[Congressional Record Volume 146, Number 94 (Wednesday, July 19, 2000)]
[House]
[Pages H6476-H6529]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
COMPREHENSIVE RETIREMENT SECURITY AND PENSION REFORM ACT
Mr. REYNOLDS. Mr. Speaker, by direction of the Committee on Rules, I
call up House Resolution 557 and ask for its immediate consideration.
The Clerk read the resolution, as follows:
H. Res. 557
Resolved, That upon the adoption of this resolution it
shall be in order without intervention of any point of order
to consider in the House the bill (H.R. 1102) to provide for
pension reform, and for other purposes. The bill shall be
considered as read for amendment. In lieu of the amendment
recommended by the Committee on Education and the Workforce
now printed in the bill, an amendment in the nature of a
substitute consisting of the text of the amendment
recommended by the Committee on Ways and Means now printed in
H.R. 4843 shall be considered as adopted. The previous
question shall be considered as ordered on the bill, as
amended, and on any further amendment thereto to final
passage without intervening motion except: (1) one hour of
debate on the bill, as amended, equally divided and
controlled by the chairman and ranking minority member of the
Committee on Ways and Means; (2) the amendment printed in the
report of the Committee on Rules accompanying this
resolution, if offered by Representative Rangel or his
designee, which shall be in order without intervention of any
point of order, shall be considered as read, and shall be
separately debatable for one hour equally divided and
controlled by the proponent and an opponent; and (3) one
motion to recommit with or without instructions.
The SPEAKER pro tempore (Mr. Ose). The gentleman from New York (Mr.
Reynolds) is recognized for 1 hour.
Mr. REYNOLDS. Mr. Speaker, for purposes of debate only, I yield the
customary 30 minutes to the gentlewoman from New York (Ms. Slaughter),
pending which I yield myself such time as I may consume. During
consideration of the resolution, all time yielded is for the purpose of
debate only.
(Mr. REYNOLDS asked and was given permission to revise and extend his
remarks, and include extraneous material.)
Mr. REYNOLDS. Mr. Speaker, last night the Committee on Rules met and
granted a modified closed rule for H.R. 1102, the Comprehensive
Retirement Security and Pension Reform Act of 2000. The rule provides
that in lieu of the amendment recommended by the Committee on Education
and the Workforce now printed in the bill, the text of H.R. 4843 as
reported by the Committee on Ways and Means shall be considered as
adopted. Additionally, the rule waives all points of order against the
bill and against consideration of the amendment printed in this report.
The rule also provides 1 hour of debate equally divided and
controlled by the chairman and ranking member of the Committee on Ways
and Means.
The rule further provides for consideration of the amendment printed
in the Committee on Rules report accompanying the resolution, if
offered by the gentleman from New York (Mr. Rangel) or his designee,
which shall be considered as read and shall be separately debatable for
1 hour equally divided and controlled by a proponent and an opponent.
Finally, the rule provides for one motion to recommit with or without
instructions.
Mr. Speaker, this is a completely fair rule for reform of our
Nation's pension and retirement security laws. Not only is the
underlying bill a completely balanced, bipartisan measure, but the rule
also makes in order a minority substitute amendment providing for a
full hour for debate. In short, the rule allows for a comprehensive
debate on this very important matter.
Mr. Speaker, Americans are investing far less than they should to
prepare for their retirement. Half of all private-sector workers still
have no pension coverage. Over a fifth of small businesses with 25 or
fewer employees offer a pension plan, and members of the baby boomers
generation, 76 million of whom will retire in the next 15 years, have
less than 40 percent of the savings needed to maintain their standard
of living.
In fact, retirement savings in the United States are at extremely low
levels, even as our economy is reaching record highs. The reason
Americans are saving less than they need for their retirement is
simple, because the Federal Government has discouraged them from doing
so.
For too long the Federal Government has been an impediment to
American workers planning and preparing for their retirement security.
Mr. Speaker, contribution limits on pensions and IRAs have not kept
with the times. In fact, they have been stuck at the 1980s level.
Worse, over the past 2 decades Congress has actually reduced
contribution limits and, as a double hit on working Americans, the
Federal Government at the same time introduced burdensome and costly
regulatory restrictions on pension plans. The result, in 1987 there
were 114,000 of these pension plans across America. Ten years later,
there were only 45,000. Since 1990 pension coverage has declined from
40 to 33 percent among workers making less than $20,000; and despite a
booming economy, the personal savings rate has dropped every year since
1992 and is at its lowest point in 66 years.
The underlying bipartisan bill is a historic measure that will
strengthen individual retirement accounts, 401(k) plans and small
business retirement plans, finally bringing retirement savings into the
21st century and helping ensure retirement security of countless
Americans.
The Comprehensive Retirement Security and Pension Reform Act allows
working Americans to set more of their hard-earned money aside in an
IRA or 401(k)-type plan, modernizes pension laws, and provides
regulatory relief to encourage more small businesses to offer
retirement plans.
The bill increases the old IRA contribution limit from $2,000 to
$5,000 over the next 3 years for both traditional and Roth IRAs, and
the bill includes an important fairness provision to allow workers over
50 years of age to catch up with contributions for 401(k) plans by
increasing the contribution level immediately.
This bipartisan measure will remove excessive, burdensome and
unnecessary Federal regulations, providing relief to American
businesses and workers by encouraging small businesses to offer pension
plans. By removing these restrictions, Americans will be allowed the
freedom to invest in their future as never before.
Mr. Speaker, H.R. 1102 is a fair, balanced and bipartisan plan that
will help millions of Americans. I would like to commend the chairman
of the Committee on Ways and Means, the gentleman from Texas (Mr.
Archer), and the gentleman from New York (Mr. Rangel), for their hard
work on this bill. Additionally, I would like to commend the gentleman
from Ohio (Mr. Portman) and the gentleman from Maryland (Mr. Cardin),
the sponsors of the underlying legislation, for their dedication to
pension and retirement reform for America.
I urge my colleagues to support this fair rule, the underlying
measure.
Mr. Speaker, I reserve the balance of my time.
Ms. SLAUGHTER. Mr. Speaker, I thank the gentleman from New York for
yielding me the customary 30 minutes and yield myself such time as I
may consume.
(Ms. SLAUGHTER asked and was given permission to revise and extend
her remarks.)
[[Page H6477]]
Ms. SLAUGHTER. Mr. Speaker, this is a modified closed rule; but H.R.
4843 deserves full and open debate, and an open rule would have ensured
that no one would be shut out of the process.
Mr. Speaker, I strongly support the underlying goals of H.R. 4843, to
provide expanded opportunities for working Americans to save for their
retirement. The bill includes a number of provisions which improve
current protections for workers and retirees, such as a reduction of
vesting to 3 years for 401(k) plan-matching contributions, encouraging
rollovers of pension plans when workers switch employment, and
eliminating compensation caps that unfairly affect the pension benefits
of rank and file workers.
Even during this period of strong economic growth, more people are
joining the workforce than are receiving pension coverage. Only half
the workforce is covered by a pension plan; and, worse, there is reason
to believe it will not provide them with an adequate level of
supplemental income in their retirement.
Although there is insufficient data to measure contributions and
benefits, data from the Federal Reserve shows pension plan
contributions declining by 50 percent in recent years.
While the underlying bill provides significant opportunities for
those workers who can most afford to save the maximum amount allowed,
few or no opportunities are available to low- and moderate-income
workers under the bill. We must continue to work together to improve
this aspect of the bill and ensure that no segment of our workforce is
excluded from the opportunity to financially improve their retirement
years.
{time} 1030
The pressure to save adequately for retirement affects all working
Americans. Statistics confirm that low-income workers are far less
likely to participate in an employment-based retirement savings plan
than workers with higher incomes, even when the plan is available to
them. Individuals who are in between $10,000 and $14,000 annually
participate at a rate of 31 percent, even though 51 percent of them
have access to plans at work. However, the participation rate for
workers earning $50,000 or more increased to 83 percent, with 88
percent of such workers having access to employer-sponsored plans.
During the consideration of the underlying bill, the gentleman from
New York (Mr. Rangel) will offer a substitute that incorporates the
text of H.R. 4843, as well as provisions to encourage the participation
of the low-income workers. Specifically, the substitute provides a
refundable credit for low- and middle-income workers who save for their
retirement, makes small business employers eligible to claim a credit
for certain expenses incurred as the result of establishing a qualified
pension plan, provides relief from certain section 415 rules and
benefit limits, and expresses a Sense of Congress that issues
concerning cash balance plans should be resolved.
Mr. Speaker, I urge that my colleagues support these important
improvements to the bill.
Mr. Speaker, I yield back the balance of my time.
Mr. REYNOLDS. Mr. Speaker, I yield back the balance of my time, and I
move the previous question on the resolution.
The previous question was ordered.
The resolution was agreed to.
A motion to reconsider was laid on the table.
Mr. ARCHER. Mr. Speaker, pursuant to House Resolution 557, I call up
the bill (H.R. 1102), to provide for pension reform, and for other
purposes, and ask for its immediate consideration in the House.
The Clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to House Resolution 557, the bill
is considered read for amendment.
The text of H.R. 1102 is as follows:
H.R. 1102
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
``Comprehensive Retirement Security and Pension Reform Act''.
(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 for this Act
is as follows:
Sec. 1. Short title; amendment of 1986 Code; table of contents.
TITLE I--EXPANDING COVERAGE
Sec. 101. Restoration of limits formerly in effect.
Sec. 102. Plan loans for subchapter S owners, partners, and sole
proprietors.
Sec. 103. Salary reduction only simple plans.
Sec. 104. Modification of top-heavy rules.
Sec. 105. Elective deferrals not taken into account for purposes of
limits.
Sec. 106. Reduced PBGC premium for new plans of small employers.
Sec. 107. Phase-in of additional premium for new plans.
Sec. 108. Repeal of coordination requirements for deferred compensation
plans of State and local governments and tax-exempt
organizations.
Sec. 109. Elimination of user fee for requests to IRS regarding pension
plans.
Sec. 110. Alternative method of meeting nondiscrimination requirements
for automatic contribution trust.
Sec. 111. Deduction limits.
Sec. 112. Option to treat elective deferrals as after-tax
contributions.
Sec. 113. Credit for pension plan startup costs of small employers.
TITLE II--ENHANCING FAIRNESS FOR WOMEN AND CHILDREN
Sec. 201. Additional salary reduction catch-up contributions.
Sec. 202. Equitable treatment for contributions of employees to defined
contribution plans.
Sec. 203. Faster vesting of certain employer matching contributions.
Sec. 204. Deferred annuities for surviving spouses of Federal
employees.
Sec. 205. Simplify and update the minimum distribution rules.
Sec. 206. Clarification of tax treatment of division of section 457
plan benefits upon divorce.
Sec. 207. Percentage limitations on contributions.
Sec. 208. Eligible rollover distributions.
Sec. 209. Immediate participation in the Thrift Savings Plan.
TITLE III--INCREASING PORTABILITY FOR PARTICIPANTS
Sec. 301. Rollovers allowed among various types of plans.
Sec. 302. Rollovers of IRAs into workplace retirement plans.
Sec. 303. Rollovers of after-tax contributions.
Sec. 304. Treatment of forms of distribution.
Sec. 305. Rationalization of restrictions on distributions.
Sec. 306. Purchase of service credit in governmental defined benefit
plans.
Sec. 307. Employers may disregard rollovers for purposes of cash-out
amounts.
TITLE IV--STRENGTHENING PENSION SECURITY AND ENFORCEMENT
Sec. 401. Repeal of 150 percent of current liability funding limit.
Sec. 402. Missing participants.
Sec. 403. Periodic pension benefits statements.
Sec. 404. Civil penalties for breach of fiduciary responsibility.
Sec. 405. Penalty tax relief for sound pension funding.
Sec. 406. Protection of investment of employee contributions to 401(k)
plans.
Sec. 407. Notice of significant reduction in benefit accruals.
TITLE V--REDUCING REGULATORY BURDENS
Sec. 501. Intermediate sanctions for inadvertent failures.
Sec. 502. Repeal of the multiple use test.
Sec. 503. Safety valve from mechanical rules.
Sec. 504. Reform of the line of business rules.
Sec. 505. Coverage test flexibility.
Sec. 506. Increase in retirement plan cash-out amount.
Sec. 507. Modification of timing of plan valuations.
Sec. 508. Section 457 inapplicable to certain mirror plans.
Sec. 509. Substantial owner benefits in terminated plans.
Sec. 510. ESOP dividends may be reinvested without loss of dividend
deduction.
Sec. 511. Modification of 403(b) exclusion allowance to conform to 415
modification.
Sec. 512. Treatment of multiemployer plans under section 415.
Sec. 513. Elimination of partial termination rules for multiemployer
plans.
Sec. 514. Notice and consent period regarding distributions.
Sec. 515. Conforming amendments relating to election to receive taxable
cash compensation in lieu of nontaxable parking benefits.
Sec. 516. Extension to international organizations of moratorium on
application of certain nondiscrimination rules applicable
to State and local plans.
[[Page H6478]]
Sec. 517. Employees of tax-exempt entities.
Sec. 518. Permissive aggregation of collective bargaining units.
Sec. 519. Repeal of transition rule relating to certain highly
compensated employees.
Sec. 520. Clarification of treatment of employer-provided retirement
advice.
Sec. 521. Annual report dissemination.
Sec. 522. Excess benefit plans.
Sec. 523. Benefit suspension notice.
Sec. 524. Provisions relating to plan amendments.
Sec. 525. Reporting simplification.
Sec. 526. Model plans for small businesses.
TITLE I--EXPANDING COVERAGE
SEC. 101. RESTORATION OF LIMITS FORMERLY IN EFFECT.
(a) Defined Benefit Plans.--
(1) Dollar limit.--(A) Subparagraph (A) of section
415(b)(1) (relating to limitation for defined benefit plans)
is amended by striking ``$90,000'' and inserting
``$180,000''.
(B) Subparagraphs (C) and (D) of section 415(b)(2) are each
amended by striking ``$90,000'' each place it appears in the
headings and the text and inserting ``$180,000''.
(C) Paragraph (7) of section 415(b) (relating to benefits
under certain collectively bargained plans) is amended by
striking ``the greater of $68,212 or one-half the amount
otherwise applicable for such year under paragraph (1)(A) for
`$90,000' '' and inserting ``one-half the amount otherwise
applicable for such year under paragraph (1)(A) for
`$180,000' ''.
(2) Limit reduced when benefit begins before age 62.--
Subparagraph (C) of section 415(b)(2) is amended by striking
``the social security retirement age'' each place it appears
in the heading and text and inserting ``age 62''.
(3) Limit increased when benefit begins after age 65.--
Subparagraph (D) of section 415(b)(2) is amended by striking
``the social security retirement age'' each place it appears
in the heading and text and inserting ``age 65''.
(4) Multiemployer plans and plans maintained by governments
and tax exempt organizations.--Subparagraph (F) of section
415(b)(2) is amended to read as follows:
``(F) Multiemployer plans and 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, a multiemployer plan (as defined in
section 414(f)), or a qualified merchant marine plan,
subparagraph (C) shall be applied as if the last sentence
thereof read as follows: `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 for 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 covering 50 percent of its
employees.--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 a 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.''.
(5) Cost-of-living adjustments.--Subsection (d) of section
415 (related to cost-of-living adjustments) is amended--
(A) in paragraph (1)(A) by striking ``$90,000'' and
inserting ``$180,000'', and
(B) in paragraph (3)(A)--
(i) by striking ``$90,000'' in the heading and inserting
``$180,000'', and
(ii) by striking ``October 1, 1986'' and inserting ``July
1, 1999''.
(b) Defined Contribution Plans.--
(1) Dollar limit.--Subparagraph (A) of section 415(c)(1)
(relating to limitation for defined contribution plans) is
amended by striking ``$30,000'' and inserting ``$45,000''.
(2) Cost-of-living adjustments.--Subsection (d) of section
415 (related to cost-of-living adjustments) is amended--
(A) in paragraph (1)(C) by striking ``$30,000'' and
inserting ``$45,000'', and
(B) in paragraph (3)(D)--
(i) by striking ``$30,000'' in the heading and inserting
``$45,000'', and
(ii) by striking ``October 1, 1993'' and inserting ``July
1, 1999''.
(c) Qualified Trusts.--
(1) Compensation limit.--Sections 401(a)(17), 404(l),
408(k), and 505(b)(7) are each amended by striking
``$150,000'' each place it appears and inserting
``$235,000''.
(2) Base period and rounding of cost-of-living
adjustment.--Subparagraph (B) of section 401(a)(17) is
amended--
(A) by striking ``October 1, 1993'' and inserting ``July 1,
1999'', and
(B) by striking ``$10,000'' both places it appears and
inserting ``$5,000''.
(d) Elective Deferrals.--
(1) In general.--Paragraphs (1) and (5) of section 402(g)
(relating to limitation on exclusion for elective deferrals)
are each amended by striking ``$7,000'' and inserting
``$15,000''.
(2) Conforming amendments.--
(A) Section 402(g) (relating to limitation on exclusion for
elective deferrals), as amended by paragraph (1), is further
amended by striking paragraph (4) and redesignating
paragraphs (5), (6), (7), (8), and (9) as paragraphs (4),
(5), (6), (7), and (8), respectively.
(B) Clause (iii) of section 501(c)(18)(D) is amended by
striking ``(other than paragraph (4) thereof)''.
(e) Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations.--Section 457
(relating to deferred compensation plans of State and local
governments and tax-exempt organizations) is amended--
(1) in subsections (b)(2)(A), (c)(1), and (e)(15) by
striking ``$7,500'' each place it appears and inserting
``$15,000'',
(2) in subsection (b)(3)(A) by striking ``$15,000'' and
inserting ``$30,000'', and
(3) in subsection (e)(15)--
(A) by inserting ``and the $30,000 amount specified in
subsection (b)(3)(A)'' after ``(c)(1)'', and
(B) by striking ``September 30, 1994'' and inserting
``September 30, 1999''.
(f) Simple Retirement Accounts.--
(1) Limitation.--Sections 408(p)(2)(A)(ii), 408(p)(2)(E),
401(k)(11)(B)(i)(I), and 401(k)(11)(E) are each amended by
striking ``$6,000'' and inserting ``$10,000''.
(2) Base period for cost-of-living adjustment.--
Subparagraph (E) of section 408(p)(2) is amended by striking
``September 30, 1996'' and inserting ``September 30, 1999''.
(g) Cost-of-Living Adjustments.--
(1) Plans maintained by governments and tax exempt
organizations.--Paragraph (1) of section 415(d) (as amended
by subsection (b)) 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) (as
amended by subsection (b)) is further 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, 1999.''.
(3) Rounding rule relating to defined benefit plans and
defined contribution plans.--Paragraph (4) of section 415(d)
is amended to read as follows:
``(4) Rounding.--
``(A) $180,000 amount.--Any increase under subparagraph (A)
of paragraph (1) which is not a multiple of $5,000 shall be
rounded to the next lowest multiple of $5,000.
``(B) $130,000 and $45,000 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 (D) of section
415(d)(3) (as amended by paragraph (2)) is amended by
striking ``paragraph (1)(C)'' and inserting ``paragraph
(1)(D)''.
(h) Increase in Amount of Deductible IRA Contributions.--
(1) Increase in maximum amount of deduction.--Subparagraph
(A) of section 219(b)(1) (relating to maximum amount of
deduction) is amended by striking ``$2,000'' and inserting
``$5,000''.
(2) Conforming amendments.--
(A) Subsections (a)(1), (b)(2), (j), and (p)(8) of section
408 are each amended by striking ``$2,000'' each place it
appears and inserting ``$5,000''.
(B) Clause (i) of section 408(o)(2)(B) is amended by
inserting ``the lesser of $2,000, or'' after ``means''.
(C) Paragraph (2) of section 408A(c) is amended by
inserting ``the lesser of $2,000, or'' after ``shall not
exceed''.
(D) Subparagraph (B) of section 4973(b)(1) is amended by
inserting ``(or in the case of a nondeductible individual
retirement plan, the amount allowable as a contribution under
section 408(o))'' after ``contributions,''.
(i) Effective Date.--
(1) In general.--The amendments made by this section shall
apply to years beginning after December 31, 1999.
(2) Collective bargaining agreements.--In the case of a
plan maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers ratified by the date of enactment of this Act, the
amendments made by this section shall not apply to
contributions or benefits pursuant to any such agreement for
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 enactment),
or
(ii) January 1, 2000, or
[[Page H6479]]
(B) January 1, 2004.
SEC. 102. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND
SOLE PROPRIETORS.
(a) Amendment to 1986 Code.--Subsection (f) of section 4975
(relating to other definitions and special rules) is amended
by striking paragraph (6).
(b) Amendments to ERISA.--
(1) Section 408 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1108) is amended--
(A) by striking subsection (d); and
(B) by redesignating subsections (e) and (f) as subsections
(d) and (e), respectively.
(2) Section 407(b)(3)(B) of such Act (29 U.S.C.
1107(b)(3)(B)) is amended by striking ``section 408(e)'' and
inserting ``section 408(d)''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of enactment of this Act.
SEC. 103. SALARY REDUCTION ONLY SIMPLE PLANS.
(a) Simple Retirement Accounts.--
(1) In general.--Paragraph (2) of section 408(p) (as
amended by section 101(f)) is further 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
(D)(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), then 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)
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 inserting ``and
the $5,000 amount under subparagraph (C)'' after
``subparagraph (A)(ii)''.
(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.--
(1) Simple plan.--Subparagraph (B) of section 401(k)(11) 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 a total of $5,000 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)(D)(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).''.
(2) Cost-of-living adjustment.--Subparagraph (E) of section
401(k)(11) is amended by inserting ``and the $5,000 amount
under subparagraph (B)(iii)'' after ``subparagraph
(B)(i)(I)''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1999.
SEC. 104. MODIFICATION OF TOP-HEAVY RULES.
(a) Repeal of Family Aggregation Rules.--Section
416(i)(1)(B)(i)(I) (defining 5-percent owner) is amended by
inserting ``(without regard to subsection (a)(1) thereof)''
after ``section 318''.
(b) Simplification of Definition of Key Employee.--
(1) In general.--Section 416(i)(1)(A) (defining key
employee) is amended--
(A) by striking ``or any of the 4 preceding plan years'' in
the matter preceding clause (i),
(B) by striking clause (i) and inserting the following:
``(i) an officer of the employer who has compensation from
the employer of more than $150,000,'',
(C) by striking clause (ii) and redesignating clauses (iii)
and (iv) as clauses (ii) and (iii), respectively, and
(D) by striking the second sentence in the matter following
clause (iii), as redesignated by subparagraph (C).
(2) Conforming amendment.--Section 416(i)(1)(B)(iii) is
amended by striking ``and subparagraph (A)(ii)''.
(c) Employee Elective Contributions to Plan Not Taken Into
Account.--
(1) Definition of top-heavy plan.--Section 416(g)(4)
(relating to other special rules) is amended by adding at the
end the following:
``(H) Employee elective contributions to plan not taken
into account.--At the election of the employer, any employee
elective contribution described in section 415(c)(3)(D) to a
plan (and earnings allocable thereto) shall not be taken into
account for purposes of determining whether a plan is a top-
heavy plan (or whether any aggregation group which includes
such plan is a top-heavy group).''.
(2) Definition of compensation.--Section 416(i)(1)(D)
(defining compensation) is amended to read as follows:
``(D) Compensation.--
``(i) In general.--For purposes of this paragraph, except
as provided in clause (ii), the term `compensation' has the
meaning given such term by section 414(q)(4).
``(ii) Employee elective contributions to plan not taken
into account.--At the election of the employer, any employee
elective contribution described in section 415(c)(3)(D) to a
plan shall not be taken into account for purposes of
determining compensation.''.
(d) Matching Contributions Taken Into Account for Minimum
Contribution Requirements.--Section 416(c)(2)(A) (relating to
defined contribution plans) is amended by adding at the end
the following: ``Employer matching contributions (as defined
in section 401(m)(4)(A)) shall be taken into account for
purposes of this subparagraph.''.
(e) Requirements for Qualifications.--Clause (ii) of
section 401(a)(10)(B) (relating to requirements for
qualifications for top-heavy plans) is amended by adding at
the end the following new flush sentence:
``The preceding sentence shall not apply to a plan if the
plan is not top-heavy and if it is not reasonable to expect
that the plan will become top-heavy.''.
(f) Distributions During Last Year Before Determination
Date Taken Into Account.--Section 416(g) is amended--
(1) in paragraph (3)--
(A) by striking ``last 5 years'' in the heading and
inserting ``last year before determination date'', and
(B) in the matter following subparagraph (B), by striking
``5-year period'' and inserting ``1-year period'', and
(2) in paragraph (4)(E)--
(A) by striking ``last 5 years'' in the heading and
inserting ``last year before determination date'', and
(B) by striking ``5-year period'' and inserting ``1-year
period''.
(g) Definition of Top-Heavy Plans.--
(1) Exclusion of certain plans from definition of top-heavy
plan.--Paragraph (4) of section 416(d) (relating to other
special rules for top-heavy plans) is amended by adding at
the end the following new subparagraphs:
``(H) Cash or deferred arrangements using alternative
methods of meeting nondiscrimination requirements.--The term
`top-heavy plan' shall not include a cash or deferred
arrangement to the extent that such arrangement meets the
requirements of section 401(k)(12). This subparagraph shall
also apply to contributions that are not required to satisfy
the requirements of section 401(k)(12) but are consistent
with the purposes of such section, as permitted under
regulations which the Secretary shall prescribe. Nothing in
this subparagraph shall preclude an employer from taking into
account contributions made under the cash or deferred
arrangement when determining whether any plan of such
employer satisfies the requirements of this section.
``(I) Defined contribution plans using alternative methods
of meeting nondiscrimination requirements.--The term `top-
heavy plan' shall not include a defined contribution plan to
the extent that such plan meets the requirements of section
401(m)(11). This subparagraph shall also apply to
contributions that are not required to satisfy the
requirements of section 401(m)(11) but are consistent with
the purposes of such section, as permitted under regulations
which the Secretary shall prescribe. Nothing in this
subparagraph shall
[[Page H6480]]
preclude an employer from taking into account contributions
made under the defined contribution plan when determining
whether any plan of such employer satisfies the requirements
of this section.''.
(2) Aggregation group not required to include certain
plans.--Clause (i) of section 416(g)(2)(A) of such Code
(relating to required aggregation) is amended by adding at
the end the following new flush sentence:
``Such term shall not include a plan or arrangement described
in subparagraph (H) or (I) of paragraph (4).''.
(h) Elective Deferrals Not Taken Into Account.--Clause (i)
of section 416(c)(2)(B) (relating to special rule where
maximum contribution less than 3 percent) is amended by
inserting ``(other than elective deferrals (as defined in
section 402(g)(3))'' after ``contributions''.
(i) Frozen Plan Exempt From Minimum Benefit Requirement.--
Subparagraph (C) of section 416(c)(1) (relating to defined
benefit plans) is amended--
(1) in clause (i) by striking ``clause (ii)'' and inserting
``clause (ii) or (iii)'', and
(2) by adding at the end the following:
``(iii) For purposes of determining an employee's years of
service with the employer, any service with the employer
shall be disregarded to the extent that such service occurs
during a plan year when no employee or former employee
benefits under the plan within the meaning of section
410(b).''.
(j) Alternative 60 Percent.--Subsection (g) of section 416
(relating to top heavy plan defined) is amended by adding at
the end the following:
``(5) Alternative 60 percent test.--
``(A) In general.--For any plan year, an employer may elect
for this paragraph to apply to all plans maintained by such
employer. If this paragraph applies to a plan, the term `top-
heavy plan' shall have the meaning set forth in subparagraph
(B) and the term `top-heavy group' shall have the meaning set
forth in subparagraph (C).
``(B) Top-heavy plan defined.--In the case of any plan to
which this paragraph applies, the term `top-heavy plan'
means, with respect to any plan year--
``(i) any defined benefit plan if, for the plan year ending
on the determination date, the present value of the accruals
for key employees exceeds 60 percent of the present value of
the accruals for all employees, and
``(ii) any defined contribution plan if, for the plan year
ending on the determination date, the annual additions for
key employees exceed 60 percent of the annual additions for
all employees.
``(C) Top-heavy group.--In the case of any plan to which
this paragraph applies, the term `top-heavy group' means any
aggregation group if--
``(i) the sum, for the plan year ending on the
determination date, of--
``(I) the present value of the accruals for key employees
under all defined benefit plans included in such group, and
``(II) the aggregate of the annual additions of key
employees under all defined contribution plans included in
such group,
``(ii) exceeds 60 percent of a similar sum determined for
all employees.
``(D) Annual addition.--For purposes of this paragraph, the
term `annual addition' shall have the same meaning as when
used in section 415(c)(2) (without regard to section 415(l)
or section 419A(d)(2)).
``(E) Certain rules not to apply.--Paragraphs (3) and (4)
(other than subparagraphs (B), (C), (D), (E), and (G) of
paragraph (4)) shall not apply for purposes of this
paragraph.''.
(k) Conforming Amendments.--
(1) Subparagraph (A) of section 416(g)(1) is amended by
striking ``subparagraph (B)'' and inserting ``subparagraph
(B) and paragraph (5)''.
(2) Subparagraph (B) of section 416(g)(2) is amended by
striking ``The term'' and inserting ``Except as provided in
paragraph (5), the term''.
(3) Subparagraph (A) of section 415(b)(5) is amended by
adding at the end the following: ``An employee shall not be
credited with a year of participation in a defined benefit
plan for any year in which such employee does not benefit
under the plan within the meaning of section 410(b).''.
(l) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1999.
SEC. 105. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR
PURPOSES OF LIMITS.
(a) In General.--Section 404 is amended by adding at the
end the following new subsection:
``(n) Elective Deferrals Not Taken Into Account for
Purposes of Limits.--Elective deferrals (as defined in
section 402(g)(3)) shall not be subject to any limitations
described in this section (other than subsection (a)), and
such elective deferrals shall not be taken into account in
applying such limitations to any other contributions.''.
(b) Conforming Amendments.--Paragraph (3) of section
4972(c) is amended to read as follows:
``(3) Contributions not taken into account.--In determining
the amount of nondeductible contributions for any taxable
year, there shall not be taken into account--
``(A) any elective deferral (as defined in section
402(g)(3)), or
``(B) any contribution for such taxable year which is
distributed to the employer in a distribution described in
section 4980(c)(2)(B)(ii) if such distribution is made on or
before the last day on which a contribution may be made for
such taxable year under section 404(a)(6).''.
(c) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 1999.
SEC. 106. 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) by inserting ``other than a new single-employer plan of
a small employer (as defined in clause (iv)),'' after ``in
the case of a single-employer plan,'' in clause (i),
(2) by striking the period at the end of clause (iii) and
inserting ``; and'', and
(3) by inserting after clause (iii) the following new
clause:
``(iv) in the case of a new single-employer plan of a small
employer, $5 for each individual who is a participant in such
plan during the plan year. For purposes of this clause (iv):
``(I) The term `new single-employer plan' means a single-
employer plan during its first five plan years; provided,
however, that a single-employer plan is not a new single-
employer plan if any contributing sponsor or any member of
its controlled group (including any predecessor of a
contributing sponsor or member of such predecessor's
controlled group) had established or maintained a plan to
which this title applied that included substantially the same
employees as such new plan, at any time within the 36-month
period preceding the adoption of such new plan.
``(II) The term `small employer` means a contributing
sponsor that on the first day of the plan year has, in
combination with all members of its controlled group, 100 or
fewer employees.
``(III) 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 their controlled groups shall be aggregated for purposes
of determining whether the plan shall be considered to be a
plan of a small employer.''.
(b) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 1999.
SEC. 107. PHASE-IN OF ADDITIONAL PREMIUM FOR NEW PLANS.
(a) In General.--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--
(1) by inserting ``(or, in the case of a new single-
employer plan described in clause (vi), the amount determined
under clause (v))'' after ``determined under clause (ii)'' in
clause (i), and
(2) by inserting after clause (iv) the following new
clauses:
``(v) The amount determined under this clause for any plan
year of a new single-employer plan (as described in clause
(vi)) shall be an amount equal to the product derived by
multiplying the amount determined under clause (ii) by the
applicable percentage. For purposes of this clause (v), 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, and
``(V) 80 percent, for the fifth plan year.
``(vi) For purposes of clause (v), the term `new single-
employer plan' means a single-employer plan during its first
five plan years; provided, however, that a single-employer
plan is not a new single-employer plan if any contributing
sponsor or any member of its controlled group (including any
predecessor of a contributing sponsor or member of such
predecessor's controlled group) had established or maintained
a plan to which this title applied that included
substantially the same employees as such new plan, at any
time within the 36-month period preceding the adoption of
such new plan.''.
(b) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 1999.
SEC. 108. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED
COMPENSATION PLANS OF STATE AND LOCAL
GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.
(a) In General.--Subsection (c) of section 457 (relating to
deferred compensation plans of State and local governments
and tax-exempt organizations) is amended to read as follows:
``(c) Limitation.--The maximum amount of the compensation
of any one individual which may be deferred under subsection
(a) during any taxable year shall not exceed $15,000 (as
modified by any adjustment provided under subsection
(b)(3)).''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to years beginning after December 31, 1999.
SEC. 109. ELIMINATION OF USER FEE FOR REQUESTS TO IRS
REGARDING PENSION PLANS.
(a) Elimination of Certain User Fees.--The Secretary of the
Treasury or the Secretary's delegate shall not require
payment of user fees under the program established under
section 10511 of the Revenue Act of 1987 for requests to the
Internal Revenue Service for ruling letters, opinion letters,
and determination letters or similar requests with respect to
the qualified status of a pension benefit plan maintained
solely by one or more eligible employers or any trust which
is part of the plan.
(b) Pension Benefit Plan.--For purposes of this section,
the term `pension benefit
[[Page H6481]]
plan' means a pension, profit-sharing, stock bonus, annuity,
or employee stock ownership plan.
(c) Eligible Employer.--For purposes of this section, the
term ``eligible employer'' has the same meaning given such
term in section 408(p)(2)(C)(i)(I) of the Internal Revenue
Code of 1986. The determination of whether an employer is an
eligible employer under this section shall be made as of the
date of the request described in subsection (a).
(d) Effective Date.--The provisions of this section shall
apply with respect to requests made after December 31, 1999.
SEC. 110. ALTERNATIVE METHOD OF MEETING NONDISCRIMINATION
REQUIREMENTS FOR AUTOMATIC CONTRIBUTION TRUST.
(a) In General.--Section 401(k) (relating to cash or
deferred arrangement) is amended by adding at the end the
following new paragraph:
``(13) Nondiscrimination requirements for automatic
contribution trusts.--
``(A) In general.--A cash or deferred arrangement shall be
treated as meeting the requirements of paragraph (3)(A)(ii)
if such arrangement constitutes an automatic contribution
trust.
``(B) Automatic contribution trust.--For purposes of this
paragraph, the term `automatic contribution trust' means an
arrangement--
``(i) under which each employee eligible to participate in
the arrangement is treated as having elected to have the
employer make elective contributions in an amount equal to
the uniform percentage (not less than 3 percent) of
compensation provided under the arrangement until the
employee specifically elects not to have such contributions
made, and
``(ii) which meets the other requirements of this
paragraph.
Clause (i) of this subparagraph shall not apply to any
employee who was eligible to participate in the arrangement
(or a predecessor arrangement) immediately before the first
date on which the arrangement is an automatic contribution
trust. The election treated as having been made under clause
(i) shall cease to apply to compensation paid after the
specific election by the employee.
``(C) Participation.--
``(i) Except as provided in clause (ii), an arrangement
meets the requirements of this subparagraph for any year if,
during the plan year or the preceding plan year, elective
contributions are made on behalf of at least 70 percent of
employees other than highly compensated employees eligible to
participate in the arrangement.
``(ii) An arrangement (other than a successor arrangement)
shall be treated as meeting the requirements of this
subparagraph with respect to the first plan year in which the
arrangement is effective.
``(D) Matching or nonelective contributions.--The
requirements of this subparagraph are met if, under the
arrangement, the employer--
``(i) makes matching contributions on behalf of each
employee who is not a highly compensated employee in an
amount equal to 50 percent of the elective contributions of
the employee to the extent such elective contributions do not
exceed 5 percent of compensation, or
``(ii) is required, without regard to whether the employee
makes an elective contribution or employee contribution, to
make a contribution to a defined contribution plan on behalf
of each employee who is not a highly compensated employee and
who is eligible to participate in the arrangement in an
amount equal to at least 2 percent of the employee's
compensation.
The rules of clauses (ii), (iii), and (iv) of paragraph
(12)(B) shall apply for purposes of clause (i).
``(E) Vesting.--The requirements of this subparagraph are
met if the requirements of subparagraph (C) of paragraph (2)
are met with respect to all employer contributions (including
matching contributions) taken into account in determining
whether the requirements of subparagraph (B) or (C) are met.
``(F) Notice requirements.--
``(i) In general.--The requirements of this subparagraph
are met if the requirements of clauses (ii) and (iii) are
met.
``(ii) Reasonable period to make election.--The
requirements of this clause are met if each employee to whom
subparagraph (B)(i) applies--
``(I) receives a notice explaining the employee's right
under the arrangement to elect not to have elective
contributions made on the employee's behalf, and
``(II) has a reasonable period of time after receipt of
such notice and before the first elective contribution is
made to make such election.
``(iii) Annual notice of rights and obligations.--The
requirements of this clause are met if each employee eligible
to participate in the arrangement is, within a reasonable
period before any year, given notice of the employee's rights
and obligations under the arrangement.
The requirements of clauses (i) and (ii) of paragraph (12)(D)
shall be met with respect to the notices described in clauses
(ii) and (iii) of this subparagraph.''.
(b) Matching Contributions.--Section 401(m) (relating to
nondiscrimination test for matching contributions and
employee contributions) is amended by redesignating paragraph
(12) as paragraph (13) and by inserting after paragraph (11)
the following new paragraph:
``(12) Alternative method for automatic contribution
trusts.--
``(A) In general.--A defined contribution plan shall be
treated as meeting the requirements of paragraph (2) with
respect to matching contributions if the plan--
``(i) meets the contribution requirements of subparagraphs
(B)(i) and (D) of subsection (k)(13),
``(ii) meets the participation requirements of subsection
(k)(13)(C),
``(iii) meets the vesting and notice requirements of
subparagraphs (E) and (F) of subsection (k)(13), and
``(iv) meets the requirements of paragraph (11)(B).
``(B) Matching contributions.--An annuity contract under
section 403(b) shall be treated as meeting the requirements
of paragraph (2) with respect to matching contributions if
such contract meets requirements similar to the requirements
under subparagraph (A).''.
(c) Exclusion From Definition of Top-Heavy Plans.--
Paragraph (4) of section 416(d) (relating to other special
rules for top-heavy plans), as amended by section 104(g), is
amended by adding at the end the following new subparagraph:
``(J) Automatic contribution trust.--The term `top-heavy
plan' shall not include an automatic contribution trust under
section 401(k)(13). Nothing in this subparagraph shall
preclude an employer from taking into account
contributions made under the automatic contribution trust
when determining whether any plan of such employer
satisfies the requirements of this section.''.
(d) Definition of Compensation.--
(1) In general.--Paragraph (9) of section 401(k) is amended
to read as follows:
``(9) Compensation.--
``(A) In general.--Except as provided in subparagraph (B),
for purposes of this section, the term `compensation' has the
meaning given such term by section 414(s).
``(B) Use of base pay.--For purposes of paragraph (12)(B),
the term `compensation' means the definition of compensation
used by the cash or deferred arrangement if such
compensation--
``(i) meets the requirements of section 414(s), or
``(ii) constitutes base pay.
``(C) Base pay.--For purposes of subparagraph (B), the term
`base pay' means a reasonable definition of compensation that
does not by design favor highly compensated employees and
that excludes on a consistent basis all irregular or
additional compensation.''.
(2) Automatic contribution trusts.--Paragraph (9)(B) of
section 401(k) (as amended by paragraph (1)) is amended by
striking ``paragraph (12)(B)'' and inserting ``paragraphs
(12)(B), (13)(B), and (13)(D)(i)''.
(3) Matching contributions.--Paragraph (11) of section
401(m) is amended by adding at the end the following:
``(C) Definition of compensation.--For purposes of
subparagraph (B), the term ``compensation'' has the meaning
given such term by subsection (k)(9)(B).''.
(e) Application by Year or Payroll Period.--
(1) Cash or deferred arrangements.--Subparagraph (B) of
section 401(k)(12) is amended by adding at the end the
following:
``(iv) Application by year or payroll period.--The
requirements of this subparagraph may be met for a plan year
by meeting such requirements either--
``(I) with respect to the plan year as a whole, or
``(II) separately with respect to each payroll period (or
other payment of compensation) taken into account under the
arrangement for the plan year.''.
(2) Defined contribution plans.--Paragraph (11) of section
401(m) (as amended by this section) is amended by adding at
the end the following:
``(D) Application by year or payroll period.--The
requirements of subparagraph (B) may be met for a plan year
by meeting such requirements either--
``(i) with respect to the plan year as a whole, or
``(ii) separately with respect to each payroll period (or
other payment of compensation) taken into account under the
plan for the plan year.''.
(f) Section 403(b) Contracts.--Paragraph (11) of section
401(m) (as amended by this section) is amended by adding at
the end the following:
``(E) Section 403(b) contracts.--An annuity contract under
section 403(b) shall be treated as meeting the requirements
of paragraph (2) with respect to matching contributions if
such contract meets requirements similar to the requirements
under subparagraph (A).''.
(e) Effective Date.--
(1) In general.--Except as provided by paragraph (2), the
amendments made by this section shall apply to plan years
beginning after December 31, 1999.
(2) Exception.--The amendments made by subsections (d)(1),
(d)(3), (e), and (f) shall apply to years beginning after
December 31, 1998.
SEC. 111. DEDUCTION LIMITS.
(a) In General.--
(1) Stock bonus and profit sharing trusts.--Subclause (I)
of section 404(a)(3)(A)(i) (relating to stock bonus and
profit sharing trusts) is amended by striking ``15 percent''
and inserting ``25 percent''.
[[Page H6482]]
(2) Compensation.--Section 404(a) (relating to general
rule) is amended by adding at the end the following:
``(12) Definition of compensation.--For purposes of
paragraphs (3), (7), and (9), the term `compensation
otherwise paid or accrued during the taxable year' shall
include amounts treated as `participant's compensation'
under subparagraph (C) or (D) of section 415(c)(3).''.
(3) Defined contribution plans.--Subparagraph (A) of
section 404(a)(3) (relating to stock bonus and profit sharing
trusts) is amended by adding at the end the following:
``(vi) Defined contribution plans subject to the funding
standards.--Except as provided by the Secretary, for purposes
of this subparagraph, a defined contribution plan which is
subject to the funding standards of section 412 shall be
treated in the same manner as a stock bonus or profit-sharing
plan.''.
(b) Conforming Amendments.--
(1) Subparagraph (A) of section 404(a)(3) is amended by
striking clause (v) and by redesignating clause (vi) (as
added by subsection (a)(3) of this section) as clause (v).
(2) Subparagraph (B) of section 404(a)(3) is amended by
striking the last sentence thereof.
(3) Subparagraph (D) of section 404(a)(8) is amended by
striking the period at the end and inserting the following:
``, except that such earned income shall be adjusted under
rules similar to the rules of paragraph (12).''.
(4) Subparagraph (C) of section 404(h)(1) is amended by
striking ``15 percent'' each place it appears and inserting
``25 percent''.
(5) Paragraph (2) of section 404(h) is amended by striking
``stock bonus or profit-sharing trust'' and inserting ``trust
subject to subsection (a)(3)(A)''.
(6) Clause (i) of section 4972(c)(6)(B) is amended by
striking ``(within the meaning of section 404(a))'' and
inserting ``(within the meaning of section 404(a) and as
adjusted under section 404(a)(12))''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1999.
SEC. 112. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX
CONTRIBUTIONS.
(a) In General.--Subpart A of part I of subchapter D of
chapter 1 (relating to deferred compensation, etc.) is
amended by inserting after section 402 the following new
section:
``SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS PLUS
CONTRIBUTIONS.
``(a) General Rule.--If an applicable retirement plan
includes a qualified plus contribution program--
``(1) any designated plus contribution made by an employee
pursuant to the program shall be treated as an elective
deferral for purposes of this chapter, except that such
contribution shall not be excludable from gross income, and
``(2) such plan (and any arrangement which is part of such
plan) shall not be treated as failing to meet any requirement
of this chapter solely by reason of including such program.
``(b) Qualified Plus Contribution Program.--For purposes of
this section--
``(1) In general.--The term `qualified plus contribution
program' means a program under which an employee may elect to
make designated plus contributions in lieu of all or a
portion of elective deferrals the employee is otherwise
eligible to make under the applicable retirement plan.
``(2) Separate accounting required.--A program shall not be
treated as a qualified plus contribution program unless the
applicable retirement plan--
``(A) establishes separate accounts (`designated plus
accounts') for the designated plus contributions of each
employee and any earnings properly allocable to the
contributions, and
``(B) maintains separate recordkeeping with respect to each
account.
``(c) Definitions and Rules Relating to Designated Plus
Contributions.--For purposes of this section--
``(1) Designated plus contribution.--The term `designated
plus contribution' means any elective deferral which--
``(A) is excludable from gross income of an employee
without regard to this section, and
``(B) the employee designates (at such time and in such
manner as the Secretary may prescribe) as not being so
excludable.
``(2) Designation limits.--The amount of elective deferrals
which an employee may designate under paragraph (1) shall not
exceed the excess (if any) of--
``(A) the maximum amount of elective deferrals excludable
from gross income of the employee for the taxable year
(without regard to this section), over
``(B) the aggregate amount of elective deferrals of the
employee for the taxable year which the employee does not
designate under paragraph (1).
``(3) Rollover contributions.--
``(A) In general.--A rollover contribution of any payment
or distribution from a designated plus account which is
otherwise allowable under this chapter may be made only if
the contribution is to--
``(i) another designated plus account of the individual
from whose account the payment or distribution was made, or
``(ii) a Roth IRA of such individual.
``(B) Coordination with limit.--Any rollover contribution
to a designated plus account under subparagraph (A) shall not
be taken into account for purposes of paragraph (1).
``(d) Distribution Rules.--For purposes of this title--
``(1) Exclusion.--Any qualified distribution from a
designated plus account shall not be includible in gross
income.
``(2) Qualified distribution.--For purposes of this
subsection--
``(A) In general.--The term `qualified distribution' has
the meaning given such term by section 408A(d)(2)(A).
``(B) Distributions within nonexclusion period.--A payment
or distribution from a designated plus account shall not be
treated as a qualified distribution if such payment or
distribution is made within the 5-taxable-year period
beginning with the earlier of--
``(i) the earlier of--
``(I) the 1st taxable year for which the individual made a
designated plus contribution to any designated plus account
established for such individual under the same applicable
retirement plan, or
``(II) if a rollover contribution was made to such
designated plus account from a designated plus account
previously established for such individual under another
applicable retirement plan, the 1st taxable year for which
the individual made a designated plus contribution to such
previously established account), or
``(ii) the 1st taxable year for which the individual (or
the individual's spouse) made a contribution to a Roth IRA
established for such individual.
``(C) Distributions of excess deferrals and earnings.--The
term `qualified distribution' shall not include any
distribution of any excess deferral under section 402(g)(2)
and any income on the excess deferral.
``(3) Aggregation rules.--Section 72 shall be applied
separately with respect to distributions and payments from a
designated plus account and other distributions and payments
from the plan.
``(e) Other Definitions.--For purposes of this section--
``(1) Applicable retirement plan.--The term `applicable
retirement plan' means--
``(A) an employees' trust described in section 401(a) which
is exempt from tax under section 501(a), and
``(B) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b).
``(2) Elective deferral.--The term `elective deferral'
means any elective deferral described in subparagraph (A) or
(C) of section 402(g)(3).''
(b) Excess Deferrals.--Section 402(g) (relating to
limitation on exclusion for elective deferrals) is amended--
(1) by adding at the end of paragraph (1) the following new
sentence: ``The preceding sentence shall not apply to so much
of such excess as does not exceed the designated plus
contributions of the individual for the taxable year.'', and
(2) by inserting ``(or would be included but for the last
sentence thereof)'' after ``paragraph (1)'' in paragraph
(2)(A).
(c) Rollovers.--Subparagraph (B) of section 402(c)(7) (as
amended by sections 301 and 302) is amended by adding at the
end the following:
``Without regard to the foregoing provisions of this
paragraph, if any portion of an eligible rollover
distribution is attributable to payments or distributions
from a designated plus account (as defined in section 402A),
an eligible retirement plan with respect to such portion
shall include only another designated plus account and a Roth
IRA.''
(d) Reporting Requirements.--
(1) W-2 information.--Section 6051(a)(8) is amended by
inserting ``, including the amount of designated plus
contributions (as defined in section 402A)'' before the comma
at the end.
(2) Information.--Section 6047 is amended by redesignating
subsection (f) as subsection (g) and by inserting after
subsection (e) the following new subsection:
``(f) Designated Plus Contributions.--The Secretary shall
require the plan administrator of each applicable retirement
plan (as defined in section 402A) to make such returns and
reports regarding designated plus contributions (as so
defined) to the Secretary, participants and beneficiaries of
the plan, and such other persons as the Secretary may
prescribe.''
(e) Conforming Amendments.--
(1) Section 408A(e) is amended by adding after the first
sentence the following new sentence: ``Such term includes a
rollover contribution described in section 402A(c)(3)(A).''
(2) The table of sections for subpart A of part I of
subchapter D of chapter 1 is amended by inserting after the
item relating to section 402 the following new item:
``Sec. 402A. Optional treatment of elective deferrals as plus
contributions.''
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 113. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL
EMPLOYERS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business related credits) is amended
by adding at the end the following new section:
``SEC. 45D. SMALL EMPLOYER PENSION PLAN STARTUP COSTS.
``(a) General Rule.--For purposes of section 38, in the
case of an eligible employer, the small employer pension plan
startup cost credit determined under this section for any
[[Page H6483]]
taxable year is an amount equal to 50 percent of the
qualified startup costs paid or incurred by the taxpayer
during the taxable year.
``(b) Dollar Limitation.--The amount of the credit
determined under this section for any taxable year shall not
exceed--
``(1) $1,000 for the first credit year,
``(2) $500 for each of the 2 taxable years immediately
following the first credit year, and
``(3) zero for any other taxable year.
``(c) Eligible Employer.--For purposes of this section--
``(1) In general.--The term `eligible employer' has the
meaning given such term by section 408(p)(2)(C)(i).
``(2) Employers maintaining qualified plans during 1998 not
eligible.--Such term shall not include an employer if such
employer (or any predecessor employer) maintained a qualified
plan (as defined in section 408(p)(2)(D)(ii)) with respect to
which contributions were made, or benefits were accrued, for
service in 1998. If only individuals other than employees
described in subparagraph (A) of section 410(b)(3) are
eligible to participate in the qualified employer plan
referred to in subsection (d)(1), then the preceding sentence
shall be applied without regard to any qualified plan in
which only employees so described are eligible to
participate.
``(d) Other Definitions.--For purposes of this section--
``(1) Qualified startup costs.--
``(A) In general.--The term `qualified startup costs' means
any ordinary and necessary expenses of an eligible employer
which are paid or incurred in connection with--
``(i) the establishment or administration of an eligible
employer plan, or
``(ii) the retirement-related education of employees with
respect to such plan.
``(B) Plan must have at least 2 participants.--Such term
shall not include any expense in connection with a plan that
does not have at least 2 individuals who are eligible to
participate.
``(C) Plan must be established before january 1, 2002.--
Such term shall not include any expense in connection with a
plan established after December 31, 2001.
``(2) Eligible employer plan.--The term `eligible employer
plan' means a qualified employer plan within the meaning of
section 4972(d).
``(3) First credit year.--The term `first credit year'
means--
``(A) the taxable year which includes the date that the
eligible employer plan to which such costs relate becomes
effective, or
``(B) at the election of the eligible employer, the taxable
year preceding the taxable year referred to in subparagraph
(A).
``(e) Special Rules.--For purposes of this section--
``(1) Aggregation rules.--All persons treated as a single
employer under subsection (a) or (b) of section 52, or
subsection (n) or (o) of section 414, shall be treated as one
person. All eligible employer plans shall be treated as 1
eligible employer plan.
``(2) Disallowance of deduction.--No deduction shall be
allowed for that portion of the qualified startup costs paid
or incurred for the taxable year which is equal to the credit
determined under subsection (a).
``(3) Election not to claim credit.--This section shall not
apply to a taxpayer for any taxable year if such taxpayer
elects to have this section not apply for such taxable
year.''
(b) Credit Allowed as Part of General Business Credit.--
Section 38(b) (defining current year business credit) is
amended by striking ``plus'' at the end of paragraph (11), by
striking the period at the end of paragraph (12) and
inserting ``, plus'', and by adding at the end the following
new paragraph:
``(13) in the case of an eligible employer (as defined in
section 45D(c)), the small employer pension plan startup cost
credit determined under section 45D(a).''
(c) Conforming Amendments.--
(1) Section 39(d) is amended by adding at the end the
following new paragraph:
``(8) No carryback of small employer pension plan startup
cost credit before effective date.--No portion of the unused
business credit for any taxable year which is attributable to
the small employer pension plan startup cost credit
determined under section 45D may be carried back to a taxable
year ending on or before the date of the enactment of section
45D.''
(2) Subsection (c) of section 196 is amended by striking
``and'' at the end of paragraph (7), by striking the period
at the end of paragraph (8) and inserting ``, and'', and by
adding at the end the following new paragraph:
``(9) the small employer pension plan startup cost credit
determined under section 45D(a).''
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by adding at the end the
following new item:
``Sec. 45D. Small employer pension plan startup costs.''
(d) Effective Date.--The amendments made by this section
shall apply to costs paid or incurred in taxable years ending
after the date of the enactment of this Act.
TITLE II--ENHANCING FAIRNESS FOR WOMEN AND CHILDREN
SEC. 201. ADDITIONAL SALARY REDUCTION CATCH-UP CONTRIBUTIONS.
(a) Limitation on Exclusion for Elective Deferrals.--
(1) In general.--Subsection (g) of section 402 (as amended
by section 101(d)) is further amended by adding at the end
the following:
``(9) Catch-up contributions for those approaching
retirement.--In the case of an individual who has attained
age 50 during any taxable year, the limitation of paragraph
(1) for such year, after the application of paragraph (8),
shall be increased by $5,000.''.
(2) Cost-of-living adjustment.--Paragraph (4) of section
402(g) (relating to cost-of-living adjustment), as amended by
section 101(d), is further amended by inserting ``and the
$5,000 amount under paragraph (9)'' after ``paragraph (1)''.
(b) Simple Retirement Accounts.--
(1) In general.--Paragraph (2) of section 408(p) (relating
to qualified salary reduction arrangement) (as amended by
sections 101(f) and 103(a)) is further amended by
redesignating subparagraph (F) as subparagraph (G) and by
inserting after subparagraph (E) the following new
subparagraph:
``(F) Catch-up contributions for those approaching
retirement.--In the case of an individual who has attained
age 50 during any taxable year, the limitation of
subparagraph (A)(ii) for such year shall be increased by
$5,000.''.
(2) Cost-of-living adjustment.--Subparagraph (G) of section
408(p)(2) (as so redesignated) is amended by inserting ``and
the $5,000 amount under subparagraph (F)'' after
``subparagraph (A)(ii)''.
(c) Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations.--
(1) In general.--Subsection (b) of section 457 (relating to
definition of eligible deferred compensation plan) is amended
by adding at the end the following new paragraph:
``(7) Catch-up contributions for those approaching
retirement.--In the case of an individual who has attained
age 50 during any taxable year, the limitation of paragraph
(2)(A) for such year shall be increased by $5,000.''.
(2) Cost-of-living adjustment.--Paragraph (15) of section
457(e) (relating to cost-of-living adjustment) is amended by
inserting ``, and the $5,000 amount specified in subsection
(b)(7),'' after ``(c)(1)''.
(d) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1999.
SEC. 202. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES
TO DEFINED CONTRIBUTION PLANS.
(a) In General.--
(1) Subparagraph (B) of section 415(c)(1) (relating to
limitation for defined contribution plans) is amended to read
as follows:
``(B) the participant's compensation.''.
(2) Conforming amendments.--
(A) Subsection (f) of section 72 is amended by striking
``section 403(b)(2)(D)(iii))'' and inserting ``section
403(b)(2)(D)(iii), as in effect on December 31, 1998)''.
(B) Section 403(b) is amended--
(i) by striking ``the exclusion allowance for such taxable
year'' in paragraph (1) and inserting ``the applicable limit
under section 415'',
(ii) by striking paragraph (2), and
(iii) by inserting ``or any amount received by a former
employee after the 5th taxable year following the taxable
year in which such employee was terminated'' before the
period at the end of the second sentence of paragraph (3).
(C) Section 404(a)(10)(B) is amended by striking ``, the
exclusion allowance under section 403(b)(2),''.
(D) Section 415(a)(2) is amended by striking ``, and the
amount of the contribution for such portion shall reduce the
exclusion allowance as provided in section 403(b)(2)''.
(E) Section 415(c)(3) is amended by adding at the end the
following new subparagraph:
``(E) Annuity contracts.--In the case of an annuity
contract described in section 403(b), the term `participant's
compensation' means the participant's includible compensation
determined under section 403(b)(3).''.
(F) Section 415(c) is amended by striking paragraph (4).
(G) Section 415(c)(7) is amended to read as follows:
``(7) Certain contributions by church plans not treated as
exceeding limit.--
``(A) In general.--Notwithstanding any other provision of
this subsection, at the election of a participant who is an
employee of a church, a convention or association of
churches, including an organization described in section
414(e)(3)(B)(ii), contributions and other additions for an
annuity contract or retirement income account described in
section 403(b) with respect to such participant, when
expressed as an annual addition to such participant's
account, shall be treated as not exceeding the limitation of
paragraph (1) if such annual addition is not in excess of
$10,000.
``(B) $40,000 aggregate limitation.--The total amount of
additions with respect to any participant which may be taken
into account for purposes of this subparagraph for all years
may not exceed $40,000.
``(C) Annual addition.--For purposes of this paragraph, the
term `annual addition' has the meaning given such term by
paragraph (2).''.
(H) Section 415(e)(5) is amended--
(i) by striking ``(except in the case of a participant who
has elected under subsection (c)(4)(D) to have the provisions
of subsection (c)(4)(C) apply)'', and
(ii) by striking the last sentence.
(I) Section 415(n)(2)(B) is amended by striking
``percentage''.
[[Page H6484]]
(J) Subparagraph (B) of section 402(g)(7) (as amended by
section 101(d)) is amended by inserting before the period at
the end the following: ``(as in effect on the date of the
enactment of the Retirement Security for the 21st Century
Act)''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 1999.
(b) Special Rules for Sections 403(b) and 408.--
(1) In general.--Subsection (k) of section 415 is amended
by adding at the end the following new paragraph:
``(4) Special rules for sections 403(b) and 408.--For
purposes of this section, any annuity contract described in
section 403(b) for the benefit of a participant shall be
treated as a defined contribution plan maintained by each
employer with respect to which the participant has the
control required under subsection (b) or (c) of section 414
(as modified by subsection (h)). For purposes of this
section, any contribution by an employer to a simplified
employee pension plan for an individual for a taxable year
shall be treated as an employer contribution to a defined
contribution plan for such individual for such year.''.
(2) Effective date.--The amendment made by paragraph (1)
shall apply to limitation years beginning after December 31,
1999.
(c) Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations.--Subparagraph (B)
of section 457(b)(2) (relating to salary limitation on
eligible deferred compensation plans) is amended by striking
``33\1/3\ percent'' and inserting ``100 percent''.
(d) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1999.
SEC. 203. FASTER VESTING OF CERTAIN EMPLOYER MATCHING
CONTRIBUTIONS.
(a) Amendments to 1986 Code.--Section 411(a) (relating to
minimum vesting standards) is amended--
(1) in paragraph (2), by striking ``A plan'' and inserting
``Except as provided in paragraph (12), a plan'', and
(2) by adding at the end the following:
``(12) Faster vesting for matching contributions.--In the
case of matching contributions (as defined in section
401(m)(4)(A)), paragraph (2) shall be applied--
``(A) by substituting `3 years' for `5 years' in
subparagraph (A), and
``(B) by substituting the following table for the table
contained in subparagraph (B):
The nonforfeitable
``Years of service: percentage is:
1.............................................................20
2.............................................................40
3.............................................................60
4.............................................................80
5.........................................................100.''.
(b) Amendments to ERISA.--Section 203(a) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1053(a)) is
amended--
(1) in paragraph (2), by striking ``A plan'' and inserting
``Except as provided in paragraph (4), a plan'', and
(2) by adding at the end the following:
``(4) In the case of matching contributions (as defined in
section 401(m)(4)(A) of the Internal Revenue Code of 1986),
paragraph (2) shall be applied--
``(A) by substituting `3 years' for `5 years' in
subparagraph (A), and
``(B) by substituting the following table for the table
contained in subparagraph (B):
The nonforfeitable
``Years of service: percentage is:
1.............................................................20
2.............................................................40
3.............................................................60
4.............................................................80
5.........................................................100.''.
(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, 1999.
(2) Collective bargaining agreements.--In the case of a
plan maintained pursuant to 1 or more collective bargaining
agreements between employee representatives and 1 or more
employers ratified by the date of 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 enactment),
or
(ii) January 1, 2000, or
(B) January 1, 2004.
(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. 204. DEFERRED ANNUITIES FOR SURVIVING SPOUSES OF FEDERAL
EMPLOYEES.
(a) In General.--Section 8341 of title 5, United States
Code, is amended--
(1) in subsection (h)(1), by striking ``section 8338(b) of
this title'' and inserting ``section 8338(b), and a former
spouse of a deceased former employee who separated from the
service with title to a deferred annuity under section
8338 (if they were married to one another prior to the
date of separation),''; and
(2) by adding at the end the following:
``(j)(1) If a former employee dies after having separated
from the service with title to a deferred annuity under
section 8338 but before having established a valid claim for
annuity, and is survived by a spouse to whom married on the
date of separation, the surviving spouse may elect to
receive--
``(A) an annuity, commencing on what would have been the
former employee's 62d birthday, equal to 55 percent of the
former employee's deferred annuity;
``(B) an annuity, commencing on the day after the date of
death of the former employee, such that, to the extent
practicable, the present value of the future payments of the
annuity would be actuarially equivalent to the present value
of the future payments under subparagraph (A) as of the day
after the former employee's death; or
``(C) the lump-sum credit, if the surviving spouse is the
individual who would be entitled to the lump-sum credit and
if such surviving spouse files application therefor.
``(2) An annuity under this subsection and the right
thereto terminate on the last day of the month before the
surviving spouse remarries before becoming 55 years of age,
or dies.''.
(b) Corresponding Amendment for FERS.--Section 8445(a) of
title 5, United States Code, is amended--
(1) by striking ``(or of a former employee or'' and
inserting ``(or of a former''; and
(2) by striking ``annuity)'' and inserting ``annuity, or of
a former employee who dies after having separated from the
service with title to a deferred annuity under section 8413
but before having established a valid claim for annuity (if
such former spouse was married to such former employee prior
to the date of separation))''.
(c) Effective Date.--The amendments made by this section
shall apply with respect to surviving spouses and former
spouses (whose marriage, in the case of the amendments made
by subsection (a), terminated after May 6, 1985) of former
employees who die after the date of the enactment of this
Act.
SEC. 205. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBUTION RULES.
(a) Simplification and Finalization of Minimum Distribution
Requirements.--
(1) In general.--The Secretary of the Treasury shall--
(A) simplify and finalize the regulations relating to
minimum distribution requirements under sections 401(a)(9),
408(a)(6) and (b)(3), 403(b)(10), and 457(d)(2) of the
Internal Revenue Code of 1986, and
(B) modify such regulations to--
(i) reflect increases in life expectancy, and
(ii) revise the required distribution methods so that,
under reasonable assumptions, the amount of the required
minimum distribution does not decrease over a participant's
life expectancy.
(2) Fresh start.--Notwithstanding subparagraph (D) of
section 401(a)(9) of such Code, during the first year that
regulations are in effect under this subsection, required
distributions for future years may be redetermined to reflect
changes under such regulations. Such redetermination shall
include the opportunity to choose a new designated
beneficiary and to elect a new method of calculating life
expectancy.
(3) Effective date for regulations.--Regulations referred
to in paragraph (1) shall be effective for years beginning
after December 31, 2000, and shall apply in such years
without regard to whether an individual had previously begun
receiving minimum distributions.
(b) Amount Not Subject to Minimum Distribution
Requirements.--Paragraph (9) of section 401(a) is amended--
(1) in subparagraph (A), by inserting ``(minus the
exclusion amount)'' after ``the entire interest''; and
(2) by adding at the end the following:
``(H) Exclusion amount.--
``(i) In general.--For purposes of this paragraph, the term
`exclusion amount' means--
``(I) $100,000 in the case of a defined contribution plan;
``(II) $100,000 in the case of an individual retirement
plan; and
``(III) $0 in the case of a defined benefit plan.
``(ii) Aggregation of plans.--For purposes of determining
the exclusion amount under clause (i)--
``(I) all defined contribution plans maintained by the same
employer shall be treated as a single plan; and
``(II) all individual retirement plans (other than Roth
IRAs) of the individual shall be treated as a single plan.
``(iii) Cost-of-living adjustment.--The Secretary shall
adjust the $100,000 exclusion amount specified in clause (i)
at the same time and in the same manner as under section
415(d), except that the base period shall be the calendar
quarter ending September 30, 1999.''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2000.
(c) Repeal of Rule Where Distributions Had Begun Before
Death Occurs.--
(1) In general.--Subparagraph (B) of section 401(a)(9) is
amended by striking clause (i) and redesignating clauses
(ii), (iii), and (iv) as clauses (i), (ii), and (iii),
respectively.
(2) Conforming changes.--
(A) Clause (i) of section 401(a)(9)(B) (as so redesignated)
is amended--
(i) by striking ``for other cases'' in the heading, and
[[Page H6485]]
(ii) by striking ``the distribution of the employee's
interest has begun in accordance with subparagraph (A)(ii)''
and inserting ``his entire interest has been distributed to
him,''.
(B) Clause (ii) of section 401(a)(9)(B) (as so
redesignated) is amended by striking ``clause (ii)'' and
inserting ``clause (i)''.
(C) Clause (iii) of section 401(a)(9)(B)(iii) (as so
redesignated) is amended--
(i) by striking ``clause (iii)(I)'' and inserting ``clause
(ii)(I)'',
(ii) in subclause (I) by striking ``clause (iii)(III)'' and
inserting ``clause (ii)(III)'',
(iii) in subclause (I) by striking ``the date on which the
employee would have attained the age 70\1/2\,'' and inserting
``April 1 of the calendar year following the calendar year in
which the spouse attains 70\1/2\, and clause (ii) shall not
apply to the exclusion amount,'', and
(iv) in subclause (II) by striking ``the distributions to
such spouse begin,'' and inserting ``his entire interest has
been distributed to him,''.
(3) Reduction in excise tax.--Subsection (a) of section
4974 is amended by striking ``50 percent'' and inserting ``10
percent''.
(4) Effective date.--
(A) In general.--Except as provided by subparagraph (B),
the amendments made by this subsection shall apply to years
beginning after December 31, 2000.
(B) Excise tax.--The amendment made by paragraph (3) shall
apply to years beginning after December 31, 1999.
SEC. 206. CLARIFICATION OF TAX TREATMENT OF DIVISION OF
SECTION 457 PLAN BENEFITS UPON DIVORCE.
(a) In General.--Section 414(p)(11) (relating to
application of rules to governmental and church plans) is
amended--
(1) by inserting ``or an eligible deferred compensation
plan (within the meaning of section 457(b))'' after
``subsection (e))'', and
(2) in the heading, by striking ``governmental and church
plans'' and inserting ``certain other plans''.
(b) Waiver of Certain Distribution Requirements.--Paragraph
(10) of section 414(p) is amended by striking ``and section
409(d)'' and inserting ``section 409(d), and section
457(d)''.
(c) Tax Treatment of Payments From a Section 457 Plan.--
Subsection (p) of section 414 is amended by redesignating
paragraph (12) as paragraph (13) and inserting after
paragraph (11) the following new paragraph:
``(12) Tax treatment of payments from a section 457 plan.--
If a distribution or payment from an eligible deferred
compensation plan described in section 457(b) is made
pursuant to a qualified domestic relations order, rules
similar to the rules of section 402(e)(1)(A) shall apply to
such distribution or payment.''.
(d) Effective Date.--The amendments made by this section
shall apply to transfers, distributions, and payments made
after the date of enactment of this Act.
SEC. 207. PERCENTAGE LIMITATIONS ON CONTRIBUTIONS.
(a) Amendments Relating to FERS.--
(1) In general.--
(A) Subsection (a) of section 8432 of title 5, United
States Code, is amended by striking ``10 percent of ''.
(B) Subsection (d) of section 8432 of title 5, United
States Code, is amended by striking ``section 415'' and
inserting ``section 401(a)(30) or 415''.
(2) Justices and judges.--Subsection (b) of section 8440a
of title 5, United States Code, is amended--
(A) by striking paragraph (2) and by redesignating
paragraphs (3) through (7) as paragraphs (2) through (6),
respectively; and
(B) in paragraph (6) (as so redesignated by subparagraph
(A)) by striking ``paragraphs (4) and (5)'' and inserting
``paragraphs (3) and (4)''.
(3) Bankruptcy judges and magistrates.--Subsection (b) of
section 8440b of title 5, United States Code, is amended--
(A) by striking paragraph (2) and by redesignating
paragraphs (3) through (8) as paragraphs (2) through (7),
respectively;
(B) in paragraph (4) (as so redesignated by subparagraph
(A)) by striking ``paragraph (4)(A), (B), or (C)'' and
inserting ``paragraph (3)(A), (B), or (C)''; and
(C) in paragraph (7) (as so redesignated by subparagraph
(A)) by striking ``Notwithstanding paragraph (4),'' and
inserting ``Notwithstanding paragraph (3),''.
(4) Court of federal claims judges.--Subsection (b) of
section 8440c of title 5, United States Code, is amended--
(A) by striking paragraph (2) and by redesignating
paragraphs (3) through (8) as paragraphs (2) through (7),
respectively;
(B) in paragraph (4) (as so redesignated by subparagraph
(A)) by striking ``paragraph (4)(A) or (B)'' and inserting
``paragraph (3)(A) or (B)''; and
(C) in paragraph (7) (as so redesignated by subparagraph
(A)) by striking ``Notwithstanding paragraph (4),'' and
inserting ``Notwithstanding paragraph (3),''.
(5) Judges of the united states court of veterans
appeals.--Paragraph (2) of section 8440d(b) of title 5,
United States Code, is amended to read as follows:
``(2) For purposes of contributions made to the Thrift
Savings Fund, basic pay does not include any retired pay paid
pursuant to section 7296 of title 38.''.
(b) Amendments Relating to CSRS.--Paragraph (2) of section
8351(b) of title 5, United States Code, is amended by
striking ``5 percent of ''.
(c) Effective Date.--
(1) In general.--The amendments made by this section shall
take effect on the date of enactment of this Act.
(2) Coordination with election periods.--The Executive
Director shall by regulation determine the first election
period in which elections may be made consistent with the
amendments made by this section.
(3) Definitions.--For purposes of this section--
(A) the term ``election period'' means a period afforded
under section 8432(b) of title 5, United States Code; and
(B) the term ``Executive Director'' has the meaning given
such term by section 8401(13) of title 5, United States Code.
SEC. 208. ELIGIBLE ROLLOVER DISTRIBUTIONS.
Section 8432 of title 5, United States Code, is amended by
adding at the end the following:
``(j)(1) For the purpose of this subsection--
``(A) the term `eligible rollover distribution' has the
meaning given such term by section 402(c)(3) of the Internal
Revenue Code of 1986; and
``(B) the term `eligible retirement plan' has the meaning
given such term by section 402(c)(7) of the Internal Revenue
Code of 1986.
``(2) An employee or Member may contribute to the Thrift
Savings Fund an eligible rollover distribution from an
eligible retirement plan. A contribution made under this
subsection shall be made by means of a direct rollover from
an eligible retirement plan in a manner that is similar to a
direct rollover under section 401(a)(31) of the Internal
Revenue Code of 1986. In the case of an eligible rollover
distribution, the maximum amount transferred to the Thrift
Savings Fund shall not exceed the amount which would
otherwise have been included in the employee's or Member's
gross income for Federal income tax purposes.
``(3) The Executive Director shall prescribe regulations to
carry out this subsection.''.
SEC. 209. IMMEDIATE PARTICIPATION IN THE THRIFT SAVINGS PLAN.
(a) Elimination of Certain Waiting Periods for Purposes of
Employee Contributions.--Paragraph (4) of section 8432(b) of
title 5, United States Code, is amended to read as follows:
``(4) The Executive Director shall prescribe such
regulations as may be necessary to carry out the following:
``(A) Notwithstanding subparagraph (A) of paragraph (2), an
employee or Member described in such subparagraph shall be
afforded a reasonable opportunity to first make an election
under this subsection beginning on the date of commencing
service or, if that is not administratively feasible,
beginning on the earliest date thereafter that such an
election becomes administratively feasible, as determined by
the Executive Director.
``(B) An employee or Member described in subparagraph (B)
of paragraph (2) shall be afforded a reasonable opportunity
to first make an election under this subsection (based on the
appointment or election described in such subparagraph)
beginning on the date of commencing service pursuant to such
appointment or election or, if that is not administratively
feasible, beginning on the earliest date thereafter that such
an election becomes administratively feasible, as determined
by the Executive Director.
``(C) Notwithstanding the preceding provisions of this
paragraph, contributions under paragraphs (1) and (2) of
subsection (c) shall not be payable with respect to any pay
period before the earliest pay period for which such
contributions would otherwise be allowable under this
subsection if this paragraph had not been enacted.
``(D) Sections 8351(a)(2), 8440a(a)(2), 8440b(a)(2),
8440c(a)(2), and 8440d(a)(2) shall be applied in a manner
consistent with the purposes of subparagraphs (A) and (B), to
the extent those subparagraphs can be applied with respect
thereto.
``(E) Nothing in this paragraph shall affect paragraph
(3).''.
(b) Technical and Conforming Amendments.--(1) Section
8432(a) of title 5, United States Code, is amended--
(A) in the first sentence by striking ``(b)(1)'' and
inserting ``(b)''; and
(B) by amending the second sentence to read as follows:
``Contributions under this subsection pursuant to such an
election shall, with respect to each pay period for which
such election remains in effect, be made in accordance with a
program of regular contributions provided in regulations
prescribed by the Executive Director.''.
(2) Section 8432(b)(1)(B) of title 5, United States Code,
is amended by inserting ``(or any election allowable by
virtue of paragraph (4))'' after ``subparagraph (A)''.
(3) Section 8432(b)(3) of title 5, United States Code, is
amended by striking ``Notwithstanding paragraph (2)(A), an''
and inserting ``An''.
(4) Section 8432(i)(1)(B)(ii) of title 5, United States
Code, is amended by striking ``either elected to terminate
individual contributions to the Thrift Savings Fund within 2
months before commencing military service or''.
(5) Section 8439(a)(1) of title 5, United States Code, is
amended by inserting ``who makes contributions or'' after
``for each individual'' and by striking ``section
8432(c)(1)'' and inserting ``section 8432''.
(6) Section 8439(c)(2) of title 5, United States Code, is
amended by adding at the end the following: ``Nothing in this
paragraph shall be considered to limit the dissemination of
information only to the times required under the preceding
sentence.''.
(7) Sections 8440a(a)(2) and 8440d(a)(2) of title 5, United
States Code, are amended by
[[Page H6486]]
striking all after ``subject to'' and inserting ``this
chapter.''.
(c) Effective Date.--This section shall take effect 6
months after the date of enactment of this Act or such
earlier date as the Executive Director (within the meaning of
section 8401(13) of title 5, United States Code) may by
regulation prescribe.
TITLE III--INCREASING PORTABILITY FOR PARTICIPANTS
SEC. 301. 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) (other than section 402(c)(4)(C)),
``(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);''.
(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 (t) of section 72 (relating to 10-percent
additional tax on early distributions from qualified
retirement plans) is amended by adding at the end the
following new paragraph:
``(9) Special rule for rollovers to section 457 plans.--For
purposes of this subsection, a distribution from an eligible
deferred compensation plan (as defined in section 457(b)) of
an employer described in section 457(e)(1)(A) shall be
treated as a distribution from a qualified retirement plan to
the extent that such distribution is attributable to an
amount transferred to an eligible deferred compensation plan
from a qualified retirement plan (as defined in section
4974(c)). For purposes of this subsection, any such
distribution shall be treated as if made from a qualified
retirement plan described in section 4974(c)(1). This
paragraph shall only apply to a transfer that is in excess of
$50,000 and that is permitted by reason of section
402(c)(8)(B)(v) or section 408(d)(3)(A)(ii).''.
(D) Subsection (a) of section 457 (relating to year of
inclusion in gross income) is amended--
(i) by striking ``or otherwise made available'', and
(ii) by adding at the end the following: ``To the extent
provided in section 72(t)(9), section 72(t) shall apply to
any amount includible in gross income under this
subsection.''.
(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 (as defined in clause (iii) or
(iv) of section 402(c)(8)(B) of the Internal Revenue Code of
1986) on behalf
[[Page H6487]]
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. 302. 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 he receives the payment or
distribution.
For purposes of clause (ii), the term `eligible retirement
plan' has the meaning given such term by clauses (iii), (iv),
(v), and (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 (as defined 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. 303. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) In General.--
(1) 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) 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) 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) Paragraph (7)(B) of section 402(c) (as redesignated by
subsection (a)(1) and as amended by section 301) 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) 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'',
(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) 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) 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) 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 301) 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 301) is amended by striking ``(2) through (7) and (9)
of section 402(c) (including paragraph (4)(C) thereof)'' and
inserting ``(2) through (6) and (8) of section 402(c)
(including paragraph (3)(C) thereof)''.
(5) Subparagraph (A) of section 408(d)(3) (as amended by
section 302) is amended by striking ``402(c)(8)'' and
inserting ``402(c)(7)''.
(6) Paragraph (16) of section 457(e) (as added by section
301) is amended--
(A) in subparagraph (A)(i) by striking ``402(c)(4) (other
than section 402(c)(4)(C))'' and inserting ``section
402(c)(3) (other than section 402(c)(3)(C))'',
(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. 304. TREATMENT OF FORMS OF DISTRIBUTION.
(a) In General.--
(1) Plan transfers.--Paragraph (6) of section 411(d)
(relating to accrued benefit not to be decreased by
amendment) is amended by adding at the end the following:
``(D) Plan transfers.--
``(i) 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 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--
``(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 subclause
(I);
``(III) the transfer described in subclause (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 subclause (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
[[Page H6488]]
``(VI) the transferee plan allows the participant or
beneficiary described in subclause (III) to receive any
distribution to which the participant or beneficiary is
entitled under the transferee plan in the form of a single
sum distribution.
``(ii) Clause (i) shall apply to plan mergers and other
transactions having the effect of a direct transfer,
including consolidations of benefits attributable to
different employers within a multiple employer plan.
``(E) Elimination of form of distribution.--Except to the
extent provided in regulations, a defined contribution plan
shall not be treated as failing to meet the requirements of
this section merely because of the elimination of a form of
distribution previously available thereunder. This
subparagraph shall not apply to the elimination of a form of
distribution with respect to any participant unless--
``(i) a single sum payment is available to such participant
at the same time or times as the form of distribution being
eliminated; and
``(ii) such single sum payment is based on the same or
greater portion of the participant's account as the form of
distribution being eliminated.''.
(2) Regulations.--The last sentence of paragraph (6)(B) of
section 411(d) (relating to accrued benefit not to be
decreased by amendment) is amended to read as follows: ``The
Secretary may by regulations provide that this subparagraph
shall not apply to any plan amendment that does not adversely
affect the rights of participants in a material manner.
(3) Secretary directed.--Not later than December 31, 2001,
the Secretary of the Treasury is directed to issue final
regulations under section 411(d)(6) of the Internal Revenue
Code of 1986. Such regulations shall apply to plan years
beginning after December 31, 2001 or such earlier date as is
specified by the Secretary of the Treasury. Under such
regulations, section 411(d)(6) of such Code shall not apply
to plan amendments that do not adversely affect the rights of
participants in a material manner. In determining whether a
plan amendment has such a materially adverse effect on a
participant, the factors taken into account shall include--
(A) all of the participant's early retirement benefits,
retirement-type subsidies, and optional forms of benefit that
are reduced or eliminated by the plan amendment,
(B) the extent to which early retirement benefits,
retirement-type subsidies, and optional forms of benefit in
effect with respect to a participant after the effective date
of the plan amendment provide rights that are comparable to
the rights that are reduced or eliminated by the plan
amendment,
(C) the number of years before the participant attains
normal retirement age under the plan (or early retirement
age, as applicable),
(D) the size of the participant's benefit that is affected
by the plan amendment, in relation to the amount of the
participant's compensation, and
(E) the number of years before the plan amendment is
effective.
The regulations described in this paragraph are intended to
permit the elimination or reduction of early retirement
benefits, retirement-type subsidies, and optional forms of
benefit that do not have a material value for a plan's
participants but create significant burdens and complexities
for the plan and its participants.
(b) Conforming Amendment.--(1) Subsection (g) of section
204 of the Employee Retirement Income Security Act of 1974
(29 U.S.C. 1054) is amended by adding at the end the
following:
``(4)(A) 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 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--
``(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 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
``(vi) the transferee plan allows the participant or
beneficiary described in clause (iii) to receive any
distribution which the participant or beneficiary is entitled
under transferee plan in the form of a single sum
distribution.
``(B) Subparagraph (A) shall apply to plan mergers and
other transactions having the effect of a direct transfer,
including consolidations of benefits attributable to
different employers within a multiple employer plan.
``(5) Except to the extent provided in regulations, a
defined contribution plan shall not be treated as failing to
meet the requirements of this section merely because of the
elimination of a form of distribution previously available
thereunder. This paragraph shall not apply to the elimination
of a form of distribution with respect to any participant
unless--
``(A) a single sum payment is available to such participant
at the same time or times as the form of distribution being
eliminated; and
``(B) such single sum payment is based on the same or
greater portion of the participant's account as the form of
distribution being eliminated.''.
(2) Paragraph (2) of section 204(g) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1054) is
amended by striking the last sentence and inserting the
following: ``The Secretary of the Treasury may by regulations
provide that this paragraph shall not apply to any plan
amendment that does not adversely affect the rights of
participants in a material manner.''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1999.
SEC. 305. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.
(a) Modification of Same Desk Exception.--
(1) Section 401(k).--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) Section 403(b).--
(A) Paragraphs (7)(A)(ii) and (11)(A) of section 403(b) are
each amended by striking ``separates from service'' and
inserting ``has a severance from employment''.
(B) The heading for paragraph (11) of section 403(b) is
amended by striking ``separation from service'' and inserting
``severance from employment''.
(3) Section 457.--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 Repealed.--
(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. 306. PURCHASE OF SERVICE CREDIT IN GOVERNMENTAL DEFINED
BENEFIT PLANS.
(a) 403(b) Plans.--Subsection (b) of section 403 (as
amended by section 501) is amended by adding at the end the
following new paragraph:
``(14) 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 (as amended by section
509) is amended by adding at the end the following new
paragraph:
``(18) 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 sections 101, 202, and
301, 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)(16))''.
(c) Effective Date.--The amendments made by this section
shall apply to trustee-to-trustee transfers after December
31, 1999.
SEC. 307. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF
CASH-OUT AMOUNTS.
(a) Amendments to 1986 Code.--
[[Page H6489]]
(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), clause (ii), (iii), or (iv) of
408(d)(3)(A), 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), clause (ii),
(iii), or (iv) of 408(d)(3)(A), 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.
TITLE IV--STRENGTHENING PENSION SECURITY AND ENFORCEMENT
SEC. 401. REPEAL OF 150 PERCENT OF CURRENT LIABILITY FUNDING
LIMIT.
(a) In General.--
(1) Code amendment.--Section 412(c)(7) (relating to full-
funding limitation) is amended--
(A) by striking ``the applicable percentage'' in
subparagraph (A)(i)(I) and inserting ``in the case of plan
years beginning before January 1, 2003, the applicable
percentage'', and
(B) by amending subparagraph (F) to read as follows:
``(F) Applicable percentage.--For purposes of subparagraph
(A)(i)(I), the applicable percentage shall be determined in
accordance with the following table:
``In the case of any plan year beginning The applicable percentage is--
2000.........................................................160
2001.........................................................165
2002......................................................170.''.
(2) ERISA amendment.--Section 302(c)(7) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1082(c)(7))
is amended--
(A) by striking ``the applicable percentage'' in
subparagraph (A)(i)(I) and inserting ``in the case of plan
years beginning before January 1, 2003, the applicable
percentage'', and
(B) by amending subparagraph (F) to read as follows:
``(F) Applicable percentage.--For purposes of subparagraph
(A)(i)(I), the applicable percentage shall be determined in
accordance with the following table:
``In the case of any plan year beginning The applicable percentage is--
2000.........................................................160
2001.........................................................165
2002......................................................170.''.
(3) Effective dates.--The amendments made by this
subsection shall apply to plan years beginning after December
31, 1999.
(b) Maximum Contribution Deduction Rules Modified and
Applied to All Defined Benefit Plans.--
(1) In general.--Section 404(a)(1)(D) (relating to special
rule in case of certain plans) is amended--
(A) by striking ``which has more than 100 participants for
the plan year'',
(B) by striking ``unfunded current liability determined
under section 414(l)'' and inserting ``unfunded termination
liability (determined as if the proposed termination date
referred to in section 4041(b)(2)(A)(i)(II) of the Employee
Retirement Income Security Act of 1974 were the last day of
the plan year)'',
(C) by inserting after the first sentence the following:
``For purposes of this subparagraph, in the case of a plan
which has less than 100 participants for the plan year,
termination liability shall not include the liability
attributable to benefit increases for highly compensated
employees (as defined in section 414(q)) brought about by
plan amendment within the last 2 years before the termination
date.'', and
(D) by striking ``(other than a multiemployer plan)''.
(2) Conforming amendment.--Paragraph (6) of section 4972(c)
is amended by striking the sentence preceding the last
sentence thereof.
(3) Effective date.--The amendments made by this subsection
shall apply to plan years beginning after the date of
enactment of this Act.
SEC. 402. MISSING PARTICIPANTS.
(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 (e) and by
inserting after subsection (b) the following:
``(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
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).''.
(b) Conforming Amendments.--
(1) Section 206(f) of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1056(f)) is amended--
(A) by striking ``title IV'' and inserting ``section
4050'', and
(B) by striking ``the plan shall provide that''.
(2) Section 401(a)(34) of such Act (relating to benefits of
missing participants on plan termination) is amended by
striking ``title IV'' and inserting ``section 4050''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions made after final regulations
implementing subsections (c) and (d) of section 4050 of the
Employee Retirement Income Security Act of 1974 (as added by
subsection (a)), respectively, are prescribed.
SEC. 403. PERIODIC PENSION BENEFITS STATEMENTS.
(a) In General.--Section 105(a) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1025(a)) is amended by
striking ``shall furnish to any plan participant or
beneficiary who so requests in writing, a statement'' and
inserting ``shall furnish to each plan participant at least
once each year (in the case of a defined contribution plan)
and upon written request of a plan participant or beneficiary
(in the case of a defined benefit plan), a statement in
written or electronic form''.
(b) Required Periodic Statements for Plans With More Than
One Unaffiliated Employer.--Section 105(d) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1025(d)) is
repealed.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 1999.
SEC. 404. CIVIL PENALTIES FOR BREACH OF FIDUCIARY
RESPONSIBILITY.
(a) Imposition and Amount of Penalty Made Discretionary.--
Section 502(l)(1) of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1132(l)(1)) is amended--
(1) by striking ``shall'' and inserting ``may'', and
(2) by striking ``equal to'' and inserting ``not greater
than''.
(b) Applicable Recovery Amount.--Section 502(l)(2) of such
Act (29 U.S.C. 1132(l)(2)) is amended to read as follows:
``(2) For purposes of paragraph (1), the term `applicable
recovery amount' means any amount which is recovered from any
fiduciary or other person (or from any other person on behalf
of any such fiduciary or other person) with respect to a
breach or violation described in paragraph (1) on or after
the 30th day following receipt by such fiduciary or other
person of written notice from the Secretary of the violation,
whether paid voluntarily or by order of a court in a judicial
proceeding instituted by the Secretary under subsection
(a)(2) or (a)(5). The Secretary may, in the Secretary's sole
discretion, extend the 30-day period described in the
preceding sentence.''.
(c) Other Rules.--Section 502(l) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1132(l)) is amended by
adding at the end the following:
``(5) A person shall be jointly and severally liable for
the penalty described in paragraph (1) to the same extent
that such person is
[[Page H6490]]
jointly and severally liable for the applicable recovery
amount on which the penalty is based.
``(6) No penalty shall be assessed under this subsection
unless the person against whom the penalty is assessed is
given notice and opportunity for a hearing with respect to
the violation and applicable recovery amount.''.
(d) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to any breach of fiduciary responsibility or other
violation of part 4 of subtitle B of title I of the Employee
Retirement Income Security Act of 1974 occurring on or after
the date of enactment of this Act.
(2) Transition rule.--In applying the amendment made by
subsection (b) (relating to applicable recovery amount), a
breach or other violation occurring before the date of
enactment of this Act which continues after the 180th day
after such date (and which may have been discontinued at any
time during its existence) shall be treated as having
occurred after such date of enactment.
SEC. 405. PENALTY TAX RELIEF FOR SOUND PENSION FUNDING.
(a) In General.--Subsection (c) of section 4972 (relating
to nondeductible contributions) is amended by adding at the
end the following new paragraph:
``(7) Defined benefit plan exception.--In determining the
amount of nondeductible contributions for any taxable year,
an employer may elect for such year not to take into account
any contributions to a defined benefit plan except to the
extent that such contributions exceed the full-funding
limitation (as defined in section 412(c)(7), determined
without regard to subparagraph (A)(i)(I) thereof). For
purposes of this paragraph, the deductible limits under
section 404(a)(7) shall first be applied to amounts
contributed to defined contribution plans and then to amounts
described in this paragraph. If an employer makes an election
under this paragraph for a taxable year, paragraph (6) shall
not apply to such employer for such taxable year.''.
(b) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1999.
SEC. 406. PROTECTION OF INVESTMENT OF EMPLOYEE CONTRIBUTIONS
TO 401(K) PLANS.
(a) In General.--Section 1524(b) of the Taxpayer Relief Act
of 1997 is amended to read as follows:
``(b) Effective Date.--
``(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to elective
deferrals for plan years beginning after December 31, 1998.
``(2) Nonapplication to previously acquired property.--The
amendments made by this section shall not apply to any
elective deferral if such deferral is used for the payment of
indebtedness incurred before January 1, 1999 (or any
refinancing thereof) on the acquisition by the plan of
employer securities or employer real property--
``(A) before January 1, 1999, or
``(B) after such date pursuant to a written contract which
was binding on such date and at all times thereafter on such
plan.''.
(b) Effective Date.--The amendment made by this section
shall apply as if included in the provision of the Taxpayer
Relief Act of 1997 to which it relates.
SEC. 407. NOTICE OF SIGNIFICANT REDUCTION IN BENEFIT
ACCRUALS.
(a) In General.--Subsection (h) of section 204 of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1054) is amended to read as follows:
``(h) Notice of Significant Reduction in Benefit
Accruals.--
``(1) If a plan described in paragraph (4) is amended to
provide for a significant reduction in the rate of future
benefit accrual, the plan administrator shall provide a
notice to--
``(A) each affected participant in the plan,
``(B) each affected beneficiary who is an alternate payee
(within the meaning of section 206(d)(3)(K)) under an
applicable qualified domestic relations order (within the
meaning of section 206(d)(3)(B)(i)), and
``(C) each employee organization representing affected
participants in the plan, except that such notice shall
instead be provided to a person designated to receive such
notice on behalf of any person referred to in paragraph (A),
(B), or (C). For purposes of this paragraph, an affected
participant or beneficiary is a participant or beneficiary to
whom the significant reduction described in this paragraph is
reasonably expected to apply.
``(2) The notice required by paragraph (1) shall--
``(A) include the plan amendment, or a summary of such plan
amendment, and its effective date, and
``(B) provide a notification and description of the
reduction described in paragraph (1).
A notification and description shall not fail to satisfy
paragraph (2)(B) by reason of a failure to provide the
specific amount of the reduction with respect to any
participant or beneficiary.
``(3) The notice required by paragraph (1) shall be
provided no less than 30 days prior to the effective date of
the plan amendment.
``(4) A plan is described in this paragraph if such plan
is--
``(A) a defined benefit plan, or
``(B) an individual account plan which is subject to the
funding standards of section 302.
``(5) In the case of a material failure to comply with
requirements of this subsection with respect to more than a
de minimis number of persons described in paragraph (1), the
plan amendment to which the failure relates shall not be
effective with respect to such persons for any period prior
to the expiration of 30 days following the date on which a
notice is provided in accordance with this subsection. For
purposes of this paragraph, the term `material failure'
includes any failure that results in materially less
information being provided to the persons described in
paragraph (1).''.
(b) Effective Date.--The amendments made by this section
shall apply to plan amendments that are adopted more than 120
days after the date of enactment of this Act.
TITLE V--REDUCING REGULATORY BURDENS
SEC. 501. 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. 502. REPEAL OF THE MULTIPLE USE TEST.
(a) In General.--Paragraph (9) of section 401(m) is amended
to read as follows:
``(9) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of
this subsection and subsection (k), including regulations
permitting appropriate aggregation of plans and
contributions.''.
(b) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 1999.
SEC. 503. SAFETY VALVE FROM MECHANICAL RULES.
(a) In General.--The Secretary of the Treasury, by
regulation, shall provide that the plan shall be deemed to
satisfy the requirements of section 401(a)(4) of the Internal
Revenue Code of 1986 if such plan satisfies the facts and
circumstances test under section 401(a)(4) of such Code, as
in effect before January 1, 1994, if--
(1) the plan satisfies conditions prescribed by the
Secretary to appropriately limit the availability of such
test, and
(2) the plan is submitted to the Secretary for a
determination of whether it satisfies such test.
[[Page H6491]]
Paragraph (2) shall only apply to the extent provided by the
Secretary.
(b) Effective Dates.--
(1) Regulations.--The regulation required by subsection (a)
shall apply to years beginning after December 31, 2000.
(2) Conditions of availability.--Any condition of
availability prescribed by the Secretary under subsection
(a)(1) shall not apply before the first year beginning not
less than 120 days after the date on which such condition is
prescribed.
SEC. 504. REFORM OF THE LINE OF BUSINESS RULES.
(a) Repeal of Gateway Test.--Paragraph (5) of section
410(b) 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) Regulations.--The Secretary of the Treasury shall
modify the regulations issued under section 414(r) of the
Internal Revenue Code of 1986 (relating to special rules for
separate line of business) to--
(1) simplify the administrability of the rules for both the
Secretary and plans, and
(2) permit employees to be allocated among lines of
business based on all the facts and circumstances.
(c) Effective Dates.--
(1) Repeal.--The repeal made by subsection (a) shall apply
to years beginning after December 31, 2000.
(2) Regulations.--The regulations modified under subsection
(b) shall apply to years beginning after December 31, 2000.
SEC. 505. COVERAGE TEST FLEXIBILITY.
(a) In General.--Paragraph (1) of section 410(b) is amended
by adding at the end the following:
``(D) In the case that the plan fails to meet the
requirements of subparagraphs (A), (B) and (C), the plan--
``(i) satisfies subparagraph (B), as in effect immediately
before the enactment of the Tax Reform Act of 1986,
``(ii) is submitted to the Secretary for a determination of
whether it satisfies the requirement described in clause (i),
and
``(iii) satisfies conditions prescribed by the Secretary by
regulation that appropriately limit the availability of this
subparagraph.
Clause (ii) shall apply only to the extent provided by the
Secretary.''.
(b) Effective Dates.--
(1) In general.--The amendment made by subsection (a) shall
apply to years beginning after December 31, 2000.
(2) Conditions of availability.--Any condition of
availability prescribed by the Secretary under regulations
prescribed by the Secretary under section 410(a)(1)(D) of the
Internal Revenue Code of 1986 shall not apply before the
first year beginning not less than 120 days after the date on
which such condition is prescribed.
SEC. 506. INCREASE IN RETIREMENT PLAN CASH-OUT AMOUNT.
(a) Amendments to 1986 Code.--Section 411(a)(11) (relating
to restrictions on certain mandatory distributions) is
amended by adding at the end the following:
``(D) Inflation adjustment.--In the case of any plan year
beginning in a calendar year after 1999, the Secretary shall
adjust annually the $5,000 amount contained 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
ending September 30, 1999, and any increase which is not a
multiple of $500 shall be rounded to the next lowest multiple
of $500.''.
(b) Amendments 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) Inflation adjustment.--In the case of any plan year
beginning in a calendar year after 1999, the Secretary shall
adjust annually the $5,000 amount contained 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 ending September 30, 1999, 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 plan years beginning on or after the date of
enactment of this Act.
SEC. 507. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) In General.--Section 412(c)(9) (relating to annual
valuation) is amended--
(1) by striking ``For purposes'' and inserting the
following:
``(A) In general.--For purposes'', and
(2) by adding at the end the following:
``(B) Election to use prior year valuation.--
``(i) In general.--If, for any plan year--
``(I) an election is in effect under this subparagraph with
respect to a plan, and
``(II) the assets of the plan are not less than 125 percent
of the plan's current liability (as defined in paragraph
(7)(B)), determined as of the valuation date for the
preceding plan year, then this section shall be applied using
the information available as of such valuation date.
``(ii) Adjustments.--Information under clause (i) shall, in
accordance with regulations, be actuarially adjusted to
reflect significant differences in participants.
``(iii) Election.--An election under this subparagraph,
once made, shall be irrevocable without the consent of the
Secretary.''.
(b) Amendments to ERISA.--Paragraph (9) of section 302(c)
of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1053(c)) is amended--
(1) by inserting ``(A)'' after ``(9)'', and
(2) by adding at the end the following:
``(B)(i) If, for any plan year--
``(I) an election is in effect under this subparagraph with
respect to a plan, and
``(II) the assets of the plan are not less than 125 percent
of the plan's current liability (as defined in paragraph
(7)(B)), determined as of the valuation date for the
preceding plan year,
then this section shall be applied using the information
available as of such valuation date.
``(ii) Information under clause (i) shall, in accordance
with regulations, be actuarially adjusted to reflect
significant differences in participants.
``(iii) An election under this subparagraph, once made,
shall be irrevocable without the consent of the Secretary of
the Treasury.''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning on or after the date of
enactment of this Act.
SEC. 508. SECTION 457 INAPPLICABLE TO CERTAIN MIRROR PLANS.
(a) In General.--Subsection (e) of section 457 (relating to
deferred compensation plans of State and local governments
and tax-exempt organizations) is amended by adding at the end
the following new paragraph:
``(17) This section shall not apply to a plan, program, or
arrangement maintained solely for the purposes of providing
retirement benefits for employees in excess of the
limitations imposed by sections 401(a)(17) or 415.''.
(b) Certain Deferred Compensation Not Taken Into Account.--
Subsection (c) of section 457 (relating to individuals who
are participants in more than 1 plan) (as amended by section
108(a)) is amended by adding at the end the following: ``This
section shall be applied without regard to a plan, program,
or arrangement described in subsection (e)(17).''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1999.
SEC. 509. 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:
``(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--
[[Page H6492]]
(A) in subsection (b)(9), by striking ``as defined in
section 4022(b)(6)'', and
(B) by adding at the end the following:
``(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)) on or
after the date of enactment of this Act, and
(B) under section 4042 of such Act (29 U.S.C. 1342) with
respect to which proceedings are instituted by the
corporation on or after such date.
(2) Conforming amendments.--The amendments made by
subsection (c) shall take effect on the date of enactment of
this Act.
SEC. 510. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF
DIVIDEND DEDUCTION.
(a) In General.--Section 404(k)(2)(A) (defining applicable
dividends) is amended by striking ``or'' at the end of clause
(ii), by redesignating clause (iii) as clause (iv), and by
inserting after clause (ii) the following new clause:
``(iii) is, at the election of such participants or their
beneficiaries--
``(I) payable as provided in clause (i) or (ii), or
``(II) paid to the plan and reinvested in qualifying
employer securities, or''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
1999.
SEC. 511. MODIFICATION OF 403(B) EXCLUSION ALLOWANCE TO
CONFORM TO 415 MODIFICATION.
The Secretary of the Treasury shall modify the regulations
regarding the exclusion allowance under section 403(b)(2) of
the Internal Revenue Code of 1986 to render void the
requirement that contributions to a defined benefit pension
plan be treated as previously excluded amounts for purposes
of the exclusion allowance. For taxable years beginning after
December 31, 1999, such regulations shall be applied as if
such requirement were void.
SEC. 512. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) Compensation Limit.--Paragraph (11) of section 415(b)
(relating to limitation for defined benefit plans) is amended
to read as follows:
``(11) Special limitation rule for governmental and
multiemployer plans.--In the case of a governmental plan (as
defined in section 414(d)) or a multiemployer plan (as
defined in section 414(f)), subparagraph (B) of paragraph (1)
shall not apply.''.
(b) Exemption for Survivor and Disability Benefits.--
Subparagraph (I) of section 415(b)(2) (relating to limitation
for defined benefit plans) is amended--
(1) by inserting ``or a multiemployer plan (as defined in
section 414(f))'' after ``section 414(d))'' in clause (i),
(2) by inserting ``or multiemployer plan'' after
``governmental plan'' in clause (ii), and
(3) by inserting ``and multiemployer'' after
``governmental'' in the heading.
(c) Combining and Aggregation of Plans.--
(1) Combining of plans.--Subsection (f) of section 415
(relating to combining of plans) is amended by adding at the
end the following:
``(3) Exception for multiemployer plans.--Notwithstanding
paragraph (1) and subsection (g), a multiemployer plan (as
defined in section 414(f)) shall not be combined or
aggregated with any other plan maintained by an employer for
purposes of applying the limitations established in this
section.''.
(2) Conforming amendment for aggregation of plans.--
Subsection (g) of section 415 (relating to aggregation of
plans) is amended by striking ``The Secretary'' and inserting
``Except as provided in subsection (f)(3), the Secretary''.
(d) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1999.
SEC. 513. ELIMINATION OF PARTIAL TERMINATION RULES FOR
MULTIEMPLOYER PLANS.
(a) Partial Termination Rules for Multiemployer Plans.--
Section 411(d)(3) (relating to termination or partial
termination; discontinuance of contributions) is amended by
adding at the end the following new sentence: ``This
paragraph shall not apply in the case of a partial
termination of a multiemployer plan.''.
(b) Effective Date.--The amendment made by this section
shall apply to partial terminations beginning after December
31, 1999.
SEC. 514. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.
(a) Expansion of Period.--
(1) In general.--
(A) Subparagraph (A) of section 417(a)(6) is amended by
striking ``90-day'' and inserting ``one-year''.
(B) Subparagraph (A) of section 205(c)(7) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1055) is
amended by striking ``90-day'' and inserting ``one-year''.
(2) 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 ``one year'' 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).
(3) Effective date.--The amendments made by paragraph (1)
and the modifications required by paragraph (2) shall apply
to years beginning after December 31, 1999.
(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.--The modifications required by
paragraph (1) shall apply to years beginning after December
31, 1999.
SEC. 515. CONFORMING AMENDMENTS RELATING TO ELECTION TO
RECEIVE TAXABLE CASH COMPENSATION IN LIEU OF
NONTAXABLE PARKING BENEFITS.
(a) In General.--
(1) Clause (ii) of section 415(c)(3)(D) and subparagraph
(B) of section 403(b)(3) are each amended by striking
``section 125 or'' and inserting ``section 125, 132(f)(4),
or''.
(2) Paragraph (2) of section 414(s) is amended by striking
``section 125, 402(e)(3)'' and inserting ``section 125,
132(f)(4), 402(e)(3)''.
(b) Effective Date.--The amendments made by subsection (a)
shall take effect as if included in the amendment made by
section 1072 of the Taxpayer Relief Act of 1997.
SEC. 516. EXTENSION TO INTERNATIONAL ORGANIZATIONS OF
MORATORIUM ON APPLICATION OF CERTAIN
NONDISCRIMINATION RULES APPLICABLE TO STATE AND
LOCAL PLANS.
(a) In General.--Subparagraph (G) of section 401(a)(5),
subparagraph (H) of section 401(a)(26), 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 inserting
``or by an international organization which is described in
section 414(d)'' after ``or instrumentality thereof)''.
(b) Conforming Amendments.--
(1) The headings for subparagraph (G) of section 401(a)(5)
and subparagraph (H) of section 401(a)(26) are each amended
by inserting ``and international organization'' after
``governmental''.
(2) Subparagraph (G) of section 401(k)(3) is amended by
inserting ``State and local governmental and international
organization plans.--'' after ``(G)''.
(c) Effective Date.--The amendments made by this section
shall take effect as if included in the amendment made by
section 1505 of the Taxpayer Relief Act of 1997.
SEC. 517. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) In General.--The Secretary of the Treasury shall modify
Treasury Regulations section 1.410(b)-6(g) to provide that
employees of an organization described in section
403(b)(1)(A)(i) of the Internal Revenue Code of 1986 who are
eligible to make contributions under section 403(b) pursuant
to a salary reduction agreement may be treated as excludable
with respect to a plan under section 401(k), or section
401(m) of such Code that is provided under the same general
arrangement as a plan under such section 401(k), if--
(1) no employee of an organization described in section
403(b)(1)(A)(i) of such Code is eligible to participate in
such section 401(k) plan or section 401(m) plan, and
(2) 95 percent of the employees who are not employees of an
organization described in section 403(b)(1)(A)(i) of such
Code are eligible to participate in such section 401(k) plan
or section 401(m) plan.
(b) Effective Date.--The modification required by
subsection (a) shall apply as of the same date set forth in
section 1426(b) of the Small Business Job Protection Act of
1996.
SEC. 518. PERMISSIVE AGGREGATION OF COLLECTIVE BARGAINING
UNITS.
(a) In General.--Paragraph (3) of section 410(b) is amended
by inserting the following immediately before the last
sentence thereof: ``Solely for purposes of applying this
subsection to employees who are not described in subparagraph
(A), an employer may elect to have subparagraph (A) not apply
to one or more units of employees who are described in
subparagraph (A).''.
(b) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 1999.
SEC. 519. REPEAL OF TRANSITION RULE RELATING TO CERTAIN
HIGHLY COMPENSATED EMPLOYEES.
(a) In General.--Paragraph (4) of section 1114(c)(4) of the
Tax Reform Act of 1986 is hereby repealed.
(b) Effective Date.--The repeal made by subsection (a)
shall apply to plan years beginning on or after January 1,
2000.
[[Page H6493]]
SEC. 520. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED
RETIREMENT ADVICE.
(a) In General.--Section 132(e) (defining de minimis
fringe) is amended by adding at the end the following:
``(3) Treatment of certain retirement planning services.--
The provision of retirement planning services by an employer
to employees, to the extent not described in subsection (d),
shall be treated as a de minimis fringe.''.
(b) No Constructive Receipt.--Section 132 is amended by
redesignating subsection (m) as subsection (n) and by
inserting after subsection (l) the following:
``(m) Retirement Planning.--
``(1) In general.--No amount shall be included in the gross
income of an employee solely because the employee may choose
between any retirement planning fringe and compensation which
would otherwise be includible in the gross income of such
employee.
``(2) Nondiscrimination requirement.--Paragraph (1) shall
apply to a highly compensated employee only if the choice
described in such paragraph is available on substantially the
same terms to each member of a group of employees which is
defined under a reasonable classification set up by the
employer which does not discriminate in favor of highly
compensated employees.
``(3) Retirement planning fringe.--For purposes of this
subsection, the term `retirement planning fringe' means any
retirement planning services provided by an employer to an
employee which are not included in the gross income of the
employee by reason of subsection (d) or (e).''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 1999.
SEC. 521. ANNUAL REPORT DISSEMINATION.
(a) In General.--Section 104(b)(3) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1024(b)(3))
is amended by striking ``shall furnish'' and inserting
``shall make available for examination (and, upon request,
shall furnish)''.
(b) Effective Date.--The amendment made by this section
shall apply to reports for years beginning after December 31,
1998.
SEC. 522. 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 the limitations imposed by 1 or more
of sections 401(a)(17), 401(k), 401(m), 402(g), 403(b),
408(k), 408(p), or 415 of the Internal Revenue Code of 1986
or any other limitation on contributions or benefits in such
Code on plans to which any of such sections apply. 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 amendments made by this section
shall apply to years beginning after December 31, 1999.
SEC. 523. BENEFIT SUSPENSION NOTICE.
(a) Modification of Regulation.--The Secretary of Labor
shall modify the regulation under section 203(a)(3)(B) of the
Employee Retirement Income Security Act of 1974 (29 U.S.C.
1053(a)(3)(B)) to provide that the notification required by
such regulation--
(1) may be included in the summary plan description for the
plan furnished in accordance with section 104(b) of such Act
(29 U.S.C. 1024(b)), rather than in a separate notice, and
(2) need not include a copy of the relevant plan
provisions.
(b) Effective Date.--The modification made under subsection
(a) shall apply to plan years beginning after December 31,
1999.
SEC. 524. 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 (29 U.S.C. 1054(g)) 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 regulation issued under this Act, 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 government plan (as defined in section
414(d) of the Internal Revenue Code of 1986 and section 3(32)
of the Employee Retirement Income Security Act of 1974), 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 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.
SEC. 525. REPORTING SIMPLIFICATION.
(a) Simplified Annual Filing Requirement for Owners and
Their Spouses.--
(1) In general.--The Secretary of the Treasury shall modify
the requirements for filing annual returns with respect to
one-participant retirement plans to ensure that such plans
with assets of $500,000 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.
(b) Simplified Annual Filing Requirement for Plans With
Fewer Than 25 Employees.--In the case of a retirement plan
which covers less than 25 employees on the 1st day of the
plan year and meets the requirements described in
subparagraphs (B), (D), and (E) of subsection (a)(2), the
Secretary of the Treasury shall provide for the filing of a
simplified annual return that is substantially similar to the
annual return required to be filed by a one-participant
retirement plan.
SEC. 526. MODEL PLANS FOR SMALL BUSINESSES.
(a) In General.--Not later than December 31, 2000, the
Secretary of the Treasury is directed to issue at least one
model defined contribution plan and at least one model
defined benefit plan that fit the needs of small businesses
and that shall be treated as meeting the requirements of
section 401(a) of the Internal Revenue Code of 1986 with
respect to the form of the plan. To the extent that the
requirements of section 401(a) of such Code are modified
after the issuance of such plans, the Secretary of the
Treasury shall, in a timely manner, issue model amendments
that, if adopted in a timely manner by an employer that has a
model plan in effect, shall cause such model plan to be
treated as meeting the requirements of section 401(a) of such
Code, as modified, with respect to the form of the plan.
(b) Master and Prototype Plan Alternative.--The Secretary
of the Treasury may, in its discretion, satisfy the
requirements of subsection (a) through the enhancement and
simplification of the Secretary's programs for master and
prototype plans in such a manner as to achieve the purposes
of subsection (a).
The SPEAKER pro tempore. In lieu of the amendment recommended by the
Committee on Education and the Workforce printed in House Report 106-
331 accompanying the bill H.R. 1102, an amendment in the nature of a
substitute recommended by the Committee on Ways and Means printed in
H.R. 4843 is adopted.
The text of the committee amendment in the nature of a substitute is
as follows:
H.R. 4843
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the
``Comprehensive Retirement Security and Pension Reform Act of
2000''.
(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; references; table of contents.
TITLE I--INDIVIDUAL RETIREMENT ACCOUNT PROVISIONS
Sec. 101. Modification of IRA contribution limits.
[[Page H6494]]
TITLE II--EXPANDING COVERAGE
Sec. 201. Increase in benefit and contribution limits.
Sec. 202. Plan loans for subchapter S owners, partners, and sole
proprietors.
Sec. 203. Modification of top-heavy rules.
Sec. 204. Elective deferrals not taken into account for purposes of
deduction limits.
Sec. 205. Repeal of coordination requirements for deferred compensation
plans of State and local governments and tax-exempt
organizations.
Sec. 206. Elimination of user fee for requests to IRS regarding pension
plans.
Sec. 207. Deduction limits.
Sec. 208. Option to treat elective deferrals as after-tax
contributions.
TITLE III--ENHANCING FAIRNESS FOR WOMEN
Sec. 301. Catch-up contributions for individuals age 50 or over.
Sec. 302. Equitable treatment for contributions of employees to defined
contribution plans.
Sec. 303. Faster vesting of certain employer matching contributions.
Sec. 304. Simplify and update the minimum distribution rules.
Sec. 305. Clarification of tax treatment of division of section 457
plan benefits upon divorce.
Sec. 306. Modification of safe harbor relief for hardship withdrawals
from cash or deferred arrangements.
TITLE IV--INCREASING PORTABILITY FOR PARTICIPANTS
Sec. 401. Rollovers allowed among various types of plans.
Sec. 402. Rollovers of IRAs into workplace retirement plans.
Sec. 403. Rollovers of after-tax contributions.
Sec. 404. Hardship exception to 60-day rule.
Sec. 405. Treatment of forms of distribution.
Sec. 406. Rationalization of restrictions on distributions.
Sec. 407. Purchase of service credit in governmental defined benefit
plans.
Sec. 408. Employers may disregard rollovers for purposes of cash-out
amounts.
Sec. 409. Minimum distribution and inclusion requirements for section
457 plans.
TITLE V--STRENGTHENING PENSION SECURITY AND ENFORCEMENT
Sec. 501. Repeal of 150 percent of current liability funding limit.
Sec. 502. Maximum contribution deduction rules modified and applied to
all defined benefit plans.
Sec. 503. Excise tax relief for sound pension funding.
Sec. 504. Excise tax on failure to provide notice by defined benefit
plans significantly reducing future benefit accruals.
Sec. 505. Treatment of multiemployer plans under section 415.
Sec. 506. Prohibited allocations of stock in S corporation ESOP.
TITLE VI--REDUCING REGULATORY BURDENS
Sec. 601. Modification of timing of plan valuations.
Sec. 602. ESOP dividends may be reinvested without loss of dividend
deduction.
Sec. 603. Repeal of transition rule relating to certain highly
compensated employees.
Sec. 604. Employees of tax-exempt entities.
Sec. 605. Clarification of treatment of employer-provided retirement
advice.
Sec. 606. Reporting simplification.
Sec. 607. Improvement of employee plans compliance resolution system.
Sec. 608. Repeal of the multiple use test.
Sec. 609. Flexibility in nondiscrimination, coverage, and line of
business rules.
Sec. 610. Extension to all governmental plans of moratorium on
application of certain nondiscrimination rules applicable
to State and local plans.
Sec. 611. Notice and consent period regarding distributions.
TITLE VII--PLAN AMENDMENTS
Sec. 701. Provisions relating to plan amendments.
TITLE I--INDIVIDUAL RETIREMENT ACCOUNTS
SEC. 101. MODIFICATION OF IRA CONTRIBUTION LIMITS.
(a) Increase in Contribution Limit.--
(1) In general.--Paragraph (1)(A) of section 219(b)
(relating to maximum amount of deduction) is amended by
striking ``$2,000'' and inserting ``the deductible amount''.
(2) Deductible amount.--Section 219(b) is amended by adding
at the end the following new paragraph:
``(5) Deductible amount.--For purposes of paragraph
(1)(A)--
``(A) In general.--The deductible amount shall be
determined in accordance with the following table:
``For taxable years The deductible
beginning in: amount is:
2001..................................................$3,000 .
2002..................................................$4,000 .
2003 and thereafter...................................$5,000..
``(B) Catch-up contributions for individuals 50 or older.--
In the case of an individual who has attained the age of 50
before the close of the taxable year, the deductible amount
for taxable years beginning in 2001 or 2002 shall be $5,000.
``(C) Cost-of-living adjustment.--
``(i) In general.--In the case of any taxable year
beginning in a calendar year after 2003, the $5,000 amount
under subparagraph (A) shall be increased by an amount equal
to--
``(I) such dollar amount, multiplied by
``(II) the cost-of-living adjustment determined under
section 1(f )(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2002'
for `calendar year 1992' in subparagraph (B) thereof.
``(ii) Rounding rules.--If any amount after adjustment
under clause (i) is not a multiple of $500, such amount shall
be rounded to the next lower multiple of $500.''.
(b) Conforming Amendments.--
(1) Section 408(a)(1) is amended by striking ``in excess of
$2,000 on behalf of any individual'' and inserting ``on
behalf of any individual in excess of the amount in effect
for such taxable year under section 219(b)(1)(A)''.
(2) Section 408(b)(2)(B) is amended by striking ``$2,000''
and inserting ``the dollar amount in effect under section
219(b)(1)(A)''.
(3) Section 408(b) is amended by striking ``$2,000'' in the
matter following paragraph (4) and inserting ``the dollar
amount in effect under section 219(b)(1)(A)''.
(4) Section 408( j) is amended by striking ``$2,000''.
(5) Section 408(p)(8) is amended by striking ``$2,000'' and
inserting ``the dollar amount in effect under section
219(b)(1)(A)''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
TITLE II--EXPANDING COVERAGE
SEC. 201. INCREASE IN BENEFIT AND CONTRIBUTION LIMITS.
(a) Defined Benefit Plans.--
(1) Dollar limit.--
(A) Subparagraph (A) of section 415(b)(1) (relating to
limitation for defined benefit plans) is amended by striking
``$90,000'' and inserting ``$160,000''.
(B) Subparagraphs (C) and (D) of section 415(b)(2) are each
amended by striking ``$90,000'' each place it appears in the
headings and the text and inserting ``$160,000''.
(C) Paragraph (7) of section 415(b) (relating to benefits
under certain collectively bargained plans) is amended by
striking ``the greater of $68,212 or one-half the amount
otherwise applicable for such year under paragraph (1)(A) for
`$90,000' '' and inserting ``one-half the amount otherwise
applicable for such year under paragraph (1)(A) for
`$160,000' ''.
(2) Limit reduced when benefit begins before age 62.--
Subparagraph (C) of section 415(b)(2) is amended by striking
``the social security retirement age'' each place it appears
in the heading and text and inserting ``age 62''.
(3) Limit increased when benefit begins after age 65.--
Subparagraph (D) of section 415(b)(2) is amended by striking
``the social security retirement age'' each place it appears
in the heading and text and inserting ``age 65''.
(4) Cost-of-living adjustments.--Subsection (d) of section
415 (related to cost-of-living adjustments) is amended--
(A) by striking ``$90,000'' in paragraph (1)(A) and
inserting ``$160,000''; and
(B) in paragraph (3)(A)--
(i) by striking ``$90,000'' in the heading and inserting
``$160,000''; and
(ii) by striking ``October 1, 1986'' and inserting ``July
1, 2000''.
(5) Conforming amendment.--Section 415(b)(2) is amended by
striking subparagraph (F).
(b) Defined Contribution Plans.--
(1) Dollar limit.--Subparagraph (A) of section 415(c)(1)
(relating to limitation for defined contribution plans) is
amended by striking ``$30,000'' and inserting ``$40,000''.
(2) Cost-of-living adjustments.--Subsection (d) of section
415 (related to cost-of-living adjustments) is amended--
(A) by striking ``$30,000'' in paragraph (1)(C) and
inserting ``$40,000''; and
(B) in paragraph (3)(D)--
(i) by striking ``$30,000'' in the heading and inserting
``$40,000''; and
(ii) by striking ``October 1, 1993'' and inserting ``July
1, 2000''.
(c) Qualified Trusts.--
(1) Compensation limit.--Sections 401(a)(17), 404(l),
408(k), and 505(b)(7) are each amended by striking
``$150,000'' each place it appears and inserting
``$200,000''.
(2) Base period and rounding of cost-of-living
adjustment.--Subparagraph (B) of section 401(a)(17) is
amended--
(A) by striking ``October 1, 1993'' and inserting ``July 1,
2000''; and
(B) by striking ``$10,000'' both places it appears and
inserting ``$5,000''.
(d) Elective Deferrals.--
(1) In general.--Paragraph (1) of section 402(g) (relating
to limitation on exclusion for elective deferrals) is amended
to read as follows:
``(1) In general.--
``(A) Limitation.--Notwithstanding subsections (e)(3) and
(h)(1)(B), the elective deferrals of any individual for any
taxable year shall be included in such individual's gross
income to the extent the amount of such deferrals for the
taxable year exceeds the applicable dollar amount.
``(B) Applicable dollar amount.--For purposes of
subparagraph (A), the applicable dollar amount shall be the
amount determined in accordance with the following table:
``For taxable years The applicable
beginning in dollar amount:
calendar year:
2001.....................................................$11,000
2002.....................................................$12,000
2003.....................................................$13,000
2004.....................................................$14,000
2005 or thereafter....................................$15,000.''.
(2) Cost-of-living adjustment.--Paragraph (5) of section
402(g) is amended to read as follows:
[[Page H6495]]
``(5) Cost-of-living adjustment.--In the case of taxable
years beginning after December 31, 2005, the Secretary shall
adjust the $15,000 amount under paragraph (1)(B) 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, 2004, and any increase under this paragraph which is
not a multiple of $500 shall be rounded to the next lowest
multiple of $500.''.
(3) Conforming amendments.--
(A) Section 402(g) (relating to limitation on exclusion for
elective deferrals), as amended by paragraphs (1) and (2), is
further amended by striking paragraph (4) and redesignating
paragraphs (5), (6), (7), (8), and (9) as paragraphs (4),
(5), (6), (7), and (8), respectively.
(B) Paragraph (2) of section 457(c) is amended by striking
``402(g)(8)(A)(iii)'' and inserting ``402(g)(7)(A)(iii)''.
(C) Clause (iii) of section 501(c)(18)(D) is amended by
striking ``(other than paragraph (4) thereof)''.
(e) Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations.--
(1) In general.--Section 457 (relating to deferred
compensation plans of State and local governments and tax-
exempt organizations) is amended--
(A) in subsections (b)(2)(A) and (c)(1) by striking
``$7,500'' each place it appears and inserting ``the
applicable dollar amount''; and
(B) in subsection (b)(3)(A) by striking ``$15,000'' and
inserting ``twice the dollar amount in effect under
subsection (b)(2)(A)''.
(2) Applicable dollar amount; cost-of-living adjustment.--
Paragraph (15) of section 457(e) is amended to read as
follows:
``(15) Applicable dollar amount.--
``(A) In general.--The applicable dollar amount shall be
the amount determined in accordance with the following table:
``For taxable years The applicable
beginning in dollar amount:
calendar year:
2001.....................................................$11,000
2002.....................................................$12,000
2003.....................................................$13,000
2004.....................................................$14,000
2005 or thereafter.......................................$15,000.
``(B) Cost-of-living adjustments.--In the case of taxable
years beginning after December 31, 2005, the Secretary shall
adjust the $15,000 amount specified in the table in
subparagraph (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, 2004, and any increase
under this paragraph which is not a multiple of $500 shall be
rounded to the next lowest multiple of $500.''.
(f) Simple Retirement Accounts.--
(1) Limitation.--Clause (ii) of section 408(p)(2)(A)
(relating to general rule for qualified salary reduction
arrangement) is amended by striking ``$6,000'' and inserting
``the applicable dollar amount''.
(2) Applicable dollar amount.--Subparagraph (E) of
408(p)(2) is amended to read as follows:
``(E) Applicable dollar amount; cost-of-living
adjustment.--
``(i) In general.--For purposes of subparagraph (A)(ii),
the applicable dollar amount shall be the amount determined
in accordance with the following table:
``For taxable years The applicable
beginning in dollar amount:
calendar year:
2001....................................................$7,000
2002....................................................$8,000
2003....................................................$9,000
2004 or thereafter.....................................$10,000.
``(ii) Cost-of-living adjustment.--In the case of a year
beginning after December 31, 2004, the Secretary shall adjust
the $10,000 amount under clause (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.''.
(3) Conforming amendments.--
(A) Clause (I) of section 401(k)(11)(B)(i) is amended by
striking ``$6,000'' and inserting ``the amount in effect
under section 408(p)(2)(A)(ii)''.
(B) Section 401(k)(11) is amended by striking subparagraph
(E).
(g) Rounding Rule Relating to Defined Benefit Plans and
Defined Contribution Plans.--Paragraph (4) of section 415(d)
is amended to read as follows:
``(4) Rounding.--
``(A) $160,000 amount.--Any increase under subparagraph (A)
of paragraph (1) which is not a multiple of $5,000 shall be
rounded to the next lowest multiple of $5,000.
``(B) $40,000 amount.--Any increase under subparagraph (C)
of paragraph (1) which is not a multiple of $1,000 shall be
rounded to the next lowest multiple of $1,000.''.
(h) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 202. PLAN LOANS FOR SUBCHAPTER S OWNERS, PARTNERS, AND
SOLE PROPRIETORS.
(a) In General.--Subparagraph (B) of section 4975(f)(6)
(relating to exemptions not to apply to certain transactions)
is amended by adding at the end the following new clause:
``(iii) Loan exception.--For purposes of subparagraph
(A)(i), the term `owner-employee' shall only include a person
described in subclause (II) or (III) of clause (i).''.
(b) Effective Date.--The amendment made by this section
shall apply to loans made after December 31, 2000.
SEC. 203. MODIFICATION OF TOP-HEAVY RULES.
(a) Simplification of Definition of Key Employee.--
(1) In general.--Section 416(i)(1)(A) (defining key
employee) is amended--
(A) by striking ``or any of the 4 preceding plan years'' in
the matter preceding clause (i);
(B) by striking clause (i) and inserting the following:
``(i) an officer of the employer having an annual
compensation greater than $150,000,'';
(C) by striking clause (ii) and redesignating clauses (iii)
and (iv) as clauses (ii) and (iii), respectively; and
(D) by striking the second sentence in the matter following
clause (iii), as redesignated by subparagraph (C).
(2) Conforming amendment.--Section 416(i)(1)(B)(iii) is
amended by striking ``and subparagraph (A)(ii)''.
(b) Matching Contributions Taken Into Account for Minimum
Contribution Requirements.--Section 416(c)(2)(A) (relating to
defined contribution plans) is amended by adding at the end
the following: ``Employer matching contributions (as defined
in section 401(m)(4)(A)) shall be taken into account for
purposes of this subparagraph.''.
(c) Distributions During Last Year Before Determination
Date Taken Into Account.--
(1) In general.--Paragraph (3) of section 416(g) is amended
to read as follows:
``(3) Distributions during last year before determination
date taken into account.--
``(A) In general.--For purposes of determining--
``(i) the present value of the cumulative accrued benefit
for any employee, or
``(ii) the amount of the account of any employee,
such present value or amount shall be increased by the
aggregate distributions made with respect to such employee
under the plan during the 1-year period ending on the
determination date. The preceding sentence shall also apply
to distributions under a terminated plan which if it had not
been terminated would have been required to be included in an
aggregation group.
``(B) 5-year period in case of in-service distribution.--In
the case of any distribution made for a reason other than
separation from service, death, or disability, subparagraph
(A) shall be applied by substituting `5-year period' for `1-
year period'.''.
(2) Benefits not taken into account.--Subparagraph (E) of
section 416(g)(4) is amended--
(A) by striking ``last 5 years'' in the heading and
inserting ``last year before determination date''; and
(B) by striking ``5-year period'' and inserting ``1-year
period''.
(d) Definition of Top-Heavy Plans.--Paragraph (4) of
section 416(g) (relating to other special rules for top-heavy
plans) is amended by adding at the end the following new
subparagraph:
``(H) Cash or deferred arrangements using alternative
methods of meeting nondiscrimination requirements.--The term
`top-heavy plan' shall not include a plan which consists
solely of--
``(i) a cash or deferred arrangement which meets the
requirements of section 401(k)(12), and
``(ii) matching contributions with respect to which the
requirements of section 401(m)(11) are met.
If, but for this subparagraph, a plan would be treated as a
top-heavy plan because it is a member of an aggregation group
which is a top-heavy group, contributions under the plan may
be taken into account in determining whether any other plan
in the group meets the requirements of subsection (c)(2).''.
(e) Frozen Plan Exempt From Minimum Benefit Requirement.--
Subparagraph (C) of section 416(c)(1) (relating to defined
benefit plans) is amended--
(A) by striking ``clause (ii)'' in clause (i) and inserting
``clause (ii) or (iii)''; and
(B) by adding at the end the following:
``(iii) Exception for frozen plan.--For purposes of
determining an employee's years of service with the employer,
any service with the employer shall be disregarded to the
extent that such service occurs during a plan year when the
plan benefits (within the meaning of section 410(b)) no
employee or former employee.''.
(f) Elimination of Family Attribution.--Section
416(i)(1)(B) (defining 5-percent owner) is amended by adding
at the end the following new clause:
``(iv) Family attribution disregarded.--Solely for purposes
of applying this paragraph (and not for purposes of any
provision of this title which incorporates by reference the
definition of a key employee or 5-percent owner under this
paragraph), section 318 shall be applied without regard to
subsection (a)(1) thereof in determining whether any person
is a 5-percent owner.''.
(g) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 204. ELECTIVE DEFERRALS NOT TAKEN INTO ACCOUNT FOR
PURPOSES OF DEDUCTION LIMITS.
(a) In General.--Section 404 (relating to deduction for
contributions of an employer to an employees' trust or
annuity plan and compensation under a deferred payment plan)
is amended by adding at the end the following new subsection:
``(n) Elective Deferrals Not Taken Into Account for
Purposes of Deduction Limits.--Elective deferrals (as defined
in section 402(g)(3)) shall not be subject to any limitation
contained in paragraph (3), (7), or (9) of subsection (a),
and such elective deferrals shall not be taken into account
in applying any such limitation to any other
contributions.''.
(b) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 2000.
[[Page H6496]]
SEC. 205. REPEAL OF COORDINATION REQUIREMENTS FOR DEFERRED
COMPENSATION PLANS OF STATE AND LOCAL
GOVERNMENTS AND TAX-EXEMPT ORGANIZATIONS.
(a) In General.--Subsection (c) of section 457 (relating to
deferred compensation plans of State and local governments
and tax-exempt organizations), as amended by section 201, is
amended to read as follows:
``(c) Limitation.--The maximum amount of the compensation
of any one individual which may be deferred under subsection
(a) during any taxable year shall not exceed the amount in
effect under subsection (b)(2)(A) (as modified by any
adjustment provided under subsection (b)(3)).''.
(b) Effective Date.--The amendment made by subsection (a)
shall apply to years beginning after December 31, 2000.
SEC. 206. ELIMINATION OF USER FEE FOR REQUESTS TO IRS
REGARDING PENSION PLANS.
(a) Elimination of Certain User Fees.--The Secretary of the
Treasury or the Secretary's delegate shall not require
payment of user fees under the program established under
section 7527 of the Internal Revenue Code of 1986 for
requests to the Internal Revenue Service for determination
letters with respect to the qualified status of a pension
benefit plan maintained solely by one or more eligible
employers or any trust which is part of the plan. The
preceding sentence shall not apply to any request--
(1) made after the fifth plan year the pension benefit plan
is in existence; or
(2) made by the sponsor of any prototype or similar plan
which the sponsor intends to market to participating
employers.
(b) Pension Benefit Plan.--For purposes of this section,
the term ``pension benefit plan'' means a pension, profit-
sharing, stock bonus, annuity, or employee stock ownership
plan.
(c) Eligible Employer.--For purposes of this section, the
term ``eligible employer'' has the same meaning given such
term in section 408(p)(2)(C)(i)(I) of the Internal Revenue
Code of 1986. The determination of whether an employer is an
eligible employer under this section shall be made as of the
date of the request described in subsection (a).
(d) Effective Date.--The provisions of this section shall
apply with respect to requests made after December 31, 2000.
SEC. 207. DEDUCTION LIMITS.
(a) In General.--
(1) Stock bonus and profit sharing trusts.--Subclause (I)
of section 404(a)(3)(A)(i) (relating to stock bonus and
profit sharing trusts) is amended by striking ``15 percent''
and inserting ``20 percent''.
(2) Compensation.--Section 404(a) (relating to general
rule) is amended by adding at the end the following:
``(12) Definition of compensation.--For purposes of
paragraphs (3), (7), (8), and (9), the term `compensation
otherwise paid or accrued during the taxable year' shall
include amounts treated as `participant's compensation' under
subparagraph (C) or (D) of section 415(c)(3).''.
(b) Conforming Amendments.--
(1) Subparagraph (B) of section 404(a)(3) is amended by
striking the last sentence thereof.
(2) Subparagraph (C) of section 404(h)(1) is amended by
striking ``15 percent'' each place it appears and inserting
``20 percent''.
(3) Clause (i) of section 4972(c)(6)(B) is amended by
striking ``(within the meaning of section 404(a))'' and
inserting ``(within the meaning of section 404(a) and as
adjusted under section 404(a)(12))''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 208. OPTION TO TREAT ELECTIVE DEFERRALS AS AFTER-TAX
CONTRIBUTIONS.
(a) In General.--Subpart A of part I of subchapter D of
chapter 1 (relating to deferred compensation, etc.) is
amended by inserting after section 402 the following new
section:
``SEC. 402A. OPTIONAL TREATMENT OF ELECTIVE DEFERRALS AS PLUS
CONTRIBUTIONS.
``(a) General Rule.--If an applicable retirement plan
includes a qualified plus contribution program--
``(1) any designated plus contribution made by an employee
pursuant to the program shall be treated as an elective
deferral for purposes of this chapter, except that such
contribution shall not be excludable from gross income, and
``(2) such plan (and any arrangement which is part of such
plan) shall not be treated as failing to meet any requirement
of this chapter solely by reason of including such program.
``(b) Qualified Plus Contribution Program.--For purposes of
this section--
``(1) In general.--The term `qualified plus contribution
program' means a program under which an employee may elect to
make designated plus contributions in lieu of all or a
portion of elective deferrals the employee is otherwise
eligible to make under the applicable retirement plan.
``(2) Separate accounting required.--A program shall not be
treated as a qualified plus contribution program unless the
applicable retirement plan--
``(A) establishes separate accounts (`designated plus
accounts') for the designated plus contributions of each
employee and any earnings properly allocable to the
contributions, and
``(B) maintains separate recordkeeping with respect to each
account.
``(c) Definitions and Rules Relating to Designated Plus
Contributions.--For purposes of this section--
``(1) Designated plus contribution.--The term `designated
plus contribution' means any elective deferral which--
``(A) is excludable from gross income of an employee
without regard to this section, and
``(B) the employee designates (at such time and in such
manner as the Secretary may prescribe) as not being so
excludable.
``(2) Designation limits.--The amount of elective deferrals
which an employee may designate under paragraph (1) shall not
exceed the excess (if any) of--
``(A) the maximum amount of elective deferrals excludable
from gross income of the employee for the taxable year
(without regard to this section), over
``(B) the aggregate amount of elective deferrals of the
employee for the taxable year which the employee does not
designate under paragraph (1).
``(3) Rollover contributions.--
``(A) In general.--A rollover contribution of any payment
or distribution from a designated plus account which is
otherwise allowable under this chapter may be made only if
the contribution is to--
``(i) another designated plus account of the individual
from whose account the payment or distribution was made, or
``(ii) a Roth IRA of such individual.
``(B) Coordination with limit.--Any rollover contribution
to a designated plus account under subparagraph (A) shall not
be taken into account for purposes of paragraph (1).
``(d) Distribution Rules.--For purposes of this title--
``(1) Exclusion.--Any qualified distribution from a
designated plus account shall not be includible in gross
income.
``(2) Qualified distribution.--For purposes of this
subsection--
``(A) In general.--The term `qualified distribution' has
the meaning given such term by section 408A(d)(2)(A) (without
regard to clause (iv) thereof).
``(B) Distributions within nonexclusion period.--A payment
or distribution from a designated plus account shall not be
treated as a qualified distribution if such payment or
distribution is made within the 5-taxable-year period
beginning with the earlier of--
``(i) the first taxable year for which the individual made
a designated plus contribution to any designated plus account
established for such individual under the same applicable
retirement plan, or
``(ii) if a rollover contribution was made to such
designated plus account from a designated plus account
previously established for such individual under another
applicable retirement plan, the first taxable year for which
the individual made a designated plus contribution to such
previously established account.
``(C) Distributions of excess deferrals and earnings.--The
term `qualified distribution' shall not include any
distribution of any excess deferral under section 402(g)(2)
and any income on the excess deferral.
``(3) Aggregation rules.--Section 72 shall be applied
separately with respect to distributions and payments from a
designated plus account and other distributions and payments
from the plan.
``(e) Other Definitions.--For purposes of this section--
``(1) Applicable retirement plan.--The term `applicable
retirement plan' means--
``(A) an employees' trust described in section 401(a) which
is exempt from tax under section 501(a), and
``(B) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b).
``(2) Elective deferral.--The term `elective deferral'
means any elective deferral described in subparagraph (A) or
(C) of section 402(g)(3).''.
(b) Excess Deferrals.--Section 402(g) (relating to
limitation on exclusion for elective deferrals) is amended--
(1) by adding at the end of paragraph (1) the following new
sentence: ``The preceding sentence shall not apply to so much
of such excess as does not exceed the designated plus
contributions of the individual for the taxable year.''; and
(2) by inserting ``(or would be included but for the last
sentence thereof)'' after ``paragraph (1)'' in paragraph
(2)(A).
(c) Rollovers.--Subparagraph (B) of section 402(c)(8) is
amended by adding at the end the following:
``If any portion of an eligible rollover distribution is
attributable to payments or distributions from a designated
plus account (as defined in section 402A), an eligible
retirement plan with respect to such portion shall include
only another designated plus account and a Roth IRA.''.
(d) Reporting Requirements.--
(1) W-2 information.--Section 6051(a)(8) is amended by
inserting ``, including the amount of designated plus
contributions (as defined in section 402A)'' before the comma
at the end.
(2) Information.--Section 6047 is amended by redesignating
subsection (f) as subsection (g) and by inserting after
subsection (e) the following new subsection:
``(f) Designated Plus Contributions.--The Secretary shall
require the plan administrator of each applicable retirement
plan (as defined in section 402A) to make such returns and
reports regarding designated plus contributions (as so
defined) to the Secretary, participants and beneficiaries of
the plan, and such other persons as the Secretary may
prescribe.''.
(e) Conforming Amendments.--
(1) Section 408A(e) is amended by adding after the first
sentence the following new sentence: ``Such term includes a
rollover contribution described in section 402A(c)(3)(A).''.
(2) The table of sections for subpart A of part I of
subchapter D of chapter 1 is amended by inserting after the
item relating to section 402 the following new item:
``Sec. 402A. Optional treatment of elective deferrals as plus
contributions.''.
[[Page H6497]]
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
TITLE III--ENHANCING FAIRNESS FOR WOMEN
SEC. 301. CATCH-UP CONTRIBUTIONS FOR INDIVIDUALS AGE 50 OR
OVER.
(a) In General.--Section 414 (relating to definitions and
special rules) is amended by adding at the end the following
new subsection:
``(v) Catch-up Contributions for Individuals Age 50 or
Over.--
``(1) In general.--An applicable employer plan shall not be
treated as failing to meet any requirement of this title
solely because the plan permits an eligible participant to
make additional elective deferrals in any plan year.
``(2) Limitation on amount of additional deferrals.--A plan
shall not permit additional elective deferrals under
paragraph (1) for any year in an amount greater than the
lesser of--
``(A) $5,000, or
``(B) the excess (if any) of--
``(i) the participant's compensation for the year, over
``(ii) any other elective deferrals of the participant for
such year which are made without regard to this subsection.
``(3) Treatment of contributions.--In the case of any
contribution to a plan under paragraph (1), such contribution
shall not, with respect to the year in which the contribution
is made--
``(A) be subject to any otherwise applicable limitation
contained in section 402(g), 402(h)(2), 404(a), 404(h),
408(p)(2)(A)(ii), 415, or 457, or
``(B) be taken into account in applying such limitations to
other contributions or benefits under such plan or any other
such plan.
``(4) Eligible participant.--For purposes of this
subsection, the term `eligible participant' means, with
respect to any plan year, a participant in a plan--
``(A) who has attained the age of 50 before the close of
the plan year, and
``(B) with respect to whom no other elective deferrals may
(without regard to this subsection) be made to the plan for
the plan year by reason of the application of any limitation
or other restriction described in paragraph (3) or comparable
limitation contained in the terms of the plan.
``(5) Other definitions and rules.--For purposes of this
subsection--
``(A) Applicable employer plan.--The term `applicable
employer plan' means--
``(i) an employees' trust described in section 401(a) which
is exempt from tax under section 501(a),
``(ii) a plan under which amounts are contributed by an
individual's employer for an annuity contract described in
section 403(b),
``(iii) an eligible deferred compensation plan under
section 457 of an eligible employer as defined in section
457(e)(1)(A), and
``(iv) an arrangement meeting the requirements of section
408 (k) or (p).
``(B) Elective deferral.--The term `elective deferral' has
the meaning given such term by subsection (u)(2)(C).
``(C) Exception for section 457 plans.--This subsection
shall not apply to an applicable employer plan described in
subparagraph (A)(iii) for any year to which section 457(b)(3)
applies.
``(D) Cost-of-living adjustment.--For years beginning after
December 31, 2005, 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, 2004, and any
increase which is not a multiple of $500 shall be rounded to
the next lowest multiple of $500.''.
(b) Effective Date.--The amendment made by this section
shall apply to contributions in taxable years beginning after
December 31, 2000.
SEC. 302. EQUITABLE TREATMENT FOR CONTRIBUTIONS OF EMPLOYEES
TO DEFINED CONTRIBUTION PLANS.
(a) Equitable Treatment.--
(1) In general.--Subparagraph (B) of section 415(c)(1)
(relating to limitation for defined contribution plans) is
amended by striking ``25 percent'' and inserting ``100
percent''.
(2) Application to section 403(b).--Section 403(b) is
amended--
(A) by striking ``the exclusion allowance for such taxable
year'' in paragraph (1) and inserting ``the applicable limit
under section 415'';
(B) by striking paragraph (2); and
(C) by inserting ``or any amount received by a former
employee after the fifth taxable year following the taxable
year in which such employee was terminated'' before the
period at the end of the second sentence of paragraph (3).
(3) Conforming amendments.--
(A) Subsection (f) of section 72 is amended by striking
``section 403(b)(2)(D)(iii))'' and inserting ``section
403(b)(2)(D)(iii), as in effect before the enactment of the
Comprehensive Retirement Security and Pension Reform Act of
2000)''.
(B) Section 404(a)(10)(B) is amended by striking ``, the
exclusion allowance under section 403(b)(2),''.
(C) Section 415(a)(2) is amended by striking ``, and the
amount of the contribution for such portion shall reduce the
exclusion allowance as provided in section 403(b)(2)''.
(D) Section 415(c)(3) is amended by adding at the end the
following new subparagraph:
``(E) Annuity contracts.--In the case of an annuity
contract described in section 403(b), the term `participant's
compensation' means the participant's includible compensation
determined under section 403(b)(3).''.
(E) Section 415(c) is amended by striking paragraph (4).
(F) Section 415(c)(7) is amended to read as follows:
``(7) Certain contributions by church plans not treated as
exceeding limit.--
``(A) In general.--Notwithstanding any other provision of
this subsection, at the election of a participant who is an
employee of a church or a convention or association of
churches, including an organization described in section
414(e)(3)(B)(ii), contributions and other additions for an
annuity contract or retirement income account described in
section 403(b) with respect to such participant, when
expressed as an annual addition to such participant's
account, shall be treated as not exceeding the limitation of
paragraph (1) if such annual addition is not in excess of
$10,000.
``(B) $40,000 aggregate limitation.--The total amount of
additions with respect to any participant which may be taken
into account for purposes of this subparagraph for all years
may not exceed $40,000.
``(C) Annual addition.--For purposes of this paragraph, the
term `annual addition' has the meaning given such term by
paragraph (2).''.
(G) Subparagraph (B) of section 402(g)(7) (as redesignated
by section 211) is amended by inserting before the period at
the end the following: ``(as in effect before the enactment
of the Comprehensive Retirement Security and Pension Reform
Act of 2000)''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2000.
(b) Special Rules for Sections 403(b) and 408.--
(1) In general.--Subsection (k) of section 415 is amended
by adding at the end the following new paragraph:
``(4) Special rules for sections 403(b) and 408.--For
purposes of this section, any annuity contract described in
section 403(b) for the benefit of a participant shall be
treated as a defined contribution plan maintained by each
employer with respect to which the participant has the
control required under subsection (b) or (c) of section 414
(as modified by subsection (h)). For purposes of this
section, any contribution by an employer to a simplified
employee pension plan for an individual for a taxable year
shall be treated as an employer contribution to a defined
contribution plan for such individual for such year.''.
(2) Effective date.--
(A) In general.--The amendment made by paragraph (1) shall
apply to limitation years beginning after December 31, 1999.
(B) Exclusion allowance.--Effective for limitation years
beginning in 2000, in the case of any annuity contract
described in section 403(b) of the Internal Revenue Code of
1986, the amount of the contribution disqualified by reason
of section 415(g) of such Code shall reduce the exclusion
allowance as provided in section 403(b)(2) of such Code.
(3) Modification of 403(b) exclusion allowance to conform
to 415 modification.--The Secretary of the Treasury shall
modify the regulations regarding the exclusion allowance
under section 403(b)(2) of the Internal Revenue Code of 1986
to render void the requirement that contributions to a
defined benefit pension plan be treated as previously
excluded amounts for purposes of the exclusion allowance. For
taxable years beginning after December 31, 1999, such
regulations shall be applied as if such requirement were
void.
(c) Deferred Compensation Plans of State and Local
Governments and Tax-Exempt Organizations.--
(1) In general.--Subparagraph (B) of section 457(b)(2)
(relating to salary limitation on eligible deferred
compensation plans) is amended by striking ``33\1/3\
percent'' and inserting ``100 percent''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2000.
SEC. 303. FASTER VESTING OF CERTAIN EMPLOYER MATCHING
CONTRIBUTIONS.
(a) In General.--Section 411(a) (relating to minimum
vesting standards) is amended--
(1) in paragraph (2), by striking ``A plan'' and inserting
``Except as provided in paragraph (12), a plan''; and
(2) by adding at the end the following:
``(12) Faster vesting for matching contributions.--In the
case of matching contributions (as defined in section
401(m)(4)(A)), paragraph (2) shall be applied--
``(A) by substituting `3 years' for `5 years' in
subparagraph (A), and
``(B) by substituting the following table for the table
contained in subparagraph (B):
The nonforfeitable
``Years of service: percentage is:
2............................................................20
3............................................................40
4............................................................60
5............................................................80
6.........................................................100.''.
(b) 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, 2000.
(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, 2001; or
(B) January 1, 2005.
(3) Service required.--With respect to any plan, the
amendments made by this section shall
[[Page H6498]]
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. 304. SIMPLIFY AND UPDATE THE MINIMUM DISTRIBUTION RULES.
(a) Simplification and Finalization of Minimum Distribution
Requirements.--
(1) In general.--The Secretary of the Treasury shall--
(A) simplify and finalize the regulations relating to
minimum distribution requirements under sections 401(a)(9),
408(a)(6) and (b)(3), 403(b)(10), and 457(d)(2) of the
Internal Revenue Code of 1986; and
(B) modify such regulations to--
(i) reflect current life expectancy; and
(ii) revise the required distribution methods so that,
under reasonable assumptions, the amount of the required
minimum distribution does not decrease over a participant's
life expectancy.
(2) Fresh start.--Notwithstanding subparagraph (D) of
section 401(a)(9) of such Code, during the first year that
regulations are in effect under this subsection, required
distributions for future years may be redetermined to reflect
changes under such regulations. Such redetermination shall
include the opportunity to choose a new designated
beneficiary and to elect a new method of calculating life
expectancy.
(3) Effective date for regulations.--Regulations referred
to in paragraph (1) shall be effective for years beginning
after December 31, 2000, and shall apply in such years
without regard to whether an individual had previously begun
receiving minimum distributions.
(b) Repeal of Rule Where Distributions Had Begun Before
Death Occurs.--
(1) In general.--Subparagraph (B) of section 401(a)(9) is
amended by striking clause (i) and redesignating clauses
(ii), (iii), and (iv) as clauses (i), (ii), and (iii),
respectively.
(2) Conforming changes.--
(A) Clause (i) of section 401(a)(9)(B) (as so redesignated)
is amended--
(i) by striking ``for other cases'' in the heading; and
(ii) by striking ``the distribution of the employee's
interest has begun in accordance with subparagraph (A)(ii)''
and inserting ``his entire interest has been distributed to
him''.
(B) Clause (ii) of section 401(a)(9)(B) (as so
redesignated) is amended by striking ``clause (ii)'' and
inserting ``clause (i)''.
(C) Clause (iii) of section 401(a)(9)(B) (as so
redesignated) is amended--
(i) by striking ``clause (iii)(I)'' and inserting ``clause
(ii)(I)'';
(ii) by striking ``clause (iii)(III)'' in subclause (I) and
inserting ``clause (ii)(III)'';
(iii) by striking ``the date on which the employee would
have attained age 70\1/2\,'' in subclause (I) and inserting
``April 1 of the calendar year following the calendar year in
which the spouse attains 70\1/2\,''; and
(iv) by striking ``the distributions to such spouse
begin,'' in subclause (II) and inserting ``his entire
interest has been distributed to him,''.
(3) Effective date.--The amendments made by this subsection
shall apply to years beginning after December 31, 2000.
(c) Reduction in Excise Tax.--
(1) In general.--Subsection (a) of section 4974 is amended
by striking ``50 percent'' and inserting ``10 percent''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2000.
SEC. 305. CLARIFICATION OF TAX TREATMENT OF DIVISION OF
SECTION 457 PLAN BENEFITS UPON DIVORCE.
(a) In General.--Section 414(p)(11) (relating to
application of rules to governmental and church plans) is
amended--
(1) by inserting ``or an eligible deferred compensation
plan (within the meaning of section 457(b))'' after
``subsection (e))''; and
(2) in the heading, by striking ``governmental and church
plans'' and inserting ``certain other plans''.
(b) Waiver of Certain Distribution Requirements.--Paragraph
(10) of section 414(p) is amended by striking ``and section
409(d)'' and inserting ``section 409(d), and section
457(d)''.
(c) Tax Treatment of Payments From a Section 457 Plan.--
Subsection (p) of section 414 is amended by redesignating
paragraph (12) as paragraph (13) and inserting after
paragraph (11) the following new paragraph:
``(12) Tax treatment of payments from a section 457 plan.--
If a distribution or payment from an eligible deferred
compensation plan described in section 457(b) is made
pursuant to a qualified domestic relations order, rules
similar to the rules of section 402(e)(1)(A) shall apply to
such distribution or payment.''.
(d) Effective Date.--The amendments made by this section
shall apply to transfers, distributions, and payments made
after December 31, 2000.
SEC. 306. MODIFICATION OF SAFE HARBOR RELIEF FOR HARDSHIP
WITHDRAWALS FROM CASH OR DEFERRED ARRANGEMENTS.
(a) In General.--The Secretary of the Treasury shall revise
the regulations relating to hardship distributions under
section 401(k)(2)(B)(i)(IV) of the Internal Revenue Code of
1986 to provide that the period an employee is prohibited
from making elective and employee contributions in order for
a distribution to be deemed necessary to satisfy financial
need shall be equal to 6 months.
(b) Effective Date.--The revised regulations under
subsection (a) shall apply to years beginning after December
31, 2000.
TITLE IV--INCREASING PORTABILITY FOR PARTICIPANTS
SEC. 401. 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 established and maintained by an employer
described in subsection (e)(1)(A), 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) in the case of a plan maintained by an employer
described in subsection (e)(1)(A), 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) maintained by an employer described in section
457(e)(1)(A); or''.
(ii) 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).''.
(iii) 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) In general.--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 inserting after clause
(iv) the following new clause:
``(v) an eligible deferred compensation plan described in
section 457(b) of an employer described in section
457(e)(1)(A).''.
(B) Separate accounting.--Section 402(c) is amended by
adding at the end the following new paragraph:
``(11) Separate accounting.--Unless a plan described in
clause (v) of paragraph (8)(B) agrees to separately account
for amounts rolled into such plan from eligible retirement
plans not described in such clause, the plan described in
such clause may not accept transfers or rollovers from such
retirement plans.''.
(C) 10 percent additional tax.--Subsection (t) of section
72 (relating to 10-percent additional tax on early
distributions from qualified retirement plans) is amended by
adding at the end the following new paragraph:
``(9) Special rule for rollovers to section 457 plans.--For
purposes of this subsection, a distribution from an eligible
deferred compensation plan (as defined in section 457(b)) of
an employer described in section 457(e)(1)(A) shall be
treated as a distribution from a qualified retirement plan
described in 4974(c)(1) to the extent that such distribution
is attributable to an amount transferred to an eligible
deferred compensation plan from a qualified retirement plan
(as defined in section 4974(c)).''.
(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 inserting after clause
(v) the following new clause:
``(vi) an annuity contract described in section 403(b).''.
(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
[[Page H6499]]
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) Spousal Rollovers.--Section 402(c)(9) (relating to
rollover where spouse receives distribution after death of
employee) is amended by striking ``; except that'' and all
that follows up to the end period.
(e) 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 to
read as follows:
``(B) Certain rules made applicable.--The rules of
paragraphs (2) through (7) and (9) of section 402(c) 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) Section 408(a)(1) is amended by striking ``or
403(b)(8),'' and inserting ``403(b)(8), or 457(e)(16)''.
(9) 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)''.
(10) Section 415(c)(2) is amended by striking ``and
408(d)(3)'' and inserting ``408(d)(3), and 457(e)(16)''.
(11) Section 4973(b)(1)(A) is amended by striking ``or
408(d)(3)'' and inserting ``408(d)(3), or 457(e)(16)''.
(f) Effective Date; Special Rule.--
(1) Effective date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
(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 (as defined 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. 402. 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 payment or distribution is
received, except that the maximum amount which may be paid
into such plan may not exceed the portion of the amount
received which is includible in gross income (determined
without regard to this paragraph).
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, 2000.
(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 (as defined 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. 403. ROLLOVERS OF AFTER-TAX CONTRIBUTIONS.
(a) Rollovers From Exempt Trusts.--Paragraph (2) of section
402(c) (relating to maximum amount which may be rolled over)
is amended by adding at the end the following: ``The
preceding sentence shall not apply to such distribution to
the extent--
``(A) such portion is transferred in a direct trustee-to-
trustee transfer to a qualified trust which is part of a plan
which is a defined contribution plan and which agrees to
separately account for amounts so transferred, including
separately accounting for the portion of such distribution
which is includible in gross income and the portion of such
distribution which is not so includible, or
``(B) such portion is transferred to an eligible retirement
plan described in clause (i) or (ii) of paragraph (8)(B).''.
(b) Optional Direct Transfer of Eligible Rollover
Distributions.--Subparagraph (B) of section 401(a)(31)
(relating to limitation) is amended by adding at the end the
following: ``The preceding sentence shall not apply to such
distribution if the plan to which such distribution is
transferred--
``(i) agrees to separately account for amounts so
transferred, including separately accounting for the portion
of such distribution which is includible in gross income and
the portion of such distribution which is not so includible,
or
``(ii) is an eligible retirement plan described in clause
(i) or (ii) of section 402(c)(8)(B).''.
(c) Rules for Applying Section 72 to IRAs.--Paragraph (3)
of section 408(d) (relating to special rules for applying
section 72) is amended by inserting at the end the following:
``(H) Application of section 72.--
``(i) In general.--If--
``(I) a distribution is made from an individual retirement
plan, and
``(II) a rollover contribution is made to an eligible
retirement plan described in section 402(c)(8)(B)(iii), (iv),
(v), or (vi) with respect to all or part of such
distribution,
then, notwithstanding paragraph (2), the rules of clause (ii)
shall apply for purposes of applying section 72.
``(ii) Applicable rules.--In the case of a distribution
described in clause (i)--
``(I) section 72 shall be applied separately to such
distribution,
``(II) notwithstanding the pro rata allocation of income
on, and investment in, the contract to distributions under
section 72, the portion of such distribution rolled over to
an eligible retirement plan described in clause (i) shall be
treated as from income on the contract (to the extent of the
aggregate income on the contract from all individual
retirement plans of the distributee), and
``(III) appropriate adjustments shall be made in applying
section 72 to other distributions in such taxable year and
subsequent taxable years.''.
(d) Effective Date.--The amendments made by this section
shall apply to distributions made after December 31, 2000.
SEC. 404. HARDSHIP EXCEPTION TO 60-DAY RULE.
(a) Exempt Trusts.--Paragraph (3) of section 402(c)
(relating to transfer must be made within 60 days of receipt)
is amended to read as follows:
``(3) 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.''.
(b) IRAs.--Paragraph (3) of section 408(d) (relating to
rollover contributions), as amended by section 403, is
amended by adding after subparagraph (H) the following new
subparagraph:
``(I) 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) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
SEC. 405. TREATMENT OF FORMS OF DISTRIBUTION.
(a) Plan Transfers.--
(1) In general.--Paragraph (6) of section 411(d) (relating
to accrued benefit not to be decreased by amendment) is
amended by adding at the end the following:
``(D) Plan transfers.--
``(i) In general.--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
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
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 subclause
(I),
``(III) the transfer described in subclause (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 subclause (III) was made
after the participant or beneficiary
[[Page H6500]]
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 subclause (III) to receive any
distribution to which the participant or beneficiary is
entitled under the transferee plan in the form of a single
sum distribution.
``(ii) Exception.--Clause (i) shall apply to plan mergers
and other transactions having the effect of a direct
transfer, including consolidations of benefits attributable
to different employers within a multiple employer plan.
``(E) Elimination of form of distribution.--Except to the
extent provided in regulations, a defined contribution plan
shall not be treated as failing to meet the requirements of
this section merely because of the elimination of a form of
distribution previously available thereunder. This
subparagraph shall not apply to the elimination of a form of
distribution with respect to any participant unless--
``(i) a single sum payment is available to such participant
at the same time or times as the form of distribution being
eliminated, and
``(ii) such single sum payment is based on the same or
greater portion of the participant's account as the form of
distribution being eliminated.''.
(2) Effective date.--The amendment made by this subsection
shall apply to years beginning after December 31, 2000.
(b) Regulations.--
(1) In general.--The last sentence of paragraph (6)(B) of
section 411(d) (relating to accrued benefit not to be
decreased by amendment) is amended to read as follows: ``The
Secretary shall by regulations provide that this subparagraph
shall not apply to any plan amendment that does not adversely
affect the rights of participants in a material manner.''.
(2) Secretary directed.--Not later than December 31, 2001,
the Secretary of the Treasury is directed to issue final
regulations under section 411(d)(6) of the Internal Revenue
Code of 1986, including the regulations required by the
amendments made by this subsection. Such regulations shall
apply to plan years beginning after December 31, 2001, or
such earlier date as is specified by the Secretary of the
Treasury.
SEC. 406. RATIONALIZATION OF RESTRICTIONS ON DISTRIBUTIONS.
(a) Modification of Same Desk Exception.--
(1) Section 401(k).--
(A) 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''.
(B) Subparagraph (A) of section 401(k)(10) (relating to
distributions upon termination of plan or disposition of
assets or subsidiary) is amended to read as follows:
``(A) In general.--An event described in this subparagraph
is the termination of the plan without establishment or
maintenance of another defined contribution plan (other than
an employee stock ownership plan as defined in section
4975(e)(7)).''.
(C) Section 401(k)(10) is amended--
(i) in subparagraph (B)--
(I) by striking ``An event'' in clause (i) and inserting
``A termination''; and
(II) by striking ``the event'' in clause (i) and inserting
``the termination'';
(ii) by striking subparagraph (C); and
(iii) by striking ``or disposition of assets or
subsidiary'' in the heading.
(2) Section 403(b).--
(A) Paragraphs (7)(A)(ii) and (11)(A) of section 403(b) are
each amended by striking ``separates from service'' and
inserting ``has a severance from employment''.
(B) The heading for paragraph (11) of section 403(b) is
amended by striking ``separation from service'' and inserting
``severance from employment''.
(3) Section 457.--Clause (ii) of section 457(d)(1)(A) is
amended by striking ``is separated from service'' and
inserting ``has a severance from employment''.
(b) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
SEC. 407. 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.--Subsection (e) of section 457 is amended by
adding after paragraph (16) 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.''.
(c) Effective Date.--The amendments made by this section
shall apply to trustee-to-trustee transfers after December
31, 2000.
SEC. 408. EMPLOYERS MAY DISREGARD ROLLOVERS FOR PURPOSES OF
CASH-OUT AMOUNTS.
(a) Qualified Plans.--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).''.
(b) Eligible Deferred Compensation Plans.--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))''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
SEC. 409. MINIMUM DISTRIBUTION AND INCLUSION REQUIREMENTS FOR
SECTION 457 PLANS.
(a) Minimum Distribution Requirements.--Paragraph (2) of
section 457(d) (relating to distribution requirements) is
amended to read as follows:
``(2) Minimum distribution requirements.--A plan meets the
minimum distribution requirements of this paragraph if such
plan meets the requirements of section 401(a)(9).''.
(b) Inclusion in Gross Income.--
(1) Year of inclusion.--Subsection (a) of section 457
(relating to year of inclusion in gross income) is amended to
read as follows:
``(a) Year of inclusion in gross income.--
``(1) In general.--Any amount of compensation deferred
under an eligible deferred compensation plan, and any income
attributable to the amounts so deferred, shall be includible
in gross income only for the taxable year in which such
compensation or other income--
``(A) is paid to the participant or other beneficiary, in
the case of a plan of an eligible employer described in
subsection (e)(1)(A), and
``(B) is paid or otherwise made available to the
participant or other beneficiary, in the case of a plan of an
eligible employer described in subsection (e)(1)(B).
``(2) Special rule for rollover amounts.--To the extent
provided in section 72(t)(9), section 72(t) shall apply to
any amount includible in gross income under this
subsection.''.
(2) Conforming amendments.--
(A) So much of paragraph (9) of section 457(e) as precedes
subparagraph (A) is amended to read as follows:
``(9) Benefits of tax exempt organization plans not treated
as made available by reason of certain elections, etc.--In
the case of an eligible deferred compensation plan of an
employer described in subsection (e)(1)(B)--''.
(B) Section 457(d) is amended by adding at the end the
following new paragraph:
``(3) Special rule for government plan.--An eligible
deferred compensation plan of an employer described in
subsection (e)(1)(A) shall not be treated as failing to meet
the requirements of this subsection solely by reason of
making a distribution described in subsection (e)(9)(A).''.
(c) Effective Date.--The amendments made by this section
shall apply to distributions after December 31, 2000.
TITLE V--STRENGTHENING PENSION SECURITY AND ENFORCEMENT
SEC. 501. REPEAL OF 150 PERCENT OF CURRENT LIABILITY FUNDING
LIMIT.
(a) In General.--Section 412(c)(7) (relating to full-
funding limitation) is amended--
(1) by striking ``the applicable percentage'' in
subparagraph (A)(i)(I) and inserting ``in the case of plan
years beginning before January 1, 2004, the applicable
percentage''; and
(2) by amending subparagraph (F) to read as follows:
``(F) Applicable percentage.--For purposes of subparagraph
(A)(i)(I), the applicable percentage shall be determined in
accordance with the following table:
``In the case of any plan year beginning The applicable percentage is--
2001........................................................160
2002........................................................165
2003......................................................170.''.
(b) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2000.
SEC. 502. MAXIMUM CONTRIBUTION DEDUCTION RULES MODIFIED AND
APPLIED TO ALL DEFINED BENEFIT PLANS.
(a) In General.--Subparagraph (D) of section 404(a)(1)
(relating to special rule in case of certain plans) is
amended to read as follows:
``(D) Special rule in case of certain plans.--
``(i) In general.--In the case of any defined benefit plan,
except as provided in regulations, the maximum amount
deductible under the limitations of this paragraph shall not
be less than the unfunded termination liability (determined
as if the proposed termination date referred to in section
4041(b)(2)(A)(i)(II) of the Employee Retirement Income
Security Act of 1974 were the last day of the plan year).
``(ii) Plans with less than 100 participants.--For purposes
of this subparagraph, in
[[Page H6501]]
the case of a plan which has less than 100 participants for
the plan year, termination liability shall not include the
liability attributable to benefit increases for highly
compensated employees (as defined in section 414(q))
resulting from a plan amendment which is made or becomes
effective, whichever is later, within the last 2 years before
the termination date.
``(iii) Rule for determining number of participants.--For
purposes of determining whether a plan has more than 100
participants, all defined benefit plans maintained by the
same employer (or any member of such employer's controlled
group (within the meaning of section 412(l)(8)(C))) shall be
treated as one plan, but only employees of such member or
employer shall be taken into account.
``(iv) Plans established and maintain by professional
service employers.--Clause (i) shall not apply to a plan
described in section 4021(b)(13) of the Employee Retirement
Income Security Act of 1974.''.
(b) Conforming Amendment.--Paragraph (6) of section 4972(c)
is amended to read as follows:
``(6) Exceptions.--In determining the amount of
nondeductible contributions for any taxable year, there shall
not be taken into account so much of the contributions to one
or more defined contribution plans which are not deductible
when contributed solely because of section 404(a)(7) as does
not exceed the greater of--
``(A) the amount of contributions not in excess of 6
percent of compensation (within the meaning of section
404(a)) paid or accrued (during the taxable year for which
the contributions were made) to beneficiaries under the
plans, or
``(B) 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).
For purposes of this paragraph, the deductible limits under
section 404(a)(7) shall first be applied to amounts
contributed to a defined benefit plan and then to amounts
described in subparagraph (B).''.
(c) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2000.
SEC. 503. EXCISE TAX RELIEF FOR SOUND PENSION FUNDING.
(a) In General.--Subsection (c) of section 4972 (relating
to nondeductible contributions) is amended by adding at the
end the following new paragraph:
``(7) Defined benefit plan exception.--In determining the
amount of nondeductible contributions for any taxable year,
an employer may elect for such year not to take into account
any contributions to a defined benefit plan except to the
extent that such contributions exceed the full-funding
limitation (as defined in section 412(c)(7), determined
without regard to subparagraph (A)(i)(I) thereof). For
purposes of this paragraph, the deductible limits under
section 404(a)(7) shall first be applied to amounts
contributed to defined contribution plans and then to amounts
described in this paragraph. If an employer makes an election
under this paragraph for a taxable year, paragraph (6) shall
not apply to such employer for such taxable year.''.
(b) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 2000.
SEC. 504. EXCISE TAX ON FAILURE TO PROVIDE NOTICE BY DEFINED
BENEFIT PLANS SIGNIFICANTLY REDUCING FUTURE
BENEFIT ACCRUALS.
(a) In General.--Chapter 43 (relating to qualified pension,
etc., plans) is amended by adding at the end the following
new section:
``SEC. 4980F. FAILURE OF APPLICABLE PLANS REDUCING BENEFIT
ACCRUALS TO SATISFY NOTICE REQUIREMENTS.
``(a) Imposition of Tax.--There is hereby imposed a tax on
the failure of any applicable pension plan to meet the
requirements of subsection (e) with respect to any applicable
individual.
``(b) Amount of Tax.--
``(1) In general.--The amount of the tax imposed by
subsection (a) on any failure with respect to any applicable
individual shall be $100 for each day in the noncompliance
period with respect to such failure.
``(2) Noncompliance period.--For purposes of this section,
the term `noncompliance period' means, with respect to any
failure, the period beginning on the date the failure first
occurs and ending on the date the failure is corrected.
``(c) Limitations on Amount of Tax.--
``(1) Overall limitation for unintentional failures.--In
the case of failures that are due to reasonable cause and not
to willful neglect, the tax imposed by subsection (a) for
failures during the taxable year of the employer (or, in the
case of a multiemployer plan, the taxable year of the trust
forming part of the plan) shall not exceed $500,000. For
purposes of the preceding sentence, all multiemployer plans
of which the same trust forms a part shall be treated as one
plan. For purposes of this paragraph, if not all persons who
are treated as a single employer for purposes of this section
have the same taxable year, the taxable years taken into
account shall be determined under principles similar to the
principles of section 1561.
``(2) Waiver by secretary.--In the case of a failure which
is due to reasonable cause and not to willful neglect, the
Secretary may waive part or all of the tax imposed by
subsection (a) to the extent that the payment of such tax
would be excessive relative to the failure involved.
``(d) Liability for Tax.--The following shall be liable for
the tax imposed by subsection (a):
``(1) In the case of a plan other than a multiemployer
plan, the employer.
``(2) In the case of a multiemployer plan, the plan.
``(e) Notice Requirements for Plans Significantly Reducing
Benefit Accruals.--
``(1) In general.--If an applicable pension plan is amended
to provide for a significant reduction in the rate of future
benefit accrual, the plan administrator shall provide written
notice to each applicable individual (and to each employee
organization representing applicable individuals).
``(2) Notice.--The 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 regulations
prescribed by the Secretary) to allow applicable individuals
to understand the effect of the plan amendment.
``(3) Timing of notice.--Except as provided in regulations,
the notice required by paragraph (1) shall be provided within
a reasonable time before the effective date of the plan
amendment.
``(4) Designees.--Any notice under paragraph (1) may be
provided to a person designated, in writing, by the person to
which it would otherwise be provided.
``(5) Notice before adoption of amendment.--A plan shall
not be treated as failing to meet the requirements of
paragraph (1) merely because notice is provided before the
adoption of the plan amendment if no material modification of
the amendment occurs before the amendment is adopted.
``(f) Applicable Individual; Applicable Pension Plan.--For
purposes of this section--
``(1) Applicable individual.--The term `applicable
individual' means, with respect to any plan amendment--
``(A) any participant in the plan, and
``(B) 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)),
who may reasonably be expected to be affected by such plan
amendment.
``(2) Applicable pension plan.--The term `applicable
pension plan' means--
``(A) any defined benefit plan, or
``(B) an individual account plan which is subject to the
funding standards of section 412,
which had 100 or more participants who had accrued a benefit,
or with respect to whom contributions were made, under the
plan (whether or not vested) as of the last day of the plan
year preceding the plan year in which the plan amendment
becomes effective. Such term shall not include a governmental
plan (within the meaning of section 414(d)) or a church plan
(within the meaning of section 414(e)) with respect to which
the election provided by section 410(d) has not been made.''.
(b) Clerical Amendment.--The table of sections for chapter
43 is amended by adding at the end the following new item:
``Sec. 4980F. Failure of applicable plans reducing benefit accruals to
satisfy notice requirements.''.
(c) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to plan amendments taking effect on or after the date
of the enactment of this Act.
(2) Transition.--Until such time as the Secretary of the
Treasury issues regulations under sections 4980F(e)(2) and
(3) of the Internal Revenue Code of 1986 (as added by the
amendments made by this section), a plan shall be treated as
meeting the requirements of such sections if it makes a good
faith effort to comply with such requirements.
(3) Special rule.--The period for providing any notice
required by the amendments made by this section shall not end
before the date which is 3 months after the date of the
enactment of this Act.
(d) Study.--The Secretary of the Treasury shall prepare a
report on the effects of conversions of traditional defined
benefit plans to cash balance or hybrid formula plans. Such
study shall examine the effect of such conversions on longer
service participants, including the incidence and effects of
``wear away'' provisions under which participants earn no
additional benefits for a period of time after the
conversion. As soon as practicable, but not later than 60
days after the date of the enactment of this Act, the
Secretary shall submit such report, together with
recommendations thereon, to the Committee on Ways and Means
of the House of Representatives and the Committee on Finance
of the Senate.
SEC. 505. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) Compensation Limit.--Paragraph (11) of section 415(b)
(relating to limitation for defined benefit plans) is amended
to read as follows:
``(11) Special limitation rule for governmental and
multiemployer plans.--In the case of a governmental plan (as
defined in section 414(d)) or a multiemployer plan (as
defined in section 414(f)), subparagraph (B) of paragraph (1)
shall not apply.''.
(b) Combining and Aggregation of Plans.--
(1) Combining of plans.--Subsection (f) of section 415
(relating to combining of plans) is amended by adding at the
end the following:
``(3) Exception for multiemployer plans.--Notwithstanding
paragraph (1) and subsection (g), a multiemployer plan (as
defined in section 414(f)) shall not be combined or
aggregated with any other plan maintained by an employer for
purposes of applying the limitations established in this
section, except that such plan shall be combined or
aggregated with another plan which is not such a
multiemployer plan solely for purposes of determining whether
such other plan meets the requirements of subsections
(b)(1)(A) and (c).''.
(2) Conforming amendment for aggregation of plans.--
Subsection (g) of section 415 (relating to aggregation of
plans) is amended by striking ``The Secretary'' and inserting
``Except as provided in subsection (f)(3), the Secretary''.
[[Page H6502]]
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 506. PROHIBITED ALLOCATIONS OF STOCK IN S CORPORATION
ESOP.
(a) In General.--Section 409 (relating to qualifications
for tax credit employee stock ownership plans) is amended by
redesignating subsection (p) as subsection (q) and by
inserting after subsection (o) the following new subsection:
``(p) Prohibited Allocations of Securities in an S
Corporation.--
``(1) In general.--An employee stock ownership plan holding
employer securities consisting of stock in an S corporation
shall provide that no portion of the assets of the plan
attributable to (or allocable in lieu of) such employer
securities may, during a nonallocation year, accrue (or be
allocated directly or indirectly under any plan of the
employer meeting the requirements of section 401(a)) for the
benefit of any disqualified person.
``(2) Failure to meet requirements.--
``(A) In general.--If a plan fails to meet the requirements
of paragraph (1), the plan shall be treated as having
distributed to any disqualified person the amount allocated
to the account of such person in violation of paragraph (1)
at the time of such allocation.
``(B) Cross reference.--
``For excise tax relating to violations of paragraph (1) and
ownership of synthetic equity, see section 4979A.
``(3) Nonallocation year.--For purposes of this
subsection--
``(A) In general.--The term `nonallocation year' means any
plan year of an employee stock ownership plan if, at any time
during such plan year--
``(i) such plan holds employer securities consisting of
stock in an S corporation, and
``(ii) disqualified persons own at least 50 percent of the
number of shares of stock in the S corporation.
``(B) Attribution rules.--For purposes of subparagraph
(A)--
``(i) In general.--The rules of section 318(a) shall apply
for purposes of determining ownership, except that--
``(I) in applying paragraph (1) thereof, the members of an
individual's family shall include members of the family
described in paragraph (4)(D), and
``(II) paragraph (4) thereof shall not apply.
``(ii) Deemed-owned shares.--Notwithstanding the employee
trust exception in section 318(a)(2)(B)(i), individual shall
be treated as owning deemed-owned shares of the individual.
Solely for purposes of applying paragraph (5), this
subparagraph shall be applied after the attribution rules of
paragraph (5) have been applied.
``(4) Disqualified person.--For purposes of this
subsection--
``(A) In general.--The term `disqualified person' means any
person if--
``(i) the aggregate number of deemed-owned shares of such
person and the members of such person's family is at least 20
percent of the number of deemed-owned shares of stock in the
S corporation, or
``(ii) in the case of a person not described in clause (i),
the number of deemed-owned shares of such person is at least
10 percent of the number of deemed-owned shares of stock in
such corporation.
``(B) Treatment of family members.--In the case of a
disqualified person described in subparagraph (A)(i), any
member of such person's family with deemed-owned shares shall
be treated as a disqualified person if not otherwise treated
as a disqualified person under subparagraph (A).
``(C) Deemed-owned shares.--
``(i) In general.--The term `deemed-owned shares' means,
with respect to any person--
``(I) the stock in the S corporation constituting employer
securities of an employee stock ownership plan which is
allocated to such person under the plan, and
``(II) such person's share of the stock in such corporation
which is held by such plan but which is not allocated under
the plan to participants.
``(ii) Person's share of unallocated stock.--For purposes
of clause (i)(II), a person's share of unallocated S
corporation stock held by such plan is the amount of the
unallocated stock which would be allocated to such person if
the unallocated stock were allocated to all participants in
the same proportions as the most recent stock allocation
under the plan.
``(D) Member of family.--For purposes of this paragraph,
the term `member of the family' means, with respect to any
individual--
``(i) the spouse of the individual,
``(ii) an ancestor or lineal descendant of the individual
or the individual's spouse,
``(iii) a brother or sister of the individual or the
individual's spouse and any lineal descendant of the brother
or sister, and
``(iv) the spouse of any individual described in clause
(ii) or (iii).
A spouse of an individual who is legally separated from such
individual under a decree of divorce or separate maintenance
shall not be treated as such individual's spouse for purposes
of this subparagraph.
``(5) Treatment of synthetic equity.--For purposes of
paragraphs (3) and (4), in the case of a person who owns
synthetic equity in the S corporation, except to the extent
provided in regulations, the shares of stock in such
corporation on which such synthetic equity is based shall be
treated as outstanding stock in such corporation and deemed-
owned shares of such person if such treatment of synthetic
equity of 1 or more such persons results in--
``(A) the treatment of any person as a disqualified person,
or
``(B) the treatment of any year as a nonallocation year.
For purposes of this paragraph, synthetic equity shall be
treated as owned by a person in the same manner as stock is
treated as owned by a person under the rules of paragraphs
(2) and (3) of section 318(a). If, without regard to this
paragraph, a person is treated as a disqualified person or a
year is treated as a nonallocation year, this paragraph shall
not be construed to result in the person or year not being so
treated.
``(6) Definitions.--For purposes of this subsection--
``(A) Employee stock ownership plan.--The term `employee
stock ownership plan' has the meaning given such term by
section 4975(e)(7).
``(B) Employer securities.--The term `employer security'
has the meaning given such term by section 409(l).
``(C) Synthetic equity.--The term `synthetic equity' means
any stock option, warrant, restricted stock, deferred
issuance stock right, or similar interest or right that gives
the holder the right to acquire or receive stock of the S
corporation in the future. Except to the extent provided in
regulations, synthetic equity also includes a stock
appreciation right, phantom stock unit, or similar right to a
future cash payment based on the value of such stock or
appreciation in such value.
``(7) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of
this subsection.''.
(b) Coordination With Section 4975(e)(7).--The last
sentence of section 4975(e)(7) (defining employee stock
ownership plan) is amended by inserting ``, section 409(p),''
after ``409(n)''.
(c) Excise Tax.--
(1) Application of tax.--Subsection (a) of section 4979A
(relating to tax on certain prohibited allocations of
employer securities) is amended--
(A) by striking ``or'' at the end of paragraph (1), and
(B) by striking all that follows paragraph (2) and
inserting the following:
``(3) there is any allocation of employer securities which
violates the provisions of section 409(p), or a nonallocation
year described in subsection (e)(2)(C) with respect to an
employee stock ownership plan, or
``(4) any synthetic equity is owned by a disqualified
person in any nonallocation year,
there is hereby imposed a tax on such allocation or ownership
equal to 50 percent of the amount involved.''.
(2) Liability.--Section 4979A(c) (defining liability for
tax) is amended to read as follows:
``(c) Liability for Tax.--The tax imposed by this section
shall be paid--
``(1) in the case of an allocation referred to in paragraph
(1) or (2) of subsection (a), by--
``(A) the employer sponsoring such plan, or
``(B) the eligible worker-owned cooperative,
which made the written statement described in section
664(g)(1)(E) or in section 1042(b)(3)(B) (as the case may
be), and
``(2) in the case of an allocation or ownership referred to
in paragraph (3) or (4) of subsection (a), by the S
corporation the stock in which was so allocated or owned.''.
(3) Definitions.--Section 4979A(e) (relating to
definitions) is amended to read as follows:
``(e) Definitions and Special Rules.--For purposes of this
section--
``(1) Definitions.--Except as provided in paragraph (2),
terms used in this section have the same respective meanings
as when used in sections 409 and 4978.
``(2) Special rules relating to tax imposed by reason of
paragraph (3) or (4) of subsection (a).--
``(A) Prohibited allocations.--The amount involved with
respect to any tax imposed by reason of subsection (a)(3) is
the amount allocated to the account of any person in
violation of section 409(p)(1).
``(B) Synthetic equity.--The amount involved with respect
to any tax imposed by reason of subsection (a)(4) is the
value of the shares on which the synthetic equity is based.
``(C) Special rule during first nonallocation year.--For
purposes of subparagraph (A), the amount involved for the
first nonallocation year of any employee stock ownership plan
shall be determined by taking into account the total value of
all the deemed-owned shares of all disqualified persons with
respect to such plan.
``(D) Statute of limitations.--The statutory period for the
assessment of any tax imposed by this section by reason of
paragraph (3) or (4) of subsection (a) shall not expire
before the date which is 3 years from the later of--
``(i) the allocation or ownership referred to in such
paragraph giving rise to such tax, or
``(ii) the date on which the Secretary is notified of such
allocation or ownership.''.
(d) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to plan years beginning after December 31, 2001.
(2) Exception for certain plans.--In the case of any--
(A) employee stock ownership plan established after July
11, 2000, or
(B) employee stock ownership plan established on or before
such date if employer securities held by the plan consist of
stock in a corporation with respect to which an election
under section 1362(a) of the Internal Revenue Code of 1986 is
not in effect on such date,
the amendments made by this section shall apply to plan years
ending after July 11, 2000.
TITLE VI--REDUCING REGULATORY BURDENS
SEC. 601. MODIFICATION OF TIMING OF PLAN VALUATIONS.
(a) In General.--Paragraph (9) of section 412(c)(9)
(relating to annual valuation) is amended to read as follows:
``(9) Annual valuation.--
[[Page H6503]]
``(A) In general.--For purposes of this section, a
determination of experience gains and losses and a valuation
of the plan's liability shall be made not less frequently
than once every year, except that such determination shall be
made more frequently to the extent required in particular
cases under regulations prescribed by the Secretary.
``(B) Valuation date.--
``(i) Current year.--Except as provided in clause (ii), the
valuation referred to in subparagraph (A) shall be made as of
a date within the plan year to which the valuation refers or
within one month prior to the beginning of such year.
``(ii) Election to use prior year valuation.--The valuation
referred to in subparagraph (A) may be made as of a date
within the plan year prior to the year to which the valuation
refers if--
``(I) an election is in effect under this clause with
respect to the plan, and
``(II) as of such date, the value of the assets of the plan
are not less than 125 percent of the plan's current liability
(as defined in paragraph (7)(B)).
``(iii) Adjustments.--Information under clause (ii) shall,
in accordance with regulations, be actuarially adjusted to
reflect significant differences in participants.
``(iv) Election.--An election under clause (ii), once made,
shall be irrevocable without the consent of the Secretary.''.
(b) Effective Date.--The amendments made by this section
shall apply to plan years beginning after December 31, 2000.
SEC. 602. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF
DIVIDEND DEDUCTION.
(a) In General.--Section 404(k)(2)(A) (defining applicable
dividends) is amended by striking ``or'' at the end of clause
(ii), by redesignating clause (iii) as clause (iv), and by
inserting after clause (ii) the following new clause:
``(iii) is, at the election of such participants or their
beneficiaries--
``(I) payable as provided in clause (i) or (ii), or
``(II) paid to the plan and reinvested in qualifying
employer securities, or''.
(b) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2000.
SEC. 603. REPEAL OF TRANSITION RULE RELATING TO CERTAIN
HIGHLY COMPENSATED EMPLOYEES.
(a) In General.--Paragraph (4) of section 1114(c) of the
Tax Reform Act of 1986 is hereby repealed.
(b) Effective Date.--The repeal made by subsection (a)
shall apply to plan years beginning after December 31, 2000.
SEC. 604. EMPLOYEES OF TAX-EXEMPT ENTITIES.
(a) In General.--The Secretary of the Treasury shall modify
Treasury Regulations section 1.410(b)-6(g) to provide that
employees of an organization described in section
403(b)(1)(A)(i) of the Internal Revenue Code of 1986 who are
eligible to make contributions under section 403(b) of such
Code pursuant to a salary reduction agreement may be treated
as excludable with respect to a plan under section 401(k) or
(m) of such Code that is provided under the same general
arrangement as a plan under such section 401(k), if--
(1) no employee of an organization described in section
403(b)(1)(A)(i) of such Code is eligible to participate in
such section 401(k) plan or section 401(m) plan; and
(2) 95 percent of the employees who are not employees of an
organization described in section 403(b)(1)(A)(i) of such
Code are eligible to participate in such plan under such
section 401(k) or (m).
(b) Effective Date.--The modification required by
subsection (a) shall apply as of the same date set forth in
section 1426(b) of the Small Business Job Protection Act of
1996.
SEC. 605. CLARIFICATION OF TREATMENT OF EMPLOYER-PROVIDED
RETIREMENT ADVICE.
(a) In General.--Subsection (a) of section 132 (relating to
exclusion from gross income) is amended by striking ``or'' at
the end of paragraph (5), by striking the period at the end
of paragraph (6) and inserting ``, or'', and by adding at the
end the following new paragraph:
``(7) qualified retirement planning services.''.
(b) Qualified Retirement Planning Services Defined.--
Section 132 is amended by redesignating subsection (m) as
subsection (n) and by inserting after subsection (l) the
following:
``(m) Qualified Retirement Planning Services.--
``(1) In general.--For purposes of this section, the term
`qualified retirement planning services' means any retirement
planning service provided to an employee and his spouse by an
employer maintaining a qualified employer plan.
``(2) Nondiscrimination rule.--Subsection (a)(7) shall
apply in the case of highly compensated employees only if
such services are 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.
``(3) Qualified employer plan.--For purposes of this
subsection, the term `qualified employer plan' means a plan,
contract, pension, or account described in section
219(g)(5).''.
(c) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 606. REPORTING SIMPLIFICATION.
(a) Simplified Annual Filing Requirement for Owners and
Their Spouses.--
(1) In general.--The Secretary of the Treasury 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.
(b) Simplified Annual Filing Requirement for Plans With
Fewer Than 25 Employees.--In the case of a retirement plan
which covers less than 25 employees on the first day of the
plan year and meets the requirements described in
subparagraphs (B), (D), and (E) of subsection (a)(2), the
Secretary of the Treasury shall provide for the filing of a
simplified annual return that is substantially similar to the
annual return required to be filed by a one-participant
retirement plan.
(c) Effective Date.--The provisions of this section shall
take effect on January 1, 2001.
SEC. 607. 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 Administrative Policy Regarding Self-Correction for
significant compliance failures;
(4) expanding the availability to correct insignificant
compliance failures under the Administrative Policy Regarding
Self-Correction 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.
SEC. 608. REPEAL OF THE MULTIPLE USE TEST.
(a) In General.--Paragraph (9) of section 401(m) is amended
to read as follows:
``(9) Regulations.--The Secretary shall prescribe such
regulations as may be necessary to carry out the purposes of
this subsection and subsection (k), including regulations
permitting appropriate aggregation of plans and
contributions.''.
(b) Effective Date.--The amendment made by this section
shall apply to years beginning after December 31, 2000.
SEC. 609. FLEXIBILITY IN NONDISCRIMINATION, COVERAGE, AND
LINE OF BUSINESS RULES.
(a) Nondiscrimination.--
(1) In general.--The Secretary of the Treasury shall, by
regulation, provide that a plan shall be deemed to satisfy
the requirements of section 401(a)(4) of the Internal Revenue
Code of 1986 if such plan satisfies the facts and
circumstances test under section 401(a)(4) of such Code, as
in effect before January 1, 1994, but only if--
(A) the plan satisfies conditions prescribed by the
Secretary to appropriately limit the availability of such
test; and
(B) the plan is submitted to the Secretary for a
determination of whether it satisfies such test.
Subparagraph (B) shall only apply to the extent provided by
the Secretary.
(2) Effective dates.--
(A) Regulations.--The regulation required by paragraph (1)
shall apply to years beginning after December 31, 2000.
(B) Conditions of availability.--Any condition of
availability prescribed by the Secretary under paragraph
(1)(A) shall not apply before the first year beginning not
less than 120 days after the date on which such condition is
prescribed.
(b) Coverage Test.--
(1) In general.--Section 410(b)(1) (relating to minimum
coverage requirements) is amended by adding at the end the
following:
``(D) In the case that the plan fails to meet the
requirements of subparagraphs (A), (B) and (C), the plan--
``(i) satisfies subparagraph (B), as in effect immediately
before the enactment of the Tax Reform Act of 1986,
``(ii) is submitted to the Secretary for a determination of
whether it satisfies the requirement described in clause (i),
and
``(iii) satisfies conditions prescribed by the Secretary by
regulation that appropriately limit the availability of this
subparagraph.
Clause (ii) shall apply only to the extent provided by the
Secretary.''.
(2) Effective dates.--
(A) In general.--The amendment made by paragraph (1) shall
apply to years beginning after December 31, 2000.
[[Page H6504]]
(B) Conditions of availability.--Any condition of
availability prescribed by the Secretary under regulations
prescribed by the Secretary under section 410(b)(1)(D) of the
Internal Revenue Code of 1986 shall not apply before the
first year beginning not less than 120 days after the date on
which such condition is prescribed.
(c) Line of Business Rules.--The Secretary of the Treasury
shall, on or before December 31, 2000, modify the existing
regulations issued under section 414(r) of the Internal
Revenue Code of 1986 in order to expand (to the extent that
the Secretary determines appropriate) the ability of a
pension plan to demonstrate compliance with the line of
business requirements based upon the facts and circumstances
surrounding the design and operation of the plan, even though
the plan is unable to satisfy the mechanical tests currently
used to determine compliance.
SEC. 610. 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, 2000.
SEC. 611. NOTICE AND CONSENT PERIOD REGARDING DISTRIBUTIONS.
(a) Expansion of Period.--
(1) In general.--Subparagraph (A) of section 417(a)(6) is
amended by striking ``90-day'' and inserting ``180-day''.
(2) 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).
(3) Effective date.--The amendment made by paragraph (1)
and the modifications required by paragraph (2) shall apply
to years beginning after December 31, 2000.
(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.--The modifications required by
paragraph (1) shall apply to years beginning after December
31, 2000.
TITLE VII--PLAN AMENDMENTS
SEC. 701. 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 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 regulation issued under this Act, and
(B) on or before the last day of the first plan year
beginning on or after January 1, 2003.
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 ``2005'' for ``2003''.
(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.
The SPEAKER pro tempore. After 1 hour of debate on the bill, as
amended, it shall be in order to consider the amendment printed in
House Report 106-760, if offered by the gentleman from New York (Mr.
Rangel) or his designee, which shall be considered read and shall be
debatable for 1 hour, equally divided and controlled by the proponent
and an opponent.
The gentleman from Texas (Mr. Archer) and the gentleman from
Massachusetts (Mr. Neal) each will control 30 minutes.
The Chair recognizes the gentleman from Texas (Mr. Archer).
General Leave
Mr. ARCHER. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
and include extraneous material on H.R. 1102.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. ARCHER. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, we have accomplished a great deal this year for older
Americans and for baby boomers who are nearing retirement. We repealed
the punitive Social Security earnings penalty so that seniors who
wanted to continue to work could do so without the loss of their
benefits. We protected the Social Security and Medicare trust funds
from being spent, put them in a lock box, and we are paying down the
debt by historic levels. Today, we continue our broad agenda to help
Americans enjoy a healthier and more fulfilling retirement.
If there is one cloud on our economic horizon, it is the lack of
personal savings, private savings in the private sector in this
country, which is at an all time low. In fact, negative. We as a people
borrow more than we save. We should be encouraging Americans to save
more, and one of the proven methods of doing that is simple: do not tax
savings or the interest earned on savings.
While we have tried many times, and the last time IRA contribution
limits were raised was almost 20 years ago in 1981, there is wide
bipartisan support for raising the limits from $2,000 to $5,000. At
least 90 Democrats cosponsored the Portman-Cardin bill, which includes
an increase in IRA limits, and 60 Democrats cosponsored a straight
expansion of IRA limits from $2,000 to $5,000.
The Committee on Ways and Means reported this bill with a strong
bipartisan vote, and I expect that support will be reflected by the
full House of Representatives today.
Mr. Speaker, I particularly thank the gentleman from Ohio (Mr.
Portman) and the gentleman from Maryland (Mr. Cardin), who have really
provided the bipartisan leadership on this issue. This should be the
hallmark of Congress, that we come together to do the right thing for
the American people. I also must mention the leadership of the
gentleman from California (Mr. Gallegly) on IRA expansions.
This bill also strengthens our pension system, and it expands
opportunities for Americans to get pension coverage, especially women.
As we know, women live longer than men and have special retirement
needs, but only 32 percent of retired women have pensions as opposed to
55 percent for men.
This bill includes catchup provisions so women who have to leave the
workforce, perhaps for a period of time to rear children and then
reenter later in life, can increase their contributions to make up for
the lost time when they were not in the workforce.
So this is the right legislation at the right time. The workplace has
changed, our retirement needs have changed, and the pension system has
changed. Now is the time to expand IRAs, improve 401(k)s, update our
pension system so more Americans have the opportunity for a safe and
secure retirement. We particularly help small businesses to create
pension plans where there is a great need for workers to be covered.
This is a good bill, one that should get a resounding bipartisan vote.
Mr. Speaker, I reserve the balance of my time.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield myself such time as I
may consume.
Mr. Speaker, we have an honest disagreement here today reflected in
the proposals that are before this House. This honest disagreement I
think crystallizes along the lines of who is to benefit from this
legislation. Once again, on the Democratic side, we argue, I think with
considerable merit, that the legislation in front of us does not do
enough to help middle-income Americans or low-income wage earners.
[[Page H6505]]
The substitute that we will discuss later on today offered by the
gentleman from New York (Mr. Rangel) is, I believe, the only way that
we can bring a balanced pension package to the President that he will
sign this year. The substitute that we will offer later on will add a
dimension that the underlying bill lacks and which it badly needs.
One of the key criticisms of the bill before us is that the benefit
increases go only to those lucky few who make a maximum contribution
under current law. The retirement savings account proposal takes a good
first step at addressing this lack of balance. It gives a refundable
tax credit to low- and moderate-income workers who participate in an
employer-sponsored pension plan or an individual retirement account.
The maximum credit is 50 percent of qualifying contributions, and would
be available to married workers earning less than $25,000 when fully
phased in. The credit phases down to zero at $75,000 for married
workers filing jointly.
Mr. Speaker, it is important to understand that the RSA proposal does
not create a separate account like an individual retirement account.
With all of the pension vehicles currently in law, placing one more
into law really did not seem to make a lot of sense. Rather, the tax
credit is tied to contributions made to an IRA, or a qualified
employer-sponsored pension plan like a 401(k) plan, or another similar
defined contribution plan. This was done for simplicity, and to ease
the administration of plan sponsors.
The RSA proposal before us today has gone through similar and many
versions. In its final version, it preserves the original goal of the
administration, which is to provide a real incentive for low- and
moderate-income workers to participate in our retirement system while
meeting concerns expressed by the pension community that the proposal
be administrable.
For example, the original RSA proposal was designed to deliver the
tax credit to business or financial institutions as reimbursement for
making employer contributions to eligible employees. The pension
community argued that this design was too complex, and that some small
businesses or tax-exempt entities would not have the ability to absorb
tax credits because they may have little or no tax liability. Thus, the
proposal was changed to a tax credit for individuals.
The proposal is intended to provide a stronger incentive for
individuals to save for retirement, of which we all agree. For those
who have not done so to date, a 50 percent credit encourages them to
take the first step in the right direction. For those who currently
save a little, it encourages them to save more. Given all of the
competing demands, it is often very hard for many workers, even middle
income workers, to set aside a percentage of their wages toward
retirement. Refundability is a key feature of this credit. It allows us
to provide a strong incentive to some workers who simply could not
otherwise participate in a pension plan.
This is not a panacea for low-income workers. The average deferral
rate for nonhighly compensated workers who make less than $30,000 a
year is less than 6 percent. The RSA proposal is the only thing that
would help us to help these workers, and it is crucial to do so if we
wish to bring some balance to this package.
Likewise, the small business tax credits contained in the amendment
may provide a significant increase in pension coverage and pension
participation for employees of small businesses. The first proposal
gives a 50 percent tax credit for 3 years to small businesses for their
start-up costs associated with a new pension plan. That is their
administrative and retirement education costs. Not only would this
provide an incentive for small businesses to offer a plan to employees,
but it also could be used as a marketing tool by financial institutions
or pension advisors to promote the adoption of a pension plan to small
business.
The second small business credit would provide a 50 percent credit
for employer contributions to a pension plan for nonhighly compensated
employees if the employer is willing to contribute 1 to 3 percent of
compensation through their employees' accounts. This credit is designed
to encourage small businesses to make employer contributions to the
plan they sponsored for their employees.
{time} 1045
By encouraging small employers to make contributions on behalf of
their non-highly compensated employees, retirement savings for all
these workers will increase.
Clearly the Rangel substitute will make this a much better bill. It
will provide significant incentives for low- and middle-income workers
to participate in those pension plans that are offered by their
employers. This is clearly where we need to concentrate our incentives
because this is where the need is greatest, among low- and moderate-
income wage-earners.
For higher-income wage-earners, those who already save a maximum
under current law, the bill in front of us provides a boost for their
savings. So as long as that increase does not lead to any pension
coverage being dropped, as some strongly argue, then there is nothing
wrong with the increases, as long as we consider low- and moderate-
income wage-earners.
However, the debate today is over the possible unintended
consequences of this and other provisions in the underlying bill. It
certainly will continue throughout the year.
There are additional controversies that surround this legislation.
For example, the Department of the Treasury and some outside groups
argue strongly that some of the provisions of this bill can actually
lead to a shrinking of pension coverage for low- and moderate-income
workers. They cite most often the provisions of the bill that weaken
the so-called top-heavy rules and the nondiscrimination rules which are
designed to protect non-key employees by making sure they get a minimum
amount of benefit from an employer's pension plan.
I know the authors of this bill, the gentleman from Ohio (Mr.
Portman) included, strongly believe the opposite, and that these are
just simplification proposals that will do no harm. But there are many
others, myself included, who feel just as strongly that the proposals
will do harm.
For example, we have a letter from 30 organizations, including the
AARP, the Gray Panthers, the Pension Rights Centers, the National Urban
League, the Older Women's League, and others who argue that if we look
at the changes in this bill that affect top-heavy rules and
nondiscrimination rules, that taken together, these provisions would
serve to aggravate the imbalances in our current pension system.
We urge Members to drop these provisions from their bill. A top-heavy
plan, by example, is a definition which we offer to the value of
benefits when top employees exceed 60 percent of the package. In order
to make sure that all other employees receive a benefit, the rules
require faster vesting and a certain minimum benefit for non-key
employees. This has led to an increased benefit for those employees.
While top-heavy rules are not being repealed, the changes made by the
bill may redefine some plans as being not top-heavy, which in turn
means that the workers covered by those plans lose their current
protections.
Ironically, one of the arguments for keeping the changes in the top-
heavy rules is that there are nondiscrimination rules in place to
protect workers. A top-heavy plan already meets the nondiscrimination
rules, yet gives key employees more than 60 percent of the benefits, so
Congress has already made a judgment that nondiscrimination rules are
not enough protection in a top-heavy plan.
Moreover, the other major complaint about this bill is that the
nondiscrimination rules are weakened, which in turn will provide, again
from the letter, ``less protection and ultimately less retirement
security'' for workers and their families.
Mr. Speaker, these are some of the concerns that have been expressed
and some of the provisions that need to get worked out by the end of
this legislative year. There is still time to work these proposals out
with President Clinton.
I believe that every one of us on this floor wants to see a balanced
pension package that can reach the President's desk in October and be
signed into law. Unfortunately, this bill will not be signed into law.
We may have somewhat different views as to where that
[[Page H6506]]
balance is, but that is what the legislative process is for.
With that in mind, the substitute that the Democratic Party will
offer today is as constructive an approach as is possible, signalling
where some of us continue to have problems with the underlying bill, as
well as sending a clear message that we would like to try to bridge the
gap.
I hope everyone will take this in the spirit in which it is offered,
and that we can make real progress on pension reform this year. Having
said that, I also think that the gentleman from Ohio (Mr. Portman) and
the gentleman from Maryland (Mr. Cardin) have served an important
purpose, and that is to generate considerable attention to the issue of
pension legislation.
I believe there is still time to work out the differences that we
currently hold and to get a good pension reform bill that President
Clinton will sign. Given the knowledge I have of the gentleman from
Ohio (Mr. Portman) and the gentleman from Maryland (Mr. Cardin), I
think that is still possible.
Mr. Speaker, I reserve the balance of my time.
The SPEAKER pro tempore. Without objection, the gentleman from Ohio
(Mr. Portman) will control the time on the majority side.
There was no objection.
The SPEAKER pro tempore. The Chair recognizes the gentleman from Ohio
(Mr. Portman).
Mr. PORTMAN. Mr. Speaker, I want to thank the gentleman from Texas
(Chairman Archer) for his leadership over the years, and all he has
done to expand saving options for all Americans, and in particular, his
personal commitment to moving this bill to the floor today. Without his
help and his support, we would not be here.
I would also like to thank my colleague, the gentleman from Maryland
(Mr. Cardin) on the other side of the aisle, who has been a true
partner over the past 3 years as we have developed this bipartisan
legislation before us today.
In the face of some very real political pressure from the
administration and others, the gentleman from Maryland (Mr. Cardin) has
remained committed to doing what he believes is right to help people
save for retirement. He deserves great credit for that.
I rise in very enthusiastic support of H.R. 1102, the legislation
before us today. This is great legislation, because it allows all
workers to put more aside in a 401(k) type plan, a traditional pension
plan, or in an individual retirement account, an IRA. It makes it
easier for employers to offer plans and maintain and establish them,
and it makes it easier for workers to roll over their retirement nest
egg from job to job.
Let us look at the problem that we face today. Seventy million
Americans, that is half the American work force, today do not have a
pension, either a 401(k) or any kind of a pension plan. The problem, of
course, is much worse in American smaller businesses. In fact we are
told that only 19 percent of businesses with 25 or fewer employees have
any kind of pension at all today.
Unbelievably, there has been virtually no growth in pension coverage
for the past 2 decades. Retirement savings in general is so low that
many experts believe that most older baby-boomers have not put nearly
enough away for their retirement. The estimates are that they have put
away only 40 percent of what they will need to have a comfortable
retirement.
Part of the problem has been right here in Congress. Over the past 20
years this Congress has done the wrong thing, not the right thing, with
regard to pensions. We have lowered the contribution and the benefit
levels. We have made pensions more costly by, yes, increasing the
number of rules and regulations and mathematical tests and the burdens
and costs of establishing and maintaining a pension plan.
What impact did that have? Let me give some specific examples. First,
from 1982 to 1994, the limits on defined benefit plans, these are the
wonderful traditional guaranteed defined benefit plans, the limits on
these plans were repeatedly reduced by Congress from 1982 to 1994 and
new restrictions were added, primarily I am told for purpose of
generating more Federal revenue.
As these cutbacks began to take effect, the number of traditional
defined benefit plans insured by PBGC dropped from 114,000 plans in
1987 to only 45,000 plans in 1997. Those are the facts.
Let me share another example. Within a year after Congress reduced
the compensation limit from $235,000 to $160,000 in 1993, the
percentage of companies offering so-called non-qualified plans, these
are non-insured plans, focused on higher-paids, went from 20 percent of
companies to 67 percent of companies.
These non-qualified plans basically ensure that highly-paid executive
and managers have retirement coverage, but they do nothing to help
lower- and middle-level income employees. That is the record.
Yes, in this legislation we do believe strongly that we ought to
increase those limits, at least restore them back to where they were 20
years ago. Yes, we believe strongly that we ought to do something to
reduce some of the costs and burdens of establishing and maintaining
these plans.
Over the past two decades, overall pension coverage has remained
stagnant. It is time for Congress to now take these steps to reverse
the trend. This bill before us today does just that. It is a
comprehensive approach. It has been developed over the past 3 years,
after careful consultations with small business people, who we want to
have offer more of these plans, with labor organizations, with pension
law experts in the private sector, in academia, in the administration,
at the Treasury Department, at PBGC, at the Department of Labor, and
most importantly, with workers themselves and individuals who will be
affected by these changes.
They have been fully vetted. These proposals have been through the
wringer. In fact, most or the great majority of them have now passed
this House twice.
About 200 Members of this House, just over 200 as of this morning,
almost equally divided between Republicans and Democrats, have now
cosponsored this bill. More than 85 outside groups, business groups
like the Chamber and the NFIB, labor organizations like the Building
and Construction Trades Council of the AFL-CIO, have endorsed this
legislation.
The approach is fiscally responsible. It is also straightforward.
First, again, we allow all workers to set aside more for their
retirement in 401(k) type plans. We address union multi-employer plans.
We made those plans fairer for all working union Members. We raise
limits for defined benefit plans and for other pensions, as well as for
IRAs, moving from $2,000 to $5,000. Again, what we are really trying to
do is at least restore these limits back to where they were in the
1980s.
In some cases, we do not even go that far. This $2,000 to $5,000
increase in the IRA limit, incidentally, is right about where it would
be had we simply indexed in 1974 the IRA limits.
We also allow special catch-up contributions for those workers who
are 50 years old or older. This is done, this accelerated contribution,
so older workers, especially women who will be returning to the work
force, have the opportunity to build up that retirement nest egg more
quickly at a time in their lives when they need it the most and frankly
can afford to put some money aside.
Second, after the contribution increases, we are modernizing pension
laws to adapt to what we have learned about the realities of an
increasingly mobile work force. So we make defined contribution plans
portable so workers can roll over their retirement nest egg between
various types of qualified plans, 401(k)s, 403(b)s, and 457 plans for
public employees.
We require employers to allow workers to become vested in their plans
more quickly. Instead of 5 years, we move it down to 3 years. This lets
workers get a piece of the action earlier.
Finally, yes, we listened to those in the trenches. We paid attention
to the surveys out there that are very clear, clearly demonstrating
that if we do not reduce the complexities and the burdens in our
current very complex, very burdensome pension laws, we are not going to
be able to expand pension opportunities for those who work in small
businesses, which is where most lower-paid and middle-income workers
now find their jobs.
That is why we make it easier for employers, particularly small
businesses, to establish and maintain plans
[[Page H6507]]
by reducing the costs and the liabilities, including modernizing
outdated laws, streamlining complex rules. Yet, we keep in place the
very important protections to ensure fairness in our pension system.
My friend, the gentleman from Massachusetts (Mr. Neal) talked a while
ago about his concerns about these provisions. I would love to have a
debate over these specific provisions. There are many people, including
the President's ERISA Advisory Council, that reported to the Department
of Labor, that said we should repeal the top-heavy rules that were
discussed a moment ago.
In fact, there are many on my side of the aisle who would like to do
that. We do not do that. The changes we make in the top-heavy rules are
minor, but yes, they will help the small businesses to be able to offer
and maintain a pension plan. We keep in place the 3 percent
contribution limit. We keep in place all the fundamentals of the top-
heavy rules. Yet, we do go into them, we roll up our sleeves, as the
gentleman from Maryland (Mr. Cardin) and I will hope to have a chance
to talk about in more detail, and we do make it easier to offer these
plans.
We keep the nondiscrimination tests in place. Again some in the
business community would like for us to have gone further. We think it
is important that every time a pension is offered to a higher-paid
worker, it must be offered right down the line to workers of all
incomes. That is why we keep the rules in place.
We do change them a little. The major change is, we say after you
have gone through all the incredibly complicated mathematical
computations and tests, then the Department of the Treasury would have
the discretion in some cases to look at a plan and say, even though you
seem to have failed this extremely complicated mathematical test, when
we look at your plan, if it retains fairness to workers in that
business, we will let you continue with this plan.
Is that too much to ask, to give a little discretion, so that it is
not all based on computations and mechanical tests? I have to tell the
Members, I think this is the least we can do to try to get at what we
know is the problem, which is the cost, the burdens, and the
liabilities that small businesses face today if they want to offer
pension plans. Unless we want to have a mandate and tell every business
in America, you have to offer a plan, and I do not think anybody is
advocating that here today, we have to deal with the reality.
I have to tell the Members, I am surprised that the Clinton
administration continues, despite this broad bipartisan support,
despite a 3-year vetting process, despite going through a process of
consultation with all the outside groups, including the Department of
the Treasury, that they continue to oppose this legislation.
It is amazing to me. They have brought out the tired class warfare
argument again over the last 24 hours, saying this is somehow tax cuts
for the rich. That is wrong.
{time} 1100
Americans who are struggling to try to meet their retirement needs do
not think they are rich when they make less than $62,000 a year, which
is the cap on IRAs, and they are told they can now go from $2,000 to
$5,000 a year. It is hard to build up an adequate retirement putting
$2,000 aside, less than 200 bucks a month. That is hard.
Yes, we think it ought to be indexed to inflation, which means it
goes up above $5,000, letting more people save.
I have got to remind people here who benefits the most from this.
Seventy-seven percent of the American workers who participate in
pension plans today make less than $50,000 a year. So much for tax cuts
for the rich. These are the people who need it most.
We ought to be getting out of the way and helping them save for their
retirement, not creating more obstacles for them to be able to have a
comfortable retirement.
Again, I want to thank Members on both sides of the aisle who
contributed so much over the years. I see the gentleman from North
Dakota (Mr. Pomeroy) here who has been a leader on the portability
provisions which are so commonsensical. I see the gentleman from
Maryland (Mr. Cardin), who we talked about earlier who is here. The
gentleman from California (Mr. Gallegly) and the gentleman from Kansas
(Mr. Moore) who have taken the lead on the IRA contributions. I see the
gentleman from California (Mr. Gallegly) is here, and I hope he will
speak in a minute about his wonderful legislation that is incorporated
as part of this legislation as well. The gentlewoman from New Mexico
(Mrs. Wilson) and the gentleman from Maryland (Mr. Wynn), both of whom
I hope will talk later today. There are so many, many others who I do
not have time to mention, but who have been part of this process and
have contributed to it in valuable ways.
I want to end by urging my colleagues to join us in this crusade, in
this movement to try to expand retirement savings for all Americans.
This should be bipartisan today. It should be a very strong message. I
hope we can get well over a veto-proof majority of the House,
Republicans and Democrats together, because if we do not, we probably
will not be able to send a strong enough message to the Senate, to the
White House and the administration that we are committed to getting
this done, not next year, not in some new Congress, but getting it done
this year for people who need it badly.
We need to provide this retirement security. We need to provide the
peace of mind that Americans deserve in their retirement years. I hope
we will send that strong message today with a strong bipartisan vote.
Mr. Speaker, I reserve the balance of my time.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield myself such time as I
may consume.
Mr. Speaker, I want to briefly reference what the gentleman from Ohio
(Mr. Portman) has said. We continue to hold on this side that the tax
proposals and tax cuts that have been proposed in this House over the
last 6 weeks overwhelmingly are skewed toward helping the well off.
Mr. Speaker, I yield 5 minutes to the gentleman from Maryland (Mr.
Cardin).
Mr. CARDIN. Mr. Speaker, first, if I might, let me thank my
colleagues on the Democratic side of the aisle, particularly the
gentleman from Massachusetts (Mr. Neal) for his long work on pension
issues, on his interest in improving retirement savings accounts for
all workers; the gentleman from North Dakota (Mr. Pomeroy), who has
been one of the real spokespersons for pension reform since his first
day in the House; the gentleman from Texas (Mr. Bentsen), who has been
a key player on the pension reform issues; and I know the gentleman
from Kansas (Mr. Moore), who is not on the floor, he will be here
later; and the gentlewoman from Florida (Mrs. Thurman) who has a
provision in this bill as it relates to ESOPs.
As the gentleman from Ohio (Mr. Portman) pointed out, this is truly a
bipartisan bill. But I particularly want to recognize the gentleman
from Ohio for his leadership on this issue. The gentleman has
demonstrated amazing patience in working with all elements, not only
here in Congress, but the different interest groups so that we could
fashion the bill that could truly be a bill that all of us should be
proud of and a bill that has been developed in a very bipartisan way.
The gentleman from Ohio (Mr. Portman) has reached out to all of us, and
I thank him for that.
The process that has been used for this legislation is the right
process. Each provision has been well vetted. We have had public
hearings in the Committee on Ways and Means. We have established the
record. We have had a mark-up in the committee. We have brought forward
a bill that is deserving Members' support.
Why do we need this legislation? Well, it is pretty self-obvious. We
brag about the economic progress of our Nation, low inflation rates,
high economic growth, stock market still growing; but our saving ratios
over the last 2 decades have steadily declined. In fact, we have had
negative quarters. We actually spend more money than we earn as a
Nation. That is certainly nothing that we can be proud of.
We understand that income security retirement requires, not only a
strong Social Security system, but a strong private retirement system;
and this is what the legislation is aimed at doing.
So what do we do? Well, we adjust limits to try to bring it back to
where
[[Page H6508]]
they used to be. Let me just give my colleagues a couple of examples.
The gentleman from Ohio (Mr. Portman) mentioned the defined benefit. In
1982, that was $136,000. If we adjusted for inflation, it would be
$242,000. Instead, it is $135,000 and we raise it to $160,000.
How about the 401(k)'s that many of our constituents are well aware
of. In 1986, that was $30,000. If we adjust it for inflation, it would
be $47,000 today. Instead, it is $10,500. We make a modest change to
$5,000.
Why do we do this? Well, it is interesting. When we reduce the
limits, and we did reduce the compensation limit in 1993, we reduced it
from 235,000 to 170,000. What happened? What happened? We found that
employers dropped their plans. They went to nonqualified plans. We had
a threefold increase in nonqualified plans that year. These
compensation limits are important if employers are going to be
sponsoring plans for all of their employees.
We provide special benefits for women. Women many times enter the
workforce; later they take time out of the workforce. We reduce the
vesting so that workers can be entitled to defined contribution
benefits by their employers earlier, 3 years rather than 6.
We allow for catch-up contributions, because many times one is a
little bit older before one is able to put money away, so we allow an
extra $5,000 contribution when someone reaches the age of 50. One is
finished paying one's children's college education bills, maybe one has
got the mortgage down to a more realistic level. Now one can start
thinking about retirement; we allow one to do that. We put the 415
provisions in there for people who work for labor unions. We help all
workers.
Mr. Speaker, I am still somewhat disappointed by criticisms that this
bill is aimed at wealthy high-paid workers. It is not. It is aimed at
allowing employers to continue pension plans that help all workers.
If one has an employer-sponsored plan, the employer puts money on the
table. That helps the lower-wage workers. We want to encourage those
types of pension plans. The IRA provisions, most of the money goes into
the IRA provisions. That goes to workers basically who are making less
than $60,000 a year. These provisions are well targeted.
The gentleman from Ohio (Mr. Portman) pointed out the top-heavy
changes. We do not eliminate top-heavy rules; we make them work. We
make them effective. The one provision we change in top heavy is, say,
that if an employer has a matched contribution, that should count
towards the 3 percent. For my colleagues see, if a pension plan is top
heavy, the employer is required to make a 3 percent contribution. Under
current law, that employer cannot count their matched contributions.
What does that do? Employers drop their matched contribution. This
encourages employers to continue to put money on the table which helps
lower-wage workers and younger workers actually participate in a
pension plan.
It is a well-balanced approach. Sure, one might want to pick at one
provision and say, does this not help one special group? All of the
provisions help all of our workers. It will help us plan for people's
retirement. I urge my colleagues to support the legislation.
Mr. PORTMAN. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman
from Pennsylvania (Mr. English).
The gentleman from Pennsylvania (Mr. English) has been a leader on
the multiemployer plan provisions in this bill, which help section 415.
Mr. ENGLISH. Mr. Speaker, I would like to join the individuals who
have spoken today in congratulating the gentleman from Ohio (Mr.
Portman) for his Herculean efforts on behalf of this legislation.
Mr. Speaker, working families must be able to fall back on strong
private pension plans when they are planning for retirement. Social
Security is simply not enough. This landmark legislation will allow
more families to save with greater flexibility for retirement.
This legislation has many simple changes, but the cumulative effect
is profound. It would allow families to secure their retirement future
by increasing the IRA contributions limits and increasing the 401(k)
limits, long overdue changes.
It would also allow baby boomers who are discovering that their
retirement is seriously underfunded to catch up through higher
contribution limits.
But particularly I wanted to note that the changes in the current
section 415 would address the unintended consequences of this
legislation which have hurt many, many of the working families in my
district.
Currently section 415 seriously hampers the ability of America's
workers, not the rich, but rank and file workers, to collect their full
pension amounts that they have earned.
Slashing the pensions of workers who retire before normal Social
Security retirement age has caused financial hardship for many workers,
especially in my district. Many of these workers have physically
demanding jobs and frequently negotiate and contribute to pension plans
specifically with the goal of being able to retire before age 65.
Thousands of retiring workers have carefully saved and planned for
their retirement. They are depending on their pensions. But when they
retire, there are arbitrary cuts in the amount they can collect.
Americans are living longer, but are not saving enough to sustain them
through an extended retirement.
This legislation goes a great distance toward improving our
retirement system and creating a greater incentive for employers to
offer private retirement plans and for individuals to save for their
retirement.
Some have labeled this as tax cuts for the rich, and I find that to
be an extraordinary claim. The fact is this legislation is clearly pro-
savings, pro-worker, pro-union, pro-taxpayer, and pro-small business.
Mr. Speaker, I urge every Member of the House to join us in support
of this very important initiative.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 4 minutes to the
gentleman from North Dakota (Mr. Pomeroy) whose work in the pension
arena has been invaluable to this Congress.
Mr. POMEROY. Mr. Speaker, I thank the gentleman from Massachusetts
for yielding me this time.
Mr. Speaker, I want to begin by commending the gentleman from
Massachusetts (Mr. Neal) and in particular the sponsors of this
legislation, the gentleman from Ohio (Mr. Portman) and the gentleman
from Maryland (Mr. Cardin) for the detailed work they have done.
Just listening to the debate and their presentations on the floor
leave one well aware of the depth of knowledge they have acquired on
this complex subject during the time of their work on the legislation.
In balance, especially as to the Portman-Cardin proper, not
addressing the IRA adjustment, but Portman-Cardin proper, I believe
that they have made decisions that are well founded in terms of trying
to continue support for defined benefit plans in the workplace.
We have seen a collapse in the workers covered by defined benefit
plans, the traditional pension coverages. In fact, from 1975 to 1995,
the number, percentage of covered workers has fallen 40 percent in
defined pension plans. The number of actual defined benefit plans in
the marketplace has gone from 114,000 in 1987 to 45,000 in 1997.
It is time we address this subject head on, and that is what the
Portman-Cardin legislation does. I have enjoyed working with the
gentleman on it.
I believe that there is much to be said for the traditional pension
plan in terms of protecting workers. It shifts investment risk away
from workers who are least able to bear it, and it provides lifelong
guaranteed benefits sustaining people in retirement years, no matter
how long they live. Let us face it, workers are living longer today, so
these features of defined benefit plans are very, very important.
This legislation also incorporates a bill that I had introduced as a
stand-alone measure called the Retirement Account Portability Act, and
it will allow much greater portability across different types of
defined contribution plans.
Right now, if one works for a nonprofit corporation, one will have a
403(b) plan. If one works for a for-profit, one will have a 401(k)
plan. If one works for a State government, one will have a 457 plan. As
one moves in the workplace between these categories of employers, one
cannot move one's defined contribution money with one. There is no
public policy purpose served by the existing law with those
[[Page H6509]]
prohibitions. It is time we knocked them down. I am very pleased this,
along with the reduction investing schedule from 5 years to 3 years for
defined contribution, was incorporated in this legislation.
So there is much to commend this bill and particularly the effort
behind it by the gentleman from Ohio (Mr. Portman) and the gentleman
from Maryland (Mr. Cardin).
The problem I have today is not with what is in the bill; it is what
was left out of the bill as the Committee on Ways and Means marked it
up. And that is a special savings incentive for workers needing
additional help in saving for retirement.
This chart makes it very clear that savings rates are lower among
households who earn less money. There is no rocket science there. It is
just obvious. Families that have incomes well in excess of $100,000 can
save much more than families earning under $35,000.
This legislation basically fails to address this savings issue. It
addresses pension, but only 27 percent of workers under 415,000 have
access to workplace retirement savings. It increases the IRA limits,
but only 7 percent of households under $50,000 are accessing the tax-
deductible IRA.
These people need a more powerful savings incentive, and it is time
we address the savings needs of middle- and modest-income households.
They have not had an additional savings incentive passed since 1981,
and the Democrat substitute, which we will debate next, would provide a
powerful new savings incentive for these families.
{time} 1115
Mr. PORTMAN. Mr. Speaker, I yield 3 minutes to my friend, the
gentleman from California (Mr. Gallegly), who has been a leader on IRS
expansion. In particular, he has added valuable contributions to this
legislation on increasing the limit and indexing IRA contributions.
(Mr. GALLEGLY asked and was given permission to revise and extend his
remarks.)
Mr. GALLEGLY. Mr. Speaker, I rise today in strong support of H.R.
1102, a bill that will enhance retirement security for all Americans.
I want to particularly recognize my good friend, the gentleman from
Ohio (Mr. Portman), my classmate, and my good friend, the gentleman
from Maryland (Mr. Cardin), and the gentleman from Texas (Chairman
Archer) for their leadership, along with many other Members on both
sides of the aisle in bringing this legislation to the floor in a
timely fashion.
This legislation includes a provision that increases from $2,000 to
$5,000 per year the amount a person can contribute to their IRA. This
mirrors the language in a bill I introduced, H.R. 1322, which has
garnered strong bipartisan support, in fact, 220 cosponsors and also
the endorsement of numerous groups representing senior citizen groups
across this country.
Increasing the annual IRA contribution limit is a matter of
fundamental fairness. Since 1974, the year IRAs were created, the
Consumer Price Index has increased 240 percent. Yet during the same
period, the IRA level has only increased once; and this was way back in
1981. Had it simply kept pace with inflation, Americans would now be
able to contribute over $5,000 instead of only $2,000.
Mr. Speaker, a very important point of this legislation is that it
has recently been brought to the attention of Members of this body that
the net savings rate has dropped to zero for the first time since the
Great Depression. If we do not reverse this trend, we threaten the long
economic prosperity of our country.
Finally, I would like to commend the authors for including language
in H.R. 1102 that I strongly supported that indexes the IRA amount to
the rate of inflation. We must never again let inflation eat away the
amount that people can save.
I would also like to thank the gentlewoman from New Mexico (Mrs.
Wilson) and the gentleman from Kansas (Mr. Moore) for all their help in
working with me on this very important issue.
I urge my colleagues to strongly support H.R. 1102.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 2 minutes to the
gentleman from Oregon (Mr. Blumenauer), whose concern for quality-of-
life issues speaks well of retirees.
Mr. BLUMENAUER. Mr. Speaker, I thank the gentleman for his courtesy
in yielding me the time.
I appreciate the hard work that has been going on both sides of the
aisle in moving this legislation forward.
I would speak just briefly to one particular item that does speak to
the quality of life of our families, who we want to be able to be safe,
healthy, and economically secure.
The section 415 modifications speak to a very real problem we have
now where working men and women who are covered by pension retirement
programs are not able to collect the full amount of money that they
would otherwise be granted. This is a problem.
H.R. 1102 would correct this. It recognizes that hard physical labor
oftentimes requires people to retire earlier.
The substitute that is going to be offered and the bill before us now
both deal with the 100 percent of compensation problem, this speaks to
the potential disparity to the lower-paid employees who do not get all
that they would otherwise be entitled because some of these programs
are based on years of service, not simply to the amount of salary.
The second provision that both bills have that I am pleased to see
deals with aggregation. In many cases we have employees who are part of
two pension plans, one that is a multiemployer plan and another that is
simply their own union or company. It is important that we include this
piece.
Finally, I would commend my colleague, the gentleman from
Massachusetts (Mr. Neal), who talked about some of the improvements
that are being made for the people most in need. These employees who
oftentimes are required to retire earlier are subjected to a problem
where there is money in the pension program, but they are not allowed
to collect it. The substitute would put an 80 percent floor and protect
them.
These are important provisions that I hope will ultimately find their
way into law.
Mr. PORTMAN. Mr. Speaker, I yield 3 minutes to my colleague, the
gentlewoman from New York (Mrs. Kelly), for the purpose of a colloquy.
Mrs. KELLY. Mr. Speaker, I rise for the purpose of entering into a
colloquy with my friend, the gentleman from Ohio (Mr. Portman), the
author of this legislation.
I am grateful for the hard work my colleagues on the Committee on
Ways and Means have done in putting together a strong package of tax
relief to ensure retirement security for working Americans.
Unfortunately, I have been contacted by constituents concerned about
potential interpretations of sections 405, 501, and 701 of H.R. 1102.
They fear these could negatively affect pension benefits.
Over the past months, I appreciate the time the gentleman from Ohio
(Mr. Portman) and members of the committee concerned with pension
issues have spent as we have worked together to ensure that these
concerns are properly addressed.
I thank the gentleman from Ohio and the committee for the report
language which addresses some of my concerns. But, Mr. Speaker, I would
like to get assurances that these sections I have mentioned are not
intended to be used to harm participants.
It is my understanding that these provisions are not intended to be
interpreted in such a way as to reduce pension benefits, discourage
companies from increasing pension benefits, or to allow violations of
the Tax Code.
So I ask my friend, the gentleman from the State of Ohio (Mr.
Portman), is my understanding correct?
Mr. Speaker, I yield to the gentleman from Ohio.
Mr. PORTMAN. Mr. Speaker, I thank the gentlewoman from New York for
yielding, and I tell her that absolutely, her interpretation is
correct. Indeed, the provisions that she mentioned are in the bill with
the intent that we will be able to expand pension coverage and
protections for American workers who are in defined benefit plans.
Mrs. KELLY. Mr. Speaker, reclaiming my time, I thank my friend, the
gentleman from Ohio (Mr. Portman), for his assurances and his
continuing efforts on the legislation. With these efforts, we can
assure concerned individuals that pensions are enhanced and protected
by this legislation.
[[Page H6510]]
We have an opportunity today to enhance retirement security for
Americans. These are all initiatives I have long advocated. I look
forward to voting in support of this important legislation today, and I
urge all of my colleagues to join me in strong support.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 3 minutes to the
gentleman from Texas (Mr. Bentsen), whose work in retirement savings is
well known to this body.
(Mr. BENTSEN asked and was given permission to revise and extend his
remarks.)
Mr. BENTSEN. Mr. Speaker, I thank the gentleman from Massachusetts
for yielding me the time.
Mr. Speaker, I rise today in support of H.R. 1102, the Comprehensive
Retirement Security and Pension Reform Act of 2000.
Presently, our Nation is experiencing the lowest unemployment rate in
a generation. This recent boom in job creation has been driven in large
part by the growth of a number of small businesses. Even as more
Americans work and incomes rise, we as a Nation have an abysmally low
savings rate of 3.8 percent in disposable personal income. If the
economy slows in the near future, that figure may rise by only one or
two percentage points, which is still low by historical standards.
Further, with fewer companies offering defined benefit plans, the
percentage of private workers covered by pension plans has decreased by
2 percent from 45 percent in 1970 to 43 percent in 1990. This is not
progress.
Finally, with Social Security as the main source of income for 80
percent of retirees, the approaching retirement of today's aging
workforce will surely place additional stress on Social Security's
ability to pay out benefits.
In short, the three-leg stool of retirement security is in jeopardy.
Plans where employers make automatic, mandatory contributions have been
replaced by plans where employees make voluntary contributions. No
longer do companies automatically bear the risks and costs of
professionally made investment decisions. Today, workers have to bear
the risks and costs of their investment decisions.
Passage of H.R. 1102 will set us on the path of enhancing retirement
security by not only increasing the annual contribution limit for IRAs
and providing catch-up provisions for older workers and easing
administrative burdens to allow employers to offer pension plans.
In particular, H.R. 1102 includes provisions of a bill, H.R. 352,
which I introduced with the gentleman from Missouri (Mr. Blunt) which
would allow small businesses to establish qualified small employer
pension plans for small businesses of less than 100 employees.
The provisions of the Bentsen bill would provide an easing of the
establishment of qualified pension plans while still requiring employer
matches and contributions for all employees.
Small businesses with less than 100 employees can participate in this
plan, yet only 21 percent of individuals employed by such businesses
have such pension plans at this time, compared with 64 percent of those
who work for businesses with more than 100 employees.
Overall I want to say, H.R. 1102 will clear up many of the problems
in the current pension programs. I know there have been a number of
criticisms about whether or not this would skew benefits to the upper
income. I might say this is somewhat different than tax cut bills we
have had before because this is about savings and not consumption. It
is voluntary.
We do not know if the bill will work or not, but we do know that the
current regulatory scheme for pensions and savings is not working, and
we ought to try this bill to see if it will work to increase the amount
of pensions to as many American workers as possible.
I encourage my colleagues to support the bill.
Mr. PORTMAN. Mr. Speaker, I yield 3 minutes to the gentleman from
Illinois (Mr. Weller), my colleague on the Committee on Ways and Means,
who played a big role in putting together not only the multiemployer
provisions but also the catch-up provisions on the 401(k) and IRA side.
(Mr. WELLER asked and was given permission to revise and extend his
remarks.)
Mr. WELLER. Mr. Speaker, I am fortunate to represent a very diverse
district, representing the south side of Chicago, the south suburbs and
rural areas. And when I listen, whether in the city, the suburbs or the
country, my neighbors tell me how frustrated they are with their Tax
Code. Not only are taxes too high, but they are frustrated with the
complexity and the unfairness of the Tax Code; and they greatly point
time and time again about how unfair our Tax Code is where it treats
retirement savings, where it treats those who want to set aside more
for their retirement.
They also tell me that women in particular have a harder time saving
for their retirement. In fact, in 1999 only 23 percent of those who
were out of the workforce, usually for raising a family, were able to
contribute to an IRA in 1999. That is less than one-fourth contributed
to their IRA.
When I think of that example, I think of my sister Pat. She and her
husband, Rich, are in their 50s. They live near Sheldon, Illinois, on
their farm. One is a farmer. One is a school teacher. But a few years
back, my sister and her husband, Rich, decided to have a family. Pat
took 7 years out of the workforce in order to be home with the kids.
And when the kids were old enough to go into school, she went back into
the workforce. But during that period of time the family income was a
lot less, it was cut in half, and expenses were up because they had
little children. During that time, Pat and Rich really could not really
set aside much more retirement savings.
That is why I think it is so important to point out in this
legislation that we help people like my sister, Pat, working moms,
empty-nesters who now have a little extra money after the kids are out
of the household, those who may have missed a little work because of
health reasons, but give them an opportunity to catchup on their
contributions to their IRA as well as their 401(k).
That is why I am so proud that provisions from H.R. 4546 were
included in this legislation allowing an individual when they turn 50
to put a full $5,000 into their IRA immediately in 2001.
As my colleagues know, the increased $5,000 is phased in over three
years. Those over age 50 will get the immediate benefit allowing them
to catch up. And also, if they have a 401(k), they will be able to put
in an additional $5,000 in every year beginning in 2001. That will be a
big help, particularly to working moms and empty-nesters, important
legislation to help those save for retirement, particularly women
making up missed contributions.
I also want to point out another key provision in this legislation. I
think of folks back home in the district, working people, building
tradesmen, carpenters, cement finishers, iron workers, operating
engineers, those who get up early, work hard all day, get their hands
dirty, and of course put in many, many hours.
Unfortunately, and I will give an example, Larry Kohr, a retired
laborer from La Salle, Illinois. Larry pointed out to me that because
of section 415 limitations in our Tax Code that he does not get what he
was promised on his pension. According to his pension plan, he should
be getting about $39,000 a year. But because of the pension limitations
under section 415, he and other building tradespeople only get about
half of what they deserve, in Larry's case about $15,000 to $16,000.
{time} 1130
Now, think about that, 30 years you get up at 6 a.m. and go out and
work hard all day, you only get half of what you were promised. I am so
proud our legislation today that helps 10 million building
tradespeople, people like Larry Kohr by giving them 100 percent of what
they deserve on their pension.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 2 minutes to the
distinguished gentleman from Kansas (Mr. Moore), who has been a welcome
new addition to this House.
Mr. MOORE. Mr. Speaker, I appreciate the gentleman from Massachusetts
(Mr. Neal) yielding me this time.
Mr. Speaker, I rise today in strong support of H.R. 1102, and I urge
my colleagues in this body to pass 1102 today.
Back as a new freshman Member of this body, in February of last year,
I introduced H.R. 802, which would basically increase the contribution
limit from $2,000 to $5,000. That concept at least was incorporated in
this bill, and
[[Page H6511]]
I am very, very proud today to stand here in support of again H.R.
1102.
As a matter of national policy, I think it makes perfect sense that
we try to encourage Americans to save more, number one; and, number
two, to save more in private retirement accounts to supplement Social
Security accounts for later on to take the stress and the strain off of
Social Security.
Mr. Speaker, I am very proud to have had an opportunity to work on a
bipartisan basis with the gentleman from California (Mr. Gallegly), the
gentlewoman from New Mexico (Mrs. Wilson), the gentleman from Ohio (Mr.
Portman), the gentleman from Maryland (Mr. Cardin), the gentleman from
Illinois (Mr. Weller), and others who have spoken here today in support
of this legislation.
It truly is a good experience to work in a bipartisan basis. When I
go home, I talk to my constituents back home, they tell me, they are
really tired of all the partisan bickering in Congress. They are tired
of hearing the Republicans did this, the Democrats did this, and what
they would like to see us doing is working together.
This is a perfect example of where Republicans and Democrats have
come together across the aisle and worked on behalf of the American
people. This is not a Republican idea. This is not a Democrat idea. It
is a good idea and should be law, and I urge its passage.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from New
Hampshire (Mr. Bass), my colleague who has been very helpful on the
small business provisions of this legislation.
Mr. BASS. Mr. Speaker, I thank the gentleman from Ohio (Mr. Portman)
for yielding the time to me.
Mr. Speaker, I rise in strong support of H.R. 1002. Mr. Speaker I
want to congratulate the gentleman from Ohio (Mr. Portman) for his
tireless efforts on working on behalf of this important issue.
Earlier this year, I introduced a bill which would reduce the
premiums paid to the Pension Benefit Guarantee Corporation by small
businesses that are looking to offer new plans. This bipartisan
initiative already had been passed by the House on a previous occasion
and was also included in the original version of the bill we are
debating today.
I fully understand the reasons for removing all nontax provisions
from the bill, but I do hope that Members who may be appointed to the
conference committee will work for the inclusion of these provisions
that were in my bill and other pension reforms that may have been
removed from the bill. With the inclusion of that, we will be assured
that we will have a bill that will encourage employers to offer
pensions, as this one does, increase participation by eligible
employees, raise the limits on benefits and contributions, improve
asset portability, strengthen legal protections for planned
participants, and reduce regulatory burdens on plan sponsors.
Mr. Speaker, I also urge Members not to lose sight of the fact that
during debate regarding who will benefit from this bill, we should
consider the fact that when IRAs were created in 1974, they were widely
regarded as a great new step in encouraging retirement savings for all
Americans, and the original limit of $1,500 was not criticized as a
giveaway for the most wealthy, but was hailed by both parties as the
introduction of a planning tool for working Americans.
Had this limit been adjusted yearly to account for increases in the
CPI, the Consumer Price Index, it would be today $5,353 each year. This
bill will not adjust the limit to $5,000 until 2003, and I think we
would do well to keep this in mind as we debate this important bill on
a bipartisan basis.
Mr. Speaker, I urge support for this bill.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 2 minutes to the
gentleman from New Jersey (Mr. Andrews), who once again has helped us
reinforce the arguments that we are undertaking today.
(Mr. ANDREWS asked and was given permission to revise and extend his
remarks.)
Mr. ANDREWS. Mr. Speaker, I thank my friend from Massachusetts (Mr.
Neal) for yielding the time to me.
Mr. Speaker, I rise in support of the underlying legislation. I also
support the Democratic substitute because I believe that it more fairly
targets the benefits of the legislation. I commend the gentleman from
Massachusetts (Mr. Neal) and his colleagues for offering it, and I look
forward to voting for it. But I want to say to my friend, the gentleman
from Maryland (Mr. Cardin), and the gentleman from Ohio (Mr. Portman)
that they have demonstrated that people can come together on very
contentious issues and do good for the country.
Mr. Speaker, I very much appreciate the work they have done on this
bill. Americans are going to have more years of retirement and,
therefore, need more income, and that is a great thing; but it is a
thing we need to be prepared for.
Mr. Speaker, I support this bill for four significant reasons. First
of all, it repeals what I view as a very strange provision that makes
it illegal for employers to put too much into the pension plan for
their employees. That makes no sense at all. This will result in more
money being put away for employees.
Second, I support this because I believe it is great news for people
who have left the labor force for a while, usually to raise children,
and then rejoin the labor force and want to catch up for those years
when they could not put money away. Very frequently women are in this
position, although it is not only women. And this is very strong news
for those who will benefit from that provision.
Third, this legislation corrects what I believe is a glaring inequity
and anomaly in the Internal Revenue Code with respect to pension
payments made to people very often associated with the building trades
or other unions or other crafts who have earned their pensions and
because of a quirk in the law had been unable to collect them fairly.
This bill corrects that.
Finally, the increase in contributions that would be made to
individual retirement accounts are a benefit to the economy, as well as
to the families who will benefit from those.
To the gentleman from Maryland (Mr. Cardin), who has shown great
leadership on this, and to the gentleman from Ohio (Mr. Portman), I am
pleased that our committee, chaired by my friend, the gentleman from
Ohio (Mr. Boehner), has been able to help shepherd this legislation
along. I rise in support of it and look forward to its adoption by this
House.
Mr. PORTMAN. Mr. Speaker, I understand we have about 3 minutes
remaining.
The SPEAKER pro tempore (Mr. Ose). The gentleman from Ohio (Mr.
Portman) has 3 minutes remaining, and the gentleman from Massachusetts
(Mr. Neal) has 2\1/2\ minutes remaining.
Mr. PORTMAN. Mr. Speaker, who has the right to close?
The SPEAKER pro tempore. The gentleman from Ohio (Mr. Portman) has
the right to close.
Mr. PORTMAN. Mr. Speaker, I yield 2\1/2\ minutes to the gentleman
from New York (Mr. Lazio), my colleague who has been a leader on this
legislation and in expanding retirement security.
Mr. LAZIO. Mr. Speaker, let me begin by saying how thrilled I am to
be here today, and I rise in strong support of this legislation.
I want to commend my good friend, the gentleman from Ohio (Mr.
Portman) who has spearheaded the efforts to provide pension and
retirement security for millions of Americans, as well as the gentleman
from Maryland (Mr. Cardin). I want to thank him as well for his great
help. We would not be here without the partnership and bipartisanship
that both have exhibited.
Mr. Speaker, the baby boom generation is graying. I ought to know, I
am one of them, and I can see myself in the mirror every day. Over 60
million baby boomers will be retiring over the next 20 years.
Let me talk for a moment about the typical baby boomer generation
story. It is a story of a typical middle-class couple who are beginning
to approach retirement age. Their children have moved out of their
house. These prototypical baby boomers have been working hard, day in
and day out, since graduating high school. They have been exemplary
members of their community, providing for their families, perhaps
volunteering for a local charity, maybe serving on a local school
board.
Throughout the years, they did all right financially, but they were
not millionaires. They never got really
[[Page H6512]]
rich. They owned their own home. They scrimped and saved to send their
kids to school and often they did not have enough left over at the end
of the month to save enough maybe for their own retirement.
When the kids are grown and educated, when the house is almost paid
off and they have a few more dollars in their pocket, you would think
they would be okay. But the fact of the matter is, they have not been
able to save that much.
The current law contribution limit for IRAs is only $2,000, the same
amount that it was 20 years ago. In today's dollars, $2,000 per year
does not add up to much. Once they retire without a steady income, many
baby boomers will have to think twice before taking all of their
grandchildren out for the ball game or for a concert, and they dare not
even dream about visiting that vacation spot that has always caught
their eye.
Mr. Speaker, the bill we debate on the floor today will help 70
million Americans who lack access to any type of pension. This bill
will allow more Americans to save more of their own hard-earned dollars
for their retirement years. It will encourage more small businesses to
set up retirement plans for their employees.
This is a bipartisan bill. It has been a result of a lot of hard
work. It enjoys the support of over 190 cosponsors from both sides of
the aisle. Let me say, there is only one thing standing between us and
actual passage, and, that is, the opposition of the administration.
I do not know why anybody would object to a bipartisan bill that
would give Americans security in their retirement years. I do not know
why anybody would stand opposed to a bill that would help pensionless
low- and middle-income workers save for their retirement. We need to
pass this bill today.
Mr. NEAL of Massachusetts. Mr. Speaker, the gentleman from New York
(Mr. Lazio) mentioned there was bipartisan support for the bill. I am
pleased to announce there is bipartisan opposition to the bill.
Mr. Speaker, I yield 2 minutes to the gentleman from Minnesota (Mr.
Gutknecht).
Mr. GUTKNECHT. Mr. Speaker, virtually everything that has been said
this morning about this bill is true, and it is a bipartisan bill. I am
delighted with the work that has gone into it, but I reluctantly rise
in opposition to the bill.
Mr. Speaker, I want my colleagues to all consider for a moment the
term ``vested.'' I think we all think we know what that term means. The
dictionary says it is law, settled, if fixed, absolute, being without
contingency, as in a vested right.
About 2 years ago, thousands of employees that worked for IBM
Corporation found out that vested does not mean what we think it means,
and all of a sudden these people who had calculators on their
computers, as part of their tool kit so they could calculate what their
pension benefit would be when they retired, all of a sudden woke up and
the company had unilaterally changed the pension formula.
They had gone from a defined benefit program to a cash balance
program, and they were given no choice. And I had offered to the
authors language to give them that choice, just for the vested
employees, because once those rights are vested, it seems to me we have
a moral obligation as a Congress, as employers. In fact, the term in
pension policy is fiduciary responsibility, and that transcends legal.
Yes, it was legal for IBM, and many of these other corporations, to
convert their pension plans into cash balanced plans. It was legal, I
think. I am not so certain, but it was not moral. It was the wrong
thing to do.
As a result, I have to rise in opposition to this bill because we
have an opportunity in this Congress to solve this problem; and just
because it is IBM this year does not mean it is not going to be another
employer next year. This is ultimately going to affect millions and
millions of Americans, and everyone in this room knows that it is
wrong. It is wrong to allow large employers to abuse their employees,
to convert these pension plans without their knowledge and without
their choice.
Mr. Speaker, I have to congratulate the authors for working together,
but this bill has one glaring omission.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield myself 30 seconds.
Mr. Speaker, I want to thank the gentleman from Minnesota (Mr.
Gutknecht) for those very telling comments, and at the same time point
out that we do not on this side hold opposition to this bill, as much
as we argue that the bill can be improved.
In the closing days of this Congress, there is going to be ample
opportunity to do that. And I would close with the remarks that I
opened with, the legislation in front of us does not do enough to help
low- and middle-income workers, and when we look at the statistical
data of the companies of the proposal in front of us, one would quickly
conclude that is the case.
We have an opportunity. The President says he will sign a pension
bill. Secretary Summers has told me he will recommend to the President
that he veto this legislation in its current form.
Mr. Speaker, I yield back the balance of my time.
Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I want to thank my friend from Minnesota (Mr. Gutknecht)
for his help on the cash balance issue. As the gentleman knows, in this
legislation we expand disclosure and expand information provided so we
improve the cash balance situation. I appreciate his help in getting us
to that point and tell the gentleman that he is welcome to come to this
side to get time any time he wants.
Mr. Speaker, I would also say at the end here that we need to be
clear, that this legislation is not only bipartisan, it has not only
been fully vetted over a 3-year period, but it does strike the right
balance. It is fair.
Most of those lower- and middle-income workers we are all concerned
about work in these small businesses that do not offer any kind of
pension coverage today, that is precisely where this bill is targeted;
that is what we are trying to do. We are trying to reverse what this
Congress has done over the past couple of decades in terms of
restricting pension access to all workers.
Mr. Speaker, I would encourage all of my colleagues on the both sides
of the aisle to support the legislation before us.
Mr. FRELINGHUYSEN. Mr. Speaker, I rise in support of H.R. 1102, the
Comprehensive Retirement Security and Pension Reform Act.
This bill contains a number of common-sense provisions to make it
easier for Americans to build a stronger financial future for
themselves. First and foremost, the bill increases the amount of money
an individual can contribute to an Individual Retirement Account (IRA).
The current $2,000 a year level, which has remained unchanged since
1981, would be increased to $5,000. An estimated 35 million Americans
have some sort of IRA account, and nearly 70 percent of them contribute
the maximum amount each year. Passage of H.R. 1102 will allow these
individuals to set aside an even greater amount of money to prepare for
their future retirement security.
Second, the bill allows workers to become vested in less time--three
years instead of five--and makes 401(k)-type plans more portable. As we
know, workers no longer spend their entire careers with the same
company. Instead, workers increasingly change jobs several times over
the course of their careers. Under the provisions of H.R. 1102, these
workers will be able to bring their accumulated retirement savings with
them when they switch jobs.
Lastly, this bill also allows older men and women, aged 50 and up, to
make a $5,000 ``catch up'' contribution to their IRAs and increases the
limit on salary reduction contributions to 401(k)-type plans to
$15,000. Further, H.R. 1102 reduces administrative burdens, such as
reporting requirements, to encourage small businesses to offer pension
plans.
According to the Treasury Department, there are 75 million Americans
who do not participate in a retirement pension plan and have little or
no other retirement savings. For these individuals, as well as the
millions of Americans who already contribute to IRAs or other
retirement accounts, I urge my colleagues to support this bill. All of
us benefit when citizens prepare for their future retirement security
and families have incentives to save.
Mr. WELDON of Florida. Mr. Speaker, today I rise in strong support of
H.R. 1102, the 401-K--IRA Pension Expansion Plan. Mr. Speaker, I am a
co-sponsor of this measure that will help the over 70 million Americans
who need the benefits of this plan. It is imperative that
[[Page H6513]]
we pass this bill today to help millions of American families save for
their retirement security, and to be able to carry those pension funds
with them when they change jobs.
In 1981, workers were permitted to put aside up to $2,000 in an
Individual Retirement Account (IRA) tax-free. Oddly, that amount has
never been raised, even in the face of inflation and increased per
capita earnings. Also, with the 1986 Tax Reform Act the number of
participants dropped dramatically because of the disincentives it
introduced. This bill addresses those shortcomings. It phases in
increases for the maximum individual contribution reaching $5,000 by
2003. That means, that over the course of ten or twenty years, a couple
can save tens of thousands of dollars more towards their retirement;
that doesn't even begin to touch on interest and any additional
matching funds from an employer. The $5,000 annual limit is also
increased annually to ensure that inflation does not again erode the
contributions that can be set aside for retirement.
Today, only half of all private sector workers have any kind of
pension plan, and only 20 percent of small businesses offer retirement
plans. However, we have seen over the past two decades that IRAs are an
effective way for all Americans to save for their future, and with the
proper incentives in this bill, it will significantly expand the rate
of savings. This measure will help all workers. It can especially help
among Generation X-ers, many of whom are already deciding to save for
their retirement. In our expanding, technology driven economy, today's
twenty- and thirty-somethings have taken it upon themselves to begin
saving for the long-term. This bill helps them by enabling and
encouraging them to set aside more of their own money over their
working years for their own retirement.
Another component of the bill is targeted to my generation. It allows
workers age 50 and above to be permitted to contribute up to $5,000
immediately in order to ``catch-up'' with years of being limited to
only $2,000/year. Estimates indicate that over the next two decades
over 16 million Baby Boomers will retire. So many of these hard-working
Americans have scrimped and saved to put aside some money for their
senior years. Now as they begin to see their personal incomes rise they
are not able to set aside as much money as they would like to in their
IRAs. We should enable them to put aside more money as their incomes
grow and as they seriously consider their financial planning for their
retirement.
In addition, this bill provides incentives to promote the portability
of IRAs. With the expanding and ever-changing economy workers are
changing jobs with increased frequency. The prospect of spending thirty
or forty years with an American institution like a General Motors or a
Ford are less likely today than they were in past generations. With the
increased portability provision in this bill it will be easier for
workers to take their retirement savings from one job to another. They
can roll over their money into an IRA with their new employer and take
it with them without penalties and continue to expand the growth of
their retirement savings.
In closing, statistics indicate that personal savings among Americans
has been down every year since 1992, and now it is at its lowest point
in decades. Also, many women put their careers on hold to raise their
children. These families not only gave up a second income for these
years, but these women were not able to contribute to an IRA. This bill
allows them to make-up contributions for those years. We should
encourage savings and the best way to do that is to promote tax-free
savings for retirement. This bill is a good bill. It is good for hard-
working Americans and their families, and I encourage my colleagues to
support it.
Mr. BILIRAKIS. Mr. Speaker, I rise in support of H.R. 1102, the
Comprehensive Retirement Security and Pension Reform Act.
The authors of H.R. 1102 are to be commended for their work in
drafting a bill to address the retirement savings gap by expanding
small business retirement plans, allowing workers to save more,
providing portability in retirement benefits for an increasingly mobile
workforce, and securing the pensions of America's workers. I am pleased
to see that H.R. 1102 increases IRA contribution and benefit limits,
provides rollovers of retirement plan and IRA distributions, and
reduces vesting requirements for employer matching contributions. These
provisions will help Americans save more for their retirement needs.
However, I still have concerns about the protection of pension
benefits of workers and retirees.
Over the years, I have heard from many of my constituents who have
lost pension benefits as the result of their employer declaring
bankruptcy or merging with another company. Current law does not do
enough to protect the retirement benefits of these employees and the
company's retirees.
Mr. Speaker, hard-working Americans do not deserve to lose their
hard-earned benefits due to a company's declaration of bankruptcy or
merger with another corporation.
As Members of Congress, we spend a lot of time and effort debating
what we can do to improve the lives of our constituents. Providing
additional protections for the retirement benefits of hard-working
Americans is a step in the right direction, and I hope my colleagues
will work with me to ensure that changes in a company's structure will
not result in the loss of benefits for our constituents.
Mr. PORTMAN. Mr. Speaker, I yield back the balance of my time.
Amendment In the Nature of a Substitute Offered by Mr. Neal of
Massachusetts
Mr. NEAL of Massachusetts. Mr. Speaker, I offer an amendment in the
nature of substitute.
The SPEAKER pro tempore. The Clerk will designate the amendment in
the nature of a substitute.
The text of the amendment in the nature of a substitute is as
follows:
Amendment in the nature of a substitute offered by Mr. Neal
of Massachusetts:
Strike all after the enacting clause and insert the text of
H.R. 4843, as reported, and add at the end the following new
title:
TITLE VIII--ADDITIONAL PROVISIONS
SEC. 801. REFUNDABLE CREDIT TO CERTAIN INDIVIDUALS FOR
ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS.
(a) In General.--Subpart C of part IV of subchapter A of
chapter 1 of the Internal Revenue Code of 1986 (relating to
refundable credits) is amended by redesignating section 35 as
section 36 and by inserting after section 34 the following
new section:
``SEC. 35. ELECTIVE DEFERRALS AND IRA CONTRIBUTIONS BY
CERTAIN INDIVIDUALS.
``(a) Allowance of Credit.--In the case of an eligible
individual, there shall be allowed as a credit against the
tax imposed by this subtitle for the taxable year an amount
equal to the applicable percentage of so much of the
qualified retirement savings contributions of the eligible
individual for the taxable year as do not exceed $2,000.
``(b) Applicable Percentage.--For purposes of this section,
the applicable percentage is the percentage determined in
accordance with the following table:
----------------------------------------------------------------------------------------------------------------
Adjusted Gross Income
-------------------------------------------------------------------------------------------------
Joint return Head of a household All other cases Applicable
------------------------------------------------------------------------------------------------- percentage
Over Not over Over Not over Over Not over
----------------------------------------------------------------------------------------------------------------
$0 $25,000 $0 $18,750 $0 $12,500 50
25,000 35,000 18,750 26,250 12,500 17,500 45
35,000 45,000 26,250 33,750 17,500 22,500 35
45,000 55,000 33,750 41,250 22,500 27,500 25
55,000 75,000 41,250 56,250 27,500 37,500 15
75,000 ............... 56,250 .............. 37,500 .............. 0
----------------------------------------------------------------------------------------------------------------
``(c) Eligible Individual.--For purposes of this section--
``(1) In general.--The term `eligible individual' means any
individual if--
``(A) such individual has attained the age of 18, but has
not attained the age of 61, as of the close of the taxable
year, and
``(B) the compensation (as defined in section 219(f)(1))
includible in the gross income of the individual (or, in the
case of a joint return, of the taxpayer) for such taxable
year is at least $5,000.
``(2) Dependents and full-time students not eligible.--The
term `eligible individual' shall not include--
``(A) any individual with respect to whom a deduction under
section 151 is allowable to another taxpayer for a taxable
year beginning in the calendar year in which such
individual's taxable year begins, and
``(B) any individual who is a student (as defined in
section 151(c)(4)).
``(3) Individuals receiving certain retirement
distributions not eligible.--
``(A) In general.--The term `eligible individual' shall not
include, with respect to a taxable year, any individual who
received during the testing period--
``(i) any distribution from a qualified retirement plan (as
defined in section 4974(c)),
[[Page H6514]]
or from an eligible deferred compensation plan (as defined in
section 457(b)), which is includible in gross income, or
``(ii) any distribution from a Roth IRA which is not a
qualified rollover contribution (as defined in section
408A(e)) to a Roth IRA.
``(B) Testing period.--For purposes of subparagraph (A),
the testing period, with respect to a taxable year, is the
period which includes--
``(i) such taxable year,
``(ii) the 2 preceding taxable years, and
``(iii) the period after such taxable year and before the
due date (without extensions) for filing the return of tax
for such taxable year.
``(C) Excepted distributions.--There shall not be taken
into account under subparagraph (A)--
``(i) any distribution referred to in section 72(p),
401(k)(8), 401(m)(6), 402(g)(2), 404(k), or 408(d)(4),
``(ii) any distribution to which section 408A(d)(3)
applies, and
``(iii) any distribution before January 1, 2002.
``(D) Treatment of distributions received by spouse of
individual.--For purposes of determining whether an
individual is an eligible individual for any taxable year,
any distribution received by the spouse of such individual
shall be treated as received by such individual if such
individual and spouse file a joint return for such taxable
year and for the taxable year during which the spouse
receives the distribution.
``(d) Qualified Retirement Savings Contributions.--For
purposes of this section, the term `qualified retirement
savings contributions' means the sum of--
``(1) the amount of the qualified retirement contributions
(as defined in section 219(e)) for the benefit of the
eligible individual,
``(2) the amount of the elective deferrals (as defined in
section 414(u)(2)(C)) of such individual, and
``(3) the amount of voluntary employee contributions by
such individual to any qualified retirement plan (as defined
in section 4974(c)).
``(e) Adjusted Gross Income.--For purposes of this section,
adjusted gross income shall be determined without regard to
sections 911, 931, and 933.
``(f) Investment in the Contract.--Notwithstanding any
other provision of law, a qualified retirement savings
contribution shall not fail to be included in determining the
investment in the contract for purposes of section 72 by
reason of the credit under this section.
``(g) Transitional Rules.--In the case of taxable years
beginning before January 1, 2008--
``(1) Contribution limit.--Subsection (a) shall be applied
by substituting for `$2,000'--
``(A) $600 in the case of taxable years beginning in 2002,
2003, or 2004, and
``(B) $1,000 in the case of taxable years beginning in
2005, 2006, or 2007.
``(2) Applicable percentage.--The applicable percentage
shall be determined under the following table (in lieu of the
table in subsection (b)):
----------------------------------------------------------------------------------------------------------------
Adjusted Gross Income
-------------------------------------------------------------------------------------------------
Joint return Head of a household All other cases Applicable
------------------------------------------------------------------------------------------------- percentage
Over Not over Over Not over Over Not over
----------------------------------------------------------------------------------------------------------------
$0 $20,000 $0 $15,000 $0 $10,000 50
20,000 25,000 15,000 18,750 10,000 12,500 45
25,000 30,000 18,750 22,500 12,500 15,000 35
30,000 35,000 22,500 26,250 15,000 17,500 25
35,000 40,000 26,250 30,000 17,500 20,000 15
40,000 ............... 30,000 .............. 20,000 .............. 0.''
----------------------------------------------------------------------------------------------------------------
(b) Conforming Amendments.--
(1) Paragraph (2) of section 1324(b) of title 31, United
States Code, is amended by inserting before the period ``, or
from section 35 of such Code''.
(2) The table of sections for subpart C of part IV of
subchapter A of chapter 1 of such Code is amended by striking
the last item and inserting the following new items:
``Sec. 35. Elective deferrals and IRA contributions by certain
individuals.
``Sec. 36. Overpayments of tax.''
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2001.
SEC. 802. CREDIT FOR PENSION PLAN STARTUP COSTS OF SMALL
EMPLOYERS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business related credits) is amended
by adding at the end the following new section:
``SEC. 45D. SMALL EMPLOYER PENSION PLAN STARTUP COSTS.
``(a) General Rule.--For purposes of section 38, in the
case of an eligible employer, the small employer pension plan
startup cost credit determined under this section for any
taxable year is an amount equal to 50 percent of the
qualified startup costs paid or incurred by the taxpayer
during the taxable year.
``(b) Dollar Limitation.--The amount of the credit
determined under this section for any taxable year shall not
exceed--
``(1) $1,000 for the first credit year,
``(2) $500 for each of the 2 taxable years immediately
following the first credit year, and
``(3) zero for any other taxable year.
``(c) Eligible Employer.--For purposes of this section--
``(1) In general.--The term `eligible employer' has the
meaning given such term by section 408(p)(2)(C)(i).
``(2) Employers maintaining qualified plans during 1998 not
eligible.--Such term shall not include an employer if such
employer (or any predecessor employer) maintained a qualified
plan (as defined in section 408(p)(2)(D)(ii)) with respect to
which contributions were made, or benefits were accrued, for
service in 1998. If only individuals other than employees
described in subparagraph (A) or (B) of section 410(b)(3) are
eligible to participate in the qualified employer plan
referred to in subsection (d)(1), then the preceding sentence
shall be applied without regard to any qualified plan in
which only employees so described are eligible to
participate.
``(d) Other Definitions.--For purposes of this section--
``(1) Qualified startup costs.--
``(A) In general.--The term `qualified startup costs' means
any ordinary and necessary expenses of an eligible employer
which are paid or incurred in connection with--
``(i) the establishment or administration of an eligible
employer plan, or
``(ii) the retirement-related education of employees with
respect to such plan.
``(B) Plan must have at least 2 participants.--Such term
shall not include any expense in connection with a plan that
does not have at least 2 individuals who are eligible to
participate.
``(C) Plan must be established before january 1, 2010.--
Such term shall not include any expense in connection with a
plan established after December 31, 2009.
``(2) Eligible employer plan.--The term `eligible employer
plan' means a qualified employer plan within the meaning of
section 4972(d), or a qualified payroll deduction arrangement
within the meaning of section 408(q)(1) (whether or not an
election is made under section 408(q)(2)). A qualified
payroll deduction arrangement shall be treated as an eligible
employer plan only if all employees of the employer who--
``(A) have been employed for 90 days, and
``(B) are not described in subparagraph (A) or (C) of
section 410(b)(3),
are eligible to make the election under section 408(q)(1)(A).
``(3) First credit year.--The term `first credit year'
means--
``(A) the taxable year which includes the date that the
eligible employer plan to which such costs relate becomes
effective, or
``(B) at the election of the eligible employer, the taxable
year preceding the taxable year referred to in subparagraph
(A).
``(e) Special Rules.--For purposes of this section--
``(1) Aggregation rules.--All persons treated as a single
employer under subsection (a) or (b) of section 52, or
subsection (n) or (o) of section 414, shall be treated as one
person. All eligible employer plans shall be treated as 1
eligible employer plan.
``(2) Disallowance of deduction.--No deduction shall be
allowed for that portion of the qualified startup costs paid
or incurred for the taxable year which is equal to the credit
determined under subsection (a).
``(3) Election not to claim credit.--This section shall not
apply to a taxpayer for any taxable year if such taxpayer
elects to have this section not apply for such taxable
year.''
(b) Credit Allowed as Part of General Business Credit.--
Section 38(b) (defining current year business credit) is
amended by
[[Page H6515]]
striking ``plus'' at the end of paragraph (11), by striking
the period at the end of paragraph (12) and inserting ``,
plus'', and by adding at the end the following new paragraph:
``(13) in the case of an eligible employer (as defined in
section 45D(c)), the small employer pension plan startup cost
credit determined under section 45D(a).''
(c) Conforming Amendments.--
(1) Section 39(d) is amended by adding at the end the
following new paragraph:
``(8) No carryback of small employer pension plan startup
cost credit before effective date.--No portion of the unused
business credit for any taxable year which is attributable to
the small employer pension plan startup cost credit
determined under section 45D may be carried back to a taxable
year ending on or before the date of the enactment of section
45D.''
(2) Subsection (c) of section 196 is amended by striking
``and'' at the end of paragraph (7), by striking the period
at the end of paragraph (8) and inserting ``, and'', and by
adding at the end the following new paragraph:
``(9) the small employer pension plan startup cost credit
determined under section 45D(a).''
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by adding at the end the
following new item:
``Sec. 45D. Small employer pension plan startup costs.''
(d) Effective Date.--The amendments made by this section
shall apply to costs paid or incurred in taxable years ending
after the date of the enactment of this Act.
SEC. 803. CREDIT FOR QUALIFIED PENSION PLAN CONTRIBUTIONS OF
SMALL EMPLOYERS.
(a) In General.--Subpart D of part IV of subchapter A of
chapter 1 (relating to business related credits) is amended
by adding at the end the following new section:
``SEC. 45E. SMALL EMPLOYER PENSION PLAN CONTRIBUTIONS.
``(a) General Rule.--For purposes of section 38, in the
case of an eligible employer, the small employer pension plan
contribution credit determined under this section for any
taxable year is an amount equal to 50 percent of the amount
which would (but for subsection (f)(1)) be allowed as a
deduction under section 404 for such taxable year for
qualified employer contributions made to any qualified
retirement plan on behalf of any nonhighly compensated
employee.
``(b) Credit Limited to 3 Years.--The credit allowable by
this section shall be allowed only with respect to the period
of 3 taxable years beginning with the taxable year in which
the qualified retirement plan becomes effective.
``(c) Qualified Employer Contribution.--For purposes of
this section--
``(1) Defined contribution plans.--In the case of a defined
contribution plan, the term `qualified employer contribution'
means the amount of nonelective and matching contributions to
the plan made by the employer on behalf of any nonhighly
compensated employee to the extent such amount does not
exceed 3 percent of such employee's compensation from the
employer for the year.
``(2) Defined benefit plans.--In the case of a defined
benefit plan, the term `qualified employer contribution'
means the amount of employer contributions to the plan made
on behalf of any nonhighly compensated employee to the extent
that the accrued benefit of such employee derived from such
contributions for the year do not exceed the equivalent (as
determined under regulations prescribed by the Secretary and
without regard to contributions and benefits under the Social
Security Act) of 3 percent of such employee's compensation
from the employer for the year.
``(d) Qualified Retirement Plan.--
``(1) In general.--The term `qualified retirement plan'
means any plan described in section 401(a) which includes a
trust exempt from tax under section 501(a) if the plan
meets--
``(A) the contribution requirements of paragraph (2),
``(B) the vesting requirements of paragraph (3), and
``(C) the distributions requirements of paragraph (4).
``(2) Contribution requirements.--
``(A) In general.--The requirements of this paragraph are
met if, under the plan--
``(i) the employer is required to make nonelective
contributions of at least 1 percent of compensation (or the
equivalent thereof in the case of a defined benefit plan) for
each nonhighly compensated employee who is eligible to
participate in the plan, and
``(ii) allocations of nonelective employer contributions
are either in equal dollar amounts for all employees covered
by the plan or bear a uniform relationship to the total
compensation, or the basic or regular rate of compensation,
of the employees covered by the plan.
``(B) Compensation limitation.--The compensation taken into
account under subparagraph (A) for any year shall not exceed
the limitation in effect for such year under section
401(a)(17).
``(3) Vesting requirements.--The requirements of this
paragraph are met if the plan satisfies the requirements of
subparagraph (A) or (B).
``(A) 3-year vesting.--A plan satisfies the requirements of
this subparagraph 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.
``(B) 5-year graded vesting.--A plan satisfies the
requirements of this subparagraph 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:
1.............................................................20 ....
2.............................................................40 ....
3.............................................................60 ....
4.............................................................80 ....
5............................................................100.....
``(4) Distribution requirements.--
``(A) In general.--Except as provided in subparagraph (B),
the requirements of this paragraph are met if, under the
plan--
``(i) in the case of a profit-sharing or stock bonus plan,
amounts are distributable only as provided in section
401(k)(2)(B), and
``(ii) in the case of a pension plan, amounts are
distributable subject to the limitations applicable to other
distributions from the plan.
``(B) Distributions within 5 years after separation, etc.--
In no event shall a plan meet the requirements of this
paragraph unless, under the plan, amounts distributed--
``(i) after separation from service or severance from
employment, and
``(ii) within 5 years after the date of the earliest
employer contribution to the plan,
may be distributed only in a direct trustee-to-trustee
transfer to a plan having the same distribution restrictions
as the distributing plan.
``(e) Other Definitions.--For purposes of this section--
``(1) Eligible employer.--The term `eligible employer' has
the meaning given such term by section 408(p)(2)(C)(i).
``(2) Nonhighly compensated employees.--The term `highly
compensated employee' has the meaning given such term by
section 414(q) (determined without regard to section
414(q)(1)(B)(ii)).
``(f) Special Rules.--
``(1) Disallowance of deduction.--No deduction shall be
allowed for that portion of the qualified employer
contributions paid or incurred for the taxable year which is
equal to the credit determined under subsection (a).
``(2) Election not to claim credit.--This section shall not
apply to a taxpayer for any taxable year if such taxpayer
elects to have this section not apply for such taxable year.
``(g) Recapture of Credit on Forfeited Contributions.--If
any accrued benefit which is forfeitable by reason of
subsection (d)(3) is forfeited, the employer's tax imposed by
this chapter for the taxable year in which the forfeiture
occurs shall be increased by 35 percent of the employer
contributions from which such benefit is derived to the
extent such contributions were taken into account in
determining the credit under this section.
``(h) Regulations.--The Secretary shall prescribe such
regulations as may be appropriate to carry out the purposes
of this section, including regulations to prevent the abuse
of the purposes of this section through the use of multiple
plans.
``(i) Termination.--This section shall not apply to any
plan established after December 31, 2009.''
(b) Credit Allowed as Part of General Business Credit.--
Section 38(b) (defining current year business credit) is
amended by striking ``plus'' at the end of paragraph (12), by
striking the period at the end of paragraph (13) and
inserting ``, plus'', and by adding at the end the following
new paragraph:
``(14) in the case of an eligible employer (as defined in
section 45E(e)), the small employer pension plan contribution
credit determined under section 45E(a).''
(c) Conforming Amendments.--
(1) Section 39(d) is amended by adding at the end the
following new paragraph:
``(9) No carryback of small employer pension plan
contribution credit before january 1, 2002.--No portion of
the unused business credit for any taxable year which is
attributable to the small employer pension plan contribution
credit determined under section 45E may be carried back to a
taxable year beginning before January 1, 2002.''
(2) Subsection (c) of section 196 is amended by striking
``and'' at the end of paragraph (8), by striking the period
at the end of paragraph (9) and inserting ``, and'', and by
adding at the end the following new paragraph:
``(10) the small employer pension plan contribution credit
determined under section 45E(a).''
(3) The table of sections for subpart D of part IV of
subchapter A of chapter 1 is amended by adding at the end the
following new item:
``Sec. 45E. Small employer pension plan contributions.''
(d) Effective Date.--The amendments made by this section
shall apply to contributions paid or incurred in taxable
years beginning after December 31, 2001.
SEC. 804. LIMITATION ON CATCH-UP CONTRIBUTIONS.
(a) In General.--Section 414(v), as added by section 301,
is amended by adding at the end the following new paragraph:
``(6) Limitation.--This subsection shall apply with respect
to a participant for a year only if the participant is not a
highly compensated employee and certifies to the plan
administrator that the participant has been out of the
workforce for at least 2 of the preceding 7 years. A plan
shall not be treated as failing to meet the requirements of
this subsection by reason of reliance on an incorrect
[[Page H6516]]
certification under this paragraph unless the plan
administrator knew, or reasonably should have known, that the
certification was incorrect.''
(b) Effective Date.--The amendment made by this section
shall apply to contributions in taxable years beginning after
December 31, 2000.
SEC. 805. TREATMENT OF MULTIEMPLOYER PLANS UNDER SECTION 415.
(a) Early Retirement Limits for Certain Plans.--
Subparagraph (F) of section 415(b)(2) is amended to read as
follows:
``(F) Multiemployer plans and plans maintained by
governments and tax exempt organizations.--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, a multiemployer
plan (as defined in section 414(f)), or a qualified merchant
marine plan--
``(i) subparagraph (C) shall be applied--
``(I) by substituting `age 62' for `social security
retirement age' each place it appears, and
``(II) as if the last sentence thereof read as follows:
`The reduction under this subparagraph shall not reduce the
limitation of paragraph (1)(A) below (i) 80 percent of such
limitation as in effect for the year, or (ii) if the benefit
begins before age 55, the equivalent of such 80 percent
amount for age 55.', and
``(ii) subparagraph (D) shall be applied by substituting
`age 65' for `social security retirement age' each place it
appears.
For purposes of this subparagraph, 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.''.
(b) Effective Date.--The amendments made by this section
shall apply to years beginning after December 31, 2000.
SEC. 806. SENSE OF THE HOUSE OF REPRESENTATIVES REGARDING
CASH BALANCE PENSION PLAN CONVERSIONS.
(a) Findings.--The House of Representatives finds the
following:
(1) Defined benefit pension plans are guaranteed by the
Pension Benefit Guaranty Corporation and provide a lifetime
benefit for a beneficiary and spouse.
(2) Defined benefit pension plans provide meaningful
retirement benefits to rank and file workers, since such
plans are generally funded by employer contributions.
(3) Employers should be encouraged to establish and
maintain defined benefit pension plans.
(4) An increasing number of major employers have been
converting their traditional defined benefit plans to ``cash
balance'' or other hybrid defined benefit plans.
(5) Under current law, employers are not required to
provide plan participants with meaningful disclosure of the
impact of converting a traditional defined benefit plan to a
``cash balance'' or other hybrid formula.
(6) For a number of years after a conversion, the cash
balance or other hybrid benefit formula may result in a
period of ``wear away'' during which older and longer service
participants earn no additional benefits.
(7) Federal law prohibits pension plan participants from
being discriminated against on the basis of age in the
provision of pension benefits.
(b) Sense of the House.--It is the sense of the House of
Representatives that pension plan participants whose plans
are changed to cause older or longer service workers to earn
less retirement income, including conversions to ``cash
balance plans'', should receive additional protection under
the Internal Revenue Code of 1986 than what is currently
provided, and Congress should act this year to address this
important issue. In particular, the tax laws, at a minimum,
should provide that--
(1) all pension plan participants receive adequate,
accurate, and timely notice of any change to a plan that will
cause participants to earn less retirement income in the
future; and
(2) pension plans that are changed to a cash balance or
other hybrid formula not be permitted to ``wear away''
participants' benefits in such a manner that older and longer
service participants earn no additional pension benefits for
a period of time after the change.
The SPEAKER pro tempore. Pursuant to House Resolution 557, the
gentleman from Massachusetts (Mr. Neal) and a Member opposed each will
control 30 minutes.
The Chair recognizes the gentleman from Massachusetts (Mr. Neal).
Mr. NEAL of Massachusetts. Mr. Speaker, I yield myself such time as I
may consume.
In the last hour, we have really gone through I think a very helpful
exercise, and that is to point out that the differences are really not
that large as currently proposed.
{time} 1145
Even though the differences are not large, they remain for low-income
and moderate-income workers substantial. If we let this get away from
us in its current form, if the President were to sign this legislation,
which I suggest that he will not, we would find ourselves quickly
coming back to an issue in succeeding sessions of the Congress on how
to deal with what is the most prickly part of the problem, and that is
how do we get low-income wage earners into a pension system? How do we
provide the necessary incentives for employers to do precisely that?
How do we speak to moderate-income workers who find themselves perhaps
in mid-life without the benefits of a pension plan as well?
The amendment today that we offer in the nature of a substitute would
accomplish this goal by encouraging individuals, all workers, to save
better for retirement through adding retirement savings accounts as
proposed by the President and the Secretary of the Treasury, Mr.
Summers. This proposal would provide a refundable credit to low- and
middle-income workers who participate in an employer-sponsored pension
plan or an individual retirement account. The credit would equal up to
50 percent of the annual contribution allowed under a traditional IRA.
Let me say that 2 years ago, the gentleman from California (Mr.
Thomas) and I led the fight here in a bipartisan manner on this floor
in support of the Roth IRA. I hold no intransigence or opposition to
the nature of expanding individual retirement accounts. I think that
there is significant data, however, that indicates that the problem
with IRAs is they tend to reward those who already have the ability to
save for retirement. No problem with getting more people in, but at the
same time we want to extend this benefit to low- and moderate-income
workers.
Under this proposal, eligible taxpayers would receive an immediate
credit equal up to $300, which would be phased up to $1,000. When fully
phased in, individuals filing a joint return with adjusted gross income
up to $75,000 would be eligible for the credit. Taxpayers filing as
heads of households with an adjusted gross income of up to $56,000
would be eligible for the credit as well, and individuals filing as
single would receive the credit if their adjusted gross income does not
exceed $37,500.
Now, we have once again an opportunity in the closing days of this
Congress to accomplish something that is very important to average
Americans, and that is the opportunity, given the uncertainty that so
many people feel about pension benefits that are allegedly set aside,
we have watched the collapse in different States across the country of
pension benefits and it is clearly an issue that is on the minds of the
American people. So I ask in the spirit of bipartisanship that we take
an opportunity in the next 6 weeks as the Congress adjourns to come
back here in September, refreshed and energetic, with the goal of some
tangible achievements.
I would alert the Members of Congress again that President Clinton
has argued, through Secretary Summers, that he will not sign this
legislation into law. That should be the stop sign that we all see at
the intersection. Let us come back and revisit it. I think the
gentleman from Ohio (Mr. Portman) has done a commendable job. I think
the gentleman from Maryland (Mr. Cardin) has done a commendable job.
The problem is that they have, in my judgment, not accomplished enough
for moderate- and low-income workers.
Modification of Amendment in the Nature of a Substitute Offered by Mr.
Neal of Massachusetts
Mr. NEAL of Massachusetts. Mr. Speaker, I ask unanimous consent to
modify this amendment. The modification is at the desk.
The SPEAKER pro tempore (Mr. Ose). The Clerk will report the
modification.
The Clerk read as follows:
Modification to amendment offered by Mr. Neal of
Massachusetts:
Strike out section 804, and renumber succeeding sections
accordingly.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Massachusetts that the amendment in the nature of a
substitute be modified?
Mr. PORTMAN. Mr. Speaker, reserving the right to object, I would just
like to get a quick explanation of the legislation.
Mr. NEAL of Massachusetts. Mr. Speaker, will the gentleman yield?
Mr. PORTMAN. I yield to the gentleman from Massachusetts.
[[Page H6517]]
Mr. NEAL of Massachusetts. Mr. Speaker, I would say to the gentleman
from Ohio (Mr. Portman), my understanding is that this was not part of
the amendment as proposed; that it was supposed to be deleted last
evening and it was not.
Mr. PORTMAN. Is this on the catch-up provisions?
Mr. NEAL of Massachusetts. Yes, it is.
Mr. PORTMAN. I think this House ought to give unanimous consent to
this. This essentially, as I understand it, would move the Democrat
substitute into a similar position of where the underlying legislation
is with regard to catch-ups. Is that correct?
Mr. NEAL of Massachusetts. Yes, that is correct.
Mr. PORTMAN. Otherwise, we would be gutting the catch-up provisions
in the Democrat substitute, which none of us want to do.
Mr. NEAL of Massachusetts. This was supposed to be deleted last
evening; and it is my understanding, based upon what the staff tells
me, that it simply was a miscalculation.
Mr. PORTMAN. Mr. Speaker, I withdraw my reservation of objection. I
think we ought to agree with the gentleman and give him unanimous
consent.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Massachusetts?
There was no objection.
The SPEAKER pro tempore. Does the gentleman from Ohio (Mr. Portman)
claim the time in opposition?
Mr. PORTMAN. Yes, Mr. Speaker. I am opposed to the substitute and
would claim the time in opposition.
Mr. Speaker, I yield 2 minutes to the gentleman from California (Mr.
Horn).
Mr. HORN. Mr. Speaker, a few months ago a constituent wrote me about
him and his wife. They had been burdened 20 years before with student
loans, and they had only recently paid them off. They never had a
chance to vest money into an Individual Retirement Account. I
introduced H.R. 3620, the Second Chance IRA Act, to allow workers to
make up for years when they missed out or simply failed to make IRA
contributions.
My legislation would have essentially doubled the IRA contribution
and tax deductions from the current $2,000 to the $4,000 to catch up on
those lost years.
Before us is H.R. 1102. It has provided a similar ``catch-up.'' This
bill would allow those workers to immediately contribute up to $5,000 a
year to an IRA. That achieves a good part of the goal to encourage a
buildup of savings for workers who are nearing retirement and never had
the opportunity to invest in an IRA.
I thank the gentleman from Texas (Mr. Archer), the gentleman from
Ohio (Mr. Portman), and the gentleman from Maryland (Mr. Cardin) for
their bipartisan effort which resulted in this legislation.
It is an important help for the women who are retiring and reentering
the workforce after raising a family, and for many other Americans who
want and need a significant retirement savings account so they can have
security in their golden years.
Let us help retirement.
Let us encourage saving.
Let us vote for H.R. 1102.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 5 minutes to the
gentleman from Maryland (Mr. Cardin), who I indicated earlier has done
a terrific job with the legislation, and our difference here is a small
one. We have time to correct it. He has done a good job with this work.
Mr. CARDIN. Mr. Speaker, I thank the gentleman from Massachusetts
(Mr. Neal) for yielding me this time.
Mr. Speaker, let me point out that the Democratic substitute is an
add-on to the underlying Portman-Cardin H.R. 1102 legislation. By that
I mean that all of the provisions of H.R. 1102 remain if one votes for
the Democratic substitute. It adds some additional provisions to
provide more incentives for particularly low-wage workers to be able to
put money away for their retirement.
When the gentleman from Ohio (Mr. Portman) and I started working on
this legislation 3 years ago, we were very sensitive to the fact that
we had not balanced the Federal budget and that we should be very
cautious on the use of tax revenues. We were very conservative in our
approach. Quite frankly, we did not think that there would be as much
money available for savings incentives as now appears to be the case as
we start considering legislation, not only to reform our pension laws
but to reform Social Security and the ability of individuals to have
private accounts, whether they are part of Social Security or
independent add-ons to Social Security.
So I think the discussion has changed somewhat.
The Democratic substitute provides for retirement savings accounts.
That will help low-wage workers. Let me indicate some of the problems
that we encountered as we worked on H.R. 1102. We were looking for ways
to help low-wage workers and to help young workers, because the truth
is young workers and low-wage workers are very difficult to get their
attention to put money away for savings. I am proud of the provisions
in the underlying bill that will help low-wage workers and will help
young workers, because the underlying bill encourages employers to
sponsor retirement plans and to use some of the same tools that we use
in the thrift savings by offering employer contribution to retirement
and to offer match by employer. That is good and that will help, and
that is why this is an important bill.
The RSAs go to the next step and say let us have the government as a
partner in providing incentives for particularly lower-wage workers to
set up their own retirement funds.
There is another important part to the Democratic substitute I would
like to mention, and that is the provision that deals with small
business, small business credits. It was actually in the Portman-Cardin
bill, H.R. 1102; and as has been pointed out in a little bit earlier
debate, I hope it does make its way into the bill as it works its way
through Congress. The gentlewoman from Michigan (Ms. Stabenow) first
introduced this bill, H.R. 1021, that provides this credit.
We have incorporated it in the Democratic substitute. It was in H.R.
1102, and I think it is an improvement to add an additional tool for
small business to set up pension plans. There is already important
provisions in H.R. 1102 that are going to help small business. This
improves it.
So, basically, the substitute is an improvement of the underlying
bill and spends a lot more money than the underlying bill that we did
not want to do when we originally looked at H.R. 1102. So I hope my
colleagues will look favorably upon this substitute. I think it does
provide a bridge for us to ultimately work out an arrangement with the
White House on tax legislation.
I hope regardless of how one feels on the Democratic substitute, and
I do hope that they will support it, I hope they will support the
underlying bill.
I think this legislation is extremely important. I think we can
improve it with the substitute; but regardless of what happens with the
substitute, I urge my colleagues to support the legislation so that we
can move forward to help secure retirement for those people when they
retire.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Florida (Mr. Foley), a member of the Committee on Ways and Means who
has been a leader on retirement security.
Mr. FOLEY. Mr. Speaker, let me first thank the gentleman from Ohio
(Mr. Portman) and the gentleman from Maryland (Mr. Cardin) for their
excellent work on this legislation that is important to all Americans.
Relative to the substitute retirement savings account, let me make
certain people understand this is a new proposal. This has not been
vetted yet. In fact, we first saw this proposal during markup and it
has since been modified so we are still trying to grapple with the
underlying assumptions that are made in the request.
The first we heard about it was the President's State of the Union
address and budget proposal. So we have a lot to work out before we
accept the substitute.
Let me again answer another claim that was made during debate
relative to IRAs. Low- and middle-income Americans use IRAs to save for
retirement. This is an absolute certainty. In fact, the median income
of new IRA contributors dropped from $41,277 in 1982 to $28,677 in
1986. The vast majority of taxpayers making IRA contributions are
lower- and middle-income
[[Page H6518]]
Americans. The inflation rate would have brought it to $5,000 today had
it been adjusted, but it has had one increase, one increase alone from
$1,500 to $2,000.
This very bill encapsulates an option to bring it up to $5,000, which
I think is significantly important.
One of the greatest fears most Americans have is will they have
enough savings and money to retire comfortably to take care of their
health care needs, purchase prescription drugs, do the things that are
required as one ages. This bill, a bipartisan bill, provides that kind
of opportunity.
Let me also underscore that there are 106 Republican co-sponsors and
94 Democrats, for a total of 200 Members of the House of
Representatives, that support this initiative. I am delighted today to
at least hear positive things about a bill in Congress coming out of
the Committee on Ways and Means. Oftentimes these bills we introduce
are derided as reckless and risky. Today, we are hearing a celebration
of bipartisanship on this floor talking about legislation that will
advance the opportunities of all Americans, and I celebrated that. I am
thrilled and delighted that this House finally has the common voice in
supporting legislation authorized and issued by the committee, and I
congratulate again the gentleman from Ohio (Mr. Portman) for his fine
work on this proposal.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 3 minutes to the
gentleman from California (Mr. Matsui), a senior and distinguished
member of the Committee on Ways and Means who is well known for his
work on retirement savings.
{time} 1200
Mr. MATSUI. Mr. Speaker, I thank the gentleman from Massachusetts for
yielding me this time.
I would like to congratulate the gentleman from Ohio (Mr. Portman)
and certainly the gentleman from Maryland (Mr. Cardin). They made a
good try and made a good effort on this legislation.
However, I have to say that there are fundamental flaws in this
legislation. First of all, it does make significant changes, although
the authors talk about technical changes, in the top-heavy rules and
the anti-discrimination rules. But these changes are actually
substantive changes and, in fact, what they will do is make it more
difficult for lower- and middle-income wage earners, employees, to be
able to get pension benefits.
In addition, statistically, a number of outside groups, because we do
not have a joint tax committee distribution table, but a number of
outside groups have said that the top 10 percent of the taxpayers will
get 62 percent of the benefits in this legislation, and that is taking
into consideration the additional employees that will be covered under
the original Portman-Cardin legislation. But this is not unusual,
because all of the tax bills that we have seen coming from my
Republican colleagues over the last 4 or 5 months have been basically
for upper-income folks anyway. So I would not make that as a major
argument. The marriage penalty and all of these others have been
basically for them.
But it is very important that if this legislation passes, and I
believe it will, that we add on the substitute provisions here. Because
at least then, it will help the distribution of where the benefits will
go and it will actually then, in fact, help wage earners and not the
top management employees or the employers themselves.
But nevertheless, this bill is a bill that if it is unchanged, is not
a good piece of legislation.
Let me just conclude by making one observation. There was an add-on
to this bill. Right now, people that want to have IRAs can have up to
$2,000 per individual per year on IRA accounts, individual retirement
accounts. This will increase that number to $5,000. So a couple will be
able to then put $10,000 a year into an IRA.
Now, I will tell my colleagues that there are not many Americans that
even put $4,000 a year into IRAs. This means that a small business
owner will probably say, I will just eliminate my entire pension
program, because why should I give to my employees and share my
profits? Why not just take two IRAs out at $5,000 each, husband and
wife, and essentially then, I can take care of my retirement and let my
employees deal with it themselves. So to a large extent, this
legislation will actually reduce, in my opinion, the opportunities for
small business to cover their employees. That is why this legislation
standing by itself is not a good piece of legislation. It will be
vetoed by the President if it stands by itself, and that is why this
substitute is so critical to make this legislation work and to make
sure that we take care of the average American taxpayer.
Mr. PORTMAN. Mr. Speaker, I yield myself 15 seconds to respond
briefly to my friend from California. The intent of this legislation
is, of course, just the opposite. It is to expand pension coverage to
small businesses. It is an interesting theory that he plays out; but if
we are to take the facts, it would be that that small business owner
could put $20,000 aside now, $15,000 plus $5,000 catch-up for himself
and if his spouse or her spouse is working, another $20,000. So it does
not seem to make much sense to shift over to the IRA. If we were just
increasing IRAs, the gentleman might have a good point.
Finally, of course, this goes to middle-income workers. We have
already talked about that, both on the IRA side and the 401(k) side.
Mr. Speaker, I yield 3 minutes to the gentleman from Ohio (Mr.
Boehner), the chair of the Subcommittee on Employer-Employee Relations,
who has been a leader in expanding pension coverage and reforming
ERISA.
Mr. BOEHNER. Mr. Speaker, let me thank the gentleman from Ohio (Mr.
Portman) and congratulate both him and the gentleman from Maryland (Mr.
Cardin) for their tireless work over the last 3 years of bringing this
bill to the floor.
Clearly, improving retirement security is a top priority this year,
as Congress works to secure America's future. But improving retirement
security is just not about fixing Social Security. It is also about
expanding access to private pensions and making innovations that will
maximize every American's opportunity for a safe and secure retirement.
I want to commend the gentleman from Texas (Mr. Archer) for his work
in crafting this bill along with the two authors and for all of his
efforts in this and past Congresses relating to retirement security and
improving our Nation's Tax Code to the benefit of all Americans.
Rarely has an ambitious legislation such as this earned such broad
support from the AFSCME and Teamsters and other labor unions, to the
U.S. Chamber of Commerce, the National Federation of Independent
Business and other folks in the private sector. As I said earlier, I
think it is a real tribute to the two authors, the gentleman from Ohio
(Mr. Portman) and the gentleman from Maryland (Mr. Cardin) and the work
that they have done.
The reforms in this bill will directly improve the retirement
security of millions of workers by expanding small business retirement
plans, allowing workers to save more, making pensions more secure, and
cutting red tape, that have hamstrung employers who want to establish
pension plans for their employees.
Mr. Speaker, H.R. 1102 was reported out of the Committee on Education
and the Workforce on July 14, 1999 with a bipartisan vote. Our
committee made amendments to the Employee Retirement Income Security
Act, or ERISA, as we know it, that complement the Tax Code provisions
that are on the floor today. And while the ERISA provisions were
removed by the Committee on Rules for procedural reasons, the gentleman
from Texas (Mr. Archer) has pledged to seek the restoration in
conference, and I thank the gentleman for this commitment and I look
forward to working with him to ensure enactment of H.R. 1102.
Mr. Speaker, we have a new world that we are living in today. As
people retire, they are living much longer than anyone had ever
anticipated; and if we want to make sure that people have safe and
secure retirements, they are going to need more assets than our parents
did when they retired. As a result, we all know about the three legs of
the retirement security stool: Social Security, private pensions, and
personal savings.
The bill we have before us today makes important strides in making
sure that people have safe and secure
[[Page H6519]]
private pension plans and expands access to them, especially by small
business owners. The incentives in this bill to expand the amount of
money that can be set aside for private savings is also very important.
Clearly, shoring up Social Security for the long term is something that
we know is going to have to be done in the next Congress.
Just today, Mr. Speaker, the subcommittee that I chair, the
Subcommittee on Employer-Employee Relations, moved out a bill that
would expand investment advice provided by employers to their
employees. It is another piece to this puzzle to help employees give
them all of the advice and effort that they need to maximize their
private pensions.
So I encourage my colleagues today to support the bill.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 4 minutes to the
gentleman from North Dakota (Mr. Pomeroy), whose work in pension
security is well known to all Members of this House. In fact, I would
submit that there are very few, if any, Members of this House that have
more knowledge on this issue.
Mr. POMEROY. Mr. Speaker, I rise in response to a preceding speaker
who said the Democrat substitute has not been vetted. It is based
essentially on a proposal known as First Credit which I introduced last
Congress and I introduced this Congress. We do not run the Committee on
Ways and Means, but there have certainly been proposals out there to
gear savings incentives to modest- and middle-income households to
accelerate the rate of savings, and any fair-minded look at the savings
issue in this country would identify that the lower-income, modest-
income, middle-income levels are having the harder time saving.
Let me just say about the underlying legislation, the problem is not
so much what is in it; the problem is what is left out. That is why the
Democrat substitute is additive, not detractive. It does not change the
underlying bill; it adds to it in a very important way, savings
incentives for families who need it.
We have learned that the underlying bill addresses workplace savings.
That is great, except half of the people in the workforce today have no
workplace savings, half have no workplace savings. As we get down to
lower levels of earnings, the percentage goes up. In fact, 70 percent
of workers earning under $15,000 have no workplace savings in the
workplace, 70 percent. Portman-Cardin will not relate to that group.
We know that the other second major component of the legislation is
the IRA, taking the IRA from $2,000 to $5,000. Treasury data tells us
that 93 percent of those eligible to use the tax deductible IRA, those
earning $50,000 and below, do not use it as of 1995. Mr. Speaker, 93
percent. It is used by only 7 percent.
So if a family cannot afford to save $2,000 a year, our response
saying, well, great, now you can save $5,000 a year is completely
ridiculous. It misses the point. They need additional help. That is
what our substitute offers, a tax credit on savings. For those income
eligible, we would match 50 percent of the contribution. I consider
this like an ``Uncle Sam'' match, much like an employer match on
savings incentives. You save $2,000, the IRA tax credit of $1,000,
matching your savings effort. I believe that this will accelerate
savings for those most needing to save.
This chart shows that savings rates is related to income. Twenty-
three percent earning between $15,000 and $25,000 are projected to be
saving enough for retirement, whereas well over 60 percent earning over
$100,000 are saving at the savings rate. We know that this tax credit
incentive on savings will work because it is modeled after the savings
incentive most effective in the marketplace, the 401(k) match. When
employers provide savings opportunities with no match, 65 percent save.
When there is a 50 percent match like this bill would provide, there is
a 78 percent response in saving.
As Members of Congress, we have access to the Thrift Savings Plan and
the Federal Government matches our savings contribution 100 percent on
the dollar. Do we not think it is only fair that we extend a match
opportunity to American workers who have no savings at the workplace
and no opportunity to save in light of sparse discretionary dollars.
This is a tax cut, but it is tax relief to those who need it most,
those earning up to $80,000 a year, struggling to save for retirement.
It is time we take this step. Last Congress we passed the Roth IRA, we
increased the limits on the spousal IRA. We did a lot of things for a
lot of people, but we did not do anything new by way of savings
incentives for those earning $50,000 and below.
Mr. Speaker, it is time we take this step, and that is what the
substitute is all about.
Mr. PORTMAN. Mr. Speaker, I yield 3 minutes to the gentlewoman from
Maryland (Mrs. Morella).
Mrs. MORELLA. Mr. Speaker, I thank the gentleman for yielding me this
time. I want to thank him and congratulate him for his diligent work
over a long period of time on this important legislation.
My accolades also to the gentleman from Maryland (Mr. Cardin) for the
work that he has done, the fine work in a very bipartisan manner.
I am a cosponsor of H.R. 1102, and I rise in strong support of it,
because it addresses the retirement savings gap by expanding small
business retirement plans, allowing workers to save more, addressing
the needs of an increasingly mobile workforce through portability and
other changes, making pensions more secure, cutting the red tape that
has hamstrung employers who want to establish pension plans for their
employees.
Mr. Speaker, we all know that incentives are necessary to increase
retirement savings for all Americans. Our savings rate is much too low
to ensure the retirement security of American families. Statistics
indicate that a typical household would need to triple its rate of
asset accumulation in order to finance its retirement. Simply put, the
current savings rate is not sufficient to fund retirement expenditures.
Even more alarming is that the U.S. personal savings rates dropped
6.3 percent of GDP in 1960 through 1980, to 4.1 percent in 1991 through
the first quarter of this year, 2000. We need to take action now. H.R.
1102 provides incentives for reversing this alarming trend.
Mr. Speaker, I want to point out something else that needs to be done
in this legislation. Unfortunately, the legislation does not address
the unfair situation which exists under current law in which Federal
employees are prohibited from saving for their retirement in the same
manner as private sector 401(k) plans. Currently, FERS employees can
contribute up to 10 percent of their salary with a government match of
up to 5 percent, and CSRS employees can invest up to 5 percent of their
salary.
For example, a FERS employee earning $35,498 per year may only
contribute $3,550 annually into his or her Thrift Savings Plan account,
while someone in the private sector earning the same amount may
contribute $6,450 more annually into their 401(k) account.
Mr. Speaker, I have introduced legislation, H.R. 483, the Federal
Thrift Savings Enhancement Act, which would eliminate that 10 percent
and 5 percent restrictions and allow all Federal employees to make TSP
contributions up to the IRS limit without changing the government
contribution. This is fair and equitable.
Mr. Speaker, I would hope that during the conference on this
legislation, our Federal workforce will be taken into consideration and
the provisions of H.R. 483 will be included in the final conference
report.
{time} 1215
It is important. It is equitable. Let us pass the bill and add that
provision.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 5 minutes to the
gentleman from Missouri (Mr. Gephardt), the highly effective minority
leader in this House.
(Mr. GEPHARDT asked and was given permission to revise and extend his
remarks.)
Mr. GEPHARDT. Mr. Speaker, I rise to argue that this reform bill is
in many ways a very good example of bipartisan legislation, and all of
us I think can agree that tax incentives for retirement savings are
needed, warranted, the right thing to do for our workers, and good for
our country in general.
But as currently written, I think this reform bill is flawed, or not
including
[[Page H6520]]
enough features that should be included, because it targets simply
those Americans who need incentives for saving the least: corporate
executives, managers, big business owners.
This legislation, as the Center on Budget Policy and Priorities wrote
recently, ``would substantially expand pension tax preferences for
high-income executives, but likely lead to reductions in pension
coverage among low- and moderate-income workers and employees of small
businesses.''
I am not opposed to helping upper-income Americans by raising the
ceilings on their annual IRA contributions. These men and women have
worked hard and deserve their piece of the pie. But I am very afraid
that with this bill, as with many of the tax-cutting measures that we
have seen in this Congress, we have lost sight of our principal
challenge and concern. We have lost sight of our goal to provide tax
relief for middle-income Americans and very small businesses, the men
and women who really deserve a real reduction in their income taxes.
The greatest failing of this bill is that it does little to encourage
retirement saving by lower- and middle-income workers, those Americans
who simply are not saving enough because they do not have enough to
save.
We have offered an alternative that we think addresses this
shortcoming and that rights the playing field so middle-income
Americans, not just the well off, receive the lion's share of
incentives to boost their retirement accounts.
We have offered an amendment, supported by the administration, that
will create retirement savings accounts in which the government will
give refundable tax credits to the retirement accounts of millions of
Americans.
Our amendment caps the level at which people can receive the tax cut
at $75,000, so that the bulk of the incentives to invest in retirement
accounts flow to the middle-income group. Our amendment provides tax
credits to small businesses of up to 50 percent of the start-up and
initial administration costs to set up businesses.
I have said many times in the last several weeks and I will say
again, I believe that all of us, Democrats and Republicans, can come
together, negotiate on the issues of taxes and spending, hammer out tax
cuts that help the vast majority of Americans, while making sure that
we address the issues that concern the American people the most: paying
down the debt, strengthening social security and Medicare, providing a
real prescription medicine reform, and sending the President a total
budget that he can sign.
I ask all of us to work together to amend this legislation so that it
truly benefits Americans most in need of tax relief; that we fashion
these other tax bills so that the President will sign them, and the
middle-income Americans and Americans trying to get in the middle class
will get the bulk of the help; and that we enact these other reforms,
like prescription drugs, medicine, a Patients' Bill of Rights, a
minimum wage increase, doing something that is sensible about gun
safety, trying to get smaller classroom sizes, which are the issues,
along with tax cuts, that really have attracted the interest of the
American people.
So I ask Members to vote for our alternative. Let us get a good piece
of legislation done that can get the support of the administration and
the bulk of the American people.
Mr. PORTMAN. Mr. Speaker, I yield myself 15 seconds.
I would like to say I agree with the minority leader, we need to work
on a bipartisan basis to come together. That is what we have done here
over the last 3 years. We have over 200 cosponsors, almost equally
divided.
Second, I want to assure him that we have indeed not lost sight of
the need to help middle- and lower-income categories. That is precisely
where we target this legislation.
Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from Arizona
(Mr. Hayworth), a member of the Committee on Ways and Means.
Mr. HAYWORTH. Mr. Speaker, I thank my colleague for yielding time to
me, and I thank my friends, the gentleman from Ohio (Mr. Portman) and
the gentleman from Maryland (Mr. Cardin), who have brought forth this
commonsense bipartisan piece of legislation.
Mr. Speaker, I listened with great interest to my friend, the
minority leader, and coincidentally, I want to wish him well in future
endeavors that may extend beyond this House, as the Vice President of
the United States may be looking for a partner in the upcoming general
election, and want to salute him for coming out with a poll-tested
speech.
Mr. Speaker, when all is said and done, I rise in opposition to the
Democrat alternative and rise in strong support of our bipartisan bill
with 200 cosponsors. I sympathize with the minority leader, because he
is finding himself in a situation where we have sought consensus and
compromise, we have come up with a commonsense piece of legislation
that encourages savings accounts, that protects and builds pension
plans.
So with this constructive piece of legislation, and now confronting
an election, what is a minority party to do? Well, of course, stand and
offer the curious paradox to say, we want cooperation, but this is not
good enough.
Therein lies the fundamental problem. We encourage personal savings
for every American. Our friends on the left in the substitute say, if
you are American, you exist; therefore, you are entitled. It is not
enough for one's personal initiative. No, the Federal government needs
to step in with a plan that, by the way, as cobbled together here, is
eminently unworkable. They ask their friends at the Internal Revenue
Service to stick their magnifying glasses and microscopes into the
affairs of Americans, because this very provision invites fraud. It
appeals to what is the wrong course of action for Americans.
We have a simple, straightforward plan. We strengthen pensions, we
build retirement savings accounts, and we do not set up a Rube
Goldbergesque machination of entitlement that over the next 10 years
will cost close to a quarter of a trillion dollars.
Support the underlying bill and reject the desperate Democrat
substitute.
Mr. PORTMAN. Mr. Speaker, I yield 4 minutes to the gentleman from
Illinois (Mr. Crane), the chairman of the Subcommittee on Trade and an
active member of the Committee on Ways and Means.
Mr. CRANE. Mr. Speaker, I thank the gentleman for yielding time to
me.
Mr. Speaker, I want to commend our two colleagues, the gentleman from
Ohio (Mr. Portman) and the gentleman from Maryland (Mr. Cardin), for
their work on this bill. This bill proves that Republicans and
Democrats can work together in a bipartisan way to achieve worthwhile
reforms.
I note that the ranking member of the Committee on Ways and Means
often urges us to work together in a bipartisan way, and I appreciate
that input from him. I am hopeful that he, too, will strongly support
this bill.
This bill also proves that it can sometimes take more than one try to
get important legislation passed. Members may have a sense of deja vu
because we enacted this bill last year, only to have the President veto
it. I hope this year he is able to sign this bill when it comes to his
desk.
This is important legislation, Mr. Speaker, for at least two other
reasons. The first is that we must do everything we can to encourage
savings in America. The figures say our private savings rate is very
low. I suspect it is lower than it should be. But I am sure we would be
better off saving more than we do.
One way to do that is through fundamental tax reform, and that is
just not in the cards right now. I hope we can focus on fundamental
reform before long, perhaps with a change in administration.
In the meantime, by rationalizing the laws relating to pensions, by
making it easier for businesses, and especially small businesses to
establish and maintain pension plans for their workers, this bill will
encourage more businesses to establish pension plans and it will
encourage more workers to participate. In the end, I believe private
saving will result as a consequence.
I also believe private saving will increase through the increase in
the contribution limits on individual retirement accounts to $5,000.
For individuals who do not have the benefit of an employer-based
pension system this is terribly important. It is also, I would point
out, a baby step towards tax reform.
[[Page H6521]]
Why is that so important? Why is it so important that individuals
save more? First, savings is the key to acquiring wealth. It is the key
to financial security to us as individuals. Financial security enhances
our sense of personal freedom.
Second, the level of saving in America also goes a long way towards
determining who owns the Nation's capital stock: the land, buildings,
the plant, and equipment.
We have a very high rate of investment right now that has contributed
mightily to our rapid rate of economic growth. If Americans do not save
enough to fund this capital expansion, then our open economy and
advanced capital markets permit us to lure foreign savings to make up
the difference.
That is the good news. We can import the capital, the foreign savings
necessary to keep our rate of investment high.
The bad news is that that means that foreign savers reap the lion's
share of the benefits from that investment. If Members want a sense of
the magnitude of this effect, just look at our persistent and high
trade deficit. Our trade deficit represents the flip side in the
balance of payments to all of the capital we are importing from abroad.
As we find ways to increase our rate of savings at home, at the very
least we help Americans to own a greater share of the capital stock
driving our economy.
The second reason this bill is so important is because it strengthens
the private pension leg of our national pension system at a time when
the public leg of that system, social security, is under a cloud.
We have heard about the troubled financial State of social security
many times in the Committee on Ways and Means. Fortunately, we have the
lockbox in place to keep the Congress from its former practice of
spending the American workers' payroll taxes on anything but paying
social security benefits. The lockbox performs a function very much
like the medical profession's dictum: First, do no harm.
The first step towards restoring social security's financial
soundness is to keep Washington from spending payroll taxes on other
programs. The lockbox achieves that goal. But beyond that, once again,
it appears we must wait for the next administration to take on social
security reform.
Until then, and even after we have enacted social security reform, we
must do everything we can to strengthen the private pension and savings
system. That means eliminating unnecessary rules and regulations and
other accumulated barnacles that have attached themselves to this part
of the tax law.
I want to thank our two colleagues for undertaking the hard work
necessary to bring this to the floor, and urge our colleagues to
support it.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 2 minutes to the
gentlewoman from New York (Mrs. Maloney), who is well known for her
work on retirement savings.
Mrs. MALONEY of New York. Mr. Speaker, I rise in support of the
Democratic substitute, which would more fairly distribute the benefits
to lower-income people, but also for the underlying comprehensive
reform legislation.
Mr. Speaker, we all know that our population is graying. Fifty years
from now, more than 80 million people will be over the age of 65. In
order to help retirees in the near term and many decades from now, it
is critical that we provide them the maximum flexibility to supplement
social security.
While President Clinton's plans to dedicate surplus money to social
security and Medicare are an important step in preserving these
programs for the long-term, individuals should have a range of options
for their retirement savings.
This is especially true and important for women. Sixty percent of
social security beneficiaries are women. Women are heavily reliant on
social security benefits because women earn less than men and because
they spend less time in the work force. Women live, on average, 7 years
longer. Less than one-third of all women retirees over age 55 receive
pension benefits, yet the typical American woman who retires can expect
to live approximately 19 years longer.
Women often choose to take time out of their working careers to
attend to their families. This bill will allow them to catch up on
their pension contributions and increase the yearly amount they can
contribute to IRAs and 401(k) plans to make up for lost time, up to an
additional $5,000 per year.
I strongly support the fair Rangel substitute and urge my colleagues
to support it, and the underlying bill.
{time} 1230
Mr. PORTMAN. Mr. Speaker, I yield 3\1/2\ minutes to the gentleman
from California (Mr. Thomas), another distinguished member of the
Committee on Ways and Means, chairman of the Subcommittee on Health,
who has been very active on the IRA front for many years.
(Mr. THOMAS asked and was given permission to revise and extend his
remarks.)
Mr. THOMAS. Mr. Speaker, first of all, the fact that we are on the
floor today with a bipartisan proposal to reform the pension and the
individual retirement accounts is quite an accomplishment, and I want
to compliment the gentleman from Ohio (Mr. Portman) and the gentleman
from Maryland (Mr. Cardin). It has been more than 20 years since we
made an adjustment in this important savings area.
I heard the gentleman from North Dakota (Mr. Pomeroy) say that the
substitute had been looked at and that it was thoroughly understood. I
do have to say it is fundamentally different than the President's
initial offering. In fact, it is substantially different than the
offering that the Democrats have presented in the Committee on Ways and
Means just last week.
Last week's offering cost $225 billion over 10 years on top of the
fund. This one only costs $105 billion over 10 years. In one narrow
particular area, the refundable credit, which was not in the
President's initial budget proposal, cost $35 billion. So it is
substantially different. It has not been aired in committee as this
bipartisan proposal has.
I heard the minority leader say that this plan simply did not treat
low-income people fairly. Well, I know the gentleman from Maryland (Mr.
Cardin), I know the gentleman from Maryland (Mr. Wynn), I know the
gentleman from Kansas (Mr. Moore), I know the gentleman from Tennessee
(Mr. Tanner), I know the gentlewoman from Florida (Mrs. Thurman), and I
know the more than 100 Democrats who cosponsor this proposal. They
would not cosponsor this proposal if it did not treat low-income people
fairly.
Now, I heard my friend from California give my colleagues an example
of what would happen under this bill with the expanded IRAs and that,
in fact, the employers, while looking out for their self-interest,
could in fact damage the savings interest of their employees. The
response we heard from the cosponsor was I think significant, and I
want to make sure everyone understands it.
This is a bipartisan proposal, precisely because, under all aspects
of the bill, the employers maximize their benefit by utilizing all of
the portions of the bill; and in pursuing their self-interest and
maximizing it, it in fact maximizes the employees' savings
capabilities.
It is the way in which this proposal is integrated that makes it
really superior. It is the product of the bipartisan working
relationship. It is the best of what this House does.
As far as the veto threat, around here we learn to read the tea
leaves, and the tea leaves are very clear. The message was very clear,
it did not say veto. It does not say veto. Treasury is trying to buy
leverage. As a matter of fact, once this moves out of here with the
bipartisan majority and off the floor of the Senate, the President does
not dare veto this piece of legislation because the last thing he wants
is an override of his veto.
The way this piece of legislation was put together, frankly, the
House owes a debt of gratitude to the gentleman from Ohio (Mr. Portman)
and the gentleman from Maryland (Mr. Cardin) and all of those who have
worked together to make these changes. They are long overdue. They are
much appreciated. It fits our needs today.
Vote no on the substitute, vote yes on H.R. 1102, and send the
President a message. This Congress is working, and it is working for
the American people in a bipartisan way.
[[Page H6522]]
Mr. NEAL of Massachusetts. Mr. Speaker, I yield myself such time as I
may consume.
Mr. Speaker, let me reiterate quickly, Secretary Summers has told me
in a phone conversation he will recommend a veto of this legislation as
currently proposed if it goes to the President's desk.
Mr. Speaker, I yield 2 minutes to the gentleman from Vermont (Mr.
Sanders), who worked on a recent pension case in the State of Vermont
who has been an inspiration for all of us.
(Mr. SANDERS asked and was given permission to revise and extend his
remarks.)
Mr. SANDERS. Mr. Speaker, I thank the gentleman from Massachusetts
for yielding to me.
Mr. Speaker, I rise in opposition to H.R. 1102. This bill is being
touted as a package of pension provisions designed to increase pension
benefits for Americans; yet some of the pension provisions included in
the bill are simply new tax breaks that mostly accrues to the
wealthiest Americans and may have the effect of slashing the pensions
of lower- and middle-income families.
Mr. Speaker, if Congress is really concerned about protecting the
pensions of American workers, it should quickly address the cash
balance pension rip-off scheme being implemented by hundreds of large
corporations all over this country.
Since 1985, despite large profits and growing surpluses in their
pension funds, over 300 companies have slashed the retirement benefits
that they promised their employees. Cash balance schemes typically
reduce the future pension benefits of older workers by as much as 50
percent. Not only is this immoral, it is also illegal, because the
reductions in benefits are in violation of Federal age-discrimination
laws.
What makes the conversions even more indefensible is the fact that
many of these companies have pension fund surpluses in the billions of
dollars, and these surpluses have grown significantly in recent years.
Frankly, it is simply unacceptable that, during a time of record-
breaking corporate profits, huge pension fund surpluses, massive
compensations for CEOs, including, interestingly, very generous
retirement benefits, that corporate America renege on the commitments
that they have made to workers by slashing their pensions.
Last year, I held a town meeting in Winooski, Vermont, for IBM
workers, the older IBM workers who had seen their pensions cut by as
much as 50 percent. Over 700 older workers came out and expressed their
outrage at what the company had done. I congratulate the IBM workers
and look forward to working with them.
Mr. Speaker, I rise in opposition to H.R. 1102. This bill is being
touted as a package of pension provisions designed to increase pension
benefits for Americans. Yet some of the pension provisions included in
the bill are simply new tax breaks that mostly accrue to the wealthiest
Americans and may have the effect of slashing the pensions of lower and
middle income families.
Last November, Treasury Secretary Summers and Labor Secretary Herman,
criticized these pension provisions, saying that they ``could lead to
reductions in retirement benefits for moderate and lower-income
workers.''
Mr. Speaker, if Congress is really concerned about protecting the
pensions of American workers it should quickly address the cash balance
pension rip off scheme being implemented by hundreds of large
corporations all over this country. In fact if this Congress is really
concerned about protecting the pensions of American workers it should
pass H.R. 2902, the Pension Benefits Preservation and Protection Act,
legislation that I authored and that now has a total of 84 co-sponsors.
Mr. Speaker, all across this country, American workers are deeply
concerned about the status of their pension plans. That concern is well
founded. Since 1985, despite large profits and growing surpluses in
their pension funds, over 300 companies have slashed the retirement
benefits that they promised their employees. Cash balance schemes
typically reduce the future pension benefits of older workers by as
much as 50 percent. Not only is this immoral, it is also illegal
because the reductions in benefits are in violation of Federal age
discrimination law. What makes the conversions even more indefensible
is the fact that many of these companies have pension fund surpluses in
the billions of dollars and that have grown huge in recent years.
Frankly, it is simply unacceptable that during a time of record
breaking corporate profits, huge pension fund surpluses, massive
compensation for CEOs (including very generous retirement benefits),
that corporate America renege on the commitments that they have made to
workers by slashing their pensions.
Last summer, I held a town meeting in Vermont for IBM workers who
live there. Seven hundred came out.
According to the Office of Management and Budget, corporations
currently receive $100 billion a year in federal government subsidies
through the tax code by offering pension plans. American taxpayers have
a right to expect that corporations who take advantage of this special
tax treatment will not slash the pensions of American workers.
Yet, hundreds of corporations throughout the country from IBM to AT&T
are doing just that by converting their traditional defined benefit
pension plans to these cash balance schemes.
Cash balance schemes are nothing but a replay of the corporate
pension raids we experienced during the 1980's. While these companies
claim that they are converting to cash balance plans to attract younger
workers into their workforce, the fact of the matter is that cash
balance plans are intentional attempts to slash the pension benefits of
older workers.
The reason why large corporations are targeting their older workers'
pensions is easy to understand. Millions and millions of Americans in
the so-called ``baby boom'' generation are rapidly approaching
retirement age. Companies that reduce the pensions of older workers
will thus realize tremendous cost savings when these people retire.
Companies claim that they are converting to cash balance schemes to
attract a younger, more mobile workforce. But, worker mobility is not
the rationale for converting to a cash balance plan, money is. As
11,000 people a day turn 50, which cash balance promoter Watson Wyatt
claims will turn us into a ``Nation of Floridas,'' employers are
looking for any way possible to reduce older workers' promised
benefits. This is outrageous.
But, what is even more outrageous is that they are not being honest
to the employees whose pensions they are slashing. As Joseph Edmunds
stated at a 1987 Conference of Consulting Actuaries, ``It is easy to
install a cash balance plan in place of a traditional defined benefit
plan and cover up cutbacks in future benefits.''
Despite the protestations of cash balance promoters, cash balance
schemes are implemented to unlawfully cut the benefits of older
employees and to disguise those cuts by implementing a plan that makes
it virtually impossible for employees to make an ``apples to apples''
comparison of their benefits under the old and new plans.
Not only does the federal government need to enforce the laws that
are on the books, Congress also must pass meaningful pension
protections right now. That is why I introduced H.R. 2902. This
legislation would primarily do three things:
(1) It would send a directive to the Secretary of Treasury to enforce
the laws that are already on the books;
(2) It would provide a safe harbor making cash balance plans legal
only if employees are given the choice to remain in their old pension
plan with detailed disclosure; and
(3) It would provide a major disincentive for companies to slash the
future pension benefits of employees.
Mr. Speaker, H.R. 2902 would provide meaningful pension protection to
millions of Americans, unlike the current bill being considered right
now. My legislation is being supported by the Pension Rights Center,
the National Council of Senior Citizens, the Communications Workers of
America, the IBM Employees Benefits Action Coalition, and several other
groups. I urge my colleagues to defeat H.R. 1102, and work with me to
pass real pension protection.
Mr. PORTMAN. Mr. Speaker, I yield 3 minutes to the gentleman from
Louisiana (Mr. McCrery), a colleague on the Committee on Ways and Means
who has been actively involved and a leader on this issue of expanding
retirement savings.
Mr. McCRERY. Mr. Speaker, I thank the gentleman from Ohio for
yielding me this time, and I commend him on his efforts as well as
those of the gentleman from Maryland (Mr. Cardin) in a bipartisan
effort to improve pensions in this country.
The gentleman from Vermont (Mr. Sanders) spoke about the cash balance
programs, and it just so happens that the gentleman from Maryland (Mr.
Cardin) and the gentleman from Ohio (Mr. Portman) recognize that there
are some problems with those, and they call for full disclosure and
transparency in those programs. The gentleman from Vermont ought to be
supporting this bill.
Mr. SANDERS. Mr. Speaker, will the gentleman yield?
[[Page H6523]]
Mr. McCRERY. I am glad to yield to the gentleman from Vermont.
Mr. SANDERS. Mr. Speaker, there are tens of thousands of IBM workers
and millions of other workers who have seen significant reductions as
the result of the conversion to cash balance. What will this
legislation do for any one of those people?
Mr. McCRERY. Mr. Speaker, reclaiming my time, if the gentleman from
Vermont would allow me to reiterate that this bill does provide for
accounting disclosure of every parcel of those plans so that those
employees will have access to the information that they have not had
access to in some of those situations that the gentleman from Vermont
presents. So while this bill may not do everything the gentleman wants,
it certainly improves the situation, and he should support that. But
the gentleman from Vermont certainly should take some solace in the
provisions that are in this bill.
The substitute, on the other hand, is something that this House
should not support for a couple of reasons. Number one, it has not been
properly vetted. It was sprung on the Committee on Ways and Means for
the first time last week, and today we have an even different version
from that that was sprung on the Committee on Ways and Means just last
week.
It doubles the cost of the underlying bill, the new substitute does.
The version that was sprung on us last week actually increased the cost
by four or five times. Today's version only doubles the cost of the
underlying bill.
The substitute is patterned after the earned income tax credit. Now,
while I support the EIC, we should know that, before we create yet
another program based upon that concept, that the Taxpayer Advocate's
1999 Annual Report to Congress identified the refundable earned income
credit as one of the most serious problems facing taxpayers and the
Internal Revenue Service in terms of its complexity, compliance, and
litigation associated with it. Surely we do not want to double the
problems with the IRS by creating a new program based on that concept.
Number two, this proposal would give refundable tax credits only to
people who cannot afford now to put part of their salaries forward. So
it really would have no effect. It would not help those folks at all.
This substitute, while well-intentioned is wrong headed. They came up
with it very quickly to try to obfuscate the issue, try to detract
attention from the fact that this is a bipartisan proposal. If the
President wants to veto this, shame on him. We are finally doing what
he asked us to do in a bipartisan way. He ought to sign it.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 3 minutes to the
gentleman from New York (Mr. Rangel), the distinguished leader of the
Democratic members on the Committee on Ways and Means. He is very
effective.
(Mr. RANGEL asked and was given permission to revise and extend his
remarks.)
Mr. RANGEL. Mr. Speaker, the gentleman from Louisiana (Mr. McCrery),
the previous speaker, said, if the President intends to veto this,
shame on him. This really shatters the whole concept of the
bipartisanship which the gentleman from Ohio (Mr. Portman) and the
gentleman from Maryland (Mr. Cardin) had tried and continue to try to
bring to this House.
Whether the majority likes it or not, the President of the United
States is a part of the equation. When he presented the retirement
savings accounts to this Congress, it would seem to me that the
majority, as well as the minority, should at least look at these
concepts and to see what could be worked out for true bipartisanship.
The whole idea that people would complain that the substitute had not
passed the committee when, even yesterday, we had budget issues coming
to the floor for votes that did not even come to the committee, this
whole idea that Committee on Ways and Means issues and tax issues
should come before the Committee on Ways and Means is relatively new. I
thought my colleagues just went to the Committee on Rules for these
issues to be before us.
But I am convinced that those who put this bill together, if they had
any idea that we would have the type of cash flow, the type of
surpluses that are available today, when they put together their bill,
that it would have been more expansive, and they would have concerned
themselves with those group of Americans that do not have disposable
income in order to have pensions.
We have less than one-third of those small business people that have
any pensions at all. Yet, two out of five of every working people work
for small businesses.
The Social Security system was not created to be a pension. It was
created to supplement a pension. So while work has been done to be of
assistance to those in the higher income tax brackets, what this does
is provide incentives, not only for employees, but it provides an
incentive for small employers to be able to do what they would want to
do for the employees and, therefore, would enhance and supplement the
Social Security benefits.
So the substitute takes into consideration the fine work that has
been done by our colleagues and just broadens it to enhance those
people who, by any standard, have been excluded from the bill that is
before us.
So I ask my colleagues to support the substitute; and I also ask
them, when they think in terms of bipartisanship, would they please
include my President.
Mr. PORTMAN. Mr. Speaker, may I inquire how much time is remaining on
each side.
The SPEAKER pro tempore (Mr. Simpson). The gentleman from Ohio (Mr.
Portman) has 7 minutes remaining. The gentleman from Massachusetts (Mr.
Neal) has 3 minutes remaining.
{time} 1245
Mr. PORTMAN. Mr. Speaker, I yield 1\1/2\ minutes to the gentleman
from New York (Mr. Fossella).
(Mr. FOSSELLA asked and was given permission to revise and extend his
remarks.)
Mr. FOSSELLA. Mr. Speaker, I applaud the gentleman from Ohio (Mr.
Portman) and the gentleman from Maryland (Mr. Cardin) for pursuing this
legislation because it is truly of benefit to the American people.
And the distinctions are very clear, as I see it, because we believe
that individuals should have more power, more freedom, and more
opportunities to save for their retirement. This legislation allows
individuals to do so.
We believe that creating wealth for Americans and their families, for
their retirement, are good things. This legislation allows those
Americans to do so.
We believe that small business owners who want to create pensions for
their employees to keep them with them so that they and their employees
can save for their retirement, should be able to do that effectively.
This legislation allows them to do so.
We believe that firefighters and police officers who want to save a
little bit more each year for their retirement, for themselves and
their families, should have the opportunity to do so. This legislation
allows them to do it.
Yes, we give to Americans the power, the freedom and the opportunity
to save a little more if they want to. That is what this Nation is all
about. And I think that is what this legislation attempts to do and,
indeed, does.
With that, Mr. Speaker, I compliment all those Members, Democrats and
Republicans, who give Americans more power to save for their
retirement.
Mr. PORTMAN. Mr. Speaker, I yield 30 seconds to the gentleman from
California (Mr. Royce).
Mr. ROYCE. Mr. Speaker, I thank the gentleman for yielding me this
time.
Mr. Speaker, clearly Social Security alone is not enough for
retirement in relative comfort today. The private pension system is an
indispensable part of retirement security, and this underlying bill,
which I have been proud to coauthor, would give American workers more
tools to prepare for a better future.
The pension reforms we are considering today will help individuals to
save more for retirement. Increased pension portability will allow
workers to roll over their pension savings between plans when they
change jobs. And streamlined rules and regulations would make it easier
for small businesses to offer pensions.
If these changes are enacted, they will give millions of American
workers better tools to prepare for retirement.
[[Page H6524]]
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
Missouri (Mr. Blunt), who put together his own legislation, which was
very popular here in the House. He had a number of cosponsors for the
Blunt-Bentsen legislation on expanding small business retirement plans.
I thank the gentleman for his contributions to this effort.
Mr. BLUNT. Mr. Speaker, I thank the gentleman for yielding me this
time and for his great work, as well as the work of the gentleman from
Maryland (Mr. Cardin) on this bipartisan legislation for retirement
security.
I also want to thank the gentleman from Texas (Mr. Archer) for seeing
that this bill gets to the floor. It makes a difference for the future
of Americans.
I want to thank the gentleman from Texas (Mr. Bentsen), who joined me
2 years ago to come up with legislation that really tried to fill the
gap for small business in America, small business and their employees,
who really had been left out of retirement security.
Today, as we talk about this bill, 84 percent of all Americans who
work for employers with 1,000 or more employees have access to
employer-sponsored pension plans. Sixty-nine percent of people who work
for employers that have between 100 and 1,000 employees have access to
pension plans. Only 42 percent of people who work for employers who
have fewer than 100 employees and only 17 percent of small businesses
that have fewer than 25 employees have access to a pension plan.
As America gets more focused on retirement security, as Americans
understand that that has to be a combination of personal savings and
Social Security and a pension, they are more and more concerned about
working somewhere where that pension is available. We have kept small
business, the engine that runs America, out of the pension environment.
This bill removes many of the obstacles. This bill makes it possible
for employers of a few people to have the same kind of access to long-
term retirement security that mega corporations have today.
It is unfair for an employer in Joplin, Missouri or Springfield,
Missouri that has 20 hard-working employees, the people who work to
make that business a reality, to not have access to pensions. That
happens with this bill.
This is an important bill, and I urge my colleagues to vote for H.R.
1102. This is a giant step for retirement security in America. It is a
giant step for small business. It is a giant step for those who would
like to see their own IRA have a meaningful annual contribution.
This legislation creates significant new opportunities for small
businesses and individuals to establish retirement security plans. It
does so by expanding small business retirement plans, such as
unnecessary regulations and expenses. This bill also increases the
limit on IRA's from $2,000 to $5,000, which is a long overdue updating
of a limit set almost 20 years ago.
I feel fortunate that I've had the opportunity to work closely with
Congressman Portman and Congressman Cardin on the provisions of this
bill that specifically affect small businesses. In fact, H.R. 1102
includes several key features from legislation I introduced, H.R. 352,
the Blunt/Bentsen Retirement Plan.
Why do small employers offer retirement benefits so less frequently
than their larger counterparts? According to the 1998 Small Employer
Retirement Survey conducted by the Employee Benefit Research Institute
Research Institute, small businesses do not offer retirement benefits
because, among other things, their revenue stream is too uncertain to
commit to a plan, because their employees prefer immediate wages or
other benefits, and because plans are too complex and expensive to set
up and maintain. In exchange for the tax benefits of an employer
sponsored retirement plan, current law imposes myriad requirements on
employers. Unfortunately, the complexity of these requirements make the
cost of administering these plans prohibitively expensive for small
employers.
H.R. 1102 includes several key provisions that address this problem.
Under current law, an employer's contributions are effectively limited
to 15 percent of the employer's payroll because contributions in excess
of 15 percent are nondeductible and subject to a 10 percent excise tax.
H.R. 1102 increases the limit on an employer's deduction for
contributions to a defined contribution plan from 15 percent to 20
percent. This will enable employers to provide more generous benefits
to employees and reduce the need for complex two-plan arrangements.
H.R. 1102 also increases the amount that can be contributed on behalf
of individuals to $40,000 or 100 percent of pay and provides regulatory
relief to encourage small businesses to offer plans. Employer sponsored
retirement plans are good for employees because they are proven to be
among the most effective ways for individuals to accumulate retirement
savings. They are good for employers because they help them to attract
and retain workers they need to remain competitive in the global
economy. These statements do not apply only to multi-national
corporations and their employees; they are every bit as relevant for
the small manufacturer in Joplin or Springfield, Missouri and their 20
hard-working employees. Unfortunately, whether or not a particular
individual has access to a retirement plan depends a great deal on the
size of his employer. H.R. 1102 is a giant step toward correcting this
inequity and I urge my colleagues to support this legislation.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield 2 minutes to the
gentleman from Connecticut (Mr. Gejdenson), the very erudite gentleman.
Mr. GEJDENSON. Mr. Speaker, I thank the gentleman from Massachusetts
for yielding me this time and for his generosity.
It is astounding to me, when we listen to this debate, where the
division is once again. There is no debate about the underlying bill.
And what has been ignored by our colleagues on the Republican side of
the aisle again is whether, in this time of great surpluses thanks to
the Clinton-Gore economic plan, whether we are going to be able to get
a few resources for the poorest of the poor, for women, and for small
businesses. That is the real debate.
It is kind of like the pension debate. The Democrats were ready to
give $4 million estates tax exempt. On the Republican side they had to
go to Bill Gates, $70 billion tax exempt. It was not enough that Bill
Gates would pass his kids $35 billion, he had to go to $70 billion.
We are not arguing with helping people who are better off in this
society and making it easier for people who own the companies to do
better in pensions. What we are frustrated by is the failure to support
the chairman and the gentleman from Massachusetts by reaching out to
the poorest of the poor, to working poor people; making sure that those
who have the least in this society get a little bit of assistance.
For a long time the Reagan-Bush deficits prevented us from having the
resources to do that job. Now, with the fiscal situation we are in
today, we have some resources. Yes, we ought to use some of those for
upper-income people, to give them a break, but why can we never seem to
have enough money at the table to take care of women, who are working
often in places without pensions; why can we not provide some
assistance to the smallest businesses to provide pensions for the
poorest people, to make sure those who are at the bottom of the
economic ladder get some benefit out of this society?
It seems to me to be clear that the gentleman from Massachusetts and
the ranking member, soon hopefully to be chairman of this committee,
offer an opportunity to make sure that we take care of average people
and working people to some small degree.
Mr. NEAL of Massachusetts. Mr. Speaker, I yield myself the balance of
my time.
Mr. Speaker, we do not object to the legislation necessarily that has
been proposed here. We believe that the amendment that we have offered
can actually strengthen this legislation.
I think the gentleman from Connecticut (Mr. Gejdenson) adequately
summed up the arguments that we offer. If an individual is willing to
go to work in America, they ought to be in a pension system. That is
precisely what our legislation, my amendment, proposes to do.
This is a decent start that has been offered here today. We can
improve this legislation, thereby providing an opportunity for people
who do get out of bed every morning and go to work to have pension
rights.
It is our argument today, based upon the evidence in front of us,
that the legislation as proposed does not go far enough. We speak to
those in the middle-income range, we speak to those in the lower-income
range based upon the notion that if an individual goes to work, they
ought to have pension rights. In the end, that is what our proposal is
all about. That is what our substitute stands for.
[[Page H6525]]
We have had a good debate today; a clarifying debate. We think our
substitute stands up under the magnifying glass. While we believe the
legislation proposed is a good start, it is simply not enough.
Mr. Speaker, I yield back the balance of my time.
Mr. PORTMAN. Mr. Speaker, I yield myself the balance of my time.
I would like to start by thanking the gentleman from Massachusetts
for a good debate today and thank him for his support of the process
and saying a moment ago that he thinks the underlying legislation is a
good start and that he does not necessarily oppose it. He would like to
add to it.
I want to tell him that I share his concern about those lower- and
middle-income workers who are not saving enough for their retirement.
We think we address that here.
The previous speaker from Connecticut talked about how we are trying
to help Bill Gates. Let me tell my colleagues who we are trying to
help. Seventy-seven percent of pension plan participants make less than
$50,000 a year. Seventy-seven percent of them. The average salary of
someone who contributes to an IRA is less than $30,000 a year.
Those are precisely the people who are going to be helped most by
this legislation; workers making between $15,000 and $50,000 a year
benefit most from pension plans. They get two-thirds of pension
accruals, even though they pay only about one-third of Federal taxes.
These are the folks we are going to help with this underlying
legislation.
Now, the substitute is before us. And again I share the concern that
the gentleman has addressed. We think we address the problem that he
states. But let us look at the substitute, because we do not know much
about it yet. It came at the committee markup level, it has been
changed a little, and now it is on the floor. We know it doubles the
cost of this legislation.
It is interesting, as a Republican, for me to be talking about the
cost of tax provisions, because the Democrats have been saying all
year, these tax relief proposals are too costly. We cannot afford to do
it because we have to save Medicare, Social Security, and so on. But
here they are doubling the cost of a tax bill. But my more fundamental
concern with it is we just do not know how it would work.
Let me give an example, and it has been talked about a little today.
If an individual was to take advantage of this new government program
and have the government contribute a 100 percent match into that plan,
then that individual could take that money out the next year. And we do
not know that there is a mechanism to keep that person from doing that;
or, if there is, how it could be administered by the Internal Revenue
Service.
We talked about the fraud in existing refundable tax credit programs.
We have a concern about that. Is it administrable? It is something I
would love to sit down with the gentleman and work out with him. I
would love to sit with the Treasury Department and work on it. This has
not been vetted.
In contrast, the underlying bill before us has gone through a 3-year
bipartisan process, reaching out across the spectrum from labor unions
to small businesses to put together something that is really going to
work in the real world to expand pension coverage and IRA coverage for
those middle-income and lower-income workers we talked about a moment
ago. Those are precisely the people who will benefit from this.
Yes, it is important to backstop Social Security. Yes, it is
important to increase the savings rate in this country that is at an
all-time low. But it is most important of all to give American workers,
particularly those baby boomers who have not saved enough, more
security in their retirement. This underlying legislation does it. It
provides for that comfort level in retirement; that peace of mind in
retirement.
I ask my colleagues to oppose the Democrat substitute; to stick to
the real thing, and vote for H.R. 1102.
Mr. KENNEDY of Rhode Island. Mr. Speaker, I rise today in support of
the Democratic substitute to the underlying bill.
I want to commend the hard work and efforts of the authors of the
bill we have before us today.
I also want to thank the authors of the Democratic substitute, and
the ranking member of the committee, Mr. Rangel, a champion for
retirement security and the preservation of our Social Security system.
It is no secret that many families have great difficulties setting
aside even nominal amounts in savings accounts or other means of asset
development. Most families are living paycheck to paycheck and at the
same time that many families are struggling, there is a high
correlation between income levels and the ability to save.
Reports show that fifty percent of American households have total
financial assets of $1000 or less; and that half of American families
have less than two percent of America's net financial assets.
The Congressional Research Service notes that 60 percent of Americans
have no other retirement plan than Social Security.
Today, I would have liked to offer an amendment to the bill,
providing the support of the Congress for increasing individual savings
and investment, with specific notice given to the needs of lower income
families, and the support of the Congress for moving forward
legislation that will encourage education and opportunity in the area
of personal savings and investment.
Unfortunately, under the closed rule that we were given, I did not
have an opportunity to offer this amendment, but the Democratic
substitute that we are debating allows for a vote of these principals.
The Democratic substitute provides assistance to low and middle
income workers and gives small business employees eligibility for
credits on their retirement plans.
This would help level the playing field in the area of retirement
security.
This is important because, in the last decade years we have witnessed
the emergence of a new wealth gap in America which threatens our sense
of fairness and our fundamental tradition of equal economic
opportunity. The division is largely between those who have savings and
investment and those who don't.
The Retirement Savings Account proposal that was included in the
substitute, is designed to provide incentives for low and middle income
workers to save or add additional money to their investment plans. In
addition to this very necessary effort, we need to move forward with
further legislation that will address the special need to close the
income gap through facilitation and education on personal savings and
investment.
The American Dream for many families revolves around the future of
their children. They want their children to be able to receive higher
education, own a home or a business, and certainly have retirement
security. Yet, this creates a dilemma, because while meaningful savings
are required to attain the American Dream, as many as two out of three
Americans are shut out from this opportunity.
One way to make the American Dream more accessible is to increase
wages and assure livable incomes. That is why I so strongly support our
public schools and education reform. But this will get us only part of
the way.
I strongly believe that we need to pass an equity and assert rights
act that is modeled after the Full Employment Act of 1946. After World
War II, Congress understood that we needed to create the national
opportunity for all Americans to have a decent job. As we head into the
21st Century, we need to understand the importance of savings--so that
all Americans can have a stake in the earning power of America's future
economic growth.
In short, if we enable families to save and invest, we facilitate the
economic freedom that will allow all Americans to afford higher
education, buy a home, and have security in their senior years.
I urge all my colleagues to vote for the substitute, which ensures
that all Americans are given a chance at greater retirement security.
Mr. PORTMAN. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Simpson). Pursuant to House Resolution
557, the previous question is ordered on the bill and on the amendment,
as modified, offered by the gentleman from Massachusetts (Mr. Neal).
The question is on the amendment in the nature of a substitute, as
modified, offered by the gentleman from Massachusetts (Mr. Neal).
The question was taken; and the Speaker pro tempore announced that
the noes appeared to have it.
Mr. NEAL of Massachusetts. Mr. Speaker, I object to the vote on the
ground that a quorum is not present and make the point of order that a
quorum is not present.
The SPEAKER pro tempore. Evidently a quorum is not present.
The Sergeant at Arms will notify absent Members.
The vote was taken by electronic device, and there were--yeas 200,
nays 221, not voting 13, as follows:
[[Page H6526]]
[Roll No. 410]
YEAS--200
Abercrombie
Ackerman
Allen
Andrews
Baird
Baldacci
Baldwin
Barcia
Barrett (WI)
Becerra
Bentsen
Berkley
Berman
Berry
Bishop
Blagojevich
Blumenauer
Bonior
Borski
Boucher
Brady (PA)
Brown (FL)
Brown (OH)
Capps
Capuano
Cardin
Carson
Clay
Clayton
Clement
Clyburn
Condit
Conyers
Costello
Coyne
Cramer
Crowley
Cummings
Danner
Davis (FL)
Davis (IL)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Dixon
Doggett
Dooley
Doyle
Edwards
Engel
Eshoo
Etheridge
Evans
Farr
Fattah
Filner
Forbes
Ford
Frank (MA)
Frost
Gejdenson
Gephardt
Gonzalez
Gordon
Green (TX)
Gutierrez
Hall (OH)
Hall (TX)
Hastings (FL)
Hill (IN)
Hilliard
Hinchey
Hinojosa
Hoeffel
Holden
Holt
Hooley
Hoyer
Inslee
Jackson (IL)
Jackson-Lee (TX)
Jefferson
John
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kildee
Kilpatrick
Kind (WI)
Kleczka
Kucinich
LaFalce
Lampson
Lantos
Larson
Lee
Levin
Lewis (GA)
Lipinski
Lofgren
Lowey
Lucas (KY)
Luther
Maloney (CT)
Maloney (NY)
Markey
Mascara
Matsui
McCarthy (MO)
McCarthy (NY)
McDermott
McGovern
McIntyre
McKinney
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Millender-McDonald
Miller, George
Minge
Mink
Moakley
Mollohan
Moore
Moran (VA)
Murtha
Nadler
Napolitano
Neal
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Phelps
Pickett
Pomeroy
Price (NC)
Rahall
Rangel
Reyes
Rivers
Rodriguez
Roemer
Rothman
Roybal-Allard
Rush
Sabo
Sanchez
Sandlin
Sawyer
Schakowsky
Scott
Serrano
Sherman
Shows
Sisisky
Skelton
Slaughter
Snyder
Spratt
Stabenow
Stark
Stenholm
Strickland
Stupak
Tanner
Tauscher
Taylor (MS)
Thompson (CA)
Thompson (MS)
Thurman
Tierney
Towns
Turner
Udall (CO)
Udall (NM)
Velazquez
Visclosky
Waters
Watt (NC)
Waxman
Weiner
Wexler
Wise
Woolsey
Wu
Wynn
NAYS--221
Aderholt
Archer
Armey
Bachus
Baker
Ballenger
Barr
Barrett (NE)
Bartlett
Bass
Bereuter
Biggert
Bilbray
Bilirakis
Bliley
Blunt
Boehlert
Boehner
Bonilla
Bono
Boyd
Brady (TX)
Bryant
Burr
Burton
Buyer
Callahan
Calvert
Camp
Canady
Cannon
Castle
Chabot
Chambliss
Chenoweth-Hage
Coble
Coburn
Collins
Combest
Cook
Cooksey
Cox
Crane
Cubin
Cunningham
Davis (VA)
Deal
DeLay
DeMint
Diaz-Balart
Dickey
Doolittle
Dreier
Duncan
Dunn
Ehlers
Ehrlich
Emerson
English
Everett
Ewing
Fletcher
Foley
Fossella
Fowler
Franks (NJ)
Frelinghuysen
Gallegly
Ganske
Gekas
Gibbons
Gilchrest
Gillmor
Gilman
Goode
Goodlatte
Goodling
Goss
Graham
Granger
Green (WI)
Greenwood
Gutknecht
Hansen
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Hill (MT)
Hilleary
Hobson
Hoekstra
Horn
Hostettler
Houghton
Hulshof
Hunter
Hutchinson
Hyde
Isakson
Istook
Jenkins
Johnson (CT)
Johnson, Sam
Jones (NC)
Kasich
Kelly
King (NY)
Kingston
Knollenberg
Kolbe
Kuykendall
LaHood
Largent
Latham
LaTourette
Lazio
Leach
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lucas (OK)
Manzullo
McCollum
McCrery
McHugh
McInnis
McKeon
Metcalf
Mica
Miller (FL)
Miller, Gary
Moran (KS)
Morella
Myrick
Nethercutt
Ney
Northup
Norwood
Nussle
Ose
Oxley
Packard
Paul
Pease
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Pombo
Porter
Portman
Pryce (OH)
Quinn
Radanovich
Ramstad
Regula
Reynolds
Riley
Rogan
Rogers
Rohrabacher
Ros-Lehtinen
Roukema
Royce
Ryan (WI)
Ryun (KS)
Salmon
Sanders
Sanford
Saxton
Scarborough
Schaffer
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shimkus
Shuster
Simpson
Skeen
Smith (MI)
Smith (NJ)
Smith (TX)
Souder
Spence
Stearns
Stump
Sununu
Sweeney
Talent
Tancredo
Tauzin
Taylor (NC)
Terry
Thomas
Thornberry
Thune
Tiahrt
Toomey
Traficant
Upton
Vitter
Walden
Walsh
Wamp
Watkins
Watts (OK)
Weldon (FL)
Weller
Whitfield
Wicker
Wilson
Wolf
Young (AK)
Young (FL)
NOT VOTING--13
Baca
Barton
Bateman
Boswell
Campbell
Kennedy
Klink
Martinez
McIntosh
Smith (WA)
Vento
Weldon (PA)
Weygand
{time} 1319
Mr. PITTS and Mr. HOBSON changed their vote from ``yea'' to ``nay.''
Mr. BERRY, Mr. DOOLEY of California, Ms. BROWN of Florida, and Mr.
INSLEE changed their vote from ``nay'' to ``yea.''
So the amendment in the nature of a substitute, as modified, was
rejected.
The result of the vote was announced as above recorded.
Stated for:
Mr. KENNEDY of Rhode Island. Mr. Speaker, today I was accompanying
President Clinton to a funeral in the First District of Rhode Island
and consequently I missed one vote. Had I been here I would have voted
``yes'' on rollcall No. 410, the Neal amendment.
The SPEAKER pro tempore (Mr. Simpson). The question is on the
engrossment and third reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
Motion to Recommit Offered by Mr. Neal of Massachusetts
Mr. NEAL of Massachusetts. Mr. Speaker, I offer a motion to recommit.
The SPEAKER pro tempore. Is the gentleman opposed to the bill?
Mr. NEAL of Massachusetts. I am opposed to the bill in its current
form, Mr. Speaker.
The SPEAKER pro tempore. The Clerk will report the motion to
recommit.
The Clerk read as follows:
Mr. Neal of Massachusetts moves to recommit the bill H.R.
1102 to the Committee on Ways and Means with instructions to
report the same back to the House forthwith with the
following amendment:
Add at the end of the bill the following new title:
TITLE VIII--CONTINGENCY BASED ON MEDICARE PRESCRIPTION DRUG BENEFIT AND
NO ON-BUDGET DEFICIT
SEC. 801. CONTINGENCY BASED ON MEDICARE PRESCRIPTION DRUG
BENEFIT AND NO ON-BUDGET DEFICIT.
(a) In General.--Subpart A of part 1 of subchapter D of
chapter 1 is amended by adding at the end the following new
section:
``SEC. 409A. CONTINGENCY BASED ON MEDICARE PRESCRIPTION DRUG
BENEFIT AND NO ON-BUDGET DEFICIT.
``(a) Comprehensive Retirement Security and Pension Reform
Act of 2000 to Apply If Certain Conditions Met.--The
Comprehensive Retirement Security and Pension Reform Act of
2000 and the amendments made by such Act shall apply to any
taxable year beginning in a calendar year after 2000 only if
the Secretary of the Treasury certifies (before the close of
such calendar year) that each of the conditions specified in
subsection (b) are met with respect to such calendar year.
``(b) Conditions.--For purposes of subsection (a), the
conditions specified in this subsection for any calendar year
are the following:
``(1) No on-budget deficit.--Allowing subsection (a) to be
effective for taxable years beginning in the calendar year,
when added to the cost of the coverage described in paragraph
(2), would not create or increase an on-budget deficit
(determined by excluding the receipts and disbursements of
part A of the medicare program) for the fiscal year beginning
in such calendar year.
``(2) Prescription drug coverage.--Coverage for outpatient
prescription drugs is provided for Medicare beneficiaries
under the Medicare Program on a voluntary basis at all times
during the calendar year with--
``(A) the premium for such coverage being not more than $25
per month (adjusted for cost increases after 2003) with low-
income assistance for Medicare beneficiaries having incomes
below 135 percent of the Federal poverty level and phasing
out for such beneficiaries having incomes between 135 percent
and 150 percent of the Federal poverty level,
``(B) no deductible required before such coverage is
provided,
``(C) the amount of the benefit being at least 50 percent
of prescription drug expenses not in excess of the coverage
limit (as defined in subsection (c)),
``(D) a $4,000 limitation (adjusted for cost increases
after 2003) on out-of-pocket prescription drug expenses of
electing Medicare beneficiaries, and
``(E) all Medicare beneficiaries entitled to receive the
discounts (otherwise available to large prescription drug
purchasers) on their purchases of prescription drugs.
``(c) Coverage Limit.--The coverage limit is $2,000 for
calendar years 2003 and 2004, $3,000 for calendar years 2005
and 2006, $4,000 for calendar years 2007 and 2008, and $5,000
for calendar year 2009 and thereafter (with adjustments for
cost increases).
``(d) Transition rule.--For calendar years 2001 and 2002,
the conditions specified in subsection (b)(2) shall be
treated as met if the Secretary of the Treasury certifies
that coverage described in such subsection will be available
as of January 1, 2003.''.
[[Page H6527]]
(b) Clerical Amendment.--The table of sections for subpart
A of part 1 of subchapter D of chapter 1 is amended by adding
after the item relating to section 409 the following new
item:
``SEC. 409A. Contingency based on medicare prescription drug benefit
and no on-budget deficit.''.
(c) Effective Date.--The amendments made by this section
shall take effect on the date of the enactment of this Act.
Mr. NEAL of Massachusetts (during the reading). Mr. Speaker, I ask
unanimous consent that the motion to recommit be considered as read and
printed in the Record.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Massachusetts?
There was no objection.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Massachusetts (Mr. Neal) is recognized for 5 minutes in support of his
motion.
Mr. NEAL of Massachusetts. Mr. Speaker, for the last 3 hours, we have
had an opportunity to clarify many differences about the legislation
that is in front of us. I think all of us would acknowledge that the
work that the gentleman from Maryland (Mr. Cardin) and the gentleman
from Ohio (Mr. Portman) have done on this legislation has been a decent
start. In fact, we believe that the substitute we offered was Cardin-
Portman improved. Cardin-Portman plus. We also would argue, I think,
that the substitute that we offered spoke to the issue that the
gentleman from Ohio (Mr. Portman) acknowledged about doing more for
middle-income and lower-income wage earners in America.
What is important about this discussion, I think, is simply this.
Some of the people that have spoken today on this legislation have
suggested that there is some doubt as to whether or not the President
will veto this legislation in its current form. Let me reiterate as I
did an hour ago. Secretary Summers has told me in a phone conversation
he will recommend to the President that this legislation in its current
form be vetoed. We have an opportunity to fix this legislation,
acknowledging a good start but an improved opportunity.
Let me speak specifically, if I can, to the motion to recommit that
is in front of this body. We all acknowledge that there is a desire for
tax cuts based upon the current surplus projections. But the question
before us now is whether or not those tax cuts leave sufficient
resources for other priorities. This motion to recommit provides that
the tax reductions proposed will not go into effect unless the
Secretary of the Treasury certifies the following: that the bill will
not invade the portion of existing surpluses dedicated to Medicare and
Social Security programs, and--and the most important part of this
motion to recommit--a meaningful Medicare prescription medicine benefit
be enacted.
The motion to recommit is also required because of a Republican
strategy of considering separate tax bills without taking into account
their overall cost. Voting against the motion to recommit is a vote for
placing these tax reductions ahead of Social Security and Medicare
solvency and a meaningful Medicare prescription drug benefit.
It is simple; it is clarifying. I am not intending to belabor the
point. What we have now in front of us is a very simple measure,
whether or not we will proceed with these cuts or we will proceed with
a healthy discussion about a Medicare prescription drug benefit. This
is not the end of the debate by any stretch of the imagination. When we
come back in September because of the President's veto pen, we are
going to have a chance to improve this legislation.
I hope that my colleagues will vote ``no'' on the measure in front of
us after we vote for the motion to recommit.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore. Is the gentleman from Ohio (Mr. Portman)
opposed to the motion?
Mr. PORTMAN. I am, Mr. Speaker.
The SPEAKER pro tempore. The gentleman is recognized for 5 minutes in
opposition to the motion.
Mr. PORTMAN. Mr. Speaker, I yield 2 minutes to the gentleman from
California (Mr. Thomas), the chairman of the Subcommittee on Health.
Mr. THOMAS. Mr. Speaker, I thank the gentleman for yielding me this
time.
Bear with me, folks. Let us take a look at this motion to recommit.
Let us find out exactly what it says. Less than 5 minutes ago, the
Democrats offered their substitute which was double the Portman-Cardin
bill. You would think that they had enough pride in authorship to
require their substitute to be in this motion to recommit. Well, that
is not true. The Portman-Cardin bill is in this motion to recommit. The
only problem is, how do you get to this new pension relief in the
Portman-Cardin bill? The motion to recommit says you have to do two
things, because it says Comprehensive Retirement Security and Pension
Reform Act of 2000, Portman-Cardin legislation, to apply if certain
conditions are met.
Now, what are those certain conditions? Number one, you have a zero
budget deficit. Number two, we have to pass and make law the Democrats'
prescription drug proposal which was defeated in the House 2 weeks ago.
So, one, they do not even have pride in authorship, including their
Democrat substitute in the motion to recommit. Secondly, they frankly
in my opinion lower the level of this debate to say, one, if you really
want this, you have to do these two other things, but here is the
insidious part about this motion to recommit: because it is
conditional, because we will not get the Portman-Cardin bill unless
these other two conditions are met, the Joint Committee on Taxation
says this has a zero score.
What does it mean? If you vote for the motion to recommit, you
defeat, not that you are cute about it, you defeat the Portman-Cardin
legislation. Frankly, the gentleman from Ohio and the gentleman from
Maryland deserve a better motion to recommit than this. This is not the
kind of motion that lends the kind of sobriety to the debate that we
have. What we need to do is hopefully not have a recorded vote on this
motion to recommit and move rapidly to the passage of much-needed
pension reform, the Portman-Cardin bill.
{time} 1330
Mr. PORTMAN. Mr. Speaker, I yield myself such time as I may consume.
This has been a refreshing debate on the House floor today, because
it has been an honest discussion of some differences and how we would
approach IRAs and pension expansion, but in the end, as the gentleman
from Massachusetts (Mr. Neal) said, Democrat opposition to the
underlying legislation has really not surfaced, in the sense that the
gentleman from Massachusetts (Mr. Neal) has said this is a good start.
I applaud the gentleman for this motion to recommit, because it
essentially says that the Portman-Cardin legislation, H.R. 1102, that
over 200 Members of this House have cosponsored, about half Democrats,
about half Republicans, ought to become law. It is just that the motion
says there ought to be a couple of things that happen in between; one,
we have to be sure we have a surplus; the second is we offer
prescription drug coverage.
Unfortunately, the prescription drug coverage that is being suggested
here that would have to be enacted into law is not precisely what this
House just voted on in terms of prescription drug coverage. It is much
different.
I want to thank the gentleman from Massachusetts (Mr. Neal) for
implicitly supporting Portman-Cardin. I want to thank all of the
Members of this House who have played such an important role in getting
us to this point. This has been a 3-year bipartisan process where we
have done precisely what so many of us talk about around here, which is
engage in a bipartisan consultative process with the people who are
most affected, that is, small businesses, labor unions, individuals who
are trying to save more in their IRAs, workers who are trying to save
more in their 401(k) plans and other pension plans.
This legislation is going to help precisely those lower income and
middle income workers out there who we talked about earlier today as
needing to save more for retirement.
We would not be here today but for the help of the gentleman from
Maryland (Mr. Cardin), who has been my partner in this for the last 3
years, also but for the help of the gentleman from Texas (Mr. Archer),
who has spent a career coming up with ways to expand savings options
for Americans and got
[[Page H6528]]
this through the committee and to the floor today.
Ladies and gentleman, I urge a no on this motion to recommit. Again,
I thank the authors of it for the implicit support of the underlying
legislation, and I strongly urge Members on both sides of the aisle to
vote yes on final passage, to send a strong message to the United
States Senate, a strong message to the President of the United States
that we, on a bipartisan basis, want to provide for retirement security
for all Americans, and we want to do it this year.
Mr. Speaker, many have dubbed this as a partisan, political year, we
want to show the American people we can get something done together.
Let us continue this 3-year bipartisan process. Let us vote yes on
final passage and let us help all of our constituents have more
financial security in their retirement.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Simpson). Without objection, the
previous question is ordered on the motion to recommit.
There was no objection.
The SPEAKER pro tempore. The question is on the motion to recommit.
The question was taken; and the Speaker pro tempore announced that
the noes appeared to have it.
Mr. NEAL of Massachusetts. Mr. Speaker, on that I demand the yeas and
nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 9 of rule XX, the Chair
will reduce to 5 minutes the minimum time for any electronic vote on
the question of passage.
The vote was taken by electronic device, and there were--yeas 185,
nays 239, not voting 10, as follows:
[Roll No. 411]
YEAS--185
Abercrombie
Ackerman
Allen
Andrews
Baldacci
Baldwin
Barrett (WI)
Becerra
Berkley
Berman
Berry
Bishop
Blagojevich
Blumenauer
Bonior
Borski
Boucher
Boyd
Brady (PA)
Brown (FL)
Brown (OH)
Capps
Capuano
Carson
Clay
Clayton
Clement
Clyburn
Condit
Conyers
Costello
Coyne
Cramer
Crowley
Cummings
Danner
Davis (FL)
Davis (IL)
DeFazio
DeGette
Delahunt
DeLauro
Deutsch
Dicks
Dingell
Dixon
Doggett
Dooley
Doyle
Engel
Eshoo
Etheridge
Evans
Farr
Fattah
Filner
Ford
Frank (MA)
Frost
Gejdenson
Gephardt
Gonzalez
Gordon
Green (TX)
Gutierrez
Hall (OH)
Hastings (FL)
Hilliard
Hinchey
Hinojosa
Hoeffel
Holden
Holt
Hooley
Hoyer
Inslee
Jackson (IL)
Jackson-Lee (TX)
Jefferson
John
Johnson, E. B.
Jones (OH)
Kanjorski
Kaptur
Kennedy
Kildee
Kilpatrick
Kind (WI)
Kleczka
Kucinich
LaFalce
Lampson
Lantos
Larson
Lee
Levin
Lewis (GA)
Lipinski
Lofgren
Lowey
Lucas (KY)
Maloney (CT)
Maloney (NY)
Markey
Mascara
Matsui
McCarthy (MO)
McCarthy (NY)
McDermott
McGovern
McKinney
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Millender-McDonald
Miller, George
Mink
Moakley
Mollohan
Moran (VA)
Murtha
Nadler
Napolitano
Neal
Oberstar
Obey
Olver
Ortiz
Owens
Pallone
Pascrell
Pastor
Payne
Pelosi
Phelps
Pickett
Price (NC)
Rahall
Rangel
Reyes
Rivers
Rodriguez
Rothman
Roybal-Allard
Rush
Sabo
Sanchez
Sanders
Sawyer
Schakowsky
Scott
Serrano
Sherman
Shows
Sisisky
Skelton
Slaughter
Snyder
Spratt
Stabenow
Stark
Strickland
Stupak
Tanner
Thompson (CA)
Thompson (MS)
Thurman
Tierney
Towns
Turner
Udall (CO)
Udall (NM)
Velazquez
Visclosky
Waters
Watt (NC)
Waxman
Weiner
Wexler
Wise
Woolsey
Wu
Wynn
NAYS--239
Aderholt
Archer
Armey
Bachus
Baird
Baker
Ballenger
Barcia
Barr
Barrett (NE)
Bartlett
Bass
Bateman
Bentsen
Bereuter
Biggert
Bilbray
Bilirakis
Bliley
Blunt
Boehlert
Boehner
Bonilla
Bono
Brady (TX)
Bryant
Burr
Burton
Buyer
Callahan
Calvert
Camp
Canady
Cannon
Cardin
Castle
Chabot
Chambliss
Chenoweth-Hage
Coble
Coburn
Collins
Combest
Cook
Cooksey
Cox
Crane
Cubin
Cunningham
Davis (VA)
Deal
DeLay
DeMint
Diaz-Balart
Dickey
Doolittle
Dreier
Duncan
Dunn
Edwards
Ehlers
Ehrlich
Emerson
English
Everett
Ewing
Fletcher
Foley
Forbes
Fossella
Fowler
Franks (NJ)
Frelinghuysen
Gallegly
Ganske
Gekas
Gibbons
Gilchrest
Gillmor
Gilman
Goode
Goodlatte
Goodling
Goss
Graham
Granger
Green (WI)
Greenwood
Gutknecht
Hall (TX)
Hansen
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Hill (IN)
Hill (MT)
Hilleary
Hobson
Hoekstra
Horn
Hostettler
Houghton
Hulshof
Hunter
Hutchinson
Hyde
Isakson
Istook
Jenkins
Johnson (CT)
Johnson, Sam
Jones (NC)
Kasich
Kelly
King (NY)
Kingston
Knollenberg
Kolbe
Kuykendall
LaHood
Largent
Latham
LaTourette
Lazio
Leach
Lewis (CA)
Lewis (KY)
Linder
LoBiondo
Lucas (OK)
Luther
Manzullo
McCollum
McCrery
McHugh
McInnis
McIntyre
McKeon
Metcalf
Mica
Miller (FL)
Miller, Gary
Minge
Moore
Moran (KS)
Morella
Myrick
Nethercutt
Ney
Northup
Norwood
Nussle
Ose
Oxley
Packard
Paul
Pease
Peterson (MN)
Peterson (PA)
Petri
Pickering
Pitts
Pombo
Pomeroy
Porter
Portman
Pryce (OH)
Quinn
Radanovich
Ramstad
Regula
Reynolds
Riley
Roemer
Rogan
Rogers
Rohrabacher
Ros-Lehtinen
Roukema
Royce
Ryan (WI)
Ryun (KS)
Salmon
Sandlin
Sanford
Saxton
Scarborough
Schaffer
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherwood
Shimkus
Shuster
Simpson
Skeen
Smith (MI)
Smith (NJ)
Smith (TX)
Souder
Spence
Stearns
Stenholm
Stump
Sununu
Sweeney
Talent
Tancredo
Tauscher
Tauzin
Taylor (MS)
Taylor (NC)
Terry
Thomas
Thornberry
Thune
Tiahrt
Toomey
Traficant
Upton
Vitter
Walden
Walsh
Wamp
Watkins
Watts (OK)
Weldon (FL)
Weldon (PA)
Weller
Whitfield
Wicker
Wilson
Wolf
Young (AK)
Young (FL)
NOT VOTING--10
Baca
Barton
Boswell
Campbell
Klink
Martinez
McIntosh
Smith (WA)
Vento
Weygand
{time} 1351
Mr. MINGE and Mr. LUTHER changed their vote from ``yea'' to ``nay.''
So the motion to instruct was rejected.
The result of the vote was announced as above recorded.
The SPEAKER pro tempore (Mr. Simpson). The question is on the passage
of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Recorded Vote
Mr. PORTMAN. Mr. Speaker, I demand a recorded vote.
A recorded vote was ordered.
The SPEAKER pro tempore. This will be a 5-minute vote.
The vote was taken by electronic device, and there were--ayes 401,
noes 25, not voting 9, as follows:
[Roll No. 412]
AYES--401
Abercrombie
Ackerman
Aderholt
Allen
Andrews
Archer
Armey
Bachus
Baird
Baker
Baldacci
Baldwin
Ballenger
Barcia
Barr
Barrett (NE)
Barrett (WI)
Bartlett
Bass
Bateman
Bentsen
Bereuter
Berkley
Berman
Berry
Biggert
Bilbray
Bilirakis
Bishop
Blagojevich
Bliley
Blumenauer
Blunt
Boehlert
Boehner
Bonilla
Bono
Borski
Boucher
Boyd
Brady (PA)
Brady (TX)
Brown (FL)
Bryant
Burr
Burton
Buyer
Callahan
Calvert
Camp
Canady
Cannon
Capps
Capuano
Cardin
Carson
Castle
Chabot
Chambliss
Chenoweth-Hage
Clayton
Clement
Clyburn
Coble
Coburn
Collins
Combest
Condit
Cook
Cooksey
Costello
Cox
Coyne
Cramer
Crane
Crowley
Cubin
Cummings
Cunningham
Danner
Davis (FL)
Davis (IL)
Davis (VA)
Deal
DeFazio
DeGette
Delahunt
DeLauro
DeLay
DeMint
Deutsch
Diaz-Balart
Dickey
Dicks
Dingell
Dixon
Doggett
Dooley
Doolittle
Doyle
Dreier
Duncan
Dunn
Edwards
Ehlers
Ehrlich
Emerson
Engel
English
Eshoo
Etheridge
Evans
Everett
Ewing
Farr
Fattah
Fletcher
Foley
Forbes
Ford
Fossella
Fowler
Franks (NJ)
Frelinghuysen
Frost
Gallegly
Ganske
Gejdenson
Gekas
Gibbons
Gilchrest
Gillmor
Gilman
Gonzalez
Goode
Goodlatte
Goodling
Gordon
Goss
Graham
Granger
[[Page H6529]]
Green (TX)
Green (WI)
Greenwood
Gutierrez
Hall (OH)
Hall (TX)
Hansen
Hastert
Hastings (FL)
Hastings (WA)
Hayes
Hayworth
Hefley
Herger
Hill (IN)
Hill (MT)
Hilleary
Hilliard
Hinojosa
Hobson
Hoeffel
Hoekstra
Holden
Holt
Hooley
Horn
Hostettler
Houghton
Hoyer
Hulshof
Hunter
Hutchinson
Hyde
Inslee
Isakson
Istook
Jackson-Lee (TX)
Jefferson
Jenkins
John
Johnson (CT)
Johnson, E. B.
Johnson, Sam
Jones (NC)
Jones (OH)
Kanjorski
Kaptur
Kasich
Kelly
Kildee
Kilpatrick
Kind (WI)
King (NY)
Kingston
Kleczka
Knollenberg
Kolbe
Kucinich
Kuykendall
LaFalce
LaHood
Lampson
Lantos
Largent
Larson
Latham
LaTourette
Lazio
Leach
Levin
Lewis (CA)
Lewis (GA)
Lewis (KY)
Linder
Lipinski
LoBiondo
Lofgren
Lowey
Lucas (KY)
Lucas (OK)
Luther
Maloney (CT)
Maloney (NY)
Manzullo
Mascara
McCarthy (MO)
McCarthy (NY)
McCollum
McCrery
McGovern
McHugh
McInnis
McIntyre
McKeon
McKinney
McNulty
Meehan
Meek (FL)
Meeks (NY)
Menendez
Metcalf
Mica
Millender-McDonald
Miller (FL)
Miller, Gary
Miller, George
Minge
Mink
Moakley
Mollohan
Moore
Moran (KS)
Moran (VA)
Morella
Murtha
Myrick
Nadler
Napolitano
Nethercutt
Ney
Northup
Norwood
Nussle
Oberstar
Obey
Ortiz
Ose
Owens
Oxley
Packard
Pallone
Pascrell
Pastor
Paul
Payne
Pease
Pelosi
Peterson (MN)
Peterson (PA)
Petri
Phelps
Pickering
Pickett
Pitts
Pombo
Pomeroy
Porter
Portman
Price (NC)
Pryce (OH)
Quinn
Radanovich
Rahall
Ramstad
Regula
Reyes
Reynolds
Riley
Rivers
Rodriguez
Roemer
Rogan
Rogers
Rohrabacher
Ros-Lehtinen
Rothman
Roukema
Royce
Rush
Ryan (WI)
Ryun (KS)
Salmon
Sanchez
Sandlin
Sanford
Sawyer
Saxton
Scarborough
Schaffer
Schakowsky
Scott
Sensenbrenner
Sessions
Shadegg
Shaw
Shays
Sherman
Sherwood
Shimkus
Shows
Shuster
Simpson
Sisisky
Skeen
Skelton
Slaughter
Smith (MI)
Smith (NJ)
Smith (TX)
Snyder
Souder
Spence
Spratt
Stabenow
Stearns
Stenholm
Strickland
Stump
Stupak
Sununu
Sweeney
Talent
Tancredo
Tanner
Tauscher
Tauzin
Taylor (MS)
Taylor (NC)
Terry
Thomas
Thompson (CA)
Thompson (MS)
Thornberry
Thune
Thurman
Tiahrt
Tierney
Toomey
Towns
Traficant
Turner
Udall (CO)
Udall (NM)
Upton
Velazquez
Vitter
Walden
Walsh
Wamp
Waters
Watkins
Watt (NC)
Watts (OK)
Waxman
Weiner
Weldon (FL)
Weldon (PA)
Weller
Wexler
Weygand
Whitfield
Wicker
Wilson
Wise
Wolf
Woolsey
Wu
Wynn
Young (AK)
Young (FL)
NOES--25
Becerra
Bonior
Brown (OH)
Clay
Conyers
Filner
Frank (MA)
Gephardt
Gutknecht
Hinchey
Jackson (IL)
Kennedy
Lee
Markey
Matsui
McDermott
Neal
Olver
Rangel
Roybal-Allard
Sabo
Sanders
Serrano
Stark
Visclosky
NOT VOTING--9
Baca
Barton
Boswell
Campbell
Klink
Martinez
McIntosh
Smith (WA)
Vento
{time} 1359
So the bill was passed.
The result of the vote was announced as above recorded.
A motion to reconsider was laid on the table.
____________________