made by this section 
     shall apply to distributions after December 31, 1999.
       (2) Special rule.--Notwithstanding any other provision of 
     law, subsections (h)(3) and (h)(5) of section 1122 of the Tax 
     Reform Act of 1986 shall not apply to any distribution from 
     an eligible retirement plan described in clause (iii) or (iv) 
     of section 402(c)(8)(B) of the Internal Revenue Code of 1986 
     on behalf of an individual if there was a rollover to such 
     plan on behalf of such individual which is permitted solely 
     by reason of the amendments made by this section.

     SEC. 4. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS; HARDSHIP 
                   EXCEPTION.

       (a) After-Tax Contributions.--
       (1) Rollovers.--Subsection (c) of section 402 (relating to 
     rules applicable to rollovers from exempt trusts) (as amended 
     by section 2) is amended by striking paragraph (2) and 
     redesignating paragraphs (3) through (10) as paragraphs (2) 
     through (9), respectively.
       (2) Direct transfers.--Paragraph (31) of section 401(a) 
     (relating to optional direct transfer of eligible rollover 
     distributions) is amended by striking subparagraph (B) and 
     redesignating subparagraphs (C) and (D) as subparagraphs (B) 
     and (C), respectively.
       (3) Annuities.--Subparagraph (B) of section 408(d)(3) 
     (relating to rollover contributions) is amended by striking 
     ``which was not includible in his gross income because of the 
     application of this paragraph'' and inserting ``to which this 
     paragraph applied''.
       (4) Eligible retirement plan.--Paragraph (7)(B) of section 
     402(c) (as redesignated by subsection (a)(1) and as amended 
     by section 2) is amended--
       (A) by striking ``The term'' and inserting ``Except as 
     provided in this subparagraph, the term'', and
       (B) by adding at the end the following:

     ``Arrangements described in clauses (iii), (iv) (v), and (vi) 
     shall not be treated as eligible retirement plans for 
     purposes of receiving a rollover contribution of an eligible 
     rollover distribution to the extent that such eligible 
     rollover distribution is not includible in gross income 
     (determined without regard to paragraph (1)).''
       (5) Taxation of distributions.--Paragraph (2) of section 
     408(d) is amended--
       (A) by striking ``For purposes'' and inserting the 
     following:
       ``(A) In general.--Except as provided in this paragraph, 
     for purposes'',
       (B) by striking ``(A) all'' and inserting ``(i) all'';
       (C) by striking ``(B) all'' and inserting ``(ii) all'';
       (D) by striking ``(C) the'' and inserting ``(iii) the'',

[[Page S8381]]

       (E) by striking ``subparagraph (C)'' and inserting ``clause 
     (iii)'', and
       (F) by inserting at the end the following:
       ``(B) Application of section 72.--For purposes of applying 
     section 72, if--
       ``(i) a distribution is made from an individual retirement 
     plan, and
       ``(ii) a rollover contribution described in paragraph (3) 
     is made to an eligible retirement plan described in section 
     402(c)(7)(B)(iii), (iv), (v), or (vi) with respect to all or 
     part of such distribution,
     the includible amount in the individual's individual 
     retirement plans shall be reduced by the amount described in 
     subparagraph (C). As of the close of the calendar year in 
     which the taxable year begins, the reduction of all amounts 
     described in subparagraph (C)(i) shall be applied prior to 
     the computations described in subparagraph (A)(iii). The 
     amount of any distribution with respect to which there is a 
     rollover contribution described in clause (ii) shall not be 
     treated as a distribution for purposes of subparagraph (A).
       ``(C) Amount described.--The amount described in this 
     subparagraph is the sum of--
       ``(i) the amount of the rollover contribution described in 
     subparagraph (B)(ii), and
       ``(ii) in the case of any portion of the distribution with 
     respect to which there is not a rollover contribution 
     described in paragraph (3), the amount of such portion that 
     is included in gross income under section 72.
       ``(D) Includible amount.--For purposes of this paragraph, 
     the term `includible amount' shall mean the amount that is 
     not investment in the contract (as defined in section 72).''
       (6) Transfers to iras.--Subparagraph (C) of section 
     402(c)(5) (as redesignated by subsection (a)(1)) is amended 
     by inserting after ``other than money'' the following: ``or 
     where the amount of the distribution exceeds the amount of 
     the rollover contribution''.
       (b) Hardship Exception to 60-Day Rule.--
       (1) Plan rollovers.--Paragraph (2) of section 402(c) (as so 
     redesignated) is amended to read as follows:
       ``(2) Transfer must be made within 60 days of receipt.--
       ``(A) In general.--Except as provided in subparagraph (B), 
     paragraph (1) shall not apply to any transfer of a 
     distribution made after the 60th day following the day on 
     which the distributee received the property distributed.
       ``(B) Hardship exception.--The Secretary may waive the 60-
     day requirement under subparagraph (A) where the failure to 
     waive such requirement would be against equity or good 
     conscience, including casualty, disaster, or other events 
     beyond the reasonable control of the individual subject to 
     such requirement.''
       (2) IRA rollovers.--Paragraph (3) of section 408(d) 
     (relating to rollover contributions) is amended by adding at 
     the end the following new subparagraph:
       ``(H) Waiver of 60-day requirement.--The Secretary may 
     waive the 60-day requirement under subparagraphs (A) and (D) 
     where the failure to waive such requirement would be against 
     equity or good conscience, including casualty, disaster, or 
     other events beyond the reasonable control of the individual 
     subject to such requirement.''
       (c) Conforming Amendments.--
       (1) Paragraph (4) of section 402(c) (as redesignated by 
     subsection (a)(1)) is amended by striking ``(8)(B)'' and 
     inserting ``(7)(B)''.
       (2) Subparagraph (B) of section 403(a)(4) is amended by 
     striking ``(2) through (7)'' and inserting ``(2) through 
     (6)''.
       (3) Section 403(b)(8)(A)(ii) (as amended by section 2) is 
     amended by striking ``section 402(c)(8)(B)'' and inserting 
     ``section 402(c)(7)(B)''.
       (4) Subparagraph (B) of section 403(b)(8) (as amended by 
     section 2) is amended by striking ``(2) through (7) and (9) 
     of section 402(c)'' and inserting ``(2) through (6) and (8) 
     of section 402(c)''.
       (5) Subparagraph (A) of section 408(d)(3) (as amended by 
     section 3) is amended by striking ``402(c)(8)'' and inserting 
     ``402(c)(7)''.
       (6) Paragraph (16) of section 457(e) (as added by section 
     2) is amended--
       (A) in subparagraph (A)(i) by striking ``402(c)(4)'' and 
     inserting ``402(c)(3)'',
       (B) in subparagraph (A)(ii) by striking ``402(c)(8)(B)'' 
     and inserting ``402(c)(7)(B)'', and
       (C) in subparagraph (B) by striking ``paragraphs (2) 
     through (7) (other than paragraph (4)(C)) and (9) of section 
     402(c)'' and inserting ``paragraphs (2) through (6) (other 
     than paragraph (3)(C)) and (8) of section 402(c)''.
       (d) Effective Date.--
       (1) In general.--Except as provided by paragraph (2), the 
     amendments made by this section shall apply to distributions 
     made after December 31, 1999.
       (2) Hardship exception.--The amendments made by subsection 
     (b) shall apply to 60-day periods ending after the date of 
     the enactment of this Act.

     SEC. 5. EXTENSION OF MISSING PARTICIPANTS PROGRAM TO 
                   MULTIEMPLOYER PLANS.

       (a) In General.--Section 4050 of the Employee Retirement 
     Income Security Act of 1974 (29 U.S.C. 1350) is amended by 
     redesignating subsection (c) as subsection (d) and by 
     inserting after subsection (b) the following new subsection:
       ``(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.''
       (b) Conforming Amendment.--Section 206(f) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1056(f)) is 
     amended by striking ``the plan shall provide that,''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions made after final regulations 
     implementing subsection (c) of section 4050 of the Employee 
     Retirement Income Security Act of 1974 (as added by 
     subsection (a)) are prescribed.

     SEC. 6. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS FROM 
                   DEFINED CONTRIBUTION PLANS.

       (a) Distributions Permitted on Severance From Employment.--
       (1) 401(k) plans.--Section 401(k)(2)(B)(i)(I) (relating to 
     qualified cash or deferred arrangements) is amended by 
     striking ``separation from service'' and inserting 
     ``severance from employment''.
       (2) 403(b) contracts.--
       (A) Clause (ii) of section 403(b)(7)(A) is amended by 
     striking ``separates from service'' and inserting ``severs 
     from employment''.
       (B) Paragraph (11) of section 403(b) is amended--
       (i) by striking ``separation from service'' in the heading 
     and inserting ``severance from employment'', and
       (ii) by striking ``separates from service'' and inserting 
     ``severs from employment''.
       (3) 457 plans.--Clause (ii) of section 457(d)(1)(A) is 
     amended by striking ``is separated from service'' and 
     inserting ``has a severance from employment''.
       (b) Business Sale Requirements Deleted.--
       (1) In general.--Section 401(k)(2)(B)(i)(II) (relating to 
     qualified cash or deferred arrangements) is amended by 
     striking ``an event'' and inserting ``a plan termination''.
       (2) Conforming amendments.--Section 401(k)(10) is amended--
       (A) by striking subparagraph (A) and inserting the 
     following:
       ``(A) In general.--A plan termination is described in this 
     paragraph if the termination of the plan does not involve the 
     establishment or maintenance of another defined contribution 
     plan (other than an employee stock ownership plan as defined 
     in section 4975(e)(7)).'',
       (B) in subparagraph (B)--
       (i) by striking ``An event'' and inserting ``A 
     termination'', and
       (ii) by striking ``the event'' and inserting ``the 
     termination'',
       (C) by striking subparagraph (C), and
       (D) by striking ``or disposition of assets or subsidiary'' 
     in the heading.
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 1999.

     SEC. 7. TRANSFEREE DEFINED CONTRIBUTION PLAN NEED NOT HAVE 
                   SAME DISTRIBUTION OPTIONS AS TRANSFEROR DEFINED 
                   CONTRIBUTION PLAN.

       (a) In General.--Section 411(d)(6) (relating to accrued 
     benefit not to be decreased by amendment) is amended by 
     adding at the end the following new subparagraph:
       ``(D) Plan transfers.--A defined contribution plan (in this 
     subparagraph referred to as the `transferee plan') shall not 
     be treated as failing to meet the requirements of this 
     paragraph merely because the transferee plan does not provide 
     some or all of the forms of distribution previously available 
     under another defined contribution plan (in this subparagraph 
     referred to as the `transferor plan') to the extent that--
       ``(i) the forms of distribution previously available under 
     the transferor plan applied to the account of a participant 
     or beneficiary under the transferor plan that was transferred 
     from the transferor plan to the transferee plan pursuant to a 
     direct transfer rather than pursuant to a distribution from 
     the transferor plan,
       ``(ii) the terms of both the transferor plan and the 
     transferee plan authorize the transfer described in clause 
     (i),
       ``(iii) the transfer described in clause (i) was made 
     pursuant to a voluntary election by the participant or 
     beneficiary whose account was transferred to the transferee 
     plan,
       ``(iv) the election described in clause (iii) was made 
     after the participant or beneficiary received a notice 
     describing the consequences of making the election,
       ``(v) if the transferor plan provides for an annuity as the 
     normal form of distribution under the plan in accordance with 
     section 417, the transfer is made with the consent of the 
     participant's spouse (if any), and such consent meets 
     requirements similar to the requirements imposed by section 
     417(a)(2), and
       ``(vi) the transferee plan allows the participant or 
     beneficiary described in clause (iii) to receive any 
     distribution to which the participant or beneficiary is 
     entitled under transferee plan in the form of a single sum 
     distribution.''
       (b) Amendment to ERISA.--Section 204(g) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) is 
     amended by adding at the end the following new paragraph:
       ``(4) A defined contribution plan (in this paragraph 
     referred to as the `transferee plan') shall not be treated as 
     failing to meet the requirements of this subsection merely 
     because the transferee plan does not provide some or all of 
     the forms of distribution previously available under another 
     defined contribution plan (in this paragraph referred to as 
     the `transferor plan') to the extent that--
       ``(A) the forms of distribution previously available under 
     the transferor plan applied

[[Page S8382]]

     to the account of a participant or beneficiary under the 
     transferor plan that was transferred from the transferor plan 
     to the transferee plan pursuant to a direct transfer rather 
     than pursuant to a distribution from the transferor plan,
       ``(B) the terms of both the transferor plan and the 
     transferee plan authorize the transfer described in 
     subparagraph (A),
       ``(C) the transfer described in subparagraph (A) was made 
     pursuant to a voluntary election by the participant or 
     beneficiary whose account was transferred to the transferee 
     plan,
       ``(D) the election described in subparagraph (C) was made 
     after the participant or beneficiary received a notice 
     describing the consequences of making the election,
       ``(E) if the transferor plan provides for an annuity as the 
     normal form of distribution under the plan in accordance with 
     section 205, the transfer is made with the consent of the 
     participant's spouse (if any), and such consent meets 
     requirements similar to the requirements imposed by section 
     205(c)(2), and
       ``(F) the transferee plan allows the participant or 
     beneficiary described in subparagraph (C) to receive any 
     distribution to which the participant or beneficiary is 
     entitled under transferee plan in the form of a single sum 
     distribution.''
       (b) Effective Date.--The amendments made by this section 
     shall apply to transfers after December 31, 1999.

     SEC. 8. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF 
                   CASH-OUT AMOUNTS.

       (a) Amendments to 1986 Code.--
       (1) Section 411(a)(11) (relating to restrictions on certain 
     mandatory distributions) is amended by adding at the end the 
     following:
       ``(D) Special rule for rollover contributions.--A plan 
     shall not fail to meet the requirements of this paragraph if, 
     under the terms of the plan, the present value of the 
     nonforfeitable accrued benefit is determined without regard 
     to that portion of such benefit which is attributable to 
     rollover contributions (and earnings allocable thereto). For 
     purposes of this subparagraph, the term `rollover 
     contributions' means any rollover contribution under sections 
     402(c), 403(a)(4), 403(b)(8), 408(d)(3)(A)(ii), and 
     457(e)(16).''
       (2) Clause (i) of section 457(e)(9)(A) is amended by 
     striking ``such amount'' and inserting ``the portion of such 
     amount which is not attributable to rollover contributions 
     (as defined in section 411(a)(11)(D))''.
       (b) Amendment to ERISA.--Section 203(e) of the Employee 
     Retirement Income Security Act of 1974 (29 U.S.C. 1053(e)) is 
     amended by adding at the end the following:
       ``(4) A plan shall not fail to meet the requirements of 
     this subsection if, under the terms of the plan, the present 
     value of the nonforfeitable accrued benefit is determined 
     without regard to that portion of such benefit which is 
     attributable to rollover contributions (and earnings 
     allocable thereto). For purposes of this paragraph, the term 
     `rollover contributions' means any rollover contribution 
     under sections 402(c), 403(a)(4), 403(b)(8), 
     408(d)(3)(A)(ii), and 457(e)(16) of the Internal Revenue Code 
     of 1986.''
       (c) Effective Date.--The amendments made by this section 
     shall apply to distributions after December 31, 1999.

     SEC. 9. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED 
                   BENEFIT PLANS.

       (a) 403(b) Plans.--Subsection (b) of section 403 is amended 
     by adding at the end the following new paragraph:
       ``(13) Trustee-to-trustee transfers to purchase permissive 
     service credit.--No amount shall be includible in gross 
     income by reason of a direct trustee-to-trustee transfer to a 
     defined benefit governmental plan (as defined in section 
     414(d)) if such transfer is--
       ``(A) for the purchase of permissive service credit (as 
     defined in section 415(n)(3)(A)) under such plan, or
       ``(B) a repayment to which section 415 does not apply by 
     reason of subsection (k)(3) thereof.''
       (b) 457 Plans.--
       (1) Subsection (e) of section 457 is amended by adding at 
     the end the following new paragraph:
       ``(17) Trustee-to-trustee transfers to purchase permissive 
     service credit.--No amount shall be includible in gross 
     income by reason of a direct trustee-to-trustee transfer to a 
     defined benefit governmental plan (as defined in section 
     414(d)) if such transfer is--
       ``(A) for the purchase of permissive service credit (as 
     defined in section 415(n)(3)(A)) under such plan, or
       ``(B) a repayment to which section 415 does not apply by 
     reason of subsection (k)(3) thereof.''
       (2) Section 457(b)(2), as amended by section 2, is amended 
     by striking ``(other than rollover amounts)'' and inserting 
     ``(other than rollover amounts and amounts received in a 
     transfer referred to in subsection (e)(17))''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to trustee-to-trustee transfers after December 
     31, 1999.

     SEC. 10. 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) such plan shall not fail to meet the requirements of 
     section 411(d)(6) of the Internal Revenue Code of 1986 or 
     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 pursuant 
     to any guidance issued by the Secretary of the Treasury (or 
     the Secretary's delegate) under any such amendment, and
       (B) on or before the last day of the first plan year 
     beginning on or after January 1, 2002.

     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 ``2004'' for ``2002''.
       (2) Conditions.--This section shall not apply to any 
     amendment unless--
       (A) during the period--
       (i) beginning on the date the legislative amendment or 
     guidance described in paragraph (1)(A) takes effect (or in 
     the case of a plan or contract amendment not required by such 
     legislative amendment or guidance, 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.
                                 ______